Legislature(2017 - 2018)Anch LIO AUDITORIUM

09/10/2018 03:30 PM House RESOURCES

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03:33:05 PM Start
03:35:33 PM Overview: Activities in the National Petroleum Reserve-alaska
05:06:21 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Joint with Senate Resources
+ Overview: Development in the National Petroleum TELECONFERENCED
Reserve - Alaska, by:
- United States Department of Interior
- Dept. of Natural Resources
- ConocoPhillips Alaska
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
              SENATE RESOURCES STANDING COMMITTEE                                                                             
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                       September 10, 2018                                                                                       
                           3:33 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
SENATE RESOURCES                                                                                                                
 Senator Cathy Giessel, Chair                                                                                                   
 Senator John Coghill, Vice Chair                                                                                               
 Senator Bert Stedman                                                                                                           
 Senator Kevin Meyer                                                                                                            
HOUSE RESOURCES                                                                                                                 
 Representative Andy Josephson, Co-Chair                                                                                        
 Representative Geran Tarr, Co-Chair                                                                                            
 Representative John Lincoln, Vice Chair                                                                                        
 Representative Harriet Drummond                                                                                                
 Representative Justin Parish                                                                                                   
 Representative Chris Birch                                                                                                     
 Representative George Rauscher                                                                                                 
MEMBERS ABSENT                                                                                                                
SENATE RESOURCES                                                                                                                
 Senator Natasha von Imhof                                                                                                      
 Senator Bill Wielechowski                                                                                                      
 Senator Click Bishop                                                                                                           
HOUSE RESOURCES                                                                                                                 
 Representative DeLena Johnson                                                                                                  
 Representative David Talerico                                                                                                  
 Representative Mike Chenault                                                                                                   
 Representative Chris Tuck                                                                                                      
OTHER LEGISLATORS PRESENT                                                                                                     
Senator Micciche                                                                                                                
COMMITTEE CALENDAR                                                                                                            
OVERVIEW:  DEVELOPMENT IN  THE NATIONAL  PETROLEUM RESERVE-ALASKA                                                               
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
STEVE WACHOWSKI, Senior Adviser on Alaskan Affairs                                                                              
U.S. Department of Interior                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:  Provided  an  update  on  how  the  state's                                                             
resources plans for the NPR-A  fit in with the President's energy                                                               
dominance agenda.                                                                                                               
MIKE NAVARRE, Commissioner                                                                                                      
Department of Commerce, Community and Economic Development                                                                      
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT: Provided  an  overview of  the NPR-A  Impact                                                             
Grant Program.                                                                                                                  
FAITH MARTINEAU, Executive Director                                                                                             
Office of Project Management and Permitting (OPMP)                                                                              
Department of Natural Resources (DNR)                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Provided an  overview of OPMP's activities in                                                             
the NPR-A.                                                                                                                      
JIM BECKHAM, Deputy Director                                                                                                    
Division of Oil and Gas (DOG)                                                                                                   
Department of Natural Resources (DNR)                                                                                           
POSITION STATEMENT:  Provided a briefing  on DOG's role  in NPR-A                                                             
SCOTT JEPSEN, Vice President                                                                                                    
External Affairs and Transportation                                                                                             
ConocoPhillips Alaska                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Provided  overview of ConocoPhillips' current                                                             
production and outlook across the North Slope and NPR-A.                                                                        
ACTION NARRATIVE                                                                                                              
3:33:05 PM                                                                                                                    
CHAIR CATHY  GIESSEL called the  joint meeting of the  Senate and                                                             
House  Resources  Standing  Committees  to  order  at  3:33  p.m.                                                               
Present  at  the call  to  order  were Senators  Coghill,  Meyer,                                                               
Stedman, and Chair Giessel.                                                                                                     
CO-CHAIR TARR said that  Representatives Birch, Drummond, Parish,                                                               
Lincoln, Rauscher (online), Co-Chair  Josephson and Co-Chair Tarr                                                               
were present at the call to order.                                                                                              
CHAIR  GIESSEL said  Senator Micciche  was also  present. In  the                                                               
audience  she also  recognized former  Representative Kurt  Olsen                                                               
and Office of Management Budget (OMB) Director Pat Pitney.                                                                      
^Overview: Activities in the National Petroleum Reserve-Alaska                                                                  
                  Overview: Activities in the                                                                               
           National Petroleum Reserve-Alaska (NPR-A)                                                                        
3:35:33 PM                                                                                                                    
CHAIR  GIESSEL  announced that  this  is  the second  hearing  of                                                               
today's joint meetings of the  Resources Committees and the topic                                                               
for this  hearing is  an overview of  activities in  the National                                                               
Petroleum  Reserve-  Alaska (NPR-A).  Over  the  last two  years,                                                               
discoveries  and announcements  of very  large oil  deposits have                                                               
generated a lot of activities in  and around the NPR-A. Today the                                                               
committee  will hear  first from  a member  of the  United States                                                               
Department  of   Interior  (USDOR),   the  agency   that  manages                                                               
development  in the  NPR-A, and  the Alaska  Commissioner of  the                                                               
Department  of  Commerce,   Community  and  Economic  Development                                                               
(DCCED) Mike  Navarre. That department  manages the  special fund                                                               
that collects  part of the  royalties from activities  that occur                                                               
in the NPR-A. The commissioner  will acquaint this committee with                                                               
that fund and  what communities on the North  Slope get services.                                                               
Then,  the  Alaska Department  of  Natural  Resources (DNR)  will                                                               
present the  activities occurring on  state land adjacent  to the                                                               
NPR-A  and  what   role  the  state  has   in  facilitating  that                                                               
development. Finally,  the committee  will hear  from one  of the                                                               
companies investing and developing projects  in the area and what                                                               
the development  plan means for  the country, the state,  and the                                                               
communities of the North Slope.                                                                                                 
CHAIR  GIESSEL  said that  over  the  past  18 months,  the  U.S.                                                               
federal government has been engaged  in making the country energy                                                               
dominant when it comes to the  production of oil and gas, and the                                                               
NPR-A, as its name suggests, is  a federal area. She welcomed Mr.                                                               
Wachowski to the table to  talk about the activities occurring in                                                               
this important area.                                                                                                            
3:35:49 PM                                                                                                                    
STEVE  WACHOWSKI,   Senior  Adviser  on  Alaskan   Affairs,  U.S.                                                               
