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      This is your public service 1-stop-shop for Alaskan and Canadian Arctic energy commentary, news, history, projects and people. We update it daily for you. It is the most timely and complete northern energy archive anywhere — used by media, academia, government and industry officials throughout the world. Northern Gas Pipelines may be the oldest Alaska blog; we invite readers to name others existing before 2001.  -dh

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Federal Obstruction

9-1-15 President Obama Visits Alaska

01 September 2015 5:27am

See a broad array of Presidental visit news and feature items in today's (9-1-15) Alaska Dispatch News

Alice Rogoff, Anchorage Dispatch, President Obama, dinner, fund raiser, Alaska oil and gas, climate change, China, Oil prices, stock market, photo by Dave HarbourComment: President Barack Obama dined last night at the Anchorage home of Alaska Dispatch Publisher Alice Rogoff (NGP Photo).  We hope that in addition to climate change issues, Alaska's major publisher was able to also discuss other matters. 

Read other national and international news accounts of President Obama's Alaska visit, here.  

We provided additional links, yesterday, here.

Alaska's dependence and constitutional reliance on natural resources largely rest upon Trans Alaska Pipeline System (TAPS) sustainability.  This is because 90% of the state operating budget and over a third of Alaska's economy are based on oil revenue.

TAPS' sustainability, the President should know, depends in large measure on federal policies affecting the National Petroleum Reserve-Alaska; the Alaska National Wildlife Refuge (1002 area); oil and gas lease sales; energy project permitting, regulation and conditions.  

Rogoff, a well known organizer of Arctic forums would also be in a good position to emphasize the importance of protecting US jurisdiction in the Arctic.  Guarding American interests is particularly important as Russia becomes more and more provocative in staking out high value oil and gas resources in the Arctic, building infrastructure and increasing its military presence.  

We have noted Canada's diligence in caring for its Arctic domain.  The United States, Canada's NORAD partner, should be doing the same.    -dh



31 August 2015 7:58am

As President Barak Obama begins his Alaska visit today, we bring readers these observations from our energy consultant friends...and others (i.e.
ADNNYT, CNN, NPR, CBS, Reuters, USA Today (Note: "Climate Change" overtakes energy as focus of trip...consistent with the Obama policy of elevating climate change as top 'national security' priority.  -dh)

Our great Aussie energy consultant friend begins the week with this observation, beginning with news of an ENI natural gas discovery in Egyptian waters, almost equal to the 35 TCF of stranded Alaska North Slope gas.

  • Italian oil and gas giant ENI reported a major gas discovery over the weekend.  This was the finding of a ~30 TCF (gas-in-place) gas-field in deep water off-shore Egypt.  The company has already signalled that it will pursue its development aggressively.

  • Gas in Egypt can readily feed both the nation's voracious energy needs and export markets through existing liquefaction infrastructure. The find will no doubt disappoint neighbour Israel, from both monetary and geo-political stability points of view, who was hoping to supply Egypt from its own large offshore gas fields.

  • In theory this find could indicate that there is a whole trend of deepwater gas fields remaining to be discovered in the Eastern Mediterranean - with profound implications for European gas markets, Russian ambitions for the Turk-stream pipeline, etc.

  • As we noted last week, Putin is due to visit China this week, but hopes of signing some sort of deal during that visit over the Altai (AKA the Western route pipeline, or the Power of Siberia-2 pipeline) appear slim.  Recent media reports have instead suggested that some sort of deal could be inked over the supply of gas to China from Vladivostock (sourced by pipeline from Sakhalin Island). 

