MEMORANDUM

To: Pete Sprague, President

Members of the Kenai Peninsula Borough Assembly

Thru: Dale Bagley, Borough Mayor

From: Bill Popp, Oil & Gas Liaison

Subject: Proposed Cook Inlet Outer Continental Shelf Lease Sale 191 & 199

Tri-Borough Resolution Stipulations

The following is the text of an email from Mr. James Lima, EIS Coordinator for the Minerals Management Service (MMS). Mr. Lima was responding to my question of how the Draft Environmental Impact Statement (DEIS) for the proposed Cook Inlet Outer Continental Shelf (OCS) Lease Sales 191 & 199 addresses the concerns of the Kenai Peninsula Borough as expressed in the Tri-Borough Position Paper through KPB Resolution 2001-127.

In analyzing Mr. Lima's comments, the MMS has responded to those points of the Tri-Borough Resolution that are within their authority to do so. The Tri-Borough Resolution is a document that is addressed to the Federal government as a whole. The leasing process is the first of three broad steps leading to production of oil or gas from the OCS. The other two steps are exploration and production.

By its very nature, the MMS proposed leasing program is limited in what it can regulate. Tri-Borough points 1, 2 and components of 4 are directly addressed by stipulations in the DEIS. However, point 3, the remainder of point 4 and all of point 5 will need to be addressed by other Federal agencies and entities such as the EPA and Congress during the latter two broad steps, exploration and production.

The following are Mr. Lima's comments:

"The January 24, 2002, Tri-Borough Agreement prepared and approved by the Kenai Peninsula Borough, Kodiak Island Borough, and the Lake and Peninsula Borough lists the following five issues that conditions the borough's support of OCS lease sales.

1.      No offshore loading of tankers. 

� In the EIS, our hypothetical development scenario assumes OCS production is sent via pipeline to existing onshore facilities where it is processed for local use and no tankering of OCS crude is envisioned.  In fact, OCS production could offset the tankering of TAPS crude from Valdez to Cook Inlet area processing facilities. 

� In the EIS, marine transportation is described in Section III.D (EIS page III-208) and incorporated throughout the analysis of cumulative effects in Section V.

� Stipulation No. 4, Transportation of Hydrocarbons, (EIS page II-13) outlines the requirements to use pipelines to transport hydrocarbons and specifies that in selecting the means of transportation, consideration will be given to recommendations of local governments and others.

2.      Specific plans to minimize and avoid commercial fishing gear conflicts with exploration and development activities.  

� EIS analysis determined that there would be little, if any, conflict between the fishing sectors and OCS operations during exploration, development, and production. 

� While the EIS analysis reveals little conflict, this concern is addressed by Stipulation No. 1, Protection of Fisheries, (EIS page II-12) which requires exploration, development, and production activities to be conducted in a manner that avoids unreasonable conflicts with commercial, sport, and subsistence fishers and their gear.  Exploration Plans and Development and Production Plans must identify potential conflicts and measures taken by the lessee to prevent unreasonable conflicts between activities and the fishers. 

� Stipulation No. 3, Orientation Program, (EIS page II-12) requires orientation for all personnel engaged in OCS exploration, development, and production activities that includes information concerning avoidance of conflicts with subsistence-, sport-, and commercial fishing activities.

3.      Exploration company must have adequate spill prevention and response capability.

� The EIS discusses oil spill response plans, agency involvement and reporting, and clean-up procedures in Section IV.A.5,  Page IV-9. 

� Information to Lessee No. 5, Information on Oil-Spill-Response Preparedness (EIS page II-17), which notifies the lessee of our particular concerns regarding oil-spill-response plans, addresses this issue. 

� In addition to operator requirements, response is provided by Cook Inlet Spill Prevention & Response, Inc.  Discussions with CISPRI staff indicate they are aware of potential for OCS activity in the lower Cook Inlet and the need for adequate response.

4.      Critical habitat areas must be identified.  

� The EIS identifies and analyzes potential effects from post-lease activities to critical habitat.

� Stipulation No. 2, Protection of Biological Resources (EIS page II-12), may require the lessee to conduct additional surveys and may require additional protection of habitat in the lease sale area. 

� Stipulation No. 3, Orientation Program (EIS page II-12), requires all personnel involved in exploration or development and production activities to attend a periodic orientation program that includes information regarding the importance of not disturbing biological resources and habitats and provides guidance on how to avoid disturbance. 

� Information to Lessee No. 1, Bird and Marine Mammal Protection (EIS page II-14), contains information regarding avoidance of impacts to habitats. 

� Information to Lessee No. 2, Information on Endangered and Threatened Species (EIS page II-15), encourages lessees to contact the U.S. Fish and Wildlife Service or National Marine Fisheries Service regarding actions that could be taken to minimize disturbance of habitat. 

� Information to Lessee No. 3, Sensitive Areas to be Considered in Oil-Spill-Response Plans (EIS page II-16), lists environmentally sensitive areas and habitat that should be considered when developing response plans.  This ITL was revised to include Areas Meriting Special Attention identified in the borough's coastal management plan. 

� ITL No. 5, Information on Oil-Spill-Response Preparedness (EIS page II-17), notifies the lessees that the ability of the lessee to protect important resources from an oil spill is a particular concern in evaluating their OSPR.

5.      Provisions for local government revenue sharing. 

� Section III.C.1.a(2), State Revenues, Page III-147, briefly describes state revenues from OCS oil and gas lease sales and operations through the 8(g) provisions.  "The Federal Government made payments to the State of Alaska of $145,000 between 1997 and 2001, including bonuses and annual rentals, as a consequence of Federal leasing in Cook Inlet.  These payments were made under provisions of the OCS Lands Act, referred to as 8(g), which require MMS to pay the states 27% of all revenues derived from Federal leasing of offshore submerged lands lying between 5 and 10 kilometers (3 and 6 miles)  from shore.  Cook Inlet Lease Sale 149 in 1997 resulted in a total of $254,000 in bonus bids and $51,000 in rentals per year, which are split between the State and the Federal Government according to the provisions of 8(g)."  Any revenue from Cook Inlet Sales 191 and 199 would be subject to the 8(g) provisions. 

� The EIS discusses specifics of revenue sources from the OCS to Alaska and local governments on page IV-170 and IV-171. 

� During Scoping Meetings with the Kenai Peninsula Borough and Kodiak Borough, we explained that as an Executive Branch agency we had no authority over revenue sharing as it is the purview of Congress.  We did highlight our support of revenue sharing legislation during the previous session of Congress.  The law that Congress ultimately enacted resulted in the allocations for the political subdivisions that are adjacent to or very near proposed Cook Inlet Oil and Gas Lease Sales 191 and 199:

 In addition to the funds specifically allocated to these political subdivisions, grants are available from the State as part of their $7,935,670 allocation of the Coastal Impact Assistance Program funds."