Journal of Commerce, 8-7-14, by Andrew Jensen. If there is one thing Anchorage Democrat Sen. Bill Wielechowski (NGP Photo) is good for, it is providing column material with his reactions to ConocoPhillips earnings reports.
This quarter is no different, and he definitely isn’t making the task any more difficult.
• “Yesterday ConocoPhillips announced $627 million in 2nd quarter profits from their Alaska operations or nearly $7 million per day from Alaska alone. On an hourly basis that equates to almost $300,000 in profits each and every hour.”
So? Here Wielechowski is simply trying to appeal to the dark impulse of envy in his audience. According to the report, the company paid an effective tax rate of 50.3 percent in Alaska for the quarter, so the government also made about $7 million per day and $300,000 per hour.
Unlike ConocoPhillips, however, it didn’t have to do anything to make that money other than sit back and collect the checks. More...
(Note that while this article is about two months old, we provide it this weekend as an addition to our archives since Jensen did such a precise job of researching actual facts and correcting the myths some are trying to perpetuate. -dh)
Pipeline Hopes Spring Eternal
CBC News. Premier Brian Gallant will use a four-day trip to Alberta to meet with business and political leaders to show his new government’s support for the Energy East pipeline.
Gallant and Energy Minister Donald Arseneault will leave for Alberta on Sunday and he will meet with Premier Jim Prentice, TransCanada Corp. officials and spend time drumming up possible investment opportunities
The Calgary Herald provides a report by the Canadian Press' Ross Marowitz this morning describing opposition in Quebec originating from the province's largest gas distributor, Gaz Metro to TransCanada's Energy East pipeline project.
U.S. and Canadian energy companies employ best practices in the world for exploration, development transportation and distribution, refining and marketing of oil and gas. Complex as it is, our companies can easily design, build and operate state-of-art facilities. Those facilities produce wealth for our countries, our companies, our citizens and an economic platform for the coming generations.
No, building facilities is easy compared with the political and regulatory challenges.
In the U.S., politics almost 4 decades ago caused the two governments to choose an Alaska Highway route for moving Alaskan and Mackenzie Delta gas to market. The less politically popular Arctic Gas project, a 27-member consortium at its zenith, would have done the job more efficiently. TransCanada was one of its principle members. The politically chosen project was never built.
In mid-1973, Vice President Spiro Agnew provided the final, tie-breaking U.S. Senate vote that allowed construction of the trans Alaska oil pipeline to begin. Imagine how history would have changed had the politicians erred by one vote--sending that project to the scrap heap.
Now, one witnesses support from the American people, from affected states and even from the U.S. State Department for building TransCanada's Keystone XL pipeline, creating thousands of jobs and increasing the North American supply of crude oil. That which is exported provides valuable foreign exchange and less dependency for crude oil on less friendly regimes. But the White House refuses to allow the international project to go forward for purely political reasons: his environmental activist friends oppose it.
Imagine how history without this pipeline will affect the wealth of citizens, companies, states and the national economies of Canada and the United States. Imagine this being done by an administration presiding over an accumulated deficit now approaching the unfathomable level of $18 trillion, a debt per taxpayer of plus or minus $153,000. Not to mention national defense implications and an injured relationship between two of the world's greatest friends and trading partners.
While the Keystone XL pipeline proponent, TransCanada, awaits final word from the U.S. on that project it is furiously seeking to create another outlet for prolific Alberta oil sands production and make best use of an underused gas pipeline.
We made reference, yesterday, to the $12 billion Energy East project, designed to convert a natural gas pipeline with spare (i.e. unused) capacity into a fully used oil line.
Marowitz noted in his report that it, "...would be one of the biggest infrastructure projects in Canadian history, crossing six provinces and traversing 4,600 kilometres in total. Roughly two-thirds of it would make use of underused natural gas pipe that's already in the ground, with new pipe being built through Quebec and New Brunswick. The idea is to connect oilsands crude to eastern refineries and to export some of the oil by tanker."
He concludes with a Deloitte study conclusion that the gas to oil pipe conversion, "...will boost the Canadian GDP by $35 billion over 20 years, add $10 billion in taxes, support 10,000 jobs and help eastern refineries.
When TransCanada files its application to proceed with the National Energy Board (i.e. NEB, Canada's counterpart to the U.S. Federal Energy Regulatory Commission, or FERC) Gaz Metro is likely to file in opposition to the project, partly on the basis that the underused TransCanada gas line currently provides the extra gas needed during high demand, winter months. One can envision a protracted, contested TransCanada application that can cause delay, raise costs and reduce value to taxpayers and ratepayers alike. We would hope Gaz Metro, on behalf of its consumers, would work out a private compromise with TransCanada that would be mutually acceptable. We would hope, too, that TransCanada would be flexible enough to join in a cooperative effort to resolve differences around a bargaining table rather than before an expensive and unpredictable regulatory, tribunal. Just look at the NEB's propensity to attach unpredictable and costly "conditions" to application approvals that could cause significant angst and expense for project proponents (e.g. Just 'Google', "conditions NEB pipeline").
