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      This is your public service 1-stop-shop for Alaskan and Canadian Arctic energy commentary, news, history, projects and people. We update it daily for you. It is the most timely and complete northern energy archive anywhere — used by media, academia, government and industry officials throughout the world. Northern Gas Pipelines may be the oldest Alaska blog; we invite readers to name others existing before 2001.  -dh


Federal Obstruction

9-28-15 Shell Abandons Alaska Arctic Exploration

28 September 2015 1:30am

See Our Aussie Energy Expert's Current View On Alaska's Energy 'Leadership'

See Senator Lisa Murkowski's Reaction To Shell's Announcement

ADN/AP Shell Announcement by Dan Joling/Yereth Rosen

Our Commentary On Shell's Alaskan Arctic OCS Exit

With Alaska's "Plan B" failing what's wrong with relying again on "Plan A"?


Dave Harbour

Alaskans will be seriously questioning the future of their state when they wake up and read the news this morning.

This is because Alaska is more than any other North American state or province dependent on oil production and production is down, down, down.  

Alaska North Slope (ANS) production once fed about 20% of domestic oil supply at a rate in the '80s that exceeded 2 million barrels per day.

The Trans Alaska Pipeline System (TAPS) transporting that oil is about 40 years old now and -- as important as it still is -- it is merely a reflection of its former, vigorous self, losing about 5% of its throughput every year as ANS field production declines.  It's nearly 3/4 empty and without added production could shut down in a few years.

Shell's success could have helped sustain Alaska's job economy and ANS throughput in TAPS.

Alaska depends upon taxes and royalties from oil flowing through TAPS for almost 90% of its lavish state operating budget.  

Recent statistics label it the highest per capita spending state in the nation and the highest per capita debtor state in the nation.  It has the highest number of non-profit corporations in the country per capita, most of which are directly or indirectly dependent on oil for at least part of their budgets.

Available state savings accounts currently protect a $3.5 - 4 billion annual operating deficit, but that savings will be gone in a year or two.  Even a return to $100/barrel oil would not put Alaska in the black based on current production and state spending trends.

In addition, over a third of the 49th State's total economy depends on oil revenue and oil-dependent jobs.

Plan A

With falling production and increased opposition to oil operations both within and from outside Alaska, state policy has drifted aimlessly for many years.

It has pretty much been a policy of tax oil and spend that oil money while minimizing taxes/fees on people and maximizing transfers of state wealth to them.

"Plan A" first began to surface in the mid-1980s when various business groups began advocating for a constitutional amendment limiting government spending via a population and inflation formula.

By the early 1990s the University of Alaska's Institute of Social and Economic Research (ISER) began showing the public and elected leaders how very modest spending controls THEN could have provided a "safe" and sustainable glide path toward a long-term, sustainable economy for current and future generations.

ISER has provided another path to sustainability (i.e. "Maximum Sustainable Yield") for the last few years, also largely ignored.

Neither an effective constitutional spending limit nor economically viable "safe economic landing" were embraced by those holding the purse strings and whose pleasure and reelection were sustained by taxing oil and spending on constituent desires.  (Note: Civic groups did succeed passing, in 1982, an amendment, but lawmakers loosened it to allow capital project designations, among others, to weaken the stricter "population and inflation" formula.  (Alaska Constitution, Article IX, Sec. 16)

Plan B

With oil income falling and spending continuing to increase over the years, even the most deluded politicians could see that "something should be done".

We call that "something" the strategy of hope, which took four forms:

a.  Hope that the 1980 Alaska National Interest Lands Conservation Act's congressionally authorized "1002" area within the Arctic National Wildlife Range (ANWR) would be successfully developed, contributing to TAPS throughput, jobs and economic stability; and

b.  Hope that sufficient new oil would be found in the National Petroleum Reserve Alaska to maintain robust throughput of TAPS, state economic stability and jobs; and 

c.  Hope that sufficient new oil would be found within existing Alaska North Slope fields and other state lands to maintain robust throughput of TAPS, jobs and state economic stability; and

d. Hope that sufficient new oil would be found in the Alaskan Arctic OCS to maintain robust throughput of TAPS, jobs and state economic stability.

And wouldn't it have been nice if all four hoped-four outcomes had materialized?

How has the strategy of hope worked out for Alaska?

Well, the State has continued its upward spending and taxing trend, somewhat ameliorated by an oil tax reform law two years ago, but continually challenged by liberal lawmakers and their constituencies since then.

The president is operating the federally owned land in ANWR as if it were a wilderness area -- part of his end run around Congress using the 'pen and a phone' tactic.

The president's Bureau of Land Management (BLM) has promulgated regulations that effectively 'lock up' half of the National Petroleum Reserve Alaska (NPR-A).  Together with other regulatory agencies like the EPA, BLM has also significantly delayed and increased the expense of new oil production in areas of NPR-A that are open to exploration and development.

The current Governor is raising the old Palin flag of populism and anti-oil rhetoric, threatening the oil industry, endangering a pending LNG project, and signaling investors that investment even in existing oil fields -- and other state lands -- is accompanied by a high risk premium.  Some even believe that the objective of the current governor is to socialize the energy industry (Our notes, here and here).

