Legislature(2019 - 2020)Anch LIO Lg Conf Rm
05/08/2020 01:00 PM House RESOURCES
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| Audio | Topic |
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| Start | |
| Presentation: Impact of Covid-19 to the Oil & Gas Industry | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
Anchorage, Alaska
May 8, 2020
1:08 p.m.
MEMBERS PRESENT
Representative John Lincoln, Co-Chair (via teleconference)
Representative Geran Tarr, Co-Chair
Representative Grier Hopkins, Vice Chair (via teleconference)
Representative Sara Hannan (via teleconference)
Representative Chris Tuck (via teleconference)
Representative Ivy Spohnholz
Representative Dave Talerico (via teleconference)
Representative George Rauscher (via teleconference)
Representative Sara Rasmussen (via teleconference)
MEMBERS ABSENT
All members present
OTHER MEMBERS PRESENT
Representative DeLena Johnson (via teleconference)
Representative Bart LeBon (via teleconference)
Representative Dan Ortiz (via teleconference)
COMMITTEE CALENDAR
PRESENTATION: IMPACT OF COVID-19 TO THE OIL & GAS INDUSTRY
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
KARA MORIARTY, President/Chief Executive Officer
Alaska Oil and Gas Association
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation by the
Alaska Oil and Gas Association dated 5/8/20.
DAMIAN BILBAO, Vice President, Commercial Ventures
BP Alaska
Anchorage, Alaska
POSITION STATEMENT: Presented current trends in the global oil
market and provided an update on Hilcorp's acquisition of BP
Alaska.
SCOTT JEPSEN, Vice President, External Affairs & Transportation
ConocoPhillips Alaska
Anchorage, Alaska
POSITION STATEMENT: Presented an overview of ConocoPhillips'
response to COVID-19.
ERIK KESKULA, Vice President, North Slope Operations
ConocoPhillips Alaska
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the presentation
by ConocoPhillips Alaska.
DAVID WILKINS, Senior Vice President
Hilcorp Alaska
Anchorage, Alaska
POSITION STATEMENT: Provided an overview of Hilcorp's response
to COVID-19.
BRUCE DINGEMAN, Executive Vice President
Oil Search Limited
President, Oil Search Alaska
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation by Oil
Search Alaska dated 5/8/20.
BETSY HAINES, Senior Vice President, Operations & Maintenance
Alyeska Pipeline Service Company
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation by the
Alyeska Pipeline Service Company dated 5/8/20.
REBECCA LOGAN, Chief Executive Officer
Alaska Support Industry Alliance
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation,
entitled "Impacts of Covid-19 on the Support Industry," dated
5/8/20.
CORRI FEIGE, Commissioner
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation,
entitled "COVID-19/Low Oil Prices: An Evolving Outlook for
Production," dated 5/8/20.
PASCAL UMEKWE, PhD, Commercial Analyst
Division of Oil and Gas Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Co-provided a PowerPoint presentation,
entitled "COVID-19/Low Oil Prices: An Evolving Outlook for
Production," dated 5/8/20.
TOM STOKES, Director
Division of Oil and Gas
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Co-provided a PowerPoint presentation,
entitled "COVID-19/Low Oil Prices: An Evolving Outlook for
Production," dated 5/8/20.
DAN STICKEL, Chief Economist
Tax Division
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Offered comments during the presentation on
the impact of COVID-19 to the oil and gas industry.
ACTION NARRATIVE
1:08:06 PM
CO-CHAIR GERAN TARR called the House Resources Standing
Committee meeting to order at 1:04 p.m. Representatives Rauscher
(via teleconference), Talerico (via teleconference), Rasmussen
(via teleconference), Hannan (via teleconference), Tuck (via
teleconference), Hopkins (via teleconference), Lincoln (via
teleconference) and Tarr were present at the call to order.
Representatives Spohnholz arrived as the meeting was in
progress.
^PRESENTATION: Impact of COVID-19 to the Oil & Gas Industry
PRESENTATION: Impact of COVID-19 to the Oil & Gas Industry
1:09:03 PM
CO-CHAIR TARR announced that the only order of business would be
a presentation on the impact of COVID-19 to the Oil and Gas
industry.
1:09:12 PM
KARA MORIARTY, President/Chief Executive Officer, Alaska Oil and
Gas Association (AOGA), provided a PowerPoint presentation on
behalf of AOGA. She directed attention to slide 2, which
depicts AOGA membership organizations, adding that AOGA is a
professional trade association "whose mission is to foster the
long-term viability of the oil and gas industry for the benefit
of all Alaskans." She informed the committee that AOGA
represents the majority of companies that are exploring,
developing, producing, refining, and marketing oil and gas on
the North Slope (NS), Cook Inlet, and in the offshore areas of
Alaska. Ms. Moriarty directed attention to slide 3 and stated
that while critical infrastructure designations by the U.S.
Department of Homeland Security, the state of Alaska, and local
jurisdictions have been crucial to the continued production,
transportation, and refining of oil and gas in Alaska,
operations have nonetheless been impacted as companies work to
minimize the risk of COVID-19.
MS. MORIARTY illustrated AOGAs key response priorities that
have remained throughout the pandemic: safety of employees,
contractors, and Alaskan communities; health and safety measures
in accordance with guidance from WHO, CDC, and state officials;
and safe and operational facilities to deliver the energy
resources that Alaskans depend on. She detailed several
examples of the steps AOGA members have taken to keep personnel
safe, facilities operational, and compliance with the governors
health mandates, including: regular communication to ensure a
unified industry response; closed in-town offices and required
remote work; limited the number of onsite company personnel at
facilities; requested state and federal regulatory agencies to
utilize teleconference or virtual communications; instituted
medical screenings for commuter flights and other facility
checkpoints; required cloth face coverings on all aircraft and
while working on the NS; implemented rigorous social distancing
protocols; and modified schedules to reduce change-outs and
allow for quarantine.
1:15:09 PM
CO-CHAIR TARR questioned whether any of the data gathered from
AGOAs medical screenings is shared with the Department of
Health and Social Services (DHSS).
1:15:39 PM
MS. MORIARTY said she was unsure and offered to follow up with
the requested information.
1:16:31 PM
MS. MORIARTY continued to slide 4, which listed the two industry
COVID-19 cases in Alaska to date, including one BP employee on
the NS and one contractor from Deadhorse. Slide 5 illustrated
the oil and gas industrys effort to support Alaskans during
this difficult time; for example, several companies donated
surplus personal protective equipment (PPE) to local hospitals
and BP donated jet fuel to FedEx and Alaska Airlines for
critical flights. She directed attention to slides 6 and 7,
which addressed several ways the industry has been significantly
impacted by COVID-19. Firstly, there has been a drastic drop in
demand for products made by petroleum; secondly, the prices of
oil have fallen to their lowest levels in nearly 20 years.
