Arctic Resources – To Ensure American Competitiveness

on June 16, 2015 at 2:00 PM


Last month President Obama defended administration policies on oil and natural gas development after opponents of Arctic drilling criticized a federal agency’s decision to give conditional approval to Shell’s exploratory drilling plans in the Chukchi Sea off Alaska. The president:

Until the U.S. transitions to other fuel “we are going to continue to be using fossil fuels. And when it can be done safely and appropriately, U.S. production of oil and natural gas is important. I would rather us – with all the safeguards and standards that we have – be producing our oil and gas, rather than importing it …

Certainly, as a high-level energy strategy the president’s comments are on target. Thanks to hydraulic fracturing and horizontal drilling, the United States has dramatically increased domestic oil and natural gas production over the past few years, becoming more energy self-sufficient, more energy secure and a global energy superpower. We can keep the American energy revolution growing with access to more reserves – especially those offshore and specifically those off the shores of Alaska.

So, some questions: Did President Obama mean what he said, and do his remarks apply to drilling in Alaska and the Arctic? Does the conditional approval given Shell in the Chukchi Sea signal there will be more favorable federal access decisions in the Arctic, or could a growing list of federal regulations for Arctic operations actually discourage others from investing in Arctic development?

These or similar questions may come up during a House Natural Resources subcommittee hearing this week on Arctic resources and American competitiveness. Turning rhetoric into action is the process of following up strategic policies with tactical decisions. More Arctic energy development was the subject of a National Petroleum Council (NPC) report earlier this year that connected Arctic exploration with enhancing “national, economic, and energy security” while benefiting the U.S. as a whole. The report:

If development starts now, the long lead times necessary to bring on new crude oil production from Alaska would coincide with a long-term expected decline of U.S. Lower 48 production. Alaskan opportunities can play an important role in extending U.S. energy security in the decades of the 2030s and 2040s. … However, these new sources of crude oil production in the 2030s and 2040s will only be available if new offshore exploration drilling can ramp up in Alaska during this decade.

Industry is ready to play its role in the Arctic, which was discussed during a briefing for reporters hosted by API last week. API senior policy advisor Richard Ranger talked about professionalism, experience and industry’s commitment to continue improving the safety of Arctic operations. Ranger:

“One of the things the NPC study points out that has not gotten a lot of attention in the story telling about industry’s experience in the Arctic is that we’ve been operating in the Arctic environment for decades. In Alaska specifically, we’ve been drilling in the North Slope since the ‘60s, and we have been making measured and methodical progress in our ability to work in that fragile environment. The resource potential and interest in Alaska has been sustained.”

As NPC’s report said, the resource is vast. Ranger said the estimated resource size of Alaska’s Prudhoe Bay when onshore development began there in the late 1960s was 9 billion barrels. So far, 16 billion barrels have been shipped through the Trans-Alaska Pipeline System that stretches 800 miles from Prudhoe Bay to Valdez, Alaska, he said. The government estimates the economically recoverable resources in Alaska’s outer continental shelf plus known field reserves growth range from 35 billion to 36 billion barrels of oil and 137 trillion cubic feet of natural gas, he said, adding that the Chukchi Sea offers more resource potential than any other undeveloped U.S. energy basin. The time to begin developing those resources is now to ensure greater U.S. energy security in the future. Ranger:

“… people say, why explore in the Arctic now when we’ve got so much oil and resource potential to be discovered and in shale resources in particular, in the lower 48? The answer is the timeline for Arctic development is 10 to 20 years out. The industry focuses on the near term and the long term. We’re interested, obviously, in sustaining our ability to work and produce energy and to sell it over the long term, and with the resources in the outer continental shelf and the Arctic, it’s the area the USGS (U.S. Geological Survey) believes is the largest remaining undeveloped province in the world. We believe, and the NPC study bears out, that for the sustainable energy security of the United States and to be able to have that resource in the queue 10, 15 to 20 years out is going to be very important for our energy security in the future.”  

Industry’s role also entails sustaining and broadening public confidence, Ranger said. That includes countering misperceptions about the Arctic’s challenges and industry’s ability to meet them. Ranger:

“The Arctic resources are large and can contribute significantly to our energy future. The Arctic environment does pose different challenges than a lot of areas where our industry operates but it is generally well understood. The narrative going on is we don’t know enough about the Arctic. The answer is we’ve been working up there for a long time … We understand a lot about the Arctic. … We need to secure public confidence. There’s obviously significant debate, and we recognize the fact that the idea that we can operate safely and have operated safely in the Arctic is not broadly realized (by) the public.”

The fact is industry is able to develop Arctic energy with proven technology. Ranger said the Chukchi and Beaufort seas can be developed with technology that’s on hand, carefully planned and professionally executed.

Going forward it’s critical that industry makes sure the public policy debate is fact-based – that policymakers and Americans know that safe Arctic development has been ongoing and will continue. It means ensuring performance-based regulations are implemented, not prescriptive requirements with little safety benefit that could actually discourage development. Ranger:

“In terms of policy, we need to be informed by facts. … Policy needs to embrace the information in the EIA and International Energy Administration reports, which is that we’re going to be relying on liquid fuels for transportation for a generation to come, at least.”

By Mark Green

Originally posted June 15, 2015

Energy Tomorrow is brought to you by the American Petroleum Institute (API), which is the only national trade association that represents all aspects of America’s oil and natural gas industry. Our more than 500 corporate members, from the largest major oil company to the smallest of independents, come from all segments of the industry. They are producers, refiners, suppliers, pipeline operators and marine transporters, as well as service and supply companies that support all segments of the industry.  

Arctic Offshore Exploration photo courtesy of Shutterstock