AOGCC: How much data can be public?

Alaska Oil and Gas Conservation Commission working with Prudhoe Bay owners on gas off-take issues, primarily what can be in the public record

Kristen Nelson

Petroleum News Editor-in-Chief

The Alaska Oil and Gas Conservation Commission is in discussions with the Prudhoe Bay working interest owners over how much data the owners will allow in the public record as a part of the commission’s natural gas off-take hearings. One of the issues the commission is looking at, and discussed at the May 19 hearing, is whether it will be able to get enough information on gas off-take rates working cooperatively with industry, or whether it will have to do its own studies, an alternative which Commission Chairman John Norman said would be more costly.

The issue for the commission, its members told industry, is that it needs to have enough information on the public record to justify the off-take decision it reaches.

The commission began this hearing in March and intended to continue it in April. Norman said the date was moved to May to allow the commission’s newest member, Commissioner Cathy Foerster, appointed March 23, time to become familiar with the record before the hearing resumed. The May hearing was recessed until a time to be determined by the commission.

The commission set oil and gas off-take rates for the Prudhoe Bay field at 2.7 billion cubic feet a day as part of the establishment of pool rules in 1977 prior to the beginning of oil production from the field. Most projects being considered today have proposed rates in the range of 4.5 bcf a day. The commission’s role is to ensure that hydrocarbon resources are not wasted: that gas production does not occur at the expense of oil production.

Before gas sales could take place at any rate higher than 2.7 bcf a day the commission would have to revise its rule.

The commission heard testimony from its consultant, Frank Blaskovich, and from industry at the March hearing. Norman said it is the commission’s feeling now that rule 9 (the 1977 gas off-take rule) is outdated because of the passage of time, the volume of production from Prudhoe and other events. The commission needs information to revisit rule 9 and while it has tools available to it to get that information, cooperation from the Prudhoe Bay producers would expedite the process, he said.

When is decision needed?

Wendy King, ConocoPhillips Alaska director of external strategy for ANS gas, told the commission it would be best if pool rules are defined prior to an open season for a North Slope gas pipeline, which is expected to occur 18 months after government frameworks are in place for the project. Uncertainties during the open season create risk and without binding agreements coming out of an open season, project owners lack the needed commitments, King said.

David Van Tuyl, BP Exploration (Alaska)’s ANS gas group commercial manager, said pipeline financing is underpinned by firm transportation commitments. Shipper economics are volume dependent and applications to both the Federal Energy Regulatory Commission and the Canadian National Energy Board depend on open season commitments, he said.

If the off-take rate is not established prior to an open season, an additional open season may be required, delaying the project by three to nine months, Van Tuyl said. The estimate is a cost of about $1 billion to get regulatory approvals, he said, but if some of that work has to be redone because the gas off-take rate isn’t approved prior to the open season and is different than expected, that cost could go up.

Asked by Commissioner Dan Seamount how much it might cost to redo some of the open season and regulatory application work, Van Tuyl said it would depend on how substantial the changes were. As an example, he said, going from 16 to 18 compressor stations would be a significant design change.

What can be shared?

Some information would be released for commission-only use, Pospisil said, some for the public record.

Seamount asked if there would be agreement on information release at the beginning of the study process. He said having specifics on releasable information before the process begins is important or the commission could get to the end and have problems with what data could be released. Pospisil said there would be as much agreement in advance as possible on the information in the data room, but taking information out of the data room would require a specific request in writing.

Norman said the commission needs data to support its decision, and said while he views working cooperatively to be the most desirable way to go, the commission could also do its own studies, which would be more tedious and expensive. He said he is concerned about waiting until well into the process for a decision on what data can be part of the public record and said he thought there needed to be a lot of effort put into the agreement. The commission needs to foresee what it needs and “let you react to that,” he said.

Foerster said she was concerned there was a risk that if the cooperative study process didn’t provide the public data the commission needed, the commission might have to stop well along in the process and do a separate study, which could delay a decision. She said it was important that the commission be able to share what goes into its decision: “We need an informed public,” Foerster said.

Norman said the commission staff and its assistant attorney general would look at the working interest owners’ proposal and see if we can come to an agreement. If we can, he said, the agreement will be public noticed.

Another voice for a public process

Heinze said he believes the commission has the responsibility to develop a case in public on how gas sales should occur — what the best case looks like. Information is “painfully absent,” he said, on the composition of Prudhoe Bay gas. The state is entitled to investigate gas sales off-take independently, and shouldn’t depend on someone else’s opinion, he said. The hearings in the 1970s (for the initial Prudhoe Bay pool rules) were lengthy and very public, Heinze told the commission.

He said the state needs to create some public understanding of gas sales issues including field management plans and alternatives.

Heinze said he is concerned about what he perceives as a lack of peer review and tension within the Prudhoe Bay unit. From the beginning of Prudhoe development and through the 1990s, he said, at least three companies had very different views and debated them, but that isn’t happening now; Heinze said he recommends a peer review of Prudhoe Bay development.

The commission is a quasi-judicial body and should be doing work akin to best interest findings, which explore the good and the bad and the ugly “with some substantial amount of information public,” Heinze said, urging the commission “to err a little bit more toward public disclosure.”

Seamount asked Heinze what, aside from economic information and price forecasting, is actually secret.

Heinze said that in the hearings in the ‘70s the information used in the models was disclosed. Most of the information should be “highly visible” since there are no unresolved issues of ownership at Prudhoe.

The evaluation tools themselves, the programs, are corporate assets on which the companies have spent a lot of money, and wouldn’t be considered public, he said. But Heinze said he doesn’t see why the information isn’t public. It would have to be disclosed to FERC, “but you have reservoir authority, not FERC,” Heinze told the commission.