This story is a corrected version. An earlier version incorrectly stated the state of Alaska would allow drilling in the most environmentally sensitive areas.
The Alaska governor’s office, which has long griped that the Obama administration has blocked oil drilling in the Arctic Ocean and Arctic National Wildlife Refuge, is aggressively pushing a plan to drill off a pristine strip of state-owned coast threading between the federally protected lands and waters.
Alaska Gov. Sean Parnell, a Republican, announced the plan on Thursday by teleconference at a Washington press conference held in conjunction with the U.S. Chamber of Commerce. It would allow the state to start allowing drilling in the Beaufort Sea, up to three miles off the federally protected regions of ANWR and the National Petroleum Reserve-Alaska, bypassing the need for federal permission. It also appears calculated to ramp up political pressure on the administration to allow new drilling on the contested federal lands and waters.
Parnell said he intends to use this move to encourage other coastal states to expand drilling.
“We’re setting an example for what other states can do. Much of Alaska’s promising lands are under federal control. We need America’s help to spur production.”
“This is breaking new ground,” said a senior official at a major U.S. oil company, who asked not to be identified since all major oil companies were not made aware of the decision before it was announced. “In the past, nothing anywhere near ANWR was even talked about. This would present an opportunity that’s never been available before. The industry will welcome this as a positive development.”
It’s long been a source of ire to the oil industry—and relief to environmentalists—that the federal government has final say on whether companies can drill in the federal waters of the Arctic Ocean, the 19 million acres of ANWR, and the 24 million acres of the National Petroleum Reserve, which are believed to hold more than 10 billion barrels of undiscovered oil. But those areas are also home to sensitive and unique ecosystems that could be devastated by a disaster like last summer’s Gulf of Mexico oil spill. Since the federal government created ANWR in 1960 and the NPR in 1923, it has fought attempts to open up the wildlife refuge and resisted efforts to issue permits to drill in the reserve. The administration has issued permits to Shell Oil to begin drilling the first exploratory wells in the Beaufort and Chukchi seas, but it delayed those plans after the Gulf spill, citing the need for more research into impacts of an Arctic spill.
All of this has aggravated officials in Alaska, which derives most of its revenue from oil royalties.
“The first couple of years of the Obama administration have felt like an onslaught,” Alaska Department of Resources Commissioner Daniel Sullivan told National Journal in an interview.
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So state officials say they found a way to take action. While the state has no control over drilling in ANWR, it does own the three miles of Arctic Ocean just off the coast—after those three miles, the federal government owns the waters. Officials say it stands to reason that that three-mile ribbon likely cuts through the vast oil deposits believed to lie beneath ANWR and the Arctic Ocean. Alaskan officials and oil companies hope that by drilling in that strip, they can tap into up to a dozen giant oil pools that would otherwise be off-limits. And if they do hit significant reserves there, that could pressure the federal government to open adjacent areas. Another option Alaskan officials are hoping for is passage of a bill sponsored by Sen. Lisa Murkowski, R-Alaska, the ranking member of the Senate Energy and Natural Resources Committee, which would allow drillers in state-owned waters to use horizontal drills to siphon oil from underneath the adjacent protected areas.
Sullivan said he expects Alaska’s October sale of onshore and offshore drilling leases to be the largest such sale this year. Overall, it will open up 14.7 million acres to drilling, an area equal to Massachusetts, Connecticut and Vermont combined.
He added that he is confident that companies that find oil in the state waters between the federal properties will be able to withstand any legal challenges.
“We’ve looked hard at the legal issues surrounding such plays, and we are confident that if a company drilled down straight down within that play, and drained that reserve, they will be within their legal rights. Large oil and gas fields don’t respect state and federal boundaries. But if a company drilling on state land hit that well they would be within their legal right to drain that well.”
The pushback from the environmental community should be fierce. Over a year after the deadly Gulf oil spill highlighted the dangers of offshore drilling, Congress has yet to pass legislation requiring new offshore-drilling safety measures, and environmental advocates, led by the Pew Environment Group, have pressed President Obama not to allow any new drilling in Arctic waters, where, green groups say, extreme weather conditions and a sensitive ecosystem could make the impacts of a spill even more devastating.
Eleanor Huffines, manager of Pew’s U.S. Arctic Program, said that the group does not have a problem with the current drilling in Alaska’s state-owned waters, which takes place near the on-land Prudhoe Bay drilling operations.
“To date the state-water offshore-drilling facilities have been done in a way that minimizes harm to the environment,” she said. “But for each plan, location is important. To date it’s been done safely, but that’s not to say you could do that off ANWR. You have to connect to the coast, which means building infrastructure. How could you do that in ANWR? The risks to sensitive species would be higher. It would be much more difficult to do safely.”
Sullivan said that the state will not allow drilling in the most environmentally sensitive areas, where whale migration and whale calving areas are.
This article appears in the June 30, 2011, edition of National Journal Daily PM Update.