Senate Energy and Natural Resources Committee Communications Director, Robert Dillon (NGP Photo), wrote us this morning, "The New York Times recently ran an article with a headline pronouncing the “end” of Alaska’s energy boom. The reporter focused on how economic anxiety is affecting the state’s Senate election, but in doing so, missed a critical point about Alaska’s “dwindling” production: the main reason it continues to fall is because the federal government refuses to allow access to the vast resources on federally controlled lands." Here is the NYT article, by Kirk Johnson. Below is Dillon's full response which we recommend to all of our readers. -dh
Response To NYT Alaska Energy Article
Today's Other Energy Links:
CBC. A meeting report between Prime Minister Stephen Harper and new Alberta Premier Jim Prentice, "...Prentice campaigned on that experience and has highlighted the importance of market access for Alberta oil during his time as premier so far."
World Energy News. Russia's state-controlled gas company Gazprom may drop its Vladivostok LNG project in Russia's Far East in favour of pipeline gas supplies to China, the firm's Chief Executive Alexei Miller told reporters ... (today).
Fairbanks News Miner Op-Ed by Bruce Campbell. ...no one has done more to impede and slow the development of Alaska’s natural gas than (Bill) Walker. If this is his idea of “support,” voters need to be wary of his claims to “support” any issue....
Huffington Post. Outside super PACs have played a major role supporting Sen. Mark Begich (D) as he faces a tough re-election race against former Alaska Natural Resources commissioner Dan Sullivan (R). (We recently analyzed the effect of this race on energy policy. -dh)
We certainly accept the premise of the New York Times article. Falling production is provoking economic anxiety, bordering on an economic crisis, in Alaska. Yet, it is also completely unnecessary, because there’s plenty of oil in Alaska. In its Annual Energy Outlook for 2014, the Energy Information Administration estimates that Alaska – alone – has 38 billion barrels of technically recoverable oil. Some of that oil is located on state lands, in the form of reserves at existing fields. But the lion’s share is in the Outer Continental Shelf (23 billion barrels), the non-wilderness portion of the Arctic Coastal Plain (over 10 billion barrels), and the National Petroleum Reserve-Alaska (roughly 1 billion barrels).
It’s also important to keep in mind that whenever Alaskans are actually allowed to look for oil, we tend to find more than expected. So in a massive state with huge swaths of land that remain unexplored, 38 billion barrels could ultimately prove to be an underestimate. Certainly, that was the case with Prudhoe Bay, which is now at 17 billion barrels produced and counting.
For today’s purposes, though, we’ll stick with EIA’s number: 38 billion barrels of oil. How much is that, exactly? Well, if produced at a rate of 1 million barrels per day, Alaska’s oil would last for 38,000 days – or about 104 years. If production is allowed to reach even higher rates, Alaska could have enough resource in the ground to replace nearly 30 years of oil imports from OPEC or more than 50 years of oil imports from the Persian Gulf.
The problem is that the federal government, which controls more than 60 percent of the land in Alaska, has repeatedly blocked efforts to develop our resources. Despite President Obama’s willingness to take credit for rising production on state and private lands in the Lower 48, his real record is best revealed in places like Alaska. He and his administration have repeatedly denied access to promising lands; blocked or delayed the approval of roads and bridges needed so that production can begin; and issued regulations that fail to hold up in court.
It’s usually more instructive to judge someone by their actions rather than their words, and the Obama administration is no different. The administration has now locked up half – more than 11 million acres – of the NPR-A, an area explicitly reserved for energy production. The administration is “revising” the management plan for the Arctic coastal plain; most interpret that as a plan to lock the area up as wilderness after the election, even though Congress has repeatedly rejected bills seeking the same. The administration is also rewriting its rules for offshore exploration in Alaska and subsequently delaying efforts to return to an area that was safely explored and successfully drilled more than 20 years ago.
President Obama is not pursuing an “all of the above” strategy in Alaska. Instead, his administration’s restrictions are now inducing levels of economic anxiety in local residents that the New York Times has deemed worthy of the national spotlight. We appreciate the coverage, but what we’d really like is a president and a Senate that will work with us to solve the problem – by producing more of Alaska’s energy.
6-25-14 "This is Alaska's time -- and it feels like we're back in the game" - ConocoPhillips Alaska President Trond-Erik Johansen
Our friend, Alaska Salmon Alliance Executive Director Arni Thomson (NGP Photo) provides us with this link to the Seattle Times: "North Dakota is booming, and its largest city has reinvented itself, attracting creative types and energetic entrepreneurs."
Recently, we pointed out that Alaska had the lowest domestic product gain of any state, during 2013...in sharp contrast to other oil producing states that are moving ahead of Alaska, including North Dakota, Texas and even California.
Our friend from Senator Lisa Murkowski's Energy Committee Staff, Robert Dillon (NGP Photo), today gave us perspective on this week's federal approval to export lightly refined product.
Dillon wrote, "over at the Houston Chronicle's Fuel Fix blog: Jennifer Dlouhy has a nice summary of the Commerce Department’s decision yesterday to allow Pioneer and Enterprise to export condensates that have been lightly processed or 'stabilized' in a distillation tower, thereby turning them into 'refined products.'
