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By Yereth Rosen

ANCHORAGE, Alaska | Mon Dec 19, 2011 7:54pm EST

(Reuters) – ConocoPhillips on Monday won a key permit that will allow construction of an oil field that is expected to provide the first-ever production from the National Petroleum Reserve-Alaska on the western North Slope.

The U.S. Army Corps of Engineers said it granted a modified wetlands-fill permit that will allow ConocoPhillips to build a road, bridge and above-ground pipeline connecting its CD-5 project with the Alpine oil field on state land just east of the petroleum reserve.

The wetlands-fill permit — initially denied to ConocoPhillips nearly two years ago — is the last major government authorization that ConocoPhillips needs to build CD-5, said Natalie Lowman, a company spokeswoman in Alaska.

Construction could start in 2014 and production could start in 2015, assuming that the project gets final approval and funding from corporate leaders at ConocoPhillips and its partner Anadarko Petroleum Corp, Lowman said. Production at CD-5 is anticipated to range from 10,000 barrels per day to 18,000 barrels per day, she said.

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ANCHORAGE, Alaska, Dec. 8 (UPI) — Three companies won the rights to explore and develop oil and natural gas on more than 141,000 acres in the National Petroleum Reserve in Alaska.

Energy companies 70 & 148 LLC, Woodstone Resources LLC and ConocoPhillips submitted winning bids for the rights to develop 17 tracts covering roughly 141,739 acres of land during a lease sale in the NPR-A, the U.S. Department of Interior’s Bureau of Land Management announced.

The sale follows an agreement from Conoco for a proposal to build a pipeline and access road into the NPR-A, the first such development for the area. The Interior Department said that development would encourage the exploration of the 23 million-acre reserve managed by the BLM.

“As industry begins to build infrastructure and explore and develop oil and gas in this area of the North Slope of Alaska, we expect to harness the energy and economic benefits of the NPR-A for our nation,” Secretary of the Interior Ken Salazar said in a statement.

The U.S. Geological Survey estimates Alaska has as much as 896 million barrels of oil and 53 trillion cubic feet of natural gas.

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Alaskans have consistently supported oil exploration on ANWR’s coastal plain

By John Fleming, U.S. Congressman

Yes, the time has come to take the federal padlock off an area that was designated for oil exploration more than 30 years ago. The United States needs the jobs and oil that a small portion of the Arctic National Wildlife Refuge, or ANWR, could yield.

In 1980, a Democrat in the White House and a Democrat-majority Congress set aside 1.5 million acres of the 19 million-acre ANWR for oil and natural gas development. But ANWR has remained trapped in the grip of extreme environmental politics.

I know firsthand how the federal government is keeping us dependent on foreign oil. The Obama administration wasted stimulus dollars on failed “green energy” projects, while showing contempt for the oil industry in the Gulf of Mexico. After imposing a months-long moratorium on drilling permits, the administration has used a “slowatorium” for the past year to dramatically slow the pace of granting permits.

We desperately need an energy policy which recognizes that the United States has the largest energy reserves in the world. By opening less than 3 percent of ANWR’s total land, we could tap into more than 10 billion barrels of oil, create tens of thousands of new jobs, and raise billions of dollars in new federal revenue. Instead, we are importing about 9 million barrels a day of crude oil and other petroleum products, and paying the price in higher energy costs and lost jobs.

Alaskans, by overwhelming majorities, have consistently supported oil exploration on ANWR’s coastal plain. But they have been met by bureaucrats who continue to bar the door of opportunity. The people of Louisiana understand. We give a similar resounding “yes” to questions about our support for offshore drilling, and yet we regularly face job-destroying regulations and permit delays.

Responsible exploration in ANWR must be part of a commonsense approach to weaning the United States off its energy dependence on foreign countries. Environmentalists have kept the roadblocks up long enough. It’s time for Congress to act and to ensure that domestic oil will be there in the future through safe and responsible exploration in ANWR.

