Headlamp – Will Governor Walker’s budget be “responsible?” Only the shadow knows…

Today, AKHEADLAMP waits for Governor Walker to introduce his FY 2019 budget. We will skip our normal format for today’s post and provide this background information provided by the Department of Revenue in their annual Fall Revenue Forecast, for our readers to consider:

  • General fund unrestricted revenues totaled only $1.35 billion in FY 2017, the lowest level for unrestricted revenue since the late 1990’s. The department is forecasting unrestricted revenue of $2.1 billion and $2.0 billion for FY 2018 and FY 2019, respectively.
  • The State of Alaska received an estimated total of $12.1 billion in revenue in FY 2017 from all sources, more than double the FY 2016 total. The big increase was mostly due to strong investment returns as the Alaska Permanent Fund returned over 12% for the fiscal year. The Department of Revenue forecasts total revenue of $10.3 billion in FY 2018 and $11.0 billion in FY 2019.
  • Given the state’s budget requirements and the low levels of unrestricted revenue which are expected to continue for the foreseeable future, the Commissioner of Revenue believes that using a portion of Permanent Fund earnings for government operations is both prudent and necessary, provided that use of Permanent Fund earnings is limited to a level that is sustainable over time.
  • The revenue forecast is based on an annual average ANS oil price of $56.00 per barrel for FY 2018 and $57.00 per barrel for FY 2019. Actual Alaska North Slope oil prices averaged $49.43 in FY 2017. Oil markets appear to have come into balance over the past year, and the Department of Revenue projects that annual average prices will stabilize around $60 per barrel in real terms going forward.
  • For FY 2017, Alaska North Slope crude oil production averaged 526,500 barrels per day, an increase of 11,600 barrels per day over FY 2016. The Department of Revenue forecasts North Slope production of 533,400 barrels per day in FY 2018 and 525,700 barrels per day in FY 2019.

To read the entire revenue forecast, click here. AKHEADLAMP will provide analysis of the full budget on Monday.

Headlamp – Acronym day: ANWR, AGDC, FERC, AVEC.

Tax bill includes ANWR. Republicans in Congress say they’ve reached a final agreement on their tax bill, and it appears to include a prize the Alaska delegation has sought for years: opening the Arctic National Wildlife Refuge to oil drilling. But Democrats say they don’t know what’s in the final agreement because they haven’t been allowed to see it. Outside the Capitol, Sen. Elizabeth Warren, D-Mass., fired up a crowd of protestors. “Are you ready to stop this Republican tax scam? Let’s do it!” Warren shouted, to chants of “Kill the bill!” But inside, in the basement of the Capitol, a conference committee was meeting over the tax overhaul. The supposed purpose of a conference is to iron out the differences between the House and Senate versions. But Republicans had already announced they’d reached agreement among themselves, and Democratic objections were futile.

Hilcorp’s new move in Texas. Houston-based Hilcorp Energy and international energy trader Vitol are teaming up to potentially build a new crude export terminal in Corpus Christi. Corpus Christi and Houston are leading the way as the nation rapidly increases its exports of crude oil since Congress lifted the decades-old ban two years ago. Hilcorp subsidiary Harvest Pipeline said it inked a deal with the Netherlands-based Vitol to explore the joint development of a major crude storage and export terminal at the Port of Corpus Christi. “The agreement between Harvest Pipeline Company and Vitol is an extraordinary opportunity to help satisfy the growing need for export capacity along the Texas Gulf Coast,” said Harvest President Sean Kolassa. “We are excited for the project to begin moving forward.”

Overhaul spells cost reduction. A bill before the Legislature in the upcoming session would overhaul workers’ compensation to lessen the overall cost of the program in the state. Senate Bill 112, sponsored by Sen. Cathy Giessel (R-Anchorage), spells out in about 50 pages a number of changes to Alaska’s workers’ compensation system. Since 2004, Alaska has been among the top three states in the U.S. for workers’ compensation spending, according to the 2013 report from the Alaska Health Care Commission. In 2016, that fell to third place, Giessel said in a speech to the joint Kenai and Soldotna chambers of commerce Wednesday. “We’ve made some progress, and I’m very pleased about that,” she said. “There’s more room to keep going.”

The answer is blowing in the wind? Oil prices are still low, at least compared with three years ago, but Alaskans are pressing ahead with renewable energy projects to reduce dependence on fuel oil for power generation and, in some cases, space heating. Alaska Village Electric Cooperative, which operates small utilities in 56 rural villages, has been aggressive in building wind generation and, more recently, linking projects to boilers and hot water loops to use surplus wind power for space heating. AVEC now has 11 wind projects, operating 34 turbines that serve 15 villages. Some communities connect with interties, so that one wind project serves two or more communities, according to Forrest Button, AVEC’s manager for project development. The co-op is now investing in more wind capacity: in Bethel in 2018 and St. Mary in 2019, and in 2020 at St. Michael and Stebbins, where one project will serve both villages, Button told Commonwealth North, an Anchorage-based business group, in a briefing on renewable energy.

AGDC and FERC. State gasline officials have made headway of late with potential buyers and investors in the Alaska LNG Project, but progress on the regulatory side has been harder to come by. The Alaska Gasline Development Corp. filed an environmental impact statement application with the Federal Energy Regulatory Commission, or FERC, for the $43 billion project in mid-April. At nearly 60,000 pages, AGDC leaders said they believed it to be the largest EIS filing in the history of the National Environmental Policy Act process, which became the federal permitting standard in 1970. The size of the EIS filing could end up being a mixed blessing for the project.