Department of Interior, Anchorage,  Alaska, provided an update on                                                               
how the  state's resources plans  for the  NPR-A fit in  with the                                                               
President's energy  dominance agenda.  There is a  lot of  oil in                                                               
the NPR-A, he said, and they  are looking for responsible ways to                                                               
make  those areas  available for  leasing for  responsible energy                                                               
development.  Getting   more  throughput  in  the   Trans  Alaska                                                               
Pipeline (TAPS)  is a  key part to  the President's  agenda. This                                                               
will be  done in partnership with  the State of Alaska  (SOA) and                                                               
the  legislature,  the  North Slope  Borough,  and  local  Alaska                                                               
stakeholder Native corporations and tribal entities.                                                                            
3:38:29 PM                                                                                                                    
He said the Department of  Interior Secretary's Order 3352 issued                                                               
on  May 3,  2017,  directed the  United  State Geological  Survey                                                               
(USGS)  and  the  Bureau  of  Land  Management  (BLM)  and  their                                                               
respective assistant  secretaries to reassess the  mineral wealth                                                               
of the  NPR-A and  the Beaufort  Sea and to  strike a  balance of                                                               
promoting development that would protect the surface resources.                                                                 
MR. WACHOWSKI  explained that  the BLM  is charged  with managing                                                               
the  surface  and  subsurface  of   the  NPR-A.  The  2013  NPR-A                                                               
integrated  activity  plan  (IAP)  looked  at  maximizing  tracts                                                               
available for  lease at the next  lease sale on December  6, 2017                                                               
and offered all  900 available tracts on 10.3  million acres. The                                                               
sale generated about $1.1 million  based on seven tracts covering                                                               
about  80,000  acres.  ConocoPhillips  was the  only  company  to                                                               
participate in  that lease  sale, but that  wasn't a  surprise as                                                               
many of the areas were of low prospectivity.                                                                                    
Their  first plan  was  to look  at the  wide  range of  resource                                                               
management  options  for  the entire  23  million-acre  petroleum                                                               
reserve and to  make more acres available. They came  up with two                                                               
options:  do another  integrated action  plan (IAP)  or select  a                                                               
different alternative within the existing IAP.                                                                                  
The  USGS  is  the  agency charged  with  the  mineral  potential                                                               
assessment in the  area and using new data  collected by industry                                                               
and USGS teams  had reassessed the Barrow Arch to  show much more                                                               
potential and released the results  last December. They estimated                                                               
a mean of  8.7 billion barrels of oil and  25 trillion cubic feet                                                               
of gas,  a significant increase  from the 1.5 billion  barrels of                                                               
oil  assessed in  2010. He  noted  that this  assessment was  for                                                               
undiscovered technically  recoverable oil and gas  resources that                                                               
are estimated to exist based  on geological knowledge and theory,                                                               
while  technically recoverable  resources are  those that  can be                                                               
produced  using  currently   available  technology  and  industry                                                               
practices. The  estimates are significantly higher  than previous                                                               
ones mainly  because two recent  oil discoveries are  larger than                                                               
anticipated; they  are the Nanushuk  and Torok formations  in and                                                               
around the NPR-A. In summary,  he said, the current USGS estimate                                                               
is  more than  six times  the  previous estimate  of the  Central                                                               
North Slope done in 2005and the  NPR-A estimate done in 2010, and                                                               
therefore  they are  looking forward  to meeting  the President's                                                               
energy dominance  strategy and  putting more oil  in TAPS  in the                                                               
CHAIR  GIESSEL  commented  that  at  an  Anchorage  meeting  last                                                               
November the head of USGS presented  the geology of the NPR-A and                                                               
ANWR, and  it was very interesting  information. She transitioned                                                               
to the  next speaker, Mr.  Mike Navarre, the commissioner  of the                                                               
Department  of  Commerce,   Community  and  Economic  Development                                                               
(DCCED). She said  that prior to being  commissioner, Mr. Navarre                                                               
was the  mayor of the  Kenai Peninsula and  before that he  was a                                                               
member of  the House for over  a decade. In these  capacities, he                                                               
really  understands the  relationship  between  development of  a                                                               
resource  in   one  jurisdiction  and  allocating   the  benefits                                                               
equitably between the state and local shareholders.                                                                             
3:45:37 PM                                                                                                                    
MIKE  NAVARRE, Commissioner,  Department  of Commerce,  Community                                                               
and Economic  Development (DCCED),  said he  was pleased  to give                                                               
them a brief  overview of the NPR-A Impact Grant  Program and how                                                               
it works.  He found that a  report goes to the  legislature on an                                                               
annual basis, which he would touch on in just a bit.                                                                            
As a bit of background, several  claims were made in the NPR-A by                                                               
Standard Oil in 1917. However,  Reserve 4 was established in 1923                                                               
to provide fuel  for the Navy, making all  claims including those                                                               
by  Standard Oil  void. They  were transferred  to the  Bureau of                                                               
Land  Management  in  1976 and  renamed  the  National  Petroleum                                                               
This area has  been home to Inupiat communities  for thousands of                                                               
years. The  initial lease sale  in 1984 generated a  little under                                                               
$47 million to the State of  Alaska and there were no lease sales                                                               
for the  next 15  years. Six lease  sales were  conducted between                                                               
1999  and 2011  in the  Northeast and  Northwest Planning  Areas.                                                               
Leases are now scheduled to be held annually.                                                                                   
3:47:19 PM                                                                                                                    
MR. NAVARRE said  the NPR-A is managed by  the federal government                                                               
and  50  percent  of  the funds  received  from  sales,  rentals,                                                               
bonuses, and  royalties on leases go  to the State of  Alaska. He                                                               
noted  at this  point little  if any  revenue has  been generated                                                               
from  oil  fields; the  bulk  of  them  have been  from  rentals,                                                               
bonuses, and lease sales.                                                                                                       
He said the  NPR-A is governed by federal statute  42 USC Chapter                                                               
78 and  state statute AS 37.05.530  that lay out the  process and                                                               
regulations followed by the DCCED.                                                                                              
The primary objective  of NPR-A impact mitigation  programs is to                                                               
provide  eligible municipalities  with  grants  to help  mitigate                                                               
significant adverse  impacts related  to oil and  gas development                                                               
within  the  NPR-A.   "Impacts"  is  a  broad   term  that  means                                                               
reasonably  attributable  to  NPR-A  oil and  gas  activities  on                                                               
population,  employment, finances,  social and  political values,                                                               
air and water quality, fish  and wildlife habitat, the ability to                                                               
provide essential  public services including health  care, public                                                               
safety,  education,  transportation,  utilities,  and  government                                                               
administration, and  other things  of demonstrable  importance to                                                               
the applicant or its residents.                                                                                                 
The next  three slides provided  a grant award history  for FY87-                                                               
FY99,  FY00-FY08,  and  FY08-FY18.  He explained  that  a  review                                                               
