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 bill to a $110 billion agriculture bill and that ANWR exploration will be a component.  Failing that, he said, “We also have some other strategies for adding ANWR to other legislation.” (Photo, 11-3-01)

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. 

"I am happy to say that less than two weeks ago,” he said, “I stood shoulder to shoulder with eight of North America's premier energy transportation companies as they announced reconstitution of the Alaska Highway natural gas transportation system partnership.  (See our earlier story.)

"This effort comes in addition to the work already put forth by a consortium of Alaska North Slope producers, Phillips, Exxon, and British Petroleum.  These companies have invested over $100 million dollars in analyzing the technological and economic feasibility of constructing the gas transportation system,” he said.  "While the producers' initial findings indicate that the project is still marginally uneconomic, I am encouraged by the level of effort they have invested….”

Murkowski said that reconstitution of the pipeline companies' partnership and continued efforts by producers set the stage for joining forces in the development of the gas transportation system.  "I have always believed that construction of this $20 billion mega-project is going to take the combined efforts of both pipeline and energy production companies.” 

He said that the re-emergence of the transportation companies should end speculation regarding a northern route.  "The Highway route affords Alaska access to a vast reserve of clean energy and feedstock for future industrial applications,” he said. 

Murkowski believes the highway route protects options to bring LNG into Valdez and gas feedstocks into the Kenai to further develop petrochemicals.  “While this effort proceeds,” he said, “I will continue to consider introducing any legislative changes needed at the federal level to make a gasline a reality for Alaskans."

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.

WASHINGTON, D.C. (Late last night, this came in.  –dh)-- Alaska Sen. Frank H. Murkowski…, released the following statement after Senate Majority Leader Tom Daschle said that he would not move an energy bill until next year.  (HOUSTON CHRONICLE-"I don't know that we'll have the opportunity to complete work on the energy bill before the end of this session," Daschle, D-S.D., told the Senate....; Anchorage Daily News)

"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.
       "Just yesterday President Bush explained more of Iraq's role in harboring terror and discussed  their refusal to allow in weapons inspectors.  Yet, in the midst of September's attacks, we imported a record 1.192 million barrels of oil a day from Iraq, the most since July 1990.   If Baghdad is our next target after Kandahar, what's going to happen to that oil?  Can we replace it?  …
      "Last week we lost two American sailors who had stopped a tanker smuggling Iraqi oil.  Our dangerous reliance on Saddam's oil is not only putting too many Americans in harm's way, it further strengthens his rule. 
      "With a comprehensive, national energy policy with solutions that begin at home, we can ensure our energy security and our national security….
      "…  If we have time to deal with the railroads, we certainly have time to do energy…."

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:

• Neither the Northern or Southern routes have yet been found economically viable but the shorter Northern route is probably cheaper unless the study produces unanticipated surprises.

• Based on an application process in both countries during the 70s, the Alaska Highway, southern route was approved as an exclusive route for Alaska gas and the company selected to manage the project was a predecessor to current southern route standard bearers.   Those approvals, memorialized in international agreements and legislation, have never been changed; to change them would seem to require Congressional and other action.  Southern route proponents have said that updated revisions to the nearly 30-year-old 'ANGTA regime' could be helpful even for the Highway route.  An Alaska gas project built by any other sponsor, or using any other route, would require Congressional and other action.  No such action has occurred.

• The routes, if completed, would supply significant revenue to Canadian and U.S. Federal and local governments; the cheaper route could provide slightly more government revenue.  Many argue, however, that royalty and tax value could be secondary to other stakeholder benefits (See Cook Inlet story above).

• The Canadian government has stated it is route-neutral, will not offer special incentives but will expedite the regulatory process (See here).  Company opinion varies on the need for Federal incentives.

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 on the current status of the feasibility study, and next steps.   "We're on track for year-end delivery of engineering, cost, and environmental information," he said.  "These updated costs will provide the basis for evaluation of project feasibility."  We asked MacDowell about timing of the final report.  He said, "the joint team will consolidate all of the data developed during the year, and will forward it to the three sponsor companies for review. It's a lot of information - around $100 million worth.  The sponsor companies will analyze the results and determine potential next steps."  MacDowell said they hope to be in a position to share information about forward plans early in the new year.  He said it is too early to speculate on how year-end results might differ from earlier releases of interim data.  The producers all along have said the individual companies would determine final project feasibility and that this phase of the study effort would be complete around year-end.  Both of these positions remain consistent.  But there seems to be a continuing public expectation that some grand release of routing choice and feasibility will occur at year-end.  If one is guided by actual statements of producers, including this latest one, it seems more likely that:

• The AGPPT feasibility work will be completed, as stated, by year-end but not likely released publicly at that time.

• The completed study will be provided to the three sponsoring companies for internal analysis.

• The individual companies will indicate their assessment of economic feasibility and could indicate preference for a pipeline route and their opinion as to the timetable for filing any resulting applications, for holding open seasons to determine reserve capacity for shippers, etc.  This could occur in the new year, date uncertain.

Some of the possible 2002 scenarios could include:

• The companies could pursue individual projects or not pursue any projects or delay consideration of projects.

• Some or all of the producers could work among themselves and/or others to form a new consortium to engage in the regulatory--and subsequently, the pre-construction--phases of one or more projects.

• The AGPPT could continue its study partnership and evolve into a consortium or disband, having completed its mission.  Note: the AGPPT consists of about 100 employees 'borrowed' from sponsoring companies and about 500 contractors on term assignments.  Dissolving AGPPT should not necessarily be regarded as abandonment of interest in developing a gas pipeline project or as an unexpected event.

• The Alaska Highway Pipeline Project proponents could, with their reconstituted partnership, respond to a producer invitation and submit an economically viable project proposal (See here).

• Delta producers could continue momentum of a Mackenzie Valley pipeline regardless of Alaska developments.

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 City he met with several Wall Street bond-rating firms and lending and investment institutions to tell them Alaska is on solid financial footing. He also met with The Wall Street Journal Editorial Board and is meeting with the New York Times board today to discuss his support for construction of an Alaska Highway natural gas pipeline.          *       Fox News, WASHINGTON — The oil and gas industry is on especially high alert after an FBI warning that Usama bin Laden may have ordered retaliatory strikes against North American natural gas facilities in event of his capture or death, industry sources said Monday...  (See our earlier editorial.).      *     Northern Gas Pipelines readers will recall we considered the North Slope Borough story very significant, and gave the other side of it last week.  Then, yesterday, Tom Kizzia provided his Anchorage Daily News , in-depth coverage.  The end of the story might be found sometime during the upcoming session of the Alaska State Legislature.  -dh         *      CBC, CALGARY  - Premier Ralph Klein left for Texas and California on a Team Canada West trade mission, Monday.  Klein says energy will be the primary focus of the mission.  The group hopes to attract more investment dollars for Alberta from US energy companies.   Klein also will pitch US firms on the idea of moving high-tech jobs to the province....     *     Northern News Services by Derek Neary, Fort Simpson - The Deh Cho First Nations want 50 per cent of royalties from development in the region. The federal government is offering the same formula proposed through the failed Dene/Metis claim.  Because the Deh Cho comprise 25.5 per cent of the Mackenzie Valley's Dene/Metis population, that would translate into between $1 million-$3 million annually for the Deh Cho, based on 12.25 per cent of the first $2 million in royalties received by the federal government from the entire Mackenzie Valley and 2.45 per cent on anything thereafter.   "The federal government's never put money on the table prior to a final agreement before. It has always flowed after ... I'm definitely walking on egg shells from a federal perspective," federal negotiator Robin Aitken said Monday. "Given what we're trying to do in the interim, we see that as showing a lot of flexibility."   Chris Reid, chief negotiator for the Deh Cho First Nations (DCFN) said the Deh Cho perceives an existing land claims formula as unacceptable, even as an interim measure.   "It's not so much the amount of money that's the issue. It's the fact that, at this point, they haven't recognized any unique revenue sharing arrangement for Deh Cho oil and gas," Reid argued....Both sides targeted March 31 as a date by when they will have an Interim Resource Development Agreement (IRDA) signed....

