The Polar Pioneer drilling rig, pictured in Dutch Harbor while contracted to Shell to drill an exploratory well in the Chukchi Sea. Photo: Shell Alaska
By Jennifer A. Dlouhy and Catherine Traywick
(Bloomberg) — Senator Lisa Murkowski said President Donald Trump is interested in opening up new coastal waters for oil and gas drilling and reversing Obama-era policies that restrict energy development in Alaska.
Both Trump and Interior Secretary Ryan Zinke are weighing ways to expand opportunities to drill in Arctic waters though the changes could take years to accomplish administratively, Murkowski said in an interview on the sidelines of the CERAWeek conference in Houston.
“It’s fair to say we are looking at how we might be able to — how the administration might be able to — allow for opportunities within this important area, offshore Alaska,” Murkowski said.
Murkowski, who heads the Senate Energy and Natural Resources Committee, joined her fellow Republican senator from Alaska, Dan Sullivan, in a meeting with Trump and Zinke earlier this week to discuss the issue. Trump “clearly understood the impact of taking off-line” oil and gas development in the Chukchi and Beaufort seas north of Alaska, Murkowski said.
“What was very clear was a recognition that what Alaska has to offer is considerable, important and we need to be working to undo much of what the Obama administration did in terms of locking up these resources,” Murkowski said of her talks with Trump.
Wildlife Refuge Drilling
Among her targets: making it easier to develop parcels in the National Petroleum Reserve-Alaska, a 23-million-acre (9.3 million hectare) region set aside 94 years ago because of its oil and gas potential, and allowing the activity in part of the Arctic National Wildlife Refuge (ANWR).
Any decision to open up ANWR would fall to Congress, where Murkowski and Sullivan are pushing legislation that would allow oil and gas development in as much as 2,000 acres of the refuge.
The president can set some changes into motion immediately by directing the Interior Department to rewrite a plan for selling offshore oil and gas leases over the next five years and add auctions of tracts in the Arctic and Atlantic oceans that the Obama administration left out. But wedging those sales back into the plan would require environmental analysis and public comment periods — perhaps consuming a year for the Arctic and even longer for parcels along the U.S. East Coast.
The Trump administration also is weighing how to undo an executive order that President Barack Obama used to withdraw almost all U.S. Arctic waters and underwater canyons in the Atlantic Ocean from future oil and gas leasing. Environmentalists say it would be unprecedented for any president to rescind such a designation, and the reversal would almost certainly be challenged in court.
“You would have opponents lining up, so it must be done in a way that can survive legal challenge,” Murkowski said. Although an executive order reversing Obama’s decision would be the cleanest option, she said such action isn’t imminent because Zinke still needs to assemble a legal team to help craft an approach capable of withstanding legal scrutiny.
“What that requires is a good solid legal team that is walking you through the steps of the process, and right now the secretary is without a team,” Murkowski said. “I know for a fact that has been a level of frustration for Secretary Zinke. He is itching to go and is very frustrated by the fact that he doesn’t have his folks in place.”
Trump has repeatedly pledged to expand U.S. energy development and remove “obstacles” holding back exploration of America’s “vast untapped domestic energy reserves.”
Obscure 1953 Provision
Most federal decisions over offshore oil and gas development happen in five-year increments, through the government’s schedule for selling leases. But Obama aimed to set permanent policy in 2016 when he invoked an obscure provision in a 1953 law to withdraw U.S. waters from future oil and gas leasing. The provision previously had mostly been used to permanently protect coral reefs, walrus feeding grounds, and marine sanctuaries.
Any move by Trump to undo Obama’s protections is sure to draw a legal challenge, but it could take years before a lawsuit is ready to be filed, and there is scant legal precedent on the matter.
Presidents have modified decisions from predecessors to indefinitely withdraw areas from drilling, but have never rescinded them altogether. The statute doesn’t include a provision for reversal. And a legal opinion from the U.S. attorney general in 1938 on similar designations under a different law said they “do not imply a power to undo.”
Whether the oil industry really wants the territory is an open question.
Shell Gives Up
While the U.S. Arctic is estimated to hold 27 billion barrels of oil and 132 trillion cubic feet of natural gas, energy companies have struggled to tap those resources in harsh conditions at the top of the globe. Exploration costs are high in remote Arctic waters, where work is confined to just a few months each year and there is sparse infrastructure to support the activity.
Oil major Royal Dutch Shell Plc spent more than seven years and roughly $8 billion trying to find a large stash of crude in the Chukchi Sea, which lies between Alaska and Siberia, but it ended the quest in 2015 after a test well yielded disappointing results.
Industry leaders say Arctic crude is needed to meet the world’s energy needs and help keep oil flowing through the 40-year-old Trans-Alaska Pipeline System. The activity also may support the development of infrastructure that could help buttress U.S. security as climate change and melting sea ice opens up new shipping routes in the Arctic Ocean.
Still, there are signs that Alaska’s oil prospects may be looking up. The Spanish oil company Repsol SA on Thursday announced a 1.2 billion-barrel discovery on Alaska’s North Slope, the biggest U.S. onshore oil find in three decades. That follows a 2016 announcement by closely held Caelus Energy Corp. claiming to have found at least 2 billion barrels of recoverable oil far beneath Smith Bay, in northwestern Alaska.
© 2017 Bloomberg L.P
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