Begich pushes four-pronged approach

Senator pushing development in Arctic National Wildlife Refuge, National Petroleum Reserve-Alaska, Beaufort and Chukchi seas

Steve Quinn

Steve Quinn

Mark Begich may still be learning his way around Washington, D.C., but he’s no novice to politics or energy.

Once the youngest person ever elected to the Anchorage Assembly — a post that lasted 10 years — Begich is now serving his third year in the U.S. Senate.

While most of his daily work doesn’t directly connect with oil and gas, he understands Alaska’s prospective role in energy security and development.

This was borne out when President Barak Obama issued an executive order calling for an interagency working group to coordinate domestic energy development and permitting in Alaska.

The order came four months after Begich called for a federal coordinator to carry out the same mission in the Arctic.

Begich sat down with Petroleum News to discuss a wide range of energy issues during the Senate’s August recess.

Petroleum News: Let’s start offshore with OCS drilling and your thoughts on getting it moving. Why is this important to the nation’s economy, energy security and to the state’s?

Begich: The first thing to point out — and I’ve said this to many of my colleagues in the Democratic caucus as well as the president — you can’t do a real energy plan for this country without Alaska as part of the equation. That’s the first baseline fundamental in my view. It’s great to talk about an energy plan, or energy development or energy security, but you’ve got to have Alaska as part of the equation because of the vast resources — not only oil and gas but also the alternative resources including coal. You name it we have it. One of the approaches we’ve taken here from day one when I took office is for years we have fought the ANWR battle, which is a good fight to have. We believe in it; Lisa (Murkowski, Republican Senator) and I have legislation on directional drilling, other options, everything we can think about with ANWR (the Arctic National Wildlife Refuge). The challenge with that single focus is our opposition has pounded on us. We have been unsuccessful for 40 years under a variety of scenarios wither they are an all-Republican delegation, Republican House, Senate and president, all Democratic or a mix. Our approach has been that even though there has been before we came on some movement on the Chukchi and the Beaufort, we decided we would take a four-pronged, that we would talk about all four of these potentials — onshore and offshore. It’s important to put more eggs in the basket. That to me was a different approach, and a better approach, and why I think we are having some success over the last little less than three years. I believe by the end of next year we will be exploring and/or developing in one, or two or all three of NPR-A, Chukchi and Beaufort because of the strategy of talking about all of these at the same time, showing the vast resources of Alaska, and also to be honest with you, keeping the opposition off kilter here because we are not just honing in on one issue. We are on multiple issues. That has helped us in a lot of ways in showing the value of OCS and explaining OCS from Alaska terms. Not only is it important for national security but also re-jiggering the energy debate from emissions, better air quality to energy security, national security, economic security. That’s how we relate them. That’s why you’re seeing some movement. We’ve done a shopping list of things, not only harassing the administration but also working with my colleagues and agencies to try and move things forward.

Petroleum News: When you say all four, you mean …

Begich: The goal there is create a diverse portfolio of options for us, the multiple levels of movement for each one and then ensuring we have multiple resources. What I mean by that, instead of a discussion of a potential development on ANWR, we are now in a discussion of real developments that are in process in a variety of fields at different levels. It gives us a lot more to talk about on the national level to our colleagues and agencies but also on a local level.

Petroleum News: Let’s talk about the Arctic. There is a bigger picture. You’ve got the Law of the Sea being debated. Are you in favor of that?

Begich: Absolutely. As a matter of fact, Lisa and I have done joint presentations. We did one in New York to a group of people. We’ve talked about it jointly the last two and a half years that I’ve been there. As chair of the Oceans Committee, which has jurisdiction over NOAA, Coast Guard and a variety of issues related to oceans even though the Law of the Sea would fall under the Foreign Affairs Committee, we have taken it. In my view it’s about the ocean so in my view we get to talk about it. The goal there is to highlight the interest. The person who is next in line is Sen. (John) Kerry who is the chair of the Foreign Affairs Committee. We’ve got him engaged even more. My understanding is in September, we are going to have a hearing in his committee on the Law of the Sea. I think our biggest struggle, to be frank, is to get people to understand that the United States is an Arctic nation, and that there are enormous opportunities from oil and gas, to fisheries to transportation to tourism to a lot of opportunities in the Arctic that we have yet to understand. We are starting to see a lot more discussion in the military, but also from the economic opportunities ties up there. One I’m a big supporter of is, now it’s time to bring to the front view of everyone that the United States is an Arctic nation; Alaska is bringing that and we have huge opportunities as one of our last frontiers of development in oil and gas, fisheries, minerals, tourism.

Begich: Anytime you have a spill — it doesn’t matter as we found out where it happens — Alaska seems to be the victim of everything. You had a spill in the Gulf of Mexico so now that relates to the Arctic. I don’t know maybe someone knows something different than I do; the Gulf of Mexico and Arctic are two different areas. There have been 30 or 40 wells drilled in the Arctic. We have enormous standards on the industry. From that perspective, I feel comfortable. Does that mean we can still improve our abilities? Absolutely. We’ve had hearings on that in my Oceans Committee.

