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Home My WebLink AboutPolicy Analysis Paper No. 81-1 Upper Cook Inlet 1981 STATE OF ALASKA OFFICE OF THE GOVERNOR . Division of Policy Development and Planning POUCH AD a JUNEAU, ALASKA 99811 age (907) 465-3577 POLICY ANALYSIS PAPER NO. 81-1 A Socioeconomic and Environmental Analysis of a State Oil and Gas Lease Sale in Upper Cook Inlet January 1, 1981 A Social Economic and __ Environmental Analysis of a State Oil and Gas wi sale Upper Cook Inlet Prepared By The Governor's Agency Advisory Committee on Lea State of Alaska sing SUAVE OF ALASKA [a = OFFICE OF THE GOVERNOR POUCH AD DIVISION OF POLICY DEVELOPMENT AND PLANNING JUNEAU, ALASKA 99811 PHONE: 465-3573 January 1, 1981 Dear Governor Hammond: Attached is a final version of A Social, Economic, and Environmental Analysis of a State Oil and Gas Lease Sale in Upper Cook Inlet. This analysis is a compilation of assessments prepared hy State agencies who are represented on the Agency Advisory Committee on Leasing. This report has been prepared pursuant to Administrative Order 52 to advise you of the issues surrounding proposed major State activities. In addition, its recommendations are not intended to be binding upon the tate agency proposing the activity, in this case, the Department of Natural Resources. Instead, they are intended to provide a source of information to assist the Department in making its lease sale decisions. The preparation dnd public review of this report has provided an oppor- tunity for a broad array of perspectives to be expressed. We helieve that such an open dialogue is valuable in making wise lease sale decisions and we appreciate the time that members of the public and State employees nave devoted to it. Sincerely, A pes ll re obert beResche, Commissioner ’ ances A. Ulmer, Director Departinent of Natural Resources Division of Policy Development and Planning A Social, Economic and Environmental Analysis of a State 0i1 and Gas Lease Sale in Upper Cook Inlet Compiled hy State Members of the Governor's Agency Advisory Committee on Leasing State of Alaska January, 1981 CONTENTS INTRODUCTION General Format and Scope Alternatives Objectives of the Lease Sale ANALYSIS Economic Factors ‘Introduction 1. Changes in Personal Income 2. Employment and Population Changes 3. Long-Term Economic Stability and 4, Price Effects Potential Administrative Roadblocks Community Well-Being Factors Introduction 1. Changes in Local Population and Lifestyles i 2. Need for Government Goods, Services, or Facilities 3. Changes in Housing Conditions 4. Local Growth Management Capabilities 5. Public Sentiment Toward the Proposed Project Fiscal Factors 1. 2. State and Local Expenditures and Revenues State Subsidies Page PwWwn — 13 21 22 23 24 27 35 42 44 45 49 52 Resource Utilization Factors 1. 2. Sy 4, Resource Industry Potentials and other Resource Values Fish and Wildlife Populations Subsistence Resources Specially Designated Areas Environmental Quality Factors 1. 2. Environmental Health and Safety Environmental Monitoring, Surveillance, and Quality Control Risk Factors 1. Technological, Environmental, and Economic Considerations Adequacy of Existing Data Base National or International External Factors Miscellaneous Factors: 1. Compatibility with Local and State Plans and Policies Governmental Permits and Approvals Project Timetable Governmental Investments and Capital Improvements State Capital Improvements Program Considerations Page 54 56 66 72 83 93 98 100 101 105 106 111 117 118 RECOMMENDATIONS Economic Factors Employment and Population Changes Community Well-Being Factors Introduction Changes in Local Population and Lifestyles Need for Government Goods, Services, or Facilities Fiscal Factors State and Local Expenditures and Revenues State Subsidies Resource Utilization Factors Resource Industry Potentials and other Resource Values Fish and Wildlife Populations Subsistence Resources Specially Designated Areas Environmental Quality Factors Environmental Health and Safety Environmental Monitoring, Surveillance, and Quality Control Miscellaneous Factors Governmental Permits and Approvals State Capital Improvements Program Considerations Page 120 121 121 121 122 122 123 123 133 134 144 144 147 147 APPENDICES Public Comment and Agency Response Appendix Community and Regional Affairs Appendix 1 - Methodology for Community Well-Being Analysis Community and Regional Affairs Appendix 2 - Development Scenario for Estimating Employment and Population Impacts on Communities Community and Regional Affairs Appendix 3 - Kenai Peninsula Borough Coastal Development Program Background Report Environmental Conservation Appendix - Water Quality Fish Fish Fish Fish Fish Implications of Oil and Gas Related Activities in the Proposed Sale Area and Game Appendix 1 - Bald Eagle Protection Act and Game Appendix 2 - Essential Habitat Land Policy for the Trumpeter Swan in Alaska and Game Appendix 3 - Essential Habitat Land Policy for the Peregrine Falcon in Alaska and Game Appendix 4 - Primary Waterfowl] Habitat within the Susitna Flats and Trading Bay Refuges and Game Appendix 5 - Folded Map - Fish and Wildlife Resources in the Proposed Lease Sale #33 Area A-109 A-134 A- 136 A-147 A-151 A-154 YENTNA GLACIER ‘NOMINATION BOUNDARY / LooKasHwiTNa » (x ‘ppmow NOMINATION BOUNDARY: STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF MINERALS ANO ENERGY MANAGEMENT OIL & GAS LEASE SALE NO.33 UPPER COOK INLET. PROPOSED SALE AREA APPROXIMATE BOUNDARY / * fpare DIRECTOR OMeM DRAWN [scaLl Of Oil/Gas Field ) 128-80 ieee Feet | Bernd raw Bg werent’ on PROPOSED SALE AREA EAEESASEg gAOAGER [ENED Big, CCOLOOEAL La ke Kno 7360 vateswivt INTRODUCTION General The State of Alaska's current five-year oil and gas leasing program was submitted to the State Legislature this past January by Governor Jay S. ‘Hammond. The first major lease sale proposed in this program is to occur in Upper Cook Inlet in May 1981. The sale is to involve both submerged lands and uplands and includes the Susitna Valley. Petroleum potential is judged moderate for Upper Cook Inlet and low for the Susitna Valley. Industry interest in the sale has been high as numerous oil and gas fields have already been discovered in and around Cook Inlet. The Alaska Department of Natural Resources, Division of Minerals and Energy Management, is responsible for preparing, conducting and imple- menting the lease sale. The Governor's Agency Advisory Committee on Leasing (AACL) assumes collective responsibility under Administrative Order 52 for development of this analysis document. The AACL is co- chaired by the Commissioner, Department of Natural Resources, and the Director, Division of Policy Development and Planning. Other committee members are the State Attorney General and Commissioners of the Depart- ments of Community and Regional Affairs, Environmental Conservation, Fish and Game, Labor, Revenue, and Transportation and Public Facilities. The Nepartment of Commerce and Economic Development also participated in developing the preliminary draft of this analysis. Administrative Order 52 also calls for the appointment of ex officio committee members who can represent local interests in areas where State leases are to be held. In consultation with borough mayors, Governor Hammond appointed the following ex officio members for this lease sale: Anchorage Borough Mr. Ben Marsh, Borough Assemblyman Kenai Borough Mr. Edward Ambarian, Borough Assemblyman Matanuska-Susitna Borough Mr. James Hitchcock, Borough Assemblyman Those appointed have been in a particularly good position to represent their boroughs' interests since the preliminary draft analysis was made public. The Department of Natural Resources held public hearings on the proposed sale in Soldotna at 1:00 p.m. on June 23, Palmer at 1:00 p.m. on June 24, and Anchorage at 9:00 a.m. on June 25, 1980. The proceedings of the hearings are included in an Appendix to this analysis. During the public review period, closing on July 21, 1980, a number of written comments were received by the co-chairpersons of the AACL. This final version of the analysis incorporates many of the revisions suggested by reviewers. In addition, written comments and State agency responses to specific questions that were raised are included in this document (Public Comment and Agency Response Appendix). Format and Scope of Analysis The basic format of this analysis consists of 25 project evaluation factors that have been identified as having a direct or at least an indirect bearing on this lease sale. These factors have been stated as questions, the answers to which consist of the following elements, as appropriate: -Analysis of the issue addressed in the question. -Recommendations, including proposed or possible alternative mitigating measures. Although the responses to certain evaluation factors have been prepared by single State agencies, others have required a collective effort by two or more agencies. As each factor appears in the Analysis section, the agency which was originally responsible for preparing analysis input or for synthesizing its input and that of other units of government is indicated. For ease of reference, all recommendations appear in a separate section immediately following the Analysis section and are organized according to the same evaluation factor headings. The potential mitigating measures that are featured in the Recommendations section have been prepared by only one or, at the most, two State agencies and are, therefore, included in this document for consideration only. They do not, at this stage of the présale planning process, reflect final State policy. They are merely intended to provide an information Source to assist the Department of Natural Resources in making its decisions regarding the lease sales. It is also important for those with a particular interest in lease sale bidding methods to realize that this important topic is not within the scope of this analysis. Bidding methods to be employed in the proposed sale are to be determined by the Department of Natural Resources prior to the lease sale. Following the Recommendation section are several background appendices, the first of which consists of public letters and testimony received on the Preliminary Draft of this document. Accompanying these public comments are State agency responses to specific issues or concerns expressed by public commentators. Alternatives Although there are sale variables such as 1) tract selections and deletions and 2) imposition of stipulations, the overall lease sale alternatives are to T) conduct the sale and 2) postpone or cancel the sale. Objectives of the Lease Sale The basic leasing strategy of the State can be summarized as follows: 1. To implement a leasing schedule that is predictable and that can be counted on by industry and government in their planning on behalf of the citizens of Alaska and the rest of the United States. 2. To provide energy resources for Alaska and the United States, assuming that oi] or natural gas are found in commercial quantities and can be developed. 3. To lease at a moderate rate that will, if oi] or natural gas is found, be a part of a balanced program of continual growth for the State and its citizens. 4. To encourage competition through the use of various bidding methods and to promote timely, as well as environmentally sensitive, exploration and production of Alaska's oi] and natural gas resources. 5. To maximize the economic and physical recovery of oi] and gas resources. 6. To provide the State and its citizens maximum economic return from the sale of State-owned oi] and gas resources by utilizing various leasing systems. 7. To maximize use of Alaska's human resources and give balanced consideration to the State's diverse cultural and sociological structure when designing lease sales. To coordinate leasing with nearby landowners so that: 1) Statewide oi] and gas leasing activities are cohesive, regardless of land ownership; 2) geologic and environmental data may be shared if possible; 3) drainage of commonly owned reservors may be equitable; and 4) oil and gas exploration and development may continue while ownership disputes are being resolved. To lease first in the most prospective areas and near areas where development has or is taking place so that potential additional development may take advantage of existing facilities wherever possible. qn ANALYSIS The following analyses form the basis of recommendations made later in this document and are organized according to project evaluation factor subheadings. As with the recommendations, these analyses have been prepared by the State agencies indicated and should be considered merely as information that is available to the Department of Natural Resources in its lease sale decisions. Cc Economic Factors Intrcduction (Department of Commerce and Economic Development): 1/ This discussion of the economic implications of the lease sale is necessarily based upon nonproprietary or nonconfidential information. The analysis presented here is based, in part, on information appearing in a 1978 publication of the Department of Community and Regional Affairs, entitled Planning for Offshore 011 Development-Gulf of Alaska Handbook. Although this publication specifically deals with Gulf of Alaska communities rather than those in Upper Cook Inlet, interested parties are referred to it for a lucid discussion of what oi] development does and does not mean to Alaska as a whole. 2/ Tables 1, 2 and 3 present employment, income, and population impacts for the case of a "moderate find." A moderate find is defined to be 150 miltion barrels of recoverable crude oi] and 0.75 trillion cubic feet of recoverable natural gas. No natural gas liquids are included.3/ A high find is defined to be double a moderate find or 300 million barrels of recoverable crude oi] and 1.5 trillion cubic feet of recoverable natural gas. These estimates are largely approximations. To place them in perspective, officially estimated recoverable reserves in all of 1/Revision of the Economic Factors section has been limited by personnel and organization changes in the Department of Commerce and Economic Development. These changes have precluded the Department from modifying portions which were originally authored by its staff personnel. Material in the Public Comment and Agency Response Appendix should, however, give readers a sense for the concerns that have been raised. 2/Reviewer comments and the Department of Community and Regional Affairs indicate the inappropriateness of using this reference for the genera- tion of population, income and employment projections for the Upper Cook Inlet sale area. The Gulf of Alaska Handbook is based on petroleum development activities on the Outer Continental Shelf (OCS) only. The OCS is geographically dissimilar to Upper Cook Inlet. The Department of Community and Regional Affairs feels that the development scenarios outlined in the Kenai Peninsula Borough Coastal Development Program Background Report, as prepared by Environmental Services Limited, provide the most accurate cumulative scenarios for Upper Cook Inlet. Although the Background Report has only been submitted to the Borough at this writing, the Department of Community and Regional Affairs considers it to provide the best possible scenarios, given the existing level of data available for the sale area. Relevant portions of the Background Report are included as an appendix to this Analysis. 3/The Department of Natural Resources deems these numbers to be within reason although its preferred -informa}’ middle estimates are 100 million barrels of oil and 0.5 trillion cubic feet of natural gas. Table 1. Employment projections, assuming a moderate petroleum find in Upper Cook Inlet. 1/ ‘Number of Jobs Onshore Offshore 2/ Construction 1982 556 1983 1,112 350 1984 834 1,200 1985 834 1986 556 1987 523 1988 720 1989 994 1990 1,269 1991 1,158 1992 1,096 1993 974 1994 852 1995 730 Onshore Support 42 185 210 155 111 111 121 149 190 190 164 158 135 125 Total 598 1,647 2,244 989 667 634 841 1,143 1,458 1,348 1,260 1,132 987 855 1/ Although this table appeared in the Preliminary Draft of this analysis report, qualifying language has since been added to the Analysis section entitled, Economic Factors 2.a. Jno ~~ Assuming no pipeline Table 2. Personal income for State residents, assuming a moderate petroleum find in Upper Cook Inlet. Millions of 1979 dollars Other Offshore Const. Support than W&S W& S$ Was W&S Total-1 Total-2 1981 0.917 0 0.120 0.040 1.077 1.110 1982 3.670 0 0.718 0.237 4.625 4.836 1983 7.339 3.557 3.162 3.427 17.485 18.558 1984 5.504 12.196 3.589 9.356 30.645 33.014 1985 5.504 0 2.649 0.874 9.027 9.870 1986 3.670 0 1.897 0.626 6.193 6.873 1987 3.452 0 1.897 0.626 5.975 6.731 1988 4.752 0 2.068 0.682 7.502 8.578 1989 6.560 0 2.547 0.841 9.948 11.545 1990 8.369 0 3.247 1.072 12.688 14.946 1991 7.643 0 3.247 1.072 11.962 14.302 1992 7.234 0 2.802 0.925 10.961 13.302 1993 6.428 0 2.700 0.891 10.019 12.341 1994 5.623 0 2.307 0.761 8.691 10.866 1995 4.818 0 2.136 0.705 7.659 9.719 Assumptions: "Other Personal Income" Annual Wage 1979 $ as % of W&S Construction $40,655 .67 Offshore $66,000 ZERO Support $17,091 -33 Notes: Ten percent of offshore jobs are assumed to go to residents. Twenty-five percent of construction jobs are assumed to go to residents. All migrants taking support jobs are assumed to become permanent residents. W&S -- Wages and salaries. Total-1 assumes zero growth in real personal income. Total-2 assumes 1.5 percent per year growth in real personal income. v Table 3. Population gains, assuming a moderate petroleum find in Upper Cook Inlet. 1/ Number of Persons (compared to no find) Generated Generated By Offshore By Construction Employment Jobs Support Jobs Total 1981 125 0 5 130 1982 500 394 28 922 1983 1,001 1,350 122 2,473 1984 751 0. 139 890 1985 751 0 102 852 1986 751 0 73 573 1987 500 0 73 544 1988 648 0 80 728 1989 895 0 98 993 1990 1,141 0 125 1,266 1991 1,042 0 125 1,167 1992 986 0 108 1,994 1993 877 0 104 981 1994 767 0 89 856 1995 657 0 82 739 Assumptions: 1) Ninety percent of all offshore jobs are filled by migrants (non-residents) who bring no other persons to Alaska with them. 2) Migrant construction worker (75 percent of the construction total) bring an average of 0.5 other persons to Alaska with them. 3) One-third of the support sector jobs go to migrants, each of whom brings one additional person to Alaska. J/Although this table appeared in the Preliminary Draft of this Analysis report, qualifying language has since been added to the Analysis section entitled, Economic Factors 2.a. 10 Alaska (essentially the existing Cook Inlet fields) were, as of 1968, 380 million barrels of recoverable crude oil, 5 trillion cubic feet of recoverable natural gas, and 350,000 barrels of recoverable natural gas liquids. Estimated reserves at Prudhoe Bay as of June 1977 were 9.6 billion barrels of recoverable crude oi] and about 26 trillion cubic feet of recoverable natural gas. Estimated recoverable gas reserves, as of April 1978, for the gas fields of the Cook Inlet area are presented in Table 4. A key assumption invoked in the economic impact estimates provided here by the Department of Commerce and Economic Development is that any oi] and gas that is recovered as a result of this sale will be used to feed the existing and proposed facilities on the Kenai Peninsula or to satisfy electricity generation needs. One might, therefore, argue that in the absence of an Upper Cook Inlet discovery, the Kenai oil and gas industry would decline. We have assumed this not to be the case. In particular, we have assumed that 1) rather than decline when present Cook Inlet oil reserves run out, the Kenai oi] industry will switch to North Slope feedstocks, if Upper Cook Inlet feedstocks do not materialize; and 2) the Pacific Alaska LNG project will have an adequate supply of natural gas even without an-Upper Cook Inlet discovery. In responses to the first three of the following questions, population, employment, and income impacts attributable to a "high" find are roughly 1.5 to 2.5 times those given in the tables describing a "moderate" find. Ji Reserves Used by DOGC duly 1977 Table 4. Estimated Recoverable Gas Reserves Cook Inlet Area By Division of Oil and Gas Conservation, Alaska Department of Natural Resources - 4/7/78 Reserves Revised by DOGC _ April 1978 Change in Est. Rem. Res. 1-1-78 Est. Orig. Rec. Res. Other Recommended Est. Rem. 1977 Est. Rem. Est. Orig. Cum.Gas Est. Rem. April 78 Less July 77. Blasko Crick Dedicated Est.Rem. Rec.Res. Gas Rec.Res. Rec. Res. Prod.to Rec. Res. (BCF) (%) 8-74 10-68 Res .3/ Rec. Res. Gas Fields 1-1-77 Prod. 1-1-78 (BCF ) 1-1-78 1-1-78 (BCF ) (BCF (BCF). 1-1-78 (BCF) (BCF) (BCF) (BCF) (BCF) (BCF) Albert Kaloa 0.119 0 0 - - - 0 Beaver Creek 400 2/ 0.113 400 240 0.571 239 (161) (40) 400 - 112 239 Beluga River 954 1/ 13.353 941 1,116 59.211 1,057 116 12 700 400 1,902 1,057 Birch Hill 11 0.065 11 11 - 20 - ll Falls Creek 13 0.019 13 13 - 80 - 13 Ivan River 26 0 26 26 - 5 - 101 101 Kenai 2,304 1/ 81.886 2,222 2,109 800.789 1,308 (914) (41) 2,400 2,207 1,308 Lewis River 90 0 90 . 90 - - - 22 90 McArthur River 800 2/ 7.737 792 168 51.481 117 (675) (85) 800 175 87 117 Hrpquawk ie 1 0.985 0 0 0 - 173 0 Micolai Creek 18 1.062 WV 7 - 50 142 7 North Cook 760 Inlet 888 1/ 47.181 841 1,120 360.275 760 (81) (10) 1,500 - North Fork 12 0.105 12 12 - 20 - 12 North Middle 0 Ground Shoal 0 0 0 0 - : - Sterling 200 2/ 0.029 200 25 1.912 23 (177) (89) 200 16 23 Swanson River 300 2/ 0.000 300 12 11.839 0 (300) (100) 300 30 0 West Foreland 20 0 20 20 - 120 - 20 West Fork 8 0 8 8 - 100 - 8 5,846 150.299 5,696 4,989 = 1,288.433 3,701 1,995) (35) 6,695 3,183 2,224 3,776 1/0i1 Daily 4-23-75 released by AGA as of 12-31-74, less 1975 and 1976 production. 2/Open File Report by Don Blasko, “Natural gas Fields - Cook Inlet Basin, Alaska". 3/Est. Rem. Rec. Reserves 3-1-77 dedicated by "Gas Sales and Purchase Agreement" with Pacific Alaska LNG Assoc, June 1977. 1. Economic Factors What changes woukd be generated in neal per capita personak ancome for curment resident Alaskans over the Life of the project Teonstructional and operational phases)? (Department of Commerce and Economic Development ; Analysis The Department of Economic Development estimates that even in the case of a high find, the changes in real per capita personal income will be miniscule. If all of the personal income generated in the peak year of the moderate find scenario were given to Alaska's July 1, 1979 population, the increase in real personal income per capita for 1979 would be only $82.50. Furthermore, this’ is an overestimate because Alaska's population continues to grow. Table 2 indicates an estimate of the total amount of real personal income, in 1979 dollars, generated by a moderate find. For the years 1981 through 1995, the mean total addition to real personal income in the moderate find case is $11.8 million per year. The Department of Revenue has examined the above question from a related yet different perspective. 1/ The balance of this discussion portrays Revenue's analysis. The considerations analyzed take into account both positive and negative potential effects of the lease sale. . Some of the more pertinent effects are these: 1/The Department of Natural Resources disagrees in many respects with the analysis prepared by the Department of Revenue, particularly with the concern expressed over the adequacy of known uncommitted gas reserves to meet the future residential and commercial demand in the Anchorage and southcentral areas. DNR believes that the Upper Cook Inlet Sale could partially alleviate this concern by selection of a bidding method that would reserve to the State a larger share of potential supplies. If bonus was the bid variable, the minimum royalty could be set at a level considerably higher than the legal minimum of 12.5%, and it could be specified that the State's royalty share would be taken in-kind. Alternatively, the royalty could be the bid variable, with the State specifying that it would take, for example, 50% of its royalty share in-kind. The State's in-kind share could then be sold to local utilities at the pre- vailing field price. 13 If _no significant finds: Positive Negative 1. Collection of bonus bids 1. Possible delay or 2. Drilling activity (employment cancel lation of and tax receipts) LNG plant J/ cont'd It is not clear that the Pac Alaska Project will affect the price of Cook Inlet gas. The decontrol of natural gas prices will result in the interplay of market forces that will determine the field prices for Cook Inlet gas, including that purchased by Pac Alaska. Hence the price increases discussed in this section of the Analysis will occur anyway. This point is implicitly recognized in footnote 3. The Department feels that the AGas system Demand (Table 5) as presented in the text is highly uninformative and very likely misleading. Without knowing the relevant demand elasticities and economic growth projections, it is difficult to judge the basis for the estimated system demand. The estimates of supply shortfall must be regarded as suspect. The analysis appears to argue that more is less and conversely less is more. Thus one discovers that not holding the lease sale with its ensuing exploration and possible discoveries assures Anchorage of a long-run supply of relatively cheap natural gas. The Department of Natural Resources is given no hint of how long it must delay the sale before Pac Alaska will give up and relinquish its current commitments. If DNR must wait 10 years (as an example) before holding a Cook Inlet sale, then we can be assured that the projected shortfall will occur. In addition, if the State could hold down Cook Inlet gas prices, the net result would be to reduce the long run supply of natural gas. Lower prices will discourage the drilling of riskier prospects and reduce the number of potential discoveries in the Cook Inlet region. The estimate of energy costs which "... could rise by as much as $2,000 per year per household...." is not a meaningful figure as presented. The text does not state whether the $2,000 is real dollars or nominal dollars; if the latter, then 61% of the increase could be accounted for by a 10% per year inflation. If the increase is real, then one must separate out that portion caused by decontrol and that portion caused by Pac Alaska demand. 14 Table 5. Projected natural gas curtailments given existing proven natural gas reserves and existing contracts and given PacAlaska LNG (Phase I) contracts for existing undedicated proven natural gas reserves in Cook Inlet, 1980-1999 (in Bcf/year) (1) (2)* (3)* (4) (5) (6) (7) State Royalty Gas Not AGAS Curtailment with PacAlaska PacAlaska AGAS System AGAS System Presently Committed to State Royalty Gas Year LNG Demand Curtailment Demand ** Curtailment Local Construction Included 1980 -0- -0- 29.85 -0- 11.00 0.0 1981 -0- -0- -31.16 -0- 10.93 0.0 1982 -0- -0- 32.28 : -0- 10.97 0.0 1983 -0- -0- 31.78 -0- 10.60 0.0 1984 75.9 23.96 32.55 -0- 14.87 0.0 1985 75.9 23.96 33.49 7.21 16.23 0.0 1986 75.9 23.96 34.44 8.13 16.23 0.0 1987 75.9 23.96 35.00 8.73 16.23 0.0 1988 75.9 23.96 36.31 10.03 16.23 0.0 1989 75.9 23.96 38.03 11.75 15.98 0.0 1990 75.9 23.96 39.40 13.12 15.10 0.0 199] 75.9 23.96 41.08 14.80 14.64 -16 1992 75.9 42.45 42.61 42.16 12.89 29.72 1993 75.9 42.45 43.77 43.77 12.89 _ 30.88 1994 75.9 65.25 45.20 45.20 7.30 37.90 1995 75.9 74.05 47.22 47.22 12 47.10 1996 75.9 74.05 49.29 49.29 12 49.17 1997 75.9 74.05 51.55 51.55 12 51.43 1998 75.9 74.05 54.03 54.03 12 53.91 1999 75.9 74.05 56.61 56.60 12 56.48 712 Bef 464 Bcf 356.25 Bcf *Phase II demand would be 149.95 Bcf/year and total curtailment, 1984-1999, would be 1.775 Tcf. The other figures would presumably remain constant. ** Assumes AGAS demand increases at approximately 3%/year or roughly at the same rate as population increases. If significant finds: Short Term (1-5 Years) Collection of bonus bids royalties, and severance taxes Drilling activity Construction of an LNG plant Enhanced temporary employment in local economy Petroleum revenue receipts (property tax at 2% split between State and Kenai) Long Term (5 Years On) Positive Production cash flows from LNG LNG plant employment Petroleum revenue receipts (royalties at x%, severance tax at 10% of wellhead value, income tax at 9.4% of taxable income, property tax at 2% split between State and Kenai) Ample reserves for both local and export demand. Positive Negative Possible electric rate increases, as contract rights to known reserves are exercised by PacAlaska and as additional demand for gas causes sales price on gas contracts to increase Negative Possible utility rate increases Potential shortage of Cook Inlet gas for Alaska consumers as previously committed gas reserves are used by PacAlaska and as reserves committed to other consumers run down Multiplier effect on economy of higher energy costs. Positive or Negative Since the amount of cash flow and economic enhancement (the positive aspects) depends upon the amount of reserves found and in some measure has been or is being analyzed by other agencies, this analysis focuses on the negative impact of potentially higher energy costs to Alaska consumers should proven reserves fall short of meeting projected local and export demand for Cook Inlet gas. 2/ There is a likelihood that within five years, energy costs to southcentral Alaska consumers could rise by as much as $2,000 per year per household (four people) if sufficient new gas reserves necessary to meet local and export demands are not discovered (as, for example, a consequence of obtaining insufficient additional gas reserves through this proposed sale). The additional costs would occur as a consequence of less Cook Inlet gas being readily available to the southcentral consumer. Natural gas curtail- ments to the southcentral Alaskan consumer could occur after construction of the LNG plant because 1) reserves presently committed by contract to these consumers will decline with use, 2) PacAlaska would exercise its options to produce from reserves which would have been "freed up" if the LNG plant were not constructed, and 3) the new gas from this sale would accrue to PacAlaska and not to southcentral consumers. The decreased amount of available gas would be replaceable 1) by new gas at prices equal to or higher than the sales price of gas committed to the LNG plant, 3/ 2) with expensive fuel oi] for at Furthermore, as contracts presently conveying gas to Alaska consumers are renegotiated, the prices will Presumably escalate to reflect changes in the greater demand for a decreasing supply of gas. 2/There is no attempt here to draw an ultimate conclusion on whether positive outweighs negative or vice-versa. 3/Conceivably, a future reserve of new gas could be leased with a provision that a particular stream of gas must be dedicated to intrastate use. However, bidding for such a lease would probably be enticed only through an expectation that sales of that new gas would be competitive with gas sold in interstate commerce. aa The foregoing statements regarding an indigenous supply-demand problem are made despite existing contentions that there is "enough gas to go around." Figures published to date (e.g., Stanford Research Institute studies on behalf of PacAlaska, studies by the Institute of Social and Economic Research, or Alaska House Research studies ) have not indicated the extent to which the supply of gas in Cook Inlet is presently or in all likelihood will be dedicated in contracts contingent upon construction of the LNG plant. The amount of gas available to Alaskan indigenous residential, commercial, and electrical use is an issue which, we suggest, must be definitively analyzed.4/ A preliminary analysis of the availability of gas for both PacAlaska and AGAS alone indicates that, even if all the State's royalty gas is dedicated to local consumption, curtailments will occur if substantial new finds of gas are not made available to the local intrastate market. Table 4 indicates this trend. Further analysis indicates that discovery of an additional 5 TCF in proven gas reserves is necessary to satisfy all demands through 1999. 4/The recent commitment of State royalty gas to Anchorage's ML&P is a helpful guarantee of gas availability. See approval in 1980 Senate Res. 25. Further, as to Pacific Alaska LNG supplies, the Federal Energy Regulatory Commission has expressly pre-granted "abandonment" authority to the State, thereby authorizing withdrawal of State royalty gas for instate use at any time. Also, the Natural Gas Policy Act of 1978 guarantees royalty withdrawal at least as to all gas not now committed to inter-state commerce, such as future discoveries, and arguably as to gas committed under present contracts with Pacific Alaska. 18 If we assume that undedicated future supplies of gas in southcentral Alaska (gas available for local consumption) are substantially reduced after construction of the LNG plant, the most obvious replacement fuel for the short and intermediate term is fuel oi]. Over a long term, hydroelectric power may be available, but that energy source would also be expensive given the capital investment necessary. Use of fuel oil, then, as an alternative energy source would result in an average fuel oi] bill in Anchorage in May 1980 of $1.01/gallon or $42.50/barrel. With 6 million Btu's in one barrel of fuel oi], this is about $7.08/MMBtu. In comparison, 1 Mcf of gas equals about 1 MMBtu. The current cost of one month's heating of a single home in Anchorage (16.1 MMBtu) is about $39.26 when natural gas is used. If heating fuel oi] were used instead of natural gas, the heating bil-l right now would be approximately $114.04 per month, or 291 percent of the gas bi1l1.5/ On the assumption that sufficient gas supplies are available for all uses, Jack Kreinheder of the Alaska House Research Agency projects that natural gas annual heating costs for a home in Anchorage will be $796.44 in 1986. Table 6 shows that the annual cost of an alternative heating option, fuel oi], will be $2,652.64 at that date. However, if at that date no gas is available, as this analysis suggests, residents will be forced to convert from gas to fuel oil with the additional cost, in 1986 alone, heing $1,856.20 per year. 5/The cost of gas per month quoted here is from an analysis by Jack Kreinheder (Legislative Research Agency) to Rep. Bill Miles, February 29, 1980. It could be argued that gas price deregulation Will eliminate the cost differential between fuel oil and natural gas on a$/Btu basis. Currently, free market prices (world market) for gas are between $3.00 - $4.60/MMBtu while No. 2 fuel oi] sells for $6.00 - $8.00/MMBtu. 19 Table 6. Projected fuel oi] costs. Refinery AK Refinery Delivered Annual Cost of Calendar Feedstock & Marketing Fuel Price Home Heating @ Year Price 1/ Margin 2/ $/B $/MMBtu 193.2 MMBtu/yr. 1980 35.00 7.50 42.50 7.08 $1356.60 1981 39.20 8.25 47.45 7.91 $1528.20 1982 - 43.90 9.08 52.98 8.83 $1705.96 1983 49.17 9.98 59.15 9.86 $1904.95 1984 55.07 10.98 66.05 11.01 $2127.13 1985 61.68 12.08 73.76 12.29 $2374.43 1986 69.08 13.29 82.37 13.73 $2652.64 1987 77.37 14.62 91.99 15.33 $2961.76 1988 86.66 16.08 102.74 17.12 $3307.58 1989 97.06 17.68 114.74 19.12 $3693.98 1990 108.71 19.45 128.16 21.36 $4126.75 1/@ 12% per year 2/@ 10% per year In addition to the direct cost increase to the consumer, a non-quantifiable multiplier effect may ripple through the economy as a result of higher energy costs. That effect would increase the costs of commercial services and local industrial goods. 20 Economic Factors 2. What are the employment and popubation changes expected to result from the project? (Department of Commerce and conomic Development a. What proportion of jobs are expected to be occupied by current Alaskans? Analysis: Tables 1 and 3 appeared in the Preliminary Draft of this analysis and the accompanying text indicated that: 1) drilling crews will be 90 percent or more non-Alaskan, 2) associated construction jobs are likely to be largely filled by non-Alaskans, and 3) support sector jobs could be expected to be one-half to two-thirds filled by Alaskan residents. More recent estimates by the Department of Community and Regional Affairs indicate that offshore exploration act- ivities would result in 90 percent non-Alaskan and 10 per- cent Alaskan workers. Onshore activities, including drilling, would be filled half by Alaskans and half by non-Alaskans. Also, support jobs would be one-third in-migrants and two- thirds Alaskans. Indirect employment would consist of Alaskans exclusively. The demand for Alaska construction workers will be increased by the policy of certain companies, such as Pacific Alaska LNG, to use Alaska manpower to the greatest extent possible. What are the characteristics of these jobs (seasonality, SRLLE, Level, occupational category, short-term, Long-zterm'? Analysis: Although construction jobs are expected to be year-round, with lapses during extreme weather, most are only expected to be available for about two years. Jobs required for drilling production as well as for support activities are, however, expected to be year-round for the life of the field. Support sector jobs are expected to require a wide range of skills and training. 21 3.- Economic Factors Does the project contribute to long-run stability? What short or Long-term prrce effects are expected to Tekake Thom tis projeae? Toepartment ae ond Economie Development) Analysis: The Upper Cook Inlet lease sale will have a noticeable effect on the stability of the Alaska economy only if 1) State revenues derived from taxes, royalties, bonuses and the like tend to overstimulate the economy, thereby reducing its stability, or 2) if they be used to help generate an alternative economic base to oil. The direct effects quantified in the attached tables are too small relative to the overall size of the State's economy to be of consequence. Certain small Alaska communities may, however, experience boom conditions if a find occurs. To pinpoint the communities likely to be so affected requires knowledge of the most promising tracts in the lease sale area. Finally, discovery of new Cook Inlet gas reserves would postpone for only a few years the date by which Anchorage's electricity needs must be met to a significant degree by alternative sources such as coal or hydroelectric power. Projected growth of electricity demand in the railbelt area is the determining factor in this case. Ecunomic Factors 4. What administrative roadblocks exist which would affect the economic feascbititu of this Sale? (Department of Natural Resources) Analysis: The difficulties and delays in obtaining permits for operating on State lands which are presently being experienced by lessees could affect the economic feasihility of the lease sale. An effort to develop procedures for the State permitting process is currently underway that would streamline the process and possibly alleviate this problem. 23 Community Weke-Being Factors Introduction (Department of Community and Regional Affairs) The first four questions of the community well-being section are based on the following assumptions: 1. Existing and proposed petroleum facilities in Upper Cook Inlet will be used to the fullest extent feasible. The new facilities will be airstrips and work camps for field exploration and development and a network of pipelines to transport oi] and gas (Figure 1). Stipulations on leases will specify that exploration development and production activities will be supported by air service or existing roads and port facilities. New roads may be constructed only when there is no prudent alternative and the access plan is consistent with policy on access affecting the northern and western parts of the Cook Inlet Basin. For purposes of analysis only, it is assumed that no road or bridge across the Susitna River would be built to link the proposed lease sale area to the existing road network in the Matanuska-Susitna Borough. Should the need for such a road and bridge be identified in the future, it would be subject to the same policy governing construction of roads during exploration. Industry will use existing and proposed facilities in Upper Cook Inlet for supporting, transporting and processing’ oi] and gas produced from the proposed sale area to the extent practical. Since substantial surplus capacity now exists at Drift River and Nikiski, it is reasonable to project that no new facilities will be required at least in the near term. However, it is possible that new facilities might be needed if there is a significant discovery in the proposed lease sale area. The number and types of new facilities would depend on the nature and size of discovery. wo Figure 1 EXISTING FACILITIES yy T GRANITE PT. FAC. GRANITE sel v yt pe BELUGA RIVER GAS FIELD S COOK INLET GAS FIELD ATS ~ J*iFT RIVER FAC ~ c 7 sy a 7 AAS z - Af~- BIRCH HILL new a6 \ = ae a | 7) 2) B Sl FE; SWANSON river Al: “T.owest ee, ZF ong cas Fievos | Safer ——, Fore Lang ve * 4 7 ~ v a a sy 7 fopisnea NO 1 — <n —, ps VER P|PELINE 7 } a SWANSON A | Z\ EAVER CREEK , iS eh > = e » a i= wesy Fons = 4 | Ma Nese nots | vy STERLING ! STERUNG SS . ‘ Pi Vy ~~ ae | -_— ali : ~ TNA all all _ Fe gD Ss fad al - > at Source: “4 Situation and Prospects, Kenat Peninsula Borough, January 1980. ~~ seen The Kenai-Soldotna area will serve as the support base as well as the center for processing gas and oi] (in addition to existing facilities on the west side of the Inlet). Consequently, most of the employment that might result from the proposed lease sale will occur in the Kenai-Soldotna area. Fifty percent of the employees directly involved in exploration, development and production will reside in the Kenai-Soldotna area and the other half will reside in Anchorage or the Matanuska and Susitna Valleys. Eighty percent of the support jobs will be filled by people who live in the Kenai-Soldotna area and the remaining 20 percent will live in the Anchorage or Matanuska and Susitna Valleys. Indirect employment is assumed to accrue to the Kenai-Soldotna area. Percentages would probably change over time, with a greater Proportion allocated to the Kenai-Soldotna area as activities progress from exploration to production. Ninety percent of jobs directly related to offshore exploration will be filled by in-migrants and 10 percent by Alaska residents. A higher proportion, perhaps half, of all jobs related to exploration, development, and production of onshore fields will be filled by Alaskans. One-third of the support jobs will be filled by inmigrants and two-thirds by current Alaska residents. All of the indirect employment will be filled by current Alaska residents. Changes in manpower could result as former residents might return to the Kenai-Soldotna area and fill jobs that would otherwise be filled by in-migrants. The proportion of residents filling any of these jobs could be increased with appropriate manpower training. These assumptions and the analysis of impacts may need to be revised to correspond to findings from further geological and economic analysis of the proposed sale area. Community and Regional Affairs Appendix 1 contains a description of the methodology used for the community well-being analysis. Community and Regional Affairs Appendix 2 contains a detailed description of the development scenario used for estimating employment and population impacts on communities. 26 ‘« Communtty Well-Being Factors 1, What Local population changes are expected (@.g., amount and nate of change, characteristics of expected in-mgrants]? Are population changes expected to cause stanisicant value on Lifestyle conflicts? Ts displacement prom traditional occupations expected? (Department of Community and Regional Affairs) a. What Locak population changes are expected? Analysis: To estimate population changes, it is assumed that the economics of the Kenai-Soldotna area, Anchorage, and the Matanuska and Susitna Valleys are expanding independently of new oi] and gas activity. Declines in employment in some sectors are more than offset by increases in other sectors. There is an existing net in-migration of workers and family members to the area. Whereas the incidence of unemployment among current residents is likely to decline as the economy expands, the total rate of unemployment in the area may well remain the same or even rise if job prospects are known to be better there than in other areas of the state. This means that the net effect of every new employment opportunity in direct, support and indirect job categories related to proposed oil and gas activity is the attraction of an additional worker. Estimates of total population changes derived from the schedule of employment in new oil and gas activity in Upper Cook Inlet are shown in Table 1. The assumptions used in the computations parallel those used by the Department of Commerce and Economic Development to estimate Statewide population increases. In the computation of local population changes, it was assumed that in-migrant family members participated with the local work force at the same rate that currently prevails in the affected areas. The population schedules depict a pattern of swell and decline modelled on that established in the employment schedules. A minor difference is that the population peak in the initial impact period occurs a year later than does the employment peak. This is an artificial result that occurs because declines 27 DIRECT UPPER COOK INLET LEASE SALE POPULATION IMPACTS: Table 1 MODERATE FIND (NON-CONSTRUCT ION) SUPPORT INDIRECT EMPLOYMENT 'S EMPLOYMENT 'S EMPLOYMENT 'S TOTAL CONTRIBUTION CONTRIBUTION CONTRIBUTION POPULATION YEAR TO POPULATION TO POPULATION TO POPULATION INCREASE Mat-Su Sold Total Mat-Su Sold Total Mat-Su Sold Total Mat-Su Sold Total 198] 86 86 172 4 14 18 0 40 40 90 140 230 1982 342 342 684 20 79 99 0 164 164 362 585 947 1983 684 684 1,368 87 347 434 0 393 393 47] 1,424 1,895 1984 513 513 1,026 100 401 501 0 560 560 613 1,474 2,087 1985 513 513 1,026 74 297 37] 0 529 529 587 1,339 1,926 1986 342 342 684 53 212 265 0 356 356 395 910 1,305 1987 323 323 646 53 212 265 0 340 340 376 875 1,251 1988 443 443 886 58 231 289 0 446 446 501 1,120 1,621. 1989 611 611 1,222 71 283 354 0 605 605 682 1,499 2,181 1990 784 780 1,560 91 362 453 0 770 770 875 1,912 2,787 1991 712 712 1,424 91 362 453 0 714 714 803 1,687 2,490 1992 674 674 1,348 78 312 390 0 667 667 752 1,653 2,405 1993 599 599 1,198 75 300 375 0 601 601 674 1,500 2,174 1994 524 524 1,048 64 255 319 0 523 523 588 1,302 1,890 1995 450 450 900 60 239 299 0 453 453 510 1,142 1,652 Assumptions: Contribution of Ratio of family 90% direct employment filled by migrants 10% direct employment filled by current Alaska residents 33% support jobs filled my migrants 67% support jobs filled by current Alaska residents 100% indirect employment filled by nimuant Alachsa wacidante family members to work force 1.22 1.07 1.22 size to employee Figure 2 (not referenced in text) UPPER COOK INLET LEASE SALE POPULATION IMPACTS MODERATE FIND POPULATION 2,000 (1,912; 1990) a (1,474; 1984) IN! 1,500 i ’ : : ese iin! ° ose, o 4 vat 1,900 Ais Wild + wey ey feet ls se Y “se , \ = = . \ oO tee, ; *, 7 1 500 - 1985 1990 1995 e——* Kenai-Soldotna: population from direct employment On am « Kenai-Soldotna: population from direct and support employment emmene Kenai-Soldotna: population from direct, support and indirect employment s+e* Anchorage and Matanuska-Susitna Valleys: total employment in employment directly related to field exploration, development, and production (90 percent of which have no family members with them) are more than offset by increases in support and indirect employment. There could well be significant lag between direct and indirect employment activities, and consequently in population and employment patterns, that are not captured by the basic assumptions. During the initial impact period, the population increase attributed to oil and gas activity peaks in 1984 at 1,474 persons in the Kenai-Soldotna area and 613 in Anchorage and Matanuska-Susitna Valleys. This represents about an 11] percent increase over the Kenai-Soldotna area's existing population (including areas outside incorporated cities) and about 0.33 percent increase over the current population in Anchorage and the Matanuska-Susitna Valleys. If the number of people living in the areas outside incorporated cities increases at rates comparable to those projected for the cities of Kenai and Soldotna (see Table 2), the increase induced by oi] and gas activity would account for less than 7 percent of the population and only 16 percent of the area's total increase. Since employment and population increases attributed to Anchorage and the Matanuska and Susitna Valleys are proportionally minute, the responses to all other Community Well-Being factors will address the Kenai-Soldotna areas only. . Figure 3 (not referenced in text) LATION ®,nn0 7,000 let Lease Sale 6,000 5,000 4,900 (4,533) 3,990 (2,365)% 2,000 1,000 (778) om HISTORICAL PERIOD 194n 19K5 1970 1978 19890 Projected Population Growth For Kenai* (baze!‘ne) RH Population Increases Due to l'pper Cook In- Ristocical Growth Trend: Kenai 1960-1979 Projected Population For Soldotna* (baseline) Historical Growth Trend: Soldotna 1960-1979 IMPACT PERIOD oooocoooOp 1985 1990 1995 Table 2 UPPER COOK INLET LEASE SALE POPULATION INCREASES ALLOCATED WITHIN KENAI - SOLDOTNA AREA FOR INITIAL IMPACT PERIOD, 1981-1986 Kenai Plus Soldotna Plus Baseline Kenai Baseline Soldotna Population Population Population , Population Year Projection Increase Projection Increase Vicinity 1980 4,730 * 2,602 * * 1981 5,062 5,106 2,862 2,891 67 1982 5,416 5,599 3,148 3,270 281 1983 5,795 6,239 3,463 3,759 684 1986 6,201 6,661 3,809 4,116 708 1985 6,635 7,053 4,190 4,469 643 1986 7,099 7,383 4,609 4,798 437 loerived using "base case" population growth rates presented in Offshore Oil Development In Lower Cook Inlet, CH2M HILL, June 1978. Compound annual growth rate for Kenai equals 7 percent; for Soldotna, it is 10 percent. The sources of growth in the base case projections are not identified in che source document; it is clear from their use chat they do not include offshore oil development in lower Cook Inlet or construction and operation of the Pacific Alaska LNG plant in the Nikiski - Kenai area. 31 Ane population changes expected to cause significant value or Life-style conflicts? Analysis: Tyonek, as shown in Figure 4, is an area whose residents' lifestyle could well be affected by drilling, transportation, and construction activities. Tyonek residents have expressed concerns about development on the west side of Cook Inlet interfering with and deteriorating their traditional subsistence economy and village lifestyle. As a historical note, in 1965 the then Tyonek Indian Reservation sold oil and gas rights on Reservation land. The sale yielded $13.6 million, and opened certain reservation lands to exploration and development activities. Since numerous exploration wells have been drilled in the Tyonek area, residents of the area had some practical experience with the effect of exploration on their lifestyles. For this analysis it is not known whether there are alternative ways to accomplish exploration and development near Tyonek, which might mitigate adverse impacts. The only other readily apparent value conflict which might accompany projected population changes is increased pressure on already overtaxed recreation resources. Is displacement from traditional occupations expected? Analysis: Since a sizeable proportion of its total employment is concentrated in the petroleum industry, the Kenai-Soldotna area is unlikely to experience displacement from traditional Occupations as a result of the proposed oil and gas lease sale. If substantial disruption of subsistence activities occurs, Tyonek residents in particular might he displaced from traditional non-market economic activities. Figure 4 LOCAL IMPACT AREAS freperee Sale arenas _metasushe sustine Soren __._.. + Reret persia borougee ' + direct employment/ population impacts #* indirect employment/ population impacts * lifestyle impacts Y AP river é 1-3 probable commmity tmpact areas unincorporated community @ incorporated communt ty e a wnineorporated ANCSA commmity a existing otl/gas facilities Comments were received from the Native village of Tyonek and the Kenai Peninsula Borough during the public review process. Various State agencies responded to questions and views raised by both (Public Comment and Agency Response Appendix). Their concerns, in several cases, were incorporated into this final Analysis and will receive further consideration by the Department of Natural Resources during development of stipulations in the Notice of Sale for the Upper Cook Inlet Lease Sale. Community Well-Being Factors 2. What changes are expected in the quality, availabikity, on demand fon governmental goods, services on facchities? (Department of Community and Regional Affairs Analysis: Four levels of government provide governmental goods, services, and facilties in the affected area: federal, State, borough, and city. The Kenai Peninsula Borough is a second-class borough which provides education, planning and zoning, assessment and taxation, and solid waste disposal on an areawide basis, that is, both inside and outside cities. The borough has also established five service areas: the Central Hospital service area, the South Hospital service area, North Kenai fire service area, North Kenai Recreation service area, and the Bear Creek fire service area. Kenai is a home-rule city and Soldotna is a first-class city. In each city, water, airports, and sewers are city-owned utilities and police, fire protection, road maintenance, parks and recreation, and libraries are provided by the city government. Tyonek is an unincorporated, predominantly Native community. It has an IRA council incorporated under federal law; the council can provide community services. However, there is no local municipal government in Tyonek. It does, of course, benefit from services provided by the Kenai Peninsula Borough. Increases in the demand for governmental supplied goods, services, and facilities are anticipated, given the population increases estimated for the Kenai-Soldotna area. With the exception of quantitatively estimating the number of school age children associated with the schedule for population increases, no attempt has been made to refine the population figures into demand calculations for specific goods. It is in this area that local information is particularly necessary. As a substitute for demand calculations, attitudes of area residents indicating how they expect the quality or supply of community services to be affected by additional oi] and gas development areas is reported. 1/ Comments about other areas of concern are reported from pertinent information presented in Offshore Oil Development In Lower Cook Inlet.2/ The CHoM Hill study of the implications of Lower Cook Inlet oil development presents detailed assessments of prevailing demand and supply conditions for governmentally supplied services in Kenai and Soldotna. This report describes existing policy and fire protection services in both communities as "at or near capacity." The Kenai water and wastewater treatment systems are estimated to be adequate to accommodate near-term growth. Soldotna's wastewater treatment plant was operating at capacity in 1978 but expansion was planned. Continued rapid growth will bring operation of that community's water treatment plan to full capacity by the mid 1980's. Supplying fire protection services and the collection and treatment of sewage waste in areas outside city boundaries and established service area may require special actions by the borough and cities as population growth in those areas continues. A profile of Kenai and Soldotna residents! attitudes about present standards of services and their expectations concerning the impacts on them of oil-induced growth is reported in Table 3. The rankings given to selected services by residents in both communities is very similar. Three groupings are apparent for each. In Kenai, residents indicate higher levels of satisfaction for electrical services, water and sewer systems, and garbage and trash pick-up; while only the first three of these services received top rankings by Soldotna residents. Fire protection, police services, and hospital and medical services constituted a second group in Kenai's rankings. i/Hitchins, Diddy 2., Richard L. Ender, G. Hayden Green and Marsha Bennett. 1977. A Profile of Five Kenai Peninsula Towns. 2/CHoM Hill. June 1978. Offshore Oi] Development in Lower ~ Cook Inlet. 30 Table 3 LOCAL ATTITUDES ABOUT SELECTED COMMUNITY SERVICES AND THE EFFECTS OF OIL RELATED GROWTH ON THEM: KENAI AND SOLDOTNA Kenai Residents: (% indicated) Type of Service Antictpated With Ot1 Attitude About Se ng Service Induced Growth Seiatiel Grestisin Drssstetes Uneertain Unsatisfie Better Same Worse Parks and Recreation | ine 11.4 38.2 33.1 |20.9|43.3 Garbage and Trash Pick-up 75.2 9.4 15.4 16.9 152.0)28.4 Police Services 64.5 18.8 16.8 25.9 131.3/40,2 Hospital and Medical Service 63.8 13.¢ 22.9 36.0 |32.0)29.2 Water System 77.7 8.8 13.5 15.1 |61.0)21.3 Sewer System 79.8 7.4 12,9 14.9 |62,.2)20.2 School System 43.2 29.1 27,1 31.5 |19.2)45.8 Electrical Services 80.6 5.4 14,1 17.6 |46,3)33.3 Fire Protection 69.2 | 20.1 | (10.8 ‘| 29.0 ;42.2125.1 Soldotna Restdents: Satisfied Uneertain Unsatisfied Better Same Worse Parks and Recreation 58.0 11.6 30.4 42.6 15.41 Garbage and Trash Pick-up 68.1 19.6 11.6 34.1 132.6 Police Services 66.6 18.1 15.2 34.8 124.4 Hospttal and Medical Serviceg 68.8 16.7 14,5 48.5 120.9 Water System 82.6 10.1 7.2 28.2 150.4 Sewer System 85.5 8.7 5.8 23.7 {61.1 School System 50.7 28.5 21.0 39.5 {14.9 Electrical Services 82.6 10.1 7.2 25.7 |44.1 Fire Proteetton | 66.7 26.2 | 7.2 |_37.5 132.4 Compiled from; Hétchins, D.R.,°R.L. Endes, G.H. Green, and M. Bennett. 1977. 7 A Pro pile of Five Kenai Peninsula Towns. Bureau of Management and Urban Agfatits and Anchorage Urban Observatory. 3” Garbage disposal and trash pick-up, fire protection, police services, and hospital and inedical services were in the second-tier satis- faction group reported by Soldotna residents. The lowest ranked services in both communities were parks and recreation and the school system. In response to a question about whether they expect these services to improve, stay the same, or worsen as a result of additional growth induced by more oi] development in their area, the profiles of responses by residents in the two communities differed considerably. More Kenai residents anticipated that hospital and medical services would get better than anticipated they would get worse. For all the other services, more respondents thought they would get worse than thought they would improve. However, a majority responded that sewer and water systems and garbage and trash pick-up would remain the same; a clear plurality felt electrical services also would not change. The worse changes were expected to occur in police services, parks and recreation, and the school system. In Soldotna, more residents considered that parks and recreation, garbage and trash pick-up, hospital and medical services, water system, and fire protection would get better than thought they would decline. However, a majority thought the water and sewer systems would remain at the same level. A plurality thought electrical services would not change. Respondents in Soldotna were fairly evenly split between thinking police and the school. system would get better or get worse. Schools, parks and recreation, and police services stand out as being judged either to have a low present standard of service, to be sensitive to growth, or both. Of these, schools is the only service that can be subjected to quantitative analysis with available information. Since the survey was conducted, two new schools have been constructed in Soldotna: Redoubt Elementary and Soldotna High School. Adding these two facilities to the area also helps conditions in the Kenai 28 schools. To date, Soldotna high school students have attended Kenai High and some K-9 grades students from Soldotna attended Kenai schools (two percent in 1977 reported in Profiles). In the 1979-80 school year, prior to the opening of the new high school, 862 students were enrolled in Kenai High; the facility is rated to have a capacity of 800. Table 4 lists 1979 enrollment figures and capacity estimates for the Kenai-Soldotna area schools. With the new schools the area will have a cumulative excess capacity of about 25 percent for elementry grade, 20 percent for grades 7-9, and 46 percent for high schools. In total they have a capacity to accommodate more than 1,500 additional students. The numbers of school age children that accompany increases in the area's population during the first peak period of the proposed project are depicted in Table 5. Focus is limited to the inital period of impacts to determine whether special action is needed now to insure there are adequate classroom facilities to accommodate growth. Table 5 indicates that between 1981 and 1986, the numbers of additional school age children rises from 20 in the first year to a high in 1984 of 276 children and declines to 168 in 1986. Weighed against existing excess capacity in the area's school facilities, there are relatively nominal increases in demand the peak level is less than 20 percent of the unused capacity. This comparison, however, does not reveal whether or not additional facilities are required during the period under consideration. During the past five years, enrollments in area schools have increased at an annual compound rate of five percent. 3/ If this rate of growth continues, the increase in enrollments including estimated additions due to Upper Cook Inlet of] and gas activity in 1984 total 1270 -- more than 80 percent of existing excess capacity. If the same growth rate is applied only to junior high enrollments, these class room facilities are exceeded by 1983. —— 3/ Kenai Peninsula Borough. 1980 Situation and Prospects. 39 Table 4 CURRENT ENROLLMENTS AND EXISTING CAPACITY KENAI - SOLDOTNA AREA SCHOOLS October 1979 School Enrollment! Capacity? North Kenai Elementary 401 425 Sears Elementary 404 i 550 Kenai Elementary 274 500 Kenai Junior High 504 600 Kenai Central High 862 800 Soldotna Elementary 427 650 Redoubt Elementary 369 ? Soldotna Junior High 344 450 Soldotna High - 800 to seuation and Prospects, Kenai Peninsula Borough, January 1980, * offshore Oil Development in Lower Cook Inlet, CH2M HILL, June 1978. Table 5 ADDITIONS TO SCHOOL AGE POPULATION DUE TO UPPER COOK INLET LEASE SALE KENAI - SOLDOTNA AREA School Age Year Children 1980 0 1981 20 1982 87 1983 231 1984 276 1985 246 1986 168 (note: These estimates are derived using only that component of pop- ulation growth that represent in- creases in the number of family units, Twenty-eight percent of the family population is assumed to be in the school age group.) The demand conditions in the school example are probably representative of what an intensive investigation would show for other governmental ly supplied goods and services. That is, increments to Kenai's, Soldotna's, and the area's populations due to Upper Cook Inlet of] and gas activity will contribute proportionally small increases to the demand for specific services. These increases in conjunction with growth expected from other sources may tax the delivery or quality of publicly supplied goods. The underlying situation is illustrated for the initial impact period, 1981 to 1986, in Figure 3 and Table 2. This suggests an appropriate perspective for reviewing the adequacy of the public goods sector of the economy; if bottlenecks to growth are found, adverse effects will be transmitted through additional oi] and gas inducements as well as from other sources. Community Well-Being Factors 3. Are changes in housing conditions expected (e.g., avaikabitity prtee, quality? (Department of Community and Regional Affairs) Analysis: Recent trends in population and new housing authorization in Kenai and Soldotna suggest that a buffer stock of available housing has emerged in both communities during the past two years. High vacancy rates in multi-family units also indicate a capacity to absorb a build-up of temporary residents that characterize the construction phase of oil and gas development. d/ Current vacancy rates for housing units are not available for Kenai and Soldotna. The most recent measure of vacancy was in 1977. 2/ The survey of five communities in the Kenai Peninsula Borough reported vacancy rates to be 2.3 and 2.4 percent for Kenai and Soldotna, respectively. These rates do not take into account new housing construction, but the survey results report observation of 93 new housing starts in Soldotna and 56 in Kenai. According to data on new housing authorized, 1977 proved to be a peak year for new housing construction in both communities: 267 units were authorized in Keani and 177 units in Soldotna 3/ The tightness of the housing market reflected by the vacancy rates was being alleviated by new construction. Official esimates report slight declines in populations in both communities since 1977. Kenai's population is reported to have declined from 5,365 persons in 1977 to 4,374 in 1978, and to have increased to 4,421 persons in 1979. Soldotna's population was 1/An alternative to the use of apartments for temporary residence is for construction contractors to provide temporary camps in which workers are required to live. 2/Hitchins, Diddy R., Richard L. Ender, G. Hayden Green and “~ Marsha Bennett. 1977. A Profile of Five Kenai Peninsula Towns. 3/ Kenai Peninsula Borough. 1980. Situation and Prospects. estimated to be 2,585 in 1977 and was reported to be 2,368 persons jn both 1978 and 1979. While authorized housing construction has fallen from 1977 levels in both communities, more than 200 units for Kenai and 100 units for Soldotna are reported to have been authorized since 1977. It is reasonable to assume that a buffer stock of housing exists in both communities that could enable them to meet immediate housing needs that would accompany a new growth spurt. It is unlikely that additional oi] and gas development in the area would significantly alter the existing composition of housing types. According to the 1977 community surveys, single family units accounted for 47 percent of the housing in Kenai, multifamily units for 29 percent, and mobile homes for 22 percent. The respective figures for Soldotna are 56 percent, 16 percent, and 28 percent. During the past five years, proportionally more apartment units have been built in each community. Forty-two percent of authorized new housing construction in Kenai has been apartments; in Soldotna, it has been 30 percent. Soldotna's trend over the past five years has also included a high proportion of single family units - 69 percent. The percentage share of mobile homes has declined in both communities during the period. An index of apartment vacancy rates in Kenai and Soldotna compiled for selected months in 1978 and 1979 indicates there is an increasing availability of multi-family housing units in both ‘communities. 4/ In 1978, the percentage of vacant apartments in Kenai ranged from 38 percent in March to 19 percent in August to 37 percent in December. For the same months in 1979, the respective vacancy rates in Kenai were 46 percent, 20 percent, and 51 percent. This represents an annual increase of apartment vacancy rates in Kenai of about 24 percent. For Soldotna, 1978 monthly apartment vacancy rates were 16 percent in March, 10 percent in August, and 22 percent in December. In the following year these had risen by an average of 51 percent, to 31 percent in March, 19 percent in August, and 22 percent in December. 43 4/Kenai Peninsula Borough. 1980. Situation and Prospects. Communtty Well-Being Factors 4. Do adequate ghowth mana ement capabibities exist? (Department of Community and Regional airs) Analysis: All of the impact areas identified in Figure 4 lie within boroughs which exercise planning and zoning authorities on an areawide basis, that is, both inside and outside cities within their corporate boundaries. Consequently, adequate authority for growth management exists. The Kenai Peninsula Borough has recently adopted comprehensive plans for the cities of Kenai and Soldotna. The Borough has drafted a coastal management program which will undergo extensive review over the next year or so. The borough has also adopted zoning ordinances in the cities of Kenai and Soldotna. Numerous public facilities plans and designs have been or are being Prepared. Among these are: a ports and harbors stydy; a regional solid waste management plan and water resources study for the Borough; a street design, water system design, and construction of a new city hall for the City of Kenai; and a water system design and the design of a new city hall for Soldotna. 4 qa Community Well-Being Factors 5. What 48 public sentiment (Local and Statewide) toward the proposed project? (Department of Natural Resources) Analysis: The broadest reflection of public sentiment to date is the Alaska Legislature's acceptance of the scheduling of this sale. The Department of Natural Resources has received numerous comments made in person (generally through phone calls) from local government representatives in Kenai and the Mat-Su area. These officials have all expressed strong support for the sale and for it being held as scheduled. A number of letters were received by the AACL during the public review period. These public comments are included’in this final Analysis (Public Comment and Agency Response Appendix). The Department of Natural Resources has received correspondence from the Trustees for Alaska and Friends of the Earth recommending that: 1) there be no leasing in the State refuges or critical habitat areas contained within the proposed sale area, 2) all areas identified by the U.S. Fish and Wildlife Service as important to endangered, threatened, or sensitive wildlife be deleted and further encircled with buffer zones, and 3) the nesting sites of the trumpeter swan and tule goose be deleted from the proposed sale area. At the request of the Department of Fish and Game, the Department of Natural Resources has removed from the initially proposed sale area the tule goose nesting area on the Big River flats and the calving ground of the lowland Kenai caribou herd. The Department of Fish and Game has felt that as the general public and fish and wildlife users become more aware that the State is planning an oi] and gas lease sale in Upper Cook Inlet in 1981, people are likely to express concerns about the proposal. du They will probably not be opposed to oil and gas leasing in the areas outside of the refuges if proper protection is provided for fish and wildlife, their habitat, and human use of the lease area. This opinion is supported by a survey conducted by Yale University on public attitudes toward critical wildlife and natural habitat issues in Alaska. 