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2015 Meet Alaska Conference & Tradeshow

Meet Alaska Conference & Tradeshow Denaâ&#x20AC;&#x2122;ina Civic and Convention Center Anchorage, Alaska 301 Arctic Slope Ave. Ste. 350 Anchorage, AK 99518 P: 907-561-4772 F: 907-563-4744 www.alaskajournal.com

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Publisher Rona Johnson (907) 275-2179 rona.johnson@morris.com Managing Editor Andrew Jensen (907) 275-2165 editor@alaskajournal.com Production Manager Maree Shogren (907) 275-2162 maree.shogren@morris.com Cover and Layout Designer Nadya Gilmore (907) 275-2163 nadya.gilmore@morris.com Reporter Tim Bradner (907) 275-2159 tim.bradner@alaskajournal.com Reporter Elwood Brehmer (907) 275-2161 elwood.brehmer@alaskajournal.com Account Executive Ken Hanni (907) 275-2155 ken.hanni@morris.com Account Executive Jada Nowling (907) 275-2154 jada.nowling@morris.com Account Executive Joy Bunde (907) 275-2153 joy.bunde@morris.com

Revenue forecast gloomy, but production outlook brightens . .................. PAGE 8 North Slope lease bids quadruple from 2013........................................ PAGE 10 Federal North Slope lease sale nets less interest than 2013..................... PAGE 10 ConocoPhillips targeting 62,000 new barrels by 2017.................. PAGE 12 Producers sanction new drill site at Kuparuk River field....................................... PAGE 13 ConocoPhillips contracts with Nabors for new drill rig......................... PAGE 13 CD-5 construction proceeds as legal wrangling continues............... PAGE15 Public hearings end for Chukchi lease sale SEIS . ........................... PAGE 16 Joint venture enables production at Mustang.................................... PAGE 18 Work continues at Bokan, Niblack, Ambler and Donlin..................................... PAGE 20 Company pursues mineral rights for Haines development.................. PAGE 21 Hilcorp buys Point MacKenzie LNG plant serving Fairbanks........ PAGE 23 LNG exports approved to free trade countries................ page 23

ExxonMobil sees abundant oil, gas far into future .......... PAGE 24 corps publishes scoping report for ASAP SEIS ................................ PAGE 26 Caelus ready to give go-ahead for nuna.........................page 29 Repsol plans $240M in drilling, seismic work for winter season....................... PAGE 29 Murkowski prepared for role as Energy Committee chair............ PAGE 31 Hearing set in state lawsuit seeking new ANWR exploration....................... PAGE 32 Federal judge orders EPA to halt pending Pebble action................................. PAGE 34 Alaska has several options for gas-to-liquids conversions.................................. PAGE 38 GTL on North Slope could slash low-sulfur diesel prices........ page 39 Alaska, B.C. cooperate quietly on transboundary issues.............. PAGE 41 Native regional corps. exploring frontier basins............................. PAGE 42 NOAA proposes huge critical habitat area for ringed seals........................... PAGE 46 Clean Air Act regulations could render Healy plant obsolete.......................................... page 46

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2015 Meet Alaska Conference & Tradeshow Welcome to

The Alaska Support Industry Alliance 3301 C Street Suite 205 Anchorage, AK 99503

Meet Alaska 2015!

On behalf of the Alaska Support Industry Alliance’s Board of Directors and Staff, thank you for joining us here today. It’s Working, Alaska … Oil Tax Reform is working … more investment, more oil, MORE JOBS.

Phone: (907) 563-2226

AK LNG is working … enabling legislation, pre-FEED activity, MORE JOBS.

Website: www.alaskaalliance.com

Point Thomson is working … more oil, 75 Alaskan contractors on site, MORE JOBS.

General E-mail: info@alaskaalliance.com General Manager Rebecca Logan rlogan@alaskaalliance.com Director of Communications Renee Limoge rlimoge@alaskaalliance.com

Cook Inlet is working … more drilling, more oil, MORE JOBS. As the organization that represents Alaskan businesses and Alaskan workers who support the oil, gas and mining industries, we see every day that resource development is working for Alaska. We need to stay the course. In the coming year, as we convene a new session, work with a new administration and a new legislature, it is important to remember what’s working for Alaska. Let’s keep the momentum going.

Fairbanks Membership Coordinator Jim Plaquet jplaquet@alaskaalliance.com Kenai Membership Coordinator Hadassah Udelhoven hudelhoven@alaskaalliance.com Communications, Events and Database Coordinator Jill Schaefer jschaefer@alaskaalliance.com

Thank you,

Rebecca Logan

General Manager Alaska Support Industry Alliance

ON THE COVER (clockwise from top left): Photo/Courtesy/ConocoPhillips Photo/Courtesy/Teck Alaska Photo/Rashah McChesney/Peninsula Clarion Photo/Courtesy/ExxonMobil Photo/Rashah McChesney/Peninsula Clarion

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2015 Meet Alaska Conference & Tradeshow

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2015 Meet Alaska Conference & Tradeshow

Revenue forecast gloomy, but production outlook brightens By Elwood Brehmer and Tim Bradner Alaska Journal of Commerce

Despite gloomy world oil markets, some good news for Alaska is that expectations for oil production are still upbeat. While production is expected to dip this fiscal year due to factors unrelated to markets, the Department of Revenue expects increases in fiscal years 2016 and 2017. The department is forecasting a decline of 22,000 barrels per day in average annual production for the state’s current fiscal year, now half complete, but a recovery of 15,000 barrels per day in fiscal year 2016 and an additional 10,000 barrels per day in fiscal year 2017. The state fiscal year runs from July 1 to June 30. The state released its production and forecast Dec. 10 in the Revenue Sources Book Fall 2014. “Given the forecast in investment, we expect that oil production should remain above 500,000 barrels per day for the next three fiscal years,” acting state Revenue Commissioner Marcia Davis said. In comparison, in its December 2013 production forecast, the Revenue Department had estimated production dropping to 498,000 barrels per day in the current fiscal year and down to 487,500 barrels per day in fiscal year 2016. The decline for the current year is mainly due to an aggressive summer 2014 maintenance program on North Slope production facilities that resulted in curtailed production during July and August. The increased output estimates for fiscal years 2016 and 2017 are based on capital investment forecasts Alaska producers have given the Revenue Department, Davis said. Production is expected to increase as new projects now in construction come on line, according to the Revenue Department. These

include CD-5, a new drillsite in the Alpine field and a new drillsite in the Kuparuk River field, both operated by ConocoPhillips. ConocoPhillips and BP, which operate the large Prudhoe Bay field, are also bringing on new drill rigs in the two large producing fields that will result in new production wells and new output. “Production is the good news, relatively speaking,” said Jerry Burnett, deputy commissioner at the Revenue Department. The not-so-good news is the estimate of state revenues, which are about 90 percent dependent on oil taxes and royalties. In its forecast, the department is predicting unrestricted general fund revenue of $2.6 billion for the current fiscal year, about half was was estimated previously. For the 2016 fiscal year, which starts this July 1, the outlook is worse; the state is expected to take in $2.2 billion in unrestricted cash. A year ago, the department forecasted $4.5 billion of unrestricted revenue in fiscal year 2015. By comparison, the state took in $5.4 billion of unrestricted revenue in fiscal year 2014, which ended last June 30. The State of Alaska’s total revenue for fiscal 2014, including investment income, was $17.2 billion. The projections are alarming, but not surprising. Alaska North Slope oil prices tumbled in recent months from $110 per barrel in July to $61.91 on Dec. 10. In fiscal year 2014, approximately 88 percent of unrestricted state revenue came from oil, according to the Revenue Department. Gov. Bill Walker released former Gov. Sean Parnell’s fiscal year 2016 budget Dec 5, without endorsement, which laid out $5.5 billion in unrestricted general fund spending. That would put the state in a roughly $2.9 billion deficit for fiscal year 2016. Walker plans on releasing an amended

budget proposal to the Legislature early next session, which begins Jan. 20. Reigning in state spending was a cornerstone of Walker’s campaign. Despite the currently collapsing oil market, Davis sees a dim light at the end of the tunnel. “After (fiscal year) 2016, we believe that oil prices will recover above $90 per barrel and remain higher throughout our forecasted period to (fiscal year) 2024,” Davis said in a department release.

2015 Meet Alaska Conference & Tradeshow

Photo/Michael Penn/Juneau Empire

Gov. Bill Walker, right, signs transitional papers in front of Lt. Gov. Byron Mallott, center, and Walker’s Chief of Staff, Jim Whitaker, at the Capitol on Dec. 1 after being sworn into office. Walker confronts a gloomy revenue situation with the deficit forecast to reach nearly $3 billion in the current year, but the state is also projecting an additional 25,000 barrels per day of oil production during the next two fiscal years.

Long-term revenue projections are for annual unrestricted state income between $3.6 billion and $4.8 billion from fiscal 2017-2024 after bottoming out in 2016 at $2.2 billion. “Although, in the short term, lower oil prices lead to lower revenues, our long-term view is optimistic,” Davis said. “Greater investment by the oil and gas industry on the North Slope and solid performance of state investments makes Alaska’s overall financial

health sound.” Kara Moriarty, president of the Alaska Oil and Gas Association, or AOGA, said, “The Fall Revenue Sources (estimate) demonstrates tax reform is working for Alaskans as indicated by the fact that we have more oil production and more industry investment.” “Oil companies said the new tax law would lead to more investment, and more production, and they were right.”

“Billions more dollars are being spent in Alaska’s oil patch since tax reform passed, including investments by small, independent oil and gas companies. New investment leads to more oil. “Even though Alaska is experiencing a period of low oil prices, the current tax policy is working as intended by generating hundreds of millions more in State revenue at these lower prices, while providing a stable business climate for increased industry investment.”

2015 Meet Alaska Conference & Tradeshow

North Slope lease bids quadruple from 2013 By Molly Dischner For the Journal of Commerce

The State of Alaska received significant interest in North Slope oil and gas leases during its 2014 lease sale. A total of 356 bids were submitted for 298 tracts, including 297 for the North Slope onshore leases, 57 for the Beaufort Sea and 2 for the North Slope foothills. High bids totaled $59.7 million, said Division of Oil and Gas Director Bill Barron at the end of the bid opening. The 2014 bids far outnumbered recent years, and are the most submitted since at least 2006. In 2013, 92 total bids were submitted. In 2012, the state received 132 bids on 122 tracts. In 2011, there were 257 high bids: 78 for the Beaufort Sea and 179 for onshore leases. “I’m certain, having talked with some of the bidders, that the affirmation of tax reform in August contributed to the number of bids we saw,” said former Department of Natural Resources Commissioner Joe Balash. For the North Slope areawide leases, nine

bidder groups sought leases and 526,947 acres were sold. For the Beaufort Sea leases, five bidding groups bid, and 107,189 acres were sold. Independents submitted the majority of the high bids. Caelus Alaska Exploration won the largest number of bids, but was also outbid on some leases, mostly by ConocoPhillips and Denver-based 70 and 148 LLC, a subsidiary of Armstrong Oil and Gas. Caelus operates on the North Slope leases formerly held by Pioneer Natural Resources, and the State of Alaska recently announced a preliminary finding in favor of Caelus’ request for royalty reduction while it brings the new Nuna field online; that decision must still be finalized. In the Beaufort, 70 and 148 LLC outbid Caelus on eight adjacent tracts west of Deadhorse. That company was also the apparent high bidder for two other tracts. Major North Slope producers also bid on leases in the Beaufort and areawide sales. ConocoPhillips won some Beaufort leases, but did not grab all of the North Slope areawide lease it bid on. The major bid was in

conjunction with Chevron and ExxonMobil for one lease in the areawide sale, which the companies won as the sole bidder. ConocoPhillips and Anadarko also jointly bid other leases, and were outbid by 70 and 148 LLC on some. Other winning bidders included Burgundy Xploration, Great Bear Petroleum Ventures 2 and Woodstone Resources. Chevron and Exxon also jointly bid on a lease with ConocoPhillips, for which they were the only bidder. R3 Exploration Corp. was the sole bidder for North Slope foothills leases. If the bids are validated, the company will have leases for 10,120 acres on two tracts in the North Slope Borough, both on the Colville River at the edge of the National Petroleum ReserveAlaska. The State will receive $147,114 for those leases. The sealed bids were opened Nov. 19; the division accepted them Nov. 17. Leases will be awarded after all of the bids are validated. Journal reporter Elwood Brehmer contributed to this story.

