What's next for Keystone XL?
|We urge our gentle readers to review yesterday's posting; we cannot remember -- in well over a decade -- posting a more useful, relevant and actionable commentary for our Alaskan, Canadian and Lower 48 readers. -dh|
Alaskanomics by Mark Edwards.
Over the next couple of days, I will post a three part series about the current oil price environment in Alaska.
It is well known that Alaska’s economy is highly sensitive to the price of oil. Billions of dollars in investment capital flow into the state each year as energy companies both explore for new oil and maintain their existing fields. This activity has an enormous positive multiplier effect on the rest of the economy as major service industries including trucking, construction, finance, legal, engineering, retail and countless others see a direct benefit from the contracts and employment required to support this massive effort. Read more....
We Are Optimistic That Good Intent Will Win The Day Over Daunting Challenges!
A tale of two pipelines and two chief executives: President Barack Obama and Governor Bill Walker
Dave Harbour (Note: By Friday more links, references and other minor modifications will be added for archive purposes.)
We must be optimistic! After all, who wants to even contemplate the bankruptcy of Alaska or the destruction of America's way of life?
So in our Churchillian way, we will never, never, never, give in to pessimism and will fight to the bitter end…and overcome!
In doing so, like in actual war, we must count on our countrymen, the ones on either side of us sharing wet foxholes and stale food; the ones who watch as we sleep, with whom we share intimacies; the ones who would defend us then die or watch us die before each other’s eyes...and, the ones we have chosen to lead us.
So as Alaska strains to regain a sustainable economy, we believe that the best intent of our leader and his actions will pave the way to happy days again.
And we can see a brighter future ahead for the United States as we and our fellow countrymen feel our way through the morass of: anti-energy rhetoric, stifling regulations, oppressive taxation, wildly expensive litigation at every turn, unpayable debt, coffers filled with fiat currency, diminished morals, a flatulent economy buoyed up on false assumptions and its declining military capability.
Our Alaska leader is a charismatic speaker and compelling character. He was born in the state, is of humble and self-made background. He is a survivor of the 1964 earthquake and Valdez Tsunami and successful attorney. No one can doubt his singular focus on producing income for his family while following a lifetime dream to create a (Preferably government controlled) gas pipeline and LNG export project. Readers might research the history of Organization for the Management of Alaska’s Resources (i.e. OMAR) and the Alaska Gasline Port Authority (Dubbed the “All Alaska Gas Pipeline”). Walker’s history cannot be distinguished from the development of these organizations: cloaked in patriotic “all Alaska”, sometimes anti-Canadian, often anti-producer terminology, proudly plodding a path independent of the traditional business community, political parties and natural resource investors.
Governor Bill Walker speaks of Alaska as an "Owner State", hearkening back to Governor Walter J. Hickel's (NGP Photo) terminology. We are convinced along with a majority of Alaskans that these two men have both had the state's best interest in mind. Others reasonably think of "Owner State" as a socialist concept involving control from the top elite, redistribution of wealth, big government, high business taxes, and hostility to business owners (i.e. bourgeoisie).
To those doubting his intent, the newly elected governor famously said in one of his first public speeches to a business gathering, as governor-elect, “I am not your enemy”. He added, somewhat reassuringly, “You can’t be anything but pro-oil development in this state to be a successful governor in this state.” We do see the point that while some may view the “state” (i.e. however that is defined) as the primary beneficiary of public policy, others might be concerned that “freedom of the citizens” should be the highest public policy priority—and not secondary to the “state”.
Governor Walker seems to be a man of intuition. He acts on what he believes at the time out of good intent: to lead an Owner State. This quality of flexibility led him to first file for public office as a republican, then gather a large democrat constituency by switching to an independent affiliation. It was a crafty move that won him the governor’s office. Walker had much of his original republican support base plus new, liberal voters who liked his pro-oil tax rhetoric, pro-government ownership theme, pro-social program expansion (i.e. Medicaid).
He campaigned on cutting the state’s budget to a sustainable level, but facing the realities of office promoted only modest cuts to the Legislature. As a campaigner, he generally supported the larger AK-LNG project involving the state, producers and TransCanada while opposing a smaller, Alaska Gasline Development Corporation (AGDC) alternative created by the Legislature and supported by Governor Parnell. Once in office, he replaced highly experienced AGDC board members with inexperienced citizens saying that their major qualification for service was that they were, “Alaskans”. He then proceeded to switch his support, proposing a strengthening of the 100% government owned AGDC alternative as a competitor of the joint AKLNG project consortium which included the state.
We would note that while Walker qualified his inexperienced gas pipeline board appointees by dubbing them, “Alaskans”, he might also have said the same of himself.
With his youthful experience as Mayor of Valdez and most of his legal career devoted to promoting an “All Alaska” gas pipeline, it could be said that his major qualification for leading thousands of state employees, governing wisely, representing Alaska to the world, negotiating in good faith with lawmakers and investors alike, is that he, too, is “an Alaskan”--
We have also written fairly extensively about a government controlled effort to finance and build for the community of Fairbanks a natural gas utility supplied by LNG from the Alaska North Slope. During the campaign, Walker opposed the project of the previous administration. At about the time of the election, the major contractor reported that the scheme to bring LNG from the North Slope via LNG trucks to be regasified and injected into a to-be-constructed, Fairbanks gas distribution system was uneconomic.
After he was elected, the government agency responsible for developing the failed Fairbanks LNG project, announced that, “In conjunction with Governor Bill Walker…,” the Fairbanks LNG project would be refashioned into another Fairbanks LNG project, this time obtaining its gas source from the Cook Inlet area. No one explained why using the Agency (i.e. Alaska Industrial Development and Export Authority “AIDEA”) that created a failed Alaska North Slope LNG project for Fairbanks would be successful in designing and constructing a feasible Cook Inlet LNG project serving Fairbanks. Neither AIDEA nor the Regulatory Commission of Alaska, to our knowledge, has considered the potential negative impact a Fairbanks LNG project would have on Anchorage natural gas consumers as competitive demand for the limited Cook Inlet gas supply will undoubtedly lead to higher Cook Inlet gas prices.
