2010 Archives

Billions of petroleum related investment dollars are flowing from Asia to Canada.

Q.  What's wrong with Alaska?

A.  It is among the most expensive operating environments in the world (i.e. labor, transportation, climate, transportation, remoteness to the markets).  It is mostly owned by the Federal government, with an Administration openly hostile to natural resource development.  Federal statutory, regulatory, leasing and taxing policies are volatile and threatening.  Alaska state petroleum taxes are the highest in the free world and unpredictable.  Alaska's government spending and income projections are unsustainable, mark of an unreliable partner.   The majority of Alaska's people and leaders are apparently content with the investment climate they have created.  Alaska's children will be unable to criticize a paltry, diminishing inheritance because they will never know -- and could only imagine -- how it might have been.     -dh

Calgary Herald by Peter Tertzakian (CH Photo).  At last count, Korean, Chinese and Japanese interests have contributed or committed at least $13.8 billion into the Canadian oil and gas economy. ... that’s only in the past 12 months, and doesn’t include unannounced deals that probably add another billion investment dollars into Calgary head-office coffers. Equity infusions and joint venture dollars account for $9.7 billion, most of which will be invested into Western Canadian projects over the next few years. The full acquisition of Harvest Energy by the Korean National Oil Company put $4.1 billion into the pockets of Harvest’s shareholders who may not reinvest into Canada’s oil and gas business. However, under the banner of Korea’s state-owned oil company the new Harvest should have no trouble accessing a pipeline to deep-pocketed Asian capital.  ...  Let’s put the $13.8 billion of Asian inflow into perspective. Capital expenditures into Canada’s oil patch are down by 25% since the heyday of 2006-to-2008, but are still running around $40 billion per year right now. Another relevant marker is that companies raise about $10 billion a year from equity markets, dominantly from Western institutions, so in this context too the influx of new Asian money is very significant, even if it’s spread out over a few years. To be sure, reinvestment into Canada’s upstream oil and gas economy would be significantly lower, probably at least 10% less, if access to the Asian capital was absent this year.

Olympian by Mike Dunham.  "Going to Extremes," which came out in 1980, became a best-seller. It presented a portrait of a juvenile society in transition, emerging from wilderness self-reliance into layered modern complexity, driven by the sudden rush of pipeline construction and oil money.

Peninsula Clarion by Brielle Schaeffer.  The Kenai City Council passed a re-zoning ordinance at its meeting Wednesday night that would allow industry on the property planned for the Cook Inlet Natural Gas Storage facility.

Downstream Today by Matthew Dalton.  The European Union will propose new restrictions on how greenhouse gas allowances can be produced from industrial gas projects, European climate change commissioner Connie Hedegaard said Wednesday.  ... The commission will develop a proposal for new rules on gas projects that will apply to the EU's emissions trading system after 2012.  "The international debate has made it quite clear what changes to the CDM are needed...and also what successor mechanisms should be put in place to make the carbon market an even more powerful instrument to reduce emissions," Hedegaard said. (Is this a trend that will float across the pond to Canada and the United States--perhaps via the United Nations?  -dh)

ADN.  Mark Myers (NGP Photo), a former head of the U.S. Geological Survey, is joining the University of Alaska Fairbanks as vice chancellor of research.  Myers currently leads the state's effort, under the Alaska Gasline Inducement Act, to encourage construction of a huge natural gas pipeline. He tells the Fairbanks Daily News-Miner that he will keep that job until mid-January to ensure a smooth transition.  The school announced Friday that Myers will replace Buck Sharpton, who was chosen last month to serve as acting chairman of the federal Arctic Research Commission. At the university he will oversee annual research budgets totaling $123 million.  He said his decision to take the $214,000-a-year research post was a personal one and not any reflection on the AGIA.  "I'm a scientist at heart. It'll be like a kid at a candy store," said Myers, who earned his doctorate in geology at UAF in 1994. "And I'm looking forward to the challenges."

7:32 a.m. ADT.  Rig fire in GOM.  Coast Guard responds.  Check news outlets

White House Press Secretary says (12:28 p.m. EDT) production well not in active production - Thirteen people rescued - 100 miles offshore, federal waters 

DOI.  Secretary Ken Salazar appears today in Barrow.  *    DOI.  Secretary Ken Salazar appears tomorrow in Anchorage.

Cook Inlet Natural Gas Storage Alaska (CINGSA): for a recent, outstanding summary see Alan Bailey's (NGP Photo-l) Petroleum News Alaska article, here.  Earlier ADN story.  KTUU's story today, by Ted Land.

Yesterday, representatives of ENSTAR Natural Gas and state regulators briefed Chairman Charisse Millett (NGP Photo-r) and her colleagues on the Alaska State House of Representatives Special Committee on Energy about the status of the Cook Inlet Natural Gas Storage Alaska (CINGSA) project.  Senate Energy Committee Chairman Lesil McGuire (NGP Photo-lower-r) also participated.  

