North Slope production fell 8 percent last year
North Slope oil production fell almost eight percent in the state fiscal year ending June 30. Production averaged 533,000 barrels per day and was 7.96 percent below the daily average for the previous fiscal year. State petroleum geologists said the long-term production decline trend is averaging about six percent annually.
Earlier this year, Alaska slipped to fourth place in domestic oil production, behind Texas, North Dakota, and California. The combination of high oil production taxes, an uncertain and stringent federal regulatory climate, and the high cost of developing remote arctic deposits are largely to blame for Alaska’s steady decline.
Although the trans-Alaska oil pipeline is now running at about one-fourth of its original capacity, a vast amount of oil remains untapped, most locked up in federal areas both onshore and offshore Alaska. Government studies indicate there could be over 40 billion barrels of oil remaining in the region.
High taxes stop Norwegian oil project
Statoil has delayed a $15.5 billion project in the Norwegian Arctic due to a planned tax increase. Statoil said it would halt the Johan Castberg development, the biggest project in Norway’s Barents Sea, after the tax hike boosted already high break even costs.
Norway is the world’s seventh largest oil exporter. It recently announced plans for its first oil tax change in two decades. Statoil said the move reduces the attractiveness of future projects, particularly marginal fields and fields which require new infrastructure.
40th anniversary of historic Senate pipeline vote
Senator Lisa Murkowski recently commemorated the 40th anniversary of the Senate approving construction of the Trans-Alaska Pipeline System (TAPS). “Four decades ago, the Senate authorized an ambitious project to construct a pipeline across the entire state of Alaska to deliver North Slope crude oil to the Lower 48,” Murkowski said. “It was a monumental decision that has shaped the trajectory of Alaska to this day.”
On July 17, 1973, the Senate voted 49-49 to approve construction of the pipeline. The deadlock was broken by the Vice President. The House approved similar language on August 2, 1973.
Work on the pipeline began in April 1974, and finished in June 1977. More than 70,000 individuals worked on the construction of the 800-mile pipeline, overcoming extreme cold, difficult terrain and problems caused by permafrost. The first oil flowed down the pipeline to the seaport of Valdez on June 20, 1977.
Construction of the pipeline spurred exploration on the North Slope, leading to discoveries of new fields, including Kuparuk, Endicott, and Alpine. At its peak in 1988, the pipeline carried 2.1 million barrels of oil a day and accounted for 20 percent of domestic production. To date, the pipeline has delivered approximately 17 billion barrels of oil to U.S. consumers.
RDC comments on National Park Service plans
In recent letters regarding the release of Land Protection Plans (LPP) for the Lake Clark National Park and Preserve, as well as the Gates of the Arctic National Park and Preserve, RDC asked the National Park Service (NPS) to allow for multiple use of lands, including mining (exploration, leasing, development), recreation, and other uses.
RDC expressed concerns that nearby projects to the Preserves should not be curtailed by an LPP, but rather be allowed to go through the State of Alaska Department of Natural Resources’ stringent regulations overseeing mining activities statewide that effectively protect the environment, wildlife, and human health.
Additionally, RDC encouraged the NPS to address and mitigate concerns put forth by the Alaska Miners Association, and reminded the NPS to stay within the scope of its mission.
In the letters, Marleanna Hall, RDC Projects Coordinator, said “conclusions that indicate activities outside of the preserve will create a disturbance to the park and visitors not only sets a dangerous precedent, but also overlooks potential mitigation measures.”
To view RDC’s full comment letters, visit akrdc.org.
Draft rules for Arctic exploration by year-end
The U.S. Interior Department plans to have an initial draft of new rules to regulate Arctic offshore oil and gas development completed by the end of the year, according to Tommy Beaudreau, Acting Assistant Secretary for Lands and Minerals.
“It’s an aggressive schedule, and the proposal would still have to go through a formal rulemaking,” Beaudreau said.
Beaudreau, who also serves as Director of the U.S. Bureau of Ocean Energy Management, said the new Arctic-specific regulations may codify some specific permit requirements imposed on Shell, as well as propose new ones. The new rules are expected to apply to all offshore areas in Alaska.
Shell, ConocoPhillips, and Statoil are awaiting the new rules before making further commitments on offshore exploration in the Arctic.
Rick Rogers, RDC Executive Director, said exploration and production companies operating in the Alaska OCS are among the most capable and sophisticated in the world. He said the new standards should avoid being overly prescriptive, and instead set performance metrics, which allow innovative companies to determine their best technologies to meet the standards. Rogers noted Shell drilled 30 wells in the Beaufort and Chukchi seas in the 1980s without incident and the industry has been operating safely in Cook Inlet for decades.
Return to newsletter headlines
