Parnell spreading the word, making allies

Governor says Alaska not only state with federal permitting problems; urges development of state’s resources for benefit of nation

By Steve Quinn

For Petroleum News

Gov. Sean Parnell has a message for federal lawmakers and regulators: That Alaska has the natural resources — be it oil, natural gas or minerals — necessary to help the nation.

He’s not just talking about it in Juneau or Anchorage. He’s either delivering it himself or he’s dispatching members of this staff from the Department of Natural Resources.

Within two months dating to April 13, DNR Commissioner Dan Sullivan has touched on several subjects including:

• The decline in throughput in the trans-Alaska oil pipeline and federal hurdles inhibiting North Slope development;

• Access to oil and gas in Alaska;

• The abundance of rare earth minerals in Alaska.

Deputy Commissioner Joe Balash weighed in on a bill by U.S. Rep. Doc Hastings, who wants the federal government to hold lease sales in the most commercially viable areas and establish permitting deadlines.

Now in the first year of his elected term, Parnell has set a goal for the state to have the trans-Alaska oil pipeline operating at 1 million barrels per day.

Parnell is also forging alliances with fellow governors in resource states and House Natural Resources Chairman Hastings.

Parnell sat down with Petroleum News for a sweeping discussion on resource development issues ranging from efforts to get the Obama administration to pull back on its wild lands position to oil taxes and the Legislature’s inability to agree on a coastal zone management plan.

Petroleum News: How is it you thought it would be a good idea to have your commissioner and others travel to Washington to testify?

Parnell: It started long before that. I saw that as a state we were, in my view, being singled out. That was my first impression — that we were being singled out for resource exploration stoppage. When it came to permit review and permit issuance, it seemed like the federal government was picking on Alaska. But in my conversations with other governors since being elected and meeting with other governors, I find that there is a widespread limiting attitude within the regulatory agencies of the federal government. We have struggles with the EPA and the Interior Department here when it comes to permitting. Well so did other states. We fought back with the wild lands initiative where they were trying to lock out more land in our state as well as others. What I realized was federal domestic energy policy targeted all states, not just Alaska, for less oil exploration and development, and less natural gas exploration and development. But primarily oil is what I was focused on, so I began building coalitions with governors to fight back, and to allow access to our state’s resources to contribute to our nation’s energy picture. I also realized from a congressional perspective that we’ve had good federal presence in Washington in our D.C. office for some time, but we have not more fully deployed our commissioners to carry Alaska’s story beyond myself. I’ve testified before federal committees and spoken to cabinet level secretaries. I felt like we have other capable people who can carry Alaska’s message. At any juncture I can, I want to be able to tell Alaska’s story, but we are going to tell it in the context of our nation to produce its own resources and not be dependent on foreign resources. Frankly we have seen some success when it comes to that coordinated effort. I can point to the wild lands initiative when the secretary of the Interior stepped back from his initial aggressive posture there as a victory for state governments getting together and protesting a lock up of our state lands.

Parnell: It’s too early to tell. It’s all cumulative. Our resources groups in the state are focused as well, our Native corporations are focused on these issues, so this is a collaborative, team effort. Kind of like statehood when Alaskans off all parties and stripes stood up and said we want to determine our own destiny as a state. We want to have a say over our destiny. And they went back to Washington together and said we need to be a state. They were successful. I think we are only going to be successful if we broaden our movement to all Alaskans, but go beyond Alaska and go to those other resource-oriented states, which is what we are doing.

Petroleum News: Just last week Murkowski introduced a bill limiting appeals to EPA permitting. Do you see that as another helpful step?

Parnell: Anything we can do to increase permitting activity, increase the timeliness of the decision making of our federal government and our state government. Any more of that will lead to more jobs and economic growth for our state. I’ll support any federal measure or any state measure that works to improve our economy and nation’s resource base.

Petroleum News: What was your take on Doc Hastings introducing a bill on Alaska’s behalf, which included a visit to the state?

Parnell: I think it’s extremely significant that Congressman Hastings took on this challenge. What he has done is nationalize what had once been only an Alaska issue. The congressman from Washington (state), Doc Hastings, has said NPR-A is of national significance. Whether or not he’s successful in getting the legislation passed remains to be seen. But the fact is that now congressmen and congresswomen beyond Alaska are beginning to step up. They are taking what Alaska viewed as only our problem that we can’t get NPR-A permitted and they are saying the fact that we can’t get NPR-A permitted translates to higher gasoline prices at the pump in our state. When members of Congress start to do that, we can all start to see the tie in to Alaska’s assets and Alaska’s resources and how they can tie into our nation’s recovery.

