Legislature(1999 - 2000)
03/23/2000 05:15 PM House O&G
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON OIL AND GAS
March 23, 2000
5:15 p.m.
COMMITTEE CALENDAR
OVERVIEW: TRANS-ALASKA GAS LINE PERMITS/YUKON PACIFIC CORP.
TAPE 00-20, SIDE A
CALL TO ORDER
REPRESENTATIVE WHITAKER convened the meeting at 5:15 p.m.
PRESENT
Members present at the call to order were: Representatives
Harris, Kemplen, Green and Chairman Whitaker
SUMMARY OF INFORMATION
CHAIRMAN WHITAKER stated that the purpose of the meeting was to
get an update from Yukon Pacific Corporation (YPC), a company
that has committed itself to taking North Slope gas to market.
MR. JEFF LOWENFELS introduced himself as President and Wayne
Lewis as Executive Vice President of YPC.
MR. LOWENFELS presented new cost estimates, the result of work
conducted by Kellogg Engineering and Wilbros (William Brothers)
to "re-cost" the Trans-Alaska Gas System. These numbers replace
previous estimates developed in 1986. This new cost estimate
contains three sets of numbers starting out with a project of 9
million metric tons, increasing to 13.5 million metric tons, and
then going up to 18 million metric tons. The numbers include the
conditioning facility, the pipeline, the compressors, the
Liquefied Natural Gas (LNG) facility in Valdez, the marine
terminal in Valdez and ships to take the gas to Asia. The
numbers are based upon a "permitted project," allowing them to
complete the economic model, with the variable in the economic
model being the wellhead price. These numbers represent the
three-phase expansion for a 36-inch pipeline carrying very high-
pressure gas from Prudhoe Bay through Fairbanks to Valdez. He
compared the 1986 cost estimate on a 14 million metric ton
project at $15 billion, with the cost for their 13.5 million
metric ton project at $10.42 billion. The reduction in cost
comes from technological advances in construction, decreased
labor costs, lower cost of pipe, etc.
CHAIRMAN WHITAKER asked if it was necessary to include the costs
of ships within the project estimate. Mr. Lowenfels responded
that the ships had to be included in order to have an "apples to
apples" cost comparison with other projects around the world.
The ships may or may not be a part of the ultimate project.
MR. LOWENFELS, in response to a request by Chairman Whitaker,
described the nature of the companies, saying Kellogg is a major
construction company in the area of LNG facilities and Wilbros is
a large engineering company, formerly a part of Williams Company.
REPRESENTATIVE KEMPLEN asked why, considering that there is
already a large gas conditioning facility on the North Slope,
would they include such a facility in their cost estimate.
MR. LOWENFELS responded that the nature of the facilities is
different. The facility currently on the North Slope separates
the gas from the oil and puts it back into the ground, whereas
the conditioning facility in the cost estimate would be one that
takes the gas and "cleans it up" to provide almost pure methane
to send down the pipeline.
MR. LOWENFELS turned to permitting and explained the documents
included in the packet he had presented to the committee,
describing the time spent in obtaining the permits. He said the
state has jurisdiction over about 23 percent of the permitting
and the federal government has 77 percent. He proceeded to show
the breakdown between permitting agencies which are within the
Joint Pipeline Office (JPO), and those that are outside it. He
also mentioned that there are documents to show which permits are
required only for an LNG project, and described the backgrounds
of the respective persons who worked on obtaining those permits.
Mr. Lowenfels commented on a chart in the packets that showed the
amount of time spent in obtaining the 8 major permits for the
projects, and explained why he feels that it would be extremely
difficult if not impossible to obtain such permits for a
different project. He pointed to language in the documents
provided to committee members, which states that, "all other
routes are hereby rejected."
MR. LOWENFELS said they are continuing to work on the wetlands
permit, and that a project of this type requires some 860
individual permits, but the 12 permits listed in the documents
are the ones "that really make the project."
REPRESENTATIVE HARRIS asked what it would take to overturn the
environmental impact statement or permit a different route.
MR. LOWENFELS said he did not think it would not be possible, but
that the process would be to apply for a federal right of way
permit. He explained that one would have to convince the
agencies that they had made a mistake in permitting the route to
Valdez. While he does not believe it is possible to permit a
different route for the pipeline, he does believe that it would
be possible to get additional permits for a spur line from
Glenallen to Wasilla.
MR. LOWENFELS, in response to further questions from
Representative Harris, stated that his company (YPC) would object
and fight efforts to permit another route for a gas pipeline, and
that could delay a pipeline project by up to nine years.
REPRESENTATIVE GREEN asked about the expiration dates of the
permits, to which Mr. Lowenfels replied that any of the permits
could expire well after the time when such a project could be
built. He also stated that their project could be sized large
enough to perhaps provide export quantities of gas to the Kenai
area through a spur line.
MR. LOWENFELS, in a lengthy exchange with Representative Green,
discussed YPC's position regarding a relationship with a pipeline
to the Lower 48, and estimated the size of the market for LNG in
Asia.
MR. LEWIS stated that in his analysis, between the years 2005 and
2010, there will be a 40 million metric ton shortfall in LNG.
MR. LEWIS, in response to a question by Representative Kemplen,
clarified that the cost estimate is not an economic model and
does not include taxes.
MR. LOWENFELS commented on YPC's relationship with the Alaska
Gasline Port Authority, saying that they continue to have
conversations and YPC hopes its permits and expertise will be
used on the Port Authority's project. He explained why YPC had
left the Alaska North Slope Gas Sponsor Group, and said if the
Sponsor Group decided to use the Valdez route for its project,
YPC would be happy and eager to sit down and discuss with them
how they could work together on it.
MR. LOWENFELS, in response to a question by Representative
Kemplen, stated that if a project using the Valdez route were not
viable, some of the YPC permits could be used for another route,
but only where the new route followed the one that was already
permitted. He also discussed the potential impact on the YPC
project of the resolution of the BPAmoco/ARCO buy out, and the
role Phillips Petroleum may play in it because Phillips does not
have competing projects around the world as does BPAmoco holds.
Also, Phillips has been delivering to the two largest LNG buyers
in the world and has a very solid relationship with the Asian
market.
MR. LOWENFELS, in discussion with Representative Kemplen, stated
that there is the possibility of a public/private ownership
scenario with regard to an LNG project or one that includes a
pipeline to the Lower 48. He also said he thinks the price would
need to be $3 per cubic feet in order to make such a project
viable.
REPRESENTATIVE HARRIS asked Chairman Whitaker about the validity
of the permits as presented to the committee by Mr. Lowenfels.
Chairman Whitaker said he would continue to seek affirmation.
ADJOURNMENT
CHAIRMAN WHITAKER adjourned the meeting at an unspecified time.
NOTE:
The meeting was recorded and handwritten log notes were taken. A
copy of the tape and log notes may be obtained by contacting the
House Records Office at Room 229, Terry Miller Legislative Office
Building, 129 Sixth Street, Juneau, Alaska 99801-1182, (907) 465-
2214, and after adjournment of the second session of the Twenty-
first Alaska State Legislature, in the Legislative Reference
Library.
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