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Munoz says budget first, restfollows; gas line progress a must
page3
l G O V E R N M E N T
l G O V E R N M E N T
l E X P L O R A T I O N & P R O D U C T I O N
Vol. 21, No. 4 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of January 24, 2016 • $2.50
page11
www.MiningNewsNorth.com The weekly mining newspaper for Alaska and Canada's North Week of January 24, 2016 l P E R M I T T I N G
Borough hikes Red Dog tax; Teck,NANA urge officials to negotiate
NEWS NUGGETSCompiled by Shane Lasley
Ketchikan-based Orca Holdings nabsa 10% stake in Ucore Rare MetalsUcore Rare Metals Inc. Jan 15 said two U. S.-based
investors have exercised their right to convert their investments
in a royalty related to the processing of rare earth elements and
other specialty metals into common shares of the company. The
royalty would have been paid on sales and income associated
with the Ucore’s first installation utilizing molecular recogni-
tion technology. The US$5.3 million the investors paid for the
royalties will be converted at a rate of C25 cents per Ucore
share, resulting in a total of 30,470,760 shares being issued.
The majority of those shares (81 percent) are owned by Orca
Holdings LLC, a Ketchikan, Alaska-based enterprise controlled
by Ucore advisory board member Randy Johnson. The transac-
tion resulted in Orca becoming a 10 percent shareholder of
Ucore, and Johnson is now a reporting insider of the company.
Johnson believes the best way for Orca and its shareholders to
benefit coming from the upside of Ucore, especially at current
U. S.-Canadian dollar exchange rates, is to convert its royalties
into company shares. “Orca has elected to convert its royalty
into shares for many reasons, all of which have to do with our
very strong belief in Ucore as an emerging leader in the global
rare metals business,” explained Johnson. "”Orca is going long
on Ucore, and we believe that the most effective way to obtain
appreciation in our investment is via equity as opposed to a
debt (royalty-based) position.” Johnson said Orca is committed
to retaining its position in Ucore over a number of years.
“We’re extremely pleased to welcome Mr. Johnson as a report-
ing insider of Ucore,” Ucore President and CEO Jim McKenzie
said. “Randy has built an impressive industrial resume in
Alaska and beyond, and his experience in company-building
will be a significant asset and resource to us as Ucore enters its
early production phase.”
Usibelli employees end 2015 unscathedUsibelli Coal Mine Inc. Jan. 15 commended its 115 employ-
ees for reaching the important milestone of no lost-time injuries
during 2015. “The employees of UCM have dedicated them-
selves to safety awareness and communication. Every employ-
ee practices it every day, resulting in achieving a year and a half
without any lost-time accidents. It’s a true team effort and a
milestone we’re all proud of,” UCM President Joe Usibelli Jr.
said. This milestone sits in the midst of a run of more than 550
consecutive days without a lost-time injury. “To reach this goal
requires an enormous amount of time and energy to implement.
We have established a safety culture in the workplace and
encourage the same awareness on the home front,” explained
UCM General Manager Alan Renshaw. While proud of the cur-
rent safety milestone, UCM Safety Director Matt Nelson has
loftier targets for employees of the Usibelli Coal Mine in Healy,
Alaska – break the 797-day record set by the company in 2006.
Usibelli Coal Mine, a fourth generation, family-owned, all-
Alaskan business, said it will produce 1.3 million short tons of
ultra-low sulfur, subbituminous coal in 2016.
IG finds no evidencePebble says EPA watchdog’s findings belie record of bias, predetermination
By SHANE LASLEYMining News
After 17 months of investigation, the U.S.
Environmental Protection Agency Office of
Inspector General said it could find no evidence
that the federal agency was unfair while conduct-
ing an assessment of the Bristol Bay Watershed.
The conclusion, however, runs counter to those of
others who have reviewed the case.
The EPA’s Bristol Bay Watershed Assessment is
a study of the potential risks large-scale mining
might pose to the abundant fish resources in the
Bristol Bay region of Southwest Alaska.
“Based on available information, we found no
evidence of bias in how the EPA conducted its
assessment of the Bristol Bay watershed, or that
the EPA predetermined the
assessment outcome,” the IG
office penned in the 30-page
report.
Pebble Partnership CEO
Tom Collier said the findings
sharply contrast with the
reams of evidence that the
State of Alaska, his company
and others provided to the
watchdog.
