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AK legilative digest Jan 2011
cs=Commentary oonn Alaskaissues andpolicy. :"PUBLISHERS:Mike Bradner,TimBradner/.BusinessOffice:522-10195 /,3037 South,Circle .chorage,AK '99507,/Fax:(907)345-5683 ee :: Digest #1/2012 January 22,2011 Senate says it is ready to play on oil taxes The Senate leadership made it clear in a briefing Jan.18 that an oil tax bill will come out of the Senate,a response to the governor's HB 110,which is now in the Senate after passing the House last year.Comments by several senators in the briefing indicated that the Senate proposal will be tied to work commitments by the industry.The lack of this has been a major point of criticism of HB 110.In his press conference Jan. 19,however,Gov.Sean Parnell said he expected the Senate to propose "meaningful”tax reform,which he interprets to be something like HB 110,at least in its fiscal impact.Meanwhile,the Senate Finance Commit- tee introduced a 2012 version of a bill "decouping”oil and gas taxes,a controversial proposal that put the Legslature in a late-session uproar two year ago.Parnell said he doesn't object to this as long as it doesn't indirectly cause an oil tax hike,which the 2010 version would have done,he said. eT anne!:Sih eis ec arititie lsaaarr eh,2 =Meanwhile,Sen.Tom Wagoner has his idea of a tax holiday for ¥_faislaae roses .Be2.2newoilproduction,a different way of pursuing an incentive.This hoeGovernor on gastine Pg.3mixwillgetverycomplicatedbeforelong.However,the Senate lead-F ."esStatus of Bills ..Be]"PgR 4:5:2ershipshastakenabigstepinacknowledgingthatthereisaproblemmleCoastalrhanageineat.o 4withoiltaxesandthatthedecliningvolumeofoilinthetrans-Alaska |¢Health inustry workforce,Pg.7 oil pipeline is now a Serious problem.=*Renewable energycredits:6:Tsoy Bill on mediation of workers'comp claims expected to move A Senate Labor and Commerce Committee bill that would allow confidential mediation efforts to resolve a disputed workers'compensation claim should move out of that committee next week,its chairman Sen. Dennis Egan (D-Juneau)said after the measure's second hearing,Jan.19.SB 116,introduced last March and first reviewed in April,gives employers and employees the option of attempting mediation,but prevents the effort or anything related to it to be used as evidence in any future hearings if resolution is not achieved. The bill says mediation sessions are confidential and may not be recorded and the expense of the effort is not assessed against the participants.It also allows a process for mediations to be negotiated into collective bargaining agreements.An amendment adding a sunset date to the bill is expected at its next hearing.The bill goes next to the Senate Finance Committee.Testimony at last week's hearing was unanimously sup- Continued on page 8 Want to subscribe ? Email:timbradner@pobox.alaska.net ...Legislative process... House Finance Subcommittee process will improve budgeting but delay House vote The House Finance Committee is reorganizing the way its operating budget subcommittees work with a six-step process expected to delay its floor vote on the annual spending plan by a week or more.The floor vote usually comes in mid-March.House leadership is discussing a revised timetable for transmission of budget bills with their Senate counterparts. The "Subcommittee Revamp”will be introduced at a training session Saturday,Jan.21,on new "performance based”missions and measures standards,which are the first piece of the new subcommittee process.Financial consultant Craig Holt,who years ago helped then-Senate Finance Committee Cochair Sen.Sean Parnell de- velop his "missions and measures”review,conducted the session for the Finance Committee. The new method is intended as a template for subcommittee operations but the procedure still ends with a list of recommendations for spending hikes and cuts.It resulted from dissatisfaction among House members with the lack of consistency among subcommittees,according to House Finance staff.All House members serve on several of the budget subcommittees.Some members favored a major shift to a "zero-based”budget process but the cochairs decided a 90-day session didn't allow enough time.Pete Ecklund,aide to Cochairman Bill Thomas (R-Haines),said subcommittees also struggle with the problem of too much information in the avail- able time and the new process is meant to provide an efficient and consistent methodology for budget review. The governor's Office of Management and Budget worked closely with the House cochairs in development of the process. After a review of a department's missions and measures targets and performance,subcommittees will review department spending from 2005 to the present.That year was chosen as a baseline because it was the last year when state spending was relatively flat,according to Ecklund.Next comes consideration of the department's compliance with its 10-year plan,then a check for its responses to recommendations of any relevant audits,fol- lowed by a look at the status of current-year budget changes.Lastly is an evaluation of spending increases or cuts for the coming fiscal year. Film tax credit extension,SB 23,one of session's likely priorities The state's infant film production industry is pressing for an extension of the state's film tax credit program, which is credited with attracting production of several major motion pictures as well as smaller features.Sen. Johnny Ellis'SB 23,which would extend the program for 10 years,is now in House Finance Committee.The program would otherwise end in 2012.Many Alaska firms,including NANA Development Corp.'s creation of a new company.have geared up to provide support services for filmmakers and want the certainty that the state support will continue.Visiting film crews have provided a spurt of business particularly in the off-season,for hotels,restaurants and car rental agencies. Page 2 Alaska Legislative Digest No.1/2012 Analysis by Tim Bradner Governor's deadline on gas:March 31 or else? Gov.Sean Parnell seemed to lay down a gauntlet before North Slope oil and gas producers in his State of the State speech to the Legislature Jan.18.Parnell said he wanted agreement on "alignment”between the three major producers,BP,ConocoPhillips and ExxonMobil,by March 31 on a natural gas pipeline and major liquefied natural gas project.The governor laid out three expected timelines:(1)settlement of the long-standing,complex Point Thomson litigation,presum- ably prior to a scheduled Alaska Supreme Court hearing the first week of February (though an agreement could come after the hearing and before a decision);(2)by March 31,an agreement among the companies on jointly working on an LNG project;(3)by June 30,agreement to "combine”(whatever that means)the state's Alaska Gasline Development Corp.24-inch "bullet line”effort with the large 48-inch Alaska Pipe- line Project,the TransCanada-ExxonMobil 48-inch Alaska highway gas line project (which presumably would switch to an LNG plant);and (4)a timetable for pursuing the LNG project by Sept.30. If the first benchmark is not met (alignment on an LNG project by March 31)Parnell warned that he would pursue "other options”(a threat?)and would ask legislators'help in acting before the mid-April adjournment of the 2012 legislative session.We're not sure what the governor has in mind but it could involve some expansion of the role of the state's current effort on a small gas pipeline to the slope,along with more aggressive action by the state on Point Thomson if there is no resolution to that dispute. All this sounds pretty gutsy and it's obviously a certain amount of political theater,but legislators learned from experts,in a "megaproject”workshop last summer sponsored by the Legislative Council, that any effort to rush the schedule on a megaproject typically ends in disaster.The companies also know this,and they won't be rushed.Of course,we can be charitable and suggest there may already be inter- company timelines similar to what the governor has laid out,in which case Parnell will get kudos for something the companies were going to do anyway.But we don't believe this is the case.The governor said he didn't consult with them before his speech,and we believe that because when we called the com- panies for comment the next day we got a "Huh?”reaction. If the latter is the case Parnell might not be on a wise course.He pulled off a coup when he persuaded the big boys -the CEOS from the three major producers -to come to Anchorage and meet on Jan.5. There was no firm agreement among the companies,or the state,other than a gentlemanly understanding that all would work on LNG.But it's a big accomplishment,in our opinion,to get people of that rank to meet and talk.Parnell was mildly criticized from some quarters for not getting a more definitive agree- ment,but most people were pleased. However,Parnell's state-of-the-state remarks reminds us ofSarah Palin and her AGIA strategy,which was the last time the state tried to force an outcome.Today AGIA is viewed by legislators as a failure. Page 3 Alaska Legislative Digest No.1/2012 -,,.Status of Bills ... Introduced in the House --HB 243:Prohibit automatic phone solicitations (By Kawasak]).......ccccccsccceeseeeeeneeetees To L&C,JUD --HB 244:For-profit corporations are not persons (By Kawasaki)20...ceeeeeesceecnseerereeenees To SA,JUD --HB 245:Snow classic as charitable gaming (By Hawker)........cccsccecceeeeesessessencncoeeeeeneeees To L&C,FIN --HB 246:Naming certain bridges (By Thomas).... eveeeeieeaeeeeenseecssesaeeaeetseeseeeneasreseass To TRANS,FIN --HB 247:July 30 as Alaska National Guard Day (By Lynn)...eeceececesseeeeeneeerenees To H.M&VA,SA --HB 248:Al Wright Airport at Minto (By Dick)... eeueseeesaccaeeeseesaneeaeceseussersateenaeosaecuss To TRANS,FIN --HB 249:Koyukuk Station Veterans Airport (By DICK)vceeceeceeseeneeeneeceneesseeseeeeesenes To TRANS,FIN --HB 250:Renewable energy grant fund (By Thomas)0.0...ee eeeeeeeeesenneeeeeees To H.Energy,FIN --HB 251:Board of Veterinary Examiners (By Dick).ooceeeeeesccessecseecrseesseessuseesenseenees To L&C,FIN --HB 252:Exempt certain small business from corporate income tax (By Costello)...To L&C,FIN --HB 253:Classification schedule IIA controlled substances (By Stoltze)0...csc eeeeees To JUD,FIN --HB 254:Alaska Native Language Preservation and Advisory Council (By Dick)..........To SA,FIN --HB 255:Prohibit text messaging while driving (By Gara)oo.ceceeeseesseeeerseeees To TRANS,JUD,FIN --HB 256:DEED intervention in a school district's instructional practices (By Dick)....ToEDUC,FIN --HB 257:Time limits applications by victims to Violent Crimes Comp.Bd.(By Kerttula)To SA,FIN --HB 258:DOTPF standards/operating procedures (By Joule)...cee ceeceecseeeeeseeteenes To TRANS,FIN --HB 259:Pharmacy records audits (By Munoz)... cecaseseuseesessecsecaeeaceneesnesseessessecnneasessesatenes To L&C,FIN PELErseN).......csccecseccsseececsceceeesceereeserseres To SA,JUD --HB 261:Loans to purchase commercial fishing entry permits (By Edgmon)....To H.Fisheries,FIN --HB 262:Access to public/transportation facilities --HB 264:Deferral muni property taxes on increase in prop.value (By Munoz).............To C&RA,FIN --HB 266:Practice of naturopathy (By Munoz)..... secsecseesecaecaecesessaseaeesseseaeensessessecnaesaseneeseeneeneey To L&C siceesesecneesseuseecseesaeeseenesenenseeasesesenesaneneeatonseas To L&C --HB 268:Dept.of Labor audits credits against oil and gas taxes (By Gardner)................To L&C,FIN --HB 269:Common interest community (By Hol- TTGS)...cccesessccesecccescecesceesescceceseceseceeeesss To L&C,JUD --HB 270:Airport notices to warn passengers of body searches (By Cissna).........0...eee To TRANS --HB 271:State highway system &commercial vehicle requirements (By Keller)...........To TRANS --HB 272:Reduce interest on post-sec.loans for residents (By Gara)00.0.0...cece To EDUC,FIN --HB 273:Vendor charges on bills of telecom carri- ers unlawful (By Gardner)........ceeeeeeeees To L&C --HB 274:Exempt certain acts/transactions from unfair competition provisions (By Holmes)To L&C --HB 275:Coverage colorectal screening state/local group health insurance (By Lynn)......To L&C,FIN --HB 276:Credits against oil/gas production tax for wells in Nenana Basin (By Thompson)To RES,FIN --HB 277:Veterans'occupational licensing fees (By Saddler)0...ese eeeeeseesseeeseeenees To L&C,FIN --HB 278:Prohibit sex offenders residing near chil- dren recreational equipment (By Petersen).To JUD --HB 279:Extend term.Date Bds.Nursing,Dental Examiners,Barbers,Big Game;Alcoholic Beverage etc.(By H.Rules)...eeeeeeseeeeees To L&C,FIN --HB 280:Credits against oil/gas production tax for wells in Kotzebue Basin (By Joule)....To RES,FIN --HB 281:March 30 as Welcome Vietnam Vets Day (By Thomas)........eseeessesesssecerceesneeeree To H.M&VA --HB 282:Apply military education credit to occu- pational licensing (By Thomas)......To EDUC,FIN --HB 283:Capital appropriations (By GOV)To FIN --HB 284:Operating budget (By GOV).....To FIN --HB 285:Appropriations mental health program and privacy issues (By Cissna)........+.To JUD,FIN |(By GOV)...cece ceserenetnesasensesteesseees To FIN --HB 263:Oil/gas production tax credit for expen---HB 286:G.O.bond issuance for municipal port ditures (By Gardner)........ceccseeteereeterteetaes To RES projects (By GOV)ooo.tenseensessnesenees To FIN House bill introductions continued in our next issue Page 4 Alaska Legislative Digest No.1/2012 ...Status of Bills ... Introduced in the Senate SB 134:Child support awards (By Kookesh)--SB 155:Termination,professional boards (By S.ToreereeerernnesrsseeerenseresnseessceseesTO HBSS,JUD |RLS)cssssssssseessssseiissseenessesiseeeenTO L&C,FINSB135:Rights of crime victims (By French)--SB 156:Ak.Railroad Corp.land lease terms (By S.sane dee eseeeneneneeeseuseneeenessosssssssnnneersesrsesseeeee TO JUD,FIN L&C.)ooeebececeetesesessesectesteseteccescesseee TO L&C,C&RASB136:Tax credit,employ veteran (By --SB 157:Hazard insurance,unoccupied property (ByWielechowsKkl)o....ccccccesesccescceneeeseesseeeees To SA,FIN S.L&C.)ccccssesecsssssessssssssiessssssesssessssees To L&C.C&RA--SB 137:Suicide prevention training,schools (By |__sp 158:Real Estate Commission (By Egan)_Davis)sree soonernnennseesnrienti TO EDUC,FIN a cccccccsssssesnsssessenesssssnanssseeneseeen To L&C,FIN -SB 138:Unfair practices,telecommunications --SB 159:Establish Susitna State Forest (By Menard)(By WielechowSki).......-.--+-ss eee TO LEC,IU Yc ccccccssssssssttsseesecersnsansstseeen To RES,FIN--SB 139:Increase base student allocation (By --SB 160:Capital budget (By GOV)......sssssee To FINDEN1S)ee To EDUC,FIN |_sp 161:Operating budget (By GOV)...To FIN--SB 140:Substances,Sched.HA controls (By --SB 162:Operating,capital,mental health programsMEYEr)o..sssssseceecessssessereeee To JUD,FIN |(By GOV)...cssssssesssssesesssssssssresseceeseesssssssesnsseeeeees To FIN--SB 141:Create Ak.Pension and Reserve Fund --SB 163:G.O.Bonds,municipal port projects (By(By Egan)oo.ssssssssssseesrreeseeerscescsseennee TOSA,FIN |GOW)ciceesscscssssssssssssssssssssssssssecseeseeee To TRANS,FIN--SB 142:Approp.surplus to Perm.Fund,pension |__sp 164:Exploration credit,Kotzebue basin drillingfund(By Ellis)...eee eeeecseeeeeeeeeeeeraey To FIN (By OLSOM)cecsesssssssssssesssssssssssessseeeeeesesee To RES,FIN--SB 143:Bd.Of Architects,Eng.,Land Surveyors |__sp 165:Retirement plans,insurance (By S.JUD(By Glessel)sorsvsseseres serie TO L&C,FIN |Comm.)esssesssesssssnssssssstsunssssnnsesnseeine To JUD,FIN--SB 144:Reinstate child,adult immunizations --SB 166:Licensing,medical lab professionals (By(By Giessel)oo.To H&SS,FIN |Davis)ooccccccsssssssessssesssssssssssssssessessesseees To L&C,FIN--SB 145:Exploration credits,Nenana Basin drill-|__sp 167:Cook Inlet oil production tax rate (By S.ing (By Wagoner)ors TO L&C,FIN |EIN)i nccccessesessessetesstessstnsstessteessisstneetsee To FINSB146:Snow classic,charitable gambling (By --SB 168:Cost-of-living salary adjustments for jus-Giessel)...ccceccessssssssccctceereesseeeeeeereereres To L&C,FIN tices/judges (By S.RLS)cessscsscssseeeeeee To JUD,FIN--SB 147:Ak.Water and Sewer Task Force (By --SB 169:Education funding distance delivery coursesKookesh)wocccccccccccccccceeeeeeeeeeeserrereens To C&RA,FIN (By S.EDUC)cicesscssssssssssssssssssssenseseses To EDUC,FIN--SB 148:Exempt gas pipeline from state property |_.sp 170:Vocational education counseling in publictax(By Wielechowski)..........To C&RA,RES,FIN schools (By Thomas)..........eesereeeres To EDUC,FIN--SB 149:Tax credits,dog mushing (By Thomas)--SB 171:Increase base student allocation (By S.Lote eD eee eee eee een ene nesses eee nseeee see neeeeenenees weseeses LO L&C,FIN EDUC)"ccccccececececscecciseseusecetsesereseesrecese TO EDUC,FIN--SB 150:Temp.occupational license,military (By |_.sp 172:Health care decisions (By Dyson)..............