"While the decision does not end the outdated policy that bans most crude oil exports," Dillon said,"it is a step in the right direction. Sen. Lisa Murkowski, the ranking Republican on the Senate Energy and Natural Resources Committee, has been pressing the Obama administration to lift the 1970s-era export ban since January. She has suggested a three-step road map to ending the ban, including allowing the export of condensates and a presidential finding that modernization of our export policy is in the national interest."
The oil export ban issue is important to Alaskans since the ability to export crude oil broadens the market for and improves the price of Alaska oil.
It is important to all Americans, since the ability to export improves US balance of payments, can assist our allies in becoming less dependent on unfriendly sources and enhances job creation.
It is important to Canada since a lifting of the US oil export ban could expand displacement and other economic strategies for most efficiently using North American energy supplies -- including throughput of the Obama-administration-delayed Keystone XL Pipeline project.
While we acknowledge local statistics of low unemployment in Alaska, we also know that can be a temporary condition unless Alaska's investment climate continues a one-year improvement trend since passage in 2013 of SB 21, the oil production tax reform bill.
If that job creating trend is killed by an ill-informed voter repeal of SB 21, Alaska will resume its slide past investment climate mediocrity toward insolvency. This is because Alaska is so dependent on oil production and sustainable oil production requires sustainable tax and regulatory treatment--among other things.
We would draw reader attention to the Resource Development Council for Alaska (RDC) story below.
Yesterday, speakers were confident in the economic future of the State, if...
...if, Alaska can become a more stable investment climate. It can do this by 1) soundly rejecting (i.e voting 'no' on) the August primary election proposition to repeal the state's improved, reformed production tax law that is already creating more investments ... and, 2) by giving investors confidence in the durability of fiscal certainty that could lead to a $40 - $60 billion LNG Export project. "It is up to us," as former legislator and incoming RDC president, Ralph Samuels (NGP Photo) said. -dh
"...we're back in the game!"
ConocoPhillips Alaska President Trond-Erik Johansen (NGP Photo-L) pretty well summarized the theme of yesterday's Resource Development Council for Alaska Annual meeting.
In his introduction of company Chairman and CEO, Ryan Lance (NGP Photo), Johansen said, “I’m sure many of you are aware that since oil tax reform legislation was signed into law a year ago, ConocoPhillips has announced new projects and increased investment in Alaska.
“We are hopeful”, he said, that “SB21 will stay in place so we can continue to build on the momentum that is here now. This is Alaska’s time – and it feels like we’re back in the game.”
In today’s Alaska, the two big political issues du jour both concern “Investment Climate”.
Calling on a background as former government relations director for ARCO years ago, I continue to think that a “good investment climate” exists when the tax and regulatory rules are competitive with other areas, and when those “rules of the game” are stable, predictable, and durable.
In short, after you invest your money in good faith, you are harmed and deterred from future investment when government authorities change the rules of the game –- to take more of the money you make, or to make it harder for you to get a return on your investment -- after the investment is in place.
Over a decade ago, the governor and legislature raised the production tax IN EXCHANGE FOR assurances of investment climate certainty that would permit large gas pipeline investments.
The severance…or, production tax was raised, sure enough, but the oil company investors were then "rope-a-doped" -- denied investment climate certainty. It was becoming crystal clear that, after several decades of relative investment climate stability (i.e. since 1981), in Alaska “A deal was no longer a deal”.
So, the first issue du jour dealing with a “good investment climate”, is the upcoming effort by some citizens to trade away long-term stability – by repealing the recently passed tax reform bill, SB 21 – for higher taxes in the short term. The second issue is whether investors have sufficient faith in the durability and reliability of Alaska’s fiscal policies, to plunk down $40- $60 billion on a gas pipeline and LNG export project.
* * *
The 2013-14 RDC president, Phil Cochraine (NGP Photo-L), opened RDC’s 39th Annual Meeting at the Dena’ina Convention Center in Anchorage by introducing Anchorage's host mayor, Dan Sullivan, who with his Energy Advisory Counsel over the years, detected the need and successfully lobbied for improved oil industry investments in the Cook Inlet area of the state.
He went on to recognize board members, veterans, staff and Paula Easley (NGP Photo), long-time executive director and then board member—who received a standing ovation.
He recognized elected officials in the room, including Lieutenant Governor Mead Treadwell, Senators Anna Fairclough, Cathy Giessel, Charlie Huggins, Kevin Meyer and several State Representatives including Mia Costello, Shelly Hughes, Craig Johnson, Bob Lynn, Lora Reinbold, Dan Saddler, Bill Stoltze and Geran Tarr and (Please let us know of others so the archives may be accurately revised.)
Alaska Oil & Gas Executive Director Kara Moriarty then addressed the large crowd of some 1,200. “Alaska runs on oil,” she said. Moriarty emphasized the importance an improved investment climate leading to improved production upon which jobs, the state budget and the future of Alaska’s children depends (NGP Photo). Pointing to the assembled children, she said, “These kids are our future ... future miners, future commercial fishermen…. It’s all about jobs.”
