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l P I P E L I N E S & D O W N S T R E A M
l F I N A N C E & E C O N O M Y
Vol. 25, No. 52 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of December 27, 2020 • $2.50
see AIDEA BID page 11
l E X P L O R A T I O N & P R O D U C T I O N
Sale of BP Alaska assets to Harvest/Hilcorp closes Dec. 18
Following conditional approval by the
Regulatory Commission of Alaska on
Dec. 14, on Dec. 18 BP and Harvest
Alaska completed the acquisition by
Harvest — a Hilcorp Energy affiliate —
of BP’s midstream assets in Alaska, BP’s
stake in the trans-Alaska oil pipeline and
Valdez Marine Terminal and in Alyeska
Pipeline Service Co. as well as BP’s
share of the Milne Point and Point
Thomson pipelines.
The upstream portion of the sale — BP’s share of the
see ACREAGE WITHDRAWN page 11
FERC approves Marathon’s Kenai LNG Terminal import project
On Dec. 17 the Federal Energy Regulatory Commission
approved a proposal to bring the Kenai LNG export terminal
in Nikiski back online as a limited-use import facility for nat-
ural gas from a “foreign location.”
Trans-Foreland will return to an active state the terminal’s
existing storage tanks, marine dock, transfer piping, boil-off
gas management system and ancillary facilities.
The application was filed on March 29, 2019, by Marathon
Petroleum subsidiary Trans-Foreland Pipeline, which also
owns and operates the adjacent Kenai Refinery. Trans-
Foreland proposed to “bring parts of the Kenai LNG Plant out
of current warm idle status by importing LNG and using the
LNG to cool existing LNG storage tanks and associated LNG
see LNG TERMINAL page 11
see BP SALE page 10
Happy holidays & best wishes in the New Year!
475K acres withdrawn from ANWR sale; Porcupine calving considered
The Department of the Interior’s Bureau of Land
Management has reduced the acreage available in its Jan. 6 oil
and gas lease sale within the Coastal Plain of the Arctic National
Wildlife Refuge, BLM said in a Dec 18 amendment to the
detailed statement of the sale.
BLM pulled 10 tracts totaling approximately 475,000 acres —
about 30% of the 1.56 million-acre coastal plain — after consid-
ering nominations and comments timely submitted in response to
a Nov. 17 call for nominations published in the Federal Register.
The withheld tracts, tracts 1 through 8, tract 11 and tract 12 are
in the southeast portion of the Coastal Plain.
BLM said the most substantive comments from organiza-
tions such as Canadian governmental entities, Audubon Society
ANS hits post-COVID high Markets shake off fears of US stimulus delays to focus on 2021 demand recovery
By STEVE SUTHERLIN Petroleum News
Despite a downward turn at the beginning of Christmas week, Alaska North Slope crude and Brent crude managed a nine-day streak priced above
$50 per barrel, with ANS closing Dec. 22 at $50.56,
down 95 cents and Brent closing at $50.08. West
Texas Intermediate closed at $47.02, off 72 cents.
Markets were rattled as the week opened on win-
ter solstice Monday Dec. 21 by a new strain of
COVID-19 identified in the U.K. which launched
new travel restrictions in Europe, including bans on
travel from the U.K. The U.K. government imposed
tighter restrictions in London and other cities, saying
the new strain exhibited a 70% faster spread than ear-
lier mutations.
ANS gapped down 2.4% to $51.51 Dec. 21, while
Brent dropped 2.6% to $50.91 and WTI lost 2.8% to
close at $47.74. The losses were the steepest since
Nov. 6.
On Dec. 18, ANS had closed up 68 cents at
Playing a new hand Set of pipeline options disclosed by Enbridge offer alternative link to Gulf Coast
By GARY PARK For Petroleum News
Calgary-based Enbridge, which owns North America’s largest oil pipeline network, has figured out that the uncer-
tain Keystone XL project is not the only
way to deliver hundreds of thousands of
incremental barrels of crude from
Alberta to the U.S. Gulf Coast.
Operating away from the harsh glare
of public attention, the company is assembling the
pieces that suggest it doesn’t need a transportation
system on the grand scale of Keystone XL to
achieve the same results.
A combination of Line 3, which is under con-
stant attack from Indigenous and envi-
ronmental activists despite having
obtained a full slate of regulatory
approvals, and Southern Access, which is
scheduled to start service in 2021, could
be the key link in Enbridge’s hopes of
optimizing its entire Mainline system
from Alberta to Ontario.
If the extension of Southern Access
does meet its latest startup date, six years
behind the original timetable, it will
carry 300,000 barrels per day on the US$765 mil-
lion, 167-mile route down Illinois from Flanagan
to Patoka.
Line 3, which replaces an aging pipeline, is
HEX CI still moving forward Focused on improving Kitchen Lights sustainability, but also looking at opportunities
By KAY CASHMAN Petroleum News
Since taking over operator-ship of the Cook Inlet Kitchen Lights unit on July 1
with its purchase of bankrupt-
cy debtor Furie Operating
Alaska LLC and related
firms, HEX Cook Inlet LLC
touts a surprisingly hefty list
of accomplishments.
The company, a joint venture between HEX
LLC (80%) and Rogue Wave AK LLC (20%), was
founded in 2020 by Alaskan John Hendrix, its pres-
ident and CEO. Hendrix, who was raised in Homer
and is an engineer, has close
to four decades of experience
in the energy industry in
Alaska, the Lower 48 and
internationally with Apache,
BP and Schlumberger.
In a Dec. 18 presentation to
a Commonwealth North study
group, Hendrix listed HEX
CI’s accomplishments, the
most recent being record natu-
ral gas production in 2020 of 15.4 million cubic
feet per day, as compared to about 12 million when
HEX took over on July 1. The others included:
• Timely and early payments on AIDEA loan.
see OIL PRICES page 12
see PIPELINE OPTIONS page 10
see HEX CI page 8
AIDEA might bid in ANWR lease sale; project in line with mission
At the Alaska Industrial Development
and Export Authority’s monthly board
meeting on Dec 23 a resolution allowing it
to bid in the Jan. 6 federal oil and gas lease
sale for the coastal plain of the Arctic
National Wildlife will be discussed in exec-
utive session and could then come up for a
vote in the public portion of the meeting.
The newly drafted Resolution G20-31
points out that one of the purposes of
AIDEA is to develop and provide financing
for industrial development and facilities that “are essential to the
development of the natural resources and the long-term economic
ALAN WEITZNER
JASON REBROOK
But the consultancy expects oil demand to resume its upward trajectory, at least for the rest of the decade. “Predictions that 2019 would turn out to be the peak for world oil demand seem unlikely to be
fulfilled.” Wood Mac said.
AL MONACO
JOHN HENDRIX KEVIN SMITH
http://www.petroleumnews.com
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2 PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020
Petroleum News Alaska’s source for oil and gas newscontentsANS hits post-COVID high Markets shake off fears of stimulus delays to focus on recovery
Playing a new hand Pipeline options by Enbridge offer alternative link to Gulf Coast
HEX CI still moving forward Focused on Kitchen Lights sustainability; also eyeing opportunities
ON THE COVER
AIDEA might bid in ANWR lease sale; project in line with mission
Sale of BP Alaska assets to Harvest/Hilcorp closes Dec. 18475K acres withdrawn from ANWR sale; Porcupine calving consideredFERC approves Marathon’s Kenai LNG Terminal import project
ENVIRONMENT & SAFETY6 Update on Trading Bay slop oil release
3 Western coastal area open for tundra travelEXPLORATION & PRODUCTION
4 US drilling rig count climbs 8 to 3466 Corps issues Willow gravel work permit
5 NMFS OKs incidental take for Eni, Hilcorp
6 AEA completes transmission line purchase
GOVERNMENT
UTILITIES
3 Canada’s hydrogen strategy falls flat Government offers mere C$1.5B to stimulate investment in hydrogen lands; critic says Canada lags behind rival countries
2 Planned solar farm asks utility exemption Energy 49 asks RCA to exclude proposed 6 MW Houston facility from utility regulation; power will go to MEA, RCA will review contract
4 Comments due Feb. 8 on regulation changes BOEM, BSEE, propose changes to 2016 Arctic OCS exploration drilling rules for burdensome regs, to reflect new technology
Alaska’sOil and GasConsultants
GeoscienceEngineeringProject ManagementSeismic and Well Data
3601 C Street, Suite 1424Anchorage, AK 99503
(907) 272-1232(907) 272-1344
l U T I L I T I E S
Planned solar farm asks utility exemption Energy 49 asks RCA to exclude proposed 6 MW Houston facility from utility regulation; power will go to MEA, RCA will review contract
By KRISTEN NELSON Petroleum News
E nergy 49 LLC has petitioned the Regulatory Commission of Alaska for exemption from regulation as a public utility for a proposed 6 megawatt solar farm in
the Houston area which would sell all energy generated to
Matanuska Electric Association through a special contract.
