Proposed refuge regulations raise alarm

Critics say Alaska is unique and should be exempt; CIRI exec relates one driller’s struggle with U.S. Fish and Wildlife Service

Wesley Loy

For Petroleum News

Alaskans are questioning the need for proposed new federal regulations on oil and gas activity in national wildlife refuges.

The House Natural Resources Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs on May 20 held a hearing on the matter.

Two Alaskans were on the witness list - Kip Knudson, the governor’s director of state and federal relations in Washington, D.C., and Ethan Schutt, senior vice president for land and energy development with Cook Inlet Region Inc.

Both argued against the new regulations possibly coming down from the U.S. Fish and Wildlife Service.

Knudson told the subcommittee that Alaska, which has 16 enormous refuges, should get a “categorical exemption” under the regulations.

Schutt related the case of one driller that encountered all sorts of difficulties in trying to access its prospect in the Kenai National Wildlife Refuge.

The Fish and Wildlife Service manages the refuges.

“There is a long history of private oil and gas development on national wildlife refuges,” Steve Guertin, the service’s deputy director, said in written remarks to the subcommittee.

Oil and gas development can be found on nearly half of the nation’s 562 refuges, Guertin said. The refuge system has about 1,700 active wells, located on just over 100 refuges.

“The service recognizes that private oil and gas rights holders are fully entitled to reasonable access to explore and develop their oil and gas resources,” Guertin said.

But better regulations are needed to prevent pollution and other environmental impacts, and to make sure taxpayers aren’t stuck with the cost of cleaning up abandoned sites, he said.

Such regulations could “improve regulatory consistency to the benefit of both refuge managers and oil and gas operators,” Guertin said.

The Fish and Wildlife Service signaled the potential regulations with its Feb. 24 advance notice of proposed rulemaking.

The subcommittee chairman, U.S. Rep. John Fleming, R-La., said in his opening statement that “no one should be surprised that this administration wants more federal restrictions on our energy industry.”

He noted that nearly 70 percent of the active oil and gas wells within the refuge system are in Louisiana.

Fleming said the agency shouldn’t duplicate regulatory functions that states already perform. He also said it “must not establish unreasonable new fees” that would have the effect of denying companies access.

Alaska should be exempt from the new regulations for a number of reasons, Knudson said in his written testimony.

Chiefly, a “robust framework” of existing state and federal law already regulates oil and gas development within national wildlife refuges in Alaska, he said.

“This framework is unique to Alaska and was specifically tailored by Congress to provide for the national interest and the economic and social needs of Alaskans,” Knudson said.

Two key laws are ANILCA, the Alaska National Interest Lands Conservation Act of 1980, and ANCSA, the Alaska Native Claims Settlement Act of 1971. These laws provide clear guidance for federal management of oil and gas activity in Alaska refuges, Knudson said.

Another subcommittee member, Alaska Republican Rep. Don Young, said in a press release: “The rulemaking proposed by the Fish and Wildlife Service undermines the unique statutory system established in Alaska by both ANCSA and ANILCA, and greatly jeopardizes the process we have put in place to develop our oil and gas resources within refuges. These mineral rights belong entirely to the private land owners and the federal government should not be allowed to impose their burdensome regulations on these areas simply because this administration says so, especially when the states, particularly Alaska, already have robust and effective regulatory regimes to ensure the safe and responsible development of these resources.”

The Kenai National Wildlife Refuge is the only Alaska refuge with oil and gas production today. It encompasses Alaska’s first big oil field, Swanson River, discovered in 1957.

CIRI owns more than 200,000 acres of subsurface oil and gas interests within the Kenai refuge, Schutt told the subcommittee.

He said the Fish and Wildlife Service’s current posture on oil and gas exploration and development in or adjacent to Alaska refuges seems to be: “No. Not here. Not now.”

Schutt related the story of NordAq Energy Inc., a small independent with a prospect called Shadura on CIRI-owned subsurface beneath the federally owned surface estate within the Kenai refuge.

To minimize impacts and accommodate the Fish and Wildlife Service, NordAq agreed to build an access road and drilling pad out of ice rather than gravel for its initial Shadura well in 2011. But the agency refused to permit locations in the refuge for drawing water to make the ice road, Schutt said.

“Not easily defeated,” he said, NordAq contracted with a fish processing plant in Kenai for truckloads of manufactured ice chips to build the road. Agency staff then raised questions about whether the “imported” ice chips might pose negative effects upon melting.

Subsequently, NordAq has had difficulty securing final agency clearance for “a simple, single-lane gravel road” to develop the apparent gas discovery at Shadura, Schutt said.