Alaskan Leaders Wary of Interior’s Latest Offshore Proposal

March 17, 2016 in Blog

Even though the Department of the Interior’s (DOI) 2017 to 2022 offshore drilling plan included three potential lease sales in the Alaskan Arctic, it is little consolation to Alaska’s elected representatives, who are all too aware of the existing burdensome and stifling regulatory hurdles that discourage development. Their caution is understandable, especially after the agency abruptly canceled offshore Arctic lease sales scheduled for 2016 and 2017 – and is currently weighing a proposal that could potentially offer no new leases after all.

Rep. Don Young (R-AK) argued that the new plan did nothing to “roll back” the “insurmountable regulatory burdens” and “crippling blows” dealt Alaskans last year by the Obama Administration that ultimately made development impossible (emphasis added):

For years, the Obama Administration has sent crippling blows to the Alaskan people by forging ahead with policies and programs that make it nearly impossible to pursue any new forms of responsible resource development. While Alaska doesn’t necessarily lose footing in its fight for new development opportunities in today’s Proposed Program, the plan does nothing to roll back the harmful decision last year to take massive portions of the Beaufort and Chukchi Seas off the table for future oil and gas leases. Likewise, today’s announcement leaves the door open for further areas to be put off limits as the Program is finalized.

The three lease proposals announced today contain vast amounts of resources, and it was very important that they remained on the table in the Proposed Program. However, considering the insurmountable regulatory burdens put in place by the DOI during Shell’s OCS exploration, I have little confidence potential bidders will come forward on the two Arctic lease sales. Unless the DOI and the agencies under its umbrella work to create a regulatory environment that truly gives exploration a chance, I have no expectation for successful development in the Arctic OCS under the Obama administration. I find little rejoice in the inadequate number of lease sales being offered today and the regulatory environment under which they are being released.”

Similarly, while Sen. Lisa Murkowski (R-AK) welcomed DOI’s announcement, she also warned that the agency’s decision to cancel a planned lease sale in the Atlantic Sea sent an “ominous warning to Alaskans,” as the Arctic lease sales could just as easily “suffer the same fate” (emphasis added):

“The administration’s decision to maintain a limited number of lease sales in the Alaskan offshore  and recognition of the importance of consultation with Alaskans is welcome news. However, the administration’s decision to cancel a sale in the Atlantic offshore – the second time it has made such a reversal – undermines the energy security of our country and is an ominous warning to Alaskans. As easily as the Atlantic was taken off the table, the proposed sales in the Cook Inlet, Beaufort Sea, and the Chukchi Sea could suffer the same fate in further reviews. … Now all Alaskans must rally to remain vigilant and defend this small victory. Further, we must continue our work to create a predictable regulatory and commercial environment as well as revenue sharing for the state and local interests.”

Sen. Dan Sullivan (R-AK) echoed Sen. Murkowski’s concerns, comparing DOI’s plan to “a car dealership announcing a lease sale without providing any keys” (emphasis added):

“While on the surface the Department of the Interior’s proposed OCS lease plan – which includes acreage in Cook Inlet and the Chukchi and Beaufort Seas – sounds positive, it’s akin to a car dealership announcing a lease sale without providing any keys. For production to be realized and for Alaska to benefit, there needs to be regulatory certainty and a willingness on the part of the Executive Branch to work with, instead of against, lease holders. The energy industry was watching Shell’s ordeal in the Arctic closely. Largely as a result of confusing and conflicting regulations, that company spent seven years and $7 billion to drill a single well. Few, if any companies, could afford a repeat.”

Gov. Bill Walker (I) called the announcement “good news for Alaska,” but he emphasized the importance of working with local communities because they “know better than anyone” on the importance and impacts of energy development (emphasis added):

“This is good news for Alaska. Today’s announcement gives Alaska flexibility in planning beyond the current price conditions. I am pleased Secretary Jewell made the decision to include one lease sale in each of the Beaufort Sea, Chukchi Sea and Cook Inlet Planning Areas in the department’s new five-year plan. Over the past year, I have had many meetings with Secretary Jewell to discuss our access to our resources. In those meetings, I emphasized to her the need for forward planning and ensuring that Alaska is part of the Interior’s five-year leasing plan. … Residents of the North Slope Borough know better than anyone in either our nation’s capital or our state capital how to balance development in their region. I will work very closely with Arctic communities who are on the frontlines of these development decisions moving forward.”

Lastly, the Alaska Oil and Gas Association warned that the possibility of future Arctic lease sales does not lessen the burden of “impracticable regulatory requirements” and “inconsistent and unreasonable rules of the game” that make offshore development very challenging (emphasis added):

“OCS exploration and development still faces very serious challenges as a result of burdensome and, in some instances, impracticable regulatory requirements, as well as Federal efforts to designate vast areas of the Arctic as critical habitat for currently healthy and abundant Arctic species. Substantial regulatory reform is necessary before responsible OCS oil and gas exploration and development is fostered as intended by Congress in the Outer Continental Shelf Lands Act. After all, companies that are considering multi-billion dollar investments are unlikely to take such a high level of risk when there are inconsistent and unreasonable rules of the game.”

By canceling offshore Arctic lease sales in 2016 and 2017 and then promptly reversing course for 2020 through 2022, the federal government is sending mixed signals that add to the regulatory uncertainty hanging over operators seeking to develop the Arctic’s vast energy resources. While DOI’s announcement this week is an encouraging step in the right direction, it is far from the support and enthusiasm that Arctic energy development deserves.