Morris News Service-Alaska/Peninsula Clarion

Cook Inlet seismic, exploration work underway

KENAI — Despite pessimistic oil and gas outlooks, two companies are conducting seismic data-gathering activities on the Kenai Peninsula this spring and another is planning more exploration work. Hilcorp Alaska is planning to gather more seismic data on the oil and gas beneath the southern Kenai Peninsula, and SAExploration, a Houston, Texas-based oilfield services company, is gathering 2D and 3D seismic data on an area of the northern Kenai Peninsula near Nikiski. After April 1, Furie Operating Alaska plans to use a jack-up rig to drill new wells in its Kitchen Lights Unit. Hilcorp, which is also based in Houston, contracted with Global Geophysical Services Inc. to do a seismic survey of the area east of Anchor Point. The exploration is planned to through roughly May 31, and will cover a scattering of different lands on the southern peninsula. The Alaska Division of Oil and Gas is working to respond to public comments and approve the application. The areas included will be near the North Fork of Deep Creek, an area south of Ninilchik on the Stariski Creek, the whole vicinity of Anchor Point, a patch of land north Homer on the South Beaver Creek and an area near the end of East End Road. Global Geophysical Services plans to primarily use shotholes as an exploration method, though vibroseis — using heavy trucks pressing plates to the ground to shake the earth and measuring the reaction on ground-based sensors — is still a possibility. The company plans to drill 800 shotholes, three inches wide and 35 feet deep, approximately 330 feet apart in the exploration areas. Shothole drilling will be supported by helicopters, and if necessary, the company will clear an 8- to 10-foot diameter space around each hole to allow access, according to the application. All the equipment and personnel will come from Deadhorse and Anchorage, setting up a base of operations on private property between Ninilchik and Anchor Point. However, the company may look to hire support personal and utilize services locally, such as housing and waste disposal, according to the application. “Efforts will be made to hire community members and utilize local resources for select support positions,” the application states. Some have raised concerns about the environmental impact of Hilcorp’s seismic work, though. Bob Shavelson, executive director of Homer-based conservation organization Cook Inletkeeper, wrote in a public comment on Hilcorp’s application that the company “does not have a realistic grasp of the complex and sensitive habitats in which it seeks to operate.” Shavelson called for more detailed information from Hilcorp about the fish habitat in the proposed exploration areas, saying the application did not include detailed enough information about stream crossings. He also noted that while the company treated shotline trajectory as confidential, it released that information at a community meeting in Anchor Point and to the private landowners. “While Inletkeeper is disappointed in the cursory information provided by the applicant to make important decisions around our invaluable salmon habitat, its intent is to help (Department of Natural Resources) and other state and federal agencies improve the process for assessing the impacts — and mitigating the impacts — from projects such as the South Kenai 2D program,” Shavelson wrote. SAExploration’s project is in a more limited space north of Nikiski and being conducted entirely from helicopters, according to the application, which was approved Jan. 8. The area includes 85 square miles in portions of the northern Kenai National Wildlife Refuge and adjacent to the Captain Cook State Recreation Area. The work was originally expected to run through April 15, but it may be done by the end of March, said Rick Trupp, the general manager for SAExploration’s Alaska operations. The company was contracted by Cook Inlet Region Inc., the Southcentral Alaska Native regional corporation, to do the exploration work, Trupp said. “We have a staging site that’s fairly close to the coast, and we’re supporting operations from on the refuge,” Trupp said. CIRI’s goal in the project is to gain more specific information about the resources that it is fairly confident are there, said Jason Moore, the senior director of corporate communications. It is a fairly small-scale operation compared to other seismic work, Moore said. “We’re confident there’s gas resources where we’re looking,” Moore said. “We’re trying to get some very specific data.” In addition to the Hilcorp and SAExploration projects, Furie has applied to conduct further exploration projects in its Kitchen Lights Unit near the west side of Cook Inlet. Furie plans to drill nine more wells over the course of the next five years, or roughly two wells per year, according to its permit application. The exploration will drill through the Tyonek and Hemlock formations into the Jurassic formation. To conduct the exploration, the company has brought a new jack-up rig to the Kenai Peninsula, the Randolph Yost. The rig is currently docked in Homer for mechanical modifications and will be deployed to the Kitchen Lights Unit when the drilling season opens on April 1, according to Furie Senior Vice President Bruce Webb. Webb said the company is ready to drill, but the rate at which the wells will be drilled will depend on what the Legislature decides about the oil and gas tax credit program. Furie is a relatively small company and has invested a fair amount in the Cook Inlet area and is just beginning to see the first money come back from its investments, he said. “We’re told ‘when is the first day we can be out there?’” Webb said. “A lot hinges on what the state does with the (oil and gas) tax credits.” Reach Elizabeth Earl at [email protected]