Millett, Chairman of the House Special Committee On Energy convened the meeting with acknowledgment of Representative Mike Hawker's (NGP Photo-l) leadership in sponsoring passage of HB 280, providing legislative encouragement and incentives for exploration, development and storage projects that might assist Southcentral Alaska gas and electric utilities in planning for adequate power and heat deliveries during the coldest and darkest days of coming winters.  Decision makers are concerned that receding gas reservoirs and the lack of new discoveries in the most populated part of Alaska could cause severe energy shortages in the immediate future.

By teleconference, Hawker said that HB 280 was an effort to enable exploration and development of new gas supplies with minimum regulatory interference.

Starring pointed out that the combined utility demand on natural gas is five times higher in the winter than in the summer, but that the demand for Enstar's home heating energy is fourteen times greater in the winter than in the summer months.  She pointed out that the greatest value in having this enhanced storage capability is 'reliability'.  "On the coldest days of winter we will be able to draw from this facility and keep our customers supplied," she said.

Representative Chris Tuck (NGP Photo-r) asked about the loss of gas in the storage process.  Gentges said that most former reservoirs, to store gas, would have formerly kept gas reserves protected for millions of years but that a 'real time' SCADA (supervisory control and data acquisition) would enable operators to accurately monitor the volumes of gas going into and leaving the storage reservoir.

In response to a question from Chairman Millett, Gentges said the project required about two to 2.5 dozen state and federal permits before operations could be sanctioned.  He anticipates permitting will be completed this year, with construction ongoing through 2012 -- followed by commissioning and operations.

Rep. Kyle Johansen (NGP Photo-r) was concerned about obsticles to permitting and Starring noted that when Enstar took the project over from its previous owner (TransCanada), the permit applications were "90% complete".  She talked of her optimism and the 100-200 indirect jobs that would result from the project even though, "only one or two people will be needed on site.  There is a vast amount of work ahead," she said, but we are on schedule and from our perspective we have a very well designed process."

Johanson asked about 'organized opposition', and Starring said there appeared to be none, and that the project goals were 'achievable'; however, we note the intervention of and comments by interested parties in Enstar's certification filing with the Regulatory Commission of Alaska.  Initial concerns expressed by some parties about the price of storage could become thorny roadblocks, given the voting record of some Commissioners who, in the past, have elevated the value of "cost" over the value of "secure gas supplies".  Also, the more supporting and opposing parties become involved in a proceeding, the more time is typically required to provide all with 'due process' and adjudicate the additional record involved.

Millett asked about Enstar's gas supply contracts and learned that within ten years most of those contracts would terminate, even as demand is expected to increase.  "When you reach 2012-14 we may not have sufficient gas under contract to meet our requirements," she said.  "We do have concerns about peak day events beginning as soon as this winter."   

Representative Pete Petersen (NGP Photo-r) expressed concern about the cost of gas.  Starring said that the cost of storage, $180 million, would roughly produce $3 per Mcf to consumers above the cost of the gas itself.  "But if we have storage," she said, "we may be able to buy gas in the summer at cheaper rates than we must now pay during winter months.

Kevin Banks (NGP Photo-l), Director of the State's Oil and Gas Division, briefed Members on the State's interest in the storage project.  "We craft a storage lease," he said, "which will contain a bundle of rights allowing a storage project to go forward."

Representative Craig Johnson (NGP Photo-r) questioned Banks on the concept of gas loss in storage.  Banks said the jurisdiction of the Alaska Oil and Gas Conservation Commission (AOGCC) covered issues like the integrity of the storage reservoir.  "My experience in working with the AOGCC," he said, "is that they are the best in the country."

Millett asked about existing storage and Banks described three producer-owned storage facilities currently in operation.  Under further questioning he said of the new state reservoir lease that, "The discussion is nearly complete and we see no problem in supplying final approval to Enstar for a storage lease."

Regulatory Commission of Alaska (RCA) Chairman Bob Pickett (NGP Photo-l) described the regulatory process and timeline for adjudication.  He declined to go into substantive detail since the CINGSA matter lies in an 'open docket' and may only be substantively addressed on the record during commission proceedings. The RCA  is generally responsible for certifying utilities and regulating the rates they may charge customers.

On the other hand, the AOGCC's jurisdiction is generally below the ground and assures that an operator can safely extract resources while, "...ensuring conservation practices, and increasing ultimate recovery, while protecting health, safety, the environment, and property rights."  AOGCC Chairman Dan Seamount told the committee that, "HB 280 gives AOGCC the authority to determine storage potential and we make decisions regarding drilling and workover activity.  We make sure wells have integrity and gas doesn't leak into surrounding areas or to the surface".  In response to a question from Peterson, Seamount said that, "We make sure that all wells have integrity and have been properly capped."

Legislators closed the meeting with a discussion about the fairness and effectiveness of state bonding requirements.  They questioned Banks further about his ideas for improving internal approval processes.  

