Headlamp – “It ain’t going to happen.” Headlamp hopes not – AOGCC overreaches with new idea

March 7, 2018 | Posted in : News

“It ain’t going to happen.” Headlamp hopes not – AOGCC overreaches with new idea. An Alaska regulator has asked the Legislature to make sure oil companies clean up old wells, even after the wells are sold to a different company. Cathy Foerster of the Alaska Oil and Gas Conservation Commission testified before the Senate Resources Committee on Monday, Alaska’s Energy Desk reported. Foerster said it’s becoming more common for smaller oil companies to operate in Alaska — and those companies may be more financially unstable. Forester warned that if a big oil field such as Prudhoe Bay is sold to a smaller company that goes bankrupt and can’t pay for cleanup, it could cost the state billions of dollars. She said the state currently has a $200,000 bond to cover the cost of plugging and abandoning all the wells at Prudhoe Bay. “For $200,000 we couldn’t even pay for the engineering study that would give us the estimate on what the true cost is to plug all of those wells,” Foerster said. “So, we’re in a bad situation on having adequate bonding for our wells, and we’re working it.” Forester gave the example of Aurora Gas, which declared bankruptcy last year. Forester said the company is unable to pay to plug and abandon its wells, three of which are on state land, making the state financially responsible for cleaning them up. “Aurora Gas doesn’t exist anymore, we cannot go back to Aurora Gas and ask them for the money to (plug and abandon) those wells,” she said. “It ain’t going to happen.”

The last couple years have been tough for Alaska contractors. While it took about two years to really be felt as money on large multi-year and preplanned projects continued to be spent, the precipitous fall of oil prices in late 2014 led to construction spending declines of 18 percent in 2016 and 10 percent in 2017 year-over-year. Not only did the price collapse hit contractors working in the state’s oil fields, but state capital spending has all-but disappeared since the oil revenues the State of Alaska relies on dried up as well. Similarly, Alaska’s construction industry workforce has declined by 17 percent since peaking in 2014 with a year average of 17,800 jobs, according to the state Labor Department. Last year the industry averaged 14,900 workers. It’s worth noting that those figures do not reflect construction jobs classified within the oil and gas sector, which has seen its workforce shrink by 5,000 jobs, or more than 30 percent, over the same period. However, there are signs of a turnaround. The 2018 Alaska Construction Spending Forecast, compiled by the University of Alaska Anchorage Institute of Social and Economic Research estimates “on the street” spending will increase 4 percent to more than $6.5 billion this year. Authors Scott Goldsmith and Linda Leask wrote in the report for the Association of General Contractors-Alaska that the modest increase will be driven by a rebound in spending by oil and gas companies that will more than offset continued declines in infrastructure investment by other sectors.

China is our NOTP, not our BFF. Your Alaska Link had the chance to speak with the Anchorage Economic Development Corporation (AEDC), following yesterday’s announcement by Governor Bill Walker, that the 49th State is planning to advance international trade collaborations with China. AEDC Logistics Business Development Director Will Kyzer described, “China is actually Alaska’s number one trading partner, and with the significant growth that we are seeing in China as a developing market, there’s really a lot of opportunity there.” As Alaska is strategically located in the global arena, Kyzer added, “One of the more significant areas that we are working on right now is a partnership called the Alaska AeroNexus Alliance…we are working to pursue some new opportunities, that haven’t really been realized here locally.” In our interview above, Anchorage Economic Development Corporation Logistics Business Development Director Will Kyzer details growing international trade, new markets, untapped financial sources and more.

2025 more demand than supply for LNG? Chevron Corp said on Tuesday it expected supply shortage in the global liquefied natural gas (LNG) market by around 2025, echoing comments made last month by top LNG trader Royal Dutch Shell. Demand for natural gas, which burns cleaner than coal and oil, has surged as countries such as China look to curb environmental pollution. Chevron, owner of the giant Gorgon and Wheatstone LNG projects in Australia, said it expects global demand to be nearly 600 million metric tonne per annum (mmtpa) by 2035, while supply could be just about half of that. “China’s demand is increasing significantly – they’ve had a very active program to move off of coal in heating industrial applications, and that’s pulled on LNG,” Pierre Breber, EVP -downstream at Chevron, said during the company’s analyst day, when asked about spot LNG prices. China imported record levels of LNG in January, as the world’s second-largest economy shored up supplies ahead of the Lunar New Year celebrations. Shell in February estimated that more than $200 billion of investments in LNG is needed to meet the boom in demand by 2030. The global LNG market is set to continue its rapid expansion into 2020 as facilities approved for construction in the first half of the decade come on line. However, a decline in spending in the sector since 2014 will create a supply gap from the mid-2020s unless new investments emerge, Shell said in its 2018 LNG Outlook.

First Reads:

Oil sector leads construction spending rebound
Alaska Journal of Commerce, Elwood Brehmer, March 6, 2018

Regulator wants to hold oil companies accountable for spills
Associated Press, March 7, 2018

AEDC: “China Is Alaska’s #1 Trading Partner”
Your Alaska Link, Maria Athens, March 6, 2018

Chevron expects LNG supply shortage by 2025
Reuters, John Benny, March 6, 2018



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Headlamp – Trump warned that tariffs could harm energy agenda.

