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Alaska MMS chief: Access, permitting of primary concern to industry Agency is looking at possible incentives for Beaufort Sea and Cook Inlet leasing, but, John Goll tells Alliance, industry has told agency that without access and clarification of permitting, incentives meaningless Kristen Nelson PNA Editor-in-Chief
The Department of the Interior’s Minerals Management Service hasn’t yet decided what economic incentives it will offer as part of its upcoming Beaufort Sea and Cook Inlet oil and gas leases.
“The department is still considering options and if we finally do more forward with some incentives we will be announce those formally in the preliminary notice of sale for the Beaufort Sea in February,” MMS Alaska Regional Director John Goll told the Alaska Support Industry Alliance Dec. 12.
But, Goll said, industry has made it pretty clear that if it doesn’t have access to land and if the permitting issue isn’t solved, incentives aren’t all that important.
All three areas, he said, are among the Department of the Interior’s national goals for Alaska: more access to prospective lands, “getting better clarity and certainty in the permitting area” and economic incentives for companies to explore and develop areas offshore Alaska.
Different EIS approach MMS is working on the access issue, Goll said, taking a different approach than in the past with one environmental impact statement for three Beaufort Sea sales included in the current five-year plan and one EIS for two Cook Inlet sales, instead of one EIS for each sale. The draft EIS for Cook Inlet is out for comment, with public meetings scheduled for January (see sidebar).
The final EIS for the Beaufort Sea and the proposed notice of sale will be out in February, he said. The first of three Beaufort Sea sales is planned for September 2003, with additional sales proposed for 2005 and 2007.
In the Chukchi Sea-Hope Basin and Norton Sound areas, sales will be driven by industry interest.
“If there is interest,” Goll said, “we would develop a sales proposal around that area and then work towards a sale.” If a call for interest produces no response, then the agency will ask the question again in a year.
Calls for both the Norton basin and Chukchi-Hope areas will be out early next year. A previous call for interest in the Norton basin drew no response. This will be the first Chukchi-Hope area call in this five-year plan.
“The Chukchi Sea shows tremendous potential both for oil and gas,” Goll said. “Several wells were drilled there around 1990, but of course it’s far from infrastructure…”
No wells have been drilled in the federal area of the Cook Inlet since the mid-1980s, Goll said. “With new technology today, new theories,” the federal waters of Cook Inlet may be a place “to look again with regard to potential for oil and gas.”
Why isn’t permitting timely? On the permitting issue, Goll said, the question is frequently asked: Why can’t projects be permitted in a timely way?
Goll said he thinks some of the permitting uncertainty over the last few years comes from agencies wanting “to make decisions on issues that maybe are more rightly those of another agency.” MMS is working on that problem with both federal and state agencies, he said.
The other issue he’s seen crop up over the past few years, Goll said, is that many reviewers want to scrap the application they receive. The approach of many has been, he said, “let’s forget what the applicant gave us to review. And let’s redesign it ourselves the way we want.”
Goll said MMS doesn’t agree with that. “If a company brings a proposal that meets the laws and meets the regulations … then why can’t they get their permits?” he asked. Some smaller adjustments may be needed, “but not a wholesale redesign, and this is something that we believe really needs to be looked at.”
Senior management involvement When President Bush took office he issued an executive order on energy projects, “telling federal agencies that they need to move ahead on energy projects with a good pace,” Goll said.
Principal agencies within the Department of the Interior — MMS, the Bureau of Land Management, the Fish and Wildlife Service — are meeting on permitting issues, Goll said, with Cam Toohey, special assistant to the secretary for Alaska, kicking off an all-day meeting Dec. 6 at MMS in Anchorage. MMS is also working with other major federal agencies including the Environmental Protection Agency and the Corps of Engineers.
“And a key to this,” Goll said, “is not just meeting on a staff-to-staff level. It is really getting some of the senior management in the agencies involved…” That involvement wasn’t always there, he said, but now Cam Toohey and Drue Pearce are working within Interior, “touching base with some of the senior management within the federal agencies, to make sure they’re aware of what is going on and the importance of these projects.”
MMS is also meeting with state agencies — the Department of Natural Resources, the Department of Environmental Conservation, the Department of Fish and Game and the Division of Governmental Coordination — to compare notes on offshore projects.
Spill response issue One key joint federal-state issue is oil spill response planning, Goll said. Two years ago when BP and Alaska Clean Seas did broken ice oil spill trials, he said, there was a lot of publicity on failed tests.
Actually, Goll said, the barge-based advanced skimming system worked very well at funneling: unfortunately it funneled ice, not oil, which clogged the skimmers, making the system ineffective on ice concentrations above 10-30 percent.
Last summer, however, a successful “free skimming” test got no press.
Free skimming, Goll said, “is a tactic used in some other countries which “relies on ice to be the containment boom.” The vessel operator locates a concentration of oil, maneuvers his vessel to the site and deploys a skimmer to collect the oil.
“You don’t really need another boom,” Goll said. “You’re using the ice as the boom.” The skimmer is then moved to the next location. Free skimming, he said, allows operators to “concentrate on collecting oil, rather than trying to push the ice out of the way and ice management.”
The tactic increases the broken ice concentrations in which skimmers can work, he said. The vessels are also more maneuverable and can reach quickly in changing conditions, allowing retrieval of more oil.
Goll also noted that a recent National Research Council report, “Oil in the Sea III,” found a dramatic improvement in spillage from the oil and gas industry and said that one issue in oil spill requirements is “how much credit can be given for the improvements that have occurred” in things like well control. (See sidebar.)
Another issue is differences in cleanup technique requirements. The state requires mechanical recovery, Goll said, while MMS can allow other approaches such as in situ burning.
Incentives still under discussion On the incentive issue, Goll said four terms of oil and gas lease sales (royalty rate, primary term of the lease, minimum bid and rental rate) can be varied by sale, and the agency is looking at how those terms can be set to provide an economic incentive to industry. MMS is also looking at using royalty suspension volumes in Alaska, an amount of oil or gas which can be produced free of royalty.
MMS is also looking at price floors — it would suspend royalties if the value of oil dropped below a certain price — and price ceilings, where royalty suspension volumes would stop if the price exceeds a certain amount. The ceiling, he said, protects the federal government and taxpayers from giving away too much of the royalties.
Goll said the MMS is looking at allowing operators more time to inventory what is around a discovery and said it hopes to have a rule on that change published in the Federal Register within the next month or two.
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