August 15, 2003

Director, Division of Oil and Gas
550 West 7^th Ave, Suite 800
Anchorage, AK 99501-3560

RE: Comments regarding Shallow Natural Gas Lease Application ADL 390354-309361 submitted by Usibelli Coal Mine, Inc.

Dear Director,

Thank you for the opportunity to provide comment on this lease application. I represent the Board and members of Denali Citizens Council, a local nonprofit citizens group with over 200 members, located at the entrance to Denali National Park. Our group, founded in 1974, supports sound planning and sustainable development in the Denali Borough.

Although Coal Bed Methane development is relatively new in Alaska, the experiences in other regions of the US with the rapidly developing Natural Gas industry have raised local concerns here in the Healy area.  The discovery of a local source of gas could potentially benefit local residents if and only if the impacts incurred during the resource development do not degrade the long term tourism economy, the residential quality of life, or the valuable wildlife resource.

Local DCC members would like to insure that the manner in which the methane is extracted would be on par with best practices and operational standards that have been employed elsewhere. We would also like to insure that the mining operator negotiate individual surface use agreements with every property owner affected by the development, including Denali Borough MLE lands, Mental Health Trust lands, University of Alaska lands, and private property, so that the development may proceed in a mutually acceptable, mutually beneficial manner.

In these comments we will attempt to be as specific as possible, but because we are only at the leasing stage of the process, the public is at somewhat of a disadvantage, having to comment on an unknown and hypothetical plan of operation.  Therefore, we request that the operator's permit not be acted upon until the following issues are addressed.  To better insure good land stewardship, we request that there be future public hearings and more opportunity for the public to comment on the plan of operation as more specific information becomes available.

Areas of Concern:

Aquifers: Our research finds that each well could produce on an average 16,000 gallons a day of water that needs to be discharged. The best practices standard is to reinject waste water, although Usibelli tells us that the schist bedrock is not permeable and would not be suitable for this technology.

• We would like to see a specific plan for water discharge that minimizes erosion and other environmental impacts.
• The operator should be required to study the aquifer, accounting for the likely volume of extraction water, the rate of aquifer recharge in the specific area, and the possible impacts to established water wells.
• The operator should be required to obtain water rights for each well developed.
• The discharged water should first be offered to the surface owner if applicable.
• Discharged water should meet all DEC standards and AK State clean water regulations.
• Surface and groundwater flow monitors should be installed at methane water discharge points, and in aquifers, and the data should be made available to the public.
• The discharge water quality should be regularly monitored by someone other than the mining operator.
• The operator will be required to cease production and will be responsible for any damages to private wells resulting from methane contamination or impairment of the aquifer.

Private Property Surface User Agreements: These particular leases in combination with the coal leases already obtained by Usibelli Coal Mine, Inc. encompass a mosaic of property ownership, including the town site of Healy, Lignite, Otto Lake and the Stampede area. There are private residences, recreational and hunting areas, tourism based businesses, and some industry. Subsurface mineral developers are working in a 20 – 30 year scenario at best and have little economic incentive to consider the long term consequences to the community.

It is individual landowners who steward their own land best for long term productivity. The surface owners, as the parties most familiar with present and planned surface uses and the effects of facilities on land values, are best able to reasonably site wells and facilities on lease property. We request that the operator be required to sign a surface use agreement with each land owner prior to land disturbing activity taking place and that no landowner should be compelled to accept a surface rights agreement that would cause economic harm or lower property value. The agreement must cover at least the following topics:

• Realizing that any damages not paid for by the industry will be borne by the surrounding community and the Alaska taxpayer, we request that adequate bonding be required. The Alaska State minimum required bond of $25,000 per lease is not in proportion to the real risk of damages or legal fees that could incur.

• The operator should indemnify and defend the surface owner with respect to gas well operation and related undertakings

• We request that landowners who successfully prove damages to their property in a court of law should be awarded attorney fees in order to prevent the cost of litigation from deterring landowners from seeking compensation.
  
• Realizing that the typical lifespan of a methane well is 10 years, perhaps 20 years at best, we request that the gas development be especially sensitive to the long term tourism economy of the area. Local tourism relies on healthy wilderness to sustain the unique Alaskan visitor experience.

Land Use and Wildlife Habitat:  Wildlife is a backbone of the Denali/Healy economy. Habitat degradation or destruction will decrease wildlife encounters and adversely affect the hunting experience.

• We request that wells be placed in a clustered development and that directional and/or horizontal drilling be required. Pipelines should be clustered with roads, and power lines should be buried in the existing right of way. Locating wells outside of critical wildlife areas and away from private residences could dramatically decrease the amount of land disturbed and be accomplished at minimal cost to the industry.
  
• We request that the monitoring agency (AK DNR) utilize the Fish and Game moose and caribou population statistics, and compare animal populations yearly as gas development occurs. If a significant decline in game population occurs, the operator is responsible for additional mitigating measures to enhance the wildlife habitat to make it once again habitable for game animals. Based upon the best wildlife science, it may be appropriate to restrict development to a specified time of year to minimize wildlife disturbance.
  
• We request that the best practices technologies in noise control, mufflers, and electric motors (when feasible) be utilized on compressor stations and generators at well heads. In remote areas a maximum noise level of 50 decibels at 100 meters is acceptable. In areas within 1 mile of private residences noise levels must be mitigated to the satisfaction of the surface owner.
  
• We request that interim reclamation be accomplished as soon as reasonably possible after drilling is completed. The drill site should be reduced to the minimum area required for production, and should be enclosed by a fence.
  
• We request that use of enclosed containers for drilling muds, etc. be required.
  
• We request that no pits be allowed.
  
• Disturbed areas should be re-contoured and seeded with native species unless otherwise negotiated by the surface owner.
  
• We request full final reclamation of all well sites within 6 months as soon as reasonably possible after each well ceases production. All abandoned roads will be put to bed unless otherwise negotiated by the surface owner.
  

We would like to see all areas of concern addressed with specific mitigation measures that are a binding part of the lease agreement.

Denali Citizens Council recognizes the economic viability of methane gas in the Healy area. Our research shows that a typical well costs about $65,000 to bring into production and produces $60,000 - $1.2 million over its productive life. Clearly the industry can afford to develop in a way that will not harm the long term tourist economy, the residential quality of life, or the wildlife habitat. Usibelli Coal Mine, Inc. has the rare opportunity to learn from the experience of others and do it right from the beginning.