Legislature(2021 - 2022)BUTROVICH 205
03/04/2022 03:30 PM Senate RESOURCES
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| Audio | Topic |
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| Start | |
| Presentation(s): Alaska Gas & Lng Advisory by Gaffneycline | |
| SJR24 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SJR 24 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
March 4, 2022
3:34 p.m.
MEMBERS PRESENT
Senator Joshua Revak, Chair
Senator Peter Micciche, Vice Chair
Senator Click Bishop
Senator Natasha von Imhof
Senator Jesse Kiehl
Senator Scott Kawasaki
MEMBERS ABSENT
Senator Gary Stevens
COMMITTEE CALENDAR
GAFFNEYCLINE PRESENTATION(S): ALASKA LNG
- HEARD
SENATE JOINT RESOLUTION NO. 24
Urging President Biden's Administration and the United States
Congress to use the oil and gas resources of the state to offset
the loss of imported oil and to increase oil and gas production
in this state and other energy-producing states to fortify the
economy and security of the nation.
- MOVED CSSJR 24(RES) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: SJR 24
SHORT TITLE: END IMPORT OF O&G FROM RUSSIA
SPONSOR(s): RESOURCES
03/04/22 (S) READ THE FIRST TIME - REFERRALS
03/04/22 (S) RES
03/04/22 (S) RES WAIVED PUBLIC HEARING NOTICE,RULE
23
03/04/22 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
NICK FULFORD, Senior Director
Gas and Energy Transition
Gaffney, Cline and Associates
Houston, Texas.
POSITION STATEMENT: Delivered the Alaska Gas & LNG Advisory
presentation.
MICHAEL CLINE, Director
Corporate Strategy
Gaffney, Cline and Associates
Cobham, England, United Kingdom
POSITION STATEMENT: Participated in the Alaska Gas & LNG
Advisory presentation.
MIKE COONS, representing self
Palmer, Alaska
POSITION STATEMENT: Testified in support of SJR 24.
ACTION NARRATIVE
3:34:13 PM
CHAIR JOSHUA REVAK called the Senate Resources Standing
Committee meeting to order at 3:34 p.m. Present at the call to
order were Senators Kawasaki, Kiehl, von Imhof, Micciche,
Bishop, and Chair Revak.
^PRESENTATION(s): Alaska Gas & LNG Advisory by GaffneyCline
PRESENTATION: ALASKA GAS & LNG ADVISORY BY GAFFNEYCLINE
3:35:10 PM
CHAIR REVAK announced the Alaska LNG presentation by
GaffneyCline.
3:35:39 PM
MICHAEL CLINE, Director, Corporate Strategy, Gaffney, Cline and
Associates, Cobham, England, United Kingdom, introduced himself.
3:35:44 PM
NICK FULFORD, Senior Director, Gas and Energy Transition,
Gaffney, Cline and Associates, Houston, Texas, introduced
himself.
3:36:31 PM
MR. FULFORD expressed appreciation for the opportunity to
discuss monetizing gas in Alaska. He noted the two prior efforts
were 1) to export natural gas by pipeline to the Lower 48 and 2)
to liquefy the natural gas in Cook Inlet and export the LNG from
an appropriate deep-water port.
MR. FULFORD highlighted that in the 2010-2013 timeframe, the
potential to export LNG to the Lower 48 evaporated due to
discoveries of large quantities of unconventional natural gas in
the U.S. This eliminated what could have been a substantial
market for Alaska LNG and created a significant competitive
force through Gulf Coast LNG exports. He attributed passage of
Senate Bill 138 in 2014 for setting the stage for the current
concept of the project, but acknowledged attempts since then to
get a project going that is sponsored by IOCs or state agencies.
MR. FULFORD acknowledged that the LNG industry generally has
faced cost inflation the last few years, but said the largest
hurtle continues to be how to develop some $40 billion in
infrastructure and still deliver cost-effective gas to buyers
worldwide. The other feature is competition. For example,
production costs of LNG in Qatar is low and its recent 32-
million ton expansion fills a very significant tranche of the
global market. Projects in Mozambique, Mauritania, and Tanzania
are also able to compete effectively and represent the
competition.