Federal North Slope lease sale nets less interest than 2013 By Molly Dischner For the Journal of Commerce

Immediately after near-record bids in the state’s North Slope oil and gas lease sale were announced, federal managers opened a much smaller number of bids for development in the National Petroleum Reserve-Alaska. The federal sale is typically smaller than the state sale, but while the 2014 state sale exceeded any year in the recent past, fewer leases were sold in the National Petroleum Reserve this year than last year. Bids were opened Nov. 19 for both sales. The two sales are typically held on the same day so that companies can bid more efficiently. The BLM received bids for seven tracts, totaling 66,650 acres at a cost of $658,978. That’s far less than the 2013 sale, when the feds received bids for 22 tracts, totaling about 245,293 acres at a cost of $2.8 million. The State of Alaska received $59.7 million in high bids for 298 tracts in three lease sales: the North Slope areawide sale, the Beaufort Sea

sale and the North Slope foothills sale. That’s one of the highest on record, and much higher than any year in the recent past. The highest bid in this year’s federal sale was by ConocoPhillips and Anadarko E&P Onshore, offering $206,201 for 3,842 acres the BLM categorized as “high potential.” ConocoPhillips on its own also bid $158,425 for a second “high potential” tract, totaling about 5763 acres. The high potential leases are in the Northeast area of the reserve, and most leases in that area have already been acquired, although about 22 were offered in the 2014 sale. The remainder of the bids came from NordAq Energy, Inc. That company picked up 57,045 acres for $294,352, all in the area considered “low potential” by the BLM, which is most of the reserve. NordAq is an Alaska-based independent that dominated both the state and federal sales in 2014, acquiring 52 state tracts and 17 federal tracts. Prior to the 2014 sale, the company had leases for about 288,571 acres.

NordAq’s newest leases are south of Point Barrow, near the center of the reserve. In 2012, it purchased six leases adjaicent to the ones it bid on this year. In September, the company announced that a Chinese investment group would fund up to $90 million in development of NordAq’s Alaska assets, and additional debt facility. According to a plan filed with Alaska’s Division of Oil and Gas, Nordaq plans to drill an exploration well on a state lease offshore from the NPR-A in Smith Bay this winter using state leases. The company is also active in Cook Inlet exploration, and is working on a natural gas development there. Federal lease sales for the NPR-A have been held regularly for the past decade, and are expected to be held yearly, however, development in the area has been limited, and the BLM website does not show any activity since 2009. The State of Alaska receives some of the revenue from the federal lease sale.

2015 Meet Alaska Conference & Tradeshow

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2015 Meet Alaska Conference & Tradeshow

ConocoPhillips targeting 62,000 new barrels by 2017 By Elwood Brehmer

(on the Slope) since 2008,” he said to Resource Development Council for Alaska conference attendees Nov. 19. The developments will require about 1,450 ConocoPhillips’ North Slope work could add up to 62,000 barrels of oil per day to its produc- construction jobs as well, he noted. ConocoPhillips’ biggest project in terms of tion by late 2017, according to Alaska President projected production is its Greater Moose’s Trond-Erik Johansen. The production would come from four proj- Tooth-1 in the National Petroleum Reserveects on the western Slope, where ConocoPhil- Alaska, at about 30,000 barrels per day of peak oil with initial production by late 2017. lips is the primary operator. Johansen said the company is doing deEarly work to get to the reserves pushed the company’s capital investment on the North Slope tailed engineering work on the 8.6-mile gravel to more than $1.6 billion this year, Johansen said. road needed to get to the pad site. The Bureau of Land Management issued a That’s up from just more than $1 billion in 2013. “This year we are going to spend about final supplemental environmental impact statetwice the amount we have done on average ment for the road Oct. 29. Wetlands permits are being pursued through the U.S. Army Corps of Engineers and Johansen said he hopes BLM will sanction the project so construction can begin by early February at the latest. “If it takes longer this project will be delayed a year because of the ice road seasons,” he said. GMT-1 will cost about $900 million to fully develop, according to Johansen. The company’s $1 billion CD-5 development is on its way to first oil a year from now. Johansen said production should peak at 16,000 barrels per day sometime in 2016. “CD-5 is going to be the first element in the fight against (production) decline,” he said. A six-mile road to the drill site and the gravel pad have been completed and work on a 1,400-foot bridge over the Nigliq Channel of the Colville River is underway. Johansen said the bridge sections are being skidded Photo/Michael Dinneen/AJOC File out on rails to the nine supConocoPhillips Alaska President Trond-Erik Johansen told Reporting piers rather than besource Development Council of Alaska on Nov. 19 that the coming put in place with a crane pany is targeting 62,000 new barrels of oil per day by 2017 at its to maximize safety and miniAlaska Journal of Commerce

various projects on the North Slope.

mize environmental impact. Installation of a pipeline, power and production facilities along with drilling activity are all on tap for the coming year, he said. Smaller developments, Shark Tooth-1 and 1H NEWS (Northeast West Sak), in the Kuparuk Field will add about 8,000 barrels per day each, he said. ConocoPhillips is about a 55 percent working interest owner in Kuparuk. Shark Tooth-1 is a new drill site on the southern tip of Kuparuk. The target there is thin sands on the edge of the field, Johansen said, that were previously undiscovered. With $500 million of total investment, first oil should come in late 2015 from Shark Tooth-1. A challenging viscous oil development is the 1H NEWS that will require some ingenuity. “We are going after it with some very smart but very expensive technology,” Johansen said. The plan is to drill five horizontal production wells and 14 vertical injection wells. The injection wells will have chokes on them to regulate water flow to optimize specific areas of production, he said. Funding approval for 1H NEWS is expected early next year with first oil in early 2017. The larger projects are on top of increased drilling activity throughout Kuparuk with new rigs. Since mid-2013 ConocoPhillips has added two Nabors drill rigs to the field and increased production through workovers and new wells. “Through September we added 8,000 barrels per day just on this rig program from these two rigs,” Johansen said. “That was just through September; I think the latest number I saw was closer to 9,000 barrels a day now.” Johansen also announced Nov. 19 that ConocoPhillips agreed to add another Nabors rig to the field. In July, the company announced a contract with Doyon Drilling to build a new rig for the field. Each new drill rig requires a direct and secondary workforce of about 100 people. The added drilling and subsequent production has helped slowed Kuparuk’s annual production decline from about 7 percent in to 1 percent over the last two years, Johansen said. “Stop the decline; that’s what it’s all about isn’t it?” he said. Elwood Brehmer can be reached at elwood. brehmer@alaskajournal.com.

2015 Meet Alaska Conference & Tradeshow

Producers sanction new drill site at Kuparuk River field By Tim Bradner Alaska Journal of Commerce

ConocoPhillips and its partners in the Kuparuk River field have approved a new drill site in the southern part of the field that will add 8,000 barrels per day of new production beginning in late 2015. “Plans for construction will move forward. This is the first new drill site at Kuparuk in nearly 12 years,” company spokeswomen Amy Burnett said. “It is expected to add about 8,000 barrels per day at peak production,” she said. It will take a period for production to build to the peak, Burnett said. Engineering and permitting for the new Drill Site 2S has been underway for some time but approval has now been given for construction. Other partners in the field are BP and ExxonMobil. The project cost has been estimated at about $600 million, the company has said in previous statements. Former Gov. Sean Parnell hailed the announcement as a tangible result of the state’s new oil and gas production tax, enacted by the Legislature in 2013. “This announcement, when coupled when coupled with two other newly-announced ConocoPhillips North Slope projects, will provide a $2 billion investment for our state. Our oil tax reform

changes are working and this is only the latest example,” Parnell said in a statement. Drill Site 2S is one of three projects ConocoPhillips has announced since the new tax law was enacted. The two others include the IHNEWS, an expansion of the West Sak viscous oil project in the Kuparuk field, and Greater

Photo/Courtesy/ ConocoPhillips

Moose’s Tooth-1, a new oil project in the National Petroleum Reserve-Alaska. IH-NEWS would product about 9,000 barrels

per day, or b/d, while GMT-1 would produce about 30,000 b/d, ConocoPhillips has said. Another project now in construction, and that was approved before the tax reform bill passed, in CD-5, a satellite of the Alpine oil field. It is expected to start production in 2015. Overall, ConocoPhillips has said that it expects to add 40,000 barrels per day of new production from these projects by 2018, assuming approval of GMT-1 and 1H-NEWS. BP, which operates the large Prudhoe Bay field, has previously announced that it is working on a series of major new development projects in the western part of the field. BP and ConocoPhillips have also laid on new drill rigs and have stepped up the drilling of production wells in the producing fields. The increased activity in the North Slope field brought resulted in enough additional production to stem a long-term decline in production. The slope producers reached an average of 531,000 barrels per day in fiscal year 2014, the state budget year ending June 30. That is about the same average daily production as the previous fiscal year and the first time production did not decline year-to-year since 2002. Historically, North Slope production has been declining at an average rate of 6 percent yearly. Tim Bradner can be reached at tim. bradner@alaskajournal.com.

ConocoPhillips contracts with Nabors for new drill rig By Elwood Brehmer Alaska Journal of Commerce

ConocoPhillips is adding another drill rig to the North Slope. Alaska President Trond-Erik Johansen said the producer signed a contract with Nabors Alaska Drilling Inc. on Nov. 17 to construct a coiled tubing drilling rig that will be used at the Kuparuk River Field. The Nabors CDR3 rig should be ready to drill in late 2016, according to ConocoPhillips. Coiled tubing drilling is a more effective way to work over old wells and boost production, Johansen said. Spools of tubing are sent down the well and then disperse horizontally in a

“spider web,” he said; it’s a way to pull thin layers of oil out of an existing reservoir that would be unreachable with traditional techniques. Johansen made his comments at the Resource Development Council of Alaska annual conference on Nov. 19 in Anchorage. “Doubling our Kuparuk (coiled tubing drilling) capacity will allow us to access more challenged oil and help stem North Slope production decline,” he said in a formal statement. The agreement with Nabors is ConocoPhillips’ second commitment to a new drill rig for the Slope this year. In July, it contracted with Doyon Drilling Inc. to build a rig that is scheduled to begin drilling in early 2016. Each rig requires about 100 direct and indi-

rect workers to support it during operation. Johansen also said the company’s Alaska capital expenditures will total about $1.6 billion in 2014, which continues a general yearly increase since it spent $680 million on projects in 2010. He, and BP Alaska President Janet Weiss attributed increased investment on the Slope to the passage oil tax reform, which was upheld by voters during a statewide August referendum. “I think we are now finally at a place where we are moving forward,” he said. Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

2015 Meet Alaska Conference & Tradeshow

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2015 Meet Alaska Conference & Tradeshow

CD-5 construction proceeds as legal wrangling continues By Tim Bradner Alaska Journal of Commerce

ConocoPhillips’ CD-5 project is well along in construction with about 600 people to be working on it this winter, but a nagging lawsuit against the U.S. Army Corps of Engineers’ decision to approve the project is still in federal court. The latest legal brief was filed by ConocoPhillips Nov. 11, replying to an appeal by plaintiffs of a detailed explanation by the corps for its approval of a Clean Water Act permit for the project. Five residents of Nuiqsut, a nearby Inupiat village, brought the suit. U.S. District Court Judge Sharon Gleason, who is presiding over the case, has not yet made a final decision that the Corps’ explanation is adequate, nor on a second issue raised by plaintiffs regarding the adequacy of the agency’s approval of a Section 404 permit under the federal Clean Water Act. Although Gleason has yet to rule, she has also not ordered an injunction to stop work on the project. CD-5 is an oil production pad on the west side of the Colville River near the Alpine oil field, is due to be complete and producing in late 2015, ConocoPhillips spokeswoman Natalie Lowman said. At peak, CD-5 will produce 16,000 barrels per day. The company and its partner, Anadarko Petroleum Corp., which owns about 20 percent of CD-5, are investing about $1 billion overall. The project is within the National Petroleum Reserve–Alaska but the mineral rights are held by Arctic Slope Regional Corp. of Barrow, the Alaska Native regional corporation for the North Slope, with a share of royalties also going to Kuukpik Corp., the village corporation for Nuiqsut, where the five plaintiffs live. In the lawsuit the plaintiffs are arguing that changes in the CD-5 project design made since an Alpine field environmental impact statement was written and approval of the CD-5 permit should have come after a new supplemental EIS, or SEIS, was done. The original Alpine EIS was done to guide overall development of the

Alpine field area including “satellite” projects like CD-5. The Corps decided in 2011 not to prepare an SEIS for CD-5, and that changes in the project design were within alternatives described in the original EIS. Gleason originally agreed with plaintiffs that the Corps made the 2011 decision without adequately explaining why it had done so. The Corps offered to develop an explanation, which was accepted by the judge, and the agency produced a 30-page explanation for its decision. The adequacy of that explanation is now being contested by the plaintiffs. In its Nov. 11 reply brief to the appeal, ConocoPhillips said the court should defer to the Corps’ expertise as to the environmental effects of the project changes, which involved construction of a bridge across a channel of the river in lieu of an underground pipeline crossing and “roadless” development of the production site. In appeals of agency administrative decisions, plaintiffs bear the burden to rebut an agency’s conclusions, but have not done so in this case. “Plaintiffs never grapple with the rational-

ity of extensive findings and explanation (by the Corps) … and their failure to do so is fatal to their argument,” ConocoPhillips argued in its brief. The company also cited comments by the U.S. Fish and Wildlife Service, another federal agency required to provide its views to the corps, which said- on the record that “the footprint of the acreage differences (among the CD-5 alternatives) are not significant,” the ConocoPhillips brief stated. The company asked Gleason Nov. 11 to dismiss the plaintiffs’ appeal. “Plaintiffs remain dissatisfied despite never participating at all in the CD-5 administrative process, which has gone on for a decade, despite delaying assertion of their claims until the last and most disruptive moment (when construction had started), and despite the fact that thousands of pages of original and supplemental environmental analysis have been assembled and published,” ConocoPhillips wrote in its brief. “Here, changes to the CD-5 project were adopted because they lessened impacts,” from the alternatives described in the original EIS, and in the end “the resulting project effects fall well within the mid-range of impacts analyzed in the Alpine EIS.”