“I have never seen an IG report that I thought
was as poorly done as this one,” the longtime
Washington D.C. insider told Mining News Jan.
18.
The publication of the brief report by the EPA’s
internal investigative body sets the stage for argu-
ments in an ongoing federal trial as well as contin-
ued U.S. Congressional committee probes into the
EPA’s potentially illegal activities.
No bias found?Though EPA IG office said it found “no evi-
dence of bias or predetermination” in the EPA’s
conduct, a number of documents uncovered by the
U.S. House Oversight and Government Reform
Committee and turned over to the inspector gener-
al prior to its investigation appeared to show that at
least some upper level officials in the EPA had
decided as early as 2010 that development of a
mine at Pebble needed to be stopped and was look-
ing for the best avenue to achieve this goal.
One such document brought to light by the
House watchdog is a December 2010 request for
funds to “initiate the process and publish a CWA
404(c) ‘veto’ action for the proposed permit for the
Pebble gold mine in Bristol Bay.”
In making the request for 2011 funds, the EPA
Office of Water budget wrote: “While resorting to
exercising EPA’s 404(c) authority is rare (only 12
actions since 1981), the Bristol Bay case repre-
sents a clear and important need to do so given the
nature and extent of the adverse impacts coupled
with the immense quality and vulnerability of the
fisheries resource.”
Of the thousands of pages of documents handed
over to the EPA Inspector General Office, this is
one of only a handful referred to in the report. The
watchdog, however, said this is evidence that
though EPA staff were discussing the potential of
initiating a Section 404(c) review of Pebble, it
does not demonstrate that a conclusion to this
process had yet been determined.
“There were EPA staff and managers who were
considering a CWA Section 404(c) process prior to
the EPA’s official announcement to conduct the
assessment, but we did not uncover any evidence
of a predetermined outcome in any of the docu-
ments or emails we reviewed or interviews we
conducted,” according to the report.
An internal EPA worksheet listing the pros and
cons of a pre-emptive CWA Section 404(c) review
of Pebble versus letting the project go into permit-
ting, however, seems to show that upper level EPA
officials were discussing the best way to stop
development of the enormous copper project using
this process.
The top drawback listed in the con column of
this 2010 “discussion matrix” was that a proactive
404(c) determination had “never been done before
in the history of the CWA.”
The agency listed political backlash and litiga-
tion risks as other potential negative outcomes of
attempting to use 404(c) to stop Pebble prior to
permitting. The document suggests that some form
of public process would help deflect some of this
backlash, which is the route the agency ultimately
took in the form of the Bristol Bay Watershed
Assessment.
The document also said that a pre-emptive
404(c) decision at Pebble could serve “as a model
of proactive watershed planning for sustainabili-
ty.”
Pebble CEO Collier said this statement sheds
some light into EPA’s motivation.
“They want to zone watersheds,” he explained.
North acted alone?One thing that the Pebble Partnership and the
EPA Inspector General agree on is the activities of
Phil North, a former Alaska-based EPA biologist,
who worked inappropriately closely with parties
opposed to developing a mine at the Pebble
deposit.
“We did find that an EPA Region 10 employee
used personal non-governmental email to provide
comments on a draft Clean Water Act Section
404(c) petition from tribes before the tribes sub-
mitted it to the EPA,” the EPA Inspector General
wrote.
The investigative body said it could find no evi-
dence that North’s involvement in editing the peti-
tion was known by his superiors.
“The report concludes that no one at EPA knew
that Phil North was engaging in this improper con-
duct with environmental activists; we have emails
that show almost a dozen people did,” Collier said.
This evidence indicates that EPA management
as high as Dennis McLerran, the administrator for
region 10, which includes Alaska, was aware of the
close relationship between North and Pebble
antagonists.
A January 2010 briefing for then EPA
Administrator Lisa Jackson shows that during the
same time that North was helping Pebble antago-
nists draft the petition, officials in EPA’s
see PEBBLE REVIEW page 12
TOM COLLIER
Ketchikan, Alaska-based Orca Holdings now owns 10 percent ofUcore Rare Metals, the company hoping to develop a mine at theBokan Mountain rare earth project located about 40 miles south-west of Ketchikan on Prince of Wales Island.
