Mayor Eben Hopson's Testimony Before the Berger Inquiry On the Experience of the Arctic Slope Inupiat With Oil and Gas Development in the Arctic
A Canadian Royal Commission, headed by Supreme Court Justice Thomas Berger, conducted the Mackenzie Valley Pipeline Inquiry, an exhaustive two-year study of the likely impact of oil and gas development throughout the Western Canadian Arctic. Mayor Eben Hopson was invited to testify before the "Berger Commission." The following is his testimony. It tells the story of how Arctic oil and gas development has been viewed by one of the most prominent political leaders in the Arctic.
Mr. Justice Berger. I appreciate this opportunity to testify before your distinguished forum to tell you about my perceptions of what is happening in the Arctic as a result of the discovery of large oil and gas reserves at Prudhoe Bay, and elsewhere, along our Arctic coast. We in Alaska have heard a great deal about the work of the Berger Commission, and I want to tell you that I appreciate the way that you have approached your task.
You have sought in your work the kind of broad point of view that will enable you to see the problem of safe and responsible Arctic oil and gas development in its true perspective. I realize that you are charged with focusing upon the problems of impact and dislocation that may result from gas pipeline construction, but you have correctly perceived that there is a whole host of associated problems for which your Inquiry has been the only responsible forum available to Inupiat and Indian citizens of the Northwest Territories.
Your work has international importance, too, because your Inquiry is documenting problems shared by the Arctic people of Canada, Alaska, and even Greenland. My staff and I have given this paper a great deal of thought, therefore, and I only wish now that I were able to be in Yellowknife today to deliver it personally, and respond to your questions.
My purpose in writing this paper is to share with you my impressions of the experience of our Arctic Slope Inupiat community of Alaska with Arctic oil and gas development. My hope is that our Inupiat people in Canada and Greenland will take notice and plan accordingly, and that government that serves us in Canada and Greenland will also take our experience and point of view into account.
Oil and gas is no new thing among us. Not many people realize that our people have been heating their homes and cooking their food with oil for thousands of years. There are oil seeps throughout our region, and on our way to our hunting camps, we would cut oil-saturated tundra into blocks. Returning from camp in the fall, we would collect these bricks of congealed pitch and tundra and burn them much the same way that urban homeowners use artificial particle logs sold in supermarkets for their fireplaces.
We have also traditionally used coal for fuel. It is estimated that our Arctic Slope region contains as much as one-third of the coal reserves of the United States. We Inupiat can prove aboriginal use of both our oil and coal for thousands of years. We had this fuel in such abundance on our land that it attracted national attention at a time in the United States when our political leaders were trying to extend American political and economic influence to other parts of the world, particularly in the Pacific.
In the early part of this century, our Federal government created several Naval petroleum reserves as part of an effort to insure that our Navy had access to fuel for its ships. Without asking us, for it was our land, our Federal government took from us 23,400,000 acres of land, as area roughly the size of the State of Indiana, without any compensation, and designated it to be Naval Petroleum Reserve No. 4. This huge area came under the administration of the United States Navy.
Not many people in America knew about this taking of our land in this fashion, and it was not until the infamous Teapot Dome Scandal involving a Naval petroleum reserve in Wyoming that national attention was directed to these reserves, large tracts of valuable land taken from America's Native people without their consent.
Back in those days in America, you must remember, there was not much political sympathy with the notion of aboriginal land rights. It was not until 1936 that we Inupiat were made citizens of the United States. In those early days we were just beginning to understand the ways of our Federal government. The full meaning of the creation of Naval Petroleum Reserve No. 4, which we call NPR-4, did not dawn on us until much later. At the time, however, we wondered how our government planned to extract our coal and oil for use by the ships of the fleet.
While NPR-4 was created in 1923, there was no effort made to explore the huge reserve for oil or gas until World War II. By then, our Navy had established a small research facility near Point Barrow. Associated exploratory drilling led to the discovery of natural gas in 1949, and the South Barrow Gas Field began its development. Gas was used to heat such Federal facilities as the hospital, the BIA school, and the Naval Arctic Research Laboratory, but we were not permitted to connect to gas to heat our homes.
By 1949, I was in my 20s, and I can vividly recall the long, frustrating, 12-year struggle to get permission to hook our homes in Barrow to gas mains that crisscrossed Barrow through our back yards. Although it sounds incredible today, the Navy was absolutely implacable in its refusal to let us use our own natural gas to heat our homes, and it took us twelve full years to get approval for us to connect to gas. It took a special congressional authorization in 1963 to sell us our gas for $0.50 per million cubic feet, a very high price at the time, one intended to force us to help amortize the Navy's gas field development costs.
World War II brought oil field employment opportunities to Barrow, and many of our people have worked over the years in seismic exploration and gas field operations. Barrow was one of the first regional centers in rural Alaska to slide into the cash economy, and for a long time was the only village community with family incomes high enough to participation in Federal home mortgage insurance and loan programs. So, our experience with the oil industry and oil development dates back to World War II when exploration of NPR-4 began in 1944.
While our Indiana-sized NPR-4 was thought to contain sizable oil and gas reserves, judging from surface evidence at least, its military status prevented normal commercial exploration and development. Such exploration as there was, was managed by a small bureau at the Navy Department in Washington D.C., with money appropriated for that purpose; but Congress never has appropriated nearly enough money to explore NPR-4 properly, so no serious effort was ever made to determine the true value of NPR-4. However, its development has become an important part of our national strategy to achieve energy self-sufficiency, and we are bracing for the impact.
Whether oil exists in commercially exploitable quantities remains to be seen. However, I hear many knowledgeable people say that NPR-4 may not contain as much oil and gas economically recoverable as it has long been assumed. However, this speculation might be being circulated to increase pressure upon our State and local governments to hold Beaufort Sea off-shore lease sales.