1:21:45 PM
MS. MORIATY noted that in March 2020, the nations oil and gas
industry saw a 9 percent reduction in drilling and refining
jobs. She said the number increases when industry related
construction, manufacturing, and shipping jobs are included,
which account for another 15,000 positions. She continued to
slide 8 and explained that a more competitive landscape is
expected to emerge from the effects of the pandemic. The long-
term outlooks predict that the world will need oil and gas well
into the future. Slide 9 illustrates that Alaskas resource
potential warrants a part in meeting that global demand. Ms.
Moriarty indicated that despite current low demand and
plummeting prices, Alaska remains a potential super basin due to
new discoveries and potential projects that could recover 14
billion barrels at minimum. Nonetheless, when global demand
returns, Alaska will not be the only oil and gas province that
will be ready to deliver. She suggested that a new level of
competition will arise between oil and gas regions to attract
company spending, and Alaska will need to compete.
1:26:56 PM
REPRESENTATIVE RAUSCHER asked why the charts on slide 8 do not
depict a drastic decline in oil production in 2020.
1:27:32 PM
MS. MORIARTY explained that the charts on slide 8 were created
prior to the pandemic. She added that the prevailing
expectation is that demand will return to normal levels as
countries start to reopen their economies and utilize petroleum
products.
1:28:48 PM
MS. MORIARTY, resuming her presentation on slide 10, addressed
the proposed oil tax ballot initiative. She opined that the
ballot measure would be a major set back if it were to pass,
adding that Alaskas entire economy would struggle to recover.
She concluded that despite the short-term impacts of low oil
prices and COVID-19, AOGA remains committed to Alaska.
1:30:04 PM
REPRESENTATIVE TUCK asked if the 150-300 percent tax increase on
the oil and gas industry, as suggested on slide 10, is total
state payments or production tax.
1:30:20 PM
MS. MORIARTY stated that the oil tax ballot measure only impacts
severance tax. She further noted that at current prices its
still about 150 percent increase over current production tax.
1:30:41 PM
REPRESENTATIVE TUCK inquired as to the overall tax increase.
1:30:46 PM
MS. MORIARTY surmised that it would be the same, as the ballot
initiative only affects production tax.
1:31:31 PM
CO-CHAIR TARR questioned whether laid-off employees are
searching for employment elsewhere or if their enhanced
unemployment benefits through the CARES Act offer them enough
wage replacement to wait this out.
1:32:47 PM
MS. MORIARTY surmised that its too soon to tell. She
speculated that even with the additional CARES Act funding,
unemployment benefits would not compare to wages from the higher
paying jobs in Alaska, such as on the North Slope. She
suggested directing that question to the Department of Labor &
Workforce Development (DLWD).
1:33:49 PM
CO-CHAIR TARR acknowledged that Alaskas maximum benefit is $370
per week, which replaces annual wages of approximately $35,000.
She further noted that the CARES Act funding adds an additional
$600 per week, which is an equivalent of $15 per hour. She
expressed a desire to figure out who has been impacted, as well
as who might leave Alaska once restrictions are lifted and how
that could impact the states economy long-term.
1:34:55 PM
REPRESENTATIVE SPOHNHOLZ recalled Professor Guetabbis testimony
in the House Labor and Commerce committee about the wage
replacement value, including the federal CARES Act funds. She
reported that benefits tap out at $50,000 per year; therefore,
unemployment benefits will not fully replace the income of those
who make more than $50,000. She speculated that oil industry
jobs are amongst the highest paying jobs in the state of Alaska
with employees making an average of $90,0000 per year;
consequently, its in their best interest to keep working
because the wage replacement will not fully replace the income.
Furthermore, the additional federal benefit of $600 per week
will discontinue in July 2020.
1:37:21 PM
DAMIAN BILBAO, Vice President, Commercial Ventures, BP Alaska,
informed the committee that he would be providing a brief update
on the global oil market and what it means for Alaska, as well
as an update on the BP/Hilcorp transaction. Mr. Bilbao stated
that oil continues to provide the largest source of oil for the
planet, with renewable energy serving as the fastest-growing
area in recent years. In 2019, the world produced and consumed
an average of 94 million barrels of oil every day. The forecast
for 2020 predicted that number would slightly increase, per
usual; however, according to the International Energy Agency
(IEGA), 2020 supply levels remained consistent as of April,
while demand dropped by almost 30 million barrels per day. He
said the difference in supply and demand is a culmination of the
slowing economy, idle factories, and limited transportation. He
further noted that the U.S. demand for oil by refineries dropped
to its lowest level since the early 1990s. Furthermore,
inventory levels increased dramatically the U.S. inventories
alone rose to 500 million barrels of oil. Without sufficient
demand the oil was not being consumed, leading a crash in oil
prices and a significant increase in cost of inventory. He
pointed out that Alaska oil was not exempt from this. Due to
the states high cost and distance from market, the resulting
price at the NS field is lower and more financially challenging.
He further noted that that the decline in Alaska production
during the early 2000s led several West Coast refineries to
invest in preparation for other sources of oil. He reflected on
the importance of maintaining NS production flat or growing
and projecting confidence to refineries in the continued
availability of NS oil resources for decades to come.
1:44:02 PM
CO-CHAIR TARR asked if Mr. Bibao, as an international operator,
participates in discussions regarding other jurisdictions.
MR. BILBARO said his focus is on Alaska.
1:45:01 PM
MR. BILBAO turned his attention to the BP/Hilcorp transaction.
He related that excellent preparations and progress has been
made. He addressed the effect of uncertainty in the oil and gas
industry, adding that the drop in oil price in addition to the
health response to COVID-19 and BPs ongoing business
transition, has been challenging for the workforce. He said
that both BP and Hilcorp senior management have a desire to
reduce the uncertainty and potential distractions faced by the
workforce that may lead to some unfortunate events in the North
Slope. As a result, BP and Hilcorp agreed to make several
changes to the purchase and sale agreement (PSA) that covers the
sale of BP Alaska. Firstly, the PSA was restructured to work
better at todays oil price. Under the revised agreement, the
total consideration for the sale remains unchanged at $5.6
billion; however, the structure of the consideration and the
phasing of the payments has been modified to include lower
completion payments in 2020 and interest bearing vendor
financing a commonly used tool for the lending of money by a
seller (BP) to a buyer (Hilcorp) who then uses the money to pay
for a portion of the transaction. Secondly, the option was
created to bifurcate the close of the upstream from the
midstream sale, as leadership recognized that uncertainty on the
close date is a potential distraction during difficult times.
