Interior agency rejects Hilcorp request for more time to develop Arctic Alaska offshore oil field

Federal regulators have rejected Hilcorp’s attempt to gain more time to develop Liberty, an offshore Arctic oil prospect that has languished since being discovered in the 1990s.

The Bureau of Safety and Environmental Enforcement, an agency of the Department of the Interior, denied Hilcorp’s application for what is known as a “suspension of production,” or SOP. Such suspensions stop the permitting clock, effectively delaying development deadlines that are usually included in the terms of leases that companies have with the federal government.

The federal BSEE action denied what would have been the 12th suspension granted to current or former Liberty leaseholders. It is the latest setback for a field that was once touted as a breakthrough in Arctic oil development but has remained undeveloped for decades.

Without a suspension or some other type of extension, the Liberty leases are due to expire by the end of this year.

Hilcorp has not shown that it deserves such an extension, the denial letter said.

[Feds receive no bids for Arctic refuge oil and gas lease sale]

Hilcorp’s latest plan for bringing Liberty into production is too vague and deficient in commitments to justify another in what has turned out to be a series of suspensions over the years, said the letter, sent by Acting Deputy Interior Secretary Laura Daniel-Davis.

The denial letter was sent on Dec. 26, the date that Hilcorp’s previous three-year suspension expired.

Hilcorp’s latest plan for work on Liberty, submitted to federal regulators last summer, “does not contain a firm timeline that would reasonably result in production before the end of the lease term,” which is Dec. 26, 2025.

Hilcorp is proposing a feasibility study for a drilling campaign in 2028 and 2029 and wants three years to work on permitting, facility upgrades and procurement for that drilling “but provides no specific details regarding these sweeping categories of action,” the denial letter said.

Hilcorp’s just-expired suspension granted in 2021 was one of nine granted to Liberty in the past, either to Hilcorp or to BP Exploration (Alaska) Inc., the project’s original operator. Additionally, suspensions were granted in earlier years to individual leases prior to them being consolidated into a single unit to be developed.

Liberty holds about 150 million barrels of oil. It was predicted to be the first producing oil field located entirely in federal territory off Alaska’s coast.

It lies about 5.5 miles from shore in the Beaufort Sea and about 20 miles east of Prudhoe Bay. It is on the outer continental shelf area of the Arctic.

The area was first explored by Shell in the 1980s. The field was discovered by BP in the late 1990s. Over the years, BP created two separate development plans for Liberty — one that involved construction of an artificial island like that used at the Northstar field it developed and other fields just offshore in the Beaufort Sea, and a later one that would have skipped the island concept, instead producing from land through ultra-extended-reach wells. BP received final regulatory approval for the second development plan and began construction work for the that plan before abandoning it in 2014.

BP sold half of the Liberty prospect and turned over the operator position to Hilcorp that year. Six years later, Hilcorp acquired full ownership of Liberty when BP exited Alaska.

Hilcorp, as Liberty’s new operator, submitted a new development plan in 2015 that revived the artificial island concept. But that plan, though approved in 2018, became mired in legal problems after a federal court ruled in 2020 that the pre-approval environmental study was flawed.

Hilcorp has now revived BP’s earlier idea of developing Liberty from existing land at the Endicott field, using ultra-extended-reach wells and skipping construction of a new artificial island, according to Daniel-Davis’ letter.

Hilcorp considers the Bureau of Safety and Environmental Enforcement’s denial of another suspension to be unjustified, a company spokesman said.

“After years of working in good faith to move the Liberty project forward, Hilcorp is extremely disappointed with this decision. We will continue to pursue this opportunity and are currently evaluating all available options. Hilcorp remains committed to ensuring the safe and responsible development of Alaska’s natural resources,” Matt Shuckerow, Hilcorp’s corporate manager of Alaska government and public affairs, said by email.

Alaska’s two U.S. senators also weighed in on Hilcorp’s behalf last month, sending a letter on Dec. 9 to top Interior officials that supported the suspension. Hilcorp needs the extra time to work on its new proposal to drill the field from existing land, the senators said in their letter, which was sent to Bob Anderson, Interior’s solicitor, and BSEE Director Kevin Sligh.

“It is our request that this submission is given due consideration, as the proper development of Liberty will produce vast benefits for the State of Alaska and our nation at-large,” U.S. Sens. Lisa Murkowski, R-Alaska, and Dan Sullivan, R-Alaska, said in their letter.

But to environmentalists, the denial is a victory.

“This reckless offshore drilling project has been doomed from the start, and I hope this is finally the end of the Liberty fantasy,” Cooper Freeman, Alaska director at the Center for Biological Diversity, said in a statement. “From poor planning and a lack of local support to high-risk bets and weak science, Liberty has been a terrifying fiasco. The bowhead whales, polar bears, and ice seals that rely on a healthy Arctic marine ecosystem would be severely threatened by this dangerous drilling project, and I’m glad the Interior Department agreed.”

The Center for Biological Diversity sent a letter to Interior officials in July that urged denial of Hilcorp’s request for a suspension.

Hilcorp holds oil and gas leases elsewhere in federal waters off Alaska. The company has eight leases in federal waters of Cook Inlet, in the southern part of Alaska. Those were acquired in Bureau of Ocean Energy Management lease sales held in 2017 and 2022. Hilcorp in September relinquished some of the leases it bought in 2017, and the company has not submitted an exploration plan for the Cook Inlet leases it still holds, according to BOEM. The single lease Hilcorp bought in 2022 is in a suspended status pending completion of a new environmental study ordered by a federal judge.

There is currently no oil or natural gas produced from federal territory in Alaska’s offshore region except for some leases that are a small part of the Hilcorp-operated Northstar field. That Beaufort Sea property is located mostly on state leases, but it overlaps a bit into federal territory.

Originally published by the Alaska Beacon, an independent, nonpartisan news organization that covers Alaska state government.