The confused state of project impact mitigation in Alaska has become a major headache for natural resource developers, and for large projects there are big bucks involved.
A major concern for the Alaska LNG Project, for example, is the potential cost of wetlands mitigation if it moves forward. Estimates are in the $500 million to over $1 billion range.
Alaska LNG’s wetlands footprint hasn’t yet been established but the state-backed Alaska Stand Alone Pipeline, an 800-mile gas pipeline that parallels Alaska LNG for most of its route, has delineated 8,907 acres of wetlands.
Donlin Creek gold is another major resource project that is proposed where the mitigation could also be hefty. Mitigation costs, what developers may have to write a check for, generally range between $20,000 and $44,000, or higher, depending on the location and type of wetland.
It just isn’t cost, though. A new twist is that there could be a “layering” of mitigation requirements by different federal resource agencies. Developers will have to find a way to navigate this, and the agencies themselves haven’t figured out how to do it.
GMT-1 costs a foretaste
A foretaste of this, and what caught industry’s attention, was the requirement for ConocoPhillips to pay $8 million for mitigation of subsistence impacts for its GMT-1 project in the National Petroleum Reserve-Alaska. This is on top of mitigation measures for wetlands impacts, which are still being negotiated.
Two agencies are involved: The U.S. Bureau of Land Management for subsistence and the U.S. Army Corps of Engineers for wetlands.
Developers have worked for years with the Army Corps on wetlands but dealing with separate mitigation for differing kinds of impacts, and by different federal agencies, is new.
“This all pretty scary,” said Bill Jeffress, a consultant with SRK Anchorage.
There are also major uncertainties with the traditional wetlands mitigation. A case being cited involves ExxonMobil’s payment, reported to be about $12 million for mitigation at its Point Thomson natural gas recycling project, which is now constructed and producing.
ExxonMobil would not comment but sources familiar with the transaction said 34 acres of wetlands disturbed at Point Thomson were multiplied to 112 acres for compensation through a negotiation with a nonprofit mitigation bank, a process required by the U.S. Army Corps of Engineers and other federal agencies.
This procedure has been in place for some years but it has been implemented differently at times, and industry’s concern is mainly over the uncertainties on how the acreage for mitigation is determined - it is usually multiplied from actual acreage disturbed - and the lack of clarity on how costs are determined.
Layering, with different mitigations
The idea behind BLM’s mitigation for subsistence with GMT-1 is now being enshrined in federal policy at the top. President Barack Obama issued a presidential order last November ordering agencies to develop policies to minimize or compensate for adverse impacts of agency actions.
The U.S. Interior Department, U.S. Environmental Protection Agency, Department of Defense and the National Oceanic and Atmospheric Administration, are covered by the order.
The kinds of impacts to be avoided or how the mitigation is to be done was not spelled out. “The implication is that each agency, regardless of its respective statutory authority, is left to work out what this means,” said Joshua Kindred, environmental counsel at the Alaska Oil and Gas Association, which is following the issue closely.
“Ultimately, it is not clear that the memorandum’s mandates can be reconciled with each agency’s statutory authority,” he said.
So far only the U.S. Fish and Wildlife Service has stepped up to the plate, publishing a proposed mitigation strategy in February. Comments are due soon on the policy, which is likely to be in effect by the end of the year, Kindred said.
The deadline appears to be pushed by the impending change in the national administration.
The Fish and Wildlife plan appears to focus on critical habitat and other areas important to wildlife as well as habitats that may be vulnerable to climate change, Kindred said.
“The thinking could be that a particular area might not be high value habitat now (which would justify more extensive mitigation) but it might be in 50 years,” Kindred said. Just how any mitigation would be done is also unclear, except for a specific mention of compensatory mitigation, or money.
Lack of certainty
It is the lack of certainty on this that worries people. “We’re familiar with how the (Army) Corps does mitigation, which is complicated in and of itself, but the President’s memo has created a lot of new territory for the agencies and for industries that may have to navigate layers of mitigation,” he said.
Kindred said a particular problem is that agencies other than the Corps do not have provisions in statute or regulations to deal with impact mitigation. “They’re not equipped to deal with it,” he said.
“For the applicant, what remedy is available when an agency policy is directly contradicted by relevant and longstanding statutes? Is there access to the courts” if decisions are disputed? There are other questions as well. Where the agencies’ and Corps’ mitigation overlap, “do the agencies defer to the Corps or the Corps to them? It’s unknown,” he said.
Kindred said the proper way for this to have been done is to give agencies authority and guidelines through statute and regulation, so the public has opportunities to weigh in. Instead, the agencies are having to develop this on the fly. “There are no guard rails,” Kindred said.
As for wetlands themselves, the Army Corps has clear authority on protection and impact mitigation under the federal U.S. Clean Water Act. In the early 1990s President George H. Bush ordered a strict “no net loss” policy for wetlands which would have severely hamstrung Alaskans, where most of the state meets the federal wetland definition.
Alaska Sen. Ted Stevens introduced a bill in Congress to exempt Alaska, and a compromise, “the Alaska wetlands initiative,” was worked out to give the Corps some flexibility in implementation of no net loss in the state.
In following years, however, the Corps deviated from the policy and reverted to more strict Lower 48 guidelines. Efforts by Sen. Lisa Murkowski resulted in provisions of the Alaska Wetlands Initiative being more closely adhered to.
There are still uncertainties, however, the biggest being how acreages are calculated and how monetary compensation is calculated if that is done.
