Oil producer Shell has finally been given the green light to explore for oil in the Chukchi Sea — but the clock is ticking. Final permits were granted last week that allow Shell to drill into oil-bearing zones, but the company must wrap up exploration efforts by late September, so it has almost exactly a month to find what it can at its Burger Prospect drilling sites. The offshore exploration could prove fruitful for the company — and, if legislative efforts by Sen. Lisa Murkowski are successful, for Alaska as well.
Shell’s permit was approved two weeks before President Barack Obama will make his first Alaska visit, and two years after the drill rig Kulluk ran aground on its way back from Arctic offshore exploration. The Kulluk incident caused federal regulators to rescind Shell’s exploration permits until the company could meet more stringent safety standards.
The requirements put in place for Shell to resume drilling — having a ship on hand carrying equipment to help minimize spills from blowouts, ceasing operations before winter arrives in earnest and limiting the number of exploratory wells being drilled simultaneously — are wise. Though Shell has been drilling in the Arctic since 2007, offshore drilling in the waters above Alaska’s North Slope is a relatively new field and one that must be developed responsibly. More than 20 billion barrels of oil and 100 trillion cubic feet of natural gas are estimated to be resting under the Beaufort and Chukchi seas, so those fields are likely to be part of Alaska’s resource development equation for decades. It’s crucial that companies employ strong safety standards to avoid disasters like the 2010 Deepwater Horizon crisis in the Gulf of Mexico: If there are further accidents, it may be some time before there is political and economic will to go forward again.
The development of offshore oil comes as traditional oil in Prudhoe Bay is becoming scarcer and more difficult to produce. But what most Alaskans might not know is that even if fields in the Beaufort and Chukchi seas are brought online, they won’t bring new tax revenues to the state under the current structure for offshore oil production.
Offshore oil is federally controlled, and tax revenue from its development currently flows exclusively to the federal government.
Though former Sen. Ted Stevens and others made efforts to provide for offshore revenue sharing with states, those efforts bore no fruit for Alaska. But this year, Sen. Lisa Murkowski has introduced the OPENS Act, which would give the state 30 percent and local governments 7.5 percent of offshore revenue. Getting the act passed won’t be easy, especially since it also contains a provision allowing for an end to the U.S. oil export ban. But Sen. Murkowski is about as well situated as a senator can be to help give the bill momentum: She is the chairwoman of the Senate Energy and Natural Resources committee, and her Democratic counterpart on the committee, Sen. Ron Wyden, D-Oregon, has proved much more receptive to the issue of offshore revenue sharing than his predecessor. What’s more, the states of Texas, Louisiana, Alabama and Mississippi secured offshore revenue sharing for their regions of the Gulf of Mexico in 2006, so there’s a precedent for extending that principle to Alaska.
It’s a formative time in the waters off Alaska’s north coast, and much is up in the air. Development of offshore oil in the Chukchi Sea is progressing, and it should be undertaken responsibly. And in Washington, D.C., an effort is underway to let Alaska share in the development of the wealth off its shores. Alaskans should press Congress to ensure it succeeds.
— Fairbanks Daily News-Miner,