Olson enjoys view of Cook Inlet rejuvenation

Soldotna Republican, who chairs Labor and Commerce Committee, says he’s ready for some AKLNG special session work in the fall

Steve Quinn

For Petroleum News

When House Rep. Kurt Olson returned to his Soldotna home, the changes he had hoped for were taking place. The Republican who oversees the Labor and Commerce Committee talks about driving north to Anchorage and seeing heavy equipment heading to Cook Inlet. He says it’s a product of tax breaks afforded several years ago and should be considered an indicator of what a good tax plan can do to spur development.

Olson’s committee is often looked upon as a safeguard for oil and gas legislation, receiving committee referrals for last year’s AKLNG gas line law SB 138 and this year’s Interior Energy Project bill, HB 132. He’ll often waive the bills to the Finance Committee, but Olson, who also serves on the House Resources Committee, could still find himself hearing the next AKLNG bill during a special session.

Olson spoke to Petroleum News about the recent regular session and the latest on the oil and gas front.

Petroleum News: Let’s start with the latest developments that are outside Alaska. Things seemed to be going well for Shell getting a rig up here, but lawmakers in Olympia and Washington suddenly had other ideas from the Seattle port. Are they meddling, protecting their own interest or a little of each.

Olson: I would say the former, not the latter. We had a situation like this arise about seven or eight years ago where Seattle was going to place a container fee on all shipments going north. I took exception to it. More or less to get their attention, I put in a resolution to terminate the Marine Highway above Bellingham either in Prince Rupert or Ketchikan.

Amazingly enough we ended up with the entire port commission from Bellingham flying up. They decided the container fee wasn’t a good idea after all. I think one might have been (U.S. Democratic Sen.) Maria Cantwell and it probably still is. I think there will be some more reactions in January. We can’t really do anything until then, but you will see some reactions.

Petroleum News: Obviously you didn’t expect a lot of movement on any gas line project this session, but what are your thoughts on where AKLNG is based on meetings you’ve had either in Resources or directly with the producers?

Olson: There weren’t too many dynamics in play, but I think by far the most important hearing we had in House Resources was with the three North Slope producers, Mark Myers, Marty Rutherford, Dan Fauske and TransCanada. They were all speaking on one topic.

Every time the committee asked a question, one would answer and the other would be shaking their heads (in agreement). You’d have to play the tape back to see it but they were speaking with one tongue.

I’ve never seen that the entire time I’ve been in office. Usually there is two of them or two of them and TransCanada. This was everybody, including Mark Myers, Marty and Dan Fauske. You can’t do much better than that.

Then the governor came up with some thoughts of his own on the direction, thinking maybe competition would be good. It’s my understanding gas would be committed to only one project and the only gas available is from the three producers.

I don’t see why he is trying to have a competing line at this point. We are pretty close to pre-FEED. Everything is on track, and on or near budget. If anything, by having a second potentially competing project is going to hurt us with the credit markets. There will be a lot of capitalists who are not from the five partners interested.

Petroleum News: Stripping out the governor’s announcement and HB132 for a second. Do you still have confidence that AKLNG is the path sought under SB138?

Olson: Let’s just say, I’m still optimistic.

Petroleum News: You said the partners were speaking off the same sheets of music, but didn’t that happen under Stranded Gas during the last year of the Murkowski administration when a contract was brought to the Legislature?

Olson: No. I saw maybe two of them. One person usually wasn’t at the table or go on record, being Exxon at the time. Now I see a real change. Apparently they all appear to be aligned.

I still think we are getting closer than we’ve ever been - ever. Nobody is going to get everything they wanted from this. The state won’t. The producers will have to make some concessions. TransCanada isn’t going to get everything it wants, either. But still has a strong chance to work because everybody who is involved is trying to make it work. A project like this won’t work until a series of moving wheels and gears are set. I certainly think we are getting close to that. We are not there. But we are close.

The other thing is, I keep going back to this but there was a quote by TransCanada’s (former) CEO (Hal Kvisle) that came out in 2008 after we awarded the AGIA license to TransCanada. It talked about Exxon’s significance (the project won’t likely go forward until Exxon is happy with it). What you’re seeing is that is happening now.

Petroleum News: Your Labor and Commerce Committee has had referrals in the past for oil and gas issues such as SB 138 last year and HB 132 this year. Do you expect to continue getting a role as movement on the AKLNG line continues?