March 6, 2018 | Posted in : News

H20 for AGDC from city of Kenai. If the Alaska Gasline Development Corporation builds its planned liquefaction plant and export terminal in Nikiski, its water will come from the city of Kenai, according to the state-owned corporation’s present plans for the LNG project, which would bring North Slope natural gas to Nikiski through an 800-mile pipeline. Previous plans to supply the plant with water from wells in Nikiski were canceled after test wells underperformed or exceeded government standards for contamination. In operation, the terminal and plant would need about 150 gallons per minute of fresh water — of which 135 gallons would be used for power generation and 15 gallons as potable water and for other utility uses, wrote AGDC Communications Manager Jesse Carlstrom in an email. Carlstrom wrote that this would be less water consumption than the existing industrial facilities in the plant area — an inactive fertilizer plant and a smaller, inactive LNG terminal — used when operating. The present LNG terminal — built in 1969 by ConocoPhillips and sold after years of inactivity to Andeavor, owners of a nearby refinery, in February — chilled its gas supply to liquid temperature using a cooling tower fed by water from local aquifers. The fertilizer plant also used an aquifer-fed cooling tower in its operation, Carlstrom wrote.

Zinke wants mores study before lease sale in MT. U.S. Interior Secretary Ryan Zinke said on Monday he has postponed a second federal oil and gas lease sale planned for March in less than a week in response to local opposition to the possibility of drilling near national parks and monuments. Zinke said the Interior’s Bureau of Land Management (BLM) will remove 17,300 acres out of the planned March 13 sale of 63,496 acres of federal land for oil and gas leases near the tourist city of Livingston, Montana, which is a gateway to the Yellowstone National Park. “I’ve always said there are places where it is appropriate to develop and where it’s not. This area certainly deserves more study, and appropriately we have decided to defer the sale,” Zinke said in a statement.

Sullivan hopes for aggressive lease sale schedule in ANWR. Trump administration officials may be able to hold the first auction for oil and natural gas drilling rights in the Arctic National Wildlife Refuge (ANWR) next year, Sen. Dan Sullivan (R-Alaska) said Monday. Speaking at CERAWeek, a major oil industry conference in Houston, Sullivan said he thinks the Interior Department could beat the 2021 deadline for a lease sale that was set out in last year’s GOP tax bill, though the agency has not committed to a timeline. “It’s my hope, and this is a very aggressive timeline, that we would have the first lease sale … to be sometime in 2019,” Sullivan told the audience. Sullivan said Interior officials are currently in Alaska laying the groundwork for eventual drilling in the Coastal Plain area of ANWR. He encouraged oil industry officials there to bid in the lease sales. The tax overhaul last year opened ANWR for drilling, settling a 40-year debate over whether to drill in the refuge. It had been a priority of Alaska leaders and some Republicans for decades. Interior must, under the tax law, hold a lease sale by 2021 and another by 2024, with at least 400,000 acres available each time. The remaining 83 parcels, which cover over 46,000 acres, will be offered for lease via an online auction as planned. The leases last for 10 years.

From today’s Washington Examiner Daily on Energy:

TRUMP WARNED THAT TARIFFS COULD HARM ENERGY AGENDA: A Republican senator and a CEO of a pipeline company both warned Monday that the steel and aluminum tariffs could disrupt the Trump administration’s “energy dominance” agenda and harm relations with crucial allies. “Right now the approach seems to be splitting our allies apart,” said Sen. Dan Sullivan, R-Alaska, during a panel discussion at CERAWeek.

No U.S. market: Echoing Gerard, Plains All American Pipeline CEO Greg Armstrong warned that the tariffs could hurt pipeline construction, stalling the ability to transport natural gas domestically and overseas. The type of steel used in pipelines is a niche market, Armstrong said on the panel with Sullivan, so most domestic steel producers have left the pipeline market because of its high cost. He said Trump’s plan to slap a 25 percent tariff on steel imports could drive up the cost for oil and natural pipelines. “We don’t think it would be appropriate to put a tariff on something you can’t buy here in the United States,” Armstrong said. “We’ll survive no matter what. It’s a thornier issue than printed in the headlines. “Armstrong said his company has about $1.5 billion worth of “projects underway that use quite a bit of steel.”

Focus on China: The comments opposing tariffs come as House Speaker Paul Ryan, R-Wis., and other Republican leaders are threatening legislative action to fight back. Sullivan said the tariffs should focus specifically on China, rather than affecting every country. Trump administration officials reiterated over the weekend they did not expect the president to provide exceptions from the tariffs for allied countries such as Canada and Mexico.


