Begich says state needs to move on LNG

Alaska’s junior senator plays educational role on ANWR, NPR-A in Senate pushes administration on Alaska oil and gas development

Steve Quinn

For Petroleum News

Mark Begich returns to Alaska for his annual address to the state Legislature. His focus will be a report from Washington on progress as well as delays toward oil and gas development. Begich, a Democrat, is finishing his first term in office. He sat down with Petroleum News to discuss these issues as well as other developments such as the state’s pursuit of an LNG project, the Keystone XL pipeline debate, ANWR and the Senate Committee on Energy and Natural Resources getting a new leader, Louisiana’s Mary Landrieu.

Petroleum News: What do you want your general takeaway to be from your visit to Juneau and your speech to the Legislature?

Begich: I’ll be talking about what I consider to be the last five years of success and movement but not completed in the sense of oil and gas development in federal waters and federal lands. It was not until the last five years did we see movement on the issues of oil and gas development in the Arctic, and oil and gas development on NPR-A. I know that we had to push double time against the Obama administration on this issue. We had to push back on regulatory agencies, to really get them to see the long-term value. We have got past that, though we’ve had some delays due to more of a process outside of the policy.

Just to give you an example, I know the state made a goal of filling the pipeline up to 1 million barrels a day. It’s in a consistent decline right now, as you know. The oil that’s going to fill that pipeline, and be the lead in filling that pipeline, is going to be from federal lands. As you know ConocoPhillips announced their 55,000 barrels per day they projected to be added to the pipeline. I think it’s 48,000 barrels that’s coming off the National Petroleum Reserve. And CD-5 is in development as we speak. They will continue to work this year and next to put it into production. Greater Mooses Tooth 1 and 2: The EIS just came out, a draft that comes with good solid alternatives so they can make sure they build the roads. We are going to make a very strong statement and push toward the administration that says no delay and expedite the process and select one of the road alternatives, and let’s get on with the show and move NPR-A forward.

I do think once we get through some of these legal wranglings on the Arctic, we will be back in the field next year. As you know the projection is significant amount of barrels of oil once they are in full development. I want to make sure the Legislature knows that — at times — no question the federal government hasn’t been our ally here. But we have movement now for the first time in a generation on oil and gas, and I will continue through my office, my role and my seniority to push these issues and make sure the administration listens to what we think is an important part to the American energy policy and to the Alaska energy and job policies.

Petroleum News: You went to bat for Shell with the administration. Do you still believe this project will move forward without major delays?

Begich: I still feel very solid over where they are at. They still have a $6 billion investment. It’s not something you sneeze at. I do believe this court proceeding adds another wrinkle in the process. I feel like we can get through that. As you know I introduced legislation to circumvent this kind of delayed kind of legal wrangling, which has not moved from Congress. Some folks don’t like it. I understand that. We are going to reintroduce it, come back in and try to keep the process moving. We have prevailed on getting the administration to recognize the Arctic is and will be a huge future for us on oil and gas for this country and, for Alaska, with job creation. The question is this one more legal wrangling by what I consider some extreme groups is painfully part of the American legal system. I disagree with their claim. It’s very narrow. This is the first time I’ve heard the environmental community claim that the federal government has under estimated the amount of oil. In the past, they say don’t develop it because there’s not enough oil there. I feel very solid where Shell is at. I think they made a financial decision this year because they didn’t want to get caught in the middle of mobilizing, then find out a judge, a single individual, who can hamper their ability to move forward. I understand their risk analysis here. We are going to do everything in our power. I’ve met with the White House and talked to Secretary Jewel and made it very clear: I don’t want any delays; I don’t want any excuses; we are going to move this forward; it’s going to develop. We need to make sure the information is on the table so the judge can make the right decision and move forward.

Petroleum News: Do you get a sense that the administration looks at places like North Dakota and Eagle Ford in Texas for the source of increased domestic production while thinking the country doesn’t need Alaska’s help?

