Legislature(2023 - 2024)BARNES 124
02/21/2023 10:15 AM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| Presentation(s) Update from Energy Suppliers | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
[Contains discussion of HB 50.]
10:16:44 AM
VICE CHAIR PATKOTAK announced that the only order of business
would be presentations on the updates from energy suppliers.
10:18:27 AM
LUKE SAUGIER, Senior Vice President, Hilcorp Alaska, LLC, gave a
PowerPoint presentation titled, "Hilcorp: House Energy
Committee" [hard copy included in the committee packet]. He
began on slide 2 and showed a map of Hilcorp's holdings on the
North Slope and Cook Inlet. He continued to slide 3 and stated
that Hilcorp is the largest operator in Alaska. The company has
approximately 1,500 employees, with 75 percent Alaska residents.
He added that this percentage had decreased after Hilcorp
acquired BP Alaska, and it is expected to increase with the
company's policy of hiring Alaskans first. He stated that
Hilcorp has 1,700 oil and natural gas wells in the state, and it
has over 700 partnerships with Alaska businesses, which has
generated over $750 million in spending with these businesses.
He said that Hilcorp has contributed over $17 million to
different philanthropic causes in the state, and these causes
were chosen by the employees.
MR. SAUGIER continued to a map on slide 4, showing Hilcorp's
operations in Cook Inlet and the Kenai Peninsula. Hilcorp
provides over 62 billion cubic feet (Bcf) of natural gas, which
amounts to approximately 80 percent of the natural gas used in
Alaska. He stated that ENSTAR Natural Gas Company operates two
points of entry for natural gas into Anchorage. The four
largest natural gas fields in Cook Inlet are in Ninilchik,
Kenai, North Cook Inlet, and Beluga River. These produced a
combined 45 Bcf of the natural gas produced by Hilcorp. He
added that of the 17 natural gas platforms in Cook Inlet,
Hilcorp owns 15.
MR. SAUGIER added that there are four natural gas storage
facilities in Southcentral Alaska, three of which are owned and
operated by Hilcorp, and one of which is owned and operated by
the Railbelt utilities. He said that the Kenai Gas Field has a
gas storage capacity of 540 Bcf. He stated that the two things
to consider for natural gas storage are capacity and the speed
at which the natural gas can be distributed. He continued that
Swanson River gas storage facility has a capacity of 3 Bcf, and
because of its increased ability to pump out gas at a faster
rate it is the "emergency" storage facility. The third storage
facility owned by Hilcorp is at Pretty Creek, and it is the only
facility on the north side of Cook Inlet.
10:33:37 AM
MR. SAUGIER continued to slide 5 and stated that Hilcorp has
spent nearly $1 billion on capital projects to build new wells
and maintain and repair existing wells. He stated that
Hilcorp's primary focus is natural gas in Cook Inlet, and all
its new wells have been drilled for natural gas. He added that
between 2012 and 2021 Hilcorp has drilled over 80 wells. He
continued to slide 6 and stated that Hilcorp plans to spend a
fourth of its budget on exploration to find new natural gas
fields in Cook Inlet. He said that Hilcorp would use four
different rigs in 2023 to drill new wells. He added that
Hilcorp would also be plugging and closing 41 wells as part of
its cleanup process.
MR. SAUGIER continued to slide 7 and stated that Hilcorp was the
only bidder in the Alaska and federal lease sale in December
2022. He stated that Hilcorp will begin trucking natural gas
from the North Slope to Fairbanks, which is a first. He
expressed Hilcorp's interest in a natural gas pipeline from the
North Slope and the potential for using its platforms for
renewable energy generation.
10:41:39 AM
CHAIR RAUSCHER, in relation to HB 50, questioned whether Hilcorp
would be interested in carbon dioxide sequestration.
MR. SAUGIER answered that Hilcorp would investigate using its
oil platforms for sequestration.
10:43:16 AM
REPRESENTATIVE CARRICK asked whether natural gas would still be
trucked to Fairbanks if a pipeline were built.
