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All three of the North Slope's major producers, plus the State of Alaska, have submitted comments to the Federal Energy Regulatory Commission on the request for an open season filed by Denali - The Alaska Gas Pipeline (a joint venture between ConocoPhillips and BP). None of the comments oppose the open season that would start July 6 for the North Slope natural gas pipeline, subject to FERC approval, though all ask questions and offer suggestions.

Those comments include:

The State of Alaska disagrees with Denali's proposed restrictions on access to open season documents in the reading rooms that will be maintained by Denali. The pipeline developer, in its open season plans submitted to FERC, included provisions to shield commercial and competitive information from State of Alaska offices and officials that have a statutory relationship with Denali's competitor, the Alaska Pipeline Project (a partnership joint effort of TransCanada Alaska and ExxonMobil).  The Alaska Pipeline Project is the pipeline developer selected under the Alaska Gasline Inducement Act for state financial and regulatory support.

The State of Alaska, in its April 30 motion with FERC, said Denali's proposed restrictions on access to documents is too broad and could hinder the legitimate interests of the state as a potential shipper on the gas line. The state asks FERC to lessen the restrictions and to accept the state's commitment that officials with access to Denali information will not share it with the Alaska Pipeline Project representatives.

ExxonMobil, in its April 30 motion with FERC, said it supports FERC approval of Denali's open season, with some clarifications. The federal commission has the authority to order changes in an applicant's open season proposal.

ExxonMobil is asking Denali to more clearly identify how it plans to segregate in-state and out-of-state pipeline costs in establishing its rates, specifically as it affects rates for in-state shipment of gas. The producer also wants Denali to further explain its proposal to allocate over-subscribed capacity to non-conforming bids outside the open season.  ExxonMobil claims Denali does not sufficiently explain how it would allocate such capacity to non-conforming bidders.

BP in its April 30 comments filed with FERC asks that Denali's open season bid sheet should more clearly define the services that are offered to ensure that all bidders are bidding on the same service arrangements, especially as they relate to seasonal variations in the maximum daily quantity. The producer also objects to Denali's precedent agreement provision requiring bidders to commit to resubmitting their bids in the event that FERC requires Denali to hold a revised open season.  BP is concerned that bidders should not be required to commit to resubmitting a bid under unknown terms if FERC orders a revised open season.

BP objects to several of Denali's requirements for a bidder to show upstream and downstream capacity, including contracts with third-party upstream and downstream service providers in advance of the in-service date for the gas line. The producer also objects to Denali's provision that would allow the pipeline developer to back out of the deal at any time, without making a termination payment to potential shippers, while a shipper has only until Feb. 1, 2011, to back out without owing a termination payment.

BP would like to see more information in the open season documents on how Denali proposes to calculate and implement negotiated rates for the pipeline, and how shippers can challenge recourse rates for the project.

BP, with the longest list of questions/objections of any of the producers or the state, supports implementation of a tracking system to account for the ownership of the natural gas liquids in the line, which Denali has said it is willing to accommodate. ConocoPhillips also raised the gas liquids tracking issue in its April 30 motion filed with FERC. In its open season proposal, Denali said it would permit the establishment of a gas component tracking system funded by the shippers but ConocoPhillips wants FERC to require agreement by all shippers on the line before Denali could establish the system.

ConocoPhillips also asks for more information on the cost-of-service components that would be included in a levelized pipeline tariff; more information on how Denali would handle any reductions in a shipper's maximum daily quantity in the line; and more information on how Denali would notify potential shippers of any design changes in the project and offer bidders the option of withdrawing their bids.

And ConocoPhillips objects to a provision that would limit a shipper's right to oppose certain filings by Denali before FERC, calling the provision "extremely broad".

Denali filed its Open Season Plan with the FERC on April 7, 2010.  Denali is a limited liability company that was formed by North Slope producers BP and Conoco Phillips in June 2008.  It will conduct its open season in an effort to secure binding commitments from prospective qualified Alaska natural gas shippers (Shippers) for firm transmission line, Gas Treatment Plant (GTP), and transportation services. 

The Denali Project is designed to deliver approximately 4.5 billion cubic feet per day of natural gas to North American markets. The GTP at Prudhoe Bay will remove CO2 and dehydrate, compress and chill the gas in preparation for transport down the mainline. When completed, the GTP will be the largest facility of its kind in the world.

