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


You Read It Here First

11-17-15 Statoil Leaves Alaska - Murkowski Schedules ANILCA Hearing

17 November 2015 6:19am

TransCanada thrives amid intense challenges.  Read more below.  -dh

U.S. Sen. Lisa Murkowski Responds TODAY TO  Statoil's decision to end its Alaska Arctic offshore exploration program.


Lisa Murkowski, Alaska Senator, Energy & Natural Resources, ANILCA, overreach, Photo by Dave HarbourSchedule now for this hearing of Senator Lisa Murkowski's (NGP Photo) Energy and Natural Resources Committee:   Thursday, Dec. 3, 10 a.m.,  Full committee hearing on implementation of the Alaska National Interest Lands Conservation Act of 1980, including perspectives on the Act’s impacts in Alaska and suggestions for improvements to the Act. 

Seeking Alpha.  TransCanada says it is sticking with a plan to increase investor payouts by 8%-10% annually through 2020 even after the rejection of the Keystone XL pipeline.

Calgary Herald, by Adam Williams & Rebecca Penty.  Days after the U.S. spurned TransCanada Corp.’s proposal to expand its Keystone pipeline network across North America, Mexico opened its arms.   TransCanada won the rights last week for its sixth pipeline in Mexico....

CBC by Paul Haavardsrud.  The fast-paced world of pipeline politics, as it turns out, doesn't take time to dwell on sentiment.

Before U.S. President Barack Obama was even finished putting the spike in one controversial Canadian pipeline project, attention was already turning to the chances that another would get built. 

Due in no small part to Keystone XL's demise, the prospects for Energy East (CP Photo), a 4,600-kilometre length of pipe running between Alberta and New Brunswick, have never looked better.  More....

Calgary Herald by Dan Healing.

More relief for Western Canada gas producers enduring pipeline bottlenecks is on the way with Calgary-based TransCanada Corp. announcing Monday a $570-million proposal to add capacity to cover 2.7 billion cubic feet per day of firm contracts on its Nova Gas Transmission Ltd. system by 2018.

Dozens of Calgary-based oil and gas companies that operate in western Alberta and northeastern British Columbia have reported interrupted production over the summer as natural gas gushing from horizontal, multi-fractured wells overwhelm systems operated by TransCanada and Spectra Energy. The Alliance Pipeline was also shut down for several days after sour gas accidentally entered the system.

Calgary Herald by Darcy Henton.  

A new carbon tax that’s expected to be proposed by the Alberta NDP to combat global warning is a “tax on everything” that will hurt laid-off Albertans, says Wildrose Leader Brian Jean.

The leader of the official Opposition demanded to know why Premier Rachel Notley suggested in a speech in Toronto last week that she plans to introduce a carbon tax while Alberta is in the throes of recession triggered by the massive collapse of oil prices.  More....

Natural Gas Intel by Joe Fisher.  

ConocoPhillips Alaska Natural Gas Corp. (CPANGC) has filed with the U.S. Department of Energy (DOE) to extend exports of liquefied natural gas (LNG) from its terminal at Kenai, AK.

CPANGC is seeking free trade agreement (FTA) and non-FTA export authorization for up to the equivalent of 40 Bcf of LNG for a period of two years beginning Feb. 19, 2016. Its current FTA and non-FTA export authorizations are due to expire soon. The Kenai LNG facility has exported LNG for almost 50 years under multiple export authorizations over that period.  More....

Peninsula Clarion by Elizabeth Earl.  

Managers are concerned that pressure on the Kenai River could increase if the Alaska LNG project goes through.

The project is still tentative and will not receive a final ruling until 2018 at the earliest, but if it does go through, the borough could see an influx of as many as 5,000 workers for the five years it takes to construct the 900-acre plant in Nikiski. Unless the camp is closed, many of them will likely recreate on the Kenai River.

Meanwhile, we see an American President reasserting an opinion this week in Turkey that Global Warming is a "critical issue", while calling the Paris murders, a "setback" in his strategy to fight terrorism.  -dh

Climate Change Comment by Thorpe Watson, NGP Reader.


Do you believe that mankind's emissions of carbon dioxide ("CO2", aka “carbon”) will cause runaway warming?

Do you believe that we can stabilize the planet's ever-changing climate by restricting our generation of COor by paying carbon taxes or by adopting a meat-free diet?

Do you believe that CO2 is “carbon” pollution?

The thousands of delegates, who will attend the Paris climate summit November 30, embrace such beliefs while ignoring facts that clearly demonstrate the delusional, if not pathological, nature of such beliefs. The pertinent facts are:


  • CO2 is not carbon or black soot.

  • CO2 is a colourless, trace gas in our CO2-impoverished atmosphere.

  • CO2 is as important as water and oxygen in sustaining life on the planet.

  • Henry's Law limits mankind's contribution to the total CO2 content of the atmosphere because the oceans are a huge CO2 sink.

  • Consequently, the consumption of all known coal, oil, and gas deposits will not materially replenish our CO2-impoverished atmosphere (less than 15%).

  • Global warming ceased more than 18 years ago in spite of increasing CO2 levels.

  • Most of the CO2 increases are caused by the natural out-gassing of the oceans.

  • The USA's emissions reduction pledge will seriously harm the USA economy and, according to the UN's flawed climate models, the reduction will reduce the world temperature by a pathetic, non-detectable 0.01oC by 2100 under the UN's most extreme and mistaken assumptions.

A more credible alarmist message is provided by scientists who claim that we will be subject to another mini ice age by 2030 (See article below). Solar scientists have been forecasting, for some time, a return of the low temperatures of the Maunder Minimum (1645 to 1715).

Rather than developing strategies to enable Canadians to adapt to inevitable lower temperatures, Prime Minister Justin Trudeau will join the Paris delegates in their quixotic attempt to stabilize the planet's climate. Like Trudeau's chief advisor, Gerald Butts, the Paris delegates are eager to implement a worldwide, carbon-free economy; that is, an economy that does not use hydrocarbon fuels (i.e. coal, oil, and gas).