MR. SAUGIER answered that Hilcorp will move the natural gas to a
storage facility on the North Slope, but it is not responsible
for the trucking. In response to a follow-up question, he
stated that Hilcorp's policy is to hire Alaska residents almost
exclusively, and it has not faced many challenges finding
Alaskan workers other than the occasional hire in a highly
specialized position. He added that the biggest challenge to
reaching 100 percent Alaska residency is because some employees
move out of state, and this is because of the unique North Slope
schedule of having 2 weeks on and 2 weeks off.
10:47:18 AM
REPRESENTATIVE MCKAY asked why Hilcorp would no longer sign any
long-term natural gas contracts.
MR. SAUGIER answered that fossil fuels such as natural gas and
oil are nonrenewable, and Hilcorp already has contracts for all
the gas it can sell. He added that other companies have reduced
their presence in Cook Inlet, and this has caused a drop in the
supply.
10:51:45 AM
REPRESENTATIVE PRAX asked whether price ceilings on natural gas
have created disincentives to new drilling.
MR. SAUGIER responded in the negative.
10:53:29 AM
The committee took an at-ease from 10:53 a.m. to 10:55 a.m.
10:55:00 AM
LORALI SIMON, Vice President, External Affairs, Usibelli Coal
Mine (UCM), gave a PowerPoint titled, "Hidden in Plain Sight:
Alaska's Affordable Energy" [hard copy included in the committee
packet]. She maintained that coal remains "very strong" as a
source of energy in the face of the declining natural gas
supply. She continued to slide 2 and stated that UCM is the
only coal mine in Alaska, and it has been operating for over 80
years with its third generation of family leadership.
MS. SIMON continued to slide 3 and slide 4 and stated that UCM
produces 1 million tons of coal on an annual basis, and this
powers all the state's coal-fired power plants. She stated that
it spends over $30 million annually with 300 different Alaska
suppliers. She stated that a report from 2021 shows that coal
saves ratepayers approximately $300 million annually in Alaska's
Interior. She continued to slide 5 and slide 6 and stated that
coal powers half of the Interior's energy generation. She
listed the six coal-fired power plants in Alaska: the University
of Alaska Fairbanks, Fort Wainwright Army Post, Eielson Air
Force Base, Aurora Energy, GVEA Healy 1, and GVEA Healy 2.
MS. SIMON continued to slide 7 and slide 8 and stated that the
UCM is "hidden in plain sight." She stated that coal is
plentiful, affordable, and reliable. She maintained that
improving technology will allow the usage of coal while still
meeting carbon reduction goals. She emphasized the importance
of coal as an "Alaskan" source of energy because it is produced
in Alaska and provides jobs for people in Alaska. She continued
to slide 9 through slide 11 and argued that the primary factor
in air quality issues in the Interior is from woodsmoke, and not
coal-fired power plants. She added that burning drier wood
would reduce the amount of polluting smoke, and UCM has created
Aurora Energy Solutions to provide dry wood to the Interior.
11:04:38 AM
MS. SIMON continued to slide 12 and slide 13 and stated that UCM
is involved in efforts to study carbon capture, utilization, and
storage (CCUS). She stated that a "healthy" mining industry
supports renewable resources, as the materials needed to create
objects, such as solar panels, must be mined. She expressed the
opinion that moving away from fossil fuels entirely is not
"realistic" for Interior Alaska, as fossil fuels will be needed
while waiting for improvements to renewable energy technology.
MS. SIMON moved to slide 14 and suggested that the use of coal
would support military readiness. She stated that the supply of
coal has 400 years of proven reserves, and there is enough coal
stockpiled to supply energy for 90 days without any additional
coal.
11:08:19 AM
REPRESENTATIVE PRAX questioned the percentage of the market that
is being provided with wood from UCM's wood kilns.
MS. SIMON expressed uncertainty on the percentage but added that
UCM provides 5,000 cords of wood annually. She expressed the
hope that this would double with a second wood kiln. In
response to a follow-up question, she answered that UCM is
involved in the coal-gasification project occurring at the
University of Alaska Fairbanks.
