Homer Alaska - Business

Story last updated at 7:23 PM on Wednesday, June 1, 2011

State wants to simplify permitting process for oil, gas development

By Tim Bradner
Morris News Service - Alaska

The state of Alaska has launched an initiative to simplify the state's permitting system for oil and gas exploration wells and new development projects.

"We're looking at our own system to see what we can do to accelerate oil and gas development, not to cut corners with environmental protection but mainly to add more certainty for companies working here," Department of Natural Resources Commissioner Dan Sullivan said in a briefing.

Sullivan has put Deputy Commissioner Ed Fogels in charge of developing a revamp of a complex system of permits that requires several hundred separate authorizations even for a relatively simple exploration well on state lands in southern Alaska.

Fogels said that his goal is to have a proposed restructuring plan ready for the state Legislature by January. Sullivan said some changes can be made through new regulations but others will require changes in state laws.

One type of permit that will soon be gone is the state coastal management consistency determination, a certification that a project built in the coastal zone, either offshore or onshore, complies with the state and local coastal management plans.

When it adjourned a special session in mid-May the Legislature failed to pass a bill extending the program beyond its June 30 sunset date. (See related story, page 7.)

A related issue Sullivan is tackling is clearing out a backlog of about 2,500 applications for various kinds of land-use authorizations, many affecting the petroleum industry, that have accumulated mainly because of staff shortages. The Legislature has authorized $2.7 million in new funding to hire additional staff for the state Division of Land and Water Management. Sullivan said he intends to have the backlog cleared within three years.

One obstacle facing Sullivan is that while the state can streamline its own permit system it cannot control federal permits or state permit actions that are interlocked with federal decisions, such as on air quality and water quality issues where the U.S. Environmental Protection Agency exerts final authority under the federal Clean Air and Clean Water acts.

"From our perspective the federal government is the key block, particularly in oil and gas. The decisions made by federal agencies here have enormous consequences," Sullivan said.

The commissioner said Gov. Sean Parnell was encouraged by President Barack Obama's announcement that he will propose administrative reforms to speed exploration in the 23 million-acre National Petroleum Reserve-Alaska, and that the governor wrote to Obama last week proposing closer state and federal coordination on administrative reforms.

Fogels was in Washington, D.C., last week to meet with White House staff working on the federal initiative, but he said he was surprised to learn that the EPA is not involved in the federal administration effort, at least so far.

Concerns raised by EPA in U.S. Army Corps of Engineers regulatory proceedings on two key Alaska oil and gas projects, a bridge across the Colville River to allow access to NPR-A oil discoveries and an environmental impact statement, or EIS, on a gas cycling and condensate project at Point Thomson, also on the Slope, have led to delays in both of those projects, Sullivan said.

The state is working well with EPA in other areas, however. For years the state Department of Environmental Conservation has administered federal air quality permits for projects in Alaska under a delegation of authority from EPA that is allowed by the federal Clean Air Act. The state must follow guidelines set by EPA but is allowed considerable leeway in adjusting permitting to fit local conditions.

Similarly, the DEC is now gradually assuming administrative responsibility for industrial wastewater permits under a delegation authority of the Clean Water Act. EPA again sets the guidelines but there is flexibility on the state level. This authority, which involves the National Pollutant Discharge Elimination Systems, or NPDES, permits, is being transferred in increments.

The state has administered NPDES permits for log transfer facilities and fish processing plants for some time, and now has authority for mining wastewater permits. Oil and gas discharge permits will be taken over in the final phase.

Fogels said one model for permitting that will be examined for oil and gas is a special large mine permitting procedure used for larger and more complex minerals projects and even for some petroleum projects, like the Point Thomson gas cycling and condensate project now in development.

This calls for the state to assemble a team of people from the different state agencies who coordinate permits. Fogels described it as a "cradle to grave" system that is set up for a project from its inception to final closure. So far 17 mining projects have successfully used the system, Fogels said.

Applicants pay for this, however, and while the process is voluntary it isn't cheap. Developers of the Pogo gold mine near Delta, east of Fairbanks, which is now producing, paid the state $250,000 to $300,000 for the service, Fogels said.

"We've billed out more for Pebble so far and they haven't even submitted an application for permits yet," he said. Pebble is a large copper-gold prospect near Iliamna, 200 miles southwest of Anchorage,

The Donlin Creek Joint Venture of Barrick Gold and NovaGold Resources, working on a possible gold mine near the Kuskokwim River, is paying $500,000 this year for its state permit coordination, Fogels said.

Joanne Slemons, the state's petroleum lands manager, said what makes Alaska's state permitting system unusually complex is that state land ownership and royalty issues are involved as well as the safety and public and environmental protection issues normal in all states.

"In states like North Dakota and Texas there are mostly private landowners and the state's role is mainly to insure things like safety," Slemons said.

Marilyn Crockett, executive director of the Alaska Oil and Gas Association, said, "It's a very complicated system, and what is unique in Alaska are the tight seasonal constraints because of the extreme climate. You really have to have your permit on time or you can lose an entire season and effectively a year. In California or Colorado you just wait another 20 or 30 days, but not here," Crockett said.

"We really applaud the state people for rolling up their sleeves to tackle this problem. This is one area where the state can have a direct influence in encouraging new oil exploration and development," she said.

Tim Bradner is a reporter for the Alaska Journal of Commerce.