Murkowski calls for adaptable Arctic leasing structure after Shell, Statoil exit Alaska offshore

12/1/2015

WASHINGTON, D.C. -- Proposed changes to federal rules regulating oil and natural gas activity on the Outer Continental Shelf and in the Arctic are necessary to create a predictable regulatory framework that supports safe exploration and American leadership in the Arctic, U.S. Sen. Lisa Murkowski (R – Alaska) said Tuesday.

“We want to make sure we have the strongest possible safety standards in place, but we also have to make sure we strike the right balance and that the U.S. doesn’t cede leadership on environmental standards to countries like Russia that are advancing in the Arctic,” said Murkowski, chairman of the Senate Energy and Natural Resources Committee.

Murkowski’s comments came Tuesday during the energy panel’s oversight hearing on the Interior Department’s proposed changes to the well control rule and other regulations related to offshore oil and gas production.

Murkowski noted that industry experts have raised concerns that the proposed rules are overly prescriptive and deny operators an appropriate level of flexibility to react to changing conditions in the field, making it more difficult to operate and potentially increasing the risk of an accident compared to existing standards.

“Offshore oil and gas production is an issue of national importance—not merely a topic for the coastal states that support it. However, since 2009, offshore oil production in our federal waters has been flat at best, while offshore gas production has been cut in half,” Murkowski said. “The truth is that our offshore regulatory system has too often held projects back—especially in my home state of Alaska. No one here will suggest that offshore production should go unregulated, or that safety should ever be anything but the very top priority, but when industry experts express concerns about the safety of proposed rules, we should all pay attention.”

Burden

Murkowski raised the experience of companies operating in Alaska’s Arctic waters, which found the uncertainty of the Obama administration’s regulation an insurmountable burden to development.

“I am deeply disturbed by the administration’s handling of our Arctic resources. The regulatory maze imposed from Washington, D.C. created a situation in which successful exploration of Alaska’s offshore was an uphill battle every step of the way,” Murkowski said.

Murkowski pointed to the experience of Shell Oil, which after seven years and an investment of more than $7 billion pulled the plug in October on its exploration of Alaska’s Chukchi Sea. Shell’s actions were a precursor to Statoil’s November decision to abandon its own plans to drill in the Alaska Arctic.

“We have now seen two companies pull out of an area in Alaska that holds an estimated 24 Bbbl of oil and more than 100 Tcf of natural gas, and where there is very strong local support for development,” Murkowski said. “It was not the physical Arctic environment that prompted these decisions; it was, to a larger degree, the regulatory environment.”

Murkowski called on the administration to change the current 10-year term for offshore leases for the Arctic in recognition of the shortened drilling season and extra challenges of operating in the region.

“I believe a new paradigm is in order, one that recognizes the federal offshore areas in the Arctic are a ‘frontier play’ worthy of a modern, adaptable leasing structure—designed to help, rather than block, exploration,” Murkowski said.

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