Oil industry blasts administration’s Arctic drilling plan

WASHINGTON — The Obama administration’s plan to adopt a focused approach to auctioning Arctic waters for oil and gas drilling isn’t winning many fans.

In comments filed with the Bureau of Ocean Energy Management before a Tuesday evening deadline, environmentalists insisted that it is too risky to allow any oil drilling in the “pristine” Chukchi Sea — even if especially sensitive areas are taken off the table.

Meanwhile, oil industry trade groups blasted the agency’s plan to abandon a previous tactic of widely selling acreage in the Chukchi Sea in favor of a “targeted leasing” approach that limits acreage to areas with fewer environmental risks and other concerns, as nominated by would-be bidders. For instance, the administration plans to keep areas north of Barrow, Alaska off limits for development because of the subsistence whaling that occurs in the region and plans to maintain a 25-mile buffer zone along Alaska’s Chukchi Sea coastline.

Arctic interest

The targeted leasing approach could dissuade oil companies from bidding on drilling rights in the Chukchi Sea during a planned auction in 2016, warned the American Petroleum Institute, National Ocean Industries Association and other groups.

An area-wide leasing approach, by contrast, “allows the bidders to consider the entire geological basin rather than a small portion of it,” the groups said in their filed comments. “Most oil companies have highly structured criteria for making exploration decisions. Allowing a firm to take the entire basin into consideration gives the U.S. the full benefits of a diversity of approaches and exploration philosophies for areas previously unleased.”

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The last auction of Chukchi Sea drilling leases, in 2008, was a record-breaker that brought in $2.6 billion in bonus bids, noted the Alaska Oil and Gas Association.

“Traditionally, targeted leasing has been a methodology (the ocean energy bureau) has employed in low-interest areas,” the group said. But, “the U.S. Arctic is not an area lacking in interest.”

‘Not a trivial matter’

The trade groups — including the International Association of Drilling Contractors and the International Association of Geophysical Contractors — also objected to the notion that the industry should identify the potential attractiveness of Chukchi Sea acreage now, three years before the planned sale, without any direction from the agency on what might be available.

“Without the assurance of broad availability of acreage that occurs through an area-wide approach, what incentive does a company have to undertake the effort of providing this data?” the API, NOIA, IADC and IAGC coalition questioned. “The requirement to provide justification to support nominations is not a trivial matter and requires the expenditure of significant resources within the short amount of time allotted through this call for nominations.”

The result is that companies could “devote time and resources to working on acreage that could ultimately be excluded” from the sale, the coalition said.

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The Alaska Oil and Gas Association said the government was asking industry “to endure the temporal and economic burden of compiling data without any guarantee that those efforts will correspond to an opportunity to engage in leasing.”

Instead, the oil industry coalition recommends the ocean energy bureau go back to the drawing board and effectively identify the areas it plans to offer in the 2016 auction before asking potential bidders to “begin their detailed analysis of this acreage.”

Could be canceled

The ocean energy bureau did not have an immediate response to the comments. It previously extended the time for industry representatives and other stakeholders to weigh in on the potential 2016 Chukchi Sea lease sale.

Interior Department officials have cast the 2016 sale as a “potential” auction, which could be canceled if there is little industry interest or for other reasons.

By early Tuesday evening, it appeared no individual companies had filed comments with the ocean energy bureau in response to its call for information on the Chukchi Sea lease sale. A spokesman with Shell Oil Co., which drilled the first half of an exploratory well in the Chukchi Sea last year, said the firm was not filing comments.

131203 Final API-NOIA-IADC-IAGC Ltr to BOEM Re Chukchi Sale 237 Call for Nominations and Info

12 03 13 AOGA Comments on OCS Lease Sale 237 FINAL