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Vol. 10, No. 18 Week of May 01, 2005
Providing coverage of Alaska and northern Canada's oil and gas industry

Successful permitting means listening

North Slope Borough permitting officials respond to concerns of industry, talk about what they want to see from oil companies

Kay Cashman

Petroleum News Publisher & Managing Editor

The North Slope Borough’s land planning and permitting section has the reputation of being an unreasonable regulator with its hand out.

Section head Rex Okakok Sr. considers the reputation unfair.

“We are in favor of oil and gas development, as long as it does not hurt our subsistence resources … and provides jobs for the people of the borough. … We bend over backwards, my staff and I, to guide oil companies through the permit application process. … In the last eight years since I’ve headed this office we have issued some 1,500 permits with only one delay, and that permit eventually did get issued,” Okakok told Petroleum News in a recent interview. “In my view we are very reasonable and helpful when a company comes in with a project.”

Mitigation fees misunderstood, says Okakok

One area of dispute between industry and the borough has been mitigation fees charged by the borough on a project-to-project basis and distributed by a panel appointed by borough Mayor George Ahmaogak. When asked about complaints from industry regarding the increasing costs of mitigation, Okakok said mitigation is getting higher as the oil industry moves west from Prudhoe Bay and Kuparuk into the “more populated areas” of the North Slope.

“Prudhoe Bay is a long way from other users of the land, the subsistence users. … There is more concern now as industry moves west,” he said, pointing to an allotment map on his wall showing the Colville River region, which includes the Alpine oil field, and a chunk of northeastern National Petroleum Reserve-Alaska. The area he was pointing to was carved up into allotments assigned to North Slope Inupiat. The Native allotments, consisting of landholdings of up to 160 acres, are held in trust by the federal government for Alaska Natives. First established in the early 1900s, the establishment of allotments ceased after the passing of the Alaska Native Claims Settlement Act. It is necessary to obtain permission to pass through or operate on a Native allotment.

Mitigating subsistence impact with cash

Okakok said an Inupiat family traditionally hunts and traps in its allotment area(s). Since 80 percent of the people in villages of the North Slope make their living in traditional ways — i.e. subsistence hunting, fishing and trapping — and others supplement their monetary income by subsistence; any activities on their allotments can potentially negatively impact a family’s income.

“One wolverine fur is worth $500,” Gordon Brower, a borough land-use specialist in the land planning and permitting section explained in an interview with Petroleum News. “That’s a lot of money to a family up here. Even though we trap, hunt and fish for much of our food, our culture has also taken advantage of western culture. So we use things like snowmachines which require the western monetary system to work.”

Kuukpik Veritas, Brower said, recently conducted a seismic shoot from Prudhoe Bay into the National Petroleum Reserve-Alaska. They “competed with 180 Native allotment owners for use of the land. So we were looking at two competing land uses and had to decide how to mediate that. At any given time they had cable strung out for miles and miles. It didn’t displace animals, but the animals do run away or hide while work is being done in each area. Then they come back or reappear when the seismic crews have gone.”

The borough’s way of mitigating losses to allotment holders “is to provide money for additional fuel and food for the hunters and trappers to go elsewhere during the period seismic or drilling is being done,” he said. “The state of Alaska overlooks some of this type of mitigation — they leave it up to us.”

So the borough requests lump sums of money to offset losses for hunters and trappers.

“That makes the applicant a good neighbor versus a negative impression taking over amongst the people up here,” Brower said.

But to an oil company employee fresh from Houston or Anchorage a request for flat sums of money sounds like extortion.

A difference in cultures

“Part of the problem is a difference in cultures,” Brower said. “A hunter in the Lower 48 doesn’t rely on the animal he takes for survival. But we do.”

The measure of a man as good husband material in the Inupiat culture is whether or not he is a good provider – i.e. hunter, trapper, fisherman, whaler.

“When an Inupiat woman chooses a young man as a husband she wants to know he can bring home the food,” Brower said.

Brower offers oil companies orientations for their employees which explain the Inupiat way of life and the borough’s land management practices.

One example of a major impact development has had on local people as development has moved west is the Alpine processing facility in the ConocoPhillips Alaska-operated Colville River unit.

People at the nearby village of Nuiqsut used to be able to “hunt and fish right near the village; maybe travel a couple of miles to shoot a caribou. … In any direction they looked there was no development of any kind. Now they look out their kitchen window and see an industrial plant. And they have to travel as much as 13 miles or more to hunt because you can’t fire a rifle anywhere near the Alpine facilities,” Johnny Aiken, a land planning manager at the borough said in a February interview with Petroleum News.

ConocoPhillips, Brower said, is paying $50,000 per year in mitigation to the borough for its new Alpine satellite developments.

“That money will be used for fuel, snowmobiles and other things to help people continue the subsistence way of life,” he said.