1/ The following is an excerpt from the report on the results of that survey: "The relative willingness of Alaskans to forego a variety of human benefits in order to protect wildlife habitats was further suggested by a number of specific issue findings. As indicated in Figure 24, nearly 60 percent of Alaskans disapproved of wilderness natural resource development if it adversely affected wildlife populations. Additionally, Figure 25 reveals that approximately 77 percent of Alaskans were opposed to development of oil, if discovered in Yellowstone Park, if this would harm the Park's wildlife. Alaska respondents also strongly supported protection of endangered wildlife even at the expense of various utilitarian benefits. This is reflected in the previously cited endangered species protection scale (Figure 26) in which Alaskans scored significantly higher than the general population, with only the Pacific Coast states, among regional groups, having comparably high scores. Additionally, Figure 27 reveals that 62 percent of Alaska respondents favored preserving large amounts of wilderness habitat to protect the grizzly bear, even at the cost of some jobs and timber supplies. The results of Table 44 indicate that nearly 60 percent of Alaskans disapproved of building an industrial plant on marshland if this endangered a bird species. These various findings reveal exceptional animal knowledge, ecological appreciation, interest in wildlife, and relatively less utilitarian orientation among Alaskans, and are summarized by the attitude and J/ Kellert, S.R. 1979. Public Attitudes Toward Critical Wildlife and Natural Habitat Issues. Presented to U.S. Fish and Wildlife Service, October 15, 1980. 46 knowledge profile on Figure 28. The indication of a relatively | strong Alaskan affection for and desire to protect wildlife and their natural habitat, even.at the sacrifice of various material benifits, somewhat contradicts many media descriptions of the Alaska citizenry as development oriented." In response to its legislative mandate under AS 16.20.036, the Department of Fish and Game sent a letter to 263 refuge users in May of 1980 describing the proposed oil and gas lease sale and the measures the Department recommended to protect fish and wildlife resources and refuge users from potential adverse impacts of development. A questionnaire was attached soliciting opinions on the proposal, sentiment toward additional road construction within each refuge, and the desirability of limiting public access and use of firearms in certain designated areas. Individuals known to have duck cabins on the refuges, people who have shown an interest in these refuges at public meetings, and anyone responding to newspaper advertisements requesting public input on the proposal were contacted. One hundred and thirty of the questionnaries were completed and returned to the Department. Public reaction toward additional oi] and gas development in the Susitna Flats and Trading Bay Refuges has not been favorable. Sixty percent of those responding did not support additional leasing in the Susitna Flats Refuge. Fifty-eight percent were opposed to further development in the Trading Bay Refuge. A majority of the individuals surveyed considered it undesirable to develop additional roads in either the Susitna Flats (79 percent of respondents) or the Trading Bay (75 percent of respondents) Refuges. Sixty-nine percent did not favor limiting public access in specific areas, and seventy-nine percent opposed regulations prohibiting firearms in certain locations to protect lease facilities and activities. In addition to the questionnaire, public sentiment on the proposed leasing was expressed at a public hearing held in Anchorage on June 25, 1980. At that time four people presented their opinions against additional oil and gas. development in the Susitna Flats and Trading Bay Refuges. In essence, they were opposed to or skeptical about leasing in either of these areas. They believed that the Department of Fish and Game had not adequately considered the impacts of leasing activities on human use and were concerned that oi] and gas development would significantly diminish the quality of their recreational experience. 1, Fiscal Factors What effect would the project have on the net balance of State and ocak expenditures versus revenues over tome? (Department of Revenue) Analysis: The general positive and negative economic aspects noted earlier in the Economic Factors section, wherein changes in the per capita income are discussed, are generally applicable here as well. A further aspect to be noted is the potential of higher State or local energy credits or other fiscal efforts to ameliorate the inflationary impact of those higher costs. The Department of Community and Regional Affairs has also examined this question from the standpoint of local expenditures and revenues and the balance of this discussion features their analysis. No major new local expenditures can be firmly projected at this time. Furthermore, since even under the high discovery scenario, production from new oi] and gas finds would not fully offset the anticipated decline in existing fields in Cook Inlet. Expansion of the tax base within the existing city limits of Kenai and Soldotna will occur primarily from residential development and increased sales. Most increases in revenues would accrue from taxation on oi] and gas exploration, production and pipeline transportation property (AS 43.56). Consequently, the net revenue benefit to the Kenai Peninsula Borough and Matanuska-Susitna Borough could be positive. AS 43.56 provides that: * The State shall annually levy and collect a tax or two percent (20 mills) upon the value of oi] and gas exploration, production and transportation property. (AS 43.65.010(a)) 49 * Organized municipalities may tax the same property. If this occurs the local tax is applied as a credit against the state tax. (AS 43.56.010(d)) * A municipality's authority to tax such property, for general operating expenses, is subject to the following high of the two limitations: 1) . The amount of revenue generated from such tax may not exceed an amount equal to $1,500 per resident, or 2) The value of property taxed, when combined with the value of the municipalities other taxable property, may not exceed an amount equal to 225 percent of the average State per capita assessed valuation multiplied by the number of residents of the taxing municipality. To illustrate the potential value of oil and gas property assessment, Kenai Peninsula Borough's full value determination as of January 1, 1979 was $2,050,959,800. Of that amount, 21.76 percent or $446,421,080, was derived from oil and gas exploration, Production and pipeline transportation property. Since virtually all of the proposed lease sale area lies outside city limits, tax revenues from oi] and gas related property will accrue to either Kenai Peninsula Borough or Matanuska-Susitna Borough. Boroughs may spend revenues they collect on only those services which they provide on an areawide basis. As stated earlier, the Kenai Peninsula Borough provides for education, planning and zoning, assessment and taxation, health, and solid waste on an areawide basis. The Matanuska-Susitna Borough provides these same services on an areawide basis. Services provided on a non- areawide basis or service area basis cannot be financed through these revenues. aU The Cities of Kenai and Soldotna provide the following services: water, sewer, airports, police, fire protection, road maintenance, . parks and recreation, and libraries. There is presently no legal mechanism for boroughs to share revenues with their cities, despite the fact that many boroughs would like to channel some of their funds into vital, yet underfunded, services provided by cities. 2. Fiseak Factors Are there explicit on implicit State subsidies associated with the project? (Department o evenue) Analysis: At least two varieties of subsidies may arise. First, the State hy leasing gas intended for interstate commerce would face price ceiling (and, therefore, bids) limited hy controlling federal legislation. As such the State would be implicitly subsidizing the energy costs of the lower 48 states. Second, if southcentral Alaska increasingly loses access to gas reserves at present price levels, future higher costs may entail subsidies. Currently, natural gas prices are controlled at the wellhead under provisions of the Natural Gas Policy Act of 1978. When the Act was passed, Congress assumed that crude oi] would be priced at approximately $15.00 per barrel, adjusted for inflation. Since 1978, the price of crude oi] has risen much faster than inflation. In fact, crude oil in May of 1980 was selling in the $28.00-$38.00 per barrel range. If gas and oi] are compared for Btu equivalency (as contracts are increasingly indicating), this means that consumers turning to natural gas rather than fuel oi], whether they are located in Alaska or the Lower 48, enjoy an after tax subsidy equal to approximately one-half of the wellhead value of the gas consumed. In other words, by now selling natural gas in the proposed lease sale at rates governed by existing Federal provisions, the State of Alaska is accepting bonus bids, royalty, and tax payments on prices which are less than half of the Btu equivalent value of the natural gas. It should be noted that Canadian natural gas and Mexican natural gas are currently being sold at border prices in the $3.60-$.40 per MMBtu range while Algerian and Indonesian gas is being offered at prices in the $6.00 per MMBtu range. or te In a discussion of future natural gas prices, several factors surface which lead to an uncertain picture for Cook Inlet consumers. Provided no congressional amendments alter the Natural Gas Policy Act of 1978 timetable,.natural gas prices will be decontrolled in 1985. An immediate rise in prices to the consumer is not likely to occur at that time due to an overlap with existing contracts. The decontrolled market price of Cook Inlet gas will be affected by future worldwide demands which, in turn, reflect the acceptability of LNG facilities and/or the availability of alternate fuels. The availability of Alaskan natural gas supplies (e.g. future Cook Inlet discoveries and the Northwest Pipeline) will undoubtedly influence market prices as well. It is assumed that decontrol of natural gas prices will eventually lead to the elimination of subsides to both in-State and Lower 48 consumers, barring specific allocation agreements that could be made. Resource Utilization Factors 1. What effect witl the project have on resource industry potentials on other resource values? Wik the project result in Lumeversi¢ble resource commitments? (Department of Natural Resources) Analysis: With appropriate mitigating measures, oi] and gas exploration, development, and production in the Upper Cook Inlet area should have a minimal. effect on the viability of other resource industries such as timber and mining. An exception is the positive impact to mining that development of transportation modes and access to joint use areas will have. The first major discoveries of oil and gas on State lands in Alaska occurred in the Cook Inlet area. Competitive oil and gas leasing offshore in the area began on September 10, 1959. Until Prudhoe Bay production came on line, the Cook Inlet Basin accounted for the majority of total oil and gas production from State lands. Five oil fields and numerous gas fields have been developed in the Cook Inlet area over the past two decades, with more than 700 wells drilled, approximately half the total number of wells drilled Statewide. The proposed Upper Cook Inlet sale region is considered part of a major gas province. Existing Cook Inlet development has not been known to have any substantially negative impacts on other resource industries. Because oi] and gas resources are nonrenewable, extraction of commercial discoveries would result in an irreversible commitment of those particular resources. The project would also create temporary commitments of other resources, such as land, during the exploration phase through the construction of air- strips, access roads, pipeline corridors, and drilling pads. If commercial production results from this sale, commitments of some land resources will be required for the life of the field. However, operators will be encouraged to utilize existing infrastructure to the maximum extent practicable so that this type of irreversible commitment can be minimized. With mitigating measures in place to protect fish and wildlife resources, habitats, and public access and with an absence of major accidents, it is likely that impacts on industries based on the use of fish and wildlife resources or habitat can be minimized. Or — There are, however, several potential impacts that have been identified by the Department of Fish and Game. These include the following: 1. Commercial guides, lodges, and wilderness adventure operators in western and Upper Cook Inlet may be impacted by industrial development and increased public access resulting from oil development. There are approximately 31 companies advertising hunting, fishing, and wilderness adventure trips in the Anchorage and Kenai telephone books. People who utilize these types of services and pay large amounts of money for a quality experience are likely to shift their business to another area as the western Cook Inlet region becomes developed. 2. Any oil and gas activities which reduce anadromous fish Populations, attract new people to the Upper Cook Inlet region, or improve public access to salmon streams could aggravate existinf resource allocation conflicts between sport and commercial fishermen. It is likely that the development of an oi] field adjacent to spawning streams on the west side of Cook Inlet could result in reductions in the commercial salman harvest. 3. Docks and processing facilities could displace some existing set net sites as has occurred in the Nikiski area. Ct Qt source Utikization Factors 2. Wile the project affect 4ish and wikdeife populations or their habitat? Wx? these effects be short-teun or Long-terum in nature? (Department of Fish and Game) Analysis: Introduction The Upper Cook Inlet lease sale and any subsequent oil and gas exploration, development, production, and transportation in the area will affect fish and wildlife populations and their habitats to some degree. The tract nomination area encompasses extremely important and productive fish and wildlife habitat. The fish and wildlife resources of the upper Kenai Peninsula and Upper Cook Inlet region support the largest recreational harvest of fish and wildlife in the State and contribute heavily to one of the State's largest commercial salmon fisheries. Subsistence harvest of fish and wildlife also occurs in the lease sale area (see section on effects on subsistence). Because of the proximity to the State's major population centers, there is intense competition between major user groups for limited resources, and major controversies have developed over resource allocations, resource protection, and public access. Fish and Wildlife Resources and Habitats Big game species found in the proposed lease area include moose, brown bear, black bear, and caribou. The proposed lease area is generally considered good moose habitat, while the portion of the lease area adjacent to the Yentna River is rated as excellent habitat. The floodplains of streams in this area and coastal areas of western Cook Inlet are considered critical calving and over- wintering moose habitat. The total moose population of the proposed sale area is estimated to be between 2,200 and 4,500 animals. Approximately 200 to 300 moose are harvested from this population annually. wr a The northern Kenai lease area includes a portion of the range of the Kenai lowlands caribou herd. There are 50 to 60 animals in this herd, and no hunting is allowed because of the herd's marginal reproductive success. 8l]ack bear and brown bear are common throughout the area, often concentrating on grassy. tidal flats in the spring and at salmon spawning streams in the fall. The Trading Bay Refuge and the coastal wetlands south to the Big River are considered very good brown bear habitat. ; Marine mammals commonly found in the area include beluga whales and harbor seals. Because of extreme winter conditions, most marine mammal usage is limited to the spring, summer, and fall and probably coincides with spawning runs of anadromous fish (herring, smelt, and salmon) into the area. The number of harbor seals in the area is unknown, but there are approximately 400 belugas in the Cook Inlet population. A few belugas (3 to 5) and an unknown number of harbor seals are harvested annually by people from Tyonek. A significant portion of the proposed lease area including the Susitna Flats, Trading Bay, and Redoubt Bay is considered very important waterfowl and shorebird habitat. Estimated spring and fall waterfowl usage of the Susitna Flats refuge exceeds 150,000 ducks, 50,000 geese, and over 25,000 swans annually. Few waterfowl surveys have been conducted in Trading and Redoubt Bays; however, estimated total duck, goose, and swan use is very similar to the Susitna Flats. Waterfowl nesting in these areas is shown in Table 1. Each pair of nesting ducks and geese will produce from four to six offspring annually. Sandhill cranes and trumpeter swans will produce from one to two offspring each year. Systematic estimates of the numbers of shorebirds using the proposed lease area are not available due to the difficulty in surveying these species of birds; however, strip surveys on the Susitna Flats Refuge show a summer peak of 478 shorebirds per square mile. wre i “I Table 1. Estimated Numbers of Resident Waterfowl Nesting on Cook Inlet Marshes, 1975-1978 (Sellers, 1980)1/. Species Susitna Flats Trading Bay Redoubt Bay Total Ducks 10,189 9,366 14,507 34,062 Swans 45 64 194 303 Canada Geese 711 0 0} 711 Sandhill Cranes 28 271 201 500 TOTAL 10,973 9,701 14,902 35,576 1/These are averages of data obtained from ADF&G waterfowl survey and inventory reports for yearly flights, 1975-1978. The Susitna Flats Refuge not only produces significant numbers of waterfowl, but is the number one hunting area in the State. Trading Bay and Redoubt Bay receive moderate hunting pressure. The lease area is also considered important bald eagle habitat. The U.S. Fish and Wildlife Service has located 32 bald eagle nests in the proposed sale area, an indication of its quality. The proposed lease area contains 19 salmon spawning streams. Thirteen of these streams are located on the west side of Cook Inlet and five are in the northern Kenai Peninsula tract nomination area (Table 2). Survey counts indicate that 146,250 pink salmon, 725 chum salmon, 4,555 red salmon, 2,025 silver salmon, and 10,035 king salmon have been observed spawning in streams within the western Cook Inlet portion of the lease sale area. Because of the difficulty in surveying salmon in glacial streams, only partial survey counts are available for western Cook Inlet streams and actual spawning populations are probably much larger. The western portion of the proposed lease area also includes the mouth of the Susitna River which is the most important producer of pink, chum, and king salmon in Cook Inlet. Peak survey counts for Susitna River tributaries indicate that over 2,931,920 salmon of all species spawn in the Susitna River drainage in good years (Table 2). 38 Stream A. West Side Cook Inlet 1. Little Susitna River 2. Susitna River 3. Alexander Creek 4. Sucker Creek 5. Lewis River 6. Theodore River & Olsen Creek 7. Beluga River 8. Three-mile Creek 9. Chulitna River 10. Nikolai River 11. Chakachatna River 12. McArthur River B. Kenai Peninsula 13. Seven/Egg Creek 14. Otter Creek 15. Swanson River 16. Bishop Creek 17. Beaver Creek Table 2. Sale Area. Pink Chum 45,000 ll 2,470,100 148, 400 100,000 700 1,000's 25 Peak Salmon Escapement Counts for Streams in the Reds Silver 3,900 - 94,000 - 100 2,000+ 5 u 550 25 salmon present but no escapement data available 250 - present - Kings 405 118,620 6,150 380 1,000 100 2,000 present king and red salmon present but no escapement data available king and red salmon present but no escapement data available salmon present but no escapement data available salmon present but no escapement data available salmon present but no escapement data available salmon present but no escapement data available salmon present but no escapement data available Total 49,305 2,931,920 108,950 380 1,005 1,700 No escapement estimates are available for salmon streams for the northern Kenai Peninsula; however, available information indicates that the runs of salmon into these streams are only of moderate size. Commercial fisheries statistics indicate that 1,479,163 salmon of all species were harvested in the northern Cook Inlet commercial fishing district between the years 1975 and 1979. During this same period, 15,363,093 salmon of all species were harvested in the central Cook Inlet commercial fishing district (Table 3). The value of salmon harvested commercially in Upper Cook Inlet between 1975 and 1979 was approximately $83,169,769.00. Salmon caught in “the central district accounted for a majority of this income; however, catches valuing several million dollars were also harvested from the northern district. With the exception of 1979, the value of the commercial salmon fishery in Upper Cook Inlet has increased steadily over the past 5 years (Table 4). Increases in the average price paid for commercial fishing permits is another indication of the growing value of this fishery (Table 5). Although it is difficult to identify the origin of salmon harvested commercially, it is probable that the majority of the fish harvested in the northern district, and a significant percentage of the salmon harvested in the central district were produced by streams located within the proposed ledse sale area. The Susitna River drainage is also the second most important sport fishing area in the State with over 88,597 angler days expended in 1977. GO T9 Table 3. Cook Inlet Cumulative Salmon Catch Report, 1975-1979. Northern District Year, Kings Reds. Cohos Pinks. Chums Total 1979 1/ 1,649 111,481 51,653 26,618 10,592 201,993 1978 1,104 66 ,003 49,221 342,129 36,948 495 ,405 1977 565 123,697 20,633 116,518 22 ,660 248,073 1976 457 69,749 — 37 ,849 148,090 — 14,048 270,193 1975 158 63,180 38 ,999 94,734 30,428 227,499 Total 3,933 434,110 198,355 728 ,089 114,676 1,479,163 Central District Year Kings Reds Cohos Pinks Chums Total 1979 1/ 11,982 790,995 208 , 303 49,911 655,017 1,716,208 1978 16,527 2,547,371 171,798 1,314,419 531,318 4,581,433 1977 14,219 1,928,731 171,970 . 437 ,337 1,209,615 3,761 ,872 1976 10,410 1,596,501 170,930 1,109,022 455,193 3,342 ,056 1975 4,681 610,854 191,951 234,450 919 588 1,961,524 Total 57,819 7,474,452 914,952 3,145,139 3,770,731 15,363,093 1/Preliminary figures Table 4. Salmon Value To Fishermen In Upper Cook Inlet, 1975-1979.1/ Salmon Value (in dollars) Year Northern District Central District Total 1979 1,608,232 13,911,472 15,519,704 1978 1,601,737 26,400,197 28 ,001 ,934 19772/ 7 - 20 ,000 000 1976 882,162 12,512,662 13,394,824 1975 554,004 5,699,303 6,253,307 Total - - 83,169.760 I/_ Value calculated from catch figures, average weight of fish and average price per pound for each species. Rounded off to the nearest dollar. 2/ District figures not available for 1977. Table 5. Cook Inlet Commercial Salmon Fisheries Permits, 1975-1979.1/ Purse Seine Total Number Average Price Paid Year Permanent Permits For Permits (In Dollars) 1979 75 - 1978 : 74 40,000 1977 72 10,625 1976 63 7,500 1975 49 - Set Gill Net Total Number Average Price Paid Year Permanent Permits For Permits (In Dollars) 1979 744 23,412 1978 742 9,824 1977 731 4,821 1976 711 1,778 1975 657 2,250 Drift Gill Net Total Number Average Price Paid Year Permanent Permits For Permits (In Dollars) 1979 554 82 ,636 1978 549 36,825 1977 539 9,643 1976 514 5,552 1975 453 3,911 J/ Information covers entire Cook Inlet region including, but not limited to, proposed lease sale area. 63 Impacts of Oi] and Gas Activities The Departments of Fish and Game and Environmental Conservation have studied oil and gas development with respect to their impacts on fish and wildlife resources and the best available methods of mitigating the impacts of these activities on fish and wildlife resources. The results of these studies are published in Recommendations for Minimizing the Impacts of Hydrocarbon Development on the Fish, Wildlife, and Aquatic Plant Resources of Lower Cook Inlet (available from the Nepartment of Fish and Game) and in Water Quality Implications of Oi] and Gas Activities in the Proposed Sale (Department of Environmental Conservation Appendix). Based on these studies the adverse impacts of oi] and gas activities can be divided into the following categories: Activity Potential Impact duration Site preparation long-term 2. Noise and disturbance short- or long-term 3. Discharge of drilling muds, short-term cuttings, and solid waste 4. O71 pollution short-term with long-term effects 5. Dredging and filling long-term 6. Shoreline alteration long-term 7. Discharge of formation waters long-term 8. Discharge of cooling waters long-term 9. Interference with commercial fishing long-term 10. Secondary development long-term 11. Air pollution long-term A detailed discussion of these impacts and supporting scientific evidence are contained in the above-mentioned reports. The magnitude of the effects of oil and gas related activities on fish and wildlife resources will depend on many factors including, but not limited to: 1) whether economically exploitable accumulations of hydrocarbons are found, 2) whether ail or gas is produced, 3) the area where a discovery is made, 4) the number of pollution accidents which occur, and 5) the type of development (new roads, airstrips, docks, etc.) necessary to develop the field. 3. Pesource Utirization Factors Wilk the project affect subsistence resources? For example, are changes in migration patterns, Loss of Spectes, dislocation, on availabihity changes expected? (Department of Fish and Tame) | Analysis: It is likely that oi] and gas exploration, development, production, and transportation in the sale area would affect both subsistence resource and other natural resource users to some degree. Traditional subsistence activities in the proposed lease area center around 1) the village of Tyonek (population 232) which is located in the approximate center of the lease area, and 2) a large subsistence salmon fishery. Approximately 1600 subsistence salmon permits were issued to individuals in the Upper Cook Inlet region in 1979. The general areas used by subsistence salmon permit holders are shown in Table 1. 1/ No harvest figures are currently available; however, it is estimated that the annual catch is between 50,000 and 150,000 salmon of all species. Subsistence activities of the Tyonek village people include: hunting for moose, marine mammals, and waterfowl; and fishing for salmon. Harvest levels for various subsistence species are contained in Table 2. The general area of greatest use extends from the village™ south to the Polly Creek area and north along the coast to the mouth of the Susitna River. Subsistence use areas are identified in Table 3. The use an area receives is dependent both upon access and the availability of resources. For example, coastal areas, river banks, and areas along the road system where boats and vehicles can be used to transport hunters and game are used more extensively than areas only accessible by foot. The use of areas within the general subsistence harvest area may also vary from year to year depending upon the availability of subsistence resources. 1/Note that only 1,208 permittees are shown. The remainder were not broken down by area. 66 Table 1. Upper Cook Inlet Subsistence Boulder Pt. to Point Possession Fire Island “Pt. McKenzie to Big Susitna River Big Su. to West Forelands W. Side Central District to Kalgin Is. Salmon Permits Issued in 1979. 799 TOTAL 1,208 Table 2. Subsistence Harvest of Various Fish and Wildlife Species by the Village of Tyonek in 1979. Species Moose Beaver Muskrat Ducks (all species) Geese (all species) Harbor seals Beluga whales Salmon (all species) Clams (all species) Number harvested 20 100 50 400 100 a number harvested but no figures available 3 . 3,500-4 ,000 1,500 Table 3. Locations Where Subsistence Occurs no Polly Creek: The beaches in this area are used for clamming in the spring. Redoubt Bay: The beaches in this area are used heavily and have been relied upon for many years for clams. Use occurs in both spring and fall, but spring use is especially important after winter food supplies have been depleted and before the spring salmon run begins. The beaches south of Drift River Terminal to Harriet Point are used most extensively. a. Drift River: Historically, the upper and middle reaches were used most heavily for hunting and trapping. Today, some duck and seal hunting is pursued in the lower reaches. b. . Kustatan River: The entire vicinity is hunted heavily when the McArthur River area and other areas do not have many moose. Some trapping takes place here. Trading Bay and McArthur River: Upper McArthur River areas are used for moose hunting and furbearer trapping. McArthur Flats is used for waterfowl hunting and furbearer trapping. a. Middle River and lower area flats are used for moose hunting, trapping and waterfowl hunting. Chakachatna River and Noaukta Slough: Used for moose hunting, trapping, and waterfowl hunting. Chuitkilnacha Creek and associated marsh areas: Used for duck hunting. Granite Point to Chuitna River: The shoreline areas here are relied upon for subsistence and commercial salmon and herring fishing. This is the main fishing area for Tyonek residents. Chuitna River and Chuit Creek Area: Both are used extensively in winter months for trapping and moose hunting. a. Chuitbuna Lake (referred to as Chuit Lake) area is used for trapping and hunting especially in the winter. During the fall the area around this lake is used for berry picking. This area has a particular importance because of its proximity to Tyonek village. b. The areas west and north of Beluga village are used very heavily in fall for hunting moose and in winter for furbearer trapping. This is also an important berry picking area. 68 c. - Old Tyonek Creek and the lakes area around Congahbuna Lake are used for moose hunting and trapping. Beluga Flats and lower reaches of Beluga River: These locations are very important for hunting beluga whale and waterfowl. Some — seals are also taken here. Susitna River: The mouth and lower reaches are used for beluga whale and seal hunting in the spring and fall. 69 Other subsistence users and use may also occur throughout the area; however, additional information is not currently available. Assuming that economic accumulations of oi] and gas are discovered and produced, it is likely that activities associated with this development would impact subsistence use. The likely impacts include: 1. Reductions in the availability of fish and game resources used for subsistence due to the accumulative impacts of activities associated with oil and gas development such as dredging, filling, road construction, disturbance, oil spills, pipeline construction, and land clearing. 2. Increased competition between local residents and other residents of the Cook Inlet region for limited subsistence resources as a result of increased access and economic growth in the sale area. 3. Increased pressure for reallocation of fish and game resources between commercial, recreational, and subsistence users. If subsistence use by Tyonek villagers is significantly impacted by oil and gas leasing and secondary development, the following socioeconomic impacts may result: 1. Diminishment of culturally established and nutritionally significant food components in Tyonek residents' diets and increased dependence on the importation of food items. The scarcity or elimination of subsistence resources will furthermore place an increased demand on existing financial resources. 2. Decline in culturally established values around which fundamental attitudes and beliefs are based. 70 Increased expenditure of time, money, and energy in the pursuit and collection of subsistence resources. With the declines in harvest of resources resulting from local population growth, it may become economically impossible for Tyonek residents to obtain subsistence resources in significant amounts. Alteration and/or elimination of alternate use areas which relieve harvest pressures from other areas during times of low quantities or quality of resources. Many hunting and trapping locations are abandoned for several years and returned to after animal numbers increase. Loss of traditional skills, knowledge, and devices employed in the procurement of subsistence resources. These skills and crafts provide important social ties within the community. Because Cook Inlet subsistence salmon permit holders are a diverse socioeconomic group, it is impossible to predict what the social or economic consequences of reductions in harvest or reallocation of resources would be. Resource Utilization Factors 4. Wike the project affect designated on specifically Actes wilderness, historic, watershed, recreational, on Scenic areas? (Department of Fish and Game) Analysis: The proposed lease sale will affect two State game refuges and ten anadromous streams of Statewide importance for sport fishing. Public access, riparian zones, and wildlife reservations on State-owned lands will be affected, as well as two State parks, and several tracts of public interest lands: reserved for consideration as recreational areas, essential wildlife habitat state parks, historic, and archeological sites. All of these areas are included below in one of four categories (I-IV). Each category is analyzed individually, and discussed in the recommendation section following the same format. L. Refuges. The proposed lease area includes almost all of the 301,950-acre Susitna Flats and approximately 40 percent of the 168,930-acre Trading Bay State Game refuges. Lease activities could also affect the Goose Bay Refuge, the Potter Point Refuge, and the Kenai National Moose Range which are located adjacent to or within close proximity to the proposed sale area. The Susitna Flats is the most important waterfowl hunting area in the State, with 7.9 percent of the total State use and over 5,280 person-days of hunting effort expended in 1978. Trading Bay is the ninth most important waterfowl hunting area, and Redoubt Bay, which has been proposed as a State refuge and is partially included in the proposed sale area, is the eighth most important waterfowl hunting area in the State. Collectively, the wetlands included in and adjacent to the sale area are the most heavily used hunting areas in the State. Harvest and hunter use figures for these areas are contained in Table 1. To support waterfowl hunting activities in the areas indicated in Table 1, over 161 cabins have been built in the coastal 72 Table 1. Upper Cook Inlet marshes, 1978. Ducks harvested % of % of Number State total Number State total Susitna Flats 11, 836 11.6 5,280 7.9 Redoubt Bay 3,367 3.3 1,470 2.2 Trading Bay 2,551 2o5 735 Lt Potter Marsh 510 5 668 1.0 Goose Ray 510 5 601 9 18,774 8.4 8,754 1351 Table 2. Sport Fishing Effort on Streams within the Proposed Sale Area. : Person-days Person-days Stream fished in 1978 fished in 1979 Total Lake Creek 8,767 14,000 22,767 Alexander Creek 6,914 8,000 14,914 Chuit River 1,185 1,3555 2,540 Theodore River 905 1,037 1,942 Lewis River 172 343 515 Little Susitna River 12,127 21,000 33,127 30,070 45,735 75,805 Waterfowl Harvest and Hunter Effort for Hunter-days Il. wetlands included in the sale area. Anadromous streams. The proposed sale area includes all or ‘portions of several important sport fishing streams which are protected under the Anadromous Fish Act. These are identified in Table 2. The streams identified in Table 2 receive some of the heaviest recreational use in the State and provide recreational opportuni- ties for over 50 percent of the State population. Recreational and fisheries values include: 1. Little Susitna River - A very important sport fish/commercial fish stream. Over 21,000 person-days of fishing effort occurred in 1979. Major species of salmon are kings, silvers and pinks. Other two salmon species present. Also has rainbow trout and grayling. Has a good reputation for trout and salmon fishing. Access is available at the Parks Highway bridge, Burma Road, and by boat from Anchorage across part of Knik Arm and up the Little Susitna through the refuge area. 2. Lake Creek - One of the best sport fishing streams in southcentral Alaska. Also a major salmon spawning stream. Received approximately 14,000 person-days of sport fishing effort in 1979. Over 3,000 king salmon of all sizes taken last year. Lake Creek is only one of three west side Susitna River streams open to the taking of king salmon. Over 75 percent of the fishing effort is in the lower two miles. This is the area that falls within the lease area. Other species present: silver, pink, chum, and red salmon. Excellent sport fishing for rainbow and grayling. Alexander Creek - One of the more important sport fishing streams in southcentral Alaska. More than 8,000 person-days of fishing effort in 1979. One of the major king salmon producers in Upper Cook Inlet. Over 13,000 king salmon have been known to spawn in the creek. Second of three streams in western Cook Inlet open to king fishing. Alexander Creek is one of the best float trip streams in the area. Floaters start in at Alexander Lake and raft to its confluence with the Susitna River. Other species present include rainbow trout, silver, pink, and red salmon. Chuit River - Has some of the best rainbow and Dolly Varden trout fishing. Over 1,000 person-days of fishing effort in 1979. Not as much fishing pressure as some of the other streams due to limited access. However, the Chuit River gives the angler an opportunity to fish in a wilder- ness setting without the crowds. ther species present: king, pink, and silver salmon. Theodore Creek - Access is limited but this stream has some of the best rainbow trout fishing around. Good for Dolly Varden also. Approximately 1,000 person-days of effort recorded in 1979. Other species present: king, pink, and silver salmon. Lewis River - Less than 1,000 person-days of fishing effort in 1979 due to limited access. Fishing reputation notes this stream is fair to good for rainbows and good for silver salmon. Other species present: oink and king salmon and Dolly Varden. III. 7. Fish Creek above Lake Creek - One of a few stream systems on the west side that has a significant population of red salmon. Very good for rainbow trout. Other species present: king and silver salmon, grayling and northern pike. 8. Moose Creek - Has the potential for a "small" sport fishery for rainbows and grayling. Other species present: red salmon and hooligan. 9. Olsen Creek - One of the best silver salmon fishing areas in the Beluga River area. Current access is by riverboat or by floatplane from the Beluga River. Other species present include pink and king salmon. 10. Nikolai - Not much fishing effort due to limited access. However, the stream has rainbow, Dolly Varden trout, pink and silver salmon. To take advantage of the excellent fishing and public demand for recreation, two lodges have been built in the proposed sale area and several air charter businesses earn a large part of their ineome by flying recreationists into this area. Many private fishing cabins are also located within the pro- posed sale area. Public Access, Riparian Zones, and Wildlife Reservations on State Owned Lands. The Department of Fish and Game has worked very closely with the Department of Natural Resources to ensure that the public's interests are protected in the State lands disposal program on the Northern Kenai Peninsula and western Cook Inlet. To this end, the Departments of Fish and Game and Natural Resources have identified riparian zones, essential fish and wildlife habitat, easements, and public access sites on State-owned land and State land slated for disposal. Public land reservations within the proposed. lease sale area include: 1. Recreational Corridors - Recreational corridors were identified in the State's lands disposal program to maintain heavily used recreational areas and the resources which support recreational activities in public owner- ship. Public interest values include recreational campsites, sport fishing, public access sites, hunting, and boating. Areas considered as recreational corridors include the 100-year flood plain of important recreational streams. These corridors range from % to %-mile on each stream bank. Descriptions of recreational corridors reserved along the Little Susitna River, Theodore River, Yentna and Skwentna Rivers, Alexander Creek and Lake Creek are contained in Table 3. 2. Wildlife habitats - Nildlife habitat reservations include habitat which is considered essential to the continued high level of production of fish and wildlife in the Susitna Basin and western Cook Inlet. These habitats include very important anadromous fish spawning streams, moose calving areas, eagle nests, and moose overwintering areas. Reservations for essential fish and wildlife habitat have been requested along the Susitna, Yentna, and Skwentna Rivers. 3. Development Setbacks - Development setbacks are designed to 1) protect important rivers, lakes, and streams from activities which would impact water quality and riparian habitat and 2) ensure public access to important sport fishing and recreation areas. Reservations for development setbacks within the lease sale area have been established on each bank of the Beluga and Chuitna Rivers. 77 Table 3. Fish and Wildlife Habitats, and Recreational Reservations on public lands in the Upper Cook Inlet lease sale area. Name 1. 2. Little Susitna River Susitna River Theodore River Beluga River Chuitna River Yentna & Skwentna Rivers Alexander Creek (and Sucker Creek) Lake Creek Type of Easement 4-mile recreational corridor 4yemile fish and wildlife habitat corridor (all contained within Susitna Flats Refuge) 4-mile recreational corridor (all contained within Susitna Flats Refuge) 200 feet; no development setback on both stream banks 200 feet; no development setback on both stream banks 4emile recreational and fish and wildlife habitat corridor 4-mile recreational corridor 4semile recreational corridor 78 IV. A description and map of areas with special land use restrictions in the tract nomination area appears in Fish and Game Appendices 4 and 5. State Parks, public interest lands and archaeological sites. The proposed lease sale will affect two designated State park areas, a number of designated public interest lands which have been identified and approved by the Department of Natural Resources for their recreation, scenic, and wildlife value, and numerous historic and archaeological sites. The types of areas and the restrictions necessary to maintain their integrity are discussed below. (also see Fish and Game Appendix 4). 1. Captain Cook State Recreation Area: This is a legis- latively established park area (AS 41.20.130 - 160) and thus is restricted to use as a public recreation area. Oi] and gas leases which were valid at the time of establishment of the area will be honored. While it is unlikely that new entries would be allowed by the Division of Parks, the statutes do allow for issuance of incompatible use permits in park areas if the Director of Parks finds that 1) the ecological values of State park lands will not be irreparably damaged or imperiled, 2) State park lands are protected from pollution, 3) public use values of the State park are maintained and protected, and 4) public safety, health, and welfare will not be damaged or imperiled (11 AAC 18.010). 2. Bernice Lake State Wayside: This is an administratively established State park area. Under the terms of the Interagency Land Management Transfer (ILMT) the Department of Natural Resources has retained the subsurface estate, however, surface entry is only allowed with the approval of the Director of Parks. The Division of Parks will allow subsurface use but not surface entry or disturbance. 74 Public Interest Lands: These are lands which have been identified by the Department of Natural Resources as being worthy of continued State ownership and management “(e.g., they should not be sold or disposed of, although continued conveyance to municipalities can occur in some situations if sufficient stipulations are placed in the deeds to protect the public interests for which they were identified). The vast majority of these areas are quite small in size (less than 640 acres). These areas are identified in Fish and Game Appendix 4. Within these smaller areas, no surface entry or surface disturbance should occur. Where the areas are larger and slant or directional drilling is not feasible, specific drilling pad sites and access roads could be established with the approval of the Division of Parks as to their location, size, time of construction, and operation. Where public interest lands are linear in nature or corridors (i.e., Alexander Creek, Iditarod Trail) they are generally one mile or less in width. Surface entry or surface disturbance could be precluded within these corridors. Exceptions to this could be granted where road or trail crossings are needed. These crossings should occur at approximately 90 degree angles to the linear axis of the corridor, and be jointly approved by the Division of Parks and the Department of Fish and Game. Lands to be Used in the Negotiations for the Kachemak Bay State Park and Chugach State Park Land Trades: The Division of Parks is currently negotiating with both the Seldovia Natives and Eklutna Natives to regain lands in these two parks which have been conveyed to these village corporations under the Alaska Native Claims Settlement Act (ANCSA). In addition to the villages owning the RO surface estates, the Cook Inlet Regional Corporation owns the underlying subsurface estates. The Division of Parks also desires to trade the Regional Corporation for other subsurface lands in its region. Some portion of these subsurface lands will most likely have to come from the area currently proposed to be leased in late 1980. Historic and Archaeologic Resources: A large number of prehistoric and historic sites are known in the proposed sale area and an equally large number have probably not yet been inventoried. Due to the largely unexplored nature of the sale area, any ground disturbing activities must be examined for sites prior to development if such sites are to be protected. Plans for development projects should be presented to the office of History and Archaeology, Division of Parks, for impact review. Stipulations for such plans may be appropriate to include in lease agreements. Legal descriptions of land use reservations for recreational lands, parks, and historical sites are available at the Department of Natural Resources, Division of Forest, Land and Water Management, and are described in Land Planning Report Number T14N, R4W, S.M., dated June 20, 1979. The Division of Parks has not yet been able to prepare specific legal descriptions for each of these areas. They are, however, mapped on 1:63,360 scale USGS topographic maps and legal descriptions can be obtained from the Division of Parks upon request. 81 The potential impacts of oi] and gas development on parks, recreational areas, and State wildlife refuges include: 1. Some reduction in recreational experience and aesthetic value - to many, hunting, fishing, or recreation in an oi] field is less satisfying than in an undeveloped area. 2. Reductions in fish and wildlife populations as a result of oil spills, habitat losses, and disturbance. A complete description of potential impacts is contained in the section on project effects on fish and wildlife populations and their habitats. 3. Loss of access to recreational areas - lease holders may attempt to restrict access to portions of recreational areas for safety reasons and to protect lease facilities from vandalism, as has occurred in the Kenai National Moose Range. 4, Loss of hunting and fishing opportunities - if the lease tracts or the access created by lease activities intrudes upon critical fish and wildlife habitat it may be necessary to close the area to hunting and fishing, as has occurred in the TAPS corridor and the Prudhoe Bay oil field. 5. Increased competition for limited resources - new infrastructure necessary to develop leases such as a connection to the State highway system, docks, and airstrips will allow additional people to enter recreational areas. Environmental Quakity Factors I. What environmental health implications are expected to resubt rom onshore and of,snore activities related to oft and gas evelopment? (Department of Environmental Conservation) Analysis: This analysis emphasizes ambient and projected air quality degradation resulting from operating offshore and onshore facilities (tankers, platform discharges, LNG plants, refineries, and oil terminals) and discusses control strategies and monitoring requirements where applicable. Additionally, water quality as it relates to human health, (e.g., drinking water contamination) is discussed briefly as well as are safety hazards typically associated with siting LNG facilities near communities. Water quality as it relates to fish and wildlife habitat is discussed extensively in the Department of Environmental Conservation Appendix and briefly under Resource Utilization, Quesgion 2. Air quality concerns and evaluation of existing situation In general, the air quality in, Upper Cook Inlet is very good, with only isolated cases near Nikiski where allowable levels for total suspended particulates (TSP) and sulfur dioxide (S05) are occasionally exceeded. Anchorage is classified as a non-attainment area (under the Clean Air Act criteria) for carbon monoxide (CO) due to periodically high levels from automobile emissions during winter thermal inversion periods (Figure 1). With these two exceptions, no frequent violations of ambient air quality standards have been documented in the Upper Cook Inlet region. Table 1 identifies the allowable ambient standards in Alaska for various air pollutants. Monitoring of air pollutant emissions from existing offshore facilities is not required under the Prevention of Significant Deterioration (PSD) section of the Clean Air Act. New facilities in State waters or on land may require a Permit to Operate from the Department of Environmental Conservation (18 AAC 50.300) if the size of fuel burning equipment, incinerator capacity, and specific industrial process exceed the criteria established in the Department of Environmental Conservation's regulations. 833 “sainseawW JOJ1U09 apimeagse ayenjeaa O} pasn ase “ew/6w QL papasoxa ‘6pig ales ayl pue “Bpjg euayD ayt ‘391440 Is0g L aunbLy ay Wor SuOIes}UaIDUOI OD aGesane inoy-g pauiquios yoIym UO SAep juasasdas elep abesane syuequiey ays, yorum erep sapiaoid yseosdde siyy Fairbanks Average* Fairbanks Post Office Fairbanks Chena Bldg. Fairbanks State Bldg. Anchorage City Fire Station Valdez Percent of Days when CO Concentrations Exceeded 10 mg/m}, 8-hour Average oot 1972-73 1973-74 1974-75 1975-76 1976-77 1971-72 1972-73 1973-74 1974-75 1975-76 1976-77 1972-73 1973-74 1974-75 1975-76 1976-77 1972-73 1973-74 1974-75 1975-76 1976-77 1973-74 1974-75 1975-76 1976-77 GHUVGNVIS 4/6 OL 3HL ONIGSIIXI SNOILVYLNIINOD AGIXONOW NOSHVID 1974-75 HLIM SAVG H3SLNIM SO LNIDH8Ad THE RATIONALE FOR AIR QUALITY CONTROL IN ALASKA: BASIC GOALS The “yardstick” against which the air quality of an area can be evaluated is an air quality stand- ard. Such standards have been established to ALASKA AIR QUALITY STANDARDS. 1. Suspended particulate matter (A) Annual geometric mean: 60 micrograms per cubic meter (B) 24-hour maximum not to be exceeded more than once a year: 150 micrograms per cubic meter 2. Sulfur oxides (measured as sulfur dioxide) (A) Annual arithmetic mean: 80 micrograms per cubic meter (B) 24-hour maximurn not to be exceeded more than once a year: 365 micrograms per cubic meter {C) 3-hour maximum not to be exceeded more than once a year: 1300 micrograms per cubic meter 3. Carbon monoxide not to be exceeded more than once a year (A) 8-hour maximum: 10 milligrams per cubic meter (BY Tehoue maximum: 40 rilligearns per cubic meter . VRotochemical o<iiants oa T-hour maximum not to be exceeded more than once a year: 160 micrograms per cubic meter 5. Nitrogen dioxide Annual arithmetic mean: 100 micrograms per cubic meter 6. Reduced sulfur compounds 30-minute maximum not to be exceeded more than once a year: 50 micrograms per cubic meter Table 1 help protect the health, property, and enjoyment of life of our citizens. ADEC’s primary objective, therefore, is to achieve the air quality standards in all areas of the state and to insure that they are maintained. In most of Alaska, the ambient air quality is much better than the established air quality standards. Even though the state standards are quite stringent, those areas of the state with exceptional air quality should not be “polluted” to the point of only good air quality. Our sec- ondary objective, therefore, is fo insure that development has minimum impact on the envi- ronment. This objective will be achieved through both state policy and the federal “Prevention of Significant Deterioration Program.” The 1977 amendments to the Clean Air Act require the implementation of this policy. ADEC intends to minimize adverse impacts on aesthetics, energy, water quality, and land use as well as air quality. The state and othec agencies responsivie for air quality control have generly beca able io Work directly with large industrial sources of air con- taminants to implement good control practices. These sources are considered on a case-by-case basis and enforcement of the regulations with these facilities is reasonably clear-eut. The most difficult problem to tackle, and the most important, is “‘people-generated” pollution. Individuals driving automobiles, even vehicles The Prevention of Significant Deterioration program (Part C of the Clean Air Act) establishes maximum allowable increases in air pollutants above existing background levels in areas where air quality is already cleaner than existing ambient standards. The program provides for classifying areas into one of three categories, depending on existing air quality (Table 2). The intent of the law is to allow economic growth in a manner consistent with preventing significant deterioration of existing air quality. The Department of Environmental Conservation is the responsible State agency for implementing this program. All locations in Upper Cook Inlet (with the exception of Anchorage for carbon monoxide) are designated under the above system as Class II areas (i.e., regions where considerably greater discharges of sulfur dioxide and particulate matter are allowable before the ambient standard will be in jeopardy of being exceeded). The Tuxedni Bay Wildlife Refuge to the south of Kalgin Island, is the only region close to the proposed sale area designated as Class I, an area requiring very strict regulation of air pollutant emissions. Ambient air pollutant concentrations do not appear to present a major concern for most of Upper Cook Inlet. Table 3 indicates ambient air monitoring data for suspended particulates (mostly dust during summer) from Kenai's Phillips LNG plant; these can be readily compared with the allowable standards to give an indication of the allowable increment remaining before regulatory controls are imposed. The Department of Environmental Conservation and EPA have generally been able to work directly with large industrial sources of contaminants on the Kenai Peninsula to implement good control practices. These sources are, and will be, considered on a case- by-case basis and enforcement of regulations with these facilities is reasonably clear-cut. 86 Table 2. Classification of areas into air auality areas. Importance of the PSD Classifications The Prevention of Significant Deterioration (PSD) limitations consist of two major parts: First, every state is classified into four categories for each of five air pollutants: particulates, sulfur oxides, carbon monoxide, nitrogen dioxide, and ozone. The first category covers those areas not meeting one or more of the standards. For Alaska, this only includes the urban areas of Fairbanks and Anchorage for carbon monoxide. The remaining areas, including Anchorage and Fairbanks for the other four pollutants, are classified into one of three categories as follows: i 1) Class I areas, which will only allow new industrial emissions to use up to an incremental percent of the National Air Quality Standards. This is an extremely smal] amount of additional air pollution, and virtually precludes any industrial growth in or near such areas. In Alaska, four areas were designated by Congress as” Class I. This classification provides for maximum protection from air quality degradation. The areas are Mt. McKinley National Park and the three wildlife refuges of Tuxedni, Bering Sea (St. Matthews Island), and Simeonof. 2) Class II areas, which will allow for moderate sized industrial growth, while at the same time assuring maintenance of a very high air quality. It will enable growth to use up to an incremental 25 percent of the National Air Quality Standards. The rest of the State was designated by Congress as Class Il. 3) Class III areas, which would allow growth to use up to an incremental 50 percent of the National Air Quality Standards. This would provide for virtually all contemplated growth in Alaska, although there may he a discernable decrease in air quality. No Class III areas have heen designated or proposed thus far in Alaska. Secondly, a mandatory preconstruction review and permit program was enacted. This program applies only to new or modified major emitting facilities as defined in the Act. It requires an applicant to prepare a comprehensive analysis of air quality changes which would result from the project, and to obtain a permit prior to starting construction. Table 3. Ambient air monitoring data for suspended particulates from Kenai's Phillip's LNG plant. ; DATA SUMMARIES (TSP) -24 hour : T : A Location Date Geometric High | 2nd High #values)150| #values)269| Data Mean (ug/m3)| (ug/m3)| (ug/m3) Recovery & comments —t 4 Homer 1973 Fire Dept. | dele (0240) 1974 1975 190 2336 | 1032 | 14 12 33% —— —+ 1976 61 sete 367 5 2 48% 1977 68 314 [259 5 1 47% > + 1978 69 341 300 11 3 84% — | _| 1 + Kenai 1973 17 50 37 0 0 38% Phillips _ | LNG Plant (0230) 1974 14 96 58 0 0 68% 1975 36 346 123 1 1 [_ 62% —}— _ 1976 41 476 199 3 1 85% 7 — 1977 23 158 112 1 0 83% + 1978 19 240 120 1 qn 95% | | 4 + — Kenai 1973 Fire Station}————______ == aaa } (0230) 1974 T T _T ho 1975 48 271 157 2 1 42% 1976 35 343 143 1 1 T_ 75% —- penn ss 1977 34 176 168 2 0 68% p—____f }__ | 1978 33 253 223 | 0 97% 88 The establishment of siting criteria which addresses the location of a given industrial facility with respect to population centers, the possibility of additional industrial growth due to initial industry entry, design specifications, existing ambient air quality, the limitations of coastal topography and climate, compatability with uses of adjacent areas, and the potential for facility sharing are all necessary when development proposals affecting air quality are reviewed hy local and State planners. With respect to carbon monoxide levels in Anchorage, research needs to be conducted in several areas to more clearly describe the relationship between health and air pollutants. Researchers at the WAMI program at the University of Alaska, a program for medical education established for states without medical schools, conducted a carboxyhemoglobin study in Fairbanks during 1975 and 1976 to determine the effect of long-term lower level carbon monoxide concentrations on human beings. This type of study has provided useful data describing the actual impact that the ambient air concentrations of the pollutant are having on the citizens of Fairbanks. This study should be continued, and possibly expanded to Anchorage. Deriyation of a statistically valid relationship between chronic low concentrations of COHb in the general population and human health would be valuable in assessing the health effects of carbon monoxide on the Alaskan urban populations. Data showing the relationship between building ventilation, workplace conditions, COHb levels, and ambient CO levels would he especially valuable for indicating areas in which to emphasize control efforts. The monitoring effort for carbon monoxide will be used to analyze long-term trends and determine control strategy effectiveness. Spot sampling with bag samplers will be conducted in Anchorage to determine if high concentration areas are developing. 3%) The continuous stationary monitoring program is expected to be maintained with the State primarily responsible for carbon monoxide sampling in Anchorage. The Cook Inlet Air Resources Management District is planning to expand its sampling responsi- bilities in Anchorage by increasing the CO monitoring network to two or three samplers. Meteorological data with which to conduct accurate pollutant concentration modelling are absent in Anchorage. Accurate models or means of estimating the impact of development on pollutant concentrations are badly needed for environmentally sound planning. A general description of wind flow patterns for the Anchorage area during stable conditions is needed as is information on low level mixing depths, or vertical atmospheric temperature profiles. e Also wind pattern and vertical temperature profile data are needed for the Willow area. This information is needed to determine the type of transportation systems which could be accommodated at the projected new capital site or in the advent of of] and gas discoveries west of this area. An additional source of air pollutants in Cook Inlet are marine vessels burning high sulfur fuels resulting in sulfur dioxide emissions. The airshed of Cook Inlet, unlike that of the stratified conditions evident, for example, in Port Valdez fjord, is charac- teristically swept clear of air pollutants by a relatively strong wind field, minimizing the likelihood of pollutant buildup often experienced during stagnant (thermal inversion) conditions. The air quality policies, implementing authorities, and recommended guidelines of the Department of Environmental Conservation are presented in the State's Air Quality Control Plan and in the land and water use guide and planning document submitted by the Department to the Office of Coastal Management. These policies and recommendation clearly describe the State's goals and detail opportunities for coastal community involvement in abating air pollution. 90 The relationship between industrial operations on the Kenai Peninsula and public drinking water quality, while being of potential concern, has not surfaced as a significant issue. The drinking water standards of DEC and regulated minimum separation distances between surface and groundwater resources and sewage and solid waste disposal sites both serve to greatly reduce the likelihood of contamination and subsequent public use of any contaminated water. Safety hazards to the general public from industrial activities (exclusive of hazards associated with oil and gas drilling, which are covered under OSHA and State operating orders) include potential fire hazards associated with Liquified Natural Gas plants near coastal communities. Regulations recently promulgated by the Coast Guard provide specific requirements for transferring gas from onshore plants to cryogenic tankers. Siting new plants distant from population centers (for example, at Cape Starichkof) would further reduce the risk of operation. . If the production of gas from the Upper Cook Inlet tract would necessitate the construction of another LNG plant in addition to the PacAlaska facility, a major public safety consideration would be the location of the facility in relation to population centers. Plants of this type may represent an immense fire and explosion hazard and should not be situated anywhere close to large numbers of people. A thorough risk analysis would be fundamental to any future LNG facility siting question in Cook Inlet. In addition to LNG plants, more attention should also be devoted to the selection of major oi] terminal locations. The several tankers which have exploded in several United States ports over the past three years raise serious questions regarding oi] terminal siting. Houston and Galveston, Texas and Long Beach, California have all recently experienced vessel explosions and fires that have killed several people at the terminals and threatened the safety of the general public living in the area. Terminal sites that might be proposed for Upper Cook Inlet should be examined in this context before any final decisions are made. Qt If oi] and gas production does occur in Alaska as a result of the many lease sales coming up in the next several years, the question of facility siting may become a more important issue. The State of Washington has established a facility siting commission to study energy facilities before they are placed in a particular area. Alaska may want to look toward forming a similar group so that basic questions regarding siting can be answered at early stages of project development. E 2. y nvivonmental Quakity Factors What are the provisions for environmental monitoring, surverllance, and quality control? epartment of Fish and fame) Analysis: The Departments of Natural Resources, Environmental Conservation, and Fish and Game have existing environmental monitoring and enforcement capabilities and responsibilities for certain sale- related activities. Department of Natural Resources The Department of Natural Resources has two main duties in connection with the environmental monitoring, surveillance, and quality control provisions of State oi] and gas leases. Both are in consequence of its position as lessor and the fact that the chief means by which these performance standards and stipulations are established is through the lease terms and conditions. Within the Department of Natural Resources these two duties are divided on the basis of expertise. First, the Division of Minerals and Energy Management, which issues oi] and gas leases as the Department's subsurface manager, is responsible for incorporating as terms and conditions of the lease the environmental monitoring, surveillance, and quality control provisions necessary to protect the State's interests. These stipulations are proposed by the Department of Environmental Conservation, the Department of Fish and Game, and the Division of Forest, Land and Water Management - the Department of Natural Resources' surface land manager. Second, the Division of Forest, Land and Water Management then assumes the responsibility for ensuring the lessee complies with these terms and conditions. In the past, the Department of Natural Resources has not had the funds or personnel necessary to adequately monitor oil and gas lease operations to ensure compliance with terms and conditions of the lease, However, since oil and gas leasing is compatible with other uses of State land and should be managed as an integral part of the multiple use concept, the Department will acquire or reallocate resources in order to staff an effective field monitoring and surveillance effort to ensure compliance with lease terms and conditions. 933 One of the terms and conditions that may be necessary in the Upper Cook Inlet Sale is a requirement that the lessee provide transpor- tation and overnight accommodations for employees of the Department of Natural Resources or others designated by the Department, with the associated costs to be reimbursed by the Department in a timely manner. The lessee will allow for the inspection of operations upon 48-hour notice by the Department; this inspection may be necessary to assure compliance with the lease terms and stipulations. Department of Environmental Conservation The Department of Environmental Conservation is responsible for monitoring and surveillance of water and air quality. Water quality monitoring of industrial activities can be broken into three categories: compliance monitoring for enforcement purposes; effluent monitoring by the permittee to characterize the specific waste discharged; and receiving water monitoring, including physical, chemical, and biological responses to waste discharges. The specific authority for the Department to require such programs lies in the Federal Clean Water Act and Title 46 of the Alaska State Statutes. Compliance monitoring is occasionally conducted by regulatory personnel (the Department and the U.S. Environmental Protection Agency) to evaluate whether a permittee is meeting the original terms of a permit. Should permit terms be violated, the routine action includes working with the company and perhaps placing the permittee on a compliance schedule within which it can meet newly imposed conditions. Legal action is generally only taken where other avenues of resolution fail. Waste effluent monitoring is the most common type of water quality monitoring and is routinely performed by the permittee to characterize the chemical constituents of the effluent being discharged to marine waters. There is a permit requirement for aromatic hydrocarbon analysis in produced waters and refinery and ballast effluents at facilities in Upper Cook Inlet. The specific parameters measured 9. will generally include one or more of those listed in the Alaska Water Quality Standards established by the Department of Environmental Conservation. Typical standards include petroleum hydrocarhons, dissolved oxygen, sediment, pH, and temperature, all of which have allowable limits or water quality criteria established for each particular use of fresh and marine waters (e.q., drinking water, growth and propagation of fish and shellfish, aquaculture). Routine monitoring of effluents provides the regulatory agency with information which will allow it to evaluate whether allowable limits are being met at the boundaries of a previously defined mixing zone around the discharge point. This later determination will also require information on the local flushing or diffusion characteristics of the water body receiving the discharge. Static bioassays designed to evaluate the toxicity of drilling fluids on adult shrimp and juvenile salmon have been conducted on platforms in Lower Cook Inlet. These studies were sponsored by the Atlantic Richfield Company. 1/ Effluent bioassay monitoring at major industrial facilities is being presently evaluated by the U.S. Environmental Protection Agency for its suitability as a standard monitoring requirement in National Pollution Discharge Elimination System (NPDES) permits. The permit requirement of monitoring biological and chemical conditions of receiving waters in Upper Cook Inlet has not heen extensive due to difficulties associated with representative sampling in the well-mixed waters and the acknowledged low marine biological productivity of this region. Work off the Point Woronzoff sewage treatment plant (for fecal coliform bacteria) and the Collier Chemical Plant (ammonia, pH) at Nikiski are exceptions. The efforts of the OCSEAP program have included specific documentation of circulation patterns, geological environment, and background levels of selected hydrocarbons and heavy metals. None of these efforts nave, however, focused on a specific industrial location. i/Miller, R.C. et al. 1978. Drilling Fluid Dispersion and Riological Effects Study for the Lower Cook Inlet C.0.S.T. Well (ARCO). Dames & Moore, Anchorage, Alaska. 