First Reads:

Protests fail to slow tax bill, or Arctic drilling
Alaska Public Media, Liz Ruskin, December 13, 2017

Hilcorp, Vitol team up on Corpus crude export project
Houston Chronicle, Jordan Blum, December 13, 2017

Legislature to consider worker’s comp overhaul
Peninsula Clarion, Elizabeth Earl, December 13, 2017

Alaskans pressing ahead with renewable energy projects
Frontiersman, Tim Bradner, December 13, 2017

‘Aggressive’ timeline for AK LNG needs one year for permitting
Alaska Journal of Commerce, Elwood Brehmer, December 13, 2017

Headlamp – More gold and more oil revenue!

U.S. Production rate is up. The U.S. Energy Information Administration said on Tuesday that the 2018 average oil production rate will hit the highest level for any year on record in the United States. In its monthly short-term energy outlook, the agency forecast that U.S. crude oil output will rise by 780,000 barrels per day (bpd) to 10.02 million bpd in 2018. Last month, it expected a 720,000 bpd year-over-year increase to 9.95 million bpd.

Alaska’s oil revenue is up. Thanks in part to increased oil prices, Alaska expects to earn $2.1 billion in unrestricted general fund revenue in the current budget year, up by $247 million from a preliminary report issued just weeks ago. Other factors contributing to the increase include unexpected production tax payments made after that preliminary report was issued, and an adjustment to mineral royalties being deposited into the general fund, said a statement from the Department of Revenue Tuesday. The statement accompanied the release of the state’s fall revenue sources book, an annual look at state income with a decade-long forecast. The prediction for unrestricted general fund income in the 2018 fiscal year, ending in June, is up from last year’s $1.35 billion, the lowest level since the late 1990s.

“There’s gold in them thar hills.” Kinross Gold Corp. has acquired mineral rights to 709 acres immediately west of the company’s Fort Knox Gold Mine and estimates the land contains an estimated 2.1 million ounces of gold. The tract of land is known as either Gilmore or Parcel G. The find has the potential to increase the commercial viability of Fort Knox, which is projected to end production in 2020 under current operations. Fort Knox is located approximately 25 miles northeast of Fairbanks.

Let’s make this easier. US Rep. Bill Johnson (R-Ohio) has introduced a pair of bills designed to facilitate US exports of LNG. H.R. 4605 would let exporters begin shipments after completing the US Federal Energy Regulatory Commission’s review process instead of requiring them to wait for US Department of Energy approval, Johnson said. H.R. 4606 would codify DOE’s efforts to begin exports of small volumes of LNG to Caribbean and Central and South American countries. “The US is currently the world’s largest producer of natural gas, with trillions of cubic feet of recoverable gas beneath our feet,” Johnson said. “We should be doing all we can to take advantage of this abundant resource, and it is my hope that these bills will help further that goal.”

Climate Change Task Force. Governor Bill Walker today announced the 20 members of the state’s new climate change task force. The team’s job is to come up with recommendations for how Alaska should deal with climate change. It was created by Walker in an administrative order issued this fall. The task force is led by Lt. Governor Byron Mallott. In a statement, Gov. Walker said announcing the team “is another critical step in advancing meaningful climate policy.”

IEP for FBX. The Interior Energy Project is finally on its way to Fairbanks. After nearly five years of analysis, negotiations, debate and a wholesale route change, the Alaska Industrial Development and Export Authority on Dec. 7 transferred control of the project to the Interior Gas Utility. The IGU is owned by the Fairbanks-North Star Borough and will take over the plan to expand natural gas use in the area. Transfer of the unfinished project mostly means handing off the responsibility to fulfill the $331.2 million development plan the two organizations jointly crafted to complete the IEP.

First Reads:

EIA raises 2018 U.S. oil output forecast to highest on record
Reuters, Catherine Ngai, December 12, 2017

State forecast for 2018 revenue jumps by $250 million as oil prices rise
Anchorage Daily News, Alex DeMarban, December 12, 2017

Kinross acquires Gilmore tract west of Fort Knox
Fairbanks Daily News-Miner, Robin Wood, December 13, 2017

US House bills introduced aimed at easing LNG exports
Oil & Gas Journal, Nick Snow, December 12, 2017

Walker names members of Alaska climate leadership team
Alaska Public Media, Elizabeth Harball, December 12, 2017

AIDEA approves deal with gas utility for Interior Energy Project
Alaska Journal of Commerce, Elwood Brehmer, December 12, 2017

Headlamp – ANWR and Offshore.

Young and Murkowski talk tax bill. Rep. Don Young is clear about what he wants from the Republican tax legislation being debated in Congress. “ANWR’s the No. 1 thing,” he told reporters during a press call last week. Sen. Lisa Murkowski said she wants to see good legislation. “I want a good tax bill. I want a tax bill that really does provide for a level of equity and fairness and simplicity,” she said Monday. Murkowski and Young are both members of the House-Senate conference committee that will meet Wednesday on Capitol Hill in Washington, D.C. Because the House has passed one version of the bill and the Senate has passed another — and because neither body has approved the other’s version — the House and Senate must come up with a compromise that can pass both bodies. Few lawmakers are chosen for the conference committee, which gives Murkowski and Young significant political power, but also puts them under significant pressure.

