[seadog] Firms unprepared for Alaska oil cleanup cost-
- From: "Tom Blanchard" <tomblanchard@xxxxxxxxxxxxxxxx>
- To: "SEADOG" <seadog@xxxxxxxxxxxxx>
- Date: Wed, 10 Jul 2002 23:18:19 -0400
Tuesday July 9, 4:17 pm Eastern Time
Reuters Company News
WASHINGTON, July 9 (Reuters) - Oil firms have not earmarked enough money to
foot a future cleanup bill of as much as $6 billion for oil drilling
operations on Alaska's North Slope once the now-prolific reservoir runs dry,
according to a congressional report released on Tuesday.
Oil firms and Alaska's governor said they are committed to eventually
removing the detritus of roads, pipelines and airstrips left by 30 years of
drilling efforts there, but see no urgency because oil could flow from the
North Slope for another half a century.
The report by the General Accounting Office, Congress' investigative arm,
adds another wrinkle to a debate over a Republican-backed plan to allow
drilling in the nearby Arctic National Wildlife Refuge (ANWR), which
Democrats have vowed to defeat on environmental grounds.
The GAO prepared the report at the request of House Minority Leader Richard
Gephardt and Massachusetts Rep. Edward Markey, two Democrats taking part in
House-Senate negotiations to reach a compromise on wide-reaching energy
legislation.
Since the opening of the Trans-Alaska Pipeline in 1977, more than 13 billion
barrels of oil have flowed from the region, supplying about 20 percent of
U.S. annual production.
However, once the wells end production, oil companies will face a big
cleanup bill, totaling between $2.7 billion and $6 billion, the GAO said.
As of January, only BP and Phillips operated fields there, while Exxon Mobil
Corp, Anadarko Petroleum Corp and ChevronTexaco Corp hold interests in some
wells there.
In a letter included in the report, the head of Alaska's Department of
Natural Resources said it was not "self-evident that it is better to adopt
specific standards today for ... activities that may not take place for half
a century."
British Petroleum, Phillips Petroleum Co. and others have collectively spent
$53 billion to build gravel roads, pipelines and airstrips for oil
production from the Utah-sized region known as the North Slope.
Oil firms say they have deep enough pockets to fund an eventual North Slope
cleanup.
"BP has the resources and has made a commitment to handle (cleanup) on the
North Slope," a company spokesman said.
BP does not reveal its specific North Slope cleanup liabilities. In 2001, BP
estimated its total global cleanup-related liabilities at $5.3 billion over
the next 30 years, the spokesman said.
The land was leased by the oil companies from the Interior Department and
the state of Alaska. Under the law, public lands must be restored after
drilling ceases.
The Interior Department and oil companies "have a very lax definition of
what will be required and how much they will have to pay," Markey said,
referring to cleanup costs.
The GAO said the cleanup will be an "enormous undertaking," especially in
the area's hostile Arctic climate -- the sun never breaches the horizon for
two months during the winter.
The state of Alaska has advanced no specific dismantlement plans for North
Slope wells. Until then, GAO said it is not possible to give an accurate
estimate of how much it will cost to dismantle the drilling sites.
Funds provided by the oil industry in shape of bond requirements will yield
only a "small portion" of potential funds needed and are "insufficient" to
ensure proper restoration, the GAO said. Oil firms must put up $200,000 for
each Alaska drilling operation and $500,000 for all of its oil and gas
leases in the state, it said.
To get bond backing to cover cleanup costs, energy firms would have to go to
a bond company "that would likely have less financial wherewithal than the
oil companies themselves," said Bob King, a spokesman for Alaska Governor
Tony Knowles.
GAO The Interior Department should issue more specific requirements for the
cleanup, the report said.
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