Similar to Lower 48 landowners payments

“As I understand it, mitigation fees are similar in intent and are not unheard of in the Lower 48 where permitting agents carry a checkbook when they meet with landowners – farmers, ranchers, etc. – to negotiate fees for down time on their property for everything from grazing cattle to deer hunting,” Robin Koutchak, an assistant attorney for the North Slope Borough in planning and environmental law, told Petroleum News in April 2005, noting such payments were not for “damages,” but closer to what the borough describes as mitigation fees.

Lower 48 payments “are based on if the work is 2D or 3D. Typically 2D pays $1,200 per linear mile; the 3D pays between $5-10 per acre. So they are paying $3,200-$6,400 per square mile to shoot 3D. This is standard practice in Texas, Kansas, Oklahoma, etc. In the eastern states they are still trying to shoot seismic for damages only and for the owners to have a chance at a well,” Koutchak said.

“The way I see it, there is no difference between paying a hunter or trapper X dollars because of the intrusion of a crew, then it is to pay a rancher-farmer for their inconvenience,” Koutchak said.

“I was also told that Lower 48 oil and gas leases with private landowners usually state in the first paragraph that the lease covers seismic exploration, core drilling etc. The smart landowners,” her source said, “specifically put in the lease that seismic crews have to pay additional money for ‘inconvenience plus damages’ to the landowner. If there are any additional actual damages, (such as a) broken culvert, damaged fences, excessive crop damages, ruts, road repairs ... then they are either fixed by the seismic contractor or the landowner is paid compensation.”

Listening to and addressing concerns

Okakok, Brower and Aiken said some of the oil companies do not listen to and address all the borough’s concerns.

“We’ll ask them to explain how they are going to do something and they’ll come back with pages and pages of explanation about something we didn’t ask about, ignoring our original concerns,” Okakok said.

“The companies that really listen to us and work with us to address our concerns are mostly the new companies,” he said, naming Armstrong Alaska Vice President Stu Gustafson as a favorite of the borough. Gustafson oversees much of Armstrong partner Kerr-McGee’s permitting and also oversaw the initial exploration well permitting at the Oooguruk unit for Armstrong’s other North Slope partner, Pioneer Natural Resources. He has a three-year unbroken record of getting North Slope onshore and offshore oil and gas exploration and development projects permitted in a timely fashion.

“Stu is a good example of what we mean by a good neighbor. He took the concept right to heart. … (At Nikaitchuq) Kerr-McGee and Armstrong are looking at doing an offshore development in a resource rich area. But he’s listening to our concerns,” Brower said.

Pre-application meetings important

When asked what permitting advice they would give new oil companies interested in operating on the North Slope, Okakok, Brower and Aiken advised applicants to set up pre-application meetings.

“We can guide them through the permitting process. … We’re going to make it a win-win situation,” Brower said.

“Sitting down with the companies before they file their permits solves a lot of problems and saves time in the long run. … Stu Gustafson addresses things ahead of time. He asks to meet with us in a pre-application meeting before he ever files his permits. ConocoPhillips is just starting to do that. Small companies are doing things in sensitive areas but they are respectful of our concerns and try to address them. That’s the difference we see between the independents and the big companies,” Okakok said.

Pre-application meetings have become part of the permitting process for federal and state agencies, but the borough doesn’t require them. That’s something the borough plans to change in its new North Slope Comprehensive Plan and North Slope Borough Coastal Management Plan. Both are expected to be finalized this summer as part of a revamping of Title 19, which contains the borough’s land management regulations and zoning ordinances.

“If there are any underlying issues, we can catch them in pre-application meetings, which quickens the approval process,” Okakok said.

Hiring locals, Native owned firms or JVs

ARCO Alaska, predecessor to ConocoPhillips, was another company the borough liked working with, Okakok said, “especially in the early days when Prudhoe had just started up. ARCO used to fly villagers into Prudhoe to work. Those jobs were important to the villages.”

Being a good neighbor to Okakok and his staff means an oil company has to contract with Native owned firms or companies that have a joint venture in place with Native-owned firms “whenever possible.” Those contractors and the oil companies also “should hire local people whenever they can,” he said.

“Stu’s company is using local people for development work … as well as hiring ASRC-owned companies, which employ a lot of local people,” Brower said.

Best available technology important

As development moves west, Brower said the borough wants oil companies to come up with “innovative ways of doing things” that continue to lessen the footprint of industry.

“EnCana was good to work with when they drilled their McCovey offshore well a few years ago,” Okakok said. “They came into see us early, before they applied for permits and they were willing to use BAT — the best available technology — for the project,” something he said is likely to be required in the new comprehensive plan.

“Our meetings with EnCana were almost boring compared to some of our meetings with ConocoPhillips,” the North Slope oil producer that was EnCana’s partner at McCovey, he said.

Okakok said three things important in planning oil and gas projects, especially offshore developments, are “command, control and containment” of the hydrocarbons, something he said Armstrong and its partners pay close attention to.

“Their attitude and ours is, ‘Let’s work together and make this work,’” he said. “Our mayor’s attitude is we can have both a subsistence lifestyle and oil and gas development.”

