Editor’s Note: This month marks the 40th anniversary of the jack-up rig George Ferris being “stuck firmly in 82 feet of clay just off the Homer Spit,” as the Homer News reported it on May 13, 1976. The incident proved to be the catalyst for the state to buy back oil leases that had been sold in Kachemak Bay. In this three-part series, Loren Flagg gives details of the Kachemak Bay oil lease sale and how the bay eventually was designated a Critical Habitat Area. The series is an abridged version of Chapter 10, “Kachemak Bay Oil Lease Fiasco” from his book “Fish, Oil & Follies.” 

PART 3

While Homer residents were duking it out in a classic public relations battle, Attorney General Gross, under a directive from Governor Hammond, was back in Juneau drafting a bill that would create a Marine Sanctuary in Kachemak Bay and condemn the oil leases there. Shortly after introduction to the House Resources Committee in early March, the bill was promptly tabled on a motion by Homer representative Leo Rhode. Leo had told committee members two public opinion polls conducted in his district showed residents were “opposed overwhelmingly” to Hammond’s plan for a marine sanctuary in the bay. 

It was now time for some damage control. Fortunately, preliminary results had just become available from two environmental studies that had been initiated at the beginning of the Kachemak Bay debacle. One was ADF&G’s own study on the “Impact of Oil on the Kachemak Bay Environment,” for which I had been assigned the position of field project leader. The other was a study on the potential impacts of oil on the marine environment by the National Marine Fisheries Service. Bob Palmer, Hammond’s chief lieutenant, was determined to see that the House Resources Committee hold hearings on these reports.

House Resources Hearing: As field project leader for the Kachemak Bay marine studies, I was called down to Juneau to give a report on our findings.  The House Resources Chairman tried to hold off the reports but pressure was brought about by both Palmer and Senate Resource Chairman Chancy Croft to have the committee hear the reports. 

The committee was shown evidence that Kachemak Bay was in fact one of the “most highly productive marine environments in the world.” Studies showed how current gyres in outer Kachemak Bay allowed larval stages of crab and shrimp to develop and settle within the bay and that bioassay studies indicated that these larvae were extremely sensitive to very low levels of hydrocarbons. A final point was that the leases that had been issued were smack in the middle of the most biologically sensitive area. 

The next biologist to speak was Stanley “Jeep” Rice from the National Marine Fisheries Service. Rice reported that his scientific study showed that petroleum development in shellfish-rich Kachemak Bay “poses a higher environmental risk than in most other areas of Alaska.” Rice said that because of the whirlpool action of the current, strong tides and wind in Kachemak Bay, “there is a higher potential for poisoning of marine life.”

Big Oil Guns Speak: Now it was time for damage control by committee members opposed to the bill. Oil industry experts were called in to try and offset the damage perceived to have been done by the reports Jeep and I had given. It was truly a classic, unbelievable performance that only the most gullible pro-oil advocate would buy. On April 11, 1976 the Anchorage Times reported this testimony under the headline “Industry, Fishermen Want Kachemak Oil.” The Times quoted Clayton McAuliffe, senior research associate with Chevron Oil Field Research Company, as follows: “It would not be possible to spill enough oil in Kachemak Bay to significantly affect fin fish and shellfish. It would take 200 million barrels of crude oil to provide one part per million (PPM) water-soluble fraction in Kachemak Bay. This would require the complete loss of all oil from 95 tankers of 300,000 ton capacity to achieve this amount.”

Three other spokesmen for Shell Oil went on to testify to the effect that fisheries and oil operations were completely compatible in Kachemak Bay  and that there was really no realistic threat to the bay from an oil spill.

The oil companies had done their job and now committee members had the justification they sought to water down the Senate version of the Marine Sanctuary bill. They added an amendment to the bill to allow exploratory drilling to go on in Kachemak Bay.

The Tide Turns: The stage was set for the final act of the George Ferris. The Ferris had been at center stage before– in fact, at one time in a major Hollywood production. In 1971, the Ferris had been cast as the secret headquarters for an international crime syndicate in the James Bond film Diamonds Are Forever. As jet fighters strafed the machine gun nests placed on the deck of the Ferris, Bond “blew the Ferris into the sky” at the climax of the film. This time the Ferris was to change the outcome of the Kachemak Bay oil lease battle and the history of Homer and Kachemak Bay forever.

The Ferris had been sitting in Mud Bay for nearly a year following extensive repairs made after the Cape Kasilof incident. In early May the rumors of the previous summer, that the Ferris was “stuck in the mud,” proved to be true. The trouble started when the rig was getting ready to leave Kachemak Bay for a job further up in Cook Inlet. The barge had been jacked down into the water at low tide and legs pinned in place in hopes that the incoming tide would create enough pressure and buoyancy to suck the legs free from the 82 feet of mud. Didn’t work. The legs of the rig buckled under pressure when the mud wouldn’t give and the incoming tide swamped the rig.

An oil spill from the flooded diesel tanks on deck the Ferris eventually resulted and efforts to contain the spill were unsuccessful. Newspaper headlines at the time read “Drill Rig Stuck to Bottom of Kachemak Bay,” “Oil Spill in Kachemak Bay,” and “ADF&G: Nothing is working in Kachemak Bay.” Following the incident, Ralph Oxenrider, vice president for Offshore Contractors in charge of the rig at the time, was interviewed by the Homer News and stated “We’ve had trouble with that damn thing ever since Sean Connery blew it up.” The Ferris was to be “blown up” one final time when in late June explosive charges were used to free it from the mud of Mud Bay.

Legislature Acts Quickly: Within two days of the Ferris incident the legislature in Juneau acted on the Marine Sanctuary Bill. The House Resources Committee amended the bill  to include everything Governor Hammond had wanted including a moratorium on drilling, a buy-back agreement, and condemnation of the leases if a buyback agreement could not be reached. The bill passed the House on a 26-13 vote and shortly after passed the Senate on a unanimous voice vote. Hammond then signed the bill. 

Kachemak Bay Leases Repurchased: It was obvious at this point that this case was making history. Big Oil had lost a battle with fishermen and other concerned citizens of the Kachemak Bay area. And the state was involved in buying back oil leases it had sold in 1973 for $25 million.  All of this was not only big news in Alaska but outside media including the Wall Street Journal, New York Times, and Science Magazine had covered the story. Hammond and Attorney General Gross went right to work negotiating with the oil companies. By early January the state had reached agreement with SOCAL, then in February with Texaco. Shell Oil held out until the very end and finally came to agreement as the deadline approached. 

The total cost of the repurchase was $28.4 million, costing the state about $3.5 million. Gross said, “If Kachemak Bay is really saved I think we’ve done something valuable.” Reflecting on the fishermen’s victory later, he commented, “All the people of Homer had to do was turn around the entire oil industry and the government of the state. And, incredibly, they did it.” Governor Hammond said the repurchase “represents a major turning point in Alaska’s history. It represents the end of an era when we sold our oil resources without any real reflection on the impact from the sale, simply for the purpose of gaining immediate revenue to run our government.”

About the author: At the time of the Kachemak Bay oil lease sale in 1973, Loren Flagg was area biologist for Cook Inlet Commercial Fisheries. Flagg retired from the Alaska Department of Fish and Game in 1987. After his retirement, he worked as a consultant to the commercial fisheries industry and as a sport fishing guide on the Kenai River. In April 1989, he was hired by the Kenai Peninsula Borough to head up the Cook Inlet area response to the Exxon Valdez Oil Spill. He lives in Kenai.