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State's natural resource development could be streamlined by Republican control

New politics may help permit process

Posted: Sunday, November 17, 2002

With Republicans now firmly in control of Congress and the White House, and with GOP majorities leveraging the Alaska Legislature led by a governor-elect promising aggressive development, the political tools may be in place for reform of the state's complex, multi-layered natural resource permitting process.

In the eyes of the oil and gas, mining and timber industries, and those advocating less-fettered resource development, it is a system in need of wholesale repair. That's because winding through the maze of regulations necessary to win a state permit these days is unnecessarily complicated, lengthy and often frustratingly arbitrary.

But while supporters of a strong permitting process agree review could lead to a beneficial revamping, they worry that in an atmosphere of unchecked enthusiasm for seeing new projects break ground, reform might easily go too far.

The permit system is there, its defenders argue, not only to protect the environment, but also to ensure that when private industry exploits Alaska's resources for profit, Alaskans see a fair share of that return.

Furthermore, they say, many of the faults alleged by industry to be present in the state's system largely are problems created by federal regulations and mandates, not state rules.

Indeed, permits for drilling new oil and gas wells, harvesting forests or mining precious ores from the earth typically need not only a state OK, but federal agreements as well.

How likely is it that the Legislature will tackle permitting reform and what will that legislation look like? The answers depend largely on perceptions of what is or is not wrong with the system now. There is no end to opinions on that subject.

The industry

"It's not just the oil and gas industry. Anybody that has to go through a permitting process gets the same frustrations," said Judy Brady, executive director of the Alaska Oil and Gas Association, an Anchorage-based trade association of 16 oil and gas industry members.

Among the complaints she hears all the time are that state agencies -- including the departments of Natural Resources, Fish and Game, Environmental Conservation and Governmental Coordination -- have the ability to tack stipulations on to permits in ways that slow the permit process and drive up costs.

In many cases, companies are forced to reinvent the wheel, even where permits seek development in regions where the parameters have been well understood for years, said Brady. That's common in Cook Inlet oil and gas development, she said.

"You can even end up with a different process for two different companies, depending on whom they work with inside the agencies," she said.

Ben Schoffmann, project manager for Marathon Oil Company's Ninilchik development, said the state process is not very predictable.

"The timeline is quite variable, depending on a number of issues," he said. "It's difficult to plan work and get it done in a timely manner."

There also appear to be overlapping responsibilities and interests among state agencies that occasionally lead to contradictions in stipulations attached to permits.

"In the event there are contradictions, it is not clear how those are to be resolved," Schoffmann said.

Such contradictions can arise between the requirements of state agencies and those of the Alaska Coastal Zone Management Program, Brady said. The program helps ensure protections for the sensitive coastal environment and requires that development efforts within the zone be consistent with its provisions. Thus a consistency review is a part of any coastal permit process.

When oil and gas were more plentiful and the fields were young, there was money to cover the costs of a far-reaching permitting process.

But things have changed.

While exploration and production firms are watching their bottom lines ever more closely, the permitting program grows ever more complicated and costly, Brady said. There's plenty of blame to go around.

"This didn't just happen in one administration," Brady said. "It's been a kind of creeping gridlock."

And the oil companies have contributed to it themselves by simply going along with permit stipulations without complaint in the interest of saving time or by going several steps further than required in a process Schoffmann called the "compliance-plus" approach.

"But the next time that becomes the standard," he said. "We're constantly chasing our tail."

Brady said she hopes the Legislature dives into the permitting process with the intent of making it clearer and more predictable.

"We will ask the Legislature and the governor to revisit some of these key areas," she said. "We need to see where we are."

Brady said the administration of Gov. Tony Knowles must be credited with important reforms already in place. Frank Murkowski's administration will make still more, as will the new Legislature, she predicted.

"Sometimes, just seeing things in a new way leads to reform," she said. "It has to. It is so gridlocked now."

Bill Popp, the Kenai Peninsula Borough's oil and gas liaison, offers another perspective on the problems of permitting. He, too, believes the system is broken. Neither the oil companies nor state agencies can clearly detail how the system is supposed to work, he said.

"I've asked, 'Can you draw for me in flow-chart form the permitting process for an oil and gas well?'" he said. "Nobody has been able to step up and do it on either side. That's a clear sign something is wrong with the regulatory process at the state level in Alaska. It's a confusing, illogical and unclear process."

Rather than an easily understandable set of steps, the state permitting process turns every permit request into a unique application, he said. Like Brady, Popp said the industry must shoulder a measure of the blame.

"There's sometimes a lack of institutional knowledge. Agencies never see the same (industry) people twice. They don't fill out information on applications correctly," Popp said. "I've also heard complaints about the regulatory process being used as a competitive tool. That is, companies applying for multiple permits for leases they have no intention of going through on just to misdirect competitors."