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 Purgason, Vice President, Hydrocarbon Development, Williams-John Burdek, Chairperson, Ta'an Kwach'an Council-Jacob Adams, Chair & President Arctic Slope Regional Corporation- Marty Cheyne, President & Chief Executive Officer, Devlan Exploration-Dave Harbour, Publisher, Northern Gas Pipelines-David McClement, Former President, NANA-Colt/Colt Engineering-Forrest E. Hoglund, Chair & Chief Executive Officer, Arctic Resources Inc.-Stephen J. Wuori, Group Vice President, Planning & Development, Enbridge Inc.-Marty Heeg, Vice President, Business Development, Foothills Pipe Lines Ltd.-Bob Reid, Executive Director, Mackenzie Valley Initiative, TransCanada PipeLines Limited-Brian Fraser, Business Manager, Shehtah Drilling Limited, Kerry Wilson, Operations Manager, Shehtah Drilling Limited-Roland George, Principal, Purvin & Gertz, Inc.-Jeff Bigger Business Development Manager, Syntroleum Corporation******The International Association of Energy Economists Alaska Chapter program features Cook Inlet gas supply and demand at its monthly luncheon meeting Tuesday, Nov. 27 in BP's 1st-floor conference rooms B & C at 900 E. Benson Blvd. in Anchorage.  Featured speakers include: Bill Van Dyke, petroleum manager for the Division of Oil and Gas; Tim Ryherd, Division of Oil and Gas geologist, and IAEE President William Nebesky, the Division's Commercial Analyst.******Greg Mattson, performance unit manager, Alaska New Developments, BP Exploration (Alaska) Inc. is the featured speaker for the Alaska Support Industry Alliance Thursday breakfast meeting scheduled for 7 a.m., Nov. 29 at the Petroleum Club of Anchorage. 907-563-2226.******Resource Development Council for Alaska Conference, in Anchorage: "Alaska Resources 2002: Can Alaska Compete?" Robert Stiles, RDC President-Steve Marshall, President, BP Exploration Alaska Inc.-Rick Mott, Vice President Exploration and Land, Phillips Alaska, Inc.-Jack Williams, Production Manager-Alaska, ExxonMobil-Mark Hanley, Public Affairs Manager-Alaska, Anadarko Petroleum Company-Charles Pierce, Vice President, UNOCAL Alaska-John Barnes, Alaska Regional Manager, Marathon Oil Company-Gary Carlson, Senior Vice President, Forest Oil Company-Tony Fountain, President, BP Gas and Power, North America-AK Sen. John Torgerson, Chair, Joint Committee on Natural Gas Pipelines-Roger Simmons, Consul General of Canada-Rob Shoaf, Senior Executive, Alyeska Pipeline Service Company-Ira Perman, Executive Director, Alaska Humanities Forum-Ernie Hall, President, Alaskans United-Jamie Kenworthy, Executive Director, AK Science & Technology Foundation-Cavan Carlton, Arctic Project Director-Wayne Sartore, Vice President, Northern Pipeline Development, Enbridge-John Ellwood, Executive Vice President & Chief Operating Officer, Foothills Pipe Lines, Ltd.-Representative(s) from Alaska Gas Producers-D r. Sung Sohn, Chief Economist, Wells Fargo & Company-John VanBrunt, President and CEO, Agrium, Inc.-Ernesta Ballard, Principal, Ballard and Associates-John Rense, Chief Operating Officer, NANA Development Corporation-Bob Maynard, Attorney, Perkins Coie LLP-Governor Tony Knowles******DECEMBER 3^rd, 2001 MANAGING COMMUNITY CONSULTATIONS & STAKEHOLDER RELATIONS, Calgary: David Savage, President, Savage Management Ltd.-Gerry DeSorcy, Former Chair, Public Safety and Sour Gas Committee-Harry Lillo, Implementation Team Leader for Public Safety & Sour Gas, Alberta Energy & Utilities Board (AEUB)-Richard Neufeld, Partner, Fraser Milner Casgrain-Maureen Payne, Senior Vice President, GPC International-Richard Roberts, President, Praxis-Bill Remmer, ADR Co-ordinator, Alberta Energy & Utilities Board (AEUB)-Ken Shipley, Director, The Fort McKay Industry Relations Corporation-Christine Burton, Manager Regional Consultation, Suncor Energy Inc.-Tom Marr-Laing, Director, Energy Watch Program of the Pembina Institute- Joanne D. Nutter, Socio-economic Manager, Mackenzie Delta Opportunity, Imperial Oil Resources-Jeff Rath, Barrister & Solicitor, Rath & Co.-Chief James Ahnassay, of the Dene Tha' First Nation-R.W. Taylor, Assistant Deputy Minister, Oil Development Division, Alberta Energy, David Luff, Vice President Environment & Operations, Canadian Association of Petroleum Producers (CAPP-Brian Vermeulen, Manager Surface Land & Aboriginal, and Community Relations-Robert Hunt, Senior Vice President, Akita Drilling Ltd.-OD Hansen, Public Affairs Advisor, WesternGeco-Bee Schadeck, consulting for Anadarko Canada and Northstar Energy-Barbara Shumsky, Manager Public Affairs, Syncrude Canada Ltd.- Jane Newlands, Community Relations Manager, BC Hydro.

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 gas branch.  John Masterson pointed out earlier this week....   *      CBC, Whitehorse, Yukon - The Yukon government has spent $18,000 to prove something it has long claimed. (Download the report here. -dh) The economic development minister says it gives him hard evidence the so called "Over the Top Route" is not viable.   The territorial government insists building a pipeline across the Beaufort Sea can't be done. If that were the case, it would bolster the Yukon's efforts to have Alaskan gas shipped down an Alaskan highway pipeline through the territory.  .... The minister, Scott Kent (Photo), says the money was well spent. "We'll get good bang for our buck on it," he says.  "The money that we spent on it, you know if we can get a $2-billion direct investment in the Yukon for the money we spent on it, that's a pretty good investment," Kent says.  ....  (See official release, here.)     *     "Let's Develop Alaska's Gas Wisely," Op-Ed, Anchorage Daily News by Jim Sykes.

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 Alaska compose a major source of revenue for the state and certain communities, most notably the North Slope Borough and Valdez.  Since ad valorem taxes will apply to the value of gas pipeline related property and affect overall economics of any project, we provide some insight here into a growing debate.  The legislature, which spends more than it takes in, currently makes up the difference from savings accounts, now fast depleting.  It has introduced Senate Bill 186 for the purpose of gradually reducing the percent of the property tax a local community can claim, effectively increasing the state government share.  North Slope Borough Mayor George N. Ahmaogak, Sr., has spoken strongly on this subject, urging defeat of the bill (Please review this earlier story), and implying a linkage to gas pipeline routing and ANWR issues.  Senator Dave Donley recently reacted to the criticism with a detailed rationale for the legislation (Please review the response here).      *      Northern News Services, by Thorunn Howatt, Yellowknife - Last week Premier Stephen Kakfwi took a trip south to reassure oil and gas representatives that the territorial government is stable and the North is open for business.  "I was interested in connecting to some of the people in the oil and gas business. I think some of them were tuned into this motion of confidence that we had," said Kakfwi, referring to a recent special committee report that rocked the government.  "It was important to reconnect and let them know I'm a premier with even a stronger mandate than before and that there is very strong support from my cabinet, the MLAs and as well from the public."  Kakfwi met with members from Enbridge Pipeline Inc., Northrock Resources Ltd., Imperial Oil's K.C. Williams and Paramount Resources.   The trip was meant to update industry as well as government on future plans regarding energy exploration and issues regarding a Mackenzie Valley pipeline.   The Kakfwi government has strongly endorsed a proposal to take arctic natural gas from the Mackenzie Delta Beaufort Sea southward following the Mackenzie Valley. Low energy prices have caused some companies to cancel exploration and drilling plans.  "Northrock has cancelled some activity in the Sahtu," said Kakfwi. But he explained that Paramount is looking to activity in the Deh Cho region.  ... Another message carried by Kakfwi was the change in the territorial oil and gas portfolio. The Deh Cho region's Jim Antoine (Photo) took over from Joe Handley. ....

