ARCTIC

Obama walks a tightrope between energy, environment in Alaska

In late January, the White House released a folksy online video packed with photos of Alaska wildlife and featuring an appeal from President Obama for Congress to protect the Arctic National Wildlife Refuge as wilderness.

Two days later, the White House barred energy development on nearly 10 million acres in Alaska's Beaufort and Chukchi seas, while also proposing new lease sales in other parts of the region.

Fast on the heels of those actions, Royal Dutch Shell PLC confirmed that the oil giant still intends to explore for crude this summer in the Chukchi Sea, despite depressed world oil prices.

Shell CEO Ben van Beurden assured investors that the company is working closely with the Interior Department to eliminate legal roadblocks and secure the necessary permits for the company's 2015 drilling plan.

That flurry of Arctic news offered the first outlines of the Obama administration's policies at a time when the United States is gearing up to take the lead of the international Arctic Council in April.

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The White House is following a dual track on the Arctic. By proposing to protect offshore and onshore Alaska lands, the president bolstered his environmental credentials.

But Obama is also laying the groundwork for a larger industrial presence in the frozen North.

Bureau of Ocean Energy Management regulators are working overtime to resolve an environmental lawsuit that currently blocks them from considering Shell's exploration plans for the Chukchi Sea (EnergyWire, Jan. 27).

At the same time, the Army Corps of Engineers is putting the finishing touches on a draft proposal to build a deepwater marine port along Alaska's western shore. And the Coast Guard has proposed a new system of sea lanes to manage increasing ship traffic in the Bering Strait.

At a December congressional hearing, U.S. Special Representative for the Arctic Robert Papp Jr. argued that the United States needs to prepare for the inevitable, dramatic changes in the Arctic.

"The Arctic is ripe for development now, but it's also a pristine environment which we'd like to preserve," said Papp, the former Coast Guard commandant. "We need to come to a balance of economic development with preserving that beautiful region that we have."

He offered personal predictions that the Arctic will see "sustainable development that will be extracting oil and gas from the offshore region, whether it's the extended continental shelf or closer to shore."

"I would see new connections to the pipeline, probably innovations in terms of renewable energy and natural energy for the residents of the Arctic and the north part of Alaska," he added.

He also called for "permanent [military] bases on the North Slope -- not just seasonal things that the Coast Guard and other agencies do, but there will have to be a permanent presence up there."

"All these things are going to require investment by our country, investments that we have not done yet, but they're looming out there ... Russia is investing along its North Sea route. We're going to have to do very similar things."

'War on Alaska'

By proposing wildness protections for ANWR, Obama knowingly stepped on a political third rail (E&E Daily, Jan. 26).

For decades, the 19-million-acre refuge has been the holy grail for the environmental community, which has campaigned to protect the region's diverse wildlife and ecologically sensitive terrain.

Conservationists have repeatedly held off aggressive attempts by pro-oil lawmakers to tap into ANWR's oil and gas reserves.

Federal scientists say the refuge could hold 10.4 billion barrels of oil and 37 trillion cubic feet of natural gas -- a substantial bounty at a time when oil production is declining in other parts of the North Slope.

State officials argue that the federal government is vastly underestimating ANWR's fossil fuel potential. However, the Interior Department continues to thwart state efforts to have Alaska conduct its own 3-D seismic tests to assess the oil reserves on the refuge.

Obama's recommendation to protect ANWR as wilderness won immediate praise from national environmental groups and several Alaska Native groups.

But Alaska politicians saw Obama's action as the equivalent of treason. "This administration has effectively declared war on Alaska," said Alaska Republican Sen. Lisa Murkowski, chairwoman of the Senate Energy and Natural Resources Committee.

Brookings Institution Senior Fellow Charles Ebinger charged that the administration's decision to preserve massive stretches of Arctic lands "represents the death knell of a coherent national petroleum policy."

"The argument that Alaska is to be protected because of its 'special' environmental concerns seems hypocritical given the vital importance of the petroleum industry to the Alaskan economy," Ebinger and Brookings research assistant Heather Greenley wrote in a policy paper.

Now critics are warning that the president could cement his plan to prohibit development on ANWR by designating all or part of the refuge as a national monument.

They note that the Antiquities Act gives Obama the sole authority to create a national monument. By comparison, Congress has the final word on whether to shift ANWR into wilderness status -- a move the Republican-dominated House and Senate are not likely to make.