-Wiclechokt)..--sseceseerr terrestres TO SA BS Pc csasssesssetensetenseseneseenneteneseenate To H&SS,JUD --SB 151:Sentence mitigation,fetal alcohol spec-Senate bill introductions continued in our next issue trum disorder (By Meyer)..............To H&SS,JUD Commitee key: --SB 152:Legislature approve Pebble Mine (By French)voscecscssceecossseeeessteeeecnnneeeesen To C&RA,RES ub.Judiciary --SB 153:Gas storage facilities,tax credits (By L&C.Labor and Commerce TOMAS)...sscecseseccsseecseeceseeeeeeeeeeeeeenes To RES,FIN we vo Mbtany and Vet.Affairs --SB 154:Low-interest loans,home conversion to RSCoescssecesstssnseeseetie Resources gas (By Thomas).......ceeeeeeeee To C&RA,FIN Be SS rere flea and Social Services TRANS....eeecseeresneeceees Transportation Page 5 Alaska Legislative Digest No.2/2012 ...ReSOUICES ... Edgmon's HB 261 would lower interest rates on fisheries loans Financially challenged Alaskans seeking state money to buy limited entry commercial fishing permits could get larger loans at lower interest rates under the terms of a bill introduced,Jan.17,by Rep.Bryce Edgmon (D- Dillingham).HB 261 limits the interest rate on "Section B”loans from the commercial fishing revolving loan fund to 2 percent below prime,within the range of 3 to 10.5 percent.The measure also doubles the maximum amount of such loans to $200,000."Section B”loans,under the Commercial Fishing Loan Act are available only to Alaska residents who are unable to borrow from commercial banks.HB 261 was referred to the House Special Committee on Fisheries and the Finance Committee.Rep.Steve Thompson (R-Fairbanks),chairman of the Fisheries Committee,and Rep.Charisse Millett (R-Anch.)cosponsored the bill. Revised fishing guide license bill,McGuire's SB 24,set to move from committee Sen.Lesil McGuire's much revised bill to establish a permanent sport fishing guide and outfitter licensing board will get a Senate Resource Committee hearing Monday and will be sent on to the Finance Committee at the panel's Wednesday session,Cochairman Tom Wagoner (R-Nikiski)said after the Senate majority news con- ference,Jan.8.The state's current sport fishing guide licensing and harvest logbook reporting program has been extended on a year-to-year basis since 2009 and expires on Jan.1,2013 without further legislative action. SB 24 extends that deadline to Jan.1,2014,when licenses authorized by the new "Sport Fishing Guide Ser- vices Board”will be required.The nine-member board would license and regulate sport fishing guides,includ- ing master and assistant guides and outfitters and transporters.Guides,but not outfitters,would be required to pass written or oral tests to obtain a license.The revised bill includes less regulatory power for the board and makes it something of an advocate for the fishing guide industry by requiring it to report annually to the gov- ernor and Legislature on "the economic effect of sport fishing on the state's economy”and make recommenda- tions,The language was copied from existing law outlining duties of the Alaska Minerals Commission,which is an advocate for the mining industry but has no regulatory powers. Legislators lay low on coastal management initiative House and Senate leaders are laying low on what they intend to do about the coastal zone initiative.Backers of the ballot proposition handed in petitions with 33,500 signatures on Jan.17,and while it will take a while to determine if signatures are valid and the statutory requirements were met (a certain minimum of signatures are needed from election districts across the state)it seems likely that the proposition is headed for the fall election ballot.Legislators are trying to figure out if any version of what was proposed in coastal management legisla- tion last year might be considered "similar”.The Legislature can pass a similar law to take the place of an ini- tiative going to the ballot.The initiative language,however,would restructure the coastal management program as it was prior to major changes made several years ago by former Gov.Frank Murkowski.It is much different than what was considered last year.The alternatives are that legislators can (1)try to forge something new and get the agreement of the initiative backers (municipal people)not to challenge it,or they can (2)just let it go to the ballot,let voters decide,and then amend it after two years.Course |would complicate this session,while course 2 would reinstate a coastal management permitting system that resource developers found very difficult to deal with. Page 6 Alaska Legislative Digest No.1/2012 ...Business... House State Affairs moves HB 182,requiring on-line publishing of agency reports Legislation that prohibits state agencies from printing paper copies of their annual reports moved out of the House State Affairs Committee,Jan.19.HB 182 would save an estimated $150,000 in annual printing costs. Introduced last year by Rep.Kyle Johansen (R-Ketch.),the bill requires that printed copies of annual reports will be available upon request at the State Library's distribution and data access centers,though costs of $20 per hour plus ten cents per page may be charged.The measure was amended to clarify that hard copies will be printed if required by federal law or specific agreements.Rep.Paul Seaton (R-Homer)called for a provision that would require graphs or other illustrations in state reports to be formatted so they can be understood if reprinted only in black &white.Seaton did not offer an amendment,but the question may be addressed in the House Finance Committee,which now has the bill. Wilson's HB 216 would set deadlines for publication of regulations Bills that direct state agencies to adopt regulations would include specific deadlines for adoption of the rules under the terms of HB 216,which was reported out of the House State Affairs Committee,Jan.19.Sponsored by Rep.Peggy Wilson (R-Wrangell),the bill also requires that public notices of proposed regulations include an "in- formative summary”that describes,in "clear,easily readable language,”the current regulation and how it would be impacted by the proposal.Wilson acknowledged some agencies would face "considerable”increases in costs by expanding the size of public notices that must be published in local newspapers.At a Jan.19 hearing Wilson offered an amendment to exempt some boards and commissions that may meet only once or twice a year from the bill,but withdrew the proposal for consideration in the House Judiciary Committee,which hears the bill next. Health care providers'top legislative priority is workforce issue,in HB 78 Health care providers'top priority is a workforce issue,the shortage of physicians and other medical profes- sionals,mainly in small communities and rural areas.HB 78,now in House Finance,would provide assistance for medical school loan repayments for graduate physicians agreeing to work in Alaska.A separate grant program is aimed at attracting experienced medical professionals,mainly to serve in rural areas.Many states have similar programs but Alaska does not.Rep.Bob Herron of Bethel is providing key support for the bill in the House. Rep.Thomas wants 10-year extension of renewable energy program in HB 250 An extension of the state renewable energy grant program is being pushed by Rep.Bill Thomas,the architect of the current program.Thomas introduced HB 250 with six cosponsors on Jan.17.The bill asks a 10-year exten- sion,authorizing $50 million per year.The current five-year program,also authorizing $50 million annually, expires in 2013.While $50 million per year is authorized the actual appropriation is usually less,$25 million in some years.The program provides grants for renewable energy projects mostly in small rural communities. Many of these are wind projects but biomass and small hydro projects,have also been funded.The Legislature makes an annual appropriation for the grants,the Alaska Energy Authority solicits and vets applications and makes the final awards,which require matching funds from participants.Many of the wind projects funded by the program are having the expected startup problems and some of the efficiency and savings in fuel are taking longer than expected.Experienced wind operators in rural Alaska like Alaska Village Electric Cooperative say it takes at least two years to get things running smoothly. Page 7 Alaska Legislative Digest No.1/2012 OMB director Rehfeld gives House members first briefing on budget Gov.Sean Parnell's FY 13 spending package is a "results based”spending plan that focuses on resource development and infrastructure expansion,the director of Office of Management told the House Finance Com- mittee in its first budget hearing of the session,Jan.18."When the governor released his budget in December he framed the discussion around results,”said Karen Rehfeld.The $12.1 billion operating budget (HB 284/SB47) includes $6.43 billion (53 percent)in unrestricted General Funds,$2.87 billion (24 percent)federal money, $1.48 billion from Permanent Fund earnings (12 percent)for dividends and inflation-proofing,$834.5 million (7 percent),and $1.3 billion (11 percent)from designated General Funds and other state revenue sources. Resource development infrastructure expansion are the governor's largest spending targets,aside from overall state operations.HB 286/SB 163,the governor's general obligation bond proposal,totals $350 million,includ- ing $200 million for the Port of Anchorage,$110 million for the Port MacKenzie rail extension and $10 million each for port projects in Seward,Emmonak and the Bristol Bay and Ketchikan Gateway Boroughs.Resource development spending includes $28.5 million for "roads to resources”projects,including $10 million each for the Umiat foothills and Tanana roads,$4 million to continue the route into the Ambler mining district and $4.5 million for an industrial route to the Klondike.In response to a question from Rep.Mike Doogan (D-Anch.),Re- hfeld assured lawmakers that the Klondike project is entirely in Alaska.Parnell is also asking for $3 million for a helicopter to be dedicated to State Trooper search and rescue operations in the Interior.Rep.Tammie Wilson (R-North Pole)didn't directly question the need for the whirlybird but asked for statistics on how much it would have been used in recent years and whether those being rescued would be billed for the service. Bill would allow mediation in workers'comp Continued from page | portive of the bill except for the Dept.of Labor,which is officially neutral.Mike Monagle,director of the state Division of Workers Compensation would not venture an opinion on whether the bill would help reduce Alaska's workers'compensation costs,which are among the highest in the country.Supporters included representatives of Alaskan ironworker,plumbers and pipefitters unions,steel erection company owners from Anchorage and Fairbanks and a California-based spokesman for the Ironworkers International Union. pm ee d ' Subscription -Alaska Legislative Digest and Supplements3037SouthCirclePh:(907)440-6068-Fax:(907)345-5683 Anchorage,Ak -99507 email:mbradner@gci.net Cost:$475.00lyear -Eimail online edition!print edition! Name Title Company Ph. Address Fax City State Zip Email -for online edition \as Page 8 Alaska Legislative Digest No.1/2012 *Anchorage Dally News MONEY/COVER STORIES Sunday,November 20,2011 B-5 New gas discoveries show that incentives work _Exciting things have happenedwithCookInletoilandgasexplo- ration over the last few weeks.Es- _copeta Oil Co.,a small independent,announced that it found gas in an off-shore well drilled with a jack-up rigintheInlet. There are now reports that Nor- dAq Energy,an independent based in Alaska,has encouraging results with a test well it drilled last winter on land owned by Cook Inlet Region Inc.,the Anchorage-based Alaska Native regional corporation,on the Kenai Peninsula. A third development is Australian independent Buccaneer Energy's earlier announcement of a gas dis- covery in a well drilled so close to the city of Kenai that locals call it "the Wal-Mart well”becauseitcanbe seen from Wal-Mart's parking lot.- Asecond well drilled at the lo- cation by Buccaneer wasn't so en- couraging,which illustrates that this business has its risks,but the com-'pany is optimistic and plans a third Panonwell,Meanwhile,gas from Buccaneer'sfirstwellwillflowintoEnstarNat- ural Gas Co.'s pipelines this win- ter.That additional gas for Enstar should be comforting for those of usinterestedinkeepingourhousesand;businesses warm.. Two other independents,Arm- strong Oil and Gas and Cook Inlet Energy,will also supply Enstar this winter from Armstrong's wells on the southern Kenai Peninsula and Cook Inlet's operation on the west _side of the Inlet.:All this is important because we still have a gas supply problem in Southcentral Alaska caused by the long-term depletion of gas reserves and a lack of exploration until re- cently. In fact,we're particularly vulner- _able this winter because it appears we won't have Conoco Phillips'lique- fied natural gas,or LNG,plant at Ni- kiski available to shift gas to the local utilities if there's very cold weath- er and a supply disruption.The com- pany plans to mothball the plant aftermakingalastshipmentofLNG tocustomersinAsia,although the facil-ity will be maintained so that it could be restarted. What's important about the new gas discoveries is that they show there's gas to be found in Cook Inlet and that policies put in place by the Legislature to grant generous state incentives to encourage new drillingareworking.We can't count on that 1new gas yet,however.The gas being supplied this winter by Buccaneer,Armstrong TIM eeeBRADNERoe ECONOMY and Cook Inlet are small quantities, although everything helps. Escopeta's and NordAq's dis- coveries may be important,but we won't know for sure until more work is done. Escopeta drilled one well and was able to do some testing,but the com- pany will have to wait until spring to do the more important tests and drill a second well to confirm its find. The same is true for NordAq. Unusually warm weather caused the company to pull its rig off loca- tion last spring before its well could be fully tested.Further tests will be completed in the spring of 2013.A second well is also planned. Let's wish them luck. Meanwhile,back to the gas short- falls.The regional utilities,Enstar and the electric utilities,have a le- gal responsibility to ensure we have gas and electricity.Because of that,"they are being prudent and continu-ing to plan to import LNG by 2015 as_abackstop in case the drillers are unlucky.Astate corporation,the Alaska Gasline Development Corp.,is also' continuing with engineering work onapossible24-inch pipeline built fromtheNorthSlopetoSouthcentral. That's the ultimate backstop,but it wouldn't operate until 2018 or later.On a third front,the Alaska En-ergy Authority,another state agen-cy,is working on preliminary plan-.ning for a large hydroelectric project at Watana on the upper Susitna Riv- er.This wouldn't be operational until 2022 or so. There's always a lot of debateabouthydro.Large up-front capi- tal costs make hydro projects less attractive,although once built they provide electricity at stable ratesfordecades.The state-owned Brad- ley Lake hydro project near Hom-er is now the least expensive source of power to the regional electric grid,and its cost hasn't changed since the project was built in the 1980s.We certainly can't say that for nat- ural gas,which today fuels most of our power generation. The Watana project could supply about half the Southcentral and In- terior Alaska power needs,reduc- ing our need to burn gas.We could instead use that gas to manufacture products like fertilizer or liquid fuels. Interestingly,this is what Norway does.Norway supplies almost all its _own power needs with hydro and us- es its oil and gas resources for reve- nues to its treasury,or to support lo-cal industry.That's a good model forAlaska.:We should be encouraged by the"new gas discoveries in Cook Inlet, but they're not yet gas in the tank,so to speak.Meanwhile,we've adopted a wise set of energy supply options including exploration incentives,a _pipeline from the North Slopeasa - fallback,and Watana hydro as a long- term power source.The utilities,be- ing prudent,must also plan for LNG imports in the short term. We need to stay the course with all those initiatives,at least until we know more about what we have in Cook Inlet.But consider how lucky we are to have these options and the financial resources to pay for them. Tim Bradner writes for an Alaska economic report- ing service.He also consults for private clients and writes for business publications.His opinion column appears every month in the Daily News. a B-6 Sunday,November 20,2011 'Anchorage Dally News WEATH STATE SUMMARY .3-DAY FORECAST 2y Anchorage todaywoeMostlycloudy.A chance of°snow.20° (5 Tonight"get..Mostly cloudy with snoweeshowerslikely. 