Oil and Gas Development in Alaska – Water Policy Consulting LLC

Governor Dunleavy Nominations Graphite Creek Project to Fast-41 Permitting

Hot Springs Creek Below the Proposed Graphite One Mine Site

Due to Alaska Governor Mike Dunleavy’s nomination of Graphite Creek project in the remote Kigluaik range north of Nome, as a high-priority infrastructure project, as eligible for new legislation intended to fast track the permitting process for transportation projects. Title 41 of the Fixing America’s Surface Transportation Act, (Fast-41) adopted by Congress during the Obama administration which was intended to be a surface transportation reauthorization focusing on highway, transit, and rail programs. The Act establishes a new Federal Permitting Improvement Steering Council (FPISC), authorized to stream line the NEPA process including elimination of public review and comment. Due to the unprecedented authority provided to the Council, until now, the Act has traditionally been applied only to Infrastructure and transportation Projects.

However, mining companies and the Trump administration have been pressuring FPISC to include mining as a sector under the Act. According to the mining industry magazine Critical Minerals Alaska 2020, “a federal entity meant to provide a one-stop-shop capable of coordinating permits across different federal agencies, thereby streamlining and shortening the overall process for large infrastructure projects that are eligible for the program. Mining projects that supply the materials needed for the energy, communication, and transportation infrastructure in the U.S. may be eligible for Fast-41.” [1] If the proposed Graphite One Mine is included into Fast-41, Critical Minerals Alaska 2020 says it “could help reduce the seven to 10 years it takes the average large mining project in the U.S. to get through the permitting process.”[2]

The sudden surge in the mining of graphite and other precious minerals in Alaska results from a dramatic increase in demand for batteries, solar power, computers, and other high-tech products that require such minerals. For instance, graphite is a significant component of the lithium-ion batteries used for electric cars and some renewable energy systems. According to the World Bank , due to the growing global interest in such cars and energy, the demand for graphite, lithium, cobalt, and other battery metals could increase by nearly 500 percent by 2050.[1] The report says that, “[g]raphite demand increases in both absolute and percentage terms since graphite is needed to build the anodes found in the most commonly deployed automotive, grid, and decentralized batteries. ” Similarly, according the United States Geological Survey, there are currently no graphite mines in the United States, requiring American battery and other manufacturers to import 58,000 metric tons of graphite during 2019.[2] According to CMA2020, with “5.7 million metric tons of quality graphite outlined so far, Graphite One Inc.’s Graphite Creek deposit in Northwest Alaska could provide a reliable domestic supply of graphite to North America’s burgeoning lithium-ion battery sector.” [3]

[1] Shane Lasley, High priority Alaska REE, graphite projects Gov nominations elevate mine projects to Fast-41 permitting, p. 6-7, High priority Alaska 2020 (November 2, 2020).

[2] Ibid.

[3] Shane Lasley, Western Alaska deposit could feed graphite into supply chain, Mining News, CRITICAL MINERALS ALASKA, pp. 28-29 (2020)

Public Lands Management Under Trump Descends into Chaoss

President Donald Trump’s appointment of William Perry Pendley as Director of the Bureau of Land Management who is openly hostile to environmental regulations, has turned into yet another legal debacle typical of the current administration. Pendley’s inflammatory statements and open opposition to social justice and diversity including for native and African American communities, statements that public lands should be privatized, conflicts of interest, unethical conduct, support of anti-government extremists and efforts to dismantle the BLM, have outraged conservation and tribal organizations throughout the western U.S. It, therefore, quickly became obvious to Interior Secretary David Bernhardt that because of Pendley’s record, there would be no way he would obtain confirmation from congress if the administration did what was legally required and nominate him for that purpose. In fact, in a procedure that the U.S. Supreme Court calls a “critical structural safeguard” of democracy, the Appointments Clause of the Constitution requires that the heads of prominent federal agencies be nominated by the President and confirmed by the Senate” a standard that is also found in the federal Vacancies Reform Act.

Especially when it comes to dismantling environmental regulatory standards, however, the Trump administration has never been that concerned with federal law or, for that matter the U.S. Constitution and Bernhardt resolved the issue of Pendley’s radical anti-public land views, racism and support of extremists simply by repeatedly extending Pendley’s appointment as Director of the agency for the past 13 months.

