First crude flows from federal leases in Arctic Alaska petroleum reserve

Oil is flowing from the first drill site built on federal land in a nearly century-old oil reserve that had seen limited commercial production until recent years.

ConocoPhillips Alaska on Tuesday announced that oil is flowing at the Greater Mooses Tooth No. 1 drill site, part of the National Petroleum Reserve-Alaska that is turning heads after new discoveries and a sharply boosted federal estimate of oil potential in 2017. 

"This is another milestone for development in the NPR-A," said Joe Marushack, president of ConocoPhillips Alaska.

With capacity to grow from nine wells to 33, the field's production is expected to peak at 25,000 to 30,000 barrels of oil per day.

Development costs are estimated at $725 million. The field generated about 700 jobs during peak construction the last two winters, ConocoPhillips said.

New oil discoveries within and near the reserve, and the potential for more, prompted IHS Markit in August to label Alaska's North Slope a resurgent "super basin." The research firm anticipates the interest could lead to new companies coming to Alaska to pursue oil exploration and development.

Oil production is critical to Alaska's state budget and economy. The new oil will add to the roughly 500,000 barrels of oil daily pumped off the North Slope so far in 2018.

The oil produced at Greater Mooses Tooth No. 1 will be subject to Alaska's petroleum production tax.

Half the royalties from federal leases will go to a state-managed mitigation program for impacted local communities, said Natalie Lowman, a spokeswoman with ConocoPhillips Alaska.

Arctic Slope Regional Corp., an Alaska Native-owned corporation representing the North Slope, is the primary royalty owner for oil production from the field, Lowman said.

"In addition, the North Slope Borough will receive significant property taxes from the project, and development of GMT1 will result in increased state government revenue from severance taxes as well as income taxes," Lowman said in an emailed statement.

In 2015, ConocoPhillips began producing oil from CD5, the first field built within the boundaries of the 23 million-acre reserve. That site was built on Alaska Native-owned land, not federal land.

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The reserve was established by President Warren G. Harding in 1923 as a potential oil warehouse for U.S. Navy ships after World War I. Exploration drilling had long occurred in the reserve, but commercial production didn't happen there until 2015.