Legislature(2019 - 2020)SENATE FINANCE 532
01/17/2019 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Department of Natural Resources: Production Forecast | |
| Department of Natural Resources: Production Highlights, Permitting Issues, and Status of Development on North Slope | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
January 17, 2019
9:02 a.m.
9:02:03 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:02 a.m.
MEMBERS PRESENT
Senator Natasha von Imhof, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Lyman Hoffman
Senator Peter Micciche
Senator Donny Olson
Senator Mike Shower
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Corri Feige, Commissioner, Department of Natural Resources;
Senator Cathy Giessel; Senator Shelley Hughes; Senator
Chris Birch; Chantal Walsh, Director, Division of Oil and
Gas, Department of Natural Resources; Pascal Umekwe,
Commercial Analyst, Division of Oil and Gas, Department of
Natural Resources; Sara Longan, Deputy Commissioner,
Department of Natural Resources.
SUMMARY
DEPARTMENT OF NATURAL RESOURCES: PRODUCTION HIGHLIGHTS,
PERMITTING ISSUES, and STATUS of DEVELOPMENT ON NORTH SLOPE
DEPARTMENT OF NATURAL RESOURCES: PRODUCTION FORECAST
^DEPARTMENT OF NATURAL RESOURCES: PRODUCTION FORECAST
9:05:38 AM
CORRI FEIGE, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES,
introduced herself. She stated that she would present the
Fall 2018 Production Forecast; and an activity update on
the North Slope and permitting processes related to that.
She noted that it was extremely important to the Department
of Natural Resources (DNR) that the committee was provided
with the most accurate and concise information possible.
She understood the gravity of the committee's work. She
noted the testifiers who would be discussing various
aspects of the presentation.
9:07:14 AM
CHANTAL WALSH, DIRECTOR, DIVISION OF OIL AND GAS,
DEPARTMENT OF NATURAL RESOURCES, introduced herself.
9:07:39 AM
PASCAL UMEKWE, COMMERCIAL ANALYST, DIVISION OF OIL AND GAS,
DEPARTMENT OF NATURAL RESOURCES, introduced himself.
Mr. Umekwe discussed the presentation, "Fall 2018
Production Forecast: Senate Finance Committee" (copy on
file). He looked at slide 2, "Outline":
? Overview and Highlights on Production
o Fall 2018 forecast: Comparing recent actuals vs
forecast
o North Slope Projects Highlights
o Fall 2018 forecast: The State's Overall
Production Outlook
? 2018 Production Forecast
o Objectives
o Overview of Methodology
?Current Production, Under Development,
Under Evaluation
o Near-term and longer-term results
Mr. Umekwe addressed slide 3, "Fall 2018 Production
Forecast: FY 2019 Outlook." The slide showed a comparison
with the forecast and the actual production. He noted that
the actual production was approximately 501,569. He
remarked that it only addressed the first five months of
the current fiscal year.
9:10:01 AM
Mr. Umekwe highlighted slide 4, "Overall Perspective: North
Slope":
? Production is relatively flat:
o FY15 to FY17 increase in production (2-3
percent per year)
o FY17 to FY18 decrease in production (1.5
percent)
? Recent Major Changes in Production
o Prudhoe Bay Unit
?Non-rig workovers .notdefincrease active well
count
?Reservoir modeling .notdefidentifying targets
?Facilities modeling .notdefplanning maintenance
?Doing more with less .notdefoperational
efficiency
o Kuparuk Unit
?DS-2S (Sharks Tooth)
?1H-NEWS
o Colville River Unit
?CD5
o GMT1:
?First oil Oct 2018
? Future Projects coming in:
o Near future:
? Milne Point Moose Pad, CD5 Expansion, GMT2
o Farther out:
? Exciting discoveries moving forward
(Pikka, Willow)
? Old discoveries now moving forward
(Liberty)
Mr. Umekwe looked at slide 5, "20-Year Production Outlook:
Production Categories":
? Currently producing (CP) fields remain backbone of
state oil production in near and medium term. Near
term projects under development (UD), often within
existing fields, impact 12-month outlook.