UC
OR
E R
AR
E M
ETA
LS I
NC
.
This week’s Mining News
The Pebble Partnership reacts to the EPA’s Inspector General reporton the contentious Bristol Bay Watershed assessment. Page 9.
Celebrating 20 years: 1996-2016
Tax changes upGovernor proposes 5% base, tax credit changes, AIDEA development lending
By KRISTEN NELSONPetroleum News
The Alaska Legislature, which gaveled
in Jan. 19, is tackling the state’s budg-
et problems, beginning with a review of
Gov. Bill Walker’s proposed budget. As
part of tackling budget problems caused by
the dramatic drop in crude oil prices and
the continuing decline in crude oil produc-
tion in the state, the governor has proposed
changes in the state’s oil and gas tax system designed
to save the state money.
And in an effort to replace some of the support to
small- and medium-sized oil and gas companies
presently using the state’s oil and gas cred-
its, Walker is also proposing that the
Alaska Industrial Development and
Export Authority be authorized to support
oil and gas development in the state.
In a transmittal letter to the Legislature
for the tax change bill, Senate Bill 130 and
House Bill 247, the governor said the four
elements in the bill would protect the
state’s fiscal future “while instituting cau-
tious reforms in the oil and gas tax credit
system.”
Elements of the bill include simplifying the oil
and gas tax system by repealing “numerous narrowly
Smith Bay plan gets OKDOG OKs Caelus plan for second exploration well in the Tulimaniq leases
By ALAN BAILEYPetroleum News
Alaska’s Division of Oil and Gas has approved
Caelus Energy’s plan of operations for the sec-
ond of two exploration wells that the company plans
to drill in the shallow waters of Smith Bay this winter.
The drilling location is near the mouth of the
Ikpikpuk River, about 59 miles southeast of Barrow.
Both wells form part of what is referred to as the
Tulimaniq exploration project. The first well, the CT-
1 well, is being permitted under an amendment to an
existing plan of operations, while the newly approved
plan of operations relates to the second well, the CT-
2 well.
Caelus became operator of the Tulimaniq project
in June after acquiring a 75 percent interest in the
Tulimaniq leases from NordAq Energy. NordAq, pre-
viously the sole lease owner, had originally planned
to drill a single Tulimaniq well in the winter of 2014-
15 but deferred the drilling plan.
The wells will primarily be stratigraphic test
wells, designed for the collection of rock cores and
the conducting of vertical seismic profiling. Well test-
ing may be conducted if oil is encountered.
A few years ago FEX, a subsidiary of Talisman
Energy Inc., commissioned a seismic survey in Smith
Bay as part of an exploration project in the region.
The geology of the Smith Bay area, although remote,
appears very prospective for oil. There are known oil
Applying the brakesAlberta to slow royalty plan release among tumbling crude, currency values
By GARY PARKFor Petroleum News
New realities are starting to penetrate the
Alberta government’s inner circle which is
drafting its 2016-17 budget while pondering how
far to go in implementing royalty changes.
In December, Premier Rachel Notley disclosed
there would be a “relatively small” delay in the
planned release of a report from a review panel
from Dec. 31 to “early January.”
“People are looking for the outcome sooner
rather than later,” she said, adding her government
did not want to “kick something out the door that’s
not ready.”
“Later” has now become the operative word as
the roiling of crude markets shows no signs of end-
ing and a rapidly weakening Canadian dollar heads
into unknown territory.
The clearest shift has been away from commit-
ments during last spring’s election campaign that
Albertans would receive the “full and fair value”
from their natural resources to hints that the royal-
ty regime will remain unchanged until at least the
Miller Energy, SEC work towardsettlement of enforcement action
Miller Energy Resources Inc. is trying to finalize an enforce-
ment settlement with the U.S. Securities and Exchange
Commission.
The matter is bound up in Miller’s Chapter 11 bankruptcy
reorganization now pending in Anchorage.
The SEC issued a Jan. 12 order making certain findings and
imposing a $5 million civil penalty against Miller as part of a
settlement.
“This case involves financial accounting and reporting fraud,
as well as audit failures, related to the valuation of certain oil and
gas assets acquired by Miller Energy,” the order says.