MR. FULFORD highlighted the notable structural advantages of
Alaska LNG compared to LNG projects around the world. One is the
low cost of the feedstock because it is produced as a result of
the very substantial investments in oil production. He suggested
that to some extent it should be possible to leverage those
investments and produce a feedstock for the plant that is very
low in cost. He said the other feature, which arguably has
become more important, is that Alaska represents a potential
source of gas to Pacific gas buyers, which is where the growth
in the LNG market resides. This is increasingly important, given
the current concerns with U.S. LNG exports from the Gulf going
to Europe.
3:41:10 PM
MR. FULFORD turned to slide 3 and discussed global market
changes in the last few years. He said this has probably been
the most difficult time for the LNG industry in its entire
history. A significant structural oversupply began in about 2018
due to increases in U.S. Gulf Coast production without
sufficient demand, and the COVID-19 pandemic in 2020 tipped the
balance further. It created an unsustainable investment climate
for LNG and a loss-making climate for many of the buyers who
were already present.
MR. FULFORD identified price volatility as nearly an equal
problem because it could make LNG an unsustainable choice of
fuel in the future. He also highlighted the need for a stable
economic environment and terms that allow the billions of
dollars of investment to be paid off over a period of decades
rather than years. He predicted that a more global price would
emerge as LNG becomes more fungible and more is flowing
worldwide.
MR. FULFORD said the other feature worth mentioning is the
increased effort to look for lower carbon ways to deliver LNG
and find a way to meet both customer and investor requirements
for a lower carbon project. He noted that some major LNG
producers like Shell and TotalEnergies have started offering net
zero cargos to their customers. He predicted increasing pressure
to deliver a lower carbon product, but acknowledged the
impediment of the current political situation in Europe.
3:45:46 PM
SENATOR KIEHL asked how countries were analyzing the carbon
intensity of a fuel source.
MR. FULFORD answered that for a typical LNG product, about 25
percent of the carbon emissions occur during production at the
wellhead, transport to the liquefaction plant, and
regasification. The remaining 75 percent is related to burning
the fuel. He said the terms Scope 1, 2, and 3 are applied to the
entire energy value chain. Scope 1 and 2 typically relates to
the direct and indirect use of energy to produce the fuel and
Scope 3 relates to burning the fuel. Some of the net zero LNG
cargos focus entirely on Scope 1 and 2 while others focus on
Scope 1, 2, and 3. He said this makes it difficult to analyze,
but in Europe, in particular, it is retail customer use that
provides a sense of the carbon intensity for that fuel source.
He acknowledged that the definition of fuels that are net zero
or carbon free was still evolving.
SENATOR KIEHL offered his understanding that Alaska North Slope
gas would have a Scope 1 advantage because of established
infrastructure and discovered gas and a Scope 2 disadvantage due
to the long pipe. The analysis of Scope 3 would be that gas
would beat oil.
MR. FULFORD offered a redefinition. Scope 1 would be high
because of compressors in the pipeline and exchangers in the
liquefaction plant. Scope 2 would be the electricity used to run
the plant, which might come from somewhere else that is
producing carbon. Scope 3 is the delivery of the natural gas to
the customer who burns it for heat or other things.
SENATOR KIEHL said that was helpful.
3:49:20 PM
MR. FULFORD turned to slide 4, Natural gas price volatility
2020-2022. He acknowledged that in the last two weeks natural
gas has been propelled to the forefront of the geopolitical
debate and international discussion because Europe is vulnerable
to imported Russian gas. The imports and payment for Russian gas
currently are outside the sanctions that have been imposed, but
European gas buyers are still uneasy and wholesale prices in
Europe have increased steeply. Today the price is about $60 per
Btu, which is equivalent to $400 per barrel of oil. Estimated
cost in the UK last year was 700 pounds and next spring is
projected to be as high as 3,000 pounds.
