AGIA an issue in Juneau

House Bill 142 says line uneconomic without firm commitments by summer
Kristen Nelson Petroleum News



Is it time to declare AGIA dead? That’s the question some Alaska legislators are asking.
The TransCanada-ExxonMobil Alaska Pipeline Project, one of two projects to move Alaska North Slope gas to market, was licensed by the state under the Alaska Gasline Inducement Act.
Tony Palmer, vice president of Alaska development for TransCanada, said after the close of the July 30 open season last year for the Alaska Pipeline Project that “we have received multiple bids from major industry players and others for significant volumes.”
The next step, he said, is to work with potential customers to resolve conditions on the bids: “That’s what we’ll be doing over the next several months.”
Palmer told Petroleum News just prior to the close of the open season that the goal was to have precedent agreements signed by the end of the year. If conditions are simpler, it may take less time, he said.
On the other hand, “If we get many complex conditions we may not be able to achieve it in 100 business days,” extending beyond the end of the year when precedent agreements could be signed, Palmer said.
Because year-end has come and gone without signed precedent agreements, some members of Alaska’s Legislature are now concerned that the AGIA-licensed project is a failure and they want to legislate a way for the state to get out of its contract.
State required continuation
Under AGIA, the state required that in the event of a failed initial open season — no bidders for pipeline capacity or not enough bidders — the licensee would be committed to continue through certification by the Federal Energy Regulatory Commission.
That was one of the must-haves in AGIA, which in return provided a number of incentives, including $500 million in state matching funds for work on the project through FERC certification.
Palmer told legislators during the 2007 debate over AGIA that TransCanada preferred — in the case of a failed initial open season — to focus on obtaining customers “as opposed to doing the engineering and regulatory and legal work to capture a FERC certificate.”
Palmer said that even though the state offered a higher cost-share match after an open season, that TransCanada would prefer not to pursue the certificate “until we had customers or credit.” Told that fellow Canadian pipeline company Enbridge had told legislators “no producers, no pipeline,” Palmer said in his view it is “no customers, no credit, no pipeline.”
The Legislature passed AGIA in 2007, and despite its concerns over the FERC certification requirement, TransCanada submitted an AGIA application and received the AGIA license in 2008.
Both the Alaska Pipeline Project and the competing BP-ConocoPhillips Denali project held open seasons last year. Both reported receiving bids; neither project has completed negotiating precedent agreements.
HB 142 introduced
Which brings us to the new session of the Alaska Legislature, and concerns by some House Republicans that since precedent agreements have not been signed the AGIA-licensed project may not be economic and may not result in a pipeline, while the state is committed to reimbursing TransCanada up to $500 million.
The sponsors of House Bill 142, introduced Feb. 4, say the bill would provide an exit strategy for the state if there are insufficient firm transportation commitments resulting from the initial open season.
House Speaker Mike Chenault, R-Kenai, speaking at a Feb. 7 press conference, said the Legislature is in the dark.
“We’ve heard from TransCanada after the open season that gas was bid,” but don’t know if there is enough gas for a pipeline, he said.
Chenault also said “our perception of natural gas supplies in the Lower 48 at the time of the AGIA process are considerably different than what they are today,” with shale gas production growing at a rapid rate.
