See the LNG Project's Public Meeting Schedule here. News Miner Story: Gasline Advisory Board
Respecting both "Due Process" and the “Duty to Consult"
Canada's "Duty to Consult" (1,2) and America's similar concept are not and should not be just legal requirements for natural resource companies. Consultation is a basic principle of good communications, responsible corporate citizenship, or, at the least, enlightened self interest.
We have known and respected the work of Bill Gallagher (NGP Photo) for over 20 years.
A serious, fair minded man, he was one of the first counselors to begin publicly speaking about the importance of Canadian project managers communicating in good faith with local stakeholders.
Of his book (NGP Photo with our Alaskan Anaktuvuk Masks), “Resource Rulers: Fortune and Folly on Canada’s Road to Resources”, Bill says his is, "the definitive book tracking the rise of Native empowerment and their remarkable legal winning streak in the Canadian resource sector. Understanding the Native interconnections, eco-activist linkages, and government responses is essential for planning successful resource strategies."
To consult, cooperate and communicate with the public in general and stakeholders specifically, is a responsibility to shareholders and the obligation of a responsible project manager -- as we have discovered in both Alaska and Canada.
In short, project consultation with all relevant parties is as important to the success of an investor's project as good design, engineering and construction.
Corporate managers who fail to embrace this reality will be more likely to take superbly engineered project blueprints to their graves than to ribbon cutting ceremonies.
On the flip side, stakeholders who take advantage of project managers through intimidation or by making unreasonable demands can, likewise, kill projects that would otherwise sustain local, regional and even national economies and families.
Thus, an effective process of consultation can only work well in an honestly regulated environment where the government and all parties respect due process and the rule of law is faithfully upheld.
We would add this opinion.
Good project managers should always consult with local stakeholders. The relatively little time and money spent in demonstrating friendship, open communication and good corporate citizenship ultimately saves shareholder dollars and minimizes dispute.
However, when the common sense requirement of good communication becomes a legal "duty" (i.e. applied differently in the US and Canada) complete with years of court precedent, two phenomenon may begin to occur. First, investors can become tempted to invest minimally in good communication and for the primary purpose of meeting the letter of the law. Second, distant stakeholders, like environmental and social activists may attempt to use the legal "duty" of consultation as a tool to delay or block projects for political, fundraising or other reasons.
In Alaska's case, the Pebble Partnership mining project has provided jobs and economic support to local communities while investors develop a mining plan upon which it can base future permit applications. Though the project did not labor under a "duty to consult" law exactly like Canada's, it did recognize that surviving a challenging permit process would require local stakeholders to be both knowledgeable about and beneficiaries of the project. The project's public outreach program has been exceptionally executed.
The permit process to follow, would then allow public comment on each phase of the project as it pursued the permitting requirements. A final decision on the permit applicant's project would be based on an objective review by regulators of the record of evidence collected from filings and testimony. That decision, in turn, can be administratively appealed or appealed through the court system. This is known as "due process", a key provision of America's 'Rule of Law', memorialized in the 5th and 14th Amendments of the US Constitution.
The Pebble mining project would occur on Alaska state lands leased to the partnership. But after one lodge owner began spending millions of dollars to oppose the project -- in concert with environmental activists and some local residents -- the Environmental Protection Agency (EPA) stepped in and is now in process of attempting to preemptively block the project. No application exists, nor does a record of decision based on an application; and, the potential applicant holding valid Alaska state leases is denied an opportunity to appeal a decision on an actual application based on a record.
The EPA rational is based on grounds that the project could cause environmental harms that it imagines will occur even before the project has filed for a permit and been allowed its constitutional right of due process.
But if the EPA can preemptively strike down a mining project without allowing it due process, no highway, oil and gas, municipal utility, agricultural, transportation or commercial fishing project is safe from a preemptive, arbitrary and/or capricious government shutdown.
Yes, we strongly support local stakeholder consultation by project investors. We also caution our fellow citizens that to properly balance opposing viewpoints, an impartial government regulator is essential.
If citizens either in Canada or the United States perceive that regulatory authorities do not base decisions on an objective legal record achieved through due process, the rule of law itself is jeopardized.
When the rule of law disappears, civilization devolves into a chaotic state wherein "Might Makes Right", as the Romans found in the 5th Century and as Germany taught the world in the 1930s through WWII.
We hope that alert citizens throughout North America will choose to support good communication and win-win outcomes between natural resource wealth producers and local citizens.
But we acknowledge that this will not be possible without courts of law, legislative bodies, presidents and prime ministers who are able to overcome political temptations and consistently support the rule of law -- and the due process upon which it depends -- to produce just and reasonable decisions.
In that way, perhaps we can pass down to our children a society that rests on solid, ethical standards demonstrating that, indeed, "Right Makes Might".
Predecessors, like Abraham Lincoln (NGP Photo), passed that legacy to our our later generation when he said in the great Cooper Union Address, "Let us have faith that right makes might, and in that faith, let us, to the end, dare to do our duty as we understand it."
If we and our leaders properly discharge our Constitutional obligations as we understand them, perhaps our children will look back and say of our generation that, "They protected for us, the great legacy of the rule of law, wherein doing the 'right' thing makes a country 'mighty'."
Yes the duty to consult with one another is both right and good business. But even more important is the duty to maintain a nation and society of well observed laws and the protection of due process.
Thanks to BP's Julie Hasquet, we hear that the Alaska LNG/Pipeline project will provide community project briefings next week (i.e. very timely with respect to our commentary today.)
We encourage our NGP readers to attend one of these community meetings to learn more about the Alaska Liquefied Natural Gas (LNG) project.
