Keeping an eye on the oil industry

Something happened Friday that bears watching.

Texas-based Escopeta Oil Co. started drilling an offshore well in Upper Cook Inlet, north of Nikiski.

Drilling in Cook Inlet is nothing new. The oil industry has been active in those waters for decades.

What makes the Escopeta well unusual is that the drilling is being done with a so-called jack-up rig, which sits on legs pinned to the seafloor. Tugs towed the rig into Cook Inlet in August, capping a long voyage up from the Gulf of Mexico.

The Escopeta exploratory well is the first to be drilled from a jack-up rig in Cook Inlet in nearly two decades.

Oil industry regulators I've spoken with are clearly wary of Escopeta, a small company that went through years of struggle to pull together the money, equipment and state leases for the drilling project.

In recent days, the regulators have questioned Escopeta's adherence to certain regulations. Escopeta's people have rebutted these concerns, and swear they have experienced pros operating the rig.

But the regulators remain less than confident, and on Friday handed Escopeta this letter limiting the depth to which the company can drill.

"A well control incident in Cook Inlet could have devastating consequences for the state and the state's most vital industry," wrote Bill Barron, state oil and gas director.

The industry to which he refers, of course, is the oil industry. But one might easily include the fishing industry.

Unalaska council endorses offshore oil leasing

Here's an article I wrote for Petroleum News, an Anchorage trade paper, about proposed oil and gas leasing in Bristol Bay:

Fishing port favors North Aleutian sales

Wesley Loy
For Petroleum News
Sept. 20, 2009

The Unalaska City Council on Sept. 8 passed a resolution supporting proposed federal offshore oil and gas leasing in the North Aleutian Basin.

Unalaska Island is home to Dutch Harbor, the nation’s leading commercial fishing port in terms of total poundage of fish and shellfish landings. Fleets from Dutch Harbor work heavily in the waters of Bristol Bay, within the North Aleutian Basin, northeast of the island.

The Unalaska resolution lends support for proposed lease sales in 2011 and 2014, subject to mitigation measures another local government in the region, the Aleutians East Borough, has proposed to the U.S. Minerals Management Service.

Such measures, along with baseline research, are intended to protect the region’s fisheries and the environment, the Unalaska resolution says.

Leasing benefits, schedule

Leasing in the North Aleutian basin “will benefit the local economy, provide good paying jobs, expand local infrastructure and contribute to the national energy supply needs,” the resolution says.

It adds that “natural gas is a clean energy source, and does not present an oil spill concern or catastrophic risk to our commercial fisheries.”

The MMS is taking public comment until Sept. 21 on a proposed national Outer Continental Shelf leasing program for 2010-2015.

The plan proposes Lease Sale 214 for 2011 in the North Aleutian basin, which is believed to be gas-prone. This sale already is included in the current 2007-2012 OCS leasing program, and MMS is preparing an environmental impact statement.

The new five-year program proposes a second sale for the basin, Lease Sale 239 in 2014.

A 1986 lease sale resulted in issuance of 23 leases in 1988, but the government later bought the leases back in the wake of the Exxon Valdez oil spill and rising opposition to drilling in salmon-rich Bristol Bay.

Other supporters, opponents

Another local government in the North Aleutian basin region, the Lake and Peninsula Borough based in King Salmon, in late August sent the MMS a resolution “expressing conditional support” for the two sales. The borough wants fisheries protections, revenue sharing and other considerations.

The Bristol Bay Borough in March passed a similar resolution.

Many environmental groups, however, as well as some commercial fishing interests, are opposing the lease sales.

Oil and gas exploration could disturb fisheries, and important areas for king crab, cod and pollock are “right in the heart of where these oil reserves would be potentially extracted,” Keith Colburn, a crabber featured on the hit cable TV show “Deadliest Catch,” said in a Sept. 9 report from Unalaska broadcaster KUCB.

Unalaska City Council member Dennis Robinson, however, favored the resolution supporting the lease sales, and suggested the island would do well to broaden its fisheries-based economy.

“I don’t view it as a risk to our fisheries,” he said in the KUCB report. “Oil and gas exploration happens in the North Sea, it happens in the Gulf of Mexico.”

Outside Alaska, aquaculture efforts march on

Alaska evidently has it so good that it need not consider a serious expansion of its aquaculture industry.

Elsewhere, however, folks are thinking big.

Here's an excerpt from a daily investors newsletter I receive sketching out a fantastic plan involving fish, algae and oil production in the Gulf of Mexico.

Would we consider something like this in Alaska? Nope, don't think so.

Something Smells Fishy‏

Wells Fargo Daily Advantage

Aug. 25, 2009

Are we ready for cars that are powered by the oil squeezed out of fish which munch on algae? One company hopes so. LiveFuels is a firm hoping to cash in on the algae-based biofuel craze by developing new ways to process algae into liquid energy to power our cars, buses, and trucks. They also claim their methods will help reduce a problem in the ocean caused by fertilizer runoff.

Each spring, fertilizer runoff from farms across the Midwest flows down the Mississippi river and into the Gulf of Mexico. This creates the second-largest algae bloom in the world — the size of New Jersey. It is called a "dead zone" because the algae feeds on the fertilizer, which in turn feeds a booming bacteria population which sucks up so much oxygen in the ocean water that fish and plants either move away or perish. Scientists, environmentalists, and the seafood industry have been monitoring the negative impact of fertilizer runoff and the dead zones for years.

Instead of harvesting the oil directly from the algae in the harmful dead zones (a costly proposition), LiveFuels plans to enlist an army of traveling fish to gobble it up. (Think of it like a farmer renting out goats to "naturally" cut the grass along highways and airports.) More than 25,000 pounds of fish per acre would be released into the dead zones to feast on the algae. The fish would be contained in caged fish farms and, after plumping up, would be rounded up and the oils squeezed out of them. Lovely imagery, hey? But the process results in no carbon footprint, the phosphates from fish bones are used for (ironically) fertilizer, and protein for animal feed and oil for fuel is generated.

— Brian Bock

Oil drilling and Bristol Bay

So, are you aware that the federal government has proposed an offshore oil and gas lease sale for Bristol Bay in 2011?

Here's an article I wrote for the latest issue of Petroleum News about how one sale supporter is fighting for protection of fisheries.