? Future fields (UE), which are currently being
evaluated by operators, begin to play a more
significant role in production in the next 5-6 years
9:15:24 AM
Mr. Umekwe discussed slide 7, "Fall 2018 Forecast
Objectives":
? Provide a 10-year official production forecast for
the State's Revenue Sources Book
? Maintain focus on near-term accuracy
o More emphasis on most recent history in
projections for the near future
o Include seasonal changes in production to
improve near-term view
? Increase focus on longer-term accuracy
o Ensure product is valid for longer-term
projections, based on individual field
characteristics and operator plans
o Apply engineering constraints to ensure
realistic projection of near-term production
characteristics into the out years
Mr. Umekwe looked at slide 8, "Production Categories -
Definitions":
Forecast duration: 10-year official forecast
? Currently Producing (CP): online by 6/18
Oil from existing wells in currently producing
pools ? Under Development (UD): < 12months
Oil from projects that will add incremental oil
to existing fields, or fields with first oil
within one year
Projects in Plan of Development document, often
scheduled and part of operator's annual budget
? Under Evaluation (UE): >12 months
Oil from projects likely to occur in the future,
but which have not met the requirements of the
previous category
Mr. Umekwe highlighted slide 9, "Production Categories:
Addressing Uncertainty":
? Currently Producing (CP) fields:
o Relatively small uncertainty range due to
established behavior of producing pools
o Probabilistic Decline Curve Analysis
projections ? Projects Under Development (UD):
o More uncertainty than CP
o Uncertainties include financial and reservoir
performance risks
o Probabilistic type wells
? Projects Under Evaluation (UE):
o More uncertain than CP and UD
o Financial risk: using project breakeven price
and State official price forecast
o Other uncertainties include
Chance of occurrence in the 10-year
forecast window
Timing; start of sustained production
Production profile/reservoir performance
(probabilistic type wells)
9:20:55 AM
Senator Wielechowski queried the aspects that were
considered when examining the projects that were under
evaluation. He wondered whether there was an examination of
net present value or internal rates of return. He asked
specifically the types of internal rates of return and net
present values to determine whether a project should move
forward. He wondered whether there were disputes between
DNR and the industry.
Mr. Umekwe replied that there was consideration of those
factors. He shared that for some of the projects, there
were discussions of the break-even price. The break-even
price included a "full-blown cash-flow model", which
included the expected rate of return and expected spend to
get the production online. He stated that ultimately, when
a breakeven price was derived, the model would allow
consideration of the future of the project.
Mr. Umekwe looked at slide 10, "Continued Focus on Both
Short- and Long-Term Forecast Accuracy":
? DOG Forecast maintains balanced focus on near and
long term accuracy, and continues to evaluate
underlying assumptions for its short and long term
outlook on each field
? This approach is important for the forecast to
continue to serve multiple purposes
Near-term accuracy required to support the
State's near-term budgeting goals
Long-term accuracy required to support State's
long term revenue projections and decisions
around long-term fiscal picture
Field level accuracy required for realistic
assessment of impact of near-and long-term
development plans on non-state land (NPRA
development, etc.)
Mr. Umekwe highlighted slide 11, "Near-Term Focus":
? Ensuring clearest possible outlook in the near term
o Near term guidance is based on the most recent
pool information, operational practices and
performance
? Emphasis is placed on near-term production to
capture impacts of scheduled maintenance/turn-around
events
? Probabilistic Decline Curve Analysis weighted toward
recent production history
? Full credit to planned UD production
o Makes for more accurate near-term production
forecast and helps account for rate additions due
to field efficiency improvements
Mr. Umekwe addressed slide 12, "Near-Term Focus: North
Slope":
? Ensuring accurate forecasts in the near term to
support revenue planning in the next fiscal year
? Also, tracking observed monthly production
variations
9:25:20 AM
Mr. Umekwe highlighted slide 13, "Realistic Long-Term
Projection":
? Attention to realistic long-range outlook for the
fields reflecting field development plans
? Decline Curve Analysis on current production
emphasizes recent history but also considers previous
history of the fields
? Engineering judgement is applied to honor field
development and reservoir engineering constraints
? Future projects that add to production in out years
are based on current project definition, project
characteristics and uncertainty analysis
Mr. Umekwe looked at slide 14, "Comparing Long-Term
Projections":
? Fall 2018 Forecast: Producers' outlook/forecast
falls within DOG production forecast range
Mr. Umekwe discussed slide 15, "Increasing Uncertainty as
New Fields/Projects Come Online." He noted that there was
uncertainty in the out years. He remarked that the out
years had many projects. He stated that the discussion
would be related to range, and the high/low sides.