MR. FULFORD highlighted that the volatility and sharp focus on
gas strengthens the position of Alaska gas. It is an environment
that investors are accustomed to and it represents a vast
undeveloped source of fuel for Asian markets. He opined that the
recent events have caused strategic buyers to think about where
they can secure a safe, secure supply of natural gas. He noted
that he gives the State Department an update every six months
and he knows that the opportunity to expand U.S. influence
globally through this very significant resource is high on their
agenda.
He suggested Mr. Cline comment on the oil market and the similar
geopolitical shocks that occur.
3:53:52 PM
SENATOR BISHOP asked how Alaska can capitalize on North Slope
gas when lending institutions on the East Coast won't invest in
Arctic projects.
MR. FULFORD said it is a problem but he believes that if the
usual players decline to fund various projects there will be
others that will be willing, although on different terms.
3:57:52 PM
SENATOR VON IMHOF wondered whether the war in Ukraine might be a
paradigm shift in terms of access to capital. She asked: 1) how
long will price volatility last; 2) will there be a paradigm
shift up for a long period; 3) how long will it take for an
Alaskan project to come to fruition; 4) will other projects beat
Alaska to the punch; 5) does it matter or is all the gas needed
because Russian gas will potentially be gone; and 6) when does
Alaska make the go or no-go decision.
MR. FULFORD said those questions accurately portray some of the
timing considerations about monetizing Alaskan gas. However,
even if a decision were made today, gas would not leave the
North Slope for at least four or five years. He offered his
belief that there will be a degree of paradigm shift because the
energy security of Europe has always been a concern. Many of
those concerns have been downplayed, but clearly there are
material risks when Russia is a significant supplier of gas to
Europe. He posited that this would accelerate the transition to
natural gas in Europe because people are already uneasy about
the use of fossil fuels. However, any meaningful transition to
lower carbon energy will take even longer than monetizing Alaska
natural gas because massive infrastructure changes will be
needed.
4:01:17 PM
MR. CLINE agreed that the paradigm shift will be around energy
security. He referenced the OPEC embargos that changed the
perspective on crude oil supplies. At that time the Middle East
was not just a supplier of oil, it was a strategic link to
economic security. He opined that what has happened in Ukraine
has made it clear that countries ought to be thinking about
locking in energy security for long term supplies of gas in a
treaty-like relationship. He suggested that this may be an
opportunity for Alaska and make it easier to get financing.
Monetizing North Slope gas has become more strategic than an
individual project.
4:03:15 PM
SENATOR MICCICHE shared his philosophy that a country that is
able to provide its own energy security must do so. This would
not slow the progress of alternative and renewable energy; it
would be complementary.
He mentioned meetings this week in New York with top leadership
from lending institutions and relayed his frustration that they
have drawn an arbitrary line in Alaska to protect the Arctic
National Wildlife Refuge (ANWR). Despite the fact that Alaska
has best of class Environmental, Social and Governance (ESG)
processes, financial institutions are rewarding other arbitrary
lines. He wondered whether Alaska gas would be appreciated more
if the price started with a premium then dropped to regular
prices.
4:07:17 PM
SENATOR KAWASAKI highlighted that BP, Chevron, and Exxon have
either exited or are in the process of exiting Russia. He asked
if those are some of the long-term signals that Senator von
Imhof mentioned or if smaller companies will take those places.
MR. CLINE replied that may happen but it is unprecedented to
have such a quick and drastic movement away from Russian
interests. It is a dramatic signal that this is being taken very
seriously and the Kremlin ought to be worried.
MR. FULFORD agreed with Mr. Cline's comments regarding the
significance and speed of some of the recent events. He said he
believes that the problems that Russia is starting to encounter
in exporting its own gas will be exacerbated rapidly by the exit
of those companies.
SENATOR KAWASAKI said he didn't realize that ConocoPhillips
exited Russia entirely after the Crimean invasion and did not
return. He asked if it was normal for companies to leave like
that and never return.
