Shell’s Alaskan oil plan makes long-term sense amid questions over shale’s longevity
The National, by Steven Kopits. Shell announced this week that it was abandoning efforts to develop oil from the Alaska’s outer continental shelf (OCS).
Faithful readers may wish to review related personal correspondence from last night with our esteemed Aussie oil and gas analyst, here.
Our equally esteemed Mid-Atlantic oil and gas analyst friend adds this note today that should be an even stronger signal to Alaska's Governor Bill Walker.
And, what is that signal?
The note signals Walker that he better start acting as though Alaska were competing with oil and gas producing areas that have more competitive natural attributes.
Walker should observe that signal and begin sending his own signals to oil & gas industry investors. He should begin showing them that he fully supports their oil and gas projects; will defend them before the feds; will cease demonizing industry; will remove from the table options for increased industry taxes; and, will cease efforts to attach conditions to a gas transportation project, including the condition of state ownership.
He should also bite the bullet in Alaska's failing economy and begin decisively cutting state spending.
The company had drilled a well in the Burger prospect in the Chukchi Sea this past summer, but the results were disappointing. Although the company found hydrocarbons, the flows were insufficient to warrant further exploration. With that, Shell decided to suspend activities in Alaskan waters indefinitely.
Shell had such high hopes. If all went well, it would have produced an average of 650,000 barrels of oil for 35 years from the OCS. From 2025 until 2060, the OCS would power Alaska’s economy and contribute up to 10 per cent of domestic US oil production.
The project, which we estimated would cost more than US$300 billion in total, would have represented the largest infrastructure project in the United States in the next 15 years.
There was no more visionary initiative anywhere in the world.
For Shell, the Alaskan OCS was the third leg in the company’s answer to peak oil. Shell was among the first to recognize in 2005 that increasing oil production would be a heroic undertaking. Finding new oil would be “no cheaper, no easier”, it said.
To meet the challenge, Shell proposed a three-legged strategy. First, a massive gas-to-liquids plant would be constructed in Qatar. And it was. The Pearl GTL plant, as it is called today, came on line in 2011. It produces 8 per cent of Shell’s total output, equaling 260,000 barrels of diesel and lubricants daily.
The second leg of Shell’s strategy rested on a series of liquefied natural gas plants. These plans were essentially scrapped earlier this year when Shell canceled four LNG projects.
This left the third leg, Alaska, which was perhaps the jewel in the crown. The scale of ambition, the volumes, the duration and the vision were breathtaking. The commitment was enduring. Even when the going got tough, Shell hung in there and continued to fight for Alaska, despite head winds from regulators, Greenpeace and a series of technical setbacks.
With weak initial well results, however, Shell capitulated and has suspended operations in Alaska “for the foreseeable future”, which should be read as “permanently”.
The vision of oil scarcity that fuelled Shell’s ambitions after 2005 has dissolved, the victim of the shale revolution. As little as two years ago, the promise of shale was uncertain and underestimated (not least by me).
Whereas Shell was prepared to go to the ends of the earth for new oil, company management could have driven a couple of hours from corporate headquarters to a fully plumbed basin – the Permian – and produced more oil with nothing more than fracking and horizontal drilling.
Alaska is redundant under such circumstances. Consequently, until the shale revolution has run its course and oil prices have returned closer to $100 per barrel, expect Shell to keep its distance from Alaska. By the time the dust has settled, the wait could be a decade or more.
And yet I still believe in Shell’s earlier vision. Shale may prove an endless cornucopia of new oil, but maybe not. The oil and gas division of North Dakota’s Department of Mineral Resources has estimated that Bakken shale oil production would only be 35,000 barrels per day higher at the end of 2017 than it is today, even at Brent oil prices above $95 per barrel. Restarting US shale may take much higher prices and much more time than anticipated.
The flood might not last. No one expects shale growth to last past 2025, and many see a peak before 2020. Shell, by contrast, would not have begun flowing oil from Alaska until after 2025.
If we look in decadal terms rather than quarterly, Shell’s visionaries may ultimately be vindicated. Shale, to the best of our knowledge, will not cover us for more than a few more years. In all likelihood, we will need the oil for which Shell is searching in Alaska.
Nor has Shell entirely closed the door. Marvin Odum, Shell’s director of upstream Americas business, has said that Shell “continues to see important exploration potential in [offshore Alaska], and the area is likely to ultimately be of strategic importance to Alaska and the US.”
With oil prices at current levels, however, even three months has become a long time for a company such as Shell. Why was its decision to abandon Alaska announced two days before the end of the quarter? One might speculate that third-quarter financial results would be so disastrous that Shell would want to be able to demonstrate tangible, direct and immediate commitment to reducing expenses and capital expenditures. There is no easier place to cut than Alaska.
Even if everything went well, Shell would not see a dime from Alaska for at least a decade. Terminating Alaska improves the bottom line immediately.
