Biden federal lands order likely to impact long-term Alaska oil expansions

Anchorage — New upstream projects under development on federal lands in northern Alaska will not be immediately affected by the Biden administration's executive order pausing oil and gas approvals, but expansions of those projects could be impaired, according to state Commissioner of Natural Resources Corri Feige.

The state is counting on new production from ConocoPhillips' Willow and GMT-2 projects in the 23-million acre National Petroleum Reserve-Alaska to help keep Alaska production stable at about 500,000 b/d. These are under construction and so far appear unaffected by Biden's order, said Feige at a state legislative briefing Feb. 3.

Feige also sees a possible a silver lining for Alaska amid the new uncertainty.

"It's likely these new policies will drive a shift of exploration focus back to state lands on the North Slope," she told legislators.

However, permits are likely to be held up for any exploration in the 1.5-million acre Coastal Plain of the Arctic National Wildlife Refuge, or ANWR. The Interior Department held a lease sale in ANWR on Jan. 6 and issued leases Jan. 19.

ANWR exploration is a hot button for conservation groups who have already filed lawsuits to stop drilling there.

So far the Biden administration appears to be making decisions on a case-by-case basis, Feige said. In late January acting Interior Department officials shut down exploration drilling by 88 Energy, an Australian independent, on its leases in the NPR-A, according to the company. But Interior relented shortly after to allow drilling to proceed. 88 Energy is testing its Peregrine prospect north of Umiat, near the southeast boundary of the petroleum reserve.

"I would not take this action by DOI as an indication of broad flexibility on the part of the Biden administration where oil and gas projects are concerned," Feige told S&P Global Platts. "I do believe that DOI will look at existing projects on a case-by-case basis in making regulatory and policy determinations."

However, project approvals are likely to be slow rolled.

"The greater issue is likely to be the amount of time that any future regulatory authorizations for existing projects and leases require to move through the new federal administration's process," she said.

The about face for 88 Energy in NPR-A came after the state's congressional delegation had appealed to the White House and Interior officials to allow the company to continue work after having been given initial approvals. The temporary suspension of activity cost the company about $3 million in initial mobilization of a drill rig and support workers, said Laura Boomershine, legislative liaison for the state resources agency, at the briefing.

ConocoPhillips' GMT-2, now in final construction in the northeast NPR-A, will start production late this year with an expected peak rate of 35,000 b/d to 40,000 b/d. Willow, a larger nearby project, is expected to produce 130,000 b/d beginning in 2025 or 2026. Construction of access roads and gravel pads for Willow has started along with detailed engineering. A Final Investment Decision on Willow, which is expected to cost about $6 billion, is planned for late this year.

While permits for the current work have been issued "any expansion or alteration of those activities would be subject to the moratorium and could be impacted," Boomershine said. ConocoPhillips' exploration of nearby discoveries could be affected, too.

It is also increasingly unlikely that the federal government will hold a lease sale this year in the NPR-A, Boomershine said. The Bureau of Land Management "has not issued a call for nominations for a 2021 lease sale this year. There was not a sale last year for the first time in many years," she said.

Meanwhile, the state intends to fight the Biden administration in court when the new policies impair access to state or privately held resources. Governor Mike Dunleavy has already proposed a $4 million fund for litigation and mentioned state action to protect rights of private Alaska Native corporations who own 91,000 acres of inholdings in ANWR's coastal plain.

"Both the BLM record of decision for the Coastal Plain oil and gas program, and the Alaska National Interest Lands and Conservation Act of 1980 recognize the need for private and Native lands like those (in ANWR) owned by Kakovik Inupiat Corp. to not be isolated or 'land locked' within ANWR," Feige told S&P Global Platts.

Kakovik Inupiat Corp. has a winter seismic survey planned for its 91,000-acre inholding, but the BLM has not yet approved permits for the seismic operator to cross refuge lands to reach KIC's acreage.