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New Year Offers Promise, Progress for Liberty Project

TAPS could see much-needed throughput increase


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Rendering of the Liberty Project, a light oil drilling project on the North Slope.

Rendering courtesy of Hilcorp Alaska LLC

If was just one word to describe the long-in-the-making Liberty Project slated for Alaska’s North Slope—a light-oil drilling operation that would boast a man-made 9.3-acre island and is projected to cost more than $1 billion—it would likely be “arduous.”
A review of the project’s long and winding history is illuminating: Liberty Project faced two decades of hurdles and obstacles since Shell Oil Company drilled four wells to evaluate marketable oil reserves between 1982 and 1987, as noted in a chronology published by the Bureau of Ocean Energy Management (BOEM).
In 1996 BP Exploration (Alaska) acquired the Liberty lease and, in 1997, drilled the first exploratory well five miles off the coast in Foggy Island Bay. That initial drill revealed an estimated 120 million barrels of recoverable reserves—indicating that the site could be the largest light oil reservoir found on the North Slope.
For the next sixteen years Liberty underwent a series of regulatory scrutiny and review relating to a long list of potential issues, from impact to a wide range of endangered species to geomagnetic observations. The project essentially stalled in 2012 with BP’s announcement that it would not pursue the proposed Liberty project in its current form. 
Then BP, in the first half of 2014, sold its interest in four North Slope Alaska oil fields to Hilcorp Alaska LLC, including a 50 percent stake in Liberty (BP retained a 40 percent stake). ASRC Exploration holds the remaining 10 percent. The partners estimate Liberty is home to 150 million to 330 million barrels of oil-in-place.
So, while Liberty has faced an arduous journey, its future appears to be brighter than ever as 2018 dawns and all its predicted benefits—from increased state revenue and an economic boost tied to hundreds of new construction jobs to ensuring a longer lifespan for the 800-mile Trans Alaska Pipeline System (TAPS)—are closer to becoming a reality. 
In fact, 2018 may very well mark the most critical timeframe for a project that would create Alaska’s 19th artificial island and its biggest one to date.

Where Liberty Stands as the New Year Begins

The start of the New Year should find federal and state agencies two months into what is expected to be a ten-month regulatory review. 
The assessment was scheduled to begin immediately after a ninety-day public comment period that ended November 18, 2017. The comment period followed the issuance of a draft environmental impact statement (EIS) in August of 2017 from the BOEM and an EPA proposed National Pollutant Discharge Elimination System permit authorizing wastewater discharge. 
In publishing the draft EIS, BOEM described the document as “another important step in the department's strategy of responsible resource development,” and stated that the agency is “committed to working with [the] state, Alaska Native communities, investors, and all stakeholders when we analyze development and production plans.”
The agencies, which collaboratively held four public hearings regarding their respective actions in October 2017, are playing leading roles because Liberty lies within federal waters inside the Beaufort Sea’s barrier islands. 

A Whole Lot of Scrutiny, And a Whole Lot of Permitting

The draft EIS and EPA permit actions represent a substantive milestone in the project’s history and a crucial one given sixty federal, state, and local permitting and authorizations are required for project implementation, according to Hilcorp’s Liberty Project Manager Mike Dunn.
“The final EIS and Record of Decision are expected by fall of 2018,” says Dunn, noting Hilcorp is working to complete permitting requirements necessary to construct the project. 
The project calls for an artificial island to be built in nineteen feet of water, and the drilling operation’s lifespan is expected to be fifteen to twenty years, according to Hilcorp. There will be no permanent road or causeway; access will be via a temporary ice road in winter and boats, helicopters, and hovercraft used for transportation needs when the ice road is not available. 
The build, says Hilcorp, will benefit from three decades of learning gleaned since North Slope’s first offshore oilfield, Endicott, went online in 1987, and its construction will closely reflect the construction at Northstar.
“Liberty will utilize the construction and operational technology perfected at Alaska’s other offshore facilities,” says Dunn.
Once operational, Liberty’s oil will be transported via a subsea buried pipeline to a new onshore pipeline, tying into the Badami pipeline, and then eventually into TAPS. 
The environmental review is being closely monitored by the Alaska Department of Natural Resources given the potential impact to fisheries, wildlife, animal habitat, and the possibility of oil spills and leaks.
The state’s role, however, is more limited than in past drilling operation proposals, explains Ed King, special assistant to Andrew T. Mack, Alaska’s commissioner of natural resources.
“Most of the process will occur with the BOEM; however, the state is involved in some portions of that process and is watching its progress closely,” says King, noting the state is always interested in the safety of its people and environment.
“We believe that the EIS process will ensure that development occurs in a responsible way and the state permitting process for any activities on state lands will adequately protect the state’s interest.”
Liberty, King says, is roughly twice the size of any of Alaska’s other eighteen offshore oil exploration and development islands. That list includes three drilling operations that are still up and running: Northstar (2001), Oooguruk (2008), and Nikaitchuq (2011).
“The prospect of it being developed is meaningful to Alaska and is important to the North Slope,” says King.
The meaningful aspect is not just big; it’s better described as huge. 