In the midst of market volativity and the Obama Administration EPA initiatives against carbon fuels, our unnamed, Mid-Atlantic energy consultant friend offers this observation: 

We caution investors against overreacting to the near-term impact of the final Clean Power Plant (CPP) rule, and observe that the rule's effects will likely vary across the country and across companies.  There are several reasons to be skeptical that the rule will be as impactful in reality as it now appears.   How exactly the CPP influences individual firms, utility or otherwise, will hinge on their specific circumstances and the approaches particular states take toward compliance, which will take years to play out. 
·         Very Lengthy Implementation. It will take many years before the rule is truly 
·         State Cooperation Remains Key, Although Problematic. The rule’s effectiveness hinges upon state cooperation, which is far from assured.  Large coal burning and mining states have already expressed their disdain for the rule, and in many cases have filed or backed lawsuits opposing it.  It is very questionable whether key coal burning states will cooperate with EPA to develop adequate SIPs in a timely fashion, or at all.  While EPA can develop state specific Federal Implementation Plans (FIPs) as an alternative, that would take time and be challenging to put into effect. 
·         Litigation. Until now, legal challenges of the rule have been deemed legally premature.  Now, with the rule out and due to be published in the Federal Register, those hurdles will lift, allowing litigation to commence.  Since these suits will proceed over many months, they won’t stop some states from developing SIPs and submitting them for EPA review in the interim.  We maintain that the rule is legally vulnerable on several grounds, including its call forreductions in emissions from outside the fences of power plants, and its statutory underpinning, Section 111(d) of the Clean Air Act, which has not been thoroughly litigated in the past. 
·         The Next Administration Will Moderate the Rule.  Regardless of who wins the White House in 2016, Republican or Democrat, they are going to put their imprimatur on the CPP.  A Republican would likely stop implementation and direct the EPA to come up with a new much less aggressive approach that would effectively put the rule on hold for several years.  A Democrat, with their eye on reelection, would likely retain the broad parameters of the rule, but adjust it to moderate the impact on key states like Ohio, Pennsylvania and Virginia, states that produce or burn significant amounts of coal.  Since the confirmation of a new EPA administrator will likely take at least six months and the confirmation of key EPA personnel upwards of one year, there will be a significant delay for any actual changes to the CPP.   


8-18-15 Outrageous Decisions

18 August 2015 3:00pm

Bill Walker, governor, Alaska, Standard and Poor's, downgrade, oil, taxes, john donne, ernest hemingway, for whom the bell tolls, Photo by Dave HarbourGovernor Bill Walker's Outrageous Decisions


Dave Harbour



Standard and Poor’s Ratings Services lowered the outlook on the State of Alaska’s credit rating from “stable” to “negative” on Aug. 18, and gave politicians one year to reorganize the fiscal house before the downgrades accelerate.

Standard and Poor’s wrote that the current budget deficit is inconsistent with the state’s “AAA” rating on its general obligation bonds and its “AA+” on appropriation-backed bonds, but cited the state’s still healthy budget reserves as a bridge that could maintain the high ratings.  (READ MORE HERE).

Note: Circa. 2007 your author (i.e. a regulatory commissioner at the time) had the responsibility of briefing approximately 20 investment companies and the three rating agencies in NYC on Alaska's fiscal challenges.  Approximately two dozen of those professionals have remained on our email alert list over the years.  These analysts are the best and the brightest in their financial fields and Alaskans should never be so provincial as to think that what is said and done here is not noticed by investors, analysts and lenders in New York and throughout the world.  

Alaska is not an Island unto itself....


Immediately after the November election Governor-elect Bill Walker (NGP Photo) assured assembled members of the Resource Development Council for Alaska that he was not their enemy.  

We suspected his poor performances over the years in a quixotic representation of the so-called "Port Authority" would be reflected in his governorship.  

But, we held out hope that performance of his new duties would match his significant charisma and public speaking talents.

Alas, to this watcher of Alaska's slumping economy, the new Governor has engaged in a pattern of poor decisions.

He announced opposition to the Alaska Gasline Development Authority (AGDC) concept of being a back up plan to deliver Alaska North Slope (ANS) Gas to the state's residents.

Then, he began to criticize the large gas transportation project aimed at both monetizing ANS gas through exports and providing taps along a pipeline right-of-way to residents.

We commend the major Alaskan investors/oil producers and Trans Canada for maintaining a stiff upper lip and good attitude as they continued their multi million dollar effort to prove the feasibility of the Ak-LNG project amid a volatile world economy and a failing and unsustainable Alaska economy.

