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Northern Gas Pipelines is your public service 1-stop-shop for Alaska and Canadian Arctic energy commentary, news, history, projects and people. It is informal and rich with new information, updated daily. Here is the most timely and complete Arctic gas pipeline and northern energy archive available anywhere—used by media, academia, government and industry officials throughout the world. Northern Gas Pipelines may be the oldest Alaska blog; we invite readers to suggest others existing before 2001.

 

Alaska Taxes

1-14-14 Meet Alaska Part II

14 January 2014 9:45am

Meet Alaska Part II

(Scroll Down For Part I.  Remember that we wish our archives to maintain the highest degree of accuracy.  Accordingly, we solicit reader responses: additions, corrections to anything included herein.)

by

Dave Harbour

THIS MORNING IN WASHINGTON: You Read It Here First!

Lisa Murkowski, Keystone XL, crude oil export ban, Obama, Photo by Dave HarbourU.S. Sen. Lisa Murkowski (NGP Photo) today sent a letter to President Obama urging him to lift the prohibition on exporting crude oil produced in the United States. Doing so, Murkowski wrote, will allow American producers to access global markets, which will boost production, protect jobs, and increase our energy security.

Murkowski called on President Obama to take a leadership role on lifting the export ban and offered her support in Congress.

“Your leadership will be critical to our success in this endeavor,” Murkowski wrote to the president. “In particular, I would draw your attention to the status of our nation’s hydrocarbon trade. While exports of our natural gas and petroleum products have grown, our work is far from finished, and our policies are, in some cases, far from adequate.

“Despite the obvious geopolitical, economic, and environmental benefits of building out our nation’s liquefaction capacity as soon as possible, the Department of Energy continues to slow-walk its approval of export licenses to our allies. The Keystone XL pipeline, which the State Department estimated would support over 42,000 jobs, remains unapproved even after years of delay. I once again urge you to take immediate action on these infrastructure projects, which you have generally promised to champion,” Murkowski continued.

The administration retains the authority to lift the ban on its own. The U.S. Commerce Department can authorize a swap if domestic crude cannot be marketed in the United States. The president can also issue a national interest determination.

“Lifting the prohibition on crude oil exports also presents us with a rare opportunity to work together in a bipartisan fashion to address this situation before it becomes a problem,” Murkowski wrote. “Together, we can send a strong signal to the world that the United States is ready to lead on energy, the environment, and trade. Lifting the ban will help create jobs, boost the economy, and keep our production at record levels.” 

The full text of Murkowski’s letter to the president is available on the Senate Energy and Natural Resources Committee website. Murkowski sent similar letters to the State, Energy, and Commerce departments, and to the Federal Energy Regulatory Commission, which can be found in the documents section under letters.

Murkowski, the energy panel’s top Republican, released a white paper on energy exports last week. The paper, A Signal to the World: Renovating the Architecture of U.S. Energy Exports, is available on the committee’s website, as is supporting analysis by the nonpartisan Congressional Research Service. 

See our 1-7-14 Story (You read it here first!)

Sean Parnell, Governor, Alaska, SB 21, oil tax, production tax, severance tax, Alaska Support Industry Alliance, Photo by Dave HarbourYesterday we pretty much focused on various aspects of Governor Sean Parnell’s (NGP Photoannouncement at Friday’s Meet Alaska conference, that all major gas pipeline/LNG project parties had reached, “alignment”.

Today, we recognize the people represented at the Alaska Support Industry Alliance’s annual “Meet Alaska” event -- and what they said -- for the benefit of our thousands of Asian, Canadian and US readers who were not present.

ConocoPhillips' Exploration & Production Executive Vice President based much of his presentation on Alaska's competitive positioning in the world oil and gas market.

Matt Fox, ConocoPhillips, Alaska, SB 21, oil tax, production tax, severance tax, Alaska Support Industry Alliance, Photo by Dave HarbourMatt Fox (NGP Photo) told the audience that his company -- the largest oil & gas exploration company in the world -- would be spending most of its available capital on development and on major projects.  (See Fox's slide presentation here.)