But at what cost? We have allowed the surplus of shale oil to lull us into a false sense of security, that oil has become “cheaper and easier”. And in the short run, it has. But the long run is far from decided.
For now, oil in Alaska is dead. It is dead in Norway and Russia as well. Norway’s Statoil is struggling with costs on its Arctic Johan Castberg project, and Rosneft has conceded that it cannot proceed in Russia’s Kara Sea without its partner ExxonMobil.
Arctic oil, until the shale revolution ends, is in a deep freeze. But this does not mean that we will not need that oil, nor that current oil prices are sustainable.
Rather, the economics of the oil business have become so dire that even the most committed and visionary of companies are forced to abandon their most cherished plans.
- Can TAPS live long enough to support a new round of offshore exploration next decade (with production from any successful efforts therefrom in the decade after that)?
- Did Burger J materially reduce the technical assessment of the US Arctic’s prospective resources? (I have seen no on-line chatter about what the well actually found-out from a sub-surface perspective - in the long run this could be far more important than the regulatory/political issues that have received most media attention).
- Will Washington ever permit 1002 exploration/production and if so would that be sufficient to keep TAPS going until “1” above?
- AKLNG should help TAPS - but how will it fare given gas supply rivals internationally and the surprisingly socialist impulse from AK’s politicians?
My response to our Aussie oil and gas analyst friend:
Petroleum News. Fugro has been awarded a large geotechnical and geophysical program by ExxonMobil Alaska LNG LLC, AKLNG - a consortium of ExxonMobil, ConocoPhillips, BP, TransCanada and the state of Alaska. The 2015 G&G program follows successful completion of a similar but smaller program carried out by Fugro in 2014. More....
Faithful readers know we are dedicated to building and maintaining the most thorough archive existing anywhere, documenting the history of Alaska and Northern Canadian natural gas monetization efforts.
Herb Butler's contribution today helps bring us to the current era.
However, we provide here for your reference, links to the long and more detailed history of Alaska and Canadian northern gas pipeline and LNG projects.
We are indebted to Herb Butler and the Fairbanks News Miner for providing this Alaska gas project commentary and timeline. -dh
1976: The U.S. Congress passed the Alaska Natural Gas Transportation Act in an effort to encourage the construction of a gas pipeline from Prudhoe Bay to the Lower 48.
1980: A Right-Of-Way license was issued by the Federal Energy Regulation Commission to the Alaskan Northwest Natural Gas Transportation Company. In 2008, that license was voluntarily withdrawn. There are many conflicting opinions why this effort failed to deliver fuel gas to a large U.S. market. The primary reason was the refusal of the oil field producers to provide marketable (high quality) natural gas from the Prudhoe Bay field.
1999: The Alaska Gasline Port Authority was formed. AGPA is comprised of the three boroughs, Valdez, Fairbanks North Star and North Slope. The mission of this group is to develop a liquefied natural gas export system based in Valdez. The source of fuel gas is from the Prudhoe Bay oil field.
2003: The state of Alaska formed the Alaska Natural Gas Development Authority, whose mission is to develop a natural gas pipeline from Prudhoe Bay to Valdez and a spur line to Southcentral Alaska.
2004: The U.S. Congress passed the Alaska Natural Gas Pipeline Act to resolve or clarify many issues attendant to the permitting of an interstate Alaska natural gas pipeline. ANGPA also provided an $18 billion loan guarantee and some tax relief.
2007: The state of Alaska passed the Alaska Gas Inducement Act. AGIA would provide a $500 million matching contribution to the construction of a gas line from Prudhoe Bay through Fairbanks, Delta Junction, Tok Junction and into Canada following the Alaska Highway. Notice that the matching contribution seems to be the only inducement in this vehicle.
2008: TransCanada, a gas pipeline company, was awarded the only AGIA license. TransCanada states their pipeline would not be completed until 2018. Denali Pipeline was created by British Petroleum and Conoco in competition with TransCanada for the AGIA license and continued on with their project after TransCanada was selected by AGIA.
2009: The Alaska Gasline Development Corporation is created by the Legislature to advance the plans for Alaska Stand Alone Pipeline, another plan with no forward momentum.
2011: Denali Pipeline discontinues their pipeline project.
2014: TransCanada terminates the AGIA license but expresses an interest in building a pipeline from Prudhoe Bay to Southcentral Alaska (Nikiski) because of the work already accomplished under the AGIA plan. It is this position that Gov. Bill Walker wants to purchase for $100 million. A definitive plan or project does not exist to deliver high-quality natural gas to the LNG port in Nikiski. The Alaska LNG Project is added to AGDC’s responsibilities.