Photo/Courtesy/STG Inc.

A fleet of cranes weatherized for North Slope work by STG Inc. are seen at the CD-5 bridge crossing the Colville River. Construction is proceeding even as legal wrangling continues over the Army Corps of Engineers permit for the project.

2015 Meet Alaska Conference & Tradeshow

Public hearings end for Chukchi lease sale SEIS By Tim Bradner Alaska Journal of Commerce

The U.S. Bureau of Ocean Energy Management wrapped up a schedule of six public hearings in Alaska Dec. 4 on a revised environmental impact statement for a 2008 Chukchi Sea Outer Continental Shelf lease sale. The final hearing was held in Fairbanks on Dec. 4 on the draft supplemental EIS. Earlier, hearings were held in Kotezbue, Point Hope, Wainwright, Barrow and Anchorage. BOEM expects to have a final EIS in late February and a Record of Decision in March, the agency wrote in a filing to the U.S. Alaska District Court. It is not certain whether that will give Shell time to mobilize for a hoped-for 2015 summer exploration drilling the company plans in the Chukchi Sea. Shell and other companies bid more than $2 billion for leases in the 2008 lease sale and Shell has been attempting to drill exploration wells, but U.S. Alaska District Court Judge Ralph Beistline ordered the EIS to be redone after a coalition of environment groups filed suit challenging the estimate of potential oil development; eventually the 9th U.S. Circuit Court of Appeals agreed with their challenge and remanded the case to his court. The revised supplemental EIS changed assumptions of possible oil and gas discoveries in the lease sale area, making them larger than in the original 2008 EIS, and also increasing the probabilities of oil spills. Shell has already filed and received BOEM approval for an oil spill containment plan for its exploration plan. That plan is keyed to a “worst possible discharge” the company has estimated from the specific prospect Shell hopes to drill, which is separate from the estimate made by BOEM in the supplemental EIS for hypothetical discov-

eries that could be made. Environmental plaintiffs in the case may argue that the oil spill plan previously approved should be redone but Shell has contended that its estimates for any spill haven’t changed. In the revised EIS, government geologists estimated that two commercial discoveries could be made in the sale area, one a larger “anchor” field with 2.9 billion barrels of recoverable oil followed by a smaller “satellite” field with 1.4 billion barrels recoverable, or 4.3 billion barrels of oil combined. These estimates are the “high case” for discoveries in the sale area, according to the draft SEIS. The peak oil flow estimated is 558,702 barrels per day. In the 2008 EIS, the U.S. Minerals Management Service, the agency that preceded the BOEM, put the estimated size of a discovery at 1 billion barrels, which environmental groups said was too low. The revised estimate is based on a hypothetical development scenario that also assumes that 465 oil-producing wells will be drilled, 93 “service” wells and eight platforms installed. “The modeled anchor field and even the satellite field are larger than any field in the Gulf of Mexico Outer Continental Shelf,” according to the revised EIS. No estimates of natural gas were made but BOEM said it also relied on a 2011 resource assessment for the Chukchi Sea that estimates the sale area contains a mean estimate of 76.8 trillion cubic feet of gas as well as 15.4 billion barrels of oil. These are volumes that could be discovered and developed with current industry technology, but the estimates do not take economic or logistical factors into account, according to the draft SEIS. BOEM’s estimate of 4.3 billion barrels that

could be discovered and developed assumes an oil price of $110 per barrel. The EIS also includes some discussion of

2015 Meet Alaska Conference & Tradeshow

Photo/Marc Thiessen/AP

The Noble Discoverer drill rig, seen here in Seward in 2013, will be one of two rigs working at the Shell leases in the Chukchi Sea in 2015 if the company receives approval for its latest exploration plan.

possible direct loading of oil from platforms to tankers in the Chukchi Sea as an alternative to a pipeline to shore.

A stipulation in the OCS leases from the 2008 sale encourages the transportation of oil and gas by pipeline to shore but does not

completely forecast direct loading to tankers at sea, according to the EIS. However, according to the document, BOEM has determined that, “direct tankering of oil from offshore Chukchi Sea platforms is not a viable strategy, and that the only viable strategy is to transport produced oil by platform. “There is no precedent for direct tankering of oil from locations featuring the ice conditions which characterize the leased portions of the Chukchi Sea. While it is acknowledged that ice-hardened tankers are used or proposed to transport oil on a year-around basis in the Barents Sea and Kara Sea (off northern Russia) these areas are more protected from incursions of multi-year ice floes, have much less multi-year ice overall due to the warming effects of the (Atlantic) gulf stream, and thus do not experience the same level of ice hazard as the Chukchi Sea.” In pubic hearings, environmental groups underscored an estimate in the draft EIS that two “large” oil spills of 1,000 barrels or more could occur during the production lifetime of fields discovered, and that there was a 75 percent chance that this would happen based on BOEM’s analysis of spill history in Gulf of Mexico OCS production areas. “The agency’s prediction that there is a 75 percent chance that a major oil spill could occur is of grave concern to Alaskans,” Darcie Warden, Alaska director for the Wilderness Society, told the agency hearing panel. “Given that there is no way to clean up a spill in the Arctic’s harsh conditions, this could be catastrophic to polar bears, ringed seals, whales and marine and coastal birds which depend on the Arctic Ocean.” Other Alaskan groups held different views. Rick Rogers, executive director of the Resource Development Council of Alaska, an Anchorage advocacy group, said “Lease Sale 193 has undergone thorough environmental reviews (in 2008 and in 2014) and the BOEM has once again acknowledged that exploration can take place in the offshore waters of the Chukchi Sea with minimal environmental impact.” Shell is targeting the Berger prospect about 60 miles offshore the northwest Alaska coast. ConocoPhillips and Statoil also hold leases in the region but are watching Shell’s efforts to secure regulatory approval before filing their own applications to explore. Tim Bradner can be reached at tim. bradner@alaskajournal.com.

2015 Meet Alaska Conference & Tradeshow

Joint venture enables production at Mustang By Tim Bradner

Center 1, LLC. Brooks Range Petroleum Corp. will be the Mustang field operator and will build and operate the facility, Armfield said. The process plant and pipelines are exBrooks Range Petroleum will begin drilling this winter on production wells for the new pected to cost between $200 million and $225 Mustang oil field on the North Slope. The first re- million, he said. Total costs, including drilling, lease of funding from investors, which includes are expected to be $500 million. “We are very pleased to take this important the Alaska Industrial Development and Export Authority, was made Oct. 29 and will finance the step and to move forward with the construction drilling as well as development of an oil and gas of the production facility for the Mustang field,” Armfield said. processing facility and connecting pipelines. AIDEA will invest $50 million in the proMustang is expected to produce about 9,000 barrels per day, or b/d, in 2016 with that cessing plant in addition to $20 million AIDEA increasing to about 12,000 b/d in 2017, Brooks previously invested with partners in a Mustang Range Chief Operating Officer Bart Armfield access road and gravel pad, will will bring the has said. Production will be from the Southern state’s total investment to $70 million. This is the first equity investment by AlDEA Miluveach Unit west of the Kuparuk River field. In a press release, Brooks Range said in upstream production infrastructure. The auAIDEA, the state’s development corporation, thority’s previous oil infrastructure investment, and CES Oil Services, a subsidiary of Charisma also done with partners, was in a jack-up rig to Energy Services Ltd. of Singapore, will own the do Cook Inlet exploration drilling. The Mustang plant will be the first indepenprocessing facility through Mustang Operations dently-owned, open-access production facility on the North Slope. “The Mustang facility will enable companies operating on the North Slope to economically develop additional fields in a highly prospective area that to date has remained relatively underexplored.” Armfield said in the statement. This is significant because independent companies exploring on the North Slope have had difficulty negotiating access to process facilities in producing fields that are owned by BP, ConocoPhillips and ExxonMobil, major operators on the Slope. This limitation motivated AIDEA to help finance an independent open-access process plant, AIDEA officials have said. The plant is being designed to handle 15,000 Photo/Michael Dinneen/AJOC File barrels per day, to leave ConocoBrooks Range Chief Operating capacity available for proAlaska Journal of Commerce

Officer Bart Armfield

duction that would come from new discoveries, separate from the Mustang field. Armfield has said that Brooks Range has nearby prospects it intends to test once Mustang is operating, and companies are exploring and making discoveries in the immediate area. Those include Repsol, which plans to drill three evaluation wells this winter to evaluate discoveries the company made two years ago. Previously AIDEA, the state authority, has mainly financed infrastructure like access roads for mining projects and ports, although it is also now investing in a small liquefied natural gas plant at Prudhoe Bay that will ship LNG by truck to Fairbanks, in Interior Alaska. Armfield said production from the Mustang field would not have been possible without the project financing provided by the AIDEA-CES partnership. “Because of AIDEA, BRPC was able to secure hundreds of millions in private investment to pursue additional development drilling at Mustang.” Armfield said. This project will boost the state’s economy, create hundreds of new jobs, and generate significant revenue for the state. “More drilling means more jobs, more production, and more revenue for the State of Alaska,” Armfield said. “This project will generate 50 jobs related to design and engineering, environmental permitting and services; 250 construction jobs; 20 to 25 full-time operations positions and up to 200 indirect long-term jobs. “AIDEA’s overall $70 million investment is estimated to leverage more than $500 million of private investment in Mustang Field development. We are entering an exciting new era on the North Slope. With this project, Alaska is beginning to see the fruits of Senate Bill 21 (the state’s 2013 oil tax reform legislation) which, when combined with AIDEA’s willingness to work with independent oil and gas companies, will unleash the vast potential that remains untapped on the North Slope.” Although exploration and development planning had been underway for Mustang prior to the Legislature’s passage of SB 21 the enactment of the tax changes created a more favorable long-term economic environment for production, which helped Brooks Range secure the final package of investment for the field development. Tim Bradner can be reached at tim.bradner@alaskajournal.com.

2015 Meet Alaska Conference & Tradeshow

2015 Meet Alaska Conference & Tradeshow Photo/ Courtesy/NovaCopper

NovaCopper Inc. continues work on its large, undeveloped base metals project in the Ambler Mining District and at Bornite in the western Brooks Range. The company is in a joint exploration and development partnership on the project with NANA Regional Corp., whose shareholders like those seen here have been working at the site.

Work continues at Bokan, Niblack, Ambler and Donlin By Tim Bradner Alaska Journal of Commerce

Ucore has issued a Request for Proposals for a Bankable Feasibility Study for the BokanDotson Ridge heavy rare earths project on Prince of Wales Island in Southeast Alaska. Ucore made the announcement Oct. 15. A Bankable Feasibility Study is a detailed document that would be acceptable in financial markets, and it is a requirement of a company advancing a project toward development. Consultants working on the feasibility study will have access to final metallurgical work and the operation of a planned Bokan pilot plant before finalizing the feasibility study, Ucore said. “The preparation of the BFS is a milestone for Ucore, and marches us yet another step closer to construction at Bokan Dotson-Ridge. Our project continues to progress according to plan,” said Jim McKenzie, president and CEO of Ucore. The company also completed a 5,000-meter in-fill drilling program, with 1,500 meters of drilling at depth aimed at expanding the known mineral resource at deeper intervals. Ucore also did 1,000 meters of geotechnical and groundwater drilling to support the company’s environmental work and permitting. McKenzie said Ucore will continue is work on permitting as the feasibility study progresses on a separate track. This will shorten the time

to development, he said. The Bokan prospect is on southern Prince of Wales Island about 40 miles southwest of Ketchikan. Another minerals project, Heatherdale Resources’ Niblack mine, is also in an advanced stage of exploration and development planning in the same region. Bokan is the highest-grade heavy rare earth deposit in the U.S. Its target metals are dysprosium, terbium and yttrium. The company plans to use an innovative approach to separate higher-grade from lower-grade ores via an x-ray sorting process, and is investigating a procedure to process the rare earths on site. University of Alaska Fairbanks’ Mineral Industry Research Laboratory is working with the company on its development of a rare earths processing technology.

