Federal Progress

HEAR SENATOR MURKOWSKI SPEAK ON OIL TAXES VIA C-SPAN AT 2:20 P.M. EDT.  LOOK BELOW FOR BREAKING NEWS ON NEW GAS HYDRATE TEST WELL INSTALLATION!  ALWAYS TUNE IN HERE FOR BREAKING NEWS AND COMMENTARY ON STATUS OF GAS PIPELINE PROJECTS! 

Yesterday we addressed President Obama's Saturday pro-domestic energy speech; today the ADN editorializes: 

BOTTOM LINE: Let Shell explore, let Slope producers tap NPR-A -- and keep a close watch.  No question there is risk, and a lot of work to do before production -- if it pans out. But, as Sen. Mark Begich (NGP Photo) pointed out, our policy should be to develop with care. Exploration is a first step -- and a chance for Shell to show that it's operating with the best possible safeguards.  Sen. Lisa Murkowski's (NGP Photo) succinct summation of an American oil-and-gas energy policy hasn't lost its currency: Produce more, use less. Alaska's Arctic still has much to contribute on the production side.

Department of Energy.  A fully instrumented well that will test innovative technologies for producing methane gas from hydrate deposits has been safely installed on the North Slope of Alaska. As a result, the "Iġnik Sikumi" (Iñupiaq for "fire in the ice") gas hydrate field trial well will be available for field experiments as early as winter 2011–12.  The well, the result of a partnership between ConocoPhillips and the Office of Fossil Energy’s (FE) National Energy Technology Laboratory, will test a technology that involves injecting carbon dioxide (CO2) into sandstone reservoirs containing methane hydrate. Laboratory studies indicate that the CO2 molecules will replace the methane molecules within the solid hydrate lattice, resulting in the simultaneous sequestration of CO2 in a solid hydrate structure and production of methane gas.

Calgary Herald by Dina O'Meara.  Suspension of oil and gas production is spreading across northern Alberta as wildfires rage out of control.  Oil and gas producers Monday evacuated workers and closed heavy oil facilities, pipelines and processing plants as emergency teams battled wind-fuelled fires that now cover more than 30,000 hectares.  Canadian Natural Resources pulled 1,300 workers from two camps associated with its Horizon oilsands project outside of Fort McMurray as flames burned within 150 metres of one of its lodges.  "We have no actual fire on our site per se, it's still a ways away, but we're just taking precautionary measures," vice chair John Langille told the Herald.

Our Friend, Thomas Maunder, Anchorage Chapter Secretary of the American Association of Drilling Engineers invites one an all to their annual BBQ.  "On Friday afternoon", he says, "we will host our annual Fin, Feather, or Fur Food Festival at the bottom of the sledding hill at Kincaid Park.  I invite all you to come and enjoy what has become a great day of good food and comradeship.  The funds we hope to raise go to two main efforts.  Every year since we began hosting this event, we have contributed to 3 of the local food charities.  We support Bean's Cafe, The Downtown Soup Kitchen and Kids' Kitchen.  Last year we donated $3000 to each organization.  The remaining funds we direct to scholarships for engineering students already attending college and recent high school graduates.  The format is that each team (we have 21 registered so far) will prepare and serve a menu item that began life with fins, feathers or fur.  We have one group that brings in a 4th category -- alligator.  The success of the event has surpassed our wildest dreams.  Please come and join us on the afternoon of the 20th.  Call or message with any questions."  Tom Maunder, Chapter Secretary, 907-529-1645.

Scroll down for Denali-The Alaska Gas Pipeline News Releases  Commentary: We announced the termination of this project at 10:03 today {5-17-11} and took the precaution of copying all of the project's website news releases below for posterity.  One expects that the website at some point will be unceremoniously discontinued, too, and readers will find the impressive record of that project and its dedicated management memorialized here for future reference -- as we have done for all of the historical gas pipeline projects beginning in the late 1960s.   As a suggestion for students/researchers seeking information: put your search criteria into the local Google search bar, above left, and you will be led to all of our websites having information about your search terms.   Thank you, Denali participants, for the important effort and know that the daunting political and financial challenges you faced were not of your making nor within your control.  You aquitted yourselves with distinction and grace.  -dh

