CANCELLED!: Meet Bill Walker and Craig Fleener, Wasilla this Friday 4pm to 7pm at Re/Max in Wasilla!

CANCELLED DUE TO ROAD CONDITIONS!

Please join us, 4pm -7pm, Wasilla Re/MAX building to meet Bill Walker and Chris Fleener, candidates for Governor and Lt. Governor.

Bill Walker will not hesitate, but Parnell just sits and waits for . . . ?

With the oil and gas conversation in Alaska politics focusing on the upcoming referendum on HB21, the Governor’s recently passed reduction in oil taxes, there has been little news on the natural gas pipeline front since the Producers promised further "studies". The last news from the producers was that they had made a preliminary decision with respect to the port of export. They chose Nikkiski, but were again studying the situation further, meaning no decisions to actually build a pipeline until a time uncertain into the future.

The Producers’ had to know of the impending legislation in Congress that would give a right of way through Denlai National Park. S.157 and H.R. 586 were introduced in June, 2013. This legislation allowed a natural gas pipeline to be built along the 7 miles of existing highway right of way that runs through Denali National Park lands. A take-off to the park facilities through an existing utility corridor would extend from the park entrance to the park facilities to allow the Park Service access to the gas. The Secretary of Interior would be required to issue a permit for the line crossing federal park lands if it meets environmental reviews and meets ANILCA requirements. Per Eric Elam of Young’s office, the legislation passed the House and Senate and was signed into law on September 18, 2013. The bill also provided funding for the Kantishna Micro-Hydro Project, a 50kw hydro-power project to provide power to the Kantishna Roadhouse owned by Doyon RNC.

With the signing of the legislation into law, a major hurdle in the construction of any natural gas pipeline down the Parks corridor using either the Alaska Railroad right of way or the highway right of way has been eliminated. This does not mean that litigation will not ensue on the part of the anti-development forces aligned against any development of Alaska’s resources. These forces have had two major victories to date.

The Pebble Mine project is all but history with Anglo Mining pulling out. Usibelli Coal has not been able to move forward on the Jonesville Coal Mine in the Matanuska Valley for the same reason. Therefore, the likelihood that the greenies will let any natural gas pipeline construction move through Denali, even using the highway right of way, without litigation to extract blood money is unlikely. Alaska’s history is rife with opposition to major resource development by Outside groups who have no other vested interest other than using the courts and Alaska as a revenue source.

The only pipeline corridor that is free of any litigation is the TAPS corridor, which is the choice of Bill Walker in both his 2010 and current gubernatorial campaigns.

Legislatively, the way is now clear for a pipeline down the Parks or a pipeline down the Richardson highways. The choice is which way, and most importantly when?

Japan is facing a shortfall in LNG due to interruptions from some LNG suppliers, such as Nigeria. Japan will be facing higher gas prices over the winter, because of the necessity of purchasing LNG spot cargoes rather than receiving LNG as part of a long term contract supply. The situation is rife for potential for Alaska’s North Slope gas. December deliveries to Japan is $17/MMbtus. Last year, the average was $13.25/MMbtus. Qattar will not be able to supply additional LNG to Japan over the winter, with supplies contracted to other buyers. Qatter supplied gas to Japan helping to keep the price down to $13.25/MMbtus.

The Wood-MacKenzie Report demonstrated a delivery to Japan of Alaska LNG North Slope gas of approximately $8.50/MMbtus. Using a 10% inflation per annum figure since the report’s release in 2010, gives an estimated delivered cost of approximately $11.31/MMbtus today, without respect to market considerations, and depending upon whether or not one believes the government’s inflation figures or what is experienced in the rising prices of other commodities. 

October Japan LNG market prices are $15.15/MMbtu. By December, the Japan LNG market prices are already contracted at $17.20/MMbtu. China is competing with Japan for LNG, causing increasing prices for existing supplies.

The specter of Alaska LNG competing with LNG from Kitimat is very real with Shell’s planned LNG terminal. Shell let a $4 billion contract to TransCanada to build a 2 bcf-2.5 bcf natural gas pipeline to 700 kilometers from B.C. shale fields Kitimat. (Yes, the TransCanada partnered with Exxon . . . ) Shell has partnered with Korea Gas, Mitsubishi and PetroChina to build its Kitimat LNG terminal.

Meanwhile, Governor Parnell waits, the oil companies study, and Alaska faces an increasingly uncertain fiscal future.

Either Governor Sean Parnell does not want to remain governor, or he is getting some bad advice with respect to his failure to move aggressively into the Japanese market.

His competition for the governor’s job will not be so hesitant. Bill Walker has been a relentless advocate of moving Alaska’s North Slope to market as LNG before the LNG market in Asia is diminished by other suppliers. Japan has been a primary focal point in his marketing of Alaska LNG. Walker and the Alaska Gas Port Authority have been tireless in their promotion of Alaska’s natural gas to Asian markets. Remember, the all-Alaska natural gas pipeline being promoted by AGPA and Bill Walker was the basis for Sarah Palin’s campaign for governor. If Governor Sean Parnell will not make a decision, Bill Walker and his Lt. Gov. candidate Chris Fleener will.

For more information:

LNG Insight: Utility buyers change buying strategy for winter
http://www.platts.com/videos/2013/october/lng-buyers?video_uuid=ngt147ob

http://www.platts.com/podcasts-detail/spotlight/2013/october/lng-prices

http://business.financialpost.com/2013/08/15/shells-kitimat-lng-project-gets-boost-from-asian-partners/?__lsa=128e-8da1

Congressman Young’s press release

http://donyoung.house.gov/news/documentsingle.aspx?DocumentID=348902

HB4 is a bad idea and a slap in the voters' faces

HB4 creating the Alaska Gas Development Corporation was passed by the Alaska House on 2 April, 2013 by a vote of 30-9. This bill is the culmination of over 10 years of effort on the part of the Legislature and the Governor to end the Alaska Natural Gas Development Authority created by 138,000 votes for Proposition 3 in 2002. HB4 is now before the Alaska Senate, where it will probably pass, given the list of sponsors in the Senate: Senators Dyson, Huggins, Giessel, McGuire, and Micciche. There are only 20 members of the Alaska Senate. Senator Charlie Huggins is the Senate President. Therefore, the likelihood of this legislation failing to pass is nil.

Alaska’s history of attempting to get a natural gas pipeline built to move natural gas from the North Slope to market has been convoluted. HB4 further complicates this confusing and contradictory history.

Prop 3 passed in 2002 mandated the State to create a natural gas development authority (AS 41.41) to build the all-Alaska natural gas pipeline from Prudhoe to Valdez, with a 250 mmcf spur to south central. The capacity of the all-Alaska natural gas pipeline (AANGPV) to be built was approximately 2.5-3.0 bcf/da with most of the gas converted to LNG and then shipped to market in the U.S. or to foreign markets. Proposition 3 created the Alaska Natural Gas Development Authority (ANGDA), which was to be have been the vehicle that would oversea the natural gas development potential for Alaska. From the very start, ANGDA was vehemently opposed, disrespected, and diminished by Governor Frank Murkowski, Governor Sarah Palin, Governor Sean Parnell and the Legislature from 2002 forward. With their opposition to ANGDA, the aforementioned belied any intention of respecting the peoples’ will where building a natural gas pipeline was concerned. This disrespect has been amplified in the creation of the Alaska Gas Development Corporation (AGDC) and the Alaska Stand Alone Pipeline (ASAP).

Governor Frank Murkowski rejected the will of the voters with his churlish opposition to ANGDA and the all-Alaska natural gas pipeline (AANGPV). Murkowski funded ANGDA with an initial appropriation of $50,000 and the Legislature gave more money later in 2003. ANGDA’s yearly budgets then and since barely covered the cost of the few positions created. Compare this situation with the $400 million that will be shoveled into the AGDC’s Alaska Stand Alone Pipeline (ASAP) by the Legislature under HB4 and the $214 million previously appropriated for the various iterations of the ASAP line. Today, ANGDA’s website lists four on the ANGDA Board and one employee as Executive Director. Harold Heinze, a former CEO of ARCO, was the previous Chief Executive Director until he stepped down on December 8, 2011.

ANGDA accomplished much during its colored history. ANGDA explored moving gas south by truck to Fairbanks, permitting of the 250 mmcf spur line from Glennallen to Palmer’s Enstar natural gas hub, and building a natural gas pipeline from the Kenai Penninsula north to communities along the Parks Highway, which would have provided an incentive for further exploration and development of the Cook Inlet oil and gas fields. Given the dearth of resources and the failure by the Legislature and the Governors, and their opposition to ANGDA, to provide for bonding capacity, as has been done for the AGDC through Alaska Housing Finance Corporation and the Alaska Rail Road, ANGDA’s accomplishments were not insignificant. Under Harold Heinze and Scott Heyworth, ANGDA moved to meet its statutory mandate as was allowed by hostile administrations and an indifferent and, since the 2009, an increasingly hostile Legislature.

During his term, Governor Frank Murkowski had promised a natural gas pipeline and worked diligently on a 4.0 bcf/da pipeline proposal to make his promise reality. His efforts allegedly culminated in a contract with Exxon, Conoco and British Petroleum Alaska to build his pipe dream. The Palin campaign was able to successfully promote the all-Alaska natural gas pipeline in opposition to Murkowski’s efforts. It was revealed that what Murkowski called a contract was nothing more than an intent on the part of the oil companies to study the viability of building a 4.0 bcf natural gas pipeline to Alberta.

The size of any pipeline has also been an interesting side issue, and one often overlooked in any debate. The natural gas pipeline strategy effected under Murkowski, Palin and Parnell has been for a 4.0 bcf/day natural gas pipeline from the North Slope to Alberta. The theory being that there must be sufficient volume to replace declining revenues produced by the North Slope’s declining oil production. The all-Alaska natural gas pipeline proposed in 2002 was to be a 2.5 bcf with Bill Walker expanding that to 3.0 bcf under his campaign proposal. The AANGPV would terminate at an LNG train to convert the methane to Liquid Natural Gas (LNG).

