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Northern Gas Pipelines is your public service 1-stop-shop for Alaska and Canadian Arctic energy commentary, news, history, projects and people. It is informal and rich with new information, updated daily. Here is the most timely and complete Arctic gas pipeline and northern energy archive available 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 suggest others existing before 2001.

 

Federal Obstruction

4-8-14 What Do Underfunded Pensions Have To Do With An Alaska Gas Pipeline?

08 April 2014 9:07am

Remember this announcement, 5 years ago today?  ANCHORAGE, April 8, 2008 - BP [NYSE: BP] and ConocoPhillips [NYSE: COP] today announced they have combined resources to start Denali - The Alaska Gas Pipeline. The pipeline will move approximately four billion cubic feet of natural gas per day to markets, and will be the largest private sector construction project ever built in North America. The project combines the financial strength, arctic experience and technical resources of two of the most capable and experienced companies in the world.


Globe & Mail.  The U.S. Energy Information Administration reported last week that Canadian oil exports to the United States are the highest in at least four decades. 

Today, CongressmanDoc Hastings, ESA, Photo by Dave Harbour Doc Hastings' (NGP Photo) House Natural Resources Committee held a Full Committee legislative hearing on four straightforward bills to update the Endangered Species Act (ESA) for the 21st century and improve species recovery.   This effort works in the favor of Alaska's and America's economy without diminishing reasonable support for protecting truly endangered species.  -dh


Does Alaska's Pension Liability Threaten Gas Pipeline Viability?

(See SitNews Ketchikan Reprint)

by

Dave Harbour

Alaska spends more than it takes in.  To that extent must investors worry about when -- and not if -- the next tax proposal will creep over the horizon toward THEM.  

Below is the link to an Op-Ed wherein mayors (i.e. whose own retirements are at risk with underfunded pension liabilities) urge lawmakers to support the Governor's proposal to reduce the $12 billion unfunded pension liability by $3 billion.

Bill Corbus, Juneau, State Spending, Mine, Electric Utility, Photo by Dave HarbourToday's Juneau Empire Op-Ed.  See long-time Alaskan utility and natural resource expert, Bill Corbus' (NGP Photo) related opinion.  -dh

To do that, lawmakers will have to remove $3 billion from state savings accounts at a time when their deficit spending level requires use of depleting savings.

Oil production from Prudhoe Bay is declining, upon which 90% of state spending is based.  Oil revenue could continue its dramatic, annual production decline putting more reliance on savings accounts to balance an unsustainable state budget.

See Alyeska Pipeline Service Company President Tom Barrett, Alyeska Pipeline, oil, taxes, production, TAPS, Photo by Dave HarbourTom Barrett's (NGP photo) response to yesterday's Alaska state revenue forecast.  We believe that better than projected production decline rates are due to the passage a year ago of SB 21, which reformed Alaska's oil production tax.  -dh

Paying off the entire pension liability is impossible since Alaska doesn't have $12 billion in total savings available.  (4-10-14 Note: See "Understanding Alaska's Budget".  Some might say we have over $20 billion in savings available; but since political reality prevents expenditure of most of these sources for "government pension fund liabilities," they should not all be considered available.) 

Gas pipeline investors have to be wondering, "If I commit to a portion of a $40 - 60 billion gas pipeline/LNG export project and the state continues running out of money, how safe is my investment from predatory tax policy?"

Alaska has a track record of taxing for more than it needs to operate and, to add insult to injury, taxing the oil industry retroactively.  It has built the highest cost per capita bureaucracy in the nation.  Now, in the face of rising costs and diminished revenues it is urging oil companies to invest in a mega gas pipeline project so that revenue from that project a decade from now can fund the state's spending appetite.

Link to our reports and commentary on LNG competition, here.

Energy advisor, Keith Kohl, says in his communique today that, " Like us, Canada's National Energy Board has approved seven LNG export license applications — but unlike us, the first project slated to start tapping the Asian LNG markets as early as next year."