Moriarty warned that in the weeks leading up to the August primary election, “…you will hear about the SB 21 $2 billion give-away…that DOESN’T EXIST.” She also cited a recently completed McDowell Group study emphasizing the impact of oil industry investment on jobs. (View Moriarty's slide pack. Note that the actual presentation may have deviated somewhat from prepared remarks.)
Following the introduction by Johansen, Lance (NGP Photo) addressed, “The U.S. Oil & Gas Renaissance – Alaska’s Role” (We provide his slide pack here).
He said the U.S. oil and gas renaissance is growing because of a shale revolution and affirmed that the phenomenon has “staying power”. Canada is experiencing similar production increases which, together, make possible the increased export of natural gas by 2016.
At the same time, he said, Asian consumer demand for gas is providing a market for the increased gas supply. While several dozen LNG export terminals have been proposed in the U.S. and Canada, not all can be expected to be built, he said.
Alaska has fiscal challenges and Lance noted that Canada has certain ‘infrastructure challenges’, as we have discussed in these pages. The surviving LNG projects, he suggested, will likely come from areas encompassing competitive advantages, including “reasonable fiscal terms”. Lance emphasized that Alaska had advantages in the growing LNG marketplace, including its 40-year history of exporting LNG to Japan from its Cook Inlet plant at Nikiski and Alaska’s relatively close proximity to Asian markets.
He also said that Alaska’s role in producing more crude oil could be enhanced by reasonable policies. “ConocoPhillips has a 50-year history in Alaska and remains committed to the state,” he said. He said he sensed the excitement in the economy and emphasized that maintaining the tax reforms of SB 21would be, “…good for the state, good for jobs and good for industry.”
In an interview following the meeting, we discussed the nature of fiscal certainty with Lance. We asked about the importance of reliability to a gas pipeline decision. He said, “stability and certainty are pretty important when making investments over 40-50 years. “
He added that, “We just want an understanding that we can ... say this is the kind of returns we expect out of these projects and that does require some sense of fiscal certainty and stability.
“But I tell people”, he went on, “we handle this around the world everywhere. We have fiscal stabilization clauses in our contracts … with most governments and we make big investments all around the world. So this isn’t new ground we’ve had to tread.... ...we’ve done this globally, we know what it means, what we are just asking is … when we are in these big long projects that you keep us stable through the course of that period. “
We think no reasonable person would think Lance’s request to be unreasonable. Even Russians and Chinese don’t apparently think the request for fiscal certainty to be unreasonable.
As we probed the subject further, he said, “…people ask me about Russia, China, and where we’ve been for over 20 -30 years … we haven’t changed the contract most places.”
He added that in Alaska, the fiscal terms have changed, “numerous times”. He concluded, “…that’s why the companies are talking about this issue; talking about why we need to have some sense of stability and certainty as we go forward with these investments.”
If any elected official were to ask us, “how do we make the investment climate attractive to a gas pipeline investment,” we would say, “Dear Alaskan colleagues, you have a problem.”
We would explain that Alaska has to overcome the greed mentality behind statements like, “It’s our oil”, and “They represent their shareholders and we represent ours”.
Both of those statements are employed as excuses to rob investors of money after they have made investment decisions. Oil company shareholders and boards would never condone actions by their company to represent them by violating lease terms or breaking tax laws or vilifying public officials.
Yet Alaska over the last decade has taken billions more from oil companies after investments have been made and risks undertaken in good faith; passed tax legislation demanding retroactive payment; and, vilified Alaska’s most capable investors for no defensible reason.
Alaska's elected officials have given tax breaks to film producers and small oil companies that produced few jobs and little tax revenue while unfairly taxing large petroleum investors who employ many and pay much.
If Alaska wants to attract more investment leading to more oil production and a gas pipeline it had better start doing an attitude check. Like North Dakota and Texas and Oklahoma, Alaska just might be better served by admitting it is an oil state, appreciating that blessing and becoming proud of its standing as a big “oil patch state”.
Being friendly to investors does not mean giving away the store. It does mean becoming a place where, after an investment is made, the investor does not lose sleep wondering if the state’s leaders in the morning will decide they want to take more money and saddle the investor with new tax and regulatory burdens.
Like RDC President Ralph Samuels said, “It’s up to us”.
If our decision is to become a responsible investment climate, perhaps we can certify Trond-Erik Johansen’s hope that we are, truly, “back in the game”.
* See ADN story by Alex DeMarban (NGP Photo: DeMarban at press conference following luncheon speech.)
* See RDC's video of Lance's presentation.
For Ralph Samuels
RDC’s 39th Annual Meeting Luncheon
Dena’ina Convention Center
June 24, 2014
Thank you, Phil. It is my honor to serve as President of the Resource Development Council. Alaska faces many challenges, but there are also great opportunities on Alaska’s horizon.