It took Statehood for Alaska to enable serious oil exploration in our State, and the first commercial oil field to be developed on the Kenai Peninsula, near Anchorage. With statehood, Alaska was entitled by Congress to select 105 million acres of Federally-owned land, that is to say land taken from Alaska's Native people without asking, or payment.
Naturally, Alaska's State land official began selecting lands with the most immediate income potential, for our new State was very cash poor. These lands included the Kenai oil fields, and the land adjacent to NPR-4, for the Reserve, being military land, was not available for State selection. The land next to NPR-4 was Prudhoe Bay.
The potential benefits of oil and gas development on Native-owned lands was brought home to us when the Indian village of Tyonek, on the Kenai Peninsula, received several million dollars from gas leases. Tyonek, which had long suffered from poverty and destitution, was rebuilt with modern homes and utility systems and other community facilities in the mid-60s. In fact, some of this new Tyonek Indian oil wealth was used to finance the early operations of the Alaska Federation of Natives, which began uniting the various regional native land claims into a single state-wide political movement during the last half of the 1960s.
I think you should know, however, that the people of Tyonek ran through their oil wealth in less than a decade, and today they are poor and on the dole once again; their wealth was lost through poor investments made by their lawyers and consultants. Some people worry, with some justification, that this cycle will happen many times again throughout Alaska in our post-settlement period, but I am hopeful that it won't.
There is no denying, however, that the chief beneficiaries of the Alaska Native Claims Settlement Act so far have been the lawyers. The experience of the Tyonek Indians with oil and gas development in their area is instructive, however, and should be carefully studied and documented.
The Kenai oil boom was a prelude to the Prudhoe Bay strike, and the development of the Prudhoe Bay oil field upon which so many are depending to ease the energy crisis in both Canada and the United States. Because we Inupiat had not lived in permanent communities in the Prudhoe Bay area for a long, long time, oil field development did not dislocate any of our people, although some of us lost fishing camps, and family graves were violated. Because the Federal government had transferred its title to Prudhoe Bay lands to the new State of Alaska, the State was able to lease this land to oil corporations for exploration.
The land was leased for about $25.00 per acres, and 12 percent royalty on production. We Inupiat, who owned this land, were not consulted by the Federal government or the State government on any of these real estate transactions.
State land officials were very callous and uncaring, even ignorant, of the entire question of aboriginal land rights. Throughout rural Alaska, Native villagers saw the State select lands surrounding their villages without any consultation with them, and we began to hear the State talk about limiting subsistence hunting, and imposing other limitations on use of our land. This caused, in every region of rural Alaska, land claims organization to begin. One of the things I am trying to say in this paper is that our Native Land Claims is an integral part of oil and gas development in Alaska, and this is also true for Canada and Greenland.
In our Arctic Slope region, the Arctic Slope Native Association was organized in 1964, and we filed a formal protest against transfer of Federal land within our region to the State of Alaska. We claimed aboriginal title to all of the 88,581 square miles within our region. Other regional native associations were organized, and followed our example, thus casting a cloud over the legal title of all of the land of rural Alaska.
This brought all Federal land title transfers in Alaska to a halt, and in 1968, Interior Secretary Stewart Udall imposed an official land freeze that was to remain in effect until the entire Native Land Claims question was answered, either in the courts or in Congress.
Unfortunately, our action was too late to save our title to the Prudhoe Bay oil field, Federal title having already been passed to the State of Alaska.
I repeat. In all this, we were never consulted. After the State leased our land to the oil corporations, they moved onto our land to behave in ways that would never be permitted today.
Gravel, a most precious commodity in the Arctic, was removed from river beds and beaches without proper regard to environmental impact. The gravel was used to build roads and pads over our old graveyards, and our sod houses at our fishing and summer camps were destroyed. Fish spawning areas were destroyed, and fish were killed during seismic exploration in our lakes.
The ancient caribou migration routes began being disturbed along our coast, and many of us feel that Prudhoe Bay and associated pipeline construction is to blame for what appears to our State game biologists to be s serious decline in our caribou herds. Our land began being littered by the junk of oil exploration. We suffered serious trespass.
In fact, our Federal courts have upheld the Edwardsen vs. Morton case in which the Atlantic Richfield Company has been held libel to trespass damages to our people during this time.
The courts actually held that the Prudhoe Bay oil field belonged to the Inupiat people of the Arctic Slope until our title was extinguished by the Alaska Native Claims Settlement Act in 1971. ARCO is appealing this decision to the US Supreme Court, and our trespass case is being defended now by the US Department of Justice.
Based on our legal doctrine, it is clear that oil operators now on our land in Canada are also trespassing, and it is my hope that Canadian courts will someday mete out the same kind of justice for Canadian Inupiat as US courts have provided to us.
The Prudhoe Bay oil discoveries created very little interest in the Native Land Claims Movement until the Federal land freeze was imposed whereupon oil industrial interest in settling our Land Claims was ignited and flamed to a white hot heat. Our Land Claims Movement had tied up valuable land, our land, making it unavailable for development.
This was made very clear when the State of Alaska conducted its second Prudhoe Bay lease sale in 1969 that realized $900 million for the State treasury. That was our land the State leased for nearly $1 billion. Those who can understand that the fabulous Prudhoe Bay oil field was taken from us without any compensation can begin to understand the justice of our demands today. The Arctic is owned by us, the Inupiat. It is our land. We do not mind sharing it with others, but we want to negotiate terms.
We Inupiat of the Arctic Slope and Northwest Alaska provided much of the leadership of the Alaska Native Land Claims Movement in the 1960s that led to the passage of the Alaska Native Claims Settlement Act of 1971.
I got actively involved in the Movement in 1965, and served as the first Executive Director of the Arctic Slope Native Association. Later, I served as Executive Director of the Alaska Federation of Natives. I was in a good position to view the Land Claims Movement from the inside. We sought an equitable solution to our land claims. We never did talk about settling on the basis of true market value, and we understood that most Americans did not understand or agree with our aboriginal land rights, and that we were dealing with honest differences of opinion.
