Headlamp – Just how bright is our future?

April 20, 2018 | Posted in : News

11.8 billion barrels are waiting. The Trump administration is taking its first administrative step toward allowing oil and natural gas drilling in Alaska’s Arctic National Wildlife Refuge (ANWR). The Interior Department’s Bureau of Land Management (BLM) released a notice Thursday that it is starting the “scoping” process for an environmental review to examine the impact of leasing drilling rights to companies in ANWR’s 1.6 million-acre coastal plain. The BLM will take public comments for 60 days and hold four meetings in Alaska to inform the public how it will conduct the environmental review, it said in the notice, which is set to be published Friday in the Federal Register. The notice comes just four months after Congress voted to allow drilling in the federally owned ANWR for the first time. Democrats had for decades successfully blocked efforts to open ANWR to rigs, but the GOP pushed the measure through as part of its Tax Cuts and Jobs Act. That law requires the BLM to hold at least two drilling rights lease sales in the next 10 years. Joseph Balash, Interior’s assistant secretary for land and mineral management, said last month that the first lease sale could be as soon as next year, the Anchorage Daily News reported. A draft environmental review, a final review, lease sales and applications to drill would be needed before any drilling, with the potential for lawsuits high at many of those steps.

New discovery means over 420 still have jobs. Recent exploration around the Pogo Mine near Delta Junction has shown promising evidence of more rich deposits of gold nearby. A Pogo geologist told a group of miners and industry officials early this month that more exploration will be needed before company officials can decide whether to expand the operation and develop the resources. But the officials are excited about the potential. Pogo Exploration Superintendent Gabe Graf’s Powerpoint was a largely technical talk, like most given during the Alaska Miners Association Biennial Conference. But in the course of the presentation, he offered a comment or two about some drilling done last year in the Goodpaster prospect that even a layman could easily understand. “… So we just turned the rig, drilling a shallower hole coming across,” Graf said. “And this hole, we hit 17-and-a-half feet of 1-point-seven-three-nine ounces per ton. Very good, very excited about that.” “It’s exciting for us, because it potentially means we continue to extend our mine life out there, and we continue to keep 320 employees,” Kennedy said. “We continue to keep 100-plus contractors employed. And we continue to be able to contribute to the community like we have been doing for the past 10 or 12 years.”

Higher oil prices have a positive impact on Alaska’s economy. North Slope oil prices this week rose to their highest level in more than three years, helping boost optimism that the battered Alaska economy could slowly be reversing course. “I have no doubt the higher prices are having a positive impact on the economy,” said Neal Fried, an economist with Alaska Department of Labor and Workforce Development. Exactly how much is hard to know at this point, Fried said. But there have been positive signs as North Slope oil prices reached $73 on Wednesday, with geopolitical tensions growing in the Middle East and elsewhere. High-paying employment in the Alaska oil industry is a leading indicator of statewide economic performance. Oil industry job losses have moderated after big cuts in recent years, Fried said. “Last year, companies were laying people off,” Fried said. “This year, in some cases, companies are actually hiring some people.” The higher price has led Petroleum Equipment and Services, providing drilling-related equipment and work to the oil industry, to anticipate additional work and add two employees to a staff of 20, said owner Kevin Durling. He said large oil companies are becoming profitable again after slashing expenses following the drop in oil prices that began in 2014. Work is modestly rising for industry support companies such as his. “Seventy (dollar) anything is good,” Durling said. Daily Alaska North Slope prices, as estimated by the state Department of Revenue, reached $70.22 on April 10 and have remained above $70 since. Improvements to the economy and hiring are expected to be gradual, assuming oil prices stay where they’re at or keep rising, economists said. Contractors still face a tough environment, said Rebecca Logan, general manager of the Alaska Support Industry Alliance. “(The price) is a great place to be and we hope it stays here, but it’s way too early to really make an impact,” Logan said.


First Reads:

Trump administration takes major step toward Alaska refuge drilling
The Hill, Timothy Cama, April 19, 2018

Pogo Mine officials “very excited” about two promising gold prospects under exploration
Alaska Public Media, Tim Ellis, April 19, 2018

North Slope oil has hit $70: What that means to Alaska’s economy, the oil industry and the state treasury
Anchorage Daily News, Alex DeMarban, April 19, 2018

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Headlamp – Attorney General Jahna Lindemuth to Sen. Bill Wielechowski: No constitutional concerns with bill to pay debts that are owed.

April 19, 2018 | Posted in : News

Attorney General Jahna Lindemuth: No constitutional concerns with bill to pay debts that are owed. Alaska’s attorney general is at odds with a legislative attorney over the constitutionality of Gov. Bill Walker’s proposal to issue bonds to pay off remaining oil and gas tax credit obligations. Attorney General Jahna Lindemuth says her office carefully reviewed legal issues surrounding the proposal and concluded the plan is lawful. She says there are no constitutional concerns with it. Lindemuth’s statement came after Senate Democrats released a memo from a legislative attorney, who weighed in on the issue at the request of Democratic Sen. Bill Wielechowski (will-uh-COW-ski). The attorney, Emily Nauman, said there was a “substantial risk” that a court might find the proposal unconstitutional. She said the bill appears to establish a corporation solely to issue debt that, due to constitutional limitations, can’t be issued by the state.

Alaska’s new best friend. Governor Bill Walker announced Alaskan organizations that will travel this May for Opportunity Alaska: China Trade Mission. They include fisheries, tourism, and investment businesses, as well as a baby food maker, an architecture firm, and a university. The group represents varying sectors in Alaska’s economy and hopes to continue to make inroads with Alaska’s largest trade partner.

