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Northern Gas Pipelines, (Alaska Gas Pipeline, Denali - The Alaska Gas Pipeline, Mackenzie Valley Gas Pipeline, Alaska Highway Gas Pipeline, Northern Route Gas Pipeline, Arctic Gas, LNG, GTL) is your public service, objective, unbiased 1-stop-shop for Arctic gas pipeline projects and people, informal and rich with new information, updated 30 times weekly and best Northern Oil & Gas Industry Links on the Internet. Find AAGPC, AAGSC, ANGTL, ANNGTC, ANGDA, ANS, APG, APWG, ANGTA, ANGTS, AGPPT, ANWR, ARC, CARC, CAGPL, CAGSL, FPC, FERC, GTL, IAEE, LNG, NEB, NPA, TAGS, TAPS, NARUC, IOGCC, CONSUMER ENERGY ALLIANCE, AOGA,AOGCC, RCA and more... 2009 LINKS: FERC Reports to Congress, 1, 2, 3, 4, 5, 6, 7....; USGS Arctic Gas Estimates; MMS hearings: RDC, Our NGP, AJOC, DH, ADN, KTUU; Enstar Bullet Line: Map and News Links; ANGDA; Alaska Energy Forum; Prosperity Alaska 2008 LINKS: Shell Alaska OCS Study; Mackenzie Gas Project EIS; Join the Alaska Gas Pipeline Blog Discussion; Governor Sarah Palin's AGIA Links; 2007 ACES tax bill links; Department of Revenue 2007 ACES tax documents; 2007 ACES tax Presentations; 2007 ACES tax news; Alaska Gas Pipeline Training and Jobs; Gas Pipeline and Economic Development; Andrew Halcro; Bjørn Lomborg; FERC's Natural Gas Website LinksWASHINGTON: Alaska Natural Gas Pipeline Act; History of H.R. 4; DOE Energy Bill Position, 6-02; Daschle-Bingaman Energy Bill (Alaska, Sec. 1236 & tax credit, Sec. 2503 & H.R. 4 Conferees), Tax Credit; See amendments, "Energy Policy Act of 2002"; "Alaska Natural Gas Pipeline Act of 2001 (Draft)" & Background Paper, 8-9-01;Alaska Legislature Joint Committee position; Governor's position; Governor's 10-Point Plan; Anadarko Analysis; U.S. Senate Energy Committee Testimony, 10-2-01 - text version; U.S. Senate Energy Committee Testimony, 9-14-00; Report on the Alaska Natural Gas Transportation Act of 1971, prepared by staff of the Federal Energy Regulatory Commission, 1-18-01 ALASKA: 1-23-03, Governor Frank Murkowski's State of the State Speech; 2002 DRAFT Recommendations to 2003 Legislature; '02 Alaska Legislation; Alaska Highway Natural Gas Pipeline Policy Council; Joint Legislative Gas Pipeline Committee; 9-01 Alaska Models: Canadian Routes, LNG, GTL; HR 4 Story; Cook Inlet Supply-Demand Report: AEDC; Commonwealth North Investigation & Our Article; Report: Backbone; Legislature Contacts; State Gas Pipeline Financing Study; 5-02 Alaska Producer Update; Kenai: "Oil & Gas Industry Issues and Activities Report, 11-02"; Alaska Oil & Gas Tax Structure; 2-27-02 Royalty Sale Background; Alaska Gas Pipeline Office opens, 7-01, and closes, 5-02; Betty Galbraith's 1997-1998 Chronology. Our copy. CANADA: 1-10-03, "Arctic Gas Pipeline Construction Impacts On Northern Transp."-Transport Canada-PROLOG Canada Inc.-The Van Horne Institute;Hill Times Reports, 8-30-02; 9-30-02, Cons. Info. Requirements; CBC Archives, Berger Commission; GNWT Economic Impact Study, 5-13-02; GNWT-Purvin & Gertz Study, 5-8-02; Alberta-Alaska MOU 6-02; Draft Pan- Northern Protocol for Oil and Gas Development; Yukon Government Economic Effects: 4-02 & PPT; Gas Pipeline Cooperation Plan Draft & Mackenzie Valley Environmental Impact Review Board; Mackenzie Valley Pipeline MOU Draft, 6-01; FirstEnergy Analysis: 10-19-01; Integrated Delta Studies; National Post on Mackenzie Pipeline, 1-02;Northern Pipeline Act; Haida Nation v. British Columbia; Indian Claims Commission; Skeena Cellulose decision -- aboriginal consultations required, 12-02; Misc. Pipeline Studies '02 COMPANIES: Alaska Gas Producers Pipeline Team Newsletter, 7-27-01; APG Newsletter: 5-02, 7-02 & 9-02; ArctiGas NEB PIP Filing Background; NRGPC Newsletter: Fall-02; 4-02 ArctiGas Reduces Field Work; BP's Natural Gas Page; Enbridge Perspective; Foothills Perspective; Williams Perspective; YPC Perspective, 7-02 MEDIA REFERENCE: Alaska Journal of Commerce; Alaska Inc. Magazine; Anchorage Daily News; Canadian Broadcasting Corporation; Fairbanks Daily News Miner, Juneau Empire; Northern News Services; Oil & Gas Reporter; Petroleum News Alaska; Whitehorse Star, etc. EXTENDED CONFERENCE NEWS: Alaska Support Industry Alliance, Anchorage Chamber of Commerce, Canadian Institute, Insight Information, Inuvik Petroleum Shows, International Association of Energy Economists, Resource Development Council for Alaska, Ziff Energy Group
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11/28-12/1: Somewhat personal--Since we will be participating in the Arctic Gas Symposium the balance of the week, Northern Gas Pipelines has prepared for faithful readers the following useful reports to satisfy your demand for information. Read three exclusive reports below for a Senator's take on Congressional action, a report on yesterday's meeting of economists, and the latest outlook from the Alaska Gas Producers Pipeline Team, with our comments. (Please take a moment during the next few days to Email us with your ideas: what should we be covering that we aren't? What are we doing well or not so well? What isn't anyone covering that should be? What ideas do you have for improving this simple but content rich website? Would you like to be a volunteer reporter and supply stories/photos of gas pipeline-related events? Did you at one time work on one of the gas pipeline projects; if so, would you please provide us with your own story, 2-20 pages!) Lastly, let us tease you. One of our Canadian readers is a 9th grader named Jeremy who has assumed responsibility for producing a school paper on Arctic gas pipelines. We have assisted him with contacts and web links. By mid-December we look forward to sharing with you the correspondence and final product; we are sure that it will reinforce your confidence in the generation for whom we are really working on pipeline projects. If you are willing to offer your help or expertise to Jeremy, please email us at the link above and we'll put you in touch. This thoughtful young man would deeply appreciate your help. * CBC, Yellowknife, N.W.T. - Politicians and business people from the Northwest Territories are selling Texans on their territory today. * DALLAS - Team Canada's latest trade mission to the United States... * Inuvik, N.W.T. - About thirty scientists from around the world will be in the Mackenzie Delta this winter...drilling for natural gas hydrates. ******* (While the author endeavors to produce accurate reports from meeting notes, he encourages all persons and offices named in this and other articles and readers-at-large to provide additions/corrections to ensure validity of the historical record. -dh ...Draft Revision: 11-28-01)
Northern Gas Pipelines-Senator Frank Murkowski said this week that he intends to attach an energy In answer to questions posed by Northern Gas Pipelines, Murkowski’s office provided a statement quoting the Senator as saying he was pleased with movement in the development of an Alaska Natural Gas Transportation System. Murkowski added that the U.S. needs a comprehensive energy policy and that, following 9-11 less dependency on foreign nations in unstable areas is vital.