Petroleum News: When we talked in February, it was your goal to build consensus among governors and federal lawmakers. How is that going?

Parnell: I think we are making progress. Again, I point to the wild lands decision. But I also point to Congressman Hastings making opening the NPR-A a policy of national significance rather than just of state significance. That to me is tremendous progress. We need to keep doing that with the Arctic offshore and with ANWR. Alaska is rich with resources and our nation needs them.

Parnell: I’m pleased that they are going to meet a deadline; that they’ve done the work. We have several pipeline options on the table. The overarching goal is to commercialize North Slope gas for Alaskans and beyond. How we get there is still being worked out. I can envision an in-state line going from the Gubik gas fields and feeding that gas to Fairbanks and the Interior region and a large diameter, 4.5-bcf-a-day, pipeline running from Prudhoe Bay south through Alberta to American markets. I think there is room for both, depending on how they come out. My bottom line goal is to move Alaska’s gas to Alaskans and markets beyond.

Petroleum News: You hear about folks in those areas who either don’t have access to natural gas or are running low, is this a supply issue or a global markets issue?

Parnell: It’s both. It’s a supply issue in Fairbanks because there is no access to low cost natural gas; it’s a supply issue in Southcentral because production is declining. If our state’s daily demand — and I’ll just use rough numbers — is 300 mcf of gas a day, the reservoirs at Prudhoe Bay and Point Thomson, they can produce 4.5 to 6 billion cubic feet a day. That’s not a good match if all we do is take that gas off only for Alaska communities and don’t get that gas to markets beyond. Because what that means is it will take a thousand years to use the reservoir and we’re not maximizing the reservoir. If however Gubik gas can produce 300 to 500 mcf a day, that’s a closer match to Alaska’s demand and it’s a short timeframe for getting that project done. So I hold out hope for not only Prudhoe Bay and Point Thomson gas.

Petroleum News: Linc Energy just announced its investment into the Umiat field. Is this a piece of the puzzle toward 1 million barrels per day?

Parnell: Well, it is. When I think about the million-barrels-a-day goal, I think about increasing production from state lands and increasing production from federal lands. The federal lands we’ve already talked about: NPR-A, Arctic waters and ANWR. On state lands, we have a lot of state lands with the prospect of more oil. In order to do it, we need to explore. Linc Energy showing interest in Umiat, our work to reduce taxation on new fields, our work to streamline permitting and our work to make Umiat more accessible, by road for example, all should lead to new exploration and development. We don’t want to see just four to six to 10 new wells. To get to a million barrels a day, I want to see tens and hundreds of new wells. To get there it’s going to require all hands on deck like our commissioner at DNR said. It’s going to require some change. I talked about fiscal regime; I talked about permitting; I talked about lowering the cost of access. Those are three ways that we spur hundreds of new wells, not settling for two, four or six, although that is good news right now.

Parnell: So far it hasn’t since ACES, but if we can make Alaska more attractive at that higher price, and that’s been my whole reason for wanting a change. ACES was built on $60 to $90 a barrel. Nobody really planned for this $100-plus barrel oil. That’s what I would call the tweak to the overarching system so that it creates more of a climate for investment at the higher price range. Right now the investment is going elsewhere. The rig counts in North Dakota are in the hundreds. I ask why not Alaska? We’ve got the resources.

Petroleum News: Do you think you made your case for the change?

Parnell: Obviously we’ve got more work to do, but I think the public was there supporting it; they wanted to see economic growth; wanted to stem the decline. We had some people in the Senate who don’t have any plan to increase production. They are satisfied with the status quo. I’m not. So we are going to continue working to move HB 110 to convince 11 in the Senate that we need to increase production and help me find a way to do that. That’s my message.

Petroleum News: Coastal zone management is set to expire June 30 because no deal was reached in the legislature, but you thought you had a deal — a couple of times — so what now?

Parnell: We did have a deal. We spent hundreds of hours of negotiation. We put together a compromise that balanced the interests, making sure the communities had meaningful local input that’s not there currently. It balanced the interests of resource development and the jobs there, too. We got a 40-0 vote in the House, which you don’t get very often on a substantive, technical piece of legislation. It just unraveled in the Senate again.

I was surprised at the Senate’s overreach. That’s something I couldn’t help. I should say, the Senate majority.

People assume when this is gone, there is nothing in place. The fact of the matter is there is a lot of regulatory structure or framework remaining. When I think of any kind of offshore or onshore resource development, I think of public comment and public process available to individuals and local communities. So the public input for every permit is just as rigorous as before.