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Providing coverage of Alaska and northern Canada's oil and gas industry
April 2014

Vol. 19, No. 15 Week of April 13, 2014

Olson thinks gas project has a chance

Soldotna Republican has seen other North Slope projects fall apart, says this time around everybody is ‘trying to make it happen’

Steve Quinn

For Petroleum News

State Rep. Kurt Olson has seen his share of natural gas pipeline drama. First came negotiations between Gov. Frank Murkowski’s administration and North Slope leaseholders BP, ExxonMobil and ConocoPhillips that created rancor among the legislators. Then there was the Alaska Gasline Inducement Act that stirred the memory of former Majority Leader Ralph Samuels casting the lone vote against Sarah Palin’s plan. All this stacked against decades of hope by Alaskans clamoring for a pipeline to bring North Slope natural gas to market.

Olson is a member of the House Resources Committee that wrapped up Senate Bill 138, Gov. Sean Parnell’s offering to advance a liquefied natural gas plan. Olson also chairs the Labor & Commerce Committee, which received a committee referral to SB138. While not the most common destination for an oil and gas bill, Olson has overseen debates on bills this hearty. He ran the House Special Committee on Oil and Gas during the debate over Palin’s oil tax bill, the former Alaska’s Clear and Equitable Share.

Olson, a Soldotna Republican, sat down with Petroleum News to share his thoughts on the discussion that took place in House Resources and the prospects of the bill ever landing in his committee.

Petroleum News: What drove your interest in hearing the bill?

Olson: I didn’t ask for the bill. I was asked if I would take it. I’m on Resources. Two of the Labor and Commerce members are also on Resources: me and Dan Saddler. Craig Johnson is also on Resources and an alternate on Labor and Commerce. So I’ve got someone who is not only experienced but down here for the last rodeo. It was my impression I was asked because if there were minor tweaks that needed to be done after it left from Resources, they could be done prior to going to Finance. I can’t give you an example because the only thing to give me a little consternation is about TransCanada. I don’t think there is anything that warrants it going to Labor & Commerce. But the top binder that I lug back and forth, I had one of those made for every member of Labor & Commerce just in case. Dan and I have been in the meetings. We’ve had other people drifting in and out of the Resource meetings.

Petroleum News: Did you feel prepared regardless because you’ve led the hearings on ACES when you ran the House Special Committee on Oil & Gas in the fall of 2007?

Olson: Handling it was not an issue. I just wanted to make sure my committee was up to speed. That’s why we’ve been encouraging them to read the documents and come to a meeting when they can. They actually have been reading them.

Petroleum News: Do you have any concerns you’re going to get back to that divisive time during the Stranded Gas Act?

Olson: No. Not at this point in time. If you ask me that in a year, it might be different. Hopefully in a year, we’ll be in a good place. At this point, I’m optimistic. Most of the people in this building want to see it happen. Not all of them. There are some who want to defend decisions they made in the past. I know I’ve made a number of mistakes, but I try not to make the same ones over and over again. If I make them, I’d rather tell somebody I made a mistake than try to find a way to bury it.

Petroleum News: As someone who has been through these debates before, what’s different from past committee hearings and debates?

Olson: Speaking for the Resources Committee, I think we as a committee are going to in greater depth, to a degree that I haven’t seen in six or eight years. It was more committee driven than administration driven.

Petroleum News: You mentioned consternation with TransCanada. Can you talk about that?

Olson: TransCanada is more than qualified to do the pipeline. My major concerns deal with how TransCanada got to the table. The main thing that TransCanada brought to the table was the AGIA contract: The fact that it would be extremely expensive for the state to cut them loose. My personal feeling was we could have cut them loose when they missed some deadlines or in the last two years. The bill that would have done that (HB142 three years ago led by House Speaker Mike Chenault, and Reps. Mike Hawker and Craig Johnson) could have taken care of that but it didn’t get out of the Senate.

There is a letter that has been issued in the last couple of days that will terminate AGIA in the near future. That to me was never in good faith. The main reason I probably would have brought the bill to Labor & Commerce would have been to get a better deal, that letter or something. It looks to me like they got a great deal. You’ve got El Paso that could have done the pipeline and you’ve got Enbridge, and I’m guessing all three of the majors would have been qualified to do so as well. One of the questions we asked of TransCanada was for a list of their largest projects. The definition the state has been using for mega project the last few years was a project in excess of $1 billion.

TransCanada listed one and I believe that was Keystone and that was worth about $6 billion. On that one they were over budget by about 12 percent but in the big scheme of things I think we’ve had a lot worse than that on some of their projects.

During the AGDC (confirmation) hearings, and I think it was two for one person and three for another.

TransCanada is qualified. I’ve been aware of their company for a number of years. I’ve been involved with the industry from the outside when I was with the insurance industry. The company I worked for was out of Canada and so was TransCanada’s predecessor.

Petroleum News: I realize TransCanada’s involvement is a tough pill to swallow for some people. Is it because there are hard feelings from AGIA?

Olson: I think it’s partly from AGIA and the sweetheart deal that they got. I’ve never seen something like that, but then again I’m not in the oil industry. I’ve worked with the industry from the outside. Me, personally, I would not want to be responsible for killing a deal that’s brought us closer to this since I’ve been involved.

Do we want to bring it out in court and buy our way out of AGIA or do we want to work it out with them. I want people to come to their own conclusions rather than me say that I didn’t vote for ACES or the AGIA (license) ratification. (Former Majority Leader) Ralph Samuels was the only one who voted against AGIA.

