Project Report:
Leveling the Playing Field for Oil & Gas Development in Alaska: An Economic Study on the Subsidies Provided by Dismantlement, Removal and Restoration (DR&R) Rules for Industry Infrastructure.
Purpose
- Investigates the causes of economic imbalances.

Summary

In September 2013, Cook Inletkeeper released a new report with the Center for Sustainable Economy, entitled "OIl & Gas Infrastructure in Cook Inlet, Alaska: A Potential Public Liability." This report addressed economic imbalances found in oil and gas development by highlighting the externalities surrounding bonding and removal costs for industry infrastructure (e.g., offshore platforms, pipelines, etc.) in Alaska’s Cook Inlet. In Spring 2014, Inletkeeper engaged economist John Talberth with the Center for Sustainable Environment to review the State of Alaska's proposed rules on decommissioning, removing and remediating (DR&R) retired oil and gas infrastructure, and to make policy recommendations for state and federal regulators and lawmakers, to level the playing field and ensure the external costs of DR&R are properly internalized.

Description

This is a three phase project, and Phases 1 & 2 have been completed:

PHASE 1 provided an overview of Cook Inlet oil and gas infrastructure and state and federal DR&R requirements; defined the state and federal laws and rules applicable to DR&R, quantified the extent of industry infrastructure (e.g., number of pipeline miles, etc.), defined the age and life expectancy of the infrastructure, and revealed the bond or other surety amounts committed to remove them after operations cease.

PHASE 2 put a value on infrastructure removal based on infrastructure life expectancy and estimated removal costs in other jurisdictions.

PHASE 3 will include policy recommendations for state and federal regulators and lawmakers, to level the playing field and ensure the external costs of DR&R are properly internalized.

Goal: Support changes in public policy that internalize DR&R costs for oil-producing regions through Alaska and beyond.

Objectives: a) Review DR&R and bonding rules and laws in other jurisdictions; b) develop policy recommendations for new laws or rules for bonding and DR&R that remove economic imbalances and reflect the true cost of development.

Purpose

Externalities occurring in the realm of resource development can create enormous economic imbalances, which can result in significant environmental impacts. The costs for properly removing industry infrastructure—including offshore oil platforms, pipelines and processing facilities—can be significant. Yet leaving such infrastructure in place also carries significant costs, in the form of pollution and habitat destruction in publicly-owned lands and waters. Too often these dismantling, removal and restoration (DR&R) costs are ignored until the economic viability of the oil fields collapses, leaving state managers—and by extension, the citizenry —responsible for complex and expensive clean-ups. Additionally, by failing to properly internalize DR&R costs, certain corporations can gain a competitive advantage over others which internalize these costs elsewhere. In the end, these economic imbalances can result in long term physical and chemical pollution in important local ecosystems.

Scope

Cook Inlet is the birthplace of commercial oil and gas in Alaska. Yet today, a wave of new oil and gas development is pushing into the frontier waters of the Alaska Arctic—the Beaufort and Chukchi Seas. This study will highlight economic imbalances in Cook Inlet, with a goal to inform more fair, efficient and predictable rules for offshore development in the Arctic and beyond.

Information Dissemination

This information was shared through a press release to Alaska print, TV, radio and social media; on facebook; and through an email to over 1200 Alaskans on Inletkeeper's mailing list. It was also made available to over 50 participants at a September 9, 2013, workshop sponsored by the Alaska DNR to consider new DRR rules.

Project Link http://inletkeeper.org/resources/contents/drr/view

Amounts Approved
$25,000.00 on 6/4/2012 (Check sent: 7/2/2012)
$25,000.00 on 8/12/2013 (Check sent: 8/27/2013)



Jack-Up Drilling Rig "Endeavor", September 2012
Large tax credits have induced two new jack-up drilling rigs to start exploratory drilling in Alaska's Cook Inlet.

Steelhead Platform, Cook Inlet, Alaska
Steelhead Platform, Cook Inlet, Alaska

Dillon Platform Pipeline, Cook Inlet, Alaska
Dillon Platform Pipeline, Cook Inlet, Alaska

Posted 3/8/2012 7:49 PM
Updated   9/26/2014 8:18 PM

  • Nonprofit


 
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