Legislature(1999 - 2000)
01/13/2000 10:03 AM House O&G
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON OIL AND GAS
January 13, 2000
10:03 a.m.
MEMBERS PRESENT
Representative Jim Whitaker, Chairman
Representative Fred Dyson
Representative Gail Phillips
Representative Joe Green
Representative John Harris
Representative Brian Porter
Representative Allen Kemplen
Representative Tom Brice
Representative Harold Smalley
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION BY ALASKA NORTH SLOPE LIQUEFIED NATURAL GAS PROJECT
PREVIOUS ACTION
No previous action to record
WITNESS REGISTER
STEVE ALLEMAN, Commercial Manager,
Alaska North Slope Liquefied Natural Gas Project
700 G Street
P.O. Box 100360
Anchorage, Alaska 99510-0360
POSITION STATEMENT: Testified on behalf of the Alaska North Slope
Liquefied Natural Gas Project
JAMES E. EASON
8611 Leeper Circle
Anchorage, Alaska 99504-4209
POSITION STATEMENT: Provided information on fiscal legislation
ACTION NARRATIVE
TAPE 00-2, SIDE A
Number 0007
CHAIRMAN JIM WHITAKER reconvened the House Special Committee on Oil
and Gas meeting at 10:03 a.m. Members present at the call to order
were Representatives Whitaker, Phillips, Green, Harris, Porter,
Kemplen, Brice and Smalley. Representative Dyson arrived as the
meeting was in progress.
CHAIRMAN WHITAKER introduced Mr. Steve Alleman to present testimony
regarding the Alaska North Slope Liquefied Natural Gas (LNG)
Project.
PRESENTATION
Number 0096
STEVE ALLEMAN began by reading prepared remarks:
Mr. Chairman, for the record, my name is Steve Alleman.
My current assignment is as the Commercial Manager for
the Alaska North Slope LNG Project, I reside in
Anchorage, and I am employed by Phillips Petroleum
Company. Thank you for the opportunity to testify today
on behalf of the sponsor group.
Number 0167
I am very pleased to be here today to say that the Alaska
North Slope project has made considerable progress this
year. As you will hear, we have a solid forward plan for
commercializing North Slope gas via LNG, and, to our
knowledge, no one is applying more resources and money to
do so than we are.
Number 0177
MR. ALLEMAN continued his testimony:
Most recently, the membership in our group has changed.
BP Exploration (Alaska) Inc. is now a 12 percent member.
This is a very welcome addition, considering BP's
extensive North Slope lease position and operations, its
world-wide project experience, and its interest in
pursuing all options to commercialize Alaska gas. In
addition to BP, the other members, of course, are ARCO
Alaska, Inc.; Foothills Pipe Lines, Ltd.; Marubeni
Corporation; and Phillips Petroleum Company. As we have
often stated, and it is even more true today, this is a
very experienced and strong group that we believe
provides the best chance for commercialization of North
Slope Gas via the LNG option.
Number 0227
The objective of this group is the same as when we formed
in 1998: to develop a competitive LNG export project at
the earliest possible time as market conditions warrant.
To be competitive, we need to exploit our advantages and
overcome our challenges. An Alaska project has several
positives, including a developed resource, proximity to
the market, and political stability. But it has two
significant challenges, the cost of an 800-mile pipeline
and the fact that the project needs to be appropriately
sized to afford it the best chance to enter the market.
Previous state studies and internal studies point to a
potential answer to the cost issue. To be competitive,
an Alaskan LNG project needs cost reductions unique to
Alaska; it needs federal and state fiscal modifications
and certainty. Our studies suggest that the combined
level of federal and state fiscal relief that is needed
may be politically feasible. This is because relief that
occurs early in the project can help improve the project
economics while still providing federal and state
revenues later in the project.
Number 0311
MR. ALLEMAN continued his testimony:
The issue of project size requires creative thinking and
effort. We believe that the marketability and timing of
an LNG project improve if it is smaller. History shows
that the successful mega-LNG projects serving East Asia
started with a small size, then built up in steps. Our
analysis convinced us that previously studied projects of
14-15 million tons per year were just too large to be
competitive with other market entry projects.