Meanwhile, dozens of pending LNG export projects in the the US and Canada are all romancing the same Asian energy consumers.  Experienced observers know that profit margins will likely be thinner than they hope for.  Asian utility managers are not stupid.  They will want the lowest possible "ship or pay" cost for LNG energy in return for their own "take or pay", long-term financial commitments.  (Some good, Lower 48 researchers are excited about Alaska's prospects, but may not be fully aware of investor concerns or competitive pressures from other export projects that we have covered in these pages.  -dh)

The LNG project that offers the lowest, competitive price to an Asian utility in return for a 20-year, firm contract, cannot afford to risk company solvency on "assurances" that Alaska will not create new energy taxes out of thin air and even apply them retroactively--thus altering project metrics and risk.  The risk that the contracted delivery price of LNG to an Asian market could be lower than the cost of delivering the LNG -- under a "ship or pay" arrangement, may be an unacceptable risk to a responsible investor.

So the final question that any gas pipeline investor might be asking now is, "Can Alaska assure my company that today's gas pipeline investment is safe from future tax increases when unfunded pension liabilities, run-away budgets and diminishing oil production pose a dreadful danger in spite of Joe Griffith, In-state gas, gas pipeline, electric utility, MEA, CEA, Photo by Dave Harbour, ANGDA, CWNany politician's soothing assurances and best intentions?"  

As our friend, utility manager Joe Griffith (NGP Photo), has often said, "Hope is not a strategy."  We all hope for conditions that will enable sustainable budgets and projects to supply both the jobs and the financial resources of the future.  But hope alone will not achieve that goal.  

What then is an answer to this Gordian knot of intertwining politics and energy policy?  Cut public spending to be consistent with income.  Cut welfare/entitlement spending to be consistent with median welfare spending of all other states.  Business taxes should not exceed median of business taxes in other states.  Institute new taxes only on new investment, not on prior investment.  Never tax retroactively.  Cut tax and regulatory burdens to essential and responsible needs.  Avoid state investment into private sector projects--which always involves politicians risking "Other Peoples' Money".  Of course, there are as many suggestions as there are people with opinions.

So is some combination of these and other responsible remedies too difficult?  

If workable solutions are "too difficult" they will not be undertaken and undisciplined, unsustainable economic policies will ultimately result in involuntary compliance with economic realities.

Parents warn children that this is called, "learning the hard way".            

   


​Fairbanks News Miner, by Mayors John Eberhart, Luke Hopkins and Bryce Ward​.  

Gov. Sean Parnell’s budget includes a $3 billion line item to reduce the Public Employees Retirement System (PERS) and Teachers Retirement System (TRS) unfunded liability, which is about $12 billion. The mayors of Alaska, through the Alaska Conference of Mayors and the Alaska Municipal League, fully support the governor’s initiative to stop the can from being kicked down the road.

The state has attempted to make inroads in regard to this huge liability, but so far hasn’t had success. Every year the deficit has increased. The governor has stepped forward to address this issue in a responsible way.


Comment: Yesterday, April 7, 2014 the Alaska Department of Revenue issued its Spring 2014 Revenue Forecast.  We believe it provides a brighter outlook for a future, sustainable economy, if decision makers continue to support the sort of tax reform to which the increased production may be Tom Barrett, Alyeska Pipeline, TAPS, state revenue forecast, alaska, throughput, tax policy, Photo by Dave Harbourlargely attributed.  But for future years, a sustainable economy based almost entirely on the back of one industry needs serious, objective attention and problem solving.

Note that the forecast includes improved North Slope production and projects a lower decline than has been anticipated.   The following is from the office of Alyeska Pipeline Service Company President Tom Barrett (NGP Photo).  -dh

Barrett issued the following statement this morning:

“The Department of Revenue’s forecast is great news for TAPS.  This much needed upward shift in throughput is critical, because moving less oil through TAPS creates significant challenges for the men and women who work to keep the pipeline operating safely and reliably. Every barrel in TAPS counts and the prospect of thousands of additional barrels moving down the line is welcome news.” 

