Opinions

Offshore oil leasing evokes sense of deja vu in Alaska

  • Author: Tim Bradner
    | Opinion
  • Updated: January 17
  • Published January 17

When Interior Secretary Ryan Zinke announced his new plan for outer continental shelf oil and gas leasing Jan. 4, a lot of Alaskans felt a sense of déjà vu, at least as waters off Alaska's coasts are concerned.

On a national scale, Zinke's plan takes your breath away – 90 percent of the nation's offshore waters would be up for lease. But many Alaskans have a sense of "been there, done that."

We've drilled 108 exploration wells in waters off Alaska since 1976. We haven't found much.

Parts of Zinke's plan are already being peeled away. Florida waters were taken out when its governor, Rick Scott, a Republican, objected.

Alaskans are ambivalent about the OCS because there is no federal revenue-sharing. With some exceptions, our coastal communities sense risk but few benefits.

However, larger coastal communities like Unalaska, Nome and Kodiak will provide support for the explorers. If oil is found and developed, this could become an important industry.

We should be realistic, though. Zinke proposes 18 lease sales off Alaska between 2019 and 2024. Most of these areas have been leased and drilled, with zilch results.

This is important because the failure so far of Alaska offshore exploration, despite billions spent, will weigh heavily in any company's decisions to venture out again.

Interior officials acknowledge that unless companies show an interest in an area, they won't go to the expense of holding a lease sale, and we've seen examples of OCS lease sales canceled by the government. We've also seen lease sales being held where no company showed up to submit a bid.

Let's look at the record, from the U.S. Bureau of Offshore Energy Management. In the Gulf of Alaska there were 12 wells drilled between 1976 and 1983; in Lower Cook Inlet there were 13 wells drilled from 1978 to 1985; in the St. George Basin in the Bering Sea, near the Pribilof Islands, there were 10 wells drilled in 1984; in Norton Sound near Nome six wells were drilled in 1984 and 1985; in the very remote Navarin Basin, which is adjacent to our boundary with Russia, eight wells drilled in 1985; five wells drilled in the Chukchi Sea from 1989 to 1991 and Shell's last test in 2015 makes it six. In the Beaufort Sea off Alaska's northern coast, 30 wells drilled from 1981 to 2002.

I would point out there were no mishaps or oil spills during all of this.

Even though this sounds like a lot of drilling, explorers correctly say that even this number of tests cannot really assess these huge areas. There are many examples, including Alaska's North Slope, where companies drilled a string of dry holes before finally hitting one they could develop.

Still, the amount of effort that has gone into the Alaska OCS is surprising, and there have been a couple of really spectacular flops: Shell's "Burger" well in the Chukchi Sea in 2015 and Sohio Petroleum Co.'s "Mukluk" in the Beaufort Sea in 1981. These leave a bad taste among explorers.

Mukluk, which cost its developer over $1 billion (real money in those days), effectively chilled industry's interest in the Beaufort OCS for almost 20 years. Shell spent over $6 billion in its recent efforts.

It is true that industry has new tools to use in exploration that weren't available two or three decades ago, so even areas that were written off by industry deserve a second look.

But it's also true that the oil and gas business is changing, which may not bode well for these hugely expensive offshore ventures.

Cheap shale oil has really upended the oil industry, and there are more challenges in years ahead as renewable energy and fuel efficiency gain ground. The world appears headed toward a flattening of conventional oil demand.

Still, some of these offshore areas merit attention. The Chukchi and Beaufort seas appear geologically more attractive than other basins around Alaska.

Although a lot of wells have been sunk in the Beaufort and Chukchi, an important difference is that oil and gas have been discovered in both regions. They were just not big enough to develop.

Shell found oil and gas in the Chukchi Sea in the early 1990s. Union Oil of California and Arco Alaska both found oil in the eastern Alaska Beaufort Sea, Union in 1986 and Arco in 1992 and 1993.

Shell has sold its Beaufort Sea leases near where Union found oil to Arctic Slope Regional Corp. of Barrow, the Alaska Native regional corporation for northern Alaska. ASRC appears intent on exploring the leases, which is ironic given that the Inupiat people of the North Slope have traditionally opposed offshore drilling.

To sum up, Zinke's OCS announcement doesn't put Alaska in a place we haven't been before. However, we should be concerned about the secretary's move to relax federal offshore safety regulations.

Our state, through the Alaska Oil and Gas Conservation Commission, has a good track record of ensuring safety of petroleum drilling and operations, including independent inspections of blowout preventers on wells, something Zinke wants to relax for federal waters.

How about Alaska's congressional delegation pushing for our state regulators to oversee federal offshore drilling? I'd feel safer.

Tim Bradner is editor of Alaska Legislative Digest and is the Atwood Visiting Professor of Journalism at University of Alaska Anchorage this spring.

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