New OCS plan closes off 9.8 million acres of Arctic

Two days after the President Obama said he planned to ask Congress to designate 12.8 million acres of the Arctic National Wildlife Refuge (ANWR) as Wilderness, including the energy rich coastal plain, his administration moved to block exploration and development from occurring on 9.8 million acres within the Chukchi and Beaufort seas.

Combined, the ANWR coastal plain and the Outer Continental Shelf off Alaska’s northern coast contain an estimated 36 billion barrels of oil, which could refill the three-quarters empty trans-Alaska oil pipeline and sustain Alaska’s economy for decades. The offshore areas permanently closed by the latest action could contain billions of barrels of oil. Meanwhile, the area remaining open for now are estimated to contains 15.4 billion barrels.

The Draft Proposed Program, which was released in January, is to cover the years 2017 to 2022. It includes three potential lease sales in Alaska – one each in the Chukchi Sea, the Beaufort Sea, and Cook Inlet. The sales would occur in the late years of the fiveyear plan.

According to the Interior Department, four of the five areas off-limits in the draft plan were also unavailable in the previous 2012-2017 plan. The fifth area is around Hanna Shoal in the Chukchi Sea, about 100 miles off the northwest Alaska coast.

Shell’s leases, which were acquired in Lease Sale 193 in 2008, are just outside the Hanna Shoal exclusion area. Shell spent more than $2 billion to acquire the leases and has spent an additional $4 billion preparing to drill.

Shell announced last month that it intends to explore for oil on its Chukchi leases this summer if it receives approval from the federal government. In August, Shell submitted a new exploration plan to the Bureau of Ocean Energy Management (BOEM) and since then the company has been meeting with the agency on the plan.

BOEM recently completed a courtordered supplemental environmental impact statement on the 2008 lease sale. The agency is expected to reach a key decision on the document by April. Shell also needs final permits to drill this summer. If it is granted a green light, the company expects to spend $1 billion on its 2015 drilling program.

Other exclusion areas include a coastal buffer in the Chukchi Sea, the Barrow Canyon in the northeast Chukchi Sea, and subsistence hunting areas around Barrow and Kaktovik, which were omitted from previous federal offshore lease sales under a “deferred” status. However, under the new plan, development in these areas would be banned forever.

Although the 2017-2022 plan includes three Alaska offshore lease sales, there is no guarantee they will ever be held. The proposed lease sales in the new five-year plan will not be held until after President Obama leaves office.

Editor’s Note: See Industry Digest on page 11 for related story on new Arctic regulations.

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