Now, on top of these first three disappointing Plan B results comes Shell's decision based, in part, on a hostile, federal regulatory regime.


Plan A -- involving support for Alaska's major industry and spending discipline -- didn't work out when the Plan B strategy of hope offered the above 4 lifelines.

Now that the reality is setting in that there is so little hope for the strategy of hope,  Alaska may be forced to reconsider the best approach of all: the original Plan A.

Plan A has the negative qualities of being distasteful to big public spending and high oil taxing constituencies.

It requires citizens to 'do without' certain government amenities.

It requires lawmakers and the governor to seek the high road, be the adults in the room and prepare a sustainable economy for the next generation.  This includes fighting the hostile and debilitating overreach of the federal government.

But Plan A has the major benefit of preventing intergenerational inequity, of providing a sustainable economy for Alaska's children rather than robbing their generation to secure the selfish wants of this generation.

Keep watching.  We'll know the political class for what it is after absorbing today's news.  

Will politicians embrace Plan A along with the dedication and self discipline it requires?  

Or, will they do everything to avoid political pain at the expense of the next generation (i.e. as the federal government has done), perhaps by constructing a Plan C that is no more responsible than Plan B's strategy of hope?

Royal Dutch Shell will cease exploration in Arctic waters off Alaska's coast following disappointing results from an exploratory well backed by billions in investment and years of work


Shell has spent upward of $7 billion on Arctic offshore exploration, including $2.1 billion in 2008 for leases in the Chukchi Sea off Alaska's northwest coast, where an exploratory well about 80 miles off shore drilled to 6,800 feet but yielded disappointing results.


"Shell continues to see important exploration potential in the basin, and the area is likely to ultimately be of strategic importance to Alaska and the U.S.," Marvin Odum, president of Shell USA, said in The Hague, Netherlands. "However, this is a clearly disappointing exploration outcome for this part of the basin."

Shell will end exploration off Alaska "for the foreseeable future," the company said, because of the well results and because of the "challenging and unpredictable federal regulatory environment in offshore Alaska.  (Our emphasis added.  -dh)

The Burger J well drilled this summer will be plugged and abandoned, Shell spokeswoman Megan Baldino said. 

Read more at ADN...

Other references will be added here:


Alaska's LNG Prospects

Today, our Aussie oil and gas analyst friend wrote:

Further to the news story on Friday about the sovereign risks facing LNG projects even in the USA, such as Alaska LNG (AKLNG)  - Alaska's populist Governor has subsequently formally introduced a concept that no doubt will look attractive to his peers in Mozambique, Tanzania, etc - a "gas reserves tax".  

The intent of this concept is to tax resources in the ground, thereby presumably encouraging oil companies to develop assets.

The concept shows a fundamental lack of understanding as to what are "reserves" - which seems surprising for a State which is built on the oil industry.  

Although Alaska's North Slope contains very substantial and well understood contingent resources of gas - it contains no gas reserves and will not do so until AKLNG reaches FID (i.e. reserves require commerciality).  

By seeking to tax in-ground resources, Alaska's Governor reduces the chances of such resources actually becoming (commercially available) reserves.

Free subscription to Aussie Oil & Gas Observer


September 25, 2015


Regular readers will know that this blog considers the Alaska LNG (AKLNG) project to be the Aesopian tortoise of the LNG project world – not as flashy as some, but plodding towards first gas next decade.

However, that tortoise carries a heavy shell that would be familiar to LNG project proponents in most locations around the world – a Government that wants to maximize its share of something that does not as yet exist – and therefore risks getting a larger share in nothing rather than a reasonable share in something.

Australian readers of this blog will likely be familiar with only one Alaskan Governor – the surprisingly socialist (when it comes to taxing oil companies) Sarah Palin.  Her populist instincts live on in the State and even the Russian news service Interfax today points out that AKLNG risks being bogged down by politics 

Alaskan based website Northern Gas Pipelines  today provides an update on the latest Government meddling in AKLNG and asks the reasonable question – “with so many government cooks in the LNG kitchen, really, what could possibly go wrong?”

SitNews, Ketchikan, Alaska, by Mary Kauffman

Alaska Governor Bill Walker issued a proclamation Thursday calling the Alaska Legislature into a special session next month to consider legislation to move a project forward to get the natural gas on the North Slope to market. Efforts to to commercialize North Slope gas dates back to the 1970s.

Addressing what the Governor describes as the urgency of North Slope gas production, Walker called the special session to be held in Juneau on October 24th.

“With a $3.5 billion budget deficit, this gasline project has gone from a wish-list item to a must-have,” said Governor Walker. “Under the negotiation process I inherited, very little has been accomplished on the commercial agreements. It is time to make the necessary legislative changes so a single party cannot delay the production of Alaska’s natural gas resources and sway our destiny.”

Senator Lisa Murkowski's reaction to Shell's announcement

U.S. Sen. Lisa Murkowski, R-Alaska, today released the following statement regarding Shell’s decision to suspend operations in Alaska’s offshore waters:

“I am extremely disappointed by this decision, just as I have been deeply frustrated by the years-long path that led to it.