I know that these differences exist here in Canada, also. During our struggle for settlement, we were offered everything from outer continental shelf lands to large amounts of cash, but largely because of the insistence of the Arctic Slope Native Association, we held out for land title, as well as cash. As you know, the Alaska Native Claims Settlement Act provided for 40 million acres in fee simple, and $1 billion in cash, plus interest, over twenty years. My regional corporation will receive roughly one twelfth of that.
But the Land Claims Movement involved more than a complex real estate transaction. While we worked toward a settlement, we also worked for local government. At the same time that our Arctic Slope Native Association filed our Land Claims, we began organizing our regional, home-rule municipal government under the terms of our State Constitution, and the Alaska State Municipal Code, which I had a hand in drafting when I serve in our State Senate. So we were familiar with how to organize local regional government in rural Alaska. Beginning in 1965, our work for local government resulted in the creation of the North Slope Borough in 1972.
Our Land Claims Movement was well underway when Governor Walter Hickel conducted the famous $900 million Prudhoe Bay lease sale in 1969.
Outgoing Governor Bill Egan, who had led the Alaska Statehood Movement, and had presided over Alaska's Constitutional Convention, had resisted leasing Alaska's remaining Prudhoe Bay parcels because he knew that the Prudhoe Bay reserves would be worth a great deal more, and would mount in value very rapidly. He felt that Alaska should wait for a better oil market before leasing its only proven oil field to the oil industry.
He resisted heavy pressure from the oil industry, and his resistance probably contributed to his defeat for reelection. Alaska's press is dominated by the Anchorage Times, a paper owned by a family that did very well in the Kenai oil boom, and which is devoted to maintaining a pro-oil climate of opinion in Anchorage, where half of Alaska's population reside.
Before turning his office over the Walter Hickel, Governor Egan urged Hickel to delay leasing Prudhoe Bay lands until they mounted in value, but Hickel rushed to lease these lands. He wanted to open up rural Alaska for all kinds of resource development, and he saw the Prudhoe Bay sale as a way to greater economic development and State resource income over the long pull, benefits that he thought outweighed those gained by waiting for an improved market for gas and crude.
The $900 million received from the 1969 Prudhoe Bay lease sale was a pleasant surprise. Hickel's land officials had expected less; more on the order of $400 million.
Today the Prudhoe Bay oil field is a remarkable Arctic sight to behold. Nearly $3 billion has been invested there to tap its proven 7.6 billion barrels of oil, and 26 trillion cubic feet of natural gas. The assessed valuation of taxable property at Prudhoe Bay is $2.20 billion, from which the State of Alaska raises over $200 million annually in property taxes, and from which our North Slope Borough realized $13.5 million this year in tax revenue.
About 200 miles of the Trans-Alaska Pipeline lies within the North Slope Borough. We have no villages near the oil field, or the pipeline, although Anaktuvuk Pass is some 50 miles west of the pipeline. For the people of Anaktuvuk Pass, the pipeline and its camps has meant no benefits at all. The Alyeska Pipeline Service Corporation could have included Anaktuvuk Pass in its sophisticated communications system, bringing telephone service to this remote village, but it failed to do so.
In fact, the caribou herd stopped coming up Anaktuvuk Pass, and our villagers there have had to do without caribou, an ancient staple in their diet. The caribou now use the pipeline corridor to migrate.
Prudhoe Bay is an industrial community of transient workers. With the exception of one or two families of State airport employees at Deadhorse, there are no families there. About 2,500 working men and women live at Prudhoe Bay, and another 2,500 work in the construction camps along the pipeline within our Borough. Presently, we have a village resident population of about 4,000.
For tax purposes, our combined village/industry population now is about 9,000. Prudhoe Bay is served by two jet-sized airports. British Petroleum is assembling one of the largest oil field electrical generation systems in the world, capable of lighting every village in the entire Arctic between Siberia and Greenland, if there was the means of distributing power across the Arctic coast. We dream of an international Arctic power grid someday resulting from Arctic resource development, and making it safer.
The North Slope Borough has complete public utilities authority, and in cooperation with the Northwest Alaska Native Association's NANA Regional Corporation in Kotzebue, whose NANA Environmental Systems acts as our Prudhoe Bay utility operator under Borough franchise, we are developing oil field utility systems, beginning with water, sewer and solid waste systems.
I point this out as an example of inter-regional Inupiat economic cooperation to capitalize on the economic opportunities provided by Arctic oil and gas development. I would like to see this inter-regional cooperation grow to spill over our national boundaries as a natural consequence of Arctic resource development.
In this present case, cooperation was possible because of the powers of home-rule Borough government in Alaska. Control of local government is an important economic tool with which to protect our interests as Arctic resource development grows and flourishes. The development of local government for the Arctic Slope Inupiat was an important product of the Land Claims Movement, and today the North Slope Borough,with its area of jurisdiction of 88,000 square miles, is geographically the largest single municipality in the world.
Our area is roughly the same size and shape of the states of California, Oregon, and Washington. We have the longest municipal coastline in the world, and the North Slope Borough is one of the major Arctic coastal governments. Our Borough lies on two seas: the Beaufort, which we share with Canada, and the Chukchi, which we share with the Soviet Union.
We Inupiat have always been a very democratic people, with strong traditions of local government. This is because we have always been a widely-scattered people who have had to work closely together in harmony with ourselves and with nature in order to survive.
"Government," as such, was introduced when the whaling fleet came to the Beaufort Sea, when the trappers came to the Canadian Arctic, and when the Danes came to Greenland. Behind them came the Christian missionaries, and behind them came those who "governed" us.
In Barrow, we were governed by the Bureau of Indian Affairs. When I was a boy in Barrow, we were governed by teachers, preachers, and traders. I recall being drafted into the army in 1943 when my wife, Rebecca, was eight months pregnant with our first child.
I did not meet my first son until I returned from the Army after the war. It was an all white draft board that drafted me when other single boys were available.