50/50 or nothing? The U.S. Senate tax bill would open the Arctic National Wildlife Refuge to oil lease sales and split revenues with the state 50-50. Some Alaskans insist the state should get 90 percent, as promised in the statehood act. But if the tax bill passes, some opponents warn the state’s actual revenues from ANWR, no matter how much the oil companies bid, could be zero. Matt Lee-Ashley, a deputy chief of staff at the Interior Department during the Obama administration, sees lots of reasons not to pass the tax bill. He works for the Center for American Progress, a liberal think tank. But here’s what he wants Alaskans to know: That $1 billion the Congressional Budget Office projects the state would get from the first decade of lease sales in the refuge may never materialize.

Does AGDC have a transparency problem? Over the last several weeks, there have been several announcements from the state’s gas line corporation. The Alaska Gasline Development Corporation spent at least $2 million marketing Alaska’s megaproject this year. And so far, it has signed agreements to explore the project with potential partners and possible customers in China, South Korea, Japan and Vietnam. It has spent another $1 million on promotional handouts, trade shows and communications. But, back in Alaska lawmakers are still pushing for more. They’re asking questions about the money being spent and what may come back in to the state. The state’s gasline corporation has a transparency problem. It’s either being forced to give up too much information, hurting its chances of being competitive in the global liquefied natural gas market. Or, the corporation with the highest paid state employee at its helm, isn’t disclosing enough about what it’s doing with the state’s money.

From Washington Examiner’s Daily on Energy:

INDUSTRY READIES FOR ZINKE’S RELEASE OF NEW OFFSHORE DRILLING PLAN: Industry advisers say the Department of Interior soon will release a draft proposal of its 2019-2024 offshore oil and gas leasing plan, which is expected to be the largest five-year lease program ever proposed in the U.S. Some sources are expecting the proposed draft to be released as soon as Tuesday, but an Interior Department official indicated it may take a little longer. The plan is expected to reverse the Obama administration’s withholding of leases on the Atlantic Coast and the Arctic. It also is expected to address drilling opportunities on the Pacific Coast as well as more possibilities in the Gulf of Mexico.

Meanwhile, Senate hearing examines oceans policy: the Senate Commerce Committee will hold a hearing Tuesday afternoon on the nation’s oceans policy that will touch on offshore energy development. Christopher Guith, senior vice president for policy for at the Chamber of Commerce’s Global Energy Institute, will discuss the potential for energy development and the Trump administration’s plan for leasing. Sen. Dan Sullivan, R-Alaska, chairman of the subcommittee on oceans and fisheries, will hold the hearing called “National Ocean Policy: Stakeholder Perspectives.”

What’s good for the Arctic… The Trump administration is preparing to unveil as soon as this week an expansive offshore oil plan that would open the door to selling new drilling rights in Atlantic waters, according to people familiar with the plan. President Donald Trump ordered his Interior Department to write the new blueprint with the aim of auctioning oil and gas drilling rights off the U.S. East Coast — territory that his predecessor, former President Barack Obama, had ruled out. The Interior Department’s coming draft proposal, an initial milestone in replacing the Obama-era sale plan, dovetails with the oil industry’s push for new places to drill, said the people, who asked not to be identified before a formal announcement. Trump’s proposal would span the years 2019 to 2024, replacing the Obama plan, which runs through 2022.

First Reads:

Young says Arctic drilling is priority from tax bill; Murkowski wants quality
Juneau Empire, James Brooks, December 12, 2017

Warning from left: Deficit could eat Alaska’s ANWR money
Alaska Public Media, Liz Ruskin, December 11, 2017

As Alaska’s gasline corporation pushes for Asia deal, legislators push for more information
Alaska Public Media, Rashah McChesney, December 11, 2017

Trump to Open the Door for Oil Drilling Off U.S.’s East Coast
Bloomberg, Jennifer A. Dlouhy, December 11, 2017

Headlamp – Is the worst of the recession over?

Is the worst over? At CRW Engineering Group in Anchorage, managing partner Mike Rabe said his firm has been scrambling for work. The projects available to chase the last couple of years have been on the small side, he said, often focused more on maintenance and improvements rather than entirely new ventures. “We’ve had to work harder than ever. Competition is high and there’s not a lot of work out there,” Rabe said. As a result, his firm spends more money and time up front to become more knowledgeable about the projects it tries to win. There haven’t been layoffs, Rabe said, but profits are down. About two years into Alaska’s recession, many businesses are still feeling the pain. Almost every industry continues to lose jobs, according to preliminary job estimates from the Alaska Department of Labor and Workforce Development. But the state’s over-the-year job losses have gradually slowed this year, and some economists cautiously say that the worst hit of the current downturn may have already passed.

Like a phoenix from the ashes… As another fevered push to open the pristine Arctic National Wildlife Refuge to energy exploration collapsed on the Senate floor in December 2005, Ted Stevens, then the powerful and wily Republican senator from Alaska, declared it “the saddest day of my life.” At that moment, it looked as though the decades-long fight over drilling in 1.5 million acres of the remote refuge could finally be at an end. Republicans essentially gave up for the remainder of the George W. Bush administration after Democrats won control of Congress, and the drilling proposal had no chance during the Obama years, so it virtually disappeared as a topic of congressional conversation.