The third change to the PSA is post-close resourcing to ensure
that Hilcorp is positioned for success on day one. After close,
up to 50 BP employees that are currently scheduled for early
retirement beginning June 30, 2020, will continue to support
Prudhoe Bay operations for 90 days. Mr. Bilbao turned attention
to progress made on the regulatory front. He reported that
after discussions with several state and federal agencies, BP is
optimistic that the upstream sale will be ready to close on June
30, 2020. In support of the sale of BPs midstream assets, BP
and Hilcorp submitted nearly 9700 pages in response to the
Regulatory Commission of Alaskas (RCAs) request in March for
additional information. The BP Hilcorp response has been made
available to the Department of Natural Resources (DNR) as part
of the departments review of the sale. He stated that the RCA
submission is as comprehensive and complete as we could make
it. He further explained that most of the questions and
responses focus specifically on sensitive information, with 75
percent of the confidential material falling into three
categories: (1) Risk assessment; (2) Studies on dismantlement,
removal, and restoration (DR&R); (3) Minutes of meetings between
Taps owners and Alyeska leadership. He noted that risk
assessment and some of the DR&R studies are protected as
confidential energy infrastructure information because of the
potential for misuse in preparation for a terrorist attack.
Another 17 percent of the confidential documents are insurance
policies, which contain competitively sensitive information
about the Alaska pipelines and many of Hilcorps businesses both
inside and outside of Alaska, and 8 percent of the remaining
confidential documents include operating agreements for
pipelines and the PSA terms.
1:51:13 PM
MR. BILBAO reiterated that the terms of the PSA were ruled
confidential by the RCA. The RCA and DNR, he said, are
entrusted with decisions related to the transfer of assets [from
BP to Hilcorp] and have full access to the entire response
submitted on May 4, 2020. In closing, he said that BP is making
every effort to treat people with respect and support during
these uncertain times. He announced that BP donated 3 million
gallons of jet fuel to support the COVID-19 response, of which 1
million is going to Alaska Airlines to aid them in supplying
remote communities in Alaska. He also shared that BP launched a
digital response hub with Research Data to meet the states 14-
day quarantine requirements. The platform records health data
in real time, eliminates additional contact with health
professionals, and immediately flags potential warning signs, he
said. He further noted that BP pledged to donate the online
platforms code to any company that needs to screen and
quarantine employees, with the goal of helping to mitigate the
spread of COVID-19 in Alaska.
1:53:40 PM
REPRESENTATIVE SPOHNHOLZ asked what percentage of the 9,700-page
RCA response has been deemed confidential.
1:54:17 PM
MR. BILBAO explained that the vast majority were requested to
be held confidential, which reflects the confidential nature of
the subject matter. He estimated that over 85 percent of the
response is directly focused on areas of sensitivity.
1:55:09 PM
REPRESENTATIVE RASMUSSEN thanked Mr. Bilbao for sharing
information about BPs new [digital response hub]. She
expressed her hope for future collaboration in Alaskas business
community.
1:55:46 PM
CO-CHAIR TARR sought further clarification on the primary
changes made to the PSA that covers the sale of BP Alaska.
1:56:22 PM
MR. BILBAO summarized the three changes made to the PSA:
payments were restructured for a low-price environment; the
option to bifurcate the close of the upstream from the midstream
sale was created; post-close resourcing was ensured to position
Hilcorp for success with qualified personnel. He noted that the
restructured PSA payments included both the deferral of certain
payments beyond 2020 and interest-bearing vendor financing. He
described interest-bearing vendor financing as follows:
Interest-bearing vendor financing is a commonly used
tool in M&A transactions. Its a fancy way of saying
that the seller loans the money to the buyer, and the
buyer then repays that loan like any other loan it
would obtain from another entity from a bank but
it's receiving that loan from the seller.
1:58:15 PM
CO-CHAIR TARR questioned whether offering interest-bearing
vendor financing could change the RCAs perception or approval
of the BP/Hilcorp deal.
1:59:06 PM
MR. BILBAO declined to speak on behalf of the RCA. He explained
that this method is occasionally used by the industry to reduce
uncertainty on the financing, adding that its clarifies where
the loan is coming from. He said the regulator knows that BP is
providing the financing, which addresses some of their questions
and uncertainty.
1:59:56 PM
CO-CHAIR TARR asked whether aspects of the DR&R studies are
available to the public.
2:01:06 PM
MR. BILBAO stated that the category of DR&R includes a broader
scope of documents that include, for example, a definition of
risks within the Trans-Alaska Pipeline System (TAPS), which are
of national concern for security reasons. He said that is
another reason why much of this material is held confidential
and, aside from commissioners and their staff, is not shared
publicly.
2:02:11 PM
REPRESENTATIVE RAUSCHER questioned whether interest-bearing
vendor financing was only used toward the down payment.
2:02:40 PM
MR. BILBAO shared that the interest-bearing vendor financing is
an element used in the amendment to the PSA. He added that
additional financial terms would not be disclosed.
2:03:26 PM
REPRESENTATIVE SPOHNHOLZ asked when to expect the RCAs
decision.
2:03:37 PM
MR. BILBAO said that decision would be welcomed as soon as the
RCA is ready to deliver it, adding that preparations are being
made to close on the midstream portion of the business by June
30, 2020. He noted that the RCA originally issued the timeline
of a decision by September 28, 2020.
2:04:25 PM
REPRESENTATIVE SPOHNHOLZ surmised, youll know when we know.
2:04:31 PM
MR. BILBAO confirmed that.
2:05:50 PM
SCOTT JEPSEN, Vice President, External Affairs & Transportation,
ConocoPhillips Alaska, provided additional context regarding
ConocoPhillips Alaska, Inc.s response to the COVID-19 pandemic,
as well as an overview of the companys decision to curtail NS
production. He paraphrased from a written statement, as
follows:
When the COVID-19 outbreak started to look like it
could impact Alaskan or North Slope operations, we
quickly started to take action to protect the well-
being of our workforce and their families, help
mitigate the spread of the disease, and safely run our
business. One of our first actions was to implement
health screenings on March 2, at Ted Stevens
International Airport for all of our north bound
passengers traveling on the company planes. On March
9, the screening process was expanded to include
temperature checks. Anyone who could not pass the
health screening was not allowed to go north. As the
seriousness of the COVID-19 outbreak became more
apparent, we became concerned about our limited
capacity on the North Slope to respond to multiple
[coronavirus] cases. We made several decisions on
March 18 to address this concern.
