Alaska’s Natural Gas Pipeline:A Federal Update - Tanana Chiefs Conference Annual Convention

Alaska’s Natural Gas Pipeline: A Federal Update
Tanana Chiefs Conference Annual Convention
Fairbanks, AK
March 18, 2009

By Drue Pearce, Federal Coordinator
Office of the Federal Coordinator
Alaska Natural Gas Transportation Projects

SLIDE 1: Introduction Page
Good Afternoon—Jerry (Isaac), thank you for inviting me to the Tanana Chiefs Conference Annual Convention. I believe it is important that, we, the federal government, seize every opportunity possible to have a dialogue with Alaska Natives regarding the natural gas pipeline. No matter how many hats you wear – tribal, ANCSA corporate, local government, permanent fund dividend recipient, federal taxpayer, the pipeline will affect your lives. We need to coordinate and communicate with each other.
I am going to talk to you today briefly about the projects, technical challenges associated with them, and the need for infrastructure upgrades. I am also going to outline the new administration’s position on the projects, the role of my office as Federal Coordinator, the responsibilities of the Federal Energy Regulatory Commission, otherwise known as FERC, and the opportunities for you and your communities to interact with the federal government and be involved in the projects.
One of the largest known reserves of natural gas in America sits in Alaska’s Arctic, associated with the development of oil at Prudhoe Bay. The 35 trillion cubic feet of proven natural gas reserves will make a significant long-term contribution to the United States’ energy supplies. Since the late 1990’s, the State of Alaska, the three North Slope Producers, TransCanada, and other major pipeline companies have been pondering whether now is the time when construction of the gasline is economically feasible. CLICK

SLIDE 2: Pipeline Projects
Alaska has a unique pipeline history. While you may know much of it, a brief recitation is useful. After discovery of the elephant sized Prudhoe Bay field in 1967, TAPS, the nation’s largest oil pipeline was built. A parallel gasline has remained a dream. CLICK

SLIDE 3: ANGTA
While TAPS was being constructed, plans were initiated to build a large diameter pipeline to deliver the associated natural gas to the lower 48. Congress enacted the Alaska Natural Gas Transportation Act and President Carter designated the route, design and project sponsors for this transportation system. The southern portions of the pipeline shown in light green on this map are known as the “pre-build” and went into operation in 1981-1982. The northern portion shown in dark green, would link North Slope gas to the pre-built legs. Foothills Pipe Line Ltd, now a subsidiary of TransCanada, is the legacy owner and operator of the pre-build. The northern portion is the route of the pipeline that has remained an elusive target but irresistible dream to Alaskans. CLICK

SLIDE 4: ANGPA
There have been countless proposals to produce North Slope gas since the late 1970’s. The latest effort led to Congress passing the Alaska Natural Gas Pipeline Act, known as ANGPA in 2004. That statute created my office, the Office of the Federal Coordinator for Alaska Natural Gas Transportation Projects, and encouraged the expeditious approval, construction, and operation of a natural gas transportation project for delivery of North Slope gas to U.S. markets.

SLIDE 5: Planned Pipeline Projects
There are four projects that the Office of the Federal Coordinator is monitoring. The first two are mainline proposals which you have heard about today from the proponents and the final two are bullet/spurline proposals which you hear about almost daily in the news.
I won’t repeat the detailed messages you have heard from Denali and TransCanada. As a quick recap, Denali developed a competing project that does not comply with all of the State of Alaska’s AGIA requirements – which the Governor calls the “must haves”. Denali has entered the formal pre-file application process with the FERC and they have filed a Right-of-Way application with BLM.
TransCanada Alaska has begun engagement of the U.S. federal agencies regarding their project.
It is important to note however, that the State AGIA license does not grant an exclusive right to land use and right-of-way permits at the State level. Nor is there an exclusive right at the federal level.

The Alaska Natural Gasline Development Authority, known as ANGDA, has proposed a spurline from Southcentral to Fairbanks. The Army Corps of Engineers is the lead agency for their EIS. They completed their scoping meetings, including Delta and Fairbanks which were held on February 25 and 26. The Corps has also begun the Government-to-Government consultation for this project.
Enstar, SouthCentral Alaska’s gas distribution company, has proposed a bulletline that would run from the Brooks Range through Fairbanks to Southcentral. The Army Corps of Engineers will also be the lead on their EIS. They are discussing potential route options with various federal and state agencies including one option that would run 7 miles along the edge of Denali National Park. (Click)