REPRESENTATIVE PRAX asked about the possibility of using smaller
coal plants to power some of the remote villages.
MS. SIMON answered that it would be possible, but there would
need to be more coordination between UCM and these communities.
11:11:19 AM
REPRESENTATIVE SCHRAGE questioned UCM's climate goals.
MS. SIMON answered that several of the past administrations have
discussed carbon reduction goals. In response to a follow-up
question, she expressed the understanding that coal power plants
have relatively low effects on air quality in the Interior and
mentioned the possibility of using waste steam from power plants
to heat hot water.
11:16:08 AM
CHAIR RAUSCHER asked for the names of the six coal-fired power
plants in Alaska.
MS. SIMON reiterated that they are the University of Alaska
Fairbanks, Fort Wainwright Army Post, Eielson Air Force Base,
Aurora Energy, GVEA Healy 1, and GVEA Healy 2.
11:17:41 AM
REPRESENTATIVE CARRICK asked what opportunities UCM sees in
renewable energy.
MS. SIMON answered that even if coal were to stop being used for
electricity generation, it would still be needed to create steel
for wind turbines, for example. She stated that this is just
one of the examples of mining minerals necessary for making
renewable energy. She added that 37 percent of UCM's employees
are multigenerational.
11:22:22 AM
The committee took an at-ease from 11:22 a.m. to 11:23 a.m.
11:23:50 AM
BENJAMIN JOHNSON, CEO and President, Blue Crest Energy, Inc.,
gave a PowerPoint presentation titled, "Cook Inlet Basin
Overview and Characterization; Energy Supply/Demand Challenge;
Cosmopolitan Tyonek Gas Opportunity" [hard copy included in the
committee packet]. He began with slide 2 and showed a map
marking the locations of oil and gas fields in Cook Inlet. He
stated that the Cosmopolitan Tyonek gas field is proven but
undeveloped. He said that production would fall below demand
unless a new source of natural gas is utilized. He expressed
the opinion that renewable energy development or importing
natural gas would both be expensive options.
11:25:54 AM
MR. JOHNSON continued to slide 3 and slide 4 and pointed out the
chart that shows natural gas in Cook Inlet running out by 2027
does not include the potential of the Cosmopolitan Tyonek gas
field. He suggested that there would be 8 to 10 years of
natural gas in this field, with the possibility of it lasting
longer. He stated that the field includes oil and is three
miles offshore. He added that the way the gas and oil would be
recovered, spills would be very unlikely. He continued to slide
5 and slide 6 and showed a diagram on how Blue Crest would
recover the oil and gas from the Cosmopolitan Tyonek field. He
added that the wells providing this data have already been
drilled. He stated that this includes seismic data. In
response to a committee question, he answered that the green
dots represent oil tests, and the red dots represent natural gas
tests.
MR. JOHNSON pointed out on slide 7 the three-dimensional map of
the oil and natural gas sands in the Cosmopolitan Tyonek field.
He moved to slide 8 and stated that a small platform would need
to be built to access the natural gas in this field. He said
that Blue Crest has already conducted the initial research and
is working on the engineering for the project.
11:34:14 AM
REPRESENTATIVE PRAX asked about the State of Alaska's role in
the permitting process.
MR. JOHNSON answered that Blue Crest has been working on the
permitting process for three years and expects things to
continue without any issues. In response to a follow-up
question, he said that the whole process has been ongoing for
eight years.
11:35:46 AM
REPRESENTATIVE MCKAY asked if either the bill involving carbon
storage [HB 50] or carbon credits would be helpful in attracting
investment for the project.
MR. JOHNSON answered that environmental concerns are a hurdle in
attracting investment, and the bills could potentially play a
role in alleviating these concerns.
11:36:54 AM
REPRESENTATIVE CARRICK asked whether a gas shortage could be
avoided if the project could be completed in time.