NovaCopper and NANA continue work at Ambler/Bornite NovaCopper Inc. continues work on its large, undeveloped base metals project in the Ambler Mining District and at Bornite in the western Brooks Range. The company is in a joint exploration and development partnership on the project with NANA Regional Corp. of Kotzebue, a major land and resource owner in the region. Kennecott Minerals made the original discoveries at Borite, on the upper Kobuk River,

and Arctic, in the Ambler Mining District nearby. The Arctic property was acquired by NovaCopper, and NANA Regional Corp. acquired the Bornite project from Kennecott. NovaCopper and NANA then joined to pursue both projects in a joint venture. Major activities in 2014 included the cataloging and shipment of historic drill core samples from the Bornite deposit that were acquired by Kennecott, the previous owner. The cores were transported to a warehouse in Fairbanks where core-logging facilities are located. A total of 4,030 boxes were shipped that included 12,918 meters of core. These cores are now being relogged and resampled. The analysis of the Kennecott cores, when combined with information from recent drilling by NovaCopper and NANA, will give a more complete picture of the Bornite deposit. While work continues to get a more detailed assessment of the known resource, progress is being made to overcome two challenges facing development in the region: Access and energy. On transportation access, the Alaska Industrial Development and Export Authority, or AIDEA, continues work on an industrial access road built west into the region from the Dalton See

WORK, Page 21

2015 Meet Alaska Conference & Tradeshow

Company pursues mineral rights for Haines development By Molly Dischner For the Journal of Commerce

A Vancouver-based company is continuing to explore potential mixed metals near Haines with backing from a Japanese government corporation. Constantine Metal Resources Ltd. and its partners are pursuing a mine northwest of Haines near the Haines Highway corridor that would produce copper, zinc, gold and silver. The inferred resource estimate is about 4.75 million tonnes. Dowa Metals and Mining Co. Ltd. is a partner in the project, and Japan Oil, Gas and Metals National Corp. signed a funding agreement with the two in August. The area being explored relies on the same mineralization as the Greens Creek mine, south of Haines on Admiralty Island. Preliminary results from the 2014 program showed a significant zone of copper, zinc, silver and gold, according to a September release from Constantine President Garfield MacVeigh.

The summer’s work included five test holes, all of which showed significant mineralization and expanded the area where mineralization is believed to exist. In September, Constantine announced that it had acquired mineral and surface rights for a portion of the Palmer project area near Haines. There will be a presentation on the project at the Alaska Miners Association annual convention at 3:30 p.m. on Nov. 6. The Palmer project includes state and federal mining claims, as well as Alaska Mental Health Trust land. Constantine was the successful bidder for the subsurface and some surface rights held by the mental health trust earlier this year, according to a statement from MacVeigh. In total, the company has rights to about 108,000 acres in the area. Exploration and other 2014 work on the project was estimated at $6.2 million. The Japanese metals corporation joined the project in August, with the ability to fund up to 45 percent of Dowa’s participation, and funded

10,000 meters of drilling. Constantine remains the owner of at least 51 percent of the project; Dowa has the right to pay for up to $22 million of work over four years and acquire up to 49 percent ownership. According to information from Constantine, the 2014 work plan included 10,000 meters of drilling, with three exploration drill rigs and a fourth geotechnical drill rig, as well as construction of a supply road and environmental and geotechnical studies. The environmental work being done as part of the Constantine project includes projects on Haines-area waterways. In September, Constantine’s contractor, R2 Resource Consultants, applied for Permission to install and operate three stream-flow gauges in the Haines State Forest on the Klehini River and Glacier Creek. Comments on the proposed activity are due to the state Division of Mining, Land and Water by Nov. 11; the stream flow monitoring is proposed to occur from Nov. 15, 2014, through Nov. 14, 2019.

Barrick Gold and NovaGold are at halfway point on Donlin EIS

project, as owners and operators. Facilities such as the gas pipeline to be built from Cook Inlet to supply energy and a port facility on the Kuskokwim River. Prior to making a final construction decision Donlin, partners will update the feasibility assessment and construction cost estimates. A key accomplishment in 2014 was the successful negotiation of an updated land-use agreement for the mine between Donlin Gold and the Kuskokwim Corp., or TKC Corp., which is the owner of surface lands. The agreement gives TKC Corp. preference on certain contracts and hiring and training TKC shareholders. The agreement also has a provision that commits Donlin Gold to work with local, state and federal entities on a future training center in Aniak. Donlin Gold will also help fund scholarships for TKC shareholders. There is also a separate agreement with Calista Corp. that Calista shareholders, spouses and descendents will have scholarship opportunities and preferences for employment. Calista owns the subsurface mineral rights at Donlin Gold.

WORK

Continued from Page 20 Highway, the main north-south highway serving the North Slope oilfields from Interior Alaska. AIDEA is the state’s development finance corporation. AIDEA is currently engaged in preparing applications for a right-of-way across federal lands under the Alaska National Interest Lands and Conservation Act along with a wetlands permit application to the U.S. Army Corps of Engineers. The access road, if built, would serve not only the NovaGold and NANA mine projects, but also those proposed by other companies in the region. On energy, the western Brooks Range projects would benefit from the Interior Energy Project, another AIDEA project that involves the trucking of liquefied natural gas from a small LNG plant proposed for Prudhoe Bay to Fairbanks, where LNG would fuel power generation and space heating. It is possible that the project could also serve mines via the proposed access road, providing a lower-cost option for energy than diesel.

The draft environmental impact statement for the proposed Donlin gold mine is essentially half done and is on schedule for a 2015 release, NovaGold Resources, one of the owners of Donlin Gold, said in a report issued Oct. 7. The companies are working to develop a large gold deposit at Donlin Creek at a location a few miles from Crooked Creek, in the midKuskokwim River region. The outstanding environmental baseline data and analysis required to complete the EIS have been provided to the U.S. Army Corps of Engineers, and once other agencies have completed their review of that the data will be incorporated by the corps into the draft EIS. Once it is issued the public will have an opportunity to review and comment on the document. Work on the EIS began in 2012. Meanwhile, Donlin Gold is still looking for other firms to invest in infrastructure parts of the

2015 Meet Alaska Conference & Tradeshow

Hilcorp buys Point MacKenzie LNG plant serving Fairbanks By Elwood Brehmer Alaska Journal of Commerce

Hilcorp Energy has agreed to purchase the Southcentral liquefied natural gas plant that supplies Fairbanks Natural Gas. Fairbanks Natural Gas President and CEO Dan Britton said the prospect of the sale was spawned from discussions between the companies on how longer-term gas supplies could be secured. Titan Alaska LNG, a partner company of Fairbanks Natural Gas under Pentax Natural Gas Co., operates the Point MacKenzie LNG plant. Britton is also president of Titan. There is currently a gas contract in place from Hilcorp through 2018 to supply the plant. Hilcorp Alaska Vice President Kurt Gibson said Nov. 21 that the sale agreements were signed “several days ago.” The sale is tentative pending approval from the Regulatory Commission of Alaska. Hilcorp spokeswoman Lori Nelson said acquisition of the plant would mark the company’s first foray into LNG. “The Titan plant basically represents an opportunity for us to expand within the state

to Fairbanks where less expensive energy is certainly something they are looking for and we have the opportunity to provide,” Nelson said. Financial terms of the sale were not disclosed. The plant will be operated by Hilcorp’s subsidiary Harvest Alaska because it is a midstream asset. Britton said Hilcorp has the resources and the will to expand LNG processing, another reason for the sale. “We were having ongoing discussions around expansion of the facility and how we might facilitate that,” he said. “Those discussions led to the transaction that we have today.” Expansion plans won’t be formalized until the sale is approved, according to Nelson. She said Hilcorp is working to secure equipment necessary to grow the plant. Titan’s LNG trailers and two LNG-powered trucks are included in the sale, Britton said. The company’s also put in place a 10-year LNG supply agreement for up to the equivalent of 0.95 billion cubic feet, or bcf, of gas annually, which covers what the utility’s current customer base demands, according to Britton. The plant has the peak production capacity

to process slightly more than 1 bcf of gas per year. Fairbanks Natural Gas has about 1,100 mixed residential and commercial customers in the city’s core. It is in the midst of a multi-year expansion to its gas distribution network. The first phase of distribution construction was financed by the Alaska Industrial Development and Export Authority as part of the state-sponsored Interior Energy Project, or IEP, a plan to truck North Slope LNG south to the Interior by late 2016. Gibson said the 10-year supply agreement is essential because the Point MacKenzie plant is the only option for getting gas to the Interior now. He also said Hilcorp is not looking to compete with the IEP. “For now, (Fairbanks Natural Gas) needs to know they’ve got a secure supply and turning loose of the plant from their perspective, I think, was conditioned on making sure that they have a long-terms supply of natural gas,” Gibson said. The producer has recently signed five-year supply contracts with larger Southcentral utilities. An integral part of the plan, Britton said his company is still committed to the IEP.

LNG exports approved to free trade countries By Molly Dischner For the Journal

The U.S. Department of Energy will allow the proposed Alaska LNG Project to export liquefied natural gas from the North Slope to free trade agreement countries, but the project is still waiting for permission to export to nonFTA countries. The primary market for Alaska LNG exports is the non-FTA countries, such as Japan, China and India, although a project could also send some LNG to South Korea, which is an FTA country. The export decision came shortly after the Nov. 17 comment deadline for Alaska LNG’s application to export North Slope LNG. The project partners have asked to export 20 million metric tons of LNG per year for 30 years. The DOE received 27 comments during the submission period; of those, 22 were supportive of the proposed project, according to the fed-

eral coordinator’s office. BP, ConocoPhillips, ExxonMobil, TransCanada Corp. and the Alaska Gasline Development Corp., a state entity, are partners in the Alaska LNG project, which includes an 800-mile pipeline, an LNG plant at Nikiski on the Kenai Peninsula, and a major gas processing plant on the North Slope. The project began its pre-filing process with the Federal Energy Regulatory Commission in September. A ConocoPhillips spokesperson said the authorization marked another important step in the project. Alaska’s congressional delegation applauded the approval Nov. 21. “This FTA license is good news for Alaska, but by law it had to be approved. The real test is the non-FTA license,” Sen. Lisa Murkowski said in a formal statement. “I am watching the process carefully to ensure there are no unnecessary delays in approving exports to Ja-

pan and other non-FTA countries. I have said from the beginning that DOE should continue to consider Alaska gas exports on their own separate track — as they always have.” Rep. Don Young agreed. “Restricting the ability to export LNG would effectively kill the dream of constructing a natural gas pipeline, something we Alaskans have worked on for years,” Young said in a formal statement. “Today’s announcement by the DOE is a positive step in the right direction and moves us closer to bringing our state’s tremendous resources to market. Not only would this project add much needed revenue to the state and provide well paying jobs, it could also provide the Alaskan people access to more affordable energy. As this process moves forward, I remain committed to ensuring red-tape and federal roadblocks don’t stand in the way.”