“In the more than seven years that Shell has held leases in the Chukchi, it has only recently been allowed to complete a single well. What we have here is a case in which a company’s commercial efforts could not overcome a burdensome and often contradictory regulatory environment. The Interior Department has made no effort to extend lease terms, as recommended by the National Petroleum Council. Instead, Interior placed significant limits on this season’s activities, which resulted in a drilling rig sitting idle, and is widely expected to issue additional regulations in the coming weeks that will make it even harder to drill. Add this all up, and it is clear that the federal regulatory environment – uncertain, everchanging, and continuing to deteriorate – was a significant factor in Shell’s decision.

“What we need – but still do not have – is a predictable and sensible regulatory system both onshore and offshore that encourages companies to make major investments in our future. Continued uncertainty will only further damage our competitiveness and our economy. And so today, I call on the administration to work with Alaskans – to develop a legitimate plan, driven by our input and preferences, to ensure the prolific resources in our federal areas are produced.

“There are many steps that can be taken, if the Interior Department and others commit to working with us. We must enable the sanctioning of GMT-1 and further development in NPR-A, rapidly progress Liberty and open new areas in the nearshore Beaufort Sea, extend offshore lease terms, conduct Lease Sale 237 as scheduled, finalize a strong Five-Year Plan for 2017-2022, provide for offshore revenue sharing, and expedite leasing throughout the state – including the non-wilderness portion of ANWR.

“There is also more at stake here than the current status of one company’s exploration program. Development in the Arctic is going to happen – if not here, then in Russia and Canada, and by non-Arctic nations. I personally believe that America should lead the way. The Arctic is crucial to our entire nation’s future, and we can no longer rely solely on private companies to bring investments in science and infrastructure to the region. As the Arctic continues to open, we urgently need to accelerate our national security investments in icebreakers, ports, and other necessities.”  (See the source here.)