Know when to hold ‘em, know when to fold ‘em. A Houston-based LNG company is hoping to chart a course that hasn’t really been tried before: owning upstream natural gas assets, building the pipelines to get the gas to port, and owning the export terminal to ship the gas overseas. That part is not exactly new, but the kicker is that the company is hoping outside investors will pay a hefty portion of the bill, and in return they get an equity stake in the projects. Tellurian Inc. is a closely watched LNG company that is gambling on a high stakes bet that could change the dynamics of gas exports. The company is trying to get investors to pay around $12 billion of the upfront cost to build the Driftwood LNG export terminal in Louisiana. Footing that bill will grant them equity stakes as well as the ability to purchase the upstream gas without a markup. The plan has the advantage of not needing to take on debt, offloading some of the risk onto other companies. But the trick will be inking those deals. So far, Tellurian has not been able to secure major equity partners, although Total SA has pumped $207 million into the company, with smaller investments from others. “This cleverly removes the banks from the whole formula, and then it becomes the buyer’s problem,” Jason Feer, head of business intelligence at Poten & Partners Inc., told Bloomberg.

We’re talking Benjamins. Only a week ago week ago, news surfaced that Saudi officials were quietly hoping to push oil prices up to $80 per barrel, which would help boost the valuation of Saudi Aramco IPO. But why not $100 per barrel? Reuters reports that Riyadh would be fine with prices rising that far, which lends weight to the notion that OPEC will keep the production cuts in place even as its mission to drain surplus oil inventories around the world appears to be largely “accomplished.” OPEC and its non-OPEC partners are even considering yet another extension that would push the cuts into the middle of 2019. But with inventories back to average levels and expected to fall for the foreseeable future, the production limits would surely push the market into a deficit. The over-tightening, presumably, would lead to higher oil prices…just in time for the Aramco IPO. OPEC just posted its fifth consecutive month in which it recorded a new record high compliance rate with the production limits. In March, according to Bloomberg, the compliance rate surged to 164 percent, a new high, up from 148 percent in February. Unsurprisingly, output fell in Venezuela, but Saudi Arabia also chipped in further reductions.

From today’s Washington Examiner, Daily on Energy:

MURKOWSKI COMMITTED TO BIPARTISAN ENERGY BILL: Senate Energy and Natural Resources Chairwoman Lisa Murkowski said Thursday morning that she is committed to pushing a bipartisan comprehensive energy bill. The Alaska Republican made the statement at a hearing to address rural energy challenges, which will be addressed in the comprehensive bill.

“Sen. [Maria] Cantwell and I are committed, still, to advancing this,” Murkowski said, referring to the top Democrat on the committee. “We’ve worked hard on this as a committee, and those provisions will benefit our remote communities.”

The bill stalled in the last Congress in conference committee, as House members thought they could get a better bill under Trump.


First Reads:

Lindemuth: No constitutional issues with Alaska bonding plan
AP News, April 18, 2018

Alaska businesses selected for Opportunity Alaska: China Trade Mission
Office of the Governor, April 18, 2018

A Natural Gas Giant Like No Other
Oil Price.com, Nick Cunningham, April 17, 2018

$100 Oil Is Back On The Table
Oil Price.com, Nick Cunningham, April 18, 2018

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Headlamp – FYI Legislators, the stability of fiscal terms important to companies looking to invest in Alaska.

April 18, 2018 | Posted in : News, Uncategorized

“Clearly one of the most important things when a company looks at an area is stability of fiscal terms…” A Papua New Guinea oil company that’s new to Alaska is hiring workers to appraise and develop a large North Slope discovery — bucking a trend that’s seen the state’s industry workforce slashed and companies leaving. Oil Search last year acquired a $400 million stake in the Nanushuk field, a discovery announced by Armstrong Oil and Gas and Repsol in 2015. Geologists estimate the discovery is one of the largest in Alaska. Oil Search plans to find out just how big it is. The company operates oil and gas fields in Papua New Guinea. Its partners include ExxonMobil and Total. In late March, Oil Search officially took over as the Nanushuk operator. The company’s work could provide a big economic boost to the state, said Keiran Wulff, head of Oil Search in Alaska. The Anchorage Daily News spoke with Wulff last week at the downtown Anchorage building, Peterson Tower, where the company is retrofitting an entire floor to house a large staff. “We like the fact that in Alaska there was a lot of opportunity, despite the oil majors being up here a long time. There’s been some significant oil fields discovered, but also, relative to other parts of the world, the drilling density in Alaska is not significant.” “Once we commit to the development fully, hopefully in the second half of next year, that would provide significant impetus for employment opportunities for people in the state. Clearly one of the most important things when a company looks at an area is stability of fiscal terms because you spend a lot of money on projects and a lot of time and there are a lot of opportunities around the world.”

Unpredicted drop in crude inventories. Crude rose to its highest level since 2014 in New York as the drop in U.S. inventories reported by an industry group helped to sustain a rally spurred by geopolitical risks. Futures in New York rose as much as 2 percent, extending their gain beyond last week’s three-year high. U.S. crude and gasoline inventories fell last week, the American Petroleum Institute was said to report on Tuesday, in contrast to forecasts for a build in U.S. government data later. OPEC and Russia will probably look at ways to prolong their cooperation on cuts when they meet in Saudi Arabia this week. Oil had fallen earlier this week from the highest in more than three years as geopolitical risks surrounding Syria eased, with Russian President Vladimir Putin now seeking to reduce tensions with the U.S., according to people familiar. The U.S. has started talking to North Korea directly, President Donald Trump said on Tuesday, helping to buoy some equity markets. “The product draws were a bit surprising,” Tamas Varga, analyst at PVM Oil Associates, said, referring to the drop in gasoline and distillate inventories reported by the API. “As long as the geopolitical premium is here with us we should not sell off.”

The charity state of Alaska. The Alaska Legislature is already cutting into the amount of the yearly oil-wealth fund check given to residents to help pay for state government. Now, lawmakers are looking at other ways for residents to spend more of their check — to help pay for state government. One proposal would set up a raffle to benefit schools, with a minimum buy-in of $100 from a resident’s Alaska Permanent Fund dividend. Twenty-five percent of entry dollars would go toward the prize fund. Another bill, which passed the Senate, would let residents donate all or part of their Alaska Permanent Fund dividend to the state treasury to help pay Alaska’s bills. All this comes as lawmakers, deadlocked on taxes, look for alternatives to bolster state coffers in response to a persistent state budget deficit. It also comes amid a roiling political debate over the future of the dividend. Alaska has no state sales or personal income tax. The size of the yearly check paid to residents has been capped at $1,022 and $1,100 the past two years, and lawmakers propose limiting it again this year as they prepare to use earnings from the oil-wealth fund for the first time to help fill the deficit.

