“They’ll just see a bunch of dead companies lying around…” A proposal to issue bonds to pay off about $900 million in tax credit debt to oil and gas companies hasn’t gained much traction in the Legislature. Gov. Bill Walker included it in his budget in December. Since then, the bill has had no hearings in the House and just one in mid-February in the Senate. Walker said Tuesday that he’s still hopeful that it will make it through this session. “Well, I actually have heard some fairly positive things about that from various legislators, once they understand it,” Walker said. “I think there was some confusion initially and so we spent some time with them and so I think there’s some interest in that.” Most of the credits are owed under a now-defunct cashable credit program that was designed to entice new companies to explore and produce oil and gas in the state. The bill would allow companies to opt into a program that would pay credits now, but at a discount. The cost of borrowing the bonds would be built in to the discounted rate, so the state won’t lose money.
Bat Cave fights off 22 million attacks a day. The symbol of a well-known caped crusader is taped to the door of a secure room at Alyeska Pipeline Service Company’s Anchorage headquarters. The sign reads: “THE BAT CAVE.” My guides don’t know why the sign’s there. Maybe it’s the lack of windows. Or maybe it’s because the people who work in this room see themselves as undercover crime-fighters, like Batman — because they sort of are. This is the office of Alyeska’s cybersecurity team. The trans-Alaska pipeline has dealt with its share of problems — earthquakes, declining oil flow, even gunfire. But today, the pipeline is facing another, more modern threat: cyberattacks. Energy infrastructure is a tempting target for hackers, and the trans-Alaska pipeline is no exception. Alyeska, which operates the pipeline, now ranks cyberattacks as one of its top three risks. In the room where part of the pipeline’s cybersecurity team is stationed, Alyeska’s Bill Rosetti points at a wall of data flowing down three giant screens hanging above the cubicles. It’s all totally incomprehensible to a layperson. But for Rosetti and his staff, weird activity on one of the colorful charts rippling across the screens could indicate something serious. “The idea here is that we are looking for things to be normal,” Rosetti explained. “And anything that’s not normal is something that needs to be investigated.” Rosetti is Alyeska’s chief information officer. He’s in charge of keeping cyberattackers at bay. Rosetti takes that job seriously, because the trans-Alaska pipeline is getting hit by cyberattacks all the time — and not just a few. “We see about 22 million attacks a day,” Rosetti said.
China on China in Alaska. The U.S. northwestern state of Alaska is getting one step closer for Chinese investment in its ambitious energy program after U.S. energy regulators set assessment in motion for a planned liquefied natural gas (LNG) project in the state. The Federal Energy Regulatory Commission has set December 2019 as the deadline for the Alaskan LNG project to receive its final environmental impact statement, which Alaska Governor Bill Walker said has cleared a hurdle for investments in the project, local media reported Wednesday. “This is a major step forward that establishes clarity and predictability in the federal permitting process, which is critical for investors,” Walker said in a statement. The LNG project in the design phase in Alaska would connect a natural gas reservoir in Prudhoe Bay in northern Alaska through 800 miles (about 1,280 km) of pipe with a liquefaction plant on the southcentral Alaskan coast. The project, upon completion, will have an annual design capacity of 3.9 billion standard cubic feet (100 billion cubic meter) per day peak capacity of natural gas. Alaska has been aggressively seeking foreign funds, particularly Chinese investment, for its energy program. The U.S. state signed an agreement with Chinese energy company China Petrochemical Corp., or Sinopec, last November on the latter’s purchase of its LNG resources. Sinopec said it was interested in the possibility of LNG purchase on a stable basis from Alaska state.
Exemption, please? U.S. energy pipeline developers say they intend to pursue exemptions to the Trump Administration’s proposed steel tariffs, as concerns grow for those companies and from key exporters to the United States like South Korea. “We have a number of pipeline projects that would be impacted significantly by this cost increase,” said Adam Bedard, chief executive of Arb Midstream, an energy transportation and marketing company. If exemptions become available, “we’d certainly try and qualify for it.” He was referring to the U.S. Commerce Department’s effort to devise a procedure for companies to apply to avoid paying a 25 percent tariff on imported steel or 10 percent on imported aluminum. Commerce has 10 days to come up with the procedure to apply for exemptions from the steel and aluminum tariff declaration issued last week. There is a national security exemption for U.S. companies to buy steel items that domestic manufacturers do not produce in the volumes or quality required. The president also said exemptions would be available to certain countries. Imports account for 77 percent of the steel used in U.S. pipelines, according to a 2017 study conducted for the pipeline industry. Some manufacturers already have customers waiting two years for pipeline to construct lines to carry shale oil and gas from West Texas fields to U.S. Gulf Coast export hubs.
