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Bering Straits Native Corp. examining potential for new arctic port facilities

Posted: June 25, 2014 - 12:08pm

The prospect of new port facilities in Western Alaska will rely heavily on arctic oil and gas development, according to a recent Northern Economics study.

Commissioned by Bering Straits Native Corp. and marine services company Crowely Maritime Corp., the feasibility analysis released June 6 focused on Port Clarence, northwest of Nome on the Seward Peninsula.

BSNC found that a “basic” port and man camp could be up and running within four years of a firm oil and gas industry commitment to engage in developing the Alaska Outer Continental Shelf, or OCS, energy resources.

Northern Economics Inc. is an Anchorage-based consulting firm that frequently analyzes resource and infrastructure development in Alaska.

Shell was the last company to do major work in the Chukchi and Beaufort seas in 2012, drilling partial “top holes” in leases at each. Shell was restricted to only drilling above oil-bearing zones because its spill response barge had not been approved for Arctic operations.

With the 2008 Chukchi lease sale environmental impact statement now being revised by the Bureau of Ocean Energy Management after a court order, it is unclear exactly when arctic OCS oil and gas exploration will resume. The agency is targeting March 2015 to complete its work, which could allow for Shell to have a working season that year. When it does, BSNC wants to be ready.

Early stage infrastructure at Port Clarence would likely cost between $34 million and $72 million, with a likely total falling in the $48 million range, the study determined. With that money, a basic, gravel-filled sheet pile dock, similar to that at the Red Dog port, and a 66-person camp could be constructed, according to the study.

One of the biggest reasons Port Clarence was the focus of the study is its low projected ongoing costs when compared to other, more developed sites in the region. Operations and maintenance for the preliminary development is forecast at $1.4 million per year. When assumed debt service on the infrastructure is added, the annual revenue requirement of such a base is estimated at $4.15 million.

Port Clarence is one of a handful of spots on Alaska’s western coast with naturally deep water; it would require little to no dredging. Its mean near-shore depth is about 35 feet, and the channel past Point Spencer leading into the natural harbor is more than 40 feet deep.

Northern Economics concluded that oil and gas exploration and oil field support services were the only two large industry markets likely to use the port regularly.

If the decision is made by the oil industry to further invest significant money into arctic OCS exploration — Shell alone has said it has spent upwards of $6 billion there already over eight years — the critical decision to develop or not would likely come in 2018 or 2019, according to the study. An active and ready Port Clarence would be needed not long after.

The study noted that Port Clarence is about 500 miles from the majority of the federal Chukchi OCS oil and gas leases. Dutch Harbor, currently the closest domestic deepwater port, is more than 1,300 miles from the lease areas, a distance that could make timely emergency or spill response difficult.

Port Clarence is typically ice-free from early June through mid-October, according to the study. In the study, Crowley is cited as suggesting ice breakers could expand the operating season up to 10 months a year.

The depth characteristics of the port are one of the reasons BSNC is seeking conveyance of the shoreside land, the regional Alaska Native corporation has said.

“The growing potential of the arctic is a high priority for us. I believe that in addition to supporting oil and gas industry needs, Port Clarence is going to positively contribute to sustainable economic growth in the region,” BSNC President and CEO Gail Schubert said in a formal statement.

In May Rep. Don Young introduced legislation to the House to transfer nearly 2,400 acres of federal land on and near Point Spencer to BSNC as part of the land owed to it under the Alaska Native Claims Settlement Act, plus 180 acres to the state of Alaska.

Current infrastructure at Point Spencer includes an airstrip and a U.S. Coast Guard LORAN-C navigation facility, decommissioned in 2010. Young’s bill would allow the Coast Guard to retain its use of the 140-acre site and give it the option of leasing space from BSNC if it needs to in the future.

Increasing maritime activity in the Bering Strait is a major reason the U.S. Army Corps of Engineers also is investigating the possibility of enhancing the marine infrastructure in the region, currently centered in Nome. In March 2013, the Corps of Engineers released a preliminary study of its own — part of ongoing multi-year planning — that narrowed a list of potential Western Alaska deepwater port sites to Nome and Port Clarence, for their respective infrastructure and proximity to deep water.

A number of projections have been made as to how much Bering Strait vessel traffic will increase in the coming years if summer Arctic sea ice continues to recede. The study reports that from 2009-2013, the trans-Strait vessel count grew from 239 to 349 in 2013, including the first liquefied natural gas tanker — headed south — through the Strait.

The Northern Economics team referenced the Corps of Engineers work numerous times in its study. A federal Arctic port plan was originally scheduled to be released earlier this year, but a desire by Corps leadership to investigate more options in regards to specific site plans has pushed the release of the draft plan back closer to the end of the year, according to Corps of Engineers Alaska spokesman Curt Biberdorf.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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