From today’s Washington Examiner, Daily on Energy:

ZINKE WON’T REDUCE AMOUNT COMPANIES PAY TO DRILL OFFSHORE: Interior Secretary Ryan Zinke on Tuesday declined to cut the amount that oil and gas companies pay for offshore drilling deep in federal waters. Zinke rejected the advice of the Interior Department’s Royalty Policy Committee, an advisory board that unanimously recommended that he lower the royalty rate companies pay on offshore drilling from 18.75 percent to 12.5 percent in federal waters deeper than 200 meters.

Low down: The proposed amount was the lowest rate the government can charge for offshore leases. Zinke said lowering the rate is not necessary to attract industry interest in drilling deep offshore.


First Reads:

Papua New Guinea oil company moves to develop big Alaska prospect
Anchorage Daily News, Alex DeMarban, April 17, 2018

Crude rises to highest since 2014
Chron, Alex Longley, April 18, 2018

Alaska looks at ways for residents to give to government
Daily News-Miner, Becky Bohrer, April 17, 2018

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Headlamp – AGDC says no to Port MacKenzie and you’re still the one to Nikiski.

April 17, 2018 | Posted in : News

Tweet of the day: Wood Mackenzie (@WoodMackenzie) “China said in early 2017 it was targeting annual production of 30 billion cubic metres (bcm) of shale gas by 2020, but we forecast that production will reach 17 bcm by that time”

Nikiski is still the one. The President of the Alaska Gasline Development Corporation has confirmed that Nikiski is still the preferred site for the AK LNG liquefaction facility. On Thursday, April 12, AGDC President Keith Meyer stated in a press conference that Nikiski is still the preferred site for the natural gas liquefaction plant and terminus. The Mat-Su Borough filed a complaint on January 9, with the Federal Regulatory Energy Commision (FERC) stating that the project and regulators “improperly and intentionally excluded” the borough’s Port MacKenzie as a “reasonable alternative” for the proposed liquefied natural gas plant. According to the AGDC they plan to build a natural gas offtake facility at milepost 731 (measured from Prudhoe Bay) for gas withdrawals in the Mat-Su valley. Nikiski was identified as the preferred site location over four years ago, after more than two dozen possible locations were analyzed. Back in March, a schedule was released by the FERC to the AGDC. According to the plan, a draft Environmental Impact Statement will be completed by March 2019, with the final Environmental Impact Statement set for December of that year. Construction will begin after FERC finalizes its regulatory decision in March 2020.

Geopolitical uncertainty stimulates oil prices. Oil prices were little changed on Tuesday as investors took profit following last week’s rally above three-year highs, with prices supported by growing concern over the potential for supply disruptions. Brent crude oil futures LCOc1 were down 9 cents at $71.33 a barrel by 11:50 a.m. EDT (1550 GMT), having come off an earlier high of $71.89, while U.S. crude futures CLc1 slipped 8 cents to $66.14. “We’re starting to see a little of the premium come off from geopolitics, and the focus is shifting to inventories,” said Bill Baruch, president of Blue Line Futures in Chicago. Brent has risen 1.4 percent so far this month. It hit a peak last week of $73.09, the highest since late 2014, amid mounting tensions in the Middle East, the possibility of renewed U.S. sanctions against Iran and falling output in Venezuela, where economic crisis has dragged down oil output to multi-year lows. “The rally upwards was purely on geopolitical risk and if now we haven’t had any further stimulus, we’re seeing prices slip off a bit,” Natixis commodities strategist Joel Hancock said. Analysts expected uncertainty over U.S. policy towards Iran to continue to support prices through May 12, the deadline that U.S. President Donald Trump gave to Congress and European allies to “fix” the Iran nuclear deal.

Winter is coming…and we’re excited. ConocoPhillips say its 2018 winter exploration and appraisal program on Alaska’s western North Slope produced promising results. The Houston-based company Monday announced it had concluded 2018 winter program and that three appraisal wells supported a previously announced estimate of at least 300 million barrels of oil at its Willow Discovery leasing area within the National Petroleum Reserve-Alaska. Company executive vice president Matt Fox calls the results “promising.” The company says it originally planned to drill five wells, including two appraisal wells at Willow. Drilling efficiencies allowed the drilling of a third appraisal well plus three exploration wells. The company says all six wells reached oil and verified potential. The exploration wells represent new discoveries and the company will assess results in anticipation of additional appraisal next winter.

From today’s Washington Examiner, Daily on Energy:

TRUMP, ABE, MACRON ON CLIMATE COLLISION COURSE? President Trump will meet with Japan’s Prime Minister Shinzo Abe at Mar-a-Lago Tuesday and a week later with French President Emmanuel Macron at the White House. Both leaders are facing interesting energy climates.

Japan’s fossil fuel imports: Abe’s country is one of the largest importers of coal and natural gas, two areas of intense interest in meeting Trump’s energy dominance agenda, which includes more exports of both fossil fuels.

At the same time, Abe is a signatory to the Paris climate change deal, which Trump is leaving, although it will take until the next presidential election to do so. It will take a heavy lift for Japan to reduce its reliance on fossil fuels to meet its climate goals, especially in the wake of 2011 Fukushima nuclear disaster that caused its expensive shift in power production away from carbon-free nuclear energy.

France talks a good game: Macron, of course, has chided Trump for his climate stance, but for the most part wants to appear as though not having the U.S. on board the Paris Agreement will not deter the rest of the world from cutting greenhouse gas emissions.

However … : France imported more electricity last year than in the past five years, while lagging other European countries in its adoption of renewables, according to Reuters.

