Speech: Secure Our Future: Oil
Governor Sean Parnell
September 29, 2011
Good afternoon! Welcome to Alaska! I’m glad the Energy Council selected Alaska for this conference, and it’s great to hear that some members of your executive committee went to the North Slope and other places -- visited a platform here in Cook Inlet, for instance.
I have three things to talk about today:
Alaska’s world-class resources.
The challenges we have in common.
And Alaska’s energy strategy, so you might leave here with parts of a takeaway plan for your home area. Because we are all in this together.
Our focus today is on oil and gas.
And Alaska has world-class oil and gas basins:
The ultimate recoverable oil onshore on the North Slope of Alaska is thought to be over 32 billion barrels.
Offshore Alaska? At least another 30 billion barrels of oil remains locked underground in the Beaufort and Chukchi Seas.
Natural gas onshore on the Slope exceeding 124 trillion cubic feet. Offshore, another 200 trillion.
And then there are plays in Cook Inlet and south of the NPRA, vast areas yet to be explored in Alaska!
The bottom line: There is a wealth of hydrocarbon in this state waiting to be explored and developed.
In fact, on December 7, the State of Alaska will offer for lease ALL available state-owned land in the North Slope Foothills, and near ANWR and the NPR-A.
Let me tell you a bit more about that:
We’ll have nearly 15 million acres for lease in a proven world-class oil and gas basin.
That’s about the size of Massachusetts, Vermont, and Connecticut combined.
The oil potential in the State’s lease sale area is enormous. And, based on information we have, we believe there are more than 100 oil accumulations of potential economic size remaining to be found on state and private lands here.
Dozens of those are estimated to contain 50 to 150 million barrels of oil.
These estimates don’t include the tens of billions of barrels of heavy, viscous, and shale oil on state lands.
The primary lease terms we’ll offer are for 10 years. With stable rental terms for the entire lease term if diligent development or production takes place.
The US Geological Survey has estimated Alaska’s North Slope has more oil than any other Arctic nation.
We’ve got oil and gas -- no question about it!
Alaska also has significant infrastructure to bring this oil to market:
The Trans Alaska Pipeline or “TAPS” -- It’s quite a story. 800 miles of pipe, running north to south through the middle of Alaska, crossing three massive mountain ranges and more than 30 major rivers and streams.
TAPS carries 11 percent of the US oil supply. Back in the ‘70s, TAPS was built for 8 billion dollars, and it’s transported 16 billion barrels since. The largest privately funded construction project at the time. In constant dollars, a $30 billion investment in Alaska.
At its peak, oil flowed through TAPS at two million barrels a day.
Yet, the amount of oil NOW flowing in the pipeline was under 539 thousand barrels a day in August.
Here in Alaska, the only way to keep the oil flowing is by increasing exploration and production—putting more oil through that pipeline.
So let’s talk about the challenges to new energy production we share with many of your jurisdictions:
In the U.S., one of the greatest impediments to new oil and gas exploration and production is our own federal government.
You’ve recently heard a presidential candidate or two express some feelings about the EPA—and I’ve heard concerns expressed about them from my fellow governors, both Republican and Democrat.
I’ve also heard from industry, and from individual property owners. Now we have a lot of good people in these agencies, but some overreaching going on too.
For example In implementing its proposed new greenhouse gas regulations, the EPA reportedly filed court documents saying:
The EPA would need 230,000 new employees to implement the new regulations. Think about that for a minute.
The cost to the U.S. taxpayer of just those employees would be $21 billion. Not to mention the increased cost of doing business and consumer cost surges.
The number of businesses that would be regulated would grow by almost 44 thousand percent. From 14,000 businesses the EPA now covers, to 6.1 million.
On the company side of things, we’ve had some challenges. In 2006, Shell applied with the federal government for its first exploration related permit in Alaska’s Arctic offshore.
Shell reportedly has sunk over $4 billion in lease and capital expenditures, and has yet to commence operations—5 years later. The EPA and the Department of Interior have put into question that exploration. I hope they will be able to move forward in 2012.