Today's Email Alert

NEB.  Comment:  Canada's National Energy Board (NEB) will host a Roundtable Meeting in Inuvik at the Midnight Sun Recreation Centre from 10 to 16 September 2011 and reimburse certain outsiders up to $300,000 to fly in and sit at the roundtable.    We suspect that most of the subsidized visitors to Inuvik will be non-industry advocates.    We imagine the September event will merit some discussion at the Inuvik Petroleum Show next month.  -dh

Comment:  In these pages we have documented that virtually every action taken by the Obama Administration toward Alaska has furthered the Federal attack on the Forty-ninth state's resource-based economy.  Now, caught between the Scylla and Charybdis (Photo) of high gasoline prices and a reelection campaign, one can reasonably suspect Obama of offering lip service to economic activity when all the world knows he has done everything possible to shut down Alaska resource development.

One thing that could keep him 'honest' is his support for Senator Mark Begich's concept of a Federal OCS Coordinator, upon which we have commented.  If Obama's troops continue to block permits, stall and create diversions which have the effect of allowing no or limited Alaska OCS activity, any new OCS Coordinator will have a lot of explaining to do and that could affect the 2012 reelection of both Obama and Begich.

In the sense that hope springs eternal (and, that it is now spring), and that we have little choice, we shall reserve judgment on whether this new message from the Administration is a signal of responsible action to come or not.   -dh

Below is the text of Obama's Saturday message.  Here is the video.  Here is the House Resources Committee comment.    Here is Governor Sean Parnell's response.  Here is Senator Lisa Murkowski's response.  Here is Senator Mark Begich's response.  Here is a NYT response.  Here is Daniel Horowitz' commentary.

 Remarks of President Barack Obama

 See Arctic Imperative Summit Agenda: June 19-21, Alyeska Resort, Anchorage

"Mining and Fish" were the focus of the Resource Development Council for Alaska's (RDC) early morning meeting today in the Anchorage Convention Center when PacRim Coal's Project Manager Dan Graham (NGP Photo) inventoried the mining-fish relationships and history in Alaska.  See Video Here.  (Event Photos below.)

WASHINGTON, D.C., May 5, 2011 - Today, the House of Representatives passed H.R. 1230, the Restarting American Offshore Leasing Now Act, with a bipartisan vote of 266 to 149. Introduced by Natural Resources Committee Chairman Doc Hastings (NGP Photo), H.R. 1230 requires the Secretary of the Interior to conduct oil and natural gas lease sales in the Gulf of Mexico and offshore Virginia that have been delayed or canceled by the Obama Administration.

Point of personal privilege.  Tonight we are bound for the 2011 Kentucky Derby, a business meeting, fashion photos and reunion with Kentucky Colonels at the Churchill Downs Museum.   Photos right, 5-1-10 Derby and, left, 5-23-10 making presentation to Kentucky Governor Steve Beshear in Lexington at the summer meeting of the Interstate Oil and Gas Compact Commission.

5-5-11 RDC PacRim Coal Presentation: Event Photos:

Phil Cochrane

 Rebecca Parker

 Steve Connelly

Tiffany Thede

See Arctic Imperative Summit Agenda: June 19-21, Alyeska Resort, Anchorage

Comment.  Yesterday (Scroll down) we reported on the creation Monday of a Coastal Governors Coalition preparing to meet the various challenges posed by federal government Outer Continental Shelf (OCS) policy.  Today, we offer readers this letter sent yesterday by Michael Bromwich (NGP Photo), Director of the Interior Department's Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) to the four governors: Louisiana's Bobby Jindal, Rick Perry of Texas, Haley Barbour of Mississippi and Alaska's Sean Parnell.  The letter stresses how much input the states already have in the federal decision making process but offers an olive branch to the new 'coalition' and suggests a meeting, "as early as next week--to discuss responsible energy development on the OCS."  After the many state protests and lawsuits against 'arbitrary and capricious' federal overreach (e.g. P.17), one expects the new coalition to eagerly accept the invitation, though perhaps not as early as next week.  If the Administration is motivated by the 2012 election -- or other reasons, including the public interest -- to improve the economy and recognizes that increased exploration and development of domestic energy is the keystone of economic recovery, perhaps a diminishing of federal overreach is possible, at least for awhile.   Congratulations, Governors, for working together to improve BOEMRE's (and sister agencies') policies, the failures of which are legion and well documented herein.    -dh   (Note to BOEMRE's boss, Secretary Ken Salazar {NGP Photo}:  If you really want to operate within the law, avoid federal overreach into state sovereignty, improve the economy, create jobs, reverse the outflow of wealth to oil exporting nations, stimulate American manufacturing, rejuvenate small business entrepreneurship and inflate the service sector (in an environmentally responsible way), work with the President to: 