Bottom line: Both Japan and France find themselves in a place where aggressive climate actions may lag real-world challenges to keep the lights on.


First Reads:

Oil prices little changed as profit locked in; supply worry supports
Reuters, Ayenat Mersie, April 16, 2018

AGDC Confirms Nikiski Over Port MacKenzie For LNG Site
KSRM Radio Group, Jennifer Williams, April 16, 2018

Winter drilling in Alaska ‘promising’ for ConocoPhillips
AP News, April 16, 2018

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Headlamp – Six new wells on the North Slope. Funding still needed for AK LNG project.  

April 16, 2018 | Posted in : News

North, the rush is on. ConocoPhillips says it was able to drill six new wells, including an additional Willow appraisal well, at Alaska’s Western North Slope, with all six encountering oil and verifying the potential of the play. COP says its original plan was to drill five wells comprising two appraisal wells of the Willow discovery announced in January 2017 plus three exploration wells, but improved drilling efficiencies allowed it to drill six wells. COP says the three Willow appraisal wells support its previously announced estimate of a recoverable resource potential of at least 300M barrels of oil, and the three exploration wells represent new discoveries for the company.

Funding unresolved as agreement expiration date nears. State officials leading the $43 billion Alaska LNG Project touted a productive visit from potential Chinese partners in the project while funding for the effort remains unresolved in the Legislature. Alaska Gasline Development Corp. President Keith Meyer told reporters during a Thursday press briefing that a six-day trip to Alaska from March 25-30 by leaders of the state-owned Chinese companies Sinopec, Bank of China and China Investment Corp. was the foreign contingent’s opportunity to see for themselves that the Arctic-sourced LNG export plan is as achievable and real as Gov. Bill Walker’s administration has insisted. Meyer said he expected the three companies to send “a couple handfuls of people” across the Pacific; 38 arrived. “We had a pretty large group,” he said. “It really shows their level of interest, activity, commitment to the project so we were really happy to see that.” Among other activities, the group toured the proposed pipeline route from the North Slope to Nikiski. The development agreement, signed last November, calls for AGDC to have the framework of final deals with the three in place by the end of May, with firm commitments signed before the agreement expires at the end of the year.

Deadlines are made to be…ignored? Early last week legislative leaders had realistic hopes of adjourning on the 90th day, on Sunday, April 15, but as of Saturday it appeared there was still too much work to do. A few more days is all, House and Senate leaders promise. Fundamentally, there appears to be agreement on major issues and that a long, drawn-out session that happened last year will be avoided. The differences between the House and Senate budgets will likely be worked out quickly. The operating budget is marginally up from the current year, with higher costs this year due mainly to rising health costs. Finding money for a state capital budget is a continuing problem, however. This year’s proposed capital budget is bare bones, paying the required state match to federal transportation funds and for a few urgent state needs. The state fiscal gap is the most serious problem confronting the Legislature and there is now consensus that some of the Permanent Fund’s ample earnings can be used this year to fund next year’s budget. The state has been running back-to-back multi-billion dollar deficits. Significantly, there’s now agreement that the draw on the Fund’s earnings must be done in a structured way, and the plan now agreed between the House and Senate is that a percent-of-market-value draw, or POMV, of 5.25 percent can be made from the Permanent Fund’s earnings reserve account.

From today’s Washington Examiner, Daily on Energy:

CANADA’S TRUDEAU PROMISES TO ENSURE CONSTRUCTION OF DISPUTED PIPELINE: Canadian Prime Minister Justin Trudeau has instructed his finance minister to begin talks with Kinder Morgan to “remove the uncertainty” of the controversial Trans Mountain pipeline expansion, according to the Associated Press. Trudeau, who is a global leader in fighting climate change, is preparing legislation that says the federal government can approve the project over the protests of leaders in British Columbia.

Uncertain future: Texas-based company Kinder Morgan threatened this month to halt its proposed $7.4 billion expansion of the Trans Mountain pipeline because of opposition from the provincial government of British Columbia, which fears potential spills along a coastline that attracts tourists. The company said British Columbia must drop its opposition to the project by the end of May or it will pull out from the project. The Trans Mountain expansion would nearly triple the amount of crude flowing from Alberta’s oil sands to a port near Vancouver.


First Reads:

ConocoPhillips announces promising results in Alaska exploration
Seeking Alpha, Carl Surran, April 16, 2018

AGDC chief recaps visit from Chinese delegation as funding unresolved
Alaska Journal of Commerce, Elwood Brehmer, April 15, 2018

Hopes for a 90-day session go by the wayside
Frontiersman, Tim Bradner, April 14, 2018

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Headlamp – Zip, nada, none. Seaton gets no support from Alaskans for his money grab.

April 13, 2018 | Posted in : News

Dear Rep. Seaton,

Please listen to the consultant you hired to advise you. Rich Ruggiero of In3nergy, a consultant to the Legislature, said in an April 11 hearing on the bill that lawmakers should focus on what is necessary to bring on new North Slope developments. He recommended lowering the base tax, 10 percent is the number cited in his slide presentation, and making the highs higher. He told legislators that because costs rise with sustained price increases, windfall taxes will only occur with short duration price spikes. With sustained price increases, costs rise, lowering the production tax value, which includes costs the companies incur in producing the oil.

And to Alaskan’s who testified: “Please do your part to grow the economic pie and keep Alaskans living and working right here in our State. Help businesses to be successful so that we can reciprocate and do our own part to grow Alaska”.

Headlamp would like to point out, many Alaskans spent their time testifying last night…not one of them was in support of HB 411.

