Legislature(2013 - 2014)SENATE FINANCE 532

03/28/2014 09:00 AM Senate FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Moved SCS CSHB 266(FIN) Out of Committee
Moved SCS CSHB 267(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
SENATE BILL NO. 168                                                                                                           
     "An Act establishing the petroleum engineering                                                                             
     research for hydrocarbon optimization grant program                                                                        
     and fund in the University of Alaska."                                                                                     
2:42:25 PM                                                                                                                    
JOHN CHESHIRE,  UNDERGRADUATE RESEARCH  ASSISTANT, PETROLEUM                                                                    
DEVOLOPMENT  LABORATORY,  UNIVERSITY  OF  ALASKA  FAIRBANKS,                                                                    
(UAF) discussed  the PowerPoint,  "Alaska North  Slope (ANS)                                                                    
Conventional  and  Unconventional   Oil  and  Gas  (Resource                                                                    
Characterization and Development" (copy on file).                                                                               
Mr.  Cheshire  highlighted  slide 23,  "Alaska's  Heavy  Oil                                                                    
     What is heavy oil?                                                                                                         
          •Flows like syrup                                                                                                     
          •More dense than conventional oil                                                                                     
          Where is it found in Alaska?                                                                                          
          •On North Slope near conventional deposits                                                                            
          •Shallower depth than conventional oil                                                                                
          How much is there?                                                                                                    
          •24 - 33 billion barrels                                                                                              
          What's the challenge?                                                                                                 
          •High viscosity makes the oil difficult to                                                                            
          produce economically                                                                                                  
Mr. Cheshire discussed slide 24,  "Enhanced Recover of Heavy                                                                    
          •Water Flood                                                                                                          
          •Low cost                                                                                                             
          •Implemented on the Alaska North Slope (ANS)                                                                          
          •Poor recovery efficiency                                                                                             
          •Injection of steam heats oil, helping it flow                                                                        
          more easily                                                                                                           
          •Arctic environment makes steam injection on ANS                                                                      
          •Mix with oil causing it to flow more easily                                                                          
          •Carbon dioxide and light hydrocarbons are                                                                            
          typical solvents                                                                                                      
         •Could be available on ANS with gas sales                                                                              
          •Research ongoing                                                                                                     
Mr. Cheshire  highlighted slide 25, "Carbon  Dioxide Content                                                                    
of  ANS  Gas." He  stated  that  the slide  represented  the                                                                    
structure of typical  ANS gas. He stated that  12 percent of                                                                    
the gas was  carbon dioxide, which must be  removed from the                                                                    
gas before it could be sold.                                                                                                    
Mr. Cheshire looked at slide 26, "Research Background."                                                                         
Co-Chair Kelly  asked for  a description  of the  slide. Mr.                                                                    
Cheshire replied  that the slide  was related to  the phased                                                                    
behavior. When carbon  dioxide was injected into  the gas it                                                                    
could form a  second liquid phase. The  oil reservoir mostly                                                                    
held oil,  water, and  gas. If  carbon dioxide  was injected                                                                    
the  heavy crude  oil  would  be pushed  to  the bottom.  He                                                                    
stressed that  the research was intended  to showcase actual                                                                    
experiments rather than simulators  to determine how the oil                                                                    
behaved underground.                                                                                                            
Mr.  Cheshire   highlighted  slide  27,   "Conclusions."  He                                                                    
stressed that  it was an  ongoing research project,  but the                                                                    
process was moving  the state closer to  putting a different                                                                    
kind of oil in the  Trans Alaska Pipeline System (TAPS), and                                                                    
recovering other types of gas from ANS.                                                                                         
Mr.  Cheshire  displayed  slide 28,  "Future  Research."  He                                                                    
shared that the continuation of  the research would move the                                                                    
state  closer to  properly characterize  and understand  the                                                                    
oil in order to economically produce the oil                                                                                    
2:47:01 PM                                                                                                                    
Co-Chair Kelly  understood that there  was 12 to  13 percent                                                                    
carbon dioxide in  ANS gas. He shared that there  would be a                                                                    
gas  treatment  plant  to  remove  the  carbon  dioxide.  He                                                                    
wondered if the use of  the carbon dioxide produced value to                                                                    
the  state. Mr.  Cheshire responded  that producers  must be                                                                    
near  a carbon  dioxide source.  He felt  that there  may be                                                                    