Denali and its affiliate, Denali Canada - The Alaska Gas Pipeline (West), Inc. (Denali Canada), are offering to construct and operate an Alaska natural gas transportation project to bring natural gas resources from the Alaska North Slope (ANS) to North American gas markets (Project). Denali would construct the Alaska portion of the Project (Alaska Project) and Denali Canada would construct the Canada portion of the Project (Canada Project).

Denali's cost estimate for the GTP and mainline is $35 billion dollars (2009 U.S. dollars). Denali expects the Project to be in service in 2020.  Denali is not offering a Liquefied Natural Gas (LNG) option in the Open Season, but based on its filing, it has not closed out the possibility of an LNG option.

The Alaska Project will consist of the following FERC jurisdictional facilities:

• Transmission Lines. Denali is planning two Transmission Lines: one beginning in the Point Thomson area and one beginning at the Central Gas Facility in the Prudhoe Bay Unit. The Transmission Lines will transport gas to the GTP.
• GTP. The GTP will be located in the Prudhoe Bay Unit on the ANS and is designed to receive gas from the producing fields and to treat and condition the gas for delivery into the Alaska Mainline. The GTP's services (gas treating and compression/chilling) will be unbundled.
• Alaska Mainline. The 730-mile Alaska Mainline will be a large diameter, high-pressure natural gas pipeline and related facilities for the transportation of natural gas from the outlet of the GTP to Alaska in-state delivery points (five in-state delivery points downstream of the GTP and one at the GTP) and the international border between Alaska and Canada.

The Canada Project consists of the Canada Mainline, which includes a large diameter, high-pressure pipeline and related facilities for the transportation of natural gas from the Alaska- Canada border about 1,020 miles to Alberta, Canada. In Canada, Denali Canada will offer connections to multiple pipelines to provide Shippers options for transporting their gas to North American markets.

Among the features included in Denali's offer are the following:

• If Denali does not receive commitments for at least 85 percent of the design capacity at Open Season, a framework for Shippers and Denali to work together to consider a scaled down project, a different project such as a pipeline to an LNG facility, or to generate additional commitments to allow the original Project to proceed.
• Unbundled transmission (transportation service on the Transmission Lines), GTP, and transportation services that allow Shippers to select only those services that are necessary to treat and transport each Shipper's gas to market;
• Terms that recognize the Project's significant economic uncertainty and risks, including decision points at Project milestones for a Shipper to decide whether to continue its participation as new Project information is developed;
• A minimum credit rating requirement of BBB (Standard & Poor's) or Baa2 (Moody's Investors Service, Inc.) and no minimum volume commitment to encourage smaller leaseholders, explorers, and end users to participate in Denali's Open Season;
• A levelized rate over 20 years for negotiated rate Shippers and a three year levelization period at the start-up of operations for recourse rate Shippers;
• Distance-sensitive rates based on mileage;
• No requirement that existing Shippers subsidize expansion Shippers; and
• Credit of 100 percent of the net revenues from interruptible and authorized overrun service to firm Shippers on a pro-rata basis.

Denali intends to take advantage of the modern, streamlined regulatory processes available in the U.S. and in Canada to progress the Project. In the U.S., Denali will proceed under ANGPA and the FERC's regulations with federal coordination assistance provided by the Office of the Federal Coordinator. Denali will also adhere to the right-of-way and permitting requirements of the State.

Denali Canada will apply to the National Energy Board of Canada (NEB) for a CPCN. The NEB, like the FERC, is mandated to evaluate projects - including in relation to competing projects - on the basis of the public interest. Additionally, the Canada Project will be advanced through a single, coordinated, and modern assessment process under the auspices of the Major Projects Management Office (MPMO).

Denali's Open Season Timeline as proposed:

Contact William Doyle, Director of Permits, Scheduling & Compliance at wdoyle@arcticgas.gov

I am the Senior Project Engineer for the OFC and presented at the largest geospatial technology event for federal agencies, the Federal ESRI conference on February 19th. The session was Geoenabling Web Applications to Support Open Government and my presentation can be found here (PDF). As government strives to deliver greater transparency to the public, its web applications continue to incorporate more spatial intelligence. I focused on how GIS and geographic services bring richer, dynamic, and more collaborative mapping to government websites.