Let’s turn this EPA ship around. The Senate voted Thursday to confirm Andrew Wheeler, a former energy lobbyist, to be deputy administrator at the Environmental Protection Agency (EPA). Senators voted 53-45 to make Wheeler the No. 2 official at EPA, just below Administrator Scott Pruitt. All of the Republicans present voted for Wheeler, along with Democratic Sens. Joe Donnelly (Ind.), Heidi Heitkamp (N.D.) and Joe Manchin (W.Va.). Each of the Democrats is running for reelection this year in heavily Republican states. The vote came amid a wave of controversies involving Pruitt, who is facing calls for his resignation or firing. Democrats argued that Wheeler could become Pruitt’s successor if the administrator is dismissed, and that he has not been properly vetted for that scenario. “We should know whether Andrew Wheeler is up to the task of helping to right this badly damaged EPA ship, to restore the confidence and have it headed back on the right course,” Sen. Tom Carper (Del.), the top Democrat on the Environment and Public Works Committee, said on the Senate floor before the Wheeler vote.

An attack on oil is an attack on the US economy. Oil companies fell behind in hardening their computer control systems against cyberattacks after the collapse of crude prices more than three years ago, putting security initiatives on hold while state-sponsored hacking groups became more proficient at probing U.S. energy networks, according to cybersecurity experts. Oil and gas cybersecurity teams faced funding shortfalls for projects to protect networks that run pipelines, drilling rigs and other oil field operations, as energy companies slashed thousands of jobs and cut production, security professionals said in recent interviews and conferences. Meanwhile, the worst of the downturn in early 2016 and some of the deepest cuts to jobs and spending coincided with an intensifying campaign of online attacks on energy networks by hackers backed by the Russian government, according to a recent report by the FBI and Department of Homeland Security. The hackers almost certainly penetrated the networks, according to government and private cybersecurity specialists, likely with the aim of testing detection capabilities and responses and preparing for a day when they could launch an attack aimed at shutting down operations or damaging facilities. Attacks that interrupted the flow of power or crude oil or gasoline could disrupt, if not derail the U.S. economy.

Pebble: “complete public access and transparency.” Another environmental assessment of the proposed Pebble Mine is underway. This time, the lead agency is the Army Corps of Engineers, and in a call with reporters yesterday, the agency addressed criticism it’s already receiving as it weighs whether to give the controversial mine a permit. Sheila Newman, regulatory division deputy chief with the Army Corps’ Alaska District, said the agency recognizes that Pebble is not an average project proposal — it has a long history in Alaska, so the agency is trying to make adjustments for that. For example, it gave the public a longer-than-usual period to read the permit application before the first comment period. “We went for complete public access and transparency as soon as we possibly could for this project by making the application publicly available, I think it was 15 days after we received it. So that was a first,” Newman said. The Army Corps recently extended the first period for the public to weigh in on the proposed mine — called the scoping period — by two months, after Native Corporations and top officials like Lisa Murkowski said 30 days wasn’t long enough.

From today’s Washington Examiner, Daily on Energy:

OPEC NEARS ‘MISSION ACCOMPLISHED’ ON OIL PRODUCTION CUTS: OPEC is nearing “mission accomplished” on its efforts to prop up oil prices by cutting supply, the International Energy Agency said Friday. “It is not for us to declare on behalf of the Vienna agreement countries that it is ‘mission accomplished’, but if our outlook is accurate, it certainly looks very much like it,” the IEA said in its monthly oil markets report.

Beating expectations: Less than 10 percent of the global surplus in oil supply remains, the IEA said, as OPEC and its non-member partners, such as Russia, have reduced production more than expected as oil demand has increased.

OPEC, beginning in January 2017, reached an agreement to reduce output by about 1.2 million barrels a day. But the group’s 14 members actually produced 60 percent less oil than that target amount in March.

Is it sustainable?: Crude oil prices have recovered to $70 per barrel from below $30 in 2016, but energy experts have speculated the historic surge in U.S. output could limit the price surge.


First Reads:

New tax bill introduced
Petroleum News, Kristen Nelson, April 13, 2018

Senate approves Trump’s pick for No. 2 at EPA
The Hill, Timothy Cama, April 12, 2018

Oil and gas cybersecurity projects went “to the bottom of the pile” in energy slump
Chron, Collin Eaton, April 12, 2018

Army Corps addresses criticism of environmental review process for Pebble
Alaska Public Media, Elizabeth Harball, April 12, 2018


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Headlamp – The return of “Thumbs Up, Thumbs Down.” State climate change plan short on details.

April 12, 2018 | Posted in : News

Thumbs Up:

House Resources committee for passing HB 331 – a bill to pay a debt owed and put Alaskans to work

Thumbs Down:       

Rep. Paul Seaton for introducing HB 411, the 8th oil tax change in 12 years, with 5 days left in the session

Thumbs Up:

Legislature’s oil tax consultant for clearly stating “non-payment of oil tax credits is what’s keeping investors from coming to Alaska.”

Thumbs Down: 

Rep. Gara for claiming that a 25% increase of $800 million is a “modest” increase while refusing to reduce the budget by even $50,000.  


Walker’s climate change task force asks Alaskans to turn their back on fossil fuels. The state of Alaska should reduce its use of fossil fuels, increase investment in renewable energy and plan for a global transition away from oil and gas. Those are some of the first recommendations from Governor Bill Walker’s climate change task force, which is meeting in Fairbanks today. The 20-person team was appointed by the governor last fall to write a state climate policy. The first draft of that policy is out and the recommendations run the gamut — from putting a price on carbon, to supporting a more diversified economy, to improving how climate change is taught in schools, to creating an emergency response fund. Michael LeVine is a task force member and senior Arctic fellow with the environmental group Ocean Conservancy. He said the big takeaway is how widely Alaska will feel the effects of climate change. “The choices we make about our communities and our economies can’t be cabined into a corner and called ‘climate change issues,’” LeVine said. “They are Alaskan issues. They are issues that affect all of our people, all of our communities and our economy.” So far, the draft is short on key details. It calls for the state to reduce carbon emissions by 2030, but it doesn’t say by how much. And it doesn’t put a price tag on any of its proposals. Task force members say those numbers will come later.

