Resource Development Council

RDC Comment Letter:
Alaska OCS Comment Letter

September 7, 2010

Mr. Michael Bromwich, Director
Bureau of Ocean Energy Management, Regulation & Enforcement
381 Eldon Street MS 4010
Herndon, VA 20170

Re: Alaska OCS

Dear Mr. Bromwich:

The Resource Development Council (RDC) appreciates the opportunity to submit comments about future responsible development along Alaska’s Outer Continental Shelf (OCS). RDC urges the Bureau of Ocean Energy Management, Regulation & Enforcement (BOEM) to lift the current ban on exploration activities in the relatively shallow waters of Alaska’s OCS. Operating conditions in these waters are categorically different than those in the deep waters of the Gulf of Mexico and pose much lower risk. Moreover, the processes and safeguards in place today in Alaska should allow leasing and exploration activity to resume on the Alaska OCS.

RDC is a statewide membership-funded organization founded in 1975. Our Alaskan membership is comprised of individuals and companies from Alaska’s oil and gas, mining, timber, tourism, and fisheries industries, as well as Alaska Native corporations, local communities, organized labor, and industry support firms. RDC’s purpose is to link these diverse interests together to encourage a strong, diversified private sector in Alaska and expand the state’s economic base through the responsible development of our natural resources.

RDC supports offshore exploration in the Alaska OCS because it is confident operations can occur safely. However, since recent events in the Gulf of Mexico, opponents of offshore drilling are calling for an indefinite ban on new exploration and development in Alaska. RDC sharply disagrees. While the tragedy in the Gulf reminds us there is always a risk to developing domestic energy resources, we cannot simply ignore our need for oil and gas.

RDC and many Alaskans share President Obama’s view that America needs to conserve more and put new emphasis on renewable and alternative energy. By doing so, the nation can ultimately break its reliance on foreign oil. Yet while America must conserve more and move toward renewable energy, it still needs to pursue new oil and gas production, given the fact it will take decades before renewable energy becomes a dominant energy source. Even with the Obama administration’s goal to decrease dependence on oil, it is projected that fossil fuels will still account for two-thirds of this nation’s energy consumption in 2025.

Where will the oil come from to meet this demand? The OCS is the most logical choice, given its immense potential. If not the OCS, then where? For every barrel of oil not developed domestically, the nation will have little choice but to import another from foreign countries – where weaker environmental regulations often apply. Given economic and geopolitical concerns, that barrel should be produced here in Alaska – under American laws, regulations and oversight, and by American workers.

Drilling in the Arctic does pose unique challenges, but it also offers distinct advantages over deepwater exploration and development. There are also major differences between state and federal oversight and regulatory frameworks, as well as fundamental differences in the geology of the regions. All of these contrasts warrant special consideration in public policy decisions and should lead the BOEM to conclude that exploration should move forward offshore Alaska.

Important distinctions between Alaska and the Gulf include water depth, geology, and seasonality of drilling operations. In the Chukchi and Beaufort Seas, exploration would occur in water approximately 150 feet in depth, compared to 5,000 feet or more in the Gulf. The wells being drilled in the deep waters of the Gulf are also significantly different than those that would be drilled in Alaska, not only in water depth, but down-hole pressure. The pressure encountered in deepwater drilling is multiple times greater than in Alaska where wells would be drilled to a depth of 7,000 to 10,000 feet, compared to 20,000 feet in the Gulf. With the lower pressure, the safety margin in Alaska drilling is much greater and drillers would have significantly more time to identify and respond to an event. In addition, the relatively shallow water depth would allow blowout preventers to close much more rapidly than those in deep water. The blowout preventers would also be directly accessible to dive teams, unlike the Gulf where any maintenance or repairs must be accomplished by remote control vehicles. Another distinction is that many Alaskan offshore operations are seasonal in nature. For example, Shell has proposed conducting its exploratory drilling during the summer and fall open water season. Ice management vessels will be positioned on site to deflect any ice flows that could potentially approach a rig.

There has never been a blowout in the Alaska or the Canadian Arctic. Thirty wells have been drilled in the Beaufort and five in the Chukchi – all without incident. These wells were drilled in the 1980s, utilizing older technology compared to what exists today.

Advances in technology provide an additional measure of confidence in Alaska drilling. Energy development in Alaska is subject to in-depth analysis by federal law, a stringent permitting process, and oversight by state and federal agencies. In every instance, development is preceded by extensive studies. The North Slope and the offshore are now perhaps the most studied energy basins in America. The federal government has spent more than $300 million on studies in Alaska and in the past decade the agency has funded over 250 studies here, with the majority of those focused on the Beaufort and Chukchi Seas.

