Legislature(2011 - 2012)

04/15/2011 02:20 PM House RES


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02:20:50 PM Start
02:21:06 PM Presentation(s): Gigamethanol and Gas to Gasoline
03:29:41 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         April 15, 2011                                                                                         
                           2:20 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Eric Feige, Co-Chair                                                                                             
Representative Paul Seaton, Co-Chair                                                                                            
Representative Peggy Wilson, Vice Chair                                                                                         
Representative Alan Dick                                                                                                        
Representative Neal Foster                                                                                                      
Representative Cathy Engstrom Munoz                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Bob Herron                                                                                                       
Representative Berta Gardner                                                                                                    
Representative Scott Kawasaki                                                                                                   
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                              
Senator Thomas Wagoner                                                                                                          
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
PRESENTATION(S):  GIGAMETHANOL AND GAS TO GASOLINE                                                                              
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                              
No previous action to report                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
THOMAS P. ROCHE                                                                                                                 
T.P. Roche Company                                                                                                              
Kemah, Texas                                                                                                                    
POSITION STATEMENT:  Testified during the discussion of                                                                       
GigaMethanol and Gas to Gasoline presentation.                                                                                  
                                                                                                                                
DEO VAN WIJK, Chairman                                                                                                          
Janus Methanol Ltd.                                                                                                             
Porter, Texas                                                                                                                   
POSITION STATEMENT:  Testified during the discussion of                                                                       
GigaMethanol and Gas to Gasoline presentation.                                                                                  
                                                                                                                                
CHARLES SINK, Director of Enterprise & Trust Services                                                                           
Chugachmiut                                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Testified  during  the  discussion of  the                                                             
GigaMethanol and Gas to Gasoline presentation.                                                                                  
                                                                                                                                
SENATOR TOM WAGONER                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Testified  during  the  discussion of  the                                                             
presentation on GigaMethanol and Gas to Gasoline.                                                                               
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
2:20:50 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  PAUL   SEATON  called  the  House   Resources  Standing                                                             
Committee meeting to order at  2:20 p.m.  Representatives Seaton,                                                               
Feige,  Foster, Dick,  P.  Wilson  were present  at  the call  to                                                               
order.    Representative Munoz  arrived  as  the meeting  was  in                                                               
progress.                                                                                                                       
                                                                                                                                
^PRESENTATION(S):  GigaMethanol and Gas to Gasoline                                                                           
       PRESENTATION(S):  GigaMethanol and Gas to Gasoline                                                                   
                                                                                                                              
2:21:06 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON announced  that the only order  of business would                                                               
be a presentation on GigaMethanol and Gas to Gasoline.                                                                          
                                                                                                                                
A brief at-ease was taken.                                                                                                      
                                                                                                                                
2:23:34 PM                                                                                                                    
                                                                                                                                
THOMAS P. ROCHE, T.P. Roche Company, introduced himself.                                                                        
                                                                                                                                
2:23:43 PM                                                                                                                    
                                                                                                                                
DEO VAN WIJK, Chairman, Janus  Methanol Ltd., related that he has                                                               
built  eight methanol  plants  around  the world.    Of the  last                                                               
three,  two  are  mentioned in  the  presentation,  including  in                                                               
Frankfurt.                                                                                                                      
                                                                                                                                
2:24:16 PM                                                                                                                    
                                                                                                                                
CHARLES   SINK,  Director   of  Enterprise   &  Trust   Services,                                                               
Chugachmiut,  stated that  Chugachmiut is  a regional  non-profit                                                               
for the  Chugach Region.   He said he  persuaded Mr. van  Wijk to                                                               
come to Alaska to do a  scoping of his technology and explain how                                                               
it would fit in Alaska.                                                                                                         
                                                                                                                                
2:24:52 PM                                                                                                                    
                                                                                                                                
MR. VAN WIJK  indicated this presentation was  prepared and given                                                               
during the National Petroleum Refinery  Association (NPRA) in San                                                               
Antonio in March 2011.   Janus Methanol AG, a Swiss-based company                                                               
has offices in  Germany, the Netherlands, Porter,  Texas, and his                                                               
role is as Chair of the company [slide 2].                                                                                      
                                                                                                                                
2:25:10 PM                                                                                                                    
                                                                                                                                
MR.  VAN WIJK  stated that  the company  has been  considering at                                                               
complexes  in  the  Netherland, Russia,  Mozambique,  Texas,  and                                                               
possibly Alaska.   The project  needs is huge volumes  of natural                                                               
gas, minimum  of capacity of 640  million or two-thirds of  a bcf                                                               
of natural gas [slide 3].                                                                                                       
                                                                                                                                