First, we put in place a policy that required all
personnel traveling to the North Slope to have been in
state for at least two weeks and pass the health
screening before traveling to the North Slope. For
those who had traveled out of state during their time
off, theyre required to undergo a two-week quarantine
before they could travel north. In order to
accommodate this, we changed shift schedules so that
those who need to travel out of state would have time
to travel and then spend their two-week quarantine
period on their days off; for example, this meant for
some people, their schedule went from two weeks on
two weeks off, to four weeks on four weeks off.
Second, we decided that the most effective, proactive
measure we could take was to scale back our North
Slope operations to reduce the number of personnel
that could be exposed to the disease. We prioritized
scaling back operations that were out on ice roads and
farthest from infrastructure. Consequently, we made
the difficult decision on March 18, to end our 2020
exploration drilling program early; bring to closure
any ice-season dependent nonessential activity and
bring personnel back to Anchorage that were not
critical to ongoing operations.
On April 7, we elected to further reduce our North
Slope personnel by laying down our rigs at Kuparuk and
Alpine. The timing of this decision was driven by our
COVID-19 strategy of removing personnel from the North
Slope, but oil price also played a role. Its likely
that we would have made the same decision a few weeks
later as the scale of the historic drop in oil price
became more apparent.
At our peak this last winter, we had approximately
3,000 workers onsite - today, we have about 1,100.
Unless we see a [coronavirus] outbreak on the slope,
we will likely remain at this level until we begin to
ramp up our operations again.
2:08:51 PM
In Anchorage, our response to the [coronavirus] threat
has been to ask employees to work from home. We made
that decision on March 16. Of our approximately 600
town-based employees, only a handful are still working
from the office. This staff working in the office are
following all the recommended social distancing
protocols and through all of this, we have been
following the state mandates issued by the governor.
We are now in the process of determining when and how
we will bring people back to our office and the North
Slope. Our plan for the Anchorage office is to bring
people back in three stages with diminishing social
distancing protocols at each state. In order to
provide the ability to follow strict social distancing
requirements of the first phase, we intend to bring
back no more than 25 percent of the workforce on May
18. In phase two, we will bring back up to 50 percent
and in phase three, all employees. The dates we are
implementing phase two and three have not been set.
In making the decision about which employees return to
work, we will be flexible and consider the lack of
childcare facilities, employees who may be at high-
risk or live with family members who are high-risk,
and other factors, which are unique to todays
environment.
On the slope, our resumption of activity will not be
as straight forward. The historic demand destruction
caused by societys response to the COVID-19 threat
coupled with a global oversupply of oil is an
extraordinary confluence of factors that has caused
the price of oil to drop to very low levels. Alaska
has not been exempted from the price drop. As posted
on the DORs website, the average price of ANS in
April, was $16.55 per barrel before transportation
costs. Subtracting transportation yields an average
April ANS North Slope price of around $8 per barrel.
In response to unacceptably low oil prices,
ConocoPhillips, on April 16, announced its decision to
curtail May production in Canada and the lower-48 by
225,000 barrels per day, gross. On April 30, we
announced that we intended to curtail our June North
Slope production from Kuparuk and our western North
Slope fields by 100,000 barrels per day, gross. This
decision will be reviewed on a month to month basis.
The market conditions that are driving our decision to
curtail production will also be key in our decision to
resume North Slope drilling. The decision of the
voters on the oil tax ballot measure will also play a
role. If the ballot measure passes, it will result in
a significant tax increase - even at low oil prices -
and will put a break on future investment and stall
recovery of the North Slope.
2:11:01 PM
In anticipation of some of your questions, I want to
make a few comments about the curtailment were
planning. The amount of curtailment is driven by the
minimum production required to run the facilities. We
are not completely shutting down production because of
the cost and complexity of a total field shutdown. We
want to be able to respond if market conditions
improve. We have discussed curtailment with Alyeska
Pipeline Service Company. The volume we are
curtailing will not adversely impact their operations.
This is a separate action from the TAPS proration.
Our curtailment ramp down will begin in the later part
of May. We are planning on ramping down production at
the Colville River Unit to approximately 25,000
barrels per day this is down from a typical average
day of about 55,000 to 60,000 per day before
curtailment to about 35,000 barrels per day from the
Kuparuk River Unit, which is down from about 100,000
barrels per day.
We are in extraordinary times. Our company is very
concerned about the state of the Alaskan economy and
the wellbeing of the states residents. We have taken
a number of actions in response to the [coronavirus]
threat to put barriers in place to prevent its spread
and to protect our workforce, their families, and
Alaskans at large.
We are also continuing our philanthropic donations.
Today, we have made close to $3 million in donations
to nonprofits around the state and recently made a
$200,000 donation, including a $100,000 matching
grant, to the Alaska Can Do campaign. The Alaska Can
Do campaign is being run by the United Way of
Anchorage and the Alaska Community Foundation with
support from the Rasmuson Foundation. The campaign is
aimed at providing immediate and long-term support to
nonprofits that serve Alaskans whose lives have been
impacted by the pandemic. Our other donations include
support for nonprofits, like Beans Caf?, Covenant
House Alaska, Catholic Social Services, Blood Bank of
Alaska, Camp Fire Alaska, AWAIC [Abused Womens Aid In
Crisis], and other organizations that are particularly
critical in providing support in todays environment.
2:13:15 PM
MR. JEPSEN in closing, related that the response to the COVID-19
pandemic combined with the demand destruction in reaction to the
coronavirus threat has caused ConocoPhillips to significantly
reduce North Slope activity. He reported that there has yet to
be a case of COVID-19 among ConocoPhillips North Slope
operations or town-based employees. He conveyed that
ConocoPhillips is encouraging its contractors to hire Alaskans
for any openings. However, the recovery, he said, will depend
on the recovery of oil price and demand, as well as on the
investment climate in regard to the outcome of the oil tax
initiative.
2:14:11 PM
REPRESENTATIVE SPOHNHOLZ applauded the continued philanthropic
leadership demonstrated by ConocoPhillips. She inquired as to
the number of employees that worked on the [North Slope] in May
2019.
2:14:45 PM
MR. JEPSEN clarified that as of January 2020, ConocoPhillips had
3,000 employees on the NS, whereas after demobilizing rigs and
scaling back operations this spring, the number of employees
reduced to 1,100.
2:15:09 PM
REPRESENTATIVE SPOHNHOLZ asked how many employees were laid off
versus furloughed.
2:15:27 PM
MR. JEPSEN was unsure. He stated that none of the
ConocoPhillips employees were laid off.