6-8 p.m., Tuesday, July 15
William A. Egan Civic & Convention Center
6-8 p.m., Thursday, July 17
Wedgewood Resort - Gazebo Room
The Alaska LNG team will provide a project overview and share information about current studies. It will be an opportunity to both hear about and comment on the project.
Happily, sponsors will provide refreshments.
We encourage all of our readers -- throughout the country -- to comment as well by the July 31 deadline! Here's how.
In her letter of July 8, 2014, Senator Giessel wrote:
Ms. Kelly Hammerle
Five Year Program Manager
381 Elden Street
Herndon, Virginia 20170
Dear Ms. Hammerle:
Alaska is fortunate to be an important contributing part of our nation’s leading role in global oil and natural gas production. Our nation has the opportunity to continue to be an energy leader if the Bureau of Ocean Energy Management (BOEM) adds currently unavailable offshore areas, such as Alaska, the Atlantic, and the Gulf of Mexico to the upcoming 2017-2022 Five Year Plan.
These additions would further boost our nation’s economic and energy security as well as create much needed tax revenue. Alaska has experienced the continued benefit of increased jobs and revenue from oil and natural gas development, and I believe that every state with these natural resources should have the opportunity to benefit from the same economic gain. Equally important, as part of the United States of America, other states should be contributing to our nation’s economic and energy growth and not remain stymied by policy barriers.
I am a strong supporter of protecting our environment; Alaska, with its refined application and permitting process, is an example that oil and natural gas can be developed in a way that protects both people and its ecosystems. Therefore, I am confident that energy companies and other states will utilize the same best practices, standards, and regulations that are in place to safely develop offshore oil and natural gas resources.
I applaud our Congressmen for passing a bi-partisan bill, the “Lowering Gasoline Prices to Fuel an America That Works Act” to support offshore oil and natural gas development and support whatever means are available to move this economic opportunity forward.
I would appreciate your consideration and urge BOEM to include currently unavailable offshore areas, such as Alaska, the Atlantic, and the Gulf of Mexico in the upcoming 2017-2022 Five Year Plan. We must continue to generate jobs and revenue to rejuvenate our nation’s economy and decrease our reliance on foreign energy sources.
Senator Cathy Giessel
Globe & Mail by Jeffery Jones. A big supporter of oil sands industry expansion, as well as export pipelines such as Keystone XL, Jeff Immelt said he wants to share his company’s environmental technology as a way to win over critics concerned about the climate impact of the oil sands.
Respecting the "Duty to Consult"
Canada's "Duty to Consult" (1,2) is not and should not be just a legal requirement for natural resource companies -- it is a basic principle of good communications, responsible corporate citizenship, or, at the least, enlightened self interest.
To consult, cooperate and communicate with the public in general and stakeholders specifically, is both a responsibility to shareholders and the public obligation of a responsible project manager -- as we have discovered in both Alaska and Canada.
In short, project consultation with all relevant parties is as important to the success of a project as good design, engineering and construction.
Corporate managers who fail to embrace this reality will be more likely to take superbly engineered project blueprints to their graves than to ribbon cutting ceremonies.
Stakeholders who take advantage of project managers through intimidation or when making unreasonable demands can, likewise, kill projects that would otherwise sustain local economies and families.
Thus, an effective process of consultation can only work well in an honestly regulated environment where the government and all parties respect due process and the rule of law is, accordingly, upheld.
NGP Readers Connect The Dots To Anticipate the Future: We Note US Financial Misstep Yesterday (scroll down) and Defense Vulnerabilities Today...With A Little Help From CBC. -dh
CBC by Brian Steward. ... Putin even seems determined to test spots along the vast North American Air Defense Identification Zone (ADIZ), which stretches out 200 miles, or 321 kilometres, beyond Canadian and U.S. continental borders.
U.S. jets intercepted Russian long-range bombers off Alaska and California this month, just the latest in an increasing number of confrontations off the Pacific coast.
Fairbanks News Miner, by Matt Buxton. Things were quiet out at Flint Hills Resources’s North Pole refinery on Friday. There were crews cleaning and dismantling Crude Unit 2, the last refining unit to close in May, but gone is the loud buzz of crude being refined into gasoline and jet fuel.
Commentary: FACTA and Energy
(We invite readers to correct any misunderstanding we may have and offer additions/corrections. We particularly invite comments regarding the effect of FACTA on energy companies/employees. Comment here.)
It isn't an energy issue, but, yet it is: we believe the United States will be receiving more and more negative reactions to its implementation of FACTA on and after July 2.
We won't bother to explain the Foreign Account Tax Compliance Act (FACTA) to those unfamiliar with it here, but we highly recommend that all NGP readers review this one account of Canadian reaction, from today's CBC News correspondent, James Fitz-Morris.
The United States can expect that this overreaching law will produce an equal and opposite reaction from countries everywhere, as we seek to impose duties on banks of other countries while reducing the freedom and privacy of American citizens.
If Canada reacts the way this article suggests, and if Canada is America's best friend and biggest trading partner, do we expect others involved in the use of American reserve currency dollars for facilitation of energy trading to be less offended and react with grace and forgiveness -- or with retribution?
Will America's perceived FATCA-arrogance affect the use of the US dollar as the world's reserve currency? If the US dollar's reserve currency status is diminished, how will that affect interest paid on the national debt, inflation burdens born by citizens and energy prices calculated in dollars?
If countries begin retreating from US relationships, how will this affect the ability and/or cost of US based energy companies and employees to operate worldwide? What about effects on US export trade? Imported product pricing? Tourism? Airline and ground transportation industries?
Will this untimely implementation of a FATCA financial fuselage on banking institutions worldwide improve our national security? Will it benefit our allies and soldiers in harms way from South Korea to the Middle East?