While noting his company's interest and investment in the Eagle Ford, Bakken, Permian Basin and other prospective oil & gas areas of the world, Fox also reminded the audience that, "International LNG is a global commodity as well as oil."

He said that the shale phenomenon has provided the United States with a hundred years of supply on a very flat supply curve, "...stabilizing the price range for a long time to come."

While Russian and North Sea gas supply sets prices in Europe, a recent $16 Mcf price in Japan -- still exacerbated by the nuclear accident -- provides Alaska with a window of opportunity.

However, he said, "we have to make sure that we have confidence in Alaska's fiscal regime."

"Competition is incredible," he said, adding that Alaska's recent enactment of production tax reform (SB 21) was already stimulating more investment in the state.

"You have to go back quite a ways to find where we spent more money on Alaska North Slope (ANS) than now, following passage of SB 21."

*     *     *     

The Alliance also represents Alaskan mining support industries and National Mining Association president Hal Quinn (NGP Photo) addressed the state's competitive challenges.  

Quinn emphasized the importance of allowing oil, gas and mining industries to be free to export and engage in the world market, noting that coal not only provides the U.S. with 40% of its electrical supply but coal supplies 40% of world electric supplies as well".  

Maintaining a vibrant world market that supplies reliable energy is critical, he said, noting that India's labor force alone is projected to grow at a rate of 1 million/month.

Minerals provide 15% of America's Gross Domestic Product he said.  (We further observe that reasonably priced energy supplies are the foundation upon which other mineral exploration and development and manufacture is based.  -dh)

After Quinn criticized the EPA for exercising federal overreaching authority that could stop a lawful mining project before it has filed for a permit (See our earlier commentary), he also cautioned the audience about unjustified delays in the federal permitting process.  "No one should ever confuse the rigor of the permitting process with its length," he said.  (See Quinn's presentation here.)

Gina Dickerson, ExxonMobil, Point Thomson, Project Manager, Ice Road, Alaska North Slope, Photo by Dave HarbourExxonMobil's Gina Dickerson (NGP Photo) provided an encouraging update of activities aimed at accessing the ANS gas and gas liquids potential at Point Thomson.  

As project manager, Dickerson briefed the audience on the project's three wells (i.e. two for production and one for injection); the 17" pipeline to Badami facilities; the nearly $2 billion spent on the project to date, 70% of which has been spent in Alaska;  a 48 mile winter ice road to the Endicott's accessible facilities, and the dramatic 2-year progress toward completing an airstrip and support facilities.  (See Dickerson's presentation here.)

 

(Still in progress; more coming on Thursday....)


Today's Consumer Energy Alliance Clips:

90.5 WESA - NPR: Energy Alliance: Fracking Is Not a 'Four-Letter Word'.  An energy supply and consumption watchdog group is taking its fight against a proposed moratorium on shale drilling in Pennsylvania to the lawmakers sponsoring the bill and to their constituents.  The Consumer Energy Alliance sent a letter to State Sen. Jim Ferlo (D-Allegheny) asking him to pull the legislation from consideration.  SB 1100 was introduced in September and was referred to the Senate Environmental Resources and Energy Committee where it has languished ever since. The bill calls for the state to stop issuing new drilling permits until a full assessment of the environmental, social and economic impacts of shale drilling can be completed.

Capital Soup: Consumer Energy Alliance-Florida Statement on Subcommittee Passage of Hydraulic Fracturing Legislation   The Florida House of Representatives’ House Subcommittee on Natural Resources and Agriculture today passed House Bills 71 and 157, sensible hydraulic fracturing legislation sponsored by Rep. Ray Rodrigues (R – Lee County). Upon passage of the legislation, Consumer Energy Alliance (CEA) – Florida Executive Director Kevin Doyle issued the following statement: “Consumer Energy Alliance applauds both Representative Ray Rodrigues for sponsoring legislation that would lay the foundation for a transparent process for hydraulic fracturing in the State of Florida and the Florida House Subcommittee on Natural Resources and Agriculture for its passage today. As we continue to shift our energy reliance toward natural gas, Florida’s business community and consumers can be negatively impacted if we do not have the right policies in place to protect the benefits that our current energy situation is providing to our country.”