committee  is put  together that  is subject  to approval  by the                                                               
legislature  that  includes  the  DCCED and  that  the  committee                                                               
sometimes appropriates  an award without really  knowing how much                                                               
money is going to be available.                                                                                                 
CHAIR GIESSEL asked him to clarify that.                                                                                        
3:49:41 PM                                                                                                                    
MR. NAVARRE  responded that deposits from  the federal government                                                               
in  FY19 are  accounted  up  to the  end  of  August. Last  year,                                                               
deposits amounted to almost $12  million. After the end of August                                                               
another $13.5 million was deposited into that fund.                                                                             
MR.  NAVARRE  augmented  his  explanation  with  an  FY20  Impact                                                               
Mitigation  Grant Timeline.  Only  six communities  in the  North                                                               
Slope Borough are available to  the application process: Nuiqsut,                                                               
Wainwright, Atqasuk, Anaktuvuk Pass,  and Utqiagvik. The postmark                                                               
due  date for  completed applications  is November  15, 2018.  On                                                               
January 2019 the committee  selections become publicly available.                                                               
The  legislature appropriates  the funding  and grant  awards are                                                               
made in  late April 2019. But  sometimes the budget has  not been                                                               
adopted by  then, so, they  don't know  how much money  is really                                                               
available for the grants.                                                                                                       
3:52:38 PM                                                                                                                    
Under "Resources" he listed:                                                                                                    
-FY20 NPR-A Handbook                                                                                                            
-FY20 NPR-A Fillable Application                                                                                                
-Annual  (FY18) Report  to  Legislature,  which provides  history                                                               
since its inception. He suggested  changing that requirement to a                                                               
full  report every  five years  with annual  updates, to  provide                                                               
more efficiency.                                                                                                                
3:53:57 PM                                                                                                                    
REPRESENTATIVE  BIRCH  asked  what   reporting  aspect  he  found                                                               
COMMISSIONER  NAVARRE replied  that  seeing  how the  legislature                                                               
gets the annual information anyway,  having annual updates with a                                                               
report  to  the  legislature  every  five  years  would  be  more                                                               
CO-CHAIR   TARR   said   she   assumed   that   the   legislature                                                               
appropriating funding  in late April  2018 is timed  with passing                                                               
the budget, but in the past  couple of years, the budget has been                                                               
passed  in something  more  like  July, and  she  asked how  that                                                               
timeline  would   impact  when   the  money  gets   allocated  to                                                               
communities. She also asked why funding  was so high in the FY04-                                                               
06 group of projects.                                                                                                           
COMMISSIONER NAVARRE  said lease sales almost  certainly occurred                                                               
in those years.                                                                                                                 
CO-CHAIR TARR asked why the lease  sales in those years were much                                                               
more successful than in other years.                                                                                            
COMMISSIONER NAVARRE  responded that  lease sales  weren't always                                                               
done on  an annual basis;  sometimes they would take  place every                                                               
certain number of years.                                                                                                        
3:56:05 PM                                                                                                                    
SENATOR  STEDMAN said  both Finance  Committees  have an  ongoing                                                               
discussion  on   whether  to   line-item  grants   to  individual                                                               
communities  or  to keep  them  as  one  lump-sum buried  in  the                                                               
budget, so not  too many legislators even notice  it. However, he                                                               
felt that they  should be a line item for  each community. A hot-                                                               
button issue  with these grants  over the  years is that  all the                                                               
state's 50 percent  royalty goes to the  affected communities and                                                               
none of it goes to the Permanent Fund.                                                                                          
COMMISSIONER  NAVARRE  replied  that  some  of  it  goes  to  the                                                               
Permanent  Fund and  if money  is  left over  at the  end of  the                                                               
fiscal year, it goes to an education fund.                                                                                      
SENATOR  STEDMAN  asked what  would  happen  if more  development                                                               
COMMISSIONER NAVARRE  said he was  cautious to not  speculate too                                                               
much on  revenue from future  development. A lot of  factors play                                                               
into  projects that  aren't in  production  yet. Greater  Moose's                                                               
Tooth 1  (GMT-1) is  coming online  this fall  and will  start to                                                               
generate  royalties, but  either  the federal  government or  the                                                               
Department  of Revenue  (DOR) could  better  estimate what  those                                                               
impacts might be.                                                                                                               
SENATOR STEDMAN said it would be nice  if he could keep an eye on                                                               
the incentives the state will  potentially pay out to these areas                                                               
recognizing that a good portion of  these funds may not come back                                                               
into the  treasury to help offset  those costs. We don't  want to                                                               
end up with a lot going out and nothing coming in.                                                                              
CHAIR GIESSEL commented  that the whole the  rationale for having                                                               
this meeting is to raise awareness of this subject.                                                                             
COMMISSIONER  NAVARRE added  that significant  policy discussions                                                               
have to take place.                                                                                                             
SENATOR STEDMAN  said his understanding  is that  federal statute                                                               
42 ties the state's hands. Is that correct?                                                                                     
COMMISSIONER  NAVARRE replied  that  there  are some  limitations                                                               
directed by  federal statute, but  the state statute  limits some                                                               
options, also.                                                                                                                  
4:00:14 PM                                                                                                                    
CHAIR  GIESSEL noted  that Representative  Young made  a proposal                                                               
for the state to receive 47  percent of the royalty and the other                                                               
3  percent  would  go  to  Native  corporations.  She  asked  the                                                               
commissioner if not  knowing exactly how much money  is coming in                                                               
was partly a  factor of the fiscal years  being different between                                                               
the state and the federal government.                                                                                           
COMMISSIONER NAVARRE  replied that  it's also  the timing  of the                                                               
deposits going into the fund; if  they come in after August, they                                                               
go into  the next fiscal year.  When the funds are  actually paid                                                               
into the  fund is  hard to estimate,  especially for  lease sales                                                               
and when a field goes into production.                                                                                          
CHAIR GIESSEL  noted that five  years ago the  federal government                                                               
was short of cash and sequestered some mining royalties.                                                                        
CO-CHAIR  TARR said  the  original  intent of  this  fund was  to                                                               
mitigate resource development  to local community infrastructure,                                                               
but as  times goes on  and infrastructure is more  developed, she                                                               
wondered if  the impacts should be  assessed in the same  way and                                                               
if that would change what communities would qualify.                                                                            
COMMISSIONER NAVARRE  said that the  funding is fairly  broad and                                                               
subject to interpretation and some subjective analysis.                                                                         
