Trump’s energy focus raises hopes in Alaska

By Margaret Kriz Hobson | 09/26/2017 07:14 AM EDT

Alaska Gov. Bill Walker (I) first grasped the dramatic changes in store for his state under the Trump administration when he attended an inaugural event early this year. As Walker and his wife began to leave a late-night reception, they bumped into Ryan Zinke, whom President Trump had already selected to head the Interior Department.

Interior Secretary Ryan Zinke signed an order in May meant to jump-start oil and gas development in the National Petroleum Reserve-Alaska. Alaska Gov. Bill Walker (I) is seen behind Zinke.

Interior Secretary Ryan Zinke signed an order in May meant to jump-start oil and gas development in the National Petroleum Reserve-Alaska. Alaska Gov. Bill Walker (I) is seen behind Zinke. Interior Department/Flickr

Correction appended.

Alaska Gov. Bill Walker (I) first grasped the dramatic changes in store for his state under the Trump administration when he attended an inaugural event early this year. As Walker and his wife began to leave a late-night reception, they bumped into Ryan Zinke, whom President Trump had already selected to head the Interior Department.

As Walker recalled at a recent business forum, "We were introduced, and [Zinke] said, ‘You’re the governor of Alaska?’ And I said, ‘Yes I am.’"


"He grabbed my hand and said, ‘You’re going to love me.’"

During the previous eight years, Alaska state officials and oil industry executives had been in a virtual cold war with Washington over the Obama administration’s land preservation policies in the Frontier State.

Now they have high hopes that Trump’s pro-drilling approach to federal land management will trigger a North Slope oil revival that could help stimulate Alaska’s failing economy, which has been ravaged by low crude prices.

The administration has already fast-tracked three big oil projects in northern Alaska.

Over the last three months, regulators have issued separate draft environmental impact statements for Armstrong Energy LLC’s giant Nanushuk oil discovery on state lands and Hilcorp Alaska LLC’s offshore Liberty oil field project in federal waters. Interior also granted conditional approval for Italian company Eni SpA to explore for oil on its Beaufort Sea leases.

The Trump administration is also promising to open energy development on vast new tracts of the Arctic National Wildlife Refuge and the National Petroleum Reserve-Alaska, as well as throughout the U.S. Arctic Ocean.

To manage U.S. federal lands, the White House has selected officials with strong ties to Alaska.

Trump’s new deputy secretary for the Interior is David Bernhardt, who handled the state of Alaska’s unsuccessful 2013 legal efforts to conduct seismic studies in the Arctic National Wildlife Refuge. The controversial attorney also served as Interior solicitor under President George W. Bush and counselor and deputy chief of staff to then-Interior Secretary Gale Norton.

Joe Balash, chief of staff for Alaska Sen. Dan Sullivan (R), is in line to become assistant secretary of the Interior for land and minerals management. Balash previously served as natural resources commissioner for the state of Alaska.

At Interior, Balash will oversee the Bureau of Land Management, Bureau of Ocean Energy Management, and Bureau of Safety and Environmental Enforcement, as well as the Office of Surface Mining Reclamation and Enforcement (Climatewire, Sept. 20).

Meanwhile, Zinke chose Steve Wackowski as his senior adviser for Alaska affairs. Wackowski chaired Alaska Sen. Lisa Murkowski’s (R) 2016 re-election campaign.

These dramatic political changes have been welcomed by Alaska state leaders and oil company executives. They were all smiles during Zinke’s May visit to the state and applauded wildly when the Interior secretary asserted that "the only way that [U.S.] energy dominance is possible is through the great state of Alaska."

But Alaska’s road to new oil development will face significant roadblocks as the Trump administration’s opponents seek to protect federal lands from oil drillers.

In fact, the legal challenges have already begun. In May, a coalition of environmentalists and indigenous groups filed suit against Trump when the president issued an executive order scrapping President Obama’s ban on oil and gas drilling in most of the U.S. Arctic (Greenwire, May 3).

Nicole Whittington-Evans, Alaska regional director for the Wilderness Society, observed that the environmental community is gearing up to fight "what could be one of the largest public lands sell-offs that our nation has ever seen."

"That’s a real concern to us," she said. "Their policies are geared toward catering to the industry, disregarding public and community sentiment to protect special areas on our public lands."

Alaska map. Map credit: Claudine Hellmuth/E&E News
The Trump administration’s road to “energy dominance” includes oil development in the U.S. Arctic Ocean, Arctic National Wildlife Refuge and National Petroleum Reserve-Alaska.