Gerald Butts was a senior adviser to Premier Dalton McGuinty when Ontario started down the carbon-free road to bankruptcy under its so-called 'Green Energy Act'. It is actually an anti-green act because it wrongly vilifies CO2. CO2 is a vital component of the carbon cycle, which is essential in the greening of our planet. At this time, Canada's industrial heartland (i.e. Ontario) is being dismantled under the Act.

How much of our sovereignty will Trudeau surrender to UN bureaucrats in the delusional belief that we can stabilize an ever-changing climate? I am sure the UN will be very willing to accept the payment of “indulgences” should we fail to meet our emission-reduction targets.

Furthermore, I am deeply concerned that the "International Tribunal of Climate Justice", to be resurrected at the Paris summit, could be given sufficiently broad powers to deny our freedom of expression. Specifically, the Tribunal would then have the power to deny our right to challenge the UN's false global-warming/climate-change narrative.

If you think I'm being paranoid, please note what has been said by such prominent figures as Robert Kennedy Jr. and David Suzuki; that is, they view climate realists as felons. Even the lawyers for Michael Mann would like to apply RICO laws against Mark Steyn who challenged Mann’s fraudulent “hockey stick” graph; that is, his bogus global temperature graph.

In reality, the alarmist climate narrative is not about science. Christiana Figueres (Executive Secretary UNFCCC) recently admitted that the primary purpose of the narrative is to gain acceptance for a new economic world order. Needless to say, it would be reasonable to assume that we will then be governed by corrupt, unelected, UN bureaucrats anxious to steal redistribute our wealth.

Will Ottawa follow Ontario down the carbon-free road to bankruptcy? A weak, low-carbon economy will not only move us towards an impoverished, Medieval lifestyle but will also threaten the unity of Canada and make us more vulnerable to the radicals of the world.

In addition to the foregoing man-made disasters, there is the natural threat of global cooling within 15 years. Will our politicians wake up in time to develop a strategy enabling Canadians to adapt to lower temperatures and to cope with the consequential reduction of farm output?

Let us hope that truth and common sense will prevail.




GLOBAL COOLING: Decade long ice age predicted as sun 'hibernates'

SCIENTISTS claim we are in for a decade-long freeze as the sun slows down solar activity by up to 60 per cent.

By Jon Austin

PUBLISHED: 03:07, Thu, Nov 5, 2015


A team of European researchers have unveiled a scientific model showing that the Earth is likely to experience a “mini ice age” from 2030 to 2040 as a result of decreased solar activity.

Their findings will infuriate environmental campaigners who argue by 2030 we could be facing increased sea levels and flooding due to glacial melt at the poles.


11-9-15 Former Alaska Commissioner Recommends Minimizing Gasline/LNG Risk

09 November 2015 7:59am

Our readers know that over the last year we have investigated and commented on the large risks accompanying large equity investments of public money into large energy projects.

The two of which we are most concerned, are the AK-LNG gas monetization project and the Interior Energy Project.

Under the 'Search Our Site' box, top right, readers can review these earlier commentaries by entering desired 'key words'.


Support Hilcorp's Liberty Project HERE...TONIGHT!

Can Walker Find A Less Risky Way To Support Alaska's LNG Project?

Bill Walker, Governor, Alaska, LNG, equity ownership, Dave Harbour Photo

A former Alaska Department of Natural Resources Commissioner (DNR) and other Alaskans sent LNG Project risk reduction suggestions (i.e. below) to Governor Bill Walker (NGP Photo) on November 3, 2015.

Harry Noah, Commissioner Natural Resources, Alaska, LNG, Photo by Dave HarbourThe letter was signed by former DNR commissioner, Harry Noah (NGP Photo), and four other prominent Alaskans, including Frank Murkowski, Alaska Governor, LNG, U.S. Senator, Photo by Dave Harbourformer Governor Frank Murkowski (NGP Photo).  

In the letter, the writers expressed concern about the level of risk the state was about to undertake in 'buying out' TransCanada's interest in the Ak-LNG project, during the special session which was convened from October 23th to November 5th.

The letter provided more than risk concerns about the enormous, Alaska LNG project, currently in a pre-Front End Engineering and Design phase (Pre-FEED).  It also recommended the governor adopt certain priorities dealing not only with a reduction of risk that the state could lose hundreds of millions in public money.  

Other suggestions included a focus on issues that could support ultimate success of the project, including the Larry Persily, Pipeline Coordinator, Alaska, LNG, Kenai Borough, Anchorage Daily News, Photo by Dave Harbourprovision of fiscal security to the LNG Tim Bradner, LNG, Journal of Commerce, Alaska Legislative Digest, BP, Dave Harbour Photoproject's producer-investors and giving the public much more information.  -dh

Below is the full text of the letter, for our readers to review.  We also ​provide this relevant, historical recording of a 2014 forum sponsored by Commonwealth North. ​

Professor Emeritus Scott Goldsmith, University of Alaska, ISER, LNG, Smooth Landing, Fiscal Crisis, Photo by Dave Harbour

The forum included as moderator, the then Alaska Gas Pipeline Federal Coordinator, Mark Foster, Regulatory Commission of Alaska, LNG, utility rates, Photo by Dave Harbour, Anchodrage School DistrictLarry Persily (NGP Photo-above-R); Harry Noah; energy writer Tim Bradner (NGP Photo-above-l); University of Alaska Economics Professor Emeritus Scott Goldsmith (NGP Photo-below l); and, former Alaska Utility Commissioner (RCA) Mark Foster (NGP Photo-Below R).


November 3, 2015 Letter to Governor Walker below.  