Meanwhile, appearing to do everything possible to discourage the state's largest investors, he began touting his ability to use AGDC as a vehicle for competing with the major Ak-LNG project.  Many of us were bewildered at the strategy, or lack thereof, that could lead a Governor to support investment in one project, then advocate using another state organization to compete with it.  
Today, we are not bewildered by such decisions; we conclude them to be outrageous behavior by a public official.
In the early part of the year, the Governor began to hint that increased industry taxes might be part of the answer to Alaska's deficit budgeting.  Most savvy observers have long observed that in order for Alaska to become solvent again it must encourage more oil development, not discourage it.

With Alaska failing to balance its budget or even enact significant cuts in its spending, the state's governor proposed even more deficit spending: expanding Medicaid.

Following the Legislative session, earlier this summer, he vetoed legislative expenditures to fund tax credits lawfully accrued by oil producers for investments in the state.

He then championed expanded state involvement in creating a natural gas utility for Fairbanks but urged his 'independent board appointees' to the Alaska Industrial Development and Export Authority (AIDEA) to switch gas sources.  AIDEA now seeks to obtain expensive natural gas reserves (i.e. 3x higher than current, Lower 48 prices) from the limited Cook Inlet supplies serving the major population in South Central Alaska while abandoning the world class reserves on the ANS where gas could be obtained cheaper.

As we noted in yesterday's posting, Walker is now beginning to threaten the oil industry with a reserves tax -- an outrageous and hostile act that would tax private sector energy investors for NOT producing gas even if market timing indicated caution and prudence in project sanctioning.

Today, we note that Standard and Poor's has begun the process of downgrading Alaska's credit rating (i.e. story right column above).  Three ANS oil industry taxes and a royalty payment fund about 90% of Alaska's state government operating budget and support over a third of the state's economy.  The 40-year-old Prudhoe Bay field responsible for most of that wealth has been declining in recent years at a 5-7% annual rate.  The trans-Alaska pipeline transporting that crude oil to market is nearly 3/4 empty.  Major transportation difficulties are now on the horizon and without significantly increased oil throughput, the pipeline could shut down within just a few years--or sooner.

Meanwhile, Alaska will have burned through all of its major savings accounts within the next two-three years.  While a $55 billion Alaska Permanent Fund is a tempting source of cash, the state's Constitution prevents easy access to it.  In any case, spending that savings would not lead to a sustainable economy; it would just prolong the point of no return.

On top of the fact that the state is not earning what it spends...using its savings...and its governor wants to increase spending...three other factors portend economic disaster for Alaska absent masterful management of money and resources: 1) A nearly $10 billion unfunded liability in the State's employee retirement programs; 2) a steadily declining level of oil production; and 3) an average oil price this summer that is half of what it was last summer.

Were we advising the Governor, we would:

  • urge action that would support investment in the state--and honest partnership with investors.
  • We would significantly cut spending in America's highest per capita spending and debtor state.  
  • We would seriously attempt to wean the highest per capita population of not-for-profit corporations in America from state government largess.  
  • We would cut virtually all capital spending, save for maintenance (i.e. which really is in the operating category).
  • We would undertake whatever legislative changes that could lead to not overspending on public employee overhead.  
  • We would also cut all higher education spending that worked counter to Alaska's resource development priorities (i.e. mandated by Alaska's constitution), and
  • we would energetically fight the Federal government every step of the way as it, and its environmental allies, seek to scuttle the 49th ship of state.

Somehow, we think this Governor to be incapable of such decisiveness, though we are still open to being pleasantly surprised.  But we'd better be surprised quickly because a 'drop dead' date quickly approaches and to survive, Alaska needs a major policy overhaul.

If this doesn't happen, we are mindful of John Donne's 1624 observation, later made more famous by Ernest Hemingway, who predicted and then lived the reality of really tough times: the Spanish Civil War.  We hope Governor Bill Walker takes history to heart, for he, too, is no island unto himself.   Outrageously bad decisions can not only create a bad governor's legacy, but can forever injure the economic future of an entire state, our hopeful offspring and coming generations of our descendants.