As a result, in July 2020, the state of Montana and several conservation organizations filed a lawsuit to enjoin Bernhardt from continuing to extend Pendley’s status as Acting Director of BLM. This prompted Trump to finally put Pendley’s name before congress as required only to almost immediately remove it because of concerns of several republican senators in key states who are up for election about the audacity of the appointment. However, rather than remove Pendley as acting Director in accordance with with the law, Secretary Bernhardt announced that Pendley will “stay on leading BLM” as the bureau’s deputy director of policy and programs, who is also “exercising the authority of director.”

This, once again, got the attention of the Montana U.S. District Court which as part of the lawsuit filed by the state and conservationists a couple months before, promptly enjoined Pendley from exercising such authority and Bernhardt from unlawfully delegating the authority of the BLM director to him. In fact, the Court’s declaration that Pendley served unlawfully as the Acting Director of the BLM for well over a year, also meant that many of the decisions he made during that time were similarly illegal, threatening Trump’s strategy to dismantle protections of public lands and open them up to development.

Chief Judge Brian Morris found that “’any function or duty’ of the BLM Director that has been performed by Pendley would have no force and effect and must be set aside as arbitrary and capricious” and instructed DOI to compile any such acts and provide a full report to the Court. Therefore, any of the official actions Pendley took over the 424 preceding the decision including opening up the Arctic National Wildlife Refuge or the National Petroleum reserve to oil drilling,” or vast acreages of public lands, including areas relied on by Native village communities for subsistence, to mining, are potentially unauthorized.

Unflagging Opposition to Business-as-Usual Extraction Practices

With Present Trump rolling back one environmental policy after another, ongoing efforts to slow global warming, safeguard wilderness, and provide clean water and air can seem futile. But never doubt that a handful of thoughtful, committed lawsuits can change the world. Indeed, it may be the only recourse that can.

We need look no farther than the Gwich’in Native community for inspiration when it comes to fighting to protect the environment. For more than thirty years they have resisted attempts to open up the Arctic National Wildlife Refuge to oil and gas drilling. Under Trump’s plan to open lease sales across the entire coastal plain, that fight has kicked into high gear. For the Gwich’in, the coastal plain, birthing grounds for the Porcupine caribou herd which numbers approximately 200,000, is sacred ground. Their culture, history and way of life revolve around the caribou and the 1.5 million-acre expanse of coastal lands. Sarah James, Gwich’in elder, explains, “We have a special connection in that we are a part of the caribou and the caribou are part of us. It is our language, our songs, our dance…. We take care of the caribou, and in return, they take care of us, and that’s really important to my people here.”

The Gwich’in Sterring Committee, along with several other plaintives including Canada’s Yukon chapter of Canadian Parks and Wilderness Society, filed a lawsuit in late August, seeking to overturn Trump’s approval for oil leasing, and siting violations of the Alaska Native Claims Settlement Act and likely impacts to the Porcupine Caribou Herd.

A second lawsuit to halt oil leasing on the Refuge filed by The National Audubon Society, Natural Resources Defense Council, Friends of the Earth, and Center for Biological Diversity sight insufficient concern over increased greenhouse gas emissions and melting permafrost, poor air quality, and negative impacts to the region’s wildlife.

And most recently, a third lawsuit to overturn drilling in the Arctic National Wildlife Refuge was filed on September 9th with the U.S. District Court in Anchorage by attorneys general for 15 states and led by Washington and Massachusetts. The lawsuit states that drilling will contribute to global climate change and its effects such as sea level rise and extreme weather events.

A number of other environmental legal battles continue in Alaska and Siberia. In North-western Alaska’s National Petroleum Reserve, Trump seeks to overthrow Obama-era safeguards by expanding development into regions of the Reserve long slated for protection. Two recent lawsuits are pushing back against expanded development in NPR-A oil leasing. The lawsuits are in response to the final environmental impact statement released by the Bureau of Land Management in June allowing oil leasing on 18.7 million acres in the 23-million-acre reserve, including drilling in Teshekpuk Lake. Teshekpuk is the largest lake on the North Slope and provides critical habitat for migratory waterfowl and shorebirds.