(Note: all parties named in stories or other readers are invited to send in additions or corrections since our goal is to make sure our facts are as accurate as possible.  There is no expiration date by which we will not make necessary changes.  -dh)

***BREAKING NEWS...SALAZAR MAKES SURPRISE VISIT TO BARROW AND ANCHORAGE!***

***Alaska Dispatch Story***Barrow Details***Anchorage Media Conference Details***

(This Administration Has Treated Alaska Very Poorly.  Activities Affecting Alaska Are Opaque And An Affront to Both Due Process and Common Courtesy.  -dh)

We Urge Readers to Follow Consumer Energy Alliance (CEA) Coverage

CEA Announcement:  On Tuesday, September 7^th, The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) Director Michael R. Bromwich (NGP Photo) and other US Dept of Interior officials will be in Houston to hear expert panelists discuss the Obama Administration’s offshore oil and gas drilling plans -- including views on the current moratorium.  (Commentary: Every one of our hundreds of Gulf Coast readers -- particularly elected officials -- should consider a drive to Houston for the meeting next Tuesday.  How many realize that this one appointed bureaucrat will advise the appointed Secretary of the Interior on all aspects of OCS moratoria, permitting policy, lease sales and lease sale conditions?  And, how many correctly conclude that this one man has been given the power to change Texas, all the gulf states, and the standard of living for all Americans?  I think I see complacency beginning to retreat in the face of outrage.  I hope so.  Rise up.  See our coverage of last week's Anchorage meeting.  Oh, and watch out for a potential, crafty outcome: removing the formal moratoria but establishing such a weight of new access restrictions and permit requirements that de facto moratoria effectively stop OCS momentum until the national leadership is replaced.  In Anchorage, Bromwich said, "There is no actual or 'de facto' moratorium on shallow water drilling".  On June 23, Secretary Salazar said in an Appropriations Committee meeting in answer to questioning by Senator Lisa Murkowski that the moratorium does apply to Alaska, even though Alaska's OCS programs involve shallow water activity in less that 200'.  Also note that Obama's Corps of Engineers is strangling development within the National Petroleum Reserve-Alaska; the Obama Administration's EPA has withheld critical OCS permits; Obama's NOAA is using the ESA to shut down access to prospective areas; the Obama White House is creating a way to zone the oceans--which could affect all forms of commerce/use of oceans and even of waterways that feed the oceans.  In short, this is a bigger problem than just the Bromwich moratorium issue.  Surely, the foxes are in the hen house.  The BOEM meeting next week--as critical and life-changing as it could be--is just one small part of a much larger challenge to America's very survival.     -dh)

***BREAKING NEWS...SALAZAR MAKES SURPRISE VISIT TO BARROW AND ANCHORAGE!***

***Alaska Dispatch Story***Barrow Details***Anchorage Media Conference Details***

(This Administration Has Treated Alaska Very Poorly.  Activities Affecting Alaska Are Opaque And An Affront to Both Due Process and Common Courtesy.  -dh)

We Urge Readers to Follow Consumer Energy Alliance (CEA) Coverage

CEA Announcement:  On Tuesday, September 7^th, The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) Director Michael R. Bromwich (NGP Photo) and other US Dept of Interior officials will be in Houston to hear expert panelists discuss the Obama Administration’s offshore oil and gas drilling plans -- including views on the current moratorium.  (Commentary: Every one of our hundreds of Gulf Coast readers -- particularly elected officials -- should consider a drive to Houston for the meeting next Tuesday.  How many realize that this one appointed bureaucrat will advise the appointed Secretary of the Interior on all aspects of OCS moratoria, permitting policy, lease sales and lease sale conditions?  And, how many correctly conclude that this one man has been given the power to change Texas, all the gulf states, and the standard of living for all Americans?  I think I see complacency beginning to retreat in the face of outrage.  I hope so.  Rise up.  See our coverage of last week's Anchorage meeting.  Oh, and watch out for a potential, crafty outcome: removing the formal moratoria but establishing such a weight of new access restrictions and permit requirements that de facto moratoria effectively stop OCS momentum until the national leadership is replaced.  In Anchorage, Bromwich said, "There is no actual or 'de facto' moratorium on shallow water drilling".  On June 23, Secretary Salazar said in an Appropriations Committee meeting in answer to questioning by Senator Lisa Murkowski that the moratorium does apply to Alaska, even though Alaska's OCS programs involve shallow water activity in less that 200'.  Also note that Obama's Corps of Engineers is strangling development within the National Petroleum Reserve-Alaska; the Obama Administration's EPA has withheld critical OCS permits; Obama's NOAA is using the ESA to shut down access to prospective areas; the Obama White House is creating a way to zone the oceans--which could affect all forms of commerce/use of oceans and even of waterways that feed the oceans.  In short, this is a bigger problem than just the Bromwich moratorium issue.  Surely, the foxes are in the hen house.  The BOEM meeting next week--as critical and life-changing as it could be--is just one small part of a much larger challenge to America's very survival.     -dh)