From today’s Washington Examiner, Daily on Energy:
TRUMP TO GET AN EARFUL FROM BIG OIL: President Trump is scheduled to sit down Thursday afternoon with a group of large oil companies to discuss a “laundry list” of issues.
The American Petroleum Institute’s executive board has made meeting with Trump a priority given a number of pressing issues including steel tariffs, NAFTA negotiations, offshore drilling and the ethanol mandate.
Laundry list: Sources tracking the meeting say the “laundry list” likely will include: offshore drilling, Renewable Fuel Standard reform, regulatory reform, pipeline construction, natural gas drilling and methane rules, North American Free Trade Agreement renegotiation, and Trump’s inclination to impose tariffs. API opposes the steel and aluminum tariffs Trump imposed on those imports last week, saying it would disrupt energy infrastructure development.
Gerard not pleased with tariffs: API President and CEO Jack Gerard recently said in an interview on the sidelines of CERAWeek in Houston this month that he was hopeful he could meet with the White House to persuade the president against imposing a broad tariff. The tariff decision does carve out a process for industries to petition for exemptions on steel products.
Still, Gerard said he was disappointed that Trump moved forward with the steel tariffs.
Pence joins meeting: Vice President Mike Pence is scheduled to attend the meeting, too. Others tracking the meeting say that Pence’s presence suggests the ethanol mandate will come up. He was supposed to meet with large ethanol producers on Monday, but the meeting was scrapped because of a scheduling conflict. Pence’s home state of Indiana is a big corn producer and has a major stake in the Renewable Fuel Standard.
Walker hopeful plan to pay off oil tax credit debt with bonds will pass this session
KTOO Public Media, Rashah McChesney, March 14, 2018
The trans-Alaska pipeline fights off 22 million cyber attacks. Daily.
Alaska Public Media, Elizabeth Harball, March 14, 2018
U.S. state of Alaska one step closer for Chinese investment in energy
Xinhaunet, Liangyu, March 15, 2018
U.S. energy pipeline developers to seek exemptions to steel tariff
Reuters, Liz Hampton, March 14, 2018
Project online by 2025. The federal agency responsible for studying the environmental impact of the Alaska LNG project has released a timeline for completing its review. The Federal Energy Regulatory Commission announced Tuesday that it plans to release a draft of the final Environmental Impact Statement in a year, Alaska’s Energy Desk reported. The project could be authorized by March 2020 if the agency sticks to its timeline, although the state was hoping to get through that permitting process and begin construction next year. Alaska Gasline Development Corporation President Keith Meyer said the corporation can still bring the project online by 2025. “We’re just happy that it’s a schedule that we can work with, we can live with and that does not adversely impact the project,” Meyer said.
Promises made to rural Alaska. Alaska’s senior Sen. Lisa Murkowski used her plum position atop the Senate’s energy committee Tuesday to advance rural Alaska issues with Interior Secretary Ryan Zinke. Murkowski quizzed Zinke on permitting for the controversial Ambler Road project and land management concerns for miners in Interior Alaska. Her efforts to secure favorable outcomes comes after a string of “wins” for the Alaska delegation with the department, including opening part of the Arctic National Wildlife Refuge to potential oil drilling and beginning the process of building a road through the Izembek National Wildlife Refuge. “You and I have worked closely to chart a path to energy security which you have noted runs right through the state of Alaska,” Murkowski said, thanking Zinke for his actions over the last year. Murkowski questioned Zinke on the status of the department’s involvement in a resource management plan for Interior Alaska, in the 40 Mile District, that was released during the final days of the Obama administration.