And while a lawsuit filed by the Natural Resources Defense Council challenging the U.S. Environmental Protection Agency’s reversal of restrictions on Pebble Mine was dismissed in US District Court, Alaska Senator Dan Sullivan has joined a growing rank of conservatives who are openly opposed to the Pebble mine project. The proposed gold, molybdenum and cooper mine, in South-central Alaska’s Lake and Peninsula region, is recognized as a threat to the nationally-significant Bristol Bay salmon fisheries. Following the release of secret recordings by Pebble executives, Sullivan stated in a tweet on September 24^th, “Let me be even more clear: I oppose Pebble Mine. No Pebble Mine.” This follows a surprise stipulation issued by the U.S. Army Corps of Engineers in late August to Dynasty Minerals Ltd requiring the mine owners to outline how they will offset damage to wetlands and any impacts to the Bristol Bay salmon fishery. Other conservatives who oppose the mine, at least as it is currently proposed, including Alaska Senator Lisa Murkowski, Donald Trump Junior and Fox News host Tucker Carlson.

In the southern part of the state, Southeast Alaska Conservation Council, and other conservation groups including the Chilkat Indian Village of Klukwan, lost lawsuits in federal district court and the Ninth Circuit court which sought to challenge federal permits issued to the Palmer mine project near Haines. The Constantine Metal Resources Ltd. obtained permits to build 2.5 miles of roads across U.S. Bureau of Land Management (BLM) lands to access zinc, copper, gold and silver deposits. The lawsuit argued that BLM did not factor in future mining development at the Palmer mine and impacts on the 3,000 bald eagles and spawning salmon along the nearby Chilkat River.

In southeastern Alaska, the Trump administration is zeroing in on the Tongass National Forest, seeking to exclude this, the nation’s largest national forest, from the Clinton-era roadless rule. A much-disputed study by the U.S. Forest Service states that lifting protections “will not significantly harm the environment.” By year’s end, the Trump administration hopes to open vast tracts of pristine old growth forest to road construction and timber sales. Recent lawsuits blocking timber sales that failed to identify impacted areas, and for deficiencies in the review process have stalled the sales process several times. That pushback resulted in the Trump administration implementing the new roadless rule exemption.

Meanwhile, in the Russian far north, a lawsuit has been filed against Norilsk Nickle seeking 1.96 billion dollars in damages for a May 29^th fuel spill. The spill, blamed on melting permafrost, dumped 21,000 tons of diesel into the Ambarnaya and Daldykan rivers which feed into Lake Pyasino before emptying into the Arctic Ocean. The spill is one of the largest ever recorded in the Arctic and has been compared with Alaska’s 1989 ExxonValdez spill, in part because both spills coincided with the spring migration — just as birds and fish are returning to their natal grounds.

The one take-away the Gwich’in can offer in this legal playing field is don’t give up. The fights for the Coastal Plains, the Tongas, and the headwaters of Bristol Bay continue, one lawsuit at a time. For Gwich’in elder Sarah James it’s straight forward. “We’re not a nonprofit. We’re not a movement. We’re not a corporation. We’re a neets’aii Gwich’in tribal government, and that’s how we’re now taking on this issue, government-to-government, and we’re standing our ground.”

There are alternatives to sacrificing the Arctic National Wildlife Refuge’s coastal plain

The Trump administration recently gave the final go-ahead to drilling in the Arctic National Wildlife Refuge, which by the end of 2020 would authorize the sale of two separate 400,000-acre oil and gas leases, encompassing a major portion of the refuge’s coastal plain and 8 percent of the 19.3 million-acre Refuge.

Opponents who have filed multiple lawsuits to stop the leasing, believe that the approval process was rushed for political reasons resulting in a flawed and inadequate analysis of the environmental impacts, violating prohibitions on killing or harassing of polar bears and laws requiring the protection of indigenous subsistence resources as well as exacerbate sea level rise, extreme weather events, the spread of diseases like and other impacts of climate change.

