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Balash says Interior will work withstate, others, on O&G development
l N A T U R A L G A S
l U T I L I T I E S
l E X P L O R A T I O N & P R O D U C T I O N
Vol. 23, No. 23 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of June 10, 2018 • $2.50
page3
Conoco purchase of Anadarko’swest North Slope interests closes
ConocoPhillips said June 4 that it has obtained approvals
for the acquisition of Anadarko Petroleum Corp.’s 22 percent
lease interests in the western North Slope of Alaska.
ConocoPhillips announced the acquisition Feb. 1, saying at
that time that it had signed a definitive agreement with
Anadarko for that company’s 22 percent nonoperated interest
in the western North Slope of Alaska, as well as Anadarko’s
interest in the Alpine pipeline, for $400 million in cash,
“before customary adjustments,” and subject to regulatory
approval. The transaction had an effective date of Oct. 1,
2017.
In addition to producing assets, ConocoPhillips’ interest in
exploration and development lands, including the Willow dis-
Washington, BC echo same concernsabout oil shipments in Pacific waters
An informal Pacific Coast cross-border alliance is taking
shape in opposition to the movement of crude oil to export ter-
minals connecting North America with energy hungry Asian
markets.
And the loose partnership of British Columbia,
Washington, Oregon and California has gathered momentum
now that Canadian Prime Minister Justin Trudeau, once
viewed as a fast-emerging global leader in climate change
measures, is within a few weeks of becoming the owner of
Kinder Morgan’s Trans Mountain pipeline to deliver 890,000
barrels per day of diluted bitumen from the Alberta oil sands
to a tanker port in Vancouver.
AIDEA converts its Mustang ownership interest to loan financing
During its May 31 meeting the board of the Alaska
Industrial Development and Export Authority passed a resolu-
tion converting its ownership interests in the Mustang oil field
on the North Slope to a loan to CaraCol Petroleum LLC, one
of the field’s working interest owners. The deal involves
AIDEA selling its ownership interest in Mustang Operations
Center 1 LLC to CaraCol for $52.5 million, and its interest in
Mustang Road LLC for $8.5 million. CaraCol will fund its
purchases through an AIDEA loan of $64 million plus any
associated AIDEA costs. MOC1 and Mustang Road 1 are
vehicles though which AIDEA has provided financial support
for the field development and are minority working interest
owners in the field.
Alyeska sets summer maintenanceIt’s planned maintenance season in Alaska, with Alyeska
Pipeline Service Co. announcing several pipeline shutdowns
this summer. The company said May 31 that the line-wide
shutdowns, from 12 to 18 hours, allow for maintenance work
along the line and at the Valdez Marine Terminal “while the
pipeline is not in its regular operating state.”
The company said there will be three planned maintenance
shutdowns between June 15 and July 6.
Alyeska operates the pipeline and terminal on behalf of
owners BP Pipelines (Alaska), ConocoPhillips Transportation
Alaska, ExxonMobil Pipeline Co. and Unocal Pipeline Co.
The company said Alyeska employees and contractors will
complete projects at various locations along the line from
Pump Station No. 1 in Prudhoe Bay to the Valdez Marine
see CONOCO PURCHASE page 11
see OIL SHIPMENTS page 11
see MUSTANG INTEREST page 9
see SUMMER MAINTENANCE page 11
ANWR seismic plannedSAExploration, ASRC, KIC proposed to survey 1002 area over two winter seasons
By ALAN BAILEYPetroleum News
SAExploration Inc., Arctic Slope Regional
Corp. and Kaktovik Inupiat Corp. have filed
with the federal Bureau of Land Management a
plan for a proposed 3-D seismic survey program in
the 1002 area of the Arctic National Wildlife
Refuge. The program, referred to as the Marsh
Creek 3-D, would encompass the entire 1002 area,
an area of some 2,600 square miles in the ANWR
coast plain. SAExploration, the proposed operator
for the survey, anticipates the survey program tak-
ing two winter seasons to complete.
BLM is in the process of developing an envi-
ronmental impact statement for the conducting of
oil and gas lease sales in the 1002 area. However,
existing seismic data for the refuge is old, is wide-
ly spaced and is 2-D rather than 3-D. Companies
interested in bidding in a lease sale would presum-
ably want modern seismic data, to evaluate tracts
to bid on. Geologists have indicated that, especial-
ly in the relatively undeformed western part of the
LNG giants teaming upShell, Petronas now lead partners in LNG Canada, nudging project closer to FID
By GARY PARKFor Petroleum News
One more building block has fallen into place
to secure the future of LNG Canada, putting
the C$40 billion project in sight for a final invest-
ment decision before year’s end.
Petronas, Malaysia’s state-owned energy giant,
announced it is taking an equity position — with-
out disclosing the investment amount — in the
Shell Canada-led project, meaning the venture
now has the backing of two LNG powerhouses.
As a result of the transaction, the ownership
interests are now Shell at 40 percent (down from
its earlier 50 percent), Petronas 25 percent,
PetroChina 15 percent (previously 20 percent),
Japan’s Mitsubishi 15 percent (unchanged) and
South Korea’s Kogas 5 percent (previously 15 per-
cent).
The partnership said the timing and outcome of
the FID will be based on global energy markets
and the overall competitiveness and affordability
of the project.
Pacific NorthWest abandonedPetronas, which abandoned its own C$36 bil-
Pentex sale close deferredIGU requests 2 changes to sale agreement; AIDEA board accepts one, rejects other
By ALAN BAILEYPetroleum News
In the latest twist in the Alaska Industrial
Development and Export Authority’s Interior
Energy Project, the AIDEA board has extended to
June 14 the timeframe for closing the sale of Pentex
Natural Gas Co. to the Interior Gas Utility. The intent
had been to close the sale by the end of May.
The concept behind the sale is the consolidation of
gas utilities IGU and Fairbanks Natural Gas, a Pentex
subsidiary, to enable the development of a fully inte-
grated gas distribution system in the Fairbanks region
and to achieve economies of scale in the gas supply
arrangements. FNG supplies gas to some consumers
in central Fairbanks. IGU is owned by the Fairbanks
North Star Borough — it has started building a gas
distribution infrastructure but does not currently have
a gas supply. AIDEA purchased Pentex in 2015 with
the aim of eventual Fairbanks utility consolidation.
Letter of agreementThe IGU board had approved the completion of
the sale, subject to two changes to the sale agreement.
On May 22 IGU drafted a letter of agreement speci-
fying the requested changes, asking that the AIDEA
see ANWR SEISMIC page 10
see LNG GIANTS page 10
see PENTEX SALE page 12
The survey plan says that SAE anticipatessupporting two seismic crews for thesurvey operations during each of the
winter seasons that the survey programtakes to complete.
The project has considerable buy-in fromaboriginal communities, led by the HaislaNation Council, although the council hasyet to sign a final commercial agreement.
The IEP has state funding in the form ofSustainable Energy Transmission and
Supply, or SETS, loans, AIDEA bonds anda state capital appropriation.