Earlier this week, we wrote that while we wished the new governor well we, “….hoped there was not a screw loose somewhere.”
On the bright side, we can see how dogged determination and flexibility led Bill Walker to the governor’s office. On the other side, we could be concerned about the wisdom of his decisions affecting the future of both the big Alaska LNG export project and the government coordinated Fairbanks gas utility experiment.
Here, Walker seems determined to have the government-owned AGDC project control the destiny of Alaska North Slope gas. Over there, he seems determined to have the power of government force feed the economics of a small, interior Alaska city gas utility. Between the two efforts, billions of dollars are at stake along with the economic health and future of the state.
These scenarios are playing out at a time when Alaska is the highest per capita spending state in the nation and the highest per capita debtor state in the nation. One might say, “Well, but Alaska has few people and a lot of territory to cover.”
That excuse for high per capita metrics might be convincing when there is plenty of money. But Alaska’s operating budget is 90% dependent on declining Prudhoe Bay oil production as is over a third of the state’s entire economy. Even with high oil prices last year (i.e. Over $100/bbl), the state was balancing deficit spending from its savings accounts. The low oil price environment now finds the state’s savings, this coming summer, to be in the $9 billion range whereas its Alaska state employee retirement account has an unfunded liability of almost $10 billion.
The governor’s campaign focus on cutting operating budget spending to a sustainable $5.2 billion has faded and the majority of legislators seem unwilling to become the champions of spending restraint—even as the fiscal cliff approaches. We regard this lack of leadership to flow from moral weakness: fear of loss of future legislative leadership positions, popularity, support, elections.
Yet, we must remain optimistic that out of a republican led house and senate there will arise true leaders, true diplomats, true patriots who will work with (or, against) the Governor to create a sustainable spending plan—no matter the political or personal fallout!
The low oil prices have also put a squeeze on oil production. Naturally, oil companies worldwide are spending less on capital projects with oil at $50/bbl than they were when it was twice as valuable. That phenomenon will exacerbate the drop in Alaska revenue from taxes and royalties over time, hastening Alaska’s coming day of fiscal reckoning.
We are left with no choice but to be optimistic. Yes, we are realistic and understand the challenges. But a majority of Alaskans elected Bill Walker to lead them out of the wilderness of insolvency to a new day of prosperity.
We must be optimistic that our “All Alaska” governor has the insight, courage, wisdom and grace to be both humbled at the challenges he faces and capable enough to overcome them. We are also optimistic that Walker’s propensity to be flexible will enable him to reverse course if he sees the ship of state headed toward rocky shoals.
Just as we are optimistic about the good intent of Alaska’s leadership to overcome daunting challenge, so are we optimistic that the citizens of the United States can overcome the debilitating policies and actions of the person they elected as their president, twice.
Some say that the lawyer, professor, politician, community organizer who became President of the United States is incompetent. On the contrary, we have followed his administration closely and believe him to be highly competent in achieving his goals.
When he first ran for office, he promised to engage in “Fundamentally transforming the United States of America”. We believe that none of his armies of excited supporters ever asked, "transform into what"? A campaign slogan was, “Change we need”. What kind of change? To his constituency, these were powerful, emotional draws, though ill defined, similar to Governor Walker’s reliance on “All Alaska” themes. Obama also admitted that his plan would cause utility rates to “Skyrocket” but we think most of his constituency may have felt shielded from those by 'LiHeap' and other federal subsidies.
Killing the Keystone XL Pipeline project is a good, contemporary example of "redistribution of prosperity."
This project was supported by a majority of citizens. It had regulatory support from the Obama State Department, since it would cross international boundaries. It also had support from a few but not all unions.
And, it had the dedicated opposition of the entire, North American environmental community.
Killing Keystone meant killing 40k free enterprise jobs while creating six years worth of enormous fundraising cash flows for coffers of environmental activists.
In past years, the State Department professionals would have a legal record that supported approval and that would have been that: it was, simply, in the public interest.
But this administration's strategy of "prosperity redistribution" left no room for a public interest decision.
This is why the current administration is also presiding over the corruption of America's traditional reliance on an even handed rule of law!
Since taking office, virtually every White House action has been carefully engineered to “redistribute prosperity” for political gain.
The Administration has designed its programs to create prosperity for those supporting a big government, liberal regime and to pull the floor out from under those depending on private sector employment.
This is not incompetence. It is a highly competent operation designed to increase wellbeing -- and numbers-- of political supporters and undermine the wellbeing -- and numbers -- of political opponents.
The President has faithfully executed his campaign promise of, “Fundamentally transforming the United States of America”.
Today, we think it might be difficult to impossible, for even the White House's most fervent supporters, to discover more than a couple of major White House initiatives which have actually been designed to support traditional American values, culture, and the rule of law.
Following are a few examples of the harmful changes to America’s values, customs and even the rule of law in support of the “redistribution of prosperity” strategy described above:
- Energy and Environment
- White House failure to approve Keystone XL pipeline in spite of overwhelming public support, greater energy independence, tens of thousands of private jobs, a positive environmental report from the State Department, improved relations with America’s largest trading partner, Canada.
- Refusing to negotiate a favorable outcome and being 100% inflexible concerning the Keystone XL and other energy projects while negotiating weak US positions and outcomes against Russian imperialism, Islamic Terrorists and countries supporting them.
- EPA acting unconstitutionally, to preemptively disapprove an Alaska mining project being planned on Alaska state leased lands before the project had completed a mining plan or filed for even one mining permit with state or federal agencies.