For years, Alaskans have discussed the need for better mapping and many of our project agencies identified a need for a single reference system for information collection. There is not a consistent, standard set of maps detailing the pipeline route in Alaska. Each state and federal agency has data pertinent to their mission; however, sharing that data and incorporation it into one authoritative basemap is instrumental to expedite permitting. We selected a 20-mile stretch of the pipeline route at Atigun pass as our prototype. We then used LiDAR for our basemap and flew the 20-mile stretch in the fall of 2009. With LiDAR we can detect geohazards, wetlands, conduct stream mapping, and ensure the engineering design meets specifications for frost-heave and permafrost construction.

Our goal is to demonstrate that the prototype is an authoritative, consistent, and integrated source of information that can be used by all parties to permit, design, construct, operate, and maintain a gas pipeline. The prototype has two separate platforms. An ArcGIS platform that the agencies will have access to and can layer their information on, and a public web platform that will provide public transparency to the project enabling more informed public comments and a value added database that can incorporate historical data.

The public transparency piece of the prototype is key and provides valuable information and visualizing to the communities and native tribes. The agency web service application provides an authoritative basemap and allows stakeholders to insert their layers and manipulate the data. This project is different in regards to multiple agency collaboration and therefore efficiency to expedite the project. Our next step is to acquire additional agency inputs and develop a data integration plan.

The OFC also participated in the Alaska Forum on the Environment (AFE) in Anchorage the week of February 8. AFE hosted over 1,700 attendees from diverse backgrounds including environmental professionals from government agencies, non-profit and for-profit businesses, community leaders, Alaskan youth, conservationists, biologists and community elders. The OFC hosted a booth at the AFE where we had access through the web to our prototype GIS for AFE attendees to try out the system. I also presented it to the group on February 9 and my presentation can be found here (PDF).

I had the opportunity to attend the winter committee meetings of the National Association of Regulatory Utility Commissioners this week in Washington, D.C. There were three full days of committee meetings on natural gas. Sunday set the stage for the week as there was much interest on recent studies related the abundance of natural gas in the United States. Much of the focus over the past year has been on shale formations and the assessment released by the Potential Gas Committee (PGC) in 2009. The assessment found that the United States possesses a total natural gas resource base of 1,836 trillion cubic feet (Tcf) and a total available future supply of 2,074 Tcf-the highest resources evaluation in the PGC's 44-year history, equaling about 100 years of supply. Americans consume an average of 22 Tcf per year.

It did not take long for the question to arise that with all this new natural gas available is there a need for an Alaska natural gas pipeline? The answer during Sunday's Subcommittee on Gas discussion was an unequivocal yes! Natural gas is the cleanest source of all hydrocarbons. With many of the nation's coal facilities 25 years of age and older, natural gas is the preferred future energy source for electric power generation. Moreover, municipalities throughout the country are looking to power their automobile fleets with clean burning natural gas. The message is clear; we need all the natural gas we can domestically produce to ensure the energy security of the United States. Finally, no matter what committee was in session-all roads led to job creation and the natural gas industry is part of the solution not the problem.

On Tuesday, the Committee on International Relations and Committee on Gas joined together to discuss natural gas as it relates to the United States and Canada. The panel discussion was chaired by the Honorable Gaetan Caron, Chairman and CEO of Canada's National Energy Board; and included panelists Bob Pickett, Chairman of the Regulatory Commission of Alaska; Jon-Paul Therot, Chairman of the Quebec Energy Board; and Phil Moeller, Commissioner of the Federal Energy Regulatory Commission. I must make the qualifying statement that the government officials from the United States and Canada were not speaking or otherwise representing the official positions of their respective boards, commissions and agencies.

It was an excellent panel discussion. FERC Commissioner Phil Moeller articulated that an Alaska natural gas pipeline is needed. He stated that regardless of what people think about natural gas it will become part of the electricity generation mix. Mr. Moeller even addressed the estimated price tag of the gasline that is approaching $40 billion. He did this by recalling his trip to Alaska's North Slope in the summer of 2008. During a break while visiting various facilities in Deadhorse, he and his colleagues sketched out a "back-of-the-envelope" calculation on the natural gas that is basically being produced but re-injected back into the reservoirs. They figured based on market prices at the time that Alaska producers were re-injecting nearly $35 billion per year back into the reservoirs every year.