Co-Chair Stedman surmised that there should not be an
expectation of a million barrels per year, but there should
be an expectation of 500,000 barrels per year for the
foreseeable future.
Mr. Umekwe replied that it was a fair statement. He looked
at slide 15, and noted that the best estimate was somewhere
around 500,000 barrels of oil per day. He noted that there
was a chance that there could be several hundred thousand
barrels per day, but stressed that it was often not the
case. He stated that some projects were delayed, or may not
be as strong as expectations. He remarked that future
production could only be in the terms of the bounds of the
possible outcomes going forward.
Mr. Umekwe addressed slide 16, "Projects Under Evaluation,
Medium to Long Term." He noted the slide showed a map of
the different land ownerships across the North Slope, and
the different projects that were considered in the Fall
2018 Forecast. He remarked that the projects in the yellow
section were in federal land; the pink section was the
Artic Slope Regional Corporation (ASRC) mineral interest;
and the blue section was state-owned land. He stated that
most of the projects were within the state section of the
central North Slope. He remarked that there were some
projects that were as far flung to the west as Smith Bay,
which were within state waters; but that area was very far
away from available infrastructure, resulting in
substantial cost in effort to bring production.
9:30:49 AM
Mr. Umekwe looked at slide 17, "Risked Under
Development/Evaluation Projects." He noted that, even at
the peak, production was somewhere close to 200,000 barrels
of oil per day, which was additional to the production. He
noted that it was additional to the declining base
production level. He remarked that it could not be easily
seen as an addition to today's 500,000 barrels of oil per
day; rather whatever production would be like at the point
of the peak. He noted that, overall, it was an exciting
time when seeing all the projects to sustain production. He
felt that there should be a strong emphasis on current
projects; and those that could bring projects online as
quickly as possible. He thanked the members of the team who
conducted the work within the resource evaluation section
of the division, and the commissioner.
Senator Wielechowski queried the range of internal rates of
return that DNR considered a project to be profitable.
Mr. Umekwe responded that the cost of capital was an
important component that companies examined before project
investment. He acknowledged that it could change in time,
because money may be given. He stressed that there was not
a tight range, rather there was a wide range. He furthered
that it was probably somewhere around 10 to 15 percent rate
of return, depending on the company.
^DEPARTMENT OF NATURAL RESOURCES: PRODUCTION HIGHLIGHTS,
PERMITTING ISSUES, and STATUS of DEVELOPMENT ON NORTH SLOPE
9:33:51 AM
Commissioner Feige stated that there would be an update on
permitting and activity in DNR.
Ms. Walsh discussed the presentation "Alaska Department of
Natural Resources: Oil and Gas Outlook, and Permitting"
(copy on file). She addressed slide 2, "Department of
Natural Resources, Land Base and Ownership":
Land Base
? 586,412 sq. miles?more than twice the size of Texas
? Larger than all but 18 sovereign nations
? More coastline than all other 49 states combined
? More than 3 million lakes; half of world's glaciers
? Approximately 40 percent of the nation's freshwater
supply
Land Ownership
? Federal Land: more than 200 million acres
? State Land: Approx. 100 million acres of uplands, 60
million acres of tidelands, shore lands, and submerged
lands, and 40,000 miles of coastline
? Native Corporation Land: 44 million acres
9:36:05 AM
Senator Hoffman noted that the Native Corporation lands
were considered private property. He asked how much
additional land was considered private property in the
state.
Ms. Walsh replied that it was approximately 1 percent.
