State lets Conoco expand North Slope unit, but with conditions

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A flow line curves above the horizon on the western North Slope. ConocoPhillips wants to expand one of its units in the region. (Elizabeth Harball/Alaska’s Energy Desk)

The state is trying to speed up development of oil fields on the North Slope by putting pressure on ConocoPhillips to explore a new area.

This week, the Department of Natural Resources announced it’s allowing Conoco to expand one of its North Slope units, but only under certain conditions. In February, the state turned down Conoco’s request after the company paused plans to drill an exploration well there.

Now, the state’s approval requires Conoco to drill an exploration well in the new area by May 31, 2018. If Conoco doesn’t agree to the state’s terms and timeline, it will have to give up the area for other companies to bid on.

Andy Mack, head of the Department of Natural Resources, said the state sees potential where Conoco wants to expand so it’s eager to reap the rewards.

“This entire region is an area where we see a lot of excitement, a lot of interest, and the geology is tremendous,” he said. “And so we’re asking ourselves, how do we get this area on production quickly and safely? And that’s what we were faced with here in this decision.”

If Conoco agrees to the state’s conditions, its Colville River Unit, west of Prudhoe Bay will grow by more than 9000 acres. The lands are jointly owned by the state and the Arctic Slope Regional Corporation.

The state had originally wanted Conoco to drill an exploration well earlier this year. In a March letter to the state, Conoco said it delayed drilling because it needed to address concerns from the village of Nuiqsut, which is just south of the Colville River Unit.

Mack said he now agrees Conoco made the right call.

“I think it was very reasonable for them to ultimately step back from that well last winter and to continue to discuss how they could move forward safely,” he said.

The state’s decision also included a financial incentive for Conoco to hire at least 80 percent Alaska residents when it explores for oil in the new acreage. Mack said those incentives are a new strategy for the state.

“This is a unique way to do business, in some respects, and the state always has to do what is in its interests,” said Mack.

In an email, Conoco spokeswoman Natalie Lowman said Alaska residents already make up 85 percent of the company’s total workforce in Alaska. She added that the company is reviewing the state’s decision, but declined to comment further.

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