ConocoPhillips said on Thursday it will not move forward with an oil-patch prospect that could produce the first drops of oil from the nation's largest reserve unless the federal agency in charge accepts its proposed development plan.
At issue is a project known as Greater Moose's Tooth Unit 1 in the northeast corner of the National Petroleum Reserve-Alaska, an Indiana-sized chunk of untouched federal land on Alaska's North Slope west of Prudhoe Bay.
The project is considered critical for oil-dependent Alaska. It received key support last week, with the U.S. Army Corps of Engineers saying it will permit for an 8-mile access road and other infrastructure near the Inupiat village of Nuiqsut.
But it's not the Army Corps that will make the final call on what development plan can go forward. Instead, the Bureau of Land Management, which oversees the 23-million-acre reserve, will make that decision.
Observers say BLM's announcement will help determine how, or even if, future oil development occurs at other prospects in the untapped reserve, set aside in 1923 to provide fuel for the military. (NPR-A is not to be confused with another massive chunk of undeveloped federal land to the east, the better-known 19-million-acre Arctic National Wildlife Refuge with its own bitter feud over oil.)
The Bureau of Land Management has said it prefers a different -- and slightly costlier -- development alternative than the one proposed by Conoco and permitted by the Corps. Also joining BLM in expressing support for what's known as Alternative B are conservation groups, the U.S. Fish and Wildlife Service and the tribal government in Nuiqsut.
BLM's preferred alternative would not allow a road and pipeline to be built in a three-mile protective buffer alongside Fish Creek, an important hunting and fishing area long used by the village of 450 for subsistence. The buffer was created by BLM as part of its land-management plan for the reserve.
Conoco said it can't advance the project unless BLM agrees with the Corps' recent decision. Under Conoco's plan -- estimated by the company to cost $900 million -- the road and a parallel pipeline would have a more direct route to the drill site but would encroach into Fish Creek's protective buffer. Still, the road and pipeline would remain 2.5 miles away from the creek at the closest point.
The Corps said Conoco's route is safer for the environment, in part because the road is one mile shorter than in Alternative B, requiring less gravel fill to be added to wetlands in the Arctic region. Capital costs for Conoco's proposal would be 4 percent less than Alternative B, the BLM has said.
BLM also must not burden the project with excessive mitigation measures, said Amy Burnett, a communications specialist with ConocoPhillips in Alaska.
"The BLM record of decision must agree with the record of decision from the Army Corps of Engineers and the BLM mitigation measures must be acceptable in order for the project to move forward for consideration by our senior management," Burnett said.
The Native village corporation in Nuiqsut, Kuukpik Corp., supports Conoco's route.
The project is considered critically important to Alaska, which faces massive revenue shortfalls because of the recent oil-price crash and is sorely in need of boosted oil production. While the state has more than $12 billion in the bank to cover deficits, Alaskans are jittery oil companies will soon delay or stop projects, threatening the nation's most oil-reliant state.
Peak production at Greater Moose's Tooth 1 is estimated at 30,000 barrels per day, with first oil possible in late 2017, Burnett said. The state, which would split royalties and other revenue in half with the federal government, is counting on production from that project and others in the reserve for future revenue.
Gov. Bill Walker and Sen. Lisa Murkowski, chair of the Senate Energy Committee, have both urged rapid approval of Conoco's proposed plan.
How BLM addresses this project will set a "precedent for how development will be handled going forward" in the reserve, said Robert Dillon, an aide to Murkowski and communications director for the Energy Committee. Mitigation measures that drive costs too high or other barriers to development could discourage future investors and projects in the reserve, he said.
Murkowski agrees with the Corps that Conoco's plan better protects the environment, and she wants it speedily approved, he said.
"Sen. Murkowski feels like they've been dragging their feet for a long, long time," said Dillon, referring to the BLM.
Conservation groups disagree. Lindsey Hajduk, program director for the Conservation Lands Foundation in Alaska, said BLM should not give into Conoco's "bullying."
"ConocoPhillips is trying to bulldoze its way through this process, putting its own profits above our national interest. It is appalling for the multi-billion-dollar company to suggest that it can't meet basic environmental safeguards that would protect Alaska's water and wildlife resources," she said.
Nicole Whittington-Evans, head of The Wilderness Society in Alaska, said BLM must support Alternative B. The reserve's management plan -- with its buffer around Fish Creek that should not be violated -- "laid out a strong strategy that balances conservation and energy development. Adhering to its terms is the most responsible way to manage these public lands."
A spokesperson with the BLM said the agency is working on a path forward that is "federally unified, environmentally sound and economically feasible." The agency is also pursuing "robust" mitigation measures that will address potential impacts and "benefit affected parties, including subsistence users and environments," said Lesli Ellis, communications chief for BLM Alaska.
"We hope to have our record of decision finalized soon," said Ellis.