Those assets, along the west side of Alaska’s Cook Inlet,
A cost question for the Railbelt;debate continues over grid reform
The question of how best to manage the Alaska Railbelt’s
power transmission grid has long been a subject of debate.
And, with the Regulatory Commission of Alaska having this
summer recommended the use of an independent transmission
company to manage the grid, and with the Railbelt electric
utilities engaged in a voluntary project aimed at grid manage-
ment reform, matters seem to be coming to a head.
The primary purpose of grid reform is to reduce the cost of
electricity for Railbelt consumers through the optimum use of
available power generation facilities, while also ensuring that
acceptable levels of power supply reliability are sustained. As
it currently stands, the grid infrastructure is aging and has sin-
gle points of failure. Because of limited transmission capabil-
ities, the grid tends to become congested, thus limiting the
see MILLER ENERGY page 18
see GRID DEBATE page 18see ROYALTY PLAN page 20
see SMITH BAY page 19
see TAX CHANGES page 15
GOV. BILL WALKER
“We’re sitting at historic lows for drillingactivities ... and for employment
opportunities. This is not a time foruncertainty.” —Mark Scholz, president,Canadian Association of Oilwell Drilling
Contractors
2 PETROLEUM NEWS • WEEK OF JANUARY 24, 2016
Petroleum News North America’s source for oil and gas newscontents
Alaska’sOil and GasConsultants
GeoscienceEngineeringProject ManagementSeismic and Well Data
3601 C Street, Suite 1424Anchorage, AK 99503
(907) 272-1232(907) 272-1344
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FINANCE & ECONOMY
GOVERNMENT
7 Hilcorp requests changes at Deep Creek
Requests 400-acre expansion of Happy ValleyBeluga/Tyonek gas pool, also vertical extension;hearing tentatively set for Feb. 24
3 Munoz: Budget first, the rest follows
House Finance Committee member says new fiscal planis a legislative priority, but gas line progress still a must
14 Coast Guard publishes icebreaker specs
Hopes for funding in 2017 federal budget to addressshortfall in U.S. strategic heavy icebreaker capabilities in polar regions
14 China sets trade rules
Canada told free-trade pact hinges on pipelinesto Pacific Coast, removal of ban on Chinese oil asset ownership; Trudeau plans trip
13 State OKs Doyon Nenana seismic survey
Native corporation plans to infill some previousreconnaissance surveying as part of a search for oil and gas in the basin
INTERNATIONAL
8 Houston Willow license comments sought
Oil and gas exploration license proposal from 2007again out for public comment; this part of bestinterest finding procedure
LAND & LEASING
PIPELINES & DOWNSTREAM
5 Interior Energy Project reports progress
Moving toward decision on LNG supply for Fairbanksfrom either the North Slope or Cook Inlet; prototype LNG trailer being tested
4 Gateway in a mess
BC Supreme Court delivers setback to Enbridge, rulesprovincial government failed to meet obligationsto consult with First Nations
6 BC rejects Trans Mountain
Provincial government says Kinder Morgan has failedto meet its safety conditions, but company insists pipeline plan isn’t dead
NATURAL GAS
15 Go ahead on Barents offshore fields
15 No substantial new information for lease sales
14 Conoco plans Kuparuk drilling annex pad
14 Suncor lands COS deal
4 Earthquake forces fracking shutdown
8 State approves Pikka unit plan
Miller Energy, SEC work towardsettlement of enforcement action
A cost question for the Railbelt;debate continues over grid reform
Tax changes up
Governor proposes 5% base, tax credit changes, AIDEA development lending
Smith Bay plan gets OK
DOG approves Caelus plan for second exploration well in the Tulimaniq leases
Applying the brakes
Alberta to slow royalty plan release among tumbling crude, currency values
ON THE COVER
By STEVE QUINNFor Petroleum News
House Rep. Cathy Munoz may rep-
resent a Juneau district nowhere
near the path of the projected natural gas
pipeline that would deliver gas from the
North Slope to tidewater in Nikiski, but
she and others on the House Finance
Committee keep a watchful eye on the
state’s prospects of a gas line project
coming to fruition.
Fresh off a special session to sever
ties with TransCanada, the Juneau
Republican says while the budget
remains a priority, the gas line remains
vital to the state’s future. In a recent
interview, immediately before the
Legislature gaveled in, Munoz offered
her thoughts on prospective develop-
ments with the gas line and possible
changes to the oil tax credit system.
