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Dear Commissioner Irwin,
This letter is in response to Trustees for Alaska's appeal to your department's issuance of permits for core drilling for Evergreen Alaska.
I find the Trustees assertion that the underlying law is unconstitutional to be unfounded. The express authority of the Legislature to develop Alaska's resources can be found in and of the Alaska Constitution. Claiming shallow gas leases to be unconstitutional because they are not competitively leased is condemning decades of mining leases unconstitutional for the same reason. The Legislature made a best interest finding when it implemented the policy. It is in the public interest to ensure maximum development of its resources by exploring for and developing new natural gas supplies. The short and long term known reserves in the Cook Inlet Basin are unequivocally in question. As you know, non-conventional resources often replace depleted conventional gas.
The department is mandated by law to carry out the policy of the Legislature. The shallow gas-leasing program was passed into law eight years ago. Regulations were drafted five years after that and there have been two additional bills since the first legislation, , making it more of a commercial operation, and HB 69, which codified express authority of state's overriding interest over local regulation that is implied in the Constitution. also recognized that regulating shallow gas operations is not the same as regulating conventional oil and gas operations. The was given the express authority to make the regulations fit the activity with HB 69. They already had the authority by wavier. After all, CBM wells are basically deeper low- pressure water wells that produce natural gas.
Setting department policy based on speculation of what the Legislature may or may not do is "bad agency policy." The Trustees' assertion of a possible buy back by the governor is different from discussions I have had with the third floor. Only the Legislature can authorize the $10 to $15 +- million required. With serious budget issues at hand, I am extremely doubtful it will be a serious consideration.
Evergreen's announcement that their current project south of the is uneconomic eliminates most residents who are objecting. This area includes Sutton and Lazy Mountain. Why would the state buy back uneconomic leases? I am sure any operator would love to sell uneconomic leased areas back to the state and recover their costs. It reminds me of when the residents of Homer fooled the state into buying dying trees across Kachamak Bay to preserve the "view shed." When those trees burn (not if) it will be a firestorm.
Shallow gas does not need an oil spill response plan, because there is virtually no possibility of a well hitting formations capable of producing oil. The Upper Cook Inlet Basin has been explored and drilled fairly extensively. A Beverly Hillbillies scenario is virtually impossible. There is virtually no risk of encountering H2S, extremely low risk of hitting over pressure gas, and produced water has less than 1% the salinity of seawater. The state dumps thousands of times more salt on the roads each winter than a producer could ever accidentally spill from produced water.
Citizens need look no further than their own back yards when concerns of water quality are raised. Their own septic systems are much more likely to pollute fresh water aquifers than a deep (CBM) water well that happens to produce low pressure, non-toxic methane gas. Every known pathogen plus tons of toxic household chemicals, motor oil, antifreeze and detergents get pumped into the very shallow porous gravel that septic systems (and water wells) operate in.
With Alaska's industrial water quality laws second to none, all produced water not of rainwater quality must be re-injected into a Class II injection well. Class II wells are documented water injection technology based on sound science. Solid waste referred to in the Trustees appeal consists of drilling fines. It is ground up bedrock. Nothing more, nothing less. Ground up rock!!!! It would make good road building material. Recent tests results of solid waste held in the lined pits required by DEC (so much for no regulation) analyzed by DEC show no abnormal levels of anything toxic or pollution.
Property rights were well thought out when our founding fathers (and mothers) reserved the subsurface for the state. This common property right is reflected in all citizens receiving a portion of the royalty from the reserved mineral estate, in the form of earnings from the Permanent Fund. Those who advocate a buyback should return their Permanent Fund Dividend! Private property rights are further protected in of the Alaska Constitution, "Reservation of access shall not unnecessarily impair the owners use, prevent the control of access, or preclude compensation of access." I think most reasonable people were aware that they were not buying the subsurface mineral estate when purchasing their surface rights. Congress conveyed to the State in the Statehood Act, mineral reservation to this subsurface estate. The State faces losing the subsurface mineral reservation ( (i) Alaska Statehood Act) if it attempts to convey this property to anyone else. This is not even a taking, as all property owners knowingly signed contracts to buy only the surface rights to their property. The political button "Our land their profits" is a denial of the fact that they never bought the mineral estate or they were incredibly ignorant of the law of the land and the agreement they willingly entered in to when they signed the contract. Split estate means, there are two distinct properties on a parcel of land, the surface and the subsurface mineral reservation. As you know, common law gives dominance to the subsurface, subject to Article VIII Section 9 property rights. In conclusion, there has been no compromise of anyone's private property rights, as there has been no taking, collusion, duress or deception of any property owner in the purchase of their property.
