Advocates see large promise from ANWR oil exploration


Maureen Lorenzetti
OGJ Online

WASHINGTON, DC, July 11 -- Opening a small portion of the coastal plain of the Arctic National Wildlife Refuge to drilling could yield the largest oil field the industry has found in more than a generation, drilling supporters told the US House Committee on Resources Wednesday.

Roger Herrera of lobby group Arctic Power said, "I would prefer to await the results of exploratory drilling before being dogmatic about the amount of oil present, but because we already know that significant amounts of oil are present in Sourdough field, which partially underlies the western edge of the Coastal Plain, and because of the conservative nature of the US Geological Survey figures, it is easy to believe that 10 billion or more bbl might be producible from the area.

"Such an amount would represent the largest new oil province found in the world in the last 30 years. The Caspian Sea area might prove the single exception to that, but it remains to be fully proven."

Herrera, a former BP PLC executive, added the most recent government estimates of recoverable oil in the "1002" area of ANWR are in his group's opinion, too low, and that the economic assumptions over whether it makes sense to drill are unrealistic.

Herrera said that in its 1998 assessment, USGS concluded that at $25/bbl and with an oil recovery factor of 37-38%, there was a 95% chance the coastal plain could produce 5.7 billion bbl of oil over a period of 25-plus years, and a 5% chance that almost 16 billion bbl could be produced.

"The relevance of these estimates is not in the geological assessment of how much oil might be present, but rather in the economic and technical parameters which impact the figures. I believe that the price of oil demanded by the USGS for optimum production is much too high. It does not take into account the huge cost efficiencies of the new arctic drilling technology already discussed," he told the committee.

"However, even more important is the USGS estimate of how much oil can be taken out of a given geological reservoir. The expectation that only 37-38% of the oil present can be extracted is too low.

"Prudhoe Bay field is now calculated to have 60-65% of its oil eventually produced. Endicott field, producing from a different, more difficult, geological horizon, will give up more than 55% of its oil, and Alpine field, which is the beneficiary of state-of-the-art, 2001 technology, and which taps a "tight" reservoir, will produce over 50% of its oil. These examples justify the assertion that 37-38% recovery is much too low. Consequently the USGS resource figures are extraordinarily conservative and can be considered minimal and pessimistic," he said.

Interior Sec. Gale Norton also spoke in support of ANWR drilling, now included in Chairman James Hansen's (R-Utah) new bill HR 2436 that seeks to codify public land and production initiatives advocated in the White House's energy blueprint last May.

She said, "The president and I both believe that oil and gas development can successfully coexist with wildlife in Alaska's arctic region.

"Our support for enactment of authority to lease oil and gas resources in ANWR is a prime example of the Interior Department's dual commitment to energy development and environmental conservation," Norton told the committee.

"We recognize that the ecological resources of the refuge are unique and precious. We must respect and conserve this wealth for future generations of Americans. However, because of advances in technology and in our enhanced understanding of the ecology, we are now able to proceed with exploratory work with very little long-term effect. "

She added that under the terms of the Hansen legislation, ANWR lease holders would be subject to the most stringent environmental protection requirements ever applied to federal energy production.

ANWR drilling opponents, who consistently have argued that the area is too environmentally sensitive to develop, argued there is strong evidence to suggest that drilling proponents have "significantly exaggerated the area's energy potential," according to testimony by the Alaska Wilderness League.

House lawmakers say Hansen may be able to report an ANWR leasing measure out of his committee but a full House vote may be elusive. Both the Congress and White House say they want to move forward with comprehensive energy legislation this summer (OGJ Online, July 9, 2001).

Democrats who oppose the bill also say that including a contentious issue like ANWR in public lands bill was designed to distract the public from other portions of the proposal, like expanded royalty in-kind and a renewal of deepwater royalty relief for oil operators.

"You plop a controversial item like ANWR in a long bill and hope everyone focuses on that. Meanwhile, lying below the surface is a whole bevy of equally contentious items that consequently may escape the same level of scrutiny," said Rep. Nick Rahall (D-W.Va.)

"Others today may butt heads over whether or not that bit of tundra in northeastern Alaska should be leased to energy development. My role will be to expose the rest of the package. And a central feature is this business of providing relief from the payment of oil and gas royalties to the American people -- a royalty holiday -- under the guise of needing to give companies an incentive to drill."

Contact Maureen Lorenzetti at maureenl@ogjonline.com

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