Consumer Energy Alliance’s The Energy Voice: Penn. State Senators asked to ‘Keep The Heat On This Winter’  It’s January.  It’s Cold. No surprise there, but why in the middle of the harsh winter months are Pennsylvania State Senators working to advance legislation to put a moratorium on shale gas development in Pennsylvania?  The bill is SB 1100 or the Statewide Natural Gas Drilling Moratorium Act.  If made into law, Pennsylvania’s bustling shale gas economy would come to a halt. Who would be affected? In total 2.6 million people

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1-13-14 Alliance Is Forum For Energy - Government Communications

13 January 2014 10:22am

Governor's Announcement Underlines The Importance Of The Alliance's "Meet Alaska" and Other Energy Conferences

Part I

by

Dave Harbour

ADN by Governor Sean Parnell (NGP Photo).Sean Parnell, Meet Alaska, Alliance, ACES, Oil Tax Reform, SB 21, referendum, gas pipeline, AGIA, state ownership, Photo by Dave Harbour  

For the first time in Alaska's history, we have the framework in place to build the Alaska liquefied natural gas (LNG) project on Alaska's terms and in Alaskans' interests.

We have the necessary parties to make the Alaska LNG project go: three producers, a pre-eminent Arctic pipeline builder, an entity that will carry Alaskans' interests (Alaska Gasline Development Corp.) and state agencies responsible for royalties and taxes.

See Parnell's prepared speech here.

Alaska and Canada are fortunate to host a number of northern energy/mineral natural resource conferences throughout the year.

These events bring government, industry, the media and public together providing updated information and technology advances along with networking opportunity.

In Alaska, the major natural resource conferences include the Alaska Support Industry Alliance's annual Meet Alaska conference; Resource Development Council for Alaska's annual Alaska Resources Conference; the Alaska Miners Association annual conference; and, the annual Alaska Oil & Gas Congress, among others.

We have seen major natural resource announcements flow from many of these meetings and last week's Meet Alaska gathering was no exception.

By now the public is pretty well aware of Governor Sean Parnell's announcement at Meet Alaska last Friday, that the state would seek equity participation in a pipeline/LNG project, that an earlier agreement with TransCanada would be discontinued and that all the major parties have aligned their interests.

While we joined most in the room -- responding enthusiastically to the Governor's announcement and initiative -- astute observers of gas pipeline politics over the years know that he and the Legislature face a number of remaining hurdles.  

  • The details of 'major party alignment' can only be reviewed and digested after an actual document is agreed to and made public.
  • The alignment of parties is surely contingent on Alaska not repealing the tax reform act its Legislature passed last year.   (See Stoel Rives, LLC bill analysis.)
  • One would further expect alignment of interests among the major parties to depend on the structure of any new natural gas tax statute that might be created.
  • For over a decade the major, potential gasline investors have reasonably reminded the public and public officials that fiscal certainty guarantees must be in place before a multi billion dollar gasline project can be sanctioned and financed.
  • Will the state provide cash equity from its savings accounts, when those accounts even now cannot satisfy the unfunded liability of state pensions plus projected state spending/income deficits over the next few years?  Or, will the state provide equity financing by selling revenue bonds (i.e. not putting the full faith and credit of the state on the line, requiring a higher interest payment), or via a voter approved general obligation bond, with a lower interest payment at the cost of the state's full faith and credit pledge?
  • To know a project is real, observers generally expect some verification from buyers that a market exists --particularly with the Asian markets being wooed by multiple LNG projects from Australia, Russia, Indonesia, the Lower 48 and Canada.  While market demand will be better known following a formal 'Open Season' process, when state financing is involved citizens might expect more in the way of affirmation that markets exist that fit the volumes and timeframes of this particular project.
  • Do pipeline planners count on a certain amount of demand from in-state markets?  Will utilities begin to plan for 'take or pay' agreements that obligate pipeline capacity?  How will this affect existing relationships between Cook inlet gas sellers and utility gas buyers?
  • Has any party petitioned the Alaska Oil & Gas Conservation Commission for its projection of North Slope gas volumes that will be available at the projected time of an LNG/pipeline project completion?  Under Sec. 31.05.030 the AOGCC regulates "for conservation", "Environmental Conservation", and "for public health and safety purposes": "the quality and rate of the production of oil and gas from a well or property."  

