Oil Patch Insider: Miscommunication delays Chukchi drilling decision; Fire Island wind farm still a go

Nov. 20 came and went without an eagerly awaited decision by the U.S. Minerals Management Service on Shell’s 2010 exploration plan for the Chukchi Sea — a decision that MMS now says will be forthcoming “shortly” after Nov. 28.

Both the federal agency and Shell have been sparing in their comments about why the decision was delayed, but it appears that Shell did not “request” to be able to respond to public criticism of its Chukchi plans, but rather “offered” to do so, not understanding MMS would delay its Nov. 20 decision. (See original Oil Patch Insider report in the Nov. 15 issue of Petroleum News.)

The miscommunication became obvious — and public — on Nov. 19 when Marvin Odum, the president of Shell’s U.S. subsidiary and executive VP for exploration in the Americas, “read in the papers” that his company supposedly requested a delay, something he told reporters Shell did not do.

MMS spokesman Nicholas Pardi told Petroleum News Nov. 20 that, “There may have been some miscommunication. Shell offered to respond to public comments on their exploration plan. We have given them that opportunity, but asked that they provide it quickly — within 10 days, so that it can be considered in the review of the exploration plan.

“Shell’s recommendations should be with us by the 28th and we anticipate a decision shortly thereafter,” he said.

When asked about the status of MMS’ court-ordered rework of the Chukchi Sea environmental assessment, Pardi would only say the agency “is currently working on the environmental sensitivity analysis.”

—Kay Cashman

ADN report: Fire Island wind farm still on despite loss of partner

Citing mismatched business goals as the reason for the split, the Anchorage Native corporation said that it and California-based EnXco agreed to part ways in October. Until then, EnXco had been the developer of the 54-megawatt wind farm and CIRI’s equity partner in the project.

CIRI said it hopes to sign a deal with another well-known wind farm developer in early December. CIRI can fund the project without an equity partner, if need be, said Ethan Schutt, a CIRI vice president for land and energy.

The parting with EnXco has not caused the project’s timeline to slip, CIRI spokesman Jim Jager said.

He and Schutt pointed out that CIRI spent more than $1 million this fall clearing ground for the turbines and studying the geology of the rugged island.

One reason the company has been aggressive in its timeline is that the wind farm needs to be operating by 2012 to qualify for a federal stimulus grant that would pay roughly one-third of the turbine, transmission line and other construction costs.

CIRI has pegged the cost of building the wind farm at $165 million, but it will be refining those costs in the coming months. Additionally, the state Legislature has committed $25 million to pay for a transmission line linking the wind farm with the Anchorage electrical grid. That money won’t be spent until CIRI convinces Anchorage utilities, such as Chugach Electric Association, to purchase the wind power.

For now, Chugach is studying how to integrate wind power into the electrical grid while minimizing the cost of any upgrades to ratepayers, said Phil Steyer, the utility’s spokesman.

While some have argued in favor of building a much bigger wind farm, Chugach and CIRI say that would make the project more costly and more technically challenging than it is already.

CIRI said it would make more sense to install additional wind turbines in other parts of Southcentral instead of having them confined in one area where the wind won’t always blow.

To the chagrin of some lawmakers and renewable-energy advocates, CIRI, the local utilities and the Federal Aviation Administration have wrangled over the technical aspects of the wind farm for years.

The utilities are concerned about upgrades that might be needed to integrate wind power into the grid. So far, the scale of those potential upgrades seems minor to CIRI, but both it and Chugach have hired consultants to study the issue further.

The FAA previously raised big concerns about the wind farm interfering with navigation equipment on the island used for the nearby international airport. To meet the FAA’s concerns, CIRI next summer plans to spend millions of dollars to replace the navigation system on the island with an upgraded system located on the mainland.

CIRI said that it will have good estimates on how much it will cost the utilities to purchase power from Fire Island early next year. It hopes to sign sales agreements with the utilities by June.

The wind power generated from the proposed 34 turbines on the island will supply roughly 18,000 to 19,000 homes. The per-kilowatt-hour cost of electricity from Fire Island probably will be slightly higher than today’s cost from Cook Inlet natural gas, the dominant source of electricity for Southcentral homes.

—Elizabeth Bluemink,

Anchorage Daily News, Nov. 23

Alaska Gov. Sean Parnell has made the following appointments to state councils and boards: Alaska Permanent Fund Corp. — Larry Hartig, commissioner of the state Department of Environmental Conservation. Hartig replaces Emil Notti, commissioner of the state Department of Commerce, Community and Economic Development.

Alaska Safety Advisory Council — Phillip K. Galloway of Parker Drilling from Wasilla and Douglas A. Tansy of Norcon from Delta Junction. Re-appointed to the council were Herb Everett of Westmark Hotels from Anchorage, Daniel R. Monteleone of the Municipality of Anchorage, Robert S. Peterson of the International Union of Operating Engineers Local 302 from Juneau, Michael E. Schowen of BP from Anchorage and Zebulon J. Woodman of Laborers Local 942 from Fairbanks. The 14-member council aims to reduce the risks of accidental death and injury in Alaska.

Alaska Workforce Investment Board — Larry Bell of the International Brotherhood of Electrical Workers Local 1547 from Wasilla. Re-appointed to the board were Martin T. Anderson Jr. of Alaska Technical Training from Sterling, Jim L. Lynch of Fairbanks Memorial Hospital, Bonnie Jo Savland of Alyeska Pipeline Service Co. from Anchorage and Frederick A. Villa of the University of Alaska from Fairbanks. The board develops and manages a comprehensive state system, which is designed to result in better job education and training programs.

—Petroleum News staff