First Reads:

LNG project to use Kenai city water
Peninsula Clarion, Ben Boettger, March 5, 2018

U.S. Interior chief holds off on federal oil lease sale after outcry
Reuters, Valerie Volcovici, March 5, 2018

Alaska senator: Arctic refuge drilling sale could start next year
The Hill, Timothy Cama, March 5, 2018

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Headlamp – Drilling in ANWR decades away; South Korea, Samsung and Ships

March 5, 2018 | Posted in : News

Drilling Decades Away. It took roughly four decades for Alaska’s congressional delegation to pass a law that would allow drilling in part of the Arctic National Wildlife Refuge (ANWR), but it will likely be yet another decade before there’s any actual drilling. The three members of Alaska’s congressional delegation — Republican Sens. Lisa Murkowski and Dan Sullivan and Rep. Don Young — all said this week that actual drilling, and the economic boom that could come with it, is a long way away. But they are pushing for focused work from Alaskans in the Trump administration now in hopes getting projects started. “It’s interesting… more often than not I heard people say, ‘I never thought it was going to happen in my lifetime,’” Murkowski said of her recent trips back to the state. “But I remind people that just because we have the congressional permission” doesn’t mean production is imminent, she said.

South Korea, Samsung and Ships. According to a statement by the Korean shipbuilder, the LNG carrier newbuilding has been approved by the board of an unidentified overseas owner. The contract terms are scheduled to be agreed by March 9, Samsung Heavy said. The order includes an option for one more LNG vessel, which is a subject to board approval by the unidentified owner. Samsung Heavy’s 2018 orders so far include 8 containerships, 1 LNG carrier, and 2 tankers totaling 11 vessels worth $1.03 billion. The new LNG carrier contract will extend the order total to 12. Last year, Samsung Heavy won $3.3 billion worth LNG-related newbuild orders including 3 LNG carriers, 2 FSRUs, and one FLNG.

From today’s Washington Examiner Daily on Energy:

U.S. BEGINS SENDING NATURAL GAS TO INDIA: Cheniere Energy Inc. on Monday will send its first shipment of U.S.-produced liquefied natural gas to India through its Sabine Pass terminal in Louisiana. Houston-based Cheniere has a 20-year deal with GAIL India Ltd., to supply 3.5 million metric tons of LNG annually.

  • Important partnership: “Today’s shipment is significant because it means security for the world’s third-largest energy consumer,” said U.S. Energy Association Executive Director Barry Worthington.

The Trump administration has emphasized the U.S. and India increasing collaboration on natural gas from America. Even though the U.S. is the largest natural gas producer in the world, it is a newcomer to exporting it and is seeking to find new markets. India, meanwhile, has a growing economy in search of new, reliable sources of energy.


First Reads:

Alaska delegation says drilling in ANWR is at least a decade away
Anchorage Daily News, Erica Martinson, March 4, 2018

South Korea’s Samsung Heavy to build one LNG carrier
LNG World News, March 5, 2018

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Headlamp – Alyeska doing the right thing right; Shell hid a whale?

March 2, 2018 | Posted in : News

How Shell hid a whale…The gasps in the audience were clearly audible at the auction of Mexico’s oil blocks a month ago as Royal Dutch Shell’s hefty bids were announced one by one. The size of Shell’s cash payments – $343 million out of the total of $525 million that Mexico earned in the sale – far outstripped its competitors’ offers, guaranteeing that the company swept up nine of the 19 offshore blocks. The Anglo-Dutch major knew something no one else did. Six months earlier, its drilling rig had struck a giant oil reservoir, the Whale well, in the U.S. side of the Gulf of Mexico – just across the border from many of the Mexican blocks, which share a similar Paleogene-age geology. Calculating that this significantly increased the chances of the Mexican blocks also containing treasure, Shell delayed the announcement of the discovery until the day of the auction, after bids had been submitted. “Post the Whale discovery we had some geological insights. It is not by accident we didn’t announce it until the day of the bid,” Andy Brown, Shell’s head of oil and gas production, told Reuters. “The nine blocks give us significant potential.”

Doing the right thing right. Tanker operations in Prince William Sound are safer today than ever before. Fewer tankers travel through the Sound; those that do are double-hulled and equipped with rapidly improving technology, communication and safety features. Alyeska’s escort and response capabilities have proved out over the past 20 years. Our people live our commitment to the environment on the water every day. And we will drive operational excellence on the sound higher this summer with transition of Alyeska’s marine services provider to Edison Chouest Offshore (ECO). Alyeska’s investment in a new, more capable fleet will enable their experienced Coast Guard licensed crews to better protect the resources of the Sound for all of us. This change is far more than a new business arrangement for Alyeska. The marine service contract is one of Alyeska’s, and Alaska’s, most important. ECO will share our stewardship and responsibility obligations working with Alyeska’s people and stakeholders to prevent, and, if needed, respond to, marine spills.

From Today’s Washington Examiner, Daily on Energy:

TRUMP TARIFFS ALARM ENERGY INDUSTRY: President Trump’s announcement Thursday that he would impose tariffs on steel and aluminum imports is not receiving a warm reception from the oil and natural gas industry, which raised concerns that his proposal would raise costs and stifle economic growth.

