Just as Alaska was bracing itself for the economic fallout of the Biden administration’s adversarial stance on oil and gas, two recent court decisions are giving the state hope.
On June 15, a federal judge lifted the administration’s temporary ban on federal lease sales, clearing the way for a highly anticipated lease sale in the prolific National Petroleum Reserve – Alaska. And, on May 26, a brief filed by the U.S. Department of Justice affirmed that the Willow Project, a major discovery in NPRA that has been tied up in environmental-related lawsuits, complies with environmental regulations.
While it remains unclear how soon the NPRA lease sale can take place, it is expected that the Willow project, one of the North Slope’s largest projects in recent years, will move forward.
Willow – which is estimated to hold up to 750 million barrels of oil – will create more than 2,000 construction jobs, 300 permanent jobs and generate more than $10 billion in federal, state and North Slope Borough revenue.
When Willow was discovered by ConocoPhillips in 2016, it was an answer to a prayer for the industry-dependent state, whose once prosperous North Slope had gone all but dormant since the 1990s. Alongside the 1.2-billion-barrel Pikka discovery in 2013 by Armstrong Energy, the Willow discovery will not only bolster the local economy, it will ensure continued operations of the Trans-Alaska Pipeline System, which has been struggling with declining throughput levels.
In a May 27 press release, U.S. Sen. Lisa Murkowski of Alaska said, “At a time when Russia is providing more barrels of crude oil to the United States per day than Alaska, the Alaska Delegation has continued to stress to this administration the importance of this new development project.”
The Trump administration robustly supported exploration and development on federal land, including areas that have been off-limits for decades on Alaska’s North Slope. In fact, when it approved an early January 2021 lease sale in highly prospective parts of NPRA, a land rush was expected. However, the Biden administration swooped in and put a “pause” on all lease sales on federal lands for further review.
Halting the NPRA lease sale, coupled with a February injunction against the Willow project ordered by the U.S. Ninth Circuit Court of Appeals, left Alaska reeling. All it could do was lobby for its livelihood and await its fate.
That fate looks brighter now that U.S. District Judge Terry Doughty granted a preliminary injunction against the Biden administration’s moratorium on lease sales. Arguing that “millions and possibly billions of dollars are at stake” in a memorandum accompanying the injunction, Doughty allowed federal lease sales nationwide to proceed while lawsuits filed by 13 states against the federal government on the matter are litigated.
And, while a second, nearly identical lawsuit against the Willow project remains outstanding, the brief filed by the Justice Department in the U.S. District Court for Alaska affirming compliance with environmental regulations is expected to influence the outcome and allow the Willow project to proceed.
New Life in NPRA
The Willow and Pikka discoveries on the North Slope caught many by surprise. After the historic discoveries of Prudhoe Bay in 1968 and the Alpine Field in 1994, discoveries north of the Brooks Range all but stopped for nearly two decades. But as companies began relying more heavily on 3-D seismic data, subtle stratigraphic traps began to crystalize in northeastern NPRA and adjacent areas, catching the eyes of ConocoPhillips and Armstrong, in particular.
The Pikka discovery just outside of NPRA and the Willow discovery in northeastern NPRA prompted the U.S. Geological Survey to reassess resources in the Cretaceous Nanushuk and Torok formations, including state waters and NPRA. In 2017, it estimated a mean value of undiscovered, technically recoverable resources at 8.7 billion barrels of oil and 25 trillion cubic feet of natural gas. According to the assessment, the estimates are “significantly higher than previous estimates, owing primarily to recent, larger-than-anticipated oil discoveries.”
“Seismic data across the entire North Slope and northeastern NPRA shows the potential for new resources,” said AAPG Member Renee Hannon, former Alaska onshore exploration and geoscience manager for ConocoPhillips. “This is exciting because it opens up a new stratigraphic play in the Nanushuk Formation on the North Slope.”
Overseeing the USGS’s assessment, AAPG Member and USGS Senior Research Geologist David Houseknecht added, “I wouldn’t be surprised to see additional discoveries in the Willow to Pikka size range. There are numerous anomalies in seismic data just like those associated with Willow and Pikka that have not been tested.”
Because of the industry’s growing interest in NPRA, the Trump administration made available 18 million acres for the January lease sale, including 7 million highly prospective acres near the environmentally sensitive Teshekpuk Lake area – acreage that has rarely or never been leased.
Teshekpuk Lake sits in the middle of a major hydrocarbon fairway. Yet, it has been designated a “Special Area” by the Bureau of Land Management because it is a critical breeding ground for migratory birds, a calving area for caribou and the largest lake in Arctic Alaska that allows for fishing in winter months.
It remains unclear which tracts in NPRA, including prospective tracts near Teshekpuk Lake, will be included in the NPRA lease sale.
But industry eyes remain on the prize.
“The industry is looking there with tremendous interest, even those that have never worked in Alaska. They see an opportunity to come in and become involved in a very prolific play,” Houseknecht said. “The areas south, east and west of Teshekpuk Lake, which were previously leased in 1999 when the Alpine play was on fire, have not been leased in recent history.”
Development on existing federal leases has been allowed by the Biden administration. Currently, there are 2.6 million acres and 310 lease tracts on existing leases in NPRA, yet only 15 of those tracts have been tested for the Nanushuk play, Houseknecht said.
“There is still a lot of prospectivity that could be explored,” he said. “There’s a great deal of running room there.”
As litigation over the fate of future lease sales on federal lands continues, AAPG Member Mark Myers, former commissioner of the Alaska Department of Natural Resources and former USGS director, said that Alaska also could face permitting issues as the Arctic climate changes.
“We are seeing a dramatic change in the landscape regarding a warming climate, erosion along the coastal plain, thawing permafrost and a change in vegetation,” he said. “This also affects the ecology of the region dramatically. How do you deal with that in terms of permitting activities? Those are the challenges for the new administration. It affects their views on lease sales.”
Having explored in Alaska for more than 30 years and overseeing the Willow discovery, Hannon emphasized the industry’s successful strides in innovation and safety. Footprints have been significantly reduced with horizontal drilling, and gravel pads have shrunk from 65 to 12 acres, she said. The industry also has positive relationships with local stakeholders, native communities, federal agencies and state regulators and has responsibly developed resources for decades, she added.
“When you start cancelling sales and removing acreage from sales, not only do you stop exploration, but you stop innovation for developing newly discovered resources,” she said. “This is when you start stranding these assets. If you don’t get them into TAPS, you could have issues with future minimum flow rates.”
Alaska’s DNR projects that the Pikka and Willow discoveries will account for roughly 40 percent of total Alaska future production, keeping flow rates steady at roughly 500,000 barrels a day. Without them, volumes are expected to drop by half by 2030.
According to Sean Clifton, policy and program specialist for the Alaska Department of Natural Resources’ Division of Oil and Gas, “We need the inertia of activity across the North Slope, including federal lands, to continue that development that gets oil in the pipeline, gives people jobs and keeps us growing.”
When you factor in pilots, mechanics, truck drivers and cooks, Clifton said, “just about everything that everyone does in this state ties into the oil and gas business.”
It is estimated that the North Slope and offshore Arctic region currently hold 50 billion barrels of technically recoverable oil.
“We know Alaska can deliver this oil to domestic customers in an environmentally responsible way and in a reliable manner rather than importing from foreign sources where regulations are less stringent,” Hannon said. “You have to have a lot of respect for Alaska. They are definitely a leader in environmentally sound development.”