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Vol. 18, No. 19 Week of May 12, 2013
Providing coverage of Alaska and northern Canada's oil and gas industry

Fight for the frontier

State, ConocoPhillips, ASRC join defense of permit for first NPR-A development

Wesley Loy

For Petroleum News

Quite a legal battle is shaping up over the expansion of oil and gas development into Alaska’s western North Slope frontier.

The conflict centers on a planned project known as Colville Delta 5.

ConocoPhillips Alaska Inc. has a federal permit to build and operate the CD-5 drill site inside the National Petroleum Reserve-Alaska.

Seven residents of Nuiqsut, a predominantly Inupiat Eskimo village a few miles southeast of CD-5, are suing in Anchorage federal court to invalidate the permit issued by the U.S. Army Corps of Engineers in December 2011.

Now opposition to the suit is mounting.

On May 3, state lawyers filed a motion to intervene in the case to help defend the permit.

As Petroleum News went to press, U.S. District Judge Sharon Gleason had not yet ruled on the state’s motion.

But she’s already let in two other parties as intervenor-defendants: ConocoPhillips, which describes itself as “the target of this lawsuit in all practical terms,” and Arctic Slope Regional Corp., which owns the subsurface estate at CD-5.

The state, ConocoPhillips and ASRC all say they have significant economic interests at stake in the case.

An Alpine satellite

CD-5 is planned as the first permanent oil development site inside the NPR-A, a vast area west of the North Slope’s existing oil fields. President Warren G. Harding created the petroleum reserve in 1923.

The project is one in a string of “satellite” developments near the producing Alpine field, in the Colville River unit. ConocoPhillips is unit operator, with Anadarko Petroleum Corp. holding a minority interest.

Production from CD-5 will flow into the Alpine facilities for processing.

The ConocoPhillips board sanctioned CD-5 in October 2012, with construction scheduled to begin in the winter of 2014.

The project will involve building a drill pad, a six-mile gravel access road and a bridge across the Nigliq Channel of the Colville River. This will be the first bridge over a major channel of the Colville.

ConocoPhillips struggled mightily to get the permit.

The Army Corps initially denied a permit, holding that less environmentally damaging alternatives existed. The agency said CD-5 could be developed without a road, and without a bridge and suspended oil pipeline across the river. Instead, the pipeline could be installed under the channel using horizontal directional drilling.

The permit denial rankled Alaska elected officials, and ConocoPhillips appealed.

The plaintiffs

In reconsidering and ultimately issuing the permit, the Corps determined road access to CD-5 was the only way to provide year-round spill response access, and that leak detection could be more difficult with a buried pipeline.

The village plaintiffs argue the Corps violated the Clean Water Act by failing to provide a “reasoned explanation” for reversing itself. Their lawsuit also contends the Corps failed to conduct adequate analysis under NEPA, the National Environmental Policy Act.

Trustees for Alaska, a nonprofit environmental law firm in Anchorage, is representing the villagers: Jonah Nukapigak, Sam Kunaknana, Edward Nukapigak, Clarence Ahnupkana, Robert Nukapigak, Martha Itta and John Nicholls.

The seven are subsistence hunters and fishers, and say the CD-5 development could further degrade a way of life already compromised by oil and gas activity in the Colville River Delta.

“This project will add a bridge, road and traffic to one of our most important fishing and hunting areas,” Kunaknana said Feb. 28, the day his group sued the Army Corps.

The suit asks the court to vacate the CD-5 permit and “issue an immediate and permanent injunction prohibiting any further construction activities resulting in the discharge of any dredged or fill material into any wetlands or waters of the United States associated with the development of CD-5 until a valid permit is issued.”

State’s motion to intervene

The state has laid out a number of points to support its motion to intervene.

A court decision to revoke or enjoin the CD-5 project permit, or to compel further NEPA analysis, would prevent or delay oil production and directly affect state revenue, the state said.

In a declaration filed with the court, state Oil and Gas Director Bill Barron said the CD-5 pad will be on land where Kuukpik Corp. owns the surface estate and ASRC owns the subsurface. Kuukpik is the Native village corporation for Nuiqsut.

The pad will be used to produce from a reservoir that extends into state subsurface, the Barron declaration said.

Thus, the state is in line for royalties as well as production taxes, but only if CD-5 produces, Barron said.

What’s more, a ruling that halts the CD-5 development could jeopardize jobs for Alaskans, lawyers for the state said.

And such a ruling could discourage an industry of paramount importance to the state, they said.

“An uncertain government approval environment will increase the risk imposed on industry investment in Alaska’s oil and gas. This, in turn, will cause oil and gas development investment to go elsewhere where the rewards are greater and the regulatory environment more stable,” court papers said.

State lawyers also noted the Alaska Department of Environmental Conservation and the Alaska Department of Fish and Game considered the potential environmental and wildlife impacts of CD-5.

A judgment for the plaintiffs, the state argued, “interferes with Alaska’s management of its own wildlife, environment, natural and human resources.”

The Army Corps can’t adequately represent Alaska’s interests in the case, state lawyers added.

ConocoPhillips, ASRC interests

In arguing successfully for intervenor status, lawyers for ConocoPhillips told the court the company has invested hugely toward developing CD-5.

ConocoPhillips has expended millions of dollars acquiring leases, exploring for oil, conducting environmental and design studies, obtaining permits and contracting for the development, court papers say.

Vacating the permit or indefinitely enjoining development would “erase over a decade of effort,” the company said.

ConocoPhillips further said it could hardly rely on the Army Corps to look out for its interests, as the company and the Corps “have quite often been at direct and significant odds” regarding CD-5 permitting.

ASRC, in its bid to intervene, said it and Kuukpik had leased land to ConocoPhillips to develop the oil at CD-5. Both Native corporations and their shareholders are in line for production royalties, court papers said.

ASRC said it “has an interest in defending a permitted project design that reflects and incorporates the preferences of the Alaska Natives residing in the area, as expressed through Kuukpik and ASRC.”

Judge Gleason granted ConocoPhillips intervenor status on April 22, and ASRC on May 3.

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