Borough makes another push for offshore drilling

Posted: Thursday, October 13, 2005

Exploration and development of oil and gas resources in Cook Inlet's federal waters has been seen for years as critical to the economy of Southcentral Alaska, and the Kenai Peninsula Borough Assembly has formally backed those activities with supporting resolutions.

But the U.S. Mineral Management Service has canceled or postponed two federal lease sales planned for the current five-year program because of a lack of industry interest.

Tuesday night, the Kenai Peninsula Borough Assembly passed resolution 2005-090, supporting the inclusion of Cook Inlet in the next five-year Outer Continental Shelf Oil and Gas Leasing Program set for 2007-12 — despite the recent track record.

Bill Popp, the borough's liaison to the oil and gas industry, says that while there is "significant resource potential" in the OCS area, low prices contributed to the industry's decision to pass on the federal call for bids during the current five-year program. Lease Sale 191, scheduled for 2004, was canceled outright and this year's planned Lease Sale 199 has been put off until July 2007.

But current elevated oil prices hovering above $50 per barrel may change the oil and gas industry's interest level, Popp noted in a memo to the assembly that included the administration's recommendation to support Cook Inlet's inclusion in the new program.

"Cook Inlet currently has 80 million barrels of proven oil reserves and 2.09 trillion cubic feet of proven natural gas reserves," Popp said. "It is also likely that, with the outlook for oil and natural gas prices to remain above previous historic levels in the coming years, industry interest in the Cook Inlet OCS will likely grow in [the] face of changing economics for what is currently a remote region of the Cook Inlet Basin."

Popp said an MMS "median recoverable resource estimate," which is biased toward an expected industry interest in oil rather than gas, suggests there may be as much as 760 million barrels of oil in Cook Inlet's OCS area. That same analysis predicted recovery of 1.4 trillion cubic feet of gas. Popp said that those figures could change should, for instance, exploration stumble on a healthy deposit of gas while searching for oil. He also said MMS estimates tend to be conservative.

Southcentral Alaska faces significant future shortages of gas, the assembly noted in the resolution. It will take continued exploration efforts to meet the needs of residential, business and industrial users, the assembly said.

In other business, the assembly took testimony and then easily passed four ordinances Tuesday night.

n Ordinance 2005-19-24 appropriated a $71,500 state grant for a mobile hydrant unit for the Bear Creek Fire Service Area. That machinery will extend the fire fighting capability of the service area and is expected to lead to lower fire insurance rates for service area residents.

n Ordinance 2005-19-26 appropriated a $340,621 state grant for improvements to the emergency siren system serving Kachemak Bay and Resurrection Bay communities. The current system is antiquated and unreliable and the potential for damage caused by tsunamis in those areas requires the system be upgraded, borough officials said.

n Ordinance 2005-39 authorized the sale of a nine-acre parcel of land near Anchor Point to Kachemak Gun Club Inc., which currently leases the land for use as a shooting range.

n Ordinance 2005-40 amended borough code to exempt certain senior housing from real property taxes.

The assembly also passed Resolution 2005-092, certifying the results of the Oct. 4 municipal election. Winners of the three open assembly seats took their oaths of office.

Afterward, Grace Merkes, the incumbent assembly member representing Sterling (District 5), resumed her seat for the night's business. Margaret Gilman, who unseated incumbent Betty Glick to represent Kenai (District 2), and Deb Germano, winner in Homer (District 8), will take their seats at the Nov. 1 assembly meeting.

Gilman and Germano are both Kenai Peninsula Borough Board of Education members. Those school board seats will have to be filled by appointees until next fall's election.

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