(Find original .pdf here)

The Honorable Bill Walker Governor of Alaska  PO Box 110001 Juneau, Alaska 99811-0001  
November 3, 2015  
Dear Governor Walker; 
It is unreasonable to think that the State will get a return on an investment in the gasline project for 8 – 12 years. While waiting the State should do everything in its power to support the project, including taking its gas in kind and providing fiscal certainty on taxes. 
However, there should be a discussion between your Administration and the Legislature about the risks the State will face after it buys out TransCanada. By owning 25% of the project the State will be required to pay 25% of the front end, pre-construction costs prior to a decision by the Producers whether or not to build the project. What happens to those funds if the Producers decide not to build the project? This paper proposes two alternative ways to avoid that risk. 
The front end pre-construction costs that the State must pay (even if the project is not built) are considerable It has been estimated that Front End Engineering and Design will cost approximately $2 billion, of which the State’s share would be $500 million.  
But the State’s share could be more - detailed engineering and design is normally 7-8% of a project’s capital cost. Assuming that the capital cost is $55 billion, the State would owe over a billion by this measure. How much State money would actually be at risk is hard to know at this point because a spending schedule is not available.  
The project risks are considerable. Alaskans will not have a more realistic estimate of the cost of construction ($45 – 65 billion) until FEED is completed.
At present we have no permits, no construction schedule, no agreement on the size of the pipe (42” v. 48”), no ramp up schedule for LNG production (the market can only take so much LNG at the start of such a project without depressing demand, thereby reducing the price) and no real ability to estimate what the price of LNG will be 8 – 12 years from now.  
However, the Administration is proceeding on the assumptions that after buying out TransCanada the State will own, and pay for, its 25% share of the project and that the Producers will build the project 8 – 12 years from now. The first assumption is dangerous because the second assumption is unknowable.. 
For example, FEED is next big project decision the Producers need to make. If they decide to proceed to FEED the State would be required to pay its 25% share ranging from $500 million to over a a billion dollars. If the Producers then decide for whatever reason not to build the gasline, a decision over which the State has no control, the State would lose its investment.  
The State’s record of losing its pre-construction investments on gasline projects demonstrates the risk of assuming that a project will be built 8 - 12 years in advance of first gas. For example: 
1. The 1978 Legislature awarded a 27-year contract to Texas based Alaska Petrochemical Company selling them nearly all of our Royalty Oil.  Three years later the company known as AlPetCo closed its doors, walked away owing the state nearly $60 million.  
2. Governor Hickel used private money to fund Yukon Pacific, but the line was not built and its investors lost money.   
3. The State made $500 million available to TransCanada to build the line under Governor Palin’s Alaska Gasline Inducement Act (AGIA) and is now spending another $150 million to buy out of the agreement.   
4. Had AGIA succeeded in constructing a gasline to the Lower 48, it would have lost the State money because of the advent of the new, shale gas technology.  
5. The Port Authority failed to build a gasline to Valdez and lost the pre-construction money invested by Fairbanks, Valdez, and the North Slope Borough in the process.    
Each of these projects was advanced in good faith by Alaskans who had the best interests of the State at heart. The problem is that whether a project that has an 8 – 12 year lead time will actually ever be built is unknowable. 
There are two ways to advance the project but prevent the State from losing preconstruction risk money if it is not built:  
First Alternative:  
1. The State would maintain the same level of project participation and oversight that it is now doing, except that the State would not advance pre-construction risk money;  
2. In cooperation with the Producers the Administration would determine what the preconstruction costs are and make that information available to the Legislature and the public;   
3. The Producers have been clear that they require fiscal certainty on taxes and a State commitment to takes its gas in kind before spending $billions on FEED. In exchange for the State agreeing now to fiscal certainty on taxes and taking its gas in kind it is equitable for the State to require that the Producers, not the State, to advance the FEED and  preconstruction risk money to develop the project;  
4. If the Producers elect to construct the project the State would then pay its 25% share of the pre-construction costs as part of its financing of its 25% share of the construction costs; and   5. If there is no project the State would not pay the pre-construction costs.  
Second Alternative: 
1. The State would provide fiscal certainty on taxes and commit its gas to the project as Royalty in Kind, but the State would not be an owner of the gasline or the liquefaction plant. This is the same arrangement we currently have with TAPS.  
2. The State would be responsible for selling its gas. It would pay a transportation tariff to the gasline owners.  
3. In advance of reaching such a decision the State would make an economic analysis of the financial impacts of ownership (including the risk of loss of pre-construction dollars and construction cost overruns) versus non-ownership. The analysis would also compare what would have been the economic consequences had the State owned a share of TAPS versus the funds the State has made without owning such a share. This information would be made available to the Legislature and the public and discussed. 
In conclusion it is equitable to have the Producers take the risk of losing the pre-construction costs in exchange for fiscal certainty and the State taking its gas in kind because the Producers control the decision of whether or not to construct the gasline. Moreover, these are risks the Producers take on projects all over the world. Conversely, as the record above shows, the State has already lost significant amounts of money in taking these pre-construction risks. 
Finally, prudence dictates that the State avoid significant financial risk at a time when it needs to conserve State funds because of low oil prices and falling production.  
      Yours truly, 
______/s/______________  _____/s/_____ FRANK H. MURKOWSKI  JIM CLARK Former Governor of Alaska  Former Chief of Staff Former Alaska Senator   To Governor Frank H. Murkowski   
_____/s/______    ______/s/_______ HARRY NOAH    JOHN REEVES Former Commissioner of DNR  Fairbanks Businessman Former Bullet Line Manager    
_____/s/_______     PERRY GREEN     Green Furriers 



11-5-15: A Review of the November 2015 Special Session of the Alaska State Legislature

05 November 2015 9:37am

One Observer's View of the November 2015 Special Session of the Alaska State Legislature
(Revised following receipt of reader comment)
Offered on this, the last day of the Special Session, November 5, 2015

On 10-29-15 we circulated this 'email alert' that resulted in several citizens and a few lawmakers asking, to the effect that, "Well Mr. Smarty Pants, if you're so bright how would you handle this situation?"  (Actually, they were much kinder than that, and we only bring it up because reader questions were the reason we created this review.)  

While we never claimed to be anything other than an observer, we emphatically never claimed to have a claim on "what's right".  In fact, we will restate to our gentle readers right now that we have more reason to be humble than most of the people we interface with daily.