Growth in Russian Arctic shipping. The first shipment of LNG from Sabetta on Friday marks the onset of a period of big growth in Russian Arctic shipping. The Christophe de Margerie carried some 172,600 cubic meters of LNG as it set out from Sabetta, the new big port on the northern tip of the Yamal Peninsula. It is the maiden trip from Russia’s Arctic flagship project, the Yamal LNG, and the ship is expected to have an eastbound course towards the markets in Asia. The Christophe de Margerie has ice-protection level Arc7 and is capable of independently breaking through up to 2.1 meters of ice. It is the first of 15 ships of its kind to serve the new natural gas project. The tanker has an engine power of 45 MW, which is “comparable with a nuclear powered icebreaker,” natural gas company Novatek says.

Slow but steady? The oil and gas industry will continue its slow recovery as upstream companies increase production, helping the midstream and services businesses as well, according to Moody’s 2018 outlook. Excess supply will continue to dampen oil prices in the coming year. Natural gas prices, on the other hand, will benefit from higher demand, but price gains will still be limited. “Prolonged oversupply will constrain oil prices in the next 1-2 years, though [Organization of Petroleum Exporting Countries]-led production cuts have now stabilized around price-supportive levels,” said Steve Wood, Moody’s managing director for oil and gas. “We expect prices to remain within the $40-60/bbl band through 2019, assuming continued compliance with global production targets.”

Senator Hughes on the budget. Calling on all Alaskans! If you don’t read anything else political between now and the next legislative session in January, please bear through the numbers and read this piece. You will be shocked but you also will be well-equipped to answer the questions above. What does it all mean? Where are we? Egads. If we’ve really cut 44 percent (we haven’t) then we must be down to bare bones (we aren’t). Consider this: Although our state has unique challenges, is larger than the state of Idaho, and has fewer local governments chipping in, our per capita spending is four times that of Idaho. You read that right: four times. The truth is, we can still make reductions without sacrificing excellent, essential services and in doing so, avoid asking Alaskans to pull hard-earned dollars from their wallets to pay for inefficiencies and nice but unnecessary programs.

First Reads:

Alaska’s economy is still struggling, but the worst may have passed
Anchorage Daily News, Annie Zak, December 10, 2017

How Arctic Drilling, Stymied for Decades, Made Surprise Return in Tax Bill
New York Times, Carl Hulse, December 9, 2017

First Yamal LNG shipment means a new era of shipping on Russia’s Northern Sea Route
Independent Barents Observer, Atle Staalesen, December 11, 2017

Moody’s: Oil, gas industry to continue recovery in 2018
Oil & Gas Journal, Oil & Gas Journal Editors, December 8, 2017

Have we cut state budget enough? Must Alaskans pony up? No.
Anchorage Daily News, Sen. Shelley Hughes, December 10, 2017

Headlamp – NES helps North Slope workers avoid layoffs; Balash confirmed!

Balash IN at Interior! The U.S. Senate confirmed Alaskan Joe Balash to a top position at the Interior Department on Thursday, generating immediate concern from a conservation group over his past efforts to unlock the Arctic National Wildlife Refuge for minerals exploration. Balash will serve as assistant secretary for land and minerals management under Interior Secretary Ryan Zinke. Balash, a former Alaska natural resources commissioner under Gov. Sean Parnell, had previously fought for an Alaska-led plan to allow modern seismic studies in the 19 million-acre refuge where oil exploration has been off-limits for decades. Such seismic studies might be permitted under the Trump administration.

Wait, not so fast – in a GOOD way! A new oilfield services contractor for three North Slope fields said Wednesday it has offered jobs to the workers who faced the prospect of losing employment with the previous contractor, ASRC Energy Services. ASRC notified state officials last week it would be laying off workers from Dec. 18 until Dec. 31 because the operator of the fields, Hilcorp, had engaged a new contractor. ASRC said 92 workers would be affected. The new contractor, Anchorage-based Northern Energy Services, has offered jobs to all the affected employees, NES official David Chaput said in an emailed statement. “We, along with Hilcorp, sincerely hope to continue relying on their experience and expertise, and will not be reducing the overall workforce,” Chaput said.

Pentex sale clears next hurdle. A unanimous vote by the Alaska Industrial Development and Export Authority’s board of directors cleared the way for its sale of Pentex Natural Gas Company to the Interior Gas Utility for $60 million. The board meeting was held in Anchorage and broadcast Thursday via teleconference. Included in the Pentex sale is the utility Fairbanks Natural Gas, a liquefaction plant in Cook Inlet, a trucking company to bring LNG to Fairbanks and an unrelated pad on the North Slope. Public comments were short but opposed to the sale, including criticisms from former Gov. Frank Murkowski. He failed to see the danger in waiting a few months or a year to see what happens with oil wells being drilled closer to Fairbanks. “You’re putting the burden on ratepayers up there,” Murkowski said.

