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Strategies for Lam] Disposition and Management Resulting STRATEGIES FOR LAM] DISPOSITION AND MANAGEMENT RESULTING FROM PORT DEVELOPMENT PROPOSALS IN THE AREA OF KING POINT, YUKON July, 1986 Disclaimer The views and opinionscontained in this document are entirely those of theauthor and should not be taken to representpolicies or positions of the Department of IndianAffairs and NorthernDevelopment, any other department or agency of the federal or territorial governments, or any otherinterest group or organization. FOREWARD I This document was preparedunder contract from the Department of Indian I Affairsand Northern Development. The scope of the work requested coversthe factors and issuesthat would limit ordefine DIAlJD’s ability to manage thedevelopment and operation of a portin the north. I Inasmuch as thisissue has been the subject of considerablestudy over the past few years, a consciouseffort was made not to duplicatesuch work. Both thefunding level andthe deadlines for the project I precludedanything more than a briefreview of suchpast work. The purpose of thisreport was tobring together all the relevant factors and constraints - most of whichhad been identified in thepast I - andfrom them formulaterecommendations on how DIAND mightdeal with theissue of portdevelopment on the Beaufort Shore. Legislative, regulatoryand policy options and constraints were examined along with I physical andevironmental factors. From this a series of critical issues were identified andused as thebasis for assessing the current Plonenco/Interlogdevelopment proposal. The assessnentconcluded that theproposal as presented was unacceptabledue to the area of land and I lease term requested. The overallconclusions of thisreport however, do suggestthat DIAND I shouldsupport private sector port development on theBeaufort Shore in King Point area. Severalrecommendations are made to assist DIAND in its task of defining its role and controllingor managing the development process so as toensure all legitimateconcerns and interests are met. The recornmendations do not anticipate DIAND being directlyinvolved in theprovision and management of port facilities or I infrastructure. TABLE OF CONTENTS SECTION -PAGE FORWORD ......................................... 1 I BACKGROUND ...................................... 1 I1 111 POLICY CONSTRAINTS .............................. 13 IV PHYSICAL AND ENVIRONMENTAL ISSUES ............... 16 V ISSUES TO BE ADDRESSED BY DIAND ................. 19 VI MANAGEMENT OPTIONS .............................. 22 VI1 ASSESSMENT METHODOLOGY .......................... 25 VIII ASSESSMENT OF MONENCO/INTERLOG PROPOSAL ......... 28 IX RECOMMENDATIONS ................................. 32 X NEGOTIATION/IMPLEMENTATION STRATEGY ............. 37 APPENDIX I: Allocation of Common Use Facility Costs APPENDIX 11: Documents Reviewed F -1- I BACKGROUND Over the last ten to fifteen years, studies and on-site data gathering have confirmed that year round shippingin the Canadian Arctic isnot only feasible, but may in fact become a reality. There is some agreement that initial hydrocarbon production wells may have their product moved by ship until production volumes and price are sufficient to support pipeline transmission. Some of the wells in the Mackenzie delta area may have sufficient production volumes to justifya small diameter pipeline from the beginning. Significant future shipping volumes are likely to require deep draft (up to twenty meters) vessels, although medium draft (up to twelve meters) may be used initiallyor €or small volume operations. Depending on the volume of production, the cost of port facilities and other factors, medium draft vessels may be able to provide adequate levelsof service for a relatively long period of time. Such vessels cannot currentlybe handled on a regular basis at existing port facilities in the western Arctic. Tuktoyaktuk serves as the primary operational port for western Arctic petroleum exploration activity and for resupply along the western Arctic coast.Its location in the deltaof the llackenzie River severely limits its usefulness a as medium or deep draft port. Within the harbour itself, depths range from five to twenty-two meters, which with sufficient dredging would likely permit access by medium and deep draft vessels.A far more serious limitation is the extensive, shallow continental shelf beyond the delta. Average depth of water upto 18 kilometers offshore is only six meters, making the costof constructing and maintaininga dredged approach channel up to twenty meters deep prohibitive. McKinley Bayis currently used for support to exploration in the eastern halfof the Beaufort area, and may be used to support future exploration or production in that area. As early as 1973, in response to Alaska offshore petroleum