Bill Walker’s AANGPV proposal would have provided for use of the gas liquids in-state to grow Alaska’s private sector, whereas Palin/Parnell’s AGIA, both the Canadian route and the LNG proposal under consideration to Valdez, and Murkowski’s proposal intended that the gas and gas liquids be shipped out of state for consumption and use elsewhere with little benefit to Alaskans beyond the in-state pipeline and LNG train construction and a direct infusion of cash at the State level.

The Alaska Oil Gas Conservation Commission (AOGCC) has set a limit on the amount of natural gas that is available for sale in order to maintain sufficient pressure on North Slope legacy fields to allow production of remaining oil reserves. AOGCC has set a limit of 2.5-3.0 bcf available per day to deliver to a pipeline. Over 8 bcf per day is now reinjected back into the oil fields on the North Slope in order to maintain pressurization of the fields to make oil production feasible. AOGCC has been pretty consistent in its requirement that at least 5 bcf of the 8 bcf of gas produced per day be reinjected. The priority is in maintaining the State’s oil revenues.

During her 2006 campaign, Sarah Palin supported the mandate imposed by Proposition 3 and the construction of the AANGPV. Upon taking her oath of office, then Governor Sarah Palin turned her back on her support for that mandate and project, and moved forward with her Alaska Gas Inducement Act, which, to date, has produced nothing. AGIA was almost a mirror of Murkowski’s proposed pipeline plan. Instead of relying upon the Producers (Exxon, BP and Conoco), AGIA granted an exclusive to the winner of the competition promoted by the Palin Administration. Unfortunately, there was only one competitor, and that was TransCanada. Her successor, Governor Sean Parnell has not been able to move the proverbial natural gas pipeline football forward one inch towards a commitment for construction, a timeline to do anything, or even claim a successful open season.

During the 2010 campaign for governor in the Republican Primary, Bill Walker championed the AANGPV in his bid for the Republican nomination for Governor. Walker added a new dimension to the pipeline conversation that has been ignored since Parnell’s victory in the Republican Primary. That new dimension was the idea of value added resource development in the use of some of the gas to provide cheaper energy for the agriculture, timber, and mineral industries. Walker’s proposal would have seen take offs to communities down the Richardson Highway and at Glennallen. There was discussion regarding another spur across the Denali Highway to Cantwell. Fairbanks would have benefitted from the pipeline as the pipeline would have gone through with the gas liquids stripped at Fairbanks. The propane and butane would have been used as alternative fuels, with the ethane, hexane and other components being used to provide the building blocks for a plastics and petrochemical industry, giving a benefit to Alaska’s economy well beyond just the construction of the AANGPV. Walker’s proposal was the only proposal for a natural gas pipeline that went beyond just exporting Alaska’s gas to a foreign or domestic market.

The ASAP proposal was previously known as Harry Noah’s pipeline under Sarah Palin/Sean Parnell. The economics were never viable, but $14 million in State funding was appropriated to Noah’s pipeline study group for what was then known as the Bullet Line. Rep. Mike Hawker and Rep. Mike Chennault brokered deals to create the Alaska Gas Development Corporation by creating a frankenmonster of an entity to end the public’s mandate represented by ANGDA, but doing what the Legislature never did for ANGDA: providing for the ability to bond to finance any gasline projects using the resources of the Alaska Rail Road and the Alaska Housing Finance Corporation.

The Republican Primary in 2010 saw three competing natural gas pipeline projects: former Rep. Ralph Samuels promoted the ‘Bullet Line’ (ASAP), Governor Sean Parnell promoted AGIA, and former Mayor of Valdez Bill Walker promoted the AANGPV.

For some reason, it was fine by the Republican legislative majority and voters to support the Bullet Line, even though it was to be 100% state financed, and limited to a maximum volume of 500 mmcf/da under AGIA, but having the State of Alaska buy into the AANGPV for a 20% interest in order to control the timeline for construction was ‘socialist’ and a subject of great controversy. The estimated cost of the Bullet Line was $4B-$7B at that time, and the estimated cost of the AANGPV was $20B-$24B. Since, the ‘Bullet Line’ cost estimates have grown to almost $8B, but the AGIA version of the AANGPV costs have increased from the 2010 AANGPV estimates to $45B-$65B according to the October 1, 2012 letter to Governor Sean Parnell from Exxon, BP and Conoco.

Note the disparity in cost increases between the two pipelines. Does it make sense that the estimated costs of the AANGPV should increase by three times over the cost factors of the ‘Bullet Line’/ASAP pipeline? Is this a case of TransCanada/Exxon, BP and Conoco inflating the AANGPV to reinforce their reluctance towards moving North Slope natural gas to market?

The upswing in shale gas production has eliminated the domestic U.S. natural gas. A projected 200 trillion cubic feet of natural gas reserves in continental U.S. shale deposits made the idea of shipping Alaska natural gas to a U.S. market moot. Now, Alaska natural gas will have to compete with domestically produced U.S. shale gas on the world market, given the export permits applied for to move shale gas as LNG to Asian markets.

One of the greatest errors on the part of the Parnell Administration was ignoring the needs of Japan after the 2011 earth quake. A delegation came to Alaska seeking an audience with our governor. They did not meet with him. Another delegation came last year in June and met with DNR Commissioner Dan Sullivan. After leaving Alaska, the delegation comprising four Japanese companies, including Mitsubishi, travelled to British Columbia and Louisiana where they invested almost $4 billion between Cheniere Energy’s Sabine Pass LNG export expansion project and in Shell’s LNG export facility at Kitimat, B.C.

Alaska has a long term (43 years) relationship with Japan with respect to LNG exports. Conoco’s LNG train at Nikiski has been producing LNG for export to Japan since before the completion of the TAPS.

It certainly appears that AGIA has cost Alaska in lost business opportunities.

The ASAP’s primary purpose is no longer just the idea of supplementing Cook Inlet/Kenai gas production until storage and new exploration and development activities eliminate the specter of natural gas shortages that saw the closure of the Agrium ammonium nitrate fertilizer plant in Nikiski several years ago with the loss of 65 jobs. The ASAP will provide natural gas for Conoco’s LNG train at Nikiski for export to Asia. Given that the ASAP will be constructed at State of Alaska expense and its operation subsidized by the State, that is a very good deal for Conoco. At lease some of Alaska’s natural gas will make it Asia’s LNG market.

Cook Inlet has approximately 19 trillion cubic feet of estimated reserves remaining to be discovered. Exploration and development has picked up over the last two years, with more drilling planned this year. Unfortunately, there needs to be an upgrade in transportation infrastructure and storage to get the natural gas from the producing field to sufficient storage to carry south central’s demand through increasingly colder winters. It is not a declining production that is the issue, it is the lack of a suitable intra-field pipeline system to get the gas to the storage facility. As a result, Alaska may see the first importation of natural gas from Russia later this Spring.

With the 2014 gubernatorial elections looming, Governor Sean Parnell is in much the same situation as former Governor Frank Murkowski was at the time of his reelection bid against Sarah Palin. Under Parnell, the AGIA 4.0 bcf pipeline option to Canada is dead. The only viable option is the AGIA LNG option similar in size and scope to the AANGPV, excepting for no spur to Palmer and no in-state use of the gas liquids. Given the conflicts of interest on the part of Exxon, BP, Conoco and TransCanada, LNG from Alaska is unwelcome in the Asian market, because of competing developments on the part of the aforementioned.

Given that his administration cannot state any firm date for the construction of a pipeline, could it be that Governor Sean Parnell is exploring the possibility of running against Senator Mark Begich with the intent of bailing from the Governor’s office before the house of cards that is AGIA falls in on itself?

Such could be inferred from the remarks made by Lt. Gov. Mead Treadwell today. Treadwell commented on the recent upheavals in the Alaska Republican Party and its ability to promote and support the campaign against Democrate Senator Mark Begich. Treadwell stated that it may not be him running against Begich, but possibly Governor Sean Parnell. Treadwell had previously announced his intent to explore a run against Senator Mark Begich on November 30, 2012. If so, Treadwell will certainly run for governor in Parnell’s stead.

Bill Walker may have another shot at the Governor’s mansion if Parnell runs for the U.S. Senate. Under Parnell, Treadwell has not been terribly prominent in the public eye.

It should be noted that Governor Sean Parnell has not opposed theAGDC/ASAP proposal of Rep. Mike Hawker and Rep. Mike Chennault as demonstrated by HB4, nor did he oppose the previous iteration of that project proposed by Harry Noah under then Governor Sarah Palin. This lack of opposition leaves him in a position of being able to claim some degree of success with respect to moving Alaska’s North Slope natural gas to market. Ignoring of course, the fact that the ASAP project is limited to 500mmcf under AGIA, meaning the cost of transport to market will have to be subsidized by the State for the life of the pipeline. The cost of constructing the pipeline would also be borne by the State of Alaska.

Bill Walker’s AANGPV was the best option to date, as his plan provided for instate use of the gas liquids and natural gas to provide for cheap energy for agriculture and industry, alternative fuels for the Bush, and a petrochemical industry for Alaska. TransCanada and Exxon will send the gas and the gas liquids to Asia, if they bother to build a pipeline at all. Further, the AANGPV provided for a 250 mmcf/da spur into the Enstar Hub at Palmer to help mitigate the anticipated storage shortfalls from Cook Inlet natural gas production. A spur from Paxon west to Cantwell was also anticipated providing for a spur feeding to Nenana and connecting to any ANGDA pipeline from Nikiski north to Cantwell.

Competing with any potential Alaska LNG exports, Exxon has several large scale natural gas development LNG projects in the Pacific (Australia, Indonesia, New Guinea), and also needs a market for its portion of Qatar gas with the loss of the U.S. domestic natural gas market to domestically produced shale gas.

TransCanada is part of the Foothills Pipeline Company, which is involved in the Kitimat LNG port project. TransCanada was recently awarded a contract by Shell for a 2.4bcf pipeline to Kitimat, B.C.

Conoco has its portion of Qatar natural gas to move to market, now in Asia, because of the loss of the domestic U.S. market to shale gas. Conoco also has two Australia LNG projects that will compete with Alaska LNG for the Asian market.

Given the conflicts of interest on the part of Exxon Mobil, Conoco Phillips and TransCanada, is it any wonder why there has been no forward movement on AGIA?

