Guttenberg: Pipeline prospects best ever

Fairbanks Democrat believes state’s chance of advancing gas pipeline project strong, remains dubious of Shell’s Arctic drilling plans

STEVE QUINN

For Petroleum News

House Rep. David Guttenberg loves to tell stories about working on the trans-Alaska pipeline system, but he’s hoping even better stories emerge as the state tries to advance a large-diameter natural gas pipeline project that ends at an LNG export terminal.

The Fairbanks Democrat who serves on the House Finance Committee says he’s more optimistic than ever since he took office in 2003. Guttenberg shared his thoughts on the project and other resource issues with Petroleum News.

Petroleum News: Let’s start close to home with the recently passed IEP bill. What do you think that means for folks in the Interior?

Guttenberg: This is part of a larger issue as well. We’ve got a 48-inch pipeline running through our town. To see that resource flowing right by has always been very frustrating. Flint Hills was here, but the economy of scale was not there for them to build up. So it’s about time the state addressed economic disparity across the state with the costs of energy. That is the number one driver of any community: the cost of energy. So recognizing that, it’s a great step forward.

Petroleum News: So what is next now that you’ve got the bill in place? What would you like to see done?

Guttenberg: Part of it is building out the infrastructure, which they are doing now, then finding the long-term gas supply. You get into this scenario that’s always been problematic for Alaskans: when somebody puts a plan in place and it looks good, and you’re almost ready to buy into it, somebody else down the road says I’ve got this plan or somebody else says I’ve got propane. What about propane? You’re always striving for the perfect deal and it leaves you in a state of never actually accomplishing anything. And that’s frustrating.

Petroleum News: With that in mind, what would you like to see happen?

Guttenberg: The most important thing is the infrastructure keeps getting built out and they sign a deal for a long-term source of gas.

Petroleum News: So you’ve noted that different people keep coming back and saying, I’ve got this solution and I’ve got that solution. Why do you feel this is a good first step?

Guttenberg: This governor got involved with this project more so than other governors in the past. So it facilitates something happening. It has more people actively involved in pursuing the answer. This project is in place because the private sector has not wanted to do it. At the end of the day, the private sector would love to bring gas to Fairbanks for a nickel less than the price we are paying for oil. Well, that doesn’t work.

Every household has to invest into the conversion process to go from oil to gas, and that’s expensive. The private sector has illustrated - and I’ll just use the last 18 to 19 years since Fairbanks natural gas has been here - that that is not a game they are going to play. So the administration is taking a more active role in how are going to get it done.

People always say let the markets work, let the private sector take over. Well, that hasn’t happened. It’s failed. It’s an example where a project like this coordinating the process and the gas, and putting money into the infrastructure is the only way it’s going to work. So this administration taking an active role is how it’s going to work.

Petroleum News: So would you like a timeline established to get this done?

Guttenberg: They are building out in phases for the dirtiest air (problem) so they can accomplish things for the EPA’s goal. People don’t recognize that this is more than just getting affordable energy for Alaskans. It’s also meeting clean air standards which are very problematic. It’s not just the EPA people have a problem with. The air here is very bad in the winter and we have to handle that. There could be repercussions if we decide to do just nothing.

Gas is supposed to start getting delivered next fall. The infrastructure for the first phase for the build out and at that point, it would be a waste if the gas isn’t there to go into those homes. It would be a waste of a year. It would add costs to the project. The project has to start paying for itself and you do that with the ratepayers. If you don’t have any ratepayers, you don’t have any opportunity to do that.

Petroleum News: Still on natural gas, you’ve got the prospects of advancing a large-diameter pipeline project. With that in mind, you’ve seen gas ideas and projects come and go since 2003, what are your thoughts on the current discussion?

Guttenberg: My concern is that there are factors beyond the state’s control that make economic decisions and keep the gas in the ground. That’s been an issue that I’ve had all these times, whether it’s gas or oil, or how we do our taxes. I think that’s why the governor was elected because he’s taking a more active role with the state being a partner in this.