Environmental community

"Generally, my understanding is it is not the state process that is so onerous. Gov. Tony Knowles has been actively pursuing a partnership with the oil industry," said Randy Virgin, executive director of the Alaska Center for the Environment. "He's made it as easy as it could be. The problems are with the federal process."

The buzzword among reformers is "streamlining," Virgin said.

"For me, to hear the industry harping on streamlining strikes me as really off base. They risk undermining public confidence on what's going on out there in the field," he said.

The state has an obligation to ensure that development is done properly, not only for the sake of the environment, but for the sake of the economy, too, Virgin said.

"I feel like a good permitting process and adequate enforcement are essential to a stable business climate and protection of the environment," he said.

Peter Van Tuyn, an attorney with Trustees for Alaska, said the state's permitting system is not out of line with the rest of the country.

"The one area we've heard a lot of complaints about from developers (has to do with) protections unique to the coastal zone. Under the Knowles administration, there's not been a lot of protection of the Alaska Coastal Zone Management Program. Industry, more than once, got what it wanted. That's unfortunate," Van Tuyn said.

"The purpose of the laws applying to the coastal zone is to protect an area particularly sensitive to development."

It is an area rich in resources beyond oil, gas and mineral extraction, he said.

"Shouldn't we, as the public, require extra deliberations into permitting requests in the coastal zone?

Bob Shavelson, director of the nonprofit industry watchdog group Cook Inlet Keeper based in Homer, said the view of the industry is biased by the profit motive.

"If you look at the rules, it is a fairly discrete process," he said. "But if you come from the perspective that you would like to see no environmental reviews, then obviously any review is too much."

Shavelson said the state permitting process, as well as that of the federal government, has an interesting history and some pretty good grounds for its existence.

In the late 1960s, he said, states managed their own sets of environmental rules and also competed with other states to attract industries and the jobs they brought.

"That led to what was called the 'regulatory race to the bottom,'" Shavelson said.

Often, the states with the weakest environmental laws saw industry settle inside their borders.

Congress responded with national legislation, including the Clean Air Act of 1970 and the Clean Water Act of 1972. Other laws followed.

"The whole idea was to level the playing field by not allowing jurisdictions to compete by lowering standards," Shavelson said. "Fast-forward to 2002. Now we are firmly in the midst of a global economy. Once again, we are in a situation where a state like Alaska has to compete with developing countries abroad."

The major financial considerations? Labor costs and environmental protection.

"Look at Unocal and its recent job layoffs in Cook Inlet," Shavelson said. "They have simply made a corporate decision to make more money, and they are not going to be hiring people in Cook Inlet but will be hiring people in Asia and the Middle East where there are far fewer environmental and labor costs. We really have no leverage. These multinational corporations treat jobs and the environment like widgets on a global game board."

Shavelson expects a legislative fight over the permitting process. He points to recent election campaign rhetoric used effectively by Republicans against Democrats as an example of the political posturing the public is likely to see.

"There was an effective effort to tar anyone who cares about the environment as an extremist," he said. "We got put in the jobs-vs.-the-environment box when in fact, long-term jobs and a healthy environment are one in the same to us."

Reform may be necessary, Shavelson said, but the state has a vital role to play in resource development and should guard against taking what bite remains out of state permitting and enforcement statutes.

"We are talking about air, water, public lands, public trust resources," he said. "We expect our government to administer this trust function and protect them for future generations."

Shavelson said state environmental protections have been severely weakened in the past several years by a rollback in regulations and a marked decline in enforcement.

"In fact, enforcement has left the state's lexicon," he said. "They've made an effort to rename it 'compliance assistance.'"

Also impacting state permitting and regulatory duties have been years of funding cuts that have forced state agencies, such as the Department of Environmental Conservation and the Department of Natural Resources, to focus on some programs at the expense of others.

From Van Tuyn's perspective, the extent to which permitting can be blamed for slowing projects almost invariably relates to the underfunding of state agencies that are left with too few resources to do their jobs efficiently.

"It's a Catch-22. You argue that streamlining is important and the answer is to cut funding. That limits the ability of those left to do the permitting in a timely manner. That's a cycle that needs to be broken," Van Tuyn said.

State agencies

"The coastal zone management program has long been a whipping boy," said DNR Commissioner Pat Pourchot, who acknowledged posing serious questions about it when he was a state lawmaker in the 1980s. "It is often maligned, sometimes rightfully so and sometimes out of ignorance."

From the state's standpoint, it has provided overall coordination for projects in a holistic way, Pourchot said. It's also proved very popular among coastal communities because it gives residents a way to influence decisions on developments that will impact their lives.

Revision may be necessary, and, in fact, ACMP revisions currently are under consideration. But the program shouldn't be done away with, Pourchot said. That would be like "throwing the baby out with the bath water," he said.