4:03:23 PM                                                                                                                    
CHAIR GIESSEL thanked  him for his presentation  and welcomed the                                                               
Department of  Natural Resources (DNR)  to the table  saying they                                                               
are charged with maximizing the  state's resources in a patchwork                                                               
of  jurisdictions   and  that   the  resources   don't  recognize                                                               
boundaries and cross jurisdictions as in the NPR-A.                                                                             
FAITH   MARTINEAU,   Executive   Director,  Office   of   Project                                                               
Management   and  Permitting   (OPMP),   Department  of   Natural                                                               
Resources  (DNR), Anchorage,  Alaska,  said she  would cover  the                                                               
state's  role in  NPR-A's development,  the overlap  of resources                                                               
between state  and federally managed  lands, the  state's support                                                               
for specific  projects within NPR-A and  the proposed development                                                               
within  that  federally managed  area  of  the state.  She  would                                                               
provide  information from  the perspective  of the  OPMP and  the                                                               
state's  role through  its  Large  Project Coordination  Program,                                                               
their participation as a cooperating  agency and as regulator and                                                               
resource manager from the perspective  of the Division of Oil and                                                               
Gas.  She would  also touch  briefly  on state  support of  NPR-A                                                               
projects of  Greater Moose's Tooth 1  & 2 and the  newly proposed                                                               
Willow Master Development Plan by ConocoPhillips.                                                                               
MS.  MARTINEAU said  AS 38.05.020  (b)(9) provides  the authority                                                               
and duties  of the  DNR commissioner to  lead and  coordinate all                                                               
matters  related  to  the state's  review  and  authorization  of                                                               
resource development projects.                                                                                                  
4:06:17 PM                                                                                                                    
The   commissioner  has   delegated   that   authority  to   OPMP                                                               
specifically  and  they  implement  that  responsibility  through                                                               
their Large Project Coordination Program.  The model is unique to                                                               
the  State of  Alaska; it  requires an  "opt in"  by the  project                                                               
proponents and  it is  defined by  a Memorandum  of Understanding                                                               
(MOU) that is  developed between OPMP and  the project proponent.                                                               
It  includes the  scope of  work and  associated funding  so that                                                               
cost  recovery can  be  accomplished for  each  of the  different                                                               
regulating agencies.                                                                                                            
MS.  MARTINEAU  said this  particular  program  has a  number  of                                                               
benefits: it  provides a streamlined  regulatory process  for the                                                               
project  proponent  that  otherwise  is a  very  complicated  and                                                               
rigorous and provides a mechanism  to the state for cost recovery                                                               
for  support  services  that  are   comensurate  with  the  large                                                               
development  project.  It  also  ensures the  public  that  state                                                               
agencies are maximally involved in  the review and development of                                                               
a  proposed  large  project.  Their  existing  project  portfolio                                                               
represents both  extraction industries:  oil and  gas development                                                               
and  hardrock  mining;  however,  NPR-A  is  about  oil  and  gas                                                               
MS. MARTINEAU  said the MOUs  also establish funding  and support                                                               
for  their  participating as  a  cooperating  agency through  the                                                               
federally  required  National  Environmental  Policy  Act  (NEPA)                                                               
process,  which   frequently  involves  the  development   of  an                                                               
Environmental  Impact  Statement (EIS)  for  land  use plans  and                                                               
large  development projects.  OPMP serves  as the  lead in  these                                                               
types of efforts  and coordinates the state  agencies' review and                                                               
comment for both.                                                                                                               
The  Alaska National  Interest  Lands  Conservation Act  (ANILCA)                                                               
coordination team  and the federal  plan review team  provide the                                                               
necessary technical  support and  expertise in order  to evaluate                                                               
the information  contained within both  land use plans  and large                                                               
development proposals.                                                                                                          
4:09:34 PM                                                                                                                    
MS.  MARTINEAU said  the BLM  manages NPR-A  consistent with  the                                                               
existing  2012  NPR-A Integrated  Activities  Plan  for which  an                                                               
Environmental  Impact  Statement  (EIS)  was  developed  and  the                                                               
corresponding record  of decision,  which defines areas  that are                                                               
available for oil  and gas leasing as well as  areas that are not                                                               
available,  related  infrastructure,   timing  restrictions,  and                                                               
other   stipulations  and   mitigation   measures.  The   state's                                                               
participation  on  the  IAP  was  as  a  cooperating  agency  and                                                               
provided  comments  on  the  suite   of  alternatives  that  were                                                               
developed  and  analyzed  in EIS,  any  subsequent  modification,                                                               
further analysis,  or development  of a new  plan that  the state                                                               
would participate in as a cooperating agency.                                                                                   
MS.   MARTINEAU   said   OPMP   has  maintained   an   MOU   with                                                               
ConocoPhillips for development  of GMT 1 & 2  and participated as                                                               
a cooperating  agency for  development of an  EIS for  both. They                                                               
are currently helping ConocoPhillips  navigate the regulatory and                                                               
permitting   process  with   the  state   agencies  for   further                                                               
development of that unit. (slide 6)                                                                                             
The  Willow  Master  Development   Plan  describes  the  proposed                                                               
development that  would occur by ConocoPhillips  within NPR-A and                                                               
is very  similar to the  Alpine Satellite development,  for which                                                               
an EIS  was prepared. It contemplates  not just a gravel  pad and                                                               
associated  infrastructure, an  access road  and a  pipeline, but                                                               
also  takes an  overarching look  at what  a greater  development                                                               
might look  like in the  Willow area, and even  contemplates some                                                               
areas that ConocoPhillips is still in the process of creating.                                                                  
MS.  MARTINEAU said  BLM is  currently preparing  an EIS  for the                                                               
Willow Master  Development Plan (MDP)  and notice of  intent went                                                               
out in August. It is  currently conducting scoping and collecting                                                               
comments on what type of issues should be analyzed.                                                                             
4:11:26 PM                                                                                                                    
JIM  BECKHAM, Deputy  Director, Division  of Oil  and Gas  (DOG),                                                               
Department of Natural  Resources (DNR), said they  have a support                                                               
role  in NPR-A  development.  They have  to  get the  hydrocarbon                                                               
resources  to  TAPS; basically  anything  west  of the  Coleville                                                               
River  is  where  they  are  going  to  support  any  development                                                               
activity.  That means  supporting permits  for rights-of-way  for                                                               
access to  any projects to  the west most  likely in the  form of                                                               
permitting  pipelines  to  transport   oil  to  TAPS.  They  will                                                               
participate in  EIS drafting  as they did  in ANWR  and authorize                                                               
facilities sharing across units going west.                                                                                     
He said  the North  Slope has  limited processing  facilities and                                                               
the  department   tries  to  minimize  the   footprint  in  their                                                               
developments,  so  they  encourage facility  access  and  sharing                                                               