SLIDE 6: Infrastructure
In order to construct any of these pipelines, it is imperative to have the necessary infrastructure in place to stage all the manpower and materials for construction. In both the U.S. and Canada, we need to either upgrade or build new bridges, highways, airports, material sites and maintenance camps to support tens of thousands of workers, the heavy equipment and the 2.5 million tons of steel needed to construct the pipeline. The latest estimate outlines at least a $1 Billion in projects just in Alaska. The State of Alaska may utilize part of its Stimulus package funding to begin these critical upgrades this year.
It will take 4-6 years to complete the major infrastructure projects necessary to the project. They must be done before pipeline construction can begin. We can’t afford unnecessary delays in completing these upgrades; they will kill this pipeline project. CLICK

SLIDE 7: Technical
I want to talk for a few moments about the technical challenges related to the mainline projects. These challenges are straightforward, relatively easy to address issues that science and lots of money are expected to be able to solve. Some of the issues we expect to face are: related to construction in the Arctic; finding enough laborers to fill the 2004 estimated 54 million man hours of work; ensuring integrity for the largest high pressure gas pipeline ever built in the Arctic; harmonizing design requirements in the United States and Canada; and lastly understanding the change in the Arctic climate.

SLIDES 8 TO 23: Permafrost Map Slide Show
As you know, the climate in Alaska is changing. It is important that we understand permafrost changes and other effects climate change may have on the pipeline after its construction.
Permafrost trends must be incorporated into the design of a pipeline so it will last 30-50 years. We assume that areas of solid permafrost will be displaced by discontinuous permafrost as change progresses. The University of Alaska, State of Alaska Geophysical Surveys, and U.S. Geological Survey have been working together to map and model the change. On the screen is a model that demonstrates the range of permafrost in Alaska from 1950 to today and how it is forecast to shift by 2100. The areas in red are permafrost free and as you look further north the colors shift to light blue and dark blue areas – the darker the blue, the colder the ground temperature. Watch what is forecast to happen. CLICK
(PAUSE while slide show runs)

SLIDES 24 TO 34: Permafrost Map Slide Show One More Time – 2000-2050
I am going to play the map one more time showing you the map from 2000 to 2050. This time, we look at the forecast change every 5 years. CLICK (PAUSE while slide show runs) CLICK

SLIDE 35: Obama Administration
The longest ever Presidential election is finally over and federal agencies are deep into the transition phase.
I am pleased to report that the Obama Administration recognizes the need for an Alaska natural gas pipeline. The President recognizes that the pipeline can increase America’s energy security, create jobs, and help bring clean natural gas to domestic U.S. markets. He has mentioned the project several times since taking office.
I am focusing my attention as Federal Coordinator on briefing key political appointees on the project and the work the federal agencies and project proponents have done to date to prepare to build a pipeline that will supply natural gas to the lower 48 and create thousands of new jobs. CLICK
SLIDE 36: What is the Role of the OFC
My job as Federal Coordinator is to ensure coordination, compliance and oversight, as well as information dissemination. We are headquartered in D.C. and opened our Alaska field office last month with an Environmental Engineer on staff. Additional staff will be added as appropriate.
Coordination among the various federal and State agencies is critical to the successful and expeditious construction of an Alaska natural gas transportation project. The OFC is the lead on development of project implementation plans to facilitate the roles of the federal agencies participating in the pipeline effort. The OFC has also begun negotiations with the State of Alaska on a joint Monitoring and Surveillance Agreement to oversee final design and construction of the project.

Expedience is crucial to the success of the project. The OFC will conduct compliance and oversight reviews to ensure that no federal agency attaches any term or condition not required by law that may impair or prevent progress of the projects.
Given the magnitude of the project it is essential to the success of the project that coordination, oversight and communications are effective and efficient.
The Alaska gasline project is so big, it will make its own weather – and we all know what Alaska’s weather is like! CLICK

SLIDE 37: U.S. Federal Agencies
There are over 22 federal agencies that have roles and responsibilities relating to this project. Just keeping track of these agencies and their responsibilities is a full-time job.
Environmental reviews have to be completed by the U.S. Federal Government, State of Alaska and Canada. ANGPA provides for a specific timeframe, 18 months, for completing the U.S. federal environmental reviews for the project and designates the FERC as the lead agency for completing the environmental review. The Canadians and State of Alaska have agreed to try to time their processes to coincide with the schedule outlined in ANGPA. The schedule is very demanding, especially if there are two applications to process. FERC will write one Environmental Impact Statement for each applicant that all the other federal agencies will use to process any permits. This is unique and will inevitably result in new challenges. It will be imperative that all the federal agencies agree to the schedule put forward by FERC. CLICK

