2 million acres slated for federal lease sale

Posted: Sunday, April 25, 2004

A month from now, the U.S. Minerals Management Service will put 2 million acres of offshore Cook Inlet territory on the auction block hoping Outer Continental Shelf Lease Sale 191 will attract bids from the oil and gas industry.

While the lease area is large, the federal lease sale is not expected to result in a great deal of actual production activity, according to an MMS spokes-person.

Meanwhile, a Kenai Peninsula watchdog group continues to express concerns that environmental protection stipulations written into the sale's bid documents don't go far enough to ensure protection of water quality, habitat and valuable fisheries resources.

The sale area covers a region stretching from just south of Kalgin Island to just northwest of Shuyak Island from three to 30 miles offshore.

In response to public concerns and the wishes of municipalities around the sale area, several regions once considered for inclusion were removed. These include blocks offshore of the lower Kenai Peninsula and the Barren Islands, areas that include critical habitat for endangered Stellar sea lions, as well as areas identified by the Kenai Peninsula Borough.

These areas are used for subsistence by the residents of Port Graham, Nanwalek, Seldovia and others, according to an April 15 MMS press release.

The sale includes provisions for protection of fisheries and other biological resources and requires the use of pipelines to transport any discovered oil or gas. A stipulation concerning fisheries requires oil and gas exploration and production companies to work with local fishing groups to avoid conflicts, MMS said.

Those provisions are not enough, said Bob Shavelson, head of Cook Inlet Keeper, a Homer-based nonprofit agency that monitors water quality in the Cook Inlet watershed.

"It appears to be lip service," Shavelson said Thursday.

"All the most important aspects for water quality and fisheries protections are discretionary. The (federal) government will ask a lessee to take these things under advisement. That's as far as they are willing to push to protect our resources."

An MMS spokesperson disagreed.

Fred King, chief of the environmental assessment section for MMS in Alaska, said the agency believed its requirement that applicants meet with fishery groups and others are not discretionary, but required.

"We believe the stipulations are adequate," he said.

It is difficult, he added, for every possible contingency to be addressed beforehand. For some issues, it may be better to deal with them one on one as they may occur.

"Similar types of things have been done in lease sales in the Beaufort Sea protecting bowhead whales and were found to work quite well," he said.

But Shavelson said literally hundreds of comments taken during drafting of the sale's environmental impact statement, including some in great detail, have fallen on deaf ears.

"I don't think the public believes their voices will be heard under this administration," he said.

He cited two issues ignored in the EIS.

"There has always been a request not to discharge toxic drilling wastes off shore," he said. "The MMS has hid behind the legal shroud of jurisdiction, saying it is not their responsibility."

Water quality is the purview of the Environmental Protection Agency.

In virtually all other areas of the country, except Cook Inlet, the agency standard is "zero discharge." In 1996, the EPA rejected zero discharge of drilling wastes, arguing that the technology to grind and inject the waste had not been demonstrated to be available throughout Cook Inlet.

It cited "operational interferences" that would result if companies were required to haul the wastes to shore for disposal.

Shavelson has disputed the basis on which those conclusions rest. Further, he said that the EPA and MMS, both federal agencies, should be able to cooperate "to provide a definitive response" to environmental concerns.

"It's the 21st century," Shavelson said. "We don't need to be dumping toxics into our fisheries any more."

Shavelson also said the sale regulations contain "no serious effort" to address the crisis in the Cook Inlet beluga whale population.

"The MMS service would prefer to put on the blinders and pretend the whale isn't teetering on the edge of extinction," he said.

King said MMS had evaluated the information and the science presented by Keeper. But he also said MMS does see the water quality issue as the responsibility of EPA and that it is up to that agency to determine what can and cannot be discharged into Cook Inlet. King noted EPA is in the process of updating its permit requirements.

"They have the same information from Cook Inlet Keeper as we have," he said. "We don't think MMS should be telling EPA how to do their business."

For the first time in the federal waters of Cook Inlet, a lease sale will offer a package of economic incentives, MMS said. They include upping the primary lease term to eight years, lowering minimum bids to $10 per acre, annual rental rates of $2 per acre, and something called "royalty suspension volumes," which relieve royalty payments on a producing lease up to the first 30 million barrels of "oil equivalent." (Thirty million barrels equals168.6 billion cubic feet of gas).

Continuing growth in Southcentral Alaska is driving an ever-rising demand for oil and gas. MMS estimates the offshore potential for conventionally recoverable natural gas at more than 1 trillion cubic feet.

Nevertheless, King predicted a low level of response to the lease sale.

He said MMS had predicted more response during earlier sales, but that never panned out. He said sales 191 and 199 are expected to produce perhaps one development.

The EIS created for Sale 191 will be applied to Sale 199, scheduled for May 2006. MMS will seek public comment on that sale, focusing on any new issues that might arise.

The May 19 sale will be held in conjunction with the state of Alaska's Cook Inlet 2004 area-wide sale, which covers 815 tracts located in the Matanuska and Susitna river valleys, the Anchorage bowl, the western and southern Kenai Peninsula from Point Possession to Anchor Point, along the western shore of Cook Inlet from Beluga River to Harriet Point, as well as areas within Cook Inlet out to three miles.

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