GOLDPAN PRESENTATION TO PHIL COCHRANE
RDC has been fortunate to have both a strong board of directors and staff over the course of its nearly 40 years of existence. Our leadership team has been second to none and Phil Cochrane is no exception. Phil has served as RDC’s president for two consecutive years and helped guide our team as Senior Vice President for the two years prior.
At this time I would like to present Phil with our traditional President’s Gold Pan in appreciation for his service to RDC. Thank you Phil for your leadership, hard work, and unending commitment to the mission of RDC – growing Alaska’s economy through responsible resource development. (Applause)
LEGISLATURE AND OIL PRODUCTION TAXES
Over the past year, the 28th Alaska legislature and Governor Parnell’s administration made significant progress in affecting positive change for Alaska’s natural resource dependent economy. RDC members engaged in a proactive way by testifying, writing, calling and visiting their elected leaders on important issues. To all of you who responded to our repeated action alerts, thank you! If you didn’t step up, there is more work to do and there will be many opportunities to make your voice heard.
The legislature and administration made progress on advancing a large-diameter Alaska gas pipeline project by passing enabling legislation that empowers the state to become an owner in the Alaska LNG project. The legislature also passed injunctive security legislation relating to industrial operations in our state – an issue RDC has been working on for several years to bring more fairness and reason into the litigation process. RDC was at the forefront of these and many other issues.
For years RDC has been advocating for the reform of ACES, the oil and gas production tax put in place in 2007 that has been hugely responsible for an accelerated North Slope production decline. As you all know, oil production tax reform finally passed the legislature last year and RDC’s top priority this year is to defeat Ballot Measure 1, which would repeal the new tax structure that took effect January 1st and bring back the old failed ACES tax regime.
The new tax policy is a significant improvement and the industry’s response is encouraging. There is good reason to be optimistic that Alaska is back in the game and that the stage is now set for a future of growth and opportunity. At this time I would like to call on RDC Executive Committee member Kara Moriarty to further address this critical issue.
INTRODUCTION OF TROND-ERIK JOHANSEN
Thank you Kara. Turning to our program, RDC is pleased to welcome both Trond-Erik Johansen and Ryan Lance to our program. Mr. Johansen will be first out of the gate, followed by our keynote speaker. Mr. Johansen is president of ConocoPhillips Alaska, a position he assumed in April 2010. He joined ConocoPhillips in 1986 and has held a variety of petroleum engineering, well engineering and leadership positions in numerous locations in the U.S. and abroad. Please welcome Trond-Erik Johansen.
(Note for Ralph: Trond-Erik will introduce Ryan Lance)
(Any personal comments and reflections on the presentation. Present to Ryan as a token of our appreciation, Judy Patrick’s new book, “Photographs of Alaska’s North Slope: Arctic Oil.”)
A big thank you once again to all of our sponsors for their generosity, and each and everyone one of you for your ongoing support of RDC. With all of us working together, we can build a prosperous economy and overcome the challenges before us.
I would like to remind everyone to visit the RDC website at akrdc.org on a regular basis for the latest industry and issue updates. Today’s presentation, as well as all other RDC events and breakfast meetings, are available online.
Please mark your calendars for RDC’s annual conference this fall, which will be held on November 19-20th here at the Dena’ina. Our breakfast forums will resume in September.
One final note, in the next decade alone, Alaska will need to fill 7,500 oil and gas jobs. And with the potential Alaska LNG project and other oil and gas projects, there will be even more jobs available for Alaskans. The Alaska Department of Labor and Workforce Development – in partnership with industry and other stakeholders – unveiled a comprehensive workforce plan to prepare for oil and gas jobs now and in the future. There are cards on the tables at the back with more information. You can also go to the department’s website at Labor DOT Alaska DOT GOV.
In addition, as you leave today, please take with you a copy of our 2014 Annual Report, which is available on the tables and at the exits.
Finally, remember to VOTE NO ON 1 come Tuesday, August 19th!
This concludes the 39th Annual Meeting of the Resource Development Council. Thank you all!
ADN -- A 13-pound, battery-powered drone catapulted from a Prudhoe Bay gravel pit on Sunday has become the first authorized commercial operation by an unmanned aircraft over land in the United States. (See our breaking news alert from yesterday.)
Our friend, Katy, of energycitizens.org, write us today that, "Recent events in Ukraine and other parts of the world have made it abundantly clear that the United States can no longer sit on the sidelines. (See our related editorial.)
"By increasing liquefied natural gas (LNG) exports", she writes, "we have an opportunity to help provide security to our allies and strengthen our position as a global energy leader. It’s good for our country, good for jobs, and good for our allies.
"That’s why I’m asking that you take one minute out of your day to send a letter in support of the Cove Point LNG project in Southern Maryland.
You have a chance to make a big difference by speaking out on this important issue. Will you make your voice heard today?