2:25:59 PM                                                                                                                    
                                                                                                                                
MR.  VAN  WIJK  stated  that  his  company  worked  with  British                                                               
Petroleum (BP) to develop the plants  in Trinidad and Tobago.  He                                                               
explained  that having  one of  the major  oil and  gas producers                                                               
involved  immediately  makes  the  project viable.    He  further                                                               
stated that his company is one  of the smaller companies so being                                                               
creative  and at  the  forefront of  technology  is important  to                                                               
convince  larger  companies  that the  company  brings  something                                                               
special to  the projects.   Thus far  Janus Methanol AG  has been                                                               
successful in doing so.  His  group has collectively in excess of                                                               
500 years  of methanol experience.   No other group has  ever had                                                               
that much experience to offer [slide 4].                                                                                        
                                                                                                                                
2:26:40 PM                                                                                                                    
                                                                                                                                
MR.  VAN WIJK  turned  to  the 2009  photograph  of Trinidad  and                                                               
Tobago,  noting that  in 1984  this  space was  empty sugar  cane                                                               
country [slide  5].  Today,  about $15 billion has  been invested                                                               
in  the  country,  thousands  of  people  find  employment.    He                                                               
suggested  people  can  learn from  their  mistakes,  noting  the                                                               
photograph shows  a hodgepodge of industries,  including ammonia,                                                               
methanol,  and steel  industries.   No  one  thought through  the                                                               
design,  but the  area  has been  very  successful in  attracting                                                               
industry.                                                                                                                       
                                                                                                                                
2:28:05 PM                                                                                                                    
                                                                                                                                
MR.  VAN WIJK  explained that  Janus  Methanol AG  was the  first                                                               
company  to build  a 5,000  tons methanol  plant in  Trinidad and                                                               
Tobago using  the MegaMethanol technology  [slide 7].   Thus far,                                                               
six  plants have  been  built.   He said  that  due to  financial                                                               
reasons  he  sold his  company  Saturn  to a  large  corporation,                                                               
Methanex.   He was then absent  from the business for  ten years,                                                               
during which  time Methanex developed  the technology  going from                                                               
5,000 to 10,000  tons of methanol per day.   The plants are built                                                               
in  clusters of  two, so  20,000 tons  of methanol  per day  or 7                                                               
million tons  of methanol per  year.  He identified  one problem,                                                               
which is that  the chemical market for methanol is  31 to 32 tons                                                               
million  per  year  and  including China  the  market  totals  46                                                               
million tons per  year.  He offered that if  a company built four                                                               
clusters of plants  it would dominate the world  of methanol, but                                                               
producing  such  a  large amount  of  methanol  would  ultimately                                                               
reduce the price of methanol [slide 7].                                                                                         
                                                                                                                                
2:29:33 PM                                                                                                                    
                                                                                                                                
MR. VAN  WIJK related  he attended a  conference in  Russia where                                                               
ExxonMobil   Corporation  unveiled   its  methanol   to  gasoline                                                               
technology  (MTG).    ExxonMobil Corporation's  first  plant  was                                                               
built in  New Zealand in 1982.   He reminded members  of the 1979                                                               
oil crisis  and surmised that  New Zealand feared being  left out                                                               
so it developed  the methanol to gasoline technology  (MTG).  The                                                               
technology was technically success  but commercially in the 1990s                                                               
oil  prices fell  to $10  per barrel  and ultimately  the project                                                               
failed.  Exxon bought Mobil  and the technology was forgotten, he                                                               
said.   He related  that China  has built an  MTG plant  based on                                                               
coal, noting  all petrochemical  projects in  China are  based on                                                               
coal.   However, one  disadvantage of  coal is  the expense.   He                                                               
pointed out  that it is  much cheaper to  use natural gas  in the                                                               
MTG process [slides 8 and 9].                                                                                                   
                                                                                                                                
2:31:03 PM                                                                                                                    
                                                                                                                                
MR. VAN  WIJK turned  to the  photographs of  the ATLAS  plant in                                                               
Trinidad  [slide 10-11].   In  2008, it  was the  best performing                                                               
plant ever  built.   He identified the  components of  the plant,                                                               
including  the  distillation,  fired heater,  syngas  compressor,                                                               
syngas  generation,  and  methanol   synthesis.    The  engineers                                                               
determined the  best place to save  costs would be in  the syngas                                                               
generation plant.   He said  the steam reformer  represents about                                                               
20 to  25 percent of the  total investment but the  costs for the                                                               
syngas compressor alone  is 25 million euros (¼,   yet the syngas                                                              
compressor has been very vulnerable to breakdown.                                                                               
                                                                                                                                