“We understand that Alaska depends on us to safely deliver the oil that funds so many state services.  That’s why Alyeska and the TAPS Owners have aggressively pursued solutions to declining flow.  But, as I have often said, ‘the best and most direct solution for TAPS is more oil.’”

“I applaud the Governor and the Legislature for fostering an environment that encourages more development.  The forecast reflects that the investments being made by the producers should pay off soon for Alaska.  That’s good news for TAPS and for everyone in the state.”

More information about the challenges of declining throughput is available at http://www.alyeska-pipe.com/TAPS/PipelineOperations/LowFlowOperations

About Alyeska Pipeline

For more than 36 years, Alyeska has operated the 800-mile Trans Alaska Pipeline System (TAPS), safely moving oil from Prudhoe Bay on the North Slope of Alaska south to the Port of Valdez, the northernmost ice-free port in the United States. The pipeline traverses three mountain ranges, permafrost regions and 34 major rivers and streams. Alyeska personnel work in Anchorage, Fairbanks and Valdez and at pump stations and response facilities all along the pipeline. They also operate the Ship Escort/Response Vessel System (SERVS) for Prince William Sound. Alyeska was created to construct, operate, and maintain TAPS for owner companies which today are BP Pipelines (Alaska), ConocoPhillips Transportation Alaska, ExxonMobil Pipeline Company and Unocal Pipeline Company

For more information, visit http://www.alyeska-pipe.com or follow Alyeska on Facebook or on Twitter at http://www.twitter.com/AlyeskaPipeline

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4-2-14

02 April 2014 6:33am

U.S. Sen. Lisa Murkowski (R-Alaska) today released a report demonstrating that the Department of Commerce retains the power to modernize its regulations and allow condensate exports.  

The report contains more than 40 pages of Commerce Department decisions from the 1970s and 1980s on expanded exports of residual fuel oil, petroleum coke, butane, specialty naphtha, and other petroleum-related products.

Fairbanks News Miner by Matt Buxton.  Mayors from communities along the route of a proposed natural gas pipeline still are wary about the project’s impacts despite Gov. Sean Parnell’s creation of a project review board.


E&E News (4/1/14) reports: A federal court in Washington, D.C., today upheld a pair of sweeping 2011 settlements between the Obama administration and environmental groups over the streamlining of endangered species decisions, concluding that a homebuilders coalition lacked standing to challenge them. It marked the fourth time in a row federal courts have determined groups have no basis for challenging the legal agreement signed with WildEarth Guardians and the Center for Biological Diversity.

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3-28-14

28 March 2014 10:30am

Roger Marks, alaska gas pipeline, Photo by Dave HarbourJuneau Empire.  Roger Marks (NGP Photo), a petroleum economist in private practice, gives the House Resources Committee his evaluation of Senate Bill 138 and the associated proposed North Slope natural gas commercialization proposals at the Capitol on Thursday.


Lisa Murkowski, Senate power, energy natural resources, interior department, Photo by Dave Harbour, Sally JewellNational Journal.  Two facts should keep Interior Secretary Sally Jewell awake at night.

First, if Republicans win the Senate, Alaska's Sen. Lisa Murkowski (NGP Photo) will wield tremendous leverage over Jewell's department. She would lead both the Energy and Natural Resources Committee that oversees the department and the Appropriations subcommittee that controls its budget.

Second, Murkowski is utterly furious with the Interior Department these days.

 

 

 

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3-25-14 A Frontal Attack On States' Rights

26 March 2014 6:03am

OP-Ed by Joseph Cafariello.  The EU’s 28 member states have mandated that the European Commission come up with a plan within three months to outline ways in which Europe can satisfy its energy needs without continued reliance on Russia.  (Energy Nation says, "Tell Congress To Increase LNG Exports"; Photo: Map of Ukraine gas pipelines bringing gas from Russia to the EU states.)