"Next year is not soon enough for energy. These are volatile times. To be so dependent on such an uncertain corner of the world places American lives at risk and our economic future in jeopardy. …I still believe we have an obligation to solve this problem. I remain committed to bringing about a vote on energy - if the leadership will not set a date certain this year, I will use whatever procedural means are available to make that occur. Northern Gas Pipelines-“Alaska Energy Economists Discuss Cook Inlet Gas Supply and Relationship to North Slope Gas Decision.” Yesterday the Anchorage chapter of the International Association for Energy Economists gathered to hear a joint presentation by three State Division of Oil and Gas officials representing the Department of Natural Resources. SEE FULL STORY AND PRESENTATION LINKS HERE. Comment: Just as Cook Inlet production is declining, so are state revenues. Alaska currently spends more than it takes in, making up the balance from fast depleting savings accounts. The savings account reserves are on an even sharper decline than Cook Inlet gas reserves and will be used up before the end of the decade. Even revenue from an ANS gas pipeline would only slow the decline in revenue, not reverse it. The concern for Cook Inlet production, the industry jobs/tax base it supports and gas supply for Fairbanks are only a few of the reasons why political leaders in Alaska are so focused on enabling an Alaska Highway or Trans-Alaska LNG project. Either could bring the huge ANS reserves closer to major population centers. Now, readers outside Alaska may come to understand why there continues to be tension between the desire to achieve maximum value for ANS gas—maximum income for the state--and the desire to keep Alaskans employed and their homes warm. A long delay of an ANS gas project, however, would jeopardize both goals...the worst outcome. -dh ANCHORAGE-Alaska Gas Producers Pipeline Team (AGPPT) Year-long Feasibility Project Approaches Conclusion (Northern Gas Pipelines Report and commentary). Not surprisingly, the political leaders of Alaska, Northwest Territories and Yukon Territory have made their political support known for various project routings based on what they perceive to be the best interests of their constituents. It is valid for politicians to reflect their political views in regulation and law. It is also true that political acts cannot necessarily command economic feasibility nor compel private investment. Various companies bought the leases in Arctic areas, explored, found oil and/or gas. Their constituencies are shareholders who provided the exploration funds expecting a fair investment return. If governments did not specify route and mode for transporting resource in the original lease agreements, companies are entitled--indeed required--to produce the most efficient system in faith with shareholder expectations. Accordingly, the companies are obligated to make rational, non-political decisions for moving their resource to market. The AGPPT feasibility study for commercialization of Alaska North Slope gas was scheduled for completion at the end of 2001. The final route was also expected to be identified and an application filed with Canadian and U.S. governments by year-end or shortly thereafter. Several things have happened over the last year including a dramatic slide in the market demand and price for gas. Also, the AGPPT has argued that a keystone in project feasibility is fiscal/regulatory 'clarity' in Alaska and Federal legislation, neither of which has occurred. Neither does it look likely that the AGPPT will file project applications with the two Federal governments by year-end, or shortly thereafter as earlier planned. So, the team has announced no final routing or feasibility conclusions, though there are interim conclusions we can deduce from statements and actions:
Affecting the final outcome must surely be the recent announcement of a ConocoPhillips merger combining North Slope and Mackenzie Delta gas reserves of the joined companies. Three major producers share the significant 35 TCF proven North Slope gas reserves. Two of the three now have proven reserves in the Mackenzie Delta while the other has exploratory interest there. Accordingly, shareholders would properly insist that any decision on gas commercialization routing and timing consider company reserves and potential on the North Slope and in the Delta. Also affecting the outcome are recent announcements that the Alaska Highway Project sponsors have reestablished their partnership (See here) and entered into a cooperative process with the Kaska Nation (See here) and that much Alaska sentiment still supports an LNG system (See here). Northern Gas Pipelines this week questioned David MacDowell, External Affairs Manager (Photo, 10-25-01) for AGPPT
Some of the possible 2002 scenarios could include:
Both AGPPT and the Canadian government have logically stated that government roadblocks to any project are more likely to bring down a project than facilitate one. One scenario could envision government legislation providing legislative incentives for a politically preferred route or disincentives/prohibitions for a politically unpopular route. Were this to happen, as a trade-off benefiting certain interests, all outcomes could have negative impact on some combination of royalty owners, taxpayers and/or shareholders, future investors contemplating the investment climate of northern, North America. Northern Gas Pipelines readers, including the author, might instinctively prefer a combination of three routes: (1) an Alaska LNG project "Y" leg from Fairbanks to Valdez; splintering off from (2) an Alaska Highway Pipeline Project route which intercepts gas from (3) a Mackenzie Valley Pipeline. But were we told we could have that scenario if we were willing to pay for it, chances are we'd commission a study to determine what scenario would produce the best return for our investment of billions of dollars. Viewing the results of that study, we'd then decide if the perfect project also provided an economic return; if it didn't we'd be obligated to commit our money to a feasible project. If politicians erected roadblocks to that project, we’d be out of options. That very process seems to be playing out now among the primary investors. We don’t know whether their final decision will turn out to be the most popular conclusion from their viewpoint or ours. But following an expensive process of prudence and due diligence the results will reflect a scientific approach…and reality (On this subject, here's an economist's opinion). -dh 11/27: Gov. Tony Knowles' (10-31 photo) office sent Northern Gas Pipelines a notice that yesterday in New York 11/26: This will be another significant week in the life of Arctic gas pipeline discourse: Arctic Gas Symposium Participants, 11/29-30, Houston: Judy Brady, Executive Director, Alaska Oil & Gas Association--Matt Janisch, Managing Director, BMO Nesbitt Burns Inc.-Ministers Jim Antoine (Northwest Territories), Scott Kent (Yukon Territory), and Murray Smith (Alberta)-Corry Woolington, Land Manager-Alaska, Chevron U.S.A. Inc.-Robert 11/24-25 (Weekend): Gas Prices, Henry Hub: 11-23, $1.87; 11-16, $2.28; Year ago, $6.37. * Houston Chronicle By IAN MCKINNON (Reuters News Service), CALGARY, Alberta -- The energy industry is gearing up for an active winter drilling season on the tundra of Canada's Far North, but soft natural gas prices and a weak economy have deflated expectations of a full-fledged boom. ... "Short-term price fluctuations are something that we're not concerned with because we're looking at the long term," said Chris Dawson, a Petro-Canada spokesman. ... Petro-Canada and Devon plan to drill three 9,840-foot deep wells between the small Mackenzie River Delta towns of Inuvik and Tuktoyaktuk. Paramount intends to drill two wells farther south, near Fort Liard, below the Arctic Circle. ... In recent federally supervised land sales, producers committed to spending $406 million on exploration over the next few years just in the Mackenzie Delta. ... A Northwest Territories official said overall activity is robust, with about 20 seismic programs set for this winter, which will be used to target wells in upcoming drilling seasons. "Aside from the central Mackenzie Valley, it looks like projects are up all ... around," said Chuck Parker, an assistant deputy minister in the government's resources department. "We're working to maximize northern employment but it looks like there will be lots of opportunities for work." ... Oil-field service provider Akita Drilling Ltd. is keeping two new rigs in Alberta this winter and delaying the move of the $11.24 million units to the Mackenzie Delta until later in 2002. "It looks like the number of wells that will be drilled this year (in the Arctic) will be similar to what was drilled last year," said Murray Roth, Akita's vice-president of finance. "I would say it's a disappointment. We would have liked to have seen some additional growth there." ... "The reality of the situation is that when the prices are low, like they are now, the companies start to ask themselves what the prices are going to look like in the future," said gas analyst Roland George of consultants Purvin & Gertz Inc. Imperial Oil Ltd., Shell Canada Ltd. and the Canadian unit of Conoco are studying building a $1.9 billion pipeline to transport about one billion cubic feet a day of Arctic gas to southern Canadian and U.S. consumers. Additional finds by Petro-Canada and other firms would improve the viability of the project. * GAS PIPELINE MEETINGS GALORE: Next week will be extremely active for the gas pipeline community. Stay tuned for our Monday report on the events and the players convening in Anchorage, Calgary and Houston. 11/23: Whitehorse Star by Chuck Tobin-The Yukon government is looking to the Whitehorse trough as the next area to make available for oil and gas exploration, says the manager of the territory’s oil and 11/22: YELLOWKNIFE -- Premier Stephen Kakfwi has appointed Melody Morrison as Principal Secretary to Cabinet. Morrison is from Whitehorse, Yukon where she has worked since 1995 as an advisor to the Kaska Nation in land claims, self-government and treaty negotiations. She has worked for the Council of Yukon First Nations (formally the Council Yukon Indians) and served as Executive Assistant to the Minister of Renewable Resources and Tourism for the Yukon Government. From 1992-1995 Ms. Morrison was Principal Secretary to the Premier of Ontario, co-ordinating all operations of the Premier’s Office, and providing advice and support to the Ontario Premier in strategic planning, communications and the implementation of government priorities and planning. “Ms. Morrison is an astute and energetic advisor, negotiator and team leader,” the Premier noted. “She has extensive and diverse experience with issues across Canada and particularly in the North. Her insight and guidance will be a valuable and welcome resource ....” Morrison has supported the public service communications efforts of Northern Gas Pipelines and will assume her new duties January 3, 2001. We wish her well. -dh * ANCHORAGE: Ad valorem tax collections in