“Royalty owners indicated that, when they asked for any type of follow-up on this, they get really vague and ambiguous statements,.” The Legislature’s Administrative Rules Committee approved a new set of oil and gas rules Monday, but regulations that add transparency to royalty statements won’t take effect until July 2019. The new rules require oil companies to clearly identify the amount and purpose of each deduction taken from royalty payments. Bruce Hicks, assistant director for the North Dakota Oil and Gas Division, said regulators heard from royalty owners who are frustrated about deductions taken from their payments and the lack of information explaining them. “Royalty owners indicated that, when they asked for any type of followup on this, they get really vague and ambiguous statements,” Hicks said. The rules require any deductions taken from oil and gas royalties to be labeled under categories of transportation, processing, compression and administrative costs.
From today’s Washington Examiner, Daily on Energy:
EPA STREAMLINES POLLUTION CONTROL PROGRAM TO BOOST PLANT EXPANSIONS: The EPA moved Tuesday to relax requirements for power plants and other industrial facilities in a way that will allow them to expand operations without the fear of being punished.
New guidance, New Sources: Pruitt said the new guidance affects New Source Review rules that have been difficult for industrial facilities to navigate when considering adding more plant capacity or making upgrades.
Removing barriers: EPA’s air chief, Bill Wehrum, said the new guidance outlines a “common-sense interpretation of NSR rules,” and said the result is the removal of “unnecessary administrative barriers to the construction of cleaner and more efficient facilities.”
The industry has long seen New Source Review as a tricky regulation that should be avoided when possible. The EPA program attempts to determine if, by modifying a power plant, or building a new manufacturing plant, for example, a significant new source of pollution is being created.
Timeline set for environmental study of Alaska LNG project
AP News, March 14, 2018
Interior secretary promises action on rural Alaska issues
Anchorage Daily News, Erica Martinson, March 14, 2018
Rules adding transparency to oil royalty statements get final OK
The Bismarck Tribune, Amy Dalrymple, March 12, 2018
Trump move to reduce duplicative studies angers ENGO’s. The Trump administration’s latest efforts to streamline oil and gas development have drawn sharp criticism from environmentalists who say the policies shortcut federal law. At issue are new guidelines unveiled last month by the Bureau of Land Management that aim to avoid long, drawn-out National Environmental Policy Act reviews whenever possible. One feature of the February memo is an emphasis on the use of “determinations of NEPA adequacy” for oil and gas leasing. The approach, known as a DNA, allows the agency to forgo fresh environmental review when it already has studies that cover a new proposal. DNAs are unique to BLM. The term does not appear in the NEPA statute or related regulations; BLM created the tool to avoid conducting costly analysis that repeats previous work. Supporters say the approach makes perfect sense: Why spend resources to study something the agency already studied? BLM officials used them during the Obama and George W. Bush administrations, too. But critics see DNAs as vulnerable to misuse. They fear the Trump administration is setting up for a major escalation that would bypass targeted environmental analysis for hundreds of thousands of acres of newly leased lands.
“We need to persuade global financial leaders that the North American Arctic is the world’s safest emerging market,” Last summer, the icebreaker Xue Long (Snow Dragon) became China’s first vessel to transit the Northwest Passage, travelling from the Pacific Ocean to the Atlantic through the Arctic Ocean archipelago. Then, in January, China officially included the Arctic region in its massive Belt and Road Initiative, making Northern Canada, Alaska and Greenland eligible for Chinese investment in railways, roads, pipelines and utility grids. China understands the Arctic will be part of a new global trade infrastructure system. Does North America? According to the U.S. investment firm Guggenheim Partners, the Arctic will require close to US$1-trillion of infrastructure investment over the next decade, including transportation, telecommunications and social services to support a new era of economic opportunity from energy, fishing and mining, to defense and tourism. With fewer than one million residents, the North American Arctic has no choice but to seek outside capital for its enormous strategic and economic opportunities. We recently convened an international forum at the University of Toronto to help North American players come to grips with what’s at stake in their far north. Here’s what was suggested.
Tillerson out – Pompeo in. President Donald Trump said Tuesday he was replacing Rex Tillerson as secretary of state, just over a year into the former Exxon Mobil CEO’s tenure. “Mike Pompeo, Director of the CIA, will become our new Secretary of State. He will do a fantastic job!” Trump wrote on Twitter. “Thank you to Rex Tillerson for his service! Gina Haspel will become the new Director of the CIA, and the first woman so chosen. Congratulations to all!” The news follows what had been a difficult tenure for Tillerson, who fought to keep pace with a president who liked to conduct foreign affairs through his Twitter account and struggled to get key positions within the State Department filled.