95 The water quality monitoring and surveillance of onshore oil and gas activities on the Kenai Peninsula has been conducted primarily from the standpoint of mitigation of sedimentation of water bodies from culverts, bridge and pipeline crossings, and timing and routing of construction activities to avoid sensitive habitats or critical life history processes. Ambient air quality monitoring on the Kenai Peninsula has been restricted to total suspended particulate (TSP) measurements at the Phillips liquified natural gas (LNG) plant and nearby fire station from 1973 to 1978. The only other site intensively monitored in Cook Inlet has been Anchorage, most notably for carbon monoxide, but also for particulates and sulfur dioxide. A future monitoring site is planned in the Nikiski industrial area to monitor nitrous oxides, TSP, carbon monoxide, ozone and possibly ammonia. The Department of Environmental Conservation's Southcentral Regional Office maintains an active tanker inspection program at Nikiski and Valdez to evaluate structural integrity, hydraulic leaks, transfer lines, and deck runoff. Ballast discharge is also routinely inspected. Flight patterns over producing platforms to inspect for visible oil slicks are occasionally conducted in Upper Cook Inlet. Department of Fish and Game The Department of Fish and Game's Habitat Protection Section issues permits for activities in anadromous streams under AS 16.05.870 and on State fish and wildlife refuges under AS 16.20.060, and it has responsibilities for protecting the habitats of endangered species on State lands under AS 16.20.185. The Habitat Protection Section currently performs limited environmental monitoring surveillance, and quality control on activities permitted under Title 16 in conjunction with other permitting tasks and in response to requests by other agencies and citizens. Additional monitoring and surveillance 96 on activities covered by Title 16 is performed by the wildlife protection officers of the Department of Public Safety. However, present funding and manpower limit monitoring and surveillance to approximately 10 percent of the permits issued. Monitoring and surveillance of fish and wildlife populations is performed by the Department's Game, Commercial, and Sport Fisheries divisions. Annual surveys are made in certain index areas to determine the abundance and distribution of key fish and wildlife species including moose, brown bear, waterfowl, and salmon. Survey results are used in the management of fish and wildlife populations and in the development of hunting and fishing regulations. However, this information is. of only limited usefulness in detecting changes in the abundance and distribution of fish and wildlife resources because 1) many of the index areas are aot located in the areas where development impacts will occur, 2) in the short- term, it is extremely difficult to separate natural fluctuations in a population from population declines resulting from development- related impacts, and 3) much of the available baseline information on abundance and distribution of fish and wildlife is not adequate to detect short-term, small scale population changes which result from development in a previously undisturbed area. At present, a Problem can only be detected after a major change in abundance and distribution has occurred. Federal Agencies Several federal agencies also have responsibility for permitting and monitoring certain lease activities and resources in the lease sale area. These include the U.S. Coast Guard (effects of platforms on navigation), Army Corps of Engineers (dredge and fill in wetlands and navigable waters), Environmental Protection Agency (air and water quality), National Marine Fisheries Service (endangered and non- endangered marine mammals), and U.S. Fish and Wildlife Service (endangered species and migratory birds). <O a1 1. Risk Factors Does the project tnvolve Lechnokogtent, environmental, financial, on economte factors which have a high degree of uncertainty or isk? (Department of Natural Resources) Analysis: Oil and gas exploration and development have been ongoing both on land and offshore in the Cook Inlet area for two decades. Technology for this region is highly developed, as demonstrated by the history of related spills and environmental effects which shows that the amount of oi] spilled and the number of incidents involving fish and wildlife populations has declined significantly in recent years. With proper resource agency review of Plans of Operations and the application of mitigating measures, activities related to oil and gas leasing in the Upper Cook Inlet area can continue to be conducted with minimal environmental risk. Operators are required to comply with a multitude of State and federal laws that were designed specifically to protect the environment and to guarantee well safety. Operators will be required to file with the Department of Natural Resources a detailed Spill Prevention Control and Countermeasure (SPCC) Plan whenever drilling or lease operations are planned. An Oi] Spill Contingency Plan may also be required, as appropriate. Mitigating measures will address such concerns as drilling mud and produced water disposal, protection of historic and archeological sites, and provisions for facility siting in sensitive areas. All hydrocarbon exploration projects involve substantial economic risk to the operator, as the odds against commercial oi] or gas discoveries are high. According to the Department of Fish and Game, the factors associated with the proposed lease sale which would present a high degree of risk to the environment would be a major oi] spill and the siting of lease facilities. A major oi] spill in the marine waters of Upper Cook Inlet, in the coastal wetlands, or in an important anadromous river, such as the Susitna, could affect large numbers of fish or wildlife. Major spills could result from loss of well control, pipeline breaks, tanker accidents, failure of storage tanks, and human error. Although the statistical probability of spills from these sources is low, several known major spills affecting fish and wildlife resources have previously occurred in Cook Inlet. Other activities, such as roads which block the flow of water across 98 wetlands and the siting of facilities with high levels of noise and disturbance in an important waterfowl] nesting area, can also have a significant affect on wildlife. The major risk associated with these activities is having to site a road or facility in essential fish and wildlife habitat. Their impacts, however, can be predicted with a reasonable degree of certainty. 94) 2. Risk Factors To what extent 4s the existing data base adequate to answer the above questions? (Department of Natural Resources) Analysis: The State's data base is inadequate to completely assess the financial and economic risks associated with the project. As noted before, more than 700 oil and gas wells have been drilled in the Cook Inlet Basin. The history of exploration-and production in this basin, coupled with current technology, has, however, provided useful information for assessing potential environmental risks. The balance of this analysis reflects the Department of Fish and Game's assessment of such risks. The existing data base is sufficient to predict that a major oil spill would have significant effects on fish and wildlife and their habitat, and that statistically a certain percentage of the oil produced will be spilled. The Alaska Oil and Gas Conservation Commission estimated Cook Inlet reserves to be, as of January 1, 1980, 202 million barrels of oi] and 3,519 billion cubic feet of natural gas. Most of these reserves are thought to lie within or adjacent to the proposed sale area. The discovery and production of gas would not, of course, contribute to an oi] spill. Oil spill statistics indicate, moreover, that the chances of a major oi] spill during the exploratory phase of oi] development are very low; and that spill likelihood increases only slightly during the development phase. The probability of an oi] spill during the production and transportation phase is, however, fairly high. U.S. Geological Survey figures show that .0017 percent of the total production from an oil field is spilled as a result of pipeline accidents.1/ One blowout occurs for every 2,860 wells drilled and spills an average of 2,100 barrels of oi1. Platform fires account for a spillage rate of approximately .0029 percent of total production. Another 1/Bureau of Land Management. 1976. Lower Cook Inlet Final Environmental Impact Statement. Alaska Outer Continental Shelf Office, Anchorage, Alaska. 100 .016 percent of the oil is spilled in tanker accidents as the oil is transported to market. Human error is yet another significant source for oil pollution in the marine environment. 2/ Overflowing fuel tanks and malfunction, rupture, or failure of platform piping valves usually result in minor to moderate size spills. Numerous oi] spills have occurred in Cook Inlet since drilling operations began in the early 1960's. Prior to 1970, oi] companies were not legally required to report spills and consequently infor- mation for this period is sketchy and incomplete. Articles appearing in the Anchorage News between May and August, 1962 report three exploratory oi] and/or gas well blowouts that occurred in the Inlet during this time. One of these, Pan American's (AMOCO) State No. 1 well, resulted in the release of oi] and gas into the Inlet and required the drilling of a relief well in order to bring it under control. Environmental Protection Agency oi] spill records indicate that spills were not an uncommon occurence in Cook Inlet from the mid 1960's to the early 1970's. At least 183 oi1 spills occurred in Cook Inlet between May, 1966 and December, 1972. 3/ The volumes of oil spilled during these incidents varied from less than a barrel to an estimated 15,000-17,000 barrels. An accurate average spill volume cannot be calculated because many of these spills were not reported and the volume of oi] spilled is unknown. In several instances, the magnitude of the spill was recorded only in terms of the area(s) affected. Numerous oil: slicks at least a mile long and several hundred yards wide were recorded. Three oil pollution incidents which unquestionably affected local wildlife populations have been documented. In November and December of 1967 several hundred oiled birds, predominently white-winged scoters and guillemots, washed ashore in the Ninilchik-Homer area. Less than a 2/National Academy of Science. 1974. Effects of pollutants on marine organisms. Deliberations and recommendations of the National Science Foundation International Decade of Ocean Exploration Effects of Pollutants on Marine Organisms Study. 45p. 3/Unpublished records on file at the office of the Environmental Protection Agency, Anchorage, Alaska. Includes only those spills specifically identifying of] as the contaminant. 10; year later, in October of 1968, 200 oiled guillemots were discovered in the vicinity of Anchor Point. During February and March of 1970, approximately 100,000 ducks and seabirds were killed by oil pollution which washed ashore along the southern tip of the Kenai Peninsula and particularly along the shores of Kodiak Island. Seals, sea otters, and possibly eagles and other species were also affected. An estimated 1,000 miles of coastbine was contaminated during the incident. The source(s) of oi] and circumstances involved in these spills is not known. Whether other fish and wildlife populations were affected is also a mystery. Unfortunately, this is the case with the majority of the oil spills that have occurred in Cook Inlet, especially during the first 10 years of drilling operations. Table 1 illustrates oi] spill volumes and the incidence of spills in Cook Inlet between 1973 and July of 1980. This table was compiled by ARCO, using records obtained from the U.S. Coast Guard station in Anchorage. Spills are divided into three categories: 1) oi] industry-related, 2) non-oil industry-related, and 3) originating from unknown sources. Volumes are not reported for unknown source spills because the small volumes could not be determined. The non- oil industry-related spills are those that would have occurred even if there was no oil industry activity in the Inlet. An example is a fuel oi] spill from a tanker carrying fuel to Anchorage for domestic use. Measures to mitigate the potential impacts of a major oi] spill on fish and wildlife resources are contained in the section on project effects on fish and wildlife populations and their habitats and in the section on the effects of the proposed project on designated or specifically defined recreational areas. 109 Risk Factors 3. Are there external factors (e.g., national or international) _ which feature prominently in the success on faclure of the project? (Department of Natural Resources) Analysis: The attractiveness of extraction and development of Alaska's hydrocarbon resources is enhanced by any actions that increase the real price of oi] and gas and/or increase the uncer- tainty of sunnly from foreign sources. Post-1973 history indicates that the previous stability in world oi] supplies and predictability of prices no longer exists. From the State of Alaska's point of view, the relative instability in the world oi] market will greatly enhance the potential revenues to the State from oi] and gas leasing because oil and gas companies will be willing to nay a higher price for a reliahle, stable sunply. ° 103 Table 1. Oi] spill volume and incidence.of spills in Cook Inlet, 1973-1980. (compiled by Atlantic Richfield Company) Oi1_ Industry Spill Volune Other Sources Spill Volume Unknown Source Year (barrels) Incidents (barrels) Incidents Incidents 1973 228 10 37 6 0 1974 26 23 (4)1/ 258 7 1 19752/ 22 11 8 4 6 19753/ 1 1 1 1 0 1976 52 13 (3) 28 19 (6) 5 1977 12, 14 (1) 16 26 (6) 8 1978 14 7 (2) 7 18 (4) 10 1979 4 6 (1) 18 15 (2) 5 19804/ 8 4 55 9 (3) 4 431 98 (12) 460 112 (22) 40 This table was compiled using records obtained from the U.S. Coast Guard Station in Anchorage, Alaska. 1/The number in parentheses indicates the number of spill incidents for which there was no volume reported. 2/January 1, 1975 - August 21, 1975. 3/August 22, 1975 - December 31, 1975. 4/dJanuary 1, 1980 - July 9, 1980. 104 Miscetlaneous Factors 1. ls the proposed project or action compatible with Local and state plans or policies? epartment of Community and Regional Affairs) Analysis: Provided the proposed lease sale is conducted under conditions described in this analysis, specifically reliance on existing facilities, the sale is expected to be compatible with local and State plans or policies known and in force at this time. There is, hawever, insufficient information at this time to determine if the proposal to lease the subsurface rights for oil and gas development is compatible with the legislative intent in establishing the Susitna Flats and Trading Bay refuges or with the Department of Fish and Game's refuge management plans. The Department feels that the effects of oi] and gas activities on fish and wildlife resources and habitats can be minimized if the mitigating measures Proposed in the Recommendations section of this analysis are instituted and enforced. It is, however, the Notice of Sale document itself which will ultimately describe those mitigating measures necessary to achieve compatible resource development. Development of the sale document will involve cooperation between the Department of Natural Resources, Division of Minerals and Energy Management and other State agencies. One of the questions that remains to be resolved is whether the impacts of oi] and gas development on human use of the refuges can be mitigated. Department of Fish and Game personnel have studied this problem and feel that impacts on human use can be mitigated provided that recommendations outlined in this analysis are followed. Miscellaneous Factors 2. What governmental (State, gederat, Local) approvals, permits or Licenses ane requined? (Department of Commerce and Economic Development) Analysis: There are a number of applicable permits that are required of successful lease sale bidders and those engaged in related facilities or transportation systems. One reference which should prove useful in determining federal, State, and local permit requirements is the State of Alaska's Directory of Permits, prepared by the Departments of Commerce and Economic Development and Environmental Conservation (June, 1979). As the opening page of the directory indicates, those persons interested in a particular permit or permits should contact the appropriate agency before attempting to obtain a permit for a specific activity. Table 1 is a list of 1) some State and related federal permits applicable to State oi] and gas lease sale, 2) the agencies administering these permits, and 3) the amount of time it takes to obtain permits. Nearly all of the above permits can be obtained in ninety days if all goes well. The only exceptions are the NPDES permit and the U.S. Dept. of Army Corps of Engineers 404 permit. With respect to the NPDES permit, it is the State's understanding that if an operator can keep waste water discharges in the "minor" category, the U.S. Environmental Protection Agency may waive the need for the permit and rely on the State's waste water discharge permit. The State permit takes only 60 days to acquire. Table 2 indicates those permits which may be required for an oil drilling operation in Alaska. This list was compiled by the Department of Environmental Conservation with assistance from oi] industry representatives. A summary of Department of Natural Resources decisions, approvals, and other planning steps is indicated in response to Question 3 below. 106 Table 1. State and related federal permits of particular importance to State oi] and gas leasing activities in Alaska. Permitting Agency Permit Title Approximate Time DNR Plan of Operations for Oi1 and 30 to 60 days Gas Exploration DNR Miscellaneous Land Use Permit 30 to 60 days DNR Tide Lands Lease 60 days DNR Special Use Permit 30 to 60 days DNR Material Sales 90 days oGcc Permit to Drill or Deepen 10 days if no exception -to spacing regulations DNR Encroachment to State Highways 30 days j ADF&G Title 16 Permits for any 2 weeks anadromous fish stream ADF&G Refuge Permits or Critical 2 weeks Habitat Permits DEC 401 Water Quality Certification 60 to 75 days DEC Solid Waste Disposal Approval 60 days DEC Air Quality Control Permit to 30 days Burn (if not needed for burn- ing or flaring of produced fluids, then permit is issued in 5 days) DEC Pesticide Applications Permit 60 days (if not a public pesticide project, then permit can be issued in 5 days) DEC Surface Niling Permit 5 days DEC Waste Water Discharge Permit 60 days EPA National Pollution Discharge 180 days Elimination System Permit (if an NPDES permit is needed, this eliminates the need for a separate waste water discharge permit from the State) CORPS OF Discharge of Dredge or Fill into 120 days ENGINEERS — Federal Waters (404 or Section 10 Permit) 107 sOt State Agencies Alaska Oil and Gas Conservation Commission Commerce and Economic Development Environmental Conservation Fish and Game Health and Social Services Labor Natural Resources Table 2. Permits for oi] drilling operations in Alaska. Enhanced Recovery Methods Regulation of Wells and Fields. Abandonment and Plugging Practices (applies to all wells) © Permit to Drill or Deepen - Oi] and gas pool rules Registration of Corporations Wastewater Disposal Permit Air Quality Control Permit to Open Burn Air Quality Control Permit to Operate Discharge into Navigable Waters - Certificates of Reasonable Assurance Solid Waste Disposal Permits Surface Oiling Permit Pesticide Applications Permit State Game Sanctuary Permit ( Entering into Game Sanctuary) Anadromous Fish Protection (Construction in anadromous fish waters) Critical Habitat Area Permit (Construction in Critical Habitat area) State Game Refuge Permit (Construction in Fish and Game Refuge) Food Service Permit (Any Food Service Operation) Plumbing Code and Permits Fire and Unfired Pressure Vessels (Inspection Certificate) Burning Permit (Burning of any material under DNR) Miscellaneous Land Use Permit (For any Surface Activities) Right-of-Way or Easement Permit (Construction on State Land) Special Land Use Permit Lease Operations Permit (Division of Minerals and Energy Management) Gravel Use Permits (Division of Forest, Land and Water Management) GOT Table 2 (continued). State Agencies Natural Resources (continued) Public Safety Revenue Transportation and Public Facilities Federal Agencies Agriculture Defense Interior Oil and Gas Leases (For State Lands) Tidelands Permit (State-owned Tidelands) Water Use Permit (Appropriating Waters of the State) Water Well Authorization State Park Noncompatible Use Permit (Any Projects in Parks) Life and Fire Safety Plan Check - Construction and Occupancy of Buildings Permit to Use Dangerous Fireworks (Industrial, Agricultural, etc.) Pennit for Oversize and Weight Loads and/or Vehicles (AK Highway System, etc.) Alaska Business License Mineral Material Permit - National Forest - (gravel, etc. from National Forest Lands) Special Use Permit (any activity on National Forest Land) Discharge of Dredged or Fill Material into U.S. Waters (Army Corps of Engineers) Structures or Work in or Affecting Navigable Waters of U.S. Transportation of Dredged Material to Dump in Ocean Waters Oil and Gas Exploration Operations - Notice of Intent (BLM) Oi] and Gas Leasing (on Public Lands) Oil and Gas Leasing Outer Continental Shelf (Submerged Lands of OCS) Rights-of-Way for BLM Lands (Access to or through Federal Lands) Shore Bound Pipeline on Outer Continental Shelf Right-of-Way Approval Table 2 (continued). Federal Agencies Interior (continued ) Treasury Transportation National Wildlife Refuge Lands - Special Use Permits (Easement for roads, pipelines, etc. - U.S. Fish and Wildlife Service) 0i1 and Gas Wells - Permit to Drill, Deepen or Plug (U.S. Geological Survey) Outer Continental Shelf Geological/Geophysical Exploration Permit and Agreement (U.S. Geological Survey) Use of Explosive Permit and License Permit for Bridges over Navigable Waters (U.S. Coast Guard) Notice of Intent to Establish or Change an Airport Landing Area Structures Which May Interfere with Airplane Flight Paths - Notice of Proposed Construction or Alteration - FAA Pipeline Safety Act Agencies, Bureaus and Commissions U.S. EPA Ott FCC Local Government Prevention of Significant Deterioration of Air Quality Program New Source Performance Standards Oil Storage Facilities - 011 Spill Prevention, Containment and Countermeasure Plans Permit to Discharge into Water (NPDES) Licensing and Operating Radio Equipment (Federal Communication Commission) Check for any Local Permit (Cities/Boroughs) MiseetLaneous Factors 3. What 43 the timetable for various stages of the project? How Alextoze is this Schedre? (Department of Natural Resources) Analysis: The following is a general outline showing the steps at which the Department of Natural Resources must grant approvals or make decisions regarding this lease sale. Key decision points are indicated by an asterisk. Oil_and Gas Leasina *1. DNR proposes sale as part of the State's five-year oi] and gas leasing schedule. *2. Sale is commented on by AACL as part of five-year leasing schedule. *3. Sale is submitted to the Legislature as part of the five- year leasing schedule. *4, DNR: a. prepares and distributes general sale area map. b. issues call for industry nominations and requests identification of areas which should be excluded or leased only under certain conditions, as well as other comments for puhlic sector. *5. DNR prepares preliminary tract selection maps. 1il *6. *7, *8, *9. *10. *11. 12. 13. 14. *15. *16. DNR conducts geologic and economic analysis of proposed sale area. The geologic assessment and the pre-sale economic are currently scheduled for completion in late 1980. Public hearings: can be held at the option of DNR or at the request of a municipality or affected Native corporation or village under AS 38.05.305. For this sale, hearings at the option of DNR were convened in Soldotna at 1:00 a.m., June 23; Palmer at 1:00p.m., June 24; and Anchorage at 9:00 a.m., June 25, 1980. DNR selects bidding method. DNR, in consultation with other agencies, develops lease terms, lease stipulations and "information to lessees." DNR makes final tract selections and prepares and publishes final tract map. DNR makes finding that sale is in public interest pursuant to AS 38.05.035. DNR publishes final notice informing bidders of terms of sale. Lease sale is held. This sale is presently proposed to take place in May, 1981. DNR evaluates bids. Bids are accepted or rejected. If accepted, leases are awarded. Prior to commencing any operations on a lease: a. Lessee submits Plan of Operations to DNR/DMEM for approval. DNR circulates to appropriate State agencies for review, notably the Departments of Fish and Game and Environmental Conservation. 113 Note: The Plan of Operations is a detailed description of the physical activities which will be conducted on the lease, including: (1) the sequence and schedule of the proposed operations, (2) location and design of well sites, material ‘sites, water supplies, building, roads, airstrips, and all other production of the leased area, (3) plans for restoration of the leased area upon completion of operations, and (4) a description of operating procedures designed to prevent or minimize adverse impacts upon other natural resources and other uses of the leased area and adjacent areas. In addition, each Plan of Operations must be accompanied by a detailed Spill Prevention, Control and Countermeasure (SPCC) plan for each drill site and for onshore and off- snore or hazardous substances® Generally, a Plan of Operations imust be submitted by the lessee for each lease operation. DNR evaluates stipulations for each Plan of Operations recommended by other agencies. In the event of disagreement, DNR conducts meetings with agency representatives and the lessee if necessary to reach reconciliation. If reconcilia- tion cannot he reached at the field level, the disagreement is elevated through successive levels of decision-making responsibility, and will be decided by the Governor if necessary. DNR writes stipulations for each plan of operations based on recommendations from other agencies and internal review. Permit is issued for lease operations. The procedures outlined above are an effort to make the operating conditions as lease-specific as possible rather than imposing region-wide stipulations that do not pertain to certain leases. DNR is attempting to prepare very general lease stipulations prior to the sale that will apply to every lease tract in the sale area. Specialized stipulations for the Plan of Operation phase would reflect specific problems associated with a lease or related group of leases. 17. Following a discovery on any lease, DNR determines whether the well is capable of producing hydrocarbons in paying quantities from the lease. A lease so certified has its primary lease term automatically extended. 18. DNR may extend noncertified leases beyond their primary term if exploratory drilling operations are being carried out under an approved Plan of Operations or if the leases are committed to an approved unit. Otherwise, the lease automatically expires at the end of the primary term. 19. On any lease certified capable of production which is not producing, DNR can order production to begin or resume within 90 days, or within six months under new leases. Failure to begin or resume production results in forfeiture of the lease. Jnitization 20. Lessees submit application to the Commissioner of DNR to request the utilization of a cohesive production area. *21. The Commissioner of DNR approves unit agreement. 115 ~ *22. Lessee drills exploratory wells pursuant to the terms of the unit agreement if none exist already. 23. Following a discovery, DNR witnesses and certifies whether the discovery is commercial. 24. If the discovery is commercial, the unit operator submits to DNR a Plan of Development and Operation outlining the general method and schedule of proposed development. 25. DNR determines whether the proposed plan is adequate to assure timely and prudent development, and either approves the plan or proposes modification of the plan. 26. DNR reviews geology and subsequently approves the contraction or expansion of the unit to cover the production area. 27. If no discovery is made within the unit area, the unit automatically terminates pursuant to the specific terms of the unit agreement. 11.6 MiseekkLaneous Factors 4. What Local, State and/or federal investments are necessary and_does the project schedule atlow sufficient Lead time to complete necessary capital investment? (Department of Community and Regional Affairs) Analysis: No major new capital investments are anticipated as a result of the proposed lease sale. Construction and maintenance of airstrips and localized service roads are assumed to be the responsi- bility of lessees. Miscetlaneows Factors 5. Do capital improvement programs consider needs generated od atunrak resource development? epartment of Transportation and Ti Facilities) _ Analysis: It is the conclusion of the Department of Transportation and Public Facilities that the proximity of the proposed lease sale to existing transportation centers indicates that exploration and development activities would not affect, to any large extent, the need for the Department to plan facilities in the immediate future. Activities on the Kenai Peninsula would be conducted in areas impacted by past and existing petroleum operations with no ant- icipated need for additional facilities. The areas north of Cook Inlet that are proposed for leasing are not presently connected to the State road system. A highway corridor extending to and crossing the Susitna River north of 8ell Island has been designated for possible future development west and north of the inlet. 118 RECOMMENDATIONS The following recommendations are organized according to the same project evaluation factor subheadings that were used in the previous ANALYSIS section. Each recommendation has been proposed by one or two State agencies, as indicated. These i recommendations have been proposed for consideration only to aid the Department of Natural Resources in its lease sale decisions, and should not be construed as representing final State policy. 140 Economic Factors What are the employment and popukation changes expected to result {rom the project? (Department of Commerce and Economic Development) a ‘What proportion of fobs are expected to be occupied by current Alaskans? Recommendation: The percentage of Alaska workers could be increased by developing training programs and recruiting efforts with drilling: companies. What are the characteristics of these jobs (seasonality, shire Levelt, occupational category, short-tou, Long-terun)? Recommendation: Although many of the employment opportunities which would be created by the proposed oi] and gas lease sale would be needed to sustain the existing workforce, the percentage of Alaskan workers could be further increased by developing training programs and recruiting efforts with drilling companies. Some success in training for jobs has occurred at the Seward Skill Center and Kenai Peninsula Community College. Further training efforts could be beneficial.’ However, since long-term employment arises from the development and production of oil and gas fields, as opposed to their exploration, the degree to which the workforce could expand over the Tong term would depend largely on the success of finding commercial quantities of oil and gas reserves. -- 120 ~ Community Well-Being Factors Introduction (Department of Community and Regional Affairs) Recommendation: During the early phase of exploration, the State should develop, in conjunction with the Kenai Peninsula and Matanuska-Susitna Boroughs and the Municipality of Anchorage, a policy on access (overland, airport) affecting the northern and western parts of the Cook Inlet basin. The policy would need to consider other potential developments, such as the Beluga coal field development. The policy would address all phases of development and be applied to any appropriate legal instrument. Stipulations on leases should specify that exploration activities will be supported by air service or existing roads and port facilities. New roads may be constructed during exploration only when there is no prudent alternative, providing they are consistent with the policy on access developed in the immediately preceding recommendation. What Locak population changes are expected (e.g., amount and nate of change, characteristics of expected in-mignants]? Are population changes expected to cause significant value on Lifestyle conglicts? Ts placement from traditional occupations expected? (Department of Community and Regional Affairs) Recommendation: While population changes attributable to the Proposed State oil and gas lease sale are not large, the cumulative effects of the proposed lease sale, Beluga coal field developments, explortation and development activities in Lower Cook Inlet, and the proposed federal Cook Inlet lease sale #60 could be substantial. The State should monitor, preferably through the Kenai Peninsula Borough, changes in population and the demand, availability and quality of governmental goods, services, and facilities. What changes are expected in the quality, availability, or demand {oA governmental goods, services on facilities? (Department of ommunity and Regiona airs) Recommendation: As with population changes, the State should monitor the demand, availability and quality of governmental goods, services, and facilities. Fiscak Factors What effect would the project have on the net balance of State and ocak expenditures versus nevenues over cone? (Department of Community and Regional Affairs) Recommendation: The State should seek to establish enabling legislation which would allow boroughs to share revenues with cities within its corporate boundaries. The State should also request a special appropriation for financial assistance to municipalities adversely affected financially by State oil] and gas lease sales. Are there explicit on dmplicit State subsidies associated with the profect? (Department of Revenue) Recommendation: The idea? situation to avoid an unnecessarily adverse effect on the southcentral Alaska economy would be to obtain secure gas contracts for future local consumption. Resource Utilization Factors What effect wilt the project have on resource industry potentials on other resource values? Wiel the project result in Uuieversible resource commitments? (Department o atural Resources ) Recommendation: Activities associated with lease activities such as site clearing, gravel removal, dredging, filling and road construction could result in long-term commitments of fish and wildlife habitat (up to 30 years). Because these activities are not likely to impact extremely large areas, they will be significant only if they occur in critical or essential fish and wildlife habitat, such as moose overwintering or swan nesting areas, or if they occur frequently enough or at enough locations to result in impacts that become cumulative. In most cases, habitat impacted by lease activities could eventually be restored to its original condition. One method of doing this is through a stipulation in the lease document requiring the lessee to restore the site. A useful measure for ameliorating impacts to fish and wildlife is the Department of Natural Resources' standard requirement for a minimum $10,000 performance bond per lease or $500,000 for Statewide lease operations. Such bonds are designed to cover the costs of site damage and restoration. If the State can demonstrate that an unusual risk exists and can indicate potential costs, it can require an "unusual risk" bond. This would be done only after public notice and public hearing. Wile the project affect fish and wildlife populations on their habitat? eee these effects be short-term on Long-term in nature? (Department of Fish and Game) Recommendation: Although certain impacts are unavoidable when developing an oil or gas field in an undeveloped area, many impacts can be minimized through the use of mitigating measures. The Departments of Fish and Game and Environmental Conservation have made a careful study of the best management practices to minimize effects of various activities on fish and wildlife resources and their habitats, and have analyzed the existing - 4282 controls over these activities (Table 6). The best management practices have been divided into two categories: 1) best management practices to be used by all permitting agencies in issuing pérmits within the sale area (contained in the above- mentioned reports) and 2) sale-specific mitigating measures to - be included in the lease document, Plan of Operations, and Notice to Lessees by the Department of Natural Resources. The following measures are recommended for consideration by State agencies and others. They should not be considered as representing final State policy. 1. General mitigating measures and resource protection a. Special protection should be instituted for areas essential to the production and survival of important fish and wildlife populations. This includes habitats such as waterfowl nesting and staging areas and moose overwintering and calving areas. Special protection would include such measures as locating facilities outside of these sensitive areas or seasonal restrictions on certain activities. A preliminary identification of essential fish and wildlife habitat is contained in Fish and Game Appendix 5. Mitigating measures to protect these areas are included in the section on project effects on designated or specifically defined wilderness, historic, watershed, recreational or scenic areas, and in the following sections on endangered and protected species. b. No discharge of produced waters should be permitted in any freshwater body, intertidal habitats, shallow nearshore waters at river mouths, and those areas experiencing gyre circulation patterns. Table 6. Controls by Impact Category and statements of Adequacy, ue use as a planning tool in developing new mitigating strategies e.g., lease stipulations) where appropriate to supplement existing cot controls). Impact category Produced water Drilling muds and cuttings Ballast and refinery effluent, heated effluents Solid and oily waste disposal Marine trans- portation, oil spill contingencies Current control Waste disposal permit (DEC), subsurface disposal permit (DNR), or NPDES permit (EPA) and 401 certificate (DEC) Waste disposal pemit (DEC) Waste disposal pemit (DEC) Solid waste disposal permit (DEC) Oil Spill Contingency Plan, Certificate of Risk Avoidance Adequacy of Current control from water quality standpoint Adequate with exceptions noted at right. Adequate with exceptions noted at right. Adequate through plant design review and conditions. Adequate; case-by-case determination. Adequate regulatory basis for large terminals and tankers only; inadequate for exploratory and production. Recommended additional mitigating measures Lease stipulation prohibiting direct discharges to freshwater bodies, shallow nearshore waters at river mouths, intertidal habitats, and those areas experiencing gyre circulation patterns. Berm onshore sump or reserve pits near water bodies. Prohibit disposal into freshwater bodies and shallow tidal flats at mouths of major rivers. None. Information to bidders reiterating normal prohibitive disposal practices. Development of contingency plans and detailed discussion in DNR Plan of Operations for production and exploratory phases, pipeline spill monitoring and detection systems. Table 6. Impact category Wetland development, sedimentation from culvert installation, and road construction and gravel removal per Vessel traffic system wo oO (VTS) Destruction of essential fish and wildlife habitat (site clearing, disturbance, pollution, etc.) Impacts on productive wetlands (dredging, fill, drainage, etc.) Restrictions on public access and use of fish and game resources Continued Current control Section 404 pennit (Corps of Engineers), 401 certifi- cation (DEC), Plan of Operations (DMEM), Title 16 pennit (DF&G) Anadromous fish act, refuge legislation, Plan of Operations (DNR), miscellaneous land use pennits (MLUP) Corps 404 pemit, miscellaneous land use permits, State coastal management act Constitutional requirements, refuge legislation Adequacy of Current control from water quality standpoint Generally adequate. Conflicting review time frames; absence of data correlating cause and effect relationships; little mandatory control outside stream beds. Reliance on USCG operated systems. Adequate for anadromous streams and refuges; inadequate for other State lands. Adequate with a case-by- case detennination. Adequate for refuges and unreserved State lands; inadequate on State leases. Recommended additional mitigating measures Information to bidders stressing coordinated permit application procedures; more detailed Plans of Operation are required. Recommend utilizing the manual of guidelines (BMP's) available from DEC on road construction practices; Fish and Wildlife Service guidelines on gravel removal and site rehabilitation should also be referenced. Recommendation to USCG for establishment of VTS for Cook Inlet if warranted by increased tanker traffic in area. Protection of essential fish and wildlife habitat identified by ADF&G be made a requirement of all MLUP's and Plans of Operations. Information to lessee's notifying them of requirement to avoid impacts on wetlands habitats. Lease stipulation guaranteeing public access to all of lease except facilities and reserving authority to limit public access to State. No discharge of drilling muds should be permitted in any freshwater lake, stream, critical wetland, or intertidal area. Drilling muds and cuttings with no hydrocarbons or toxic components may be discharged in the subtidal water of Upper Cook Inlet or disposed of at an approved upland site. Onshore mud pits located in wetlands or adjacent to lakes or streams must be properly lined and bermed to prevent spillage or leakage into adjacent water bodies. Restriction of public access to, or use of, any / traditional hunting, fishing, subsistence, trail, or recreational area as a consequence of oil and gas activities should be minimized. The Department of Natural Resources, in consultation with the Department of Fish and Game, may require modification of the location of proposed surface access facilities to avoid particularly sensitive fish and wildlife habitat areas, such as moose calving grounds or peregrine falcon nests, or may require that the facilities be “put to bed" after use. To the maximum extent feasible, the consolidation of facilities associated with development of a field (i.e., roads, airstrips, pipelines, etc.) should be required to minimize impacts on fish and wildlife habitat. Before Plans of Operations are approved and drilling permits are issued, the applicant should be required to demonstrate the capability to expeditiously detect, contain, and clean up any oi] spill which might result from lease activities, before the spill impacts any important fish and wildlife resources or habitat. This includes the capability to drill a relief well in the event of loss of well control and the identification of an alternate drilling platform for marine or intertidal wells. Lease facilities which produce, transport, or process oil or other pollutants;which have a storage capacity of greater than 660 gallons; and are located in wetlands or adjacent to water bodies, should be designed and constructed so as to prevent the spread of oi] and other pollutants both “above and below ground. Where feasible and prudent, facilities which store greater than 2,000 gallons of oi] should be sited at least 1/4-mile from any lake, wetland, or naturally flowing water drainage system with a flow of greater than 5 feet per second. No modifications (dredging, drainage, or filling) of productive coastal wetlands should be allowed unless it can be demonstrated to the satisfaction of the Department of Fish and Game that they will not impair fish and wildlife production.1/ Productive coastal wetlands will be identified prior to the lease sale notice. 1/Productive wetlands are those wetlands which are: 1) used for staging, nesting, or feeding by waterfowl or shorebirds, 2) used for spawning, rearing, or migration by anadromous or resident fish, and 3) hydrologically important for type 1 and type 2 wetlands. 128 j. Access roads, pipelines, and other facilities should be designed and sited to avoid sensitive fish and wildlife habitat, and to prevent interference with natural drainage and migrational corridors. k. If this sale results in a significant increase in tanker traffic, the Coast Guard should be encouraged to establish a vessel traffic control system to reduce the chances of a tanker collision and oil spill. Mitigating measures for State refuges. See section on project effects on designated or specifically defined wilderness, - historic, watershed, recreational, or scenic areas. Mitigating measures to protect endangered and protected species. There are four species of birds which nest within the sale area which require special consideration in the leasing process. These include: a. Peregrine falcons. Two endangered sub-species of peregrine falcon, Falco peregrinus anatum and Falco peregrinus tundrius, are found in Alaska and are protected under both State and federal endangered species regulations. A description of the Essential Habitat Policy appears as Fish and Game Appendix 3. There are currently no known peregrine falcon nesting sites within the tract nomination 129 bd. area. However, in the event that peregrine falcon nests are discovered the following mitigation measures would ensure lease activities are in compliance with the State and federal endangered species acts: (1) Land use practices and/or development that will significantly alter or eliminate existing habitat conditions within one mile of nesting sites should be prohibited. (2) All human activities (unless specifically authorized) within one mile of nesting sites should be prohibited between April 1 and August 15. (3) Nesting habitat in public ownership and under State control should be protected and/or retained. (4) All aircraft should be Prohibited within 1,500 feet of the surface and within a horizontal distance of one mile of nesting sites between April 1 and August 15, (5) The use of harmful pesticides and other environ- : mentalspollutants detrimental to the peregrine falcon or its food source should be prohibited within habitat areas used by them. Eagles. Bald eagles and their nests are.protected by federal law. Substantial numbers of eagles nest within the sale area, and nest site locations in the proposed lease area are shown in Fish and Game Appendix 5. To ensure compliance with the Bald Eagle Protection Act (Fish and Game Appendix 1), no surface entry should be permitted within 500 feet of an active bald eagle nest during the period April 1 to August 31. Temporary activities which do not alter the habitat may be allowed outside of this time period. 15 c. Trumpeter Swans. Although not classified as an endangered species, trumpeter swan populations are slowly recovering from overexploitation in the early 1900's. The total North America population is estimated at 8,000 individuals. The Upper Cook Inlet sale area encompasses a substantial portion of the trumpeter nesting range in Alaska. Swan nests are usually located in wetlands adjacent to the shoreline of lakes where the young are reared after hatching. A short monograph describing the life history and habitat requirements of the trumpeter swan appears as Fish and Gane Appendix 2. The Department of Fish and Game and the U.S. Fish and Wildlife Service have identified a number of active swan nesting sites in the tract nomination area. These are shown in Fish and Game Appendix 5. Research has shown that trumpeter swans will abandon a traditional nesting area if subjected to even a low level of disturbance such as the construction and use of one or two recreational cabins on a lake. To ensure continued usage of swan nesting sites in the Upper Cook Inlet region, the following stipulations should be applied to leases for tracts containing or adjacent to swan nests: (1) Activities which create visual or noise disturbance within 1/4-mile of swan nesting ponds, marshes, or lakes from May 1-August 31 should be prohibited. Restricted uses include, but are not limited to, operation of motorized vehicles and airplanes, construction of permanent facilities, discharge of any explosive devices including firearms, construction of permanent campsites or waysides, and use of chain saws Or generators. (2) No floatplane operations should be permitted on any water body with nesting swans during May 1 to August 31. 13i Tule goose. ‘The tule goose is a rare subspecies of white- fronted goose. The existence of this subspecies has been debated since it was first described in the Pacific Flyway in 1917. More than a dozen investigators have since tried to determine the validity of subspecies classification of these white-fronts. The location of nesting grounds and the degree of isolation during the nesting season were the unknown and most important aspects of subspecies classifi- cation. Only recently has documented evidence of their nesting grounds become available. Current studies indicate that an estimated 2,000-3,000 tule geese inhabit the Cook Inlet region on a seasonal basis. Thus far, the Bachatna Flats has been identified as the most important high density tule goose nesting habitat in Alaska. Two smaller tule goose nesting areas within the Susitna Flats Refuge have also been documented (see Fish and Game Appendix 4). At the request of the Department of Fish and Game, the Department of Natural Resources has deleted acreage in the Big River vicinity from the proposed lease sale area. Wetlands adjacent to the Kustatan River, which also provide important habitat for tule geese, have also been deleted from the sale area at the request of the ADF&G, with the exception of one tract along the southern tip of the West Foreland. Within this tract, no surface entry should be allowed below the 100 foot elevation contour and directional drilling should be required in the event that the tract is explored and developed. Tracts in the Kustatan River vicinity which were under consideration for deletion, and subsequently dropped from the sale (with the exception noted above), are shown in Fish and Game Appendix 4. 132 Wikk the project affect subsistence resources? For example, are > changes in mgration patterns, 2055 of species, dislocation, or availability changes expected? (Department of Fish and Game) Recommendation : The magnitude of numerical and qualitative declines in fish, wildlife, and other resources beyond unavoidable levels as a result of habitat loss or degradation due to site preparation, dredging, filling, and oi] spills will depend on the mitigation measures adopted to offset the impacts. Many of these impacts can be minimized through careful siting, seasonal operations, extra safety precautions, and alternative construction methods. Recommended mitigating measures are identified in the section on effects of the proposal on fish and wildlife resources and habitats. The Department of Fish and Game has also identified the following means that are available to mitigate the impacts of increased competition for fish and wildlife resources. These alternatives are featured here for consideration by State agencies and others, and they should not be interpreted as recommendations by ADF&G or as representing final State policy. 1. The closure of regional and village corporation lands to mineral development and public use. 2. Restriction of public use of new roads and airstrips associated with oi] and gas development. 3. A mandatory orientation program for oi] field workers explain- ing the need to maintain fish and wildlife values and cultural practices. 4. Manipulation of hunting and fishing regulations to favor local users. 5. Voluntary restrictions on hunting and fishing activities of oi] field workers by lessees. 133 Weee the paofect aggect designated or (Soe wilderness , historic, watershed, recreational, or Scenic aneas? (Department of Fish and Game) Recommendation: Impacts of oi] and gas exploration, development, and production in wildlife refuges and recreational areas can be minimized or mitigated. Mitigating measures that have been recommended by the Department of Fish and Game, with the aid of the Department of Environmental Conservation, where appropriate, include the following. Except where they are a direct reflection of existing State laws , following the recommendations are presented as possible measures to be considered by State agencies and others and should not be considered as representing final State policy. I. Mitigation for oi] and gas activities in State refuges. The management of State fish and wildlife refuges is the responsibility of the Department of Fish and Game under AS 16.20.050 and AS 16.20.060 (Refuges). Before the use, lease or other disposal of land under private ownership or State jurisdiction and control in State refuges, the responsible individual or governmental agency must notify the Commissioner of the Department of Fish and Game and secure his approval before any activity can take place. The legislative performance standards for Department management of refuges are very clear. Refuges were established to protect 1) fish and wildlife habitats and populations, and 2) public uses of fish and wildlife and their habitat. Any other uses of refuges and critical habitats have to be compatible with the primary management objectives described in 1 and 2. For example, AS 16.20.036 describes the management goals for the Susitna Flats Refuge. 134 "Sections 22-27, 34-36 (b) The Susitna Flats State Game Refuge is established to protect the following: (1) Fish and wildlife habitat and populations, particularly waterfowl nesting, feeding and migration areas; spring and fall bear feeding areas; salmon spawning and rearing habitats; (2) public uses of fish and wildlife and their habitat, particularly waterfowl, moose and bear hunting; viewing; photography; and general public recreation in a high quality environment. (c) Entry upon the Susitna Flats State Game Refuge for purposes of exploration and development of oi] and gas resources shall be permitted when compatible with the purposes specified in (b) of this section; however, all existing leases shall be valid and continue in full force and effect according to their terms." The Department has carefully considered the impacts that oil and gas development might have on fish and wildlife resources and human usage of refuges and critical habitats, and has concluded that oi] and gas exploration and development would be acceptable on most critical habitat and refuge lands under the conditions described in this text. To ensure that fish, wildlife, and human use values are protected, refuge lands and critical habitats will be classified according to the following system: 1. Lands where a lessee can operate under the terms of a general permit from the Department which will be subject only to standard mitigating measures and existing State and federal regulations. 185 2. Lands where a lessee can operate after compliance with special mitigating measures to protect sensitive fish and wildlife values. This includes critical waterfowl nesting, staging and molting areas which have been identified as "primary waterfowl habitat." Coastal wetlands in both the Susitna Flats and Trading Bay Refuges are included in this classification. In general the "primary waterfowl areas" within the refuges include lands that lie from 1 to 2 miles inland of mean high tide. Cottonwood Slough in the McArthur Flats and the Little Susitna and Big Susitna Rivers are exceptions. In these locations the "primary waterfowl area" extends 3 to 3 1/2 miles inland and approximately 1/2 mile on both sides of the river banks. All offshore lands adjacent to these coastal wetlands lying within 1 mile of mean high tide are also included in this classification. A legal description which specifically identifies the "primary waterfowl areas" within the refuges appears as Fish and Game Appendix 4, 3. Vital refuge lands where no surface entry will be permitted (seasonal operations of a nonpermanent nature may be permitted under some circumstances). Vital lands include trumeter swan and eagle nesting sites. Preliminary draft mitigating measures and conditions for oil and gas exploration and development within refuges have been developed. These stipulations will be applicable to all future oi] and gas development within the refuges. Existing operations will be subject to the terms of their respective lease agreements. Following the land classifi- cation presented above, these measures include, but may not be limited to: General mitigating measures for all refuge lands a. Oil and gas lease operations within a State refuge will only be conducted under the terms of a permit from the Alaska Department of Fish and Game. This permit will be issued upon receipt and approval of detailed plans of operations for the exploration, development, production, and transportation phases of oi] and gas development. b. The consolidation of facilities and activities associated with lease operations will be required. c. No surface discharge of produced waters will be allowed in the wetlands, uplands, or tidelands of either the Susitna Flats or Trading Bay Refuges. d, No discharge or disposal of drilling muds will be allowed in or adjacent to any freshwater lake, stream, wetland, or interdial area. e. No restriction of public access to or use of refuge lands will be permitted as a consequence of oil and gas activities. Restriction of public use of small, limited areas in the immediate vicinity of buildings and active drill sites may be allowed with the approval of the Department of Fish and Game. f. All lease facilities including, but not limited to, storage tanks, well heads, pipelines, valves, pumps, etc., must include all available design features to minimize the possibility of accidental oi] spills or fires resulting from hunting accidents or vandalism. g. All roads, pads, and facilities constructed within refuges or critical habitat areas must be sited and designed to 1) have minimal impacts on fish and wildlife resources and public use, and 2) mitigate adverse impacts. 137 Mitigation measures will be required for all lease operations which result in unavoidable adverse impacts having a significant effect on fish and wildlife, their habitats, or human use, as determined by the Department of Fish and Game. No drilling will be permitted until the lessee has demonstrated the capability to expeditiously detect, contain, and clean up any hydrocarbon spill which may result from lease activities, before the spill impacts any important fish and wildlife resources or habitat. This includes the capability to drill a relief well in the event of a loss of well control. Lease facilities in wetlands adjacent to water bodies must be designed and constructed to prevent the spread of hydrocarbons and facilitate cleanup both above and below ground. Where feasible and prudent, facilities which store, process, or transport greater than 2,000 gallons of oi] should be sited at least 1/4-mile from any lake, wetland, intertidal area, stream, creek, or river. Upon abandonment or expiration of a lease in a State refuge or critical habitat the lessee will remove all structures, pipelines, roads, and pads and restore the area to its original condition unless the Department determines it is in the best interest of the public to retain some or all of the improvements made by the lessee. Borrow removal will be permitted where it does not adversely affect fish and wildlife resource or their habitat, or where there is an opportunity to enhance fish and wildlife populations. Surface transportation across wetlands will be restricted to periods of the year when sufficient ground frost and snow cover are present to prevent damage to wetlands and other sensitive habitats, as determined by the Department of Fish and Game. 138 Mitigating measures for primary waterfowl habitat within State refuges. a. Fixed wing aircraft overflights over the primary waterfowl production and staging areas will be restricted to a minimum of 500 feet, and helicopter overflights to 1,000 feet, during the period April 1 - October 31. j b. ATI surface exploration and development activities in the “primary waterfowl areas" (Fish and Game Appendix 4) shall be conducted only between November 1 and March 15 unless extended by permit. Routine maintenance and emergency repairs will be allowed on a year round basis during the production phase. A maintenance plan describing routine maintenance activities to be conducted between March 16 and October 31 will be submitted to the Department of Fish and Game for review and approval. c. Gravel pads and wellheads are the only permanent above ground structures which will be allowed in "primary waterfowl areas." Gravel pads and wellheads will be designed and constructed to utilize best available technology to minimize visual impacts on “primary waterfowl] areas," d. Drilling pads within the "primary waterfowl areas" will be sited and designed to avoid adverse impacts or to enhance fish and wildlife values and public uses of the refuge. Mitigating measures for vital fish and wildlife habitat within State refuges. a. Eagle nests. Bald eagles and their nests are protected by federal law. Numerous eagle nests have been identified within the Susitna Flats and Trading Bay Refuges. Eagle nests within the tracts tentatively selected for leasing are identified in Fish and Game Appendix 5. To ensure compliance with the Bald Eagle Protection Act and refuge management plans (Fish and Game Appendix 1), no surface entry will be permitted and no permanent 139 facilities will be allowed within 500 feet of an active bald eagle nest during the period April 1 - August 31. Temporary activities which do not alter the habitat may be.allowed outside of this time period. b. Trumpeter swan nesting sites. Swan production areas (wetlands where adults and flightless cygnets have been seen) are shown in Fish and Game Appendix 5 Several swan nesting areas have been identified within the refuges. Because swans traditionally the same nesting areas year after year and are sensitive to disturbance by humans, these documented production areas should receive special protection as outlined below (Fish and Game Appendix 2): (a) No surface entry, including low altitude aircraft, will be allowed within 1/4-mile of swan produstion areas during the nesting and brood rearing season (May 1 through August 31). (b) No roads, above-ground wires, or other permanent facilities shall be located within 1/4-mile of ~ these swan production areas. Although careful control over all development activities in refuges is necessary to ensure that fish and wildlife values and human use are maintained, it is anticipated that, in practice, the mitigating measures identified and any additional mitigating measures necessary can be met by a potential lessee. The State will make every effort to ensure that the State's economic interests in oi] and gas production, as well as benefits from fish and wildlife production and harvest, are optimized. Il. Ill. Mitigation for oil and gas activities in or near anadromous streams and important sport fishing areas. In addition to the mitigating measures included under the section on effects of the proposal on fish and wildlife resources and under Title 16, the following measures are proposed: 1. Lease facilities such as airstrips should be sited away from important recreational fishing streams so there is no visual or audio impact on recreationalists, potential for oi] spills into the streams, destruction of essential wildlife habitat, or blockage of migrational corridors. 2. All anadromous and sport fishing streams should have development setbacks of 200 feet on each bank with 100- foot public access easements. 3. Wherever possible, lease facilities, roads and pipelines should parallel stream drainages, and be located out of the active (5-year) floodplain. No fuel storage will be located in active floodplains. Mitigation for oi] and gas activities on recreational corridors, wildlife habitat, and development setbacks on State-owned lands. In addition to the mitigating measures already identified in the section on effects of the proposal on fish and wildlife resources, the Department of Fish and Game proposes that public land use reservations within potential lease areas be identified in the lease document to ensure that the public's interest in these areas are not negated. The Department Proposes that all mitigating measures identified herein should be included and that no lease rights should be conveyed which would infringe on public use or reduce the public benefits accruing from these lands. Additional mitigating measures for these areas include: 1]. Recreational Corridors - mitigating measures necessary to maintain the public's interest in recreational corridors include the following: a. No development should occur in the annual floodplain of any stream in a recreational corridor. Lease facilities such as airstrips should be sited away from important recreational streams so there is no visual or audio impact on recreationalists, potential for oil spills into the streams, destruction of essential wildlife habitat, or blockage of migrational corridors. The no development zone should include an area approximately 1/2-mile wide on each bank of the Little Susitna River, Theodore River, Alexander Creek, Skwentna River, Yentna River, and Lake Creek. Design and siting of any essential facilities in a designated recreational corridor should be approved jointly by the Department of Fish and Game and the Division of Parks. b. Essential road or pipeline crossings in the corridor should be constructed at right angles to the corridor and streams and should be designed to minimize visual impacts, impoundment of flood waters, and interference with wildlife movements. Any essential lease activities within a corridor should be jointly approved by the Department of Fish and Game, and Division of Parks, where applicable. 2. Wildlife Habitats - Because of the diverse and extensive nature of essential fish and wildlife habitat reservations within the proposed lease area, and the fact that many of the activities associated with oi] and gas development would have minimal impacts on fish and wildlife if carefully planned and constructed, the Department of Fish and Game feels that with proper controls many of these activities could be accommodated on a case-by-case basis. To achieve this balance of uses and ensure that essential fish and wildlife habitat is maintained with minimal restrictions on lease activities, the following stipulations should be included in the lease document or Plan of Operations: 142 a. The Plan of Operations for lease operations and related activities within designated essential wildlife habitat will be subject to review by the Department of Fish and Game and/or the Division of Parks. - b. No development other than essential pipelines or roads will be permitted in the annual floodplain of streams within a designated wildlife habitat corridor. Development Setbacks - To protect essential riparian fish and wildlife habitat, water quality, and public access within the sale area, the Department of Natural Resources' Notice to Lessees should contain the following statement: No development will be allowed within 200 feet of either stream bank of the Beluga or Chuitna Rivers. No restriction of public access within this corridor will be permitted. Environmental Quality Factors What environmental health dmplications are expected to result som onshore and offshore activities related to ot2 and gas evelopment? (Department of Environmental Conservation Recommendation: In addition to the general suggestions which appear in the analysis, the following Table 4. has been prepared to demonstrate the adequacy of current require- ments for maintaining environmental health in and near the lease sale area. , What are the provisions for environmental monitoring, surveillance, and quality control? (Department of Fish and Game) Recommendation: State agencies' present ability to conduct monitoring, surveillance, and quality control in areas scheduled for rapid development can be improved by: 1. Adherence to the State's five-year oil and gas lease sale schedule. Contingency and ,imited-acreage sales should be limited to those that are identified on the schedule. 2. Adequate funding for monitoring, surveillance, and quality control components of permitting agency budgets for oi] abd gas leasing projects. 3. Development of a systematic inter-departmental monitoring strategy for the lease area to monitor physical and biological indices such as fish and wildlife abundance and distribution and water quality. A mechanism within the lease document could be incorporated to adjust mitigating measures and standards to compensate for changes outside of the expected range of impacts and for any new information whicn may become available over the lease term. This mechanism should allow for increased restrictions on activities causing significant impacts as well as relaxation of standards where scientific evidence is available to show that impacts would be minimal under less stringent controls. Specific monitoring strategies include: Table 4. Recommended mitigation strategies for maintaining evironmental health in the Upper Cook Inlet lease sale. Adequacy of current control(s) to maintain Health Current environmental Recommended additional issue controls quality mitigation measures 4 Sul fur Air Adequate None dioxide Quality and parti- Control culate Permit to levels from Operate and onshore and ambient air offshore quality facilities standards (18 AAC 50.020) PSD permit (EPA) Carbon Authorities Adequate None appropriate as a monoxide above lease stipulation; intern and local refinement of strategy required. Marine Marine Adequate None tanker vessel emissions section of Air Quality Regulations (18 AAC 50.100) Drinking water Adequate None contamination Fire safety OSHA, Adequate None Department of Transportation (Coast Guard) 1/ No new mitigating measures are considered necessary for use as lease stipulations or in Plans of Operations. Existing regulatory controls are adequate to deal with the issues presented above. a. Evaluation of the effectiveness of sedimentation control measures in stream crossings and pipeline burials through sediment and settleable solids monitoring. . Development of cost-effective approaches to biological and chemical monitoring, emphasizing long-term sublethal responses of biota to pollutants and including examination of subtle indices of change (growth, behavioral changes, and fecundity). . Monitoring of changes in abundance and distribution of moose, caribou, and waterfowl in response to disturbance generated by lease activities and the construction of roads, Pipelines, and airstrips. The establishment of a responsive mechanism for adjusting the terms of permits of nonrenewable resource agencies in response to impact on renewable resources and humans use of these resources. For example, NPDES permits issued by the Department of Environmental Conservation have various time-frames, mostly 3- or 5-year, although some are issued on a year-by-year basis. This allows the Department to assess impacts and adjust terms of the permits, if appropriate. 