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Potential Good News for a Resource State   Leave a comment

Like it or not, resources drive the train of Alaska’s economy and so President Obama’s wrecking-ball approach to environmentalism really harmed us and is one reason Alaska is in a recession right now. Yes, low oil prices are part of it, but more than that, our inability to expand oil development and put more oil in the pipeline creates a chronic problem. So, this is potentially good news for Alaska … and, whether you know it or not, the country. Lela

Alaska Journal of Commerce

Tim Bradner

State officials will push new U.S. Interior Secretary Ryan Zinke for a revamp of Obama administration rules restricting oil and gas development in the National Petroleum Reserve-Alaska, state Natural Resources Commissioner Andy Mack said May 12.

Image result for image of npr-a

“We will be submitting a specific proposal within the next couple of weeks to Secretary Zinke. This grows out of meetings our governor, Bill Walker, had with the secretary earlier this year in which he seemed receptive,” Mack said in an interview.

“We believe we can help BLM (Bureau of Land Management) in developing a new plan that is balanced,” between resource development and environmental protection, said Mack, who was officially confirmed to his position May 16.

The NPR-A was created in 1923 as a potential source of oil for the U.S. Navy, but despite exploration over the years it is only recently that there have been commercial oil and gas discoveries.

The U.S. Bureau of Land Management, which manages the 23-million-acre petroleum reserve on the western North Slope, would develop the new plan, but Mack said the state hopes to be heavily involved.

BLM’s current management plan, developed under former Interior Secretary Ken Salazar, was implemented in 2013 and placed large parts of the reserve into special conservation areas, effectively putting large areas off-limits to petroleum exploration and development.

The current plan also makes access difficult for transportation infrastructure, such as pipelines or roads for use by communities in the region, state officials have said in the past.

Salazar’s final Record of Decision approving BLM’s plan placed 11 million acres, about half of the reserve, into special conservation areas. This included a 3.6-million-acre special protected area around Teshekpuk Lake and including coastal wetlands near the Beaufort Sea coast.

State officials were critical of the plan because NPR-A’s coastal areas are considered highly prospective for petroleum discoveries. The Barrow Arch, a broad regional geologic formation that hosted the large Prudhoe Bay-area oil discoveries farther east, also extends along the coast of the northeast NPR-A and includes areas Salazar put off limits.

Mack said the restricted areas also impede infrastructure needed to support discoveries on state-owned submerged lands offshore the reserve.

Caelus Energy, a Dallas-based independent, has announced a significant discovery at Smith Bay, offshore the NPR-A and about 100 miles northwest of the nearest industry infrastructure at the Alpine field.

If Caelus is unable to build an onshore pipeline from Smith Bay through coastal areas of the reserve it will be forced to build an offshore pipeline, which creates risks and environmental hazards.

The prospectivity of NPR-A itself for discoveries has now been confirmed by ConocoPhillips and its minority partner, Anadarko Petroleum, who are making discoveries further inland in the reserve.

The companies are now developing one project, Greater Mooses Tooth No. 1, or GMT-1, which is scheduled to start production in late 2018, and have two other prospects, GMT-2 and Willow, a new discovery, in the planning stages.

Any new initiative to unwind restrictions will be highly controversial with national environmental groups, particularly if it eases restrictions in the Teshepuk Lake and coastal wetlands areas of the reserve that are heavily used by migrating waterfowl in the summer.

It would also require a redo of the environmental impact statement for the current NPR-A management plan, which is also likely to spark litigation from conservation groups.

However, what is also different now, Mack said, is that Inupiat communities on the North Slope, now mainly dependent on air and seasonal barge service, are supporting provisions for transportation infrastructure in the NPR-A as a way to bring living costs down.

In other remarks, Mack said in a May 12 briefing that he believes recent new discoveries on the North Slope will continue to prop up North Slope production. The commissioner spoke to Commonwealth North, an Anchorage-based business and public policy group.

“The recent increase in oil production can almost entirely be attributed to the strong performance at CD-5,” a new project near the Alpine field developed by ConocoPhillips and Anadarko Petroleum, Mack said. Strong production at Prudhoe Bay and the Kuparuk River field, which supply most North Slope oil production, were also factors.

The state Department of Natural Resources is now forecasting a 4 percent drop in North Slope crude oil production next year to an average of 505,000 barrels per day. The new estimate revises a number published April 14 in an earlier forecast, that reflected a sharp drop to 445,000 barrels of average slope output, a 12 percent decline which alarmed state legislators working on state budgets.

Ed King, a petroleum economist and the Department of Natural Resource liaison with the Legislature, said the agency adjusted figures in the earlier number to account for new production.