South Korean Supply Chain. Workers at a rural South Korean factory are busy extracting some of the world’s most coveted metals, used in the batteries that power electric cars. But they’re not digging in the ground or refining ore. Instead, they are sorting through a pile of lithium-ion batteries from old mobile phones and laptops. As China’s aggressive hunt for overseas cobalt and lithium for electric vehicles pushes up prices and causes a global shortage of the key metals, South Korea is increasingly turning to such “urban mining” to recover cobalt, lithium and other scarce metals from electronic waste. In 2016, the most recent year from which data is available, 19.6 trillion won ($18.38 billion) worth of metals were extracted from recycled materials, meeting roughly 22 percent of the country’s total metal demand, according to a report by the Korea Institute of Industrial Technology. SungEel HiTech is South Korea’s largest battery recycler. A decade ago, the company was at a crossroads as plasma TV panels, from which it extracted gold and silver, began to phase out.

Seaton says he and others will be “too busy worrying about re-election to deal with oil taxes” later.   The House Finance Committee has proposed a tax on the oil industry that could be worth more than $700 million to the state’s treasury. It comes with just a few days left in the 90-day session, though the state’s constitution still permits lawmakers to work through May 16. The proposal, first heard Tuesday night, reflects an ongoing effort by the House majority to generate new revenue while the state faces a $2.3 billion budget deficit. So far, those two-year efforts have been met with staunch Senate resistance. House Finance Committee Co-chair Paul Seaton (R-Homer) says the state cannot rely just on budget cuts and tapping into savings each year. “It’s one of those things where you need to have revenue,” Seaton said. “Balancing revenue and expenditure is balancing the budget. If you don’t want to balance the budget– other than taking out from a different savings account– you might not like this. “Most people realize that the lowest taxation on oil companies on the North Slope in the history of our state– I mean that’s when we started producing oil– is not a good system.” Senate Finance Co-Chair Anna MacKinnon (R-Eagle River) says there is hardly enough time for such review.


First Reads:

‘Urban mining’ in South Korea pulls rare battery materials from recycled tech
Reuters, Jane Chung and Ju-min Park, April 12, 2018

Draft Walker climate policy urges Alaska to transition away from fossil fuels
KTOO Public Media, Rachel Waldholz, April 12, 2018

House finance reprises oil tax debate
KTVA, Steve Quinn, April 11, 2018

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Headlamp – Alaska take note: The ability to borrow attracts new investment!

April 11, 2018 | Posted in : News

Unpaid credits have harmed companies ability to borrow. Currently, Alaska owes nearly $900 million to companies in the form of oil tax credits. A bill that would have the state issue bonds to pay those companies is on the move in the legislature. Gov. Bill Walker introduced companion bills in the House and Senate this session. Each lays out of a plan for the state to issue bonds to quickly pay down the debt it owes to oil and gas companies. The House Resources committee voted Tuesday morning to pass its version of the bill along to the next committee. But, the committee’s co-chair Rep. Geran Tarr, D-Anchorage, said she doesn’t support it. She said the state would be swapping one type of interest-free debt for another that could have less favorable repayment terms. If the state issues bonds and then fails to make payments, that could affect its credit rating. “It means that we would have to prioritize it over other important state needs like public safety, if there were such a time as everything falls out from under us. So that’s difficult for me,” Tarr said. The state’s tax credit bill stems from a program that was designed to encourage companies to explore and develop new oil fields in the state. The state used to pay off the balance of the credits each year, but as oil prices sank the Walker administration pulled back and made minimum payments on what the state owes. For three years, oil and gas companies — and some banks — have repeatedly told lawmakers that the unpaid credits are hurting development in Alaska. Pat Galvin, Chief Commercial Officer of Great Bear Petroleum, said the unpaid credits harmed companies’ ability to get financing for exploration and development. Great Bear has exploration wells on the North Slope that are on hold.

BP batteries. BP has teamed up with Tesla to build its first battery storage project at one of its U.S. windfarms as part of a strategy to expand its renewable energy business, the energy group said on Tuesday. Tesla will supply the 212 kilowatt (KW)/840 kilowatt hour battery at BP’s Titan 1 windfarm in South Dakota in the second half of this year. It operates 12 other windfarms in the United States. Providing large-scale battery power to windfarms allows them to store energy when wind is ample and make electricity available when demand is high, offering a crucial commercial advantage to an otherwise volatile energy source. “Lessons from the project will enable BP to make better informed decisions when evaluating and developing battery applications in the future,” BP said in a statement. “The project also supports BP’s broader strategy to invest half a billion dollars annually into low-carbon technologies, including projects within its established renewables portfolio as well as in new low-carbon businesses.”

Friends in high places. President Trump on Tuesday nominated an Anchorage attorney to serve as a U.S. District Court judge in Alaska. Jonathan Katchen works in commercial and natural resource law at the firm Holland & Hart. He previously worked for the state of Alaska, as senior counsel for Dan Sullivan, the current U.S. senator, when Sullivan was Alaska’s natural resources commissioner. He also worked for Sullivan as a special assistant when Sullivan was Alaska’s attorney general. And Katchen is a former law clerk of U.S. Court of Appeals Judge Maryanne Trump Barry, sister of the president. If confirmed by the Senate, Katchen would replace Judge Ralph Beistline of Fairbanks. Beistline went into “senior status,” or semi-retirement, at the end of 2015.

Ability to borrow promotes investment. U.S. oil and gas producers expect their borrowing ability to increase over the next few months, leaving them open to invest in new shale assets, particularly the Eagle Ford in Texas. That’s the conclusion of Haynes & Boone LLP, which found that more than 80 percent of respondents predict their borrowing bases, or credit availability backed by collateral, will likely increase as banks conduct their biannual reviews. That may benefit the Eagle Ford and Austin Chalk as the “next big play,” the study said. The Eagle Ford is already an established shale play, generating about 12 percent of U.S. oil, but it’s been receiving more attention of late. While the formation produces only about a third as much crude as the Permian Basin, the country’s most prolific field, the Eagle Ford is closer to the Gulf Coast’s network of refineries and pipelines, and drilling rights are cheaper.