We hope Congress and the President have carefully considered their FATCA demands upon both American citizens and the financial institutions of the world. If not, they should quickly reconsider.
What are FATCA's chances of achieving a positive result in the long run?
In the short run, what are FACHA's chances of improving America's reputation, economy and national security?
We hope the geniuses whose hands are on the controls of our destiny have the answers and know where this financial adventure will take America and the rest of the world.
Today's Energy In Depth Links:
Scientists study seismicity in Okla. CBS. Energy in Depth told CBS News that "the best science available to us right now suggests strongly that hydraulic fracturing has nothing at all to do with these small seismic events." Austin Holland of the Oklahoma Geological Survey has documented only a small percentage of recent quakes with a link to fracking. So far, he said he hasn't been able to conclusively link the quakes to fracking or wastewater injections.
Major production milestone hit in Texas. Forbes, EID’s David Blackmon. Oil drillers in Texas reached a new milestone in April, by producing more than 3 million barrels of crude oil every day (bpd) during the month of April, which is the highest daily oil output in the Lone Star State in any single month since at least January 1981, when the EIA started reporting each state’s monthly oil production (see chart above).
Cambridge Kiwanians hear update on oil and gas. Daily Jeffersonian (sub req’d). "Ohio has always been a prolific oil and gas producer," Shawn Bennett, Ohio director for Energy In Depth, told Cambridge Kiwanians recently.
Industry, environmentalists fight over record transparency. Akron Beacon Journal. Energy in Depth is at odds with Food & Water Watch over what was found in Ohio state records released by the Kasich administration. Click here to read EID’s post on the F&WW records request.
Natural Gas reduces carbon emissions. Fayetteville Observer, Column. While there is room for debate about the president's overall climate plan, it is clear that the cornerstone of American energy policy and climate action is the shale (fracking) revolution. Indeed, substitution of gas for coal has already reduced U.S. carbon emissions by 15 of the required 30 percent since 2005. No other country has made this type of progress.
Hydraulic fracturing is shrinking carbon dioxide emissions. Seattle Times, Column. The U.S. is leading the world in reducing its carbon dioxide emissions. And those reductions are largely due to the innovation that is happening not in green energy, but in the oil and gas sector’s ability to produce hydrocarbons from shale deposits.
Shale's debt could get shaky if Fed raises rates. Houston Chronicle. Corporate bond investors, eager to buy high-yield bonds from U.S. independent oil and gas producers, have tripled the sector's junk-rated debt (formally called speculative-grade) to $788 billion since the shale energy surge began seven years ago. But next year, the Federal Reserve may tap the brakes.
Complex condensate. Houston Chronicle, Editorial. Our nation needs more leaders who can explain the nuances and cost-benefit analysis of fracking in an atmosphere all too often defined in black and white. The House passed a good bill, and the fact that Houston's own made it happen was the cherry on top.
Working together on energy needs. Washington Post, Column. Because of fracking, a method of extracting gas from shale rock formations, our region now gets most of its natural gas from neighboring states such as Pennsylvania and West Virginia, replacing supplies from the Gulf of Mexico.
US energy revolution will change life for the better. Albuquerque Journal, Op-Ed. Today, the nation is experiencing an energy renaissance that is helping American families by providing thousands of jobs and economic growth, lower energy costs and higher incomes. Energy production is one of our nation’s fastest-growing industries and an engine for economic growth in the U.S. for years – if not decades – to come.
GOP: Fueling the world. Washington Times. Sen. Lisa Murkowski is looking to help drive the natural gas export rush and maybe even turn some heads into considering shipping oil, despite pricing and environmental concerns.
Utility deals heating up with gas glut. Bloomberg. Electricity providers have attracted almost $50 billion in takeover offers this quarter, the most since the beginning of 2011, according to data compiled by Bloomberg. Cleco Corp., a $3.5 billion regulated power provider, this week became the latest utility to receive interest.
Half-Million Oil Barrels Bound for Export Erasing Glut. Bloomberg. As many as 500,000 barrels of light oil a day may be eligible for export under a new government classification, helping to soak up surging U.S. shale oil production.
Atop Sea of Oil in South Texas, Some Still Struggle. New York Times. The boom has both given and taken away. School officials bought 1,300 iPads, one for every student in the district. And there are jobs — well paid in the oil fields for some, marginal in fast food joints and cheap motels for others.
Abundant shale production also yields potential supply pinch for aromatics. Platts. The US petrochemical industry might be buzzing about all the cheap ethylene it can now make thanks to inexpensive ethane from shale gas plays. And while that certainly is helping position US polymer producers nicely in the global marketplace, there is another side to the shale coin.
Oil train dangers extend past Bakken region. Associated Press. The dangers posed by a spike in oil shipments by rail extend beyond crude from the booming Bakken region of the Northern Plains and include oil produced elsewhere in the U.S. and Canada, U.S. safety officials and lawmakers said.
Russia's quiet war against European HF. The Week Magazine. Russia is trying to maintain its energy stranglehold over Europe by backing movements across the continent to demonize fracking, the head of NATO alleged. It is part of Russia's broader use of soft power and covert means to complement its more overt efforts to reassert influence in Europe and keep countries there from developing alternatives to an energy addiction worth $100 million a day to Moscow.
Scotland shale reserves 'a fraction of those in northern England'. The Guardian. Shale gas reserves in Scotland are a fraction of those in northern England, according to a new study that will give a modest boost to backers of the energy source. NOTE: BBC News also reports.
Reassessing EU energy security. Cyprus Mail. The Russian Federation’s annexation of the Crimea has reawakened the spectre of EU energy security, bringing back memories of the 2006 and 2009 energy rows between Russia and the Ukraine.
