10-24-12 ASAP's Final EIS Released For Public Comment
On Wednesday November 14, 2012, Paul Ziff (NGP Photo), CEO
of Ziff Energy Group will be giving a presentation entitled "Natural Gas Under Siege” at the BMO Centre in Calgary, Alberta. "Can natural gas production be competitive under the status quo? The North American natural gas producing industry is “under siege”. Natural gas prices have descended to a low not seen since the 1990’s and the current price is far below the full cycle cost to replace gas that is produced and sold."
of Ziff Energy Group will be giving a presentation entitled "Natural Gas Under Siege” at the BMO Centre in Calgary, Alberta. "Can natural gas production be competitive under the status quo? The North American natural gas producing industry is “under siege”. Natural gas prices have descended to a low not seen since the 1990’s and the current price is far below the full cycle cost to replace gas that is produced and sold."FEDS Release Final Environmental Impact Statement on the Alaska Stand Alone Gas Pipeline Project
(Or, "Falling in Love With Our Own Molecules")
by
Dave Harbour
We received news from the BLM this morning that The Final EIS for the Alaska Stand Alone Gas Pipeline Project (ASAP) is open for public comment. The 30-day comment/review period begins on October 26, 2012, and ends on November 26, 2012. The Record of Decision on the proposed action will be issued after the public interest review is complete.
This is good news for those who have been advocating a so-called 'bullet line' 
to bring currently stranded Alaska North Slope (ANS) Gas volumes to gas and electric utilities in Interior and Southcentral Alaska. In particular, Alaska House of Representatives leaders including Speaker Mike Chenault (NGP Photo-r) and Representative Mike Hawker (NGP Photo-L) have provided primary legislative support for this local energy alternative, along with Senator Lesil McGuire (NGP Photo) in the Senate. Governor Sean Parnell (NGP Photo-L)
has supported the effort. Alaska Housing and Finance Corporation CEO Dan Fauske (NGP Photo-R) is also CEO of the Alaska Gasline 
Development Corporation (AGDC), responsible for development of the ASAP Project. Together with his technical and external affairs staff he has provided regulators with the significant support needed to successfully reach the Final EIS stage. One should also note that this is a singular, historical event: the first Alaska North Slope intrast
ate gas pipeline to receive a Final EIS.
ate gas pipeline to receive a Final EIS.While kudos all around are justified for the work accomplished to date, celebration time will be brief as decision makers continue pondering the longer term realities and challenges.
- EIS Not Yet Reality. Until a 'Record of Decision' is issued following the current 30 day comment period, the prize is still not locked in. So, parties will take a deep breath and await the final, final, final result following receipt and evaluation of comments. The EIS is granted for a specific project not for a hybrid or different project. So, anything different than the specifically proposed 24", 737 mile pipeline is not necessarily covered by the pending EIS adoption.
- Final EIS adoption is a requirement for gas pipeline construction but not a guarantee of construction.
- By the end of the 2012 3rd quarter, Governor Parnell had expected the producers, TransCanada and the ASAP sponsor, AGDC, to "complete discussions to examine consolidation prospects", and "to have selected a project concept and developed an associated work schedule with a timeline for completion."
- In a sponsor statement of his bill, HB 9, earlier this year, Chenault said, "Nearly two years ago, the Legislature passed House Bill 369 advancing an instate natural gas pipeline. Since that time, the Alaska Gasline Development Corporation has made tremendous progress developing a project along a solid timeline. It is imperative to maintain that momentum in pursuit of instate gas for Alaskans, while keeping open all options for participating in an aligned project. Committee Substitute for House Bill 9 (FIN) will refine a solid, early proposal into a plan. This legislation does not call for construction of an instate gas pipeline, but allows AGDC to advance a commercial project to that stage. The bill also provides AGDC the tools to be a strong, participating partner on behalf of Alaskans in a large-diameter export gasline project. Since HB 9 did not pass the Senate or become law, a number of expediting features it embraced are not in place to support the planning timeline.
- Even if the Legislature passes useful enabling legislation next session, will the producer/TransCanada consortium want to use the ASAP Route? If not, a new EIS will be required. Even if the same ASAP route is used, should a larger pipeline be desired, the FEDS will require a new or revised EIS approval.
- Selecting a project concept, as noted in the Governor's linked page above, involves a high degree of cooperation and consensus:
- Will the majority of legislators -- and leaders in critical positions -- come together to expedite and support progress?
- Will private sector parties want to work with a government pipeline entity that could involve unknown, future regulatory, legislative and/or administrative complexities?
- Does anyone yet know what kind of pipeline will be proposed?
