Murkowski pushing Alaska gas for Asia

Disputes federal actions in state, says Alaska has important role to play in national energy self sufficiency across all resources

Steve Quinn

For Petroleum News

U.S. Sen. Lisa Murkowski paid her annual visit to Juneau so she could deliver her annual address to the state Legislature.

The Republican was to speak to lawmakers Feb. 21 then return to Washington, D.C., in time for a meeting with Japanese Prime Minister Shinzo Abe, a continuation of a recent trip Asia trip to gauge interest in Alaska’s natural gas.

Murkowski, also a former three-term member of Alaska’s House of Representatives, is the state’s senior senator entering her 11th year in office.

Also the ranking member of the Senate Energy and Natural Resources Committee, Murkowski spoke to Petroleum News about her efforts to advancing Alaska and the country’s energy development.

Petroleum News: You recently traveled to Asia. What drove that trip and what were you findings?

Murkowski: I have been seeking a series of meetings from leaders in Taiwan, South Korea or Japan to talk about Alaska’s energy potential or specifically Alaska gas opportunities. After a series of meetings in the fall of last year, I determined that it would be worthwhile to visit Japan and also Taiwan to speak with not only cabinet ministers and industry leaders, but to gauge the extent of the energy issues that face Japan after the March 2011 tsunami and the impact on their nuclear industry. These were very successful in Japan. I am following up those meetings. I have been invited to a very small dinner with the prime minister of Japan. I feel quite honored to have been asked specifically by the prime minister to join him on Friday evening (Feb. 22). I think it’s quite clear that my message was received in Japan and hopefully received favorably.

Petroleum News: So what was your message?

Murkowski: My message was that Alaska has a wealth of resources. We have an opportunity to assist our long-term friend and ally, Japan, who is in an energy vulnerable situation because of the pull back on nuclear power generation. I re-enforced the position that we are not only close to Japan in terms of geography, but that there is safety. We don’t have any pirates between here and Japan. We don’t have a Straits of Hormuz.

It’s wide open water and coming from a friend and a state that has a long-time, long-term relationship for export of many things, be it timber or fish but also recognizing that Alaska has had the longest term export contract for anything and that is for our LNG coming out of Nikiski. Relationships matter in Japan and that was pointed out to me in just about every meeting I had.

There was a recognition that Alaska stands ready. Of course there was a great deal of concern about timing of Alaska’s gas and whether it would mesh with the timing of Japan’s immediate need. I was not able to give them comfort but the timelines match up. Japan will need a stable source of supply for not only the short term and midterm but truly the long term, and I think Alaska can be that long-term partner.

Petroleum News: What do you think it will take to advance a project that will market Alaska’s gas?

Murkowski: We have seen a measure of progress that the governor has asked for and the producers have delivered in terms of timeline benchmarks that have been set forth. I think we can all agree that we wish it was coming along quicker. The fact that we do have alignment between the producers and TransCanada, the administration is working with them and in concern with this timeline that has been laid out. That’s important.

As impatient as Alaskans get, I think it’s important to have perspective. We are looking at a $50 (billion) to $65 billion project. The size and scope of this project is world class. It is something that requires the level of consideration that is going into this. In the meantime, Alaskans are getting antsy. They see what’s going on in the Lower 48, they see that Alaska could be a major participant of meeting the needs in Asia and we are not in the queue. There is an anxiety there because we’ve been talking about this for 30-plus years. So I don’t think we should become discouraged. We need to recognize the size and scope of what we are dealing with, the fact that we do have a process in place, but I think it could always be expedited somewhat.

Petroleum News: With all this in mind, what is your vision for Alaska’s energy either nationally or globally?

Murkowski: Alaska is such an integral part of America’s energy solutions. We have enormous potential in this country, and in a document that I released a couple of weeks ago entitled Energy 2020, I speak to America’s energy potential and the fact that by the year 2020, we can be energy independent, recognizing our incredible potential, not only with our fossil fuels but also with our renewable energy opportunities.

What this energy independence includes is also a resource from Canada but what I’d like to do is get this country off of OPEC oil. That is absolutely a doable situation. There are also people out there who say it won’t take us until 2020, we can do it in 2017. It’s important for Alaskans to recognize that while the Lower 48 is booming from shale gas and is booming from oil production coming out of North Dakota and other areas of the country, Alaska is decreasing our production. If we truly are going to have an all of the above energy policy for the United States of America, Alaska needs to be a participant. We are not yet stepping up to the level of others stepping up. Our oil production is on the decline. Our natural gas, we are moving forward with it and I acknowledge that. Many will say Alaska needs to get into the game when it comes to American energy production. We can and should be doing more on renewables. This is where I believe America can be a leader. We are recognized for our oil production. I want us to be recognized nationally for our renewable production as well. Whether it is from hydro, whether it is geothermal, whether it is our biomass, whether it is our ocean energy potential, we have so much to offer when it comes to wind, so Alaska can be the leader in all areas. That’s where I’ll continue to push.

Murkowski: We are all concerned about the declining projection and the reality that our pipeline is less than half full. There comes a level of throughput where through a host of different reasons, it becomes difficult if not impossible — and I hate to use the word impossible because it’s a pretty tough word — but it becomes extraordinarily difficult and perhaps unsafe to continue moving oil through the trans Alaska pipeline.

We all know the issues that come about with the lower throughput. You’ve got temperatures that drop causing the waxy buildup. You’ve got issues that may cause stress to the line itself. I share Admiral Barrett’s concerns. We don’t want to get to that point where we are concerned about our ability to safely restart that line if we had to shut down in the middle of a cold winter.

