05 DECEMBER 1978
Hopson Testimony: Department of the Interior Hearings Regarding Lifting the Ban on Joint Bidding by Companies Producing More Than 1.6 Million Barrels of Oil a Day Worldwide in the Proposed Joint State-Federal Sale of Oil and Gas Leases
It is obvious that Secretary Andrus instituted the ban on the joint bidding by "major" oil corporations in behalf of the Department of the Interior to encourage greater competition in the sale of federal oil and gas leases off the coast of Alaska and greater competition is assumed to encourage the participation of smaller petroleum producing firms.
The Borough believes these motives are commendable. Although Alaska has no truly local petroleum development firms, most Alaska based corporations (Native and non-Native alike) are small when compared to the global giants of the petroleum world.
Even the extremely successful local Alaskan corporations have experienced great difficulties in competing against large national and multinational firms with their abilities to command large quantities of capital, expertise and political considerations.
Often contracts are lost of business preempted despite superior and more intimate knowledge of local conditions and operations and with proven records of performance in Arctic conditions foreign to many "Outside" firms. Thus, armed with local knowledge and local experience, Alaskans can philosophically appreciate a competitive climate favoring smaller firms.
On the other hand, the bidding in the joint state-federal lease sale in the Beaufort Sea will not involve local firms as bidders. Even the so-called "minors" who would consider bidding are giants by Alaska standards.
However, based upon previous experiences of onshore Arctic petroleum development and Alaska offshore exploration, costs must be viewed as extremely high. Can the smaller petroleum corporations independently fulfill the requirements and responsibilities involved with offshore petroleum development in the Beaufort Sea? In the face of severe environmental constraints and considerations, can these firms assume the unavoidable costs necessary to avoid or minimize environmental loss or degradation? These expenditures are imperative. The costs are real and unavoidable.
The overriding consideration of the North Slope borough must be environmental. Any possibility of firms not being able to command financial resources sufficient to meet all conceivable environmental contingencies cannot be tolerated.
Many permanent residents of the North Slope Borough are opposed to any petroleum development offshore. These people believe that an environmentally sound OCS petroleum development program will not be conducted. They lack confidence in industry operations and they lack confidence in the state and federal authorities to strictly enforce environmental legislation designed to protect the environment. Frankly, they fear oil spills which will result in irreparable damage to the habitat especially the habitat of the bowhead whale.
Other Borough residents believe that meticulous considerations of the environment can be enforced by law. They believe that cautious, well conceived development programs can be carried out without undue degradation to the environment. They conceive that if development is not carried out in this manner that the program must be terminated in the Beaufort Sea.
Let us look at the people who will be directly affected by the decision made regarding the joint state-federal oil and gas lease sale. The only people directly affected over time are the permanent residents of the North Slope borough and these people are the Inupiat. Of course, there are residents other than Eskimos within the Borough, but these residents are essentially transient and can be classified within four broad categories.
First are residents whose purpose for being within the Borough is associated with providing services to the local Eskimo population. The second group is associated with the military complexes. The third group is the scientific community who is studying the Arctic, and the fourth group is associated with natural resources extraction principally oil and gas resources.
Although considered residents, few of these people can be considered permanent residents of the North Slope borough. Most governmental employees providing services on the North Slope remain a limited number of years. Those associated with the military either directly or by contract normally are rotated after a year or two at their station in the North Slope. Individuals in the scientific community remain only on a project basis or until their field data are collected or in other instances, seasonally migrate to the north to do research of limited duration. The employees of the petroleum industry are rotated from their permanent homes outside the North Slope on a still shorter basis. Therefore, over the years it is the Inupiat of the North Slope and only the Inupiat who must live with the local creations of the petroleum development.
Let me stress the importance of the environment to our people, the Inupiat of the North Slope Borough. It is imperative to recognize that the environment is the foundation of our culture. The habitat or the environment in general supports the fish and wildlife populations needed by our people. These populations provide subsistence for the resident Inupiat and the process involved in the subsistence pursuits form the basis of Inupiat culture.
It is recognized that subsurface petroleum resource development has either directly or indirectly provided a greater cash income to the residents of our area, and it enables the Borough to provide facilities and services to Borough residents blatantly ignored in the past by state and federal authorities. Therefore, the Borough as a responsible local governmental unit cannot afford to do other than totally exercise its authorities to insure prudent management of its lands and water and the resources therein.
A review of Borough management objectives in our Prudhoe Bay area, coastal management program indicates Borough intent to guard the environment. Competing uses such as petroleum development have a place when and where their effects will neither result in decreased productivity of fish and wildlife resources nor the loss of endangered or threatened species and where a contribution is made to the health and well-being of the permanent residents of the Borough.