About John Fleming:

Congressman John Fleming, M.D., represents Louisiana’s 4th District. He is Chairman of the Natural Resources Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs, and is a member of the House Armed Services Committee. He is also a physician and small business owner.

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By TALIA BUFORD | 10/25/11 10:19 PM EDT

Field experiments this winter into methane hydrates on Alaska’s North Slope could determine whether the resource will become the shale gas of the next generation.

The work done in Alaska will inform the potential extraction of methane hydrates believed to lie beneath the seabed of the Gulf of Mexico, and if successful, could also provide a feasible way to store molecules of carbon dioxide and remove them from the atmosphere.

That is, if the experiments work, said Christopher Smith, deputy assistant secretary for oil and natural gas at the Energy Department.

“We know theoretically we can do a lot of things,” he said, “but in order to attract investments and move forward with bigger types of demonstrations and industry interest, we’ve got to show on the physical scale that the things we understand theoretically will work out when you’re in the messy environment of the natural world.”

In January, the Energy Department will begin about 100 days of experiments into carbon exchange and methane harvesting from methane hydrates — lattices of ice that trap molecules of gas deep underground.

“We see that it is something that holds enormous potential, enormous promise and for that reason, we’re making some relatively modest investments, but some really targeted investments that are really going to help us understand the science behind how hydrates behave,” said Smith.

The project is small in terms of capital.

Energy is investing $5 million, while an additional $7 million will come from the Japan Oil, Gas and Metals National Corp., a government entity. ConocoPhillips will contribute $5.3 million to the research project. In comparison, DOE invested about $150 million over 14 years on research into extracting shale gas.

The small price tag is actually a good thing, Smith said.

“We can do a really efficient test, and it will give us real insight on the big picture in the Gulf of Mexico,” he said.

The research is being performed in Alaska, Smith said, because beyond having a large resource base, the infrastructure is already there and it’s cheaper to drill on an ice pad than to set up a deep water well.

“Alaska is the ideal natural laboratory for doing this type of work,” Smith said.

Methane hydrates will form where methane and water are present under the right temperature and pressure conditions, making the Gulf of Mexico a likely location for large amounts of the resource said Arthur Johnson, a petroleum geologist and consultant for Hydrate Energy International in Kenner, La.

“It is an absolutely enormous resource potential, but of course you have to be able to extract it safely, and the other thing is economics,” Johnson said. “If you have to put more energy into it than you’re getting out, it’s not a resource.”

Johnson said estimates suggest tens of thousands of trillion cubic feet of natural gas are tied up in hydrate reservoirs beneath the floor of the ocean and in the permafrost in Arctic regions. One cubic foot of methane hydrate yields about 164 cubic feet of gas.

What it comes down to is economics, said Davy Kong, spokeswoman for ConocoPhillips.

“Many experts believe that methane hydrates hold significant potential to supply this clean fossil fuel,” Kong said. “At present, the technology does not exist to produce methane economically from hydrates. This trial is an important first step in analyzing a production technology with potential both to produce this resource and to sequester carbon dioxide in the process.”

Johnson said work is still being done to calculate how much more gas would have to cost in order for hydrate extraction to be economically viable. But as the government does the fundamental research to prove that commercial extraction is viable, the industry will take over the research, Johnson said.

“If there were some disaster that related to gas shale, where there was a clampdown on production, hydrate could be in the position in a few years of picking up the slack there,” Johnson said.

The DOE has been conducting research into methane hydrates since at least 2005, although the resource has been on the radar of the industry for years.

Hydrate would often be found as companies drilled for oil and gas around the Gulf, Smith said, and research was initially done to ensure that hydrate didn’t become a hazard to drilling. Last winter, the department drilled a well on an ice pad in Alaska, and this winter, scientists will return to the well to conduct two rounds of tests to verify their theories on how methane hydrates will perform.