- Depending on composition of the gas in the pipeline, does anyone know how the Alaska Oil and Gas Conservation Commission will rule. That is, will AOGCC be convinced that extraction of gas is more valuable to the state and conserving to the resources than using natural gas and gas liquid injection to enhance oil recovery? Are we right to assume this big inch line will move all available 'wet' gas with AOGCC approval or some combination thereof. Without knowing the composition, how should the pipeline and conditioning facilities be correctly designed and properly financed?
- Will proponents want a 42" to 48" line from the ANS to tidewater in Cook Inlet (i.e. Beluga or Nikiski?) or to Valdez?
- If the big inch line goes to Valdez, what about Southcentral consumers? Will the southern section of ASAP's project evolve from an ANS 'bullet line' to a Fairbanks 'spur line', moving gas from Interior Alaska to Southcentral? Will that be a separate project not involving producers/TransCanada? Will it involve a state subsidy? If so, will other parts of the state demand compensating subsidies? Would the new ASAP 'spur line' move gas to consumers and industries requiring gas liquids? This is a big deal, for if no liquids would be moved on the spur line from Fairbanks to Southcentral, a conditioning plant at Fairbanks would be required that would also produce pipeline quality residential gas for Fairbanks. Who would pay for the conditioning plant? Who will be paying for an expanded Fairbanks distribution system? How would development of this project affect Enstar's investment into its CINGSA storage facility (Note: Scroll down to note Enstar's presentation this Friday in Anchorage)? If CINGSA costs are paid by Southcentral consumers, how would consumer rates be affected when ANS spur line rates are added? Or will those be subsidized? And, at what cost? To whom?
- We observe that these questions are merely the tip of a big iceberg of a challenge for those drafted to meet the mandates of elected officials, but mercifully stop in deference to brevity.
- Natural Gas Shortage. Long before Anchorage Mayor Dan Sullivan's Energy Task Force began educating Alaskans about the growing shortages of gas for industry, business, home heating and electric power generation, decision makers were aware of Cook Inlet's declining supplies. The Regulatory Commission of Alaska failed to capture a unique window of opportunity for stabilizing both the supply and price of Cook Inlet Gas through 2016, as we recall here (i.e. costing Southcentral consumers as much as $1/2 billion or more in rates -- to date -- than the rejected Enstar/Marathon contract would have provided). Legislators have created incentives for Cook Inlet exploration and production. So far, no discoveries capable of offsetting the huge decline in both deliverability and supply have materialized. The CINGSA storage project will help once it is filled to capacity, hopefully by next fall. Delivery during the coldest months is a current threat that will be partially accommodated by CINGSA, but not in the long run. Soon, supplemental supplies will be needed from either the North Slope or LNG imports. Remember that while the CINGSA project helps with winter deliverability problems it cannot overcome overall supply shortages. Meanwhile, the Cook Inlet shortage is forcing Fairbanks entrepreneurs to look direct to Prudhoe Bay for their own unique supply of gas, by trucking liquefied natural gas (LNG) south on the dangerous Haul Road, at someone's expense. Readers can see how this local gas shortage reality contributes to the complexity of the larger ANS gas pipeline concept challenge.
We love to be characterized as being 'optimistic'. We are optimistic...as long as public officials signal to industry, "tell us what we might do to help," rather than, "here is what we are going to do to help our constituents and we demand your cooperation."
Alaska has become too socialized. Our state spends too much, way to much. We have become a Mecca for those who wish to be Alaskans, not to be pioneers but to profit from government program spending. When this Army of public dependents grows to the extraordinary size it has, it develops a sizeable elected official cadre of defenders. It is an addiction with a death spiral, for as spending becomes greater, the demand for taxes increases. Elected officials then will characterize increasing taxes or maintaining high taxes as 'necessary'.
Overcoming addiction requires the admission of addiction.
Today Alaska is addicted to big government and predatory taxation of the private enterprise that sustains us, but too proud to admit it. Our defication doesn't smell badly and our molecules are heavenly. High spending, high taxes, diminishing pipeline throughput to fund 90% of the government's operating budget is the proof of our addiction. It is unsustainable. For the most part the addiction results from elected officials who are either well intentioned or whose calculus leads them to spend more on the constituencies that will reelect them to positions of power.
Meanwhile, because the pressure for taxing and spending grows so strong, it is difficult to glean a clear path through the gas pipeline labyrinth we have discussed today. With elected officials striving so hard to out think the private enterprises, those who might have exercised their initiative must be saying, "Fine, Senator; you want to make all the decisions. O.K.., you win. I'm out of here."
