Sun hasn’t set yet on ANWR
Alaska oil advocates lauded Interior Secretary Ryan Zinke’s order directing federal agencies to reevaluate the oil and gas potential within the National Petroleum Reserve-Alaska and the coastal plain of the Arctic National Wildlife Refuge, but what did it get them?
The answer, unsurprisingly, will largely depend on how much money is willing to be spent and who will spend it.
The secretarial order, signed May 31 in front of a cheering crowd during the Alaska Oil and Gas Association’s annual conference in Anchorage, directed resource evaluators in the U.S. Geological Survey and the bureaus of Land Management and Ocean Energy Management to send operational plans within 21 days of the order to execute the resource assessments up the chain of command.
By all counts, those plans and budgets for them were submitted on time.
Next, the Counselor to the Secretary for Energy Policy is supposed to collate the three plans into a document for Zinke — himself a geologist by trade — to review by July 1.
While the USGS is the federal government’s collection of underground experts and their associated data and has done hydrocarbon resource assessments in the past, BOEM stores and interprets resource data for BLM, which manages the NPR-A, according to USGS Senior Research Geologist David Houseknecht.
Houseknecht led or participated in the drafting of similar assessments of the NPR-A in 2002 and 2010 and the ANWR coastal plain in 1998, and is well-regarded by many geologists that have studied the North Slope.
He declined to comment on the details in the USGS plan as it is still in the amendment phase, but said without additional funding it would be unlikely that his agency would be able to gather much new data.
Key new information would almost certainly come in the form of 3D seismic data, the acquisition of which has in recent years pretty much become an industry standard prerequisite for nearly any investment in a prospect.
A seismic program conducted from 1983 to 1985 in the 1.5 million-acre ANWR coastal plain collected 1,180 miles of 2D data, but geologists today often compare it to an X-ray of the earth; 3D seismic is likened to an MRI.
During the winter of 1985-86 Chevron and BP partnered to drill the KIC-1 exploration well on ANWR in-holdings owned by Kaktovik Inupiat Corp. and Arctic Slope Regional Corp. It is the only well drilled in ANWR and what was found remains one of Alaska’s best-kept secrets.
As for the NPR-A, Houseknecht hinted that Interior leaders might want to get the assessment done before much new data can be collected.
“With the timeframe we have to work with it’s unlikely any new seismic will be acquired within the NPR-A, but certainly the workflow will include the USGS and BOEM together analyzing data that already exists,” he said.
Zinke’s order states the joint assessment plan for the NPR-A and Section 1002 of ANWR “shall include consideration of new geological and geophysical data that has become available since the last assessments, as well as potential for reprocessing existing geological and geophysical data.”
While that may not sound very exciting to those hoping for a comprehensive new look at the oil potential of the state-sized federal holdings on each end of the North Slope, Houseknecht said there is already a lot of 3D data available for the northeast portion of the NPR-A, which is the area closest to existing oil infrastructure.
Companies occasionally provide seismic data to government geologists for licensing and evaluation on the premise the data itself remains private.
The ANWR coastal plain is regularly called the “1002 area”, a reference to the section of the 1980 Alaska National Interest Lands Conservation Act, or ANILCA, that describes it. ANILCA established many of the designated federal areas in Alaska, including ANWR.
Section 1002 of the exhaustive legislation called for the initial wildlife and hydrocarbon resource assessments and outlines the subsequent steps for oil and gas exploration and development if Congress were to approve it.
Federal refuges are usually off-limits to such activity, but the proximity of the coastal plain to the mega fields of the central North Slope pushed Congress to make an exception regarding ANWR.
When ANILCA was passed the country was also heavily dependent on imported oil and the 1973 OPEC embargo on exports to the U.S. was not a distant memory.
Alaska’s congressional delegation has long led a Republican effort in Congress to pass legislation opening the 1002 for exploration. It passed Congress once as an amendment to a budget bill President Bill Clinton ultimately vetoed in 1996.
President Donald Trump has $2 billion in revenue from an ANWR lease sale in his 2018 budget proposal.
The Alaska delegation has again introduced legislation to open the coastal plain to exploration drilling. The bills in the House and Senate set a cap on impacted areas at 2,000 acres on the presumption exploration could be done in the winter and any development would fully utilize new long range drilling technologies.