• Stop EPA's awkward and illogical assaults on NPR-A and Chukchi-Beaufort Sea OCS exploration.
• Instruct USFWS to support proper implementation of ANWR 1002 area exploration and development.
• Inhibit NOAA's irresponsible use of the ESA as a weapon against human activity with insufficient evidence of harm to species.
• Respect the good faith purchasers of BOEMRE lease sale tracts and responsibly process permits of lessees in a timely way.
• Open leasing to OCS tracts in all reasonable, prospective areas that have support of adjacent governors and provide those areas with a share of OCS rent, royalty and bonus revenues to help them accommodate the increased economic activity.
• Rein in BLM's job-killing Wild Lands overreach and threat to multiple use policy.
• Reverse the President's initiative through CEQ to establish a new, job-killing Ocean Policy Council.  This thuggish assault on water and even land-based recreation, employment and commerce will implement a policy of zoning the oceans and waterways of America against human activity--on top of a matrix of already-stringent environmental protections .

All this said, if what we really have here is a "failure to communicate" or an "attitude" problem or a philosophical impasse, we will be vigilant for signs of federal officials offering grudging, passive-aggressive courtesy while obstruction of domestic energy development continues in more subtle, albeit still effective ways.  

But in good faith, we shall also be vigilant for signs of genuine acts to improve our national wellbeing through execution of more reasonable federal natural resource policies  

Meanwhile, there is good news in Canada, as the Calgary Herald's Deborah Yedlin observes that Stephen Harper's election signals good relations with the "oilpatch".   "As good a result as we could hope for because a Liberal/NDP alliance would have likely meant more taxes and environmental rules," said a longtime energy insider, expressing hope that there would also be changes on the regulatory front to avoid another failed process such as what befell the Mackenzie Valley pipeline.   -dh

Register here for the North American meeting of the Society of Petroleum Engineers and hear Alaska Oil & Gas Conservation Commissioner Cathy Foerster's (NGP Photo-Above) Keynote address next Monday morning in Anchorage: "The Alaska Oil and Gas Conservation Commission's Response to Macondo."  -dh

Petroleum News Headlines: 

• Heavy oil starts (Full story) Following a lengthy delay after the completion of a $100 million heavy oil test facility on Alaska's North Slope, BP has now put a heavy oil test well into operation .....
• Exxon's Thomson warning (Full story) ExxonMobil is suggesting its Point Thomson project on Alaska's eastern North Slope might not make its projected start-up date due to further delays in securing a federal wetlands permit. The U.S. Army Corps of Engineers, which is the lead agency reviewing ExxonMobil's project, is now running a year....
• Korea eyes Arctic gas (Full story) Korea Gas, the world's largest importer of LNG, is quietly scouting the Canadian Arctic amid speculation that the state-owned company has plans other than shipping natural gas by pipeline to southern North American markets. Chad Yeng, general manager of Kogas Canada, told the Globe and Mail that if....

