The Impact of Non-technical Risks on Oil and Gas Activities in Alaska's Arctic

Abstract

Abstract This paper presents Alaska as a case study for evaluating the impact of non-technical risk on oil and gas exploration and development in the Arctic. Stakeholder relationships, regulatory uncertainty, government funding, listing species under the Endangered Species Act, cumulative impacts, and litigation are all non-technical risks that can delay oil and gas projects. Since 2005, there have been over a dozen legal challenges to oil and gas activities due to non-technical risks. The magnitude of costs associated with project delays due to non-technical risks in Alaska’s Arctic is on the order of billions. The February 2008 Chukchi Sea Lease Sale 193 attracted 667 bids totaling almost $3.4 billion, the most for any offshore lease sale in Alaska’s history. In 2012, according to a United States Department of Interior report, approximately three-quarters of Alaska’s offshore leases (3.7 million acres) were subject to litigation. As a result of legal challenges, agency staff must respond to court orders rather than process permits and authorizations required for exploration and development. With permit applications sitting idle, company profit margins are diminished and public trust deteriorates. In recent years, three major oil companies have reported spending over $75 million over five years to collect environmental data, yet data gaps are still perceived to exist. In particular, the absence of a regional assessment of cumulative impacts of development activities is leaving companies and authorizing agencies vulnerable to stakeholder scrutiny and litigation. Despite these issues, sustainable project exploration and development is possible. Understanding what non-technical risks exist, and then integrating methods to minimize them at the strategic leadership level during the pre-feasibility stage can minimize delays and lay the foundation for sustainable oil and gas projects.