In a Dec. 3 filing, Jenn Miller, CEO of Renewable IPP as
manager of Energy 49, said the commission has approved
similar petitions in the MEA service area for Southfork
Hydro LLC and Fishhook Renewable.
Miller said the 6 MW AC solar farm would sell all the
power generated to MEA at wholesale prices. “The project
is slated to begin construction summer 2021 and begin oper-
ation by year end 2021,” she said, and is expected to “oper-
ate for 30 years, providing clean energy and will not increase
electricity cost to MEA members.”
Miller told the commission that compliance with its full
regulation would be “burdensome and redundant on this
small project.” The commission will approve Energy 49’s
power purchase agreement with MEA “through a special
contract filing, which provides regulatory oversight of the
project,” she said. “Energy 49 is also required to meet
MEA’s technical interconnection requirements to ensure
safe and reliable operations,” Miller said, and it would be an
unnecessary administrative burden on the commission to
also oversee regulation of the project.
Energy 49 also requested that RCA expedite its decision
on the project and issue a decision by March 31 “as this
enables funding to be released in time to support 2021 con-
struction” allowing private investors to qualify for 2021
Federal Investment Tax Credit of 22% before that rate steps
down in 2022.
“The 22% ITC is critical to support investible project
economics,” Miller said.
A Dec. 18 order from RCA designating a panel and
appointing an administrative law judge denied the request
for an expedited decision, saying it would issue a final order
no later than June 1, based on statutory requirements.
Renewable IPP operates solar power as a partner in the
Willow Solar Farm, which came online late last year and at
1.2 megawatts was then the largest solar farm in the state.
The expansion of that project to its 1.2 MW size was
financed by the Alaska Energy Authority.
A June report from the University of Alaska Fairbanks’
Center for Energy and Power said at the end of 2019 there
were some 8 MW of solar photovoltaic installations in the
state, including 5.6 MW net metered on the Railbelt, the 1.2
MW Renewable Independent Power Producers installation
in Willow and a 563 kilowatt utility installation in Fairbanks.
“In the last year alone, the installed capacity on the
Railbelt has nearly doubled,” the UAF report said.
Energy 49 is an Anchorage-based limited liability com-
pany managed by Renewable IPP LLC, the company told
RCA. It described Renewable IPP as “an ‘Alaska Grown’
small business which develops, constructs and operates util-
ity scale solar farms in Alaska,” and said Energy 49 was
see SOLAR FARM page 5
To advertise: Contact Susan Crane
at 907.250.9769
http://www.petroak.com
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By GARY PARK For Petroleum News
T he goals are high flying: A gain of 350,000 jobs over 30 year, a lowering of Canada’s carbon emissions by 45 mil-
lion metric tons a year by 2030 and a com-
bination of public and private investment
of C$5 billion to C$7 billion over the next
five years.
Those are three visions laid out in a 104-
page Hydrogen Strategy for Canada
unveiled by the federal government on
Dec. 16, which one observer said could
have been covered in four pages.
But it’s unclear whether the government
believes as strongly in its claims as it does
in its argument that hydrogen could under-
pin a domestic market of C$50 billion a
year and produce a clean-burning fuel that
Natural Resources Minister Seamus
O’Regan estimates could meet 30% of
Canada’s energy needs by 2050.
For many observers the long-touted
plan amounted to someone pouring water
on a fireworks display — lots of fizzing
and spluttering, but not enough details to
represent a commitment.
Regional hubs Among its vague ideas, the government
proposes to establish several regional hubs
across Canada in areas where expertise in
hydrogen already exists — in other words
a potential vote-catching move beyond the
core natural gas supplies that would under-
pin the industry.
The hubs would be located in British
Columbia, Ontario, Quebec and the
Atlantic region which have ports that could
become export outlets for hydrogen, and at
the high-traffic corridor on the Windsor,
Ontario-Detroit border crossing — the
busiest between Canada and the U.S. —
where hydrogen could meet fuel demands
for heavy equipment and transport.
Despite all O’Regan’s grand declara-
tions that “hydrogen’s moment has come”
and that Canada is ready to harness the
global momentum powering demand for
hydrogen — which one study quoted in the
strategy estimated hydrogen energy could
become a C$12 trillion industry by 2050 —
the government offer to stimulate spending
amounted to a mere C$1.5 billion from its
Low Carbon and Zero Emissions Fund,
fueled by carbon taxes.
“Spread across all technologies, that’s
not a large investment compared with other
jurisdictions,” said Simon Dyer, deputy
executive director at the Alberta-based
think-tank Pembina Institute.
However, he expected intense competi-
tion for the money, which would ensure
that only the best projects were funded.
Temporary support The government said that “while the
sector must ultimately be self-sustaining,
temporary support is needed in the next
five to 10 years to attract and de-risk indus-
try investment.”
That includes spending on infrastruc-
ture, such as gas pipelines and subsidies to
persuade industrial and transport sectors to
pivot to hydrogen, while rail, aviation,
mining, oil refining and ammonia and steel
production are all identified as industries
that could use the gas to help lower carbon
output.
“Ultimately, the market will decide
where best to deploy hydrogen once
greater supply becomes available in
Canada,” said the strategy. “The two big
drivers will be cost competitiveness com-
pared to alternative energy sources that can
serve each end-use, and decarbonization
potential which will ultimately be linked to
the economics as carbon pollution pricing
reflects the true price of emissions.”
The Alberta government offered only a
subdued response, with Energy Minister
Sonya Savage suggesting the strategy
will rely heavily on “our natural resource
production and emissions reduction tech-
nology.”
Canada’s Environment and Climate
Change Minister Jonathan Wilkinson, seen
as an equal partner with O’Regan in craft-
ing the strategy, said that as countries
around the world strive for net-zero green-
house gas emissions by 2050, Canada is
“well positioned to be among the global
leaders on hydrogen production (which
could) put Canada on a path to exceeding
our 2030 Paris (climate change)
Agreement target.”
On the environment front, the docu-
ment notes that the European
Commission is already creating a meas-
urement system that takes into account
the total GHG emissions associated with
hydrogen so that clean produces can be
granted a certification.
The next goal for Canada in its so-called
“call for action” is to work on developing
and adopting national definitions and stan-
dards for “clean” hydrogen based on car-
bon intensity thresholds.
It starts down the road far behind 20
countries around the world that have devel-
oped their own hydrogen strategies, many
of which have spent or earmarked billions
of dollars to accelerate hydrogen technolo-
gies within their borders.
British Columbia success story So far, one of the few success stories
in Canada is British Columbia’s hydro-
gen fuel cell manufacturer Ballard Power
Systems, which has accumulated more
than 1,400 patents and patent applica-
tions, with annual revenue of more than
US$100 million from sales of its fuel cell
stacks that are used in thousands of
buses, trucks and warehouse forklifts
around the world.
l G O V E R N M E N T
Canada’s hydrogen strategy falls flat Government offers mere C$1.5 billion to stimulate investment in hydrogen lands; critic says Canada lags behind 20 rival countries
PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020 3
229-6000
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DENALIUNIVERSAL.COMMCOMAL.COMERSAL.COMNIVERSAL.CLIUNIVERSANALIUNIVEDENALIUNDENALDEN
EXPLORATION & PRODUCTIONWestern coastal area open for tundra travel
The western coastal area of the North Slope opened for winter season tundra trav-
el Dec. 17.
The Alaska Department of Natural Resources’ Division of Mining, Land and
Water, said Dec. 17 that it had documented that soil temperatures and snow cover
within the western coastal area have met criteria for opening — 6 inches of snow and
colder than minus 5 degrees C at 30 centimeters depth.