NYT by Clifford Krauss.  SAVOONGA, Alaska — Shell Oil will present an ambitious proposal to the federal government this week, seeking permission to drill up to 10 exploratory oil wells beneath Alaska’s frigid Arctic waters.  ...  Shell has led the way, working for five years to convince regulators, environmentalists, Native Alaskans and several courts that it could manage the process safely, protect polar bears and other wildlife, safeguard air quality for residents and respond quickly to any spill in the region. But BP’s Deepwater Horizon disaster a year ago put a chill on new offshore drilling. ... “Americans are reeling from staggering prices at the pump,” said Representative Cory Gardner, a Colorado Republican on the House Energy and Commerce Committee. “So the president has to justify to the American people why we are not replacing Saudi Arabian oil imports with U.S.-produced oil.”  ...  “If the Obama administration approves drilling in the Arctic, it will demonstrate that they have learned nothing from the gulf spill,” said Brendan Cummings, senior counsel at the Center for Biological Diversity, which is suing to stop Shell.  Administration officials say only that they will thoroughly review Shell’s new proposal. “We need to continue to take a cautious approach in the Arctic that is guided by science and the voices of North Slope communities,” said Kendra Barkoff, a spokeswoman for the Interior Department, which oversees most of the process.  ...  Pete Slaiby (NGP Photo-L), Shell’s top executive in Alaska, was glad-handing last week in Savoonga, a village on an island in the Bering Sea. ... Shell has already spent $3.7 billion on the 10-year offshore leases and preparations for exploration, although the company has yet to drill a single hole. Shell will formally present its new proposal — to drill up to 10 wells over the next two years in remote waters north of Alaska, in the Chukchi and Beaufort seas — in the next few days. If the plan is approved within nine months or so, exploration could begin next year.  Just as in the past, executives realize they need to fight the battle on multiple regulatory and legal fronts. “It’s like holding a bunch of pins in your hand, and trying to make sure not one drops,” said Brian Malnak, Shell’s vice president of government affairs.  ...  Shell is proposing to use two drill ships, each capable of drilling a relief well for the other in case of the kind of blowout that destroyed the Deepwater Horizon rig. The company is also promising to add more testing and an extra set of shears to its blowout preventers and to keep emergency capping systems near drilling sites to capture any potential leaks.  Alaska once accounted for a third of the nation’s oil production, but its fields are now in steep decline. The decrease in production threatens the continued safe use of the Trans-Alaska Pipeline System, also known as TAPS, which requires a steady flow of oil to avert corrosion and spills.  The Alaskan Arctic potentially holds 27 billion barrels of oil. “If we could open the Arctic to oil exploration,” said Alaska’s governor, Sean Parnell (NGP Photo), “we can fill that TAPS line in a way to preserve it for another 50 to 100 years.” Major production from the Arctic would probably be a decade away, however.  ...In his presentation in Savoonga, Mr. Slaiby said Shell and other companies had safely drilled in Alaska’s Arctic waters in the 1980s and 1990s, without a spill or major damage to wildlife. And he noted that the wells Shell intended to drill here were far shallower than BP’s ill-fated Macondo well, making the possibility of a blowout more remote.

Commentary.  As reported in the The Alaska Dispatch today by Patti Epler, Senator Mark Begich is proposing legislation creating a Federal Coordinator to expedite Outer Continental Shelf (OCS) exploration and development in federal waters (S.843).  The model for this is not new, first designed as a "Federal Inspector" position with passage of the Alaska Natural Gas Transportation Act of 1976, then recreated as a "Federal Coordinator" position in the Alaska Natural Gas Pipeline Act of 2004.   -dh 

When the concept first appeared we commented and, while we credit Senator Begich for trying, have found no reason to change our viewpoint that creation of another bureaucracy cannot overcome the potholes put in place by the one in charge of the bureaucracy:

Senator Mark Begich (NGP Photo) proposes Arctic Coordinator.  (Comment.  We credit the good senator for trying to clean up after the leader of his party.  However, if the Obama Administration were doing its job, a "coordinator of regulators" would be unnecessary.  Since the Administration is not doing its job, pretext is given to establish a new bureaucracy which may, but likely will not, create more competence within the Federal regulatory structure.  One guesses that the new position -- like that of the gas pipeline Federal Coordinator -- will be extremely sensitive to direction from the President, whose Administration has created such energy policy chaos in the first place.  In short, if Obama wanted to stimulate more domestic production he could easily do so without manufacturing another bureaucracy over which he exercises control.  In truth, Obama is the Federal Coordinator-in-Chief and no shuffling of people or creation of new positions will change that raw fact.  -dh)