Report: More imported gasoline drives up in-state price

The market for Alaska’s refineries is becoming even tougher with reduced demand and increased pressure to compete with imported fuels. Though the state’s refineries are closer to markets in Alaska, reducing transportation costs, competitive pricing from refiners in Asia and the U.S. West Coast may challenge their businesses, according to a December 2015 report prepared for the Alaska Department of Natural Resources. California-based Econ One Research, Inc., completed the report in response to a request from the Alaska Senate Finance Committee. The state is down to three commercial refineries after Flint Hills’ North Pole refinery ceased operations in 2014: Petro Star’s refineries in Fairbanks and Valdez and Tesoro’s refinery in Nikiski. Petro Star mostly produces jet fuel while the Tesoro refinery mostly produces gasoline and exports the remaining heavy oil to other markets. Alaska’s refineries are smaller and simpler than other operations, and in Tesoro’s case, the distance from other markets that insulates it from competition may also make it difficult to export other products. Tesoro exports about 30 percent of each barrel in the form of fuel oil, for which there is no market in Alaska, because the facility in Nikiski is limited by its technology and cannot convert it to lighter fuel oils. The refineries on the West Coast can convert up to 90 percent of a barrel, making it harder for Tesoro to compete, according to the report. About 70 percent to 80 percent of total demand for petroleum products comes from in-state refineries, while the rest comes from the Pacific Northwest or Asia. In-state refiners supply most of the demand in Southcentral and Interior Alaska, according to the report. Exports from Alaska have been gradually decreasing. Before 2008, Alaska was a net exporter of refined petroleum product; after 2009, the state became a net importer. Imports represented 22 percent of Alaska’s supply in 2013, according to the report. “Alaska’s refineries supply the majority of demand for refined product in the State, though their contribution has declined over the past decade as imports have claimed an increasingly larger percentage of Alaska’s product demand,” the report states. Diane Hunt, the special projects and external relations coordinator for the Alaska Division of Oil & Gas, said the report was requested by Sen. Anna MacKinnon, R-Eagle River, in the wake of the Flint Hills refinery closure and had been sent to the senate roughly the same time as the Department of Natural Resources. The report also shed a little more light on refined petroleum product prices in Alaska. Prices are generally higher than they are in the rest of the U.S., although it is not consistent across products — the biggest difference is seen in gasoline and diesel, while the least difference is seen in jet fuel. Tesoro is now the only gasoline and diesel producer in Alaska, and concerned about a monopoly, some have called for an investigation into the company’s practices because Alaska’s gas prices are consistently much higher than other states’. The Alaska Department of Law has looked into the higher cost of gas in Alaska several times over the past few decades. The latest was in 2008, when an investigation concluded that there was no evidence of collusion between the state’s refiners. Price gouging itself is not illegal, but collusion between companies to raise prices is illegal, according to the investigation. The renewed call came from Sen. Bill Wielechowski, D-Anchorage, who sought to block Tesoro Alaska’s proposed purchase of several Flint Hills assets to expand distribution in the Interior region. “The already delicately balanced retail gas market in Alaska will be dominated by the company should this sale be approved, keeping further competition from the state and hiking prices for customers,” Wielechowski wrote in a January letter to Alaska Attorney General Craig Richards. The report puts forth an alternative explanation for higher gas prices in the state. Essentially, the authors suggested large buyers of gasoline secured purchases at prices similar to what the cost of importing would be, called “import parity.” “While gasoline is generally not imported into the Southcentral or Interior of the State, imports are a potential alternative to local supply,” the report states. “Large buyers of gasoline and diesel, including the State, have been able to purchase gasoline and diesel at prices that generally reflect the cost of importing product … from the Pacific Northwest.” Reach Elizabeth Earl at [email protected]