- USFWS acting with the White House to, de facto, apply wilderness status to ANWR’s 1002 area, designated by Congress for potential oil and gas exploration, without an act of Congress (i.e. violation of ‘no more’ clause of ANILCA).
- BLM acting with White House support to restrict half of the Nation’s petroleum reserve in Alaska from petroleum exploration and development.
- Corps of Engineers and EPA acting to block ConocoPhillips from reasonable infrastructure development in accessible portions of NPR-A.
- Federal Government failing for decades to clean up federal government oil spills created by its own operations in the NPR-A…then demanding special funding from Congress to clean up messes as it should have done decades earlier.
- Unrestrained and unreasonable application of the ESA throughout the western United States primarily aimed at blocking energy projects.
- Creating a ‘war on coal’ which six years ago provided 40% of the nation’s electricity and the lowest cost electricity for American consumers.
- BOEM and many other agencies providing ‘community outreach’ and other support to the White House’s Ocean Policy Task Force, thus unlawfully using money designated by Congress for one purpose to another purpose not approved by Congress.
- Designating Critical Habitats under the ESA when species were not ‘endangered’ and whose populations were increasing (i.e. Steller Sea Lions and Polar Bear)
- Using the EPA’s flimsy application of the CAA to stop Shell’s Arctic exploration of lawful, Federal leases
- Sending EPA armed storm troopers into interior Alaska to look for non-existent CWA violations in mining camps
- Using the Corps of Engineers to forward White House environmental agenda in conjunction with the EPA in on-shore areas (i.e. CD-5, Yukon River Bridge, etc.), rather than providing citizens with simple, agenda-free access to due process.
- National defense
- Using the U.S. Coast Guard to forward White House environmental agenda in Alaska’s waters when other Arctic nations are using their military forces to expand and protect Arctic jurisdiction for an area containing 20% of the world’s remaining oil and gas reserves.
- Creating false ultimatums (i.e. red lines) for Syria and for Iran’s nuclear programs while ignoring the cries of mercy from Christians and other minorities under attack by ISIS.
- Disrespecting White House military aids
- Culling the ranks of loyal Generals and Flag Officers
- Denying Purple Hearts for those killed or injured on base by Islamic terrorism
- Giving aid and comfort to the enemy (Article III, Sec. 3, U.S. Constitution):
- Engaging in treacherous and one sided terrorist prisoner exchanges resulting in unjustifiable release of some of "the worst of the worst".
- Giving citizen rights to incarcerated terrorists
- Publicly announcing plans for military operations
- Publicly announcing plans for retreat from Iraq and Afghanistan
- Releasing some of "the worst of the worst" terrorist detainees by executive fiat when the administration expects at least 30% to return to the battlefield, seeking to kill Americans and their allies.
- Threatening the Ukraine’s destruction by failing to provide military aid or energy support to the NATO candidate.
- “Fundamentally transforming the Internet” by having the FCC promulgate rules in secret to create government controls over that traditional, ubiquitous medium of free expression. (We appreciate the courage of our friend, Democrat FCC Commissioner Mignon Clyburn (NGP Photo), who has second thoughts and could be the swing vote on this massive overreach orchestrated in large part by an overreaching White House. The five commissioners vote tomorrow.)
- IRS targeting of opposition, not-for-profit groups
- Federal monitoring of AP
- Federal targeting of Fox News
- AG dropping charges against voter intimidation by black terrorist group
- Federal non-enforcement of immigration laws
- Irresponsible release of thousands of detained and incarcerated illegal aliens, a significant number of whom are convicted murderers, rapists or felons in general.
- Irresponsible seeding of illegal aliens, including children, into cities throughout America without regard to educational, social, financial or communicable disease impacts on citizens.
- Stimulus spending projects designed to funnel hundreds of billions of dollars into the coffers of the administration’s corporate and labor supporters
- Unrestrained and unsustainable spending
- Devaluation of U.S. currency over time (i.e. although in a world of QE, the dollar is the best of the worst currencies, for a time at least)
- Continual stimulation of racial unrest in black communities by the AG and the President (i.e. Sharpton’s dozens of White House visits.)
- Transformation of College Loan Program from private sector management to federal bureaucratic management.
We could go on and on. And, we suspect our faithful readers could as well.
However, we now wish to end on our optimistic note: that the pent up power of freedom, of the determination of America’s people to ‘do or die’ will overcome a breathtakingly competent socialist takeover of America’s government, culture and political structure.
Since optimism leads to action which leads to success, we also encourage our dear readers to carefully consider the old analogy. The frog put in a pan of cold water does not realize he is cooked while the water temperature is slowly increased to boiling. America is entering the boiling stage now. Will citizens even realize the change that has enveloped their constitutional republic?
Or will complacency lead to inaction, acceptance and a slow but sure end to our way of life?
We are optimistically betting that, soon enough, our collective psyche will awaken both to Alaska’s daunting challenges…and the duty to recapture America’s values, culture and rule of law traditions.
2-23-15 We continue to wish Alaska's new governor well, but hope there's not a screw loose somewhere....
In tomorrow's posting, we'll explain why we struggle with the logic of recent public statements. -dh
Meanwhile, we urge our readers to carefully listen to Governor Bill Walker's words from his news conference last week.
Then, we suggest that our discerning readers fill in any blank spaces by absorbing Walker's message in his Saturday, Mat-Su Frontiersman Op-ed piece:
|From Sunday's Fairbanks News Miner comes this related Op-ed by Senate Resources Committee Chairman, Cathy Giessel (NGP Photo):
Walker sincerely shares the same goals as myself, my colleagues and the rest of the state: it’s high time we got our gas to market. But when it comes to how that goal is achieved, his proposed road is a funny one. (See Rhonda McBride's KTVA commentary below.)