2:32:36 PM                                                                                                                    
                                                                                                                                
MR. VAN  WIJK said the engineers  at Janus Methanol AG  worked to                                                               
skip  the steam  reformer, which  in 2004  deemed unnecessary  to                                                               
methanol  gas production  [slide  12].   He  identified that  the                                                               
right one is  gas cooled and the left one  is water cooled [slide                                                               
13].   The  advantage  bypassing the  syngas  compressor and  not                                                               
needing the huge compressor only  three vessels would be required                                                               
to produce a total of 10,000 tons of methanol per day.                                                                          
                                                                                                                                
2:33:37 PM                                                                                                                    
                                                                                                                                
MR.  VAN WIJK  stated one  additional advantage  has been  gained                                                               
during distillation  using this  method since the  steam reformer                                                               
could only run at 40 to 44 bars  but the new method can run at 60                                                               
bars.   The same size  of plant  could produce double  the volume                                                               
[slide 14].   Mr. van Wijk  stated that the syngas  compressor is                                                               
gone in  this photograph [slide 15].   Instead of the  25 million                                                               
(¼   cost for  the syngas  compressor, the  booster only  costs 4                                                              
million euros  (¼.   This  process also changed the  fired heater                                                              
and sea  water cooling  system, but  the one  depicted is  a much                                                               
larger  system than  would be  necessary  in the  Gulf of  Alaska                                                               
[slides 16 and 17].                                                                                                             
                                                                                                                                
2:34:55 PM                                                                                                                    
                                                                                                                                
MR. VAN WIJK  summarized that Janus Methanol AG has  been able to                                                               
reduce the  cost of the per  ton annual capacity [slide  18].  He                                                               
predicted that  if a 3,000 ton  methanol plan was built  today it                                                               
would cost $1,000  per ton of annual installed  capacity or about                                                               
$1 billion  in total.   However, the  ATLAS plan would  cost $600                                                               
per ton of  annual installed capacity.  He  predicted that taking                                                               
steps to increase  production to 20,000 tons per  day (tpd) using                                                               
this technology would  reduce the cost to $300 per  ton.  Thus, a                                                               
total of  7 million tons  of methanol could be  produced annually                                                               
for about  a $2 billion investment.   In response to  a question,                                                               
he answered that these costs are in dollars.                                                                                    
                                                                                                                                
2:36:19 PM                                                                                                                    
                                                                                                                                
MR. VAN  WIJK stated Janus  Methanol AG  already has a  big plant                                                               
but it  would like to build  more plants.  He  outlined the known                                                               
methanol conversion  technologies as methanol to  gasoline (MTG),                                                               
methanol to Propylene  (MTP), and methanol to  olefins (MTO), but                                                               
that in his  view the MTP and MTO are  technically proven but not                                                               
commercially proven [slide 20].                                                                                                 
                                                                                                                                
2:36:59 PM                                                                                                                    
                                                                                                                                
MR. VAN WIJK pointed out the  plant photograph in New Zealand and                                                               
the process  it uses [slides 22  -25].  He turned  to the world's                                                               
first  coal to  liquids plant  using  MGT in  Shanxi Province  in                                                               
China [slide 26].                                                                                                               
                                                                                                                                
2:37:18 PM                                                                                                                    
                                                                                                                                
MR.  VAN  WIJK  reported  the   specifications  of  MTG  gasoline                                                               
properties and composition which is  high in octane at 92 percent                                                               
without  producing  any  sulfur  [slide  27].    He  related  two                                                               
products are produced in the Janus  Methanol AG plants.  Out of 7                                                               
million tons  of methanol, three  million tons of gasoline  and 4                                                               
million tons of water are produced.   The water byproduct is pure                                                               
enough  that   it  could   be  used   for  cooling   purposes  or                                                               
agriculture.    Additionally,  the   MTG  yields  meet  all  U.S.                                                               
specifications, he said.                                                                                                        
                                                                                                                                
2:38:30 PM                                                                                                                    
                                                                                                                                
MR.  VAN WIJK  stated one  important aspect  is that  all of  the                                                               
majors  have investigated  billions on  gas-to-liquids using  the                                                               
Fischer  Tropsch  method.    That  process  produces  fuel,  LPG,                                                               
naphtha, distillate/diesel, but also a  large amount of wax.  The                                                               
MTG route produces some LPG,  but yields approximately 89 percent                                                               
of gasoline [slide  29].  The process does not  produce any other                                                               
byproducts except  water and meets  all U.S. specifications.   In                                                               
response   to  Co-Chair   Feige,  he   agreed  the   two  columns                                                               
represented the outcome using cobalt and iron catalysts.                                                                        
                                                                                                                                
