It’s time to stand up for responsible development

By Bob Shavelson
The debate over Buccaneer Energy’s jack-up drill rig and related drilling plans has fallen along predictable lines. Some see Buccaneer as a hopeful sign of good jobs and increased oil and natural gas supplies. Others see Buccaneer as a shadowy, profit-driven Australian corporation lured to Cook Inlet by massive state subsidies, with little regard for local people or our fisheries.
Of course, the truth falls somewhere in between. But a recent lawsuit filed by Buccaneer’s contractor – Archer Drilling reveals a driving need to put the brakes on Buccaneer’s rush to drill, and to ask some pointed questions about its ability to drill safely in Cook Inlet’s prized fisheries.
Buccaneer is a young, independent corporation motivated largely by the considerable subsidies offered by the State of Alaska. Under Alaska’s Clear and Equitable Share (ACES) program, Buccaneer can get back $.65 for every exploration dollar spent and $.45 for every development dollar. Last year, Buccaneer claimed it reaped $13 million for its Kenai Peninsula work.
Additionally, Buccaneer is chasing up to $25 million in tax credits under the so-called Stampede Act, which offers massive inducements to companies drilling new, deep wells in Cook Inlet. Buccaneer routinely boasts of these “highly favorable” tax conditions in its investor communications.
Aside from the fact these subsidies distort free markets and deny Alaskans the true value of our publicly-owned resources, they also attract companies like Buccaneer with little knowledge of our people and our place, and with few financial resources to address major problems.
Buccaneer raises serious concerns for several reasons. First, it lacks the experience and know-how to operate in offshore Alaska. It’s never engaged in offshore exploratory drilling in Alaska’s challenging conditions and it’s stumbled its way through our permitting process. Furthermore, it has defaulted on its leases in Upper Cook Inlet, and is close to default on onshore leases around Kachemak Bay, for failure to explore as promised.
Next, Buccaneer is a shaky corporate venture. It lost over $45 million last year, its stock is currently trading at $.05 a share, and its market capitalization is a mere $68 million and dropping. One financial website gives Buccaneer a 43 percent chance of bankruptcy. And based on the fact it couldn’t pay workers in Kenai on time, and now, according to Archer, owes more than $6 million in unpaid bills for jack-up rig work, its cash flow presents serious concerns.
To make matters worse, our state corporation – the Alaska Industrial Development and Export Authority – invested $24 million in the rig and falls second in line behind Chinese investors if Buccaneer goes belly-up. AIDEA is also liable if there’s a big spill; according to public documents, “[a]s an owner of a jack-up rig, AIDEA would be liable for a catastrophic event associated with exploratory drilling.”
Finally, and perhaps most disturbing, Buccaneer has not been honest with our local community or its investors. When its jack-up rig arrived in Kachemak Bay in August, Buccaneer announced the rig would be gone in two weeks after a short list of repairs. When that time line slipped, Buccaneer cited “unanticipated” problems with alarm systems and other low level issues.
Yet, reports from workers and allegations by Archer paint a wholly different picture; that Buccaneer knew the rig needed substantial repairs after years sitting off the coast of Malaysia, yet it prematurely pulled the rig from a Singapore shipyard knowing Alaska did not have the shipyard services needed to complete the substantial upgrades for Alaskan drilling. In its legal complaint, Archer sums up the situation: “By favoring wishful thinking over hard facts, [Buccaneer] turned a blind eye to the amount of time, money and effort need to bring [the jack-up] rig up to operational levels.”
Archer Drilling is a respected company familiar with operations in some of the harshest drilling environments in the world. In its complaint, Archer asserts Buccaneer is incapable of safely drilling offshore in Cook Inlet. Buccaneer’s track record of late and non-payments, its unfamiliarity with Alaska conditions, and its unwillingness to tell the truth do not lend confidence. Furthermore, Buccaneer tried to spin its dispute with Archer through a press release; Archer backed up its allegations with a complaint in a court of law. As a result, I believe Archer.
Yet, Gov. Sean Parnell, DNR Commissioner Dan Sullivan and other state officials have been blindly pressing to get Buccaneer the permits it needs to drill in Cook Inlet, despite huge flashing red warning signs. But if we expect to develop our resources in a responsible and ethical manner, it’s time to stop the permitting stampede and take a hard look at whether Buccaneer is the type of corporation that can safely drill in our Cook Inlet fisheries.

Bob Shavelson is Director of Advocacy for Cook Inletkeeper, a nonprofit organization working to protect our waters, our fisheries and the people who rely on them. He has spent the past 18 years working on Cook Inlet oil and gas issues. A copy of the Archer complaint can be found at: http://inletkeeper.org/resources/contents/archercomplaint/view

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Posted by on Dec 26th, 2012 and filed under Point of View. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

4 Responses for “It’s time to stand up for responsible development”

  1. Time to stand up to liars says:

    Thanks for writing this. We really need to deal with the corruption that has been uncovered with this debacle, lies coming from the top being perpetuated by city officials and media.