146 Miscellaneous Factors What governmental (State, federal, Local) approvals , enumits on Licenses ane requined? (Department of Commerce and Economic Development) Recommendation: The most valuable recommendation that can be made at this point is for all interested parties to develop as clear and timely an understanding as possible of those approvals, permits, and licenses of interest to them. Past experience indicates that early awareness of such requirements allows for required approvals to be dealt with expeditiously and precludes last-minute problems and delays. The Department of Enviornmental Conservation's Permit Information and Referral Centers have been established in Juneau and Anchorage to provide this service to the applicant. Do Capital improvement proghams consider needs generated by naturak resource development? (Department of Transportation and Public Facilities) E Recommendation: The Department of Transportation and Public Facilities suggests that any development plan. proposed or reviewed by State agencies should consider utilizing a consolidated trans- portation corridor for establishment of permanent access routes. APPENDICES Public Comment and Agency Response Appendix Public comments received during the 30-day review period are included in this appendix. Comments were reviewed, and questions/concerns raised by the commentators were directed by the Division of Policy Development and Planning, Office of the Govenor to the appropriate State agency(ies) for response. Agency responses are paired with the concerns or comments that they address. Unfortunately, the Department of Commerce and Economic Development was unable to respond to questions directed to that Department due to reorganization and personnel reductions. Other agencies with related expertise or responsibilities attempted to address these concerns. Comments by the following parties are presented and responded to in this section: Kenai Peninsula Borough Matanuska-Susitna Borough Native Village of Tyonek Scott Schliebe Cook Inlet Aquaculture Association Alaska Waterfowl Association Friends of the Earth and Trustees for Alaska National Audubon Society Alaska Oi] and Gas Association Chevron U.S.A., Inc. Ely, Guess and Rudd Exxon Co., U.S.A. Pacific Alaska LNG Association Roesource Development Council for Alaska Public Hearing Witnesses in Anchorage Mark Sandberg Jacob Almaras S.W. Gustafson David Benton Bruce Boyd PUBLIC COMMENTS KENAL PENINSULA BOROUGH (Frank Mcilhargey First and foremost, the Kenai Peninsula Borough is in full support of the State moving ahead with its oil and gas lease sale in the Upper Cook Inlet. The area is centered by an established support base. The existing industrial and community infrastructure has the capacity to support exploration and the level of development likely to occur should there be commercial finds. This is oil country and we are ready. We want to compliment the State agencies who participated in the analysis. We were very impressed with how knowledgeable those departments are in their considerations of the sale, its potentials and the adaptability of the Cook Inlet area to support the levels of activity which the sale might cause. However, we are concerned with several areas of that report dealing with the planned development here of the Pacific Alaska LNG plant. When under construction and in operation the plant will be of positive consequence to this area and to the State. Consider that we are talking about a billion dollar construction project to be built over a three year period, employing a peak of 1,200 workers. Long term benefits are over $4-million yearly in local area taxes with an equal number of dollars flowing through primary and secondary employment, local purchases and other business creating activities. You must realize that we here in this area get very nervous regarding statements which challenge the prospects for that plant being built. We are not paranoid on the subject, but we are hyper and that's for damn sure. First we direct your attention to page 98, a discussion of safety considerations by the State's Department of Environmental Conservation. They get into the hazard of LNG sitings in relation to heavily populated areas and suggest that any ne" sitings for LNG should be out of the Nikiski-Kenai area. Ve feel that this statement needs to be clarified. It can be interpreted in several ways. To us it implies a challenge to the location of the Pacific Alaska LNG plant at Nikiski. If that is intended, it would seem meaningless. The company site has already been through the hoops and has full approval. The “regulations recently promulgated by the Coast Guard", as cited by DEC, do not apply. The company has grandfather rights. One can only conclude that DEC's concern is with other plants which might result of the sale. If so, their consideration might be something to bear in mind. However, it is not likely that, based on the quantities of natural gas available in the Cook Inlet Basin, further liquefaction of natural gas is potential in this area. 2 We also question, and ask for clarification, their consideration of the dangers of tanker movements in the Nikiski area. The potential that new discoveries will cause additional tanker traffic is unlikely. The best case is that there will be sufficient commercial finds to sustain existing levels of production and traffic currently in the area. So the point seems moot except for one concern we have. AGENCY RESPONSE 1. DEC: The statement in the Analvsis regarding LNG siting is not meant to indicate that DEC is challenging the location of the Pacific Alaska LNG plant at Nikiski. The intent is simply to point out the need to consider the siting issue for any future LNG plants that might be built as a result of gas discoveries from the Upper Cook Inlet lease sale. Me are fully aware of the approval which nas been given for the construction of the Pacific Alaska LNG plant at Nikiski and are not objecting to that action. 2. DEC: At the present time congested conditions do not exist for marine traffic in Cook Inlet. The likelihood of this occurring as a result of tne lease sale exploration and production activities is very remote. Our comments in this regard are only intended to point out that if marine transportation did increase because of the lease sale, oi] pollution risks would probably increase since tnere would be a greater chance for collisions, rammings and groundings to occur. PUBLIC COMMENTS That is the implications on the movement of other shipping in that area. We have hopes that the area will be site for expanded industrial and general cargo shipping activities. While DEC is specifically ‘talking to the movement of tankers, their concerns would seem to question any additional shipping activity in that area so long as tankers are part of the overall traffic. 3 Also in our nose guard defense for the Pacific Alaska LNG project, we turn to portions of the Department of Revenue analysis found on pages 9 through 13 and pages 46 through 49. Like the Departments of Natural Resources and Commerce, we question the Department of Finance opinion that existing Cook Inlet gas supplies are not sufficient to support the LNG plant and long term local commercial and residential needs. Revenue glosses over the Stanford Research study which concluded that, based on projected igentifiable demand, t ere is in fact "enough gas to go around”. We are much more willing to go with the accuracy of the Stanford search Center than we are the Department of Revenue. Therefore, se do not agree with Rgvenue that: first, the LNG plant will not be dDuilt snould there be no significant finds from this sale; and, second, at the construction of the plant will have near and long term negative effects even with s ificant finds of natural gas. Their point seems to te that LNG exported from the area reduces the long term supply available. to users here, the result being an increase in the price which will take natural gas out of the range of low cost fuel for local users. In consideration of this point, I think we need to recognize that the availability of natural gas to the Anchorage consumer and en markets is not the result of the presence of local markets but rather a secondary, and subsidized, benefit of primary national and international market demands. Alaska's oil and gas resources would not, and could not, be developed to satisfy Alaska's markets. They are just too small to justify development and production costs. So, the presence of gas in the area and the fact that there is a demand elsewhere, makes gas available to users in this area,and local markets should be served. But not under the terms which Revenue implies the gas should be made available. Local utilities and we, the consumers, have been fortunate that local consumption is being satisfied from contract rates that are now much less than today's fair market price. We are not paying the going rate. As a result we bave the benefit of cheaper heat and power subsidized by the State and all the citizens of Alaska. This has to be considered if you agree that oil and gas resources taken from State lands are owned dy every citizen whether living on the Kenai, in the Anchorage Bowl, at Nome or wherever. I would offer that the only means through which all State sidents can equally share in benefits of those resources is througn distributing ¢ resources to everyone equally or through sale at true value. Obviously, the distribution of gas AGENCY RESPONSE 3. REVENUE: The known reserves alone are not sufficient to meet all projected Toca demand as indicated in Table 4 of the . draft Analysis. Gas used locally will be subject to recontracting. Gas prices are regulated; therefore, the term, fair market price, is misleading. Also because of price regulation, exported gas will not necessarily be priced higner than locally used gas. In fact, exported gas amounts to a subsidy to out-of-state consumers since regulation tends to suppress the price below the fair market price. This is fully explained on page 46 of the draft Analysis. PUBLIC COMMENTS KI Al PE SULA BOROUGH cont'd throughout Alaska is not possible. Therefore, any price which the State accepts for its royalties short of the going market price is a loss of State revenue absorbed by every resident; in effect, a subsidy to a few residents. So, in summation of this matter of supplies and prices of gas to local consumption, local availability is the result of demand elsewhere. So long as that demand is the vehicle through which the resources are developed, any portion of the resource available locally at a fair market price is a positive rather than a negative effect. The negative effect would be in providing the resource at a reduced price. In-State use would represent subsidy from all State residents to those few residents who would benefit. In its listing of proposed positive and negative effects from the Upper Cook sale, the Department of Revenue fails to consider all of the positive effects of the Pacific Alaska LNG development. They did consider construction and LNG employment but failed to consider revenues to accrue locally and to the State through taxes and gas receipts. There are a few other matters needing additional consideration in the State's analysis. 4 On page 31, in Community and Regional Affairs review of government services, we ask that the statement concerning the Borough Providing “health" services be corrected to remove the impression that we exercise such powers on a Borough wide basis. The Borough lacks such powers. The hospitals at Homer and Soldotna are operated by special districts while the Seward hospital is owned by the City, and the convalescent hospital there is privately operated. We are also giving further consideration to such recommendations in the Analysis as: CEIP type funding Growth monitoring Air quality measurement Manpower training Enabling legislation for shared revenues and financial assistance to affected municipalities if we have further comments, they will be furnished prior to your July 21st deadline. SCOTT SCHLIEBE TA nove to allow addicional of1 and gas leasing in the Cook Inlec area would appear to be untimely and should be delayed until a number of concerns are answered. The points enumerated in the Alaska Waterfowl Associations’ open letter to members are a bare ainimum requiring clarification 2 Other quescions requiring closer scrutiny include the relationship of exploratory/operational drilling activities on che Marine environment and species dependent upon chose resources.) Incidence of affect of development upon aarine sammals utilizing the area. Affect of gas burc-off into the atuosphere, especially adjacent to Anchorage, during cold winter veache: 3 These, are a few of ay concerns while perhaps the nose importance question remains within the status of che Tule Goose and its relationship to the intertidal areas of Redoubt Bay and Cook Inlet. AGENCY RESPONSE 4. DC&RA We agree to delete health from the Tist of areawide powers exercised by Kenai Peninsula Borough and apologize for the inaccuracy. 1. DF&R: Because of extreme tides, silt, and low temperatures, only a very limited number of resident marine species are found in Upper Cook Inlet. The Depart- ment has carefully investigated the effects of drilling and production on marine life and feels that because of the limited marine resources and oceanographic conditions, anv potentially adverse effects can be mitigated. 2. DF&R: Belugas and harbor seals are thought to be the only marine mammals utilizing the Upper Cook Inlet sale area. Although no quantitative data are available to access impacts of drilling operations on marine mammals, the Department feels that unless there are numerous accidents, the expected level of oil and gas development will not significantly affect marine mammals. 3. OF AG: See response to National Audubon Society #1. PUBLIC COMMENTS MATANUSKA-SUSTTNA BOROUGH (Lee Wyatt {30 The subject of] and gas lease sale could be an important element to the economic growth and development of the Matanuska-Susitna Borough as well as all of Alaska and in order to ensure a.balanced, orderly approach, and proceed with the proper planning processess we generally agree with and endorse the general content and concept for the development of the potential reserves. We have appreciated the opportunity to review the subject document and generally concur with the document as presented. However, we would like to see further clarification on; such elements as; proposed access to drilling sites; coordination with our current Coastal Management. Program Study; impact on employment and local hire policies. In addition, we feel that additional attention and more detail] should have been given to the Matanuska-Susitna Borough in terms of the community well-being factors as we have many of the same type of problems in common with the Kenai area. We would greatly welcome the opportunity to discuss some of our problems with you as all the requested State reviews somewhat impact our financial and Staff resources and we feel we have only made cursory review and would have liked to have gone into more detail. NATIVE VILLAGE OF TYONEK (Don Standifer) 7/10/80 I have some comments to make regarding the upcoming oil 1 es in the upper Cook Inlet. I feel very strongly that there should be maximum restriction imposed on the oil companies in regards to sportsfishing, hunting, leaving leased areas. ] First oil companies that do acquire a leased area should have a restriction that doesnt allow the employees to wander off the leased area to do any sportsfishing or hunting simply because it would endanger our natural resources. We the people of@Tyonek are all native people and we have a subsistence way of life here. And to give the oil companies a right to fish and hunt on our land or the land around them, could bring the number of wildlife down to a level where the Department of Fish & Game could close our subsistence down until stocks rebuild. Thus eliminating our subsistence way of life. 2 Second, thi should be restriction for employees leaving leased area simply because they can shoot up our fish camps, damage property, sell illegal things to our people, bring alcohol to our village which is a dry villace. + 3 And third, we the people of Tyonek wish a restriction of 1 mile to the shores of Tyonek from Granite Point to Chuitt River. The restriction would Se for off shore oil gS as we believe that if an gil rig was too close to shore it would interrupt the travel of fish and other water life creatures. $0, in conclusion of this letter bear in mind we do not object to the oil sale leases as long ast land, animal life, and our way of life is protected to the fullest extent. If you dont put these restrictions in wasted my words. leases then I have PS. Sy the way we have experienced all of the above. COOK INLET AQUACULTURE ASSN. (Floyd Heimbuch) 7/1/80 The Cook Inlet Aquaculture Association is the recognized Regional Aquaculture Association in Cook Inlet waters for the purposes of salmon enhancement and rehabilitation. The Board of Directors has representation from five Commercial Fishermen groups. They 'e North Pacific Fisheries, Homer, Kenai Peninsula ?ishermen's Cooperative, Soldotna, Cock Inlet Pishermen's Fund, Ninilchik, Commercial Fishermen of Cook's Inlet, Kenai, and Cook Inlet Commercial Fishermen's Associa- tion, Anchorage. The following are also members on our Board of Directors: Mat-Su Borouch, Kenai Peninsula Borough, University of Alaska (KPCC), Cook Inle ti Association, Kachemak City, Ninilchik Village Council, mai Conservation Society, Isaac Walton League, Seward City Council, and a Processor rep. from Salamatof Seafoods, Soldotna. We are engaged in projects and planning of future projects for enhancing or rehabilitating salmon runs in Cook Inlet. These include habitat improvement projects now in planning stages which will be located in the lease a. We have some projects under construction in the proposed lease area. AGENCY RESPONSE OPOP: Comments acknowledged. Considerable revisions have been incorporated into the final Analysis. We hope the general concerns expressed by the Matanuska-Susitna Borough manager are now addressed. ie The Oepartment recognizes the concerns expressed by the village of Tvonek, but the Board of Fish and fame cannot Dromulgate regulations which would prohibit one group of citizens from hunting and fishing on State lands. However, residents of Tyonek can prohibit or limit public hunting, fishing, or use of their lands at any time. Under the provisions of the State Subsistence Act, the Soard of Fish and Game could enact regulations which would give subsistence priority over recreational and commercial uses of fish and wildlife in the event that a serious conflict develoved in the Tvonek area. Tyonek residents should consider the possibility of a private agreement with lessees to voluntarily limit or restrict hunting and fishing activities of employees and contractors. 2. DNR: Such a restriction can be negotiated with tne lessees as part of their plans of operation. Alcohol is not generally allowed on the lease sites for Obvious safety reasons. 11 concerns of the native village of Tyonek will be discussed and considered at all pnases of the exploration and development of the lease area. 3. DNR: The Oepartment is still in the process of revising the sale area. A final tract map will de issued in December of 1980. The Department will serfously consider the requests of the people of Tyonek in the delineation of the final sale area and in the development of the lease stipulations. PUBLIC COMMENTS AQUACULTURE ASS In addition to the actual production of salmon work, we have three members on the six member Regional Planning Team. This team also has one member each from the Commercial Fish, Sport Fish and FRED Divisions of ADF&G. This team is charged by law with the responsibility of developing the Regional Salmon Plan. This plan includes all User Groups harvest demands, goals and objectives and strategies to achieve them. Both natural and artificial stocks are included. The Plan also includes a social and economic profile of the region and an analysis of the capacity of the region to produce fish both naturally and artificially. When it comes to knowledge of the amount of salmon Produced in specific areas, the ability of a specific area to produce naturally or artificially and the value of that resource for either sport, commercial, or subsist- ence this organization understands the problems involved. There are several issues in the draft on which there is little information to make good decisions. There is insufficient information for determining where much of the historic’ salmon production came from. How production could be affected by this sale and the subsequent activity is a debatable issue with not much data. There is growing awareness by those of us concerned with production of salmon that the Northern portion of Ccok Inlet has bsen neglected or under estimated as a contributor to the salmon production in Cook Inlet. The preliminary draft does not deal realistically with the commercial saimon value that is now present and doesn't even consider past production or future potential. Page 72-76 is a good example of discussing only small portions of the total salmon resource value. Of the total Cook Inlet sdlmon catch, less than 10% is harvested by recreational and subsistence methods. Yet there is production or production potential of this resource in or near the proposed lease area that could exceed 25% of the total Cook Inlet salmon resource that in both 1977 and 1978 exceeded $30,000,000. On page 49 there is discussion of bonding to insure return of the area too its original condition. While that is not fully understood by the writer, it sounds as if a $10,000 bond is to insure protection of a resource in this area which in some years is worth 100 times as much. This assumes that 4% of the production of Cook Inlet salmon moves through or could be produced in the lease area. The mentioning of that data is lacking and the attempt to make you aware of the dangers involved in actions without sufficient basic data is an attempt to share a mutual icnor- ance and point out the dangers involved. CIAA and ADF&G both often work with little knowledge of salmon production in the proposed lease sale area. Our joint efforts on the Regional Planning Team and the compilation of a Regional Plan for salmon production have made us painfully aware of this lack of information. Cook Inlet Aquaculture is for resource development. Therefore, I would like to stress that the value of the salmon resource in this area is not known. Further more, the preliminary draft in some instances does not mention this, in some instances glosses over it, or mentions it as lacking without enough comment as to the dangerous decision that can be made because of the lack. I would like to stress that CIAA is for resource development. These comments should not be construed as being in opposition to this lease sale. This letter is attempting to point out that! 1. The salmon resource value in the proposed area is ignored, glossed over, or dealt with carelessly in the draft. 2. The true value of the salmon resource to all harvestors in the lease area is not known. 3. The natural salmon production capacity of the area is not known. 4. The potential for salmon enhancement in the area is not known. 5. With activity and people in the spawning area there is additional harvest or molesting of fish at critical life stages. 6. 1979 is not a representative year for determining the resource value. 7. Greater concern for the salmon resource should be demonstrated than is shown in the preliminary draft. AGENCY RESPONSE 1. DF&R: Additional information on past salmon production and recent commercial salmon harvest values for Upper Cook Inlet has been included in the final Analysis. Refer to the section on Resource Utilization refuges, anadromous streams, and recreational areas. Unfortunately, it is not possible to make a comprehensive evaluation of the total salmon resource value for the Upper Cook Inlet lease sale area because of the lack of essential scientific information on salmon escapements and the future economics of the fishery. However, the Department recognizes these deficiencies, and compensated for them in developing managenent’ recommendations for the sale. 2. DNR: The bonding regulation, 11 AAC 83.160, states that the Department of Natural Resources Commissioner "will, in his discretion, after notice and an opportunity to be heard, require a bond in a reasonable amount greater than the amount specified in (a) of this section ($10,000) where a greater amount is justified by the nature of the surface, the uses and improvements on or in the vicinity of the leased land, and the degree of risk involved in the types of operations proposed or being conducted on the lease. The statewide bond furnished under (c) if this section ($500,000) will not satisfy any requirement of a bond imposed under this provision but will be considered by the commissioner in determining the need for and the amount of any additional bond under this subsection." The $10,000 or $500,000 bond should be considered as minimum requirements. As per the above statement, the Commissioner may request a larger amount depending upon the circumstances. 3-9. oF: Comments acknowledged. Refer to response #1 and the section on Resource Utilization. VRON U.S.A. INC. 7/17/30 There are cany parts of the preliminary draft that are excellent and should be utilized in the final draft. For example, those sec- tions of the draft entitled Community Wellbeing Factors (subsec- tions 1-4) and Fiscal Factors present a comprehensive analysis of potential impacts on the local community. However, in an effort to Provide the State of Alaska vith information supporting as accurate: as possible an assessment of potential impacts of a Sale in the Upper Cook Inlet, cost of our comments will suggest acendaents or additions to the preliminary draft. Possibly the cost useful and relevant data for evaluating inpacts of the sale is foucd in a review of the present oil and gas ope: tions within the potential lease block area. We strongly suggest that the final draft of this study contain a synopsis of the impacts these operations have had (if any), and how these impacts have been nitigated. The prelisinary draft devotes a substantial discussion to possible impacts on Fish and Wildlife (pages 47-113). We urge that the final draft contain a history and analysis of the effects of existing development in this area. At nany times throughout the preliminary draft reference is nade to the lease sale area as "undeveloped." This is aisleading in view of the existence of at least five cil fields and nurercus gas fields, with sore than 700 wells have been drilled to date. In order to remedy this omission, we suggest the final draft include @ separate section addressing the present oil and gas operations. This should be a statement of where these fields are with respect to other natural resources and what effect ofl and gas operations have had on the eavironzent. fa order to assist you ia the preparation of your final draft, ve enclose a cap which has combined the prelini- nary draft sap data showing fish and wildlife resources vith inforna- tion showing existing operations, unit scundaries, fields, prior exploratory wells, etc. In addition, where it is feasible to do so, studies quoted should be annexed to the final draft so that specific data can be brought to the attention of those zaking the final decision regarding the sale. Wherever possible, where existing operations or reports can supply data, ve urge that they be annexed in order that speculation be avoided. We feel very strongly that the record supports a less negative evalu- ation of the effects of oil and gas developsent on the area than is Presented in the prelininary draft. for example, an analysis of aici~ gating seasures suggested for refuge lands (p. 82-89) should include a discussion and evaluation of mitigating measures presently imposed on existing operations. Samples of existing leases can be annexed. These set forth stipulations presently used to ensure that mitigation Reasures be followed. Thus, the tone of conjecture which pervades the environmental part of the draft can be replaced by an analysis of existing data. The draft lacks a general bibliography of environmental research papers, studies and reports supporting the many assertions and subjec- tive judgmants contained therein. The final draft should contaia these important citations and references. Although a few references are scattered through the repert, the results are rarely set forth. For example, p. 103 refers to studies of the effect of the toxicity of drilling fluids on various organises in the Lower Cook Inlet. However, there is no statesent of the conclucions of the study, which, ia fact, showed no negative environmental impact from the emission of drilling fluids. (See Drilling Fluid Disoersion and Biolonical Effects Studv for the Lower Cook inlet C.0.S.T. Well (ARCO), prepared by Danes & Moore, Anchorage, Alaska, April, 1975). Those conclusions contain valuable data that can assist the Cormissicner cf Natural Resources and Covernor in evaluating impacts of the sale. Many other studies are cited. In every instance where 2 study or survey is cited, the conclusions should also te presented. Tha existing operations should be enalyzed in any discussion of impacts ts extremely important when calculating potential impacts from oil spills. The preliminary draft at p. 108 states as follows: “According to the Departaent of Fish and Game, the only factor associated with the proposed lease sale which would present a high degree of risk to the environsent would be the risk of a sajor oil spill.” The table on p. 111 ts an estimate of anticipated annual ofl spills. The BLM estizate is 1 bbl. spilled for each 4,748 bbis. produced or ,0212 spillage, (Col. (1).) For the total 25 year production (2.6 billion bbis.) this equals 1 bbl. spilled for each 4,229 bbls. produced; or .024% spillage, (Col. (2).) Table 2 on p. 11 contains actual ofl spill history from 1949-1975. Although che prelininary draft does not analyze the figures they cite, computations reveal a .00148% spillage rate or 1 bbl. spilled for each 67,709 bbls. produced. We strongly suggest the final draft include the results and conclu- sious that can be drawn from the facts set forth in Tables I and IL. Since the draft states an oil spill is the most serious of any of the potential izpacts, discrepancy between the BLM estinaces (.0242) and actual spillage (.001482) is material. (For clarity, the subject Tables are annexed to these comments with the additional information added). Other surveys, such as the USCS report for 1971-1978, have indicated tess than 1900 bbls. spilled for 2.8 billion bbls. produced, Again, analysis of existing data nay be sore reliable than speculation. 3 AGENCY RESPONSE 1. OF SG: Very little historical inform- ation js available on the environmental impacts of existing oil and gas operations (exploration, develooment, production, and transportation) in Cook Inlet. However, a significant number of incidents involving oiled seabirds and other marine species occurred in the late 1960's and early 1970's and illustrate that oi] contamin- ation of the Inlet has occurred at least intermittently for the past 10 to 15 years. Refer to the Risk Factors section #2 for a more complete discussion of these spill incidents. Since very little specific information is available about these incidents, this information was not included in the draft Analysis in order to avoid speculation and conjecture as much as possible. However, sufficient documentation is available to snow that oil pollucion of Cook Inlet waters has been a problem in the past, and current research indicates that there is still cause for concern. Unfortunately, the scientific evidence necessary to evaluate the potential risk of additional offsnore development in Uoper Cook Inlet is not availaole. 2. OFKG: See response #1 above and refer {0 the Risk Factors section #2 in tne Final Analysis. 3. OPOP: Comment acknowledged and will be taken into consideration for, future lease sale analysis. 4. OF BG: The management objectives for lands wnicn now fall within the Susitaa Flats and Trading Say Refuges are not the same today as thev were prior to refuge formation. Therefore, stipulations and mitigating measures included in lease agreements which predate the establishment of these refuges are not necessarily applicable to the present situation. Leaislation creating these refuges clearly states that the two orimary objectives are (1) protection of fish and wildlife resources and their habitat, and (2) public use of these resources in a nigh quality environment. The Oepartment is legaliy bound to ensure these objectives are met before allowing potentially conflicting uses. S. FSG: Dames and Moore's (1978) study of drilling fluid dispersion was conducted in an area characterized by strong tidal currents and frequent physical disturbance in the form of moving sand waves. This study did not find any adverse imoacts on the diota of the area; however, the bioassays Conducted in conjunction with tne dispersion study did snow that ooorly diluted drilling muds were definitely toxic to oink salmon and other study organisms. The imoacts of effluent dispersal in an area of strong currents and deeo water will not necessarily be indicative of the impacts under other circumstances. The Dames and Moore oroject was simoly presented by DEC as an examole of current monitoring and surveillance research being conducted in the field of oi] and gas develooment. This study provided valuable information; however, the findings are not necessarily aoolicable to the entire Uooer Cook Inlet lease sale area. ‘the Dames and Moore study is cited in the final dnaivsis, and a complete bibliograohy of environmental research papers used by AOF&@ in preparing the draft Analysis nas been sent to J. J. Anders, Manager, Alaska Divison of Chevron U.S.A. Inc. OEC: This section of the analvsis specifically addresses tne past crovisions made for environ- mental monitoring surveillance and quality control. impacts of various industrial activ- ities on water quality, fish and wildlife and subsistence resources are discussed in questions 2, 3 and 4 under Resource Utilization Factors and in the Environmental Conservation Appendix. The Statement on drilling mud toxicity studies on gage 103 of the draft Analysis simoly cites an historic study and does not suggest similar Studies will be mandated in Cook Inlet. Sather, the recommended mitigating measure for drilling muds found in Table S in the Environmental nservation Appendix clarifies the Oepart- ment's policy with regard to mud disposal in Cook Iniet. This appendix also saecifically discusses the consensus results of orevious drilling mud toxicity studies. 5. O85: The SLM of] spill prediction table (Table T, page 111 of the draft Analysis) has Deen omitted from the final Analysis. Add- itional documentation of the of] spill history for existing operations in Cook Inlet has Deen suostituted. Refer to the section on Risk Factors. 7 Im addition to environmental concerns, the draft (p. 9-15) | 10 ont'd) an analysis of the impacts on the local comunity from increased gas Production and the construction of ax LNG plant. The conclusions indicated that unfavorable impacts will result, including increased cost and lowered supply for south central Alaska. We strongly dis- agree with those conclusions, That a lease sale will lead to increased exploration, discovery, production and construction of an LNG plant is not disputed. However, it does not logically follow that this will cause all locally produced gas to be transported out of the area leaving south central Alaska without adequate supply. As long as the State has the option of taking its royalty share in kind, it can commit state royalty gas to the needs of local residents. In addition, the State has the final approval power for the construction of an LNG facility, and can attach stipulations whicli protect southeastern Alaska's supply of natural gas. An analysis of the preliminary draft necessarily involves a review of the AACL's Charter. Their charter is set forth in Administrative . Order 52, which provides that "the Committee shall establish proce- dures for submitting to me a report (at least 3 months prior to a major lease sale) evaluating that lease sale from its economic, social and environmental impacts." A statement on p. 121 indicates that step 2 in an ofl and gas lease sale is approval of the sale by the AACL as part of the 5 year leasing program. We find no authority for this statement in Administrative Order 52. Although it indicat that AACL shall comment to the Governor on the leasing schedule recommended by the Commissioner of Natural Resources, no approval mechanism is established. We suggest the final draft in- corporate appropriate changes. Also, p. 123-124 contains a confusing reference to "lease operation stipulation" (see p. 123(b) and p. 124(c)). Lease stipulations are normally finalized at the time of the sale. This is consistent with prudent business practices because stipulations can increase or diminish the value of property. Therefore, lease stipulations should continue to be imposed at the tine of the sale, and not, as stated in the preliminary draft, at the time the plan of operations is being reviewed by various agencies In closing, we suggest the final draft discuss impacts of the addi- tional revenue raised by the sale and subsequent development of ofl and gas fields. This issue is one of "economic impact" and 1s squarely within the AACL's charter. An analysis of how the addi- tional revenues from a lease sale will affect the State as well as local government is pertinent to the decision that will be made by the Commissioner of Natural Resources and Governor. The comments and suggestions set forth above are offered to assist the AACL in fulfilling its advisory function. As an advisory comaittee, the AACL's sole function is to gather a relevant data base from which the Commissioner of Natural Resources and Governor can draw in making the final decision regarding an Upper Cook Inlet sale. Table 1. Anticipated annual oil introduction to the marine environment during peak production resulting from the proposed Cook Inlet Sale No. CI (BLM, 1976). Maximum Cumulative 25 Annual Spillage Year Total Location Source Barrels Barrels Lower Cook Inlet Pipeline Accidents 5,800 48,000 Formation Water 780 19,500 Spills from Platform 9,900 82,000 Fire: Overflow, Malfunction 185 1,500 of Rupture Minor Spills (less 550 13,750 than 50 bbls.) Subtotal 17,215 164,750 Transportation Route Tankers 54,400, 450,000, Total 71,615 614,750 NOTE: For the maximum annual spillage this amounts to 1 bbl. spilled for each 4,748 bbls. produced; or .021% spillage (Col. (1))+ For the total 25-year production (2.6 billion bbls.) this equals 1 bbl. spilled for each 4,229 bbls. produced; or .024% spillaxe (Col. (2)). Thus the BLM predicted spillage is 14 tices as great as the actual experi- ence in State domain AGENCY RESPONSE 7. REVENUE: The State does have the option of taking its royalty share in kind. the analysis is intended to point out the possible desirability of having the State exercise its Powers to see that local demands are met. 8. | ONR: Comment acknowledged. See revisions in Miscellaneous Factors section of the final Analysis. 9. ONR: This portion of the text refers to stipulations for Plans of Operation, and not the lease stipulations which are incorporated into the Notice of Sale. Chevron's comment is acknowledged, and the language has been clarified in the final Analysis. 10. REVENUE: The extent of additional State revenues in terms of additional royalties and severance tax will be determined by the size of reserves discovered. No attempt is made to quantitatively estimate the size of potential discoveries (Please refer to the section on Economic Factors - positive and negative impacts). PUBLIC COMMENTS AGENCY RESPONSE CHEVRON U.S INC (cont'd Table 2. O41 spill volumes and incidence of spilis in ‘ Cook Inlet (compiled by Department of Natural Resources). Oil Industry ae eee Sources Spill Volume Spill Volune Unknown Source XEAR. (barrels) Incidents barrels) Tacidents Incidents 1949 30 1 ° 1962 sno data r 0 1964 no data 1 O 1965 160 L ° 1966 4,855 28 30 2 3 1967 1,824 47 10,000 1 26 1968 1,070 49 389 -u 18 1969 918 21 6,243 10 12 1970 1,039 23 3,984 9 cry 1971 72 12 1,796 6 as 1972 19 8 32 7 1 1973 24 6 29 8 1 1974 19 25 268 7 4 1975 an 12 )||: 18 4 3 10,011 223 22,817 73 124 Lneough August 21, 1975 O11 Industry Other Sources Overall average size of spill 45 barrels 313 Average size of spill last five years 67 barrels Total volume spilled last five years 2,141 barrels ‘NOTE: For all the Cook Inlet Area chis amounts to 1 bbl. spilled for each 67,709 bbls. produced; or .00148% spillage. NATIONAL AUDUBON SOCIETY (Dave Cline) 3/21/80 1 This 1s to request that you ielete the following lands from Praposed 1 OF SG The Oeoartment of Natur: s : T t al Oil and Gas Lease Sale #33: Resources has deleted tne Tule goose and trumpeter swan nesting area along the 3ig TENR1 4a River from the provosed Upper Cook Inlet rane 1sW sale area. etlands adjacent to the § Kustatan River nave also Deen deleted TINRT SY from tne lease sale. Refer to the sections a on Community Well-deing - oudlic sentiment ’ and Resource Utilization - fish and wildlife 7 cr ulations and their habitat. These state lands nave deen identified by Alaska Qeoartrent of Fish Pe eT and Game diologists as constituting likely nesting, and known summer haditat i of the rare Tule goose. ‘Trumpeter swans (a former endangered species) and a vartety of other waterfowl are also known to inhabit this area. The acreages involved are a smal! fraction of thase involved in the proposed lease sale. The Tule goose, one of four ecotynes (subspecies) af white-fronted geese, was first described by scientists on its California wintering grounds 7 in 1917, The rare dird's northern nesting grounds remained unknown for over six decades, however. Then in 19/9 the gresence of adult Tule geese and eir young waz verified in Redount Gay of Upper Cook Inlet, about SO miles southwest Qf Anchorage. Mr. Dan Tin, state waterfowl diclogtst for tne Alaska Department of Fisn and Game, deserves a creat deal of credit for solving this, ane of the lasc great mystertes in North American waterfowl mngnagement. It is now estimated thut the present world population of Tule geese {3 approximataly 2,000 ta 3.000 birds. The rare bird's Alaskan nesting habitat can be expected to grew tn significance as ward af its existence oecoms wore widely known. Should imeompatiole land uses be allowed there, great controversy would inevitably result. Since the birds reside un state lands, the State of Alaska is presented with a unique opportunity to gain national recognition for taking the lead in Tule goose conservation. Preliminary studies of Tule ceese in 1979 indicated that the birds are very sensitive ta major human disturvances during the nesting season. Inclusion of their habitat in an oil and gas lease sale is deemed totally incommatibie with assuring chem long-term protection. In addition to deleting the aforoumntioned lands from the lease sale, { would also stronyly urye that all state lands proposed for inclusion in @ Redouot Say Stare Game Refuye (plnase see Senate Jill Mo. 282, cate Y17/77, attached) be retained in state ownership and classified far pro- tection of wildlife pursuant ta AS 3A.0$.047. Because of the yreat siynificance of these lands ta the rare Tule goose, trumpter swan, and a variety of other waterfowl species, it is cur intant to work with the Alaska Waterfowl Associatinn and other interested Alaska conservationists lo serk pacsane of lang averdue legislation to create a state yame refune in Rednuut Nay next year. 10 PUBLIC COMMENTS ELY, GUESS & RUDD (SOCAL) 7/21/80 AGENCY RESPONSE Attached hereto is a set of comments by William L. Cole on the above-referenced matter. These are transmitted to you pursuant to the terms of the letter of June 13, 1980, contained in the above-referenced document. Southern California Gas Company (SoCal) has reviewed the prelim- Aanary draft prepar by the Governor's Agency Advisory Committ. on Leasing, "A Social, Economic and Environmental Analysis of @ State Oil and Gas Lease Sale in Upper Cook Inlet". The analysis represents a good first effort by the State to describe and examine objectively the many complex issues related to the proposed lease sale. SoCal wishes to comment on these issues and those which affect the PacAlaska LNG Project, although a separate specific response to certain issues relative to the PacAlaska Project is being submitted by our affiliate, Pacific Alaska LNG Associates. SeCal appreciates the opportunity to provide our comments for consideration by the State in preparing the final report. Mx. Kenneth Dorking has reviewed these comments and has expressed Pacific Gas and Electric Company's concurrence with them. Needless to say, ScCal strongly supports the lease sale and the objectives outlined on page 4 of the report; and also believes it is important that the sale be held as expeditiously as possible. I. The Lease Sale Is In The Best Interests Of Alaska and the Country The United States as a whole is facing an ever-increasing enersy shortage, This country is currently dependent on foreign wources for a large, and growing, portion of its energy supply. This dependence on foreign sources has caused Americans to pay higher prices for energy and, by limiting our foreign policy options, has had a detrimental effect on our national security. Moreover, our dependence on foreign sources has been a major factor in our balance of trade deficit in recent years, thereby causing the dollar to decline relative to other currencies. As further evidence of the national, and indeed, international seriousness of the energy problem, President Carter and various West European leaders pledged at the recent summit meeting in Venice to reduce dependence on foreign oil and to speed-up the development of alternative sources of energy. Just after returning from Venice, the President signed into law a bill which will allocate $20 billion -~ more money than wi allocated to the apace program to put a man on the moon -- to the development of synfuels from domestic coal resources. Given the seriousness of the energy problem, and the national effort expended to solve it, it is encumbent upon all to do everything possible to help alleviate this crisis. and, further development of our domestic re: base to lessen our dependence on foreign sources is, as the President stated, a top national priority. Alaska can help in this regard by developing its own resource base to the fullest extent possible. The North Cook Inlet is an area where there is believed to be substantial reserves of both ot) and natural gas. ‘The development of these reserves will benefit the economy of Alaska as a whole and incr: the supply of energy available for Alaska consumers. This is true regardless of whether or not the PacAlaska LNG facility is built. Consequently, the benefits to the Country and Alaska of the lease sale appear to far exceed any foreseeable negative impact that would result from it. Il. Effect of Pacific Alaska LNG Project On: Energy Prices in the Cook Inlet Basin 1, REVENUE: See response to Alaska Oi] 1 The Report suggests that if the proposed lease sale results and Gas Association. #1 in significant finds of natural gas, one potential negative ef +t will be an increase in energy costs to Alaska consumers. The Report implies that the main contributor to these increased energy costs will be the PacAlaska LNG Project. At the outset, it should be kept in mind that the Report is an-analysis of the North Cook Inlet Lease Sale; not the PacAlaska LNG Project. In light of this, it seems illogical to argue that the North Cook Inlet Lease Sale -- which will increase domestic supply of natural gas -- will actually cause natural gas prices to increase. At worst, it will have no effect on prices and could nave the effect of dampening prices by increasing the supply of gas to the domestic market. On the other hand, without the lease Sale, and the additional volumes of gas that will be developed, greater increases in wellhead prices become more likely. This is true irrespective of the PacAlaska LNG Project. With respect to the PacAlaska Project, it is an over- simplification of a more complex issue to conclude that PacAlaska will result in higher prices to domestic consumers. Presently, natural gas maximum weJlhead prices are regulated the federal government. In 198$ the wellhead price of gas produced from wells completed after 1977 will be deregulated. Producers, as well as the State, will be expected to sock out the hichest price for ssles of this gas. Oil, for which natural gas is almost a perfect substitute, is currently priced many times higher than natural gas. In a dereculated market, the price of tural gas should be competitive with the energy equivalent price of oil. This will occur regardiess of the PacAlaska Project. ii PUBLIC Ci 'S ELY, GUESS & RUDD (SOCAL) (cont'd) III, Gas Supsly Issues 2 The Report expres: some concern as to whether or not Cook Inlet Basin natural gas reserves will be sufficient to meet the demand of dom ic Cook Inlet consumers and the PacAlaska Project. The study on this issue done by SRI indicates thas if just a very small portion of pot ial natural gas reserves are developed, supplies will be sufficient into the foreseeable future.1/ The most recont rezort on this issue published by the State is slightly more peasimistic.2/ The State report, however, fails to take into considera mt potential for reserve additions in the Cook Inlet Basin. If the State resort, in its analysis of the supply- demand balance in the Cook Inlet area, took into consideration that at least a minimal portion of potential reserves will inevitably be discovered, it too would conclude that supplies a. sufficient to meet future demand. na footnote on page 9 of the Report, the Department of Resources is well aware of the proven and potential natural gas resources in the Inlet, and they too agree that susslies are sufficient to meet future demand, including the PacAlaska Project. mternational, Natural Gas Semand And Suzoly To the Year 2000 In the Cook Inlet Basin of South-Central Alaska, Menlo Park, CA, Kovember 1377. 2/ &. Goldsmith & K. O'Connor, Historic and Projected oi] and Gas Consumption, Institute of Social and Economic Research, University of Alaska and Division of Minerals and Energy Management Ocpart- went of Natural Resources, January 1980. Since 1968 only a linited number of exploratory wells have been drilled in the Cook Inlet Basin due to the lack of a compet~ itive market to sell the gas. Still, SoCal‘'s geolasists estimate that 3 trillion cubic feet (Tc£) of gas have been added to the Cook Inict reserve base in the last 12 years; nearly i Tcf of the total has been added by PacAlaska affiliates throush their reserve development programs. Further illustration of the vast sotential of the Cook Inlet is evidenced by industry interest in the Proposed North Cook Inlet Lease Sale and the fact that the additional potential in the Cook Inlet Basin ia estimated at between 7 Tof and 10 Tef. And, if there is any doubt as to the sufficiency of gas supply, this is all the more reason to go ahead with the lease aale. The Report imolies that if the sale is held, this will PacAlaska Project more likely, which will in turn iner je the likelihood of supplies being insufficient to meet future demand. Again, the lease sale should be analyzed inde- pendently from the SacAlaska Project, and from this viewpoint, the lease sale cannot do anything but increase the supply of gas. Even if the lease sale is analyzed in tandem with the PacAl Project, no consideration is given in the Reporte to the fact that undiscovered potential reserves in the Cook Inlet Sasin are 2 to 3 times greater than the quantity required throughout the 20-year Life of the PacAlaska Project. Taking account of current Broved reservea ~- which by themselves are adequate for at least Phase I of the LNG project -- as well as this vast potential, clearly indicates that supplies are sufficient to meet future demand. Without a market for the enormous potential reserves in the Inlet, producers will be less likely to cake part in the increaa= ingly expensive exploratory effort required to develop these re- serves. Alaska will benefit from the development of the Inlet by the bonuses received fromthe lease sale, the royalty share taken from production, and the economic stimulus i nd associated development activity will provide to the State economy. Vv. Bconomic Impact of the Lease Sale 3 The section of the Report dealing with the economic inpace of the proposed lease sale is very well done. Estimated direct addition to State income resulting from the lease sale is ‘ $33 million (1979 dollars) Ag the Appendix to the Report points out, there will also be indirect effects, and these are extremely difficult to estimate precisely. Because of the multiplier-effect, however, it is commonly known that the indirect effects will almost certainly be creater than the direct effects. A typical aultiplier could be anywhere from 2 to 5, depending on the specific circum- stances. To orovide a more realistic assessment of the economic impacts from the lease sa it may be instructive to use a con- servative estimate of the multiplier, rather than none at all, and to mention the indirect effects to personal income in the main portion of the report rather than the Appendix. Also, it is not clear from the Report whether or not the construction of the PacAlaska LNG plant is included in the employ= ment and personal income projection (it appears that it is not, bue it is not clear). If it is, then tax revenue to the State from construction cf the plant, and its operationa -- which will be significant -- is certainly a factor to be consid 1d.3/ Also, a significant number of jobs will be created for current Alaskan residents by construction of the LNG facility. Vv. Potential Stste Subsidies 4 Phe arguments raised on page #2-in this regard, while legical, can be countered by the fact that no consideration has been given to the fact that “new well gas” (gas from wells completed after 1977) will be deregulated in 1985. ‘The producers, i « the successful bidders, recognize this and will, therefor incorporate this expectation into their bids. Moreover, as virtually all new reserves added through the lease sale will “new well gas*, the bids will reflece the real value of th jource -= not the regulated value. 12 AGENCY RESPONSE 2. REVENUE: Potential reserves are not known with certainty and, therefore, are not considered. 3. Comment acknowledged. The Oepartment of Commerce and Economic Oevelopment, which originally prepared this section has, however, undergone a major re- organization that has precluded obtaining a Departmental response to this comment. Other State personnel do, however, tend to agree that a multiplier of 1.0 to 2.0 would be a reasonable factor for estimating doth direct and indirect impacts. The point remains that gas racted at prices for vertods of time veyond 1985 wnich will suosidize consumers of that » whether in Alaska or in California, See additional analysis weitten in Fiscal Factors (2) section of the final Analysis. PUBLIC COMMENTS AGENCY RESPONSE ELY, GUESS & RUDD (SOCAL) (cont'd) VI. Environmental Impacts 5 _ At the hearings on the Report, witnesses testified about their concerns involving the wildlife refuges if the sale was to be authorized. The Department of Fish and Game, which has jurisdiction over the operation and maintenance of the wildlife refuges in the North Cook Inlet Basin, has indicated that the habitat can be well protected notwithstanding the North Cook Inlet Lease Sale. Indeed, Fish and Game has indicated that the effect of the lease sale will be minimal,"if any. 5. DF&G Comment acknowledged. Pish and Game's analysis of this issue, as opposed to the viewpoints expressed by those with an under indable personal concern for the protection of the area (hunters environmentalists, etc.), is much broader in scope and best represents the interests of the State collectively. For these reasons, Fish and Game is best qualified to analyze these issues and to continue to regulate these areas. T/ Packlaska has done a considerable amount of work estimating the investment expenditures required for construction of the ING facility in Alaska, and the required peak and full-time permanent jobs that it will create, See attached Table I for these estimates, TABLE I PAC ALASKA ESTIMATE OF INVESTMENT EXPENDITURES Alaska Facility End of 1979 Doll, Construction, Payroll & Tax Expenditures Construction Expenditures 1,100.0 million Annual Property Tax 10.0 million Annual Federal and State Income Tax 50.0 million Total Construction Payroll 66.0 million Annual Operation & Maintenance Payroll 4.6 million Number of Jobs Created Peak Construction Workforce 1,000 Average Constraction Workforce 600 Permanent Full—time Jobs 99 Note: These figures do not include exploration and development expenditures required to develop Cook Inlet reserves, or expenditures of constructing pipeline to transport gas from the procacing fields, FRIENOS OF THE EARTH & TRUSTEES FOR ALASKA 3/4 80 This letter constitutes the preliminary comments of Priends of the Earth on the State's proposed Upper Cook Inlet Oil and Gas léase sale. Because of the extremely large size of the nomination area and the complex nature of the resource issues involved our comments must be of a general mature at this time. We 1 supply you with a more detailed account of specific areas of concern later in the: review process for this proposed activity. In general we have identified topics of concern regarding this proposed lease sale. These include leasing in critical habitat and state refuges, adequate protection of fish and wild- life resources, and special protection of endangered or threatened species. 1 A. Leasing in State Refuges and Critical Habitat Areas 1. DF&G: Comment acknowledged. The nomination area for the proposed sale includes the Potter Point, Goose Bay, Palmer Hayflats, Susitna Flats, and Trading Bay Refuges and the KXalgin Island Critical Habitat Area. These areas were set aside in order to protect vital habitat for important fish and wildlife populations.. Oil and gas exploration and development could have serious impacts on these areas and their respective fish and wildlife resources. Because of this, we recommend that no leasing occur in the State refuges or critical habitat areas. 2 B. Special Protection for Endangered or Sensitive Species There are several endangered, threatened or sensitive wild- life species ‘in the proposed lease area. These include peregrine falcon, trumpeter swan, tule goose, and bald eagle. For some of these species (peregrine, bald eagle) no systematic identification of important or critical habitat (such as nesting sites}, hag been made. “As we understand it, the U. Ss. sh and Wildl: fe ances eaSAry igee will be inventorying such sites this spring. we eyaeanesss & {\ 13 PUBLIC COMMENTS deletion of those areas identified by USFWS as being important so these species. These deletions should encompass buf! zones So insure adequate srotection of these species. Trumpet swans normally nest in wetlands adjac shore of a lake where the young are reared after atchiag. Swans will abandon traditional nesting areas if suSjected <o ev low levels of distursance. The nomination area compasses a large portion of the trumpeter nesting range in Alaska. Because of this we zecommend that trumpeter swan Nesting sites be fully inventoried and deleted from the nomination area. We would also strongly recommenc that the nesting of the tule goose (recently identified by Alaska Department of Fish s Game) be deleced from the present tract ncminaticn area. so the C. Adequate Protection for Fish and Wildlife Resources Qur third concern is that adequate mitigation measures be developed to procect the fish and wildlife populations of the entize lease area. The nomination area encompasses sone of most productive fish and wildlife habitat in the state produces the state's second largest commercial salmon fish zy as well as the largest recreational harvest of fish and wildlife. As such, we urge your Department to initiate close consultation and cooperation with the Deoarmments of Fish and Game an mviron= mental Conservation in order to develop strong, effective mi measures which will insure protection of vital habitat anda Biological resources. ALASKA WATER L_assoct 8/17/80 The Waterfowl Asscctaticn and the'cabin owners! Tepresentatives hive considered che srecosed of] ard gas leasing of Susitma Flats and “hading ay Refuges. Richard frowles of ARGO, a drilling superintendent, was also present. 223 comments were practical amd Tre following are our viens: regerding this matter: I cout if any of us wish vo see ofl and gas leasing in this area. However, we are copmtzans of the fact that the areas involvec alreacy have some leases that evidénsly aredated the creation of te. refuges. 2. That at the; tim of che refuses establishment we were aware Shac chere was-poceritcal ‘oll ani ms in the-area“and rscoguized that Sty at eater sorcions of ty may need reasorasle utilization of such resources. 3. That leaves us of che view that the “question realty ts in: canner can it te done sostrreascnably. That ts, to do minimum narm now, honefully leave the refures in Detter snare than cricr to exnloration and to accommlish this without prohibitive emense. 4. The existence of a lease or drilling should not preclude reasonable hunting and fishing. Firearms should be allowed on leased "lend by recreational aunters and fisherman. Hunting snould net te allowed within 100 yards of a drilling rig, ete. §. The lessees should not butld permanent Teacs across che flats cr as access theretc. That is che refuges should Mot become Sreeways with Aigh public weeled or cracied vehicle access. 7. It ts clear trom su exertence trac aimlanes, air dcacs, Scats amd foct traffic do the least damare to che tidal marshes. 8. Spectal attention should be given “eagle, swan and crane nesting areas, and acerenrtate nrevisisn rade to ensure chat chese creatures nest and survive. say this Secause their nesting is reouted to Se escectally sensitive. 9. Access Sy heavy equinment etc. should “be cy ice read there Sisle. Heliconters sxculd Sly 509 feet or above excanrt 647. td AGENCY RESPONSE 243. OF 4G: See response to National Audubon Society and refer to the section on Resource Utilization. 1,2, 3,7, 13 & 14, OFaG: Comments acknowledged. = 4, 5, 6, 8, 10, 11, 12 & 15. DFG: The Oepartment has provosed measures to mitigate these concerns. Refer to the section on Resource Utilization. PUBLIC COMMENTS 10. ATVs should onerate only in desimmated areas where their harm would be minimal. ll. After the leases are over, special "access reads should be interrupted, seeded and rede immassable. The sare should hold true of drilling pads. Pads and roads would dissinate through erosion etc. should be favored. 12 We also are aware that black bear, “brown bear and moose use the refuges in same nurbers. Mecse calving in the spring, might te most sensitive. Tule geese nesting and rearing, areas should be avoided, 1¢ nossible. 13. Several experimental breeding tonds could be scooped and seeded if contractors with D-9s or drag-lines could denate a few hours of equipment time. ANA and Alaska Denartrent of Fish & Care could secure grasses, etc. and do prover planning. 15. The over all ebjective would be to - increase the Value and utility of the refuge system and the waterfowl and other fauna they support, while extracting natural resources at minimm cost. 15. Thought should be given to Trumeter “Swan limited nesting Reserves on some of the small lakes in the Susitna valley. Such reserves could also serve as state fishing reserves at dates after nesting and rearing are well om, Mest of such water areas are not ‘nresently inviting for other purposes. Examnles are small lakes or. oxbows of the Susitna River. PACIFIC ALASKA LNG ASSOCIATES 7/16/80 The report is well prepared and presents information plainly and fairly accurately. However, I would like to address several issues which show some possible misunderstandings about our plans to build an LNG liquefaction facility at Nikiski. 1. On page 98 of the draft the statement is made that siting new LNG plants distant from population centers would re- duce the risk of operation. 1 Although in an absolute sense this may be true, I would like to point out that the risk assessment analysis for our proposed LNG plant, prepared by Science applications, Inc. concludes that the highest fatality probability from the LNG facility (assuming the worst possible incident) is one chance in 190 million per person per year for the general public within 5/8 of a mile from the site. Needless to say, this is extremely small, and many thousands of times less than the probability of fatalities resulting from other, very common, activities. This finding by SAI is supported by the LNG industry's excellent safety record. Moreover, the issue of the location of the liquefaction faci- lity at Nikiski was the subject of numerous hearings before State and Federal agencies. The presiding judge at the FERC hearings noted in his decision that "no party or intervenor, aclu e State of Alaska, challenges the conclusions by the PEIS + ‘that the level of risk to the public inherent in an LNG operation at Nikiski within the Kenai Peninsula Bcrough is acceptable’, and that ‘if an LNG transportation system is approved by the Commission to trans- Port gas to California . . . the proposed liquefaction faci- lity should be located at Nikiski'." (Initial Decision Approving South Alaska LNG Project, U.S. Federal Energy Regulatory Commission Docket Nos. CP75-140 et al., August 13, 1979, p. 320; emphasis added). 2. On the same page the statement appears that "plants of this type represent an immense fire and explosion hazard." 2 This obviously emotional statement is not accurate, and should be deleted. in fact, LNG in the liquid state cannot burn and gannot explode. The gas which vaporizes from combined wich air in the proper proportions so that gas repre- Sents 5 to 15% of the mixture, and such mixture could explode if it is in a confined space and if an ignition source is present. Research performed under the sponsorship of the U.S. Coast Guard confirms the lack of explosive potential of uncon— fined LNG vapor clouds. 3. On page 27 of the Appendix, reference is made to "heated effluent discharges . » associated with water-cooled lique- fied natural gas (LNG) plants." 3 Our proposed ING liquefaction plant will, just as the presently operating Phillips-Marathon LNG plant, use air-ccoling processes, and there will thus be no heated effluent discharges. P the ING is natural gas and will behave as natural gas would, i.e. it can burn when WS AGENCY RESPONSE 1. DEC: Pacific Alaska notes that the assessment study for their proposed LNG plant at Nikiski shows very low probabilities for a fatality from the facility. Although the statistical probability of death or injury may be small, it is also true that the probability should lessen as the distance between the proposed pant and population centers increases. This being the case, an LNG plant should not be located near large numbers of people if the opportunity and conditions exist for construction at a more remote location. 2. DEC: We do not believe that the statement regarding LNG hazards in the Analysis is inaccurate or should be deleted. The potential for an explosion or fire always exists at LNG facilities. Certainly, LNG cannot burn or explode when in a liquid state and our statement was not directed at LNG when it is in this form. LNG can, however, become very dangerous when the right conditions are present for an explosion or fire to occur. Presumably, these conditions could exist if a storage tank ruptured and spilled its contents. In order to make the statement in the Analysis more clearly understood, we have modified it to read as follows: “Plants of this type may represent an immense fire and explosion hazard and should not be situated near large numbers of people.” The type of accident that must be avoided is that of 1944 Cleveland, Ohio tragedy in which an LNG storage tank ruptured and collapsed, causing a fire which killed 128 people. 3. DEC: The statement in the draft Analysis regarding heated efflulent discharges associated with water-cooled LNG plants is made in reference to possible future LNG plants, NOT the proposed facility at Nikiski. PUBLIC COMMENTS IFIC ALASKA LNG ASSOCIATES ( cont'd ) 4. On page 30 of the Appendix being discharged from tankers. 4 LNG vessels are doubl ference is mace to dirty ballast hulled and ballast water is carried only in clean tanks located between the inner and outer hull. Ballast is never introduced into the LNG cargo tanks and dirty ballast discharge is therefore not a probiem in LNG operazions. 5. On page 16 Pac: fic Alaska LNG is mentioned in the context of accelerated construction activity in the State, which will ia turn cause new job openings resulting from the lease sale co be filled mostly sy non-Alaskans. 5 Although this is a problem we cannot help solve directly, I want to emphasize that Pacific Alaska is committed to using Alaska manpower to she greatest extent struction and operation of our planned possible in the con- facility. Although the preliminary draft contains several inaccuracies relating to gas supply matters, these issues will be addressed by others in Separate submittal EXXON COM! A. (Crandall Jon 7/21/80 We are pleased’ to have been given this opportunity to review che committee's preliminary draft and to share with you some of che ideas and recommendations we have as. mbled concerning it. These comments reference the pertinent page and paragraph of the draft and are enclosed herewith as Attachment I. Exxon strongly supports this sale and it is our hope the state will hold it in a timely manner. there is anything that I or any of ay staff may do co b at In the event of assistance to you in this undertaking please do not hesitate to let me know. Preliminary Orafe Contents VoAs reiterated lacer in this analysis, potencial Ritigating seasures chat are feacuced may have deen recommended Sy only one oc tuo state agencies and, herefore, included in-chis document for con- fon only. they do not at this early stage presale pisaning process, reflect final scate policy.” Hopefully, they lend substance to this analysis and will invice comments from a full range of interests.” 