2 PETROLEUM NEWS • WEEK OF JUNE 10, 2018
Petroleum News Alaska’s source for oil and gas newscontents
Alaska’sOil and GasConsultants
GeoscienceEngineeringProject ManagementSeismic and Well Data
3601 C Street, Suite 1424Anchorage, AK 99503
(907) 272-1232(907) 272-1344
www.petroak.cominfo@petroak.com
l E X P L O R A T I O N & P R O D U C T I O N
ANS production down marginally in AprilAverage 513,257 bpd, compared to 516,869 bpd in March, drop of less than 1%, but down 5.5% from April 2017 average of 543,252 bpd
By KRISTEN NELSONPetroleum News
Alaska North Slope crude oil production averaged
513,257 barrels per day in April, down 0.7 percent,
3,612 bpd, from a March average of 516,869 bpd, and
down 5.5 percent from an April 2017 average of 543,252
bpd.
Production data is from the Alaska Oil and Gas
Conservation Commission, which provides volumes by
well on a month-delay basis, making April the most
recent data available.
The largest month-over-month per-barrel decline was
at the ConocoPhillips Alaska-operated Kuparuk River
field, which averaged 113,047 bpd in April, down 5.8
percent, 6,917 bpd, from a March average of 119,964,
but down only 0.4 percent from an April 2017 average of
113,458 bpd.
In addition to the main Kuparuk pool, Kuparuk pro-
duces from satellites at Meltwater, Tabasco and Tarn,
and from West Sak.
The Caelus Alaska-operated Oooguruk field had the
largest month-over-month percentage drop in produc-
tion, down 12.3 percent, 1,135 bpd, averaging 8,083 bpd
in April compared to 9,218 bpd in March, and down 47.1
percent from an April 2017 average of 15,280 bpd.
Point ThomsonPoint Thomson, operated by ExxonMobil Production
Co., averaged 5,291 bpd in April for those days when
there was production, down 5.5 percent, 305 bpd, from a
March average of 5,596, and down 31.3 percent from an
April 2017 average of 7,699 bpd. The company told the
Alaska Division of Oil and Gas last year that production
was impacted by “difficulties with its gas injection com-
pressor,” and said, “it was conducting maintenance or
repairs on the compressor during periods when produc-
tion ceased or decreased.”
Facilities at Point Thomson are designed to produce
10,000 bpd. In April, the field had production — from its
single well — for 18 days, with the production on those
18 days making the well the third most productive in the
state, behind only two wells at ConocoPhillips’ CD5 pad
at the Colville River unit, which averaged 7,762 bpd and
5,378 bpd.
Endicott, NikaitchuqEndicott, operated by Hilcorp Alaska, averaged 6,295
bpd in April, down 4.6 percent, 306 bpd, from a March
average of 6,601 bpd, and down 16.3 percent from an
April 2017 average of 7,519 bpd.
The Eni-operated Nikaitchuq field averaged 13,652
bpd in April, down 1.4 percent, 192 bpd, from a March
average of 13,844 bpd, and down 22.3 percent from an
April 2017 average of 17,572 bpd.
Other fields saw increasesThe largest per-barrel month-over-month increase
see ANS PRODUCTION page 3
ANWR seismic plannedCompanies proposed to survey 1002 area over two winter seasons
LNG giants teaming upShell, Petronas lead LNG Canada, nudging project closer to FID
Pentex sale close deferredChanges to sale agreement; AIDEA board accepts one, rejects other
ON THE COVER
Conoco purchase of Anadarko’swest North Slope interests closesWashington, BC echo same concernsabout oil shipments in Pacific watersAIDEA converts its Mustangownership interest to loan financingAlyeska sets summer maintenance
EXPLORATION & PRODUCTION2 ANS production down marginally in April
Average 513,257 bpd, compared to 516,869 bpd in March,drop of less than 1%, but down 5.5% from April 2017average of 543,252 bpd
6 National rig count rises by 1 to 1,060
7 Contraction planned for Redoubt unit
Mandatory unit contraction would eliminate all acreage except existing Hemlock participating area and proposed South Stepout PA
3 Balash promotes more federal cooperation
Says Interior is going to work in partnership with state, other North Slope landowners to encourage Alaska oil and gas development
6 Hilcorp seeks RCA Drift River approval
Wants to discontinue use of terminal and associatedinfrastructure following startup of pipeline oil transportation under Cook Inlet
FINANCE & ECONOMY9 Exxon aims to boost earnings, production
8 Hilcorp buying Exxon out of Endicott line
4 Final protesters removed from perches
GOVERNMENT
SIDEBAR, Page 4: BLM retains ANWR public comment deadline
PIPELINES & DOWNSTREAM
By ALAN BAILEYPetroleum News
During a speech at the Alaska Oil and Gas
Association’s annual conference on May 31
Joe Balash, assistant secretary for lands and min-
erals management in the U.S. Department of the
Interior, said that the federal administration is
intent on taking more of a partnership approach
when working with the state and other land own-
ers for the development of oil and gas in Alaska.
“We are about to turn a major corner and things north of
the Brooks Range are about to change in some pretty
astounding ways, in ways that I personally find to be very
positive for the future of our nation and for our great state,”
Balash said.
Interior manages 72 million surface acres and 220 mil-
lion subsurface acres onshore Alaska, and more than 1 bil-
lion acres of lands offshore the state, he said.
NPR-A developmentsOf particular interest at present is the National Petroleum
Reserve-Alaska, where ConocoPhillips is pursuing an oil
development strategy in the Greater Mooses Tooth unit, and
where the company is assessing a major oil find in its
Willow prospect.
“Taking a look at the onshore, we’re jump starting
Alaska energy production from the federal land base on the
North Slope, specifically in the NPR-A,” Balash said.
The GMT-1 development will result in the first produc-
tion entirely from federal land in the NPR-A, and in March
Interior released the draft environmental impact statement
for the GMT-2 development.
“This is a huge opportunity for the federal government,”
Balash said. “The sharing of that royalty revenue with the
state will help with the fiscal conditions and in turn will pro-
vide additional, critical throughput into TAPS
(the trans-Alaska pipeline).”
Once Interior has completed its review of the
GMT-2 development, it will turn its attention to
Willow, where ConocoPhillips has conducted
drilling that yielded very promising results,
Balash said.
Challenges and rewardsThe challenge in Alaska does not so much
revolve around finding oil as around making
money from an oil discovery, Balash commented. But the
benefits from successful development come, not just in
terms of financial reward, but also in terms of impacts on
the social fabric of communities, the impacts of stable jobs
and income on people’s wellbeing. And, for rural commu-
nities, development enables people to continue their tradi-
tional way of life while also receiving a cash income,
Balash said.
“That’s something that, I think, sometimes gets lost in
the arguments around whether or not to develop our
resources,” he said.
Balash cited the example of the Red Dog mine where, he
said, data have provided evidence for the manner in which
the mine development and operation have improved peo-
ple’s health in the local community.
ANWR coastal plainAt the eastern end of the North Slope the federal tax bill
passed in November has opened the coastal plain of the
Arctic National Wildlife Refuge for oil and gas activities.
Currently the Bureau of Land Management, an agency
within Interior, is conducting a 50-day public comment
period for the scoping of an environmental impact state-
ment for oil and gas lease sales in the refuge. Balash said he
has been made responsible by Interior Secretary Ryan Zinke
for the completion of the EIS and the conducting of a suc-
cessful lease sale. Under the terms of the National
Environmental Policy Act, the development of an EIS is a
necessary step towards a lease sale.
The Gwich’in people from the Yukon Flats region of
Interior Alaska and the nearby region of western Canada are
vehemently opposed to oil and gas development in the
ANWR coastal plain because of concerns about potential
impacts on the Porcupine caribou herd that forms a key sub-
sistence resource for the Interior communities — the cari-
bou calve on the coastal plain during the summer. But peo-
ple in the industry, and the federal and state regulators, also
care about the continued success of the caribou, Balash said.
