Sunday, October 9, 2011

Industry criticizes BLM for paltry offer in NPR-A sale

By Tim Bradner,
Alaska Journal of Commerce

State officials say they have been told by the U.S. Bureau of Land Management that a federal lease sale planned for the National Petroleum Reserve-Alaska in December will be held on the same day, Dec. 7, that the state will hold an area-wide sale on state lands including acreage adjacent to the NPR-A.

Industry officials are meanwhile expressing disappointment that BLM will offer only 3 million acres of the 23 million-acre petroleum reserve, compared with the state’s offer of almost 15 million acres in its lease sale, and criticized the Department of the Interior for withholding parts of the northeast NPR-A that offer the best prospects for major oil discoveries.

“They have clearly let the U.S. Fish and Wildlife get the upper hand by setting aside the Teshekpuk Lake area near the coast,” said Dick Gerrard, Alaska manager for FEX LLC, in an interview. “BLM is clearly taking the easy way out to avoid conflicts,” he said.

Gerrard said he is disturbed at the precedents being set for large-scale withdrawals from lease sales of tracts near the coast.

“Once this happens the policy gets set in stone. There are many places, as we’ve seen on state lands to the east at the Milne Point and Niakuk fields, where drilling very near the coast allows for extended-reach wells to tap reservoirs a few miles offshore,” he said.

Areas south of the coast that are being offered for leasing are more prone to natural gas discoveries, Gerrard said. FEX, the U.S. Subsidiary of Talisman Energy, a major Canadian independent, has been active in NPR-A exploration but is now withdrawing.

Ken Boyd, a former state oil and gas director now working as a consultant, said much of the acreage being offered by BLM in December has been leased before by companies and relinquished due to low potential. “They (Interior) just refuse to offer the areas with the best potential,” Boyd said.

However, state geologists mapping the North Slope shale formations, which could be a source of production of oil from shale through fracturing, do show shales in the areas that BLM will offer.

Gerrard, of FEX, said, “If someone were making a resource play (for shale) they may pick up some of these leases as an option, but because the area is within NPR-A, west of the Colville River and without access to infrastructure, a shale oil development would be prohibitively expensive.”

Joe Balish, state deputy commissioner of Natural Resources, said the state would like to see BLM offer up more acreage, but is pleased that at least something is out there. “Would we like to see more? Yes. But at least this is a start,” Balish said.

Balish said the state will hold its lease sale in Anchorage on the morning of Dec. 7, and that BLM officials have told him they will hold theirs in the afternoon, also in Anchorage. A BLM spokeswoman in Anchorage said the NPR-A sale date has not officially been set because it requires publication of the sale notice in the Federal Register.

“We can say that the lease sale will be held in early December,” spokeswoman Ruth McCord said.

However, BLM has released information on the tracts to be offered. In documents released with the tract maps BLM said it is offering approximately 23 percent of the 13.4 million acres in two planning areas of the reserve that are approved for leasing.

In its lease sale, the state will offer almost 15 million acres of unleased lands in the central North Slope, the foothills region of the southern North Slope and state-owned submerged lands in the Alaskan Beaufort Sea.

“We are very focused on prospects along the Colville River that may straddle the border between state lands and the NPR-A, and we’re happy to see the BLM coordinating their sale with ours,” in the timing of the lease offerings, Balish said.

Balish said the state would include state-owned Beaufort Sea submerged lands north of the coast in its lease sale, including some offshore acreage north of the NPR-A. The state owns subsurface rights from the shoreline out to Alaska’s three-mile territorial limit.

That means the state could be leasing tracts just offshore the onshore acreage BLM has withheld from leasing. Environmental groups have pushed Interior to withhold onshore tracts near the coast because this is prime habitat for migratory waterfowl. However, the area also has some of the highest potential for major oil discoveries, industry and government geologists have argued.

Republished with the permission of the Alaska Journal of Commerce. Tim Bradner can be reached at tim.bradner@alaskajournal.com. Read more: http://www.alaskajournal.com/Alaska-Journal-of-Commerce/October-2011/Industry-criticizes-BLM-for-paltry-offer-in-NPR-A-sale/#ixzz1aIGqdRCo