There are still four or five of us around who have that institutional knowledge.

Petroleum News: Going back to Ralph’s vote of no. Looking back, did that take courage?

Olson: You had a very popular governor and you knew it was going to go through. So, yeah it was a courageous thing to do. I did it one time. I won’t tell you when, but it was pretty lonely feeling. Most of my peers agreed with me about three years later on the issue. So I know how Ralph feels.

Petroleum News: What gives you a sense that you’re actually moving forward? We’ve heard so much these last six to eight years how this is the way to go.

Olson: The first thing is Point Thomson. It’s a class facility. They have quarters for 350 people and they plan to have it doubled by this time. I haven’t talking to anyone from Exxon to discuss whether that’s the case yet, but I suspect it is by all of the materials I saw stacked up there. That impressed me.

I know I’ve said this before since I’ve been back but the runway is incredible. The runway, considering the size, it’s probably the best runway in the state. It was necessary and it’s an incredible runway and airport operation for such a remote project.

The amount of money and just the sophistication of the landing strip there is incredible. I believe they had to put in eight or 10 feet of gravel to put in frost heaves. It’s a lighting system more sophisticated than Anchorage international. That tells me they are there to stay.

I ran into several people I know from Soldotna up there who had been paramedics and firefighters who had retired and taken jobs up there. When I looked around there were a lot of people who were not roustabouts who were in their late 40s, early 50s. One was a retired trooper, another was high up in APD who retired. I was told by the woman running operations, they were looking for people who have been in crises and emergency situations and know how to handle it. The people I talked to all were senior people who had years of experience who knew what to do if the unexpected happened: plane crashes, storms, fires, triage casualties. They are covering all the bases. From the safety standpoint, the camp looked like a class act. That made me think they were serious, putting not only the time, but the money and labor into it so they are ready.

Down on the south end of the state, in Nikiski which is Mike Chenault’s district. Our districts used to be referred to as the doughnut and the doughnut hole and not because of our sizes, either. It’s the fact that his district goes around mine. Half of the people in my district work in his and half of the people in his district work in mine. I spend a lot of time in his district and likewise he spends a lot of time in mine. We’re both seeing things like ASRC doing an expansion, new people moving in and ExxonMobil in the process of acquiring leased land: office space and warehouses. That tells me they are serious.

There was a quote by TransCanada’s CEO that came out in 2008 that talked about Exxon’s significance (essentially the project won’t go forward until Exxon is happy with it), and I think that’s happened.

Petroleum News: How about within the bill, the MOU or the HOA? Is there anything among those documents that gives you confidence?

Olson: They had the head of the Alaska operations from all three companies, an Exxon contract attorney from D.C., plus Tony Palmer from TransCanada come into my office to sit down and ask if I had any questions. They were all here at the very beginning of session. They were speaking with one tongue. They said you’ve got all of us right here. That’s the best way to get a question answered. And it wasn’t just me. It was everyone around the building. I’ve never seen that.

Petroleum News: Not even during the Murkowski administration when they had a deal struck?

Olson: No, I always thought it was two out of three. Well, one lukewarm, one wanted it and another was ambivalent. I think everything is starting to come together.

Conoco has some of their export license back already. We lost the export licenses as a result of over regulation by the RCA when they cut back the length of time that they would allow for contract sales to Tokyo Electric. I know I’ve mentioned this before but we’ve never had a gas shortage in Cook Inlet because of the relationship between Tokyo Electric and ConocoPhillips. They would peak shave loads with the consent of the Japanese when we had a cold snap. Rather than put into production gas that would only have demand during a month or two out of the year, they could make up for it by shorting the gas going to Japan. Because it was sold on a Btu basis, they could put a richer gas on the next load. They wouldn’t need to put out an extra ship for another load. The RCA then said, Enstar and other users had a concern that we are going to have a shortage. My gut feeling is the RCA didn’t know how peak shaving worked. Now that I see they are getting contracts again, we’ll see how it works out. We went from having 100 percent of the Tokyo Electric market down to a much smaller percent.

Petroleum News: You mentioned AGDC: There is the issue whether someone from out of state (Richard Rabinow of Texas) should be on the board. Do you support that?

Olson: Yes, I’ve had a chance to interview him. The guy has been out of the business for 10 years. He has no stock with the company. I like the institutional knowledge, where he’s worked, the projects he’s been associated with and expertise that he brings. I liked his humility a lot.

Petroleum News: Well, the House took care of that with HB383 that allows the governor to select someone from out of state for a board.

Olson: I just think we need the best person for that particular job, and we took care of that.

Petroleum News: What do you like about AGDC’s role?

Olson: I think we need it. I think we have good people in there. I’ve known Dan Fauske a long time. I’m impressed with any number of things that he’s done. I knew of him when he worked on the North Slope. At Alaska Housing Finance Corp. we had 3 to 4 percent default when the rest of the country was under water because Dan would only allow Alaska Housing to make loans to people who were qualified to get loans not find a way to qualify them. I like his style. I like the way he will find a way to take on different things.

Petroleum News: In wrap up, where do you think the state is headed with the prospects of a gas line project?

Olson: I think we are closer than we’ve ever been. Nobody is going to get everything they wanted from this. I don’t think the state is. The producers made some concessions. TransCanada isn’t going to get everything it wants. It has a strong chance of happening because everybody who is involved is trying to make it happen. It’s never going to happen until a bunch of moving wheels and gears are in place. We are getting close to that. We are not there. But we are close.






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