COMMENTARY: Former Attorneys General: Ballot Measure 1 is bad law

As former Attorneys General, and Alaskans fortunate enough to call this great state home, we urge Alaskans to vote “No” on Ballot Measure 1. The citizens who drafted our state Constitution understood that the protection of our natural resources was of the utmost importance, but they also acknowledged that a state with an abundance of natural resources, yet thinly populated and with little connectivity in terms of a road system, would have to rely on the responsible development. This principle is best expressed in Article VIII, Section 1 of our constitution, which states that “(it) is the policy of the State to encourage the settlement of its land and the development of its resources by making them available for maximum use consistent with the public interest.” Ballot Measure 1 disrupts this balance to the detriment of all Alaskans. The Alaska Supreme Court recently ruled that the initiative could remain on the ballot, but only after striking its unconstitutional sections. However, even after striking the most onerous provisions, the court observed that “viewed as a whole,” it was apparent that Ballot Measure 1 would create a broad new definition of what is protected fish habitat and make Alaska’s “fish habitat protection statutes significantly more restrictive.” For example, Ballot Measure 1 contains, according to the Alaska Supreme Court, “a plethora of undefined terms.” For landowners trying to comply with the law, this is a step in the wrong direction — and this is just as true for an entity seeking to develop a large mine as it is for land owners wishing to install a culvert on their property. It also radically expands the opportunity for legal challenges to granted permits, allowing anyone to challenge a permit in court resulting in costly delays and endless litigation. Under current laws and regulations, studies are required to determine whether a body of water contains certain kinds of fish. If Ballot Measure 1 passes, this flips, and all waters in the state will be assumed to be fish habitat until proved otherwise. This has the potential to create a legal quagmire for property owners, especially private citizens. Thousands of Alaskans have riverfront or lake front property, and there are many improvements to property that might impact a body of water, such as a stream, running on private property. Ballot Measure 1 may force a landowner to pay for an expensive habitat study to prove that fish will not be impacted by a planned improvement. Worse, Ballot Measure 1 changes the penalties from civil to criminal for property owners who fail to secure the required permits. Failure to seek a permit for even minor construction activity in a river flood plain, which encompasses huge areas of Alaska, will make individual Alaskans, workers on municipal projects, and business owners criminals under our laws. We are not alone in expressing grave doubts. We join dozens of groups and organizations in opposing this Ballot Measure. Contractors, regional and village Native corporations, labor unions, resource development and energy companies, and responsible Alaskans are rightfully concerned that another significant project may never be built in this state if the initiative passes — and this would certainly be true for rural Alaska as well. Ballot Measure 1 is a bad law. It has not been subject to public comment, hearings, or review by regulators or independent scientists. Alaska deserves better than Ballot Measure 1, and we urge Alaskan voters to reject this fatally flawed measure when they vote on Nov. 6. Signed by: Craig Richards, John Burns, Michael Geraghty, Dave Marquez and Sen. Dan Sullivan.

