Proposal to reallocate revenue over legacy well cleanup stirs outrage

Wesley LoyPetroleum News

Alaska's legacy well issue flared up again recently after elected officials learned of an Interior Department proposal to "reallocate" federal oil and gas revenue sharing payments to the state.

The president's 2014 budget proposal for the Interior Department calls for temporarily halting revenue sharing payments to the state from oil and gas activity in the National Petroleum Reserve-Alaska.

Interior would use the money to remediate the so-called legacy wells in the NPR-A and to complete land title conveyances to the state and Alaska Natives under the Alaska Native Land Claims Settlement Act of 1971.

Alaska officials have been demanding the federal government clean up the more than 100 legacy wells drilled by federal departments and their contractors between 1943 and 1982. The officials say many of the wells were never properly plugged and abandoned, and the sites are junk-strewn and potentially hazardous.

U.S. Sen. Lisa Murkowski, R-Alaska, ripped the Interior Department for the idea of grabbing the revenue sharing money.

"The idea that this administration would rob the state to clean up this mess is unbelievable," Murkowski said in an April 11 press release. "These are federal wells that were drilled on federal lands and every day since then have remained a federal obligation. At no point should our state's revenues be swiped to pay for them."

The Interior Department proposal says the normal 50-50 revenue split between the federal and state governments would resume once the work on the legacy wells and the land conveyances is complete.

"This approach of temporarily suspending revenue sharing payments is similar to the approach taken by Congress to address priority site remediation needs in the Naval Oil Shale Reserve No. 3 located in the State of Colorado," the Interior Department said.

Erin Curtis, a spokeswoman in Anchorage for Bureau of Land Management, the Interior Department agency that manages the vast NPR-A, told Petroleum News that the reallocation proposal would require passage of federal legislation.

"There's a lot of steps left in the process," Curtis emphasized.

But Alaska elected officials are not happy with Interior's idea of diverting the state's revenue sharing payments.

"This is another slap to the state by the federal management agencies," Murkowski said. "Not only does the federal government not live up to its promises but now the administration wants to stick us with the bill. It's disturbing enough that we are blocked from producing oil on the vast majority of federal lands within Alaska and that long overdue land conveyances still have not been completed.

"To now declare that the federal government is entitled to the meager revenues that may trickle in over the next few years is a breach of trust, and it shows a complete lack of awareness on the part of this administration."

Murkowski helps oversee the Interior Department as the ranking Republican member on the Senate Energy and Natural Resources Committee and the Interior Appropriations Subcommittee.

NPR-A oil and gas revenue includes receipts from occasional lease sales, and annual rents on leases. Rent revenue ranges from $3 million to $5 million per year, the BLM's Curtis said.

NPR-A doesn't generate royalty revenue as BLM land doesn't yet host any producing wells.

State Rep. Charisse Millett, R-Anchorage, likewise blasted the Interior Department's revenue sharing reallocation idea.

"Those polluted wells are clearly a federal responsibility," Millett said in an April 11 press release. "The Department of the Interior finally decides to begin an earnest cleanup effort but proposes paying for it by effectively stealing Alaska's share of the oil and gas revenue from NPR-A. This is a perfect example of the arrogance and hypocrisy the federal government and this administration have shown towards our state."

Millett was the lead sponsor on a legislative resolution (HJR 6) calling on the BLM to plug and reclaim the "travesty wells" as soon as possible. The resolution passed the Alaska Legislature unanimously.

Petroleum News