Slope Cleanup Not Guaranteed
REPORT: Will oil firms provide funds to pick
up after rigs run dry?
by Liz Ruskin, Anchorage Daily News, July 9, 2002)
-- Once the North Slope oil is gone, it will cost the oil companies
billions of dollars to dismantle all the buildings, roads and
gravel. But the state of Alaska has required that the companies
post bonds of only $500,000 to cover all their oil and gas leasing
on state land, the General Accounting Office noted in a report
it is releasing this week.
amounts represent a small fraction of the funds that may be
needed for dismantlement, removal and restoration of state lands
on the North Slope should a company refuse to or be unable to
pay," the report's authors said.
comes as no surprise that the area will take billions to dismantle,
remove and restore -- DR&R for short -- said Bob King, Gov.
Tony Knowles' spokesman.
are huge, world-class companies, and I don't think there's any
reason to believe they won't have the wherewithal when it comes
time to shut down the North Slope," he said.
Peter Van Tuyn, an attorney at the Anchorage-based law firm
Trustees for Alaska, said the report validates what he and other
environmentalists have been arguing for years, usually regarding
tearing down the trans-Alaska oil pipeline: The state has no
guarantee that the cleanup money will be available when it's
other things, the report faults the state for not establishing
clear DR&R standards. Essentially, the report says, the
companies are obligated to clean up to the state's satisfaction
and the state hasn't said what that means exactly. That makes
it impossible, the GAO said, to accurately estimate how much
the work will cost. Nonetheless, the report's authors came up
with the figure: $2.7 billion to $6 billion.
lack of clear standards from the outset could make the DR&R
requirements the state eventually imposes tough to enforce in
court, Van Tuyn said.
smaller operators often take over when a field declines, he
keep changing the players, but we don't guarantee the cleanup
costs at any stage," he said. "There's kind of a 'trust
me' issue that's very disturbing from an environmental and a
public policy perspective."
a company is big and established isn't good enough, he said.
at Enron," he said. "It was huge. Now it's vaporized."
Ed Markey, D-Mass., who led the charge in the House last year
against opening the Arctic National Wildlife Refuge to oil drilling,
requested the GAO -- the investigating arm of Congress -- to
look into the matter. He said the report is a "powerful
indictment" against the existing permitting process and
the companies. He also compares the issue to the recent corporate
disgraces. "Hiding $6 billion in cleanup liabilities is
a world-class accounting scandal in the same league as WorldCom
and Enron," Markey wrote Monday.
no basis for that accusation, according to Ronnie Chappell,
spokesman for BP Alaska.
statement is disappointing and irresponsible," he said.
"Our balance sheets make full accounting of the DR&R
companies disclose the worldwide total of those liabilities.
money may be set aside on paper, said Van Tuyn, "but where
is the money?"
not set aside in any escrow account, Chappell acknowledged,
but he said BP has already begun making good on its commitment.
company, for example, is reclaiming old pits where chemical-laced
drilling lubricants and cuttings were dumped. The material is
ground up and injected down drilling holes.
companies have committed to performing the dismantling and they
are legally obligated to do it, the governor's spokesman said.
Cleanup technologies improve over time, so why should the state
have set standards in the 1970s for a cleanup that might happen
30 years from now, King said.
Alaska's big three oil producers -- BP, Phillips and Exxon Mobil
--were to post gigantic bonds, they would go to a bonding company
that would likely have less financial might than the oil companies,
sense would that make?" he asked.
Fineberg, an oil industry critic who lives in Ester, said it
makes plenty sense.
like insurance. You have safeguards to ensure that the far distant,
unlikely occurrence is covered," he said. "You come
up with a financial arrangement to make sure it is covered."
and Van Tuyn said they provided information to the GAO investigators.
Liz Ruskin can be reached at 1 202 383.0007 or email@example.com