Opportunity beckons

Turnabout: Faced with fish decline, Bristol Bay Natives look to oil

Steve Sutherlin

Petroleum News Associate Editor

In a dramatic turnabout, Alaska’s Bristol Bay Natives have endorsed the idea of oil development in the Bristol Bay Region. Bristol Bay has long been thought to hold commercial quantities of oil and gas, but oil development in the bay had been on hold due in large part to reluctance of fishing-dependent local residents to support oil exploration on a large scale.

In the bay — a 180-mile wide (at the mouth) by 250-mile crook north of where the Alaska Peninsula joins the west coast of Alaska — prolific salmon resources have historically been the primary economic driver. The area also has fisheries for pollock, cod, halibut, sole, crab and other species.

Today, however, the fishing industry in Bristol Bay is on the ropes, and oil development is looking much more attractive as a vehicle for future prosperity in the region. The Bristol Bay Native Corp. has rallied local support to assure the oil industry that the region is open for business.

“There is widespread to almost unanimous support for on shore, and mixed support for offshore drilling,” Paul Roehl, vice president of land and development for Bristol Bay Native Corp., told Petroleum News.

The corporation has developed a resolution in favor of immediate exploration and development of the outer continental shelf North Aleutian Basin sale 92 area, which went to bid in October 1988 and garnered $96 million in bids for 23 leases totaling 122,000 acres. The March 1989 Exxon Valdez oil spill intensified opposition to the OCS 92 sale, which was eventually cancelled and the bid proceeds returned to the oil companies. Currently the OCS 92 area is under a development moratorium, and the U.S. Minerals Management Service won’t revisit it until 2011.

The corporation would like to see the moratorium lifted early, to create high-paying, rewarding jobs for the people of the region, particularly given recent disastrous commercial salmon seasons.

Salmon not enough

The OCS 92 lease sale occurred at a time when Bristol Bay salmon brought as much as $2.60 per pound, while oil sold for only $17.20 per barrel, Roehl said. Today salmon brings only about 40 cents per pound. In 1988, the value of oil and gas in the bay was seen as insignificant, compared to the rich value of the fishery.

U.S. Rep. Don Young, in a 1995 press release supporting a continued moratorium on leasing in the bay, summed up the thinking of his constituents in the region at the time.

“All told, the commercial fisheries have an average annual wholesale value approaching $1 billion and employ more than 10,000 Americans. The area of the Sale 92 leases is also the heart of a major migration, staging and feeding area for numerous marine mammals, seabirds and waterfowl,” Young said. “The commercial and intrinsic value of the region’s marine life is too great to put at risk for the small amount of estimated recoverable oil reserves in the North Aleutian Basin.”

Today, however, economic realities dictate a fresh outlook.

“We have some ‘not in my backyard’ holdouts,” Roehl said, “But the younger generation is more progressive on oil and gas development.”

Another factor affecting the opinions of Natives on the oil versus fish question is the fact that there is less Native ownership of fishing permits in Bristol Bay than was the case in the 1980s. Many local fishermen, whipsawed by the fluctuations in the fishery, have sold their permits, Roehl said. Today, a large number of permits are owned by people who live outside the area, and outside the state.

On the other hand, Roehl said, the corporation is insistent that oil development be done in an environmentally sound manner, with maximum protection to the fishery resources.

“Culturally, spiritually, salmon are very vital to the region,” he said. “We must preserve fisheries.”

Pipeline needed

A pipeline is the obvious solution, Roehl says.

The pipeline might be expected to meander, due to the mountains and streams of the peninsula. More daunting, perhaps, is the need for storage and tanker facilities on the Pacific side, a cost that has caused at least one large independent to pass on the idea for now.

Forest Oil, which had once expressed some interest in the Bristol Bay region, told Petroleum News in June that it wasn’t interested in Bristol Bay because of other commitments, indicating it was already exploring in a non-producing, frontier basin in Alaska, the Susitna.

“It’s a huge risk for any oil company to take a chance,” said Beischer.

While investment in a pipeline may be a daunting prospect, Roehl and Beischer agreed that the need for a pipeline presents an opportunity as well. Should large-scale oil development take place in Bristol Bay, pipeline ownership might prove to be a good investment.

Much is uncertain about the future of oil and gas development in Bristol Bay but the corporation is doing what it can to reduce the uncertainty. It has approached the state to fund a $450,000 Bristol Bay basin analysis, to be performed by the Arctic Energy Technology Development Laboratory at the University of Alaska Fairbanks. The study would pull together old well logs and other documents, and digitize what seismic data exists on the area.

Currently, records of oil exploration in the region are in scattered locations. It is hoped that the availability of the data in a comprehensive study will prime the interest of oil companies.

In addition to direct economic benefits of oil development spending, Roehl said the availability of local energy sources would stimulate other industry in the area.

“There is a big need to reduce the cost of energy in Alaska,” Roehl said. “Low cost energy makes other mineral development possible.”

DOG says Bristol Bay intriguing

Steve Sutherlin

Petroleum News associate editor

“We are currently getting information from the local community and doing some baseline assessment work on the geology of the area,” he said. “We’re reevaluating the area in light of changes in geologic understanding, exploration and development technology and economic and market conditions. Successful development would provide substantial economic benefits to the region, including more affordable local energy.”

Myers said there was sporadic drilling in the area from the early 1900s through 1985. The state has a substantial land position on the onshore portions of the basin and could consider putting the area up for areawide lease sale, he said.

While state land extends three miles offshore, the state is enjoined from allowing surface activity on submerged lands in the bay, so any oil or gas exploration or development surface activities would be limited to onshore areas only, said Jim Hansen, chief petroleum geophysicist and lease sales manager for the DOG.

State lands on edge of basin

“Basically, there is basin north of the Alaska Peninsula — a big sedimentary basin, on laps to onshore area — to the northwestern half of the Alaska Peninsula between Katmai and Port Moeller,” said Don Brizzolara, DOGpetroleum geologist.

Brizzolara said oil seeps, noticed as early as 1903, have drawn people to the area.

A total of 26 wells drilled on the peninsula itself, from the 1920s through the 1960s, and one offshore in the 1980s, didn’t find anything of consequence, Brizzolara said, adding that seismic technology at the time the wells were drilled was quite primitive.

“What that area really needs to define these structures is modern seismic data to find the sweet spots out there,” he said.

The Alaska Peninsula is a volcanic arch that stretches 500 miles in length from the mainland to the beginnings of the Aleutian chain, and varies from 100 miles wide, to 25 miles wide near Port Moeller. The volcanic activity makes exploration dicey.

“The volcanic strata often have a bad effect on reservoir rock ... certain minerals that come from volcanic rock can get into your reservoir rocks and basically plug up the porosity,” Brizzolara said. “Also you’re dealing with a higher geothermal gradient — hotter rocks basically, and that can affect reservoir quality.”

Despite the challenges, the area looks intriguing, he said.

“In the last 10-20 years technology has really advanced, and our geologic understanding of Alaska has advanced,” Brizzolara said. “It’s an area we need to take a look at; there could be treasure down there that we could have missed.”