2:40:06 PM                                                                                                                    
                                                                                                                                
MR.  VAN  WIJK,  in  response  to a  question,  agreed  that  the                                                               
temperatures listed  as 220 C and  340 C refer to  the centigrade                                                               
temperatures used.                                                                                                              
                                                                                                                                
CO-CHAIR  SEATON inquired  as  to the  temperature  that the  MTG                                                               
process uses.                                                                                                                   
                                                                                                                                
MR.  VAN  WIJK   answered  that  the  methanol  pod   runs  at  a                                                               
temperature  of 1200  degrees  centigrade (C)  for  syngas.   The                                                               
gasoline  pod  uses  a  substantially   lower  temperature.    He                                                               
described several steps necessary:  first methanol is made, which                                                               
contains  56 percent  water; next  the water  would be  separated                                                               
through  a small-dimethyl  ether  (DME) plant;  and finally,  the                                                               
methanol would  be converted  by using  the methanol  to gasoline                                                               
(MTG) process.                                                                                                                  
                                                                                                                                
2:41:04 PM                                                                                                                    
                                                                                                                                
MR. VAN WIJK  provided liquid transportation fuels  from coal and                                                               
biomass figures  from ExxonMobil  [slide 30].   He  estimated the                                                               
cost to build  a Gulf Coast plant at $2.6  billion, including the                                                               
cost of the methanol, DME, and MTG plants.                                                                                      
                                                                                                                                
2:42:07 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON  asked whether  the $2.6 billion  is for  the MTG                                                               
with carbon capture or without carbon capture.                                                                                  
                                                                                                                                
MR.  VAN WIJK  answered that  the cost  estimate included  carbon                                                               
capture.                                                                                                                        
                                                                                                                                
CO-CHAIR SEATON  related his understanding  that would  result in                                                               
20,000 tons of methane per day.                                                                                                 
                                                                                                                                
MR. VAN WIJK  agreed, noting it would result in  about 8,600 tons                                                               
or 63,000 barrels of gasoline per day.                                                                                          
                                                                                                                                
CO-CHAIR FEIGE presumed the carbon dioxide would be reinjected.                                                                 
                                                                                                                                
MR. VAN WIJK agreed.                                                                                                            
                                                                                                                                
2:43:03 PM                                                                                                                    
                                                                                                                                
MR.  VAN WIJK  turned  to  the last  slide  that illustrates  the                                                               
proposed plan for  a plant in Mozambique [slide 31].   He said he                                                               
was unsure  this would be  suitable for  Alaska.  He  pointed out                                                               
the right side of the slide  depicts two methanol plants with the                                                               
total capacity  of 10,000 tons  and on the  left side.   The plan                                                               
would be to  build two ammonia plants with the  capacity of 7,500                                                               
tons each.   He  related the whole  range of  downstream products                                                               
made  partly  based on  methanol  and  partly based  on  ammonia,                                                               
including   formaldehyde   and   gasoline.     He   characterized                                                               
Mozambique  as the  fifth poorest  country  in the  world with  a                                                               
population of  23,500,000 and  a life expectancy  of 37  years of                                                               
age.   Only 350,000 people  have jobs,  and of those  150,000 are                                                               
government  jobs.     He   identified  this   complex  as   a  C1                                                               
petrochemical complex,  which would  consist of  25 plants.   The                                                               
workforce  needed  would  encompass  between  40,000  and  50,000                                                               
people on  site.  The amount  of land needed is  huge, but little                                                               
else exists in  Mozambique.  He predicted the plant  would need a                                                               
community of about 300,000-350,000 people in size to support it.                                                                
                                                                                                                                
2:45:58 PM                                                                                                                    
                                                                                                                                
MR.  VAN WIJK  passed out  a handout  which compared  North Slope                                                               
costs to  Gulf Coast costs.   He acknowledged that he  has little                                                               
knowledge  of North  Slope  construction costs  so  he made  some                                                               
broad assumptions.   He estimated the total project  cost at $5.2                                                               
billion, with depreciation  over 15 years, which  would equate to                                                               
a cost of  $116 per ton.  He calculated  the return on investment                                                               
at 20 percent  after tax, which "boils down" to  a return of $347                                                               
per  ton.   He  provided estimates  and cost  per  ton on  items,                                                               
including a  35 percent  tax estimate of  gross revenues  or $186                                                               
per ton the  oxygen plant at double  the cost or $84  per ton, an                                                               
estimated 225 employees for actual  operation, and 2,500 to 3,000                                                               
employees during construction.   He estimated $150,000 person for                                                               
wage or $11.25 per metric  ton of gasoline and operating expenses                                                               
at $50  million or $49.50 per  ton and the catalyst  cost per ton                                                               
at $15.25.                                                                                                                      
                                                                                                                                
