Governor Draws Line in Coastal Sand – NEB’s Gaeton Says Gas Production Declining – State Executive Calls Pipeline Situation Urgent – US House Passes Energy Package – Gas Pipeline Panel On TV This Weekend – Shell Submits Chukchi Exploration Plan
HQ Yellowknife. Bob McLeod (NGP Photo) said the Mackenzie Gas Project would translate to billions of dollars for the NWT and Canadian economy, calling it a “nation building endeavour.”
Calgary Herald by Dina O’Meara. Canadian natural gas production is expected to drop by 4.4 per cent within two years on an oversupplied North American market and a shift toward drilling more lucrative oil prospects, according to a new report. … Fevered drilling for shale gas in the United States flooded North American markets at a time when demand was soft because of the recession. As prices fell on abundant supply, producers steered their drilling programs toward more profitable oil and natural gas liquids assets. "Natural gas production in Canada has been gradually declining as a result of these two trends," said chief executive Gaetan Caron (NGP Photo), in a statement. "This is expected to continue unless a closer balance between demand and available supply can be reached, pushing natural gas prices up."
Commentary: We applaud Governor Sean Parnell’s (NGP Photo) courage and consistency in protecting the public interest as represented in his letter to Senate leaders yesterday clarifying his position on Coastal Management Program legislation lingering in the last week of a special session. We admire Senator Cathy Giessel (NGP Photo) for her floor speech this week during the special session. -dh
On the heels of this week’s Wall Street Journal article detailing Alaska’s critical relationship to the declining throughput of the Trans Alaska Pipeline (TAPS), Natural Resources Deputy Joe Baylash (NGP Photo)told an Alaska Support Industry Alliance audience yesterday that, "The situation is urgent."
TAPS is an economic lifeline for Alaska, providing over 85% of the state government’s operating revenue and sustaining over a third of the entire economy. With TAPS oil volumes (throughput) declining at a 6-7% annual rate, the days of that facility are numbered unless new volumes can be discovered and brought into production. He said that one of the
Administration’s principle goals is, "…arresting the declining throughput of TAPS."
Baylash said that, "every day we are seeing a new record for low throughput," and that upcoming cold winters could create conditions leading to a premature shutdown. This is because lower throughput lengthens the time for a barrel of oil to move 800 miles from the Alaska North Slope to the ice free port of Valdez. Slowing the passage of oil causes the temperature of oil to decline in the insulted pipeline, especially during a very cold winter. Baylash said that in recent winters, Alaska has," dodged a bullet," noting that winter problems become more serious as oil temperatures decrease due to declining throughput.
Baylash said that to increase throughput, action at the state and federal levels was required (as we have noted herein over the last several years). He said that the state’s adoption of a more competitive tax regime would increase incentives for new work on the Alaska North Slope. He said that Governor Parnell would support a balanced coastal management program law now being debated in a special session, but would veto a bill that was not in the interest of the state. "Alaska has gone above and beyond other states when it comes to local input in coastal management programs." He said the state was dedicated to continue its fight against federal obstruction which contributes to the lack of new pipeline throughput from federal lands.
ADN. A 90-minute public forum on gas line benefits for Alaska’s economy that was held this week at the University of Alaska Anchorage will be replayed on cable television. The forum will be rebroadcast at 8 and 11 p.m. Friday, 1 p.m. Sunday, and 11 a.m. and 5 p.m. Monday on the same TV channels statewide that carry Gavel to Gavel. Panelists included Larry Persily (NGP Photo), federal coordinator, Alaska Natural Gas Transportation Projects; Scott Goldsmith, economics professor, Institute of Social and Economic Research, UAA; Brian Rogers, chancellor, University of Alaska Fairbanks; and Bill Van Dyke, petroleum engineer, Petrotechnical Resources Alaska. Thanks to Persily’s Communications Director, Jennifer Thompson, we have this story from agency writer, Bill White. * The video is on the agency’s home page now.
ADN. Shell Oil as expected has submitted an offshore exploration plan for up to six exploratory wells in the Chukchi Sea off Alaska’s northwest shore over the next two years.
Politico: House completes oil drilling trifecta. The House Thursday afternoon passed the third of three GOP offshore drilling bills as lawmakers continue to battle over high oil and gas prices. Thursday’s bill would direct the Obama administration to open waters off Alaska, California and much of the Atlantic Coast to offshore drilling. The Interior Department would have to craft a five-year lease plan that meets the goal of producing 3 million barrels of domestic oil a day by 2027. Wednesday, the House passed legislation to expedite drilling permits in the Gulf of Mexico. Last week, lawmakers approved a bill to force new lease sales for areas in the gulf and off the Virginia coast.