4:09:50 PM
MR. CLINE said he believes it would be hard for companies to
justify returning. He admitted that he was very surprised by
BP's announcement to exit its shareholding in Rosneft because it
is such a large financial decision. However, if it does happen
as announced, he did not see BP returning to Russia.
CHAIR REVAK noted the tight timeline for the meeting.
4:10:42 PM
MR. FULFORD skipped to slide 5 and focused on the point, "Future
years may well be more stable." He said the U.S. entry into LNG
has been very quick and it has introduced a more entrepreneurial
trading-based approach. The noticeable effect was the reduction
in price in the 2018-2019 timeframe. However, as more LNG
carriers move around the world in response to price
fluctuations, the more the gas industry is able to stabilize and
commoditize, similar to what oil has done. He said he believes
that in 5-10 years the ever increasing flow of gas between major
markets around the world will bring a degree of stability. That
will make it easier to establish a true value for gas globally
and provide a more sustainable outlook for lenders who even now
are becoming more accommodating of gas indices.
4:13:09 PM
MR. FULFORD turned to slide 6 and observed that one effect of
the volatile LNG industry the last couple of years is that a
number of projects that were only months away from a financial
investment decision had to postpone their plans due to low
prices. He highlighted the significant investment Qatar made in
LNG last year that would emerge in the next 2-3 years. The U.S.
Gulf Coast has also seen a flurry of LNG activity recently,
particularly Chinese buyers who realize the importance of
securing a long-term, committed supply of gas. In terms of the
overall outlook, he said it is clear that significant LNG
demands will reappear by about 2027. It could be even sooner if
China's current trajectory continues. Regardless of the
assumptions about the LNG transition, he said oil and gas and
LNG in particular remains a very robust market.
4:15:45 PM
SENATOR KAWASAKI read the bolded text near the bottom of slide
6, "...this could be the last chance to monetize the substantial
gas resources in a traditional manner." He asked what the phrase
means and what the definition is of a traditional manner.
MR. FULFORD said gas resources in Alaska have the potential to
be monetized in many different ways. The current concept of
production on the North Slope looks increasingly like a
relatively high cost solution in today's world, particularly as
the carbon intensity of LNG becomes more important. In terms of
monetizing natural gas in the traditional manner, the potential
for an ice breaking type of fleet to pick up LNG directly from
the North Slope could arguably be seen as less traditional.
Also, with technologies like blue hydrogen and blue ammonia, the
North Slope is arguably well positioned to produce hydrogen or
ammonia, sequestering the carbon appropriately and producing
what effectively would be a zero carbon fuel using the gas. He
acknowledged that the ideas were well down the road, but worth
significant investigation in the context of the Alaskan economy.
4:18:34 PM
SENATOR BISHOP observed that the energy market is fickle. For
example, when the state was looking at building a pipeline to
Alberta and on to the Lower 48, import terminals were being
built on the Gulf Coast. Those became export terminals, which
demonstrates how fast the market can change.
SENATOR MICCICHE followed up on Senator Kawasaki's question. He
asked how Gaffney Cline evaluates the risk of supply
availability when it can change so dramatically from the Final
Investment Decision (FID) through construction.
MR. FOLFORD answered that Gaffney Cline evaluates most of the
significant gas developments around the world on a continuing
basis, which provides insight into what the industry is doing.
In the context of evaluating supply risk, the top question is
whether the project will remain viable. Typically, the company
does a comparative study of existing and potential LNG. He
acknowledged that the example Senator Bishop cited, of the
extraordinary revolution in technology that reversed many of the
underlying assumptions in the Lower 48, was a black swan event
that Gaffney Cline probably would not have been able to predict
years in advance.
4:22:33 PM
SENATOR VON IMHOF referenced the last bullet point on slide 6
that identifies a new window of opportunity for Alaska. It read
as follows:
However, AK LNG will require very large capital
investments and the State will need to weigh the risks
carefully.
