Legislature(2013 - 2014)BUTROVICH 205
03/21/2013 07:30 AM Senate SENATE SPECIAL COMM ON IN-STATE ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska Department of Natural Resources-commercializing North Slope Gas | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE SPECIAL COMMITTEE ON IN-STATE ENERGY
March 21, 2013
7:32 a.m.
MEMBERS PRESENT
Senator Click Bishop, Co-Chair
Senator John Coghill, Co-Chair
Senator Peter Micciche
Senator Dennis Egan
Senator Bill Wielechowski
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Cathy Giessel
COMMITTEE CALENDAR
PRESENTATION: ALASKA GAS PIPELINE PROJECT OFFICE OVERVIEW -
COMMERCIALIZING NORTH SLOPE GAS
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
DAN SULLIVAN, Commissioner
Alaska Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Provided an overview of commercializing
North Slope gas.
ERIC HATLEBERG, Project Manager
Alaska Gas Pipeline Project
Alaska Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Provided an overview of commercializing
North Slope gas.
ACTION NARRATIVE
7:32:32 AM
CO-CHAIR CLICK BISHOP called the Senate Special Committee on In-
State Energy meeting to order at 7:32 a.m. Present at the call
to order were Senators Micciche, Egan, Co-Chair Coghill, and Co-
Chair Bishop.
7:32:51 AM
CO-CHAIR BISHOP welcomed Senator Giessel to the committee
meeting.
^PRESENTATION: Alaska Department of Natural Resources-
Commercializing North Slope Gas
PRESENTATION: Alaska Department of Natural Resources-
Commercializing North Slope Gas
7:33:16 AM
CO-CHAIR BISHOP announced that the order of business would be an
overview from the Alaska Department of Natural Resources (ADNR)
on the Alaska Pipeline Project (APP).
7:33:26 AM
DAN SULLIVAN, Commissioner, Alaska Department of Natural
Resources, said his overview would address DNR's perspective on
Alaska's gas commercialization efforts. He explained that the
focus would not only be on APP, but on broader state initiatives
that included the Alaska Gasline Development Corporation (AGDC),
the governor's Interior Energy Plan (IEP), and the Liquid
Natural Gas Trucking Plan (LNGTP). He stated that he would
present important milestones, actions moving forward, and
reasons for legislators to voice a unified gasline development
message to the different stakeholders. He said ADNR had a sense
of optimism, but recognized the fact that North Slope gas
commercialization had been a quest for over 40 years. He
declared that there were ways to break away from the skepticism
and take advantage of new opportunities. He addressed Alaska's
potential for getting gas to markets as well as in-state
citizens.
7:36:04 AM
ERIC HATLEBERG, Project Manager, Alaska Gas Pipeline Project,
Alaska Department of Natural Resources, introduced himself to
the committee.
COMMISSIONER SULLIVAN stated that commercializing the North
Slope would have to be steady and progress step-by-step. He
addressed Alaska's gas commercialization at the beginning of
2012 as follows:
· ConocoPhillips and British Petroleum (BP) folded the
Denali-Alaska Gas Pipeline project.
· ExxonMobil and TransCanada continued to look at the Lower
48 market despite rising opportunities in Asia.
· Point Thomson (PT) was being fought over.
· Alaska was not in the discussion as a possible supplier to
the Asian market.
COMMISSIONER SULLIVAN said all of that had changed, but Alaska
still had a long way to go. He stated that it was important for
the public to recognize that progress had been made in order to
break the circular spiral of cynicism.
7:38:32 AM
He addressed North Slope gas commercialization benchmarks that
were presented during the governor's 2012 State of the State
address. He referred to skeptics who noted that the goals set by
the governor had not been achieved in Alaska's history. He
asserted that the first key principal was to get gas as quickly
as possible to Alaskans at a cost that was not prohibitive. He
noted that the focus of IEP, LNGTP, and AGDC was to provide
Alaskans with affordable natural gas. He said the second key
principle was based on APP's focus to maximize the value of the
state's massive resource base that brought the most opportunity
and the lowest cost. He affirmed that the two key principals
were complementary and not conflicting. He stated that the
ultimate goal was to have a project that incentivized both gas
and oil exploration. He said ADNR envisioned two large North
Slope pipelines: Trans-Alaska Pipeline System (TAPS) and natural
gas. He explained that the broader strategic scheme was to
provide an outlet for future gas and oil exploration.
He declared that the governor's 2012 benchmarks had been met. He
noted that the first benchmark to align the North Slope
producers was an important achievement. He remarked that it was
not impossible to commercialize North Slope gas without
alignment, but it was easier to attain when the state and the
producers were working together.
7:41:58 AM
He said the second benchmark met was the PT settlement. He
explained that the PT settlement was strategic for three major
reasons:
1. Opened up the North Slope's eastern region.
• PT had never produced one molecule of hydrocarbons.