2:16:12 PM
REPRESENTATIVE SPOHNHOLZ questioned whether any ConocoPhillips
employees have been furloughed.
2:16:33 PM
MR. JEPSEN said none of the ConocoPhillips employees have been
laid off or furloughed. He noted that employment increases
during the winter due to the exploration program and ice road
season; therefore, some seasonal employees worked a shorter
season this year. He clarified that 3,000 employees do not work
on the NS year-round.
2:17:24 PM
CO-CHAIR TARR asked how ConocoPhillips has accommodated their
year-round NS employees and whether its a better investment to
keep them employed at this time.
2:18:10 PM
ERIK KESKULA, Vice President, North Slope Operations,
ConocoPhillips Alaska, explained that ConocoPhillips
transitioned roles that were not required for day-to-day
operations on the NS to work remotely to ensure that the
response could be managed in the event of an outbreak.
2:20:12 PM
CO-CHAIR TARR expressed interest in returning for a conversation
after the pandemic is resolved to discuss the outlook for the
oil and gas industry.
2:21:17 PM
DAVID WILKINS, Senior Vice President, Hilcorp Alaska, presented
an overview of Hilcorps response to COVID-19, as well as
operational impacts of the coronavirus and current challenges in
the global markets. He said that Hilcorp is facing a global
pandemic coupled with a drastic drop in oil demand and
oversupply in the global crude [oil] market, which has
introduced numerous challenges to business. Nonetheless, he
remarked that Hilcorps production and drilling operations have
continued, largely unchanged. He credited Hilcorps field
employees, contractors, and vendors for quickly developing a
plan to cut costs and continue operations. He emphasized that
Hilcorp continues to be coronavirus-free and is focusing on
maintaining a safe and healthy workforce. He related the
following actions in response to COVID-19: proper social
distancing and personal hygiene; removal of nonessential field
personnel; encourage employees to work from home; extended
shifts to decrease travel frequency and private charter flights
from Anchorage to Deadhorse to limit outside exposure; mandatory
14-day quarantine for out-of-state travel; required health
screening prior to flights.
2:25:33 PM
MR. WILKINS turned his attention to Hilcorps continued
philanthropic efforts. He announced that Hilcorp has moved
over $1.5 million to the Alaska Community Foundation for 501(c)3
nonprofits. He said the fund will grow as Hilcorp takes on more
employees after successfully closing the BP acquisition. He
reiterated that despite current challenges, Hilcorps production
and operations have been unaffected; recently, oil production at
the companys Milne Point Unit set a new milestone at 36,000
bpd, up from 34,000 bpd in February 2020. He shared that
Hilcorp continues to operate three drilling rigs in Alaska: two
on the NS and one in the Cook Inlet basin. Furthermore, the
company expanded its operations at Milne Point with a third
polymer pilot project at F pad. On the NS, drilling activity at
Milne Point field is expected to continue as planned, utilizing
Hilcorps Innovation drill rig - operated by Parker Drilling -
and the Doyon 14 rig. He noted that crews at Milne Point have
taken additional precautions by establishing a secondary
security and screening check point to further minimize the risk
of coronavirus exposure or spread. In the Cook Inlet basin,
Hilcorp is focused on meeting its natural gas commitments to
local utilities. He said, Cook Inlet gas production is
building storage during the spring and summer and we continue to
drill there so that we can store gas for the winter."
2:28:38 PM
MR. WILKINS further reported the company is using Hilcorps 169
drill rig, operated by Parker Drilling, in the Cook Inlet. He
noted that shifts for the drilling crew have been extended to
reduce travel frequency and our camps have been added our
additional health and safety protocols so that we keep everybody
healthy." He explained that workover operations are critical to
maintaining and increasing production and remain a key component
of Hilcorps 2020 work plan and beyond. On the NS, Hilcorps
ASR workover rig has been laid down for maintenance; however,
the company expects to reactivate it later this summer when
maintenance is complete. Rig workovers in the Cook Inlet are
utilizing Hilcorp rigs 404 and 401, both of which are operated
by All American Oilfield, a subsidiary of Chugach Native
Corporation. He further noted their crews are 100 percent
Alaska-based and continue to work 14-day shifts. Mr. Wilkins
informed the committee that Hilcorp continues to work closely
with BP and the state of Alaska to ensure a seamless transition
throughout the BP/Hilcorp transaction. He added the company is
working hard to ensure day-one readiness, which includes
preparations for welcoming BP employees and contractors that
will join Hilcorp. He said the company plans on being an
important part of Alaskas economy and community for years to
come.
2:32:10 PM
BRUCE DINGEMAN, Executive Vice President, Oil Search Limited,
President, Oil Search Alaska, provided a PowerPoint presentation
by Oil Search Alaska (OSA) on the oil and gas industry response
to COVID-19 and the accompanying decline in oil price. Mr.
Bilbao directed attention to slide 2, which provided an overview
of OSAs 2019-2020 Winter Season. He highlighted that OSAs
medical plan was approved by the state; no incidence occurred in
their operations and robust back-to-office protocols were
implemented. He pointed out the extensivity of the companys
winter program. OSA properties are located between the Kuparuk
River Field and Alpine, both operated by ConocoPhillips Alaska,
Inc. Over the winter season, OSA had two exploration drilling
wells located Pikka East (Mitquq) and Horseshoe (Stirrup).
Additionally, OSA conducted a large civil works program
involving the construction of key infrastructure for future
development: road and bridge to ND-B + pad; operations center
pad (NOP); process facility pad (NPF); upgrade Mustang road. He
noted that OSA had the earliest spud off ice in more than 40
years. Furthermore, the Mitquq well yielded hydrocarbon
potential at the high end of pre-drill expectations and the
Stirrup well tested at one of the highest rates for the Nanushuk
with single stage simulation. Further successes from SOAs
civil works program included 68 miles of ice roads and 111 acres
of ice pads; 2.24 million cubic yards of gravel hauled; 11.5
miles of gravel road and 56 acres of gravel pad.
2:37:12 PM
MR. DINGEMAN continued to slide 3, which outlined OSAs Pikka
project. He noted that the project has a scope of $6 billion
gross and encompasses a significant development across three
drill sites, over 100 wells, and a large processing facility.
The graph on slide 3 illustrated the projects subsequent growth
opportunities, forecasting a large proportion of future TAPS
throughput at 600,000 bpd reached by 2030 with the potential to
last for decades. The project is in progress, with field
appraisal complete, key regulatory and stakeholder approvals
complete, organization built, engineering underway, and primary
road and other infrastructure under construction. Potential
impacts to the state of Alaska include jobs and labor income
during project construction and ongoing production operations;
source of petroleum revenue; and multiplier effects in local
communities.