Alaska’s political leadership, on the other hand, seems unfazed by yet another botched Trump administration environmental analysis and the fact that more drilling in the Arctic will contribute to Alaska’s carbon footprint. Sen. Lisa Murkowski, for example, said “[t]his is a capstone moment in our decades-long push to allow for the responsible development of a small part of Alaska’s 1002 Area. … I’m confident the ROD has been developed carefully and comprehensively and look forward to the lease sales mandated by law…”

Why are our political leaders still stepping in line with President Trump’s insatiable thirst for oil no matter what the environmental cost, when economists have been warning for decades that the state is too dependent on the oil and gas industry to bail it out from spending at an unsustainable rate year after year?

It should have been obvious in the mid-1980s when global oil prices crashed sending the state into a full recession, that not only were the days of the oil and gas fueling fiscal growth over, but continuing to put all the state’s eggs in one basket would actually harm the economy. That the ongoing sugar-daddy delusion was still alive and well by 2003, however, is illustrated by then-Gov. Frank Murkowski’s announcement regarding the solution to the state’s economic crises: “Ladies and gentlemen, in a single word, it’s oil.”

Today the state’s addiction to oil is partly illustrated by the millions it provides via annual tax write-offs to oil and gas corporations who drill in Alaska but do not provide much in the way of return on this investment. in 2014, for example, the state’s largest producer, ConocoPhillips, made 68 percent of its global profits from Alaska but invested only 15 percent of its global capital in the state.

Despite the delusion of some politicians that drilling in places like ANWR could take Alaska back to the days of economic Nirvana of Prudhoe Bay, one thing that could prevent development in ANWR would be if presidential candidate Joe Biden who, if elected, has promised to “permanently protect” the refuge.

But in the end, rather than politics or litigation, it is simple economics that could stop drilling in the coastal plain. Ever sense COVID-19 — which came at a time when oil prices were already down — drove those prices to historic lows, the industry as a whole has been bleeding money, shedding jobs, and interest in drilling in the remote sites with difficult conditions, such as the Arctic refuge, may be waning.

More importantly, while oil companies are making cutbacks in drilling programs, banks
are less inclined to front them capital on future investments resulting in a vicious cycle of less funding available for future drilling. This situation has been further exacerbated by the
declaration from several global banks that they will stop financing oil and gas exploration in the Arctic due to the need to move away from fossil fuels and invest in alternative energy sources because of the rapidly increasing impacts of climate change on communities and ecosystems in the Arctic.

The good news is that with the banks turning away from fossil fuel investments while they decide what kind of energy programs could benefit from COVID-19 stimulus funding, there may not be a better chance than right now to move towards green energy. Fossils fuels have become no more than an economic dinosaur and a carbon-producing disaster, especially for the Arctic.

So, rather than sacrificing the coastal plain and Alaska’s fiscal future, why not investigate the potential local and global economic impact of renewable energy in the Arctic, including solar, and hydro and wind power as part of Alaska’s financial recovery?

This Op-ed also appeared in the September 24, 2020 edition of Arctic Today.

Trump Would Like You to Think He’s Gone Environmental

Just weeks away from the Presidential election, Trump is pandering for votes by suggesting that he is our man when it comes to preserving the environment. Describing himself as “the number one environmental president since Teddy Roosevelt,” in recent weeks he has backtracked on his administration’s move to grant a permit for Pebble Mine in Alaska which has to potential to devastate Bristol Bay salmon runs, and extended a federal moratorium on offshore drilling in the Gulf of Mexico which is largely supported by residents of Florida, Georgia and South Carolina where he is trying to solidify his base. Moreover, he rescinded his nomination of William Perry Pendley, the controversial candidate chosen to run the Bureau of Land Management. This smokescreen does little to obscure the dozens of deregulatory actions undertaken by the Trump administration, including rolling back fuel economy standards, opening the Arctic National Wildlife Refuge coastal plains to oil leasing, and tougher air-quality standards to name but a few.

