Potential Public Liability for Fossil Fuel Infrastructure in Cook Inlet

CSE teamed up with Alaska’s Cook Inletkeeper to help make the case for adequate bonding requirements for fossil fuel infrastructure in Cook Inlet. The existing oil wells, platforms, pipelines, and onshore processing facilities are now nearly 50 years old are starting to be shut in. As they shut in, oil and gas companies are required to initiate plans for dismantling and removal of key infrastructure on state-owned land and to restore affected marine and shoreline ecosystems (DR&R).

However, as demonstrated in Alaska and other states, this obligation is often disputed, unclear or not met, leaving states and federal taxpayers with a potential financial liability for cleaning up the damage left behind. The total costs of DR&R for 16 offshore platforms and 160 miles of oil pipelines in Cook Inlet will range between $402 million and $1.11 billion. However, DR&R funding available to the State through bonds may represent no more than 25-50% of these total anticipated costs. Adding gas pipelines and other infrastructure with more ambiguous DR&R requirements would greatly increase this cost estimate and the associated funding gap.

Our report demonstrates that bonding and related surety obligations for oil and gas infrastructure need enhanced clarity and predictability to best serve the interests of industry, government and Alaskans alike. Bonding requirements should not be based on a schedule of nominal fees, but the actual expected costs of DR&R for each facility, pipeline, platform, or other infrastructure element.