synergy among the products.                                                                                                     
Senator   Bishop  wondered   if  the   carbon  dioxide   was                                                                    
considered  a  carbon.  Mr. Cheshire  replied  that  it  was                                                                    
carbon dioxide.                                                                                                                 
Senator  Bishop wondered  if Alaska  would be  available for                                                                    
carbon  credits from  the federal  government. Mr.  Cheshire                                                                    
replied that he did not know the details of that program.                                                                       
Senator  Dunleavy  wondered  if carbon  credits  for  taking                                                                    
carbon out  of the  atmosphere. Senator Bishop  indicated in                                                                    
the affirmative.                                                                                                                
Co-Chair  Kelly stated  that he  did not  think the  program                                                                    
would  qualify  for carbon  credits,  because  there was  no                                                                    
removal of carbon from the atmosphere.                                                                                          
2:50:25 PM                                                                                                                    
THOMAS POLASEK, UNDERGRADUATE  RESEARCH ASSISTANT, PETROLEUM                                                                    
DEVOLOPMENT  LABORATORY,  UNIVERSITY  OF  ALASKA  FAIRBANKS,                                                                    
discussed slide 29, "Alaska Heavy Oil Resource."                                                                                
          Heavy oil resource overlies existing fields                                                                           
          Oil is present in multiple reservoir zones                                                                            
          Total: 24 - 33 Bbbls oil in place                                                                                     
Mr.  Polasek  highlighted  slide 30,  "Permafrost  Thaw  and                                                                    
Subsidence."  As hot  fluids or  steam are  put through  the                                                                    
wells, it would increase the  rate of thaw. Normal oil wells                                                                    
produce  oil at  approximately 150  degrees Fahrenheit.  The                                                                    
heat that would be applied would be at 600 Fahrenheit.                                                                          
Mr.  Polasek  discussed  slide   31,  "Permafrost  Thaw  and                                                                    
Subsidence."  Depending  on  the  soil, the  soil  would  be                                                                    
greatly disrupted by  the thawing. The friction  of the soil                                                                    
on the  well could cause the  wells to bend a  small amount.                                                                    
The uneven  settling could  also destroy  the infrastructure                                                                    
at the surface.                                                                                                                 
Mr.  Polasek looked  at  slide 32,  "Ice  Content and  Upper                                                                    
Permafrost Soils." The  picture on the left  showed the dark                                                                    
areas as  ice, so there  would be great shifting.  The right                                                                    
hand side showed  ice pout, so there may not  be shifting in                                                                    
that area.                                                                                                                      
Mr.  Polasek   discussed  slide   33,  "Ice   Content  Upper                                                                    
Permafrost Soils." The pictures  showed how the strength and                                                                    
integrity of the soil could degrade if melted.                                                                                  
Mr. Polasek highlighted  slide 34, "Experimental Equipment."                                                                    
The focus of  his research was to determine how  to keep the                                                                    
heat inside the wells. The slide outlined their work.                                                                           
Mr. Polasek discussed slide 35, "Project Objectives."                                                                           
     •Collect data to analyze how best to protect current                                                                       
     and future wells                                                                                                           
     •Acquire empirical data for tuning permafrost thaw                                                                         
     computer simulations                                                                                                       
     •Gain lessons learned for future research using frost                                                                      
     cell equipment                                                                                                             
2:55:05 PM                                                                                                                    
Mr.  Polasek   looked  at   slide  36,   "Project's  Current                                                                    
Progress." He  stated that the  slide showed the  frost cell                                                                    
inside of a refrigerated  room; the students collecting silt                                                                    
from  the  Army's  Cold   Regions  Research  Lab  permafrost                                                                    
tunnel; and installing the miniature  casings into the cell,                                                                    
which demonstrates  the size  of the block  of soil  for the                                                                    
Mr.  Polasek   highlighted  slide  37,   "Project's  Current                                                                    
Progress." The slide shows photos  of the process of loading                                                                    
the cell.  The wires  were the  different heat  sensors that                                                                    
were inserted in the soil with  another layer of silt on top                                                                    
of the wires. The  miniaturized tubing represented the rings                                                                    
in the  oil wells.  Each one  of the  tubes was  now sitting                                                                    
inside the  casing, so the  fluids would be  flooded between                                                                    
the  two  tubes.  The  wires  were  intended  to  accurately                                                                    
monitor the heat traveling through  the wells. The two wells                                                                    
on  the  right were  vacuum-insulated  tubes,  to mimic  the                                                                    
vacuum-insulating  tubing  that  could  be  put  inside  the                                                                    
Mr. Polasek  discussed slide 38,  "Impacts on  Future Alaska                                                                    
