Parnell's Plight

Governor Sean Parnell has dug himself a hole that is deep and wide. Parnell has enough trouble brewing that would cause any sitting governor to start looking at the Help Wanted ads in the local papers. There are four primary areas of concern.

Parnell’s first problem is AGIA.

AGIA was pronounced as DOA by Parnell himself with respect to any expected success of the Open Season. Parnell’s refusal to answer rival Bill Walker’s FOIA request for disclosure of the Open Season is proof that Parnell is playing a delaying game without any expectation of success.

Against AGIA is the reality of the shale gas developments in Canada and the U.S. The Outside gas reserves are estimated to be enough for a 150 year supply of natural gas. The fact of the lack of any permitting to show in the 3 years since the passage of AGIA belie his current assertions that AGIA is alive and well.

AGIA, like Conoco/BP’s Denali project, takes our gas and gas liquids to Canada, thereby benefitting Canada, not Alaska.

Is Parnell acting in the best interests of Alaska by pushing AGIA?

Parnell’s second problem is his contempt for the law with the growing controversy over his appointments of Nancy Dahlstrom and Gene Therriault as his Military Advisor and Oil and Gas Advisor, respectively.

This situation would not be so remarkable were it not for the fact that both Dahlstrom and Therriault were sitting legislators at the time of the creation of the positions to which they were appointed. As ‘advisors’ their appointments did not have to be approved by the Legislature. The problem for Parnell arises with the fact that both appointments were in violation of Article II of the Constitution of the State of Alaska:

“Section 2.5 - Disqualifications.
No legislator may hold any other office or position of profit under the United States or the State. During the term for which elected and for one year thereafter, no legislator may be nominated, elected, or appointed to any other office or position of profit which has been created, or the salary or emoluments of which have been increased, while he was a member. . . .”

There was little comment about former Sen. Gene Therriault’s appointment, except by yours truly and a few others. With the second appointment of Rep. Nancy Dahlstrom, the pundits and the press finally figured out that our governor was ignoring the law.

Is our Governor above the law?

Another indication of the contempt that his governor and his appointees have for the law is the conduct of Gov. Parnell’s MG Katkus in requiring a subordinate to appear in uniform to testify to the House Military and Veterans Affairs Committee in support of Katkus’ appointment as Commissioner DMVA and Adjutant General. This act was unprecedented, and constituted a blatant act of undue influence. This situation was akin to Gene Therriault filling in for the Governor at a campaign function in Fairbanks earlier this summer. Both situations constitute at the very least undue influence on the part of the Governor and by Katkus as Parnell’s appointee.

Parnell’s third problem is the contradiction to any claim that he is working to resolve the Cook Inlet gas supply crisis.

Parnell’s Oil and Gas Division refuses to timely renew expired Cook Inlet oil and gas leases to exploration and development companies. This failure by Parnell’s Oil and Gas Division is incredible in the face of the alleged purpose of the bullet line.

Is Governor Parnell playing politics with a critical gas supply issue to the detriment of Alaska’s largest population segment?

Parnell’s fourth problem that is indefensible and, perhaps, the least recognized by the media, is Gov. Parnell’s decision to virtually eliminate the Alaska State Defense Force as a viable emergency response asset under DMVA.

In 2006, many of the Army National Guard assets were called to federal active duty in Iraq, Afghanistan and Kosovo, leaving the ASDF to perform disaster response. ASDF was called to State Active Duty three times in 2006.

How is reducing the State’s ability to respond to a disaster a showing of leadership?

Are we voters going to let Governor Sean Parnell’s open contempt for the law and his failure in leadership stand?

FERC Misinformation

A recent decision by the Federal Energy Regulatory Commission (FERC) has provided the grist for the political mill of those opposing the all-Alaska natural gas pipeline and Bill Walker’s candidacy for governor. However, this is a case of the disinformationistas being aided by the silence of the lamb (Parnell), rather than it being the death knell to anyone’s campaign.

FERC recently declined to renew an application by Yukon Pacific Corporation for an LNG export train at Anderson Bay. This decision has been declared a death knell to Walker’s campaign by Walker’s detractors. Walker’s pipeline advocacy is in support of the all-Alaska natural gas pipeline to Valdez. The decision has been heralded as barring any export of Alaska gas, thereby ending both Walker’s candidacy and the Valdez pipeline option. Nothing could be farther from the truth.

