Alaska is kicking off 2018 following several major developments related to oil and gas exploration and production on federal lands on the North Slope, both onshore and on the offshore outer continental shelf (OCS).
In May 2017, Interior Secretary Ryan Zinke visited Alaska and declared that “the path for energy dominance is a path through the great state of Alaska.” While in Alaska, Secretary Zinke unveiled Secretarial Order 3352 “National Petroleum Reserve – Alaska,” which called for:
- Re-evaluating the Bureau of Land Management’s (BLM) Integrated Activity Plan for the National Petroleum Reserve – Alaska (NPR-A) with an eye toward promoting oil and gas leasing and development in the NPR-A.
- Developing updated oil and gas resource assessments for Alaska’s North Slope, focusing on federal lands in the NPR-A and the Section 1002 Area (the 1002 Area) of the Arctic National Wildlife Refuge (ANWR).
Indeed, the end of 2017 saw several major developments involving oil and gas exploration and production on federal lands in Alaska’s North Slope, including BLM’s leasing of nearly 80,000 acres in the NPR-A for oil and gas development in early December. Additional recent highlights include:
- USGS and BOEM Release Updated Resource Assessments. On December 22, 2017, the Interior Department announced the results of new resource assessments for the NPR-A, conducted by the United States Geological Survey (USGS) as directed by Secretarial Order 3352, and for federal waters in the Beaufort Sea Planning Area conducted by the Bureau of Ocean Energy Management (BOEM). These assessments significantly increased estimates of undiscovered, technically recoverable oil and gas resources (UTRR) on the North Slope, both onshore and offshore, which was welcome news to the State of Alaska.
Based on multiple discoveries during 2015 through 2017 in the Nanushuk and Torok Formations in and near the NPR-A — including the recent Pikka, Willow and Smith Bay discoveries — as well as new, three-dimensional seismic data, the USGS announced mean estimates of 8.7 billion barrels of oil and 25 trillion cubic feet of gas for the region, a dramatic increase from its 2010 resource assessment of 1.5 billion barrels of oil. Offshore, BOEM revised its mean UTRR estimates for the Beaufort Sea Planning Area upward to 8.9 billion barrels of oil and 27.7 trillion cubic feet of natural gas, which the Interior Department described as a net increase of nearly 700 million barrels of oil equivalent over BOEM’s 2016 resource assessment for the Beaufort Sea.
- ANWR 1002 Area Legislation Passes. In a major victory for Senator Lisa Murkowski and the Alaska Congressional delegation, Section 20001 of the Tax Cuts and Jobs Act (PL 115-97), was signed into law by President Trump on December 22, 2017. The legislation opened the 1002 Area, defined in the legislation as the “Coastal Plain” of ANWR, to oil and gas leasing and development.
First, the legislation provides that Section 1003 of the Alaska National Interest Lands Conservation Act (ANILCA), which generally prohibits “leasing and other development leading to the production of oil and gas” within ANWR, shall not apply to the 1002 Area, covering approximately 1.5 million acres of the more than 19 million acre refuge. Second, the legislation requires the Interior Secretary to establish a “competitive oil and gas program for leasing, development, production, and transportation” for the 1002 Area to be administered in a similar manner as the NPR-A. Third, the law requires the Interior Department to conduct “not fewer than 2 lease sales” within 10 years, with the first to occur within four years and the second within seven years. Finally, the legislation establishes a royalty rate of 16.67% for oil and gas leases in the 1002 Area, with Alaska and the United States Treasury sharing evenly the revenue from leasing, rentals, and royalties.
- Offshore Oil and Gas Exploration Projects Advance. Late 2017 also saw new oil and gas exploration drilling in federal waters in the Beaufort Sea. On December 27, 2017, Eni spudded a new exploration well from the man-made Spy Island Drillsite in state waters in the Beaufort Sea as part of the company’s Nikaitchuq North exploration program. Eni’s exploration plan, which BOEM approved with conditions on July 12, 2017, provides for up to four exploration wells, two extended reach mainbores and two sidetracks to evaluate the oil and gas potential of three of Eni’s federal OCS leases. The Bureau of Safety and Environmental Enforcement (BSEE) is overseeing the drilling operation.
Related to a separate project, on December 9, 2017, the comment period closed on BOEM’s draft environmental impact statement (EIS) evaluating Hilcorp’s development and production plan for the Liberty Project, which would involve the construction of drilling and processing facility on a man-made gravel island approximately nine kilometers offshore in the Beaufort Sea. Hilcorp estimates that the Liberty Unit contains approximately 150 million barrels of recoverable oil.
- US Senate Confirmed Alaska’s Joe Balash as Interior Assistant Secretary for Land and Minerals Management. On December 7, 2017, the United States Senate confirmed Joe Balash as the Interior Department’s Assistant Secretary for Land and Minerals Management, which has responsibility for overseeing the BLM, BOEM, BSEE, and the Office of Surface Mining Reclamation and Enforcement, the Department’s coal mining regulator. Mr. Balash previously served as Alaska’s natural resources commissioner. In his new position, he will play a central role in the Interior Department’s oversight of energy development on federal lands and the OCS in Alaska.
In light of these developments at the end of last year, Alaska enters 2018 with significant momentum to expand oil and gas exploration and production. Latham will continue to provide updates on public policy, market, and legal developments concerning energy development in Alaska.