The Federal Government, through the Bureau of Land Management (BLM) and the U.S. Fish & Wildlife Service (USFWS), controls approximately 75 percent of Alaska’s North Slope. The National Petroleum Reserve Alaska (NPR-A) to the west of the Colville River is administered by the BLM. The geological prospectivity of the North Slope for oil and gas accumulations does not stop at the Colville River. This then raises the question of why after more than 60 years, has the BLM failed to initiate any commercial oil production in NPR-A?
One of the possible reasons for the slow pace of oil exploration and production has been the reluctance of the BLM (unlike the State of Alaska) to conduct regular and predictable areawide leasing. The latest evidence for this occurred in July when BLM released its “Lease Tracts 2010” in preparation for its recent August lease sale.
Since the BLM first announced in November 2009 its intention to conduct a new lease sale, the area being considered has continued to shrink. The latest announcement has now removed from an already reduced sale area released in April 2010, the entire Northwest NPR-A Planning Area (145 tracts) as well as 51 tracts from the northern part of the Northeast NPR-A Planning Area.
Many of the removed tracts had originally been located within a designated “High Potential Area.” Both the BLM and the media are reporting this as a success story in demonstrating cooperation between both government agencies and various special interest groups (NGOs). This latest move by the BLM ignores the reasons for establishing a petroleum reserve on the North Slope in an attempt to appease certain elements in Washington, environmental groups, other agencies, and the media. For Alaska, these last-minute actions by the BLM represent yet more bad news in the effort to maintain and initiate more vigorous exploration and production activities outside of state lands.
Here are some important points to consider:
1) By reducing the proposed sale areas late in a lease sale process, the BLM creates political uncertainty and a disincentive to those companies considering future investment on the North Slope.
2) Some of the most prospective areas (high on the “Barrow Arch”) have now been removed from leasing, including those closest to potential future production.
3) Once areas have been removed from a sale it can establish a dangerous precedent by allowing special interest groups to challenge any reinstatement in the future.
4) After this sale, the BLM plans to conduct yet another EIS/IAP for the NPR-A, a process that will take over two years to complete and thereby prevent further leasing until 2013 at the earliest.
5) Oil throughput in the trans-Alaska oil pipeline continues to decline and more production is required to maintain a viable operation. It is unreasonable to expect state lands to continue to support the oil pipeline when most of the North Slope is administered by federal agencies.
6) Besides areawide leasing, the BLM still refuses to consider any form of infrastructure development or exploration incentives for the NPR-A. Alternatively the state conducts annual lease sales, continues with its “Foothills West Transportation Access” proposal, and offers significant exploration incentives (even for BLM projects) in an effort to stimulate new activity levels.
7) The last time the BLM conducted a NPR-A lease sale that was overly restrictive (combined with an oil price collapse) and received no industry interest (1984), there was a hiatus of 15 years before another lease sale took place (1999).
8) There have been no environmental incidents in the NPR-A since the resumption of leasing in 1999. All seismic and drilling operations have been highly regulated and an example to the rest of the world on how oil and gas activities should be conducted in a fragile environment.
From an exploration perspective, it is disappointing to see this latest lease sale decision by the BLM. The proposed reduction in lands made available for leasing is detrimental to improving the North Slope exploration investment climate, activity levels, and ultimately new production. Without more exploration “seed corn” today, tomorrow’s production will continue to decline.
Richard (Dick) Garrard is a Petroleum Geologist.
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