Lawsuits Filed on ANWR

Three lawsuits have been filed seeking to block the Trump administration’s efforts to sell oil leases in the Arctic National Wildlife Refuge. The National Audubon Society, Natural Resources Defense Council, Friends of the Earth, and Center for Biological Diversity have signed off on a lawsuit sighting insufficient concern over increased greenhouse gas emissions and melting permafrost, poor air quality, and negative impacts to the region’s wildlife. The lawsuit alleges violations of the National Environmental Protection Act, the National Wildlife Refuge System Administration Act, and the Endangered Species Act. A second lawsuit, filed by the Gwich’in Steering Committee also sites violations of the Alaska Native Claims Settlement Act, and includes plaintiffs in Canada’s Yukon chapter of Canadian Parks and Wilderness Society. Most recently, a third lawsuit was put forth by fifteen states including California, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont and Washington. Concerns addressed in this lawsuit include habitat damage and greenhouse gas emissions, as well as impacts to waterfowl hunting and a lucrative birdwatching industry for birds that breed on the Arctic plain and overwinter in the lower 48 states.

Opinion – Alaska Faces an Economic Year Like no Other

Jessica Shepherd

Back in late March, when Alaska was reporting its first spate of Covid-19 cases, Reuters published a synopsis of the state’s economy. In the article Alaska State Senator Natasha von Imhof, co-chair of the Senate Finance Committee, was quoted as having said, “We are being hit on all sides with the stock market crash, oil prices plummeting and the tourism and fishing season all but idle.” To see the original article see here.

Now, nearly six months later, we wondered how Alaska was faring based on the parameters von Imhof used to measure the state’s economic resiliency. Following is an assessment of the oil industry, the Alaska Permanent Fund, tourism, and the seafood industry for mid-August. The picture is grim, but perhaps not as dire as it looked back in March.

On March 23^rd, due to a Covid-induced stall-out in all things travel-related, oil prices plummeted from a high of $69 a barrel at the first of the year to just $23 a barrel. This equated to an overnight loss to Alaska’s treasury of some $500 to $700 million dollars. Given that the industry break-even cost of production is $39 a barrel, it was cheaper to leave oil in the ground. But the worst was ahead of us. In late April oil briefly dropped to below zero due to a glut on the market. In response, ConocoPhillips, Alaska’s biggest oil producer, announced plans to reduce production by 2,000 barrels per day and institute layoffs for 250 staff. This was followed shortly thereafter by Doyon’s announcement of 300 layoffs. As we all know, oil drives Alaska’s economic engine. As of this writing, on August 10^th, oil is back up to $45 a barrel. Still well below the price at the beginning of the year, but significantly better than the March-April outlook.

Then there was the stock market dive, which sent the Permanent Fund in a tailspin. In two weeks, the fund declined by 10% to a value of $58.7 billion. Today, even after paying out a $992 dividend in July to all eligible Alaskans, the fund is back up to $64.7 billion. The stock market, which has been oddly resilient during the pandemic, has, to date, spared the fund from a sustained loss.

The tourist season was all but on hold in the spring as cruise ship companies canceled summer sailings and Canada closed the boarder to independent travelers. As a result, it’s been a quiet summer in Alaska’s tourist destinations. Restaurants remain closed or subsist on a subdued cliental of locals and in-state travelers. Alaska’s usually clogged highways are pleasantly uncongested, and towns like Cooper Landing, Telkeetna, and Skagway are eerily quiet. And the skies over communities like Homer are oddly still now that RavnAir has folded. There’s something to be said for uncrowded sidewalks and ample parking at the grocery store, but the loss in tourist dollars has many small business owners spooked. Even with relief funding and small business loans, places like the Alaska SeaLife Center in Seward, the Egan Center in Anchorage, and Chena Hot Springs Resort outside of Fairbanks, along with hundreds of bed and breakfasts, hotels, restaurants and shops have laid off staff and cut expenses to the bone, and they still aren’t making ends meet. Recovery, when it comes, will take a long time, and many of our favorite small businesses may no longer be there.