U.S. Senator Mary L. Landrieu, Chair of the Energy and Natural Resources Committee, yesterday called the proposed EPA wetlands rule unfair, unwise and unnecessary.’  (Murkowski also opposes EPA rule.)
Lisa Murkowsk, LNG Exports, Photo by Dave HarbourU.S. Sen. Lisa Murkowski (NGP Photo), yesterday called on the Obama administration to expand U.S. energy exports and unshackle the nation’s energy policies to spur economic activity and improve its geopolitical standing.​
Obama Administration selective enforcement of wildlife laws re: Energy.  Hearing today.  See letter.

Comment: A careful reading of this "Monuments" Op-Ed analysis -- released today -- would lead one to believe that Alaska is the poster child for massive federal government land ownership.  We believe this analysis demonstrates why the huge monument designations in the state should be found to be illegal.

Proclaiming vast land areas in Alaska to have massive restrictions under the Antiquities Act has removed multiple use and access to millions of acres that do not conform to the "historical" and "cultural" guidelines by which they were designated.  

Lastly, the Alaska Statehood Act was based in large measure on Alaskans' ability to make a living from the natural resources of the state.  While this concept referred more specifically to the 104.5 million acres specifically allocated to the state, Alaskans had traditionally survived and subsisted in part on use of what were, following statehood, multiple use federal lands.  

To, thus, restrict land access and use in the 49th state and elsewhere by presidential fiat, without approval either of Congress or the citizens of the affected state, is a gross misuse of the power to designate "National Monuments" under the Antiquities Act and a frontal attack on States' Rights.  -dh

OP-ED: Give the American People a Voice in the National Monument Process

Roll Call Op-Ed by Reps. Rob Bishop (UT-01) and Steve Daines (MT-At Large)  

March 25, 2014

The Antiquities Act was established in 1906 as a way for the president to single-handedly create new national monuments. The law provides the president with the express authority to proclaim “historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest” as national monuments, “the limits of which in all cases shall be confined to the smallest area compatible with the proper care and management of the objects to be protected.”

Today, the new era of national monuments consist of vast swaths of vacant federal land, not specific structures or landmarks.

The Antiquities Act followed on the heels of Westward Expansion, which brought looting and vandalism upon antiquities found on public land throughout newer states and former territories. The environmental laws and protections we have today, such as the National Historic Preservation Act, were not yet in existence, and the president needed a way to expeditiously protect federal lands under imminent threat. The very first national monument was established just three months after the law was enacted. President Theodore Roosevelt designated 1,152 acres in Wyoming as the Devils Tower National Monument. In the 108 years since, the law has been used a total of 137 times by 15 presidents.

While the intended purpose of the Antiquities Act is to protect artifacts of cultural and historic significance, it has been used over the past 108 years as a political arrow in the quiver of many presidents. The act has allowed both Democratic and Republican presidents to work outside of the transparent public process that all other individuals and federal agencies must follow. This is one of the law’s major flaws.

We don’t disagree that many of the spaces and places protected over the last century are worthy of national monument designations. However, not all of these designations were made with public involvement or widespread local support. Federal designations have too great of an impact on local communities for them to be made without the involvement of those closest to the ground. If the proposed designation has widespread support at the local level, presidents shouldn’t have a problem moving the designation through a public process.

In Congress, our committees and subcommittees hear from expert witnesses and local officials as part of legislative review. If the committee review process is positive, bills are more likely to move through the system. If committee reviews go badly, bills are rightfully stalled until the sticking points are addressed. Presidents are not subjected to these same checks and balances when it comes to the Antiquities Act. They are not required to engage the public throughout the process.

Like Congress, the president ought to formally be required to consider the input of local communities and states prior to declaring new national monuments. The inequity of unilateral action lends itself to heavy political influence and pressure from special interests. This is why we are supporting the Ensuring Public Involvement in the Creation of National Monuments Act, which would require the application of the National Environmental Protection Act (NEPA) to future national monument designations.