where  possible.  Hydrocarbon transportation  across  state-owned                                                               
and managed unit boundaries requires  authorizations by the state                                                               
per lease and unit. So,  the division reviews any application for                                                               
facility access  or sharing agreement  and considers  any factors                                                               
but principally  conservation of resources, prevention  of waste,                                                               
and protection of all parties, including the state.                                                                             
CO-CHAIR JOSEPHSON remembered  that one of the  original MDPs for                                                               
this area was done by Secretary  Salazar in the first term of the                                                               
Obama Administration and asked what  he knew about the undoing of                                                               
those   plans  and   the   redoing  of   them   in  a   different                                                               
MR. BECKHAM replied  that he is not qualified to  comment on that                                                               
and is not involved in any of it.                                                                                               
MS. MARTINEAU  added that  Representative Josephson  was probably                                                               
referring  to  the  Integrated   Activity  Plan  (IAP)  that  was                                                               
previously approved by Secretary  Salazar, and that typically EIS                                                               
modifications  vary from  plan to  plan.  Secretary's Order  3355                                                               
describes  new timelines  and  guidance over  how  long the  NEPA                                                               
process should take  and completion of an EIS from  the notice of                                                               
intent to the record of decision.                                                                                               
4:15:20 PM                                                                                                                    
CO-CHAIR TARR said that the North  Slope has some issues and that                                                               
commercial agreements give owner  operators an advantage over new                                                               
entrants  because some  infrastructure  costs  have already  been                                                               
paid  for.  Those  particular   commercial  terms  are  happening                                                               
outside  of any  involvement from  the  state. She  asked if  Mr.                                                               
Beckham was saying  that once some kind of  agreement is reached,                                                               
that that  paperwork gets forwarded  to the department,  but they                                                               
are mostly  checking off requirements against  the previous lease                                                               
sale but not weighing in or analyzing beyond that.                                                                              
MR. BECKHAM replied that was  correct; the department doesn't get                                                               
involved  in commercial  negotiations  between  two parties.  But                                                               
once they have settled on  those agreements, the department steps                                                               
in to make  sure that any agreement is first  and foremost in the                                                               
interests of  the state,  meaning no  wasted resources,  and that                                                               
all involved parties are protected equally.                                                                                     
SENATOR MEYER  remarked that  the fields  they are  talking about                                                               
today are 100 percent-owned by one company.                                                                                     
MR. BECKHAM replied that is true.                                                                                               
SENATOR MEYER  reasoned that the commercial  terms shouldn't hold                                                               
up the permitting process on those  two fields. He asked how many                                                               
federal and  state permits  a company  has to  get before  it can                                                               
bring a field into production.                                                                                                  
MR. BECKHAM  replied that it  takes quite  a few permits,  but he                                                               
would have to get the exact answer back to him.                                                                                 
SENATOR MEYER asked  him for suggestions on ways  to expedite the                                                               
permitting process while keeping it in place.                                                                                   
4:18:20 PM                                                                                                                    
MR.  BECKHAM said  he would  touch on  that in  a little  bit. He                                                               
provided  an  example of  a  shared  facility agreement  recently                                                               
approved by  the division,  for moving  GMT 1  production through                                                               
the  Alpine central  processing  facility in  the Colville  River                                                               
Unit (slide 9).                                                                                                                 
4:19:11 PM                                                                                                                    
Slide 10 depicted tax and royalties  by region on the North Slope                                                               
compiled by the  Department of Revenue (DOR) and  the next slides                                                               
provided USGS assessments  for the NPR-A. He  said the Department                                                               
of  Interior   Secretary's  Order  3355  deals   with  permitting                                                               
resource  overlap.   He  explained  that  some   discussions  are                                                               
happening  within state  and federal  government about  a program                                                               
that  allows  the state  to  take  over some  federal  permitting                                                               
responsibilities  if the  requirements are  similar for  each, so                                                               
they aren't  both run at  the same time.  Some of those  are well                                                               
completions,  well recompletions,  and  plugging and  abandoning.                                                               
The state has a robust  permitting process through the Alaska Oil                                                               
and Gas Conservation Commission  (Alaska Oil and Gas Conservation                                                               
Commission  (AOGCC)) and  might be  able to  streamline that,  as                                                               
MR. BECKHAM explained that SO 3355  was issued with the intent of                                                               
immediately  improving  the department's  National  Environmental                                                               
Policy Act Review  and limited EISs to 150 pages  to be completed                                                               
within 365 days (one year).  Some EISs were taking multiple years                                                               
and  limiting  it   to  one  year  makes  all   of  the  agencies                                                               
essentially streamline  their activities to coordinate  in a more                                                               
expeditious manner.                                                                                                             
4:22:10 PM                                                                                                                    
REPRESENTATIVE BIRCH asked if the  department has a handle on the                                                               
overall plugging and abandonment piece.                                                                                         
MR. BECKHAM asked if he was referring to the legacy wells.                                                                      
REPRESENTATIVE BIRCH replied  those and other wells  at some time                                                               
in the future.                                                                                                                  
MR. BECKHAM said  he didn't want to speak for  the AOGCC, but the                                                               
department  does  have a  good  handle  on the  requirements  for                                                               
plugging and abandoning wells.                                                                                                  
4:23:40 PM                                                                                                                    
CO-CHAIR JOSEPHSON went to page 7  noting that the division has a                                                               
role  in  permitting rights  of  way  and the  transportation  of                                                               
hydrocarbons and  asked if  it's safe to  say that  those permits                                                               
are  pro forma  and asked  given that  its federal  land, if  the                                                               
state could do otherwise than just grant the permits.                                                                           
MR. BECKHAM  replied the department  doesn't have input  into the                                                               
permitting on NPR-A, but they have  a great deal to say about how                                                               
crossing  rivers is  done responsibly  and safely.  And while  he                                                               
likes  to say  their job  is to  get to  yes, because  without it                                                               
there is no transportation or  production, it is not an automatic                                                               
yes. All the impacts and  opportunities are weighed, and they try                                                               
to come  up with the  best possible solution  and get to  yes, as                                                               
SENATOR  MICCICHE said  slide 8  talks  about authorizations  for                                                               
facility  access,  specifically  to  processing  facilities,  and                                                               
asked  what  factors  are  considered  and  to  what  degree  the                                                               
department is involved in trying to work out those issues.                                                                      
4:25:54 PM                                                                                                                    
MR.  BECKHAM  answered   that  most  of  the   issues  deal  with                                                               