RDC recognizes that subsistence whaling is vitally important, both economically and culturally to North Slope villages. Industry and government working together have the ability to protect subsistence resources while producing needed domestic energy for the nation. Strong regulatory oversight, combined with other mitigation measures, can be employed to protect all resource and subsistence users.

Opponents of oil exploration have cited the lack of infrastructure in the Arctic as a reason not to drill in the region. However, it is important to note that additional infrastructure will be built to accommodate future needs once a green light is given to exploration and development activities. The lack of infrastructure today is directly due to the fact that there has been virtually no development or commercial activity of any kind offshore in the Arctic. However, Shell has committed to stage extensive resources onsite to immediately respond to any incident. The company has also committed to building and staging in the region a pre-fabricated dome to place over a troubled well. Moreover, virtually all functions of Shell’s operations will be monitored at remote sites off the rig, giving industry and government critical “real-time” data and allowing for early detection of potential problems. In addition, the Alaska Clean Seas consortium has substantial resources and experience in the Arctic and has done extensive mapping to identify sensitive areas. The consortium has also conducted extensive drills in the Arctic and has active research programs dating back into the early 1980s.

It is important to note that not all questions and concerns regarding oil and gas exploration and development can possibly be answered and met. Not all risks can be eliminated. If the federal government insists that every concern and risk be eliminated, then it must be prepared to import virtually all the oil it requires to meet future needs. It must then also accept the consequences of a much heavier reliance on foreign oil, including soaring trade deficits, a weaker and more vulnerable economy, and compromised national security. Put another way, failure to move forward with OCS development in Alaska will put the economy at risk, as well as the nation’s security. RDC has a high level of confidence that exploration and development can occur safely in the Arctic and that mitigation measures can be put in place to address most concerns and minimize impacts to the environment, polar bears, and other species.

The responsible development of potentially immense oil and gas deposits in the Arctic would significantly boost Alaska’s economy and extend the life of the trans-Alaska oil pipeline. The Alaska OCS has the potential to sharply increase throughput in the pipeline, which is currently operating at one-third capacity. Without new significant discoveries of oil, the pipeline could be uneconomic to operate at some point after 2020. In addition, OCS gas reserves would significantly improve the long-term economic viability of the proposed gas pipeline from the North Slope to the Lower 48 – a clean energy priority of the Obama administration. To become a reality, the pipeline requires additional gas reserves beyond what has already been discovered onshore.

New production in the Alaska OCS would also reduce America’s reliance on foreign energy. The Alaska OCS is an important future source of U.S. energy supply with an estimated 27 billion barrels of oil and 132 trillion cubic feet of natural gas potentially in place. By comparison, total production from the North Slope over the past 32 years has been approximately 16 billion barrels. The potential recoverable reserves offshore Alaska is more than all the current total proven U.S. oil reserves of approximately 21 billion barrels. Alaska would have the ninth largest oil resources in the world ¬ ahead of Nigeria and Libya – if access is granted to these potential reserves.

Yet despite this potential, the U.S. chooses to import 60 percent of the oil it consumes – at a great cost. Not developing its reserves in Alaska and those elsewhere in the American OCS makes no sense from an economic and energy security stand point. American oil production is projected to decrease by 9.9 billion barrels within the next 20 years, nearly a 15 percent annual decrease from current levels. Meanwhile, imports of oil from OPEC are projected to increase by 4.1 billion barrels, nearly 19 percent – and at a cost of $607 billion.

Given its potential for immense recoverable reserves and enormous economic benefits to the state and nation, the Alaska OCS should be opened to responsible development. OCS development would generate hundreds of billions of dollars in royalty and tax revenues to the state and federal governments and aid the nation’s economic recovery by reducing the trade deficit and creating tens of thousands of new jobs. OCS leases off Alaska’s coast have already generated billions of dollars to the federal treasury.

With its enormous potential reserves, the OCS can sustain Alaska’s economy for generations. Currently there are more than 108,000 Alaskan jobs tied to the discovery, production and shipment of Alaskan oil and natural gas, accounting for more than 15 percent of Alaska’s population. According to a University of Alaska study, OCS production could provide an annual average of 35,000 additional jobs within the state for 50 years and $72 billion in new payroll.

It is vital that our nation’s abundant energy resources be fully utilized for compelling economic and energy security reasons. RDC encourages BOEM to lift the ban on drilling in the Chukchi and Beaufort Seas and to work closely with the State of Alaska and local governments to ensure development coexists with subsistence activities and other uses.

Thank you for the opportunity to provide comments on Alaska OCS development and oil spill preparedness and response.

Resource Development Council for Alaska, Inc.