If the project doesn’t pan out with the producers, then we are ready and poised to build an alternative. If the large-diameter line with the producers doesn’t pan out, and those guys can’t come up with something, then the state will build something. As the state builds its model and gets that stuff in place, because the large diameter line is failing, then some people will buy into the smaller diameter. It will get bigger and bigger, and pretty soon it will have most of the players involved anyway.

I think they are all just jockeying for position for the best thing they can do and because the governor has an alternative plan anyway, it creates a situation where you’re just going to have to do it.

So I have more hope than ever before that something will come of this. I mean I’m an old pipeline guy. I worked on TAPS when we were building the road and cutting the right of way. When the pipeline was done, I stuck around and worked in Prudhoe for 20 years. I was waiting all of those years like everyone else was so I have more hope than ever before that something will get done.

Petroleum News: OK, let’s talk about the pipeline construction days. What do you remember about those days?

Guttenberg: I remember a lot of things. One of the things I remember is the loss of opportunity. I won’t get into the tariff aspects of it which was kind of on the back horizon. Back then Alaskans didn’t have the opportunity to take advantage of the jobs. When the pipeline was done and the career jobs on the pump stations were in place and that people retired off of and had an opportunity to work for 20 or 30 years, we weren’t trained.

We weren’t in place to have those jobs. We had maintenance and contracts like that. If you looked over the pump stations, the operators and engineers, a lot of those people move to Alaska for the jobs. They were two (weeks) on and one off, or a month on and a month off. It just seems to me that we were not trained. We were not in a position to say those jobs are ours.

It’s the same thing in Prudhoe, not just the pump stations. Those are the good jobs. The construction jobs were seasonal, then they go away. It should be Alaskans who are in position to take those 30 year jobs, those career jobs. I worked seasonal, when the construction jobs that were in place.

But the long-term jobs in the facilities and the major maintenance contracts were where people needed to be, and we need to make sure if something happens again, that Alaskans are in place to take those jobs.

Petroleum News: The population was vastly different than it was now. Don’t you think the state would have more qualified workers?

Guttenberg: I was here pre-pipeline. I didn’t know anything about it. I got here in 1969. Things were starting to happen. It wasn’t on my horizon. We were naïve. We were young. We were innocent. We weren’t players in the world of oil. I remember the state rolling out without the state knowing what was in the best interest of the state. Now hopefully we are better informed and we will be prepared and we will have generations of our children retiring off of those jobs.

Lots of people come to Alaska and do a great job, but now we have to think about who is here, what do we have to train them with? Is the university turning out scientists, engineers and biologists? We’ll have a couple of years to get that done. Not everything requires a four-year degree, a masters or a Ph.D. A lot of those guys have technical training on the Slope.

We need to be more aware of it and participate with the industry. We need to get hard numbers from industry. How many people are you going to need in these facilities? How many engineers? How many operators? And make sure we have the opportunity to get qualified people in those places. If we don’t we’ll be doing what’s done all too often and that’s repeating our mistakes.

Petroleum News: I’m not asking you to speak for respective committee chairs, but do you see the Labor and Commerce committees having bigger roles as the project advances? Normally, it’s just Resources and Finance.

Guttenberg: Well, as far as some of that stuff goes, the Finance sub committees do recommendations for training. The gathering of the information and the understanding should start out of those committees. The administration will put stuff out on the table and the industry will put stuff on the table, the committees will do their research and ask questions, then go from there. It certainly needs to be a coordination. The Finance Committee doesn’t have the time - certainly in a 90-day session - to unpack all of those situations. I would hope the Labor and Commerce takes on some of that and asks what do we need to do to prepare?

When things start rolling, first they are slow, then you know they are rolling, then things move fast. We will have little time to make sure people are trained. The labor unions have the first sense of needs. People will be rolling in and we will be swamped with community impact issues. That is kind of the first thing that will hit the table. Being prepared and having our people in place is the second part.

Some of those engineers and facilities people will need to be involved on the construction side to know where things are, to know what it looks like underground, to understand why things are the way they are, but not everybody. So we’ll have a little time.

Petroleum News: Looking ahead, what would you like to see the state accomplish, be it in a special session or otherwise between now and year’s end?