“So the real challenge to us is to find the balance in craft-
ing the stipulations and best management practices that will
allow exploration and development to take place in a way
that does not do harm to that herd and to people that depend
upon it,” he said.
Balash commented that he had just spent a couple of
days in Arctic Village, home to some of the Gwich’in, and
had enjoyed caribou meat prepared in a variety of ways. He
was about to travel to other North Slope communities,
including the village of Kaktovik, on the northern edge of
ANWR.
EIS efficiencyIn more general terms, when it comes to the preparation
l G O V E R N M E N T
Balash promotes more federal cooperationSays Interior is going to work in partnership with state, other North Slope landowners to encourage Alaska oil and gas development
was at the BP-operated Prudhoe Bay
field, which averaged 267,915 bpd in
April, up 1.5 percent, 3,932 bpd, from a
March average of 263,983 bpd, but down
7.8 percent from an April 2017 average of
282,769 bpd.
In addition to Prudhoe oil, production
from the Prudhoe Bay field includes other
pools: Aurora, Borealis, Lisburne,
Midnight Sun, Niakuk, Polaris, Point
McIntyre, Put River, Raven and Schrader
Bluff.
The largest percentage month-over-
month increase was at the Hilcorp
Alaska-operated Northstar field, which
averaged 9,257 bpd in April, up 3.8 per-
cent, 339 bpd, from a March average of
8,918 bpd, and up 18.4 percent from an
April 2017 average of 7,817 bpd.
The ConocoPhillips-operated Colville
River unit averaged 67,249 bpd in April,
up 1.2 percent, 802 bpd, from a March
average of 66,447 bpd, and down 2.5 per-
cent from an April 2017 average of
68,958 bpd.
In addition to oil from the main Alpine
pool, Colville production includes satel-
lite production from Fiord, Nanuq and
Qannik.
The Hilcorp Alaska-operated Milne
Point field averaged 21,770 bpd in April,
up 0.8 percent, 168 bpd, from a March
average of 21,602, and up 2.2 percent
from an April 2017 average of 21,304
bpd.
Badami, operated by Savant Alaska, a
Glacier Oil & Gas company, averaged
698 bpd in April, up 0.3 percent, 2 bpd,
from a March average of 696 bpd, and
down 20.3 percent from an April 2017
average of 876 bpd.
Cook InletCook Inlet production averaged
16,095 bpd in April, up 2.2 percent, 347
bpd, from a March average of 15,748.
Hilcorp’s Beaver Creek field averaged
90 bpd, down 6.3 percent from a March
average of 96 bpd.
Granite Point, also operated by
Hilcorp, averaged 2,848 bpd in April,
down 3.2 percent from a March average
of 2,942 bpd.
BlueCrest’s Hansen field, the
Cosmopolitan project, averaged 765 bpd
in April, down 4.3 percent from a March
average of 799 bpd.
The Hilcrest-operated McArthur River
field, Cook Inlet’s largest, averaged 5,283
bpd in April, up 10.6 percent from an
April average of 4,776 bpd.
Hilcrest’s Middle Ground Shoal field
averaged 1,483 bpd in April, down 4 per-
cent from an April average of 1,544 bpd.
Redoubt Shoal, operated by Cook Inlet
Energy, a Glacier Oil & Gas company,
averaged 1,367 bpd in April, up 4 percent
from a March average of 1,314 bpd.
Hilcorp’s Swanson River field aver-
aged 1,505 bpd in April, up 2.7 percent
from a March average of 1,465 bpd.
Trading Bay, also a Hilcorp field, aver-
aged 1,754 bpd in April, down 3.2 percent
from a March average of 1,811 bpd.
West McArthur River, operated by
Glacier Oil & Gas company Cook Inlet
Energy, averaged 1,000 bpd in April,
down 0.1 percent from a March average
of 1,001 bpd.
ANS crude oil production peaked in
1988 at 2.1 million bpd; Cook Inlet crude
oil production peaked in 1970 at more
than 227,000 bpd. l
PETROLEUM NEWS • WEEK OF JUNE 10, 2018 3
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continued from page 2
ANS PRODUCTION
“Taking a look at the onshore, we’re jumpstarting Alaska energy production from the
federal land base on the North Slope,specifically in the NPR-A.” —Joe Balash,
Department of the Interior
JOE BALASH
see BALASH SPEECH page 4
4 PETROLEUM NEWS • WEEK OF JUNE 10, 2018
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of environmental impact statements,
Interior is figuring out how to simplify the
process, to reduce the timeframe involved
and the size of the resulting documentation.
The process, as it stands, takes too long,
costs too much and is too complicated,
Balash said. Moreover, the resulting docu-
ments are too large to be of practical value.
Having a 2,400-page EIS does nothing to
advance the interests of transparency and
the understanding by the public and the reg-
ulators of the issues involved, Balash sug-
gested.
A group of expert witnesses and stake-
holders, convened at the direction of
Interior Secretary Ryan Zinke, has made
recommendations for the improvement of
the EIS process. And Deputy Secretary of
the Interior David Bernhardt has issued an
order, placing a limit on the time taken for
EIS preparation and on the number of pages
in an EIS document.
“I’m pleased to report that just two
weeks ago we moved our first draft EIS for
a coal project in the Colorado region
through the process in a manner that not
only met those requirements but actually
beat them,” Balash said, adding that
improved ways of conducting internal
reviews would lead to the greatest time sav-
ings.
Reducing the time taken for the EIS
development would reduce the long project
lead time that erodes into the net present
value of a project, Balash said.
North Slope roadsBalash also commented on the Arctic
Strategic Transportation and Resources, or
ASTAR, program, a program to develop an
all-season road network connecting North
Slope communities. As previously reported
in Petroleum News, the Alaska Department
of Natural Resources has been working
with the North Slope Borough on this pro-
gram, carrying out stakeholder outreach and
assessing project economics.
“I could not overstate how big this is,”
Balash said, commenting on the shrinking
length of the winter off-road travel season
on the North Slope and the potential for a
road network to reduce operational costs for
the oil industry.
Offshore lease salesIn the federal offshore, the federal
administration is re-examining the five-year
lease sale program and issued a new draft
plan in January. Interior received more than
1.86 million comments on that draft plan,
Balash said. The Outer Continental Shelf
Lands Act requires the government to take
into account the view of local communities
and the state governors — Alaskans and the
Alaska regional Native corporations have
indicated that their views have previously
been disregarded, Balash said.
For this new iteration of the five-year
plan, Interior has heard, for example, from
the North Slope whaling captains and from
the state. At this stage, the intent is to have
another version of the plan published later
this year, to include a lease sale for the
Beaufort Sea, Balash said.
Balash also commented that past federal
challenges to Alaska resource development
came from personnel and policies in
Washington DC, and not from federal per-
sonnel in Alaska.
“It is my sincere hope that we can
institute some changes here in the way we
do our business on the federal side of the
table,” Balash said. “And I ask that all of
you take that with a new view too.” l
BLM retains ANWR public comment deadlineThe federal Bureau of Land Management announced on June 4 that it will not
extend the public comment period for the scoping of an environmental impact
statement for an oil and gas lease sale program for the coastal plain of the Arctic
National Wildlife Refuge. As previously determined, the comment period will end
on June 19, the agency said.