Olson: I would suspect we would do that again. It’s the last stop before Finance and most of the time I waive it because it’s ready for Finance.

I’ve had a number of conversations with the Department of Labor a number of times about AKLNG.

Petroleum News: Speaking of the Department of Labor, do you think it helps to have the Labor Commissioner (Heidi Drygas) on the AGDC board?

Olson: You know, I certainly don’t have any trouble with it.

Petroleum News: OK, so then you’ve got the governor’s announcement to expand the scope of in-state gas line. You were among the lead sponsors on HB 132. Why was it necessary to have that bill?

Olson: I think we needed to have some sideboards. We didn’t need for it to go in a number of different directions. I saw the potential for that happening.

Petroleum News: The words Plan B as it relates to the gas line once carried a positive tone under HB 4, but seems to have changed into something with negative connotation. Why does Plan B seem to be tougher to digest in conversation at this time?

Olson: Some of us think it may not be Plan B. At that point at time (HB 4) we were under the AGIA 500 mcf limit so we had to have a Plan B.

Petroleum News: In the end, even with the veto, the majority caucus so far has won this debate when the Finance committees stripped money from AGDC to fund education. Do you think you’ve left him enough?

Olson: I think you’re probably asking the wrong person. There are people who probably think it wasn’t enough and there are people who probably think it’s too much, what we left.

Petroleum News: Moving closer to your home, what are you seeing on the Kenai that AKLNG is going in the right direction or at least in a direction that you like? In the past, you’ve cited real estate accumulation as a strong indicator. Does that still hold?

Olson: Anecdotally what I’m hearing and what I’m seeing is there is a tremendous about of activity going on. They have acquired all the land they need. They did not use eminent domain. According to the people who sold out to them, they were treated fairly.

One woman went on the radio saying she was concerned at the beginning, but at the end said she was treated fairly and had nothing but good things to say about those who were doing the negotiations. They helped her find a new house.

They helped her relocate her belongings. She had lived in the same house for 50 years and I know I would have had concerns. She was one everybody had concerns that it would work out and it did. I think we are seeing people laid off up on in the Slope get active down there because there are jobs.

You know the other thing is, the stampede (driving recent Cook Inlet exploration) is still going on. Again, it’s too soon to look at it with unbiased opinions, but I think Tom Wagoner (former senator from Kenai) was the person who led this. There are a lot of people who thought he was getting too far out, but history will ultimately show that he was spot on with the concepts he put forward. I know at the end it was merged into someone else’s bill, but that was Tom’s baby.

Petroleum News: There’s still some unfinished business with two board appointments, Michael Gallagher for AOGCC and Joe Paskvan for AGDC board.

Olson: I didn’t think they were qualified for the way the positions were described for each other. I worked with Joe for a number of years. I’ve got a lot of respect for him. With AOGCC, about five or six years ago there were definitions for what that would be. I believe in Senate Resources he stated his downhole experience was that he operated a backhoe. It was all over by that time. He had worked at the terminal, but that’s not pipeline experience.

With Joe, look at the people he replaced. Drue Pearce was head of the gas line office in D.C. isn’t qualified. I believe she still maintains a house here, too. Robert Rabinow from Exxon was imminently qualified. He’s one of the few people who brought on a gas line project to fruition. He was retired and had no stock in the company. Al Bolea (former BP executive), same thing. He had plenty of experience and he lives in the valley. And I don’t believe they were hired because they were extremely close to Gov. Parnell. I think he went out and found the best people he could find.

Petroleum News: Removing those three, was it that big of a surprise knowing that they work to the pleasure of the governor?

Olson: No. I just never expected to see that kind of clear cutting on such a large scale and it went well past boards and commissions. It went deep into the structure of state government.

Petroleum News: Even though you didn’t vote for him, why do you think Rick Halford made it?

Olson: I don’t have any problems with Rick. When I first got down here, he was still Senate president. His last year was the first year I was down here as a staffer. The bulk of the support came from the Senate and folks who served with him. Then again I don’t think that applied as much to Joe, but Joe wasn’t around nearly as long as Rick was. Halford was in the House and the Senate and built up a lot of relationships. Joe didn’t have the opportunity to develop the relationships.

Petroleum News: Do you think you may have hamstrung the AGDC board by not confirming Paskvan?

Olson: No. We hope the governor will take more time to think about this. He can put somebody on and that person won’t have to be confirmed until next April.