14° {>es MondayoOMostlycloudy.Snow likely.=. . 21°8° ty.TuesdayaMostlycloudy withachance's2°"°-of snow showers.13°7° NATIONAL CITIES Yesterday Today TomorrowCityHi/Lo/W Hi/Lo/W _Hi/Lo/W Atlanta 63/43/c 66/58/pe 74/60/cBoston53/36/pe 64/40/pe 49/38/pcChicago55/44/r.°45/36/e 49/38/pcDallas79/63/e 78/66/t --78/63/t Denver 48/20/pe 46/28/pe -52/31/pceDetroit50/37/r 52/35/pe 45/35/shHonolulu85/77/pe 81/74/pe 81/73/shHouston78/65/pc 82/70/pe +82/71/peKansasCity71/37/pe -40/34/¢ 49/37/cLasVegas62/50/pe 60/44/pce -60/43/pcLosAngeles63/55/c 60/S1/t 65/52/peearsPAITEteODTanQ1/70ine ,Allow pressure system moves into the Gulf of Today's forecaste:Alaska and pushes a front over southem Alaska.a . Po This will tigger scattered snow showers over the Barrow Dsouth,while the north will remain dry and sunny.pe ;4/35 Loy All forecastswy7o.99 and maps provided bypruthoeBayWeatherivhaaly@Kotzebue>4/18|PRECIPITATION te oes aeFortheprevioussixmonths, ktuvuk P:Actual 33 Normal Ej °pe ue ana co atase48;a ae 44 a 5 @:40 ;sms36y.@ Unalakleet a ikeOyALBsoryxaa , ”F x -.Bethel 30 E McGrath ".@ Falrbanks ars aaa:]ae E-7-10 4-28 ome M5/27 eet ooaeFaiaia°¥»,0.0 ee Be Be iq ° &Ps Te tasJunJulAugSepOctNovos..Talkeetna ¥D a Palmer .y Sel te 12/1.2 asad 14/2>a Cana :;@e”, a %::Glennallen .4,SAnaseeeEBOyeS88)|;@ Dillingham Anchorage e bes +g BeeoyOry_18/4 .20/14 Pe EEO etrdwood.- efas dopa te '®4 ms °94°09 Kenal 7 ;°.15/4 ss 2rae)tee Loy es.Fe mata fe*@ Unalaska coi Bay - ?gg we eee Ge Walder ne Seward39/27"12/28 oo..o°?+Homer 24/17 o%o 19/4Kodiak31/18 es 37/20 ANCHORAGE ALMANAC &.Statistics are for Anchorage Intemational YALLEY /KENAI ¢Airport through 5 p.m.yesterday.we °JuneauStatisticsthrough5p.m.yesterday.Temperatures gh 5 p.m.yesterday,You 18/17Hi9°-Wasillaheh.-8°High,er 7 ,Sitka @ -:"o>.Record high wo 5O?11949 LOW anne Nov.25 Dec.2 Dec.10 Dec.17 34/34 88aRecordlow-7°in 1963 'Normal high.....New First:Full Last aan KetchikanNormalhighNormaltow........chikaTodayTomorrow34/32oSnowfalllast24hours. .Normal low.15 Month to date snowfall Moonrise 2:37 a.m.4:12 a.m..@Humidityat5p.110...ssssesssecsnessesssese 79%Moonset 2-16 pm.2:12 p.m. Snowfall Palmer 'a High o°LAST WEEK'S TEMPERATURE TREND ; adn.com/weather Visit our web site for the latest conditions and forecasts for Alaska. ALASKA COMMUNITIES .Yesterday Today TomorrowCommunityHi/Lo/W _Hi/Lo/W Hi/Lo/W Adak 39/12/¢41/35/pe 38/36/snBarrow16/-1/fg 4/-15/sn -10/-18/fgBethel3/-3/sn 1/-10/pe -.2/-10/pe Cold Bay 42/38/¢-42/29/r 33/27 /snCordova18/-2/s 31/23/sn 30/21/sn Delta Junction -11/-36/s -16/-26/s -18/-25/sn Denali N.P.6/-5/s 10/-2/pe 10/-5/sn Dillingham 12/0/¢-18/-4/sn 4/-12/s Dutch Harbor 46/39/r 39/27/sh 31/26/snFairbanks-23/-36/tg -15/-27/s -14/-20/snFortYukon-34/-41/¢-29/-31/pe -14/-18/pc Glennalien -16/-34/s --2/-8/pe 5/-6/sn Gulkana -16/-34/s -2/-8/pc 5/-6/sn Haines 10/3/pe =4/3/pc--16/12/snHomer19/1/s 31/18/sn 27/14/sn Juneau 17/10/pe 18/17/c 26/21/sn Kenai 2/-16/s 24/14/sn 22/9/sn Ketchikan 28/24/sn 34/32/sn 38/35/r King Salmon 28/3/fg 26/0/sn _5/-10/pc Kiawock -28/26/fg 36/36/sn 40/36/rKodiak34/26/sn 37/20/sn 28/15/sn Kotzebue -8/-14/s -2/-9/pe_--5/-19/peMcGrath-25/-36/fg -14/-23/s -14/-26/pc Metlakatla 33/25/na 33/33/sn --37/35/r Nome 11/1/pe 13/5/s 9/-7/pe Northway -27/-43/ig -24/-32/s -15/-21/sn Paimer -1/-10/s 14/2/¢-15/-1/snPaxson-11/-36/s -16/-26/s -18/-25/sn Petersburg 24/17/pe 27/2T/pe 35/30/sn Prudhoe Bay*=-6/-15/sn -4/-18/sn -16/-24/sn Saint Paul 39/37/t 37/25/sn -32/25/snSeward16/9/sn 19/4/sn 17/2/sn Sitka 30/23/fg 34/34/pe 42/36/sn Skagway 10/8/s 2/2/pe 15/7/snSoldotna0/-18/s 20/4/sn 18/2/sn_. Talkeetna 7/-18/s 12/-1/pe -:11/-3/sn Tok -29/-47/na -22/-31/s -13/-22/pe Unalakleet 5/-5/s 4/-6/s_-1/-18/pe Valdez 12/6/s 24/17/sn 25/16/sn Wasilla 0/-20/s 12/1/e 13/-4/sn Whittier 15/9/na |24/5/sn --20/5/sn Willow*3/-3/na 9/-3/e..10/-R/sn A-8 Sunday,March 13,2011 WONEY Anchorage Daily News It's time for a talk with TransCanada Corp.about re- negotiating at least parts of the state's contract with the pipeline company.What seemed like a good idea three years ago doesn't anymore. TransCanada has been a good partner with the state,howev- er,and there might be a win- win solution. Here's the problem:The U.S.is awash in cheap gas be- ing produced from shale.The world is also glutted with liq- uefied natural gas,or LNG, looking for a market.Things © don't look good for our $40 bil- lion-plus Alaska gas pipeline. Our immediate concern is . that the state is spending con- siderable sums to support this project,$160 million next year, in fact.Of more concern,how- ever,is that we're hobbled in pursing alternatives for our gas by our contract with Trans- Canada.In fact,we're exposed to treble damages if we do. TransCanada is adverse- ly affected,too,because its contract with us obligates the company to keep spend- ing money on engineering and other work related to an appli- cation to be filed with the Fed- eral Energy Regulatory Com- mission by 2012.Given the glut of gas on the market,it seems unlikely that TransCanada will have firm transportation con- + s=Es tracts signed when it has to make that application. It could be a big waste of money.Even though Alaska pays 90 percent of these costs under our contract,TransCan- ada pays the remaining 10 per- cent,so it matters to the pipe- line company too. This is an unusual arrange- ment.Typically a pipeline com- pany signs up customers to ship certain volumes of gas during an "open season,”a pe- riod in which shipping con- tracts are solicited,and then the company designs the pipe- line around the contracted amounts.With contracts and engineering in hand,the devel- oper proceeds to FERC licens- ing,which is quite involved. Why we obligated Trans- Canada to proceed to licens-- ing without contracts,if theopenseasonfails,and with on- ly a guess at what the volumes might be,is a story I'll get to. However,this could be a waste because if and when shippers do appear someday,the vol- umes will likely be different and the engineering may have to be redone.We're talking big "money,several hundred mil- lions of dollars. T recall TransCanada pleading with former Gov.Sar- ah Palin and the Legislature not to stick this requirement into the state's Alaska Gasline Inducement Act,or AGIA,but to no avail.It was only when Palin offered to have the state pay 90 percent of expenses af- ter a failed open season that TransCanada agreed to this provision.The AGIA contract has the state pay 50 percent of pre-open season costs,by the way.These payments are now being made. The state's AGIA Strate- gy has some good points,but some of its assumptions were flawed and the chickens are coming home to roost.The base assumption go-ing in was that thegas pipe:line was economic.In hind-sight,that seems amazing. There was also a desire for an -independent pipeline compa- ny like TransCanada to lead :. the project.However,once the pipeline company developedtheproject,there was concernthattheNorthSlopeproduc- ers,who own the gas,would .. not commit to ship their gas: A key part of the AGIA strat- egy was for the pipeline com- pany to continue working to- ward the FERC application and spending money on engi- neering,without shipping con- tracts.State officials believed the producers could eventual- ly be pushed into the project. TransCanada's open sea- son was held late last spring. We're going on nine months, ECONOMY and there is no word yet on re- sults,Denali,the competing BP-and Conoco Phillips-led pipeline project,also held an open season last summer.De- nali said recently it hasn't yet secured contracts either. Itis these contracts,and the credit of the companies that sign them,which enable the pipeline company to raise financing for construction. Palin.is now gone,leaving all this in Gov.Sean Parnell's lap.TransCanada and Denali both say they have potential shippers and are negotiating..- Parnell is urging patience. We may yet hear good news,but it's difficult to imag- ine that,in this market envi-- ronment,large companies will -sign shipping contracts obli-gating them to pay a hundredbilliondollarsormore. Whatis frustrating for Alaskans,however,is that the arrangement hobbies us in pursuing alternatives.Specif- ically the contract limits the amount of gas committed to an alternative,such as a pipe- line built to Southcentral Alas- ka,to 500 million cubic feet a day.However,any hope ofmakingsuchaprojectfeasi-ble lies in shipping the higher volumes necessary to achieve economies of scale,as well as attract industrial customers. Parnell is sticking with TransCanada because we signed a contract.The state should indeed honor its com- mitments.There comes a time,though,when we have to think of Plan B.The in-state gas pipeline work now going on,involving a smaller pipe- line to Southcentral Alaska,is a good framework for that. This could involve Trans- Canada because the company knows how to build pipelines. The state should consider be- ing an equity partner at least in proportion to its one-eighth royalty ownership share of the gas.The pipeline should be built large enough,at least to Interior Alaska,so that the section from the Interior to Al- berta can be built when mar- kets allow it. The pipeline to South- central should also be large enough to supply gas to util- ities and new industrial cus- tomers such as,possibly,Sasol, a South African energy compa- ny that has been interested in bringing its proven gas-to-liq- uids,or GTL,process to Alas- ka.GTL makes high-value liq- uid products,like ultra-clean diesel and jet fuel,from natu- ral gas. Sasol executives visited Alaska several years ago,but State officials gave them the cold shoulder because they were interested only in a pipe- line.Rebuffed here,the com- pany will now develop its first North American GTL plant in British Columbia,using gas from shale.But Sasol is still interested in Alaska,I'm told, despite the earlier snub. This should be our Plan B. Renegotiate with TransCana- da and make it our partner in a trans-Alaska pipeline.Re- cruit Sasol or another compa- ny with proven GTL capabili- ties to be the anchor industrial customer for a pipeline to southern Alaska. Someday the Lower 48 will need Alaska's gas.Not just yet,though. Tim Bradner writes for an Alaska eco- nomic reporting service.He also consults for private clients and writes for busi- ness publications.His opinion column appears every month in the Anchorage Daily News. NARMSme"ANU oeAY iCOMPASS.-ther points ofview EDN Ge mG PORTHRe TE a gS ate ot 'Tvs time for Alaskans to pick upthe ballByBILLWALKERIn1919,the Green Bay Packers were.founded witha $50 contribution from five:local businessmen known as the "Hungry Five.”They formed the Green Bay Foot-ball Corporation and sold stock to local .residents at$5 pershare.stInthe1950stheCityofGreenBay,:with a voter-approved bondissue,con-*.structed the necessary infrastructure (a'”arestadiumnowknownasLambeauField).*- The corporation raised money by selling stock to the team's fans.This was both - to support the team and to ensure that it -would not be moved from Green Bay toalargercity.Green Bay,a city of approximate-ly 100,000 people -is by far the smallest franchise city in the nation.This football .::franchise became the home of the.most Befamousofallfootballcoacheswhose*._hame appears on the Super Bowl trophy,Vince Lombardi.Last month this small-"est NFL community's team won the Su- per Bowl and brought the Lombardi tro- phy home. This team was literally created by lo-= cal folks taking control rather than hop-: ing and wishing and waiting for large cor- porations to come in and do what the residents of Green Bay believed was intheirownbestinterests.Alaska faces a similar situation.We pay some of the highest energy prices in the world.We have air quality issues in some of our cities,including Fair- banks,where the EPA may soon prohib- it the burning of alternative fuels such as wood.Our oil pipeline that funds over 80 percent of the state budget is two- thirds empty and in rapid decline.We stand by,watch and wring our hands as the producers reinject huge volumes of gas that comes out with the oil on the »We must act as Green Bay did to control our ;own destiny,build our own gas line,deliver-.:cheap,clean energy to Alaskans,create value=)addedjobs and return billions ofdollarsin ., revenue annually to the statetreasury --or.it :will soon be ''game over.”oo ”North Slope back into the ground rath-er than using it ourselves and delivering it to market. Rather than build the gas line infra- 'structure ourselves,financially anchored -in long-term contracts in the Asian mar--."