We are delighted to see the forward movement provided under Parnell's leadership with support from a majority of legislators.  With Alaska's potential for equity investment in the project, however, we also know that such challenges as those noted above must be anticipated and resolved on the way to successfully monetizing Alaska North Slope Gas.

Tomorrow, we look forward to bringing readers our take on other Meet Alaska presentations -- and event photos -- from last Friday!


 

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1-12-14

12 January 2014 3:31pm

Sean Parnell, black & white, ACES, AGIA, Gas Pipeline, Oil Taxes, Photo by Dave Harbour, LNGADN By Lisa Demer.  Gov. Sean Parnell (NGP Photo) on Friday announced that he was prepared to abandon the Palin-era natural gas pipeline law and set the state on a new path as an investor and partner in a long-dreamed-about natural gas project from the North Slope.  (We'll have more report and photos for our readers on Monday.  -dh)

 
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1-11-14

11 January 2014 3:55pm

Sean Parnell, Meet Alaska, Alliance, Gas Pipeline Announcement, photo by Dave HarbourJuneau Empire.   Gov. Sean Parnell (NGP Photo) on Friday announced a new way forward on a long-hoped-for natural gas pipeline that includes scrapping the terms of a 2007 law he says no longer works well for the situation.

(We'll have more news links, our own report and commentary for readers on Monday.  -dh)

 
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12-29-13 Governor Frank Murkowski Opines On Pipeline

29 December 2013 5:24pm

Alaska Dispatch, by Frank Murkowski (NGP Photo).  

Alaska Governor, Frank Murkowski, Gas Pipeline, Dave Harbour PhotoI urge that we not continue to fund overlapping energy projects.

Over the last several years the administration and the Legislature have authorized the following:

1. $557 million has been expended over the last nine years on consultant fees and reports;
2. In the last session the Legislature approved $355 million for the in-state bullet line on top of $72 million from former years;
3. The Legislature committed $332.5 million in grants and loans to truck North Slope gas to Fairbanks; and
4. The Legislature appropriated $95 million to advance the Susitna dam.

While these funds are not all appropriated, they amount to $1.3 billion, a good portion which has already been spent.  (Read More....)

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12-20-13 "Don't Forget the Mackenzie Delta!"

20 December 2013 2:12am

See Today's Petroleum News Headlines Here.

CBC: Joint review panel says Northern Gateway Pipeline project is in best interest of Canadians  -  CALGARY HERALD RELATED STORY TODAY: BY JAMES WOOD AND CHRIS VARCOE


Don't Forget the Mackenzie Delta!

Will Alaskan and Canadian Investors Merge Their Interests Into the Most Efficient Outcome for Arctic Gas?

by

Dave Harbour

Globe & Mail, TUESDAY by Jeffrey Jones.  

Before the end of the year, Imperial Oil Ltd. and its partners must inform the National Energy Board of its intentions with the Mackenzie gas project, the $16.2-billion pipeline from the Arctic which has stalled due to the flood of cheaper supplies closer to major North American markets.

