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North Slope-Based Corporations Look for Opportunities Close to Home

Arctic drilling and logistics translate into jobs and benefits for shareholders


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Bureau of Ocean Energy Management

For the past decade, communities on Alaska’s North Slope have kept a close eye on oil and gas exploration plans for the Outer Continental Shelf. Development offered tremendous economic opportunities for the region.

So when Royal Dutch Shell announced it was pulling out of the region in 2015, relinquishing most of the $2.1 billion in leases it had acquired, it hit the communities hard. Ukpeaġvik In˜upiat Corporation, the village corporation for Barrow with a diversified family of businesses centered on oil and gas development in the Arctic, lost more than five hundred jobs, says President and CEO Anthony Edwardsen. Olgoonik, the village corporation for Wainwright, lost another one hundred jobs.

Despite the setback, North Slope-based Alaska Native corporations are still working together to support the oil and gas industry by tackling regulatory issues and infrastructure deficiencies that contributed to the demise of the offshore exploration projects, says Teresa Imm, director of resource development at Arctic Slope Regional Corporation (ASRC).

“Our biggest struggle we had was with the Obama administration,” Imm says. “We came so close to getting a lot of stuff done and when it came to the regulatory challenge—that put a huge damper on us.”

For instance, oil companies were allowed to drill twenty-five holes in the Gulf of Mexico, but only two in the Chukchi. “There was no balance in it,” Imm says.

The corporations reached out to Alaska’s congressional delegation and the Obama administration, Edwardsen says.

“We tried very hard to convince the Secretary of the Interior,” he says. “We said we had to have this. They put so much on Shell, it made it very difficult for all of us. We don’t want to go through that again. Our people rely on industry and when we lost those 537 jobs it was hard. It had a huge impact on everything.”

 

AIO Consortium

In addition to her role at ASRC, Imm is also general manager of Arctic Inupiat Offshore (AIO), a consortium made up of ASRC and six village corporations: Ukpeaġvik In˜upiat Corporation (Barrow); Tikigaq Corporation (Point Hope); Olgoonik Corporation (Wainwright); Kaktovik Inupiat Corporation (Kaktovik); Atqasuk Corporation (Atqasuk); and Nunamiut Corporation (Anaktuvuk Pass).

Through AIO, the corporations acquired an interest in Shell’s activities in the Chukchi Sea. Now, however, they’re using their experience to help other companies succeed on the North Slope, which they hope will again translate into jobs and benefits for shareholders.

“With AIO we were acutely looking at a structure that would work together collectively with the village corporations and ASRC,” Imm says. The corporations’ many subsidiaries have extensive experience with Arctic construction, oil and gas support, pipelines, and aiding scientific fieldwork. ASRC is the largest Alaska-owned corporation, while Ukpeaġvik is one of the most successful village corporations. It is a major employer in Barrow, where it operates a hotel and oversees construction and engineering companies, as well as several joint ventures.

Imm notes that while Shell gave up all but one of its leases in the Chukchi, they still have leases in the Beaufort, as do other companies. Work is also continuing on the Liberty project operated by Hilcorp Alaska, located six miles offshore east of Prudhoe Bay.

“There are some leases that are still active,” Imm says.

AIO has made it clear it plans to stay active, says Rex Rock Sr., ASRC president and CEO. The organization has been trying to educate the Bureau of Ocean Energy Management (BOEM) and other federal entities about the importance of offshore development.

“We’re going to pursue OCS development,” he says. “We are working with companies that are willing to work out there. We want to work forward. OCS will continue to provide opportunities.”

AIO is evaluating potential investments in offshore projects, Imm says.

“We are actively moving forward and looking for opportunities,” she says. “We are continuing to engage on the regulatory side. We need a reasonable regulatory regime to be able to operate in, either as our own entity or with others.”

The consortium is keeping a close eye on changes BOEM made to air quality regulations for drilling in the Arctic Outer Continental Shelf.

“A lot of the burden that those Arctic regulations place is on the exploration companies,” Imm says. “We are trying to be engaged on the process so we can ensure that the regulations don’t become too cumbersome on OCS.”

 

New Opportunities

Climate change brings opportunities, as well. The North Slope is on the front lines of global warming, and scientists are keenly interested in tracking the changes. In 1992, Ukpeaġvik founded the Barrow Environmental Observatory, a 7,466-acre area of tundra, lakes, and wetlands set aside for scientific research.

UIC Science, a Ukpeaġvik subsidiary, handles the permitting for the site. It hires local In˜upiat who are knowledgeable about the environment to work as staff members and help with logistical needs of visiting scientists.

Increased traffic is also likely to mean a need for increased search and rescue capabilities. The US Coast Guard doesn’t keep a cutter in the Arctic, although it does station some aviation assets in Barrow during the warm season. The local corporations, however, are also looking at how they can help fill those needs.

Luther Bartholomew, general manager for Bowhead Transport, a Ukpeaġvik subsidiary, says he has noticed an increase in traffic through the Northeast Passage over Russia as well as along the Northwest Passage. The voyage of luxury cruise ship the Crystal Serenity that passed through the Chukchi and Beaufort seas this summer is likely only the first of many.

“That’s something we’ve all taken notice of, and we’re looking at how we could provide services for that cruise ship and that industry,” he says. “Those are things we’re looking to provide as far as ensuring our growth and sustainability,” he says. “Our government services arm has small vessels that they use to support the sciences and environmental services.”

Bowhead provides the only scheduled cargo service on the North Slope. In addition to the specialized tugs and barges it uses for cargo, Bowhead and its government services sister corporation Qayaq Marine have a fleet of small boats that could be put to use in any number of ways, Bartholomew says.

For instance, Bowhead could help load and unload passengers and crews and shuttle them to the Barrow airport, he says. They could be used to transport birder groups or other tourists to the North Slope. As tourism grows, other opportunities may also become available for polar bear viewing or whale watching. Aurora tourism is growing.

Over his many years working with Alaska’s northern communities, Bartholomew says he has seen an improvement overall in community health as far as residents’ environmental and cultural stewardship.

“The pullout of Shell and the loss of confidence in oil and gas has definitely affected community members,” he says. “That will be a lasting impact for a while. Overall, the communities remain strong. Our confidence remains strong. Our community is built on strong family-oriented companies that were here long before the oil and will remain for whatever comes after.”

 

 

This article first appeared in the October 2016 print edition of Alaska Business Monthly.

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