December 21, 2004 --- Vol. 10, No. 123December 2004

State denies reconsideration of Bristol Bay basin exploration license

The Alaska Department of Natural Resources has denied a reconsideration request from Trustees for Alaska of its final best interest finding for Bristol Bay basin exploration license No. 1.

DNR 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 the Trustees request for reconsideration, but said he does not find additional analysis requested by Trustees to be necessary.

Pat Galvin, petroleum land manager for DNR’s Division of Oil and Gas, said 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.”

The work commitment for the seven year license is $3.2 million. To compute the bond required for the first year, the division divides $3.2 million by seven years — i.e. $450,000. If Bristol Shores is unable to get a bonding company to post the bond, then Galvin says the division 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 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 6, and so forth for each year until the license expiration.

“After fourth year if they haven’t spent a certain percentage we can shrink the license area and then the work commitment could be changed,” Galvin said.

At the end of seven years if part or all of the work was not done the entire amount of the remaining work commitment, which would be posted as a bond or cash equivalent for the final year’s work, could be forfeited to the state in exchange for tying up the acreage for seven years, Galvin said.

Jerry Allen who heads the management group that is working with Bristol Shores told Petroleum News today that Bristol Shores intends to move forward on the license.

“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. I’ve been told there are some people in Southwest Alaska who are very upset with the Trustees,” Allen said.

“Something like 21 villages called up Bristol Shores to see what they could do to help us,” he 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. The Trustees filing for reconsideration has “already cost us a year. We could have been shooting seismic this winter,” Allen said.

Note: See full story in the Dec. 26 edition of Petroleum News available online on Friday.

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