|
Pearce, Persily agree on gas progress Former, current federal coordinators see need for fiscal agreement with state; disagree on role federal government plays in success Kristen Nelson Petroleum News
The former and current federal coordinators for Alaska natural gas transportation projects agree that progress has been made on a project to take Alaska North Slope natural gas to market, but disagree on the role the federal government will play in the success of the project.
Larry Persily, the current federal coordinator, brought a letter from President Obama to the 6th Annual Oil & Gas Congress, held in Anchorage at the end of September, supporting the project. Persily said Sept. 28 that what the letter means is “that the White House is still aware of the project, still supports it and is still willing to help.”
Drue Pearce, Persily’s predecessor as federal coordinator, said Sept. 29 the congress Sept. 29 that the letter represents a “huge disconnect.” Oil and gas are produced together in Alaska, she said, and without a viable oil industry companies won’t remain in the state to invest in natural gas.
The Obama administration wants the gas pipeline because it would move clean natural gas, but at the same time is engaged in a very effective agenda of shutting down Alaska’s oil and gas industry through actions such as refusal to permit CD-5 development in the National Petroleum Reserve-Alaska, slowdown of permitting for Point Thomson development, a new plan for NPR-A which Pearce said would further restrict land available for leasing and the wilderness review for the Arctic National Wildlife Refuge which, she said, results in all of ANWR being managed as wilderness by the U.S. Fish and Wildlife Service until a final decision on wilderness determination is made.
“Many of the federal agencies are doing everything in their power, hand in hand with the environmental industry, to shut us down,” Pearce said. “Unfortunately they’re meeting with success on many fronts.
“Alaska is under an assault in a manner never before experienced in our history, with the possible exception of Jimmy Carter’s ANILCA (the Alaska National Interest Lands Conservation Act),” she said.
Alaskans impatient On the Alaska side of a gas pipeline project, Persily said he is concerned about the level of disbelief in the project.
There are a lot of skeptics in Alaska, he said. People are getting impatient and “impatience is bad; it leads to bad decisions.”
The project is real, Persily said, citing half a billion dollars spent since 2000 by the major North Slope producers and TransCanada, and the open seasons on both the Alaska Pipeline Project (TransCanada-ExxonMobil) and Denali (BP-ConocoPhillips).
An agreement between the state and producers on revenues from gas is necessary and possible, Persily said, but not “if Alaskans want untold wealth — if they want to get filthy stinking rich off the gas line like they did oil, it isn’t going to happen. There just isn’t enough money there to play with.”
On an in-state line supported by the state, Persily said that if you ship only 250 million cubic feet of gas a day state revenues might be $200 million a year, as opposed to an estimated $2 billion a year from a mainline carrying 4.5 billion cubic feet a day.
The line the Alaska Gasline Development Corp. is studying is going to require state subsidy, he said.
Persily said that if the Alaska Legislature is looking at writing a $4-$5 billion check for an in-state line (to keep tariffs down in Southcentral), with volume so small it wouldn’t encourage more gas exploration and development on the North Slope, an alternative should be to sit down with the project sponsors and “see how you can take that $4 or $5 billion, leverage it in a big project,” and see if that could make the economics work on a big line.
Persily said his “advice to legislators and others would be, if you’re willing to write that big of a check, make sure you’re getting the most you can for it.”
Basin control issue Pearce said she doesn’t think Alaskans understand what they got for their $500 million with the Alaska Gasline Inducement Act or AGIA. Disagreement with AGIA has been cited by Denali as a reason why that project’s owners wouldn’t join an APP project. There will, in the end, be only one pipeline, Pearce said.
But “this battle is way beyond who actually has the name on the pipeline, whether it’s the Alaska Pipeline Project or it’s Denali.”
“This is a battle actually over basin control,” Pearce said, because a major difference between the Denali and APP offerings is whether they offer rolled-in rates — APP does and Denali does not, which determines “whether future shippers are forced to pay the entire cost of an expansion of the pipeline or a proportional share.”
Future explorers have higher barriers to shipping their gas without rolled-in rates, she said.
“That may be in the producers’ best interest — in fact it probably is in the producers’ best interest — but it’s questionable whether or not that’s in the state’s best interest.”
On the tax regime issue, Pearce said the industry couldn’t agree last year on changes they wanted to the state’s current oil tax regime, Alaska’s Clear and Equitable Share or ACES.
She said she didn’t know what changes are needed in the state’s fiscal system, but does know one thing: “Unless the industry — and that’s all Alaska’s players not just the three we call the producers — unless they all come together, agree on a proposed change, then bring it to the table and forcibly lobby for it while they’re joined at the hit, it won’t happen.”
The Legislature is too divided on the topic, she said, and no governor “could or can shepherd a major tax regime change through the present Legislature without a united industry working the issue.”
She also said industry has to do a better job of working with the state and showing that changes in the tax regime will increase investment in the state.
| 