2:48:13 PM                                                                                                                    
                                                                                                                                
MR. VAN  WIJK estimated total  operation expenses based on  a per                                                               
ton cost  of gasoline  of $810, noting  this estimate  includes a                                                               
gross  margin  of $533  per  ton.  He  said gasoline  equals  367                                                               
gallons per metric  ton.  He estimated the  natural gas feedstock                                                               
cost at  $2.00 per MCF or  $160.00 per metric ton,  which equates                                                               
to $2.20 per  gallon excluding the natural gas.   Adding the cost                                                               
of natural gas would bring the  total feedstock cost to $2.64 per                                                               
ton, which  includes a profit of  $1.45, he said.   The real cost                                                               
of 2.00 MM/BTU would be $1.20, including depreciation, he added.                                                                
                                                                                                                                
2:50:22 PM                                                                                                                    
                                                                                                                                
MR. VAN WIJK pointed out that  an argument could be made over the                                                               
profit  margin and  while  he was  unsure what  it  should be  he                                                               
believed it  would depend  on market value.   He  summarized that                                                               
the potential to produce gasoline,  even by doubling construction                                                               
costs of  $2.65 to $2.85 would  allow a $1.45 per  gallon margin.                                                               
He compared that to today's  wholesale prices which are in excess                                                               
of $3 per gallon so the  margin would increase to about $2.00 per                                                               
gallon at today's prices.                                                                                                       
                                                                                                                                
2:51:40 PM                                                                                                                    
                                                                                                                                
MR. VAN WIJK speculated  as to how this is possible.   He said 80                                                               
percent of  the investment is  for the methanol component  and 20                                                               
percent  for   the  production   cost  of   DME  gasoline.     He                                                               
acknowledged that the costs are  extremely sensitive at the front                                                               
end, but once those are under control, the rest would follow.                                                                   
                                                                                                                                
2:52:23 PM                                                                                                                    
                                                                                                                                
MR. VAN WIJK recalled the proposed  estimate in Alaska is that an                                                               
estimated  at 4.5  bcf of  gas would  be available  on the  North                                                               
Slope  which represents  the  equivalent of  14  plants with  the                                                               
capacity in methanol of 1.12 million  barrels per day.  He stated                                                               
that  another advantage  of methanol  is that  it can  be blended                                                               
with oil  and it still  keeps the oil fluid.   He has  heard wide                                                               
ranging estimates, in terms of  the Trans-Alaska Pipeline System,                                                               
anywhere from 2 MMbbl to 4  MMbbl per day.  Currently, he thought                                                               
the volume  produced was  640,000 barrels per  day.   He outlined                                                               
problems encountered with low volumes  of oil including viscosity                                                               
issues unless  methanol or  gasoline is injected.   He  said this                                                               
problem  exists in  Siberia, where  lots  of oil  that cannot  be                                                               
moved because it freezes up.   However, that does not happen when                                                               
the methanol is added, he said.                                                                                                 
                                                                                                                                
2:54:19 PM                                                                                                                    
                                                                                                                                
MR.  VAN  WIJK  related  that  the plan  would  be  to  ship  the                                                               
oil/methanol  slurry to  Valdez,  distill the  methanol out,  and                                                               
then ship  the gasoline to Japan  and other countries in  the Far                                                               
East.  The Far East is  the likely market due to the restrictions                                                               
and costs of the Jones Act.   He predicted that if producers were                                                               
forced to  sell to California the  gas price would be  lower than                                                               
if it is  shipped to the free market.   He surmised that Alaskans                                                               
must be unhappy with the Jones Act since it costs them money.                                                                   
                                                                                                                                
2:55:36 PM                                                                                                                    
                                                                                                                                
MR. ROCHE suggested further discussion  on the potential with the                                                               
4.5  bcf  per day  design  basis  for  use with  the  TransCanada                                                               
pipeline.   He  estimated  that if  that gas  was  used for  this                                                               
application, it would mean 14 trains  instead of 2 trains, so the                                                               
investment would be spread over 15  years and could fully use the                                                               
TAPS.                                                                                                                           
                                                                                                                                