First, they’ll attempt to exchange molecules of carbon dioxide with the methane found in the hydrates. If that’s successful, the carbon dioxide will be stored in the ice while the methane can be harvested. Then researchers will work on depressurizing the methane hydrate formations to gather data on the rate at which methane is released.

All the work will be done on a gas hydrate field trial well in the Prudhoe Bay region that will be constructed around late December, Smith said. The experiments are expected to last about 40 days each.

The test this winter will be the longest data collection into methane hydrates ever conducted. Tests performed by Japan in recent years have yielded a week of data at most, Smith said.

“This investment is going to make a massive leap in terms of our experimental understanding of how hydrates behave,” Smith said.

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By Tennille Tracy

-Environmental groups challenge clean-air permits issued to Shell.

-Shell needs the permits to begin drilling for oil in the Arctic.

-Shell says it’s confident the permits will withstand challenge.

WASHINGTON -(Dow Jones)- Environmental groups have filed a formal challenge to air-quality permits that Royal Dutch Shell needs to drill for oil in the Arctic.

The challenges, filed Monday, represent the latest effort to block Shell from drilling off the coast of Alaska and could derail the company’s plans to begin exploring the region in 2012.

The permits under question were approved by the U.S. Environmental Protection Agency in September. The permits allow Shell to use the drillship “Discoverer” and a fleet of icebreakers and other vessels in the Chukchi and Beaufort Seas.

The environmental groups, led by Earthjustice, say the permits granted by EPA don’t protect air quality. They filed a petition with the EPA’s Environmental Appeals Board.

“The EPA essentially is green-lighting dangerous Arctic Ocean oil drilling,” Earthjustice attorney Colin O’Brien said in a statement.

Shell spokeswoman Kelly op de Weegh said company executives “believe the EPA conducted a thorough technical analysis before issuing this air permit, and we expect the permit to be upheld by the Environmental Appeals Board.”

Environmental groups have launched several challenges to Shell’s plan to drill in the Arctic. In September, the groups sued the Interior Department for approving the company’s exploration proposal for the Beaufort.

Monday’s challenge marks the second time Shell’s air-quality permits have been appealed. In 2010, environmental groups and Alaska Native groups successfully blocked an earlier set of permits, forcing the EPA to amend the permits and re-issue them. The amended permits are being challenged today.

On Friday, the EPA approved a separate permit for Shell, allowing the company to operate a drill rig known as “Kulluk.”

Unlike drilling projects in the Gulf of Mexico, where the Interior Department is responsible for clean-air permits, projects in the Arctic require approval from the EPA.

Republicans on Capitol Hill have started to take notice of Shell’s struggles. The Republican-controlled House of Representatives approved a bill in June that imposes deadlines on U.S. regulators to approve or deny permit applications. The Senate has not yet taken up the bill.

Shell has said it wants to begin exploring for oil in the Arctic in the summer of 2012. It will have to reconsider those plans, however, if environmental groups are successful in blocking the air-quality permits or delaying a review of them.

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The 12-member congressional “super committee” charged with cutting the U.S. budget deficit should open up the Arctic National Wildlife Refuge for drilling if it wants to raise revenue without hiking taxes, House Natural Resources Committee Chairman Doc Hastings said Wednesday.

Speaking at a Capitol Hill event, the Washington Republican said boosting domestic oil and gas production is a “simple step” for both creating jobs and helping to close the U.S. budget deficit.

The super committee, which begins its meetings Thursday, is tasked with recommending $1.5 trillion in deficit reduction, including from tax reform.

Hastings, whose committee has jurisdiction over federal lands, said producing oil from ANWR could net the government between $150 billion and $300 billion through leasing and royalties.

Hastings acknowledged the political difficulty of opening up the reserve, long defended by Democrats and environmentalists. President Bill Clinton vetoed legislation that would have opened the reserve to drilling, and there’s little indication members of Clinton’s party have changed their minds about the reserve.