From today’s Washington Examiner, Daily on Energy:

BOB MURRAY SAYS EMERGENCY ORDER ‘ONLY OPTION’ TO SAVE COAL: The CEO of coal giant Murray Energy, an ally of President Trump, said Tuesday that Energy Secretary Rick Perry “has to” approve an emergency order to save nuclear and coal power plants across the Midwest, warning of impending “disaster” if the government doesn’t act.

“It’s probably the only option right now,” Bob Murray said in remarks at the Bloomberg New Energy Finance’s Future of Energy conference in New York. “It’s absolutely needed. It can be for a specific time frame to stop these nuclear and coal closures until we get our house in order to ensure the resilience, reliability and security of the grid. It doesn’t have to be permanent. It must be done.”

Coal contract: Perry is expected to make a decision soon on whether to approve a emergency petition from Ohio-based utility FirstEnergy to require PJM Interconnection, the nation’s largest federally overseen grid operator, to enter into contracts with coal and nuclear plants across the Midwest to use their electricity.

The Murray connection: Murray Energy, America’s largest privately owned coal company, is uniquely set up to benefit from an emergency order benefiting FirstEnergy’s power plants.

FirstEnergy is a customer of Murray’s, using the company’s coal to produce power.


First Reads:

Walker’s bills to swap oil tax credit debt for bond debt making progress
KTOO Public Media, Rashah McChesney, April 10, 2018

BP Teams Up with Tesla to Venture into Battery Storage for Windfarm
Rigzone, Shadia Nasralla and Justin Varghese, April 10, 2018

Trump picks Anchorage attorney for District Court
Alaska Public Media, Liz Ruskin, April 10, 2018

U.S. Oil Debt Eases, Meaning Drillers Target Next Shale Play
Bloomberg Markets, Kevin Crowley, April 10, 2018

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Headlamp – Saudi Arabia, India and the Arctic.

April 10, 2018 | Posted in : News, Uncategorized

Pick your number. Saudi Arabia wants to get oil prices near $80 a barrel to pay for the government’s crowded policy agenda and support the valuation of state energy giant Aramco before an initial public offering. In conversations with OPEC delegates and oil market participants, Saudi officials had been careful to avoid pinpointing an exact price target. Yet people who have spoken to them said the inescapable conclusion from the conversations was that Riyadh is aiming for $80. The private discussions, relayed by several people who met the Saudis over the last month and asked not to be named to protect their relationship with the kingdom, chimes with the hawkish tone in public from Saudi officials. Oil extended gains. London’s benchmark Brent crude futures rose as much as 2.3 percent to $70.21 a barrel. In an interview with Time magazine last week, Saudi Crown Prince Mohammed bin Salman made the first public statement linking his expectation of higher oil prices with the timing of the initial public offering of Saudi Aramco. “We believe oil prices will get higher in this year and also get higher in 2019, so we are trying to pick the right time,” he told the magazine in reference to the IPO. Riyadh, which initially targeted the second half of 2018 for the listing, is now aiming for next year.

Temperatures are rising in the Arctic. In both the literal and geopolitical senses. As global warming melts sea ice across the far north, the region is becoming a development hot spot, with major powers like Russia and China seeking control of resources and transport routes. This creates a potential security flashpoint, too. In March, a large ship carrying liquefied natural gas left Russia’s Yamal Peninsula, which juts out from northwestern Siberia and contains some of the world’s biggest gas reserves. The vessel was carrying the first India-bound shipment of LNG from the peninsula through Arctic waters via the Bering Strait. Russian energy giant Novatek is producing LNG in Yamal. “The first cargo delivered to the growing Indian market is an important development step,” Lev Feodosyev, Novatek’s first deputy chairman, said of the shipment. Climate change made it possible. Arctic sea ice has been steadily shrinking due to our planet’s rising average temperatures. The maximum ice coverage hit the lowest level on record in 2017. By as early as 2030, the Arctic Ocean could be largely free of ice in the summer, according to the Arctic Monitoring and Assessment Program, a working group under the intergovernmental Arctic Council.

If you wait until the last minute…it only takes a minute. Alaska’s Legislature could finish the legislative session within a few days of its scheduled 90-day length. But it’s not clear which bills lawmakers will pass in the remaining days, other than those related to the budget. Senate President Pete Kelly said Senate leaders are optimistic about ending the session shortly after Sunday, the last day under the schedule set by state law. Kelly, a Fairbanks Republican, said there’s been less disagreement between the two chambers this year. “Last year, it was a full-on war between the House and the Senate,” Kelly said Monday. By comparison, Kelly describes “high-level cooperation” this year on the budget. Still, only six bills have passed both chambers. That number is much lower than the current record for the fewest bills passed in the state’s history – 32, set last year. The Senate passed the sixth bill today – House Bill 168, a measure that repealed the Administrative Regulation Review Committee, which hasn’t done anything in 15 years. Kelly said the slow pace is the result of differences between the Senate and House. “It’s just going to be the natural outcome of having two bodies that are philosophically different,” Kelly said. “And we haven’t had that for a long time.” Eagle River Republican Sen. Anna MacKinnon said there will be opportunities to pass several more bills before the session ends. “There are many things we agree on and you’ll see those coming to fruition in the last seven days,” MacKinnon said.

From today’s Washington Examiner, Daily on Energy:

PERRY TRAVELS TO INDIA FOR HIGH-LEVEL ENERGY TALKS: Rick Perry will travel to India next week to discuss the future of the U.S. energy relationship with high-level officials on the subcontinent.

LNG arrives in India: The meeting comes as the first shipments of U.S.-produced liquefied natural gas begin to arrive in India this month, an administration official pointed out to the Washington Examiner.

Lots of meetings: Perry will be having “multiple bilateral meetings” during the trip, Energy Department spokeswoman Shaylyn Hynes said.


