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A Social Economic & Environmental Analysis of a Proposed Oil & Gas Lease Sale in Lower Cook Inlet 1981
A Social Economic and Environmental Analysis of a Propose Oil and Gas Lease Sale in Lower Cook Inlet Prepared By The Governor's Agency Advisory Committee on Leasing State of Alaska October 1981 01-A3LH STATE OF ALASKA OFFICE OF THE GOVERNOR POUCH AD JUNEAU, ALASKA 99811 DIVISION OF POLICY DEVELOPMENT AND PLANNING PHONE: 465-3573 October 9, 1981 Honorable Jay S. Hammond Governor of Alaska Pouch A Juneau, AK 99811 Dear Governor Hammond: ~ Attached is the final version of A Social, Economic, and Environmental Analysis of a State Oil and Gas Lease Sale in Lower Cook Inlet. This analysis iS a compilation of assessments prepared by State agencies which are represented on the Agency Advisory Committee on Leasing. The purposes for preparing this analysis are to 1) analyze the social, economic, and environmental implications of the proposed project, both Statewide and locally, 2) recommend measures that the State could take to improve planning for the lease sale and to minimize those potential adverse impacts that are identified in the analysis, and 3) to provide the Depart- ment of Natural Resources with a broad information base for its use in making decisions about the proposed lease sale, including the ultimate decision of whether or not the sale should he held. This report has been prepared pursuant to Administrative Order 52 to advise you of the issues surrounding proposed major State activities. However, its recommendations are not intended to be binding upon the State 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 and public review of this report has provided an opportunity for a broad array of perspectives to be expressed. We believe 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 have devoted to it. Sincerely, hn W. kar J. é John Katz, Commissioner James M. Souby, Director Div. Department of Natural Resouces of Policy Development and Planning ACE 7421442 17) Pf A Social, Economic and Environmental Analysis of a Proposed State Oil and Gas Lease Sale in Lower Cook Inlet Prepared by the Governor's Agency Advisory Committee on Leasing State of Alaska October 1981 ACE 7421443 CONTENTS MAP OF PROPOSED SALE AREA EXECUTIVE SUMMARY INTRODUCTION General Format and Scope Alternatives Objectives of the Lease Sale ANALYSIS Economic Factors Introduction 1. Employment and Population Changes 2. Changes in Personal Income 3. Long-Term Economic Stability and Price Effects Community Well-Being Factors 1. 2. 3. 4. 5. Need for Government Goods, Services, or Facilities Changes in Housing Conditions Changes in Local Population and Lifestyles Local Growth Management Capabilities Public Sentiment Toward the Proposed Project Fiscal Factors 1. 2. State and Local Expenditures and Revenues State Subsidies Resource Utilization Factors Resource Industry Potentials and other Resource Values Fish and Wildlife Population and Subsistence Resources Specially Designated Areas Page woowe 14 17 23 25 26 28 29 30 32 34 42 43 45 64 ACE 7421444 CONTENTS (continued) Environmental Quality Factors PwWwnre Environmental Health and Safety Water Quality Implications Marine Transportation Aspects Environmental Monitoring, Surveillance and Quality Control Risk Factors 1. 2. 36 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 2. Governmental Permits and Approvals 3. Project Timetable 4. Governmental Investments and Capital Improvements 5. State Capital Improvement Program Considerations RECOMMENDATIONS Resource Utilization Factors Resource Industry Potentials Fish and Wildlife Population and Subsistence Resources Specially Designated Areas Environmental Quality Factors Environmental Health Implications Water Quality Implications Marine Transportation Aspects Environmental Monitoring Surveillance and Quality Control Page 73 79 93 104 109 111 114 115 116 121 127 128 130 131 136 141 142 146 147 ACE 7421445 APPENDICES Public Comment and Agency Response Appendix Institute of Social and Economic Research Appendix 1 - Methodology for Economic Analysis Department of Natural Resources Appendix 1 - A Competitive Oi] and Gas Lease Form Fish and Game Appendix 1 - Essential Habitat Land Policy for the Peregrine Falcon in Alaska Fish and Game Appendix 2 - Bald Eagle Protection Act Fish and Game Appendix 3 - Legal Description of Kalgin Island and Clam Gulch Critical Habitat Areas Fish and Game Appendix 4 - Kenai Lowlands Caribou Herd Critical Calving Grounds and Summering Habitat Fish and Game Appendix 5 - Folded Map - Fish and Wildlife Resources in the Proposed Sale 35 Area Page A-1 A-27 A-34 A-38 A-39 A-40 A-41 ACE 7421446 cg CHISIK_ AND OUCK ISLANDS. | | ; ¢ sand c I 77 LAKE ; ™ thy e 4 ‘ 7 CLAM GULCH p= CRITICAL erat merce /riaw | ROW Ruw | Riow | ROW 7 tro avert FLATS bee PT. © + aai.Musay “KACHEMAK BAY ole HABITAT AREA cs AUGUSTINE SELDOVIA ISLAND +———_+——_+—_ +__+—_++ % 2 STATE OF ALASKA LEGEND DEPARTMENT OF NATURAL RESOURCES PROPOBED SALE Anca DIVISION OF MINERALS AND ENERGY MANAGEMENT OIL & GAS LEASE SALE NO.35 LOWER COOK INLET SALE NO.35 IS SCHEDULED FOR DANUARY 1961 [YETON[® WARRIGON Jonawn ey] SCALE1800000 THE FIRST QUARTER OF 1982 ons Settled TNE PROPOSED SALE AREA icLUDE: hocaueyes, Tanner ammmenar| ike Seen ARES gE pewe ua te Kimo ler Bppoereat SALE AND'NOT UNDER EXISTING LEASE ACE 7421447 EXECUTIVE SUMMARY The State of Alaska is proposing to conduct a competitive oi] and gas lease sale involving 148 tracts and 600,000 acreas of land on February 2, 1982. This proposed sale was included in the five-year oi] and gas leasing program accepted by the State Legislature in January 1981. The proposed sale is to involve submerged lands (90 percent) from Kenai south to Oi] Bay and uplands (10 percent) near Kenai and west of Redoubt Bay (refer to the map of the proposed sale area immediately preceding this executive summary). This document was prepared by the Governor's Agency Advisory Committee on Leasing. The committee consists of representatives of nine State agencies and ex officio representatives from communities in or near the Proposed sale area. The Honorable Danforth Ogg, Mayor of the Kodiak Island Borough and Mr. Jerry Anderson, Borough Assemblyman for the Kenai Peninsula Borough, are the ex officio members for this lease sale analysis. The format of the analysis includes a series of questions designed to address the sale from socioeconomic, environmental, and fiscal perspec- tives. Following the analysis of these questions are recommendations made by different State agencies to the Commissioner of Natural Resources for his consideration when deciding whether or not to hold the sale and, if the sale is to be held, what mitigating measures should be included in the lease Notice of Sale and in future Plans of Operation. Summary of the Analyses and Recommendations A short summary of the analyses and recommendations follows. The reader is encouraged to refer to the page identified with each item for further information. Economic Factors ee GELOFS 1. Very few people will migrate to Alaska in response to activities associated with the project. (page 14) 2. Provided a commercial discovery is made, the number of direct and in- direct full-time equivalent jobs expected to be created as a result of the lease sale ranges from 404 during the first year of exploration activity to 1,126 during the fifth year of activity. (page 17) 3. Only 5 percent of the offshore jobs will go to Alaska residents, whereas 85 percent of the onshore and indirect jobs will employ Alaska residents. This difference is the result of offshore jobs requiring specialized skills whereas onshore jobs are intermittent and require a lower average skill level. (page 20) ACE 7421448 4. Due to the anticipated size of this development and the fact that it is likely to occur when similar or larger developments are occurring in the area, it will have little affect on the economic stability of the State or local regions. (page 24) Community Well-Being Factors 1. Existing industrial facilities, such as water supply or fire protection, are adequate to accommodate increased activities resulting from the sale. (page 25) 2. The demand for additional housing, local services and facilities is expected to be minimal. (pages 25-26) 3. Since petroleum industry activity has occurred in the Kenai and Anchorage regions for over two decades, the project is expected to have little direct influence in changing values or lifestyle commit- ments. (page 28) 4. Public sentiment toward the project is mixed. Opponents of leasing in Cook Inlet have been concerned that oi] and gas activity could endanger the fisheries resources and aesthetics of the area. Tracts previously proposed in Shelikof Strait were deleted from the proposed sale area in response to some of these concerns. Proponents of the sale have generally felt that safe technology for oil and gas devel op- ment exists in this sale area and that a reduction of dependence on foreign oi] would help ensure national security. (pages 31-32 and Public Comment Appendix) Fiscal Factors 1. The revenues accruing to the State as a result of the pending sale are dependent on a number of factors. Based on a number of assumptions, including the situation in which exploration occurs but no discoveries are made, total revenues accruing to the State are projected to be $13.0 million from property taxes plus the revenues from lease bonuses. If it is assumed that oi] and gas are discovered and production occurs, oi] revenues accruing to the State are projected to be $3,430.06 million while gas revenues are projected to total $932.15 million; in addition to the property tax revenues previously received by the State. (pages 33-40) Resource Utilization Factors The magnitude of the effect of this sale on existing resources within and adjacent to the sale area will depend on many factors, including, but not limited to : 1) the quantity of petroleum discovered; 2) the type and scale of facilities used to develop the field; 3) the amount and timing 21449 ss AG EATS, of noise, disturbance, and air and water pollution created by the develop- ment; 4) seasonality of activities; and 5) the number and magnitude of oi] spill incidents which occur. 1. 3. The proposed sale area includes the Kalgin Island Critical Habitat Area and offshore tracts located approximately 3 miles from the Clam Gulch Critical Habitat Area. Both of these areas provide particularly important habitat for fish and wildlife populations. (pages 64-65) Clam Gulch, Ninilchik, and Deep Creek State Parks are all located on the Kenai Peninsula coast adjacent to offshore tracts within the proposed lease sale area. There are also numerous tracts of public interest lands located within and adjacent to the lease sale area. These parks and public interest lands are of high recreational value. (pages 66-72) Numerous historic and prehistoric sites have been documented within and in close proximity to the sale area. Damage to cultural or archeological sites during the course of development would be an irre- versible resource loss. (pages 71-72) Cook Inlet, particularly portions of the proposed sale area, supports a major commercial fishing industry for salmon, halibut, herring, king and Tanner crabs, and razor clams. The largest salmon harvest in Cook Inlet is taken from a region included in the proposed sale area. Con- flicts could develop between commercial fishing activities, drilling rigs and increased marine traffic associated with supporting oil field activities. In addition, fouling of fishing gear by oil or other pol- lutants could present a problem in the event of a spill. (pages 42-43) There are 48 documented anadromous streams within, or in close proximity to, the proposed lease sale area, with a majority of these (35) located along the western side of Cook Inlet. Anadromous streams on the Kenai Peninsula are of particular importance in terms of sport fishing and recreational use due to their accessibility. Any oil and gas activi- ties which might reduce anadromous fish populations, attract new people to the Cook Inlet region, or improve public access to salmon streams could aggravate exisiting resource allocation conflicts between sport, subsistence, and commercial fishermen. (pages 66-69) The four species of big game animals which commonly inhabit areas within or adjacent to the sale area include moose, black bear, brown bear and caribou. The area around Kenai-Salamatof provides critical summering and calving habitat for the Kenai lowlands caribou herd. The lowlands of Redoubt Bay support seasonally high densities of moose, black bear and brown bear. (pages 45-46) ACE 1421450 Species of marine mammals which commonly inhabit the area include belukha, killer and minke whales, Dall and harbor porpoise, harbor seals, sea lions and sea otters. The small population of belukha whales which occur in Cook Inlet may be genetically distinct from the other populations inhabiting the Bering, Chukchi, and Beaufort Seas. (pages 46-47) The area within and adjacent to the sale area is important nesting, feeding, molting, and staging habitat for a large variety of waterfowl and shorebirds. Wetlands in the Bachatna Flats of Redoubt Bay consti- tute one of the major waterfowl nesting areas in Cook Inlet. Several species of raptors also occur along the Cook Inlet coast including bald eagles and peregrine falcons. (pages 48-50) Environmental Quality Factors 1. Ambient air pollutant concentrations do not appear to present a major concern for the sale area. The Tuxedni National Wildlife Refuge is the only region in the proposed sale area which may require strict regulation of industrial air pollutant emissions from nearby sources. (pages 73-78) As a result of excellent tidal flushing and great water depths, direct disposal of produced waters will be an acceptable practice in the majority of cases. Exceptions may include the Chinitna and Tuxedni Bay areas and waters directly offshore from the Clam Gulch Critical Habitat area. (pages 80-84) Past and current drilling mud and cutting disposal practices for Cook Inlet include over-the-side discharge for non-oil-based muds, reinjection down the well bore, and disposal at approved upland sites. It is expected that the majority of offshore locations in the proposed sale area can adequately accommodate the rate of input from new offshore facilities with little or no water quality degra- dation. (pages 84-91) 011 spills are an inherent risk in oil and gas exploration and develop- ment. The enforcement of strong preventative measures and proper operating controls and practices by industry as well as the develop- ment of effective oil spill contingency plans, should lessen the potential for serious environmental impacts resulting from oi] pol- lution from oi] and gas development. (pages 97-101) Four State agencies and five federal agencies have environmental monitoring and enforcement capabilities and responsibilities for the activities that may occur as a result of the lease sale. (pages 104- 108) Risk Factors i. In Cook Inlet, between 1971 and 1980, approximately 508 barrels of oil were introduced into the environment from identified petroleum industry sources. While the possibility of a major spill due to a drilling 6 ACE 7421451 mishap, production equipment failure, pipeline break, or human error exists, the odds of such an event occurring are very low. (pages 111-112) 2. Severe tides and currents, fierce winds, and winter icing conditions pose serious navigation problems to vessel traffic in Cook Inlet. Since existing marine transportation routes and facilities will be used, nearshore shoal areas which exist in Upper Cook Inlet also present a risk to increased vessel traffic which may result from this sale. (pages 93-101) Recommendations The following summary includes only a small number of the recommendations made by different State agencies and identifies the recommending agency. These recommendations have been included in the analysis for consideration only; they do not, at this time, reflect final State policy. The reader is encouraged to refer to the Recommendation Section to obtain a more com- prehensive view of the recommendations made and an unabridged version of the recommended action. 1. If serious area use and gear conflicts develop between fishermen and industry activities, the State should consider sponsoring a grievance committee made up of commercial fishermen, industry operators, and an arbitrator. (Department of Natural Resources; page 130) 2. No restriction of public access to or use of any traditional hunting, fish, subsistence, trail, or recreational area should be permitted as a consequence of oi] and gas activities. (Department of Fish and Game; page 131) 3. To the maximum extent possible, any new facilities associated with exploration or development shall be consolidated so as to minimize impacts on fish and wildlife habitat. (Department of Fish and Game; page 133) 4. Access roads, pipeline, and other facilities should be designed and sited to avoid sensitive fish and wildlife habitat and to prevent interference with the natural drainage and migrational corridors. (Department of Fish and Game; page 133) 5. In the event that peregrine falcon nests are discovered within or adjacent to the lease sale area, adherence to the mitigating measures outlined in the Recommendations section will ensure that lease activities are in compliance with the State and federal endangered species acts. (Department of Fish and Game; page 134) 6. Compliance with the Bald Eagle Protection Act should be required and approved for activities occurring near eagle nesting sites. (Depart- ment of Fish and Game; page 134) 7. Prior to development of any lands within the Clam Gulch or Kalgin Island Critical Habitat Areas, a Critical Habitat area permit should be obtained. A Title 16 permit should be obtained for oil and gas activities in or near anadromous streams and important sport fishing areas. (Department of Fish and Game; pages 135-136) 8. Mitigating measures proposed for State parks, public interest lands, and historic and archaeological sites should be followed to provide maximum protection of Kalgin Island, Redoubt Bay and the Kenai low- lands caribou herd. (Department of Fish and Game; pages 137-139) 9. A Spill Prevention Containment and Countermeasure Plan (SPCC) covering the prevention, detection and cleanup should be required for onshore facilities which are not covered under present State regulatory controls. (Department of Environmental Conservation; page 144) 10. If increased vessel and tanker traffic occurs as a result of the proposed sale, the State should encourage the U.S. Coast Guard to examine the need for a vessel traffic system/traffic separation scheme (VTS/TSS) to be established in Cook Inlet. (Department of Environmental Conservation; page 145) 7 ACE 7421453 INTRODUCTION General The State of Alaska's current five-year oi] and gas leasing program was submitted to the State Legislature in January 1981 by Governor Jay S. Hammond. The proposed lease sale for Lower Cook Inlet is scheduled to occur during the first quarter of 1982. The sale is to involve both submerged lands and uplands. Petroleum potential in the area is judged to be moderate. 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 final 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. 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 has appointed the following ex officio members for this lease sale: Kenai Peninsula Borough - Mr. Jerry Anderson, Borough Assemblyman Kodiak Island Borough - The Honorable Danforth Ogg, Mayor 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 meetings on the proposed sale in Kodiak at 7:00 p.m. on June 3 and in Homer at 7:00 p.m. on June 4, 1981. A summary of those meetings is included in an Appendix to this analysis. During the public review period, closing on May 30, 1981, a number of written comments were received by the co-chairpersons of the AACL. Where possible and appropriate, the preliminary draft analysis doc- ument has been revised to correct errors and omissions, and to clarify and/or augment discussions of issues of concern. All substantive issues were analyzed to determine which revisions were necessary to strengthen and improve upon the final version of this document. In addition, written comments and State agency responses to specific questions that were raised regarding this sale are included in this document (Public Comment and Agency Response Appendix). ACE 7421454 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 one or both of the following elements, as appropriate: 1. Analysis of the issue addressed in the question. 2. Recommendations, including proposed or possible 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. The Institute of Social and Economic Research of the University of Alaska prepared the section on Economic Factors. As each factor appears in the Analysis section, the agency 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. Individual potential mitigating measures, proposed in the Recommendations section, have been prepared by only one or, at the most, two State agencies and are included in this document for consideration only. They do not, at this stage of the presale planning process, reflect final State policy. They are merely intended to provide information to assist the Department of Natural Resources in making its decisions regarding the lease sale. It is also important for those with a particular interest in lease sale bidding methods to realize that this 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. Alternatives Although there are sale variables, such as 1) tract selections and dele- tions and 2) imposition of stipulations, the overall lease alternatives are to 1) conduct the sale and 2) postpone or cancel the sale. Objectives of the Lease Sale Since achieving statehood in 1959, the State of Alaska has become increas- ingly dependent on petroleum-related sources: not only royalties, bonuses and rentals generated directly by leasing, but also petroleum production (severance) taxes, corporate income taxes on oi] and gas companies, and, beginning in 1973, a tax on property used to produce and transport oil and gas. More than 80 percent of the State's revenues for fiscal 1981 were petroleum-related, and this figure is expected to rise throughout the rest 9 ACE 7421455 of the decade as production from Prudhoe Bay continues at peak levels, oi] prices increase, and non-petroleum taxes are reduced or eliminated. This dependency on a single non-renewable resource industry has been a public policy concern for several years and both the legislative and executive branches are taking long-range measures to diversify Alaska's economy. The fact remains, however, that petroleum revenues will continue to be the major source of State income for the foreseeable future. This dependency could lead to a serious revenue shortfall in the 1990's, Current Prudhoe Bay production will begin to decline by 1987, even with the secondary recovery made possible by the waterflood project at Prudhoe Bay. New Beaufort production may not commence in time to keep the Trans Alaska Pipeline System flowing at its design capacity. The result could be a drastic cut in State income immediately after a decade of budget surpluses that raise expectations and annual appropriations. Thus, a continued program of State lease sales to develop new petroleum sources and replace declining Prudhoe Bay production is essential if serious financial difficulties are to be avoided in the last decade of this century. An important effect of continued State oi] and gas lease sales is their role in helping to reduce U.S. dependence on imported oi]. Alaska is the nation's largest potential source of new crude oi] supplies. But even in- cluding yet-to-be discovered North Slope sources, U.S. domestic production by 1990 is projected to be only 7 million Bbis/days, while nationwide oil demand is expected to be 15 million Bbls/day. To the extent that the nation remains dependent on unstable Middle East supplies, its economy and even its military security are jeopardized. As U.S. citizens, Alaskans would not remain unaffected by these economic and national security threats. Thus, both national and State interests coincide in continued lease sales and orderly petroleum development. State Leasing Strategy The need for new State petroleum revenues in the 1990's and assisting the United States in reducing its dependence on imported oil by increasing domestic production are the primary reasons for holding the Lower Cook Inlet Lease Sale. More specifically, the sale area is adjacent to areas which have experienced extensive oi] and gas exploration, development and/or production over the last twenty years. The infrastructure built to support this past and present activity will be available, in large part, to support activity in this lease sale area. Additional goals and the State's leasing strategy are outlined below: 1. Leasing Schedule: To adhere to a predictable oil and gas leasing schedule, aS required by State statute, which will open promising State-owned lands. E TH245° 10 fe 10. 11. Coordinated Leasing: To coordinate leasing with nearby owners of subsurface rights so that: 1) Statewide oil, gas and mineral Teasing activities are cohesive, regardless of land ownership; 2) geologic and environmental data may be shared if possible; 3) drainage of commonly owned petroleum reservoirs may be equitable; and 4) oil and gas exploration and development may continue while ownership disputes are being resolved. Order of Leasing: To lease first in the most promising areas in which development has occurred or is currently taking place, so that potential additional development may take advantage of existing facili- ties wherever possible. Also include a range of wildcat areas for leasing to expand the resource base of the State. Access: To avoid incompatible surface commitments in areas with identi- fied or potential mineral deposits. Maintain access to promising oil and gas areas by reserving access corridors and by avoiding commitments to incompatible surface uses in key transportation corridors. Regulation: To ensure that the State's management guidelines and/or regulations affecting oi] and gas development are consistent with State policies, and achieve the desired result in the most simple and effective manner. Resource Inventory: To collect resource information adequate to estimate a fair return to the State when developing leasing procedures and terms of sales. Adequate resource information is also neeeded for long-term fiscal planning. Maximize Income: To use a variety of bidding methods to encourage com- petition and maximize the economic return to the State and its citizens from the sale of State-owned oil and gas resources. Rate of Disposal: To lease State lands at a rate that will, if oil] or natural gas are found, be a part of a balanced program of continuing economic growth for the State and its citizens. Public Participation: To work with members of the public, local govern- ments, special interest groups, and other government agencies when selecting areas for leasing and developing subsequent lease sales. Stipulations and Mitigating Measures: To attach appropriate stipulations and mitigating measures that will minimize harm to fish and wildlife resources and the environment and minimize disruption in rural communities. Monitor Surface Activities: To monitor exploration and development activities on the surface of State lands leased for oil, gas, and mineral development to assure compliance with stipulations and mitigating measures. 4 ACE qe2i4st 12. In-State Processing: To promote in-State processing of oil and gas royalties through royalty sales contracts. ACE 7421458 12 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 pre- pared 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. All of the following analyses regarding the exploration and development scenario for Sale 35 in Lower Cook Inlet are based on information developed by Gordon Harrison, consultant and provided to the Department of Natural Resources, Division of Minerals and Energy Management. This information, outlined in the following five assumptions, is based on the most likely scenario if production is to occur and provides the basic guidelines for any further discussion in this text. 1. Existing and proposed petroleum facilities in Upper Cook Inlet will be utilized to the fullest extent possible. No new major shore transpor- tation or processing facilities will be required for either oi] or gas discoveries. An onshore metering facility will be constructed at the point where the submarine pipeline comes ashore. However, this facility would not be a major installation impacting habitat or requiring significant employment to construct, operate, or main- tain. For purposes of this document, major new construction will be limited to platform installation and placement of submarine pipeline. 2. Crude oil is dehydrated offshore and transported by submarine pipe- line to an onshore metering facility, then to the Drift River Terminal. All associated gas will be reinjected, used as fuel on the platform, or brought ashore and used as fuel and/or sold. 3. Gas field discoveries will be shipped by submarine pipeline to an on- shore metering facility and then to the Nikiski industrial area. 4, Phase I of the Pacific Alaska LNG project is completed without new re- serves being discovered in this sale and, Phase II is not triggered by discoveries of the mid- to high-range magnitude in Lower Cook Inlet. 5. Time which will elapse from the exploration to production phase is approximately 7-8 years. An estimated sixteen exploratory and deline- ation wells will be drilled resulting in the following production facilities: a. two oi] producing platforms (conventional steel jacket platform) b. one gas producing platform (conventional steel jacket platform) c. ninety miles of submerged transport pipeline a3 ACE 7421459 Economic Factors Introduction (Institute of Social and Economic Research) Long-term regional impacts of oil and gas leasing are a function of the size and location of discoveries that may result. The size and location of reserves determine the type, magnitude, and site of production facili- ties, which, via their direct employment, are the source of local socio- economic impacts. Size and location of petroleum reserves can, however, only be determined through exploratory drilling. To forecast socioeconomic impacts of petroleum development in advance of actual discoveries requires speculation about petroleum resources and their probable pattern of develop- ment. As a planning exercise, this process is very tentative and prelim- inary, but useful to the extent that it identifies potentially significant community impacts that may be influenced by measures taken during the pre- Tease period. With regard to the lease sale at hand, acreage to be offered may reasonably be expected to yield discoveries of 100 million barrels (MMbbls) of oil (recoverable) and 0.5 trillion cubic feet (Tcf) of natural gas. A high- range estimate for the acreage is 300 MMbbIs of of] and 1.0 Tcf of gas. The most promising acreage is offshore, so it is assumed that exploration and development would occur there. New oi] discoveries of 100-300 MMbb1s in the area of this sale would be comparatively modest. 1/ Production from fields in Upper Cook Inlet has been declining for years, and as a result there is surplus capacity in existing onshore facilities. Oi] produced from fields found in Sale 35 will be transported via submarine pipeline and existing onshore pipelines 2/ to the Drift River Terminal or Nikiski refineries. It is not clear when or how new gas reserves of 0.5 to 1.0 Tcf would be marketed. It is believed, however, that this new gas by itself, would not be directly re- sponsible for construction of either Phase I or II of the proposed Pacific 1/Recoverable reserves of about 1 billion barrels of oi] have been dis- covered to date in Upper Cook Inlet. 2/Onshore common carrier transport pipelines currently exist on the west side of Cook Inlet to the Drift River Terminal (Drift River Pipeline 071 Company pipe) and on the east side to the Nikiski industrial area (Kenai Pipeline Company pipe). 14 Alaska LNG project. 3/ Consequently, construction of new onshore pipelines or crude oi] terminals should not be required as a result of commercial discoveries made from this sale. As indicated previously, an onshore metering facility will be required to monitor the flow of oil or gas from the production platform, however, major field development would be limited to the installation of production platforms and submarine pipelines. A corollary of the foregoing assumption is that exploratory drilling on State leases in Upper Cook Inlet and on federal leases in Lower Cook Inlet will be unsuccessful, or if successful, the new production would not absorb existing surplus capacity of shore facilities. 4/ Large commercial discov- eries of oi] in other lease sale areas, in addition to commercial discov- eries in this lease sale area, could exceed the surplus capacity of existing onshore facilities (shore bases, treatment plants, crude oil terminals, re- fineries). In the event that petroleum discoveries resulting from this sale could not be produced through existing shore facilities, some onshore construction would be required, such as expansion of the Drift River Terminal and Nikiski LNG capacity. Thus, manpower requirements during the field development period and employment opportunities for Alaska residents would be greater than in the case of only offshore development activity. Manpower requirements for the production (operation) period, however, should not be substantially affected. 3/Our assumption is that there are sufficient existing reserves available to meet the threshold requirements (200 MMcf/d) of Phase I, and that construction will occur before acreage in this sale is fully explored and developed. A large discovery (1.0 Tcf) would certainly improve the prospects for Phase II, but, again, it would not alone provide the threshold requirements (400 MMcf/d). 4/In fact, both the State and federal government have predicted discov- eries in their impact assessments of lease sales in these areas. We have, however, chosen to evaluate the potential effects of this lease Sale 35 by imposing a plausible development scenario on the existing situation in the Cook Inlet area. While we are mindful of the signi- ficance of discoveries in other sale areas to the development and impacts of discoveries in this sale, we believe that building upon hypothetical development scenarios from other lease sales compounds the imaginary element of this analytical exercise to an unacceptable degree. Furthermore, our concern is primarily with long-term socio- economic impacts, which in this case will be associated with the operation of new offshore production platforms, even if significant discoveries occur elsewhere. That is, the marginal effect of produc- tion from discoveries in this sale on the manpower requirements for operating shore processing facilities should be insignificant, whether or not expansion of those facilities is necessary because of other discoveries. 15 ACE 7421461 The economic analysis that follows hinges on the key assumptions that ex- Ploration and development activities occur offshore and that construction of shore facilities, other than onshore metering facilities, is not necessary. Quantitative estimates of employment, population, and income effects are derived from a mid-range development scenario that includes one offshore 100 MMbbIs oi] field and one offshore 0.5 Tcf gas field. A detailed description of the field development scenario and assumptions and methods used to estimate the economic and population effects appears in Appendix 1 (pp. A-1 through A-26). ACE 7421462 16 Economic Factors 1. What are the employment and population changes expected to result from the project? (Institute of Soctal and Economic Research) a. What local population changes are expected (e.g. amount and rate of change, characteristics of expected in migrants)? Analysis: An esimate of population increase generated by the mid- range development scenario is presented in Table 1. The figures are based on estimates of the total amount of employment created by the development scenario and the likely distribution of onshore jobs between residents and nonresidents. Incremental population is derived from these employment estimates by an assumption about the number of nonworking dependents that would accompany the average onshore in- migrant worker, This relationship is expressed as a "dependency ratio" (also referred to as the "labor force participation factor") which is the ratio of total population to total work force in the area. It is assumed that the dependency ratio is smaller in years 1 through 5 than in years 6 and after because most employment will be temporary during the first 5 years. In addition, fewer dependents would be expected to accompany in-migrant workers during this economically un- settled exploration and development period. It is also assumed that no offshore in-migrant workers would bring dependents to Alaska during the exploration and development period since airfare is normally paid for these workers to their point of hire during rest breaks. In the operation period, the same dependency ratio has been assumed that currently exists in the Kenai Peninsula Borough and the Anchorage area, which is approximately 2.0 (see Table A-11 in Appendix 1). TABLE 1, ESTIMATED POPULATION INCREASED CREATED BY MID-RANGE DEVELOPMENT SCENARIO 1/ Year Kenai Peninsula Anchorage Total 1 13 3 16 2 21 4 25 3 21 4 25 4 38 7 45 5 41 7 48 6 142 28 170 (operation begins) 1/From Table A-11 in Appendix 1. SOURCE: Institute of Social and Economic Research, University of Alaska ACE 7421463 17 b. What proportion of jobs are expected to be occupied by current ATEERAneT Analysis: Estimates of total employment generated by the mid- range development scenario are presented in Table 2. Estimates of the share of this employment going to current Alaska residents are shown in Table 3. Note that these numbers estimate peak number of people employed. During the period of exploration and field development (years 1 through 5), work will not be year- round. During the period of operation (year 6 and after), the numbers represent full-time annual employment. Employment required for a high-range development scenario would be between 1.7 and 2.0 times the number in Tables 2 and 3. 1/ TABLE 2, ESTIMATED TOTAL EMPLOYMENT MID-RANGE DEVELOPMENT SCENARIO (peak number of people) Direct Indirect Year Employment Employment Total 1/ 1 362 42 404 2 543 64 607 3 543 64 607 4 975 113 1,088 5 1,007 119 1,126 6 184 129 313 (operation begins) 1/From Table A-10 in Appendix 1. SOURCE: Institute of Social and Economic Research, University of Alaska A/If all of the reserves of the high-range resource estimate were found in one oi] and gas field and produced from 5 platforms (as shown in Table A-2), then the workforce would increase 66 percent over the mid-range scenario. If 6 platforms were required, as might be the case if two sets of oil and gas fields were discovered with 150 MMbbls and 0.5 Tcf each, then the later force would be approximately double that required by the mid-range scenario. 18 b. What proportion of jobs are expected to be occupied by current Alaskans? _ Analysis: Estimates of total employment generated by the mid- range development scenario are presented in Table 2. Estimates of the share of this employment going to current Alaska residents are shown in Table 3. Note that these numbers estimate peak number of people employed. During the period of exploration and field deveTopment (years 1 through 5), work will not be year- round. During the period of operation (year 6 and after), the numbers represent full-time annual employment. Employment required for a high-range development scenario would be between 1.7 and 2.0 times the number in Tables 2 and 3. 1/ TABLE 2. ESTIMATED TOTAL EMPLOYMENT MID-RANGE DEVELOPMENT SCENARIO (peak number of people) Direct Indirect Year Employment Employment Total 1/ 1 362 42 404 2 543 64 607 3 543 64 607 4 975 113 1,088 5 1,007 119 1,126 6 184 129 313 (operation begins) 1/From Table A-10 in Appendix 1. SOURCE: Institute of Social and Economic Research, University of Alaska 1/If all of the reserves of the high-range resource estimate were found in one 011 and gas field and produced from 5 platforms (as shown in Table A-2), then the workforce would increase 66 percent over the mid-range scenario. If 6 platforms were required, as might be the case if two sets of oi] and gas fields were discovered with 150 MMbbls and 0.5 Tcf each, then the later force would be approximately double that required by the mid-range scenario. 19 TABLE 3. ESTIMATED EMPLOYMENT OF CURRENT ALASKA RESIDENTS MID-RANGE DEVELOPMENT SCENARIO (peak number of people) Direct Employment 1/ Indirect Employment 2/ Total Employment 3/ Year Alaska Residents Alaska Residents Alaska Residents Offshore Onshore Number % of Total 1 16 31 36 83 21 2 24 46 54 124 20 3 24 46 54 124 20 4 44 82 96 222 20 5 45 88 101 234 21 6 96 4/ 22 4/ 110 228 73 (operation begins) 1/From Table A-7 in Appendix 1. 2/From Table A-9 in Appendix 1. 3/Total Employment from Table 2. 4/During the operational phase, all employees will live in Alaska. These numbers are estimates of current Alaska residents who obtain employment from among the estimated 184 new direct jobs. SOURCE: Institute of Social and Economic Research, University of Alaska. At a given level of petroleum development (that is, at a given level of demand for labor such as we have hypothesized in the mid-range development scenario), several factors influence the number of jobs that will be obtained by Alaska residents. For exploration and field development activities, these include the following: 1. the match between skill requirements and available trained Alaska residents; 2. the general demand for labor regionally and Statewide at the time exploration and development activities occur; ACE 7421464 20 3. the number of exploration and development contracts obtained by Alaska-based firms; and 4. prevailing wage rates in the exploration and development jobs. During the operational period, the primary factor affecting the number of Alaska residents hired is the match between skill requirements and available trained residents. Different assumptions about those factors produce different estimates of resident employment. Our estimates of Alaskan employment during the exploration and field development period reflect the following assumptions about each factor: 1. Offshore drilling and construction activity requires a relatively high component of skilled labor which few Alaska residents possess. The demand for people with these skills will be high elsewhere in Alaska (many can be employed onshore as well as offshore, for example, in exploration and production drilling and in the installation of production equipment at the Prudhoe Bay and Kuparuk fields. Also, offshore exploration will occur con- currently elsewhere in Alaska on State and federal leases). 2. The general level of demand for labor, particularly oil field and construction labor, will be high Statewide because of continuing field development and exploration on the North Slope and construction of the Northwest Alaska gas line and Alpetco projects. 3. Major contracts for drilling and construction will go to outside firms, and comparatively small, peripheral contracts will go to Alaska contractors. 4. A consequence of the foregoing is that offshore wage rates will be substantially below Alaska wages for comparable work. Based on the above assumptions, it is predicted that few offshore jobs (5 percent) will go to Alaska residents in years 1 through 5 of the development scenario. Most of the onshore direct jobs (85 percent) and indirect jobs (85 percent) will, however, go to Alaska residents during this period because the average skill level required is not high and the work is intermittent (see Tables A-7 and A-9 in Appendix 1). Estimates of employment of Alaska residents during the production phase reflect different assumptions about the match of skill re- quirements and available Alaska residents. Operating and main- taining offshore platforms requires a highly trained work force. Because production from existing offshore fields and employment on ACE 7421 21 465 the Upper Cook Inlet platforms is declining, there Sholld be expe- rienced local technicians available for a substantial portion (60 percent) of the new offshore jobs. 2/ A largé portion of new on- shore direct jobs (90 percent) and indirect jobs (85 percent) should go to Alaska residents (see Tables A-7 and A-9 in Appendix 1) because these jobs require a much lower average level of skill and adequate local manpower should be available. 