MR. JOHNSON stated that the project would be completed in time
if an investor were found. In response to a follow-up question,
he stated that there is natural gas available in the current oil
sands being worked by Blue Crest, and this could add several
years to the amount of natural gas available. He expressed the
opinion that the combined efforts of different companies should
prevent a natural gas shortage.
11:39:51 AM
REPRESENTATIVE PRAX questioned the conditioning needed for the
natural gas produced by this project.
MR. JOHNSON answered that the gas is very clean and would
require little conditioning.
11:40:54 AM
REPRESENTATIVE SCHRAGE asked if carbon sequestration legislation
would help with investments for natural gas projects.
MR. JOHNSON answered that, based on conversations with
investors, this legislation would make natural gas projects
"safer" investments.
11:43:34 AM
The committee took an at-ease from 11:43 a.m. to 11:44 a.m.
11:44:18 AM
JOHN HENDRIX, President, Furie Operating Alaska, LLC, gave a
PowerPoint presentation titled, "Furie Operating Alaska LLC:
House Energy Committee Presentation" [hard copy included in the
committee packet]. He began on slide 3 and slide 4 and stated
that Furie is Alaska's only locally owned and operated natural
gas exploration and production company. He provided background
information on the operations of the company, which included
that the headquarters are in Anchorage.
11:47:40 AM
MR. HENDRIX continued to slide 5 and slide 6 and gave an
overview of potential new explorations and developments for
Furie. He stated that a large portion of 2023 will be spent on
repairing two of the current wells owned by Furie. He added
that production is planned to be increased in 2024; however,
shipping could cause delays, along with rising costs,
unpredictable weather, and the sand in Cook Inlet.
11:53:13 AM
MR. HENDRIX continued to slide 7 displaying a map comparing
natural gas and oil activity in 2015 versus 2022. He continued
to slide 8 and gave an overview of different actions the
legislature could take to help natural gas production. He
pointed out that Furie pays 12.5 percent of gross revenue in
royalties on top of existing taxes. He recognized that the
state has taken too long to interpret and make available seismic
data. He recommended that Alaska accelerate the permitting
process for oil and natural gas production.
MR. HENDRIX continued to slide 9 through slide 12 and gave an
overview of natural gas prices in Alaska and around the U.S. He
stated that natural gas prices are roughly the same as they were
in 2009, even without adjusting for inflation. He acknowledged
that the proximity of the natural gas being produced keeps the
price from increasing greatly, and this is because of
transportation costs. He observed that there are no overarching
plans to make a complete switch to renewable energy.
12:01:48 PM
REPRESENTATIVE PRAX asked where the property tax number comes
from for natural gas platforms.
MR. HENDRIX answered that the number is issued by the state. In
response to a follow-up question, he said that any workforce
issues come from the service company side. He added that one of
the companies employs only Alaskans, while the other flies some
people up from the contiguous U.S.
12:03:55 PM
REPRESENTATIVE MCKAY asked if any imports being made by Furie
were because of the unavailability in Alaska.
MR. HENDRIX answered in the affirmative.
12:05:16 PM
REPRESENTATIVE SCHRAGE commented that he appreciates Furie's
work to provide natural gas to Southcentral Alaska. He
suggested that oil and natural gas demand will peak in the next
decade; however, it will start to decrease as more renewable
energy technologies are adopted at a faster pace.
REPRESENTATIVE PRAX expressed the belief that, more than any
other factor, the demand for renewable energy is because of the
federal subsidies.
12:10:01 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 12:10 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Usibelli in House Energy February 21 2023.pdf |
HENE 2/21/2023 10:15:00 AM |
Usibelli |
| House Energy 2023-02-21 BlueCrest.pdf |
HENE 2/21/2023 10:15:00 AM |
Blue Crest |
| HOUSE 2 21 23 Furie.pdf |
HENE 2/21/2023 10:15:00 AM |
Furie |
| House Energy Comittee slides vFINAL Hilcorp.pdf |
HENE 2/21/2023 10:15:00 AM |
Hilcorp |