2:40:19 PM
MR. DINGEMAN turned to slide 4, which outlined an updated
business plan for the Pikka Project in light of the current
economic environment. Slide 4 read as follows [original
punctuation provided]:
2020 spending materially reduced
? Rephased the project
? Staff reductions
? Pay cuts
? Suspend exploration drilling for winter 2020/2021
Resume in 2021/2022 at earliest
Re -phased Pikka project: final investment decision
(FID) - moved out of 2020
? Exploring opportunities to optimize the project and
reduce breakeven costs
? Suspend engineering at logical breakpoints during
2020
? Currently planning for first oil in 2025
Alaska is a core -priority for Oil Search
? Focused on maintaining capability to ramp -up when
market conditions improve
? Socially & environmentally responsible development
is fundamental
? Developing a world -class project and being a model
for cooperation are key goals
2:42:38 PM
MR. DINGEMAN in closing, informed the committee of OSAs deep
commitment to Alaska, as the state is a key platform of growth
for the firm. He noted that over 90 percent of the companys
staff is locally sourced and stressed OSAs desire to develop in
a socially responsible way.
2:43:55 PM
REPRESENTATIVE SPOHNHOLZ asked what price point would allow the
advancement of OSAs fall drilling season.
2:44:10 PM
MR. DINGEMAN explained OSA is exploring ways to reduce the
breakeven cost of the [Pikka] project through reengineering and
technical work. He added that current analysis shows the
project has a mid-40 dollars per barrel ("dpb") requirement for
economic return. He said a rebound of high 40s into the 50s
would inspire confidence to progress the project.
2:45:19 PM
REPRESENTATIVE SPOHNHOLZ recalled that as of a few weeks ago,
the futures market projected $37 dpb. She recognized that the
oil price forecast for the coming months is not encouraging,
which from a state government standpoint, poses a challenge for
Alaskas oil revenue situation. She added that OSAs projected
100,000 barrels could be useful.
2:46:29 PM
MR. DINGEMAN explained that they price of oil is a key
determinant for the Pikka Project to proceed; further, as 2025
is the current date for first oil, price expectation in 2025
would drive investment decisions. Nonetheless, he stated that
todays oil price is also important because it drives the firms
cash flow, which allows the OSA to make investments to proceed
with the project. He listed two important criteria: a high
enough price level to generate cash for healthy investment;
compelling economics at the expected future price level. He
said OSA is considering both current and future conditions in
the evaluation to proceed.
2:47:42 PM
CO-CHAIR TARR observed that suspending the upcoming winter
exploration season appears to be a trend. She expressed
interest in staying updated on project expectations and
projections for the coming years.
2:48:41 PM
MR. DINGEMAN said he would be happy to stay engaged as OSAs
plans unfold and evolve. He further noted that through active
communication, DOR has an updated view of OSAs forecasts and
outlooks to allow for effective planning.
2:49:38 PM
BETSY HAINES, Senior Vice President, Operations & Maintenance,
Alyeska Pipeline Service Company, provided a PowerPoint
presentation by the Alyeska Pipeline Service Company (APSC).
She informed the committee that APSCs efforts to manage health
risks in its workforce began before Alaska had its first
positive case of COVID-19. She said the organization responded
quickly and effectively to mitigate the risk of COVID-19 and
have continued to move oil without disruption. Referencing
slide 2, she pointed out that that APSC has moved more than 18
billion barrels of NS crude oil through TAPS and in 2019, had
99.75 percent reliability. She explained todays presentation
is focused on TAPS operation in the current environment of
suppressed demand and excess supply; further, she said she would
address two commonly asked questions regarding TAPS storage.
2:52:23 PM
MS. HAINES directed attention to slide 3 and noted that TAPS was
not designed to be an oil storage facility. She remarked:
The system was designed to take oil in to Pump Station
1 in Prudhoe Bay [and] transfer the oil through pump
stations and into Valdez. In Valdez, the oil is
routed to a tank farm and balanced across available
tanks until a tanker arrives and is loaded with oil.
We have fourteen tanks in Valdez with a working
inventory capacity of 6,605,000 barrels.
2:56:30 PM
MS. HAINES continued to slide 4, which pictured a flow chart of
upstream and downstream stakeholders. She explained the oil
Movements Department at APSC creates an inventory forecast by
monitoring oil projected to enter the system, along with the
tankers schedule and capacity. With this approach, the
department can anticipate when inventory will become an issue.
She noted that high inventory is considered anything above 75
percent. The goal is to keep inventory moving through the
system, she said. She added that the majority of high inventory
scenarios are resolved with good forecasting and solid schedule
management; however, if oil cannot be moved through the system,
APSC must reduce the amount of oil entering TAPS, otherwise
known as a proration. In a proration, APSC notifies TAPS
connectors to reduce the delivery of oil to TAPS by a specific
percentage; 90 percent proration delivers a 10 percent in
incoming crude oil. She stated that APSC works hard to avoid a
proration; however, there are times when it is necessary, and
this month is one such time. Using their forecasting method,
APSC had already identified inventory challenges in May and
implemented a 90 percent proration on April 24, 2020. Today,
APSC made a 5 percent adjustment and is currently at operating
at an 85 percent proration a 15 percent reduction. The
strategy, she said, is to implement a light proration over a
longer period of time to address inventory issues projected to
occur throughout May. Ms. Haines directed attention to slide 5
and addressed the impact of low throughput. Slide 5 read as
follows [original punctuation provided]:
Low throughput results in slower oil flow through the
pipeline.
TAPS was designed to move warm crude oil in an
Arctic environment.
? As throughput declines, so does the rate at which
crude oil flows through TAPS to Valdez.
4.5-day transit time in 1988
18-day transit time in 2018
? Slower flow rates may allow oil and water to
separate during transit.
? Oil cools during longer transit times.
? Cooling may lead to potential ice formation and
additional wax accumulation.
MS. HAINES continued to slide 6, which listed strategies to
mitigate the aforementioned challenges: special pigging regimes,
wax management strategies, and adding heat at key locations.
She explained that APSC monitors the crude oil temperature along
TAPS through the winter and determines the need for mitigation,
such as heat. Heat can be added at pump stations with
recirculation and along the pipeline with mobile heaters (slides
7 and 8). Ms. Haines directed attention to slide 9 to address
how low TAPS can operate at. Slide 9 read as follows [original
punctuation provided]:
? Earlier flow assurance research examined TAPS
operational issues at flow rates above 300 MBD.
