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How Washington Can Help Alaska Drill: Three years in, Shell is still waiting to recover a single barrel of oil


October 18, 2008


Anchorage, Alaska

Since 2005, Shell Oil has spent hundreds of millions of dollars to buy leases in hopes of exploring for oil off the coast of northern Alaska. Based on past drilling, the area seems a sure bet for increasing domestic oil supply. But so far Shell has not been allowed even to look for oil on these leases, much less extract any of it.

Why? Because the regulatory and permitting process covering offshore energy development for most of the nation guarantees delay, and because of a legal system that has no sense of urgency in making a decision — any decision.

Two years ago, environmentalists teamed up with Alaska Natives who depend on subsistence whaling for their livelihoods and culture. They sued in federal district court in Alaska in July 2007 to stop Shell’s exploratory drilling, claiming that it could disturb the whales and interfere with traditional bowhead-whale hunts. The case was quickly elevated to the Ninth Circuit Court of Appeals where it has languished since. While Shell has worked earnestly with whalers to meet their concerns, there doesn’t seem to be any sense of urgency among federal regulators or the courts.

Threats to traditional whaling — the backbone of Alaska’s northern Native lifestyle — must be fully addressed. Still, it is disappointing that we’ve created a system that is paralyzed from making timely decisions on whether development can or can’t occur. I believe that, given the more than three decades of experience we have in Arctic energy development and the new technology we have, environmentally sensitive development can occur in harmony with traditional lifestyles. But we’ll never find out if the courts can’t make a decision.

We’ve known for decades that the Beaufort and Chukchi Seas hold considerable oil. It was therefore encouraging when Shell decided to spend the money necessary to extract oil in an area called Sivulliq, 16 miles off Alaska’s coast.

The company followed the right procedures, securing federal leases for the area (at a cost of $83 million) and winning approval from the federal Minerals Management Service in February 2007. It also committed to spending $200 million to rent two ships and build others capable of hauling drilling equipment and an oil-containment boom, just in case it was needed. Shell also built a small fleet of ships able to break up or drive away ice-sheets that could pose a threat to floating well platforms.

But other federal agencies — including the Environmental Protection Agency (EPA) — had trouble issuing the endless stream of required environmental permits in time for drilling to start in August 2007. Outside of the Gulf of Mexico, federal agencies from the EPA to the National Marine Fisheries Service do not seem to have enough staff to regulate or issue permits for Outer Continental Shelf development (OCS) in a timely manner.

In the midst of the permitting process, Shell was hit with a lawsuit filed by the North Slope Borough, Alaska Eskimo Whaling Commission, the Center for Biological Diversity, and others. North Slope residents, who engage in subsistence whale hunting, worried that the activity in the Beaufort might scare the bowhead whales into deeper waters, making hunting more dangerous. They and environmental groups sued for an injunction to block drilling.

The Ninth Circuit issued a temporary injunction on July 19, 2007, and held a hearing the next month to decide if Shell could proceed later in September, after the whale hunt was over. Fifteen months later, after a second potential drilling season has come and gone, the court still has not ruled.

The U.S. Geological Survey this summer completed its first real assessment of the Arctic’s potential, and found that the Alaskan Arctic likely contains 30 billion to 50 billion barrels of recoverable oil and 221 trillion cubic feet of natural gas — the majority of it offshore. Thus while the Arctic likely holds 13% of the world’s yet-to-be-discovered oil, we are making it more difficult to benefit from our nation’s energy bounty.

How do we rectify the situation?

First, we need to conduct a modern assessment of how much oil and gas we actually have — something Congress has approved but not authorized the funds to do. The Interstate Oil and Gas Compact Commission estimates that there are 30 billion barrels of oil and 134 trillion cubic feet of natural gas locked up in areas other than in the Alaskan Arctic that have been legally off limits for years. Those prohibitions lapsed at the beginning of this month, so now we need to know what we have and start the process of tapping into it.

We also need to create consolidated offshore environmental permitting offices for the entire country. This will allow us to gather experts under one roof and speed the permit process. And we must ensure that the judiciary isn’t killing energy production by allowing drilling to be held in court limbo for years.

We should share OCS tax revenues with states and local jurisdictions to offset their infrastructure costs. That will increase the willingness of local residents to accept the ever decreasing risks of offshore development without resorting to a court fight.

And finally, we should join the world and approve the Law of the Sea Treaty so America can defend its claim to all of the energy under our continental shelf.

With the nation’s environmental community shifting into overdrive, filing suits on everything from how oil and gas exploration will affect polar bears and seals to how carbon emissions affect the air and climate change, we must responsibly streamline the process to tap the OCS while fully protecting the environment. Americans forget we are the world’s third-largest oil producer. It’s not like we don’t have the resources to tide us over until the new age of alternative fuels arrives. We just have been misled into thinking we can’t do it safely.

Ms. Murkowski, a Republican, is a U.S. senator from Alaska and member of the Senate Energy and Natural Resources Committee.

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