11/21: ANCHORAGE (SPECIAL REPORT; readers may skip story and move directly to gas pipeline
Simmons was optimistic about energy development and said that the Alberta tar sands contain more In answer to an audience question regarding project complexity, Simmons said, "Getting gas through Canada will not be a problem; it will be facilitated." In answer to a question about incentives, Simmons said that Canada withdrew from the "subsidy business" years ago, but "...we can facilitate the process." He added that in returning to basic principles, if a project is uneconomic, "...it will not work anyway." Then, he cautioned about too much government interference. He said he'd been in politics long enough to know that government can destroy a project by creating too many rules around it. He did acknowledge that continuing settlement of Aboriginal land claims have produced an environment in which First Peoples want to be a part of the process. Aboriginal control of lands would create, "...more jurisdictions to work with," he said, but land claims would not be an impediment to a gas pipeline. Responding to a question about use of Alaska/Canadian labor on a gas pipeline project, Simmons indicated that he is encouraged by training and educational relationships growing between Canada and Alaska, citing a Yukon College/University of Alaska-Fairbanks program. "The problem will not be finding enough jobs for the people," he said, "but finding enough skilled workers to meet the requirements." (Obtain Consul General Simmons' prepared speech here.) 11/20: At 7 a.m. this morning, The Honourable Roger Simmons, PC, Consul General of Canada,
11/19: ConocoPhillips merger: please see our full report with links and comment (additional links to other related news and commentary will be added during the day). * CBC's 11/17-18: Anchorage Daily News, by David Reaume (Photo): ... With a combined market capitalization exceeding
Globe and Mail-Scott Kent (Photo, right-with author 2-01) the Minister of Economic Development for Yukon, a vocal proponent of the proposed pipeline, said the removal of the legal question lifts a huge barrier to 11/16: Northern Gas Pipelines asked the Alaska Gas Producers Pipeline Team for its reaction to the Alaska Natural Gas Transportation System (ANGTS) reformed partnership more fully reported in yesterday's news below. The statement that they provided reinforced earlier statements made before government agencies during the past year: "We understand that the pipeline companies have signed an MOU that may begin to address some of the historical issues associated with ANGTS. Our goal is to identify an economic project. We would be pleased if this announcement ultimately furthers development of an economic project to move Alaska's North Slope gas to market." The statement went on to conclude that, "We hope they are able to develop specific tariff proposals to be considered by our sponsor companies. We have consistently said that we're interested in any and all competitive proposals." See other stories: Anchorage Daily News, Fairbanks Daily News-Miner, Vancouver Sun.... * Northern News Services, Yellowknife - Conoco Canada, formerly Gulf, is planning to conduct a 3D seismic exploration program in the Delta (late this year, finishing Spring 2002). The program will involve about 586 square kilometres of land surrounding Parsons Lake, on Crown and private Inuvialuit 7(1)(b) lands within the Inuvialuit Settlement Region. ... Western Geco has been contracted to do the seismic work. One 60-person sleigh camp will be used. A 225-person weatherhaven camp will be set up on the west side of Parsons Lake. Conoco representatives attended a community consultation meeting in Tuktoyaktuk recently on the proposed program. A few days later, representative Ray Prudholme explained the program is being done in conjunction with 3D seismic work being conducted by Petro-Canada. ... While in Inuvik, Brian Plesuk, team leader, community and aboriginal relations, made a $15,000 donation on behalf of Conoco to Aurora College, to help pay for the oil rig floorhand and service rig training programs it conducted earlier this year. ... Campus director Miki O'Kane said final costs aren't in yet, but that the college did overspend on the programs.... * Northern News Services, by Derek Neary, Fort Providence - The Liidlii Kue First Nation won't be signing any proposed pipeline agreements until an independent consultant reviews the documents, Chief Rita Cli said Tuesday. Through a survey of band members last month, the LKFN determined a mandate existed to sign the Aboriginal Pipeline Group's memorandum of understanding (MOU). However, Cli said she won't rush into it. "Once you sign on the dotted line it's final," she said. "Just to get clarity I want to get this second opinion. Everything's on hold." Cli said she's expecting to have a consultant review the MOU and the Arctigas Resources Corp. (ARC) pipeline proposal before Christmas. She and her council will rely on the consultant's recommendation in making a final decision, she said. ... The pipeline issue arose once again at last week's Deh Cho First Nations leadership assembly in Fort Providence. ... Cli is determined to have a clause changed in the Wrigley special assembly resolution so that harvesters' consent is not a requirement for a Mackenzie Valley pipeline. Instead, the clause would be stronger if it stated that First Nations membership's consent is needed, she argued. DCFN Grand Chief Michael Nadli is holding Cli to the Wrigley resolution. 11/15: PLEASE SCROLL DOWN TO SEE YESTERDAY'S REPORT: The Alaska Oil and Gas Royalty Development Advisory Board met to review a "Preliminary Finding for A Competitive Sale of North Slope Royalty Gas". * Calgary, November 15, 2001 -- Alaska Highway natural gas pipeline project participants today signed a memorandum of understanding (MOU) between six major American energy firms and three Canadian firms, according to a project news release issued this afternoon. The companies are proceeding immediately with development of a proposal for transporting Alaskan natural gas to markets and they expect to present a proposal to the Alaska North Slope producers by year-end. Once agreement is reached with the producers, the companies intend to move forward with the project, with the goal of delivering Alaskan gas to Canada and the Lower
48 states by 2008. “All the Governor Tony Knowles' office responded today: Gov. Tony Knowles (Photo, 10-31-01) hailed today's agreement among six major American energy firms and three Canadian firms as a major step toward development .... WASHINGTON - A release this afternoon from Alaska Sen. Frank Murkowski's office commented on the agreement to reconstitute a partnership to transport Alaska natural gas to markets in the Lower 48. Murkowski, after a meeting with the major natural gas transmission companies Anchorage Daily News, by Liz Ruskin-Washington -- Sen. Frank Murkowski, in his continuing endeavor to show there is broad support for drilling in ANWR, assembled black and Latino business leaders, Orthodox Jews, organized labor, seniors, veterans and Inupiat Eskimos for a press conference Wednesday on the Capitol lawn. * Yesterday, U.S. Senator Ted Stevens' office (Photo, 8-14-01, Anchorage) sent Northern Gas Pipelines this statement regarding ANWR status: "Recently, I've made statements on the Senate floor regarding the importance 11/14: Late yesterday, The Department of Natural Resources' Division of Oil and Gas has approved an expansion of the North Slope Point Thomson Unit (PTU) which coupled with the current plan of development, should result in production from the unit by 2008, Commissioner Pat Pourchot announced today. The operator of the unit, ExxonMobil Corporation, estimates the high-pressure Thomson Reservoir contains more than 8 trillion cubic feet of gas and over 200 million barrels of recoverable condensate. * Whitehorse Star, by Chuck Tobin-The Kaska Nation has signed an agreement with Foothills Pipe Lines Ltd.; also, CBC story (See our stories, yesterday, below.) * Peninsula Clarion-Senate Majority Leader Tom Daschle has pushed to the back of the line the energy legislation that includes opening ANWR, saying the Senate should now be focused on the priorities of economic recovery efforts, aviation security and passing appropriations bills. That leaves no room for an ANWR debate.... * REPORT: The Alaska Oil and Gas Royalty Development Advisory Board Met yesterday to review a "Preliminary Finding for A Competitive Sale of North Slope Royalty Gas".