The National Journal asked Consumer Energy Alliance President David Holt (NGP Photo) to weigh in on the political liability of the EPA regulations on coal power plants. He said:
“When it comes to a debate over the cost of basic necessities such as heat or electricity voters will not give candidates much wiggle room. The candidates who can make the case that their votes will support policies that make prices affordable are going to win over their electorate.” —David Holt, president, Consumer Energy Alliance
Today's Energy In Depth Headlines:
New York should regulate, not prohibit, development. Buffalo News, Op-Ed. In 2012, New Yorkers consumed more than 1.2 trillion cubic feet of natural gas, most of it coming from shale gas being produced in other states. We need to be regulating, not prohibiting, the development of natural gas in New York.
The War On Fracking Is Over — And The Greens Lost. Daily Caller, Op-Ed. Approximately one million wells have been hydraulically fractured over the last six decades without cases of water contamination. During Congressional testimony in 2011, Environmental Protection Agency administrator Lisa Jackson stated, “I am not aware of any proven case where the fracking process itself has affected water, although there are investigations ongoing.”
Cost-effective completions. Oil & Gas Financial Journal. In early 2006, the oil and gas industry soared to never-explored heights and profitability. The cost of individual projects began to receive less scrutiny, and an arms race to develop the next industry-revolutionizing technology and grab the corresponding market share was on.
US natural gas output will set a record this year. Kansas City Star. U.S. natural gas output will reach 73 billion cubic feet a day for the first time this year as new pipelines tap into shale supplies stranded in the Marcellus formation in the Northeast, a government report said Tuesday.
Water Shortage in West Does Not Stop Development. NBC News. Used since the 1940s, hydraulic fracturing is the process of drilling and injecting fluid into the ground at high pressure in order to fracture shale rock to release natural gas and oil. The fluid is a combination of water and chemicals, mixed with sand. As of now, the method is in use in 17 states, with a total of some 82,000 wells nationwide.
Drillers give updates on where they and their plans stand. Farm and Dairy. Consol Energy will begin drilling its 9,000-acre leasehold around the Pittsburgh airport in August. The company plans to drill 8,000 feet laterals on the wells and expects production to start flowing from the airport acreage in early 2015.
Sejm approves shale gas law. Warsaw Business Journal. Poland's lower house of parliament approved legal regulations on shale gas extraction on Tuesday. The bill, an amendment to the existing geology and mining law, is aimed at speeding up work on shale deposits in the country.
South's gas could help planet. Otago Daily Times, Op-Ed. This is a direct result of the US shale gas boom. That has enabled gas to replace coal in US power plants, and natural gas produces less than half the CO2 of coal.
US shale boom benefits Asian buyers. Oil & Gas Financial Journal. Using the US natural gas production boom to promote the idea of a sustainable "global gas glut," Asian importers have successfully managed to chip away at the longstanding oil-indexed pricing mechanism for liquefied natural gas over the past two years.
Texas Gov. promotes interstate competition. Bakersfield Californian. Texas Gov. Rick Perry, unapologetic for luring California jobs to his home state, told Kern County political and business leaders Tuesday the Golden State must free industry from excessive taxation, regulation and litigation in order to become more competitive.
Colorado at Epicenter of Political HF Fight. KUNC News. Colorado is quickly becoming ground zero for a political war over the future of hydraulic fracturing. Political spending both for and against potential anti-fracking ballot measures is already washing over the state.
Lawsuit Claims Ban Not Being Enforced In Lafayette. Associated Press. Two Lafayette residents are suing Colorado officials for not enforcing a ban on hydraulic fracturing. The Daily Camera reports that the residents say that a hydraulic fracturing ban passed in November is not being enforced.
Colorado now regulates industry. Reporter-Herald, LTE. The responsible opponents of hydraulic fracturing, those that study the science behind the issue, have concluded that the short-term hydraulic fracturing process itself is essentially non-damaging. They have rightly concluded that volatile organic compounds and methane emitted in the long-term production process are one remaining area in which the industry can improve its performance.
Will Potential HF Compromise Really Stop the Fight? CBS-Local, Column. Governor John Hickenlooper, along with the two largest gas and oil operators in Colorado, is shopping a new compromise to avoid potential hydraulic fracturing initiatives from appearing on the November ballot. Like any compromise, selling the idea to both sides of the aisle is difficult. But that is a political reality that is true for almost any significant compromise.
Loveland vote on separate ballot from county. The Coloradoan. On June 24, the city of Loveland will count citizens’ votes for or against a proposed two-year moratorium on hydraulic fracturing, a controversial oil and gas extraction process that has already been restricted in five Front Range cities, including Fort Collins.
Colorado could be 'ground zero' for debate. KUSA News. If state lawmakers can't reach a compromise on hydraulic fracturing, it could lead to a battle on the ballot getting national attention. Late Tuesday, it appeared a compromise drafted by Governor Hickenlooper and some of his democratic allies was falling apart. The Denver Business Journal reported the Colorado Oil and Gas Association voted against the proposal, after it sat at the table working to draft it.
Energy companies wait on IDNR. Rock River Times. A bill aimed to skip the rule-drafting process and begin hydraulic fracturing in Illinois recently died in the hands of legislators. The bill would have allowed hydraulic fracturing to begin while rules for the practice were still being drafted. It would have also imposed a moratorium in northern Illinois.
