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Operations, gas line transition focus Report from governor’s oil and gas team prioritizes field operations, gas, tax policy, government efficiency, offshore development Kristen Nelson Petroleum News
Field operations and gas projects topped the list of priority issues identified by the oil and gas working group of the transition team conference which Alaska’s governor-elect, Bill Walker, and Lt. Gov.-elect Byron Mallott assembled in November after their election. The transition report was released Jan. 21 and is available online at http://gov.alaska.gov/Walker/transition-2014.html.
In releasing the report Walker said he doesn’t expect to agree with every suggestion, but said he would use the reports to measure the interests of Alaskans in issues at hand.
“This living document, sustained by the relationships built during the conference, will be a valuable tool as we begin to tackle the budget and review legislation for the coming year,” Walker said in a statement.
Field operations In a summary of comments on the field operations issue the report said two themes emerged during the discussion of field operations - that the administration should have open discussions with industry to determine how the state can work more effectively with industry and that state agencies need to be more responsive to industry concerns. The report suggested that technical workshops might be a way to accomplish that responsiveness.
The group discussed increasing production, including incentivizing producers to explore and develop new opportunities in new and legacy fields.
Providing access for “new competitive entrants” was discussed, especially providing them with “reasonable and timely access to existing field facilities.” The report said there was contention in the group as to how best to provide that access and whether commercial negotiations were sufficient with the majority of the group of the opinion that commercial negotiations were not sufficient “due to disparities in the relative market power among the stakeholders.”
The report said there was agreement that regulation by the state of access to facilities, if adopted, needed to be “timely, on reasonable terms, and sensitive to an existing owner’s investment in and legacy use of such facilities.”
Existing regulatory issues On existing regulations there was concern among many that requirements for many routine approvals “were ill-defined and inconsistently applied,” and that the administration needed “to issue regulations which more efficiently, consistently, and timely resolve the approval process” for routine activities.
DR&R, dismantling, removal and restoration, were discussed and the group agreed the state’s approach to DR&R needed to be reviewed “to make sure that the risk is equitably shared among stakeholders.” A problem of potential regulatory overlap was identified, and there were comments that smaller oil companies “are frustrated by the introduction of DR&R bonding requirements into the lease assignment process.” There was agreement that greater clarity and consistency is needed and “that the risks associated with DR&R should be more broadly distributed.”
Another issue discussed was the industry-supported 470 fund, used for oil spills. The report noted that while only the oil industry pays into the fund, it is used “largely in support of commercial shipping and other industry groups.”
The report said the group favored expanding funding to include other industry groups benefitting from the fund.
Gas project Construction of a large-diameter natural gas line for a liquefied natural gas project is a “central goal for the new administration,” the group said, urging the Walker administration to maintain momentum on the Alaska LNG project, but also to “achieve a commitment to build the AK LNG project through an appropriately disciplined process.”
The administration should also conduct due diligence necessary to understand and assess the project, “move forward without inappropriate risk on either side,” ensure Alaska’s needs are met and encourage cooperation between the Alaska LNG project and the in-state project, the Alaska Stand Alone Pipeline.
Some members of the group were concerned that there was not a current commitment to build the Alaska LNG project; others noted several steps need to be taken by all participants, including the state, before a commitment can be made.
There was concern about assessing the LNG project in terms of how best to bring the greatest net revenue to Alaska, as well as contention over the extent to which the new administration should be bound by agreements reached by the prior administration in Senate Bill 138 and the Heads of Agreement.
Most in the group wanted a project team formed to gather information, analyze the project and establish communication with the new administration and the industry on revenue sharing between the state and industry.
While there was agreement that the administration should maintain momentum for the construction of a large-diameter gas line; some wanted to also see momentum maintained for the in-state line, the Alaska Stand Alone Pipeline.
The group was concerned that industry may not progress the Alaska LNG project, or that the state “may accept an inappropriate amount of risk or uncertainty,” and a request that the Walker administration communicate and interact with industry frequently and periodically report the status and agreements to the Legislature and the public.
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