David Holt, Consumer Energy Alliance, Arctic, NPR-A, Beaufort, Chukchi, Photo by Dave HarbourCEA President David Holt (NGP Photo) was the guest on several radio interviews discussing the Arctic for All campaign, America's energy revolution, Alaska's role in domestic energy production and the importance of offshore energy resources. 
Anchorage's KBYR featured Holt on the Mornings with Michael Dukes Show. He was also a guest on the nationally syndicated Radio America: Neal Asbury’s Made in America Show.   Hear the interviews here!
Mead Treadwell, Former Alaska Lt Governor, Arctic, Op-Ed, The Hill, Dave Harbour PhotoThe Hill Op-ed by Mead Treadwell (NGP Photo). …the Obama administration is in a tizzy to solidify its Arctic strategy. January in particular has been quite busy for the administration: an executive order to better coordinate U.S. Arctic policy, a proposed drilling ban in the Arctic National Wildlife Refuge (ANWR) and now a proposed leasing plan that excludes significant areas of the Arctic Ocean for development. These actions all have two things in common.  Treadwell FB Page.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

"Alaska's Challenge of Cash & Energy Shortage: Part II"

Yesterday: Part I

Tomorrow: Part III

Yesterday, we reviewed Alaska's fall from fiscal grace: how Washington created a great state in 1959 from territorial status, based on the state's ability to achieve independence and economic parity with other states through development of natural resources.

Then we briefly reviewed how that promise soured, for two reasons: 1) a more and more hostile federal government, with cadres of grassroots environmental activist armies, have steadily removed land access and blocked projects using a variety of statutory, regulatory and judicial techniques; and 2) citizens and their elected officials allowed the productive 1968 Pudhoe Bay discovery to seduce them into overspending and creating an unsustainable, hungry bureaucracy whose appetite is sapping away state savings and threatens to devour the entire economy within a few years.

Yesterday's was a review of Alaska's challenge of cash shortage.  That summary serves as a basis for understanding the challenge of energy shortage faced by the Interior Alaska community of Fairbanks today.  

Most business, political and community leaders there are engaged in a controversy which today consumes the political dialogue in that city.  This may be due to the oft-cited fact that in a city mostly dependent on heating oil derived from $100/barrel crude oil, an average heating bill exceeds the amount of the average mortgage payment.  

Buzz Otis, Fairbanks, Natural Gas Supply, Dave Harbour PhotoAs our business leader contributor, Buss Otis (NGP Photo) pointed out yesterday many folks find themselves on the edge of economic survival and the sudden, world oil price drop over the last several months is not very fully represented in local fuel bills.

Accordingly, citizens in that northern, Alaska city seek relief.

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Fifty years ago, ENSTAR natural gas company began developing a distribution system designed to serve a brand new market with newly discovered Cook Inlet area natural gas supplies.  

Before the arrival of natural gas home heating and cooking, Alaskan Natives and pioneers relied upon fuel sources ranging from firewood to coal to coal- and then gas-generated electricity.

ENSTAR's system evolved over the years as residential, business and commercial customers paid for the cost of the system in the rates they paid.

In 1902 Fairbanks, in the much colder climate of the state's interior, experienced a gold and population rush, soon accompanied by coal mining operations.  Coal mining evolved in the South Central and Fairbanks areas, culminating in opening of the Usibelli Coal Mining in the 1940s, providing a heating and power source to Fairbanks and to the nearby Ladd Army Air Field (now Fort Wainwright).

Also in the mid-1940's local residents created an electric cooperative; Golden Valley Electric Association (GVEA) now operates and maintains over 3,000 miles of transmission and distribution lines for its customers.  It has generated its electricity from coal, naptha, natural gas, hydro and wind and maintains an intertie capability of receiving peak supplies from the Anchorage area Electric Cooperative, Chugach Electric Association.