The governor had originally on the campaign called the AK LNG Project fatally flawed, that Alaska didn’t have a big enough stake in the project. Then the governor said the backup plan was redundant, that money was being spent twice. Once in office, the governor removed three highly qualified members of the Alaska Gasline Development Corporation board, and told his commissioners on the board to not sign confidentiality agreements, all in the name of transparency.
In contrast to the producer-driven AK LNG project, my intention is that ASAP be market-driven, with Alaska in control. Using existing funding, the project will explore market opportunities and financing arrangements with potential buyers of Alaska’s gas and will be designed for both in-state and export markets. Working with the buyers, the project will develop a financing plan anchored with long-term contracts for purchase of Alaska gas.
What it comes down to is this: we will work with the producers to continue to develop the AK LNG project. With ASAP, we will work with gas buyers to secure the opportunities the market offers. Whichever project is first to produce a solid plan, and conditions acceptable to the state, will get the state’s full support. Or, perhaps the two projects could be combined at some point along the way.
Given our financial situation, we can no longer afford to stand by and wait while Alaska’s future is decided in the boardrooms of international corporations that have competing global interests. (Also reference: FuelFix, Alaska Dispatch, Alaska Native News. -dh)
Governor’s actions on natural gas raise concerns for Republican majority
...the governor did an about-face on a project he had campaigned against — the Alaska Stand Alone Pipeline project, known as ASAP, or the “Small Line” — as opposed to the “Big Line,” the Alaska Liquefied Natural Gas project, which so far has been the main focus of getting North Slope gas to market for both in-state use and export.
2-20-15 Alaska Gasline Board Appointees AND More On Fairbanks Gas LNG/Transportation/Distrbution Project
Yesterday, Alaska Governor Bill Walker appointed three new board members to the AGDC (Alaska Gasline Development Corporation, aka. "ASAP").
Video: note sound volume low in beginning, becomes normal after a few minutes.
STATUS: Interior Energy Project (Government project to establish a new, natural gas LNG / transmission / distribution system for Fairbanks Alaska.)
Here is our "links page" to the IAP for quick reference.
On February 12 we had become confused about status of the multi-hundred million dollar government program to provide one Alaskan community with low cost energy.
Since a previous administration had tried and failed to make such a project financially feasible, we wondered how a different administration would use the same agency (AIDEA, Alaska Industrial Development and Export Authority) to reinvent the project in a way that might serve the broad public interest.
We also include a reference to the regulatory docket, containing a full array of background information.
AGDC is the governmental corporation charged with building a small in-state gas pipeline down from the Alaska North Slope to South Central Alaska. It would serve consumers from the Interior community of Fairbanks to the largest population in the state, centered in Anchorage. The AGDC also serves as the state's representative to the larger, Alaska LNG project supported by TransCanada (i.e. of Keystone XL and Energy East fame), ExxonMobil, ConocoPhillips and BP. Most experts believe that only one of the projects will be built and that the AGDC project serves as a 'back up' project to serve consumers and provide smaller export volumes in case the larger project is never built.
The new AGDC board members replace three appointees of the previous Parnell administration whom Walker fired upon taking office.
During this video press conference, our readers will note that the qualification Walker most heavily counted on was the qualification of being an "Alaskan" (While the popular and provincial word, "Alaskan" refers to a fact of citizenship, it also connotes an emotional reference that, in this case, apparently substitutes for educational and professional credentials). This is an important reflection to investors, international trading entities and the federal government of the new governor's philosophy of governing.
Below is the text of yesterday's news release issued by legislative leaders whose original law created AGDC.
We will leave the video and press release record for our readers to digest. (Segments below, See the full release here....)
Thursday, February 19, 2015, Juneau, Alaska – House Speaker Mike Chenault (NGP Photo-R) and Representative Mike Hawker (NGP Photo-R-below), architects of the legislation creating the Alaska Gasline Development Corporation, urged a diligent review of the qualifications of three new board members appointed today by Gov. Bill Walker. The three appointees are former state Senator Joe Paskvan, a Fairbanks lawyer; former state Senator Rick Halford of Dillingham, a retired pilot; and Hugh Short of Bethel, a businessman and former mayor.
“AGDC’s original board members, some with international pipeline expertise, were a tremendous asset to AGDC,” Hawker said. Along with directing the organization, the public members added value by serving on subcommittees along with AGDC staff on commercial, engineering, and governance topics.
AGDC is not the only state corporation/entity to require specialized expertise in board members. The Alaska Aerospace Corporation, Alaska Housing Finance Corporation, Alaska Industrial Development and Export Authority, Alaska Permanent Fund Corporation, and Alaska Railroad Corporation statutes all require certain qualifications in board members.
In the case of AGDC, the presence of two cabinet-level commissioners on the board, not their designees, is designed to ensure the board as a whole considers the broader interests of the state and of all Alaskans in directing the organization.
The three fired AGDC board members were:
- Al Bolea of Big Lake, brought insights into governance and the oil and gas industry through his former roles as a BP executive; chairman of Alyeska Pipeline Service Company, and CEO of Dubai Petroleum in the United Arab Emirates.
- Drue Pearce of Anchorage, brought a wealth of expertise in federal rules related to permitting, a deep history of Alaska oil and gas development, and a comprehensive understanding of Alaskans’ needs through her former roles as a state senator; the Department of Interior’s Alaska advisor; and the federal coordinator for Alaska natural gas transportation projects.
- Richard Rabinow, of Texas, brought decades of experience in major pipelines, through his former work as President and CEO of Longhorn Pipeline Partners; as President of Exxon Mobil Pipeline Company; chairman of the Association of Oil Pipe Lines; and membership on the TransAlaska Pipeline System Owners Committee. See the full release here....
Our Friday IEP Commentary:
On February 12 we had become confused about status of a revised, multi-hundred million dollar government program to provide one Alaskan community with "low cost energy".