New discoveries

Trump’s pro-oil policies come at a time when federal geologists have acknowledged that Alaska’s North Slope may hold significantly more oil than they previously thought.

In 2010, the U.S. Geological Survey estimated that NPR-A and adjacent state waters held only 896 million barrels of oil. That was a tenfold drop from the agency’s 2002 assessment, which estimated oil reserves of 10 billion barrels.

Recently, however, oil companies have reported substantial new oil discoveries. In January, ConocoPhillips Alaska Inc. announced the discovery of at least 300 million barrels of recoverable oil at its Willow leases in the eastern NPR-A.

Two months later, Denver-based Armstrong Energy LLC and Spanish oil operator Repsol SA announced the largest onshore oil discovery in three decades at their Nanushuk oil unit. That play, estimated to hold more than 1.2 billion barrels, is located just outside of federal petroleum reserve lands.

The largest oil discovery — 2 billion barrels of recoverable oil — was reported last year by Caelus Energy LLC at its Smith Bay leases. That unit is located in state waters north of the NPR-A. However, the Dallas-based independent recently postponed further work at the remote site due to low oil prices and uncertainty over the state’s oil tax structure.

Now USGS geologists are using drilling data from the recent discoveries to reassess the region’s oil potential. Researchers came to Alaska this summer to survey the North Slope geology and study core samples from previous wells. The federal scientists have also contracted for their own new 3-D seismic studies in NPR-A.

According to USGS research geologist David Houseknecht, the agency’s reassessment of the NPR-A region’s oil potential is likely to be released before the end of the year.

Wildlife Refuge. Photo credit: USGS
The Arctic National Wildlife Refuge’s 1002 area. | U.S. Geological Survey

New studies

The federal government has precious little information on the amount of oil available in the 1.5-million-acre northern plain of ANWR. No wells have been drilled in that northeastern corner of Alaska since the 1980s, and those findings are being held as proprietary by the oil companies involved.

In addition, the only exploration data available on the coastal plain, also known as the 1002 area, consists of "vintage" 2-D seismic studies, Houseknecht said. USGS is currently reprocessing that data in hopes of obtaining a clearer picture of ANWR’s oil potential. The updated analysis won’t be available until next summer.

Rather than relying on those 30-year-old studies, however, the Trump administration wants to allow new state-of-the-art seismic studies on the coastal plain.

Fish and Wildlife Service acting Director James Kurth recently directed the service’s Alaska office to prepare an environmental assessment and a proposed rule allowing applicants to submit new exploration plans for the ANWR’s northern plain. Kurth set a Sept. 30 deadline on completion of the new documents (Energywire, Sept. 19).

Alaska state officials say they would be the first in line to seek permits for advanced 3-D seismic studies on ANWR’s northern plain. However, by law, no oil can be pumped from the Arctic wildlife refuge without the approval of Congress.

Environmentalists strongly oppose the Trump administration’s new approach to ANWR seismic testing. They insist that new seismic studies are specifically barred under the Alaska National Interest Lands Conservation Act (ANILCA), which governs the Arctic refuge.

Jamie Rappaport Clark, president of Defenders of Wildlife, has attacked the Interior’s campaign to allow exploration in the wildlife refuge.

"This administration is shameless in their pursuit of fossil fuels, even in our nation’s greatest wildlife sanctuary — home to birds, caribou and polar bears," argued Clark, who headed FWS during the Clinton presidency.

"The collusion between those hell bent on drilling in the Arctic refuge is obscene, and we will see this administration in court to put a stop to it."

Alaskan coastal erosion. Photo credit: Brandt Meixell, U.S. Geological Survey/Flickr
Coastal erosion reveals the extent of ice-rich permafrost in the Teshekpuk Lake Special Area of the National Petroleum Reserve-Alaska. | Brandt Meixell, USGS/Flickr

Rewriting policy

Along with pushing for new seismic testing in ANWR, Interior is also working to open more lands in NPR-A to oil and gas development. To do so, regulators are taking preliminary steps toward rewriting the reserve’s integrated activity plan that was written by the Obama administration.

The current plan, finalized in 2013, set aside almost half of NPR-A’s 22.8 million acres for the protection of wildlife habitat and sensitive coastal resources. Now several oil industry officials are urging the Trump administration to give them greater access to some of those protected areas.

