Pipeline deal could open up Alaskan oil reserve

WASHINGTON Mon Dec 5, 2011 7:48pm EST

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WASHINGTON (Reuters) - Two U.S. agencies have reached an agreement with ConocoPhillips on a plan in Alaska that could let the company be the first to drill for crude and gas in a national oil reserve in the state, the Interior Department said on Monday.

The agreement, which was with the company, the Environmental Protection Agency and the U.S. Fish and Wildlife Service, confirms that construction of a pipeline and bridge over the Colville River to the Alpine development known as CD-5 is acceptable, as long as environmental mitigations and other changes are outlined in the permit application.

The development is in the National Petroleum Reserve-Alaska, which is managed by the Interior Department.

The Army Corps of Engineers is expected to carry out the remaining steps associated with the permit review in coming weeks.

Lisa Murkowski, a U.S. senator from Alaska, said the agreement could begin to open up the NPR-A to crude and national gas production. The reserve is estimated to contain more than 1 billion barrels of technically recoverable oil.

"I've had numerous disagreements with the administration on Alaska issues, but I appreciate the involvement of the White House and the Interior Department in removing this particular roadblock to improving our nation's energy security," Murkowski said.

Conoco expects to produce up to 18,000 barrels per day at CD-5, if the plan is approved, but the bridge and tunnel could open up much greater access to the reserve.

As part of his plan to increase domestic oil production, President Barack Obama issued an executive order in July establishing a working group on coordination of Domestic Energy Development and Permitting in Alaska.

The Corps of Engineers had ruled against the plan in 2010 and the federal government said it should build the pipeline under the river. But Conoco said it would be too expensive and that corrosion on the line would be better detected if it were above ground.

Conoco has also agreed to allow other companies that develop leases in the NPR-A to use the same bridge crossing, rather than seek approval for additional channel crossings in the area. The Interior Department said that would reduce the environmental impacts associated with development of existing and future leases in the NPR-A west of the Colville River.

"We're encouraged by today's announcement and we hope we'll see the real permit soon," said Natalie Lowman, spokeswoman for ConocoPhillips in Alaska.

Lowman did not want to comment about timelines for development until the final permit was issued.

The Department of the Interior will hold annual lease sales in the NPR-A and the next sale will take place on December 7.

(Additional reporting by Yereth Rosen in Anchorage; editing by Bob Burgdorfer)

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