Southeast GreenPACE Says EPA's Clean Power Plan Would Raise Consumer Costs, Yet Fail to Lower Earth's Temperature 
The Partnership for Affordable Clean Energy (PACE) issued a statement today that criticized the Environmental Protection Agency's unprecedented mandate on carbon dioxide emissions under its Clean Air Plan, especially the change to demand more reductions by 2030.
DC City Biz ListOffshore Drilling Could Boost The Economy Or Be An Unnecessary Risk
Drilling for oil the coast of Virginia is either a chance to boost the economy or an unnecessary risk for beachfront communities and the environment. Voices on both sides of the argument were in Richmond on Thursday for a forum hosted by the Consumer Energy Alliance.
Consumer Energy AllianceCEA Leads Discussion on the Need for Responsible Atlantic Offshore Energy Development
Consumer Energy Alliance today hosted the 2015 Atlantic Energy Forum in Richmond, Virginia, featuring Abigail Ross Hopper, Director of the Bureau of Ocean Energy Management and other distinguished panelists.
New York TimesShell Abandons Disappointing Offshore Alaskan Well
Royal Dutch Shell said Monday that it would stop exploration off the coast of Alaska “for the foreseeable future.” The decision came after the Burger J well, which the company drilled this summer, produced disappointing results. The company said the well had “found indications of oil and gas, but these are not sufficient to warrant further exploration” of the Burger prospect, a geological structure.
The HillSenate Dems tell Obama to end Arctic drilling
Some Senate Democrats are once again asking President Obama to end oil and natural gas drilling in the Arctic Ocean. In a letter Friday, 12 senators asked Obama to block any additional drilling after Royal Dutch Shell wraps up its exploratory drilling in the Chukchi Sea, northwest of Alaska, this fall.
The HillClinton explains shift on Keystone, other key issues
Hillary Clinton on Sunday pointed to the nation’s shifting energy profile for her opposition to the Keystone XL pipeline after she had initially seemed to voice support for its construction. In an interview on NBC’s “Meet the Press,” Chuck Todd asked Clinton if her position on Keystone had changed as a matter of political expediency.
Post and CourierHillary’s slick move on XL pipeline
Hillary Clinton continued her unimpeded march toward the Democratic presidential nomination for 2016 by announcing her opposition to the Keystone XL pipeline. In doing so, she checked another box on her campaign strategy list, reassuring some core Democratic voters and probably ensuring some large campaign contributions.
The HillEnergy empowers the world’s poor
The White House, the United Nations, even the Vatican are in full court press for action to reduce manmade global warming at the climate summit in December. Many well-intentioned people believe manmade global warming is so dangerous we should spend trillions trying to prevent it by reducing emissions of carbon dioxide (CO2), which would require tremendous reductions in fossil fuel use.
FortuneWhy America’s power grid needs natural gas now more than ever
Now that the Obama administration has finalized its Clean Power Plan regulating greenhouse gas (GHG) emissions from the power sector, the focus of attention turns to the states, which must now find a way to reduce emissions consistent with the Plan. One question states face as they envision a lower carbon future is how much to rely on natural gas-fired generation.
Washington ExaminerHouse sets vote to lift oil export ban
The House is set to consider a bill on the floor this week to lift a 40-year-old ban on exporting crude oil from the United States. The bill is being supported by the House leadership as integral to the Republican energy agenda this Congress, and many high-level lawmakers have vowed to see it passed before the end of the year.
BloombergOil Traders May Look to the Sea for Profit Amid Price Collapse
The global oil glut may soon expand to the ocean. While traders are already cashing in on the surplus by housing oil in onshore tanks across the globe -- including on the tiny Caribbean island of St. Lucia-- expanding the storage to tankers at sea may near a point where it becomes profitable, according to Citigroup Inc., Goldman Sachs Group Inc. and IHS Maritime & Trade.
Associated PressAlaska’s Walker brushes aside reserves tax criticism
Gov. Bill Walker on Friday brushed aside criticism from Republican lawmakers that they were blindsided by his call to reinstate the gas reserves tax during the upcoming special session. “I sat right at this table and talked about fiscal certainty and project certainty,” Walker said during a news conference at his Anchorage office. He met with lawmakersMonday to inform them of his call for the special session, which starts Oct. 24 in Juneau.
Alaska Highway NewsDespite fracking fights, resource extraction key for Peace Region, says NDP candidate
When Kathi Dickie was considering whether to run for parliament as a New Democrat in Northeast B.C., one question was on the top of her mind. "My question to the NDP was if you're against development of our natural resources, then I'm not your candidate," Dickie told the party brass.
Beaumont EnterpriseKeystone XL Pipeline needs market decision
Democratic presidential candidate Hillary Clinton came out against the Keystone XL Pipeline last week, a decision that will have an impact on the 2016 race. And Southeast Texas, because the Valero refinery in Port Arthur would process 150,000 barrels a day of tar sands crude from Canada - if it ever gets here.
Midland Reporter-TelegramGovernment agency plans intensive safety study - Two-year project targets all aspects of oil and gas industry
High salaries and soaring numbers of new jobs were not the only things attracting attention as the oil and gas industry boomed in recent years. Industry fatality, injury and exposure rates drew focus, especially from the National Institute for Occupational Safety and Health, part of the Centers for Disease Control and Prevention.
Fuel FixCalifornia regulators restore emissions-cutting fuel rule
California regulators on Friday restored ambitious rules to cut transportation fuel emissions 10 percent within 5 years. The rules further strengthen California’s toughest-in-the-nation carbon emissions standards, but oil producers warn the changes could drive up costs for consumers at the gas pump.
Denver PostColorado oil companies say they are safer, stats say otherwise
The country's oil and gas companies say they are cooperating more and working harder to make jobs safer for employees even as a new report suggests oil-field work has never been more dangerous. The industry touts the rise of training networks, partnerships with governments and tough certification standards as helping to improve the work environment in one of the most dangerous jobs in the country.
Fuel FixPro-industry group throws support behind drilling on Texas university land
A pro-industry group is firing back at calls by environmental advocates to restrict drilling on university land in Texas, arguing that oil and gas revenue has provided massive financial support for the University of Texas and Texas A&M.  
Houston ChronicleCommunity colleges offer training for petrochem jobs
Petrochemical plants along the Texas Gulf Coast and the Port of Houston are spending billions of dollars to expand facilities. It is estimated that these projects, along with the retirement of existing workers, will provide jobs for more than 50,000 skilled workers.
Austin American-StatesmanHouser: Concerns about fracking on UT land overstated
University Lands, which comprises about 2.1 million acres of land in West Texas, is a resource unlike any other in the nation. The lands were set aside in 1839 specifically to benefit Texas higher education. Today, more than 20 academic and health institutions in the University of Texas and Texas A&M systems benefit from these assets.
Baton Rouge AdvocateOur Views: New roles for natural gas, including on the road, will help Louisiana’s growing natural gas industry
The price of oil is sharply down from last year, but if there’s one thing Louisiana has still got, it’s lots of natural gas at a historically low price level. That is of course good news for the metropolitan areas of the state, including big refineries in Baton Rouge and Lake Charles and in the River Parishes above New Orleans.
Columbus DispatchOil, gas industry boosts local economy
There is no question, these are tough times for Ohio’s oil and gas industry. Prices for crude oil and natural gas are at their lowest levels in decades. The downturn in prices and drilling activity has caused many people to ask questions: Is Ohio’s oil and gas industry still a major contributor to our local economy? How important is this industry to the average Ohioan? The answers are yes, and, in fact, more important now than ever.
Washington TimesGOP will allow tax vote, if Democrats secure enough support
Leaders of the Pennsylvania Legislature’s Republican majorities will allow a floor vote on a budget package that includes an income or sales tax increase if Democrats can secure enough support to pass it, officials said Friday.
Tribune-Review2 Marcellus pipeline projects move forward
Two large pipeline projects aimed at easing a glut of natural gas from the Marcellus shale advanced in the federal permitting process this week. Houston-based Columbia Pipeline Group said its proposal to build the $2 billion, 165-mile Mountaineer Xpress in West Virginia entered a pre-filing phase before the Federal Energy Regulatory Commission.
WKBNJudge tosses Pa. landowners’ lawsuit against fracking opponents
A judge has dismissed a lawsuit that landowners filed against people and groups who oppose fracking in a western Pennsylvania township. Natural gas drilling has been delayed in Middlesex, Butler County while some of the rural community’s 800 residents challenge a zoning ordinance that would allow drilling in 90 percent of the rural township.
Myrtle Beach Sun NewsOffshore Wind a Viable Source for Future Electrical Energy
It’s evident, or should be, that electrical energy in the future will come from sources other than fossil fuels such as coal, oil or even natural gas. Offshore winds are one of the most viable alternate energy sources and coastal South Carolina residents should applaud ongoing efforts to produce power from the wind.