The people of the Northwest Territories have waited for years for the project to get under way, but with the shale gas revolution in full swing it is doubtful that it will proceed as proposed. In October, Imperial CEO Rich Kruger told The Globe and Mail that the company is studying a revamp of Mackenzie that could see it reborn as part of a larger initiative for export of liquefied natural gas, though a plan is far from finalized.


CBC TODAY.  Imperial Oil has announced it will not go ahead with the Mackenzie Gas Project, as the market conditions are just not good right now, says a company spokesman.  ... But Pius Rolheiser, spokesman for Imperial Oil, says no construction doesn't mean the project is dead.

Will Arctic gas be monetized within our lifetimes?  If so, will we go it alone or will Canada and Alaska merge interests as they once did four decades ago?  And what about the elephant in the room: 'fiscal certainty'?

Background.  Producers, politicians and natural gas transporters and distributors began designing transportation systems in their minds' eyes even before the 1967-68 winter discovery of Prudhoe Bay's prolific oil and natural gas reserves became reality. 

Gas and oil discoveries in the Mackenzie Delta, North of Inuvik, NWT, exacerbated excitement on both sides of the border. 

The original, proven gas reserve estimates at Prudhoe Bay of 26 Trillion Cubic Feet (Tcf) have grown to about 35 Tcf, largely as a result of ExxonMobil's later discovery at Point Thomson.

The early Mackenzie Delta gas reserve estimates of less than 5 Tcf have more than doubled since the original discoveries.  Some resource (i.e. not proven) estimates suggest reserves exceeding 15 Tcf.

Currently, Alaska Native regional and village corporations, the state of Alaska and the Alaska North Slope Borough have interests in gas reserve development as do the nearby Canadian Aboriginal companies, villages and the Northwest Territories government.

Industry and political interests first debated then agreed upon west coast delivery points for Alaska oil four decades ago, with the uncodified understanding that northern gas would flow to the Midwest, through Canada.

Energy interests in both countries first worked separately at the beginning, and then together, to identify the preferred route and mode for transporting the gas.

A Canadian 'study group' merged with an Alaska 'study group' in 1971.  The new consortium carefully chose its leaders.  Arctic Gas and Competing Projects, gas pipeliineCanadian banker, William Wilder, chaired an impressive management committee including, at one time, 26 oil and gas production, transportation and distribution company CEOs.

(Map: 1970s era competing projects, courtesy of OFC.  Arctic Gas, Red; Alcan, Black; El Paso, Blue dotted)

Former TransCanada President Vern Horte became president of Canadian Arctic Gas Study Ltd. and former Alaska Lieutenant Government Bob Ward became president of Alaskan Arctic Gas Study Company--the Arctic gas consortium's two operating entities.  Famed Canadian journalist Earle Gray directed communication activity for the Canadian company from Toronto and your author handled communication and government relations functions from Alaska to Washington, D.C. under the close supervision of Ward, the consortium's American vice chairman, William Brackett, and a sub set of the management committee: the Arctic Gas Public Affairs Committee.

At the time, public lands between Prudhoe Bay and the Mackenzie Delta were available for pipeline transportation corridors.  On the American side, the Arctic National Wildlife Refuge was then the protected, but less restrictive, Arctic National Wildlife Range.

In pursuing its alternate routes and modes studies, the Arctic Gas Consortium, spent an unprecedented -- at that time -- $250 million, on engineering and environmental studies necessary to prepare applications to the National Energy Board (i.e. NEB) in Canada and the Federal Power Commission (i.e. The FPC is now the Federal Energy Regulatory Commission, FERC).

The study of alternate routes, included moving American gas by pipeline from Prudhoe Bay to the Mackenzie Delta.  From there the pipeline would carry both American and Canadian gas to Southern Canada.  Some gas could flow to Canadian markets, while the mainline would bifurcate, moving about a third of the remaining gas to the West Coast and intermountain states.  The majority of gas would supply mid west and eastern states.

All other alternative routes were found to be uneconomic or far less economically feasible, including two routes south of the wildlife range and El Paso Natural Gas' pipeline/LNG proposal.