Accordingly, over the past year we have worked to improve
our chances with the marketplace by reducing the size of
our project while at the same time evaluating our
opportunities for further cost reductions. We completed
an updated and detailed assessment of market conditions.
This helped us determine the largest volume project that
could enter the market within a reasonable time frame.
We are also systematically engineering the project to
ensure that the optimum size can be achieved. We are now
optimizing our Market Viable Project, or, as we call it,
our MVP.
This past fall, we announced this MVP as a 7 million
ton-per-year, LNG export project, [a size] which has been
established as our working basis for further refinement
and optimization. This is about half of the project size
that has been assumed for more than a decade. Again, our
motivation is to develop a project that is appropriately
sized to gain a toehold in the market while at the same
time having the ability to expand that project as market
conditions warrant. Thus, with a projected pre-shipping
cost of $5-6 billion, we have significantly reduced our
project risk in the areas of market, capital cost, and
financing.
Number 0440
MR. ALLEMAN continued his testimony:
As for the market and what it is telling us about timing
and the overall prospects for an Alaska project, there
are encouraging signs. While the economic turmoil of the
past few years in our target Asian markets has negatively
impacted near-term demand for LNG, there seem to be good
prospects for substantial, sustained growth in the long
term. However, we must face the reality that the
competition for market share will be fierce. While the
LNG marketplace will favorably view the positive aspects
of an Alaskan project that I mentioned earlier, these
savvy buyers will ultimately commit to an Alaskan project
only when it becomes economically competitive with their
best alternatives.
Therefore, we think it important to clarify our thinking
on two points. As a result of our in-depth analysis and
LNG market experience, the sponsor groups does not
subscribe to the idea of a "market window" for an Alaskan
project. We do believe, however, that once an Alaskan
project is economically competitive, then it can
legitimately vie for a share of what we project to be a
long-term, more sustained growth of demand. Second, we
recognize that the affirmative decision that will cause
an Alaskan project to happen will come from the market,
not from the investors or from government. LNG projects
are not like oil development; you cannot afford to "build
it and they will come." The market will drive this
project and the LNG buyers will need to be enticed to an
Alaskan project by making it economically competitive.
Number 0545
MR. ALLEMAN continued his testimony:
To maintain a continuous market presence, to be available
to respond to market questions, and to provide
information on our project to these LNG markets, the
Alaska North Slope LNG Project announced in September,
1999, its opening of a market liaison office in Tokyo,
Japan. This office is located in Marubeni's Tokyo
complex and is maintained by Marubeni personnel. As a
sponsor group member, Marubeni provides its own project
and market expertise complemented by the experience and
expertise of the other sponsors, including that of
Phillips Petroleum Company, which, as you know, has been
marketing LNG to Japan from Alaska for more than 30
years.
Number 0588
Often we get the question, "What is the schedule for
starting up the project?" In light of my earlier
statement, the more relevant question is, "What are the
activities and schedule for making the project
economically competitive and enticing to the LNG buyers?"
In just a moment, I will address that question. But
first, I want to discuss the matter of pipeline route and
LNG plant site that is sometimes associated with the
question of market timing.
Number 0566
As we announced this past fall, the project sponsors have
narrowed the route and site to two alternatives: first,
to Anderson Bay in Prince William Sound and, second, to
Nikiski in Cook Inlet.
When we narrowed our site selections to two alternatives,
we found that neither was clearly better than the other.
The Cook Inlet route may offer some cost advantages and
more naturally fit with Cook Inlet's role as the center
for gas usage in Alaska, while the Prince William Sound
route has some existing permitting that may give it a
nominal time advantage.
But the real question is not where permitting stands
today, but what is required to fully permit either
alternative to the point at which construction of a
project can occur. Based on our sponsors' expertise in
actually permitting and then building multi-billion
dollar projects as well as from the benefit of external
analysis, we determined that other locations require
substantial additional permitting and refinement before
a project is ready to fund. Therefore, this perceived
time advantage could be mitigated with cooperation from
the federal and state government.