Nova Scotia study looks at HF impacts. Cape Breton Post. A new study on the potential for hydraulic fracturing in Nova Scotia says there just isn’t enough research available to draw firm conclusions about the impact on communities.
Loveland vote shows Colorado is a model for energy dialogue. Denver Post, COGA. It is healthy to question the safety, effectiveness and logistics of oil and gas development in your community. When taken too far and driven by fear, however, this investigation can foolishly ban production of an energy resource that we all use every day. Armed with the facts about responsible energy development, Loveland voters last week rejected the politics of fear and took a stand.
Fears surrounding Rocky Flats a foreshadow of hydraulic fracturing. Denver Post, Op-Ed. Today's energy debate about which regulations will protect people and property values vs. which are job killing, un-American tree-hugger boogey men. I'm suspicious that the energy companies and the local politicians know as little about that as the Department of Defense, DOE, Rockwell and Dow did about plutonium fires.
In Idaho, waiting on the natural gas industry. Idaho Statesman. The access road next to their potato field was widened properly, she said, and will be available for the Shueys' use. "It has been amazing," Shuey said. "The people have been wonderful." Trendwell West reported this week that it had found natural gas, but not enough to make the well economic. Still, the firm is not leaving Idaho.
Shale supporters frustrated with delays. The Southern. When Gov. Pat Quinn signed the Illinois Hydraulic Fracturing Regulatory Act into law June 17, 2013, Joe Bisch had high hopes for Grayville, the small southeastern Illinois town where he serves as mayor. “This time last year, I thought hydraulic fracturing would have come to Grayville by now, along with jobs, businesses, economic growth. I thought hydraulic fracturing would be lifting us up,” he said of the town and its citizens.
HF: Boom or Bomb. Quincy Journal. When Gov. Pat Quinn signed the Illinois Hydraulic Fracturing Regulatory Act into law June 17, 2013, Joe Bisch had high hopes for Grayville, the small southeastern Illinois town where he serves as mayor.
New York Court of Appeals upholds rights of towns to ban natural gas drilling. Post-Standard. New York's highest court has upheld the bans on natural gas drilling passed by two small Upstate towns. It is a major decision for the future of hydrofracking in New York state, where the drilling process has been on hold for more than five years. The decision allows towns to forbid fracking and other forms of gas drilling within their borders.
Lawmakers want more taxes for Marcellus. Herald-Standard. Local lawmakers said they support levying severance taxes on the Marcellus Shale natural gas industry though no official proposals have been presented in Harrisburg.
Study assesses health implications of HF in Maryland. Cumberland Times-News. Public health officials on Saturday unveiled a recently completed study that assesses health implications of hydraulic fracturing as the governor’s office plans to make a decision by the end of the year on the future of the practice in Maryland.
IT advances benefiting the energy industry. Watertown Daily Times, Op-Ed. Thanks to information technology, U.S. oil and natural gas production is experiencing an astounding boom.
Just say no to a severance tax - but not for the reasons you might think. Patriot-News, Op-Ed. Those seeking to protect Pennsylvanians from the environmental and public health dangers of hydraulic fracturing shouldn't be fooled by the appeal of higher taxes on the extreme drilling process.
Leasing headed over the top. The Review, Guest Column. Mineral rights owners, take note: if you leased your gas and oil rights a few years ago and drilling hasn't taken place, then it is possible for you to cash in a second time on your holdings, as many of the Marcellus Shale leases signed throughout northern West Virginia a few years back soon will expire without drilling taking place.
Santarsiero seeks to protect state lands from drilling. The Intelligencer. State Rep. Steve Santarsiero is proposing new restrictions on natural gas drilling on state lands to protect Pennsylvania’s natural resources.
Bill banning waste in NJ sent to Christie. Star-Ledger. A bill championed by environmentalists and lawmakers from both parties that would ban the dumping of hydraulic fracturing waste in New Jersey is now headed to Gov. Chris Christie's desk.
Shale invigorating the US economy. Plain Dealer. In defense of shale development before a packed audience at the City Club of Cleveland, Thomas Farrell II, CEO of Dominion Resources, dismissed environmentalists, called wind and solar "niche players," and gave a full-throated argument that shale gas will not only make the nation energy independent but transform America into an "arsenal of energy."
Velocys buys Pinto Energy, companies working on Ohio gas-to-liquids plant. Crain’s Cleveland Business. Velocys, a Houston-based company that also has offices in Columbus, has acquired Houston-based Pinto Energy. The two are developing a $300 million plant in Ashtabula that will take natural gas from the Marcellus and Utica shale regions and convert it to diesel fuel.
Glitch sparks smoky fire at gas well. Columbus Dispatch. None of the 45 workers on site was hurt, state and oil-company officials said yesterday. One firefighter was treated for smoke inhalation. “All of the people are accounted for, and we’re not aware of any injuries reported. There probably are people being subject to examination, but it seems to be OK,” said Bjorn Otto Sverdrup, spokesman for Statoil North America, which operates the wells.
Norway's Statoil battling fire at Ohio well. Reuters. Norwegian energy firm Statoil is battling a fire at the Eisenbarth well pad in Monroe Country, Ohio, part of its shale gas operations in the Marcellus area, it said in a statement on Saturday. "There is a fire involving equipment on location," the firm said. "It is limited to surface equipment and does not involve the wells."
Fish kill might be linked to fire. Columbus Dispatch. The state is investigating a fish kill in an eastern Ohio creek near where a fire occurred at a shale-well hydraulic fracturing site on Saturday. The Ohio Department of Natural Resources learned yesterday of the fish kill in Possum Creek in Monroe County, said Jason Fallon, an agency spokesman. Fallon said he did not have details about the extent of the kill. “I can’t confirm if it’s related to the gas-well fire,” he said.
