Study highlights benefits of Arctic Ocean drilling

AP News
Posted: Feb 24, 2011 8:10 PM
Study highlights benefits of Arctic Ocean drilling

Shell Oil is touting a report it commissioned that says outer continental shelf petroleum development off Alaska's northern shores could create 54,700 new jobs that could be sustained for 50 years.

The study was released Thursday by Northern Economics Inc., an Anchorage-based firm, and the University of Alaska's Institute of Social and Economic Research. It comes one day before the federal Bureau of Ocean Energy Management, Regulation and Enforcement conducts a scoping meeting in Anchorage to take public testimony on its plan for offshore drilling over the next five years.

Environmental groups and some Alaska Native organizations have sued to block drilling. They say the industry has not demonstrated an ability to clean up a spill in ice-choked waters and that basic resources such as deep-water ports, major airports, response equipment or a Coast Guard base are lacking in coastal communities nearest the proposed drilling.

Shell Alaska Vice President Pete Slaiby said in prepared remarks that it's important to make the business case for Alaska and the nation when it comes to potential offshore development.

"First and foremost is putting in place a safe, responsible exploration program," he said. "But if we realize the full potential of the oil and gas resources in the Alaska offshore, generations of Americans will have the opportunity to directly benefit from industries' success."

The study builds on 2009 work that predicted economic benefits for Alaska. This time it projects benefits for the entire country using federal estimates that the Beaufort and Chukchi seas hold 27 billion barrels of oil and 132 trillion cubic feet of natural gas.

The report says $145 billion in new payroll in 2010 dollars would be paid to employees through 2057, including $63 billion to employees in Alaska and $82 billion to employees in the rest of the United States.

The development would also be a direct economic bonanza to government coffers, the study concluded.

It projects $167 billion for the federal government, $15 billion to the state of Alaska, $4 billion to local Alaska governments and $7 billion to other state governments.

The study's base case assumed long-term average prices through the year 2030 of $65 per barrel for oil and $6.40 per million Btu for natural gas. The estimated total government revenue increases if energy prices remain higher.

Offshore offshore drilling is seen as a way to extend the life of the trans-Alaska pipeline. The study calls it "infrastructure protection."

The pipeline delivers about 14 percent of domestic oil production to refineries on the West Coast. However, it now operates at less than one-third of its 2.1 billion barrel per day capacity, which leads to maintenance problems, including additional paraffin dropping out of the oil at cooler temperatures and contributing to corrosion.

The study concludes that without additional oil development, the pipeline is anticipated to encounter operating difficulty below about 500,000 barrels per day and will shut down when it reaches 200,000 barrels per day. The study concludes Alaska OCS development can help extend the operating life of the pipeline by keeping oil in it.

The study also sees indirect benefits to the U.S. economy by retaining money within the nation's borders that otherwise would be spent to import energy.