North Slope Oil Production."                                                                                                    
     1. Estimated 24 - 33 billion barrels of heavy oil,                                                                         
     much of it is inaccessible without thermal EOR                                                                             
     2. One step closer to unlocking access to heavy oil on                                                                     
     Alaska's North Slope                                                                                                       
Co-Chair Kelly wondered  surmised that the 24  to 33 billion                                                                    
barrels  of  oil  was   under  current  infrastructure.  Mr.                                                                    
Polasek agreed.                                                                                                                 
Mr. Polasek looked at slide 39, "Future Work."                                                                                  
     1. More complex/multilayered models. UAF is the first                                                                      
     to do this type of physical modeling.                                                                                      
     2. Further research into geomechanical forces on                                                                           
     scaled down wells                                                                                                          
     3. Collaboration with Alaska's energy industry                                                                             
Co-Chair Kelly shared that there  were hundreds of thousands                                                                    
of trillions of  cubic feet of natural gas in  the earth. He                                                                    
asked  that   Mr.  Patil  discuss  the   existing  potential                                                                    
resource on ANS,  and the resource that  would be underneath                                                                    
existing infrastructure.                                                                                                        
SHIRISH PATIL,  DIRECTOR, PETROLEUM  DEVELOPMENT LABORATORY,                                                                    
UNIVERSITY  OF ALASKA  FAIRBANKS,  looked at  slide 3,  "ANS                                                                    
Heavy  Oil  and  Gas  Hydrate Resources."  He  testified  in                                                                    
support of SB 168. He stated  that the slide showed a cross-                                                                    
section of the  ANS measured oil fields. The  two blue areas                                                                    
were the  methane hydrate resource  that sits under  or near                                                                    
the  existing infrastructure.  The  red color  was the  free                                                                    
conventional  gas, which  was where  the potential  pipeline                                                                    
would bring the gas to market.                                                                                                  
Co-Chair  Kelly asked  for information  regarding timing  of                                                                    
the  project, because  Alaska was  currently only  producing                                                                    
light  oil.  Mr.  Patil  replied  that  there  was  research                                                                    
regarding  throughput for  TAPS at  roughly 550,000  barrels                                                                    
per  day, and  was  rapidly declining.  While other  methods                                                                    
were considered for extracting more  oil from ANS, the light                                                                    
oil production  was declining.  He felt  that the  heavy oil                                                                    
production  would  not go  as  quickly  as desired.  If  the                                                                    
carbon  dioxide from  measure gas  sales was  not available,                                                                    
the gas  must be sequestered.  The development of  heavy oil                                                                    
was critical to move the  oil through TAPS. Heavy oil, light                                                                    
oil, and  natural gas development was  an optimization issue                                                                    
that one must see as timing crucial.                                                                                            
3:02:50 PM                                                                                                                    
Co-Chair Kelly  stated that this  was the first time  he had                                                                    
heard  that  gas production  must  occur  to assist  in  the                                                                    
development  of heavy  oil. Mr.  Patil  stated that,  though                                                                    
there will  be gas  sales, the  gas must  be used  to inject                                                                    
into  Prudhoe  Bay to  maintain  the  reservoir pressure  to                                                                    
extract more oil.                                                                                                               
Senator  Bishop wondered  if the  bottom  right picture  was                                                                    
from  BP's  heavy oil  project.  Mr.  Patil replied  in  the                                                                    
Senator  Bishop asked  if  BP had  stopped  their heavy  oil                                                                    
project.  Mr.  Patil responded  that  there  was still  some                                                                    
production from  that project. He  stressed that  there were                                                                    
some limitations  in how much  production could be  from the                                                                    
heavy oil.                                                                                                                      
Mr.  Patil looked  at slide  18, "The  Gas Hydrate  Resource                                                                    
Pyramid."  He noted  the  different,  important layers  that                                                                    
must be permeated  in order to reach  the resource including                                                                    
arctic  sandstones,   deep-water  sandstones,  non-sandstone                                                                    
marine  reservoirs  with   permeability,  massive  surficial                                                                    
nodular   hydrate,  and   marine  reservoirs   with  limited                                                                    
Mr.  Patil  spoke  to  slide  19,  "Gas  Hydrate  Production                                                                    
Modeling." He stated that the  research used many tools that                                                                    
represented the different aspects of ANS.                                                                                       
Mr.    discusses   slide    20,    "Barrow   Gas    Hydrates                                                                    
     Research Objective                                                                                                         
          - To simulate natural gas production from gas                                                                         