Petroleum News: You’re fresh off spe-cial session, and even some develop-ments since then. Before discussingwhat’s ahead, what is your take on thespecial session and what transpiredsince then?
Munoz: I think the special session
was very well executed. The committees
on both sides — the Senate Finance
Committee and the House Finance
Committee — asked thorough questions.
We got a very full record of discussion
and support around the TransCanada
buyout.
Petroleum News: What about con-cerns among some members over a per-ceived lack of communication and trans-parency, or a sense that not everyonewithin the administration was on thesame page?
Munoz: When Gov. Walker came into
office there were some changes immedi-
ately with the direction of the gas line,
particularly in the membership at the
AGDC board. When the summer unfold-
ed, there were other changes, potential
changes and the discussion of changes
that caused a great deal of concern
among many legislators. One was the
route of the pipeline. The second was the
possibility of implementing a gas
reserves tax. The third was looking at
expanding the pipeline from 42 to 48
inches, which is currently under study.
Before starting the special session,
there was a great deal of concern as to
whether or not the governor and the
administration supported the direction
outlined in SB 138. The takeaway of the
special session, for me anyway, is that
the governor is on board with this inte-
grated model where you have the hold-
ers of the gas, the three majors in the
state of Alaska all working together in
cooperation on an integrated project
from the extraction of the gas all the
way down to the shipment of the gas to
the orient. The partners are involved
with each other in all levels of the value
chain. That is a concept that continues to
move forward.
Petroleum News: You noted changeson the AGDC board, more changes tookplace after the special session, includingtwo whom lawmakers have long respect-ed: (President) Dan Fauske and (boardchair) John Burns. What were yourthoughts on that? Is it too much or is it amatter of the governor still getting set-
tled in? Munoz: Well cer-
tainly the governor
has the authority to
choose board mem-
bers. I was con-
cerned with the loss
of experience. Dan
Fauske is highly
regarded. He brings
a great deal of expe-
rience to be able to get a large-scale
project completed. He’s well liked, so I
think he is going to be very difficult to
replace. In answer to your question, I
would have preferred to at least see Dan
Fauske stay on board.
Petroleum News: Moving forwardstill with the gas line project, why is itimportant for someone from Southeast topay attention to a project just as muchas someone from Anchorage, the NorthSlope Borough or someone on the KenaiPeninsula?
Munoz: If the project gets built, it
will probably be one of the largest infra-
structure projects in the history of our
country. The potential for revenue to the
state is significant. Of course all regions
in the state will benefit from direct rev-
enue to the general fund as well as eco-
nomic opportunities. People in Southeast
Alaska will benefit in numerous ways
with the construction of the project and
the revenue that comes with the project.
In previous discussions, the Legislature
set into place with the direction of Sen.
(Lyman) Hoffman and other coastal leg-
islatures, a mechanism whereby some of
the revenue from the gas line can go to
help build up alternative energy outside
the Railbelt. I think that was a very
important inclusion in the gas line.
Ultimately all regions in the state benefit
from this project whether you live in the
Railbelt or not.
Petroleum News: Speaking of alterna-tive energy. Some people see that in dif-ferent ways. Some see alternative aswind, hydro or solar. Others see it asanother option in the form of natural
gas. Southeast seems to have both work-ing for you, whether it’s hydro or withAvista proposing an LNG project to beanchored in Juneau. How do you viewit?
Munoz. There is always going to be a
need to develop infrastructure outside of
the Railbelt, not just in Southeast,
Alaska, but in many of our rural commu-
nities. Juneau is fortunate that we have
access to hydro power resources. We
also have a company with a great deal of
experience that is considering bringing
natural gas to our community.
But we also have to look out for the
communities outside of
Juneau. Even the commu-
nities in our region face
some of the highest energy
costs in our state. So hav-
ing a mechanism — a
fund — to provide the opportunity to
build alternative energy projects in
coastal Alaska is very important. Those
projects could include tidal generation,
hydro or wind.
There are a number of opportunities
so we need to continue to keep an eye
on the communities that pay the highest
cost in the state and look for ways to
bring those costs down.
Petroleum News: So what’s your out-look at the prospects of Avista bringingnatural gas to the state?
