Sullivan working to make state a leader

DNR commissioner says department working on increasing production, more competition on North Slope, getting energy to Alaskans

Steve Quinn

For Petroleum News

Dan Sullivan’s work as the state’s natural resources commissioner began before his appointment from Gov. Sean Parnell. It started when he served as the state’s attorney general.

He’s a lawyer; he’s a marketer of Alaska’s resource potential to investors in Houston, Asia and Anchorage; he’s an advocate for what he believes is not just right, but the law under such federal statutes as the Alaska National Interest Lands Conservation Act, ANILCA, and the National Environmental Policy Act, NEPA.

Upon taking over DNR in 2011, Sullivan made reducing the backlog of permit applications one of his first public priorities.

Since then he’s been building a case, one piece at a time, for Alaska being a lead in the nation’s “energy renaissance.”

Sullivan offered his thoughts on what’s been accomplished and work that remains in a discussion with Petroleum News.

Petroleum News: Can you please offer an overview of how you and your department are carrying out DNR’s mission?

Sullivan: It’s important to sit back and look at what’s going on in the country. It’s clearly an exciting time for the U.S. in terms of energy production. The country is experiencing an energy renaissance that I think is beyond anyone’s expectations. As you know we are predicted to be the largest producer of oil by 2020 and the largest producer of natural gas by 2020 — in the world. That’s great news.

What’s critical from Alaska’s perspective is that we become a part of it. Indeed, that we become one of the leaders in that. We think we can. Certainly we have a lot of optimism and that’s because of the positive progress we’ve seen in a relatively short amount of time. In the petroleum industry, progress can take time. It’s certainly not perceived as a straight line.

We are very bullish on what’s going on in Alaska and the country.

Big picture: The strategic goals we’ve been focused on I don’t think are very surprising — three in particular: to turn around the TAPS throughput decline with more investment, more competition on the slope, more jobs and more production; to accelerate commercialization of North Slope gas, which has been a goal for decades — large volumes; third getting energy — secure, reliable affordable energy — to Alaskans as soon as possible.

These are strategic goals, but as you know a lot of these are related. If you have a large-volume gas line — whether it’s the APP (Alaska Pipeline Project) parties or AGDC (Alaska Gasline Development Corp.) — you have a huge potential for a symbiotic relationship where companies looking for gas, will likely find oil also and vice versa. Dual lines from the North Slope filled with oil and gas is ultimate strategic vision and goal.

Those are supported by efforts that cut across these goals. There are three that I wanted to highlight in particular: Permitting reform and modernization; aggressive advocacy for Alaska resource development to attract investors and potential buyers of our resource; working closely with our stakeholders toward these common goals — our Legislature, the North Slope Borough, the industry, the federal government, certainly.

One other thing we’ve been focused on here is executing, executing, executing. The nitty-gritty — blocking and tackling — of getting things done is often not necessarily viewed, but it’s a critical part of what we’ve been doing. Getting concrete things done that benefit the state in the resource development sector accomplished.

Petroleum News: Let’s start with advocacy. You’re on the road a lot advocating for Alaska, almost as a marketer as much as a commissioner. How do you view your job in that context?

Sullivan: When I came on board here, I asked the question a lot: “Who’s going out and making the case on our geology? Who’s going out and making the case on what the lease terms are coming up on our lease sales? Who’s going out and making the case in Asia, where there is a huge demand for LNG, that we bring comparative advantages to the table for Alaska LNG project that almost no other region in the world has?” To be honest the answer didn’t seem apparent that it was going on in a concerted way.

One of the things we were transparent on was to lay out a strategy that really ramped up those efforts. You mentioned LNG 17 (conference in Houston). That was part of a broader strategy that we refer to as our demand-pull strategy. It’s the idea that we need to use all the levers we have at our disposal to accelerate gas commercialization. Certainly getting gas to Alaskans is our number one goal, but a large-volume project, which in many ways can be one of the most competitive, is going to need buyers beyond Alaskans and Alaska industry.

