Murkowski promotes energy agenda

Senator helps ease ‘torturous’ offshore permitting process, promotes LNG export project with Japan, pipeline access across NPR-A

Stefan Milkowski

For Petroleum News

As ranking member of the Committee on Energy and Natural Resources, Sen. Lisa Murkowski is deeply involved in energy issues. Murkowski has tracked Shell’s progress toward drilling in the Chukchi and Beaufort seas and, frustrated at the pace of air quality permitting, successfully pushed to transfer authority from the Environmental Protection Agency to the Department of the Interior.

She’s also fighting to open the Arctic National Wildlife Refuge, promoting an Alaska natural gas export project with Japan, and working on an energy policy she says will truly be “all of the above.”

Petroleum News spoke with Murkowski on June 14.

Petroleum News: Let’s start with Shell. You recently toured the Kulluk drilling unit. What was your impression?

Murkowski: I was impressed. Taking a vessel that has been used in the Arctic in years past, retrofitting it to the highest standards. The fact that there are zero emissions is quite considerable. Looking at the engine system they have installed — it really is impressive.

Petroleum News: It’s taken Shell seven years and billions of dollars to get here. What can we learn about the permitting process from their experience?

Murkowski: We have learned that the permitting process can be torturous. We knew it was going to be a difficult process, simply because there has been no activity up in the Arctic for decades. You also had the Deepwater Horizon and all that came with that disaster. There was a moratorium throughout the country.

You have a permitting process through the EPA that is unnecessarily slow. I’d been considering (transferring air quality permitting from the EPA to Interior) for about a year before we brought it up and passed it through the appropriations process. DOI has always had authority over oil production in the Gulf of Mexico. But EPA has taken over the issue in Alaska, and Shell was in a situation where the process was excruciatingly slow.

The EPA failed to demonstrate that it was even capable of issuing a valid permit in a reasonable amount of time. The Interior department can certify air quality compliance in a matter of months. I think it can do a better job of protecting the environment without delaying responsible development to the point of deterring investment.

Petroleum News: How do you respond to concerns from Rep. Henry Waxman and other House Democrats that regulations won’t be as stringent now?

Murkowski: We moved the authority to a department that has been engaged in the issuance of permits for decades. It’s been working in the Gulf of Mexico, and there is no reason that it shouldn’t work as efficiently in the Chukchi and Beaufort.

There are those who say it won’t be as stringent. I would disagree. The difference is that you have a level of efficiency within the Department of the Interior that has been built up over decades. With EPA, it was a brand new mission; they had not been engaged in a full-on permitting process as we saw with Shell. They didn’t have the expertise. They demonstrated that they just weren’t capable of handling this in a reasonable time.

Petroleum News: You criticized the Bureau of Ocean Energy Management for reducing Shell’s drilling season to give time for a late-season cleanup in the case of a spill, calling it unnecessary and not based on science. What did you mean?

Murkowski: They indicated they were taking historical averages as to when the ice came and walking back the number of days it would take to have the drillships out of the area. What happens if this year it’s different?

Right now we’re seeing one of the coldest springs and early summers in the Arctic in a long, long time. The level of ice in the Chukchi and Beaufort is pretty much unprecedented. Summer is going to come later this year. Fall might also come later.

Instead of saying, We will look to the ice conditions, (BOEM) gave basically a drop-dead date.

Petroleum News: Are you comfortable with Shell’s oil spill response plans?

Murkowski: It’s not so much whether Lisa is comfortable with it, but whether the regulators are comfortable with it, whether they feel it’s adequate and sufficient. We have seen permit after permit being issued. That’s the real test.

Petroleum News: How important is this summer to the future of offshore development in the Arctic?

Murkowski: It’s fair to say the eyes of the world will be upon Shell. This has obviously been a long buildup, with scrutiny not only in the regulatory process but also through the courts. This is probably the most studied and reviewed energy development project we have seen, perhaps ever.

We’re going to be looking to see whether they’re successful, in the sense that there’s a good find out there, hopefully multiple good finds.

But Shell will be scrutinized for a lot of reasons. I think Shell is setting the standard for the type of exploration that we will expect in the Arctic — and not just in Alaska, but in Russia, Canada, Norway, Greenland, all around the Arctic.

The environmental community is looking to make sure there are no mistakes, that Shell is working within their permits. Whether it’s concern for the whales, or air quality, or water quality, there will be a great deal of attention.

So there’s a great deal riding on Shell’s performance this summer. I think they understand that. I think they know their success this summer will impact future development in the Arctic. I want them to set the standard high, and I believe they’re doing that.

Murkowski: We continue to push on ANWR. I will not relax on this because I believe it is the right thing for this nation and for our state. We’ve got the resource, the demand is clearly there, and I know we can do it right and in concert with the environmental concerns that have been expressed.

The plan is to keep working to educate people. I’m going to be bringing a group of colleagues to Alaska at the beginning of August to see ANWR, to see hopefully what we will have started offshore by then. It’s important for members to know what ANWR is and what it’s capable of.

