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Energy

If feds hold a Cook Inlet lease sale, will anyone come?

  • Author: Alex DeMarban
  • Updated: August 16, 2016
  • Published August 16, 2016

For the past decade, a lack of industry interest has prompted the federal government to cancel several proposed lease sales in Cook Inlet.

But the U.S. Bureau of Ocean Energy Management is considering another sale for federal waters in the region, for June 2017.

The proposal stems from interest in a lease sale expressed by at least two companies in 2012, officials said.

But since then, oil prices have collapsed and the state is scaling back its tax credit program for oil and gas activity. Even industry representatives now seem uncertain whether this latest sale, if it's held, will produce any bids.

On the table are 224 blocks, each about 9 square miles, generally in the southern Inlet. The agency says the sections are near facilities needed to support exploration and development.

The agency took public comments on a draft Environmental Impact Statement on Monday night at the Dena'ina Civic and Convention Center in Anchorage.

The meeting ended after only eight people spoke.

Two representatives of pro-development groups said the oil and gas industry has a long track of coexisting safely with other commercial efforts in the Southcentral Alaska basin, including fishing and tourism.

Six opponents of the lease sale, recalling the devastation to fishermen and wildlife from the 1989 Exxon Valdez oil spill in Prince William Sound, urged agency officials to cancel the sale.

Suzanne Schafer said even if the industry comes out of its "stagnant" phase, the lease sale should be skipped.

"Even if it picks up, do you think it's worth it to keep polluting our environment," said Schafer, Alaska field organizer for Moms Clean Air Force, a group fighting air pollution and climate change.

Industry interest in the Inlet may be at a low point. Following a period of steady activity that brought new discoveries of natural gas, the leasing came to a halt in May. In an unusual first, the state canceled its 2016 Inlet oil and gas lease sale, saying no bids had been received.

State waters are located within 3 miles of the coast.

As for federal waters 3 or more miles offshore, there hasn't been much bidding there since 1977, when the federal government issued 88 leases, according to the agency's draft EIS for the sale.

More recently, the agency received no bids for a lease sale in 2004. Lease sales were canceled in 2006, 2008 and 2010 following a lack of industry interest, the agency said. There are currently no active leases in the federal waters of the Inlet's outer-continental shelf.

Last year, the Interior Department took a similar step for proposed lease sales in the U.S. Arctic Ocean north of Alaska.

In October, following Shell's decision to abandon its pursuit of Arctic Ocean drilling, the department canceled lease sales proposed for the Beaufort and Chukchi seas included in the 2012 to 2017 leasing plan for the outer-continental shelf. The department cited poor market conditions and low interest.

Next year's potential Inlet lease sale, also part of the five-year plan, includes proposals to protect wildlife, such as endangered beluga whales.

The lease area could hold an "undiscovered economic resource" containing about 215 million barrels of oil — a little more than a year's worth of current North Slope production — and 570 billion cubic feet of natural gas – enough to meet Alaska's needs for at least five years.

Carl Portman, deputy director of the pro-industry Resource Development Council, said at the meeting the agency should hold the 2017 Inlet lease sale.

Development in federal waters of the Inlet would provide future energy security and jobs for the state's most populated region. He said oil and gas activity has slowed due to low oil prices, but no one knows what prices will be in a year.

The agency should "allow market dynamics to decide the fate of a future lease sale," he said.

Jeremy Price, with Americans for Prosperity in Alaska, said a canceled lease sale will further chill investment during a difficult economic time.

Laura Comer, with the Sierra Club in Alaska, said a sale to support "dirty, dangerous offshore drilling" should not be allowed. She said it's "morally and legally unjustifiable" that the agency did not analyze global climate impacts of the proposed sale.

For example, oil and gas produced and consumed because of the sale would release carbon dioxide, a greenhouse gas contributing to climate change.

The agency, in its draft EIS analyzing impacts of a lease sale, said it would be "unduly speculative" to attempt to quantify the "marginal increase in national oil and gas consumption (much less resulting environmental effects)" that the proposed sale could result in.

A decision whether to go ahead with the Inlet lease sale is expected after the agency releases a final EIS in early 2017.

The agency is also planning hearings on the draft statement in Homer on Wednesday and in Kenai on Thursday, with the meetings to start at 5 p.m.

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