Category Archives: Cook Inlet
Critics Hit Obama’s Energy Move
President Obama’s recent invitation to open an area in Alaska to energy drilling is playing to poor reviews from industry leaders and administration critics, who say the move is an attempt to mislead the public about the administration’s willingness to open federal lands to more oil and gas production.
Over the weekend during a brief refueling stop in Alaska on the way to the nuclear summit in Seoul, Mr. Obama issued a release inviting industry input on an oil and gas lease sale in Alaska’s Cook Inlet.
“Today’s announcement is part of our commitment to increasing safe and responsible domestic oil and gas production as part of an all-of-the-above energy strategy for America,” said Secretary of the Interior Kenneth L. Salazar. “We will continue to support efforts to safely expand offshore oil and gas exploration, using the best science to assess where recoverable resources lie and providing industry with abundant opportunity to lease and develop areas that contain those resources.”
But the Cook Inlet, off the coast of South-Central Alaska is the oldest oil field in the state, dating back to the early 1960s, and industry organizations are ridiculing the move as an attempt to try to dress up an old leasing area the industry has had little to no interest in drilling in for years. In fact, two previous Cook Inlet sales in 2009 and 2011 were either canceled or put on hold because of lack of industry interest.
“Oil production has been tapering off there – that’s true for any old oil field,” said Benjamin Cole of the industry-funded Institute for Energy Research. “It’s not economic for the industry to put oil wells there.”
Mr. Cole compared the administration’s lease sale offer in the Cook Inlet to a used-car dealer offering a 1962 Ford with 350,000 miles on it.
“It may be a good car, may have been a good car for all those people who learned to drive on it, but it may not make economic sense to lease it again,” he said.
A spokesman for the House Natural Resources Committee said the panel would not have an official response but argued this “latest political move is really much ado about nothing.”
The Cook Inlet lease sale was part of President George W. Bush’s 2007-12 plan for drilling in the outer continental shelf, which the Obama administration canceled and then delayed coming up with its own five-year proposal until last year.
“This is another case of President Obama canceling a lease sale that was scheduled by a previous administration and then trying to take credit for possibly allowing it to happen,” said committee spokesman Spencer Pederson. “Also, the Cook Inlet is mostly natural gas, so if the administration is using this to distract Americans from noticing gasoline prices have doubled under President Obama, House Republicans have a list of places we would suggest the administration open for American oil production to help lower prices at the pump.”
A Department of Interior spokeswoman declined to comment on the claims about the Cook Inlet, but pointed to an Interior Department estimate that the area could contain more than 1 billion barrels of undiscovered oil and 1.2 trillion cubic feet of natural gas.
The same report estimated another area off Alaska, the Chukchi Sea, could contain an estimated 15.4 billion barrels of oil and 76.8 trillion cubic feet of natural gas.
ConocoPhillips Alaska operates the Kenai liquefied natural gas export terminal in the Cook Inlet Area and has expressed interest in the drilling in the Interior Department’s latest lease sale opportunity.
In contrast, oil companies jumped at the chance to drill in the Chukchi Sea when the Bush administration offered a lease sale for a portion of it in 2008.
But more than a dozen environmental organizations have tried to derail drilling in the Chukchi Sea scheduled to start in July by challenging the drilling plans of companies such as Royal Dutch Shell in court.
Sabrina Fang, a spokeswoman for the American Petroleum Institute, says the industry has only marginal interest in the Cook Inlet and would much prefer to see more permitting opportunities in the Chukchi Seas, as well as Beaufort Sea, another area off Northern Alaska, which is home to one of the largest colonies of Beluga whales.
“Leasing in areas that have been available for years is not the forward-thinking energy policy needed to increase future energy security,” Ms. Fang said. “If the administration was serious about Alaska oil and gas exploration, then they would schedule lease sales in these areas before 2015 and 2016.”
- BOEM: Conditional Approval for Shell’s Chukchi Sea Exploration Plan (USA) (mb50.wordpress.com)
- USA: Shell’s Chukchi Sea Oil Spill Response Plan Approved (mb50.wordpress.com)
Alaska: Escopeta Reports Massive Gas Discovery in Cook Inlet
Escopeta Oil Company LLC, a Houston-based independent, has discovered what it estimates to be 3.5 trillion cubic feet (99 billion cubic metres) of natural gas at a prospect in southern Alaska’s Cook Inlet, a company official said on Saturday.
The estimate is based on results of a single well and represents in-place reserves, not recoverable reserves, said Bruce Webb, a company vice president in Alaska. “Usually the recoverable reserves are somewhere in the neighborhood of 50 to 80 percent of gas in place,” he said.
The discovery, at the offshore Kitchen Lights unit, appears to be the biggest in 25 years in Cook Inlet, said Escopeta, which is privately held. The basin is Alaska’s oldest producing oil and gas region, with production dating back to the 1950s, and it supplies natural gas mostly to regional markets in and around Anchorage.
Webb said Escopeta plans further exploration drilling, through at least 2014, and will also test deeper oil-prone levels.
Escopeta’s well was drilled from a jack-up rig that the company shipped to Alaska on a foreign-flagged vessel, in violation of federal maritime law. Escopeta had hoped to win a Jones Act waiver from the U.S. Department of Homeland Security while the rig was in transit, but that did not materialize, Webb said.
For its Jones Act violation, Escopeta faces a $15 million fine assessed last month by the Department of Homeland Security, he said. “We rolled the dice and took the chance. It didn’t work out. So now we’re subject to the penalty,” he said.