2:56:11 PM                                                                                                                    
                                                                                                                                
MR. VAN WIJK agreed.  He  estimated 1,500 people would be need in                                                               
7 complexes  and a construction  force of about 3,000  people for                                                               
about 15  to 18  years.   He predicted  the plants  would produce                                                               
about  140,000 tons  of methanol  per day  or 450,000  barrels of                                                               
gasoline per day.   He offered his belief that  this would change                                                               
the low-priced gas into a huge  money maker.  He compared that to                                                               
exporting natural  gas to  the Lower 48  since he  predicted that                                                               
natural gas would remain  in the next 10 to 15 years  at $4 to $6                                                               
per million.   A variety  of possibilities for using  natural gas                                                               
exists,  such as  to produce  gasoline or  develop a  C1 chemical                                                               
complex.     These   are  tools   currently  available   and  are                                                               
technically proven,  but the North  Slope is not an  easy climate                                                               
to build in.  However, the  pipeline has already been built so it                                                               
made sense to him to use the TAPS for delivery, he said.                                                                        
                                                                                                                                
2:59:09 PM                                                                                                                    
                                                                                                                                
MR. VAN WIJK offered his belief  often the best solutions are the                                                               
simplest  solutions.   He said  he  found this  solution by  pure                                                               
accident. He detailed several other  meetings he has attended and                                                               
concluded  that  this technology  is  promising  and will  change                                                               
geopolitical,  geoeconomical,  and geosocial  aspects  worldwide.                                                               
He concluded that  the U.S. has tremendous  potential to increase                                                               
gasoline  production   and  eliminate  its  overall   debt.    He                                                               
estimated that the first plant could be online in in five years.                                                                
                                                                                                                                
3:02:40 PM                                                                                                                    
                                                                                                                                
SENATOR  TOM  WAGONER, Alaska  State  Legislature,  asked him  to                                                               
repeat the  one formula for  conversion and whether  it pertained                                                               
to 450,000 gallons or barrels.                                                                                                  
                                                                                                                                
MR. VAN  WIJK answered barrels.   In further response  to Senator                                                               
Wagoner, he said he used 140,000 tons per day.                                                                                  
                                                                                                                                
CO-CHAIR SEATON wanted  to be certain to get the  comments on the                                                               
record.                                                                                                                         
                                                                                                                                
SENATOR  WAGONER reiterated  his question  was on  the conversion                                                               
from  the  140,000  tons  per day  throughput  on  the  estimated                                                               
maximum number of trains to 450,000 barrels per day.                                                                            
                                                                                                                                
3:04:01 PM                                                                                                                    
                                                                                                                                
MR. VAN  WIJK, in response to  a question, answered that  the oil                                                               
would  most  likely  be  blended because  of  the  importance  in                                                               
keeping the  oil fluid.  He  detailed that he envisioned  a total                                                               
of 14  trains, with each  train consuming 320,000 BTU.   However,                                                               
noting his  preference in  building tanks in  pairs so  the total                                                               
consumption would be 640,000 BTU.   Fourteen trains could produce                                                               
up  to 140,000  tons  of  methanol per  day,  which converted  to                                                               
barrels would equal  1.12 MMbbls of methanol per day.   The yield                                                               
would be  43 percent, since  methanol contains 56  percent water,                                                               
which would  result in a  production of about 450,000  barrels of                                                               
gasoline per day.  He  characterized the proposed project as "one                                                               
heck of  a refinery."   He reported  that a  world-scale refinery                                                               
would produce  200,000 barrels  per day and  would cost  at least                                                               
$10 billion to build,  if a permit could be had.   He related his                                                               
understanding that  a permit for  a refinery has not  been issued                                                               
for more than 25 years.   He offered his belief that the proposed                                                               
project as described would be "permittable."                                                                                    
                                                                                                                                
3:06:03 PM                                                                                                                    
                                                                                                                                
SENATOR WAGONER  inquired as to  whether the water used  would be                                                               
pure enough that it could be used for hydro-fracking.                                                                           
                                                                                                                                
MR.  VAN WIJK  answered absolutely.   He  said it  is so  pure it                                                               
would be  drinkable.   He explained that  Janus Methanol  AG will                                                               
build ammonia and  urea plants in Africa, but  that the continent                                                               
has a  shortage of available  water so any byproduct  water would                                                               
be used for irrigation.                                                                                                         
                                                                                                                                
3:07:21 PM                                                                                                                    
                                                                                                                                
MR.  VAN  WIJK  distributed  a handout  of  his  calculations  to                                                               
committee members labeled "A" and "B."                                                                                          
                                                                                                                                
3:07:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON  asked the reason that the  jobs stop at                                                               
15 years.                                                                                                                       
                                                                                                                                
MR.  VAN  WIJK  reviewed  the   employees  for  construction  and                                                               
operation.   About 1,500 employees  would be  needed indefinitely                                                               
to run  the plant.   Approximately 3,000 construction  jobs would                                                               
disappear after construction but  construction would last between                                                               
15 and  20 years.   He acknowledged  he does not  have experience                                                               
building on the  North Slope, but normal construction  time for a                                                               
project of this  size is 36 months and it  would take another two                                                               
years to obtain financing, he said.                                                                                             
                                                                                                                                
