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The Explorers 2021: DNR evolving to address new industry challenges, opportunities
CORRI A. FEIGE Commissioner, Alaska Department of Natural Resources
Whoever wrote “there’s nothing new under the sun” probably never worked in the Alaska energy industry! New technologies, laws, problems and opportunities seem to arise at an ever-increasing pace, challenging those in the industry to remain nimble and adaptive if they are to thrive, or even survive.
We in state government, working in partnership with private industry to responsibly develop Alaska’s natural resources, are not immune to the challenges of adapting to constantly changing industry practices and market demands. The Alaska Department of Natural Resources is working hard to meet changing conditions head-on, reorienting its divisions to better serve needs of our established oil and gas industry, while also standing up programs to encourage and manage Alaska’s newest energy sector: geothermal.
Grounded in state statutes and regulations, DNR’s activities best fulfil our constitutional obligations when they reflect practical considerations, particularly so when faced with Alaska’s declining oil production volumes and aging infrastructure. We in DNR have therefore been busy finding new ways to manage our current programs supporting the state’s oil and gas industry more efficiently. These changes will help provide oil and gas explorers and producers a more streamlined, one-stop shop for permitting activities to the greatest extent possible.
Significant realignments for permitting In recent months, DNR has made some significant realignments of the responsibilities for permitting activities relating to oil and gas development between the two divisions most closely involved: the Division of Oil and Gas, DOG, and the Division of Mining, Land and Water, DMLW.
We believe those seeking permits to operate in Alaska deserve state permitting teams who are responsive to industry needs, communicate clearly and consistently, and cooperate instead of confront. Both the public interest and the interest of the producers conducting business here demand transparent, consistent, clear, reasonable and logical direction from the state that is firmly founded in law, matched with responsible resource and land management and oversight that makes practical sense and does not create inefficient, duplicative processes.
DNR has therefore reoriented DOG and DMLW to work cooperatively to issue decisions and authorizations effectively and efficiently in the service of DNR’s constitutional mandate to develop, conserve and maximize the use of Alaska’s natural resources consistent with the public interest.
DOG is the lead division for all permitting and regulatory activities directly related to oil, gas and geothermal activities. This includes, but is not limited to, geological and geophysical surveys and seismic data acquisition, pipelines and supporting infrastructure (both common carrier and non-common carrier pipelines), hydrocarbon processing plants, seawater treatment plants and other facilities supporting infrastructure or activities in the normal course of exploration, development, production and transportation of oil, gas or geothermal resources.
DMLW is the lead division for all DNR land use authorizations not directly related to oil, gas or geothermal activities. This includes opening and closing dates for tundra travel, mineral extraction (excluding oil, gas, and geothermal resources), material sales and water use not authorized under AS 38.35, the Right-of-Way Leasing Act.
Notable surface leasing change One of our more notable changes is that surface leasing on state land for oil- and gas-related activities will no longer be authorized and managed by the professionals in DMLW, but by those in DOG. As a result, operators hoping to develop a project are much more likely to receive all their required authorizations from a single division, easing communications with the state, smoothing the regulatory process and speeding progress toward mutual success.
When it comes to inspections, DOG and DMLW will retain their responsibility for conducting site visits to ensure operators are meeting the conditions of their leases, permits and other authorizations. However, the divisions will work harder to coordinate compliance visits to minimize overlap, reduce redundancy and create cost-efficient and effective compliance programs that both accomplish compliance objectives and make good common sense.
DR&R Feige’s responsibility Dismantlement, removal and restoration are the inevitable last stage of any project, and one of my responsibilities as commissioner is approving final DR&R plans so the land may be returned to the state in good condition. To simplify on-the-ground contact with regulators during this process, the lead DNR divisions responsible for managing primary activities will continue to be responsible for managing DR&R as well - of course, in coordination with other DNR divisions, and with the Alaska Oil & Gas Conservation Commission, the Department of Environmental Conservation and the Department of Fish & Game as necessary.
DOG and DMLW will soon distribute new materials to explain which division will handle specific authorizations. In the meantime, if operators have specific questions about a potential authorization, they are welcome to contact either DOG or DMLW, who will be happy to point them in the right direction.
These changes may require us to establish new relationships or learn new skills, and change is never easy. However, it’s been said that if we want things to get better, we must be willing to let things change. I believe DNR’s changes related to oil, gas and geothermal permitting and authorizations should go a long way to simplifying things in the long run and making operating in Alaska more mutually pleasant, productive and profitable.
Supporting geothermal At the same time DNR is working to realign our permitting activities for established energy sectors, we are also working to encourage efforts to coax a new source of energy from beneath Alaska’s surface: geothermal energy.
There is growing recognition in Alaska of the opportunity that geothermal energy presents to provide a reliable source of energy, especially for rural communities and remote resource extraction sites. Geothermal energy can provide uninterruptible power for electricity generation and space heating based on commercially available technology.
Since 1983, the state has held four geothermal lease sales: three in the Mount Spurr area and one on Augustine Island. These areas were deemed prospective for geothermal energy based on substantial indications of geothermal resources and attractive targets for competitive sale of tracts.
While this program has provided the state with valuable data to help us understand the resource potential, the state’s current geothermal program has not had resounding success. Whether due to tight caps on total lease acreage, strict conversion requirements, technical challenges or other factors, application of geothermal technology in Alaska is limited, none of the four leases have produced paying quantities and no commercial grade resources have been discovered on state lands.
However, that may be changing. Governor Dunleavy has worked with our experts in the Division of Geological & Geophysical Surveys and DOG to introduce legislation aimed at improving our record. Senate Bill 104 and House Bill 135 would update Alaska’s geothermal statutes to be more in line with the terms and conditions of oil and gas exploration licensing.
The proposed legislation would match our existing oil and gas exploration program by changing “permits” to “licenses” and providing for a five-year geothermal license term, with a similar optional one-year extension. This increased term further supports opportunities for exploration in areas far from existing infrastructure. In addition, the maximum license acreage would double from 51,200 to 100,000 acres to provide explorers greater latitude to identify the subsurface resource for surface expressions of geothermal indications, such as hot springs.
These bills would significantly change the process of converting an exploration license to a non-competitive geothermal lease, based upon the completion of an agreed upon work commitment and submission of a plan of exploration. Such a work commitment would follow the oil and gas model, in which the work commitment is expressed in direct exploration spending.
Two companies have recently expressed interest in geothermal exploration near Mount Spurr. DOG has issued a two-year permit to explore state land near Mount Spurr to Raser Power Systems of Utah and has issued a preliminary finding proposing a similar permit to Alaska-based GeoAlaska. These explorers could be the first to see their exploration permits converted to non-competitive leases under the bills.
The bills would also change statute by modernizing the definitions for geothermal resources and geothermal fluids to account for advancements in technology that enable the use of resources at a greater temperature range.
Whether these changes will succeed in making geothermal energy a viable industry in Alaska may be uncertain. But it was not all that long ago when oil production in Alaska seemed like a long shot - and, as Wayne Gretzky famously said, “you miss 100% of the shots you don’t take.” With a little luck, and a willingness to embrace change, we could find ourselves injecting new energy into Alaska’s economy … by discovering a new source of Alaska energy.
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