9-15-15 "Tell It Like It Is"

15 September 2015 9:28am

Yesterday: LNG Prospects Lower.  Now: Hawaii, NOT a Prospective Customer For BC and Alaska

Yes, Low Oil Prices Also Affect Service Industries and Their Thousands of Employees and Sub Contractors!

EPA Alert

Calgary's New "Tell It Like It Is Leader"

Big OCS News Today: New Moratorium!

Reader Commentary, Below, and Our Reaction

Commentary, "Telling it like it is" carries with it a responsibility for diligence and judgment: We are honored to receive so many calls and emails every week, over many years, from readers throughout the world.  We hardly ever make public note of such moving messages, but we have archived a few here.  

We are deeply grateful for our reader interaction and wish to highlight these two examples (i.e. left column) today out of respect and appreciation for all faithful readers.

Such support keeps us going strong.  We know that industry cannot often "tell it like it is," for it is natural to fear that criticizing a local, state or federal regulator can produce retribution and shareholder losses.  This in a country wherein government has grown to not fear the people, as the Constitution envisioned.  

Ordinary citizens can't often take the time to study and communicate their reaction to complex energy issues; they just don't like the general result.

News media stories and editorials are pretty much sanitized by management.

So, it falls to independents like us to try to connect the dots and keep our readers informed via links, associations and commentary.  And we want you to know that we know our credibility rests upon our sense of responsibility and judgment.

With your continued support, we will not be deterred from performing this duty as responsibly and with as much good judgment as possible.  -dh 

 ...glad you provide this information.   It keeps us IN THE LOOP!  Have a GREAT WEEK, DAVE!  Bunny and Al Chong

... Most importantly you add such wealth of Knowledge on our energy  and industrial and political business news in Alaska. 

You are read by many and are the only news letter that covers all the economic and environmental concerns that occur in Alaska and DC as well as sister energy States like North Dakota and Wyoming. 

I do not know why others do not more aggressively cover the government and especially the "Political Industry"....  Thanks, Dave.   Paul Richards

Comment: Way to go, Marcella Munro!  Could Canada be thirsting as much for anti-PC, "tell it like it is" truth-telling leaders as the U.S.?!!!

Calgary Herald by Don Braid.  Marcella Munro, Premier Rachel Notley’s suddenly controversial new hire at McDougall Centre, has a surprising answer when asked if she’s against pipelines and the oilsands.

“Me? My BMW 325i is my favourite possession. There is no planet on which I could try to argue against the oilsands. I love all the good things petroleum does for me — including driving too fast on Highway 2.”

Notley’s new Calgary “outreach” director certainly isn’t hiding under the stairs at McDougall after being fiercely attacked by the Wildrose and PCs.

EPA ALERT: Let's mark our Thursday calendars.  We would bet EPA will swiftly change tactics from apologizing for incompetence to avoiding blame and liability (i.e. Lawyer talk: "We are sorry for the inconvenience but were just doing our job to clean up industry's mess."  -dh)

Committee on Natural Resources and Committee on Oversight and Government Reform to Hold Joint Hearing on the EPA’s Animas Spill.

WASHINGTON, D.C. – On Thursday, September 17, 2015, at 10:00 AM, in Room 2167 Rayburn House Office Building, the Committee on Natural Resources and the Committee on Oversight and Government Reform will hold a joint oversight hearing titled, “EPA’s Animas Spill.”


Committee on Natural Resources and Committee on Oversight and Government Reform joint oversight hearing titled, “EPA’s Animas Spill”

WHEN: Thursday, September 17, 10:00 AM 

WHERE: 2167 Rayburn House Office Building

Visit the Committee Calendar for additional information, once it is made available. The meeting is open to the public and a live video stream will be broadcast at House Committee on Natural Resources.  

LNG Prospects

The Asia Pacific Resilience Summit kicked off this morning, an event that showcases clean tech solutions for island grids, communities, and military applications across the Pacific. The opening keynote speaker, Governor David Ige, wasted no time in making major headlines, stating, for the first time publicly, a strong opposition to proposed LNG projects.


Yes, Low Oil Prices Also Affect Support Industries!  

Just as oil and gas producers and taxing governments are affected by low oil prices, so are the support industries and their thousands of employees, subcontractors and shareholders.  Today, we bring you a few words from our respected, anonymous energy consultant friend from the Mid Atlantic region.  -dh

"We have continually pointed out that the business models of the private equity companies and the E&P industry could hardly be more antithetical to each other. Cash flow back to the investor is a necessary part of the PE investment strategy, while E&Ps think positive cash flows are for sissies and big, dumb integrated oil companies. But the flood of money into the market and low interest rates have brought them together.  Can this marriage be salvaged?

"One ancillary thought: Given the cash shortage for E&Ps for 2016, the Service Companies may get hit worse.