2/This assumption is clearly related to our assumption that any new lease ~ sales elsewhere in Upper Cook Inlet prove to be unproductive. In case commercial discoveries were made on State leases in Upper Cook Inlet, for example, a large share of platform operation and maintenance jobs would probably go to in-migrants, depending upon the effectiveness of vocational training efforts in Alaska and related factors. ACE 7421466 22 2. Economic Factors What changes would be generated in real per capital personal income for current resident Alaskans over the life of the project (construction and operation phases)? (Institute of Social and Economic Researc Analysis: Of the groups affected by offshore petroleum development, concern is focused on the effects to residents in Alaska prior to development. While changes in the welfare of other groups is borne voluntarily, the effects on these current residents are often in- voluntary. One measure of the welfare effects of Lower Cook Inlet development is the change in real per capita income which results from the development. Real per capita income measures the average resident's claim on goods and services. By itself this is not an unambiguous measure of welfare since income is not shared evenly by the population. Because of this distributional problem, estimates are presented for the economic welfare effects on current Alaska residents and on total residents, including those who migrate as a result of the project. The size of the real per capita income effects depends on: 1. The number and type of jobs created. The type of job is important because wage rates vary among jobs. 2. Who gets the jobs which in turn affects the distribution of income. To the extent non-Alaskans secure petroleum jobs the real per capita income effects are reduced. 3. The share of Alaska firms securing work on the project. This de- termines the effect on proprietors' income. 4. Changes in population determine the number of people over which the income change is spread. 5. Changes in the price level. If rapid expansion increases prices, this will reduce the real income of all Alaskans, not just those associated with the project. Table 4 shows the projected income increases earned by current Alaska residents and residents attracted to the State by the development. This projection depends on the assumption about the distribution of jobs between current residents and in-migrants. During the production phase, real capita income of current residents is increased by $21. If total Alaskans are considered, real per capita income is increased by $25. ACE 7421467 23 TABLE 4. LOWER COOK LEASE SALE 1/ REAL INCOME EFFECTS be Total Personal Income (Millions of 1979 $) Year Alaska Residents Current Residents 1 1.05 0.93 2 1,75 1.55 3 1.75 1.55 4 2.75 2.41 5 3.34 2.94 6 9.88 8.34 1/See Tables A-12 and A-13 in Appendix 1 SOURCE: Institute of Social and Economic Research, University of Alaska ACE 7421468 24 3. Economic Factors Does the project contribute to long-run economic stability? What short- or long-term price effects are expected to result from the project? (Institute of Social and Economic Research) Analysis: The effect of oi] development on economic stability would impact the following five categories: 1) employment opportunities; 2) Seasonality of employment; 3) linkages with other industries; 4) the pattern of employment; and 5) the scale of the economy. Employment opportunities relate to the need to reduce unemployment. Because of this, the number of jobs is not the sole consideration; in- stead, the ability of Alaskans to fill these jobs must be considered. This depends on the matching of skills required and skills possessed in the population. The more technical the jobs, the less likely they are to match the skills of unemployed Alaskans. Seasonality defines the seasonal pattern of employment. Reducing sea- sonality improves the economic stability. The pattern of employment is similar to seasonality in its emphasis on steady employment demand in the development phase and lower employment demand during operations. To the extent Lower Cook Inlet development follows this pattern, it reduces economic stability. The final characteristics of stability concern linkages and scale effects. Each measures the potential for future growth, Resource developments have potential for both backward and forward linkages; the potential reflects both the size of the development and cost conditions. These linkages lead to further economic growth and ex- pansion of firms connected with the resource development sector. Scale effects are the expansion of markets and the structural change which results as markets expand. The size of this development and the fact that it will most likely occur when similar and much larger developments are occurring in the area, limit the effect of this project on the economic stability of the State or affected regions. Total employment impact will be less than one percent of the Kenai and Anchorage current employment totals, while long-run employment is less than one-tenth of one percent. 95 ACE 7421469 1. Community Well-Being Factors What changes are expected in the quality, availability, or demand for governmental goods, services, or facilities? (Department of Community and Regional Affairs) Analysis: Because existing industrial facilities will probably be able to accommodate increased activities resulting from the sale, there will likely be no increased demand for industrial services such as water or fire protection. Although there would probably be a slight increase in demand for certain governmental goods, services and facilities to accommodate new residents, no discernible changes can be anticipated in their availability or quality. Below is a summary of the status of major community services in Kenai Peninsula Borough and outstanding needs for expansion. 1/ It is pre- sented to give the reader an overview of the situation which would be affected, albeit slightly, by the proposed sale. Only the larger settlements on the west side of Kenai Peninsula - Homer, Kenai, Seldovia, and Soldotna - are referred to below since it is assumed that they will absorb most of the population increase and industrial activities related to the proposed sale. 1. Water. Kenai, Seldovia, and Soldotna are all upgrading their water systems. Homer, within their municipal boundaries, is upgrading their water system. This will include an additional 750,000 gallon capacity to the Homer spit. 2. Wastewater Treatment. Kenai and Soldotna wastewater treatment facilities are in need of expansion. 3. Solid Waste. Kenai Peninsula Borough exercises jurisdiction over solid waste on an areawide basis. Both Homer and Seldovia require new landfill sites. 4. Schools. Jurisdiction over areawide education is exercised by the Kenai Peninsula Borough. The Borough projects the need for new ten-room elementary school buildings in Homer and Soldotna, one new classroom in Anchor Point, and an 800 student high school building in Soldotna. A bond issue has been approved for a new junior high and high school in Soldotna. 1/Environmental Services Limited. 1980. Kenai Peninsula Borough Draft Coastal Development Program. ACE 1421470 26 5. Police. City police departments are working at near capacity. Unincorporated areas of the Borough are served by the State Troopers. 6. Fire. Fire services are provided by all first class and home rule cities and by two fire service areas in unincorporated areas. Fire protection is sufficient for the present, but additional staff and equipment wil be required as population increases. Soldotna has expressed an immediate need for new equipment and a larger paid staff. Fire protection is also needed on Homer Spit. ACE T421471 Community Well-Being Factors 2. quality)? Analysis: Are changes in housing conditions expected (e.g. availability, price, (Department of Community and Regional Affairs) Since the housing stock in both Kenai Peninsula Borough and Anchorage has been shaped largely by oil and industry employment during the last two decades, it is doubtful that any change in housing conditions will result from the proposed lease sale. The most recent published statistics on housing conditions (vacancy rates in 1977, housing units authorized from 1977-1979, and apart- ment vacancies rates in 1979) appear to support the conclusion that all four major communities on the west side of Kenai Peninsula have fairly healthy housing stocks (i.e., 5-6 percent vacancy rates as shown in Table 1). TABLE 1 HOUSING CONDITIONS Vacancy Rates Housing Units Vacancy Rates All Housing Types © Authorized Apartments 1977 1/ 1977-1979 2/ 1979 27 Homer --- 322 5.3%-19.6% Kenai 3.4% 474 18.9%-50.9% Soldotna 2.4% 286 8.0%-32.0% Seldovia 5.4% 39 --- A/Hitchins, D., R. Ender, H. Green, and M. Bennett. Five Kenai Peninsula Towns. 2/Kenai Peninsula Borough. 1977 280 pp. January 1980, Population 1377 1979 3/ 1,802 2,227 5,364 4,421 2,586 2,365 612 528 - A Profile of Situation and Prospects. 3/Population estimates approved by the Alaska Department of Community and Regional Affairs for State revenue sharing purposes. 28 ACE 7421472 Community Well-Being Factors 3. Are population changes expected to cause significant value or life- style conflicts? Is displacement from tradtttonel occupations ex- pected? (Department of Community and Regional Affairs) Analysis: Population changes resulting from the proposed lease sale are expected to be minute. Anticipated population changes might pro- duce significant conflicts if new residents settle in the smaller communities on the west side of the Kenai Peninsula (e.g., Port Graham, English Bay, or Ninilchik) or if new residents increase hunting and fishing or other recreational pressure in the Cook Inlet region where such resources are already heavily used. No significant displacement from traditional occupations is anticipated since both Kenai Peninsula Borough and Anchorage economies have relied heavily on oil industry employment for over two decades. In fact, since development of the proposed lease sale area would generally coincide with a gradual decline in existing Upper Cook Inlet oi] and gas fields, new oi] industry employment opportunities would compensate for jobs lost in Upper Cook Inlet. This trend would be tempered somewhat by employment which might result from 1981 State Oil and Gas Lease Sales 33 (Upper Cook Inlet) and 32 (Cook Inlet, south of the Kenai River). 239 ACE 1421473 @. Community Well-Being Factors 4. Do adequate local growth management capabilities (land use plans, ordinances, and revenue-generating mechanisms) exist? partment of Community and Regional Affairs) Analysis: The proposed sale area lies entirely within the Kenai Peninsula Borough which, as a second-class borough, has mandatory area- wide planning, platting, and zoning powers. The Borough is in the initial stages of developing a coastal management program which would apply to the proposed lease sale area as well as to any affected uplands within the Borough. A Phase I draft copy of resource inventory information and analysis is currently undergoing review. The Kenai Peninsula Borough has adopted a subdivision and zoning ordinance. Regulations under these borough ordinances address pri- marily urban areas. Few restrictions pertain to areas outside city limits. The Borough has also adopted comprehensive plans for each of the following cities on the west side of Kenai Peninsula, the area most likely to be affected by the proposed lease sale: City Year of Plan Adoption English Bay - 1972 Homer - 1969 Kenai - 1980 Port Graham - 1972 Seldovia - 1980 Soldotna - 1979 The Kenai Peninsula Borough also exercises taxation and assessment on an areawide basis, both inside and outside city limits. The Borough generates revenues through both property and sales taxes. The full value determination of assessment property is $2.1 billion. The Borough levies property tax at a differential rate: 15.58 mills in Homer, 15.0 mills in Kenai, 19.0 mills in Seldovia, 11.9 mills in Soldotna and 2.5 mills elsewhere (except special service areas). In 1979 a 2 percent sales tax was levied throughout the Kenai Peninsula Borough for schools. Homer and Seldovia levied an additional 1 percent sales tax; Soldotna levied an additional 2 percent sales tax; and Kenai levied an additional 3 percent sales tax. The Borough's bonded indebtness is 45.7 million, or 2.23 percent of its assessed value.1/ 1/Alaska Department of Community and Regional Affairs. Alaska Taxable, 1979, ACE 7421474 In conclusion, the Kenai Peninsula Borough has ample growth management authority and revenue generating capability to deal with the relatively small population and land use impacts anticipated from the proposed lease sale. ACE 7421475 31 Community Well-Being Factors 5. What is public sentiment (local and Statewide) toward the proposed project? (Department of Natural Resources) Analysis: Public sentiment toward the proposed project is mixed. During the April 25 to August 1, 1980 Call For Nominations and Comments period, the Department of Natural Resources received correspondence identifying areas to be excluded from the proposed leasing area or leased only under special conditions. The Kodiak Area Native Association (KANA) expressed their concern about the impact potential hydrocarbon spills could have on the shore- lands of the Kodiak Archipelago. They requested that, "No off-shore State lands be leased south of 59 degrees 20 minutes north latitude." The North Pacific Rim, a regional native non-profit corporation serving the Chugach Native Region, indicated that the Port Graham and English Bay areas should not be included in the sale. Potential hydrocarbon spills could impact coastal resources that residents of these two villages depend upon for a substantial part of their diet. In response to these two requests, the Department of Natural Resources deleted the relevant tracts from the proposed sale area. A public meeting to receive comments on the Preliminary Draft SEAA for Sale No. 35 was held in Kodiak on June 3, 1981. Public concern and parti- cipation at this meeting was low due to the removal from the proposed sale area of offshore lands south of Oi] Bay. An additional indication of public sentiment concerning lease sales in this area is contained in the transcript of testimony for the meeting concerning Upper Cook Inlet Lease Sale 33, (Testimony - Public Hearing Lease Analysis, June 23, 1980. Soldotna, Alaska). Speaking on behalf of the Kenai Peninsula Borough mayor, the Borough representative commented that, "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." The Baring-Gould Report (1977) 1/ which describes Homer resident's views toward growth and development, and testimony presented at a local public hearing in October 1980 for Federal OCS Oil and Gas Lease Sale 60, reflect the generally negative feelings of many Homer residents toward any offshore oi] and gas leasing. 1/Baring, M., F. Gould, and R. Heasley. 1977. Homer Area Survey; Attitudes Toward Local Growth and Development. 200 pp. ACE 7421476 32 Local sentiment expressed at a public meeting in Homer, conducted by the Department of Natural Resources on June 4, 1981, reflected local opposition to both Sale 32 (to be held August 25, 1981) and Sale 35. Most comments referred to anticipated negative effects of oil development and potential oi] spills on the community, local lifestyle, and on the marine ecosystem and associated fisheries. Letters received by DNR from several Homer residents after the meeting reflect similar concerns. These letters are contained in the Public Comment appendix in the back of this document. ue ACE 7421477 Fiscal Factors 1. What effect would the project have on the net balance of State and Tocal expenditures versus revenues over time? (Department of Revenue) Analysis: The revenues accruing to the State as a result of a Lower Cook Inlet lease sale will vary widely depending on the economic and political circumstances at the time of the sale, the specific lease conditions offered by the State, oil company response, number of tracts actually leased, and success rate during exploration. This analysis makes certain assumptions about each phase of the leasing, exploration, and production operations in an attempt to provide a realistic estimate of potential State revenues. Likewise, certain assumptions are made concerning State and local expenditures resulting from the lease sale and subsequent activities. The Lower Cook Inlet area has not generated particularly high interest in the oil industry during leasing of federal tracts. In 1977, the federal government leased 87 tracts out of a total offering of over 140, receiving nearly $400 million in royalty bids. As of February 1980 five wells were "dry" holes and only two other wells were being drilled. 1/ Since that time, one additional well has been drilled. The overall lease record for State offered tracts in the Cook Inlet Basin has been slightly better. Between 1959 and 1974 there were a total of 19 lease sales in offshore Cook Inlet, yielding a total of $39.6 million in bonus money. Seventy-three percent of the bonuses were under $5 million and 65 percent of the total tracts offered were actually leased. Twenty of the 118 wells drilled (16.9 percent) resulted in finds of commercial value and size. 2/ This drilling success rate is slightly lower than a national success rate of 18.0 percent for exploratory wells drilled between 1959 and 1974. 3/ 1/"Cost Squeeze Retards Cook Inlet Output," Oi] and Gas Journal, February 4, 1980, pg. 36. Se eT 2/"State Petroleum Leasing Methods and Possible Alternatives," Energy Report No. 2-77, Alaska Division of Minerals and Energy Management, February, 1977, pp. 42 and 51-55, 3/Calculated from exploratory well data. Basic Petroleum Data Book, American Petroleum Institute, April 1979. ACE 71421478 34 Although this information suggests there may be low oil industry re- sponse to the Lower Cook Inlet Lease Sale 35, current high oi] prices and the advent of free market prices for domestic crude oil may create increased interest in the lease offering and thus generate significant lease bonuses. On the other hand, given the results of earlier drilling it is assumed by the Department that the possibility of commercial development occurring in this lease sale is between 10 and 20 percent. The relatively low probability of commercial development in the lease area is a direct function of the economics of Cook Inlet production. The costs of drilling wells and operating in the area are quite high in comparison to other offshore areas such as the Gulf of Mexico. These high costs make the commercially feasible size of discovery relatively large. As technology improves, and increases in oi] and gas prices outstrip inflation, a discovery currently considered non-commercial may become economically attractive in the future. For purposes of this analysis it is assumed that a commercial ly- viable deposit must contain at least 100 MMbbls of recoverable crude oil and/or 0.5 Tcf of natural gas. At present, there are insufficient data to establish reservoir characteristics in Lower Cook Inlet with any certainty. The U.S. Geological Survey estimates there is a 95 percent probablity that Lower Cook Inlet contains at least 250 MMbbIs of recoverable oil] and 250 Bcf of gas. For simplification, this analysis assumes a cash bid bonus and a royalty share of 12.5 percent. No attempt is made to estimate the size of bonus bids. Based on 1) geological prospects and high costs of exploration and development, and 2) results of previous lease sales in Cook Inlet, it is not anticipated that cash bonuses will exceed $50 million. This analysis projects the revenues to the State based on two scenarios. The first is that only the exploration phase will be conducted and that no discoveries will be made. The second scenario assumes that a discovery of commercial size is made and production occurs. The scenarios and the resulting revenue flows, specifically property tax, severance or production tax, royalties, and oil and gas income tax are explained in the following discussions. Once the tracts have been leased, the oil companies will begin exploration. This phase will generally occur over a four to five year period, In the first scenario where exploration occurs but no discoveries are made, it is assumed that exploration begins in the northern portion of Lower Cook Inlet following the lease sale in the first quarter of 1982. By 1983, there are three drill ships or semi-submersibles and 35 ACE 17421479 three supply ships in the area; assessed valuation is $195 million and the property tax at 20 mills is $3.9 million (Table 1). During 1983 another drill ship or semi-submersible and supply ship are placed on site, resulting in increased property taxes to $5.2 million. As a result of the combined effects of high costs and no discoveries, exploration activities taper off during 1984, leaving only two drill ships or semi-submersibles and two supply ships on site. By 1985, Property tax received on this equipment is $2.6 million. During 1985 only one drill ship or semi-submersible and one supply ship remain in the area and on January 1, 1986 the State receives property taxes of $1.3 million. Property tax flows cease after 1986 as explora- tion is discontinued. Since there is no income from production, the only cash flow to the State for this "exploration only" scenario is from the property tax. The total tax received for the period 1982 through 1986 is $13 million (Table 1). Total revenues for an “explora- tion only" scenario will be $13 million plus lease bid bonuses. In the second scenario it is assumed that commercial discoveries of oil and gas are made in 1984, at which time the decision is made to develop the fields. Production systems feasible for the Lower Cook Inlet area include conventional steel jacket platforms, concrete or steel gravity platforms and floating platforms. Steel jacketed plat- forms with submarine pipelines to existing shore terminals in Upper Cook Inlet is the preferred system. 4/ For purposes of this analysis it is assumed that the oil field and gas field are sufficiently separated to require use of two individual platforms. The crude oil will be transported via submarine and on- shore pipeline from the platform to the existing Drift River terminal which, because of declining Upper Cook Inlet production, will have surplus capacity to store the new oil. It is further assumed that the natural gas will be transported via submarine pipeline to the Kenai Peninsula near the existing Phillips LNG plant or the Alaska Gas and Service Company pipeline. At this point, the gas could either be converted to LNG and shipped to U.S. west coast markets or used to supply energy needs of the Kenai Peninsula and Anchorage area via existing distribution facilities. This decision will depend on the market demand projected for 1988, the first year of expected production. Once the decision is made to develop the oi] and gas field, con- struction activity begins on the submarine pipeline and production platforms. The pipelines are completed and become taxable property during 1986. The production platforms are completed during 1987 4/"New Study Analyzes Alaska OCS Areas," Dames and Moore, Oil and Gas Journal, January 12, 1981, pp. 73-79. 36 Ace 422480 and become subject to property taxes. The projected valuations and tax flows from 1983 through 1995 are shown in Table 1. Because of the uncertainties involved in platform utilization for other dis- coveries on State and federal tracts in Lower Cook Inlet, no fore- cast has been made for property taxes beyond 1995, Total property taxes for 1988 through 1995 amount to $97.9 million. The production scenario assumes that recoverable oil reserves amount to 100 MMbb1s extracted between 1988 and the year 2005. The well head price upon which producer income, State royalties, and State Production taxes are based is assumed to be unregulated and ranges from $60.30 per barrel in 1988 to $198.09 per barrel by the year 2005. 5/ The royalty is calcuated at 12.5 percent of the value of production . The production tax is calculated as 12.25 percent of the value of production, less royalties. The corporate income tax is estimated to be equal to approximately 75 percent of the production tax. The revenue flows and production patterns are shown in Table 2. Total oi] revenues will be $3,430.06 million of which $1,372.90 million are royalties, $1,175.52 million are production taxes, and $881.64 million are corporate income taxes. Recoverable gas reserves are estimated to be 0.5 Tcf. Gas extracton will begin in 1988. It is further assumed that U.S. gas prices will be decontrolled by 1988, therefore, gas from Lower Cook Inlet will be priced from $4.16 per Mcf in 1988 to $9.90 per Mcf in 1999. The gas royalty is calculated at 12.5 percent and the production tax at 10 percent of the value of production, less royalties. The assumed pro- duction pattern and revenue flows are shown in Table 3. Royalty income will be $419.00 million, production tax revenue will be $293.23 million, and the corporation income taxes will amount to $219.92 million, giving a total gas revenue of $932.15 million. These oil and gas revenues will be added to the revenues previously received by the State. Total direct oi] and gas income from all royalties, taxes, bonuses and rentals amounted to $4,886,800,000 through 1979. 6/ Royalties and taxes on production throughout the State totaled $1,416,340,000 for fiscal year 1980. 7/ 5/Projections are based on current inflation rates and data compiled by the Economic Section of the Petroleum Revenue Division. 6/1979 Statistical Report. Alaska Oil and Gas Conservation Commission. pg. 13. 7/Petroleum Production Revenue Forecast, Quarterly Report. Alaska Department of Revenue, Petroleum Revenue Division. March 1981. pg 42. 37 ACE 7421481 8 zevIZbL 30V TABLE 1 PROJECTED PROPERTY VALUATION AND TAXES GENERATED FROM LOWER COOK INLET SALE 35 ($ MILLION) EXPLORATION DEVELOPMENT Year Drill Supply Gas Oi] Gas 0i1 Total Total Barge Vessels Pipeline Pipeline Platform Platform Valuation Tax (20 mills) 1983 180.0 15.0 195.0 3.9 1984 240.0 20.0 260.0 5.2 1985 120.0 — 10.0 130.0 2.6 1986 60.0 5.0 48.0 72.0 185.0 3.7 1987 96.0 114.0 25.0 90.0 325.0 6.5 1988 96.0 114.0 48.0 182.0 440.0 8.8 1989 96.0 114.0 50.0 198.0 458.0 9.2 1990 96.0 114.0 52.0 210.0 472.0 9.4 1991 96.0 114.0 55.0 220.0 485.0 9.7 1992 96.0 114.0 55.0 220.0 485.0 9.7 1993 96.0 114.0 55.0 220.0 485.0 9.7 1994 96.0 114.0 55.0 220.0 485.0 9.7 1995 96.0 114.0 55.0 220.0 485.0 9.7 Total 600.0 50.0 912.0 1098.0 450.0 1780.0 4890.0 97.8 Tax (20 mills) 20.0 1.0 18.24 21.96 9.0 35.6 SOURCE: Petroleum Revenue Division, Economic Section, Alaska Department of Revenue. 6e €8e7t2yl 3dV TABLE 2 PROJECTED CRUDE OIL PRODUCTION ROYALTIES, PRODUCTION TAXES, CORPORATE INCOME TAX FOR LOWER COOK INLET LEASE SALE 35 $ Price Producer AK Royalty AK Production AK Corporation Total Production Production Per Income at 12.5% Tax at 12.25% Income Tax AK Revenue Year (millions Bb1.) Barrel ($ millions) ($ millions) ($ millions) ($ millions) _($ millions) 1988 5.45 60.30 328.64 41.08 35.22 26.42 102.72 1989 8.00 66.37 530.96 66.37 56.91 42.68 165.96 1990 10.00 73.00 730.00 91.25 78.25 58.69 228.19 1991 10.00 80.30 803.00 100.38 86.07 64.55 251.00 1992 9.30 88.34 883.40 100.43 94.69 71.02 276.14 1993 9.00 97.17 903.68 112.96 96.86 72.65 282.47 ~ 1994 9.00 106.89 962.01 120.25 103.12 77.34 300.71 1995 7.30 117.57 858.26 107.29 91.99 68.99 268.27 1996 5.80 129.33 750.12 93.76 80.40 60.30 234.46 1997 4.60 142.26 654.40 81.80 70.14 52.61 204.55 1998 4.50 156.43 704.16 88.02 75.48 56.61 220.11 1999 3.75 164.30 616.13 77.02 66.04 49.53 192.59 2000 2.90 170.37 495.53 61.94 53.11 39.83 154.88 2001 2.50 176.00 440.00 55.00 47.16 35.37 137.53 2002 1.80 181.28 326.31 40.84 34.98 26.24 102.06 2003 1.75 192.32 326.76 40.87 35.03 26.27 102.17 2004 1.70 198.09 326.95 40.86 35.05 26.27 102.20 2005 1.65 198.09 326.85 40.86 35.04 26.28 102.18 Totals 1/ 100.00 10,967.13 1,372.90 1,175.52 881.64 3,430.06 1/Columns may not total exactly due to rounding off of numbers. SOURCE: Petroleum Revenue Division, Economic Section, Alaska Department of Revenue OF $B8bT2oL 39V TABLE 3 PROJECTED NATURAL GAS PRODUCTION, ROYALTIES PRODUCTION TAX, AND CORPORATE INCOME TAX FOR LOWER COOK INLET LEASE SALE 35 Producer AK Royalty AK Production AK Corporation Total Production Production $ Price Income at 12.5% Tax at 10% Income Tax AK Revenue Year (BCF) Per MCF ($ millions) ($ millions) ($ millions) ($ millions) ($ millions) 1988 27.25 4.16 113.35 14.15 9.93 7.45 31.53 1989 40.00 4.54 181.60 22.70 15.90 11.93 50.53 1990 50.00 4.94 247.00 30.90 21.60 16.20 68.70 1991 50.00 5.38 269.00 33.65 23.53 17.65 74.83 1992 50.00 5.86 293.00 36.65 25.63 19.22 81.50 1993 50.00 6.40 320.00 40.00 28.00 21.00 89.00 1994 50.00 6.98 349.00 43.65 30.53 22.90 97.08 1995 50.00 7.60 380.00 47.50 33.25 24.94 105.69 1996 47.50 8.28 393.30 49.15 34.43 25.86 109.47 1997 42.75 9.04 386.45 48.30 33.83 23.37 105.50 1998 34.25 9.84 337.00 42.15 29.48 22.11 93.74 1999 8.25 9.90 81.70 10.20 7.15 5.36 22.71 Totals 1/ 500.00 3,358.90 419.00 293 ,23 219.92 932.15 1/Columns may not total exactly due to rounding off of numbers. SOURCE: Petroleum Revenue Division, Economic Section, Alaska Department of Revenue Substantial benefits could accrue to citizens throughout Alaska from revenues received as a result of the Lower Cook Inlet Lease Sale 35. While all expenditures are dependent on State policies and Legislative approval, some of the possible benefits could include reduced property taxes, increased educational and capital construction funds, reduced fisheries taxes, additional funds for recreational areas, etc. Prediction of State and local expenditures directly related to the Lower Cook Inlet lease sale and subsequent exploration and produc- tion activity is more complex. As noted, no significant onshore capital construction activity is expected. Whatever construction and support activity do occur will probably be undertaken by private enterprise. Since any discoveries of recoverable reserves would generally compensate for declining reserves in Upper Cook Inlet, no major influx of population is expected. Hence, the demand for public services is not expected to be significantly impacted by the Lower Cook Inlet Sale 35. Ad ACE 7421485 2. Fiscal Factors Are there explicit or “implicit" State subsidies associated with the project? (Department of Revenue) Analysis: There are no subsidies explicitly associated with the project. Implicit subsidies which might be created by controlled oi] and gas prices are not expected to exist by the time production actually occurs because the controls on prices will be non-existent. The potential exists for the State to use its royalty share of projected production to subsidize in-State industry and consumption. Such a sub- sidy might take the form of lower royalty receipts if that oi] or gas is committed to the local market at lower than market determined prices. This analysis assumes that no subsidies will occur as a result of the State's Lower Cook Inlet lease sale. 42 1. Resource Utilization Factors What effect will the project have on resource industry potentials or other resource values? Will the project result in irreversible commit- ments? (Department of Natural Resources) Analysis: The Cook Inlet region has experienced the exploration and development of many oil and gas fields during the last 20 years. This general area is the only region of Alaska, except for Prudhoe Bay, in- volved in the production of significant quantities of oi] and gas. Because oi] and gas resources are nonrenewable, extraction of commercial discoveries in this area would result in an irreversible commitment of these particular resources. The project could cause minimal and long term (up to 30 years) commit- ments of other resources, such as land, during the exploration phase through the construction of airstrips, access roads, and drilling pads. If commercial production results from this sale, commitments of additional land resources will be required for at least the life of the field, perhaps longer. Operators will be encouraged, however, to use the existing infrastructure to the maximum extent practicable in order to minimize this type of commitment, particularly during the exploratory phase. Oil and gas exploration, development, and production in the Lower Cook Inlet area should have little effect on the value or potential of other resource industries such as timber and mining, if appropriate mitigating measures are in place. Only a small amount of onshore acreage near the City of Kenai, Kalgin Island, and Redoubt Creek are being considered in this proposed sale. As a result, there is little chance of conflict with timber development. No mineral resources are known to be present in these onshore tracts. If development of trans- portation modes are required and they allow access to areas of joint interest, they could have a positive impact on these two resource in- dustries. It is likely that potentially adverse impacts on industries based on the use of fish and wildlife resources or habitats can be minimized with 1) an absence of major pollution events, and 2) adequate miti- gating measures to protect fish and wildlife resources, habitat, and public access. There are, however, several potential impacts identi- fied by the Department of Fish and Game. These include the following: 1. Conflicts could develop between oil field support vessels, seismic vessels, drilling rigs, and associated increased marine traffic, and commercial fishing gear such as drift nets, crab pots and longline gear. The method of drift net fishing utilized in Central Cook Inlet often involves boats and gear drifting over relatively large areas. Construction of fixed objects within the fishing Ace 7421487 43 2. grounds may reduce harvest opportunities because commercial fishermen will have to remove their gear from the water to avoid platforms or support vessels. Longlines are stationary halibut fishing gear that may be damaged or lost when vessels fail to nav- igate around buoys marking their positions. In addition, fouling of fishing gear by oil or other pollutants could present a problem in the event of a spill. Any oil and gas activities that reduce anadromous fish populations, attract new people to the Cook Inlet region, or improve public access to salmon streams could aggravate existing resource allocation conflicts between sport, subsistence, and commercial fishermen. It is likely that the development of an oil field which results in increased public access to spawning streams on the west side of Cook Inlet could result in reductions to commer- cial, subsistence, and recreational harvests of salmon. It is assumed that no new major onshore facilities (except for onshore metering stations) will be built. However, if new docks and processing facilities should unexpectedly be necessary they could displace some existing set net sites, as has previously occurred in the Nikiski area. ace 7422488 44 Resource Utilization Factors 2. Will the project affect fish and wildlife populations or their habitat? Will these effects be short-term or long-term in nature? (Department of Fish and Game) Analysis: Exploration for oi] and gas reserves in the proposed lease sale area and any subsequent development and production of these resources will undoubtedly affect fish and wildlife populations and their habitats to some degree. A wide variety of species are dependent upon the marine and coastal environments of Lower Cook Inlet. Large populations of both terrestrial and marine mammals inhabit the region. Several million marine birds, shorebirds, and waterfowl] migrate through Lower Cook Inlet. Hundreds of thousands of water birds summer, nest, and raise their young in this area. Aquatic species inhabiting the area provide the basis for numerous important fisheries. The revenue produced by these fisheries is currently the economic mainstay of the Lower Cook Inlet region. Based upon 1978 figures, the value of fish- eries resources which are caught in, or migrate through, Lower Cook Inlet were worth in excess of $38,000,000 to fishermen and $76,000,000 on the first wholesale market. 1/ Local fish and wildlife populations also provide recreational opportunities for over 70 percent of the State's population. Sport hunting and fishing, as well as noncon- sumptive recreational activities, are pursued extensively in Lower Cook Inlet, particularly along the Kenai Peninsula. Competition between major user groups and controversies over resource protection and allocations are increasing each year. Lower Cook Inlet is a relatively undeveloped and biologically pro- ductive environment. Activities and developments which could cause short- or long-term changes to the environment must be carefully evaluated to ensure that potential impacts are fully understood and reasonable protective measures are taken. Lands which provide important habitat and support particularly high densities of fish and wildlife populations in the proposed Sale 35 area are illustrated in Fish and Game Appendix 5 and discussed in the following paragraphs. 1/Alaska Department of Fish and Game. 1978 Annual Report on Commerical Fisheries Statistics. 110 pp. CE 7421489 495 A Fish and Wildlife Resources and Habitats 1. Big Game Species: Four species of big game animals (moose, black bear, brown bear, and caribou) inhabit lands within and immediately adjacent to, the proposed lease sale area. Moose concentrations in this region occur on Kalgin Island, along the Kenai Peninsula coast from Salamatof to Happy Valley, and along the Alaska Peninsula coast from Bachatna Flats to the Crescent River. Coastal lowlands provide important winter habitat, with especially high densities of moose concentrating in these areas during the winter months. Concentrations of bears occur at various locations within and near the sale area during the spring and summer. After emerging from their dens, both black and brown bears move into grassy flatlands to graze on sedges, grasses, and other plants. On the Kenai Peninsula, black bears concentrate in the vicinity of Woodpecker Lake and lands to the northeast during the spring. On the Alaska Peninsula, both brown and black bears utilize grassy lowlands of the Bachatna Flats and Tuxedni Bay. High spring densities of black bears also occur on coastal lands from Katchin Creek to Polly Creek, while brown bear concentrations can be found at Chinitna Bay and at the head of Oil and Iniskin Bays. During the summer, black and brown bears congregate along anadromous streams to feed on spawning salmon. Streams where concentrations of bears occur are identified in Fish and Game Appendix 5. The Kenai lowland caribou herd, a band of 60-75 animals, seasonally inhabits the lowlands in the Salamatof-Kenai vicinity and is likely to be directly affected by oi] and gas exploration and development within the lease area. Natural populations of caribou were eliminated from the Kenai Peninsula area in 1913. The Kenai lowlands herd is one of two herds re-established on the Kenai Peninsula through transplants in 1965 and 1966. The Kenai lowlands caribou herd generally moves from its wintering grounds on the Moose River Flats to the muskeg area north of the Kenai Airport during April or early May. Calving takes place in this region during late May or June. The herd remains in the vicinity of the calving grounds all summer. Following the rutting season in October, the herd returns to the wintering grounds in November or December. Caribou within the Kenai lowland herd are known for their except- tionally large size and are especially important to local Kenai residents for wildlife viewing and limited hunting opportunities. A portion of the Kenai Peninsula onshore tracts included in the sale area encompass the critical calving and summering habitat for this herd. The Department has identified this area as public interest land of exceptionally high wildlife value, and special considerations in developing this region are discussed in this section under Resource Utilization Factor, #3. ace T422490 2. Marine Mammals: Numerous species of marine mammals occur within and adjacent to the lease sale area. Belukha, killer, and minke whales, and Dall and harbor porpoise are commonly occurring cetaceans. Harbor seals, sea lions and sea otters also inhabit this region. Harbor seals occur throughout Cook Inlet. The total population probably exceeds 3,000 individuals. In the vicinity of the lease area, particularly high densities exist along the northern and southern shores of Kalgin Island, at Harriet Point, Tuxedni Bay, several locations within Chinitna Bay, Dry Bay, Iniskin Bay, and at the head of Oil Bay. In the past, harbor seals were considered to be relatively sedentary animals with perhaps limited seasonal movements. However, recent studies indicate that there is considerable variation in individual behavioral patterns since both long distance movements (80-250km) and year- round site loyalty have been documented. The Lower Cook Inlet harbor seal population reaches a peak density during the winter as individuals from Upper Cook Inlet move south into the area. Harbor seals are currently protected under the Marine Mammal Protection Act of 1972. Sea lions are commonly found in southern Cook Inlet. Numerous rookeries and hauling grounds are located to the south of the lease sale area, along the southern tip of the Kenai Peninsula and in the Barren and Afognak Islands. Sea lions range widely in search of food, utilizing Kamishak Bay as an important feeding area. Sightings of sea lions in Kamishak Bay during April and May indicate that these animals are probably feeding in the herring spawning areas during the spring (see Fish and Game Appendix 5). Sea lions eat a wide variety of foods and undoubtedly feed in other areas of Lower Cook Inlet also, but the exact location of these areas and the degree of use they receive are poorly understood, Offshore feeding areas are probably used extensively. Sea lions are currently protected under the Marine Mammal Protection Act of 1972. Alaska sea otter populations were nearly decimated by commercial hunting between 1742 and 1911. Fortunately, several small nucleus populations did survive, including one group of animals in the Rock Bay-Port Graham vicinity and another group around Augustine Island. These populations have been increasing in numbers and have apparently been expanding their range during the 1960's and 70's. Food availability and perhaps the occurrence of sea ice will probably determine the northern limit of range expansion for this species. A sighting in 1975 near Kalgin Island suggests that at least stray individuals may occur within the lease area. Sea otters are protected under the Fur Seal Treaty Act of 1911. ACE 7421491 47 During 1979, walrus were sited at several locations within Cook Inlet. It is thought that these were stray individuals from the Bering Sea and it is not likely that walrus numbers will increase dramatically within the proposed lease area. Cook Inlet provides habitat for a population of approximately 500 belukha whales. This population may be genetically distinct from the larger belukha populations inhabiting the Bering, Chukchi, and Beaufort seas. The available information indicates that Cook Inlet belukha whales summer primarily in Upper Cook Inlet and move south to winter in the Lower Cook Inlet region. Relatively large concentrations of belukha whales have been observed during the spring and summer in the vicinity of Kalgin Island and at the mouth of the Susitna River. Kamishak Bay is noted for winter sightings of this species. Estuaries tend to provide the primary summer feeding grounds. Groups of these whales are periodically observed at the mouths of the Kenai, Kasilof, and Fox rivers. Specific calving areas have not been identified, but calving may occur in the large estuaries in the northwest portion of Upper Cook Inlet. Fin, sei, humpback and grey whales are endangered whales which have occasionally been observed in both Kachemak and Kamishak Bays. The carcass of a rare and endangered Stejneger's beaked whale was discovered in Kachemak Bay in November 1977, and a live member of this species was found stranded at the mouth of the Kenai River in November 1980. Other cetaceans also venture into Lower Cook Inlet, but the frequency and extent of their incursion into the region is not known. 