The Cook Inlet natural gas supply is dwindling at a continuous rate. Fairbanks Natural Gas buys its gas at Point Mackenzie in the Matanuska Valley from Enstar. FNG has had to pass on increasing prices to the local customers in Fairbanks. FNG is unable to expand its distribution in Fairbanks because of Enstar pricing and allocation. The expected shutdown of Cook Inlet natural gas sources will happen by 2020 unless a new gas field is found. At this point, there is no alternative source other than Prudhoe Bay.
FNG is trying its best to acquire quality natural gas in Prudhoe Bay, to no avail. The Prudhoe Bay gas is of extremely low quality because it contains 12 percent carbon dioxide (CO2) and approximately 76 percent methane. FNG cannot produce LNG (frozen methane) at Prudhoe Bay without extracting all of the CO2. This is because CO2 freezes much sooner than methane and therefore causes all kinds of freezing cycle stoppages. FNG and/or their producer must build an extraction system before a freezing system. Then there is the disposal issue. What do you do with all the CO2 that is extracted? FNG was purchased by AIDEA in 2015. AIDEA is spending a large amount of money to build gas storage and distribution systems in North Pole and Fairbanks without a guaranteed source of natural gas.
This is good news to the refineries and the liquid fuel distributors. They have some positive future expectations. We consumers in Alaska are facing a dilemma though. We must contend with a status quo situation well into the next years and maybe even longer. Large fuel oil bills will become even larger in size there is no doubt about that. The natural gas users are facing a grim future. They must think of reverting back to liquid fuel.
Two facades are in place in Alaska.
1. AIDEA has spent a large amount of money on a natural gas supply system in the Fairbanks and North Pole area without any guaranteed source.
2. Gov. Walker wants to pay TransCanada pipeline $100 million dollars for their interest in a pipeline project that does not exist. The Alaska LNG Project is only a plan, just like all the other plans before it. A schedule and budget does not exist. The media has reported proposed costs as high as $65 billion.
Herb Butler is a retired oilfield and refinery engineer who spent decades working in the oil and gas industry in Alaska. He lives in Fairbanks.
More about Timeline
More about Transcanada
- ARTICLE: Alaska governor plans to call for company buy-out in gas project
- ARTICLE: Companies file export application for Alaska LNG
- ARTICLE: Itemized work on Alaska gas line confidential
- ARTICLE: Feds: No more false starts on Alaska gas pipeline
Today, Facebook friends were mulling over the possible benefits of government ownership of Alaskan energy projects. Norway was sited, as it often is these days, as a place where government ownership has produced wonderful results. In fact, it seems that Alaska's governor, based on recent statements, may well be considering using Norway as an example of how Alaska should approach the monetization of its oil and gas resources.
We wrote the following piece today:
"Are Norway and Alaska Identical Twins, or Are They Apples and Oranges?"
"Norway is a sovereign country that, along with its ownership of companies, can and does eliminate costly appeals and delays by activists.
"Alaska is a quasi sovereign state whose energy activities are subject to federal regulatory delays and federally permitted (if not encouraged) due process, sue and settle tactics and "endless" judicial challenges.
"Yes, Norway can balance some of the inefficiency of government ownership by sympathetic government regulation.
"Socializing Alaskan industry produces all of the dangers of crony capitalism and all of the risks of hostile federal government regulation, augmented by costly and in many cases, frivolous social, political and legal activism.
"Norway and Alaska share some things in common, including a northern climate, majestic landscapes and bountiful natural resources.
"That does not mean this state and that country are alike in every way.
"Once again, we are cautioned about comparing apples and oranges.
FOR IMMEDIATE RELEASE
Contact: Miles Baker, VP External Affairs & Government Relations (907) 321-8650
AGDC Clarifies Status of ASAP Project
Federal Environmental Work on In-State Gasline Project Ongoing
September 28, 2015 Anchorage, AK – The Alaska Gasline Development Corporation (AGDC) released a statement today clarifying the status of the Alaska Stand Alone Pipeline (ASAP) project. In the last few days, several media outlets have incorrectly reported that the corporation’s board of directors took action to suspend work on the ASAP project during their September 23rd meeting in Anchorage.
In a prepared statement, AGDC President Dan Fauske said:
The Alaska LNG project continues to be this corporation’s number one priority. However, our board’s direction to management has been clear – continue to maintain the viability and readiness of the Alaska Stand Alone Pipeline (ASAP) project as the state’s backup plan. The corporation is prudently managing the state’s resources by eliminating duplication of effort and cost, but intent on preserving ASAP’s knowledge base and readiness in the event the Alaska LNG initiative does not progress to project sanctioning. At our September meeting, the AGDC board received a progress update from the ASAP team, but issued no directional change to management regarding the project.