• PT was located in one of the most prolific oil and
gas regions in the country.
• 70,000 barrel per day pipeline would connect to
TAPS.
• Smaller explorers and companies would have access
to plug hydrocarbons into pipeline infrastructure.
2. Pre-investment for gas commercialization.
• 25 percent of the North Slope's conventional known
gas was at PT.
• Companies were spending billions of dollars to
develop PT as a down payment to commercial gas.
3. Strategic development for job creation.
• Senator Bishop, former Commissioner for the Alaska
Department of Labor and Workforce Development, made
sure that the PT settlement included a strong Alaska
hire provision.
• Hundreds of high paying jobs would be created,
peaking at over 2000.
COMMISSIONER SULLIVAN asserted that private sector money was
pouring into the state and was critical for gas
commercialization.
He said three different things were achieved in 2012 after the
PT settlement as follows:
1. Explained the settlement to the legislature and public.
2. Permitted the settlement with the North Slope Borough
and all of the other state agencies to make sure
building occurred during the winter of 2012-2013.
3. Ice roads were built.
7:45:24 AM
He called attention to a PT map of the Permitted Field Layout.
He addressed the PT-West Pad location on the map and noted that
the site's well was required to be drilled pursuant to the PT
settlement by 2016/2017. He remarked that the PT-West Pad was a
very big and complex well, but the producers announced that
development would be moved up to 2015/2016. He said the
development date change was good in terms of jobs and project
development. He said the accelerated well development schedule
was fast considering PT's remote location.
COMMISSIONER SULLIVAN addressed ExxonMobil's Initial Production
System (IPS) at PT-Central Pad and noted the importance of the
facility for the Point Thomson Export Pipeline (PTEP); a 70,000
barrel per day pipeline that would connect to TAPS. He said PTEP
work was being farmed out to multiple Alaska companies and
Alaska's citizens would benefit from the positive economic
impact.
He stated that the governor's action-forcing benchmarks
contributed to significant national and international press
regarding positive news in Alaska. He called attention to third
quarter benchmarks when the governor required hardened numbers
and timelines. He noted a progress letter from North Slope
companies that showed the benchmarks were being met. He
commented on a front page article in Canada's Globe and Mail
newspaper that addressed Alaska's assertive tact in its gas
program. He noted that Canada was Alaska's biggest competitors
and the article sent a message.
7:48:51 AM
He addressed attachments from the North Slope producers' letter
submitted to the governor in March 2012. He said Attachment-1
addressed the Southcentral Alaska Liquid Natural Gas Integrated
Team. He explained that Attachment-1 was important because it
demonstrated that companies were integrating their efforts and
areas of expertise. He explained that ConocoPhillips had
expertise in liquefaction, TransCanada in pipeline building, and
BP in operating North Slope facilities. He said the latest
integration briefing showed that 200-plus people were working
and tens of millions was being spent with important progress
being made.
He addressed Attachment-2 that was presented in February and
showed significantly more concept selection work in response to
the governor's request for hardened numbers. He stated the
combination of Alaska's massive resource and the numbers showed
that the Liquid Natural Gas (LNG) project would be one of the
largest in the world.
7:50:58 AM
CO-CHAIR BISHOP announced that Senator Wielechowski had joined
the meeting.
COMMISSIONER SULLIVAN addressed Attachment-3 and the governor's
request for an associated timeline. He explained that
Attachment-3 laid out a stage-gated approach that any large
scale development would need to go through. He noted that the
governor's latest State of the State address laid out what would
be required to happen in regards to commercial, engineering, and
regulatory activity. He said since October, the project had gone
through the Concept Selection stage-gate and ADNR was pushing
companies to move into the Front-End Engineering and Design
(FEED) stages by late spring or early summer; Pre-FEED and FEED.
He noted the continued importance in focusing on gas for
Alaskans, but the key stage-gate in the timeline was the Final
Investment Decision (FID) sanction. He stated that FID was the
go-no-go point and ADNR was pushing for a decision by 2015. He
said it was in the state's interest for Alaska's policymakers to
encourage the North Slope companies to accelerate the stage-gate
timeline. He called attention to incentives that were put into
the PT settlement for sanctioning prior to May 2016. He said
from the state's perspective, pushing the North Slope companies
through the stage-gate process was critical. He noted that the
stage-gate process was a document that showed how the North
Slope companies viewed the timeline through spending, personnel
deployment, and ancillary activities.
