Some ask state to buy back leases
Posted: Friday, December 26, 2003 12:00 am
Label: COALBED METHANE
By DUSTIN BLEIZEFFER
Star-Tribune energy reporter
GILLETTE - A series of political missteps over an anticipated coalbed methane gas play in Alaska has pitted some state residents against the industry and diminished the public's trust of state and other elected officials there.
In recent months, businesses and landowners joined the Alaskan town of Homer in insisting that the state buy back coalbed methane leases and start its leasing process over, this time with more public input and changes to better regulate the industry.
The controversy, among others, involves a coalbed methane production company based in Denver, Evergreen Resources. The Powder River Basin Resource Council, which has advocated for responsible development in Wyoming, sent two people to Alaska at the invitation of several landowner groups there to educate the Alaskans about dealing with coalbed methane development. (See story, B1.)
Unlike Wyoming, Alaska has yet to see more than a couple dozen coalbed methane test wells. But with vast amounts of shallow coals and increasing national interest to develop the low-cost, clean-burning fuel, many people in Alaska anticipate a boom similar to what has already hit southern Colorado and northeastern Wyoming.
"The reason why there is discussion about a buy-back is not because of what people see happening on the ground but because people feel betrayed by their politicians," said Chris Whittington-Evans, a member of Friends of the Mat-Su, an Alaskan grassroots organization.
But earlier this month, Alaska Gov. Frank Murkowski announced that a buy-back of state coalbed methane leases would be considered only as a "last resort."
"Prior to approving any coalbed methane development, the (Alaska) Department of Natural Resources will make a determination as to whether additional site specific measures are necessary given the particular values of the location," Murkowski said in a press release.
"Until DNR's public process is complete and the companies have determined where development might occur, it is premature to consider buy-backs," Murkowski said.
Political wounds
The political chafing began in 1996 when state Sen. Scott Ogan, who at the time held a seat in the Alaska House of Representatives, championed a bill that contained several incentives for spurring the development of Alaska's vast coalbed methane gas reserves. The legislation cut the state's royalty for coalbed methane gas from 12.5 percent to 6.25 percent in areas where the gas could serve as heating fuel for communities detached from established gas service lines.
But House Bill 394, the "Shallow Gas Leasing Program," also contained provisions that some view as pork barrel politics, Whittington-Evans said. The bill significantly lightened the state's lease notification law and allowed the state to take noncompetitive bids for coalbed methane leases at extremely low prices.
With a $500 application fee, a company can request an area up to 6,400 acres, and the annual lease rent is $1 per acre, according to the Alaska Department of Natural Resources.
Some residents became suspicious of the incentives when Ogan, who is now a state senator, took a job with Evergreen Resources shortly after the legislation was passed. Later, a state official at the Alaska Oil and Gas Conservation Commission yielded to public pressure to resign after allegedly lobbying for the coalbed methane industry.
Several calls to Ogan were unreturned.
Several Alaskan landowner groups such as Friends of the Mat-su are trying to educate the public about the rapidly evolving coalbed methane industry and have only begun to learn about it during the past year. The industry itself says it is plagued by bad press and misconceptions.
Jack Ekstrom, director of government affairs for Evergreen Resources, said his company is making a good-faith effort to be a good neighbor and to educate the public about coalbed methane gas.
"We've been there for more than two years providing field tours, bringing Alaska regulators and legislators down to see our operation in the Raton Basin (in Colorado), and we've been completely open with them," Ekstrom said.
Whittington-Evans with Friends of the Mat-Su, said that much like Wyoming, the state of Alaska understands the value of mineral development as well as it understands the value of pristine wilderness, tourism and recreation. But residents of the Mat-su Valley and the Homer area, which lies on Cook Inlet south of Anchorage, were shaken by the realization that state-owned methane reserves below their homes and businesses were leased with almost no public notification effort
"People feel a certain amount of betrayal from their elected officials, so they're asking for a good-faith effort to buy back those leases and start over," Evans said.
Perhaps the most notorious example is in the town of Homer. The town has two local, weekly newspapers. But the state leased a large portion of the watershed leading to the town's municipal drinking water reservoir, placing a notice not in one of the local newspapers, but in a widely circulated Anchorage newspaper. Anchorage is 226 miles north of Homer. In early December, the Homer City Council passed a resolution asking the state to buyback those leases.
The week before Christmas, the state agreed to let Evergreen drill three core holes on state property near Homer, according to the Fairbanks Daily News-Miner.
On Tuesday, Friends of Mat-Su and three Homer area residents appealed the state's decision to let Evergreen Resources drill those new test wells, saying the decision violates the state's mandate to manage its resources for the maximum benefit of the people.
The appeal also seeks a moratorium on all shallow natural gas drilling until a task force comes up with new guidelines for drilling, or until the Legislature acts on new rules.
"The state has invited citizens to help them create new rules for this industry," Whittington-Evans said. "With this appeal, landowners' valid concerns are being dismissed and the industry gets to move ahead."
Pat Galvin, coalbed methane coordinator for Alaska's Department of Natural Resources, said the state realizes it doesn't have the full confidence of its citizens.
"I think the issues associated with the Shallow Gas Leasing Program … have exacerbated the concerns about coalbed methane itself. The two together have created a perfect storm," Galvin said in a phone interview.
State officials are hoping to win back any lost public trust by reviewing existing regulations and making necessary changes to mitigate the impacts of coalbed methane development.
The effort is being led by the Department of Natural Resources.
"My department has already stated that we will not consider a coalbed methane development proposal until those rules are in place," Galvin said.
"First of all, we need to get the public confidence back that Alaska can regulate coalbed methane development and can make sure the impacts associated with it are minimized."
Galvin said much of the public discussion so far has confused the issue of mitigating the impacts of coalbed methane development with issues stemming from the Shallow Gas Leasing Program.
The latter, Galvin said, must be a discussion between legislators and the citizens of Alaska.