Feds target oil, gas industry pay. Longview News-Journal. . Andrea Johnson, a lawyer with Burleson LLP, a Houston firm specializing in energy, said the Fair Labor Standards Act is complicated and that when it comes to energy workers, many are well paid and might be exempt from overtime.
Crude Catering. Odessa American. More than 65 workers manned the well in Sallie 14-28H south of Odessa. There were the diesel suppliers, the wire-line contractors and the crew with Cudd Energy Services, among others who would develop the well in 42 stages to release the crude from shale rock. And then there were the three employees of Furr’s cafeteria. Because out on the oilpatch, the vendors and the vendors of vendors get hungry. This creates a niche that caterers increasingly seek to fill.
San Antonio energy tech company attracts high-profile investors. Houston Chronicle/Fuel Fix. Ed Whitacre, former chairman and CEO of AT&T and General Motors, has joined former Vice President Dick Cheney and Mexican billionaire Carlos Slim to invest in a San Antonio-based technology company that collects oil-field data.
Economic boom pounds Texas' roads. Standard-Producers. A Senate committee met last week and one expert talked about the conundrum of keeping up with transportation in Texas in general: Texas is booming, and that boom means a strain on roads, yet good roads are vital to a good economy.
Remaining poor while living atop a field of wealth. News-Journal. Texas has reaped tremendous financial benefits from oil and gas. But the poor in the colonias seldom own the leasing rights for the natural resources that lie under the ground they live on. One-third of Texas’ $48 billion in tax revenue last year came directly or indirectly from the oil and gas industry, said Bernard Weinstein of the Maguire Energy Institute at Southern Methodist University in Dallas.
The dark side of the ‘Texas Miracle’. Texas Tribune, Column. It’s hard to argue with the job creation numbers they tout. Since 2003, a third of the net new jobs created in the United States have been in Texas.
6-25-14 "This is Alaska's time -- and it feels like we're back in the game" - ConocoPhillips Alaska President Trond-Erik Johansen
Our friend, Alaska Salmon Alliance Executive Director Arni Thomson (NGP Photo) provides us with this link to the Seattle Times: "North Dakota is booming, and its largest city has reinvented itself, attracting creative types and energetic entrepreneurs."
Recently, we pointed out that Alaska had the lowest domestic product gain of any state, during 2013...in sharp contrast to other oil producing states that are moving ahead of Alaska, including North Dakota, Texas and even California.
Our friend from Senator Lisa Murkowski's Energy Committee Staff, Robert Dillon (NGP Photo), today gave us perspective on this week's federal approval to export lightly refined product.
Dillon wrote, "over at the Houston Chronicle's Fuel Fix blog: Jennifer Dlouhy has a nice summary of the Commerce Department’s decision yesterday to allow Pioneer and Enterprise to export condensates that have been lightly processed or 'stabilized' in a distillation tower, thereby turning them into 'refined products.'
"While the decision does not end the outdated policy that bans most crude oil exports," Dillon said,"it is a step in the right direction. Sen. Lisa Murkowski, the ranking Republican on the Senate Energy and Natural Resources Committee, has been pressing the Obama administration to lift the 1970s-era export ban since January. She has suggested a three-step road map to ending the ban, including allowing the export of condensates and a presidential finding that modernization of our export policy is in the national interest."
The oil export ban issue is important to Alaskans since the ability to export crude oil broadens the market for and improves the price of Alaska oil.
It is important to all Americans, since the ability to export improves US balance of payments, can assist our allies in becoming less dependent on unfriendly sources and enhances job creation.
It is important to Canada since a lifting of the US oil export ban could expand displacement and other economic strategies for most efficiently using North American energy supplies -- including throughput of the Obama-administration-delayed Keystone XL Pipeline project.
While we acknowledge local statistics of low unemployment in Alaska, we also know that can be a temporary condition unless Alaska's investment climate continues a one-year improvement trend since passage in 2013 of SB 21, the oil production tax reform bill.
If that job creating trend is killed by an ill-informed voter repeal of SB 21, Alaska will resume its slide past investment climate mediocrity toward insolvency. This is because Alaska is so dependent on oil production and sustainable oil production requires sustainable tax and regulatory treatment--among other things.
We would draw reader attention to the Resource Development Council for Alaska (RDC) story below.
Yesterday, speakers were confident in the economic future of the State, if...
...if, Alaska can become a more stable investment climate. It can do this by 1) soundly rejecting (i.e voting 'no' on) the August primary election proposition to repeal the state's improved, reformed production tax law that is already creating more investments ... and, 2) by giving investors confidence in the durability of fiscal certainty that could lead to a $40 - $60 billion LNG Export project. "It is up to us," as former legislator and incoming RDC president, Ralph Samuels (NGP Photo) said. -dh
"...we're back in the game!"
ConocoPhillips Alaska President Trond-Erik Johansen (NGP Photo-L) pretty well summarized the theme of yesterday's Resource Development Council for Alaska Annual meeting.
In his introduction of company Chairman and CEO, Ryan Lance (NGP Photo), Johansen said, “I’m sure many of you are aware that since oil tax reform legislation was signed into law a year ago, ConocoPhillips has announced new projects and increased investment in Alaska.
“We are hopeful”, he said, that “SB21 will stay in place so we can continue to build on the momentum that is here now. This is Alaska’s time – and it feels like we’re back in the game.”
In today’s Alaska, the two big political issues du jour both concern “Investment Climate”.
Calling on a background as former government relations director for ARCO years ago, I continue to think that a “good investment climate” exists when the tax and regulatory rules are competitive with other areas, and when those “rules of the game” are stable, predictable, and durable.