What does Stand for Salmon really stand for? A ballot initiative aimed at protecting Alaska’s salmon habitat is kicking up a controversy. Environmental groups call it a needed step to protect Alaska’s most iconic — and lucrative — fish. But the state, many industry groups and several Alaska Native corporations are speaking out against it. If Alaskans are confused about what the ballot initiative would actually do, that’s understandable. Both sides can’t seem to agree on how it would affect future development in Alaska. At a Stand for Salmon event held in Anchorage this fall, supporter Arlo Davis collected his first signature from Kevin Illingworth. As he signed on, Illingworth said like a lot of Alaskans, he thinks protecting salmon should be a priority. “I know the importance of salmon to our entire state — not just any one group or individual, but to all of us,” Illingworth said. Illingworth’s signature is just one of 32,127 Stand for Salmon’s organizers need to pin down before mid-January to get it on the ballot. That’s not the only hurdle. The state thinks the initiative is unconstitutional and is challenging it in court.

NPR-A v. ANWR. While debate is focused on a controversial budget measure to allow oil drilling in the Arctic National Wildlife Refuge, a more accessible oil and gas frontier in Arctic Alaska is producing industry excitement and drawing significant investment. The National Petroleum Reserve in Alaska, or NPR-A, and adjoining state lands around the Colville River Delta on the western side of the North Slope have proved to be an attractive place for new oil development, thanks to recent and rich discoveries, accessibility of infrastructure and a series of projects in development that are poised to start producing in the next few years. Recent discoveries in the area, on both state and federal land, are fueling predictions of new fields that will produce 30,000 to 100,000 barrels a day. Oil companies have been very successful on the western side of the North Slope, a contrast to the east side where ANWR is located, said Andy Mack, commissioner of the Alaska Department of Natural Resources.

The FERC is full. Kevin McIntyre was sworn in Thursday as the new chairman of the Federal Energy Regulatory Commission (FERC), the agency said. McIntyre’s swearing-in as both a new commissioner and the chairman restores the agency to five commissioners for the first time since 2015. He was previously an attorney at Jones Day, heading its energy practice and often representing industry clients before FERC. McIntyre, a Republican, replaces Neil Chatterjee, who had served as chairman on an interim basis since August while McIntyre went through the Senate confirmation process. Chatterjee, also a Republican, will stay on at FERC as a commissioner. McIntyre’s chairmanship comes at an important time for the often obscure agency that oversees wholesale electricity markets, interstate pipelines and similar matters.

First Reads:

Pentex sale gets crucial second approval
Fairbanks Daily News-Miner, Robin Wood, December 8, 2017

92 North Slope workers facing layoffs offered new employment
Anchorage Daily News, Alex DeMarban, December 7, 2017

Alaskan Joe Balash confirmed to key post at Interior Department
Anchorage Daily News, Alex DeMarban, December 7, 2017

How would the salmon ballot initiative impact development in Alaska?
Alaska Public Media, Elizabeth Harball, December 7, 2017

While ANWR fight grabs headlines, a different part of Alaska’s Arctic is seeing a burst in oil exploration
Arctic Now, Yereth Rosen, December 8, 2017

New energy commission chairman takes reins
The Hill, Timothy Cama, December 7, 2017

Headlamp – Lease sales, big and small.

Third-largest lease sale in two decades. Major oil companies did not bid Wednesday on state leases near the Arctic National Wildlife Refuge as Congress moves to open the refuge’s coastal plain to drilling, but small bidding groups did. And new North Slope prospects generated interest in the annual state lease sale that officials said was one of the biggest of the last two decades. The state received $19.9 million in bids for the North Slope lease sale on Wednesday, making it the third-largest sale in the last two decades, said Chantal Walsh, director of the Alaska Oil and Gas Division. That was a surprise because so much of the land in the region had already been leased, she said. The amount of leased state land on the North Slope is at historically high levels, said Mark Wiggin, deputy commissioner of the state’s Natural Resources department.

Meanwhile, at the BLM… A lease sale for oil and gas drilling rights in Alaska — deemed the largest-ever there by the Trump administration — produced bids for only 7 tracts of land and garnered only $1.16 million in revenue, officials announced late Wednesday. The Bureau of Land Management auctioned 900 tracts of land in the National Petroleum Reserve in Alaska (NPR-A), totaling 10.3 million acres, for oil and gas drilling rights this week. But only two companies bid, securing drilling rights for 7 tracts of land — or less than 1 percent of that offered — for only $1.16 million, Reuters reports.

Jepsen gives “upbeat and positive” address at Alliance luncheon. ConocoPhillips reports Alaska’s consistent tax structure and business-friendly climate are major factors behind new investments and imminent new production. But the company remains concerned about the state’s budget deficit and uncertainty about taxes. The analysis was presented Wednesday by Vice President of External Affairs and Transportation, Scott Jepsen. He was speaking in Fairbanks at a monthly luncheon hosted by The Alaska Support Industry Alliance. ConocoPhillips expects dozens of new wells in multiple oil fields to come online during the next five years. Projections indicate each field could produce an additional 20,000 to 100,000 barrels of oil per day (BOPD).

Murkowski touts energy bill. With details of President Donald Trump’s infrastructure plan remaining scant, the chairman of the Senate Energy and Natural Resources Committee suggested Wednesday that a broad energy bill would jump-start it. Lisa Murkowski, Republican-Alaska, said she too had questions about what the $1 trillion infrastructure package touted by Trump would look like, and encouraged the administration to take a look at the Senate’s bipartisan energy bill for a package “that is ready to go and that’s already pre-vetted.” That bill would streamline permitting for natural gas and hydro power projects, facilitate LNG exports, support the modernization of the electric grid, increase buildings’ efficiency and aid development of next generation renewables and advanced nuclear, she said in a keynote address at the GridConnext conference held by Clean Edge and the GridWise Alliance. “So it’s a pretty substantive piece when you think about infrastructure as a whole.”

