9-1-17 Governor Walker of Alaska Makes Confusing/Damaging Energy Decisions

Is Alaska’s Governor pro-development…but only as long as his state government calls the shots and does the developing? (Below we find the Governor’s confusingly supportive actions. In the right column, we find more substantive actions contributing to a loss of investor interest and a more dangerous economic climate.) -dh

Alaska Governor Bill Walker. Northern Gas Pipelines Photo by Dave Harbour

Our commentary: Below, we have the appearance of a governor supporting federal energy access programs. But then you notice such minor expressions of support for natural resource development alongside anti-free enterprise acts (i.e. right column). You may conclude that while Alaska’s governor wants more federal territory to develop in Alaska, he wants the state government to do the developing as opposed to free market investors. But how could any reasonable American leader want to follow in the footsteps of Hugo Chavez? We’ll leave that question for our discerning readers to ponder in the days ahead and then clarify for us. -dh

Feds seek more reasonable access to public lands

Walker lends support to Trump in lawsuit over Arctic drilling, The Beaufort Sea, one of the areas the Trump administration would like to re-open for oil drilling.

State Files Motion in Support of Arctic Outer-Continental Shelf Leasing

August 31, 2017 ANCHORAGE — The State of Alaska has filed a motion to intervene in a lawsuit regarding access to globally important oil and gas resources in the Beaufort and Chukchi Seas on the Arctic Outer-Continental Shelf (OCS).

In April, the President signed an order reopening the Chukchi Sea OCS and portions of the Beaufort Sea for potential exploration. The prior administration had withdrawn the entire Chukchi OCS and the vast majority of the Beaufort OCS from the Department of Interior’s 2016 5-Year Offshore Leasing Plan. This matter is now in court. The State’s motion seeks to intervene in support of the President’s April order.

“In filing this motion, our objective is to make sure that the State of Alaska has future development opportunities in the Arctic OCS,” said Governor Bill Walker. “State agencies routinely balance environmental conservation and protection with responsible resource development, and the Arctic OCS is no different. This gives the state a unique stake in the outcome of this litigation, and puts us in the best position to defend those interests.”

Alaska’s oil and gas resources can contribute significantly to meeting future U.S. energy needs; estimates by the U.S. Geological Survey and Bureau of Ocean Energy Management indicate as much as 40 billion barrels of undiscovered, technically recoverable conventional oil and more than 200 trillion cubic feet of conventional natural gas lie in the region. OCS production would also help boost throughput in the Trans-Alaska Pipeline, and increase state revenue and jobs.

“Federal law recognizes that input from coastal states is the cornerstone of access to these resources,” Department of Natural Resources Commissioner Andy Mack said. “Access to them should not be limited without consultation with the state and local governments.”

Other references:

Tillerson proposes scrapping Arctic and climate envoys
Secretary of State Rex Tillerson wants to do away with special envoys focused on the Arctic and climate change, as part of his effort to overhaul the State Department.

Commentary: Yesterday Was A Historical Milepost In Alaska’s History!

Did Alaska’s government take action resulting in the departure of some producers?

From Alaska Headlamp, comes this mention of one of our earlier editorials: Alaska’s Government Gas Pipeline/LNG Project Still Treads Water, Northern Gas Pipelines, Dave Harbour, August 21, 2017

Gasping for air. In spite of low prices and unprecedented competition in the gas/LNG industry, Alaska’s government subsidized North Slope gas monetization project continues to tread water, shall we say, “gasping for air.” It seems to be awaiting a life-saving miracle as it responds to regulatory questions, keeps staff and contractors employed and manages ‘marketing’ offices in Tokyo and Houston.

State rejects ExxonMobil plan to expand oil production at Point Thomson. On Tuesday, the Walker administration denied a proposal by ExxonMobil Corp. to expand oil production at the Point Thomson field…

Alaska LNG Project Subsists On Subsidies

Either Way, Alaska’s Investment Climate Is Damaged

By wpnorthern|2017-09-01T08:52:33-09:00September 1st, 2017|AGDC, Alaska Taxes, Alaska's Fiscal Crisis, Alaskanomics, ANWR, Arctic Policy, Commentary, Crony Capitalism, Government Waste, Interior Energy Project (IEP)|2 Comments