Further, we found that permitting for either alternative
was not the pacing item for a market-driven startup. We
believe that it is better to identify an economically
competitive project first, and then optimize the project
for location. Neither site works if the overall project
isn't "do-able."
Number 0705
MR. ALLEMAN continued his testimony:
And now, let me answer the question I posed earlier about
our ongoing activities to make the project competitive.
As I do so, please keep in mind my earlier comments that
an Alaskan project needs cost reductions and fiscal
modifications before it can be competitive.
The sponsor agreement calls for the completion of the
first stage of work on the Alaska North Slope LNG Project
about mid-year. At that time, we will have completed the
pre-conceptual engineering, the various optimization
studies, and the revised cost estimate for the MVP. At
that time, we will have a revised understanding of the
economics of the project and the information necessary to
begin discussions with the LNG markets.
We are planning for success. We are developing our
specific Stage 2 plan for key work products necessary to
move this project beyond Stage 1. We will spend the
balance of Stage 1 refining our economics, optimizing our
systems and pipeline designs, and preparing to move into
Stage 2, if the sponsors so decide. One major factor in
this decision is whether the Stage 1 findings in June
sufficiently suggest that we have the potential for an
economically viable project. Another major factor in the
decision will be the level of federal and state
government support expected as the project proceeds. On
this point, I would quickly point to what an important,
positive signal Alaska's 1998 Stranded Gas Development
Act, HB 393, gave to the sponsor group when it was
organizing for Stage 1.
Number 0794
By this summer, we will have completed a variety of
commercial initiatives necessary to advance the project.
Federal fiscal modifications will be leveraging to the
economic viability of the project. The completion of key
elements of our first stage of work allows us to provide
better definition of the MVP for discussions in
Washington, D.C. In the near future, we will finalize an
internal draft of a "white paper" on federal issues,
which will lay out various ways forward and which will
serve as the initial foundation for federal discussions
in the coming months.
Also, before the end of Stage 1, we plan to submit an
application for state fiscal relief under the Stranded
Gas Development Act (HB 393). This will begin what we
expect will be a multi-year process of negotiating and
developing a proposed state fiscal contract. We would
not expect that proposed contract to be submitted to the
legislature earlier than the 2002 session.
Number 0849
MR. ALLEMAN continued his testimony:
I would like to use my last topic as the springboard for
the sponsor group's legislative interests in 2000. For
this session, we hope that the Alaska Legislature will
favorably consider legislation in the area of commercial
regulation of in-state gas. We have developed a
legislative concept that will provide that the in-state
gas volumes be regulated on a non-discriminatory basis
that does not jeopardize the security of long-term,
contracted export volumes. The intent of this concept is
first, to be applicable to all stranded gas pipelines;
second, to be complementary to a non-discriminatory
federal process; third, to clarify state and federal
jurisdictions; fourth, to provide the rules for in-state
gas transportation and sales; and, finally, to provide
needed exemption from public utility designation. This
concept would need amendments to the Pipeline Act, Public
Utilities Act, and Right-of-Way Leasing Act. Legislation
in this area would resolve a key uncertainty in the area
of commercial regulation, and we respectfully recommend
it to the Legislature.
Number 0914
MR. ALLEMAN continued his testimony:
In summary, Mr. Chairman, I would like to quickly
highlight some, but not all, of the key activities that
have been keeping us busy since we last met. Those
include:
Development and refinement of an economic
model specific to the project.
Description and definition of our . . .
[downsized] . . . Market Viable Project
LNG plant site selection analysis and
reduction to two preferred locations
Pipeline route analysis and reduction to
two preferred alternatives
Cooling medium analysis and selection for
the LNG plant
Development of key cost estimating
assumptions
Development of a contract and technology
selection strategy
Numerous internal and external pipeline,
plants, and system design evaluations and
optimizations
Opening of our market liaison office in
Tokyo
Development and drafting of needed
pipeline regulatory legislation
HB 393 application development for filing
this spring
Initial discussions and project updates
to Alaska's Congressional Delegation, the
United States Department of Energy, and
United States Department of Commerce in
Washington, DC
Numerous contacts, meetings, and project
updates to the administration and
legislators
Project updates to the port authority
mayors as well as to the Anchorage,
Kenai, and Matanuska-Susitna boroughs
... as well as many other previous and ongoing
activities.
