Federal approval given for ConocoPhillips’ Willow oil project on North Slope, but oil tax ballot proposition could cause delay

The U.S. Bureau of Land Management has issued a Record of Decision on ConocoPhillips’ planned Willow oil project in the National Petroleum Reserve-Alaska, or NPR-A. This clears the project for final permits and investment decision by the company.

Alaska’s congressional delegation announced the decision last Tuesday.

ConocoPhillips spokesperson Natalie Lowman cautioned, however, that a ballot proposition pending on the Nov. 3 Alaska state election that would raise taxes on the industry could delay the construction decision.

Alaska state production taxes apply to production from federally owned lands like the federal petroleum reserve as well as production from state-owned and private lands.

The NPR-A is a 23-million-acre federal land reserve west of the major producing oil fields on the North Slope. It has been the focus of exploration for years, and discoveries have been made in recent years.

“A decision on moving into FEED (Front End Engineering and Design) for Willow will be made later this year, but project construction could begin in 2021 subject to receiving regulatory approvals,” Lowman said.

The Willow project involves a multi-billion-dollar investment for three drill sites, a processing facility, wells, roads and pipelines. Two more drill sites could be added later.

The project is expected to in excess of 100,000 barrels per day if developed, ConocoPhillips, Lowman said.

A key federal authorization still needed is a Section 404 wetlands permit from the U.S. Army Corps of Engineers. With a 2021 start in construction, production would begin about five years later, or in 2026.

One sensitivity is that Willow is close to the Teshekpuk Lake Special Area, an ecologically important area to the north and near the Alaskan Beaufort Sea coast. State and federal regulatory agencies, along with conservation groups, will be watching whether construction activity as well as further exploration will adversely affect wildlife in the region.

The northern coastal part of the NPR-A is important habitat for migratory waterfowl.

Meanwhile, another ConocoPhillips project in the petroleum reserve, GMT-2, is now under construction and is approximately half complete, Lowman said.

GMT-2 is located about 10 miles east of Willow. “We intend to finish construction and start drilling next year. First oil is still expected in late 2021,” Lowman said. Estimated production is 35,000 barrels per day to 40,000 barrels per day.

Willow and GMT-2 are among several new oil projects ConocoPhillips has planned in the NPR-A. GMT-1, almost a twin to GMT-2, is located about eight miles east of GMT-2 and is now producing.

CD-5, located a few miles further east and near the eastern boundary of the NPR-A on the Colville River, is also now producing.

ConocoPhillips is still exploring the region and has identified other potential oil accumulations.

Explorers have drilled wells for years in the petroleum reserve beginning in the 1950s when the reserve was the U.S. Naval Petroleum Reserve No. 4. Congress transferred it to the Department of the Interior in 1976, renaming it the National Petroleum Reserve-Alaska.

After decades of dry holes and only small oil and gas finds were made, all uneconomic in a commercial sense, exploring companies developed new technologies in the 1990s and after 2000 that began to make commercial-size discoveries.

Alaska U.S. Sen. Lisa Murkowski applauded the release of the Record of Decision.

“As we navigate uncertain times, the federal approval of a major new North Slope development project provides real opportunities for Alaska and a path forward to help rebuild our economy,” Murkowski said.

She chairs the Senate Energy and Natural Resources Committee.