GAO: Policy-makers should ensure industry can pay for North Slope cleanups

By OGJ editors

WASHINGTON, DC, July 11 -- US regulators should ensure producers are financially prepared to clean up any drilling and production-related damage done to public lands before new exploration is allowed to begin, a new report by the General Accounting Office said.

Last year Democratic leaders who oppose proposals by the administration of President George W. Bush and Republican congressional leaders to drill on the Arctic National Wildlife Refuge coastal plain called on GAO to consider the long-term environmental ramifications of Alaska oil exploration and development (OGJ Online, March 16, 2001).

House Minority Leader Dick Gephardt (D-Mo.), Rep. Nick Rahall (D-W.Va.), ranking minority member of the House Committee on Resources and Rep. Ed Markey (D-Mass.) asked GAO to estimate how much it would cost industry to return the North Slope to its original condition once drilling stops and how companies planned to pay for it.

GAO is an independent, investigative federal agency that Congress frequently uses to analyze controversial issues.

The congressional auditor offered specific recommendations to both the Department of the Interior, which administers public lands, and to Congress. The report was released publicly July 8.

NPR-A
Regarding the National Petroleum Reserve-Alaska, GAO said the secretary of the interior should instruct the director of the Bureau of Land Management to issue specific dismantlement removal and restoration requirements to ensure the land is properly restored after oil and gas activities cease. Congressional auditors also called on BLM to review its existing financial assurances for oil and gas activities in NPR-A to determine whether companies can prove they have enough money to fully restore the area when oil runs out.

Interior officials largely agreed with GAO's suggestion to review whether oil companies have the means at their disposal to restore the land.

Alaska officials, however, said they feel GAO's call to issue specific restoration requirements for NPR-A prior to further exploration is premature. Alaska officials said it would be better to address the issue when oil production ends and the obligation actually becomes due. For NPR-A alone, GAO noted that the potential price tag for cleaning up the area could range from $2.7 billion to $6 billion, based on preliminary industry estimates.

Congress's role
GAO also offered suggestions to Congress. Statutes such as the controversial House ANWR leasing provision now being mulled by a congressional conference this summer should include two key caveats, the agency indicated.

First, lawmakers should write legislation that includes "a restoration goal that will allow the federal agency or agencies responsible for developing dismantlement, removal, and restoration requirements to have a clear understanding of what the Congress wants achieved."

Second, any leasing provision should have "specific assurances that these same agencies obtain adequate financial assurances from producers that funds will be available to meet the goal of returning the land to a condition that the Congress has specified."

Uncertain cost
Looking at existing North Slope operations, much of which is on state land, GAO said that dismantling and removing more than 30 years of accumulated infrastructure "including 224 miles of pipeline, more than 10,000 acres of gravel pads, roads, and airstrips, and numerous production facilities and plant" will be an enormous undertaking with a costly price tag that can't yet be quantified without specific requirements from policy-makers.

Responding to the report, North Slope producer BP PLC said that it is confident it is prepared to meet restoration requirements. The company's recent annual report indicated it earmarked over $5 billion for global environmental remediation in 2001.

Other producers, speaking on condition of anonymity, said the industry has a good record in Alaska; they pointed to 3 decades of experience dealing with the harsh conditions. They added that future drilling projects will benefit from new technology that leaves a footprint that is only a small fraction of what is now present on the North Slope.

Environmental groups, however, disagree. They say that North Slope development has already led to massive groundwater and offshore pollution that overrides any economic benefits. And they argue that the arctic ecosystem is far too fragile to recover from oil-related development.