The question of opening the ANWR coastal plain for oil and gas activities is
highly contentious, being strongly opposed by environmental organizations while
strongly supported by Alaska lawmakers and proponents of oil and gas develop-
ment. While some people from North Slope communities have expressed support
for the opening, the Gwich’in people from the Yukon Flats region of Interior
Alaska and the nearby region of western Canada remain opposed because of con-
cerns about potential impacts on the Porcupine caribou, a vital subsistence
resource for Interior communities.
The purpose of the EIS is to analyze the potential environmental impacts of
different leasing alternatives. The EIS may also consider any exploration, devel-
opment and production activities that may result from the leasing.
“I have heard diverse and extensive messages across the state regarding
thoughts, interests and concerns of a broad range of stakeholders, and these con-
sistent messages will inform the development of the EIS,” said Joe Balash, U.S.
Department of Interior assistant secretary for land and minerals. “The heartfelt
and quality comments we have received to date are what we have come to expect
from Alaskans. I sincerely appreciate the interest shown in the coastal plain EIS.”
Interior Secretary Ryan Zinke has made Balash responsible for the completion
of the EIS and for the ANWR lease sale program.
—ALAN BAILEY
continued from page 3
BALASH SPEECH
PIPELINES & DOWNSTREAMFinal protesters removed from perches
The final two protesters who had perched themselves on trees and poles to
block construction of a natural gas pipeline through Appalachia have come down.
The Roanoke Times reports one protester was forcibly removed June 1 and
another came down voluntarily as authorities approached.
The June 1 actions end three months of aerial blockades in Virginia and West
Virginia to protest construction of the Mountain Valley Pipeline.
Authorities removed 30-year-old Catherine “Fern” McDougal the morning of
June 1 from an elevated platform in Giles County where she had been camped out
since May 21. She was charged with four misdemeanors in federal court.
A few hours later, a man known only as Deckard came down from a tree stand
on Peters Mountain in West Virginia. That stand had been occupied since Feb. 26.
—ASSOCIATED PRESS
PETROLEUM NEWS • WEEK OF JUNE 10, 2018 5
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By ALAN BAILEYPetroleum News
Cook Inlet Pipe Line Co., a subsidiary of Hilcorp Alaska,
has asked the Regulatory Commission of Alaska to
authorize the permanent decommissioning of the Drift River
Terminal and its associated infrastructure on the west side of
Cook Inlet. Hilcorp is engaged in a project to reconfigure its
Cook Inlet pipeline system to enable the transportation of oil
by pipeline west to east under the inlet. Currently, oil from
the fields on the west side of the inlet is transported by the
onshore Cook Inlet pipeline south to Drift River, from where
it is carried by tanker to Nikiski on the east side of the inlet.
Close to volcanoThe Drift River terminal lies at the foot of Redoubt
Volcano. In particular because of the risk of the terminal
being impacted by an eruption of the volcano, Hilcorp wants
to eliminate the terminal’s use. In 2009 an eruption of
Redoubt forced an evacuation of the terminal and an emer-
gency drawdown of oil stored at the terminal site.
In addition to the decommissioning of the terminal and its
tank farm, CIPL has asked RCA to approve the decommis-
sioning of the terminal’s Christy Lee tanker loading plat-
form, and the portion of the Cook Inlet pipeline that runs
south from the Trading Bay pipeline junction to the terminal
and the loading platform.
CIPL told the commission that there is no evidence of
any plans for oil development in the Drift River area that
might need the terminal facilities. Moreover, the facilities
would require significant investment to remain compliant
with agency requirements, CIPL said.
DecommissioningThe company envisions that decommissioning would
begin on Jan. 1 and will involve oil removal and cleaning for
the pipeline and terminal facilities, and the dismantlement
and removal of all above ground components of the disused
section of the Cook Inlet pipeline. The Christy Lee platform
would be placed in lighthouse mode, in anticipation of being
removed in conjunction with the eventual removal of Cook
Inlet oil platforms. CIPL would also arrange remediation of
any contaminated soil.
The company anticipates the cost of decommissioning,
excluding the cost of removing the Christy Lee platform, to
be $21 million.
Currently CIPL provides oil transportation services
through the Drift River Terminal and its associated pipeline
and loading platform under an RCA certificate of public
convenience and necessity — hence the need for RCA
approval of the decommissioning.
Converting a CIGGS lineHilcorp’s oil transportation project involves switching
over one of the existing twin Cook Inlet Gas Gathering
System pipelines to the transportation of oil rather than gas.
That would provide the means of shipping oil west to east
under the inlet. The western end of the CIGGS line will be
hooked up to the northern end of the Cook Inlet pipeline sys-
tem via a new short length of onshore oil pipeline. To main-
tain an adequate capacity for the carriage of natural gas
under the inlet, following the conversion of the CIGGS line,
Hilcorp is laying a new subsea gas line from the Tyonek gas
platform to the west side of the inlet, and is upgrading part
of the existing gas pipeline that runs from the Tyonek plat-
form to Nikiski. l
l P I P E L I N E S & D O W N S T R E A M
Hilcorp seeks RCA Drift River approvalWants to discontinue use of terminal and associated infrastructure following startup of pipeline oil transportation under Cook Inlet
6 PETROLEUM NEWS • WEEK OF JUNE 10, 2018
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Better.
E&PNational rigcount rises by 1 to 1,060
The number of rigs drilling for oil
and natural gas in the U.S. increased by
one the week ending June 1 to 1,060.
At this time a year ago there were
916 active rigs.
Houston oilfield services company
Baker Hughes reported that 861 rigs
drilled for oil (up two from the previ-
ous week) and 197 for gas (down one).
Two were listed as miscellaneous
(unchanged).
Among major oil- and gas-produc-
ing states, Oklahoma added two rigs,
and Colorado, Texas, and Wyoming
each added one.
Louisiana lost two rigs. New
Mexico and North Dakota each lost
one.
Alaska, Arkansas, California, Ohio,
Pennsylvania, Utah, and West Virginia
were unchanged.
The U.S. rig count peaked at 4,530
in 1981. It bottomed out in May of
2016 at 404.
—ASSOCIATED PRESS
By ERIC LIDJIFor Petroleum News
I n a reflection that the revival of the Redoubt unit has arrived at a
new phase, Glacier Oil & Gas Corp. has asked the state to contract
the unit and to form a new participating area.
Through its subsidiary Cook Inlet Energy LLC, the company made
the application in November 2017 to comply with a state regulation
requiring companies to contract a unit to participating areas and any
facilitating acreage after 10 years of sustained production.
The contraction would reduce the size of the five-lease Redoubt
unit to some 3,117 acres, down from approximately 23,526 acres now,
by removing ADL 381201 in its entirety and removing large portions
of ADL 378114, ADL 374002, ADL 381203, ADL 381003.
The remaining unit would cover the existing Hemlock participat-
ing area in the northern half of the unit and the proposed South
Stepout participating area in the southern half.
Change in ownershipForcenergy Inc. formed the Redoubt unit in 1997 and reached sus-
tained production in 2002. Through its predecessor Miller Energy
Resources Ltd., Glacier acquired the Redoubt unit in late 2009 and
undertook a redevelopment effort between 2010 and 2013.
The Alaska Department of Natural Resources agreed to defer the
mandatory contraction while Cook Inlet Energy redeveloped the unit.