A Long List of Potential Benefits

Liberty not only boasts the potential to offset declining oil production on the North Slope and extend the life span and efficiency of TAPS (given it is projected to provide 60,000 to 70,000 barrels of oil per day), it promises to bring much needed jobs and state revenue. 
Both would be welcome given Alaska’s current economics. An Alaska Labor Department report, “Alaska Economic Trends January 2017,” notes the state’s economy “is shrinking faster than at any other time since the 1980s,” with 6,800 jobs lost in 2016 and spread through nearly all sectors of the economy. Initial jobs losses in 2015 were tied directly to oil production and the result of failing prices.
According to the report, the impact of declining oil production marks a historic point and puts Alaska “in unchartered territory… For the first time in nearly forty years the State of Alaska will have to fund the majority of its budget with something other than oil revenue.”
As critical as oil production is to the economy, it is just as critical to the health and future of TAPS.
“New oil is needed to keep the pipeline operating efficiently now that throughput is less than 25 percent of capacity,” says David Wilkins, Hilcorp senior vice president, adding the oil operation will play an important role in keeping TAPS operational for decades.
“It will provide important tax and economic benefits to the federal government, the state, and communities across the North Slope,” adds Wilkins, stating the needed construction jobs will be primarily for Alaskans and that Liberty, as an operation, will create opportunities for many Alaska-based businesses.
Liberty is expected to create 200 to 300 jobs during construction and require 20 to 30 full-time operations staff once production begins, according to Hilcorp.
On the tax and revenue side, King says, Liberty would generate revenue for the state from federal royalty sharing and property taxes for the portion of the project on state land.
The much-needed production for TAPS, notes King, will play a big factor in extending the life of TAPS infrastructure. According to an online fact sheet, almost 17 billion barrels of oil have moved through TAPS since it went online.
Overseeing the future of TAPS is the Alyeska Pipeline Service Company, established in 1970 to help design, oversee construction, and perform operation on and maintenance for the pipeline. At its peak in 1988 the pipeline was pumping 2.1 million barrels per day, according to Tom Barrett, Alyeska Pipeline’s president.
That figure plummeted to about 518,000 barrels per day in 2016.
“These lower throughput levels create serious challenges for the long-term operation of TAPS,” explains Barrett. 
In response, the company has had to make large investments to re-engineer and adapt the pipeline to the declining capacity.
“The changing hydraulic profile on TAPS has already triggered the replacement of mainline pumps and certain station piping, additional pigging, and an additional pig launchers and receiver,” says Barrett.
The challenges, he explains, will continue if throughput continues to decline and the best solution is for more oil to be delivered via TAPS from the North Slope.
“The Liberty Project could play a vital role in that long-term solution,” he says. “As we focus on ensuring the nation continues to benefit from the investment in the critical energy infrastructure of TAPS over the next several decades, we support responsible exploration efforts that could result in increased throughput into the pipeline. The Liberty project is one of those efforts.”
Alyeska Pipeline Service Company’s contention is echoed by the Resource Development Council for Alaska, an organization that believes Liberty will provide “energy security” for not only Alaska but the United States.
“The ever-changing oil tax structure in Alaska has caused a lot of uncertainty and has damaged Alaska’s reputation as a stable jurisdiction to invest in the development of energy resources,” says Marleanna Hall, executive director. 
“Moreover, responsible resource development projects across Alaska often face overly burdensome and often unnecessary regulatory hurdles,” she adds. While the organization will not play a role in operations, Hall says its members “will have opportunities to work on developing this important project.”
 
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