TransCanada is also the big-inch gas pipeline member of the Alaska LNG Project consortium attempting to build a pipeline/LNG project designed to transport long-stranded Alaska North Slope Gas to Asian markets. This is the most feasible concept now that the gas shale phenomenon has precluded the need for Mackenzie Valley and Alaska Highway gas pipelines (i.e. In both projects, TransCanada played a leading role).
One can imagine the tension that must exist in the TransCanada board room with three world class pipeline projects all teetering between approval and rejection amid tumultuous world tensions in a volatile regulatory, political, price, supply and demand environment!
If none of the three projects moves forward, that will be a big problem for shareholders since so much development cost will be written off and/or shared with existing pipeline ratepayers.
If all three projects were to receive market place and political and regulatory approvals, that in and of itself would be a huge challenge for TransCanada to manage in the coming decade.
Management of multiple mega projects poses a huge variety of challenges, including but not limited to: 1) transitioning from a baby boomer, experienced pipeline workforce to a vast generation of new workers; 2) giving existing pipeline maintenance, marketing and construction adequate attention; 3) convincing Alaska partners and other project stakeholders that it has the resources to manage all the projects in a somewhat similar timeframe; 4) conducting three world class stakeholder engagement programs both prior to, during and following construction; and 5) managing state, provincial and federal regulatory filings and disputes in both countries and across many states and provinces; and 6) dealing with limited, worldwide big inch pipe manufacturing and other logistical capabilities.
Having worked with and known TransCanada for a long time, we believe that if any company is capable of absorbing such multiple challenges, it is TransCanada.
That said, one hopes -- for the sake of North American economies -- that all three projects are successful and that TransCanada can successfully and efficiently build and operate them.
One also hopes that these three projects will 1) moderate world tensions in Europe, where new, North American energy might take the edge off of Russian energy blackmail/bribery; 2) free Alaska stranded gas while filling an Asian demand from a secure and diversified, North American source; and 3) enable the United States and Canada to reaffirm their historical relationship as each others' largest trading partner and best friend.
While hope is not a strategy, one cannot resist the belief that hope does, indeed, spring eternal and will win in the end.
To our other readers throughout the US and Canada: Contact CEA to replicate the model!
CNBC's Art Cashin On Oil Prices. Readers can draw their own conclusions about how energy prices can affect the feasiblity of oil and gas pipeline and LNG projects. -dh
Macleans by Andrew Leach. If you ask Jim Prentice, the premier of Alberta, what keeps him up at night, he might say pipelines, but I’m sure oil prices aren’t too far behind....
Calgary Herald Editorial. It seems the European Union may have finally come to its senses about Alberta's oilsands. A new EU proposal that could make it easier to import crude oil derived from oilsands bitumen is good news for this province.
Our comment: North-South Keystone delay is more ammunition for West & East Canadian pipelines.
More demand from Europe may well increase competition and Asia's thirst for Canadian "secure" imports, placing more priority on Alberta-BC pipelines as well.
To the extent that low energy prices are sustained for a long period of time pipeline/LNG project financing can be adversely affected, delaying some project plans...derailing others.
Dithering vs. Decisiveness Affects Energy Projects
Meanwhile, by its Keystone XL pipeline inaction, it seems the White House is intentionally opting America out of Canadian energy transportation opportunities, jobs and economic vitality. This diplomatic failure has created a high level of mistrust between the two countries which have historically been each other's largest trading partner.
We should add that when the U.S. policy of dithering applies to national security, energy security is at risk and that is also a fact energy investors must consider.
Israel has recently demonstrated, once again, the importance of decisiveness and the principle of "peace through strength". The current "peace" has made the promise of natural gas exports more realistic, because Israel decisively answered a national security threat. It seems poised to leverage its gas exports for peaceful diplomatic ends. Its exports should have some proportional effect on world gas supply and demand.
Thus should its production enter into the calculus of other middle eastern, North American, Australian, Asian and Russian LNG project planners.
See poem below. -dh
Your jobs-to-be now wither, hither,
as our own envoys yawn and dither;
and Canadian convoys rolling thither,
pack our pipe dreams northward, yon:
sadly, ditching US anon.