Finally, the seafood industry, which, as the second largest revenue stream in the state, contributes 5.2 billion dollars to the economy annually, faced a shortage of processing plant workers early in the season due to travel restrictions placed on the non-U.S. citizens who make up a large percent of seasonal workers. Citing concerns about Covid-spread among small, medically-underserved villages, local lawmakers in the Bristol Bay region went so far as to ask the governor to cancel the fishing season this year. In response, the state mandated a 14-day quarantine for out-of-state workers, and still, cases erupted aboard fishing vessels and at processing plants in Cordova, Whittier, Seward and Kodiak. In fact, the majority of non-residential cases in Alaska have been among seafood workers. Read more about Alaska’s fishing industry and Covid-19 cases here. Salmon runs in Bristol Bay were respectable, but the initial price came in at just 60 cents a pound, compared to $1.54 last year. And in Kodiak, Prince William Sound and Cook inlet sockeye runs were disappointing. Read more about Alaska’s 2020 salmon harvest here.

One indicator von Imhof did not take into account during her March economic assessment pertains to the state’s population. Alaska’s population has decreased for three consecutive years, declining from an all-time high of 741,456 on July 1 2016, to 731,545 on July 1, 2019. Figures for 2020 will come out later this month, but given the downturn in oil revenue and jobs, tourism, and, to a lesser degree, in fisheries, it’s likely the downward trajectory will continue.

So what do we make of this information? Alaska has ridden out the first six months of the Covid-19 pandemic a little better than expected, thanks to the whims of the stock market and oil prices. Unfortunately, the private sector hasn’t fared as well, and as we approach the fall and winter with no further federal support in sight, the difficulty of keeping small businesses afloat until next year may be prove to be too much for many shops, restaurants and other service industries. They will only survive to the degree that we, as consumers, support local businesses rather than relying on Amazon.com and Walmart. Please think on that the next time you shop.

The Trump administration continues its push for offshore Arctic oil development

Secretary of the Interior David Bernhardt and Secretary of Commerce Wilbur RossIn U.S. District Court in Anchorage recently, filed notice that they are appealing the March 29 ruling that threw out Trump’s executive action reopening closed Arctic and Atlantic waters to oil leasing.

In that ruling, U.S. District Court Judge Sharon Gleason said Trump violated the law with a 2017 executive order that reversed President Obama’s actions withdrawing most U.S. Arctic waters and portions of the Atlantic Ocean from the federal offshore oil and gas leasing program. Presidents have the right under the Outer Continental Shelf Lands Act to withdraw areas from leasing, but adding areas to the leasing program requires Congressional action, Gleason said in her ruling.

The ruling erected a new hurdle to a planned 2019 Beaufort Sea lease sale and threw the Trump administration’s entire five-year leasing plan into question

U.S. Fish and Wildlife Service Criticizes Trump’s Arctic Refuge Drilling Study

In unusually harsh criticism, the U.S. Fish and Wildlife Service says the Trump Administration failed to adequately consider oil spills, climate change and the welfare of polar bears in its rush to open Alaska’s Arctic National Wildlife Refuge to oil drilling. The criticism which appeared in written comments filed by the agency stated that Draft Environmental Impact Statement (DEIS) failed to consider oil spill response planning, analyze impacts of climate change in the Arctic, require polar bear denning habitat surveys; pointed to substantial information gaps and implied that the agency in charge of drafting the DEIS (the Bureau of Land Management) failed to properly consult with USFWS as required by federal law.

The Fish and Wildlife oversight agency comments come at a time of increasing criticism of the BLM’s proposal to lease 400,000 acres in ANWR which is the largest wildlife sanctuary in the United States and which serves has habitat for multiple species including bears, caribou, lynx and muskox. Because 16 billion barrels of recoverable crude oil reserves also lie underneath the area, it is a major component of President Donald Trump’s “Energy Dominance” strategy.

Not only do the USFWS comments illustrates that even federal agency’s are starting to resist the administration’s rush to develop resources in the Arctic at the expense of environmental laws but, like the rest of Trump Arctic drilling campaign, the flawed permitting process which includes an order from the President that the National Environmental Policy Act process be completed within one year and the Final EIS be no more than 150 pages, may result in litigation. Such shortcutting of a process which is intended to be thorough and normally takes years and thousands of pages of documentation, can mean the failure to fully analyze significant impacts, tribal consultation and coordination will be inadequate, important scientific data will be ignored, and the public notice and comment process will be negatively impacted.