Prospects For Exporting Alaska LNG? Reference: U.S. LNG exporters could lose money for years, analysts say, Price competition holding back Canada’s LNG export hopes, Exxon drops plans to develop 46 tcf gas field offshore Indonesia (Links from Larry Persily)
Is Gas To Liquids In Alaska’s Future (Scroll down)?
TODAY: HOUSE COMMITTEE MOVES TO IMPROVE MINING LAW/RULES. ALASKA COULD BE BIG BENEFICIARY.
Today, the Subcommittee on Energy and Mineral Resources held an oversight hearing “Seeking Innovative Solutions for the Future of Hardrock Mining.”
“Hardrock mining on federal land in the United States has a storied past, a challenging present and multiple needs for reform,” Subcommittee Chairman Paul Gosar (R-AZ) said.“From rocks to roads, rare earths to green technologies, and iron ore to wind farms, all infrastructure projects rely upon a mining operation.”
Associate Director for Energy and Minerals with the U.S. Geological Survey Dr. Murray Hitzman laid out today’s reality: domestic and global demand for mineral commodities is on the rise while the U.S. is increasingly reliant on foreign minerals. He advocated for research to reinvest in “fundamental data on mineral resources” and “an accurate assessment” of our nation’s deposits.
“The Nation’s land undoubtedly contains additional deposits of critical and strategic minerals, but mineral exploration by the private sector is hampered by the lack of modern geological and geophysical data,” Hitzman stated.
Thorough research is crucial as the Committee continues to develop proposals for a comprehensive infrastructure package. Infrastructure, economic development projects and a range of consumer goods rely on raw materials, something Mitch Krebs, President and CEO of Coeur Mining, Inc., emphasized throughout the hearing.
“[I]t’s important that we don’t lose sight of the connection between the mining activities we carry out and what these metals are needed for,” Krebs stated. “By eliminating the unnecessary duplication that currently takes place at multiple levels of government and by tackling the lack of coordination and communication among various regulatory agencies, we could bring certainty and a level of common sense to the process.”
Currently, it takes an average of 7 to 10 years for final permitting approval in the U.S. compared to an average of two years in Australia and Canada. Krebs debunked the notion that mining companies run rampant using existing loopholes.
“It took over 19 years to finally obtain the ninety separate local, state and federal permits for the Kensington mine and put it into production,” Krebs stated. “The idea that there is some kind of a loop hole after 19 years, a thousand studies and a trip to the Supreme Court, I don’t think those guys would let a loophole [stand.]”
The panel appeared to find consensus on the need to incentivize mining on federal lands, and discussed how a carefully crafted royalty policy coupled with permitting certainty could add billions to the treasury and state coffers, address the overwhelming problem of abandoned mines and boost job creation.
“The U.S. ranking would be higher if not for the permitting delays. So if you’re going to add a royalty, it will be a discouragement. But if you improve permitting that would be an encouragement,” attorney James Cress said.
Bret Parke, Deputy Director of the Arizona Department of Environmental Quality, expressed serious concerns with the Environmental Protection Agency’s proposed financial responsibility requirements under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Beyond the fact that it’s duplicative to state programs, the rule would create an even greater economic burden for state governments and the mining industry.
“Modern state regulatory permitting programs and related [financial responsibility] ameliorate the very risk Congress was addressing more than three decades ago when it passed CERCLA,”Parke said. “These mature and sophisticated state and federal regulatory programs have made the requirement to promulgate the proposed rule duplicative and unnecessary.”
Click here to view full witness testimony.
Here are two new programs we are pursuing to support a GTL option on the North Slope and one of these programs for a SouthCentral location supporting ASAP.
TAPS Quality Bank and Petroleum Alternative Liquids (PAL).
- A North Slope GTL program suffers from lower product values at least until it has sufficient volumes to cover the added cost of batch pigging down TAPS. We estimate that we will need a minimum of 75,000 bbl/d of GTL’s to cover the added cost of North Slope tankage and the slightly higher TAPS labor costs of running pigs from Pump Station 1 to Valdez. In the interim one has to assume that you will only receive the NS crude oil price. But we think the TAPS Quality Bank will add from $20 to $25/bbl to the ANS crude price. How so?
For the past 30 + years TAPS has been charging Flint Hills (MAPCO) and PetroStar a Quality Bank deduction for removing middle distillates from the ANS crude stream. While a closely guarded secret PetroStar’s CEO Dave Chapados said in a letter to the Alaska Legislature in 2013 that when you add the cost of the ANS crude to the Quality Bank charge it’s within 95% of the cost of jet fuel delivered to Anchorage. I guess this is the reason Flint Hills had to shut down as it could not compete against imported jet fuel from Asia to Anchorage. We have taken from PetroStar’s comments that the Quality Bank charge is in the $20 to $27/bbl range.