Government was often very painful. We were no longer governing ourselves. Had we governed ourselves, I know my people would have let me stay in Barrow at least until I could see my wife through her first pregnancy. It was little things like this that built up our great resolve to govern ourselves once again.
Village government in the Territorial days of Alaska provided just enough taste of democracy to cause us a great thirst for more, and I expect that the same is true for the villagers of the Northwest Territories and Greenland.
I can recall that I specialized in local government legislation when I served in the Territorial House and the State Senate. I know and understand how important restoration of local government is to the overall Land Claims Movement. For it is a restoration, which is happening in the Arctic, a restoration of democratic self-determination to all Inupiat.
Local government is not a privilege to the conferred upon us when we are ready for it. I am told that it is still fashionable in the Canadian Arctic to insist that our people are not ready for local government. That is not true. If we do not govern ourselves, if we do not enjoy local government today in Siberia, Alaska, Canada and Greenland, it is because local government was taken away, however gently, and it has not been restored to us.
The North Slope Borough is an example of partial restoration of local government to the circumpolar Inupiat community. As local government goes in the United States, our Borough is probably statutorily the most powerful local home-rule government in America. The development of the North Slope Borough was a direct consequence of the development of Prudhoe Bay, which produces over 98 percent of our Borough revenue.
Our total annual Borough budget is $27 million, half of which comes from our own Prudhoe Bay tax levies, and the other half of which comes from various State revenue sharing programs. Of course, most of this State support comes from Prudhoe Bay, also. We receive very little Federal funds, and we are seeking greater Federal participation in our budget as a consequence of the accelerated development of NPR-4.
To bring all this into perspective, we Inupiat of the Arctic Slope are about 4,000 in number, living in seven small villages, with about 60 percent of our resident population living in Barrow. These 4,000 are served by a regional municipal government with an annual operating budget of $27 million; with an "A" rating on the New York municipal bond market; and which is administering a six-year, $140 million capital improvement program that is being funded from municipal bond rates. This has been an important impact of Arctic oil and gas development.
We have found that local government for our people is not an inevitable result of Arctic oil and gas development, however. Our people in Canada, Greenland and elsewhere in Alaska will have to struggle hard against great resistance to govern themselves.
Local government is resisted at every turn by the oil industry in the name of tax avoidance. Oil corporations are not people, even though politicians and bankers often behave as if they were people and had the human rights of people. A corporation has no ideological commitment to the development of democratic self-determination.
The oil corporations operating in the Arctic have no commitment to the development of local government in the Arctic. On the contrary, oil corporations are committed to tax avoidance, and one way to avoid taxes is to oppose the organization of local government. That has been our experience.
Because of the shabby way that Alaskans were treated during our Territorial days by the Federal government, local government organization was specifically provided for in our State Constitution, and is spelled out in great, easy to understand detail in our State Municipal Code. Any group of citizens in rural Alaska can petition for one of several classes of local government, depending upon the degree of local responsibility desired.
Alaska has a Local Boundary Commission to oversee the organization of local government, and the decision and rulings of this Commission are final unless modified or overturned by the courts or the State Legislature.
The rules to follow in borough organization are fairly simple. We followed them, and filed a petition for a first-class borough for our entire Arctic Slope regional community, which included Prudhoe Bay.
Oil corporation lawyers appeared before the Local Boundary Commission to oppose our petition, saying that it was improper for our small, widely-scattered population to organize such a large area into a single municipal government capable of imposing property taxes upon Prudhoe Bay industrial property, especially in light of the fact that none of our community lived within 150 miles of the Prudhoe Bay oil field. They said that our petition was not fair to the oil industry.
When our Local Boundary Commission considered our petition, I was employed as a special assistant to Governor Egan, who had regained the governorship in the elections of 1970. I was able to watch after our borough petition, and saw it through all the steps through which it had to pass. When the Local Boundary Commission finally approved our petition in 1972, I resigned from the Governor's staff to run for Mayor of the new North Slope Borough.
I ran for an office that I was not sure would actually exist, for some oil corporations went to court to challenge the constitutionality of our Local Boundary Commission's approval of our petition.
Under our law, upon the Local Boundary Commission's approval of our petition to organize borough government, the State was required to hold elections to submit borough organization to referendum for all registered voters within our proposed borough area, and to elect borough officials.
The oil corporations tried to get the courts to enjoin the State from holding this election, but failed. When our Superior Court held for the Borough's constitutionality, the decision was appealed by the oil corporations to our State Supreme Court. When our State Supreme Court upheld our Borough's constitutionality, we thought that we had won, but not so' the oil corporations carried the battle against local government in the Arctic into the political arena of the State Legislature.
This phase of the battle, I think, is worth relating in some detail because it illustrates just what might reasonably happen to our people in the Northwest Territories as they become involved in the politics of oil in the Arctic.
It is clear now that the first symbol of circumpolar oil politics that have embroiled our people was the Super tanker S.S. Manhattan. The voyage of this ship led to Canada's rapid enactment of the Arctic Waters Pollution Prevention Act, and it confirmed our worst suspicions about the real ability of the oil industry to extract oil and gas from our Arctic homeland safely and responsibility.
I was pleased that this voyage drew world attention to the environment of the Arctic Ocean and the Beaufort Sea. Until the voyage of the Manhattan, I had heard a lot of loose talk among oil industry people about what could and could not happen in the Beaufort Sea. The voyage of the Manhattan made clear the necessity of the Trans-Alaska Oil Pipeline. It signaled to the world that the price of oil was going up.
The oil pipeline would have to cross State-owned land, putting the State in a good position to derive maximum benefits for our citizens from Prudhoe Bay oil production. In 1972, the State Legislature enacted a package of oil and gas revenue and regulation legislation designed to maximize State revenue, and reinforce the State's role in environmental protection and insuring maximum employment of resident Alaskans on pipeline construction.
This legislative effort caught the oil industry unprepared, so the industry threatened not to build the pipeline unless the 1972 oil package was repealed or heavily modified. These threats were taken seriously.