Expedited permitting, but not at the expense of the environment. The Department of the Interior, the U.S. government’s second largest revenue generator behind the IRS, is trying to be a better business partner to oil companies to curb falling revenues, Vincent DeVito, energy advisory to the Secretary of the Interior, said on Thursday. The department plans to expedite permitting on drilling in Arctic National Wildlife Refuge (ANWR) in Alaska, DeVito said at the S&P Global Platts Energy outlook in New York. Expediting the process would not be at the expense of environmental stewardship, he said.

Japanese utility in the game with AGDC. Legislators got their first chance to publicly question Alaska Gasline Development Corp. officials about a recent agreement with Chinese companies to advance an LNG export project during a Dec. 4 hearing. Meanwhile, AGDC executives in Japan were busy putting the finishing touches on the state-owned corporation’s latest pact to cooperate on developing the $43 billion Alaska LNG Project with potential customers. Shortly after AGDC President Keith Meyer told the House Resources Committee and other legislators in attendance that his team was close to signing a letter of intent with Tokyo Gas Co., the corporation issued a release announcing just that. “Tokyo Gas and Alaska have a special relationship in LNG and I was pleased to host (company President Michiaki) Hirose for meetings and a project update in Juneau this past August to help continue that kinship,” Gov. Bill Walker said in an official statement.

First Reads:

Small bidders snatch up land near ANWR in state oil lease sale
Anchorage Daily News, Alex DeMarban, December 6, 2017

‘Largest ever’ drilling lease sale in Alaska yields few bids
The Hill, Devin Henry, December 7, 2017

ConocoPhillips outlines new projects, concerns about taxes
Fairbanks Daily News-Miner, Robin Wood, December 6, 2017

Murkowski eyes Senate action on broad energy bill in early 2018
Platts, Jasmin Melvin, December 6, 2017

U.S. Interior Department wants more oil drilling, expedite ANWR permits
Reuters, Reuters Staff, December 7, 2017

AGDC gets interest from Tokyo, questions from lawmakers
Alaska Journal of Commerce, Elwood Brehmer, December 6, 2017

Headlamp – IGU to buy Pentex; NPR-A and ANWR

Let’s get this show on the road. Should an Alaska state agency be allowed to build a 211-mile road into the wilds of the Brooks Range to enable mine development in a remote part of the Arctic? That’s the question a multiagency environmental review is asking of a controversial proposal to build the Ambler Mining District Industrial Access Project, which could open commercial opportunities for mining of copper and other mineral deposits in a now-roadless part of northwestern Alaska. The process is protracted. A draft environmental impact statement is expected in March of 2019, with a record of decision expected in January of 2020, according to the U.S. Bureau of Land Management, the lead agency for the review.

NPR-A: a “hotbed of oil exploration!” Even as the U.S. Senate moves to allow oil drilling in Alaska’s Arctic National Wildlife Refuge (ANWR), the real action is 150 miles (241 km) west, where industry proponents hope a coming sale of 10 million acres of land will revitalize the state’s sagging crude production. The Trump administration, through the U.S. Bureau of Land Management, will auction off 10 million acres on Wednesday in the National Petroleum Reserve (NPR-A), a hotbed of oil exploration and development in the western part of Alaska’s North Slope. The planned sale has encouraged the oil industry while angering environmental groups. It would be the largest amount of land offered in a single lease sale there. The last sale of 1.45 million acres in 2016 netted $18.8 million, according to the U.S. Interior Department.

Tokyo Gas and the LIO. The state gas line corporation has signed an agreement with Tokyo Gas that makes it a potential buyer of Alaska gas, adding enthusiasm to the state’s plans to develop a $43 billion gas project with help from the Chinese. Keith Meyer, president of the Alaska Gasline Development Corp., said Monday the agency had signed the nonbinding “letter of intent” with the company in Tokyo earlier in the day. The agreement expresses Tokyo Gas’ interest in buying liquefied natural gas from the proposed Alaska LNG project, Meyer said. The large Japanese utility also has the opportunity to explore other ways to support the Alaska LNG project, which is currently looking for investment partners. The megaproject, requiring the building of massive facilities including an 800-mile pipeline, lacks funding for construction. It isn’t expected to begin production until at least 2024, if it’s ever built.

IGU moves forward. The Interior Gas Utility voted 5-2 on Tuesday night to proceed with the purchase of Pentex Natural Gas Company for about $60 million, a critical step in a long — and at times contentious — battle to bring natural gas to Interior Alaska. Tuesday’s vote authorizes IGU General Manager Jomo Stewart to execute a purchase and sales agreement and a finance agreement with the seller, Alaska Industrial Development and Export Authority. On Thursday, AIDEA will hold its own vote to approve or deny the sale. Stewart said the sale would put IGU “within striking distance of our goal” of $15 per thousand cubic feet of gas (MCF). He said a three-year contract to purchase gas occasionally suffers from bad optics, but makes finding cheaper gas easier than a long-term contract would.