Senator Hoffman queried the number of acres.
Ms. Walsh agreed to provide that information.
Senator Hoffman announced that the total acreage in Alaska
was 365 million.
Ms. Walsh agreed to provide that information.
Senator Hoffman pointed out that the vast majority of
private property in Alaska was native property.
Ms. Walsh looked at slide 3, "Department of Natural
Resources, Land Life Cycle":
Secure lands and access from Federal Government.
Identify minerals and oil and gas prospectivity via
Best Interest Findings.
Lease lands for exploration and development.
Permit programs to ensure conservation of resources
and protection of state's lands and interests.
Manage production units and mines to protect state's
royalty interests.
Approve and monitor reclamation and closure operation.
Ms. Walsh highlighted slide 4, "Department of Natural
Resources, Oil and Gas Resource Potential":
North Slope
? More undiscovered, potentially recoverable oil than
any other Arctic nation
o OIL: Est. 40 billion barrels of conventional
oil
o GAS: Est. over 200 trillion cubic feet of
conventional natural gas
? Untapped unconventional resource potential,
including tens of billions of barrels of heavy oil,
shale oil, and viscous oil, and hundreds of trillions
of cubic feet of shale gas, tight gas, and gas
hydrates
Cook Inlet
? Significant undiscovered resources remain
o 19 trillion cubic feet of natural gas
o 600 million barrels of oil
o 46 million barrels of natural gas liquids
Senator Hoffman queried the number of undiscovered
potential offshore of Alaska.
Commissioner Feige replied the numbers were "rolled up"
figures that were provided by the United States Geological
Survey (USGS) and the Bureau of Ocean Energy Management
(BOEM). She agreed to provide the offshore number
information.
9:40:34 AM
Ms. Walsh addressed slide 5, "Department of Natural
Resources, Oil and Gas Outlook." She shared that the blue
section showed the current leases in the North Slope. She
announced that the white section represented available
land. She stated that the green section showed the leases
that were picked up during the lease sale. She shared that
it was the third-highest revenue generating lease sale. She
noted that there was not much land available for lease. She
shared that it was the highest bid per acre, at nearly $550
an acre. The total acres leased were 244,000 acres. She
felt that the lease sale was a positive statement about oil
and gas exploration in Alaska.
Ms. Walsh discussed slide 6, "Alaska Department of Natural
Resources: Production Highlights." She shared two
questions:
1. Why don't we see the big bumps of production from
the projects that were forecasted in our future, when
we look at our production forecast?
2. How is it that revenue for the state differs for
where production is occurring, and by what companies.
Ms. Walsh highlighted slide 7, "State of Alaska, Royalty
Rate." She stressed that revenue for the state is generated
through two different sources: royalties and taxes.
Royalties, which were administered through the Division of
Oil and Gas were brought into the state, and 25 percent of
that collection went to the Permanent Fund with the
remaining 75 percent in the General Fund. Looking at the
North Slope, there were four areas of difference for
royalty. She noted the top of the slide, which was the
offshore area. The offshore royalty rate was 16 and two-
thirds. The state of Alaska, within the first three miles
offshore, received 100 percent of that 16 and two-thirds;
three to six miles out, the state received 27 percent of
the 16 and two-thirds; and greater than six miles out, the
federal government took the entire 16 and two-thirds. She
looked at the state lands, which had royalty rates between
12.5 percent and 16 and two-thirds percent.
9:45:32 AM
Senator Wielechowski recalled that when the royalty rate
exceeds 12.5 percent, there was a decrease in the tax rate.
Mr. Walsh was not aware of that. She was not an expert on
tax. She stated that taxes varied by the actual companies
and the price of oil
Co-Chair Stedman assumed that Senator Wielechowski was
referring to the gross value of reduction mechanism
embedded in the newer fields and areas, which did not
directly target the royalties, but targeted a severance. In
effect, if reduced the impacts of the newer fields.
Senator Olson wondered whether the ASRC contract with the
state would change.
Ms. Walsh responded that 50 percent of the royalty rate at
Natural Petroleum Reserve-Alaska (NPRA) went to the federal
government, and 50 percent went to the mitigation fund.