Given the conflicts of interest on the part of Exxon and TransCanada, Governor Parnell has to be either totally brain dead, or simply ignoring reality, given his insistence on pursuing AGIA in the face of competing projects on the part of the TransCanada, Exxon, Conoco and BP. There is no provision under AGIA to declare breach of contract based upon a conflict of interest.

Given the increasing availability of natural gas in the world market, it may be better for the State to pay $500 million to $1.5 billion in penalties get out of AGIA. The lost opportunities will cost the state several orders of magnitude of any penalty under AGIA.

What are the differences between the ASAP natural gas pipeline and the all-Alaska natural gas pipeline option to Valdez?

Cost of construction is borne by the State: ASAP–100%; AANGPV–20% State ownership interest

Capacity: ASAP–500 mmcf/da; AANGPV–2.5-3.0 bcf/da

Benefits: ASAP will increase south central consumer gas costs by up to 13%; AANGVP will reduce or maintain present consumer costs, provide for growth in the private sector, because of in-state use of gas liquids, benefit beyond Alaska for growth in Asian customer’s economies

Cost of construction: ASAP–$8B; AANGPV–up to $45B-$65B (oil companies’ estimate) with LNG train and harbor improvements

Route: ASAP–North Slope to Nikiski across several salmon streams, Denali National Park and Denali State Park, but will not go through Fairbanks with no spur for consumers down the Richardson Highway south to Valdez; AANGVP–TAPS corridor from Prudhoe to Valdez covering all communities along the route through Fairbanks, with a 250 mmcf/da spur from Glennallen to Palmer and passing through Fairbanks down the Richardson Highway with a potential spur across the Denali Highway, LNG route--Valdez to Asia

Permitting status: ASAP–no permits issued; AANGVP–existing permits from Yukon Pacific Corp.

Estimated completion: ASAP–2019; AANGVP–two-three years from funding

Cost of gas to delivery per million cubic feet: ASAP–$9-$11.25/mmcf for Anchorage consumers (p13 of ASAP Project Plan); AANGVP–<$10/mmcf from the North Slope to Japan, including TAPS, LNG conversion costs, and LNG tanker costs (p15 of Wood-Mac study)

Gas liquids: ASAP–stripped at North Slope and reinjected; AANGVP–stripped at Fairbanks for use in Alaska

Testimony on HB4 was heard before the Senate Finance Committee today. HB4 is expected to pass out of the committee.

For more information:

ASAP Project Plan, Dec. 20, 2011–Joint In-state Gas Caucus

http://housemajority.org/neuman/pdfs/27/Gas_Caucus_New_Scenario_20121220.pdf

Wood MacKenzie Alaskan LNG Exports Competitiveness Study

http://www.arcticgas.gov/sites/default/files/documents/11-07-alaska-lng-competitiveness-study.pdf

Exxon Mobil LNG:

http://www.exxonmobil.com/Corporate/energy_production_lng.aspx

Conoco Phillips LNG:

http://lnglicensing.conocophillips.com/EN/lngprojects/Pages/index.aspx

British Petroleum LNG:

http://www.bp.com/sectiongenericarticle.do?categoryId=9015376&contentId=7028020

http://www.bp.com/sectiongenericarticle.do?categoryId=9015513&contentId=7043288

TransCanada:

http://www.transcanada.com/coastal-gaslink.html

Other related articles:

http://www.examiner.com/article/agia-transcanada-s-conflict-of-interest

http://www.examiner.com/article/agia-exxon-s-conflict-of-interest

http://www.examiner.com/article/senator-lisa-murkowski-is-selling-lng-to-japan-when-parnell-will-not

http://www.examiner.com/article/support-for-the-all-alaska-natural-gas-pipeline-appears-local-campaigns

http://www.examiner.com/article/the-legislature-and-the-governor-neither-of-whom-can-make-a-decision

 

http://www.examiner.com/article/denali-is-dead-now-what

Exxon and ROSNEFT expand agreements

On February 13, 2013, Exxon and ROSNEFT of Russia expanded their 2011 Strategic Cooperation Agreement in what is being touted by Larry Persily, Federal Coordinator for Alaska Gas Transportation Projects, as a major development for the North Slope Point Thompson natural gas project owned by Exxon and as an indicator of a potential natural gas pipeline in the offing. However, what is being touted by Persily and in the Alaska press as a done deal is far from being a "done" anything.

Igor Sechin, president of ROSNEFT, said, "The agreements signed today bring the already unprecedented scale of ROSNEFT and ExxonMobil partnership to a completely new level. The acreage in the Russian Arctic subject to geological exploration and subsequent development increased nearly six-fold. That means the enormous resource potential of Russian Arctic offshore fields will be explored and developed in the most efficient manner with the application of cutting-edge technologies and expertise of our strategic partner, ExxonMobil, using state-of-the-art environmental protection systems. Participation in the Point Thomson project will increase ROSNEFT’s access to the latest gas and condensate field development technologies used in harsh climatic conditions".

　

Stephen Greenlee, president, Exxon Mobile Exploration Company, said the agreement builds on the ongoing successful cooperation between the companies. "This expansion is an illustration of the strength of the partnership that exists between ExxonMobil and ROSNEFT," said Greenlee. "We look forward to working together on these new projects."

Igor Sechin, president of ROSNEFT, and Stephen Greenlee, president of Exxon Mobil Exploration Company, signed several agreements under the watchful eye of Vladimir Putin, President of Russia. These agreements expand the relationship of Exxon and ROSNEFT, including an ongoing program of staff exchanges of technical and management employees.

Exxon and ROSNEFT are expanding their cooperation under a 2011 Strategic Cooperation Agreement that expands exploration to six times that existing to include an additional 150 million acres in the Russian Arctic.

A separate Memorandum of Understanding covers the intent to study the viability of an LNG export facility in the Russian Far East. Under this MOU, Exxon and ROSNEFT will form a working group to commence work to study the viability of the proposed LNG project.

Will this LNG project have any impact upon Exxon’s participation in AGIA with TransCanada?

Exxon and TransCanada are studying the potential of the Valdez natural gas pipeline LNG project to move North Slope gas to market. Under a separate Heads of Agreement ROSNEFT was given an option for a 25% interest in the Pt. Thompson field. An option for an interest, but no commitment from ROSNEFT for any intent to invest in the development of Pt. Thompson.

It appears that Mr. Persily and those touting the option for Pt. Thompson seem to be overlooking the nationalist aspects of any investments on the part of ROSNEFT. Russia will come first to any investment in Alaska. ROSNEFT is the national oil company of Russia. This deal with Exxon is not being done to benefit Exxon and much as it will benefit ROSNEFT.

It is assumed by Persily and others that ROSNEFT would want to move the North Slope gas to market as soon as possible. Therefore, the agreement with ROSNEFT regarding Pt. Thompson is considered a good omen with respect to a natural gas pipeline to move North Slope natural gas to market.

Pt. Thompson has approximately 8 trillion cubic feet of natural gas. Pt. Thompson has been a technically challenging development, as it is a high pressure field with approximately 8 trillion cubic feet of gas reserves. The North Slope holds an known reserves of 35 trillion cubic feet of natural gas and condesates and an estimated potential of greater than 125 trillion cubic feet.

ROSNEFT hopes to benefit in the technology sharing aspects of the agreements with Exxon.

Little explored offshore blocks in the Chukchi, Laptev, and Kara seas were included in the agreement expansion. These blocks are reported to have good potential for oil and gas.

Kara Sea blocks:

East Prinovozemelskiy-1, 2, and 3; 125,904 sq km, 31.1m acres, water depth is 10 meters-440 meters

Severo-Karsky, 196,000 sq km, 48.4m acres, water depth is 20 meters-480 meters

Laptev Sea blocks:

Ust’ Oleneskiy, 64,103 sq km, 15.8m acres, water depth is 19 meters to 90 meters

Ust’ Lensky, 46,851 sq km, 11.6m acres, water depth is 15 meters-90 meters

Anisinsko Novosirbirsky 140,981 sq km, 34.8m acres, water depth is 20 meters-2,000 meters

Chukchi Sea blocks:

Severo-Vrangelevskiy 1, 2, 115,176 sq km, 28.4m acres, water depth is 40 meters-370 meters

Yuzhno Chukotsky, 73,197 sq km, 18.0m acres, water depth is 40 meters-70 meters

The following cautionary note was included with Exxon’s press release:

"CAUTIONARY NOTE:

Statements of future events and conditions in this release are forward-looking statements. The Strategic Cooperation Agreement represents a binding outline of terms, and closing of the transactions contemplated by the agreement is subject to execution of definitive final agreements, receipt of necessary regulatory approvals, and other customary conditions. Actual future results, including potential costs and benefits realized by the parties as a result of the transactions, could differ materially depending on the outcome of future negotiations; the actions of governmental authorities and regulators, including legal and legislative uncertainties; the outcome of exploration programs; changes in prices and other market and economic factors affecting the oil and gas industries; future technological developments; other technical and operating factors; actions of competitors; and other factors discussed under the heading "Factors Affecting Future Results" on the Investors page of ExxonMobil’s website at exxonmobil.com."

The news from ROSNEFT and Exxon sounds good on the surface. However, given Putin’s penchant for using Russia’s oil and gas as bludgeons to effect foreign policy with Russia’s neighbors, means that Alaska’s leadership should take this agreement with a grain of salt. It is not in Russia’s interest any more so than it is in Canada’s interest for Alaska North Slope natural gas to enter the Asian market.

The Pt. Thompson option offered to ROSNEFT may have just been chaff on the part of Exxon to further delay any progress to bring North Slope gas to market. The option may have just been an offering to the State to show compliance with Governor Sean Parnell’s demand and Exxon’s agreement to settle the State’s litigation that Pt. Thompson be in production by 2016.

In any case, any deal with Russia will certainly involve more benefit for Russia than for Exxon or Alaska.