That is why we always invite reader corrections to any of our statements of fact; our highest priority is maintaining accurate gas pipeline information spanning half a century so that our archives may continue to benefit industry, government, academia and the news media for years to come.

However, we do hope that our career, can be made useful to our readers, along with our experiences in industry-government interaction going back to the beginning days of both TAPS and gas pipeline and LNG projects...and our personal interaction with all of Alaska's post-statehood governors except one.

In that spirit of humility, we have observed the special session proceedings.  We have been very respectful of both House and Senate Democrat and Republican Members, and the many witnesses appearing before them (with minor exceptions).

We earnestly believe that while everyone in recent days has been 100% focused on best concluding the relationship with TransCanada, our service is to offer counsel regarding the medium and longer term future and Ak-LNG's role within other state budget concerns.

We have no advisor or supervisor or editor to assist with our work.  We are truly independent.  That liability is freely admitted.  We thus hope that in spite of our own failings, readers will benefit with a series of snapshot viewpoints they may never before have considered.

Your indulgence and readership are deeply appreciated.


Background as we view it:

This review of the "November 2015 Special Session of the Alaska State Legislature" is designed to both comment on the result and provide insight into the challenges of state ownership that await this and future governors, legislators, citizens and industry representatives.

As the special session called by Governor Bill Walker ended this week, we did not oppose the Legislature's decision to approve certain appropriations.  The appropriations allowed the governor to reimburse TransCanada (TC) for its expenses to date, plus interest, to "buy out" its participation in the project and to fund state operations and contributions to Ak-LNG's ongoing, pre-Front End Engineering and Design work (Pre-FEED). 

If TC had remained engaged the state would have been obligated through agreements made by previous administrations to pay more than it would under the current arrangement (i.e. The 7.1% interest rate paid to TC is significantly higher than the state could now get via its own financing). 

During current, special session hearings, legislators discovered that:

  • there appear to be no single line of authority or clearly delineated organization chart illustrating management of Alaska's equity interest; overall state coordination of Ak-LNG project participation is unclear and could threaten project efficiency.
  • the Administration seemed to be contradicting its long-vaunted claim of "transparency" when denying transparency to the Legislative branch of government by:
  • not providing a full data packet to Members when the special session was called, even after repeated requests, and
  • not communicating the full extent of major project roadblocks -- caused by the administration -- associated with its position on confidentiality agreements (CA), a withdrawal agreement format and commercial gas sales agreements, and
  • not communicating that the AG had influenced the Alaska Gasline Development Corporation (AGDC) board to approve creation of two subsidiary corporations and the reasons therefore, and
  • the AG refusing an audience with the House Judiciary committee earlier this week, causing a cancelation of the meeting, and appearing to being evasive as he participated in other meetings.

We believe Legislators and citizens as well, were comforted in part by knowing that the four Ak-LNG members will vote on whether to go forward with the project's 2016 work plan on December 4 -- and that takes a unanimous vote.

Accordingly, we believe that may begin to ponder longer range questions:

  • As investment decisions begin to require more and more cash outlays, should the state continue supporting a high risk venture that could be justified by high profits in a future robust, world LNG market?
  • Or, should the state be satisfied with royalties and taxes from the project while avoiding risky equity gambles in highly technical, competitive pipeline, LNG, and gas sales industries whose unpredictable business environment is exacerbated by fickle energy prices, incredibly intense competition, volatile world economies and high costs?
  • (Note: While legislators, industry and the governor seem to be fully supportive of the first alternative right now, we truly hope that this review in some small way assists well-studied Alaskans and aficionados of the state to draw their own conclusions, enabling them to better compare the high risk/low risk options.  We also acknowledge the importance the Ak-LNG producers place on having the state government at its side as the project moves forward @ 4:19:04.  Indeed, one should seriously question whether or not they would wish to continue the project at this time without the state's 25% equity participation.)
Big Challenges.  Legislators and the governor rejoiced last night over successful approval of the governor's appropriation requests to achieve the 25% equity position in the Ak-LNG project. 
However, we urge all concerned to be alert to inevitable and continuing challenges.  We believe that dealing with certain, multiple difficulties could drag the governor and legislators into an unanticipated preoccupation with responding to AGDC requests and project crises and other unintended consequences of government participation.

Project crises could result in delays, unanticipated expenditures and large controversies that prevent lawmakers and the governor from competently carrying on the traditional responsibilities of office.  Examples of such project crises include:

  • Constant controversy time spent debating issues like confidentiality agreement (CA) requirements, withdrawal agreements and "completion" of commercial gas agreements.  All of these are current issues elevated to a controversial level by the Administration, to the possible detriment of project "alignment" which all parties claim they must have to be successful.
  • Having an unpredictable state partner insist at the "last minute" on big expenditures benefiting its equity interest injects an element of uncertainty. For the state, it carries with it the obligation to be the "cost payer" for 100% of the increased project costs that it "causes".  One of the most well recognized pipeline and utility rate principles is that the causer of costs pays the costs.  Following this principle, the state should pay, as the governor has said, for his desire to 1) "study" a 48" pipeline model as compared with the 42" case that has already been studied to death -- at great expense.  2) The state should also pay for the six month delay that the governor's 42" vs. 48" request may already causing.  If the state's expenditure should prove that the 48" model benefits all parties, we can imagine all parties at that point freely agreeing to share the study costs.  However, if the 48" model study reveals higher costs, the state should continue to bear all of those higher costs--thus negatively affecting net revenue the state might otherwise enjoy until future gas producers are capable of taking up the slack in capacity.  Since the state justifies the 48" model on the thesis that it encourages more North Slope gas exploration by those who are not equity owners of Ak-LNG, that is a value that could accrue to the state and a new royalty/tax payer but not the other three equity owners.  Accordingly, the state should also be prepared to shoulder other costs of the governor's 48" idea: 3) the additional cost of materials, labor and overall construction; and 4) the additional cost of operating any spare capacity in a 48" line that is, in essence, reserved by the governor for unknown future gas owners; and, 5) the cost of connecting any new gas shippers should be borne by the new "cost causers", not the existing 4-member consortium.

