Alaska officials bask in glow of $21 million oil lease sale

Enlarge This Image

Related

• Oil fracking could be next big thing on North Slope
• Alaska North Slope lease sale could attract more oil shale players
• BP ready to launch new 'heavy oil' project on North Slope

Alaska News & Features

Stony River students plot course to Washington, D.C.

Scientists dismiss tsunami trash radiation worries for Alaskans

most read

• Sudden spike of HIV cases in Fairbanks area concerns health officials
• Government should have 'rescued' truth instead of doomed 'Big Miracle' whales
• Video: What happens when a moose wanders into an Alaska hospital?

State officials called Alaska's much-awaited oil and gas lease sale a qualified success on Wednesday, noting that the state took in $21 million as 19 groups entered bids.

Still, the state must keep working to roughly double the flow of oil in the trans-Alaska pipeline and meet Gov. Sean Parnell's goal of 1 million barrels a day, said Dan Sullivan, Natural Resources commissioner.

According to Sullivan, good news from Wednesday's state lease sale includes:

• Shell Oil snatched up 80,000 acres in state waters of the Beaufort Sea, some 60 miles west of their closest federal lease. If commercial quantities of oil and gas are found in that area in Harrison Bay, Shell might be able to build "synergies" by developing both state and federal areas, said Curtis Smith, spokesman for the oil giant in Alaska.

• Tracts on the North Slope generated $14 million in lease sales, the sixth-largest amount ever for that area.

• Some bidding groups faced competition, and some tracts leased for up to $900 an acre.

• New companies leased tracts that could lead to shale-oil development in the southern portion of the North Slope, where Great Bear Petroleum is exploring this winter. Royale Energy Inc. of California was among the new firms.  

• ConocoPhillips expanded its holdings to the east.

For its annual lease sale, the state's Division of Oil and Gas offered 14.7 million acres of state land in three areas -- the North Slope, the North Slope foothills, and in state waters along the Beaufort Sea.

A federal lease sale was held a few hours after the state sale for the National Petroleum Reserve-Alaska. That sale earned $3.6 million.

As for the state sale, no tracts were leased in the foothills, a hard-to-access area with terrain that could be costly to develop with gravel roads and other infrastructure.

Lois Epstein, Arctic program director for The Wilderness Society's Alaska office, said Shell's new interest in Harrison Bay is a worry, given the company's limited ability to respond to an oil spill in the area, the lack of response infrastructure on the North Slope, and the limited understanding of the area's ecology.

"How are you going to have a cleanup when booms will be destroyed by ice? When you have skimmer systems that won't work well if you have any significant ice? Spill cleanup is not something that can be done well even in temperate conditions, but when you're talking about Alaska Arctic conditions, it adds another level of difficulty," she said.

"I'm not saying we should not do any (development), but if we're going to protect these areas, let's not move forward until we're ready," she said.   

Shell hopes to begin exploring its federal leases in the Beaufort Sea starting next year.

Smith said Shell has a long history of drilling in remote areas and spent hundreds of millions of dollars to assemble an unprecedented offshore spill-response fleet because it cannot call on the U.S. Coast Guard, which has no Arctic base, to help in the event of a spill. That includes spending $350 million on two new icebreakers and a capping and containment system modeled after the technology that stopped the Macondo blowout in the Gulf of Mexico last year, Smith said.  

"Shell will track in real time every inch of every well drilled at our real-time operations centers in Houston, New Orleans and Anchorage. This real-time data will also be available via satellite to anyone in the world who has access," Smith said in an email to Alaska Dispatch.  

Smith said Shell's Alaska experience has largely occurred in state waters, rather than federal waters, including pioneering development in Cook Inlet, one of the top oil provinces in the U.S. decades ago.

For Epstein, the sale confirmed strong interest in oil development on state land, which is not as fragile as federal areas like the potentially oil-rich but environmentally sensitive Teshukpuk Lake region in the National Petroleum Reserve-Alaska.