“New information has come in since the production estimates were prepared several months ago. When we assembled the forecast certain new projects were not included but those are included in the revision,” King said.

The forecast period is for state fiscal year 2018, which begins July 1 and extends to June 30, 2018.

The department is also estimating an increase in Cook Inlet oil production in fiscal year 2018 to an average of 17,400 barrels per day, up from a 14,900 barrels per day average for this year, fiscal year 2017.

King cautioned that North Slope production estimates could still vary, depending on the success of producers in the large Prudhoe Bay and Kuparuk River fields holding production even, as they did in 2016, King said.

The two fields provide the bulk of North Slope production and have historically declined at about 5 percent yearly. However, field operators BP, at Prudhoe Bay, and ConocoPhillips, at Kuparuk River, managed to largely stem the declines last year.

BP held production at less than a 1 percent decline at Prudhoe even after cutting its drill rigs from five to two. King said it’s uncertain that performance will be repeated in 2017 with fewer rigs at work.

In the Kuparuk River, field production was roughly even with 2015 with the decline largely offset by production from the new Drill Site 2S. CD-5, a nearby production site, also contributed new production, King said.

No new projects are expected in 2017 that will provide a similar offset to decline. However, new production projects now in construction on the Slope will begin production late 2018 and help stem decline in 2019.

These include ConocoPhillips’ new Greater Mooses Tooth No. 1 project in the National Petroleum Reserve-Alaska, with an expected output of 30,000 barrels per day, and Hilcorp Energy’s new Moose Pad project in the Milne Point field, with an expected output of 12,000 to 18,000 barrels per day.

The state spring forecast also revised a production estimate for current-year fiscal year 2017 production to an average of 523,700 barrels per day, a second straight year of increases and far greater than the 495,000 barrels per day that was projected this past December.

This includes greater output from the Prudhoe Bay than state officials expected earlier as well as more production from CD-5.

While the near-term outlook is for level production in Alaska, or a minor decline, the medium-term, to 2022, is more uncertain because low oil prices have delayed some projects that were expected to come on line in that period, according to Paul Decker, chief of resource evaluation group in the state Division of Oil and Gas.

Those include Caelus Energy’s Nuna project, which could produce 25,000 barrels per day, and Mustang, a small project planned by Brooks Range Petroleum, which will be able to produce 12,000 barrels per day to 15,000 barrels per day. Both are on hold and are unlikely to be put into production before 2022.

However, prospects are brighter for the long-term beyond 2022, Decker said, although this may depend on some improvement in oil prices. Armstrong Oil and Gas and Repsol are engaged with regulators on approvals of the Pikka project, which will be capable of producing 120,000 barrels per day, and ConocoPhillips has its GMT-2 in the NPR-A, which could produce 25,000 to 30,000 barrels per day, the company has said.

King said both of those projects are at least five or six years out.

Further out in the queue is Willow, a new ConocoPhillips discovery in NPR-A, that could be capable of 100,000 barrels per day, and Caelus Energy’s discovery at Smith Bay, in state-owned offshore waters north of the NPR-A, the company believes might produce 200,000 barrels per day.

Tim Bradner is co-publisher of Alaska Legislative Digest and a contributor to the Journal of Commerce. He can be reached at

Posted May 19, 2017 by aurorawatcherak in Alaska, Uncategorized

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When a Petroleum Reserve is a Park   Leave a comment

Last year Secretary Salazar released a new Integrated Activity Plan and Environmental Impact Statement (IAP/EIS) for the 23 million acre National Petroleum Reserve- Alaska (NPR-A).  The plan, which had been under consideration for a year and gone through a public comment period, closed 30% of the reserve to oil and gas exploration in the SW and NE corners and allowed oil exploration in roughly half.

Alaska’s delegation to Washington and the Governor derided the plan as treating an officially designated petroleum reserve as a wildlife refuge. Rex Rock of the Arctic Slope Regional Corporation (ASRC) which owns land within NPR-A and whose Alaskan Native shareholders subsist off the lands in question stated, “the Department of the Interior is locking up the most prospective areas for increased domestic energy supply, while proposing lease sales on tracts of land with low oil potential”.  Secretary Salazar said in his announcement that the version of the plan chosen was drafted with the strongest conservation measures in mind. Four plans were released in March 2011 by the Bureau of Land Management (BLM) part of the Dept. of Interior.