3:08:56 PM                                                                                                                    
                                                                                                                                
MR. SINK  clarified that Mr.  van Wijk's projections are  for the                                                               
proposed two-train plant.                                                                                                       
                                                                                                                                
MR. VAN WIJK  explained that the output would be  640 million per                                                               
day,  with $300  per  gallon  capacity based  on  the Gulf  Coast                                                               
model.   In response  to Co-Chair Seaton,  he agreed  the figures                                                               
are based on a proposed two-train Atlas-sized plant.                                                                            
                                                                                                                                
MR.  VAN WIJK  clarified for  Representative Munoz  that he  just                                                               
doubled the capital  costs.  He referred to  his handout, labeled                                                               
"A" and  the figure of  $810, which  contains $533 per  ton gross                                                               
profit, of which 35 percent  represents taxes.  He estimated $558                                                               
million in taxes, not counting and production royalty costs.                                                                    
                                                                                                                                
3:10:39 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON inquired  as to  whether  the calculations  have                                                               
been made.                                                                                                                      
                                                                                                                                
MR. VAN WIJK answered yes.                                                                                                      
                                                                                                                                
3:10:50 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON  reviewed his calculations.   He referred  to the                                                               
handout  previously  referenced to  the  second  line down  which                                                               
projects the return on investment  of 20 percent at $2.6 billion,                                                               
and tax at 35 percent.                                                                                                          
                                                                                                                                
MR. VAN  WIJK said he  doubled the  oxygen cost and  adjusted the                                                               
labor to  $150,000 per person,  increased the operating  costs to                                                               
$100 million, and  added in the catalyst's cost.   He divided the                                                               
total of  $810 by 367  and arrived at a  total cost of  $2.21 per                                                               
gallon excluding natural gas.                                                                                                   
                                                                                                                                
3:11:55 PM                                                                                                                    
                                                                                                                                
MR.  VAN WIJK  reviewed  his  figures on  chart  "B"  again.   He                                                               
related that 367 gallons per metric  ton using 80 MM/BTU would be                                                               
required to produce 1 gallon of  gasoline.  He said that he added                                                               
$.436  per gallon  to  the  $2.21 for  a  total  of $2.64,  which                                                               
includes  $1.45 gross  margin  less  the 35  percent  taxes.   He                                                               
concluded the  real cost  would be  $1.20 per  gallon based  on a                                                               
$5.2 billion investment.                                                                                                        
                                                                                                                                
3:12:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FOSTER asked for an explanation of a train.                                                                      
                                                                                                                                
MR. VAN WIJK returned to slide 11 and identified a train.                                                                       
                                                                                                                                
3:14:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FOSTER asked  for involvement  of Chugachmiut  in                                                               
the project.                                                                                                                    
                                                                                                                                
MR. SINK answered that his  involvement has been loosely based on                                                               
my  acquaintance with  Mr. Roche.   He  brought Mr.  van Wijk  to                                                               
Alaska and he  serves as his contact in Alaska.   He offered that                                                               
Chugachmiut  is a  Native non-profit  serving  health and  social                                                               
services.    His  division  has  the  Village  Protection  Safety                                                               
Program,  but he  also deals  with real  estate and  forestry, as                                                               
well as economic and business development for individual tribes.                                                                
                                                                                                                                
3:16:22 PM                                                                                                                    
                                                                                                                                
MR. SINK  related that  Chugachmiut been  working on  the quality                                                               
and sustainability  of jobs,  which is a  topic he  has discussed                                                               
with Mr. van Wijk.                                                                                                              
                                                                                                                                
CO-CHAIR SEATON commented two villages are in his region.                                                                       
                                                                                                                                
MR. VAN WIJK said it has  always been his philosophy to train and                                                               
use as much local personnel as possible on projects.                                                                            
                                                                                                                                
3:17:21 PM                                                                                                                    
                                                                                                                                
SENATOR WAGONER asked how many acres each train would require.                                                                  
                                                                                                                                
MR.  VAN WIJK  responded that  each train  uses approximately  40                                                               
acres, which includes the tank farm.                                                                                            
                                                                                                                                
3:17:44 PM                                                                                                                    
                                                                                                                                
MR. VAN  WIJK referred to  slide 11  and pointed out  the various                                                               
tanks.                                                                                                                          
                                                                                                                                
CO-CHAIR  SEATON  inquired as  to  whether  methanol is  commonly                                                               
known as wood alcohol.                                                                                                          
                                                                                                                                
