Legislature(2023 - 2024)BARNES 124
02/21/2023 10:15 AM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s) Update from Energy Suppliers | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
February 21, 2023
10:16 a.m.
DRAFT
MEMBERS PRESENT
Representative George Rauscher, Chair (via teleconference)
Representative Tom McKay
Representative Josiah Patkotak
Representative Mike Prax
Representative Calvin Schrage
Representative Ashley Carrick
MEMBERS ABSENT
Representative Stanley Wright
OTHER LEGISLATORS PRESENT
Representative Jesse Sumner
COMMITTEE CALENDAR
PRESENTATION(S) UPDATE FROM ENERGY SUPPLIERS
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
LUKE SAUGIER, Senior Vice President
Hilcorp Alaska
Houston, Alaska
POSITION STATEMENT: Gave a PowerPoint titled,- "Hilcorp: House
Energy Committee," during the presentation "Update from Energy
Suppliers."
LORALI SIMON, Vice President of External Affairs
Usibelli Coal Mine
Juneau, Alaska
POSITION STATEMENT: Gave a PowerPoint titled,- "Hidden in Plain
Sight: Alaska's Affordable Energy," during the presentation
"Update from Energy Suppliers."
BENJAMIN JOHNSON, President and CEO
Blue Crest Energy
Juneau, Alaska
POSITION STATEMENT: Gave a PowerPoint titled,- "Cook Inlet
Basin Overview and Characterization; Energy Supply/Demand
Challenge; Cosmopolitan Tyonek Gas Opportunity," during the
presentation "Update from Energy Suppliers."
JOHN HENDRIX, President
Furie Operating Alaska
Juneau, Alaska
POSITION STATEMENT: Gave a PowerPoint titled,- "Furie Operating
Alaska LLC: House Energy Committee Presentation," during the
presentation "Update from Energy Suppliers."
ACTION NARRATIVE
10:16:19 AM
CHAIR GEORGE RAUSCHER called the House Special Committee on
Energy meeting to order at 10:16 a.m. Representatives Patkotak,
Carrick, Schrage, Prax, McKay, and Rauscher were present at the
call to order.
[Chair Rauscher handed the gavel to Representative Patkotak].
^PRESENTATION(S) UPDATE FROM ENERGY SUPPLIERS
PRESENTATION(S) UPDATE FROM ENERGY SUPPLIERS
[Contains mention of HB 50.]
10:16:44 AM
REPRESENTATIVE PATKOTAK announced that the only order of
business would be a presentation titled, "Update from Energy
Suppliers."
10:18:27 AM
LUKE SAUGIER, Senior Vice President, Hilcorp Alaska, gave a
PowerPoint titled, "Hilcorp: House Energy Committee" [hard copy
included in committee packet] during the presentation "Update
from Energy Suppliers." He began on slide 2 and showed a map
with Hilcorp's holdings on the North Slope and Cook Inlet.
MR. SAUGIER continued to slide 3 and stated that Hilcorp is the
largest operator in the state of Alaska. The company has
approximately 1,500 employees in the state, 75 percent of whom
are Alaska residents, a percentage that decreased after
Hilcorp's acquisition of BP Alaska that it excepts to increase
with the company policy of hiring Alaskans almost exclusively.
He stated that Hilcorp has 1,700 oil and natural gas wells in
the state. Hilcorp has over 700 partnerships with Alaska
businesses, which has generated over $750 million in spending
with those businesses. He said that Hilcorp has contributed
over $17 million to different philanthropic causes in the state
chosen by the employees.
10:21:40 AM
MR. SAUGIER continued to slide 4, which shows a map of Hilcorp's
operations in Cook Inlet and the Kenai Peninsula. Hilcorp
provides over 62 billion cubic feet (Bcf) of natural gas, which
amounts to approximately 80 percent of natural gas used in
Alaska. He stated that there are two points of entry for
natural gas into the city of Anchorage, Alaska, which are
operated by ENSTAR Natural Gas Company. The four largest
natural gas fields in Cook Inlet are: Ninilchik, Kenai, North
Cook Inlet, and Beluga River, which produced a combined 45 Bcf
of the natural gas produced by Hilcorp. He added that of the 17
natural gas platforms in Cook Inlet, 15 are owned by Hilcorp.
10:27:02 AM
MR. SAUGIER added that there are four natural gas storage
facilities in Southcentral Alaska, three of which are owned and
operated by Hilcorp, and one of which is owned and operated by
the Railbelt Utilities. He said that the Kenai Gas Field has a
gas storage capacity of 540 Bcf. The two things to consider for
natural gas storage are capacity and the speed in which the
natural gas can be taken out and distributed. He continued that
Swanson River gas storage facility has a capacity of 3 Bcf, and
it is considered to be the "emergency" storage facility due to
its increased ability to pump out gas at a faster rate. The
third storage facility owned by Hilcorp is the Pretty Creek, and
it is the only facility on the north side of Cook Inlet.
