Resource Development Council
New federal OCS plan is a mixed bag for Alaska

In a landmark decision on national energy policy, Interior Secretary Ken Salazar recently announced expanded oil and gas development on the U.S. Outer Continental Shelf (OCS), along with an aggressive effort to increase use of renewable energy sources such as wind and solar.

Recognizing that the U.S. will be dependent on fossil fuels for two-thirds of its energy needs in 2030, both Salazar and President Obama told the nation that America must produce more oil and gas domestically and reduce its reliance on foreign sources. He said new oil and gas development will help sustain economic growth, create jobs and maintain business competitiveness.

While the plan calls for expanded leasing in Lower 48 offshore areas, for Alaska, the new energy policy is a mixed bag.

On one hand, it signals support for exploration on federal oil and gas leases already issued in the Chukchi and Beaufort Seas. Such support is good news for Shell and other companies looking to launch exploration programs in the Arctic. Shell has paid more than $2 billion to the government for leases in the Chukchi, and has spent heavily on studies and permitting.

The Interior Department will also move ahead with a planned lease sale in Lower Cook Inlet in the current five-year program.

On the other hand, the Department of the Interior removed four lease sales planned for the Chukchi and Beaufort Seas from the current leasing program, which ends in 2012. Those sales have been deferred to the 2012-2017 program for potential inclusion, pending more studies and research. Moreover, the North Aleutian Basin was removed altogether from future leasing.

New lease sales will be scheduled in the eastern Gulf of Mexico, off the coast of Virginia and much of the mid-Atlantic.

Obama said the new plan reflects an emphasis on science rather than political ideology in balancing energy development needs and environmental protection.

“That’s why my administration will consider potential areas for development in the mid and south-Atlantic and the Gulf of Mexico, while studying and protecting sensitive areas in the Arctic,” Obama said. “That’s why we’ll continue to support development of leased areas off the North Slope of Alaska while protecting Alaska’s Bristol Bay.”

Salazar said, “by responsibly expanding conventional energy development and exploration here at home we can strengthen our energy security, create jobs and help rebuild our economies.” The Interior Secretary said the administration’s strategy calls for developing new areas offshore, exploring frontier areas and “protecting areas that are too special to drill.”

Mayor Edward Itta of the North Slope Borough was pleased at the deferral of further Arctic lease sales to at least the next five-year program beginning in 2012 and said the decision, overall, was a balanced one, given it allows exploration on existing leases

Governor Sean Parnell expressed concern, noting the plan creates uncertainty about future oil and gas leasing in the Arctic. “Although the plan calls for expanded leasing in the Lower 48 offshore areas, uncertainty remains about the future of OCS leasing in Alaska, particularly in the Chukchi and Beaufort Seas during the 2012-2017 leasing period,” Parnell said. “Few areas of the United States possess the potential of Alaska’s northern OCS area. By not maintaining a predictable program in the Alaska OCS, 35,000 job opportunities are unavailable to Alaskans, the cost of energy will go up, and the U.S. will continue to depend on imported oil.”

Senator Lisa Murkowski said, “I appreciate the department’s decision to allow valid existing rights to explore Alaska’s huge offshore oil and gas reserves to go ahead.”

Senator Mark Begich added, “Although I want to see more details, it appears President Obama has struck a careful balance between environmentally responsible development in Alaska’s outer continental shelf and conducting additional science to ensure other resources, such as marine mammals, are protected.”

Congressman Don Young called the plan a “ploy” to restrict exploration, explaining that it prevents leasing in areas that had previously been approved under the Bush administration.

Since the recent events in the Gulf of Mexico, opponents of offshore drilling are calling for a freeze on new exploration and development in the Arctic and elsewhere. However, there are important distinctions between drilling in the deep waters of the Gulf of Mexico and the relatively shallow waters of the Alaska OCS. In the Chukchi and Beaufort Seas, exploration would occur in water 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 Horizon well was drilling in 5,000 feet of water to a depth of 18,000 feet. The pressure encountered in the Horizon wells and others like it in the Gulf is multiple times greater than in Alaska where wells would be drilled to a depth of 10,000 feet.

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 a down-hole event. Moreover, because of the much lower pressure, the weight of the drilling mud remaining in a well would effectively shut off the well in the highly unlikely event of an incident. Moreover, the relatively shallow water depth would allow blowout preventers to close much more rapidly than those in deep water.

There has never been a blowout in the Alaska or Canadian Arctic. Thirty wells have been drilled in the Beaufort and five in the Chukchi – all without incident.

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