**REPORT TITLE:** Governance in the Beaufort Sea Region: Petroleum
Development and the North Slope Borough.

**STUDY TITLE:** Governance Study in the Beaufort Sea Region: Petroleum
Development and the North Slope Borough (TR-16).

CONTRACT NUMBER(S): BLM: CT6-61; MMS: 14-12-0001-29002

SPONSORING OCS REGION: Alaska.

APPLICABLE PLANNING AREA(S): Beaufort Sea.

FISCAL YEAR(S) OF PROJECT FUNDING: 1979.

COMPLETION DATE OF REPORT: July 1978.

COST(S): FY 1979: \$41,431; CUMULATIVE PROJECT COST: \$41,431.

PROJECT MANAGER(S): R. Schmidt.

AFFILIATION: University of Alaska, Institute of Social and Economic
Research.

ADDRESS: 3211 Providence Drive, Anchorage, Alaska 99508.

PRINCIPAL INVESTIGATOR(S)\*: T. Morehouse.

KEY WORDS: Beaufort Sea; Alaska; socioeconomics; North Slope Borough;
development; revenues; institutional change; impacts; historical review;
Alaska Region.

ACCESS NUMBER: 29002

**BACKGROUND:** This report is part of the Alaska Outer Continental
Shelf (OCS) Socioeconomics Studies Program, a multi-year research effort
which attempts to predict and evaluate effects of Alaska OCS petroleum
development upon the unique physical, social, and economic environments
in the State. This study examined relationships between petroleum
development and evolution of local government institutions on Alaska\'s
North Slope in the decade since the oil and gas discoveries at Prudhoe
Bay in 1968.

**OBJECTIVES:** (1) To examine the relationships between petroleum
development and the evolution of local government institutions on
Alaska\'s North Slope since 1968.

**DESCRIPTION:** The report structure reflects an analytical approach,
including a series of successively more detailed explorations of issues,
events, and institutions present within the study area. Chapter I
contains a description of methodology used for data collection. Chapter
II is primarily an introduction to North Slope Borough (Borough)
government and a review of its origins, structure, and finances, with an
emphasis on local tax and revenue features and the capital improvement
program implemented within local villages. Chapter III contains an
extensive overview of regional institutions and issues and an
examination of extra-regional and intra-regional institutional
relationships of the Borough and the tax, development, environmental,
and related issues around which these relationships revolve. Chapter IV
contains a description of the Borough internal policy process. Chapter V
provides an examination of specific Borough responses to major cases of
petroleum development plans and activities. Chapter VI contains
conclusions regarding the general character of the Borough, major policy
issues and external relations, and political development in the region.
This last chapter also provides a series of general implications for
local government institutional change in other rural Alaska Native
regions.

**SIGNIFICANT CONCLUSIONS:** Resource development activities can bring
increased environmental threats as well as augmented tax bases to
regions and communities. Rural leaders may respond positively to capture
new tax bases; they may also respond defensively to threats to existing
subsistence habitat and outside intrusions into previously isolated
Native village areas. In such cases, new local government authority and
jurisdiction may be necessary to tax and impose zoning and other local
land use controls in affected areas. It is significant that, on the
North Slope, the Borough was incorporated concurrently with
establishment of the Arctic Slope Regional Corporation. Elsewhere in
rural Alaska, regional corporations are the dominant institutions and
have preempted key political and economic leadership roles. Thus,
regional corporations are increasingly capable of either controlling or
strongly influencing their regions\' future course of institutional
development.

**STUDY RESULTS:** The story of the Borough is highlighted by Borough
leaders\' aggressive pursuit of tax revenues, authority, and
recognition, often in the face of outside opposition and resistance.
Prudhoe Bay oil made the Borough government financially feasible and
economically and politically expedient for regional Natives.
Establishing a borough for the entire North Slope was the most effective
means available for gaining direct local access to the enormous tax base
at Prudhoe Bay. Once established, the Borough could also assert Native
claims to share control over regional land, water, and subsistence
resources, beyond rights granted under the Native Claims Settlement Act.
Since the Borough\'s incorporation, its officials have devoted
substantial energies to asserting and defending their tax and regulatory
powers. Basic incorporation objectives included gaining control of
public educational programs and providing new facilities, services, and
jobs in all North Slope villages.