In January, AGDC completed FEED and delivered a full Class 3 cost estimate for the ASAP project. The milestone was the culmination of a substantial body of work, conducted over several years and it was achieved on-time and under budget. However, in response to the State of Alaska’s decision to prioritize the Alaska LNG project, the AGDC board prudently adjusted the future work plan, budget and timeline of the ASAP project to bring it into alignment with key Alaska LNG decision milestones. This included postponing additional commercial activities pending an outcome on the Alaska LNG project. With principal ASAP engineering work completed, AGDC has concentrated its work efforts on continuing the U.S. Army Corps of Engineers (Corps) Supplemental Environmental Impact Statement (SEIS) process so that federal permits and right-of-ways for the ASAP project can be secured.
During last week’s board meeting, the ASAP project team confirmed that AGDC filed a revised Section 404 Clean Water Act permit application with the Corps on September 10th and would also be submitting an updated right-of-way lease amendment to the State of Alaska within the next several weeks. The team also highlighted that it has recently posted a new interactive map viewer to the ASAP website in support of the SEIS process. The map viewer allows the public to explore the project’s alignment, geographic footprint, facilities and design components in order to better visualize the project and its potential impacts.
The ASAP project is designed to deliver utility grade natural gas from Alaska’s North Slope to Fairbanks, Anchorage and as many other communities within the state as possible. The project consists of a gas conditioning facility, a 36-inch diameter pipeline from Prudhoe Bay to ENSTAR’s existing gas distribution system near Anchorage at Big Lake; and a 30-mile lateral to Fairbanks.
See Our Aussie Energy Expert's Current View On Alaska's Energy 'Leadership'
ADN/AP Shell Announcement by Dan Joling/Yereth Rosen
Our Commentary On Shell's Alaskan Arctic OCS Exit
With Alaska's "Plan B" failing what's wrong with relying again on "Plan A"?
Alaskans will be seriously questioning the future of their state when they wake up and read the news this morning.
This is because Alaska is more than any other North American state or province dependent on oil production and production is down, down, down.
Alaska North Slope (ANS) production once fed about 20% of domestic oil supply at a rate in the '80s that exceeded 2 million barrels per day.
The Trans Alaska Pipeline System (TAPS) transporting that oil is about 40 years old now and -- as important as it still is -- it is merely a reflection of its former, vigorous self, losing about 5% of its throughput every year as ANS field production declines. It's nearly 3/4 empty and without added production could shut down in a few years.
Shell's success could have helped sustain Alaska's job economy and ANS throughput in TAPS.
Alaska depends upon taxes and royalties from oil flowing through TAPS for almost 90% of its lavish state operating budget.
Recent statistics label it the highest per capita spending state in the nation and the highest per capita debtor state in the nation. It has the highest number of non-profit corporations in the country per capita, most of which are directly or indirectly dependent on oil for at least part of their budgets.
Available state savings accounts currently protect a $3.5 - 4 billion annual operating deficit, but that savings will be gone in a year or two. Even a return to $100/barrel oil would not put Alaska in the black based on current production and state spending trends.
In addition, over a third of the 49th State's total economy depends on oil revenue and oil-dependent jobs.
With falling production and increased opposition to oil operations both within and from outside Alaska, state policy has drifted aimlessly for many years.
It has pretty much been a policy of tax oil and spend that oil money while minimizing taxes/fees on people and maximizing transfers of state wealth to them.
"Plan A" first began to surface in the mid-1980s when various business groups began advocating for a constitutional amendment limiting government spending via a population and inflation formula.
By the early 1990s the University of Alaska's Institute of Social and Economic Research (ISER) began showing the public and elected leaders how very modest spending controls THEN could have provided a "safe" and sustainable glide path toward a long-term, sustainable economy for current and future generations.
ISER has provided another path to sustainability (i.e. "Maximum Sustainable Yield") for the last few years, also largely ignored.
Neither an effective constitutional spending limit nor economically viable "safe economic landing" were embraced by those holding the purse strings and whose pleasure and reelection were sustained by taxing oil and spending on constituent desires. (Note: Civic groups did succeed passing, in 1982, an amendment, but lawmakers loosened it to allow capital project designations, among others, to weaken the stricter "population and inflation" formula. (Alaska Constitution, Article IX, Sec. 16)
With oil income falling and spending continuing to increase over the years, even the most deluded politicians could see that "something should be done".
We call that "something" the strategy of hope, which took four forms:
a. Hope that the 1980 Alaska National Interest Lands Conservation Act's congressionally authorized "1002" area within the Arctic National Wildlife Range (ANWR) would be successfully developed, contributing to TAPS throughput, jobs and economic stability; and
b. Hope that sufficient new oil would be found in the National Petroleum Reserve Alaska to maintain robust throughput of TAPS, state economic stability and jobs; and
c. Hope that sufficient new oil would be found within existing Alaska North Slope fields and other state lands to maintain robust throughput of TAPS, jobs and state economic stability; and
d. Hope that sufficient new oil would be found in the Alaskan Arctic OCS to maintain robust throughput of TAPS, jobs and state economic stability.