AK LNG pre-FEED work continues with uncertain future

KENAI — Local representatives of the Alaska LNG Project said that although their leaders have spoken of possible delays, employees of the project remain set on smaller steps before them. These steps include creating final drafts of impact reports and completing property acquisitions for the prospective pipeline’s liquefaction facility and export terminal in Nikiski. On Feb. 17, representatives of the Alaska LNG Project partners — the State of Alaska, BP, ExxonMobil, and ConocoPhillips — said at an Anchorage press conference that uncertainty over the global LNG market may bring changes to the larger structure of the project. In a public meeting Saturday at the Kenai Visitor Center, Alaska LNG Community Stakeholder Advisor Josselyn O’Connor said these possible changes were not prompting hesitation with the project’s work. “Our marching orders are to get through and complete pre-FEED,” O’Connor said, using the project’s acronym for preliminary front-end engineering and design — the preparatory work needed to decide whether to invest in building the 806-mile pipeline to carry natural gas from the North Slope. Since 2012 the Alaska LNG partners have invested approximately $500 million in conceptualizing the pipeline, including $230 million budgeted for 2016, and are expected to make a further investment of up to $2 billion if they continue to actual engineering and design. The Alaska LNG Project has estimated it will ultimately spend between $45 and $60 billion on its facilities. “We know there’s a lot of noise around the project right now,” O’Connor said. “But we’re committed to pre-FEED. I think the owners stood up and said they’re committed to pre-FEED. We’re also looking at optimization: how do we get the cost of this project closer to the lower end of that price ticket? The other big thing is the resource reports. Those have to line up.” Alaska LNG will have to submit 13 reports of the project’s estimated effect on the local environment and culture to the Federal Energy Regulatory Commission, a national licensing authority. O’Connor said she expects the reports to be submitted in summer 2016. In response to an audience question, O’Conner said Alaska LNG will not need to complete its land purchases for the Nikiski facility in order to continue FERC licensing. She said the project has purchased about 570 acres and will eventually need to buy between 800 and 1,000 acres for the Nikiski terminal. Larry Persily, a former federal oil and gas coordinator and current advisor to Kenai Peninsula Borough Mayor Mike Navarre on LNG issues, said FERC would consider Alaska LNG’s application even if its acquired land is “a little bit of a jigsaw, and there’s a few pieces missing.” “When the project applies to the Federal Energy Regulatory Commission, they have to show they control the site,” Persily said. “The law does not require that they own 100 percent of the property, but they’ve got to show federal regulators that they have enough of the property under contract purchase option to show they control it.” He added that at least one prospective LNG project has been denied a FERC license for lacking sufficient control of property. When asked by an audience member what the project might do with the land if it does not reach the building stage, Alaska LNG Project Advisor Jeff Raun was uncertain. “In terms of our property management plan, I’m not sure of a clause that says ‘what do we do if...?” Raun said. In an interview afterward, Persily said that in the event the Alaska LNG Project decides not to build, recouping the land investment would be “the least of their worries,” and the property tax the project would continue to pay on the unused land would be a small part of its overall expenses. At the meeting’s conclusion, Persily also commented on the presently oversupplied global LNG market, in which major buyers in South Korea and Japan have dropped their imports by around 14 percent over the past two years, according to an email update by Persily. “The only LNG export projects anywhere in the world in the past few years that have gone to a final investment decision — because the market is so bad — have been the ones on the U.S Gulf Coast, where they already had an LNG import terminal in place,” Persilly said Saturday. In that case, he said exporting had been viable because it only required a slight reconfiguration of an unused export terminal. The U.S largely stopped importing natural gas after the technique of extracting gas from shale was perfected in the 2000’s, creating a new domestic supply. He added that the only other recent new LNG exporter is an effort subsidized by the Russian government. In a later interview, Persily said that given the value of the North Slope gas Alaska LNG wants to market, it’s unlikely Alaska’s pipeline and terminal will never be built. “I don’t think it’s a question of not building it, but when,” Persilly said. Reach Ben Boettger at [email protected]

