BLM plan to divert Alaska's share of revenues angers state
State officials and Alaska’s U.S. Sen. Lisa Murkowski aren’t happy about a plan by the U.S. Interior Department to divert the state’s 50 percent share of National Petroleum Reserve-Alaska revenues to pay for the cleanup of old wells drilled by the federal government.
Many of wells, drilled decades ago, are leaking oil and gas.
Some of the state’s 50 percent share would also be used to pay for conveyance of federal lands to the state and Alaska Native corporations. The land obligations to the state were made under the Alaska Statehood Act of 1959. The land obligations to Native corporations were under the Alaska Native Claims Settlement Act of 1971.
U.S. Bureau of Land Management, or BLM, spokeswoman Erin Curtis confirmed that the plan to divert the state royalty share was a part of President Barack Obama’s budget for the 2014 fiscal year submitted to Congress.
However, using the state revenue share would also require legislation by Congress, she said.
Gov. Sean Parnell is not amused, spokeswoman Sharon Leighhow said.
“The responsibility of cleaning up legacy wells in the National Petroleum Reserve-Alaska rests squarely on the federal government. The suggestion that Alaska pay for what is clearly a federal obligation is completely misguided,” Leighhow said.
Cathy Foerster, chair of the Alaska Oil and Gas Conservation Commission, or AOGCC, was more direct.
“This is a budget ploy. They’re saying that if they cause a problem, then the State of Alaska is responsible for fixing it,” Foerster said.
AOGCC is the Alaska agency responsible for ensuring that proper well abandonments are done in Alaska. BLM claims immunity from the state’s rules, Foerster said.
One thing that riles Foerster is the BLM’s claim that the federal agency is immune from the state’s rules, including regulations for safe well abandonment.
The NPR-A is a 23-million-acre reserve west of the Prudhoe Bay area oil fields that was set aside for its oil potential in 1923. Exploration was done by the federal government over several decades but no commercial-scale oil or gas fields were discovered.
Curtis said BLM currently receives about $5 million to $9 million in revenues from lease sale bonuses and lease rentals, 50 percent of which goes to the state under the 1975 National Petroleum Reserve Act.
There is currently no production from federal leases in the reserve although exploration by industry is underway.
Meanwhile, BLM has $1 million a year in its base budget for cleanup of the old wells, she said. This is woefully inadequate, Murkowski said.
“The last three wells they remediated cost $2 million each,” Murkowski said. “At this pace it will take BLM 100 years to clean up these wells.
“The idea that this administration would rob the state to clean up this mess is unbelievable.
“Not only is the federal government not living up to its responsibilities, but now the administration wants to stick us with the bill.”
Curtis said BLM plans cleanup of surface debris near Cape Simpson, an area on NPR-A’s northeast coast where several wells were drilled years ago, but she could not confirm whether any well remediation is also planned.
One well that is the highest priority for remediation is Iko Bay State No. 1, BLM said on its Alaska website. Foerster said this well is leaking gas. This is in a different location than the Cape Simpson sites.
The U.S. Navy drilled 91 wells between 1944 and 1952. An additional 36 wells were drilled by the U.S. Geological Survey, with Husky Oil as contractor, between 1975 and 1981. In 1991 the federal government began leasing to private companies in the reserve, and since then exploration wells drilled by private companies have been properly reclaimed, Foerster said.
BLM said on its website that $86 million has been spent since 2002 on well and surface debris cleanup, with 18 wells plugged and contaminated soils cleanup. Another 18 wells are partially plugged and are used by the U.S. Geological Survey as climate-change monitoring wells.
Twenty-five old well sites have been transferred out of federal ownership, with 19 transferred to the North Slope Borough, the regional municipality, and five to Arctic Slope Regional Corp.
The North Slope Borough and ASRC have remediated some of those wells on their own, those organizations have said.
Foerster, chair of the state conservation commission, has been in a long-running battle with the BLM over the legacy wells and BLM’s refusal to abide by state rules.
“A few months ago a BLM attorney stated in an AOGCC hearing that, because federal law trumps state law, BLM can come into the state of Alaska any time, go anywhere, do anything, and have no obligation to obey Alaska regulations,” Foerster said.
A few years ago the BLM began drilling several coal-bed methane exploration wells in NPR-A without obtaining a permit from the AOGCC. Later the commission discovered that several of the coal-bed methane wells were drilled without the drill being equipped with a gas diverter, a safety device that diverts gas that may surge to the surface if the rig hits a shallow gas pocket, Foerster said.
AOGCC rules require rigs to have gas diverters on shallow wells as well as larger blow-out preventer equipment on deeper wells.
Industry has also criticized BLM’s well cleanup planning.
Richard Garrard, a consulting geologist who managed FEX LLC’s exploration program in the NPR-A several years ago, said BLM could be doing its cleanup in a more cost-effective manner by strategically planning to mobilize rigs and equipment in locations where there are clusters of wells to plug rather than one well at a time.
The agency has also declined industry’s suggestions to lease NPR-A lands for exploration with a stipulation that a private company winning a lease would undertake the obligation to close out old wells, Garrard said.
BLM likely took that position because many of the old wells are in a coastal area of the reserve that has been designated off-limits for exploration because of sensitive bird habitat, despite the fact that several of these wells are still leaking, Garrard said.
As for the land conveyances, the president’s budget includes $17 million to pay for surveys and other expenses related to transferring lands to the state and Native corporations.
Unless the funds are augmented by some of the state’s 50 percent share of NPR-A revenues the $17 million would amount to a 50 percent cut from current-year spending on land transfers, Murkowski said.
“At this annual funding level, BLM estimates it will take as much as 80 years to finish patenting the land conveyances,” the senator said.
Tim Bradner can be reached at email@example.com.