Regulating carbon dioxide emissions. Rock River Times, Op-Ed. Switching to natural gas could generate pressure to accelerate hydraulic fracturing within the state. Fortunately, an effort to weaken state HF standards was recently blocked.
Analyst says Australian shale play could benefit Lafayette. Daily Advertiser. Two oil conferences kick off this week: The Global Petroleum Show opened Monday in Calgary, Canada, and the Louisiana Energy Conference kicks off today in New Orleans. At both, attendees are sure to discuss where the next big boom will happen.
Libertarian conservatism at work in NC legislature. News & Observer, Column. On many issues, the legislature has strongly tilted public policy toward market forces – and against anything they perceive as being an impediment to the market, whether it involves the environment, health insurance, education, worker injury claims or taxes. So the legislature is trying to jump-start natural gas exploration of the state’s shale deposits –called hydraulic fracturing– by paying for some initial testing to entice energy companies to begin operating here.
Senate GOP calls on candidate to denounce 'dirty' green money. News & Observer. The state Senate Republican caucus on Tuesday rallied behind one of its own, Sen. Chad Barefoot, who is the object of a barrage of TV ads by national and state environmental groups. The News & Observer reported Tuesday that Barefoot, a Republican who represents parts of Wake and Franklin counties, is one of four GOP senators being targeted by a $1 million-plus advertising campaign because of their support of hydraulic fracturing.
House budgets zero dollars to drill shale-gas test holes. Greensboro News & Record. Republican leaders set aside no money in the state House’s budget proposal Tuesday to probe for shale-gas reserves, in contrast to the proposals recently made public by Gov. Pat McCrory and the N.C. Senate.
Bakken production growth expected to slow as the play matures. Oil & Gas Journal. Production growth from the Bakken tight oil formation is expected to moderate in the next 2 years as older wells decline and new wells strain to offset natural production declines, analysis by Wood Mackenzie Ltd. shows. The research and consulting firm expects Bakken oil production will increase at a rate of 100,000 b/d/year, rising from an average of 1.1 million b/d in 2014 to 1.7 million in 2020.
Statoil tackles Bakken flaring with innovation. Oil & Gas Journal. Statoil North America Inc. is at the forefront of efforts to reduce flaring in the Bakken shale in North Dakota, pilot-testing a mobile system that converts associated gas into CNG at the well site. The system, called the Last Mile Fueling Solution, uses a device the size of a standard 8 ft-by-20 ft. shipping container to compress associated gas.
MDU expands North Dakota presence with greenfield refinery. Oil & Gas Journal. A greenfield refinery, an interstate gas pipeline, and production from the Bakken shale are just a few of the projects being pursued by MDU Resources Group Inc. in the rolling prairie of North Dakota.
Marcellus continues to defy expectations. Oil & Gas Journal. Shale has been the primary driver of US gas supply growth since 2007, and the Marcellus shale has been the largest single contributor to rising production. Marcellus production topped 14.5 bcfd in March and is expected to account for nearly one fourth of all US gas output by 2015, according to a report by Morningstar Inc.
Bulgarian professor visits Marcellus region. Associated Press. Georgiev, assistant professor of economics at Sofia University in Bulgaria, spent the past month researching the economic impacts of Marcellus Shale drilling in Allegheny and Washington counties. By the end of his stay, he concluded that natural gas drilling in Bulgaria would "definitely be beneficial" from an economic perspective.
Critics challenge Sunoco Pipeline as public utility. Philadelphia Inquirer. Sunoco is repurposing an 83-year-old refined-products pipeline to transport Marcellus Shale natural-gas liquids to Marcus Hook, where most of the material - ethane and propane - would be exported.
NY top court considers local bans on drilling. Straus News. New York's highest court is expected to decide by the Fourth of July whether municipalities can use local zoning laws to ban shale gas development using hydraulic fracturing within their borders.
‘Manufacturing renaissance ahead’ for shale gas industry. Columbus Business First. Oil and gas shale drilling in the Appalachian Basin is rapidly developing, but there is still a laundry list of challenges facing the industry, a law firm in the region says in a new report. “The shale gas industry is entering a period of transition – from its startup years to an era of production efficiencies and a manufacturing renaissance ahead,” Pittsburgh-based Babst Calland says in its annual report.
Ohio approves 32 new Utica shale permits last week. Akron Beacon Journal. A total of 32 new Utica shale permits were paproved as of June 7 by the Ohio Department of Natural Resources. That included three in Belmont County, two in Carroll County, one in Guernsey County, two in Harrison County, one in Hefferson County, seven in Monroe County, 14 in Noble County, one in Tuscarawas County and one in Washignton County.
Hilcorp Gets More Well Permits for Western Pa. Youngstown Business Journal. Hilcorp Energy Co. continues to seek oil and gas prospects in western Pennsylvania three months after one of its drilling operations was linked to a spate of small earthquakes that rattled the eastern edge of Mahoning County. The Pennsylvania Department of Environmental Protection issued five new permits to Hilcorp June 3, authorizing the company to drill horizontal wells in Mercer County, the agency reports.