    “Gov. Sean Parnell, DNR Commissioner Dan Sullivan and other state officials have been blindly pressing to get Buccaneer the permits it needs to drill in Cook Inlet, despite huge flashing red warning signs.”

    Right now ConocoPhillips(Parnell) is shipping natural gas to Asia for twice the price we pay in Alaska, supplied by Buccaneer. After the Fukishima disaster, Japan needed a new energy sources and ConocoPhillips(Parnell) saw a major gravy train selling our resources to Asia at double the cost.

    Parnell has been handing out state money in preparation for corporations(see Homer Dock and Dump) giving state money for the rig, incentives for getting here first(our $$ to out of state pirates), and now they are even brazenly lying about us running out so they can get whatever permits they want, so they can continue to send our natural gas to Asia. This is BS and they think we are idiots.

  2. Maka Fairman says:

    Thank you Bob Shavelson. I would like to share a letter with the readers, one I couldn’t send to Mr. Parnell. Maybe he will read it here:

    Dear Mr. Parnell,

    I want to thank you for the electronic greeting card for Christmas, I tried to write you back, but alas, there’s no way your subjects can contact you, so I thought I should say these things to your subjects as well.

    It would be nice to have voted your ideas into position, but since Sarah followed suit in Alaska by nominating you the way Frank Murkowski nominated his daughter, it’s hard to make any sense out of voting.

    This country has problems, Houston, and you are not helping with the solution by creating a huge debt problem (no Alaskans I know of) have ever asked for. We have already made our opinions known about more drilling rigs in (for oil) in Alaska, yet you go out and buy us an old dilapidated oil derrick that has impacted Kachemak Bay and probably can never be repaired enough to be used in Alaska’s climate. It has broken our dock (is that why you gave Homer $$$ millions (up front) for dock repairs … before it even happened?).

    Endeavor (Buccaneer) legs have been anchored in Homer’s critical habitat for months now (many Homer citizens fought against this happening before you were born). The Buccaneer personel have created problems between Homer businesses who have reaped huge financial profits from your endeavor (no pun intended), and, of course, those who have not… well, what about the rest of the people who live here? That rig affects us all, and obviously we don’t have anything they want (other than room and board). The damage created for the entire community simply will not go away.Those who cater to that damage should not be reaping the spoils.

    Homer is not a place for tyrants and gold diggers (or oil riggers). Look around and see what I see. The majestic mountainous backdrop as you come over the top of Baycrest Hill, glaciers sometimes shrouded in clouds with Eagles soaring overhead, the bay itself full of healthy activity (human and sea life), the snow capped peaks across the bay dotted with smoke coming from cabins, … doesn’t that do something to you? It still opens my heart every time I come over that crest. That’s why I’m still here (way over 30 years ago). Can you imagine all that beauty without any life? It isn’t a good thought.

    Kachemak Bay will always be beautiful, but without protecting it, there would be no one to see it or take pleasure in its beauty and bounty, and certainly no way to make a living for those who wish to stay here. An oil spill in an area as small as Kachemak Bay would devastate all life, we still remember the Exxon. Any type of chemical mishap would destroy the sea beds, all sea life, birds, animals, and humans alike.

    Aren’t we somewhat already worried about the Fukushima debris reaching our shores? Do we need to worry about the get rich quick oil pirates too? Be honest with the people you serve. The Buccaneer is not here for gas. It’s here for oil exploration … gas is nothing but a by-product, and we have plenty of gas from Prudhoe Bay.

    There should be some shame on your part, Mr. Parnell, for living off the hard work of Alaska’s citizens. We didn’t have the opportunity to trust you through a vote, so why should we trust your words now? It’s hard to trust anything politicians do or say, because we’re all quickly learning, no politicians best interests are in taking care of Alaskan’s or Alaska.

    Politicians are in the game for the money (running out of fossil fuels is just a joke, right?) In my opinion the whole planet is one giant fossil ready to be used … but it’s also our home. It’s all we have.) The money you earn is OUR MONEY, and, if I may remind you, you work for Alaska people not BIG OIL. Please, get that rotting carcass of a rig out of Kachemak Bay and give the land back to the people for protection and respect. This venture proves you know little about big oil business, or, the nature of Alaska people. Why are you Alaska’s Governor?

    Sincerely,
    Maka Fairman

    • Thank you Maka says:

      Thank you for showing so clearly that some things are much more important than money…

      “Look around and see what I see. The majestic mountainous backdrop as you come over the top of Baycrest Hill, glaciers sometimes shrouded in clouds with Eagles soaring overhead, the bay itself full of healthy activity (human and sea life), the snow capped peaks across the bay dotted with smoke coming from cabins, … doesn’t that do something to you? It still opens my heart every time I come over that crest.”

  3. Matt says:

    “The truth lies somewhere in between” – Ok, so where is the “between” in your summary of the “facts” here? The article does not even attempt to look at the issue from either side. Who are the “workers” that are cited in the article? What “financial website” is it that says Buccaneer is likely to go bankrupt? The article and author don’t do a very good job at appearing unbiased. Does the author know anything about the rusted handrails (that had to be replaced in AK) that were simply painted over under Archer’s watch in Singapore?

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