Senator Cathy Giessel’s Floor Speech:
(Juneau) Sen. Cathy Giessel, R-Anchorage, spoke on the Senate Floor today regarding TAPS and the effect that declining throughput is having on the integrity of the pipeline. Her remarks as delivered are as follows:
“Today’s Wall Street Journal contains an article entitled ‘Shrinking Oil Supplies Put Alaskan Pipeline at Risk’. The article overviews the significant challenges presented by the reduced volume of oil in the TransAlaska Pipeline System, fondly known to us as TAPS. Because of the fact that nearly all the state’s revenue comes through TAPS, I think of it as the State’s aorta- that blood vessel that carries life sustaining blood to the body of our state.
“The operation of TAPS is becoming more complex and will continue to do so. This was highlighted in January of this year, when a confined leak was detected and required repair.
Repair necessitated a 148-hour shutdown of the line during the coldest time of the year. A large, skilled workforce was deployed from Fairbanks and Anchorage to respond. Repair timing was complex, because prolonged shutdown could have resulted in complete inability to restart the pipeline flow.
“Understanding the need for educated contingency planning, Alyeska Pipeline Company and TAPS owners have conducted a $10 million Low Flow Impact Study. The study took theoretical flows down to 300,000 barrels per day. For reference, Mr. President, present TAPS throughput is 635,000 BPD. Risks identified by the engineering specialists were: water dropout, corrosion, ice formation, wax deposition, the need for increasing numbers of scraper pigs, and geotechnical issues.
“As an aside, Mr. President, I have to emphasize that the folks conducting this Low Flow research are professionally prepared with appropriate knowledge to critically evaluate the data and scenarios. This contrasts with opinions about TAPS’ lifespan from folks with expertise in literature or some other field, whose expertise is not in engineering, flow dynamics of liquids or metallurgy. If you had a health problem, Mr. President, I am certain that your wife would insist that you seek the wisdom of a skilled healthcare professional rather than, say an attorney or English teacher. She would want you to see a highly skilled cardiologist, with specialized knowledge. The same principle applies here – engineering and technical specialists are the people with the credible expertise regarding maintaining TAPS. Back to the Study – The Low Flow Study showed that at 550,000 BPD temperatures of the oil would likely drop below freezing. (For reference, current oil temperature drops to about 40 degrees now.)
“Ice formation in the line would interfere with check value and other equipment functionality. Yes, pigs can sweep this ice out but in doing so, there is risk of damage to the pumps and other equipment in the line. This was a concern during the January shutdown this year. At 350,000 BPD, the colder oil in sections of buried pipeline would allow ice lenses to form in the surrounding soil. Folks in the interior know the damage that ice lenses cause to roads and structures. Frost heaves under TAPS will challenge its integrity.
“We have heard about wax precipitation out of the oil at low temperatures. The Study finds this to be a significant issue at flow rates of 300,000 BPD. Wax, as you can envision, clogs the pipe and the pumps, in just the same way that cholesterol clogs human blood vessels, like an aorta…leading ultimately to death…
“Wax buildup was an issue during this last January shut-down and required aggressive action to keep two of the three pumps at Pump Station 9 operational. Alyeska has testified before the other body a couple months ago that they are prepared to aggressively address these issues through heaters, insulation, corrosion inhibitors, frequent pigging. I understand some of these actions will begin to be implemented as soon as this year.
Innovation and increased investment will no doubt remediate some of these issues. The costs will be hundreds of millions of dollars.
“Regardless of mighty human efforts, no one can guarantee TAPS will continue to provide a steady, predictable stream of revenue to the State. No one can predict the lifespan of TAPS, any more than they could predict lifespan of any of us, Mr. President. The fact is, this Legislature has a ‘Math Problem’ to solve: that is how to increase the amount of oil being extracted from the remaining abundant resources on the North Slope. The Legislature must solve the real ‘Math Problem’ that will bring back oil production. We in the Legislature have four possible prescriptions to help our patient: investment incentives, permitting, regulations and taxes.
“Alaskans and Americans, who are reading this Wall Street Journal article today, are watching and waiting for us to act. Our patient’s health is in jeopardy…”