I hope this brief overview of our plans and basic
thinking will show the committee that the sponsors are
actively trying to commercialize Alaska North Slope gas.
At this point, I would like to thank the chairman for the
opportunity to testify and would be happy to address the
committee's questions.
CHAIRMAN WHITAKER invited questions.
Number 1026
REPRESENTATIVE PHILLIPS asked if the sponsor group had been
approached by other Canadian organizations or businesses that want
to be involved or want to change the focus of the project.
MR. ALLEMAN replied that they had not, other than the involvement
of Foothills Pipe Lines Ltd. [a Canadian firm] as a member of the
sponsor group, but that they would be alert to any opportunity for
synergies.
REPRESENTATIVE PHILLIPS mentioned that she had recently met in
Alberta with some members of Parliament and others involved with
the oil and gas industry, and they are very interested in the
potential project.
MR. ALLEMAN said the sponsor group's goals include remaining
flexible, open to any alternatives that can be mixed, matched, or
otherwise used to share costs.
Number 1106
REPRESENTATIVE BRICE asked if downsizing the project from 14-15
tons per year to 7 tons per year meant moving from a 22-inch to a
12-inch pipe, and if that would accommodate future growth.
MR. ALLEMAN replied that the sponsor group does not plan to
significantly reduce pipe size from the 28- to 30-inch range. He
noted that it would be possible to add compression as they proceed.
The sponsors, he added, also are looking at reducing the initial
size of trains and of the gas treatment facility on the North
Slope, both of which can be modularized to expand to increase
capacity.
1220
REPRESENTATIVE GREEN said he concurred that downsizing would make
the project more marketable, but asked how one can "attack a
circle" -- how all pieces such as financing, permitting, buyer
commitments, and market awareness of the project fit together so
sponsors know they have a viable project.
MR. ALLEMAN acknowledged it was a difficult question. First and
foremost, he emphasized, the sponsor group needs to have a project
defined, a viable project that will be market driven. He said part
of the risk is that it will be very late in the process before the
group knows whether it will have market commitment.
REPRESENTATIVE GREEN continued, asking if sponsors must secure and
commit to financing before they can secure a market.
MR. ALLEMAN called it a chicken-and-egg situation. He explained
that the sponsors have a target they are calling their "big close"
-- a date by which they need to have sales and purchase agreements
executed and financing in line. He added that "everyone" will
include the state.
NUMBER 1363
REPRESENTATIVE SMALLEY asked if downsizing would affect not only
the amount of liquefied natural gas available for export, but also
that for in-state consumption, including value-added production of
petrochemicals and plastics. He also wondered if planners had
looked at downsizing in relation to enticing other industries to
use the gas.
Number 1388
MR. ALLEMAN said projected in-state consumption, including that of
additional industry, would be a very small part of the total, one
that the sponsor group does not see as a problem to serve. As far
as considering other gas-type projects, he said the sponsor group
would look at anything inside or outside Alaska that might work,
remaining flexible in order to make the project viable.
Number 1453
REPRESENTATIVE PHILLIPS asked if Marubeni Corporation is actively
marketing in Asia.
Number 1467
MR. ALLEMAN reiterated that the way the sponsor group is proceeding
is to make sure they have a project definition, a viable project.
He said they already are inundated with people coming to the
marketplace, and that the sponsors are keeping them advised through
the new market liaison office in Tokyo. Mr. Alleman said he will
be in Tokyo in March and going with Marubeni Corporation personnel
to talk to various markets that have expressed interest in the
project, but at this point, sponsors are maintaining awareness of
the project's progress rather than negotiating sales agreements.
Number 1508
REPRESENTATIVE HARRIS inquired about legislation the sponsors have
said they would need, federal and state fiscal modifications to
help mitigate uncertainty, and asked if the sponsor group is
prepared to help draft such legislation.
MR. ALLEMAN replied that legislation is being drafted to submit to
the resource committees in both houses as early as tomorrow.
