Recognize industry know-how in US Arctic policies, API officials urge

US Arctic oil and gas policies should recognize the industry’s extensive global Far North experience and technology, American Petroleum Institute officials said. “If we don’t use this knowledge, other Arctic nations will move to the forefront of energy development there,” API Upstream Operations Director Erik Milito told reporters at a June 12 briefing.

“The Arctic environment poses different challenges from the rest of the US, but it’s generally well understood,” added API Senior Advisor Richard Ranger. “Operators off Canada, Norway, and Russia; other countries’ governments; and institutions of higher learning also have shared significant knowledge.”

The US Department of the Interior proposed regulations in February that it said would ensure that oil and gas operations on the US Outer Continental Shelf off Alaska occur safely and responsibly (OGJ Online, Feb. 20, 2015). Once finalized, the requirements would affect activity under the 2017-22 OCS Management Program, but not operations before that period.

API, the National Ocean Industries Association, and the US Chamber of Commerce’s Institute for 21st Century Energy jointly urged adoption of regulations that accommodate a broader range of equipment and drilling platforms, and alternatives to relief wells to restore well control in comments submitted May 27 to the US Bureau of Ocean Energy Management and US Bureau of Safety and Environmental Enforcement (OGJ Online, May 28, 2015).

The two API officials noted that the time is ripe for broader discussions of US Arctic oil and gas offshore issues with the US assumption of the Arctic Council’s chairmanship and the National Petroleum Council’s releasing its report outlining prime Arctic oil and gas issues (OGJ Online, Mar. 27, 2015). The US House Natural Resources Committee’s Energy and Minerals Resources Committee has scheduled a hearing on Arctic Resources and American Competitiveness for June 16.

Add significant costs

“The proposal for a same-season relief well capability would require a tool which could lop about a month off the back end of an Arctic drilling season,” Ranger said. “There are capping and other systems that already are positioned with the wells which are being drilled. Under the proposal, an operator would have to design an Arctic drilling operation that could be backed out and stopped, which would add significant costs.”

Milito said requirements for Safety and Environmental Management Systems with rigorous risk assessments, which the oil and gas industry initially suggested, are in place already. “Overly prescriptive rules can stifle innovation,” he said. “A lot of good work has been done. More can occur if we stay away from prescriptive regulations.”

Stakes are high because the OCS off Alaska’s coast contains significant potential oil and gas resources, Milito and Ranger said.

BOEM estimates that the Chukchi Sea, off Alaska’s northwest coast of Alaska, contains 2-40 billion bbl of unproved technically recoverable crude oil resources and 10-210 tcf of unproved technically recoverable natural gas resources, the US Department of Energy said in a June 12 article.

More than half of Alaska’s unproved technically recoverable crude resources are offshore the ANS, it added. Those 23.8 billion bbl are comparable to the 22.8 billion bbl in the Bakken formation and are more than twice the 10.3 billion bbl of unproved technically recoverable crude resources in the Eagle Ford formation, DOE said.

“Our policies will need to be informed by fact,” Ranger said. “They need to embrace information in EIA and other reports that we’re going to rely on oil and gas for decades, if not generations.”

Infrastructure needs

In a conversation with OGJ following the briefing, Milito and Ranger said that significant infrastructure questions will need to be addressed if oil and gas resources off Alaska’s north coast are to be developed.

“If something happened in the next election and the new administration decided not to move ahead on this, there still would be significant oil spill risk from cargo and cruise vessels increasingly passing through the area,” Ranger said.

The US government will need to provide as ice-breakers and other services, he said. There currently is no road between existing crude production at Prudhoe Bay and Point Barrow, the closest possible site for a deepwater port where a US Coast Guard spill response system could be based, Ranger said. If one was constructed, it would have to cross the northern edge of the National Petroleum Reserve-Alaska, which would require extensive discussions and negotiations, he said.

An oil spill preparedness capability is what the industry would bring to the table, Ranger said. Shell Offshore will have to design each phase of its planned Chukchi Sea lease drilling for cost-effective logistical support, he said. “Assuming we get permission to lease more tracts there in the next 5-year OCS plan, we’re going to face questions about support base activity,” Ranger said.

“The greater certainty that results from sound federal and state policies, the more the industry will move forward,” said Milito. “If the government decides to allow 27 billion bbl of oil to be produced, the industry will step forward. Alaska also has a history of making things happen.”

Contact Nick Snow at nicks@pennwell.com.

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