“The actions taken today are inconsistent with the administration’s goal of continuing the energy renaissance and building world-class infrastructure,” Jack Gerard, president and CEO of the American Petroleum Institute, said after Trump said he would impose 25 percent tariffs on steel imports and 10 percent on aluminum.

Stifling energy exports: “We are concerned that the administration’s plan to impose tariffs on steel could have the unintended effect of endangering much-needed U.S. LNG export projects,” said Charlie Riedl, executive director of the Center for Liquefied Natural Gas. Energy exports are key part of Trump energy dominance agenda.

“The administration had taken meaningful steps to improve the current permit review process for natural gas infrastructure and it would be unfortunate if their steel tariffs created new and different barriers to projects,” Riedl said.

First Reads:

How Shell hid a Whale before placing Mexican oil bet
Reuters, Ron Bousso & Marianna Parraga, March 2, 2018

Spill prevention and response capabilities are improving for Prince William Sound
Anchorage Daily News, Tom Barrett, March 1, 2018

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Headlamp – Federal tax reform and changes in fuel costs make Ambler mining district more attractive.

March 1, 2018 | Posted in : News

Federal tax reform and changes in fuel costs make Ambler mining district more attractive. The company that has led exploration in the Ambler mining district is now shifting to develop its primary prospect after many years of work. Trilogy Metals released a pre-feasibility study for its project at the Arctic prospect in Northwest Alaska with a higher initial capital estimates cost but a lower overall cost Feb. 20. Formerly NovaCopper Inc., Vancouver-based Trilogy Metals changed its name in 2016 to reflect the multi-metal deposits the company holds. Located in the middle of the large Ambler mining district that stretches along the southern face of the Brooks Range in Northwest Alaska, Trilogy leaders project the high-grade Arctic deposit to be the first of several mines in the area. The Arctic prospect holds an estimated 2.4 billion pounds of indicated copper resources at a 3.07 percent grade; 3.3 billion pounds of indicated zinc at 4.23 percent; and precious metal resources estimated at 55 million ounces of indicated silver and 730,000 ounces of gold, according to the Feb. 20 report. Estimated costs to develop Arctic have grown 9 percent since a 2013 preliminary economic assessment and are now pegged at $780 million. However, a 60 percent drop in expected annual operating and 20 percent decrease in closure and reclamation costs — to about $65 million each — cut the all-in cost for the mine by 5.5 percent from $964 million in 2013 to $911 million today. Trilogy executives said during a call with investors that the drastic drop in operating costs is due to changes in the plan for waste rock and tailings management, fuel and federal tax reform. The original high-level Arctic design called for potentially acid-generating waste rock to be comingled with mine tailings, which resulted in the need for a larger tailings facility and dam, according to Trilogy CEO Rick Van Nieuwenhuyse.

Swimming upstream against the constitution? A ballot initiative aimed at protecting salmon habitat has cleared a significant hurdle on its track to making a November state election ballot, according to a Tuesday report from the Division of Elections. The controversial “Stand for Salmon” initiative, as it’s known, would create a more stringent permitting process for development projects on salmon habitat in Alaska. Opponents, many of them in resource extraction industries, say it’s bad for business. Supporters say they’re streamlining a 60-year-old law in an attempt to protect Alaska salmon. Both sides of the issue are now one step closer to clashing on a Nov. 6 general election ballot: the initiative has satisfied its major signature requirements in an ongoing review from the Division of Elections. DoE is currently reviewing each of Stand for Salmon’s 43,706 signatures. To pass the review, Stand for Salmon needs only 32,127 signatures or 10 percent of those who voted in the previous general election. As of Tuesday, 38,694 signatures were verified. Headlamp awaits a decision from the Alaska Supreme Court on the constitutionality of the initiative.

Up, up and away! U.S. oil production surged to an all-time high in November, topping the previous record set nearly half a century ago, government data showed on Wednesday. The nation’s drillers pumped 10.057 million barrels a day in November, the U.S. Energy Information Administration said in a monthly report. That edges out the previous record of 10.044 million barrels a day set in November 1970. The record-setting output comes after a revision to last month’s report showing November’s output leaped to 10.038 million barrels a day. While the new all-time high production shows American drillers pulled ahead of Saudi Arabia to briefly become the world’s second biggest producer, the United States may have slipped back into third place in December. The first monthly reading for December shows U.S. output slid back to 9.949 million barrels.

From today’s Washington Examiner, Daily on Energy:

EXXON CANCELING RUSSIAN ENERGY PROJECTS BECAUSE OF SANCTIONS: Exxon Mobil said in a regulatory filing Wednesday that it is canceling projects with Russian state oil giant Rosneft because of risk from U.S. and European Union sanctions on Moscow.

Exxon said it decided late last year to abandon the ventures, but will formally start the process to withdraw this year. Exxon said it would suffer an after-tax loss of $200 million over the failed effort.

  • Opposing sanctions: The company, when it was led by now-Secretary of State Rex Tillerson, had opposed the U.S. sanctions imposed in 2014 for Russia’s invasion of the Crimean peninsula. The company argued U.S. companies would be blocked from operating in Russia, the world’s largest oil producer.
  • Lost hope: Exxon had hoped to drill in Russia’s Arctic ocean oil fields, considered one of the world’s largest untapped energy resources.