"Here are some thoughts from Wunderlich Securities on the prospects:"

Below the surface of the energy market, we believe that there exists a confluence of factors ready to bubble up and impact E&Ps, OFS, and MLPs. With continually low natural gas prices, abysmal NGL prices, very weak oil prices, and no V-shaped recovery in sight...

...structural shifts in the energy landscape.... Private equity continues to have a considerable interest in the space ... some banks may look to reduce their exposure.... the amount of funds in the space could remain very high. However, the cost of those funds could also be rising as funding from private equity replaces more conventional sources. ...with commodity prices making new lows and fewer hedges in 2016 than in 2015, we think there is a confluence of factors that could alter the energy landscape in the coming 3-6 months....

Big OCS News Today

Obama Administration’s Regulatory Agenda will Result in Virtual Moratorium on Gulf Offshore Energy Development

Administration’s Policies “Undermine Safety, Rather Than Enhance It”

WASHINGTON, D.C. – Today, the House Committee on Natural Resources held an oversight hearing in New Orleans, LA, on the current state of offshore oil and gas activity in the Gulf of Mexico.  The panel received testimony from U.S. Senators David Vitter (R-LA) and Bill Cassidy (R-LA), industry representatives, and the U.S. Department of the Interior’s (DOI) Bureau of Safety and Environmental Enforcement (BSEE).

The hearing focused on the impact of federal policies on energy development in the Gulf, including DOI’s proposed well control rule, and what actions can be taken to promote the responsible development of outer Continental Shelf (OCS) resources.

"Federal regulations such as the proposed well-control threaten another moratorium by shutting down the majority of the Gulf rig fleet.  Some provisions of this rule could actually undermine safety, rather than enhance it," stated Committee on Natural Resources Chairman Rob Bishop (R-UT). "Other federal measures, such as the crude export ban, limit new market opportunities and U.S. production potential. We should encourage the production of affordable energy, not continue decades-old policies that force companies to shut-in those resources because they are not economic to bring to market."

"This administration's energy policy appears to have two objectives: cause Louisianans to lose their jobs and continue our dependence on foreign oil,” stated Rep. Garrett Graves (R-LA). “We have already been through the moratorium and permitorium where the federal government shutdown the Gulf of Mexico's energy fields. These new illogical regulations on the offshore industry –  conceived in a vacuum with insufficient stakeholder input – will not ensure safe exploration and production operations,  but they will result in less production, more supply boats tied up and more people losing their energy jobs."

“The Obama Administration was held in contempt of court over its previous moratorium in the Gulf, so now President Obama is seeking through regulation to create a new moratorium by making it prohibitively expensive to drill in the Gulf,” stated Water, Power and Oceans Subcommittee Chairman John Fleming (R-LA). “I’m glad the BSEE will finally be sitting down with industry experts, but it’s a shame they didn’t do that from the start."



9-7-15 BLM Cleanup Progress: Thanks to an Alaska Senator and Chairman of the Alaska Oil and Gas Conservation Commission

07 September 2015 7:23pm

BLM completes Cape Simpson cleanup work - 09/06/2015 (Login to read Full story) The federal Bureau of Land Management said Sept. 1 that it has completed cleanup of Cape Simpson legacy well sites in the National Petroleum Reserve-Alaska. BLM said it facilitated removal of surface debris through an inter-agency agreement with the U.S. Army Corps of Engineers. The corps contracte....

Read the 'rest of the story', beginning in 2012 and long before....  -dh


9-1-15 President Obama Visits Alaska

01 September 2015 5:27am

See a broad array of Presidental visit news and feature items in today's (9-1-15) Alaska Dispatch News

Alice Rogoff, Anchorage Dispatch, President Obama, dinner, fund raiser, Alaska oil and gas, climate change, China, Oil prices, stock market, photo by Dave HarbourComment: President Barack Obama dined last night at the Anchorage home of Alaska Dispatch Publisher Alice Rogoff (NGP Photo).  We hope that in addition to climate change issues, Alaska's major publisher was able to also discuss other matters. 

Read other national and international news accounts of President Obama's Alaska visit, here.  

We provided additional links, yesterday, here.

Alaska's dependence and constitutional reliance on natural resources largely rest upon Trans Alaska Pipeline System (TAPS) sustainability.  This is because 90% of the state operating budget and over a third of Alaska's economy are based on oil revenue.

TAPS' sustainability, the President should know, depends in large measure on federal policies affecting the National Petroleum Reserve-Alaska; the Alaska National Wildlife Refuge (1002 area); oil and gas lease sales; energy project permitting, regulation and conditions.  

Rogoff, a well known organizer of Arctic forums would also be in a good position to emphasize the importance of protecting US jurisdiction in the Arctic.  Guarding American interests is particularly important as Russia becomes more and more provocative in staking out high value oil and gas resources in the Arctic, building infrastructure and increasing its military presence.  