SLIDE 38: FERC Pre-Filing Enviro Review Process
This is a flowchart that outlines the FERC application process. The check depicts the point at which Denali and TransCanada Alaska’s latest timelines are expected to mesh. The boxes above the check indicate activities each expect to complete within the next 24 months. (NOTE the public input opportunities, comment periods.) A major part of the FERC pre-filing process is completion of the FERC Resource Reports. CLICK

SLIDE 39: FERC Resource Reports
The Environmental Resource Reports constitute the “environmental report” portion of a FERC application and are similar to the information required by the Canadian authorities. There are eleven reports that will apply to the natural gas pipeline projects. These reports are one of sixteen exhibits in the final application to FERC. Other exhibits address topics such as gas and market supply data; flow diagrams; the cost of the facilities; financing, depreciation, and tariff provisions; etc.
Environmental Resource Reports are prepared by the applicant and based on collected survey data and other available information. They provide the review agencies with information with which to conduct their analyses. Each Environmental Resource Report presents the existing conditions in the area affected by the proposal and the impacts likely to occur during project construction and operation, and cumulatively. The Environmental Resource Reports also present the applicant’s proposed mitigation. Within this context, the Environmental Resource Reports address and attempt to resolve all issues which are identified during the scoping process.
Finally, the Environmental Resource Reports include a reference list and copies of correspondence between the applicant and state and federal resource agencies.
Both applicants expect to complete Resource Reports one and ten before the end of the year as they prepare their Open Season packages and get ready for the open houses and Environmental Impact Statement Scoping meetings.
Resource Report 1 is the General Project Description. It will describe facilities associated with the project, special construction and operation procedures, construction timetables, future plans for related construction, compliance with regulations and codes, and permits that must be obtained.
Resource Report 10 is project Alternatives. This report must describe alternatives to the project and compare the environmental impacts of such alternatives to those of the proposal. The discussion must demonstrate how environmental benefits and costs were weighed against economic benefits and costs, and technological and procedural constraints.

The potential for each alternative to meet project deadlines and the environmental consequences of each alternative shall be discussed.
Two other reports you should note are Resource Report 4 and 5. Resource Report 4 is Cultural Resources. It requires consultations, cultural resource surveys investigations and providing reports and plans on cultural resources. And Resource Report 5 is Socioeconomics. In this report, applicants must identify and quantify the impacts of constructing and operating the proposed project on factors affecting towns and counties in the vicinity of the project. This includes subsistence, issues, tribal consultation and human health issues. CLICK

SLIDE 40: Native Stakeholders
It is important for the federal government to engage with all project stakeholders. There are a number of them, I am going to focus on the Native Stakeholders.
Alaska is unique. We have a system of layers that is very different from the lower 48. We have 229 federally recognized tribes. And, the Alaska Native Claims Settlement Act (ANCSA) created Regional and village corporations with vast land holdings. Many of you also serve on local councils, school boards, RACs, etc.
As the federal government moves forward with permitting the gas pipeline projects, we will work closely with all the Native Stakeholder groups who are interested in participating in the process.
The Executive Memorandum on Government-to-Government Relationship with Tribal Governments (September 2004) and Presidential Executive Order 13175 (November 2000) require all federal agencies to conduct “government-to-government consultations” with “directly and substantially affected” tribes when activity, such as regulation making or project permitting may affect them.
Being involved in the development process ensures that native communities are aware of upcoming projects, allows their concerns and proposals to be expressed, and provides them with the opportunity to take part in revenue collecting. As I mentioned, Alaska has 229 federal recognized tribes who will be contacted regarding the government-to-government process.

SLIDE 41: Government-to-Government Consultations
In addition to leading the work on the Environmental Impact Statement, FERC will be the lead for the federal government in the Government-to-Government consultations. The Consultation process is expected to begin around the same time as the start of the NEPA Scoping process, which occurs after the company Open Houses.
These consultations are crucial. They provide the forum to ensure that the impacted Alaska Natives’ concerns are considered as the planning moves forward – that’s you. In order to ensure continuity throughout the life of the project, FERC is working to establish a written Government-to-Government consultation plan that will serve the needs of all the federal agencies. The plan FERC is establishing is project specific. Since FERC only has one project under review, the first written plan will address the Denali project. However, FERC anticipates they will engage in a similar process/plan when TransCanada pre-files. The plans will be similar but the specifics in the plan, like the list of directly affected tribes, will depend on the route of the project.

