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On Alaska gas line, AEnergia asks ‘how?’ Long shot applicant explains details of AGIA proposal based on ‘paradigm shifts,’ partial state ownership and a lot of acronyms Eric Lidji Petroleum News
AEnergia believes Alaska is asking the wrong question about a natural gas pipeline.
The debate in Juneau right now concerns who will build a gas pipeline in Alaska, when and if the time comes. To Bill Burkhard and Andrew Taber, principals of AEnergia, the question should be: “How will it get built?”
Why “how” and not “who”?
Burkhard and Taber believe a pipeline to bring North Slope natural gas to market would be so large in scope, and the North American pipeline design and construction community is so small in size by comparison, that the same people and firms would be involved in the construction effort regardless of which company is actually at the helm.
“When you get something this large, it’s a necessity,” Burkhard told Petroleum News on March 7. “There is no company this large.”
So AEnergia wants to focus on the method of building a pipeline, and only then go out to look for materials, financing and people.
Burkhard worked on the first attempt to build a natural gas pipeline in Alaska back in the late 1970s and early 1980s. He is now an incident commander for flood control in the Sacramento-San Joaquin Delta Region of northern California.
Taber also lives and works in the Sacramento area as the chief executive officer of Taber Consultants, a long-time geotechnical engineering firm.
Burkhard picked up the project again and brought Taber onboard in 2000. They formed Ænergia late last year solely to apply for the license offered under the Alaska Gasline Inducement Act.
Simply put, AEnergia wants to build a public service pipeline. The state would own part of it and industry would own part of it. And for a time, at least, AEnergia would own a small part as well.
“We’re not in it for the money,” Burkhard said. “We didn’t apply to AGIA seeing the license as a lottery.”
Although the state decided months ago that AEnergia did not submit an adequate proposal, Burkhard and Taber waited until the comment period closed on March 6 to take the ideas behind their plan and where they hope to go from here to the public.
Perhaps the best way to unravel the Ænergia proposal is through the acronyms and phrases the proposal uses to describe itself: NIMS, CMM, the Project Nexus and OSTER.
NIMS, CMM and the Project Nexus NIMS stands for National Incident Management System.
It’s a model for responding to emergencies involving different agencies or crossing several jurisdictions. It’s used on both a national level and a local level, and from the military to the private sector.
“It’s the strongest configuration you can put people in to get a mission accomplished,” Burkhard said.
AEnergia believes NIMS is the best way to construct an Alaska natural gas pipeline, which would require the coordination of numerous state and federal agencies, Native and local governments and broad selection of professions and disciplines from the private sector.
To apply the emergency response tools of NIMS to a pipeline, the AEnergia plan creates a CMM, or Critical Mission Management Team, lead by AEnergia, as the project chief.
This team would follow through on goals set out by the Project Nexus, a public-private partnership among the federal government, the State of Alaska, local jurisdictions, the financing body, the producers and AEnergia, as the AGIA licensee.
The relationship between the CMM and the Project Nexus would both focus on specific goals at every step of the way, and be open to creative interpretation in achieving those goals.
“The Nexus would set the objectives,” Burkhard said.
In turn, the CMM would have a long leash in meeting those objectives.
OSTER When the producers ask about fiscal certainty, AEnergia answers with OSTER.
OSTER stands for One Simple Transparent Equitable Ratio and it would replace the tax and royalty structure that has governed the relationship between the state and the oil industry for fifty years.
Because the state would own part of the pipeline in the Ænergia plan, the ratio would guide both costs and profits.
Although adjustable in any direction, AEnergia proposed a ratio of 25-74-1.
That means for every dollar spent on the project, the state would pay a quarter, the producers would pay 74 cents and AEnergia would pay a penny. And for every dollar made on the project, those three parties would get the same amount back.
The various owners would be allowed to join a cooperative to market all the gas in bulk, or sell gas individually, if desired.
Paradigm shifts Burkhard and Taber believe the AEnergia proposal hasn’t gained traction because it requires such a large shift in thinking about a project many people in Alaska have been thinking about for decades. They said several lawmakers, after hearing the proposal explained in depth, seem interested in the ideas.
The Palin administration gave six reasons for rejecting AEnergia’s application.
The first three all involve Canada: First, the plan only takes gas to the Canadian border and not all the way to market, second, it doesn’t describe the route the pipeline would take past the border; and third, it doesn’t secure Canadian rights of way or authorization.
Fourth, it doesn’t unconditionally commit to future expansion.
Fifth, it doesn’t commit to Federal Energy Regulatory Commission certification of a gas treatment plant on the North Slope.
Sixth, it doesn’t adequately address who would pay for the $30 billion pipeline.
Burkhard and Taber believe many of the issues raised by the Palin administration go away once the project in considered in terms of “how” and not “who.”
For instance, Burkhard and Taber say the Project Nexus would choose the Canadian partners responsible for carrying the pipeline through Canada, and would also set up the system for expanding the pipeline when new companies find gas resources on the North Slope.
They said securing the financing needed to build the pipeline should be treated like securing the steel pipe needed to build it: something to “shop” for once the project is under way.
“Just being an applicant, we’ve had folks from Wall Street and other sources say, ‘Hey, you know we can come up with money for you if you guys need money,’” Taber told the Senate Resources Committee on Feb. 15. “The money, I think, is there for a project. It’s just a commodity.”
Despite the list of challenges from the Palin administration, Burkhard and Taber believe the AEnergia proposal captures the creative spirit of AGIA to find a new way to complete an old project.
“We’ve tried to honor the AGIA process all along. ... We’ve not done anything to take a shot at the governor,” Taber told Petroleum News. “We just think they haven’t seen it for what it is yet, and when they do they will have a lot of interest.”
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