Brower said “Stu’s concept of buried pipelines and a ‘pipe in a pipe’ fit right in there. We have asked oil companies to bury pipelines in the past but they said it was too costly,” he said, acknowledging that higher oil prices might make other companies willing to consider the additional cost of buried pipelines.

“Stu’s other idea of production-in-a-box was something he and I more or less worked out after a pre-application meeting. We went down to a local restaurant and sketched it out on napkins. … We like to see those kinds of innovative concepts as development moves into more populated areas where aesthetics and so forth are important,” Brower said.

“We’d like to see pipelines buried, if possible, where caribou are most likely to cross or migrate. … I’ve seen them (caribou) stampede when the marble flies and mosquitoes get bad. They’ll head for the coast where there are fewer bugs and when they’re within a mile from the shore they will have slowed down,” he said.

“The companies have agreed to build pipelines a minimum of seven feet off the ground so that when the caribou stampede the bulls with large racks can move under them,” Brower said, but buried pipelines are still the borough’s preference. “The best place to build above-ground pipelines would be within a mile of the coast if you were looking to bring oil into TAPS” from other areas, such as NPR-A or the 1002 area of the Arctic National Wildlife Refuge.

New comprehensive plan in the works

The development of a new comprehensive plan for the North Slope Borough, whose jurisdiction extends east through ANWR, west through NPR-A to the coast, south to the Brooks Range and north through state waters, will help clarify the borough’s expectations for land uses and therefore expedite the permit process, Okakok said.

“There are issues that are not addressed or are not clear” in the current comprehensive plan, he said. “We hope to get rid of a lot of the gray, to clarify things. … The comprehensive plan and the coastal management plan will drive Title 19.”

The borough’s land planning and permitting section reviews land-use plans, issues land-use permits, monitors compliance of land management regulations, oversees the North Slope Borough Coastal Management Program, handles requests to rezone property under Title 19, performs technical reviews and analyses of development projects, and reviews Section 404 wetland dredge and fill permit applications for compliance with the Federal Clean Water Act.

Title 19 contains the North Slope Borough’s land management regulations and Barrow zoning ordinances, which were adopted in 1990 and are part of the North Slope Comprehensive Plan. The ideas contained in the plan were developed by officials and residents of the borough as the result of many public meetings held to develop it, the coastal management plan and other planning studies.

The “whole idea of regulations is not to disapprove of development, but to set up guidelines about what is expected in the way of response when you come to sensitive areas,” Okakok said.

“Certain thresholds will be developed. The new plan will say when you reach certain thresholds, then you need to be concerned. … John Devens (executive director of the Prince William Sound Regional Citizens’ Advisory Council) did the same kind of thing for the Sound.”

The permit application itself will also change, he said. The new one “will ask for more clarification. Right now all we ask is yes and no type questions — i.e. ‘Did you address such and such.’” The new application will ask for more details from the applicant “to be sure that all of the borough’s policies” are addressed.

The comprehensive plan will “be an areawide plan. It will address all our issues as a whole; not one by one for each applicant. It will probably allow more permits to be approved administratively, which shortens the process,” Okakok said.

Subsistence zones of concern

One area of industry concern about the new plan has been whether or not the borough would establish subsistence zones within its jurisdiction that would prohibit or severely restrict oil and gas activities.

In the draft coastal management plan issued by the borough on March 29, subsistence use of plants, fish and wildlife, including marine mammals in state and federal waters are accorded “the highest priority use of the lands and waters in the coastal area.”

In the chapter on designated areas “all onshore areas within the borough” are designated as subsistence use areas.

“Major oil fields existing at the time this plan was revised” are designated as “major energy facility areas.”

The borough also clearly lays claim to jurisdiction over the federal outer continental shelf because of subsistence use.

“Establishing subsistence zones is not something the borough can do by itself, and it’s not something easily designated but it is an option,” Okakok said in a follow up interview with Petroleum News in April 2005.

“When we first started working on it we felt we needed to have that type of option because we didn’t think the state or feds were … protecting subsistence and we still don’t.”

Subsistence zones gave the borough a legal option, but Okakok said there was nothing “in process right now. It’s an option we need to have in there but (establishing subsistence zones) would take a lot of work, a lot of time, and a lot of meetings, and approving them would take the involvement of industry, the state, the federal government, all the stakeholders,” Okakok said.

What the borough hopes to do is establish guidelines to set up subsistence zones if they need them in the future.

“Being a regulator we’ve learned that if it’s not in writing you won’t get it, so if that issue would ever come up and the borough feels the state or feds are not enforcing their regulations to protect subsistence then we’d have the option of establishing subsistence zones,” he said.

“It’s in our best interest to have it in Title 19 just in case. As to whether we would use next year, the following year, I doubt it. It’s at least a few years away,” Okakok said.

There would be a lot of “hoops to jump through” to get subsistence zones developed and approved, he said. They would require a lot of scientific studies and the establishment of thresholds, which can take several years, he said.

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