President Donald Trump gave Alaska some good news late last week when he signed an executive order directing Interior Secretary Ryan Zinke to review a plan from President Barack Obama’s administration that banned drilling in parts of the Pacific, Arctic and Atlantic oceans. Though a price slump that began in 2014 has reminded Alaskans to plan for a future in which oil no longer provides the lion’s share of state revenue, the commodity remains a vital part of the Alaska economy and likely will remain so for decades to come. The executive order relating to offshore drilling provides hope that drilling on the outer continental shelf off the state’s northern coast may be allowed again.
Though portions of the Beaufort and Chukchi seas were briefly opened to exploratory drilling on the outer continental shelf, Royal Dutch Shell, the only major producer to drill exploratory wells, exited the area in 2015. The company said it had spent more than $7 billion on the project and cited disappointing results from its test wells, as well as an unpredictable federal regulatory environment, as reasons why it was leaving.
The end of OCS exploration in Alaska and President Obama’s 2016 order placing the area off-limits were cheered by those who felt offshore drilling in the Arctic was unsafe or unnecessary. But it was mourned by those in the oil industry in Alaska as well as many outside it who recognized the decline of other traditional fields and the desirability of keeping petroleum prospects healthy in the state. Although offshore oil might not provide the same royalty and tax revenue benefits as development onshore, particularly on state-owned land, it would nonetheless provide a boost in jobs and economic activity.
For a variety of reasons, however, it would be wise for Alaskans not to put too many eggs in the basket of offshore drilling. Though President Trump said he is modifying the text of the Obama memorandum banning offshore leasing in the Arctic to revert back to earlier designations for how leases could proceed, the move is legally untested, as was President Obama’s order placing those areas off-limits in the first place. With conservation groups spoiling for a fight on executive orders related to resource development, the issue is likely to end up the subject of a lengthy court battle.
It’s important, too, to remember that federal regulations were only part of the reason why companies ceased exploration in Alaska’s offshore areas. The other, high costs, is a factor beyond the control of the state or President Trump. Until oil prices rebound significantly, it’s hard to see major producers being willing to make the kind of investments Shell made in the Beaufort and Chukchi seas again.
The executive order on offshore drilling remains good news for the state. As a resource state, Alaska needs flexibility to develop oil and gas responsibly. The potential for offshore leasing, though it would occur in areas under federal control, would open up significant areas thought to be key to that effort in the long term. And timing is important. The longer the U.S. delays in acknowledging its Arctic resource potential, the more likely it will be that those opportunities will be endangered by other nations — such as Russia — that are moving aggressively to develop.
— Fairbanks Daily News-Miner, April 30, 2017