In a Dec. 21 status report the division said the western coastal area continued to
be the only area to have met the division’s requirements.
The opening applies only to operators with valid off-road vehicle travel permits
for operations on state-owned lands on the North Slope.
While overall snow cover is good, it may be thin in some areas, the division said
Dev. 17, and those areas should be avoided or special construction methods used to
protect the tundra surface. The division’s off-road winter vehicle requirements
include adequate frost and snow cover and approval of individual routes of travel.
“Site inspections will be conducted periodically by state personnel to ensure com-
pliance,” the division said.
DNR staff will be on the Slope the week of Jan. 4 to continue monitoring snow
conditions and soil temperatures, with the next off-road travel status report expected
out around Jan. 11.
For question contact the division’s Northern Region Land Section in Fairbanks at
907-451-2740.
—PETROLEUM NEWS
see HYDROGEN STRATEGY page 5
The government said that “while the sector must ultimately be self-sustaining, temporary support is
needed in the next five to 10 years to attract and de-risk industry
investment.”
http://www.denaliuniversal.com
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4 PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020
ADDRESS P.O. Box 231647 Anchorage, AK 99523-1647 NEWS 907.522.9469 [email protected] CIRCULATION 907.522.9469 [email protected] ADVERTISING Susan Crane • 907.770.5592 [email protected]
OWNER: Petroleum Newspapers of Alaska LLC (PNA) Petroleum News (ISSN 1544-3612) • Vol. 25, No. 52 • Week of December 27, 2020
Published weekly. Address: 5441 Old Seward, #3, Anchorage, AK 99518 (Please mail ALL correspondence to:
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Kay Cashman PUBLISHER & FOUNDER
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ANWR: No Seismic? No Problem.
Learn about an alternative land valuation strategy using our proprietary modeling system
for undiscovered oil.
Explore a demo scenario in the ANWR 1002 Area here: https://bit.ly/3m0EBok
Contact: Erik Anderson
[email protected] Cell: (781) 307-5448
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Since 2008
EXPLORATION & PRODUCTIONUS drilling rig count climbs 8 to 346
The Baker Hughes U.S. rotary drilling rig count continued to increase, up by eight
the week ending Dec. 18 to 346, still down substantially, by 467, from a count of 813
a year ago.
When the count hit 244 the week of Aug. 14, it was not just the low for 2020, but
the lowest it has been since the Houston based oilfield services company began issuing
a weekly U.S. rig count in 1944.
Prior to this year, the low was 404 rigs in May 2016. The count peaked at 4,530 in
1981.
At the beginning of the year the count was in the low 790s, where it remained
through mid-March, when it began to fall, dropping below what had been the historic
low in early May with a count of 374 and continuing to drop through the third week of
August when it gained back 10 rigs.
The Dec. 18 count includes 263 rigs targeting oil, up five from the previous week
but down 422 from 685 a year ago, 81 rigs targeting gas, up by two from the previous
week but down 44 from 125 a year ago, and two miscellaneous rigs, up by one from
the previous week and down one from a year ago.
Twenty-one of the holes were directional, 308 were horizontal and 17 were vertical.
Alaska count unchanged New Mexico (66) was up by six rigs from the previous week, while Texas, with the
most active rigs at 158, was up three from the previous week, although still down 260
from 418 a year ago.
Wyoming (4) was down one rig from the previous week.
Rig counts were unchanged in the remaining states: Alaska (3), California (6),
Colorado (7), Louisiana (40), North Dakota (11), Ohio (5), Oklahoma (14),
Pennsylvania (19), Utah (3) and West Virginia (9).
Baker Hughes shows Alaska with three active rigs Dec. 18, unchanged from the pre-
vious week but down by three from a year ago.
The rig count in the Permian, the most active basin in the country, was up by six
from the previous week at 174, but down 240 from a count of 414 a year ago.
—KRISTEN NELSON
l G O V E R N M E N T
Comments due Feb. 8 on regulation changes BOEM, BSEE, propose changes to 2016 Arctic OCS exploration drilling rules to remove burdensome regs, reflect new technology
By KRISTEN NELSON Petroleum News
P roposed revisions to Arctic exploratory drilling regulations, announced Nov. 19 by the U.S.
Department of the Interior’s Bureau of
Ocean Energy Management and Bureau
of Safety and Environmental
Enforcement, were published in the
Federal Register Dec. 9, with commits
due by Feb. 8.
Interior’s November statement said
the purpose of the changes was “to
remove unnecessary, burdensome provi-
sions while ensuring that energy explo-
ration on the Arctic Outer Continental
Shelf remains safe and environmentally
responsible.”
“As countries like Russia increase
their presence in the Arctic — including
the use of U.S. technologies to develop
their seabed resources, it is increasingly
important to ensure that the United States
has a strong presence in the Arctic OCS,”
said Deputy Secretary of the Interior Kate
MacGregor. “The Beaufort and Chukchi
Seas have a long legacy of oil and gas
development — we believe these pro-
posed revisions will better harness new
technological innovation and best science
to allow for responsible domestic energy
development off the coast of Alaska.”
Executive Order 13795, issued by
President Donald Trump in 2017, directed
Interior to review the 2016 Arctic
Exploratory and Drilling Rule and report
recommendations, Interior said.
The department said the revision team
included career subject matter experts and
regulatory specialists who looked to addi-
tional research in the review, including a
BSEE-commissioned technology assess-
ment program study, National Petroleum
Council reports and consultations with
“leaders of more than 23 Alaska Native
tribes, Alaska Native Claims Settlement
Act (ANCSA) corporations and munici-
palities throughout Alaska.”
The department said the revision team
also addressed an issue not in the 2016
rule, lease suspensions for seasonal
weather-related constraints.
2016 rule The Federal Register notice said the
2016 rule was a response to BSEE- and
BOEM-initiated environmental and safe-
ty reviews based on experience in the
Arctic OCS “gained from Shell’s 2012
and 2015 Arctic operations, and concerns
expressed by environmental organiza-
tions and Alaska Natives.”
The notice says the 2016 rule was
“narrowly focused, applying solely to
exploratory drilling operations conducted
during the Arctic OCS open-water
drilling season by drilling vessels and
‘jack-up rigs’ (collectively known as
mobile offshore drilling units or MODU)
in the Beaufort Sea and Chukchi Sea
Planning Areas,” designed to ensure those
exploration operations were safe “while
taking into account the unique conditions
of the Arctic OCS, as well as Alaska
Natives’ cultural traditions and their need
for access to subsistence resources.”
The BSEE and BOEM review of the
2016 rule takes into account a congres-
sional declaration in the Outer
Continental Shelf Lands Act that policies
and procedures for managing oil and gas
development in the OCS be “intended to
result in expedited exploration and devel-
opment of the Outer Continental Shelf in
order to achieve national economic and
energy policy goals, assure national secu-
rity, reduce dependence on foreign
sources, and maintain a favorable balance
of payments in world trade.”
The bureaus have also reviewed new
information on technological develop-
ments in an ice environment and based on
that review are proposing revisions in the
2016 rule to “reduce unnecessary burdens
on stakeholders while still maintaining
safety and environmental protection.”
Proposed changes Proposed changes include:
•BSEE proposes to eliminate reference
to capturing water-based muds and cut-
tings where subsistence values might be
impacted because the requirement
appears to overlap with regulation by the
U.S. Environmental Protection Agency
see DRILLING RULES page 5
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PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020 5
l G O V E R N M E N T
NMFS OKs incidental take for Eni, Hilcorp By KRISTEN NELSON
Petroleum News
T he National Marine Fisheries Service has approved applications from Hilcorp Alaska and Eni US Operating allowing issuance of letters of authorization for
the incidental taking of small numbers of marine mammals
incidental to ice road and ice trail construction, maintenance
and operation on Alaska’s North Slope from 2020-25.
In a Dec. 22 Federal Register notice the agency said the
takes authorized would be incidental to ice roads and ice
trails construction and maintenance.
“Hilcorp and Eni plan to conduct necessary work,
including use of heavy machinery on ice, to facilitate access
to North Slope offshore oil and gas facilities. The action
may incidentally expose marine mammals occurring in the
vicinity to elevated levels of sound, human presence on ice
habitat, and interactions with heavy machinery, thereby
resulting in incidental take, by Level A and Level B harass-
ment and serious injury or mortality,” the agency said in the
Federal Register notice.