2 tne preiiminacy draft contains a listing of seven basic objectives of the lease sale. The fifth objective of che preliminary draft 3 5._ “To give aaxiaum consideration to the State's very diverse and sociological structure when designing lease sales.” ads as follows "....The Pacific Alaska LNG project will have an adequate suoply of natural gas even without an Upper Cook Inlet discovery. @ Page § of che preliminary draft presents incriaental employment projections assuming 2 acderace find in the Cook inlet. 5 The Economic Factor Section suggests that energy coues to south central Alaska consuaers could rise as much as $2,000 per year per household as i tesule at tne lease sale. the Sasis for this Srgusent 3 thae PAC Alasaa is glanning co build B01NG plane as a consequence of additional gas R the proposed sais sea, and snip exe elute 8 at deconerolied prices. che ai o€ new gas from the Alaskan cacket plus je of reserves presently committed by consusers would supposedly sequal tof higner chan gas tothe ate 3 tne copore empires Fesule, che atteape fo seipue [ate that a pocei serves aust Se dedicated to intr The preliminary deatt presents a table (Table 4) wnich provid tion of natural gas curtail- existing peoven natural and existing contracts, and given PAC ING contracts for existing undedicated proven tural gas reserves in the Coow inlet. © the Community Yell-2eing Factor Section staces chat reliance on existing facilities will not only de encouraged, Sut nade aandatory. The only new facili- cies allowed during exploration and development will aurstrios, work camps, and a network of pipeline transport oil and gas: 7 “Stipulations on leases should specify that explora- tion activicies will be suoported by air service or existing roads and port facilities and that no new roacs will be constructed suring exploration except ainor local service roads at exploration sites.” Comments The numerous aitigating neasures included in the peeliainacy draft nave Deen presented for: consideration only. Since the mitigating measures do noc reflect final scace policy, the state shoul4 provide an opportunity (or the oil industry to participate in a review of the final aitigating seasures proposed for inclusion in the sease sale stipulation prior to che lease sale. recommended that the word “saximum™ in this te is ¢ anced’ objective de replaced with the word This statement is in direct conflict with later discussions presented on Pages 11 thru 15 of the preliminary drate. Employment in the Kenai-Soldot associ> ated vith current oil be expected to decit: production from these Some form of regular le to sustain current oil employment Levels in thi ing will be required id gas related je areas. A provision for aandatory dedication of Ras to the intra-state narket could discourage development of gas in this sale are are impossible from an economic standpoint. It is impoetane co note: however, that vuilding of an LNG plant could be triggered Ly uny significant #25 discovery in a logistically feasible location. Therefore, the future construction of LNG facilities aay not solely depend upon the proposed sale. Althougn local supplies could de Strengthened by dedication of in-Kini Streams any pricii peice lower than 2 subsiay. Data presented in the preiiminary draft is not sufficient for full understanding of Table 4. There is an apparent direct conflict 2etween columns #4 and 5 provided in the table The Resource Utilization Factors Section (Page 33, 97) implies the construction of je allowed wich proper tions to miniaize Narmful Community Well-3eing Factors Section should be cevised similar aanner to incluce provisior Biniaua essential corridors for There aay be no practical alternative to the construction of = for the support of exploration and drilling activities in certain areas. This section should changed to read a3 on leases should sp activities will se support or existing roads and port facilities. roads will be constructed during exploration only when there rs no prudent alternative. AGENCY RESPONSE 4. OE Since LNG vessels do not use their cargo tanks for ballast, the Appendix reference to dirty ballast dumping is meant to apply to oil tankers and barges only. S. OC&RA: We acknowledge and commend Paciffe Alaska LNG's commitment to using Alaska manpower to the greatest extent possible in-the construction and operation of its planned facility. In the final Analysis the following sentence has been interjected on page 16 between the sentence beginning “Associated construction jobs..." and that beginning “Support sector jobs...": “The demand for Alaskan construction workers will be increased by the policy of certain companies, sucn as Pacific Alaska LNG, to use Alaska manpower to the greatest extent possible.” 1. ONR: See response to Alaska 011 and Gas Association #4. 2. ONR: Comment acknowledged. The objective has been revised in the final Analysts. 3. DPOP: This assumption appears to be valid, Dased on comments solicited from other agency personnel. The Oepartment of Commerce and Economic Development whicn originally prepared this section, has, however, undergone a major reorganization that has precluded obtaining a Departmental response to this comment. 4. POP: Comment acknowledged. The Department of Community and Regional Affairs addressed this issue in its response to Exxon #9. The Department of Commerce and Economic Oevelopment, wnich originally prepared this section, has, however, undergone a major reorganization that nas orecluded obtaining a Oepartmental response to this comment. 3. REV Comment noted. See discussion of implicit and explicit subsidies. 6. We agree. The recommendation has been rewritten in the final Analysis. 7. OC&i We agree. The recommendation nas been rewritten in tne final Analysis. PUBLIC COMMENTS EXXON COMPANY U.S.A. (cont'd) t Contents liminary De: nthe preliminary draft's discussion of community B in isatng factors, the analysis of local population Changes contains the following statement: “whereas the incidents of unemployment among current residents is likely to decline as the economy expands, the tot rate of unemployment in the area may well remain the Same or even rise if job prospects are known to be better there than in other areas of the state. This means that the net effect of every new employmen Opportunity in direct support, and in indirect job cat act jes is the attraction of an additional worker. liminary draft presents a projection of pop- D Tre PestieLeey fonai-Soldocna aceas which indicaces these areas can be expected fas in the past (1960 ~ that the growth rate i to grow in the future as it 1974). 1Q "The Department of Natural Resources has received correspondence from the Trustees for Alaska and Friends of the Earth recommending that there be no leasing in the State refuges or critical habita areas contained within the proposed sale area, and that all areas identified by the USF&G as important to endangered, threatened or sensetive wildlife be deleted and further encircled with buffer zones and that the nesting sites of the trumpter swan and goose be deleted from the proposed sale area.” s related to the proposed oil and gas . Conments, i 1 and ‘An expansion to the economy provided by oi Sceiureies sssociated with the proposed lease Sale will provide additional employment oppor- tunities for Alaskans. This must be considered as an overall beneficial impact. The historical growth trends presented on Page 27 of the preliminary draft contain growch attributable to che development of existing leases in the Cook Inlet. Therefore, as production declines from existing fields, some fora of continuing lease activity will be required to sustain oil and gas related employ- nent included in these trends. With proper mitigating measures, oil and gas exploration and development is acceptable on critical habitat and refuge lands. There is no sound basis for the arbitrary elimination of acreage in the proposed lease sale area without a site-specific investigation by the appropriate regulatory agency to justify such decision. With proper surface entry restric tions, exploration and production activities can be performed in sensitive areas in such @ manner that will maintain long-term wild- life production. 17 AGENCY RESPONSE 8. DC&RA: We agree that an expanding economy will provide employment opportunities for Alaskans, especially if Alaskans possess the necessary skills and industry pursues an aggressive in-State hiring “policy. We also agree that in general this would have a beneficial effect. However, the purpose of the analysis on page 23 of the draft Analysis was not to assess the economic benefits or employment benefits of the lease sale, but rather to estimate population changes. For this analysis,.it is important to make assumptions about the immigration of current non-residents into the State in pursuit of job opportunities created by a lease sale. The unemployment assumption refers to the total pop- ulation, both residents and non-residents, including non-residents who might have been attracted to the State by job opportunities but who may remain unemployed. 9. _DC&RA: — This comment and comments #8 and #27 of the Alaska Oil and Gas Association maintain that a new oi] and gas lease sale in Upper Cook Inlet is necessary to sustain the existing levels of employment in the Kenai-Soldotna area and is highly unlikely to increase the present level of oil and gas employment. Furthermore, comments #13 and #14 of the Resource Development Council of Alaska suggest that scenarios include other major developments in Cook Inlet, so that the Upper Cook Inlet State oil and gas lease sale may be assessed in terms of anticip- ated overall development in the region. The Department has not been able to determine the underlying assumptions upon which the Department of Commerce and Economic Development's population Projections are based. There also appears to be insufficient public information about the geology and field character- istics of the proposed lease sale area to accurately devise detailed scenarios. The best scenarios we have been able to find are the cumulative development scenarios contained in the Kenai Peninsula Borough Coastal Development Program Back- ground Report, prepared by Environmental Services Limited. Although some of the information is not as comprehensive as might be desired, we believe this to be the best readily available cumulative scenario for the region. Table 2.1 of the Background Report Presents three scenarios for oi] and gas development in Upper Cook Inlet. (1) Low case: oi] - production ending 1987, gas - moderate finds. (2) Intermediate case: oi] - increased recovery efforts, gas - moderate finds. (3) High case: additional oi] and gas discoveries. Since the geological information available from the Department of Natural Resources is that the area is “gas-prone” and has low to moderate potential, the three scenarios outlined above seem reasonable. Charts showing the increase and decline of oi] and gas production from Cook Inlet since 1960 also are consonant with the Proposed scenarios. Historical production charts, coupled with the low to moderate potential of the proposed lease sale area, lend further support to the assumption on p. 246 of the above mentioned Background Report, that even the high scenario includes "only a slight decline in Upper Cook Inlet oil and gas (production) ." Although the draft Kenai Plan does not go into detail about the assumptions leading to employment figures, nor specify employment year-by-year, we believe their estimates are as accurate as can be, given the paucity of data on the lease sale area. 10. ONR: The Department is in the process of developing the stipulations for the Upper Cook Inlet lease sale. Exxon's concerns will be considered. The Tule goose nesting grounds in Redoubt Bay will be deleted from the sale. OF &G: See response to Alaska Oil and Gas Rssociation #23, conc'd) ‘The Department of Fish and Games Division of number of con= Game is Sending cuc 4 letter to a servation orgamization and other retuge users potifying thea of the proposal co lease refuge lands fo0¢ oil and gas developmenc and requ their opinion on leasing wicnin the two refuge included in the saie area. To date, 55 replies ved and, even with Department of Sucances that ost adverse iapacts wilt be minimized through che use of stringent gontrols, approximately 60% of che respondents have Deen opposed to any addicional oil and gas leasing in either che Susitna flats oc Trading day refuges. 73 to 80% of all respondencs were opposed co con= struction of any new roads in the refuges and to aay cing activicies whicn might restrict public use in either refuge.” 1274 useful seasure for anelioracing impacts to fish and wildiife is che Deparcuent of Natural Resource's standard requirement for a miniaum $5,000 peefor- ance dond per lease. Such bonds are designed to cover the cost of site damage and restoration. If the State can demonstrace that unusual risk exists and can indicate potential costs, ic can require an “snusual risk” bond. This would be done only after public notice and public hearing. Under regula- Eions soon to be adopted, the bond would de $10,000 per lease, or $500,000 per lease opera: fions stacenwid TZ "special protection should be insticuted ssential f¢ Production and survival of inpor fane fish and wildlife populations. This incluces habitac such as vaterfowl nesting and staging ace and soose overwintering and calfing areas. Special protection vould include such aeasures a3 locating Facilities outside of these sensitive areas, oF Seasonal cestrictions on such activities Wo "No discharge of drilling suds should be permitted in any Eresnwater lake, stream, wetland, or inter= tidal Drilling suds vith ao hydrocarbons oF SOxic components may be discharged into subtidal waters of Uoper Coox Inlet or disposed or in an approved upland site.” ¢ table presented on Page 59 suggests that existing control of setland developaent is less an adequate. © be properly lined and bermed ad leakage into adjacent water 16 “onshore aud pits a <0 prevent spillage bodies.” 17 “Before plans of operation are approved and drilling permits are issued, the applicant should be required fo denonstrate the capability to expeditiously detect, FOREN, aMe Cleanup any oul spill which aigne from lease accivicy, Sefore the spill impacts any portant fish and wildlife resources and habitats. ‘This includes che capability to drill a relief veli in the event of a loss of well control and the idencifi- cation of an alternate drilling platform for aacine of acer-tidal wells”. 18 "Facilities should be sized at lease one quarter pits {rom any sake, veeland, of naturally flowing pager crainage system with 4 flow of greater tha: 5 feee per second.” 19 "Yo sodi fications (dredging, drainings, of productive coastal ands should unless az can Se demonstrated to che 3 = £411) allowed Cisfaction ne of Fish and Game that chey will moair fish and wildlife produetion.~ 20 dase pi and/or developeent chat will grificantly alter or eliminate existing Aadicac sditions within one mile of nesting site should 21 addicional lease stipulations are presented to protect Bald Zagles. 22 tre areliminary drat: proposes restrictions on ail and gas development near © ef swan nesting sites, rong these restrictions is the prohibition of sur- face entry within one-quarter mile of a trumpeter swan 2roduction area. A second cestriction 13 tne exScasion of float plane operation on any vater body xith testing swans from tay Ist co August 10th of each ear. 23 -rre ceparcaent of Fish and Game has idencified the following seans that ace available to mitigate the inpacts of ased competition for fisn and wiidlite resources... 1. The closure of regional and village cocporation to mineral development and public use...” 24 "To insure chac fishy wildlife, and huean use lues are protected, cetuge lands and critical Rabicats will Se classifiea according co the following system: .... C. Vital retuge lands where 29 surface entry will de pernitted (seasonal spera- te aay De pecmicced under some circumstances). al lands’ inciude icumpeter svan and eagle nesting sites.” This discussion vould be sore complete if the number of questionnaires which wcre sailed was included. the significance of 65 replies is not clear unless the nunder of question- naires sent is known. The legislacure provided for the leasing of = these cefuges for oil and gas exploration and development. The basis for finding such use incoapatable should be factual and not influenced by a small scecial interest group. is suggested that the results of his imited survey vould Se biased. Therefore, discussion of the survey should de excluded from the final economic and environmental analysis for the proposed sale These proposed additional regulations are unecessary and redundant as chere are alceady numerous stipulations and pecait regulations that require the lessee to perform site restoration activities. With proper mitigating measures, exploration and production activities can be perforaed in sensitive areas in such a manner that lon} term wildlife production will be aaincaii There is no sound basis for the arbdicracy elimination of any proposed sale acreage without a site-specific investigation oy an ate regulatory agency to justily j@cision. Any special nabicat areas, Such as noose overwintering and calfing areas, should be clearly specified prior to the lease sale. Any seasonal restrictions on oil and gas activities should de ineluded in the sCipulacions and dased solely on provable acts of the particular activity involved. lt is essential that the allowance for dischacge of cuctings into waters of the Cook Inlet be maintained in che final drafe, of this analysis. Through che existing Corps of Engineers permit processes, all agencies have sore chan adequate Opportunity to develop appropriate recommen: dations and stipulacions for development in wetland areas. There is no reasonable need co Line all onshore aud pits to prevent leakage into adjacent vater dodies. This requirement should only be included for permitting of activities on a site by site basis. A demonstration of this capability would require an actual spill vhich is noe practical or desireable. Further, che identification of a specific alternate drilling platéora or vessel is not practical because of changing logistics throughout exploration and develop- ment. Thecefore, chis mitigating measure should be changed to read as follows: “Sefore Plans of operations are approved and drilling Permits are issued, che applicant should Se Fequired to aake provision for the protection Of important fish and wildlife resources o¢ habitat wich a capaoilicy co expeditiously detect, contain, and clean up oil spill! This vill include the requirement for development of a feasable celief vell plan for each well. The one quarter mile requirement should be eliminated. This requirement does noc Fecognize the fact that there may de site specific micigating conditions wnich vould allow placemene of facilities closer :aan one quarter mle. This restriction should be deleted. Wetlands ee adequately covered by the existing Section 404 permit of the Corps of Engineers The smount of surface acreage required should depend on terrain feacuces and snouid be determined by site-specific studies pertormes dcior co tne se sale. This fact is acknowledged sy che Oepartment of Fish and Game on page a8 of the preliminary draft. Ye see no need for additional lease stipulations for the protection of Sald Eagles and their nests, There are already adequate federal laws to guarancee their precection. The Crumpeter swan is not an endangered species While ic is recognized that che crumpcer swan is Sensitive to disturbances dy humans. practical micigacing aeasures including lopment of alternative nabdicat, should be attempted defore development and entry restrictions are imposed. Pursuic of ecolo- cally sound alternatives co development ction represents the dest balance n the needs for energy and interest in fish and wildlife. of the State of Alaska are already Co minerai development without any nowiedge of the minerais in slace. it is not gasily understood shy additional withdrawal of lands is necessary. fisn and wildlife are esources that can be procected witnout the extreme measuce of excluding competing interests Large are. Vital Lands should include only lands used o¥ endangered species. The trumpeter swan {3 nat an endangered species and cnerefore snouid Se included in the primary wateriawl nadicat classification. 13 AGENCY RESPONSE 11. OF&G: See response to Resource Development Council #26. 12. ONR: See response to Alaska Oi] and Gas Association # 27. 13. OF8G: See responses to Alaska Oi] and Gas Association #'s 23 and 28. 14. DEC: Agreed. The statement has been revised to include cuttings. 15. DEC: Agreed. See response to Alaska O41 and Gas Association # 29. 16. OF&G: This recommendation has been rewritten in the final Analysis. See additional comments in response to Marathon Oi] Company #2, J7. OEC/DF 3A: See response to Alaska 011 and Gas Association #33. 18. OF SG: This recommendation has been revised jn the final Analysis. Refer to the section on Resource Utilization - fisn and wildlife populations and their habitat. 19, OFS See response to Marathon 0i1 Company #5. See response to Alaska Of] and #36. 20. OFA: fas Association 21. OF aR See response to Alaska Oi] and Sas Association #38, 22. OF aR: Destruction of habitat and displacement of moeter swans is oartially responsible for the near extinction of this species. Development of alternative habitat is extremely difficult as it requires a complet knowledge of the species’ biology, habitat require ments and benavioral characteristics in addition to the capability to reproduce all the necessary . parameters influencing the soecies. Protection and maintenance of a species’ natural habitat is far more feasible and desirable. - 23. OFSG: Comment acknowledged. See response to Alaska Oi] #39. 24. OF BG: and Gas Association PUBLIC COMMENTS 25 26 27 28 29 30 EXXON OMPANY U Preliminary Draft Contents General mitigating measures for all refuge lands (Category 1) include the requirements that: 5. "No restriction of public access to or use of refuge lands will be permitted as a consequence of oil and gas activities. 6. All lease facilities including but not limited wellheads, pipelines, valves, pumps, etc., must be designed to prevent accidental oil spills or fires resulting from hunting accidents or vandalism.” 9. "No drilling will be permitted until the lessee has demonstrated the capability to expeditiously detect, contain, and clean up any hydrocarbon spill which may result from lease activities... 10. “Lease facilities in wetlands or adjacent to water bodies must be designed and constructed to prevent the spread of hydrocarbons and facilitate cleanup both above and below ground. Facilities should be sited at lease one quarter mile from any lake, wetland, inner-tidal are stream, creek, or river.” Mitigating measures for primary waterfowl include the following: 2. “Exploration and development activities in the primary waterfowl area (Fish and Game Appendix 4) shall be conducted only between November 1 and March 31. 3. "No permanent large structures above Bround transmission lines, or above Rround pipelines will be allowed within the "primary waterfowl area”. 5. "Other operations associated with the development of production fields within the primary waterfowl area may also have seasonal restrictions depending on the area involved and the nature of the work." “Lease facilities such as airstrips should be sitea avay from important recreational fishing Streams so there is no visual or audio impact on recreationalists, potential for oil spills in the streams, destruction of essential wildlife habitat or blockage of migrational corridors." The mitigating measures for recreational corridors include "No development should occur in the annual floodplain of any stream in a recreationa corricor. Lease facilities such as airstrips should be sited away from important recreational réams so that there is no visual or audio impact on recreationalists, potential for oil spills into streans, disteuction of essential wildlife habitat or blockage of migrational corridors. The no development zone. "One of the terms and conditions that may be necessary in the Upper Cook Inlet sale is 2 requicement that the leasee provide transporta> on and overnight accommodation for employees of the Department of Natural Resources or others designated by the department, at intervals and Cimes the department deens necessary for adequate inspection and field surveillance. An alternative to this would be a requirement that the leasee simply reimburse the department for all expenses incurred in monitoring and surveillance of oil and gas lease terms and conditions.” State agencies present abilities to improve nonitoring, surveillance, and quality control in areas scheduled for rapid development can be improved by: 3. Development of a systematic inner-department monitoring strategy for the lease area to monito physical and biological indices, such as fish and wildlife abundance and distribution and water quality. A mechanism within the lease document could be incorporated to adjust mitigating measures and standards to compensate for changes outside of the expected range of impacts and for any new infor- nation wnich may become available over the lease term. This sechanism should allow for increased restrictions on activities causing significant impacts as well as relaxation of scandards where scientific evidence is available to show that impacts would be minimal under less stringent controls Specific monitoring strategies include: < 4. The establishment of a responsive mechanism for adjusting the terms of permits of Ron- renewable resource agencies in response to acts on renewable resources and human use of these resources There shou)d be a provision for restricted access in the immediate vicinity of oil and gas facilities. In place of the words “to prevent", insert the words "to reduce the likelihood of" in the first sentence. Demonstration of spill cleanup capability would require an actual spill. "demonstrated" should be replaced by the words "provided for" Also the words "might reasonably be expected to” should replace the word "may" The first sentence of this proposed mitigating measure discusses design criteria for facilities placed in wetlands. The second sentence, however, states that facilities should be sited outside wetlands. The second sentence should be deleted since adequate protection is provided by the requirement of the first sentence. Exploration drilling and development activities should not be included in this mitigating measure. If commercial quantities of oil and/or gas are found, development activities must be conducted 12 months of the year. This mitigating measure could preclude development. Permanent processing facilities may be necessary and above ground transmission lines and pipelines may prove to be less damaging to the environment than subsurface lines. All seasonal restrictions must be identified prior to the lease sale. The terms, visual and audio impacts, are unclear and undefined. All fishing streams are assumed to be recreational, many of which are frequented by float planes and wheel planes. Airfields used to support lease activities should present no special audio or visual impacts. Since mitiga- tion for the potential of oilspills, destruction of essential wildlife habditac, or blockage of migrational corridors are covered elsewhere in this analysis, this section should be deleted in its entirety. The terms, visual and audio impacts, are unclear and undefined. Airfields used to support lease activities should present no special audio or visual impacts. Since mitigation for the potential of oilspills, destruction of essential wildlife habitat, or dlockage of migrational corridors are covered elsewhere in this analysis, this section should be deleted in its entirety. These terms and conditions should be omitted because there would be no physical restrain: on the number and length of time of inspection and surveillance tours. It is proper for the Department of Natural Resources to budget and justify such tours on an annual basis for approval by the legislature. There will be adequate revenue from the sale to provide for expense money for this purpose. The lessee should bear the cost of this monitoring. Direct funding of the State's policing function by private ind@®ery raises serious ethical concerns. This section would establish a dangerous precident which would allow for increased restrictions on development activities after the original lease agreement was signed without the mutual consent of both the lessor and lessee. It is therefore recommended that this section be deleted from the final draft. This recommendation should be omitted. The terms and conditions of permits establish 1) Whether or not the permitted activities are feasible. 2) How such activities will be conducted, and 3) How facilities will be designed, constructed, and operated. Changing the terms and conditions of permits after financial committments have been made is not a reasonable provision. See previous comment. 4a AGENCY RESPONSE 25. DF&G: Adjustments have been made in the recommendations regarding public access to and use of refuge lands, design of lease facilities, and siting of lease facilities within and adjacent to wetlands. Refer to the Recommendation Section (Resource Utilization - refuges, anadromous streams, and recreational areas). The recommendation regarding spill cleanup capability requirements has been retained. See response to Alaska 0i1 and Gas Association #33. 26. OF&6: Adjustments have also been made in the recommendations regarding acceptable activiti and structures within the “primary saterfow] area". Refer to the Recommendation Section (Resource Utilization - refuges, anadromous streams, and recreational areas}, Comment on seasonal restrictions acknowledged. 27. OF&G: See response to Alaska Oi] and Gas Association #49. 28. OF&G: See response to Alaska Oi] and Gas Association #49. 29. DNR: See the response to Marathon O11 Company #17. The Department will not require that the lessee furnish transportation, board and room free to the ONR employees or their designated agents. 30. OF&G: See response to Alaska Of] and Gas Association #53. PUBLIC COMMENTS ALASKA OIL & GAS ASSN 13/30 1 The Alaska Oil and Gas Association wishes to express support of the proposed lease sale in the Upper Cook Inlet at the earliest possible date. However, following a review of the subject draft, AOGA is seriously concerned about two of the fundamental assumptions used to develop the analysis. Our remarks on these assumptions are to be found in the general comments which precede the specific comments on details of the analysis in the attached comments. It is suggested that the ramifications of - these assumptions (which we believe are erroneous) are reflected throughout the report, but are not noted in every instance. In general, AOGA is also concerned by the large number of unnecessarily restrictive mitigating measures presented for consideration in the subject draft. Since these measures are not intended to reflect State policy, we recommend that the State provide an opportunity for the industry to participate in the formulation of final stipulations. We appreciate this Opportunity to comment. ¢ 2 Economic Factors Pages 3 through 15--we disagree with the logic which postulates that a si. ficane discovery of natural gas in the sale area would necessarily result in a shortage and/or higher costs of natural gas or electricity locally. This seems to be rse logic. fe view the gas contract options and the 23c Alaska project as extraneous to the sale issue. The chain of events deécribed which would act to raise the value of local gas could be initiated by any find of significance inside or outside this sale area. While the described rationale could be considered one valid scenario arising from the sale in the short term, it is hardly the only one, or one of general applicability over the long term. RAL Ci ITS A more logical approach for this analysis would be to assume that all local fuel prices will eventually come to be based on lower ‘42 prices with a differential equivalent to transportation costs. Within this logic Alaska utilities cculd reasonably be expected to compete for local supplies with a price advantage, so long as Alaska is a net exporter. Local supplies might also be assured to some degree by dedication of “in kind" royalty streams; however, we would note that pricing of royalty streams at any price lower than market value would be in effect a subsidy. Ecomonic Factors, Page 16--We disagree with the assumption (#6, page ythat only 10% of the jobs relating to exploration, development and Production will be filled by Alaska residents. While it is true that offshore exploration drilling is typically carried out principally by Ron-residents, it is not necessarily true of onshore drilling, development drilling, construction or production activities. It muse be pointed out that a considerable pool of industrial skills now resides in Alaska which is potentially capable of filling a substantial portion of the jops generated. Further, the Cook Inlet fields, which employ Rany of the Xenai-Soldotna residents, are on the decline, which will result in an employment decline. 3 we concur with the recommendation (page 16) that appropriate training would improve the capability of local residents to qualify for the employment opportunities which the Cook Inlet development would provide. However, it is suggested that these same employment opportunities are needed to sustain the existing work force. Whether this work force would significantly expand or not would not depend, to a larce extent, on the success or failure of finding developable reserves of oil or gas. Mits Measures a The potential mitigating measures included in the 3 preliminary draft were not intended to be final state policy regarding the lease sal, It is recommended that the state srovide an Opportunity for the cil industry to participate in the formulation of final stipulations. SPECIFIC COMME’ iTS 4 Page 3, 2. Recommendations--The potential mitigating measures included in the State’s sreliminary draft were not intended co be final state policy regarding the lease sale. [t is recommended that the state Brovide an opsortunity for the oil industry to participate in the formulation of final stipulations. 5 Page 4, Leasing Strateqy--The state should consider its contribution tothe national energy supply as a prime objective. 6 Page 4, 3.--Consideration should be balanced with other objectives. 7 Page 6, End of First Para Taph--The statement that Pacific Alaska LNG Hit nave ah deqees ae ave 38 adequate Supply of natural gas even without an Upper Cock Inlet discovery is contradictory to other statements in this analysis. 8 Page 5, Second Paragraph-~Industry experience suggests that the 1.3 - rei autetshiers sees high. Oil and gas-related employment in the Kenai-soldotna area is likely to decline with declining productzon. Some form of leasing is needed to sustain present employment levels. 9 Page 9-10--Refer to our general comments. 10 Page 12, First Paragraph, Second Line, 3--Local users of gas should be te to compete for any new discovered gas reserves. Wl Page 12, jotnote #3--Refer to comment above. AGENCY RESPONSE 1. REVENUE: The analysis has been extended to depict the Botential impacts on the cost of local gas consumption for varying sizes of newly dis- Covered reserves. This involves fairly complex contracting logic including "take or pay” provis- jons, economics of size in cargaining, and price regulation. In any event the impact on local gas prices is not the central issue. The central issue is availability of gas for local use and the relatively higher orices of alternatives to gas recalling the differences in price regulations Detween gas and crude oi] and the greater process- ing requirements of other energy feed stocks (distillate and residual fuels). It was discovered that in order to meet all requirements, over 5.0 TCF of additional gas reserves must be discovered. If available reserves are not sufficient to meet both local and export demand, and prices are regulated, the allocation of gas detween local and export demand becomes subject to regional political allocation decisions since market forces cannot be relied upon to distribute the available Supply. 2. OC&RA: We agree with the observation that the percentage of jobs filled by Alaska residents would vary with tne stage of gas development and the location of the field and that the 10 percent Alaska resident hire figure applies only to off. snore exploration. OCR&A's assumption No.6 for the analysis of Community Well-Being Factors nas been rewritten in the final Analysis. 3. OC&RA: The recommendation has been rewritten in the final Analysis. 4 ONR: The Division of Minerals and Energy Management will make every attempt to ensure that the final stipulations reflect the concerns of all parties involved with the Upper Cook Inlet lease sale. Thus far, tnere has been no formal process for the develooment of Stipulations. Commissioner Lafescne, however, indicated at the Public Hearing, held in Anchorage on June 25, 1980, that al] comments concerning the proposed lease sale would be welcomed up to the time of the final sale notice. The Division will consider ail comments made concerning the draft Analysis and the included Proposed mitigating measures in the formation of the final lease stioulations. This Analysis Process, with the opportunity for public review and comment, should be viewed in part. as 2 preliminary steo prior to the development of these final stioulations. Industry, therefore, Ras ample opportunity to exoress their views regarding mitigating measures and lease Stipulations. 5. ONR: This consideration nas been included in the revised list of objectives. S. CNR: Consideration of the cultural and sociological structure of the lease area will be a balanced part of the design of the lease sale. 788, OCSED: Comments acknowledged. The Department of Commerce and Economic Sevelooment, wnicn originally prepared this section has, however, undergone a major reorganization that nas percluded obtaining a Oepartmental response to these comments. 7. SEVENUE: This assumotion, though ine consistent with existing proven reserves in Cook Inlet, may prove valid in terms of the potential of tne entire Cook Inlet basin. 8. = REVENUE: The numbers 1.5 and 2.5 refer to impacts resulting from larger discoveries (i.@. hign vs. noderate find) and are, therefore, not economic multipliers as commonly defined. 9,10 411, REVEN! See response to comment #1. Wil PUBLIC COMMENTS ALASKA OIL @ GAS ASSN. (cont'd) 12 13 4 15 16 7 18 19 20 21 Page 14, Table 4--Data presented is insufficient to allow understanding of table. It appears there are errors in the titles of columns 4, 5, and 6. : Page 16--See general comments. Page 16, 2.b., Second Paragraph Under Analysis--Disagree. Support Sector jobs require a wide Tange oF Stil Panga GF skills and training. Page 16, 2.b. Recommendations--Agree. These technical training opportunities are beneficial tn 4 providing training which allows local residents to £ill job opportunities made available by the sale. Page 18, 4. Analysis--It is suggested that final selection of mitigating measures wi have a profound effect on interest in the sale and thereby on bidding levels. These measures will directly affect the economic feasibility of a sale. Simplification of permitting procedures is essential if exploration is to be promoted. Page 19, 2.--It is more reasonable that the following assumption be __ made: "Stipulations on leases should specify that exploration activities will be supported by air service or existing roads and port facilities. New roads will be constructed during exploration only when there is no prudent alternative." Page 19, 3.--The meaning of this assumption is not clear, but it is reasonable to assume that the industry will utilize existing facilities to the extent practical. However, it is most probable that some new facilities will be needed, given a significant discovery. The amount of new facilities would depend on the nature and size of discovery. However, substantial surplus capacity exists at Drift River and Nikiski. Page 21, 6.--See general comment. Page 21, Recommendations--Right of access should be clearly defined before the lease sale. fage 22--For the reasons stated earlier, change the first two sentences to read: "Stipulations on leases should specify that exploration activities will be supported by air service or existing roads and port facilities. New roads will be constructed during exploration only when there is no prudent alternative." e¢_23--An expanding economy will provide employment opportunities Alaskans. This must be a beneficial effect. Page 27, Table 2--See general comment. Historical growth trend in Kenai tna results from oil and gas development activity. without i leasing in the Cook Inlet basin, growth and employment will of AGENCY RESPONSE 12. REVENUE: Column 4 should be titled AGAS System Demand. This table dramatically ilfustrates how far short proven reserves are of meeting all projected demands. 13. DC&RA: We agree. The statement has been rewritten in the final Analysis. 14, OC&RA: We agree. This recommendation has be expanded further in the final Analysis. 15, ONR: The Department is in the process of developing the lease stipulations for the Upper Cook Inlet sale. Every attempt is being made to keep the stipulations as simple as Possible. The Department is reviewing the permitting procedures with the thought of streamlining the process as much as possible. The oi] and gas leasing handbook to be published next year will be a great help. 16. OCBRA: We agree with the conmentator's language. The assumption has been rewritten in the final Analysis. 17. OC&RA: The purpose of this assumption was to provide a paramenter on the employment and population projections for the proposed sale. Had we assumed that one or more new facilities would be required, we would have had to project con- struction and operation employment related to them. Since we are highly uncertain of the Probability that new facilities will be needed, at least at this stage in the proposal, we chose not to project empioyment and population impacts from new facilities. This assumption has been rewritten in the final Analysis to accommodate the commentator's concerns. There are two aspects of assumption 3 which might have been confusing to the commentator, but they were inserted for good reason. Ref— erence to “proposed facilities" in Upper Cook Inlet meant to include such facilities as Pacific Alaska LNG plant. Reference to the success of development of oi] fields in Lower Cook Inlet was included as an assumption to reduce the demand especially on the Nikiski facilities. However, as a result of other comments, the scenarios used as the basis for projection of employment and population have been completely revised. This has been done to reflect all other known proposed developments in the Cook Inlet region. This should provide greater detail about our assumptions of the demand placed on existing facilities in Upper Cook Inlet by proposed PS lormatiad other than the proposed lease sale. 18. OC&RA: Since the proposed lease sale has been postponed until May 1981, it may be possible to develop the access policy proposed in the recommendations on page 21 of the draft Analysis prior to the lease sale. We agree that right of access should be defined before the lease sale. 19. OC&RA: We agree that rewording is warranted. The recommendation on page 22 has been rewritten in the final Analysis. 20. DC&RA: We agree that an expanding economy wilT provide employment opportunities for Alaskans, especially if Alaskans possess the necessary skills and industry pursues an agressive in-State hiring policy. We also agree that in general this would have a beneficial effect. However, the purpose of the analysis on page 23 of the draft was not to assess the economic benefits or employment benefits of the lease sale, but rather to estimate population changes. For this analysis, it is important to make assumptions about the immigration of current non-residents into the State in Pursuit of job opportunities created by a lease sale. The unemployment assumption refers to the total population, both residents and non- residents, including non-residents wno might have been attracted to the State by job Opportunities but wno remain unemployed. 21. DC&RA: See response to Exxon #9. PUBLIC COMMENTS ALASKA OIL & GAS ASSN. (cont'd) 28--Numerous exploratory wells have been drilled in the Tyonek Most adjacent lands are patented so residents will have a voice in development, and will undoubtedly participate in construction activities. Page 30--Refer co general comments. 23 Pace 41, Second Paragraph--There is no sound basis for the arbitrary slisination of any of the proposed lease sale acreage without a site specific investigation by the appropriate regulatory agency to justify such a decision. . With proper mitigating measures, exploration and production activities can be done in sensitive areas and in such a manner that will maintain long-term wildlife production. 24 Pace 42--The vale poll has been contradicted by a Dittman poll, which was carried out in Alaska. The Dittman poll showed general public acceptance of the oil and gas industry's ability to safely operate in all areas of the State. 25 Page 43, Last Complete Paragraoh--This discussion on the number of Feplies Feceived to a Gcestionndire sent co refuge users regarding the leasing of the Susitna Flats and Trading Bay refuges would be nore complete if the number of questionnaires mailed was stated. The significance of 65 replies, of which 60 percent were opposed to the sale, is not clear unless the number of questionnaires is xnown. The legislature provided for the leasing of these refuges for oil and gas exploration and development. ‘The basis for finding such use incompatible should be factual and not influenced by a select group of special interest groups and refuse users. It is suggested that the results of the limited survey conducted would be biased and should not be included in the final economic and environmental analysis for the Proposed sale. 26 2ace 46, First Paragraoh of Analysis--Something appears to be omitted from this paragraon. 27 Page i9--According to this section new regulations will be adopted that would increase the $5,000/lease performance bonds (bonds the cost of site restoration) to $10,900/lease or $500,000 for operations State wice. We feel that this is unnecessary and redundant as there already are numerous stipulations and vermit regulations that require the lessee to restore the site. 28 Pac Recommendations, l.a.--There is no sound basis for the arbitrary = Sh Of any Of tne proposed lease sale acreage without a site specific investigation by the appropriate regulatory agency to justify such a decision. With proper mitigating measures, exploration and production activities can be done in sensitive areas and in such a manner that will maintain long-term wildlife production. Special habitat areas, such as moose overwintering and calving areas, should be specified and publicized prior to the lease sale. Any seasonal restrictions on certain activities should be based on probable impacts of a particular activity. Certainly, some flexibility exists for facility location, but seasonal restriction of activities connected with oil and gas groduction is not operationally possible without stopping sroduction during those seasons. elopment--Through the existing Corps of S have more than adequate opportunities lations. Table 4 suggests that this permit to injec put and st: is leSs than adequate. 30 2ace 50, b. Add “or" between "body" and “intertidal”. 31 Page 60, c.--Add “and cuttings" between “muds” and “with no" in 3rd ine. Allowance of discharge of cuttings into waters of the Cook Inlet should be included. we te AGENCY RESPONSE 22. OCSRA: We agree that reference to nistoric oi] and gas activity in the Tyonek area and land ownersnio in the area is important in the response to the question of significant value of lifestyle conflicts. This section nas been rewritten in the final Analysis. ~ The second part of the conmentator's suggestion that since most adjacent lands are patented residents will nave a voice in development and will undoudtedly participate in construction activities, suggests that the commentator may not de drawing a distinction between the Tyonek Village Corporation (for profit corporation created under the Alaska Natives Claims Settle- ment Act) and the village of Tyonek. While the members of the village corporation undoubtedly include many of the residents of the village, the village corporation and the village are two entirely distinct entities with two entirely different purposes and, frequently, different interests. The resconse to the question about significant vaiue or life- style conflicts, refers to "Tyonek residents” as individuals, as opposed to the corporate entity which owns most of the “adjacent land wnich are patented." The letter submitted by the Native village of Tyonek conveying comments on the proposed oi] and gas lease sale reaffirms the tnrust of the final Analysis. 23. OF8G: The Degartment of Fish and Game conducted Site-specific studies in doth the Kenai lowland caribou calving ground, and the Tule goose Nesting area before requesting that leasing in tnese areas de delayed for two years. [n its request to ONR, the Cepartment indicated that these were clearly sensitive areas, but that the Department would attempt to develop strategies to allow compatible resource development. 24. OF&G: The findings of the Dittman and Yale polls are not contradictory. The Dittman poll was directed primarily toward oil industry taxation, not the environmental Considerations associated with such development. 2s. OF 3G: Discussion of the refuge user questionnaire nas been rewritten to include the additional information re: ues ted, Refer to the section on Public Sentiment Toward tne Proposed Sale, and our resoonse to tne Resource evelaoment Council #26. 26. POP: Comment acknowledged and correction nas been mace. 27. SNR: A $10,000 of! and gas lease Yond is now required for a single lease or 4 $300,000 bond may be obtained for onerations conducted statewide. The Commissioner of Natural Resources nas the authority to require additional unusual risk bonds if necessary. The bonding requirement ensures some degree of solvency a the gart of a lessee. Bonds are not easily obtained and if a lessee's bondin Tust Day off a bond, the lessee may aie difficult to acquire otner conds, In addition, the $10,000 or $500,000 would nelp defray the costs of cleaning up after a defaulting lessee. The Division of Minerals and Energy Management goes not anticivate collecting money from tne bonds. The bonds are simply another safe guard for the interests of the people of the State of Alaska and work in conjunction with the remainder of the oil and gas leasing reguiations and stipulations. 28. OF&G: Refer to response #23 above. To tne extent oossibdle, Dased on presently available information, special habitat areas will be identified orior to the Tease sale. ae see response to Marathon Oil Company oN ese comments will be considered during the development of the final lease Stipulations for the Upper Cook Inlet sale. 29. DEC: The suggested modification nas deen made. The “less than adequate" statement refers to the oresent regulatory review system for wetlands activities, road construction and gravel removal and tne time frames involved. Once the review period (often extended) is comoleted, the 2ermits and control methods are generally adequate. 30. DPOR: Comment acknowledged. 31. Dee: been mage. The suggested modification has PUBLIC COMMENTS LASKA OIL & GAS ASSN. (cont'd 32 Page 60, d.--There is no reasonable need to line all onshore mud pits to prevent leakage into adjacent water bodies, except when the state demonstrates the necessity of such a requirement. Page 61, g.--Recommend this proposed mitigating measure be changed as 33 Boliowss “tefore Plans of Operations are approved and drilling permits are issued, the applicant should be required to make provisions for the protection of important fish and wildlife resources or habitat with a capability to expeditiously detect, contain and clean up oil spills. This includes the requirement to develop a feasible relief well plan for each well." Note: A demonstration of the above capability would require an actual spill which is not practical. The identification of a specific drilling platform is not practical because of changing logistics thoroughout exploration and development. 34 6 h.--The first sentence duplicates the detail which is already required in the Spill Prevention Control and Countermeasure Plan which must be in place for any oil and gas facility over a moderate size. The second sentence requiring that facilities be “sited at least 1/4 mile from any lake, wetland, or naturally flowing water drainage system, with a flow of greater than 5 feet per second" does not recognize that there may be site-specific mitigating conditions which would allow placement of facilities closer than 1/4 mile. Industry has shown that siting of facilities closer than 1/4 mile can occur without damage to the hydrologic functions, if given the flexibility to make determinations based on site characteristics. 35 Page 61, i.--Delete this entire section. This is provided under the Section 404 Permit of the Corps of Engineers. 36 Page 62, 3.a.--The amount of surface restriction required should depend On terrain features and be determined by site-specific studies. This fact is acknowledged by the Department of Fish and Game on page A-48 of the preliminary draft. 37 Page 63, 3.a.(4)--Delete. Unenforceable and covered by existing Fish and Cané-régalations concerning harrassment of gildlife. See comments on page 62, 3.a. above. 38 Page 63, b--We see no need for additional lease stipulations for the Protection of Bald Eagles and their nests. There are already Federal Laws to guarantee their protection. 39 Pace 64, First Complete Paragraph and (1) and (2)--Delete. The mitigating measures proposed are arbitrary and capricious. If such restrictions are needed, they should be applied to all users of the habitat in question, and not be included in stipulations addressing a single industry. 40 Pace 69, Recommendation (i) 1.--The Department of Fish and Game includes closure o ands to mineral development and public use in its recommendations for mitigation of impacts. Large areas in Alaska are already withdrawn from general use, and it is not easily understood how withdrawal of more land is required. Fish and wildlife are renewable natural resources that readily adjust to impacts resulting from oil and gas activities. 41 Page 82, c.--Vital lands should include only those used by endangered species. The Trumpeter Swan is not an endangered species and should be included in the primary waterfowl habitat classification. 42 Page 83, a.5.--There must be a provision for restricted access within the immediate vicinity of facilities to discourage vandalism. 43 Page 83, a.6.--This item states that all facilities must be designed to prevent accidental oil spills resulting from vandalism. It is very well known that this kind of design is not possible, by the very nature of vandalism. It is possible to reduce the likelihood of spills caused by vandalism, but not prevent them. 44 Page 83, a.9 Demonstration of this capability would require an actual spill. Suggest using the words “provide for" in lieu of the word “demonstrated” in the first sentence. 45 Page 84. a.10.--The second sentence should be deleted because adequate Protection is provided by the requirements in the first sentence. See comments for page 61, h. 46 Page 94, b.2.--Exploratory drilling and development activities shoula not be included in this mitigating measure. If commercial quantities are found, development activities must be conducted twelve months of the year. Appropriate mitigating measures are available to permit drilling twelve months per year. <This mitigating measure could preclude development. lanent processing facilities may be necessary. Above-ground transmission lines and pipelines may prove to be less damaging to the environment than subsurface lines. AGENCY RESPONSE . OF SA: This recommendation has been rewritten’ Refer to the section on Resource Utilization - fish and wildlife populations and their habitat, and see response to Marathon Oi] Company #2. 33. DEC/DF&G The changes that AOGA proposes in the wording of the mitigating measure on contingency plans do not provide the specifics necessary to ensure the development of an effective oil spill contingency plan. The use of the word "demonstrate" in the proposed measure is important in that it requires the applicant to show, either by actual spill demon- strations or through review process, that adequate steps have been taken to respond to and clean up oi] spills from lease operations. In addition, it is important for industry to identify alternate drilling rigs that can be used if a relief well is needed at a blowout since a lengthy amount of time may be spent in the process of securing and transporting another rig to the blowout site. 34. DEC: —_In general, AOGA's statement regarding current EPA requirements for SPCC plans is correct. However, EPA regulations have a 660- gallon lower limit on oi] storage capacity while the proposed mitigation measure has a 500-gallon limit. The recommendation has been clarified in the final Analysis. OF&G: See response to Marathon Oil Company #4 and refer to the section on Resource Utilization - fish and wildlife populations and their habitat. 35. OF&G: See response to Marathon Oi] Company” #5. i 36. OF &G: Terrain features are not the primary factor in determining appropriate protective measures for a given species. Behavioral character- istics, habitat requirements, and numerous other factors must be considered. The Statement on page A-48 of the draft Analysis has been clarified for the final report. Refer to Fish and Game Appendix 37. OF&G: This measure is not duplicative of other Fish and Game regulations. AS 16.20.185 Provides for the protection of habitat critical for species that are now or may in the future be threat- ened with extinction. Refer to response #36. 38. OF&G: This mitigating measure was included to ensure Compliance with the Bald Eagle Protection Act of 1940, as amended (16 USC 668-6684). It does not differ significantly from Federal protection measures and should not present a Problem. 39. OF&G: Trumpeter swans were only recent] removed fron the Federal Endangered Spectes List and are still protected under the Migratory Bird Treaty Act of 1918 and international treaties with Mexico and Canada. In order to ensure compliance with these laws and the continuation of this species, OF&G will recommend that appropriate protective measures be incorporated into the planning process for all development activities in sensitive areas. 40. OF&G: This statement is incorrect. See response to Marathon Oil Company #6. 41. OF&G: Comment acknowledged. Refer to response #39 above. 42. OF &G: Adjustments have been i this recommendation. ne Refer to the Recommendation section (Resource Utilization - refuges, anadromous str recreational areas). ToT 43. DF&G: This recommendation has been rowritten. Refer to the Recommendation section (Resource Utilization - refuges, anadromous streams, and recreational areas). 44, vF&G: Refer to response #33 above. 45. uFaG: __. Adjustments nave been made in this recommendation, Refer to the section on Resource Utilization - refuges, anadromous streams, and recreational areas 46. OF &G: See response to Mai i eases rathon Oi] 47 OF8G: Adjustments have been made in this recommendation. Refer to Recommendation section (Resource Utilization - refuges, anadromous streams, and recreational areas). Comment on above-ground transmission lines and pipeline is acknowledged. 48 Pace 25, 5.5.--All seasonal restrictions must be identified prior to the lease sale. 49 Pace 86, 2.a.--The terms, visual and audio impacts, are unclear and Sndefined. All fishing streams are assumed to be recreational, many of which are frequented by float planes and wheeled planes. Airfields used to support lease activities should present no special audio or visual impacts. Since mitigation for the potential of oil spills, destruction of essential wildlife habitat, or blockage of migrational corridors are covered elsewhere in this analysis, this section should be deleted in its entirety. 5O 37, 3.2.1.--Setting the "visual or audio impact on recreationalists" acove tne essential needs for support facilitites is too restrictive and vague and should be omitted. Placing audio and visual impact on recreationalists- above the national Reeds of essential oil and gas production sets a dangerous precedent for t State. 51 2age 99, First Paragraph--In the analysis, it is suggested that a may ity siting commission" be established to study facilities placement ina particular area prior to placement. [It is important to point out that in Alaska the Coastal Zone Management districts are being established for coastal siting decisions of the kind suggested here Tf such a state function is needed for Alaska, it could create re lundance on the part of coastal planning and could generate conflicts in decision- Making at a local, regional, or state level. 52 Pace 102, First Paragraph- se terms and conditions should be omitted Decause there would ce no fiscal restraint on the number and length of time of inspection and surveillance tours. It is proper for the Department of Natural Resources to budget and justify such tours on an annual basis for approval by the Legislature. There will be adequate revenue from the sale to provide for reasonable expense money for this purpose. Direct funding of the states policing function by private industry raises serious ethical and legal questions. 53 2age 106, 3.--This recommendation would allow for increased restrictions Sa developaene aceivicioe after the original agreement was signed. This is contrary to our philosophy that all restrictions should be outlined prior to the signing of a lease. If in the event future restrictions become justified they should not be implemented without the consent of the lessee. 54 Page 107, ‘This recommendation should be omitted. The terms and conditions of permits establish: 1) whether or not the sermitte: activities are asible, 2) how such activities will be conducted, and 3) Row facilities will be designed, constructed and operated. Changing fhe terms and conditions of permits once financial commitments have been made would not be reasonable. 55 Page 111, Table I--The forecast spillage rates in Table 1 are not accurate, even Based on statistics sown on pages 109 and 110. 56 face 4.23, Third Paragraph--The first sentence in this paragraph States that the exploratory phase of oil and gas develooment poses the jargest potential for oil spills due to blowouts. This is not true; in fact the statement is contrary to that found on page 109, "...chat fhe chances of a major oil spill during the exploratory chase of oil evelopment are very low; and that spill likelihood increases only slightly during the development phase.” MARATHON OTL COMPANY 7/13/30 Marathon strongly supports the proposed oil and gas lease sale in the Upper Gook inlet es scheduled. ‘The estaolisnment of a relissie issse sale schedule is necessary to provide for adequate pre-leasing exploration and evaluation. ‘The subject report for proposed State Sale 33 covers an area of +hich most, if not all, portions have been leased before, beginning pricr to Statehood. ‘The previous leasing has resulted in extensive exploration and discovery of commercial quantities of oil and gas. ‘he data base should be abundant, and built on a long case history, particularly when the area is known to be located adjacent to the most populous portions of the state. A reading of the above-captioned draft leads us to believe that this information has been disregarded and the State is less than sincere in its effort. Though we believe there is a fundamental legai question as to the mandate for the "Analysis", we offer the comments set cut below. Marathon defers to the OGA conments on the economic section. As to the environmental section, Marathon's comments are as follows: 1 Qi Pages 28, 68 and 69 - The Analysis procoses additional mitigating measures fot “he Drotecticn of subsistance users. %easonable lease stipulations are expected, Sut they should in ro way ce core restrictive than those established for similar activities conducted on lands owned or controlled oy these same subsistance users. 24 AGENCY RESPONSE SGENCY RESPONSE 48. OFSG: Comment acknowledged. $9. OF&G The Department feels that locating facilities such as airstrips, oil storage tanks, etc., on the banks of some of Alaska's most neavily used sport Fisning streams would significantly degrade the quality of the recreational experience. The occassional use of a stream dy aircraft transporting recreational fishermen is unlikely to create the same level of visual or audio impacts as locating an airstrip or processing facility on the stream bank. 50. OF&G This measure was proposed to avoid unnecessary impacts on important recreational streams. It is assumed that the siting of any essential facility which is clearly in the State or national interest would take presidence over other uses of recreational corridors. $1. O€C: See response to Marathon Oi] Company #16, with regard to the facility siting commission. 52. ONR: See response to Marathon Oi1 Company #17. The Oepartment of slatural Resources will not require that 3 lessee furnish transportation, ooard, and room free to the ONR employees or their designated agents. 53. OF &G: Potential imoacts of oi] exploration and development activities can only be predicted based upon current knowledge. If significant impacts occur, wnicn could not be anticipated in advance, the State should have a mechanism available £0 adjust lease agreements to prevent or minimize such imoacts. In addition, if specific requirements are found to be unnecessary at a later date, they should de eliminatea from the agreement. Oe! See response to Exxon #30, 34. OF 4G: See response #53 above. 55. OFaG: This tadle has been omitted fri the final Analysis. Additional documentation” of historical oil soills in Cook inlet nas been substituted in the final report. Refer ta the section on Risk Factors. 36. DEC: This para slariffed in the final snares, fee? al Analysis. 1. OCaR We understand and support the desire to de treated equitadly in regard to lease stipulations and mitigating measures. In the final Analysis, the following sentence will be suostituted for the third recommend. ation: "3. attach aporooriate stipulations to leases, provided all potential lessees are treated equitadly thereunder." OF &G The mitigating measures oresented on tnese pages were not recommended, Sut 5 moly identified as possible measures to mitigate the effects of development activities and Increased access on subsistence use. OF4G agrees that it would be inconsistent for che suosistence users in the Upper Cook Inlet sale area to request Tore restrictive management of State-owned lands tnan they imoose on their own lands. However, the Jepartment is Sound oy law to consider suosistence as the nignest priority use of fish ana wildlife resources on State lands. PUBLIC COMMENTS MARATHO, 2 10 W 12 13 14 OIL co Page 60, d - The proposed stipulation that all onshore mud pits be Timed prevent leakage into adjacent water Godies is unreasonable. Such a requirement should be applied only where the State can demonstrate that it is necessary to protect water quality. ¢ 61, g - The requirement that "...the applicant should be required to demonstrate the capability to expeditiously detect, contain, and clean up any oil spill which might result fran lease activities..." (emphasis added) is both impractical and unreasonable. ‘The capability to perform the required tasks could only be demonstrated in the presence of an actual spill. In addition, the ability to demonstrate a response to any Oil spill is impossible since “any” is an indefinate term, ‘here are an infinite number of factors which could affect a spill event, therefore the requirement to be able to respond to any oil spill is totally unreasonable. Since oil spill response capabilities are already required by various state and federal agency regulations, the proposed stipulation is unnecessary and should be deleted. Page 61, h - Design of non-transportation related facilities so as to Brevent the spread of oil ani other pollutants is already required by Spill Prevention, Control and Countermeasure Plan regulations. ‘Trans- portation related facilities are subject to similar restrictions imposed by the U.S. Coast Guard and Department of Transportation. Therefore this proposed stipulation is redundant and should be deleted. In addition, the requirement that facilities be located 1/4 mile from certain water ocdies is unreasonable and in same instances infeasible. To allow a certain degree of flexibility, this requirement should not be included as a stipulation. Page 61, i - Any modifications of coastal wetlands are already controlled under the U.S. Amy Corps of Engineers Section 404 permits. ‘The Department of Fish and Game has more than sufficient opportunity for input and comment before the issuance of any such permit. ‘The stipulation proposed in this section would be duplicative and should be deleted. Page 63, 3a(4) and 64, 3c(1) & (2) - Is it actually necessary to Feserict the specified activ Specified activities during portions of the year in order to mitigate adverse impacts upon wildlife? Both exploratory and production activities have repeatedly been demonstrated to be compatible with Alaska's wildlife. As drafted, these restrictive stipulations are directed only toward oil industry activity. Unless they apply to all users of the area, we see them as discriminatory and without a basis in logic. Page 80 - On page 80 it is stated that leaseholders have attempted to restrict access to certain recreational areas for safety reasons and to protect lease facilities. While some control of access to certain facilities is necessary, all leasehold operators have adopted and practice multiple use policy on all public lands. In most cases it is the governmental agency managing the land that requests limited access to the area. Page 83, a 5S & 6 - Although Marathon Oil Company supports a multiple use concept toward state-owned lands, there should be an allowance for restricted access within the immediate vicinity of facilities. Reasonable public access restrictions are necessary to protect the public as well as the environment. Restricting public access to facilities would also serve as an effective impediment to vandalism. Page 83, a 8 - This statement is obviously a “catch all" which is too br to enforceable. Page 83, a 9 - See comment for page 61, g. Page 83, a 10 - See comment for page 61, h. Page 84, a 11 - Provisions for restoration of lands are presently a condition Of the lease terms and regulations. Page 84, b 1 - See comment for pages 63, 3a(4) and 64, 3c(1) & (2). Page 84, b 2 - Elimination of exploration and development activities Tou the Specified area from April 1 through October 31 is totally unreasonable. Such a requirement would make production activities impossible thereby eliminating any incentive for exploratory activities Further, shutting down these activities for such a period would cause irreparable harm by the reduction of ultimate recovery. ‘This proposed stipulation should be deleted in its entirety. 