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NEWS BULLETIN

July 30, 2010 --- Vol. 16, No. 68July 2010

Bids received in open season

The Alaska Pipeline Project’s initial open season closed at 2 p.m. today Alaska time.

While results are confidential, Tony Palmer, vice president of Alaska development for TransCanada, provided the following statement:

“The Alaska Pipeline Project can report that we have received multiple bids from major industry players and others for significant volumes.

“We’re encouraged about the future advancement of the project if key conditions can be resolved. Although we need to further assess the results, we’re encouraged by the bids received, the interest expressed in our initial open season and shippers’ willingness to take the ongoing steps needed to continue to advance the project.”

“Our next step will be to work with our potential customers to resolve those conditions — that’s what we’ll be doing over the next several months,” Palmer said.

The Alaska Pipeline Project, a joint venture of TransCanada and ExxonMobil, is the North Slope to market natural pipeline.html'>gas pipeline project licensed under the Alaska Gasline Inducement Act, which provided $500 million in reimbursement for project costs in exchange for meeting certain state “must haves” and a commitment to continue the project through Federal Energy Regulatory Commission certification even if the initial open season was unsuccessful.

Given today’s statement by TransCanada that is not an issue, although as Palmer told Petroleum News yesterday in a background briefing, challenges remain, the next one being negotiating with bidders over conditions contained in the bids so that precedent agreements can be signed.

Palmer said the goal is to have those agreements signed by year end.

If conditions are simpler, it may take less time, he said.

On the other hand, “If we get many complex conditions we may not be able to achieve it in 100 business days,” which would extend beyond the end of the year when precedent agreements could be signed, Palmer said.

Once precedent agreements are signed, he said, FERC requires that within 10 days the pipeline “reveal the names of the customers, their volumes and the term of their agreement — the term being the date that it commences and the date that it terminates.”

Palmer said that there are still many hurdles in front of the project, starting with resolving conditions in the bids, and including regulatory approvals and financing.

AOGCC protests Blowout Prevention Act, notes federal failings in Alaska

The Alaska Oil and Gas Conservation Commission has sent a letter ripping anti-blowout legislation now pending in Congress, and also questioning federal oversight of drilling and abandoned well sites in Alaska.

The July 27 letter, signed by commissioners Cathy Foerster, John Norman and Dan Seamount, is addressed to Sen. Lisa Murkowski, R-Alaska.

The letter urges her to oppose H.R. 5626, the Blowout Prevention Act of 2010, whose sponsor is Rep. Henry Waxman, D-Calif., chairman of the House Committee on Energy and Commerce.

The committee on July 15 passed H.R. 5626 by a vote of 48-0, with one abstention.

The bill contains controversial language that would make state regulation of drilling, both offshore and potentially on land, subject to federal oversight.

The Alaska commissioners, in their letter, say this is “an unwarranted, unprecedented and far-reaching extension” of federal regulatory authority to lands under state jurisdiction, and is curious considering the “incompetent” federal regulation of the Macondo well involved in the Gulf of Mexico catastrophe.

The letter touts Alaska’s 50-year record of well permitting and drilling oversight, including frequent inspections of blowout prevention equipment.

Alaska’s enforcement of regulations is rigorous, in contrast to federal agency oversight of wells on federal land in Alaska, the letter says.

“The only entity which has had difficulty complying with Alaska’s regulations is one of the Federal agencies now proposed to oversee Alaska’s drilling program: the United States Department of Interior, Federal Bureau of Land Management,” the letter says. “For years the Commission has endeavored to obtain BLM’s compliance with the Commission’s regulatory scheme. Nonetheless, several BLM wells have been drilled without proper blowout prevention equipment, and BLM has failed and refused to comply with requirements to properly plug and abandon wells they have drilled.”

As evidence, the commissioners attached 11 photographs to their letter showing old wellheads on federally managed North Slope land. The well sites appear derelict, in some cases with rusting barrels strewn about and oil seepage on the tundra.

The AOGCC letter says “to suggest the Federal government can do a better job of regulating oil and gas drilling than the States is simply ludicrous.”

Suncor writing down Alaska leases

Suncor Energy appears to be backing away from Alaska.

In its second quarter financial filings, the Canadian company said it “recognized a charge of $44 million to reflect the write-down of certain land leases in the Natural Gas operating segment. These assets are in areas of Western Canada and Alaska that the company does not plan to pursue given its strategic business alignment.”

Suncor picked up almost 300,000 acres spread across the Brooks Range foothills and the National Petroleum Reserve-Alaska when it acquired the assets of the Canadian company Petro-Canada. In the foothills, Suncor became a partner of BG and operator Anadarko Petroleum. In NPR-A, Suncor became a partner of FEX, a subsidiary of Talisman.

In September 2009, Suncor announced plans to divest much of its natural gas assets by the end of 2010, but as of late May, Suncor spokesman Dany Laferrière said, “We’re still reviewing all our options and we haven’t made a final decision as to our assets up there.”

Suncor already divested land in the Rockies, Western Canada and Trinidad and Tobago, and proposed divesting other Western Canada lands and “non-core” North Sea assets.

Suncor has been focusing on its oil sands operations over its natural gas properties.

See stories in Aug. 8 issue, available to subscribers online at noon, Friday, Aug. 6, at www.PetroleumNews.com

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