-kets,we await the delayed disclosure of ...:"results of the state financed AGIA open.season held confidential by TransCanada"and Exxon Mobil as well as the separate«"Denali open season conducted by BP andConocoPhillips.Why the delay?These producershavesignificantcompetingliquefied nat-ural gas (LNG )projects elsewhere in:the world in countries where they mustdeveloporlosetheirrightstothegas. Meanwhile,Alaska's gas is not in the game because we,as owners of the gas, have decided to sit in the locker room for over 30 years waiting for someone else to 'tell us when our gas can take the field. .This is akin to the Green Bay Pack- ers waiting for the owners of the Pitts- burgh Steelers,New England Patriots or .Minnesota Vikings to tell them when they can take the field.Sounds ridiculous?It is,but that is exactly what we are doing as Alaskans as we wait for Exxon Mobil, Conoco Phillips and BP to take our gasintotheircompetingmarkets. We must act as Green Bay did to con- trol our own destiny,build our own gas line,deliver cheap,clean energy to Alas-. kans,create value-added jobs and re--_-5 turn billions of dollars in revenue annu-ally to the state treasury -or it will soon:be "game over.”The U.S.Department of }iEnergyhassaidthereissufficientgasin§the Lower 48 for the next 100-plus years:$thereby closing that market to Alaska's:_gas.If we persistin ignoringthe remain-?:ing lucrative opportunitiesin the Asian market,shame on us.We will have wan- tonly wasted Alaska's future. Putting Alaska first by building a gas line for LNG export to Asian markets "was a project the late Gov.Wally Hick-el felt passionately about.When Hickel was secretary of the Interior,following a speech he gave in New York,he was ap- proached by an individual who said,"I just want to shake your hand!I'm Vince Lombardi.”A chance meeting of two gi- ants with unparalleled drive,vision and determination. It is time we Alaskans exit the lock- er room and march onto the field.Take charge,take possession of the bail,call _the plays and declare "game on!” Bill Walker ran for governor in the 2010 Republican primary.He is the owner of an Anchorage law firm that specializes in oi!and gas and municipat law. A DU 710-7StateoptimisticonCook Inlet gas INVESTMENT:Development, storage could keep supplies good into 2020s,study says. By ERIC LIDJI 'Petroleum News With the U.S.Geological Survey re- cently saying the Cook Inlet basin could hold more gas than previously thought, the next question is whether tapping |that gas is commercially economical. The State of Alaska believes so. With the right amount of investment and storage,the Cook Inlet could meet -Southcentral gas demand through at least 2018,according to a new Division .of Oil and Gas report. And if that investment yields goodresults,it might push the timeline outto2021.The 34-page report compared the Cook Inlet basin to a 1990 pick-up truck: "In both cases we have been served .well and the prospect for more years is likely if we continue to invest.Failure .to provide sufficient investment will ac- celerate the end date.Conversely,even if we were to continue to invest,at some point it will become more economical to buy a new truck or in the case of gas supply to import from another source.” AS a basin-wide look,the study eval- uated the potential of the whole region, but didn't claim to say whether any in- dividual project is economical or not. The study tried to figure out how much gas could be produced at various ratesofreturn. The state experts estimated that_the region needs around 90 billion cu-bic feet per year,a figure that does not include demand for a potential liquefied natural gas export operation. By defining a "project”as one sea- son of work at an existing field and two seasons at a new field,the report identi- fied 39 potential projects in the Cook In- let,26 in existing fields,12 in new fields A group ofSouthcentral utilities recently saidAlaskawillneedto - start importing liquified natural gas into.the region as soon as 2014 to stave off a 2 billion _cubic foot shortfall. and one basin-wide compression proj- ect.The study team then performed an economic analysis on each project,con- sidering costs under the existing fiscal system and timelines for bringing new production online.It considered var-ious probabilities for success,as wellasthreepotentialratesofreturn:10,15 and 20 percent. The report measured the commer- cial viability of Cook Inlet by calculat- ing the internal rate of return and ex- pected monetary value of the basin,and compared those values against a pro- jected supply curve for the basin.The results "strongly suggest”that the ba- sin contains economical natural gas, while "some of the EMV's are small compared to other projects available for investment worldwide,”the report concluded. For the supply curve analysis,the state relied on its 2009 study of the po- tential reserves remaining in the ba- sin.That report estimated that Cook In- let still holds at least 863 billion cubic feet of proved,developed and producing re- serves,and could possibly hold much more depending on the amount of indus- try investment pumped into the region. The 2011 report considers currently producing fields and undeveloped pros- pects identified in the 2009 study,but not exploration or unconventional de- \TOOMUCH>STUFF? velopment.The report also focuses ex- clusively on the potential of the basin, without considering the impact of pos-'sible gas imports,orof North Slope gasbeingshippedtoSouthcentral. CONJECTURE AND CONTRADICTIONS _.The report comes amid much con- fusion about the future of the Cook In- let basin. After considering projected region- al demand,known drilling programs on the horizon and plans to bring more efficient power generation online,a group of Southcentral utilities recently said Alaska will need to start importing liquified natural gas into the region as soon as 2014 to stave off a 2 billion cubic foot shortfall.That could easily climb to 27 bef by 2017 and 47 bef in 2018 if gas is needed to power operations at the pro- posed Donlin Creek mine. Less than a week later,the USGS is- sued a report suggesting that the basin could hold 19 trillion cubic feet of undis- covered gas and 599 million barrels of undiscovered oil. At least two independent compa- nies -Escopeta Oil and Buccaneer Energy -believe at least some of . those resources exist in their offshore leaseholds.Escopeta plans to drill at its Kitchen Lights unit this summer, while Buccaneer is aiming to drill at its Southern Cross and North West Cook Inlet units later this year,or more likely next summer. But while those companies prepare for the first offshore exploration in the Cook Inlet in many years,the State of Alaska is considering plans to bring North Slope natural gas into the region through either a standalone pipeline or a spur off a pipeline into Canada. The Alaska Gasline Development Corp.recently issued a report show- ing that the standalone pipeline could be built for $7.52 billion and come online as soon as 2019. a y ia ™adaay!i ieee aa fN: ,:aes+3g BIav_OF .:2 iF Commercial &Residential _(907)334-9461 *www.eproofing.biz. :oraAKECHECHostanExchangeStudentToday! 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Foundedin 1976 ASSE International Student Exchange Program is a Public Benefit,Non-Profit Organization. Fairbanks Daily News-Miner -Alaska bullet gas line expected to cost 7 billion to 8 billion Page 1 of 8 a Home Subscribe Marketplace Classifieds My Content ArcticCam News =Opinion Sports Features Multimedia Community ads signin Alaska bullet gas line expected to cost $7 billion to $8 billion 3 SEB OOOASEASAARAAARA QbyChristopherEshleman/ceshleman@newsminer.com | 4 daysago|3301 views|21 [14 S|enja FAIRBANKS-An intrastate natural gas pipeline would cost between $7 billion to $8 billion to build if demand for North Slope gas can reach 500 million cubic feet per day,a consulting team said Thursday. The line,a darling of many state lawmakers and business leaders,could deliver natural gas prices for a transportation costs -tariffs -of $8 or $9 per thousand cubic feet,the group reported.That would,after other costs are accounted for,halve retail natural gas prices in Fairbanks while significantly expanding supplies here. 'SHE LUXURY OF THE ARCTICVisitcuraewwebsitewow.inuawoul.com Yarn!Yarn!Yarn! INUA WOOL SHOPPE lgigigigioiginiooloiolnisisicicioloias}a.40aThose figures exclude the option of using government subsidies to further lower transportation prices,an option excluded from presentations Thursday in Anchorage but recommended by some of the project's proponents. The report focused generally on a pipeline that uses spur lines to reach Fairbanks and North Pole,an assumption that has rankled business and political leaders here.It weighed a range of pipeline sizes,from 250 million cubic feet per day for four times that size.Costs estimates ranged from $5.7 billion to over $11 billion.A bigger pipeline would cost more but could push natural gas prices lower while a smaller pipeline would lower construction costs at the cost of higher prices. The report,ordered last year by the Legislature,arrived the same day government-led pre- development work on the proposed North Siope-to-Southcentrai Alaska pipeline project shifts to a new five-member oversight team led by the state Housing Finance Corporation. The capita!cost estimate -half pipeline and half treatment and liquid-extraction plants - followed a rigorous,multimillion-doliar review by engineering consultants.The estimate is higher than suggestions last year from natural gas companies. Dan Fauske,who directs the finance corporation and serves as chairman for the five-member pipeline project,said the numbers are a foundation upon which to build future study.Fauske's -team now has one year to deliver a finished development plan for the pipeline,one of a handful of huge energy projects afloat in Juneau,to the Legislature. "It's really a great start,very well done,very factual,”Fauske said of Thursday's report."But more needs to be done.” The five-member group,overseeing the newly-created state Gasline Development Corp.,is also charged with reporting monthly to the Legislature,according to House Bill 369,which created the team.It will also te!l lawmakers in December about any changes needed in state law. The report's base case:Industries could tap the pipeline of valuable gas "liquids”at both Fairbanks and the Anchorage area.Doing so only in Anchorage would slash the cost of a half- Dailybillion-cubic-foot-per-day pipeline from $7.8 billion to $7 billion,according to the report.p'ours ...,an FeaturedSomeFairbanks-area business leaders and lawmakers have said they'll fight to get any pipeline national running directly through Fairbanks.But much of Thursday's presentation focused generally on a on NBCreservations Seid radogoktrunkreachingNenanawithasmallerbranchheadingeasttoreachFairbanksandNorthPole.on no The borough government in mid-2008 told the state attorney general that Alaska has subsidized Anchorage natural gas while leaving Fairbanks,360 miles from Cook Inlet gas fields,to survive on pricier oil.Then-Mayor Jim Whitaker threatened a lawsuit over geographic bias in state natural resource policy,an option Mayor Luke Hopkins has hinted could remain alive if state plans fall short of offering Fairbanks deep supplies of natural gas. Fauske,speaking from Anchorage,credited the consulting team with focusing on the cheapest option -a main line that bypasses Fairbanks -but said managers can now also weigh Fairbanks-specific options. "This is also an issue that (will be)studied further as we go along,”he said. http://www.newsminer.com/pages/full_story/push?article-Alaska+bullet+gastlinetexpected...7/6/2010 Fairbanks Daily News-Miner -Alaska bullet gas line expected to cost 7 billion to 8 billion Page 2 of 8 "It's an eye opener,a challenge for this project to see if we can develop the market,and the Advertisementdemand.to amortize these costs,”said Keith Meyer,a consultant for the consulting firm Michael a,verusement !Attn:Anchorage MomsBakerCorp.,which helped lead the study.Single mother finds easy way to earn great money from home during recession.Her shocking Story...Learn moreContactstaffwriterChristopherEshlemanat459-7582. Share This Article | similar stories Anchorage:Moms Make $77hr -Single mother finds easy way to earn great money from home during recession.Her shocking story...Learn more Bill would have Alaska buy pipe for gas line |4 months ago Plans call for back-to-back open seasons for Alaska gas lines |4 months ago Deep breaths:Bullet line idea needs some more stress tests |4 days ago Alaska lawmaker questions prospects for natural gas pipeline |5 months ago Alaska House panel weighing gas tax bill |2 months ago 1 Add Your Link Here!° post a comment comments (21)Also inside Today's news /Photos /Locat / Alaska /Sports /Opinion «robir8 wrote on Friday,Jul 02 at 04:37 PM »Features Sundays /Health /Food /Outdoors/ Latitude 65 /Youth /Business 1AhHa,newsminer.com Archives /About /Feedback / Privacy Policy /User Agreement /Hot Jobs /Contact/Tell the oil guy amps is pressure and volts is volume,he'll get it.HVDC is the only RSS Feeds /Twitter /YouTube way to go for long distance power transmission.Submit Letters to the Editor /Applause / Events /Obituaries /Products.report abuse 4AhHa wrote on Friday,Jul 02 at 04:06 PM »Software Copyright ©2010 matchbin inc.content copyright ©2010 «.t Fairbanks this software is in a public beta test phase read our Privacy policy "«robir8 wrote on Friday,Jul 02 at 01:08 PM »Fairbanks -The voice of Interior Alaska since 1903 is in fairbanks. AK JahHa Whosale price for GASOLINE is 1.98 per gallon.Wholesale price for Natural Gas is Henery Hub $4.68 per 1000/cu/ft.Retait price for gas delivered in Anchorage (Enstar)is $8.69 1000/cu/ft.What they gonna pay when the crick runs dry?* Reply comment -- |stand corrected natura!gas is in $4.68 range. The error is what |get for watching TV. Below is a link to various commodity prices. http://futures.tradingcharts.com/marketquotes/index.php3?market=CL Although,my original figure was way off!$8-9 Dollars fright charge is double the wholesale spot market price outside. |suspect the contract price is much lower,but i can't prove it. As for HVDC if it works in China it will work over here. Suggest googling ---China HVDC It will give you an idea what it is all about. comment.. Critics say you can't build a HVDC power line because of Ohm's Law. Voltage times amps equals watts.v x a =w 1 amp is about what a flash draws at 3 volts.The bulb is using 3 watts. The same 1 amp flowing at 800,000 volts is 800,000 watts. http://www.newsminer.com/pages/full_story/push?article-Alaskatbullet+gas+linetexpected...7/6/2010 Fairbanks Daily News-Miner -Alaska bullet gas line expected to cost 7 billion to 8 billion ”For any wire size it's resistance increases as the amps increase causing the wire to heat. If you double the wire size the resistance drops by 1/2. An example:look at the wire on your 12 v car battery it is very large compared to the wire on a 100w (1 amp at 110 v)table lamp.The battery wire is designed to carry several 100 amps at 12 DC (1,200 watts). The bigger the wire the more current you can carry. Want more power through the lamp cord,double,triple,quadruple etc the voltage and the power goes up while the resistance stays the same. That famp dinky little cord carrying 1 amp at 1,000,000 volts would carry 1,000,000 watts. 10 lamp cords would carry 1,000,000 watts each. That is 10,000,000 watts. Some oil company guy claimed you can't build a power line to the slope because of heating the wire.|looked him he the eye,and said double the wire size. Daaaaahhh! One other thing about HVDC --you only need to insulate 1 wire,the other wire can be buried in the ground.Because it is buried,it can be much larger than the over head wire. Probably you use steel oil well casing for the ground. -wyelj report abuse DistantThunder wrote on Friday,Jul 02 at 03:57 PM » The percieved gas supply crisis in Anchorage can be solved for $40million --this includes rejetting all of the gas-orifices in Anchorage to propane. Nitwits get a budget,and the first thing they do is go and hire Michael Baker Consulting again to tell them just how stupid they are..same thing year after year. Consultants always steer Alaska in the wrong direction..they just always can't resist making mountains out of molehills. Please make the effort to contact me and ask me..{wiil spell it out for you,every last 15cent nut and bolt...the truth will shock and surprise you. report abuse 99712 wrote on Friday,Jul 02 at 03:28 PM » Fiatus-while you are correct that Anchorage doesn't really give a rip about anyone else,the answer to your queston is,indeed,found in the demerits of the bullet line. Did you read what the tariff is to Anchorage with a 250 MCF/D throughput?Almost $15.00 dollars.The gas is extra.No way is Anchroage going to pay $20.00 Per MM/BTU for natural gas. Anchorage gets cheap gas from the All Alaska Gasline through a spur from Glennalten,AK.You'd have to believe that Anchroage doesn't care about the cost of gas.Sorry.No.They do.That is why the work ANGDA has done to permit the ROW for the spur to Anchorage is so important. Bottom line:Anchorage gets cheap gas from the All Alaska Gasline thorugh economy of scale of a large gasline just like Fairbanks will.The bullet line gas is just to expensive-among its many,many other problems. report abuse Page 3 of8 http:/Awww.newsminer.com/pages/full_story/push?article-Alaska+bullet+gas+line+expected...7/6/2010 Fairbanks Daily News-Miner -Alaska bullet gas line expected to cost 7 billion to 8 billion Page 4 of 8 «Flatus wrote on Friday,Jul 02 at 02:16 PM » |don't think it is worth discussing the merits or demerits of the bullet line because | don't think it comes down to these. What it comes down to is this:more than half of the state's population fives in the Anchorage area.The Anchorage area is about to experience an energy crisis. That won't be tolerated,and as all the political power resides in the Anchorage area,doesn't need to be tolerated.The bullet line will be built. Please tell me why this isn't probable. report abuse oYellowFang wrote on Friday,Ju!02 at 01:17 PM » PS.The idea of converting the gas to electricity on the Slope has been thought of and argued and studied and it always comes down to the fact that it doesn't work. Even with Direct Current transfer it doesn't work.So,there's another fine "Bullet Line”for all of the people (like Jay Ramras)who don't want to listen to the engineers and wind up costing everyone else both time and money. report abuse 99712 wrote on Friday,Jui 02 at 01:14 PM »*Examiner-Are you kidding?You are trying to defend a line that by-passes Fairbanks and North Pole,doesn't deliver new revenue,and doesn't even provide affordable gas?Give us a break. To your "questions",let's address them: The bullet line does in fact need an Act Of Congress to go through Denali National Park.Murkowski tried that last year in the energy bill and FAILED.Routing the line outside the park boundaries only makes the hideously expensive bullet tine project even more expensive. Meanwhile,the Ali Alaska Gasline has an approved FEIS-a Final Environmental Impact statement issued in 1989.Why?The EIS work has been completed-and it is much easier to run a gasline down an EXISTING pipeline corridor. As far as re flagging LNG ships goes-you do not have a clue.Alaska has been shipping LNG out of Alaska since about 1969.Ships carrying LNG to non-US ports are not required to have their hulls built in the USA.Under the Jones Act ships moving gas between US destinations require US built hulis.Those ships are availabie-if needed-for re flagging.And that does not require Congress. As far as FERC goes-they have already ruled in favor of a presumption FOR export from Alaska.That is why a export license was issued for LNG export from Valdez.Further,FERC is allowing LNG export from the Lower 48.You,'Examiner clearly do not know what you are talking about.You sound like a puppet for Samuels who loves the garden hose pipeline and hates the voter's mandate to build the Ali Alaska Gasline.