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Vol. 25, No.06 Week of February 09, 2020
Providing coverage of Alaska and northern Canada's oil and gas industry

5-day sail to Tokyo

Adak Island proposed for new western Strategic Petroleum Reserve facility

Steve Sutherlin

Petroleum News

Adak Island, a port and former naval base 1,200 miles southwest of Anchorage on the Aleutian Chain, has been proposed as a new federal Strategic Petroleum Reserve facility, an idea that has the support of Gov. Mike Dunleavy and Alaska’s congressional delegation.

The base is owned lock, stock and barrel by the Aleut Corp., an Alaska Native regional corporation.

The idea is being promoted by David Ott, president and CEO of Tennessee-based Tuskahoma Enterprises LLC.

Ott, a former U.S. Navy pilot and former infrastructure manager for Shell Alaska, hatched the concept after a strategic study in 2014, which identified Adak as the strongest candidate to base Shell’s arctic drilling assets.

After Shell pulled out of Alaska in 2016, Ott continued to consider Adak’s port and its unique strategic position in the north Pacific, which he felt could be better utilized to support national security.

“When I left Shell in 2016, I was keen on helping the Aleut Corporation find something for that base. As a naval aviator I knew the history of it even though I was a carrier guy, not a long runway guy.

“My proposal ... I started with a concept paper last April and I briefed the Department of Energy Office of Fossil Fuels Strategic Petroleum Reserve over the phone, and they were absolutely interested in what I was proposing,” Ott said. “They were doing a configuration study of the existing SPR sites as well as defining what the requirements were now and in the future; my timing was really good.”

In May, Ott took the idea to the state.

“I engaged the Director of Economic Development Matt Fagnani,” Ott said. “Matt and I knew each other from when he was at the Aleut Corporation and I told him what I was thinking.”

Fagnani liked the fact that the Department of Energy was interested, Ott said.

Later that month Ott briefed the governor’s new industry development team.

In October, Gov. Dunleavy wrote a letter to Secretary of Energy Rick Perry urging the consideration of Adak for the SPR program.

Making the Strategic Petroleum Reserve more strategic

Adak is remote, a lonely dot on the world map, but is actually quite close to energy customers in the Pacific, compared to the current salt dome storage in the Gulf of Mexico region.

Moving some of the Strategic Petroleum Reserve to a western location close to developing strategic partners in the Indo-Pacific makes great sense, Ott said.

“You are able to react to aggression or tsunamis, earthquakes, typhoons - which you see all the time - within days, not weeks,” Ott said, adding that vessels with SPR reserve going to Pacific markets must make a 48-day transit from the Gulf of Mexico around South America, because they can’t go through the Panama Canal.

“From Alaska, from Adak, it’s five days to Tokyo; it’s seven days to Seoul; it’s about nine days to Indonesia, so you’ve got the ability to react quickly,” he said.

Adak, lonely as it may be, is in a central location.

“Adak is exactly midway between Seattle and Tokyo - 2,500 miles east, or 2,500 miles west,” Ott said. “It’s about 1,200 miles to Anchorage, 400 miles to Dutch Harbor.”

“I didn’t even consider Dutch Harbor because I knew having (Shell) infrastructure there with OSI, you were constantly competing for resources,” he said. “So I didn’t want to negatively influence Dutch Harbor with something like this.”

Ott’s father, like Ott, a tribal member of the Choctaw Nation of Oklahoma, has a unique perspective on the significance of Adak.

“My dad, as being the Indian chief that I liken him to be, considers Adak the last great American trading post,” Ott said. “Manifest Destiny happened because of trading posts moving supplies and goods westward in the great western expansion of the United States.”

Public/private venture; no upfront cost to DOE

Ott is proposing a contractor-owned and operated facility with an initial 21 million-barrel oil capacity, having the ability to scale to 100 million barrels.

“What I’m proposing to the federal government and what’s got them interested is, they don’t own it, they don’t buy it, they don’t construct it, and there is no upfront cost,” Ott said. “All they’re doing is paying lease costs for contracted storage as an anchor tenant.”

“The government has a requirement, so instead of having 635 million barrels stuck in leaky salt caverns down in the Gulf of Mexico, take 100 million or more, and put it closest to the developing point of need - and that’s the why.”

The national security scenario is changing, and the SPR program needs to change with it, Ott said.

“The 2017 national security strategy, which is authored by the current administration includes energy dominance, and energy security is an enabling capability, so one of the top five priorities is energy dominance.”

“The first time in 75 years, we’ve become a net exporter so that supply cushion increases, ergo the tank storage wherever has got to increase,” he said. “A lot of that tankage is going to be down in the Gulf.”

So what changed?

“It was the chaos and the instability quite frankly in the Red Sea and in the Arabian Gulf that I could just see as a train wreck,” Ott said. “A couple of natural or manmade disasters in that area of the world and the natural disasters in the Indo-Pacific and you have a real chance to see an impact on the global economy when Tokyo, when Seoul, when China, when Indonesia, Malaysia, and the Philippines start struggling for energy security.”

The island with an unmatched array of assets

In the northern waters of Alaska, ports are few, and deepwater ports fewer still.

At Adak, the existing facility has a 36-foot draft at the pier which hasn’t been dredged in decades, Ott said. Deeper water is available. The base has two intersecting military grade 7,600-foot runways. Alaska Airlines provides bi-weekly scheduled service.

There are world class logistics capabilities, Ott said, adding, “Plenty of lay down, plenty of dry storage.”

Importantly, there is ample level terrain to site the fuel tanks and protective oil containment.

“As far as crude oil storage, I talked to one developer; it would be state of the art and it would be Alaskanized, it would have double dome roofs on the tanks, it would be earthquake strength, it would be triple containment - in other words you would have a tertiary and secondary containment system.”

“My depiction of the facility shows 10-acre plots per tank,” Ott said. “One million-barrel tank with a 10-acre berm around it as the tertiary consignment, and then you’d have duck pond around the tank and then membrane underneath it.”

Ott sees the first quarter of of 2023 as a feasible date for first operations, assuming the federal government moves in a timely fashion to okay the deal.

“It requires a letter of interest from the Department of Energy to begin - and that would be with the planning phase, the design phase,” Ott said.



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