BlueCrest: Credits an investment, not a cost

KENAI — BlueCrest Energy President and CEO Benjamin Johnson urged the public to contact the Legislature and ask them not to make any changes to the oil and gas tax credit program until 2017. The company is less than three months away from its first oil production at the Cosmopolitan field off the coast of Anchor Point. Production will be relatively limited at first — neighbors can expect to see one to two trucks a day on the Sterling Highway, taking crude oil north to the Tesoro refinery in Nikiski. As more wells are drilled, that number could be as many as 20 per day, Johnson said. While the oil production is on schedule, the other aspect of the development remains in limbo. A gas pocket that sits above the oil reservoir will be postponed if the state makes significant cuts to the oil and gas tax credit program, Johnson said at the annual Industry Outlook Forum in Kenai’s Old Carr’s Mall on Jan. 28. “It doesn’t work without the tax credits or some type of incentive,” Johnson said. “But we know that we have large amounts of resources. … These resources need to be developed. The tax credits are really critical to make sure that that’s done.” The position of the gas requires offshore drilling, while the oil development will be done with directional drilling from a facility onshore. Placing offshore platforms is significantly more expensive, and if the tax credit program is modified too much, it will postpone the gas development, Johnson said. There is a deadline for the gas development as well. A jack-up rig, the Spartan 151, is currently harbored in Seward and would be used to develop the gas wells if the development moves forward, Johnson said. However, unless the development goes through in 2016, the rig will leave Alaska and, “I’m not sure when we’ll be able to get another rig to drill offshore,” Johnson said. “To know if we’ll drill in 2016, we have to have the funding commitments and everything put together in 2016,” Johnson said. “Everything’s ready to go, we could be drilling April 15 if we knew the tax credits were going to be in place. ” The oil and gas tax credit program is one of the most scrutinized area of Alaska’s state budget as the Legislature looks to plug an approximately $3.5 billion gap in the unrestricted general fund this year. Gov. Bill Walker has called the incentives “unsustainable” and has proposed changes that would significantly cut payments, limiting the annual repurchases to $25 million. While Johnson said he could see the reason for some changes to the program, he said the Legislature should keep the same program for at least the next year. The company has already signed contracts based on the expectation that those tax credits will be carried through, he said. BlueCrest has accrued $45 million in tax credits to date, and the building this year would total about another $100 million in tax credit payments, Johnson said. He asked the attendees at the forum to “let the governor know” the impacts of changing the oil and gas tax credits. “This is the time that … it’s important that the Legislature and the governor understand that the gas development in the Cook Inlet is very important,” Johnson said. “Properly designed tax credits are … a very good investment for Alaskans. It’s an investment, not a cost.” Even if the gas production has to be delayed, the company plans to begin drilling soon, with first oil expected by April from the first well. Two additional wells will be drilled later this year, all of which will be hydraulic fracture wells, Johnson said. All three wills will be directionally drilled from an onshore rig that was designed specially for the BlueCrest project, designed to run on both diesel and natural gas, Johnson said. Johnson said 100 percent of the employees hired to work on the facility are Alaskans, and the company just hired several graduates from Kenai Peninsula College. Jayce Robertson is one of those new employees. A December 2015 Kenai Peninsula College graduate, Robertson obtained his degree in process technology and was immediately offered a job working at BlueCrest, which he said he will start Feb. 1. “I am extremely grateful for the opportunity that BlueCrest has offered me,” Robertson said when he spoke at the forum. “This is also a success story for Kenai Peninsula College and BlueCrest Energy.” Johnson said Robertson was one of a group of students who attended the forum last year who stood up during Johnson’s speech and asked to be hired for the development of Cosmopolitan. “We’re really excited about the folks that we just hired out of Kenai Peninsula College,” Johnson said. “I was thankful when they stood up last year and said, ‘Hey, hire me!’ And we did.” Reach Elizabeth Earl at [email protected]