Regulators air draft plan to increase well bonding amounts

State regulators heard mixed reaction from oil industry representatives about proposed increases to bonding requirements for drilling new wells. The Alaska Oil and Gas Conservation Commission held a public hearing Oct. 16 in Anchorage on the draft regulations, which would demand up to a $30 million bond be posted to drill and operate the largest oil fields. The AOGCC oversees the technical down hole oil and gas drilling and resource issues for the state. AOGCC Chair Hollis French said the added bonding expense would update state regulations to better reflect today’s costs to plug and abandon a well. French referenced a 1991 Legislative Budget and Audit report that said the State of Alaska should update its minimum well bonding requirements. At the time the bonding requirements were $100,000 for one well and a minimum of $200,000 for multiple wells and a “statewide blanket bond,” he said, bonding levels that remain today. The 1991 report concluded that an operator with a $200,000 bond then likely wouldn’t be able to cover plugging and abandonment costs, according to French. The three-member commission held a work session in June 2017 to discuss updating the requirements. The resulting 23-tier bond schedule would require at least $500,000 for the first 2 permitted wellheads with the minimum amount increasing to $1.7 million for up to 10 wells. A $15 million bond would be required for up to 999 wells and $30 million for more than 3,500 wells. Alaska’s largest Prudhoe Bay and Kuparuk River fields have each contain more than 1,100 well bores. Alaska Oil and Gas Association Regulatory and Legal Manager Peter Caltagirone said the bonding rate changes would be unprecedented; he noted they amount to a 150 percent increase for drilling two wells, a 50-fold increase for 100 wells and a 6,500 percent increase for 500 wells. The proposed regulations also don’t consider other agreements operations might have with DNR, he said, and do not require the state to release the bond when a well is plugged and abandoned, as state regulations currently do. “The proposed changes discourage new investment at a time when Alaska could use some new investment,” Caltagirone said, adding they would require new producers to comply immediately. AOGA is open to updating the bonding requirements in some form, according to Caltagirone, but the industry group would like to see more communication amongst regulatory agencies. Commissioner Cathy Foerster retorted that the commission is only interested in meaningful cost comparisons, such as how the proposed schedule compares to actual current plugging and abandonment costs. ConocoPhillips Drilling Engineer Randall Kanady testified that the company, which operates the large Kuparuk and Alpine oil fields and is developing other large projects, believes the overall tiered approach is “sensible” but would like to see it simplified. He suggested the minimum bonds but broken into three tiers to generally match the operators — explorers, small producers and major producers — with a $1.25 million bond covering up to 19 wells; $6 million for up to 200 wells; and $12 million for additional wells. Kanady noted the $12 million bond would be a 60-fold increase over current requirements. The Audubon Society, The Wilderness Society and Cook Inletkeeper submitted joint testimony largely commending the commission for its plan. They cited a 2016 Bureau of Land Management report that stated the agency was spending $40 million to plug, abandon and clean up 18 wells in the National Petroleum Reserve-Alaska on the North Slope, or more than $2 million per well. These so-called “legacy” wells were drilled and abandoned by the U.S. Navy and U.S. Geological Service between 1944 and 1974, with BLM inheriting responsibility for cleaning up the wells in 1982, according to its website. The conservation groups praised the tiered bonding schedule instead of a “blanket” fee, noting the per well costs decrease as the number of wells grows. “These changes greatly improve the likelihood that state government will not have to pay the high costs of problematic well operations or abandonment throughout Alaska, including in remote parts of the state where it is very expensive to conduct industrial activities such as plugging and abandoning wells,” they wrote to the AOGCC. Several members of the public similarly approved of the plan. However, Kenai Peninsula resident Jim White testified that such costly requirements prevent individual Alaskans from participating in the state’s oil and gas industry. White said he holds subsurface mineral rights to 4,600 acres on the Peninsula. Elwood Brehmer can be reached at [email protected]