The buried refrigerated pipeline through permafrost areas was found to be the most efficient, direct mode of transportation.  It would protect the tundra and have the lowest possible operating costs.  All alternative modes were found to be economically inferior, including conversion of gas to electricity and transport via high voltage transmission lines, conversion of the gas to LNG and moving it from the Arctic to southern markets using trucks, railroads, dirigibles, submarines, tankers, etc.

The Arctic Gas project failed to gain NEB approval in Canada; the FPC disapproved El Paso's LNG concept; and, the 'approved' Alaska Highway project failed to overcome economic challenges as the true estimates of its cost became known just as natural gas prices became depressed in the early 1980s.  When gas prices improved twenty years later, governments and industry again became interested in creating and Arctic gas transportation project.

Discussion.  Since Arctic Gas days, American and Canadian governments have made access over the public lands between Prudhoe Bay and Inuvik more restrictive.

One also notes that when the original Arctic Gas project was first studied, the low cost of taxation helped overcome the high cost of Arctic construction, procurement and labor.  But as the 1970s progressed, producers became more and more alarmed that in Alaska "a deal was not a deal".  That is, the Governor and Legislature demonstrated no desire to restrain spending or taxation just because companies calculated their original lease sale bids and later investments on the circumstances then prevailing.  Oil companies in the 1970s experienced almost annual tax increases.

Jay Hammond, Alaska Governor, Tax Reform, Oil Taxes, Chapter 21, Photo by Dave HarbourIn 1981, Governor Jay Hammond (NGP Photo), joined by legislative leaders in both parties, agreed upon a 'fair share' tax methodology, which provided fiscal certainty until after the turn of the century.

In 2006 Governor Frank Murkowski (NGP Photo) proposed an increase in the severance, or production tax in return for a guarantee of fiscal certainty that would protect future producer investments--including a gas pipeline investment.  The producers and Frank Murkowski, Governor, Production Tax, producer agreement, Photo by Dave HarbourGovernor shook hands, in good faith.  Then, the legislature acted to increase the production tax but denied the recommendation for fiscal certainty.  

Adding insult to injury -- from an investor perspective -- incoming Governor Sarah Palin, ACES, AGIA, oil tax increase, liberal, Photo by Dave HarbourSarah Palin (NGP Photo) then proposed a larger production tax increase which the Legislature increased to an even higher level and then decided to apply retroactively -- with Palin's support.  

Last Spring, the Legislature adopted Senate Bill 21, reforming Palin's production tax.  With over 90% of the Alaska state operating budget dependent on steeply declining oil production, elected leaders are intent on improving the climate for investing in continuing exploration and development -- and in a gas pipeline.

While an improvement in tax policy is now and will likely continue to produce more investment, it cannot overcome the cloud of distrust created by previous government decisions—and a current effort by some legislators, unions and environmental activists to repeal SB 21.  Only some sort of fiscal guarantee against inappropriate government expropriation of private revenues will serve to support an additional $40 - $60 billion gas pipeline investment -- in our opinion.

Even if the Governor and lawmakers were to favor such a guarantee, it would surely be accompanied by vigorous debate and opposition since Alaska's constitution jealously guards the State's right to modify tax policy.  

Yes, we agree there are certain valid roles for government subsidy.  Roads, bridges and docks come to mind.  

As to energy projects, the Alaska Bradley Lake Hydroelectric project is a wonderful example of a proper role for government.  

On a larger scale, the Susitna-Watana Hydroelectric project -- as Norway has found -- could use today's oil dollars to provide 50 or 100 years of inexpensive energy to citizens.  And, yes, until this long-lead-time project comes on line, Alaskans will need other energy sources.

Furthermore, tax and regulatory incentives have their place and have worked in the Cook Inlet oil and gas basin.