Hilcorp still ready to buy assets as it looks to cost control

KENAI — As other oil and gas companies seek to trim expenses with layoffs and stalling development, Hilcorp Alaska has no plans to stop acquisitions. The company will continue to buy properties in Alaska, said Chad Helgeson, the Kenai area operations manager, in an update to the public at the annual Industry Outlook Forum in Kenai on Jan. 28. “Hilcorp is a growth company, acquisition-based,” Helgeson said. “That’s been our model.” The company’s workforce has also steadily increased. Of the approximately 520 employees statewide, 240 live on the Kenai Peninsula, Helgeson said. Aggressive purchases have left Hilcorp as the largest producer in Cook Inlet and with holdings on the North Slope. The company has no plans to downsize, either, and will take advantage of properties coming up for sale as other companies hit the rocks, Helgeson said. “Right now, pretty exciting times — a lot of properties are probably going to be available for sale,” Helgeson said. “What are we going to buy next? I have no idea.” At the same time, the company is feeling the impacts of sliding oil prices, though it continues to purchase and spend. Between 2014 and 2015, Hilcorp’s spending in Alaska decreased from $443 million to $281 million, a direct reflection of the decline in oil prices, Helgeson said. This year, the company expects to spend about $220 million, he said. The allocations of investment changed as well. In 2014, most of the money went to capital projects and drilling; in 2015, that changed to be majority maintenance and operations. As oil prices continue to decrease, the company will continue to monitor it and adjust its operations accordingly, Helgeson said. “As the price of oil continues to drop down, our goal is to be responsible and sustainable,” Helgeson said. “Our goal is to be here for the long-term. Our oil and gas contracts are going eight years out … we’ve got to be responsible.” The focus for the Kenai area this year is to control costs, Helgeson said. One of the questions is how the company can look at its Cook Inlet assets and continue to make them profitable, he said. The company applied earlier this year to drill two new wells in its Happy Valley pad southeast of Ninilchik and is in the process of applying to expand the boundaries of its lease in the Deep Creek Unit. The current pool boundaries, defined by the Alaska Oil and Gas Conservation Commission in 2004 when Marathon Oil leased the property, do not adequately include the majority of the gas in the formation, according to the application. This is still in process but is something the Kenai area team will work on this year, Helgeson said. If the commission approves the motion, Hilcorp’s rights under the lease would expand by about 400 acres, according to the application. Helgeson said the company is also exploring a project on the southern Kenai Peninsula and is planning to do seismic work on it later this year. However, the permitting process takes time, so it may be 2017 before any work actually begins, he said. He said there would be public meetings on any exploration the company does but did not give a more exact location of the exploration. “(We’re asking) ‘What can we do to extend the life of our fields?’” Helgeson said. “We’re planning to do some exploration type of activity. … What we’re finding is that it takes somewhere between 12 and 18 months to fully permit a project.” Reach Elizabeth Earl at [email protected]