I am looking for a way to fairly compensate surface owners and even provide some incentive to encourage access to the subsurface. I believe this will take away most of the conflict with those who do not want this development on their surface estate. I also have no problem with continuing to regulate operations that are currently successfully addressed in mitigation measures like conductor casing to protect fresh water aquifers, best technology & setbacks for sound mitigation for compressors and well heads, and requiring electric motors to run wellhead pumps when operating near residential areas when electricity is available. When properly done, with thoughtful mitigation measures, this development is successfully compatible with urban rural interface development.
It is unfortunate that one of the persons named in the appeal was reportedly the first to trespass on private property at a core hole-drilling site. If true, this action shows a callous disregard for the private property rights recognized in law of the property owner where the core hole is being drilled. The subject property is clearly marked with no trespassing signs. This action put him and the people with him in danger of being near an active industrial operation where safety requirements like steel - toed boots, hard hats, and safety glasses are a must. It also created a liability exposure for the operator having unauthorized persons on an active drill site. It speaks volumes of the NIMBY syndrome of some people who openly violate other property owner's property rights!
Core hole drilling is a long accepted, well-documented practice. Trustees claim "stock mitigation measures" are being imposed. Core drilling is a long-standing non-controversial, stock exploration activity throughout Alaska. However, I do not believe requiring conductor casing to protect fresh water aquifers is a stock mitigation measure I have seen anywhere else. The data obtained from these samples is very valuable not only to determine if the geology is economic, but important for hydrology studies. These will not be producing gas wells. This activity is nothing new to Alaska, nor is it any cause for concern. You were correct to issue permits. Deny this appeal and any other appeal or resolution on the same basis.
Please note on the "Trustees" letterhead that they are a "Public Interest Law Firm." As I am sure you are aware, the Legislature ended the long-standing practice of awarding public interest litigant status to these firms. The Legislature did not think it was in the public interest to pay Trustees to sue us to keep vital resources from being developed. Trustees appeal is one action in a long line of other actions designed to delay, discourage and stop development of our resources in the Cook Inlet Basin and other areas of the state. I find it patently absurd that they are claiming Constitutional grounds for stopping this permitted activity, when the Constitutional mandate to do exactly the opposite is expressly clear.
It is regrettable that certain Mat-Su Borough (MSB) officials spread bad information. One elected official recently stated on the record, that there would be a well drilled every 10 acres like Rifle, Colorado, a patently false claim. They further said the development would look like the North Slope. My understanding is that Rifle, Colorado is a high pressure, tight sands play, nothing like the four or five wells per section development I have seen in the Raton Basin. The North Slope claim would be laughable, if this person was not serious and convincing others that it is true. Fears of devaluing property values and the tax base are patently absurd. The only property devaluation that may happen is from the fear mongering by politically motivated elected and wantabe elected individuals. In the Raton Basin, the CBM industry is the backbone of the economy. The CBM industry pays approximately half of the local taxes. Property values have steadily increased as the industry invests hundreds of millions of dollars in the local economy. Hundreds of direct and indirect jobs with millions in payroll have been created. It is private sector development that creates real wealth and makes a diversified economy and tax base.
