Producers, explorers duke it out in House oil and gas committee

Kristen Nelson

The House Special Committee on Oil and Gas heard opposing views Feb. 5 on whether the state should sell its royalty North Slope gas, with existing gas producers telling the state to hold off and companies just exploring for gas telling the state it should go ahead.

Michael Hurley of Phillips said a royalty gas sale “further burdens” an already economically challenged project because space contracted by an explorer to ship royalty-in-kind gas could be filled instead by the explorer’s own gas, forcing producers to allocate some of their own space to ship the state’s gas as royalty-in-value, theoretically reducing the producers’ ability shipping capacity from 3.5 billion cubic feet a day to 3.2 bcf.

Ken Konrad of BP Exploration (Alaska) Inc. told the committee that known resource owners are backing the line and unknown resource owners are backing the RIK sale, which, he said, transfers the ability to ship without transferring the risk — and reduces the chance of the project getting built.

Richard Glenn, vice president of lands for the Arctic Slope Regional Corp., told the committee ASRC wants to continue working with existing North Slope producers, but has to speak out in favor of further exploration, access to capacity and access to the planning process for a North Slope pipeline. He said ASRC feels that the RIK sale is a necessary place marker for non-owners of gas.

Alan Sharp of AEC told the committee AEC wants to see the pipeline designed from the start with all the North Slope reserves in mind and said there would be little or no additional cost if the line is designed for incremental expansion.

Mark Hanley of Anadarko Petroleum Corp. said it is a policy call for the state: If the producers control initial capacity in the pipeline you won’t have exploration in the state by companies like Anadarko and AEC — and are unlikely to get lease sale participation.