There’s rich history in Native corporation’s bid to become an oil company

There are some notable things about the federal government's approval last week of an offshore lease unitization plan in the Alaskan Beaufort Sea proposed by ASRC Exploration Inc., a subsidiary of Arctic Slope Regional Corp. of Barrow. ASRC is the Alaska Native regional development corporation for the state's northern region.

This signals a return, if not by a major oil company, then at least a nimble and aggressive Alaska company, to the Arctic offshore. Since Shell pulled out of the Chukchi Sea two years ago no one has shown much interest in the region.

Secondly, it highlights ASRC's continued evolution toward becoming a full-blown oil explorer and developer from its beginning as a landowner and passive royalty owner.

It's worth noting that Doyon Ltd. and Ahtna Inc., two other Native corporations, are exploring state-owned lands in Interior Alaska.

[Native corporation makes move toward exploring for oil in Arctic Ocean, where Shell failed]

Some historical perspective: Alaska's oil industry and Alaska Natives have been intertwined since oil was discovered on the Slope. It was the state's selection of the oil-prone North Slope lands in the early 1960s that began the big push by Native groups for a settlement of Alaska aboriginal land claims. Arctic Slope, interestingly, filed the first big land claim, for all of the North Slope, a bold move that encouraged other Native groups to file similar claims.

After the settlement of the land claims in 1971, Native corporations played a role in securing the approval by Congress for the Trans Alaska Pipeline System in 1973, which led to development of the North Slope oil fields and the start of oil production at Prudhoe Bay 40 years ago.

This made Alaska as we know it today possible, along with the Alaska Permanent Fund and our cherished annual citizen dividend.

For all this Alaskans owe a word of thanks to Charles Edwardsen Jr., or Etok, a fiery Inupiat leader who was infuriated by the state selection of the Prudhoe Bay lands and instigated the Arctic Slope land claim.

I remember meeting Etok in Barrow in 1964 and listening as he laid out his plan for the land claim and a prediction that the presence of oil on the slope would cause Congress to finally settle the issue. Prudhoe Bay had yet to be discovered, and Etok was thinking of small oil and gas discoveries made by the U.S. Navy in what is now the National Petroleum Reserve-Alaska in the 1950s, but he was still prophetic.

However, all this goes back earlier. In my mind it wasn't Atlantic Richfield Co. that first found oil on the slope, or even the U.S. Navy. It was the Inupiat.

In the early 19th century Europeans exploring the Arctic (they were Hudson Bay Co. traders) met Inupiat people. The Inupiat showed their visitors how wedges of tundra soaked with oil from seeps could be cut, hauled back to villages, and used as fuel.

Word got around about the Arctic oil seeps and government geologists were on the North Slope poking around even as the gold rush was underway in other parts of Alaska.

They liked what they saw, and in 1923 President Warren Harding created the Naval Petroleum Reserve No. 4, now the NPR-A.

No oil had yet been discovered by World War II, but the government knew there was potential and asked the Eskimo Scouts, military units formed by Alaska Natives (and the forerunner of today's Alaska Army National Guard) to map a possible pipeline route from the Arctic Slope to Interior Alaska.

That route came through Anaktuvuk Pass in the Brooks Range, a broad, relatively low pass that seemed the logical transit through those mountains. A pipeline was never built, but the Scouts' work was knowledge passed on to the early planners of what was to be the trans Alaska oil pipeline, although Atigun Pass was eventually chosen for TAPS because it was a shorter route.

From this perspective, the Inupiat of the Arctic Slope have had a long involvement in oil. Stepping directly into the business seems a logical step.

There's more: Arctic Slope Regional Corp., the private corporation formed when Congress enacted the land claims settlement (there were 12 other regional Native corporations) felt shorted by the land formula in the claims act. In fact, Arctic Slope was the only group to note "no" in the final deal in 1971 when it was considered by the Alaska Federation of Natives.

However, some of the mineral rights gained by ASRC under its selection rights included lands with oil, and the corporation was to move into oil services work.

The combination of these made ASRC strong financially, to the point that it could make investments in producing fields (the small Badami field east of Prudhoe Bay) and in bidding in state onshore lease sales. ASRC is now working on an onshore development called Placer and also owns Petro Star, an Alaska refining company, which also markets fuel. The corporation could soon become an integrated oil company, on a small scale, supplying crude oil to its own Alaska refineries.

The move offshore, into Shell's former leases in the Beaufort Sea, is a whole new evolution, however. The prospect ASRC will explore was drllled by Shell in 2013 and includes a discovery made by Unocal decades earlier that was uneconomic.

The Beaufort Sea potential was not pursued further by Shell. ASRC, now the lease owner, gets the benefit of the larger company's knowledge on the prospect.

ASRC has some important advantages. The area is in shallow water 15 miles  off Alaska's shore. There is also existing onshore infrastructure if oil is discovered, mainly the pipeline built by ExxonMobil that connects the Point Thomson gas field with Prudhoe Bay.

An awkward thing for ASRC, however, is that the prospect is right in the spring and fall migration routes of bowhead whales, an important subsistence resource, and cultural touchstone, for the corporation's Inupiat shareholders.

There are different ways of looking at this, however. One is that Inupiat subsistence users are at the greatest risk from an offshore oil spill or blowout, but they will also be the greatest beneficiaries assuming a discovery can be developed.

ASRC's involvement will ensure local participation, and oversight, in the planning and development of a discovery. There's no guarantee that a major accident won't happen, however.

This is a difficult internal issue, but something that ASRC's shareholders will have to sort among themselves. It's a quandary that local ownership of resource development can bring.

Tim Bradner is co-publisher of Alaska Legislative Digest and editor of Alaska Inc., a quarterly magazine.

The views expressed here are the writer's and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com.