"No man is an island, entire of itself; every man is a piece of the continent, a part of the main. If a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as if a manor of thy friend's or of thine own were: any man's death diminishes me, because I am involved in mankind, and therefore never send to know for whom the bell tolls; it tolls for thee."  -John Donne




7-29-15 EPA Continues To Amass Federal Power At Expense of Citizen Freedom

29 July 2015 1:28pm

Rebecca Logan, Alaska Support Industry Alliance, Waters of the United States, WOTUS, E&E News, Photo by Dave HarbourFrom our friend, Rebecca Logan (NGP Photo), General Manager, Alaska Support Industry Alliance:  
The new EPA rule on Waters of the United States (WOTUS) is perhaps the most critical issuing facing us today.  The article below gives a great perspective on why so many are concerned about the rule, and the rule-making process. 

Rebecca Logan
General Manager
Alaska Support Industry Alliance

Senator Lisa Murkowski, energy policy, Photo by Dave Harbour U.S. Sen. Lisa Murkowski, (NGP Photo), today convened the Senate Energy and Natural Resources Committee to continue consideration of the bipartisan Energy Policy Modernization Act of 2015 with discussion on 20 additional amendments to the bill. In total, the committee has worked through 45 of the 94 amendments filed to the bipartisan legislation since the markup process began on Tuesday.


Critics of new rule say Army Corps memos prove their case
Annie Snider, E&E reporter
Published: Tuesday, July 28, 2015
This story was updated at 9:31 a.m. EDT.
Congressional opponents of the Obama administration's water rule are arguing that newly revealed memos critical of the regulation from the country's on-the-ground experts at the Army Corps of Engineers confirm their argument that the rule is fatally flawed.
"While interspersed with staff recommendations and legal conclusions that I understand you wish to keep confidential and hidden from the American public, the facts in these documents support my conclusion, and the conclusion of the 30 states that have already filed lawsuits challenging the final [Waters of the U.S.] rule, that the rule is lacking factual, technical and legal support," Senate Environment and Public Works Chairman James Inhofe (R-Okla.) wrote to the political official who oversees the Army Corps yesterday.
Documents first reported by Greenwire yesterday show that leaders at the Army Corps, which is responsible for the lion's share of calls about which streams and wetlands fall under the scope of the Clean Water Act, fiercely disagreed with changes made in the final version of the U.S. EPA-Army Corps rule. At least two congressional oversight committees have also obtained copies of the memos.
The main thrust of the Army Corps' concerns was about new geographical limits set in the final rule that for the first time deemed some wetlands and ponds to be too far from the tributary network to warrant federal protection. But the memos also called out some changes in the final rule that the corps said went too far in claiming federal authority.
For instance, the corps' top environmental lawyer argued that language in the rule extending automatic protection to all wetlands and ponds within 1,500 feet of a larger covered water if they're also in that water's floodplain was too broad. The corps contended that 300 feet would be more defensible.
And the memos raised questions about the special approach the final water rule has regulators take when making calls about five categories of wetlands that are often seen as being too far from the river system to be federally regulated.
The approach taken under the final rule -- which would have the importance of such wetlands judged not in isolation, but in combination with other similar wetlands -- could easily be struck down in court, the corps legal analysis states.
In his letter yesterday, Inhofe used some of these newly revealed concerns from the corps to reiterate requests for information about how the rule's provisions were developed.
The corps memos, as well as other statements from the agencies, "confirm my suspicion that the determinations that purport to support expanded jurisdiction in the final WOTUS rule were not based on the experience and expertise of the Corps," he wrote.
House Transportation and Infrastructure
Subcommittee on Water Resources and Environment Chairman Bob Gibbs (R-Ohio) also requested and obtained copies of the memos from the Army Corps.
In a statement to E&E Daily yesterday, he said the documents raise major concerns about the process by which the rule was developed.
"This information is extremely troubling, but I have to say I am not surprised," he said. "States, local governments, and other stakeholders opposed this flawed and biased rule throughout the rulemaking process. Their input and concerns were clearly ignored by the EPA, and now we have evidence they ignored their own federal counterparts."
Gibbs contended that the corps was "cut out" of the process by EPA.
"The EPA controlled the rule-making process to get the result it wanted: the ability to maximize the federal government's regulatory power over waters, wet areas, and adjacent lands," he said. "There is too much ambiguity in the rule to give federal regulators the discretion to do whatever they want and give activists plenty of room to create havoc."
The memos have come to light as congressional opponents of the water rule are attempting to block it legislatively.
The House has already passed a stand-alone measure to kill the regulation and has approved riders to two spending bills that would block its implementation.
But the real fight is in the Senate, where opponents are scraping to get 60 votes.
Inhofe's Environment and Public Works Committee approved the upper chamber's lead measure to scrap the rule,S. 1140, on a party-line vote in June. It is unclear if and when it might come up for a floor vote. Sen. John Barrasso (R-Wyo.) signaled his interest in the issue this week when he filed a version of that measure as an amendment to the upper chamber's highway package.
Reprinted from E&E with permission from Environment & Energy Publishing, LLC. www.eenews.net


