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Begich Receives Upbeat Report from Federal and Industry Officials on 2012 Offshore Oil Drilling Season

This summer’s preliminary exploratory oil drilling in Alaska’s Arctic waters made significant progress toward next season’s work and streamlined the way for more aggressive development next year, according to testimony provided by a wide range of local, federal and industry officials during a hearing of the Senate Committee on Commerce, Science and Transportation held in Anchorage on Thursday and chaired by U.S. Sen. Mark Begich.

Shell Alaska Vice President Pete Slaiby detailed for Begich his company’s progress this year, which included mobilizing two drill ships, more than 20 support vessels, fully trained 1,800 personnel and conducted extensive scientific research. Slaiby said the federal regulatory process is working for Shell and that Shell made significant progress this summer.

“The lessons learned from 2012’s complex logistics fleet and personnel deployment are significant,” Slaiby said. “Shell is already incorporating these lessons into our 2013 even more robust plans.”

U.S. Coast Guard Rear Admiral Thomas Ostebo also announced during the hearing that Shell’s oil-spill containment barge, the Arctic Challenger, had received final certification from the Coast Guard for operation in Alaska yesterday. It also recently received reclassification from the American Bureau of Shipping.

Begich organized the hearing to consider lessons learned from Shell Alaska’s drilling this summer in the Chukchi and Beaufort seas, which was cut shorter than anticipated by a combination of technical challenges, Arctic conditions and regulatory delays. Testifying were top federal officials, industry representatives and an official of the North Slope Borough.

“Alaska’s Arctic waters hold what many believe may be the largest yet-to-be recovered oil and gas reserves in the world,” Begich said. “After a brief but successful first drilling season, I called this hearing to hear from government and industry about what went right and what didn’t, and what we need to change so we can meet the future energy demand of Alaskans and Americans.”

The Arctic is estimated to hold an undiscovered 90 billion barrels of oil, 1,700 trillion cubic feet of natural gas, and 44 billion barrels of liquefied natural gas. This comes at a time when oil production at Prudhoe Bay is declining, costing Alaskans jobs and reducing revenues to the state.

Since his first day as a senator, Begich has pushed the Obama Administration to permit offshore oil and gas exploration, which it has done. He thanked the administration’s top official at the hearing, Deputy Interior Secretary David Hayes, for the administration’s approach to energy development.

“Alaska is an important component of our nation’s energy strategy,” Hayes said. “President Obama has stressed the Administration’s commitment to a comprehensive, all-of-the-above energy strategy to both grow America’s energy economy and continue to reduce our dependence on foreign oil. This includes not only investing in advanced technologies and alternative fuels and energy generation, but also the safe, responsible, and environmentally sustainable production of domestic oil and gas.”

In 2011, the Obama administration proposed a five-year plan for offshore oil drilling, calling for opening new areas in the Gulf of Mexico and Alaska, and expanded areas of the Arctic Ocean off of the North Slope. Shell has been cooperatively working with the administration over the last 10 years to secure permits to drill in the Chukchi and Beaufort seas. Despite a number of regulatory and technical setbacks, Shell was successful in drilling top holes this season which will set the stage for next drilling season.

Laura Furgione, acting director of the National Weather Service and the National Oceanic and Atmospheric Administration, told the hearing continued federal investments are necessary as increased development occurs in the future to better understand the Arctic.

“The breadth and complexity of these impacts require a concerted, systematic and rapid effort with partners from international to local levels,” Furgione said. “NOAA’s scientific capabilities are being deployed to increase understanding of climate and other key environmental trends, to predict the ecosystem response to those trends, and to offer the technical expertise needed to develop policy options and management strategies for mitigation and adaptation to the environmental challenges in the Arctic region.”

Ostebo, commander of the Guard’s 17th District, noted the Coast Guard has been operating in the Arctic since 1867 and now must monitor more than 950,000 square miles off Alaska’s coast.

“To protect the Arctic environment, we are engaging industry and the private sector to address their significant responsibilities for pollution prevention, preparedness, and response,” Ostebo said. “Recognizing that pollution response is significantly more difficult in cold, ice, and darkness, enhancing preventative measures is critical.”

North Slope Borough Chief Administrative Officer Jacob Adams welcomed North Slope development but called for the sharing of revenue from offshore development which impacts the people of his region.

“Congress should act to ensure that royalty revenue received from OCS development is shared with local communities to help mitigate the negative impacts of development,” he said.

Begich has introduced revenue sharing legislation that would share the financial benefits of off-shore development with the state, local communities and affected tribes.

Edith Vorderstrasse, consulting division manager of Ukpeaġvik Iñupiat Corporation, complimented Shell on its work with UIC shareholders. “We believe Shell has effectively engaged Inupiat communities because they have listened to their concerns, made meaningful changes to their plans and kept the promises they have made. As a result, Shell has formed a strong relationship with Alaska Native Corporations for this venture, but it should be much stronger.”

Vorderstrasse said the UIC board of directors is seeking additional effort in three main areas: impact assistance to local communities, long-term contracting opportunities and workforce development for shareholders.

Sen. Begich engaged officials on topics such as the infrastructure needs of increased Coast Guard operations in the Arctic, the need for better ice forecasting techniques, and current patterns and changes to Arctic weather. He also inquired to local community and business leaders about the increased activity. 

Sen. Begich has proposed a number of bills in the Senate to promote Arctic development, including bills to increase the icebreaker capacity of the United States, strengthen the diplomatic role of the U.S. by appointing an Arctic ambassador, examine the health needs of residents of the Arctic, and provide a stream of funding for scientific research in the Arctic.

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