Though NEPA is another law largely in need of reform, public participation is at the core of its process, and by making this a requirement of future monument declarations we can ensure that those on the ground have a say in the process. The American people deserve to have input on new policies and laws that will affect their communities and livelihoods. The legislation importantly gives everyone a voice in the process, not just those who happen to have the ear of the president.

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3-13-14

13 March 2014 6:45am

Alaska Public Media by Alexandra Gutierrez.  The latest version of a bill advancing a natural gas megaproject restores language concerning collective bargaining.  The Senate Finance Co-Chair Pete Kelly announced on Tuesday evening that the committee will scrap the less specific language they had planned to use when dealing with labor terms.


Commentary: The following post by the Pebble Project precisely reflects the editorial position we have taken for several years.  

We would add that the White House has no business lecturing Russia and other nations on the importance of respecting "rule of law" when it has taken large steps in the last five years to diminish the American "rule of law" set forth by our founders.

Other examples of Obama Administration of "rule of law" violations include "Fast and Furious", "Uninforced immigration laws", "Unpunished IRS illegal targeting", "Uninforced voter intimidation", "Unpunished Violation of 1st Amendment (i.e. Fox News and AP)", "Illegal changes by fiat in Affordable Care Act to delay deadlines and exempt special interests from enforcement", etc.  

Even if we did not 'support' the Pebble Project, we should be both offended and fearful that EPA's violation of the First Amendment to the Constitution and to the permitting process in this case allows EPA and its environmental activist allies to stop any project anywhere at any time without regard to due process.  

Is this the America we were brought up to love, respect and defend with our lives, fortunes and sacred honor?  -dh

___________________________________

On February 28, EPA Administrator Gina McCarthy short-circuited the established National Environmental Permitting Act (NEPA) process rather than allowing the Pebble Partnership to design and submit an actual mine development proposal and have it fairly and objectively evaluated. EPA is potentially preparing to preclude Pebble development without ever seeing a proposed mine plan.

The NEPA process has been sufficient to evaluate and advance major Alaska resource development initiatives since its inception in 1970. Alaskans are familiar with NEPA and are confident that it works. The possibility of EPA preemptively vetoing projects before they’re even presented has many Alaskans thinking and talking about it:

David Wight, past president of the Alyeska Pipeline Service Co, is frank in his ADN editorial: “EPA choose wrong process to vet Pebble.”

Lorene Anelon, president of Iliamna Natives Limited, argues in favor of a return to NEPA in theBristol Bay Times, stating that “EPA action on Pebble fails to consider people of region.”

And the editorial staff of the Fairbanks Daily News-Miner calls it a clear case of the agency overreaching, declaring “EPA goes too far on Pebble mine.”

 

There’s still time

EPA hasn’t issued any regulatory decision about the Pebble Project yet. The process announced by EPA Administrator McCarthy late last month began a series of steps that is still being sorted out. Alaskans who favor a predictable, reliable permitting process—one that allows responsible resource development to continue serving as a major driver of Alaska’s economy—should read these and other editorial perspectives, and stay tuned for ways to make their voices heard.

 

Related Websites

 
 

Other Resources

 

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3-12-14

12 March 2014 5:51am

Becky Booher, Associated Press: Draft Gas Pipeline/LNG Bill Proposes Changes To AGDC/Taxes


Advice To Those Who Want A Vibrant Economy And Who Elect Politicians

Competition Perspectives: Part III (Part I, Part II)

by

Dave Harbour

Yesterday we finally finished a commentary on how important it is for a sovereign to pay attention to its competitive position as an investment climate.  

​​Links from the Alaska Gas Pipeline Office of The Federal Coordinator:

No sooner had we turned off the laptop (from our perch this month high in the Ecuadorian Andes) than we received relevant news from Dan Healing, Calgary Herald.  MGM is giving up on its effort to produce gas and shale oil in the Northwest Territories due to the excruciatingly long and prohibitively expensive regulatory process.  (Note the sense of optimism in N.W.T. in 2012, even after struggling for success since 2007.  Alaskan companies are doing their best to navigate the dangerous shoals appearing and disappearing among the flood of regulations, delays, laws, taxes and political campaigns on their side of the border.  Citizens might want to note that in MGM's case over in the N.W.T., all signs were that projects were moving ahead--until the day of an unexpected press announcement.)