From the Washington Examiner’s Daily on Energy:

REFINERS SCRAMBLE AHEAD OF WHITE HOUSE MEETING ON ETHANOL: Refiners are gearing up for what could be a major showdown at the White House Thursday over the future of corn ethanol and the Renewable Fuel Standard.
Sen. Ted Cruz will be sitting down with Trump and members of his Cabinet to discuss his administration’s decision not to curtail the RFS, and continue support of blending high amounts of corn ethanol in the nation’s gasoline supply, while supporting soybean diesel and other more advanced fuels derived from crop waste.
Sources with large refiners said they are scrambling in preparations for the meeting, which is likely to include an industry component in addition to EPA and Agriculture Department officials and other high-level White House advisers. Cruz led a group of senators in sending a letter to Trump urging a meeting when it became apparent that the administration was scrapping proposed reductions in the RFS’ annual targets that refiners are required to abide by.
Independent refiners complain that the cost of complying with the RFS would force them to lay off workers if they are not provided some kind of relief in meeting the standard. EPA set the 2018 goals last week with no changes to the annual targets, while rejecting refiners’ request to significantly change the program to free them from having to abide by the requirements.
RFS ‘has failed to deliver:’ The free-market think tank American Enterprise Institute issued a report Wednesday ahead of the White House meeting listing the shortcomings of the RFS and is holding a briefing ahead of the meeting.
“The main potential benefits to society from the Renewable Fuel Standard (RFS) stemmed from potential reductions in greenhouse gas emissions due to increased biofuel and decreased fossil fuel use. The policy has failed to deliver these benefits,” according to the report’s summary.

First Reads:

The environmental review process is beginning for a controversial new road in Alaska’s Arctic
Arctic Now, Yereth Rosen, December 6, 2017

While U.S. Senate pushes Alaska wildlife refuge drilling, industry looks elsewhere
Reuters, Yereth Rosen, December 5, 2017

State signs deal with Tokyo Gas as it seeks buyers for Alaska LNG
Alaska Dispatch News, Alex DeMarban, December 5, 2017

Interior Gas Utility approves Pentex purchase
Fairbanks Daily News-Miner, Robin Wood, December 6, 2017

Headlamp – Optimism among CEO’s of US companies highest in 6 years.  

We’ve got high hopes. Optimism among chief executive officers of large U.S. companies rose to the highest in almost six years, as the outlook for capital spending improved, a Business Roundtable survey showed Tuesday. Hiring plans eased as wages became the top cost pressure. Highlights of CEO Economic Outlook (4Q):

  • Index advanced to 96.8, highest since 1Q 2012, from 94.5; readings above 50 indicate expansion
  • Gauge of capital spending plans in the next six months increased to 92.7, highest since 2Q 2011, from 86.4; sales outlook rose to 122 from 116.9
  • Measure of hiring expectations fell by 4.5 points to 75.7
  • CEOs identified labor as biggest cost pressure, first time in six years that regulatory costs weren’t the top answer

Cart before the horse? It’s been nearly a month since the state signed a joint-development agreement with three Chinese entities to potentially build a natural gas pipeline in Alaska. But, does the state have an agreement to sell the gas produced by oil companies? That was question lawmakers asked the Alaska Gasline Development Corporation’s President, Keith Meyer, at a House Resources Committee meeting Monday. It’s one of many agreements on the Alaska LNG project that still need to be secured. Meyer says the corporation says is actively negotiating with oil companies on the matter. Alaska owns the resource when it’s in the ground, but oil companies own the leases to produce oil and gas. As part of the project, the state is now offering those companies $1 per million BTU of gas, a set unit often used to quantify the commodity. “To get a dollar for that, a billion a year, we think is pretty reasonable,” Meyer said Monday. “It’s not as high as Henry Hub, which is north of $2 now, you know, $2.50, but Henry Hub’s at the beach in Louisiana, not up on the North Shelf.” But oil companies may not be ready to accept an offer just yet. “We need to know what it costs to produce gas before we sign an agreement to sell gas,” said Damian Bilbao, vice president of commercial ventures with BP, adding that the company hasn’t studied what it costs to produce natural gas to take to market. “We need to make sure that if we’re going to enter into agreements for 20 years, 25 years, to sell gas, that we know what it’s going to cost to produce.” Without a commitment from oil companies to sell their gas, the state can’t market or tax it.

Statoil’s Arctic oil project becomes reality. After years of hesitation, consideration and re-consideration, the Norwegian oil company Tuesday announced that the Arctic oil project will become reality. The Johan Castberg will be one of the biggest industrial projects in the Norwegian Arctic ever. About 49 billion NOK (€5 billion) will be spent on the development of the 450 to 650 million barrels of oil equivalent. Although it was expected, the announcement is still big news from the company which in the course of 2017 has conducted a series of unsuccessful exploration well drilling operations in region, while a bit further south, oil company Eni has experienced serious problems with its Goliat project, a license in which Statoil has a 35 percent stake. “This is a great day!” says Margareth Øvrum, Statoil’s executive vice president for Technology, Projects and Drilling.

Congressman Young named to conference committee. Alaska congressman, Rep. Don Young (R), was named Monday by Speaker of the House, Rep. Paul Ryan, (R) Wisconsin, to serve on the conference committee that will be tasked with trying to reach a compromise over differences between the House and Senate tax reform legislation, which includes a provision to allow oil exploration in the Arctic National Wildlife Refuge. In a press release, Young said “There is still a long way to go in our unified effort to unleash Alaska’s true energy potential, but I am committed to getting this across the finish line.” Senate Majority Leader Mitch McConnell is also expected to soon name senators to the conference committee, and Sen. Lisa Murkowski (R) Alaska, said after the GOP tax reform bill was approved that she wants to serve on the panel. BREAKING NEWS:   Congressman Young will become the longest serving member of Congress when Congressman Conyers steps down.