10:33:37 AM
MR. SAUGIER continued to slide 5 and stated that Hilcorp has
spent nearly $1 billion in capital projects to build new wells
and maintain and repair existing wells. Hilcorp's primary focus
is natural gas in Cook Inlet; all new wells being drilled have
been for natural gas and have drilled over 80 wells between
2012-2021.
MR SAUGIER continued to slide 6 and stated that Hilcorp plans to
spend a fourth of its budget on exploration to find new natural
gas fields in Cook Inlet. He said that Hilcorp will used four
different rigs in 2023 to drill new wells, the names of which
are: Monopod, Bruce, Hilcorp 147, and Hilcorp 169. Hilcorp will
also be plugging 41 wells it plans to close as part of its
clean-up process.
10:39:15 AM
MR. SAUGIER continued to slide 7 and stated that Hilcorp was the
only bidder in the Alaska and federal lease sale in December
2022. Hilcorp will be trucking natural gas from the North Slope
to Fairbanks, Alaska, which is a first. He added that Hilcorp
would be interested in a natural gas pipeline from the North
Slope, and that Hilcorp is interested in the potential for using
its platforms for renewable energy generation.
10:41:39 AM
CHAIR RAUSCHER asked whether HB 50 would give Hilcorp any
interest in sequestration of carbon dioxide into the ground.
MR. SAUGIER answered that Hilcorp would look into using its oil
platforms to do so.
10:43:16 AM
REPRESENTATIVE CARRICK asked if trucking natural gas would still
be used to move natural gas to Fairbanks if a pipeline were to
be built.
MR. SAUGIER answered that Hilcorp moves the natural gas to a
storage facility on the North Slope and is not responsible for
the trucking. In response to a follow-up question, he stated
that Hilcorp's policy is to hire Alaska residents almost
exclusively, and it has not faced many challenges finding
Alaskan workers other than the occasional hire in a highly
specialized position. He added that the biggest challenge to
reaching 100 percent Alaska residency among its employees is
because some people choose to move out of state due to the
unique 2 weeks on, 2 weeks off schedule of the North Slope.
10:47:18 AM
REPRESENTATIVE MCKAY asked why Hilcorp announced that it would
no longer sign any long-term natural gas contracts.
MR. SAUGIER answered that fossil fuels such as natural gas and
oil are non-renewable, and Hilcorp is contracted for all of the
gas it can sell. He added that other companies have reduced
their presence in Cook Inlet, causing a drop in the supply.
10:51:45 AM
REPRESENTATIVE PRAX asked whether there are currently any price
ceilings on natural gas that could be disincentivizing new
drilling.
MR. SAUGIER answered that there are not.
10:53:29 AM
The committee took an at-ease from 10:53 a.m. to 10:55 a.m.
10:55:00 AM
LORALI SIMON, Vice President of External Affairs, Usibelli Coal
Mine, gave a PowerPoint titled, "Hidden in Plain Sight: Alaska's
Affordable Energy" [hard copy included in committee packet.]
She added that coal remains "very strong" as a source of energy
in the face of declining natural gas supply. She continued to
slide 2 and stated that Usibelli Coal Mine is the only coal mine
in the State of Alaska and has been operating for over 80 years
and is on its third generation of family leadership.
MS. SIMON continued to slides 3 and 4 and stated that Usibelli
Coal Mine produces 1 million tons of coal on an annual basis
that powers all of the state's coal-fired power plants.
Usibelli Coal Mine, Inc. spends over $30 million annually with
300 different Alaska suppliers. She stated that a report from
2021 shows that coal saves ratepayers approximately $300 million
annually in Alaska's Interior.
11:00:37 AM
MS. SIMON continued to slides 5 and 6 and stated that half of
the Interior's energy generation is powered by coal. The six
coal-fired power plants in Alaska are: University of Alaska
Fairbanks, Fort Wainwright Army Post, Eielson Air Force Base,
Aurora Energy, GVEA Healy 1, and GVEA Healy 2.
MS. SIMON continued to slides 7 and 8 and stated that Usibelli
Coal Mine is "hidden in plain sight." She stated that coal is
plentiful, affordable, and reliable, and improving technology
will allow the usage of coal while still meeting carbon
reduction goals. She emphasized the importance of coal being an
"Alaskan" source of energy that is produced in Alaska and
provides jobs for people in Alaska.