Hilcorp conducts oil and gas operations at Northstar pro-
duction facility and Eni conducts oil and gas operations at
Spy Island drill site.
Hilcorp constructs annual ice roads and trails allowing
access between West Dock at Prudhoe Bay and Northstar,
while Eni constructs annual ice roads and trails between the
Oliktok production pad and the Spy Island drill site. Eni also
builds an annual ice road from shore to the Oooguruk drill
site.
Hilcorp’s Northstar ice road is built to transport person-
nel, equipment, materials and supplies, and allows standard
vehicles to be used, but depending on operational needs and
weather, in some years Hilcorp may build only a primary
ice trail which can support only tracked, lighter-weight
vehicles.
Eni builds a single ice road and three ice pads each year,
with two floating ice pads used for parking areas at Spy
Island and one grounded ice pad at the Oliktok Point end of
the ice road.
On Jan. 17, 2020, NMFS published a proposed rule and
regulations to govern takes of marine mammals incidental
to Hilcorp and Eni’s ice roads and trails construction and
maintenance, requesting comments.
NMFS made some changes in response to comments,
including revised buffers for seal avoidance and an addi-
tional monitoring and reporting measure requiring Hilcorp
and Eni to engage local hunters through the Ice Seal
Committee to gather recommendations on methods for
ringed seal detection along sea ice roads and trails and
incorporate the recommendations into training materials for
personnel and “include the methods used for detection of
seals and seal structures with an assessment of their effec-
tiveness in the final reports.” l
The strategy has pinpointed several
transport, power generation and industri-
al sites that could become regional proj-
ect hubs over the next five years, includ-
ing Alberta’s Industrial Heartland near
Edmonton, which already has access to
plentiful supplies of natural gas and car-
bon capture and storage facilities.
One issue the strategy seems destined
to stir up is the emerging debate led by
environmental groups who argue that pro-
moting “blue” hydrogen, derived from
natural gas, with resulting carbon emis-
sions trapped carbon capture and storage
technologies, would amount to subsidies
for the oil and gas sector. A group of envi-
ronmental and non-profit groups recently
urged the federal government instead to
focus on greener options. l
continued from page 3
HYDROGEN STRATEGY
and “might result in BSEE issuing requirements that
contradict EPA’s requirements.”
•Source control and containment equipment would con-
tinue to be required when the operator is drilling or working
below surface casing, but BSEE proposes to allow the oper-
ator to adjust the point during operations when it must posi-
tion its capping stack “so that it is available to arrive at the
well location with 24 hours after a loss of well control.” If
the operator can demonstrate that operations would not
encounter any abnormally high-pressured zones or other
geological hazards before reaching the last casing point
prior to penetrating a zone capable of flowing hydrocarbons
in measurable quantities, “then BSEE will allow the opera-
tor to delay its positioning of the capping stack until reach-
ing that casing point.”
•BSEE also proposes to eliminate the requirement that
containment dome and cap and flow system be positioned
to arrive at the well location within seven days of loss of
well control because a study shows meteorological condi-
tions in the Beaufort and Chukchi seas are “key factors lim-
iting the time periods when SCEE may be safely deployed
throughout the Arctic OCS,” and it isn’t practical for the
agency to prescribe that certain SCEE “be positioned within
proximity to a well location when the conditions for safely
deploying this equipment in the Arctic OCS are limiting.”
•Same season relief well and subsea isolation devices
requirements would be revised to provide the operator the
option of using an SSID or having access to a relief rig by
providing an operator the opportunity to adjust when during
operations it must stage its relief rig from when working
below surface casing to when drilling or working below
“the last casing point prior to penetrating a zone capable of
flowing hydrocarbons in measurable quantities” if the oper-
ator can demonstrate no abnormally high-pressured zones
or other geological hazards would be encountered before
reaching the last casing point.
•BSEE proposes to clarify when mudline cellars are
required since the existing regulations can be read to require
use of mudline cellars in all cases except when the cellar
would present an operational risk “and that was not BSEE’s
intent,” the agency said.
•BOEM proposes to eliminate the requirement for an
integrated operations plan because the information required
in the IOP overlaps that required in an exploration plan “and
the IOP’s early information sharing is unnecessary in light
of BOEM’s practice for reviewing and coordinating review
of the EP.”
Additional issue The proposed rule also considers an issue not addressed
in the 2016 rule — seasonal weather-related constraints in
the Arctic OCS.
BSEE is proposing to add a new provision to its regula-
tions which would provide operators who are conducting
operations but prevented by seasonal constraints from com-
pleting the operations to obtain a suspension of operations
which “would suspend the running of the lease term and
effectively extend the term of the affected lease by a period
equivalent to the period of such suspension,” providing
operators who are “otherwise ready and able to conduct
drilling operations with additional time to diligently explore
their leases, without facing lease expiration due to interfer-
ence by seasonal constraints unique to the Arctic.” l
continued from page 4
DRILLING RULES
formed so that private investment could fund and own the
Houston solar farm. Houston is the only project planned by
Energy 49 at this time “and exemption (from utility regula-
tion) is requested solely for the Houston Solar Farm project
rather than the entity of Energy 49,” the company said.
The Willow Solar Farm Pilot, a 100 kW project, and the
900 kW Willow Solar Farm Expansion are Renewable IPP’s
two completed solar projects.
“Both of these projects were delivered under budget and
sell power to MEA at their avoided cost,” the company said.
The Willow expansion is owned by AK Renewable
Energy Partners and managed by Renewable IPP; AK
Renewable Energy has a contract, approved by RCA, to sell
power to MEA.
Energy 49 is working with MEA on a contract for power
from the Houston solar farm and estimates that contract will
be submitted by MEA to RCA for approval in January.
Renewable IPP is in the development stage for the
Chugach Solar Farm, which would be a 9.6 MW Anchorage
installation selling power to Chugach Electric Association.
Renewable IPP said in a November fact sheet on the
Chugach project that it is in the process of leasing land, com-
pleting detailed grid studies, agreeing on power purchase
terms with Chugach Electric and finalizing private invest-
ment.
That project, representing $12 million of private invest-
ment, is planned for 2022. l
continued from page 2
SOLAR FARM
-
6 PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020
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UTILITIESAEA completes transmission line purchase
The Alaska Energy Authority has completed its $17 million purchase from Homer
Electric Association of the 39.3-mile electricity transmission line between the Sterling
Substation and Quartz Creek on the Kenai Peninsula. The transmission line, referred
to as the SSQ line, is critically important for the shipment of power from the Bradley
Lake hydroelectric plant in the southern Kenai Peninsula to electric utilities elsewhere
on the Alaska Railbelt electricity system.
Bradley Lake supplies the least expensive power available on the Railbelt electric-
ity grid. The facility is owned by AEA, operated by HEA and managed by a commit-
tee with members from the Railbelt utilities and AEA. The objective behind the pur-
chase of the SSQ is to align the management of the line with the operation and use of
Bradley Lake.
“This acquisition furthers AEA’s mission to reduce the cost of energy in Alaska,”
said AEA Board Chair Dana Pruhs. “The addition of these assets results in the SSQ
line becoming part of AEA’s Bradley Lake Project with better cost alignment and will
facilitate upgrades benefiting Alaska ratepayers.”
“This purchase marks a pivotal moment in the history of our partnerships,” said
AEA Executive Director Curtis Thayer. “The transaction brings significant benefits to
customers today and into the future — including better cost alignment, increased reli-
ability, and future prospects for upgrades to the line, which would decrease line losses
and allow for increased power transmission north, and unconstraining Bradley
power.”
“This transmission line is key in delivering consistently low-cost renewable hydro-
electric power to some of the largest population centers in the state,” said Tony Izzo,
chair of the Bradley Lake Project Management Committee and CEO of Matanuska
Electric Association. “We applaud the Alaska Energy Authority’s leadership in part-
nering with the utilities to provide energy security and stabilize costs for ratepayers
throughout the region.”
—ALAN BAILEY
To advertise in Petroleum News, contact Susan Crane
at 907.250.9769petroleumnews.com
EXPLORATION & PRODUCTIONCorps issues Willow gravel work permit
ConocoPhillips Alaska has received a permit from the U.S. Army Corps of
Engineers for gravel work at Willow.