In short, after you invest your money in good faith, you are harmed and deterred from future investment when government authorities change the rules of the game –- to take more of the money you make, or to make it harder for you to get a return on your investment -- after the investment is in place.
Over a decade ago, the governor and legislature raised the production tax IN EXCHANGE FOR assurances of investment climate certainty that would permit large gas pipeline investments.
The severance…or, production tax was raised, sure enough, but the oil company investors were then "rope-a-doped" -- denied investment climate certainty. It was becoming crystal clear that, after several decades of relative investment climate stability (i.e. since 1981), in Alaska “A deal was no longer a deal”.
So, the first issue du jour dealing with a “good investment climate”, is the upcoming effort by some citizens to trade away long-term stability – by repealing the recently passed tax reform bill, SB 21 – for higher taxes in the short term. The second issue is whether investors have sufficient faith in the durability and reliability of Alaska’s fiscal policies, to plunk down $40- $60 billion on a gas pipeline and LNG export project.
* * *
The 2013-14 RDC president, Phil Cochraine (NGP Photo-L), opened RDC’s 39th Annual Meeting at the Dena’ina Convention Center in Anchorage by introducing Anchorage's host mayor, Dan Sullivan, who with his Energy Advisory Counsel over the years, detected the need and successfully lobbied for improved oil industry investments in the Cook Inlet area of the state.
He went on to recognize board members, veterans, staff and Paula Easley (NGP Photo), long-time executive director and then board member—who received a standing ovation.
He recognized elected officials in the room, including Lieutenant Governor Mead Treadwell, Senators Anna Fairclough, Cathy Giessel, Charlie Huggins, Kevin Meyer and several State Representatives including Mia Costello, Shelly Hughes, Craig Johnson, Bob Lynn, Lora Reinbold, Dan Saddler, Bill Stoltze and Geran Tarr and (Please let us know of others so the archives may be accurately revised.)
Alaska Oil & Gas Executive Director Kara Moriarty then addressed the large crowd of some 1,200. “Alaska runs on oil,” she said. Moriarty emphasized the importance an improved investment climate leading to improved production upon which jobs, the state budget and the future of Alaska’s children depends (NGP Photo). Pointing to the assembled children, she said, “These kids are our future ... future miners, future commercial fishermen…. It’s all about jobs.”
Moriarty warned that in the weeks leading up to the August primary election, “…you will hear about the SB 21 $2 billion give-away…that DOESN’T EXIST.” She also cited a recently completed McDowell Group study emphasizing the impact of oil industry investment on jobs. (View Moriarty's slide pack. Note that the actual presentation may have deviated somewhat from prepared remarks.)
Following the introduction by Johansen, Lance (NGP Photo) addressed, “The U.S. Oil & Gas Renaissance – Alaska’s Role” (We provide his slide pack here).
He said the U.S. oil and gas renaissance is growing because of a shale revolution and affirmed that the phenomenon has “staying power”. Canada is experiencing similar production increases which, together, make possible the increased export of natural gas by 2016.
At the same time, he said, Asian consumer demand for gas is providing a market for the increased gas supply. While several dozen LNG export terminals have been proposed in the U.S. and Canada, not all can be expected to be built, he said.
Alaska has fiscal challenges and Lance noted that Canada has certain ‘infrastructure challenges’, as we have discussed in these pages. The surviving LNG projects, he suggested, will likely come from areas encompassing competitive advantages, including “reasonable fiscal terms”. Lance emphasized that Alaska had advantages in the growing LNG marketplace, including its 40-year history of exporting LNG to Japan from its Cook Inlet plant at Nikiski and Alaska’s relatively close proximity to Asian markets.
He also said that Alaska’s role in producing more crude oil could be enhanced by reasonable policies. “ConocoPhillips has a 50-year history in Alaska and remains committed to the state,” he said. He said he sensed the excitement in the economy and emphasized that maintaining the tax reforms of SB 21would be, “…good for the state, good for jobs and good for industry.”
In an interview following the meeting, we discussed the nature of fiscal certainty with Lance. We asked about the importance of reliability to a gas pipeline decision. He said, “stability and certainty are pretty important when making investments over 40-50 years. “
He added that, “We just want an understanding that we can ... say this is the kind of returns we expect out of these projects and that does require some sense of fiscal certainty and stability.
“But I tell people”, he went on, “we handle this around the world everywhere. We have fiscal stabilization clauses in our contracts … with most governments and we make big investments all around the world. So this isn’t new ground we’ve had to tread.... ...we’ve done this globally, we know what it means, what we are just asking is … when we are in these big long projects that you keep us stable through the course of that period. “
We think no reasonable person would think Lance’s request to be unreasonable. Even Russians and Chinese don’t apparently think the request for fiscal certainty to be unreasonable.
As we probed the subject further, he said, “…people ask me about Russia, China, and where we’ve been for over 20 -30 years … we haven’t changed the contract most places.”
He added that in Alaska, the fiscal terms have changed, “numerous times”. He concluded, “…that’s why the companies are talking about this issue; talking about why we need to have some sense of stability and certainty as we go forward with these investments.”
If any elected official were to ask us, “how do we make the investment climate attractive to a gas pipeline investment,” we would say, “Dear Alaskan colleagues, you have a problem.”
We would explain that Alaska has to overcome the greed mentality behind statements like, “It’s our oil”, and “They represent their shareholders and we represent ours”.
Both of those statements are employed as excuses to rob investors of money after they have made investment decisions. Oil company shareholders and boards would never condone actions by their company to represent them by violating lease terms or breaking tax laws or vilifying public officials.
Yet Alaska over the last decade has taken billions more from oil companies after investments have been made and risks undertaken in good faith; passed tax legislation demanding retroactive payment; and, vilified Alaska’s most capable investors for no defensible reason.