CHAIRMAN WHITAKER recognized a member of the audience.
Number 1560
JAMES E. EASON identified himself as working with the sponsor
group. He expressed concern that there may have been a
misunderstanding of the question, as he understood Representative
Harris to ask about fiscal legislation, and the legislation to
which Mr. Alleman referred was not fiscal, but regulatory in
nature.
Number 1574
MR. ALLEMAN apologized for any confusion. He explained that as he
understands the negotiation process under Alaska's 1998 Stranded
Gas Development Act (HB 393), it begins with the sponsor group
filing an application with the House Resources Standing Committee
to be deemed by them as a qualified project. Near the end of the
first stage of project development, he continued, sponsors will
have a better definition of which areas they want to address. What
follows will be a negotiation process with Wilson L. Condon,
Commissioner, Department of Revenue, that will take a couple of
years during which sponsors will quantify the amount and type of
help they need and a give and take process will define what makes
sense for sponsors and for the state. He estimated that the
resulting contract will be brought to the legislature in 2002.
CHAIRMAN WHITAKER clarified that Mr. Alleman was specifically
referring to HB 393, Alaska's 1998 Stranded Gas Development Act,
and stipulations associated with it.
Number 1631
REPRESENTATIVE PHILLIPS asked if the resource committees are
working on that legislation needed regarding regulation of in-state
gas.
CHAIRMAN WHITAKER said yes.
Number 1650
REPRESENTATIVE PORTER asked Mr. Alleman if sponsors will need to
know the results of their negotiations with the federal government
before they can complete their fiscal analysis.
MR. ALLEMAN explained that the process will need to proceed in
parallel to a point, as sponsors seek both federal and state fiscal
relief. He referred again to the "big close" near the end, when
everyone wants to see what everyone else is bringing to the table.
He said a concern of sponsors regarding the federal government
relates to what is called "claw back." That, he said, means that in
working out an agreement with the state, sponsors do not want to
end up giving back those gains to the federal government.
Number 1608
REPRESENTATIVE KEMPLEN referred to the earlier discussion about
in-state demand for natural gas. He asked how much in-state demand
for natural gas the sponsors had estimated in their modeling.
MR. ALLEMAN said he did not know the exact number, but that it is
fairly insignificant, about 5 percent of the total output. He
offered to provide more specific information.
Number 1781
REPRESENTATIVE GREEN noted that hydrocarbon values have been on a
roller coaster over many years, and he asked what sort of
safeguard is being built into the project to protect against a
significant drop.
MR. ALLEMAN replied that one would want firm commitments from
liquefied natural gas purchasers, long-term commitments
historically in the 10-20 year range. He noted that there might be
some volatility in demand within the state as gas became available
in different places.
Number 1840
REPRESENTATIVE BRICE inquired about possible impacts of the
proposed merger of the British Petroleum Company (BP/Amoco) with
Arco Alaska, Inc., whether or not the merger goes through.
MR. ALLEMAN said the sponsor group is happy to have BP Exploration
(Alaska) Inc./Amoco as member, and while the merger is a big issue
for the state, it is a non-issue from the project standpoint.
Number 1875
REPRESENTATIVE BRICE asked if that meant that should the merger
fail, the liquefied natural gas project still could proceed.
MR. ALLEMAN said yes.
Number 1882
REPRESENTATIVE PHILLIPS observed that it may take a huge public
relations battle to change the prevailing mentality from the idea
that the existence of a market window is the driving force behind
the project.
MR. ALLEMAN said the sponsor group is more comfortable with the
concept of an expanding market over time rather than that of a
market window that opens and closes.
REPRESENTATIVE PHILLIPS emphasized that she thinks the shift away
from a market window mentality is going to be a major issue.
Number 1949
REPRESENTATIVE KEMPLEN referred to Mr. Alleman's earlier mention of
an expanding market over time, reflecting an increasing demand for
natural gas in the global economy. He also referred to Mr.