The company hopes to convince the department to reduce the fine, he said.
By Yereth Rosen (Reuters)
Obama’s Real Energy Policy
Congresswoman Michele Bachmann recently promised $2/gallon gas at one of her campaign functions, and a researcher affiliated with NASA reported that aliens may destroy humanity to save the planet. Which statement is farther off the wall? Let’s set the stage with the facts.
Last week, the Obama administration found itself in a legal battle with Exxon over the largest find in the company’s history, a field of over 1 billion barrels off the coast of Louisiana. This represents 5% of total U.S. oil reserves and there’s supposed to be a lot more out there. The Marcellus Shale field in New York, Pennsylvania, Ohio, and Maryland contains between 160 and 500 trillion cubic feet of natural gas. Out in North Dakota, Montana, and Saskatchewan, the Bakken deposit is estimated to contain from 10-40 billion barrels of oil equivalent according to industry experts. This doesn’t include large deposits in Colorado, Wyoming, and elsewhere. Even if Bakken comes in at the low end it, represents another 40-50% increase in onshore American oil reserves.
In the meantime, the oil companies drilling in the Gulf of Mexico are still reporting incredible delays in re-opening even the inshore oil rigs. Offshore fields have become almost impossible to develop despite the incredible size of some of these discoveries. The government shut down even the inshore oil fields in the Gulf after the Deepwater Horizon disaster last year. The Department of the Interior just announced the first auction of oil leases since the Deepwater Horizon tragedy in April of last year, to be held in December. The Gulf provides 29% of America’s oil and 13% of our natural gas.
A report released in July by LA Senator David Vitter noted the departure of 10 deep-water rigs, the imminent departure of several more, and the diversion of 8 more since the moratorium was declared in May 2010. Each of these projects ranged from hundreds of millions to billions of dollars in investment. Many of those rigs are on their way to the vast 50- to 80-billion-bbl Lula oil field off the Brazilian coast. It is interesting to note that the Export-Import Bank is loaning $10 billion to Petrobras, the Brazilian oil company, to invest in their offshore oil industry. Funny timing.
The administration has also done its best to stall drilling both on the North Slope and in the Cook Inlet in Alaska. While talking about exploration, new pipelines, and improved practices, the reality is that every roadblock possible is being placed in the way of increased production. Last year, Fenton Associates, the public relations agency for many environmental groups, boasted that they had shut down drilling in Alaska.
“Drill, baby, Drill” has been replaced by “Chill, baby, Chill.”
While having approved several nuclear power projects, all of them additional reactors at existing sites, the government has adroitly avoided offering the necessary licensing guarantees necessary to obtain funding to build them. Another catch-22 engineered by the bureaucracy.
Ezra Klein in the Washington Post reports that the EPA is moving forward with its plans to shutter 20% of the nation’s coal-fired power plants. While many are grandfathered in, the power will still go offline starting in the next 18 months. The president has clearly stated on the record that he wants to put the coal industry out of business.
The real battle is being fought under the radar. The administration is using regulatory power and permitting to choke off conventional power. Last year, I sat in a packed conference center at China’s largest solar power conference as I listened to one of Europe’s leading solar power executives state that the industry needed to work to make conventional power so expensive that alternative energy sources can compete. This has been a part of the plan all along and the current administration seems to be working along those lines.
This is economic and engineering Luddism at its worst. After the farce of the carbon offset scam and many of the issues facing the industry, administrators, systems operators, and users would be well-advised to look upon many alternative energy technology providers with a gimlet eye. Objectivity is critical to the long-term health of the energy industry.
Let’s look at the alternatives. Test data on solar modules indicates a failure rate of between 3-7% within seven years of installation. Failures of inverters are exceeding 10%. None of this data is reflected in the current economic models for solar power. The assumption is 25 years, but there is very limited data. The business model for solar panels is becoming ever more challenging with rising materials costs globally and that of labor in China. In North America Solyndra has gone through over $535 million in government funding and is on the edge. Evergreen Solar, another poster child for solar power in this country, filed for bankruptcy last week.
Globally, the solar module industry will install 11-12 gigawatts of power this year, or the equivalent of 4-5 nuclear power plants. This certainly does not keep up with demand. As Germany and Japan have announced the phase-out of nuclear power, the great mystery is how it will be replaced.
As GM, Nissan, Toyota, and other car companies have ramped up production of electric vehicles, General Motors reported that the company had sold only 125 Chevy Volts in July. Costco announced that the company was removing electric vehicle charging stations from most of its locations because the stations are never used.
Wind power has received a lot of press, but even there, the largest project planned for the country was canceled because of obstruction and a poor financial outlook. Wind power is subsidized at up to 10 times the cost of conventional energy and is unpredictable. In studies of the over 6,000 turbines in Denmark, it has been found that without heavy subsidies, wind power would rapidly fail. Germany and Spain have withdrawn subsidies for wind power installations not because the industry has grown more viable, but rather because the difficulties and costs associated with this source of power outweigh the benefits.
And yet nowhere have I seen a coherent and objective study of the energy needs and policy of the United States, the world’s largest consumer. As American consumption of energy stands at 27,000 terawatts, with $85-bbl oil, an economy on the verge of recession, and significant capacity going offline, it would be nice to have a policy that is not based upon smoke and mirrors, or even some kind of sensible policy at all.
Maybe Congresswoman Bachmann isn’t so crazy after all. Judge for yourself. In the meantime I’ll be watching the skies for alien invaders.