Since a previous administration had tried and failed to make an Interior Energy Project (IEP) financially feasible (i.e. for the Interior Alaska community of Fairbanks), we wondered how a different administration would use the same agency (AIDEA, Alaska Industrial Development and Export Authority) to reinvent the project in a way that might serve the broad public interest.
We were further confused about how the state could be considering such a huge new spending venture (i.e. even with funds obtained by an "Independent" public corporation of the state), when:
- it had already invested hundreds of millions of dollars into two gas pipeline projects that would flow gas right by the Fairbanks community, if built, and
- its operating budget, 90% dependent on Alaska North Slope (ANS) revenue was operating billions of dollars in the red, even before last year's 50% oil price drop, and
- its remaining savings accounts after this fiscal year will add up to approximately $9 billion, when the unfunded liability of the State's personnel retirement system is almost $10 billion, and
- when Alaska is the highest per capita debtor state in the nation, and
- Alaska is the highest per capita spending state in the nation, and
- the oil price drop is likely to guarantee a continued drop in ANS production upon which the state's government and economy are based.
Those realities pretty much beg for citizens to ask of their government, "Why are you undertaking any huge, new spending program -- no matter how well motivated it may be -- when the state simply cannot afford any new expenditures or risk?"
Since the logic defied our analysis, we sent questions to AIDEA. Some were admittedly better than others. As a former regulatory commissioner we posed some questions that may have been important, but without fully understanding all of the history and nuances. As a former oil industry executive and consultant to many of the large companies operating in the state, we asked several questions. And as a grandfather whose kids will end up inheriting the result of our state and national governmental decisions, we had questions, and still do, about the intergenerational equity of Alaska's rather cavalier, decades-old pattern of deficit spending.
So, please ignore the questions you find unhelpful and, please, feel free to send us your own questions which we will append to this commentary for reference of decision makers.
NGP February 12, 2015 Questions to AIDEA Below (slightly edited for this viewing) - AIDEA escaped answering our query and questions in this way
|Note: Yesterday we received a copy of Harvest Alaska's position, provided here for your review. Harvest seems relatively unconcerned about the transfer of LNG facilities directly to AIDEA, believing that AIDEA is bound by a sale and purchase agreement. Their greater concern probably rests with an Attorney General position to which the letter refers.|
2. Did the Administration ask AIDEA to change the focus from North Slope Gas to Cook Inlet gas? Does AIDEA believe Cook Inlet reserves -- as suggested in FNG's TA -- can now support both South Central Alaska and Interior demand? In the event that the new, Interior demand causes gas shortages or higher prices in South Central Alaska, is AIDEA comfortable with the obvious necessity of importing LNG (i.e. in the event a large ANS gas pipeline is delayed or found to be infeasible under prevailing market conditions)? How does AIDEA see the RCA process affecting its own project planning (i.e. the June 1 deadline for a final TA order)? Does AIDEA plan to involve Harvest Alaska in its planning process? Please explain.
|Since we are no longer privvy to the inner workings of the Regulatory Commission of Alaska (RCA) we asked one of the most foremost regulatory attorneys for a quick summary and links. His response is here....|
4. While state statutes allow for 'self regulation' of a municipal utility, does AIDEA see any value in having a more objective third party like the RCA economically regulate the FNSB utility--other than a local elected officials and/or a board of political appointees?
13. Since GVEA will, hopefully, be a major base load customer, how has AIDEA addressed CEO Cory Borgeson's concern expressed in a Journal of Commerce interview that, "As to whether or not AIDEA should look to Cook Inlet for a gas supply, Borgeson said the low wholesale cost of North Slope gas is hard to overcome." Has AIDEA acted to respond to that concern?
RCA Re: IEP LNG Sale Process
Since we are no longer close to the RCA's regulatory process, we asked one of the state's best respected regulatory attorneys to summarize the regulatory aspects of a proposed sale of LNG assets to Harvest Alaska, a Hilcorp affiliate.
Docket U-15-002 is FNG’s application (through Tariff Advice Letter TA37-514) for approval of a LNG supply agreement (LSA) with Hilcorp’s subsidiary, Harvest Alaska. The LSA is conditional upon the AG’s approval and upon the closing of the sale of the Pt. MacKenzie liquefaction plant and related assets from Pentex (FNG’s parent company) and Titan (FNG’s sister company) to Harvest. Attached to this email is FNG’s TA and the RCA’s Order No. 1 opening the docket. The link to the RCA web site for Docket U-15-002 follows: http://rca.alaska.gov/RCAWeb/
The liquefaction plant was transferred last year from FNG to Titan for no consideration, and is now being transferred from Titan to Harvest for undisclosed consideration. FNG has not requested, nor has the RCA approved, the recent transfer of control of FNG, the transfer of the plant to Titan, or the transfer from Titan to Harvest.
AIDEA politely answered our query and questions this way:
Good Afternoon Dave,
Please see the attached public documents. These should answer your questions.
BP and Commonwealth North: Two economic reports offer "Good News for Alaska"
Commonwealth North hosted its 9th annual Alaska Assets Review on February 18. The program recognizes that as shareholders of “Alaska Inc.” the citizens of Alaska need to be informed about how the assets of their company are performing. This year Northrim Bank President and CEO Joe Beedle (NGP Photo-L) and former Lt. Governor Mead Treadwell (NGP Photo) presented the performance review. Read full report....
BP’s Annual Energy Outlook also appeared this week; it has become one of the most reliable sources on the topic of the future of energy. According to this new edition of the BP Energy Outlook 2035, global demand for energy is expected to rise by 37% from 2013 to 2035, or by an average of 1.4% a year. (Our continuing question is: with greater worldwide shale production will Alaska cultivate a competitive investment climate benefiting the marketing of its remote natural gas and oil reserves?"