11/21:  ANCHORAGE (SPECIAL REPORT; readers may skip story and move directly to gas pipeline remarks by clicking here.)-Consul General of Canada, Roger Simmons (Photo) PC, told Commonwealth North members yesterday that after 17 trips to the 49th State he appreciates a message President John F. Kennedy delivered to Canada's Parliament.  In that message over 30 years ago, Kennedy characterized the relationship of the two countries as one shared by "neighbors, friends, partners and allies".  Simmons gave the North American Air Defense Command (NORAD) as a "unique example of how the two countries trust each other (Note: In another forum today, LTG Norton A. Schwartz reported that 35 members of the Canadian military work in his Alaska Command headquarters, protecting North American air space.) 

As further examples of the countries' interdependence, Simmons noted they share about $1.4 billion in trade daily.  The U.S., he said, has invested over $200 billion in Canada while Canadians have invested over $150 billion in America (i.e. proportionally, more).  "Our relationship is based on facilitated border relationships," he said.  On the subject of terrorism, Simmons observed that the countries need to "...build a wall not between us but around us...," referring to Canada's successful strategy of preventing persons deemed security risks from boarding airplanes to Canada rather than attempting to track them once they began melting into the North American population. (Photo: Alaska's Lt. Gov. Fran Ulmer greets Simmons before meeting.)

Simmons was optimistic about energy development and said that the Alberta tar sands contain more oil than Saudi Arabia, 300 billion barrels.  Canada sells 80% of its products to the U.S. and 90% of its energy.  He said that within this decade the North American market will require both Prudhoe Bay and Mackenzie Delta gas to satisfy growing demand.  "Canada is supportive of delivering gas to the market by pipeline," he said, "but neutral as to the route".  He acknowledged ongoing producer studies and said that if they revive the Alaska Highway routing the Canadian government would revive the Northern Pipeline Agency and regulatory support required by the project.  "Prime Minister Chrétien has committed to have the proper regulatory mechanisms in place," he said.  "We believe that delivering Arctic gas to market is doable." (Photo-CWN Chairman Joe Griffith standing at podium, with left-right: gas study group chairman Dick Barnes, Governor Walter J. Hickel, Michael Porcaro and Simmons)

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, appeared in Anchorage at Commonwealth North to address: Canada's economic interests in natural gas development, Canadian hurdles and opportunities, role of First Nations, North vs. South line, and internal Canadian politics.  We're preparing a report for faithful readers....     *     Anchorage Daily News, by Ben Spiess-The proposed $35 billion merger of Phillips Petroleum Co. and Conoco Inc. will have minimal impact on the company's Alaska business, Kevin Meyers, president of Phillips Alaska Inc., said Monday.     *     Northern News Services, by Jorge Barrera, Yellowknife - Deh Cho Grand Chief Michael Nadli said he expects a royalties sharing agreement with the federal government next summer.   "Hopefully by this summer, we'll have an interim resource revenue sharing agreement with the federal government," said Nadli during a stop in Yellowknife for land and resource revenue negotiations with the federal government. ...   Nadli said the Deh Cho Nation is united anew in solidarity opposing constructing of the Mackenzie Valley pipeline under current terms.   Around 40 per cent of a proposed pipeline from the Beaufort Delta through the Mackenzie Valley cuts through Deh Cho territory.  The Deh Cho wants their own royalty deal with the federal government.  ... "(Fort Simpson Chief Rita Cli) reaffirmed her support for resolution (signed in Wrigley)," said Nadli while in Yellowknife for land and resource revenue negotiations. "She wanted to strengthen the resolution even more."   The Wrigley resolution opposing the pipeline under current terms was singed this summer by the Deh Cho Nation. ...  Nadli said the Nation is organizing a strategic planning session to formalize a game plan.   The Deh Cho Fort Liard band recently jumped to the Aboriginal Pipeline Group which just signed a deal with four major Oil Companies to build a pipeline.      *       CBC, Inuvik, N.W.T. - At least four oil and gas companies have decided not to drill in the Northwest Territories or the Yukon this winter. They're blaming a drop in oil and natural gas prices.     *     Northern News Services by Dave  Sullivan, Hay River - Residents of Hay River's Dene Reserve made a smart move joining the oil and gas industry, speakers at a grand opening said Thursday.   After eyeing successful moves by Fort Liard into the booming energy industry, the Hay River Reserve waded in with a $750,000 investment. The community borrowed the cash to build a warehouse for Northern headquarters of two Alberta oil patch companies -- Chinook Testing Inc. and IROC Systems.   Chinook, a pipe-testing company, has gone into partnership with Hay River's Doug Cardinal and Fort Liard's Honourary Chief Harry Deneron to form Chinook Testing Inc (NWT) Ltd., jointly owned by Chinook Testing Inc. and 4859 Northwest Territories Ltd., a numbered company owned and operated by Cardinal and Deneron. They hold 51 per cent of shares in the joint ventures.   The territorial government gave $100,000 to the companies for training, and gave up title to about three hectares of land. ... Hay River Chief Pat Martel told over 100 people gathered Thursday in the new building "If you talk about education for young people, you've got to have something for them to look forward to. I can go back into the bush and do the things my father taught me, but that's not the way it is today. We have to move forward. In order to do something like this, you have to involve the people who know how." ... With no customers yet, Chinook Testing's half-million dollar investment in the region so far means "rolling the dice," President and CEO John Roth said in an interview. ... Roth says his company's investment does not depend on a Mackenzie Valley pipeline going ahead, and he isn't too worried about cuts to Northern drilling programs this winter. "The slowdown will make things more manageable. There was already a shortage of qualified manpower," he said....

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 Randy Henderson (Photo-right, with production support from Stacey McGaghey and Phil Morck) honored Northern Gas Pipelines this morning by interviewing us (click here to listen) about our public service web page. If you'd like to tune in to CBC Yellowknife, first click here, then on "North" (bottom of blue box), then on "Yellowknife" {Real Audio required}  -dh (Photo-left)    *     CBC, Yellowknife, N.W.T. - The possibility of building a natural gas pipeline from Alaska isn't dead, even though Alaskan producers have said the line isn't economically feasible. A consortium of energy and pipeline companies involved in the original Alaska Highway pipeline 25 years ago have come back to the table. (See our 11/15 story.)

11/17-18:  Anchorage Daily News, by David Reaume (Photo): ...  With a combined market capitalization exceeding $450 billion, the team of BP, Exxon and Phillips forms one of the financially strongest private-sector consortiums on the planet. Further, it would be hard to find potential investors in an Alaska gas pipeline who are better informed as to the project's strengths and weaknesses. Under these circumstances, it seems reasonable to conclude that if this group declines to proceed, the project is very, very unlikely to be attractive to any other reasonably well-informed and prudent private-sector investors, none of whom is likely to be as well informed or as financially strong as the BP-Exxon-Phillips consortium. ...  (Note: as suggested in our commentary (11/18, below), the ConocoPhillips merger could affect the focus and outcome of gas pipeline projects to which Reaume refers.  This is especially true at a time in which recessionary trends have delayed projected strengthening of North American natural gas demand/prices and the timetable for potential gas transportation projects.  -dh)          *         WEEKEND SPECIAL REPORT, Phillips and Conoco Merge Into Third Largest U.S. Integrated Energy Company:  (Commentary: In July 2001, Conoco acquired Gulf Canada Resources Limited.  It was the largest oil and gas deal in Canadian history. It immediately increased Conoco's North American natural gas production and proven natural gas reserves by 50 percent, and worldwide total reserves - oil, natural gas and Syncrude - by 40 percent.  Of more interest to Northern Gas Pipelines readers, are the Mackenzie Delta gas reserves which flowed into the new entity.  In 2000, Phillips Petroleum Company had earlier completed the largest acquisition in its history – the purchase of ARCO Alaska Inc., transforming Phillips overnight into one of Alaska's major oil and gas producers.  Until this week, Conoco has been primarily concerned with commercializing Mackenzie Delta reserves while Phillips has been focused on studying the feasibility of transporting its Arco-acquired North Slope gas reserves to market.  The new corporate personality potentially combines split interests: feasible commercialization of stranded gas reserves in  Canada's Mackenzie Delta and on Alaska's North Slope, until now a dilemma shouldered by ExxonMobil and Imperial Oil Limited {See our maps, here and the less discussed, important bitumen link, here}.  Corporate strategy could remain unchanged: that is, a Mackenzie Delta gas pipeline strategy and a separate Prudhoe Bay strategy.  However, one cannot assume ConocoPhillips shareholders, consumers, pipeline companies, governmental tax collectors and royalty owners (i.e. who share many interests) will ignore the economies of scale some joint transportation project could create in this brave new world.  -dh)