(That is why Sammy Sell Out is behind Walker in the polls). So you were wrong about FERC.Wrong about the Jones Act.Wrong about Denali National Park.Wrong about existing permits... report abuse ®YellowFang wrote on Friday,Jul 02 at 01:08 PM » No,we don't have to reflag any LNG ships.We just have to waive the Jones Act, which is what has been done for forty years.Duh.Some of the people on this site are so full of themselves and their supposed "knowledge”it's pathetic. Bill Walker has the ONLY project big enough and ready enough to (hopefully)save this state from a complete economic collapse. Parnell's pipeline to Canada is going nowhere fast.The Canadians can't even get their own Mac Delta pipeline through the First Nations,but we think our competing project will succeed?And if they succeed in building the MacKenzie Delta line, http://www.newsminer.com/pages/full_story/push?article-Alaska+bullet+gas+line+expected...7/6/2010 Fairbanks Daily News-Miner -Alaska bullet gas line expected to cost 7 billion to 8 billion Page 5 of 8 there would be no need for the AGIA pipeline.See the bind?Parnell isn't about building a pipeline.He's about delaying a pipeline. And Samuels is rotor-routing about "increasing oil production"but he doesn't mention that all those secondary sources he's talking about will take ten years to develop,need a new oil pipeline to get to market,and only replace about 30%of our North Slope income. Really,people,you need to wake to blazes up and see the freight train heading toward us.We either get the All Alaska Gas Pipeline up and moving or the oil companies are going to crash this economy.They WANT to delay a gas pipeline. They WANT an economic collapse,because it will allow them to buy up everything for pennies on a dollar. The ONLY candidate we've got is Bill Walker.And the only hope we have of avoiding the Oil Bust is the All Alaska Gas Pipeline.WAKE UP. report abuse «robir8 wrote on Friday,Jul 02 at 01:08 PM » lahHa Whosale price for GASOLINE is 1.98 per gallon.Wholesale price for Natural Gas is Henery Hub $4.68 per 1000/cu/ft.Retail price for gas delivered in Anchorage (Enstar)is $8.69 1000/cu/ft.What they gonna pay when the crick runs dry? report abuse «idewhatiwant wrote on Friday.Jul 02 at 10:19 AM » Government spending could pay for the project in less than two days. report abuse lifeisshort wrote on Friday,Jul 02 at 09:00 AM »oEver dawn on you who want big economy for Fairbanks,itmay never happen.This town existed jong before the oil pipeline and will exist ifa gas line never happens. By the way how many remember that less than 100 years ago there were towns like Livengood,Olens,Euerka,Tofty in the interior where thousands lived.Then the gold went away as did these communities.Nothing new in Alaska.Just maybe Fairbanks has reached as big as it will get and many people out there like it that way.Walker supporters,why not buy ads rather than using the comment section. What no money to do so,or as usual want something from the public to enhance your pocketbooks. report abuse Examiner wrote on Friday,Jul 02 at 08:55 AMs My!My!My!It looks like the Bill Waiker campaign staff is out if full force again. Well,|had to work the late shift fast night and my eyes are a little bleary.However, my brain didn't go to sleep.Even though Walker's folks keep repeating the falsehood that a bullet line would need an act of Congress to go through Denali Park,it's just another slick lie.A line doesn't need to go through the Park.It can follow the power line route to the East of the highway.C'mon boys!And,speaking of an act of Congress,Walker's folks slickly avoid talking about the fact that they would need an act of Congress to re-flag LNG ships in order to get gas to market and they know they don't have a chance to get that act introduced,much less passed.There's more.MUCH MORE that the Walker camp doesn't want to tell us. How much does the Port Authority owe him?How are they going to get past FERC regulation (FERC says they can't)?How much gas do they lose when they compress it and re-gassify it somewhere (only God knows where)?There's no shovel-ready Port Authority project and they know it.The only chance they have is if they can kill every other potential project and they keep trying to do just that. In a three man primary race,old "One Cause Walker deserves to be a distant third.Gotta get some sleep. report abuse «Idwalaska wrote on Friday,Jul 02 at 07:52 AM » http://www.newsminer.com/pages/full_story/push?article-Alaska+bullet+gas+linetexpected...7/6/2010 Fairbanks Daily News-Miner -Alaska bullet gas line expected to cost 7 billion to 8 billion ryAll fine and dandy.How about permitting,environmental impact statements, national and state parks,wildlife refuges,stream and river crossings and the litigation challenges by the greenies over these areas?Not to mention the cost will increase dramatically with each passing year. The all-Alaska naturat gas pipeline will not bypass Fairbanks and will be carrying 3.5bcf including the gas liquids that would create industry and jobs in the Fairbanks area. Why bother with a garden hose,when one can have a pipeline? Bill Walker is the only candidate running who wants to put Alaskans first,keep the jobs and money here,and build industry from value-added resource development using the gas liquids here. report abuse YellowFang wrote on Friday.Jul 02 at 07:49 AM » It was Fairbanks'own darling,Jay Ramras who demanded that the state waste time and money on this "bullet line”idea,even when very experienced pipeline engineers told him why it wouldn't work out for consumers.They told him--but he just stuck his fingers in his ears and wouldn't listen.Thanks to Jay,we are all three years further down the track without a gas pipeline and have wasted $22 million. Take a bow,Fairbanks.You are responsible for sending the rest of the state this result,|hope you all have sense enough not to vote for him ever again. TAPS is wearing out.ANWR and Offshore aren't happening,so there's no money to rebuilt it.Just what do you think you're going to do?When TAPS goes down, 85%of our economy goes with it. The only project that is big enough to save our bacon and ready to go,is the All Alaska Gas Pipeline. Samuels'little oil deposits in the Foothills won't come online for ten years and will need a new oil pipeline to get to market.Even then,they will only yield about 30% of North Slope. No,no,no---lift your heads up and look around. The oil companies WANT our economy to crash,so they can come in here and pick everything up,both public and private property,for chump change. That's why they are fronting two pro-oil candidates this year,Parnell and Samuels. They figure to give us two choices of the same poison.Either way,we would be bypassing the one project that can save us a major collapse. For God's sake,Fairbanks,wake up.Hear the auctioneer? report abuse 1AhHa wrote on Friday,Jul 02 at 07:47 AM » From the story: "could deliver natural gas prices for a transportation costs -tariffs -of $8 or $9 per thousand cubic feet,the group reported.” Retail price is tariff plus mark up to customers. or in other verbiage wholesale cost plus retail costs plus profit equals price. Just checked CNBC stock market TV ch. THE WHOLESALE PRICE FOR GAS IS $1.97 AT 7:30 am Friday 7/2/2010 Conclusion:your hair cut on this pipe dream is between 4 and 5 times more than the price outside. Anyone who thinks anyone is going sell gas TO outside for 8-9 dollars is intoxicated on their pipe dream. Page 6 of8 http://www.newsminer.com/pages/full_story/push?article-Alaska+bullet+gas+linetexpected...7/6/2010 Fairbanks Daily News-Miner -Alaska bullet gas line expected to cost 7 billion to 8 billion Page 7 of 8 And |being nice today. 1 still think for that kind of money you can build a HVDC electrical power line to the north American power grid.Where you have 10s of million customers with a flip of a switch. The power would come from burning the gas and hydro. --hgpic report abuse xShokd wrote on Friday,Jul 02 at 07:32 AM » Talk talk talk.How's about a story about how much money the state has coughed up already for endiess "studies"and "consultants”and such.This little endeavor will never see an end (soundsa little like the middle east right now!)as long as the state keeps just giving away money with no accountability. report abuse lifeisshort wrote on Friday,Jul 02 at 07:04 AM »aAnother good laugh this am,Bill Walker as the attorney and project manager of the Alaska Gasline Port Authority and he and his group have done absolutely nothing in the past decade.He has taken the port authority into massive debt including the massive amount the authority owe him.By the way he has never said he will forget a debt ridden Port Authority the money he is owed in order to reach their goal.Now he wants the state money so he can do the same thing to the State treasury.Proof of his ability is in what he has failed to do,not in what he keeps saying he will do.No project,millions in debt. report abuse xFairbanksgas wrote on Friday,Jul 02 at 06:31 AM » "The line,a darling of many state lawmakers and business leaders" The ones supporting this the loudest are former Veco golden boys,AKA Corrupt Bastards Club.Given their close ties with the oil industry one has to ask why a bullet line? In the near future the biggest crisis southcentral Alaska is currently facing is a shortage of natural gas.The collective voice of Fairbanks screaming for natural gas is barely a whisper all the way down in Juneau.The oil companies do not want to produce the gas into an already saturated market with huge transportation costs.They would rather wait until the price stabilizes at a much higher level to maximize their profits. Along comes the bullet line.It will appease most of Alaskans with a steady in-state supply and quiet the demand to finally build a gas fine.There are two huge problems,however,that make this idea DOA.First,is that a bullet line does not replace any of the state revenue that is steadily decreasing as oil production slumps off.Although |think the state budget is severely bioated when the time comes they will simply start demanding an income tax before making significant cuts.Second and more importantly is that the gas from a bullet line will cost much more than from an export line.The per unit cost of capitol investment,compressor stations,processing and everything else are divided up by the amount of gas coming out the other end of the pipe.Simply put,the more gas you sell the fess is costs per unit for everything else.Would you rather have to pay the entire $10 billion for a bullet line or build a $25 billion All-Alaska pipeline and have LNG customers pay for 90%ofthe costs while at the same time replacing state oil revenue with gas revenue? The answer seems pretty simple to me and that is one of the big reasons that |will be voting for Bill Walker this August. report abuse «twain wrote on Friday,Jul 02 at 05:50 AM » http://www.newsminer.com/pages/full_story/push?article-Alaskatbullet+gastlinet+expected...7/6/2010 Fairbanks Daily News-Miner -Alaska bullet gas line expected to cost 7 billion to 8 billion Page 8 of 8 . Fairbanks,Anchorage,kenai,the way to go.This line is notgoing to valdez.that option is dead. report abuse «$ldon wrote on Thursday,Jul 01 at 10:24 PM » report abuse view more comments Newsminer.com encouragesa lively exchange of ideas regarding topics in the news.Users are solely responsible for the content.Please keep it clean,respect others and use the 'report abuse'link when necessary.Read our full user's agreement. http://www.newsminer.com/pages/full_story/push?article-Alaskatbullet+gas+linetexpected...7/6/2010 Is there a Cook Inlet natural gas shortage?Utilities,state officials have different answers |...Page 1 of 4 a ADN.com Next Story > New Kenai gas find could be approved this year SehSS EARS SHAGE RAE FARE Alers Published:February 2,2013 By ALAN BAILEY -Petroleum News Amid concerns over the continuity of natural gas supplies for Southcentral gas and power utilities, apparent disconnects between statements by the Alaska Department of Natural Resources,or DNR,and the utilities about the abundance or otherwise of remaining gas in the Cook Inlet basin have created a sense of confusion for those who worry about the specter of an Alaska winter with inadequate energy supplies. Residents of Southcentral Alaska depend on gas from aging gas fields in the basin for heating homes and other buildings,while about 90 percent of the region's electricity comes from gas-fueled power plants. Utilities say that,with production from those gas fields declining at around 16 percent per year,supplies are likely to run short around 2014-15,necessitating actions such as running some power generation on expensive diesel fuel or importing some natural gas from outside the region. The core issues at stake seem to be the certainty that utilities need for gas supplies for their customers and the time required to bring new gas on line. The Alaska Legislature has held a series of committee meetings around the theme of "who's keeping the lights and heat on,"hearing presentations from DNR and the utilities,to gain a clearer understanding of the gas supply situation.During one of these meetings,a House Energy Committee meeting on Jan.23, Rep.Charisse Millett,R-District 24,expressed the frustration that some lawmakers and others feel. "It's very concerning that we have two groups of people that one says we're awash with gas in the Cook Inlet and then another group saying that we have gas and that we're just not producing enough of it," Millett said."So it's disturbing for those of us who live in the Cook Inlet (region)because this has been the ongoing debate between the (state)administration and what the utilities have been saying.” During presentations to the Senate Resources Committee on Jan.21 and to the Regulatory Commission of Alaska on Jan.23,DNR Commissioner Dan Sullivan said that DNR shares the utilities'concerns about potential shortfalls in the delivery of gas to Southcentral consumers and power plants.But,while there are legitimate concerns about the amount of gas that the utilities have available under secure contracts with Cook Inlet gas producers,DNR,as manager of the state's gas resources,takes a much broader view of the situation,Sullivan said. "We also think there are still large volumes of oil and gas in the inlet,not maybe in huge fields,but in intermediate fields,and we think that's important,"he said."We've been focusing on that view." Sullivan said that DNR has seen success in encouraging