Begich calls for action on gasline

With a year remaining in his first term, Sen. Mark Begich is trying to make the case nationally for Alaska oil and gas projects

By Steve Quinn

For Petroleum News

U.S. Sen. Mark Begich is making rounds in Alaska during the Senate’s August break. He’s hoping he can use some of that time to entertain newly minted U.S. Secretary of the Interior Sally Jewell.

Begich says he wants to show Jewell first-hand how Alaska’s resource development potential on the North Slope and in Arctic waters represent economic security for the U.S.

Now in his fifth year in office, the Anchorage Democrat spoke with Petroleum News on a variety of oil and gas issues connected to Alaska.

Petroleum News: You’ve made the Arctic one of your priorities. Let’s start with Shell. You went to bat for Shell at the White House and they had to suspend Arctic operations this year? Do you feel let down by Shell?

Begich. I’m not sure I feel let down. They had some complications. It’s a big project and they had a whole new rig. But I feel very confident they will be back in it the beginning of next summer. I think that’s a really positive thing for oil and gas development in the Arctic that hasn’t really been happening in 20 years. I wish they were in this year, but I’m not panicked about it because they are back next year. It’s taken 20 years to get someone interested in doing development. I’ll do everything I can to help them next summer.

Petroleum News: So are you confident next summer can be a renewed launch for Arctic exploration and development?

Begich: I do. They are already doing some work now, like seismic studying. I feel confident next summer they will be back in. If that’s the case, once they hit what I think they’ll hit — that’s incredible oil and gas finds there, especially oil finds — as soon as that happens, we will forget about one complication last year because we will have a multi-decade development.

Petroleum News: As you look at Arctic development, what’s missing in an Arctic policy for our country, at least as you see it?

Begich: One, from a 50,000-foot viewpoint, and that is a comprehensive approach to Arctic development on an international level. What I mean by that is we are doing stuff, Russia is doing stuff. We got together on search and rescue. But we still need to get together as international communities on infrastructure development, oil spill response, Law of the Sea, science. So I think there is that 50,000-foot view that is coming but it’s slow.

Bringing it down a little bit lower, I think the issue that’s very important is how we as Alaskans take advantage of this unique opportunity of thousands of jobs that will be created. What kind of workforce development are we planning to prepare Alaska’s workforce for the long-term in terms of oil and gas development. What are we doing to make sure we are investing those kinds of monies both on the state and federal level regarding port development to support oil and gas development. The Legislature has moved slowly, but there still should be a lot more debate in discussion about what kind of investment they need to make. As you recall last session, I challenged the state of Alaska to do a $2 billion port fund for development. They didn’t take that challenge. Hopefully next year they will.

Petroleum News: Would you say we as a nation are behind the rest of the world in crafting a policy and acting on it?

Begich: I think that’s a two-parter. The White House just released a framework policy. There’s another policy framework that’s been done by the Interior Department and Corps of Engineers have been working on. What we need to do now is merge them into one long-term national policy, pull the trigger and get going. On one hand, we have a policy being built. On the other hand, other Arctic nations are moving at a more rapid pace than we are.

On top of that the private sector is not hesitating to move forward. That’s why working with companies like Shell, and working with regional and village corporations and tribes in Alaska, working in partnership, we are moving forward.

Begich: We should be nervous when China wants to build more icebreakers than we’re building. We should be concerned when China says we need to divide the assets by region. I know some of the folks want to look at this as a chance for international cooperation. Well, I don’t mind cooperation; I just don’t want them taking our resource.

Petroleum News: You’ve spoke in the past about maritime traffic concerns. What are they?

Begich: We’ve seen over the last several years, an almost 10-fold increase in maritime traffic coming up and down the Bering Sea. That’s good for us, but that creates some risk for us. What I mean by that is, if you have a vessel — a cruise ship or a barge — moving through there and they run into a hazard, creating a search and rescue needs, we have to be prepared for that. We have needs that should be put forward. We have been working on the Homeland Security Subcommittee on the appropriations committee, making sure they have the resources necessary. Along with that, creates opportunity if we do the right kind of port design along western shore of Alaska, we can be home to the servicing companies of these ships and make sure we get the business rather than going over to Russia. There’s opportunities, but there’s risk to be had.

