Alaska oil's new 'Gulf of Mexico'
Oil companies are eyeing Alaska's largely untapped outer continental shelf. Critics say that's another Exxon Valdez waiting to happen.
The reinforced wall of sandbags protects the village of Kivalina, Alaska, an Inupiat community on the Chukchi Sea.
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The treacherous, ice-choked waters off Alaska have long lured risk-taking fortune hunters seeking furs, fish, or other riches.
Merchant marine companies in the 19th century were so intent on pursuing the lucrative whale-oil and baleen trade that they were willing to lose entire ships, and they did. Vessels were occasionally crushed by masses of shifting sea ice.
Today, the prize is petroleum.
Inspired by higher prices, new technology, and the inescapable fact that Alaska's onshore fields are running dry, companies have put up billions of dollars to start the search for oil and gas in the lightly developed, federally managed Alaska outer continental shelf (OCS). In all, the OCS could hold oil in quantities similar to that at Prudhoe Bay – the oil field that has fueled Alaska's economy for four decades.
Yet those forces of nature so brazenly flouted by traders centuries ago, coupled with the new stresses from a rapidly changing Arctic climate, are giving environmentalists and Inupiat Eskimos pause. If boosters consider the OCS to be the next Prudhoe Bay, critics fear it could be the next Exxon Valdez.
Lawsuits have already forced oil companies to pare back or delay drilling plans. But with the Obama administration set to review offshore drilling rights in the region – promising a balance of economic and environmental needs – the issue is now coming to a head.
The US Minerals Management Service estimates the entire Alaska OCS – the waters stretching from three to 200 miles offshore – holds 27 billion barrels of oil. Almost none has been touched by a drill bit.
The most promising section of the Alaskan OCS could be the Chukchi Sea – the largely ice-covered expanse between northwestern Alaska and northeastern Russia. Also a target is the Beaufort Sea off the north coast.
Industry representatives say they are only beginning to grasp the enormous hydrocarbon potential of the area, once considered too far and too forbidding to justify investment. Only five wells have ever been drilled in the Chukchi. In the similar-sized Gulf of Mexico, the number is nearly 50,000, notes Rick Fox, Alaska asset manager for Shell, the company leading the charge into Alaska's OCS.
Shell has so far spent $2.5 billion in an effort to establish offshore Alaska as a major global operating center. This includes $2.1 billion for Chukchi leases in a record 2008 sale.
Alaska politicians are gung-ho supporters of OCS development, even though OCS oil would provide no royalties or production-tax dollars to the state, since it is federal territory. The reason: Without OCS oil, the 32-year-old Trans Alaska Pipeline System (TAPS) faces a grim future. It is running at one-third of its capacity.
"We are quickly approaching the minimum throughput rate, beyond which the flow of oil cannot be maintained. Without development of new sources of Alaskan oil, TAPS could shut down within the next decade," Gov. Sean Parnell said in a Sept. 3 letter to Interior Secretary Ken Salazar, who is mulling the Obama administration's national offshore-drilling strategy.
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