North Slope Projects and Production Jeopardized by HB 247

“I do not intend to offer changes to SB21,” said then candidate for Governor, Bill Walker to the Alaska Dispatch News in October of 2014. Instead of keeping his promise, Gov. Walker introduced HB 247 to kick off the 2016 legislative session. The original version of HB 247 proposed substantial changes to SB 21, which nearly 100,000 Alaskans voted to maintain in August of 2014. Revisions to the bill made by the legislature have improved the bill, but still provide uncertainty and no fiscal stability for projects.

We at Headlamp believe it is important for Alaskans to understand how HB 247 threatens production from projects already sanctioned, and projects under consideration (exploration phase) with the potential to add considerable amounts of new production. The map below from the Alaska Department of Natural Resources (DOR) Division of Oil and Gas shows industry activity in the North Slope basin as of May, 2016.

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The following North Slope projects are threatened by HB 247:

  • Smith Bay, Caelus Energy Alaska: Caelus announced May 20, 2016 in Petroleum News that their find is “a very giant oil field over there” and may represent a “1 billion barrel opportunity.”
  • Oooguruk/Nuna, Caelus Energy Alaska: Nuna is an off-shore development from the Oooguruk unit and will cost Caelus over $1 billion to develop. Production would start at 10,000 barrels daily, with peak production ranging from 20,000 to 25,000 barrels per day.
  • Mustang Development, Brooks Range Petroleum: Project cost to exceed $500 million. Represens t the key to future development west of Kuparuk. Peak production 12,000 to 15,000 barrels per day.
  • Pikka/Nanushuk development, Repsol-Armstrong: Massive multi-billion-barrel field. Possibly the biggest discovery since Prudhoe Bay. Cost to develop will be in the billions of dollars. Peak production estimated by Armstrong and former DNR Commissioner Meyers to range between 120,000 to 250,000 barrels per day.
  • Icewine development, Accumulate Energy Alaska/88 Energy/Burgundy Xploration: Conducting seismic work. Shale play. Estimated deposit of 492 million barrels. Current seismic/exploration drilling cost: $60-75 million.

Total production at risk: 150,000 to 290,000 barrels per day (for projects that have given production estimates). If Smith Bay and Icewine come online, production levels would increase dramatically.

Final takeaway: HB 247 is still bad policy. Incentives impact investment; investment impacts production; increased production is good for all Alaskans.