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Southwest Alaska towns hope to share in Arctic oil boom

  • Author: Jim Paulin
  • Updated: July 15, 2016
  • Published March 18, 2013

Forget the troubled Kulluk oil drillship's $6 million tax break. That's small potatoes compared to the much bigger multiples of millions in oil money that local Alaska governments want. The coming of Big Oil to Southwest Alaska -- fueled by offshore oil drilling farther north in the Arctic -- 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 roads, schools, hospitals, airports and more.

The Southwest Alaska Municipal Conference wants 37.5 percent of the royalties from future offshore oil lease sales for 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, according to a recent resolution.

While it's too late to benefit from the 2008 sales, future leases of rich underwater petroleum reserves are set for 2016 and 2017, and even more are likely, considering that Alaska's Arctic Ocean holds between 25 and 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, raising serious concerns of damage to the environment and a historic site. None of those fears were realized in that incident, though it clearly shows the potential for harm. The cost to Shell in responding to the near-disaster makes $6 million seem small, and anyway Alaska's government says the rig is exempt because it wasn't drilling in state waters inside three miles from shore.

Shell has suspended exploration this year to give it time to fix its drill rigs. Yet with 90 percent of state revenues derived from oil, mainly in the declining North Slope fields, the state's dependency on oil continues. A 38-0 vote by the state House of Representatives this year reaffirmed that support, since petroleum taxes are needed to fund services and the huge obligation of pension payments to retired teachers and state employees.

Another impact in Unalaska has created some friction between Shell and the commercial fishing industry, when the oil company reserved a large block of rooms at the Grand Aleutian Hotel. However, Shell has agreed to allow their empty rooms to be rented to other customers. The hotel room shortage has led to reports of fishermen renting pickup trucks as emergency overnight accommodations, stretching out across the front seat with the heater on. An expansion of the hotel is under consideration.

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 last month.

The state ferry Tustemena, almost 50 now, is getting way too old, 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 be back until June. That's eight months of down time in the shipyard. 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 bigger docks, like Unalaska, Sand Point, and King Cove.

Villages without sufficient dock capability, among them Akutan, False Pass, and Chignik are out of luck. 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 to start designing a new vessel as soon as possible, one that can reliably ply the region's challenging waters without regularly leaving for rehab 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 Aleutian island to deep into the Interior, 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. Jim Paulin can be reached at paulinjim(at)

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