Pourchot opened the meeting, facilitating election of the Chairman and announced the purpose of the Robson (Photo) said interest in North Slope royalty gas began intensifying in the last year with Netricity’s She briefed members on several aspects of a potential sale, including:
Robson said completion of this initial phase inviting public comment will occur by month’s end. A firm In response to questioning by Chairman Navarre, Robson said the Division was “somewhat concerned” about a sales contract obligating the state for decades when gas won’t flow until late in the decade and Anadarko’s Hanley testified that his company wished to express support for the State’s going forward with the North Slope royalty gas sale process. “Holding a sale now provides the State with maximum flexibility,” he said. He provided the board a letter from David Anderson, Anadarko’s Manager of International Commercial Development, saying that the bid process “…creates an opportunity for the State to capture real economic value for its royalty gas volumes years before the State will actually have royalty gas volumes available to sell. …there appears to be absolutely no downside to this initiative by the Department of Natural Resources.” As to Anadarko’s interest of using royalty gas contracts as a means of assuring pipeline capacity for its future discoveries, Anderson’s letter said that “…failure to secure firm transportation now could result in Anadarko’s prospective gas discoveries being stranded without any means to produce and sell the gas.” Hanley added that obtaining royalty gas is a way of obtaining capacity on a gas pipeline which reduces—but does not eliminate—his company’s risk. “It is critical that we obtain capacity,” he said. “If we cannot obtain capacity it makes no sense to explore for gas.” (Photo-Hanley-left, and Sharp during interview after meeting) The second witness appearing before the Board, Sharp of AEC Marketing, had much the same message as a new but significant gas exploration participant on Alaska’s North Slope. In a cover letter to the Board, he said “…now is an opportune time for the State to capture the maximum benefit from…royalty gas. …initiating the royalty-in-kind process and finalizing the awarded gas sales contracts as soon as possible is critical for current and future gas exploration in Alaska.” In his testimony, Sharp familiarized the Board with his company, Canada’s largest natural gas producer holding reserves in Western Canada, the U.S. Rockey Mountain area and Ecuador. Then, turning to the principal points, he said the Alaska gas producers intended to conduct an open season for gas pipeline capacity as early as the first quarter of 2002. “AEC’s U.S. subsidiary and Anadarko are actively exploring in the Foothills of the Brooks Range, however, we will not have proven gas reserves by 2002. Therefore, nominating for firm capacity in the open season is extremely risky…,” he said. “Without some assurance concerning pipeline capacity, continued investment in new Alaska gas exploration is unlikely.” He added that a royalty gas sale’s benefits to Alaska were significant: the State could achieve new gas reserves, more royalty revenue, stimulate new gas exploration and achieve a higher level of competition without obligation or risk. (You may download Sharp's testimony here.) 11/13: Whitehorse-Dave Porter, National Negotiator for the Kaska Nation told the Canadian Aboriginal Mining Congress yesterday that Aboriginal Nations must, "...reach out and work together to forge strong alliances and an historic common agenda.” Porter quoted Harry Deneron, honorary Chief for Life of Acho Dene Koe earlier this year, “Ownership in the pipeline is for our children tomorrow. Royalties will be our trust for the future.” (Deneron's vision seems to be taking form. See the balance of Porter's speech here and note the ANGTS development reported below. -dh) *
BREAKING NEWS... TODAY ......VANCOUVER--The Kaska Nation and Foothills Pipe Lines Ltd. today announced the signing of a cooperation agreement for the Kaska’s potential involvement in the Alaska Highway Pipeline Project (AHPP). The agreement completes the first phase of a three-phase process between the Kaska Nation and Foothills Pipe Lines. The second and third phases of the process are structured with a view to concluding a participation agreement by March 31, 2002. “March 31 is significant because concluding our land claims, self-government and trans-boundary agreements is our highest priority,” said Peter Stone, CEO of Kayeh Nan Petroleum Inc., who signed on behalf of the Kaska Nation (Photo: Stone-right, Ellwood-left; click for full size). “The cooperation 11/12: Henry Hub natural gas prices: 11/9: $2.63 11/2: $2.97 Year ago: $5.38 (Caveat emptor plumbum. -dh) * PLEASE SEE JOINT GAS PIPELINE COMMITTEE REPORTS BELOW * Northern News Services, by Thorunn Howatt, Port Providence - Deh Cho First Nations leaders want to settle land and self-government talks before signing on to a Mackenzie Valley natural gas pipeline. … "The pipeline is on everyone's mind," said Grand Chief Michael Nadli. He said the Deh Cho Process must be resolved first. "We're not anti-development," said Nadli. He insisted the Deh Cho will "roll out the red carpet" for pipeline and development once the region is closer to its goal. … So far, just one DCFN chief has signed -- Fort Liard's Judy Kotchea. … Although it was rumored that Liidlii Kue First Nation Chief Rita Cli would announce her intention to sign the MOU, she remained non-committal. … Hay River Chief Pat Martel didn't push hard to sign the MOU but urged Aboriginal Pipeline Group supporter Harry Deneron to speak about oil and gas opportunities for the region. … Members from ArctiGas were present for the leadership meeting. … ArctiGas' managing director Bruce Hall said the corporation has spent millions of dollars on its project since 1999. During an ArctiGas presentation, the company reminded Deh Cho leaders that up to $100,000 is available to communities toward the investigation and legal fees associated with checking out the proposal. 11/10-11, Weekend-WASHINGTON - Alaska Sen. Frank Murkowski (Photo-right, 11-3-01) Friday REPORT: Thursday the Alaska Legislature's Joint Gas Pipeline Committee finished a two day meeting in Kenai. Thursday's report is immediately below; click here for Wednesday's report. Chairman John Torgerson (Photo, left to right: Sen. Olsen, Reps. Ogan and Green, Sen. Torgerson, 7-1-01) welcomed Bill Van Dyke, Petroleum Manager of Alaska’s Oil and Gas Division, as the Alaska Legislature's Joint Gas Pipeline Committee embarked on the second of its two-day meeting in Kenai. While the Committee is most concerned about Alaska North Slope (ANS) gas, its Chairman represents Kenai Peninsula voters, heavily dependent on Cook Inlet area oil and gas jobs while Vice Chairman Joe Green represents Anchorage constituents, dependent on Cook Inlet gas for heating and power generation. Van Dyke’s presentation illustrated gas reserves in the Cook Inlet area and production numbers. About 2Tcf of proven reserves remain, causing a concern for upcoming shortages highlighted in a recent AEDC report. Most of the gas last year came from larger fields discovered in the 1960s, Van Dyke said. “We haven’t added new reserves this year from new discoveries. I expect that to Tim Ryherd, also of the Oil and Gas Division addressed exploration. Gas in the Cook Inlet was discovered in the process of looking for oil, he said. Only one of the large gas fields was discovered while actually looking for gas. From a historical perspective, exploration activity is now at a high level and he commented that this is, “…very positive for Cook Inlet gas exploration activities”. He said gas is attracting more interest from existing operators and new players. “I think additional gas will be the focus for the future…and drive exploration in the Cook Inlet,” he concluded. Will Nebesky, an Oil and Gas Division economist (and president of IAEE), spoke on the history of demand for Cook Inlet gas and the outlook. He said that the priority gas utilities and power generation uses consume about 30% of total demand with the balance dedicated to industrial and field use. He discussed historical prices and compared them with lower 48 benchmarks, reviewing two major measures of value: utilities prices and royalty value, involving a set of ‘higher of’ provisions and settlement agreements. Around 2003-04, he affirmed, there is a disruption of supply balance assuming no new reserves. He said that a recent contract between Unocal and Enstar using a pricing mechanism related to Henry Hub prices reflects the effect of gas scarcity in the Cook Inlet area. He said that while the Cook Inlet supply is about .6Bcfd, a projected Fairbanks demand with a North Slope gas pipeline could be about .04Bcfd. (Please see the Van Dyke, Ryherd, Nebesky presentation here.) Senator Donny Olson was concerned about the volatility of residential prices resulting from the new Unocal/Enstar contract. Nebesky pointed out that the various contracts and prices, blended together, provide a certain stability in pricing. Olsen wondered about the effect on production of including Henry Hub numbers in calculations. Nebesky emphasized that increased exploration in some ways can be traced to the expectation of higher prices. In answer to further questioning by Representative Scott Ogan, Nebesky said that Phillips’ LNG export licenses for LNG terminate in 2009 and can be expected to be reviewed at that time. In the event those licenses are not reviewed, more gas could be available for consumer use. An upward price trend will put economic pressure on continuing industrial use of gas, affecting economics of both LNG and fertilizer production. Chris Tworek (Photo), Vice President, Supply Management of Agrium, Inc. said his company would like to discuss solutions and seek a long term partnership with producers and the government. He said that Agrium is one of world’s largest fertilizer producers with 5,000 employees and 14 facilities producing 11 million tons/year. It is the second largest retailer in North America, with 226 outlets and annual sales exceeding $2 billion.