Our concern is that too many unprioritized projects levered into existence by public subsidy and designed to energize the same markets could waste money, deflect private investment and result in both abandoned efforts and a diminished treasury

Adding to that confusion are well intended special interest groups and politicians supporting a bewildering array of energy projects, many of which are not proven to be economically feasible.  Most persevere on the strength of past or present public subsidy, political support and a “strategy of hope”.  These include:

The Palin Administration, in our opinion, grievously erred by proposing a financial incentive for the large diameter, Alaska gas pipeline project.  Palin erred because some of her objectives (i.e. "must haves", in return for the subsidy) were already covered under terms of the Alaska Natural Gas Pipeline Act of 2004 and because her action thwarted competition, to a large degree, and limited state prerogatives in other ways.  

In any case, the large diameter pipeline is the project most likely to survive, monetize Alaska gas and provide for most foreign and domestic consumer needs in the long term.  This is because it is almost completely under private control of investors who -- under proper conditions -- will provide the funding and markets and accept most of the risk for project completion.  The other projects, surviving as they must on the tide of diminishing tax revenues and the brilliance of bureaucratic agencies are at best in competition with one another and at worst, are short term remedies accompanied by long term salvage headaches.

Conclusion.  

Had we more time and had the gentle reader more patience we surely could have put finer clothing and adjectives on the shoulders of many of today’s well-intended government energy projects.  But in fairness, had we done so, we’d have had to extend this essay further to objectively discuss the logical infirmities of each--which must be reserved for a future commentary.

For now, we offer this conclusion:

The state should establish priorities for all pending, state supported energy projects.  

For example: if Cook Inlet oil and gas incentives produce significant new gas supplies, perhaps subsidies for other gas projects should be automatically suspended.

One also muses that high diesel fuel is the major driver for subsidized gas and electric projects for Fairbanks--but we hear virtually no discussion about the potential for Alaska to provide subsidized royalty oil to Fairbanks for local refined products.  This solution could both heat homes and generate power--a stopgap measure that protects life and property until a large diameter gas pipeline and/or Susitna-Watana hydro project can provide sufficient, reasonably priced energy.

We first offer a perspective that -- aside from the grand, Susitna-Watana Hydro dam, the energy project most likely to survive and succeed, will be the project that remains closest to the free markets.  Fast moving events can more easily confuse slow reacting bureaucratic decision makers than more agile entrepreneurs intent on making and not losing money for their shareholders by providing valuable services and products to the marketplace. 

Secondly, we observe -- without the liability of special interest influence --  that it would be eminently logical were American and Canadian companies to once again merge efforts.  By combining large volumes of Canadian and Alaskan gas, economies of scale could produce an incrementally better feasibility profile for the project.

A more efficient project would provide more royalties and tax revenue to governments.

A joint project would benefit the related Inupiat/Inuit of the Arctic Slope Regional Corporation lands and Canada’s Inuvialuit and Gwich’in aboriginal corporations through contracting opportunities, local property taxes and because some production in both areas flows from indigenous lands.  Other Alaska Natives could benefit from a more efficient project though the 7(i) revenue sharing provision of the Alaska Native Claims Settlement Act (ANSCA).  The most efficient possible project would provide the highest returns to producers, Native shareholders and the state tax/royalty income stream in a highly competitive world energy environment.

Today, the proliferation of shale gas discoveries throughout North America makes that market less attractive for Arctic gas, if not infeasible, when compared with certain Asian markets.

Since foreign markets will likely become the destination for Arctic Gas, LNG transport becomes the mode of transportation.

That leaves routing.  The Globe & Mail and CBC pieces above suggest that Imperial is considering new options for Canadian Arctic gas.  Imperial’s US brother, ExxonMobil, is an influential participant on the US side.  Other Alaska producers have interest in Mackenzie Delta gas and TransCanada has been a major supporter of the Mackenzie Valley Pipeline's Aboriginal Pipeline Group and all were once involved in the Arctic Gas Project.  One expects that the subject of a joint, American-Canadian project has at least been discussed, if not studied.