Rep. Mike Hawker, R-Anchorage, said the goal of the legislation is “to create a sense of urgency about moving forward with the AGIA process.” That urgency was “not mandated in the original AGIA legislation and … I think it was an oversight in the original AGIA legislation,” he said.
The bill creates “a rebuttable presumption that the project licensed under the Alaska Gasline Inducement Act is uneconomic because of insufficient firm transportation commitments during the first open season,” gives TransCanada until July 15 to disclose that it received firm transportation commitments sufficient to support construction of the project, and requires the commissioners of Natural Resources and Revenue to notify the Legislature before Aug. 1 whether firm transportation commitments were disclosed to them prior to July 15.
The commissioners would have until Aug. 15 to submit a report to the Legislature that there are sufficient firm transportation commitments for the project to go forward, or that the project has credit support sufficient to finance construction and predicted costs of transportation “would result in a producer rate of return that is not below the rate typically accepted by a prudent oil and gas exploration and production company for incremental upstream investment that is required to produce and deliver gas to the project.”
TransCanada, administration, respond
Palmer told Petroleum News Feb. 8 that TransCanada “is confident that we have done everything we can do to advance the project and meet the obligations we have to the State of Alaska; and to date the State of Alaska has met their obligations to us as the licensee.”
He said he wouldn’t prejudge what might happen with the bill, but will “participate as requested and we’ll see how that plays out.”
The Associated Press is reporting that the administration plans a legal review of the bill.
Deputy Commissioner of DNR Joe Balash told AP there are concerns about “impacts and potential exposure” from the measure.
Larry Persily, federal coordinator for Alaska Natural Gas Transportation Projects, told Petroleum News in a Feb. 8 e-mail: “I understand Alaskans’ frustrations with the pace of the gas pipeline project and I know people want to see some positive news about the open seasons. I only ask that people not confuse the debate over AGIA with the project itself. The pipeline is possible, the project would be good for the state and the nation, and the federal government is ready to work with whichever company or companies are willing to risk the tens of billions of dollars needed to finance the pipeline.”
Legislative reactions
Members of the Senate Bipartisan Working Group had mixed reactions to the bill.
Senate President Gary Stevens, R-Kodiak, said in a Feb. 8 press availability there were some concerns in the Senate about whether the state has given the process enough time, and said he didn’t “anticipate a similar bill on the Senate side, but we’ll see how things progress on the House side.”
Sen. Bert Stedman, R-Sitka, said he thinks discussion is timely, and said he’s “concerned that we could be tied up in the contractual obligations for years into the future.”
Sen. Tom Wagoner, R-Kenai, said he thinks the Legislature needs to wait to see the results from the open season “and then sort it out at that time.”
House Democrats, speaking at House Minority press availability Feb. 8, were opposed.
Minority Leader Beth Kerttula, D-Juneau, said she thinks “the State of Alaska should be taking down barriers to entry instead of putting them up and I think that unfortunately what the new AGIA bill would do is break our deal to get a gas line.” She said she thinks the bill would produce a lawsuit by “breaking our deal and setting an artificial deadline.”
The bill has been referred to only one committee, House Finance, and Kerttula said she intended to talk to Chenault about that.
Rep. Scott Kawasaki, D-Fairbanks, a member of House Resources, said “certainly AGIA and the whole concept of AGIA is a Resources issue” and should be heard by that committee.