development, and later to Canadian, offshore exploration, the Beaufortshore has been examined by governments and private corporations to identify potential medium and deep draft port locations. At least seven such studies have ' been undertaken allof which identify the King Point areaas one, if not the best, location. Herschel Island, Stokes Point and McKinley Bay have been identifiedfor short term, medium draft potential, but,as will be noted in more detail later, noneof these are appropriatefor long term deep draft operations. Port development discussionsfor the western Beaufort have been hampered by two factors- a general lackof detailed environmental, wildliEe and geological information, and a long-standing desire in some quarters to seeas much of the Yukon north coastal wildernessas possible preserved in its natural state. There has been recognition that some development will likely be required and thatto the extent: I possible,this should be limitedto one location. King Point appears to be generallyaccepted as the most likelycandidate for this location.Figure 1 shows thelocation of KingPoint on theBeaufort Shore. In 1978, pendingresolution of nativeland claims and thedesignation of a specificpark/wildlife area, 15,000 square miles of land was withdrawntemporarily from disposal under the Territorial Lands Act. Subsequently, a nationalpark was created west of the Babbage Riverand the Yukon Territorial Government (YTG) establishedHerschel Island as a TerritorialPark. Except for shallow/rnedium draft, linited scale, and temporarypurposes, Stokes Point and Herschel Island should no longer beconsidered for port operations and no new significantport development west of the Babbage River will be permitted.This has left King Point as the most likelyalternative for long term, deep I draftport development in theweetern Beaufort. In 1983 Monenco Limited and Interlog Consultants Ltd. (Monenco/Interlog)proposed the development of a singlemulti-user port at KingPoint, and subsequentlyupdated and expanded the information in I mid-1985. While no final decisionhas been reached to date, earlier port developmentproposals at StokesPoint and King Point by Gulf Canada ResourcesInc. have been rejected, and a proposal by Peter I Kiewit Sons Co. Ltd. is currently onhold. Recent reductions in oil priceshave made industryofficials reluctant to predict just when major new exploration may beundertaken, or when theproduction phase couldbegin for those fields with confirmed reserves. This in turn, reducesthe pressure on theDepartment of Indianand Northern Affairs (DIAND) to commit itselfto the developments proposed for KingPoint. Notwithstanding,Plonenco/Interlog is still seeking DIAND approval of their proposal. In view of the long standing interest in a permanent,deep water port I on thewestern Beaufort shore, and the limitations imposed on several viable sites, it would seem reasonable for theDepartment to choose or designate a site wherefuture medium/deep draftport development can occur, if needed by theindustry. This would permit more detailed planningfor specific development options to be undertaken with the knowledge and assurancethat there would notlikely be any unreasonable delays in DIAND approvals for thenecessary leases. It seems likely thatthere will be a period of several yearsbefore final construction decisions will be made - thusgiving time toundertake additional planning and datagathering, both by proponents of portdevelopment, I DIAND and otherswith an interest in how the port will evolveand what impact it will have. It is alsolikely that a port,once established, would eventuallyplay a role in other activities such as resupply and possiblygeneral purpose export/import of goods throughthe western Arctic. -3- I NORTH YUKON / ANDADJACENT ALASKA AND SCALE 0. 25 so krn BEAUFORT SEA Mnd The ability to introduce new regulations, modify existingones and amend or introduce legislation doesof course exist. However, the review that follows concentrateson an examination of whether, and under what conditions, port development can occur without the need to adjust the legislative, regulatoryand policy frameworks that exist. The examination indicates that port developmenton the Beaufort can take place without the needfor such amendments, therefore none are proposed. The following review assumes thatDIAND would generally prefer to retain control and responsibilityfor development in the north, including port development, providing such control or responsibility is legitimately retained. II LEGISLATIVE AND REGULATORY ISSUES 4 There are several statutes and regulatory provisions that an have impact on where port development can occur on the Western Beaufort Sea I shore and others which relate to the planning and managementof projects of this size. The following comments
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