          hydrate reservoir accounting for gas hydrate                                                                          
          dissociation phenomena.                                                                                               
          - To forecast and optimize natural gas production                                                                     
          with precise reservoir management                                                                                     
          - Perform a study on production variance                                                                              
         depending on different wellbore designs.                                                                               
          - Predict production behavior in planned wells.                                                                       
3:08:54 PM                                                                                                                    
Mr.  Patil  highlighted slide  21,  "GTL:  The Gel  Strength                                                                    
Problem." The slide showed a  simulation that related to gas                                                                    
to  liquids   transportation,  but   also  applied   to  the                                                                    
throughput in  TAPS. He stressed  that the flow  would stop,                                                                    
if the outside temperature drops.                                                                                               
Mr. Patil discussed slide 40, "Oil  & Gas Related R&D at UAF                                                                    
Synergies,  Partnerships (University,  State Govt.,  Federal                                                                    
Govt., and Industry)."                                                                                                          
     •Phase Behavior, Asphaltene Precipitation- Viscous/                                                                        
     Heavy Oil                                                                                                                  
     •Chemical Flooding and Conventional EOR                                                                                    
     •Wettability and Improved Oil Recovery                                                                                     
    •Chemical & Microbial Characterization- Viscous Oil                                                                         
     •Methane Hydrates                                                                                                          
     •CBM- Rural Energy Applications- Ft. Yukon                                                                                 
     •Novel Ceramicrete Technology for the Arctic                                                                               
     •Carbon Sequestration                                                                                                      
     •GTL Transportation                                                                                                        
          Workforce Development                                                                                                 
          New Reserves to Declining Production                                                                                  
          Economic Development                                                                                                  
Mr. Patil  highlighted slide  44, "Partnership  for Economic                                                                    
Development." He stressed that all  of the graduates had 100                                                                    
percent placement success.                                                                                                      
Mr.  Patil looked  at  slide  55, "PDL-Established  Research                                                                    
Partnerships."  The chart  showed the  placement success  in                                                                    
the various partners in the industry.                                                                                           
Mr. Patil displayed slide 56,  "Recent NETL-DOE Funded Oil &                                                                    
Gas Related R&D at  UAF Synergies, Partnerships (University-                                                                    
Federal  Govt., State  Govt.,  Industry,  Non Profits)."  He                                                                    
stated that  the federal  funding for  oil and  gas research                                                                    
was recently  zeroed out, so  the state needed to  invest in                                                                    
research in the  universities.  He restated  his support for                                                                    
SB 168.                                                                                                                         
3:13:31 PM                                                                                                                    
ROBERT HALL,  SELF, WASILLA (via  teleconference), testified                                                                    
in support  of SB  168. He stated  that creating  a targeted                                                                    
department was beneficial to Alaska's  economy. He felt that                                                                    
recent oil and  gas legislation had created  benefits to oil                                                                    
and  gas development.  He remarked  that the  challenges for                                                                    
oil  and  gas  development  on the  North  Slope  were  very                                                                    
unique, and unlike other oil and gas fields.                                                                                    
3:15:54 PM                                                                                                                    
AT EASE                                                                                                                         
3:16:04 PM                                                                                                                    
SB 168 was HEARD and HELD in committee for further                                                                              

Document Name Date/Time Subjects
SB 168 - 28-LS1343 U.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 - ConocoPhillips Alaska Files Permits for 1H NEWS at Kuparuk (News Release).pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 - PDL ASP Flooding Chemical Oil Recovery.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 - PDL CO2 Injection for Heavy Oil Recovery.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 - PDL Thermal Oil Recovery and Subsidence Challenges.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 - Sectional Analysis.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 - Sponsor Statement.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 - STARR Program Overview.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB168 Petroleum Development Laboratory March 2014.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 Petroleum Development Laboratory March 2014.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB168 BioPresentersPatilCheshirePolasek.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
HB266 Amendment #2 Olson.pdf SFIN 3/28/2014 9:00:00 AM
HB 266
HB266 Amendment #3 Dunleavy.pdf SFIN 3/28/2014 9:00:00 AM
HB 266
HB266 Amendment #4 Kelly.pdf SFIN 3/28/2014 9:00:00 AM
HB 266
HB266 Amendment #5 Olson-Kelly-Meyer-Fairclough-Dunleavy-Bishop-Hoffman.pdf SFIN 3/28/2014 9:00:00 AM
HB 266
HB266 Amendment #6 Kelly-Olson-Hoffman-Fairclough-Bishop-Meyer-Dunleavy.pdf SFIN 3/28/2014 9:00:00 AM
HB 266
HB266 Amendment #7 - Kelly - Bishop.pdf SFIN 3/28/2014 9:00:00 AM
HB 266
HB266 Amendment #8 Kelly-Olson-Fairclough-Bishop-Dunleavy-Hoffman-Meyer.pdf SFIN 3/28/2014 9:00:00 AM
HB 266
SB168-UA-SYSBRA-3-27-14.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB168 Possible Questions - Senator Kelly.pdf SFIN 3/28/2014 9:00:00 AM
SB 168