New setback for ConocoPhillips’ big Willow project on North Slope

ConocoPhillips’ multi-billion-dollar Willow North Slope oil project suffered a setback in federal court Wednesday when U.S. District Court Judge Sharon Gleason voided permits and rights-of-way granted by the U.S. Bureau of Land Management after lawsuits were filed by conservation groups.

Gleason agreed with contentions by lead plaintiff Sovereign Inupiat for a Living Arctic and five other plaintiffs that key parts of a lengthy federal Environmental Impact Statement for Willow were legally defective, although the judge upheld the defendant, the BLM and ConocoPhillips, on several other points.

Gleason found the analysis of greenhouse gas emissions to be inadequate along with mitigation measure for impacts on polar bears.

The judge also found that BLM had done an inadequate analysis of alternatives to plans for gravel roads and drilling pads and rejection of a plan to drill in the winter only to reduce effects on wildlife.

“The permits and approval granted to ConocoPhillips disregarded local health concerns, required public process and the law, and today’s ruling corrects that,” said Bridgett Psarianos, staff attorney for Trustees for Alaska, the environment law firm that represented the plaintiff group.

ConocoPhillips spokesperson Rebecca Boys was cautious in her assessment. ”We will review the decision and evaluate the options available regarding this project,” she said. The court decision will require the agency and company to redo parts of the environmental analysis for the project, which may require a Supplemental Environmental Impact Statement.

ConocoPhillips was hoping to make a construction decision on Willow by the end of this year, but a new environmental review and SEIS could delay that for a year to two, assuming the project is ultimately upheld by the courts.

A delay will have effects on anticipated new oil for the Trans Alaska Pipeline System, which is running at less than one fourth of its original capacity.

If Willow could remain on schedule it could be in production in 2025 or 2026 with peak production estimated at 150,000 barrels per day. If a new SEIS is done, Willow production could happen in 2027 or 2028, or longer.

This will affect future TAPS oil volumes, which are also affected by declining production in existing North Slope fields, but it will minimally affect state revenues because the state’s share of federal royalties from Willow go to a special fund to support Inupiat villages on the North Slope.

While state production taxes do apply on federal lands the near-term tax payments are reduced by ConocoPhillips’ ability to apply expenses from its fields elsewhere on the slope under the state’s net-profits type tax.

The regional municipality, the North Slope Borough will be adversely affected the delay in development of new industrial property tax base.

Alaska’s oil and gas support industry will also be affected because contractors had hoped for substantial new work in 2022 that Willow could provide.

Construction of gravel roads and drill pads for Willow had been planned for the winter/spring season of 2021 but when the lawsuits were filed Gleason ordered an injunction halting the work until decisions were made on the overall case, which has now happened.

ConocoPhillips has continued engineering work on the project, however. Willow’s initial phase is estimated to cost about $3 billion but the ultimate build-out of the project will require a total of about $6 billion, the company has said.