Begich: No. When our production, when you think about it, we don’t have any controversy over how to move our oil — unlike the Lower 48, especially in the Dakotas. Think about it, it’s double the amount of oil moving on trains the year before. The risk increases dramatically and as you know there have already been some mishaps. Some people are a little nervous about that. From Alaska’s perspective, I don’t see any deviation from where I have convinced them and pushed them: and that is Alaska Arctic oil and gas development is critical for the national security of this country and job creation, and for Alaska. I’m not taking my eye off them. Don’t get me wrong here. Let me make that clear. From his (Obama’s) chief of staff all the way down, they have heard from me very directly. It took me this long to convince them. I don’t want to be turned away when something changes.

Petroleum News: What kind of Arctic plan would you like to see from the White House?

Begich: The Arctic policies being developed — the White House has one; the Interior has one; the Department of Defense has one; the Corps of Engineers has one; the Coast Guard has one. There is a true lack of coordination from my perspective.

The administration needs to get off the dime and coordinate these in a way to get a comprehensive policy direction. Not only for our country, but also for how we interact with other countries in relation to the Arctic. We have the data now. What I mean by the data is we have enough information from all of these agencies to tell us what we need to be doing, what we should be looking for or what information needs to be gathered. Now we need to create a cohesive policy and just go. They need to put some juice behind this. It needs to be more coordinated. The White House hasn’t done a great job on this. What we need to do with the Ocean Subcommittee in Appropriations, which I chair, is put more resources there.

Petroleum News: What about naming a full-time ambassador for the Arctic?

Begich: I think that has important long-term value. You have to have a diplomatic level with other Arctic nations. Secretary Kerry has laid out a position that is not an Arctic ambassador, but to me it will have a role of coordinating all of these activities and be a real voice with our international leaders, but also within the federal government, a focal point on Arctic policy. I would like to have seen an Arctic ambassador. It seems like Washington, D.C., has just learned with have an Arctic Ocean. I think there is more value to having an ambassador. But this first step that Kerry has done is a good first step toward the path of coordinating our policy and giving us some direct action.

Petroleum News: Should this ambassador be an Alaskan?

Begich: Yes, I believe it should be. There are a lot of people who I think would be great for this type of position. I’m not going to disclose those, but I think there are some people who are perfect. I think you want someone who understands Alaska, its uniqueness for being an Arctic state and the ability to work with other dignitaries and have the ability to have that level of rapport with members of other countries.

Petroleum News: The Senate is getting a new Energy chair. Does it help to have someone from an oil-producing Gulf state?

Begich: Absolutely; without question. When I came to the Senate five years ago, Mary Landrieu was considered the oil caucus for the Democratic caucus: just her. When I came in, I joked that I doubled it. Since then we’ve increased our members: Joe Manchin (West Virginia); Sen. (Joe) Donnelly (Indiana); Sen. (Mark) Pryor (Arkansas); Sen. (Heidi) Heitkamp (North Dakota). We’ve increased our members within the Democratic caucus, but having someone like Mary who has been there a long time and is now the chair is going to have huge value for the energy industry overall and specifically for Alaska. She’s a friend of Alaska. I was in Louisiana a few weeks ago. I can tell you, they know the Begich family has a unique relationship with Louisiana because of my father’s passing with Congressman Boggs, who is from Louisiana. That (incident of the missing plane carrying Nick Begich and House Majority Leader Hale Boggs) is still remembered there.

Petroleum News: OK, on to the Keystone XL line continues to be hot topic. Why should Alaskans care about this?

Begich: First of all Canada is a great trading partner and business partner in a lot of ways. Many have already been producing oil from those fields to the tune of a little over half a million barrels a day going to Chicago. You never heard people complain when it first started years ago. It’s like the ANWR of the Lower 48, and I think they are wrong. It creates a lot of jobs and opportunity across this country. It keeps oil products refined in this country. I think it helps with our refinery capacity.