Reader reaction to our Tuesday column, "If I were President....", from retired Executive Director of the Alaska Oil and Gas Association, Bill Hopkins: "Dave Harbour for President! Love your executive agenda, Dave. GO, trooper!" Our readers will be relieved to know that we respectfully declined Bill's nomination. -dh
Alaska's Interior Energy Project (i.e. IEP, natural gas to Fairbanks area. Follow Legislative action.). Below we have the copy of an opinion expressed today by Ray Latchem, Alaska's longtime expert LNG entrepreneur. We believe the momentum behind Governor Bill Walker's (NGP Photo) revised IEP created during Governor Sean Parnell's (NGP Photo) administration is almost unstoppable at this point.
We do wish, however, that other creative ways of inducing the private sector to take on a similar project had not been so easily dismissed by decision makers. (See our IEP update page.) -dh
... consider adding an alternative move the governor could take that would achieve the goal of lowering energy prices in Fairbanks without costing the State a dime....
Instead of spending cash that's in short supply, make some Prudhoe Royalty gas that is abundantly available for free if someone will move it south to Fairbanks.
The Governor and legislature can do this without costing the State anything. This is how several Middle East LNG plants got started; the states made the gas available for cheap. It draws developers.
AIDEA has already spent the money to build the gravel pad for the LNG plant on the Slope. Let them contribute this to the effort. There are a couple of other improvements they could add to make it more attractive.
|Latchem raises a valid point; more demand and less supply results in higher prices. Note that South Central Alaska consumers have likely paid hundreds of millions more than necessary for Cook Inlet natural gas as the result of a short sighted and tragic 2006 decision by the Regulatory Commission of Alaska that rejected Henry Hub pricing as a basis for CI gas supply agreements. Alaska decision makers should put more emphasis on the counsel of experienced Alaskan energy players like Latchem. (Link to earlier Latchem correspondence re: IEP. -dh|
Another issue that needs discussion is Cook Inlet gas. It is trading at multiples of HH pricing. This actually costs South Central $MMs. Adding additional Interior energy loads to this market will only reinforce the gas pricing relative to competing oil, rather than gas on gas like HH. If the State encourages CI gas to go to the interior, they are in effect costing Anchorage a lot of money. When this becomes public in Anchorage, the notion of tapping Prudhoe gas for free to Fairbanks will be quite popular. Whisper this into the Governor's ear. Anybody doing anything with PB gas should be given a metal.
I didn't agree with SB23, but now that it passed and more than $15MM has been spent, they need to seek competitive bids to finish the supply chain. AIDEA should not own or operate the plant; leave that to those efficient private operators. They can provide low cost financing, the pad site, etc. things that will reduce the bid prices they receive.
The reason AIDEA should provide the financing is that none of the users in Fairbanks are willing to sign a take or pay agreement that ordinary lenders require to address the market risk associated with developing the LNG plant.
AIDEA's pad site could also host other gas development projects. Methanol production is only one. PB gas field is one of the few of its size that doesn't have a petrochemical complex.
It's time to unlock PB gas for something other than local consumption. Things happen very slowly with PB gas. It was first produced for field consumption about 1975. It took another 14 years before it was made available to Deadhorse next door. For 14 years Deadhorse ran on oil while atop 27 TCF of gas.
We put forth a plan that would have gotten PB gas to Fairbanks this year, but AIDEA selected a much larger but less experienced developer in what had to have been one of the most convoluted processes ever. The experiment failed. Now they should pick up the pieces and what's left of the money, get rid of the inexperienced consultants, ask experienced developers what type of structure would produce the most competitive price and move forward.
The solution is simple. Start with the cheapest wellhead gas price: free for so many years. This saves the Interior money and will limit the draw on the already over priced CI gas. So South Central benefits, too.
Next, use AIDEA's pad site they bought from us to be a host site for any small scale gas developments, starting with an LNG plant to supply the Interior.
I'm pretty sure the truckers don't want any help from the State, they will stand up for the opportunity to haul an extra 10 or more loads per day without any incentives. The State is providing them the road to run on, like it would provide the pad to the LNG developer.
FNG already is set up to receive LNG, but IGU and GVEA will need a receiving and storage site. GVEA purchased land in North Pole for this.
I could go on, but what's the point. Alaska still has a lot of money and the course is set to spend it. But I wonder, if (an economist) did a study that showed adding more captive demand to the CI gas supply resulted in every person in South Central paying $100 more than they would if there were fewer buyers in that market instead of more, that each of those people wouldn't prefer to tap PB gas instead.
Then (the economist) could study what happens when you actually do tap the gas like we did in 1989 when first gas was delivered to Deadhorse. Deadhorse has saved $MMs, cleaned up the air, etc. It was a completely private development.
Posted: 18 Feb 2015 06:24 PM PST
Commonwealth North hosted its 9th annual Alaska Assets Review on February 18. The program recognizes that as shareholders of “Alaska Inc.” the citizens of Alaska need to be informed about how the assets of their company are performing. This year Northrim Bank President and CEO Joe Beedle and former Lt. Governor Mead Treadwell presented the performance review.
A bit of a history lesson on the reason Alaska has the wealth of assets that it does. During the statehood debate, it was recognized that the state’s population would likely never have the critical mass to finance government through conventional means employed by other states, primarily per capita taxation. In recognition of the need for Alaska to have means to produce its own revenue, the state was granted 104 million acres of land and mineral rights to significant acreage on federal lands. From this, it was felt that Alaska could build and sustain an economy and pay for necessary government services. The annual program tracks the performance of Alaska’s assets, including natural resources, financial assets and enterprises.
The full report and presentation can be found at www.commonwealthnorth.org. A few highlights of the discussion are below.
Alaska's natural resources are abundant and a large part of Alaska's economy.
Financial assets are an important topic of discussion because of the budget issues being seen in Alaska.
The state’s enterprises are facing challenges, but are working to stay strong.