Alaska's Bob Picket started off his presentation with a simple but resounding, "Alaska gas is good." He focused his comments on two main points: (1) our relationship with Canada is something the United States should not take for granted; and (2) unconventional gas is not a killer of an Alaska natural gas pipeline. His opinion was that Canada and the United States are the best of trading partners and energy is a key factor in the relationship. If it were not for Canada, the United States would be at the complete mercy of overseas nations for our vital energy supplies. Canada is #1 when it comes to working with the United States. On the same token, it was pointed out that the United States, with its increased domestic production of natural gas, is increasingly exporting more gas to Canada each year. The relationship between the two nations is invaluable. When it came to the discussion of natural gas, whether related to unconventional gas plays or the Alaska natural gas pipeline, Mr. Pickett, was firm, "The natural gas industry creates jobs; it is the cleanest of all hydrocarbons; the gas is domestically produced; it is integral to our energy and economic security; and we need to utilize it more." The loud and clear message delivered by Chairman Picket was, "It is time to stop treating natural gas as an orphan and stop leaving natural gas out of the policy discussions in the United States."

Alaska's natural gas is good!

This week OFC's Environmental Engineer Christa Gunn and I participated in the 2010 Pipe Tech Americas Summit in Houston, Texas.  It was well attended and included an overview on the massive cross-border Keystone pipeline project; emergency repair systems; risk based management; and horizontal directional and environmental air drilling.

As OFC's Director of Permitting, Scheduling & Compliance I was part of a panel discussion on the current challenges facing the pipeline industry.  The panel was moderated by Michael Felt of Universal Ensco and included Joe Paviglianiti of Canada's National Energy Board and Jerry Rau of Panhandle Energy Company. 

Jobs, jobs and more jobs was the focus of the panel's discussion.  I noted that the Alaska natural gas pipeline would be the largest privately financed construction project in the history of North America, creating tens of thousands of jobs over its lifecycle.  I summarized the two mainline natural gas pipeline projects, Alaska Pipeline Project (TransCanada-ExxonMobil) and Denali (BP-ConocoPhillips) and then focused on the recurring theme during the panel discussion: personnel, succession plans for an aging workforce and training.  I explained that Alaska has built a 52-acre pipeline training yard in South Fairbanks. The Fairbanks field site offers an environment that replicates the actual pipelines right-of-way, complete with frigid temperature workspaces, mechanized welding operations, heavy equipment operation, ditching, stringing and other associated pipeline construction machinery. The training facility is focused on training a new and rejuvenated workforce for the Arctic energy industry.

A recent announcement by Progress Energy that it will be decommissioning eleven coal plants by 2017 leaves room for more reliance on clean natural gas, pipeline infrastructure and job creation.  Moreover, with a recent INGAA Foundation report finding that $120-130 billion will be invested over the next 20 years in infrastructure in the natural gas industry, including pipeline construction and connecting arctic resources to support growth in the electric generation and industrial sectors-Alaska's natural gas pipeline projects were front and center.

Earlier this week the Federal Energy Regulatory Commission (FERC) held a public workshop on the Alaska Natural Gas Transportation project Open Season.  Over 100 individuals attended from various private industry groups and state and federal agencies.  Richard Foley and Todd Ruhkamp, FERC Washington DC staff, provided details on the project history, ANGPA, the Open Season process and goals, as well as how to provide electronic comments.  The goal of the Open Season is to promote competition in the exploration, development, and production of Alaska natural gas.  The Open Season process is flexible to allow project sponsors to market the project, yet allow for fair competition among prospective shippers.

The Open Season is held a minimum of 90 days, bids are evaluated, winners announced and precedent agreements (PA) negotiated.  PA's are a sensitive yet key step to the Open Season process where the project applicants and shippers agree on conditions.   FERC provided an example of the Ruby pipeline where it took approximately 2 years to sign the PA's.  Some conditions include options for carbon/greenhouse taxes, anchor PA's are approved by the state Commission, and creditworthiness requirements are satisfied.  Another noteworthy point is no bid can be rejected solely because a bidder has a bid pending in another Open Season.

