Today, IPAA’s Declaration of Independents released a profile of Alaska and Gulf of Mexico oil plays. In particular, these oil plays are different from others that we’ve highlighted. For one, they have been some of the more traditional plays that America’s independent producers have been developing for much of the 20th century. Also, much of the oil reserves are in federal territory. This means that federal policies towards energy development have a serious impact on production levels.
Taken together, Alaska’s and Gulf of Mexico’s oil make up 1/3 of U.S. proved oil reserves. However, in recent years, oil production has lagged in these established regions. The Obama administration’s 2010 moratorium had a devastating blow on Gulf of Mexico development, with permitting and leasing finally recovering it to pre-moratorium levels. Alaska’s development has also been curbed by national policies, with the slow leasing and permitting process of the Chukchi Sea as a prime example. With the advent of horizontal drilling and hydraulic fracturing, production activity has flocked toward onshore states, where the hot plays are mainly on private land.
The good news is that these areas still have a lot of potential, even with shale oil and natural gas prospects in Alaska. Our economists noted: “Earlier this year, the U.S. Geological Survey (USGS) prepared a new assessment of these resources, concluding that although significant uncertainties are present, the potential is large. For North Slope shale plays, the USGS put the mean estimate at 940 million barrels of oil with a high end of as much as 2 billion barrels. The USGS also assessed a mean of 42 trillion cubic feet for natural gas and 262 million barrels of NGLs.”
As for the Gulf, “An assessment of undiscovered technically recoverable oil and gas resources performed by the Bureau of Ocean Energy Management (BOEM) in 2011 put the mean estimate for the Gulf of Mexico at 48 billion barrels of oil and 219 trillion cubic feet of gas – or 89 billion barrels and 398 trillion cubic feet when offshore Alaska, Pacific, and Atlantic are also included.”
These are no small estimates for energy. As a result – the potential for jobs is just as large. After all, a study commissioned by IPAA in 2010 estimated that the offshore industry in the Gulf contributed to 400,000 jobs in 2009!
Despite lagging production, Alaska and the Gulf of Mexico continue to be “strategic pillars of America’s energy supply.” That’s why having a national energy policy that encourages development of our vast resources – and vast they are – is critical to our nation’s energy portfolio.
Last week, the Obama administration patted itself on the back when the Interior Department carried out a Gulf of Mexico offshore lease sale scheduled by the Bush administration. In fact, this administration has cancelled or delayed more lease sales than they have held. The sale brought in $1.7 billion dollars for the government. While the dollar amounts were very large and it is heartening to see interest in the Gulf after the devastating moratorium following Macondo, fewer companies bid and the sale was dominated by supermajors. This reflects the monetary strain that going through the bureaucratic hurdles has on smaller companies, who would otherwise seek to develop oil offshore in the Gulf. It will be interesting to see what the administration’s 2012-2017 five-year outer continental shelf plan (scheduled to be released this week) will hold. Public lands are designed for multiple-use – a major strategic use for our nation’s public lands is energy development. For the sake of our economy and energy security, hopefully this plan will open up access for more development opportunities for America’s independent producers.