Headlamp – Stop demonizing Pruitt; Let’s Make a Deal & methodology matters

Stop demonizing Pruitt. Scott Pruitt is under fire, this time for trying to stay safe. Because the EPA chief requires 24/7 security, according to a new Washington Post report, the agency has pulled agents from environmental investigations to serve on his security detail.  There is an obvious solution to this staffing problem. End the demonization of Pruitt in the press and the threats against the environmental administrator will taper off. A safer Pruitt will inevitably free-up agents to pursue dangerous polluters.  Normally the EPA’s Criminal Investigation Division doesn’t do VIP security. G-men with green thumbs, they follow up leads and knock down the doors of criminal polluters. “These guys signed on to work on complex environmental cases, not to be an executive protection detail,” explains former special agent Michael Hubbard. “It’s not only not what they want to do, it’s not what they were trained and paid to do.”

Let’s Make a Deal. The Alaska Industrial Development and Export Authority-owned Titan LNG has reached a natural gas supply deal with the Texas-based Hilcorp, which owns a natural gas development operation in the Cook Inlet. This morning the AIDEA board will meet to decide whether the deal satisfies requirements of House Bill 105, which authorized the state to finance the Interior Energy Project. Gene Therriault, team leader of the project, said if the board finds this deal with Hilcorp satisfies the requirement, it would unlock the entire funding package for the Interior Energy Project: $57.5 million in capital funds, $125 million in an AIDEA loan program, and authorization for as much as $150 million in bond funding. Unlocking the full financing package for the Interior is crucial to adding more customers.

Got guts? Trump does. During a speech in Anchorage today, a top Interior Department official said kick-starting oil development in the Arctic National Wildlife Refuge, or ANWR, is a priority for the Trump administration. “The untapped potential of ANWR is significant. But it is the Trump administration that had the guts to step up to the plate and facilitate production,” Vincent DeVito, the Interior Department’s Counselor for Energy Policy, told a conference for ocean researchers in Anchorage Wednesday. DeVito occupies a new post created by the Trump Administration, advising Interior Secretary Ryan Zinke on developing oil and other resources from federal land and waters. Last week, the Washington Post reported the Trump administration is pushing to allow seismic testing in the Arctic Refuge. Seismic testing would provide new information on where and how much oil is in the Refuge.

May the force be with you. Lawyers expect a spate of force majeure contract lawsuits after Hurricane Harvey tore through Southeast Texas and parts of Louisiana last month, paralyzing a fifth of U.S. fuel output and pushing some oil production offline. Hurricanes and other natural disasters can affect the energy industry’s ability to honor contracts related to oil and natural gas production, transport and oilfield services. Force majeure is a legal declaration that means the operator cannot fulfill a contract due to circumstances outside its control. Damage in Texas wrought by Harvey is estimated at around $180 billion, according to Texas Governor Greg Abbott, with some of that in the oil-rich Eagle Ford shale region southwest of Houston. While the full extent of Harvey’s effect on the Gulf Coast energy industry is still being tabulated, damage from hurricanes Katrina and Rita in 2005 shut in more than 8 billion cubic feet of gas production and 1.5 million barrels per day of oil production.

Getting rid of red tape at FERC. US Sens. James Inhofe (R-Okla.) and Angus S. King Jr. (I-Me.) introduced a bill aimed at improving coordination of federal interagency National Environmental Policy Act reviews of interstate natural gas project applications before the US Federal Energy Regulatory Commission. Four national oil and gas associations immediately welcomed the Sept. 20 measure. “By streamlining the permitting process, we can get pipelines from planning to serving the public faster and more efficiently,” Inhofe said. “This bill brings all federal, state, and local regulatory agencies to the table early on to coordinate participation—resulting in a more collaborative and timely review process.” King noted, “By establishing timelines for federal reviews, the legislation cuts through red tape in a way that can deliver relief for Maine families and businesses facing high energy costs while in no way compromising environmental standards.” The legislation is necessary because the permitting process for interstate gas pipelines has become more protracted and challenged despite the obvious need for them to be built, Interstate Natural Gas Association of America Pres. Donald F. Santa said. “We hope the Senate takes prompt action on this legislation that will facilitate the responsible and orderly development of infrastructure, enabling consumers to enjoy more fully the benefits of America’s abundant and affordable natural gas supply,” he said.

Methodology matters. Some of the affected parties are raising concerns as state tax assessors are finalizing a methodology for valuing oil and gas properties other than the Trans-Alaska Pipeline System for the first time. Alaska Petroleum Property Assessor Jim Greeley said in an interview that the way the state currently assess values for oil and gas properties isn’t new; it’s been phased in over the last five years. However, the means for assessing the industry’s often complex and extremely expensive infrastructure has never been spelled out in state regulations, according to Greeley. “The regulation provides only high-level, broad guidance that basically says for production properties you have to use replacement cost (valuation),” he said. “Then for pipelines it says you can use sales, income or replacement cost and it stops there so there’s no specifics of methodology in currently. That’s what we’re trying to fix.” The vagueness of the regulations opens the door to subjectivity by the state and local governments or the property owners, creating a situation that’s “ripe for appeal,” Greeley added.

Making the hard decisions. As Alaska’s largest newspaper struggles to stay in business after drowning in millions of dollars of debt, the Alaska Dispatch News reported Wednesday night, the layoffs have begun. According to the ADN website, “A “significant” number of employees have been laid off at Alaska Dispatch News as part of a restructuring under the company’s new owners.” The article says every department in the company was affected: from advertising to the newsroom, including editors and reporters.  The paper says job reductions began last week and continued through Wednesday.

No money? No Ferry. A legislative mistake may mean a spring shutdown of the Alaska Marine Highway. Pat Pitney, director of the Alaska Office of Management and Budget warned legislative leaders of the oversight in a letter dated Sept. 19, and on the following day, Sen. Bert Stedman, R-Sitka, revealed the trouble to attendees of the annual Southeast Conference meeting here. “The marine highway’s going to run out of money sometime in early April,” Stedman said to a room surprised into silence.  Department of Transportation commissioner Marc Luiken confirmed that the state does not have enough money to operate its ferry system through the end of the fiscal year but said the exact date will depend on a variety of factors, such as fare revenue, that aren’t known.

First Reads: 

LNG makes deal with Texas-based firm for supply of natural gas
Fairbanks Daily News-Miner, Kevin Baird, September 21, 2017

Interior official says Trump administration has the ‘guts’ to allow oil exploration in ANWR
Alaska Public Media, Elizabeth Harball, September 20, 2017
Energy contract lawsuits expected to jump in Harvey’s wake
Reuters, Bryan Sims, September 20, 2017

US Senators offer bill to improve FERC application review process
Oil & Gas Journal, Nick Snow, September 20, 2017

State works to formalize method for assessing oil and gas properties
Alaska Journal of Commerce, Elwood Brehmer, September 20, 2017

Alaska Dispatch News begins layoffs
KTVA, KTVA Web Staff, September 20, 2017

Alaska Legislature’s mistake may shut down state ferry system
The Juneau Empire, James Brooks, September 20, 2017

Angry that Scott Pruitt pulls agents off of environmental investigations for his security detail? Then stop demonizing him
The Washington Examiner, Philip Wegmann, September 21, 2017