Senator Olson wondered whether the five communities in the
mitigation fund were within the North Slope Borough.
Ms. Walsh replied in the affirmative.
Senator Olson wondered whether there was discussion about
that percentage changing.
Ms. Walsh stated that she was not aware of any discussions
about changing that percentage.
Commissioner Feige furthered that there were a number of
settlement agreements that governed the jointly managed
lands. There were no discussions to change the percentage
distributions.
Ms. Walsh looked at slide 8, "State of Alaska, 20-Year
Production Outlook":
? Risked profiles (Includes risks of occurrence, start
time and performance applied to success case profile)
? Legacy fields remain backbone of state oil
production in near and medium term
? Future fields which are currently being evaluated by
operators, begin to play a more significant role in
production in the next 5-6 years
Ms. Walsh addressed slide 9, "State of Alaska, Analysis of
Willow vs. Pikka." She stated that the Willow development
resided on NPRA lands. The Pikka development was on joint
state and ASRC lands. The model used for the analysis was
built and supported by divisions, and the data was publicly
available.
9:50:49 AM
Ms. Walsh looked at slide 10, "State of Alaska, Willow
Development (Success Case)":
2019 WIO:
100 percent ConocoPhillips
Land Ownership:
Federal
Project Milestones (operator):
.notdef 2019 Further Appraisal
.notdef 2024 or 2025 First Oil
Project Scale (operator):
.notdef Resource size (500 1100 mmboe)
.notdef Likely plateau (over 100 mbbls/day)
Scenarios
.notdef Graph 1: CPAI is a minimum taxpayer
.notdef Graph 2: CPAI is a net taxpayer
Tax Impacts:
.notdef Expenditure
.notdef Price
Potential to generate over $8B - $13B to SOA through
2040 (undiscounted)
9:54:28 AM
Co-Chair Stedman queried the year that it would be net
cashflow positive to the state.
Ms. Walsh replied that it would be 2026
Co-Chair Stedman surmised that there should not be an
expectation of helpful revenue in two years.
Ms. Walsh agreed.
9:55:05 AM
Co-Chair Stedman stressed that there was an immediate
issue. He felt that the project would not assist in a
current positive cashflow.
Ms. Walsh agreed.
Senator Wielechowski queried the cost to the treasury in
the upcoming decade.
Ms. Walsh replied that there was a document submitted to
the legislature that was the cause of why there was a
collaboration with DOR. The biggest negative impact to that
analysis, which looked at the $75 per barrel, was Willow.
Willow projected a build of a new facility.
Ms. Walsh looked at slide 11, "State of Alaska, Pikka
Development (Success Case)":
2019 WIO:
51 percent Oil Search, 49 percent Repsol
Land Ownership:
83 percent State, 17 percent ASRC
Project Milestones (operator)
.notdef 2018 Winter Appraisal (2 wells)
.notdef 2019 2020 FEED
.notdef 2021 2023 Development
.notdef 2023 or 2024 First Oil
Co-Chair Stedman asked for a definition of "FEED."
Ms. Walsh replied with a definition of FEED: front end
engineering design.
Ms. Walsh continued with slide 11:
Project Scale (operator):
.notdef Resource size (400 720 mmbbls)
.notdef Likely plateau (120 mbbls/day)
Co-Chair Stedman remarked that one still did deductions,
but carried them forward.
Ms. Walsh agreed.
Co-Chair Stedman wondered what would occur with additional
production.
Ms. Walsh replied that a $60 per barrel would be similar to
the ConocoPhillips example, and would be at a minimum
taxpayer bracket. The right-offs would occur after first
production.
10:00:16 AM
Senator Micciche noted that the Willow development had an
estimate of 100,000 barrels per day. He noted the impact of
the lack of royalty, yet less production over time with the
same return to the state. He looked at Pikka, which showed
a higher level of expected production with the advantage of
royalties to the state, yet the same level of return. He
wondered what he was missing in the calculation.
Ms. Walsh replied that there may be a typo in the
presentation, and agreed to address the issue.