Also from an international perspective because the more fuel and oil products from our own oil and our North American allies makes a big difference in how we do business around the globe. Why is that important? It may mean we are not sending our Alaskan soldiers overseas to fight wars over oil.

That’s a blunt, plain fact. We spend a lot of time in the Middle East protecting oil routes because we desperately need that oil. We are becoming more and more dependent on our own resources. And when you can depend on Canada as an ally right here in North America, it gives us better international security and ensures that the risks of fighting wars over oil and sending Alaskan people overseas gets diminished. I’ve been to too many funerals so I know exactly the impact that has.

From an economic standpoint, it means the oil industry in North America is strong, which means competition. We have a lot more independents in Alaska than we’ve ever had.

Petroleum News: You noted that Keystone was kind of the ANWR of the south. Let’s talk about ANWR. There are still people, even in your caucus, who want ANWR permanently off limits for development. Has anything really changed since you entered the Senate?

Begich: Let me take you back five years ago: You would read every two or three weeks nationally about ANWR, usually driven by some Democrats. You rarely see those stories today. I believe my task was: one, lower the temperature; two, educate members; three, get more pro oil Democrats into the Senate. All of these folks I brought to Alaska. In fact I’m bringing Joe Manchin to Alaska. The goal is to lower the temperature, let people understand ANWR. Not only ANWR but also the Arctic, and National Petroleum Reserve and get some wins here. Two of those three are moving forward. Sen. Murkowski and I have a bill to do the first stage of directional drilling from the field next door. It’s not a perfect solution, but it’s a point to keep this talked about. Usually at the beginning of each session there is an anti-ANWR bill. This year it didn’t get introduced until a couple of months ago and I think it had two sponsors on it at that point. In the past it’s usually 15, 20 or 25. That wasn’t the case this time. Are we winning the war on ANWR? We are winning each battle and we’ve got a war still ahead of us. We think it’s the right kind of development in an environment where the technology is pretty advanced.

Petroleum News: Closer to home, what are your observations on the state pursuing an LNG export project?

Begich: Here’s my general thought on this. I know the Legislature has been going through all of this. Here’s how we have positioned ourselves on this issue. Whatever they do, they’ve got to get moving forward. I’ve supported LNG as mayor, but we’ve got to plan here. We’ve been able to convince the administration that whenever the state makes the call and whatever route they are going to do, we are going to streamline the permitting process lickety-split. That is a commitment we received from the administration. We will plow through it very quickly. But they have to make a decision. I know they are completing their due diligence on the governor’s proposal. At the end of the day, you have two goals you’ve got to meet. You’ve got to make sure there is gas for Alaskans. You’ve got to make sure you’ve got LNG export capacity that has long-term economic benefit for Alaska and for this country. Every time I’ve been asked how would I do this I’ve always said from the North Slope to the Interior, the state should build an oversized line, pay for it with a buyout clause after so many years and get on with the show because once you get to the Interior, there will be enough private sector companies to buy in on the back end for consumption in Alaska’s market as well as LNG export. Every day we wait, we are losing in advantages here. There are so many LNG projects going on now compared to where it was five years ago. We are losing our edge. The Legislature needs to deal with it this session and work with the governor. If they like it or don’t, figure it out, then get a project moving forward.

In an odd way, having the Panama Canal construction delayed is good and bad for Alaska. It will hurt us on the commodity end for goods coming to Alaska, but it’s good because the delay means 90 percent of the LNG tankers can’t get through from the East Coast of the United States over to the Pacific as soon as it could have. Once that canal opens up, 90 percent of those tankers on the market today will be able to fit through there and we will have a market disadvantage.

Petroleum News: Speaking of export, how do you feeling about lifting an oil export embargo?

Begich: It’s a world commodity. We don’t ban exports of wheat, corn or fish. It may give us advantages of getting better pricing if we know we can move it from one side of the country and receive it on the other side. You’ve got to be careful that you don’t create situations with our refinery capacities and our chemical industry capacity, but I think you can do it.