Guttenberg: Well, there are rumors that we will have a special session in October on the AKLNG. The first thing is I hope we have enough information so that we can be boned up and educated on the issues before we get down there, so we don’t just show up in Juneau and they roll it out, and we have to do full committee hearings people aren’t asking the most basic questions, that we have a process and understand what it is that’s going on, so it’s not just laid out on the table, here it is take it or leave it.

That’s the way I felt the Parnell process was with the two components on the agreement he signed with the industry. I thought they were take it or leave it. Clearly some of it was way too confidential. I wouldn’t sign those confidentiality agreements because I’m a public official and I have to answer public questions. I’m concerned about that.

But at least give us a few weeks to understand the documents so we can have some preliminary hearings and briefings. That’s coming up fast. First of all, we lost 54 days in the spring stuck in a special session that accomplished something for me but not some other people. It’s coming up fast. It’s amazing how fast it happens.

But I don’t want to go to a special session without something hard on the table. If we don’t have something to do on October, then just start a special session Jan. 3 that goes to the beginning of regular session instead of going down without something on the table. I don’t want to go for it to be a show. I don’t think the governor wants to, either - nor anybody else.

Petroleum News: When you do return, it looks like the Legislature may be examining the value of the tax credits. I know you addressed that last week. Is this something that should be reviewed?

Guttenberg: Oh yeah. Whether I agree or disagree with the tax regime on the table, I think it’s entirely appropriate to examine what it’s doing every couple of years. What’s changed with the economic situation? What can we do to enhance development? Should we do credits this way? Should we change the way we do credits? I just think it’s appropriate for us to examine what’s going on and also examine what we left on the table. I think it’s an appropriate time now to do just that now.

Petroleum News: So it’s not that you’re against the tax credits. It’s just something else you want to look into under the bigger heading of the budget?

Guttenberg: We need to ask ourselves are we getting what we are paying for. There are a couple things we are paying for that we are not getting. We talked about what should we do different than the last time. I talked about jobs and being ready. With the tax credits and the things we are giving money to do, I think we don’t get anything back for them.

There are things we should be getting besides increased production. I think the state doesn’t get enough information about what’s at the bottom of the well. I think that’s a credible question. Where should we be developing? The whole picture of what’s inside Prudhoe Bay and what’s at the bottom of those wells, I don’t think we have. How does the state manage its resources if we don’t know what’s down there? They people we are paying hundreds of millions of dollars of credits are not giving us back the information. The state has an obligation. We should be asking for that when we give credits.

Petroleum News: A little farther north, Shell is hoping to still do some drilling this summer. What are your thoughts on Shell returning to the Arctic?

Guttenberg: My personal opinion is that Shell is looking to divest itself of its Arctic enterprises. They made an announcement in a big press release earlier this year how they reconfigured, what they considered their mission and where they are going to put their resources and their time, and this was not mentioned. I think they are just following through their construction commitments to the feds and to the state in order not to devalue their product and they are, in my opinion, they are going to sell them. According to what they said drilling in the Arctic did not fit in their plan any longer. I don’t know if they are going to be able to but that’s what I think it’s about.

Petroleum News: A few months ago Shell had its rigs in a Seattle port which naturally drew opposition from environmentalists, but it also caught the attention of city and state leaders, including the governor (Jay Inslee). What were your thoughts on the pushback? Were they meddling in Alaska’s business or protecting their own interests?

Guttenberg: OK, there are a couple of things involved in that. I gave a floor speech on the resolution on that. We don’t own the Arctic. That belongs to the United States. We are just the ones closest to it. Sometimes when Alaskans protest about people’s concerns over what happens here, you know we are citizens of the United States.

Everyone has a right to have a voice. The state, I think, has to take care of its business with oil and gas development so some of that (resolutions) is justified.

I thought it was funny because Shell had the problem (with the Kulluk) and told us they would risk everything for a couple million dollars in taxes by doing things that were not safe.

They ended up putting their drill rig on the rocks. They already told us they don’t want to be here. They don’t want to use our ports; they don’t want to leave ships here; they don’t have headquarters here; they don’t want to have staging areas here. So why are we standing up for them? We can support drilling in the Arctic when we are ready - when we actually have things in place. I think some of the concerns people have had, they are justified. Shell has not lived up to the strongest commitment they should have in being ready and being prepared.