Tworek pointed out that Nitrogen is one of the easiest ways to monetize gas anywhere in the world. North America produces 14% of world’s production; much of that had to shut down with recent high prices and the market was replaced by offshore gas. He said the company sees expansion possibility for the Kenai plant; it could easily increase gas use by 30Bcf/y…to 55Bcf/y…but needs long-term certainties to be in place. As to solutions, Tworek said that while a North slope gas pipeline is one possible solution, he’s reviewed encouraging estimates of more Cook Inlet gas and goal bed gas (i.e. as described in other presentations). Agrium is willing to invest, he said, and “partner” with exploration companies and pipelines. The company is open to purchasing state royalty gas for industrial use. He added that successful partnering can continue Alaska’s success, and benefit its economy. Torgerson asked how competitors price their royalty gas value. Tworek described the $.90-1.00/Mcf Trinidad example as a bench price with escalators and a Malaysian example. (Readers may obtain a copy of Chris Tworek’s presentation here.) George Findling (Photo, 9-19), Manager, External Strategies for Phillips Alaska, Inc. introduced Scott Dan Thomas, Unocal’s Land Advisor, said Cook Inlet producing assets are climbing rapidly. “Unocal has aggressively obtained leasehold positions in a broad array of properties on public and private lands,” he said. Historically, he said there has been an abundance of gas in the Cook Inlet and low prices; so, there was no need to explore. He said a 5Tcf supply will be needed in next 20 years and that a large, “gaping” demand needing to be filled. He said of coal bed gas potential that the coal and gas exist but that coal bed gas exploration had not been successful for Unocal. Unocal sold its interests to Evergreen, he said, “and we wish them the best”. On Cook Inlet gas demand, Thomas said, “Today’s supply equals demand but known reserves cross gas demand at peak times in 2003. In 2005-06 normal demand will outstrip supply even with storage.” In 2000, he said, Unocal sold the Kenai fertilizer plant to Agrium as part of its world wide strategy to focus on oil and gas. Had it not been for the recent contracts (reflecting higher prices) current exploration wells would not be underway, he noted. Thomas said that Unocal is very much dedicated to Alaska and to the Cook Inlet area. The company will increase its annual spending with a 2003 target of $55 million for exploration. On Alaska’s royalty valuation method calling for producers to pay the state a royalty value based on a variety of price indicators, Thomas said that royalties should be based on actual sales, that it is “abundantly unfair to pay a higher royalty than the price actually paid”. He cited several supporting examples. Representative Mike Chenault asked Thomas about his chart showing a decline in gas demand in 2009-10 and was told it represented freed up supply occurring if the Phillips LNG export permit expired. (Readers may obtain a copy of Dan Thomas’ presentation here, soon…. Check later.) Scott Heyworth (Photo-5-24), Chairman, Citizens Initiative for the All-Alaska Pipeline, told Members that he was Torgerson asked about Heyworth’s coordination with Yukon Pacific Corporation (YPC) and the Alaska Gasline Port Authority advocates. Heyworth said he had obtained his LNG education from Jeff Lowenfels, former YPC president. He said he was working now with the Authority and YPC to develop coordination. He opined that the initiative created authority could “…purchase the assets of YPC.” He said the authority would have to obtain the YPC permits in any case. Representative John Davies asked Heyworth’s view of counsel earlier offered the committee by a state oil and gas economist referring to “LNG project numbers being upside down, having negative value”. Heyworth said, “I don’t agree … in any way, shape or form. The numbers work for me. We’re not upside down.” (Readers may obtain a copy of Scott Heyworth’s presentation here.) Chairman Torgerson invited John Ellwood (Photo, 5-17) to the microphone. Ellwood, a frequent witness at Alaska 1. The Alaska Northwest Natural Gas Transportation Company (ANNGTC) partnership. He recalled October 2 Senate testimony on this issue: “In the initial stages of the Alaska Highway Project, numerous U.S. energy companies were partners in the Alaska Partnership. However, during the decade of the 1980s and the 1990s when the producers of Alaska natural gas were unwilling to commit that gas to Lower 48 markets because of low energy prices, all of the U.S. partners withdrew from the Alaska Partnership. Foothills and TransCanada, as the two remaining partners, have offered to the current holders of the withdrawn partner interests an opportunity to rejoin the Alaska Partnership. The negotiations with these companies have been productive and are ongoing”. He said that, “We have already scheduled further meetings so that we can continue to work on the details for reconstituting the Alaska Partnership. It is anticipated that all parties will have signed a Memorandum of Understanding (MOU) within the next month. TransCanada, Foothills and the withdrawn partners are committed to eliminating commercial barriers to construction of the ANGTS and in so doing would be prepared to release contingent claims against the Alaska Partnership related to previous investments in the ANGTS as part of a commercial arrangement to ensure a market viable project.” (Please note: Alaska Northwest Natural Gas Transportation Company (ANNGTC) Partners include (Successor or parent company shown in brackets): Active partners: TransCanada Pipelines USA (TransCanada Pipelines, Ltd.); United Alaska fuels (Foothills PipeLines, Ltd.) – Withdrawn partners: American Natural Alaskan Company (El Paso); Calaska energy Company (PG&E); Columbia Atlantic Trading Company (Williams); Northern Arctic Gas Company (Enron); Northwest Alaskan Pipeline Company (Williams); Pacific Interstate Transmission Company (Sempra); Pan Alaskan Gas Company (Duke); Tetco Four, Inc. (Duke); Texas Gas Alaska Corporation (Williams). 2. Foothills commercial proposal. He said, “A commercial agreement with the Alaska producers…has been delayed, in part, because of the withdrawn partnership issue overhanging the project, and because the Alaska North Slope (gas producers) are focused on completing their project feasibility study. … we remain confident that we will reach a commercial arrangement to develop a viable project.” 3. Work on the pipeline right-of-way. Ellwood said the transportation system from Prudhoe to Alberta is approximately 1,750 miles long. “Foothills is well advanced along the road of securing the pipeline right-of-way,” he said. “More than 400 miles of right-of-way on federal lands has been acquired. Currently, we are making progress on securing the 200 miles of right-of-way on State lands with the Gas Pipeline Office. Work is under way to assess the information that was previously submitted in an earlier application, and a process to move forward has been identified. With the State right-of-way lease expected to in hand by 2003, over 90% of the right-of-way for the project will have been acquired or reserved.” In a summary, he announced an outreach project, “to establish a consultation process that will enable interested Alaskans to become involved in the project.” He also acknowledged the importance of producer involvement. “We remain confident that the long-term demand for and the price of natural gas in the North American markets will support this project,” he said. (Readers may obtain a copy of John Ellwood’s presentation here.) Richard Peterson, president of ANGTL has long advocated gas-to-liquids technology (His assertions are gaining more credibility as industry fast-tracks GTL technology and efficiency and as
Tony Izzo, President of Enstar (Photo), then took the floor. He said the Southcentral Alaska gas distributor and its customers account for 13% of Cook Inlet gas consumption. He said that while discontinuation of industrial use would not put Enstar supply at risk he would urge legislators to do “everything possible to avoid that”. (Readers may obtain a copy of Tony Izzo’s presentation here.) Mark Sexton, President & CEO of Evergreen Resources appeared with his Operations Vice President, Dennis Carlton, from their Denver offices via teleconference. Evergreen extracts natural gas from coal seams primarily in the Raton Basin but is becoming increasingly interested in Alaska. “Alaska has as much or more coal as the rest of the U.S.,” he said. For Alaska’s Cook Inlet basin, he said, “We and others believe one of the very viable options for the future is coal bed methane, as much as 200 Tcf. Enstar’s 20” pipeline intersects the Pioneer Unit where Evergreen plans to drill 6-12 wells next year. “Natural gas in the Cook Inlet will provide a long term supply of natural gas,” he said. “Our studies suggest coal bed methane has the potential of replacing the decline in gas, eliminating the need for bringing North Slope gas to Southcentral Alaska.” Sexton’s Alaska budget, he said, is $5 million next year; accelerated prudently over time. He recommended that the legislature consider streamlining the permitting and regulatory process for coal bed gas. He said experience had taught that surface access may become THE major obstacle to exploration: legislation requiring surface owners go give access to subsurface leases is advisable. On that subject he made several points:
Ogan was concerned about conflicts between surface and subsurface owners. Sexton said that his company’s approach was to have conversations with people and local communities and demonstrate how coal bed gas development might benefit people. He gave examples of adjusting road routing; providing gas sales to landowners. He said citizens are less concerned once they see the small impact (1-2% of the land is used). In the Mat-Su area Sexton believes that small wells can be hidden easily inside a group of trees or with use of natural barriers. His company goes to great lengths, he said, to minimize noise. Olsen asked about the potential of coal bed gas for rural Alaskans. Sexton said Evergreen had researched the Red Dog mine area. “A coal bed methane play is frequently the way to supply natural gas to many such areas,” he said. “Each community could be served with just a few wells.” He also emphasized that while coal is accompanied by gas, the only way to determine economic feasibility was to drill and test the structures. (Mark Sexton's presentation has been requested and will be linked here, when available.) (While the author endeavors to produce accurate reports from meeting notes, he encourages all persons and offices named in this and other articles and readers-at-large to provide additions/corrections to ensure validity of the historical record. -dh ...Draft Revision: 11-10-01) 11/9: Northern Gas Pipelines monitored meetings over the past two days of the Alaska Legislature's Joint Gas Pipeline Committee. The first report below (11-8) reflects the 11-7, Wednesday meeting. Thursday's meeting will appear in the weekend report, complete with links to several presentations. This is a wealth of information for anyone interested in northern gas pipeline projects in Alaska and Canada. Headline Samples: "Alaska's Washington Representative Reports No Gas Pipeline Legislation Before Thanksgiving, Perhaps Not Until 2002"; "Alaska's Cambridge Energy Research Associates Consultant Says Gas Pipeline Window May Be Pushed Back A Year Or More"; "State Economist Highlights Gas Pipeline Risk Factors"; "Alaska's Deputy Revenue Commissioner Questions State Pipeline Ownership"; "Joint Pipeline Office Coordinating With Huge Array of U.S. Agencies, Canada Next Year"; "Department of Natural Resources Says Cook Inlet Reserves Declining, Exploration Increasing"; "Agrium Vice President Says Cook Inlet Gas Shortage Could Cost Peninsula Hundreds of Jobs, Millions of Dollars"; "Phillips Won't Seek LNG Export Past 2009 Absent More Cook Inlet Reserves"; "UNOCAL Says Cook Inlet Demand to Surpass Supply Within 5 Years, Is Aggressively Exploring"; "LNG Citizens Initiative Gains Half of Votes Needed for Ballot"; "Foothills Says 'Withdrawn Partners' Issues Nearly Settled"; "Gas-To-Liquids Value to Alaska and U.S. Underestimated"; "Evergreen Resources May Have Alaska Gas Supply Surprise With Coal Bed Gas Technology"; "Enstar Says Absent New Gas Supply, Industrial Use Could Be Threatened" (Supplement your knowledge by reviewing the official Committee reports on the 11-7 and 11-8 meetings; also this related story: Peninsula Clarion, By Shana Loshbaugh-Millions of dollars and hundreds of jobs for the Kenai Peninsula may be at stake in the current debate about a potential gas pipeline across Alaska and Canada. See this Clarion story by Jay Barrett-Committee member Rep. Mike Chenault, R-Nikiski, said that for years petroleum companies did not seek gas, only oil. Now that they are looking for gas again, new reserves could be found.) * CBC, Fort Providence, N.W.T. - Divisions smoldering within the Deh Cho First Nations about pipeline development in the Northwest Territories burst into flames yesterday afternoon. Two chiefs who've signaled they're ready to make a decision about the pipeline squared off against the grand chief.... * Northern News Services, Dave Sullivan, Fort Providence - The Deh Cho may allow a pipeline through traditional territory for half of the royalties that go to the government of Canada. The 50-50 split would be a temporary measure until self-government talks, which would include turning over Crown land and mineral rights, are worked out, chief negotiator Chris Reid told delegates Nov. 6 at a leadership assembly. The figure is in a proposal for the federal government called an interim resource development agreement. ... The federal government's counter proposal is a one per cent royalty on all gas going through Mackenzie Valley, to be pooled and split among all First Nations, Reid said. ... The Deh Cho calculate they will derive $2 billion in revenue from a 50-50 royalty split, based on $100 billion worth of gas that could pass through the region during the lifetime of a Mackenzie Valley pipeline. With 40 per cent of the pipeline going through the Deh Cho area, the First Nations would realize 20 per cent of total royalties. At royalty rates ranging from one to five per cent of gas value, and rising to 30 per cent of net profit after the pipeline is paid for, federal pipeline revenue could be about $25 billion over 20 years. The Deh Cho's share would be $4 billion of that, with half going back into federal coffers. 11/8: CBC, Fort Providence, N.W.T. - Two more Deh Cho communities in the Northwest Territories are signaling they're ready to make a decision about aboriginal ownership of a proposed Mackenzie Valley pipeline. The debate was re-ignited at a meeting in Fort Providence Wednesday. The pipeline discussion was supposed to take just 15 minutes during the Deh Cho First Nations leadership meeting yesterday. Grand Chief Mike Nadli is trying to keep the pipeline issue from dominating every meeting of the Deh Cho First Nations. ... Nadli says the region took a clear stand on the issue in August at a special assembly in Wrigley. Delegates decided then not to support any pipeline unless industry and government meet a stiff set of conditions which put Deh Cho land claims and resource management first. But not every community agrees. Last month, Fort Liard signed the one third ownership deal negotiated by the aboriginal pipeline group with the Mackenzie Delta gas producers. Chief Rita Cli says Liidlii Kue First Nation may be next. ... Chief Pat Martel told delegates he wants to improve life for young and unemployed people on the Hay River reserve. ... Nadli is proposing to meet with the chiefs behind closed doors .... REPORT: Yesterday, the Alaska Legislature's Joint Gas Pipeline Committee began a two day meeting in Kenai which ends later today. The Chairman, Senator John Torgerson, introduced Kenai Mayor John Williams (Photo-with Betsy Arbelovsky, early 2001 Gas Policy Council meeting in Kenai) who cited the Alaska’s Director of State/Federal Relations and Special Counsel to the Governor, John Katz, spoke first by teleconference from his Washington office. He first addressed several factors relating to gas pipeline public policy development:
Katz described what he believed to be 3 pivotal Senators, Jeff Bingaman (Photo), · Whether to include producer-recommended gas pipeline legislation in the final bill · Whether to simply rely on the ANGTA regime, recommended by Foothills Pipe Lines, Ltd. · Whether gas pipeline legislation should fall within context of energy legislation or stand alone · Whether the Senate should support prohibition of the northern route · Whether to include tax incentives in general, or incentives restricted to specific routes in order to influence the choice of routes. “Senator Murkowski is clearly looking at the advisability of gas legislation and it’s best to leave it at that juncture pending his decision,” Katz said. Senator Bingaman will make recommendations to Majority Leader Daschle, he said, by end of week. “My guess is that that legislation will rely heavily on producer legislation and will not stipulate a particular route.” Katz said he thought Bingaman is reviewing a spectrum of ways to provide incentives for a gas project, including accelerated depreciation, tax credits, price floor for gas. Katz said, the third pivotal member, Daschle, will control the Senate floor, decide when to introduce legislation and when the debate will occur. He will also approve the substance of natural gas legislation and, according to Katz, “…has indicated his strong preference for the southern route.” Daschle apparently wants to give deference to committee chairmen but has reserved for himself final decision on what will be put before the Senate and under what conditions. Katz then said he would characterize what he believed to be positions of the advocates.