We have noted Canada's diligence in caring for its Arctic domain.  The United States, Canada's NORAD partner, should be doing the same.    -dh



31 August 2015 7:58am

As President Barak Obama begins his Alaska visit today, we bring readers these observations from our energy consultant friends...and others (i.e.
ADNNYT, CNN, NPR, CBS, Reuters, USA Today (Note: "Climate Change" overtakes energy as focus of trip...consistent with the Obama policy of elevating climate change as top 'national security' priority.  -dh)

Our great Aussie energy consultant friend begins the week with this observation, beginning with news of an ENI natural gas discovery in Egyptian waters, almost equal to the 35 TCF of stranded Alaska North Slope gas.

  • Italian oil and gas giant ENI reported a major gas discovery over the weekend.  This was the finding of a ~30 TCF (gas-in-place) gas-field in deep water off-shore Egypt.  The company has already signalled that it will pursue its development aggressively.

  • Gas in Egypt can readily feed both the nation's voracious energy needs and export markets through existing liquefaction infrastructure. The find will no doubt disappoint neighbour Israel, from both monetary and geo-political stability points of view, who was hoping to supply Egypt from its own large offshore gas fields.

  • In theory this find could indicate that there is a whole trend of deepwater gas fields remaining to be discovered in the Eastern Mediterranean - with profound implications for European gas markets, Russian ambitions for the Turk-stream pipeline, etc.

  • As we noted last week, Putin is due to visit China this week, but hopes of signing some sort of deal during that visit over the Altai (AKA the Western route pipeline, or the Power of Siberia-2 pipeline) appear slim.  Recent media reports have instead suggested that some sort of deal could be inked over the supply of gas to China from Vladivostock (sourced by pipeline from Sakhalin Island). 

In the midst of market volativity and the Obama Administration EPA initiatives against carbon fuels, our unnamed, Mid-Atlantic energy consultant friend offers this observation: 

We caution investors against overreacting to the near-term impact of the final Clean Power Plant (CPP) rule, and observe that the rule's effects will likely vary across the country and across companies.  There are several reasons to be skeptical that the rule will be as impactful in reality as it now appears.   How exactly the CPP influences individual firms, utility or otherwise, will hinge on their specific circumstances and the approaches particular states take toward compliance, which will take years to play out. 
·         Very Lengthy Implementation. It will take many years before the rule is truly 
·         State Cooperation Remains Key, Although Problematic. The rule’s effectiveness hinges upon state cooperation, which is far from assured.  Large coal burning and mining states have already expressed their disdain for the rule, and in many cases have filed or backed lawsuits opposing it.  It is very questionable whether key coal burning states will cooperate with EPA to develop adequate SIPs in a timely fashion, or at all.  While EPA can develop state specific Federal Implementation Plans (FIPs) as an alternative, that would take time and be challenging to put into effect. 
·         Litigation. Until now, legal challenges of the rule have been deemed legally premature.  Now, with the rule out and due to be published in the Federal Register, those hurdles will lift, allowing litigation to commence.  Since these suits will proceed over many months, they won’t stop some states from developing SIPs and submitting them for EPA review in the interim.  We maintain that the rule is legally vulnerable on several grounds, including its call forreductions in emissions from outside the fences of power plants, and its statutory underpinning, Section 111(d) of the Clean Air Act, which has not been thoroughly litigated in the past. 
·         The Next Administration Will Moderate the Rule.  Regardless of who wins the White House in 2016, Republican or Democrat, they are going to put their imprimatur on the CPP.  A Republican would likely stop implementation and direct the EPA to come up with a new much less aggressive approach that would effectively put the rule on hold for several years.  A Democrat, with their eye on reelection, would likely retain the broad parameters of the rule, but adjust it to moderate the impact on key states like Ohio, Pennsylvania and Virginia, states that produce or burn significant amounts of coal.  Since the confirmation of a new EPA administrator will likely take at least six months and the confirmation of key EPA personnel upwards of one year, there will be a significant delay for any actual changes to the CPP.   


8-18-15 Outrageous Decisions

18 August 2015 3:00pm

Bill Walker, governor, Alaska, Standard and Poor's, downgrade, oil, taxes, john donne, ernest hemingway, for whom the bell tolls, Photo by Dave HarbourGovernor Bill Walker's Outrageous Decisions


Dave Harbour



Standard and Poor’s Ratings Services lowered the outlook on the State of Alaska’s credit rating from “stable” to “negative” on Aug. 18, and gave politicians one year to reorganize the fiscal house before the downgrades accelerate.

Standard and Poor’s wrote that the current budget deficit is inconsistent with the state’s “AAA” rating on its general obligation bonds and its “AA+” on appropriation-backed bonds, but cited the state’s still healthy budget reserves as a bridge that could maintain the high ratings.  (READ MORE HERE).

Note: Circa. 2007 your author (i.e. a regulatory commissioner at the time) had the responsibility of briefing approximately 20 investment companies and the three rating agencies in NYC on Alaska's fiscal challenges.  Approximately two dozen of those professionals have remained on our email alert list over the years.  These analysts are the best and the brightest in their financial fields and Alaskans should never be so provincial as to think that what is said and done here is not noticed by investors, analysts and lenders in New York and throughout the world.  

Alaska is not an Island unto itself....


Immediately after the November election Governor-elect Bill Walker (NGP Photo) assured assembled members of the Resource Development Council for Alaska that he was not their enemy.  