The silence being on the part of the Parnell Administration in keeping quiet an inquiry of Jan. 28, 2010 from Pipeline Coodinator Bob Swenson made to FERC as reported in the Oil and Gas Journal in an editorial dated March 22, 2010.

Cheniere, Inc. is converting its Sabine Pass, TX LNG import facility to receive foreign LNG and to loop it back for export to Asian markets. Cheniere cites a 42% drop in LNG imports between 2007 and 2008 into the U.S. because of increased domestic supplies. This market trend results from increased supplies of natural gas in the domestic U.S. market from shale gas and other unconventional sources.

Cheniere has also applied for permits to export U.S. domestic produced natural gas to global markets. This would be only the second facility in the U.S. built to export domestically produced LNG to foreign markets. The first such facility was built at Nikkiski, Alaska and has been exporting LNG to Japan since 1969.

In his Jan. 28, 2010 inquiry to FERC, Gov. Sean Parnell’s pipeline coordinator Bob Swenson described 3 scenarios and requested to know if FERC would have regulatory oversight.

Scenario 1 was an in-state pipeline with North Slope gas being used in-state only. FERC’s response was that FERC would have no regulatory oversight authority for such use.

Scenario 2 was an in-state pipeline with North Slope gas being used in-state with some of the gas being exported to domestic U.S. markets. FERC”s response was that FERC would regulatory authority over domestic export to the U.S. market.

Scenario 3 was an in-state pipeline with North Slope gas being used in-state with some of the gas being exported to foreign markets. FERC’s response was that FERC would not have regulatory authority over North Slope gas exported to a foreign market.

FERC does not have regulatory oversight over North Slope natural gas exported to foreign markets. Therefore, the issue of FERC’s denial of Yukon Pacific’s permit to export North Slope gas from Valdez to the U.S. domestic market has no bearing whatsoever on Walker’s Valdez pipeline project.

Parnell knows that Walker’s Valdez pipeline plan is viable and economically sound. Cheniere, Inc.’s filing for an export permit to export domestically produced LNG to global markets further supports Walker’s contention that Alaska should export its natural gas to a global market rather than to an oversupplied U.S. market.

Rival Ralph Samuels has also lauded the FERC decision regarding the YPC permit as supporting his position that Walker’s plan is not viable. Obviously, in light of the response by FERC to the Parnell Administration’s inquiry, Samuels is wrong in his position. Samuels knows full well that FERC has domestic market oversight, not foreign, and that Walker’s plan is to export natural gas to Asia.

On the one hand, Parnell acts to withhold information, on the other, Samuels acts, as have others, to promote half truths.

The positions of the various candidates on the issues regarding the pipelines and the looming economic disaster facing the State would be illuminated at public forums where they would debate on the issues. Unfortunately, Gov. Sean Parnell has decided that he does not want to participate in any more debates until just before the Primary Election in August. He was put on the spot by Walker at the Kodiak Crab Festival on May 29th.

Walker asked Parnell about the $20,000,000,000 give-a-way that his refusal to sign SB 305 separating natural gas taxes from oil taxes will cost the State. This give-a-way amounts to a State subsidy for the Canadian route construction of AGIA or Denali. Both benefit from Parnell’s action. Apparently, Parnell chose to waffle and make polite noises rather than answer a direct question.

It appears that Walker’s growing support is making Parnell and Samuels a bit nervous in the service as it were.

Palin’s appointment is going to haunt Parnell

Last year, Sarah Palin appointed a pipeline czar. Harry Noah, who was Executive Director of Mental Health Trust Lands, was appointed by Sarah to the newly created position of natural gas pipeline czar. The position was charged with overseeing the development of natural gas pipelines and moving Alaska’s gas to market. Harry is a miner without oil and gas experience, but is someone who has ties to Dep. Commissioner Marty Rutherford, Dept. of Natural Resources (DNR).