MS. SIMON continued to slides 9 through 11 and stated that the
primary factor in air quality issues within the Interior of
Alaska is from woodsmoke and not coal-fired power plants. She
added that burning drier wood would reduce the amount of
polluting smoke, and Usibelli Coal Mine, Inc. created Aurora
Energy Solutions to provide dry wood to the Interior.
11:04:38 AM
MS. SIMON continued to slides 12 and 13 and stated that Usibelli
Coal Mine, Inc. is involved in efforts to study carbon capture,
utilization, and storage (CCUS). She added that a "healthy"
mining industry supports renewable resources, as the materials
needed to create objects such as solar panels have to be mined.
She stated that moving away from fossil fuels entirely is not
"realistic" for Interior Alaska, and that they will continue to
be needed while waiting for improvements to renewable energy
technology.
MS. SIMON moved to slide 14 and stated that coal supports
military readiness. The supply of coal has 400 years of proven
reserves and there is enough coal stockpiled to supply energy
for 90 days without any additional coal being added.
11:08:19 AM
REPRESENTATIVE PRAX asked what the percentage of the market is
being provided wood from Usibelli's wood kilns.
MS. SIMON answered that she is not sure of the percentage, but
Usibelli provides 5,000 cords of wood annually, which it hopes
to double if it is able to create a second wood kiln. In
response to a follow-up question, she answered that Usibelli is
involved in the coal gasification project occurring at the
University of Alaska Fairbanks.
REPRESENTATIVE PRAX asked about the possibility of smaller coal
plants being used to power some of the remote villages.
MS. SIMON answered that it would be possible, but there would
need to be more coordination between Usibelli and those
communities.
11:11:19 AM
REPRESENTATIVE SCHRAGE asked what climate goals had previously
been referenced.
MS. SIMON answered that several of the past administrations
going back to Governor Sarah Palin have discussed carbon
reduction goals. In response to a follow-up question, she
answered that coal power plants have relatively low effects on
air quality in the Interior and mentioned the possibility of
using waste steam from power plants to heat hot water.
11:16:08 AM
CHAIR RAUSCHER asked for the names of the six coal-fired power
plants in Alaska.
MS. SIMON reiterated that they are: University of Alaska
Fairbanks, Fort Wainwright Army Post, Eielson Air Force Base,
Aurora Energy, GVEA Healy 1, and GVEA Healy 2.
11:17:41 AM
REPRESENTATIVE CARRICK asked what opportunities Usibelli sees in
renewable energy.
MS. SIMON answered that even if coal were to stop being used for
electricity generation, it would still be needed to create steel
for wind turbines, among other examples of mining minerals being
necessary for making renewable energy work. She added that 37
percent of Usibelli's employees are multi-generational.
11:22:22 AM
The committee took an at-ease from 11:22 a.m. to 11:23 a.m.
11:23:50 AM
BENJAMIN JOHNSON, President and CEO, Blue Crest Energy, gave a
PowerPoint presentation titled, "Cook Inlet Basin Overview and
Characterization; Energy Supply/Demand Challenge; Cosmopolitan
Tyonek Gas Opportunity" [hard copy included in committee
packet]. He began with slide 2 and showed a map marking the
locations of oil and gas fields in Cook Inlet. The Cosmopolitan
Tyonek gas field is proven but undeveloped. He said that
production will fall below demand unless a new source of natural
gas is utilized, and renewable energy development or importing
natural gas are both expensive options.
11:25:54 AM
MR. JOHNSON continued to slides 3 and 4 and stated that the
chart showing natural gas in Cook Inlet running out by 2027 does
not include the potential of the Cosmopolitan Tyonek gas field.
There is 8-10 years' worth of proven natural gas in that field,
with the possibility of it lasting longer. He stated that the
field includes oil and is offshore three miles. He added that
the way the gas and oil would be recovered would make a spill
very unlikely.
MR. JOHNSON continued to slides 5 and 6 and showed a diagram on
how Blue Crest would recover the oil and gas from the
Cosmopolitan Tyonek field. He added that wells have already
been drilled that provide the data he is working with, including
seismic data.
11:31:46 AM
REPRESENTATIVE SCHRAGE asked what the dots on the slide
represent.
MR. JOHNSON answered that the green dots represent oil tests,
and the red dots represent natural gas tests.
11:32:21 AM
MR. JOHNSON continued to slide 7 which he explained is a three-
dimensional (3D) map of the oil and natural gas sands in the
Cosmopolitan Tyonek field.
MR. JOHNSON moved to slide 8 and stated that a small platform
would need to be built to access the natural gas in the
Cosmopolitan Tyonek field. Blue Crest is currently working on
the engineering for the project and has already conducted the
initial research.
11:34:14 AM
REPRESENTATIVE PRAX asked about the State of Alaska's role in
the permitting process.