A question from the audience was: will FERC accept comments after the 60 day window?  FERC would like to see comments prior so they can ensure they meet there timeline and that is one of the reasons they are providing workshops now to ensure the public is familiar with the electronic commenting process.  The workshop included a detailed explanation of the navigation of FERC's various electronic forms of information and communication.  Mailed comments will also be accepted and incorporated into the electronic database.

The FERC was asked to clarify how the process will work for the APP project since it is offering a LNG option.  FERC indicated that APP will provide two separate packages allowing for shippers to bid on both options.  The Environmental Impact Statement (EIS) and National Environmental Policy Act (NEPA) process is separate from the Open Season process however the project description is similar to resource report one, required in the NEPA process.

For those interested in Open Season, here are the FERC points of contact:

Denali and APP filings with FERC are available for review in FERC's Public Reference Room or may be viewed on the Commission's website at http://www.ferc.gov using the "e-Library" link http://www.ferc.gov/docs-filing/elibrary.asp.  Enter the docket number excluding the last three digits in the docket number field to access the document, TransCanada (APP) Docket No. PF09-11-000 and Denali Pipeline Project Docket No. PF08-26-000.  Also, FERC has a general Alaska page, http://www.ferc.gov/industries/gas/indus-act/angtp.asp, which includes a FERC Open Season Fact Sheet.

For assistance, contact FERC at FERCOnlineSupport@ferc.gov or call toll-free, (866) 208-3676, or for TTY, (202) 502-8659.  Richard Foley, regulatory gas utility specialist, Office of Energy Projects, Division of Pipeline Certificates, also can assist with questions. He can be reached at (202) 502-8955 or via email at richard.foley@ferc.gov.

Note: If proceeding(s) are protested, FERC Staff cannot discuss the case except to direct persons to the website.

Last month, I gave a presentation on challenges related to moving energy in the arctic, including moving arctic natural gas to North American markets, at a U.S. government High North Conference hosted by the U.S. European Command.

Experts discussed emerging arctic issues ranging from climate change to increased shipping, from seabed resources to international engagement, from research to strategic public diplomacy. Given my background with the Coast Guard, the Department of Transportation and now Alaska Natural Gas Transportation Projects, I was asked to address challenges related to the safe and environmentally secure delivery of energy resources.

As Alaska residents appreciate, the arctic is an amazing and complex ecosystem with unique characteristics and extensive natural resources. Although it seems obvious, its defining, but not always appreciated, characteristics include extreme cold and seasonal darkness not experienced by most on our planet. At 40 below, Fahrenheit and Centigrade temperature scales register the same, and 40 degrees below F/C poses unique challenges to any activity. Other fundamental challenges include vast distances, storms that dominate any operation, limited port, airport/ telecommunications/road infrastructure and brief summers. All add enormous costs. The arctic also is an ocean undergoing significant change. Sea ice has been diminishing and marine life is changing.
These factors, and the enduring concerns of indigenous people who have lived successfully in the arctic for thousands of years, affect arctic development and transportation.

Energy development in the U.S. arctic is not new. For 40 years, challenges have been met, and technology for exploration, development and transportation has steadily improved. For a natural gas pipeline, discontinuous permafrost and seismic pose particular challenges, but do not appear insurmountable.

By virtue of Alaska’s place on the globe, America is an arctic nation with broad, fundamental interests in the region. National security, economic development, environmental and natural resource issues, and resident indigenous people make the capability to anticipate and address the benefits and consequences of arctic activities essential. And, the proximity of other arctic nations makes close and forward-looking international cooperation imperative, whether the issue is natural gas or anything else.
 

It’s been an exceptional honor to be the first federal coordinator for the Alaska Natural Gas Transportation Projects. I am extremely proud of what the Office of the Federal Coordinator [OFC] has accomplished: a secure budget, a great staff, an unqualified annual audit and a solid strategic plan.

I was sworn in 36 months ago and since that time I have put together a dedicated group of 10 people who work in our Washington, DC headquarters and our Anchorage, Alaska field office. They are extremely talented, fully engaged and dedicated to a single mission — to advance our nation’s energy, economic and environmental security by expediting the delivery of clean natural gas from the North Slope of Alaska to North American markets.