Munoz: They are the in the due dili-
gence phase. They are meeting with
municipal government leaders, business
owners and legislators, educating them
about the opportunity. The benefit is
long experience. It’s a company with
100 years of business experience.
They have knowledge in other com-
munities and other regions of the coun-
try delivering natural gas successfully.
They are looking at getting a legislative
extension on the infrastructure tax
exemption opportunity for municipali-
ties.
Currently a municipality can opt to
allow a tax exemption for a property
over a certain number of
years if a project brings a
new form of energy to the
community. So I think
Avista is looking at extend-
ing that out 10 or 20 years.
First of all they are working with the
city of Juneau to find out if they would
support extending it.
Petroleum News: I know Avista hasspent most of its time with the JuneauAssembly, but have you met with them?
Munoz: I have. I met with the execu-
tives from Avista (Jan. 14). They have
the capital. They are a company with a
great deal of experience, and knowledge
and the commitment to make it happen,
particularly in the natural gas market.
l G O V E R N M E N T
Munoz: Budget first, the rest followsJuneau Republican, House Finance Committee member says new fiscal plan is a legislative priority, but gas line progress still a must
PETROLEUM NEWS • WEEK OF JANUARY 24, 2016 3
ARCTIC REGULATORY COMPLIANCE& TECHNICAL OILFIELD SERVICES, LLC
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Fax - 866.532.3915130 W. International Airport Rd, Suite R Anchorage, AK 99518
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see MUNOZ Q&A page 17
4 PETROLEUM NEWS • WEEK OF JANUARY 24, 2016
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ENVIRONMENT & SAFETYEarthquake forces fracking shutdown
The Canadian unit of Spain’s Repsol has been ordered to shut down a hydraulic
fracturing operation in west-central Alberta after an earthquake hit the area on Jan. 11.
A spokeswoman for the Alberta Energy Regulator said the company has “ceased
operations ... and they will not be allowed to resume operations until we have
approved their plans.”
Repsol said it is working with the AER to ensure all environmental and safety rules
are followed.
The company confirmed that a seismic event had occurred and that it was conduct-
ing fracturing operations at the time the 4.8 quake occurred. The AER automatically
shuts down a fracking site when a quake of 4.0 or greater is recorded.
Repsol said it will review and analyze “available geological and geophysical data,
as well as onsite seismic monitoring data.”
A seismologist with Natural Resources Canada said it was too soon to tell whether
Repsol’s activities triggered the quake, which she said was “quite large for the area,
larger than normal.”
Jeffrey Gu, a professor of geophysics at the University of Alberta, said 366 seismic
events, many in the range of 2.4 to 4.4, have been recorded over the past year in the
area surrounding the community of Fox Creek.
He said that if it is shown that fracturing induced the quake it would be the largest
such event on record in Canada.
Alberta Premier Rachel Notley said she will ask the AER to speed up a review of
fracturing events and make recommendations “we can consider sooner rather than
later.”
For now, the AER is applying new rules imposed last February in the Duvernay
formation, one of the largest shale oil and gas deposits in that covers a large span of
western Alberta.
—GARY PARK
l P I P E L I N E S & D O W N S T R E A M
Gateway in a messBC Supreme Court delivers setback to Enbridge, rules provincialgovernment failed to meet obligations to consult with First Nations
By GARY PARKFor Petroleum News
From the time it was launched early
this century, Northern Gateway has
faced premature and often exaggerated
reports of its demise. Now they have to be
taken seriously.
A British Columbia Supreme Court
ruling has brought the C$7.9 billion proj-
ect by Enbridge to a halt in a verdict that
has implications far beyond the twin-
pipeline system into the realm of any
activities that affect First Nations
lifestyles and their land, notably Kinder
Morgan’s proposed expansion of its rival
Trans Mountain pipeline.
Justice Marvyn Koenigsberg said the
British Columbia government abdicated
its statutory duties and breached its duty
to consult First Nations when it signed
and failed to terminate an “equivalency
agreement” that handed Canada’s
National Energy Board sole jurisdiction
over the environmental assessment deci-
sion making on Northern Gateway.
He said the provincial government
cannot rely on the NEB for environmen-
tal approval.
Joseph Arvay, the lead attorney for the
petitioners — the Great Bear Initiative
Society and Gitga’at First Nation (collec-
tively the Coastal First Nations) — said
the ruling now “makes it clear that the
province has jurisdiction over this
pipeline so long as the conditions reflect
its competence over the environment.”
