Expanded Offshore Alaska Oil Drilling?
Author: Yereth Rosen
ConocoPhillips' COP.N Cosmopolitan unit north of Homer is so close to shore that all drilling is being done from land. Just a tiny amount of the targeted hydrocarbons are in federal territory; most of the unit actually lies on state leases within three miles of the coast.
Such is the modest state of oil development in Alaska's federally managed outer continental shelf, where drilling means high costs, forbidding conditions, sometimes strident citizen opposition and minimal success.
Now the Bush administration wants to reverse those fortunes.
While the president's push for onshore oil drilling in the Arctic National Wildlife Refuge has foundered, his administration is aggressively promoting offshore oil exploration in wide swaths of Alaska's federal waters, which are unaffected by leasing bans in much of the Lower 48 coastline.
The Interior Department's Minerals Management Service plans eight oil and gas lease sales in the coming five years.
First on the new leasing schedule is a Sept. 24 sale for 9.4 million acres in the Arctic's Beaufort Sea; next is a May, 2004 sale for federal areas of Cook Inlet, the channel that runs from Anchorage to the Gulf of Alaska. Other regions, like the Chukchi Sea, which separates Alaska from Siberia, are also up for future leasing.
The program contrasts to the Clinton era, in which outer continental lease sales were few and narrowly focused. Only two Alaska lease sales have been held since 1997, and acreage was limited to avoid environmentally sensitive areas and to concentrate on near-shore sites considered most feasible for exploration.
Interior Secretary Gale Norton says past leasing was too conservative. "Too many lease sales were canceled or reduced greatly in scope in the previous decade," she said in a recent Anchorage speech. "This greatly hindered companies from planning to participate in sales."
Administration officials have their highest expectations for the Beaufort. Government geologists estimate it holds nearly 7 billion barrels of recoverable oil, but only 30 wells have been drilled there since leasing began in 1979.
"There's been very little drilling for the size of the sea. Thirty wells is nothing," said Rance Wall, MMS regional supervisor for resource evaluation.
To entice interest, the agency is offering Beaufort Sea royalty breaks similar to those granted for Gulf of Mexico exploration. Oil producers could be entitled to produce as much as 45 million barrels royalty-free, under the program.
But past experience in the Beaufort, as elsewhere in Alaska's federal waters, may offer little encouragement for new exploration.
There was the infamous Mukluk prospect, where companies bid billions of dollars for drilling rights and BP in 1983 poured $120 million into one well. The result was the world's most expensive dry hole.
BP BP.L last year shelved another offshore project, the 120-million barrel Liberty field, after costs of its offshore Northstar field mushroomed to nearly twice initial estimates.
Earlier this year, EnCana ECA.TO plugged and abandoned its offshore McCovey prospect, even though Gov. Frank Murkowski had touted it as holding the potential to produce 300,000 barrels a day and lift Alaska out of its fiscal doldrums.
Meanwhile, there is fierce citizen resistance to some offshore drilling. The North Slope's Inupiat Eskimos, though supportive of onshore oil development and its economic benefits, oppose drilling in their whale-hunting grounds.
They and their environmental allies say industrial noise and lights harm whales, polar bears and other wildlife, and that an oil spill in the shifting Arctic pack ice would be an ecological nightmare.
"I've never seen the capability of industry to effectively do any mechanical cleanup in the OCS, even in the nearshore," said Gordon Brower, a North Slope Borough land-use special assistant.
On the Kenai Peninsula south of Anchorage, attitudes are mixed about oil leasing in the feder