First Reads:

Stand for Salmon jumps signature hurdle
Juneau Empire, Kevin Gullufsen, February 28,2018

Cost estimate drops for Ambler mining prospect
Alaska Journal of Commerce, Elwood Brehmer, February 28,2018

US crude oil output hit an all-time high in November, taking out the 1970 record, new data show
CNBC, Tom DiChristopher, February 28,2018

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Headlamp – Coal, Kenya, China; Update from Governor’s out-of-state climate change Czar

February 28, 2018 | Posted in : News

“People were stunned that it actually happened.” When President Donald Trump took office in January 2017, Alaska Republican Lisa Murkowski had been a member of the United States Senate for 15 years. She’d pulled off a historic write-in campaign, built a reputation as someone who thinks deeply about policy, and helped pass a sweeping bipartisan public-lands deal. But a year after gaining control over two of the Senate’s most influential energy and natural resource committees, Murkowski had made little headway in her plans to develop Alaska’s protected lands and waters. Three changes in particular had eluded her. The federal “roadless rule” that spares old-growth forest in Southeast Alaska’s Tongass National Forest survived litigation, and Murkowski’s efforts to bypass it legislatively had fizzled. The Aleutian village of King Cove was still cut off from the rest of the world by the Izembek National Wildlife Refuge. And one of President Obama’s executive orders kept the coastal plain of the Arctic National Wildlife Refuge closed to drilling. Murkowski, a lifelong Alaskan who believes that her constituents’ well-being is inextricable from access to the state’s natural resources, was furious. “There is no other way to describe it,” she said of the executive order, than “as a war. We are left with no choice but to hit back as hard as we can.”

Godzilla vs King Kong – Big Corn vs. Big Oil? U.S. President Donald Trump has asked for more talks between representatives of the oil and corn industries after a meeting on Tuesday failed to yield an agreement on how to help refiners cope with the country’s biofuels policy. Trump has called the talks between Big Corn and Big Oil amid rising concern in the White House over the U.S. Renewable Fuel Standard (RFS), a law requiring refiners to mix biofuels such as corn-based ethanol into their fuel. The decade-old policy was intended to help farmers and reduce U.S. petroleum imports but has increasingly divided farmers and energy companies – two of Trump’s most important constituencies. A refining company in the key electoral state of Pennsylvania last month blamed the RFS for its bankruptcy. The meeting on Tuesday included Republican Senators Ted Cruz of Texas and Pat Toomey of Pennsylvania – both from major oil refining states – along with Charles Grassley and Joni Ernst of major corn grower state Iowa. “No deal made,” said Grassley in a Twitter post after the meeting, adding the proposals discussed were “not ‘win win’” and would “destroy ethanol demand.”

Coal in Kenya compliments of China. Across a narrow channel from this historic port town, where baobabs tower over the forest and tiny crabs skitter in and out of the mangroves, Kenya could soon get its first coal-fired power plant, courtesy of China. The plan’s champions, including senior Kenyan officials, say the plant will help meet the country’s fast-growing demand for electricity and draw investment. Its critics worry that it will damage the area’s fragile marine ecosystem, threaten the livelihoods of fishing communities and pollute the air. The battle over the project, which is frozen pending the outcome of a court case, reverberates far beyond Lamu, a 700-year-old Indian Ocean port town of coral-lime houses and carved wooden doors that has been designated a Unesco world heritage site.


An update from the Governor’s out-of-state climate change czar:

2018 is off to a productive start. Throughout the year, we will strive to provide updates via e-mail on the work of the leadership team and highlight any upcoming opportunities for public input.

Governor’s Climate Change Webpage

The new climate change webpage, part of the Governor’s website, is accessible at climatechange.gov.alaska.gov

Climate Leadership Team

The Climate Action for Alaska Leadership Team held its inaugural meeting on December 18, 2017, in Anchorage. Team members identified near-term and long-term (2030 and 2050) goals and visions for Alaska’s climate policy, and developed an initial work plan for 2018. As stated in the Administrative Order, the leadership team has a September 2018 deadline to present its recommended climate action plan to the Governor.

CALT members will participate in one or both working groups on mitigation and adaptation. The Mitigation Working Group will focus on growing renewable energy, energy efficiency, and community and commercial emissions reductions. The Adaptation Working Group will focus on strengthening social, environmental, and economic resilience in the context of climate change. As they develop policy recommendations, both groups will meet regularly, engage with stakeholder groups and pursue partnerships, identity gaps and potential research.

Agency Highlights

On January 8, the DHSS Section of Epidemiology released the “Assessment of the Potential Health Impacts of Climate Change in Alaska”. The report can be found at http://www.epi.alaska.gov/bulletins/docs/rr2018_01.pdf.