Houston, Texas and Bartlesville, Oklahoma (Nov. 18, 2001, from official releases) - Conoco Inc. (NYSE:COC, motto "Think Big, Move Fast") and Phillips Petroleum Company (NYSE:P, motto "The Performance Company") today announced that their boards of directors have unanimously approved a merger of equals, and that the companies have signed a definitive merger agreement.  The new company, which will be named ConocoPhillips, will be a strong competitor with enhanced returns and accelerated growth opportunities from an excellent financial and operational position. Upon completion of the merger, Archie W. Dunham (Photo-left), Conoco chairman and chief executive officer, will serve as chairman of ConocoPhillips and will delay his scheduled retirement to 2004.  James J. Mulva (Photo-right), Phillips chairman and chief executive officer, will be president and chief executive officer of the combined company, and also become chairman upon Mr. Dunham's retirement.  (PLEASE SEE OUR COMPLETE COVERAGE WITH LINKS HERE.   This is a good time to repeat what regular readers know: we extend an open invitation for anyone to supply additions or corrections to all news/editorial/reference materials shown on this public service website.  -dh)     

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 the project.  (See our news below, 11-15/16.  -dh)  "There was a chance this could have ended up in a lengthy court battle that would have significantly hampered" the project, he said. "It's certainly very good news."     *     Representative Jeanette James reports on Canadian/Alaska rail connection which could impact gas pipeline plans.  1. Conference urges the United States / Canada Bilateral Commission, authorized by Sen. Frank Murkowski's 'Rails to Resources' legislation be fully implemented as soon as possible.  2. Conference supports Rep. Jeannette James' HB 241 authorizing extension of a rail / utility corridor from Eielson AFB to Whitehorse, Yukon, Canada.  3. Conference requests clarification from Sen. Ted Stevens regarding efforts to extend the Alaska Railroad approximately 70 miles from Eielson AFB to Fort Greely.     *     CBC, Yellowknife, N.W.T. - The Deh Cho First Nations in the Northwest Territories have come together again on the pipeline issue, after a closed door meeting in Fort Providence. A split appeared in the organization last week when Liidlii Kue First Nation indicated it was ready to sign a pipeline ownership deal.      *     CBC, Inuvik, N.W.T. - Oil and gas companies say the lack of a northern pipeline is contributing to their decision to scale back operations this winter. ...  Marty Cheyne is the president of Devlan Exploration. He admits the lower prices have affected his drilling programs more in the north than in the south. ...   Alan Boras is with Alberta Energy Company. He says the availability of a pipeline is an essential element in deciding on whether a company will explore in the north....    *    D.H. alerted us to this  Oil and Gas Journal story on the ANGTS reformed partnership story covered below.

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 MOU signatories were involved in developing the Alaska Highway project at one point,” says Dennis McConaghy, co-Chief Executive Officer of Foothills Pipe Lines and Executive Vice President for Gas Development,  TransCanada PipeLines, Ltd. (Photo-left, See 7-11 presentation ), joined by other representatives of Foothills' owner companies: D. Michael G. Stewart, Executive Vice President, Westcoast Energy Inc. (Photo-right), and John R. Ellwood, Vice President, Engineering and Operations of Foothills Pipe Lines Ltd. (Photo-middle).  “Through this agreement, the companies are demonstrating their intent to renew their commitment to the commercialization of vital natural gas infrastructure from the Alaska North Slope to Canada and the Lower 48 states.”  The six U.S.  companies include subsidiaries of Williams, Duke Energy, Sempra Energy International, Enron, PG&E Corporation and El Paso Corporation.  The three Canadian companies, TransCanada PipeLines, Westcoast Energy and Foothills Pipe Lines, have remained active partners in the Alaska Natural Gas Transportation System (ANGTS) from its inception.  The parties have executed an MOU establishing key principles for re-enlisting in the Alaskan partnership to construct the Alaskan portion of the Alaska Highway natural gas pipeline project.  A key element of the MOU is that the current and re-enlisting parties are committed to eliminating historic and other commercial barriers to construction of the Alaska Highway project.  (See this week's related Kaska story.)

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 .... Foothills Pipeline Company of Calgary announced today the signing of a memorandum of understanding that sets out principles for regrouping the former partnership ....  "Today's announcement by Foothills and other pipeline companies that a major hurdle has been cleared is great news for the Alaska Highway natural gas pipeline project", Knowles said. "These major international pipeline companies have now endorsed the pipeline route and are bullish about the project. It's time to get on with the business of advancing a project that's good for Alaska and good for America."   "The Alaska Highway natural gas pipeline", knowles added," will put America to work at a time when the Lower 48 economy is teetering on a recession and when American consumers are demanding affordable, environmentally friendly energy. Alaskans overwhelmingly support this project because it will provide good jobs for Alaskans, affordable energy for our communities and revenues to pay for vital services."

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 announced that Foothills Pipeline Inc., TransCanada Pipelines, Duke Energy, El Paso Pipeline Group, Pacific Gas and Electric (PG&E), National Energy Group, Sempra Energy, Westcoast Energy, Williams Gas Pipeline and Enron, have agreed to principles to return to the Alaskan gas transportation system partnership, and are proceeding immediately with development of a proposal to present to the Alaska North Slope producers by year's end.  "This is a big step forward in bringing Alaska's natural gas to markets in the Lower 48.  I always have believed that construction of an Alaskan gas transportation system to the Lower 48 is going to take the synergistic efforts of pipeline companies and the oil and gas production companies in cooperation with the State, the federal government and Canada. These companies bring huge financial and engineer capability, along with the existing federal permits for the highway project, to the gas line effort.  "While this does not guarantee construction of a North Slope gas delivery system, it is a big step in the right direction," said Murkowski.   "Alaska's oil and gas reserves hold the keys to a future of dependence."  He said the principals agreed to resolve an outstanding $4 billion liability against the system, which has clouded the companies participation with Alaska's oil and gas producers in recent efforts to construct an Alaska gas line.  Today's announcement, Murkowski said, sets the stage for constructive discussions between gas production and transportation companies over the economic feasibility and routing of the gas line to move Alaska's estimated 36 trillion cubic feet of natural gas to market.  The companies, who today rejoined the Alaska Natural Gas Transportation Consortium, were original members of the Northwest Energy Co. led-consortium that won permits and presidential approval in 1976 to move Alaska gas to market through a pipeline that paralleled the trans-Alaska oil pipeline to Delta and then followed the Alaska Highway south through. The companies over the years had dropped out of the project. There return markedly improves the chances for financing of an Alaska project. It should also help Alaska's efforts to make sure any gas line allows the possibility for an all-Alaska extension to Valdez or the Kenai Peninsula to permit LNG gas exports from Alaska.