Alleman's statement that in the past, natural gas has needed a firm
commitment from purchasers. But, he continued, if the market for
natural gas is going to be increasing in the future, does not the
probability of a spot market for natural gas also increase, with
demand ratcheting up to match that? He further asked how the
economics of the project would change if, indeed, a spot market for
natural gas develops.
MR. ALLEMAN emphasized that although a spot market could be used
for expansion, it should not be the basis on which a huge project
is moved forward.
Number 2024
REPRESENTATIVE HARRIS recalled that in addition to BP Exploration
(Alaska) Inc./Amoco joining the group, Yukon Pacific Corp. has
dropped out. He asked if that had any negative effect on the
project.
MR. ALLEMAN said it had not.
Number 2045
REPRESENTATIVE BRICE referred to Mr. Alleman's earlier mention of
ongoing discussion with Alaska's congressional delegation in
Washington, D.C., and work on finalizing a white paper for briefing
them. He asked if the committee might have a preview.
MR. ALLEMAN replied that the sponsor group would present a
multi-faceted, go-forward plan. He said those in Washington, D.C.,
have raised some of the same issues as had committee members,
including "claw back" as well as other government involvement and
programs.
Number 2104
REPRESENTATIVE BRICE asked if feedback had been positive or
negative, from (1) the regulatory, and (2) the political side.
MR. ALLEMAN reported that feedback has been very positive, and
that those in Washington, D.C., agree that all avenues should
continue to be explored until sponsors hone in on one they think is
really the answer. He repeated that feedback has been very
positive and upbeat, both politically and in the agencies.
Number 2143
REPRESENTATIVE DYSON referred to page 5 of Mr. Alleman's prepared
remarks, where it says, "Federal fiscal modifications will be
leveraging to the economic viability of the project." He asked
what that meant.
MR. ALLEMAN said it means that federal flexibility will be
extremely important to the overall project. He mentioned that the
sponsors have said all along that they will need fiscal
modifications such as tax changes, tax reductions, tax holidays, or
moving taxes to more profitable years. He said the sponsor group
would be approaching both state and federal governments about
accelerated depreciation and the like.
REPRESENTATIVE DYSON asked if that would require changes in federal
law.
MR. ALLEMAN replied that the answer to that question was not yet
known.
Number 2202
REPRESENTATIVE DYSON inquired about other states' interests that
might be contrary to Alaska's, and therefore prompt those states to
mobilize opposition.
MR. ALLEMAN said it would be premature to speculate on that. He
did not envision anything off the top of his head, but said that
does not mean that someone, somewhere, might not oppose it. He
added that when one looks at the project in relation to the balance
of trade issue, there are potential advantages to the rest of the
country.
REPRESENTATIVE DYSON mentioned that in talking with some Canadians
about pipeline infrastructure, they very candidly had said that
cooperating with Alaska could mean a less advantageous market for
Canadian gas, and that they would look after their own interests
first.
Number 2268
REPRESENTATIVE KEMPLEN asked if BP Exploration (Alaska)
Inc./Amoco's membership in the sponsor group presents a potential
conflict of interest. He recalled that the company has a
commitment toward a gas-to-liquids technology and the
commercialization of that technology, an option that would use the
existing pipeline. He wondered how the sponsor group is planning
to deal with this potential competitive use of natural gas from the
North Slope, as it might be more economical for the owner of the
existing pipeline to use gas-to-oil technology as opposed to the
option of creating a liquefied natural gas project.
MR. ALLEMAN said the sponsor group does not see a conflict, as
there are at least 35 trillion cubic feet of natural gas on the
North Slope, which is room for more than one gas facility.
Conversely, he continued, if the other group decided to ship
natural gas south via tidewater, that would not present
competition, but rather an opportunity for shared cost.
Number 2348
REPRESENTATIVE PORTER asked if there should be any concern about
the project's ability to provide enough natural gas within the
state while meeting export expectations.
MR. ALLEMAN replied that the sponsor group foresees no problem
taking care of in-state needs concurrent with the necessary level
of commitment to export.
CHAIRMAN WHITAKER asked for further clarification about the
potential for conflict between commercial commitments and in-state
purchases.
