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Oil industry warns Alaskan measure to protect salmon may stifle projects

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Oil industry warns Alaskan measure to protect salmon may stifle projects

Alaskans will vote Nov. 6 on a proposal aimed at mitigating the impact of large-scale development on the state's salmon fisheries. While advocates said the state needs to enact "clear, science-based standards" to guide permitting, companies engaged in oil and gas production said additional rules are unneeded and could delay projects and increase costs.

The proposal, known as Ballot Measure 1, would define activities that have "significant adverse effect" on the habitat of anadromous fish, or those fish that swim from the sea up freshwater water bodies to spawn; potentially broaden the definition of anadromous fish habitat to include nearly every waterway in the state; and alter the process for securing permits for projects that may affect that habitat.

According to campaign finance records, groups on both sides of the debate have drawn a total of over $13 million in campaign contributions through Oct. 5, with nearly 89% of donations going to Stand for Alaska, the group opposing the measure. Together, ConocoPhillips and BP have spent nearly $2.3 million funding Stand for Alaska. Mining companies Donlin Gold and Hecla Mining Co. together have contributed about $2.2 million opposing the measure.

Groups including Yes for Salmon and Stand for Salmon have drawn nearly $1.5 million in support, mostly from conservation groups.

Proponents of the measure cite an Alaska Department of Fish & Game, or ADF&G, estimate that less than half of Alaska's salmon-bearing streams are listed in the state's current anadromous waters catalog and said current laws and regulations lack "clear, science-based standards" to guide permitting.

"Alaska's current law governing development in fish habitat consists of no more than a few sentences. This means that 'proper protection of salmon' is open to interpretation and permitting decisions are subject to political whims," Stand for Salmon said.

Some oil and gas companies said there are already adequate protections in place.

"We think [the measure is] going to create unreasonable and unnecessary requirements that are going to make it harder for our business to maintain, build and improve our operations," BP PLC spokeswoman Megan Baldino said Oct. 11.

Baldino noted there are 18 state and federal policies governing fish habitat protection in the state and said, "This is going to replace the current world-class fish habitat protections with new, unclear, untested requirements."

Under the current permitting process, applicants work with the ADF&G to define permitting requirements before submitting a draft permit application.

The proposed process would shift to a two-tier permit system. Applicants would first file an application the ADF&G would use to determine whether a project requires a minor permit or a major permit. The major permitting process would add a public comment period and allow any interested party to challenge permits the agency grants. In addition, all permit applicants except government agencies and tribal organizations would be required to post performance bonds to help guarantee compliance with the permit's conditions.

"If it passes, it's going to impact any project that involves rivers, lakes, streams, possibly even tundra," Baldino said. "For example, culvert or bridge installations, stream crossings for vehicles, roads, pipelines, power lines, wastewater treatment plants, ice roads, pads. … On the North Slope, all of that stuff is part of our business. If, for any reason, this brings delays, that results in costs to our business."

"Many years of biological data on the North Slope are incorporated into the analyses used by agencies to determine the terms for our development permits to protect against significant impact on the environment," ConocoPhillips spokesman Daren Beaudo said. "We believe the ballot initiative, if passed, will create unnecessary permitting delays and senseless litigation because of its ambiguities and broad scope. We are also concerned that in some instances, it could prohibit industry developments on the North Slope and elsewhere in the state."

In an Aug. 18 opinion piece published in the Juneau Empire, Alyeska Pipeline Service Co. President Tom Barrett said that "with rigid new agency review requirements and permitting criteria, and a wide-open appeals process, the initiative would complicate and delay inspection and certain maintenance activities, and create uncertainty about what is considered minor routine maintenance and grandfathered projects. ... When we confront fires floods and earthquakes, there's no time to waste."

Alyeska Pipeline, owned by a consortium of energy companies including BP, ConocoPhillips, Exxon Mobil Corp. and Chevron Corp. subsidiary Unocal Pipeline Co., operates the 800-mile Trans Alaska Pipeline System that in 2017 carried an average 527,323 barrels of oil per day from Alaska's North Slope to Valdez, an ice-free port on the state's southern coast.

Oil and gas development in Alaska

At the north end of that pipeline, BP operates the entire Prudoe Bay field on Alaska's North Slope. The third-largest field in the U.S. by proved reserves, it produced an average 280,000 bbl/d of oil in 2017 and accounted for more than half of Alaskan oil production.

BP said its operations in Alaska support more than 8,300 jobs across the state. In 2017, the company said it spent more than $855 million with vendors and paid $543 million in taxes, royalties and other government payments.

Its more immediate plans in the state include a 3D seismic survey of the area to be completed in 2019 to support new drilling and well work.

Looking further ahead, during a July analyst presentation, ConocoPhillips outlined $6 billion in investments it is weighing that are geared toward developing and maintaining crude oil production along Alaska's North Slope, while BP said it hopes to find a market for its North Slope natural gas production through the Alaska LNG project.

Led by state-run Alaska Gasline Development Corp., the project's massive scope involves building an 800-mile, 42-inch diameter pipeline that will carry up to 3.3 Bcf/d of natural gas from the North Slope to south-central Alaska; building a 3.9 Bcf/d gas treatment plant on a 200-acre site in Prudhoe Bay; building a liquefaction facility on the Kenai Peninsula in Nikiski consisting of three LNG trains, two 240,000-cubic-meter storage tanks, terminal facilities and loading berths; and relocating a 1.3-mile portion of the Kenai Spur highway.

According to the organization's project schedule, engineering and permitting of the project is expected to be completed in 2018, and a final investment decision is expected in 2019. Construction is scheduled to begin in 2019, and the project will enter service in 2025.

Alaska Gasline Development Corp. spokesman Jesse Carlstrom said the ballot initiative's passage "would not be helpful" to the project.

Protecting Alaska's seafood industry

According to Stand for Salmon, at over 30,000 workers, Alaska's seafood industry directly employs more workers than any private industry in the state and contributes $5 billion to the state's economy. Proponents of the measure are worried that existing permitting standards threaten that industry and could lead to increased habitat restoration costs in the future.

The ballot measure's supporters hope voters look to the Pacific Northwest as an example.

According to the Washington State Recreation and Conservation Office, human activity contributed to the decline in Pacific Northwest salmon populations. Specifically, wild salmon disappeared from 40% of their historic breeding ranges in Oregon, Washington, Idaho and California.

The office pointed to a 2011 report commissioned by the Washington governor's Salmon Recovery Office and the Council of Regional Salmon recovery organizations that estimated the statewide cost of the habitat-related elements of salmon recovery at the regional level from 2010 to 2019 at $5.5 billion, including $4.7 billion in capital costs and nearly $800 million in noncapital costs.

"Alaska can't afford to lose its salmon or foot this bill," Stand For Salmon said.

"Of course, we've not had that much money to spend," said Susan Zemek, a spokeswoman for Washington's Recreation and Conservation Office. Zemek said that from 1999 through 2016, state, federal and local funds going to salmon recovery were $1.2 billion, excluding funding from the Bonneville Power Administration, which operates hydroelectric dams in the region, and work done by local governments and tribal organizations outside of the offices' grant process.