These objectives are being realized, but not without additional problems
of financing and management, particularly in the Capital Improvements
Program (CIP). The CIP is dependent on an assured flow of oil property
tax revenues, a flow which has been subject to blocks and restrictions
and remains in jeopardy. Borough government has not yet stabilized into
a \"normal local government\" pattern; financially, as well as in its
external relations, its vulnerabilities continually force it into
reactive, \"crisis\" government modes.

The most important limit on Borough taxation of oil properties is not
oil company opposition, rather State government laws and regulations.
The interest of the State government in assuring some measure of
statewide tax and revenue equity transcends Borough interest in gaining
unrestricted authority to tax the greatest concentration of oil company
properties in Alaska. This basic interest, which persists through
changes of administration and legislature, was the primary reason for
the State\'s original reluctance to support Borough incorporation, and
it remains the reason for State administrative and legislative
limitations on the Borough\'s taxing authority.

Economic security is, of necessity, the Borough\'s first priority, with
environmental security ranking second. Since the Borough is not
responsible for petroleum development and has little influence over
whether, when, and where such development occurs on Federal and State
lands, it can afford to press both development-taxation and
environmental protection demands to their limits, often in apparent
contradiction and without consistency or balance. In practical effect,
the Borough\'s demands for environmental protection are incompatible
with its encouragement of petroleum development which offers potential
economic benefits to the Borough and its people. Except for Federal OCS
development which may have a smaller potential payoff for the Borough
than developments elsewhere in the region, Borough officials have not
sought seriously to impede exploration and development activities on
North Slope lands. The Borough instead appears to exhibit two trends:
(1) it is seeking protection, particularly of subsistence resource
habitats and specific Native traditional use lands; protection can be
accommodated without significantly deterring oil exploration or
development activities on the National Petroleum Reserve, on regional
corporation lands, or at Prudhoe Bay and in adjacent areas; and (2) it
is making claims to some share of control over Federal and State lands
and waters, regardless of whether oil exploration and development
activities are directly involved. For this reason, it is often difficult
to distinguish the Borough\'s environmental protection responses from
its broader political responses to Federal and State actions affecting
the North Slope region. The Borough has claimed some success, for
example, in lobbying Congress (i.e., on National Petroleum Reserve
legislation) and the State legislature (i.e., on municipal tax law
amendments), effectively finding and cooperating with influential allies
in the process. Currently the Borough is represented in several
intergovernmental advisory groups and due, in part, to Federal and State
laws mandating local involvement, the Borough participates routinely in
various Federal and State development and environmental permitting
processes affecting North Slope lands and waters.

The Arctic Slope Corporation is potentially the major regional
institutional check on Borough government, but it has not yet acted
consistently or aggressively in this role. The Corporation has exhibited
a non-interference pattern, mutual accommodation, and cooperation (i.e.,
cooperation between the two organizations), notwithstanding personal
conflicts and other surface tensions between some of their officials. It
is likely, however, that their institutional differences will grow,
particularly as Borough taxation increasingly impinges on corporation
activities. There are already signs of corporation resistance to Borough
tax policies affecting oil exploration programs in which the corporation
is engaged both as land owner and business contractor.

**STUDY PRODUCT(S):** University of Alaska, Institute of Social and
Economic Research. 1978. Governance in the Beaufort Sea Region:
Petroleum Development and the North Slope Borough. A final report for
the U.S. Department of the Interior, Bureau of Land Management Alaska
OCS Office, Anchorage, AK. NTIS No. PB-294316/AS. Social and Economic
Studies Program Technical Report No. 16. Contract No. 14-12-0001-29002.
xiv + 229 pp. + app.

\*P.I.\'s affiliation may be different than that listed for Project
Manager(s).