Miller, SEC settle for $5M fine; assets overvalued by $400M

KENAI — The U.S. Securities and Exchanges Commission has reached a $5 million settlement with Miller Energy Resources after the company inflated the value of its Alaska assets. The settlement, reached Jan. 12, concluded the SEC’s investigation into the oil and gas company, the parent company of Cook Inlet Energy. The SEC charged the company, two former executives, and one of its former accountants with fraudulently inflating the values of the company’s Alaska oil and gas properties by more than $400 million. The inflated reports began in January 2010, shortly after Miller Energy acquired a series of Alaska properties from another company, according to the settlement document. Between 2010 and the announcement of the charges in August 2015, the company’s stocks skyrocketed — from about 60 cents per share to almost $9 per share. The company’s then-CFO, Paul W. Boyd, double-counted fixed assets, and then-CEO of Alaska operations David M. Hall knowingly understated expenses, according to the SEC’s cease-and-desist order from August 2015. An accountant from now-defunct accounting firm Sherb & Co audited the company’s reports in the year after the acquisition and failed to thoroughly investigate the financial statements, according to the cease-and-desist order. The company bought its Alaska properties for $2.25 million in 2009 and later valued at $480 million. “When computing their estimate of fair value, Miller Energy and the CFO failed to consider the existence of numerous, readily apparent data points strongly indicating that the assets were worth substantially less than the $480 million value Miller Energy recorded,” according to the settlement. Boyd and Hall requested a reserves report with faulty numbers and then presented it as the total fair value of the oil and gas reserves, increasing the total value of the company on paper by $368 million, according to the settlement. They also “refashioned” an insurance study that misrepresented the value of the company’s assets, according to the settlement. “As a result of the foregoing, Miller Energy overvalued the Alaska assets by more than $400 million,” according to the settlement. Miller Energy has agreed to unregister all its stocks and fully cooperate with the SEC to produce documents and provide employees to testify about the violations, according to the settlement. Miller Energy is also in the midst of a Chapter 11 bankruptcy and restructuring itself. The company announced the bankruptcy in October, blaming plummeting oil prices, a drilling plan that did not produce to expectations and the withdrawal of a private lender. The company owes more than $180 million, as reported by the Clarion on Oct. 1, 2015. Should the bankruptcy court accept the company’s plan for restructuring, the $5 million will become a “general unsecured claim,” essentially an IOU. The fine would then be paid “consistently with the payments made to Miller Energy’s other general unsecured creditors,” according to the SEC decision. The federal bankruptcy court has until June 30, 2016 to decide whether to accept the bankruptcy plan, according to the settlement. If the court does not accept the bankruptcy plan, Miller Energy will have to pay the SEC in installments, completing payment by no later than 2019. Reach Elizabeth Earl at [email protected]

CINGSA appeals decision on sales of gas discovery

KENAI — Cook Inlet Natural Gas Storage Alaska is contesting a revenue-sharing scheme that would allow it to sell 2 billion cubic feet of natural gas found in its underground storage facility if it gives 61.1 percent of the revenue to its client utilities. CINGSA is appealing for the Alaska Superior Court to overturn a Dec. 4, 2015, decision by the Regulatory Commission of Alaska, the state entity that oversees public utilities. The Regulatory Commission allowed CINGSA to sell 2 billion cubic feet of the 14.5 billion cubic feet of gas it had discovered while drilling a storage well in 2012 and keep 13 percent of the profits. The rest would be divided among the four utilities that hold 20-year contracts to store gas in the CINGSA facility — Homer Electric Association, Anchorage’s Municipal Light and Power, Chugach Electric Association, and CINGSA’s sister company ENSTAR — according to the percentage of stored gas each owns. CINGSA representatives had earlier argued before the Regulatory Commission that their company had sole property rights over the gas and could sell it as they wished, and later presented a scheme in which CINGSA split profits with its clients half and half. The Regulatory Commission rejected both after hearing arguments from the client utilities that their investments in CINGSA storage contracts had made the facility — and the discovery — possible, and that the removal of the found gas would decrease well pressure required to extract stored gas, constituting a risk deserving a return in revenue from the gas sale. CINGSA and ENSTAR spokesperson Lindsay Hobson said CINGSA would argue its original contention: that it has a right to all the revenue from the gas it found. “We’re appealing on the basis of our litigation position, and our litigation position was 100 percent of the proceeds of CINGSA’s asset to remain with CINGSA as the property owner,” Hobson said. CINGSA’s statement of points on appeal contends that in creating the revenue-sharing scheme it did, the Regulatory Commission “effectuated an unconstitutional taking without just compensation by ordering CINGSA to distribute to third parties proceeds of the sale of assets undisputedly owned by CINGSA” and that it did so “without reference to any law or legal principle.” The appeal was filed Jan. 4 and initially assigned to Judge Catherine Easter, who was peremptorily disqualified after a motion by CINGSA attorney Matthew Findley. Alaska court rules allows a party to a lawsuit to disqualify a judge. The case was then assigned to Judge Pamela Washington, who was similarly disqualified by a motion from ENSTAR attorney David Shoup. As of Jan. 26, the case is assigned to Judge Eric Aarseth. Hobson said CINGSA had not estimated the value of the 2 billion feet of natural gas. “Right now, with prices, it’s too speculative for us to say the value of something we can’t sell today,” Hobson said. Reach Ben Boettger at [email protected]

