Changing tack on oil and gas
| Feb 22, 2010Sen. Bill Wielechowski figures that if what you're doing isn't working, it's time to pull some novel ideas from the box.
Clearly, he said, years of massive tax credits for oil and gas production in Cook Inlet haven't gotten the state far. Production is on the decline and deliverability during peak times isn't a sure thing in Southcentral.
"What more can we do in Cook Inlet?" Wielechowski asked.
For him, it's ironic that some members of the Legislature are championing more tax breaks for North Slope oil companies, hoping to spur production -- when a case study done in Anchorage's backyard seems to conclude that doesn't work.
Instead, he wants to charge the state's Department of Natural Resources with developing a fresh strategy that could, in a way, turn into state oil and gas exploration.
Wielechowski's Senate Bill 208 requires Gov. Sean Parnell -- the only one with the authority to direct a state agency -- to instruct DNR to come up with a plan .
"What I would like to do is give DNR six months, hire some outside consultants if they need to, and come up with a different strategy than the standard, knee-jerk lower taxes strategy that we've employed, and which doesn't work," Wielechowski said.
That strategy could include marketing Cook Inlet's assets, as defined by a state geological study, or getting the state to agree to buy up gas if an explorer hits a large field. He's also hoping to bring the Alaska Natural Gas Development Authority into the game, possibly as a buyer for oil and gas leases in the Inlet, and as an exploration company.
"I hate studies just as much as anyone else -- I would love to see action right now," Wielechowski said. "This is sort of the Wally Hickel approach. If the companies that have the leases are not going to explore, then let's take them back and do it ourselves."
ANGDA could fund exploration to firm up fields, and sell those off to a production company, he speculated.
But ANGDA's chief executive, Harold Heinze, said the authority "has absolutely no interest in getting into the oil and gas business" -- although he added that the market encouragement offered through Wielechowski's bill is spot-on.
"The objectives make absolute sense to us," Heinze said. "We think there is very good reason to try."
ANGDA's approach remains with the region's electric utilities and a new structure to gas supply purchase agreements. If utilities can pay for five or more years worth of gas supply up front, producers may enjoy better cash flow and faster payback on well development costs.
Both approaches could push the situation past a standstill: Without gas, there's no market, and without a market, there's no incentive for producers to locate new gas. Wielechowski hopes the state stepping in could spin the private sector into action.
"If government can step in and figure out a way to assist, to make this happen, that's in everyone's best interest," he said.
Wielechowski's plan was pre-filed more than a month ago and referred to the Resources Committee -- which he chairs with Sen. Lesil McGuire, R-Anchorage -- and to the Finance Committee. A first hearing on the bill is expected fairly soon, he said.
That's when he'll find out what his colleagues think about the unusual -- some might say radical -- approach. But support could come from a couple of angles. Wasilla Republican Sen. Charlie Huggins sits on Resources and is a staunch advocate of in-state natural gas. The Cook Inlet plan could stand out as an alternative to a gas pipeline, bogged down in conflict at the moment. And McGuire and Wielechowski, who were among a group of lawmakers who recently toured a South African plant that turns natural gas into liquid petroleum products, channeled that experience into a renewed push for a GTL plant in Southcentral, where the chance to turn a raw resource into a value-added product could generate Alaska jobs and offer an economic base for continued U.S. military operations.
McGuire and Wielechowski jointly filed Senate Bill 228, which would grant tax incentives to a company pursuing a gas-to-liquids project in Alaska. Sen. Johnny Ellis, D-Anchorage, signed on as a co-sponsor.
Contact Rena Delbridge at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
McGuire and Wielechowski jointly filed Senate Bill 228, which would grant tax incentives to a company pursuing a gas-to-liquids project in Alaska. Sen. Johnny Ellis, D-Anchorage, signed on as a co-sponsor
Alaska spent via BP $75 to $90 million exploring the latest GTL that just now end up in the ash can. They hit the same only 60% efficiency wall we hit in 1983. BP tried everything that was rational, and a lot that wasn’t, trying to find a way a round the 60% wall there isn’t one.
Next question; Where the blank do they think they are going to sell the GTL? BP said they gave their GTL away.
McGuire & Wielechowski trip to South Africa produced nothing new. Their bill is just cover for justifying the trip. They learned nothing from that trip that could not have learned here.
If there were a reason to send two people to South Africa, McGuire and Wielechowski are about the least competent persons to send.
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If Wielechowski actually wanted to resolve the Cook Inlet gas situation he would have introduced a bill which would have require Governor Parnell to carry out Parnell’s oath of office and see that mandates of the leases and Alaska’s Constitution are carried out. That is to tell Conoco/ Marathon / Chevron produce the leases or the State will take the leases back like Murkowski did with Point Thomson.