It may seem a little odd that oil exploration in a remote location on the eastern side of Prince William Sound would directly benefit the city of Kenai, but that's exactly what the Kenai City Council is hoping.
Council members passed a resolution in their Wednesday meeting urging the U.S. Forest Service to approve a plan of operations for an exploratory drilling program in Katalla proposed by Cassandra Energy Corp.
Katalla, about 50 miles south of Cordova in Prince William Sound, is the site of Alaska's first commercial oil production, from 1902 to the early 1930s. Attempts at oil production on the site were abandoned until the 1980s, when exploration was again attempted, but not brought into production.
Cassandra Energy Corp. of Kenai, with its office in Anchorage, has started a permitting process within the last year to begin new exploration at the Katalla site. The site is in the Chugach National Forest and includes both federal and private land. The surface of the site is federally-owned, while the Chugach Alaska Native Corp. gained the rights to the subsurface oil and gas in the 1982 Land Settlement Agreement.
However, if commercially viable volumes of oil or gas are not produced by the end of December 2004, those rights will revert back to the federal government.
Cassandra Energy has entered into a lease-option agreement with Chugach Alaska Native Corp. to perform horizontal drilling techniques in the site with the goal of beginning commercial production there.
In order to do so, Cassandra must get through a lengthy and complicated permitting process, which is currently in the stage of an environmental assessment being conducted by the U.S. Forest Service.
Although the public comment period for the assessment has ended, Bill Stevens, president of Cassandra Energy, addressed the council Wednesday and asked it to pass a resolution that would show the Forest Service the city of Kenai supports the project.
"It's been 25 months now in permitting," Stevens said. "That's about four times as long as it should have been. ... We're like a duck in a shooting gallery. Every ideology that is anti-development and anti-oil wants to shoot at this, and the more positive input the better. A positive comment can do nothing but good."
Stevens told the council the city stands to benefit handily if Cassandra Energy gets the necessary permits to allow it to proceed with exploration.
"Of interest to Kenai is that this operation will be basically worked out of Kenai," he said.
Inlet Drilling Alaska will be the main contractors in the project, which means there will be an estimated $2.5 to $3.5 million in wages paid to the residents of Kenai, according to Stevens. He also said there could be another $2.5 million in transportation costs from the project, half of which could funnel into the Kenai area economy through other contractors.
"And those are all minimums," he said. "It's not even in your back yard, yet you benefit from revenue going out to build this."
Bill Popp, the oil and gas liaison for the Kenai Peninsula Borough, researched the matter and supplied the council with information regarding Cassandra Energy and the history of the Katalla site. He suggested the council pass a resolution supporting the project in general, while not getting involved in the complicated intricacies of it.
"The continued promotion of oil and gas development in central region is what I would encourage," Popp said.
The council voted unanimously to pass the resolution. Council member Duane Bannock was not present.
In other action Wednesday, the council:
n Unanimously passed a resolution supporting the approval of a Kenai, Kachemak pipeline right-of-way lease application.
n Unanimously passed a resolution appropriating $3,650 for the abatement of a dangerous building on the Kenai Spur Highway.
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