October 21, 2005

Alaska mulls drilling in fishing area

By Yereth Rosen

ANCHORAGE, Alaska (Reuters) - A part of Alaska best known
for its abundant fish could become the state's newest oil and
gas frontier, if Gov. Frank Murkowski and at least one major
energy company have their way.

The Bristol Bay region in southwestern Alaska, site of the
world's biggest sockeye salmon runs, rich crab fisheries and
other lucrative seafood harvests, could join the North Slope
and Cook Inlet to become the state's third energy-producing
province, Murkowski said in a recent Anchorage speech, setting
the stage for a potential political fight.

"This is an ice-free area, and if we get lucky it could
have a profound effect on another major producing area for
Alaska. We're very excited about it," said the Republican
governor, who has scheduled an October 26 state lease sale for
mostly onshore territory on the Alaska Peninsula adjacent to
Bristol Bay.

Some local groups have loudly opposed drilling, but some
locals have also embraced it.

Royal Dutch Shell Plc's Shell Exploration and Production
Inc. has expressed interest in Bristol Bay development,
particularly for natural gas in federal waters offshore, an
area from which energy companies were ejected a decade ago.

In meetings with local officials and fishing groups, Shell
representatives have outlined ambitions for platforms,
pipelines and perhaps exports of liquefied natural gas in
several years, if the resource proves large enough.

Years ago, when opposition to drilling was fierce and
memories of the Exxon Valdez spill were fresh, such plans would
have likely caused an uproar.


In the late 1980s, fish prices were high and oil prices
were low, and the idea of drill rigs in Bristol Bay was
considered a dire threat by many, said Bob Juettner,
administrator for the Aleutians East Borough, a local
government encompassing six coastal villages.

"One red salmon was worth more than a barrel of oil in the
summer of 1988," he said.

But now, with fishing fortunes dwindling and energy prices
soaring, many residents of the fish-dependent region are
embracing Murkowski's and Shell's development ideas.

"I think a lot of people are seeing the handwriting on the
wall, that there's less of an opportunity for people going into
fisheries," said Juettner.

While the state and the U.S. Bureau of Land Management are
considering onshore energy development in the area, the North
Aleutian Basin is considered the real energy prize in the
region. A 10-year-old Minerals Management Service assessment
estimates the federal offshore area holds 230 million barrels
of recoverable oil and 6.8 trillion cubic feet of natural gas.

The projected oil reserves are modest. A supply of 230
million barrels would satisfy less than two weeks of U.S. oil

Natural gas is the main attraction, Shell officials have
said. The development the company envisions would mean a big
transformation for a region where the biggest community,
Dillingham, has only about 2,400 residents.

Bristol Bay's federal waters are currently off-limits to
oil and gas leasing. Presidential and Congressional moratoria
were slapped on after the 1988 sales. While the Congressional
ban was lifted in 2003, the presidential ban remains in place.

Despite his enthusiasm for energy development in the
region, Murkowski stopped short of asking for an end to the
presidential moratorium, saying that the decision should depend
on public and industry sentiment.

Citing threats of oil releases and chemical pollution and
the "disastrous effect" of the Exxon Valdez spill, the Bristol
Bay Native Association, a tribal organization, earlier this
month passed a resolution against offshore development.

But some Bristol Bay-area groups, including local
governments and Native organizations, have called for the
drilling ban to be lifted.

The pro-drilling attitude is new, Murkowski acknowledges.
"It represents a departure. It marks a change in the way rural
Alaska is approaching resource development," he said in a
speech Thursday to the Alaska Federation of Natives.