The Frontiersman, based on patently absurd claims by some Borough Assembly members and CAVE members (Citizens Against Virtually Everything) recently claimed that CBM development is "virtually unregulated." Bull---oney, I have personally seen the tremendous resources and reams of paper that go into getting a permit to drill. Virtually every stage of the operators plans are scrutinized before being signed off by some of the worlds most experienced geological and technical professionals at the AOGCC, DNR and DEC. The Frontiersman also published claims by a reader that "hydrochloric acid gas" is used to enhance production of gas wells (no such thing exists). The reader referred to an actual hydrogen sulfide incident in Texas that killed 9 people in the mid 70's from an oil field. There is no known hydrogen sulfide produced from or used with CBM wells or core drilling. The Frontiersman was grossly negligent by publishing an inaccurate article instilling unfounded fear in the hearts of Valley residents that their lives could be in danger living near a shallow gas well.
Water quality problems in other states associated with the surface discharge of highly dissolved minerals are consistently being run up the flagpole. These statements are also grossly untrue. However, even if they were true, surface discharge does not happen in Alaska, and DNR and other state agencies need to make this abundantly clear. " Baseline water aquifer analysis" can only be obtained by drilling new holes and comparing it to existing core hole, gas and water well drilling and mining data. How do those who are calling for new studies suggest it be scientifically done without drilling? KTUU (Channel 2 / Anchorage) reported during their series on CBM that the city of Gillette, Wyoming is using produced water from CBM wells in their city water supply because it is better quality than what they were currently using.
In a CBM well, multi layers of steel casing and Portland cement protect the fresh water aquifers. Conductor casing is set and cemented through the gravel until bedrock is reached. This is followed by another surface casing, which is also cemented. This is like a double wall tanker cemented underground that protects the freshwater aquifer zones. No freshwater infiltrates the CBM well and no produced water infiltrates the fresh water aquifer. This is highly regulated, standard scientific practice for CBM and other oil and gas operations. The casing is only perforated at the known coal layer in the impermeable bedrock. Anecdotal claims of possible damage to drinking water sources make good sound bites. However casing and cementing followed by injecting produced water into deep formations via a Class II injection well is a proven scientific practice that will unequivocally protect fresh water resources.
While development in a densely spaced downtown and subdivision areas would require mitigation measures that would probably be un-economic, I would personally welcome a CBM well on my more rural property. I have been personally contacted by dozens of Valley residents that have indicated the same.
I request that DNR publish and further articulate your findings, as I know you have been in the field in Colorado and Wyoming. A reasoned scientific approach must prevail in this discussion as fear mongers are misleading the public for anti-development fund-raising objectives. We can and must avoid the mistakes made in other areas with this new industry. Working with a first rate operator, Alaska shall be a model for other states. Imposing unreasonable stays will discourage other conventional and non-conventional operators from coming to Alaska, and possibly drive an outstanding operator from Alaska. This would be contrary to the clear policy being set by this Administration and the Legislature. Rural Alaska's only hope of becoming energy independent is with shallow gas. Without a successful operator in the state, the chances of this happening are slim.
In conclusion, the legislature acted well within its Constitutional authority in enacting , SB 319 and HB 69. Article VIII Section 1&2 expressly outlines our duties to develop our resources. Granting core hole permits is good public policy, consistent with long standing policy and practices of obtaining geological and hydrological data from this information. The request for a stay is dilatory rhetoric designed to unnecessarily delay and discourage this and other operators from doing business in Alaska. The data gathered from this phase of the operation is critical in making the scientific analysis if further regulatory action is needed.
Please deny this request for a temporary or permanent stay.
Senator Scott Ogan
District H
Twenty-third Alaska State Legislature
CC:
Congressional Delegation Governor Frank Murkowski
Senate President, Gene Therriault
Speaker of the House, Pete Kott
Alaska Energy Council Members
Senate Resources Members
House Resources Comm. Co-Chair, Beverly Masek
House Resources Co-Chair Nancy Dahlstrom
House Resources Members
House Oil & Gas Chairman Vic Kohring
House Oil & Gas Comm. Members
Commissioner of DEC
AOGCC Commissioners
Mayor Tim Anderson
MSB Assembly Members
MSB Manager John Duffy
Mayor Jim Cooper
Palmer City Manager, Thomas Healy
Palmer Assembly Members
Mayor Dianne Keller
Wasilla Assembly Members
KPB Mayor Dale Bagley & Assembly Members
Homer Mayor Jack Cushing & Assembly Members
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