Lessons we already knew

Posted: Thursday, May 05, 2011

The BP Oil disaster in the Gulf of Mexico last year should serve as a stark reminder to Alaskans just how vulnerable our fisheries and the families they support are to spilled oil. Alaska is no stranger to such events.

Cook Inlet, which supports one of the state's premier commercial and sport fishing economies, is a clear example of what we have to lose if an uncontrollable well blowout occurs here. Such an incident is not so difficult to imagine.

Right now, two independent oil companies, Houston-based Escopeta Oil, and Buccaneer Alaska Drilling LLC, an Australian firm, are looking to bring jack-up rigs to Alaska. They are convinced huge quantities of oil and gas remain beneath the Inlet, ready to be exploited. When a jack-up rig arrives, offshore drilling in Cook Inlet could begin within months.

While rare, blowouts have occurred three times on Inlet rigs, in 1962-63, 1985 and 1987-88. Are the state's response measures sufficient to handle a blowout from new wells? That's unknown at this time, because the proposed drilling anticipates sinking wells into previously untapped formations containing unknown pressures.

Cook Inlet's ecosystem and economy would not soon recover from the damage caused by a blowout that took weeks or months to seal. Alaska should demand drillers use the "best available technology" (BAT) when they drill exploration wells. That means, among things, requiring companies to show they can drill relief wells quickly -- to relieve the pressure from a blowout -- or even that they drill them concurrently with their primary wells.

Canada currently requires "same-season" relief-well drilling capability in its arctic waters, meaning companies must be able to demonstrate they can drill a relief well in the same season as an exploration/production well. Even Adm. Thad Nelson, the man charged with overseeing the Gulf cleanup effort, has said that idea should be considered for U.S. waters. With the potential for two jack-rigs in Cook Inlet at the same time, we have an important opportunity to do exploratory drilling right.

More costly? Certainly. Safer? Definitely. Out of the question? No, unless corporate profits continue to hold a higher priority than fisheries protection and human safety. In Alaska's oil economy, unfortunately, state priorities have historically deferred to development and profit, and little in the current regulatory climate appears ready to alter that economic status quo.

But economics from a different perspective are important too.

A new state law (Senate Bill 309, signed by Gov. Sean Parnell last summer) provides a 100-percent subsidy -- up to $25 million -- to the first company to drill a well in the pre-Tertiary zone, with lesser subsidies of 90 percent and 80 percent -- up to $22.5 million and $20 million -- for the second and third wells, respectively.

There's an old saying: the free market is a wonderful thing -- we should try it sometime. In light of our current economic recession -- the worst in decades -- why exactly is the state offering still more tax breaks to oil companies? Alaska needs that revenue and shouldn't be creating new tax holidays for what amounts to high-stakes gambling.

Meanwhile, the Alaska Industrial Development and Export Authority (AIDEA) has granted Buccaneer's request to invest up to $30 million in its project. While AIDEA should be applauded for making capital available to businesses in Alaska, why should the state hand public money to the richest industry on the planet? Buccaneer may be a small fry player among giants, but surely it could find backing from within the industry itself. Escopeta apparently has. It isn't currently seeking public financing.

The oft-heard demands that government keep its hands off "private" enterprise lose their force when wealthy oil companies seek to make their risks "public" by reaching into taxpayers' pockets.

These are critical issues. Whether we choose to heed the warnings from the Gulf of Mexico will determine whether future drilling in Cook Inlet and on the North Slope are done safely. Better spill prevention and response measures -- including a requirement for relief wells for exploratory drilling -- are the first step toward more responsible oil and gas development in Alaskan waters.

Hal Shepherd is Acting Executive Director of the Kachemak Bay Conservation Society.

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