Zoning changes might shake up oil, gas works

Posted: Friday, May 27, 2011

Oil and gas development might be at stake in the land use debate surrounding a code change to the zoning for two Kenai neighborhoods.

Among the parties working through the allowable land uses in two Kenai neighborhoods is the Alaska Mental Health Trust, which owns land in MAPS and subsurface rights in Three Ws.

Currently, both subsurface and surface extraction of natural resources is allowed with a conditional use permit in neighborhoods zoned as Rural Residential 1.

But the changes proposed by residents of the two neighborhoods where that zone is in place would disallow both of those uses.

For the Alaska Mental Health Trust that is the major point of contention.

"That took our entire bundle of rights in respect to Three Ws," said Greg Jones, the executive director for the Mental Health Trust Land Office.

The state and federal government own most of the subsurface rights in Alaska. Landowners do not. But the Alaska Mental Health Trust does. And Three Ws falls right into one of its subsurface parcels.

The trust owns land and subsurface rights throughout the state. It is charged with using its property to generate revenue that supports Alaskans' mental well-being. On the Kenai Peninsula, the trust owns thousands of acres of subsurface rights, meaning they benefit from oil and gas development in the area.

The trust provides funding for a variety of local organizations.

According to a report provided by the trust, it has spent about $777,528 on the Kenai Peninsula over the last seven years. That money has been leveraged to receive another $3 million. The funding has benefited Serenity House at the Central Peninsula Hospital, programs offered by Bridges Community Resources, the Kenai Peninsula Food Bank, and other entities.

But a prohibition on development could limit the trusts' ability to generate revenue for Alaskans and limit oil and gas development in the city.

Jones said the trust usually holds lease sales when industry interest warrants. None is scheduled for the Three Ws neighborhood, but it doesn't take long for them to come together, he said.

"We could easily do one in the next year," he said.

But the code change would make the leases useless, because the subsurface deposits couldn't be accessed.

Jones said a body of law supports the notion that the city can't take away those rights entirely, and he didn't think that piece of the changes would hold up in court. But, he said, he didn't want to see the court get involved.

"It should be a cooperative process," Jones said.

Jones said he understood why neighbors wouldn't want drill rigs in their back yards.

"The surface is, that's your neighborhood," he said.

But Jones said there's another option: drilling sideways.

"They've been doing it out of Kenai for 40 years," he said.

And Jones said the neighbors would likely be involved if drilling was going to impact their lives. Because a conditional use permit is currently required for subsurface development in the RR1 zone, the city and residents would have the opportunity to see any plans before they were enacted.

Among the trust's parcels is the land near Walmart where Buccaneer Alaska is drilling. Jones said the trust owns the subsurface rights, but not the land. Before drilling, Buccaneer had to negotiate with both the trust, and the landowner. The trust's permission alone didn't greenlight that project, he said.

Buccaneer is currently working through the conditional use permitting process for other Mental Health Trust land in Kenai. The proposed project would drill one or more wells near Highbush Lane off the Kenai Spur Highway later this summer, if all goes according to plan.

The trust has another interest in the land use changes. It owns nearly five acres along the Kenai Spur Highway in MAPS, which Jones said is the largest undeveloped parcel in the neighborhood.

He said the trust wanted to be part of the discussion on other land use changes, too, but doubted that the work could be done by the August deadline that Kenai's city council set at their last meeting.

"It's hard to put something like this together that quickly," Jones said.

Molly Dischner can be reached at molly.dischner@peninsulaclarion.com.

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