companies such as Hilcorp Energy and Apache Corp.to come to Alaska to seek and develop some of the substantial oil and gas resources that the state believes remain in the basin.The Cook Inlet basin is currently seeing something of a renaissance in oil and gas exploration and development. So,what is the situation on the future prospects for continuing Cook Inlet gas supplies? http://www.adn.com/2013/02/02/2775 137/is-there-a-cook-inlet-natural.html 2/4/2013 Is there a Cook Inlet natural gas shortage?Utilities,state officials have different answers |...Page 2 of 4 * The state has conducted studies into how much gas might be available for production from the basin.And independently from the state,the utilities commissioned consultancy firm Petrotechnical Resources of Alaska,or PRA,to assess the situation.As a starting point,both DNR and PRA used a technique called decline curve analysis,projecting the rate of decline of gas production from currently operational gas wells and gas fields to predict the future decline in gas production from the basin as a whole.Both DNR and PRA came to almost identical conclusions:tn the absence of new gas wells,gas production will drop below gas demand around 2013 to 2014. But,on the assumption that gas producers will continue to drill more wells,DNR and PRA have taken different approaches to evaluating how much gas might in reality be produced from the Cook Inlet basin in the coming years.DNR has assessed how much gas could be available for development,regardless of how long that development might take or how much it might cost,while PRA has evaluated the extent to which feasible rates of new gas well drilling might impact the gas production decline. DNR used two techniques to assess how much gas people might reasonably expect to see come from the basin as gas field development continues,Paul Decker,a petroleum geologist with Alaska's Division of Oil and Gas,explained to the RCA commissioners on Jan.23. The first of these techniques,called "material balance,"uses changes in gas field reservoir pressures over time,as gas is produced,to estimate how much gas remains in pressure contact with producing gas wells.The use of this technique expands by about 32 percent the gas volume estimated from decline curve analysis,Decker said. The second technique involves a geologic analysis,mapping known reservoir horizons to estimate volumes of gas that are likely to lie trapped underground. Decker also explained the importance of assessing uncertainties when using these techniques. Undeveloped gas can broadly be categorized as reserves,gas proved to exist from drilling and economic to produce,and resources,gas not proved from drilling or not shown to be economically viable,he said. And within those categories there are statistical ranges of uncertainty in gas volume estimates. Decker said that for the most part DNR does not have access to companies'reserves estimates,the volumes that the companies use when making decisions over gas sale contracts with utilities.But DNR views the volume estimates obtained from decline curve analysis as high probability reserves and the estimates from material balance as medium probability reserves.The volume estimates obtained from geologic analysis include some reserves,as well as less certain gas resources including some gas that would be discovered from exploration. Overall,DNR has estimated that there remain about 1.1 trillion cubic feet of producible gas reserves in the 28 existing fields in the Cook Inlet basin,Decker said.The geologic analysis indicates another 355 billion cubic feet of natural gas in undeveloped areas of existing fields,mainly in three large fields:the Beluga River field,the Trading Bay unit Grayling Gas Sands and the North Cook Inlet field,he said. Further gas estimated from the geology would be found as a result of future exploration. And,while DNR does not disagree with PRA's view that there is a shortage of gas under utility contract, the gas resources in the basin are not depleted,Decker said.A plot of all of DNR's reserves and resource estimates relative to anticipated Cook Inlet gas demand indicates that there may be enough gas in basin to meet gas demand through to the late 2020s,if enough drilling is done. "What it reflects is that not enough wells are being drilled fast enough to keep pace with demand,"Decker said."We believe that there's significant gas left in the basin.” On Jan.21 Deputy Commissioner of Natural Resources Joe Balash told the Senate Resources Committee that the drilling required to sustain Cook Inlet gas supplies requires adequate commercial incentives.Balash recounted events in 2005 when the Regulatory Commission of Alaska rejected a http:/Awww.adn.com/2013/02/02/2775 137/is-there-a-cook-inlet-natural.html 2/4/2013 Is there a Cook Inlet natural gas shortage?Utilities,state officials have different answers |...Page 3 of 4 . proposed gas supply contract between Marathon Oil Co.and Enstar,following concerns about proposed price rises in the contract,with opposition to the contract from a number of entities including the state Attorney General's Regulatory Affairs and Public Advocacy Section. The rejection of that contract sent a chill through the Cook Inlet industry,was followed by a dramatic drop in drilling activity and may have triggered Marathon's eventual departure from Alaska,Balash said.But that contract,which had prices indexed to the Lower 48 Henry Hub market,would have met all of Enstar's gas needs through 2016,including seasonal swings in gas demand.Ironically,given a subsequent fall in Henry Hub prices that no one predicted in 2005,gas prices in the Marathon contract would have dropped rather than risen. But Marathon's willingness to commit to that contract demonstrates that the company had sufficient gas to meet Enstar's needs for the duration of the contract,Balash said. "We're not out of gas,"Balash said."Marathon would not have put its corporate reputation and balance sheet on the line if they didn't think there were sufficient reserves to meet all of the requirements." PRA,in its forecasts,has not made any attempt to estimate as-yet undeveloped gas volumes in the basin.Instead,on the assumption that there is more gas to develop,either in existing fields or from gas exploration,the PRA analysis has evaluated the rate of gas-well drilling required to overcome the gas supply decline.And,by considering the numbers of wells that have been drilled each year in the past and then evaluating how much drilling might realistically take place in coming years,the PRA study sought to forecast future gas production using likely future drilling rates. PRA sees the possibility of at least three new gas well completions each year,with the realistic possibility of as many as eight wells per year and a likely drilling rate somewhere in the middle of that three to eight range,PRA consultant Bill Van Dyke told the House Energy Committee on Jan.23.Based on typical gas production rates from new Cook Inlet wells,the anticipated drilling rate suggests an addition of 10 million to 20 million cubic feet of gas production each year,but with the new wells themselves going into decline after startup.Adding up the numbers and projecting the production rates forward leads to that prediction of a supply shortfall around 2014-15. And to enter into gas supply contracts with utilities,gas producers need proven reserves,not uncertain resource estimates. "Would you bet the energy security of your community on the speculative prospects of major gas finds in the Cook Inlet and major gas development at this time?"Rep.Mike Hawker,R-District 27,asked Van Dyke. "No,|would not,”Van Dyke replied."Utilities need a guaranteed gas supply.A probabilistic study of how much gas is in Cook Inlet is not a guaranteed gas supply." Van Dyke also commented on the timing issues associated with bringing a new gas field on line.Ina simplest case,say on the Kenai Peninsula,it might take two to three years to complete all of the planning, permitting,contract negotiations and development involved in bringing a new field into production,he said.That would bring new gas from the new field into the gas infrastructure after the date of the projected gas supply shortfall. And if gas producers accelerate the rate of drilling in the existing fields,the effect would be to accelerate the production decline rates in the fields,thus further reducing production rates a few years down the road.Essentially,people are trying to deal with a set of gas fields,all undergoing a natural production decline,Van Dyke said. "We're showing a 16 or 17 percent annual decline and that's a pretty steep decline rate to chase,"Van Dyke said."You're going to have to find a lot of new gas just if you want to keep production flat,let alone increase it,because you have this base that's always in natural decline." http://www.adn.com/2013/02/02/2775 137/is-there-a-cook-inlet-natural.html 2/4/2013 Is there a Cook Inlet natural gas shortage?Utilities,state officials have different answers |...Page 4 of 4 - Moira Smith,vice president and general counsel of Enstar Natural Gas Co.,told the Energy Committee that Enstar has been supplying Southcentral residents with gas since 1961,using only Cook Inlet supplies. "It is Enstar's primary goal to continue to do that,and to do that at a price that's reasonable for Southcentral customers,"Smith said. But,with a gas supply shortfall on the horizon,the utilities are taking steps to bolster Southcentral energy supplies from other sources,she said. "We've reached the bottom line,which is that we need to supplement Cook Inlet gas production,”Smith said. Back to Top <Previous Story Alyeska outlines work on pipeline as a result of 2011 spill Next Story > New Kenai gas find could be approved this year Email Newsletters > Manage newsletter subscriptions Tablets > Apps and services for tablet devices Mobile > Apps and services for your mobile phone Social Media > Get updates via Facebook and Twitter e-Edition > Your daily paper delivered to your computer Home Delivery > Manage your home delivery account ©2013 www.adn.com and wire service sources.All Rights Reserved.http:/Avwww.adn.com http://www.adn.com/2013/02/02/2775137/is-there-a-cook-inlet-natural.html 2/4/2013 'aj ,_>)(,specia service of;Special Resource.-pe retI, gh ys asSupplement-a --Alaska Economic Report - 'KK Economic Report_&Alaska Legislative Digest Z ;--A special supplement available only to”regular report subscribers by special order.JJ Resources Supplement January 9,2012 LNG -another turn of the wheel? Parnell meets industry execs on gas,to jump-start ...something Gov.Sean Parnell met with the CEOs of the three major North Slope producers last week:BP's Robert Dudley;ConocoPhillips'Jim Mulva and ExxonMobil's Rex Tiller- son,in an attempt to forge unity on a major natural gas project and to shift the emphasis from an all-land pipeline to a large liquefied natural gas,or LNG,project.Parnell be- lieves the shale gas glut in the Lower 48 has dimmed prospects for an all-land pipeline, and given that the outlook for LNG in Asia is better,the project should shift to LNG. Many Alaska looks at this with skeptism after all the goings back and forth between land pipelines and LNG projects over the years.In the 1990s,for example,BP and ARCO (now ConocoPhillips)worked together on an LNG project for North Slope gas. ExxonMobil at the time worked on a gas-to-liquids approach that would makea liquid to be transported though the trans-Alaska oil pipeline.These plans were dropped in favor of a new look at a land pipeline in 2000. Getting execs together to talk LNG a coup for Parnell However,getting the three senior company executives together now to talk Alaska gas and in Alaska,and to get at least two (BP and ConocoPhillips)to say LNG appears more practical now than a pipeline,was a bit of a coup for Parnell even if the event itself was more symbolic than substantive.Nothing was really agreed on except a vague commit- ment that the three would work together to try and make something happen,and that LNG would appear to have priority.There may have been something more substantive agreed on in private meetings with the governor than was acknowledged to the public, but given the magnitude of the undertaking and the unresolved issues blocking "align- ment”on gas development,we believe the commitment is very general at this point. Still,symbolism in something like this can be hugely important,and the fact that the top executives of these firms made the trip and to Alaska spent time talking about North Slope gas has created a sense of fresh momentum,even as it has created other uncertain- Continued on next page [Special Resource Supplement,available only to regular subscribers of the Alaska Economic Report or AlaskaLegislativeDigestatanadditionalrateof$130/year;3037 South Circle,»Anchorage,Alaska 99507(907)522-0195-Fax (907)522-1761° What was agreed?Only to "work together” Continued from previous page ties.It was interesting that there was no mention of the state's own initiative to build a 24-inch pipeline,the "bullet line”from the North Slope.We comment on this later. What was agreed,exactly?What BP's Dudley and ConocoPhillips'Mulva said in public was that the three companies would work jointly through 2012 to see what kind of project can be done,and that LNG is the preferred alternative.ExxonMobil issued a statement that somewhat echoed Mulva and Dudley but identified LNG as among al- ternatives.However,the fact that ExxonMobil would single out LNG and not mention other options,like a pipeline,is significant. Meanwhile,where is TransCanada in its partnership with ExxonMobil and the pipe- line project to Canada now in advanced planning?Nothing was said about this last week,except that BP and ConocoPhillips,and the governor,said any LNG project would be done within the framework of the Alaska Gas Inducement Act,or AGIA, which implied that the existing contract with TransCanada continues but with a change of scope to an LNG project.ExxonMobil is a partner with TransCanada in the pipeline but is not a signatory to the AGIA contract. Companies agree to work through AGIA,a first What is now significant,we believe,is that BP and ConocoPhillips agreed last week that any project would come under AGIA.Until now those companies have resisted be- ing part of an AGIA project and even formed their own Denali Pipeline project in com- petition with the TransCanada/AGIA project.Denali was dropped,however,but Trans- Canada is continuing the pipeline work because of the AGIA contract commitments. In fact,TransCanada told us it is committed to filing the U.S.Federal Energy Regu- latory Commission application for the all-land pipeline later this year,as the AGIA contract requires.Most of the work connected with that filing has now been done,so presumably the application would be made and would then just sit until,someday,a land pipeline might be built. Still,TransCanada itself agrees that a fresh look at the project is needed given the glut of shale gas in North American markets.The company has in fact been talking to the major producers about an LNG alternative since early 2011,it told us.It would seem more practical for all these companies to now work with TransCanada,an experienced pipeline builder,within the existing AGIA agreement rather than to forge some new Continued on next page Page 2 Alaska Economic Report Supplement January 9,2012 \ \S Working through AGIA provides symbolic framework Continued from previous page AGIA agreement,which would require legislative ratification and the messiness that entails.Again,to us the importance of working within AGIA is more symbolic in that it would seem to enable everyone to come together under an indentified structure that has a relationship to the state of Alaska.This may be more apparent than real because there are undoubtedly a lot of messy details to be worked out before any formal alliance under AGIA can happen.The problems in AGIA cited by the three producers when the law was passed by the Legislature years ago haven't gone away,and even ExxonMobil has said in the past it wants changes in the AGIA contract before it formally signs in. The "advantages”of AGIA to