As Murkowski spokesman Robert Dillon suggested, the ANWR wilderness announcement "could be only the start of the Obama administration's plans for Alaska."

A more nuanced offshore approach

The ANWR firestorm continues to overshadow the Interior Department's second big Arctic policy proposal: the draft five-year management plan for oil and gas leasing in the offshore Arctic.

The management plan for the Beaufort and Chukchi seas was included in BOEM's draft strategy for leasing along all U.S. shores during the 2017-22 time frame (EnergyWire, Jan. 28).

The administration's approach to Arctic exploration is more nuanced than the ANWR wilderness plan. Interior is proposing to offer oil and gas leases in the Beaufort Sea in 2020 and in the Chukchi Sea in 2022.

But in announcing the long-term leasing program, the president also used a little-known legal provision of the Outer Continental Shelf Lands Act to prevent future oil and gas leasing in targeted regions of the Arctic.

Specifically, the White House set aside a biologically rich region of the Chukchi known as Hanna Shoal, as well as whaling areas around Barrow and Kaktovik and a 25-mile-wide buffer and subsistence zone along the Chukchi coast.

All told, Obama preserved almost 10 million acres of the Beaufort and Chukchi seas.

"These are relatively small conservation steps that will contribute disproportionately to the health of the Arctic ecosystem," said Michael LeVine, Pacific senior counsel for Oceana.

Former Deputy Interior Secretary David Hayes praised the five-year Arctic management plan as an excellent example of a balanced approach to conservation and energy extraction.

"Let's take off the table the question of leasing in the most sensitive areas, which is, essentially, what the Obama administration is doing with the proposed five-year plan," said Hayes, now a senior fellow at the left-leaning Center for American Progress and visiting lecturer at Stanford Law School.

"There's still plenty of acreage out there potentially for oil leasing."

State priorities underscore challenges

Last fall, the State Department released an agenda ranking climate change as the top priority for the Obama administration's two-year stint as chair of the Arctic Council.

The White House plan also highlights Arctic Ocean stewardship and "improving economic and living conditions" in the North.

In stark contrast, the Alaska Arctic Policy Commission recently completed its own two-year state study of the needs of the Alaska Arctic. The panel, created by the Alaska Legislature, categorized Arctic economic development, including resource extraction, as the top priority.

At a time of stark differences between the federal and state perspectives on U.S. Arctic policy, Obama will be judged by what he does rather than what he says.

Today's Arctic policy discussions have been overpowered by the president's ANWR wilderness designation. But the focus could quickly shift if the Interior Department allows Shell to explore for oil this summer in the Chukchi Sea.

Under the current legal and regulatory timelines, the White House could be in position to sign off on Shell's exploration plan by late April, just as the United States assumes leadership of the Arctic Council.

If Shell begins drilling in the Arctic this summer, the environmental community is likely to unleash a frenzy of international protests on a far grander scale than the ongoing Keystone XL pipeline demonstrations.

Meanwhile, the future of U.S. Arctic oil development could depend on how much oil Shell discovers in the frigid Chukchi.

Federal scientists say Alaska's northern waters may hold a total of 23 billion barrels of oil. Company officials are hoping for a find of billions of barrels of oil.

If Shell proves those optimistic predictions to be true, other oil companies may reconsider their now-dormant Arctic leases and take a harder look at upcoming federal lease sales. BOEM is considering offering leases in the Chukchi next year and in the Beaufort in 2017.

Times are far different today than in 1998-2000, when the United States last served as chair of the Arctic Council.

Made up of the world's eight Arctic nations -- Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the United States -- the council provides an increasingly important forum for policy and scientific cooperation. Leadership of the group rotates among members on a two-year basis.

During America's last term as chairman, "the Arctic ice had not melted to the extent it has now, and nobody was talking about offshore oil and gas or ship traffic along the Northern Sea Route," said Malte Humpert, executive director of the Arctic Institute.

Today, however, the Arctic has reached conditions that international analysts refer to as "the new normal," with near-shore waters remaining ice-free for longer periods each summer and commercial interest growing in the frozen North.

In that changed atmosphere, Obama is walking a high-wire act between Arctic land preservation and oil and gas development.

"It's a fine balance between preservation of the natural environment and the acknowledgment that there's economic value," Humpert noted.

"It'll be interesting to see how the U.S. takes this responsibility and turns it into policy."

Twitter: @hobsonenergywire | Email: mhobson@eenews.net

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