The OFC coordinates and expedites the work of more than 24 federal agencies with roles in the permitting, licensing and certificating the natural gas pipeline. In addition, I’ve actively engaged the Canadian government, the State of Alaska and all stakeholders, from Alaska Natives to the conservation community to the unions.

My objective has always been that we be collectively prepared to deal with the competing applicants as they come forward with their projects.

I want to thank the men and women in federal service, especially the career "feds", for their enthusiasm and hard work as they define their roles and responsibilities and engage one another, the proponents and other stakeholders. I have an enormous amount of respect for my federal colleagues – they really are “here to help!”

The State of Alaska and the legislature are key to the success of the project. Communication between the OFC and the state is critical. We’ve had great support from all sectors, and I applaud Alaskans for their deep desire to make the pipeline happen.

I also cannot overemphasize the incredible response we’ve received from our Canadian counterparts. I have met with Ministers Prentice and Raitt, Canadian senators, heads of the federal permitting agencies [NRCan, NEB, NPA, MPMO and CEAA], leaders from the affected territories and provinces and members of the Alaska Highway Aboriginal Pipeline Coalition. Canadians are engaged and enthusiastic about the economic benefits that the pipeline will bring to North America.

A word about the applicants is in order. Both the ConocoPhillips / BP joint venture, known as Denali – the Alaska Gas Pipeline (Denali), and the TransCanada/ExxonMobil partnership, known as the Alaska Pipeline Project (APP), are world class operations with exceptional talent dedicated to building the pipeline. I want to personally thank the teams of APP and Denali for their enthusiasm, professionalism and communicative way of doing business. I’ve known some of the Denali and APP players for years, others are new friends, and to a person, they are part of truly outstanding organizations.

I want to take this opportunity to thank my fellow Alaskans for allowing me to work for you every day for the past 25 years. Every day has been an adventure. Know that I won’t stop now – my passion for our state, our country and this project isn’t diminished. I look forward to the next chapter and adventure.

Dave Holt, president of the Consumer Energy Alliance, recently said: “The road to energy security is through Alaska.” Let me expand on that... The roads to energy security, economic security and domestic homeland security for America all run through Alaska.

I look forward to working with Alaskans so that together we can ensure that our place as the busiest intersection of those roads is protected. The Alaska Natural Gas Pipeline is the project that will forge our legacy.

The Alaska gas pipeline project was very much part of the discussion mix today when the Senate Energy and Natural Resources Committee convened to hear the opinions from a wide array of experts on the role of natural gas in mitigating climate change.  Witnesses from BP, TransCanada, Xcel Energy, Calpine, Energy Information Administration (EIA) and Dow Chemical all testified. The conversation varied from the projection of natural gas supplies, volatility of the natural gas market to the implications of unconventional fuel sources such as shale on other resources like coal. 

BP and TransCanada discussed the need for Alaska’s natural gas and emphasized that the natural gas market was big enough for all the new shale gas and Alaska’s gas. Their statements sounded a lot like those of Rod Lowman’s from America’s Natural Gas Alliance two weeks ago.  During question-and-answer session, Senator Lisa Murkowski [R-AK] asked them again about Alaska’s natural gas.  Both TransCanada and BP agreed that Alaska’s gas is a supply component for the North American market and would help keep prices level in the future.  TransCanada also emphasized that the natural gas industry has increased infrastructure in recent years.  Having a transportation system to get natural gas to the markets will play an important role in stabilizing gas prices.

Finally, they talked about the potential effects of influx levels of natural gas on manufacturing and jobs.  It was a great discussion.  You can read the witness statements and listen to the hearing here.

Jennifer Thompson
Director of Communications and Policy Support
Office of the Federal Coordinator Alaska Natural Gas Transportation Projects

The Office of the Federal Coordinator plans to develop a Google-like prototype that will assimilate data from a variety of sources in order to create one geospatial data source for federal agencies, the State of Alaska and stakeholders to use when studying the proposed route of an Alaska natural gas pipeline.

Recent activities also include meetings between the OFC and Canadian authorities, and the completion of a first phase Consolidated Implementation Plan about Denali – The Alaska Gas Pipeline.