On January 30, DEC release an updated Alaska Greenhouse Gas Emissions Inventory Report, which describes and quantifies human-caused sources of greenhouse gas (GHG) emissions occurring between 1990 and 2015 from Alaska operations and facilities. The report can be found at http://dec.alaska.gov/air/anpms/projects-reports/greenhouse-gas-inventory.


First Reads:

At last, Alaska makes headway on its development dreams
High Country News, Krista Langlois, February 28, 2018

White House pushes for more talks after ‘no deal’ on biofuels
Reuters, Jarrett Renshaw, February 27, 2018

Why Build Kenya’s first coal plant? Hint: Think China
The New York Times, Somini Sengupta, February 27, 2018

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Headlamp – Congratulations to TOTE; Reducing royalty rate to encourage development.

February 27, 2018 | Posted in : News

Congratulations to TOTE! TOTE Maritime Alaska’s North Star arrived in Anchorage, following her first voyage after being outfitted with two LNG tanks, completing the first of four conversion periods of the Orca class vessels. The two LNG tanks have been positioned immediately behind the ship’s bridge, TOTE said in a statement. In addition to the LNG tanks and accompanying infrastructure, the ship received critical engine updates necessary to utilize LNG as a fuel and underwent a standard regulatory dry-dock. This conversion will drastically reduce air emissions from TOTE Maritime’s Alaska ships, virtually eliminating sulfur oxides (SOx) and particulate matter while drastically reducing nitrogen oxides (NOx) and carbon dioxide, the company said. Over the next four years, three more conversion periods will be required to finalize the transition of TOTE Maritime Alaska’s vessels to LNG. Each of these conversion periods will take place in the winter to minimize the impact to customers and consumers alike. The conversion of both ships is scheduled to be complete in Q1 of 2021.

Reducing royalty rate to encourage energy development. An Interior Department advisory panel is considering whether the federal government should sharply cut the royalty rate that oil and gas firms pay for deepwater drilling while expediting energy development on federal land in Alaska and elsewhere. The recommendations by members of the Royalty Policy Committee, who hail from the energy industry or from states with significant drilling or mining activity, will be taken up Wednesday when the panel formally meets in Houston. The group had lapsed during President Barack Obama’s second term, but Interior Secretary Ryan Zinke revived it in October as a way to promote energy exploration in the United States. Earlier iterations of the committee, which was established during the Clinton administration, focused largely on technical questions, such as how to maximize the federal government’s royalty collection process. By contrast, the current panel’s subcommittees and working groups have drafted more sweeping policy proposals, posted online, that aim to make leasing federal resources more attractive.

April Showers in February. The Alaska Senate’s newest member has been sworn in. Republican Mike Shower of Wasilla was sworn in Monday by Senate President Pete Kelly. Shower, who served in the U.S. Air Force, replaces Republican Mike Dunleavy, who resigned to run for governor. The process for replacing Dunleavy was messy, marked by clashes between Gov. Bill Walker and Republicans. Senate Republicans rejected Walker’s first choice, who was not one of the three candidates sent to Walker for consideration by Senate District E Republicans. Walker’s second nominee, Thomas Braund, was on the list, but withdrew, citing personal reasons, amid a firestorm over social media posts. Walker’s administration said it did not endorse Braund or the other two GOP finalists and asked district Republicans for more names.

Oil tankers reduce costs and wait times for Asia. Big oil tankers sailing from the U.S. are set to bring along some benefits for refiners in Asia while allowing them to sidestep traders serving the world’s top crude-buying region. The new option to load oil into very large crude carriers at the U.S. Gulf Coast terminal operated by the Louisiana Offshore Oil Port, or LOOP, will reduce costs and waiting time for Asian buyers of American supplies, according to shipbroking firm Braemar ACM. It also reduces the need to rely on traders to manage complicated tanker logistics that sometimes involve multiple smaller vessels transferring crude into a bigger boat. The first fully laden supertanker sailed from America earlier this month, leaving for China from LOOP’s deep-water facility – the only one in the U.S. capable of filling some of the industry’s biggest tankers. In the wake of an end to a four decade-ban on exports and as OPEC curbed output to clear a glut, a stream of shipments from the Gulf Coast headed east as major buyers such as India and South Korea looked farther for supplies.

First Reads:

Shower sworn in as Alaska state senator
KTUU, Becky Bohrer, February 26, 2018

Interior Dept. panel weighs lower royalty payments for offshore oil and gas drilling
The Washington Post, Juliet Eilperin, February 26, 2018

Giant Oil Ships From the U.S. to Cut Time, Money and Traders
Bloomberg Markets, Serene Cheong, February 25, 2018

TOTE’s North Star completes first trip after LNG conversion
LNG World News, February 27, 2018

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Headlamp – Free money and an LNG supply crunch.