And wouldn't it have been nice if all four hoped-four outcomes had materialized?
How has the strategy of hope worked out for Alaska?
Well, the State has continued its upward spending and taxing trend, somewhat ameliorated by an oil tax reform law two years ago, but continually challenged by liberal lawmakers and their constituencies since then.
The president is operating the federally owned land in ANWR as if it were a wilderness area -- part of his end run around Congress using the 'pen and a phone' tactic.
The president's Bureau of Land Management (BLM) has promulgated regulations that effectively 'lock up' half of the National Petroleum Reserve Alaska (NPR-A). Together with other regulatory agencies like the EPA, BLM has also significantly delayed and increased the expense of new oil production in areas of NPR-A that are open to exploration and development.
The current Governor is raising the old Palin flag of populism and anti-oil rhetoric, threatening the oil industry, endangering a pending LNG project, and signaling investors that investment even in existing oil fields -- and other state lands -- is accompanied by a high risk premium. Some even believe that the objective of the current governor is to socialize the energy industry (Our notes, here and here).
Now, on top of these first three disappointing Plan B results comes Shell's decision based, in part, on a hostile, federal regulatory regime.
Plan A -- involving support for Alaska's major industry and spending discipline -- didn't work out when the Plan B strategy of hope offered the above 4 lifelines.
Now that the reality is setting in that there is so little hope for the strategy of hope, Alaska may be forced to reconsider the best approach of all: the original Plan A.
Plan A has the negative qualities of being distasteful to big public spending and high oil taxing constituencies.
It requires citizens to 'do without' certain government amenities.
It requires lawmakers and the governor to seek the high road, be the adults in the room and prepare a sustainable economy for the next generation. This includes fighting the hostile and debilitating overreach of the federal government.
But Plan A has the major benefit of preventing intergenerational inequity, of providing a sustainable economy for Alaska's children rather than robbing their generation to secure the selfish wants of this generation.
Keep watching. We'll know the political class for what it is after absorbing today's news.
Will politicians embrace Plan A along with the dedication and self discipline it requires?
Or, will they do everything to avoid political pain at the expense of the next generation (i.e. as the federal government has done), perhaps by constructing a Plan C that is no more responsible than Plan B's strategy of hope?
Royal Dutch Shell will cease exploration in Arctic waters off Alaska's coast following disappointing results from an exploratory well backed by billions in investment and years of work
Shell has spent upward of $7 billion on Arctic offshore exploration, including $2.1 billion in 2008 for leases in the Chukchi Sea off Alaska's northwest coast, where an exploratory well about 80 miles off shore drilled to 6,800 feet but yielded disappointing results.
"Shell continues to see important exploration potential in the basin, and the area is likely to ultimately be of strategic importance to Alaska and the U.S.," Marvin Odum, president of Shell USA, said in The Hague, Netherlands. "However, this is a clearly disappointing exploration outcome for this part of the basin."
Shell will end exploration off Alaska "for the foreseeable future," the company said, because of the well results and because of the "challenging and unpredictable federal regulatory environment in offshore Alaska. (Our emphasis added. -dh)
The Burger J well drilled this summer will be plugged and abandoned, Shell spokeswoman Megan Baldino said.
Other references will be added here:
- Wall Street Journal
- Greenpeace's "Great News"
- Alaska Oil & Gas Association
- Consumer Energy Alliance
Alaska's LNG Prospects
Today, our Aussie oil and gas analyst friend wrote:
Further to the news story on Friday about the sovereign risks facing LNG projects even in the USA, such as Alaska LNG (AKLNG) - Alaska's populist Governor has subsequently formally introduced a concept that no doubt will look attractive to his peers in Mozambique, Tanzania, etc - a "gas reserves tax".
The intent of this concept is to tax resources in the ground, thereby presumably encouraging oil companies to develop assets.
The concept shows a fundamental lack of understanding as to what are "reserves" - which seems surprising for a State which is built on the oil industry.
Although Alaska's North Slope contains very substantial and well understood contingent resources of gas - it contains no gas reserves and will not do so until AKLNG reaches FID (i.e. reserves require commerciality).
By seeking to tax in-ground resources, Alaska's Governor reduces the chances of such resources actually becoming (commercially available) reserves.
Free subscription to Aussie Oil & Gas Observer
September 25, 2015
Regular readers will know that this blog considers the Alaska LNG (AKLNG) project to be the Aesopian tortoise of the LNG project world – not as flashy as some, but plodding towards first gas next decade.
However, that tortoise carries a heavy shell that would be familiar to LNG project proponents in most locations around the world – a Government that wants to maximize its share of something that does not as yet exist – and therefore risks getting a larger share in nothing rather than a reasonable share in something.