7:55:28 AM
He addressed the governor's other important stipulation that
APP, comprising of TransCanada and ExxonMobil, work together
with AGDC. He noted that a Memorandum of Understanding (MOU) for
cooperating was signed in the third quarter. He said the
relationship with AGDC was strong with great cooperation. He
stressed that efforts between APP and AGDC had been
complimentary without being duplicative. He explained that
AGDC's in-state gas emphasis for Alaskans centered on regulatory
permitting, Environmental Impact Statement (EIS), and rights-of-
way. He stated that the progress made over the past year focused
on alignment with the companies that had the gas leases and the
technical engineering. He remarked that the state should be
optimistic with the progress made over the past year. He said
aggressively promoting Alaska's LNG project with APP and AGDC,
had drawn attention from the global marketplace.
7:58:01 AM
He addressed Alaska's comparative advantages over other LNG
projects. He noted that the governor and ADNR presented Alaska's
LNG advantages on briefings made in Japan, Korea, China, and
large LNG conferences. He remarked that Alaska's biggest
advantage was its huge resource base and explained that many gas
projects, Russia and Mozambique for example, did not know the
extent of their reserves. He emphasized that Alaska knew exactly
that it had one of the largest known conventional gas resources
in the world.
COMMISSIONER SULLIVAN said a lot of existing infrastructure was
in place whether the gas commercialization project was done with
AGDC, APP, or a combination between the two entities. He noted
that existing rights-of-way would assist with the permitting
process. He declared that Alaska was the only place in all of
North America that had exported any gas to Asia. He cited
Alaska's exceptional record of reliability with never missing
cargo shipments to Japan and other parts of Asia.
He stated that Alaska had comparative advantages with regard to
geographic proximity, political stability, legal stability, and
cost competiveness. He said two recent studies that the state
was not involved with showed that a large scale Alaska LNG
project would have very strong competitiveness relative to other
projects. He disclosed that Alaska had LNG companies involved in
the project, a very important attribute for potential buyers.
He noted possible opportunities to help move state and federal
permitting forward. He said ADNR was looking at all permits
required in addition to permits previously issued. He remarked
that the proposed route was one of the most studied in the
country in terms of EIS, previous permits, and authorization. He
reported that federal regulators had been receptive to take into
account previous studies and permits to allow the project to
move forward without the need to start over. He stated that
accelerated permitting would make the project more cost
competitive by saving time and money.
8:01:47 AM
He addressed whether federal agencies would allow LNG export
licenses for the Lower 48. He asserted that Alaska should not be
part of the Lower 48's export debate. He stated that the U.S.
Department of Energy (DOE) and the White House were advised that
Alaska should not be included in any gas export restrictions. He
explained that the concern for exporting Lower 48 gas could
limit supplies and raise prices for domestic consumers. He noted
that economic activity had increased and the reindustrialization
of the Midwest was spurred by the low cost of gas. He stated
that the dynamics with exporting Alaska LNG were actually
opposite to exporting Lower 48 gas. He explained that a large
scale Alaska LNG or gas commercialization project would decrease
gas prices and increase gas supplies to Alaskans, Hawaiians,
Americans, and military operations.
COMMISSIONER SULLIVAN said ADNR was very confident that Alaska
would not be caught up in the Lower 48 export debate. He noted
that the DOE and the White House were shown a previous
authorization from President Regan that proclaimed Alaska
natural gas exportation would not have a negative impact on the
Lower 48 gas market. He said DOE and the White House were not
aware of the [1988] Presidential Finding. He asserted that
Alaska's lawyers believed that the presidential authorization
set a precedent and was still valid.
8:03:54 AM
SENATOR MICCICHE noted that U.S. Senator Murkowski had been
working on allowing Alaska to export natural gas for several
years. He asked if Alaska was staying engaged in order for the
state to avoid being involved in a "political football"
discussion.
COMMISSIONER SULLIVAN replied that ADNR was staying very engaged
and was in contact with Mr. Chris Smith, Acting Assistant
Secretary for Fossil Energy for the Department of Energy. He
explained that Assistant Secretary Smith was involved with
oversight for issuing gas export licensing. He noted that ADNR
stayed engaged by watching the Lower 48 export debate. He
explained that companies like Dow Chemical, a strong free trade
proponent, were asking for gas export limitations due to the
impact on American competitiveness and jobs. He remarked that
Dow Chemical was looking at building chemical manufacturing
facilities back in the U.S. due to the lower cost of gas. He
summarized that ADNR was staying in contact with companies that
shared Dow Chemical's perspective to ensure their messaging
recognized that Alaska was different.
He said LNG was a global market that was very competitive. He
addressed Alaska's comparative advantages over the Lower 48 and
Western Canada. He noted that Western Canada had to resolve
significant issues with the country's First Nations. He
explained that Alaska had resolved comparative issues
surrounding the Alaska Native Claims Settlement Act (ANCSA) and
TAPS.