protection of  working interests  owners' rights and  the state's                                                               
rights  after  the  commercial agreement  has  been  made,  which                                                               
includes  whether or  not  each working  interest  owner will  be                                                               
afforded  the ability  to have  the benefits  of the  facility if                                                               
another  producer is  using it,  and  the benefits  to the  state                                                               
relating  to  royalty  oil  that  comes from  that  unit  and  is                                                               
processed in that facility.                                                                                                     
SENATOR MICCICHE asked  if the department is involved  at all, is                                                               
it  an  entity-to-entity  negotiation,  or  does  the  department                                                               
become more  involved if a  development would be  very beneficial                                                               
to the state rather than a marginal development.                                                                                
MR. BECKHAM replied  that the department doesn't  get involved in                                                               
commercial negotiations  between unit  operators whether it  is a                                                               
big or a little project.                                                                                                        
4:27:15 PM                                                                                                                    
CHAIR GIESSEL  thanked the presenters and  invited ConocoPhillips                                                               
to  provide   its  presentation.   She  said   ConocoPhillips  is                                                               
developing   the   Willow   prospect,   the   subject   of   this                                                               
SCOTT    JEPSEN,   Vice    President,   External    Affairs   and                                                               
Transportation,  ConocoPhillips Alaska,  Anchorage, Alaska,  said                                                               
he would talk about ConocoPhillips'  robust production outlook in                                                               
the NPR-A and across the North  Slope. He would also review their                                                               
exploration programs  and talk  about what he  considers to  be a                                                               
renaissance of investment  on the North Slope  and would conclude                                                               
with   some  higher-level   observations  and   challenges  going                                                               
Slide 3 delineated  North Slope state and federal  units. He said                                                               
ConocoPhillips has a  36 percent working interest  in the Prudhoe                                                               
Bay Unit that  is operated by BP. The Kuparuk  River Unit is west                                                               
of  that and  ConocoPhillips's  working interest  is 55  percent,                                                               
however  they have  recently agreed  to acquire  BP's 39  percent                                                               
interest  and  at  closing,  ConocoPhillips  will  own  about  95                                                               
percent. The  NPR-A boundary is  further west  and ConocoPhillips                                                               
has  an interest  in the  Colville  River Unit  where the  Alpine                                                               
field  is located.  They  have two  developments  in the  Greater                                                               
Moose's Tooth  Unit and the  Willow prospect located in  the Bear                                                               
Tooth Unit.                                                                                                                     
MR. JEPSEN  said that earlier  this year  ConocoPhillips acquired                                                               
Anadarko's working  interest in the  Colville river Unit  as well                                                               
as  all  the   jointly  held  acreage  in  NPR-A,   so  now  they                                                               
essentially have about 100 percent  working interest in the NPR-A                                                               
and the Colville River Unit.                                                                                                    
Back in 2013, ConocoPhillips had  an uncompetitive tax structure,                                                               
a  high cost  of supply  (which meant  they were  investing their                                                               
monies  elsewhere), a  declining  production  profile in  Alaska,                                                               
limited investment and a focus on Lower 48 unconventionals.                                                                     
4:32:15 PM                                                                                                                    
Today  their   profile,  even  without  their   BP  and  Anadarko                                                               
acquisitions,  has  changed  substantially.   In  2028  they  are                                                               
predicting having  100,000 barrels  a day higher  production than                                                               
today. What  changed? One of the  things that changed is  that SB
21  improved their  fiscal framework,  technological advancements                                                               
and  innovations helped  target new  and bypassed  resources, and                                                               
cost of supply  was reduced; they made a  comprehensive effort to                                                               
capture  value  from  core  fields  and  infrastructure  and  the                                                               
renewed focus on exploration has yielded early success.                                                                         
MR.  JEPSEN said  slide  6 used  the  categories of  exploration,                                                               
project  inventory, development  programs, lowering  base decline                                                               
and  identifying   opportunities  to   sustain  cost   of  supply                                                               
reductions  to illustrate  the  drivers.  The most  technological                                                               
improvement came in the area  of drilling that made a significant                                                               
difference in terms of what and  how much can be developed. Slide                                                               
7 mapped their North Slope pipeline projects.                                                                                   
4:37:04 PM                                                                                                                    
He said they  see big upside in exploration (slide  7), but a lot                                                               
of work still needs to be  done to better understand the ultimate                                                               
production  profile, but  they have  found some  very substantial                                                               
resources.  GMT 1  will  have  first oil  in  this year's  fourth                                                               
quarter; their estimation  is around 30,000 barrels a  day with a                                                               
value of $1 billion. There were  about 700 workers during the two                                                               
construction seasons.                                                                                                           
GMT 2 is similar to GMT 1 in  scope except that it will have more                                                               
wells,  which means  it  will be  more  expensive. They  estimate                                                               
about 38,000 barrels a day at peak with a value of $1.5 billion.                                                                
MR.  JEPSEN  said that  ConocoPhillips  is  using their  extended                                                               
reach drilling rig  in the Fiord West accumulation,  an area they                                                               
couldn't figure  out a  way to  develop economically  before. But                                                               
with this  rig they can  now drill from  the existing CD  2 drill                                                               
site. Permitting  will always be  a challenge because  Fiord West                                                               
is on the coastline with its sensitive wetlands.                                                                                
4:39:07 PM                                                                                                                    
Last,  the  Willow Discovery  in  the  Bear  Tooth Unit  will  be                                                               
developed much like the Alpine  Field. They estimate thousands of                                                               
jobs during construction and several  hundred permanent jobs when                                                               
it comes on stream.                                                                                                             
CO-CHAIR JOSEPHSON  asked if the  legislature should  expect this                                                               
new production to supplant existing production or add to it.                                                                    
MR. JEPSEN answered that it will be additive.                                                                                   
4:39:57 PM                                                                                                                    
MR. JEPSEN  explained that  they drilled  three wells  inside the                                                               
Willow  Discovery in  the north  and  West Willow  1, a  separate                                                               
accumulation, and  have positive  results in  all of  them (slide                                                               
8). They have  had three different well tests, about  37 miles of                                                               
ice roads and five different ice pads.                                                                                          
ConocoPhillips also  did some exploration  on Stoney Hill  in the                                                               
Narwhal Trend  down to the south,  which is a little  bit further                                                               
from  infrastructure. The  two different  tests were  successful.                                                               
They also drilled and tested the  Putu well, which is about three                                                               
miles from the village of Nuiqsut.  Now they are trying to figure                                                               
out how best  to develop these. They will  all require additional                                                               
appraisal and analysis.  Putu has an advantage in  the sense that                                                               
it  is  within   the  Colville  River  Unit  and   is  closer  to                                                               
facilities; and  the base plan  there is to bring  the production                                                               
