Alaska Governor Asks Govt to Expedite Offshore Drilling Projects

(Dow Jones Newswires), Apr. 1, 2011

Alaska's governor asked federal regulators to move ahead in allowing new oil development in the Arctic Ocean, as the state looks for ways to shore up declining production.

In a letter sent Thursday to U.S. Interior Secretary Ken Salazar, Gov. Sean Parnell wrote that "Alaska is the United States' most important and abundant domestic source of future oil and gas." He cited a 2008 U.S. Geological Survey report that estimated more than 10 billion barrels of oil and more than 100 trillion cubic feet of natural gas lay beneath the surface of Alaska's Beaufort and Chukchi Seas. Parnell seized on current concerns in the U.S. about the stability of foreign sources of oil, amid turmoil in the Middle East and rising oil prices.

"We need to develop and increase our domestic supply of oil and gas," Parnell wrote.

Parnell and other Alaska officials have been working to streamline oil production taxes and take other measures to attract more onshore and offshore oil and natural gas development in Alaska. Parnell has introduced legislation, currently working its way through the state legislature, that would slash oil production taxes put in place by his predecessor, former Alaska Gov. Sarah Palin.

Parnell said Wednesday that he had set a "new goal for Alaska" of 1 million barrels of oil production per day through the Trans Alaska Pipeline System within ten years. Current oil production shipped from Alaska's North Slope 800 miles to the port of Valdez through the pipeline system is about 600,000 barrels per day, down from its peak of about 2 million barrels a day 20 years ago.

While the state has encouraged production on state lands and in state waters, for which the state would earn production royalties, officials are also keen to see new offshore drilling in the Outer Continental Shelf, as Alaska collects fees from oil shipped through the Trans Alaska Pipeline.

Alaska's government has also encouraged development of a natural gas pipeline that would ship gas from the North Slope to Canada and the Continental U.S. An alternative project would entail building a liquefied natural gas terminal that would export Alaska gas to overseas markets.

TransCanada and ExxonMobil are developing a $41 billion gas pipeline that would stretch 1,700 miles (2,700 kilometers) from the North Slope to a network of pipelines that connect Alberta, Canada, to the Midwest. A joint venture owned by BP and ConocoPhillips called Denali, has a rival Alaska pipeline plan, with a similar price-tag. Both sets of developers have held open seasons to determine interest by gas shippers in their projects. The companies have not yet released the results of their open seasons.

Copyright (c) 2011 Dow Jones & Company, Inc.

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