2/ 3. Avian Wildlife: Approximately 100 species of seabirds, waterfowl, and shorebirds are associated with the marine and coastal environ- ments of Lower Cook Inlet. Several species of raptors also occur along the Cook Inlet coast, including the bald eagle and peregrine falcon. April and May represent the most dynamic time of year for bird life when millions of migrating birds pass through Cook Inlet or arrive to nest and raise their young. Major staging areas for waterfowl and shorebirds in the vicinity of the sale area include Kalgin Island, the Bachatna Flats, and Tuxedni, Chinitna, and 2/Additional information on other cetaceans occasionally occurring in the Lower Cook Inlet region can be obtained by referring to the federal Draft Environmental Impact Statement for Lower Cook Inlet, available upon request from the Anchorage BLM/OCS office. 48 ace Ty Iniskin Bays. Wetlands located at the mouths of the Kenai and Kasilof Rivers are also of major importance to ducks, geese, and swans. Up to 12,000 lesser snow geese utilize the Kenai Flats for staging during the spring. Coastal lowlands in Redoubt Bay provide important breeding and nesting habitat for a variety of waterfowl species, including the trumpeter swan and tule goose. At least 60 seabird colonies are scattered throughout Lower Cook Inlet. The most commonly occurring species which nest in colonial association include gulls, kittiwakes, cormorants, guillemots, puffins, murres, murrelets and auklets. Chisik and Duck Islands, in Tuxedni Bay, support the largest population of nesting seabirds in the vicinity of the sale area. Over 40,000 seabirds inhabit these islands during the spring and summer. Gull Island, at the entrance to Chinitna Bay, provides nesting habitat for an undeter- mined number of seabirds. Numerous smal] colonies in and near Iniskin Bay support approximately 5,000 nesting seabirds. A small colony near the mouth of the Kasilof River supports an un- known number of Arctic terns. Birds nesting at these colonies, as well as flocks of shearwaters, northern fulmars, fork-tailed storm petrels, and other species, feed in the offshore waters of Lower Cook Inlet throughout the spring and summer. Large numbers of waterfowl and shorebirds are found along the coast of Cook Inlet during the fall migration. By winter, most of these birds have migrated south, although approximately 30 species remain and inhabit inshore areas along the shores of bays and inlets. The highest densities of over-wintering marine birds occur in the relatively ice-free waters of southeastern Cook Inlet. Major marine bird concentration areas are shown in Fish and Game Appendix 5, and specific types of habitats supporting these species seasonally are contained in Table 1. High quality bald eagle habitat can be found throughout the Cook Inlet Basin. Over 80 bald eagle nests have been identified by the U.S. Fish and Wildlife Service in this region. No eagle nesting sites have been documented within the sale area, although several are present along the coast of Lower Cook Inlet adjacent to offshore tracts included in the sale area. Peregrine falcons have also been observed on lands bordering the lease area. Federal biologists conducting research on Chisik Island in 1978 observed a pair of peregrines regularly over a period of 3 months. The nesting site was never located but the falcons' frequent use of the area and their behavior indicated that their nest was in the vicinity. ACE 7421493 49 TABLE 1. COMPARISON OF SEASONAL USE OF BIRD HABITATS IN LOWER COOK INLET (Numbers represent percent of the total AS DETERMINED BY AERIAL SURVEYS. marine birds found in the survey area for each habitat type) 1/ Habitat Type Spring Summer Fall Winter % % % % Offshore Water 5 Exposed Inshore Water 16 16 20 28 Exposed Mudflats 2 2 12 Tr.2/ Exposed Sand Beach ] Tr. 1 ot Exposed Gravel Beach Tr. 2 3 1 Exposed Rock Beach Tr. 5 3 1 Exposed Island Sand 1 Tr. Exposed Island Gravel Tr. Tr. Tr. Exposed Island Rock 1 4 1 Tr. Bay Water 20 20 20 32 Bay Mudflats 17 4 2 6 Bay Sand Beach Tr. 6 1 Bay Gravel Beach Tr. 2 3 Tr. Bay Rock Beach Tr. 3 2 Tr. Bay Island Upland Tr. Tr. Bay Island Sand Tr. Bay Island Rock Tr. 1 1 Lagoon Water 1 1 6 12 Lagoon Mudflats Tr. 2 4 1 Lagoon Sand Beach Tr. Tr. Tr. Lagoon Gravel Beach Tr. Tr. Tr. Lagoon Rock Beach Tr. Tr. Tr. Lagoon Island Upland Lagoon Island Sand Lagoon Island Gravel Salt Marsh 3 Tr. 4 Exposed Delta Water Tr. ] 1 Tr. Exposed Delta Mud Tr. Tr. 1 Exposed Delta Sand Tr. ins Tr. 1 Exposed Delta Gravel 7 Tr. Tr. Tr. Protected Delta Water 3 1 6 1 Protected Delta Mud 1 1 2 Tr. Protected Delta Sand Tr. iin. 1 Protected Delta Gravel Tr. Tr. 1 Alluvial Floodplain 6 1 1 Unidentified Exposed 6 15 1 2 Unidentified Bay 12 4 2 10 Unidentified Lagoon Tr. Tr. 1 2 Unidentified Alluvium Tr. 4. 1 Tr. 1/Arneson, Paul D. 1980. Final on Identificati Documentation and Delineation of Coastal Migratory Bird Habitat in Alaska. Alaska Outer Continental Shelf Office, Anchorage, Alaska. Research Unit 3., 220 pp. 2/Tr. = Trace, less than one percent. ACE 142 1494 4. Fish and Shellfish Populations: High concentrations of salmon, demersal fish, and shellfish inhabit the waters of Lower Cook Inlet within, and adjacent to, the proposed lease sale area. The distributions of these aquatic species are illustrated in Fish and Game Appendix 5. Pelagic species of primary concern include salmon and herring. All five species of North American Pacific salmon are found with- in the proposed lease sale area. Particularly large concentrations of salmon "mill" in the area east of Kalgin Island for a period of time before moving into their respective spawning streams. All species are represented; timing, however, varies with the species and run. There are 48 documented anadromous streams within, or in close proximity to, the lease sale area. Thirty- five of these are located along the western side of Cook Inlet, 10 are on the Kenai Peninsula, and 3 are on Kalgin Island. Table 2, included in this section under Resource Utliization Factor, #3, identifies these anadromous streams and the species of salmon that occur in each. Dolly Varden and steelhead trout are also present in many of these streams. Pacific herring concentrations occur in coastal waters from the East Foreland south along the Kenai Peninsula and from Redoubt Point to Kamishak Bay along the Alaska Peninsula. Herring spawning areas have been documented along the Iniskin Peninsula and at several other coastal locations in Kamishak Bay. It is likely that herring spawn in all of the bays on the west side of Cook Inlet from Tuxedni Bay south, although further verification is needed. Critical spawning grounds are located from 0i1 Bay to Bruin Bay. Three species of demersal fish (halibut, yellow fin sole, and Pacific cod) inhabit waters within or adjacent to the sale area. High concentrations of these species occur primarily during the spring and summer, with most individuals migrating to deeper waters to overwinter. Halibut are present along the Kenai Peninsula coast in the vicinity of Tuxedni Bay, Chinitna Bay, and Kamishak Bay. Waters surrounding Kalgin Island also support rela- tively high concentrations of halibut. High densities of yellow fin sole and Pacific cod also occur in close proximity to the sale area. Yellow fin sole are present throughout most of Kamishak Bay, and Pacific cod inhabit the deeper more central waters of Lower Cook Inlet. High cod concentrations extend from a point approximately parallel to Homer to a point parallel with Cape Ninilchik on the Kenai Peninsula. Razor clams, and dungeness, king, and Tanner crab are the major shellfish species present within or adjacent to the proposed lease sale area. On the eastern side of Lower Cook Inlet razor clams are found on sandy beaches between the Kenai River and 9641242 39V , Year 19794 1978 1977 1976 1975 Total COMMERCIAL SALMON HARVEST AND VALUE DATA FOR THE CENTRAL Kings 11,982 16,527 14,219 10,410 4,681 57,819 TABLE 2 DISTRICT OF COOK INLET, 1975-1979. Reds 790,995 2,547,371 1,928,731 1,596,501 610,854 7,474,452 Central District Cohos 208 ,303 171,798 171,970 170,930 191,951 914,952 Pinks 49,911 1,314,419 437 ,337 1,109,022 234,450 3,145,139 Chums 655,017 531,318 1,209,615 455,193 919 ,588 3,770,731 Total 1,716,208 4,581,433 3,761,872 3,342,056 1,961,524 15,363,093 Valued/ (in dollars) 13,911,472 26 400,197 _F 12,512,662 5,699,303 58,523,594 ly Value calculated from catch figures, average weight of fish, and average price per pound for each species. 2/ Preliminary catch figures. 3/ District figures not available for 1977. SOURCE: Alaska Department of Fish and Game. 1975-1979. Rounded off to nearest dollar. Commercial Fisheries Annual Reports, Homer Spit with greatest abundance in the Clam Gulch and Deep Creek-Stariski Creek areas. Razor clams are scattered along various beaches on the west side of Cook Inlet from Harriet Point southward. Large populations occur at Polly Creek and along the north shore of Chinitna Bay. High densities of dungeness crab occur along the Kenai Peninsula coast from Cape Kasilof southward. A portion of the population is present year-round, but some dungeness crab may inhabit this area only seasonally. High concentrations of king and Tanner crab are found primarily to the south of the proposed sale area; however, high densities of these species are found as far north as the Iniskin Peninsula. Harvest of Fish and Wildlife Resources Fish and wildlife populations of Lower Cook Inlet are harvested by several major user groups. Extensive commercial, sport, and sub- sistence harvesting takes place throughout this region. Commercial Fisheries: The sale area lies predominantly within the Central Commercial Fishing District of Cook Inlet. This district receives a great amount of commercial fishing pressure, and the largest salmon harvest in Cook Inlet is taken from this area. Fishing methods utilized include drift gill nets, purse seines and set nets. According to Alaska Department of Fish and Game commercial fisheries statistics, 15,363,093 salmon of all species were harvested in the Central District between 1975 and 1979. Yearly harvest figures and the financial value of these catches are shown in Table 2. With the exception of 1979, a low catch year and not considered to be indicative of the true value of this fishery, the yearly income derived from commerical salmon harvest has been increasing steadily since 1975. Another indication of the financial worth of this fishery is illustrated in the dramatic upward trend in prices paid for commercial salmon permits in recent years. A summary of this trend is presented in Table 3. Pacific halibut are fished commercially in all areas of Cook Inlet south of Kalqin Island. A major part of the halibut catch in Cook Inlet occurs in the area south of Ninilchik to Augustine Island in waters ranging from 10 to 35 fathoms. The halibut fishery is requlated by the International Pacific Halibut Commission (IPHC); each halibut Management area overlaps and includes several State management areas. IPHC statistical area 3A includes Cook Inlet, but catch records for specific State commercial fishing areas are not available. Until recently, the herring fishing effort was concentrated in Resurrection Bay in the Eastern District and Kachemak Bay in the Southern District. Since 1972, fishing 5 21497 3 ACE 74 TABLE 3. COOK INLET COMMERCIAL SALMON FISHERIES PERMITS, 1975-1979.1/ Year 1979 1978 1977 1976 1975 Year 1979 1978 1977 1976 1975 Year 1979 1978 1977 1976 1975 Purse Seine Total Number Permanent Permits 75 74 72 63 49 Set Gill Net Total Number Permanent Permits 744 742 731 711 657 Drift Gill Net Total Permanent Permits 554 549 539 514 453 Average Price Paid For Permits (In Dollars) 40,000 10,625 7,500 Average Price Paid For Permits (In Dollars) 23,412 9,824 4,821 1,778 2,250 Average Price Paid For Permits (In Dollars) 82 ,636 36,825 9,643 5,552 3,911 1/ Information covers entire Cook Inlet region including, but not limited SOURCE: Alaska Department of Fish and Game. to, proposed lease sale area. Commercial Fisheries Annual Reports, 1975 - 1979. ACE 1421 2. 3. effort has shifted to the Kamishak District and southern Central District including Tuxedni, Chinitna, Iniskin and Bruin Bays. Purse seining is the primary means of harvesting herring in Cook Inlet, although set nets are also used in the lease sale area. Shellfish: The principal shellfish species commercially harvested in, or adjacent to, the proposed lease area include king, Tanner and dungeness crab and razor clams. The king and Tanner crab catches for Lower Cook Inlet occur in the Kamishak District southeast of Augustine Island and in Kachemak Bay, which is located in the Southern District. The Southern District is also the primary harvest area for dungeness crab. In addition, a small commercial razor clam fishery exists at Polly Creek north of Tuxedni Bay. There is believed to be a potential for a commercial razor clam fishery in Chinitna Bay. Sport Hunting and Fishing: A majority of the sport fishing and hunting effort in this region is concentrated on the Kenai Peninsula. The Kenai River alone received 178,485 man-days of fishing effort in 1979. Clam beds along the Kenai Peninsula also receive extensive use from recreationists. Over 26,000 man- days of effort were expended at Clam Gulch in 1979 when 765,690 clams were taken. Polly Creek, on the west side of Cook Inlet, receives occasional heavy use by fly-in clammers during spring tides. Additional sport fisheries harvest and effort data is presented in this section under Resource Utilization Factor, #3. The increase in sport fishing effort in Lower Cook Inlet over the past years is evident when examining these statistics. Coastal lands within, and adjacent to, the proposed sale area constitute portions of three State Game Management Units (No's. 15, 16, and 9). Unit 15 includes lands along the eastern side of Cook Inlet. Hunting pressure throughout the Kenai lowlands is generally high especially near the population centers and along the road systems. Large numbers of moose and black bear and smaller numbers of brown bear are harvested from this area. The taking of caribou from the Kenai lowland herd has been prohibited in the past due to the low reproductive success of the herd, although a limited trophy hunt on bulls has recently been passed to the Board of Game. The herd has been very popular for viewing because of easy road access and its close proximity to Kenai. The southern extension of Unit 16 includes the lowlands of Redoubt Bay. Moose are hunted extensively in this area, particularly by residents of Kenai. Over 27 moose were harvested ACE 7421499 from this region in 1980. 3/ Black bear and brown bear hunting also occurs in the spring. Redoubt Bay is also the eighth most important waterfowl hunting area in the State. Approximately 2,400 ducks were harvested from this region during 1979. Trapping of small game species (i.e., wolverines, fox, marten, etc.) commonly occurs in the Redoubt Bay area. Coastal lands along the western side of Cook Inlet from Harriet Point southward are included in Unit 9. Although some hunting does occur along the coast in this region of Lower Cook Inlet, pressure is relatively light and only a few animals are harvested from this area. 4, Subsistence Activities: There are no native villages located within, or immediately adjacent to, the proposed sale area; how- ever, people of the Village of Tyonek (population 232) do engage in subsistence activities in the northwestern portion of the sale area. Beaches in Redoubt Ray are used for clamming during the spring and fall, and are of particular importance to the villagers during spring after winter food supplies have been depleted and before the spring salmon runs begin. Intertidal areas south of Drift River Terminal to Harriet Point are also used for subsistence clamming during the spring. People of Tyonek hunt waterfowl and seals to a limited extent along the lower reaches of Drift River, and the entire Kustatan River drainage receives heavy use when moose hunting is poor along the McAuthur River and at other locations. Trapping is also pursued along the Kustatan River. In addition to these subsistence activities, there is a large sub- sistence salmon fishery within the sale area. All of the commun- ities in the vicinity of the lease sale area have people who, to varying degrees, depend upon local fish and game resources for a significant portion of their annual food supply. According to permit returns, subsistence salmon fishing within, and adjacent to, the proposed lease area occurred at eight qeneral locations in 1979. Table 4 proposed identifies these locations and the number of salmon harvested at each. A total of 3,614 salmon were taken from these areas. As illustrated in Table 5, this represents over 50 percent of the subsistence salmon catch in the Central Fishing District during the 1979 season. An additional 1,622 salmon were harvested at undetermined locations within the Central 3/Less than 50 percent of the harvest tickets for Unit 16b have been returned, The actual harvest was probably greater than 27. ACE 7421500 56 District. It is likely that a significant percentage of these were also harvested within, or adjacent to, the proposed sale area. The store-bought value of these subsistence catches has not been calculated, but users that take near or at their limit unquestionably defer the total household expenditure for food. Under the 1979 subsistence salmon fishing regulation, the entire Upper Subdistrict of the Central District was closed to subsis- tence salmon fishing. Undoubtedly, this affected both the number of individuals involved in this activity and the distri- bution of subsistence fishermen within the Central District of Cook Inlet. Unfortunately, historical subsistence fishing records are not adequate to determine what changes occurred as a result of this closure. It is not possible to assess whether the displacement of subsistence fishermen or the number of salmon harvested in given areas was significantly different from previous years. In 1980, there were 402 households in Kenai Peninsula communities (excluding Port Graham and English Bay) that acquired subsistence fishing permits. Additionally, commercial set netters who fish the Central District utilize fish for personal consumption during the fishing season and preserve fish for use during the remainder of the year. An adequate assessment of the extent of such use has not been made, however, a survey of 1980 subsistence permit holders (ADF&G, 1980) found that 75 respondents who held commercial fishing licenses took from 25 to 500 salmon from their commercial catches for subsistence use (see Table 6). A total of 440 commercial fishermen acquired Cook Inlet subsistence fishing permits in 1980; 99 of these hold set net permits for Cook Inlet (see Table 7). Although the villages of Port Graham and English Bay are not located within, or immediately adjacent to, the proposed sale area, the North Pacific Rim Regional Non-profit Corporation has expressed two major areas of concern regarding Sale 35 on behalf of these two villages. First, further increases in Homer's population could stimulate inflation, resulting in increases in the cost of various items purchased in Homer by the villagers. Price increases would have serious economic effects on these communities, which depend upon fishing and fish processing for most of their income, and would not benefit from the boom economy generated by neighboring oil and gas activity. Accelerated population growth is also likely to result in greater competition for the limited fish and wildlife resources of Lower Cook Inlet. The villages are concerned that increased competition could lead to the implementation of additional restrictions on subsistence use of these resources. The second area of concern is the effect of a large oi] spill on the natural resources of the region. Port Graham and English Bay ACE 7421501 zostzeL 39V TABLE 4 SUBSISTENCE SALMON HARVEST AT LOCATIONS WITHIN AND ADJACENT TO THE PROPOSED LEASE SALE AREA, 1979 1/ Species Location and Harvest Boulder Chisik Chinitna Harriet East Redoubt Kalgin Polly Point Island Bay Point Foreland Creek Island Creek Total Kings 22 8 0 ] 0 2 0 2 35 Reds 1,77] 141 52 30 118 31 44 44 2,231 Cohos 811 20 79 . 75 0 45 42 8 1,080 Pinks 86 8 9 2 0 10 3 0 118 Chums 45 15 4] 26 6 14 1 2 150 Total 2,735 192 181 134 124 102 90 56 3,614 —— 1/ Based on 278 permit returns out of 362 permits issued. No data available for the other 84 permits. SOURCE: Compiled from unpublished Alaska Department of Fish and Game subsistence harvest return data. €0stz"L 39V TABLE 5 COOK INLET SUBSISTENCE SALMON PERMITS AND HARVEST DATA, CENTRAL DISTRICT, 1979. 1/ Permits and Harvest Within and Adjacent to Lease Sale Area Permits and Harvest at Undetermined Locations Permits and Harvest V Based on 529 permit returns out of 709 permits issued. SOURCE : Within Central District Outside Lease Sale Area Total » No. Permits Harvest No. Permits Harvest No. Permits Harvest No. Permits Harvest 362 Kings 35 249 Kings 0 98 Kings 11 709 Kings 46 Reds 2,231 Reds 831 Reds 762 Reds 3,824 Cohos 1,080 Cohos 681 Cohos 486 Cohos 2,247 Pinks 118 Pinks 38 Pinks 64 Pinks 220 Chums 150 Chums 72 Chums 41 Chums 263 Total Harvest 3,614 1,622 1,364 6 ,600 No data available for the other 180 permits. Compiled from unpublished Alaska Nepartment of Fish and Game subsistence harvest return data. TABLE 6 ESTIMATED NUMBER OF SUBSISTENCE SALMON TAKEN FROM COMMERCIAL CATCHES 1/ Estimated Numbers Taken Permitting = Location 0-25 26-50 51-100 101-250 251-500 501-1000 1000+ Kenai/ Soldotna 16 9 5 1 Anchorage 1 1 1 Homer 22 4 2 Total 39 14 8 1 No amount estimated 10 Homer No amount estimated 3 Soldotna Subtotal 13 Total = 75 users 1/Based on 1,715 users SOURCE: Alaska Department of Fish and Game. Survey, Cook Inlet - 1980. 60 AC Subsistence Fishery Permit E 1421504 TABLE 7 NUMBER OF COMMERCIAL FISHING LICENSES HELD BY SUBSISTENCE FISHERMEN 1/ Permitting Location Type Kenai License Anchorage Soldotna Homer Herring 6 8 12 Crewman 10 16 31 Halibut 26 43 87 Clam 1 5 I Drift 2 2 10 Set Net 33 37 29 Octopus 1 0 1 Yes 2 0 0 Crab 2 0 34 Shrimp 3 0 18 Bottom Fish 5 6 Longline 4 Black Cod 1 Seine 1 Total ‘ 90 117 233 1/Based on 1,715 surveys. SOURCE: Alaska Department of Fish and Game. Subsistence Fishery Permit Survey, Cook Inlet - 1980. ACE 7421505 61 depend heavily upon fish and wildlife populations in Lower Cook Inlet and any spills that significantly impact these resources would, in turn, have serious social and economic consequences for these villages. Fisheries Enhancement Projects Several fisheries enhancement projects are ongoing or proposed within the lease area. Drift River Tributary, Polly Creek, Silver Salmon Creek-Chinitna Bay and Silver Salmon Creek-August Hil] have been identified for removal of fish passage obstructions to increase salmon production. These projects would be sensitive to stream obstructions, dewatering, or pollution. Packers Lake on Kalgin Island has been identified as a highly productive system for sockeye salmon propagation. Maintenance of high water quality and lake productivity is essential for future enhancement projects at Packers Lake. Impacts of Oi] and Gas Activities The Department of Fish and Game has studied oi] and gas development extensively with respect to the potential impacts on fish and wildlife resources. The best available methods for avoiding, minimizing, and mitigating these impacts have also been investigated. The results of this research have been published in Recommendations for Minimizing the Impacts of Hydrocarbon Development on the Fish, Wildlife, and Acquatic Plant Resources of Lower Cook Inlet {available from the Department of Fish and Game). Based on the findings of this work, the adverse impacts of oi] and gas activities can be divided into ten general categories. Major activities, their associated impacts, and the potential duration of these impacts are presented in Table 8. A detailed discussion of these impacts and supporting scientific evidence are contained in the above-mentioned report. The magni- tude 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 accumu- lations of hydrocarbons are found; 2) whether oil or gas is pro- duced; 3) the area where the discovery is made; 4) the type of development (i.e., new roads, airstrips, docks, etc.) necessary to develop the field; and 5) the number and magnitude of oi1 pollution accidents which occur. ace 1421306 62 2) 9) TABLE 8 MAJOR OIL AND GAS DEVELOPMENT ACTIVITIES, IMPACTS ON FISH AND WILDLIFE RESOURCES, AND POTENTIAL IMPACT DURATION. ACTIVITY Site preparation Noise and disturbance Discharge of drilling muds and cuttings 0i1 pollution Dredging and filling Shoreline alteration Discharge of formation waters Cooling waters Increase in local Population and changes in access to specific areas Secondary development IMPACT(S) Alteration or destruction of habitat; interference with migrations and natural movements; alteration of natural drainage systems; sedimentation and pollution of water from stormwater runoff and erosion. Abandonment of critical habitat such as reproductive, feeding, and molting areas; reduction in breeding success. Smothering of benthic organisms; interference with filter feeding mechanisms; death due to acute or chronic toxicity. Death due to coating, ashpyxiation, and toxicity; alteration of food chain; interference with biochemical processes or behavioral patterns. Destruction of benthic habitat; smothering of benthic organisms; alteration of water quality and circulation patterns; physical destruction when organisms are swept into dredging equipment. Alteration or destruction of habitat; alteration of natural sediment balance and tidal circulation; interference with migration routes. Abandonment of habitat; interference with growth and reproduction; mortalities from toxic components such as hydrocarbons and heavy metals. Entrainment and impingement of aquatic organisms; thermal pollution; chemical contamination of water. Increased competition between commercial, sport, and subsistence users; changes in traditional hunting and fishing patterns. Loss or alteration of habitat; abandonment of critical habitats; interference with migrations and natural movements. 63 POTENTIAL IMPACT DURATION long-term short or long-term short-term short-term with long-term effects long-term long-term long-term long-term short or long-term long-term Resource Utilization Factors 3. Will the project affect designated or specially defined wilderness, historic, watershed, recreational, or scenic areas? (Department of Fish and Game) _ Analysis: There are two existing Critical Habitat Areas (AS 16.20.260) and three State parks (AS 41.20.050) located in the vicinity of the proposed lease sale area. Forty-eight anadromous streams (Alaska Statutes, Title 16), including several of State- wide importance for sport fishing, are found in this region. Numerous tracts of public interest lands with exceptionally high recreational, scenic, watershed, and wildlife habitat values and a number of historic and archaeological sites are also located in the vicinity of the proposed sale area. Oi1 and gas development in the Lower Cook Inlet sale area could affect some or all of these areas to a certain extent, depending on the size and location of potential oil and gas fields. Lands with formal designations are included below in one of three categories (I-III). Each category is analyzed individually and discussed in the Recommendations section which follows this same format. I. Critical Habitat Areas: The proposed sale area includes the Kalgin Island Critical Habitat Area and offshore tracts located approximately 3 miles from the Clam Gulch Critical Habitat Area. Both of these areas provide particularly important habitat for fish and wildlife populations. Kalgin Island Critical Habitat Area is located at the southern tip of Kalgin Island (see Fish and Game Appendices 3 and 5). Wetlands in this area support high concentrations of migratory waterfowl during the spring and fall. Numerous species remain in the area throughout the summer months utilizing these wet- lands as nesting habitat. Kalgin Island also supports large numbers of moose which utilize this area. Up to 72 moose were counted on Kalgin Island during recent surveys. The Clam Gulch Critical Habitat Area includes intertidal and submerged lands from Cape Kasilof to Happy Valley (refer to Fish and Game Appendices 3 and 5). Dense concentrations of razor clams inhabit the sandy beaches along this portion of the Kenai Peninsula. The razor clams at Clam Gulch provide the basis for the single most important recreational fishery in the State. According to Department of Fish and Game harvest statistics, a total of 107,730 man-days of effort were expended harvesting 3,521,750 clams from the beaches of Clam Gulch between 1975 and 1979, Yearly harvest and effort data for this period is contained in Table 1. 64 ace TABLE 1 RAZOR CLAM HARVEST AND EFFORT DATA FOR CLAM GULCH, 1975 - 1979, Year Harvest Effort (man-days) 1979 765,690 26,430 1978 729,490 23,580 1977 710,050 21,160 1976 708,670 20,850 1975 607,850 15,710 TOTAL 3,521,750 107,730 SOURCE: Nelson, D. Alaska Department of Fish and Game. Soldotna, Alaska. Personal communication. 1981. ACE 7421509 65 Il. Anadromous Streams: There are 48 documented anadromous ‘streams within, or in close proximity to, the proposed lease sale area, with a majority of these (35) located along the western side of Cook Inlet. Table 2 identifies these streams and the species of salmon which occur in each. Anadromous streams on the Kenai Peninsula are of particular importance in terms of sport fishing and rec- reational use due to their accessibility. Sport fishing harvest and effort data are available for 3 of the 10 Kenai Peninsula streams located adjacent to the sale area, including the Kenai and Ninilchik Rivers, and Deep Creek. In 1979 these three anadromous streams were fished extensively by sport fishermen and received 178,485, 18,282, and 12,560 man-days of fishing effort, respectively. Table 3 indicates the increase in sport fishing pressure these streams have received in recent years and the numbers of salmon and trout harvested between 1977 and 1979. Marine sport fishing at the mouth of Deep Creek has also increased since 1977, as indicated in Table 4, Sport fishing harvest and effort data for the anadromous streams on the west side of Lower Cook Inlet are not available; however, these streams receive relatively light use in comparison to those on the Kenai Peninsula. III. State Parks, Public Interest lands, Historic and Archaeological Sites. 1. State Parks: Clam Gulch, Ninilchik, and Deep Creek State Waysides are administratively established State parks located on the Kenai Peninsula coast adjacent to offshore tracts within the proposed lease sale area. According to the Division of State Parks, the use of State park facilities on the Kenai Peninsula is estimated to be increasing at an annual rate of 10 to 12 percent. These waysides are used heavily by recreationalists, and use of facilities has already reached a level of maximum utilization. In order to meet the growing need for recreational land in this area, the Division of Parks has recently acquired additional acreage from private parties in close proximity to the Ninilchik and Deep Creek State Waysides. Under the terms of the Interagency Land Management Transfer (ILMT) establishing these areas, the Department of Natural Resources, Division of Minerals and Energy Managment, retains management of the subsurface estate; however, surface entry is only allowed following approval by the Director of Parks. Generally, the Division of Parks will allow subsurface use in State Parks but not surface entry or disturbance. 421510 66 TABLE 2. DOCUMENTED ANADROMOUS FISH STREAMS LOCATED WITHIN AND ADJACENT TO THE PROPOSED LEASE SALE AREA. Kenai Peninsula River/Stream/Creek Salmon Species Present!/ Swanson River R, Co, P Bishop Creek R, Co, P Kenai River K, R, Co, P Beaver Creek K, Co Slikok Creek K, Co, P Kasilof River K, R, Co, P Coal Creek Co, P Crooked Creek K, R, Co, P Ninilchik River K, Co, P Deep Creek K, Co, P Kalgin Island River/Stream/Creek Salmon Species Present Packers Creek R, Co Unnamed creek north of Packers Creek Lake R, Co Unnamed creek north east of Packers Creek Lake R, Co Alaska Peninsula River/Stream/Creek Salmon Species Present Kustatan River K, R, Co Unnamed Creek north of Big River Co Big River K, R, Co, P Seal River Co Bill Creek Co Rust Slough Co Cannery Creek R, Co, P Little Jack Slough Co Unnamed creek south of Little Jack Slough R, Co Unnamed creek south of Katchin Creek Co Harriet Creek R, Co a Redoubt Creek Co, C Little Polly Creek Co, C Polly Creek Co, C Crescent River K, R, Co, P, C Unnamed creek north of Rusty Mt., Tuxedni Bay Co, C Unnamed creek northwest of Rusty Mt., Tuxedni Bay Cc Unnamed creek west of Difficult Creek, Tuxedni Bay c Hungryman Creek c Bear Creek Co, C Johnson River Co, P, C Unnamed creek south cf Silver Salmon Lakes Co, C West Glacier Creek Co Silver Salmon Creek Co, C Marsh Creek c Chinitna River R Roscoe Creek ; c Wrong Branch Trail Creek c Fitz Creek c Brown Creek PL, Cc Bowser Creek P, Cc Right Arm Creek PLC Portage Creek Poe Iniskin River P,C Unnamed Creek south of Iniskin River PL If K- King, R - Red, Co - Coho, P - Pink, C - Chum. SOURCE: Inventory map accompanying report on “Recommendations for Minimizing the Impacts of Hydrocarbon Development on Fish, Wildlife and Aquatic Plant Resources of Lower Cook Inlet. ADF&G, 1979. 67 ACE 7421511 89 zistzyb 3% TABLE 3 SPORT FISHING HARVEST AND EFFORT DATA FOR THREE KENAI PENINSULA STREAMS, 1977-1979. Kenai River Effort Dolly Year (man-days) Kings Reds Cohos Pinks Varden Rainbows 1979 178,485 8,843 16,887 15,276 127 34,687 14,644 1978 164,264 — 7,130 33,619 10,823 26,579 17,140 9,272 1977 122,138 7,985 23,196 9,537 163 7,423 4,438 TOTAL 464, 887 23,558 73,702 35,636 26,869 59,250 28,354 Ninilchik River Effort Dolly Year (man-days Kings Cohos Pinks Varden Rainbows Steelhead 1979 18,282 1,493 200 ~ 2,390 382 127 1978 14,173 1,445 88 46 1,003 217 90 1977 11,350 1,168 122 - 424 170 60 TOTAL 43,805 4,106 410 46 3,817 769 277 Deep Creek Effort Dolly Year (man-days) Kings Cohos Pinks Varden Rainbows Steelhead 1979 12,560 703 362 - 2,027 118 145 1978 13,872 804 1,383 294 3,046 127 371 1977 11,399 425 306 109 1,330 300 269 TOTAL 37 ,83] 1,932 2,051 403 6,403 545 785 SOURCE: Compiled from & id_in Fish Restoration Inventory and Cataloging Reports,“ ABFaG fg aod: ¥ TABLE 4. MARINE SPORT FISHING HARVEST AND EFFORT DATA, DEEP CREEK, 1977-1979. Effort ; Year (man-days) Kings Reds Cohos Pinks Dolly Varden 1979 35,354 4,070 1,006 387 82 382 1978 34,679 4,800 1,437 503 588 325 1977 32,218 4,470 1,133 557 305 603 TOTAL 102,251 13,340 35576 1,447 975 1,310 SOURCE: Federal Aid in Fish Restoration Inventory and Cataloging Reports 1977 - 1979. Alaska Department of Fish and Game. 69 ACE 7421513 2. Public Interests Lands: There are numerous tracts of public interest lands located within and adjacent to, the proposed lease sale area. These lands are illustrated in Fish and Game Appendix 5. Areas included in this classification have been identified by various State agencies as being worthy of continued State ownership and management. Public interest lands 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. A majority of the public interest lands identified by the Division of Parks in the lease sale area are relatively small in size but are of high recreational value. Many of the existing State parks are currently overcrowded and unable to meet the increasing public demand for recreational areas. This is particularly true along the Kenai Peninsula coast, which is easily accessible to over 70 percent of the State's population. It is the State's policy to make land available for public recreation purposes. In order to provide for adequate public recreation land, the Division of Parks has identified various tracts which would be espe- cially well suited to meeting the increasing demand for recreational lands. A number of these areas are located within, and adjacent to, the proposed sale area (refer to Fish and Game Appendix 5). The Department of Fish and Game has identified two tracts of _land encompassing extremely important fish and wildlife habitat, which are aiso located within, or in close proximity to, the proposed sale area. The lowland habitats of Redoubt Bay have been proposed as a State refuge, and legislation addressing this proposal will be under consideration in the near future. Wetlands in the Bachatna Flats of Redoubt Bay constitute one of the major waterfowl nesting areas in Cook Inlet. A wide variety of species are present, including trumpeter swans, a species particularly sensitive to human disturbance and only recently removed from the federal endangered species list. An estimated 2,000-3,000 tule geese, a rare subspecies of the white-fronted goose, also nest in this region. Thus far, the Bachatna Flats has been identified as the most important tule goose nesting habitat in Alaska. In addition to its importance to avian wildlife, the lowlands of Redoubt Bay support seasonal high densities of moose, black and brown bear. Moose winter and calve in this area, and both black and brown bears utilize these lowlands intensively during the spring. A large harbor seal hauling ground is also located at the north end of Redoubt Bay. 70 The second tract of public interest land identified by ADF&G is partially included within the boundaries of the proposed sale area in the Kenai-Salamatof vicinity. Lowlands in this area provide critical summering and calving habitat for the Kenai lowland caribou herd. A detailed discussion of this herd is contained in the previous section (Resource Utilization Factor, #2). The Department of Natural Resources has identified a parcel of watershed land located just south of the lease sale area in the vicinity of Beaver Creek. It is of particular value as a water supply source for the City of Kenai. Specific legal descriptions of these public interests lands have not been prepared; however, they are mapped on 1:63,360 scale USGS topographic maps and legal descriptions can be obtained from the appropriate State agency. Historic and Archaeological Resources: Numerous historic and prehistoric sites have been documented within, and in close proximity to, the proposed sale area. An equally large number have probably not been inventoried yet. Gaining insight into both the natural history of Alaska and the cultural background of its peoples can be accomplished through careful study of these sites, and development projects should be reviewed prior to ground disturbing activities wihch may destroy these resources. The potential impacts of oil and gas development on Critical Habitat Areas, State parks and recreational areas, public interest lands, and historic and archaeological sites include: 1. 2. Reduction in fish and wildlife populations and/or changes in species distribution as a result of habitat losses, disturbance, and oil pollution. A complete description of potential Impacts is contained in the section that discusses how the project might effect fish and wildlife populations and their habitats (Resource Utilization Factor, #2). Loss of hunting and fishing opportunities. If the lease tracts or access created by lease activities intrudes upon critical fish and wildlife habitat, it may be necessary to close the area to hunting and fishing to protect fish and wildlife populations from overharvest. Hunting and fishing closures within the TAPS corridor and the Prudhoe Bay oi] ACE 7421515 71 field were instituted in 1973 for this purpose. In 1979 the TAPS corridor was reopened to fishing, but both areas are still subject to special big game hunting restrictions. Reductions in fish and wildlife populations or changes in species distribution due to development activities could also bring about a decrease in hunting and fishing effort and success. Loss of access to recreational areas and potential reduction in the quality of recreational experiences. Where lease tracts include portions of recreation areas, lease holders may attempt to restrict access to portions of recreational areas for safety reasons or to protect facilities. Degradation of the esthetic appeal of recreational lands may also occur in developed areas. Since the saie area is largely offshore these impacts would, however, probably be minimal. Increased competition for limited resources. Population growth resulting from lease activities, although minimal is likely to bring about an increased demand for recreational areas. If new docks, airstrips, and roads become necessary, this will allow additional people access to these lands. An increase in competition among the major user groups for fish and wildlife resources of Cook Inlet is also likely to occur. Competition is already intense, and controversies over resource allocations are growing in magnitude. Additional development will probably further stress this already contentious situation. ACE 7421516 V2 Environmental Quality Factors 1. What effect will the project have on the environmental health or safety of the populace? (Department of Environmental Conservation) Analysis: This analysis emphasizes ambient and projected air quality degradation resulting from operating offshore and onshore facilities (exploratory drilling-testing, platform discharges, LNG plants, refin- eries, and oil terminals and tankers) and discusses control strategies and monitoring requirements where applicable. Additionally, water quality as it relates to human health, (e.g., drinking water contamina- tion) is discussed briefly as are safety hazards typically associated with siting LNG facilities near communities. 1. Air quality concerns and evaluation of existing situations In general, the air quality in Lower Cook Inlet is very good, with only isolated cases near Nikiski in which allowable levels for total suspended particulates (TSP) and sulfur dioxide (S09) are occasion- ally exceeded. With this one exception, no violations of ambient air quality standards have been documented in the Cook Inlet region. Table 1 identifies the allowable ambient standards in Alaska for various air pollutants. Monitoring of air pollutant emissions from existing offshore facil- ities is not required under the Prevention of Significant Deterior- ation (PSD) section of the Clean Air Act. New facilities in State waters or on land may require a Permit of Operation from the Department of Environmental Conservation (18 AAC 50.300) if the size of fuel burning equipment, incinerator capacity, and specific industrial process exceeds the criteria established in the Depart- ment's regulations. 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 qual- ity is already cleaner than existing ambient standards. The program provides for classifying areas into one of three categories, depend- ing on existing air quality (Table 2). The intent of the law is to allow economic growth in a manner consistent with the prevention of significant deterioration of existing air quality. All station- ary sources which are subject to Prevention of Significant Deterior- ation review, due to exceeding annual emission rates established by EPA, are required to install "Best Available Control Technology" as an emission limitation. The U.S. Environmental Protection Agency is the responsible agency for implementing this program. ACE 7421517 73 TABLE 1 THE RATIONALE FOR AIR QUALITY CONTROL IN ALASKA: BASIC GOALS ALASKA AIR QUALITY STANDARDS 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: cubic meter 150 micrograms per Sulfur oxides (measured as sulfur dioxide) (A) Annual arithmetic mean: per cubic meter 80 micrograms (B) 24-hour maximum 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: cubic meter 1300 micrograms per Carbon monoxide not to be exceeded more than once a year (A) (8) 8-hour maximum: cubic meter 1-hour maximum: cubic meter 10 milligrams per 40 milligrams per Photochemical oxidants 1-hour maximum not to be exceeded more than once a year: 160 micrograms per cubic meter Nitrogen dioxide Annual arithmetic mean: cubic meter 100 micrograms per Reduced sulfur compounds 30-minute maximum not to be exceeded more than once a year: 50 micrograms per cubic meter 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 help protect the health, property, and enjoyment of life of our citizens. DEC's primary objective, therefore, is to achieve the air quality standards in all areas of the State and to ensure 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 to ensure that development has minimum impact on the environ- ment. 