AGDC navigates trade friction, touts Alaska-hire agreements

State gasline officials celebrated progress ensuring Alaskans will have first crack at filling the thousands of jobs that could be available to build the $43 billion Alaska LNG Project while at the same time trying to navigate the no man’s land of the U.S.-China trade dispute. The Alaska Gasline Development Corp. announced a framework deal with three construction trade groups Oct. 13 that are expected to lead to project labor agreements for building the three major components of the LNG export plan. The agreement with the Southcentral Alaska Building and Trades, Fairbanks Build and Trades, and the Alaska Petroleum Joint Craft councils sets the groundwork for negotiating project labor agreements, or PLAs, with the large engineering, procurement and construction firms that will manage the project through the construction phase. It sets the terms for work rotation schedules, employment and safety training requirements. Wage schedules for the project will be set based on current rates for public construction contracts when the work begins, according to AGDC. Gov. Bill Walker said in a formal statement that the state’s leading role in the project gives Alaskans control over the megaproject and puts them “in the driver’s seat for filling the thousands of jobs that this project will create.” The trade councils are affiliated with the Alaska AFL-CIO, which has endorsed Walker in the upcoming election for governor. “An Alaskans-first agreement guarantees qualified Alaska residents will be first in line to construct and operate the major components of this gasline,” Alaska AFL-CIO President Vince Beltrami said. AGDC estimates the project will generate upwards of 18,000 new jobs in the state over about six years of construction if it is sanctioned. Nearly 12,000 of those jobs will be directly dedicated to the project itself: 1,300 heavy equipment operators; 1,500 pipefitters and welders; 2,300 general laborers; and 3,500 truck drivers to move countless types of materials, modules and construction equipment — not to mention the 807 miles of steel pipe. Hundreds more electricians, carpenters, ironworkers and engineers will also be needed, as well as 1,600 people to feed, house and otherwise support those swinging hammers and welding pipe, according to AGDC. Trade talk Meanwhile, corporation President Keith Meyer emphasized the ongoing viability of the project in the face of a 10 percent tariff instituted last month by China on U.S. LNG imports during an Oct. 11 board of directors meeting. China originally contemplated a 25 percent tariff on U.S. LNG imports. Nationalized Chinese oil and gas giant Sinopec is a tentative anchor customer for the project after it signed a nonbinding agreement with AGDC to purchase up to 75 percent of Alaska LNG’s expected 20 million tons per year of production capacity in November 2017. That joint development agreement also detailed the prospect of the Bank of China and China Investment Corp. correspondingly financing up to 75 percent of project development costs with a mix of debt and equity. The Chinese consortium and AGDC signed a supplemental agreement Sept. 29 to collectively reaffirm their desire to reach a firm deal by the end of this year, Meyer noted. He said the “trade friction” between Washington and Beijing is creating uncertainty that LNG project developers in other countries see as an opportunity to fill growing Chinese demand for natural gas imports. “This project looks beyond that momentary friction,” Meyer said in an interview, adding that a contingent from the Chinese embassy was recently in Anchorage to discuss Alaska LNG and broader trade opportunities with state officials. “Their message is cooperation not conflict, and we feel that way as well,” he said. Negotiations are progressing; the companies are awaiting government approval on certain deal terms and Sinopec has signed confidentiality agreements with the producer companies in Alaska that provides access to the upstream gas resource data, according to Meyer. He also stressed that the project’s stable gas pricing — AGDC has estimated it can get LNG to Asian ports for $7 to $8 per million British thermal units — is still a very strong selling point for utility customers wanting an alternative to the price volatility of traditional oil-linked LNG contract terms. FERC homework On the regulatory side, AGDC Vice President of Program Management Frank Richards said he expects the corporation to set a schedule to respond to the latest series of questions and comments from the Federal Energy Regulatory Commission in the next few weeks. On Oct. 2, FERC, which is writing the Alaska LNG environmental impact statement, or EIS, sent AGDC 193 questions and comments, the sixth such data request the agency has issued for the project. Richards said that some of FERC’s requests will have to wait until data can be gathered during the 2019 summer field season and others won’t be needed until the final EIS is being drafted. AGDC has been on a tight budget since taking control of the project in January 2017 and Meyer acknowledged that funding has to some extent impacted the corporation’s ability to answer FERC quickly. “If we had more money to spend we could turn (responses) quicker, but I think we’re turning it adequately,” he said. AGDC has chosen not to request additional funding from the state Legislature over the last two budget cycles while the state was in the midst of multibillion-dollar budget deficits. Instead, since early 2017 the corporation has relied on $102 million left over from prior year gasline appropriations to pull together the $43 billion endeavor. The corporation had $48.6 million remaining as of August and is forecasted to have $12.1 million left at the end of the 2019 state fiscal year in June, according to Finance Manager Philip Sullivan. He said AGDC is under-spending its budget in all areas; actual spending was $247,000 below its operating budget plan for the first two months of fiscal 2019. Its full-year operating budget was approved at $10.3 million. A contributing factor to that is AGDC currently has 20 full-time in-house employees, but it budgeted for 26 employees, Sullivan added. Richards and Meyer also noted that despite the tight funding for advancing the EIS, FERC recently moved the Alaska LNG EIS schedule up a month; the draft EIS is now expected in February 2019, with a final draft coming the following November. Meyer said additional funding would most help with “keeping an aggressive construction schedule on track,” as the industry consensus is that the current global LNG oversupply will evaporate closer to 2022 than the 2024-25 timeframe discussed a couple years ago. Most of the growing demand is coming from China, he said. “Now everybody’s trying to be that project to fill that (supply) gap,” Meyer added. While AGDC has not directly asked for additional funding, the corporation requested authority from the Legislature last session to accept third-party investments. However, the Legislature rejected that request in its final state operating budget. If AGDC could get an injection of more than $100 million, the corporation would be able to complete advanced engineering and schedule long lead time items, such as pipe for the gasline from steel mills that are already busy with orders in the global natural gas boom, Meyer said. That funding would be rewarded with an equity share of the project. “The more money we have the more aggressive we can be,” he said. Elwood Brehmer can be reached at [email protected]