 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 of opening ANWR, pointing out that it is a matter of national security and that there is increasing political instability among oil producing countries,” he said.  “Our dependence on foreign oil has created a national security crisis.  Alaska oil from the coastal plain could be sufficient to replace the quantity of oil America buys from Iraq, Saudi Arabia or Venezuela. We import nearly 60 percent of our oil daily, with over 700,000 barrels per day coming from Iraq.   It is projected that we will import nearly 230 million barrels of crude from Iraq by the end of this year.  Almost 40 million of those barrels will be unloaded in California alone.  At $20 per barrel, we will send over $5 billion to Iraq this year.  During peacetime operations the Department of Defense uses approximately 300,000 barrels of oil a day - most of it jet fuel.  That increased by over 200,000 barrels per day during the Gulf War and defense fuel usage is again increasing as a result of our ongoing actions in Afghanistan….  It is important to note that unlike ANWR other national security issues are not facing the threat of a filibuster on the floor of the U.S. Senate.  In 1973 when the Senate debated an amendment to create a right-of-way for the Alaska pipeline there was a tacit understanding in the Senate that any item dealing with national security would not be filibustered.  I shared with my colleagues something I originally told them during the debate on the Alaska pipeline in 1973 - we cannot afford to bury our heads in the snow and freeze, nor can we allow our economy and the jobs of thousands to be endangered while we stand idly by - it was true in 1973 and is even more true now."     *      CBC, Inuvik, N.W.T. - At least four oil and gas companies have decided not to drill in the Northwest Territories or the Yukon this winter. They're blaming a drop in oil and natural gas prices.       *     An important reference added to our bibliography: Resource Development and the Mackenzie Valley Resource Management Act: The New Regime by John Donihee (Contributing Editor), Jeff Gilmour and Doug Burch, 2000. 281 pp. ISBN 0-919269-49-4.

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".

The meeting included election of Chairman Mike Navarre (i.e. who also served on the Alaska Highway Natural Gas Pipeline Policy Council; photo, with Member Lynne Aleshire), a briefing by Natural Resources Commissioner Pat Pourchot, process review by Oil And Gas Division Deputy Director, Bonnie Robson and testimony given by Alan Sharp, Alberta Energy Corporation Marketing's Director of Northern Business Development and Anadarko Petroleum Corporation's Alaska Public Affairs Manager, Mark Hanley.

Pourchot opened the meeting, facilitating election of the Chairman and announced the purpose of the meeting: to review the preliminary finding linked above.  He emphasized the state’s interest in attracting public comment during the next month, including testimony to be offered by witnesses at this meeting.  The final best interest finding, he said, would be followed by issuance of an RFP, then a bid opening, a final review of the Advisory Board and the Governor’s submission of contracts to the Legislature for approval.  (Click on Photo, right to left: Pourchot; Department of Community and Economic Development Commissioner Member Deborah Sedwick; Department of Revenue's Member Dan Dickinson; public Members Aleshire and Gordon Severson.)  

Robson (Photo) said interest in North Slope royalty gas began intensifying in the last year with Netricity’s interest in on-site use supporting power requirements for a Prudhoe Bay, high-technology application.  Interest increased, she said, as the Governor’s Alaska Highway Natural Gas Pipeline Policy Council’s In-State Use committee investigated royalty gas applications, then as the major gas producers indicated the potential for a gas pipeline ‘open season’ occurring as soon as the first quarter 2002.  She said that if the state’s process for determining interest in royalty gas sales were not underway via the current process, it could miss the open season schedule.

She briefed members on several aspects of a potential sale, including:

• Gas quantity.  Of a potential 4-4.5Bcf/day required by a gas pipeline, the state’s 1/8th share would be in the .5Bcf/d range.  She said it would be prudent for the State to retain a portion of its share for sale ‘in-value’ by producers to maintain a ‘benchmark’ of value.
• Duration.  While gas sales contracts could span 10-25 years, she said the state could maintain a ‘fairly large flexibility’, due to the inability to forecast price and demand so far into the future.
• Price.  Robson anticipates a potential royalty gas sale contract will provide for a base price (roughly equal to the in-value benchmark), a bonus bid (a fixed dollar amount), and a premium (allowing bidders maximum flexibility).
• Additional terms.  These might include intent language triggering renegotiations in the event of unanticipated developments.
• Payment security.  In the past royalty purchasers have sometimes been unable or unwilling to pay required prices.  It may be that modern contracts will require payment of fees within 30 days, with support of interest penalties for late payment.
• Conditions.  Possible conditions precedent might include: gas flowing by a date certain, execution of an open season by a date certain, contract made effective when a certain route/mode of pipeline transportation system is approved.
• Other.  Possible options, cancellation requirements, field delivery points, gas conditioning arrangements, etc.

Robson said completion of this initial phase inviting public comment will occur by month’s end.  A firm contract form with fixed terms and conditions will be issued with a Final Best Interest Finding by mid-December and Request for Proposals.  By mid-January there could be a public bid opening.  Contract negotiations, review by the board and final contract submission to the Legislature would follow. (Photo-Peter Stokes, Unocal's Project Manager for Business Development & North Slope was one of a dozen oil industry executives and journalists attending the meeting.)

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 contracts would be signed in 2002.  The volatility of world and Lower 48 gas prices required that the state retain flexibility.  Responding to member Dan Dickinson’s (Department of Revenue representative; Photo-with Sedwick) comment regarding effect on the State and producers on exercising state sale options, Robson said, “Every oil and gas lease in the State gives the State the option of changing its in-kind/in-value preference with six months’ notice.  Every producer in the State knew this requirement before bidding on leases.”

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 agreement with Foothills signals the Kaska’s optimism about achieving those agreements and paves the way for our potential participation in the Alaska Highway Pipeline Project.”  John Ellwood, Executive Vice President and Chief Operating Officer of Foothills Pipe Lines, Ltd., said the cooperation agreement is an example of how industry and First Nations can work together to maximize the benefits of a major construction project.  “Foothills is pleased to have reached this important milestone in our relationship with the Kaska people, and we look forward to working closely together on pipeline development in Kaska territory,” said Ellwood.  The Kaska Nation is composed of five First Nations: the Liard First Nation and the Ross River Dena Council, both in the south-eastern Yukon; and in northern British Columbia the First Nations of Lower Post, Dease River, and Kwadacha. The Kaska traditional territory stretches from the MacMillan Pass at the Yukon/NWT border to Williston Lake in British Columbia.  Foothills Pipe Lines, jointly owned by TransCanada PipeLines Ltd. and Westcoast Energy Inc., is the Canadian sponsor of the AHPP and is also a partner in the Alaska Northwest Natural Gas Transportation Company (ANNGTC) in the State of Alaska.  (Download Kaska and Foothills releases.)

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 took the Democratic Senate Leadership to task for failing to see the potential for economic stimulus represented by oil and gas exploration in the Arctic coastal plain of Alaska.  "A spokesman for the Democratic Leader (Sen. Thomas Daschle, Photo-left) is quoted in today's Washington Post as stating that 'everyone knows we won't get a drop of oil out of Alaska for a decade and it won't last more than a few days.'  The reality is that if it ranges between the estimates 5.6 billion and 16 billion barrels of recoverable oil, it would be as much as we would import at current levels from Saudi Arabia  in 30 years or from Iraq over 50 years," Murkowski said.  "It is the largest potential oil field that we could possibly find in North America and it can flow within 18 months of opening as a consequence the process of simply moving the permitting process along."     *    Whitehorse Star-There were also presentations by Foothills Pipe Lines Ltd.’s Brian Love....    *

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 change in the next decade,” he said.  He said Agrium’s large fertilizer operation processes 55Bcf per year and Phillips’ LNG operation consumes 80Bcf/y, with field operations using 15Bcf/y.  Most of the balance is left for utilities.  Van Dyke said that assuming a worst case of no new supply there were various scenarios for curtailed gas supply for industrial use.  One scenario could assume Agrium’s curtailed operation in 2005 with other industrial curtailment in 2009, leaving about a 20-year supply for priority utility use.  If Agrium continued to 2010, he said, an 11-year supply would remain for utility use.  If Agrium and LNG operations continued to 2015, there would be no gas left for utilities.  He said that if the last scenario were augmented by 1Tcf of new discoveries, development and production – though involving a ‘leap of faith’ in that rapid an execution of the process--) all industrial uses could continue to 2015, leaving a 20 year supply for utilities.

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. 

The Kenai plant’s 300 employees (30 contractors) produce 6% of all nitrogen made in Canada and the U.S. (Photo: Governor's Gas Pipeline Policy Council touring facility, 5-01)  Primary markets include: Korea, Mexico, South American and Taiwan.  Primary competitors are: Russia, Trinidad, Pacific Rim and South America, offering low prices and having access to inexpensive gas feedstock.  European competitors have offered higher prices, but as a result have lost industrial capacity and market share.  The company spends about $130 million/yr in Alaska, including $25 million in wages.  