Alaska's elected officials have given tax breaks to film producers and small oil companies that produced few jobs and little tax revenue while unfairly taxing large petroleum investors who employ many and pay much.
If Alaska wants to attract more investment leading to more oil production and a gas pipeline it had better start doing an attitude check. Like North Dakota and Texas and Oklahoma, Alaska just might be better served by admitting it is an oil state, appreciating that blessing and becoming proud of its standing as a big “oil patch state”.
Being friendly to investors does not mean giving away the store. It does mean becoming a place where, after an investment is made, the investor does not lose sleep wondering if the state’s leaders in the morning will decide they want to take more money and saddle the investor with new tax and regulatory burdens.
Like RDC President Ralph Samuels said, “It’s up to us”.
If our decision is to become a responsible investment climate, perhaps we can certify Trond-Erik Johansen’s hope that we are, truly, “back in the game”.
* See ADN story by Alex DeMarban (NGP Photo: DeMarban at press conference following luncheon speech.)
* See RDC's video of Lance's presentation.
For Ralph Samuels
RDC’s 39th Annual Meeting Luncheon
Dena’ina Convention Center
June 24, 2014
Thank you, Phil. It is my honor to serve as President of the Resource Development Council. Alaska faces many challenges, but there are also great opportunities on Alaska’s horizon.
GOLDPAN PRESENTATION TO PHIL COCHRANE
RDC has been fortunate to have both a strong board of directors and staff over the course of its nearly 40 years of existence. Our leadership team has been second to none and Phil Cochrane is no exception. Phil has served as RDC’s president for two consecutive years and helped guide our team as Senior Vice President for the two years prior.
At this time I would like to present Phil with our traditional President’s Gold Pan in appreciation for his service to RDC. Thank you Phil for your leadership, hard work, and unending commitment to the mission of RDC – growing Alaska’s economy through responsible resource development. (Applause)
LEGISLATURE AND OIL PRODUCTION TAXES
Over the past year, the 28th Alaska legislature and Governor Parnell’s administration made significant progress in affecting positive change for Alaska’s natural resource dependent economy. RDC members engaged in a proactive way by testifying, writing, calling and visiting their elected leaders on important issues. To all of you who responded to our repeated action alerts, thank you! If you didn’t step up, there is more work to do and there will be many opportunities to make your voice heard.
The legislature and administration made progress on advancing a large-diameter Alaska gas pipeline project by passing enabling legislation that empowers the state to become an owner in the Alaska LNG project. The legislature also passed injunctive security legislation relating to industrial operations in our state – an issue RDC has been working on for several years to bring more fairness and reason into the litigation process. RDC was at the forefront of these and many other issues.
For years RDC has been advocating for the reform of ACES, the oil and gas production tax put in place in 2007 that has been hugely responsible for an accelerated North Slope production decline. As you all know, oil production tax reform finally passed the legislature last year and RDC’s top priority this year is to defeat Ballot Measure 1, which would repeal the new tax structure that took effect January 1st and bring back the old failed ACES tax regime.
The new tax policy is a significant improvement and the industry’s response is encouraging. There is good reason to be optimistic that Alaska is back in the game and that the stage is now set for a future of growth and opportunity. At this time I would like to call on RDC Executive Committee member Kara Moriarty to further address this critical issue.
INTRODUCTION OF TROND-ERIK JOHANSEN
Thank you Kara. Turning to our program, RDC is pleased to welcome both Trond-Erik Johansen and Ryan Lance to our program. Mr. Johansen will be first out of the gate, followed by our keynote speaker. Mr. Johansen is president of ConocoPhillips Alaska, a position he assumed in April 2010. He joined ConocoPhillips in 1986 and has held a variety of petroleum engineering, well engineering and leadership positions in numerous locations in the U.S. and abroad. Please welcome Trond-Erik Johansen.
(Note for Ralph: Trond-Erik will introduce Ryan Lance)
(Any personal comments and reflections on the presentation. Present to Ryan as a token of our appreciation, Judy Patrick’s new book, “Photographs of Alaska’s North Slope: Arctic Oil.”)
A big thank you once again to all of our sponsors for their generosity, and each and everyone one of you for your ongoing support of RDC. With all of us working together, we can build a prosperous economy and overcome the challenges before us.
I would like to remind everyone to visit the RDC website at akrdc.org on a regular basis for the latest industry and issue updates. Today’s presentation, as well as all other RDC events and breakfast meetings, are available online.
Please mark your calendars for RDC’s annual conference this fall, which will be held on November 19-20th here at the Dena’ina. Our breakfast forums will resume in September.
One final note, in the next decade alone, Alaska will need to fill 7,500 oil and gas jobs. And with the potential Alaska LNG project and other oil and gas projects, there will be even more jobs available for Alaskans. The Alaska Department of Labor and Workforce Development – in partnership with industry and other stakeholders – unveiled a comprehensive workforce plan to prepare for oil and gas jobs now and in the future. There are cards on the tables at the back with more information. You can also go to the department’s website at Labor DOT Alaska DOT GOV.
In addition, as you leave today, please take with you a copy of our 2014 Annual Report, which is available on the tables and at the exits.
Finally, remember to VOTE NO ON 1 come Tuesday, August 19th!
This concludes the 39th Annual Meeting of the Resource Development Council. Thank you all!
|AJC by Tim Bradner: Gov. Sean Parnell terminated TransCanada AGIA pipeline contract. (Also see our report two days ago. -dh)|
From Mail Online: Russian agents are secretly working with environmental campaigners to halt fracking operations in the UK and the rest of Europe, the head of Nato warned yesterday. (Do we believe this effort does not extend to Canada and the Unites States? -dh)
Refer to the Federal Coordinator's new webpage for public information on the Alaska LNG Project. -dh
Prudhoe Bay and TAPS: HAPPY BIRTHDAY TO YOU!