MR. ALLEMAN affirmed that there is a need to assure the fulfillment
of long-term contracts without jeopardizing in-state needs. He
believed the legislation being drafted addresses that concern and
anticipates continuing to meet in-state needs if the pipeline is
extended in the future.
Number 2415
REPRESENTATIVE GREEN asked if the proposed pipeline would serve as
a common carrier if another enterprise were to find a deposit and
want to ship gas.
MR. ALLEMAN, while disclaiming expertise in this area, said his
understanding is that the pipeline would serve as a common carrier
for delivery within the state, with some type of provision for
expansion if additional capacity is needed.
REPRESENTATIVE GREEN sought further clarification, asking
specifically if another company would be able to use the sponsor
group's pipeline to ship gas or if they would have to build their
own, supposing that they were both supplying in-state and
exporting.
TAPE 00-2, SIDE B
[Numbers run backward because of tape machine]
MR. ALLEMAN reiterated that he thinks the draft legislation
includes rules regarding expansion, and that he does not foresee
any conflict regarding that issue.
CHAIRMAN WHITAKER added that the forthcoming draft legislation
addresses those very issues, and that they should soon be discussed
in depth. However, he continued, this is an important subject, and
he does not wish to limit the number or length of questions.
Number 2412
CHAIRMAN WHITAKER directly addressed Mr. Alleman, saying he hoped
the sponsors perceived a different tenor this year. "We want to
help you," he said. "That is not to say we did not last year, but
we are not 'coming at you' this year. I'm not 'coming at you' this
year." He said he thinks the sponsor group has made significant
progress, and he understands there are uncertainties and questions
regarding the hydrocarbon industry in Alaska and does not want to
add to that. He expressed the opinion that the forthcoming
legislation makes a lot of sense, and no matter which project is
built, it is probably necessary. He pledged that he will do all he
can to help and said he is sure that committee members will be
equally supportive when they understand the nature of the
legislation and what it would accomplish.
Number 2382
CHAIRMAN WHITAKER alluded to Phillips Petroleum Company having an
interest in Point Thomson, and asked about Point Thomson's role in
an eventual project.
MR. ALLEMAN said the sponsor group hopes Point Thomson's role will
be significant. Certainly, he said, Phillips Petroleum Company
[his employer] is a working interest holder, and although not
speaking for them, he is certain that company is very interested.
He said the sponsor group's project will include a
nondiscriminatory bid process to permit anyone to bid on gas coming
from the North Slope. He stated that current plans neither preclude
the use of Point Thomson nor exclusively focus on Prudhoe Bay as
the source of gas.
CHAIRMAN WHITAKER voiced the opinion that Point Thomson should be
an integral part of the project if for no other reason than to gain
access to the substantial quantity of liquids there.
Number 2316
CHAIRMAN WHITAKER then expressed concern over the possibility that
the proposed project might be short circuited or delayed by
political regionalism within Alaska.
MR. ALLEMAN said it is understandable that people throughout the
state are interested in having the pipeline come in their
direction, and, further, that the sponsor group has drawn criticism
for continuing to consider two routes. However, he emphasized, it
makes sense to keep both options open while the group continues to
work toward the best combination of factors for a viable project.
He concluded by again advocating letting the market and economics
drive the project.
Number 2239
CHAIRMAN WHITAKER said it is becoming clear that there is
potentially, if not probably, a market not only for liquefied
natural gas in the Far East, but also for pipeline gas in the Lower
48. He asked if the sponsor group was working on a project of
appropriate size and technology to serve both.
MR. ALLEMAN confirmed that the group is doing so, saying that the
potential market in the Lower 48 provides additional opportunity
for shared cost and value.
Number 2174
CHAIRMAN WHITAKER concluded by saying he believes that when the
project is deemed feasible, it will be a conglomeration of a number
of approaches and that he hopes the sponsor group's philosophy
continues to be to remain open to all suggestions and approaches.
"Again," he said, "we are here to help you. We would rather help
you sooner rather than later, and we would rather you build your
project . . . sooner rather than later."
ADJOURNMENT
Number 2146
The House Special Committee on Oil and Gas was adjourned at 11 a.m.
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