For more information:

ROSNEFT press release:

http://www.rosneft.com/news/pressrelease/130220133.html

EXXON Mobile Exploration Company press release:

http://news.exxonmobil.com/press-release/rosneft-and-exxonmobil-expand-strategic-cooperation

The Maritime Executive:

http://www.maritime-executive.com/article/Rosneft-and-ExxonMobil-Expand-Strategic-Cooperation/

PennEnergy

http://www.pennenergy.com/articles/pennenergy/2013/02/arctic-license-additions-for-rosneftexxonmobil-partnership.html

The Alaska Dispatch:

http://www.alaskadispatch.com/article/rosneft-takes-alaska-natural-gas-field-stake-exxon-mobil-brokered-deal

The Miami Herald:

http://www.miamiherald.com/2013/02/13/3232883/russia-signs-deal-for-stake-in.html

Subsea World News:

http://subseaworldnews.com/2012/09/07/russia-rosneft-exxonmobil-sign-agreement-for-feasibility-study-of-shallow-water-platform/

Exxon's conflict of interest--why there will be no Alaska natural gas pipeline.

Governor Sean Parnell and oil company bosses

Exxon and Alaska’s oil and gas

Exxon is Alaska’s bad boy of oil development. Who does not remember the Exxon Valdez spill in Prince William Sound and the aftermath? As a result, Exxon has been cast as the "heavy" in any oil development conspiracies abounding regarding Alaska’s North Slope oil taxes controversy and oil development in general in Alaska. Exxon is the largest oil company in the world and the wealthiest. Exxon is the great white shark of oil development, the rest are remoras or pilot fish who go where the big fish goes and feed off the leavings. In the Book of Five Rings (Go Rin No Sho) by Miyamoto Musashi, a 17^th century Japanese Samurai, he describes five states of military strategy. They are air, fire, water, void and the mountain. Exxon is the mountain. When Exxon speaks, the world oil and gas industry listens.

After the North Slope oil and gas lease sale in 1972 that netted the State of Alaska $900M, the oil companies were not in any hurry to build a pipeline to bring Alaska’s North Slope oil (20,000,000,000 barrels) to market. Then Governor William "Bill" Egan (D) had to take the proverbial bull by the horns. In 1973, after months of wrangling with the oil companies, Egan threatened the oil companies that if they did not announce plans for a pipeline within the week, the State of Alaska was going to build an oil pipeline to Valdez. By the end of the week, the oil companies had announced plans for the Alyeska Pipeline Service Company which would build and operate the Trans Alaska Pipeline System (TAPS). Construction began in April, 1974.

Oil development on the North Slope had been moving forward since the 1960s.

The cost of TAPS, a 48 inch diameter steel casing pipeline 800 miles long was estimated at $900 million. By the end of construction in June, 1977, the cost had risen to $8 billion. The oil companies did have a 30 year tax write off for all expenses associated with the construction and operation of the pipeline. TAPS was allegedly paid for in the first 3 months of operation transporting 2,000,000 barrels of crude per day to Valdez for shipment by U.S. flagged tankers to refineries on the West Coast.

The cost of oil production on the North Slope steadily declined as the cost of construction and infrastructure was recouped over the years. Today, the profit margin for North Slope oil production varies, but using Conoco’s figures 2011 saw a profit of $25 per barrel of oil from North Slope Alaska production. It is this relatively high profit margin for a barrel of oil in relation to other hydrocarbon reservoirs world-wide that is the basis for resistence to any change in the Alaska’s Clear and Equitable Share (ACES) oil production tax.

Like AGIA, ACES was a product of then Gov. Sarah Palin’s Administration.

The North Slope profit margin of $25/barrel is much higher than the $1/barrel profit allowed under the Iraqi oil bids by Exxon in 2009.

In the1980s, a proposal was put forth to the oil companies on the North Slope and the State by Yukon Pacific, a consortium of companies including Sempra Energy, attempted to promote a natural gas pipeline project to Valdez. Yukon’s project was a 2 bcf/da-2.5 bcf/da capacity pipeline to terminus LNG port at Valdez. Meeting stiff resistance from Alaska’s governors who had their own pipe dreams, Yukon failed to make any progress after spending hundreds of millions of dollars on permits. Yukon sold most of its permits to AGPA.

Exxon’s position with respect to building a natural gas pipeline to take Alaska North Slope natural gas to market has aways been to settle the Thompson Point lease controversy with the State, then move forward. Or, to do nothing.

In 2006, Exxon had allegedly reached an agreement with Governor Frank Murkowski along with BP and Conoco to move North Slope gas to market. As was revealed when the "contract" was made public, the pipeline was just a pipe dream on the part of the Murkowski Administration. Exxon and the other North Slope Producers promised nothing, other than to study the issue, and, then at some indefinable point in the future to consider building a pipeline.

Exxon stated to its shareholders and to anyone who would listen during Murkowski’s Administration (2003-2006) that it was Exxon’s position that Alaska North Slope gas would begin flowing to market around 2025, given a construction start estimate of 2018-2020.

In 2009, in a suprise move, Exxon joined with AGIA contractor TransCanada to build a natural gas pipeline under AGIA. However, at that time, the focus was still on bringing Alaska natural gas and the valuable gas liquids to the Alberta Hub. It was suspected that Exxon’s involvement was self-serving, both acting to delay any pipeline decision or to redirect Alaska’s gas for Exxon’s benefit in the recovery of oil from Alberta’s tar sands.

It was demonstrated in 2010 during the Bill Walker for Governor campaign that this route was not profitable, and that Alaska’s natural gas would most likely end up in Ft. MacKenzie being used to recover oil from the massive Alberta tar sands desposits. The price of natural gas at the time was about $5/1,000 cf. The cost of transporting the gas from the North Slope to the Alberta Hub was estimated at $5, leaving no profit for Alaska to tax. The ‘unprofitable’ Alaska gas would then have been transported to Alberta freeing Canadian gas to go to market in the U.S.

The October 30, 2012 letter to Governor Sean Parnell declared Exxon, BP, Conoco and TransCanada were willing to study the feasibility of a pipeline to Valdez for conversion to LNG and transport to Asian markets.

Thompson Point is a massive high pressure gas deposit. By October, 2012, Gov. Sean Parnell’s Administration had reached agreement with Exxon regarding Thompson Point. The way was now clear to move forward with development of the Thompson Point gas field. The development of Thompson Point was considered necessary to produce the volume of natural gas to make any North Slope to tidewater natural gas pipeline project viable.

Exxon’s conflict of interest

Exxon’s 2009 move to join with TransCanada was surprising to most. Previously, in 2008, both BP Alaska and Conoco, the other two major North Slope Producers, had announced their own natural gas pipeline project. The Denali gasline project was another 4.5 bcf/da natural gas pipeline from the North Slope taking gas to the Alberta Hub.

What was paradoxical was that with Exxon’s joining with TransCanada in a competing project, all three Producers were now aligned with competing projects. Yet, all three companies’ gas production was necessary to make any natural gas pipeline viable. Therefore, neither AGIA nor Denali were viable. For whatever reason, neither Governor Sean Parenll nor the Legislature ever figured this out or completely ignored the reality of the situation. Governor Parnell continued to mouth platitudes about the viability of AGIA, Open Season and that AGIA would happen. The Legislature, however, took off on its own down an entirely different route.

Exxon’s conflict of interest where AGIA is concerned is in its foreign natural gas commitments.

In 2011, the first exports from Qatar where Exxon had invested $12B in upgrading the Northern Field LNG train to export LNG to the U.S. were delivered to the U.S., and immediately turned around for transport to Asia. "In cooperation with our partner Qatar Petroleum, ExxonMobil used its experience and knowledge of gas marketing around the world to successfully access traditional LNG markets in Asia, such as Japan and Korea, and develop new opportunities in Europe and the United States. ExxonMobil is proud to have played a role in helping Qatar become the world’s largest exporter of LNG." The shale gas revolution had impacted what was to be a 25 year commitment to bring Qatar LNG into the U.S. domestic gas market. That market no longer exists due to the low price for U.S. domestically produced shale gas.

(https://www.exxonmobil.com/Corporate/energy_production_lng_qatar.aspx)

The August 28, 2012 Platts and the Wall St. Journal reported ExxonMobil and Qatar Petroleum had formed a joint venture named Golden Pass Products which had applied for a domestic U.S. produced shale gas export permit overseas, including Asia. GPP is seeking to export 740 bcf of natural gas yearly from its LNG terminal at Port Arthur, TX. GPP would spend about $10B in upgrading the LNG train for export. The Port Arthur, TX LNG port would be able to export 2 bcf/da of natural gas.

(http://professional.wsj.com/article/SB10000872396390444375104577595760678718068.html?mg=reno64-wsj; http://blogs.platts.com/2012/08/28/worlds-biggest/; http://www.alaskadispatch.com/article/exxon-qatar-petroleum-apply-texas-lng-export-permit )

By contrast, the AGIA or AGPA LNG option to Valdez would ship up to 1,095 bcf of North Slope natural gas to market per year as LNG (3 bcf/da X 365 days).

On October 12, 2012, Bloomberg reported that Exxon, Conoco and TransCanada were estimating the cost of the AGIA natural gas pipeline to Valdez and LNG train to cost at between $45 to $65B and to take up to 10 years to construct.     (http://www.businessweek.com/news/2012-10-04/exxon-bp-estimate-alaska-lng-export-project-at-65-billion )  Exxon is developing the Australian Gorgan gas field located 130 kilometers off shore. Exxon owns a 25% share in the development. The Gorgon gas fields have a recoverable reserve of natural gas of an estimated 40 tcf. The market for Gorgon gas is Australia and Asia. In 2009, Exxon signed a deal worth $41B with PetroChina to provide the PRC with LNG. ( http://www.exxonmobil.com/Australia-English/PA/about_what_wa_gorgon.aspx ; http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a1_DE7dmIwE8 )

Exxon is negotiating with with CBM Asia Development to partner in the development of coal bed methane gas deposits in the Barito Baswin, South Kalimantan, Indonesia.
(http://finance.yahoo.com/news/exxon-mobil-cbm-asia-negotiate-133313186.html)

Exxon bought Celtic Exploration, Ltd.’s leases in the Duvernay and Montnay Alberta shale gas formations for $2.86B Canadian. Exxon also has leases in the Horn River British Columbia shale gas formation.
(http://www.bloomberg.com/news/2012-10-30/exxon-favors-gas-over-oil-sands-in-m-a-deals-corporate-canada.html )

　

Does Exxon have a reason to delay any Alaska natural gas development of its North Slope fields, including Thompson Point, given its Pacific basin and Qatar natural gas developments?