We suspected his poor performances over the years in a quixotic representation of the so-called "Port Authority" would be reflected in his governorship.  

But, we held out hope that performance of his new duties would match his significant charisma and public speaking talents.

Alas, to this watcher of Alaska's slumping economy, the new Governor has engaged in a pattern of poor decisions.

He announced opposition to the Alaska Gasline Development Authority (AGDC) concept of being a back up plan to deliver Alaska North Slope (ANS) Gas to the state's residents.

Then, he began to criticize the large gas transportation project aimed at both monetizing ANS gas through exports and providing taps along a pipeline right-of-way to residents.

We commend the major Alaskan investors/oil producers and Trans Canada for maintaining a stiff upper lip and good attitude as they continued their multi million dollar effort to prove the feasibility of the Ak-LNG project amid a volatile world economy and a failing and unsustainable Alaska economy.

Meanwhile, appearing to do everything possible to discourage the state's largest investors, he began touting his ability to use AGDC as a vehicle for competing with the major Ak-LNG project.  Many of us were bewildered at the strategy, or lack thereof, that could lead a Governor to support investment in one project, then advocate using another state organization to compete with it.  
Today, we are not bewildered by such decisions; we conclude them to be outrageous behavior by a public official.
In the early part of the year, the Governor began to hint that increased industry taxes might be part of the answer to Alaska's deficit budgeting.  Most savvy observers have long observed that in order for Alaska to become solvent again it must encourage more oil development, not discourage it.

With Alaska failing to balance its budget or even enact significant cuts in its spending, the state's governor proposed even more deficit spending: expanding Medicaid.

Following the Legislative session, earlier this summer, he vetoed legislative expenditures to fund tax credits lawfully accrued by oil producers for investments in the state.

He then championed expanded state involvement in creating a natural gas utility for Fairbanks but urged his 'independent board appointees' to the Alaska Industrial Development and Export Authority (AIDEA) to switch gas sources.  AIDEA now seeks to obtain expensive natural gas reserves (i.e. 3x higher than current, Lower 48 prices) from the limited Cook Inlet supplies serving the major population in South Central Alaska while abandoning the world class reserves on the ANS where gas could be obtained cheaper.

As we noted in yesterday's posting, Walker is now beginning to threaten the oil industry with a reserves tax -- an outrageous and hostile act that would tax private sector energy investors for NOT producing gas even if market timing indicated caution and prudence in project sanctioning.

Today, we note that Standard and Poor's has begun the process of downgrading Alaska's credit rating (i.e. story right column above).  Three ANS oil industry taxes and a royalty payment fund about 90% of Alaska's state government operating budget and support over a third of the state's economy.  The 40-year-old Prudhoe Bay field responsible for most of that wealth has been declining in recent years at a 5-7% annual rate.  The trans-Alaska pipeline transporting that crude oil to market is nearly 3/4 empty.  Major transportation difficulties are now on the horizon and without significantly increased oil throughput, the pipeline could shut down within just a few years--or sooner.

Meanwhile, Alaska will have burned through all of its major savings accounts within the next two-three years.  While a $55 billion Alaska Permanent Fund is a tempting source of cash, the state's Constitution prevents easy access to it.  In any case, spending that savings would not lead to a sustainable economy; it would just prolong the point of no return.

On top of the fact that the state is not earning what it spends...using its savings...and its governor wants to increase spending...three other factors portend economic disaster for Alaska absent masterful management of money and resources: 1) A nearly $10 billion unfunded liability in the State's employee retirement programs; 2) a steadily declining level of oil production; and 3) an average oil price this summer that is half of what it was last summer.

Were we advising the Governor, we would:

  • urge action that would support investment in the state--and honest partnership with investors.
  • We would significantly cut spending in America's highest per capita spending and debtor state.  
  • We would seriously attempt to wean the highest per capita population of not-for-profit corporations in America from state government largess.  
  • We would cut virtually all capital spending, save for maintenance (i.e. which really is in the operating category).
  • We would undertake whatever legislative changes that could lead to not overspending on public employee overhead.  
  • We would also cut all higher education spending that worked counter to Alaska's resource development priorities (i.e. mandated by Alaska's constitution), and
  • we would energetically fight the Federal government every step of the way as it, and its environmental allies, seek to scuttle the 49th ship of state.

Somehow, we think this Governor to be incapable of such decisiveness, though we are still open to being pleasantly surprised.  But we'd better be surprised quickly because a 'drop dead' date quickly approaches and to survive, Alaska needs a major policy overhaul.

If this doesn't happen, we are mindful of John Donne's 1624 observation, later made more famous by Ernest Hemingway, who predicted and then lived the reality of really tough times: the Spanish Civil War.  We hope Governor Bill Walker takes history to heart, for he, too, is no island unto himself.   Outrageously bad decisions can not only create a bad governor's legacy, but can forever injure the economic future of an entire state, our hopeful offspring and coming generations of our descendants.

"No man is an island, entire of itself; every man is a piece of the continent, a part of the main. If a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as if a manor of thy friend's or of thine own were: any man's death diminishes me, because I am involved in mankind, and therefore never send to know for whom the bell tolls; it tolls for thee."  -John Donne



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