I want to be clear; the mainline consultation will not be the only one pursued. There are other projects being considered in Alaska, like the in-state pipelines, which require government-to-government consultation. To avoid confusion FERC expects to keep their government-to-government review as similar to other agency reviews as possible.
I think we can all agree that the desire at the end of the day is for natural gas to leave the North Slope to be available to Alaska and markets in the lower 48.
My office will provide oversight to ensure the FERC Government-to-Government Consultation plan is followed. I understand how important it is to listen to and work with you as you express your concerns about projects. My office will be another place you can turn if you feel you are not being heard. We will listen and work with you.

There are many opportunities, in addition to the Government-to-Government consultations, to participate in the federal review process. As part of the NEPA process, the applicants, FERC staff and other State and federal agencies will be holding meetings along the route for example open houses, scoping meetings, meetings with individual stakeholders, and DEIS comment meetings. I encourage you all to participate in these parts of the process. CLICK

SLIDE 42: Consultations Section 106
Federal agencies are also required to do a cultural and historic resource analysis and consultation. The National Historic Preservation Act of 1966 created the National Register of Historic Places and the Section 106 review process. The Section 106 consultation ensures that preservation values for cultural and historic properties are factored into federal agency planning and decisions. FERC is the lead federal agency for the Section 106 review.
The consultation under section 106 focuses on concerns related to cultural resources, which include:
- Archeological sites
- Historic properties
- Traditional cultural properties

SLIDE 43: Section 106 FERC Chart
In this case – and different from the government-to-government, the sponsor initiates consultation by letter. That letter generally includes a statement offering the native entity to contact FERC directly if they want and gives the necessary contact information. FERC regulations require the applicant to initiate consultation with Native Groups prior to filing an application. The FERC Guidelines direct the applicant to consult “as early as possible in the planning process” (section IV). FERC directs the applicant to consult the State Historic Preservation Office, SHPO) and land managing agencies, as well as conducting independent research to identify the appropriate groups to contact.
The FERC guidelines establish that “Consultation with Indian tribes should be conducted in a manner sensitive to the needs and concerns of the tribes” (IV.B). The FERC continues to use the services of the applicant (and its consultants) to do the “leg-work” and collect information, conduct surveys, and prepare reports. However, any information considered privileged remains so under the auspices of the NHPA (section 304).
The OFC is working with the State of Alaska and the other federal agencies to create a database that can store the information collected during the 106 review. I want to ensure that as we move forward with all these projects we are coordinated. I don’t want to have Denali collecting information at a cultural site one month and then TransCanada disturbing the same site a few months later. The point of the process is to identify the sites so you disturb them as little as possible. We would like to work with you as the process moves forward to ensure duplication doesn’t occur. If you think it is happening, please let us know. CLICK

SLIDE 44: Local Training and Hiring
There are other avenues for participation by your communities in this project. Promoting and ensuring local training and hiring in the Alaskan oil and gas industry is largely a joint venture. Locals are familiar with the terrain, the customs, the people and are prepared to work under extreme weather conditions. As Industry plans projects, they take into consideration how to incorporate local hiring and knowledge.
For example, last year, Denali made available $30 million to fund job training programs, in-State feasibility, and infrastructure upgrade studies for roads, bridges, ports, etc. They opened an office in Tok and hired locals to help conduct some of the work in the region.
On the federal level, the US Department of Labor under the Employment and Training Administration has awarded grants totaling $20 million to the Alaska Department of Labor to prepare Alaska’s current and future workers for careers in the growing energy sector, including the natural gas and oil pipelines.

The Alaska Department of Labor has put together a workforce development plan and a few months ago announced the opening of the new Fairbanks Pipeline Training Center. This pipeline will create thousands of new jobs.

LAST SLIDE 45: THE END
The OFC and all the federal agencies are excited about getting a natural gas pipeline built. It is important not only for Alaska but also for the nation. In order to get this pipeline built, we must ensure that the tariff stays low enough for the natural gas to be profitable when it is delivered to the lower 48. At this time, that means the tariff must stay below $3 per MMBTU (million metric british thermal units) of gas. Every delay or additional expense adds to the tariff and can kill this project. It happened in the past with the Alaska pipeline project and is happened right now with the Mackenzie gas pipeline project in Canada.
It is important that we all pledge to come to the table with an attitude that we want to find ways to say “yes”. Every Alaskan needs to work together to keep this project economic if we want to see the lifetime of benefits this natural gas pipeline can provide.
North America needs this gas. Alaska and Western Canada need this project. Its time is now! Thank you again for inviting me to your Convention.
THE END

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