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 Jepsen, Manager Cook Inlet Asset.  Jepsen first addressed the company’s field production activity then the company’s LNG activity, owned jointly with Marathon.  He said, “Total feed to the plant from Phillips and Marathon is approximately 77 BCF per year.  The plant produces on average about 1.5 million tons per annum of liquefied natural gas which is sold to Japanese utilities.  Our current plans do not envision any significant changes to the operation of the LNG facility.”  Continuing to answer written questions put to him earlier by the committee, Jepson said that on April 2, 1999, Phillips and Marathon were granted a renewal of the export license for the Kenai LNG plant for the period April, 2004 to March, 2009 by the U.S. Department of Energy, Office of Fossil Fuels.  For that renewal, a thorough analysis of reserve adequacy was conducted and substantial hearings were held.  “The results of that process demonstrated that reserve capacity was sufficient for LNG exports to continue through the approved period’” he said.  “It was also found that export was consistent with the public interest and would not result in a local or regional gas supply shortfall on an annual basis.”  He added that Phillips hopes to operate the Kenai LNG plant after 2009 but that it is too early to know whether the company will seek another extension.  He said that if an extension will only be requested if there are adequate gas reserves to provide for state needs.  On North Slope gas plans, Jepson said Phillips, as a member of the ‘Sponsor Group’ had last April reached a conclusion that the Nikiski area and a pipeline from Prudhoe Bay “…would provide a technically feasible and permittable LNG plant site/route configuration,” but it had not yet proven economically viable.  On Asian LNG demand, he observed that, “there is an over abundance of lower cost supply and in smaller increments compared to new LNG that would be delivered from Alaska.”  On the concern for increased Cook Inlet gas supply, he said “From an exploration and production point of view, this is really a time for optimism, not pessimism,” then provided supporting rationale.  When asked for recommendations on state support for enhancing gas exploration and discovery, Jepsen said, “Clearly, more frequent and wider lease sales and expedited permitting is an excellent policy.  In addition, State support of increased federal lease sales in the potentially gas prospective lower Cook Inlet would also be appropriate.”  (Readers may obtain a copy of Scott Jepsen’s presentation here.)

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 sponsoring, “a very popular initiative.”  He said his group has obtained: 37,500 signatures, over 50% of those required.  He reviewed provisions of the ‘authority’ the initiative and subsequent vote would create and emphasized that, “Creditors cannot access the general fund or the Alaska permanent fund.”   Heyworth went on to encourage legislators to pass ‘substantially similar’ bill this session to save the cost of placing the matter on the 2002 ballot.  He said the language which Senator Robin Taylor put forth last year in SB 221 “would suffice and be a sound piece of legislation.”  He said the legislature could ‘strengthen’ Senator Taylor’s bill with appropriations not permitted in the initiative language and recommended an amount: “$1 or 2 million.”

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 gas pipeline tribunals, serves as Chief Operating Officer and Executive Vice President of Foothills Pipe Lines Ltd.  He last appeared before this committee with colleagues on July 18, August 15 and September 19.  He thanked Torgerson and the committee “…for your words and contribution to the US Senate Energy Committee hearings”.  Today, he addressed three issues:

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 government shows more signs of offering incentives for development of the ‘clean diesel’ fuel. -dh).  Today, as in recent communications to thought leaders, he says, “a North Slope gas to liquids (GTL) program followed by a lower 48 coal based gas to liquids program can work in 38 different states.” 

According to Peterson, “If the US wants a National Energy Policy to reduce its dependence on foreign crude oil it can to look to the example of the South African’s.  South Africa pioneered coal gasification - gas to liquids in the 50’s and expanded the program in the 70's when OPEC boycotted the US in order to reduce its imports of foreign crude.”  With modern technology, he says the U.S. could build more efficient plants at a lower cost than South Africa did.

Peterson’s thesis is to transform Alaska North Slope gas into about 1 million barrels per day of synthetic diesel, moving it down the Trans-Alaska Pipeline to Valdez for shipment to the lower 48 and replacing up to ¼ of the U.S. use of traditional “dirty” diesel fuel.

He said the Legislature should undertake ways to encourage gas production, assuring producers not discouraged from selling to his and other industrial operations (Referring, it seems, back to that royalty gas valuation issue. -dh).  (Find the ANGTL web page and GTL information here.)

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.  The company has the capacity to double the existing load of 128 Mcf/d, owning and operating about 2,700 miles of distribution and transmission pipelines.  Izzo discussed average and peak demands.  “By 2003,” he said, “we could have problems with peak demand and by 2006 average daily demand could be affected.”  He went on to express optimism for new discoveries.  Absent that, he said in agreement with earlier speakers, industrial use would be at risk and/or the requirement for peak storage facilities.  Izzo said his company supports “…an in-state route for North Slope Gas to ensure access to reliable low cost energy for future generations of Alaskans.” 

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:

1. The goal is to work for long term supply of gas for citizens of the state.
2. Coal bed methane is a long-lived resource providing security of supply and numerous jobs and long term economic prosperity.
3. He supports a North Slope natural gas pipeline, but more for the purpose of exporting Southcentral gas down the line than being dependent on it for Southcentral gas supply.

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 importance of long term gas supply for the Kenai Peninsula and welcomed the visitors to his town.  Torgerson said that the main focus of this meeting is gas resources available to the Kenai Peninsula and how additional supplies can best be brought to Southcentral Alaska.  (Note: Studies have shown that this most populated part of Alaska has only several years of proven gas reserves remaining; hence, one of the pressures for Alaska’s support of a southern route for North Slope gas.  –dh) 

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:

• On national energy legislation, Katz said, “…it is clear that we will not see it on the floor before the thanksgiving recess.  It seems,” he said, “increasingly likely though not certain that there will be a session in the Christmas timeframe and possible a bill will be brought to the Senate floor at that time.”
• He said the Senate majority leader in a rare parliamentary maneuver has brought energy under his personal aegis.  Senator Tom Daschle (Photo) and his staff have taken the responsibility of putting the various provisions together for debate on the floor, Katz said.  The Senate energy committee has discontinued its markup of gas pipeline provisions and will make recommendations to the majority leader, we believe, by this Friday.
• The Senate republicans have become increasingly impatient with the progress of energy legislation, Katz said, and may work on their own version to bring to the floor.  Another possibility might be for the republicans to take the house energy package, HR4, and propose is as an amendment to other fast moving vehicles.  He noted it prohibits the northern route and includes an ANWR provision.
• Katz spoke of the relationship between gas pipeline and ANWR issues.  In the Senate is broad support for developing North Slope gas, he told the committee.  “However, there are members of the senate (including the senate majority leader and committee chairman), who would like in essence to remove ANWR from the Senate debate and replace it with gas pipeline language and other provisions related to oil and gas.  Conversely, there are other members who don’t want that linkage to occur and want both ANWR and gas pipeline issues to come to a vote.  I think it is safe,” Katz said, “to say that the formal position of the Administration is to be project neutral and not propose legislation at this time.”  Katz said the Bush Administration also seems to show great deference to Alaska’s leadership.

Katz described what he believed to be 3 pivotal Senators, Jeff Bingaman (Photo), Daschle and Frank Murkowski.  Key issues they are now negotiating include:

·         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.

• The Producers remain strong advocates of their legislation, which they believe to be route neutral and absolutely crucial to a project, he said.
• “Foothills and some of their partners have indicated their preference for the ANGTA regime, perhaps modified.  They believe that is the quickest way to commercialize gas and create jobs”, he said.
• “The state Administration continues to advocate the Governor’s 10 principles,” Katz said.  “We continue to place heavy emphasis on the ANTGA regime and the southern route.  He emphasized how close the Administration position is to, “…the position taken by Senator Torgerson’s committee”. 

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 and Natural Resources Committee chairman to the Majority Leader were good news or bad news.  Katz said, “… in terms of the energy policy bill it might not be so bad from the gas line perspective since Senator Daschle is more inclined to the southern route.”  He said Daschle may feel the best way the process can be accelerated is to coordinate through his office.   From an ANWR perspective, Katz said, “it is a setback since the majority leader did not want to see a bill come out of the committee with ANWR included.” 