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Last year Fairbanks' Flint Hills refinery closed.  The refinery took crude oil from the Trans Alaska Pipeline System (TAPS), refined it into various fuels — including products used for power generation, motor fuel and home heating.  While a smaller Flint Hills refined fuel terminal remains, it distributes imported products refined by others.  Local residents remain concerned that the local refinery once offering a degree of independence from 'outside' sources is now gone.

Shortly after Flint Hills ceased refining operations last summer, the price of oil began to fall but Otis noted the complete drop in crude pricing is not fully reflected in imported, refined product pricing in Fairbanks.

As anxiety about high priced, home heating fuel increased, the Interior Alaska political representatives became — over the last few years — more pressured to "do something".  While the private market in all previous Alaska energy challenges has shown itself to be a superior arbitrator of supply and demand, elected officials seem drawn to the prospect of 'helping with public money' as constituent voice levels rise.

During the 2013 legislative session lawmakers joined then Governor Sean Parnell in approving a government solution.  The Alaska Industrial Development and Export Authority (AIDEA) would be tasked with an assignment to facilitating the spending and transfer of hundreds of millions of dollars to create an Alaska North Slope LNG trucking project designed to provide Fairbanks with a new, 'affordable' and stable source of natural gas for home heating.

The advantages would be many, perhaps.  Natural gas produces fewer air quality issues than coal or heating oil.  Perhaps it could be cheaper, with help from the state coffers.  

However, we are not aware that AIDEA has the in-depth technical and managerial expertise qualifying it to design, finance, build, own, operate, and/or market an LNG and gas distribution operation–or even properly supervise those who do.  Oh, and, by the way, for the project to work a new natural gas distribution system would have to be installed throughout the 30k population "Golden Heart City" since the existing utility only serves about a thousand customers.  

In short, this was to be a very complex piece of work involving many moving parts, many disciplines and the creation of a whole new distribution system.

When Governor Bill Walker took over his new office in December, it soon became obvious that the AIDEA sponsored, North Slope LNG trucking project would cost vastly more than projected.

With that development other parties began expressing interest in continuing the Fairbanks project with gas either originating from the North Slope, as previously planned, or from the gas producing fields of Cook Inlet.

Last week Governor Walker surprised many when we reported on a AIDEA news release disclosing that it would be undertaking a new, Cook Inlet-based LNG project that would likely displace interested private parties, including Ray Latchem, a highly experienced and successful Alaskan entrepreneur and Hilcorp a leading Cook Inlet oil and gas producer and an important, new Alaska North Slope operator with ability to assume risk and acquire all the LNG/gas distribution expertise that might be required for such a project. 

No sooner had one AIDEA-sponsored Fairbanks LNG Trucking Project expired than a new administration ordered it to, Phoenix-like, raise a new government project from the ashes of the old rather than reaching out for an expression of private interest and investment.

By pure happenstance yesterday, we received an extremely detailed email from Latchem, a man who is, arguably, the most experienced small LNG plant developer in the State's history and perhaps one of the best in the world.  We think our readers will find both his email to us and his letter addressed to Governor Bill Walker to be highly informative, filled with history and facts.

We would like to have a similar document from Hilcorp.  Having been a regulator and worked for producing oil and gas companies I can understand should its management have any reluctance to defend whatever plans it may have had — or still might have — in a way that might be perceived as offensive to the State of Alaska, the Lessor, the Regulater.

Tomorrow, we'll close with a brief, Part III.

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Please remember that we provide our news links, maps, presentations, documents and commentary for the archives–so that those who follow us will have access to decades of data on Northern North American gas pipelines and the energy related policies affecting them.  We are especially concerned with accuracy in our own commentary, for while we follow these issues closely, we depend upon the eyes and brains of dozens of experts who regularly correspond with us.

Whenever a correction or addition to one of our commentaries is merited, we make the change so that the archives have the best possible information.  Of course, we do not normally change our editorial position, but will even do that if a factual error is the basis for an editorial opinion.  Accordingly, your input is invited all the time.  Thank you for your readership!  -dh