From today’s Washington Examiner, Daily on Energy:
FERC GIVING PIPELINE APPROVALS A FRESH LOOK: The Federal Energy Regulatory Commission is reviewing its nearly 20-year-old policy for approving pipeline projects as the agency evaluates how to best manage the transport of bountiful shale natural gas to market, while balancing environmental and climate change concerns.
FERC has been characteristically tight-lipped since it announced in December its plan to take an open-ended “fresh look” at its 1999 policy statement governing how it issues permits for pipelines.
Different expectations: With no clear expectation of what could happen, experts and advocates are anticipating what FERC may do.
“I would be very surprised if this particular FERC made it even more difficult to get pipelines built, given the emphasis this administration has on energy infrastructure issues,” said Tony Clark, a Republican who served as a FERC commissioner from 2001 to 2012, noting President Trump appointed four of the five current commission members. Industry satisfied: Pipeline backers say the current policy works fine.
If anything, they are angling for fewer hurdles to development because they say the shale industry is already facing pipeline bottlenecks that could stop it from delivering on forecasts predicting U.S. oil production will top 11 million barrels a day by November.
Greens tire of ‘outdated’ policy: Pipeline opponents, meanwhile, say FERC’s pipeline policy is outdated, created when climate change concerns were less dominant and the shale boom was unanticipated.
They say FERC has become a “rubber stamp” for pipeline approvals because the policy statement encourages the committee to lean too heavily on economic considerations when making decisions.
North America must seize its Arctic opportunity – or risk being left out in the cold
The Globe and Mail, Clint Davis, Jessica Shadian and Mead Treadwell, March 11, 2018
Former Exxon CEO Tillerson out as secretary of state
Chron, James Osborne, March 13, 2018
Critics pounce on NEPA streamlining tool for leasing
E&E News, Ellen M. Gilmer, March 13, 2018
United Steelworkers file suit. The United Steelworkers filed suit against BP last week, arguing that the oil giant violated an agreement with the union when it outsourced work to a Prudhoe Bay contractor in 2016. Five union-represented workers lost their positions in the outsourcing. The union wants BP to restore the workers’ jobs and cancel the contract with NANA Management Services to run a sewage treatment facility, according to a union grievance report included in the lawsuit, filed in U.S. District Court in Anchorage. The complaint comes after BP made other contractual changes over the last year that are expected to reduce union workforces, as BP seeks to save money amid low oil prices. Union workers typically earn more than their non-union counterparts, studies show.
Unanswered questions or unquestioned answers? Alaska Gasline Development Corp. officials will meet with U.S. Federal Regulatory Commission staff in Washington, D.C. March 22 to clarify the Commission’s request for information on a number of issues on the proposed Alaska LNG Project. Among those is a reevaluation FERC has requested of Port MacKenzie, in the Matanuska Susitna Borough, as the site of a large natural gas liquefaction plant and terminus of a large-diameter gas pipeline from the North Slope. Nikiski, on the Kenai Peninsula, is currently the proposed site of the LNG plant and pipeline terminus. Dave Cruz, Chair of AGDC’s Board, said he does not believe the federal regulators derail the proposed Liquid Natural Gas Pipeline.
From today’s Washington Examiner, Daily on Energy:
MURKOWSKI SAYS STEEL TARIFFS COULD RAISE COST OF ALASKA NATURAL GAS PROJECT: Sen. Lisa MurkowskI, chairwoman of the Senate Energy and Natural Resources Committee, said Friday that Trump’s tariffs on imported steel could add $500 million to the cost of a major natural gas export terminal planned in her home state of Alaska.
“The back of the envelope numbers with these tariffs, we might be in a situation where it might be as much as half a billion dollars added on the most expensive infrastructure projects that we have seen with this country,” the Alaska Republican said at the CERAWeek energy conference in Houston.
Exporting to China: Alaska in November struck a $43 billion joint development deal with China on an 800-mile pipeline to bring natural gas from the North Slope to Asia.
‘Confusing message’: Murkowski also said the tariffs complicate relationships with countries that are importing more U.S. oil and natural gas, such as South Korea. “It sends a confusing message,” she said.