25 AGENCY RESPONSE 2. OF&G: This recommendation has been rewritten. Refer to the section on Resource Utilization - fish and wildlife populations and their habitat. Research has demonstrated that the chemical components of drilling muds can be toxic to freshwater organisms. The protection of natural water bodies and assoc- iated habitat is provided for under AS 16.10. 010 and AS 16.05.870. 3. DF&G: This recommendation has been retained. It is not unreasonable to require that companies Operating on State lands be responsible for their actions and the potential consequences which may result from their activities. Refer to response to Alaska Oi] and Gas Association #33. DEC: See response to Alaska Oi] and Gas Association #33. 4. OF&G: This recommendation has been revised to allow for greater flexibility and to conform with EPA regulations for a 660-gallon lower limit on oil storage capacity. Refer to the section on Resource Utilization - fish and wildlife pop- ulations and their habitat. ADF&G has included these standards in the final Analysis to facilitate compliance with Federal regulations requiring SPCC plans and to ensure that best management practices are used in the development of faciltities in or adjacent to wetlands under State jurisdiction. Use of these standards will not result in the issuance of additonal permits or delays in the present project review processes. 5. DF&: Section 404 permits only apply to the discharge of dredge and fill material. Activities such as drainage ditches can also modify wetlands and negatively impact fish and wildlife resources. Authority for requiring such a measure is provided for under AS 16.05.870 and Coastal Management Standard 6 AAC 80.130. 6. DF&G: The Department has carefully considered the potential impacts of oi] and gas activities in important waterfowl! nesting areas and feels that within the Susitna Flats and Trading Bay Refuges it is necessary to restrict specific activities during portions of the year to maintain the present level of waterfowl Production. However, these areas only comprise a small percentage of the total refuge lands. Scientific evidence does not support the contention that Alaska's wildlife is compatible with exploratory and production activities in all circumstances and situations. Stipulations presented in the draft Analysis are directed toward oil industry activities because this report deals specifically with a proposed oi] and gas lease sale. ADF&G will recommend that these protective measures be required of all development activities in the immediate vicinity of endangered and sensitive species. 7. DF&G Comment acknowledged. 8. DF&G: Limited restriction of public access in the immediate vicinity of buildings, drill pads etc., is reasonable; however, such restrictions should not be applied to large areas, particularly in a refuge where public recreation is one of the highest priority uses. 9. OF 8G: This measure has been rewritten. Refer to the section on Resource Utilization - refuges, anadromous streams, and recreational areas. 10. Refer to response #3 above. iW. Refer to response #4 above. 12. OF&R: ADF&G has the Primary responsibility for managing refuge lands. Management objecti for refuges are not necessarily the same sees Don-refuge lands. ONR land restoration standards for of] and gas development are currently being reviewed by ADF&G. If DNR standards are approp- riate and applicable to refuge lands, the Depart- ment will not recommend that additional stipulat jons be included in lease agreements. 13. OF&G: Refer to response #6 above. - not tolerate disturbance during the nesting season. Only exploration and development activities need be restricted in this manner. Normal production activities wil? be allowed on a year round basis. justments have been made in this recommendati Refer to Recommendation Section (Resource Utilization - refuges, anad , romous str . recreational areas). a PUBLIC COMMENTS AGENCY RESPONSE MARATHON OLL CO. (cont'd) 15. OF&G: Adjustments have ie been ween prov: could omen: this recommendation. Refer to the Recommendation 1S eee documbation of onl ond gee “actly reid tee Section (Resource Utilization - refuges, anadromous designed and constructed 2 protect’ the eeivormine to its fullest and streams, and recreational areas). ADF&* recognizes that the restriction of certain structures within © restrict aboveground pipelines will reduce the options available. the “primary waterfowl area” will reduce the options i i vailable. However, protection of this habitat t Sear meation of a facility siting commission is necessary to ensure that legislatively mandated eine exeabl ished. in alastee ae cement Proveams vnich are refuge management odjectives are met. currently being established in Alaska. [t would seem inacprooriate—at a time when efforts are being made to place more control in the hands 16. OC: A facility siting commission need Of Ocal guthorities—to usurp part of that control and place it back not be im conflict with local coastal management into State hands. programs if the commission worked jointly witn the local government in the development of its 17 Page 102 - In the first full paragraph it is suggested that a lessee coastal management programs. Marathon’s point May ce required to furnish transportation, board and roam or in the is well taken and close consultation between alternative, reimburse the Department of Natural Resources for them to the commission and the local government would be inspect and monitor operations. The furnishing of these services oy essential. the lessee both ethic legal tions. further, it should ; Spotl Si tate fata tet tia SS ee 1, ats relo's semen 1 scene, ‘ished loyees . and the text has been revised. cl, Sareea oe bodice! of Natural Resources will not require that a 18 Page ill, Table 1 - It is difficult to imagine any reason for the lessee furnish transportation, board and room inclusion of Table 1 in this document. ‘The information contained in “free to the inspectors. The proposed stipulation the table is based upon questionable statistics whic were derived with is as follows: The lessee will allow for the nO consideration given to the spill history of operations in Cook inspection of their operations upon 48-hour inlet. But the most glaring error is that the information listed in notice by the Oepartment of Natural Resources to able 1 is not even for che area of interest at all.Table 1 lists the assure compliance with the lease terms and stip- potential sources amounts of oil soi; ting from the sale of ulations. The lessee may be required to provide leases in Lower Cook Ink ‘The volumes were calculated based upon an food and lodging for employees of the Oepartment estimated annual oroduction in Lower Cook Inlet of 340 million barrels or others designated dy the Department with the of oil. ‘the total amount of estimated reserves in the area of interest associated costs to de reimbursed oy the Oepart- for this sale is Only 202 million—ard a large cart of that area is ment in a timely manner. onshore. It is even more inconceivable that information of this type 5 Gould be included in the document when, on the very next page, Table 2 This change in wording will ensure continuity snows the relatively low spillage rate experienced by operators in the of ONR actions. The Division of Forest, Land Gok Inlet. Further, your table demonstrates that “other sources" are and Water Management currently performs similar the leading cause for oil spills in the Cook Inlet. inspections of timber leases witn the same reimbursement provisions. ’n inclusion in this document of a table which is based upon aningful statistics and meaningful production volumes might be useful. el, 18. OF&G: Suggested change has been made, in its present form, Saly serves to alam an uninformed or casual Table T (page 111 of the draft Analysis) has reader of the prospect of having 71,615 barrels of oil introduced into been deleted. Additional documentation of Cook Inlet annually as a result of the proposed sale. tne oil spill history for existing operations in Cook Inlet has been sudstituted in the final 19 Page A.28 Paragrach 3 - The statement that "The exploratory chase of Analysis. Refer to the section on Risk Factors. on gas develogment introduces one of the largest potentials for an Oil spill occurence cecause of the cossibility of a major blowout” is 19. OF AG: According to the Council on not only misleading, but simply untrue. Quite to the contrary, the Environmental Quality (1974), “Exploratory exploratory chase of offshore drilling historically represents one of drilling is one of the most nazardous steps in the lowest sotentials for a spill resulting from a blowout. developing offshore oil and gas. The potential hazard stems from the possibility of a blow U.S. Geological Survey, Qpen File, Report 80-101 on OCS Oil and Gas Blowouts for period 1971 - 1978 confirms that no solution has occurred ° x : Exploratory oi] well blowouts have polluted from a Blowout of an exploratory well in U.S. waters. : U.S. waters; fn fact, one such incident occurred in Cook [niet in 1962. Pan American's (AMOCO) Cook Inlet State No. 1 well “erupted on August 21 spraying gas and oil over tne Inlet and creating a churning mass of water adout 30 feet nigh." (Anchorage News, Aug. 28, 1962) Pipeline breaks, tanker collisions and other mishaps have also resulted in oil contamination of Cook Inlet waters. for more information, refer to the section on Risk Factors, out..." - RESOURCE DEVELOPMENT COUNCIL FOR ALASKA 7/18/80 Comments on “Objectives of the Lease Sale” 1. NR: Obj No. 1 Item No. 1 correctly notes that one important objective Porton’ Cbdective No. I has been revised as of a leasing schedule is chat sales be held on a pre- : dictable basis. However, chere is no statement of the — Smee Dae ee Teas 12 ¢MBlement 2 Teasing schedule industry or government acting on behalf of its citizens. nd covi counted on oy industry and government in their olanning on benalf of the citizens of Alaska and the rest of the United States. Industry has limited resources to commit co sale prepara- tion. Maximum induscry participation in a sale will occur only when industry has done adequate pre-sale evaluation of tracts to be leased. Industry will then be able to offer informed bids. The compecicive climace will then be enhanced and as a consequence the public will receive increased offers (both number and amount) for public lands. When sales are not held according to schedule, industry misallocaces its scarce resources preparing for a sale which is delayed or cancelled. Repeated delays or concellations will result in lose gredibilicy. The simple result will be an induscry which commits its resources to exploration elsewhere than on state lands. Under such circumstances the public will suffer. There will be less exploration and hence fewer discoveries on state land. PUBLIC COMMENTS RESOURCE DEVELOPMENT COUNCIL FOR ALASKA (cont'd) 2 Item No. 2 implies that the "State" should be primarily concerned with offsetting a projected decline in state revenues associated with a decline in production from Prudhoe Bay. Such an implication can only be read to mean that leasing is for the purpose of enhancing the state treasury. There are more important reasons for leasing as follow: The citizens of Alaska and the U. S. are critically dependent on imported energy - This situation can only be ameliorated by accelerated exploration which is dependent upon availability of land to explore. The statement also implies that income from a dis- covery is a necessary consequence of a given lease sale. The historical record does not support such a conclusion. 3 Item No. 3 is a truism. The point is how to stimulate competition. Since this sale will apparently be dealyed, the result will necessar- ily be delayed exploration and production (if a discovery or dis- coveries eventually result). Please see comments on Item No. 1. 4@ Item No. 4. The term "fair economic return" should be defined. Many would argue that the term is meaningless unless it is con- strued to mean the highest bid in a competitive sale. Various alternative leasing systems (royalty bidding, net profit share) actually shift the risk from the private sector tna the public sector. Since some alternatives require little or no "up-front" money or binding commitment to explore, the use of so-called "contingency" payment leasing systems may be expected to encourage speculation which is in conflict with Item No. 3. Item No, 5. There is no basis for the implication that Alaska's society is any more (or less) diverse from a cultural or socio- logical standpoint. There is no justification for the statement that Item No. 5 should be a primary objective. ar AGENCY RESPONSE 2. ONR: Objective No. 2 has been revised as follows: 2. To provide energy resources for Alaska and the United States assuming that oi] and/or natural gas are found in commercial quantities and can be developed. 3. To lease at a moderate rate that will, if oi] or natural gas are found, be a part of a balanced Program of continual economic growth for the State and its citizens. 3. DNR: Objective No. 3 has been revised as follows: 4. To encourage competition through use of various bidding methods and to promote timely, as well as environmentally sensitive, exploration and production of Alaska's oil and gas resources. A new objective has also been added: 5. To maximize the economic and physical recovery of oil and gas resources. In spite of the Department of Natural Resources’ efforts, an occasional delay in a sale may occur. The lease sale procedures are complicated and full of complex legal requirements that must be met before a sale is held. Sometimes these requirements cause a delay. The Department is attempting to streamline its leasing procedures and will publish a leasing handbook in early 1981 that will assist both State agencies and the oi] and gas industry in following these procedures. Competition can be stimulated by encouraging the smaller companies and individuals to bid for State leases. This is accomplished through the use of various bidding methods which allow for smaller amounts of bonus money to be bid. It is true that this places more risk on the public sector, but in the long term it may also provide more income to the State and its citizens. 4, ONR: Objective No. 4 has been revised as follows: 6. To provide the State and its citizens maximum economic return from the sale of State-owned oi] and gas resources by utilizing various leasing systems. 5. DNR: This objective does not imply that Alaska’s society is more or less diverse’ than any other, merely that it is diverse. Objective No. 5 in the preliminary draft has been revised, is now Objective No. 7, and reads as follows: 7. To maximize use of Alaska's human resources and give balanced consideration to the State's diverse cultural and sociological structure when designing lease sales. PUBLIC COMMENTS RESOURCE DEVELOPMENT COUNCIL FOR ALASKA (cont'd) 6 Item No. 6 fails to state why and under what circumstances the state should lease in concert with the federal government (or for chat matter any other landowner, i. e. native corporations). The fact is that a joine sale may bé necessary because of a dispute as to ownership, as was the case in a recent Beaufort Sea lease sale. However, there are more basic reasons why the state may wish to lease before or concurrently with other landowners. The 1976 OCS sale in the Gulf of Alaska demonstrates such a case. The state deliberately withheld the leasing of its adjacent state lands when the federal government leased. One reason which was given for not leasing state lands was a belief that the adjacent federal lands would prove productive and the state would then receive increased bonuses for its lands. Eleven dry holes on federal lands have caused a general lack of interest in the state submerged lands in the Guli of Alaska. The federal government received over 500 million dollars for its land. The state received nothing as a result of its gamble that the federal lands would be productive. Hence, adjacent landowners should consider concurrent leasing to avoid such condemnation. 7 Item No. 7 is not a logical statement. Oil and gas are unique in their commercial accumulation. So-called "infrastructure" results from successful exploration. Oil and gas are not necessarily found where "infrastructure" is in place. eneral Comments on Objectives * These seven items do not represent a logical set of objectives to be realized by sale #33 or any other lease sale. * The items ignore most of the important reasons for + leasing, such as the critical need for additional energy and economic well-being in Alaska, the nation, and che world ac large. * Nothing is offered to support the choice of objectives. Comments on Economic and Fiscal Factors: 8 Discussion seems to be focused primarily on one scenario, a treatise limited to one major assumption. On page ll in paragraph one under “positive or negative" is a policy statement which is judgmentally appraised. The report tends to be biased toward non-development of gas lease sales, trying to justify the non-development status. 9 The Demand and Supply analysis relative to employment, construction and projected fuel costs is inadequate. It needs more economic discussion on relative short and long-run stability. Economic and financial treatment of the net balance effect of state and local expenditures relative to proposed revenues, and especially relative co community assessment, is not adequate. 10 The economic evaluacion relative to the natural gas resource does not complecely analyze the explicit and implicit state subsidies. Also, comparisons in the analyses are like comparing apples and oranges. 11 A complete population analysis should be included in the comprehensive state/local revenue expenditure plan, especially with ucilization of the Department of Labor and Dr. Reaum's economic model. More detailed financial analysis is required to justify the given informational “policy statements." 12 The economic and community well-being discussion (pages 9-22 and page 46) exhibits a bias towards an unrealistic pricing policy for the gas produced; that is, an indirect state subsidy to Anchorage area resi- dents is implied and accepted as being good. Realistic economic analysis based upon supply-demand factors and a competitive market would not support this approach. A fair market price for gas is more realistic. If a subsidy is desired, let's be direct and not write it into lease stipulations. A type of "scare tactic" seems to be used here. The argument presented appears cto be that leasing withoyt such stipulations will lead to a decreased supply to Alaskans and thus higher prices. The effect of discouraging exploration (through difficult leasing practices, etc.) will most certainly lead to depletion of our present reserves and finally to subscantially higher gas prices when transportation costs are incorporated. vw x AGENCY RESPONSE 6. ONR: Draft Objective No. 6 has been revised, is now Objective No. 8 and reads as follows: : 8. To coordinate leasing with nearby landowners so that: (1) Statewide oil and gas leasing activities are conesive, regardless of land ownersnip; (2) geologic and environmental data may be shared if possible; (3) drainage of commonly owned reservoirs may be equitable; (4) oil and gas exploration and development may continue while ownership disputes are being resolved. The Upper Cook Inlet sale is coordinated with the federal OCS Sale No. 60, to be conducted in September 1981, in that both sales are offering tracts in the same geographic region of the State, thus pulling State and federal leasing activ- ities together in a cohesive program of oil and gas exploration and development. A coordinated lease sale is one that is held within approximately one drilling season before or after a lease sale is conducted on nearby land. A joint sale is one that is held with another landowner at the same sale proceedings. The Federal- State Joint Seaufort Sea Oil and Gas Lease Sale is an example of a joint sale. Joint sales may be necessary due to land ownersnip disputes as were present in the Seaufort Sea example. 7. ONR: Draft Objective No. 7 has been revised, is now Objective No. 9 and reads as follows: 9. To lease first in the most prospective areas and near areas where development has or is taking place so that potential additional development may take advantage of existing facilities wherever possible. ONR: General Comments on Objectives: These objectives are contained in the State's 1980 five-year leasing arogram, which is oreoared by. the Department of Natural Resources. The Department is currently working on its 1981 five-year program and will consider these comments when it writes tne 198] report. 8. REVENUE Should new gas reserves be discovered jin Upper Cook [niet, there will be competing alternative uses for this gas. The oasis of analysis is what the potential cost to local consumers would be snould insufficient new reserves be discovered and curtailnent of local consumption be made in favor of consumption in Southern California. This calculation can be dased on relatively unbiased evidence. Calculation of the denefits to California and the U.S. as a wnole or to Alaska from a Targer permanent fund surplus from increased royalties on exported gas are not calculated Increased employment impacts are included in the analysis. 9, DC3RA: In response to the conmentator's concerns over the analysis of tne balance between local expenditures and revenues, we agree tnat a revision is warranted. This section has been rewritten in the section on Fiscal Factors of the final Analysis. 10, REVENUE: The comparison of cost ts mace Using neat equivalents, 8TU's, wnicn is unambiguous as possible. 11. QC&RA: The Department as well as others invoived in preparing the final Analysis are somewnat unclear as to the thrust of this comment. 12. REVENUE: The point is that an consumer of gas is subsidized at the present time. The effect of price decontro! and future supplies and demands on the future of subsidies is discussed in the revised section of Fiscal Factors (2) in the final Analysis. PUBLIC COMMENTS RESOURCE DEVELOPMENT COUNCIL FOR ALASKA (cont'd) UPPER COOK INLET LEASES Community Wel eing Factors 13 Not enough consideration was given to a scenario which includes the concurrent development during the 1980's of several large scale energy developments in Cook Inlet: the Beluga coal fields (which is scheduled for methanol development); Susitna hydropower project 14 15 16 7 development; Bradley Lake Hydropower development; Pacific Alaska LNG; and construction of high vol intertie between Anchorage and Fairbanks plus oil and gas exploration in Upper and Lower Cook Inle Such a scenario might indica structure than the "existing tage electric transmission lines and an t. te greater need for additional infra- facilities" assumed in this report. Such a major recasting of the basic scenario would result in far different estimates of population changes. There is no indication that Tyonek was involved in an oi the natives donducted on the: netted them approximately $1 the author knew the native village of 1 and gas lease during the 1960's which ir own former Indian Reserve and which 4 million. The history of the conse- quences of this sale's cost/dollar benefits to the Tyonek's is certainly germane to the que Similarly there is no indica exploration and development formation of the Trading Bay Surely an objective analysis health of the fish and wildl than securing opinions of pr more reliable method of assui management than that describ: stion posed on pages 23, 28 and 30. tion the author knew that oil and gas at Trading Bay and Beluga predated the and Susitna Flats Wildlife Refuges. of this historical development on the ife populations in the refuges, rather edictably anti-development groups, is a ring continued -responsible wildlife ed on page 43. Resource Utilization Factors Clearly a major shortcoming of the report is the lack of adequate maps, particularly maps showing land tenure and discussion of land tenure. What this menas is reader knows exactly which L. oil and gas Teasing. This serious ommission is re: of this section: waterfowl the sites of the cabins of tl that neither the authors, nor the ands are open (available) for state sponsible for the very misleading focus hunting areas, anadromous streams and he Susitna Flats squatters. Implied but not stated is that the wildlife reserves are unavailable for oil and gas leasing. An attempt to plot the conse Measures for all refuge land facility construction at all A vast portion of the potent. categories identified as lak creek, river, etc. quences of #10 in the General Mitigating s (see page 84) would result in ni due to the definition. iil ial gas lease region falls into the e, wetland, intertidal area, stream AGENCY RESPONSE 13 & 14 DC&RA: See response to Exxon #9. il : 15. OC&RA: We agree that a description of earlier of] and gas activities in the lease sale are germane to the Community Well-Being factor which addresses value or lifestyle conflicts. We have provided additional background information in the final Analysis section of Community Well-Being factor #1(b). 16. DF&: AS 16.20.036 describes the management goals for the Susitna Flats Refuge, including how the refuge legislation affects the status of lease agreements predating refuge formation. Refer to the section on Resource Utilization - refuges. Note that page 43 of the draft Analysis Provides information regarding public sentiment toward the proposed lease sale. This information is not scientific evidence and is not presented as such. Also see response to Chevron U.S.A. Incorporated #'s 1 and 2. 17. DNR: At the time that the draft Analysis was written, the call for nominations and comments for the Upper Cook Inlet sale had not been issued. Therefore, only a first generation map was available. The land status of a sale area is reviewed after the call for nominations and comments has been issued. In October, 1980 a revised map became available and is included in the final Analysis. The new map reflects the results from the call for nominations and comments and the initial land status search. The land status search is performed on a township-by-township basis, and a considerable amount of time and work is saved by obtaining an idea of where the interested parties might wish to lease before the land status search is begun. No “wildlife reserves" have been created by the State of Alaska. Game refuges, game sanctuaries and critical habitat areas have been created by the Alaska legislature to protect particularly significant biological communities. These land classifications are open to oi] and gas leasing but special care must be taken in the exploration and development of the leases. The Division of Minerals and Energy Management and the Departments of Fish and Game and Environmental Conservation work together to develop special protective stipulations for these areas. The only areas in which oil and gas leasing is prohibited at this time are the Kachemak Bay and Bristol Bay restricted areas. Neither of these area are near the Upper Cook Inlet sale area. There are no game sanctuaries or critical habitat areas in the proposed sale area; however portions of the Trading Bay and Susitna Flats Game Refuges are included within the proposed area. 18. DF&G: Adjustments have been made in this recommendation. Refer to the section on Resource Utilization - refuges. IC_COMMENTS 19 20 21 22 RESOURCE DEVELOPMENT COUNCIL FOR ALASKA (cont'd) .General Comments There is a lack of overall cohesiveness, and some misinformation, in the document which should be corrected. There are numerous instances, most of which have already been cited, where experience and historical data does not support conclusions and recommendations. There are reference documents cited which are noc accepted as techni- cally accurate and as such detracts from the comments credibility. An example is found on page 5: Planning for Offshore Oil Develo; ment - Gulf of Alaska Handbook, Coamunicy and Regional Affairs, £578. There is a frequent lack of definition of terms such as on page 84: “primary waterfowl area." If the book is to be used by a variety of people, researching such terms should not be left to the reader. On page 48, paragraph 2, last sentence: "It is likely that the development of an oil field adjacent to a spawning stream on the west side of the Cook Inlet could result in reductions in commercial salmon harvest." We find no evidence or documentation to support such a claim. The question and answer format tends to direct the analysis and is manipulative. An example is on page 47, Item l in the use of the term, “irreversible resource commitments." Consumocion of any non- renewable resource is an "irreversible commitment." This does not mean we can afford to leave that resource in situ, but rather that we must wisely develop the resource and use such energy sources in con- junction with other renewable and non-renewable resources to optimize the benefits and minimize the cost to sociecy. 23 4 serious ommission in the draft is chac of a master map of the lease area. The individual maps are helpful, although in some areas inaccurate, but there is no definition of which lands are actually available for leasing after permanent withdrawals, proven fields, existing leases and native owned lands are removed. It is important to stress chat a valid indicator of future impact is that of exploration and production in the Cook Inlet to date. The Department of Natural Resources states on page 47 of the draft: Uncil Prudhoe Bay production came on line, the Cook Inlet Basin accounted for the majority of cotal oil and gas Production from State lands. Five oil fields and numerous gas fields have been developed in the Cook Inlet area over the past two decades, with more chan 700 wells drilled, approximacely hal? the cotal number of wells drilled statewide. The proposed Upper Cook Inlet sale region is considered part of a major gas province, Existing Usok Thiet develsouent toe ROE been known co have any substantially negative Impaccs Underlining a on other resource Industries. While che overall tone of the AACL analysis emphasizes che potencial Negative impacts, this is probably one of the more positive points broughe out. 50 AGENCY RESPONSE 19. QC&RA: We agree that Planning for Of*shore Oil Develooment--Cul? 9 aska andbook snould not be used as a reference in the Economic Factors section, but not - for the reasons cited by the commentator. It should be deleted because the Sulf of Alaska Handbook pertains to the outer continental shelf in the Gulf of Alaska and not to State waters and uplands of + Upper Cook Inlet. It would have been more heloful if the Economic Factors section clearl stated his assumptions, rather than citing a general reference. Unfortunately, the Department of Commerce and Economic Development, which prepared this section, has undergone a major reorganization that has precluded obtaining a Departmental response to tis comment. The commentator's implication that the Gulf of Alaska Handbook is not a credible document has not been suoported through subsequent correspondence with this Department in which issues have arisen regarding economic growth, the purpose and use of scenarios and the journal- istic style that was used in preparing the handbook. 20. OFaG: Oefinitions of primary waterfow! habitat and vital lands have been included in the final Analysis. Refer to the section an Resource Utilization - refuges, anadromous streams and recreational areas. . 21. OFSG: Apparently the Resource Development Council misunderstood this statement. Conflicts between commercial, sport, and sudsistence user groups in Cook Inlet already exist. If a commercial . oi] discovery is made in the Unser Cook - Inlet area and this drings additional people into the region, the existing Oressure to reallocate portions of the , commercial salmon harvest to recreational . and subsistence users is likely to increase. If oi] develooment resuits in improved access to currently inaccessible spawning streams in the lease sale area, harvest of spawning fish is likely to . increase. This will result in decreased salmon production, unless the narvest of salmon is reallocated to allow greater numbers of fish to reacn new recreational fisning streams. Because the commercial fishery harvests most of tne saimon in the Inlet, there will be consideraoie political pressure to reallocate a portion of their narvest to other users. Reductions in commercial salmon harvest is likely to occur under these circumstances and the Department stands by this assertion. 22. OPoP: This Analysis was designed in a question and answer format in order to focus attention on specific factors. With such a broad range of factors influencing the ultimate lease sale decision, it was felt that framing analysis around logical questions would nelo to crystallize the issues involved. This Analysis on the Upper Cook [niet oi! and gas lease sale is the first to be undertaken using this format. we feel that the results warrant its continuation. Revisions to these questions will undouotedly occur as the process evolves. The Resource Development Council of Alaska's comment will be considered when revisions are . made. 23, ONR: We agree that a “master map" > would be a good addition to the final Analysis. . For the reasons outlined in our response #17 adove, nowever, it nas been difficult coordin- ating the publication of maps with the develop- ment of this Analysis. OPOP: Comment acknowledged. future Analyses will hopefully contain sucn a ‘master map" once the process Decomes More refined. PUBLIC COMMENTS 24 25 26 2 RESOURCE DEVELOPMENT COUNCIL FOR ALASKA (cont'd) The Council urges the state to lease those lands which are at its discretion and support multiple use of lands. Alaska already has national interest lands which preclude multiple use; it is not in the best interest of the state to limit the use of state lands as well. On pages 77 and 78 discussion of state park public interest lands would seem to indicate that most entry to these lands would be denied by the Division of Parks and/or the Department of Fish and Game. The Council's Technical Review Committee finds it commendable that this report was prepared by the Governor's Agency Advisory Committee on Leasing considers the economy as well as the environment. It is evident, however, that all too often we find the experts drifting outside their areas of expertise and offering comments on subjects for which they are not qualified to judge. An example is when an economist presumes to make judgments concerning ship traffic safety and siting of an LNG plant. When such comments are included they naturally raise questions of the credibility and validity of a study or report, detracting from the effectiveness of the document. Another example would be an opinion poll done by persons with no background for such work and should not be included, especially when valid opinion polls are available. An opinion poll of refuge users would not be valid if it concludes or implies that conservation organizations are the only users of refuge areas. 7 This report suggests that housing in the Kenai-Soldotna area is tight while no records are available after 1977. While other areas of the report set the record straight, it would be better and less confusing to have deleted the old data and simply used current information available. If valid current data is not available, the item should be deleted. 28 Further, an economist who believes the existence or non-existence of one LNG plant will change the cost of utilities in Anchorage is obviously giving no consideration to the worldwide energy situation. To suggest Alaska can declare its energy sources off-limits or set its own prices on non-renewable resources is, at best, naive. 3h AGENCY RESPONSE 24. DNR: The agencies involved in preparing the Analysis must overlay maps of these various land classifications and the proposed sale area to determine if there are any overlaps that will necessitate mitigating measures (stip- ulations). The public interest lands discussed on pages 77-78 are managed by the Division of Parks, not by the Department of Fish and Game. The Department supports the concept of multiple use and will continue to allow all compatible uses of State refuge lands. However, depending upon the activities, management for one use may preclude responsible management for another use. The primary objectives and priority uses of refuge lands are clearly specified in AS 16.20.036. Refer to the section on Resource Utilization - refuges. 25. OPOP: To the extent possible and reasonable, agency personnel have restricted their analysis to their particular field of expertise. After reviewing the Analysis in light of this comment, we did not find the specific example to which the Resource Development Council of Alaska refers. 26. OF&G: The section on public sentiment toward the proposed sale has been partially rewritten to clarify the origin of the refuge user list and final results of the questionaire. Legislation creating these refuges clearly states that the two primary objectives are (1) long-term wildlife production, and (2) human use in a high quality environment. Refuge users (i.e., sportsmen, recreat- ionalists, etc.) constituted a majority of the recipients of this questionnaire, and in light of the primary objectives of refuge management, their opinions regarding oi] exploration and development within the refuges must be considered in the decision- making process. In addition, advertisements were placed in both local newspapers soliciting opinions from any interested parties. Individuals not contacted through the refuge user list had an opportunity to respond at that time or at the public meetings held to discuss the proposed lease sale. 27. DC&RA: On page 38, the draft Preliminary Analysis states that the most recent measure of vacancy for housin unit was taken in 1977, Other Figures Tgures cited in this section kd to new housing starts, 1977-1979 and apartment vacancy rates, -1979. While it wou @ desirable to have a 1978-1979 housing unit vacancy statistic for comparison, none is available. However, the preliminary Analysis states that between 1977 and 1979 Kenai's population declined by 944 and Soldotna's by 217. Ouring the same period 467 new housing units were authorized in Kenai and 277 units for Soldotna. The analysis goes on to conclude that a buffer stock of available housing has probably been created as a result of a slightly declining population and increasing housing starts. Given the lack of current data on vacancy for housing units, but the importance of that factor to the argument laid out in this section, we feel that the only reasonable response to the comment- ator's suggestion is to first state the con- clusion of this section and only then present. arguments supporting it. See changes in- corporated into the Community Well-Being Factors (3) section of the final Analysis. 28. REVENUE: Obviously the price of energy is determined by markets much larger than Alaska. The presence of demand for Cook Inlet gas for export, however, raises questions of the adequacy of supply to meet a1] demands. Curtailment of supply to local demand in favor of export demand increases local utility costs as other more expensive sources of energy must be relied on. Gas prices are subject to regulation and are much lower than prices of alternative fuels. PUBLIC COMMENTS RESOURCE DEVELOPMENT COUNCIL FOR ALASKA ( cont'd) 29 30 Comments Regarding Oil Spill Statistics Risk Factors; 2nd paragraph, firsc sentence is a truism; at spill would have significance effects on fish and wild- emphasis added) 2nd sentence--recites Alaska Oil and Gas Coumission estimates of Cook Inlet reserves; no problem. 3rd sentence--"Most of these resource reserves are thought to lie within or adjacent to the proposed sale area." The sentence is no doubt true, but what is not stated is that only a very small portion of the estimated Cook Inlet reserves are attributed to the lands available to be leased at the proposed sale #33. The majority of the anticipated reserves are either already under. lease and in various stages of development or the minerals are owned by parties other than the State, such as Cook Inlet Region, Inc. Therefore, the analysis is misleading in crying to establish a much higher risk of a major spill than is appropriate for the lands actually under consideration in chis proposed action. Pages 109/110 regarding probability of an oil spill--see Blair Wonzells 5/23/80 analysis. Page 110--final paragraph; I take exception to the final paragraph on page 110. The statement is a conclusion of need for additional mitigating measures without supporting documentation for the extra burden. Efforts to minimize the potential impact of a very unlikely major oil spill should obviously be encouraged to the extent they are truly effective. Present laws and regulations of the Oil and Gas Conservation Commission with regard co drilling and producing practices already provide complete authority and the mechanics to enforce good environmentally safe operating procedures. Add to this the overlapping regulations of the Alaska Department of Environmental Conservation, the U. S. Army Corps of Engineers and the federal EPA and OSHA laws and you have already created more regulation and encumbrances to stop drilling operations than could possibly be needed, and unfortunately many of these add virtually zero protection but add many dollars to the costs of operations and government administration which must be paid for by the energy consumers and the taxpayers. AGENCY RESPONSE 29. OF&G: Of] spill probablity predictions presented in the draft Analysis were compiled by the Bureau of Land Management OCS office and included in the Final EIS for the Lower Cook Inlet Sale CI. Except where otherwise stated in the EIS, these predictions are based on USGS spill statistics for the 10-year period, 1964-1975. The percentage of oi] spilled per barrel produced is a constant which has been derived from past experience with oil spill incidents in existing oi] fields. The actual volume of predicted oil spillage can vary depending upon the amount. of of] produced, but it is assumed that this will fall within the percentages spilled in recent years. 30. OF&G: Comment acknowledged. PUBLIC COMM EXCERPTS from the PUBLIC HEARING, 6/25/80 ANCHORAGE, ALASKA MR. SANDBERG: Good morning, Mr. Commissioner. My name is Mark Sandberg. I'ma lawyer from downtown. I'm also the new president of the Alaska Waterfowl Association. Now, last night as I read and re-read your Analysis, I think it's a very good document, but I also think it reads like a compendium of reasons why we ought not to have a lease sale in the area. It struck me that we're talking about trading some fairly modest economic and...economic gains in the area of revenues and in the area of jobs for some fairly significant environmental impacts. Now, I know the Department of Fish and Game has told us that those impacts can be minimized, and those people are professionals. I don't mean to suggest that I think I know better, because I certainly don't. But what I would suggest is that, speaking on behalf of a group that's heavily involved in recreational utilization of the area, I would like to see some consideration given to the quality of the human experience and the recreational experience, and I certainly did not seem to find that in this book. Mostly, it seems to talk about economic tradeoffs, about moving guides to some other area, about doing things that have only to do with dollars. And while it certainly recognizes that there are a lot of very important salmon spawning areas, a lot of critical habitat, it doesn't really seem to address striking the balance between the critical habitat and those environmentally sensitive areas...and, the modest development which we're talking about here, the modest gains that we're talking about here. So, what I'd like to suggest is first of all, I would very much like not to see any of] and gas development on the refuges. I think that those areas, even if we can keep--I mean, even if the Department of Fish and Game is right, and even if we can have as many ducks and as many geese and as many cranes as we had before, there is more to the experience of being out there than simply man days or number of ducks produced by a particular pond. And I would suggest that it's fundamental) inconsistent with the character of those areas to have oil and gas development occur out there. The second thing is, I would also request that...that critical areas outside of the refuges be identified and be excluded. I... personally, I obviously don't feel qualified to tell you what those are. I mean, you have professional people and I would not suggest we ought to second guess them. But, I would suggest that for the very modest gains we're talking about here in terms of overall state policy, I would strike the balance somewhat differently. Thank you. MR. ALMARAS: Good morning. My name is Jacob Almaras. I'ma five-year resident of Anchorage, Alaska, and I'm here on behalf of myself as a refuge user. And I'd like to just supplement some of the comments that Mark Sandberg has made. First of all, I don't know whether any you folks are waterfowl! hunters. If you are, then I think you can...you can appreciate the fact that the waterfowl hunting experience, the actual killing of birds is...is...is kind of an incidental bonus. Most waterfowl hunters go to the field to get away from the city, to go to an area where there are no roads, where there are no oil rigs. Un, I can picture myself greeting the dawn in a duck blind in the Susitna Flats area where I've hunted extensively since I've been in Alaska with my eleven year old son in the shadow of an oil rig or looking over a nice gravel road. And I submit to you that that cuts the joy of that experience, the hunting experience, immeasurably. Please also bear in mind that we're talking about an area as is in the report that is heavily hunted by Anchorage residents. I think the statistics cited in the report were that 12 percent of all duck hunting activity occurs in the Susitna Flats refuge. Now, if you take 2 look at that area, you will note that its accessible by air from Anchorage, and it's accessible in all but the most prohibitive weather conditions. There are no mountain passes to negotiate, and it's also wo AGENCY RESPONSE 1. OF&G: Maintaining a high quality environment for the purpose of recreational and esthetic enjoyment of refuges is one of the two primary objectives of refuge manage- ment, and many recommendations designed to preserve these values of refuge lands are included in the final Analysis. Refer to the section on Resource Utilization. 2. DF&G: Comment acknowledged. 3. OF&G: The Department has requested the deletion or delay in leasing of certain critical habitat areas outside of the refuges. Refer to the sections on Community Well-Being - public sentiment and Resource Utilization - fish and wildlife populations and their habitats. In addition, lease activities within the refuges which involve primary waterfowl habitat or vital lands will be subject to special protection and mitigation measures. Refer to the section on Resource Utilization - refuges, anadromous streams, and recreational areas. 1. D&G: Comment acknowledged. c AGENCY RESPONSE PUBLT AGENCY RESPONSE PUBLIC HEARING 6/25/80 (cont'd) an area wnich a sufficient number of lakes to make float plane access relatively easy. There are certain areas there where people also land on wneels, but I...the major, the major way to get-over there is by float plane. Tf you diminisn the hunting experience, where do we go? Oo we go to the Chickaloon Flats? Well, from what [ understand, the Chickaloon Flats is a smaller area and an area that's damn tough to get in and out of. Uh, where else do we go? 00 we go to Cordova? well, Cordava’s a lovely hunting area, but, of course, it's, it's considerably more expensive to get to Cordova and then you're dealing with negotiating mountains with your airplanes. And you may...you know, you're not going to be able to rely on being able to go during the very short hunting season that we have. Effectively, you can hunt ducks on the Susitna Flats from September first until the fifteenth of October. And that's it. So, you know, while I'm certain that the Statistics...the dollar signs will, will give you an acceptable balance on Deper, you cannot measure the esthetic impact, and you'll never be able to do that. I'd be happy to respond to any questions before I go sit in my chair. COMMISSIONER LE RESCHE: I appreciate those comments. And again, the Legislature did establish these areas, not only the Susitna Flats but Trading Bay as areas where just the thing you're pointing out shall be considered before any, any lease decisions are made. 2 MR. ALMARAS: I would be interested in tne final results of the 2 OF 8G: The origin of the refuse user ee list and finaT results of the questionaire are questionnaire that was sent to the refuge users. I submit that there won't included in tne final Analysis. Refer to the section on Community Well-deing - puolic be five percent of those who respond that will respond in anything but the sentiment. mast negative way. MR. GUSTAFSON: My name is Stu Gustafson, and I live in Eklutna Flats, and [ use this same area for fishing and hunting. And I've been pleasantly pleased by Chevron and City Service. My funds are limited too. { can't travel very far, but they're further limited that [ cannot afford floats. and I aopreciate having these roads for safety purposes and what not for landing and going fisning and going hunting and taking my kids out. There's a lot of surface activity over there, but that activity creates a lot less noise than tne mass of float planes and other planes that fly in and out daily during the hunting season, wnich does not seem to affect hunting too much. And any facilities that are on the ground, the amount of noise that I could see that 1 would be coming off them would be pretty insignificant. And that there's more 1. OF&G: Comment acknowledged. traffic because of hunters and fishers than anything, and the more places we have to land over there, the more spread out the hunters can be, and it decomes 2 better situation for everybody. Thank you. MR. SENTON: Good morning. My name's David Benton, and ['n reoresenting Friends of the Earth. Uh, I can't really say much about the document because we didn't receive any notice of this hearing or receive the document until late yesterday afternoon, but we did supmit comments on the preliminary tract nomination. At that time, we hadn't seen any stipulations or anytning from Fisn and Game regarding the refuges, so we informed your Department that we thoughtthat it was not appropriate to lease in the refuges. Uh, I haven't had a chance to review the Stipulations to see whether or not they would actually mitigate ail the impacts we're talking about. Uh, however, the kinds of concerns that we're worried about are roads and facilities and . Structures which will provide increased access to areas that pernaps would recelve less impact from hunting and fishing as weil as other kinds of use than would normally haopen. In other words, what ['m saying is that froma T user standpoint, I would think that the quality of the experience would be 1. OF&G: Comment acknowledged. better if the area was in a wilder state. And if you have a lot of roads and a Tot of gravel pads and some oi1 rigs uperating and what not, then that experience is going to go downhill. PUBLIC COMMENTS AGENCY RESPONSE PUBLIC HEARING 6/25/80 (cont'd) MR. BENTON: One other thing that I did notice looking through it 2. POP: While no explicit reference 2 BENTO! 9 9 ? was made to the Alaska Coastal Management this merning before I came over here is that there's nothing about Coastal Program (ACMP), general consistency is implied and assured since agency personnel Zone Management in there and there's a paragraph that says it'll be...that inte the ACMP wrote their Departments’ the lease sale will be, you know, in compliance with state policiies and goals and what not, but I would suggest that there would be a determination in the document as to how the lease sale is in compliance with State Coastal Mangement Act, because it is affecting tidelands and some coastal areas as well...the. standards and guidelines of the State Coastal Act. MR. COLE: Mr. Chairman, my name is William Cole of Southern California Gas Company, affiliated with the Pacific Alaska LNG Company. We had not intended to make an oral statement today. We do plan on filing written comments on the document and on the sale, but for the purpose of the record today, we would like to go on record as strongly supporting the lease sale. As the Chairman knows and others know in the room, we, of course, are interested in natural gas for California. We see this as a further move in the possibility of natural gas to meet our demand to go on record as supporting the sale, and we will file detailed written comments. 1 MR. COL well, Mr. Chairman, we feel that there is a benefit to the State in establishing, brining into fruition now, the project that we've 1. ONR: This concern will be taken been working on for some period of time. We think that there will be economic into consideration when the Department Prepares its 1981 five-year leasing program. benefits to the State. We feel that, that there are national benefits, Mr. Chairman, that, as a matter of fact, I didn't see in your comments or in the document that was prepared. Uh, it, it goes without saying that nationally we are in a situation where we have an energy problem. We have a dependence on imported energy. This is a matter that, as we all know, was discussed in Venice. And to the extent that we can reduce that dependence, it is in our ‘ national interest to do so. And hence, we feel that it is not only in the interest of Alaskans and Californians, but in the interest of our nation to be in a position to reduce that dependence. And we feel that this sale, in part, may accomplish thet or foster. that. MR. BOYD: My name is Bruce Boyd. I have a fishing site on the MacArthur River, and I've been in the area of Trading Bay extensively for the last five years. Uh, that area has a lot of wildlife in it that Fish and Game evidently is not aware of, for one thing. I talked to Dan Tim, the Biologist, that's presently investigating that area and have told him about Eagle nests, Swan nesting sites, and such, that he was completely unaware of. He was down there a few weeks ago, and he said that he was surprised to see as many ducks as he did see. So, I think your, your statistics in here as far 1 as wildlife goes in probably quite a ways off. Uh, like for instance, it...in OF&G: Que to budgetary, logistical, and time limitations, OF&'is unable to once place in here it said that there was no Sandhill Cranes in the Redoubt Conduct completely comprehensive resource evaluation studies on all State lands. Bay or Trading Bay area. Well, there is quite a few nesting there. The Additional data is welcomed, and the information passed on to Dan Timm numbers of Eagles that it indicates in here is, is way off. Because there's has been noted and will be considered in developing management policy. Just many, many Eagle nests, highly used Eagle nests in that area. But the one thing that I noticed in that area is the only places you find Eagle nests ang Swans are areas that...where there is minimal or no use by other people. You know, like the Trading Bay facility there that Marathon operates, anywhere's near that facility you won't find Eagle nests or Swans. And that area...I think that I feel that if they're allowed to put roads into that area, that it's going to eliminate the Swans in that area and it's going to eliminate the Eagles in that area. 2 MR. 80YD: So, uh...and the fishing in that area, too, I think, could 2. DF8G: Comment acknowledged. be highly affected by roads, roadwork, and so on. Plus, if these roads are opened to everybody, the hunting pressure, there is going to go up. tremendously. 10 11 12 13 14 15 16 17 18 19 20 21 STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES BEFORE PANEL MEMBERS: COMMISSIONER 808 LERESCHE, Chairman BRUCE BAKER, Governor's Office Staff Kenai Borough Assembly Chambers Kenai, Alaska The above-entitled hearing opened, pursuant ta Notice, at approximately 1:00 p.m. on Monday, June 23, 1980, at the location set forth above. eel ALASKA-WIDE COURT REPORTERS 545 EAST FOURTH AVENUE — 277-6922 ANCHORAGE. ALASKA 99501 10 ll 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Name FRANK McILHARGEY VINCE O'REILY LEN McLEAN WITNESSES Representing Kenai Borough Assembly Mayor of Kenai PacAlaska LNG 8 ALASKA-WIDE COURT REPORTERS Page 10 ll 12 13 14 15 16 17 18 19 21 | 22 23 24 25 20 Name VINCENT O'REILY FLOYD HEIMBUCH D0. O. CADDY LEN McLEAN JIM SETTLE GENE SANAR ENWARD AMBARAL A. B. SCOULER J. K. GUILD FRANK McILHARGEY IN ATTENDANCE Hin earulliens Representing Mayor, City of Kenai CI Aquaculture Shell Oi] PacAlaska LNG PHILLIPS EXXON Kenai Borough Assembly Tenneco Oi] Company Southern California GasCo. Kenai Borough Assembly ALASKA-WIDE COURT REPORTERS 545 EAST FOURTH AVENUE — 277-6922 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PROCEEDINGS COMMISSIONER LERESCHE: The purpose of this meeting, and it is that, it is not a public hearing or anything, is to get what local comments we can at this early stage on our proposed oil and gas lease sale in the Lower Cook Inlet and also the Upper Susitna Basin. This will be the fifth sale on our present five-year leasing program. The first one was in Copper River last summer. You had the Beaufort Sea Sale, which some of you probably heard of. Ah, between now and the sale at hand, we're going to have another sale of relinquished acreage near Prudhoe and another sale in the Prudhoe Bay Upland, south of the Prudhoe Bay field and then this, the Lower Cook Inlet-Upper Susitna Sale, which the nominating area is outlined on this map. It is scheduled now for 1980, maybe early 1981, depending on how things go. Ah, the sale area that is proposed is approximately 90,000 acres, which would boil down to about 350 tracts, if we did four-section tracts as we likely will. According to state geologists, the potential in the Cook Inlet area is moderate to high and in the Upper Susitna Basin--the little block up above-- is moderate to low. There is high industry interest in the area, as most of you sitting out there realize. Now this is the first sale, first state sale, to receive what is called a "major project review." This process was established by the Governor's office to give us a little more basis for analysis before we have the sales. Essentially, to formalize the types of comments we're bound by law to get from all state agencies and citizens before we go ahead with the sale. Along with the major project feview, is a document which is available in the back of the room as a preliminary draft, and this is a compilation of comments and suggestions from all concerned state i. 139 ALASKA-WIDE COURT REPORTERS 345 EAST FOURTH AVENUE — 277-5922 10 11 12 13 14 15 16 17 18 19 20 21 22 23 | 24 25 | agencies regarding this sale area, the sale itself, the possible positive and maybe negative impacts and suggestions for what kind of special stipulations may or may not be put on the sale. This document and the final form of it is purely an advisory document to myself as Commissioner and to the Governor as we go to finalizing decisions on the sale. That is, decisions as to what tracts to offer, what terms to offer them under, and things like that. These are available in the back. We do certainly want comments on them. I'm sure the Governor's office would like comments not only on the substance but on the usefulness on this type of analysis, an the formal, and things like that, since this is the First of these documents that the State has produced. In the document, there are addresses to which you can send your comments. We also have sign-up sheets in the back, and I would appreciate it if everyone in the room would sign up as part of the public record. As most of you are aware, the public record Proceeding sale is becoming more important in this State, witness what we are going through on the Beaufort Sale right now. With me is Bruce Baker,who is a member of the Governor's staff, who was instrumental in putting this document together, and he will also be listening to any comments we have. With that, I'm sorry this room is laid out the way it is. We don't want to stand behind this thing, but I guess it's the only way. I would like to hear from anyone who has comments on this proposed sale, whether or not this area needs it, or wants it, and any special types of provisions that might-- you might suggest be included in this sale. And whoever wants to speak, please sit way down there. FRANK McILHARGEY: Am I coming through this PA? COMMISSIONER LERESCHE: I guess so. I can hear you pretty well the <7 40 ALASKA-WIDE COURT REPORTERS 345 EAST FOURTH AVENUE — 277-6922 ANCHORAGE, ALASKA 99501 10 11 12 13 14 | 15 16 17 18 19 20 21 22 23 24 25 ‘ director for the Kenai Peninsula Borough. The Borough Mayor, Don Gilman, has way it is. She is recording this, recording the comments. FRANK McILHARGEY: I assume this is a public hearing. I have written comments here, but if you will excuse me, I will read from them. COMMISSIONER LERESCHE That's fine. FRANK McILHARGEY: I am Frank McIlhargey, the economic development asked me to direct these few remarks for the record of this hearing. We may submit more information within the time frame allowed. We are still reviewing the document and some considerations need more time. First and foremost, the Kenai Peninsula Borough is in full support of the State moving ahead with its oil and gas lease sale in the Upper Cook Inlet. The area centered by the established portion, the existing industrial and community interest structure has a capacity to support exploration and the level of development likely to occur should there be commercial findings. This is oi] country and you might say, "we're ready." We want to compliment the State agencies who participated in this analysis, and we like the idea of the analysis. ! think it's very helpful. We're very impressed with how knowledgeable some of the departments are in their considerations of the sale, its potential, and the adaptability of the Cook Inlet area to support the levels of activity which the sale might cause. However, we are concerned with several areas of the Report dealing with the plans and development here of the Pacific Alaska LNG plant. When under construction and in operation, the plant will be of positive consequence to the area and to the state, considering that we are talking about a billion dollar construction project to be built over a three-year period and employ at least 1,200 construction workers with long-term benefits of around $4 million -8- di ALASKA-WIDE COURT REPORTERS S45 EAST FOURTH AVENUE — 277-6922 Pace alaeva 10 11 12 13 14 15 16 17 18 19 20 | 21 22 23 24 | 25 yearly in local taxes with an equal number of dollars going through primary and secondary employment, local purchases and other business-creating activities. You must realize that we here in this area get very nervous regarding statements which challenges the prospects of that plant being built. We're not paranoid of the subject, but we are hyper, that's for damn sure. First, we direct your attention to page 98, the discussion by the Department of Environmental Conservation. To get into the hazards of LNG titles in relation to heavily, populated areas and to suggest that any of these titles for LNG should be out at the Nikiski-Kenai area, we feel that this statement needs to be clarified and to be interpreted in several ways. To us, it implies the challenge to the location of the Pacifid Alaska LNG plant at Nikiski. If that is intended, it would seem meaningless to us. The company site has already been through the hoops and has full approval. The regulations recently promulgated by the Coast Guard as cited by DEC do not apply. The company has "grandfather rights" as we understand it. One can only conclude that environmental...DEC's concern with other plants which might result from the products producing this sale. If so, their consideration might be some- thing to bear in mind. However, it is not likely based on the quantity of the natural gas available in the Cook Inlet basin; further, the liquid faction of natural gas is potential or likely in this area. We also question as to clarification their considerations of the dangers of tanker movements in the Nikiski area. The potential for new discoveries, that new discoveries will cause additional tanker traffic is unlikely. The best case is that there will be sufficient commercial finds to sustain the existing levels of production and traffic currently in the area. So the point seems moot except 3~ dQ ALASKA-WIODE COURT REPORTERS 345 ZAST FOURTH AVENUE — 277-6922 ANCHORAGE. ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 for one concern we have. That is the implications on the movement of other shipping in that area. We have hopes that the area will be a site for expanded industrial and general cargo shopping activities in the future. Now, DEC is specifically talking to the movement of tankers. Their concern would seem to question any additional shipping activity in that area so long: as tankers are part of the overall traffic. Also in our noseguard defense for Pacific LNG project, we turn to the Department of Revenue's analysis found on pages 9 through 13 and pages 46 through 49. Like the Department of Natural Resources will comment, we question the Department of Finance's opinion that Cook Inlet gas supplies are not sufficient to support the LNG's plants and long-term local, commercial, and residential needs. The Stanford Research Institute studies have concluded that based on projected, identifiable demand, there is, in fact, "enough gas to go around." We are much more willing to go with the accuracy of Stanford Research Center than we are with the Departmen of Revenue. Therefore, we do not agree with Revenue that: first, the LNG plant will not be built should there be no significant finds from this sale and second, that the construction of the plant will have near and long-term negative effects even with significant finds of natural gas. Their point seems torbe that LNG export it from the area, reduce the long-term supply available to users here, the result being an increase in price which would take natural gas out of the range of low cost fuel for local uses. In consideration of this. point, I think we need to recognize that the availability of natural gas to the Anchorage consumer, an energy market, is not hte result of the presence of local markets but rather a secondary and perhaps subsidized benefit of local markets, but rather a secondary and perhaps subsidized benefit of primary -10- are ALASKA-WIDE COURT REPORTERS 545 EAST FOURTH AVENUE — 277-6922 ANCUABDAGE AL Aen anans 10 il 12 | 13 14 15 16 17 18 20 21 22 23 24 25 national and international market demand. Alaska's oil and gas resources would not and could not be developed to satisfy Alaska's market. They are just too small] to justify the development and production costs. So the presence of gas in the area and the fact that there is a demand elsewhere makes gas available to users in this area and local markets should be served and not under the terms which Revenue implies that gas should be made availeble. The local utilities and we, the consumer, have the fortunate and local consumption of being satisfied in the contract rates that are now much less than todday's market price. We are not paying the going rate. As a result, we have the benefit of cheaper heat and power subsidized by the State and all the citizens of the State. This has to be considered if we agree that oil and gas resources taken from state lands are owned by every citizen whether living on the Kenai, in the Anchorage bowl, in Nome or wherever. I would offer that the only means through wnich oil-state residents can equally share the benefits of those resources would be either distributing the resources to everyone equally or through sale at true value. Obviously, the distribution of gas throughout Alaska is not possible; thereofre, any price that the State accepts for its royalty shortof the going market price is a loss of state revenue enjoyed by every resident; in effecr., a subsidy to the few residents. So, a summation of this matter of supply in the crisis of gas and local consumption, local availability is a result of the demand elsewhere so long as that demand is a vehicle through which the resources are developed. Any portion of the resources available locally at the fair market price is a positive rather than negative effect. The negative effect would be in providing the resources at a reduced price and such in-state use would then roresent subsidies from all -ll- §4 ALASKA-WIOE COURT REPORTERS S345 EAST FOURTH AVENUE — 277-6822 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 | 18 19 20 21 22 23 24 25 state revenue to those of you residents. In listing the proposed positive and negative effects in the Upper Cook Inlet, the Department of Revenue seems to fail...or at least I didn't pick it up in my review...fail to review, consider all of the positive effects of Pacific Alaska LNG development. They did consider construction and LNG employment. They failed to.consider...at least from my review...tne revenues to accrue locally and through the State through taxes and gas receipts. There are a few other matters that need additional consideration with the State's analysis. On page 31, in the Community and Regional Affairs review of government services, we ask that the State and Borough provide health services be corrected, to remove the impression that we exercise such powers on a Borough-wide basis. The Borough does not have those powers. The hospitals at Homer and Soldotna are operated by special districts while the Seward Hospital is owned by the city and the convalescent hospital there is privately operated. We are also giving further considerations to such recommendations that appear in the analysis as CBIP-type funding, gross monitoring, air-quality measurement, man-power training, enabling legislation for shared revenues and finance and assistance to be effected in the municipality. If we have further comments, they will be furnished prior to your July 21st memo. COMMISSIONER LERESCHE Thank you, Frank. That was very useful. Ah, I might clarify a couple of things. This is a draft document, and it came directly from those departments. I'm sure you realize, and I know Lynn does, the State has been strongly supportive of the PacAlaska LNG project from the beginning of the hearings and throughout, and this document certainly shouldn't imply any change in our position on that one. Ah, I was also very interested -i2- do ALASKA-WIDE COURT REPORTERS 545 EAST FOURTH AVENUE — 277-6922 10 ll 12 13 | 14 15 16 17 19 20 21 22 | 23 24 25 in your comments about the price the State should get for its resources. I'm sure the gentleman from Tesoro will remember that when I sell the royalty oil next time, too. Thank you very much. I appreciate it. Vince? VINCE O'REILY: My name is Vince O'Reily, I'm the Mayor of Kenai. I wanted to express that the city has not seen any assertable objection to your proposed lease sale. As a matter of fact, from the information brought to us by citizens, it indicated support for this sale and the continued lease sales. Many of the points raised by the Borough, we would also be interested in having further answers to. But in general, what we wish to indicate on the record is our support for this ald also that you act upon the various state agencies to do a detailed study in advance to do a thorough process. COMMISSTONE® LERESCHE: Okay. Maybe I can ask both of you gentleman: have you had sufficient contact so far from the state agencies who have worked on this thing? VINCE O'REILY: Very little, if anything. FRANK McILHARGEY: I've had no contact myself. Now, I can't speak for the Borough Planning Department. I don't know of any state representative that came to the city for specific information, Bob. COMMISSIONER LERESCHE: Okay. Thanks. I sure would like to hear from someone else. All I can say is the hearing in Barrow on the Beaufort was a little bit longer than this one. (laughter). Are there any further comments? How about questions? Do you want to talk about land disposal? (laughter) FRANK McILHARGEY: I might add, Bob, that probably we will be going througm some kind of point-bypoint analysis, 0D analysis, because things need tb -13- 46 ALASKA-WIOE COURT REPORTERS 345 EAST FOURTH AVENUE — 277-6922 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 | 20 21 22 23 24 25 be clarified in the report. There's kind of a broad statement about the development today eliminating what appears to be taken based on the language, the number of beach sites, and I don't think that's the case. I think where statements like that are made, they should indicate that these beach sites were eliminated--fishing sites--and they should cite how many actually were used up. Because, as I go out in the Nikiski-Kenai area, I see guys operating fish sites right next to the industrial facilities. I don't see any-- COMMISSIONER LERESCHE: I was curious about that myself. When I lived here, they had nets right underneath the dock. FRANK McILHARGEY: And other things, we share a very worthwhile statement in the review. I think it was your Department that made it, but there should be a fish-laon discussion before this is finalized with the people of Tyonek, ah, and the various state agencies and the Borough about some impacts on the Natives. COMMISSIONER LERESCHE: Yah, we would appreciate very mich any comment you could give us in writing, including everyone here, however complete or whatever. LEN McLEAN: For just a matter of clarification, you want typo's pointed out also? COMMISSIONER LERESCHE: Well, that depends on how busy you are. (laughter) I wouldn't worry about pointing out-- LEN McLEAN: I mean, sometimes misspelled words can be very misleading. I have to read a sentence three or four times before I discover it was a misspelled word. COMMISSIONERLERESCHE: Sure. ye 14g “ ALASKA-WIDE codn¢ REPORTERS 5345 EAST FOURTH AVENUE — 277-6922 10 11 | 12 | 13 | 14 15 16 18 aa 20 21 22 23 24 25 LEN McLEAN: "Has" substituted for "gas." COMMISSIONER LERESCHE: You've got it. It's only one character. Anyone else? Well, comments or questions on anything else the State is doing to you or for you? FRANK McILHARGEY: Let me just ask you a question, Bob. When you have a deadline for commentary on the 21st of July, when would you expect to publish the final document? What implications will that have on the sale? COMMISSIONER LERESCHE: Well, as I said, this document is an advisory document to the Commissioner of Natural Resources and, of course, the Governor who ultimately approves or disapproves anything I suggest. And presumably--I will defer to Bruce, but the document will be rewritten in light of the comments. So, it's an important place to get your comments in. Of course, before actually having the sale, we have all the statuatory notice requirements which will be time for more official comments. I know I personally will use this quite a bit in making the smaller decision on how to hold the sale and so, I would appreicate if you have anything significant to comment on this document. Bruce? BRUCE BAKER: July 21 will give us a comfortable time period, Frank, in which to crank this thing around to accommodate the comments we've heard to get it to the Commissioner and the Governor in the fall, like we plan on giving the sales in December. This is one piece of that presale process, of course. We figured five to six weeks would be okay for most people. If somebody has a real problem with that, I guess they could contact us and we could, you know, do something. COMMISSIONER LERESCHE: Yes, any further comments, I mean, I'l] listen -15- 48 ALASKA-WIOE COURT REPORTERS 545 EAST FOURTH AVENUE — 277-6922 ANCHORAGE ALASKA 99501 10 11 12 14 15 16 17 18 19 | 20 21 22 23 24 25 to them until the day of the official. notice, which is 30 days before the sale, so you won't be shut off July 31. I might comment now, too, there's a good chance this sale will slip into the first, second, third month of 1981. Now the Governor has certainly instructed me to have these sales on schedule if we possibly can and that is our objective, but due to some things that occurred in the Legislature this past year, that is funding for our geologists being delayed months beyond when we thought we would get it, there is a chance of some slip, but that certainly won't sine any intent not to proceed with it. It will be just an adminstrative delay which I hope doesn't happen, but I felt I should point that out today. We do have one of the Borough Assembly people, Ed Barrian...oh, that's you. Okay, he will be an exofficio member on this advisory committee to advise myself and the Governor so you will have a direct line through Ed to us as we continue with this preparation. BRUCE BAKER: You know, one thing, Frank, that might be valuable, is for you to...for me to have one or two agency people just contact you direct... or for you to them. It could work either way, but you might just be able to talk a little bit about a couple of the points for instance that the Department of Environmental Conservation had a tanker traffic and on facility siting. Each of you might get a little bit better understanding of where you are headed on that so that your comment and their reaction to it will be a little bit more to the point. I'm sure they would be glad to chat with you on it. FRANK McILHARGEY: We will make those comments. BRUCE BAKER: Yah, there's a person who wrote that in DEC. I can give -16-49 ALASKA-WIDE COURT REPORTERS 545 EAST FOURTH AVENUE — 277-6922 ANIGURBARE AL AGHA aaKAt 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 you his phone number. UNIDENTIFIED PERSON: Do you want the Commissioner to close this with a prayer? (laughter) COMMISSIONER LERESCHE: I've learned a lot of those in the past few months. (laughter) I do appreciate your all coming and I further appreciate everyone signing the sign-up sheet so we will keep our record very organized this time around. Thanks very much. It's a pleasure to se all of you again. (The hearing adjourned at 1:40 p.m.) =17-50) ALASKA-WIDE cous REPORTERS $345 EAST FOURTH AVENUE — 277-8922 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 | 21 22 23 24 25 | STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES BEFORE PANEL MEMBERS: COMMISSIONER BOB LE RESCHE, Chairman Matanuska-Susitna Borough Assembly Hall Palmer, Alaska The above-entitled hearing opened, pursuant to Notice, at approximately 1:00 A.M. on Wednesday, June 25, 1980, at the location set forth above. = SE aie REPORTERS 345 EAST FOURTH AVENUE — 277-6922 10 11 12 13 14 15 16 | 18 | 19 20 21 | 22 23 24 25 PROCEEDINGS COMMISSIONER ROBERT E. LERESCHE: We have someorie who wants to speak to this resale, so let's do it. MR. ALLEN TESCHE: We have ‘competing microphones here so I will take my choice. Thank you, Commissioner LeResche. My name is Allan Tesche. I am the attorney for the Matanuska-Susitna Borougn. I have been asked by Mayor Larson today to come forward at this hearing and represent him and the Borough and express our support for the concept and implementation of the proposed sale of the state of Alaska within the Upper Cooke Inlet area. We would say that the Borough is wholeheartedly in support of this effort. We believe that it would have substantially favorable economic impacts not only to the state of Alaska in general but to the Matanuska-Susitna Borough in particular. We will be furnishing your office with a more detailed written statement of our position on the proposed sale, but the Mayor did want me to come forward today and again, express our support of this and our nope that this sale will take place as planned this year so that the development of the Borough and the State can continue in an orderly fashion. I don't know if there are any questions that I can answer at this time. As I say, a more detailed written statement will be forthcoming. COMMISSTON LERESCHE: Thank you. No, not right now, but we would appreciate any comment both on our draft document and on the sale itself that you can give us. MR. TESCHE: We will be happy to furnish those to your office. COMMISSIONER LE RESCHE: And I might point out too that the Governor has appointed a gentleman, I believe, from the Borough Assembly, Mr. Hitchcock. ALASKA-WIDE COURT REPORTERS S45 EAST FOURTH AVENUE — 277-5922 ANCHORAGE, ALASKA 99501 be 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. TESCHE: Mr. James Hitchcock, yes, the Assemblyman. COMMISSIONER LERESCHE: ...who served exofficio on the Advisory Committee that the Governor has created to advise myself and himself on this sale so that the Borough will have as much contact and as much influence on the particulars of the sale as you choose to nave through Mr. Hitchcock. I encourage you to use him in that way. MR. TESCHE: We certainly will. Thank you very much. MR. ROD SCHULLING: Mr. Hitchcock is expected, apparently, to be here. We can't reach him by phone, so he may be here. COMMISSIONER LERESCHE: Okay. Well, we can sit around here a little while longer. We will recess the meeting for a minute. OFF RECORD ON RECORD COMMISSIONER LERESCHE: We will close the meeting, and we will get together with Hitchcock this afternoone. (Hearing Closed at Approximately 1:30 P.M.) 53 ALASKA-WIDE COURT REPORTERS Community and Regional Affairs Appendix 1 Methodology for Community Well-Being Analysis we 54 Appendix 1 Methodology for Community Well-Being Analysis* The community well-being component and related issues outlined in the Major Project Review description for the Upper Cook Inlet Oil and Gas Lease Sale are principally concerned with: . identification of impacts on communities resulting from direct and induced employment and population changes, , assessment of the ability of affected communities to take actions to minimize anticipated adverse consequences, and, . identification of appropriate actions that the State may initiate to help offset lifestyle, public facilities and services, housing, and fiscal disadvantages with which affected communities are confronted due to the proposed action. The methodology implied by these concerns is straightforward. The first task is to determine which geographic areas and communities might be affected by oil and gas exploration, development, and production activities. Data indicating the oil and gas potential of the proposed sale areas are not readily available at this time. However, because oil] and gas facilities already are intensively developed in the Upper Cook Inlet region, existing patterns of facilities provide a reasonable guide for judgements about where and how future oi] and gas development will occur. If exploitable oil and gas fields are discovered in the proposed sale areas, it is likely that existing and planned (Pacific Alaska LNG Plant) facilities will be ysed to a great extent to treat, transport, and process the oil and gas. Certain types of community impacts may be apparent at this point. Field and transport activities that occur in close proximity to small, remote villages can trigger conditions that may be beneficial or detrimental to their residents. The second step is to estimate the amount and location of direct employment during the exploration, development, and production phases, allocating direct employment to communities. The allocation can be derived from assumptions or findings indicating the types and location of required facilities (e.g., pipelines, treatment plants, terminals, LNG plants, etc.), estimates of where support bases will be located, and estimates of where workers will choose to live. The incidence of direct employment in different communities provides the pattern from which secondary or indirect employment can be estimated. The conceptual link between direct and indirect employment is income. Originating outside the *The scope of this report consists of responses to those questions in the Major Project Review for which the Department of Community and Regional Affairs has lead responsibility. IThis assertion was provided by DMEM personnel. community, direct income flows into the local economy as wages and salaries, rental payments, profits and other forms of income payments made to accomplish the direct activity. Newly injected into the economy, the direct payments will have “income multiplier" effects as they are locally spent. The size of the multiplier depends on local spending and importing patterns. It is costly to acquire the detailed information required to accurately construct income multipliers. An established technique is to substitute "indirect" (or secondary) employment multipliers for the income-expenditure relationships that form income multipliers. Secondary employment multipliers applied to levels of direct employment within a community create estimates of the additional employment impacts the community is expected to experience. Estimates of total population changes and their underlying worker-to- family size assumptions are provided elsewhere in this analysis under Economic Factors. These same assumptions and procedures will be employed to calculate direct population changes for communities. To estimate population changes that are due to increased secondary employment opportunities, oe incl household size-to-worker ratio in the community being studied will be used. A twofold analysis is conducted to identify and investigate adverse 7 impacts on communities. One approach inquires whether or not the direct and indirect effects that are projected to affect a community are desirable to its residents. If they are opposed to proposed direct activities, can the residents and local government succeed at Preventing them from occurring in ways that affect the community? Residents (including government representatives) may favor, in balance, an oil/gas project proposed for their community; they may desire that some features of the project be altered to reduce or eliminate undesirable consequences. Are local options conducive to these objectives available and feasible? The second approach focuses on community facilities and governmentally supplied services. The objective is to identify capital investment bottlenecks and service delivery problems that could prevent a desirable oil/gas project proposed for the area from happening or that would alter how it occurs, creating deleterious consequences. Having to suffer overcrowding in local schools because capital improvement financing for new classrooms was not available prior to their need is an example. Attitudes of residents are the essence of the first approach to community impact problems; fiscal conditions underlie the second. "Fiscal problems are primarily the result of two fac- tors: (1) The time lag between the first public costs and the first tax revenues received from the project; and (2) Inequities in the distribution of the tax re- venue and public costs. Revenue benefits are long Established technique" notwithstanding, employment multipliers are as specific to a local economy as are income multipliers. If the identification of a serious community problem is predicated on the 4422 of the Secondary empLoyment impact, more indepth analysis of local multipliers may be warranted to confirm the finding. 56 range and regional while major costs for public services and facilities are immediate and local."! The second approach entails identifying quality indicators for different services and facilities and assessing whether there is existing excess capacity to enable the time lag between first public costs and first tax revenues to be closed. Additionally, it attempts to determine whether or not regional fiscal inequities exist in the respective cost and benefit streams associated with a community's attempt to accommodate a proposed project. TOCS Develot : A : OCS Development: A Blessing or A Headache? The Choice Is Soldotna's, prepared by Michael A. Brogan and Ike D. Waits, Kenai Peninsula Borough Planning Department, 1977. Community and Regional Affairs Appendix 2 Development Scenario for Estimating Employment and Population Impacts on Communities Appendix 2 DEVELOPMENT SCENARIO FOR ESTIMATING EMPLOYMENT AND POPULATION IMPACTS ON COMMUNITIES The sources of direct information used to formulate a representative pattern of oil and gas development in Upper Cook Inlet are: « total direct employment and population schedules provided by the Department of Commerce and Economic Development, and, « field development possibilities provided by the Department of (NEN) Resources, Division of Minerals and Energy Management DMEM). Indirect sources that were useful and much relied upon when employment and population impacts were being estimated at the community level were Profile of Five Kenai Peninsula Towns, Offshore Oi] Development In Lower Cook Inlet, and a variety of documents prepared and published by the Kenai Peninsula Borough staff. The employment and population schedules consist of yearly estimates of direct offshore construction and support employment and estimates of the induced annual change in population for the period from 1981 through 1995. A crucial assumption concerning the geographical pattern of development is that any oi] and gas recovered as a result of this sale will be used to feed the existing facilities on the Kenai Peninsula or to satisfy electric generation needs. DMEM conjectured that existing gas wells on the west side of Cook Inlet in the vicinity of the sale area and current drilling for gas in the northern proposed sale area indicate that a sizable gas field discovery might warrant a greater expectation than oi]. Existing facilities (including the pipeline network) would probably be extensively used; much of the gas would probably be committed to the planned Pacific Alaska LNG plant to be located in the Nikiski-Kenai area. Neither source provided insight into how many and where storage, treatment, and pipeline facilities likely would be constructed under different sets of assumptions regarding field locations (west side onshore gas or oil, northern proposed sale area gas or oil, and offshore gas or oil). In addition to having implications on the employment and population schedules, this type of assessment might have clearly determined conditions under which it would be feasible to have a configuration of development substantially different from a practically total reliance on existing facilities. The following analysis of community based employment and population impacts is derived from the total schedules provided and adopts the limited impact assumption that use of existing facilities wherever possible is the only feasible option. Figure 1 depicts the existing network of pipeline facilities, illustrating access to the Nikiski - Kenai - Soldotna area that is assumed will serve as the support base for - 159 exploration and development activities as well as the place of residence “for many of the people directly employed in these ventures. This area is designated as community impact area "1" in Figure 1. The Anchorage and Natanuska-Susitna Valleys areas and Tyonek are also shown as impact areas. In addition to having administrative offices, it is assumed that workers who do not live in the Kenai area will reside in Anchorage or the Matanuska-Susitna Valleys. Tyonek is shown as an area that could well be affected by drilling, transporting, and construction. Tyonek residents have expressed concerns about development on the west side of Cook Inlet interferring with and deteriorating their traditional subsis- tence economy and village lifestyle. For this report, it is not known whether or not there are prospects for compensating features associated with the proposed activities that Tyonek residents consider more important than the undesired consequences. It is not known whether or not there are alternative ways to accomplish exploration and construction activities in the vicinity of Tyonek, some of which might mitigate adverse impacts. If the Kenai - Soldotna area serves as the support base as well as the center for processing gas and oi], most of the employment that might result from the proposed lease sale will occur there. Table 1 and Figure 2 present estimates of the number of people directly employed in the petroleum-related activities or working in induced jobs who elect to live in the Kenai - Soldotna area. It is assumed that 50 percent of the enployees directly involved in exploration, development and production activities will reside there and the other half will work out of Anchorage. Fight percent of the support jobs will be filled by people who live in the Kenai - Soldotna area and 20 percent hy people who live in the Anchorage and the Matanuska-Susitna Valleys. The indirect employment originates within the Kenai - Soldotna area and it is assumed that all these workers will live in the vicinity. Time constraints and limited information necessitated a highly selective assessment strategy. Basic assumptions made it apparent that the Kenai - Soldotna area would serve most effectively as the geographical focus of the impact analysis. The two years of construction employment provided in the schedule from which these estimates are derived has not been included. The schedule shows 350 and 1,200 construction jobs in 1983 and 1984, respectively. Although an influx of this many people into the area will present problems that need to be anticipated, the period of significant impact depicted is so brief that this component of employment is not usefully incorporated into the assessments of community facilities and services. Table 1 depicts two peaks in employment impacts: one in 1983 when the lease sale related employment total 860; the second in 1990 when employment reaches 1,985. The trough between these years occurs in 1987 with total impact employment at 483. Following 1999, total employment tapers down to 641 during the next five years. Although the rises and dips are precipitated hy changes in direct employment, no explanation of what is occurring in that sector is given in the source document. By all accounts, a paucity of pertinent information was available from which employment levels could be reliably projected. They may or may not accurately describe the levels of activity that are likely to occur Figure L LOCAL IMPACT AREAS + direct employment/ population impacts # indirect employment/ population impacts * lifestyle impacts 1-3 probable community impact areas © incorporated commmnity @ wnincorporated commmntty a unticorporated ANCSA commmity @ extsting otl/gas facilities Figure 2 EMPLOYEES RESIDING IN KENAI - SOLDOTNA aRea (Moderate Find) (1,085; 1990) 1,000 ™, (8604 1983) a ~N 500 1985 1990 1995 ° * Direct Fmployees residing in Kenai - Soldotna area =2== ¢ Direct plus Support Employees residing in Xenai - Soldotna area emmmee Direct plus Support plus Indirect Fmployees residing in the Xenai - Soldotna area . Table 1 UPPER COOK INLET LEASE SALE EMPLOYMENT IMPACTS: EMPLOYEES RESIDING IN KENAI - SOLDOTNA AREA (Moderate Find) YEAR OFFSHORE SUPPORT INDIRECT TOTAL 19e1 70 6 16 92 1982 278 34 66 378 1983 556 148 156 860 1984 417 168 217 802 1985 417 124 204 745 1986 278 89 138 505 1987 262 89a 132 483 1988 360 97 173 630 1989 497 119 235 851 1990 634 152 299 1,985 1991 579 152 277 1,008 1992 548 131 259 938 1993 487 126 233 246 1994 426 108 203 71, 1995 365 1aq 176 641 Sources: Offshore and support employment in Yenai - Soldotna area derived from schedules of Total Offshore and Support Employment prepared by the Nepartment of Commerce and Fconomic Development. Indirect employment derived using multipliers provided in "Economic Forecasts - Lower Cook Inlet leas cyate”, Department of Community and Regional Affairs, October LIB. asim lures. $0060 (otal oftI here, 80% of 9 Land 100% pf rredtmed biraployees $e om a Leone -cotcotna area Li Vaetnahon Foonbreae -2 ytars- oritted. if the lease sale is made. Although subsequent analysis derives implications of the "projected" levels of impacts, such findings cannot be meaningfully attributed to the proposed lease sale. The projections will be used to identify special problem areas, but it should not be interpreted that they reliably convey information about the magnitude of any problems flagged or the scale of response needed to resolve them. The preliminary draft of community impacts has been prepared without review or response of local officials or residents. During the next phase of the Major Project Review, the State will contact the Kenai Peninsula Borough, City of Kenai, City of Soldotna, Municipality of Anchorage, Matanuska-Susitna Borough and Tyonek to acquire new information about local conditions and the set up monitoring procedures for gauging impacts. 63 Community and Regional Affairs Appendix 3 Kenai Peninsula Borough Coastal Development Program Background Report wes 64 KENAI PENINSULA BOROUGH COASTAL DEVELOPMENT PROGRAM BACKGROUND REPORT Prepared by Environmental Services Limited The preparation of this report was financed in part by funds from the Alaska Coastal Management Program and the Office of Coastal Zone Management, National Oceanic and Atmospheric Administration, U.S. Department of Commerce, administered by the Division of Community Planning, Department of Community and Regional Affairs, and the Kenai Peninsula Borough Assembly. Alaska Coastal Management Program ECONOMIC AND POPULATION PROJECTIONS FOR THE KENAI PENINSULA BOROUGH 1978 - 1992 Introduction : A simple economic base model has been developed for projecting economic activity and population growth in the Kenai Peninsula Borough from 1978 through 1992. The model and its detailed results are included as Appendix B, with copies available at the Kenai Peninsula Borough planning department. This report is summarized in the following pages. For projection purposes, the borough is. divided into two major regions - the Kenai-Cook Inlet (KCI) and Seward Census Districts. Three sets of employment and population projections were developed, referred to as the low, intermediate and high cases, based on anticipated timing and employment projections of specific industrial development proposals. Anticipated growth in these basic industries was used to project base or exogenous employment by standard industrial sectors. Multipliers were then determined to relate growth in basic employment to growth in indi- rect or exogenous sector activities (such as manufacturing, transporta- tion, communication and utilities, wholesale and retail trade, finance, insurance, real estate and service). Population projections were then made based on the relationship established between population and total employment (base plus indirect employment). In other words, employment and population projections are not simple linear growth rate projec- tions, but reflect anticipated timing and employment levels resulting from proposed industrial developments. Because of the much larger population size and regional differences in economic-and demographic trends within the KCI District, emp Loyment and population projections have been disaggregated into Upper and Lower Peninsula regions. The Upper Peninsula region is composed of all voter precincts from Tustumena north, including Tyonek. (Clam Gulch forms the southern limit of the Tustumena precinct.) The Lower Peninsula region includes all voter precincts from Ninilchik south. The three regional (Upper and Lower Peninsula and Seward) employment and population projec- tions for the intermediate case were then used to adjust projected popu- lation growth in cities and voter precincts (based on trends in voter population statistics) to reflect anticipated future developments. All projections are based on assumed timing and level of activity of key base sector industries, especially future oil and gas and fisheries developments, and are therefore speculative. In particular, the population projections for cities and voter precincts must be re- garded as highly speculative, as choice of residential location of new industry employees involves many variables. Nevertheless, the model and its growth projections are very useful for planning purposes. The model establishes the relationships between growth in key industrial sectors and total employment and population growth. The employment and popula- tion projections are the best possible with existing data and do point out the important growth trends occurring in. the borough. ~o 88 This economic base model was constructed from available economic, employment and population statistics and earlier regional growth models. The equations used to project growth are quite straightforward and the model has been computer programmed and key punched. In this way, the Kenai Peninsula Borough can easily review and refine the projections — _ from time to time, as development occurs and new statistical data be- comes available. Therefore, the economic base model can continue to serve as the means of developing growth projections in future Kenai Peninsula Borough planning efforts to maintain consistency. Growth Assumptions The underlying growth assumptions for the low, intermediate and high case projections are summarized in Tables 2.la and 2.1b and are generally described as follows: In the KCI District, the major factors underlying the growth of the district relate to oil and gas and to fisheries. Recreation and tourism are also important factors, but are dependent upon direct regional eco- nomic development and population growth and are not easily quantifiable. In the low case, no lower Cook Inlet oil and gas development or produc- tion activity was assumed and oil and gas activity in upper Cook Inlet declined. No bottomfisheries activity occurs and the level of salmon and shellfish harvests remain stable. The value of the catch grows modestly due to assumed price increases. Slight growth in state and local government also occurs. The high case includes major oil and gas discoveries in lower Cook Inlet, increased petrochemical activity and only a slight decline in up- per Cook Inlet oil and gas. A major bottomfisheries industry develops and a high level of coal production occurs in the Beluga area. The in- termediate case tends to’ be midway between the high and low cases. For the Seward region, ‘the low case is limited to minor expansions of fisheries and timber activity, with some construction and state and local government growth included. The high case is largely linked to significant OCS oil and gas activity, coupled with major bottomfish ex- pansion. The intermediate case is, again, midway between the high and low cases. See Table 2. 1b. To get an understanding of the growth in value of the fishing industry, Figure 2.3 shows the dramatic increase in the value of fish to fishermen in the KCI District. Recent developments indicate that the value is following the high growth projection. The Kenai Peninsula Borough is also a key processing region. Although only about five per- cent of the state's catch comes from local fishermen, some 20 percent of the state's catch is processed in the borough. In addition to the direct employment in fishing and processing-related activities, our analysis indicates that for each additional million dollars of catch to fishermen, approximately.50 jobs in the endogenous (indirect) sector are created. co 240 67 89 £92 a. Kenai-Cook Inlet Table 2.1 GROWTIL ASSUMPTIONS DEVELOPMENT LOW CASE INTERMEDIATE CASE HIGH CASE Upper Cook Inlet OIL AND GAS CONSTRUCTION no new facilities LNG-1981 LNG-1981 AND MANUFACTURING Upper Cook Inlet OIL AND GAS Lower Cook Inlet OIL AND GAS BELUGA COAL VALUE OF CATCH- 1990 BOTTONF ISH DEVELOPMENT GOVERNMENT oil-production ending 1987 gas-moderate finds 0.09 bb 0.6 tr. ft.4 none $46.9 million harvest-existing level value-3 percent/year None 2 percent to 1985, then 1 percent/year oil-increased recovery efforts gas-moderate finds production start-up 1982 peak 1987 oil-0.75 billion barrels gas-}.6 trillion cu. ft.— production start-up 1987 730,000 tons/year $79.0 million shellfish-3 percent/year salmon-4.5 percent/year 1980-4.4 percent/year 2.2 percent/year refinery expansion additional oil and gas discoveries production start-up 1980 peak 1984 oil-2.6 billion barrels gas-3.3 trillion cu. ft. production start-up 1982 730,000 tons/year doubling 1987 $117.2 million shellfish-3 percent/year salmon-8.9 percent/year (increase in value and harvest) 1980-8.8 percent/year 3.4 percent/year FIGURE 2.3 VALUE OF FISH TO FISHERMAN KENAI-COOK INLET = cr ie 3 2 Ow ° 9 Q c 2 20 m Zz oo 2 S D> 20 o 964 6 & 67 6 ® 70 nN 7 73 4H TH % 77 78 79 820 MB MK 8B B64 8 BH 87 88 B89 90 HA 2 The petrochemical industry has been a major exogenous (basic) sector employer since development of the upper Cook Inlet oil and gas fields. Lower Cook Inlet oil and gas exploration and development is a key variable in determining future economic and population growth in the borough. Figure 2.4 shows historic and projected total direct (exogen- ous) employment resulting from oil, gas, coal and mineral developments and the construction and manufacturing activities occurring directly as result of these developments. The peaks represent the high level otf employment occurring during the construction phases of oil, gas and coal developments. The effect of these peaks can be traced through total . employment and population projections which follow. Borough Growth Projections for borough growth, as measured by base (exogenous) and indirect (endogenous) employment, total employment and population are shown in Table 2.2 and Figures 2.5, 2.6, 2.7 and 2.8. Average rates of growth for selected periods are shown in Table 2.3. For the low case, little growth occurs. Total employment grows from 8,288 in 1978 to 9.335 in 1992, an average annual rate of 0.85 per- cent. Population declines from its 1978 level of 25,335 initially and then climbs to 26,749 by 1992. In the intermediate case, employment grows from 8,353 in 1978 to 15,584 in 1992 at an average annual rate of 4.6 percent. Some variation occurs in inlet oil and gas activity. Population has increased from its 1978 level of 25,335 to 39,306 in 1992. The high case sees employment increasing almost threefold, from 8,469 in 1978 to 24,031 in 1992. This is an annual rate of growth of 7.73 percent per annum over this 15-year period. Again, much of this growth is due to lower Cook Inlet oil and gas activity, but is also due to expansion in salmon processing and rapid growth in bottomfisheries development and other industrial developments including Beluga coal. It should also be noted that the rate of growth ia the latter part of the period has declined significantly, due largely to the tapering off of lower Cook Inlet oil and gas employment during the operation phases. Population for the borough has increased from 25,335 in 1978 to 55,056 by 1992. Regional Growth Borough growth projections have been disaggregated to the Seward, Upper and Lower Peninsula subregions to project anticipated geographical differences in economic activity and resultant employment and population trends. As the borough projections were made by combining projections for the Seward and the KCI census districts statistics, the growth assumplions in Seward remain the same. Thirty percent of the exogenous construction, government and miscellaneous base employment: was assigned to the Lower Peninsula sub- FIGURE 24, TOTAL ENERGY/MINING INDUCED EMPLOYMENT 964 6 6 67 6& ® 70 1 2 7 M TH TF 77 78 79 60 M MH 8B 84 B & B7 BB 89 90H 13900 12,500 12,000 1,500; 11,000 10,500 10,000 9,500 9,000 8,500 8000 7,500 7,000 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3000 2,500 2,000 1,500 1,000 FIGURE 25 BASE (EXOGENOUS) EMPLOYMENT KENAI BOROUGH 964 6 6 67 68 @® 7O nN FP a3 4p a7 78 79 60 & ®@ 63 84 6 & 87 88 89 90 H FIGURE 26 INDIRECT (ENDOGENOUS) EMPLOYMENT KENAI BOROUGH 904 6 6 Gr 68 @ 70 1 7 73 M 7 7% 77 78 79 8O MH MK & 84 OS B& BF 8B 89 90H ~ pl PL ba 65 & 8? oi wW 70 a FIGURE 2.7 TOTAL EMPLOYMENT KENAI BOROUGH me fs Ww & TH TT 718 79 BO @ 8 84 85 & 387 BB 89 90 H 92 FIGURE 2.8 KENAI BOROUGH POPULATION PROJECTION 9649 6 @ 6/ 68 @ 70 A 2 13 H TH TS 77 78 79 86O M MK B63 84 8 & B7 68 B69 910 H Table 2.3 KENAI PENINSULA BOROUGH ANNUAL GROWTH RATES (PERCENT) Indirect "Total Exogenous Period Employment Emp Lloyment Population a. Low Growth Assumptions 1978-1982 0.63 1.36 -0.19 1982-1987 : 0.33 1.22 0.53 1987-1992 1.52 2.01 0.71 1978-1992 0.85 1.54 0.39 b. Intermediate Growth Assumptions 1978-1982 6.87 6.62 2.70 1982-1987 5.44 5.76 4.45 1987-1992 1.88 4.51 2.32 1978-1992 4.56 5.56 3.19 c. High Growth Assumptions 1978-1982 15.56 13.44 9.89 1982-1987 7.65 8.07 7.45 1987-1992 1.94 6.00 6.79 1978-1992 7.73 8.82 5.70 region, an amount equivalent to its share of the number of registered voters in the KCI District. An estimated 20 percent of employment in fish processing was estimated to occur in the Lower Peninsula region, as well as 57 percent of the catch value to fishermen, relative to the dis- tribution of. processing and fishing permits, respectively. All growth attributed to bottomfishing within KCI was allocated to lower Cook Inlet, which is closer to the fishery and the likely location of bottom- fish development, along with Seward. [n addition, 15 percent of the employment generated by oil and gas activity related to the Lower Cook Inlet sale was assigned to the Lower Peninsula region in the intermedi- ate growth projection and 20 percent in the high growth projection. Because of the existing industrial infrastructure Present in upper Cook Inlet and a leveling off or decline of upper Cook Inlet production, it is anticipated that most initial exploration and development of lower Cook Inlet oil and gas reserves will be serviced out of the Upper Peninsula regions. In the high growth case, Beluga coal field develop- ment is also assigned to the Upper Peninsula. Regional employment pro- jections and their percentages of total borough figures are shown in Tables 2.4a, 2.4b, and 2.4c. 259 aaa Table 2.4 EMPLOYMENT PROJECTIONS BY REGION AND PERCENTAGE OF BOROUGH EMPLOYMENT LOWER UPPER BOROUGH YEAR PENINSULA PENINSULA SEWARD EMP. % EMP. VA EMP. % EMP. A. LOW GROWTH ASSUMPTION 1978 1679 = =20.2 5399 65.1 1211 14.6 8288 1982 1842 21.6 5383 63.2 1290 15.1 8515 1987 2068 23.9 5232 60.4 1355 15.7 8655 1992 2313 24.8 5602 60.0 1420 15.2 9335 B. Intermediate Growth Assumptions 1978 1682 20.1° 5458 65.3 1213 14. 8353 1982 2158 19.8 7405 67.9 1332 12.3 10895 1987 3174 22.3 9453 66.5 1570 ll. 14197 1992 4122 26.5 9553 61.3 1909 12. 15584 C. High Growth Assumptions 1978 1685 19.9 5569 65.7 1215 14. 8469 1982 3037 20.1 10589 70.1 1476 9. 15102 1987 4688 21.5 14743 67.5 2397 ll. 21828 1992 6514 27.1 15240 63.4 2277 9.5 24831 260 77 [In 1978, Seward accounts for 14.6 percent of borough employment, the Lower Peninsula 20.2 percent and Che Upper Peninsula O5.1 percent. For the low growth case in 1992,°the shares are 15.2 percent, 24.8 per- cent and 60.0 percent for Seward, Lower Peninsula and Upper Peninsula, respectively. The principle regional shift in employment growth occurs from the Upper to Lower Peninsula, due largely to the fact that oil and gas activity is decreasing in the upper region. For the intermediate case in 1992, Seward accounts for 12.2 percent of total employment, the Lower Peninsula accounts for 26.5 percent and the Upper Peninsula for 61.3 percent. These changes reflect the rela- tive growth of the KCI region versus Seward primarily due to the lower Cook Inlet oil and gas development. Within the KCL region, the Lower Peninsula has grown relative to the Upper Peninsula because of expansion of the bottomfishing industry which can be expected in the Homer area. The high growth projection for 1992 shows Seward with 9.5 percent of total employment, the Lower Peninsula with 27.2 percent and the Upper Peninsula with 63.4 percent. The shifts in regional percentage of em- ployment from 1978 figures are due to the same basic factors that account for the intermediate case shifts. Despite Gulf of Alaska oil and gas activity and bottomfishing development, Seward's growth rate is surpassed by economic developments in the KCI district. Within the KCI district, the Upper Peninsula's share of projected 1992 employment is greater than in the intermediate case due to lower Cook Inlet oil and gas exploration and development activity. Population estimates for the three regions were also developed for 1982, 1987 and 1992 for the low, intermediate and high growth cases and are presented in Tables 2.5a, 2.5b and 2.5c. Since population is dependent primarily on employment, the shifts in population distribution which occur between subregions from 1978 to 1992 for the three popula- tion projections are caused by the same factors which determined the shifts in regional employment. Table 2.6 summarizes the population in- creases and annual growth rates projected for the low, intermediate and high growth cases by region. [In all three cases, the Lower Peninsula is expected to grow at a more rapid rate than the other two regions. Again, the rapid jump in the growth rate of the Upper Peninsula from the intermediate to the high case is due to major oil and gas developments, which are probably unlikely but could occur in the event of major finds. Population projections for cities and voter precincts outside of cities were also prepared for the years 1982, 1987 and 1992 are are con- tained in Table 2.7. Population projections were made by projecting Present growth trends in voter registration by precinct, then corre- lating voter registration to precinct population. The three regional (Seward, Upper and Lower Peninsula) population projections determined by the intermediate case growth model (the most likely growth model) were then utilized to adjust the present voter precinct population trends to reflect the level of anticipated future economic development in each region. These city and voter precinct projections are highly speculative because of the smaller base from which they are determined. Present 261 78 Table 2.5 POPULATION PROJECTIONS BY REGION AND PERCENTAGE OF BOROUGH POPULATION LOWER UPPER BOROUGH YEAR PENINSULA PENINSULA SEWARD POP. % POP. % POP. % POP. A. LOW GROWTH ASSUMPTION 1978 6289 24.8 15982 63.0 3064 12.1 25335 1982 6539 26.0 15317 60.9 3288 13.1 25145 1987 6915 26.8. 15500 60.0 3404 13.2 25819 1992 7310 27.3 15933 59.6 3507 13.1 26749 B. Intermediate Growth Assumptions 1978 6289 24.8 15982 63.0. 3064 12.1 25335 1982 6796 24.1 ~=——:18057. 64.0 3333 11.8 28187 1987 8968 25.6 22436 64.0 3645 10.4 35049 1992 12308 31.3 22788 58.0 4210 10.7 39306 C. High Growth Assumptions 1978 6289 24.8 15982 63.0 3064 12.1 25335 1982 8678 23.5 24854 67.3 3417 9.2 36949 1987 12895 24.4 35464 67.0 4572 8.6 $2931 1992 14271 25.9 25838 65.1 4947 9.0 55056 262 Table 2.6 PROJECTED POPULATION INCREASE AND. ANNUAL GROWTH RATES FOR REGIONS, 1978-1992 Population Annual Location _ 1978 1992 Increase Growth Rate a. Low Growth Assumptions Lower Peninsula 6289 7310 1021 1.1% Upper Peninsula 15982 15933 -49 0.0% Seward 3064 3507 443 1.0% b. Intermediate Growth Assumptions Lower Peninsula 6289 12308 6019 6.4% Upper Peninsula 15982 22788 "6806 2.8% Seward 3064 4210 1146 2.5% c. High Growth Assumption Lower Peninsula 6289 14271 / 7982 8.5% Upper Peninsula 15982 35838 19856 8.2% Seward 3064 4947 1883 4.1% growth trends were dependent upon voter registration rather than direct population figures. Residency within a voter precinct is not as dependent upon economic factors as is regional population growth. Anti- cipated levels of regional economic development are therefore specula- tive. However, these projections are important to future planning ef- forts because they do estimate future population levels and demonstrate differences in growth rate at the local level. Table 2.8 summarizes the projected 1992 population and its annual growth rate for first class cities and unincorporated regions. These Projections are based on intermediate case economic development. Dif- ferent growth rates would occur in the low and high cases and, within regions, shifts may be different. Inspection of Tables 2.6 and 2.7 shows that population shifts are occurring within the regions as well as 263 Hise Table 2.7 POPULATION PROJECTIONS BY PRECINCT AND PERCENTAGE OF BOROUGH POPULATION Precinct 1978 % 1982 % 1987 % 1992 % Lower Peninsula 6289 24.8 6796 =. 24.1 8968 25.6 12308 1.3 Anchor Point 1447 ar 1492 5.3 1948 5.6 2589 6.6 Diamond Ridge 433 1.7, 626 2.2 1052 3.0 1899 4.8 English Bay 110 0.4 114 0.4 138 0.4 173 0.4 Fritz Creek 876 3.5 950 3.4 1257 3.6 1688 4.3 Halibut Cove 85 0.3 81 0.3 105 0.3 139 0.4 Homer 2054 8.1 2250 8.0 2920 8.3 3872 9.9 Ninilchik 470 1.9 477 1.7 595 1.7 764, 1.9 Port Graham 230 0.9 222 0.8 251 0.7 302 0.8 Seldovia 584 2-4 584 ari 701 2.0 882 2.2 Upper Peninsula 15982 63.1 18057 64.1 22436 64.0 22788 8.0 Kalifonsky 1707 6.7 1896 6.7 2404 6.9 2476 6.3 Kenai 1 1731 6.8 2043 72 2502 7.0 2517 6.4 Kenai 2 1779 7.0 2012 7.2 2457 7.0 2464 6.3 Kenai 3 864 3.4 912 Sia 1022 2.9 959 2.4 Nikiski 1 1481 5.8 1483 a. 1690 4.8 1611 4.1 Nikiski 2 2004 7.9 2315 8.2 2929 8.4 3013 7.7 Ridgeway 1473 5.8 1726 ep | 2217 6.3 2304 5.9 Soldotna 2368 9.3 2697 9.6 3427 9.8 3532 9.0 Sterling 1384 5.5 1536 5.4 1957 5.6 2022 5.1 Tustumena 881 3.5 1003 3.6 1272 3.6 1308 3.3 Tyonek 310 1.2 434 1.5 559 1.6 582 115 Seward Region 3064 12.1 3333 11.8 3645 10.4 4210 0.7 Bear Creek 688 2.7 835 3.0 922 2.6 1208 3.1 Cooper Landing 238 0.9 254 0.9 284 0.8 332 0.8 Hope 92 0.4 103 0.4 121 0.3 148 0.4 Moose Pass 268 1.1 260 0.9 261 0.7 282 0.7 Seward 1 628 Zo 608 2.2 585 1.7 611 1.6 Seward 2 1150 4.5 1273 4.5 1402 4.0 1629 4.1 264 81 ' Table 2.8 PROJECTED POPULATION AND ANNUAL GROWTH RATES IN FIRST CLASS CITLES AND UNINCORPORATED REGIONS OF THE KENAI PENINSULA BOROUGH UNDER INTERMEDIATE GROWTH ASSUMPTIONS Population Annual Growth Location 1978 1992 Increase Rate a. First Class Cities Homer 2054 3872 1818 5.9% Seldovia 584 882 298 3.4% Kenai 4374 5940 1566 2.4% Soldotna 2368 3532 1164 3.3% Seward 1778 2240 462 1.7% Total Incorporated Cities 11158 16466 5308 3.2% b. Voter Precincts Outside of First Class Cities, By Regions Lower Peninsula 3651 7554 3903 7.1% Upper Peninsula : 9240 13316 4076 2.9% Seward Region 1286 1970 684 3.5% Total : Unincorporated Area 14177 22840 8663 4.1% Total Borough 25335 39306 13971 3.7% between the regions. Homer is projected to be the most rapidly growing city within the borough. Soldotna continues to grow at a faster rate than Kenai. In the borough as a whole, annual growth in unincorporated areas (4.1 percent) is exceeding annual growth in first class cities - (8.2 percent). This growth is particularly strong in voter precincts just outside of first class communities, namely Diamond Ridge, Anchor Point and Fritz Creek precincts for the Homer area, Bear Creek for the Seward area and, to a lesser extent, Ridgeway, Nikiski and Kalifonsky in the Kenai-Soldotna area. 265 A. B. Cc. MAJOR TNDUSTRIAL DEVELOPMENT TSSUE #1 GENERAL DESCRIPTION 1. PROJECT NAME: Upper Cook Inlet Oil and Gas Continued Exploration and Development OPERATOR: Chevron USA, ARCO, others CONTACT: Jim Hart, ARCO 21 BRIEF DESCRIPTION OF PROPOSED DEVELOPMENT AND PURPOSE: Chevron USA was contacted and had no plans for additional drilling unless state oil and gas lease sales occur. ARCO is presently drilling a new well in upper Cook Inlet. A spokes- man for ARCO felt improved pricing from crude oil deregulation “should mean more drilling. Recent gas finds near Tyonek and Kenai may also affect exploration plans. 3. CAPACITY (SIZE OF DEVELOPMENT): Crude oil production in upper Cook Inlet peaked at slightly over 800 million barrels of oil per year (BPY) in 1970. Production has since declined to an estimated 54 million BPY and, by. 1990, is expected to bottom out at 30 million BPY. Movements of crude oil by tanker from upper Cook Inlet will drop by about 20-25 million BPY. Gas production began slowing down in 1970 and is currently at 280 billion cubic feet (BCF). Production is expected to peak at about 300 BCF in the early 1980's and decline to about 100 BCF by 1995. 4. PROBABILITY OF DEVELOPMENT OCCURRING: Production is already occurring, littler further exploration is expected to occur, although the deregulation of oil could stimulate some drilling. REQUIRED FACILITIES Type of Facility General Requirements and Proposed Location Coastal Dependency ONSHORE : Existing coastally-dependent and coastally-related facilities will be utilized or expanded if necessary. OFFSHORE: New platforms and pipelines if additional commercial finds are made. TIMING 1. CONSTRUCTION START-UP: Existing. 2. INITIAL OPERATION DATE: Existing. 197 as 3. DURATION: Low case: completion of production 1987. High case: additional discoveries and production; no date of production completion. D. EMPLOYMENT . Intermediate Case High Case TOTAL PEAK EMPLOYMENT: 1,574 in 1983 1,610 in 1983 (Includes construction and manufacturing directly related to the petroleum industry in Upper Cook Inlet) PEAK EMPLOYMENT: 690 in 1978 690 in 1978 (Upper Cook Inlet employment in extraction) PEAK OIL AND GAS CONSTRUCTION AND MANUFACTURING EMPLOYMENT: : 1,010 in 1983 1,010 in 1983 E. ENVIRONMENTAL RISK/CONCERN i. Z. AIR POLLUTION: Minimal; existing support facilities will be used. WATER POLLUTION: Minimal; existing facilities will be used and potential risk of major oil spill at anticipated level of exploratory effort is very low. * HABITAT LOSS: Minimal; existing facilities will be used and potential risk ofa major oil spill is very low. RECREATION, SCENIC’ OR HERITAGE VALUES: Minimal; existing facilities will be used and major oil spill is unlikely. Little population growth expected which would indirectly in- crease recreation demands. COMMERCIAL FISHING: In the event of a major spill, pipeline break or blowout, the fishing industry could be seriously im- pacted. This risk is very minimal, based on the anticipated level of future exploration and safe record of the upper Cook Inlet oil and gas development to date. F. DEMAND ON COMMUNITY FACILITIES AND SERVICES i; 2. POWER: Minimal; existing industrial facilities will be used. WATER AND SEWER: Minimal; existing industrial facilities will be used. HOUSING: Minimal; existing housing is adequate. 198 G. SOURCES The Peninsula Clarion, 5/10/79, 4/11/79.° Woodward-Clyde Consultants and Soros Associates, 1979. Port and Harbor Demand and Feasibility Study. Tuck, Brad, 1979. Economic and Population Growth Projections for the Kenai’ Peninsula Borough. : 199 A. B. OQ MAJOR INDUSTRIAL DEVELOPMENT ISSUE #2A GENERAL DESCRIPTION 1. PROJECT NAME: Lower Cook Inlet Oil and Gas: OCS Lease Sale, Exploration and Development - Intermediate Find OPERATOR: ARCO, Marathon, Exxon, Union Oil, BP and Texaco CONTACT: ARCO, Marathon representatives 2. BRIEF DESCRIPTION OF PROPOSED DEVELOPMENT AND PURPOSE: Exploration and development of 1977 lower Cook Inlet Lease Sale-intermediate find. A petroleum find at this level would probably not require construction of new onshore facilities. A maximum of four exploratory rigs would be drilling at one time, five platforms would be installed. Production would probably compensate for declining upper Cook Inlet output rather than serving as additional input. 3. CAPACITY (SIZE OF DEVELOPMENT): 95% probability of finding five oil fields with recoverable reserves of 0.75 billion bar- rels of oil and 1.6 trillion feet? of gas. 4. PROBABILITY OF DEVELOPMENT OCCURRING: 75%. REQUIRED FACILITIES Type of Facility General Requirements and Proposed Location Coastal Dependency ONSHORE: Expansion or use of spare capacity of existing onshore facilities in the Nikiski area as upper Cook Inlet oil and gas produc- tion declines. OFFSHORE: New platforms and pipelines are needed. TIMING lL. ee 3 EXPLORATION START-UP: 1978. INITIAL PRODUCTION DATE: 1982. PEAK PRODUCTION DATE: 1988. DURATION: 40 years total (approximately 25 years per field) EMPLOYMENT 1, EXPLORATION: Company examples of employment per exploratory vig - “00 86 E. F. G. 2. ARCO: 170; 118 of which are out-of-state, 44 Anchorage area residents Marathon: 135; 110 out-of-state, 22 Anchorage area residents Other companies will be drilling; employment figures are unknown. With four exploratory rigs in operation, direct exploratory employment would be 610. PEAK EMPLOYMENT: 1,770 in 1987 in exploration, development and related construction and manufacturing. ENVIRONMENTAL RISK/CONCERN 1. 2. AIR POLLUTION: Minimal; would use or expand existing facilities. WATER POLLUTION: Onshore - Minimal; would use or expand existing facilities. Offshore - minimal, unless a major blow- out, pipeline break or tanker accident were to occur. HABITAT LOSS: Onshore - Minimal; would use or expand existing facilities. Offshore - Minimal; unless a major blowout, pipe- line break or tanker accident were to occur. RECREATION, SCENIC OR HERITAGE VALUES: Minimal; new onshore facilities are not expected and major spills unlikely. Indi- rect impact of increased recreation demand due to induced population growth would be moderate. COMMERCIAL FISHING: A major oil spill, though highly unlikely, could have a serious impact on local fisheries. The level of exploration and development activities in an inter- mediate find should not interfere with fishing activities. DEMAND ON COMMUNITY FACILITIES AND SERVICES 1. POWER: Minimal; would use or expand existing facilities. Existing power supply is adequate. 2. WATER AND SEWER: Minimal; would use or expand existing industrial facilities. 3. HOUSING: Minimal; some temporary housing would be necessary. Vacancy rates indicate adequate housing is generally available with some construction of new units. SOURCES BLM, Alaska Outer Continental Shelf Office. News Releases 10/23/78, 12/28/78, 2/8/79. 201 eS 87 a. B. MAJOR TNDUSTRIAL DEVELOPMENT ISSUE #2R GENERAL DESCRIPTION 1. PROJECT NAME: Lower Cook Inlet Oil and Gas: OCS Sale, Exploration and Development - High Find OPERATOR: ARCO, Marathon, Exxon, Union Oil, BP and Texaco CONTACT: See sources 2. BRLEF DESCRIPTLON OF PROPOSED DEVELOPMENT AND PURPOSE: Exploration and development of 1977 lower Cook Inlet Lease Sale-high find. At this level, a maximum of seven exploratory rigs would be drilling at one time (in 1980-81) and 17 plat- forms would be installed. The high case would probably re- quire two additional oil terminals and one additional LNG plant (for a total of three), as well as additional service bases and treatment facilities. a CAPACITY (SIZE OF DEVELOPMENT): 10 oil fields with recoverable reserves of 2.6 billion barrels of oil and 3.3 _ trillion feet? of gas. 4. PROBABILITY OF DEVELOPMENT OCCURRING: 5%. REQUIRED FACILITIES - see Figure 2.2 Type of Facility General Requirements and Proposed Location Coastal Dependency Oil | deep water port: 54' depth Nikiski, Stariski Terminals (2) harbor entrance, 2,860' most likely; Drift turning basin; large River and Cape quantities of fresh water; Douglas suggested large power demand; if major finds in land: 240 acres (120 each); western Cook Inlet coastally-dependent or related LNG Plant power and water; deep water Nikiski, Stariski (in addition to port: 47' depth at harbor Proposed Pacific entrance, 33' at berthing Alaska LNG plant area, 3,196' turning basin; land: 60-120 acres; coastally-dependent or related 203 Cc. Treatment Facilities (approx. 2) Support Bases (approx. 3) Offshore Facilities 23 oil platforms 2 gas platforms 84 exploratory wells 80 service wells 440 production wells Pipelines Support Fleet power; pipeline or decpwaler port and unloading facilities; transportation; communications; land: 140 acres (80 each); coastally-dependent and related : sheltered harbor with 18' depth at MLLW and turning basin of 1,000 to 1,800'; water; airport access; power; coastally-dependent and related; land: 120-240 acres (40-80 acres each) coastally-dependent coastally-dependent 500 miles (200 submarine); 630 onshore acres, ROS 3-18 vessels 21 at peak (approx. 70,000 DWT tankers) Tuxedni Bay, Stariski, Seldovia, English Bay, Port Graham Nikiski, Homer, Seldovia, English Bay, Port Graham Lower Cook Inlet Lower Cook Inlet Lower Cook Inlet to Terminal Sites TIMING 1. EXPLORATION: Beginning 5-12 months (exploration began in July 1978). on DEVELOPMENT: Beginning at time of capable of commercial production. occur tion would during the fourth after lease sale discovery of reservoir On-site platform installa- through ninth year after the lease sale (1981-86). INITIAL PRODUCTION: Would begin 3-5 development drilling (approximately 1981). months after first DURATION: Life expectancy of individual oil and gas wells is 20-25 years and the last platforms wouId be removed about 40 years after production has commenced (approximately 2020). 205 89 5. PEAK ACTIVITY: 2-4 years after oil and gas production begins or 8 years after lease sale (approximately 1986). D. EMPLOYMENT 1. PEAK INDUCED EMPLOYMENT: 4,676 in 1986 in exploration, development and related construction and manufacturing. E. ENVIRONMENTAL RISK/CONCERN 1. ATR POLLUTION: Major emissions from OCS related activities include particulates and sulphur dioxide from tanker and shore facility combustion, dust from wind and traffic and evapora- tion or hydrocarbons from fuel storage tanks and tankers. WATER POLLUTION: Probably minimal; however, oil and gas development does present some risk and requires large amounts of fresh water. There are, therefore, potential impacts on ground surface water (such as lowering of the water table, saltwater intrusion and reduced stream flow) and possible com- petition with municipal water systems and other users. Liquid waste from sewage treatment, ballast treatment and cooling water is significantly warmer than receiving waters into which it is discharged and often contains bromides and rust inhibi- tors. Hazardous wastes and effluents from OCS related facili- ties raise serious concerns as to their proper disposal and subsequent effects on water quality, biota and human health. Major pollution of marine waters could occur in the unlikely event of a major spill. HABITAT LOSS: ‘Onshore - probably minimal; development no expected to affect any critical habitat. Some habitat loss may occur from living requirements of increased population. Offshore - Major impacts would occur in the event of a major spill; impacts would otherwise be minimal. RECREATION, SCENIC OR HERITAGE VALUES: Probably minimal; most development will occur close to already existing development. Increased demand for recreation will result from induced popu- lation growth. Some potential conflict exists with develop- ment of onshore facilities and recreation in the Stariski area, but appears resolvable. COMMERCIAL FISHING: In the event of major spills, the fishing industry would be seriously impacted. Risk is minimal, but increased due to level of activity in deeper, more exposed waters. Oil and gas exploration and development activities could interfere with commercial fishing operations unless they are carefully designed and timed. F. DEMAND ON COMMUNITY FACILITIES AND SERVICES l. POWER: (Figures are based on existing facilities within the Cook Inlet/Gult of Alaska Region.) 206 Requirements: - LNG plant: 2,000 to 184,000 K2 Oil Terminal: 750 Kw to 37.5 Mw : Treatment facility: 150-1,200 Kw Service base: 400 Kw For large power demands, the oil companies would probably develop their own power sources. 2. WATER AND SEWER: In the past, all oil and gas facilities have developed their own water and sewer services. Induced popula- tion growth can overstress local facilities. Existing CEIP funding has assessed this impact and plans are already being made for facility improvements (CH2M Hill, 1978). Water availability is good in northern Cook Inlet and fair but ade- quate in lower Cook Inlet. 3 HOUSING: Good quality housing is difficult to find in some areas. Vacancy rates are usually low - less than 5.5 percent in 1976. Large and sudden population increases could overbur- den the housing supply. Housing should be provided by the developer for construction workers. G. SOURCES BLM, Alaska Outer Continental Shelf Office, 1979. Lower Cook Inlet Oil and Gas Lease Sale FEIS (3 volumes). BLM, Alaska Outer Continental Shelf Office. News Releases 10/23/78, 12/28/78, 2/8/79. CH2M Hill, 1978. Offshore Oil Development in Lower Cook Inlet CRA, 1977. Planning for Offshore Oil Development: Gulf of Alaska OCS Handbook. Tuck, Brad, 1979. Economic and Population Growth Projections for the Kenai Peninsula Borough. aA. B. MAJOR INDUSTRIAL DEVELOPMENT ISSUE #3 GENERAL DESCRIPTION 1. PROJECT NAME: Pacific Alaska LNG Plant and Pipeline OPERATOR: Pacific-Alaska LNG Company CONTACT: Len McLean, 278-9571 2. BRIEF DESCRIPTION OF PROPOSED DEVELOPMENT - AND PURPOSE: Development of LNG plant with a capacity of 400 million cubic feet of gas per day. Cost estimates are $406 million for plant, $166 million for pipelines and $358 million for two LNG Carriers. Plant and support facilities will be built on 59 acres near Nikiski. Development is dependent on FERC and California Public Utility permits. Both appear to be forthcoming. 3. CAPACITY (SIZE OF DEVELOPMENT): 200 million cubic feet per day guaranteed; if gas is available, second trail will be added with 200 million cubic feet per day capacity for total of 400 million cubic feet per day. 4. PROBABILITY OF DEVELOPMENT OCCURRING: 99% (FERC approval has been granted). REQUIRED FACILITIES Type of Facility General Requirements and Proposed Location Coastal Dependency Pipelines 6 through 24" diameter; Upper Cook Inlet to 291.6 miles; Ninilchik coastally-dependent LNG Plant (2) 550,000 barrel LNG Nikiski (9 miles storage tanks; two gas N. Kenai) liquifaction trains; deepwater marine terminal; construction dock and haul road; coastally-dependent and related LNG tankers (2) 130,000 cubic meter Nikiski to Point vessels; coastally- Conception, CA dependent 208 92 TIMING 1. CONSTRUCTION START-UP: 1980, dependent on: a. Federal Energy Regulatory Commission approval of California LNG site (granted); b. California Public Utilities Commission approval; and c. money market. 2. INITIAL OPERATION DATE: 1983. 31 DURATION: 20 year contract, 40 years or longer if gas is available. EMPLOYMENT bw TOTAL PEAK INDUCED EMPLOYMENT: Probability of 1,200 in 1983 employeed in operation and _ related construction and manufacturing. 2. PEAK OPERATING EMPLOYMENT: 65-70 employees. ENVIRONMENTAL RISK/CONCERN Li AIR POLLUTION: Major emissions for OCS related activities will include particulates and sulphur dioxide from tanker and shore facility combustion, dust from wind and traffic and evaporation of hydrocarbons from fuel storage tanks. 2. WATER POLLUTION: Minimal; plant is air cooled. 3. HABITAT LOSS: Minimal; development will occur in industrial area. 4. RECREATION, SCENIC OR HERITAGE VALUES: Minimal; development will occur in industrial area. DEMAND ON COMMUNITY FACILITIES AND SERVICES 1. POWER: 10,000 kW. ah WATER AND SEWER: Facilities will be provided by Pacific LNG. Estimated yearly wastewater flow is one million gallons for sewage and runoff. Water demands will be low as the plant is air cooled. However, 14-15 million gallons will be required during construction to test tanks. Good water potential exists in the region. Si HOUSING: Will be provided for construction force. Existing housing vacancies can meet the demand of most of the induced population growth. - 209 93 A. B. MAJOR INDUSTRIAL DEVELOPMENT ISSUE HON GENERAL DESCRIPTION 1. PROJECT NAME: Beluga Coal Development and Tyonek Port Development OPERATOR: Placer Amex CONTACT: Renno Patsch Placer Amex, Inc. One California Building Suite 2500 San Francisco, CA (415) 986-0740 2. BRIEF DESCRIPTION OF PROPOSED DEVELOPMENT AND PURPOSE: This Proposed development of the Beluga coal fields, with port facilities at Tyonek, is contingent on future market condi- tions, both on the international and state levels. Beluga coals are very low in sulphur, but are also low in heat value and fairly high in moisture content compared with competing coals from other areas. Therefore, marketing Beluga coal will be difficult because of 1) the low heat value of the coal 2) the high cost of mining in Alaska and 3) the added trans- portation costs for an equivalent heat value. At this time, a primary prospect is steam coal for local power generation. However, the quantity of coal needed would be below the mini- mum economic productivity of 5.0 million tons. 3. CAPACITY (SIZE OF DEVELOPMENT): The field Proposed for first production has an estimated required minimum export quantity of between 5 and 6 million tons per year to make the operation economically feasible and competitive. 4. PROBABILITY OF DEVELOPMENT OCCURRING: Low, not likely to occur before 1985. REQUIRED FACILITIES Type of Facility General Requirements and Proposed Location Coastal Dependency Surface Mine scrappers, bulldozers, Beluga Coal Fields trucks and shovels; gentle topography and thin ovec- burden; fuel and other Support services; not coastally-dependent - Railroad 30 miles across gentle Beluga to Tyonek topography; not coastally- related 211 94 Marine Terminal deep water port; storage Tyonek loading facilities; water and power demand for removing ash and drying coal; coastally-dependent Vessels 100,000 D.W.T. or tug-barge Tyonek to West combinations Coast or Japan Power Plant mine mouth - not coastally- Beluga or Tyonek related; elsewhere - coastal- ly related due to need for receiving terminal; potential major demand for water cooling Cc. TIMING 1. | CONSTRUCTION START-UP: Intermediate case: 1987 High case: 1982 2. INITIAL OPERATION DATE: Unknown, dependent on market. D. EMPLOYMENT a PEAK CONSTRUCTION: Unknown. 2. PEAK OPERATING: Intermediate case: 220 from 1987 on High case: 840 in 1992 E. ENVIRONMENTAL RISK/CONCERN 1. AIR POLLUTION: Minimal, except for emissions from power plant. Low sulphur coal and emission standards requirements minimize impact. 2. WATER POLLUTION: Potential for thermal pollution of power plant discharge or of mine drainage from surface mining acti- vities impacting upland aquatic systems. 3. HABITAT LOSS: Surface mine should be revegetated to reduce habitat loss. 4. RECREATION, SCENIC OR HERITAGE VALUES: Area presently receives little use and is of low value relative to adjacent areas such as Lake Clark National Monument. F. DEMAND ON COMMUNITY FACILITIES AND SERVICES re POWER: Would generate its own power. ‘- 2. WATER AND SEWER: High water demands, area has good water availability. Industry will develop its own facilities. 3. HOUSING: Temporary and permanent mine and terminal related housing should be provided. Development could induce growth in Central Kenai Peninsula and cause indirect demands on com- munity facilities and services there. G. SOURCES Woodward-Clyde and Associates and Soros Associates, 1979. Port and Harbor Demand and Feasibility Study : Tuck, Brad, 1979. Economic and Population Growth Projections for the Kenai Peninsula Borough. 213 MAJOR INDUSTRIAL DEVELOPMENT ISSUE #4B A. GENERAL DESCRIPTION t. 3. 4. PROJECT NAME: Beluga Coal-Oil Mixture Development OPERATOR: Placer Amex Inc. and associated companies CONTACT: Noel W. Kirshenbaum Manager, Project Development Placer Amex Inc. San Francisco, CA BRIEF DESCRIPTION OF PROPOSED DEVELOPMENT AND PURPOSE: Mining of Capps and Waterfall coal seams (estimated recoverable re- serves of about 200 million tons) and removing ash. Develop- ment of Cook Inlet area coal fired thermal power plant and a transportation system to export approximately 5-6 million tons of coal per year to the west coast and Japan as a coal-oil mixture. The coal-oil slurry would be a mixture up to 50% pulverized coal mixed with residual fuel oil from Valdez or Indonesia. The resulting mixture exhibits the handling, storage and combustion chracteristics and advantages of a liquid product. Economics and feasibility of water transpor- tation can help assure a competitive delivered price for this coal. CAPACITY (SIZE OF DEVELOPMENT): World scale. PROBABILITY OF DEVELOPMENT OCCURRING: High. B. REQUIRED FACILITIES Type of Facility General Requirements and Proposed Location Coastal Dependency = Surface Mine relatively flat topography; Capps, Three Mile thin overburden; not and Chitina, Beluga coastally-dependent coal leases Coal-fired mine mouth - not coastal ly- Mine mouth or aear Plant Power dependent; port site - or deep water port coastally-related Railroad 30 miles; flat topography; Beluga fields to not coastally-dependent terminal (possibly Tyonek-North Forelands area) aha 97 Marine T erminal deep waler port; storage; west side of Cook conveyors; vessels up to Inlet (possibly 100,000 DWT or tug-barge ~ Tyonek-North combination; flat areas Forelands area) for storage and staging; coastally-dependent C. TIMING 1. 2. Bt CONSTRUCTION START-UP: 1981-82. INITIAL OPERATION DATE: 1984-85. DURATION: 30 years minimum. MENT D. EMPLOY 1. z E. ENVIRO PEAK EMPLOYMENT: 3,000-4,000. PEAK OPERATING: 1,000-1,500. NMENTAL RISK/CONCERN 1. F. DEMAND 1. AIR POLLUTION: Power plant - low sulphur coal so emissions will be minimal. WATER POLLUTION: Potential risk of ‘tanker accident and resultant coal-oil mixture spill. Waste water from coal will require careful treatment. Potential for acid mine drainage affecting aquatic systems near surface mining operation. HABITAT LOSS: Loss of habitat at mine along railroad right- of-way and terminal. Mine site would be revegetated. RECREATION, SCENIC OR HERITAGE VALUES: Limited recreational use of this area presently occurs due to access. Recreation value low relative to adjacent Lake Clark National Monument. Some impact to native traditional cultural value. Development will improve access and recreational use. ON COMMUNITY FACILITIES AND SERVICES POWER: This project would utilize power from the coal-fired Power plant developed as a result of the project. Initial costs of power would be higher than from existing gas-fired plants. However, the added energy could attract other indus- trial developments, including aluminum processing, because of the guaranteed long-term supply of power from Beluga Coal. WATER AND SEWER: Project would devedop its own water and waste water systems. Water demand would be high, but poten- tial surface and ground. water availability in the Beluga- Tyonek area is high. 215 98 3.