MR. JOHNSON answered that Blue Crest has been working on the
permitting process for three years and expects things to
continue without any issues. In response to a follow-up
question, he said that the whole process has been ongoing for
eight years.
11:35:46 AM
REPRESENTATIVE MCKAY asked if either bill involving carbon
storage or carbon credits being considered by the legislature
would be helpful in attracting investment for the project.
MR. JOHNSON answered that environmental concerns are a hurdle in
attracting investment, and that those bills could potentially
play a role in alleviating those concerns.
11:36:54 AM
REPRESENTATIVE CARRICK asked if the project could be completed
in time to avoid a gas shortage.
MR. JOHNSON stated that the project would be completed in time
if an investor were found. In response to a follow-up question,
he stated that there is natural gas available in the current oil
sands being worked by Blue Crest that could add several years to
the amount of natural gas available. He added that the combined
efforts of different companies should be able to prevent a
natural gas shortage.
11:39:51 AM
REPRESENTATIVE PRAX asked what amount of conditioning would be
needed for the natural gas that would be produced by this
project.
MR. JOHNSON answered that it is very clean and would require
little conditioning.
11:40:54 AM
REPRESENTATIVE SCHRAGE asked if there are any examples of carbon
sequestration legislation aiding in investment for natural gas
projects.
MR. JOHNSON answered that based on conversations with investors,
such legislation makes natural gas projects "safer" investments.
11:43:34 AM
The committee took an at-ease from 11:43 a.m. to 11:44 a.m.
11:44:18 AM
JOHN HENDRIX, President, Furie Operating Alaska, gave a
PowerPoint presentation titled, "Furie Operating Alaska LLC:
House Energy Committee Presentation" [hard copy included in
committee packet]. He began on slides 3 and 4 and stated that
Furie is Alaska's only locally owned and operated natural gas
exploration and production company. He gave some background
information on the operations of the company, including the
headquarters of Anchorage, Alaska.
11:47:40 AM
MR. HENDRIX continued to slides 5 and 6 and gave an overview of
potential new explorations and developments for Furie. He
stated that a large portion of 2023 will be spent on repairing
two of the current wells owned by Furie, and it plans to
increase production in 2024. There are also potential delays in
shipping, along with rising costs, and the work can be affected
by unpredictable weather and the sand in Cook Inlet.
11:53:13 AM
MR. HENDRIX continued to slide 7 displaying a map comparing
natural gas and oil activity in 2015 vs. 2022.
MR. HENDRIX continued to slide 8 and gave an overview of
different actions the legislature could take to help natural gas
production. He stated that Furie pays 12.5 percent of gross
revenue in royalties on top of existing taxes. He said that the
State of Alaska takes too long to interpret and make available
seismic data. He stated that Alaska should accelerate the
permitting process for oil and natural gas production.
11:58:59 AM
MR. HENDRIX continued to slides 9 through 12 and gave an
overview of natural gas prices in Alaska and around the U.S. He
stated that natural gas prices are roughly the same as they were
in 2009, even without adjusting for inflation. The proximity of
the natural gas being produced keeps the price from increasing
greatly due to transportation costs. He stated that there is
still no overarching plan to make a complete switch to renewable
energy.
12:01:48 PM
REPRESENTATIVE PRAX asked where the property tax number comes
from for natural gas platforms.
MR. HENDRIX answered that the number is issued by the State of
Alaska. In response to a follow-up question, he said that any
manpower issues come from the service company side. He added
that one of the companies employs only Alaskans, while the other
does fly some people up from the contiguous U.S.
12:03:55 PM
REPRESENTATIVE MCKAY asked if any imports being made by Furie
were due to unavailability in Alaska.
MR. HENDRIX answered affirmatively.
12:05:16 PM
REPRESENTATIVE SCHRAGE commented that he appreciates Furie's
work to provide natural gas to Southcentral Alaska. He added
that although oil and natural gas demand will peak in the next
decade, it will start to decrease as more renewable energy
technologies are adopted at a faster pace than they previously
have been.
REPRESENTATIVE PRAX responded that he believes that much of the
demand for renewable energy is due to federal subsidies more
than any other factor.
12:10:01 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 12:10 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Usibelli in House Energy February 21 2023.pdf |
HENE 2/21/2023 10:15:00 AM |
Usibelli |
| House Energy 2023-02-21 BlueCrest.pdf |
HENE 2/21/2023 10:15:00 AM |
Blue Crest |
| HOUSE 2 21 23 Furie.pdf |
HENE 2/21/2023 10:15:00 AM |
Furie |
| House Energy Comittee slides vFINAL Hilcorp.pdf |
HENE 2/21/2023 10:15:00 AM |
Hilcorp |