Petroleum News: Why was there such credence placed on these credentials when it seems to be causing differences still?

Olson: It’s the magnitude of the project. Board of nursing accomplishes a lot, and there are 20 boards where we look at them and quickly vote up or down because they are knowledgeable about their industry. In this case we need to get the best people the governor can find.

Petroleum News: Still on the gas line, what would you like to see accomplished between now and year’s end?

Olson: I don’t know if pre-FEED is going to get pushed back. I’d like to see us keep on track. I don’t want to see any delays. They make the markets nervous. Heaven forbid but we could have one of the large producers look at Alaska and decide they want to be someplace else and shed all their assets. Or sell out to somebody else. The longer we wait there could be unintended consequences of the delay.

Petroleum News: So would you consider no special session in the fall a delay?

Olson: I’m certainly hoping we have one in the fall. We better or I think we have a problem.

Petroleum News: Another piece of unfinished business is the speaker’s Agrium bill. Do you think the tax breaks that go with this bill are subject to concerns about giving a tax break at a time of huge budget shortfalls?

Olson: That’s at least half of it. Look at what Cook Inlet tax credits did. Since I’ve been back, I’ve driven to Anchorage three or four times, I’m amazed that I’m seeing a lot of heavy equipment being driven down there. I’m seeing pipe and things I don’t even know what they are, but they going to our oil patch down here.

Petroleum News: Now this may not be an area of specialty for you, but the Legislature spent a lot of time on resolutions speaking to Arctic resources and development, especially with the recent administration decision for ANWR and offshore drilling. The U.S. just assumed the role of chair for the Arctic Council. What’s your take the country’s role now and how can it help Alaska?

Olson: I think we’ve done similar resolutions since I got here. We do them automatically pretty much every year. I think it’s getting more and more important that we do them. You’ve got countries who are not considered Arctic nations, for example China, building ice-breakers when we’ve got two. One of them is elsewhere and neither of them are maybe not state of the art. We have more vessels transiting across the top. What’s going to happen if we get a cruise ship stranded? How are we going to get those people any place? It would be several days before we could get any vessel of any size to them.

Obviously they will be in Canadian waters. One of the Laws of the Sea say that anybody who can respond, will. If we don’t have anything to respond with, don’t have any infrastructure, don’t have any ports, don’t have land-based services every few hundred miles, we are going to have a problem. It might not be next year. It might not be the next five years. We might have a major spill. How are we going to mobilize? How do you put together a sea plan for 2000 miles of ocean?

Petroleum News: The Obama administration sees the country’s role in the Arctic Council for climate change. Alaska would like for a focus to be on economic development. Can any of that be reconciled the next two years?

Olson: I certainly hope so. Mark Myers, who was director at the USGS, has 50 years of aerial photos and photos and a power point. You can watch what’s happening in the coast up there. All of the sudden you can see the legacy wells a couple hundred feet inland are now a couple hundred feet out in the water. There has been an impact up there. We are going to have to do something about the legacy wells. The feds are finally kicking in a bit of money. (House Majority Leader) Charisse Millett has been merciless in pressuring the federal government.

Petroleum News: Do you find it hypocritical that ConocoPhillips has to set aside money for cleaning up the legacy wells that were drilled by the federal government?

Olson: No. We saw something over at Pebble Mine where the most recent company had inherited the assets also inherited the dumps. They were bringing equipment up on barges. They were backhauling the previous two or three companies’ waste. They were doing it not because they had to but because they could. They had an empty vessel going back down. They didn’t need to do that but it was the right thing to do. You didn’t read too much about that. The legacy wells will be much more expensive that hauling out scrap metal.

Petroleum News: You’re still in session and one of the criticisms of the budget lies with the tax credits some believe are too high given the state’s budget shortfall. What’s your take on that?

Olson: How many times have we changed it the last three of four years? Remember the buzz word was fiscal certainty, then it ratcheted down to fiscal stability. All they wanted some degree of comfort that things weren’t going to change again in two or three years. They were planning out development and what they were going to do. It wasn’t what it was changing to or from but that it was changing with such frequency and that was difficult for budgeting. If they know what the tax is and that it’s going to stay, then they can find a way to budget for it. If it’s done frequently and at the whim of somebody who needs money, a stable framework of some sort is going to be necessary. That’s the crux of the issue.