Does Exxon have a reason to delay the construction of any natural gas pipeline to move Alaska North Slope gas into a world market where that gas would compete with other foreign sourced gas projects in which Exxon has invested?

Is there any reason why the State of Alaska should not declare a breach of contract under AGIA for conflict of interest on the part of Exxon and TransCanada?

Does TransCanada have a conflict of interest?

 
Through Canada or to Valdez?

When former Governor Sarah Palin took office in 2007, she turned her back upon her campaign’s support of the all-Alaska natural gas pipeline to Valdez, even though she spoke in support of the project and stood with those who supported the project during the campaign. Supporters included former Governor Walter J. Hickel who was an outspoken proponent of the Valdez LNG project and a vocal opponent of Murkowski’s give away to Canada. Undoubtedly, her rising popularity was in no minor part due to her support of the all-Alaska natural gas pipeline to Valdez alternative to then Governor Frank Murkowski’s "contract" with Exxon, Mobil, and BP to build a 4.5bcf/da pipeline through Canada to the Midwest. Palin then beat former Governor Tony Knowles in the General Election in November, becoming the first woman governor of the State of Alaska.

By 2006, it was obvious to most Alaskans that then Gov. Murkowski’s pipeline contract was nothing but a promise by the oil companies to consider building a pipeline after much study and consideration. Exxon spoke of 2025 as the time frame for Alaska North Slope natural gas to move to market. Palin beat Murkowski in the August, 2006 Primary Election. Palin then won the November General election against former Governor Tony Knowles.

The die was cast for the Alaska Gasline Inducement Act.

Upon taking office, Sarah Palin literally reset on her support of the all-Alaska natural gas pipeline. Then Gov. Sarah Palin reappointed Tom Irwin as Dept. of Natural Resources Commissioner. Former Deputy Commissioner Marty Rutherford was also reappointed as Deputy Commissioner DNR. Both had been fired by by Gov. Frank Murkowski for disagreements regarding his actually having a contract with the oil companies to build a pipeline. However, both were firmly convinced that Alaska needed the large diameter 4.5 bcf/day pipeline through Canada to replace oil revenues from the Trans Alaska Pipeline Systems steadily declining volume transported to market. The North Slope oil production was about 700,000 barrels per day (bpd) at that time.

Irwin and Rutherford played a major role with legislative input in drafting AGIA. The project initially mirrored Murkowski’s project with one exception. The project did not rely solely upon the oil companies to build a gas pipeline. AGIA called for a competition with the best project as the winner. TransCanada became the sole competitor and was selected as the sole contractor under AGIA. The Alaska Gas Port Authority, a consortium of the cities of Fairbanks, Big Delta, and Valdez, submitted a proposal that was deemed late, incomplete and, therefore, not considered. By the gubernatorial election of 2010, the route was to the Alberta Hub, and not down through Alberta to the Midwest.

Since, AGPA has touted its route and LNG terminal plan as an alternative to AGIA. AGPA’s arguments have largely fell upon deaf ears in both the Paline/Parnell Administrations and the Legislature. Yet, the LNG market was demonstrating a major growth in Asia.

The contradiction in the volume of the planned pipeline projects, both Palin’s and Murkowski’s, was the Alaska Oil and Gas Conservation Commission limit of allowable production committed for export to market for North Slope Natural Gas. AGOCC set the amount at about 2-3bcf/da. This figure took into consideration the amount of natural gas necessary to keep the North Slope oil fields pressurized for continued production. Where Murkowski or Palin intended to come up with another 1.5 bcf/da between AGOCC’s limit and the 4.5 bcf/da capacity of their pipelines to Canada has to this day never been fully explained. Nor, has Governor Sean Parnell’s administration bothered to explain why his administration has continued to support TransCanada’s planned 4.5 bcf/da pipeline through Canada under AGIA in the face of the AGOCC’s limit on North Slope natural gas available for export.

In 2007, the Palin Administration announced the award of the AGIA contract to the sole applicant: TransCanada. TransCanada plans incorporated much of former Governor Murkowski’s pipeline. The volume was 4.5 bcf/da, the diameter a >=48 inch casing, the route through Canada to Alberta, then down to the Midwest. Later, TransCanada modifed its plan to use the Alberta Gas Hub distribution system to the U.S., thereby using existing pipelines to distribute gas to the U.S. from Canada. However, the price of the project continued to grow. The estimated cost for construction increased from $18B to over $40B by the gubernatorial election of 2010. From 2007 to today, little or no progress was made on the project. No permits for a route were issued in Canada or Alaska. No firm construction date was ever stated by TransCanada.

In 2008, Conoco and BP announced a competing natural gas pipeline project to Canada called Denali. The plan called for a 4.5 bcf/da natural gas pipeline to export North Slope natural gas to Canada. In May, 2011, Conoco and BP announced that the Denali project was no longer viable. About a week before that announcement, the Alaska president of Conoco’s Alaska operations stated that it was never the intention of Conoco or BP to bring Alaska’s North Slope to market, as they had intended to warehouse the natural gas indefinitely through reinjection back into the wells. Conoco and BP’s Denali proposal was intended to influence the course of Alaska’s legislative and gubernatorial policies pertaining to gas production and marketing of North Slope natural gas. The acts on the part of BP and Conoco amounted to fraud upon the State. The silence on the part of the Parnell Administration and the Legislature was deafening. (http://www.facebook.com/notes/alaskans-for-an-all-alaska-gasline/rebuttal-to-representative-les-garas-alaska-dispatch-opinion-piece-by-larry-wood/219621878075614)

On June 11, 2009, Exxon partnered with TransCanada. This partnership raised questions about the viability of just one producer on the North Slope participating in the project, when it was recognized that all three were necessary to any agreement to sell enough gas to move by pipeline. At that time, BP and Conoco were touting their "competing" Denali gasline project.

Since 1978, the completion of the TAPS oil pipeline, no discernible forward progress has been made towards actual construction of a natural gas pipeline in Alaska. Neither Denali’s nor TransCanada’s heavily publicized Open Seasons had produced any customers for their Alaska projects.

The reality of any natural gas pipeline from the North Slope, was that it took production from all three producers, Exxon, Conoco and BP, to provide sufficient natural gas to make a pipeline project viable. Further, the Point Thompson controversy between Exxon and the State also had to be settled.

The all-Alaska natural gas pipeline project first proposed by Yukon Pacific in the early 80s was for a 2.5 bcf/da pipeline from the North Slope to Valdez to be converted to LNG for export to the U.S. That was basically the same pipeline and volume intended in the plan voted on 2002. AGPA’s pipeline plan today is 3.0 bcf/da. Note that these volumes are within the AGOCC’s volume restrictions for North Slope gas export.

In mid-2011, Governor Sean Parnell finally awakened to the reality of the world LNG market. He suddenly decided that the only viable market for Alaska’s North Slope natural gas was as LNG to Asia. Since, he has tried to move AGIA in that direction. Under AGIA, TransCanada has the option to build a pipeline to a LNG terminus at Valdez for LNG export to market.

In October, 2011, Governor Sean Parnell called for a meeting with the North Slope oil producers to discuss a gasline and the LNG option. On January 6, 2012, Gov. Parnell met with Exxon’s CEO Rex Tillerson, BP Alaska’s CEO Bob Dudley, and Conoco’s Alaska operations CEO Jim Mulva in Anchorage. Gov. Parnell announced that he achieved a promise on the part of the producers to consider ways of getting Alaska’s North Slope gas to market. As promised, in a letter dated March 30, 2012, the oil companies outlined their intent to move forward on a gasline under AGIA. They updated their progress in another letter dated October 3, 2012. However, the progress was basically couched in terms declaring that ‘fiscal certainty’ was required for both a natural gas pipeline and any increase in oil production in Alaska. A position that the oil companies have steadfastly promoted for some time.

The first open season by TransCanada and Exxon ran from April 30-July 30, 2010. The second open season was conducted August 31-September 14, 2011. Both were apparently a bust with insufficient commitments to make any announcements regarding pipeline construction. Under AGIA, TransCanada has five years from the first open season before the project can be declared uneconomical and abandonment would be declared by either the State or TransCanada. (http://www.petroleumnews.com/pntruncate/285716809.shtml)

Today, Alaskans are still awaiting news of a natural gas pipeline project that will actually move North Slope natural gas to market.

Does TransCanada have a conflict of interest in its commitment to Kitimat?

Kitimat, British Columbia is the site of a proposed LNG terminal. In 2010, Apache Corp. announced the first agreements regarding LNG commitments with Korea. A 10 year commitment was made by Korea for Canadian LNG exported from Kitimat.

Since, the Kitmat development has expanded to include an additional LNG terminal and oil export capability to be built by a partnership lead by Shell to transport Alberta tar sands oil and LNG to Asia. The oil pipeline will be two parallel pipelines to be built by Enbridge. The pipelines would run 694 miles from Bruderheim, AB to Kitimat, B.C. with an estimated construction cost of $5.5B Canadian. Up to 1,000,000 barrels of crude per day would be transported by the pipelines.

TransCanada’s involvement and conflict of interest lies in its commitment to Shell to build a $4B (Canadian) 434 mile long natural gas pipeline from the B.C. shale gas fields to Kitimat. Kitmat’s LNG terminal will export approximately 1.2 bcf/da of LNG for Asian markets. Shell expects to export up to $10B in Canadian LNG to Asia through TransCanada’s pipeline. Shell is estimating a demand that will see up to 200 LNG tankers a year taking on LNG from Kitimat. The estimated completion date, given the environmental and indigenous lands rights of way issues, is expected by the end of the decade. The pipeline to be built by TransCanada is expected to measure over a meter (>39 inches) in diameter with an initial capacity of 1.7 bcf/da.

(http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/transcanada-wins-4-billion-pipeline-contract/article4231488/ ; http://www.transcanada.com/6054.html; http://www.coastalgaslink.com/ ; http://nwcoastenergynews.com/2012/06/05/2778/transcanada-build-shell-natural-gas-pipeline-kitimat/ )

Shell and its partners, Korean Gas, Mitsubishi, and PetroChina, are planning to build a separate LNG terminal from that planned by Apache Corp. back in 2010.

