Oil Patch Insider

AGIA coordinator Myers shares thoughts on gas line; Obama, Harper taking the high-tech route

As previously reported in Petroleum News, on Jan. 21, Gov. Sarah Palin named Mark Myers coordinator for the Alaska Gasline Inducement Act.

In a recent interview with Petroleum News, Myers answered the following questions about the proposed North Slope natural gas pipeline, and his role in making it a reality.

Q. Who do you think will ultimately own the gas line? TransCanada through TC Alaska or North Slope producers BP and ConocoPhillips, who own the competitive Denali project?

A. “Certainly the state’s committed to build it through the AGIA contract with TransCanada. Whether or not the producers will own part of that pipeline, I don’t know. I think that’s an open question. Certainly the role of TransCanada and the state’s agreement with TransCanada … is well-established, so that gas line will certainly move forward.

“But there is a lot of opportunity for the producers to be part of the gas line if they choose to. Certainly we’re not going to build two large-diameter parallel pipelines.”

Note: In a December energy conference in Anchorage, the federal coordinator for Alaska natural gas transportation projects, Drue Pearce, said, “The prevailing wisdom is that the two proponents for the main line will, at some point in time, get together, since only one main line can actually be built.”

Q. Will producers BP, ConocoPhillips and ExxonMobil commit gas in an open season held by TransCanada?

A. “They have to make up their own minds, but certainly all efforts will be … made to make a reasonable commercial offer to transport their gas, an offer with good profit potential for the companies.”

Q. What is your role as the AGIA coordinator for the state?

A. “It’s to facilitate implementation of the Alaska Gas Line Inducement Act,” signed into law in June 2007.

“The state coordinator is basically the counterpart of the federal coordinator, Drue Pearce.

“My job has three components:

“One, to oversee state permitting with respect to the gas line … to get all the agencies together, to make sure there is not a lot of undue duplication, and do what we can to streamline the process. …

“Additionally, to try to bring parties together, like the producers and TransCanada, at the right time. ...

“A third part of the job is outreach on the project … such as spending time in Washington, D.C., explaining the project; explaining how important the gas line is to the nation, and how the project dovetails with the goals of the Obama administration.

“Ultimately it’s in the nation’s best interest to see as much natural gas as possible come from Alaska. … Natural gas is an important bridge to a renewable energy future for the nation. A gas line would help reduce U.S. dependence on foreign energy sources and … natural gas is an environmentally preferred fuel because of its clean burning nature, its lower carbon footprint.”

Q. What about the current global economic recession?

A. “We’re in what people describe as the greatest recession since the Great Depression. We’ve seen a worldwide decrease in demand and supply, so one would expect commodity prices for energy, all commodities, to go through a series of tremendous downward pressures. ... Recovery is often very swift, and because the worldwide population keeps growing … you’ll see a heavy demand for supplies of energy in the future, which bodes very well for much higher gas and oil prices in the future. …

“But … no matter what the economic outlook in the short term, there is a continuity of operations in regard to the gas line, and AGIA.

“The state’s $500 million commitment to the project and TransCanada’s equal commitment to continue the process in a steady way is huge.

“Very often projects that are totally in the commercial sector react very strongly to very short-term price and profitability changes, instead of taking a long-term view. … Governments have the capacity to be able to take a long-term view, so I think that’s a real positive aspect of AGIA, providing stability for gas explorers and producers.”

Q. Is TransCanada being overly optimistic about its ability to successfully negotiate with the First Nations to build a gas line through Canada?

A. “TransCanada is the leading pipeline operator in Canada, and has good relationships with the First Nations. … Certainly there are existing treaty rights along that route, grandfathered in, but still we have to respect the rights of the First Nations, so that will be part of the discussions that have to occur. But I think having a Canadian company working in Canada is valuable in respect to building those relationships necessary to move the gas line forward. Certainly there are parties that will want to leverage this pipeline … that must be expected, but it’s part of the job of the AGIA coordinator to try to bring the parties into alignment, so we’ll do the best we can … respecting TransCanada’s skill and knowledge in working with the First Nations.”

Q. How serious do you think BP and ConocoPhillips are about a gas pipeline, about selling their North Slope gas?

A. “I very much hope they are serious. I think I will find out more in the near future.”

Myers also spoke highly of the state’s current fiscal regime and the fact it is spurring “aggressive exploration of oil and gas” in Alaska.

Prior to accepting the position of AGIA gas line coordinator in January, Myers was the director of the U.S. Geological Survey, an entity with more than 10,000 scientists, technicians and support staff, and an annual budget of more than $1 billion.

USGS’ 400 offices are in every state and in several foreign countries. The agency partners with 2,000 agencies of state, local and tribal government, the academic community, other federal allies, non-governmental organizations, and the private sector.

Prior to heading up USGS, Myers was the director of Alaska’s Division of Oil and Gas under the Department of Natural Resources, and the state geologist overseeing the Division of Geological and Geophysical Surveys.

He earned a doctorate in geology from the University of Alaska Fairbanks in 1994.