Alaska lawmakers propose ditching Palin's pipeline plan

JUNEAU – Leading state lawmakers introduced legislation Friday to abandon a centerpiece of former Gov. Sarah Palin’s administration: a state-sanctioned effort to advance a major natural gas pipeline.

The measure from Alaska House Republicans underscored the impatience and skepticism that many lawmakers have expressed about the current process and a belief the state is no closer than it was several years ago to realizing the long-hoped-for line.

Under the Alaska Gasline Inducement Act championed by fellow Republican Palin, the state promised TransCanada Corp. up to $500 million to advance a line. TransCanada won the exclusive license in 2008.

The state has reported that reimbursements so far have topped $36 million.

The company missed a self-imposed target for reaching agreements with shippers at the end of 2010 but has cautioned against reading much into that, noting that negotiations are complex and continuing.

But a number of lawmakers are losing patience — and faith — that this process will succeed in getting a line built this decade, if ever. The measure Friday was the first such introduced by the Legislature.

The bill, introduced by Republican Reps. Mike Chenault, Mike Hawker, Craig Johnson and Kurt Olson, would presume the project is uneconomic if TransCanada cannot show proof to Gov. Sean Parnell’s administration before July 15 that it has received firm shipping commitments.

Parnell has stood behind the process, saying he supports efforts by private industry to build a line that could carry gas from the North Slope to market.

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So far, Parnell looks like Palin Lite

I had high hopes for Sean Parnell when he took office last July. After Sarah Palin, it seemed a bright young governor who had a positive relationship with the oil and gas producers would be an improvement.

But so far, Parnell has looked more like Palin Lite, a charisma-free copy of his predecessor. He still has time and opportunity to redeem himself, notably if he kills that foolish attempt by Tom Irwin and Marty Rutherford to cancel the Point Thomson oil and gas leases held by Exxon and its partners.


It should be an easy decision. After all, if state lawyers get the Superior Court judge’s decision overturned and Natural Resources Commissioner Irwin’s attempt to cancel the leases is upheld, they could kill the gas pipeline. It really is as simple as that.

The state’s tussle with Exxon over development of Point Thomson goes back a long time. The company appeared to be dragging its feet on drilling and development for years, though there was no pipeline to take the gas away and the high-pressure field has tremendous engineering challenges, on which it spent many millions.

In 2006, Gov. Frank Murkowski decided to poke his finger in the corporate giant’s eye and moved to cancel the leases. Asked later why he did it, Murkowski said he wanted the Exxon people to come back with a better development plan and a firm commitment to carry it out. “And they did,” he said.

But Palin, Irwin, Rutherford and now Parnell have continued the fight and carried it to ridiculous extremes, putting Alaska’s economic future at great risk. Last summer, Irwin said he didn’t trust Exxon to fulfill its promises, so the commissioner’s uneasiness keeps the legal battle raging. He should try taking a Valium.

The gas pipeline is no sure thing by any means. And Point Thomson contains more than 8 trillion cubic feet of gas, a volume needed for pipeline viability. If those leases get tied up in a decades-long legal hassle — to ease Irwin’s worries — the gas could be nearly worthless by the time the mess gets untangled.

Irwin and his deputy Rutherford are both good people, but they have a doggedly negative attitude toward the North Slope producers that should disqualify them for their jobs. If they persist in the attempt to get the leases canceled, and Parnell goes along with it, this state may find itself back where it was at statehood in 1959, but without the bright prospects.

Idiotic public policy sometimes seems a way of life in Alaska. And that aimed at Exxon in retribution for the 1989 tanker disaster — plus the Palin-Irwin-Rutherford claim that Alaska didn’t get a big enough share of the North Slope pie — is classic dog-in-the-manger politics.

Oil money has funded this state’s government for two generations, Alaska did away with its state income tax 30 years ago and we have a free-money program that sends just about every living soul here a nice check every October.

State leaders came to terms with the companies exploring and developing the North Slope years ago. As a result, billions in investments were made, billions in taxes and royalties were collected. But now some of our leading lights want more. If this were 1898 and you tried that on a gold mining partner, you would be asking for a necktie party.

Sure, it’s politically incorrect in Alaska to say good things about Exxon. I don’t know any of the current bunch, but some of the finest people I’ve ever met were Exxon employees. That includes Otto Harrison, who headed up the Exxon Valdez cleanup; many of the engineers and managers who worked for him and those that helped build the trans-Alaska oil pipeline; and the late Max Nalley, who was the company’s public affairs manager for several years.

The list also includes my old hunting and fishing buddy, Hank Rosenthal. Hank was delivered to Alaska by the icebreaking tanker Manhattan, which reached Prudhoe Bay via the Northwest Passage. He was the public relations guy on the project. I was in public affairs at ARCO in those days and Rosenthal became my Exxon counterpart (actually the company was named Humble Oil & Refining in those days).

Hank and I both had statewide responsibilities and could always come up with a reason to meet with people in Unalaska when the geese were in at Cold Bay, Southeastern Alaska when the ducks were flooding in there, and in summer anywhere the salmon were running.