“Generally speaking, Democrats continue to oppose drilling in ANWR,” says Democratic strategist Jon Summers, former spokesman for Senate Majority Leader Harry Reid. He argued for creating jobs through developing renewable energy sources. “I think [Americans] would like to reduce our reliance on oil,” Summers said.

Democrats on the bipartisan committee have so far given no indication they’re considering boosting drilling and instead are talking about stripping subsidies from the industry.

“Why with this kind of quarterly income should we be subsidizing exploration? Especially when we know that there are millions of acres of leases out there not being used? And we know that exploration ought to be taking place under the current profit margins,” Rep. James Clyburn, a South Carolina Democrat and super committee member, told MarketWatch recently.

Hastings and the industry are clearly in synch with each other. The congressman was speaking at a conference hosted by the American Petroleum Institute and the Hill newspaper. Earlier Wednesday, an API-commissioned study said changing rules to allow more oil and gas production in the United States (including in ANWR) could add 1.4 million jobs by 2030 and bring in more than $800 billion in government revenue.

The super committee must come up with its recommendations by Thanksgiving. Before then, Hastings said, given the prices of oil and gasoline, “maybe some of these members will have an epiphany” about boosting drilling.

– Robert Schroeder

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By Ben Geman

The Interior Department on Thursday backed Royal Dutch Shell’s plan to drill in Arctic waters off Alaska’s coast next year.

The Obama administration’s stance on Shell’s plans is closely watched by environmentalists that bitterly oppose Arctic drilling and Republicans who have decried what they call undue delays.

Interior’s Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) conditionally approved the oil giant’s plan to drill up to four oil-and-gas wells over two years in the Beaufort Sea off Alaska’s northern coast.

Shell, which has for years been seeking a green light to drill in Arctic waters, must still receive several other approvals, including drilling permits and final EPA air permits, as well as other sign-offs from the U.S. Fish and Wildlife Service and the National Marine Fisheries Service.

But Thursday’s action nonetheless signals that the administration is moving toward allowing Shell to drill in the fragile Arctic ecosystem, where the company has vowed to employ a robust series of safety measures.

“We base our decisions regarding energy exploration and development in the Arctic on the best scientific information available,” said BOEMRE Director Michael Bromwich in a statement.

“We will closely review and monitor Shell’s proposed activities to ensure that any activities that take place under this plan will be conducted in a safe and environmentally responsible manner,” Bromwich said.

Interior has beefed up safety standards and scrutiny of oil industry plans in the wake of last year’s BP spill in the Gulf of Mexico, and has also undertaken further scientific reviews of the Arctic ecosystem.

The president of Shell’s U.S. operations said last week that he’s growing more confident that the Obama administration will allow the oil giant to drill off Alaska’s coast in 2012.

Shell, in a statement Thursday, cheered Interior’s action.

“The conditional approval of our Revised Beaufort Sea Plan of Exploration is welcome news and adds to our cautious optimism that we will be drilling our Alaska leases this time next year,” said spokeswoman Kelly op de Weegh.

She added that BOEMRE was “thorough in its scientific and technical analysis of our plan, and we look forward to continued progress as we pursue the permits necessary to drill.”

The company is also seeking approval to start drilling next year in the adjoining Chukchi Sea.

Republicans have cast Shell’s years-long quest to drill in federal waters off Alaska’s northern coast as an example of federal roadblocks to domestic energy development.

The White House, under political pressure amid high gasoline prices, in May announced a series of steps to speed up domestic development, including a new inter-agency team to streamline Alaskan permitting.

Here’s more from BOEMRE’s announcement about Shell’s Beaufort Sea plan:

Based on its review of the plan, new information that included extensive input from stakeholders, and previous National Environmental Policy Act analyses, BOEMRE found no evidence that the proposed action would significantly affect the quality of the human environment. Therefore, BOEMRE determined that an Environmental Impact Statement (EIS) was not required, and issued a Finding of No Significant Impact (FONSI), a key step in the approval of the [exploration plan].