2015 Meet Alaska Conference & Tradeshow

ExxonMobil sees abundant oil, gas far into future By Jonathan Fahey AP Energy Writer

NEW YORK (AP) — North America, once a sponge that sucked in a significant portion of the world’s oil, will instead be supplying the world with oil and other liquid hydrocarbons by the end of this decade, according to ExxonMobil’s annual long-term energy forecast. And the “almost unspeakable” amount of natural gas found in recent years in the U.S. and elsewhere in North America will be enough to make the region one of the world’s biggest exporters of that fuel by 2025, even as domestic demand for it increases, according to Bill Colton, Exxon’s chief strategist. “The world has such an improved outlook for supplies,” Colton said in an interview. “Peak oil theorists have been run out of town by American ingenuity.” In a forecast that might make economists happy but environmentalists fret, Exxon’s two chief products, oil and natural gas, will be abundant and affordable enough to meet the rising demand for energy in the developing world as the global middle class swells to 5 billion from 2 billion and buys energy-hungry conveniences such as cars and air conditioners. This is a result of advances in drilling technology that have made it possible for engineers to reach oil and gas in unconventional rock and extreme locations and quieted talk that the world was quickly running out of oil. And it is despite what Exxon assumes will be increasingly strict policies around the world on emissions of carbon dioxide and other gasses emitted by fossil fuel use that scientists say are triggering dangerous changes to the world’s climate. Exxon’s outlook forecasts world energy

supply and demand through 2040 and is updated every year. It is noted by investors and policymakers and used by Exxon to shape its long-term strategy. Colton said the recent sharp decline in oil prices does not have much effect on the company’s long-term vision, and that the company expects prices to rise and fall, sometimes dramatically, throughout the period. Exxon’s vision is broadly similar to that of other forecasters, including those by the International Energy Agency, which released its most recent long-term forecast last month. Demand for energy will grow rapidly in coming decades in the developing world, while demand in the developed world is expected to be flat or even decline as countries impose stricter emissions policies and become more efficient. The use of coal, now the world’s second most important fuel after oil, will eventually slip as countries try to reduce air pollution and greenhouse gas emissions. Natural gas, which burns cleaner than coal and emits half the global warming gases as coal, will supplant coal in the number two spot. Exxon takes a relatively dim view of the prospects for renewable energy, however. It believes that some of the aggressive targets for renewables cited by governments are too expensive to come to fruition, and the technologies have not advanced far enough to make them cheap or effective enough for broad adoption globally. “They are just not ready for prime time,” Colton says. While Exxon expects wind, solar and other non-hydro electric energy to grow faster by far than any other energy technology over the period, those renewables will provide just 4 percent of the world’s energy by 2040, up from 1 percent in 2010. Fossil fuels will still dominate:

Oil will account for 32 percent of world energy, natural gas for 26 percent, and coal for 19 percent. Nuclear and biomass will account for 8 percent each, and hydroelectric power will account for 3 percent. Michael E. Mann, a climate scientist and director of Penn State’s Earth System Science Center, notes that many experts dispute Exxon’s conclusion on renewables because in several places around the world renewable energy is competitive with the price of traditional power,

2015 Meet Alaska Conference & Tradeshow

Photo/Cliff Owen/AP

This file photo taken June 12, 2014, shows Dominion Energy’s Cove Point LNG Terminal in Lusby, Md. North America, once a sponge that sucked in a significant portion of the world’s oil, will instead be supplying the world with oil and other liquid hydrocarbons by the end of this decade, according to ExxonMobil’s annual long-term energy forecast released Dec. 9.

even without a high price on carbon pollution that Exxon and others seem to agree is coming. Scientists say if Exxon’s vision comes to pass the world’s climate system will become dangerous and chaotic, and some environmental economists suggest that economies will be forced to stop burning fossil fuels at such high rates to prevent catastrophic climate change. “Exxon’s vision of a fossil fuel-driven future is one in which carbon dioxide levels rise well beyond the dangerous limit, where we will wit-

ness fundamental threats to food, water, land, our economy, national security, and our environment,” Mann says. “Let us hope, for the sake of us and our planet, that this is not our future.” Other recent scientific studies suggest oil and gas companies and government forecasters could be overestimating how much oil and gas is accessible in the shale formations that have fueled the U.S. boom in oil and gas production. Ken Cohen, Exxon’s government and public

affairs chief, says the studies “are not consonant with the facts.” He says Exxon is finding instead that improving technology is increasing productivity of each well they drill. That will mean that the end of the decade, North America will be exporting more oil and liquid hydrocarbons than it imports, a remarkable turnaround for a region that was a major global importer. “Limitations are political and policy-related more than technical,” Cohen says.

2015 Meet Alaska Conference & Tradeshow

Corps publishes scoping report for ASAP SEIS By Tim Bradner Alaska Journal of Commerce

Even as the state administration changes in Juneau, work is continuing on the state’s backup “Alaska Stand Alone Pipeline,” or ASAP, a plan for a 36-inch natural gas pipeline from the North Slope to Southcentral Alaska. The latest development is publication by the U.S. Army Corps of Engineers and its contractor, ERM Alaska Inc., of summaries of “scoping” sessions held by the corps on a supplemental environmental impact statement, or SEIS, for the project. An EIS has already been approved for an earlier version of the ASAP project but a change in the project design from 24-inch diameter pipe to 36 inches and some changes in routing required a supplemental EIS to be done. The state-owned Alaska Gasline Development Corp. is leading the ASAP project as an alternative way to get North Slope gas to communities in the state in case a larger pipeline and liquefied natural gas project falters. Sixteen scoping meetings on the SEIS were

held by the Corps between August and October to gather public comment on the changes in the design. The draft SEIS is expected out from the Corps in mid-2015. After a public review period of the draft, a final SEIS will be published. The Alaska Gasline Development Corp. is leading development of the ASAP project while also serving as the state entity that would own part of the larger, industry-led pipeline and LNG project if that moves forward. If that happens, the ASAP project would not be built, AGDC president Dan Fauske has said. The state Legislature has appropriated funds to the state corporation sufficient to see the project through its engineering and permitting phases to an “open season” in 2016, if that is needed. An open season is a period in which a pipeline developer solicits indications of interest from potential shippers of natural gas. If those are tendered, the pipeline developer would proceed to the negotiation of shipping contracts, which would enable financing for construction to be secured. AGDC spokesman Miles Baker said that if the ASAP project proceeds it would be state-led as

far as open season. After that, the state would enter a contract with a pipeline builder and owner that would construct and operate the pipeline. The state has had discussions with Enbridge Inc., a Canada-based pipeline company, on taking this role. The state is meanwhile partnering with TransCanada Corp., a competitor to Enbrige, in the large pipeline and LNG project. To date the state Legislature has appropriated $419.8 million for the ASAP project, of which $120 million was spent through the end of fiscal year 2014, the budget year that this past June 30, with an additional $98 million being spent in the current fiscal year 2015, Baker said. Legislators made a separate appropriation of $69.8 million in FY 2014 for AGDC’s work on the state’s portion of the large pipeline and LNG project, and an additional $25 million is being made available for the work in the current year. Gov. Bill Walker, who took office Dec.1, will be reviewing the ASAP project and may make changes. During the campaign he suggested scaling back funding for the project based on the budget deficits and limited economics of scale serving only in-state customers.

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2015 Meet Alaska Conference & Tradeshow

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Caelus ready to give go-ahead for Nuna By Tim Bradner Alaska Journal of Commerce

Caelus Energy is scheduled to give formal “sanction,” or approval, Dec. 31 for its $1.5 billion Nuna development project on the North Slope and will be mobilizing contractors to install a gravel pad and road in early 2015, a company official told state legislators in a Dec. 2 briefing. Caelus plans to employ about 500 contractor employees this winter on the construction and two large three-dimensional seismic programs, company vice president Pat Foley told the Legislature’s Budget and Audit Committee. Typically Caelus employs 200 to 300 contractor workers seasonally in addition to its 80-person staff, so the 2015 season will reflect a significant increase in activity. Caelus, which is privately-held, acquired Alaska assets of Pioneer Natural Resources Co. last summer, mainly the producing Oooguruk field, in shallow waters offshore the Kuparuk River field, and the onshore undeveloped Nuna prospect. The company requested a temporary reduction in state royalty as an incentive to test new production techniques in the Torok formation, a large geologic formation that contains substantial in-place oil resources but with technical challenges in producing the oil. Nuna has estimated recoverable reserves of 50 million to 100 million barrels of oil that can be recovered in its phase one, Foley said. Thirty

production and injector wells are planned. Without the temporary royalty reduction, the development of Nuna would be delayed a number of years and may not be developed at all because of the technical uncertainties with the Torok formation, Foley said. Former State Department of Natural Resources Commissioner Joe Balash gave preliminary approval for a reduction, which is still out for public review. Incoming DNR Commissioner Mark Myers or Marty Rutherford, the acting DNR Commissioner, will have to give the final OK, which would come in January. One of the seismic “shoots” will be on the western North Slope near the Nuna project and the other on the eastern Slope where the company acquired tracts in a Nov. 19 state oil and gas lease sale. Foley said Caelus has a $500 million capital budget for 2015, about half allocated to phase one of Nuna, the development of the first production pad (there is a plan for an eventual second pad) and the second to an expansion of the Oooguruk production island to accommodate more production wells. Under terms of the royalty modification, Caelus will be held to hard deadlines for Nuna, Foley said. With gravel installed in 2015 the company must begin the installation of flow lines and surface production facilities in early 2016 and to start production in late 2016. Nuna is expected to i0nitially produce 5,000

barrels per day to 10,000 barrels per day with output ramping up to a peak of 15,000 barrels per day to 20,000 barrels per day, Foley told the legislative committee. The royalty reduction for Nuna, from 12.5 percent to 5 percent, lasts until Caelus has earned $1.25 billion in gross revenues on the project, which Foley estimates would occur in 2020, although it could come earlier, in 2019, or later, in 2021, he said. After that the 12.5 percent royalty will reapply along with a 30 percent share of net profits paid to the state. State Division of Oil and Gas Director Bill Barron told the legislators the net cost to the state of the royalty reduction is estimated at $44 million, and that the net profit share provision in the Nuna leases are not changed by the temporary reduction in royalty. Nuna construction and production contracting will inject $1.3 billion into the state’s economy, Foley said, and the project will also result in $1 billion to $1.7 billion in tax and royalty payments to the state. Democratic Rep. Les Gara, said the state will receive little to no production-tax value from the field under the tax overhaul passed in 2013. State Sen. Click Bishop, a member of the Budget and Audit Committee, said, “Let me get this straight. We give up $44 million to make sure this project goes and get back $1 billion to $1.7 billion in the long run. That right?” Barron said Bishop’s conclusion was correct.

Repsol plans $240M in drilling, seismic work for winter season By Elwood Brehmer Alaska Journal of Commerce

Repsol is continuing its North Slope exploration with $240 million of drilling and seismic planned this winter company Alaska manager Bill Hardham said. The Spanish major will drill three wells and test two. It will also conduct a 360 square-mile 3-D seismic program, what the company calls the Horseshoe project. The Horseshoe area is south and west of the Colville River Unit and mostly south of the Greater Moose’s Tooth Unit. The Colville River bisects the area and large portion of it is in the National Petroleum Reserve-Alaska. Hardham said Repsol will build 30 miles of ice road into its “focus area” that is the Colville

River delta. “To date, we’ve invested approximately $650 million on our North Slope projects and we have another significant campaign planned,” Hardham said at the Resource Development Council for Alaska conference. All three of the wells will be in the Colville delta area on the eastern edge of the Colville River Unit, roughly the same area that Repsol has drilled most of its wells in previous years. Of the three wells it drilled during its 2014 winter program, two were on the delta and one was south of the Kuparuk River Unit to the east. Permits have been submitted for the drill areas and an ice airstrip at the head of the delta will allow the company to transport crews directly to the area, he said. Work on the sea-

sonal infrastructure will commence as soon as conditions allow. This winter’s activity will require a largely contracted workforce of more than 500 people on the North Slope, Hardham said. Repsol operates in more than 30 countries and its U.S. headquarters are in Houston. When the 2015 winter season is over the company will have drilled nine wells on the Slope over the last three seasons, based on its current plans. Along with the three wells drilled last winter, Repsol tested two wells and conducted two 3-D seismic programs. The company had success with its 2013 drilling program. See

REPSOL Page 50

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Murkowski prepared for role as Energy Committee chair By Andrew Jensen Alaska Journal of Commerce

It was tough to find anyone who was more excited than Sen. Lisa Murkowski at Dan Sullivan’s election night party. Warming up the crowd before Sullivan entered and final vote tallies were still rolling in with the Republican challenger maintaining the comfortable lead he held all night over incumbent Sen. Mark Begich, Murkowski walked away from the microphone and grabbed a chair, lofting it over her head and asking the crowd if they knew what it meant for the U.S. Senate. “I’m the chair!” she exclaimed to wild cheers and applause. Murkowski, who has served in the Senate since 2002, took the chairmanship of the Energy and Natural Resources Committee that has jurisdiction over the Interior Department. It’s a powerful position for the senior senator from Alaska given the role the agency plays in a state where two-third of the land is owned by the federal government. Even without Sullivan defeating Begich, the Republican Party had already netted a gain of seven seats in the Senate earlier in the evening to swing control away from the Democrats for the first time since 2006. Not only did the GOP take over the Senate and expand its majority in the House by more than a dozen seats, Democrats were stunned by their party’s losses in governor races in stronghold states Illinois, Massachusetts and Maryland. “It is a wave, and I think it’s a positive wave for our country, positive in what we can achieve for the country in terms of economic growth, jobs and prosperity,” Murkowski said moments before taking the stage. “If you think about the areas we have seen a real bump up for our nation’s economy, it has been in the energy sector. The chance that we will have as a country with a Republican majority, my ability to set the agenda as chair of the Energy and Natural Resources Committee, is really quite exciting. This is certainly good news for Alaska and good news for the country.” Murkowski has spent years preparing for the chairmanship role, and pointed to a series of white papers released since she commissioned the “Energy 2020” report in 2012 that she said lays out the roadmap for where she is going.