Australian readers of this blog will likely be familiar with only one Alaskan Governor – the surprisingly socialist (when it comes to taxing oil companies) Sarah Palin. Her populist instincts live on in the State and even the Russian news service Interfax today points out that AKLNG risks being bogged down by politics
Alaskan based website Northern Gas Pipelines today provides an update on the latest Government meddling in AKLNG and asks the reasonable question – “with so many government cooks in the LNG kitchen, really, what could possibly go wrong?”
SitNews, Ketchikan, Alaska, by Mary Kauffman
Alaska Governor Bill Walker issued a proclamation Thursday calling the Alaska Legislature into a special session next month to consider legislation to move a project forward to get the natural gas on the North Slope to market. Efforts to to commercialize North Slope gas dates back to the 1970s.
Addressing what the Governor describes as the urgency of North Slope gas production, Walker called the special session to be held in Juneau on October 24th.
“With a $3.5 billion budget deficit, this gasline project has gone from a wish-list item to a must-have,” said Governor Walker. “Under the negotiation process I inherited, very little has been accomplished on the commercial agreements. It is time to make the necessary legislative changes so a single party cannot delay the production of Alaska’s natural gas resources and sway our destiny.”
Senator Lisa Murkowski's reaction to Shell's announcement
U.S. Sen. Lisa Murkowski, R-Alaska, today released the following statement regarding Shell’s decision to suspend operations in Alaska’s offshore waters:
“I am extremely disappointed by this decision, just as I have been deeply frustrated by the years-long path that led to it.
“In the more than seven years that Shell has held leases in the Chukchi, it has only recently been allowed to complete a single well. What we have here is a case in which a company’s commercial efforts could not overcome a burdensome and often contradictory regulatory environment. The Interior Department has made no effort to extend lease terms, as recommended by the National Petroleum Council. Instead, Interior placed significant limits on this season’s activities, which resulted in a drilling rig sitting idle, and is widely expected to issue additional regulations in the coming weeks that will make it even harder to drill. Add this all up, and it is clear that the federal regulatory environment – uncertain, everchanging, and continuing to deteriorate – was a significant factor in Shell’s decision.
“What we need – but still do not have – is a predictable and sensible regulatory system both onshore and offshore that encourages companies to make major investments in our future. Continued uncertainty will only further damage our competitiveness and our economy. And so today, I call on the administration to work with Alaskans – to develop a legitimate plan, driven by our input and preferences, to ensure the prolific resources in our federal areas are produced.
“There are many steps that can be taken, if the Interior Department and others commit to working with us. We must enable the sanctioning of GMT-1 and further development in NPR-A, rapidly progress Liberty and open new areas in the nearshore Beaufort Sea, extend offshore lease terms, conduct Lease Sale 237 as scheduled, finalize a strong Five-Year Plan for 2017-2022, provide for offshore revenue sharing, and expedite leasing throughout the state – including the non-wilderness portion of ANWR.
“There is also more at stake here than the current status of one company’s exploration program. Development in the Arctic is going to happen – if not here, then in Russia and Canada, and by non-Arctic nations. I personally believe that America should lead the way. The Arctic is crucial to our entire nation’s future, and we can no longer rely solely on private companies to bring investments in science and infrastructure to the region. As the Arctic continues to open, we urgently need to accelerate our national security investments in icebreakers, ports, and other necessities.” (See the source here.)
TODAY'S RELEVANT CONSUMER ENERGY ALLIANCE ENERGY CLIPS:
Southeast Green: PACE Says EPA's Clean Power Plan Would Raise Consumer Costs, Yet Fail to Lower Earth's Temperature
The Partnership for Affordable Clean Energy (PACE) issued a statement today that criticized the Environmental Protection Agency's unprecedented mandate on carbon dioxide emissions under its Clean Air Plan, especially the change to demand more reductions by 2030.
DC City Biz List: Offshore Drilling Could Boost The Economy Or Be An Unnecessary Risk
Drilling for oil the coast of Virginia is either a chance to boost the economy or an unnecessary risk for beachfront communities and the environment. Voices on both sides of the argument were in Richmond on Thursday for a forum hosted by the Consumer Energy Alliance.
Consumer Energy Alliance: CEA Leads Discussion on the Need for Responsible Atlantic Offshore Energy Development
Consumer Energy Alliance today hosted the 2015 Atlantic Energy Forum in Richmond, Virginia, featuring Abigail Ross Hopper, Director of the Bureau of Ocean Energy Management and other distinguished panelists.
New York Times: Shell Abandons Disappointing Offshore Alaskan Well
Royal Dutch Shell said Monday that it would stop exploration off the coast of Alaska “for the foreseeable future.” The decision came after the Burger J well, which the company drilled this summer, produced disappointing results. The company said the well had “found indications of oil and gas, but these are not sufficient to warrant further exploration” of the Burger prospect, a geological structure.