He said provincial government handed
its powers over Northern Gateway to the
Canadian government when it entered
into a so-called equivalency agreement
with the NEB.
But that abdication was invalid now
that the court has established that the
province has failed to use its “legal back-
bone,” he said.
Koenigsberg ruled that the province is
required to consult with the Gitga’at
about the potential impacts of the project
on areas of provincial jurisdiction and
how they might affect the Gitga’at abo-
riginal rights.
BC environmental assessmentThe ruling means that until the British
Columbia government makes a decision
on the pipeline and issues an environmen-
tal assessment certificate, none of the 60
permits, licenses and authorizations nec-
essary for the project to proceed can be
issued.
To many legal and aboriginal experts
that means rolling the project back sever-
al years to restart the environmental hear-
ings.
However, a Northern Gateway
spokesman said Enbridge still intends to
proceed with the pipeline based on the
209 conditions issued 18 months ago by
the NEB and the federal government.
He insisted approval of the project
“falls within federal jurisdiction and (the
court decision) does not change that
approval or the project’s environmental
assessment.”
The spokesman said the future of
Northern Gateway now comes down to a
“jurisdictional matter between the federal
and provincial governments.”
BC’s initial interpretationBritish Columbia Justice Minister
Suzanne Anton said her initial interpreta-
tion of the court decision is that the
province will not have to duplicate the
entire review process and, pending an
evaluation of the judgment, her govern-
ment does not know whether to appeal.
“What the court has said is we can rely
on the process that was in front of the
National Energy Board, but we do need to
make our own independent provincial
decision based on our own provincial leg-
islation,” she said.
At the time the “equivalency agree-
ment” was negotiated to streamline the
regulatory process, the province trumpet-
ed the pact as something that would
reduce “byzantine bureaucratic practices”
and help create jobs.
Opponents celebrateThat assessment has rebounded, with
Northern Gateway opponents celebrating
Koenigsberg ruled that theprovince is required to consult
with the Gitga’at about thepotential impacts of the project onareas of provincial jurisdiction andhow they might affect the Gitga’at
aboriginal rights.
see GATEWAY page 6
By ALAN BAILEYPetroleum News
The Alaska Industrial Development
and Export Authority’s Interior
Energy Project has submitted its latest
quarterly report to the Alaska Legislature,
describing progress in making a major
boost to gas supplies for the city of
Fairbanks and the surrounding region of
Interior Alaska. The idea is to reduce fuel
costs in the Interior by making natural gas
readily available to residents and busi-
nesses, while also improving air quality
in Fairbanks by lowering the incentive to
use pollution causing, wood burning
stoves.
Two conceptsHaving received several responses to a
request for proposal for the gas supply
arrangements, the team has narrowed the
supply options to two concepts, both
involving the manufacture of liquefied
natural gas and the transportation of LNG
to Fairbanks. One option involves the
construction of an LNG plant in the Cook
Inlet region, while the other involves the
construction of an LNG plant on the
North Slope. In both cases the LNG
would probably be trucked to Fairbanks
by road, although shipment by railroad is
also a possibility for LNG from Cook
Inlet.
Robert Shefchik, Interior Energy
Project team leader, told the AIDEA
board during the board’s Jan. 13 meeting
that the evaluation committee for the
LNG proposals anticipates meeting on
Jan. 22, with a view to putting a recom-
mendation for a preferred LNG option to
the board ahead of a special board meet-
ing in the latter half of February, or by the
board’s scheduled meeting on March 3, at
the latest. The board can then formally
decide which option to adopt.
This timeframe is consistent with the
project development schedule that each
of the two short-listed proposers have put
forward, Shefchik said.
Progress on gas supplyProgress has also been made in estab-
lishing a gas supply for either LNG
option, the Interior Energy Project quar-
terly report says.
If the North Slope option is picked,
Golden Valley Electric Association, the
Fairbanks electric utility, has formed a
joint venture called Northern Lights Gas
with engineering firm MWH to market
gas using an existing North Slope gas
supply contract between Golden Valley
and BP, the report says. AIDEA has been
holding talks with Northern Lights Gas to
determine the terms and conditions for
the sale of gas to the partners in the
Interior Energy Project. The project is
also evaluating potential gas supply
options from other North Slope produc-
ers, the report says.