She asked if the State of Alaska would pay for this very large
capital investment or if it would be China, Exxon or a
combination. She asked how this is handled in other places. The
next question is about the size of that investment and whether
it has risen or fallen over the last several years. She also
asked if the numbers in the Wood Mackenzie report were accurate.
MR FULFORD responded that Alaska's economy is so inextricably
linked to its oil and gas resources, monetizing those resources
is more akin to a Middle Eastern country or nation whose economy
is similarly linked to oil and gas. Alaska is different than
Texas or Louisiana that have an array of privately funded LNG
projects. Arguably, the model used elsewhere in the world that
involves higher state involvement is appropriate for Alaska. It
might help get the project launched. He deferred the question
about the estimated cost until later in the presentation.
4:25:20 PM
MR. FULFORD displayed slide 7 and said that in the interest of
time, he would mention just a few of the features on the slide
regarding competitive levers and risks. He talked about feedgas,
project structure, and partners and financing.
Feedgas. In Alaska, an array of competent upstream providers are
operating significant assets that would form the basis for the
LNG project. The makeup of an LNG project typically would
involve one of those significant upstream stakeholders. That has
been the case in previous projects but is not necessarily the
case at the moment.
Forming a partnership with the feedgas producer and establishing
a project structure which creates alignment along the value
chain is most important. He offered his professional view that
the question of alignment and trust among stakeholders is the
feature that accelerates development most quickly.
Project Structure That last observation also relates to the
project structure where typically there are three broad concepts
used for LNG. One is a fully integrated project, which
ultimately was envisioned in the early days after Senate Bill
138. Another is a merchant project where one buys the gas from
the producer and then sells it on into the LNG project. The
third is a tolling structure where the pipeline and liquefaction
is treated separately as an infrastructure project that operates
under a tariff. He said a tolling type structure can often lend
itself to a host government involvement so the project structure
is definitely an area to consider.
Partners & Financing One facet of de-risking a project is equity
marketing. This would apply in Mozambique, Senegal, and many of
the current LNG projects where the project developers themselves
sign an LNG purchase contract thereby providing the basis for
the finance.
4:29:30 PM
MR. FULFORD moved to slide 8 and talked a little more about
feedgas. He offered his understanding that Prudhoe Bay is
approaching the blowdown phase so monetizing the gas will become
more and more important. Because a lot of the capital investment
has been made and paid for through oil revenues, there is the
potential for a much lower cost of gas. He said it depends on
the upstream economics, but there should be a very strong case
to produce natural gas from the North Slope at a relatively low
cost.
MR. FULFORD directed attention to the graph on slide 9 that
provides an opportunity to talk about the cost base of the
project. He highlighted two features. The first is the basic
upfront cost of the capital investment in the infrastructure. He
acknowledged that AGDC had done some work on this and noted that
he read the report that Wood Mackenzie produced. He noted that
the assumptions in the report came from AGDC, but it was not
possible to tell the basis of some of those numbers.
MR. FULFORD said he noticed that the cost of the gas processing
plant and the pipeline remain a little less than was envisioned
a few years ago, but the cost of the liquefaction plant came
down quite significantly. He said he was not sure when those
estimates were made, but with the current cost of steel and the
cost headwinds facing most oil and gas developments, it's a cost
reduction from a 2015 number. He opined that the current steel
market seems a challenge and pointed to the example of the
transboundary oil pipeline in Canada. It started out with a
similar budget to the gasline from the North Slope to Cook Inlet
but has since inflated significantly. He said that provides a
context in terms of the current market.
SENATOR VON IMHOF asked how one estimates the cost of a gas
liquefaction facility in Prudhoe Bay. She noted that he gave a
bit of an answer when he mentioned Alberta.
