2003 RDC Annual Meeting: Elevating Expectations:
Current & Future Development Opportunities

Patty Morrison, Deputy Assistant Secretary,
Lands & Minerals Management, US Department of the Interior

Thank you, Kevin for that gracious introduction.

I’d like to discuss the accomplishments of both BLM and MMS in Alaska and their efforts in meeting the goals of the National Energy Plan. Let me first acknowledge the tremendous effort and cooperation between the state and federal government resulting in the renewal of the right of way for the Trans-Alaska Pipeline for 30 more years.

Without this administrative renewal, we would not even be discussing the National Petroleum Reserve, Alaska, leasing in the Outer Continental Shelf of Alaska, or, with great hope, ANWR as central components of President Bush’s National Energy Plan and our commitment to fulfilling the National Energy Plan.

Within the last two years, the conversations were consumed with details of the renewal. Now the pipeline is a given and not even mentioned at planning sessions.

The National Energy Plan recognized the need for the oil flowing through the Trans Alaska Pipeline to heat and light homes, and fuel our vehicles. This oil supports the quality of life to which we are accustomed and reliant upon.

The economic stimulus to the American economy from new oil discoveries provides for a fiscally strong local, state and federal government.

The National Petroleum Reserve-Alaska, at over 23 million acres, is the largest contiguous block of public land administered by the BLM, and is certainly a high priority area for this administration. We are revisiting the Northeast Management Plan through a supplemental EIS and are preparing the final EIS for the Northwest Management Plan.

As you know, we have held two lease sales for Northeast National Petroleum Reserve-Alaska. In 1999 and 2002, we’ve leased 193 tracts totaling 1.4 million acres and collected $167 million in bonus bids.

Henri Bisson, State Director for BLM in Alaska, has made it a goal and a priority to complete the final record of Decision for possible changes in the Northeast National Petroleum Reserve-Alaska by the end of next year, 2004, with a subsequent lease sale to be held in June of 2005.

The revised plans will consider areas previously left unavailable to oil and gas development. BLM geologists and petroleum experts believe these areas contain more than two billion barrels of technically recoverable petroleum. With emerging technology and smaller footprints associated with oil and gas production, we believe the area can be safely explored without significant impact to sensitive wildlife and subsistence resources.

Much of the land near Teshekpuk Lake has important caribou habitat and migration pathways and significant breeding and molting ground for sensitive waterfowl species.

We will also consider changing current prescriptive stipulations into performance-based stipulations like those being developed for Northwest National Petroleum Reserve-Alaska. Performance-based stipulations are based on objectives rather than fixed rules allowing BLM the flexibility to adapt to changing technology.

As for industry activity within the Northeast National Petroleum Reserve-Alaska, ConocoPhillips and Anadarko have submitted a proposal for their Alpine Satellites Development Project and BLM is well underway in preparing the draft EIS. BLM expects to issue a final EIS and Record of Decision on the project early next summer.

With regard to planning activities on-going for the 8.8 million acre Northwest National Petroleum Reserve-Alaska, the draft EIS comment period recently ended with BLM receiving over 96,000 comments. By putting into action Secretary Norton’s 4 C’s - consultation, cooperation, communication - all in the service of conservation, Henri Bisson and his committed staff consulted with industry, the North Slope Borough, Alaska Natives, environmental groups and the State through Governor Murkowski to clarify issues raised by their comments and discuss proposed mitigating measures for exploration and development activities. The final EIS is due to be released the first week of October with the first lease sale for Northwest National Petroleum Reserve-Alaska scheduled for March, 2004.

Staying with oil and gas exploration and development, I’d like to move to offshore Alaska.
Much of the National Energy Plan is focused on the Outer Continental Shelf. About one year ago, Minerals Management Service came out with its 5year plan, which included 8 possible sales offshore Alaska. The number one message we heard from the industry up here was that we needed to get back to a reliable and regular offshore leasing schedule. Too many sales were cancelled or changed greatly in scope in the previous decade. This greatly hindered companies from planning to participate in sales. John Goll, the MMS Regional Director, and his staff took that to heart and we are on schedule for the initial sales in the Beaufort Sea and in Cook Inlet.

This administration has great hopes for the energy that is available off the Nation’s coasts. Presently the Outer Continental Shelf (primarily in the Gulf of Mexico) accounts for nearly 30% of the nation’s oil and gas production, with the federal portion of Northstar being the first Alaska OCS production. We have great potential off Alaska’s coasts, which will be made available for leasing on a regular basis. MMS is currently proposing three lease sales in the Beaufort Sea. Lease sale 186 is scheduled for September 24, 2003 with the two others in 2005 and 2007. Two Cook Inlet Sales, 191 and 199 are scheduled for 2004 and 2006 respectively.

As part of the process for the Beaufort Sea Sale 186, we have consulted with the Governor, and Governor Murkowski has given his full support to the sale. He did recommend that for this sale we remove key bowhead whale subsistence areas near Barrow and Kaktovik. We also received the state’s coastal zone consistency concurrence, which is non-conditional. It has not been contested by the Borough.

We realize that the offshore offers economic challenges. So one special feature for the Beaufort is that we are considering economic incentives in the form of Royalty Suspensions, price floors and price ceilings. These are patterned after the very successful incentives offered in the Gulf of Mexico over the past five years, and would be our first use of incentives in Alaska. Final determinations of the specifics should be available July 2002.