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. DEC intends to minimize adverse impacts on aesthetics, energy, water quality, and land use as well as air quality. The State and other agencies responsible for air quality control have generally been able to work directly with large industrial sources of air contaminants to implement good control practices. These sources are considered on a case-be-case basis and enforcement of the regulations with these facilities is reason- ably clear cut. ace 7421518 74 TABLE 2 CLASSIFICATION OF AREAS INTO AIR QUALITY 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: 1) particulates; 2) sulfur oxides; 3) carbon monoxide; 4) nitrogen dioxide; and 5) ozone. The first category covers those areas not meeting one or more of the standards. For Alaska, this only includes the urban areas, including Anchorage and Fairbanks. The other four pollutants are classified into one of the three categories as follows: 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 small 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 Denali National Park and the three wild- life refuges of Tuxedni, Bering Sea (St. Matthew's 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 II. 3. Class III areas, which would allow growth to use up to an increment- al 50 percent of the National Air Quality Standards. This would provide for virtually all contemplated growth in Alaska, although there may be a discernable decrease in air quality. No Class III areas have been 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 40 CFR 51, August 7, 1980. 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. ACE 7421519 79 With the exception of Tuxedni National Wildlife Refuge Area, all locations in Lower Cook Inlet are designated 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 National Wildlife Refuge to the south of Kalgin Island, is the only region in the proposed sale area designated as Class I. Very strict regulation of industrial air pollutant emissions is required of sources which may impact the Tuxedni National Wildlife Refuge in order to preserve the pristine air quality and to protect the visibility qualities as required by Section 169 A of the Clean Air Act. Ambient air pollutant concentrations do not appear to present a major concern for most of Lower 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 in Table 1 to give an indication of the allowable increment remaining before regula- tory controls are imposed. The Department of Environmental Conservation and EPA have gener- ally 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. Enforcement of regulations with these facilities is reasonably clear-cut. An additional source of air pollutants in Cook Inlet are marine vessels burning high sulfur fuels resulting in sulfur dioxide emissions. The airshed of Lower Cook Inlet, unlike that of the stratified conditions evident in Port Valdez fjord, is character- istically 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 recom- mended guidelines of the Department are presented in the State's Air Quality Control Plan and in the land and water use quide and planning document submitted by the Department to the Office of Coastal Management. These policies and recommendations clearly describe the State's goals, and detail opportunities for coastal community involvement in abating air pollution. Contact the Department of Environmental Conservation at Pouch 0, Juneau, Alaska 99811, for a copy of the State's Air Quality Control Plan. ACE 7421520 76 TABLE 3. AMBIENT AIR MONITORING DATA FOR SUSPENDED PARTICULATES FROM KENAI'S PHILLIP'S LNG PLANT. DATA SUHMARIES (TSP) -24 hour ; ae —— 7 - Location Date Geometric High | 2nd High #values) 150 #values) 260 Data Mean (ug/m3)} (ug/m3)} (ug/m3) Recovery & comments 1 + tes Homer 1973 HI Fire Dept. 4 a 4 (0240) 1974 : 1975 190 | 2336 1032 T 14 [ 12 33% 1976 | 61 532 367 5 2 48% aE 1977 68 aH 259 5 1 47% 1978 69 341 300 ll il 3 84% 4 | Kenai 1973 17 50 37 0 0 38% Phillips | UNG Plant (0230) 1974 14 96 | 58 0 0 68% 1975. | 36 346 123 1 + 1 62% 1976 41 tet) Tiss 3 1 | 285% 1977 23 158 112 - 1 0 83% 1978 19 aL 120 | 1 0 95% oo Kenai 1973 Fire Station | | (0239) 1974 t | | 1975 48 271 157 2 1 42% 1976 35 343] 143 ‘| 1 1 75% —+ = 1977 34 176 168 2 0 68% | +— 1978 33 253 223 11 0 97% V7 ACE 7421521 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 the Department and regulated minimum separation distances between surface and groundwater resources and sewage and solid waste disposal sites, serve to greatly reduce the likelihood of contamination and subsequent public use of any contaminated water. 78 ACE 1421522 Environmental Quality Factors 2. What effect will the project have on water quality? (Department of Environmental Conservation) Analysis: Issues of water quality with respect to oi] and gas activities can be categorized 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. Deep stratigraphic test wells to evaluate subsurface geology are commonly drilled during the pre-exploratory phase. Associated with this activity are discharges of drilling muds and cuttings and onshore storage of materials. With the exploratory phase comes increased activity as onshore mobilization 1s accelerated in support of offshore drilling. The potential for fuel spills is enhanced slightly due to the higher probability of marine vessel encounters from the larger absolute volume of vessels engaged in support activity. Waste discharges from offshore exploratory rigs include drilling muds and cuttings (approximately 2,500-4,000 bb1s per well). The Lower Cook Inlet Sale 35 is projected to result in approximately sixteen explora- tory and delineation offshore wells. Sanitary and solid wastes are treated consistent with State regulations. The development and production phase constitutes the phase of greatest concern from a water quality standpoint. With this phase come the long term, continuous, and generally low-level sources of coastal pollution expected over the seventeen year life of the field. This sale is projected to result in 3-5 offshore production platforms. Waste categories unique to this phase include: 1. produced waters which are brought up with oil or gas at the drilling platform and separated before their ultimate disposal; 2. ballast water discharges from onshore treatment facilities and tankers; 3. potential oil and hazardous substance spills from marine transport and routine oil transfer 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 sedimentation of surface waters associated with construction activities. ACE 7421523 79 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 and Environmental Protection Agency permits and the associated coastal management consistency determinations; 3. solid waste disposal permits; 4. review of engineering designs for onshore facilities; and 5. approvals for oil discharge contingency plans. Regulatory controls over water quality aspects of oi] and gas operations in Cook Inlet and onshore fields vary with geographic locations and are tailored to the capacity of the receiving environment to assimilate wastes to ensure that the State's water quality standards are not violated and identified 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'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. 1. Produced Waters (oii field brines Current operating practice with regard to produced water disposal in the Cook Inlet region offers a clear example of a geographically variable discharge policy. Produced water composition, although variable depending on the specific oi] reservoir, is generally high in heavy metals, devoid of oxygen, and relatively high and variable in dissolved aromatic hydrocarbons (Table 4). Concentra- tions of phenolic compounds listed in Table 4 can exceed 2.5 mg/l. High concentrations of phenolic and other nonvolatile hydrocarbons have been documented from the Shell Oil Company treatment facilities. The proper disposal of hydrocarbon waste is a major water quality issue during the production phase of oil field development. ACE 7421524 80 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 ground- water 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 and continuation of subsurface disposal techniques is encouraged. 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 a more controversial issue. Reinjection of water to maintain field pressure and enhance recovery of oil is generally considered to be economic- ally desirable after several years of field development, as Production rates drop and the volume of water brought to the surface becomes proportionally much greater than the amount of oil. Variables which moderate biological effects include the particular circulation and flushing characteristics of the marine waters in question, depth of water, volume of pollutants, bacterial degradation and identified uses and biological sensitiv- ities in the local area. For most of the sale area tidal flushing is excellent (a parcel of water may move 40 miles during the flood tide), water depths are generally great. Given these criteria, direct disposal to surface marine waters is an acceptable practice in the majority of cases. Exceptions may include the Chinitna Bay and Tuxedni Bay areas and waters directly offshore from the Clam Gulch critical habitat area. The Nepartment has recently initiated an effluent monitoring program for dissolved hydrocarbons as a standard permit condition in order to more accurately character- ize the chemical constituents of platform discharges and their concentrations as a function of time and geographic location. Table 5 represents some of the results of the program for the ARCO Granite Point facility. All current offshore producing platforms in Cook Inlet (Figure 1) discharge produced waters by one of the following methods: direct over-the-side discharge (e.g., several Amoco platforms), or direct piping onshore to production treatment facilities before ultimate disposal into Cook Inlet. 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 6 lists the monthly cumulative volumes of produced water from some individual wells in producing fields in Upper Cook Inlet and the Kenai Peninsula during February 1980. In summary, a continuation of the currently practiced disposal techniques for produced water in onshore and offshore areas of Lower Cook Inlet appears acceptable with the exception of very shallow nearshore areas at the mouth of river systems, intertidal habitats, freshwater bodies, subtidal areas immediately adjacent to designated critical habitats, and those areas experiencing gyre ACE 7421525 81 TABLE 4. DISCHARGE CONCENTRATIONS OF TREATED PRODUCTION WATERS IN UPPER COOK INLET AND NECESSARY DILUTION TO WATER QUALITY CRITERIA ARCO Granite Point Facility?/ 4) Marathon Trading Bay Facility™/ 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 10 0.03 107} Arsenic 0.05 0 0.02 0 Cadmium 0.04 107! 0.28 10°72 Chromium 0.14 0.57 107! Copper 0.05 0.18 107! Mercury 0.002 107} 0.0001 0 Nickel 0.05 0 1 107} Lead 0.20 107! 0.2 1072 Antinomy 0.14 0 0.026 0 Selenium 0.01 0 0.017 Zinc 0.05 0 0.11 0 Petroleum Hydrocarbons2/ Benzene 1.3 1072 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 1072 0.16 107! Methylnapthalenes 0.20 1072 0.15 0 Dimethylnapthalenes 0.50 1072 NA NA Trimethylnapthalenes 0.50 NA NA NA Oil and Grease 4.2 0 2.0 0 W 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. 82 ACE 7421526 iaoLt 4 continued. / The Marathon separation and treatment facility at Trading Bay receives unprocessed petroleum liquids from Dolly Varden, Grayling, King Salmon, and the monopod platforms. Af 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). a 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. SOURCE: Adapted from the Bureau of Land Management Draft EI i ‘i erart Ets Tor Oil and Gas Lease Sale 60, Lower Cook Inlet. 1980. me S for O11 and & 42192! circulation patterns which would tend to maintain higher hydrocarbon concentrations than would normally be expected under the typical circulation regime. Areas warranting a closer look include those which support shellfish and significant waterfowl] concentrations. State wildlife refuges will be closely managed by the Department of Fish and Game. 2. Drilling Muds and Cuttings The issue of environmentally acceptable drilling mud and cuttings 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 local oceanographic circulation patterns, depth of water, sensitiv- ity of the receiving water biota, volume of discharge, 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 ferrochromium lignosulfonate. The chemical composition of "typical" drilling muds used in the Lower Cook Inlet federal OCS exploratory phase is shown in Table 7. Past and current drilling mud disposal practices for 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. Drilling muds free of hydrocarbon contamination may normally be discharged to subtidal marine waters. Discharge to freshwater and intertidal regions is normally prohibited; onshore sumps adjacent to freshwater bodies must normally be bermed or otherwise fully contained and rendered impermeable. Whereas the acute (lethal) short-term toxicity of drilling fluids to adult organisms characteristic of Cook Inlet appears low, the sublethal, long-term effects on stationary bottom organisms and sensitive larval crustaceans are poorly understood. To fill this information void, drilling mud toxicity (LC59) tests with larval crustaceans were initiated in the spring of 1980 under the auspices of the Bureau of Land Management-sponsored Outer Continental Shelf Environmental Assessment Program. 1/ Available short-term 1/Caris, M.G. and D. Rice. 1980. Toxicity of O11 Well Drilling Muds to Alaskan Larval Shrimp and Crabs. Outer Continental Shelf Environmental Assessment Program Final Report. Research Unit No. 72. 29pp. ACE 7421528 84 TABLE 5. CHEMICAL ANALYSIS OF GRANITE POINT OUTFALL, AROMATICS MG/L December 12, 1980 December 26, 1980 January 2, 198] t *Constitutent | P B T M-PX O0-X P 3B T H-PX O-X P B T M-PX = O-X¥ *Point 1 | 2.4 3.71 1.59 0.37 0.13 2.5 3.89 1.14 0.33 -0.12 2.7 0.97 0.09 0.04 7-02 Point 2 | 2.3 3.40 1.40 0.30 0.09 - = = - - - - - - = Point’ 3 | 1.7 0.21 0.09 0.04 0.02 0.21 0.05 0.02 90.03 7.01 1.3 0.02 0.02 0.01 7-02 * Constituents analyzed were Phenol (P), Benzene (B), Toluene (T), M-P Xylenes (M-PX), O-Xylenes (0-%} * Location of points on diagram attached - Sample not analyzed 62STZ24L 3DV . roa rr40, 42, 44.53 a, on a> 54 cura Meo, 37 an Fe 7 KEY Industrial or mimnicipal outfall @ gy Stream with numerous placer clains Landfill or dump vars lode claim boundary Area of indiscriminate dumping High concentration of mining claims Sewage lagoon Petroleum extraction and handling site Raw sewage disposal area QQ Nometallic mineral mine (coal, gravel, etc.) Placer mine % = Boat harbor or dock Placer mine discharge GBB ivg handting, transfer or storage site = = = Boundary of timber sales, clearcuts, and other developed Forest Service lands FIGURE 1. TABLE 6. ALASKA INOIVIOUAL WELL PRODUCTION FOR FEBRUARY 1980 REPRESENTATIVE PRODUCED WATER VOLUMES - COOK INLET Aro 200 ann or ONN SHUT~IN - - OIL FIELOS = - AN ASAE ROO CORO Ona OMe ear w SAseTeAse DRONE NRO WO Dae 4 DODOLHO—NT TOME 2O4D ONE OD aon OG eee nee whet cer teen exrars Me te TR OAT ATO OmM nnn 8 Ont NOryet NBDOOM F-04FOFMO oe el XO NOYmD SH m4 MOnt = ooo > wee - aoe oe o NNN ~ Noe as a anwo4O4e AMMOR SNS MMA ror wo LAROOAMN ONAN ONNOMRA 2am e ANMERONO DONMNAT TS 4+0RORO mann < weenerne ee te eee one ¥ YNNNOOTO DO HOO MANAMORT wera ONKR tT tH0— PD AMA TR OIN MO wow . NOMA O a Ne WON XE ote awe > DS ae a “4 ° OOWLTONARE ONIN MAINO OM ons Y @fnnERsos DAF TOMOADTNOW Ont YON RMYOOe ONENOOMMOTAND mon OC te reeeene tee ee eee amMDosOOND DMNUAMINOODR ONO aa 2 th OMe RADONNEONNTND oon Fo Onan On OOMNA MEAN AHO nom > weer we . ween > eee Oo OREM eee “ NNR OW wun ge RiNnenoraND HOME DINO MIAIAO “0 MOAN ATTRO DANAE DOL MTMAD ae EF seeveeeee eee eee e eee ee eee 1 omoN@wonwn OO OR LAR NORM Ont - @NNO RR ” o att tt oO a MRODALTAAS WFONSON@Oror-ooN Ono e WeNROnRaS DONOOF DODDODOM— ane DO AMmAMAMmMM AME NNN ram ° “ HK PRRAeAAMD DAAADAAAAAAAOH AO SZ wueeveeveveuy ANNAN NNN = ADOORNNONMM DODOMARSHMONnOOD Mtns rHN L CDBONONSCHHD OMMNOINRINDOOTRE Toon BY CQOANEMRAR HRA MaNaNnoMoaces yoranin = IMANNAMAR IA MRAM NT ORRNININ NenIN® ” = N iAW nN oo ae < tt w ° = MODNONYTM $4 RMYOROORNOMODGR athNAR JP AMNONRRA Ft RMR NARY TONER OOO NANORe D FOLARDOM NN B® NOHHDRONTMOO NNRDOR O eee wee oe ee ee wee ~ Atta NOt CD mM aN oO am OO STINT ef ANN NM OO AN a NNN - ae ) Br eek - - = ae ” «4 2 z z => > 5 = TYAN ONMr Nott ~ OMOOMaNMNODEROMD ~~ ONOKKe J HIOOMANMMODT + OOM TOCDOTOADRE FAOORRS D XCOLNARAOINN ACOTAMATNONOANGO Z@LQ0LO Dee nne een ene Dene ene nn anee ean nea SC NOSR RMN OGRE FAMAEONONOAMM BODOG Jon ARNOD oO NN me 00 Y AMD - Zz t+ Zz 4 ~ on com s . ° HHe40 °o “4 < oa as « Ou On e ar oF J4 ssa ss4 aac a< aaa BRE Reo Her 2 000 oon 900 ° FRE FrO Fer ago °o 9 0a a oa a a ws ee Oo fx wio wso AANROTANMLNONAORMN FMOFNMSHONOZ<ANMONDD ttt ANNAN LOH AMM A DAMM MAMMA LO LHMAM OW SZ det iwazzr ried tear te pwasZzit bwar OaXYX¥KMKKKI WEKODOOKKKOOKUOXYS WEROOXI WwW xO xO xO ww eo e ou « @ oO we we 285 a oe 2 DISREEEEERERR OSZRREEEREEEREEEEF RSEEEE ZEOseraeen OOR ES DOS w 2222222222 4 Z2z2zz7222A72ZLZZS w ZzzzZ QT 5555553555 FY55555355555555 FYI555 <2 >> ee >>> >> 2 eee eee ree >>> oo >>> eOdddandddaed COMKaKeaeaneeae = COnd WULOADODOOAG WaMaMAaasansass woaae SS IOQOOQVOOVOD —_ HIVOOOLOOHLOOLOOY = HH AYO ZanZezZZZ2z2Z222 KVV2Zz2ZZZ2z2z72ZZ MHA STZ Onn OHHH Onn jae 900000000 & 0000000000000 «000 JI2zadadaaqaqaedt | D2ZAddddacacaqqqq | SZad< WlOrerretertee LOrrtrrratnrerrxe LOcae FERRER ERR RR RSE RRRRERERERER ORE xz “Zz “Zz s <a> <> YY 2 z “2 ’ 8 , 4 , 127,508 6759423 747,720 2339425 808,768 190994624 NN no mo Or NW at TH TO NN NN mAD MOMN OAH ODDO = aN LOM too OD OOM ADO MAN nee ee TOM HUM. “ - omnm +00Mm NON FaOrm RNGEMNTO wee eee OMmMn tine maN@ N = ° ° 2 a < 4 4 Jun ™ < <<40 °o e ee oO cow ° - eRe met a wo tiwaz Zz Yo AMAD < tna w tiwa VU nord «as - « ao ao o o °o “oO b b 4 o a) <z z ze<«< oo =) ao Tenn x BRanr 4 Onan Oo rer O ° tt 4 COgrerr can Oo = oumm 34M WOOLY 300 JOrrTs wrTt x a 5071677 901,933 147,855 76.55 532 29 982 6,019 Alaska 0i1 and Gas Conservation Commission, February 1980. SOURCE Substance Attapulgite clay Bentonite clay Caustic soda 88 Ferrochrome lignosul fo- nate ZEST 24, 30y Organic Polymer TABLE 7. COMPONENTS OF DRILLING MUDS WHICH ARE NORMALLY DISCHARGED INTO THE SEA. Source Use Quarry To cause gelling of salt water based muds Quatry To cause gelling of freshwater based muds Electrolysis For pH of sodium control chloride brine Digestion of Dispersant wood by sul- and emulsifier fonate process removal of cel lulose; 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 montemorillonitic 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 6S €€ST2yl 3dV TABLE 7 continued. Substance Source Proprietary Soap making defoamer process Barite Mined as the mineral Gypsum Mined as the (Plaster of mineral Paris) Tennin Extracted from the Quebracho tree Carboxymethy] From stalks cellulose and stems of plants Sodium acid Reaction of pyrophosphate sodium with pyrophosphoric acid Siderite Mined as the mineral Use Composition Defoamer Aluminum stearate Al (Ch, (CH, )16) 3 Weighting Barium sulfate agent Ba S04 Flocculant Calcium sulfate and calcium CaS04.2 H20 source Thinning agent Complex organic compound, 5(C14H909) .C6H70 Fluid loss Complex organic agent polymer Thinning Na2H2P207 agent Weighing FeC03 agent Known Hazard NONE It is recommended that public water supplies contain no more than 1 mg/1 barium Potentially hazardous NONE Potentially hazardous NONE NONE Ub Hestzbl 39V TABLE 7 continued. Substance 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 carnallite Sodium Passils Precipitate biocarbonate carbon soluble dioxide thru calcium, pH a solution of control normal carbonate Composition HCHO C6CISOH Potassium chloride KC1 NaHC03 Known Hazard Potentially hazardous Potentially hazardous NONE NONE SOURCES: Rogers (1963), Robichaux (1975), Land (1974), USDI (1975c,d,i). laboratory toxicity tests and direct field examination suggest a hypothesis that the major and very localized detrimental effects from drilling mud and cutting disposal results 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 adequately accommodate the rate of input projected from new offshore facilities with little or no water quality degradation. Ballast Water and Refinery Effluents and LNG Effluent Discharges Water treatment facilities which accept ballast from oceangoing tankers are presently located at Nikiski and Drift River in Cook Inlet. Absolute volume discharges 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 was initiated in 1981 as a permit condition to Chevron's refinery and ballast plants at Nikiski by the Department. This program is 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. The aromatics are generally acknowledged as the fraction of most concern based on toxicity results. This information will ultimately be useful in deciding whether any stringent controls (e.g., through an effluent limitation) should be imposed on the discharges. Pre- liminary analysis of Chevron's and Cook Inlet Pipeline Company's ballast water indicates 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. These levels are much lower than those aromatic concentrations present in the Alyeska ballast facility in Port Valdez, where average concentrations of 6,000 ppb (6 mg/1) are reported for the effluent. Data from refineries in Cook Inlet indicate a higher concentration of aromatic hydrocarbons than for the adjacent ballast facilities. 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 rates and threshold temperature increases in marine waters. ACE 7421535 91 Solid Sanitary and Oily Waste Disposal Solid wastes generated from offshore drilling in Cook Inlet have typically been disposed of at the Kenai landfill (see Figure 1 for Upper Cook 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 oil spill contingency plan. Oily wastes from onshore processing facilities are generally accumulated in waste lagoons at the plant site. While the higher 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. Sanitary wastes generated from offshore facilities must be treated to secondary standards. Onshore generated wastes can be effectively accommodated using existing treatment facilities in communities. 92 Environmental Quality Factors 3. What are the potential sources of oi] pollution? What are the current oilspill prevention and cleanup capabilities? (Nepartment of Environ- mental Conservation) Analysis: 0i1 and gas development has inherent oi] pollution risks associated with it. These risks pose hazards to the abundant fish and wildlife resources in Lower Cook Inlet and stem from a variety of activities linked to the lease sale. Each major phase of field exploration and development presents its own specific pollution potential, whether from exploratory rigs, production platforms, oi] terminals, or tanker vessels, and represent a significant portion of the oi] annually spilled into the world's oceans. Each of these systems will be examined in further detail in the paragraphs which follow. The exploratory phase of oil and gas development introduces the potential for an oi] well blowout which may result in an extremely large oil pollution incident. Although blowouts during exploratory drilling that result in an oil spill are rare, 1/ resulting oilspills represent a significant threat to the natural resources of an area, particularly nearshore, and should, therefore, be considered in any review of a lease sale proposal. 2y 1/One well blowout which may have discharged oi1 into Cook Inlet, occurred on August 21, 1962 at Pan American's Cook Inlet State No. 1. According to the August 28, 1962 issue of the Anchorage News, the well flowed both oi] and gas until it was finally capped. Records on file with the Alaska 0i1 and Gas Conservation Commission indicate that this was a gas blowout. 2/Numerous studies have been completed, or are currently being conducted, which document the short- and long-term effects of oi] spills on biological resources. A few recent studies on the long term chronic effects include: Gundlach E., L. Thebeau, and D. Domeracki. 1981. Persistence of Metula 0i1 in the Strait of Magellan Six and One Half Years After the Incident. Research Planning Institute of Columbia, South Carolina. 61 pp. Cabioch, L., J.C. Dauvin, and F. Gentil. 1978. Preliminary Observations on Pollution of the Sea Bed and Disturbance of Sub- Littoral Communities in Northern Britany by 0i1 from the AMOCO CADIZ. Mar. Poll. Bull. 9(11): pp. 303-307. Johansson, S. 1979. Impact of 0i1 in the Pelagic System. In the TSESIS 011 Spill. A Cooperative International Investigation, Article 3, 15 pp. Asko Laboratory, University of Stockholm. Sweden; Swedish Water and Air Pollution Research Institute (IVL); Spilled 011 Research Team, NOAA, U.S.A.: Energy Resources Company Inc., U.S.A., Elmgred & Westins, Eds. Sanders, H.L., J.F. Grassle, G.R. Hampson, L.S. Morse, S. Garner-Price, and C.C. Jones. 1980. Anatomy of an Oi] Spill: Long-term Effects from the Grounding of the Barge FLORIDA off West Falmouth, Massachusetts. Jd. Mar. Res., 38: pp. 265-380. 93 ACE 7421537 Due to a variety of factors, a blowout in Lower Cook Inlet could have far-reaching impacts. Because of the relatively narrow width of Cook Inlet, the extreme range of tides, circulation patterns, and the presence of swift currents, a spill could spread very quickly to other regions of the Inlet (see Figure 3 for circulation patterns). Attempts to contain and cleanup the spill would probably be severely hampered because of these factors. If the blowout occurred during winter months, the problem would be compounded due to the presence of ice. This ice can extend as far south as Kamishak Bay, can be very thick in Upper Cook Inlet during the cold winters, and can cause substantial problems in cleanup activities. The technology to clean up oi] in ice and fast currents 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 if a spill occurred from a blowout releasing thousands of barrels of oil per day. Commercial and sport fishing, subsistence, recreation opportunities, beachfront businesses, and shipping could be affected by a major blowout. Oil discharges that occur at exploratory rigs and supply bases are another important and prevalent source of oil 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 biologi- cal resources of a coastal area. In the vast majority of cases, these spills occur as a result of human carelessness and poor mainten- ance practices. By enforcing strong preventative measures, most of these discharges can be eliminated. The production phase of oi] and gas development encompasses a large group of facilities and includes platforms, refineries, oil terminals, pipelines, and offshore loading systems. The major 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 be prevented. Spills from storage facilities such as refineries and oi] terminals result when valves or drains are inadvertently teft open, interconnecting pipelines break, vandalism occurs, or the storage tanks rupture. Again, most spills can be greatly reduced with proper controls and practices. The marine transportation aspects of oil development entail more varied and complex risks. Although human error is responsible for a great number of oil spills, other causes also come into play. Examples of these include equipment failures, groundings, collisions, rammings, weather and hydrographic conditions, other vessel traffic, and the absence of Coast Guard operated vessel traffic systems (VTS) (see Figure 4 for details). ACE 7421538 94 —-—-—® Circulation suggested by limited or indirect evidence ei é x (ANCHOR PT. Figure 3, Net surface circulation in Lower Cook Inlet, based primarily on data collected during the spring and summer seasons. SOURCE: Burbank, D (ed) 1977. Environmental Studies of Kachemak Bay and Lower Conk Inlet. Alaska Dept. of Fish and Game, Marine ani oastal Habitat Section, Anchorage, Alaska. 95 ACE 7421539 ESTIMATED REDUCTION IN ACCIDENTS BY USING “VARIOUS VESSEL TRAFFIC SYSTEM COMPONENTS ‘ (CUMULATIVE) PERCENT REDUCTION IN VCSSEL CASUALTIES © 109 90 BASIC SOPHISTICATED . — 80 . SYSTEMS . SYSTEMS Figure 4, SOURCE: Engineering Computer Optecnomics (ECO). 1976. An Assessment of the Proposed Prince William Sound VTS. 96 ACE 7421540 19s 15a 153° Gk acts geese Ms, ad E COOK INLET TIDAL STREAM CHART 5 Hours before HW Anchorage The figures give the mean neap and spring rates in tenths of a knot, thus: 18,37 indicates a mean neap rate of 8 knots and a mean spring rate of 3.7 knots (bank) 0,0 to 04,09 | 05,10 to OG/9 ~~ 10,20 to 19.39 — 2040 102959 —-~ 3060 ond greater Seldovia FORT GRAHAM A npn nr PI a arp or lage hae Figure 5. —_—_— SOURCE: Cook Inlet aetoutne Or anization (CIRO). 1979. CIRO Operations Manual. Crow Maritime Services. Anchorage, Maske os 917 ACE 7421541 — —_—__—_ ia SP i 1 a OOK INLET TIDAL STREAM CHART / Hour ofter HW Anchorage The figures give the mean neap and spring rates in tenths of a knot, thus: 18,37 indicates a mean neap rate of 18 knots and a mean spring rate of 3.7 knots (bank) OO to 04,09 > 05/0 to 0919 ———- = 10,20 to 19,39 —~ +2040 10 29,59 — += =30,60 and greater 6r Figure 6. ACE 7421542 SOURCE: Cook Inlet Response Organization (CIRO). 1979. CIRO Operations Manual. Crowley Maritime Services. Anchorage, Alaska. 98 Highest Tide 33.3 Mean Higher High Water 29.0 Mean High Water 28.3 Mean Tide Level 15.3 ” Mean Low Water 2.2 Mean Lower Low Water 0.0 Lowest Tide 76.5 Mean Range 26.1 Diurnal Range 29.0 0 Extreme Range 42. nn a ° Highest Tide meen Higher High Water 19.8 ve Mean High Water 19.b “ - Mean Tide Level 10.4 = 2 . Mean Low Water 1.6 ‘ Mean Lower Low Water 0.0 e Lowest Tide 6.0 Mean Range 17.5 Diurnal Range 19.8 Extreme Range 32.0 Highest Tide . Mean Higher High Water yy Mean High Water Mean Tide Level Mean Low Water Mean Lower Low Water Lowest Tide Mean Range Diurnal Range Extreme Range ren SUG RVems @SOnuuUorw VorUonavoas Figure 7. Cook Inlet Tides in Feet ACE 7421543 Source: U.S. Army Corps of Engineers. 1974, FEIS: Offshore Oi] and Gas Development in Cook Inlet, Alaska. Anchorage, Alaska i TABLE 9, ICE CASUALTY INCIDENTS COOK INLET 1971-74 DATE LOCATION ACCIDENT 1-23-71 | Cook Inlet ] Ice damage to tug rudder 2-5-71 Between Anchor Tanker collided with ice Point and Drift River 1-14-72 | Drift River Tanker emergency disconnect due to ice flow; spilled 1/2 bbl crude 1-25-72 | Cook Inlet en route Tanker collided with ice to Drift River 1-27-72 | Cook Inlet off Kasilof | Tug collided with ice 1-27-72 | Kachemak Bay Vessel pushed ice through stern while mooring 2-4-72 5 miles south Rig pusher and barge collided in ice Cape Ninilchik 2-10-72 | Anchorage Port Vessel collided with dock 3-7-72 Cook Inlet en route Vessel collided with ice Homer to Drift River 3-16-72 | Collier's Dock, Kenai | Barge collided with ice; caused by ice flow 3-21-72 | Cook Inlet Tanker collided with ice 3-24-72 | Near Platform "Baker"| Rig tender collided with ice and fixed object 4-4-72 Collier Dock Vessel collided with ice and dock 2-14-73 | Drift River Tanker emergency disconnect due to : ice flow; spilled 10 bbls crude 3-23-73 | Cook Inlet Ice damaged vessel! fuel tank; spilled 350-400 gal. diesel 3-10-74 | Cook Inlet Tanker emergency disconnect due to ice flow; spilled 8-10 bbls crude (From the files of Captain of the Port, U.S. Coast Guard, Anchorage.) ACE 7421544 100 Of the several factors that contribute to marine transportation pol- lution risks in Cook Inlet, one of the more important is the naviga- tional dangers that exist in the region. Tides range as high as 40 feet and currents attain maximum velocities of up to 10 knots (see Figures 5-7 for Cook Inlet tide and current charts). Severe tides and currents, along with fierce winds, blowing rain and snow, and ice cover over the winter months, make navigation a hazardous under- taking (Table 9). In addition, Upper 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 oil terminal at Nikiski and spilled 9,600 barrels of jet fuel. Similar accidents could happen to other tankers as a result of the Lower Cook Inlet Sale 35 since existing marine trans- portation routes and facilities will be used. The dumping of dirty ballast from tankers can be a problem in the marine transportation of petroleum unless sufficient onshore treat- ment facilities are available. Ballast treatment facilities currently exist at Drift River and Nikiski. The extent to which these two facil- ities will be able to handle additional ballast from vessel traffic generated by the lease sale will largely depend on the size of the tanker fleet. The ballast-deballast cycle involves placing seawater 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 of the visible sheen test. This process usually results in dirty ballast being discharged at some point in the vessel's voyage. Although Alaska law prohibits the dumping of dirty ballast in State waters, sometimes this does occur 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 water relatively close to the loading terminal. If illegal discharging becomes a chronic problem, substantial oi] pollution can result. Between 1969 and 1973, the U.S. Coast Guard estimated that about seven MMbbIs of oil entered the worlds ocean annually from this ballast source. ACE 7421545 101 Status of existing regulatory controls over cil spills Existing State authorities in the field of of’ and hazardous sub- stances spill] prevention and cleanup lie jn AS 46.03 and AS 46.04. These statutes prohibit the discharge of oi] into the environment except under permit, recuire that comprehensive oi] spill contingency plans be developed for ali tankers, barges, oil storage facilities with a storage capacity of greater than 10,000 barrels, and offshore exploratory rigs and production platforms operating in the State, prohibit the discharge of oily ballast in State waters, and require the reporting of all oil and hazardous substance spills. There are also criminal and civil penalties for unlawful oi] discharges and proof of financial responsibility requirements for the aforementioned facilities and vessels. Vessel design and safety equipment are regulated by the U.S. Coast Guard (USCG). Alaska's 1976 tanker safety law was struck down by the U.S. Federal Court as being unconstitutional because it 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 USCG to establish strong regulations in this area. The State will continue to support the establishment of federal laws and regulations governing the safe operation of tanker vessels and oi] terminal facilities. The State regulations concerning contingency plans for terminals, barges, tankers, exploratory rigs, and production platforms are important in that they require plans to be designed for Alaska's unique environmental conditions and logistical problems. The Department 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. Any new tanker or terminal operations in Cook Inlet, however, would not necessarily be covered by CIRO. Current State regulations also contain specific requirements for the reporting of oi] and hazardous substance spills. In order to improve Statewide spill reporting, a toll-free Zenith 9300 reporting system was initiated by the Department four years ago which allows anyone with access to a telephone a means of reporting an oi] spill anywhere in the State. The report is forwarded to the Department where it is investigated, if necessary. This system has worked fairly well but may require some modification in the near future as the State gains more experience with it. There have been several occasions in the past where oil slicks in Cook Inlet have been reported to the Department and upon investigation, no source was found. It has been suspected that many of these unexplained ACE 7421546 102 spills have been ballast discharge or tank washings from tankers involved in 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. ACE 7421547 103 4. What Environmental Quality Factors rovisions exist for environmental monitoring, surveillance, and quality control? (Department of Fish and Game) Analysis: The State Departments of Natural Resources (NNR), Environmental Conservation (DEC), and Fish and Game (DF&G), the 011 and Gas Conservation Commission (AOGCC), and several federal agencies have existing environmental monitoring, enforcement capabilities, and responsibilities for certain sale-related activities, as follows: 1. Department _of Natural Resources The Department of Natural Resources has the responsibility for the environmental monitoring, surveillance, and quality control provisions of State oil and gas leases. The chief means by which these performance standards and stipulations are established is through the lease terms and conditions. The Division of Minerals and Energy Management, which issues oi] and gas leases as the Department's subsurface manager, is responsible for incorporating terms and conditions of the lease and 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 within the Department of Natural Resources. The Division of Forest, Land and Water Management assumes the responsibility of ensuring that 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 oii and gas lease operations to ensure compliance with terms and conditions of the lease. The Department has acquired resources in order to staff an effective field monitoring and surveillance effort to ensure compliance with lease terms and conditions. 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: 1) compliance monitoring for enforcement purposes; 2) effluent monitoring by the permittee to characterize the specific waste discharged, and 3) receiving water monitoring, including ACE 7421548 104 physical, chemical and biological responses to waste discharges. The specific authority for the Department to require such pro- grams lies in the Federal Clean Water Act and Title 46 of the Alaska State Statutes. Compliance monitoring is occasionally conducted by regulatory agencies (Department of Environmental Conservation 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 taken only 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. Similar permit requirements will be in effect for Lower Cook Inlet. The specific parameters measured will generally include one or more of those listed in the Alaska Water Quality Standards established by the Department. Typical standards include petroleum hydro- carbons, dissolved oxygen, sediment, pH, and temperature, all of which have allowable limits or water quality criteria estab- lished for each particular use of fresh and marine waters (e.g.., 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 the previously defined mixing zone around the discharge point. This latter 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, juvenile salmon, and zooplankton have been conducted on platforms in Lower Cook Inlet. These studies were sponsored by the Atlantic Richfield Company and Union Oi] Company of California. 1/ Effluent bioassay monitoring at major industrial facilities is presently being evaluated by the U.S. Environmental Protection Agency for suitability as a standard monitoring requirement in National Pollution Discharge Elimination System (NPDES). permits. A/Miller, R.C. et al. 1978. Drilling Fluid Dispersion and Biological Effects Study of the Lower Cook Inlet C.0.S.T. Well (ARCO). Dames & Moore, Anchorage, Alaska. Johnson, R.G., and S. LeGore. 1976. Physical and Toxicity Bioassay Studies in Cook Inlet, Alaska During Drilling Operations, June-August 1976. (Union O71 Company of California) NALCC Environmental Sciences, Northbrook, Illinois. ACE 7421549 105 The permit requirement of monitoring biological and chemical conditions of receiving waters in Lower Cook Inlet has been required at the Collier Chemical Plant (ammonia, pH) at Nikiski. The efforts of the Outer Continental Shelf Environmental Assess- ment Program have included specific documentation of circulation patterns, geological environment, and background levels of selected hydrocarbons and heavy metals. None of these efforts have, how- ever, focused on a specific industrial location. It is likely that effluent chemical monitoring programs and biological assays (site specific) will be required for operators discharging produced waters and refinery and ballast effluents in Lower Cook Inlet. The water quality monitoring and surveillance of onshore oi] 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 the 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's Southcentral Regional Office maintains an active tanker inspection program for loading berths at Nikiski 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 will be conducted in Lower Cook Inlet. Current State regulations also contain requirements for the reporting of oi] and hazardous substance spills. ACE 7421559 106 3. Department of Fish and Game The Department of Fish and Game's Habitat Protection Section issues permits for activities in specified anadromous streams under AS 16.06.870, on State Fish and Game Refuges under AS 16.20.060, in designated Critical Habitat Areas under AS 16 20.260, and has responsibility for protecting the habitats of endangered species on State lands under AS 16.20.185. The Habitat Protection Section currently performs limited environ- mental monitoring, surveillance, and quality control on activ- ities permitted under Title 16 in conjunction with other permit- ting tasks and in response to requests by other agencies and citizens. Additional monitoring and surveillance of activities covered by Title 16 is performed by the Fish and Wildlife Protection officers of the Department of Public Safety. However, present funding and manpower limit monitoring and surveillance to approximately 30 percent of the permits issued. Monitoring and surveillance of fish and wildlife populations is performed by the Department's Game, Commercial Fisheries, and Sport Fish Divisions. Annual surveys and counts 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 popuiations and in developing hunting and fishing regulations. This information is, however, only of limited usefulness in detecting changes in the abundance and distribution of fish and wildlife resources because 1) many of the index areas are not located in the areas where development impacts will occur, 2) in the short-term, it is extremely diffi- cult 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, smal] 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. Alaska 0i1 and Gas Conservation Commission The Alaska 0i] and Gas Conservation Commission (AOGCC) is an independent regulatory body with primary authority over actual drilling operations. Through review of the Permit to Drill application submitted by companies, AOGCC ensures the technical adequacy of a specific drilling operation. The AOGCC's regulations specify minimum blowout prevention equipment, strength and proper cementing of casing, adequate pressure ratings, and formation pressure tests. Petroleum inspectors within AOGCC witness the testing of blowout prevention equipment. 107 ACE 7421551 5. 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 (effect of platforms on navigation), the U.S. Army Corps of Engineers (discharge of dredged and fill material in U.S. waters and contiguous wetlands, obstructions and alterations of navigable waters), the Environmental Protection Agency (air and water quality), the National Marine Fisheries Service (marine mammals and some endangered species), and the U.S. Fish and Wildlife Service (endangered species and migratory birds). 