The Hill: Senate Dems tell Obama to end Arctic drilling
Some Senate Democrats are once again asking President Obama to end oil and natural gas drilling in the Arctic Ocean. In a letter Friday, 12 senators asked Obama to block any additional drilling after Royal Dutch Shell wraps up its exploratory drilling in the Chukchi Sea, northwest of Alaska, this fall.
The Hill: Clinton explains shift on Keystone, other key issues
Hillary Clinton on Sunday pointed to the nation’s shifting energy profile for her opposition to the Keystone XL pipeline after she had initially seemed to voice support for its construction. In an interview on NBC’s “Meet the Press,” Chuck Todd asked Clinton if her position on Keystone had changed as a matter of political expediency.
Post and Courier: Hillary’s slick move on XL pipeline
Hillary Clinton continued her unimpeded march toward the Democratic presidential nomination for 2016 by announcing her opposition to the Keystone XL pipeline. In doing so, she checked another box on her campaign strategy list, reassuring some core Democratic voters and probably ensuring some large campaign contributions.
The Hill: Energy empowers the world’s poor
The White House, the United Nations, even the Vatican are in full court press for action to reduce manmade global warming at the climate summit in December. Many well-intentioned people believe manmade global warming is so dangerous we should spend trillions trying to prevent it by reducing emissions of carbon dioxide (CO2), which would require tremendous reductions in fossil fuel use.
Fortune: Why America’s power grid needs natural gas now more than ever
Now that the Obama administration has finalized its Clean Power Plan regulating greenhouse gas (GHG) emissions from the power sector, the focus of attention turns to the states, which must now find a way to reduce emissions consistent with the Plan. One question states face as they envision a lower carbon future is how much to rely on natural gas-fired generation.
Washington Examiner: House sets vote to lift oil export ban
The House is set to consider a bill on the floor this week to lift a 40-year-old ban on exporting crude oil from the United States. The bill is being supported by the House leadership as integral to the Republican energy agenda this Congress, and many high-level lawmakers have vowed to see it passed before the end of the year.
Bloomberg: Oil Traders May Look to the Sea for Profit Amid Price Collapse
The global oil glut may soon expand to the ocean. While traders are already cashing in on the surplus by housing oil in onshore tanks across the globe -- including on the tiny Caribbean island of St. Lucia-- expanding the storage to tankers at sea may near a point where it becomes profitable, according to Citigroup Inc., Goldman Sachs Group Inc. and IHS Maritime & Trade.
Associated Press: Alaska’s Walker brushes aside reserves tax criticism
Gov. Bill Walker on Friday brushed aside criticism from Republican lawmakers that they were blindsided by his call to reinstate the gas reserves tax during the upcoming special session. “I sat right at this table and talked about fiscal certainty and project certainty,” Walker said during a news conference at his Anchorage office. He met with lawmakersMonday to inform them of his call for the special session, which starts Oct. 24 in Juneau.
Alaska Highway News: Despite fracking fights, resource extraction key for Peace Region, says NDP candidate
When Kathi Dickie was considering whether to run for parliament as a New Democrat in Northeast B.C., one question was on the top of her mind. "My question to the NDP was if you're against development of our natural resources, then I'm not your candidate," Dickie told the party brass.
Beaumont Enterprise: Keystone XL Pipeline needs market decision
Democratic presidential candidate Hillary Clinton came out against the Keystone XL Pipeline last week, a decision that will have an impact on the 2016 race. And Southeast Texas, because the Valero refinery in Port Arthur would process 150,000 barrels a day of tar sands crude from Canada - if it ever gets here.
Midland Reporter-Telegram: Government agency plans intensive safety study - Two-year project targets all aspects of oil and gas industry
High salaries and soaring numbers of new jobs were not the only things attracting attention as the oil and gas industry boomed in recent years. Industry fatality, injury and exposure rates drew focus, especially from the National Institute for Occupational Safety and Health, part of the Centers for Disease Control and Prevention.
Fuel Fix: California regulators restore emissions-cutting fuel rule
California regulators on Friday restored ambitious rules to cut transportation fuel emissions 10 percent within 5 years. The rules further strengthen California’s toughest-in-the-nation carbon emissions standards, but oil producers warn the changes could drive up costs for consumers at the gas pump.
Denver Post: Colorado oil companies say they are safer, stats say otherwise
The country's oil and gas companies say they are cooperating more and working harder to make jobs safer for employees even as a new report suggests oil-field work has never been more dangerous. The industry touts the rise of training networks, partnerships with governments and tough certification standards as helping to improve the work environment in one of the most dangerous jobs in the country.
Fuel Fix: Pro-industry group throws support behind drilling on Texas university land
A pro-industry group is firing back at calls by environmental advocates to restrict drilling on university land in Texas, arguing that oil and gas revenue has provided massive financial support for the University of Texas and Texas A&M.