February 26, 2018 | Posted in : News

It’s Almost Free Money… The Alaska Legislature is considering a proposal to borrow up to $1 billion from global markets to cover a debt it owes to oil and gas companies. Gov. Bill Walker’s administration said the borrowing could be a way to reduce that deficit at the expense of some longer-term risk, the Juneau Empire reported. Revenue commissioner Sheldon Fisher and tax division director Ken Alper presented the plan on Wednesday to the Senate Resources Committee. “The large, overarching goal of this is to provide additional stimulus into the economy,” Fisher said. The state promised billions of dollars in tax credits to smaller oil and gas companies between 2003 and 2017. But when petroleum prices plunged, the state could no longer afford the program. The state has been paying only the minimum amount on what it owes for the past several years, as was required by state law. But as of Dec. 31, the state owes $806 million in credits. If estimates hold true, the debt will be closer to $1 billion once expected applications are filed this year. Under the proposal, the state would borrow money to pay the credits. In order to receive that money immediately — instead of years down the line — oil companies would agree to be paid less than what they’re owed, as much as 10 percent under some circumstances. That cut would compensate for the fact that the state would have to pay interest on the money it borrowed. “It’s almost free money, if you will, to be able to accelerate the payment into the current time period,” Fisher said. “So far, I have not met anyone who does not want to participate.” Fisher said many companies have taken out loans against their expected credits and are in desperate need of cash.

LNG supply crunch in the 2020’s? Shell thinks its possible. Tens of billions of dollars of new investment is needed in liquefied natural gas projects to avoid a supply crunch in the 2020s, Royal Dutch Shell has warned. The global market is still absorbing supplies from a wave of LNG megaprojects built in Australia over recent years, as well as the emergence of the US as a net gas exporter for the first time in more than half a century. But Shell, one of the world’s largest suppliers of LNG, said renewed investment was needed to meet surging demand from China and other developing countries. Steve Hill, head of Shell’s gas trading and marketing business, said the LNG market was absorbing “quite comfortably” an unprecedented increase in supplies from new projects such Chevron’s Gorgon and Wheatstone developments in Australia. Shell, Chevron and other big LNG producers such as Total and ExxonMobil have put the brake on further investment because of concern that the Australian projects, together with rising US gas exports, would lead to a supply gulling prices have fallen sharply since 2014 in parallel with oil but both markets have staged a partial recovery over the past year and Mr. Hill indicated that Shell was beginning to refocus on the case for renewed expansion.

First Reads:

Legislature considers borrowing $1 billion to pay oil debt
AP News, February 26, 2018

Shell warns of future LNG supply crunch
Financial Times, February 26, 2018

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Headlamp – LNG Friday: Fairbanks LNG, Kenai LNG, China LNG

February 23, 2018 | Posted in : News

IGU and Siemens looking at coal-bed methane resources. The Interior Gas Utility and Siemens Government Technologies, a U.S. division of the German firm Siemens, are discussing a potential contract for the delivery and purchase of liquefied natural gas. Siemens approached IGU in fall 2017 to signal its interest in supplying Interior Alaska with LNG from an undeveloped site near Houston, between Wasilla and Willow on the Parks Highway. Siemens has given IGU’s board of directors’ multiple presentations about its desire to construct liquefaction plants, harvest natural gas, and transport and sell it to the Fairbanks market. The company hopes to tap into coal-bed methane resources on 3,000 acres of Knikatnu Village Corp. land. Siemens proposes funding all project development, and in turn has requested a development agreement with IGU. Kelly Laurel, director of energy and infrastructure for Siemens Government Technologies, said the proposed development agreement asks IGU for assurances that the project will move forward if gas can be provided at or below a certain price. Laurel said Siemens is willing to shoulder the risk by funding project development to determine if the gas will meet target prices.

When Nikiski talks….Alaska LNG will listen. Nikiski residents now have a direct line to the Kenai Peninsula Borough government and the Alaska Gasline Development Corporation to voice their concerns about the Alaska LNG Project. The Kenai Peninsula Borough Assembly approved the formation of the Alaska Liquid Natural Gasline Project Advisory Board at its meeting Tuesday, intended to give the community of Nikiski a forum to discuss issues related to the Alaska LNG Project. The planning for the project, a state-sponsored megaproject that involves an approximately 800-mile pipeline to bring natural gas from the North Slope to a liquefaction plant in Nikiski with the intent to export it to markets in Asia, has been stirring discussion in Nikiski for the last several years.

What’s good for China is great for Alaska LNG. China surpassed South Korea to become the world’s second-largest importer of liquefied natural gas (LNG) in 2017, according to data from IHS Markit and official Chinese government statistics. Chinese imports of LNG averaged 5 billion cubic feet per day (Bcf/d) in 2017, exceeded only by Japanese imports of 11 Bcf/d. Imports of LNG by China, driven by government policies designed to reduce air pollution, increased by 1.6 Bcf/d (46%) in 2017, with monthly imports reaching 7.8 Bcf/d in December. China’s imports of natural gas have grown to meet increasing domestic natural gas consumption, which has been primarily driven by environmental policies to transition away from coal-fired electricity generation. The Chinese government has also implemented policies to convert several million residential households in China’s northern provinces, which traditionally rely on coal heating in the winter, to use natural gas-fired boilers instead. Natural gas storage capacity in China is relatively limited, estimated at just 3% of total natural gas consumption. China’s seasonal peak demand is met primarily by natural gas imports, either by pipeline from Central Asia or by shipments of LNG. Despite increases in China’s domestic production and in pipeline imports in 2017, natural gas shortages in northern China led to record levels of LNG imports during the 2017 winter. Overall, natural gas imports accounted for 40% of China’s 2017 natural gas supply, and LNG made up more than half of those imports.