Photo/Andrew Jensen/AJOC

Sen. Lisa Murkowski, left, celebrates with Julie Fate Sullivan, wife of Dan Sullivan, at the Hotel Captain Cook in Anchorage on Nov. 4 after Sullivan defeated incumbent Mark Begich in the U.S. Senate race. Murkowski took over as chair the Senate Energy and Natural Resources Committee when the new Congress convened this month.

“We’ve probably put out four white papers in the last few months,” she said. “They are thoughtful. They are timely. They are really quite provocative in certain areas when you think about oil exports. “We’ve laid the groundwork, so there’s no surprises about where I’m going to be coming from on the energy perspective. I’m excited about the opportunity to lay this out to my colleagues on the committee, to friends in the Senate and House and to the administration and say, ‘what can we make happen here?’” She also had strong words for Interior Secretary Sally Jewell, who has infuriated Murkowski with her refusal to approve an 11mile, one-lane road to complete a connection between the communities of King Cove and Cold Bay that would provide an all-weather land route for medical evacuations.

Jewell dropped the decision on Alaska two days before Christmas last year and has largely refused to communicate with residents of King Cove and their senator since. Murkowski said the issue is far from over, and an encounter with three women from King Cove at an Anchorage restaurant on election night only steels her resolve. Murkowski also sits on the powerful Senate Appropriations Committee and will directly control Jewell’s budget. “Sally Jewell is probably looking at the outcome tonight with a little concern about what she may be facing because I will not only be the chairman of the Energy and Natural Resources Committee, I will also be the chair of the Interior Appropriations subcommittee that has the auSee

MURKOWSKI Page 32

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Hearing set in state lawsuit seeking new ANWR exploration By Elwood Brehmer Alaska Journal of Commerce

The State of Alaska will have its day in court to push for oil and gas exploration in the Arctic National Wildlife Refuge. Alaska U.S. District Court Judge Sharon Gleason granted a motion for oral argument Nov. 21 on the state’s motion for summary judgment in its case lawsuit to force the Interior Department to approve a state exploration plan for ANWR. The hearing will be held Jan. 20 at the federal courthouse in Anchorage. U.S. Fish and Wildlife Service Director Daniel Ashe denied the exploration proposal, submitted in July 2013, in September of that year. His decision was based on a 2001 Interior Department solicitor general opinion that the department’s authority to permit activity in the refuge expired in 1987 when a report on previous 2-D seismic exploration of ANWR’s coastal plain was completed. The state is proposing a higher quality, 3-D seismic survey and has said it would put $50 million towards the effort. If results from a first

year of work were encouraging, the state would seek partners for a second year. Modern seismic imaging can greatly increase the success rate of subsequent exploratory drilling. Any drilling program would still have to be approved by Congress. The state’s case is centered on language in the 1980 Alaska National Interest Lands Conservation Act. ANILCA designated most of the 19.2 million-acre refuge as wilderness, except for the 1.5 million acres of coastal plain known as the 1002 area. The Interior Department has argued that Section 1002 of ANILCA, which lays out oil and gas activity guidelines in the refuge, is silent on when its authority to allow exploration expires. According to the State of Alaska, the wording is clear that the Interior secretary “shall,” as the law states, approve a plan within 120 days of submittal if it meets environmental guidelines. The only timeline restriction in ANILCA was a two-year moratorium on exploration that began immediately after it was passed, the state contends. In its reply to Interior’s opposition to sum-

mary judgment filed Nov. 11, the state says the department is wrong in its assertion that ANILCA is ambiguous regarding a sunset provision because it ignores parts of Section 1002. The Interior Department claimed in its Oct. 14 opposition to summary judgment motion that Congress “implicitly left a gap for the agency to fill” in the wording of ANILCA. Interior’s interpretation of Section 1002 is that it cannot authorize any further exploratory activity after the 1987 report to Congress was submitted. “On its face, ANILCA is silent as to the deadline by which exploration plans must be submitted to the (Interior) secretary,” the department’s motion states. The Alaska Native Gwich’in Steering Committee, Resisting Environmental Destruction on Indigenous Lands, Alaska Wilderness League, Center for Biological Diversity, Sierra Club and other environmental groups have joined the Interior Department as intervenor defendants in the case. Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

cans fail to govern, if we say our responsibility is just to win the next cycle, we won’t win. We will not be in charge. We will not be setting the agenda. We will not be legislating. We have our chance now. This is our time and if the American public doesn’t see us doing the hard work, then we’re going to be shown the exit just as the Democrats have been this cycle.” She said that Reid’s grip on Senate process, with only 11 amendments receiving floor votes in more than a year, was not a good strategy to protect so-called “red state” Democrats such as Begich and the others who lost Nov. 4. “They had nothing to run on,” she said. “Basically you have to be for your leader or against your leader. What are these Democrats going to do? They’re going to line up with their leader because they want to make sure they stay in those committee positions. That’s not the way to govern. That’s not the way the process should work. The process is about the give and take, about the debate, about the free ability to take up amendments and build bills rather than

to cram bills. This is where I think we’re going to start to make a difference. “Our approach is not going to be to move something through because we have the political muscle to do so. We’re going to move it through because it’s the right thing to do.” A good place to start would be with the Keystone XL pipeline that has languished under President Obama’s State Department and Reid’s refusal to allow a floor vote to approve it despite overwhelming support both in the Senate and the American public in general. Asked if a clean vote on a Keystone XL bill was coming, Murkowski said, “Why not? Why would we not? Why would we not do a straight up or down vote on Keystone? Approve the stinkin’ thing after five-and-a-half years with strong bipartisan support and 75 percent of the American people support it. Let’s move it for crying out loud.”

MURKOWSKI

Continued from Page 31 thority over her budgets,” Murkowski said. “I’m not going to forget those women. I’m not going to forget these families. I’m not going to forget the people of King Cove. I’m not going to give up.” Murkowski, regarded as one of the most bipartisan members of the Senate, was asked if Jewell made a mistake by getting on her bad side. “I’m a pretty amenable person and so what I’m trying to do is help the people I represent,” she said. “I’m not about vindication. I’m not about getting up in the morning to poke someone in the eye. What I’m trying to do is help the people of Alaska and I’m going to do that.” Murkowski also addressed the notion making the rounds among the national media that Republican control of the Senate would only make gridlock and partisanship worse. She said it was up to her party to make sure that will not be the case by returning to regular order that disappeared under outgoing Majority Leader Harry Reid. “I disagree heartily,” she said. “If Republi-

Andrew Jensen can be reached at andrew.jensen@alaskajournal.com.

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Federal judge orders EPA to halt pending Pebble action By Elwood Brehmer Alaska Journal of Commerce

The Environmental Protection Agency’s proposal to block Pebble mine is on hold after a Nov. 24 federal court ruling. U.S. Alaska District Court Judge H. Russel Holland ordered a preliminary injunction be put in place on the EPA’s Clean Water Act Section 404(c) process in the Bristol Bay region. The ruling came immediately after oral arguments on a motion for the injunction filed by Pebble Limited Partnership in its lawsuit against the EPA. Pebble claims the 1,000-plus page Bristol Bay Watershed Assessment, the document on which the EPA based the need to take action against mine development, is biased and flawed. Pebble CEO Tom Collier said in a formal statement the ruling is important because it prevents the EPA from continuing its process to ban the mine. If a final agency determination were reached prior to a final ruling in the case, the court could not repeal the agency’s action. “The court today granted our preliminary injunction blocking EPA from taking any further steps in the 404(c) regulator process it has initiated at Pebble before Judge Holland is able to issue a final decision on the merits of our case,” Collier said Nov. 24. “We expect this case may take several months to complete. This means that for the first time EPA’s march to preemptively veto Pebble has been halted.” The EPA has the authority under Section 404(c) of the Clean Water Act to ban specific development projects it deems would cause a significant adverse impact on fish and wildlife because of fill placement. Trout Unlimited Alaska Director Tim Bristol said in a formal statement the ruling does not prevent the EPA from eventually using

the science in the assessment. Trout Unlimited has been a lead organization in the fight against Pebble. “This decision is far from damning, but it does nonetheless represent an unfortunate example of Pebble throwing up legal and procedural road blocks against scientific fact and the will of Alaskans, which has consistently spoken out against Pebble mine,” Bristol said. “Moving forward, we hope the legal process is quickly and fully resolved so the people of Bristol Bay can get back to living their lives, running their businesses and making investments with an eye on a fish-filled and mine-free future.” It is the second suit Pebble has brought against the agency heard by Holland. He dismissed a prior case Sept. 26 on several of Pebble’s claims because the EPA has not made a final decision. The State of Alaska intervened on Pebble’s behalf in that case. The agency announced its intent to begin the 404(c) process in late February, about a month after the final Bristol Bay Watershed Assessment was released. It typically takes about a year to complete. EPA Region 10 officials are quick to note the authority has only been used 13 times since the Clean Water Act was enacted in 1972. While the law does not specify when the agency can use its authority, the copper-gold Pebble project would be the first instance in which it was used prior to a formal project plan being released. Pebble’s first lawsuit challenged the EPA’s authority to block a project prior to a wetlands permit application being submitted to the U.S. Army Corps of Engineers, which evaluates such applications. The EPA has ultimate say, however, and can veto a project even if the Corps approves the application. Holland ruled that Pebble attorneys raised

“serious questions” as to whether working groups that contributed to the watershed assessment document were subject to the Federal Advisory Committee Act, which attempts to ensure the advice agencies receive from such groups is objective and the process is public. Pebble contends emails sent as the assessment was formed from 2011-2014 between EPA Region 10 staff and mine opposition groups including Trout Unlimited Alaska and the United Tribes of Bristol Bay prove the agency had a predetermined agenda to block the mine. The EPA Inspector General’s Office initiated a review of the Bristol Bay Watershed Assessment earlier this year. That review is ongoing. Pebble attorney Roger Yoerges argued antimine groups and the agency worked together

2015 Meet Alaska Conference & Tradeshow

Photo/File/AJOC

A large crowd gathers in Anchorage to comment on the Bristol Bay Watershed Risk Assessment prepared by the Environmental Protection Agency assessing potential impacts of mining in the region. A federal judge has ordered the EPA to halt work on the pending action to preemptively stop the project through an unprecedented use of the Clean Water Act Section 404(c).

to form the assessment. “The EPA specifically reached out to groups who it knew what their opinion was,” Yoerges said. The agency was seeking advice to advance a common agenda, he said. Department of Justice civil division attorney Brad Rosenberg for the EPA said the agency had an “open door” policy to groups on both sides of the issue and did not shun Pebble while it developed the assessment, as the mine developers claim. “The fact that EPA was receptive to the belief of multiple environmental groups should not be a surprise to anyone,” Rosenberg said. Pebble’s Collier said after the ruling that the company’s accusation that the EPA col-

luded with environmental groups is based on documents disclosed in Freedom of Information Act requests. “The documents we have been able to review thus far disclose more than 500 contacts between EPA and activists,” he said. “We fully expect that once we have access to all documents that there may be many times that number.” Holland also said Pebble is likely to suffer irreparable harm if it is not allowed to litigate the case because, “The 404(c) action underway now could result in ‘no action,’ but it isn’t headed that way,” Holland said in preparation to issue his ruling. He ruled against Pebble’s claims that it faced economic hardship as a result of the

EPA’s actions. The preliminary injunction would only lead to a temporary delay in the agency’s actions at this point, he said, as public testimony on the Pebble 404(c) process has closed. After issuing his ruling, Holland ordered Pebble to file an amended complaint. He called its original 138-page complaint an “outrageous violation” of court procedure guidelines. Pebble was ordered to file an amended complaint by Dec. 19 and a revised motion to dismiss was to be filed by the EPA no later than Jan. 23. Holland later clarified his order to the EPA that it may perform no work on the decision while the injunction is in place. Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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Alaska has several options for gas-to-liquids conversions By Tim Bradner Alaska Journal of Commerce