Houston Chronicle: Community colleges offer training for petrochem jobs
Petrochemical plants along the Texas Gulf Coast and the Port of Houston are spending billions of dollars to expand facilities. It is estimated that these projects, along with the retirement of existing workers, will provide jobs for more than 50,000 skilled workers.
Austin American-Statesman: Houser: Concerns about fracking on UT land overstated
University Lands, which comprises about 2.1 million acres of land in West Texas, is a resource unlike any other in the nation. The lands were set aside in 1839 specifically to benefit Texas higher education. Today, more than 20 academic and health institutions in the University of Texas and Texas A&M systems benefit from these assets.
Baton Rouge Advocate: Our Views: New roles for natural gas, including on the road, will help Louisiana’s growing natural gas industry
The price of oil is sharply down from last year, but if there’s one thing Louisiana has still got, it’s lots of natural gas at a historically low price level. That is of course good news for the metropolitan areas of the state, including big refineries in Baton Rouge and Lake Charles and in the River Parishes above New Orleans.
Columbus Dispatch: Oil, gas industry boosts local economy
There is no question, these are tough times for Ohio’s oil and gas industry. Prices for crude oil and natural gas are at their lowest levels in decades. The downturn in prices and drilling activity has caused many people to ask questions: Is Ohio’s oil and gas industry still a major contributor to our local economy? How important is this industry to the average Ohioan? The answers are yes, and, in fact, more important now than ever.
Washington Times: GOP will allow tax vote, if Democrats secure enough support
Leaders of the Pennsylvania Legislature’s Republican majorities will allow a floor vote on a budget package that includes an income or sales tax increase if Democrats can secure enough support to pass it, officials said Friday.
Tribune-Review: 2 Marcellus pipeline projects move forward
Two large pipeline projects aimed at easing a glut of natural gas from the Marcellus shale advanced in the federal permitting process this week. Houston-based Columbia Pipeline Group said its proposal to build the $2 billion, 165-mile Mountaineer Xpress in West Virginia entered a pre-filing phase before the Federal Energy Regulatory Commission.
WKBN: Judge tosses Pa. landowners’ lawsuit against fracking opponents
A judge has dismissed a lawsuit that landowners filed against people and groups who oppose fracking in a western Pennsylvania township. Natural gas drilling has been delayed in Middlesex, Butler County while some of the rural community’s 800 residents challenge a zoning ordinance that would allow drilling in 90 percent of the rural township.
Myrtle Beach Sun News: Offshore Wind a Viable Source for Future Electrical Energy
It’s evident, or should be, that electrical energy in the future will come from sources other than fossil fuels such as coal, oil or even natural gas. Offshore winds are one of the most viable alternate energy sources and coastal South Carolina residents should applaud ongoing efforts to produce power from the wind.
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Suncor (TSX:SU), Canada's largest energy company, boosted its stake in the Fort Hills oil sands project
ADN by Pat Forgey. The big oil companies that plan to produce and ship North Slope natural gas have agreed to pay $16.5 billion in property taxes on the huge project, but they'll pay them to the state instead of local governments, Revenue Commissioner Randy Hoffbeck said Wednesday.
“This past Monday, employees were informed of organizational changes being implemented over the next several months. At this time, our new structure has resulted in a reduction of some senior leadership positions. Moving forward, staffing levels will be further impacted,” wrote company spokesman James Millar in an email.
NGI Daily by Joe Fisher. Alaska Gov. Bill Walker (NGP Photo) plans to hold a special session of the state legislature next month related to the Alaska LNG project. The main, and perhaps only, topic is expected to be a potential state buyout of TransCanada Corp.'s stake.
|Alaska Journal of Commerce by Tim Bradner.
Alaska LNG Project managers presented an upbeat report on technical progress of the giant gas project in a Sept. 9 briefing to legislators, but also warned of the economic challenges faced.
Steve Butt (NGP Photo), an ExxonMobil official who is manager of the overall project, described the possible complications of an expansion of the pipe diameter requested by Gov. Bill Walker. However, if the expansion were done the goal would be to keep the project on schedule for a 2018 or 2019 construction decision, he said.
Butt said there are about 1,000 people at work on.... More...
A deal would have to occur by Dec. 15 due to provisions of agreements between the state and the pipeline company. Lawmakers have received notice of the special session, which is expected to end by Thanksgiving. More....
Forbes by Brigham A. McCown. Alaska was long at the vanguard of America’s energy industry. At one time the State of Alaska accounted for as much as one-quarter of the entire country’s domestic oil production. Alaska’s vast fields also served as a source of pride – and the backbone of the state’s economy. As production surged, it was common to hear industry men revel in the United States’ diminishing reliance on foreign supplies as they worked rigs up and down regional reserves.
Yet, as energy development in the lower 48 has burgeoned over the past decade, those refrains have waned.... More...