About the Author: wpnorthern

Dave Harbour, publisher of Northern Gas Pipelines, is a former Chairman of the Regulatory Commission of Alaska, a Commissioner Emeritus of NARUC, NARUC's Official Representative to IOGCC and Vice Chairman of NARUC's Gas Committee. He served as Gas Committee Chairman of the Western Conference of Public Service Commissioners. He also served as commissioner of the Anchorage Bicentennial Commission and the Anchorage Heritage Land Bank Commission. He earned a Bachelor of Arts Degree: English, at Colorado State University, a Master of Science Degree: Communications-Journalism at Murray State University and graduated from Utility Regulatory School for Commissioners at Michigan State University. He served as a Vice President for Communications and Public Affairs at Alaska Pacific University, taught bank marketing classes at the University of Alaska and was an English teacher at Los Alamos High School. Harbour served in ranks of Private - Captain during a 4-year assignment with the Army in Korea, Idaho, Georgia and Fort Meade and received the Meritorious Service Medal among other commendations. Harbour is also a past Chairman of the Alaska Council on Economic Education, the Alaska Oil & Gas Association Government Affairs Committee, the Anchorage Chamber of Commerce, the Export Council of Alaska and the Department of Commerce's District Export Council. He is a past President of the Alaska Press Club, American Bald Eagle Foundation, Consumer Energy Alliance-Alaska and Common Sense for Alaska. Harbour was instrumental in founding the American Bald Eagle Research Institute (UAS), the Alaska Support Industry Alliance, the Downtown Anchorage Business Partnership, and Arctic Power. He also served as CEO of several small Alaska organizations, including the Anchorage Parking Authority and Action Security, Inc. Harbour is also Chairman Emeritus of the Alaska Oil & Gas Congress. Harbour's wife, Nancy, is a professional, performing arts administrator and his three boys, Todd, Benjamin and William work in the fields of environmental management, energy marketing and medicine.

2 Comments

Richard Peterson September 2, 2017 at 10:54 am - Reply

DNR rejects Exxon led Point Thomson Plan of Development mandated by the 2012 PT Settlement Agreement..

Interesting how this occurs on the day Governor Walker was suppose to announce his new AK LNG financial partner. Could this be just another “hey look at this shinny object over here” instead of I haven’t found a partner yet. Actually I think it is more about Governor Walker having a bone to pick with Exxon and Governor Walker being able to say “see the infrastructure to support the AK LNG project is moving forward so re-elect me in 2018.

More to the point. The 2012 PT Settlement Agreement assumed that a Major Gas Sale agreement would be in place. It isn’t and there isn’t the slightest chance that one will be in place in the next few years. The Settlement Agreement limited Exxon and the Working Interest Owners to two programs. Increased liquid production into TAPS and or a major gas pipeline to Prudhoe Bay with gas injection into the Prudhoe reservoir to increase oil recovery.

Wait a minute didn’t AOGCC say that 3 billion cubic feet of gas could be removed from Prudhoe Bay to support the AK LNG project and it would have little to no impact on recovery oil reserves from Prudhoe Bay. However, the 2012 PT Settlement Agreement says injecting natural gas from the PT field into the Prudhoe Bay field would result in more oil being recovered. Seems like the AOGCC really isn’t an independent State agency after all.

The problem with the 2012 PT Settlement Agreement was that the State of Alaska insisted that there only be two options for PT. One was a gas line to Prudhoe to support the Major Gas Sale Agreement and or; two, increased liquid production by stripping off more liquids from the recycled gas. This second option has been very problematic for Exxon. Repressing back to 10,000 psi is at the very outer edge of technology and it has proven not to work as hoped for. No other energy company in the world is up to this challenge so why fault Exxon when it is proving to be more difficult than they planned for.

Why is the State limiting Exxon to only these two options. Shouldn’t Exxon and its partners be able to look at any option that results in further development of PT, especially since the AK LNG program has fallen flat on its face. If the DNR was truly looking out for the best interests of Alaska they should have said, “the AK LNG project has fallen on hard times and a Major Gas Sales Agreement has proven elusive” so lets go back to the PT Settlement Agreement and see if there is a better way to move PT development forward without totally eliminating the gas supply should an AK LNG magaically become economic down the road.

There is GTL technology that can take the existing 200 million per day being recycled and converting it into at least 20,000 bbl/d of synthetic crude oil. Also by not having to re-inject this gas back into the reservoir at 10,000 psi Exxon can recover larger amounts of condensate adding to the liquids going into TAPS.

Build the GTL plant on an enclosed barge, float it into place, leave the plant on the barge, operate it until you deplete the reservoir or a major gas sales agreement appears and the gas is needed to support that project. Then float the GTL plant to a new location, say Prudhoe Bay. Or Exxon give us any other option that may make sense because the State needs the added revenue from selling additional products as soon as possible.

At least a barged mounted GTL plant would be generating close to $500 million per year in revenue rather than spending a billion dollars to pump the natural gas into Prudhoe Bay and waiting 15 to 20 years to recover this incremental oil AOGCC claims will appear.

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- wpnorthern September 9, 2017 at 10:22 am - Reply
  
  Thanks, Richard, for another addition to the Alaska energy body of knowledge.
  
  Some may agree with all of your observations.
  
  Most may agree with many of your observations.
  
  All should remember your dedication to identifying gas monetization options for decades.
  
  Dave