Co-Chair Stedman looked at Willow, and assumed that the
charts included the net cash flow to the state, rather that
cash flow to another entity.
Ms. Walsh replied that the Willow development had an orange
and grey bar that were each revenues.
Ms. Walsh continued with slide 11:
Scenarios
.notdef Graph 1: Min tax for extended time due to spent
and loss carryforward (LCF)
.notdef Graph 2: LCF impacts fewer years of tax
Tax impacts:
.notdef No negative pre-production stream
.notdef Little to no tax production for early years
Potential to generate over $8B - $13B to SOA
through
2040 (undiscounted)
Senator Wielechowski asked for charts with a 10 percent
discount rate.
Ms. Walsh agreed to provide that information.
Ms. Walsh stated that the correct number for Willow was 5
to 9, whereas Pikka was correctly indicated at 8 to 13.
Senator Micciche noted that there was a negotiation with
the federal government, and the state lost significant
royalties in the Alaska National Wildlife Refuge (ANWR). He
wondered the administration was pushing for a change in the
rates.
Commissioner Feige replied in the affirmative, and there
was an introduction to the concept with the Department of
the Interior.
10:06:18 AM
Co-Chair Stedman asked for a definition of "significant."
Ms. Walsh addressed slide 12, "State of Alaska, Royalty
Analysis." She stated that there was an examination of the
four different areas.
Commissioner Feige furthered that the 50 percent of the
$345 million for Willow would go into the mitigation fund.
The result would be approximately $300 per year.
Co-Chair Stedman stated that the number would be divided by
five.
Commissioner Feige agreed.
Senator Wielechowski wondered whether the fields on the
federal lands were eligible for the gross value reduction
under the tax law.
Commissioner Feige replied in the affirmative.
Ms. Walsh hoped the questions had been addressed related to
where production occurred on the North Slope.
10:09:05 AM
Ms. Walsh discussed slide 14, "State of Alaska, Status of
Development":
.notdef 2019 is expected to be the highest year in the last
20 years for exploration and production rig activity.
10:09:42 AM
AT EASE
10:10:36 AM
RECONVENED
10:11:19 AM
Co-Chair Stedman queried DNR's opinion on the activities
within the oil and gas industry.
Ms. Walsh responded that DNR was in a position to see jobs
for individuals in the oil and gas industry, because of
activity. She stated that exploration did not lead
immediately to production, or money to the state general
fund. She stressed that it was an exciting indication of
the state's oil and gas.
Commissioner Feige furthered that part of the exploration
uptick was because of Brookian play types. She stressed
that there was excitement in the classification of the
North Slope as a "super basin", because of the prolific
nature of the resource.
Co-Chair von Imhof asked whether there were other factors
that a company would invest in Alaska.
Commissioner Feige stated that, in her personal opinion,
companies wanted a diverse set of projects in their
portfolios.
10:15:46 AM
Senator Wielechowski asked how many exploration and
production rigs were on the North Slope, and queried a
comparison to Texas or North Dakota.
Ms. Walsh stated that the projected rig count for the 2019
season was upward of 15 rigs, which was the high in 2004.
She felt that Alaska barely compared to the other states.
Co-Chair Stedman requested the historical rig count.
Ms. Walsh agreed to provide that information.
Ms. Walsh continued with slide 14:
.notdef Pikka, Mustang, and Placer finds demonstrate great
potential.
.notdef New data suggests enormous potential in Nanushuk and
Torok formations.
.notdef Legacy fields including Prudhoe and Kuparuk have
exceeded internal expectations through infield work.
.notdef Smaller companies, like Caelus, BlueCrest and
Armstrong, are engaging in exploration plans that will
help maximize TAPS throughput into the future.
.notdef New players, like Oil Search, indicate industry
acknowledgment of large, viable fields that were
unknown.
.notdef Continuous work with North Slope communities,
presidential administration, and Congressional
delegation on Arctic energy policy and decision making
that support responsible development (ANWR Coastal
Plain, OCS, NPR-A)
Ms. Walsh discussed slide 15, "Department of Natural
Resources, Status of Development." The slide showed a map
of North Slope Oil and Gas Activity.