Many Alaskans have been intrigued with the possibility of converting natural gas, coal, wood waste or even municipal waste into liquid fuels. There are vast stranded gas resources on the North Slope, and very likely gas discoveries that will be made in remote, unexplored sedimentary basins, where there is no infrastructure. As for coal, Alaska has been described as the “Saudi Arabia” of that resource, with vast, undeveloped coal resources in the Arctic and Southcentral and Interior Alaska. With municipal waste, coastal communities in Southeast Alaska are barging their garbage to landfills in the Pacific Northwest because expanding local landfills in Southeast, where flat land is often scare, is very costly. What’s common about these resources they are made of carbon and hydrogen, just like liquid fuels such as gasoline, diesel, jet fuels and other oil-based products, like solvents and specialty waxes. Making natural gas into diesel or a specialty wax, is a matter of rearranging the hydrocarbon molecules. It gets complicated, of course, because there are other chemicals, some harmful, in coal, and these must be removed. There are also challenges with biomass like wood waste or garbage. The chemistry of wood fiber is complicated, and municipal waste must be sorted — no tin cans or bottles, please. Much of the work on technologies to make fuels, in gas-to-liquids, coal-to-liquids or biomass-to-liquids, has been with natural gas, because its hydrocarbon molecule, (CH4) is relatively simple — “short-chain” in chemical terms — compared with very “long-chain” molecules that make up coal, or biomass. However coal-to-liquids plants have been in operation for 70 to 80 years. The basic chemical process, a chemical re-

action known as the Fischer-Tropsch process, was developed in 1925 by two German scientists, Franz Fischer and Hans Tropsch. Germany built plants using the process to make military fuels from coal during World War II, and after the war U.S. companies became interested and imported a German plant to Texas for tests. American companies abandoned the project, however, because large oil discoveries in Texas led to low prices of crude oil, which became a more economic feedstock for refineries than the more expensive synthetic crude made by Fischer-Tropsch. South Africa was still interested, however, because that nation had virtually no domestic oil but a great deal of coal, and South Africa’s leaders (long before the fuel embargos during Apartheid) made it a national priority to become more energy self-sufficient. Because of this, South Africa’s Sasol became been a technology leader in developing the Fischer-Tropsch process for commercial use, particularly with coal. For more than 50 years Sasol has had large coal-to-liquids operating, and more recently gas-to-liquids plants, and while the early plants had government subsidies the more recent, more efficient, plants are fully commercial. Shell is another leader in gas-to-liquids, with a plant built and operating for years in Malaysia making ultra-clean diesel and petrochemical products. More recently Sasol and Shell have built large gas-to-liquids plants in the Persian Gulf, where there are large gas resources. These have now been operating for several years. A Fischer-Tropsch plant, whether large or compact, essentially involves three stages. The first stage is either a gas reformer, if natural gas is the feedstock, or a gasifier, if a solid feedstock like biomass or coal is used. Both of these would break down the feedstock, breaking apart its molecules, into a mixture of hydrogen

and carbon monoxide called synthesis gas. The “syn-gas” is then fed into the second stage of the plant, the actual Fischer-Tropsch reactor. The gas flows over beds of catalysts which combine the molecules of the hydrogen and carbon monoxide into longer-chain hydrocarbon molecules. What results is a paraffin, typically in the form of a wax. This flows to the third stage, a small refining unit that can either convert the paraffins into a synthetic crude oil, if that is desired, or going further, to make products like diesel, gasoline, jet fuel or other products, like specialty waxes. Some have criticized the Fischer-Tropsch process as being energy inefficient, in that only 60 percent or so of the energy content of the feedstock winds up in the final product, with the other approximate 40 percent wasted. Richard Peterson, president of Alaska Natural Gas-to-Liquids, or ANGTL, a firm planning a small scale GTL plant on the North Slope, said this is true only to a point. These plants generate a lot of heat and if the waste heat is used, for example to generate power for the plant or to sell power, as much as 80 percent to 90 percent of the energy content of the feedstock is used. This is comparable to the energy efficiency of a liquefied natural gas See

OPTIONS Page 39

2015 Meet Alaska Conference & Tradeshow

GTL on North Slope could slash low-sulfur diesel prices

Photo/Courtesy/Velocys

Miniaturization, automation and use of robotic fabrication processes are an important part of Velocys’ strategy for costeffective construction of smaller-scale gas-to-liquids units. In the photo, robotic welding is underway on a Velocys reactor unit.

By Tim Bradner Alaska Journal of Commerce

Ohio-based Velocys Inc. is interested in Alaska. A local firm, Alaska Natural Gas-toLiquids, is working on a proposed gas-to-liquids plant at Prudhoe Bay using Veolocys’ technology to make fuel for the oil field operators and contractors from natural gas, which could be made available by North Slope producers. The plant would make ultra-low sulfur diesel, but gasoline and methanol can also be made if customers desire those products, according to ANGTL President Richard Peterson. Those liquids must now be shipped by rail and truck from Southcentral Alaska to the North

Slope. Making the fuels at Prudhoe Bay with low-priced natural gas available there could reduce North Slope operators’ and contractors’ fuel costs by an estimated 30 percent, Peterson estimates. Years ago, the Slope operating companies made high-sulfur diesel for local use but when the U.S. Environmental Protection Agency mandated the use of ultra-low sulfur diesel — no more than 15 parts per million sulfur — the Slope operators found they could not economically make the ULS diesel on the slope. It was cheaper to import the ULS by truck even though it was a matter of crude oil being shipped to Valdez, sent by tanker to Nikiski, and then after being refined shipped 900 miles back to the Slope. Some ULS diesel is made Valdez is shipped all the way by truck. However, the diesel made through the Fischer-Tropsch, or F-T, process easily meets the EPA specifications. It has zero sulfur and is EPA approved as non-toxic. “With no aromatics, F-T diesel burns cleaner than natural gas and has the advantage that you don’t have to change any of the infrastructure to use it,” said Peterson. The plant ANGTL proposes would produce about 4,000 barrels per day of liquid products, using 40 to 50 million cubic feet per day of natural gas. ANGTL hopes to supply the North Slope operating companies as well as contractors. Drill rigs would be a customer, too. At some point a North Slope GTL plant might also be able to supply fuel to communities in the region. Coastal communities in the Arctic are now supplied by

tugs and barges during the ice-free open water period in summer. One possibility is a two-way delivery of fuel in the Arctic. Barges that bring products north from Dutch Harbor to serve communities east of Prudhoe Bay, such as Kaktovik or Tuktoyutuk, in Northwest Territories, would head back west empty and could be reloaded at Prudhoe and resume the westward journey, so that Alaskan communities could get fuel from either north or south. Other applications in Alaska might be found for small GTL plants as it is demonstrated that such a plant can be built and operated in the extreme environment of the North Slope. For example, NANA Regional Corp. hopes to do more oil and gas exploration in the Selawik Basin near Kotzebue, which geologists say is prone to natural gas. If gas is found in the region a small scale gas-to-liquids plant might be able to make diesel for local use at a more affordable cost than importing it seasonally by barge. This might also help supply more affordable energy to the large Red Dog lead-zinc mine, which is also in Northwest Alaska and is a big consumer of diesel fuel. Teck Alaska, the Red Dog Mine operator, now imports its fuel. Another possibility is that if a small gas pipeline is built to the Kuskokwim River to support the large gold mine planned at Donlin Creek, a small-scale GTL plant could make liquid fuels there, too. Tim Bradner can be reached at tim. bradner@alaskajournal.com.

plant and use it to make more products. Also, at Prudhoe Bay there could be other uses for the CO2, such as being used by the field operators for enhanced oil recovery. Meanwhile, there’s also interest as to how other carbon-based feedstock, such as biomass (wood waste or municipal waste) or coal could be used with a small-scale GTL plant. Biomass gasification has been used quite often in the past 20 years, to make a synthesis

gas for various uses, but because of the high cost of moving the biomass, plants have been small. Still, over the years these gasifiers have become very efficient in producing the “syngas,” Petersn said. “Coupling these small biogasifiers with the Velocys small scale F-T plants gives us the real possibility of producing lower cost and better quality fuels in remote areas, where resources exist but the market or demand is small,” he said.

OPTIONS

Continued from Page 38 process, Peterson said. “A GTL plant in a cold climate will be more energy efficient with as much as 90 to 95 percent of the Btu’s in the feed gas being converted into fuels and powering the plant with waste heat,” Peterson said. Similar criticisms are made over the carbon dioxide generated by a Fischer-Tropsch plant, but Peterson said the process he will use at Prudhoe Bay would re-circulate the CO2 in the

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Alaska, B.C. cooperate quietly on transboundary issues

Photo/Hall anderson/ ketchikan daily news

The Unuk River in Southeast Alaska is seen in this 2004 aerial photo with its various sloughs. Burroughs Bay is the large body of water at the top of the photo. The proposed KSM mine in British Columbia is near the headwaters of the Unuk River and concerns have been raised about potential downstream impacts on Alaska.

By Elwood Brehmer Alaska Journal of Commerce

Alaskans concerned with mining in transboundary watersheds often aren’t aware of the cooperation between the state and provincial governments, according to a British Columbia resource official. “I’m not sure if there’s any elected person in the state of Alaska that really knows the extent to which we engage Alaska on northwest (British Columbia) mining projects and that’s on us. We need to do a better job,” British Columbia Minister of Energy and Mines Bill Bennett said. Specifically to the proposed Kerr Sulphurets Mitchell, or KSM, porphyry copper-gold mine near the headwaters of the Unuk River drainage in British Columbia, Bennett said the province has held “dozens and dozens” of meetings with representatives from the Alaska and U.S. governments since 2008. The Unuk River empties into the Pacific between Wrangell and Ketchikan. Kyle Moselle, a large project coordinator for the Alaska Department of Natural Resources said the Large Mine Permitting Team, or LMPT, system used by the state to coordinate the per-

mitting process between agencies for in-state mines provides a “plug and play” model in discussions with Canadian officials about British Columbia mines that could affect transboundary fisheries. Enacting the LMPT system is done by the mine proponent, he said, which also pays for the resources dedicated to the process. A DNR official is devoted to the project as a coordinator between the departments of Environmental Conservation, Fish and Game, Natural Resources and any others that need to be involved. Moselle said the coordinator works to assure processes are followed but not unnecessarily duplicated among departments. “Issues or areas of concern are usually ID’d earlier in the review process and communicated among the agencies and back to the project proponent more effectively,” Moselle said. He made his comments during a presentation at the Alaska Miners Association conference Nov. 6 in Anchorage. Federal and provincial Canadian agencies easily fit in to the system when their environmental assessment process is at hand, he said. Agency representatives form a technical working group that allows the state to address any

concerns as the environmental assessment plays out. The DNR coordinator then acts as a liaison to consolidate formal comments from the state working group to British Columbia officials, according to Moselle. It all leads to a “strong working relationship” between the neighboring governments, he said. The Aug. 4 tailings dam failure at the Mount Polley copper mine in British Columbia’s Fraser River drainage has caused the public to make incorrect assumptions about the province’s environmental requirements, Bennett said. “The conclusion, for example, that I’ve read in Alaska media that Canada and (British Columbia) have weak environmental standards and poor processes, and we’re under-resourced in our ministries and so forth, that’s just not right; that’s just not correct,” he said. Such conclusions are the easy answer, according to Bennett. It’s still unclear as to why the earthen dam failed and poured tailings slurry into nearby waters, he said. Bennett suspects there was an

See

COOPERATE Page 42

2015 Meet Alaska Conference & Tradeshow

Native regional corps. exploring frontier basins By Tim Bradner Alaska Journal of Commerce

Oil prices may be in the pits but Alaska Native corporations are pushing ahead with exploration in largely-unexplored “frontier” basins in the state. Ahtna Inc., the regional corporation for the Copper River area, plans to begin 40 miles of two-dimensional seismic survey on state lands west of Glennallen this month. Ahtna and two partners hold a state exploration license in the area. If the results are favorable Ahtna hopes to drill an exploration well, said Joe Bovee, Ahtna’s vice president for land and resources. Ahtna has purchased rights and reprocessed about 90 miles of seismic data acquired by oil companies exploring in the 1970s and 1980s. The new seismic being obtained will fill gaps in this data, Bovee said. A potential target for an exploration well should be selected by May, he said. It will be a shallow test of 4,000 feet to 6,000 feet but the structure to be tested could hold a significant amount of gas. The exploration is being done in partnership with two independent oil and gas companies,

Texas-based Rutter and Wilbanks Corp. and Santa Petroleum Pty. Ltd., an Australian firm, Bovee said. Ahtna teamed with Rutter & Wilbanks in earlier exploration in the region including a well drilled that discovered gas. Technical problems with the well and reservoir prevented development of gas production, however. Most recently Ahtna and its partners have committed $2 million to the seismic work. If a well is drilled, it would cost an estimated $12 million. State exploration incentives are helping defray some of the costs of the exploration. If gas is discovered it would provide an important source of energy for power generation in the Copper River region as well as fuel for space heating of buildings and homes. Meanwhile in Interior Alaska, Doyon Ltd. of Fairbanks has just completed a 50-squaremile three-dimensional seismic survey of an area within the Nenana Basin, an area about 60 miles west of Fairbanks where Doyon holds 400,000 acres of state oil and gas leases. Doyon has drilled two exploration wells already in the basin, one in 2009 and a second in 2013. Jim Mery, Doyon’s senior vice president for lands and resources, said the seismic data will be processed and interpreted this spring,

and used to determine a location for a third exploration well. Although the two wells drilled, Nunivak No. 1 and 2, did not find an accumulation of oil, the well data demonstrated the presence of active oil and gas system in the basin, meaning that hydrocarbons were being formed, Mery said. The second well was particularly encouraging in showing the presence of good source rocks for oil and gas and good reservoir rocks capable of holding hydrocarbons generated in the source rocks. The presence of impermeable rock layers to “seal” the top of reservoir traps was also determined. While Doyon had partners in its first well, the lack of a commercial discovery discouraged them from continuing. Doyon continued and funded the second well and additional seismic work on its own. Mery said the corporation hopes to attract a partner for the drilling of a third well, however. Doyon is also active in the Yukon Flats Basin, an area north of Fairbanks where Doyon and three village corporation partners, at Ste-

ever do is put at risk the salmon that swim in (British Columbia) rivers.” KSM Seabridge Gold Inc. Vice President for Environmental Affairs Brent Murphy said the Kerr Sulphurets Mitchell, or KSM, project his company is proposing would be a combined surface-underground mine typical of other porphyry mines in the region. KSM would have an initial mine life of 52 years. While the mine site is 22 miles upstream of the Canada-Alaska border near the Unuk River, the tailings management facility would be 18 miles away in the Bell Irving River drainage. The Bell Irving River feeds the Nass River, which flows south of Alaska and is not a transboundary watershed. Ore from the mine would be sent to the tailings facility via a conveyor and tunnel system and processed there, Murphy said.