Council considers options for tracking halibut rental boats

A lot of unanswered questions, concern about fishery access and uncertainty about who is responsible remain part of the debate over how to register and track halibut harvested by unguided anglers in rental boats. The North Pacific Fishery Management Council discussed a potential course of action on a registry system for rental boats carrying unguided anglers fishing for halibut. It’s been an issue for the council for several years, springing from a sore spot among the commercial and charter halibut fleets because of the more relaxed bag limits on unguided halibut anglers. Unguided anglers get to keep two fish per day of any size, while guided anglers only get to keep one in Southeast and two with a size limit on the second one in the Central Gulf of Alaska. The charter sector is also subject to a sector harvest limit, while there’s no real tracking on unguided angler halibut harvest. In recent years, both private citizens and guides have been asking the council to do something about businesses renting out boats for unguided halibut fishing, particularly in Southeast. The intent of the higher bag limits was to protect access to the fishery for Alaskans, but some operations have begun commercializing it to bypass the charter sector. Potential solutions, though, are difficult to pin down. Council member and charter business owner Andy Mezirow introduced a motion with three suggested alternatives for how to keep a closer track on unguided anglers in rental boats, including doing nothing, requiring registration for non-guided rental sportfishing vessels, and aligning the bag limits in the charter and non-guided sector. Mezirow said this will be necessary given the growth in participation among nonguided anglers. “Defining all of these entities as one sector, requiring registration and applying the same bag limits is a necessary action to understand and then manage this fleet,” he said. The total sportfishing harvest of halibut in regulation areas 2C and 3A — Southeast Alaska and the Central Gulf of Alaska, respectively — actually declined between 2003 and 2016, but the proportions of who was harvesting them changed. In 2011, the harvest by unguided anglers surpassed the harvest of the charter fleet in Southeast, which may account for why people say the unguided sector is growing while the overall harvest numbers have stayed relatively flat, said Steve MacLean, the protected species coordinator for the North Pacific Fishery Management Council. In the raw data, though, fish being caught on private boats by individual Alaskans are indistinguishable from fish coming off rental boats being hired by tourists, MacLean said. “Unfortunately, we don’t have data on the number of fish caught by rental boats,” he said. “We don’t have any way of understanding the number of halibut coming off these rental boats like other private boats.” Council staff researched the registration methods available and concluded that the Alaska Division of Motor Vehicles registry is likely close to accurate, though it’s hard to separate vessels specifically registered to rent for unguided halibut angling from other pleasure craft, he said. “We did identify at least one company that is known to offer boats to rent for anglers for halibut that does not have any registered rental boats, but does have registered pleasure boats,” he said. “We had to look up the business owner and look up their address, and then search for boats identified or registered to that owner or that address, and we did find that there were a number of boats registered to multiple people at that address, pleasure boats. “We also do know that there are several companies that do have a boat that is registered as a rental boat but they do not offer fishing services. There are a number of venture companies that offer zodiacs for (activities like) wildlife viewing, glacier access. Those are all counted as rental boats.” While staff members were building the discussion paper, they also investigated which would be the best agency to implement registration or logbook requirements. The National Marine Fisheries Service, which works with the council and the International Pacific Halibut Commission to regulate halibut harvest, has one type of registration established but does not collect logbooks. While the Alaska Department of Fish and Game does collect sportfishing guide logbooks and conduct a private angler statewide harvest survey, the agency indicated that a separate logbook just for private halibut anglers would be burdensome, MacLean said. Several residents of Southeast Alaska testified that they’ve seen operations like fishing lodges take advantage of the more liberal unguided bag limit by offering a day or two of guided fishing followed by a rental boat for unguided fishing or the establishment of “fishing clubs.” Linda Behnken, the executive director of the Alaska Longline Fishermen’s Association, urged the council to move forward with registration requirements. Though it looks like harvest is flat, the council has to account for the fact that overall halibut abundance in the Gulf of Alaska has been declining, she said. “You’ve seen a drop in abundance, and you’ve seen the same level of removals,” she said. “That’s only happening because there’s an increased effort.” There’s a delicate line for the council to walk: protecting private resident access to the fishery and controlling business use of it. The motion isn’t intended to impinge upon private Alaskans’ ability to fish for halibut, especially as food, as citizen access to resources is provided for in the Alaska Constitution, Mezirow said. However, that’s something Alaska Department of Fish and Game Commissioner Sam Cotten said he’s concerned about in this motion. “There’s a strong level of support from the commercial halibut industry for the direction this will take, and it sounds like there’s a strong level of support from the charter industry … but there’s really no lobby for the resident angler,” he said. “When you look at the definition that’s been used here … resident anglers are going to be impacted differently based on their own economic situation, perhaps.” Elizabeth Earl can be reached at [email protected]

Pages

Subscribe to Alaska Journal RSS