Unintended consequences.  All of our respected elected and appointed officials mean well, "intending to represent the good people of the state of Alaska".  However, while we cannot imagine or fully describe all possible unintended consequences of government attempting to control both its obvious and subjective interest in a free enterprise project, we have already articulated a number of traps and snares in earlier Northern Gas Pipelines commentary.  All of these, and more, could require a significant amount of elected official time.   As a refresher, here are a few of those possible traps and snares:

  • Existing and future governors and legislators seeking to pressure the three private consortium members into accepting project expenses that do not benefit their shareholders.  This dangerous possibility is created when one's peer, one's "aligned" partner is also one's regulator, one's royalty landlord and one's tax master.
  • Elected officials "recommending" that AGDC talk with certain contractors about their capabilities--thus indirectly undermining AGDC contracting policies.
  • Alaska elected/appointed officials in Juneau or Washington D.C. "recommending" employees/executives for AGDC consideration, thus attempting to influence employment practices that may corrupt established, fair hiring practices.
  • Should AGDC be prohibited from hiring family and recommended friends of elected officials as a way to protect against the application of undue or even subtle influence?  Members of the legislature work for private Ak-LNG affiliates; should legislators be permitted to work as employees or contractors for Ak-LNG, a public agency whose budgets and policies they control?
  • Should the legislature, in this unique circumstance, create a "wall of ethical separation" between state officials and Ak-LNG's AGDC and private participants? 
  • Should AGDC, as Anchorage's ML&P has done in the past, purchase expensive "tables" or "tickets" at public events and invite elected/appointed officials to join executives at the event?
  • Under what conditions should AGDC employees/spouses/families be given special treatment at public expense as private companies do at private expense (i.e. Christmas parties, birthday parties, retirement parties, summer BBQs, undocumented compensatory time, company vehicles, etc.?  Can AGDC operate as a 'business' member of Ak-LNG under traditional state human resources policies?  Should it?  Do citizens want AGDC to become a "sponsor" of various community non-profit or government events, at public expense?  Should AGDC use public funds to support member or board involvement in various community non-profits?)
  • Should AGDC, acting as a 'business', develop community relations, stakeholder and public relations programs that result in the transfer of public money to private beneficiaries (i.e. travel, food, entertainment, scholarship programs, gifts, logo items, etc.).
  • Should public meeting laws apply to AGDC 'business meetings and practices'?
  • Should decision makers review the application of freedom of information requests to AGDC's public and confidential communications, especially when they could negatively affect private members of Ak-LNG?
  • And, on, and on, and on....

Conclusion.  We believe that for all these and many other compelling reasons, Alaska's elected officials should consider taking the following steps.

  • Complete the buyout.  We do not oppose the buyout of TC's participation in Ak-LNG.  It might have been done differently.  (i.e. One could have proposed amending, for robust committee discussion and debate, conditions the administration must meet prior to executing the buy-out.  Those conditions might have eliminated many of the legislative concerns raised during the special session.  The concerns included lack of an effective AGDC chain of command; role of the AG in AGDC business; confidentiality agreement regulations acceptable to Ak-LNG's private participants; conflict of interest rules and any other employee or agency practices that could or should deviate from state statutes and regulations.  Of course, in committee these could be shown and agreed upon as related to the Governor's call.)
  • Auction Alaska's equity interest to a qualified buyer.  In view of the above, one could imagine sincere consideration being given to arranging a date certain (i.e. or, an appropriate time in the "stage gate process"), by which the state could conduct a world-wide auction of the state's entire equity interest in the Ak-LNG project under terms and conditions acceptable to both the Legislature and to the three private participants in Ak-LNG.  If adoption of this sort of process is considered, it might be done only after passage of an acceptable constitutional amendment guaranteeing the private participants an adequate degree of fiscal certainty.  Thus, any "alignment" issues affected by a sale of the state's equity could possibly be ameliorated.   But in our view, this could only happen if the private project participants felt sufficiently comfortable with a new alignment of interests enabled by the constitutional guarantee of fiscal certainty .
We believe that over time, private participants may come to appreciate a way in which their investments may be reasonably protected and their Ak-LNG operations freed from government equity encumbrances.
Returning to the role of a taxing authority and royalty owner could free elected officials and citizens of the specter of possible financial losses in the highly speculative LNG market.  It could also make moot the highly debatable, best case list of "Assumptions" used by the administration's Black & Veatch consultants in justifying the large, projected increase in annual revenues to the state afforded by equity participation.

Shedding Ak-LNG equity over time could permit the governor and legislature to focus all their energies and talents on the pressing problems of a state facing immediate fiscal crisis:

  • an operating budget with a $3-4 billion annual deficit
  • a disinclination to make significant spending cuts leading to a sustainable budget
  • available savings to subsidize such a deficit for only another 2-3 years
  • a current unfunded employee pension liability that is several times greater than the annual deficit
  • an annual deficit that could expand to 90% of the current operating budget if the Trans Alaska Pipeline (TAPS) should fail.  The hot oil pipeline now operates 3/4 empty, is losing throughput at a rate of 5-7% annually, and is vulnerable to a catastrophic shut down -- especially during a cold winter.  TAPS over its life has already experienced a number of unexpected shut-downs resulting from maintenance, man-caused and force majeure events.
  • If the TAPS should fail, it could affect the future of the Ak-LNG project, since producing Alaska North Slope (ANS) gas is enabled by both the production of oil and the extensive and expensive array of production and service facilities already existing there.  
  • 90% of Alaska's operating budget originates with oil & gas tax and royalty income, mostly from the ANS.  Even if an LNG project becomes reality by 2025, the income it would generate would come too late to support a more immediate, significant loss in TAPS throughput.  The volatility of the LNG market and the now-accessible world-wide reserves of shale oil and gas contribute to a prudent view that the state should not now be counting on any particular income from a gas project.  Before counting its eggs, the state should wait until 20-year "take or pay" contracts are safely secured before an Ak-LNG final investment decision (FID) is made.  Even then, in the final stretch, there is the potential for unknown and extremely dangerous delay and project completion risks.  Perhaps the state legislature and governor should have a discussion and perhaps even call for a public vote confirming the public's risk-avoidance preferences.
  • Decisions about state budget spending cuts/increases will be difficult and demanding enough. Inserting into the schedule of elected officials the overwhelming, additional burden of minding Ak-LNG equity exigencies will cross all legislative, executive, political, public relations, cultural, logistical, geographical and legal boundaries, and officials should be prepared for that.
  • Controversies surrounding additional taxation or the Permanent Fund or Sovereignty Funds will introduce overwhelming challenges into a life for elected officials of perpetual crisis.
We believe that the three private members of Ak-LNG appreciate the state's involvement and financial contribution.  We believe they truly think that the so-called "alignment" among public and private gas owners will assist in creating fiscal certainty for the private investor partners.  
We also believe that the governor's willingness to seek a constitutional guarantee of fiscal security limited to gas and not applying to oil creates a weak alignment and oil tax increase vulnerability that must be corrected.  We believe that vulnerability was exposed when the governor included in the recent special session call -- before he removed it -- a requirement to consider a gas reserves tax.        
*     *     *
Having considered all of the above, we think one would conclude that the interests of citizens, the legislature, the governor and the Ak-LNG private participants could all be much enhanced by following a simple plan.  
That plan might consist of several easy steps for the state going forward: 
1) being a good and non controversial public partner to the three private Ak-LNG partners, for the time being, in the enlightened self-interest of expanding the state's equity value; and 
2) supporting successful approval of a constitutional amendment providing Ak-LNG participants with gas & oil fiscal certainty for a 20-25 year gas project life; and 
3) deciding after the fiscal certainty issue is settled and with advice from Ak-LNG partners, whether the future risks and citizens' risk adversity profiles justify continued equity participation.
*     *     *
Having watched most of the legislative activity during the Session, we are comforted.  
Comfort comes from knowing that those we elected are acting in good faith and working hard.  
Witnessing the session, we are pleased to report to readers that confidence placed in this Legislature paid off.  
Members of all parties acted in a common bond to produce a public interest result.  
They did produce a good result and in so doing reflected great credit on the state and upon their own abilities.





Dave Harbour, publisher of Northern Gas Pipelines, is a former Chairman of the Regulatory Commission of Alaska and a Commissioner Emeritus of the National Association of Regulatory Utility Commissioners (NARUC).  He served as NARUC's official representative to the Interstate Oil & Gas Compact Commission (IOGCC).  

The former Army officer is past Chairman of the Alaska Council on Economic Education, former Chairman of the Anchorage Chamber of Commerce, and past President of the American Bald Eagle Foundation and the Alaska Press Club.  He is Chairman Emeritus of the Alaska Oil & Gas Congress.

Harbour has served as a public/government/external affairs manager for three gas pipeline companies and an oil company and has owned several small companies in Alaska.  

He has addressed or chaired dozens of oil and gas conferences throughout the United States and Canada and hundreds of his editorials and articles have appeared in newspapers, magazines and electronic media throughout North America.

Harbour holds a Master of Science Degree in Journalism-Communications and is an accredited member of the Public Relations Society of America (APR).

Opinions or viewpoints expressed in this webpage or in our email alerts are solely those of the publisher and are not intended to -- and frequently do not -- reflect the opinion(s) of any affiliated company, person, employer or other organization that may, in fact, oppose the views stated herein.  -dh


11-4-15 Converting TransCanada's Ak-LNG Equity To Alaska Government Interest - Great Profits Ahead Or A Risky Experiment In Socialism?

04 November 2015 7:08am

The Alaska Legislature's House Finance Committee Voted This Morning To Support A Senate Bill Approving The Buyout Of TransCanada's Participation in the Ak-LNG project. (Audio here).

 Tune in live, here, for upcoming House and Senate floor sessions and press conferences.



11-03-15.  House Finance Committee Testimony (CA issue)

10-29-15.  Government Ownership: Mission Impossible

10-25-15. For Whom The Bell Tolls

We will have more to say about this Alaska LNG government ownership policy and appropriation Tomorrow

We believe we are witnessing a paraphrased version of what one national leader said nearly 8 years ago: This special session of the Alaska State Legislature and an activist governor are, "...in the process of fundamentally changing the state of Alaska."  

Read Our Complete Analysis Tomorrow Morning!    









The link to this .pdf document is easier to read.