McClendon announces billions more in shale investment. WKSU. A billboard on I-77 south of Canton announces that American Energy Partners is hiring. And the founder of that partnership -- Aubrey McClendon -- announced this week he’s investing $1.75 billion in the Utica and Marcellus shale regions of Ohio, Pennsylvania and West Virginia.
Pinnergy will develop an Eagle Ford disposal well. San Antonio Business Journal. Pinnergy Ltd. will begin development on a wastewater disposal well in the Eagle Ford Shale in the next 60 days, the Austin-based oilfield services firm’s top officer says.
New distribution facility will hire 20 south of San Antonio. San Antonio Business Journal. Leading chemical distributor Univar Inc. has begun work on a new 52,000-square-foot facility south of San Antonio and plans to hire 20 people within its first year of operation, officials say. The Redmond, Wash.-based company in April confirmed plans to develop a warehouse on 12 acres of land in the nearby city of Elmendorf. However, it didn’t break ground until late last month.
Permian operators increasingly target shale. Oil & Gas Journal. Horizontal drilling last year overtook vertical drilling in the basin as new technology and high oil prices rejuvenated the legacy oil play and independent operators like Pioneer Natural Resources Co. and Approach Resources Inc. tapped into shale formations previously considered uneconomic. "The Permian is one of the hottest regions in North America right now," Benjamin Shattuck, analyst with Wood Mackenzie Ltd., told UOGR.
FTS will go to China with new Sinopec joint venture. Dallas Business Journal. FTS International will be taking its hydraulic fracturing talents to China through a joint venture with Sinopec Group, the companies announced Tuesday. Fort Worth-based FTS International will own 45 percent of SinoFTS while Sinopec will own 55 percent. It’s the first collaboration between a non-Chinese well completion company and a national Chinese company.
Courtesy of Alaskanomics, we have the following Alaska North Slope project update:
There have been numerous announcements from the oil and gas industry regarding new projects since the passage of SB21, the More Alaska Production Act (Note in our report last week the support for this oil and gas reform act from the mining industry -dh). Announcements have come from the major producers, as well as smaller, independent companies. Information compiled by the Bradner Alaska Economic Report shows that $8.6 billion in new projects have been announced since the passage of SB21. This is on top of the $4 billion that was in the works at Point Thomson and $1 billion for ConocoPhillip’s CD-5 near Alpine field.
Oil industry leaders have been quick to point out that SB21 helped spur the increase in projects and new production and these projects could change depending on the outcome of the August 19 primary election. The announced projects and their expected production include:
Brooks Range Petroleum
Pt. Thomson Project
$13.6 billion and an increase of 145,900 to 150,900 b/d by 2018
These projects not only represent increased investment in Alaska and increased oil production, but they also represent more jobs for Alaskans. Oil industry leaders are optimistic that new development can continue with the help of SB21 and that the new tax reform is encouraging new projects throughout the State of Alaska.
Northrim Bank and its President, Joseph Beedle (NGP Photo), hosted a packed house economic briefing yesterday at the Dena'ina Convention Center in Anchorage featuring Economists Mark Edwards and Bill Conerly. We'll have more for readers by Monday. -dh
Opportunity For Alaskans In Canada?
Petroleum News: British Columbia Premier Christy Clark, supported by a delegation of top cabinet ministers and petroleum leaders, has persuaded the Canadian government to declare that the LNG sector is a potential “nation-builder” which could create 100,000 jobs.
Although the accord signed in Ottawa earlier in April is non-binding, it includes a commitment to promote the active use of temporary foreign workers, TFW, which could ease one of the deepest concerns among investors in the industry.
CBC News. Comment: The Northwest Territories government hopes to bury a high speed, 1,100 km fiber-optic cable from Fort Simpson to Inuvik.
It proposes using the Mackenzie Valley Pipeline route and much of the pipeline filing data to justify a light, environmental review.
What is the practical difference between cleared rights of way, using the same real estate, for a buried gas pipeline or fiber cable? We are sure that this question will arise during the permitting process and that the answer will not be very satisfying to Inuvik citizens, small businesses and aboriginal corporations that, for two generations, fought for and failed to have approved the routing for a Mackenzie Valley Gas Pipeline.
Countless hopes, dreams, and lives of every NWT and YT resident were affected by the loss of the pipelines' opportunities--one way or another.
Hopefully, an easier permitting process awaits a buried cable using the same right of way.
Perhaps the lessons of gas pipeline failure and fiber-optic cable success will not be lost on more logical, future decision makers. -dh
The Publisher and the Professor Opine: You Decide!
Reader Comment: A highly accomplished university professor, a friend for over 20 years, sent this comment in response to the above editorial on Alaska's underfunded pension program, which we are delighted to bring to you below, along with a response.
Dave: As usual a sound analysis of the underfunded pension liability.
However, I read that you suggest that we return various spending or taxing to the Median levels of other states. That point is where 50% of the states would lie above and 50% below.
Would those states above the median in spending and taxing be obviously thwarting business growth and profit? I doubt it.