To wrap up, Alaska is challenged, but it is also well funded and well endowed. Many people are working on ways to find solutions to the state’s fiscal problems. Commonwealth North has produced a report for Alaska’s leadership. This report highlights some opportunities to work through the fiscal problems and ways to fix the budget gap. This report, Alaska’s Operating Budget: Critical Crossroads, Choices and Opportunities will be presented in Anchorage on February 25 at a lunch hosted by Commonwealth North.
Open Letter To Honorable Sally Jewell, Secretary Of Interior On Occasion Of Her Visit To Alaska
We keep hoping that the current Administration's agency appointees will place loyalty to the one appointing them secondary to the public interest and fidelity to the Constitution.
|Secretary Jewell: We especially commend for your reading the wise counsel Alaska North Slope Borough Mayor Charlotte Brower has offered to you and the Administration. Here is her February 10, 2015 Op-Ed piece in the Alaska Dispatch News. Here is a speech she gave during your Alaska tour -- just yesterday -- to the Alaska Federation of Natives that directly addresses you and your administration. -dh|
So far, we've been disappointed. Agencies have operated in lockstep with the Obama Administration's political agenda rather than what they should know to be the honest, logical, right thing to do on behalf of the national interest. (We would hope that DOI could learn to honestly respond to the public interest without having to be continually chastened by our representatives in the Congress.)
In these pages, we have carefully documented flagrant examples of federal overreach, violations of the rule of law and due process. We have illustrated the Administration's application of 'death by a thousand cuts'. We have analyzed the cumulative effect of the debilitating volume and number of federal regulations and anti-development rulings. We have shown how an insidious cabal has worked together against the public interest and witnessed political coordination between your Department and special interest parties.
Many of not most of these anti-public interest violations have occurred within the agencies and offices of the Department of Interior, but the pattern runs rampant in most if not all of the Departments and even 'independent agencies'.
Above, we have linked you to examples. Please go to the Pacific Legal Foundation's webpage to learn of other federal abuses of power. Free enterprises throughout America are suffering from an unrestrained imposition of federal power that decreases private sector productivity and freedoms while increasing proliferation of bureaucratic personnel and rules.
Below is an email we received from a pioneer Alaskan whose fortune and investment was wiped out by your Department. It is only one of many examples, as we have shown. Were you to express a little sympathy for Wally McGregor's plight at the hands of your predecessors, it wouldn't compensate him for his financial losses, but it might give him hope that perhaps help is on the way and that, perhaps, he has not also completely lost his faith in Constitutional protections.
We commend this and countless other Alaskan case histories and counsel to your consideration, not the least of which is Mayor Charlotte Brower's (Photo with publisher Dave Harbour) Op-ed piece that we covered yesterday. Please also read her speech, given yesterday, to the Alaska Federation of Natives-Kotzebue Retreat; it is directly related to your Department.
We wish for you to experience a safe and informative trip.
Below is Wally's email to a Northern Gas Pipelines reader and his painstakingly prepared case history of, "The Orange Hill Story".
Dave Harbour, Publisher, Northern Gas Pipelines
Email from Wally McGregor copied to Northern Gas Pipelines:
I have been on the front line of the opposition to the WAR ON PRIVATE PROPERTY since the passage of ANILCA in 1980 when our Orange Hill property, a “World Class Copper Deposit” was enclosed in the Wrangell-St. Elias National Park and the right to mine denied thereafter, as were your properties.
Over the course of the past 35 years, the National Park Service has refused to compensate for the Taking and has gone so far as to terminate a mineral appraisal, after the geologic data was disclosed to the appraiser.
As you are also aware, fighting for a Constitutional Right is enormously expensive in terms of both time and money, in my case, to no avail. To me, the Constitutional Fifth Amendment is nothing more than a piece of paper. The protection of private property rights is disregarded with impunity by the federal bureaucracy.
The attached copy of “AN UNAMBIGUOUS TAKING, THE ORANGE HILL STORY describes the ruthlessness and deviousness of the National Park management in its dealing with inholders on the issue of a private property rights.
Clearly, the disregard for private property rights is not confined to the National Park Service which imposes an enormous threat to the State of Alaska that is dependent upon its natural resources. Unless the threat is addressed and forthrightly dealt with there will be no incentive to invest in Alaska.
To me and my wife during our days of prospecting and exploration in the 60s and 70s, Alaska was ‘The Land Of Tomorrow’ The encroachment of the federal government has dimmed that concept of Alaska’s future.
Alaska Federation of Natives-Kotzebue Retreat
Remarks of NSB Mayor Charlotte E. Brower
Tuesday, February 17, 2015- 8:30 AM
Uvlaalluataq, [Acknowledge people in attendance]. It’s wonderful to be here in beautiful Kotzebue so close to where I was born and raised in Selawik. Quyanaqpak for privilege to speak to you this morning.
This past week the North Slope Borough was honored to host Kivgiq 2015. Thousands of our friends and neighbors from across Alaska, Canada and elsewhere gathered in Barrow to celebrate the messenger feast. Our theme was “kiikaa atautchikunsavaqatigiiksa- let us keep doing more together.” In many ways, this theme is reflective of the mission of AFN and I think it was especially befitting given the challenges that face Alaska Native people today.
Over the past month those of you that have been engaged in following the news have witnessed a firestorm of controversy surrounding recent decisions by the Obama Administration and the Department of the Interior relating to wilderness designations in the Arctic National Wildlife Refuge, Outer Continental Shelf oil and gas leasing areas, and development within the National Petroleum Reserve- Alaska. Those of us on the North Slope have been especially sensitive to these decisions as they have a direct impact on our people, economy and way of life. Accordingly, we have made our feelings known through press releases, opinion editorials, and other means.