MEMORANDUM TO: Honorable Mark Neuman, Chairman, House Finance Committee 
FROM:  Dave Harbour, East Anchorage Resident, Kingston Road, 99504 
 Mailing address: 2440 E. Tudor Rd. #463, Anchorage, 99507 
SUBJECT: Testimony Concerning AGDC Confidentiality Agreements  
DATE:  November 2, 2015  
Mr. Chairman: 
Introduction.  One can be confident that all citizens watching the House Finance Committee proceedings yesterday, and earlier, share a high opinion of the committee’s diligence.  Member homework and the quality of Member questioning reflected honor on the Legislative process and their own abilities.  For the record, I will state that my opinion of the other body’s Finance Committee proceedings is equally high. 
To buy-out TC or not.  To pass some version of TC buy-out legislation is a monumental decision.  Some of us believe that while there may be financial benefits accompanying a buyout by December 4, the Administration and its Black & Veatch study overstate those benefits by presenting a “best case” based on the “Assumptions” employed by the study.  I would follow that evaluation with a view that, as some of your Members have observed, the state government’s ability to be an effective working partner in one of history’s largest and most complex construction projects is not at all certain.    
Buy-out not “if” or “when” but “how”.  Nevertheless, it seems a fait accompli has overtaken the Administration, Legislature, Citizens and Ak-LNG producers, namely: that the government will become an LNG project ‘partner’, fully aligned with the private entities, by early December.  So it’s not a matter of “if” or even “when”, but “how do we deal with some of the irritating problems associated with state ownership before the deed is done?” 
Forgetting the large mass of problems awaiting government equity, LNG project participation, let us now focus on the issue of Confidentiality Agreements (CA).  CAs are not likely the biggest obstacle in the way of a partially government owned LNG project.  However, the issue may be symbolic.  CAs may be symbolic of how public vs. private entities view certain issues critical to project success.  For example, if the government representative cannot have a “seat at the table” because his bureaucratic minders will only permit him to sign a CA of their design, not one tailored to the needs of the entire partnership, it could be a tragic way in which a multi-billion dollar investment is stalled or lost.  One such way a restrictive CA could harm the project is that the government representative is forced to say to the industry “partners”, “Well, you would not accept my CA template and would not permit me to participate in the meeting.  Accordingly, I cannot give a favorable vote on this expenditure because I do not see how it is either justified or in the best interest of the State of Alaska.”  Can you not envision that a negative vote from the state on an expenditure requiring consensus could delay and possibly cause a reasonably priced item – like a pipe rolling mill contract award – to cost significantly more when the current opportunity passed unacted upon?  
AGDC Management Opinion.  I’ve been impressed over the last few days with AGDC management answering questions in ways that had the ring of truth to them, but in ways that could have caused the state Administration to be upset.   For example, when Representative Saddler asked if the current draft CA regulations would speed up or delay project progress, management answered that it would slow the project.   Indeed, we know AGDC management responded candidly because there is no way a government produced CA template opposed, as this one is, by Ak-LNG’s private participants could have a positive effect on “alignment of interests”. 
Alignment.  The state, TransCanada and the producer participants frequently speak of the importance of “alignment of the parties.”  How can there be alignment of the parties if one of the parties is bound by a rule prepared by state attorneys designed, not to promote efficiency of the project, but to promote political transparency in a process which is by its very nature required to be opaque?  In short, if Alaska is to be an aligned party to one of the world’s greatest construction projects, it must be able to execute the same CAs executed by the private partners—otherwise, they are unaligned.  The question one would then have is, “if alignment in matters of confidentiality cannot be assured, can there be a successful project?”  To that question, one should logically answer a qualified, “yes”.  Without confidentiality alignment, the AK-LNG project could be successful if the unaligned state representative would stay out of meetings to which his state CA template did not admit him, and simply vote “yes” on confidential matters in consensus with his more knowledgeable, private industry, non-aligned “partners”. 
Another serious problem.  Here is another serious challenge: UNCERTAINTY.  If AGDC promulgates the CA regulation before December 4, at least everyone can know the state’s position on the CA template before the TC buy-out deed is done.    However:  What if the private “partners” still find the CA template objectionable after the AGDC board approves it?  In that case, the state will have already had the Legislature’s approval and mandate to pay TC and take its place in the project, along with expanded equity risk participation.  The unaligned partners will be stuck with each other and with an unacceptable, unresolved CA relationship.  What if AGDC does not conclude its CA rulemaking before December 4, as indeed seems likely?  In that case, the State will purchase the TC interest in Ak-LNG and not know until sometime later whether the Administration will “allow” its attorney and the board members over which it could exercise influence to approve the regulations -- along with unknown amendments that may memorialize lack of alignment and project disputes. 
Recommendation.  Based on the foregoing, the Legislature could consider providing AGDC the following:  Statutory authority to create its own CAs required to timely and properly progress the Ak-LNG project subject only to approval of its board of directors (i.e. with the further provision that individual board member votes will be recorded for the record; and, that if the record is discussed in executive session that a confidential, individual vote record be maintained), and  Some sort of either statutory protection or a statement of Legislative intent that clearly cushions AGDC against the application of political influence by either the Administration or the Legislature (i.e. exception: potential board members may, of course, be fully interviewed and 
vetted and questioned by a governor prior to appointment and by a legislature prior to confirmation).  Authorization that the AGDC board may hire employee attorneys, contract attorneys or the state’s Assistant Attorneys General of their choice and that having retained such counsel, the Attorney General may not give direction to AGDC but may provide advice to the board and management. 
Conclusion.  I offer this testimony, having been in previous careers before retirement: a federal and state industry lobbyist; a municipal official dealing with bond indentures; a regulatory utility commissioner, a university executive and an owner of small businesses.   
In closing, a related but broader issue should be considered.   
If a curtain of separation is not placed between AGDC and elected officials, the temptations of political influence will grow as the project grows.  The issue of confidentiality agreement protocol we discuss today, came about because the Administration may desire to impregnate an inherently confidential process with some incompatible requirement of political “transparency”.   But just think of the other opportunities for public officials to want AGDC management to do something that pleases their politics, families, coworkers or contributors! 
Anyone monitoring the hearings of the past week has to know the state seeks to be a fully aligned, ethical partner in this complex, historical project.  But citizen observers will also mostly know that AGDC must be free – under the guidance of its public interest board – to say “yea” or “nay” on all matters with impartiality, wisdom and a just view of the myriad issues that could be involved.  The board, management and staff should also be free to act, unfettered by the further complication of wondering whether the governor, the son of a legislator or a special interest group advocacy might be offended.   
Ak-LNG is a business and if you want the state to be a part of it, it will have to act like a business or its participation, over time, is sure to corrupt the most highly anticipated project of this generation. 

10-27-15 TODAY ConocoPhillips Began Producing New Oil On Native Land In the National Petroleum Reserve - Alaska

27 October 2015 2:12pm

ANCHORAGE – ConocoPhillips Alaska today announced that its CD5 drill site began producing oil. CD5, part of the Alpine Field, is the first commercial oil development on Alaska Native lands within the boundaries of the National Petroleum Reserve-Alaska (NPRA). CD5 is the second new ConocoPhillips North Slope drill site to come on stream this month. First oil was announced at Kuparuk Drill Site 2S on Oct. 12.