Stability is probably the key in my mind. Also, corporate America charges us more or it cost us more to acquire those goods and services. Kids who depend of “welfare” to eat, go to school on a bus, or get health care don’t eat 50% of the meal, ride halfway there or only get kinda well. And if our “bureaucracy” is more expensive, I am not surprised.
I wonder if you checked to see how much higher engineers, doctors, accountants, oil execs, etc. earn compared to those in “median states”. I suspect they would howl in indignation if you suggested that they all get less.
But your analysis of the problems created by the underfunded pension liability is well stated and I wish we had more leaders in our legislature who understood the realities of our financial system as well as you.
(Note: I don’t think we pay our bureaucracy enough. We ask someone making $100k to negotiate with and regulate industries and executives making millions, with staffers and lawyers making outrageous salaries as well. And maybe if we paid the Legislators more, we could find some independent minds who could work in everyone’s best interest, including the oil industry.)
Harbour's response to the Good Professor's comment above.
We appreciate the good professor's two observations: his compliment for our view on the underfunded pension liability of the state; and, his thoughtful comment on why the remedies to Alaska's unsustainable budget which we offered are, in his opinion, wrong.
This is why we followed our recommendations for solving Alaska's fiscal challenges, with the further acknowledgement that, "Of course, there are as many suggestions as there are people with opinions."
Professor B. did not offer his own suggestions for solving Alaska's fiscal challenges; he only attacked our recommendations.
His further comment was that Alaska should spend more money on executive salaries so that those who "negotiate with and regulate" industry could, presumably, more ably do so.
The beauty of a oil & gas lease sale is that the private market produces for Alaska the highest value for a natural resource that the market will pay. The highest.
Most of our current investment climate problems occur as a result of changing the rules of the game for investors after a lease sale has taken place. Politicians are tempted to greed once they see that an investor is profiting from a lease sale bid that he had first put at risk. They are tempted to relieve the investor of the profit "reward" earned by the lease sale investment, subsequent exploration, capital investment and development (i.e. because the investor is 'greedy, makes outrageous salaries, etc.'). The point of investor success is where the good Professor would hire high priced bureaucrats to extract even more from investors than their own due diligence had determined valid at the time of the lease sale.
This is why we have always held that Alaska should spend within its means -- so that the temptation to change the rules for investors is not exacerbated by a desperate need for cash to cover undisciplined spending.
If Alaska, as we have editorialized, becomes a state where "a deal is a deal", then decision makers will spend and tax with prudence and restraint. Life will be simpler. The need to demonize investors will diminish as will the temptation to discriminate against them. Since lawmakers won't tolerate rule changes after investor commitments have been made, there will be no need for a new cadre of highly compensated bureaucrats to "negotiate and regulate" in ways that extract more from investors than they themselves thought prudent when investment decisions were made.
The good professor argues for 'stability' for government beneficiaries. While beneficiaries of taxpayers (i.e. including educators) will always want the guarantee of stable taxpayer income, it is easy to forget that those who risk their own money tend to invest more and more confidently when they work in a 'stable' tax and regulatory climate.
We appreciate reader comments, especially from those who are highly educated and thoughtful about the issues -- and, especially when they disagree with us. It gives us a chance to reevaluate our own logic and conclusions.
In this case, we emerge from the additional thought and dialog more convinced than ever that Alaska's real secret to a bountiful future is learning to treat investors as we wish to be treated when we are considering a personal investment.
Hold a lease sale for natural resources to VOLUNTARILY extract the highest value from investors that a competitive bidding process will yield. Then, try to MINIMALLY interfere with -- and even safeguard -- the metrics upon which an investor based the lease sale bid, for the life of the project.
It is the Golden Rule applied in a different way than we normally do ... but the principle is the same. And it is that principle that will most likely lead to sufficient investor confidence for a multi-billion dollar gas pipeline investment to be made.
That is why, for years, industry has told the state and its residents that big investments require assurance of "Fiscal Clarity".
Rejection of the Golden Rule of treating others as we would wish to be treated can only lead to a life of misery and greed...and a lower likelihood of significant investments.
Can anyone dispute that this enduring principle applies to states as well as it does to families and individuals? -dh
Clearly, Russia has leverage over Ukraine. Depriving Ukraine of energy supplies or reasonably priced energy could deal a devastating economic blow to the struggling country.
The map also illustrates the importance of the United States and Canada reasonably developing their own energy resources. Energy is the building block of an economy and all economic activity in modern societies is totally dependent on both the supply and the reasonable pricing of energy supplies--as we learned with the Arab Oil Embargo in the 1970s.
With continuing delay of the Keystone XL pipeline and continuous stalling of other energy and mining projects, America's leaders are preventing their citizens not only from having massive new employment, but from enjoying the energy independence and national security which they deserve and could so easily enjoy but for an obstinate Administration.
The map was created from data provided from National Gas Union of Ukraine by RIA Novosti. We display the map with appreciation, subject to permission requested from the owner. This and other similar maps are available to public viewing on Google. -dh