The oil industry's pipeline plans were under attack in court and Congress by environmentalists. Hundreds of millions of dollars had been invested by pipeline construction contractors and vendors in the construction of a pipeline that was being delayed too long. Bankers were getting nervous. There was a lot of money on the line, and a good many of Alaska's leading businessmen were getting hurt.
The 1973 oil shortage was in full swing around the United States. This all contributed to a political climate in Alaska in which Governor Egan, who had kept the Legislature in session in 1972 until they had enacted his oil package, now had to negotiate with the oil industry.
The result of these negotiations was the 1973 special session of the Legislature that was called to enact new oil tax and regulatory legislation that repealed or modified much of the 1972 oil package, and destroyed the North Slope Borough's revenue authority.
We responded to this move by engaging the best legislative consultant and lobbyist in Alaska. He had an offer from one of the oil corporations, but he elected to represent the Borough instead -- for ideological reasons.
We were able to reach a compromise that enabled the Borough to retain its revenue authority, but we were limited in our ability to tax oil property to $1,000 per capita. The State levied a 20 mill property tax on all oil production property in the State, and taxes paid to the North Slope Borough up to our $1,000 per capita limitation would be credited to the new State ad valorem oil tax. Our previous authority to tax oil in the ground, and the proven oil reserves, was nullified.
I am told that Governor Egan's Attorney General was badly seduced by oil company lawyers as they negotiated the demise of the 1972 oil tax package, and that most of the legislation introduced in the special session of 1973, including that which nullified our revenue authority, was, in fact, written by oil corporation lawyers.
The oil corporations play rough politics. They do not much care about the welfare of local government, and are even willing to go to the highest authority to undermine local government in the Arctic.
Soon after the 1973 special session of our State Legislature, we got together with the oil corporation lawyers and lobbyists and agreed to the terms of a truce. We settled a $15 million tax dispute for $5 million; agreed to suspend our sales and use tax for a period of time; and the oil corporations agreed not to oppose our Capital Improvement Program and our municipal bond sales. We planned to sell bonds to raise the money we needed to build new homes, utility systems, schools and other community facilities in our villages, and the industrial utility system at Prudhoe Bay.
While all this legal and political combat with the oil industry was going on for nearly two years, we had to implement regional borough government from scratch.
While we fought to defend the Borough's continued existence, we had to build a completely new regional governmental administration. We had to develop our tax rolls; begin establishing assessed valuation for all property within the Borough; build a regional educational system from the parts left us by the BIA and the Department of Education; and build a planning department able to deal with oil and gas development, as well as those things that planning and zoning departments usually do.
Truce with the oil industry meant that we could begin building new village schools; begin electrifying our villages and providing them with safe sewer and water systems; begin building new roads and drainage systems; and begin building badly needed new housing. We could begin a $140 million Borough-wide Capital Improvements Program that would mean full employment in all our villages for the coming decade. We began the C.I.P. in 1974, and construction began in 1975. We have been using the construction management approach, rather than bidding our work out to contractors. This has been our policy to insure maximum local hire on Borough construction projects.
Our Borough's C.I.P. has been plagues by incredible inflation. This inflation, I feel, has been one of the greatest economic impacts of pipeline construction.
When the Trans-Alaska Oil Pipeline was first proposed, it was said that it would cost as much as $900 million. The oil industry now estimates that the final cost of the line will be $7.7 billion, and it is admitted that there probably will be upward revisions of this estimate. Anything you have heard about the pipeline construction project is true.
There has been incredible waste of manpower and material, and poor quality control has necessitated lots of reworking of the line's construction. All this has created a ruinous inflationary climate in which our own village construction projects have suffered.
I feel that the people of the Canadian Arctic must prepare themselves for undergoing a steep increase in their cost of living as a direct result of oil and gas development. That has been our experience on the Arctic Slope.
Recent studies have revealed that it costs three times as much to live in Barrow as it does in Washington, D.C. The pipeline construction has created a highly charged, hot inflationary climate that has made it almost impossible for us to manage our community construction projects effectively. As a result, the economic benefits of oil and gas development to the Arctic community must be gauged accordingly.
We know that we are building in an artificially inflated climate, and our capital debt will be with us long after the boom is over, much like a hangover. Wage inflation has been very high, and it remains to be seen whether or not our high wage rates will be supportable after the initial boom of the pipeline and oil field construction is over.
I am very concerned about the long-term economic impact of oil and gas development upon our Arctic community. We are riding the crest of a high economic wave, and I fear about where it will deposit us, and how hard we will land.
As we have seen, Arctic oil and gas development has resulted in such social developments in Alaska as the enactment of the Alaska Native Claims Settlement Act, and the development of strong local government with the creation of the North Slope Borough.
These were political initiatives of Alaska's Native people. With the development of local government, we Inupiat of the Arctic Slope have found that we must deal in areas in which local government is seldom engaged. Our Borough government, for instance, has had to evolve its own policy toward Arctic oil and gas development that transcends our political borders into a kind of foreign policy.
The Beaufort Sea is a symbol of the reasons for this. There is only one Beaufort Sea. It is a single Arctic ecological system shared by the North Slope Borough, and the Northwest Territories. We Inupiat are a single Beaufort Sea community living under two national flags. We must contend with two different political systems, and two sets of rules governing oil and gas development, to protect our environmental values within our larger Beaufort coastal community.
We Inupiat of the North Slope Borough, downstream in the Beaufort gyre from Canada, have a measure of local control over oil and gas development on our side of the border, but we are unable to influence development in Canada because we have not yet developed local government in the Northwest Territories.
For this reason, we have undertaken to create a circumpolar Inupiat Assembly with which to work with the multi-national oil industry to develop a single set of rules for the industry to follow for safe and responsible circumpolar Arctic gas and oil development. Working with the Inuit Tapirisat of Canada, the Northern Quebec Inuit Association, the Committee for Original Peoples Entitlement, the Greenlanders Association and other Greenlandic community organizations, we have planned the first Inuit Circumpolar Conference which was to have been held in Barrow in November, 1976.
