Seismic deniability in ANWR debate: Fuel for Thought

Alaska wants to update decades-old seismic surveys of the Arctic National Wildlife Refuge to boost exploration. But in a twist, some officials feel that ignorance in this case may be better for the state’s coffers.

Alaska officials hope to jump-start exploration in ANWR with $10 million in “seed money” toward the cost of a 3-D seismic program to gather new information on oil and gas prospects.

ANWR is estimated to hold as much as 10 billion barrels of recoverable oil. But that estimate, compiled by the US Geological Survey, is years old and based mainly on results shared from one group-sponsored seismic survey in the 1980s that relied on older 2-D geophysical profiling.

The new plan involves modern 3-D seismic that would present a much more detailed picture of potential reservoirs, says Andy Mack, the state’s Commissioner of Natural Resources.

Some 3-D seismic can even indicate the presence of fluids in reservoir rock, although exploration drilling is still needed. If the Legislature approves the appropriation, the state will solicit partners who will share in the information, Mack said. A seismic operator would be contracted to do the project.

‘MOOSE PASTURE' LEASE SALE

Although Alaska has been a gung-ho supporter of ANWR exploration for decades, and the recent decision by Congress to open the refuge was spearheaded by the state’s congressional delegation, some Alaska legislators question the state’s investment in seismic.

State Senator Peter Micciche, Republican from Kenai, in southcentral Alaska, thinks the venture could backfire.

“There is a risk that you could chill interest if the seismic results devalue certain prospects,” in the refuge’s coastal plain, Micciche said.

Sometimes it’s better to hype the lease sale but leave companies without the data, so they bid blind. Just this happened in one of the earliest North Slope lease sales. Right after the 1969 Prudhoe Bay oil discovery, the state, which badly needed money, decided to auction unleased lands around the discovery. The sale was held in a matter of months, deliberately timed so no company had time to do seismic.

Tom Kelly, the state resources commissioner, became the state’s chief huckster and talked up the sale at industry forums. The result was $900 million in bonus bids, an astounding amount at the time.

As it turned out, most of the leases sold in the sale turned out to be unproductive — “moose pasture,” as Alaskans put it. Kelly said later that if companies had had time to do seismic the state would have received a fraction of what it got.

CREATING 'HAVES AND HAVE-NOTS'

Roger Herrera, a retired BP geologist who has done extensive work on ANWR, said the state’s proposal is a risk like anything in the oil business. But he cautions that if only the participants in a state-led consortium have the data, it creates a split among prospective bidders, with “haves and have-nots,” which will definitely discourage the have-nots from taking a gamble.

“My suggestion is for the state to use its limited funds to do 3-D seismic only on the most prospective areas and then sell the information at very low cost to as many people as possible,” Herrera said. That strategy disseminates the information broadly, rather than having it be held by only a few, he said.

However, there’s already a have and have-not situation in ANWR, Herrera said. Two companies who drilled an exploration well in the early 1980s, Chevron and BP, still have those test results as well as lease rights in a private land holding in the refuge.

Arctic Slope Regional Corp., an Alaska Native development corporation, owns a 92,000-acre private enclave in ANWR and has agreements with Chevron and BP. Herrera said this has always created a split in the industry because of the perception that BP and Chevron have the upper hand. Because of that, the bidding could be depressed anyway, he said.

FEDERAL ANWR SALE

The total price for a single winter “group shoot” in ANWR is unknown. But when Alaska proposed a similar project three years ago that would have been paid for completely by the state, a cost of $50 million was estimated.

Then US Interior Secretary Sally Jewell shot the plan down. Mack said he doesn’t think Ryan Zinke, the current Secretary, will have a problem.

“It’s our belief that having newer and better data on ANWR will generate more interest in two lease sales the Department of the Interior will conduct,” Mack told legislators in a recent hearing. “This is based on our experience in making seismic data we have obtained through its exploration tax credit program available to companies."

The state has been able to stoke industry interest in new plays in the Colville River area west of Prudhoe Bay by making data available to explorers.