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Homer area residents keep close eye on resource development

Posted: Thursday, November 06, 2003

Residents of the lower Kenai Peninsula, an area being eyed by developers as a possible source of natural gas, are watching the ongoing debate in the Matanuska-Susitna Borough, where public opinion and coal bed methane projects have collided over surface and subsurface rights.

The most recent development occurred last week when Rep. Vic Kohring, a leading supporter of coal bed methane development in the valley, announced that legislation under consideration by the House Special Committee on Oil and Gas, which he chairs, would strengthen existing private property rights and water protections.

Kohring is proposing a Property Rights Protection Act and a Water Supply Protection Act. Drafts of the legislation are not yet available.

It was Kohring's House Bill 69 adopted last spring, however, that has people in the valley worried. The law reaffirmed the state's right to put aside local ordinances and regulations dictating development when development is deemed an overriding interest by the state, and more specifically, handed the power to make that decision to one person the commissioner of the Alaska Department of Natural Resources.

Coal bed methane development test projects already are under way in the valley, conducted by Ever-green Resources Inc., a Denver-based company. Mat-Su residents worry about pollution to groundwater, drilling rigs in their back yards, and noise, among other things. They also don't like knowing they may have no choice or voice in the matter.

On the Kenai Peninsula, gas developers are eyeing the region around Homer and Anchor Point as a potential source of gas, and many of the same concerns have arisen.

Enstar Natural Gas Co. said it is waiting until its supplier, Northstar Energy Group Inc., sinks and proves up a second gas well east of Anchor Point before launching a project to build a transmission and distribution pipeline system to Homer.

An independent company, Lapp Resources Inc., has state subsurface leases on 20,637 acres of state and private property south and east of Anchor Point and extending toward the head of Kachemak Bay, plus a deal with Unocal to develop six of those leases. So far, it's just an idea on paper, but the leases would allow tapping of shallow gas deposits above a depth of 3,000 feet. That could include tapping coal bed methane deposits, one type of shallow natural gas deposit.

Peninsula residents also have expressed dismay over House Bill 69, and reaction to Kohring's latest proposal to strengthen property and water rights has been tepid.

Kenai Peninsula Borough Assembly member Milli Martin, whose South Peninsula District covers much of the territory of the local shallow gas leases, said she is waiting to see what Kohring comes up with and whether it modifies the effects of House Bill 69, which she said silenced the local voice.

"I wish he had offered to change HB 69 to restore the local voice instead," she said.

Kohring isn't offering anything new, said Bob Shavelson, director of Cook Inlet Keeper.

"The primary constraint remains the fact that the mineral lease holder has a dominant legal right to come on a surface owner's property. No legislation, without constitutional amendment, is going to change that."

Bill Popp, the Kenai Peninsula Borough's liaison to the oil and gas industry, said that even before HB 69 was passed, the state could override local development laws if it deemed it necessary. That power is written into the Alaska Statehood Act.

"Whether HB 69 created a different process, I'd have to defer to the attorneys," he said. "If local laws prevent development, however, they fly in the face of the Statehood Act, Supreme Court case law and the constitutional aspects of this."

The newly proposed legislation is meant to clarify the language in current state law, Kohring said Tuesday. Property rights and water rights are a legitimate concern, he said, adding that he considers himself "a strong advocate" of property rights and he is "not beholden to the oil industry."

"We want to make it abundantly clear how property rights and water rights are protected," he said. "If the question is, 'Will companies be able to run roughshod over property rights?' the answer should be, 'No.'"

As for handing the decision whether to override local development regulations to the commissioner of DNR, Kohring said even if HB 69 didn't exist, chances are that decision would rest with the commissioner in any case. He said that, in retrospect, perhaps that provision should have been left out of HB 69.

Kohring acknowledged that proposing the Property Rights Protection Act and the Water Supply Protection Act were, in part, a reaction to public concerns voiced in the valley. But he insisted it had nothing to do with the politics of an upcoming election year.

The proposed Property Rights Protection Act is meant to reinforce the fact that developers may not trespass on a person's property without notice or consultation. It requires a surface use agreement be negotiated with owners.

The Water Supply Protection Act would provide necessary language that water supplies will be protected from shallow natural gas development, Kohring said.

"Shallow natural gas is a new industry and new concerns have been raised. This legislation will address them while the industry is still in its early years," Kohring said.

Private property surface rights owners are not without some recourse, Popp said. He points to other state statutes requiring surface entry agreements between surface and subsurface rights holders.

"They can't just walk on your land and start drilling," he said.

"What's important to look at here, though, is the split estate," he said, referring to the differentiation between surface and subsurface rights.

Borough attorney Colette Thompson recently reviewed state law governing surface and mineral (subsurface) rights. In a memo to Popp, she said that in the western states, mineral rights are considered dominant over the surface estate. Traditionally, subsurface rights holders are entitled to as much of the surface as necessary to get to the mineral deposits without owing any damages to the surface estate.

In Alaska, however, things are different. The subsurface estate still dominates, but state law says developers are entitled only to "as much of the surface as may be reasonably necessary to exploit the oil and gas." By state statute, developers are responsible for any damages to the surface estate, Thompson said.

The Alaska Statehood Act requires the state to retain mineral rights to land conveyed by the federal government when that land is further conveyed to municipalities and private citizens or risk forfeiting the land back to the federal government.

"If we start allowing surface estates to be dominant, we could potentially lose state mineral rights for the areas affected. The federal government could take them back," Popp said.

Homer-area resident Michael McCarthy, who has testified at public forums in opposition to coal bed methane development on the lower peninsula, said there are several issues that have yet to be addressed.

"It's good that (Kohring) is looking at it," he said Tuesday. "It may save him from really being hung instead of just in effigy. The can of worms he's opened in questionable constitutionality that subsurface rights are dominant over surface rights is a falsehood. There is parity. You can't do one without respecting the other. That has not been addressed by Kohring or anyone in his camp."

McCarthy said the situation is more sensitive on the peninsula than in the valley. Homer is closer "to a seismic/water-saturation problem," a problem that has not been addressed. Also yet to be considered is what impact subsurface leases would have on conservation trust land.

"There is quite a bit of land around here that comes in that category," he said, adding that some of it lies over leased territory.

Kohring said those issues should be looked at.

Whether state statutes in effect before House Bill 69 was passed were enough to ensure an unencumbered hand at resource development is a debatable point. Popp said he's heard discussion within the state administration that suggests HB 69 was little more than a duplication of existing law stated a different way.

Martin agreed that the Statehood Act and other legislation may already have provided much of what HB 69 included, but ultimately, HB 69 left the critical decision of whether a development was an "overriding" need in the hands of one person a nonelected public official.

"I have a real problem with that," Martin said. "Is that really serving the public good?"

Shavelson questioned the value of Kohring's proposed and as yet unseen Water Supply Protection Act in light of how little the state apparently knows about the condition of Alaska's water resources.

The Alaska Department of Environmental Conservation currently is seeking comments on a draft Integrated Water Quality Monitoring Report. Shavelson said in his opinion that report demonstrated that the DEC doesn't have a handle on the condition or quality of the vast majority of Alaska surface waters.

"When you consider how much more complex and difficult to monitor groundwater systems are, the fact is we have virtually no good baseline data that's going to help us understand changes brought about by coal bed methane development," Shavelson said.

"If Kohring is serious, then (lawmakers) will make a commitment to monitor ground and surface waters in and around proposed development areas before development occurs. If not, it is all just window dressing."



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