Celtic Diva's Blue Oasis: Senator Johnny Ellis on Gasline Goals

Friday, June 20, 2008

Senator Johnny Ellis on Gasline Goals

June 20th, 2008

GASLINE GOALS


Friends and Neighbors,

I took an oath to the Alaska Constitution to develop our resources for the maximum benefit of the people of Alaska . In order to fulfill that oath, I have four bottom-line goals for a gas pipeline:

- Get an economic project moving now
- Good jobs and business opportunities for Alaskans
- In-state use of our gas
- Maximum revenue for the state
- Foster a gas exploration rush on the North Slope through an enhanced open-access pipeline. This is where the most long-term jobs and state revenue will come from.


Point Thomson

As the on-going statewide gas line hearings have progressed, a variety of topics have come to the forefront. This week’s discussions in Anchorage have centered around the dispute between the State of Alaska and ExxonMobil, the operator of the Pt. Thomson oil and gas field, and the effect it could have on a future gas line.

Historical Timeline of the Pt. Thomson Unit

- 1975: Hydrocarbons are first discovered in the area
- 1977-1983: Exploration continues, with 7 additional wells drilled and two other distinct units identified
- 1990’s: Hydrocarbons are discovered at Badami, just west of Pt. Thomson. Production begins in 1998.
- 2006: Exxon’s 23rd Plan of Development is rejected by the Murkowski administration, and the rejection is upheld by the incoming Palin administration.
- Today: The State is in litigation to recover the leases from Exxon on the grounds that they have failed to produce the resource in order to re-lease the lands to a willing partner.


According to the state Department of Natural Resources, Pt. Thomson contains between 8.5 – 10.4 trillion cubic feet of natural gas and between 1 – 1.5 billion barrels of oil. This oil is in two parts – an oil rim around the gas reserves and a condensate form which is mixed in with the gas.

Under Alaska law, resources must be produced to minimize waste. Because of the mixture of oil and gas and the specific geologic and chemical properties of the basin, the oil must be produced before the gas if it is to be produced at all. This means that gas production must wait to get underway until most of the oil has been recovered, which most estimates put at 10-15 years.

What does Pt. Thomson have to do with AGIA?

Exxon claims that no gas pipeline is economic without the additional gas that Pt. Thomson would produce. The state and independent economists dispute that, saying that the combination of Prudhoe Bay and the extensive but undefined resources on the rest of the North Slope are more than enough.

This debate raises a number of questions. First, the major North Slope producers, including Exxon, proposed a gas pipeline of similar size and scope under the Murkowski administration. The geology of the Pt. Thomson field and legal production requirements have not changed since that time. Second, BP and Conoco, also owners of Pt. Thomson leases, have proposed the Denali pipeline, which is designed to carry an equal amount of gas. What is it about these proposals that allows them to go forward, while dooming the plan that the administration and TransCanada have put forth?

The statewide road show will continue through the next two weeks in Palmer, Soldotna, Barrow, and Ketchikan , and these and many other questions will continue to be addressed. The legislature will reconvene in the capital on July 9th. I predict a lively debate and a final vote before the middle of July.

Summer Solstice

Tomorrow is the longest day of the year – I hope everyone has a chance to get outside and enjoy summer. There are a number of fun events, from running (or cheering) at the Mayor’s Marathon and Half-Marathon at West High School, to AWAIC’s summer solstice festival at the Park Strip, or maybe just time with family and friends before winter starts to creep up on us all once again.

3 Comments:

Anonymous Polarbear said...

Senator Ellis: Thank you for your post. Of course, nothing dooms the TransCanada Alaska proposal. Tom Irwin's team has built the only public NPV analysis of all three proposals - TC Alaska, Denali, and All-Alaska LNG. The analysis shows all three proposals to be viable, with the best profitability for the TC Alaska alternative. The TC Alaska proposal also shows the best resistance to market fluctuations in the value of gas over the long term. Given these facts, TransCanada's history as the largest gas transporter in the world, and the stability of the TC Alaska - State of Alaska partnership, TransCanada heads for the project financing task with a significant advantage. A financier is going to conclude that TransCanada has already won tax stability from the state, while the Denali team of producers claim they must have additional tax breaks which the State is not going to give (nor should be given.)

The Point Thompson gas is not required for the TransCanada proposal to be successful, nor would Pt. Thompson gas somehow be magically present for the Denali project early on, either.

The TransCanada proposal offers a substantial advantage in early commitment to 5 natural gas spurs, accompanied by stable distance-sensitive cost-of-transport fees. The Denali Project vaguely promises the spurs, but with no commitment to stabilized fees based on cost (not market). The 5 natural gas spurs are under-valued in the current debate. Those spurs will be the basis for affordable energy infrastructure for northwest Alaska, southwest Alaska, the Yukon upper to lower, Fairbanks, and for rural areas along the path to Anchorage. As a state, we have regretted not accomplishing greater secondary economic development from the oil pipeline. The natural gas spurs will help us distribute secondary economic development to regions long waiting for infrastructure.

TransCanada Alaska has won the AGIA competition fair and square. It is time to respect the integrity of our competitive bid process and award the AGIA license to TransCanada.

6/20/2008 3:13 PM  
Anonymous Anonymous said...

In order to fulfill that oath, I have four bottom-line goals for a gas pipeline:

- Get an economic project moving now
- Good jobs and business opportunities for Alaskans
- In-state use of our gas
- Maximum revenue for the state
- Foster a gas exploration rush on the North Slope through an enhanced open-access pipeline. This is where the most long-term jobs and state revenue will come from.


erm..., that's five. right?, yeah, five. Thanks though, thanks. yeah. love your work, keep it up. yeah, five. okay, what's next?

6/23/2008 12:29 PM  
Anonymous Anonymous said...

oh, geese, one more thing. what happens to Alaska's gas line project when the new Obama folks finally chase the speculators out of the energy markets in this country and prices drop 25 to 50 percent? are we still on for a line? any line?

6/23/2008 12:32 PM  

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