108 ACE 7421552 1. Risk Factors Does the project involve technological, environmental, financial or economic factors which have a high degree of uncertainty or risk? (Department of Natural Wesources} Analysis: For over two decades the Cook Inlet area has experienced oi) and gas exploration and development, on land as well as offshore, The history of related spills and environmental effects demonstrates that both the amount of oi] spilled and the number of incidents involving fish and wildlife populations have declined significantly in recent years. This trend should continue and generally improve with proper resource agency review of Plans of Operations and the application of mitigating measures and activities related to oil and gas leasing in Lower Cook Inlet. There is a substantial degree of economic risk to the operator in all hydrocarbon exploration projects. The odds against discovering commercial quantities of oil and gas 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 the risk of a major oi] spill and the improper siting of lease facilities. A major oi] spill in the marine waters of Lower Cook Inlet, in the coastal wetlands, or in an important anadromous river, could affect large numbers of fish or wildlife. Major spills (greater than 1,000 gallons) could result from loss of well control, pipeline breaks, tanker accidents, failure of storage tanks, and human error. Circula- tion studies conducted by the Department of Fish and Game and others indicate that oi] spilled into marine waters of the lease area could be transported over large distances within a relatively short period of time. Fishermen experience a typical drift of 16-20 nautical miles in the vicinity of the Midchannel Rip between the latitudes of Kenai and Ninilchik, and movement of over 30 nautical miles in length during a single ebb tide (about 6 hours) has been documented. A continuous spill occurring over an entire flood or ebb tide has the potential to produce a slick more than 10 nautical miles wide or long. Under typical weather and oceanographic conditions prevailing within the lease area, it is likely that at least some of the oil from a large spill would come ashore in a relatively short period of time. Large quantities of oil could also concentrate within the rip zones which are considered prime fishing areas by commercial drift ACE 7421553 109 net fishermen. Although the statistica? probability of spills from those sources is low, spills having at least 2 short-term effect on fish and wildlife resources have occurred in Cook Inlet. To minimize the envionmental risk, operators are required to comply with a multitude of State and federal laws that were designed specifi- cally to reduce the number and impact of oil spills and to protect the environment. Prior to conducting any exploratory or development operations, operators are also required to file, with the Department of Environmental Conservation, a detailed Oi] Spill Contingency Plan and Countermeasure (SPCC) Plan whenever offshore drilling or other lease operations requiring a large (greater than 10,000 bbls) oi] storage facility are planned. Operators will be required to address such concerns as meteorological conditions, protection of historic and archaeological sites, sensitive environmental areas and oil spill cleanup equipment inventories in the contingency plans. Prior to conducting any exploratory or development operations, operators must submit a Plan of Operations for approval to the Department of Natural Resources, Division of Minerals and Energy Management and a drilling or workover proposal to the Alaska Oi] and Gas Conservation Commission (AOGCC) prior to commencing drilling operations. The AQGCC will analyze the adequacy of the proposed casing design, surface hole diverter system, blowout prevention equipment, and surface and downhole safety valves. Petroleum inspectors from the Commission will visit each rig to function test and pressure test the blowout prevention equipment and periodically visit each well to test the safety valves. Other activities, such as roads that block the flow of water across wetlands, and the siting of facilities with high levels of noise and disturbance in an important waterfowl nesting, or caribou calving area, can also have a significant effect on wildlife. The major risk associated with these activities is the necessity of siting a road or facility in an essential or sensitive fish and wildlife habitat. The impacts of these activities, however, can be predicted with a reasonable degree of certainty. ace T42155* 110 2. Risk Factors To what extent is the existing data base adequate to answer the previous risk question? (Department of Natural Resources) Analysis: The State's data base is inadequate to completely assess the Financial and economic risks associated with the project, even though 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 existing data base is sufficient to predict that a major oi] spill would have significant effects on fish and wildlife and their habitat, and that statistically, a percentage of the oil produced will be spilled. As of January 1, 1980, the Alaska Oi] and Gas Conservation Commission estimated Upper Cook Inlet remaining reserves to be 202 MMbb1s of oi] and 3,519 Bcf of natural gas. The discovery and produc- tion of gas would not, of course, contribute to an oil spill. Oi] spill statistics indicate, moreover, that the chances of a major oi] spill during the exploratory phase of oil 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, in comparison, relatively high. In 1969 and 1970, major spills at Santa Barbara and on the Gulf of Mexico OCS focused industry and public attention on the environmental aspects of oi] spills. As a result, industry emphasized the prevention of oi] spills, accordingly changed their operating procedures and made use of new technology to increase the environmental safety of their Operations. Federal and state governments instituted new regulations and increased the size of their inspection staffs. Since that time, the reporting of oi] spills has increased while the subsequent volumes spilled have decreased. Therefore, only oil spill data from about 1970 to the present time can be used with any degree of confidence to accurately reflect current and future trends. In Cook Inlet, between 1971 and 1980, oi] spillage by the petroleum industry is estimated to have been approximately 508 bbIs. This figure does not include terrestrial spills. It does however, include oil spills directly attributable to exploration, development, produc- tion and transportation of crude oi]. Also included are any spills which may occur during the transportation of refined products directly related to, or in support of, industry operations in the Cook Inlet Region. This does not include spills which occur while transporting refined petroleum products to local Alaska communities or out-of the State. Thus, while the possibility of a major spill due to a drilling mishap, production equipment failure, pipeline break, or human error could occur, the odds of such an event are very low. Table 1 indicates the oil spill volumes and the incidence of spills in Cook Inlet between 1971 and July of 1980. 111 ACE 7421555 TABLE i OIL SPILL VOLUME AND INCIDENCE OF INDUSTRY RELATED SPILLS IN COOK INLET WATERS, 1971-1980. (ADAPTED FROM TABLE COMPILED BY ARCO OIL AND GAS COMPANY) Oil Industry Spill Volume Year _(barrels) Incidents 1971 75.0 10 (15) 1/ 1972 22.3 11 (1) 1973 131.3 12 1974 150.0 3 (4) 1975 23,1 13 1976 75.9 15 (4) 1977 9.7 12 (1) 1978 14.2 9 (1) 1979 4.0 5 1980 2/ __ 2.5 3 Totals 508.0 93 (26) 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, 1980 - July 9, 1980. Note: Data in the above table may be adjusted in the future as the result of efforts by the U.S. Coast Guard, ARCO Alaska, Inc. and the Alaska 0i1 and Gas Conservation Commission to more precisely determine oil spill incidents and their volumes. ACE 7421556 112 Measures to mitigate the potential impacts of a major oil spill on fish and wildlife resources are contained in the Recommendations section under the Resource Utilization Factors. 113 3. Risk Factors Are there external factors (e.g., national or international) which igure prominently in the success or failure of the project? epartment of Natural Resources) Analysis: The attractiveness of extraction and development of Alaska's hydrocarbon resources is enhanced by any action that increase the real price of oi] and gas and/or increase the uncertainty of supply 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 oi] and gas companies will likely be willing to pay a higher price for a reliable, stable supply. ACE 7421558 114 Miscellaneous Factors 1. Is the proposed project or action compatible with local and State plans and policies? (Department of Community and Regional Affairs) Analysis: Since the proposed project is assummed to rely largely on cant taued use of existing industrial facilities in Kenai Peninsula Borough, it appears to be compatible with local and State plans and policies which have been articulated to date. 2. Miscellaneous Factors What governmental (State, federal, local) approvals, permits or Ticenses are required? Analysis: (Department of Environmental Conservation) 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). The Directory of Permits lists State, federal and local permits in Alaska. This booklet serves as an inventory and gives general information on the certifications, permits, approvals, plan reviews, licenses, etc., that a developer may need for his project. This booklet can be obtained at any Permit Center listed below upon request: LOCATION AND MAILING ADDRESSES OF PERMIT CENTERS Regina Sanders Alaska Permit Information Center Department of Environmental Conservation 437 "E" Street, Second Floor Anchorage, Alaska 99501 Telephone: (907) 279-0254 Carmen McCumby Alaska Permit Information Center Department of Environmental Conservation 675 7th Avenue, P.O. Box 1601 Fairbanks, Alaska 99707 Telephone: (907) 452-2340 Joan Hughes Alaska Permit Information Center Department of Environmental Conservation Pouch 0, 3220 Hospital Drive Juneau, Alaska 99811 Telephone: (907) 465-2615 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 listed permits can normally be obtained in ninety days under optimal conditions. The only exceptions are the NPDES permit and the U.S. Department of the Army Corps of Engineers 404 permit. With respect to the NPDES permit, it is the State's under- standing that if an operator can keep waste water discharges in the ACE 7421560 116 TABLE 1. STATE AND RELATED FEDERAL PERMITS OF PARTICULAR IMPORTANCE TO STATE OIL AND GAS LEASING ACTIVITIES IN ALASKA Permitting Agency DNR DNR DNR DNR DNR AOGCC DNR ADF&G ADF &G DEC DEC DEC DEC DEC DEC DEC DEC EPA CORPS OF ENGINEERS Permit Title Plan of Operations for 0i17 and Gas Exploration Miscellaneous Land Use Permit Tide Lands Lease Special Use Permit Material Sales Permit to Drill or Deepen Encroachment to State Highways Title 16 Permits for any anadromous fish stream Refuge Permits or Critical Habitat Permits 401 Water Quality Certification Solid Waste Disposal Approval Air Quality Control Permit to Burn (if not needed for burn- ing or flaring of produced fluids, then permit can be issued in 5 days) 011 Spill Contingency Plan Pesticide Applications Permit (if not a public pesticide project, then permit can be issued in 5 days) Proof of Financial Responsibility Surface Oiling Permit Waste Water Discharge Permit National Pollution Discharge Elimination System Permit (if an NPDES permit is needed, this eliminates the need for a separate waste water discharge permit from the State) Discharge of Dredge or Fill into Federal Waters (404 or Section 10 Permit) 117 Approximate Time 30 to 60 days 30 to 60 days 60 days 30 to 60 days 90 days 10 days if no exception to spacing regulations 30 days 14 days 14 days 60 to 75 days 60 days 30 days 65 days 60 days 65 days 5 days 60 days 180 days 120 days AcE 7421561 "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. Under the pending permit reform regulations, the responsibility for coastal management consistency determinations would be split between several agencies and would be conducted concurrent with their normal permitting activities. At the present time, consistency determinations for coastal activities are made through the Division of Policy Development and Planning in the Office of the Governor. Table 2 indicates those permits which may be required for an oil drilling operation in Alaska. This list was compiled by the Depart- ment of Environmental Conservation with assistance from oil industry representatives. ACE 7421562 118 TABLE 2. PERMITS THAT MAY BE NEEDED FOR OIL AND GAS DRILLING OPERATIONS IN ALASKA ON STATE LANDS State Agencies Alaska Oi1 and Gas Conservation Commission Commerce and Economic Development Environmental Conservation Fish and Game Health and Social Services Labor Natural Resources Enhanced Recovery Methods Regulation of Wells and Fields. Abandonment and Plugging Practices. (applies to all wells) Permit to Drill - Oil 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 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 Miscellaneous Land Use Permit Right-of-Wat of Easement Permit (Construction on State Land) Special Land Use Permit Approval of Plan of Operation (Division of Minerals and Energy Management) Gravel Use Permits (Division of Forest, Land and Water Management) 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) 119 E 142156 AC TABLE 2 continued State Agencies Public Safety Revenue Transportation and Public Facilities Federal Agencies U.S. Army Corps of Engineers Treasury Transportation Life and Fire Safety Plan Check - Construction and Occupancy of Buildings Permit to Use Dangerous Fireworks (Industrial, Agricultural, etc.) Permit for Oversize and Weight Loads and/or Vehicles (AK Highway System, etc.) Alaska Business License None Discharge of Dredged or Fill Material into U.S. Waters Structures of Work in or Affecting Navigable Waters of the U.S. Transportation of Dredged Material to Dump in Ocean Waters 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 EPA FCC Local Government Prevention of Significant Deterioration of Air Quality Program New Source Performance Standards Oil Storage Facilities - Oil 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) ace TH2156* 120 Miscellaneous Factors 3. What is the timetable for various stages of the project? How flexible is the schedule? (Department of Natural Resources) Analysis: The planning and execution of an oil and gas lease sale is a Tengthy process, beginning before the sale area is included in the State's proposed five-year leasing program. It involves a number of state agencies, with the Department of Natural Resources as the lead agency. It also involves the public and local communities. The Process described here is an idealized version and one DNR hopes to follow for future sales. Given the time constraints in this process, those sales scheduled for late 1983 will be the first ones to have fully undergone these steps. Aside from certain legal noticing requirements, there are important reasons why a process as lengthy as this one is necessary. The early announcement of a potential sale encourages the early mobilization of public and private resources for the purpose of gathering information (geophysical/geological, environmental, socioeconomic) relevant to the Proposed sale area. Certain aspects of the process require added emphasis. Approximately 30 months before a proposed sale date, the Department of Natural Resources begins to acquire regional geophysical/geological data. This information is used in conjunction with industry nominations and public comments to define a specific sale area. This reduces the proposed sale area to a smaller, more compact size and permits public and private agencies to more accurately focus their sale-related evaluations. In the past, industry nominations have largely determined the tract selections for a given sale. As the information gathering process continues, DNR gathers additional geophysical/geological data, including information about geohazards. This information permits DNR to roughly assess the hydrocarbon potential of the sale area. These rough approximations provide other State and local agencies with information important to their assessments of potential sale related socioeconomic and environmental impacts. DNR's evaluation process gradually moves from region to basin to a tract specific analysis. These refinements permit the assessment of potential trade-offs associated with tract deletions that may be suggested for reasons of environmental concern. Without tract specific information, DNR may unknowingly delete high potential tracts. ACE 7421565 AS38.05.180 requires that DNR conduct a thorough presale analysis prior to each proposed sale. This analysis is used to select a bidding system and lease terms tailored to a specific area and designed to yield the State a maximum return on its hydrocarbon resources. For the analysis to be valid, an intensive interpretation of geophysical/ geological, engineering and economic data is necessary. The following is a general outline showing the steps at which the Department of Natural Resources must grant approval or make decisions regarding this lease sale. Oil and Gas Lease Sales 1. Approximately 61 to 26 months before a sale is proposed to take place: DNR chooses a new area to add to the lease schedule, based on its assessment of oil and gas industry interest in State- owned land. DNR then invites the public to comment on the proposed addition. Proposed additions to the five-year schedule are also reviewed by the Agency Advisory Committee on Leasing (AACL), by the general public, and by affected communities located near new sale areas. 2. 59 to 24 months before the proposed sale date: The new area is included in the five-year leasing program presented to the Alaska Legislature. 3. 32 to 22 months before the proposed sale date: DNR issues formal "call for nominations and comments" to the oil industry, State and federal agencies, and the public for the general sale area (nomination area) shown in the five-year leasing program. At the same time, DNR begins a search for seismic data available on the private market and starts compiling surface and subsurface geologic data on the nomination area. In so doing, DNR reviews geologic literature, gathers data filed in connection with unitization agreements and land use permits, and collects logs from existing wells drilled in the general sale area. 4. 23 months: DNR analyzes the nominations and comments submitted by the oil industry, interest groups, other agencies, and the public. On the basis of this information, the nomination area is scaled down to the "proposed sale area." 5. 22 months: DNR decides whether to offer incentive credits for exploration of the sale area under AS38.05.180(i). ACE 7421566 122 6. 10. ll. 12. 13. 14, 15. 21 months: The availability of the new proposed sale area map is advertised. The map is sent to affected communities to use in planning for the sale. Other State agencies, including the members of the AACL, are also invited to review the proposed sale boundaries. After making its final selection of geophysical data, DNR begins contracting to purchase and process the data over the next seven months. Meanwhile, DNR starts interpreting the geologic data it has gathered on the proposed sale area and schedules field work to fill in any identified gaps. 15 months: State members of the AACL begin researching and summarizing the data they will contribute to the "Social, Economic and Environmental Analysis" (SEEA) that is prepared for major sales under Administrative Order No. 52. 12 months: The Department completes its preliminary geologic analysis of the proposed sale area and provides the economic and engineering units with estimates of ranged reservoir parameters. 11 to 10 months: The draft SEEA is made available to the public at about this time. 10 to 9 months: Public meetings are held on the draft SEEA. 9 to 8 months: Public review period for draft SEEA ends. 8 months: DNR initiates land status research to determine leaseable acreage. Once engineering data are on hand, an economic analysis of the proposed sale area is begun. 6 months: Geologic analysis, including the identification of potential geohazards, is completed. The Department begins a preliminary assessment of bidding methods to be used in the sale. 6 to 5 months: The draft SEEA is revised as a result of public and agency review. Meanwhile, based on a combination of the information contained in the SEEA, agency comments made directly to the Department, and geologic and geophysical information, the sale area boundaries undergo their final revision. A tract map of the revised sale area is prepared. 4 to 3 months: Final version of the SEEA is printed and distributed. ACE 7421567 123 16. 17. 18. 19, 20. 21. 22. 3.1/2 months: A preliminary decision that the sale will best serve the State's interest is prepared in accordance with AS 38.05.035 (a)(14). Notice of the sale, including the proposed sale terms and stipulations and a copy of the preliminary decision, is mailed to affected communities under AS 38.05.305 and their comments are requested. At the same time, advertise- ments are published in the sale area stating that the preliminary decision on the proposed sale is available and inviting public response. 2 1/2 months: Comments are received from the general public and from communities within the sale area. Final decisions on the sale, tracts to be included, and the stipulations to be used are made on the basis of these comments and those of other State agencies. A coastal management consistency determination is prepared and the final finding under 38.05.035 (a)(14) is written. 2 months: Based on geophysical information, DNR prepares a final prospect map (confidential) of the proposed sale area and selects a bidding method to be used in the sale. 2 to 11/2 months: Public notice under AS 38.05.035(b) of the final sale terms is initiated, with a copy of the notice to affected communities and to all parties on the DNR oil and gas mailing list. Timing of this step is critical because of the very narrow "window" allowed under the statute. 1 month: A final land status check and identification of third- party interests are carried out. Day zero: The lease sale is held on its scheduled date. The Lower Cook Inlet sale is presently proposed to take place on February 2, 1982. Within a week after the lease sale, the apparent high bids are analyzed, and the Commissioner of DNR decides whether to accept the high bids. The winning bidders are notified. Lease Operations 23. Prior to commencing any operations on a lease: a. Lessee submits Plan of Operations to DNR/DMEM for approval. DNR circulates to appropriate State and local agencies for review. ACE 7421568 124 d. 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, buildings, roads, airstrips, and all other facilities necessary for exploration, development and 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. Generally, a Plan of Operations must be submitted by the lessee for each lease operation. In addition, a detailed Spill Prevention, Control and Countermeasure (SPCC) plan for each onshore drill site and for onshore storage, transfer, and transportation facilities is required in the lease to be submitted by the lessee to DEC. An 0i1 Discharge Contingency Plan must be submitted to DEC for offshore drilling operations or onshore transfer facilities with a storage capacity greater than 10,000 bbls. DNR evaluates modifications to the Plans 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 recon- ciliation cannot be reached at the field level, the disagree- ment is evaluated through successive levels of decision-making responsibility, and will be decided by the Governor, if necessary. DNR requires modification of each Plan of Operations based on recommendations from other agencies and internal review. The Plan of Operations is approved, with any necessary modifi- cations. The procedures outlined above are an effort to make the operating conditions as lease specific as possible rather than imposing regionwide stipulations that do not pertain to certain leases. Specialized stipulations for the Plan of Operations phase would reflect specific problems associated with a lease or related leases. ACE 7421569 125 Extension of the Lease Term 24. 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. DNR must 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. 126 4. Miscellaneous Factors What local, State and/or federal investments are necessary and does the project schedule allow sufficient lead time to complete necessar t 7 d Regional Kffatrs} capital improvements? (Department of Commun ty an Analysis: It is doubtful that any major new investments in capital improvements would be necessary as a result of the proposed lease sale for the following reasons: 1. the development scenario for the proposed lease sale assumes that there would be no new facilities (other than onshore metering facilities) constructed to support the proposed lease sale other than offshore production platforms; and the Economic Factors section of this analysis projects population growth as a result of the sale to be of minimal impact to the Anchorage and Kenai Peninsula Borough populations. Furthermore, we assume that population increase in Kenai Peninsula Borough would be shared by all settlements along the western side of the peninsula, thereby diluting impact on any particular community. However, even a Slight increase in population could increase pressure to improve community services. Please refer to Community Well-Being Factor, #1, for a summary of the status and expansion needs of community services in Kenai Peninsula Borough. 127 5. Miscellaneous Factors net eer Ss Do State capital improvement programs consider needs generated by the rojected oil and gas development? Department of Transportation and Public Facilities) Analysis: It would appear that the proximity of the Proposed lease sale to developed communities affords opportunity to utilize existing transportation facilities. Exploration and development activities on the Kenai Peninsula, in particular, would be conducted in areas im- pacted by past and existing petroleum operations. The Department of Transportation and Public Facilities is conducting multi-modal Regional Transportation Studies for the Aleutian Islands, Kenai Peninsula Borough, and Kodiak Island. The tentative completion dates for these studies are March 1981, August 1981, and early 1982, respectively. The major purpose of these efforts is to develop a transportation plan that will accommodate the present and projected future travel demands in these areas. This will provide a major resource for the objective selection of capital improvement projects critical to the development of the regional transportation system. Included in the studies is an evaluation of transportation needs associated with economic development and, in this respect, the capital improvement program will consider demands generated by natural resources activi- ties. Development of offshore and much of the onshore areas would utilize transport systems currently in place. Location, type, and magnitude of collection and trans-shipment facilities would depend upon the area of discovery, amounts of oil and gas involved, and disposition of the petroleum resource. Direct capital needs of resource development would be the responsibility of the developer. Any possible indirect needs requiring State capital investments could be accommodated to meet demand. 128 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 recommendations have been proposed for consideration only to aid the Department of Natural Resources Tn its lease sale decisions, and should not be construed as representing final State policy. ACE 742 129 1571 Resource Utilization Factors 1. What effect will the project have on resource industry potentials or other resource values? Will the project result in irreversible commitments? (Department of Natural Resources) Recommendations: Requirements associated with lease activities such as site clearing, gravel removal, dredging, filling, and road construc- tion 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 spawning grounds, brown bear concentration areas or caribou calving 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. The State 0i1 and Gas Competitive Lease Document includes a requirement that the lease operation sites be restored to the satisfaction of the State (Department of Natural Resources Appendix 1). One measure of ameliorating impacts to fish and wildlife is the Department's standard requirement for a minimum $10,000 performance bond per lease or $500,000 per lease operations, Statewide. 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 cost, it can require an “unusual risk" bond. This would be done only after public notice and public hearing. Gear conflicts between commercial fishermen and oil and gas related activities should not present significant problems during the exploration phase. Operators should be made aware of major concentrations of drift net and long line gear so that they can avoid these areas when possible. However, if a commercial find is made within major fishing grounds, such as the area between Kalgin Island and the Kenai Peninsula, it will probably become necessary to develop more sophisticated conflict avoidance systems such as mandatory vessel traffic corridors. Under a maximum development scenario some gear conflicts and preemption of fishing areas is probably unavoidable. If serious gear conflicts develop as a result of increased oi] and gas activities in the area, the State should consider sponsoring a grievance committee made up of commercial fishermen, industry operators, and an arbitrator. The committee could work to avoid conflicts, investigate problems, and settle damage claims in a timely manner. This would help to avoid the protracted and costly litigation that often accompanies incidents of gear conflict. ACE 7421572 130 2. Resource Utilization Factors Will _the project affect fish and wildlife populations or their habitat? Will these effects be short-term or long-term in nature? (Department of Fish and Game) Recommendations: Although certain impacts are unavoidable when deveToping an oil] or gas field, many impacts can be minimized through the application of mitigating measures. The Department of Fish and Game, in consultation with the Department of Environmental Conservation, has made a careful study of the best management practices available to minimize the effects of oil and gas activities on water quality and fish and wildlife resources and their habitats. An analysis of the existing controls over these activities has also been made (refer to the following Table 1 and Table 1 in the Recommmendations section for Environmental Quality Factor, #2). The best management practices have been divided into two categories: 1) practices to be used by all Permitting agencies in issuing permits within the sale area, and 2) sale-specific mitigating measures to be included in the lease document, Plan of Operations, or Notice of Lessees by the Department of Natural Resources. In addition to the recommendations presented by the Department of Environmental Conservation in the section on Environmental Quality Factors, #2, the following measures are recommended for consideration by State agencies and others, and 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, but is not limited to, waterfowl nesting and staging areas, brown bear concentration areas, moose overwintering areas, salmon spawning areas, and moose and caribou calving grounds. 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. b. No restrictions of public access to, or use of, any traditional hunting, fish, subsistence, trail, or recreational area should be permitted as a consequence of oil and gas activities. ACE 7421573 131 TABLE 1. RECOMMENDED FISH AND WILDLIFE MITIGATING STRATEGIES BY IMPACT CATEGORY AND STATEMENTS OF ADEQUACY (for use as a planning tool in developing new mitigating measures to supplement existing controls) Impact Category - Current Control - Adequacy of current - control from water quality standpoint Recommended additional - mitigating measures Impact Category - Current Control - Adequacy of current - control from water quality standpoint Recommended additional - mitigating measures Impact Category - Current Control - Adequacy of current - control from water Recommended additional - mitigating measures Destruction of essential fish and wildlife habitat (site clearing, disturbance, pollution, etc.). Anadromous Fish Act, Critical Habitat Area permit, Plan of Operations (DNR), miscella- neous land use permits (MLUP). Adequate for anadromous streams, State Critical Habitat areas and refuges; in- adequate for other State lands. Protection of essential fish and wildlife habitat identified by ADF&G be made a re- quirement of all MLUP's and Plans of Oper- ations. Destruction of productive wetlands (Dredging, fill, drainage, etc.). Corps 404 permit, miscellaneous land use permits, State coastal management act. Adequate with a case-by-case determina- tion. Information to lessees notifying them of requirement to avoid impacts on wetland habitats. Restrictions on public access and use of fish and game resources. Constitutional requirements, refuge legis- lation. Adequate for refuges and unreserved State lands; inadequate on State leases. Lease stipulation guaranteeing public ac- cess to all of lease except facilities and reserving authority to limit public access to State. ACE 7421574 133 Cc. e. 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. Lease facilities which store greater than 660 gallons of oil and other pollutants 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, facili- ties 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 five 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. 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. 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 or caribou calving grounds or peregrin falcon nests, or may require the facilities be restored to their original condition. Permanent facilities should be prohibited in important razor clam habitat in the Polly Creek area, including all tidelands from 1/2 mile north of Redoubt Point southward to the Crescent River. No solid tideland fill should be allowed in important razor clam habitat from 1/2 mile north of Redoubt Point southward to, and including, Chinitna Bay. 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 2 wetlands. ACE 7421575 133 2. Mitigating Measures for Legally Classified Critical Habitat Areas Refer to Resource Utilization Factor, #3 - tf ects on designated or specifically defined wilderness, historic, watershed, recreational, or scenic areas. Mitigating Measures to Protect Endangered Species a. Peregrine falcons: Two endangered subspecies of peregrine falcon, Falco peregrinus anatum and F. p. 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 1. There are currently no known peregrine falcon nesting sites within, or adjacent to, the proposed lease sale area. However, in the event that peregrine falcon nests are discovered, the following mitigating measures will ensure that lease activities are in compliance with the State and federal endangered species acts: 1) Within one mile (1.6 km) of any nesting site: a) Aircraft overflights will be prohibited below 1,500 feet (457 m) in altitude between April 15 - August 31. b) All ground level activities will be prohibited between April 15 - August 31. c) Habitat alterations and construction activities including, but not limited to, roads, pipelines, disposal sites, gravel mining, and storage facil- ities will be prohibited. 2) Within two miles (3.2 km) of any nesting sites: a) All activities having noise levels sufficiently high to disturb nesting efforts will be prohibited between April 15 - August 31. Such activities include, but are not limited to, blasting and gravel washing operations. b) Permanent facilities having high noise levels or sustained human activity or altering large acreages will be prohibited. Such facilities include, but are not limited to, airfields, construction camps, operational material and disposal sites, and compres- sor stations. ACE 7421576 134 b. 3) Within fifteen miles (24 km) of any nesting site: a) The disposal of waste material in high quality peregrine falcon prey habitat will be prohibited. Ponds, lakes, wetlands, and riparian habitats are of partiular concern. b) The use of pesticides will be prohibited, with the possible exception of limited non-aerial application of approved, non-persistent insecticides at construc- tion camps. Eagles: Bald eagles are protected by federal law. Substantial numbers of eagles nest in the Cook Inlet Basin, and several nests in close proximity to the sale area have been identified (see Fish and Game Appendix 5). To ensure compliance with the Bald Eagle Protection Act (Fish and Game Appendix 3), no surface entry should be permitted within 500 feet of an active bald eagle nest during April 1 to August 31. Temporary activities which do not alter the habitat may be allowed outside of this time period. Permanent facilities should be prohibited within 500 feet of all bald eagle nests. ACE 7421577 135 3. Resource Utilization Factors Will the project affect designated or specifically defined wilderness, historic, watershed, IST or scenic areas? (Department of Fish and Game) Recommendations: Impacts of oi] and gas exploration, development, and production in Critical Habitat Areas and on recreational lands can be minimized or mitigated. Mitigating measures proposed by the Department of Fish and Game include the following: 1. Mitigation for oi] and gas activities in Critical Habitat Areas. In the event that lessees wish to utilize lands within the Clam Gulch or Kalgin Island Critical Habitat Areas, the following mitigating measures will be required: 1. 2. The management of State Critical Habitat Areas is the responsibility of the Department of Fish and Game under AS 16.20.260. Prior to the development of any lands within a designated Critical Habitat Area a permit must be obtained from the Department. Permits will be issued upon receipt and approval of detailed plans of the proposed project. The consolidation of facilities and activities associated with lease operations within Critical Habitats will be mandatory. All roads and facilities must be designed and constructed to 1) have minimal impacts on fish and wildlife resources and public use; 2) mitigate adverse impacts; and 3) minimize visual impacts on public use areas. 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 Alaska Department of Fish and Game. Lease facilities must include all available design features to minimize the possibility of accidental oil spills or fires resulting from vandalism or hunting accidents. Facilities must be designed and constructed to prevent the spread of hydrocarbons and facilitate cleanup both above and below.the ground. Facilities which store or process greater than 2,000 gallons of oil and all pipelines, must be approved by the Department as to their location, size, time of construction, and operation. ACE 7421578 136 II. 7. 10. Upon abandonment of facilities and roads, the lessee must rehabilitate the area to the satisfaction of the Department of Fish and Game, 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. No restriction of public access to Critical Habitat Areas will be permitted as a consequence of oil and gas activities. Restriction of public use of small, limited areas in the immediate vicinity of facilities may be allowed with the approval of the Department of Fish and Game. No surface discharge of produced waters or disposal of drilling muds or cuttings will be allowed. Borrow removal will be permitted where it does not adversely affect fish and wildlife populations or their habitats or where there is an opportunity to enhance fish and wildlife populations. Mitigation for oi] 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, gathering and metering stations, and compressor stations should be sited away from important recreational fishing streams in order to minimize visual and audio impacts on recreationalists, potential for oil spills into the streams, destruction of essential wildlife habitat, or blockage of migrational corridors. All anadromous and sport fishing streams should be provided with minimum development setbacks of 200 feet on each bank with 100 foot public access easements. Larger setbacks may be required in extensive floodplain areas. Wherever possible, lease facilities, roads, and pipelines should parallel stream drainages and be located out of the active floodplain (5-year). To the extent possible, no fuel or petroleum products should be stored in active floodplains. ACE 7421579 137 III. Mitigating measures for State parks, public interest lands, historic and archaeological sites. 1. State parks. a. No surface entry or surface disturbance of park lands will be allowed as a result of development activities associated with the proposed lease sale. Whenever possible, development-related facilities should be screened or set back from parks 300-1,000 feet, depending upon the density of vegetation and local topography. Public interest lands. ae With the exception of Kalgin Island, no surface entry or surface disturbance of public interest recreation lands identified by the Division of Parks should be allowed without the approval of that agency. Slant or directional drilling should be employed to extract subsurface resources beneath tracts of high recrea- tional value which lie within the sale area. Where feasible, directional or slant drilling should be used to extract any oi] and gas deposits beneath the surface of Kalgin Island. If this can not be accom- plished, drill pad sites, access roads, and other facilities should be approved by the Division of Parks and Department of Fish and Game prior to con- struction. No permanent facilities such as buildings, storage tanks, roads, or above-ground pipelines should be allowed within the Redoubt Bay public interest land identified by the Department of Fish and Game. The Kenai lowland caribou herd calves exclusively in a small wetlands area immediately north of the Kenai airport. This herd is already under stress because of calf mortality resulting from harassment and predation of domestic dogs which have access to the area on exist- ing roads. Any additional access to, or disturbance within, the calving and summering areas may result in the total collapse of this herd. As a condition of leasing, special mitigating measures should be insti- tuted to protect critical calving and summering habitat of the Kenai lowlands caribou herd. If stipulations cannot be accommodated, then the Department of Fish and Game recommends that no leasing occur within the caribou calving and summering area. A legal description of these areas appears as Fish and Game Appendix 4. Protective measures should include: ACE 7421580 138 (1) (2) (3) (4) (5) (6) No surface entry within the critical calving grounds. Prohibit all lease related activities within the critical summering habitat between April 1 and October 15. Support activities should be confined to existing roads. No new roads or permanent facilities should be constructed within the calving or summering habitat. No above-ground pipelines should be allowed. Facilities that require year-round access should be located only in the spruce forested areas. Lessees should be required to conduct a monitoring study of the caribou herd under the guidance of the Department. If the herd is adversely impacted to a significant degree due to lease related activities, mitigation should be required through manipulation of vegetation to favor caribou forage or by transplanting members of the herd to a suitable habitat elsewhere. e. Watershed Lands. 1. On lands identified as public interest watershed lands, bulk storage of petroleum products in excess of 2,000 gallons should be: (a) located outside of active floodplains, wetlands, or groundwater recharge areas, and, (b) surrounded by an impermeable berm and liner capable of containing the entire capacity of the facility should a spill occur. Roads, pipelines, and support facilities should be located away from active floodplains, wetlands, and groundwater recharge areas wherever possible. All mud pits should be lined and bermed or designed in such a manner as to avoid contamination of soils or seepage into groundwater or surface waters. Produced waters should be either: (a) deep well reinjected, (b) treated on-site to meet Class I water standards, or (c) piped away from the area, treated, and disposed of in a manner acceptable to the Department of Environmental Conservation. ACE 7421581 139 3. Historic and Archaeological Sites. a. Areas scheduled for development should be examined for historic and archaeological sites prior to ground disturbing activities if 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 requiring that development plans be reviewed by the Office of History and Archaeology may be appropriate to include in lease agreements. ace 7421582 140 Environmental Quality Factors 1. What effect will the project have on the environmental health or safet. of the populace? (Department of Environmental Conservation) Recommendations: If oil and gas production does occur in Alaska as a result of the many lease sales proposed 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 consider forming a similar group only if existing State mechanisms can not be satisfactorily utilized to answer basic questions regarding facility siting. 