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Southwest Alaska municipalities want bigger share of oil royalties

With an increase in oil exploration, ports such as Dutch Harbor -- shown here hosting the drill rig Kulluk -- are bracing for more activity and greater demand for municipal services, and they are seeking a share of oil royalties to pay for them. Courtesy Mark Meyer / Greenpeace

Forget the Kulluk’s $6 million tax break. That’s small potatoes compared to the much bigger multiples of millions in oil money that local governments want.

The coming of Big Oil to southwest Alaska puts big and expensive burdens on municipal services, and representatives of local governments want federal policy changed to give the communities money to pay for impacts to their roads, schools, hospitals, and airports.

The Southwest Alaska Municipal Conference wants 37.5 percent of the royalties from future offshore oil lease sales to go to coastal communities, the same percentage that benefits Gulf of Mexico towns. In 2008, offshore lease sales in the Alaska’s Beaufort and Chukchi seas would have provided $900 million in royalties, the Feb. 22 resolution said. While it’s too late to benefit from the 2008 sales, future leases of rich underwater petroleum reserves are set for 2016 and 2017.  Alaska’s Arctic Ocean holds an estimated 25 to 27 billion barrels of crude oil, the resolution said, citing a study by the U.S. Geological Survey.

In addition to an increased demand for services, the resolution notes that offshore oil activity could mean “potential environmental and cultural impacts.”

Impacts are already being felt from the arrival of Royal Dutch Shell in Alaska. The arctic-class oil rig Kulluk grounded in the Kodiak archipelago New Year’s Eve, as the rig left on a schedule designed to avoid a potential tax bill of $6 million in Unalaska, raising serious concerns of damage to the environment. None of those fears were realized in that incident, though it clearly showed the potential for harm. The cost to Shell in responding to the near-disaster makes $6 million seem small by comparison. In addition, Alaska’s government says the rig is exempt from local taxes because it wasn’t drilling in state waters, which extend up to three miles from shore.

Shell has suspended exploration this year, to give it time to fix its drill rigs. Yet with 90 percent of Alaska's revenues derived from oil, mainly in the declining North Slope fields, the state’s dependency on oil continues unabated. Petroleum taxes fund an array of services and back the huge obligation of pension payments to retired teachers and state employees.

The conference also wants a new ferry for the region and doesn’t like the current legislative redistricting plan, according to additional resolutions approved at its meeting in Anchorage.

The state ferry Tustumena, at nearly age 50, is getting too old, according to municipal officals, and is showing its age with more and more time out of service for repairs. Built in 1964, the boat has been out of service since June, and probably won’t return until June. That means that during the first two months of Aleutian Chain service, the vessel will be replaced temporarily by the Kennicott, a larger ship that can only call at communities with big docks, such as Unalaska, Sand Point, and King Cove.

Villages lacking sufficient dock capability include Akutan, False Pass, and Chignik. They won’t get any ferry service for passengers and vehicles until the Tustemena returns, frustrating the SWAMC delegates representing local governments in the region, according to the resolution. SWAMC called on the Alaska Department of Transportation and Public Facilities to start designing a new vessel as soon as possible, one that can reliably ply the region’s challenging waters without regularly leaving for repairs in the Lower 48.

The delegates from the commercial fishing-dependent area also condemned efforts to bio-engineer salmon, to make farmed fish grow faster and be more competitive with Alaska’s wild salmon, a move that could “imperil the state’s fishing industry.” In 2012, the resolution states, 124 million salmon were harvested in Alaska, worth $505 million.

The resolution slammed the U.S. Department of Agriculture’s finding of no significant impact, which could allow scientists from the Massachusetts firm, AquaBounty, to tweak the genes of salmon for the commercial gain of the farmed fish industry.

The new arrangement of districts for state representatives and senators irks the organization, especially with the region now served by a Senate district extending from the westernmost Aleutians deep into Interior Alaska, or from Attu to Fairbanks. A state court has ordered the plan redrawn in time for the next elections in 2014. The resolution calls for redistricting that “honors traditional socio-economic ties in the southwest region.”

This story first appeared in The Bristol Bay Times/Dutch Harbor Fisherman and is republished here with permission.