I’ve got two bills introduced but haven’t had an opportunity for a hearing on them. I don’t have the votes in the Energy Committee today. We likely don’t have the votes on the floor today. But that doesn’t mean that we relax on the initiative. We’re going to keep pressing on it.

Petroleum News: What’s your sense of how far President Obama is willing to go in opening new areas?

Murkowski: We have seen a level of commitment coming out of the administration. Sometimes it’s a little slow and, like the process Shell had to go through with its permits, a little torturous. But we have seen somewhat of a willingness to open new areas. I’d like to think we have more opportunities in (the National Petroleum Reserve-Alaska) now because the permit for the bridge with CD-5 was allowed to advance.

But I also recognize that within the NPR-A management plan, there could be efforts that could negatively impact our ability to produce and transport resources throughout the state. We may have been successful in opening new areas in the Chukchi and Beaufort, but we could lose that fight if we’re prevented from establishing a pipeline corridor to hook into TAPS. If it’s not allowed to cross the reserve, we could face stranded resources, stranded investments.

Petroleum News: You’ve been promoting a gas pipeline project that exports gas to Japan. Why is Japan a good market for Alaska gas?

Murkowski: First and foremost is the relationship that has been built between Alaska and Japan. We’ve been sending natural gas from Cook Inlet to Japan for 40 years. We’ve got a history of cooperation, a history of trade, and that’s a real positive.

Japan is in need of energy resources after the tsunami and the shutdown of their nuclear facilities. You’ve essentially got 30 percent of Japan’s electricity shut down. Japan is looking to switch a major portion of its power generation to natural gas, but they need an affordable, reliable source. I think Alaska can be that source.

Another market that is important to recognize is the South Korean market. South Korea is the second-largest importer of LNG, so there’s great potential there for us.

Petroleum News: Is there a time window for capturing a piece of those markets?

Murkowski: I always say the window is not open indefinitely. Japan needs the resource now. They’re talking to many other nations about how they can meet the need. (We need to) establish that we can be that energy provider for 100 years. Between offshore, NPR-A, what we currently have, ANWR, the potential is 100 years plus. I’m told it’s 150 years that we could supply 4 (billion cubic feet per day) to Japan. And this doesn’t count tapping into Alaska’s methane hydrates.

We have the resource. We’re as close as most other nations. We’ve got the relationship. We need to move on it.

Petroleum News: You’ve talked up this idea to members of the Japanese parliament and also to Prime Minister Yoshihiko Noda. What kind of response did you get?

Murkowski: It was quite encouraging. I met first with several members of the Japanese diet. When they came over, they were focused on the availability of Lower 48 shale gas. But they came to understand very quickly that there is debate right now about whether to ban export of natural gas out of the concern that it could increase consumer prices.

I explained that Alaska gas is different. Ours is not shale gas. It’s wet gas. Our market is separate from the Lower 48.

I have been talking to anybody who’s willing to listen about why what we have in Alaska really does help meet the needs of Japanese. I had a dinner with the Japanese ambassador and the South Korean ambassador, and was delighted that we were able to spend most the evening talking about energy and what Alaska has to contribute.

Petroleum News: I understand you’re working on an energy plan to be released this summer. What can you tell me about that?

Murkowski: About a year ago, I gathered all the smart folks on my energy committee and said, Look, we have not really moved much in the way of energy policy this Congress, and that’s unfortunate, but it gives us time to focus on a real comprehensive energy policy.

I asked them to do a little homework. Go back to every energy policy laid out since the ’70s. Let’s look at what’s been run up the flagpole and down, what’s worked and what hasn’t. I want to re-imagine what a national energy policy could look like, and I want it to be comprehensive. Instead of just saying, “all of the above,” I want it to mean all of the above.

There is focus on increased domestic production, absolutely. But it also has equal emphasis on how we move to the energy sources of the future, how we can realistically build out our renewable energy sources. I want to make sure we have equal emphasis on efficiencies and conservation so we’re smart with our energy use, and we’ve got to focus on transmission.

I’m really excited about what we’re going to put out. It will be towards the end of the summer. We’re not going to be introducing legislation. We are defining strategic goals. We are laying forth a vision.

Petroleum News: In the past, you’ve co-sponsored cap-and-trade legislation. Do you support any kind of climate change legislation now?

Murkowski: There’s nothing out there even up for consideration.

My focus is on making sure we have access to abundant and affordable energy. The kind of climate proposals we’ve seen in the past couple years have been built around the idea that you push things in a direction by making energy scarcer and more expensive. I don’t think that’s the right way for us to be going. Look at the state of our economy right now. Alaskans can’t afford to have their energy be more expensive.

There are steps we can take to use the energy we’ve got more efficiently and then transition, whether it’s to sources like natural gas, which has a smaller footprint, or renewable energy, whether it’s geothermal, wind, or hydro, anything — but where it makes sense to do it economically.

Our big problem is how we pay for the policies. My idea is to take a portion of the revenue the government receives from fossil fuel production and dedicate it to R&D. We’re big oil consumers today, but there’s nothing wrong with letting oil essentially work itself out of a job.