141 Environmental Quality Factors 2. What effect will the project have on water quality? (Department of Environmental Conservation) Recommendations: Toxicity studies on the long-term effects of produced waters on sensitive invertebrate species should receive a high priority ranking in pollution-related research and monitoring. This issue is the subject of one study proposal for funding through the proposed State-sponsored coastal studies program. Table 1, which follows, outlines recommendations to mitigate potential impacts on water quality. ACE 7421584 142 2. TABLE 1. RECOMMENDED WATER QUALITY MITIGATING STRATEGIES BY IMPACT CATEGORY AND STATEMENTS OF ADEQUACY (for use as a planning tool in developing new mitigating measures to supplement existing controls) Impact Category - Current Control - Adequacy of current - controls from water quality standpoint Recommended additional - A. mitigating measures Impact Category - Current Control - Produced Water Lease Stipulation for surface dis- posal permit and subsurface disposal or NPDES permit (EPA) and accom- panying 401 Certificate (DEC). Adequate with exceptions noted below for sensitive areas to be covered by lease stipulations. Lease stipulation prohibiting direct discharges to freshwater bodies, estuarine waters at river mouths, and intertidal habitats, waters immediately adjacent to important clam beds (refer to Department of Fish and Game Appendix 5), and those areas experiencing gyre circulation patterns. Disposal to other marine waters is permitted. Disposal of produced waters in upland areas of Cook Inlet, including wet- lands, shall be by commonly practiced subsurface disposal techniques, except that the Commissioner of the Department of Environmental Conserva- tion may give consideration to alter- native disposal methods when it is demonstrated to his satisfaction that subsurface disposal techniques are not feasible or prudent. Disposal in refuge areas under the general manage- ment of the Department of Fish and Game shall be subject to the case-by- case determination of the Commissioner of the Department of Environmental Conservation, and must be approved by the Commissioner of the Department of Fish and Game. Drilling muds and cuttings. Waste disposal permit (DEC) and/or lease stipulations. 143 ACE 7421585 TABLE 1 continued 2. Adequacy of current - control from water quality standpoint Recommended additional - mitigating measures 3. Impact Category - Current Control - Adequacy of current - control from water quality standpoint Recommended Additional - Mitigating Measures 4. Impact Category - Current Control - Adequacy of current - control from water quality standpoint Recommended additional - mitigating measures Adequate with exceptions noted below to be covered by lease stipulations. Drilling muds and cuttings free of hydro- carbon contamination may be discharged to subtidal marine waters. Discharge of drilling muds to lakes, streams, rivers, intertidal areas, tidally influenced mouths of rivers, and waters immediately adjacent to important clam beds (refer to Department of Fish and Game Appendix 5) is Prohibited. Onshore sump or reserve pits shall be bermed or otherwise fully contained to prevent leaching to adjacent water bodies. Ballast and refinery effluent, heat ef- fluents. Waste disposal permit (DEC) or NPDES permit and 401 Certification. Adequate through plant design review and conditions. Heated effluents. None Solid and oily waste disposal Solid waste disposal permit (DEC) and/or stipulation. Adequate with a case-by-case determination. Suggest reference in information to Bid- ders reiterating normal acceptable and prohibitive disposal practices (see DEC regulations). ACE 7421586 T44 TABLE 1 continued 5. Impact Category - Current Control - Adequacy of current - control from water quality standpoint Recommended additional - mitigating measures Impact Category - Current Control - Adequacy of current - control from water quality standpoint Recommended additional - mitigating measures Marine transportation and oi] spill -contin- gencies. 0i1 Spill Contingency Plan. Adequate regulatory basis for large terminals, platforms, offshore exploratory rigs, tankers; inadequate for onshore exploratory and produc- tion facilities of less than 10,000 barrels. Lease stipulations requiring the operator to submit a Spill Prevention Containment Counter- measure (SPCC) Plan to the Department of Environmental Conservation for approval prior to drilling and construction of onshore, transfer and transportation facilities less than 10,000 barrels. In addition to addressing the prevention, detection and cleanup of oi] spills in the SPCC Plan, the operator must define response plans and actions to be taken in the event of a well blowout. This includes the identification of a suitable alternate rig(s) and the time required to obtain equipment, mobilize, rig up and commence drilling of a relief well. Wetland Development, sedimentation from culvert installation, road construction and gravel removal. Section 404 permit (Corps of Engineers), 401 Certification (DEC), Plan of Operations (DMEM), Title 16 permit (DF&G). Generally adequate. Conflicting review time frames; absence of data correlating cause and effect relationships; little mandatory control outside stream beds. Information to Lessees stressing coordinated permit application procedures; more detailed Plans of Operation are required. Recommended utilizing the manual of guidelines (BMP's) available from DEC on road construction practices and Fish and Wildlife Service guidelines on gravel and site rehabilitation. These could be referenced in the Information to Lessees section of the lease document. ACE 7421587 Environmental Quality Factors 3. What are the marine transportation aspects and oil spill potential and contingencies during the exploratory and production phases of the project? ‘(Department of Environmental Cansarvationy Recommendations: 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 involvement, 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 oi] spills damaging the Prince William Sound environment. The VTS/TSS for TAPS has worked well and a similar system may be recommended for use in Cook Inlet. 146 Environmental Quality Factors 4. What provisions exist for environmental monitoring, surveillance, and quality control? (Department of Environmental Conservation) Recommendations: Table 1, included in the preceeding discussion on recommendations for maintaining water quality, identified mitigating measures and provisions for environmental monitoring, surveillance, and quality control. It should be referred to for additional recommendations pertaining to this section. The direct discharge of produced waters to surface marine waters of 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 regions supporting significant water fowl or shellfish concentrations. Hydrocarbon contamination of sediments and water above the allowable water quality standard for sediments are likely to occur in these shallow water habitats. Drilling mud and cuttings disposal “over-the-side" is acceptable in all areas located far offshore in Cook Inlet. Offshore disposal in tidal flats and 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 from the fact that alternative upland disposal sites present little or no economic hardship on industry when wells are drilled in delta areas. Historically, disposal directly into freshwater bodies has not been permitted in Alaska. Acceptable solid and oily waste disposal practices and authorities should be highlighted in the Information to Lessees section of the lease document to avoid unnecessary lost time in the permit application process. 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 should 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 Wildife Service to prepare a summary and detailed guidelines for gravel site selection, removal practices, and rehabilitation in arctic and subarctic floodplains in Alaska. ‘/ 1/Woodward-Clyde Consultants. 1980. Gravel Removal Studies in Arctic and Subarctic Floodplains in Alaska. Technical Report. FWS/0BS - 80/780. ACE 7421589 147 Inclusion, or at least reference to, these guidelines in the Inform- ation to Biders section of the lease document would provide a focus for more serious consideration of this important water quality issue. Contingency plans will play a substantial part in the mitigation of effects of oi] spills from rigs and platforms. Lease stipulations for Lower Cook Inlet should have strong provisions concerning contingency plans similar to the stipulations and bidder information that have applied to the Beaufort Sea and the relinquished Prudhoe Bay tracts. The Department's current regulations regarding contingency plans are adequate for offshore rigs and platforms but do not apply to similar onshore facilities. Onshore, contingency plan provisions will be needed in the lease document through stipulations or bidder informa- tion. Under the Department's present authority to estabish environmental safeguards for oil 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 the model of environmental engineering, can be greatly improved. Not a single spill that has occurred from TAPS has been detected by the spill monitoring system of 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 for any future pipelines, especially those that cross large bodies of water and sensitive environmental zones. As indicated in Table 2, no new mitigating measures for air quality on fire safety are considered necessary for use as lease stipulations or inclusions in the Plan of Operations for Lower Cook Inlet activities. Current controls to maintain environmental quality appear to be adequate. State agencies' present ability to improve monitoring, surveillance, and quality control in areas scheduled for rapid development can be improved by: 1. Adherencce to the State's five-year oi] and gas lease sale schedule. Contingency and limited-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 oil and gas leasing projects. ACE 7421590 148 TABLE 2 RECOMMENDED AIR QUALITY AND FIRE SAFETY MITIGATION STRATEGIES FOR MAINTAINING ENVIRONMENTAL HEALTH IN THE LOWER COOK INLET Health issue Sulfur dioxide and particu- late levels from onshore and offshore facilities Carbon monoxide Marine tanker emissions Drinking water contamination Fire safety LEASE SALE Adequacy of current control(s) to maintain environmental quality Current controls Air Quality Control Permit to Operate and am- bient air quality standards (18 AAC 50.020) PSD permit (EPA) Authorities above Marine vessel section of Air Quality Regula- tions (18 AAC 50.100) OSHA, Department of Transportation (Coast Guard) 149 Adequate Adequate Adequate Adequate Adequate Recommended additional mitigation measures None None appropriate as a lease stipulation; internal and local refinement of stra- tegy required. None None None ACE 7421591 Development of a systematic inter-departmental monitoring strategy for the lease area to monitor physical and biological indices such as fish and wildlife abundance, distribution, and water quality. A mechanism within the lease document should be incorporated to adjust mitigating measures and standards to compensate for changes outside of the expected range of impact and for any new information which 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. NPDES permits issued by the Department of Environmental Conservation have various time- frames, mostly three or five years, 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. Specific monitor- ing strategies include: a. Evaluation of the effectiveness of sedimentation control measures in stream crossings and pipeline burials through sediment and settleable solids monitoring. b. Development of cost effective approaches to biological and chemical monitoring, emphasizing long-term sublethal responses of biota to pollutants, including the examination of subtle indices of change (growth, behavioral changes, and fecundity). ce 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, airstrips, and any onshore facilities which may be necessary. ACE 7421592 150 APPENDICES ACE 7421593 Public Comment and Agency Response Appendix ACE 7421594 SUMMARY OF KODIAK PUBLIC MEETING ON SALE 35 (7 p.m., Kodiak Island Borough Assembly Chambers) June 3, 1981 There was a very poor turnout at Kodiak - a reflection, to a large extent, of the lack of local concern about Sale No. 35 since the sale area does not include Shelikof Strait acreage originally included in the Nomination area. Linda Freed, CZM Coordinator for the Kodiak Island Borough (KIB), stated that the KIB Assembly and OCS Advisory Board have not taken an official position on Sale No. 35 - again, a reflection of lack of concern. When asked about the adequacy of local involvement in the SEEA preparation, Ms. Freed said that the KIB had been adequately informed during the processs. The meeting progressed into a general information exchange between agency participants and the approximately 6 public attendees. Craig Bartlett, new editor of the Kodiak Mirror, asked several questions about State and federal leasing programs, schedules, and policies. The pending OCS Sale 60 (Lower Cook Inlet-Sheilokof Strait) is of more immediate concern to Kodiak residents. One resident asked why the State ventures into risky offshore areas before safer onshore areas. Kay Brown, Deputy Director, Division of Minerals and Energy Management, (Department of Natural Resources), responded that at this time the State generally focuses leasing activities in areas adjacent to existing development and where adequate technology currently exists. The final comments received were made by one local resident who expressed general dissatisfaction with offshore leasing (both State and federal), citing primarily the valuable renewable fisheries resources which may be in jeopardy which are needed by the world's population. He also questioned the capability of offshore rigs and supply vessels to withstand brash ice conditions in Cook Inlet. Kim Sundberg of the Department of Fish and Game explained the design of offshore platforms currently situated in Upper Cook Inlet which enables them to withstand ice conditions. ACE 7421595 SUMMARY OF HOMER PUBLIC MEETING ON SALE 35 (7 p.m., Homer High School) June 4, 1981 A total of 19 residents turned out for the public meeting. Six people presented testimony; five expressed strong opposition to offshore leasing in Lower Cook Inlet. The sixth person expressed concern about the inadequacy of and current problems with solid waste disposal facilities (Sterling site) and water and sewage systems (City of Homer and separate, outlying areas around Homer). The general tenor of the meeting was one of extreme local frustration with the apparent lack of State and federal response to sustained local opposition to leasing, as evidenced by proposed State Sale No. 35 and federal OCS Sale No. 60 which both include acreage in Lower Cook Inlet. There was considerable reference to comments presented by these same people at the October 1980 hearing held in Homer regarding OCS Sale 60. Several speakers stated that Homer residents feel disillusioned with both the State and federal governments, particularly State government which should be more responsive to local community attitudes toward leasing and energy development. Two people questioned a national policy which favors accelerated energy production, and therefore continued high level energy consumption. They feel that the State is merely following the federal leasing actions. They argued that the State does not now need the money to be gained from leasing and they seriously questioned the State's lack of responsiveness and account- ability to local community opposition. Three people specifically stated that they feel that public meetings are merely a "formality", a "game" and that the decisions to hold a particular lease sale have already been made. One citizen (Joy Post) read a statement presented at an OCS hearing in 1976 which argued for a prudent, cautious approach to offshore leasing in Alaska. Several points were made regarding the value of renewable resurces, quality of life, pristine environment, offshore technology, and oil cleanup capability. She questioned whether anything had changed in the past 5-6 years since the statement was made by Robert LeResche, then Head of Habitat Protection, Department of Fish and Game. Various individuals also expressed concern over the ability of industry to contain an oil spill under the extreme sea state conditions which can occur in the sale area. A question from Kay Brown (DNR) regarding the extent of local opposition prompted a discussion of available local surveys. Residents referenced a Baring-Gould survey, conducted in 1977 for Homer's Comprehensive Plan, which indicated that approximately 68-83 percent (2 estimates) of the Homer residents did not want oil development in the area. At a public hearing for federal OCS Sale 60 in Homer last fall, approximately ACE 7421596 600 residents signed a petition opposing oi] exploration and development in Cook Inlet. One resident (George Ripley) welcomed a new survey regarding local opinions toward Sale No. 35 provided that it was conducted by a reputable entity outside DNR. He felt that a bonafide survey, with adequate prior notification to the local community, might be a more useful way to solicit comments than a public meeting. One resident (George Ripley) commented on the lack of public access to industry's development plans which he thought were proprietary. Kay Brown clarified the State's review process for specific Plans of Operation submitted to DMEM by individual companies. She stated that a requirement for Public Notice of all Plans of Operation may occur under the pending State regulatory reform procedures. Kay further explained that currently anyone can request a Plan of Operation under review from DMEM, In summary, the majority of the people at the Homer hearing were disillu- sioned hy State leasing plans in their area. Comments were rational and generally non-emotional but indicated a high level of frustration with the State regarding its accountability and responsibility to local concerns and attitudes when making its leasing decisions. ACE 7421597 Institute of Social and Economic Research Appendix 1 Methodology for the Economic Analysis ACE 7421598 PUBLIC COMMENTS Box Bir Horrek, AKA, 19603 Tewé 7/98 V Prcker We nag Corerrrs Sar thy Bree ony come beaver Crk fat. Lane ont of Zoe phe tone f the pobhc hearers om rhe heck : bese ret 2st, dm Fhe Core { ev ort AY thine Bek Sie nee Cork, arly mot Dave t hire on zt rhe Fickmetezy Gems pretahtn He ult epee XH? ~ cere t depreciate en abt, ad Contd, Aho of eo taney cx Fhe Ak,” Ae Ae sar, AGENCY RESPONSE 1. ADPSG - ADF&G has carefully researched the available informa~ tion on fish and wildlife populations and habitats likely to be affected by the proposed lease sale. Areas within or immediately adjacent to tracts proposed for leasing are discussed in the SEEA. These areas, as well as Lower cook Inlet in general, were considered during the development of our recommendations (refer to Resource Utilization Factors #'s 2 and 3 and Risk Factors #'s 1 and 2). Fish and wildlife resources of Lower Cook Inlet and the risks involved in allowing oil and gas exploration and development in the sale #35 will be considered when the Commissioner of Natural Resources and the Governor review the SEEA and determine whether the proposed lease sale should proceed, be postponed, or cancelled. ACE 7421599 PUBLIC COMMENTS Reger Melatyre P.O. Box 1702 Homer, AK 99603 Jane 4, 198i ka State Departaent of Natural Resources Division of Minerels and Energy 703 'W. Northern lights Blvd. Anchorsge, AK 1 Geatiemen: to attend the public hearing tonight concerning nos. 32 and 35 in Homer, because of illness. I ending to you the following written testimony. I believe this sele should be delayed, if for no other reason thon that we received very little w @ notice on the post office le. story in the Homer News which came out Thursday, containing very little information. The environmental impact ststement has been available in the library (only 2 copies) only three days. Few of us have been able to get shold of it. My work hours far from the library coincide with those of the library, so it is always difficult for me to get there for ~ books, anyway, Therefore, meny of us have had absolutely no oppor tunity to examine the proposed sales. Runor has it that Jerry Anderson brought down a lot of copies of the statement to Homer in January, but these were apparently not distributed to the general community, I have not wlked to any member of the community who knew about the sole until very recently, and, as I say, the iapact state. Rent only arrived this past Tuesday, June 2, leaving little time for circulation, to sey nothing of careful presentetion of testimony. Irie mk seuoras Pays I can make some genere1 statements: I om not in fevor of drilling in the Outer Continental Shelf, until ell other possibilities have been exhausted, or until cleanup deen merkedly improved. The ocean’ environment is 1 can be carried over large areas, and espe- ‘shing area such as Cook Inlet, not only the a cially in an’ inte: economic and food be tut a significant proportian.of the world. Any drilling thet food thet goes to other perts of done should be done on land, end that only after this nation has effected # consistent form of oi] vation; I s ens of t r@ allowing the inedequat in conserveti.n of heating fuels has been nade, but the le continues to run rampant, and this is not consistent with @ sone energy policy. Some form of ‘rationing or other restriction on destroy our basic renewable ry driving is in order before The current trend seems to me nothing less than suicid ‘The Homer News article (May 28, 1961) states: "In a study of Lei $o 49; 29+, Dropered by the Governor's Agency Advisory Coasivtes on Le: jointed out tt , elthough the probability of s major spill in the area is low, should such e spill occur, great numbers of fish ond wildlife and their hebitats would be significently af- ected. hove alzesdy Deer intorsed by the 8 Board of Pishe: not enough fish in the area for us to feed our families; why put this resource further at risk? It ie and on the other hend, that without dint of proper energy ‘The 041 compe would Like to quot her testimony reg: here. She got the 8 claim there have been no epille. Here, I se figures presented by Joy Fost of Hoser in fing Oil Lease No, 60, which figures from the Alaska Dept. of Fish and Gane. May, 1962. Standard-Richfield-Shell Beluga #1 had a blowout in the in was not brought under control for 43 days Aug., 1962. Another blowout in the inlet by Pan-Am Zor 3 gonths Deginning in January of 1966, there were 140 sightings of oil pollution in Cook Inlet. Of these of unknown origin, 1 was from a fishin platforms, 9 from'pipelines, 10 trom shoi tankers and 16 from explorations rig of over 1,000 bbls. of these spills were major spills Between 1972 and 1960 there were 98 spills in the Cook Inlet caused by the oil industry, 112 spills from other sources and 40 spills from unknown sources. I believe the delicacy of the environment is being grossly un- derestinated by both state end federel governments and the oil industry in the inti & of immediate profits and monetary gains. I wish to not to core or really Listen to what we sey; though afl this 18 frue, indeed, I feel the REAL crine of this grand rush to get every drop of ott ut of the ground is against the envizomzent to the entire planet, not just to industry and goveraael et their will. Yours truly, fa Pe ware ans HO CAuesr RESP TL SP REIS ISH of the surrounding communities are threatened, pening yet, particulerly since mass transit systems that do exist die. 1d, on the one hand, that the shortage of fish jo great that we, who by lew have priority, cennot catch our winter lopment to risk the stocks. feelshould also appear June, "1962. Pan-Am had a blowout at middle ground shoal #1 end elthough the effect of oil development on the lifestyles (ond just the sbiity to ourselves) of this area will be drastic there will aot de jane tersepiace ease teat through any of] damage), kes one bitterly angry that those meking decisions which belongs ‘to manipulate AGENCY RESPONSE 1. AOGCC - Comments acknowledged. The following response pertains to that part which refers to previous spills in Cook Inlet. a. Beluga River No. 1 well blowout on April 28, 1962, ~ releasing gas/mud/water. The data is correct, except the well is not in Cook Inlet. b. On June 11, 1962, a gas blowout occurred at Pan American's Midle Ground Shoul No. l well. “This well was out of control for 43 days and was eventually abandoned". ‘The well did not blow for 43 days, but they certainly did have problems with the hole; sloughing, lost circulation, and cementing. ‘This well, along with many others, has been abandoned. c. Pan American's Cook Inlet State No. 1 well which blew out in 1962 released oil as well as gas. No question about the blowout occurring, however, the data does not support the contention that there was oil associated with the gas. An Anchorage Times photo shows a clean burning flame, the well is nearly in the center of the North Cook Inlet gas field and Bill Van Alen, of our office, does not recall any oil associated with the gas (Mr. Van Alen was then employed by Pan American and did visit the blowout). ‘Two of these spills were gas blowouts in Cook Inlet. . Important questions to consider are: 1. Is this 1962 data reflective of what may happen today? Since 1970, industry has made significant gains, both incentive wise and operationally, in preventing blow- outs. Government regulations, both federal and state, are much stricter, however, the possibility of a blowout, and especially a gas blowout, still exists. 2. Perhaps the most important question is the relevance of gas blowouts to oil spills. Gas blowouts do not cause significant pollution. Therefore, it is inappropriate —- meaningless —- to use gas blowout data in an analysis of oil spill risks. ACE 7421600 1) 2 78, pari u 12 13 14 PUBLIC COMMENTS ARCO (cont'd) 4 - A statement is made that 10 to 15 explora- tory wells are expected; this disagrees with the assumption listed on page seven that only three to five exploratory wells are anticipated. The assumptions at the beginning of the text, forming the basis of predicting potential impacts, were not totally adhered to in several other sections. Page 79, item 1 - Water may be produced with gas also, either directly or indirectly as a result of dehydration. Page 92 - Regarding an informational void on long term sublethal effects of used drilling muds to bottom dwelling organisms, the American Petroleum Institute's Publication No. 4330 (Effects of Used Drilling Muds on Benthic Marine Animals, October 1980), stated that; "We can therefore conclude that discharge to the ocean of all but the most toxic used waterbased drilling muds will have no measurable long or short term effect on marine biota." They went on to state that "...it is extremely unlikely that marine animals will accumulate heavy metals from discharged used drilling muds to concentrations which are harmful to the animals themselves or that pose a health hazard to human consumers of fishery products." Page 98 - It is unreasonable to compare a potential blowout in the Lower Cook Inlet with the blowout at the Bay of Campeche in Mexico. No well drilled in Cook Inlet has had the tremendous productive capacity that the Campeche blowout possessed. Comparisons of this nature cause unnecessary alarm and should not be included in a document that strives for objectivity. Why not use Upper Cook Inlet producing rates and estimates of rates associated with early blowouts as an example? Page 140, Table 1 - Regarding impact Category 1, we suggest that current controls and permits are adequate to control potential impacts to fish and wildlife habitats. Regarding Category 3, we suggest that current controls are adequate and that no additional measures, such as lease stipulations guaranteeing public access to all of the lease except facilities, are needed. ACE 7421601 AGENCY RESPONSE 10. DPDP - This statement has been changed to suggest that sixteen exploratory wells are likely to occur. The assump- tions outlined at the beginning of the text have also been changed to reflect sixteen exploratory wells. With the help of reviewer comments received on the draft SEEA, we have made a concerted effort to ensure that all descre- pancies and inconsistencies have been corrected in the final version of the SEEA document. 11. DEC - Comment noted. The statement has been changed to indicate that produced water may also accompany gas extraction. 12. DEC - It is essential that the general statement of the American Petroleum Institute be specifically qualified to set the context within which the quote is made. We expect this of industry just as we expect it of our own agency. Objectivity demands that the study parameters and constraints be identified carefully and incorporated in the conclusion. For example, the data base used in making the API conclusion may have been regional (e.g. Gulf of Mexico), could have come from studies in waters greater than 200 meters deep, covered a single or multiple well dump, evaluated gross responses when attention should have been focused on sublethal responses, and would have defined "long term" in terms of months rather than years which will probably be required to objectively answer questions such as bioaccumulation and sublethal effects. In this regard, shallow water studies evaluating bio- accumulation and subtle physiological effects of multiple well dumps over several years in ice covered Arctic regions on bethic infaunal and bottom feeding fishes are absent. What is good for the goose (deep ocean waters) is not necessarily good for the gander (very shallow waters). 13. | DBC - Comment noted. The sentence has been changed to read as follows: “Therefore oil could impact a large area of Cook Inlet, especially if a spill occurred from a blowout releasing thousands of barrels of oil per day." 14. ADF&G - There are certain critical habitats, such as calving grounds and major waterfowl nesting areas, that must receive special consideration during industrial development to ensure unrestricted and continued use of the areas by populations dependent upon them. and permits for State lands in general do not always afford adequate protection for these particularly important habitats. Critical habitats of this nature are generally relatively small and mitigating measures designed to protect these areas should not present undue hardships on industry in the exploration and development of the State's oil and gas resources. The leasing of State lands for oil and gas exploration and development is escalating rapidly and will involve a continually greater percentage of the land under State jurisdiction in the years to come. In order to adequately protect the State's fish and wildlife resources, it is imperative that the State reserve the right to guarantee or limit public access to given areas. In general, the public should not be excluded from State lands, with the exception of small limited areas where it is necessary to protect specific populations or habitats, or because of safety considerations. Current controls PUBLIC COMMENTS ARCO (cont'd) 15 Page 148, item (2) - Wording is confusing and inconsistent. 16 Page 151 - Facility siting is part of the existing permitting process. Creating a new agency is unnecessary. EXCERPTS from the PUBLIC MEETING, 6/4/81 HOMER, ALASKA Joy Post 1 Page 51 - crab studies conducted by Dames and Moore indicate that the coast betwen Bluff Pt. and Anchor River is a critical coastal area for crab larvae. 2 General comment - where is the bibliography and sources for the resource information contained in the SEEA? Doug Sweat 1 Page 35 - While the SEEA suggests that substantial benefits accrue to Alaskans' from oil revenues, he emphasized the need for basics both the City of Homer and outlying areas (adequate water, sewage and disposal facilities). He does not bedrudge Anchorage its proposed sports arena, but questions the adequacy of revenues flowing to smaller camunities for basic services. 2 Page 92 - Regarding long-term, low-level toxcity from drilling muds, Mr. Sweat expressed frustration at his inability to obtain the OCSEAP studies reports from BIM. Once he brought up this subject, others expressed interest in current information and perhaps the need for further Cook Inlet studies. 3 Page 94 - Mr. Sweat stated that the Kenai Peninsula Borough and ADEC had experienced problems with the landfill at Sterling this spring and suggested that new facilities will be needed shortly. AGENCY RESPONSE 15. 16. 1. 2. 3. ADFsG - This recommendation has been rewritten (refer to Resource Utilization Factors #3). DEC - The need for a facility siting comission has not been demonstrated to date. This statement is intended to suggest that a commission might be necessary only if circum stances or public need warrant the creation of such a body. Modifications have been made to clarify this statement to read: “Alaska may want to consider forming a similar group only if existing state mechanisms can not be satisfactorily utilized to answer basic questions regarding facility siting." ADF&G - Fish and wildlife populations inhabiting coastal waters betwen Bluff Point and Anchor River were not specifi- cally addressed in the SEEA because this area is not within or inmediately adjacent to the proposed sale area (refer to Fish and Game Appendix 5). However, ADF&G realizes that neighboring areas may be affected by the proposed lease sale #35 and has taken this into consideration when developing recammended stipulations and mitigating measures. The Department has also addressed concerns regarding the fish and wildlife resources of this area, and has proposed appropriate protective measures, in conjunction with the Kenai limited acreage sale #32. DPDP - All tables have sources listed on the same page below the table and other information sources are qualified by footnotes at the bottom of each page. REVENUE - Mr. Sweat's concern as to revenues from oil and gas being used to provide basic services is well taken and we have attempted to address this problem within our analysis. We must emphasize, however, that any expenditures of oil and gas revenues are dependent on overall State policies and legislative action and are not under agency control. DPDP - The requested OCSEAP reports have been forwarded. Information on other current studies or reports which are available can be obtained from the Office of Marine Pollution and Assessment, Attn: Chris McQuitty, P.O. Box 1808, Juneau, Alaska 99802 Phone (907) 586-7432, DEC - The Department of Environmental Conservation is currently monitoring the Sterling landfill and will be involved in any future decisions regarding the fill. ACE 7421602 PUBLIC COMMENTS ARCO Alaska, Inc. 5/18/81 1 Page 4, item 4 - One objective of the leasing strategy of the State is to encourage competition by using various bidding systems. The use of various bidding systems has not increased competition. An example is the variable net profits system used by the State in the Beaufort Sea lease sale. The only State tracts not receiving bids werre net profits share tracts. Nine of the twenty- six net jprofits share tracts received no bids, eight received only one bid, and two received only two bids. All bidders were major companies. The small independent companies and individual groups were obvious in their avoidance of these tracts. On the other hand, competition may have been limited due to unfamiliarity with a new system. However, net profits systems and variable royalty systems tend to increase the volume of reserves required for a marginally econamic prospect and also increase the econamic limit of production compared to a bonus bid system. Increased campetition at the lease sale does not necessarily result in more efficient/effective development of the State's natural resources. In fact, the contrary may be true. Reducing the front-end commitment to unrealistically low levels invites speculators and uneducated bidders to participate. These bidders are either obtaining acreage in anticipation of selling it toa third party or do not have the expertise or financial resources necessary to proceed to the next phase of exploration. In other words, they will be unwilling or unable to drill wells and the acreage will go unexplored until the term expires or the lessee will suffer gambler's ruin as a result of the State's attempt to encourage competition. 2 Pages 6-7 - Though, generally the study was well done there are some basic assumptions on Pages 6 and 7 of the draft that warrant attention. These assumptions were made to limit the alternatives addressed in the study and will not in themselves dictate facility and pipeline designs. However, their use here may suggest overly restrictive lease stipulations later. Assumption #1 indicates no new onshore pipelines or facilities will be necessary for either oil or gas production as a result of this sale. this assumption is premature. the option of building new facilities and using onshore pipelines should be left open. Assumption #2 indicates that all treating would be done on the platform and pipeline quality oil would be transported to the Drift River Terminal. Additionally, all associated gas would be reinjected. In the Upper Cook Inlet, gas is separated fram the Produced liquids at the platforms. The gas not used as fuel for the platform and the oil/water mixture are shipped via separate lines to treating facilities onshore. The excess associated gas Production is sold. This same arrangement may also be most desirable for the Lower Cook Inlet and thus should not be precluded prematurely, Oil may be delivered to the Drift River, Nikiski, or some new tanker terminal. Assumption #3 and #4 indicate gas discoveries will be nearshore in the East Foreland area and will not impact the construction of Phases I and II of the PALNG liquification plant. A gas discovery could occur anywhere in the sale area. Phase I of the PALNG Project does not have sufficient reserves dedicated at this time. Either phase of the project could be triggered by discoveries in the Sale 35 area. Assumptions 5(a) and 5(b) indicate conventional steel jacket Platforms. Both tower (Upper Cook Inlet-type construction), and jacket structures may have application in parts of the lease sale area. AGENCY RESPONSE le 2. DNR - Comment acknowledged . Gordon Harrison - Because employment is determined by Specific characteristics of a petroleum development program, it was necessary to construct a specific development scenario in order to quantify employment and population effects. The scenario used in this analysis is one of dozens that might plausibly have been advanced. By varying the size, charac- teristics, and location of hypothetical petroleum reserves, one can imagine many alternative field development schemes using a number of different production techniques and technologies. The particular set of assumptions used in this analysis was not intended to state how things will be, but rather how they might be under a particular set of circum stances, in order to carry forward with a quantitative assessment of socioeconomic impacts. Perhaps this point was made too obliquely in the introduction; the purpose of the scenario should have been stated more directly. ACE 7421603 PUBLIC COMMENTS ARCO (cont'd 3 Page 14, item 1 - The technical schools in the area can provide 3. training to Alaskan residents to meet a portion of the perceived demand for skilled labor. 4 Page 28, paragraph 2 - To date, there have been eight wells 4. drilled on the Federal tracts in Lower Cook Inlet. 5 Page 32, paragraph 3 - A 17-year assumed life is inconsistent 5. with later statements of 20-30 years (Page 78). 6 Page 41 - Certainly, any activity in the Inlet will affect fish 6. and wildlife populations to same degree, but a better effort could be made to prioritize the affects (impacts) in the text. 7 Page 59 - Potential impacts should be described in terms of 7. magnitude as well as duration. An impact may be minor but long Some impacts, such as construction of gravel roads and pads, may be long term but may have positive benefits that far outweigh the "destruction of habitat" impact created by this construction activity. term, or major but short term. 8 Page 60 - Concerning public interest lands and archaeological 8. sites, the statement is made that "oil and gas development in the Lower Cook Inlet sale is likely to affect all of these areas to some extent". The scale of this proposed development is such that perhaps some localized areas could be affected, but certainly not all. 9 Page 70, item 2 - Concerning loss of hunting and fishing oppor tunities, the first sentence should be reworded, as it indicates that overharvest of fish and wildlife resources has occurred in the TAPS corridor and Prudhoe Bay oil field. These areas were, in fact, closed to prevent overharvest. AGENCY RESPONSE Gordon Harrison - Camment acknowledged. REVENUE - The statistics presented in the SEEA as to number of wells drilled in Lower Cook Inlet was based on February 1980 data. however, it raises the total number of wells by only one and does not change the tenor of the analysis. ARCO Alaska Inc.'s information is more current; REVENUE - The 17-year period used for revenue flow project ions resulted from our analysis of the reservoir size assumptions ~ provided by the Institute of Social and Econanic Research (ISER). No production timetable was provided; therefore, we assumed a 17-year period as being a realistic production period. The statement on page 78 has been changed to reflect a field life of 17 years. ADP&G - Additional information on the adverse impacts of oil and gas activities on fish and wildlife resources has been incorporated into the final SEEA (refer to Resource Utilization Factors #2). in a realistic manner is not possible at this point in the leasing process, however. As pointed out in the draft Analysis, the magnitude of the effects of oil and gas activities on fish and wildlife resources will depend on a variety of factors. Tracts within the proposed sale area that will actually be leased and developed are not known. Other considerations necessary to make such an evaluation, which are also unknown include, but are not limited to, 1) whether economically exploitable accumulations of hydro- carbons are found, 2) whether oil or gas is produced, 3) the area where the discovery is made, 4) the type of development (i.e., new roads, airstrips, docks, etc.) necessary to develop the field, and 5) the number and magnitude of oil pollution incidents that occur. The - effects of oil and gas activities on fish and wildlife populations in Lower Cook Inlet will depend on the role these factors play during exploration, development, and production. Prioritizing the potential impacts ADFsG - The magnitude of potential impacts have not been quantified because of the inavailability of information necessary to make such evaluations (refer to our response to your comment above regarding page 41). It is conceivable that certain impacts, such as the construction of gravel roads, can be beneficial. However, it is not possible to evaluate whether a given road or facility will be beneficial without reviewing specific details on the exact location of the facility, its design, and the construction methods to be employed. It is extremely unlikely that a facility would benefit fish and wildlife strictly by chance. A conscientious effort to improve habitat through the proper siting and design of facilities would be far more likely to produce favorable results. ADF&G - This statement has been rewritten to incorporate the suggested language (Factors #3). ACE 7421604 9. ADF&G - Suggested change made. This paragraph has been rewritten to clarify to closures of the TAPS corridor and Prudhoe Bay oil field to hunting and fishing (refer to Resource Utilization Factors #3). PUBLIC COMMENTS American Fisheries Soci ‘81 1 Page 39, paragraph 3 - We recommend that an explanation be added on why oil and gas exploration and production in the ICI area should have little affect on the value or potential development of other resources industries such as timber and mining. Where are the timber and mining areas? What is the value of each resource? Where will development activities for these resources confront each other? How do mitigating measures ease the problem? What are other considerations? 2 Page 49, paragraph 4 - Do you class herring as a bottom dweller or a pelgic species? Also, it is important to discuss other fish species that are present and the interaction of prey and predator species. Habitat of all fish species will be affected by oil spills. In addition, spills that affect the prey species also will in time affect predator species. 3 Page 70, paragraph 3- First sentence: In reading this sentence one assumes that the Trans Alaska Pipeline System (TAPS) has been open and overharvest of fish and wildlife occurred in the TAPS corridor and the Prudhoe Bay Oilfield. We recommend that a statement be added as to why the TAPS was closed and when it was opened (1979) to fishing, etc. AGENCY RESPONSE 1. DNR - Lease Sale No. 35 consists primarily of offshore 2. 