The USGS last updated its oil and gas resource estimate of the coastal plain in 1998 and leaned heavily on the data from the mid-80s to do it, according to Houseknecht.
The agencies’ calculations were large but speculative; the mean estimate for technically recoverable oil in the ANWR coastal plain was 7.6 billion barrels, with another 3.5 trillion cubic feet of extractable natural gas.
“I’m asked every year, ‘Why hasn’t the USGS not updated its 1998 assessment?’ My first answer is always, ‘There is no new information,’” Houseknecht said.
“One thing that could be done would be to reprocess the old 2-dimensional data that were collected in 1984 and ’85 because in the last 20 years seismic processing has made leaps and bounds in terms of the capacity to enhance old data.”
Integrating data from adjacent areas and a couple offshore wells that wasn’t available before could be of some benefit as well, he added.
To attract bids, a lease sale would almost certainly require substantial 3D seismic data to be available to companies, Houseknecht said further.
In 2013, former Gov. Sean Parnell’s administration, which included current Sen. Dan Sullivan as Natural Resources commissioner, submitted a work plan to the Interior Department that would’ve had the state fund up to a $50 million winter 3D seismic shoot in the 1002 area.
The administration attempted to use a section of ANILCA that it believed allowed any entity to submit a qualifying exploration plan for the area, but then-Interior Secretary Sally Jewell rejected the proposal and ultimately had her decision upheld by the U.S. District Court for Alaska.
Current DNR Commissioner Andy Mack said the Parnell administration had a solid plan.
“Understanding the resource potential in that area is critically important,” Mack said in a June 14 interview.
The Walker administration is open to resubmitting a winter seismic application for ANWR, according to Mack, and would be happy to partner with industry on an application as well.
Mack also said the administration is willing to support the effort financially at some level, but neither he nor Houseknecht could say how far $50 million would go.
“That was 2013 — different budget times,” Mack said. “But I think most Alaskans would look at this as a solid investment in the future.”
Alaska environmental groups were not pleased with Zinke’s order, contending it is the first step towards drilling in the renowned refuge.
However, Mack said he believes a very large majority of Alaskans want to see ANWR opened up.
In early 2015 the state Revenue Department estimated large-scale oil production in ANWR could eventually net the State of Alaska upwards of $150 billion, but that was at $100 per barrel oil.
Under current federal law the state would receive 90 percent of royalty revenue from production, but that could change in legislation to open it to drilling, if it were to pass. The state production tax would also apply.
Recent large oil finds in or adjacent to the eastern portion of the NPR-A mean it’s almost a given the resource estimate figures for the 22 million-acre parcel would go up significantly, according to Houseknecht.
The NPR-A was last assessed in 2010 when the USGS estimated it holds about 900 million barrels of recoverable oil and a very large natural gas resource with a mean estimate of 53 trillion cubic feet.
That was after a 2002 assessment put the expected mean oil resource at more than 9 billion barrels.
“I was on everybody’s dirty list when I reduced the oil estimate, or we did, in 2010,” Houseknecht recalled.
The 2002 estimate was based in part on the assumption that the oil in the Alpine formation found on the east edge of the reserve continued halfway into it, he added. But within two years ConocoPhillips had drilled exploration wells west of Alpine that found mostly gas and little oil.
So the 2010 assessment was scaled back, and it put the largest NPR-A oil accumulations in the 250 million-barrel range and said the largest finds in the Nanushuk or Torok stratographic trap formations would likely recover about 10 million barrels.
Last October Caelus Energy announced it discovered up to 2.4 billion recoverable barrels in the Torok formation in the state waters of Smith Bay, just offshore from the NPR-A.
ConocoPhillips also revealed its discovery of 300 million recoverable barrels in the Nanushuk in the NPR-A in January. Repsol and Armstrong Energy are working a 1.2 billion-barrel-plus Nanushuk prospect just to the east of the NPR-A.
The large number of bids in the 2016 NPR-A lease sale indicated renewed industry interest there, too.
Zinke’s order also called for a review of the NPR-A Integrated Activity Plan, and the prospect of more oil in the reserve could be used as support for reopening areas closed to leasing under the last NPR-A plan in 2013.
If the land-use plan for the NPR-A is overhauled it won’t happen quickly, as it involves a multi-year environmental impact statement.
“As new data becomes available our perspective changes on these rocks and how much oil they may contain,” Houseknecht said.
Elwood Brehmer can be reached at [email protected].