The final environmental impact statement for the project was released by the
federal Bureau of Land Management Aug. 14, followed by a record of decision
on the final EIS on Oct. 26.
The Corps permit, dated Dec. 18, is for the discharge of clean fill and associ-
ated work in waters of the U.S. for construction of the Willow master develop-
ment project at portions of the Bear Tooth and Greater Mooses Tooth units in the
National Petroleum Reserve-Alaska. The permit expires Dec. 31, 2025.
The company said in July that it expected a final investment decision on
Willow this year and first oil in 2025-26.
ConocoPhillips Alaska spokeswoman Natalie Lowman told Petroleum News
by email in October after the Willow ROD was released that it allowed the com-
pany to move forward with project planning.
“A decision on moving into FEED (Front End Engineering and Design) will be
made later this year, but project construction could begin in 2021 subject to
receiving regulatory approvals,” she said.
In the company’s Oct. 29 third quarter earnings conference call, Matt Fox,
ConocoPhillips executive vice president and COO, said the company is moving
forward with the Willow project, but that “assumes taxes will not increase,” refer-
ring to Ballot Measure 1 on Alaska’s November general election ballot. “If it pass-
es, we might want to reconsider the timing,” he said.
That ballot measure was defeated.
—KRISTEN NELSON
Update on Trading Bay slop oil release In a Dec. 17 situation report on the Dec. 15 slop oil release at Hilcorp Alaska’s
Trading Bay production facility, the Alaska Department of Environmental
Conservation’s Division of Spill Prevention and Response said Hilcorp and Cook
Inlet Spill Prevention and Response Inc. personnel were on site Dec. 17 continu-
ing to recover oil from the containment area, with 17 barrels of the 190-barrel
release recovered.
The release occurred during a transfer of slop oil from Tank 4 to the slop oil
tank, TK-9500. As that was occurring the operator noticed the TK-9500 tank level
was not increasing proportionately to the decrease in the level of Tank 4, and after
visual inspection, the operator observed oil under and around the edges of the sec-
ondary containment liner.
The division said the operator immediately isolated tank TK-9500 and the
leaking line.
Hilcorp describes slop oil “as oil that includes more water than their specifica-
tions for selling that oil,” the division said, with the slop oil going through addi-
tional treatment to remove excess water, after which it put back into the oil pro-
cessing system.
In a final situation report, issued Dec. 22, the division said that as of Dec. 21
115 barrels of slop oil had been recovered.
“Response personnel continue to recover oil from the containment area with a
vac truck,” the division said, and Hilcorp and its contractor Chosen Construction
are working to remove snow and ice in preparation to excavate the site of impact-
ed soils and inspect the ruptured line.
The division said Dec. 21 that CISPRI personnel were being demobilized and
Chosen Construction has installed heaters to thaw certain areas within the con-
tainment area.
“Once the collection of oil with a vac truck is complete, personnel will work
on small sections to scrape up contaminated soil. Excavation of the compromised
line is anticipated to begin soon to uncover the pipeline point of failure,” the divi-
sion said, with response actions, sampling and waste disposal continuing to be
coordinated with Hilcorp and DEC.
—KRISTEN NELSON
ENVIRONMENT & SAFETY
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PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020 7
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• Majority of field operations contract-
ing turned over to Alaska-based
Udelhoven Oilfield Services, which was
founded in Kenai in 1970 by Jim
Udelhoven who Hendrix said July 7 is
“one of those men
whose word you
can trust with a
handshake.”
• Hired Alaskan
Kevin Smith (first
employee ever for
Furie in the field),
who had retired
from BP after a 25
year-plus career on
the North Slope to
take the position.
• Brought in production safety man-
agement coach Daryl Leech on Aug. 21.
• Anchorage office functioning vs. a
Houston office.
• Anchorage local employees up
500%, field employees up 1000%.
• Established data management con-
trol.
• Performing well surveys on A1 and
A2A (two of the field’s four production
wells).
• Entered A4 well, fishing attempted,
punched tubing, production achieved.
“When we took over, we basically had
to go in and fix everything,” Hendrix
said. “There was not one Alaska person
working in our field (including contractor
personnel). There was only one person in
the Anchorage office. … Well files were
in boxes. … We’re going to have to go
back and work all of the wells over to
have access to all the original reserves
because in a lot of it you have tubing
inside the well covering up the flow,” he
said.
Praised AIDEA When HEX took over operations on
July 1, there were three wells in the unit
that weren’t producing as much as they
could be and a fourth well, A-4, the
newest well, which was offline because
the company was not allowed to produce
from the Sterling formation. There were
two wireline fish and a tubing plug in the
well which prevented HEX from access-
ing it and adding perforations to the
Beluga formation.
“It was a journey, it was a challenge to
get where we are today,” Hendrix said,
more than once thanking AIDEA — the
Alaska Industrial Development and
Export Authority — for providing
financing.
“It was the only financial institution at
the time in the state that would help us —
even across the United States and North
America it was very tough to get financial
backing for a project in Alaska.”
This, in part, is due to Alaska’s lack of
credibility in financial markets because
the state has not met its oil and gas tax
credit obligations.
“We continue to say we are open for
business, but we must demonstrate it,”
Hendrix said, starting with “paying our
tax credit obligations.” However, he did
praise Gov. Mike Dunleavy for proposing
the FY22 budget fund oil and gas tax
credits at the statutory minimum of $60
million — and the governor’s decision to
introduce legislation requiring state
departments and agencies to end existing
relationships and partnerships with finan-
cial institutions that have chosen to stop
financing oil and gas exploration and
development in the Arctic.
Furie’s creditors are owed approxi-
mately $103 million dollars against
unpaid state tax credits and although once
the credits are paid HEX won’t get much
from them, he wants to see those creditors
paid.
Also on Hendrix’s list of must-dos for
the State of Alaska is improving “permit
timing.”
Finally, he wants to see more educa-
tion of Alaskans on the benefits of
responsible resource development.
Room for growth In addition to the offshore Kitchen
Lights unit, which is the largest unit in
Cook Inlet with more than 83,000 acres,
Furie’s main assets include an offshore
natural gas production platform. The
Julius R. is the newest platform in Cook
Inlet. Structured to have six wells online,
there are four wells in its slots now, he
said.
“And there is a subsea pipeline that
goes to our onshore facility at Nikiski
from the Julius R. platform. … It’s 16
miles long and 16 inches in diameter,”
Hendrix said.
In the seventh plan of development for
Kitchen Lights, submitted to the Alaska
Department of Natural Resources’
Division of Oil and Gas in September,
HEX said Kitchen Lights gas production
was restored in April 2019 by the former
owners of Furie after water in the subsea
pipeline created hydrate plugs.
Production is now limited to the
Beluga formation to restrict the amount of
produced water entering the pipeline.
In his December presentation, Hendrix
explained that with the Beluga reservoir
in decline the upside prize for the new
owners is returning the Sterling reservoir
to production, which will require a water
handline permit for overboard discharge
of water.
Hendrix mentioned the company is
waiting on that permit from the Alaska
Department of Environmental
Conservation and expects it at any time.
HEX’s plan of development for
Kitchen Lights said all four of the wells
on the Julius R. platform have been perfo-
rated in both the Sterling and the Beluga.
“Obtaining the platform water han-
dling permit more than doubles our
remaining reserves and revenue,” HEX
said.
The onshore gas processing facility
can reportedly handle five times what it is
doing today.
HEX’s way forward “The way forward is to continue to be
a sustainable Cook Inlet producer. We’ve
got to continue to increase our produc-
tion. We’ve got to think about jobs for
Alaska and about economic development
in Alaska,” Hendrix said, noting the
ADEC permit was needed to accomplish
these things.