MR.  VAN WIJK  answered  he  is correct.    He  provided a  brief                                                               
history,  noting   that  window  washing  fluid   is  50  percent                                                               
methanol.   In  the 1980s  California tried  to introduce  M85, a                                                               
blend of  85 percent  methanol with  15 percent  unleaded premium                                                               
gasoline,  and M100,  which  is pure  methanol.   He  anecdotally                                                               
stated that  "big oil"  did not  like that  effort.   He reported                                                               
that methanol is  used to produce 4 percent of  the products made                                                               
in the U.S., including nylon, formaldehyde, and glue.                                                                           
                                                                                                                                
3:20:47 PM                                                                                                                    
                                                                                                                                
MR.  VAN WIJK  characterized  GigaMethanol as  so  simple and  so                                                               
revolutionary that  the process could  change the future  of this                                                               
country,  not just  the  state of  Alaska.   A  hundred years  of                                                               
natural gas reserves exist in the  U.S.  The U.S. can produce its                                                               
own gasoline.  He said that  ExxonMobil did not disagree with his                                                               
notes and he  surmised that the company knows  this technology is                                                               
forthcoming.  He predicted the  first plant would likely be built                                                               
in Texas.  In response to  Co-Chair Seaton, he concluded that the                                                               
first  plant of  this  dual  design would  be  built since  Janus                                                               
Methanol AG has already built  four functioning plants around the                                                               
world.   He  also predicted  that four  dual-design plants  would                                                               
"kill" his current business.                                                                                                    
                                                                                                                                
3:23:06 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON related  his understanding  that Mr.  van Wijk's                                                               
vision is  to create  methanol on  the North  Slope, run  it down                                                               
TAPS to Valdez, through a  natural gas conversion plant, and ship                                                               
it to market.                                                                                                                   
                                                                                                                                
MR. VAN WIJK agreed.                                                                                                            
                                                                                                                                
CO-CHAIR  SEATON inquired  as  to whether  the  project would  be                                                               
constructed  in  conjunction  with the  producers/owners  on  the                                                               
North Slope.                                                                                                                    
                                                                                                                                
MR.  VAN  WIJK  answered  he  has met  with  three  of  the  four                                                               
producers,    ExxonMobil,    BP     Exploration    Alaska,    and                                                               
ConocoPhillips.   He pointed out  that ExxonMobil  suggested that                                                               
he travel  to Alaska to  discuss and convince other  producers to                                                               
join.   He offered his  belief that he could  go to the  bank for                                                               
financing the moment  one or two of the producers  were on board,                                                               
but at  this point  his company  needs partners.   ConocoPhillips                                                               
said it  would not sell  the natural gas  since it wants  to sell                                                               
gasoline, but  BP Exploration Alaska has  expressed some interest                                                               
in  the project.   He  opined that  does not  make sense  to keep                                                               
pumping the gas back down into  the well since the producers want                                                               
to  earn  profits and  could  do  so  with  his technology.    He                                                               
estimated that  the proposed project would  produce $1.28 million                                                               
per  day for  the producers  and it  could be  up to  seven times                                                               
greater than that based on natural gas alone, he said.                                                                          
                                                                                                                                
3:25:38 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON indicated  the  legislature  has been  reviewing                                                               
gas-to-liquid (GTL)  technology, although  it has not  yet looked                                                               
at Janus  Methanol AG's technology.   This technology  appears to                                                               
be  more efficient  than other  processes.   The legislature  has                                                               
been aware of  the wax issues using  the Fischer-Tropsch process.                                                               
He related his understanding that  methanol does not seem to have                                                               
those  same issues.   The  legislature has  also been  discussing                                                               
royalty  and   tax  methods  with  the   Department  of  Revenue,                                                               
including discussions on  point of production and  not taxing up-                                                               
front.  He appreciated today's  presentation as it represents one                                                               
potentially  good  option  to  consider  how  to  monetize  North                                                               
Slope's natural gas.                                                                                                            
                                                                                                                                
3:27:46 PM                                                                                                                    
                                                                                                                                
SENATOR WAGONER suggested having a  joint meeting in Anchorage at                                                               
a future date.                                                                                                                  
                                                                                                                                
CO-CHAIR SEATON  agreed that  would be  advisable.   He indicated                                                               
the committee has two photographs that were recently donated.                                                                   
                                                                                                                                
CO-CHAIR  FEIGE described  the photographs  as one  of the  Delta                                                               
barley fields  and another of  hay fields on the  Kenai Peninsula                                                               
donated by the Alaska Farm Bureau.                                                                                              
                                                                                                                                
3:29:41 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 3:30 p.m.                                                                 

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