With production currently above its 2009 levels, Glacier now believes
deferrals are no longer needed and applied for contraction.
The efforts to date focused mostly on the existing Hemlock partic-
ipating area through sidetracks and workovers of existing wells and
waterflood injections to enhance recovery.
But the company also targeted a previously undeveloped accumu-
lation with the Redoubt Unit No. 9 well. Although an electric sub-
mersible pump failed at the well soon after installation, the company
said it was “encouraged by early production” and planned to fix the
pump and restart production. The well forms the basis of the applica-
tion for the South Stepout participating area, which would cover some
l E X P L O R A T I O N & P R O D U C T I O N
Contraction planned for Redoubt unitMandatory unit contraction would eliminate all acreage except existing Hemlock participating area and proposed South Stepout PA
PETROLEUM NEWS • WEEK OF JUNE 10, 2018 7
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see REDOUBT UNIT page 8
GLA
CIE
R O
IL &
GA
S C
OR
P.
By KRISTEN NELSONPetroleum News
Hilcorp Alaska acquired certain of
BP’s North Slope assets in early
2014, including all of BP’s interests in the
Endicott and Northstar oil fields and a 50
percent interest in Liberty and Milne
Point. BP’s interests in oil and gas
pipelines associated with those fields
were also included.
Hilcorp and ExxonMobil Pipeline Co.
are now applying to the Regulatory
Commission of Alaska for approval of a
transfer of ExxonMobil’s share of the
Endicott Pipeline Co. to Hilcorp sub-
sidiary Harvest Alaska LLC.
In a request received by RCA June 5,
Harvest Alaska and ExxonMobil Pipeline
applied jointly for commission approval
of the transfer of ExxonMobil’s share of
the Endicott Pipeline Co., slightly more
than 21 percent, to Harvest Alaska, which
already owns some 68.5 percent of the
line. The remaining almost 10.5 percent
is held by Unocal Pipeline Co.
Following approval of the application,
Harvest Alaska would own some 89.5
percent of the line.
The application notes that the Endicott
Pipeline was built in 1987 and certificat-
ed by the commission in 1989 to transport
crude oil from the Endicott main produc-
tion island to the trans-Alaska oil pipeline
at Pump Station No. 1 via a connection
with the Northstar Pipeline near PS-1.
Endicott also moves crude oil from the
Badami Oil Pipeline, which connects to
the Endicott line at approximately its
midpoint and moves natural gas conden-
sate originating at ExxonMobil’s Point
Thomson field via the Badami Oil
Pipeline. The Endicott line has a capacity
of some 100,000 barrels per day and a
currently estimated remaining economic
life of six years, “which could be extend-
ed if new or additional oil production is
developed in the area that it serves, or if
natural gas condensate produced from the
Point Thomson Field requires transport to
TAPS Pump Station No. 1 beyond 2024,”
the companies said in their application to
RCA.
The Endicott Pipeline is operated by
Harvest Alaska, which was formed in
2014 as a wholly owned subsidiary of
Hilcorp Alaska. Hilcorp Alaska owns
interests in and operates 30 oil and gas
field production facilities in Cook Inlet
and on the North Slope and employs 472
people in Alaska. Hilcorp began acquir-
ing Cook Inlet properties in 2011 and
began operating in 2012.
Hilcorp Alaska and provides opera-
tional support to Harvest Alaska for the
subsidiary’s North Slope and Cook Inlet
oil and gas pipelines, including the
Endicott Pipeline.
Harvest Alaska employs 28 people in
Alaska and operates and manages several
oil and gas pipeline systems in Cook Inlet
l P I P E L I N E S & D O W N S T R E A M
Hilcorp buying Exxon out of Endicott line
8 PETROLEUM NEWS • WEEK OF JUNE 10, 2018
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907. 258.4704
1,280 acres at two leases.
As of June 2018, the state had yet to
rule on either the proposed unit con-
traction or the proposed participating
area but had approved a new plan of
development for the unit.
Small projects this yearIn that 18th plan of development for
the coming year, Glacier announced a
long-term goal of delineating and
developing the Central, Southern and
Northern fault blocks at the unit, but
said that its immediate plans mostly
involve sidetracks and workovers.
The company undertook a similar
range of projects in its 17th develop-
ment year, running through the end of
April 2018. The company drilled the
Redoubt Unit No. 3A sidetrack as a
waterflood injection well. The compa-
ny also replaced electric submersible
pumps in the Redoubt Unit No. 1A and
Redoubt Unit No. 5B wells, although a
related project to hydraulically fracture
those two sidetracks was cancelled fol-
lowing pump failures. l
continued from page 7
REDOUBT UNIT
see ENDICOTT LINE page 10
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PETROLEUM NEWS • WEEK OF JUNE 10, 2018 9
ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS
Companies involved in Alaska’s oil and gas industryAdvertiser Index
All of the companies listed above advertise on a regular basis with Petroleum News
l F I N A N C E & E C O N O M Y
Exxon aims to boost earnings, productionBy DAVID KOENIG
Associated Press Business Writer
Exxon’s CEO says the company can more than double
its earnings by 2025 and will invest in new oil and gas
production even if policymakers adopt rules to combat cli-
mate change.
Darren Woods told shareholders May 30 that technolo-
gy like biofuels will allow the company to produce energy
with lower carbon emissions.
Environmentalists say Woods is offering political spin
instead of solutions.
The oil giant’s annual meeting in a symphony hall was
a tame affair, lacking the usual number of protesters. For
the first time in years, there were no environmental reso-
lutions from activist shareholders and no fiery speeches
during the open-comment period.
Woods, like his predecessor and former Secretary of
State Rex Tillerson, said the world will need oil and gas
for decades. Exxon, Woods said, is responding to that
demand while investing in technology such as carbon cap-
ture and biofuels to reduce heat-trapping carbon emis-
sions. Earlier in May, the company promised to cut its
own emissions of methane, a powerful greenhouse gas, by
15 percent by 2020 largely by reducing leakage from nat-
ural gas wells.
“We see our role as helping close the gap between what
people want and what can be responsibly done,” Woods
said.
Environmentalists counter that Exxon’s technology
investments, some in partnership with leading universi-
ties, will not produce enough reductions to avoid the worst
effects of climate change, including more bouts of severe
weather.
Kathy Mulvey, a climate activist at the Union of
Concerned Scientists, called Woods’ comments “all PR”
— public relations. She said Exxon’s investments in alter-
see EXXON BOOST page 11
Working interest ownersBrooks Range Petroleum LLC operates
the field on behalf of its working interest
owners, which also include TP North
Slope Development LLC, MEP Alaska
LLC, Nabors Drilling Technologies USA
Inc. and AVCG LLC.
As collateral for its loan to CaraCol
AIDEA is retaining its security interests in
Brooks Range’s North Slope assets and in
the assets of MOC 1 LLC. And, in addition
to the repayment of principal and interest
for the loan to CaraCol, AIDEA will
receive options in CaraCol’s parent com-
pany, Alpha Energy Holdings Ltd.
Although Mustang is a modest sized oil
field, the field lies at a convenient location
close to the existing North Slope infra-
structure, in particular the Alpine oil
pipeline. Brooks Range has been following
a strategy of developing field facilities that
can act as hub facilities in the future for
other developments nearby, as well as sup-
porting the Mustang field itself. AIDEA
sees providing financial support for the
field as consistent with the agency’s mis-
sion of facilitating commercial activity in
Alaska.