Co-Chair Stedman asked Ms. Walsh to provide further
information pertaining to land ownership
Commissioner Feige commented that she would provide follow-
up maps.
10:21:58 AM
Ms. Walsh highlighted slide 16, "Department of Natural
Resources, Status of Development," which showed two maps.
She noted that activity maps for Cook Inlet were also on
the department website. She directed attention to the map
on the left of the slide.
Commissioner Feige read slide 17, "Alaska Department of
Natural Resources: Permitting Status." She stated that Ms.
Longan would address the information.
SARA LONGAN, DEPUTY COMMISSIONER, DEPARTMENT OF NATURAL
RESOURCES, looked at slide 18, "State of Alaska, anatomy of
a Large Scale Development Project":
.notdef Statewide or regional impact - infrastructure
development, economic growth opportunities
.notdef Generally require long term leases or dedicated
legal access such as easements in order to obtain
project financing
.notdef Lease/Unit Plan of Operations or Plan of Development
.notdef Shorter term land use permits are necessary for
construction
.notdef Material sales for development
.notdef Water Authorizations for development and operations
10:25:54 AM
Senator Bishop asked about water authorizations. He
wondered if they were annual or if it was possible to do
multiple year authorizations.
Ms. Longan replied that some of the water authorizations
were annual, and there were tools for multi-year water
authorization and use. She stated that there was a
scientific process to analyze the available water, and
monitored it over time based on the various companies'
water needs.
Ms. Longan discussed slide 19, "Operating Efficiencies,
Division of Oil and Gas":
Division of Oil and Gas
.notdef Now includes the State Pipeline Section
.notdef Average oil and gas permit timeline is 3 month
.notdef Currently no permit backlog
Automation
.notdef Electronic applications
.notdef Continuous feedback loop with applicants
.notdef Updated guidance documents available online
Co-Chair Stedman requested a comparison between Alaska,
North Dakota, and Texas related to permitting timelines.
Ms. Longan highlighted slide 20, "Oil and Gas Resource
Potential From Federal Managed Lands":
Tax Act Coastal Plain Activity
.notdef BLM to administer an oil and gas leasing program in
the Coastal Plain of ANWR
.notdef Section 200001 PL 115-97 requires at least 2 lease
sales to be held by 2024
.notdef Each sale must offer 400,000 acres of highest
hydrocarbon potential, up to 2,000 surfaces acres of
Federal land to support production and support
facilities
.notdef SOA Royalty 50 percent
NPR-A Activity
.notdef Oil and Gas Leasing
.notdef CPAI continued progress
o CD-5 production
o GMT-1 began production October 2018
o GMT-2 and Willow Development
o SOA Royalty 50 percent through NPR-A Impact
Mitigation Grant Program
SOA authorizes water withdrawal; fish habitat permits
for activities on federal lands
SOA consultation, shares expertise on tundra travel,
air quality, reclamation, etc.
10:32:13 AM
Co-Chair von Imhof wondered whether there could be more
than two lease sales.
Ms. Longan replied in the affirmative.
Co-Chair von Imhof queried the determination of the highest
hydrocarbon potential.
Ms. Longan replied that it was utilizing oil resource
estimates, with an understanding where there was high,
medium, and low perspectivity in various major federal
agencies.
Co-Chair Stedman handed the gavel to Co-Chair von Imhof.
Senator Wielechowski wondered whether the department was
impacted by the current federal government shutdown.
Ms. Longan replied in the affirmative.
Senator Wielechowski requested an analysis of the impacts,
and whether they were severe impacts.
Ms. Longan replied that the issues were on a sliding scale
of impacts. She agreed to provide further information.
10:35:15 AM
Senator Shower wondering whether the data included other
agencies. He asked whether it was an aggregate, or was
there a possibility for the data to not be included.
10:35:43 AM
Ms. Longan replied that it was not included. She hoped to
highlight other agencies permitting processes, for a
possible collaboration to reduce delays on projects.
Co-Chair von Imhof handed the gavel to Co-Chair Stedman.