Rev. 10-16-14, 16:12, CDT
1. Ode To An American Pipeline Policy Tragedy, Copyright 2014 Dave Harbour (Note to editors: we herewith give permission for editors and publishers to reprint this poem between 10-16-14 and 12-31-14 without compensation to the author under the condition that proper attribution is made along with a link to this page and a copy or link to the copied work is forwarded here. Editors and publishers wishing to reproduce the poem after 12-31-14 are invited to contact the author for permission here.)
2. Ode To An American Pipeline Policy Tragedy: Or, Pipeline Opportunity Lost?, with Apology To John Milton. With that, we leave our cherished readers with this observation and question: TransCanada's Keystone falters as its Energy East project rises. Had earlier, decisive White House approval produced thousands of Keystone XL Pipeline jobs by now in the U.S. and Canada, would so much Alberta oil pipe capacity -- East and West -- now be so necessary? -dh
According to Andrew Topf of Oil Price, of the ten countries with the largest per capita use of oil, the United States is not even in the top five. She's #8, right behind Canada! -dh
The College of Engineering, Architecture and Technology at Oklahoma State University inducted five industry leaders into its Hall of Fame last Saturday including 1986 Chemical Engineering graduate, Janet Weiss (NGP Photo) now President of BP Alaska.
CEA POLL SHOWS MAJORITY SUPPORT IN KEY STATES FOR OFFSHORE DRILLING:
Consumer Energy Alliance voter polls conducted in three states with pivotal U.S. Senate races finds strong support for allowing oil and natural gas drilling in U.S. waters inside the Arctic Circle. The poll finds Alaska, Georgia and Louisiana each have close races for U.S. Senate that will indicate the direction of federal policy towards offshore energy. More....
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Also...see our recent commentary on the effect of the Senate races on Alaska energy policy. -dh
How Government Deals With One Invasive Species, The Dandelion
(Point of personal privilege)
This is, admittedly, a pet peeve. The only way I could relate the dandelion invasion to our study of energy, is to make a point that bureaucracies will never be as efficient with public dollars as citizens are with family dollars.
As a homeowner, I go out and dig up every new dandelion. My wife plants a wonderful array of floribunda alaskana every spring. Church volunteers cull dandelions and cultivate daisies.
But government cultivates dandelions and kills desirable species while simultaneously holding 'Invasive Species Workshops'.
This morning I provided a comment to Alaska Business Monthly regarding an upcoming 'Invasive Species Workshop' listed on its Industry News page. I don't know if the organizers will make a dent in the invasion of unwanted species next year. They do justify spending public money on workshops and publications and 'public outreach' -- which incrementally increases the demand for higher taxes. So, hopefully, the effort will produce cost-effective results.
Meanwhile, with a little common sense, at no additional cost and without workshops government planners could significantly slow the spread of one invasive species, the dandelion.
In our primary area of interest and expertise, energy, one notes that with North Dakota oil and gas production being on mostly private property, it flourishes (Also note Texas, Pennsylvania, Ohio, etc.). But in federal areas, bureaucracies stop production before it begins while cultivating their own, invasive bureaucratic growth. For example, observe the gold plated offices, in Anchorage, inhabited by Department of Interior agencies along with their hundreds of employees, including huge public relations staffs. And, what is their demonstrated, primary role: stopping human activity in a state whose Constitution requires development of natural resources.
The invasive dandelions of government are protected while entrepreneurial daisies and poppies are cut down and eventually culled out of existence.
To continue this little allegory, below we reprint for your information and, perhaps, entertainment, "A Dandelion Story", slightly modified for our readers.
P.S. If Invasive Species Workshop participants do make a dent this coming year in stopping or slowing the growth of invasive species -- particularly the dandelion invasion -- we will look forward to receiving information from them and including it in our searchable archives. We know these public employees are well intended and we look forward to hearing about their results.
Commentary for readers: Alaska Business Monthly (as modified)
A government-sponsored "Invasive Species Workshop" will occur October 28-30 in Anchorage (www.alaskainvasives.org).
Government agencies have generally ignored the invasive species 'elephant in the room', the ubiquitous dandelion.
From public rights of way, dandelion seeds attack neighborhood lawns and establish beach heads throughout our wilderness.
We plant daisies and poppies in the rights of way to meet beautification / landscaping / environmental standards for federal dollars. But the folks who make the plans don't maintain the projects.
Then, dandelions invade. The dandelions are first to pop up in May and early June. Smart maintenance managers could mow then, before yellow dandelion flowers go to seed and before delicate poppy and daisy heads pop up.
But no. Maintenance managers allow the dandelions to flower then go to seed, just as the wonderful poppies and daisies are coming up in mid to late June. The street/highway maintenance managers then send out the lawn mowers to cut down the dandelions just as they are going to seed, spreading the invasive seed, while simultaneously cutting off the heads of daisies and poppies before they can develop seeds.