The company also has a bonding chal-
lenge with the Alaska Oil and Gas
Conservation Commission, which
Hendrix is working to resolve. “We have
8 PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020
-8200517-907
TIME
IONS
am
m.
t NSTIAK.comLearn more aTION.ATAND INSTALLA
UTIOLA SOLORT
ANYWHERE, ANYTour tea
MO
connect y
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continued from page 1
HEX CI
see HEX CI page 9
JIM UDELHOVEN
http://www.nstiak.comhttp://www.acuren.comhttp://www.crpipeandsteel.com
-
PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020 9
Oil Patch Bits
ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS
Companies involved in Alaska’s oil and gas industry
A Acuren . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 AES Electric Supply, Inc Afognak Leasing LLC Ahtna, Inc. Airport Equipment Rentals . . . . . . . . . . . . . . . . . . . . . . . . . .5 Alaska Dreams Alaska Frontier Constructors (AFC) Alaska Fuel Services Alaska Marine Lines Alaska Materials Alaska Railroad Alaska Steel Co. Alaska Tent & Tarp Alaska Textiles Alaska West Express Arctic Controls ARCTOS Alaska, Division of NORTECH Armstrong AT&T Avalon Development
B-F Bombay Deluxe BrandSafway Services Brooks Range Supply C & R Pipe and Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Calista Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 ChampionX Chosen Construction Colville Inc. Computing Alternatives
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G-M GCI GMW Fire Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Greer Tank & Welding Guess & Rudd, PC HDR Engineering, Inc. ICE Services, Inc. Inlet Energy Inspirations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Judy Patrick Photography . . . . . . . . . . . . . . . . . . . . . . . . . .12 Little Red Services, Inc. (LRS) LONG Building Technologies Lounsbury & Associates Lynden Air Cargo Lynden Air Freight Lynden Inc. Lynden International Lynden Logistics
Lynden Transport Maritime Helicopters
N-P Nabors Alaska Drilling NANA Worley Nature Conservancy, The . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 NEI Fluid Technology Nordic Calista North Slope Borough North Slope Telecom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 Northern Air Cargo NRC Alaska, a US Ecology Co. Oil Search PND Engineers, Inc. PRA (Petrotechnical Resources of Alaska) . . . . . . . . . . . . . .2 Price Gregory International
Q-Z
Raven Alaska – Jon Adler Resource Development Council SeaTac Marine Services Security Aviation Shoreside Petroleum Soloy Helicopters Sourdough Express Strategic Action Associates Tanks-A-Lot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Weston Solutions Wolfpack Land Co.
All of the companies listed above advertise on a regular basis with Petroleum News
Lynden VP Dennis Mitchell joins Airforwarders board As reported by Lynden News Dec. 17, Lynden International
Senior Vice President Dennis Mitchell was elected to the board of the Airforwarders Association on Nov. 16.
The AfA serves as the voice of the air forwarding industry and represents nearly 400 member companies dedicated to moving cargo throughout the supply chain. The association’s members range from small businesses with fewer than 20 employees to large companies employing more than 1,000 people and business models varying from domestic to worldwide freight forwarding operations. The AfA helps freight forwarders move cargo in the timeliest and most cost-efficient manner whether it is carried on aircraft, truck, rail or ship.
“Dennis is a highly respected member of the AfA that was selected by our membership for a board position. His skills and expertise in the transportation industry will help guide the AfA in its ambitious agenda toward continued success,” says Brandon Fried, AfA execu-tive director.
Mitchell will be sworn in on Jan. 5 to serve a three-year term as one of eight AfA board members. Lynden International Vice President Laura Sanders also served a 12-year term on the AfA board from 1999 to 2012. Lynden International has been a member of the AfA for more than 25 years.
Mitchell brings 26 years of Lynden experience to his board position as well as back-ground as a business owner. He owned his own customs brokerage firm from 1986 to 1994 prior to joining Lynden in Anchorage. He holds a bachelor’s degree in Business
Administration and Supply Chain Management from the University of Alaska and is a licensed customs broker. Mitchell is also the former chair of the board of directors for the Anchorage Economic Development Corp.
Little Red Services receives ConocoPhillips award Little Red Services said Dec. 18 that during a virtual ceremony in late November its
team received the ConocoPhillips 2019 Supplier Recognition Award for the company’s “focus on execution.”
The 13 recipient companies were chosen from a worldwide network of suppliers. Recipients were honored for exhibiting exceptional leadership in observance of the ConocoPhillips SPIRIT values. Suppliers were recognized for two distinctions: focus on exe-cution and doing business better. ConocoPhillips global business units generated nomina-tions internally and winners were carefully selected by a cross-functional committee of senior managers.
“Since the 80s we’ve been partnering with ConocoPhillips Alaska on the North Slope,” said Jerry Webre, president of LRS. “ConocoPhillips Alaska asked if we could double our exploration well testing capacity for the 2019 exploration season. Our team did an out-standing job of pulling together a second full kit in a few months. I’m proud of how this team engaged with our client and suppliers to secure, prepare, and modify equipment to deliver exceptional well testing.”
Editor’s note: Some of these news items will appear in the next Arctic Oil & Gas
Directory, a full color magazine that serves as a marketing tool for Petroleum News’ contracted advertisers. The next edition will be released in March.
DENNIS MITCHELL
multiple overlapping bonds” with the various agencies,
including AOGCC. “All we’re asking for is, let’s be sen-
sible about this overlap bonding. Let’s get it right.”
“Right now we are out there working on our water
handling equipment to get it up and running,” Hendrix
said. “We don’t have a permit to operate it, but they did
give us a permit to construct. … It’s worth it to us to
spend a million or two in hopes we will get the operating
permit because if all of a sudden we get it and the
equipotent is not running, we could lose six months of
production,” Hendrix said
Udelhoven is in the process of pre-installing the
equipment. They have been “out there with about 14
people for two weeks, welding, and setting new separa-
tors.”
The end result, he said, is improved operation effi-
ciency, “better than we’ve ever seen in this field.”
Another thing HEX has been doing is looking “very
diligently” for additional drilling and production oppor-
tunities “above the base,” Hendrix said. “Where can we
next drill? We only have two slots unless we sidetrack a
well. … What else is out there? What gives us the
biggest bang for a buck? What is the lateral extent of our
field?”
“We’re getting a good handle on that,” he said. “We
hope in the near future to have a drilling program.”
But right now the company is in fixing mode.
For example, “there is so much opportunity out there
to cut costs,” Hendrix said, such as the $500,000 or so a
year the company spends on electricity just for its
Nikiski plant, when it could make its own electricity
with its gas.
Alaska’s way forward Going back to the subject of making Alaska competi-
tive near the end of his presentation, Hendrix said the
state must have a stable fiscal regime.
If there is another ballot initiative, he would like to
see one that makes Alaska’s fiscal regime stable for at
least the next four years “and then they can change it.
But every year? Who’s going to put money in a state that
moves every year?”
“We’re turning into a Third World state with First
World regulations,” he said, referring to his dissatisfac-
tion over the most recent attempt to raise taxes that was
introduced in Ballot Measure 1 with “no public process.”
(The measure was voted down by Alaskans on Nov. 3.)
And we must move Alaska from a raw product pro-
ducer to a value-added producer, he said.
If we want to keep our children in Alaska with paying
jobs, and “stop the brain drain, “we need to basically
expand from being a raw producer … to a producer of
product with by-products.” That will mean more jobs,
Hendrix said.
It will also mean more revenue to the state.
Our oil and gas, he said, is worth more as a by-prod-
uct than as a raw product. l
continued from page 8
HEX CI“We hope in the near future to have a drilling
program.” —John Hendrix
-
10 PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020
Prudhoe Bay, Milne Point and Point
Thomson fields and related assets —
closed June 30. Hilcorp took over as
Prudhoe Bay operator on July 1. The
company already operated Milne Point;
Point Thomson is operated by
ExxonMobil Production.
The $5.6 billion sale of BP’s Alaska
assets to Hilcorp was announced in
August 2019.
RCA’s decision on the midstream was
conditional on some additional filings by
Dec. 28 (see story in Dec. 20 issue). The
companies provided the required filings
electronically on Dec. 18, telling RCA the
electronic filings would be followed by
original paper copies upon their arrival in
Alaska on or before the required Dec. 28
date.
In a Dec. 18 statement Harvest
Midstream, the parent company of
Harvest Alaska, said with the RCA deci-
sion Harvest acquires BP’s approximately
49% interest in the Trans-Alaska Pipeline
System and 49% of Alyeska Pipeline
Service Co.
“The completion of this acquisition is
a critical milestone for Harvest,” said
Jason Rebrook, chief executive officer of
Harvest Midstream. “TAPS is an icon of
American ingenuity and has a proven
track record of safe and responsible oper-
ations with strong relationships in the
communities it touches. We are commit-
ted to positively building upon this great
legacy and we look forward to partnering
with Alyeska, other TAPS owners and the
State of Alaska for years to come.”