“First oil at CD5 is a landmark for our company, Kuukpik Corporation, Arctic Slope Regional Corporation and for Alaska. This announcement is the culmination of more than 10 years of work and collaboration with key stakeholders, including the residents of the nearby village of Nuiqsut,” said Joe Marushack, president of ConocoPhillips Alaska. “I am thankful to all the stakeholders and hundreds of workers who contributed to the safe and successful completion of this project.”

Click here for the full news release which is also available in the newsroom atwww.conocophillipsalaska.com


10-25-15 Alaska LNG Legislative Hearings

25 October 2015 8:20am

Click here to find today's Alaska LNG project legislative activities and videos, archived and live streaming!

(Today's Email Alert Editorial: Link, text)

  • See this excellent comparison of Alaska's 1980s economic recession, compared to the current and projected economy and an ADN story by Jeannette Lee Falsey.
  • Juneau Empire by James Brooks
    Other News

    RT.  Putin builds large Arctic military base as America fiddles.

    What is Alaska LNG? Part 2: Meet the liquifaction plant.  Alaska Public Radio Network...Oct. 25, lawmakers will gather in Juneau for the start of a special session on the Alaska LNG project, which would carry natural gas from the ...  (See Part I, here.)

    Alliance Launches New Voice For Alaska Businesses
    ... of importance to our members: the Alaska LNG project. So we came up with the idea of the Alaska Headlamp as something that could break through ...

    ... If the state borrows from the open market, it will be asking for money at a time when it has a multibillion-dollar gap between revenue and expenses.

    “We expect that, absent revenue, that’s going to put pressure on the state’s credit rating,” said Steven Kantor, managing director of First Southwest, which the state hired to analyze the financial aspects of the project. “The state’s credit rating may decline as we issue so much debt without corresponding revenue.”

    In addition, there’s no way to know whether the price of gas in 20 years — when AKLNG is operating — will be high enough to make the project pay off.

    Banks may decide that they’re willing to loan the state money, but the state’s credit rating might suffer just as yours would if you have too many loans. If that happens, the state will pay more to finance things like schools and port projects as well as AKLNG.  ....

ADN by Jeannette Lee Falsey.  Arts Community Braces For A Downturn.

Peninsula Clarion Editorial.  The Alaska Legislature is set to convene its third special session of the year, this time to take up Alaska LNG Project issues. Gov. Bill Walker has proposed that the state buy out TransCanada’s stake in the project, and pitched a gas reserves tax measure for lawmakers to consider.

Unfortunately, lawmakers aren’t yet sure what they will be considering as the administration had not yet released any bills on either subject. And on Wednesday, legislative leaders announced the session would start with committee hearings at the Capitol, rather than the hours-long briefing planned by the administration.

And here we go again.

For Whom The Bell Tolls

TODAY, our readers can link to the Alaska Legislature's streaming videos of hearings dealing with the Alaska LNG project.
Be sure to go to church first and pray, "for whom the bell tolls."  Here's why.
The U.S. could count on Alaska for hundreds of thousands of new jobs and an infusion of hundreds of billions of dollars throughout the entire country's manufacturing, transportation, and service sectors.
But hostile federal regulatory activity, coupled with environmental activism, is keeping critical resources of a state 20% the size of America, effectively off limits.
The federal actions are exacerbated by a governor whose free market and oil industry investment policies are both hostile and irrational.
Today, our readers will see a plot unveiled by video before their eyes: as the governor tries to convince legislators to invest billions into an LNG project's equity at a time when 1) the state can't afford it, and 2) the majority of the world's LNG projects -- many, many of which seem more economically feasible -- are in the process of being abandoned or delayed.
The governor may be panicking, for to observers the state looks functionally broke as the perfect economic storm gains force and momentum within the 49th state:
  • Alaska's government operates with a $3-4 billion annual deficit and its leaders display pitifully little determination to restrain spending; and
  • its accessible savings accounts will be dry, unable to support deficit spending within a couple years; and
  • it has not been able to pay down a nearly $10 billion unfunded liability of its state and local government employee and teacherunfunded pension liability; and
  • its $50 billion+ Permanent Fund (PF) corpus cannot be tapped by the Legislature without a Constitutional amendment, which its PF Dividend-addicted citizens are loathe to give; and
  • its deficit situation grows worse as the nearly 3/4 empty Trans Alaska Pipeline System (TAPS) continues to lose oil throughput at a 5-6% annual rate; and
  • its state budget is 90% dependent on that dwindling TAPS throughput; and
  • its entire economy is over 1/3 dependent on TAPS economic activity, and
  • the credit rating agencies are beginning to downgrade the credit worthiness of the state, thus compounding its troubles as the cost of borrowed money increases.  (Yesterday, if you were watching the Legislative video, you heard financial advisers warning that borrowing money now would be at the most favorable time, before further rating downgrades occur...but that if the state had to borrow later to support failing Alaska LNG project equity commitments, the whole world would know its financial problem and lenders would require still higher risk premiums in return for their investments.)  
In economic terms, to be frank and realistic, one realizes during these hearings that Alaska is facing the specter of an "economic death spiral" if major, difficult decisions are not made very soon.

We would wonder how a state in such circumstances would waste even a weekend discussing the possibility of providing  a multi-billion dollar 'deficit investment' in an project when 1) payback is not likely to occur for a decade, and 2) the depletion of deficit supporting savings accounts and perhaps the termination of TAPS operations could occur within just a few years, and 3) completion risk of an LNG project in today's world environment is sky high.

Meanwhile, caught in the quagmire of these circumstances amid a perfect economic storm, the Alaska governor is pressuring the Legislature to pass a contingent natural gas reserves tax on the very companies he hopes will build an LNG project.

The federal hostility against Alaska is cutting off sources of new TAPS-replenishing, Arctic oil income and a hostile state administration cannot help but have the effect of further discouraging, if not alienating, investors.

New readers might ask of us: "For whom does the bell toll?"

Without some kind of a born again experience, Alaska, we fear that, indeed, the bell "tolls for thee".

Don't forget to tune in after church.  This will be interesting.

Read more here....


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