1. To value and have valued by others the long term needs of fish and wildlife above all competing uses.
2. To enforce sound management of all fish and wildlife resources and the environment upon which the fish and wildlife and man depend.
3. To effect management on the basis of total ecosystems.
4. To use Borough regulatory powers, to enter into agreements and to generally promote the protection of fish and wildlife habitat regardless of jurisdiction.
5. To compel management plans and actions to perpetuate and enhance the habitat to obtain optimum fish and wildlife populations.
6. To insist upon the protection of endangered and threatened species.
7. To preserve the traditional Inupiat lifestyle and culture by maintaining unimpaired subsistence use and access to all lands and waters and the fish and wildlife which inhabit them and by preserving the historic resources of the Inupiat culture.
8. To permit competing uses only when assured that the effects will neither result in decreased productivity of fish and wildlife resources within the ecosystems nor the loss of endangered or threatened species.
9. To support competing uses only to the extent that they contribute to the health and well-being of the permanent residents of the North Slope Borough and fulfill the intent and spirit of self-determination as embodied in the Alaska Native Claims Settlement Act.
Of specific concern to the Borough are policies which may be employed by the state and federal governments which would result in a larger than necessary consumption of habitat supporting fish and wildlife. If bans on joint bidding are construed as inhibiting common use of facilities, i.e. service bases, heliports, roads, docks, pipelines and other facilities, avoidable environmental degradation will take place in the Borough and the Borough must vehemently oppose these actions.
The joint use of sites and facilities, including existing facilities if there is unused capacity available, should be required to the maximum extent possible. furthermore, it is the position of the Borough that any long term structures or facilities for administration, operations or residence should be located in the Prudhoe Bay/Deadhorse area. No long term facilities other than pipelines, pump houses and other structures or facilities absolutely necessary to the operations of petroleum fields should be located outside this area.
Major shoreline uses and facilities such as docks, barge landing areas and service bases will be confined to Prudhoe Bay. Safety of offshore personnel is deemed the only exception meriting consideration for shoreline location outside Prudhoe Bay. In these cases, the prime areas of consideration are viewed as being the DEW line stations which are no longer in use.
The present policy of rotating workers is assumed to continue and that no permanent residential settlement or new towns will be located in the Borough. The practice of maintaining camps for employees who are shuttled into the area for work periods then outside to their permanent residence is viewed as the beset means of limiting the impact of people upon the environment.
Failures to employ the joint use of structures and facilities and to rotate workers would serve to increase wildlife habitat consumption, pollution, and competition for limited subsistence resources.
To the maximum extent possible, there must be joint use of facilities, rotation of work forces and a confinement of activities to the Prudhoe Bay/Deadhorse area.
There must be assurances that firms bidding on the joint state-federal Beaufort Sea lease sale will conform to the state and federal body of environmental law and the North Slope borough ordinances relating to the environment. There must be assurances that firms have the resources to conform to the letter of this law and have contingencies for the most extreme of environmental disasters.
The development firms must be able to bear the costs of severe land use restrictions on a seasonal basis and to limit activities which would inhibit the production of the habitat.
In addition, a wide range of other environmental costs must be assumed. some of these are as follows:
- Identification, study and interpretation of sites or areas of historic, architectural, archeological and general cultural significance and avoiding these sites during all development stages.
- Maintaining buffer zones to exempt wildlife from forms of pollution such as noise.
- Returning lands and waters as closely as possible to their natural state upon termination of development activities.
- Being forced to locate on a site specific basis due to a range of environmental conditions.
- Facing delays after exploration until separate and suitable plans of operations are approved for the development/production phase.
- Gaining knowledge of a range of unknown environmental factors critical to successful petroleum exploitation.
- Conforming to a thorough set of environmental stipulations dealing with noise, erosion, silting, gravel extraction, water usage, waste disposal and other factors.
- Conducting environmental training programs in the broadest sense dealing with archeological, geological and biological considerations as well as the historic, social, and cultural aspects of the North Slope and its residents.
- Conducting field training programs as contingency for oil spill containment and clean-up.
- At the extreme, having the resources to quickly respond to an environmental disaster such as a large oil spill so as to avoid substantial environmental loss or damage.
- And, providing compensation for the loss of fish and wildlife and their habitat resulting from spills and other disasters.
In summary, the enforcement or the waiver of the ban on joint bidding is not the pressing issue to the North Slope Borough. At issue is the effect of the enforcement or waiver upon the industry operations in regard to the environment.
If either the enforcement or the waiver inhibits the joint use of facilities defined in the broadest sense, the environment will be unduly burdened.
If firms without adequate resources for the most extreme of environmental contingencies are encouraged to bid and are successful, the entire Beaufort Sea may well be jeopardized. The cooperative joint bidding of firms with resources to counter the most adverse environmental contingencies and with a commitment to share facilities is mandated for sound, environmentally compatible development.
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