However, there may be a new wrench in the monkey works of the plans for any west coast LNG terminal, including Valdez.

TransCanada has an exclusive under AGIA. An exclusive normally implies a higher standard of commitment to the grantor than would an ordinary contract without an exclusive.

Given TransCanada’s commitment to Kitimat, should the State of Alaska move to declare breach to end AGIA?

Is there any basis in fact or common sense that would require the State to continue what is clearly a contract that is compromised by a conflict of interest by the grantee of the exclusive under that contract?

The latest cost estimate to construct a 3.0 bcf/da natural gas pipeline from the North Slope to Valdez is now estimated by TransCanada and Exxon to be $65B, including the LNG train at Valdez. The last estimate of the cost of construction for the AGIA Alberta Hub pipeline was approximately $40B. Compare the $65B cost of the AGIA LNG option to that the cost of the Kitimat 1.7 bcf/da >39 inch natural gas pipeline to be built by TransCanada under its agreement with Shell Oil. The cost of the Kitimat natural gas pipeline is just $4B Canadian.

(http://www.bloomberg.com/news/2012-10-04/exxon-bp-estimate-alaska-lng-export-project-at-65-billion.html)

Is the $65B price tag of the Alaska natural gas pipeline and LNG train under AGIA just hype to dissuade any protest at further delays?

Are we really closer to a natural gas pipeline? Nah.

http://www.examiner.com/article/closer-to-a-natural-gas-pipeline

In an Anchorage Daily News op-ed piece on May 11, 2012, Governor Sean Parnell extolled that his Administration was closer than ever to a large diameter natural gas pipeline being built, because of the settlement with Exxon over the Pt. Thompson development. One has to wonder just what this guy is on in terms of meds? He must be on the same psychotropic, hallucinogenic medications that the Legislature is on.


Otherwise, how could one reconcile the Legislature’s seemingly mindless following of Rep. Mike Hawker’s and House Speaker’s Mike Chennault’s incredible determination to wipe the 2002 vote and mandate of 138,000 Alaskans off the record, to remove same from State Statute, and to prove that the State will expend hundreds of millions to demonstrate that LNG from Russia can be imported cheaper to south central than their pipedream. This in the face of $14/tcf-$17/tcf LNG delivered in Japan.

What is it about the all-Alaska natural gas pipeline option that causes it to never be spoken of by our Governor and by our Legislature, never considered as a viable option, never mentioned by the Press, yet, demonstrated by the market as being incredibly prescient, given that this option was voted on and passed—you know, mandated—by the vote of 138,000 Alaskans way back in 2002? The only Republican candidate to champion this option was Bill Walker with his run for Governor in 2010.

Governor Parnell has asked nicely for TransCanada and the Producers to consider the LNG option to Valdez under AGIA. TransCanada and Exxon said sure, and now, studies will be made to determine the viability of that option through December of this year, and beyond. Is that not all that Governor Frank Murkowski’s so called contract achieved? A promise to “study”?

In the meantime, prices in Japan are $14/tcf-$17/tcf for LNG delivered to Japan. The cost of Alaska LNG delivered to Japan estimated by the Wood-Mac report for AGPA was $8.50/tcf. The proposed all-Alaska natural gas pipeline to Valdez championed by Bill Walker’s run for governor in 2010 called for a 3bcf per day pipeline from the North Slope to Valdez with 250mcf being taken off at Glennallen and delivered by a spur line to the Enstar Hub at Palmer. That left 2.75bcf per day for delivery to world markets. Under Walker’s proposal, the gas liquids would have been retained in Alaska for use to build a petrochemical industry and to provide alternative fuels for the Bush.

Every day, the governor has his head up his posterior, the Legislature is entranced by Hawker’s and Chennault’s Pied Piper routine, the State denies itself $15,125,000 at a sale price of $14/tcf delivered. Over the course of a year that is $5.52billion. Kiss another $5.52B good-bye by December 31 of this year.

The oil companies down south are moving, developing, and continuing to explore based upon $2.02/tcf of methane. Methane that may be exported, which will compete with Alaska gas and may even displace our gas in Asian markets, given our governor’s and our Legislature’s inability to see the handwriting on the proverbial wall.

Japan is shutting down its nukes, and Alaska has a market for our natural gas, if we want it. Two delegations from Japan have come to talk with the State, the first rebuffed by our Governor just after the 2011 earthquake.

Our DNR Commissioner met with the most recent Japanese delegation, our Lt. Gov. had dinner with them, but . . . nothing. Our DNR Commissioner goes to the PRC to investigate the LNG market, but not to Japan. After 41+ years of trade in LNG to Japan, Alaska is unwilling to discuss the potential with the Japanese.

Unlike our governor and his administration, Senator Lisa Murkowski is trying to do just that with her recent meetings with the Japanese Prime Minister and members of the Japanese Diet. Murkowski is trying to sell Japan on Alaska LNG, but is wasting her time in the face of a hostile Parnell Administration.

What's wrong with this picture, Alaska?

The Legislature with CB9 and CS9 have told the people to stick it with our 2002 vote, that our vote meant nothing. We have been proven right in the market, but our State leaders have shown their contempt for our will by completely ignoring what we mandated.

This governor and our Legislature have ignored us, when we were right all along.

Yet, now, Governor Sean Parnell extols that Alaska is closer than ever before to getting a pipeline??!!!!

Unlike the Gov, Sen. Lisa Murkowski is trying to sell LNG to Japan

Senator Lisa Murkowski (R-AK) raised the prospect of Japan buying Alaska natural gas to overcome the shortfall in power generation with the shutdown of 51 of Japan’s 53 nuclear reactors after the 9.0 earthquake off of the coast of Japan last year. Sen. Murkowski spoke with Prime Minister Yoshihiko Noda at a State Department Dinner hosted by Sec. of State Hilliary Clinton. Sen. Murkowski is the Vice-Chair of the U.S. Japan Interparliamentary Group. Sen. Murkowski has used this opportunity and her position to discuss the prospect of using Alaska natural gas in Japan in her discussions with her Japanese counterparts in meetings over the last week.

Senator Murkowski is meeting today with the acting secretary general of the Democratic Party of Japan.

Senator Murkowski has also asked President Obama to support the export of Alaska natural gas to Japan and to write a letter to the Japanese Prime Minister expressing his support Japan’s purchase of Alaska natural gas.

Sen. Murkowski seems to be doing something that our Governor and his administration have not bothered with. Sen. Murkowski is attempting to do the Governor’s job of selling Alaska’s natural gas to a viable customer who needs a reliable, long term supply of LNG.

Unlike Governor Sean Parnell, has refused to meet with two Japanese delegations sent to Alaska seeking to discuss the purchase of Alaska natural gas. The week after the March 11, 2011 earthquake and tsunami that devastated Japan, a Japanese business delegation came to Alaska to meet with Governor Sean Parnell. Parnell refused to meet with them. The week of Feburary 27th , a Japanese delegation again travelled to Alaska and attempted to meet with leaders of the State government. Two members of the Japanese delegation met with Dan Sullivan, Commissioner, Dept. of Natural Resources (DNR). Nothing was disclosed by Sullivan regarding the discussions other than to say that the meetings were of an “introductory nature” rather than defining any business goals. Bloomberg was reporting that Japan was sending delegations to Louisiana and Texas to discuss the possibility of buying U.S. natural gas to meet their energy shortfalls from the shutdowns of their nuclear power plants. Meanwhile, the only meetings the Japanese were able to hold in Alaska were with the Commissioner, DNR, that produced nothing of any consequence. On February 29, 2012, Lt. Governor Mead Treadwell had dinner with the Japanese delegation. Nothing has been disclosed since regarding any outcomes of those meetings with State officials.

Alaska has a 41 year history of exporting natural gas to Japan from Nikkiski. This is a history and partnership that can be used to Alaska’s benefit in marketing our gas to Japan. Yet, Governor has ignored this opportunity and advantage. Keiretsu and face are major components of the Japanese business deal. If one has good keiretsu (business associations, dealings, reputation) and good face (character, reliability, solid, honest), then one is in a very good position to do business in Japan. Alaska has such a relationship with Tokyo Power and Light, the customer for Alaska’s natural gas over the last 41 years. Yet, our governor and our Legislature ignore this fact and act as if Alaska has no interest in Japan as a market. When Dan Sullivan went to Asia recently to inquire about the viability of a market for Alaska natural gas in Asia, he did not go to Japan. Like the all-Alaska natural gas pipeline to Valdez championed by Bill Walker during his gubernatorial campaign supported by both the Alaska Gas Development Authority and the Alaska Natural Gas Development Authority (ANGDA), the idea of selling gas to the one reliable, long term customer that needs it, Tokyo Power and Light, is ignored by the Parnell Administration.

One can only wonder what could cause the Governor and the Legislature to ignore a certain customer with a very real need? Japan has been paying as much as $17 per thousand cubic feet of LNG delivered to Japan. Domestic U.S. price of natural gas was recently $2.02 per thousand cubic feet. There is no domestic market for Alaska natural gas in the lower-48.

The portent of the return of 300,000 barrels of North Slope Crude oil to the oil terminal at Valdez by the Alaska Explorer 11 April, 2012 should be a wake up call that Alaska is facing much larger problems than just a competitive natural gas market. Alaska’s literal fiscal future is at stake with oil flowing through a pipeline that may have to be shut down, not because of a lack of oil on the North Slope, but because of a glutted domestic market for oil.

Alaska will become a much quieter place in the near future if our Governor cannot bring himself to kill AGIA, to end the fiscal idiocy of committing another $200 million to a pipeline concept that cannot make money, and commit the State to build the all-Alaska natural gas pipeline to Valdez. Negotiating the best price for our gas and a long term commitment with Tokyo Power and Light and Mitsubishi would give Alaska the anchor customer necessary to finance the project.

Governor Parnell and this Legislature have done an incredible job of ignoring reality. That reality is about to bite all of us in the proverbial . . . posterior. Alaska’s future is growing dim and distant, with its youth and young adults the beneficiaries of a lack of foresight and concern that is incredible in the face of the information available to those in leadership positions.

Thank you, Sen. Lisa Murkowski for trying to the right thing for Alaskans in the face of a Governor and a Legislature that continue to ignore the obvious.