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 rate of return and Marks verified that it would but that such scenarios were not included in his models. 

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 Revenue, spoke by teleconference of the world economy’s “dampening impact on prices going forward”.  He said current US gas storage capacity of 3.1Tcf was within .1Tcf of being full.  He said inventory could be drawn down if we encounter another extremely cold winter but that with such high inventories even less production will be required next year to maintain levels.  He said we may expect a decline in production next year, but that it will be more than offset by the high storage levels.  Small said CERA expected price recovery beginning in 2002 which should result in more production again in 2003. 

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 3^rd 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 observations.   He and department consultants have interviewed numerous oil industry executives, individuals, Alaska leaders, bankers, etc.  With those meetings, he said, there is much enthusiasm for the benefits a gas pipeline project will bring the state.  There are also benefits of pipeline ownership.  But the risks, too, are great.  He listed some of the potential risks of state equity involvement, including: cost overruns, FERC may not allow recovery of overrun costs, unanticipated risks, risk of investing when Alaska has limited funds (The Constitutional Budget Reserve Fund and Permanent Fund Earnings Reserve Account are falling precipitously due to both stock market losses and the State’s deficit spending practices).  Then he spoke of price risks; how small swings in market prices could make the tariff insufficient to pay for transporting the gas.  “The decision whether to build the gasline, and who will build it, will come down to a deal over who is willing to share how much of the price risk”, he said.  “Also thinking about risk, does it make sense for the state, which is already heavily dependent on oil revenues, to take a large investment in gas?  Should we instead diversify from the oil and gas sector in generating state revenues?  It’s one thing for a corporation to take a risk that could mean no dividends to shareholders if it goes sour one year.  It’s another thing for a state to take a risk with providing essential public services.  Remember, we expect the Budget Reserve to hit empty in the second half of 2005, and the Permanent Fund earnings reserve has taken a major hit in the stock market.”  Then, he posed the question, “Would the state be better off letting someone else take all the risk, and we then would do what we do best – and that is tax the profits?”   Obtain Persily's complete presentation here.

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.

State Pipeline Coordinator, Bill Britt (Photo, Spring-01), updated the committee on progress of Joint Pipeline Office (JPO) operations, staffing and projects.  Primary current work focuses on Foothills Pipe Lines, Ltd. Right of way activity supported by regular meetings.  His office is also coordinating with the Alaska Gas Producers Pipeline Team as they reach the conclusion of their $100 million feasibility study.  Britt has reimbursement agreements with both parties this year and is working with them to define the scope of any work which may be scheduled next year.  He discussed the complex and elaborate coordination efforts with state and Federal agencies.  The JPO is developing a permit directory and flow charts in an effort to organize the huge volume of data.  Next year, he plans to focus on developing similar coordinating relationships with Canadian agencies and hopes to initiate “a reasonably large outreach program”. 

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)

11/5: 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 pipeline progress, he said two questions should be kept in mind:  first, will producer feasibility studies support the economic viability of any project; and, second, will legislative changes the producers proposed be approved.  He noted optimism regarding resolution of the potential liability associated with the ANGTS 'withdrawn partners' issue.  He said that while Congress is unlikely to move gas pipeline legislation this year, he is encouraged that progress is occurring among stakeholders.  Murkowski affirmed that meetings he had suggested at the October 2 Senate Hearing were ongoing.     *     Henry Hub natural gas prices: 11/2, $2.97; year ago, $4.50; 10/26, $3.06.     *     Northern News Services, by Nathan VanderKlippe, Inuvik - Leaders from the Aboriginal Pipeline Group flew to Ottawa this past weekend to petition the federal government for financing.  "We're planning to speak with all the ministers, or as many people as we can, to get a feeling of what they're willing to do with us," said APG president Nellie Cournoyea (Photo).  The APG needs to secure funds for its one-third stake in the pipeline, which will cost an estimated $1 billion.  ... Included in the APG delegation were Gwich'in Tribal Council president Fred Carmichael, Calgary businessman Doug Cardinal and K'asho Got'ine Chief Frank T'seleie.  A previously-scheduled trip to Ottawa was called off because no agreement was reached between the APG and the oil producers' association. With the Oct. 15 signing of a memorandum of understanding, the APG felt it was fitting to go now.  The delegation met with Minister of Indian and Northern Affairs Robert Nault (Photo) last Thursday, Nov. 1. ...  Cournoyea emphasized that this was a preliminary meeting, and chances of immediate success were very slim. ... But even as the APG works to secure its funding, the producers association has yet to formally commit to the pipeline.   Although the MOU has been signed, the producers group must file a notice of intent with authorities before applications can be made for regulatory approval, said producers group spokesman Hart Searle. ... "We need to do negotiation of the necessary commercial agreements, which embody some principles about how the parties are going to work together and set out the principles under which the work in the next phase would be conducted and address governance issues," he said. ...  Searle said if the decision is made to go ahead, it would be announced late this year or early next year.

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.

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 changing array of new technology is leading the company to be a "...new generation of people with a new set of skills."  It is a theme we have heard over the last year from Alaska's gas producers who also own part of the oil pipeline: a gas project will also require a new generation of operators and technology.

The main purpose of Wight's presentation was to give insight on the Trans-Alaska Pipeline System (TAPS) right-of-way renewal project; at many points in his presentation he referred back to the importance of Alyeska's employees and contractors.  He said that the principal components of the renewal process are people, physical assets and business systems and processes.  With regard to the recent pipeline shooting incident, the  third biggest spill to date on the pipeline, he said management's key concerns were safety of people, protection of the environment and resumption of operations.  Response was efficient: within 12 hours the spill was contained; in less than 24 hours workers were capturing more oil than was escaping and within 36 hours the leak was stopped.  Response effectiveness was due to earlier preparation for such challenges, people well trained and cooperation from community response units as far away as Fairbanks and the North Slope.  (Note: JPO's October 4 Pipeline Puncture Update - Over 174,000 gallons of fluids recovered to date.  Recovery and clean up continue....   Current information can be located on the Unified Command Internet site here.)


Process and procedure seemed critical to Wight, but he suggested that the new generation would have to approach process differently.  "When the company began," he said, "we had two procedure manuals; now we use more than 400."  He said Alyeska was now working to simplify processes and that the old cultural dependence on old procedures would be changing.

Wight wanted to correct a misconception that the pipeline was constructed for only 25 years of operation.  "That came from reserve estimates at the time of construction," he said, and pointed out that excellent maintenance programs can extend pipeline life significantly.   "(Current)...reserve estimates say there should be sufficient oil from the North Slope to keep us operating for at least the next 25 years."

He enumerated several current challenges: internal corrosion, replacement of electronic and control components and soil conditions-including earthquake hazards.  In the post 9-11 environment he commented that the company has various levels of security.  During Desert Storm, he said the company observed the highest security level.  "We are now one step below that," he said.  He suggested the company would focus security priorities on the most difficult to reach, hardest to replace assets.

Wight concluded by stating that while the company has made some mistakes, it dislikes mistakes, seeks to identify them and tries to root them out to avoid repetition.

A chilled, buried gas pipeline has vastly different properties than a heated, elevated oil pipeline.  But one can expect gas project sponsors will have much to learn from their oil pipeline forbearers.  Alyeska has much to offer in the way of 'northern pipeline business best practices' that embrace such shared interests as: management, maintenance, security, crisis response, regulatory compliance and policy development.