AK LNG Project may bring more Kenai River traffic

KENAI — Managers are concerned that pressure on the Kenai River could increase if the Alaska LNG P roject goes through. The project is still tentative and will not receive a final ruling until 2018 at the earliest, but if it does go through, the borough could see an influx of as many as 5,000 workers for the five years it takes to construct the 900-acre plant in Nikiski. Unless the camp is closed, many of them will likely recreate on the Kenai River. The Kenai River Special Management Area board raised concerns about access to the river at its meeting Nov. 12. The Kenai River is already seeing impacts from too many people wanting to fish and boat, and the addition of a potential 5,000 more LNG employees — and potentially their families — to the peninsula. Larry Persily, borough mayor Mike Navarre’s special assistant for oil and gas, addressed the board with an update about the particulars of the project. Much is still up for debate, including whether the project will even happen, he said. “It’s going to be three years at best before we know whether this project is going to go through,” Persily said. “But during those three years, there will be a lot of work to do and a lot of community input.” The board has been debating ways to limit access to the river for some time. During the board’s October meeting, the members asked Alaska Department of Parks and Outdoor Recreation representative Jack Blackwell to request a white paper from the Department of Law about ways to limit use of the river. Blackwell said he requested the paper, but it was not ready for the November meeting. However, he said it would be ready for the December meeting. The overuse of the river could be affecting habitat and water quality as well. Jeanne Swartz, a board member and an environmental program manager with the Alaska Department of Environmental Conservation, said a water quality survey from the Kenai Watershed Forum showed a relative improvement in water quality but elevated levels of certain metals, including copper and zinc. “We’re not sure what could be causing that,” Swartz said. “We looked at the things that we were sure weren’t a problem and took them out of the program, and everything else is going to be looked at closely. Then we’ll be able to make a more sophisticated or more in-depth analysis.” Elevated levels of copper can disturb young salmon, according to the National Oceanic and Atmospheric Administration. When the agency conducted a survey of 811 sites around the country in 2007, they found that elevated levels of copper may have come from road runoff in the surrounding areas and interfered with the salmon’s senses. Swartz said the Department of Environmental Conservation is not sure what is causing the elevated levels of metals in the river but may request data from the Alaska Department of Transportation about road traffic as well as other information about potential sources of toxins in the environment. If the LNG does come to Nikiski, there will likely be significant increases in traffic on roads close to the Kenai River, which could cause impacts in the water quality if road runoff damages salmon. Persily suggested that the board list all its items of concern and submit them to the Federal Energy Regulatory Commission, which will be conducting the Environmental Impact Statement for the LNG project. That statement will take approximately three years and will play a significant role in the project’s fate, he said. “FERC and the regulators know that this is going to have to look at salmon habitats, road traffic and air quality standards,” Persily said. “If there’s a concern that what are the company’s plans to deal with 5,000 workers roughly who on their days off will want to go to limited recreational opportunities on Kenai, that should be proposed in the EIS.” Reach Elizabeth Earl at [email protected]
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