Nothing like the obvious biting one in the butt . . .

The recent announcement by Governor Sean Parnell of his new found support for the LNG natural gas pipeline option was not a surprise. This is a guy who has been politically urinating into the wind for at least the last two years. He has stayed true to Palin’s AGIA in the face of industry trends that dictated an end to the big pipe south before AGIA was even enacted. Governor Parnell could not ignore LNG market trends and the impact of domestic U.S. and Canadian shale gas production any longer without looking like the proverbial village idiot.

Even the pols in the Legislature are getting on the LNG train.

You know something has become so obvious that it cannot be ignored when our legislators begin to mouth platitudes about something that they have ignored since, what, about 1984?

The proverbial handwriting was on the wall for all to see, but those in elected office.

Just before Conoco announced the end of the charade that was the Denali natural gas pipeline project, the president of Conoco in Alaska stated that the intent of Conoco all along was to warehouse North Slope natural gas into the foreseeable future. Why would Conoco conceal its intent to do nothing with its North Slope gas? Conoco and Exxon have a 25 year commitment to move LNG from Qatar to the U.S., where there is no longer a market. Asia is now that market.

Qatar represents a $22B USD investment on the part of Exxon and Conoco to upgrade the northern and southern LNG gas trains and production facilities to meet export obligations. The first LNG tanker with Qatar LNG docked at a U.S. LNG import terminal earlier this summer, where the gas was off loaded and then reloaded back onto a LNG tanker, and shipped to a foreign market. The gas was not used in the U.S.

The Wood-Mac Report on the Alaska Gasline Port Authority’s website supports the viability of exporting Alaska natural gas from Valdez. The estimated cost of delivery to an Asian market for Alaska LNG is $10 per million BTUs (mmbtu equals one thousand cubic feet). Cost of natural gas and shipping from the North Slope to Japan via the all-Alaska natural gas pipeline to Valdez is estimated in the Wood-Mac report at $8.50/mmbtu total, delivered. Pipeline transport is estimated at $1.70/mmbtu, with shipping to Asia by LNG tanker estimated at $.59/mmbtu.

The All-Alaska Natural Gas Pipeline project would have a total volume of 2.7 billion cubic feet per with 250 million cubic feet going to south central via a spur line from Glenallen. It is the volume of gas shipped to Valdez that keeps the price of the 250mcf/day to south central low enough that our natural gas prices would not increase. Further, the gas liquids would be kept for use in-state to provide the resources for a new petrochemical industry in the Fairbanks area.

In 2010, the Japanese were paying up to $12/mmbtus for LNG. The highest price paid this year by Japanese LNG customers has been almost $17/mmbtu.

BG Group PLC of Great Britain has made a significant commitment with Cheniere Energy Partners, Sabine Pass, LA, to export shale gas as LNG to Asia. BG expects a sale price for the LNG at 115% of the Henry Hub price plus a $2.25/mmbtu premium.

Wood-Mac’s projections for a delivered price from Sabine Pass is $10.50/mmbtu, or $2/mmbtu more than delivered Alaska gas. LNG shipping costs to Asia from LA are about four times higher than from Alaska. BG is so bullish on LNG that BG has another LNG export project of its own underway at Lake Charles, LA.

Election year is coming up, and the pols up for election have to fool those idiots that vote once again into believing that they are really gonna do something about Alaska’s economic situation . . . this time, if only they are reelected! We are supposed to ignore bad decisions and the lack of initiative and indecision since about 1994.

Only the State of Alaska’s leadership seems to be incapable of grasping industry trends. Natural gas export by LNG is viable from the U.S. and is being aggressively pursued by all, but Alaska.

Alaska needs real leadership, not more of the same.

Parnell and ACES . . . too little, too late?

The Legislature starts its second special session, still without a budget, still without any Alaska’s Clear and Equitable Share (ACES) revisions, and without agreeing to continue coastal zone management. Thus far, a very good reason to file thirteen our entire Legislature in the next two election cycles. Unfortunately, we voters will forget about the State’s issues with the windup to the 2012 Presidential race. There is more news about former Governor Sarah Palin than about the incredible failures on the part of Legislature.

Gov. Parnell has vowed to keep fighting to reduce the rates oil companies pay under the current ACES law. ACES was passed during Gov. Sarah Palin’s unfortunately not brief enough gubernatorial administration. It should be remembered, that our Gov. Sean Parnell was then Gov. Sarah Palin’s Lt. Governor. A first belated step towards ‘independence’ from Palin for Parnell?

Gov. Parnell is a former State legislator who became an oil company lobbyist in Juneau after this tenure in the State Senate and House. That he would try to reduce the impact upon the oil companies is not surprising, but, a bit late.

In case no one has noticed, the oil flowing through the TAPS is declining to the point of no return, meaning that it will no longer be economically viable to move oil down the pipeline because of the declining volume of oil, and the point at which there can be no restart of the pipeline system if there is a shutdown for any reason. The last shut down last winter was a touch and go in terms of restarting the flow of oil. Alyeska’s president Thomas Barrett stated in a public radio interview that Alyeska was very concerned about the ability to restart oil flowing after the shutdown for a broken pipe at Pump Station 1 in January of this year. He went on to say that it was touch and go as to whether or not the pipeline would restart. He further estimated that within the next four to five years at the most, operating levels of 500,000 barrels or less would be reached at which point, Alyeska’s engineers believed that restarting the pipeline after a shut down would not be possible. It was also disclosed that TAPS has suffered up to an 80% deterioration in the walls of the pipe. This would mean a lengthy replacement of pipe in order to extend the life of TAPS, should methods and technology prove that recovery of the heavy oil under Prudhoe can be accomplished in economic quantities.

BP announced a heavy oil R&D recovery project well had demonstrated the viability of recovering heavy oil under the North Slope. There is an estimated 20 billion barrels of heavy crude yet to be recovered from legacy fields at Prudhoe and the surrounding area comprised of heavy oil. BP has been tight lipped about this project, having made only the one press release earlier this year. Heavy crude recovery is the most likely candidate for increasing the flow of oil through TAPS.

Off shore oil is another potential, but only if the Obama Administration figures out that the only way to reduce gasoline prices to the consumer is by increasing the amount of crude available in the market place.

The impact of oil shale recovery will soon be felt in the market place in much the same manner as the impact of shale gas on the natural gas market Outside and in Canada. Already, significant discoveries and returns are turning the Bakken oil shale in North Dakota into developments whose potential may exceed that of Prudhoe Bay in the early days of its development. Recent activity in Texas is proving out the viability of oil shale recovery there, turning depressed areas into boom towns, a welcome change from the impact of an ongoing recession. It is estimated that if the oil shale development continues at the present pace, within the next 20 years Middle East oil will not be needed in the U.S. domestic market.

If car manufacturers would produce vehicles fueled by natural gas for urban areas, that time frame may be halved or reduced even further. In which case, we would no longer have to take in the Wahabbist element from Saudi Arabia that George H. Bush, Bill Clinton and George W. Bush decided the U.S. could absorb to keep Saudi Arabia’s oil flowing. The Bush-Clinton-Bush policy of taking in extremist religious fanatics from Saudi Arabia under the student visa program has been a policy that is a direct threat to our national security.

Gov. Sean Parnell’s desire to reduce the ACES tax rates may be too little too late, just as the delays in deciding upon a reasonable natural gas pipeline option has ended Alaska’s role as a potential major player in either the domestic gas market or the world LNG market. The same can now be said for shale oil.

To the Governor’s credit, at least he is backing a positive option. Whether or not reducing ACES will have any impact upon Alaska’s oil production remains to be seen.

Whether or not there will be sufficient oil production increases within the next five years to keep TAPS in operation is the question. With the shutdown of TAPS, so also ends 90% of the State’s revenues. Alaska will be a far different place within five years of the shutdown of TAPS.

Sarah Palin, Sean Parnell: How to make Alaskans less safe

Mr. Governor, Mr. Lt. Governor, Mr. Commissioner/TAG:

“We're not allowed to use the term militiaman or militia any longer.
They tell us it sounds like a security term and we no longer are involved in any way in security!”

How does the above quote reconcile with National Guard Bureau Regulation 10-4?

NGR 10-4
National Guard Bureau Regulation 10-4 covers the relationship of the National Guard to the State Defense Forces under 32 USC § 109(c).

The section Recommendations for Improvement in my Blue Print for the ASDF was drafted using the following sections of NGR 10-4 as a guide.

NGR 10-4
Paragraph:
“4. Status
a. Command and control: State Defense Forces, as contemplated by these regulations, the foregoing statutory authority, The Constitution of the United States, the constitution and laws of the State concerned, is solely a State organization under the exclusive jurisdiction of the respective governor. It is not subject to call, order, or draft, as such a force, into the Armed Forces of the United States. It is not subject to Federal regulation, control, or supervision other than as provided expressly, or by reasonable implication, by the statute cited in para 3. Such a force may not be controlled or commanded by Federal authorities, and missions are identified and assigned only by appropriate State officials. The State Adjutant General, even though he/she may be a federally recognized officer, is not considered as Federal Authority.
b. Appointment and commissioning of officers: Persons appointed as an officer in a State Defense Force, including general officers, are commissioned solely by the State, and as such, are not federally recognized or guaranteed the rights and privileges of a commissioned officer in the U.S. Armed Forces, or the Reserve Components thereof. Specific rank and title are assigned by the State.