- HOUSING: Would develop temporary housing for construction effort and assist construction of permanent dwellings for the operation. Envisioned in this development is the establish- ment of a new town near the coal fields. 4. OTHER: Potential impact on Central Peninsula and Nikiski industrial area is unknown. CEIP money should be made avail- able for more in-depth studies and advanced planning needs for new community development and minimization of adverse socio- economic impacts to existing communities. G. SOURCES Kirshenbaum, N.W., June 1978. Alaskan Coal: Its Development, Status and Transportation. Placer-Amex Inc. Kirshenbaum, Noel, W., January 1979. Coal Oil Mixture and Beluga Coal. Placer-Amex Inc. 216 99 A. B. c. MAJOR [NDUSTRLAL DEVELOPMENT LSSUE #5 GENERAL DESCRIPTION 1. PROJECT NAME: Bradley Lake Hydroelectric Project OPERATOR: Homer Electric Association CONTACT: U.S. Army Corps of Engineers BRIEF DESCRIPTION OF PROPOSED DEVELOPMENT AND PURPOSE: This proposed hydropower project will interconnect with flomer Electric Association to provide low cost long-term power sup- plies for the Homer-Kenai area with a minimal impact on the environment. CAPACITY (SIZE OF DEVELOPMENT): Authorized capacity is 60 MW. The proposal to Congress was for 70 NW with potential expan- sion to 118 MW. PROBABILITY OF DEVELOPMENT OCCURRING: Requests for funds were ‘included in the presidential budget for 1980. A request has been made to the Office of Management and Budget for funding for summer work, which would include environmental studies and fisheries and mammals work, as well as exploration for on-site construction materials. REQUIRED FACILITIES Type of Facility General Requirements and Proposed Location Coastal Dependency Dam 100' high; not coastally- Bradley Lake related Underground powerhouse Access road gentle grades; crushed rock; Homer-Fox River (probably not gravel and sand; not Bradley Lake economically coastally-dependent feasible) . Barge landings, coastally-dependent; shallow Homer, Bear Lake, road to Cove water docks with unloading Bradley Lake Lake facilities and storage areas TIMING - 1. CONSTRUCTION START-UP: CRA predicts construction will begin in 1981. However, no EIS has been written, so it appears to be further into the future. Corps of Engineers had no date in mind. 217 100 INITIAL OPERATION DATE: Initial prediction January 1985, but it appears further away at this time. 3. DURATION: It has a 50-year economic life, but could easily have an operating life of 75-100 years. EMPLOYMENT . 1. PEAK CONSTRUCTION: 200 at 120 MW capacity. 2. PEAK OPERATING: 3-5 years. ENVIRONMENTAL RISK/CONCERN 1. 2. AIR POLLUTION: Little. WATER POLLUTION: Possible temperature change. HABITAT LOSS: Preliminary studies reflect potential impacts on minor coho, pink and chum salmon runs, as well as euchalon and Dolly Varden. Groundwater upwelling may provide needed water flow to prevent this. Approximately 1,800 acres of vegetation would be inundated, 133 acres associated with transmission corridors would be altered, possible to benefit of wildlife due to habitat diversification. Changes in flow regime could impact Fox River Flats, an important wetland area used by waterfowl, moose and bear. Construction of an access road could impact habitat and wildlife by increasing accessi- bility to hunters and recreationists. RECREATION, SCENIC OR HERITAGE VALUES: No known archaeologi- cal or historic sites would be impacted, although the poten- tial for archaeological remains in the Fox River Flats appears to be high. DEMAND ON COMMUNITY FACILITIES AND SERVICES 1. POWER: Would provide power for the Kenai Peninsula at the 80 kW level and, at the 118 kW level, would provide power for the Anchorage area also. 2. WATER AND SEWER: Provided by plant. 3. HOUSING: Provided by plant. SOURCES CRA, 1977. CEIP Credit Assistance Inventory. Sverdrop & Parcel and Associates, [nc., September 1975. Re-analysis of the Bradley Lake Hydroelectric Project. 218 101 aA. B. MAJOR INDUSTRIAL DEVELOPMENT ISSUE #8 GENERAL DESCRIPTION Ls. PROJECT NAME: Expansion of Existing Commercial Fisheries . Processing Industry OPERATOR: Various. See Figure 1.19 CONTACT: Tom Waterer, Salamatof Seafoods, and other processors BRIEF DESCRIPTION OF PROPOSED DEVELOPMENT AND PURPOSE: Construction of new fresh-frozen processing plants, primarily for salmon, and expansion of existing plants. This would have a significant economic impact on local communities, as well as on the borough economy in general, due to increased employment in fish processing and related service industries. CAPACITY (SIZE OF DEVELOPMENT): Expansion and new plants are currently under construction for several Kenai Peninsula Borough processing companies this year. Many more are ex- pected in the next few years, due primarily to the greatly in- creasing value of frozen fish (primarily salmon) on the Japanese market. PROBABILITY OF DEVELOPMENT OCCURRING: Currently underway and continued development is likely. REQUIRED FACILITIES Type of Facility General Requirements and Proposed Location Coastal Dependency Port Facility fish loading docks; staging Kenai, Homer and areas and transshipment Seward development; coastally- dependent Processing Plant water demands are high; power demands are moderate; level ground required; moderate dredging and filling will be necessary for staging areas and ‘plant location; sub- marine waste disposal; coastally-dependent TIMING 1. CONSTRUCTION START-UP: Has already begun. 2. INITIAL OPERATION DATE: Many are already in operation. 3. DURATION: Permanent, unless fish stocks are depleted. EMPLOYMENT 1. PEAK CONSTRUCTION: Not determined. 2. PEAK OPERATING: Not determined. ENVIRONMENTAL RISK/CONCERN 1. 2. AIR POLLUTION: Not a major concern. WATER POLLUTION: Discharges from fish processing facilities are under regulation by the Environmental Protection Agency and little risk is involved with application and enforcement. HABITAT LOSS: There would be a loss of some coastal, marine and upland habitat due to dredging, filling and construction of facilities. However, critical habitats will not be in- fringed upon with enforcement of existing state and federal regulations. RECREATION, SCENIC OR HERITAGE VALUES: No major impacts are expected if careful site planning is undertaken. DEMAND ON COMMUNITY FACILITIES AND SERVICES 1. POWER: Processing plants have moderate power demand. 2. WATER AND SEWER: Water demand is high for processing plants, while sewer demand is moderate. Only Homer has a significant water supply (storage) problem. 3. HOUSING: Housing would be required for all employees, with a peak demand in summer months. However, no large booms are expected, so the demand will be spread over several coastal communities over a considerable time period. SOURCES See contacts. 25403 MAJOR INDUSTRIAL DEVELOPMENT ISSUE #9 A. GENERAL DESCRIPTION 1. 2) PROJECT NAME: Bottomfish Industry Development BRIEF DESCRIPTION OF PROPOSED DEVELOPMENT AND PURPOSE: A major bottomfish processing plant with related facilities, in- cluding a fish offloading dock, staging areas and other re- lated facilities. CAPACITY (SIZE OF DEVELOPMENT) : Option of processing plant capacity for bottomfish is determined to be approximately 30- 40 million pounds per year. PROBABILITY OF DEVELOPMENT OCCURRING: It is likely that a major bottomfish processing industry will locate in either Homer or Seward in the next 5 to 15 years. B. REQUIRED FACILITIES Type of Facility General Requirements and Proposed Location Coastal Dependency Port Facility fish loading docks; staging Homer or Seward areas and transshipment development; coastally- dependent Processing Plant level ground required; moderate dredging and filling necessary plant site and staging area; water demands are high; power demands moderate; submarine waste disposal; coastally dependent C. TIMING 1. CONSTRUCTION START-UP: Not determined. 2. INITIAL OPERATION DATE: Not determined. 3. DURATION: Not determined. D. EMPLOYMENT 1. 2. PEAK CONSTRUCTION: Not determined. PEAK OPERATING: Employment in the bottomfish industry employs seven people in the processing plant and related onshore ser- vice industries for every one person employed in harvesting 226 104 E. F. G. Therefore, any major bottomfish industry development would have significant operating employment. Statewide, 20,000 jobs are expected in a fully developed bottomfish industry. ENVIRONMENTAL RISK/CONCERN 1. 2. AIR POLLUTION: Not a major concern. WATER POLLUTION: Discharges of fish offal from processing plants are under regulation of the Environmental Protecticn Agency and minimal risk is involved with application and en- forcement of regulations. HABITAT LOSS: There would be some loss of coastal, marine and upland habitat due to dredging, filling and construction of facilities. RECREATION, SCENIC OR HERITAGE VALUES: While the expansion of the commercial fisheies processing industry would definitely result in coastal lands losing some recreation use and scenic value, no major impacts are expected if careful site planning is undertaken. r DEMAND ON COMMUNITY FACILITIES AND SERVICES 1. POWER: Processing plants and related facilities have moderate power demand. WATER AND SEWER: Processing plants have high water demands. Industrial quantities of groundwater occurring nearby are tapped if available. Otherwise, municipal supplies are pur- chased. Most plants have their own wastewater treatment facilities. Therefore, demand on municipal sewer systems is usually low or none. Water supply outlook is excellent in Seward and will require tapping upland surface water supplies and constructing storage facilities in Homer. HOUSING: Housing would be required for all employees. However, no large booms are expected as demand will be spread over several coastal communities over a considerable period of time. Bottomfish processing is not as seasonal in nature as existing salmon and shellfish processing, so housing demands for employees would be of a more permanent nature. SOURCES 227 105 THOUSANDS OF BARRELS 100,000 Lower ’ Cook Inlet ’ High Forecast 7 / 60,000 + Upper 4 Cook Inlet Production 30,000 + Current Local Refinery Capacity ——» — 21,800,000 bbs / o ff Lower Cook Iniet / f- Medium Forecast fa 2 // 10,009 T T T 1960 1970 1980 1990 1995 Figure 2. OLL PRODUCTION PROFILE OF COOK INLET, 1960-1995 2-52 107 MILLIONS OF CUBIC FCET 400,000 + 300,000 + Teale) we és ~ * . “s », ‘“ 200,000 4 AA ». % | *. Upper Cook Inlet Annual Gas Production ‘Ny | 100,000 5 7 al vi , : , 7 1 i | ’ | : i i j ’ ‘ 2 ’ : : ’ ’ | Lower Cook Iniet ’ Median Potential ii | i | ’ ’ ¢ ¢ ’ 7 ¢ a ¢ 7 ¢ of o ? ° oo? 10,000 - ———+ + + — 1960 1965 1970 1975 1980 1985 1990 1995 YEAR Figure 3. GAS PRODUCTION PROFILE OF COOK INLET, 1960-1995 2-55 108 WATER QUALITY IMPLICATIONS OF OIL AND GAS RELATED ACTIVITIES IN THE PROPOSED SALE AREA Department of Environmental Conservation ISSUES OF CONCERN Issues of water quality concern with respect to oi] and gas activities can be categorized basically into pre-exploratory, exploratory, and development/production phases of field development and onshore support. Pre-exploratory water quality concerns are minimal. Seismic testing (offshore and onshore) will generally result in few direct effects; increased vessel traffic in local boat harbors as seismic ships take on water and fuel is commonplace. Deep stratigraphic test wells to evaluate subsurface geology are commonly drilled during the pre-exploratory phase and associated with this activity are discharges of drilling muds and cuttings. With the exploratory phase comes increased activity as onshore mobiliza- tion is accelerated in support of offshore drilling. Demand for community services and goods typically increases, most notably, accelerated harbor and airport use. The degree of effect on local housing, schools, and secondary services during the exploratory process is largely dependent on the level of prior planning and on whether offshore or onshore fields are being explored. Offshore field exploration tends to stress general community services less than onshore exploration near established communities since living quarters are provided directly on the rig. Increased vessel traffic results in a larger number of negative encounters with stationary fishing gear where heavily fished areas overlap with vessel traffic corridors. The potential for fuel spills is enhanced slightly due to the higher probabilities of marine vessel encounters. Waste discharges from offshore exploratory platforms include drilling muds and cuttings (approximately 2500 barrels per well). Sanitary and solid wastes are treated consistent with State regulations. Onshore drilling activities in regions remote from established communities will generally require the construction of temporary camps to house workers. Water quality concerns associated with these construction activities often include diffuse source pollution (sedimentation) of streams and rivers from road construction and bank erosion, filling of wetlands habitat, gravel extraction, and minor fuel spills from storage tanks. The development and production phase constitutes the phase of greatest concern from a water quality standpoint. With this phase come the Tong term, continuous, and generally low-level sources of pollution expected over the 20- to 30-year life of the field. Waste categories unique to this phase include: 1) produced waters, which are brought up with oil at the drilling platform and separated before their untilate disposal; 2) ballast water discharges from tankers; 3) potential large oil abd hazardous substance spills from marine transport activities; and 4) LNG plant and refinery effluents Waste generating categories, in addition to the above, which are also common to some earlier phases include drilling fluid disposal (on a larger scale), permanent housing, roads, expansion of community facilities to accomodate solid and sanitary wastes, commitment of land to shoreline development, and associated sedimentation of surface waters. EVALUATION OF CURRENT INDUSTRIAL OPERATIONS AND ANALYSIS OF REGULATORY CONTROLS TO MITIGATE WATER QUALITY EFFECTS Regulatory authority for the control of water quality aspects of oi] and gas development in State waters and land is vested primarily with the Department of Environmental Conservation (DEC) through issuance of the following: 1) waste water disposal permits; 2) 401 certifications of Corps of Engineers permits; 3) — EPA permits; 4) solid waste disposal permits; 5) review of engineering designs for onshore facilities. Additionally, DEC assumes a major advisory role with regard to development of water quality-related lease stipulations. The Department of Natural Resources also plays a substantive role in pollution control, primarily through terms and stipulations in lease notices, information to Bidders, and Plans of Operations, the later subject to formal multi-agency review by virtue of a memorandum of understnading (MOU) between resource agencies. The Department of Fish and Game has authority through Title 16 to regulate activities directly in fish streams and plays a major advisory role to DNR and DEC with respect to lease stipulations and respective permit conditions consistent with their responsibilities. These include specific attention to the habitat standards of the Alaska Coastal Management Program. au 1) produced ‘waters, which are brought up with oi] at the drilling platform and separated before their untilate disposal; 2) ballast water discharges from tankers; 3) potential large oi] abd hazardous substance spills from marine transport activities; and 4) LNG plant and refinery effluents Waste generating categories, in addition to the above, which are also common to some earlier phases include drilling fluid disposal (on a larger scale), permanent housing, roads, expansion of community facilities to accommodate solid and sanitary wastes, commitment of land to shoreline development, and associated sedimentation of surface waters. EVALUATION OF CURRENT INDUSTRIAL OPERATIONS AND ANALYSIS OF REGULATORY CONTROLS TO MITIGATE WATER QUALITY EFFECTS Regulatory authority for the control of water quality aspects of oil and gas development in State waters and land is vested primarily with the Department of Environmental Conservation (DEC) through issuance of the following: 1 waste water disposal permits; 2 401 certifications of Corps of Engineers permits; = Ww solid waste disposal permits; ) ) ) EPA permits; ) 5) review of engineering designs for onshore facilities. Additionally, DEC assumes a major advisory role with regard to development of water quality-related lease stipulations. The Department of Natural Resources also plays a substantive role in pollution control, primarily through terms and stipulations in lease notices, information to Bidders, and Plans of Operations, the later subject to formal multi-agency review by virtue of a memorandum of understnading (MOU) between resource agencies. The Department of Fish and Game has authority through Title 16 to regulate activities directly in fish streams and plays a major advisory role to DNR and DEC with respect to lease stipulations and respective permit conditions consistent with their responsibilities. These include specific attention to the habitat standards of the Alaska Coastal Management Program. While the decisions of agencies having specific expertise with respect to certain ACMP standards is considered definitive, consistency deter- minations for activities involving many standards and often philosophically different interpretations by agencies, are made through the Office of Coastal Management in the Office of the Governor. Regulatory controls over water quality aspects of oi] and gas operations in Upper Cook Inlet and onshore fields vary with geographic location and are tailored to the capacity of the receiving environment to assimilate wastes such that the State's water quality standards are not violated and identifical water uses are protected. Solid waste and sanitary waste disposal controls are intended to provide protection to the public drinking water and other health-related resources. The question of the relative ability of a particular environment to accommodate discharged wastes is central to the Department of Environmental Conservation's determination of appropriate permit conditions. The rate of input of pollutants is weighed against the assimilative capacity of the land or water and the specific identified uses of that particular receiving environment. An analysis of major waste categories and controls discussed below will clarify this concept. Produced waters Current operating practice with regard to produced water disposal in the Upper Cook Inlet region offers a clear example of a geographically variable discharge policy. Produced water composition, while varying depending on the specific oi] reservoir, is generally high in heavy metals, devoid of oxygen, and relatively high in dissolved hydrocarbons (Table 1). The proper disposal of these wastes is a major water quality issue during the production phase of oil field development. 113 Table 1. Adapted from BLM Drat EIS for Oil and Gas Lease Sale No. 60. Table IV.A.2.0.-2 Discharge Concentrations of Treated Production Waters in Upper Cook Inlet and Necessary Dilution to Water Quality Criteria ARCO Granite Point Facility”/ ,, Marathon Trading Bay Facility?) J 1 . Dilution to~ ; Dilution to- Toxic= Discharge Concen- Water Quality Discharge Concen- Water Quality Substance trations mg/l Criterion trations mg/l Criterion Trace Metals . Silver 0.05 107! 0.03 107! Arsenic 0.05 0 0.02 0 Cadmium 0.04 107} 0.28 1072 Chromium 0.14 0.57 107? Copper 0.05 0 0.18 1072 Mercury 0.002 107! 0.0001 0 Nickel 0.05 0 1.1 107} Lead 0.20 107} 0.2 107! Antinomy 0.14 . 0 0.026 0 Selenium 0.01 0.017 0 Zine 0.05 0.11 Petroleum Hydrocarbons>/ Benzene 1.3 107? 1.2 1072 Toluene 0.05 107 0.48 10°? Ethylbenzene 0.05 : 0 NA NA Xylenes 0.10 107! 0.48 107} Trimethybenzenes 0.50 107! 0.13 107! Naphthalene 0.10 107! 0.16 107? Methylnapthalenes 0.20 107! 0.15 0 Dimethylnapthalenes 0.50 107? NA NA Trimethylnapthalenes 0.50 \ NA NA NA Oil and Grease 4.2 0 2.0 0 =>. -\WSSSFTFSFSPSPSPHTSeT-—— —" Toxic substances identified are those listed by U.S. Environmental Protection Agency pursuant to section 307(a)(1) of the Clean Water Act, as amended. Other metals exist in petroleum formation waters, however, these are not included in the list of toxic substances. 2/ The ARCO separation and treatment facility at Granite Point treats unprocessed petroleum liquids from platforms Spark and Texaco-Superior. Platform A and receives separate produced waters from Amoco and Mobile offshore production platforms. As of December 1979, the facility discharged an average 314,000 gallons (7476 bbl/day) of treated wastewaters. 7 Lid 3/ The Marathon separation and treatment facility at Trading Bay receives unprocessed petroleum liquids from Dolly Varden, Grayling, King Salmon, and the monopod platforms. As of December 1979, the facility discharged an average of 2,878,000 gallons (68.524 bbl) of treated wastewater a day. 4/ Dilution to water quality criterion refers to orders of magnitude reduction in the reported discharge concentration before it is less than or equal to the applicable U.S. EPA water quality criterion (U.S. EPA, 1976). 3/ There are no water quality criteria for individual aromatic hydrocarbon compounds Refer to section III.E. regarding water quality criteria for petroleum hydrocarbons. Hypothetical criteria have been derived from 96-hour LD50 bioassay work on first Instar zoeae (larval stage) of dungeness crab. A 0.01 decimal fraction of the reported LD50 value was used in accordance with U.S. EPA and Alaska DEC water quality criteria for petroleum hydrocarbons. Data source: Caldwell, Calderone, and Mallon in Wolfe, 1977. Sources: Arco Oil and Gas Company, "NPDES Permit Application: Granite Point Production Facility," 1980. Marathon Oil Company, "NPDES Permit Application: Trading Bay Production Facility," 1980. Disposal from onshore producing oi] and gas wells, such as those in the Swanson River field, is through direct reinjection of wastes into subsurface formations below the depth of any groundwater horizon of drinking water quality (greater than 20,000 parts per thousand total dissolved solids). No adverse water quality effects have been documented from this practice. The economics of reinjection in offshore waters are often not as desirable as for onshore wells and consequently, the method of disposal of wastes in offshore areas is much more of a controversial issue. Reinjection of water to maintain field pressure and enhance recovery of oil is generally considered to be economically desirable after several years of field development, as production rate drops and the volume of water brought to the surface becomes proportionally much greater than the amount of oil. The relationship between pollutant levels resulting from over-the-side disposal to those Alaska Water Quality Standards regulating hydrocarbon and heavy metal concentrations in the water is a key environmental issue. Variables which moderate biological effects include the particular circulation and flushing characteristics of the marine waters in question, depth of water, volume of pollutants, and identified uses and biological sensitivities in the local area. For most of Upper Cook Inlet, tidal flushing is excellent (a parcel of water may move 40 miles on the flood tide), water depths are great, and biological productivity is low. Given these criteria, direct disposal to surface waters is an acceptable practice in the majority of cases. All current offshore producing platforms in Upper Cook Inlet (Figures 1 and 2) discharge produced waters by one of the following methods: direct discharge (e.g. several Amoco platforms), and direct piping onshore to production treatment facilities before ultimate ‘disposal to the Inlet (Figure 3). The volumes of produced water discharged can be considerable, and are, in part, a reflection of the water to oi] volumetric ratio of a particular well. Table 2 lists the monthly cumulative volumes of produced water from individual wells in producing fields in Upper Cook Inlet and the Kenai Peninsula during February 1980. While the water quality effects of direct produced water discharge from Upper Cook Inlet operations have not been specifically studied, a review of the criteria mentioned earlier would support a hypothesis of little or no adverse effects in this well flushed tidal estuary. The Department of Environmental Conservation has recently initiated an effluent monitoring program for dissolved hydrocarbons as a standard permit condition in order to more accurately characterize the chemical constituents of platform discharges and their concentrations as a function of time and geographic location. The results of the program are not yet available. In summary, a continuation of the current practice for produced water disposal in onshore and offshore areas of Upper Inlet appears acceptable with the exception of very shallow nearshore areas at mouths of river systems, intertidal habitats, and those areas experiencing gyre circulation patterns which would tend to maintain higher hydrocarbon concentrations than would normally be expected under 116 + ex 152°00. WIT Sac ; og BLP A > Industrial or municipal outfall landfill or dump Area of indiscriminate dumping Sewage lagoon Raw sewage disposal area Placer mine pa Eisen KY ee. 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Drilling Muds and Cuttings The issue of environmentally acceptable drilling mud disposal practices is recognized during both the exploratory and production/development phases of oi] and gas operations. As with produced waters, the regulatory decision on discharge is based on the following criteria: local oceano- graphic circulation patterns, depth of water, sensitivity of the receiving water biota, and the volume, rate of input, and relative toxicity of the drilling mud formulation as specified on the product label. The composition (and hence, the relative toxicity) of drilling muds is variable within certain limits since formulations are altered as a function of drilling depth to equalize pressure. All muds are composed of a majority of inert constituents (e.g., barite and bentonite clays) plus a variable suite of additives such as ferro-chromium lignosulfonate. The chemical composition of "typical" drilling muds used in the Lower Cook Inlet OCS exploratory phase is shown in Table 3. Past and current drilling mud disposal practices for Upper Cook Inlet include over-the-side discharge of non-oil-based muds, reinjection down the well bore, and disposal at approved upland sites. All three practices are subject to approval by the Department of Environmental Conservation. Whereas the acute (lethal) short-term toxicity of drilling fluids to adult organisms characteristic of the Inlet appears low (Table 4), the sublethal, long-term effects on stationary bottom organisms and sensitive larval crustaceans are poorly understood. To fill this information void, drilling mud toxicity LC 50 tests with larval crustaceans were initiated in the spring of 1980 under the auspices of the BLM - sponsored Outer Continental Shelf Environmental Assessment Program 1/. Available short- term laboratory toxicity tests and direct field examination suggest a hypothesis that the major detrimental effects from drilling mud and cutting disposal result from physical smothering of bottom dwelling organisms, with little field documentation of chemically-related toxic effects. It is expected that the majority of offshore locations in Cook Inlet can accommodate the rate of input projected from new offshore facilities. The locations of upland disposal sites for muds generated from onshore wells drilled on the Kenai Peninsula are selected on the basis of proximity to the rig, soil permeability, depth of the groundwater table, and proximity to surface waters. Berming around drilling mud reserve pits is accepted practice to effectively contain wastes (Williams, personal communication). j/ Rice, S. Lethal and Sublethal Effects on Selected Alaskan Marine Species after Acute and Long-term Exposure to 0i] and Oil] components. OCSEAP Research Unit No. 072. Preliminary conclusions include: (1) crustacean larvae are more sensitive than adult shrimp and fish; and (2) adverse effects to larvae appear to be caused primarily by physical effects of the exposure rather than chemical toxicity. 121 GSE Table 3. Components of drilling muds which are normally discharged into the sea. Substance Source Use Attapulgite Quarry To cause clay gelling of salt water based muds Bentonite Quatry To cause clay gelling of freshwater based muds Caustic Electrolysis For pH soda of sodium control chloride brine Ferrochrome Digestion of Dispersant lignosul fo- wood by sul- and emulsifier nate fonate process removal of Organic Polymer cellulose; reaction with chromium compounds Chemical process with plant starch, wood fiber as raw materials Conditioner, texturizer Composition A light green magnesium rich clay, quarried as "Fuller Earth" A light-colored montemoril lonitic clay; slippery sticky when wet; swells to 10-20 times its dry volume Sodium hydroxide, NaOH Ferrochrome salt of liqnosulfonic acid; content; Fe-2.6%, Cr-3.0%,S-5.5% Starch, cellulosic derivatives Known Hazard NONE NONE Corrosive in concentrated form; not harmful after mixing into mud at low concentration and allowed to react Possible chromium toxicity in pure form, none known from diluted form in muds NONE ect Table 3 continued. Components of drilling muds which are normally discharged into the sea. Subs tance Source Use Proprietary Soap making Defoamer defoamer process Barite Mined as the Weighting mineral agent Gypsum Mined as the Flocculant (Plaster of mineral and calcium Paris) source Tennin Extracted Thinning agent from the Quebracho tree Carboxymethy] From stalks Fluid loss cel lulose and stems of agent plants Sodium acid Reaction of Thinning pyrophosphate sodium with agent pyrophosphoric acid Siderite Mined as the Weighing mineral agent, Composition Aluminum stearate Al (Ch3(CH,)16) 3 Barium sulfate Ba S04 Calcium sulfate CaS04.2 H20 Complex organic compound, 5(C14H909) .C6H70 Complex organic polymer Na2H2P207 FeC03 Known Hazard NONE It is recommended that public water supplies contain no more than 1 mg/l barium Potentially hazardous NONE Potentially hazardous NONE NONE POT Table 3 continued. into the sea. Subs tance Source Use Formaldehyde Oxidation of Bactericide methanol Penta Reaction of Bactericide chlorophenol —hexachloro- benzene with sodium hydroxide Potassium Mined as the Flocculant chloride mineral sylvite in carnal lite Sodium Passils Precipitate biocarbonate carbon soluble dioxide thru calcium, pH a solution of control nomial carbonate Composition HCHO C6CI50H Potassium chloride KCl NaHC03 Components of drilling muds which are normally discharged Known Hazard Potentially hazardous Potentially hazardous NONE NONE Sources: Rogers (1963), Robichaux (1975), Land (1974), USDI (1975c,d,i). meTER Berite Bentonite Celciw: Chloride Calcium Carbonate Ceiles (carsosymethy) cellulose) Cnrome lignosulfonate ext conzzins Diocioe) Dowicice-B° Drispacz Kwik Seal (irsolusle Jost circulation raterial) Lignite Line Peratcrmeldenyae® Sos cid Dyrsstosonate (SAPP) Soci. Bicarbonate Sesive Hydrosice Il Peiymer Erocide 3 (priysaccnarice- Tahle 4. AQSTE TOLICITY BIOASSAYS OM DRILLING MUD MATERIALS Sea water Fresh water Sea water: Fresh water Fresh water Fresh water Fresh water Fresh water Fresh water Sea water Fresh water Fresh water Sea water Salveston Bay sea water Fresh water Fresn water Fresh water Fresh water Fresh water Fresh water Ses water Seawater Fresh water Fresh water Fresh water Sea eater Fresh water Fresh water Fresh water Ttst -HR Lg. Ae PPR Yartous »7,500 marine aninels Satifin »100,000 mollies Sailfin »100,000 mollies 7 Rainbow >100,000 trout Rainbow 210,000 trout . aia Gasbusia >100,000 Rainpoe 10,000 trout Mosquits 13,400 fisn Saflfin >%00,000 mollies Saflfin »100,000 mollies Raindos 10,000 trout Sailfin 7,800 mollies Sailfin , 12,200 wollies waite 465 thrimp Ratndow 860-5000 trout (various types) Rainbow 3460 trout Raindow 0.75 trout Ratndow 2700-2800 trovt Raindow RandamToricity trout due to mecnanical action only Sailfin 24,500 pollies Satlfin »1§,000 wollies Yarious 70-450 Organisers Raindoe 46-78 trout Raindoe 870 trout Satlfin 1,200 wolites Sailfia 7,100 mollies Raindow 7,500 trout Rainsow 105 trout Raindow 1800 trout 5 CONCENTRATION RANGE REFERENCE LTA) Daugherty 70, 000-2 000,000 (1951) Grantham and Sloan (1975) Grantham and Sloan (1978) Beckett, Moore and weir (1976) Logan, Sprague, 15,000-100,000 & Hicks (1973) Wallee (1951) Falk & Lawerence (1973) Wallen, Greer 25, 000-600,000 and Lasater (1952) Grantham and 70 000-800 ,000 Sloan (1975) Grantham ang Sloan (1975) Falk & Lawerence (1973) Hollingsworth & Lockhart (1975) Hollingswortn & Locknart (1975) Chesser and Mctenzie (1975) Seckett, Moore and weir (1976) Mix (1977) 700- 14,000 3,000-69,000 5000-50 ,000 Beckett, Moore and Wetr (1976) Beckett, Moore and wetr Becrett, Moore ang beir (1976) 300-1 ,500 1000-15000 140,000-1, 400,000 Hollingsworth & Locenart (1975) Hollingsworth & Loctnart (1575) Daugnerty (1957) 5,000- 3,000-75 ,006 $0,000 Falk b Lawerence 600-6,000 (1973) Logan, Spreque, b etces (1973) mo'lingswortn & Locthart (1975) Viingsworth 2 Loctmart (1975) Falk & Lawerence ($73) Logan, Sprague, & Kfers (1973) Bectett, Moore and wetr (1976) 650-18 ,000 300-6 ,000 3000-15 ,000 600- 6,000 1977 U.S. CONSUMPTION RATE Im ORILLING FLUIoS TONS /TR 1,900,000 650,000 12,500 2,500 12,500 65,000 5,000 . a 12,500 200,000 (a11 Jost circulate materials) 50,006 10,000 $090 1,506 $00 50,005 $00 Ballast water and refinery effluents and LNG effluent discharges Water treatment facilities which accept ballast from ocean going tankers are presently located at two locations in Upper Cook Inlet: Nikiski and Drift River. Absolute volumes discharged from the Nikiski facility have averaged about 200,000 barrels per year, over the last several years. It is expected that the total volume of ballast water discharged to marine waters from onshore ballast treatment facilities will decrease very gradually in the future as more tankers are built or retrofitted with segregated ballast tanks, thus reducing the amount of water coming into contact with oil. A ballast water and refinery effluent monitoring program has recently been initiated as a permit condition to Chevron's refinery and ballast plants an Nikiski by the Department of Environmental Conservation in an effort to accurately characterize the presently unknown chemical composition of the ballast and refinery discharges to Cook Inlet, especially the aromatic (dissolved) hydrocarbon concentration. This information will ultimately be useful in deciding whether any stringent controls (e.g., through an effluent eae should be imposed on the discharges. Preliminary analysis data are few, but indicate a range of total dissolved hydrocarbons from 60 to 120 ppb (Day, personal communication), which, after dilution, fall well within the legally allowable limit for soluble hydrocarbons as established in the Alaska Water Quality Standards. An air-cooling process is to be utilized at the current LNG facility at Nikiski such that thermal discharges are currently not an issue in Cook Inlet. Insufficient information is available to definitively predict the type of cooling system for all future facilities. Any heated effluent discharges associated with water-cooled (LNG) plants would be subject to DEC's water quality criterion regulating allowable temperature changes in marine waters. Solid and oily waste disposal Solid wastes generated from offshore drilling in upper Cook Inlet have typically been disposed of at the Kenai landfill (see Figure 1 for Upper Inlet landfill and dump locations). The Kenai site is expected to have adequate capacity until 1982. Oily wastes (sludges) are disposed of at special landfill sites designed to handle these wastes, such as the Sterling site or those designated in industry's required oi] spill contingency plan. Oily wastes from onshore processing facilities are generally accumulated in waste lagoons at the plant site. Solid wastes generated from onshore field development in the Lower Susitna Basin would likely be disposed of at the Borough's site at Willow or at a permitted site near the drilling locations. New site selection is controlled through permit by the Department of Environmental Conservation. 126 While the high groundwater table and depth of permeable soils provide some constraint to locating new disposal sites, water quality implications from solid and oily waste disposal are expected to be slight. Groundwater quality monitoring stations have not been established to assess possible leaching into subsurface aquifers. i Marine Transportation and Oil Spills Some of the greatest risks associated with oi] and gas development in Upper Cook Inlet may be the hazards that petroleum spills pose to fish and wildlife resources in the area. These risks stem from a variety of oil and gas activities associated with the lease sale. Each major phase of field exploration and development presents its own specific pollution risks, whether it be from exploratory rigs, production platforms, oi] terminals, or tanker vessels. Each of these systems will be examined in further detail in the following paragraphs. The exploratory phase of oi] and gas development introduces the potential for an oi] well blowout which may result in an extremely large oil pollution incident. Although blowouts do not happen on a frequent basis, (one oi] and gas well in Cook Inlet has experienced a blowout singe 1962), they do represent a significant threat to the natural resources of an area and should, therefore, he considered in any review of a lease development proposal. The oi] spill created by the Campeche Bay blowout in the Gulf of Mexico is a prime example of the pollution risks associated with explora- tion work. This spill resulted when a wildcat well, being drilled offshore by a semisubmersible, encountered high downhole pressures and blew out. Electrical pumps quickly ignited the oi] and gas mixture and destroyed the rig, causing a completely uncontrolled blowout. Costing 134 million dollars in spill response, lasting for 10 months and spilling 140 million gallons of crude oi], the blowout threatened the abundant fisheries up and down the Mexican coast and eventually impacted the Texas coast. The well was capped only after two relief wells were drilled, a process that took several months. Due to a variety of factors, a blowout in Upper Cook Inlet could have far-reaching impacts. Because of the relatively narrow width of Cook Inlet and the presence of swift currents, a spill would be likely to spread very quickly to other regions of the Inlet. Attempts to curtail the spill would probably be severely hampered because of the currents. If the blowout occurred during winter months, the problem would be compounded because of the presence of ice in the Inlet. The technology to clean up oi] in ice and fast currents, or for that matter in calm seas, is at a fairly rudimentary level although work in this field is progressing. Therefore, oi] could impact an extremely large area of Cook Inlet, especially at the 30,000 bbl/day flow rate of the Gulf of Mexico spill. Commercial and sport fishing, recreation opportunities, beachfront businesses and shipping could all be affected by a major blowout. Routine oil discharges that occur on a daily basis at exploratory rigs and supply bases are another important and prevalent source of oi] pollution. This type of spill results from fuel transfers, deck runoff, hydraulic leaks, storage tank ruptures and equipment malfunctions. Although not as significant from a volume standpoint, there is evidence to suggest that long-term chronic spills have a negative impact on the biological resources of a coastal area. In the vast majority of cases, these spills occur hecause of human carelessness and poor maintenance practices. By enacting strong preventative measures, most of the routine discharges can he eliminated. The production phase of oi] and gas development encompasses a large group of facilities and includes platforms, refineries, oi] terminals, pipelines, and offshore loading systems. The pollution risk from these facilities is tied to the storage of the oi] and the transfer of the oil. As is the case with exploration, the transfer process in the production phase usually involves small routine spills that can usually he prevented. Spills from storage facilities such as refineries. and oi] terminals result when valves or drains are inadvertently left onen, interconnecting pipelines break, vandalism occurs, or the storaae tanks rupture. Pipeline breaks and leaks have caused numerous spills in Cook Inlet, totaling 70,000 qallons, and are another potential source of pollution. Again, most spills can be greatly reduced with proper controls and practices. The marine transportation aspects of oi] development entail more varied and complex risks. Although human error is responsible. for a qreat number of oil spills, other causes come into play also. Examples of these include equinment failures, groundings, collisions, rammings, weather and hydrographic conditions, other vessel traffic, and the absence of Coast Guard operated vessel traffic systems (VTS). Nf the several factors that contribute to marine transporation pollution risks in Cook Inlet, one of the most important may be the navigational dangers that exist in the region. Tides range as high as 40 feet and currents attain maximum velocities of up to 10 knots. This, along with fierce winds, blowing rain and snow, and ice cover over the winter months, makes navigation a hazardous undertaking. In addition, Unper Cook Inlet has very few places of any great depth and shoaling has historically created problems for vessel traffic in the area. The grounding of the M/V Sealift Pacific in 1976 resulted when the tanker hit the shoals east of the Chevron oi] terminal at Nikiski and spilled 396,000 gallons of jet fuel. Similiar accidents could happen to other tankers in the trade. Collisions and rammings have not been a problem in Cook Inlet and miaht only become one if the lease sale created large numbers of platforms, exploratory rigs, supoly boats and tanker traffic. These types of pollution-causing incidents do not happen nearly as often as the frequent small spills, hut when they do the potential threat to fish and wildlife is expanded. 128 The dumping of dirty ballast from tankers is usually always a problem in the marine transportation of petroleum unless sufficient onshore treatment facilties are available. The ballast-deballast cycle involves placing sea water in the cargo tanks, washing out the tanks thoroughly and then taking on a fresh load of clean ballast before the vessel enters port. This last stage is necessary in order for the discharged ballast in the loading port to meet water quality standards or a visible sheen test. This process usually results in dirty ballast being discharged at some point in the vessel's voyage. Sometimes this occurs in State waters at remote locations or at night when there is little chance of being observed, and at other times vessel operators take their chances and dump in State waters relatively close to the loading terminal. If enough of this illegal discharging takes place, substantial oi] pollution can result. Between 1969 and 1973, the U.S.Coast Guard estimated that about seven million barrels of oi] entered the worlds ocean annually from this ballast source. Every effort should be made by the State to ensure that a ballast treatment facility is built at any marine oi] terminal servicing tankers. Status of Existing Regulatory Controls over Oil Spills Existing authorities in the field of oi] and hazardous substances spill prevention and cleanup lie in AS 46.03 and .04. These statutes prohibit the discharge of oi] in the environment except under permit, require that comprehensive oi] spill contingency plans be developed for all tankers, barges, large oi] terminals and offshore exploratory rigs and production platforms operating in the State, prohibit the discharge of oily ballast in State water and require the reporting of all oil and hazardous substances spills. There are also criminal and civil penalties for unlawful oi] discharges and proof of financial responsibility requirements for tankers and terminals. Vessel design and safety equipment are regulated by the U.S. Coast Guard. Alaska's 1976 tanker safety law was struck down by the U.S. Federal Court as being unconstitutional and was preempted by the 1972 Ports and Waterways Safety Act. As a result, Alaska has no direct control over tanker design and must rely on the USCGto establish strong regulations in this area. The State will continue to support the establishment of federal laws and regulations governing the safe operation of tank vessels and oi] terminal facilities. The State regulations concerning contingency plans for terminals, barges, tankers and exploratory rigs and production platforms have been effective in that they have required plans to be developed by those parties responsible for oil pollution who might otherwise not have an adequate plan. The Department of Environmental Conservation has also been working with the Alyeska group and the Cook Inlet Response Organization (CIRO) in the development and refinement of their contingency plans which cover most of the tankers and terminals in Cook Inlet and Prince William Sound. 129 A toll-free Zenith 9300 reporting system was initiated by the Department three years ago which allows anvone with access to a telephone a means of reportina an oj] snill anywhere in the State. The report is forwarded to the Department where it is investigated, if necessary. ‘This system has worked fairly well but will require some modification in the near future. There have been several occasions in the past where oi] slicks in Cook Inlet have been reported to the Nepartment and upon investigation, no source has been found. It's been suspected that many of these unexplained spills have heen ballast discharges or tank washings from tankers involved in the Cook Inlet trade. It is extremely difficult to successfully apprehend the responsible person(s) in the case of the ballast discharge unless the tanker is actually observed in the act of dumping. However, new laboratory techniques are making it possible to "fingerprint" and match the oil from the spill with a sample of oi] from a vessel cargo tank. This has proved a useful tool in prosecuting tanker operators in the courts and makes it unnecessary to see the vessel actually dump its ballast for a conviction. RECOMMENDED MITIGATION STRATEGY (REGULATORY ALTERNATIVES TO EXISTING PERMITS) Table 5 identifies controls by waste category; a statement of adequacy is intended for use as a planning tool in developing new mitigating measures (such as lease stipulations) where appropriate to supplement existing controls. . The Case For Mitigating Measures The direct discharge of produced waters to surface marine waters of Upper Cook Inlet is acceptable in the vast majority of cases. Water pollution concerns are heightened, however, in the tidal estuaries or flats at the mouths of rivers supporting rearing anadromous and resident fish species and in intertidal marshlands supporting significant waterfow] concentrations. Hydrocarbon contamination of sediments and water above the allowable water quality standard are likely to occur in these shallow water habitats. Discharge to freshwater bodies has not been permitted in Alaska and is not likely to be in the future. Drilling mud disposal “over-the-side" is acceptable in all far offshore areas in Upper Cook Inlet; near offshore disposal in tidal flats at the mouths of major river systems is undesirable both from the standpoint of entrainment of heavy metals into sediments in those shallow intertidal flats and the fact that alternative upland disposal sites logistically Present little or no economic hardship on industry when wells are drilled in delta areas. Acceptable solid and oily waste disposal practices and authorities should be highlighted in the Information to Bidders section of DNR's lease document to avoid unnecessary lost time in the permit application process. 150 Table 5. Controls by waste category and statements of adequacy, (for use as a planning tool in developing new mitigating strategies (e.g., lease stipulations) where appropriate to supplement existing controls). Waste Category Produced Water Drilling cuttings Ballast and refinery effluent, heat effluents Solid and oily waste disposal Marine transpor- tation, oi] spill contin- gencies Wetland Development, sedimentation from culvert installation, and road construction and gravel removal Current control Waste water disposal permit Subsurface disposal permit (DNR) or NPDES permit (EPA) and 401 Certificate (DEC) Waste disposal pennit (DEC) Waste disposal permit (DEC) Solid waste disposal permit (DEC) 011 Spill Contingency Plan. Section 404 permit (Corps of Engineers), 401 certification (DEC) Plan of Operations (DMEM), Title 16 permit (DF&G) Adequacy of Current control from water quality standpoint Adequate with exceptions noted at right. Adequate with exceptions noted at right. Adequate through plant design review and conditions. Heated effluents Adequate; case-by-case determination. Adequate regulatory basis for large terminals and tankers; inadequate for onshore exploratory and production activities. Generally adequate. Conflicting review time frames; absence of data correlating cause and effect relationships; little mandatory control outside stream beds. 131 Recommended additonal mitigating measures Lease stipulation prohibiting direct discharges to freshwater bodies, shallow nearshore waters at river mouths, intertidal habitats, and those areas experiencing gyre circulation patterns. Berm onshore sump or reserve pits near water bodies. Prohibit disposal into fresh water bodies and shallow tidal mouths of major rivers. None. Information to Bidders reiterating normal prohibitive disposal practices. Development of detailed contingency plans and discussion in DNR Plan of Operations for production and exploratory phases, pipeline spill monitoring and detection systems. Information to Bidders stressing coordinated permit application procedures; more detailed Plans of Operation are required. Recommend utilizing the manual of guidelines (BMP'S) available from NEC on road construction practices; Fish and Wildlife Service guidelines on gravel and site rehabilitation should also be referenced. Table 5. Continued Vessel traffic Reliance on USCG Recommendation to USCG for system (VTS) operated systems. establishment of VTS for Cock Inlet if warranted by increased tanker traffic in area. 132 Mitigating measures to minimize or prevent sedimentation of surface waters resulting from road construction, culvert installation, and gravel extraction have historically been more comprehensive for stream courses than for adjacent upland areas due to limitations on the use of Title 16 to control upland activities. The guidelines manual prepared by DEC under the 208 program describing appropriate practices (BMP's) to minimize sedimentation problems from road construction would serve a useful purpose to the contractor as an adjunct to guidelines published by the Department of Transportation and Public Facilities. Woodward- Clyde Consultants has recently completed a contract with the U.S. Fish and Wildlife Service to prepare a summary and detailed guidelines for gravel site selection, removal practices, and rehabilitation in arctic and subarctic floodplains in Alaska. Inclusion, or at least reference to, these guidelines in the Information to Bidders section of the lease document would provide a focus for more serious consideration of this important water quality issue, which, in the long run, may become the most significant. Contingency plans will play a substantial part in the mitigation of effects of oi] spills from rigs and platforms. Lease stipulations for Upper Cook Inlet should have strong provisions concerning contingency plans similar to the stipulations and bidder information that have applied to the Beaufort Sea abd the relinquished Prudhoe Bay tracts. Under the Department's present authority to establish environmental safeguards for petroleum and gas pipelines, stipulations should be inserted into the lease notice requiring effective pipeline spill monitoring and detection systems. Pipeline breaks in the TAPS system have shown that the monitoring and detection systems used in that line, considered by industry to be model of environmental engineerinf, can be further improved. Not a single spill that has occurred from TAPS has been detected by the spill monitoring system in that pipeline even though two spills have been sizeable, 210,000 gallons and 650,000 gallons, respectively. A more useful and effective detection system should be designed into any future pipelines, especially those that cross large bodies of water and sensitive environmental zones. If a major oil or gas find is made in the sale area and tanker traffic is required, the Department of Environmental Conservation would actively encourage the U.S. Coast Guard to examine the need for a vessel traffic system/traffic separation scheme (VTS/TSS) in Cook Inlet, in the event that traffic density warranted such a system. The Department was actively involved with the Coast Guard in the establishment of the Prince William Sound VTS. Because of this, the Department influenced the final design of the system and provided tanker traffic with a larger degree of safety, thereby reducing the possibility of vessel-induced oil spills damaging the Prince William Sound environment. The VTS/TSS for TAPS has worked well and a similar system would be recommended for use in Cook Inlet. Fish and Game Appendix 1 Bald Eagle Protection Act 134 The Law The Bald Eagle Protection Act of 1940, as amended (16 SC 668-668d), states in part that no person "shall take....any bald eagle...., alive or dead, an part, nest, or egg thereof..." It further defines "take" to include also "...wound, kill, capture, trap, collect, molest or disturb..." Whoever violates any part of the Act could be fined uo to $10,000 and imprisioned for two years. Within 330 feet of an eagle nest: -Major developments, such as clearcutting and commercial and industrial sites not already in existence are non-compatible with the welfare of the eagles. -Construction activities of a disturbing nature should not occur from March 1 to April 30 for all nests and from May 1 to August 31 for those nests that contain an actively nesting pair of eagles. -Landowners are encouraged to restrict use to single family dwellings or open space. -Siting of structures and roads, and the cutting of mature trees should be done in consultation with the U.S. Fish and Wildlife Service. -Nesting trees should not be removed, felled, or in any way disturbed. 135 Fish and Game Appendix 2 Essential Habitat Land Policy for the Trumpeter Swan in Alaska 136 Il. Essential Habitat Land Policy for the Trumpeter Swan in Alaska (Olor buccinator) INTRODUCTION The purpose of this management plan is to provide guidelines for cooperative management of the Pacific coast population of Trumpeter swans. The goal of this plan is to maintain and enhance natural Trumpeter swan populations for their intrinsic values as well as for their direct benefits to society. OBJECTIVES Population The current population is estimated to be approximately 5,000 birds and should be maintained at or above that level (Table 1). The recently noted increase of the Alaskan breeding population will be encouraged until the natural limits of the breeding grounds are reached. Known wintering Trumpeter swan populations will be maintained at or above 1978 census levels (see Table 2). Distribution Pacific coast Trumpeter swans nest primarily in Alaska, but incomplete surveys indicate that at least 100 birds nest in the Yukon and northern British Columbia. Breeding populations will be maintained jn those areas and where natural extension occurs. The establishment of transplanted populations will be discouraged. Annual and seasonal distribution of Pacific coast Trumpeter swans will be allowed to fluctuate according to the availability of natural foods. 137 Table 1. Breeding gound population counts of the Pacific Coast Trumpeter Swans Area Number of Swans Data Source 1968 1976 Alaska Gulf Coast 1025 857 Copper Canyon 158 179 Gulkana Basin _ 590 1,038 Hansen at al (1971) & Kenai Peninsula 181 145 Cook Inlet 417 617 King (1976) Fairbanks 476 1,112 McGrath - 37 Kayukuk - 180 Yukon ° Coal River Area 57 McKelvey & Dennington 1978 Other areas Mossop 1979 British Columbia Alsek River 25 USFWS Lakelse L. 2 C.W.S. Dawson Creek 16 C.W.S. North east B.C. 7 C.W.S. TOTAL 4,272 Table 2. Winter population counts of the Pacific Coast Trumpeter Swans Area ~ Number of Swans Nata Source Alaska British Columbia Lange Lakes 75 Lonesome Lake 350 Queen Charlotte Island 100 McKelvey 1978 Mainland Inlets 500 Vancouver Island 900 Fraser Island 100 Washington Barney Lake 298 Willipa Bay 74 Parket 1979 Other areas 33 Oregon 2 Kebbe 1979 TOTAL 2,432 139 Ill. Habitat Nesting and migration habitat will be maintained or enhanced in sufficient quantity and quality to achieve the population objectives. Feeding programs will be discouraged to prevent unnatural concentra- tions, if population goals can be achieved without these measures. Utilization Non-consumptive use of Trumpeter swans will be encouraged or enhanced where these uses are compatible with other management objectives. STATUS Description The Pacific Coast population consists of birds which breed in Alaska, the Yukon, and northern British Columbia, and winter generally along the Pacific coast. The present population is approximately 5,000 birds based on counts in 1975 and anticipated increases since then (Table 1). Most swans nest in southcentral Alaska (King 1976), while a smal] number nest in the Yukon and northern British Columbia. The winter range extends from Cook Inlet in Alaska along the coast south to the mouth of the Columbia River, and perhaps beyond (Schram 1973; Zimmerman 1978), but winter population estimates are incomplete (Table 2). 1.10 Use Use of Pacific coast Trumpeter swans is currently limited hy law in all areas to viewing, education, and scientific purposes. However, levels of use vary between areas and some illegal use occurs. Hunting was an historic use of swans in Alaska and occurred in the spring when muskrat hunting resumed. Recent increases of Trumpeter swans in some interior areas may be a result of changes in muskrat hunting, and a reduction in the kill of swans in the spring. Some illegal harvest occurs during the regulated fall waterfow] hunting season, but that loss is believed to be low. Viewing is becoming an increasingly important use of Trumpeter Swans. Viewing occurs near Petersburg, Anchorage, Cordova and on the Kenai Peninsula. Alaskan Trumpeter swans have been the subject of recent scientific research, some is ongoing, and more intensive efforts are planned. Recent work is described in a monograph by Hansen et. al. (1971); status reports by King (1968 & 1976); unpublished reports by Sladen (pers. comm.); and the proceedings of the Sixth Trumpeter Swan Society Conference, 1978. Ongoing research includes: aerial breeding ground surveys in August and September every 5 years by the U.S. Fish and Wildlife Service; local population monitoring and breeding ecology studies by the staff of the Kenai National Moose Range and the Chugach National Forest; sporadic banding and neck collaring by the U.S. Fish and Wildlife Service, W. Sladen, the Alaska Department of Fish and Game, and the U.S. Forest Service. 1di IV. Future plans include: a proposal by W. Sladen for more extensive “research into basic swan biology; and plans by the U.S. Fish and Wildlife Service to use swans an indicators of yearly production in other waterfowl, as Trumpeter swan sizes are very sensitive to. weather related stresses. PROBLEMS Management problems of the Pacific coast Trumpeter swan vary between states, provinces, and territories. Generally, however, they fall into two main categories: the loss or undesirable alteration of habitat and an inadequate knowledge of habitat requirements and migration routes. Actual and potential problems in Alaska include: poorly defined wintering areas, illegal kills, community and road development, coastal pollution by oil, general resource development, collision with power transmission lines, increasing disturbance from activities during the summer throughout the breeding range, and lack of information regarding fidelity of swans to breeding areas. Recent studies conducted in Alaska by the Department of Fish and Game and U.S. Fish and Wildlife Service biologists nave demonstrated that swan nesting pairs are extremely sensitive to disturbance and will abandon nesting sites when disturbed. MANAGEMENT PROCEDURES To meet the objectives of this plan, certain management procedures are suggested on a priority basis. These procedures vary among areas depending on the priority of the problems, agency responsibility and resources, timing, and duration. Procedures and priorities proposed in Alaska include: -continued 5-year periodic breeding ground census (1) (USFWS; ongoing) -enter into cooperative agreements to lessen the impact of developments on swan inventory (1) (USFWS, ADFG; ongoing). ~identify "essential habitat" 1/ and take action to protect and maintain it by providing input during early stages of land development or disposal. (1) (USFWS, ADFG; ongoing). -where desirable, maintain or create additional restrictions on hunting white hirds in areas where an acute Trumpeter swan-Snow goose misidentification problem exists (2) (ADFG: ongoing). -initiate wintering population and distribution surveys (3) (USFWS; when practical). -better define staging areas, migration routes and fidelity to production areas by color marking a minimum of 50 young swans over a wide geographic area within each of the major production areas (2) (USFWS, ADFG; when practical). —_— 1/"Essential habitat" means any air, land or water area, including any elements thereof, which the Commissioner of the Alaska Department of Fish and Game has determined are necessary for the survival of wild populations of a protected species listed or specially designated by treaty, convention, or certificate. Constituent elements of essential habitat include, but are not limited to, land, air, and water area; physical structure, processes and topography, flora, fauna and climate and the quality, quantity and chemical contact of soil, water and air. 143 -critically review alternate land use programs to ensure continuation of swan habitats (1) USFWS, ADFG, initiate). -develop land management policies which will effectively Protect swan habitat (ADF&G, USFWS). Department Policy The. State of Alaska recognizes that Trumpeter swans are currently protected under the Migratory Bird Treaty Act of 1918 and international migratory bird treaties with Mexico and Canada. The policies outlined below should be implemented as general standards governing Trumpeter swan essential habitat on State owned lands in Alaska. It is recognized that these guidelines may not apply in all situations. A qualified Department biologist should review specific cases and determine appropriate protective measures. I. Essential Reproductive Habitat 1. Nesting Habitat a. Description: All currently or historically occupied nesting areas. Identification of essential Trumpeter swan nesting areas will be made available upon request to the Alaska Department of Fish and Game or U.S. Fish and Wildlife Service. bh. Protection measures required 144 Surface (1) Prohibit land use practices and/or development that will alter or eliminate natural habitat within areas identified as essential Trumpeter swan reproductive areas. (2) Prohibit activities which create visual or noise disturbance within one quarter mile of swan nesting ponds, marshes or lakes from May 1- - August 31. Restricted uses include, but are not limited to, operation of motorized vehicles, discharge of any explosive devices including firearms, construction of permanent campsites or waysides, and operation of chain saws or generators. Literature Cited Davies, R.G. 1978. Status of swans wintering on Vancouver Island between 1971 and 1977. Proc. & Papers of 6th Trumpeter Swan Conf. (In press). Hansen, H.S., P. Shepherd, J. King & W. Troyer. 1971. The Trumpeter Swan in Alaska. Wildl. Mono.No.26. King, J. 1976. The current status and future of the Alaska Trumpeter Swan population. Proceedings of the Fifth Trumpeter Swan Society Conference. Trumpeter Swan Society, Box 296, Maple Plain, Minn. 55359. McKelvey, R.W. 1978. Winter distribution, martality factors & habitat conditions of the Trumpeter Swan in British Columbia. Proc. & Papers of 6th Trumpeter Swan Soc. Conf. (in press). 1979. Swans wintering on Vancouver Island. 1977-78. Can. Field Nat. 99(4):433-436. » & Dennington, M.D. (in prep.). Trumpeter Swans breeding in Yukon Territory. Schram, B. 1973. A Trumpeter Swan in Southern California. Western Birds 4:111. Zimmerman, D.A. 1978. A definite record of the Trumpeter Swan from New Mexico. 146 Fish and Game Appendix 3 Essential Habitat Land Policy for the Peregrine Falcon in Alaska Essential Habitat Land Policy for the Peregrine Falcon in Alaska (Falco peregrinus anatum) (Falco peregrinus tundrius) INTRODUCTION The Alaska legislature recognizes that, due to growth and development, certain species or subspecies of fish and wildlife are now and may in the future be threatened with extinction. A.S. 16.20.185 requires that on land under their respective jurisdictions the Commissioner of Fish and Game and the Commissioner of Natural Resources shall take measures to preserve the natural habitat of species or subspecies of fish and wildlife that are recognized as threatened with extinction. For the purposes of proving protection of the natural habitat essential to the propagation and survival of species and subspecies recognized as threatened or endangered, the following land policies will be implemented and will apply to lands and water determined to be “essential habitat." "Essential habitat" means any air, land, or water area, including any elements thereof, which the Commissioner of the Alaska Department of Fish and Game has determined are necessary for the survival of wild populations of an officially listed species or necessary for their recovery to a point at which the measures provided pursuant to the Endangered Species Act are no longer necessary. Constituent elements of essential habitat include, but are not limited to, land, air, and water area; physical processes, structure and topography; flora, fauna, and climate; and the quality and chemical content of soil, water, and air. The policies outlined helow are recommended as general standards, and should provide for the protection of essential peregrine habitat in most situations. If these guidelines prove to be inappropriate in specific instances, a qualified Department biologist can then review the case and determine the necessary protective measures. 148 I. ESSENTIAL REPRODUCTIVE HARI TAT 1. Nesting Habitat a. Description: All currently or historically occupied nesting cliffs. b. Protection Measures Required. A. Surface (1) Prohibit land use practices and/or development that will alter or eliminate existing habitat conditions within one mile of nesting cliffs. (2) Prohibit al] human activities (unless speci- fically authorized) within one mile of nesting cliffs between April 1 and August 15. (3) Protect and/or retain nesting habitat in public ownership. (4) Purchase or otherwise ensure protection for nesting habitat in private ownership. B. Air (1) Prohibit all aircraft within 1,500 feet of the surface and within a horizontal distance of one mile of nesting cliffs between April 1 and August 15. 2. Hunting Habitat. a. Description. Those areas within fifteen (15) miles of the nesting cliff(s) which supply a major portion of the food source. 149 h. Protective Measures Required. (1) Prohibit land use practices and/or developments which could detrimentally alter or eliminate the havitat or food source. (2) Prohibit the use of harmful pesticides and other environmental pollutants detrimental to the peregrine or its food source. (3) Protect and/or retain feeding habitat in public ownership. TI. ESSENTIAL MIGRATION HABITAT @. Description. Areas frequently utilized for feeding and nesting during migration. Protective Measures required. (1) Guidelines will be developed as more becomes known regarding migration routes. (2) Purchase, retain in public ownership, or otherwise insure protection of migrating peregrine concentration areas. III. ESSENTIAL WINTERING HABITAT Description. That habitat utilized during the period October through March. Protective Measures Required. (1) Guidelines will be develoved as more becomes known regarding migration routes. 150 Fish and Game Appendix 4 Primary Waterfowl] Habitat Within the Susitna Flats and Trading Bay Refuges (1) (2) (3) (4) (5) Trading Bay Refuge Township 9 North, Range 14 West, Seward Meridian, Sections N& SWk 1, 2, 3, Ss NE& 4, Es 8, 9, 10, Ms SWk 11, 15-17, 20, 21, NW 22, 28, 29, NE& 32, N& 33. Township 19 North, Range 13 West, Seward Meridian, Sections N Sik 1, 2-4, Ss NE 5, SEX 6, 7-10, Ns SWe 11, N& SWE 15, 16-20, N& SW 21, N& SWE 29, 30, N%& SWS 31. Township 10 North, Range 14 West, Seward Meridian, Sections By 11, 12, 13, SBs 14, SE% 22, 23-27, SEk 33, 34-36. Township 11 North, Range 12 West, Seward Meridian, Sections SW: 19, S35 NW; 28, 29-33. Township 11 North, Range 13 West, Seward Meridian, Sections 24, 25, S& 26, SE 33, 34-36. (8) (9) (10) (11) (12) (13) Susitna Flats Refuqe Township 13 North, Range 4 West, Seward Meridian, Sections 4 5, 4, NBs 7, NW 8. Township 13 North, Range 5 West, Seward Meridian, Sections 1-6, NF& 12. Township 13 North, Range 6 West, Seward Meridian, Sections 1-7, N3s 8-12. Township 13 North, Range 7 West, Seward Meridian, Sections 1-3, N& SEX 4, Ms 10, 11, 12. Township 13 North, Range & West, Seward Meridian, Sections N& SW 2, 3-8, N3s SW 9, NW 10, NW& 17, Ns 18. Township 13 North, Range 9 West, Seward Meridian, Sections 1-3, S% NE% 4, Ss NB 7, 8-22, Nis SW 23, NW 27, Ni 28, 29, 30, My 31. Township 13 North, Range 10 West, Seward Meridian, Sections £& 13, SE% 23, 24, 25, Ss NEX 26, 358 36. Township 14 North, Range 4 West, Seward “leridian, Sections SW: 39, 31. Township 14 North, Range 5 West, Seward Meridian, Sections 19, Sk 20-22, SW 23, 25-36. Township 14 North, Range 6 West, Seward Meridian, Sections 1, 2, 11-14, SB 19, Ss 20-22, 23-36. Township 14 North, Range 7 West, Seward ‘eridian, Sections Sk 6, 7, 8, Sa 9, We 14, 15-22, Ss NW 23, Ss 25, 26-30, N& 31-32, 33-36. Township 14 North, Range 8 West, Seward Meridian, Sections: Ss 1-2, S33 NEX 10, 11-15, Es 16, Ss NFR 21, 22-29, Sk NE: 30, 31-35, Ni 36. Township 14 North, Range 9 West, Seward Meridian, Sections Sis NWk 25, Ss NE& 26, Ss NEX 34, 35, 36. 153 Fish and Game Appendix 5 Fish and Wildlife Resources in the Proposed Lease Sale Areas (folded map)