Murkowski: Lease buyback last option

Posted: Wednesday, December 10, 2003

Buying back shallow natural gas leases on the Kenai Peninsula or in the Matanuska Valley would be an alternative used only after all other options to meet public concerns regarding the environmental safety of gas development were exhausted, Gov. Frank Murkowski said at a press conference Thursday.

Officials with the Department of Natural Resources have been gathering comments from residents of the two areas where the state has sold shallow natural gas leases while they write regulations to govern gas development. Those regulations may include such things as setback requirements, noise limitations and water-quality monitoring

DNR has imposed a gas-lease moratorium while the new rules are developed.

One kind of shallow gas development called coal-bed methane has become especially controversial because of its potential for environmental damage. In some places in the Lower 48 where it has been employed, groundwater resources have been polluted.

Residents of the lower Kenai Peninsula around Homer, as well as their counterparts in the Matanuska Valley, have crowded recent public meetings, many vocally opposed to coal-bed methane development.

Drilling opponents were buoyed last month when at a Nov. 13 press conference, Murkowski seemed to indicate a buyback might be possible by saying, " If that's what the people want, why that's clearly an alternative."

Thursday, he qualified that position.

"The state will consider buybacks of shallow natural gas leases only as a last resort," the governor said. "Prior to approving any coal-bed methane development, the Department of Natural Resources will make a determination as to whether additional site-specific measures are necessary given the particular values of the location. Until DNR's public process is complete and the companies have determined where development might occur, it is premature to consider buybacks."

Efforts to reach DNR officials connected with the regulation-writing project Tuesday were unsuccessful. Top Division of Oil and Gas officials were in Juneau meeting with Murkowski on resource development matters.

Murkowski's press secretary John Manly said Tuesday that the governor was not retreating from his earlier position, but qualifying what a buyback was.

Manly said a lot of people passionate about the gas issue construed the governor's earlier comments to mean that DNR had a task force working up numbers for a buyback. That is not the case, Manly said.

The governor's Nov. 13 comments regarding a possible buyback had been made "off-the-top-of-his-head" in response to a reporter's question, Manly said, adding that Murkowski merely had been noting that buybacks had been used before, referring to highly controversial Kachemak Bay oil leases bought back by the state in the mid-1970s.

The need for new gas sources is readily apparent, Manly said. Known reserves in the Cook Inlet region are inadequate to meet the growing residential, commercial and industrial demand.

In a press release issued Monday, Manley said coal-bed methane could be a significant source of rural energy and that the state remained committed to development of coal-bed methane.

Homer resident Nina Faust, a longtime environmental activist and member of the Kachemak Bay Property Owners Alliance, a group formed in response to the letting of shallow gas leases on the lower Kenai Peninsula, said the way the state leased subsurface rights effectively bypassed the rights of residents.

In announcing the upcoming lease sale earlier this year, the state did little advertising, and none in local newspapers, affording residents almost no chance to comment. By the time most residents became aware of the sale, the leases had been sold, Faust said.

She panned the state's decision to write new regulations after the leases have been sold.

"I don't think the state should be doing business in this fashion," she said. "The state should buy back the leases and start over. We feel our backs are against the wall."

As far as residents around Homer are concerned, the situation already has reached Murkowski's point of last resort.

Unlike in the Matanuska Valley where wells already are drilled and exploration under way, there has been no development within the 22,000 acres of shallow gas leases on the lower peninsula, making the possibility of a buyback easier, Faust said.

"Investment is minimal here," she said. "In good conscience, the state should buy these leases back."

"I just don't see where that fits with where the governor wants to go with resource development," Manly said. "He has made it clear that his administration will be about developing our resources and putting them to work.

"If you just go around buying back leases, you don't know what kind of resources you are giving up."

Many residents of the lower peninsula were shocked to learn just how invasive a shallow gas lease could be, Faust said.

According to the state, gas developers must reach agreements with surface rights holders before coming on private property. However, if no agreement can be reached, the state has the power to permit development anyway over the protests of property owners by requiring the gas company to put up a bond against property damage.

But the invasiveness goes beyond that, Faust said.

"People feel very uncomfortable. If it gets to that point, they could have drilling rigs, drill stations, compressor stations, roads, pipelines, power lines, even drilling mud pits on their property," she said. "They could even house workers on your property -- just move in trailers.

"Most people here are absolutely appalled."

Faust said the alliance might consider court action, but no suit is currently in the works.

"That is premature," she said.

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