MR. FULFORD suggested that LNG Canada was a good metric. Public
domain data indicates that project would have a 40-50 percent
cost disadvantage compared to the Gulf Coast. He said that is
understandable given the seasonal building and remoteness of the
facility. That project is building a gas pipeline across the
Rocky Mountains and it has encountered headwinds. To estimate
such a project, one would conduct a front end engineering design
for the feedstock and that would go to an EPC [Engineering,
Procurement, and Construction] company to provide an estimate.
Then the LNG community would secure either fixed price or
limited variation contracts with the EPC contractors to address
some of the cost inflation issues. For the Gulf Coast, he said
the degree of capital efficiency applied to those EPC contracts
has proven to be very effective.
MR. FULFORD added commentary in the context of the Wood
Mackenzie report and AGDC's numbers. He recalled that two-thirds
to three-fourths of the cost reduction in the report relates to
financing. Specifically, it envisions a federal loan guarantee
and a project structured to de-risk the infrastructure element.
He said he had no issue with the math and the way they derived
the assumptions but to analyze the financing arrangements it
would be necessary to dig into the likely project structure and
look at some of the benefits.
He noted that Mr. Cline had some experience with de-risking
through financing.
4:36:40 PM
MR. CLINE said his reaction to the Wood Mackenzie report is that
it may be possible to use those financial mechanisms to reduce
the cost, but he did not have a clear sense of whether it is a
bankable project. More examination of the way the financial
mechanisms relate to the assumptions is need.
4:37:28 PM
SENATOR REVAK asked for a brief explanation of the key
differences in the cost of liquefaction in Alaska versus the
Gulf Coast or Canada.
MR. FULFORD replied it is a question of how the project is
financed, how it is de-risked to the point that the cost of debt
is very low, and how that fits in with the LNG sales and the
balance sheets at the end of the supply chain.
MR. FULFORD noted that he already discussed most of the points
on slide 10 about financing challenges and potential investors.
In addition to the question of financing, he said another
feature that may give rise to some concern is the CO2 handling
and the potential for such a significant presence of CO2 in the
gas and the resulting energy intensity that goes with that.
In terms of financing, he said LNG still attracts a high grade
of financial discipline. Some very material banking groups
continue to support LNG and it's attracting some large players,
which would be of key importance to Alaska going forward. For
example, some Canadian pension funds are more amenable to
resource type investments. That is an example that there are
still entities that are interested in this type of investment.
4:42:52 PM
MR. FULFORD briefly discussed slide 11 regarding the question of
selling LNG in an increasingly carbon orientated world. He said
the high CO2 content of North Slope gas may add to some of the
concerns and difficulties, but it may also represent an
opportunity. The fairly significant carbon tax credit for any
type of carbon capture could go up, particularly if it could
help form part of a lower carbon type project. He noted that
there are other allowances and credits available too. He
mentioned the Infrastructure Investment and Jobs Act and noted
that there are some additional measures being considered in
Washington that potentially could have a beneficial effect too,
should they pass.
4:44:20 PM
MR. FULFORD hesitated on slide 12 to further discuss the
potential role for the state. He noted that he already talked
about the role of the Alaska government in facilitating
monetization of the gas, and in other committees he had talked
about the availability of fiscal incentives. In that context, he
said it's clear that it is a prerequisite to provide an
environment that makes it profitable for both the resource
holder and the state to produce gas for the LNG project. He
suggested that the state could also potentially facilitate the
project through carbon capture and sequestration. For example,
Freeport LNG in Texas is reducing the carbon footprint of its
gas by capturing the CO2 from the gas treatment plant and
sequestering it geologically. They're claiming the $50 credit
for doing that, so it's not only helping the marketability of
the LNG but it is also providing a stream of revenue.
He noted that he already talked about financial structuring and
the very significant impact of lowering the risk profile.
Returning to Senator von Imhof's question about the role the
state takes, he said whether it involves direct investment or
some kind of guarantee or support for other mechanisms to de-
risk the project for investors and participants, that
involvement is a powerful tool in bringing a scheme on board.
MR. FULFORD said the idea that there is a premium available for
gas that is low carbon is definitely catching on. Again, he said
it would probably require some kind of state support. He
highlighted the particular opportunity in Alaska is for
communities such as Fairbanks to use gas to significantly lower
both heating and generating costs, again with state support.