Purchase of field assetsIn 2012 AIDEA purchased an 80 per-
cent stake in Mustang Road LLC, the com-
pany that would build the gravel road and
pad for the Mustang development. And in
2014 the agency invested in MOC 1, the
company that would develop the Mustang
processing center.
John Springsteen, AIDEA CEO and
executive director, told the AIDEA board
that, subsequent to the investment in MOC
1, the downturn in the oil industry caused
financing problems for the Mustang devel-
opment — in February 2016 AIDEA and
Brooks Range agreed on a “warm stand-
by” plan for the development. And,
although that plan expired at the end of
November 2016, Brooks Range and
AIDEA continued to seek financing for the
project.
In June 2017 AIDEA approved an addi-
tional investment of $2.5 million into the
development. That investment, designed to
protect the investment in equipment
already developed for the field, enabled
the successful drilling and testing of the
North Tarn 1A well in the field in
November 2017. This successful test
demonstrated a well that could be commer-
cially supportable.
Revised development planIn parallel with this new drilling and
testing, Brooks Range has prepared a
revised development plan involving the
installation of a rented modular production
facility that would enable early production
from the field but would be replaced by
permanent production facilities, once those
are completed. The new plan envisions
Mustang oil production of some 2,000 bar-
rels per day by the beginning of 2019, ris-
ing to 5,000 barrels per day by the end of
that year.
The resulting reduced capital needs of
this new development plan are causing a
shift in AIDEA’s role in the project from
being an owner to a lender in the project,
Springsteen explained. Hence the switch
from ownership interests in MOC 1 and
Mustang Road 1 to a loan to CaraCol.
During its May 31 meeting the AIDEA
board also approved a line of credit of up
to $1 million for MOC 1, to act as bridging
finance for costs associated with MOC 1.
—ALAN BAILEY
continued from page 1
MUSTANG INTEREST
1002 area, high resolution seismic data
would be beneficial in identifying subtle
oil and gas traps in the subsurface.
Two crews over two wintersThe survey plan says that SAE antici-
pates supporting two seismic crews for the
survey operations during each of the win-
ter seasons that the survey program takes
to complete. During each season, survey-
ing would start about Dec. 1 and end on
May 31, or at the time when winter off-
road tundra operations must end. On state
land on the coastal plain of the central
North Slope, seismic survey operations
are commonly conducted during the win-
ter off-road tundra travel season, when the
snow cover and frozen ground protect the
tundra from damage. Vehicles and equip-
ment used are of designs that can avoid
impacting the tundra.
The Marsh Creek survey plan says that
the survey program will minimize any
impacts on the environment by using tech-
nology that can minimize the number of
vehicles deployed on the tundra; the use
of articulated, rubber tracked, low ground
pressure vehicles; reducing vehicle sizes;
and using systems that minimize the risks
of hydrocarbon spills from the vehicles.
Vibrator equipmentA modern seismic survey of this type
typically uses surface vibrator equipment
to generate the subsurface sounds that will
echo off subsurface structures. The Marsh
Creek plan anticipates the use of rubber
tracked or buggy vibrator equipment,
together with wireless, autonomous nodes
for recording the seismic signals. Vibrator
source points would be located at 41.25-
foot intervals on source lines, with geo-
phone nodes located at 165-foot intervals
on receiver lines running perpendicular to
the source lines. The source and receiver
lines would be spaced about 660 feet
apart. And up to 20 receiver lines could be
place on the ground at any one time.
Vibrators will only operate on snow
covered tundra or grounded sea ice. And a
vibrator will only have to traverse each
source line once.
Crews will lay out the wireless record-
ing nodes either by foot or through the use
of rubber tracked, tundra-approved vehi-
cles, the March Creek survey plan says.
Recording operations will be conducted
24 hours per day, using two 12-hour
shifts, the plan says. SAE has a wildlife
interaction plan that includes protocols
such as reporting the sightings of polar
bears to the U.S Fish and Wildlife Service,
the plan says.
A specialized vehicle or snow
machines will use technology including
ground penetrating radar to check for the
integrity of ice in the area of a seismic
operation. And the plan includes a proto-
col for avoiding damage to areas with wil-
lows. SAE plans to use temporary
airstrips on frozen lakes or appropriate
tundra for conducting crew changes, to
save several hours of ground travel.
Environmental organizations opposedEnvironmental organizations are
adamantly opposed to any oil and gas
related activity in the 1002 area. The
Alaska Wilderness League slammed the
proposed seismic operations, citing still
visible scars from surveying conducted in
1984 and 1985 and claiming that the sur-
veying activities will involve “convoys of
30-ton thumper trucks and bulldozers
traveling over extensive areas of fragile
tundra.”
“This is the polar opposite of what was
promised by drilling proponents,” said
Adam Kolton, executive director of the
Alaska Wilderness League. “Instead of a
small footprint and a careful process, they
want to deploy a small army of industrial
vehicles and equipment with a mandate to
crisscross every square inch of the
refuge’s biological heart.”
There have been press reports that the
U.S. Fish and Wildlife Service is dissatis-
fied with the seismic survey plan, saying
that the plan does not contain sufficient
specific detail for an adequate agency
review. Apparently the Washington Post
obtained a copy of the Fish & Wildlife
response. Although BLM is administering
oil and gas related activity in the 1002
area, Fish and Wildlife manages ANWR
as a whole and maintains a conservation
plan for the refuge. SAE will require an
incidental harassment authorization from
Fish and Wildlife for the unintended dis-
turbance of polar bears. An IHA normally
spells out mitigation measures required to
minimize wildlife impacts. l
10 PETROLEUM NEWS • WEEK OF JUNE 10, 2018
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onthe slope
and on the North Slope. Cook Inlet
pipelines operated and owned, in whole
or in part, by Harvest Alaska include the
Swanson River Oil Pipeline, the Cook
Inlet Pipeline Co.’s oil pipeline and
Kenai Beluga Pipeline. On the North
Slope, Harvest Alaska operates the
Northstar Oil Pipeline, the Northstar Gas
Pipeline, the Endicott Pipeline, the Milne
Point Oil Pipeline and the Milne Point
Natural Gas Liquids Pipeline. Harvest
Alaska also owns, in part or in whole,
those North Slope pipelines. l
continued from page 8
ENDICOTT LINE
lion Pacific NorthWest LNG project 10
months ago, blaming a weak global
market outlook and the “extremely
challenging environment” in Canada,
said it is keen to join LNG Canada to
take advantage of the export outlet for
its vast natural gas reserves in northeast
British Columbia’s North Montney
resource which is operated by its sub-
sidiary Progress Energy Canada.
Petronas said its role in LNG
Canada includes the design, construc-
tion and operation of a gas liquefaction
plant, facilities for the storage and
export of LNG and marine facilities.
The estimated costs include
TransCanada’s proposed C$4.7 billion
Coastal GasLink pipeline from the
Montney region to Kitimat on the
northern B.C. coast.
Shell has argued that LNG Canada
would help reduce greenhouse gas
emissions by replacing more carbon-
intensive commodities such as coal
with LNG.
Federal tariffs unresolvedStill to be resolved is an issue for fed-
eral tariffs as Shell awaits a response
from Canada’s Finance Department to
exempt the project from anti-dumping
duties of up to 45.8 percent on imports of
fabricated industrial steel components,
notably from China and South Korea.