Most summers there is a bumper crop of dandelions in August. Simultaneously, a few remaining daisies and poppies try again to propagate--just in time for the 2nd mowing.
At the forest edge of East Northern Lights Blvd. in Anchorage, where mowing does not occur, the daisies flourish and dandelions are sparse.
Where the miscoordinated mowing occurs, the expensively planted daisies and poppies die off for lack of progeny while the invasive dandelions multiply with help from street/highway maintenance managers.
Other government agencies also cultivate the invasive species in this way. The Anchorage School District, with its own thoughtless mowing practices, is a major cultivator of invasive dandelions whose seeds invade nearby neighborhoods throughout the city.
It seems that an "Invasive Species Workshop" goal should be to "pick the low-hanging invasive fruit". By simply changing the mowing schedules, maintenance managers could cheaply and efficiently accomplish two goals:
1. They could restrain the propagation of the most invasive of plant species, while
2. simultaneously protecting taxpayer landscape investments intended to beautify public rights of way and other government properties.
(STILLWATER, Okla., October 13, 2014) – The College of Engineering, Architecture and Technology at Oklahoma State University inducted five industry leaders into its Hall of Fame on Saturday, Oct. 11. More than 250 people were present at the ConocoPhillips Alumni Center to recognize the achievements of those extraordinary individuals.
Hall of Fame inductees included Debbie Adams (’83 Chemical Engineering), Harold Courson (‘52-‘55 Engineering), Jeff Hume (‘75 Petroleum Engineering Technology), David Timberlake (‘65 Architectural Engineering) and Janet Weiss (‘86 Chemical Engineering).
These distinguished professionals were honored by OSU for their exceptional leadership and contributions to advancing the fields of engineering, architecture and technology.
Debbie Adams currently serves as the Senior Vice President of Phillips 66 based in Houston, Texas. After graduating from OSU with her chemical engineering degree in 1983, she began her career in oil and gas as a process engineer with Conoco. She worked in several capacities for the company, including roles that took her to Sweden and England after the 2002 merger that created ConocoPhillips. During the most recent transition that resulted in the formation of Phillips 66, Adams was named the President of Transportation and promoted to Senior Vice President. She currently serves on the Board of Trustees and Board of Governors for the OSU Foundation.
Harold Courson attended the engineering program at Oklahoma A&M from 1952-1955 before leaving to pursue the oil and gas drilling business. He purchased speculative gas leases in the Texas panhandle and founded Courson Oil and Gas in 1960. His company drilled two of the first horizontal wells in the early 1970s, one of which is still producing today. He has served three terms as Mayor of Perryton, Texas, and is currently the Chairman for Courson Oil and Gas, Inc. and Natural Gas Anadarko Company. Courson was one of 100 recognized as a History Maker of the High Plains by the Amarillo Globe-News.
Jeff Hume is a 1975 Petroleum Engineering Technology graduate who began his career prior to his time at OSU. Immediately following high school, Hume worked as a roustabout in the oil fields outside Enid. He soon realized his passion for the industry and came to Stillwater to obtain his degree. Since that time, he has been a leader for Continental Resources, Inc. for more than 30 years. Hume is a registered professional engineer and member of the Society of Petroleum Engineers. He is currently the Vice Chairman of Strategic Growth Initiatives for Continental Resources, Inc.
A 1965 Architectural Engineering graduate, David Timberlake received his degree and joined the Army Corps of Engineers before transitioning to the private sector. In Washington D.C., he worked in structural engineering and construction inspection for government buildings. There he met an influential colleague who led him on the path to founding his own company — Timberlake Construction. The company has built structures in 48 of the 50 states and its founder currently serves as Chairman and CEO.
Janet Weiss brought her love for math and science, especially chemistry, to OSU when she enrolled in the Chemical Engineering program. Her father, Dr. Franklin Leach, was a professor of biochemistry at OSU, so Janet grew up gaining a love for learning from her father and the university. She graduated in 1986 and began her career at ARCO, where she moved through the ranks. For the past 14 years, Weiss has worked for BP, and she has been a leader in the oil and gas industry. She currently serves as President of BP Alaska and is a published author on the Kuparuk River Field. Weiss is an active member of the Alaska Oil and Gas Association Board, University of Alaska Fairbanks Advisory Board and the Anchorage United Way Board.
Following Saturday’s ceremony, the College of Engineering, Architecture and Technology has recognized 101 Hall of Fame inductees.
For more information on the College of Engineering, Architecture and Technology at OSU, visitwww.ceat.okstate.edu
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.