3. tracts. The onshore portions which remain after a recent land status check and the call for nominations include a small amount of acreage near the City of Kenai (about 2740 acres in T 6N, R 1, S.M.,), Kalgin Island (5740 acres in T 4N, R 17W and T 4N, R 18W, S.M.) and near Redoubt Creek (5740 acres in T 4N, R 17W and T 4N, R 18w, S.M.). This limited acreage has shown no indication of presenting conflicts with potential mineral development because no mineral resources are known to be present. There is little possibility of conflict with timber development because of the small amount of onshore acreage being offered. Paragraph 3, page 39 has been revised to reflect this information. ADFSG - Herring is definitely a pelagic species. ‘The fisheries discussion in the final SEEA has been changed accordingly (refer to 4. Fish and Shellfish Populations of Resource Utilization Factors #2). It is correct that oil spills could affect the habitat of all fish species in Lower Cook Inlet, prey species as well as predators. However, it is beyond the scope of this Analysis to discuss all fish species and predator-prey relationships occurring in Lower Cook Inlet. Due to time, financial, and base line data limitations, the State must direct its' analysis largely toward; 1) species and habitats of primary concern, in terms of human use of these resources and, 2) species and/or habitats requiring special consideration (endangered and protected species, calving grounds, spawning habitat, etc.). Although other species and habitats are not specifically discussed in the Analysis, the State does consider these areas and populations when developing recommendations for protective measures and mitigation. The Department of Fish and Game has been supporting the creation of a State coastal studies Program that would provide funding for site specific research in areas proposed for future leasing. Such a program would make more detailed information available on the fish and wildlife resources of a given area and greatly assist in the development of a more comprehensive evaluation of the potential impacts of proposed projects. The Legislature has not appro- priated funding for the Coastal Studies program thus far, but the Department of Fish and Game will continue its efforts towards obtaining better fish and wildlife data for future lease sales. DPDP ~ Further discussion of the TAPS corridor and Prudhoe Bay Oilfield is not appropriate to this document. Additional information can be obtained by contacting the Department of Fish and Game. ACE 7421605 PUBLIC COMMENTS Page 137 - 160 4a. 43. We strongly urge that the mitigation measures listed (pages 140 thru 160) be accepted in protection of the fish and wildlife resources in the Cook Inlet Sale area number 38, Fish and wildlife species, endangered species (peregrine falcon), and critical habitats in Kalgin Island, Chisik and Duck Islands, Fox River Flat, Clam Gulch, and Tuxedni Bay have significant biological and economic resource value for all commercial, recreation, and subsistence user groups. given top priority for protection during the planning, This resource must be exploration, development, and production of oil and gas in the lower Cook Inlet complex. What is expected to take place with this renewable resource if the necessary protection is not provided? Because the habitat itself is a resource key to fish 4b. and wildlife some estimate of the number of acres or miles of habitat (stream) would be helpful. This habitat has significant monetary value because if habitat losses must be replaced, the cost per acre or mile would be astronamical. What would the oil resource value be as compated to a renewable resource? Pre-emergency planning at the local or industrial level is the most effective tool for oil spill cleanup. Con- tingency plans define the action that must be taken in response to a spill before the event occurs. Cleanup equipment must be ready and in Alaska, not in Los Angeles or Seattle. The individual responsible for oil spill cleanup must be fully aware of laws that prohibit or restrict the use of specific cleanup measures such as application of chemicals, which may harm fish and wildlife. Safeguards must be established to protect humans from explosive materials. AGENCY RESPONSE ADF&G - Comment acknowledged. Additional information on the adverse impacts of oil and gas activities on fish and wildlife resources has been incorporated into the final SEEA (refer to Resource Utilization Factors #2). Without appropriate protective measures the renewable resources of Lower Cook Inlet could be affected by industrial development in a variety of ways. Loss or alteration of habitat; displacement and/or declines in -+ populations; and interference with behavorial and migrational patterns are a few of the potential impacts that could result from oil industry activities. to predict the extent of such impacts or precisely evaluate how the renewable resources would be affected because of the Unfortunately, it is not possible” multitude of factors that are involved (refer to our response to ARCO pertaining to page 41). ADFSG - The number of acres or miles of (stream) habitat included within the proposed sale area could be sited in the Analysis, however, quoting such a figure would be very mis~ leading in terms of analyzing the potential impacts of the sale on renewable resources. Due to the migratory behavior of many of the species, and the fact that the "home ranges" of species present year-round do not coincide with the sale boundaries, activities that take place in the Sale #35 area could affect populations and ecosystems located considerable distances from Lower Cook Inlet. Comparing the oil resource value of the sale area to that of the renewable resources would be extremely difficult for this reason, as well as other considerations. ‘The anticipated comercial harvest of fish species could be estimated for a given - time, but there is considerable debate about. » monetary values to species that are not harvested and value period of attaching or to the esthetic value of a given area. a problem with attaching economic values to species such as waterfowl, bear, and moose which are valued food species but not sold commercially. Additionally, it can be argued that a monetary value cannot be placed on renewable resources at all because if properly managed the resources, and consequently their value, will continue indefinitely. There is also - DEC - The State fully concurs with the concept of pre- planning for oil spills. to develop detailed contingency plans for large oil storage facilities, offshore rigs, barges and tankers. One element that must be addressed in these contingency plans is the location and availability of clean-up equipment. Currently, DEC requires industries ACE 7421606 APPENDIX 1 METHODOLOGY FOR EMPLOYMENT, POPULATION, AND INCOME EFFECTS Introduction This appendix discusses the process used to develop the estimates of employment, population, and income presented in Tables 1 through 4. The process begins with < plausible, but necessarily hypothetical, field development scenario and then builds on a number of assumptions about manpower requirements and the demographic characteristics of the work force. The numerous elements in this elaborate methodological construct can, of course, vary within a more or less wide range of reasonable expectancy. Our assumption about each element reflects our best guess (in the absence of pertinent data) about a value in that range. Thus, we believe that the quantitative estimates of employment, population, and income that result from the assumptions represent a point within a realistic range of values for each of these factors. That is, the quantitative estimates should be regarded as indicators of relative magnitude rather than precise forecasts of socioeconomic impact. Development Scenario Elements of the development scenario for the mid-range resource estimate are shown in Tables A-1 through A-3. Table A-?2 also shows basic elements of a development scenario for a high-range resource estimate. ACE 7421607 TABLE A-1 ASSUMPTIONS FOR FIELD DEVELOPMENT SCENARIO MID-RANGE RESOURCE ESTIMATE No new shore transportation or processing facilities are required for either gas or oil; new construction limited to platform instal- lation and submarine pipeline. Crude oil is dehydrated offshore and shipped by submarine pipeline to Drift River terminal. Associated gas reinjected. Gas field discovery occurs relatively close to shore in the East Foreland area and is shipped by submarine pipeline to Nikiski industrial area. Phase I of the Pacific Alaska LNG project is built without new reserves discovered in this sale; Phase II is not triggered by discoveries in this sale of either the mid-range or high-range scenario. Assumed field size and production facilities are shown in Table 2. Assumed field development schedule shown in Table 3. SOURCE: Institute of Social and Economic Research ACE 1421608 609tz"L 3IV TABLE A-2 SCENARIO ASSUMPTIONS: FIELD CHARACTERISTICS Number of i Recoverable Number of Number of, Producing Wells/ Miles of | Resource Reserves Fields Platforms Platform Pipeline Estimate oil Gas oil Gas Oil Gas Oil Gas oil Gas (bbls) | (Tcf) Mid-Range 100 0.5 1 1 2 1 15 6 80 10 High-Range 300 1.0 1 1 2 2 15 6 80 10 *Conventional steel jacket platforms SOURCE: Institute of Social and Economic Research from resource estimates by the Department of Natural Resources TABLE A-3 SCENARIO ASSUMPTIONS: FIELD DEVELOPMENT SCHEDULE Year from Start of Exploration 6 and after Activities 3 exploration and delineation wells (oil discovery) 5 exploration and delineation wells (gas discovery) 5 exploration and delineation wells Install 2 steel jacket oil production platforms (2 months each); begin development oil well drilling (18 months total per platform) ; 3 exploration and delineation wells Install 1 steel jacket gas production platform (2 months); begin development gas well drilling; continue oil development well drilling; lay all submarine pipeline (6 months) Begin oil and gas production SOURCE: Institute of Social and Economic Research A-4 E qe2L010 The central assumptions upon which these scenarios are built have been discussed in the text, namely, that recoverable reserves are between 100 and 300 mmbbls of oil and between 0.5 and 1.0 Tcf of gas; that explora- tion and development occurs offshore; and that no major discoveries occur in Upper Cook Inlet or on federal leases in Lower Cook Inlet. Within these parameters, however, numerous factors influence the pattern of development and, therefore, manpower requirements. Factors that determine the production facilities, such as the number of platforms, the com- plexity of deck modules, length of subsea pipeline, and the nature of shore facilities, include the following: e@ number and distribution of fields @ water depth e reservoir depth e thickness and shape of reservoir e gas/oil ratio and other characteristics of produced liquids @ proximity to existing support infrastructure and processing facilities e distance from shore e well productivity Among the factors that influence the schedule of field development which, in turn, determine manpower loading and peak manpower demand are the following: e amount of delineation required after discovery e complexity of producing structures e well productivity ACE 7421611 e amount of production equipment required and complexity of design e response time of vendors and fabricators of platform and pro- duction modules e length of construction season Our assumptions, explicit and implicit, about these factors are reflected in Tables A-1 through A-3. Different assumptions would pro- duce different estimates of labor requirements and, therefore, different estimates of population and income effects. Direct Employment Estimates of the manpower required for each major activity in the development scenario are presented in Table A-4. These estimates are applied to the scenario according to the development schedule in Table A-3. This is shown in Table A-5, and the results are summarized in Table A-6. The manpower estimates in Table A-4 represent employment values developed by the OCS Socioeconomic Studies Program (Bureau of Land Manage- ment, Anchorage), modified in a few instances to fit the case at hand. They are expressed as manpower requirements for each "unit" of activity that occurs in the mid-range development scenario. It must be noted, however, that manpower demand is very sensitive to a number of factors, including the following: @ type and complexity of primary processing and secondary recovery equipment on the platforms e distance of platforms from shore bases and from other platforms e labor skill and productivity ace Tezbel2 TABLE A-4 EMPLOYMENT ASSUMPTIONS (Number of People) Employment” Activity b 2 Exploration and delineation 163/well 18/well well drilling Platform installation 250/platform 25/platform Development drilling 151/platform 18/platform (1 rig/platform) Pipeline construction 200/spread 25/spread Platform operation, oil 60/platform 8/platform Platform operation, gas 40/platform 8/platform 9Includes employees off-duty. Offshore employment is typically about twice the number present at the work site because crews take one day off for each day worked on a schedule of 7 days on and 7 days off; 14 days on and 14 days off; or 28 days on and 28 days off. b Includes offshore support such as tug and supply boat services. “Includes onshore support activities such as helicopter operations, as well as administration, secretarial service, bookkeeping, expediting, etc. SOURCE: ISER, derived from the OCS manpower model; see Alaska OCS Socio- economic Studies Program, Technical Report No. 63, North Aleutian Petroleum Technology Assessment, pp. 5-2 to 5-5. Some modification of the OCS estimates has been made to account for the 100 mmbbl field size. See also Technical Report No. 55, Monitoring Oil Exploration Activities in the Lower Cook Inlet, pp. 55-78. ACE 7421613 $T9T24) 29 ESTIMATED DIRECT EMPLOYMENT TABLE A-5 MID-RANGE RESOURCE DEVELOPMENT SCENARIO Employment? Year Activity Level of Activity Length of Activity Man Months Peak No. of People oftehore| Onshore | Offshore a Onshore 1 exploration/ 3 wells 4 months/well; 1,956 216 delineation 12 drilling drilling (2 rigs) months total 2 exploration/ 5 wells 4 months/well; 3,260 360 489 54 delineation 20 drilling drilling (3 rigs) months total 3 exploration/ 5 wells 4 months/well; 3,260 360 489 54 delineation 20 drilling drilling months total 4 oil platform 2 platforms 2 months/platform 1,000 100 250 25 installation 4 months total (1 derick barge spread) development 2 rigs 14 drilling months 2,114 252 302 36 drilling (1 rig/platform) exploration 3 wells 4 months/well; 1,956 216 326 36 drilling (2 rigs) 12 drilling months total (continued) ST9TZ4L 39V TABLE A-5 (continued) Employment? Year Activity Level of Activity® Length of Activity Man Months Peak No. of People offshore [onshore Offshore | Onshore 5 oil development 2 rigs 22 months 3,322 396 302 36 drilling (1 rig/platform) gas platform 1 platform 2 months 500 50 250 2a installation gas development 1 rig 6 months 906 108 151 18 drilling pipeline 1 spread 6 months 1,200 150 200 25 installation 6 oil production 2 platforms 12 months 1,440 192 120 16 begins gas production 1 platform 12 months 480 96 40 8 SOURCE: “From Table A-3. Peon Table A-4. Institute of Social and Economic Research TABLE A-6 SUMMARY: DIRECT EMPLOYMENT Peak Number of People Offshore Onshore Total Man Months Offshore | Onshore | Total 1 1,956 216 2,172 326 36 362 2 3,260 360 3,620 489 54 543 3 3,260 360 3,620 489 54 543 4 5,070 568 5,638 878 97 975 5 5,928 704 6,632 903 104 1,007 6 1,920 288 2,208 160 24 184 (operation) SOURCE: Table A-5, A-10 ACE 7421616 e the schedule of component projects in the field development process e construction techniques e size and type of drilling and construction equipment (e.g., lay barges) e site-specific geologic conditions e environmental stipulations Therefore, our estimates could overstate or understate actual manpower needs for the various tasks in a real situation. Note that Tables A-5 and A~6 show employment in man-months and peak number of people. This is because the employment in years 1 through 5 is not year-round. Table A-5 shows, for example, that in year 5 oil development well drilling on each platform lasts eleven months; instal- lation and commissioning of the gas platform, two months; gas develop- ment well drilling, six months; and all pipeline building, six months. We have assumed that all of these activities will overlap at some point in the summer months during the "weather window" (construction season) . Therefore, the peak number of people employed in year 5 is 1,007. However, only 6,632 man-months have been worked, which is the equivalent of 553 men working for twelve months. Not until the operational period is reached does work become year-round (2,208 man-months = 184 people x 12 months). Subsequent analysis deals with the peak number of people employed, except for the calculation of income effects, which is based on man-months of labor. A-11 ACE 1421617 Table A-7 allocates the direct employment between residents and nonresidents and then allocates the residents between the Kenai and Anchorage areas. Our assumption about the share of direct offshore jobs held by residents is shown in column 4; of direct onshore employment, in column 6. As explained in the text, we vary this distribution for the exploration/development period (years 1 through 5) and the operation ' period (year 6 and after’. Our assumption about the place of residence of the Alaskan employees (columns 10 and 12) also varies between the exploration/development period and the production period. A 50-50 split between the Kenai and Anchorage area is our teat guess about the period of intermittent employment during exploration and field development; the split of 85 percent and 15 percent during operation is the current residential distribution of Upper Cook Inlet efigeiiigiiigt My b@rsonnel. - Indirect Employment Indirect employment is that support sector (nonbasic) employment generated bppfthe-presence of new direct (basic) employment in the economy. Its magnitude’ is estimated by employment multipliers that express the historical, or expected, relationship between direct and indirect (basic and nonbasic) employment in an economic system. Analysis of the case at hand is complicated by three factors:" gone & ‘ ut lyenai Peninsula Borough, OEDP Staff, A Profile of the Oil and Gas Industry, Kenai Borough, July 1978, p. 17. + fatth minor complicating factor is ignored for the purpose of this analysis, namely that aceelerated activity in the Kenai economy has secondary effects on the Anchorage economy because of linkages between the two. A-12 ACE 7421618 €T-v 619TZ7L ADV TABLE A-7 RESIDENCY PATTERNS, DIRECT EMPLOYMENT (Peak Number of People) Direct Employment* Alaska Residents Location of Residents Year Offshore Onshore Total Nonresidents Offshore } Onshore Z [= Z | No. 1 326 36 5 16 85 31 47 315 50 24 50 24 2 489 54 5 24 85 46 70 473 50 35 50 35 3 489 54 5 24 85 46 70 473 50 35 50 35 4 878 97 5 44 85 82 126 849 50 63 50 63 5 903 104 5 45 85 88 133 874 50 67 50 67 6 160 24 60 96 90 22 118 66 85 59 15 59 (operation) 'From Table A-6. e@ Multiplier effects will differ between the exploration/ development and the operation periods; e multiplier effects for offshore, nonresident workers during the exploration/development period will differ from the multiplier for onshore workers during this period; e multiplier effects will differ between the Kenai and Anchorage areas. Multiplier effects curing exploration and development will be smaller than those during the operation period because direct employment will be short term and will fluctuate during the year. Therefore, many employers in support sector industries will hesitate to hire new employees in response to increased but irregular demand. Only when increased demand becomes steady during the operation phase will the full secondary response occur. Offshore, nonresident workers will generate little per capita second- ary economic impact during the early period because they will live off- shore and spend money in the local economy only as they rotate to and from the offshore drilling rigs, platforms, barges, and boats. In the peak years of construction, however, this source of secondary employment is not insignificant to the Kenai economy. Multiplier effects will be greater in Anchorage than in the Kenai area because in a larger and more complex economy, there is greater opportunity for money to be re-spent within the system rather than to "leak" outside it. A-14 ACE 7421620 In view of the foregoing, we have used the following multipliers in the analysis shown in Table A-8: Exploration/Development Operation Kenai 1.3 1.65 Offshore, nonresidents 1.07 a Anchorage 1.5 2.0 The figures 1.65 and 2.0 are based on historical patterns of basic and nonbasic employment in these areas;> the figures 1.3, 1.07, and 1.5 represent our best guess of multiplier effects during the pre-production period. Table A-9 allocates the indirect employment between residents and nonresidents on the basis of the assumption that the former will hold 85 percent of these jobs and the latter, 15 percent. This is assumed to be the case for indirect jobs created in both the Anchorage and Kenai areas. Total Employment Table A-10 summarizes total employment from the estimate of direct employment in Table A-6 and indirect employment in Table A-8. 3506 also Bradford Tuck, Economic Development Planning for Anchorage: A Theoretical and Empirical Analysis. Municipality of Anchorage, Depart- ment of Planning, November 1980. “> ACE 7421621 9T-V 229T2bL 39 TABLE A-8 INDIRECT EMPLOYMENT (Peak Number of People) Location of Direct Employment Direct Employment? Employment Multiplier Indirect Employment — peeiore ieee Offshore | Kenai [snetorsee Offshore [ena | anchorate Kenai Anchorae | Total 1 326 36 310 28 24 (1) .07) (1) .3)0 (1) «5 30 12 42 2 489 54 465 43 35 (1) .07. (1) .3)0 (1) ~.5 46 18 64 3 489 54 465 43 35 (1) .07) (1) .3) (1) «5 46 18 64 4 878 97 834 78 63 (1) .07) (1) «3 (1) 65 81 32 113 5 903 104 858 82 67 (1) .07 (1) 4.3 (1) .5 85 34 119 6 160 24 --? 156° 28° --4 (1) .65 (141.0101 28 129 (operation) *Prom Table A-6. Derived from information in Table A-7; assumes nonresident, onshore employees live in Kenai area. “assumes onshore employment multiplier effects of nonresident, offshore employees occur in Kenai area. Spuring operations, total workforce lives in Kenai or Anchorage. “Total operations workforce of 184 divided between Kenai and Anchorage 85 percent and 15 percent, respectively. <T-¥ ezgtz7b 32 TABLE A-9 RESIDENCY PATTERNS, INDIRECT EMPLOYMENT Indirect Employment* Residents In-migrants Anchorage * a No. ae 2 1 30 12 85 26 85 10 15 4 15 2 46 18 85 39 85 15 15 7 15 3 3 46 18 85 39 85 15 15 7 15 3 4 81 32 85 69 85 27 15 12 15 2 5 85 34 85 72 85 29 15 13 15 5 6 101 28 85 86 85 24 15 15 15 4 (operation) 3From Table A-8. TABLE A-10 SUMMARY: TOTAL EMPLOYMENT (Peak Number of People) a Indirect Direct Employment Employment Total Employment Offshore | Onshore (Onshore)? Offshore 1 326 36 42 326 78 404 2 489 54 64 489 118 607 3 489 54 64 489 118 607 4 878 97 113 878 210 1,088 5 903 104 119 903 223 1,126 6 160 24 129 160 313° 313 (operation) “From Table A-6. bom Table A-8. “In operational phase, offshore workers live onshore, so total employment may be considered onshore employment. ACE 7421624 A-18 Population Effects Table A-11 calculates the population increase that results from the share of new direct and indirect jobs held by in-migrants to Alaska. This calculation is made by means of a "dependency ratio" of 1.4 for the exploration/development period and 2.0 for the period of operation. This ratio and the rationale for the use of two values is explained in the text. The ratio of 1.4 for the first period is based on our best guess of a reasonable and realistic value; the ratio of 2.0 for both Kenai and Anchorage is based on the current approximate relationship of total population to work force in these places. An important assumption implicit in the derivation of these popula- tion estimates is that in-migrants do not come to Alaska to take jobs vacated by current employed Alaskans who move into the direct and indirect jobs created by this petroleum development activity. Thus, we assume that Alaska residents who enter the new jobs will be people previously unemployed or people previously not in the labor force; or they will be people previously employed whose vacancies will be filled by unemployed or new entrants into the labor force. “See Kenai Peninsula Borough Planning Department, The Kenai Penin- sula Borough: Situation and Prospects, January 1980; Anchorage Urban Observatory, 1978 Population Profile, Municipality of Anchorage, Anchor- age, Alaska, 1978. A-19 qu2rer? 07-V 9z29tzzl 32V TABLE A-11 POPULATION EFFECTS OF DIRECT AND INDIRECT EMPLOYMENT (Number of People) In-migrant Emp loyment* Labor Force Year Kenai Area | Anchorage Area Participation Population Db b c Factor Direct [ naizece® Total Direct | Indirect [ tees Anchorage 1 5 4 9 0 2 2 1.4 13 3 16 2 8 7 15 0 3 3 1.4 21 4 25 3 8 7 15 0 3 3 1.4 21 4 25 4 15 12 27 0 5 5 1.4 38 7 45 5 16 13 29 0 5 5 1.4 41 7 48 6 564 15 71 104 4 14 2.0 142 28 170 (operation) aExcludes nonresident, offshore labor force during exploration and field development activity. Peco Table A-7. “From Table A-9. Assumes 85 percent of the 66 nonresidents shown in Table A-7 locate in Kenai, and 15 percent in Anchorage. Real Per Capita Income Effects A common feature of any resource development in Alaska is that the welfare consequences of any development are dispersed among several groups: the owners of the resource, consumers of the resource, migrants attracted to the region by the economic opportunities associated with development, and the original residents of the region at the time of development. This analysis concentrates on the probable welfare consequences to the last group, Alaska residents at the time of development. The reason for this is that any changes in the welfare of the first four of these groups are borne voluntarily, while the effects on original residents are often involuntary. Our measure of the welfare effects of the development of the state's Lower Cook leases is the change in real per capita income which results from this development. Real per capita income measures the claim of the average consumer on goods and services; an increase in real per capita income allows the average consumer to purchase more goods and services. The effect of Lower Cook development on the claims on goods and services is one important measure of the welfare effects of development. By itself, change in real per capita income is not an unambiguous measure of welfare. The primary reason is that increases in real income are not shared evenly by the population. Income changes resulting from petroleum development accrue primarily to individuals directly involved in the development. These distributional consequences reduce our ability to determine the welfare changes which result from petroleum development. — ACE 7421627 By definition, changes in real per capita income are determined by changes in three economic variables: income, prices, and population. All components of income--wages and salaries, proprietors' income, and capital gains--may be affected by petroleum development. Capital gains result from increased pressure of resources, which in the short run are in relatively short supply, such as housing. Because this development has a relatively small effect on population, we will assume the capital gains from this development are negligible. Wages and salary created by this development are a function of the number and type of jobs created. The number of jobs created depends, as we have shown, on the size of development, the need for facility construction, and the size of secondary effects. The type of jobs created is important because wage rates vary across jobs. The real per capita income effect will be lower if the majority of the employment is created in the lower-paying service sector than if the majority of jobs is created in the petroleum sector. A second consideration when discussing real per capita income effects is who gets the jobs; this affects the distribution of income increases. There is reason to believe that a large portion of the OCS sector jobs will go to non-Alaskans, particularly in the exploration and development phases. To the extent these high-wage jobs are taken by nonresidents, the effect on Alaska resident real per capita incomes will be reduced. ACE 7421628 A-22 A similar consideration determines the effect on proprietors’ income. Only income earned by proprietors in the state is relevant to our discus- sion. To the extent national or international firms participate in the development, increased proprietors’ incomes will not accrue as Alaska income. Changes in the population and price level are the other two determi- nants of changes in real per capita income. Changes in population deter- mine the number of people over which any income change is spread. Changes in prices affect the amount of goods and services a dollar can buy. Changes in prices are the one way in which petroleum development can affect residents of the state not directly associated with petroleum job creation. If prices increase, the effect is to lower the real per capita income of other residents. There are two types of price effects which can result from this type of development: boom and scale effects. Boom effects result primarily from rapid, nonmarginal (relatively large) population and employment increases which place pressure on resources in inelastic supply such as land, housing, services, and certain types of labor. The other effect is of a long-term nature; increases in the size of the economy have a tendency to reduce the price level (or reduce the rate of increase). The scale effect results primarily from an increase in the market size. We assume that because the population and employ- ment effects of this development are relatively small, the price effects of this development will be negligible. A-23 Tables A-12 and A-13 show our estimate of yearly real income increases which result from Lower Cook development. These tables assume there is no price effect from Lower Cook development and that 1979 real wage rates remain constant. We also assume that proprietors' income equals 8 percent of the total increase in resident wages and salaries and that all proprietors are currently residents in the state. The numbers in these tables reflect our assumptions about the dis- tributions of jobs between current residents, in-migrants (who become residents), and nonresidents who simply work in the state. The tables also reflect the assumption that the division of man months between these groups would be similar to the division of peak employment. This may not be the case (in fact, the peak distribution may be a minimun), but the assumption is not unreasonable. Under our assumption, the maximum increase in income to Alaska residents occurs during production when current Alaska residents earn $8.34 million from the development, and current residents plus in- migrants earn $9.88 million. This means the real per capita income of current residents would be increased by $21. Real per capita income would be increased by $25 if the new residents and their incomes were counted. This means that Lower Cook development increases real incomes more than population. In spite of this, the effect on real incomes can be considered insignificant. A-24 ACE 7421630 TABLE A-12 LOWER COOK REAL INCOME EFFECTS* (Alaska Resident) Employment? Wage Rate Personal Income (Man-months) (Per Month) (1979 Dollars) 2 Year a d £ Total Offshore {Offshore Offshore | Offshore ppo Total Other Personal Anchorage Wage & Salary Income Income (Millions $) (Millions $) (Millions $$) a St-V TEST 24) 39y 1 98 216 182 71 1518 2400 1205 1242 0.975 +078 1.053 2 163 360 304 118 1518 2400 1205 1242 1.624 +130 1.754 3 163 360 304 118 1518 2400 1205 1242 1.624 +130 1.754 4 254 568 473 185 1518 2400 1205 1242 2.549 +204 2.753 5 296 704 560 224 1518 2400 1205 1242 3.092 +247 3.339 6 1920 288 1200 331 2800 2400 1205 1242 9.148 +732 9.880 *all dollars in 1979 constant dollars. brrom Tables A-6 - A-8. Assumes both residency split and multipliers are the same for man-months as for peak employment. “offshore equals 63 percent of Kenai wage (based on Socioeconomic Studies Program Technical Report No. 55). Seased on average of Kenai oil and gas and construction monthly wage rates. “Based on average of trade and service monthly wage rate in respective region. ‘other incomes equals .08 times onshore and support employment based on 1979 Personal Income Printout, Bureau of Economic Analysis, U.S. Department of Commerce. TABLE A-13 LOWER COOK REAL INCOME EFFECTS (Current Residents) Employment (Man-months) Wage Rate (Per Month) Personal Income (Millions $) 97-V zegt27L 39V Year Total (Offshore | Offshore Offshore | Offshore Total Other Personal Anchorage Wage & Salary Income Income 1 98 184 155 60 1518 2400 1205 1242 0.853 -078 0.931 2 163 306 258 100 1518 2400 1205 1242 1.416 +130 1.546 3 163 306 258 100 1518 2400 1205 1242 1.416 +130 1.546 4 254 483 402 157 1518 2400 1205 1242 2.224 +204 2.408 5 296 598 476 190 1518 2400 1205 1242 2.694 +247 2.941 6 1152 259 1037 281 1518 2400 1205 1242 7.597 +732 8.339 Department of Natural Resources Appendix 1 A Competitive 0i1 and Gas Lease Form ACE 1421633 FORM NO. OMEM-1-79B (SLIDING SCALE ROYALTY) (Revised November 5, 1979) STATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES DIVISION OF MINERALS AND ENERGY MANAGEMENT Competitive Oil and Gas Lease ADL No. THIS LEASE is made by and between the State of Alaska, acting by and through the Commissioner of Natural Resources or his authorized agent, hereafter referred to as ‘the State,” and hereafter referred to as “Lessee,” whether one or morc + In consideration of the cash payment heretofore made by Lessee to the State, which payment includes the first year’s rental and any required cash bonus, and the promises, terms, conditions and covenants contained herein, including the Stipulation(s) numbered attached hereto and by this reference incorporated herein, the State and Lessee agree as follows: 1, GRANT {a) Subject to the promises, terms, conditions and covenants contained herein, the State hereby grants and leases to Lessee, without warranty, the exclusive right to drill for, extract, remove, clean, process and dispose of oil, gas and associated substances in or under the following described tract of land: ACE 7421634 containing approximately acres, more or less (hereafter referred to as the “leased area’’), the nonexclusive right to conduct within the leased area geological and geophysical exploration for oil, gas and associated substances, and the nonexclusive right to install pipelines and structures thereon to find, produce, save, store, treat, process, transport, take care of and market all such substances and to house and board employees in its operations thereon, (b) For the purposes of this lease, the leased area contains the legal subdivisions as shown on the attached plat marked Exhibit A. (c) If the leased area is described above by protracted legal subdivisions and the State hereafter causes the leased ares to be surveyed under the public land rectangular system, the boundaries of the leased area are those established by such survey, when approved, subject, however, to the provisions of applicable regulations relating to such surveys. If for any reason the leased area includes more acreage than the maximum permitted under applicable law (including the “rule of approximation” authorized in AS 38.05.145 and defined in AS 38.05.365(13)), this lease is not void and the acreage included in the leased area shall be reduced to the permitted maximum. If the State determines that this lease exceeds the permitted acreage and notifies Lessee in writing of the amount of acreage that must be eliminated, Lessee shall have sixty (60) days after such notice to surrender one or more legal subdivisions included in the leased ares comprising at least the amount of acreage that must be eliminated. Any such subdivision(s) surrendered must be located on the perimeter of the leased ares as originally described. If such a surrender is not filed within sixty (60) days, the State may terminate this lease as to the acreage that must be eliminated by mailing notice of such termination to Lessee describing the subdivision(s) eliminated. (d) If the State’s ownership interest in the oil, gas and associated substances in the leased area is less than an entire and undivided interest, the grant under this lease is effective only as to the State's interest in that oil, gas and associated substances, and the royalties and rentals herein provided shall be paid to the State in the proportion which the State's interest bears to the entire undivided fee. 2. RESERVED RIGHTS. (a) The State, for itself and others, reserves all rights not expressly granted to the Lessee by this lease. These reserved rights include, but are not limited to: (1) the right to explore for oil, gas, and associated substances by geological and geophysical means; (2) the right to explore for, develop, and remove natura! resources other than oil, gas, and associated substances on or from the leased area; (3) the right to establish or grant easements and rights-of-way for any lawful purpose, including without limitation for shafts and tunnels necessary or appropriate for the working of the leased area or other lands for natural resources other than oil, gas, and associated substances; (4). the right to dispose of land within the leased area for well sites and well bores of wells drilled from or through the leased area to explore for or produce oil, gas, and associated substances in and from lands not within the leased area; and (5) the right otherwise to manage and dispose of the surface of the leased area or interests in that land by grant, lease, permit, or otherwise to third parties. (b) Rights reserved by the State may be exercised in any manner that does not unreasonably interfere with or endanger the Lessee’s operations under this lease. 3. TERM. This lease is issued for an initial primary term of years from the effective date of this lease. The term may be extended as provided in Paragraph 4 below. 4. EXTENSION. (a) This lease shail be extended automatically if and for so long as oil or gas is produced in paying quantities from the leased area. (b) This lease shall be extended automatically if it is committed to a unit agreement approved or prescribed by the State, and shall remain in effect for so long as it remains committed to that unit agreement. he (c) (1) If the drilling of 2 well whose bottom hole location is in the leased area has commenced es of the date on which the lease otherwise would expire and is continued with reasonable diligence, this lease shall continue in effect until 90 days after cessation of that drilling and for so long as oil or gas is produced in paying quantities from the leased area. (2) If oil or gas in paying quantities is produced from the leased area, and if that production ceases at any time, this lease shall not terminate if drilling or reworking operations are commenced on the leased area within six months after cessation of production and are prosecuted with reasonable diligence; if those drilling or reworking operations result in the production of oil or gas, this lease shall remain in effect for so long as oil or gas is produced in paying quantities from the leased area. {d) If there is a well capable of producing oi! or gas in paying quantities on the leased area, this lease shall not expire because the Lessee fails to produce that oil or gas unless the State gives notice to the Lessee, allowing a reasonable time, which shall not be less than six months after notice, to place the well into production, and the Lessee fails to do so. If production is established within the time allowed, this leese is extended only for so long as oil or gas is produced in paying quantities from the leased area. (e) If the State directs or approves in writing a suspension of all operations on or production from the leased area (except for a suspension necessitated by the Lessee’s negligence), or if a suspension of all operations on or production from the leased area has been ordered under federal, state, or locai law, the Lessee’s obligation to comply with any express or implied provision of this lease requiring operations or production shall be suspended, but not voided, and the Lessee shall not be liable for damages for failure to comply with that provision. If the suspension occurs before the expiration of the primary term, the primary term shall be extended at the end of the period of the suspension by adding the period of time lost under the primary term because of the suspension. If the suspension occurs during an extension of the primary term under this Paragraph, upon removal of that suspension, the Lessee shall have a reasonable time, which shall not be less than six months after notice that the suspension has been removed, to resume operations or production. For the purposes of this subparagraph, any suspension of operations or production specifically required or imposed as a term of sale .or by any stipulation made a part of this lease shall not be considered a suspension ordered by law. (f) If the State determines that the Lessee has been prevented by force majeure, after efforts made in good faith, from performing any act that would extend the lease beyond the primary term, this lease shall not expire during the period of force majeure. If the force majeure occurs before the expiration of the primary term, the primary term shall be extended at the end of the period of force majeure by adding the period of time lost under the primary term because of the force majeure. If the force majeure occurs during an extension of the primary term under this Paragraph, this lease shall not expire during the period of force majeure plus a reasonable time after that period, which shall not be less than 69 days, for the Lessee to resume operations or production. (9) Nothing in subparagraph (e) or (f) suspends the obligation to pay royalties or other production or profit-based payments to the State from operations on the leased area that are not affected by anv suspension or force majeure, or suspends the obligation to pay rentals. 5. RENTALS. (a) The Lessee shall pay annual rental to the State in accordance with the following rental schedule: (1) For the first year, $1.00 per acre or fraction of an acre; (2) For the second year, $1.50 per acre or fraction of an acre; (3) For the third year, $2.00 per acre or fraction of an acre; (4) For the fourth year, $2.50 per acre or fraction of an acre; (5) For the fifth year and following years, $3.00 per acre or fraction of an acre; provided that the State may increase the annual rental rate as provided by law upon extension of this lease beyond the primary term. (b) Annual rental paid in advance is a credit on the royalty or net profit share due under this lease for that year. (c) The Lessee shall pay the annual rental to the State of Alaska (or any depository designated by the State with at least 60 days’ notice to the Lessee) in advance, on or before the annual anniversary date of this lease. The State is not required to give notice thet rentals are due by billing the Lessee. If the State’s (or depository’s) office is not open for business on the annual anniversary date of this lease, the time for payment is extended to include the next day on which that office is open for business. If the annual rental is not paid timely, this lease automatically terminates as to both parties at 11:59 p.m., Alaska Standard Time, on the date by which the rental payment was to have been made. 6. RECORDS. The Lessee shall keep and heve in its possession books and records showing the development and production (including records of development and production expenses) and disposition (including records of sales prices, volumes, and purchasers) of all oil, gas, and associated substances produced from the leased area. The Lessee shall permit the State of Alaska or its agents to examine these books and records at all reasonable times, These books and records of development, production, and disposition must employ methods and techniques that will ensure the most accurate figures reasonably available without requiring the Lessee to provide separate tankage or meters for each well. The Lessee shall use standard and consistent accounting procedures. ACE 7421635 7. APPORTIONMENT OF ROYALTY FROM APPROVED UNIT. The landowner’s royalty share of the unit Production allocated to each separately owned tract shall be regarded as royalty to be distributed to and among, or the proceeds of it paid to, the landowners, free and clear of all unit expenses and free of any lien for them. Under this provision, the State's royalty share of any unit production allocated to the leased area shall be regarded as royalty to be distributed to, or the proceeds of it paid to, the State, free and clear of all unit expenses (and any portion of those expenses incurred away from the unit area), including, but not limited to, expenses for separating, cleaning, dehydration, gathering, saltwater disposal, and preparing oil, gas, or associated substances for transportation off the unit area, and free of any lien for them. : 8. PAYMENTS. All payments to the State of Alaske under this lease shall be made payable to the State in the manner directed by the State, and, unless otherwise specified, shall be tendered to the State at DEPARTMENT OF NATURAL RESOURCES 323 EAST FOURTH AVENUE ANCHORAGE, ALASKA 99501 or to any depository designated by the State with at least 60 days’ notice to the Lessee. 