Research continues regarding operational issues
at rates lower than 300 MBD.
Data analysis to date suggests that with
additional investment it may be technically possible
to safely operate down to annualized throughput rates
as low as 200 MBD.
? A dedicated flow assurance team is evaluating new
technologies and alternative operating modes to build
confidence that TAPS can operate at lower volumes.
? Technical capability does not necessarily equate to
economic viability; the long-term sustainability of
TAPS may ultimately be limited by per barrel
transportation costs.
MS. HAINES noted that APSC has prepared for the possibility of
lower flow in the coming months. She assured the committee that
the right tools are in place and APSC will apply the necessary
mitigations to keep oil moving safely and reliably; however, the
best antidote to low flow issues is more oil. She indicated
that an attractive fiscal climate to produce and deliver oil is
required. She stressed that changes to fiscal policy, such as
the ballot initiative, limits the opportunity for the oil and
gas industry.
3:01:58 PM
CO-CHAIR TARR returned to slide 4 and remarked:
One thing that was a little bit unclear ... [is] there
were two announcements that came out: one was
ConocoPhillips individually ... to reduce production
...; the second announcement was the proration on
TAPS. It was unclear at first whether those things
would be additive, and it seemed like they should have
been in a sense that one was one particular company
and their own company production ... but then if you
do proration, I would have thought it would have been
split sort of equally among producers ... I thought
they would be two distinct things, and then the
position was modified and said, no that they wouldnt
be additive. And I just wonder if you could
elaborate on that.
3:03:05 PM
MS. HAINES explained the initial analysis that APSC conducted
for the first proration was in mid-April. She said APSC looks
at all connections coming and determines an equal cut to all
connectors. She added the information coming in from the park
connections is independent from the proration; nonetheless, it
will factor in. APSC looks at several factors in the analysis,
including upstream, capacity of the terminal and vessel
movement, which change daily. She said APSC will evaluate the
information provided from all connectors going into the month of
June, adding that proration is always the last choice. She said
APSC would like to turn back the proration as soon as possible.
3:04:46 PM
CO-CHAIR TARR surmised that ConocoPhillips is doing an
independent reduction and accommodated what would have been
included in the Kuparuk proration.
3:04:58 PM
MS. HAINES said no. She clarified that [ConocoPhillips] is
independent of the proration that was started in mid-April;
however, it does help them meet the requirements of the
proration when, in fact, they do start to decrease.
3:05:17 PM
CO-CHAIR TARR said it makes sense why they would not have been
additive, because at the time of the initial proration
announcement, ConocoPhillips would have already scaled back
enough to accommodate it. She added, if somehow it resulted in
them needing to reduce by 150,000 barrels, for example, then
thats where ... it would be more additive in the terms of the
number of barrels reduced.
MS. HAINES confirmed that.
3:05:58 PM
REPRESENTATIVE SPOHNHOLZ remarked:
Right now, weve got about 500,000 barrels per day
going through TAPS, and ConocoPhillips said that
theyre reducing production by $100,000. If youre
prorating to 90 percent then thats a 50,000 barrel
per day reduction, and ConocoPhillips is saying that
theyre reducing by $100,000.
REPRESENTATIVE SPOHNHOLZ asked if that will require an
additional proration.
3:06:34 PM
MS. HAINES explained the Kuparuk change is occurring in late
May. She reiterated that the initial proration started in
April, adding that APSC will use the same basis going forward
with a consistent proration required of all connectors to meet a
volume thats calculated to meet the high point. She said with
all four connectors meeting the requirement, if the proration
can be pulled back it will be. She stated they are two
independent events that will impact one another later in the
month.
3:07:39 PM
REPRESENTATIVE SPOHNHOLZ recalled from previous testimony that
different producers have different approaches to current events.
She surmised that negotiations that take place regarding how the
proration is apportioned amongst the different producers. She
asked if that is a fair statement.
3:08:15 PM
MS. HAINES noted much of that takes place upstream from TAPS,
which is out of APSCs purview. She said the proration is
equally distributed to all connections.
3:09:01 PM
REPRESENTATIVE SPOHNHOLZ inquired as to the maximum capacity for
the tank farm.
3:09:33 PM
MS. HAINES returned to slide 3 and said there are 6.6 million
barrels of working inventory capacity.
3:10:10 PM
CO-CHAIR TARR asked how often tankers travel to Valdez.
3:10:27 PM
MS. HAINES explained that its no longer daily. She said, its
usually 20 or less now, and it decreases into the summer.
3:10:56 PM
REPRESENTATIVE RASMUSSEN expressed her appreciation for APSCs
continued innovation towards keeping levels below previous
projections.
3:13:03 PM
REBECCA LOGAN, Chief Executive Officer, Alaska Support Industry
Alliance, provided a PowerPoint presentation, entitled Impacts
of Covid-19 on the Support Industry. She directed attention to
slide 2, which listed Alaska Support Industry Alliance
(Alliance) members by category, with oilfield support being the
largest. Slide 3 addressed where Alliance was pre-coronavirus
and featured a chart from the Department of Labor & Workforce
Development (DLWD) showing the historical correlation between
oil price and employment in the oil and gas industry. She
pointed out that during the last downturn in oil prices, between
2016 and 2019, hundreds of Alliances member companies had to
downsize or went out of business. Slide 4 illustrated the
impacts of COVID-19: immediate changes to operations, including
quarantines, travel changes, and disruption due to uncertainty;
the global oil crisis; and layoffs. She approximated that
Alliance layoffs total 690 to date; however, some member
companies have indicated that the total number is closer to
1,000. Slide 4, entitled Looking Forward, addressed the
outlook for the future. Short-term issues include changes in
workforce, which could present more opportunities for Alaskans
to fill the gap in specialized skillsets, and financial aid for
companies. Long-term issues include oil price, which in turn,
impacts the ability for delayed projects to get back on track.
Another long-term issue is policy. She expressed concern about
the ballot measure, adding that the future of Alliance members
relies on company investment.
3:20:04 PM
REPRESENTATIVE RASMUSSEN asked if many Alliance members qualify
for the PPP funding that is awaiting distribution.
3:20:36 PM
MS. LOGAN said the majority of Alliance members would qualify
for both the PPP and EIDL. She added that those organizations
are facing the same challenges as other industries. She
reported that a member survey from two weeks ago revealed 11
Alliance members had been approved for a loan; however, of those
11, only 5 had received the funds.
3:21:43 PM
CO-CHAIR TARR asked for Ms. Logans thoughts on small business
grants versus loans.