We saw a huge surge for demand in Asia for gas. Two years ago, every article that was written about what’s going on and who has the potential to fill that demand, the state of Alaska, despite our huge abundance of resources and comparative advantages, was never mentioned. We clearly were not on the map.

Our goal was to put Alaska on the map. We think we’ve done that. We were asked to be a keynote speaker at a Japanese government/consumer/producer LNG conference last September. We had a keynote-speaking role at LNG 17, the largest LNG conference in the world. We have met with hundreds buyers, potential investors, governments in Asia who play a huge role in the economy. We laid out what we’ve seen as progress taking place. We make a case that Alaska has two state-backed efforts — gas commercialization efforts — which demonstrates our focus.

ConocoPhillips, Exxon and BP have large portfolios of gas all over the world globally. When those companies are going to the Tokyo Gases, the Osaka Gases, the KOGASes, and are saying here’s our portfolio we want them to say, “we have enough Qatar gas, enough Australia gas, the best way to increase my energy security is to have a diverse supply to include Alaska gas.” We’ve had companies across the board show interest in our gas. I can say two years ago, we couldn’t say that.

We’ve been focused with regards to our lease sales in Cook Inlet and the North Slope. I think there was an assumption that companies knew all of this already, they knew the geology, they knew the lease terms. To be honest, I think that was an assumption that wasn’t a very good assumption.

Petroleum News: Let’s talk about Cook Inlet. Analysts have called it a wild card for prospective investment. What are your thoughts on Cook Inlet making these strides?

The Legislature took aggressive actions with regards to recognizing the challenges in Cook Inlet, providing incentives for increased oil and gas production, providing means for storage. What we did was take that good work and start executing and do a number of things. We went out and promoted it. We heard the Apaches and Hilcorps were interested. We saw signs they were interested in our lease sale. I went directly to the senior management of those companies, laid out the geology and showed this was not a dead basin.

We got the word out with the resource assessment as we saw it, as the U.S. Geological Survey saw it with their numbers that came out in 2011. Then working closely with the stakeholders: We frequently met with the utilities; we frequently met with the producers; we quietly tried to problem solve, relating to the issue on storage, on a number of issues relating for example to storage, relating to the FTC investigation on Hilcorp’s Marathon acquisition. So trying to get folks working together was something that has been an effort that didn’t get a lot of press, but we were executing it almost on a daily basis, and you’re starting to see a turnaround that is enormously positive for the state, for jobs and for energy security of this part of the state.

Petroleum News: On to permitting reform. What’s advanced? What’s changed? Is this streamlining or is it fast tracking to the detriment of public process?

Sullivan: Look, I think it’s a great question. The goal here has been to make our permitting system more timely, efficient and certain, while safeguarding the environment and protecting the state’s interest.

We’ve been very transparent on what we’ve focused on doing.

The good news is, on this one in particular, overall this has been a very bipartisan effort. When I came on board, we had this enormous backlog of permits applications, more than 2,500 sitting around. I went to the governor and talked to him about this.

From the top, there became a very focused effort that we need to address this, not just the backlog, but the timeliness, the certainty and efficiency of our permitting system.

We kicked off permitting reform and the first thing we did, we went all over the state holding public meetings, asking all different stakeholders, what are we doing right and what are we doing wrong.

A lot of these (applications) were smaller, mom-and-pop business that had a two- or three-year wait on certain authorizations. From our perspective that’s just choking the private sector.

In terms of the public process, the previous legislative session, we had HB 361, a bipartisan bill to look for ways to make our permitting more efficient. A lot of the emphasis was looking at ways to modernize our system by looking at the entire process, either an entire exploration area or entire exploration areas.

We’ve had the backlogged decreased by about 40 percent in the last 18 months. We got a budget increment from the Legislature, strong bipartisan support for it. This is on-going focus we need to keep and doing it in a way that protects the environment and making sure the state’s interests are protected.

It’s not just about changing laws; it’s about incremental improvements to our team here; it’s capital improvements to our technology on how to track the transparency. Our goal is if you’re a (permit applicant) and you have something with DNR and we tell you it’s going to take four months on average to get this out, you hold us to it. You’ll be able to click on a website and tell you w