Petroleum News: So is this where the $2 billion that you want the state to put forth comes in?

Begich: Yes. It would be for building deepwater and shallow water ports along Western Alaska. I have a piece of legislation that would allow the state to leverage that money to upwards of $5 billion-plus, which would be a significant amount for us to be the port service center when it comes to Arctic and Bering Sea traffic and Northwest traffic.

Petroleum News: So what can the state do to advance Arctic policy and Arctic development?

Begich. I mentioned the first one. The second is workforce development. For example, a kindergarten student today is the same student when they graduate from high school who will be ready work in oil and gas fields in the Arctic. It would be wise of us to be investing a significant amount state resources in science, technology, engineering and math education. Then prepare our young people for a career in the Arctic. I’m not sure they are that forward thinking. I think they are looking at next year’s budgets, next year’s school budget or next year’s foundation formula. That is a big mistake in education investment.

The third is what I call core infrastructure outside sea-based infrastructure. What I mean by that is water, sewer, housing. Other cities and villages who are being impacted by the development, we need to be preparing those communities for this new multi-decade employment that is coming. Again, port development, education and core infrastructure.

Begich: You need to have northern-based ice breakers so you are not flying folks or moving ships from Kodiak, but from some part on Western Alaska closer to the Arctic. The good news is we put some money into Homeland Security appropriations bill to make sure there are resources for new icebreakers in the future. We’ve been able to get some language in Homeland Security on Arctic focus to begin planning on infrastructure needs. The President, his budget didn’t do enough and actually reduced investment into the Coast Guard budget, and that was a big mistake.

Petroleum News: What about NPR-A? You’ve not been completely happy with that plan. What’s missing?

Begich: As you know it is just a plan. I want to make sure that we get some language in that plan that’s beneficial for Alaska, making sure we have an east-west as well as a two northern – north to south – pipeline routes that come out of the Chukchi and Beaufort we can tap into. That’s very important. The other piece is to recognize that the lake up there needs to be protected, but they went too far down and closed off potentially productive areas. The plan needs more work and it lacked input on the affected villages and communities who see the economic opportunity that was missed.

Petroleum News: What about ANWR. It seems like the ongoing efforts by you, Sen. Murkowski, Congressman Young and Gov. Parnell keep running into an impasse. Is this wheel spinning?

Begich: When I came into the Senate, we had kind of what I call the Babe Ruth plan, hit a home run on ANWR and all problems will be solved. Remember Babe Ruth had one of the highest numbers of strikeouts. We came with a different approach, what I call the Moneyball approach. There are four bases: NPR-A; Chukchi, Beaufort, ANWR. Let’s spend the next six years focused on that and figure out which base we can hit, move from one to the next. At the same time I wanted to make sure we lowered the temperature on the national debate against ANWR.

If you notice the last four to five years, you rarely hear about ANWR beat on. It used to be about every week some environmental group that said if you touch ANWR the sky is going to fall. I would say the last three to four years, we’ve been able to temper that. At the same time there is movement in the Chukchi and Beaufort and we see new opportunities at NPR-A, though there’s more work to be done there.

With ANWR, just because there is such a national fever against it does not mean we give up the fight. If anything we are showing how to do it, do it right with the three other areas, and ANWR becomes simpler to show and prove. Plus, there are 35 new U.S. Senators since I came into office five years ago, and we’re working to convince them.

I’m not sure I support the governor’s approach. I’m not sure his plan has the resources yet. I haven’t heard any private oil and gas companies say they are going to put $50 million on the table to do these studies. That’s the problem with his idea, even though I do support it. Anything we can do to open up ANWR is good for this state. His approach is $50 million from the state, $50 million from the federal government, $50 million from the private oil and gas companies.

Petroleum News: You said you plan to bring up Interior Secretary Sally Jewel to Alaska. What is it you want to impress upon her?