Petroleum News: Let’s switch resources and go to natural gas pipelines. What are your thoughts on the prospects of marketing North Slope gas either to Anchorage or larger markets?

Begich: I think we all know the challenge. One is gas to Alaskans in order to ensure that we have enough supply moving through the system to not only deal with our residential needs but our commercial needs and any future needs. That should be the highest priority and it is. Second, is surplus gas in order to market it and market it wherever we can in the domestic or global market?

Three years ago I had a different view because we were concerned about supply. On the federal side, we can streamline and make sure the project moves forward. The biggest challenge is the producers or the end product — who is going to buy it? Where is the market? The market has to develop itself so we have a place to sell it. Besides our own market that’s not enough to make the line financial viable.

I know there are discussions of a bullet line, maybe a line to Fairbanks. The bottom line is you need gas to Alaskans then you need another layer. Where ever we can be helpful we are going to do it. Gas is a great opportunity for us as a job creator, a revenue creator and also sustainability for our long-term survival somewhere as revenue creators.

Some people have to get off the dime. I’m glad to see the state is finally maybe getting to a point of negotiating a settlement in regards to Point Thomson which is important for long-term development of a gas line. But they have been dilly-dallying for three years or more. The end result is there is a lot of other stuff happening. Down in Australia, Chevron is spending $50 billion on LNG down there. We’ve been twiddling our thumbs on negotiating a settlement on Point Thomson to get supplies. It’s frustrating to see that. From a view I have as a senator now we are seeing all this domestic commercial production, international production and we have this enormous resource.

Petroleum News: What about Cook Inlet. Where do you see that fitting in the picture?

Begich: I’ve been a big fan of Cook Inlet all the way back to the days of when I was on the Anchorage assembly when the vote was 6-5 for a city owned utility. My instincts told me that, and all the data presented, there was a great supply of gas at the time and the cost was agreeable. At the end of the day, there is gas supply there but it’s just exploration wasn’t as aggressive. We support that; we’ve done everything we can to encourage companies to explore there, not only offshore but also onshore. But specifically offshore, we think there is a great supply for the local market, Southcentral.

Some people I know get concerned and say if we do all the gas in Cook Inlet, do we need a pipeline. My view is you keep everything in motion because the potential of gas becoming a continued growth area for domestic energy resources is huge. More and more as coal plants become less economical from an energy standpoint and from a financial standpoint, gas will become a replacement. My view is you need to become aggressive there.

I’m just glad more is happening down there, but the question is when will it happen and will it be economical at the end of the day.

Petroleum News: Do you believe there is a market for North Slope gas?

Begich: The gas down in the Lower 48, the shale gas, is under a lot of controversy where a year and a half ago, it wasn’t controversial now it is because of the fracking. The bottom line is you’ve got to get a number that makes sense. The problem with projects like this, the first few years they are always going to be hard to make economic sense. These are not three- or four-year projects. They are tough when you look at them in a short window span.

Yeah, I think there is a market, but it’s a very tough market in terms of the line. What’s that price? We are in the $4 range now, but we need to be at $7. That’s what most people say. Could we be there? Year and a half ago we were at $10. The question is can we be there on a more consistent basis. In the long haul the answer is yes. The short term is tougher to get there. You don’t do these projects overnight. I’ve got to stress the point, switching from coal in the Lower 48 to gas will be a big driver for us. If we do it right, we’ll be ready.

Petroleum News: Is there anything else on your plate?

Begich: There are a lot of things we’ve been aggressive about. We introduced legislation with industry support, now we need to have a coordinated effort with all the agencies that manage oil and gas development permitting processes on the North Slope. They were doing their own thing independently and a lot of times not very coordinated. So this effort of legislation we moved forward and we are happy the administration sees that as an important piece, managing development up on the Arctic, and now the president has done it through executive order. I think this is a huge plus. The biggest complaint I hear from industry is agencies, the agencies don’t know what other agencies are doing. They may argue they do, but it sure isn’t apparent. They are kind of crawling over each other and falling over each other. Having the Interior Department leading this effort will be a huge win in a sense of coordinating and smoothing out this ability in getting the permits in a timely manner. Some people believe this adds another layer. This doesn’t add another layer. What it does is coordinates all the layers. The thing is, this is only for Alaska. Now why is that important? There is going to be focus on us, not scattered around the country. It gives us the focus we need. The other thing is we will need is strong infrastructure in the North. I think there are ways to do it as we move forward so it doesn’t impede future development. That means long term we need a deepwater port. We think industry is anxious to participate in as well as other organizations in the federal government. This effort is going to make a difference.