Ms. Longan discussed slide 21, "Federal Processes can Drive
Timelines, NEPA." She wanted to address the length of time
it took to receive an oil and gas permit.
Ms. Longan highlighted slide 22, "State/Federal
Coordination is Key, Office of Project Management and
Permitting":
OPMP coordinates permitting of natural resource
development projects in accordance with AS
38.05.020(b)(9):
The commissioner may lead and coordinate all matters
relating to the state's review and authorization of
resource development projects.
.notdef OPMP is located in the DNR Commissioner's Office
.notdef OPMP coordination is voluntary, reimbursable
services
Ms. Longan looked at slide 23, "Office of Project
Management and Permitting, State Agency Coordination":
.notdef Department of Environmental
Conservation
.notdef Department of Fish and Game
.notdef Department of Natural Resources
.notdef Department of Health and Social
Services
.notdef Department of Transportation and Public Facilities
.notdef Department of Law
.notdef Department of Commerce, Community and Economic
Development
.notdef Department of Labor and Workforce Development
.notdef Department of Public Safety
.notdef Department of Revenue
.notdef Alaska Railroad
.notdef Regulatory Commission of Alaska
.notdef Alaska Oil and Gas Conservation Commission
Ms. Longan highlighted slide 24, "Office of Project
Management and Permitting, State Agency Coordination":
.notdef Army Corps of Engineers
.notdef Environmental Protection Agency
.notdef Bureau of Land Management
.notdef Bureau of Ocean Energy Management
.notdef Bureau of Safety and Environmental Enforcement
.notdef DOT Pipeline and Hazardous Materials Safety
Administration
.notdef National Park Service
.notdef U. S. Forest Service
.notdef U. S. Fish and Wildlife Service
.notdef National Marine Fisheries Service
.notdef Federal Aviation Administration
.notdef Occupational Safety and Health Administration
.notdef U. S. Coast Guard
Ms. Longan addressed slide 25, "Communication Protocol,
State Agency Coordination."
10:45:49 AM
Senator Bishop requested an update on the Arctic Strategic
Transportation and Resources (ASTAR) Project. He wanted to
take advantage of the royalty rate in Smith Bay.
Commissioner Feige replied that ASTAR was established
approximately one year prior in DNR, and was still an
active program. She shared that there had been a number of
public meetings with villages and communities on the North
Slope. She remarked that there was work planned for the
coming season for evaluation of gravel resources within
Natural Petroleum Reserve-Alaska (NPRA). She noted that, as
projects and exploration marched west and east, gravel was
a key resource. She added that water was also a key
resource for construction of ice roads and ice pads during
exploration season. She stated that ASTAR was currently
focused on understanding the gravel resource to understand
its availability for future development. She stated that
the coming summer would focus on work that the Division of
Geological and Geophysical Surveys would be doing with
gravel drilling.
Senator Bishop asked whether ASTAR was a priority for the
current administration.
Commissioner Feige replied in the affirmative. She
furthered that there was a critical need to understand the
resources. She stated that it was important to move the
program forward and gathering the information so that the
state was "ahead of the power game."
Senator Micciche wondered why Alaska was excluded from a
2006 Gulf of Mexico Energy Security Act, where 37.5 percent
went to gulf producing states. He noted that Alaska was
excluded form that Act. He noted that Alaska was also
excluded from the onshore federal revenues of 49 percent.
He wanted to reignite the discussion around potential of
the nonstate lands, which would have a long-term impact on
Alaska.
Commissioner Feige agreed to provide that information.
Co-Chair Stedman announced that he would disperse the
responses to the questions.
ADJOURNMENT
10:51:33 AM
The meeting was adjourned at 10:51 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 011619 SFIN - Oil production and revenue fcst 20190115_Leg presentation update_01142019_v2.pdf |
SFIN 1/17/2019 9:00:00 AM |
Operating Budget |
| 011719 CORRECTED OG Permitting SFIN 01 17 19 FINAL- corrects slide 19.pdf |
SFIN 1/17/2019 9:00:00 AM |
Operating Budget |