Hank left Exxon sometime in the 1970s and took my job at ARCO when I decided to bail out in 1980. (I gave him a heads-up before I told my boss I was quitting.) He came back to Alaska and married one of my favorite liberals, former Assemblywoman Heather Flynn. Hank fought in the Korean War and survived fighting at the Chosin Reservoir, but was killed in 2003 by a curb-jumping taxi while on vacation in Prague.

So don’t bad-mouth Exxon people around me, friend. Say what you want about Joe Hazelwood and the company’s lawyers, but there are a lot of good people at Exxon. I’ve known many of them.

If Sean Parnell and Tom Irwin don’t smarten up about Point Thomson and drop that stupid lawsuit, I just might say bad things about them.

* * *

I’m a humanitarian kind of guy. For instance, I think we should treat attempted undie-bomber Umar Farouk Abdulmutallab humanely. Police should give him a clean pair of exploding shorts, light his fuse and send him on his way, perhaps into an unoccupied field of clover.

Of course, that won’t happen. The United States is teaching the terrorists about democracy a little at a time. Their latest lesson, for instance, is that when things go wrong, lawyer up and demand your rights as a non-resident attempted mass murderer. Don’t forget to ask the policeman to read you your Miranda rights.

Terrorists also learn quickly that — if things go wrong — they are most likely to become guests of the American government, be sentenced to three nutritious meals a day and a comfortable bed, and given access to exercise equipment and lots of television, movies and other forms of scandalous entertainment. Unless sent back home to attack America again, they will suffer such infidel indignities for the rest of their lives.

I like my way better.



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Tom Brennan is author of The Snowflake Rebellion, a tongue-in-cheek novel about Alaska seceding from the union, and three other books. His Website is: http://arcticternbooks.com/

Feds will take over gas line - Palin's socialistic policy makes it easy

Alaska lawmakers are concerned feds will take over gas line - Palin's socialistic policy makes it easy to do so.


Forget “Drill, baby, drill.” Sarah Palin says she’s building a $40 billion gas pipeline, which even President Obama wants. The only problem: It isn’t there. And it’s her fault.

“I fought to bring about the largest private-sector infrastructure project in North American history,” Palin said at the Republican convention. “And when that deal was struck, we began a nearly $40 billion natural-gas pipeline to help lead America to energy independence.”

During the vice-presidential debate, she said it again: “We’re building a nearly $40 billion natural-gas pipeline, which is North America’s largest and most expensive infrastructure project ever.”

And to Katie Couric, she said, “We should have started 10 years ago,  but better late than never.”

To many outside of Alaska, it may therefore come as a surprise to learn that not only does such a pipeline not exist, but—even as Alaska’s deep winter darkness gives way to the first light of spring—the prospect that it will be built within Sarah Palin’s lifetime grows dimmer by the day.

Palin does not play well with others

More Legislature vs. Palin

Posted: April 17, 2009


The antagonism between legislators and Gov. Sarah Palin doesn’t end. Hours after the Legislature voted down the governor’s nominee for attorney general, House Finance Committee members tonight slammed the governor’s aides for not briefing legislators on Palin’s plan for an in-state gas pipeline.

“I’ve had a lot of friction with the governor this year on her lack of connection, frankly the appearance that she’s more concerned about her national ambitions than what’s going on in the state,” Anchorage Republican Rep. Mike Hawker, co-chair of the finance committee, told Palin budget director Karen Rehfeld.

The committee was deciding on a request by Palin for $9 million to help develop a private in-state natural gas pipeline from the North Slope down to the Kenai Peninsula. Hawker and the other co-chair said Palin staffers spoke to legislative leaders about the money -- but several other finance committee members complained this was the first they’d heard of it.

“Nobody from the (Palin) administration has been to my office at all…I see a number of different legislators all shaking their heads, same thing, nobody’s been in their office,” said Kodiak Republican Rep. Alan Austerman.