The Herald reported MGM President Henry Sykes as saying that, "licensing a horizontal oil well in N.W.T. takes longer than a year and costs millions of dollars. If an environmental assessment is ordered, the process stretches out for years and is no longer economic for a small company."  But Healing reported that even a large company like Royal Dutch Shell found the process infeasible.  (Read more)

We believe evidence is ample now that local political leaders --- whether they be Alaskan, Canadian or Argentinean -- better build into their tax and regulatory calculus how their very own policy changes affect their competitive positions as investment climates.  

Political leaders ignore their own self-imposed development obstacles at the peril of jobs, education, economic opportunity and even social and cultural amenities that depend upon a vibrant place to live an work.  (Misc. Note: ...which is irrelevant if their real goal is to cripple the economy so that a an executive might find it easier to amass power amid chaos and even nationalize industries and socialize the economy.)

STATE OWNERSHIP OF ENERGY INDUSTRIES

Under the category of, "Other Observations", we received this email from one of our Australian readers, in light of the Putin/Ukraine tension:

"How welcome would Putin's best mates in Rosneft be in Alaska right now if/when they exercise their option to come into Point Thomson?!

"Maybe the advocates of an 'Alaskan NOC' would welcome another State owned oil company in the State?

"Unfortunately the decision by the State {Alaska} to take direct equity ownership in aspects of the LNG project allows others to advocate further State ownership in the oil industry.

"I must admit that if I had a taxing power that gave me money for no capital outlay, I wouldn't be bothering with ownership....but it's not uncommon for developing nations to want to do this (even Britain had a national oil company until 1982 when Mrs. Thatcher sold it off).

"I do a bit of business in Mongolia (where per capita GDP is probably less than 1/20th of that in Alaska) and the Government is currently trying to promote the private sector as it retreats from mistakes brought about by over-exuberant desires for State ownership of key assets, etc.

Cycles go around everywhere!"          -N.Y.

Bottom line: those who elect politicians should begin paying more attention to long term economic realities than to short term, special interest gains.  -dh


Today's Energy In Depth Links:

 NATIONAL

Hydro-fracking complaints are not supported by scienceThe Tennessean, Op-Ed. Former governor and U.S. Secretary of the Interior Ken Salazar says, “The science is here. Hydro-fracking is safe, and it’s important that the information gets out to the public.” He is right.
 
Study: officials view HF positivelyNorwalk Reflector. Shawn Bennett, field director for Energy In Depth, said the survey results show that the economic benefits of shale development extend beyond just the oil and gas industry. "Local residents are getting jobs. They're spending more money," he said. "There's overwhelming support regarding the oil and gas industry in east Ohio," Bennett added.
 
TAEP urges US LNG exportsLNG Industry. In a letter to President Obama, the Texas Alliance of Energy Producers (TAEP) has asked for the pending export permits of liquefied natural gas (LNG) from the US to be quickly approved. The TAEP also urge Obama to support legislation in the Congress that also would allow exports of LNG.
 
Ohio Looks at Whether HF Led to 2 QuakesNew York Times. Mark Bruce, a spokesman for the department, said it was too early to determine whether drilling operations induced the earthquakes. “What we’re focusing on now is getting all the data from the company,” he said. “We’ll examine it first and decide next steps after that.”
 
Industry Group Says HF Could Help UkraineRoll Call. As Congress prepares to take up legislation in response to Russian intervention in Ukraine, a group representing American companies that rely on inexpensive gas is advocating an alternative approach. Instead of exporting natural gas, the Industrial Energy Consumers of America says the U.S. should export the hydraulic fracturing expertise that will let Ukraine — and other European countries — develop their own gas reserves.

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