(Note: new readers may wonder that Northern Gas Pipelines devotes attention to TAPS and to ANWR developments.  All North Slope gas pipeline proposals begin at Prudhoe Bay adjacent to both the oil pipeline and ANWR.  One project would skirt ANWR and one would trace the TAPS trail to Fairbanks.  Accordingly, this coverage is intended to assist readers in understanding the big picture.  Similarly, we devote targeted coverage to oil & gas developments in the Yukon and Northwest Territories and Alberta.  -dh)

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, Alyeska Pipeline Service Company; report planned for tomorrow .    *     Northern News Services, by Richard Gleeson, Yellowknife - Under the watchful gaze of a standing-room only gallery of supporters of the premier, MLAs (Members of the Legislative Assembly) on Monday reaffirmed their confidence in Stephen Kakfwi.  Thirteen MLAs, including the premier himself, voted in support of Kakfwi's leadership. ... Kakfwi said he was overwhelmed by the responses he received after calling for a show of public support for his leadership last Thursday. After the vote he said the show of support in the assembly was as moving.   The Sahtu MLA said it was the first time he had received demonstrations of support from members such as Charles Dent, Michael Miltenberger and David Krutko.   "I value that very much," the premier said.  ... the caucus, which includes all MLAs, cancelled another planned secret ballot confidence vote scheduled for (yesterday). (Underline for emphasis.  -dh)  "Members felt there would be no further gain or benefit in going through the secret ballot confidence process, given that the numbers were as strong as they were for Mr. Kakfwi," said caucus chair Bill Braden.       *       Financial Times, By Mary Chung--The US energy department (Energy Information Administration) ... will take over a closely watched weekly survey on natural gas storage estimates from the American Gas Association, a department official said. Spencer Abraham, the US energy secretary, said in a statement: "I believe it is important the Department of Energy continue the reporting responsibility for this vital resource."

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 Gas Pipeline Policy Council, first initiated last January 26 as Executive Order No. 188.  That order stated the purpose of the Council: "to engage Alaskans representing a broad spectrum of Alaska interests, experience, and geography to advise the Governor and the Alaska Highway Gas Pipeline Cabinet in determining how the state can best promote the Alaska Highway North slope natural gas pipeline project and maximize benefits for Alaskans." 

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 comprehensive workshops producing leading edge information,” he said, “…providing thoughtful, thorough examination of the universe of ideas surrounding gas pipeline issues.”  Knowles reserved special praise for Cochairmen Frank Brown-r and Jim Sampson-l (Photo, 10-31-01) as being “…articulate spokesmen and effective leaders”.  He said the Council had brought a sense of unity to the issue as had the parallel work of Senator John Torgerson’s Joint Legislative Committee.  “Without unity and forcefulness,” he said, “we wouldn’t have a chance.  … Armed with the unity you helped forge…and with your report, we have all the tools needed to go forward…,” he said. 

Cochairman Sampson opened the meeting earlier by thanking Ken Freeman, the Governor’s special assistant staffing Council activity, along with office associates, Debra Ceffalio and Erika McConnell.  He complimented the many witnesses who had participated along with mayors and citizens throughout Alaska who had welcomed the Council to its many regional meeting sites.  He offered special appreciation to representatives of the Alaska Gas Producers Pipeline Team, Curtis Thayer (Photo, left-5-01) and Michael Hurley (Photo, right-9-01).   

Cochairman Brown moderated subcommittee reports, first introducing Council Member Charlie Cole, (Photo, 9-01) former state Attorney General.  Cole’s Federal/International Action Committee submitted a draft report for Council consideration.  It embraced ten policy goals, “…developed to guide…” drafting of Federal legislation, earlier approved by the Council.  The report emphasized advantages of a ‘southern route’ for the pipeline.   “We heard overwhelming support for this principle..." in Barrow, Fairbanks and the other meeting locations, he said (Photo-Former Senator and Member Al Adams' huge district included the North Slope Borough).  The report also supports modernization of the Alaska Natural Gas Transportation Act of 1976 (ANGTA).  Member Jack Roderick asked for Cole’s opinion of what Alaska should do if an energy bill did not pass through Congress this year which contained provisions for reasonable in-state pricing and access to the gas.  Cole said that, “Plan ‘B’ would be to support the Alaska Highway route come hell or high water,” a phrase he later repeated to the Governor, receiving a similar animated response.  The Council approved the report, draft available to you, here. 

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, Mayor of Anchorage (Photo, center, with Members Mike O'Connor and Rhonda Boyles), suggested a change in wording to make it clear that a “review of the full range of alternatives” associated with an EIS applied to Highway route alternatives and not other route alternatives.  The Council agreed to the change.  Boyles, Mayor of Fairbanks, questioned whether a full or supplemental EIS would significantly delay the project.  Davies said such review would be conducted in any case and that an EIS could be accomplished without significant delay.  The Council approved the amended report, the earlier draft of which is available to you here. 

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 economically feasible for certain investors and should be undertaken with private financing.”  He recounted the many meetings of the Committee and long line of witnesses.  He praised Revenue Commissioner Wil Condon, State Oil and Gas Division Deputy Bonnie Robson and state oil and gas economist Roger Marks for their important contributions.  He briefed the Council on Committee investigation of how pipelines are financed and taxed and how a state might properly own all or a portion of a pipeline.  He said the Committee carefully reviewed both the benefits of state ownership and the obligations the state might incur as an owner or should it nominate capacity in the pipeline.  The committee, he said, invited critiques of current state tax policy and invited producer recommendations.  “I could not stress enough,” he said, “that at a future point in time the state could reopen the discussion of state ownership.”  Davies suggested the Council develop a preamble to the report which would include a discussion of the implications of producer and/or pipeline company ownership of the line and as a last resort, State ownership. The Council agreed to develop an executive summary which discussed, among other points, the advantages and disadvantages of the various ownership options.   Member Ken Thompson emphasized the importance of the report’s statement concerning stipulations the state could impose in rights-of-way leases across state lands, a theme that reoccurred in other reports and comments.  He also stated that ownership might be significantly different than the common notion of producer ownership, as in the Trans-Alaska Pipeline.  “I know of no major gas pipeline in which there is producer ownership.”  He said that gas pipeline transportation companies own major gas pipelines in the Lower 48.  Member Dave Rose, former Alaska Permanent Fund Executive said members were surprised at the lack of tax exempt financing available for such a large project, which “…played a major role as to whether the state should be involved.”  Tax exempt financing, he said, would more likely occur with local in-state projects associated with the pipeline rather than with the pipeline itself.  Member and state representative Georgianna Lincoln (Photo, during break with Commissioner Pat Pourchot), complimented the Committee on emphasizing the role Alaska corporations could play in the private financing of the project.  Member and state representative Ethan Berkowitz observed that during the October 2 U.S. Senate Energy and Natural Resources Committee hearing, there was criticism that while Alaska is asking the Federal government for project incentives, Alaska has offered no specific incentives.  Corbus, then referring to the Committee’s recommendation that tax policy changes should not be defined until project owners become known, said that the matter was one of timing.  Thompson, former Arco Alaska, Inc. President, recalled previous producer concern with rapidly changing tax policy after the Prudhoe Bay discovery.  Member Mike Navarre, former legislator and former Kenai Mayor (Photo below, left, with members Davies-middle, and Berkowitz), stated that such action was necessary because Alaska was “in its infancy” and that it took time to develop appropriate tax policy.  Member Jack Roderick, backing up Navarre, said, “Remember that when Prudhoe Bay was discovered the severance tax rate was 1%.”  Davies observed that Federal incentives had more impact than state incentives.  Sampson said he was concerned that whenever the term “stable fiscal policy” arises, he thinks of what the state must give up.  That portion of the discussion ended.  The Council approved the draft with an amendment to the last paragraph, eliminating reference to House Bill 393 but retaining balance of the content.  The original, unchanged draft is available for your review, here.  (Note: after the meeting Cochairman Brown emphasized that it was good the Council felt it was unnecessary for the State to seek an ownership role at this time.  He said that while the state could reopen the issue, the Council's investigations demonstrate that there is sufficient private sector interest and ability to finance the project.  He praised Corbus for the committee's work product.)

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 know the questions to ask and develop the answers."  She said that while theme of the Knowles administration is 'open and ready for business', "...we need to do so in an environmentally sensitive way and in ways which support Alaska's families and businesses.")

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 appeared at the meeting.  Pourchot told Northern Gas Pipelines that some of the companies expressing interest in Alaska North Slope state royalty gas are: Netricity, Williams, Anadarko Petroleum Co., and Alberta Energy Corp.   Robson repeated to the Council a briefing given earlier to the Committee, emphasizing that an expedited royalty gas findings & RFP process is now underway and could accommodate an 'open season' which the producers have said could occur in early 2002.  (Photo: Lincoln, Pourchot, Rose and Corbus).

(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)