“RDC’s Portman sees economic potential for Alaska in Arctic waters.” Alaskans gathered in downtown Anchorage on Wednesday night to weigh in on the Trump administration’s proposal to open almost all Alaska waters to oil and gas development. The Wednesday night meeting was the only opportunity for Alaskans to comment on the draft proposal in person, and many showed up to speak out against it. Adrienne Titus helped organize a protest outside the meeting. “When it comes to oil and gas development in our water and on our land, it’s going to highly affect not just our land and our water, but our people, our cultures, who we are — our identity, our food security,” said Titus, who is with the nonprofit Native Movement. But another group of Alaskans showed up to support more offshore drilling opportunities. Resource Development Council deputy director Carl Portman says his group doesn’t necessarily want to open up all the areas proposed by the Trump administration. But Portman sees a lot of economic potential for Alaska in Arctic waters. “23, 24 billion barrels. That’s huge. But that’s a very long-term prospect,” he said. “But if you have children here in Alaska that want to make Alaska home and raise their children here, then this is something you need to be paying attention to.” The Interior Department expects to make a final decision on the offshore plan by the end 2019


First Reads:

Alaskans comment on Trump draft proposal to open state waters to oil, gas development
KTOO Public Media, Elizabeth Harball, February 22, 2018

Interior Gas Utility in talks for more LNG
Fairbanks Daily News-Miner, Robin Wood, February 22, 2018

Borough establishes advisory board for Nikiski residents on LNG project
Peninsula Clarion, Elizabeth Earl, February 22, 2018

China becomes world’s second largest LNG importer, behind Japan
American Journal of Transportation, Victoria Zaretskaya, February 23, 2018

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Headlamp – Miners like Finland for investment. LNG license lapses.

February 22, 2018 | Posted in : News

Miners like Finland for investment. Today, the Fraser Institute released a new study, The Annual Survey of Mining Companies, 2017.This study finds Finland is the most attractive jurisdiction in the world for mining investment, followed by Saskatchewan. Quebec and Ontario rank in the top 10 globally. The survey rates 91 jurisdictions around the world based on their geologic attractiveness for minerals and metals and the extent to which government policies encourage or deter exploration and investment.

Tussle over data release at DOI. A report on Alaska’s oil potential is at the heart of a controversy at the Department of Interior. The magazine Mother Jones reports that a top scientist at the U.S. Geological Survey resigned late last year to protest what he saw as a threat to the agency’s scientific integrity just before USGS released a major assessment of how much oil and gas it believes is in the National Petroleum Reserve-Alaska. The assessment looked at the oil potential of the Petroleum Reserve, or NPR-A, a massive chunk of land on Alaska’s North Slope, west of Prudhoe Bay. Interior Sec. Ryan Zinke announced it just before Christmas in a press release with the headline: “New Interior Department Survey Shows ​HUGE Increase in Recoverable Energy Resources.” “HUGE” was in all caps. The USGS is a research arm within the Interior Department, and that breathless announcement was definitely not USGS style. Geologist David Houseknecht was the prime author of the report on the NPR-A. “When it comes to doing the quantitative assessments we take every precaution to avoid even the hint of political bias or influence,” Houseknecht said. Mother Jones reports USGS Associate Director Murray Hitzman resigned on principle after the No. 2 boss at Interior, Deputy Secretary David Bernhardt, pressed the USGS to release the oil and gas data to the secretary days before it was released to the public.

LNG License lapses. In the near future Andeavor won’t be exporting natural gas from the liquefaction plant and terminal in Nikiski it acquired on Feb. 1 from ConocoPhillips. The plant’s license from the U.S Department of Energy to export liquefied natural gas expired on Sunday and Andeavor — the San Antonio, Texas-based oil-refining company formerly known as Tesoro — did not acquire the license from ConocoPhillips and has not applied for an export license of its own, U.S Department of Energy spokesperson Gayland Barksdale wrote in an email.

From today’s Washington Examiner, Daily on Energy:

ENERGY DEPARTMENT DOLES OUT $17.6 M FOR CLEAN COAL TECH: Energy Secretary Rick Perry gave out nearly $18 million Thursday to six projects to develop new technology to make coal cleaner and climate friendly. The department has been active in announcing grants and competitive awards for carbon capture technology in recent weeks. The Thursday awards are the latest in that effort to move the technology ahead.


First Reads:

Annual Survey of Mining Companies: 2017
Fraser Institute, Ashley Stedman & Kenneth P. Green, February 22, 2018

USGS scientist resigns in tussle over release of NPR-A data
Alaska Public Media, Liz Ruskin, February 21, 2018

Andeavor lets Nikiski LNG export license lapse
Peninsula Clarion, Ben Boettger, February 21, 2018

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