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ConocoPhillips Says More US Cuts to Alaska Plan Would Kill Project

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The head of ConocoPhillips’s Alaska operations signaled the company would walk away from an $8 billion oil project in the Arctic if the US government forced it to further scale down drilling to just two locations, saying that would no longer be economically viable.

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(Bloomberg) — The head of ConocoPhillips’s Alaska operations signaled the company would walk away from an $8 billion oil project in the Arctic if the US government forced it to further scale down drilling to just two locations, saying that would no longer be economically viable.

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The warning comes as pressure intensifies on President Joe Biden to block the proposed Willow project in Alaska from environmentalists who say the warming world can’t afford to burn the estimated 600 million barrels of crude it could yield. 

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ConocoPhillips had originally proposed drilling across five locations, or pads, at the site in the northeast corner of the National Petroleum Reserve-Alaska, while the Interior Department has advanced an alternative plan that would initially allow just three. Now some environmental activists are musing about an even smaller, two-site option. 

“Anything less than a three-pad authorization would essentially be a project denial,” ConocoPhillips Alaska President Erec Isaacson said in an interview. “It just wouldn’t be a viable project at that point,” given the high cost of operations in northern Alaska.

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The Biden administration is still weighing the project, just weeks before the opening of a three-month seasonal window for construction on frozen tundra.

The initiative is politically fraught, coming as Biden charts a path away from fossil fuels and beseeches US oil companies to produce more crude in the meantime. Although the 23-million-acre NPR-A was set aside for energy development decades ago, environmentalists say new industrial oil operations imperil wildlife, including caribou that calve nearby. And, they say, Willow would unleash so many greenhouse gas emissions over its potentially decades-long life that it would effectively negate Biden administration efforts to advance renewable energy projects on other federal lands. 

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Last week, lawmakers from Alaska’s congressional delegation met with Labor Secretary Marty Walsh and White House officials to urge the approval of Willow, warning 2,500 construction jobs and as much as $17 billion in revenue for the federal government, the state and North Slope Borough communities hang in the balance. A follow-up session is planned as soon as this week, according to two people familiar with the matter who asked not to be named describing closed-door conversations.

Among the advocates is new Democratic Representative Mary Peltola, the first Alaska Native elected to Congress, who joined with the state’s Republican senators, Lisa Murkowski and Dan Sullivan, in September to assert that a project approval would demonstrate the administration was committed to addressing inflation and energy-security needs.

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ConocoPhillips bought the underlying oil leases more than two decades ago, applied to develop the project in 2018 and secured the Trump administration’s approval two years later. But environmentalists challenged that authorization in federal court, and though the Biden administration initially defended the approval, it was ultimately tossed out by a district judge who said the government insufficiently analyzed the climate consequences of the development and failed to consider more protective options.

The Interior Department’s Bureau of Land Management is now conducting supplemental environmental analysis of Willow in response. A draft analysis was delivered in July, setting the stage for the potential release of a final version in coming weeks and a project decision no sooner than 30 days later. 

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Project advocates, such as Sullivan, argue time is running out. ConocoPhillips executives insist the company won’t make a final investment decision until the issuance of the environmental impact statement and a supportive record of decision. The window to ink contracts and prepare for the 2023 winter work season will close within weeks, raising the prospect that even if Willow is ultimately approved again, initial construction will be shelved until 2024. 

“We need to get the record of decision complete so we can initiate the winter construction season, but also, critically, move forward with all of our major contracting as well,” Isaacson said.

Environmentalists say the administration shouldn’t yield to the pressure. 

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“There is no legal obligation or reason that the Biden administration shouldn’t be taking their time to make this decision correctly and take all of the information into account that they can,” said Jenny Rowland-Shea, the director for public lands at the Center for American Progress. 

The company has already spent more than $600 million pursuing the project — including seismic studies to map potential underground crude reservoirs and drilling 10 wells to assess the discovery. 

“Further delay or stifling the project doesn’t serve the public interest or US energy security at all,” Isaacson said, “because those barrels will be substituted by somebody else who doesn’t do it with the same” environmental protections.

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