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Vol. 22, No. 9 Week of February 26, 2017
Providing coverage of Alaska and northern Canada's oil and gas industry

Mitigation plan offered

DNR submits state wetlands mitigation program to Corps of Engineers; needs funds


For Petroleum News

A plan for a state wetlands mitigation program has been submitted to the U.S. Army Corps of Engineers after long preparation, Department of Natural Resources officials told a legislative committee in Juneau Feb. 22.

The proposal was warmly welcomed by the Senate Resources Committee as a more affordable option for Alaska firms requiring mitigation of wetlands impacts for construction.

Ironically, a budget subcommittee for DNR in the state House is also recommending that money for the program be deleted from the budget. The House Finance Committee will make the final decision, least for the House version of the budget, but the Senate will also weigh in on budget decisions.

It’s likely that the program will stay intact in the end now that DNR has formally submitted its program to the Corps.

Sen. Bert Stedman, R-Sitka, welcomed the initiative. He said contractors in his community are having difficulty dealing with Corps’ requirements to find and purchase wetlands mitigation credits projects to do small projects, even on two to three acres.

“I have constituents who are really stressed about this. These are small mom-and-pop contractors, and they’re at the point they may quit their business,” Stedman said in the Resources committee meeting.

North Slope complications

On the North Slope, the complications of wetlands mitigation are creating uncertainties and adding costs to new oil and gas projects. State Natural Resources Commissioner Andy Mack told the senators that ConocoPhillips only recently resolved mitigation issues for its new GMT-1 oil project by purchasing mitigation offset credits on 360 acres of private land two weeks ago. This was in compensation for a much smaller number of acres filled in with gravel for roads and pads at GMT-1.

This was the last outstanding permit issue for the $1 billion project, Mack said, which is in construction and due to begin production in 2018. The cost of the Corps’ wetlands offset has not been disclosed but Mack said ConocoPhillips was also required to pay $6 million under a separate mitigation requirement of the U.S. Bureau of Land Management to compensate for loss of subsistence resources to local communities.

“These companies are being asked to just write checks. This is extortion,” Stedman said

Shortage of private lands

Wetlands mitigation has become a problem in Alaska because, ironically, of a shortage of private lands on which offset credits can be purchased. The purchases and the offset projects must be approved by the Army Corps, which follows national guidelines.

Because of the scarcity of suitable private lands, and despite vast acreage of undeveloped wetlands in the state, the credit purchases have become very expensive for developers. On the North Slope costs can range from $44,000 to $125,000 per acre, Jeff Bruno, the DNR official leading the project, told the Senate committee.

A state wetlands program would be able to offer credits at a lower cost, Bruno said. DNR’s goal is to sell them basically at cost, which would include the expense of the aquatic habitat assessment of the acreages involved and any administrative expenses.

Mack said the number of acres for which credits must be purchased is also variable, and not necessarily just the acreage actually affected. The calculation depends on the type of wetland affected, and a higher-value wetland may require more acreage credits to be purchased to offset the loss. “One acre that is impacted can easily require offsets on five acres to be purchased,” Mack told the committee.

Federal lands can’t be used

Most Alaska lands are public-owned, either by the state or federal governments, but federal lands cannot be used for impact mitigation and so far state-owned lands have not been available, although DNR’s proposal would change that.

Some Alaska Native corporations, such as Arctic Slope Regional Corp., are also proposing mitigation programs using their lands but the Corps’ approval process is lengthy and complex.

So far only a handful of mitigation programs offered by private and nonprofit entities are operating in the state. All but one of these are regionally focused, mostly in Southcentral and Southeast Alaska. Only one entity operates statewide, including the North Slope, and it is currently not purchasing offset credits.

Sen. John Coghill, R-Fairbanks, a member of the Resources Committee, asked if DNR has already started development of an inventory of state lands that could be made available. Bruno said work has begun on that. It’s uncertain just how long it will take the Corps to approve the state’s proposal, however.

The House budget subcommittee recommendation to delete $200,000 from DNR’s budget for the program was initiated by Rep. David Guttenberg, D-Fairbanks, who chaired the subcommittee.

Guttenberg argued in a subcommittee meeting Feb. 15 that DNR has not substantiated a need for a state-run mitigation program that would compete with private or nonprofit programs, and that the agency has not done a cost-benefit analysis showing the project will be viable.

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