Pourchot acknowledged that complaints raised by industry have been recognized as problems by state agencies, too, such as permit timelines being out of sync, frequent extension of comment periods, and what Pourchot said were groups bent on delaying projects who abuse the process. Earlier this year, state agencies attempted to address those issues.

"We are in the process of finalizing those changes to regulations," he said. "They address most of the complaints that have surfaced over the years."

One example, he said, was a provision to remove the ability to petition the Coastal Policy Board for a further appeal process, something that needlessly extended the consistency determination process, he said.

Another would do away with what industry has labeled "homeless stipulations," which Pourchot said occur when an agency forces DNR to add stipulations to the general permit regardless of the agency's authority.

"None of this takes away the due diligence of agencies or the statutory requirement to ensure protections," Pourchot said.

But he added that he agreed with Van Tuyn's Catch-22 reference, referring to the impact of underfunding and lack of personnel.

"We spotted that," he said. "We were so strapped, it was taking up to a year to finalize leases. It was costing the state money and delaying exploration for companies."

Last year, the Legislature increased the budget for the Division of Oil and Gas, but the department could use more, he said.

Michele Brown is commissioner of the DEC. She said there is always room to improve the regulatory and permit system, but the program always needs to focus on environmental results.

"Some of the biggest difficulties will be coordinating the state and federal permitting systems," she said. "One of the important things to do is take the long view and map out what a permit needs and get it on a schedule so things happen concurrently rather than sequentially."

Sometimes difficulties arise for no other reason than human nature. For instance, there have been occasions when the first time DEC officials laid their eyes on a permit application was after developers had spent countless hours and a great deal of money putting it together. Even small questions raised by DEC at that point tend to have real financial ramifications, sometimes leading industry officials to complain they will lose money if a project is delayed and that the agency is obstructing progress, she said. Such things often could be avoided if industry and the agencies worked more closely together as permit applications were being developed.

Brown said she doesn't believe there has been any weakening of environmental standards. The process has been speeded up and further review could lead to more streamlining. What environmental groups are really complaining about is losing some ability to file suit.

"I expect you will see more of that," she predicted. "As I see it, it is more important to focus on really having environmental results as opposed to a lot of battles over how many times you get to file the same law suit to slow a project. Sometimes the environmental community likes notches on their belts rather than results."

She said the word enforcement has not been dropped from DEC's lexicon, as Shavelson alleges, but neither is it the agency's first tool.

At the same time, Brown said groups like Cook Inlet Keeper and other members of the environmental community are a vital part of the overall equation.

"There is absolutely an enormous need for an informed and involved public," she said. The nongovernmental organizations make sure that all perspectives have a voice. Our relationship with the environmental community, just as with industry, is often issue specific and personality specific. Sometimes it's good; sometimes it's a bust."

She specifically praised Cook Inlet Keeper for its water-monitoring program.

Brown also acknowledged that legislative cuts have hurt the agency's ability to run its programs. However, because of the way it handled the expectations of coming cuts, lawmakers were made fully aware that cuts to DEC were not going to be applied across the board, but rather the agency intended to curtail some programs to ensure the vitality of others.

"We told them to stop nickel and dimeing our programs," she said.

Brown said it is hard to tell exactly where the next Legislature will go with permit reforms. She noted that, from her perspective, the quality of the public debate had deteriorated. She warned against searching for the solutions to these difficult problems in a war of sound bites.

One thing is certain, she said.

"The pressure to reduce the budget is going to continue to be there."

Lawmakers

"I think we will address those issues," said Rep. Mike Chenault of Nikiski, who's House District 34 includes several large oil and gas industrial complexes and peripheral businesses that support them. Together, they are hugely important to the economy and tax base of the Kenai Peninsula.

Chenault predicted that the Murkowski administration would take a new direction in resource development, as would the Legislature.

"We'll take a deeper look at the permit process to see if there are ways to streamline and make it a more reasonable process, not only for the oil companies, but for other corporations needing permits."

He said he might introduce legislation himself along those lines and certainly would co-sponsor some.

Chenault will be in a good position to affect legislation. He is to be the co-chair of the House Resources Committee and also will be vice chair of the House Special Committee on Oil and Gas.

Chenault said the process needs revision, but it is not entirely broken.

Rep. Ethan Berkowitz, D-Anchorage, who currently is House Minority Leader, said what needs to happen is the elimination of some overlapping paperwork requirements.

"That would be a huge first step," he said. "Those are efforts the Knowles administration was working on for some time."

He said the Knowles administration has hardly forgotten about the oil and gas industry. About 25 percent of the oil coming down the trans-Alaska pipeline came on line during Knowles' tenure, he said.

Reform may be necessary, but Alaska should avoid giving away the farm.

"We have to remember that it's our oil and gas, and that it should be developed to the maximum benefit of Alaskans," Berkowitz said. "We have to go into negotiations with industry as landlords from a position of strength, but we also need to work together to develop those resources."



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