A Dec. 18 statement from BP said the
company had completed the sale of its
midstream Alaska business to Harvest
Alaska, following the August 2019
announcement by the company that it
would exit Alaska.
Dave Lawler, chairman and president
of BP America, said: “BP deeply appreci-
ates being a guest of Alaska and its
Native communities for over six decades,
and we thank the government of Alaska
for its professionalism as we worked to
finalize this sale. BP is a better company
because of our time in Alaska.”
The additional filings RCA required
from Harvest reflect that when filings
were originally made with the commis-
sion Harvest Alaska was a wholly owned
subsidiary of Hilcorp Alaska; it is now a
wholly owned subsidiary of Harvest
Midstream.
The required BP filings are related to
DR&R obligations: BP retains those for
the system as it existed at the time of the
sale.
RCA required filings affirming that
“BP Pipelines (Alaska) Inc. remains
bound as a lessee under all right-of-way
leases for which BP Pipelines (Alaska)
Inc. is obligated to perform dismantle-
ment, removal, and restoration,” and con-
firmation that BPPA would be invoiced
by Alyeska for the full share of BP and
Harvest DR&R. BP is to pay invoices and
then bill Harvest for that company’s
share. DR&R costs for the system as it
existed prior to the sale remain the
responsibility of BP; costs for work done
after the sale are the responsibility of
Harvest.
RCA said this requirement is a
response to concerns expressed over
Harvest’s financial ability to meet TAPS
DR&R obligations.
—KRISTEN NELSON
continued from page 1
BP SALE
designed to ship 760,000 bpd from
Alberta through Illinois to Wisconsin, is
now expected to ship its first oil by late
2021.
“We can probably optimize by another
200,000 to 300,000 barrels per day” from
those ventures, said Vern Yu, Enbridge’s
executive vice president and president of
liquids pipelines, told the Financial Post.
He said that volume is equivalent to the
types of crude Enbridge feeds into its
pipelines and “how we can maximize the
pumping capacity of all five Mainline net-
work pipelines. We can do all of this without
needing to invest any further capital or to get
more permits.”
Enbridge currently operates the Flanagan
South and Seaway Twin pipelines which
provide a connection from the U.S. Midwest
to the Gulf Coast and has declared it is look-
ing to capture more of the Gulf Coast mar-
ket, where refineries are equipped to handle
heavy crudes.
Yu conceded the Line 3 and Southern
Access projects were part of that strategy,
which would offer more outlets for trans-
portation-strapped Alberta oil sands produc-
ers.
“It could be a partial mitigation to other
pipelines if they don’t go forward,” he said.
‘Under the radar’ Phil Skolnick, a New York-based analyst
at Eight Capital, said the pipeline develop-
ments along a route from Alberta to
Wisconsin on Line 3 and from Illinois to
Texas on Southern Access have been
advancing “under the radar.”
Included in the package is the reversal of
the 1.2 million bpd Capline Pipeline, owned
by Marathon Pipe Line and Plains All
American Pipeline.
Capline is the largest northbound
pipeline from the oilfields of Texas and the
Gulf Coast to inland U.S. refineries.
Skolnick said a teaming up of Line 3,
Southern Access and Capline could offer
Canadian producers a multi-destination
alternative to the 830,000 bpd Keystone XL.
He said that “kind of insurance” would
be perfect for producers if it could offer 1.2
million bpd of capacity from the Alberta
trading hub to Louisiana.
However, TC Energy is not about to
walk away from its shipping commitments
for Keystone XL.
A company spokesman said the project
has been “fully contracted short of the min-
imum capacity required by regulators to be
set aside for walk-up shippers.”
The challenges facing Enbridge were
laid out in early December by Chief
Executive Officer Al Monaco, who told
investors it has become more difficult to
build major oil pipelines which now carry a
higher “risk premium” to account for longer
lead times.
The company has already had a taste of
that new world with Line 3, whose costs
have soared from US$2.9 billion to US$6.7
billion and face another revision in the first
quarter of 2021. l
continued from page 1
PIPELINE OPTIONSThe challenges facing Enbridge were laid out in early December
by Chief Executive Officer Al Monaco, who told investors it has
become more difficult to build major oil pipelines which now
carry a higher “risk premium” to account for longer lead times.
http://www.calistacorp.com
-
facilities,” as well as minor modifications
to prevent environmental and economic
waste from boil-off gas. The modifica-
tions are collectively referred to as the
“Kenai LNG Cool Down Project.”
The project will allow the Kenai LNG
Terminal to import of up to four tanker
loads of LNG per year and provide up to 7
million standard cubic feet per day of boil-
off gas to the refinery.
During periods when boil-off gas gen-
eration is insufficient to meet the Kenai
Refinery’s needs, a portion of the LNG
would be vaporized and delivered to the
refinery along with the boil-off gas.
The existing export terminal includes a
pretreatment facility, a 0.2 billion cubic
feet per day liquefaction unit, three
35,000-cubic-meter LNG storage tanks, a
boil-off gas management system, a marine
loading/unloading dock, and ancillary
facilities. The terminal has not exported
LNG since 2015 and has been maintained
in a warm idle state since 2018.
The U.S. Department of Energy Office
of Fossil Energy’s authorization to export
LNG from the Kenai terminal expired in
2018, and Trans-Foreland does not pro-
pose to return the liquefaction portion of
the plant to an active state.
Construction activities To convert the terminal for import,
Trans-Foreland said it will construct the
following:
(1) a skid-mounted, electric-powered
trim LNG vaporizer module consisting of
10 trim LNG vaporizers;
(2) a 1,000 horsepower electric-driven
boiloff gas booster compressor; (3) a
vaporizer feed pump; (4) an LNG circula-
tion pump;
(5) twelve new valves and minor pip-
ing rearrangements; and
(6) appurtenant facilities.
The project, which has two years under
the FERC authorization to complete, will
require about 35 workers during peak con-
struction and average about 20 workers,
most of whom are operations personnel at
the Kenai LNG Terminal.
All construction will occur within the
boundary of the terminal.
Approximately one month prior to in-
service, Trans-Foreland plans to apply for
authorization from the DOE’s Office of
Fossil Energy to import LNG at the Kenai
LNG Terminal.
—KAY CASHMAN
PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020 11
Holiday Savings Offer
By KAY CASHMAN Petroleum News
On Oct. 1, operator Brooks Range Petroleum Corp., or BRPC, and Finnex LLC filed the
eighth annual plan of development for the
Southern Miluveach unit on behalf of the working
interest owners with Alaska’s Division of Oil and
Gas. Sustained oil production from the unit’s
Mustang field is planned by third quarter of next
year.
The eighth POD, which will run from Jan. 1 to
Dec. 31, 2021, takes up where work in the 8,960-
acre, five-lease, unit left off in December 2019.
Note: As previously reported in Petroleum News,
on Sept. 16 the Alaska Industrial Development and
Export Authority passed a resolution approving the
negotiation and execution of a debt settlement
restructuring agreement, or DSRA, and authorized
the sale of the Mustang oil field leases to Finnex.
Finnex is the special purpose vehicle, or SPV,
page 5
l F A C I L I T I E S
l E X P L O R A T I O N & P R O D U C T I O N
Vol. 25, No. 40 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of October 4, 2020 • $2.50
August ANS down marginally; Cook Inlet production off by 2%
see INSIDER page 11
Parks redo hangs on offshore O&G; Rivalry for oil investment heats up CONSERVING NATURAL RESOURCES
has “long been tied to and directly support-
ed by oil and gas development in the United
States,” Walter Cruickshank, Ph.D., acting
director of Interior’s Bureau of Ocean
Energy Management, wrote in a recent
release.
“This may seem counterintuitive to some,
but offshore energy development revenues
from qualified leases go right back into conservation initia-
tives throughout the United States via the Land and Water
Conservation Fund,” Cruickshank said in the story, which
was first published by The Vindicator.
Established in 1964, the LWCF supports federal, state and local land, water and wetlands purchases to expand public
access to public lands, “so more Americans can experience
see ICEBREAKER page 11
l E X P L O R A T I O N & P R O D U C T I O N
Russia’s new nuclear icebreaker completed, heads to Murmansk Construction of the Arktika, Russia’s newest nuclear ice-
breaker, has been completed and the vessel is heading from St. Petersburg to Murmansk, according to Rosatom State Atomic Energy Corp. Russia claims that the new vessel is the world’s largest nuclear icebreaker. Rosatom reports that the vessel is 173 meters in length, with a displacement of 33,540 tons. Two nuclear reactors power the vessel’s propulsion system. The ves-sel is the first of a series of four similar icebreakers, planned to
be built in a program referred to as “project 22220.”
