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Money, time, an assist from the Legislature were all required
to bring Redoubt Shoal online Forest Oil announced Redoubt startup Dec. 16; the company’s Gary Carlson described some of the struggle over Redoubt in comments to the Resource Development Council annual conference Nov. 21 Kristen Nelson PNA Editor-in-Chief
Forest Oil Corp. announced Dec. 16 that it had begun production from its Redoubt Shoal field in Cook Inlet. (see Dec. 15 edition of PNA.) It was the culmination of a permitting and legal struggle.
Gary Carlson, the company’s Alaska senior vice president, told the Resource Development Council’s annual conference Nov. 21 about some of the struggles the company had in getting that project into production, including four years to get permits with an assist finally needed from the Legislature. And he urged the state to make changes, warning that it will lose future projects if changes aren’t made.
“Since Forest arrived in Alaska on 1996,” he said, “we’ve spent over $250 million in Cook Inlet, the majority of it on the Redoubt Shoal field.” He said the company is proud of the project, including the Osprey platform, the first new platform to be set in Cook Inlet in 16 years. In another first, the platform was designed to be moved to another prospect if the accumulation at Redoubt Shoal didn’t prove to be commercial.
Carlson said the pipelines to shore had been installed and production facilities capable of handling up to 20,000 barrels a day were being installed. The Kustatan onshore facilities are nearing completion, he said.
Anadarko Petroleum Corp.’s Mark Hanley had described that company’s new Arctic platform as an offshore platform moved onshore.
“We’re actually doing kind of the opposite,” Carlson said, putting operations that usually occur on the platform onshore instead. The Osprey platform is the first in Cook Inlet to be electrified with power from shore, supplied via cable, he said, and the drilling rig is being converted from diesel-fired to electric.
Separation will be done onshore and produced water sent back to the platform. The Osprey is the first in Cook Inlet platform designed to re-inject produced water, Carlson said, the first development program in Cook Inlet with all of the drilling cuttings injected and the first pipeline system in Cook Inlet that used bore holes to protect the bluff.
And the down side? With all of that, Carlson said, “it took over four years to get the permits,” and this for a “project within an oil and gas development area and where the facilities were built on private land.”
Carlson said he wouldn’t go into the details, “except to note that if the Legislature had not been in session and willing to react to these issues, there would have been another year lost in trying to get a return on the over $200 million that Forest Oil has invested in this project.”
The struggle to get permits, he said, places “an unnecessary burden on the potential investors in Alaska natural resources.”
But, he said, the cost to the public is greater.
“Unless there are substantial changes to the regulatory and litigation climate in this state, projects like this … will disappear. In addition to the cascade effect of creating indirect employment, the state and the taxpayers will miss out on royalty income, income tax and rentals,” he said.
Hidden costs “I do not need to tell this audience that there are hidden costs throughout our industry resulting from delays and concessions to regulators that do not enhance environmental protection or efficiency. The number is huge,” Carlson said.
He also said that these issues are not about the environment. Carlson said that in court recently Trustees for Alaska said they object to air traffic, boat traffic, tanker traffic that would result from new development.
“This is about stopping new development,” he said.
“And guess who pays their salaries?” he asked. “You do. We pay, the taxpayer pays, an average of $500,000 a year for these special interest litigants to sue the state.
“There’s something wrong with that system,” he said. “It needs to change.”
Carlson noted that Alaska’s new governor, Frank Murkowski, has already discussed this issue at a mining convention. The public interest litigants reimbursement program is “insane,” Carlson said, “has been counterproductive and has been misused by some of the people who are not interested in seeing development occur in Alaska.”
What’s the solution? Carlson said the public interest litigants need to be held accountable.
“They need to be bonded. When they’re causing reduction in value, destruction of value, they need to be held accountable,” he said, and bonding is one way to do it.
Alaska also needs to empower its regulators, Carlson said.
“The regulators have been trying to do a good job,” he said. “They are in some cases paralyzed by concerns of lawsuits.” That doesn’t make sense, Carlson said, and needs to be fixed, perhaps by holding selective areas of permitting separate from judicial review.
And, he said, the state either needs to fix its coastal zone management process “or we need to eliminate it.”
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