the companies,cited by the governor,are also more symbolic than real.The provision in AGIA for a 10-year agreement on stable produc- tion taxes for producers,for example,is almost certainly unenforceable.It would be more a moral than a binding commitment by the state.Also,the provision on royalty administration terms needs a huge amount of work.This doesn't mean much as it is now written in regulations (which can be changed,the producers have pointed out). Fiscal terms,and Point Thomson,are big unresolved issues So,the deals on tax and royalty terms have still to be worked out.Those are huge issues,and it means nothing has changed since 2005,really,when the three companies began working with former Gov.Frank Murkowski on a fiscal deal under the Stranded Gas Act,which Is still in state statutes,by the way. Any tax agreement,of course,is implicitly linked to proposed changes in oil taxes in House Bill 110,the governor's bill that is now in the state Senate that will be the light- ning rod for continued controversy when the Legislature reconvenes Jan.17.Also in this mix will be Sen.Bert Stedman's (Senate Finance co-chair)desire to see oil and gas taxes "decoupled”(they are presently linked in their administration,a complex issue which Stedman believes creates problems). Here's yet another unresolved issue:Point Thomson.This may be the biggest prob- lem facing alignment on gas and it involves another major company that has not been involved in any of this,Chevron,a part owner of Point Thomson.There is a proposed settlement of the extended and complex litigation between the state and the Point Thomson owners (ExxonMobil,BP,Chevron and to a lesser extent ConocoPhillips). The settlement was accepted by ExxonMobil last fall,but not yet by the other parties. Until this is resolved the ownership of an estimated eight trillion cubic feet of gas,a Continued on next page Page 3 Alaska Economic Report Supplement January 9,2012 yy) Progress?Signs to watch for in 2012 Continued from previous page major part of the 35 tcf of gas known on the slope,is clouded.No gas project can move forward until this is resolved. In summary,as the three companies attempt to form alignment through 2012 among themselves,and with the state,here are some things to watch for: «Among the companies,an agreement on Point Thomson and a settlement of the law- suit with the state over the status of the leases is crucial.If this isn't happening,there'll be no progress on the broader alignment. *On the state's part,if the Legislature can't find agreement on some form of HB 110 that makes meaningful changes to the present oil tax structure (widely agreed as being out of whack)the ability of the state to forge a long-term fiscal agreement on gas pro- duction taxes and royalty terms,even as a moral commitment,will have no credibility within the industry. [f these two things happen it will create a positive environment for the three compa- nies to work out a new plan.We won't know what that is until it occurs,of course,but if there's no action on Point Thomson and oil taxes we know it will not occur. What happens now with 24-inch in-state pipeline plan? ¢What will happen with the state's current initiative to plan a 24-inch pipeline from the North Slope to Southcentral Alaska?Gov.Parnell has proposed more funding next year for the Alaska Gasline Development Corp.for this project as another increment of funding for engineering and environmental work.With this larger project pending, should this continue?House Speaker Mike Chenault will almost surely push it,but other lawmakers may balk at the money.The project is still needed as a contingency in case nothing comes of the new agreement,Chenault will argue. ¢The potential for a large pipeline delivering gas to the Cook Inlet region (either directly or via spur line from a large pipeline to Valdez)could affect the ability of ex- plorers to raise funds for exploration in Cook Inlet.This won't be a factor if the Cook Inlet exploration is aimed primarily at oil (which much of it is)but it could raise ques- tions among investors in gas-only exploration projects.Also,remember that the Donlin Creek gold project is depending on a supply of gas from somewhere -the bullet line or Cook Inlet -well before an LNG project could be built. Correction:In our Dec.31st Resources Supplement we incorrectly quoted Linc En- ergy spokeswoman Colleen Richards with the statement that the planned state Umiat Road would make the company's planned pipeline much less expensive.The statement should have been attributed to a state official,Also,the Umiat pipeline to the trans- Alaka oil pipeline will follow a different route than the road. Page 4 Alaska Economic Report Supplement January 9,2012 adn.com |Let's look carefully at gas line posstbilities Cn C'/\A Page 1 of 3 adn.com [Print PagéIf Close Window.a ,ee co Anchorage Daily News Let's look carefully at gas line possibilities TIM BRADNER (10/22/11 19:37:54) It's easy to be confused by all the gas pipelines being worked on.There's a logic to the work being done,however.At this point it's all about developing options,which is prudent.However,we'd better take a really deep breath before we decide to actually build something,if it involves public dollars. t)One project is the big 1,700-mile,48-inch pipeline from the North Slope to Alberta,which is in an ) 3)If the big pipeline doesn't go,engineering is under way on a fallback plan,a separate,stand-alone ) engineering phase.TransCanada Corp.and Exxon Mobil Corp.are involved,both large,competent companies that know what they're doing.However,with all the shale gas in the Lower 48,this project doesn't look very good for now.But who knows what things will look like in 20 to 30 years? If this is built,a smaller "spur"pipeline could branch off at Deita to bring gas 300 miles to Southcentral Alaska via Glennallen.The Alaska Natural Gas Development Corp.,or ANGDA,a stateQuthoriy,ha done work on this.aa 24-inch pipeline from the slope to Southcentral Alaska,the so-called "bullet line."This is being pursued by another state corporation,the Alaska Gas Development Corp.,or AGDC.The bullet line would be 737 miles in length and would cost about $7.5 billion.S ayOo 'The people working on this are getting good marks for the work they're doing.There is criticism that the political sideboards on the project,mainly a restriction on the amount of gas that can be shipped because of the state's contract with TransCanada,could cripple its economics. ty)Finally,there is a 800-mile pipeline from the slope to Valdez,parallel to the trans-Alaska oilpipeline,that could serve a possible natural gas liquefaction,or LNG,plant.This is promoted by the Alaska Gasline Port Authority,or AGPA.The port authority waS formed by municipalities and is not astate corporation.Substantial sums have been spent on Au Yukon Pacific Corp.and others. With LNG prices in Asia at high levels,it is getting more attention. Of all these,the only project being led by the private sector is the large 48-inch pipeline by TransCanada Corp.and Exxon Mobil Corp. The port authority has a relationship with Japan's Mitsubishi Corp.and Sempra Energy,a U.S.firm, both interested in LNG,but the nature of these relationships is confidential. The-state has financed work on three of the four initiatives:the 48-inch pipeline to Alberta,thespurlineviaGlennallenandnowtheseparate24-inch pipeline from the slope to Southcentral. About a billion dollars will have been spent among all these.Other ideas have been proposed.gas:to-GEL (GTL}is being increasingly looked at as a fallback in case all of the pipeline projects fail,or even in addition to a pipeline.A gas-to-liquids plant on http://www.adn.com/201 1/10/22/v-printer/2 133697/lets-look-carefully-at-gas-line.html 10/31/2011 adn.com|Let's look carefully at gas line possibilities Page 2 of 3 the North Slope would get more fluids moving through the trans-Alaska oil pipeline,which is badly needed.A GTL plant in Southcentral Alaska would be a big industrial customer for a spur line or bullet line,which is absolutely necessary for the bullet line and helpful to a spur line. The important thing about GTL is that it makes high-value liquid products,like diesel and jet fuel, and would sell into markets for these fuels,not LNG or natural gas markets. To complicate things further,work is also starting on the large Watana hydro project.A $67 million commitment this year could lead to multibillion-dollar outlays by the state in just a few years. If all of this is confusing,it's understandable.There's a lot of angst about all this in the Legislature and it's clearly a case in which leadership must soon be exerted to sort things out.Sean Parnell is the guy we elected to do that. Some sensible advice is being offered,though.Anchorage businessman David Gottstein suggestswestepbackanddoacarefulanalysisofalltheseoptions,including gas-to-liquids,to see where the public interest is best served.Gottstein is a financial guy and his idea is a straight analysis ofthestate's bottom line.Other factors should be in the matrix,though,such as the cost of energy to consumers, Cool-headed analysis is needed so we don't make the wrong choices if big bucks from the state are needed. The "bullet line"is basically insurance in case the big line doesn't go and we need the gas.Having this in our back pocket ready to go is important and getting the engineering done is wise.However, we are finding more gas in Cook Inlet thanks to new state incentives (good work,legislators), which could ease some of the urgency. Cook Inlet drilling,which it could.Likewise,a new plan to truck liquefied gas,or propane,from the(Ex.fact,we should take care that talk of a state-funded bullet line doesn't actually discourage newNorthSlopetoFairbankscouldtakesomeoftheedgeoffthatcommunity's energy crises. If the big pipeline does wind up being built --TransCanada says it does have at least some interested customers --the more sensible pipeline to build to Southcentral might be the shorter pipeline from Delta through Glennallen,because it is shorter and it preserves the option of a pipeline leg to Valdez,to an LNG plant. IfI were the governor's energy czar,I would do these things:We should let TransCanada and Exxon Mobil continue work on the big pipeline and give them more support by establishing a framework for state taxes on gas production,which would help North Slope producers commit to the project;simultaneously,we need to take a really hard look at LNG exports,either through Valdez or Kenai,because LNG in Asia looks pretty good,at least now.We should encourage TransCanada and the gas producers to look at this too. We need to take a hard look at what it will really take to get large new industrial customers in southern Alaska,like gas-to-liquids,LNG or sales of gas liquids like propane.This is crucial to the bullet line and it helps the spur line. Above all,let's keep focused on what's really important,which is preserving the viability of the oil pipeline and revenues to our state.If the oil pipeline goes down,we really should just turn out the lights.Gas won't matter then. http:/Awww.adn.com/201 1/10/22/v-printer/2 133697/lets-look-carefully-at-gas-line.html 10/31/2011 adn.com |Let's look carefully at gas line possibilities Page 3 of 3 Tim Bradner writes for an Alaska economic reporting service.He also consults for private clients and writes for business publications.His opinion column appears every month in the Daily News. a,[Print Page Vf Close Window |ae Copyright ©Mon Oct 31 09:15:29 UTC-0800 20111900 The Anchorage Daily News (www.adn.com) http://www.adn.com/201 1/10/22/v-printer/2133697/lets-look-carefully-at-gas-line.htm]10/31/2011 adn.com |Confused on natural gas?Stand by for more Page 1 of 2 + ad n.com |PrintPage |[Close Window_| Anchorage Daily News Confused on natural gas?Stand by for more TIM BRADNER ECONOMY (07/02/11 20:48:47) Are we running out of natural gas in Southcentral Alaska?If the answers seem confusing,don't feel lonely. On one hand,we had utilities in the region telling the Regulatory Commission of Alaska on June 22 that we'll have a gap in gas supply by 2014,three years from now,and we'll have to import liquefied natural gas. On the other hand,we had the U.S.Geological Survey earlier last week telling us there are 17 trillion cubic feet of gas yet to be found in the Cook Inlet Basin,about twice what has been discovered to date. The USGS didn't tell us what it will cost to get that 17 trillion cubic feet,but yet another report,this one from the state Division of Oil and Gas,was out Friday confirming there is indeed new gas to be developed,but also attaching a price tag. This will get even more confusing.This coming Tuesday,the Alaska Gas Development Corp.,a state corporation,will release its long-awaited report with updated figures on what it will cost to bring North Slope gas to Southcentral by a small "bullet"pipeline. That won't be cheap,but if the state were to pay for all or most of a pipeline,the price to consumers would come down,so we wouldn't have to import LNG. The problem the utilities face,however,is that it will take eight to 10 years to get North Slope gas to Southcentral Alaska even if the project moves ahead immediately.As for new gas in the region, there is indeed uncertainty as to whether the needed investments will be made. The utilities know this,of course.Their forecast of shortages in 2013 seems premised on the assumption that the oil and gas industry won't make the needed investment in new drilling,or least enough to get us the gas we need. That's probably realistic.The utilities have to err on the cautious side because they are obligated to make sure the gas is there,that our homes and buildings are heated and the lights come on when we flip the switch. The bottom line,as the utilities see it,is that there's not enough drilling to get the gas we need. What's useful about the reports is that the USGS tells us the gas is there in the underground rocks, and the state tells us what it will cost to extract. But despite the generous incentives,we seem unlikely to get the gas supply we need,at least in the utilities'view. http://www.adn.com/201 1/07/02/v-printer/1948895/confused-on-natural-gas-stand.htm]10/31/2011 adn.com |Confused on natural gas?Stand by.for more Page 2 of 2 What's surprising to me is that the state basically pays for two-thirds of exploration drilling costs through very generous exploration incentive tax credits.We're getting some bang for our buck on this now --there is new drilling and new gas --but the utilities are still skeptical. This is a complicated problem and I won't blame members of the state regulatory commission if they feel the need to reach for a bottle of aspirin.These are the people who have to approve any costs incurred by the utilities to import LNG imports,which will have to be passed through to consumers.The consumers,meanwhile,will be thoroughly confused by government reports saying we have gas in Cook Inlet waiting to be found. In their presentation to the regulatory commission,the utilities,which included Municipal Light & Power,Chugach Electric Association and Enstar Natural Gas Co.,said talks with potential LNG suppliers are confidential and details of their discussions can't be laid out. But they did say the options include a regasification plant on shore that could convert LNG back to its gaseous form as well as ships or barges that have regasification plants built on board. It's also possible that the existing Kenai LNG plant,which is built to export the liquefied gas,could be converted and used as an import facility.That's in the mix of options too.The plant is being mothballed tater this summer when the final shipments of LNG are made to Asia. All of these things will cost money,of course.The dilemma facing the utilities and the RCA,and really all of us consumers,is whether we should invest in LNG import facilities or a regasification capacity,if there is indeed more gas to be found in the region,and maybe soon? It seems prudent to have the capability to import if drilling results are inadequate,but there is a risk that this could strand investment if the drillers get lucky.How much of a risk to take,how much capita!investment is needed and whether this should be passed through to consumers are matters that need clear and careful thought. On top of this,legislators have to think through whether the state should pay for part or all of a "bullet pipeline"from the Slope.They also must decide whether to invest state funds in a new multibillion-dollar hydroelectric dam at Watana,on the Susitna River,to supply electricity and reduce the need for gas to generate power, Hand me the aspirin bottle. Tim Bradner writes for an Alaska economic reporting service.He also consults for private clients and writes for business publications.His opinion column appears every month in the Anchorage Daily News. 4[Print Page if Close Window | Copyright ©Mon Oct 31 09:16:00 UTC-0800 20111900 The Anchorage Daily News (www.adn.com) http://www.adn.com/201 1/07/02/v-printer/1948895/confused-on-natural-gas-stand.html 10/31/2011 ecadn.com |Gas pipeline not our only optian.