But just as troubling to me as the consequences of these federal actions, are the rifts that are created between Alaska Native people who may be on different sides of the issues. We have witnessed many instances in which regions, communities and even families have been divided. And more than just being counter-productive, these divisions pose a direct threat to our people’s wellbeing.
One of the root causes of these conflicts is the strong influence that outside groups exert on Alaska Native people to further their agendas. As one example, we have witnessed numerous instances where eNGOs have entered our villages and have sought out disaffected community or tribal members who may share their ideologies and then use these same people to file lawsuits that serve their purposes. If that isn’t sufficient, these environmentalists may offer our people free trips to Washington, D.C. or other places where they can be used as props to parrot talking points and be held up to the media or the outside world in general as “Native leaders.” This is often done to undercut the messages of those of us who are actual leaders of our communities or to muddy the waters as to what are the actual thoughts and feelings of the majority of Native peoples on the issues that impact us.
Sometimes it’s our federal government that is contributing to the problem. We saw a manifestation of this during the EIS process for a proposed development project in the NPR-A, which is located near one of our villages. Despite the fact that the borough, the regional corporation, the village corporation, and the local municipal government all advocated for an alternative that they believed was the most environmentally responsible, the BLM chose its own preferred alternative which they attributed to the consultations they had with the local tribal organization. This created conflict in the impacted community and frustration for all of the entities that felt that their input was being ignored. Ultimately, BLM reversed itself and selected the alternative that the majority of our people supported. But the wounds still remain.
And there are times when we may contribute to this problem when we do not foster open lines of communication amongst our own organizations or between our neighbors and fellow Alaska Natives throughout the state. So the question may be asked- what can we do to avoid these types of divisions among us? I believe looking to our past can provide the answers for our futures.
The Inupiat have eked out an existence in some of the most inhospitable places on the Earth since the beginning of time. Our people’s survival rested on mutual cooperation and working together to overcome whatever challenges that Mother Nature could throw our way. As a testament to this legacy, our elders passed down to each generation a set of core values that were essential for our people’s survival- values that are still relevant to us today like respect for others, cooperation, and avoidance of conflict, just to name a few.
Those of us on the North Slope have recognized that our moments of greatest strength have come during the times when we stand unified as a people. We learned this lesson when we had to fight for our rights to the land that we have lived on since time immemorial during the Alaska Native Claims Settlement Act negotiations or when we had to fight the federal government and the environmentalists for the right to conduct our subsistence hunts of the bowhead whale. We also know that given the challenges and obstacles that face us today, it is important for us to continue in this tradition of unity.
As a result, we held a series of meetings that included the leadership of the municipalities, Native corporations, and tribes, on the local and regional level, to discuss how we can better stand together and speak to important issues with one voice. The decision was made to form a non-profit organization called Voice of the Arctic Inupiat, or what we like to call the Inupiat Non Governmental Organization-iNGO. Our hope is that Voice of the Arctic Inupiat can provide a forum for the leadership of our local and regional tri-lateral groups to get together and discuss the issues that are impacting our communities and to come to consensus on the views that we express to the outside world. This will make it more difficult for the environmentalists, the government, or any other outside groups to divide our people and communities or to misrepresent the will of the Inupiat people on the North Slope.
On a larger scale, we hope that the Alaska Federation of Natives will work to foster dialogue between regions and Alaska Natives from across the state to make it more difficult for outside groups to cause divisions among us and to continue to promote mutual respect between people and regions so that we do not allow our own self-interests or ideologies to cause harm to others. All of us will be more effective in advocating for our own people if we stand united as one.
We would also like to challenge our federal government to rethink its concept of consultation- especially considering the unique attributes of Alaska. Alaska Native people are represented not just by tribal organizations, but also by municipal governments, and Native Corporations. Each one of these entities have unique and important perspectives on what is important for the tribal members, citizens, or shareholders that they represent. And while the legally-mandated government-to-government consultations between our federal government and tribes are important, communication and consultation with our municipal governments and Native Corporations are equally important for federal decision- makers to glean a true perspective of the needs of our people. We have seen far too many instances where the federal government has favored one group over another and this is why so many of us continue to complain about the federal government’s lack of consultation. Meaningful federal consultation must include all three entities and equal consideration must be afforded to each in order to truly understand the needs of the Alaska Native community.
A potential model for this type of consultation could be based off of the concept of the NPR-A Working Group, which was created by Secretary Salazar in the 2012 NPR-A EIS & IAP. The Working Group is comprised of representatives from municipal governments, tribes, and Native corporations and is supposed to serve as a forum for the BLM and local people to work together on land management issues that involve the NPR-A. While we still haven’t seen support for this group from the federal government materialize like we had hoped, we feel very strongly that this could be a powerful and effective tool to ensure more meaningful local input and better federal decision-making.
Without this kind of meaningful consultation, the types of federal actions we have seen of late where our potential for economic benefit is being limited will continue to viewed as paternalistic edicts from an aloof government far detached from the realities of our daily existence. And as a consequence, our self-sufficiency and quest for self-determination will be replaced by a complete dependence on the government.
Our federal government should also know that we notice it when eNGOs issue press releases touting federal actions minutes later, or in the case of the Record of Decision for the GMT-1 SEIS last week, sometimes even hours before the federal government publicly announces its own decisions. This type of collusion between our government and special interest groups does not give us confidence in the federal process and we take it as an insult when greenie groups know more about what the federal government is planning for our lands than we do. Even if we may disagree over an outcome, we deserve the respect of being consulted and informed before we read someone else’s press release.
But notwithstanding the challenges we face, we stand committed to our theme of “kiikaa atautchikunsavaqatigiiksa- let us keep doing more together”. By remembering the values of our past and by working with each other instead of against each other, we hope to create a legacy that we will be proud to pass down to our children and grandchildren. That is the essence of who we are as Alaska Native people. Quyanaqpak, Taikuu for the opportunity to speak to you!