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Shell report says next Prudhoe is offshore

Shell must demonstrate to the courts that outer continental shelf drilling wont be harmful to marine life. (KTUU-TV)

Shell must demonstrate to the courts that outer continental shelf drilling won't be harmful to marine life. (KTUU-TV)


by Jason Moore
Monday, March 9, 2009

ANCHORAGE, Alaska — At a time when Alaska and the nation are suffering job losses, a report released Monday detailed what could be a future boom.

Shell Oil Co. had a study prepared on the economic impacts of oil development on Alaska’s outer continental shelf. While it doesn’t look at environmental or social impacts, the study says offshore development could be the next Prudhoe Bay.

Northern Economics, a consulting firm, along with UAA’s Institute of Social and Economic Research prepared the report, paid for by Shell.

The study claims the development would bring an average annual employment over 50 years of 35,000 jobs.

“If you add all three basins together — that is the Beaufort Sea, the Chukchi Sea and the north Aleutian basin — you could be in the realm of a Prudhoe Bay,” said Pat Burden, president of Northern Economics.

Shell’s exploration drilling in the Beaufort Sea has been stalled by court challenges. But if it’s allowed to progress, the company says the development would not be impacted by today’s low oil price environment.

“It’s something that’s kind of away from the day-to-day fluctuations of price. When one looks at the longer term, and (the outer continental shelf) is longer term — 10 years out in front it becomes less affected or impacted by day-to-day price fluctuations,” said Pete Slaiby, general manager of Shell Alaska.

The study says there are numerous benefits to the development: The infrastructure could allow marginal on-shore fields to be developed, helping fill the trans-Alaska pipeline; and lower tariffs could make all North Slope development more economical.

“So if you reduce the tariffs, that means you get a higher wellhead value for the oil, which translates into higher revenues to the state and to the producers,” Burden said.

Northern Economics says its estimates are conservative. But the North Slope Borough, which joined the lawsuit against Shell’s Beaufort Sea drilling, questions how realistic the predictions are.

“I think that the past year’s experience with the price of oil would suggest that making 50-year projections is as much about guess work as they are about science,” said David Harding, North Slope Borough spokesperson. “And even in tough economic times I don’t think we want to lead people down the path with promises that could turn out to be way off the mark.”

And while the economics may look impressive, none of it will happen unless the oil companies can first prove to regulators — and the courts — it can do it without harming marine mammals and the waters North Slope communities depend on.

The Ninth Circuit Court of Appeals ruled against Shell’s Beaufort Sea drilling last November. But on Friday a three-judge panel rescinded the opinion and said it would issue a new one.

At this point, no one knows what that could mean. Shell hopes to resolve the suit and be drilling in 2010.

Contact Jason Moore at [email protected]

Pete Slaiby, general manager of Shell Alaska (Mike Nederbrock/KTUU-TV)

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