Those of you who live here need not be told the importance of Cook Inlet oil and gas to the economy of Anchorage and the Kenai Peninsula. It heats your homes, provides the light in this room, and provides feed stock to the industries in Kenai. So MMS plans to offer the federal waters in lower Cook Inlet as another option for companies in search for more oil and natural gas. MMS is now evaluating comments received earlier this year on the draft EIS for Lease Sales 191 and 199. A Proposed Notice of Sale will be released in November, with the first sale scheduled for May 2004, and a follow-up sale in 2006. In written comments, the sale has received strong support from the Kenai Peninsula Borough and even from several of the Cook Inlet fishing organizations, along with suggested measures to coordinate activities between fishing and oil and gas. As with the Beaufort, we intend to have economic incentives for Cook Inlet.

The Outer Continental Shelf off northwest and western Alaska shows very good potential, but offers economic challenges. MMS is trying a different non-traditional approach in the frontier areas of Norton Sound, the Chukchi Sea and Hope Basin. For these frontier areas, the process is driven by the interest of the industry. If there is interest, MMS will develop a sale proposal around that area of interest. If there is no interest in a particular year, we will not proceed, but will continue to seek industry’s level of interest the following year.

As you are aware, EnCana, in partnership with ConocoPhillips and ChevronTexaco, drilled the McCovey Prospect in the Beaufort Sea with the SDC. In recognition of their coordination with the North Slope communities on this project, MMS presented EnCana and Lynx Enterprises of Anchorage its national Corporate Leadership Award

Offshore, spill response during periods of broken ice has been an issue. We believe tactics are available to respond to a spill if one were to occur in these conditions. One tactic tested last year showed good promise. Rather than using man-made booms, the tactic uses the existing ice itself as a boom to pool the oil, and then bring in smaller boats that can maneuver within the ice to skim the oil. MMS plans to work with the state as it reviews its strategies for broken ice.

We are also working with the Department of Energy to investigate gas hydrates. For the future, the supply is almost limitless offshore. The estimate for OCS waters is about 170,000 TCF, though that production will be far into the future. Estimate onshore North Slope is 600-700 TCF; this likely would be available sooner, if an economic technology is developed to produced these hydrates.

If and when the North Slope Natural Gas pipeline proceeds, DOI, through BLM and MMS will actively participate in permitting that pipeline.

Let’s look at a few other initiatives and issues that have significance to Alaskans.

This past April, the Secretary issued a memorandum to the Director of the BLM, mandating that there would be no further reviews for wilderness designations on BLM lands in Alaska, thus reinstating the policy set in place by Secretary Watt over 20 years ago. Many of you wrote letters advocating this policy reversal, and we thank you for your input. As reference there are 105,772,197 acres of nationally designated wilderness in the United States, of which 58,182,216 acres is located within Alaska. That is over 55% of the nationally designated wilderness in Alaska.

After years of stalemate on issues of access and ownership, BLM issued a new policy on recordable disclaimers of interest in February. This policy allows for states to apply to the BLM for formal recognition of sovereignty over navigable waterways and historic transportation routes that go through public land. Under this rule, the State of Alaska has filed an application for the Black River, which is currently under review by the BLM here in Anchorage. The state and BLM have also begun pre-application discussions for several other rivers including the Porcupine River, Klutina River, Tazlina River, Kvichak River and Wood River. BLM anticipates receiving applications on these five river systems by the end of June.

There is an exciting conclusion to potentially big problems for small miners. The state of Alaska and BLM are close to finalizing a cooperative agreement regarding bonding of mining operations on BLM land through the State of Alaska Mining Reclamation Bonding Pool. The purpose of this agreement is to define the state’s and BLM’s respective responsibilities pertaining to the administration of bonding for mining exploration and mining operations for locatable minerals under federal law on BLM lands in Alaska through the State of Alaska’s statewide bonding pool. I’d like to note that the May 16, Public Lands News reported that only 278 of 3,605 Notice level operators have been able to obtain financial assurance. With the support of BLM’s Resource Advisory Council, BLM is aggressively pursuing pilot efforts to unravel the myriad of selections and withdrawals that are currently keeping public lands in Alaska closed to resource development. The pilot projects will focus on areas with the highest economic potential. The pilot projects may include areas of state or native overselections, so the goal would be to obtain a final decision on prioritization followed by conveyance or relinquishment of overselections not needed to meet final entitlements. BLM is determined to closely examine prioritized pilot areas to make certain that economic development opportunities in Alaska are not foregone simply because no one asked the question.

This past winter, BLM-Alaska, MMS, USGS and the North Slope Borough began the North Slope Science Initiative to focus on the issue of science needs in the National Petroleum Reserve-Alaska, with the idea that we need sound science to defend our decisions and to support future development. Much of this research is already being covered by the BLM Research and Monitoring Team for the Northeast National Petroleum Reserve-Alaska. However, there has not been enough coordination between the landowners, industry and scientists. Seventeen projects that the team had recommended will go forward this summer, as planned. The current proposal would establish a Science Management Oversight Group for the North Slope consisting of a Federal, State, and North Slope Borough partnership focused on the development of a science and data management strategy that meets the needs of landowners, industry and the public. With better coordination and science, hopefully duplicate research efforts can be eliminated and a varied and larger source of monies can be brought to bear on the needed scientific research.

We are working closely with the Alaska delegation to develop legislation that would allow us to aggressively accelerate our land conveyance program. If this legislation passes and BLM acquires the necessary funds to carry out the program changes, we’ll be done in 2009 instead of 2020 as is currently scheduled. This will provide greater certainty for everyone, including native allottees, native corporations, the State of Alaska, the public and the industries that depend on access to public lands. We need to get this job done. On June 5th a draft bill was submitted to Senators Stevens and Murkowski.

Lastly, I will note that we are in the fire season and the BLM along with the Forest Service are actively coordinating their efforts to address these fires.

Thank you for the invitation to speak to you today about the exciting work Interior is doing with all of you in Alaska.