Rutherford was a former lobbyist for TransCanada. She has worked for the State in one capacity or another from the Knowles Administration through the Palin Administration, and now is one of Parnell’s upper echelon DNR staff. This individual, like Noah, has no oil and gas experience, but has been continually put in positions to influence oil and gas decisions.

The problem for Parnell is, that Noah’s post duplicates the voter created Alaska Natural Gas Development Authority’s (ANGDA) portfolio. ANGDA was created with the approval of Proposition 3 by 62% of Alaskans voting in the 2002 election.

What was ANGDA’s mandate?

To develop and market Alaska’s natural gas resources both in-state and for export, including the building of a natural gas pipeline to Valdez.
Then Gov. Frank Murkowski, who had campaigned on his own pipe dream, did not support ANGDA. Gov. Murkowski tried to give ANGDA the cold shoulder. He initially refused to fund ANGDA. Murkowski was finally forced to give the voter created authority an office and a meager budget to begin the job of getting Alaska’s gas to market. Murkowski then proceeded to continue to ignore ANGDA for the rest of his tenure as governor.
ANGDA remained in the shadow of the Murkowski pipeline to nowhere dream for the rest of the Murkowski Administration.

Sarah Palin, running against Murkowski in 2006, supported both an all-Alaska pipeline route down TAPS to Valdez and ANGDA as the vehicle to get our gas to market and to build the pipeline. During the gubernatorial campaign, Sarah criticized Murkowski’s pipe dream. ANGDA was mentioned prominently in many of her speeches on natural gas issues.

The looming Cook Inlet natural gas shortage was also a topic spoken of by our former Governor as an example of ignoring the obvious.

Once in office, Sarah Palin did a Frank Murkowski with her AGIA plan, which became the third such plan to build a large capacity (>4bcf/day) pipeline through Canada. This plan, like those of her predecessors, served to increase Canadian job opportunity, both in Alaska and Canada.

Earlier this year, Sarah appointed Harry Noah as her pipeline czar. Shortly thereafter, ANGDA’s funding was cut by the Palin Administration.

Since, the ongoing row between ANGDA and Noah has become more obstructionist on Noah’s part.

In creating the pipeline czar position, Gov. Sarah Palin did exactly what she campaigned against: duplication of mission, and an unnecessary growth of government.

As reported in the Copper Center Record in April of 2009, ANGDA has evolved into a highly respected professional organization with innovative ideas to get Alaska’s gas to market and to make use of the abundant propane that is part of our natural gas deposits for home and business heating in the Bush.

The core of ANGDA’s strategy has been to engage the private sector’s participation in its plans. The propane initiative has a commitment for propane production from the North Slope producers. Private companies will transport, distribute and sell the propane. ANGDA is conducting seminars so that electric utilities will be able to bid intelligently on natural gas supplies during the upcoming open season.

ANGDA has completed both the rights of way and economic studies for the Glenn-Richardson highway route for a 24 inch natural gas line to Palmer’s Enstar Hub. This route will take off from either the AGIA pipe at Big Delta or from an all-Alaska pipe to Valdez at Glennallen.
The economics of gas delivery are tied to volume. Taking off of either proposed big pipeline projects gives south central Alaska gas customers the best pricing for delivery. The cost of our gas will be included in the transport of the larger volume, thereby reducing the cost of any gas delivered to south central.

Pipeline Czar Harry Noah wants a 24 inch pipeline from the North Slope down the Parks Highway to Anchorage. The low volume of approximately 500 million cubic feet per day in comparison to the rates for transporting 2.5 bcf per day through an all-Alaska pipeline to Valdez will result in south central gas customers paying double or more on their gas rates to provide Fairbanks with essentially, the cheapest gas in the State. This is because Fairbanks gas would have the least cost for transport. Those of us in south central and on the Kenai would pay more because of the distance transported.

ANGDA’s position is that if the Open Seasons in 2010 for the Alaska-Canada pipe projects (AGIA and Denali) are a bust, then an in-State "bullet line" from the North Slope through Fairbanks down into south central Alaska should be considered. Until then, it makes the most economic sense to bring a spur line down the Richardson and Glenn highways off of any of the proposed large diameter pipeline projects to the gas hub at Palmer.