While on the one hand we were there at the beginning and are now delighted to celebrate the 37th birthdays of both the great Prudhoe Bay oilfield and the Trans Alaska Pipeline System (TAPS), we also keep a wary eye on the future.
After all, if we don't look out for the future of our children by carefully monitoring government policies affecting them, who will?
The EPA's "Destroy American Jobs, Economic Prosperity and Bright Futures For Our Youth" approach to reasonable environmental regulation is heartbreaking and a direct threat to the American way of life, as we have frequently documented here.
In the letter below, Alaska State Representative Charisse Millett (NGP Photo above), exposes the damage EPA proposes doing to Alaska's people in yet another frontal attack on the 49th State's effort to survive as envisioned both by the 1959 Statehood Bill and its own constitution.
We offer our respect and appreciation to Republican Representative Millett for her initiative.
We wonder why we have not seen elected officials of the other party, serving in both Washington and Juneau, exercise more control over an agency whose policies their party leadership implements. Or, we wonder, do all democrats support the EPA's overreaching policies in Alaska and elsewhere?
This month the Obama Administration and the Environmental Protection Agency announced a plan to
reduce carbon dioxide emissions from power plants.
Known as the Clean Power Plan, it threatens the
power supply in the interior section of my state unless it is amended to recognize Alaska’s unique
I would like to set aside the ongoing debate among scientists over the role carbon dioxide has in climate
change and the doomsday predictions that come with it to focus on how electric rates and electric grid
reliability will be impacted in Interior Alaska by the Clean Power Plan.
It calls for slashing carbon dioxide emissions from power plants by 30 percent in 16 years, a goal that can
only be reached in many states, including Alaska, by converting coal fired power plants to natural gas.
Interior Alaska uses coal fired power plants because it is the only available energy source capable
generating cost effective, on demand power.
Massive natural gas reserves are available hundreds of
miles north at Prudhoe Bay, but until a multibillion dollar gas pipeline is built that fuel is not an option.
Replacing coal with alternative energy sources like wind turbines endangers electric grid reliability
because the winds do not always blow. Winter temperatures in Interior Alaska can hit 60 degrees below.... (Read more here)
Our friend, Dawn Patience, reminds us that TODAY Prudhoe Bay turns 37, as does the Trans Alaska Pipeline System. Dawn also sends us a story (Scroll Down) by industry historian, Frank Baker (Photo above, 6-20-77, TAPS ceremony at Prudhoe Bay).
The field startup was June 20, 1977, Prudhoe Bay is still the largest field ever discovered in North America, 37 years later. On March 13, 1969 the Prudhoe Bay confirmation operator BP announced a major strike about seven miles from the ARCO Prudhoe Bay discovery well.
The construction of Prudhoe Bay included a barge armada transporting the facilities to the North Slope.
Nearly all the major oil field equipment were constructed as huge modules (as large as 2,6000 tons) on the coasts of California and Washington and transported to Prudhoe Bay by barge.
Freight drop flight
All materials and supplies were transported to Prudhoe Bay, more than 600 air miles north of Anchorage. The field startup was June 20, 1977, Prudhoe Bay is still the largest field ever discovered in North America, 37 years later.
June 20 Marks Prudhoe Bay’s 37th Birthday
By Frank E. Baker
Thu, Jun 19, 2014
June 20, 1977 was a gray, overcast morning at Prudhoe Bay on Alaska’s Arctic coast as scores of reporters, dignitaries and others huddled around the pipeline at Pump Station 1, Milepost 0 of the trans-Alaska pipeline, to witness history. At 10:26 a.m., pumps were started, valves were opened and the first crude oil from North America’s largest oil field flowed into the pipeline for its 800-mile journey to Valdez, where it would be loaded aboard a tanker destined for the US West Coast.
It was an historic moment for the nation, which was heavily reliant on OPEC oil, and the State of Alaska, which was struggling to gain its economic footing as a new state. For BP and ARCO, the two operators of the giant Prudhoe Bay field, it was a long-awaited moment — the culmination of a major push into the Arctic that had begun nearly 20 years earlier when geologists first ventured north to probe this remote frontier. Their search paid off in 1968 with the discovery of Prudhoe Bay — ranked among the top 20 oil fields ever discovered worldwide and still the largest field discovered in North America. Early estimates were 9.6 billion barrels of recoverable oil, making it a field of Middle Eastern size.
Thirty-seven years later, after yielding more than 12 billion barrels of oil, the field is still producing about 260,000 barrels per day (gross) and remains a key asset in BP’s global portfolio. It has provided the State of Alaska billions of dollars in taxes and royalties, created tens of thousands of jobs and helped boost the state’s savings account — the Permanent Fund — to more than $50 billion.
Today, Alaska’s oil industry accounts for about 89 percent of the state’s revenues, with a large share coming from Prudhoe Bay. In addition to its economic benefits, Prudhoe Bay and the field developments it spawned have served as a proving ground for the advancement of oil field technology, Arctic engineering, and significantly increased knowledge of the Arctic environment.
Alyeska Pipeline Service Co., which operates the Trans-Alaska Pipeline System (TAPS) on behalf of BP and other pipeline owners, is also celebrating its 37th anniversary TODAY. Counting production from Prudhoe Bay and other North Slope oil fields, it has reliably delivered nearly 17 billion barrels to the Valdez Marine Terminal, located in Prince William Sound. A monument at the terminal bears an inscription dedicated to the tens of thousands of men and women who worked on the TAPS project from 1974-77: “They didn’t know it couldn’t be done.”