Begich: We want to get her up to the North Slope. We want to show her the production and how we do the business, which is much different than most people understand. We utilize directional drilling. Actually, we perfected directional drilling in Alaska. We don’t have just pumping rigs that go up and down like Los Angeles and Texas. Ours are a much different style. They are smaller units and they take up less space and they expand once they are in the ground. I want to stress that we Alaskans understand the importance of protecting our environment. We are not interested in slash and burn policies. That’s why we’ve been able build an oil pipeline; we’ve been able to do oil and gas development in a responsible way. I want to be able to show that to her. We need to get a re-commitment on Arctic oil and gas. That’s a huge international economic and security issue for us. I want to assure her we know how to do it right and show her how it’s beneficial for Alaska and the rest of the country.

Petroleum News: What about revenue sharing? Once you get these federal waters developed, how important is it to have a revenue sharing plan in place?

Begich: I’m a sponsor on Sen. Murkowski and Sen. Landrieu’s bill, but I have a separate bill which is very Alaska centric and the reason I introduced that bill is to make it clear: what ever national program we come up with, we’d better not forget how Alaska is being treated and that it’s being treated fairly.

Begich: First of all, Keystone is a great jobs project, not only for the construction but the management of it, but it also helps move fuel from the North Dakota fields because they would be able to tie to the pipeline in rather than trucking it or putting it on trains. Pipelines are the safest way to move any product when it comes to oil and gas, which I think is a smarter thing to do. When you look at the project, it’s important because that product will be refined in the U.S. I’d rather see the pipeline come down north to south. It doesn’t have a direct effect on Alaska but what it does, it continues to move forward on oil and gas development in this country, and other states who may touch that support could then give us support we need in Alaska, which is a gas line.

Petroleum News: Speaking of pipeline development, if Alaska’s LNG pipeline moves forward, there is no federal loan guarantee backing that route. What would you like to see happen to advance a pipeline project in Alaska?

Begich: We will do everything we can. I will say that narrow pipeline, long-term, doesn’t do what Alaska needs. Any gas line produced should bring gas to Alaskans first, but in order to make it economical we should have an oversized line coming off the North Slope through the Interior. We need export capacity that we will totally miss by having a small diameter in-state pipeline only. There’s only going to be one pipeline. There is no twofer here.

We want to move that guarantee to not only export but also instate use. At the end of the day, the biggest problem with the decision on the pipeline is to get the state of Alaska to figure out what its doing. Every time I turn around they have a new plan and they are spending money left and right studying these new plans rather than saying: what’s the plan of action? The plan of action should be a large-diameter line coming off the North Slope coming through the Interior then tee it off into one or two lines for export and internal use. Maybe the state has to invest in the first half with a buyout clause after so many years.

We’ve got to get going. The markets are shifting around the world and we are going to be shifted out of the market if we are not careful. Russia is moving toward more LNG. China has moved to LNG. When the Panama Canal is enlarged, instead of 10 percent of the LNG tankers fitting through, 90 percent will fit through there. This means more export. Each country is making deals, 15- to 20-year deals today. Every time we sit around and have some myopic short-term thinking on our gas line, we lose customers of the future.

I’m not sure what they are doing down there in Juneau, but they need to get focused here and get on this. If we do only in-state use line, we’ll lose an opportunity for creating thousands of jobs for us in the future.

The first priority always will be gas for Alaskans, then move to make sure we have expansion capacity. Every day we are missing a window here.

Petroleum News: Sen. Murkowski recently put out a report saying the window for LNG export in the U.S. is closing.

Begich: I’ve been saying that for five years. Look down in Australia, you’ve got a $50 billion project in a more environmentally sensitive area than what we would consider in Alaska purely on gas supplies. China has one third of the fracking gas of the world. Once they figure out how to move that product, they will. I would agree that Sen. Murkowski is right. I’ve been saying the window is closing, get off the dime. You can see it in my multiple speeches to the Legislature. Every February or March when I go down there. I say, “What are you people doing. Get off the dime, Governor and Legislature. Make a decision.” When the markets close, they close. It’s not like oil when you can buy it on the spot market and shift overnight. Gas is done with 20-year contracts. One you’re locked in, you’re locked in. We’ve got to move on this.