United Steelworkers sue BP after it cut union-represented positions on North Slope
Anchorage Daily News, Alex DeMarban, March 11, 2018
AGDC to meet with FERC March 22 to discuss LNG Project
Mat-Su Valley Frontiersman, Don Mateer, March 10, 2018
Help us stand up for Alaskans by submitting your comments. The Bureau of Ocean Energy Management (BOEM) has issued a call for public comments on a new draft five-year Outer Continental Shelf (OCS) oil and gas leasing plan that would replace the current program that was crafted by the Obama administration and excluded most of the Alaska OCS, including the Arctic, from future exploration.
The Trump administration’s Draft Proposed Program (DPP) calls for 19 of 47 lease sales in federal waters off Alaska coasts beginning in 2019 and ending in 2024.
President Obama had removed 94 percent of the acreage that had been available for offshore leasing and this DPP proposes to do the opposite.
Action Requested: Please submit comments supporting the proposed lease sales in the Arctic and Cook Inlet. Including at this stage the most prospective areas of the OCS for potential oil and gas discovery is consistent with advancing the goal of moving America from simply aspiring for energy independence to attaining energy dominance.
Points to consider for your comments:
- The potential oil and gas resources that may be made available as a result of this DPP are fundamental to America’s energy security in the coming decades. The 2019-2024 OCS Oil and Gas Leasing Plan will provide the foundation for the nation’s energy supply into the middle of this century.
- Alaska’s Beaufort and Chukchi seas form one of the most prospective basins in the world. Together, these areas are estimated to hold over 24 billion barrels of oil and 133 trillion cubic feet of natural gas.
- Despite a surge in U.S. oil production in recent years, the U.S. still imported nearly eight million barrels per day last year to meet domestic needs.
- Offshore development would serve to help maintain the integrity of the Trans-Alaska Pipeline System (TAPS), a critical link to America’s energy distribution. TAPS has safely transported more than 17 billion barrels of oil since it came online over 40 years ago.
- Twenty-eight years ago, North Slope oil production exceeded two million barrels a day, which accounted for a quarter of domestic crude oil production. However, TAPS throughput has now declined to approximately 528,000 barrels per day. Given the vast resources available in the Arctic OCS, future production could stem the decline, allowing for TAPS to remain viable for decades.
- Excluding the Alaska Arctic from future lease sales would severely compromise the long-term energy and economic security of Alaska and the nation.
- The Arctic’s untapped resources are of critical importance to both Alaska and the United States. Oil and gas development in the Arctic OCS is predicted to produce an annual average of 35,000 direct and indirect jobs over the next half century for Alaska alone. Those jobs would represent a total payroll of over $70 billion.
- From an economic standpoint alone, promoting and fostering Arctic OCS development would represent a windfall for the national economy. Revenues generated from Arctic OCS oil and natural gas production could amount to $200 billion to federal, state and local governments.
- Industry has shown that impacts to marine mammal subsistence activity can be avoided and mitigated through close cooperation and communication with primary subsistence users. Newly instituted technologies will further ensure that development and environmental protection can coexist in the Arctic.
- Leasing and subsequent Arctic OCS exploration and development would bring much-needed infrastructure to the region and would also provide additional response capabilities in an area where shipping and other activities are increasing.
- Major investments in research in the Arctic OCS over decades by industry, government, and academia will provide a strong platform for responsible development that minimizes risks to other resources.
- Over 72% of Alaskans have supported offshore development.(Consumer Energy Alliance poll, October 2014)
- BOEM lease sales provide some level of predictability and certainty for industry to engage in long-term strategies to develop the Arctic’s vast resources.
- Oil and gas development in the Arctic OCS could ultimately prove indispensable, given forecasts that predict this nation’s energy demands increasing over ten percent in the next quarter century. Even with dramatic increases in alternative energy sources, the majority of these growing energy demands will continue to be satisfied through use of fossil fuels.