5. Mission
a. The mission of a State Defense Force, as conceived by these regulations, is to provide an adequately trained and organized State military reserve force which would be under the exclusive control of the governor. It would be capable of accomplishing those State emergency responsibilities normally assigned to the National Guard, when that force is federalized or otherwise not available to the needs of the governor. In addition, they would be available to perform any such missions as the governor directs, within Federal and State laws concerned.
b. Assignment of missions: Actual operating missions will be assigned only by authorized State officials (usually the State Adjutant General). However, the requirement for coordination of local and State internal security operations, with that of the U.S. Armed Forces, is obvious in the accomplishment of cooperative missions. SDF personnel and units will not be commanded by nor their operations and activities controlled directly by, Federal civilian or military authorities. Any direct coordination will be conducted between the senior Federal military commander present and the appointed emissary of the governor.
c. Potential missions:
(1) Assist civil authorities in the preservation of order, and protection of life and property.
(2) Meet such domestic emergencies as may arise within the State.
(3) Guard and protect critical industrial installations and facilities, as determined by the governor, when other means are deemed inadequate.
(4) Prevent or suppress subversive activities, in conjunction with, or in support of State or local law enforcement agencies.
(5) Under control of the governor, cooperate with Federal military authorities and forces engaged in active military operations or charged with internal security missions within the State.
(6) Assume control of State armories and property, provide security for any Federal property until relieved by proper authority, and assist in the mobilization of the National Guard when so directed by the governor.
(7)Perform other duties as may be assigned by the governor, under the constitution and laws of the state.
c. Conflict of missions: To the end that interests of the United States and the various States be preserved, the highest degree of cooperation should be maintained between Federal and State officials concerned. If a situation of conflict Or potential conflict of interest develops, it should be resolved between the Adjutant General and the senior Federal military commander present. Consideration should be given to the paramount Federal concern with the overall problem of national defense.

6. Organization
a. Planning and conducting military operations against hostile military forces are the responsibility of the Armed Forces of the United States. Operations and activities of State Defense Forces, as envisioned by this regulation, are supplemental to the State mission of the National Guard during peacetime and are considered to be of a constabulary nature and not that of combat forces. Organization under Tables of Organization and Equipment (TO/E) similar to military police or light infantry would most closely facilitate these anticipated missions.
b. The primary objective of DoD regarding State Defense Forces would be for a cadre-size unit to be established within each State during peacetime. This cadre would represent approximately 10 to 15% of their perceived mobilization strength, provide a command and control element, representation at each National Guard armory within the State, and allow for rapid expansion if the situation arises. Priority for any future Federal support that may be authorized will be given to those states whose Defense Force organization is considered most appropriate (by the Service Secretary) to accomplish the general missions outlined above.”

I have pointed out before that there appears to be a penalty for those States whose State Defense Forces fail to train for the missions envisioned under paragraph 5.

The question that I have yet to have answered fully, is what happens when the ARNG is off doing federal missions?

Which State agency takes the place of the ASDF under AS 26.05.100?

It certainly appears that the State Military Police Constabulary mission should be a current and ongoing mission for the ASDF, given paragraphs 4-6 of NGR 10-4, especially given that Military Police units that are now a part of the ARNG. After all, NGR 10-4 para. 4-6 envision the SDFs to be trained in the duties and missions of the ARNG, and under AS 26.05.100 the ASDF is to augment and act as a force multiplier to the ARNG. Contrary to the policy of your administration regarding the missions of the ASDF, NGR 10-4 envisions the ASDF maintaining an armed, internal security role.

Since when is it a policy of the Governor of the State of Alaska to act to reduce, or otherwise render ineffective a State military unit?

I have presented my arguments in the recent past, supported by the authorities and regulations directly impacting the situation.

All of which speak to an armed State militia with an internal security mission as found under AS 26.05.070.

Who ever heard of an unarmed militia?

It is my personal belief that this administration is ignoring the intent and purpose of Art. 1 Sec. 19 of the Constitution of the State of Alaska and the Second Amendment to the Constitution of the United States.

Not only has this administration diminished the organized militia, it has done so without any public input, and has further acted to disarm a unit of the organized militia.

Worse, this travesty has been accomplished without any oversight by the Legislature.

Alaska is not safer, Mr. Governor.

Is the War over?

Has Alaska gone geologically “inactive”?

Is the recession over?

Are Alaska’s energy needs fulfilled so that we in south central no longer have to worry about power failure or rolling brown outs, should there be a compressor failure in the
Kenai gas fields?

Is the Trans Alaska Pipeline System restored to 1980 condition and flow rates, so that the potential for shutdown is reduced to a distant consideration?

Is the Army National Guard of the State of Alaska no longer subject to federal service?

Mr. Governor, you have ignored the realities of 2006 and the fact that ARNG units just returned from the Middle East.

I am asking for a meeting at the Governor’s level, given the failure at the Commissioner level, if you and your second can take 20 minutes of your precious time to discuss what you have done to Alaska and Alaskans by the diminishment and disarming of the Alaska State Defense Force.

You sir, are the second Alaska Republican Governor who has reduced the armed forces of this State in a time of WAR!

With the silence, and thereby assent, of the Legislature, your Administration has made Alaskans less safe and reduced the State’s ability to respond to a major emergency.

Regards,
Larry Wood

Parnell is briliant--he's going to reduce the size of Alaska!

Our new old Governor Sean Parnell is slowly steaming ahead with his agenda. I would have never given him credit for this, but . . . Gov. Parnell and the Legislature have come up with a pretty clever way to cut local government and the population of the State of Alaska by about 50% almost immediately! This plan is insidious in its brilliance.

Gov. Parnell’s economic plans should have included –by now—news of TransCanada and Exxon’s plans for a pipeline. Yet, all we hear from industry and other sources is that there will be no pipeline to Canada or to the U.S. for at least 20 years—per Larry Persily, the federal pipeline coordinator. Nor, will any LNG be sent to the U.S. from Alaska. It is just too cheap to ship all of that natural gas Exxon and Conoco converted in their LNG trains in Qattar 15,000 miles to the U.S. by LNG tanker, off load the LNG tanker, recondition the LNG, load it back onto the LNG tanker . . . and export it to Asia another 10,000 miles—and, still make a profit.

Yes, I remember Ralph Samuels sagely opining that it was just too expensive to ship North Slope gas 800 miles to Valdez by pipeline, convert it to LNG, and then ship it to a foreign market. Man, am I glad that we did not make that mistake! We would be just like all rest of those fools shipping LNG all over the world and making far more than the domestic price! Wow. We almost blew it, big time!

What would we do with all of those LNG tankers coming into Valdez to move 3 billion cubic feet of gas a day to market?! Not to mention that the gas liquids would have stayed in Alaska for fuels and industry, thereby creating more jobs. And, why would we build the 250 million cubic feet per day spur line from Glennallen to the Enstar Hub at Palmer to relieve the gas shortages in the Kenai/Cook Inlet gas fields? What would the pols have to commiserate over?! We did not need those jobs, either! Thank you Ralph and Sean!

Alaska did not need all of the jobs and businesses that would have been created by building the natural gas pipeline to Valdez. Remember, 138,000 Alaskans voted to build that pipeline. Just foolishness! Why, we don’t need to worry! We can all work for the State! Right, Gov?

After all, Conoco let the cat out of the bag just before the elections. The intent was to warehouse North Slope gas for at least another 20 years. Yet, Conoco is still going forward with Denali . . . ? Uh . . . some things are better left alone, I guess, otherwise it hurts your head trying to follow the logic.

Oh, you folks that opposed building the all-Alaska natural gas pipeline and shipping our gas to Asia markets were so sage. . . .

What was it Larry Persily opined? No pipeline for 20 years?

I guess that we are just supposed to forget that we have a gas shortage that will result in brown outs and a loss of heat and power for up to two years in south central if a compressor fails in the Kenai fields. What fun that promises!

Just think, over 300,000 Alaskans without heat and power during the coldest part of the winter, maybe two winters. And, most of them . . . armed. Uh, oh.

If that is a means to get property values down, that will do it, alright.

I guess we should also forget that during this last election, it was revealed that TAPS will reach a critical juncture much sooner than expected. The point at which TAPS cannot be restarted due to a shutdown is now much closer.

We were all fat dumb and happy thinking that TAPS would continue to transport oil down to 300,000 barrels per day production. Oh, no. This has been revised to 500,000 barrels per day. Meaning, that within the coming four years, we may see an end to TAPS moving our oil once production reaches 500,000 bpd or less, and there is a shutdown of the pipeline for any reason. With that shutdown ends 90% of the State’s revenue.

Do you think there will be an income tax, not to mention a State sales tax and, maybe even a State property tax proposed over the next two Legislative sessions?

Wait a minute.

We have the Permanent Fund! Let’s see, that’s about $35B or so. At a yearly budget of $11B growing by at least 10% per year, we can hold out for . . . 3 years? Then what? Don’t think about it, our legislators and governor aren’t, so why should we?

How long will the PFDs last? Anyone want to make a bet past 2013?

The only “pipeline plan” being discussed publically is the idea of building a 36 inch or 48 inch natural gas pipeline from the North Slope to Fairbanks. After that . . . who knows? Indecision reigns supreme. Gone is any mention of the “bullet line” from Fairbanks to Anchorage. Avoided like the black plague is any mention of the all-Alaska natural gas pipeline to Valdez. Now, all we hear is that importing natural gas to Cook Inlet is inevitable.

In Canada, poly pipelines are being installed year round for gas distribution to market. You see it all over the west. Just awesome their expansion and aggressive development of their NG resources. The Canadian government just approved the MacKenzie River Delta 1.5 bcf natural gas pipeline project. In the mean time, the success of the LNG export facility at Kittimat, B.C. is no longer doubted by any here or there.

The MacKenzie River Delta pipeline is going ahead, the national energy board in Ottawa said it needs to be done, all the aboriginal malarkey is settled, and it is and will always be . . . Canada first. That project will pretty much see an end to the hot air expounded over any idea of moving our gas to Canada. We won’t be able to give our gas away if this dodo bird attitude on the part of those in Juneau continues regarding LNG exports and instate use of the gas liquids.

Yet, in Alaska . . . well, the sage heads in the Legislature and the Governor’s office have decided that in about 5 years or so the Grinch is going to visit all of us, if not before. “Before” may be a compressor failure on the Kenai, or the inability to restart TAPS after a maintenance or leak shut down. Then what? The silence has been deafening.

The Alaska Legislature and our governors have been very successful in ignoring the obvious. We have to trust them to keep doing just that. After all, a little misery and cold never hurt anyone. Right? Just suck it up and keep moving, soldier.

Enjoy heat and lights while we have ‘em!

And, then, when we all get cold enough and angry enough, let’s enjoy tar and feathering the legislators and the governors who served from 2002 forward who ignored our will. There will still be diesel to heat the tar.

Sarah looks good in black, too.

Just before we do Parnell, we should give him an award for the success of his brilliant plan. After we finish tar and feathering him, we will send him to Washington to advise President Obama on resource development, cutting government, and population control.