4:48:27 PM
SENATOR KIEHL mentioned the talk about state support and
observed that the stand outs in the slide are fiscal upstream
incentives to lower the price of gas at the wellhead, and lower
exploration and production tax revenues being offset by
employment [along the value chain]. However, neither of those
aligns with Alaska's fiscal regime. He pointed out that as the
resource owner, lower prices for the resource is not necessarily
in the owner's interest, and there is no offset from enhanced
employment around the state. He asked how the recommendations
might be made to work for Alaska's fiscal regime or if it needs
to change to make those incentives possible.
MR. FULFORD said he could imagine an LNG-specific mechanism that
provides for faster pay back on the investment in exchange for
higher state revenues over the longer term. He added that most
LNG projects worldwide rely on enabling legislation which is
specific to the LNG project. In Alaska the enabling legislation
might aim to provide an appropriate investment climate for the
project. He deferred further response on the fiscal incentives
upstream to Mr. Cline
4:51:12 PM
MR. CLINE added that in many jurisdictions worldwide, states are
very proactive in supporting upstream operations, particularly
in a down market. For example, in 2020 Norway essentially de-
risked exploration by rebating drilling costs on an annual
basis. He noted that Alaska already has some tax incentives for
wells, which is helpful.
4:52:21 PM
SENATOR MICCICHE observed that he had only pointed out the few
levers the state can pull to improve the economics of the
project. He did not mention the things the state cannot control
such as the inflation of carbon steel products, design and
development, or the cost of transportation. He asked if that was
correct.
MR. CLINE replied that is correct. The state can't do anything
about the resource potential or the federal regulatory issues,
but the state does have control over incentives and creating a
fiscally stable environment. He opined that those measures could
make a difference.
4:53:54 PM
MR. FULFORD turned to slide 13 and noted that it summarizes the
discussion today. He paraphrased the bullet points that read as
follows:
To maximize potential for major gas exports to drive
economic growth:
• Foster environment that minimizes wellhead
breakeven cost
Balanced and competitive fiscal terms
• Develop creative and stable project structure
Align interests of State, gas producers and
project lenders
MR. FULFORD described a stable project structure as perhaps the
most important feature because it has the potential to save
years of pre-project discussion to align the parties. In this
case it is a question of aligning the interests of the state,
the gas producers, and the project lenders.
• Leverage Federal policies to develop lower carbon
energy technologies / investments:
Tailor to low carbon developments supporting
natural gas exports
MR. FULFORD also highlighted the potential for federal policies
to materially improve the economics of the project, particularly
in the context of a loan guarantee and resulting lower
financing.
• Creating supportive State policies for low carbon
monetization technologies
Blue Hydrogen, Blue Ammonia and CCUS
MR. FULFORD stressed that to be competitive from the perspective
of lenders and customers, a robust emissions strategy would need
to accompany the development of the project.
• Leverage green and other financing and credit
mechanisms to lower the cost of debt
To offset substantial pre-productive capital
needs
4:56:30 PM
SENATOR VON IMHOF thanked Mr. Fulford for showing up in person
and thoroughly answering the members' questions. She expressed
hope about staying in touch as the session progresses.
SENATOR MICCICHE asked why the breakdown on page 9 didn't
include the need for a contingency since there is an enhanced
need today. He also observed that getting into the $7-$9 range
to compete with the other projects would be more difficult now
than ever.
MR. FULFORD replied that the project has strong features so
there is definitely an avenue to be pursued with the financing
cost, particularly with current federal policies. However, it
would be wrong to characterize the cost challenges as easy to
address.
CHAIR REVAK thanked the presenters and stated his intention for
this to be part of a larger discussion.