Specifically in the crosshairs is the 3.65-million-acre Teshekpuk Lake Special Area, which is located close to ConocoPhillips’ recent Willow oil discovery. Over the last several years, ConocoPhillips bought up most of the NPR-A leases located to the east of the Teshekpuk Lake region. Now oil companies are seeking access to other potentially oil-rich lands just inside the special area.

But environmental activists vow to fight industry’s land grab. The Wilderness Society’s Whittington-Evans described the Teshekpuk Lake protected area as "a globally significant wetlands area with some of the highest shorebird nesting populations in the circumpolar Arctic."

Wildlife experts say the region is also critically important to local populations of caribou and polar bears, as well as providing subsistence hunting grounds for Alaska’s Native communities.

Despite those concerns, BLM recently issued a public notice asking for comment on which parts of NPR-A should be open to new oil and gas leasing. The request specifically included lands that are now protected under the Obama management plan. Those special areas could not be auctioned, however, until Interior rewrites the existing NPR-A management plan.

Meanwhile, Interior is also taking a hard look at Arctic Ocean oil development.

Regulators are expected to rewrite the Obama administration’s five-year schedule for auctioning offshore oil and gas drilling rights on the outer continental shelf. Trump ordered a review of the Obama plan shortly after his election victory, and Zinke launched the review in early summer.

Obama’s plan specifically rejected leasing in the U.S. Arctic Ocean, as well as along the Atlantic Coast and in the eastern Gulf of Mexico near Florida. But industry groups are lobbying the Trump administration to make all federal waters accessible for seismic testing and drilling rigs (Energywire, Aug. 21).

Before the Interior Department can permit oil and gas leasing in the U.S. Arctic Ocean, however, the White House must first resolve a separate legal issue. Environmentalists are challenging the legality of Trump’s April executive order overturning Obama’s 2016 ban on most Arctic leasing

Environmentalists charge that the Outer Continental Shelf Lands Act,
which Obama used to stop leasing in most of the Arctic, doesn’t give Trump the authority to reverse his predecessor’s action. That case is pending in the U.S. District Court for the District of Alaska

Alpine Oil Operation. Photo credit: ConocoPhillips Alaska
ConocoPhillips has been gradually buying up leases to the west of its Alpine oil operation (pictured) in the Colville River Delta. | ConocoPhillips Alaska Inc.

Working current leases

While the Trump administration moves forward with plans to allow oil development on new North Slope federal lands, a few companies are sending work crews to the frigid north this winter to develop their current oil leases.

ConocoPhillips is considering up to five new wells during the upcoming ice-road season, including three to better define the oil potential at its promising Willow oil discovery in NPR-A.

ConocoPhillips is also continuing construction on two other projects, including its Greater Mooses Tooth 1 unit in the petroleum reserve. That venture is expected to produce its first oil in late 2018, with a peak production of up to 30,000 barrels per day.

The Houston-based independent, which advertises itself as "Alaska’s oil company," has been gradually buying up leases to the west of its Alpine oil operation in the Colville River Delta. In the process, the company has slowly extended its oil pipeline network well into NPR-A.

Two other independent oil companies, Armstrong and Glacier Oil and Gas Corp., are also sending work teams up to the North Slope this winter.

But persistently low oil prices and continued uncertainty about Alaska’s fiscal crisis have dampened industry enthusiasm for investments in new Alaska oil and gas operations, explained Alaska Oil and Gas Association President Kara Moriarty.

Moriarty noted that some Alaska lawmakers are proposing that the state cut its multibillion-dollar budget deficits by imposing higher taxes on the oil industry. The state Legislature has already cut tax credits for new oil and gas operations in the Cook Inlet and has been slow to pay credits that the state already owes other firms.

"There’s been a constant change in taxes — seven times in 12 years," she said. "Financial institutions like long-term predictable loans. There’s nothing predictable right now about what the fiscal terms in the state of Alaska are going to be.

"The reality is Alaska has a significant amount of resource," Moriarty observed. "It’s just expensive to get out of the ground, and it’s a long way from market. Those are two issues that we have seen for 40 years, and we have been able to overcome.

"But to continue for another 40 years, we need both strong federal policy and state policy," she said. "You can’t have one without the other."

Correction: An earlier version of this article said more than half of National Petroleum Reserve-Alaska’s 22.8 million acres were set aside for the protection of wildlife habitat and sensitive coastal resources; it is almost half of the 22.8 million acres.