Our reality is that we have an incredible piece of infrastructure bisecting our state that provides for jobs, opportunities and revenue for the state of Alaska but also a resource that is much needed for our country. We’ve got the resources to put in our line; we just need the ability to increase production. That will require us to access areas that have been limited or restricted, due to regulatory issues by our federal government which have hamstrung us, whether it’s resources on the ANWR land, on the NPR-A land or offshore. Our resource potential is enormous and our frustration with seeing declining throughput is justifiable. It’s not that we are running out of oil up there, it’s that we are seeing such resistance from the federal landlord, from our own federal government in accessing a resource that our country needs, so it is about the safety and continued operation of a line, it’s about energy security, it’s about national security, it’s about economic security. There are so many good reasons it fill up that pipeline.

Petroleum News: What are your thoughts on Shell’s first year of exploration and the problems with the Kulluk?

Murkowski: It’s important to recognize that the actual drilling they did up there was done without incident, without a front-page story. Granted they had to work under a truncated schedule. They had to move out of the way when the ice came. The whalers were able to meet their quotas. The operations that were conducted were done without incident. I think that bodes well for Shell and their continued operations up north. Of course the focus came about as Shell was moving its assets, most notably the Kulluk. When you look at what Shell has had to do with these drilling operations, I think they know and I certainly expect that all aspects of their work have been conducted with a level safety while meeting the high standards that have been set. That means moving your vessels safely and meeting the high standards set forth in the permits as difficult as they are. I think we all recognize the Arctic is a different part of the globe, and standards there are different from what you might see in offshore Gulf of Mexico where these operations have been ongoing for decades. Some would say that’s not fair, the standards are higher. I want to make sure we’ve got a safe operation. Not only while the exploration and production, but also as the full operation coming and going is conducted. So the Department of the Interior will release its review in coming weeks. The Coast Guard will release its more comprehensive review in a manner of months. So we are going to be able to obtain what Shell learned in the Beaufort and the Chukchi in the Energy Committee. It’s important for us to recognize that the exploration conduct was done so in a manner that met all the safety and environmental standards that have been put in place.

Petroleum News: With Arctic development, what are the chances of the revenue share issue being resolved?

Murkowski: I’m working on a bi-partisan revenue sharing bill now. I’m working with Sen. Widen as well as Sen. Landrieu. I had hoped we would introduce it last week, but we are working on some of the scoring of the bill. We have taken the approach that it’s important to get support from as many senators as we can, so I’m not looking at a one-state focus on this. We are reaching out to folks who support renewable energy and land conservation. We recognize the importance of letting states decide their own path forward on energy and land issues. So what we do with this bill is we direct a share of the revenues to participating offshore energy producing states. This is also for offshore wind, tidal and wave generation. We establish permanent revenue sharing: 27.5 percent with a provision for partial payment to coastal communities. The way it would operate is 25 percent of the state’s share would go directly to the coastal political subdivisions or the boroughs, the most affected by the offshore development. Then we allow an additional 10 percent to be directed to states if they establish a fund to support energy research and development, alternative and renewable energy. So what our proposal does is expand revenue sharing to include renewable energy production not only offshore but also onshore on federal lands, so it’s a much more expansive measure. The way we are approaching this allowing for renewable is a way to bring other members into partnership with us. I believe we have a very good chance at moving legislation that is designed this way. I’m pleased Sen. Widen is working with us. I feel quite encouraged with where we are in revenue sharing right now.

Petroleum News: What do you want your takeaway to be from your speech to lawmakers?

Murkowski: I spend a fair portion speaking to issues coming up in Washington, D.C., that will have direct impact on Alaska, most notably what is happening with the budget reductions either through sequestration or we will see cuts come our way because we are dealing with a $16 trillion debt. How this impacts Alaskans and how it impacts policymakers here at the state level is going to be key going forward. It’s not going to be all doom and gloom about budget. It’s reminding former colleagues that we have great opportunities within the energy field to do more whether it’s with natural gas or with our oil potential. I do speak to the fact that while we do have that potential there, we are more times than not held back by our own federal government through regulations, through permitting requirements that are at times overlapping and onerous. It’s up to all of us working together to push back, to comment, to weigh in. It’s important for us as a state to be strong and independent and have a good statewide economy. So my message is a mixture of caution from a budget perspective and a practical reality of how we move forward taking advantage of resources and the opportunities that we have.

Petroleum News: How hamstrung has Alaska been at the hands of the federal government?

Murkowski: It’s been extraordinarily difficult. We can see the difficulties compound. For years we’ve been told don’t look for oil in ANWR. That is an area that should be locked up. You should look to NPR-A. Well as soon as the producers looked to NPR-A, the agencies then said you can’t put a bridge here or you can’t put a road there. The fight to get CD-5 open was a five-year process, almost ridiculous. The good news is we were able to overcome that hurdle. Look at Shell, the billions of dollars that had been laid out to get to the first season and that was a six-week season to explore in the Beaufort and the Chukchi.

The most recent development that just has me furious is the Fish and Wildlife Service coming out and saying no to a 10-mile, one lane, gravel, non-commercial road that would travel for a small section of the Izembek ban refuge, a road that will not allow for resource development. This is not a project that will make someone rich. This provides for a safety corridor for the village of King Cove to access an all purpose runway in Cold Bay.

When we talk about our limitations on our ability to either access our resources or provide for the safety of Alaskans, when we realize the fight is against our own federal government, this is why Alaskans are up in arms about what they feel they receive from Washington, D.C.