Haines Republican Rep. Bill Thomas said nobody has spoken to him about gas plan either. Anchorage Democratic Rep. Les Gara -- who questioned if this is a set up to benefit the Enstar "bullet line" project -- said he’s being asked to approve a $9 million plan with no one ever describing to him what it is about.

Hawker said it’s an insult if Palin staffers were only talking to legislative leadership about it and not following up with other members of the state Legislature about something that is supposed to be a high priority for the governor.

“I would offer some counsel and instruction to the (Palin) administration. If this was your highest priority, it is beyond me… 11 people have been sitting at this (finance committee) table all year, you are looking for support for an appropriation and it is just beyond me that you folks didn’t have someone, quite frankly it just never occurred to me that you wouldn’t have talked to everybody on this table,” he said.

Palin budget director Rehfeld responded she is clearly sensing the frustration at the committee.

“We have had this appropriation in our budget for in-state gas since December…it has evolved, but the discussion and the interest and the desire to move forward on in-state gas has been very clear from the administration and we have talked with the committee about the budget request. So the specific design now going through the governor’s office is different, yes, than what we had proposed but I think clearly the governor has been very consistent in her discussion of in-state gas,” Rehfeld told the finance committee.

Is Palin really the biggest obstacle to a gas pipeline?

Here's the press release on McGinniss' story. After that is McAllister's response to the press release. And lastly is a zinger -- a little tidbit about Palin and Exxon meeting the other week.

CONDÉ NAST PORTFOLIO ON SARAH PALIN, BIG OIL,
AND THE PIPELINE TO NOWHERE
New York-Joe McGinniss, bestselling author of Going to Extremes, a nonfiction account of his year in Alaska, returns to the state in search of the $40 billion natural gas pipeline that Sarah Palin has said she is building. But McGinniss finds that not only is the pipeline not being built, but Palin herself is the biggest obstacle in its path. ("Pipe Dreams" p. 50). "Everything she is doing is the opposite of ‘Drill, baby, drill,' " former governor of Alaska Tony Knowles tells McGinniss. Despite pressure from the Obama administration to get pipeline construction underway, the prospect of its ever being built looks dimmer by the day. McGinniss reports how Palin has virtually ignored the pipeline issue since returning to Alaska in November to focus instead on her 2012 presidential campaign strategy. McGinniss notes her absence from major oil-company summits, and hears from a rising chorus of critics, including some of her former supporters. Alaska Republican Mike Hawker tells McGinniss, "The only thing standing in the way of an Alaska gas pipeline is the Sarah Palin administration." Palin's biggest blunder? Locking the state into an exclusive contract with a Canadian pipeline company (TransCanada) that has no access to Alaska's natural gas. Now BP and ConocoPhillips--two companies that do have gas--have launched a rival project. McGinniss writes that despite her repeated claims that she'd already gotten the project underway "What Palin had done... was contrive to pay as much as $500 million to a foreign company to look into the possibility of someday building a line." Since the election, the price of oil and gas has continued to plummet and Alaska's budget deficit has soared. McGinniss argues that Palin's $500 million commitment to TransCanada looks increasingly like money wasted. Even Hal Kvisle, the CEO of TransCanada, concedes, "I don't know whether we're going to see this [pipeline] get built or not."

*****

Here is Bill McAllister's response on the McGinniss press release:

It seems to expect people to be surprised by the fact that the pipeline is not under construction. That's not much of an "aha." Obviously, anyone paying attention knows this will be years in the making.

"Palin has virtually ignored the pipeline issue since returning to Alaska in November to focus instead on her 2012 presidential campaign strategy." Show me one shred of proof for either part of that statement. The governor had a nearly daylong meeting with her gas line team the week after the election, and of course those consultations have continued. In early December, she arranged an event in Fairbanks to present the AGIA license to TransCanada. She has gas line-related funding requests pending before both the Congress and the Legislature. This is "ignoring"?

McGinniss notes "her absence from major oil-company summits." She had Exxon in her office last week. Not sure what his point is there.