27 July 2015 5:18am

Alan Bailey, Petroleum News, Shell, BSEE, Burger prospect, Chukchi Sea, Photo by Dave HarbourPetroleum News by Alan Bailey (NGP Photo).  On July 22 the federal Bureau of Safety and Environmental Enforcement issued permits allowing Shell to drill the top hole sections of two wells in the Burger prospect in the Chukchi Sea. Shell now has all of the permits that it needs to start drilling.  However, BSEE is prohibiting Shell from drilling into hydrocarbon bearing zones until....


7-25-15 Raiding the Strategic Petroleum Reserve

25 July 2015 1:00pm

Senate Energy & Natural Resources Committee Communications Director Robert Dillon writes us that, "Reuters senior energy market analyst John Kemp today weighed in against a plan to raid the Strategic Petroleum Reserve (SPR) to pay for three years of a six–year highway bill."  Following is the article:

SPR oil sales would be a mistake before strategy review is concluded: John Kemp

Lisa Murkowski, Strategic Petroleum Reserve, US Senate, Energy Policy, Robbing the SPR, highway funds“The Strategic Petroleum Reserve is not an ATM,” Lisa Murkowski (NGP Photo), chair of the Energy and Natural Resources Committee warned the Senate this week. “It is certainly not the petty cash drawer for Congress.”

The senator from Alaska was criticising a proposal to sell 101 million barrels of crude from the government’s stocks to offset a shortfall in funding in the highway trust fund, used to pay for repairs to roads and bridges.

“Others are potentially looking to our Strategic Petroleum Reserve as nothing more than a piggybank,” Murkowski admonished her colleagues in a floor speech delivered on Wednesday.

There is nothing new or particularly surprising about Congress raiding pots of apparently surplus assets to pay for short term spending priorities.

Between fiscal 1993 and fiscal 2005, almost $6 billion worth of raw materials, previously considered critical, were sold from the national defence stockpile and the revenues used to meet spending needs elsewhere.

The stockpile sold a range of materials from aluminium oxide and chromium to cobalt, iodine, platinum group metals and tin.

Sale receipts were used to pay for everything from armed forces readiness to the provision of military equipment to foreign countries, a hospital trust fund and a memorial to the veterans of World War Two.

In Washington, where legislators are always looking for ways to spend money without raising taxes, seemingly under-utilised assets and unspent funding offer an irresistible target.

Recycling funding from old and outdated programmes to meet new and pressing requirement is not necessarily wrong.

Some of the oil stored in the SPR may be surplus to current requirements as a result of the U.S. shale revolution.

But it would be a mistake to sell SPR oil before Congress has conducted a proper debate about the stockpile’s future role in energy security.


The United States is obliged to hold stocks equivalent to 90 days net imports in government or private stocks as part of an agreement with its partners in the International Energy Agency concluded following the Arab oil embargo in 1973-74.

As recently as 2005, U.S. government stocks were equivalent to only 55 days worth of net imports, which were then running at 12.5 million barrels per day (bpd).

But thanks to shale, net imports have fallen to just 5 million bpd, while the stockpile has remained largely unchanged, pushing up the amount of import cover enormously.

