Decision to make

Salazar says Arctic OCS exploration would provide data about US resources

Alan Bailey

Petroleum News

As Shell lines up its Arctic drilling fleet, ready to embark for the Chukchi Sea, the company still needs drilling permits for its planned Arctic outer continental shelf wells.

The Department of the Interior, the federal agency with jurisdiction over the outer continental shelf, has not yet made final decisions on Shell’s drilling, Interior Secretary Ken Salazar told an energy policy forum hosted by George Washington University and Arent Fox LLP on June 5.

But Salazar showed an interest in seeing the Shell program move ahead. The Bureau of Ocean Energy Management has already approved Shell’s Chukchi Sea and Beaufort Sea exploration plans.

“We are looking at the possibility of moving into the area in large part because we need to know where America’s resources are, and we ought never to be afraid of the science and knowledge that does come from exploration,” Salazar said. “If it is done it will be done under the utmost cautionary measures that have been taken in the history of humankind, because we know and have learned a lot from what happened in places like the Gulf of Mexico.”

Don’t fall behind

Salazar expressed concern about the possibility of the United States falling behind other Arctic nations in the drive to explore the Arctic.

“When you look at what Norway and Russia are planning to do with respect to oil and gas production in the Arctic Circle, we don’t want the United States of America to be left behind,” Salazar said.

In terms of overall oil and gas exploration and development in Alaska, Salazar characterized as “a very significant accomplishment” the progress in allowing ConocoPhillips access to its CD-5 development in the northeastern part of the National Petroleum Reserve-Alaska. That will for the first time enable oil development in the reserve, he said. A nearly two-year impasse in obtaining U.S. Army Corps of Engineers approval of a Colville River crossing for access to the CD-5 site was resolved in December following Department of the Interior intervention.

“Our work in Alaska and in the Arctic has been exemplary and is something that I’m very proud of,” Salazar said.

Priority agreement

Salazar’s comments about Alaska came as part of a more general review of Interior’s energy track record under the Obama administration. Despite a pervasive sense that people in the United States are very divided over energy issues, in “the real energy world” most people agree on the key priorities for the nation, Salazar said. Those priorities consist of the need to cut U.S. dependence on foreign oil; the need for diversity in energy supplies, including renewable energy sources; the need for more oil and gas drilling, both offshore and onshore; and the importance of reducing energy demand through energy efficiency.

Significant progress

And in the real world, as distinct from the world of fairy tales, the administration has made significant progress in addressing all of these key factors, Salazar said. Natural gas production from private and federal land is at an all-time high, while U.S. dependence on foreign oil has dropped during every year of the Obama presidency, he said.

“The fact that we are now importing less than 50 percent of our oil from foreign countries is something that we ought to celebrate,” Salazar said. That’s a far cry from the 60 to 70 percent of just a few years ago, he said.

In large part, reductions in oil imports can be attributed to the improved fuel efficiency of U.S. vehicles, he said.

Salazar expressed particular pride in the administration’s progress in encouraging the use of renewable energy sources. Although the “fairy tale world” would have people go back to the old ways of doing things, in the real world the United States has doubled its renewable energy production over the past three years, Salazar said, adding later that he hopes that Congress will extend tax credits for wind energy development.

Improved safety

At the same time the Gulf of Mexico oil and gas industry is now as active as it was before the 2010 Deepwater Horizon disaster and the Macondo well blowout, while Interior’s post-Macondo actions have ramped up offshore drilling safety, with the agency working hard to restore the confidence of the American people in the safety of the offshore industry, Salazar said.

Interior is also encouraging onshore oil development in areas such as the Bakken play in North Dakota. An initiative to improve the efficiency of onshore oil and gas drilling permitting on federal lands should reduce permitting times by two thirds, Salazar said.

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Murkowski comments on U.S. energy policy

In a speech to an energy policy forum hosted by George Washington University and Arent Fox LLP on June 5 Sen. Lisa Murkowski, R-Alaska, spelled out her ideas on the needed goals for a U.S. energy policy. Murkowski is the ranking Republican on the Senate Energy and Natural Resources Committee. Commenting that the nation does not currently have a coherent or long-term policy at the federal level, Murkowski said that a policy should be non-partisan and should address the need for energy that is abundant, affordable, clean, diverse and secure.

“One thing I won’t do is stand here and tell you which resources, which technologies — or even which exact policies — will enable us to meet our energy goals,” Murkowski said. “Some of that will be laid out in the energy plan I intend to release this summer. For now, I’ll simply say that it’s inappropriate for the federal government to focus on one technology, to the exclusion of others. Markets and consumers will make the choice far better than anyone else. What policymakers should focus on instead is outcomes, and we should be open to a number of routes that could help us get there.”

Six factors

First, legislation must be developed through the Congressional committee process, rather than through some other group of lawmakers brought together to work on energy legislation. Second, there needs to be a balance between different energy technologies, encouraging oil and gas production on federal lands while also focusing on innovation.

Third, people need to “make some hard decisions” on the extent of the government’s role in technical innovation.

“The federal government can help fund research that would otherwise not be undertaken, but our job is not to offer subsidies that never end or subsidies that prop up a technology every step of the way to commercialization,” Murkowski said, citing Department of Energy involvement in North Slope methane hydrate research as a good example of government research funding.

Fourth, energy policies must pay for themselves, Murkowski said, commenting that federal economic stimulus funding for clean energy had resulted in a lower payback than anticipated.

Fifth, legislation should not directly or indirectly increase the price of energy.

And sixth, the energy legislation needs to be brought for consideration on the Senate floor, rather than languishing low down in the legislative priority list as has tended to happen in recent years.

Loan guarantees

“Some are suggesting the plug just needs to be pulled (on the loan guarantee program),” Murkowski said. “I don’t think that needs to be the case. I think we need to make sure that the loan guarantee program operates as Congress intended.”

—Alan Bailey