Environmentalists slammed the conditional approval of Shell’s Beaufort exploration plan.

“Scientific integrity and government accountability took their familiar back seat to oil company profits and power today,” said Earthjustice attorney Holly Harris in a statement, alleging the Obama administration has made a decision to “roll the dice with the Arctic.”

“BOEMRE’s decision to disregard science and gamble with a region that is crucial to endangered bowhead whales, seals, polar bears and other marine wildlife and that Native subsistence communities rely upon so heavily is inexcusable,” she said.

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By Jennifer Dlouhy

Republicans aiming to accelerate domestic oil and gas drilling today advanced legislation that would force the government to sell leases in Alaska’s National Petroleum Reserve and speed up permitting of roads, pipelines and other essential infrastructure in that remote area.

The measure was approved 28-14 by the House Natural Resources Committee, which sets the legislation up for full House consideration later this month.

Rep. Doc Hastings, R-Wash., the panel chairman and bill sponsor, said the bill was necessary to prevent the Obama administration from keeping some of Alaska’s “tremendous energy resources . . . under lock and key.” He said the measure would cut through “bureaucratic red tape” that has delayed drilling in the reserve for years.

But bureaucracy isn’t the problem, insisted Rep. Ed Markey, who stressed instead, the economics of natural gas and market forces have combined to discourage oil and gas companies from developing the region.

Recent calculations about the potential amount of oil in the 23-million-acre reserve have dipped, even as geologists say the area actually could be home to far more natural gas than once believed. But with natural gas costs now hovering around $4 per trillion cubic feet, companies would have a difficult time recouping the costs of developing that resource, including building the necessary pipelines and other infrastructure to access it.

The Obama administration just announced it would begin conducting annual lease sales inside the reserve, beginning with one at the end of this year. But Hastings’ bill would go further by also:

* requiring government agencies to issue infrastructure permits tied to oil and gas development in the reserve no more than 60 days after essential drilling permits are issued by the Interior Department.

* forcing the Interior Department to prepare a right-of-way plan that details how existing and future leases would be within 25 miles of an approved road or pipeline.

* mandating an updated assessment of the oil and natural gas resources in the reserve, because some have criticized the current estimates as too low.

The U.S. Geological Survey estimated last year that there are roughly 900 million barrels of oil in the NPR-A, which was established as a petroleum reserve in 1923 and first opened for drilling in 1998. Earlier calculations were much higher, with estimates of 2.7 billion barrels of oil and 114.36 trillion cubic feet of natural gas in the reserve.

Rep. Doug Lamborn, R-Colo., emphasized the importance of Alaskan oil to refiners in the Northwest.

“If refiners cannot rely on a steady stream of crude product from Alaska, they will be forced to rely on shipments of foreign oil from overseas to make the products that help consumers get to work and get to school,” he said.

Rep. Don Young, R-Alaska, said it only makes sense for the nation to be aggressively exploring the reserve, since it is specially designated for energy development.

“This is an area that already has been drilled — not to the point it should be,” Young said. “All we’re asking is to expedite the process.”

But Rep. John Garamendi, D-Calif., noted that the NPR-A is a remote area where it is “very hard to drill.”

And Rep. Raul Grijalva, D-Ariz., insisted it would be “wasteful and counterproductive” to force the Bureau of Land Management to “create a map of roads and pipelines to nowhere,” since that would be required under the bill even before regulators know where potential development might be.

The committee rejected an amendment by Rep. Ben Lujan, D-N.M., that would have insisted that all oil and gas produced in the reserve must stay inside the U.S. and could not be exported.

Opponents said that could unfairly shackle companies from exporting natural gas that could command a higher price outside the country.

Although 1.6 million acres — spanning 191 tracts — are now leased in the reserve, relatively little drilling has gone on there. Companies have increasingly given up their leases to drill, with 64 leases relinquished in fiscal 2010 and at least 60 already handed back to the government this year.

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