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Date ArticleType
6/23/2016 Member News
Oil Industry Pleads for Arctic Drilling Option

Oil industry pleads for Arctic drilling option

 

The oil industry is pleading with the Obama administration not to completely take Arctic offshore drilling off the table for the next five years.

Industry groups and environmentalists, among others, made it clear in comments filed last week with the Interior Department that with Atlantic coast drilling out of the picture, they are turning their focus to the debate over the Arctic.

“Access to oil and natural gas resources in the Alaska [outer continental shelf] under balanced and science-based regulations is an essential part of the nation’s long term economic and energy security,” a coalition of industry groups, including the American Petroleum Institute and the Independent Petroleum Association of America, wrote to the Interior Department.

“America’s Alaska [outer continental shelf] can make an important contribution to sustaining our nation’s overall crude oil supplies at a time in the future when Lower 48 production — now flourishing due to industry’s development of technologies to extract oil and natural gas from shale, tight sandstone and other formations previously thought to be non-economic — is projected to be in decline,” it said.

A group of Alaska-based business and labor organizations agreed.

“A strong Alaskan economy is not simply effected [sic] by the development of the Arctic OCS — it is dependent upon it,” the group said. “Our state’s oil fields have matured over the years, and it is vital that new arenas and development opportunities are realized for the future economic security of our state.”

The defense of Arctic drilling comes despite significant obstacles to production, including a lack of market interest, hurdles from the Obama administration and fierce political opposition.

President Obama is in the process of deciding whether to allow three auctions of drilling rights in the Chukchi and Beaufort seas north of Alaska during the 2017 to 2022 planning period. It’s part of the process by the Interior Department’s Bureau of Ocean Energy Management (BOEM) to map out its schedule for drilling rights sales around the country during that time period.

The plan would significantly tie the hands of Obama’s successor, because any additional lease sales that a future president wants to authorize would require a full, time-consuming revision to the five-year plan that could be subject to litigation.

In the latest update to the plan, released in March, Obama reversed his proposal from a year earlier to allow drilling in the Atlantic Ocean. Officials still want to have numerous lease sales in the Gulf of Mexico, one of the most developed offshore drilling areas in the world.

Without the Atlantic, the Arctic is the only frontier where the oil industry has an opportunity to produce oil and gas in a new offshore area, so companies and groups are fighting to preserve it.

Oil companies have shown an eagerness to get into the Arctic, though their plans have stalled for now.

Royal Dutch Shell last year drilled the first exploratory well in the Arctic’s outer continental shelf in years but abandoned it at the end of the summer and said it has no plans to try again soon. Shell concluded that the costs of Arctic drilling do not outweigh the benefits when oil prices are so low.

Concerns about falling oil prices have spurred numerous oil companies to abandon their lease rights.

But those withdrawals and the economic factors behind them aren’t the end of the story for Arctic drilling, and oil companies want to reserve the right to try again in the future.

Statoil, a Norwegian state-owned oil company that exited Alaska in November, is lobbying for future Arctic lease sales.

“Statoil is pleased that BOEM continues to recognize the importance of Alaskan [outer continental shelf] exploration and development,” the company wrote. “Statoil believes that the three proposed Alaska [outer continental shelf] lease sales should be maintained without further access restrictions.”

When Interior kept the Arctic in the most recent version of the plan, the agency said any drilling activity would be subject to strict new environmental, climate and safety considerations, which the industry is trying to fight.

Environmentalists, meanwhile, are turning their attention to the Arctic after scoring a big win on the Atlantic.

Greens have fought hard for years against Arctic drilling, warning of the possibility of major oil spills in a harsh and unforgiving environment. They also argue that the oil and gas produced in the region would be catastrophic for climate change.

“This administration now has the opportunity and obligation to think holistically about the future of the Arctic region and to ensure that decisions prioritize the health of ocean ecosystems, proven response capacity, and a sustainable energy future,” wrote Oceana. “Removing the Chukchi and Beaufort seas from the 2017-2022 Five-Year Program is one important step to furthering those goals.”

The Natural Resources Defense Council said the administration ought to permanently block drilling in the Chukchi and Beaufort seas.

“New oil and gas leasing from America’s OCS is surplus to our energy needs, if we are to come anywhere close to the agreed-upon path to containing climate change below catastrophic levels,” the group said. “We cannot burn it without promoting catastrophic climate outcomes.”

In all, Interior received more than 2,000 comments on the five-year plan. It plans to review them and publish a final schedule by the end of the year.