The Barents Observer has reported that one of the vessel’s three electrical propulsion engines is broken and will need to be
replaced.
Russia’s particular focus is the operation of the Northern Sea route, the Arctic route around the north of the country, linking the Baltic Sea with South Korea and the north Pacific. With the continuing shrinkage of the Arctic sea ice extent and thinning of the ice, there is international interest in the potential for opening
Vol. 25, No. 2 October 2020
ArcticArcticCovering Arctic oil and gas operations and the logistics, construction and service firms that support them
Oil & Gas DirectoryOil & Gas Directory
Latest Arctic Directory released
BlueCrest’s 7th POD Maintain production; trident fishbone well on hold until prices firm up
By STEVE SUTHERLIN Petroleum News
BlueCrest Alaska Operating LLC will implement well work in order to main-
tain production under its seventh plan of
development for the Cosmopolitan unit, in
effect from Jan. 1, 2021, through Dec. 31,
2021.
In a Sept. 25 letter to the Alaska
Department of Natural Resources Division
of Oil and Gas, BlueCrest said plans in its sixth POD
to drill at least one trident fishbone well in 2020,
which were delayed due to COVID-19 oil market
disruptions, will remain on hold for 2021 “until the
current market environment improves.”
Each trident fishbone well, built on the
company’s success with its single fishbone
wells, will “provide the same amount of
reservoir contact as 21-27 individual
wells.” J. Benjamin Johnson, BlueCrest
Energy CEO and president told Petroleum
News in 2019.
A complete well plan stands ready for
the company’s proposed H10 trident well,
Johnson said in a Sept. 29 interview.
“It’s on indefinite hold. We’re ready to
go but we’re waiting to have some confidence in oil
prices,” he said. “It’s a moving target; the oil prices
are down but costs have also come down.”
The company said the pause in drilling has
Trump bolsters A2A Says will issue presidential permit for Alaska-to-Alberta import and export line
By GARY PARK For Petroleum News
From the time it was floated five years ago, the lat-est version of an Alaska-Alberta rail link has
been openly scorned by many and quietly given the
brush off by others.
For 130 years, various proposals have been made
for such a project to bolster imports and exports in
Alaska and Western Canada and have just as quickly
evaporated in the absence of financial backers.
But the idea keeps resurfacing as a serious plan to
move oil and other resources to and from the Pacific
Basin through Alaska.
The current proposal involves a venture by the
Alaska to Alberta Railway Development Corp., A2A.
In mid-2019 A2A announced it had reached an
agreement with the Alaska Railroad Corp. to develop
a joint operating plan to upgrade and extend the 515-
mile Alaska Railroad mainline between Seward and
North Pole.
Apparently the mega-undertaking has attracted
the attention of President Donald Trump, who
announced on Sept. 25 that he would issue a presi-
dential permit for the A2A project, a permit which the
president signed Sept. 28.
The plan involves building a 1,600-mile track
linking Anchorage, the Yukon, the Northwest
Territories and northern Alberta at a current cost esti-
mate of C$22 billion, with Alberta’s oil sands bitu-
men exports being carried by rail to Interior Alaska,
see MUSTANG PLAN page 9
see BLUECREST page 10
see A2A RAILWAY page 10
J. BENJAMIN JOHNSON
Mustang plan filed Oil production from the North Slope Southern Miluveach unit to start 3Q 2021
BRPC/Finnex said the Mustang project lost a year in its planned development schedule, “but the project remains fundamentally sound and (capable) of being brought to fruition.”
A special offer from Petroleum News!
Purchase a one year Petroleum News subscrip�on, and receive a gi� subscrip�on for just $1! Sign up today! CONTACT Renee Garbutt I 281-978-2771 [email protected] (Gift subscriptions must be used toward new subscribers. Special offer ends Dec. 31)
growth” of Alaska, directly and indirectly
alleviating unemployment in the state.
The staff of the Authority anticipates it
will “need to incur or encumber up to $20
million in costs in the first year,” the resolu-
tion says.
If approved, the new project will be
known as “CP Oil and Gas Development.”
The U.S. Bureau of Land Management
has issued a detailed statement of the sale
and AIDEA meets the criteria for bidding
described in the DSS.
The resolution says because the leases
are in the Arctic and the Arctic Infrastructure
Development Fund, or AIDF, was set up by
the Alaska Legislature and can be increased
with funds from several sources with the
approval of AIDEA’s board, the authority
has the ability to finance projects or facilities
that promote and create infrastructure need-
ed to bring natural resources to market.
Opening new areas in the Arctic for
responsible oil and gas development is vital
for Alaska’s economy and to promote the
sustainable utilization of Arctic infrastruc-
ture facilities including the Trans-Alaska
Pipeline System, the resolution notes.
Furthermore, because AIDEA can “use
the AIDF to promote and provide financing
for Arctic infrastructure development, and is
authorized to enter into lease agreements
with government entities necessary to fulfill
the purposes of the program as outlined in
AS 44.88.830,” submitting “a bid or multi-
ple bids for tracts defined in the DSS would
be in furtherance of the Authority’s statutory
powers and in the public interest.”
If the resolution is passed by the board,
the authority will be able to accept new
funding in the AIDF, transfer the necessary
funding from the Revolving Fund to a sepa-
rate account within the AIDF for the project,
and “expend or encumber” up to $20 million
from the AIDF to pay for any and all project
expenses.
The resolution authorizes AIDEA’s exec-
utive director, Alan Weitzner, to evaluate
and submit bids for the January coastal plain
lease sale, and incur and pay for any project
expenses within his discretion as long as
they are “not material and do not alter the
intent” of the resolution.
AIDEA board members are: J. Dana
Pruhs, chair; Bernie Karl, vice chair; Albert
Fogle; Bill Kendig; Julie Sande; Julie
Anderson, commissioner, Alaska
Department of Commerce, Community, and
Economic Development; and Anna
MacKinnon, special assistant to the com-
missioner, Alaska Department of Revenue.
—KAY CASHMAN
chapters and Gwich’in tribal organizations, among others, differen-
tiated levels of “special concern and analysis” for various tracts.
“Particularly useful were such tract-differentiated comments
related to the core calving grounds of the Porcupine Caribou
Herd, which, as distinguished from the polar bear and migratory
birds, do not have special protections under federal statutes,”
BLM said.
The BLM Alaska State Director’s determination to withdraw
the tracts “reflects careful consideration of multiple factors,
specifically the environmental information developed as a part of
the environmental impact statement process, substantive com-
ments received, industry interest based on the tract nominations
from potential bidders, and the resource potential specifically in
light of the mandate BLM has from Section 20001 of Public Law
115-97 to conduct not fewer than two lease sales of at least
400,000 acres each within the Coastal Plain in those areas with the
highest potential for discovery of hydrocarbons,” BLM said.
The remaining tracts offered may be further amended or with-
drawn at any time prior to issuance of a written acceptance of a
bid, BLM said.
Leases issued as a result of the sale will have primary terms of
10 years, BLM said. A minimum bid of $25 or more per acre or
fraction thereof is required and the leases are subject to a fixed
royalty rate of 16.67%, with a minimum rental payment of $10
per acre.
Sealed bids must be received by the BLM Alaska State Office
on or after Dec. 21, and prior to the bid submission deadline 4
p.m. Dec. 31.
—STEVE SUTHERLIN
continued from page 1
ACREAGE WITHDRAWN
continued from page 1
LNG TERMINAL
continued from page 1
AIDEA BID
During periods when boil-off gas generation is insufficient to meet
the Kenai Refinery’s needs, a portion of the LNG would be
vaporized and delivered to the refinery along with the boil-off gas.
To advertise in Petroleum News, call Susan Crane at 907-250-9769
Contact Steve Sutherlin at [email protected]
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12 PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020
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$52.78, Brent closed 76 cents higher at
$52.26 and WTI — having failed to break
the $50 mark during the day’s trading —
closed up 74 cents at $49.10. The post-
COVID h