Morning Headlamp — DNR Official Says Don’t Expect 1988 Production Levels in 2017

Following news that the Trans-Alaska Pipeline System increased production in 2016 yet again, many have begun to explore possible causes and what it means for the industry in 2017. Alaska Department of Natural Resources deputy commissioner Mark Wiggin said he can’t point to a single factor behind the increase. There was a full year of production for ConocoPhillips’ first development in the National Petroleum Reserve-Alaska at the CD5 drill site. The private company Hilcorp was also more active on the North Slope, drilling 10 wells at Milne Point. And, Wiggin said, fewer North Slope facilities were shut down for maintenance last year. However, according to Wiggin, “The uptick that we witnessed in 2016, while very positive, and it’s the direction we want it heading, surely does not suggest that we are heading back to the peak year in 1988.”

When it comes to oil prices, Alaska’s official forecast is bearish. It has oil prices for the 2017 fiscal year, which ends June 30, averaging about $47 per barrel. In fiscal year 2018 the expectation is a $54 per barrel average. On the other hand, the state’s production expectations are by nature conservative. However, the sudden expected return to declining production levels comes right on the heels of 2016 – the first year of increased North Slope oil extraction since 2002. Getting the numbers right is critical to all Alaskans. Projecting such a sharp decline in production makes the budget gap much bigger and supports the narrative of needing more revenue – AKA taxing Alaskans. 

According to Tim Bradner, independents exploring potential North Slope shale oil resources are bullish on test drilling results so far, but the companies also admit to big unknowns. Some key questions will be answered by drilling this winter in Icewine No. 2, a follow-up test to Icewine No. 1 drilled last winter. Based on modeling, but without the fracture and flow test, 88 Energy and Burgundy predicted a resource base on the companies’ leases of 1.4 billion to 3.6 billion barrels of oil equivalent, although how much of this could actually be recovered is not known.

Increased fishing and hunting fees. Under H.B. 137, a small step to deal with state government’s financial problems, the Department of Fish and Game has increased license and tag fees. Resident sport fishing fees, for example, go from $24 to $29, and a new $15 Chitina dipnet fishing fee will be implemented. Non-resident fees, however, are going up the most: the grizzly bear tag is doubling to $1,000, and the muskox bull tag is doubling to $2,200. Several other non-resident tags are also doubling in cost.

The developer of the proposed Pebble gold and copper mine and the federal agency seeking to block it are asking a federal judge to halt their court battle over the project until March. Both sides say they want the court case to be put on hold so that they can pursue settlement talks. Neither, though, is ready to talk publicly about how the case might be resolved. EPA officials declined to be interviewed on Tuesday. The agency stated its position in an email: “EPA remains committed to protecting the unique and valuable Bristol Bay fishery and way of life and stands behind the process it has started to ensure protection of the watershed,” it said. “The agency remains confident regarding the outcome of the litigation, but is open to alternatives for resolving the dispute, including mediation, which the Alaska court requires parties to consider.” Headlamp isn’t confident of the EPA process. Click here to read about the corruption that exists in the EPA. 


First Reads

TAPS kicks off 40th year with a little more oil than expected
Alaska Public Radio News, Elizabeth Harball, January 3, 2017

Potential Oil and Gas Development in Cook Inlet, Alaska
Global Trade, Peter Buxbaum, January 3, 2017

ExxonMobil, Tillerson Reach Agreement to Comply with Conflict of Interest Requirements
Business Wire, January 3, 2017

North Slope independents bullish, but fracturing, extraction, need testing
Petroleum News, Time Bradner, January 3, 2017

Pebble, EPA want to freeze lawsuit and push settlement — until well after Trump is in office
Alaska Dispatch News, Lisa Demer, January 3, 2017

Watching prices, production, exploration in 2017
Peninsula Clarion, Elwood Brehmer, January 3, 2017

New year, new laws: 5 things Alaskans need to know
KTUU, Austin Baird, January 3, 2017