3:22:38 PM
MS. LOGAN offered her belief that initially, without knowledge
of how long the pandemic would last, individuals were
comfortable with loans; however, now the dynamic has changed.
She concluded that grants are needed, whereas loans are no
longer helpful to struggling businesses.
3:23:20 PM
CO-CHAIR TARR acknowledged the growing need for aid and the
anxiety regarding delays in distribution and other
uncertainties. She expressed reassurance that the timely
distribution of funding is a priority and that hopefully,
further clarity on the method of distribution would be provided
so that the funds get to small businesses.
3:24:51 PM
MS. LOGAN agreed and added that after experiencing the PPP and
EIDL process, people recognize the importance of better
parameters and guidelines.
3:26:09 PM
CORRI FEIGE, Commissioner, Department of Natural Resources,
provided a PowerPoint presentation, entitled COVID-19/Low Oil
Prices: An Evolving Outlook for Production. She explained that
the Department of Natural Resources (DNR) has continued to
operate throughout the pandemic, partly by converting to
telework. Early on, she said, it became clear that DNR could
protect the states interest by working through the framework of
statutes and limitations to stabilize the businesses working
within the oil and gas industry. She noted that to prevent a
concept of cascading failure, a steady approach from DNR has
been of critical importance. DNR has attempted to stabilize the
industry through actions such as creating payment schedules on
lease rentals, managing production curtailments and associated
impacts to operators, and monitoring environmental and permit
compliance on activities associated with normal production. She
pointed out that all of this was managed while simultaneously
carrying out COVID-19 mitigation.
3:30:36 PM
PASCAL UMEKWE, PhD, Commercial Analyst, Division of Oil and Gas
Department of Natural Resources, directed attention to slide 2,
which outlined the presentation. Slide 3 featured timeline of
oil prices and recent operator announcements. Slide 4 listed
steady-state forecast assumptions on currently producing fields,
both in a base decline and in a COVID-19/low oil price
environment. He pointed out that in a COVID-19 environment, rigs
are demobilized, nonessential well work is put off, and overall,
production is negatively impacted.
3:35:42 PM
DR. UMEKEWE continued to slide 5, which illustrated a
COVID19/low oil price production scenario. A bar chart featured
on the slide displayed a statewide production forecast
comparison for fiscal years 2020 and 2021. The forecast suggests
an estimate of 5.2 percent decline from FY 20 to FY 21; further,
rig laydowns are the main drivers for expected short term
production decline. Slide 6 listed other related factors that
could impact production outlook. He noted that prior to
suspension in active development activities, some operators had
drilled up to 50 percent of their planned wells for FY 20. Slide
7 illustrated the general impact of new drilling on near-term NS
production decline. He pointed out that historically, NS
production declines annually by 4-5 percent; however, without
additional drilling the decline would be 9-10 percent. Thus,
production from new wells mitigates overall NS production
decline.
3:41:58 PM
DR. UMEKEW referred to slide 8, which provided a production
impact summary. Slide 8 read as follows [original punctuation
provided]:
? Key Considerations:
? Analysis excludes any non-public information
byoperators and uses public announcements (as at April
28), alongside other modeling assumptions.
? Analysis assumes that drilling for 2020 will
not exceed baseline development drilling in the recent
past for all NS operators
? Production impact (Short term):
? The main driver for production drop in the
near-term is stop-work initiative by operators, due to
Covid-19 and low oil prices.
- For FY2020, estimate of ~13000 bpd drop in
production due to rig laydowns/stop work, compared to
Spring 2020 forecast developed in February 2020.
- For FY2021, estimate of ~32000 BOPD decline
against Official Spring 2020.
? Production impact (Long term):
? Downward adjustment of long-term oil prices is
expected to affect economic viability of projects
planned to come online in the medium to long term.
Results from this analysis only show production impact
through YE 2021.
? Proration/production cuts:
? Results shown exclude proration on production,
or production cuts resulting from any midstream or
downstream activities.
? Key take-away:
? Current production outlook includes very high
levels of uncertainty, due to dynamic changes in
operator decisions, in response to overarching
macroeconomic uncertainties.
3:46:09 PM
TOM STOKES, Director, Division of Oil and Gas, Department of
Natural Resources, returned to slide 5 and clarified that the
production forecast does not include the 15 percent proration
that has occurred. The forecast also excludes any voluntary
restrictions that companies are placing on themselves, such as
ConocoPhillips' plan to reduce 100,000 barrels.
3:48:37 PM
CO-CHAIR TARR referencing slide 8, asked for a timeline between
when an operator might alert DNR to a change in their production
plan and when that information would become public.
3:49:07 PM
COMMISSIONER FEIGE said DNR is communicating with producers on a
regular basis to get a sense of those looking at curtailments
due to price impacts as well as COVID-19. She explained that
typically, DNR will get a sense of the impending changes right
before the operator makes a public announcement or press
release.
3:50:19 PM
CO-CHAIR TARR pointed out that as the budget situation is being
considered, every penny is part of the consideration. She said
it's good to know there could be additional announcements
coming.
3:50:41 PM
COMMISSIONER FEIGE reiterated the fluidity of the current
situation. She said DNR and DOR will continue to provide
information as timely as possible. She acknowledged the
difficulty of anticipating the revenue picture.
3:52:01 PM
DAN STICKEL, Chief Economist, Tax Division, Department of
Revenue, explained that in response to COVID-19 the Department
of Revenue (DOR) issued a revenue forecast in early April that
was based on the DNR production forecast from information known
as of late February. He noted that at that time, DOR projected a
$37 per barrel average for Alaska NS crude oil in 2021, which is
the latest official revenue forecast. Since then, DOR has been
working with DNR on the updated production forecast and a
potential proration analysis that adds to the work done by DNR.
He offered his belief that the information related to that
analysis could potentially be released next week.
3:54:03 PM
CO-CHAIR TARR made a requested for information regarding the
updated analysis.
3:59:18 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 3:59 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AOGA 5.8.20.pdf |
HRES 5/8/2020 1:00:00 PM |
Oil and Gas |
| COVID-19 Impacts and Response by Industry - AOGA 4.22.20.pdf |
HRES 5/8/2020 1:00:00 PM |
Oil and Gas |
| Oil Search 5.8.20.pdf |
HRES 5/8/2020 1:00:00 PM |
Oil and Gas |
| Alliance 5.8.20.pdf |
HRES 5/8/2020 1:00:00 PM |
OIl and Gas |
| Alyeska 5.8.20.pdf |
HRES 5/8/2020 1:00:00 PM |
Oil and Gas |
| DNR 5.8.20.pdf |
HRES 5/8/2020 1:00:00 PM |
Oil and Gas |