Alaska proves potential of resource development

Alaska is the nation’s best proof that natural resource development, particularly in oil and gas, translates to a vibrant economy and public well-being, the president of the nation’s oil and gas trade group said May 29 in Anchorage.

“You and your predecessors have demonstrated that developing energy resources to promote economic growth and to improve the lives of your citizens need not come at the expense of your state’s stunning natural beauty or other natural resources,” American Petroleum Institute President Jack Gerard told business and community leaders at a luncheon during the Alaska Oil and Gas Association’s annual meeting.

Although the state has now slipped behind other states in oil production, Gerard said a revival of industry activity on the North Slope and Cook Inlet, thanks to the state’s shift in of its tax structure, could change that.

Overall, the state has set a dramatic example that new energy states like North Dakota are copying.

“Alaska is one of the best examples of how energy policy can change not just the trajectory of energy production, but how it can greatly improve the enhance the lives and livelihoods of its citizens,” Gerard said in his prepared remarks.

Texas has always understood this connection and North Dakota does so now, but Washington, D.C., hasn’t gotten the message. Industry activity is booming on private and state-owned lands but lagging on federal lands, Gerard said.

“According to the Bureau of Land Management, from 2008 to 2013 the number of drilling permits issued on federally-controlled onshore land dropped by 40 percent while the actual number of wells dropped
50 percent, which of course further decreases production.

“A Congressional Research Service study has found that in federal areas, production from 2009 through 2012 was down 6 percent for oil and 21 percent for natural gas.”

Activity on private and state lands showed a sharp contrast.

“Where development does not need permission from the federal government, oil production is up 31 percent and natural gas production is up 24 percent. “This difference is not due to geologic science, but rather political science.

“Nationally, the right energy policies could result in an increase of 1 million jobs in seven years,” he said.

In 2011, the petroleum industry provided a $528 billion boost to the U.S. economy, he said.

Gerard called on President Barak Obama to show more leadership on energy and cited the stalled Keystone Pipeline project as an example of federal policy in a muddle.

The government’s consideration of the project is now in its sixth year, “with no end in sight,” Gerard said. He pointed to construction of the Trans-Alaska Pipeline System in he 1970s, a project just as controversial as Keystone in its time, as an example of what can be done when industry, regulators and politicians work together, “for the common good to advance a vital energy infrastructure project,” he said.

TAPS was built in 38 months.

“For perspective, this administration has been evaluating, studying and otherwise delaying the Keystone XL pipeline for almost twice as much time as it took to build the Trans-Alaska Pipeline System,” Gerard said.

There are now 80 pipelines that carry oil and gas across the U.S.-Canada border. Keystone is the only one that has become bogged down.

In an interview separate from his address, Gerard said the delay in Keystone has resulted in a shift of crude oil movement from Alberta and North Dakota to rail, which the U.S. State Department now acknowledges will result in more carbon emissions than would the Keystone pipeline.

In Alaska, Gerard said in the interview that his organization and others on the national level are closely watching federal initiatives like the U.S. Environmental Protection Agency’s move to preempt minerals development in a huge area of Southwest Alaska. It is a dangerous precedent with national implications, Gerard said.

The industry is also closely watching for the U.S. Interior Department’s final special rules on Arctic drilling, which Shell and other companies interested in the Arctic are waiting for.

On a national level, API is best known for its advocacy and education work on behalf of industry but one of the organization’s main functions, and its original purpose, is to set technical standards. API was founded in 1919 in New York partly at the request of the federal government after World War I showed that the nation’s defense and military capabilities will be heavily influenced by the ability to efficiently produce and supply fuel.

That’s still a main function of API and its various standards and certifications are now considered the international standards for most oil and gas producing nations, Gerard said. Even China is working to match its own standards with those of API, mainly so Chinese manufacturers can sell petroleum-related equipment in international markets where API standards and certifications are observed.

Most of API’s 400-odd employees are in the U.S., and most of those in Washington, D.C., but the organization also has offices in Dubai, Beijing and recently opened in Rio de Janeiro. An office is planned soon in Milan.

Most of the work these offices do is related to certifications to API technical standards, he said.

API conducts a review of its standards every five years so there is a constant effort to keep them up to date.

Another important task for API is to form industry task forces to tackle certain problems. After the Macondo well blowout on the Gulf of Mexico in 2010, API convened a joint industry task force to review industry practices related to offshore drilling and safety. The task force recommendations were subsequently relief on by regulations in their review of the accident.

“As issues arise we are able to put these groups together, and to also include the regulators and the academic community to get the best thinking,” on the problem, Gerard said.

11/21/2016 - 3:07pm