Finally…situation if very fluid and could be influenced by external issues… Committee Vice Chairman, Joe Green (Photo-center, with Davies-l and Torgerson-r, 9-19-01 meeting) asked if moving control of the issue from the Senate Energy In answer to Torgerson’s question about direction of the environmental lobby, Katz said, “They are very into the ANWR/gas pipeline dynamic. They are devoting most of their time to ANWR. We’re hopeful that in terms of the northern route/southern route dichotomy they will be increasing voice their support for the southern route.” He also observed that he would not be surprised to see them focus on the expedited regulatory process. Chairman Torgerson introduced his committee’s legislative advisors, Duncan Smith and C. J. Zane with the firm, Dyer, Ellis and Joseph. “From our perspective”, Zane said, “the leadership is trying to figure out how to deal with ANWR.” He said efforts were underway to add ANWR to various other legislative vehicles involving defense, appropriations, homeland defense, etc. Daschle will put some sort of energy bill on the calendar. He said that doesn’t mean it will move quickly but that it is available to him should he wish to move it quickly. On the contingent liability issue, he said, “I believe Foothills and the withdrawn partners have been working diligently to resolve their issues.” Zane spoke more than Katz had about Murkowski’s draft legislation. “It is not being officially put on the table,” he said. “For now it is not in play but he is trying to have something available at the right time should the issue be moving on the floor.” While having not reviewed the bill himself, Zane said the thought the draft would bar the northern route, give preference to the ANGTA regime for a period of time and if an application were not filed by that date, certain other provisions could take place including potential of filing for a second southern route. Duncan observed that the last time a majority leader removed a bill from committee and took control of it was in 1960, referring to future President, Senator Johnson. “It is a rarified situation,” he said, “with everything being fluid and under control of the Majority Leader.” Green asked if Zane foresaw a quid pro quo “putting ANWR out of the loop”. Zane said he could assure the committee that the Alaska Delegation position is, “you don’t get our gas and without ANWR”. The afternoon session began with a briefing from Roger Marks (Photo, below with Persily), State Department of Revenue Economist. Marks briefed the committee on gas pipeline project economic feasibility. He began with a review of how pricing is established. “In a market for any commodity the price will equal the lowest cost to produce new supplies,” he said. Discussing the risk factor of gas projects, he said that pipeline companies building a project are financed based on throughput guarantees. He gave examples of the enormity of the risk. Marks briefed members on the function of a ‘discount rate’, and defined components of the ‘hurtle rate’ (the rate of return a company requires to invest). “A successful project needs to be economically feasible to merit producer support,” he said. Marks stated that a pipeline is not riskless. “It would be foolish for me to try to define a discount rate acceptable to producers” he said but did provide the committee with economic models applying to the northern and southern routes, an LNG project and a GTL project. Green asked if the true value of liquids was considered in the models. He said the producers had told him composition of gas will be about 1080Btu/mcf, but upper Midwest pipelines can accommodate only about 1040Btu/Mcf. According to the producers, he said, “extracting the residue gas makes the increased value somewhat a wash, according to the best information we have.” Representative Hugh Fate (Photo, 9-19-01 meeting) asked if gas eliminating or reducing the price risk would that increase the Representative Scott Ogan inquired about extrapolating future prices of gas based on population, power generation, etc. Marks said there were many variables and much uncertainty. “As you go from a $2 to a $2.50 well, all the gas between $2-2.50 that was uneconomic before is now economic and it is difficult to forecast that volume or what would happen 10 years from now.” He said Alaska’s will be “about the most expensive gas on the market when it comes in; if any more gas comes to the market, Alaska’s price could come down.” He then spoke of “significant competition to Alaska gas”, posed by LNG imports from Asia, Australia, the Middle East and elsewhere. On the LNG model, Marks said that traditionally, gas prices in Asia have been based on oil prices. “The whole gas structure in Asia is being decentralized, deregulated, and becoming much more competitive,” he said. That puts Alaska at a tremendous disadvantage with gas (from competing areas), he said because it is produced at tidewater without incurring the cost of a pipeline. “Asia’s contracting needs through the end of the decade have for the most part been met,” he said. Torgerson asked about validity of the Port Authority LNG proposal. Marks said it is based on 6 Bcf/d which represents more North Slope gas reserves than have been discovered. That line of questioning was brief. Regarding a GTL project, Marks said that since the oil pipeline is present and operating, one could begin with a small GTL project and build up. In Canadian pipeline and LNG project options, he said, “transportation chews up the value”. For an Alaska GTL project, the variable costs range only from 20-40 cents/barrel, meaning it could have relatively equal footing with competing projects. Green asked if the GTL model accounted for a lower oil tariff due to GTL contribution to operation of the pipeline and Marks said it did. He said for that model he used ExxonMobil’s 1999 technology and that GTL technology has improved even more since then. Ed Small (Photo-l, with Revenue Commissioner Wil Condon, 7-01), of Cambridge Energy Research Associates (CERA), retained by the Department of Small said Canada was experiencing the same, record storage levels. Canada has deep drilling rigs that have been contracted over a 3-year period. So, he said, drilling may be off next year, but not as levels as low as in the lower 48. Because of the decline in Canadian demand, he said, supply growth in Canada and abundant storage, more gas will be going to U.S. export markets this year and next. The decline in lower 48 storage will be more than made up for by Canadian imports. Recent prices to $3.25 are a little exuberant, he said. Prices close to $3 would cause conversion to oil when that is an option. Spring and early summer price levels could move to $2-2.25, Small said. Assuming economic recovery, we should expect to see prices strengthening to the high $2 level by 3rd quarter of next year with $3-3.25 in winter period. “That benchmark should encourage fairly robust drilling in 2003”, he said. Small then observed that longer term, there are, “adequate drivers to keep prices above $2.00, but equally important, there are drivers in place to keep prices below $3.00.” He expects that through 2005, prices are expected to fall in the $2.50-3.00 range. Torgerson asked about “windows for sale of Alaska gas”. Small said, “I think the window has shifted in time by about a year.” He said the window for frontier gas is in the 2009-10 timeframe, with another opening again in the 2010-12 timeframe. He said that the term ‘frontier’ applied to gas from the North Slope, Mackenzie Delta, Offshore East Coast, and LNG from many points of origin. (Note: Small had clearly demonstrated that while there are windows for frontier gas, Alaska must within those windows compete with other frontier sources. –dh) Torgerson opined that LNG was Alaska’s greatest competitor. Small gave no comfort, pointing out that virtually all the lower 48 expansion projects would be coming on stream from 2003-05 and that planned Greenfield projects would materialize toward end of the decade. He pointed out that world instability ushered in after 9-11 could have impact on oil and LNG imports, perhaps affecting the balance of LNG imports later in the decade. Torgerson asked for a review of Alaska’s petrochemical potential. Small said it is a “question of how an Alaskan development can compete globally. In our opinion Alaska is at a disadvantage because there are other sources of stranded gas which are cheaper, located at tidewater.” Torgerson then asked if Small were familiar with GASPEC, an organization rumored to be in process of organizing a gas producer group modeled after OPEC. Small was not prepared to speak on the subject but agreed to provide the committee with research into the subject. Representative John Davies wondered about a scenario in which there were not an economic recovery from recession. Small said that difficult to predict components of Alaska’s timing window included consumer confidence, consumer spending, corporate earnings, stock prices, housing starts, etc. He said a scenario for recession through 2004 would push Alaska’s window of opportunity well past 2010. Department of Revenue Deputy Commissioner, Larry Persily (Photo, with Marks-right, 10-1-01) spoke on status of his department’s study conforming to the requirements of SB 158. While findings are not complete, he did make Torgerson said the committee had similar concerns with state ownership and was looking forward to Persily’s report on other information asked for in 158 as well.