However, the great response to this initiative has caused us to decide to let out more line on this conference, and we have rescheduled our Inuit Circumpolar Conference for the week of June 13, 1977.
One of the reasons for rescheduling our conference until next June is the strong likelihood of a new political administration in Washington, D.C., one more receptive to the development of badly needed domestic and foreign Arctic policies aimed at insuring safe and responsible Arctic oil and gas development. Our big concern, of course, is off-shore development and its threat to our food chain.
Last March, I flew with two of my colleagues to attend the Annual General Assembly of the Inuit Tapirisat. We had arranged for leaders of the Greenlandic Home-Rule Movement, Greenland's version of our Land Claims program, to meet us in Tuktoyaktuk, and we returned to Barrow with the Greenlanders, and with the leaders of the Canadian Land Claims Movement to conduct pre-conference planning for the Inuit Circumpolar Conference. It was during this period of time that we became aware of the plans of the Canadian government to issue a drilling permit to Dome Petroleum for OCS exploration off the Tultoyuktuk Peninsula.
As you may know, I have taken a public stand in the United States and Canada against the Dome Petroleum Project in the Mackenzie Bay. By doing so, I have been accused by some people for sticking my nose in other peoples business. But I do not think so. There is only on Beaufort Sea, and we Inupiat of the North Slope Borough depend upon the Beaufort for our food. Anything that happens to place our Beaufort Sea in danger anywhere is my business.
I would not be doing my job as Mayor of the North Slope Borough if I failed to point to the Dome Petroleum Mackenzie Bay OCS Drilling Project as an example of the oil industry's contravention of our own national, State and local Borough Arctic environmental safeguards.
I felt strongly enough about this to fly to Washington D.C. last July to visit with officials of the embassies of Canada, Denmark, and the U.S.S.R. to discuss the international implications of the oil industry's Canadian OCS Program. Of those diplomats I talked with, First Secretary Yatsyna and his colleagues at the Soviet Embassy seemed to most understand and share my point of view.
They, too, are downstream from Canada. I got the impression that the U.S.S.R. has a formal set of interlocking domestic and foreign policies respecting the Arctic. Because we share the Chukchi Sea with the Soviet Union, we Inupiat of Alaska are just as properly concerned with Soviet Arctic oil and gas development as we are about Canadian development.
The North Slope Borough as 1,200 miles of municipal coastline to worry about and protect from harm that could come from unproven and under-developed OCS drilling and extraction technology.
The problem seems to be that there is a serious technology gap between what the oil industry wants to do in the Beaufort Sea, and what the industry can now do safely and responsibly. The Beaufort Sea is not safe for oil industrial experimentation. The Arctic is without much margin for error.
If there is to be rapid and orderly development of Arctic shelf oil and gas reserves, the oil industry is going to have to plan and behave better in the Arctic that it has been. For this to happen, there must be better communication between our Inupiat community and responsible executives of the oil and banking industries. For until we Inupiat are satisfied that the oil industry possesses the means to develop Arctic shelf oil and gas reserves safely, responsibly, and economically, we will continue to challenge the plans of the oil industry offshore in the Arctic.
I got involved with the Dome Petroleum Project controversy when the people at COPE in Inuvik asked me to intervene last February. They asked me to write to the Canadian Minister for External Affairs to inquire how the Canadian Cabinet's plans to approve the Dome Petroleum Project squared with Canada's Arctic Water Pollution Prevention Act, and this legislation's stated purpose of protecting the Arctic for us Inupiat.
Our people at COPE told me that we were being ignored in Canada by the oil industry and by Canadian senior civil servants with whom they work to plan Arctic resource development. They said that we were not being adequately involved in Arctic oil and gas development planning, and that it looked to them like the oil industry and the government were going to make some big mistakes, too big for us to tolerate without speaking up with strong warning.
Because we have established the North Slope Borough as a kind of Arctic beachhead of Inupiat self-determination, Canada's Inupiat turned to us for help when their own government officials paid no attention. I want you to know about these circumstances because many people have asked me why I got involved. It was not a popular thing for me to do. For many weeks, I was the only public official in the United States to publicly speak out against the Dome Petroleum Project, and the silence with which my statements were met was very dispiriting. I was feeling lonely, and I began to think that perhaps I had spoken out too hastily, and that I was wrong about the meaning of the Dome Petroleum Project.
In June, I attended a Beaufort Sea Conference in Seattle hosted by the National Oceanographic and Atmospheric Administration, and the University of Alaska, both involved in environmental studies of the likely impact and problems of American Beaufort Sea OCS operations. Many of the Canadian government scientists involved in Environment Canada's five-year Beaufort Sea Project attended this conference, and I learned form them that they had recommended against granting government permission for the Dome Petroleum Project, and that they were either ignored or overruled. And, I was also assured by them that I was right about raising public objection to this project. They also confirmed my impression that adequate technology for drilling and extraction has not yet been designed or tested for use in the Beaufort Sea ice environment.
I realize that the Canadian government is under great pressure to cooperate with the oil industry's plans for Arctic oil and gas exploration. This pressure is being applied in Alaska, also. On our side of the border, there is great pressure on both the Federal and State governments to conduct Beaufort Sea OCS lease sales.
Normally, the State owns the first three miles of continental shelf from mean tide. However, the Federal government is claiming in court that the creation of NPR-4 included much of the near shore Beaufort islands area that is being sought for lease by the oil industry. Because of the State's dependence upon the royalty income from Prudhoe Bay oil, oil that cannot be sold until the pipeline is completed, the likelihood of delays in the pipeline's completion has created a fiscal crisis for the State of Alaska. This year's annual operating budget for the State of Alaska totaled $700 million. The $900 million Prudhoe Bay lease sale bonus money is all gone. So, by delaying the pipeline's completion, the oil industry has increased pressure upon the State to conduct a Beaufort Sea lease sale.