back into  the Alpine facilities.  They estimate that 100  to 315                                                               
billion barrels  of resource was  discovered in  this exploration                                                               
4:43:28 PM                                                                                                                    
When ConocoPhillips  first announced Willow they  estimated about                                                               
300  million barrels  of  resource and  now  with the  additional                                                               
information they  are estimating 400-750 million  barrels of oil.                                                               
Their   compressed   seismic    imaging   (CSI)   technology   is                                                               
proprietary; it allows  them to shoot four times as  much for the                                                               
same dollar amount in the same  timeframe and get a better image,                                                               
a very helpful gamechanger for them.                                                                                            
West Willow  1 will be tied  back into facilities at  Willow, but                                                               
additional  testing has  to be  done to  understand it.  Slide 11                                                               
laid out ConocoPhillips's development  plans. They are hoping for                                                               
a record  of decision  on the  GMT 2 EIS  in October,  which will                                                               
position them  for a final  investment decision (FID)  later this                                                               
year. Assuming  that goes forward,  they would build a  road from                                                               
GMT  2 over  to the  Willow Central  Facilities, so  it would  be                                                               
connected by road back to the Alpine Central Facilities.                                                                        
They are planning on using a  sea lift, because that is typically                                                               
the way  to keep  development on the  North Slope  efficient. The                                                               
sea  lift would  land the  modules on  a temporary  gravel island                                                               
north of  Atiguru Point and in  the winter time an  ice road will                                                               
be built down to various locations indicated on the map.                                                                        
MR. JEPSEN said  the main plan for recovery is  water flood and a                                                               
enriched gas mixture  process. The plan is to  take seawater from                                                               
the  Kuparuk   sea  water  treatment  plant   with  a  connection                                                               
happening somewhere down around  Central Production Facility 2 in                                                               
the  southwest corner  of the  Kuparuk River  field. And  build a                                                               
pipeline over to Willow. They  currently bring sea water from STP                                                               
(Alpine Field),  but more  pipeline capacity  is needed  to bring                                                               
enough to do the waterflood for Willow.                                                                                         
They will  use a portion  of indigenous natural gas  liquids from                                                               
production  at Willow  alternately  with the  enriched  gas as  a                                                               
miscible   injective  to   increase  production.   This  is   the                                                               
technology they use  in all of their core fields  of Prudhoe Bay,                                                               
Kuparuk, and Alpine.                                                                                                            
MR. JEPSEN pointed  out that the farther west they  go the harder                                                               
it is  to find gravel,  but whatever  they find will  lower costs                                                               
for development at Willow. He  summarized that over the next four                                                               
to five years,  ConocoPhillips will work on  trying to understand                                                               
the  right size  for this  facility.  They talk  about a  nominal                                                               
100,000  barrels  a day,  but  exploration  and delineation  will                                                               
reveal more detail. They expect  to spend $2-3 billion within 4-5                                                               
years to  get first  production on stream  and then  another $2-3                                                               
billion to fully  develop the field. They expect FID  in 2021 and                                                               
first oil in the 2024-25 timeframe.                                                                                             
Slide 13 graphed  the Willow EIS schedule for  getting the record                                                               
of  decision. The  process has  started; the  scoping period  has                                                               
been extended  to September  20 and  the schedule  is to  have it                                                               
done in a year (August 2019).                                                                                                   
MR. JEPSEN  said that concludes some  of the newer term  stuff up                                                               
to Willow.   Now he would talk about  additional exploration. For                                                               
late 2018/19,  6-8 wells are planned  with 9 tests in  a two-week                                                               
program.  They are  doing an  exploration prospect  that will  be                                                               
drilled  off of  an existing  Kuparuk  drill site  in the  fourth                                                               
quarter this  year. The Putu  play will be  drilled off the  CD 4                                                               
site. Hopefully, both will be done by the end of the year.                                                                      
For the  exploration season Mr. Jepsen  said ConocoPhillips wants                                                               
to focus  on Willow and  will be  doing some horizontal  wells up                                                               
there to better understand what  productivity might look like and                                                               
the type  of wells that  could be used  to develop it.  They will                                                               
drill some vertical wells, test  communications between wells and                                                               
do additional  delineation, as well.   The  well will be  to test                                                               
formations   they  have   found   to   better  understand   their                                                               
feasibility. How much  they get done depends on how  fast it goes                                                               
and things like weather.                                                                                                        
4:49:34 PM                                                                                                                    
The other  questions is what  ConocoPhillips is going to  do with                                                               
rest of  the "blobs" up  there. A  "blob" is an  oil accumulation                                                               
that geologists  and geophysicists put  on a map.  Orangish blobs                                                               
are exploration  prospects. To date  they have only  tested about                                                               
75  percent of  their prospect  inventory  and so  their goal  in                                                               
2029-plus  timeframe  is  to  focus   on  testing  the  remaining                                                               
accumulations.  Mr.   Jepsen  said   it  is  "fairly   rare"  for                                                               
ConocoPhillips to  publicly share  what all of  their exploration                                                               
prospects look like, but they have a  lot of acreage and a lot of                                                               
upside and want to show that.                                                                                                   
4:50:30 PM                                                                                                                    
MR. JEPSEN said he next wanted  to share some information that is                                                               
very  rarely pulled  together on  what he  calls the  North Slope                                                               
Renaissance  for investment.  ConocoPhillips is  doing things  up                                                               
there, but  other operators  are, too.  All the  various projects                                                               
add up to  around $13 billion in capital over  the last 7-8 years                                                               
and hundreds of  thousands of new barrels of  oil production have                                                               
come online.  To give them some  idea of the scale  of investment                                                               
that  is  going on  on  the  North  Slope,  he said  these  other                                                               
projects include:                                                                                                               
- The Liberty  Project on the eastern North Slope  by Hilcorp and                                                               
BP - 55,000 barrels a day and a $1 billion in investment.                                                                       
-Oil  Search/Repsol/Armstrong at  the Pikka  Prospect talk  about                                                               
rates as  high as 100,000  barrels a  day and their  current base                                                               
plan is to  build their own separate  production facilities which                                                               
would be  in the same investment  arena he talked about  for West                                                               
Willow" $3-4 billion.                                                                                                           
-ENI is  doing exploration  and picked up  some acreage  south of                                                               
the Prudhoe Bay fields.                                                                                                         
-Brooks Range will hopefully have production this year.                                                                         
This  investment  is one  of  the  bigger untold  stories.  These                                                               
projects  aren't  just prospects  on  paper;  these are  actually                                                               
prospects that  people are fishing through  the permitting system                                                               
and have  a high  probability of going  forward. The  core fields                                                               
are Kuparuk,  Prudhoe Bay,  and Alpine; they  are the  hearts and                                                               