ACTION ALERT: New Five-Year OCS Lease Sale Draft Plan
Resource Development Council
Partners not Adversaries. Interior Secretary Ryan Zinke says his agency should be a partner with oil and gas companies that seek to drill on public land and that long regulatory reviews with an uncertain outcome are “un-American.” Speaking Tuesday to a major energy-industry conference, Zinke described the Trump administration’s efforts to increase offshore drilling, reduce regulations, and streamline inspections of oil and gas operators. “Interior should not be in the business of being an adversary. We should be in the business of being a partner,” Zinke said to a receptive audience that included leaders of energy companies and oil-producing countries. Zinke said the government should shorten the permitting process for energy infrastructure — it shouldn’t take longer than two years. “If you ask an investor to continuously put money on a project that is uncertain because the permit process has too much uncertainty, ambiguity, (it) is quite frankly un-American,” he said. The Interior Department manages 500,000 million acres — one-fifth of the U.S. land mass — as well as the lease of offshore areas for oil drilling. One-fifth of U.S. oil production takes place on land or water that the Interior Department leases to private energy companies.
Assembly meeting in Utqiaġvik Tuesday. The Interior Department’s second-in-command, Deputy Secretary David Bernhardt addressed the mayor and the assembly members at the Barrow High School Auditorium. “We’re here today to begin a conversation with you because we want to have you collaboratively and collectively involved with us as we go forward with our new job,” Bernhardt said. That new job is managing the oil and gas leasing program in the Arctic National Wildlife Refuge, which is within the North Slope Borough boundaries. “We want to hear your voice, we want to understand your issues, we have an opportunity to try to accommodate those issues that are of concern to you within our authority,” Bernhardt said. Assembly members had the chance to comment and ask questions. North Slope Borough Mayor Harry K. Brower Jr. thanked the Deputy Secretary for coming. He then went on to say that oral communication is one thing, but he wants to start seeing plans in writing. “You know, I first thing I wrote down was, when do we start reading the information in black and white. In written materials. That’s something of importance,” Brower said. Bernhardt responded that once the scoping process begins, more of those materials will become available. He also said he expects that process to kick off in the next few weeks. After the meeting, Bernhardt was also asked why three critical whaling areas were included in the initial draft of the Trump Administration’s plan for offshore leasing. Local stakeholders have identified those areas for exclusion in years past. “We started with what I would consider a zero baseline,” Bernhardt said. “Let’s presume we’re starting the dialogue fresh. The process will take the same amount of time either way, and we’ll get comments and decide whether it was right-sized nation-wide or not. So that’s where we’re at.” The Deputy Secretary said he will also be visiting Fairbanks and Nome on this trip.
From today’s Washington Examiner, Daily on Energy:
ZINKE’S PLAN TO USE ENERGY FUNDS FOR PARK REPAIRS GETS BIPARTISAN SUPPORT IN CONGRESS: Interior Secretary Ryan Zinke partnered Wednesday with a bipartisan group of lawmakers to create a fund to pay for the billions of dollars of repairs and maintenance needed in national parks and wildlife refuges.
The fund, which would hold up to $18 billion, would be paid for by new leases for energy development on onshore and offshore federal lands. It also would finance schools under the Bureau of Indian Education. The backers: Sens. Lamar Alexander, R-Tenn., and Angus King, I-Maine, sponsored legislation creating the fund on the Senate side. Additional co-sponsors include Sens. Shelley Moore Capito, R-W.Va., Martin Heinrich, D-N.M., Steve Daines, R-Mont., Cory Gardner, R-Colo., and Thom Tillis, R-N.C.Reps. Mike Simpson, R-Idaho, and Kurt Schrader, D-Ore., announced a companion bill in the House.
Fix it: The Interior Department has a $16 billion maintenance backlog, the agency says. Of that amount, the National Park Service has the largest share, $11.6 billion in 2017.
What about that park fee hike? Interior’s proposal is already more popular than other ideas the agency has offered to repair national parks.
Last year, the National Park Service proposed to more than double visitor fees for 17 popular national parks to pay for the repairs and upkeep. The plan has been widely panned.
Not dead yet: A National Park Service official told Josh that the agency is reviewing public comments about the fee hikes and expects to “complete that process in the coming weeks.”
Interior Department officials visit North Slope to talk ANWR
Alaska Public Media, Ravenna Koenig, March 7, 2018
Zinke says Interior should be a partner with oil companies
The Philadelphia Tribune, David Koenig, March 6, 2018
“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.
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
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.
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
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.
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
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.
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