“All water that comes in contact with the proposed mining operations will be retained by a proposed water storage dam,” he said. After going through a treatment plant the mine water would also go through the 18-mile tunnel to the tailings pond. Murphy said mine dams are being “rightly” scrutinized after the Mount Polley incident and that KSM’s designs have been reviewed by experts from British Columbia, the Canadian government, the State of Alaska and First Nations. “Following the Mount Polley situation, Seabridge, on its own initiative, also committed to establish an independent third-party review panel to actively participate in the future design, construction, operation and maintenance of the dams throughout the life of the KSM project,” Murphy said. Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

See

FRONTIER Page 45

COOPERATE

Continued from Page 41 engineering mistake in the initial design or construction, or in the subsequent additions to the dam. An independent investigative team has been formed to get to the bottom of the issue. “Mount Polley didn’t happen because we have poor processes in my view,” Bennett said. “This will be determined; if I’m wrong the independent panel will point that out.” British Columbia relies on engineering reports — like all jurisdictions do — to determine if a major infrastructure design like a tailings dam is sound, he said. Ultimately, Bennett said he wants Alaskans to know that the salmon returning to transboundary rivers are as important to British Columbia as they are to the state. “The Alaskan fisherman catch those salmon but they spawn in our rivers,” he said. “Our First Nations, what you call Tribes, depend on those salmon. The last thing in the world we would

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Interior Basins

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FRONTIER

Continued from Page 42

Where are they?

Map/Courtesy/Doyon Ltd.

Oil prices may be in the pits but Alaska Native corporations are pushing ahead with exploration in largely-unexplored frontier basins around the state.

vens Village, Beaver and Birch Creek, control about 1.4 million acres of land. Doyon owns subsurface and some surface rights and the three village corporations own some of the surface. The geology of the Yukon Flats is as prospective for oil and gas as the Nenana Basin and it is three times as large. The westernmost area of interest, near Stevens Village, is near the Trans-Alaska Pipeline System. Mery said Doyon is focusing for now on the Nenana Basin because the state oil and gas leases there have termination dates unless a discovery is made. The region being explored in that basin is also near infrastructure, mainly

the Parks Highway, Alaska Railroad and longdistance electrical interties, and a bridge being built by the city of Nenana across the Nenana River will provide year-around road access. “Success at Nenana will open the door to the similar and much larger Yukon Flats,” Mery said. Meanwhile, in northwest Alaska, NANA Regional Corp. is interested in exploring its own lands in the Selawik Basin near Kotzebue and is working to secure an industry partner, according to Lance Miller, NANA’s resource vice president. There are no state-owned lands in the area. NANA has reprocessed 400 miles of older

two-dimensional seismic done years ago by oil companies in the Selawik Basin, Miller said, and the updated processing techniques shows prospects in the basin that are much more inviting than earlier believed. Chevron and Unocal “shot” about 1,500 miles of 2-D seismic in total. NANA also has access to data from two exploration wells in 1974 and 1975 by Chevron, Nimiuk No. 1 drilled to 6,311 and Cape Espenberg No. 1, drilled to 8,373 feet total depth. Both wells were dry, but armed with new information NANA would like to attract another company to drill again. Tim Bradner can be reached at tim.bradner@alaskajournal.com.

2015 Meet Alaska Conference & Tradeshow

NOAA proposes huge critical habitat area for ringed seals By Dan Joling Associated Press

The federal agency that oversees the U.S. seal population has proposed 350,000 square miles of ocean off Alaska’s north and west coast as critical habitat for the main prey of polar bears. The National Oceanic and Atmospheric Administration announced Dec. 2 that it’s proposing critical habitat for ringed seals throughout U.S. jurisdiction in the Beaufort and Bering seas and in much of the western Bering Sea. AP Photo/NOAA Fisheries

A federal agency has proposed about 350,000 square miles of ocean off Alaska’s north and west coasts as critical habitat for the ringed seal that’s the main prey of polar bears.

“After reviewing the best available information, our scientists identified the habitat features that are essential for sustaining Arc-

tic ringed seals — a species that is likely to become endangered in the foreseeable future due to climate change,” said James Balsinger, NOAA Fisheries Alaska regional administrator, in the announcement. The public will have 90 days to comment. A critical-habitat designation means federal agencies that issue permits for activities within the designated waters, such as proposed petroleum drilling in the Chukchi, must consult with NOAA Fisheries to determine effects on ringed seals. A species is threatened if it’s likely to become endangered within the foreseeable future throughout a significant portion of its range. Ringed seals were declared threatened in December 2012 when federal scientists concluded that a significant decrease in sea ice was probable this century and the changes would likely cause the ringed-seal populations to decline. The state of Alaska, which unsuccessfully fought the listing of polar bears, also objected to the listing of ringed seals, noting that the current population is in the millions and is not in decline. U.S. Sen. Lisa Murkowski, R-Alaska, in a release called it “an unprecedented attempt to place restrictions on a larger than Texas-sized area of water surrounding our state.” She said she’s skeptical of the listing based on a “100-year weather projection” that could

restrict petroleum drilling, marine transportation, port development and commercial fishing. Ringed seals are the only seals that thrive in completely ice-covered Arctic waters. They use stout claws to dig and maintain breathing holes. When snow covers those holes, females excavate and make snow caves, where they give birth to pups that cannot survive in icecold water and are susceptible to freezing until they grow a blubber layer. Hungry polar bears often catch breeding females or pups by collapsing lairs. Ringed seals also use sea ice for molting. A more dire threat than polar bears is less sea ice, decreased snowfall or rain falling on lairs instead of snow, leaving pups exposed to the elements, according to proponents of the listing. Shaye Wolf of the Center for Biological Diversity, who wrote the listing petition, hailed the proposed critical-habitat designation. At almost twice the size of California, it would be the largest ever. The designation would be an added layer of protection from Arctic activities, she said, but will not keep sea ice from melting. She also called on the Obama administration for bold action on greenhouse gases that are making the Arctic uninhabitable for ringed seals and other ice-dependent animals. “It’s climate disruption, it’s global warming, that’s causing the ice to melt,” she said.

Clean Air Act regulations could render Healy plant obsolete By Elwood Brehmer Alaska Journal of Commerce

Federal efforts to reduce greenhouse gas emissions could hit particularly hard in Fairbanks according to Alaska Department of Environmental Conservation Commissioner Larry Hartig. Golden Valley Electric Association’s Healy 1 coal-fired plant could be regulated off the Railbelt power grid if the Environmental Protection Agency implements its proposed Clean Air Act carbon standards. As is often the case, federal regulations de-

signed to fit a Lower 48 model do not translate well to Alaska, Hartig said. The EPA first unveiled its proposed Clean Air Act Section 111 guidelines for limiting carbon emissions in June. The proposal sets a national goal for reducing carbon emissions from power plants by 30 percent of 2005 levels by 2030 as part of President Obama’s larger Climate Action Plan released in 2013. An extended public comment period on the pending regulations ended Dec. 1. It doesn’t fit Alaska because the state’s carbon emissions come from different sources

than the Lower 48, where 32 percent of carbon greenhouse gas emissions were a direct result of power generation in 2012, according to the EPA. In Alaska, about 6 percent of greenhouse gases come from electrical generation. The difference is due to an overall denser population and more coal burning Outside, Hartig said. About half of Alaska’s emissions are from North Slope processing plants that burn natural gas and those are already efficient, he said.

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Continued from Page 46 “It’s not a statement about the environmental performance of the oil and gas industry in Alaska by any means; it’s just that you have world-class facilities in a state that has relatively low population so it’s going to kind of dwarf everything else,” Hartig said. The Healy coal plant comes into play because it is one of the five plants in the state that fit the proposed regulation — at least 25-megawatt capacity, fossil-fuel burning plant that sells more than one-third of its power to a grid. The others are fairly efficient and generally newer Southcentral natural gas-fired plants. Another “major stumbling block for Alaska,” Hartig said, is the fact that the state has six small Railbelt utilities and piecemeal ownership of its antiquated transmission grid. That limits the ability to sell cheaper, cleaner Southcentral power to Fairbanks, he said. State studies have put about a $900 million price tag on needed upgrades to Railbelt transmission lines, which choke to just a single line in some places. Additionally, the coal-fired power from

Healy is some of the cheapest Golden Valley has and the plant is not ready for retirement, according to Hartig. It still carries debt. In the event that a new plant would have to be built, he said, “You’re paying for the new plant; you’re paying for the old plant; you’re paying for transmission and if you’re in Fairbanks you already have some of the highest costs in the country for power.” The president’s plan calls for final regulations to be issued no later than June 1, 2015, and for states to submit how they plan to hit the goal by the end of June 2016. If the regulations are implemented as currently proposed by the EPA, it would force a transformed relationship between the utilities and the Regulatory Commission of Alaska to come up with a suitable plan, Hartig said. “What the state’s doing is we’re working collaboratively with the Alaska Power Association; we’re working with utilities, the Regulatory Commission, The Alaska Energy Authority, the (Attorney General’s) office to carefully review this rather complex proposed rule and the im-

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pact it could have on Alaska,” Hartig said. If the State of Alaska is to reach its goal of 50 percent of Railbelt electricity being produced from renewable sources by 2025, which would almost certainly require construction of the $5.2 billion Susitna-Watana dam, Hartig said more focus would have to be put on power generation projects. Rural renewable projects often sponsored by the Alaska Energy Authority’s Renewable Energy Fund would not lower emissions based on the Section 111 proposal because they are not tied into a grid. While the state has put resources towards energy efficiency in urban areas much of it has been for heating efficiency, such as the Alaska Housing Finance Corp. energy rebate and loan programs. “We may think we’re doing all these great things, but they don’t impact greenhouse gas emissions as they’re being regulated under this proposal,” Hartig said. Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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REPSOL

Continued from Page 29 “We did end up discovering oil in all three wells” Repsol drilled in 2013 on the Colville delta, Hardham said. Repsol is the second-largest leaseholder on the North Slope, with more than 650,000 acres under lease. Its holdings are around the Colville and Greater Moose’s Tooth units on the western part of the developed Slope and south of the Kuparuk River Unit. Repsol became a player on the Slope in March 2011 when it partnered on about 500,000 acres of leases with Denver-based Armstrong Oil and Gas. It completed its first drilling campaign about a year later in April 2012. The company also has offshore leases in the Beaufort and Chukchi seas. Hardham said back in 2011 the state’s projected willingness to

overhaul the oil tax structure was “instrumental in Repsol’s decision to enter Alaska.” Repsol’s $240 million is a small chunk of the large investment pool currently on the North Slope. Caelus Energy, which agreed to purchase Pioneer Resource’s Alaska operations in late 2013, announced a $550 million capital budget for 2015 on its Oooguruk and Nuna developments at the RDC conference. Meanwhile, ConocoPhillips’ 2014 capital plan for the state will total about $1.6 billion, according to the company’s Alaska president TrondErik Johansen.ConocoPhillips has also announced plans this year to add two drilling rigs to the Kuparuk River field. Each rig requires about 100 direct and indirect positions to operate it.

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