lungs of  the North Slope and  must be kept healthy.  The farther                                                               
one gets from them the farther away they move from making sense.                                                                
4:53:15 PM                                                                                                                    
Slide  16,   the  last  of  the   deck,  showed  ConocoPhillips's                                                               
production  profile.  Five  years   ago,  they  were  looking  at                                                               
potentially 100,000 barrels  of oil to where they  are today, and                                                               
they have discovered  500 million barrels of oil  since 2016 with                                                               
75  percent   of  their  prospects  being   already  tested.  The                                                               
transformation has been  driven by technology, tax  reform, and a                                                               
focus on reducing costs.                                                                                                        
4:53:50 PM                                                                                                                    
In order to  stay competitive, ConocoPhillips Alaska  has to keep                                                               
its fiscal  plan in  place, he  said again. If  any costs  go up,                                                               
that  makes them  less competitive.  If the  fish habitat  ballot                                                               
measure  passes,  that  will  be a  "big  drag"  on  development,                                                               
because it lays  out a lot of mitigation  and creates uncertainty                                                               
as to  how fish habitat permits  will be managed. He  stated that                                                               
the North Slope  already follows a tremendous  amount of science-                                                               
based regulations and they don't  have an issue with fish habitat                                                               
4:55:04 PM                                                                                                                    
SENATOR  MEYER asked  if  Alaska  can assume,  since  it has  the                                                               
highest  unemployment rate  in the  nation, that  jobs will  grow                                                               
correspondingly  with  ConocoPhillips's investments  outlined  on                                                               
slide 15.                                                                                                                       
MR.  JEPSEN  replied that  he  can't  speak to  Alaska's  overall                                                               
employment, but  ConocoPhillips adds  about one job  per economic                                                               
multiplier factor  of 20 and  projects like Willow,  Liberty, and                                                               
Pikka  are  going  to  add   permanent  jobs.  So,  there  should                                                               
definitely be job growth in the oil industry.                                                                                   
4:56:18 PM                                                                                                                    
CO-CHAIR TARR said she has  tempered optimism, because Caelus and                                                               
Hilcorp, for instance, have stalled  because of unresolved issues                                                               
related to tax credits, and  the Mustang development was supposed                                                               
to be online  prior to the price  crash but is now  on hold until                                                               
the  price  recovers.  However,  the  Oil-Search/Repsol/Armstrong                                                               
project  is a  bright spot  because of  their collaboration.  She                                                               
sees one strong company that  looks like it has several potential                                                               
projects  over the  next several  years but  a lot  less optimism                                                               
around  some  of  the  other   activities  relating  to  the  tax                                                               
structure.  Previously,  the  credits   were  a  way  to  attract                                                               
explorers and  new entrants and that  has now gone away,  but not                                                               
in  a way  that  was  resolved and  those  unresolved tax  credit                                                               
issues call into  question just how long those  companies will be                                                               
in  Alaska. So,  Alaska could  end up  in the  same place  it was                                                               
before with a few strong companies on the North Slope.                                                                          
MR. JEPSEN responded that what the  state did this year to try to                                                               
resolve the tax  credit problem will help some  of the situations                                                               
she  talked  about, but  Oil-Search  just  spent $50  million  to                                                               
acquire 50  percent of Armstrong's  interest, so they  are pretty                                                               
serious. He hadn't heard BP and  Hilcorp say too much about being                                                               
dependent on tax  credits to develop the  Liberty prospect. Those                                                               
are  the big  hitters.  With regards  to  Caelus, something  will                                                               
happen with that, although he understands the uncertainty.                                                                      
Companies are  investing a lot of  money right now, he  said, and                                                               
they  wouldn't be  doing that  if they  didn't have  a reasonable                                                               
expectation that they can get  through the permitting process and                                                               
actively move  towards development.  But, he said,  "Alaska takes                                                               
deep pockets." ConocoPhillips  is exploring in the  NPR-A, but it                                                               
can be 10  years before they make a discovery  and have Willow on                                                               
stream; they have  spent $3 billion-plus on GMT  1&2 drill sites,                                                               
and once  they make a decision  to move forward, they  will spend                                                               
$400-600 million  more before  getting first  oil. So,  he thinks                                                               
it's unrealistic to expect small  operators to come up here. They                                                               
should  encourage  larger  companies, because  that's  where  the                                                               
staying power  resides, really. He  added that  ConocoPhillips is                                                               
working closely  with Brooks Range  to try  to help them  come on                                                               
stream this year.                                                                                                               
CO-CHAIR  TARR  said at  the  beginning  of this  calendar  year,                                                               
people were very cautious about  price saying that it wouldn't go                                                               
above $60 for  the foreseeable future, and for months  now it has                                                               
been  above $70  and even  up to  $80, and  she asked  what price                                                               
outlook ConocoPhillips is modeling around.                                                                                      
5:01:25 PM                                                                                                                    
MR. JEPSEN replied that they  have taken a different approach and                                                               
instead of  getting hung up  on exactly  what the price  will be,                                                               
they model around what the price  could fall to. Their goal is to                                                               
have their  projects make economic  sense with cost of  supply at                                                               
$40/barrel.  They  just  haven't been  successful  at  predicting                                                               
price and want to be able to survive another price crash.                                                                       
5:02:54 PM                                                                                                                    
REPRESENTATIVE  BIRCH commended  him for  a "great  briefing" and                                                               
his  candor in  setting  out ConocoPhillips'  targets. It's  very                                                               
encouraging to believe that there  is another 30-40 years of life                                                               
in TAPS based  on their prospects. He asked how  the Brooks Range                                                               
project   is  functioning   in  terms   of  integration   between                                                               
MR. JEPSEN responded that he  doesn't speak for Brooks Range, but                                                               
they  are looking  at bringing  in a  facility that  will process                                                               
their crude for  the first stage of production. So,  they will be                                                               
shipping pipeline quality crude through the current pipeline.                                                                   
SENATOR MICCICHE said he feels  encouraged by his projections and                                                               
asked if  this level of  activity is relatively  unprecedented or                                                               
if it is comparable to the Prudhoe Bay/Kuparuk heydays.                                                                         
MR.  JEPSEN replied  that this  level  of activity  on the  North                                                               
Slope hasn't been seen in decades.                                                                                              
SENATOR  STEDMAN  remarked  that  one  must  be  fearless  to  be                                                               
external affairs  vice president for  over a decade and  asked if                                                               
it's true he had hand-fed a brown bear.                                                                                         
MR.  JEPSEN answered  that it's  true he  was licked  by a  brown                                                               
5:06:21 PM                                                                                                                    
CHAIR GIESSEL, finding no further questions, thanked everyone                                                                   
for coming, and adjourned the joint meeting of the Senate and                                                                   
House Resources Committees at 5:06 p.m.