8:07:25 AM
He addressed some of the disadvantages that emanated from
different LNG sources: Russia, Australia, and Qatar. He
explained the use of advocacy and the demand-pull strategies to
garner interest in Alaska LNG from multiple companies and
countries. He detailed that presentations to global buyers
centered on portfolio management and energy security through
supply diversity. He said Alaska was seeing results with
interest shown from Tokyo Gas; Matsui; Kogas, the largest LNG
buyer from Korea; and Resources Energy, Inc., a Japanese
consortium that has set up shop in Anchorage.
COMMISSIONER SULLIVAN revealed that Alaska was getting invited
to speak at some of the biggest LNG conferences in the world. He
noted a recent conference in Tokyo where the Alaskan delegates
were recognized by Japanese officials as Japan's first and most
reliable supplier. He explained that only the delegations from
Qatar and Alaska were mentioned, a sign that Japan was
interested in the next LNG relationship phases. He mentioned
that Alaska was asked to speak on North American export
opportunities at the upcoming LNG 17, the world's largest
conference and exhibition on LNG. He summarized that Alaska was
an LNG pioneer and was back on the map, both would have a
positive impact on the project's pace and success.
8:12:47 AM
He noted the governor's 2013 State of the State address and the
additional benchmarks set forth for commercializing North Slope
gas. He explained that the governor asserted that a lot more had
to happen. He revealed that the North Slope companies came back
on February 15 with a Concept Selection. He remarked that it was
important that summer fieldwork be completed and the companies
moved into the Pre-FEED stage-gate. He emphasized that the
state's two pipeline efforts remained closely aligned while
avoiding redundant costs.
He summarized that Alaska was back on the global stage through
its efforts for a large scale gas commercialization project. He
declared that good progress was being made with APP, AGDC, the
governor's IEP, infrastructure build out, and LNGTP to get gas
to Interior Alaska as soon as possible. He noted that regulatory
and permitting issues would be critical. He said continued
alignment of key stakeholders was important for the project to
progress. He remarked that attaining the Pre-FEED phase would be
an important milestone with regard to the key stakeholders
aligning around a project where the companies would be spending
hundreds of millions of their own dollars on moving the gas
project forward. He asserted that the gas project's opportunity
would not be open forever and the focus had to move from
fighting over different gas lines to fighting for a gasline. He
said the state had multiple pieces moving together in an
important way and were not in conflict with each other. He
declared that the key message for Alaska's policy makers was to
encourage the North Slope companies to accelerate their
progress.
8:17:12 AM
CO-CHAIR BISHOP asked to verify that ADNR was advertising for an
LNG person.
COMMISSIONER SULLIVAN answered yes. He said the LNG position
would address and build on the progress made on the advocacy
front in Asia.
CO-CHAIR BISHOP addressed TransCanada and their part in the
integration team. He asked if TransCanada was getting engaged in
the project.
MR. HATLEBERG replied that TransCanada's involvement in the
technical part of the project was through APP. He noted that the
same individuals that had been working on the project were still
providing information for the Southcentral LNG. He noted that
key individuals from TransCanada had recently provided a
progress presentation. He reported that TransCanada's focus was
on the mid-stream.
COMMISSIONER SULLIVAN confirmed that TransCanada's focus was on
the mid-stream.
CO-CHAIR BISHOP addressed the summer field season and asked
where the biggest amount of work would be.
MR. HATLEBERG replied that the significant work would be north
of Livengood.
CO-CHAIR BISHOP noted that TransCanada's labor schedule
projected a workforce in excess of 15,000. He detailed that
TransCanada's project would be done in phases, but noted that
the project had become an in-state project and timing was an
issue. He asked for an update as the project transitioned from
planning to commencement. He stated that preparation was
important and money would have to be spent for training.
COMMISSIONER SULLIVAN replied that he would welcome the
opportunity to provide a brief. He expressed hope that the state
would have the workforce challenge for the jobs associated with
the project. He called attention to APP's projected cost of $45
billion to $65 billion and stressed that it was critical to keep
the costs in the lower range in order to keep the project
competitive in a fierce global market.
8:21:28 AM
CO-CHAIR BISHOP remarked that it was expensive to convert an
import LNG terminal into an export terminal. He asked Senator
Micciche for his input.
SENATOR MICCICHE replied that import terminals were lower cost
and noted tank construction accounted for the majority of the
cost. He explained that a gas liquefaction facility was
expensive.
CO-CHAIR BISHOP thanked Commissioner Sullivan and Mr. Hatleberg
for their presentations.
8:22:18 AM
There being no further business to come before the Senate In-
State Committee, Co-Chair Bishop adjourned the Senate meeting at
8:22 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Sullivan_In-State Energy Committee_Commercializing NS Gas Update_3-21-13....pdf |
SISE 3/21/2013 7:30:00 AM |
In State Energy |