Torgerson asked about Yukon Pacific Corporation and Britt said they had submitted a request for several alignments of the pipeline routing, relatively minor issues. Torgerson asked about Foothills’ status. Britt said the JPO was reviewing many present and earlier filed documents concerning engineering, federal grants of rights of way and other submissions: JPO was critiquing theses, determining their adequacy, identifying changes needed in response to a changing world and locating gaps in information. Torgerson asked why JPO had more attorneys than engineers; Britt said that attorneys were easier to find. U.S. Minerals Management Service geologist, John Larson, discussed resource management and minerals leasing in Cook Inlet OCS areas. He said 2004 & 2006 lease sales are being prepared in federal areas in which there is greatest interest expressed by companies. He discussed Cook Inlet proven and estimated reserves in Federally controlled areas and the need for new supplies of gas in Southcentral Alaska for residential and industrial use. (Please see Larson's presentation notes here.) Please see the Committee’s news account of the 11/7 meeting here. (While the author endeavors to produce accurate reports from meeting notes, he encourages all persons and offices named in this and other articles and readers-at-large to provide additions/corrections to ensure validity of the historical record. -dh ...Draft Revision: 11-08-01) 11/7: Edmonton Journal, by Norm Ovenden, OTTAWA - Jean Chrétien took aim at the United States' punitive softwood policy yesterday, saying Canada expects the same open borders for lumber After a good day's work Monday, we turned to email maintenance just before preparing the first entry for Tuesday's page. A good friend on Friday expressed his interest in sponsoring this web page and we were pleased to see his response, if a little puzzled. It seemed to be some sort of marketing advice intended as a guide in preparing a proposal to his company. There was an attachment. Just so you'll know, for years we have avoided viruses by not downloading questionable email attachments. But we had written this friend on Friday and expected his reply; and, the message was loosely related to our topic. So...without thinking twice.... Boom, the computer screen turned red and, thankfully, our virus scan intercepted the attachment. To make sure, we checked and scanned computers on our network using a third party, taking all day. Below is the cunning though poorly composed message accompanying the treacherous attachment: affect.exe. In researching, we find that had the virus scan not made the intercept, the file would have moved into the computer, residing as c:\windows\system\sac@m.exe or sac@m.dll. "Objective should be measurable.) An infected system, we're told, will be programmed to send out your file documents indiscriminately to those on your email mailing list. The war is fought on many fronts. -dh P.S. See this related Houston Chronicle article by Dwight Silverman, kindly suggested by reader F.B. 11/5: Senator Frank Murkowski (Photo, 11-3-01, Egan Center) held a press conference in Anchorage over the weekend. In answer to Northern Gas Pipelines questions respecting gas 11/3-4 (Weekend): Anchorage Daily News-Edited Northern Gas Pipelines report of Alyeska presentation, 11-2 below. * Northern News Services, Yellowknife-Anadarko Canada Corporation is planning to conduct a 2D seismic program in the Delta this winter. Rob Jefferies, manager of frontier operations, spoke at a community consultation meeting recently at Ingamo Hall on his firm's proposed 2D Immerk seismic program, which will go before the environmental screening process in early December. ... Delta Trace Ltd. has been awarded the contract to conduct the seismic program on behalf of Anadarko. Operations supervisor Brett Cameron explained a fixed camp will be used, with a crew of about 65 people. * Northern News Services by Malcolm Gorrill, Inuvik (Nov 02/01) - AEC West Ltd. is planning a Kamik 2D program in the Delta this winter. The proposal is to go through environmental screening in early December. David Baer, senior geophysicist with AEC, spoke recently on the program at a community consultation meeting at Ingamo Hall. ... Veri-Illuq will conduct the seismic program for AEC. 11/2: Senator Frank Murkowski will hold a press conference for media representatives in Anchorage tomorrow, between 4:15 and 4:45 p.m. at the Egan Convention Center. * Scott Heyworth's Citizens’ Initiative for the All-Alaska Gasline has collected 53% (20,000 plus signatures) of the goal of 37,500 signatures from registered Alaskan voters. The Initiative group has until January 14, 2002 to gather the remaining signatures. They must collect 28,700 valid registered signatures to have the Initiative placed on the November, 2002 ballot. * Whitehorse Star, by Jason Small-The territory inked a historic deal earlier this week with the federal government. It officially transfers the control of all public lands in the Yukon, waters within the territory and all resources on those lands, like trees and minerals. In exchange, the Yukon will be on the hook for paying for any environmental liabilities that occur on sites such as mines that are permitted by the territorial government after the transfer happens on Apr. 1, 2002. Clean-up for all of those hazards that happened on sites prior to the transfer will be paid for by Ottawa. Report: Resource Development Council for Alaska (RDC) Alyeska Pipeline Service Company President David Wight (Photo, 11-2-01) told RDC members in Anchorage yesterday that an aging workforce and the 11/1: See our report below, on yesterday's FINAL MEETING of the Governor's Alaska Highway Natural Gas Pipeline Policy Council at the Sheraton Anchorage Hotel. (Here is Ben Spiess' Anchorage Daily News' story on that Policy Council meeting.) * Whitehorse Star-Ed Schultz, the Grand Chief of the Council of Yukon First Nations, is urging citizens of the Ta’an Kwach’an Council to support the final and self-government agreements in the ratification vote to be held Thursday through Saturday. * Anchorage Daily News--John Snow, CSX Corp. chairman and chief executive officer, said Ward Whitmore will be director of project development and will direct day-to-day operation for Yukon Pacific. Yukon Pacific holds the major state and federal permits and authorizations for an 800-mile natural gas pipeline and liquefaction facility. Under the company's Trans-Alaska Gas System project, natural gas would move via pipeline from the North Slope of Alaska to Valdez, where it would be refrigerated to produce liquefied natural gas for shipment to Asia. * TODAY: Resource Development Council for Alaska: 'Trans-Alaska Pipeline Re-Certification', David Wight
(Photo), President, FINAL MEETING: Governor's Alaska Highway Natural Gas Pipeline Policy Council. This was the last scheduled meeting of Governor Tony Knowles’ (Photo, 10-31-01) Alaska Highway
At noon, Knowles addressed the Council and said, “The phrases that come to mind are ‘the best and the brightest…and hard working',” in praising Member achievements. “You’ve held a number of
Cochairman Brown invited Member Brian Davies to deliver the Environmental Considerations Committee report in place of the absent Chair, Peg Tileston. “We endorse the Alaska Highway route as the environmentally preferred alternative,” he said. He then reviewed goals and recommendations of the committee. Member George Wuerch,
Member Bill Corbus presented the shortest and perhaps most newsworthy report of the day, which stimulated the most discussion. “The State Pipeline Ownership and Tax Structure Committee believes,” Corbus said, “the pipeline is Alaska Hire/Buy/Build Committee Chairman Mike Navarre focused on recommendations to support local content in a project, to support vocational education and asked that the state Department of Community and Economic Development “…undertake a study to determine the social-economic impacts of the gas pipeline along the Alaska Highway route." He urged the Governor, for the sensitive matters of “Alaska hire” to incorporate the concept employed in the BP/ARCO merger ‘charter’ which outlined indirect but effective ways of stimulating high Alaska content. Wuerch urged that the socio-economic study being recommended include impact on local governments and the Council agreed to the change, yet to be reflected in this original draft provided for your review, here. (Note: after the meeting, Department of Community and Economic Development Commissioner Debbie Sedwick (Photo-below, reviewing report as Chairman Thompson presents recommendations) emphasized the importance of anticipating impact of the gas pipeline on local communities. "We should learn from the lessons of the past," she said, saying one could "mitigate impacts while maximizing opportunities." She said her department has already undertaken communication with Mayor Boyles' Fairbanks community and with others along the route. "Because the project will not happen tomorrow," she said, "we have time to
Ken Thompson chaired the “Access for In-State Gas Use and Future Opportunities Committee”. He opened by stating that when a gas pipeline comes south, the state can become self-sufficient with an environmentally preferable fuel. He emphasized that reserves along the southern corridor might not be either discovered or developed without the access a southern route would provide. Thompson then moved through a detailed report containing eight goals and numerous supporting conclusions and recommendations. “The State should take a long-tern, broad and strategic view of its entire natural gas resources,” the report said. The Council approved the Committee’s recommendation, included for your review, here. (Note: after the meeting, Cochairman Sampson complimented Thompson and his committee for their effort, adding that the report helps Alaskans correct a misimpression that producers must own a gas pipeline like they own the oil pipeline. "This Council has demonstrated that gas pipeline companies have a significant interest in an Alaska gas pipeline.") Natural Resources Commissioner Pat Pourchot, and Oil & Gas Division Deputy Bonnie Robson (While the author endeavors to produce accurate reports from meeting notes, he encourages all persons and offices named in this and other articles and readers-at-large to provide additions/corrections to ensure validity of the historical record. -dh ...Draft Revision: 11-1-01) |
Upcoming Conferences: IOGCC, 5/11 -13; Newspaper Front Pages--WORLDWIDE Our view of South Central Alaska's imminent Energy Crisis Founding Publisher's 2002 Editorials and 2001; magazine & newspaper articles; Seattle Chamber of Commerce Speech, 5-8-02, CBC Interview
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