First Reads:

Are Saudis pushing OPEC for $80 a barrel oil?
Chron, Javier Blas, April 10, 2018

China and Russia go to ends of the earth for Arctic control
Asian Review, Nikkei, April 10, 2018

Slow-paced session could end with a sprint
Alaska Public Media, Andrew Kitchenman, April 9, 2018

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Alaska Headlamp – Need. For. Speed.

April 9, 2018 | Posted in : News

EPA to make common sense permitting reform. Now more than ever, as the economy continues to pick up steam, it is vitally important to reduce the barriers to economic growth. Nowhere is this more important than in the manufacturing sector. In manufacturing, lengthy permitting processes can still be the death knell for projects that would otherwise expand operations and create new jobs. The Clean Air Act (CAA) has created delays so great that they kill some projects in their infancy before the permitting process has even started. While there has been bipartisan support for addressing permitting delays, Congress has only recently laid out a starting point from which improving efficiencies in permitting can be obtained. In the meantime, the Environmental Protection Agency has stepped in to make some common sense reforms that were long overdue. Citing President Trump’s push to streamline regulatory permitting, the EPA recently announced its intention to clarify the permitting process under the New Source Review (NSR) analysis, which pertains to potential increased emissions at project sites.

Two-tiered permitting process to impact minor activities. With the Alaska Legislature closing in on the final day of its regular session, the battle over a bill to tighten restrictions on permits to develop near Alaska’s anadromous streams is still attracting a lot of attention. On Saturday, dozens of Alaskans phoned in and attended a House Fisheries Committee meeting to weigh in on an amended version of House Bill 199, which would increase restrictions for obtaining a permit to develop in streams deemed to be salmon habitat. Public opinion was divided, though the majority testified in support, citing concerns about the future of Alaska’s salmon runs. Opponents said the current permitting system works and the additional restrictions would hamper industry too much. The current version of HB 199, originally sponsored by Rep. Louise Stutes (R-Kodiak), would institute a two-tiered permitting system for development impacting anadromous streams, including “major” and “minor” activities, based on the amount of damage the Alaska Department of Fish and Game’s Habiat Division determines would occur in the stream. It adds a public notice and comment procedure as well as legislative intent language about the protection of salmon resources, among other changes.

An Alaskan company built from the ground up. An Alaska company that started out as just a heater reconditioning company has grown in nearly two decades to be a crucial provider of oil field, construction and mining equipment for cold-weather climates. Fairbanks-based Equipment Source Inc. began in 2000 catering to oil field companies working on the North Slope, the Fairbanks Daily News-Miner reported. Then store creators Terry Warnath and his nephew, Josh Parks, developed their own industrial heater, the ES700. The indirect-fired air heater excelled at providing long-term, reliable and continuous service in the most severe weather conditions. Warnath and Parks soon were competing against the very companies they previously had serviced. Local businessman Tim Cerny slowly bought into the company and is now the sole owner, but Parks stayed on as the manufacturing manager. Equipment Source uses Kubota engines, Mecc Alte generator ends and other purchased parts and pieces to build its equipment. “But as far as the frame and the shell and the metal structure, we’re truly building that from the ground up here,” store manager Nick Ferree said. “It’s very fun, and not very common in Alaska, and especially not in Fairbanks. It’s not the most economical place to do stuff like that,” Ferree said.

Record setting legislative session. The Alaska Legislature is on pace to pass fewer bills in this two-year session than in any other since the early 1990s — one measure of the paralysis inflicted by polarization and the state’s deficit crisis. Lawmakers passed 37 bills between the start of their two-year session — in January 2017 — and Monday, according to an analysis by the Alaska legislative library. That’s the fewest at that point in any two-year session since the start of the library’s records, in 1994. The current Legislature passed last year’s annual state operating and capital budgets, but only after months-long delays. It’s passed contentious bills to open Alaska to ride-hailing services like Uber, and to comply with federal requirements under the REAL ID Act — as well as symbolic measures like one to commemorate black soldiers who helped build the Alaska Highway. But dozens of other bills have languished — passing the Republican-controlled Senate only to stall or die in the hands of the mostly-Democratic House majority. Or vice versa. The Legislature’s slow pace of passing bills has thwarted lawmakers’ own priorities and pet projects, as well as a major crime-fighting initiative pushed by Gov. Bill Walker. And it’s frustrated individual Alaskans — some of whom have seen their favored legislation blocked in committees. The Legislative library’s analysis is just one data point, and it’s likely lawmakers will pass a barrage of bills as they approach next week’s initial, 90-day deadline to finish the session.

From today’s Washington Examiner, Daily on Energy:

MOVING ON …. ENVIRONMENTAL APPROVALS FOR INFRASTRUCTURE PROJECTS TO BE EXPEDITED: Various federal agencies are expected Monday to sign an agreement intended to shorten the environmental review and permitting process for infrastructure projects. The leaders of at least 12 agencies will sign the “memo of understanding,” according to Bloomberg, which would implement an executive order signed by Trump in August.

Signoff: Trump is expected to preside over a signing ceremony after a Cabinet meeting Monday.

Signing the memo will be the departments of Energy, Interior, Transportation, Commerce and Homeland Security, the EPA, and the Federal Energy Regulatory Commission.

Need for speed: Trump’s Aug. 15 executive order calls for “timely decisions” on projects with the goal of completing “environmental reviews and authorization decisions for major infrastructure projects within two years.”

Under the agreement implementing the order, federal agencies will have to conduct concurrent environmental reviews, rather than consecutive reviews, to speed up the process. The main agency with expertise will lead the permitting review process, setting timelines for the other agencies to follow.

First Reads:

EPA Leads the Way on Permitting Reform
Real Clear Policy, Tim Doyle, April 6, 2018

Salmon habitat bill still milling in House Fisheries committee
The Peninsula Clarion, Elizabeth Earl, April 9, 2018

Alaska company provides machines that can withstand cold
AP News, April 8, 2018

Paralyzed by partisanship and the budget crisis, this Alaska Legislature has passed fewer bills than any on record
Anchorage Daily News, Nathaniel Herz, April 8, 2018

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