Just because the federal government leases tracts for oil and gas development doesn’t mean the leaseholders can actually use their leases, because agencies can always change their minds.
The day after Christmas, the Department of the Interior quietly notified Hilcorp that the Biden Administration will not extend the offshore oil and gas leases for the Liberty Unit in the Beaufort Sea. The agency waited until the last possible day to deny the lease extension.
“After years of working in good faith to move the Liberty project forward, Hilcorp is extremely disappointed with this decision. We will continue to pursue this opportunity and are currently evaluating all available options. Hilcorp remains committed to ensuring the safe and responsible development of Alaska’s natural resources,” said Matthew Shuckerow, spokesman for Hilcorp.
Hilcorp estimates that the Liberty Unit contains approximately 150 million barrels of recoverable, high-quality crude oil, in leases that go back to 1998, when they were owned by BP.
Located 5.5 miles offshore in shallow water of about 20 feet, the lease are inside the Beaufort Sea’s barrier islands about 20 miles east of the Endicott oil field, which is also operated by Hilcorp. It would require a manmade island for operations and a 5.5-mile pipeline to shore.
Hilcorp acquired primary ownership in 2014 and has been working with the federal government for several years to get all the requirements met that would allow the leases to be extended. The approval by the Trump Administration was put on hold by a court decision in 2020, which sent the project back for further environmental work.
These purchased leases will now expire, meaning that the untold millions of dollars worth of effort by Hillcorp has been lost.
The rejection of the lease extension came at the same time the Biden Administration locked down most of the Outer Continental Shelf for any further oil and gas development. The Department of Interior has not yet announced its action, nor has the Bureau of Ocean Energy Management, but the letter is at this link.
Alaska’s two senators, Dan Sullivan and Lisa Murkowski, sent a letter to the Department of Interior, encouraging favorable action and reminding the department that the Liberty Unit was submitted as a plan to BOEM in 2014.
“Hilcorp worked diligently with the State of Alaska, federal government, University of Alaska, and Alaska Native community to develop plans for the potential development of the Liberty Unit, and obtained an SOP for the Liberty Unit in 2021,” they said.
“Over the course of this process, however, Hilcorp encountered permitting delays, processed new information, and, consequently, made adjustments to the previously proposed plan. They determined that in order to mitigate any environmental impacts and avoid further permitting delays, the best course of direction for the development of the Liberty Unit was to pursue the use of an extended reach drilling (ERD) development project instead of a gravel island development project,” Sullivan and Murkowski wrote.
Hilcorp submitted a request for the extension of the suspension of operations and production plan on Aug. 12, 2024 and on Nov. 20, 2024, submitted an amended development and production for the Liberty Unit to BOEM, which describes Hilcorp’s proposal to develop the reservoir utilizing extended reach drilling from Endicott Satellite Drilling Island.
“In light of the proposed transition to ERD, this extension request is justified to carry out the requirements of the National Environmental Policy Act, particularly due to the inordinate delays Hilcorp has encountered in obtaining required permits because of third party challenges to agency actions. With the SOP expiring on December 26, 2024, there is simply not enough time for BOEM to review the changes within the revised DDP before the SOP expires in a few weeks,” the senators said.
“The extension of the SOP is critical, and we reiterate that its issuance will result in a more efficient, productive, and responsible development of the Liberty Unit. It is our request that this submission is given due consideration, as the proper development of Liberty will produce vast benefits for the State of Alaska and our nation at-large. We thank you for the consideration of our correspondence and respectfully ask that you keep our offices notified of the eventual outcome,” Sullivan and Murkowski wrote.
Environmental groups lauded the decision, saying drilling in the Arctic is too risky.
