Business: Hot Prospect

Off Alaska’s frigid shores

The U.S. has tapped just about all the easily recoverable oil and gas it is likely to find within its own land area. Now the most promising areas for new finds of these fuels lie offshore, under water depths ranging from a few yards to 1,000 ft. or more. Oilmen have been drilling into the outer continental shelf since the mid-’50s, and the 20,000 wells they have sunk, mostly in the Gulf of Mexico, account for 14% of the nation’s current domestic oil production and 23% of its gas. The next place they hope to develop as a major energy source is a tough one: the floor of the ice-jammed Beaufort Sea, about 275 miles above the Arctic Circle, off Alaska’s nearly barren north coast.

Estimates of how much oil could be tapped off Alaska’s entire outer continental shelf (OCS), including the Beaufort Sea, range up to 25 billion bbl., or nearly three times the reserves in Alaska’s Prudhoe Bay field. Some oilmen believe that with a big development effort, Alaska’s OCS could eventually produce 4 million bbl. a day, or enough to replace half of the nation’s present oil imports. The Canadians, who have been drilling in their sector of the Beaufort Sea for two years, are very bullish on it: this fall Dome Petroleum Ltd. brought in a 20,000 bbl.-a-day strike, the biggest ever made in Canada. But huge expenses (Dome’s well cost $70 million), heavy ice, storms and temperatures as low as — 60° F are only some of the hazards confronting U.S. development of the Beaufort Sea. An all-too-familiar problem: bureaucratic and environmental barriers are holding up progress.

Last week briefcase-toting oilmen gathered at a Fairbanks hotel to bid for drilling rights in the first small part of the U.S.’s Beaufort Sea sector to be opened to exploration. Offers by the companies totaled $2 billion for some 500,000 acres of tracts, but when the leases will be awarded is uncertain. Just four days before, a federal judge had ruled that the lease sale could not be completed until the courts resolved an environmental suit brought by the National Wildlife Federation and other groups calling for a ban on Beaufort Sea drilling so as to avoid possible harm to, among other things, the bowhead whale.

The Interior Department has required the companies to take costly environmental precautions in the area. Oilmen will mount their rigs on artificial islands built of gravel. Those located in water depths of more than 42 ft., the Government insists, must be left unused for two years, to see if they can withstand the ice; moving ice packs could knock over the rigs, causing oil spills. Moreover, the companies will be allowed to drill only five to seven months each year, starting in November. Reason: at other times the big bowheads, which weigh as much as 45 tons, migrate through the sea, and environmentalists are afraid that the drilling might disturb their breeding and calving.

Despite these precautions, lawsuits could hold up the start of Beaufort Sea development for some time. Oral arguments in the federal suit brought by the National Wildlife Federation will be heard in a Washington, D.C., court on Jan. 3, and there is no telling exactly when or how the case will be resolved. Meanwhile, another suit to halt exploration has been brought by several local parties, including the Alaskan town of Kaktovik, a coastal hamlet populated by 175 Eskimos. Since bowhead meat is a staple of the villagers’ diet, their lawyers argue, the Eskimos could be afflicted with “serious mental and emotional anxiety” if they felt that the drilling was disturbing the whales.

Apart from their frustration over the delays wrought by such environmental suits, U.S. oilmen feel that Washington is moving too slowly in leasing new offshore areas. The Interior Department recently stepped up its schedule of lease sales over the next five years, from 26 to 30, but that will do nothing in the near future to halt the gradual decline in U.S. oil production that began in 1971. Oil executives say that given the time it takes to develop offshore fields—the usual lag between discovery and full production is seven to ten years —leasing should be expanded sharply. After all, they point out, while other countries have leased as much as 35% of their coastal waters for exploration, the U.S. has opened up only about 4%.