GAO says report not intended

Posted: Friday, July 12, 2002

WASHINGTON (AP) -- The General Accounting Office says its recent report on North Slope oil leasing was not intended as an indictment of the existing federal and state permitting process, as claimed this week by Rep. Ed Markey, D-Mass.

The head of the GAO, Comptroller General David Walker, told Sen. Frank Murkowski, R-Alaska, in a letter that the report simply ''discusses our concerns'' about federal oil leasing regulations. Murkowski had asked for the clarification from the GAO after Markey released the report Tuesday and made comments on it.

Markey said that the GAO report showed how current rules allow ''oil and gas development of public lands using permits that are so vague and financial assurances so inadequate that the public interest in restoring these lands may never be redeemed.''

''Our report provides no basis to support this assertion,'' Walker wrote in his letter to Murkowski. Markey also said Tuesday that the oil companies, unwillingness to publicly estimate North Slope restoration costs was similar to the WorldCom and Enron accounting scandals.

Walker disputed that.

''Our report provides no basis for alleging any 'accounting scandal,''' Walker said.

Markey defended his interpretation of the GAO report in a statement released Thursday afternoon.

''The GAO report speaks for itself,'' he said. ''GAO has found that current bonds will cover only $500 million of the cost of a massive cleanup on the North Slope that could reach $6 billion, and the companies themselves lack any clear guidance about what will be expected of them when the bill comes due.''

Murkowski and Rep. Don Young held a news conference Thursday to publicize Walker's letter distancing the GAO from Markey's comments.

The report, which Markey requested, said lease agreements should be more specific about what oil companies must clean up after they're done pumping. It also suggested a review of the financial guarantees the companies must provide the government to insure the cleanup work gets done, noting that existing bonds would cover just a fraction of the estimated costs.

Young said he doesn't think the issue deserves any worry because the North Slope fields will produce for a long time.

''You all are looking 200 or 300 years down the road,'' Young said.

Murkowski said the long time line makes it difficult to estimate the eventual cleanup costs and thus to require full financial guarantees. Nevertheless, he said he believes the work will be done and the money will be available.

''If you look at BP, if you look at the lease holders in Alaska, I don't think there's any question about the adequacy of their capital to meet the obligations,'' he said.

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