+Page 1 of 3 * ad n.com , [PrintPage j[Close Window_| Anchorage Daily News Gas pipeline not our only option TIM BRADNER ECONOMY (01/15/11 19:58:04) There's utter gloom around town about a major natural gas pipeline project. Lower 48 markets are awash in gas,prices are low and shale gas drillers are busy finding more and more of the stuff. The conventional wisdom,the street talk,is that we've missed the market once again.It's happened twice before,in the early 1980s and early 1990s,with two earlier pipeline attempts. However,we shouldn't write the obituary on this yet because we don't know the results of the two open seasons held last year by the two competing pipeline groups,TransCanada and BP/Conoco Phillips'Denali project.It's hard to imagine astute business people waging a $40 billion gamble in such a quirky business environment.But the producing companies that have to write the checks have very smart people and what counts is their judgment,not some energy analyst (or politician). These companies have deep pockets and are fully capable of writing big checks if they believe the project can work. Still,Alaskans would be wise to consider other options,as the big companies certainly are,and not have a single-minded fix on a pipeline.Other approaches to commercializing stranded North Slope gas,like gas-to-liquids plants,might well bring more revenue to the state and actually employ more Alaskans than a pipeline. Gov.Sean Parnell says he'll stick with former Gov.Sarah Palin's Alaska Gasline Inducement Act,or AGIA (the one where the state is subsidizing TransCanada for $500 million),for a while longer, possibly until TransCanada,leading the state-endorsed project,says it's a no-go.That may be awhile,at least until the subsidy ends.I'm sure the governor has his people quietly working on other options,because the major companies certainly are.We need to be prepared for those,or even instigate our own ideas.We are,prudently,investigating our own fallback plan of a "bullet line,"a 24-inch,state-sponsored pipeline from the North Slope to Southcentral Alaska.The economics of this are dubious without a large state subsidy,however.We need some out-of-the- box thinking.eeeen ee) NEW IDEAS FOR ARCTIC GAS What's encouraging is that some people,outside the state government,are doing just that. One idea being suggested is that the state work cooperatively (gee,what a concept)with the pipeline companies to do a "pre-build"of a 48-inch gas pipeline from the North Slope to Interior Alaska as the first stage of the line to the Lower 48 or to a Valdez liquefied natural gas plant or,for that matter,a gas-to-liquids plant in Fairbanks or Southcentral.This would still have a 24-inch "spur"pipeline built to Southcentral. http://www.adn.com/2011/01/15/v-printer/1650747/gas-pipeline-not-our-only-option.html 10/31/2011 adn.com |Gas pipeline not our only optien.Page 2 of 3 > Getting the first stage of the large pipeline built would move the project along.Some believe the cost of a pre-build might be about the same as for a smaller 24-inch line from the Slope to Fairbanks,at least in this initial stage,because the 48-inch segment might be done with fewer compressors than a smaller line would need.Moving natural gas liquids with the gas,which would require more compression,could be done in a second phase.Alternatively,could some of these be shipped through the TAPS oil line?That might be possible.When the 48-inch pipe is eventually extended,additional compression could be added. This might sound unusual but a pre-build pipe segment isn't a new idea.In fact,pre-builds were done in the 1980s for what was supposed to be the Alaska gas line across Canada.The northern part wasn't built but the southern part was,as pre-builds.These are being used today to ship western Canadian gas to the United States. This turned out to be a wise investment,as TransCanada will acknowledge. That's just one idea.Another is the notion of a small 12-inch pipeline just to the Interior from the Slope being pursued by Energia Cura,a Fairbanks company.This entirely private "do it ourselves" approach by Fairbanks people,proposed as a bare-bones,low-cost pipeline,is being taken seriously by potential customers in the region,such as mining companies. WHAT ABOUT GTL? Coming back to gas-to-liquids,I believe the state's single-minded focus on a new pipeline,to the exclusion of other options,might have cost us a big opportunity. Gas-to-liquids would involve building a substantial plant that turns natural gas into a liquid fuel.As a liquid,the fuel might be easier to move to markets. A few weeks ago,Sasol,the major South African company with substantial commercial experience in gas-to-liquids,announced it is pursuing such a plant in British Columbia using gas from shale wells. This-is-the proj we should have had.Sasol has been quietly knocking on doors in Alaska,working through a smaller firm,foPmore than a decade.The company was actually discouraged from pursing a GTL plant by state officials,and now Sasol believes it isn't welcome in Alaska. Among others,the company told this to state Sens.Lesil McGuire and Bill Wielechowski when the two Alaska legislators attended an energy conference in South Africa.This is just shocking to me. Sasol has taken this project to British Columbia but it still has an interest in Alaska,I'm told. Our state officials should reach out to this company's executives to tell them the welcome mat is out. Former Lt.Gov.Craig Campbell went to China on a trade mission to lure Chinese petroleum investment here.(Nothing came of it.)I'm sure current Lt.Gov.Mead Treadwell can do Campbell one better,to tell Sasol that Alaska is as attractive a place to invest as British Columbia. Tim Bradner writes for an Alaska economic reporting service.He also consults for private clients and writes for business publications.His opinion column appears every month in the Anchorage Daily News. http://www.adn.com/201 1/01/15/v-printer/1650747/gas-pipeline-not-our-only-option.html -10/31/2011 Alaska Gasline Development Corp.hires public relations specialist |Juneau Empire -Ala...Page 1 of 2 44 JuneauEmpirecom Alaska Gasline Development Corp.hires publ Posted:November 29,2012 -12:07am JUNEAU EMPIRE ANCHORAGE -The Alaska Stand Alone Pipeline project office announced the addition of Lila Hob Hobbs will join the ASAP team as the public relations specialist.She will have numerous communic of public information materials and day-to-day management of the project website. Born in Anchorage,Hobbs has worked for the State of Alaska for more than five years and brings ce: background to the ASAP team. "Lila's understanding of state government combined with her community outreach experience brings Director of Public Affairs,Leslye Langla."Her strong communication skills will help our office effect audiences.” Hobbs earned her academic credentials at Gonzaga University in Spokane,Wash.,and the Universit: bachelor's degree in international relations. The ASAP project is Alaska's in-state natural gas pipeline project,intended to develop an affordable South-central Alaska and other communities where practicable. ASAP is a 737-mile in-state gas pipeline planned to originate at Prudhoe Bay and terminate at Point Zommen:p<__ Juneau Empire ©2012.All Rights Reserved.Terms of Service Privacy Policy /About Our Ads a http://juneauempire.com/state/2012-11-29/alaska-gasline-development-corp-hires-public-...11/29/2012 FAIRBANKS,Alaska:Governor considers state ownership of LNG plant |State News|A...Page 1 of 2 ADN.com Next Story > Mat-Su's ice-breaking ferry may have a job in the tropics Governor considers state ownership of LNGplan Published:November 27,2012 The Associated Press FAIRBANKS,Alaska -A state official says Gov.Sean Parnell is considering state ownership of a gas liquefaction plant on the North Slope. Gene Therriault (TARE'-ee-oh),deputy director of the Alaska Energy Authority,says a state-owned liquefaction plant makes sense for Alaska because a wide array of customers could potentially use the natural gas and propane coming from the plant. According to the Fairbanks Daily News-Miner (http://is.gd/onOxF3),Therriault says the plant could process natural gas from multiple oil companies and sell it to a wide group of buyers. Therriault made his remarks Monday during a meeting in Fairbanks of the Lowell Group,a group of Interior residents who meet every week to discuss community issues. Information from:Fairbanks (Alaska)Daily News-Miner,http:/Awww.newsminer.com Back to Top <Previous Story Plane loses power;pilot makes emergency landing on Bethel -area lake Next Story > Mat-Su's ice-breaking ferry may,aye a job in the tropicsnaetters Manage newsletter subscriptions Tablets > Apps and services for tablet devices Mobile > Apps and services for your mobile phone Social Media > http:/Awww.adn.com/2012/11/27/2705563/governor-considers-state-ownership.htm]11/29/2012 Page 1 of2 Advertisement YOU ARE HERE:KTUU Home -Collections Ads by Google Natural Gas Stock to Soar Discover the #1 Natural Gas Stock to Skyrocket in 2011.New Report. www.Sovereign-investor.com FEATURED ARTICLES In-State Gas Pipeline Report Expected Tuesday July 5,2011 Palin pushes TransCanada project May 29,2008 Official:"Multiple bids'in TransCanada open season July 30,2010 RELATED LINKS Rhonda McBride reports on In-State Gasline Conference http://articles.ktuu.com/2011-07-18/alaska-gasline-inducement-act_29792685 Anchorage Chamber Gets Optimistic Update on In-State Gas Line Project July 18,2011 |by Rhonda McBride In-state gas line managers gave the Anchorage Chamber of Commerce an upbeat report on ASAP -the Alaska Stand Alone Gas Pipeline project. The report follows an announcement earlier this month from the Alaska Gasline Development Corporation that the project is doable. AGDC is owned by the state and is moving forward with building a 737-mile pipeline that would bring North Slope Gas to Fairbanks and Southcentral Alaska. Be the first of your friends toRecommend 'recommend this. The project would cost at least 7.5 billion,but AGDC told the chamber that state financing needs to be part of the plan to minimize the risks. Ads by Google Advertisement $569:Hawaii 5-Night Getaway wi/Air Wt gerry te: Travelzoo Deal Experts found this package with roundtrip air,5-nights accommodations and rental car!*Sale ends July 20.TRAVELZOO "I think we're making a 50 to 100-year decision with a project like this,or something similar,”said Dan Fauske, president of AGDC."We have to stop thinking in two-year or four-year increments.” "This is a project that's going to be around long after everybody in this room is long gone.I don't mean to be morbid,” said Fauske. If all goes well,the ASAP project would send gas down the pipeline by 2019,relieving Cook Inlet Gas shortages that could be felt in the next three or four years. Power companies are already planning to import liquefied natural gas until a long term solution is found,which will make the cost of power and heating more expensive for Southcentral. Fauske and his project managers took time to address fears that ASAP would squelch exploration for Cook Inlet gas. They told the chamber that even if there was a significant discovery in the Inlet,there would not be enough gas to meet demand. "You hit 2018.What happens to the price of gas?”said Fauske."In this community,we view 2018 as the 'shoe's gonna drop,'because prices will go (up),and supply is going to be very,very minimal.So Alaskans have an opportunity to make a decision.” That decision is one Bill Walker says should be made with a bigger picture in mind.Walker ran in last year's Republican primary for governor and campaigned hard on building a large-volume "All Alaska Pipeline,”which would run from the North Slope to Valdez. 7/20/2011 Page 2 of2 "We are limiting ourselves to a very small volume line,”said Walker."That's not the Alaskan way.That's not the laoka Threw Up ii. Copyright 2011 KTUU-TV |Terms of Service The ASAP line would be 24-inches in diameter.Walker says a 48-inch line would be needed to carry the volumes of gas needed for LNG exports. Index by Keyword |Index by Date |Privacy Policy "We're trying to figure out what we should be doing on a small volume,when we should be doing something that benefits all of Alaska,that puts billions of dollars into the state coffers.” Walker says the state the 7.5 billion dollars would be better spent in a large diameter line,preferably to Valdez. The ASAP project did not look at building a 48-inch line,because of restrictions under AGIA,the Alaska Gasline Inducement Act,an agreement the state signed with Transcanada.AGIA limits the amount of gas an in-state line can ship. A line to Valdez is one of the AGIA options,in addition to a pipeline across Canada and down to the Lower 48.But so far,Transcanada has not said whether it has secured the necessary gas contracts to finance the pipeline. Lawmakers have looked to the stand-alone line as an insurance policy,in case no pipeline to the Lower 48 is built. But some have argued that it's more like a big gamble with taxpayer's money. The ASAP project is not a done deal.Just as in the Transcanada and Denali project proposals,the stand-alone pipeline would have to conduct open seasons to find producers willing to commit their gas to the project. ASAP managers told the chamber they're moving forward on that.They hope to have environmental impact statements completed by next year,as well as some of the key permits necessary. "I think this is really significant,”said Michael Rocereta,the commercial manager for the ASAP project.He told the Chamber,ASAP will be giving producers information about potential customers this week,something the producers have requested. "It's really interesting what we have developed in view of supply and demand,a view of what our customers will be,a view of what our solutions are for a project like this,”said Rocereta. Fauske told the chamber that state ownership of a project like the pipeline could be a good thing."A lot of people say state government can't own stuff.Yeah,you can.” Fauske gave a list of state-owned businesses from the Alaska Housing Finance Corporation,to the Permanent Fund Dividend,to the Railroad and the Ted Stevens International Airport.He says the key to success is to have someone else operate the line. Fauske says,he still hopes AGIA turns out to be a success,but says ASAP is the next best option,because it will not only deliver gas that is cheaper than LNG imports,but create construction jobs. Some critics question whether the gas from a stand-alone line would actually cost less,not without ongoing subsidies from the state.Others,including Alaska's Federal Pipeline Coordinator,warn that subsidizing a smaller line could jeopardize chances to build a big line. But in the meantime,ASAP has 200 million dollars set aside in the state budget to continue its work,work that Fauske is needed to keep Alaskans from being left out in the cold. "We're going to be in our basements burning our Permanent Fund checks to stay warm,while all this gas is sitting out there.” Ads by Google Pipeline Data and Maps Comprenhensive Data for the USA Complete and Detailed Data htsi-pipelines.com http://articles.ktuu.com/201 1-07-18/alaska-gasline-inducement-act_29792685 7/20/2011