At the end of 2014, the SPR’s was storing almost 691 million barrels of crude in giant salt caverns along the U.S. Gulf Coast. Stocks were equivalent to 137 days’ worth of net imports of crude and refined products.

In theory, the United States could sell up to 240 million barrels of crude and still comply with the requirement to hold stocks equivalent to at least 90 days worth of net imports.

If all those barrels could be sold at the current market price of around $50, the government could raise up to $12 billion from the sale of surplus oil.


Crude from the SPR has been released on only three occasions since it was established in the 1970s.

The first drawdown came in response to the beginning of Operation Desert Storm when the U.S. and its allies moved to oust Iraqi troops from Kuwait in 1991.

The second drawdown was ordered in response to Hurricane Katrina in 2005. And the third came in June 2011 in reaction to unrest in Libya and other Arab countries disrupting oil supplies.

The amount of crude released on each occasion was relatively small.

As a matter of law, the SPR was established to counter any “severe energy supply interruption” which could have a major adverse impact on national security or the national economy.

But its real purpose has been to protect the United States and its allies from attempted political blackmail by oil-exporting countries.

In 1973, Saudi Arabia and a number of other Arab countries cut oil production and banned the sale of crude to the United States in protest U.S. support for Israel.

In the event, the embargo was short-lived and not very effective. But the SPR was meant to ensure the United States could never be threatened in this way again by ensuring there was always enough crude on hand to enable the country to withstand an attempted economic siege.

The SPR’s effectiveness should be measured not by the number of releases or their volume but by the fact it has so rarely been needed.

Never again has there been a serious attempt to cut oil supplies to the United States to alter the country’s foreign policy.

The federal government has spent a total of $20.7 billion buying oil for the SPR over the last four decades at an average price of $29.70 per barrel, according to the Department of Energy.

The replacement cost of the oil is probably somewhere between $35 billion (at today’s price of $50 per barrel) and $105 billion (at the recent high of about $150).

The SPR looks like a fairly cheap insurance policy, especially since costs are basically sunk (most of the oil was originally purchased in the 1980s).


While there have been occasional calls for Arab countries to wield the “oil weapon” to influence U.S. policy, there have been no serious attempts since the 1970s.

How much of this has been due to the deterrent effect of the SPR rather than other changes in the oil market and the Middle East is impossible to say.

A new generation of Arab leaders took power after 1973 much closer to the United States. Iran’s revolution fundamentally altered the key relationships between Washington, Riyadh and Tehran and pushed the U.S. and Saudi Arabia closer together.

The rise of competing oil supplies from outside the Middle East, including from the North Sea, Alaska, the U.S. Gulf and the Soviet Union, radically changed the balance of power between OPEC and the consumer countries in the 1980s and 1990s.

And since 2008, the shale revolution has almost doubled indigenous oil supplies within the United States and given the country a much higher degree of energy independence, or at least self-confidence.

But the SPR has likely played a deterrent role. The SPR has acted as an effective “oil shield” which has given the U.S. government more freedom and confidence to face down threats and turmoil in the Middle East and other exporting regions.


It would be a mistake for Congress to use the SPR as a source of short term funding. Raiding a one-off asset to pay for highway maintenance and other recurrent expenditure makes no sense.

There does need to be a proper debate about the future of the SPR. Everyone agrees on this point, including the U.S. Department of Energy and the Government Accountability Office (the congressional spending watchdog).

“The Strategic Petroleum Reserve must be modernised for the 21st century,” Murkowski told her Senate colleagues this week. “Its size, its geographic disposition, the quality of the oil it stores ... these are all issues that merit further attention but we need to have a deliberative process ... what we do not need is a spur-of-the-moment deal”.

The Department of Energy is already conducting a review. But the strategy rethink should precede any sales, not the other way around. In the 1990s, the sale of formerly critical materials from the defence stockpile came only after the Department of Defense concluded they were no longer needed, not as a revenue raising measure.

There is a legitimate debate to be held about the future size, shape and role of the SPR. In the meantime, however, Congress should resist the temptation to make a short-sighted raid on the nation’s emergency crude reserves.

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