5:00:34 PM
At ease
SJR 24-END IMPORT OF O&G FROM RUSSIA
5:03:35 PM
CHAIR REVAK reconvened the meeting and announced the
consideration of SENATE JOINT RESOLUTION NO. 24 Urging President
Biden's Administration and the United States Congress to use the
oil and gas resources of the state to offset the loss of
imported oil and to increase oil and gas production in this
state and other energy-producing states to fortify the economy
and security of the nation.
CHAIR REVAK thanked the members for working with his office to
improve the resolution. He said it shows that protecting
democracy and democratic ideals abroad is a bipartisan issue.
He solicited a motion to adopt the committee substitute (CS).
5:04:13 PM
SENATOR KIEHL moved to adopt the work draft committee substitute
(CS) for SJR 24, work order 32-LS1619\B, as the working
document.
CHAIR REVAK objected for discussion purposes. He stated that the
committee worked together on the resolution and the CS makes
small changes to strengthen the message.
5:04:54 PM
CHAIR REVAK removed his objection. Finding no further objection,
the committee substitute for SJR 24, version B, was adopted.
CHAIR REVAK said he believes the speech he made on the floor was
clear but he wanted to reiterate the importance of moving away
from depending on resources that are produced in authoritarian
regimes that have no regard for the environment, public safety
or human life as has been very clearly seen this last week in
Ukraine.
He read the following RESOLVES, and noted there may be an
amendment.
BE IT RESOLVED that the Alaska State Legislature urges
President Biden's Administration and the United States
Congress to allow the nation to use the oil and gas
resources currently available in the state to offset
the loss of imported oil; and be it
FURTHER RESOLVED that the Alaska State Legislature
urges President Biden's Administration and the United
States Congress to unleash national production in this
state and other energy-producing states to fortify the
economy and security of the nation.
5:06:39 PM
CHAIR REVAK opened public testimony on SJR 24.
5:07:05 PM
MIKE COONS, representing self, Palmer, Alaska, testified in
support of SJR 24. He stated that Vladimir Putin invaded Ukraine
for power and oil. He is a dictator and tyrant whereas President
Volodymyr Zelenskyy of Ukraine is the lone "good guy." He noted
that Hungary, Rumania, and Poland were taking in refugees.
[Recording is garbled.]
5:09:17 PM
CHAIR REVAK closed public testimony on SJR 24.
He asked if there were amendments.
5:09:27 PM
SENATOR MICCICHE moved Conceptual Amendment 1 to SJR 24.
CONCEPTUAL AMENDMENT 1
Page 2, line 22:
Delete "this"
Insert "a"
Page 2, line 22, following "state"
Insert "recognized as a global leader and best in
class in environmental, social and governance
(ESG) performance, that"
CHAIR REVAK objected for an explanation.
SENATOR MICCICHE stated that the conceptual amendment includes
what the Chair mentioned in his speech on the Senate floor about
the superiority of Alaskan production.
SENATOR MICCICHE read the WHEREAS with the conceptual amendment.
WHEREAS, because development sites around Alaska hold
the potential of billions of barrels of oil, oil and
gas produced in a state recognized as a global leader
and best in class in environmental, social and
governance (ESG) performance, that can fill the void
left from stopping Russian Federation imports, thereby
eliminating national dependence on authoritarian
energy producers abroad;
5:11:22 PM
CHAIR REVAK described the conceptual amendment as friendly and
removed his objection. Finding no further objection, Conceptual
Amendment 1 to SJR 24 was adopted.
CHAIR REVAK found no questions or comments and solicited a
motion.
5:11:58 PM
SENATOR MICCICHE moved to report the SJR 24(RES), work order 32-
LS1619\B, as amended, from committee with individual
recommendations and attached fiscal note(s).
CHAIR REVAK found no objection and CSSJR 24(RES) was reported
from the Senate Resources Standing Committee.
5:13:10 PM
There being no further business to come before the committee,
Chair Revak adjourned the Senate Resources Standing Committee
meeting at 5:13 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Gaffney Cline Alaska LNG Presentation 3.4.22.pdf |
SRES 3/4/2022 3:30:00 PM |