LNG Canada Chief Executive Officer
Andy Caditz said in early May he is con-
fident the consortium will be ready to
start construction this year. Initial ship-
ments have been targeted for the 2022-24
period.
British Columbia’s New Democratic
Party, at odds with its own resistance to
Kinder Morgan’s Trans Mountain
pipeline expansion, has offered signifi-
cant tax relief to LNG Canada totaling
C$6 billion over 40 years, although it still
estimates revenues to the province will
reach C$22 billion over the same period.
The project has considerable buy-in
from aboriginal communities, led by the
Haisla Nation Council, although the
council has yet to sign a final commercial
agreement. l
continued from page 1
ANWR SEISMICThe Alaska Wilderness Leagueslammed the proposed seismic
operations, citing still visible scarsfrom surveying conducted in 1984and 1985 and claiming that thesurveying activities will involve
“convoys of 30-ton thumper trucksand bulldozers traveling over
extensive areas of fragile tundra.”
continued from page 1
LNG GIANTS
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native fuels and other technological break-
throughs are a pittance compared with its
spending on finding more oil and gas.
The Irving, Texas-based company
earned $19.7 billion last year, as rising oil
prices reversed a slide in profit. Yet the
shares fell 7 percent last year and are
down so far in 2018. Woods said the stock
will rise as earnings improve.
Earlier this year, one of Exxon’s most
prominent critics, New York Attorney
General Eric Schneiderman, was forced
from office by charges that he physically
abused several women. Schneiderman, a
Democrat, was investigating whether
Exxon misled the public and investors by
hiding what it knew about the link
between climate change and burning oil
and gas.
Schneiderman’s interim replacement,
Barbara Underwood, is continuing the
investigation, an aide said. Voters will pick
the next attorney general in November in a
state where registered Democrats outnum-
ber Republicans about 2-to-1.l
continued from page 9
EXXON BOOST
covery, totaled some 1.2 million acres,
a combination of state and federal
acreage.
In the company’s transcript of a Feb.
1 analysts’ call, ConocoPhillips execu-
tive vice president of production,
drilling and projects, Al Hirshberg, said
of the acreage acquisition, “We now
own 100 percent of these assets con-
taining about 200 million barrels of
gross reserves and about 900 million
barrels of risked gross resource, with
gross production of about 63,000 bar-
rels per day in 2017.”
Hirshberg described the acquisition
from Anadarko as “an opportunistic
bolt-on opportunity.”
ConocoPhillips Chairman and CEO
Ryan Lance said in the Feb. 1 call that
Anadarko had “expressed a desire to
sell some assets, and Alpine was one of
those. I think we’re the natural buyer
because we operate and we have the
majority interest in the area.” Lance
also said it made a lot of sense for
ConocoPhillips “to pick up that interest
and be in complete control … of the
capital pace and destiny over there.”
In its June 4 press release
ConocoPhillips said in the first quarter
of 2018 the production associated with
the acquired 22 percent lease interests
was 11,000 barrels of oil equivalent
per day. The company currently has
western North Slope production from
the Colville River unit, with produc-
tion expected to begin from Greater
Mooses Tooth in NPR-A by the end of
the year.
The Alaska Department of Natural
Resources’ May monthly lease admin-
istration activity report reflects the
transfer of acreage from Anadarko to
ConocoPhillips Alaska, with an effec-
tive date of March 1. Anadarko cur-
rently has no state lease acreage in
Alaska.
The federal Bureau of Land
Management, which leases in the
National Petroleum Reserve-Alaska,
shows no current leases for Anadarko
in a list of NPR-A acreage dated May
17.
ConocoPhillips Alaska and
Anadarko had partnered in both state
and NPR-A acreage.
—KRISTEN NELSON
Washington-BC connectionWashington Gov. Jay Inslee and British
Columbia Premier John Horgan have estab-
lished a two-way flow of information over
the past year under the Pacific Coast
Collaborative, established in 2008 to pro-
mote joint action on climate change and the
environment and protect their shared waters
from tanker spills.
In the process, Inslee, seizing advantage
of the November 2017 election when his
Democrats won full control of the state gov-
ernment, has become a rare supporter of
Horgan’s battle to scrap the Trans Mountain
expansion by setting an example that is
widely admired among environmentalists
and aboriginal communities in British
Columbia.
His administration has tightened regula-
tions around the transportation of oil in
Puget Sound, including a tax on pipelines to
help finance safety measures, battled the
Trump administration’s efforts to expand
offshore oil drilling, and refused to issue a
permit for what would have been the largest
crude-by-rail terminal in the United States.
Inslee and Horgan used an almost identi-
cal language in arguing that the environ-
mental and public-health risks outweigh the
benefits of increase tanker shipments.
BC lacks Canadian backingBut Horgan has had trouble finding
friends within Canada. Only one of nine
other provincial and three territorial pre-
miers has offered him clear-cut backing.
When Alberta threatened to cut off fuel
shipments to British Columbia in response
to Horgan’s opposition to Kinder Morgan’s
plans and the Trudeau government
announced it would spend C$4.5 billion to
take over the existing Trans Mountain sys-
tem and likely pay another C$7.4 billion for
the expansion project, Inslee reportedly
consulted closely with Horgan about an
opinion piece he wrote for the Seattle
Times.
In that article he said the project “runs
counter to everything our state is doing to
fight climate change, protect our endan-
gered southern resident killer whales and
protect communities from the risks associ-
ated with increased fossil-fuel transporta-
tion — by rail and by sea.”
That stance was scorned by the
Canadian Association of Petroleum
Producers, which described Inslee’s posi-
tion as “hypocritical,” noting that Alberta
has imposed a price on carbon emissions
that is double his proposed tax that died in
the state legislature this spring.
Four years ago, Washington’s
Department of Ecology took an even harder
line against the Trans Mountain plan, telling
Canada’s National Energy Board that
Canada and B.C. spill response measures
“are less stringent than U.S. and
Washington standards” and would not ade-
quately protect the shared waters and aquat-
ic life.
Since 2016, the state has provided quar-
terly reports of crude-oil shipments to emer-
gency responders, local governments,
indigenous groups and members of the pub-
lic, while the B.C. Ministry of the
Environment is unable to do more than esti-
mate the volumes of crude being transport-
ed across the province by rail or pipeline,
although it has promised more information
by this fall.
Matt Krogh, an activist with
Stand.earth’s Extreme Oil organization, told
Toronto’s Globe and Mail that Inslee’s
administration has advanced the state’s
most “progressive policies” in five years
and is now “able to play catch up, in partic-
ular, with things like the movement of fossil
fuels and spills preparedness” at a time
when Washington and B.C. are under
tremendous pressure to build more infra-
structure for coal, natural gas and oil
exports.
—GARY PARK
Terminal. Planned work includes:
enhancing the safety integrity pressure
protection system; preparing for inline
inspection of the line beginning in the
fall; replacing 6-inch bypass valves and
spool of a mainline check valve; and con-
ducting annual inspection and mainte-
nance of the Pump Station No. 9 power
substation.
“Planned major maintenance plays a
critical role in sustaining TAPS for
decades to come,” said Alyeska President
Tom Barrett. “Alyeska maintains the
pipeline as our commitment to the
integrity of the system and people of
Alaska.”
Slope turnaroundsOperators on the North Slope take
advantage of the Alyeska shutdown and
summer weather to schedule turnarounds.