Critics will say this is too harsh, that industry is still here, still prospering. But consider this, if you had billions invested here and were subject to the vilification and abuse heaped on you by elected officials, what would you do? Well, you'd probably just smile, grit your teeth and take it until you had maximized your investment. You wouldn't overreact. You'd try not to invest more, to put more at risk. You'd bide your time until there was a change in policy, or until you could transfer yourself to friendlier venues--as Chevron and Marathon have done. Then, also remember that as early as 2002 producers noted in virtually every public and private meeting that "Alaska Fiscal Certainty" would be an essential ingredient to an Alaska gas pipeline, yet in the succeeding decade, officials have enacted no fiscal certainty required for huge gas pipeline investments. An essential ingredient in fiscal certainty is reform of Alaska's currently, predatory oil tax policy and putting into place a reasonable natural gas taxing policy. Without these minimal actions, big energy investments will be subject to further predatory taxation and regulatory abuse. One would additionally expect some sort of constitutional protection from greedy officials who might in 2013 say, "Your taxes are reduced and your investment is safe with me," then in 2016 say,"Oh sorry, things have changed and we need/want the money after all". The reality or threat of such behavior is historically part of Alaska's DNA now and is being calculated into all Alaska investment decisions. Unfortunately, Alaska's greedy and unpredictable reputation will be hard to overcome absent a major leadership initiative, like constitutional protection against arbitrary and capricious taking of property through taxation.
So yes, we are optimistic that public officials will see the light and better pursue their important roles. As Clint Eastwood counsels, "A man's got to know his limitations." If Alaska decision makers get a grasp on their human limitations, we are optimistic. If public officials begin asking, "how can we help" rather than demonizing the creators of wealth, we are optimistic that the thousands of brilliant minds laying in wait throughout the private sector energy community will respond and do what they do best: provide a service for a profit for this and future generations.
Lastly, in our optimism, we caution ourselves not to be too much in love with our own molecules. As residential gas consumers, we all want gas for home heating and electricity produced from gas-fired generators to be as inexpensive as possible. That's rational. We have 35 trillion cubic feet (Tcf) of natural gas on the ANS and it SOMEHOW seems right that we build a pipeline and burn our own gas, right? That's seeking to be objective but being irrational. Listen. Prudhoe Bay to Anchorage is about the same distance as Williston to Denver. But no one would blink if Denver found it cheaper to bring gas in from Mexico than from North Dakota. If Alaskans can get LNG delivered from British Columbia or Sakalin or Indonesia cheaper than from Prudhoe Bay, why would we torment ourselves with all of the political gyrations discussed above? Why would we not just leave Cook Inlet supply and how ANS gas is marketed to the responsible utilities (i.e. who would likely import LNG) and producers? Why wouldn't we forget subsidies or costly government controls and make taxes competitive with other regions that are seeking to seduce our 40-year legacy investors to their more attractive boudoirs? Why? If we fall in love with our own molecules, we are liable to lose sight of what is most attractive to consumers: price and supply.
-End-
(Note: Regular readers know it is our practice to put up breaking news and commentary as it occurs, complete with blemishes. Throughout the day, the material is refined until we are satisfied that it can take its rightful place in our archives. Readers are always invited to suggest additions/corrections or provide comment, here. -dh)
Commonwealth North's Energy Action Coalition will meet again next Friday in Anchorage with Colleen Starring (NG Photo), President, ENSTAR, who will speak about the CINGSA project status and the benefits to the utility customers that will be realized this winter. The goal of this group is to continue discussion on our most recent energy reports Energy for a Sustainable Alaska: The Railbelt Predicament & The Rural Conundrum and highlight and identify challenges and opportunities in Alaska's energy environment in order to bring informed Alaskans to the table and come to solutions that will benefit all Alaskans and ensure these complex energy issues are understood. If you would like to be added to this distribution list please contact Joshua Wilson at events@commonwealthnorth.org
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Nov 11th, 2012 8:00 AM EST
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 The 124th Annual NARUC Meeting brings together all the major players in the utility sectors under one roof. Hear from experts on cyber security, hydraulic fracturing, new environmental rules, emergency response, and much, more more. Featured speakers include Maryland Gov. Martin O'Malley, Exelon Executive Vice President Mayo Shattuck III, Environmental Protection Agency Assistant Administrator for Air and Radiation Gina McCarthy, and members of the Federal Energy Regulatory Commission. In addition, the nation's State utility commissioners will set new policies on numerous crucial issues facing the utility industries. You can't miss this event! Your author will be there. -dh
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