9. PLAN OF OPERATIONS. (a) Except as provided in subparagraph (b) below, no lease operations shall be undertaken on the leased area until a plan of operations has been approved by the State if: (1) the State of Alaska owns all or part of the surface estate of the leased area; (2) the lease reserves a net profit share to the State of Alaska; or (3) the entire surface estate of the leased area is owned by a third party rather than by the Stete of Alaska and the surface owner requests that a plan of operations be required by the State. . (b) A lease plan of operations shall not be required by the State for: (1) lease operations that would not require a land use permit under 11 AAC; or (2) lease operations undertaken pursuant to an approved unit plan of operations in accordance with 11 AAC. (c) Before undertaking operations on the leased area, the Lessee shall make provision under AS 38.05.130 for full payment of all damages sustained by the owner of the surface estate as well as by the surface owner's lessees and permittees. If the surface estate is owned by a third party rather than by the State of Alaska, the Lessee shall also notify the surface owner of his right to request that the State require a plan of operations before allowing lease operations to be undertaken on the leased area. (d) The Lessee shall file with the State 10 capies of its proposed plan of operations if the proposed operations are within the coastal zone, and five copies if the proposed operations are not within the coastal zone. (e) Application for approval of a plan of operations shall contain statements and maps or drawings setting out the following: (1) the sequence and schedule of the operations to be conducted on the leased area, including the date operations are proposed to begin and their proposed duration; (2) projected use requirements associated with the proposed operations, including but not limited to the location and design of well sites, material sites, water supplies, solid waste sites, buildings, roads, utilities, airstrips, and all other facilities and equipment necessary to conduct the proposed operations; (3) plans for rehabilitation of the affected leased area after completion of operations or phases of those operations; and (4) a@ description of operating procedure designed to prevent or minimize adverse effects on other natural resources and other uses of the leased area and adjacent areas, including fish and wildlife habitats, historic and archeologicai sites, and public use areas. (f) In approving a lease or unit plan of operations, the State may require modifications it determines necessary to protect the environment or the interests of the state. The State shall not require any modification that would be inconsistent with the terms of sale under which the lease was obtained or with the terms of the lease itself, or would deprive the Lessee of reasonable use of the leasehold interest. (g) The Lessee may, with the approval of the State, subsequently modify an approved plan of operations. (h) Approval by the State of a plan of operations or any modifications of a plan of operations signifies only that the State has no objection to the operations outlined in the plan from the standpoint of the lease administrator and does not relieve the Lessee of its obligation to obtain approvals and permits required by other governmental agencies having regulatory authority over those operations. {i} All of the Lessee’s operations on the leased area shall be in conformance with the approved plan of operations. (j) Upon completion of operations, the Lessee shall submit a report indicating the completion date of operations and certifying compliance with requirements imposed as a condition of approval of the plan. 10. PLAN OF DEVELOPMENT. (a) Except as provided in subparegraph (d) below, within 12 months after certification of a well capable of producing oil, gas, or associated substances in paying quantities, the Lessee shall file two copies of an application for approval by the State of an initial plan of development that shall describe the Lessee’s plans for developing the leased area. No development of the leased area shall occur until a plan of development has been approved by the State. (b) The plan of development shall be revised, updated, and. submitted to the State for approval annually before or on the anniversary date of the previously approved plan. If no changes from an approved plan are contemplated for the following year, a statement to that effect shall be filed for approval in lieu of the required revision and update. (c) The Lessee may, with the approval of the State, subsequently modify an approved plan of development. (d) If the leased area is included in an approved unit, the Lessee shall not be required to submit a separate lease plan of , development for unit activities. geophysical 11. LOGS AND OTHER RECORDS OF OPERATIONS. (a) The Lessee shall file with the State all logs, geological and surveys taken, a description of all tests run for each well drilled on the leased area, and a plat showing the exact location of each well, within 30 days after each well or survey has been completed, suspended, or abandoned. (b) Any information filed by the Lessee with the State in connection with this lease shall be available at all times for the confidential use of the State for the purpose of enforcing compliance with the promises, terms, conditions, and covenants of this lease and the provisions of Alaska law. Inspection of this information by any persons other than officers or employees of the State of Alaska (and persons performing any function or work assigned to them by the State of Alaska) shall be governed by applicable law. 12. DIRECTIONAL DRILLING. This lease may be maintained in effect by directional wells whose bottom hole location is on the leased area but that are drilled from locations on other lands not covered by this lease. In those circumstances, drilling shall be considered to have commenced on the leased area when actual drilling is commenced on those other lands for the purpose of directionally drilling into the leased area. Production of oil or gas from the leased area through any directional well surfaced on those other lands, or drilling or reworking of that directional well, shall be considered production or drilling or reworking operations on the leased area for all purposes of this lease. Nothing contained in this Paragraph is intended or shall be construed as granting to the Lessee any interest, license, easement, or other right in or with respect to those lands in addition to any interest, license, easement, or other right that the Lessee may have lawfully acquired from the State or from others. A ‘ ACE 7421636 13. DILIGENCE AND PREVENTION OF WASTE. (a) The Lessee shall exercise reasonable diligence in drilling, producing, and operating wells on the leased area unless consent to suspend operations temporarily is granted by the State. (b) Upon discovery of cil or gas on the leased area in quantities that would appear to a reasonable and prudent operator to be sufficignt to recover ordinary costs of drilling, completing, and producing an additional well in the same geologic structure at ancther location with a reasorable profit to the operator, the Lessee shall! dril! those wells as a reesonable and prudent operator would drill, having due regard for the interest of the State as well as the interest of the Lessee. (c) The Lessee shali perform all operations under this lease in 2 good and workmanlike manner in accordance with the methods end practices set out in the apprceved plan of operations and plan of development, with due regard for the prevention of waste of oil, gas, and associated substences and the entrance of water to the oii- and gas-bearing sands or strata to the destruction or injury of those sands or strata, and to the preservation and conservation of the property for future productive operations. The Lessee shall carry out at the Lessee’s expense al! orders and requirements of the State of Alaska reletive to the prevention of waste end to the preservation of the leased area. If the Lessee fails to carry out these orders, the State shall have the right, together with any other available legal recourse, to enter the leased area to repair damage or prevent waste at the Lessee’s expense. (d) The Lessee shall securely plug in an approved manner any well before abandoning it. 14. OFFSET WELLS. The Lessee shall drill such wells as a reasonable and prudent operator would drill to protect the State from loss by reason of drainage resulting from production on other land. Without limiting the generality of the foregoing sentence, if oil or gas is produced in a well on other land not ov.ned by the State of Alaska or on which the State of Alaska receives a lower rate of royalty than under this lease, and that well is within 500 fect in the case of an oi! well or 1,500 feet in the case of a gas well of lands then subject to this lease, und that well produces oil or gas for e period of 30 consecutive days in quantities that would appear to a reasonable and prudent operator to be sufficient to recover ordinary costs of drilling, completing, and producing en additional well in the same geological structure at an offset location with a reasonable profit to the operator, and if, after notice to the Lessee end an opportunity to be heard, the State finds that production from that well is draining lands then subject to this lease, the Lessee shall within 30 days after written demand by the State begin in good faith and diligently prosecute drilling operations for an offset well on the leased area. In lieu of drilling any well required by this Paragraph, the Lessee may, with the Stete’s consent, compensate the State in full each month for the estimated loss of royalty through drainage in the amount determined by the State. 15. UNITIZATION. (a) The Lessee may unite with others, jointly or separately, in collectively adopting end operating under a cooperative or unit agreement for the exploration, development, or operation of the pool, field, or like area or part of the pool, field, or like area that includes or underlies the leased area or any part of the leased area whenever the State determines and certifies that the cocperative or unit agreement is in the public interest. (b) The Lessee agrees, within six months after demand by the State, to subscribe to @ reasonable cooperative or unit agreement that shall adequately protect all parties in interest, including the State. The State reserves the right to prescribe such an agree- ment. (c) With the consent of the Lessee, and if the leased area is committed to a unit agreement approved by the State, the State may establish, alter, change, or revoke drilling, producing, and royalty requirements of this lease as the State determines necessary or proper to secure the proper protection of the public interest. (d) Except es oihcrwise provided in this subparagraph, where only a portion of the leased area or any separate and distinct zone or geological horizon is committed to a unit agreement approved or prescribed by the State, that commitment constitutes a severance of this lease as to the unitized and nonunitized portions of the leased aree. The portion of the leased area not committed to the unit will be treated as a separate and distinct lease having the same effective date and term as this lease and may be maintained only in accordance with the terms and conditions of this lease, statutes, and regulations. Any portion of the leased area or any separate and distinct zone or geological horizon not committed to the unit agreement will not be affected by the unitization or pooling of any other portion of the leased area or zone or horizon, by operc ‘ons in the unit, or by suspension approved or ordered for the unit. If the leased area has a well certified as capable of production in paying quantities on it before commitment to a unit agreement, this lease will not be severed. If any portion of this lease is included in a participating aree formed under a unit agreement, the entire leased area will remain committed to the unit upon contraction of the unit and this lease will not be severed. 16. INSPECTION. The Lessee shall keep open at all reasonable times, for inspection by any duly authorized representative of the State of Alaska, the leased area, all wells, improvements, machinery, and fixtures on the leased area, and all reports and records relative to operations and surveys or investigations on or with regard to the leased area or under this lease. 17. SUSPENSION, The State may from time to time direct or approve in writing suspension of production or other operations under this lease. 18. ASSIGNMENT, PARTITION, AND CONVERSION. This lease, or any undivided interest in this lease, may, with the approval of the State, be assigned, subleased, or otherwise transferred es to the entire leased area, or any one or more legal subdivisions included in the leased area, or any separate and distinct zone or geological horizon underlying the leased area or one or more legal subdivisions of the leased area, to any person or persons qualified to hold a lease. No assignment, sublease, or other transfer of an interest in this lease, including assignments of working or royalty interests and operating agreements and subleases, shall be binding upon the State unless approved by the State. The Lessee shall remain liable for all obligations under this lease accruing prior to the approval by the State of any assignment, sublease, or other transfer of an interest in this lease. All covenants, conditions, and agreements contained in this lease shall extend to and be binding upon the heirs, administrators, successors, and assigns of the State and the Lessee. Applications for approval of an assignment, sublease, or other transfer shall comply with all applicable regulations and must be filed within 90 days after the date of final execution of the instrument of transfer. Transfer of this lease or an interest in this lease will be approved by the State uniess (1) the Lessee fails to comply with applicable statutes and regulations, (2) the State determines in writing that the transfer would adversely affect the interests of the State of Alaska, or (3) at the discretion of the State, if the transfer covers a portion of the leased area or a separate and distinct zone or geological horizon, Where an assignment, sublease, or other transfer is made of all or a part of the Lessee’s interest in a portion of the leased area, this lease may, at the option of the State or upon request of the transferee and with the approval of the State, be severed, and a separate and distinct lease shall be issued to the trensferee having the same effective date and terms as this lease. 19. SURRENDER, The Lessee at any time may file with the State a written surrender of all rights under this lease or any portion of the leased area comprising one or more tegal subdivisions or, with the consent of the State, any separate and distinct zone or geological horizon unceriying the leased area or one or more legal subdivisions of the leased area. That surrender shall be effective as of the date of filing, subject to the continued obligations of the Lessee and its surety to make payment of all accrued royalties and to place all wells and surface facilities on the surrendered land or in the surrendered zones or horizons in condition satisfactory to the State for suspension or abandonment. After that, the Lessee shall be released from all obligations under this lease with respect to the surrendered lands, zones, or horizons, 20. DEFAULT AND TERMINATION; CANCELLATION. (a) The failure of the Lessee to perform timely its obligations under this lease, or the failure of the Lessee otherwise to abide by all express and implied promises, terms, conditions, and covenants of this lease, is a default in the Lessee’s obligations under this lease. Whenever the Lessce fails to comply with any of the provisions of this lease (other than a provision which, by its terms, provides for automatic termination), and fails within 60 days after written notice of that default to commence and diligently prosecute operations to remedy that default, the Stete may terminate this lease if at the time of termination there is no well on the leased area capable of producing oil or gas in paying quantities. If there is a well on the leased area capeble of producing oil or gas in paying quentities, this lease may be terminated by an eppropriate judicial proceeding. In the event of any termination under this subparagraph, the Lessee shall have the right to retain under this lease any and all drilling or producing wells for which no default exists, together with a parcel of land surrounding each well or wells and rights-of-way through the leased area that are reasonably necessary to enable the Lessee to drill, operate, and transport oil or gas from the retained well or wells. (b) The State may cancel this lease at any time if the State determines, after the Lessee has been given notice and @ reasonable opportunity to be heard, that (1) continued operations pursuant to this lease probably will cause serious harm or damage to biological resources, to property, to mineral resources, or to the environment {including the human environment), (2) the threat of harm or damage will not disappear or decrease to an acceptable extent within 2 reasonable period of time, end (3) the advantages of cancellation out- weigh the advantages of continuing this lease in effect. Any cancellation under this subparagraph shall not occur unless and until operations under this lease have been under suspension or temporary prohibition by the State, with due extension of the term of this lease, continuously for 2 period of five years or for a lesser period upon request of the Lessee. Any cancellation under this subparagraph will entitle the Lessee to receive compensation as the Lessee demonstrates to the State is equal to the lesser of (1) the value of the cancelled rights es of the date of cancellation, with due consideration being given to both anticipated revenues from this lease and anticipated costs, including costs of compliance with all applicable regulations and stipulations, liability for clean-up costs or damages, or both, in the case of an oil spill, and all other costs reasonably anticipated under this lease, or (2) the excess, if any, over the Lessee’s revenues from this lease (plus interest on the excess from the date of receipt to date of reimbursement) of all consideration paid for this lease and all direct expenditures made by the Lessee after the effective date of this lease and in connection with exploration or development, or both, pursuant to this lease, plus interest on that consideration and those expenditures from the date of payment to the date of reimbursement. 21. RIGHTS UPON TERMINATION. Upon the expiration or earlier termination of this lease as to all or any portion of the leased area, the Lessee shall be directed in writihg by the State and shall have the right at any time within a period of one year after the termination, or any extension of that period es may be granted by the State, to remove from the leased area or portion of the leased area all machinery, equipment, tools, and materials. Upon the expiration of that period or extension of that Period and at the option of the State, any machinery, equipment, tools, and materials that the Lessee has not removed from the leased area or portion of the leased area become the property of the State or may be removed by the State at the Lessee’s expense. At the option of the State, all improvements such as roads, pads, and wells sha!l either be abandoned and the sites rehabilitated by the Lessee to the satisfaction of the State, or be left intact and the Lessee absolved of all further responsibility as to their maintenance, repair, and eventual abandonment and rehabilitation. Subject to the above conditions, the Lessee shall deliver up the leased area or those portions of the leased area in good condition. exercised 22, DAMAGES AND INDEMNIFICATION. (a) No rights under the reservation pursuant to AS38.05.125 may be by the State or by the Lessee until provision has been made to pay the Owner of the land upon which the reserved rights are sought to be’ exercised full payment for all damages sustained by the owner by reason of entering on the land. If the owner for any reason refuses or neglects to settle the damages, the State or the Lessee may enter upon the land after Posting a surety bond determined by the State, after notice and an opportunity to be heard, to be sufficient as to form, amount, and security to secure to the owner payment for damages, and may institute legal proceedings in a court of competent jurisdiction where the land is located to determine the damages which the owner of the land may suffer. The Lessee hereby agrees to pay any damages that may become payable under AS 38.05.1390 and to indemnify the State and hold it harmless from and against any claims, demands, liabilities, and expenses arising from or in connection with such damages. The furnishing of a bond in compliance with this Paragraph shall be regarded by the State as sufficient provision for the payment of all damages that may become payable under AS 38.05.130 by virtue of this lease. (b) The Lessee shall indemnify the State for, and hold it harmless from, any claim, including claims for loss or damage to property or injury to any person caused by or resulting from any act or omission committed pursuant to this lease by or on behalf of the Lessee. The Lessee shall not be held responsible to the State under this subparagraph for any loss, damage, or injury caused by or resulting from the sole negligence of the State. (c) The Lessee expressly waives any defense to an action for breach of a covenant of this lease or for damages resulting from an oil spill or other harm to the environment that is based on the fact that the act or omission complained of was committed by an independent contractor. The Lessee expressly agrees to assume responsibility for all actions of its independent contractors. 23. BONDS. (a) If required by the State, the Lessee shall furnish a bond prior to the issuance of this lease in an amount equal to at least $5 per acre or fraction of an acre contained in the leased area, but no less than $10,000, and shall maintain that bond as long as required by the State. (b) The Lessee may, in lieu of the bond required under (a) above, furnish and maintain a statewide bond in accordance with applicable regulations. (c) The State may, after notice to the Lessee and a reasonable opportunity to be heard, require a bond in a reasonable amount greater than the amount specified in (a) above where a greater amount is justified by the nature of the surface and its uses and the degree of risk involved in the types of operations being or to be carried out under this lease. A statewide bond shall not satisfy any requirement of @ bond imposed under this subparagraph, but shall be considered by the State in determining the need for and the amount of any additional bond under this subparagraph. ACE 1421638 (d) If the leased area is committed in whole or in part to a cooperative or unit agreement approved or prescribed by the State, and the unit operator furnishes 2 statewide bond, the Lessee need not maintain any bond with respect to the portion of the leased area committed to the cooperative or unit agreement. 24. AUTHORIZED REPRESENTATIVES. The Director of the Division of Minerals and Energy Management, Department of Natural Resources, State of Alaska, and the person executing this lease on behalf of the Lessee shall be the authorized representatives for their respective principals for the purposes of administering this lease. The State or the Lessee may change the designation of its authorized representative or the address to which notices to that representative are to be sent by a notice given in accordance with Paragraph 25 below. Where activities pursuant to a plan of operations are underway, the Lessee shall also designate, pursuant to a notice under Paragraph 25 below, by name, job title, and address, an agent who will be present in the state during all lease activities. 25. NOTICES. Any notices required or permitted under this lease shall be by electronic media producing a permenent record or in writing and shall be given personally or by registered or certified mail, return receipt requested, addressed as follows: TO THE STATE: TO THE LESSEE: DIRECTOR, DIVISION OF MINERALS AND ENERGY MANAGEMENT DEPARTMENT OF NATURAL RESOURCES 703 W. NORTHERN LIGHTS BOULEVARD ANCHORAGE, ALASKA 99503 Any notice given under this Paragraph shall be effective when delivered to the above authorized representative. 26. STATUTES AND REGULATIONS. This lease is subject to all epplicable state and federal statutes and regulations in effect on the effective date of this lease, and insofar as is constitutionally permissible, to all statutes and regulations placed in effect after the effective date of this lease. This lease shal! not be interpreted as a limitation upon the exercise by the State of Alaska or by the United States of America of the power to enact and enforce legislation or to promulgate and enforce regulations affecting, directly or indirectly, the activities of the Lessee or its agents in connection with this lease or the value of the interest held under this lease. 27. INTERPRETATION, This lease is to be interpreted in accordance with the rules applicable to the interpretation of contracts made in the State of Alaska. The Paragraph headings are not part of this lease and are inserted only for convenience. The State and the Lessee expressly covenant that the law of the State of Alaska shall apply in any judicial proceeding affecting this lease. 28. INTEREST IN REAL PROPERTY, It is the intention of the parties that the rights granted to the Lessee by this lease constitute an interest in real property in the leased area. 29. SEVERABILITY. If it is finally determined in any judicial proceeding that any provision of this lease is invalid, the State and the Lessee may jointly determine and agree by @ written amendment to this lease that, in consideration of the promises, terms, conditions, and covenants contained in that written amendment, the invalid portion will be treated as severed from this lease end that the remainder of this lease, as amended, will remain in effect. 30. DEFINITIONS. All words and phrases used in this lease ere to be interpreted where possible in the manner required in respect to the interpretation of statutes by AS 01.10.040, However, the following words have the following meanings unless the context unavoidably requires otherwise: (1) “oil means crude petroleum oil and other hydrocarbons, regardless of gravity, that are produced in liquid form by ordinary production methods, including Hquid hydrocarbons known’ as distillate or condensate recovered by separation from gas other than at a gas processing plant; (2) “gas means all natural gas (except helium gas) and all other hydrocerbons produced that are not defined in this lease as oil; (3) “associated substances” means all substances except. helium produced as an incident of production of oil or gas by ordinary production methods and not defined in this lease as oil or gas; (4) “Grilling” means the act of boring a hole to reach a proposed bottom hole location through which oil or gas may be produced if encountered in paying quantities, and includes redrilling, sidetracking, deepening, or other means necessary to reach the proposed bottom hole location, testing, logging, plugging, and other operations necessary and incidental to the actual boring of the hole; (5) “reworking operations” means all opere“tons designed to secure, restore, or improve production through some use of a hole previously drilled, including, but not limited to, mechanical or chemical treatment of any horizon, plugging beck to test higher strata, etc.; (6) "paying quantities” means quantities sufficient to yield a return in excess of operating costs, even though drilling and equipment costs may never be repaid and the undertaking considered as a whole may ultimately result in a loss; and (7) "force majeure’ means war, riots, acts of God, unusually severe weather, or any other cause beyond the Lessee‘s reasonable ability to foresee or control (including delays caused by judicial decisions or lack cf them), whether similar to those enumerated or not. 31. CONDITIONAL LEASE. If all or a part of the leased area is land that has been selected by the State under laws of the United States granting lands to the State, but the land has not been patented to the State by the United States, then this lease is a conditional lease as provided by law until the patent becomes effective. If for any reason the selection is not finally approved, or the patent does not become effective, any rental, royalty, or other production or profit-based payments made to the State under this lease will not be refunded. : 32. NONDISCRIMINATION. The Lessee and the Lessee’s subcontractors shall not discriminate against any employee or applicant because of race, religion, color, sex, age, or national origin. The Lessee and its subcontractors shall, on commencement of any operations under this lease, post in a conspicuous place notices setting forth the provisions of nondiscrimination. 33. ROYALTY ON PRODUCTION. Except for oil, gas, and associated substances used on the leased area for development and production or unavoidably lost, the Lessee shall pay to the State as a royalty percent in amount or value of the oil, gas, and associated substances saved, removed, or sold from the leased area and of the gas used on the leased area for extraction of natural gasoline or other products from the leased area. Ace 7421639 34. VALUE. (a) For the purposes of computing royalties due under this lease, the value of royalty oil, gas, or associated substances shall not be jess than the hichest of: (1) the field price received by the Lessee for the oil, gas, or associated substances; {2) the volume-weighted average of the three highest field prices received by other producers in the same field or area for oil of like grade and gravity, gas of like kind and quality, or associated substances of like kind and quality at the time the oil, ges, or associated substances are sold or removed from the leesed or unit area or the gas is delivered to an extraction plant if that plant is located on the leased or unit area; if there are less than three prices reported by other producers, the volume-weighted average shall be calculated using the lesser number of prices received by other producers in the field or area; (3) the Lessee’s posted price in the field or area for the oil, gas, or associated substances; or (4) the volume-weighted average of the three highest posted prices in the same field or area of the cther Producers in the same field or area for oil of like grade and gravity, gas of like kind and quality, or associated substances of like kind and quality at the time the oil, gas, or associated substances are sold or removed from the leased or unit area or the gas is delivered to an extraction plant if that plant is located on the leased or unit area; if there are less than three prices posted by other producers, the volume-weignted average shall be calculated using the lesser number of prices posted by other producers in the field or area. (b} If oil, gas, or associated substances are sold away from the leased or unit area, the term “field price’ in subperagraph (a) above shall be the cash value of all consideration received by the Lessce or other producer from the purchaser of the oil, gas, or associated substances, less the reasonable costs of transportation away from the leased or unit area to the point of sale. The “reasonable costs of transportation” are as cefined in 11 AAC 83,228-11 AAC 83.229 as those regulations exist on the effective date of this lease. {c) Im the event the Lessee does not sell in an arm’s-length transaction the oil, gas, or associated substances after removal from the leesed or unit area, the term “field price” in subparagraph (a) and (b) above shall mean the Price, on the leased or unit area, the Lessee would expect to receive for the oil, gas, or associated substances if the Lessee did sell the oil, gas, or associated substances in an arm’'s-iength transaction. The Lessee shal! determine this price in a consistent and logical manner using information available to the Lessee and report that price to the State. (d) The State may establish minimum values for the purposes of computing royalties on oil, gas, or associated substances obtained from this lease, with consideration being given to the price actually received by the Lessee, to the price or prices paid in the same field or area for production of like quality, to posted Prices, to prices received by the Lessee and other producers from sales occurring awey from the leased area, and to other relevant matters. In establishing minimum values, the State may use, but is not limited to, the Department of Revenue’s methodology for determining “prevailing value” for purposes of the oil and gas Property production tax, AS 43.55 et seq., in circumstances where terms of a contract set a single price for oil, gas, or associated substances without adjustments tied to market conditions for periods of longer than six years, or where the terms of a contract set prices bearing no relation to market conditions prevailing at the time the contract is entered into, or where fraud or an intent to evade payment is demonstrated. Each minimum value determination will be made only after the Lessee has been given notice and a reasonable opportunity to.be heard. Under this provision, it is expressly agreed that the minimum value of royalty oil, gas, or associated substances under this lease may not necessarily equal the price of the oil, gas, or associated substances. 35. ROYALTY IN VALUE. Unless the State elects to receive all or a Portion of its royalty in kind as provided in Paragraph 36 below, the Lessee shall pay to the State the value of all royalty oil, gas, and associated substances as determined under Paragraph 34 above. Royalty paid in value shall be free and clear of all lease expenses (and any portion of those expenses that is incurred away from the leased area), including, but not lirnited to, expenses for separating, cleaning, dehydration, gathering, saltwater disposal, and Preparing the oil, gas, Or associated substences for transportation off the leased area. All royalty that may become payable in money to the State of Alaska shall be paid on or before the last day of the calendar month following the month in which the oil, gas, or associated substances are produced. Royalty payments shall be accompanied by copies of run tickets or other information relating to valuation of royalty as the State may require, which may include, but is not limited to, evidence of sales, shipments, and amounts of gross oil, gas, and associated substances produced. 36. ROYALTY IN KIND. (a) At the State’s option, which may be exercised from time to time upon not less than six months’ notice to the Lessee, the Lessee shall deliver all or a Portion of the State's royalty oil, gas, or associated substances produced from the leased area in kind, Delivery shall be on the leased area or at a Place mutually egreed to by the State and the Lessee, and shall be delivered to + the State of Alaska or to any individual, firm, or corporation designated by the State. (b) Royalty oil, gas, or associated substances delivered in kind shall be delivered in good and merchantable condition and be of pipeline quality, and shall be free and clear of all lease expenses (and any portion of those expenses incurred away from the leased area), including, but not limited to, expenses for separating, cleaning, dehydration, gathering, saltwater disposal, and preparing the oil, gas, Or associated substances for transportation off the leased area. (c) After having given notice of its intention to take, or after having taken, its royalty oil, gas, or associated substances in kind, the State, at its option and upon six months’ notice to the Lessee, may elect to receive a different portion or none of its royalty in kind. If, under federal regulations, the taking of royalty oil, gas, or associated substances in value by the State creates a supplier- purchaser relationship, the Lessee hereby waives its right to continue to receive royalty oil, gas, or associated substances under that relationship, and further agrees that it will require any purchasers of the royalty oil, gas, or associated substances likewise to waive any supplier-purchaser rights. (d) The Lessee shall furnish storage for royalty oil and natural gas liquids produced from the leased or unit area to the same extent that the Lessee provides storage for the Lessee’s share of oil and natural gas liquids. The Lessee shall not be liable for the loss or destruction of stored royaity oi! and natural gas liquids from causes beyond the Lessee’s reasonable control. (e) If a State royalty purchaser refuses or for any reason fails to take delivery of oil, gas, or associated substances, or in an emergency, and with as much notice to the Lessee as is practical or reasonable under the circumstances, the State may elect without penalty to underlift for up to six months all or a portion of the State's royalty on oil, gas, or associated substances produced from the leased or unit area and taken in kind. The State's right to underlift is limited to the Portion of royalty oil, gas, or associated substances that the royalty purchaser refused or failed to take delivery of, or the Portion necessary to meet the emergency condition. Underlifted oil, gas, or associated substances may be recovered by the State at a daily rate not to exceed 10 percent of its royalty interest share of daily production at the time of the underlift recovery. ACE 7421640 37. REDUCTION OF ROYALTY. After initial production for two years from the field in which the leased or unit area is located has occurred, the State, in its discretion, may reduce the Lessee’s obligations to pay royalty on all of the leased area or on any trect or portion of the leased area segregated for royalty purposes upon (1) request by the Lessee, (2) a clear showing by the Lessee that the revenue from all oil, gas, and associated substances produced from the field is insufficient to produce a reasonable rate of return with respect to the Lessee’s total investment in the field, and (3) a clear showing by the Lessee that a reduction in royalty will increase total production from the field. IN WITNESS WHEREOF the parties have executed this lease effective as of the day of 119 LESSEE STATE OF ALASKA By: Title: THE UNITED STATES OF AMERICA ) ) ss. Acknowledgement of Lessor STATE OF ALASKA ) This certifies that on the day of 19 , before me, a notary public in and for the State of Alaska, duly commissioned and sworn, personally appeared ' to me known to be the person who executed the foregoing lease on behalf of the State of Alaska, who, after being duly sworn according to law, stated to me under oath that he or she has authority pursuant to law to execute the foregoing lease on behalf of the State of Alaska, acting through the Department of Natural Resources, and that he or she executed the same freely and voluntarily as the act and deed of the State of Aleska and for the Department of Natural Resources. WITNESS my hand and official seal. Notary Public in and for Alaska My commission expires INSERT NOTARY ACKNOWLEDGEMENT OF LESSEE’S SIGNATURE HERE. ACE 7421641 . Fish and Game Appendix 1 Essential Habitat Land Policy for the Peregrine Falcon in Alaska ACE 7421642 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. AS 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 perserve 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 waters 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 ACE 1421643 area; physical processes, structure and topography; flora, fauna, and climate; and the quality and chemical content of soil, water, and air. The policies outlined below are recommended as general standards, and should provide for the protection of essential peregrine falcon 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. - 1. ESSENTIAL REPRODUCTIVE HABITAT 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 develop- ment that will alter or eliminate existing habitat conditions within one mile of nesting cliffs. (2) Prohibit all human activities (unless specifically authorized) within one mile of nesting cliffs between April 1 and August 15. (3) Protect and/or retain nesting habitat in public ownership. ACE 7421644 (4) Purchase or otherwise ensure protection for nesting habitat in private ownership. B. Air. (1) Prohibit ali 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, Protection Measures Required. (1) Prohibit land use practices and/or developments which could detrimentally alter or eliminate the habitat 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. II. ESSENTIAL MIGRATION HABITAT A. Description. Areas frequently utilized for feeding and nesting during migration. B. Protection Measures Required. (1) Guidelines will be developed as more becomes known regarding migration routes. (2) Purchase, retain in public ownership, or otherwise ensure protection of migrating peregrine concentration areas. III. ESSENTIAL WINTERING HABITAT A. Description. That habitat utilized during the period October through March. B. Protective Measures Required. (1) Guidelines will be developed as more becomes known regarding migration routes and wintering habitat. ACE 7421646 Fish and Game Appendix 2 Bald Eagle Protection Act ACE 7421647 The Law The Bald Eagle Protection Act of 1940, as amended (16 USC 668-668d) , states in part that no person "shall take... any bald eagle..., alive or dead, or any 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 up 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 existance 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. AcE 7421648 Fish and Game Appendix 3. Legal Descriptions of Kalgin Island and Clam Gulch Critical Habitat Areas Kalgin Island Critical Habitat Area 1. Township 3 North, Range 15 West, NW 7. 2. Township 3 North, Range 16 West, VWs. 12. 3. Township 4 North, Range 16 West, Seward Meridian, Sections SW 6, Seward Meridian, Sections 1, E% 2, Seward Meridian, Sections Es 35, 36. Clam Gulch Critical Habitat Area All tidal and submerged lands to the minus five foot elevation, from Cape Kasilof to Happy Valley, contained in the following description: 1. Township 1 North, Range 12 West, 2. Township 1 North, Range 13 West, 23, 27, 33, 34. 3. Township 7 South, Range: 13. West, 4. Township 1 South, Range 14 West, 23, 26, 27, 33, 34. 5. Township 2 North, Range 12 West, 17, 20, 29, 31, 32. 6. Township 2 South, Range 14 West, 17, 20, 29, 32. 7. Township 3 North, Range 12 West, 28, 33. 8. Township 3 South, Range 14 West, Seward Meridian, Sections 6, 7. Seward Meridian, Sections 12-14, 22, Seward Meridian, Sections 5-7. Seward Meridian, Sections 12-14, Seward Meridian, Sections 4, 8, 9, Seward Meridian, Sections 4, 8, 9, Seward Meridian, Sections 9, 16, 21, Seward Meridian, Sections 5, 6, and that portion of 7 lying north of Happy Creek. ACE 7421650 Fish and Game Appendix 4 Kenai Lowlands Caribou Herd Critical Calving Grounds and Summering Habitat. ace T2165) Critical Caribou Calving Grounds Township 6 North, Range 11 West, Seward Meridian, Sections SE% 7, SW 8, 17-20, NW% 29, NE% 30. Critical Caribou Summering Habitat Township 6 North, Range 10 West, Seward Meridian, Sections NW S+ 18, 19, 30, N% 31. Township 6 North, Range 11 West, Seward Meridian, Sections S% 4, S% 5, NE% Ss 7, 8, 9, NW% Ss 10, 13-29, Ni SW 30, NE% 32, N% 33-36. Township 6 North, Range 12 West, Seward Meridian, Sections E% 13, E% 24. ACE 7421652 WA Fish and Game Appendix 5 Fish and Wildlife Resources of the Proposed Lease Sale Area (Map) ace 7421653 —/L/&