State denies Trustees request on Bristol Bay exploration license

Kay Cashman

The state of Alaska has denied a reconsideration request from Trustees for Alaska regarding its best interest finding for Bristol Bay basin exploration license No. 1. Although disappointed in the state’s decision, the environmental legal group says it will not take its concerns to court.

Alaska Department of Natural Resources Commissioner Tom Irwin said in a letter dated Dec. 15 that he has ordered the best interest finding amended to include a mitigation measure against offshore oil and gas facilities, a recommendation in Trustees’ request for reconsideration, but Irwin said he does not find the additional analysis requested by Trustees to be necessary.

Pat Galvin, petroleum land manager for DNR’s Division of Oil and Gas, said exploration license applicant Bristol Shores LLC has “30 days from the receipt of the commissioner’s final decision … to give us an executed license (sign the license form); pay a fee of $1 per acre, which is just over $329,000; and give us a bond to secure the first year of a work commitment.”

Bristol Shores, owned by four Native elders from the Bristol Bay Region, will commit to a $3.2 million work commitment if the company goes ahead and accepts the seven-year license. In addition to paying $329,000 up front for the $1 per acre fee, the company has to put up a bond of $450,000 to cover its one-seventh of its work commitment.

If Bristol Shores is unable to get a bonding company to post the bond, then Galvin says the state requires the cash equivalent of $450,000, such as “a CD, a certificate of deposit, with a one-year maturation, or some other type of security.”

At the end of the first year, Bristol Shores would submit proof of monies spent in that year and it would be subtracted from the $3.2 million. The amount of the bond for the second year’s work would be the total remaining work commitment divided by six, and so forth for each year until the license expiration.

Bristol Shores’ potential investors concerned

“The only thing over our heads is whether these Trustees take Irwin up on his invitation to go to Superior Court if they disagree with his ruling,” Allan said a few hours before Trustees staff attorney Vicki Clark told Petroleum News that the group will not pursue legal action.

“I’ve been told there are some people in Southwest Alaska who are very upset with the Trustees. … Something like 21 villages called up Bristol Shores to see what they could do to help us,” Allan said, noting that the company’s potential investors in the project were concerned there would be a lawsuit.

“These people (Trustees) are like corporate gadflies who buy a share of stock and raise hell at shareholder meetings. The indigenous people of Southwest Alaska take the Trustees action as a personal affront. It’s the indigenous people who land up out on the street and out of a job” when groups like the Trustees file against development projects.

“What Trustees don’t realize in going up against the DNR that what they have done is cost our clients money and time. We have lost investors because of this,” Allan said.

Bristol Shores “isn’t a big corporation that can sit around and cool their heels,” he said.

The Trustees filing for reconsideration, which Allan calls a “frivolous appeal” has “already cost us a year. We could have been shooting seismic this winter,” he said.

Bristol Shores has some “very serious but very edgy” potential investors, Allan said. “We’re continuing to talk to them, we’re keeping them on the line … but they’re concerned Trustees could go to Superior Court. … We’re stuck between a rock and a hard spot again.”

Plus, he noted, “This is wonderful time of the year to try to get someone on the phone.”

When asked if Allan would ask DNR for more than 30 days to accept the exploration license and come up with the funds, he said he didn’t know.

But he did say DNR has been “very good to work with … very helpful through the entire process.

“Right now we’re concentrating on getting a letter of intent from this one investor group indicating they’re willing to go along with us. But I understand their reluctance with the Trustees involved. I would feel the same way,” Allan said.

“I’d like to ask Trustees, ‘who died and made you trustee?’ That’s what all these folks in Southwest Alaska are asking,” he said.

Shade told Petroleum News Oct. 10 that the Trustees’ filing caused consternation and anger among Bristol Bay residents.

“We’re not taking it sitting down,” Shade said. “The impact on these remote areas is more severe than these guys realize ... this is flat discrimination — this is probably one of the biggest paintball attacks I’ve ever seen.”

Trustees’ request for reconsideration cited several concerns, including the importance of the Bristol Bay area as a wildlife habitat, as a salmon fishery and as a location for subsistence fishing and hunting.

Shade said that the indigenous people around Bristol Bay understand the environmental issues in the region and that they pay great attention to protecting the environment. He said that several years ago he himself formed a non-profit organization for raising environmental awareness in the Bristol Bay area.

All of the owners of Bristol Shores have been or are fishermen, Allan said. “They’re very concerned about the environmental aspects of the operation and protecting the migrating routes of the animals as well as the migration of the salmon.”

Shade told the state his company planned to help the environment as well as the economy, “to boost jobs and basically concentrate on local hire.”

Bristol Shores planned to spend some of the money earned from natural gas sales to clean up mercury and chemical pollution in the area caused in the 1940s and 1950s by the military.

The company has also earmarked some of its future profits for educational and cultural support.

Trustees open door to locals

“We were seeking more information and a little more analysis, but it sounds like they plan to move forward without it. … We’re very disappointed given the fishery that’s out there. It’s a world-class fishery. But we’re glad they did acknowledge the need for a mitigation measure to prevent offshore operations. It was the silver lining of DNR’s decision,” she said.

Clark said at this time the Trustees do not plan to file a lawsuit contesting the DNR commissioner’s decision.

She said she had received a call from an area resident “who was angry” about the Trustees reconsideration request, but “who has since called us on another issue. I hope folks will give us a call and talk to us. There are concerns about outsiders coming in and doing this. They are concerned that our request for reconsideration is shooting down this local group (Bristol Shores).”

Clark said she has been in touch with George Shade, president of Bristol Shores. “We hope to have a meeting.

“My understanding is that funding from the (Bristol Shores) project, if they’re successful … will be used to help with a lot of contamination out there. It’s a very laudable goal,” she said.

A little history

The governor and Alaska’s congressional delegation responded enthusiastically and a number of things began to happen. One was designation by the Alaska Division of Oil and Gas in July 2003 of a study area in the northern portion of the Bristol Bay basin in which the division solicited exploration license proposals for 3 million acres.

Bristol Shores and Evergreen Resources filed for licenses; Evergreen later dropped out.

In the division’s March 2004 preliminary best interest finding on Bristol Shores proposed license, the agency proposed amending a 1996 ruling by the Alaska Department of Natural Resources that excluded “all submerged land in and around Bristol Bay, from Ugashik Bay north to the western boundary of Kulukak Bay…” from exploration licensing — a ruling which excluded what industry observers believe is a prospective area for gas, and possibly oil.

A portion of Nushagak Bay was in the exclusion area in the 1996 ruling, and was included in Bristol Shores; proposed exploration license. The division proposed to allow exploration licensing within the bay, but with the stipulation that exploratory drilling could only be conducted “directionally” from onshore locations.