Presently, projects under consideration are Conoco-Phillips Denali project and AGIA (TransCanada and Exxon).

TransCanada and Exxon have recently expressed interest in an all-Alaska pipeline to Valdez and LNG terminal option, given the Canadian LNG terminal project at Kittimat, B.C. (This is what the Alaska voters created ANGDA to do in 2002.)

ANGDA has already completed much of the work in evaluating the Parks route. ANGDA’s work with that of the U.S DOE in 2005, private oil industry in the mid- 1990's, and the 1988 Federal Environmental Impact Study completed by the former Yukon Pacific Company (YPC) all concluded that while the Parks Highway route and the Richardson/Glenn are about equal in cost of construction, the Parks route has permitting and engineering hurdles yet to be addressed.

The Parks Highway route would require rights of way through State and federal parks and wildlife refuges, including major salmon tributaries. This route would be a lawsuit magnet by the environmental anti-development groups. Further, the route presents major engineering challenges along the route near Cantwell, Denali, and at Hurricane Gulch that have yet to be addressed.

The only route that will get natural gas to south central in a timely manner is the ANGDA route down the Richardson/Glenn Highway corridors. This route has none of the Federal or State environmental or engineering impediments. This route uses the existing TAPS oil corridor to Glennallen. The last 150 miles from Glennallen to Palmer is the only segment not in the TAPS right of way. In 2005, ANGDA acquired the State of Alaska Conditional Right of Way for last 150 miles to Palmer from Glennallen . Therefore, the route proposed by ANGDA has none of the impediments of the Parks Highway route. Both routes use the TAPS corridor right of way north of Fairbanks.

The ANGDA preferred route will provide the cheapest gas to Alaskans.

Pipeline Czar Harry Noah now intends to duplicate the work on the Parks Route with additional studies at additional State expense. Baker Engineering is contracted to repeat much of what has already been accomplished by ANGDA, the feds and YPC.

Playing against all of this is the looming shortfall in Cook Inlet natural gas supplies. The specter of rolling brown outs and blackouts during peak winter months are being publically discussed for the first time. The lack of sufficient supplies of Cook Inlet natural gas to fuel both homes and Chugach’s gas turbines at Beluga Point was openly and harshly discussed at a recent Regulatory Commission of Alaska (RCA) meeting reported by the Petroleum News. The power utilities were criticized for not having any contingency plans for such an eventuality.

Yet, the reality is, this is a looming situation known for years. It is the result of the politics of oil in Alaska, and a lack of concern by Alaska’s Legislature and governors, including Sarah Palin.

As previously reported, Marthon Oil complained to the Anchorage Chamber of Commerce earlier this year about declining gas supplies and the intransigence of the Regulatory Commission of Alaska (RCA) in issuing new drilling permits for exploration, making it difficult for the oil company to plan and allocate drilling resources. Just 7 new wells were drilled in Cook Inlet last year.

Over 10,000 new wells were drilled in Alberta alone last year. That volume of new wells is considered a bad year for oil and gas in Alberta. Down from 13,000 the year before and 18,000 the year before that.

ANGDA was created by the voters in 2002 to do what Harry Noah was charged with under the Palin Administration. Gov. Sean Parnell is continuing that mistake.
Sarah Palin’s Harry Noah may be the albatross impeding the Parnell Administration’s attempt to get Alaska back on the oil and gas development map.

The voters knew what they wanted in creating ANGDA. We wanted an all-Alaska natural gas pipeline. However, three governors and the Legislatures of those years all failed us.

The Canadians are moving swiftly to tie up Asian gas markets for their LNG facility under construction at Kittimat, B.C.

Funny, the Canadians can export natural gas to Asia cheaply, but Alaska cannot.

Why?

Both Sarah Palin and Frank Murkowski attempted to thwart the will of the people by impeding ANGDA’s mission.

The specter of rolling brownouts and blackouts in the middle of winter in Alaska’s most populated region is real.

Parnell needs to eliminate the position of pipeline czar, and let ANGDA do its job. If he continues to allow Noah to create conflicts with ANGDA and to further delay the opportunity to put Alaska’s North Slope gas to best use, Parnell may very well have to answer to the people in 2010.