We doubt the TAPS Quality Bank owners ever envisioned paying someone a premium for putting a higher value product into TAPS when they filed with the FERC for approval of their Quality Bank. But they have been charging PetroStar for 30 years this penalty so it would be difficult to change course today. That said, we believe that excess GTL’s produced on the North Slope beyond the need to supply local ULSD, gasoline and methanol demands should receive a premium above the NS crude oil price. GTL’s sold into the free market should receive from $40 to $50/bbl above the crude oil price. GTL’s blended into TAPS should receive from $20 to $25/bbl uplift from the TAPS Quality Bank.
PAL For The North Slope
In 2007 the EPA started a program to reduce U.S. dependence on petroleum based transport fuels. The program was for renewable transport fuels made from carbon bearing materials such as plants, trees and or algae. The EPA program has as its goal approximately 1 million bbl/d for 2017 and it increases to over 2 million bbl/d (32 billion gallons) by 2022. Like most Federal Government “feel good programs”, the supply side usually lags the program volume requirements resulting in a premium being paid for the required volumes. Producers of these renewable fuel volumes have to obtain a Renewable Transport Fuel Identification Number or RIN to receive these credits. As a result the refiners and blenders, the group required to deliver the renewable fuels to the end user customers is paying anywhere from $1 to $1.50/gallon ( a RIN credit) above the price of the transport fuel product (gasoline, diesel, ethanol) to obtain these renewable transport fuels.
Many people do not realize that natural gas is not a Petroleum product. Natural gas, methane is a hydrocarbon like the above Renewable Transport Fuels and like these Renewable Transport Fuels it is not a petroleum based transport fuel either. Thus GTL’s like Renewable transport Fuels will reduce U.S. dependence on petroleum based transport fuels. Land fill methane is classified as renewable but for the most part methane is not renewable. If the Renewable Transport Fuels produced can not meet the EPA mandated volumes why not allow GTL produced transport fuels to fill part of that demand? In fact GTL diesel is EPA approved as non-toxic. We doubt any renewable transport fuel has such a designation from the EPA. See EPA Water Docket, EB 57 located at 401 M Street SW Washington DC, 20460 Reference Docket No. W-98-26 in UNOCAL data file 4.A.a.3, Vol 13.
We are asking Senator Murkowski to lead the charge to have North Slope methane derived GTL’s approved by the EPA as a bridge fuel in reducing U.S. dependence on petroleum based transport fuels. At 50¢ per gallon a PAL credit would add $21/bbl to the value of North Slope GTL’s. Add in the TAPS Quality Bank uplift and a North Slope GTL will see ANS crude prices plus $40/bbl. Almost what a GTL plant delivering into the market in the lower 48 would receive.
One might ask how can someone could receive PAL credits delivering the GTL transport fuels into a crude oil line? Woody biomass pyrolysis oil in the lower 48 is being delivered directly into crude oil lines and it receives RIN credits. Also woody biomass pyrolysis oil is so toxic it can only be blended into a crude oil line up to a maximum of 10% without causing problems at the refinery. GTL’s don’t have that issue. GTL’s only improve the crude oil quality so they have no limitations on blending.
PAL For The ASAP
2. Like the North Slope, a GTL plant in SouthCentral will produce a non petroleum transport fuel with the exception that the GTL’s can be delivered directly to the end use market and directly replace petroleum based fuels. We see the Anchorage area jet fuel market which is mostly imported from Asia plus the Military PacRim demand including ULSD as the primary markets for a SouthCentral GTL plant. Maybe in Anchorage PAL credits should be 75¢/gallon or 1/2 RIN credits. If this can happen a 100,000 bbl/d GTL plant at Port Mackenzie can base load the ASAP with about 850 million per day of throughput. Add an addition 150 million per day for Fairbanks, Anchorage and say Donlin Creek and you have a 1 bcf/d pipeline with a reasonable pipeline tariff that can support other industry in Alaska. PAL credits can support ASAP, justify a GTL plant paying over $4/mmbtu for supply gas and the Rail Belt gets its 100 year supply of North Slope natural gas.
So far I have yet to find anyone in Alaska who opposes the idea of PAL credits. Senator Murkowski’s office hasn’t opined or objected to the program, and the cost of PAL credits doesn’t come from the Federal Treasury. Since this is an EPA program it might not even take Congressional action to happen but it will take Senator Murkowski’s support along with Senate Energy and possibly the DOE to at least initially limit the PAL program to stranded natural gas reserves like Alaska’s North Slope.
TAPS Quality Bank and PAL credits could be two new programs to support an Alaska GTL program at $50 crude oil prices.
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The Blaze: Eminent Domain: Oil & Gas Pipelines, Infrastructure, Ranchers David Holt, President of Consumer Energy Alliance, joins The Jacki Daily Show to discuss eminent domain and its use on oil and gas pipelines and other energy infrastructure.
On Monday, July 24th, 2017 at the Anchorage Chamber of Commerce’s Monday forum, Alyeska president Tom Barrett will talk TAPS history and spotlight work that will sustain the system into the future, as well as share ongoing challenges and illustrate TAPS’ economic impact on Alaska. More here….