The EPA’s actions and new guidance on wetlands is also troubling to property owners. The agency unilaterally expanded the definition of what constitutes a wetland.
If left unchecked, the EPA’s new guidance on wetlands would blanket 40 percent more of Alaska’s lands with that “wetlands” designation.
Entire watersheds could be classified as wetlands.
As a state, we know what happens elsewhere impacts us. We’re actually standing up for private property owners in other states. For instance in Idaho -- the Sacketts vs. the EPA. And we’ve gotten other states to join us.
Perhaps you’ll remember this case:
Mike and Chantell Sackett of Priest Lake, Idaho started to build their dream home in a cleared residential area, a platted subdivision, with water hookups and sewer pipes. They got their permits and began building.
Then, the EPA came in and told them their land is a wetland, and that they needed to return the property to its original state or pay $37,500 a day in fines.
The Sacketts had no right of appeal, no proper vehicle to protect their private property rights. The State of Alaska and other states are joining in filing an amicus brief in support of the Sacketts.
So we know Alaska isn’t the only state that has trouble with the heavy hand of federal regulators. We share these challenges with you, with other states. We, as states, have got to stand together.
Whether it’s Shell Oil or the Sackett family, we’ve got a big problem with the burgeoning federal regulatory army is slowing down our nation’s economy.
Even though federal agencies have delayed exploration on federal lands, we also have state and some private lands in Alaska where exploration can still occur. We have adopted a strategy, and we ho to bring more Alaska oil to a nation that needs it to grow our economy.
I made the point earlier that Alaska has oil to fuel our nation’s recovery. Now, Alaska has strategy to get it to market.
This initiative is called “Secure Alaska’s Future.” It could well be called, “Secure America’s Future,” because it will bring energy and jobs online over the course of the next decade.
It’s a detailed plan I have boiled down to a few major points for you. So here’s a brief look at Secure Alaska’s Future:
Our Objective is to increase pipeline throughput to one million barrels per day. We want to attract $4 billion of annual oil investment to the state, rather than the current level of about $2.2 billion.
Our Timeline to reach one million barrels per day--10 years.
Here’s how we’re going to do it:
First, we’re enhancing Alaska’s competitiveness and investment climate.
We’re working to restructure our tax regime for existing units, to reduce marginal tax rates / at higher prices / for production.
We plan to incentivize exploration and development in areas outside of existing units.
We plan to cap overall production taxes for these new units.
We want to reward drilling activity across the North Slope by providing a credit for qualified well costs.
We’ll continue to embrace royalty modifications to promote development of qualified marginal fields.
In short, we are working to improve Alaska’s climate for investment.
Second, we’re reforming the permitting process. Streamlining it. We’re improving the timeliness of state agency decisions and the consistency of those decisions.
Third, we’re ramping up the next phase of North Slope development, including OCS, state and federal lands, heavy and viscous oil, shale, smaller pools of conventional oil, and natural gas.
One way we are doing this is with Roads to Resources. We’re constructing a road to Umiat. We’re working to lower the cost of access to acreage. Lowering the cost of access to Alaska’s subsurface riches can unlock jobs and economic growth.
Fourth, we’re promoting partnerships between the state and stakeholders to grow exploration and production.
Fifth, we’re promoting Alaska’s resources as a way to grow this nation’s economy and put more people to work.
We’re engaged in a campaign to highlight the significant national benefits derived from the development of Alaska’s vast resources.
We can do a lot for this nation.
All our states and Canada’s provinces will benefit from a comprehensive energy policy that is “ALL of the Above,” / rather than simply “Either - Or.”
Oil and gas is part of “All of the Above.”
Together, we have got to make the case that increasing energy production at home makes sense.
- It makes sense as a way to grow our economy.
- It makes sense as a way to make our nation more secure.
- And it makes sense as a way to grow more opportunity for our people
As energy knowledge leaders, you can be force multipliers, / and that is my challenge to you – to all of us – to take our case directly to the people.
New energy and new jobs are linked. I am thankful for the Energy Council, for it plays a significant role in this cause.
Thank you. Glad you’re here in Alaska. Enjoy the rest of your day.