The route, on first glance would involve an approximate 750 mile straight shot from Prudhoe Bay down to the Nikiski area of Cook Inlet.  Gas could flow by pipeline from the Mackenzie Delta to Prudhoe Bay.  Logically, the two governments should allow that pipeline route to safely bury a pipeline in the permafrost on shore over currently restricted areas, like ANWR.  Less logically, a refrigerated line could be buried in the tidal lands offshore ANWR though it would be more environmentally challenging, more expensive, and subject to ice scour and certain corrosive challenges.

Those who opposed earlier "over the top" routes for moving Alaska gas to the Mackenzie Delta and then down to the midwest, could find this reversed concept for movement of Arctic gas/LNG to Asia more palpable

So will Arctic gas be monetized in our lifetimes?  Depends on how long we live.  Some of us have longer than others.  But all of us have lived long enough to know that whether the Alaskan and Canadian Arctic gas reserves are economically combined and transported together, or not, there will be permitting, financing, labor and engineering challenges galore…complicated by environmental extremist opposition, political intrigue and constituent greed. 

On top of that will be the final question: will Alaska be able to provide the financial and tax certainty necessary to assure investors that their investment will be treated, in good faith, with respect.  If Canada is involved, could that government provide fiscal certainty on its side of the border?

A bad news ending.  If government is incapable of creating a fiscal certainty guarantee, no private sector investor in his right mind will spend any more time, energy or treasure considering the feasibility of a gargantuan Arctic LNG/Pipeline project involving any route or mode of transportation. 

A good news ending.  If solid, fiscal assurance is created, a whole new world of opportunity, prosperity and promise for investors, citizens and the children of the next several generations could reward all concerned.

-End-

​Reference: Our November 2002 Commentary

(Note: We repeat for new readers that our goal is to provide accurate, useful information to readers.  Accuracy is paramount.  In support of our goal, we invite our thousands of readers to send us additions or corrections that contribute toward the accuracy of our communications.   When a valid addition or correction arrives, we try to make appropriate changes immediately.     –dh)

​Reference November 2002 Commentary


 

From the EIA: State Energy Profiles enhanced and renewables sections added

As with national trends, the energy sectors in each state continue to experience rapid changes, including increased oil and natural gas production, new renewable electricity generation, and changing motor gasoline prices. With these and other energy trends in mind, the U.S. Energy Information Administration updated its State Energy Profiles, which are available through EIA's State Energy Portal. There are new analytical narratives on the energy sectors of each of the 50 states, the District of Columbia, and five U.S. territories.

Portal users can also tap into the multilayer mapping function to show user-selected views of fossil and renewable energy resources, oil refineries, pipelines, power plants, transmission lines, and other energy infrastructure.

Policy makers, energy analysts, and the general public can access revised state-level analysis on the petroleum, natural gas, coal, and electricity sectors. In addition, the narratives feature a new section on renewable energy that details each state's renewable resources, including biomass, geothermal, hydroelectricity, solar, and wind, and how those resources are being developed.

State Energy Profiles give users detailed portraits of energy production, consumption, and energy prices at the state level. They feature almost 90 key data series, state Quick Facts, and charts for each state. Users can learn state facts such as:

  • Texas is the nation's top crude-oil producer and accounts for more than one-fourth of the nation's petroleum-refining capacity.
  • Pennsylvania natural gas production more than quadrupled since 2009 because of increased development of the Marcellus Shale, placing the state among the top producers nationally.
  • Washington ranks first in the nation in hydroelectric generation and has the lowest electricity prices.
  • Coal produced in Kentucky is distributed to about one-half the U.S. states.
  • The world's largest photovoltaic solar electricity generation facility is currently under construction in Arizona.
  • Nevada is second in the nation, after California, in the amount of geothermal power produced.

The portal also features state rankings for 10 key energy statistics, a find function to search for state data across EIA, a compare screen that allows users to look at states side by side for a variety of energy indicators, and links to additional resources.​

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