KPEDD highlights economic diversity at annual forum. Next month’s Industry Outlook Forum will hinge around the diversity of the Kenai Peninsula’s economy, featuring speakers from nearly every industry. The annual event, coordinated and hosted by the Kenai Peninsula Economic Development District, brings together state officials, business owners and industry leaders from around the state to look at the upcoming year for their industries. The lineup features speakers from oil and gas companies, the health care industry, the cannabis industry and the state, among other businesses. Kenai Peninsula Economic Development District Executive Director Tim Dillon said he and events coordinator Caitlin Coreson took a look at the industries on the Kenai Peninsula early in the process and wanted to make sure as many as possible were represented. “When you look across the board, we’ve got almost every industry,” he said.

First Reads:

China may buy Alaska gas, but are producers ready to sell it?
KTVA, Liz Raines, December 4, 2017

U.S. CEO Optimism Strongest Since 2012 on Sales, Investment
Bloomberg, Sho Chandra, December 5, 2017

Statoil announces massive investment in its northernmost oil field
Arctic Now / The Independent Barents Observer, Atle Staalesen, December 5, 2017

Rep. Don Young named to tax reform, ANWR committee
KTUU, Mike Ross, December 4, 2017

Industry Outlook Forum looks to diversity
Peninsula Clarion, Elizabeth Earl, December 4, 2017

Headlamp – Why is Alaska overtaxing its most important industry?

Tax more, get less? As we head into the homestretch of much-needed tax reform in Washington, Americans back home need to understand that the political turmoil doesn’t just reside in the Swamp. States facing significant financial hardships face difficult choices as well. And instead of looking to create fair policy that encourages growth, some states, like Alaska, are looking to reprimand industries who are the backbone to the economy – costing Americans opportunity and growth. Alaska’s Legislature is particularly known for debating the role the oil and gas industry plays in the state’s economy. In fact, economic opportunity in the Last Frontier has long been inextricably linked to oil and gas. That’s true for the thousands of Alaskans who make their living in energy development or in support of it. Yet, it’s also true for state government, which relies almost exclusively on the taxes and royalties paid by the industry to provide services and stay solvent. One would think that a state that derived 72 percent of unrestricted revenue last year from a single source – the oil and gas industry – would work hard to ensure that it is able to operate in a stable business and policy environment. And when market conditions turn against that source – as they have amid low crude prices and high operating costs – conventional wisdom suggests that keeping tax and regulatory burdens from becoming too heavy should be a priority.

Don’t crack the champagne cork yet. Sens. Lisa Murkowski and Dan Sullivan both voted for the GOP-sponsored tax reductions that passed the Senate early Saturday — a step that also brings the Arctic National Wildlife Refuge to the brink of being opened for oil leasing. The senators, both Republicans, said the bill would be good for Alaska’s economy and its middle class, as critics denounced the measure as a hastily written giveaway to corporations and the wealthy. “Do I wish that we would have allowed for that full, written text to be distributed and reviewed? Yes. I’m not going to make excuses for that,” she said. But, she added: “We have made no secret about the desire to open ANWR. Every single Congress there have been bills to do that. We have had hearings on it.” Murkowski added that she would have voted for the legislation even without the refuge provision. She and Sullivan also each got amendments added to the final bill that benefit Alaska Native corporations and cruise lines. Drilling proponents, meanwhile, can’t crack their champagne corks just yet: The Senate’s ANWR proposal is still expected to go before a conference committee of senators and House members, who would sort out differences between the two tax bills approved by each chamber.

Takin’ it to the street. You may have seen it in your local paper Sunday, the Alaska Gasline Development Corporation (AGDC) has published a 12-page informational brochure about the state’s gas project – Alaska LNG. AGDC will provide the House Resources Committee with an update on the project Monday. The Corporation says the goal behind the brochure is to provide Alaskans with detailed information about where the project stands, after the company signed a joint development agreement with China last month, in the presence of both the U.S. and Chinese presidents. Sunday’s brochure was printed in color, on large-format, glossy paper at a price of 80 cents each. Rosetta Alcantra, a spokesperson for AGDC, said she could not provide information, on a Sunday, about how many brochures were printed using public funds, but Alcantra says the quality was important when choosing the piece. “I thought ours was a very modest piece, that was a very good, informational piece, has a lot of information, has a lot of good graphics that can really only be presented in a colored format,” Alcantra said of the document, which was published in the Anchorage Daily News, Fairbanks Daily News Miner, Peninsula Clarion, Juneau Empire, and the Alaska Journal of Commerce. Additional copies were printed for the Alaska Resource Development Council.

First Reads:

Why Is Alaska Overtaxing Its Most Important Industry?
Real Clear Markets, Pete Sepp, 12/04/17

Alaska senators vote for tax bill, with extras for ANWR, cruise industry, Native corporations
Anchorage Daily News, Nathaniel Herz, 12/03/17

AGDC publishes brochure in local newspapers, ahead of gas project update
Liz Raines, KTVA, 12/03/17