Before coming to DNR, Myers served as survey chief for field programs in Canada’s Mackenzie Delta (ARCO, 1985), Alaska’s Cook Inlet (State of Alaska/USGS, 1997) and the North Slope (ARCO, 1999).

He also served as sedimentologist for 13 other North Slope field programs.

—Kay Cashman

Financial Times reports oil output near peak

Christophe de Margerie, CEO of France-based Total, said he had revised his company’s daily forecast for 2015 oil production downward by at least 4 million barrels because of the current economic crisis and the collapse in oil prices, blaming high costs in areas such as Canada, and political restrictions in countries like Iran and Iraq.

He noted that national oil companies, which control the vast majority of the world’s oil, and independent producers, which play a key role in finding new sources, were “substantially limited in their ability to fund investments in the current (financial) environment,” the Financial Times reported.

De Margerie warned that the current oversupply of oil caused by a dramatic reduction in demand would be short-lived.

See full story at www.ft.com/cms/s/0/d25b8d2c-fb97-11dd-bcad-000077b07658,_i_email=y.html.

Obama, Harper agree to pursue ‘green energy by curbing carbon emissions

The United States and Canada — with Mexico as an implicit partner — are taking an initial step toward a North American “green energy” pact that would highlight carbon capture and storage to combat greenhouse gas emissions, President Barack Obama and Prime Minister Stephen Harper announced in Ottawa Feb. 19.

For Canada, the deal spells a reprieve for exports of oil-sands-derived products that are vital to its role as the leading external source of oil and natural gas for the U.S., but face stern political and environmental opposition in both countries.

In agreeing to collaborate on research and development, the two countries, working initially through senior government officials on a United states-Canada Clean Energy Dialogue, will also concentrate on “smart” transmission grids, which use digital technology to deliver power more efficiently.

Obama told a news conference that the overriding issue of climate change is “one of the most pressing challenges of our time,” and said the dialogue will strengthen the search for answers.

He said the issue must be confronted for “good, sound economic reasons” and to enhance continental energy security.

“But right now there are no silver bullets to solve the problem,” Obama said.

Both leaders said it was too early to talk about a “harmonized” approach, with Harper suggesting the United States needs more time to develop a national strategy.

Despite moves within the U.S. Congress and by several states to restrict or ban the use of fuel derived from Alberta bitumen, Obama and Harper made it clear they will pin their hopes on technology rather than provoking a showdown over the oil sands.

Canada currently ships about two-thirds of its oil and natural gas to the United States, including about 2 million barrels per day of oil, of which more than half comes from the oil sands.

Obama has targeted an 80 percent reduction in 1990 U.S. emissions by 2050, while Canada’s goal is to cut 2007 emissions by up to 65 percent by 2050.

Before arriving in Ottawa, Obama indicated he would not go along with environmental groups and activists, who mounted an extensive campaign in the run-up to the summit, including full-page newspaper ads, urging the president to “say ‘no’ to dirty oil.”

“What we know is that the oil sands create a big carbon footprint,” Obama said in a Feb. 17 interview with the Canadian Broadcasting Corp.

But he stressed that the U.S. and Canada could mitigate that impact by collaborating on ways to capture and store CO2, limiting the release into the atmosphere of greenhouse gases that are blamed for accelerating climate change.

The message from Obama and those who accompanied him to Ottawa, including Carol Browner, the White House coordinator of energy and climate change, and Larry Summers director of the National Economic Council, seemed to be loud and clear.

The new administration has no intention of taking any steps that could compromise U.S. energy supplies and exacerbate the economic crisis.

“We want to make sure that we hit the ground running with a very important neighbor and ally,” deputy national security advisor Denis McDonough told reporters in a briefing Feb. 17.

In his CBC interview, Obama described green technology, and specifically carbon capture and storage, as a way to lower emissions without crippling the economy.

“If Canada and the United States can collaborate on ways that we can sequester greenhouse gases that’s going to be good for everybody,” he said, “because, if we don’t, then we’re going to have a ceiling at some point in terms of our ability to expand our economies.

“I think it is possible for us to create a set of clean energy mechanisms that allow us to use not just oil, but also coal,” Obama said, noting the U.S. relies on coal-fired utilities for half of its electricity. “The United States is the Saudi Arabia of coal, but we have our own homegrown problems in dealing with a cheap energy source that creates a big carbon footprint.”

Harper, in an interview with CNN, said Canada has been “wrestling for the last decade or so with our desire to have a regulatory regime that would diminish our own carbon emissions. But we’ve been trying to do so in an integrated (North American) economy when the United States has not been willing to do so.

“I think quite frankly that we have a President and an administration that wants to see some kind of regulation on this is an encouragement,” he said.

Harper said he does not believe the “Buy American” clause in the U.S. stimulus package will violate any U.S. international trade obligations, but cautioned that protectionist trade measures could quickly turn a global recession into a depression.

“I think this is a debate we would rather avoid,” said Harper, who has warned that any moves by the Obama administration to reopen the North American Free Trade Agreement would force Canada to use its position as the main external energy supplier as a bargaining lever.

—Gary Park