As part of the US effort to achieve energy self-sufficiency, the Department of Interior has accelerated the leasing of its outer continental shelf lands, and in spite of the heated opposition of the State's Republican administration, the US Department of Interior conducted its first Alaska OCS lease sale in the north Gulf of Alaska earlier this year. The Department of Interior's Alaska OCS lease sale schedule includes a Beaufort Sea sale for the fall of 1977.
Last week, while meeting with top oil corporation executives at Deadhorse, our Secretary of Interior said that he was going to try to speed things up. Governor Hammond has suggested that both the Federal and State Beaufort lease sales be integrated into a single, cooperative program. The first objectives of this joint cooperation would be near shore exploration and development in ice-fast waters where ice movement is not a danger.
The hope is that, over time, the industry could develop the means to operate in deeper water where moving ice is the greatest problem facing the industry.
I support Governor Hammond's attempt to establish a cautious and cooperative approach to American Arctic shelf development, and I expect that the North Slope Borough will be a party to this cooperation. In his letter to Secretary Kleppe, Hammond has pointed out, too, the need for US-Canadian cooperation in all phases of Arctic shelf exploration and development in the Beaufort Sea.
I am happy to see our Governor adopt this position as policy. I feel that there must be close cooperation between the d=industry and government in all Arctic shelf operations, and I feel that this cooperation must be international in scope.
We Inupiat feel that safe and responsible Arctic shelf resource development must be governed by a single set of rules established by international agreements.
We feel that the special problems of the Arctic necessitate the development of an international set of Arctic policies if we Inupiat are to be able to develop trust and confidence in the oil industry's ability to conduct Arctic shelf operations safely and responsibly.
But, you know, I have found out that the United States has no Arctic policy, as such. I wonder if this is true of the Canadian government.
When we considered planning the Inuit Circumpolar Conference, we were encouraged by Alaska's US Senator Mike Gravel, a member of the US delegation to the Law of the Sea Conference. He agreed to the need for strong Arctic regional community organization to help establish and enforce standards of safe Arctic resource development able to protect our land.
Through his help, Ambassador John Norton Moore, formerly chief of the US delegation to the Law of the Sea Conference, attended our March, 1976, pre-conference planning session for the Inuit Circumpolar Conference. He described the role of regional community organization in the implementation of the Law of the Sea Treaty when it is finally completed and ratified. It may be that the international Arctic policy agreements we seek can be worked out in the context of these Law of the Sea negotiations, and that our circumpolar Inupiat community can be involved in these negotiations, as well as in watching over the implementation of agreements reached.
I am hoping that our Inuit Circumpolar Conference next June will lead to a level of Inupiat community involvement reflective of our responsibilities of stewardship over our land.
There are many opportunities for profitable Canadian-United States cooperation. As you know, there is a great debate going on in Alaska about the route of the gas line to take Prudhoe Bay gas to market. Alaska politics favor an all-American route because of its maximum economic benefit to Alaska.
However, national politics seem to favor an Alaska-Canadian route, and the feeling is that the Eastern states will join with the Midwest to lead the Federal regulatory agencies and Congress to approve either of the two Alcan route applications that have been filed. Personally, I have not taken a public stand on the matter, and won't until I learn more.
I feel, however, that the gas pipeline route debate has pointed out to us how bound together we are through the mutual problems of Arctic oil and gas production and marketing. When I talk about the development of strong Arctic domestic and foreign policies, I am hoping that both the United States and Canada can unify behind common policies, even mutual marketing and regulatory agreements, so that we can deal with the oil industry with greater strength with which to protect our land, and enable our people to derive the greatest benefits from the sale of the people's oil and gas.
We must work together, or the industry will work us separately.
The gas pipeline debate is one of two debates raging in Alaska. The other is the disposition and continued use of the Trans-Alaska oil pipeline construction haul road.
Development-oriented Alaskans have put great pressure upon our State government to keep the haul road open as a public highway from Fairbanks to Prudhoe Bay. There are a lot of problems with that, not the least of which is cost.
The Borough's policy is that it would be extremely unwise to open the haul road for public use once the oil pipeline is built. That haul road is a 24-hour maintenance operation. It was not engineered for use as a public road. Your planners should study the Alaska pipeline haul road issue.
We are learning that great political pressures can be brought to keep Arctic pipeline construction roads open for public use, and you should plan accordingly.
New roads into the Arctic tundra are difficult to imagine, but it is all part of the politics of oil in the Arctic. The politics of oil have had a very divisive influence in rural Alaska.
When our Land Claims were settled, the Alaska Native Claims Settlement Act authorized the organization of twelve regional corporations to manage both the land and the money received from the settlement.
Many of these regional corporations have signed exploration and option agreements with oil corporations, and several of these regional corporations have begun to appear to be politically aligned with their oil corporate partners.
Suddenly, Native members of the State Legislature, who used to vote as liberal Democrats, now vote with conservative urban Republicans on oil and gas legislation, thus alienating the urban liberals whose votes we could count on to pass bush legislation in such areas as health, education and local government.
New coalitions are developing. I worry about this. I worry that while this new oil coalition may work well for the oil industry's tax avoidance, it won't work for the people of our villages.
We have had to work many years to build the political friendships in the State Legislature that we enjoy, and I would hate to see these friendships lost because of the oil boom.
I worry that as the market value of Alaska's oil rises, the new oil/bush coalition will prevent oil taxes from being raised accordingly, denying all Alaskans their fair share of oil revenue. There will be a tug of war between those of us who want to maximize State oil income for needed investment in our Alaskan cities and villages, and those who want to help the oil industry avoid taxation.
I do not want to see this tug of war split Alaska's Native leadership as it appears to be doing. I do not believe that letting oil corporations explore our land for oil obliges us to adopt the politics of the oil companies.
