On behalf of the State of Alaska, I request that you include recent testimony given by Governor Cowper and by James Eason, the State's Director of Oil and Gas, in the record of your Committee's October 2, 1990 hearing on the nation's energy policy. The testimony of Governor Cowper and Mr. Eason was presented at a National Energy Strategy Hearing held by the Departments of Energy and Interior in Fairbanks, Alaska on August 27, 1990. Copies of their testimony are enclosed herewith. Presentation by Governor Steve Cowper State of Alaska For the Alaska Regional National Energy Strategy Hearing Fairbanks, Alaska August 27, 1990 The importance of energy, in particular oil and gas, production to Alaska is self-evident to those of us who live here, especially to those who can remember the days before the first discovery well was drilled at Prudhoe Bay. However, the contributions which Alaska's oil production makes to the national economy and to national security are perhaps not as well known to many of our fellow citizens in the lower 48 states. As the events of early August and the ensuing weeks have clearly demonstrated, we cannot afford to think of a National Energy Strategy as being a short term fix for the "crisis of the moment". No matter what the crisis whether an environmental disaster or escalating oil prices our energy strategy is sure to fail if it merely becomes an expedient patchwork of responses. The National Energy Strategy must be a well-crafted and comprehensive plan which forms an essential part of our nation's future policy. - There are some very basic elements which, in my opinion, are essential to any effective energy policy. First, regardless of the range of components in a national energy strategy, oil and gas leasing and development in Alaska is, and will remain, extremely important to both the state and the nation. For reasons which I will elaborate on momentarily, this is an inescapable conclusion. Second, the timely exploration and development of the coastal plain of the Arctic National Wildlife Refuge (ANWR), the most prospective unexplored onshore petroleum province remaining in North America, must be an integral part of the nation's energy policy if our goal is to strengthen domestic production and reduce foreign oil imports. Third, continuing debate over environmentally-related mitigation of oil field development and production in Alaska must be considered at the highest policy levels--in both state and federal government--and reconciled. The possible impacts of not coming to closure on these debates range from significant increases in production costs to the complete exclusion of certain new development projects. These effects will be amplified as current production declines. Fourth, an effective national energy plan must logically consider all our future energy options. This plan must provide a road map for achieving our goals, and procedures to establish longterm continuity and adherence to the steps we decide to take. At the same time, however, the plan should remain flexible enough for us to take advantage of new technologies or changing circumstances. Further, we as individuals, need the intestinal fortitude to adhere to all the components of a new energy strategy. The worthy goals of conservation, greater fuel efficiency, alternative fuel and enhanced recovery research, as well as orderly domestic exploration and development must not be abandoned simply as a reaction to changing and unpredictable world conditions. It is my opinion that early exploration to assess ANWR's petroleum potential is critical to both the State of Alaska and the nation. It may come as a surprise to some of you to hear that the Trans-Alaska Pipeline System (TAPS) has already transported over 7.1 billion barrels of oil from the North Slope, about 6.5 billion of which have been from the Prudhoe Bay field alone. This means that nearly 60 percent of the total proven 11 billion barrels of recoverable oil at Prudhoe Bay have been produced in the 13 years since production began. In fact, North America's largest field, which since 1977 has contributed a major share to this country's daily production, has begun an irreversible production decline which could continue at the rate of 8 - 12 percent per year, even in the face of new investments in secondary and tertiary recovery to coax oil from its reservoirs. Parenthetically, and to underscore the gravity of this fact, in similar testimony before the House Subcommittee on Water and Power Resources in June 1987--just three years ago--the State's Director of Oil and Gas noted that the five billionth barrel of Prudhoe Bay oil had recently been produced. While the debates on the merits of exploring ANWR continue, the reality of declining North Slope production and its impact on domestic energy production options cannot, and should not, be avoided. Unless the opportunity for making significant new discoveries is made available, production on the North Slope will decline each and every year. The United States imported a record 49.9 percent of its oil in the first half of 1990. Domestic production was down 5.9 percent from a year earlier, to 7.63 million barrels per day. By June, the last month of the first half, production was down to 7.07 million barrels per day, 7.3 percent below the level of a year ago. With this decline in domestic production, America's oil imports rose more than 7 percent in the first six months over the corresponding period last year, to 8.4 million barrels per day. Without question, the United States, already the world's largest oil importer, is relying more and more on overseas supplies. is clear to those of us in Alaska that the high, oil and gas potential of ANWR's coastal plain, and its potential to reduce the projected domestic production decline, justify an early and thorough assessment of the area's potential. It Alaska has witnessed some extraordinary exploration successes over the years. However, the fact is that the number of failures-- dry holes--both onshore and offshore, far exceeds the successes. These failures serve to emphasize two very important points. First, having systematically explored and eliminated many formerly promising areas, there simply are no unexplored areas left in this country with ANWR's potential to substantially and positively affect our nation's overall domestic production and balance of trade. Second, we cannot simply assume that ANWR holds oil and gas reserves which can be banked for future development. Our pre-drilling estimates of resources in ANWR may, in fact, be seriously in error, as they were in the National Petroleum Reserve -Alaska (NPRA) and at the Mukluk prospect in the Beaufort Sea. Common sense, as well as national security and economic efficiency argue strongly for an early confirmation of ANWR's potential. New production from ANWR and other North Slope fields could complement each other to keep TAPS tariffs lower and wellhead prices higher, thus spurring additional exploration in the area. Now, I would like to address a sensitive issue which has some very far-reaching implications for the future of oil and gas production from Alaska's arctic regions. In the wake of the EXXON VALDEZ accident, renewed nationwide concern over the protection of our natural environment has emerged. Clearly, the public will continue to demand very close attention to the health of our environment--as they should. And yet, everybody wants abundant, cheap energy for economic growth, prosperity and personal comfort. A major challenge in the years ahead will be the delicate balancing of energy production and environmental protection, in many ways a balancing of economic vitality and human health. То underscore this point, I would like to discuss a few of the major obstacles to new oil field development specific to Alaska, and highlight the types of hard decisions that will have to be made in our joint efforts to balance continued domestic production and the protection of our environment. Currently, no less than eight federal and seven state agencies, as well as local government and various interest groups, are involved in the permitting and regulatory efforts aimed at maintaining the safe and environmentally sound extraction of oil and gas in Alaska. These agencies have a wide variety of responsibilities which have resulted from the passage of some fourteen major legislative actions which establish the regulatory framework for drilling and development operations. Their mandates and respective authorities include laws ranging from the Clean Water Act (CWA) to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or "Superfund") authorized in 1980, and the more recent Emergency Planning and Community Right-to-Know Act of 1986. The process of permitting exploration and development activities--which can take several years in some cases--has created an administrative gauntlet which is time consuming and very costly to the petroleum industry. The industry generally |