BOEM director hears support for OCS drilling in Alaska

U.S. Bureau of Ocean Energy Management Director Abby Hopper got an earful in Alaska last week.

Hopper met with Gov. Bill Walker, the state’s congressional delegation and representatives of Arctic communities — all urging that Arctic offshore lease sales be included in the next five-year Outer Continental Shelf leasing schedule.

Hopper’s schedule of meetings included no opponents to offshore drilling.

She would not tip her hand on whether her recommendations to her boss, Interior Secretary Sally Jewell, will include lease sales in the Chukchi and Beaufort Seas.

Whether Jewell will take Hopper’s advice is also unknown.

The U.S. Interior Department will release a proposed new five-year schedule for OCS lease sales from 2017-22 some time this fall, Hopper said Aug. 12 in an interview in Anchorage.

Hopper did say, however, that OCS Sale 244 in Lower Cook Inlet is still on track for 2017. That sale is part of Interior’s current five-year lease sale program and the BOEM has completed a draft environmental impact statement, or DEIS, for OCS Sale 244.

Two Arctic lease sales in the current five-year program were cancelled last year due to lack of industry interest, Hopper said in the interview. The cancellations came after Shell’s decsion to pull out of the Arctic following unsuccessful drilling in the Chukchi Sea last summer, but Hopper said that even before Shell’s announcement there was no industry support for a Chukchi Sea sale, even from Shell, and only one company nominating acreage in the Beaufort Sea.

Following Shell’s announcement of its drilling results several companies, including Shell, relinquished leases in the Chukchi and Beaufort Seas and Jewell also decided against allowing Shell an extension of Chukchi leases set to expire.

The company has retained rights to one key lease, where the “Burger J” exploration well was drilled, although that lease expires in 2020. Hopper said BOEM has received no indications that Shell plans to return to do more work at the lease.

BOEM officials who sat in on the interview with Hopper said the agency will eventually receive data from Shell’s drilling, and has already received some, which can be used in its ongoing evaluation of oil and gas resources in the region.

Shell actually drilled on the Burger prospect in the Chukchi Sea in the early 1990s and made a significant gas discovery, although it was not economic at the time. BOEM officials would not comment on just what Shell found at Burger in its earlier drilling but said the information is included in the agency’s published estimates for petroleum resources in the region.

In her meetings last week Hopper said she was struck by strong support for offshore sales from Arctic Inupiat Offshore, a consortium of Alaska Native corporations in Arctic coastal communities.

“They told me that responsible oil and gas development is important in maintaining their traditional way of life,” she said, which requires, these days, economic activity and cash-paying jobs.

“Oil and gas development has brought many benefits to their communities including water and sewer, roads and other infrastructure,” Hopper said she was told, although the reference was to onshore, not offshore, industry activity.

Hopper also met separately with Arctic Slope Regional Corp., the Native regional corporation for the North Slope.

In her meetings with the state’s two U.S. Sens. Lisa Murkowski and Dan Sullivan, Hopper got a similar message.

Hopper also visited two North Slope oilfields, Hilcorp Energy’s Northstar project and the Nikaitchuq field operated by Eni Oil and Gas. Both are offshore fields in shallow water just north of the onshore Prudhoe Bay field, and part of the Northstar field extends into federal OCS leases for which Hopper is responsible.

In a visit to Alaska last spring, Hopper visited North Slope coastal communities including Kaktovik, Nuiqsut, Barrow, Point Lay, Point Hope and Kotzebue and encountered several opponents to offshore drilling in some of the villages.

Hopper said in the interview that the federal OCS Lands Act spells out criteria for decisions on whether to hold a sale including the position taken by the state’s governor, resource potential and environmental concerns and the alternative uses of the OCS.

“There is no particular priorities as to how the criteria are applied,” she said.

Even if lease sales are included in the schedule there can be no guarantee they will actually be held. Industry must first express interest in them, and a federal EIS is required.

In contrast with the Arctic sales there were expressions of interest by industry in the lower Cook Inlet sale. BOEM’s Alaska spokesman, John Callahan, said the number of nominations received from companies is confidential.

However, agency officials also said the nominations were received before the collapse of crude oil prices in late 2015. Hearings were held on the draft EIS Aug. 15, in Anchorage, with hearings also planned for Kenai and Homer.

If the sale is held it is possible that there will be a no-show by industry, which happened once before with a Lower Cook Inlet sale, an embarrassment for BOEM’s predecessor agency, the Minerals Management Service, after the expense of the EIS and lease sale preparations were incurred.

MMS also cancelled two subsequent Lower Cook Inlet lease sales when there were no nominations of acreage by companies.

If Lease Sale 244 is held BOEM would offer 1.09 million acres on 224 OCS tracts for in sale 244. The lease sale area is just south of state-owned submerged lands in upper Cook Inlet, where there are several producing oil and gas fields.

Previous Lower Cook Inlet OCS sales have included offshore acreage to the south, which is in deeper water and distant from infrastructure. The smaller, more compact acreage now being offered is closer to infrastructure and known oil and gas-producing fields.

Tim Bradner is a correspondent for the Journal. He can be reached at [email protected].


08/17/2016 - 11:54am