This tendency to assist the oil corporations avoid taxes may extend even to the point that our regional native corporations will oppose the development of home-rule government in rural Alaska.
Rather than fight for local self-determination for our people, the influence of the oil corporations may lead our regional corporations to fight against it. Even now, in fact, I wonder if we could have organized the North Slope Borough today against the opposition of my own Arctic Slope Regional Corporation, of which I am a vice president. I worry about the direction that the politics of oil is taking among our people in the Arctic.
It is happening all over the State. It is probably happening here in the Northwest Territories. The politics of the Arctic are no longer the politics of the people, but they are the politics of oil.
While money is flowing freely from the $7.7 billion oil pipeline construction, Alaska's working men and women are being distracted from the Federal OCS Program in Alaska, the details of which would have caused great controversy in earlier days.
But now, most people are for anything that will keep the boom going, and the OCS Program is viewed in that category. Oil boom economics are addictive.
However, there is emerging a definite set of OCS politics out of Alaska's small coastal communities facing the greatest threat, as well as opportunity, from Interior's OCS plans. You should study the case of Yakutat, a Tlingit Indian community on the North Gulf of Alaska; the island Borough of Kodiak; and our own Borough, as we provide the leadership in the State's resistance to the worse features of the Federal government's plans for outer continental shelf development. The OCS Program of the oil industry is destined to become one of America's most persistent political problems.
The OCS Program threatens great harmful impact to Alaska's coastal people, who are predominantly Native people. "Impact" is a much heard word in Alaska. Others here from Alaska and the North Slope Borough will talk about impacts experienced and anticipated. It is all very grim. I am reminded of James Arvaluk's observation in Barrow last March at our pre-conference. He said that while our first Inuit Circumpolar Conference will deal with Arctic oil development, the subject should be treated as a problem rather than as an opportunity for our people. I agree.
However, there is one positive impact that we Inupiat should enjoy from Arctic oil and gas development; access to natural gas to heat and power our villages.
After fighting for twelve years, we were able to connect to gas from the South Barrow Gas Field in 1963. In working with Congress last year, we were able to write language into HR 49, legislation that demilitarized NPR-4, that obligated the Department of Interior to guarantee us continued access to Barrow to our natural gas, and at prices that reflect just the cost of lifting the gas. This will work out to about $0.33 per thousand cubic feet, probably the lowest consumer price for gas in the United Sates.
I feel that, wherever feasible, our Arctic communities should be connected to gas as part of the cost of oil and gas development throughout the entire Arctic. Our Arctic communities should not have to pay market price for gas, but it should be available to our villages at rates that will amortize the cost of village distribution systems, and the cost of gas utility operation and maintenance.
The cost of piping gas to our villages located reasonably near gas fields and gas pipelines should be borne by the operators as a part of their Arctic investment and overhead. I have taken the public position in Alaska that this benefit should accrue to all Alaskans living in communities near gas operations, including Fairbanks and larger, on-Native communities.
The problem I see preventing this benefit being realized may lie with the apparent intention of the natural gas industry to utilize cost averaging in establishing rates; to distribute the cost of natural gas transportation evenly to all communities served by gas pipelines.
Thus, our Arctic communities would be required to pay the same rates as communities of our Midwestern provinces and states. From our point of view in the Arctic, that would not be fair at all. We Inupiat regard the gas as our gas, taken from our land. Access to our natural gas at cost of lifting and distribution is our right that precedes from our aboriginal land rights.
If cost averaging is to be utilized, I hope that we can convince our US and Canadian regulatory agencies to exempt our Arctic communities from participation in this averaging. Such exemption, such special treatment for our communities, would be an example of an Arctic policy that I would like to see the United States and Canada adopt jointly; an Arctic community energy policy.
I feel diffident about commenting upon our Inupiat Land Claims Movement here in Canada. While I am a member of our common, circumpolar Inupiat community, and all the Arctic is my land, I am not a citizen of Canada and I feel that I should not comment upon the work of our people here to secure a land claims settlement without their authorization.
But I would like to say that I do not feel that there should be any further oil and gas development in the Northwest Territories until a just and equitable settlement of the Inupiat Northwest Territorial Land Claims has been secured.
It was not until the powerful oil lobby in Washington, D.C., got behind our Land Claims Movement that we were able to secure settlement legislation.
I feel that settlement of the Canadian Native Land Claims is part and parcel of Arctic oil and gas development in Canada, and the oil industry should join Canada's Native people to secure a fair settlement as soon as possible. I feel the same way about Greenland and the OCS Program underway in the Davis Strait.
The oil industry should get behind the Greenlandic Home-Rule Movement. Our people in Greenland are not being consulted in any meaningful way as their resources are being sold out from under them. Home-rule is the key to an equitable land claims settlement anywhere in the Arctic. It is the heart of the Land Claims Movement.
The Native Land Claims Movement is an international movement toward justice for all of the world's aboriginal people, people who owned and used the land that European refugees took, and did not pay for. This movement is alive wherever Native people still survive.
Last fall, I sent a representative to the first World Indigenous Peoples Conference at Port Alberni, B.C., and it was made clear that world resource development in fueling the same kind of land claims settlement negotiations as are underway in Canada. I feel that contemporary standards of justice mandate that Canada deals forthrightly with our Inupiat Land Claims as the first order of business in the development of Canadian Arctic oil and gas development.
Thank you very much for this opportunity to put my feelings, experience and perceptions on record here in the Canadian Arctic. I am sorry that my illness prevented me from testifying in person.
I would like to take this opportunity, however, to formally invite you, Justice Berger, to attend the first Inuit Circumpolar Conference to be held in Barrow, Alaska, beginning June 13, 1976. Perhaps you could arrange to convene your Inquiry there during one of the days of that week. The North Slope Borough would be pleased to cooperate with you in any way. In any event, you will be our honored guest because we respect the work you are doing here. We will ask you to comment upon your experiences in your assignment of establishing the criteria for justice to Canada's Arctic people in the face of the world's energy crisis.
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