NPR-A is the largest petroleum reserve in America and was established during WWII as a possible source for domestic oil supply. The reserve lies in the northcentral region of Alaska just to the west of Prudhoe Bay and Alpine oil field. Since 2000, 29 private wells have been drilled in NPR-A. The US government has drilled and abandoned without cleanup 136 wells there (Google Lisa Murkowski and legacy oil wells). Not a single barrel of oil has been produced from the area, mainly due to the lack of roads and pipelines to NPR-A. Permits to cross the bordering Colville River to link to pipelines in Prudhoe Bay and the Trans Alaska Pipeline have been blocked. In May 2011 President Obama stated he supported yearly lease sales in NPR-A to allow for greater domestic oil production. Many Alaskans consider the President’s optimism a political red herring since the limited tracks offered had few prospects and access was being blocked by his administration. No industry would bid on land unless they thought commercial reserves they could deliver to market lay under it.

The Secretary’s new plan took 30% of the most oil-rich prospects off the table and allowed exploration in only half of the remaining. Special “no-go” zones near Teshekpuk Lake in the NE corner close to Alpine oil field just outside of NPR-A have been created as well as by the village of Wainwright where a possible Chukchi Sea pipeline would reach landfall. Yes, those areas contain the expected largest quantities of oil and/or are necessary for the transport of oil. Alaskans view this as deliberate administrative blocking to discourage development that has strong support from the Native community and the governing North Slope Borough. The Secretary, in making his decision on the plan, stated that environmental concern and conservation were his first priorities.

Secretary Salazar outright ignores the history and reality of Prudhoe Bay. Built on tundra littered with thousands of lakes and wetlands, Prudhoe Bay has managed to retain a 100% success rate with wildlife, birds and fish of the area. All species of bird, fish, mammals and plant life are monitored by law within the oil fields on multiple levels of jurisdiction. Not a single species or site has shown decline in animal population or degradation due to development. In fact, the bird and mammal populations within the oil field are higher than the surrounding areas because no hunting is permitted within the fields. Teshekpuk Lake within NPR-A is no different from other areas within Prudhoe Bay and sports no special or different wildlife or fauna than other areas on the coast.

Salazar claimed conservation of caribou and Native subsistence culture (“Native interests”) are reasons for taking land off the leasing schedule. This is completely unsupported by the Native community. Arctic Slope Regional Corporation is a Native-owned company representing the people of the area and is also one of the most active oil companies in the state. The Western Arctic Herd which migrates through NPR-A calves further to the south, not around the coast or newly restricted areas. For perspective, the Central Arctic Herd at Prudhoe Bay (to the east) has increased from 5000 to 66,000 animals and calves in the middle of the oil fields. My husband has taken photographs with a telephoto lens showing a calf sliding out of its mother. He was standing at the door of the Main Construction Camp Housing Unit.

Caribou, waterfowl, and fish do not stop moving at the edge of a “special area” but roam freely. Locking up one part of land to allow development in another means nothing to migrating animals, birds and fish. Both the North Slope Borough and the Arctic Slope Regional Corporation and all the local village corporations support development in all of NPR-A.

Both the North Slope Borough and the Arctic Slope Regional Corporation derive revenue from taxes and leases on their private land from the industry. These tax and royalty dollars pay for the construction of schools, public utilities, airports and hospitals for the Arctic communities. The USGS recently revised its estimates of oil and gas for NPR-A down from 9bbls to 1bbls with 500,000 million barrels being economically recoverable. It’s also thought that 50 trillion cubic feet of gas exist under the reserve.  This estimate includes oil from land recently taken off the table by the Secretary.

Some of the areas taken off the table by the Secretary in plan B-2 are areas that had already been leased to commercial entities and that have proven oil potential.  Authority to operate these leases will have to be rescinded by the government, bringing into question the entire leasing process.

Recently problems with ConocoPhillips “CD-5” drill site just inside NPR-A on Native lands were cleared up but showed the inconsistencies and double standards of the federal agencies involved in permitting operations.  Despite issuing environmental operations permits itself for the project, the EPA disapproved and prevented US Corps permits on construction of a bridge to the site. Yes, the EPA issued permits for the project and then disapproved the Corps permits for the same project. The project was delayed for three years while ConocoPhillips continued to pay on the federal lease every year without the ability to produce from it. The permit that was finally issued included 22 special conditions meant to minimize the impact to the environment within the Arctic Coast Plain. Now, seven members of the village of Nuiqsut (a village created – along with Atqasuk — in the 1970s for the express purpose of soaking the oil companies) are suing to prevent the bridge across the Colville River from being built and the Center for Biodiversity has announced its planning to sue under the Endangered Species Act.

And people wonder why Alaskans think we might be better off as an independent nation? Really??? You wonder? Isn’t that a little like wondering why a battered wife wants to leave the man that’s beating her?

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