McGinnis calls AGIA a blunder, but every lawmaker but one voted for it, and a majority voted to stay the course over a year later and give TransCanada a shot. The governor campaigned in 2006 on getting Alaska's terms for its gas, in contrast to the Murkowski contract that ceded tax sovereignty, judicial sovereignty and regulatory sovereignty. AGIA was a game-changer, a new paradigm.

*****

And here's a follow-up exchange between Alaska Dispatch and McAllister about the Palin-Exxon meeting:

Alaska Dispatch: Gov. Palin met with Exxon? Can you tell me more about that meeting and the date it occurred? Why did she meet with Exxon? For Pt. Thomson? The gas line? Something else? What was the result of the meeting?

McAllister: I don't have details. I just saw them go into her office. I didn't ask her about it afterward. But hey, that wasn't the first time since the election. That's what's so off-base about McGinnis. He obviously doesn't have a clue what she does.

*****

And now we end with a few questions for you to chew on in the comments section:

1) Was AGIA nothing more than a ploy to get the industry to move on the gas line project?

2) Can Alaskans trust BP and Conoco to follow through with their Denali pipeline?

3) Should the state continue down the AGIA path, including subsidizing TransCanada, especially during these lean economic times/lower oil prices?

4) And is Palin really the biggest obstacle to a gas pipeline?

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AP INVESTIGATION: Palin's Pipeline Terms Netted 1 Viable Bid, From Firm With Inside Ties

AP INVESTIGATION: Palin's Pipeline Terms Netted 1 Viable Bid, From Firm With Inside Ties

TIES THAT BIND

Palin's team was led by Marty Rutherford, a widely respected energy specialist who entered the upper levels of state government nearly 20 years ago. Rutherford solidified her status when, in 2005, she joined an exodus of Department of Natural Resources staff who felt Murkowski was selling out to the oil giants.

What the Palin administration didn't tell legislators _ and neglected to mention in its announcement of Rutherford's appointment _ was that in 2003, Rutherford left public service and worked for 10 months at the Anchorage-based Jade North lobbying firm. There she did $40,200 worth of work for Foothills Pipe Lines Alaska, Inc., a subsidiary of TransCanada.

Foothills Pipe Lines Alaska Inc. paid Rutherford for expertise on topics including state legislation and funding related to gas commercialization, according to her 2003 lobbyist registration statement.

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Interesting Times for Alaska

ANOTHER ITEM from the Globe and Mail interview with TransCanada CEO Hal Kvisle got lost in the smoke and steam resulting from Kvisle's comment that "nothing goes ahead until Exxon is happy with it."

Kvisle also suggested in an interview last Sunday with the Toronto-based newspaper that Denali and TransCanada are likely to join forces sometime in the next two years.

At least that is the apparent implication of his statement . . .

that it's unlikely more than one open season will be held in 2010. "This is not about TransCanada dreaming up the project we think will work," he said. "It's about the five key parties getting together and crafting something here." The five parties are apparently the three big producers, TransCanada and the state of Alaska.

Kvisle noted that plans at this point call for both Denali, the company formed by ConocoPhillips and BP to build a gas pipeline, and TransCanada to hold open seasons in 2010. The open season is when customers are solicited to ship their gas through a pipeline.

The Globe and Mail reporter said Kvisle told him it's unlikely two open seasons will be conducted. That makes sense, since TransCanada couldn't really compete with a line being built by the companies that control North Slope gas — nor could it woo the companies away from using their own pipeline.

But it would mean at least one of the two entities would either delay an open season — TransCanada is obligated by its contract with the state of Alaska to hold an open season in 2010 and Denali is ahead of TransCanada — or Kvisle expects both sides to join forces sometime in the next two years.

So unless natural gas prices go in the tank sometime soon, which doesn't seem likely, the next two years should be an interesting time in Alaska.

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The true economically viable option Denali Alaska Gas pipeline