BP spokeswoman Dawn Patience told
Petroleum News in a June 1 email that
several temporary brief outages are
planned for the summer, along with other
maintenance.
“BP has normal planned summer
maintenance at Prudhoe Bay this sum-
mer,” she said, with work “focused on
piping replacements, facility mainte-
nance, vessel repairs and other improve-
ment projects.” Patience said summer
maintenance and temporary facility shut-
downs take advantage of temporary
pipeline shutdowns and the milder sum-
mer weather in the Arctic.
ConocoPhillips Alaska also has turn-
arounds planned, spokeswoman Natalie
Lowman said in a June 6 email, including
“major maintenance work and a shut-
down in mid-June at the Kuparuk CPF2
facility.” She said the company’s western
operations staff has “a major maintenance
shutdown” planned for Alpine in mid-
July.
—KRISTEN NELSON
continued from page 1
OIL SHIPMENTS
continued from page 1
CONOCO PURCHASE
continued from page 1
SUMMER MAINTENANCEPlanned work includes: enhancing
the safety integrity pressureprotection system; preparing for
inline inspection of the linebeginning in the fall; replacing 6-inch bypass valves and spool of a
mainline check valve; andconducting annual inspection andmaintenance of the Pump Station
No. 9 power substation.
board sign off on the changes as part of the
AIDEA authorization for the sale comple-
tion. During its May 31 meeting the AIDEA
board passed a resolution agreeing to one of
IGU’s requested changes but rejecting the
other change. AIDEA extended the deadline
for sale closure by two weeks, to enable the
IGU board to decide whether to agree to
AIDEA’s terms.
The objective of the IEP is to bring an
expanded, affordable natural gas supply to
Fairbanks and the surrounding Alaska
Interior, to reduce the cost of energy for
consumers while also alleviating air pollu-
tion primarily resulting from the use of
wood burning stoves to heat buildings. In
addition to FNG, Pentex owns the Titan liq-
uefied natural gas plant near Point
Mackenzie and a trucking operation for
transporting LNG to Fairbanks.
Requested changesThe change to which AIDEA has agreed
relates to improvements to a North Slope
gravel pad that IGU is purchasing as part of
the Pentex deal. But AIDEA has rejected a
change that would consider the possibility
of developing a new LNG plant adjacent the
Alaska Railroad near Houston, as an alter-
native to a plan in the sales document to
expand Pentex’s existing Titan LNG plant
— the AIDEA board said that the sale doc-
umentation already includes language
accommodating potential changes to the
development of expanded LNG supplies for
Fairbanks and that IGU’s proposed change
to the documentation could have ramifica-
tions elsewhere in the purchase and sales
agreements.
AIDEA board members also expressed
concern about a request for changes to the
documentation less than two weeks before
the sale was due to close, given that the doc-
umentation had been completed and agreed
in December.
“We have a good development process.
We have language within that development
process that ensures that the parties work
together. And we have a dispute resolution
that requires mediation and further allows
the parties to work together,” said AIDEA
board member Fred Parady, in reference to
the documented development plan for
increased LNG production.
State fundingThe IEP has state funding in the form of
Sustainable Energy Transmission and
Supply, or SETS, loans, AIDEA bonds and
a state capital appropriation. In 2015 some
SETS funding enabled FNG to begin an
expansion of its gas distribution network,
while also enabling IGU to start building its
network. The network build-outs came to a
halt after that year, following changes in the
plans for furthering the IEP.
The IEP plan now involves IGU using a
SETS loan to purchase Pentex, with IEP
funding also enabling the construction of a
new, expanded LNG storage facility in
Fairbanks. The expanded storage, by
enabling the increased stockpiling of sum-
mer produced LNG, will enable the estab-
lishment of expanded gas supplies for
Fairbanks consumers through the distribu-
tion system expansions that were achieved
in 2015.
Increased LNG supplyHowever, the eventual aim is to increase
the LNG supply, thus enabling the gas dis-
tribution system in Fairbanks to be further
built out. The plan outlined in the Pentex
purchase and sale agreement envisages the
expansion of the existing Titan LNG plant,
using further IEP financing. However, at
this stage no final decision has been made
on that plant expansion — the expansion
would require IGU to issue a request for
proposal for the development, with
AIDEA, as financier for the project, having
oversight of any development decision.
Manufacturing company Siemens, in
conjunction with Knikatnu Corp., the
Native village corporation for the Knik and
Wasilla area, has proposed the construction
of a new LNG plant near Houston, as an
alternative to expanding the Titan plant.
The proponents of the Houston proposal
argue that this concept would offer the
advantages of having a new modular and
easily expandable plant, with the possibili-
ty of conveniently shipping LNG to
Fairbanks by rail rather than by road.
Siemens and Knikatnu conducted pre-
sentations on their concept to the AIDEA
board during the agency’s Oct. 26 board
meeting and, apparently, have more recent-
ly been discussing their proposal with the
IGU board. During the October AIDEA
board meeting Jerry Juday, assistant attor-
ney general, Alaska Department of Law,
commented that, although the Pentex sale
documentation specifically references the
expansion of the Titan plant as the means of
expanding the Fairbanks LNG supply, the
document does not preclude the possibility
of the Houston group submitting its alterna-
tive LNG plant proposal, in response to the
anticipated RFP for Titan plant expansion.
In its May 22 draft letter of agreement
IGU requested modifications to the docu-
mented development process for LNG sup-
ply expansion in the Pentex sale agreement,
to include an evaluation of the Siemens
proposal, as an alternative to the Titan plant
expansion, with a procedure for reconciling
any difference of opinion between AIDEA
and IGU over the preferred solution. The
AIDEA board’s rejection of this proposal
reflected the board’s view that the Pentex
sale and financing agreements already
accommodate the possibility of an alterna-
tive to the Titan expansion.
Storage tank constructionMeanwhile, the construction of the new
LNG storage facility in Fairbanks has been
proceeding to plan. Dan Britton, president
and CEO of Pentex, told the AIDEA board
that, with the concrete foundation for the
tank already having been laid, the first of
the panels for the tank was due to be deliv-
ered on June 6; all of the tank’s 44 panels
should be installed by mid-July. The expec-
tation is to have the new facility ready for
commissioning at the end of June 2019.
One significant concern for the IEP is
the rate at which Fairbanks consumers will
switch to the use of natural gas for the heat-
ing of buildings: The project economics
hinge on having an adequate demand for
natural gas as a result of heating conver-
sions. Gene Therriault, IEP team leader,
told the AIDEA board that the recent pas-
sage by the state Legislature of a bill
enabling the on-bill financing of conver-
sions should help push up the conversion
rate. An on-bill financing arrangement
enables the payment of the conversion
costs though installments added to a con-
sumer’s monthly gas bills.
The Legislature had previously passed
legislation enabling the implementation of
Property Assessed Clean Energy, or PACE,
arrangements that can bring low cost
financing to businesses wishing to convert
to natural gas use.
In addition, the Environmental
Protection Agency has awarded a $4 mil-
lion grant to Fairbanks North Star Borough
for assistance in addressing air pollution
issues: The EPA has indicated that the
funds will be used in a program for replac-
ing wood burning stoves with cleaner burn-
ing appliances. l
12 PETROLEUM NEWS • WEEK OF JUNE 10, 2018
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continued from page 1
PENTEX SALE
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