In the Cook Inlet region, the Interior
Energy Project team has been evaluating
responses to a request for interest in pro-
viding an appropriate gas supply. And the
identification of a selected gas supply
arrangement, with costs and expected
terms, forms part of the process for
selecting an LNG option from the request
for proposal, the report says.
The two finalists being considered for
an LNG supply are Spectrum, a western
U.S. regional LNG producer, and Salix, a
subsidiary of northwestern U.S. electric
and gas utility Avista Corp. Spectrum
proposes the North Slope option while
Salix favors a Cook Inlet supply. The
Spectrum North Slope plant would have
an initial gas processing capacity of 6 bil-
lion cubic feet per year, while the Salix
plant would have an initial capacity of 3
bcf per year, the report says.
Oil price challengeThe falling cost of fuel oil in
Fairbanks, as world crude oil prices drop,
is presenting some challenges for the
project, as oil becomes more cost com-
petitive with gas. In mid-December the
Golden Valley Electric board authorized a
long-term oil supply for use in the utili-
ty’s North Pole dual-fuel power plant.
That will have the effect of limiting
Golden Valley’s purchase of Fairbanks
LNG to the summer. This summer pur-
chase of LNG will compensate for an oth-
erwise low seasonal gas load at that time,
although the overall lower annual gas
demand for power generation may cause
higher space heating costs in Fairbanks,
the report says.
And the low oil prices have triggered a
re-work of projections of the anticipated
rate at which Fairbanks residents may
convert their home heating systems to gas
rather than oil. The team now expects
conversions to drop by about one-third
from earlier projections. First conver-
sions should take place in 2017, as new
gas supplies start to come available, with
the number of conversions increasing
from some 1,600 in that first year to a
cumulative total of some 10,800 by 2023,
the report says. The team is investigating
means whereby people could obtain
financial assistance with gas conversion.
Possibilities include commercial loans;
and funding from state and federal gov-
ernment energy efficiency, clean energy,
air quality and clean water programs.
Road tests for trailerFrom the perspective of shipping LNG
to Fairbanks, a prototype, large capacity
LNG trailer is undergoing Alaska road
tests. Tests will be conducted on both the
Parks Highway and the Dalton Highway,
the two highways to Fairbanks from the
south and the north, the report says. And,
having approved the carriage of LNG on
the Alaska Railroad for a small scale test,
the Federal Railroad Commission has
now increased the volume of LNG that
the railroad can carry and extended the
time period for the LNG carriage
approval, thus opening the possibility of
shipping LNG from the Cook Inlet region
by rail. Salix is working closely with the
Alaska Railroad on this possibility, the
report says.
In anticipation of a much expanded
gas supply, the build out of the gas distri-
bution pipeline system in the Fairbanks
area by utilities Fairbanks Natural Gas
and the Interior Gas Utility continued
throughout the summer of 2015, the
report says. Fairbanks Natural Gas has
now added more than 60 miles of new
pipeline to its system in central
Fairbanks. The Interior Gas Utility
installed 73 miles of pipeline in the North
Pole area.
Pentex purchaseOn Sept. 30 AIDEA completed its pur-
chase of Pentex Natural Gas Co. LLC, the
owner of Fairbanks Natural Gas, a small
LNG plant near Point MacKenzie on
Cook Inlet and a transportation business
that trucks LNG from Point MacKenzie
to Fairbanks. As a consequence of
AIDEA’s ownership, Fairbanks Natural
Gas has proposed reducing the gas rates
for its residential customers by 13.5 per-
cent.
The eventual objective is to combine
Fairbanks Natural Gas and the Interior
Gas Utility into a single operation that
would be spun off to a local control enti-
ty. Based on discussions with several
entities, AIDEA has begun discussions
with the Interior Gas Utility over that util-
ity’s potential purchase of Fairbanks
Natural Gas, and possibly also of the
associated Point MacKenzie LNG plant
and LNG trucking operation. The objec-
tive is to complete negotiations by March
31, with a target of closing transactions
by June 30, the report says.
And on Dec. 4 utility representatives
met with personnel from AIDEA and the
Alaska Energy Authority in the
Anchorage offices of Enstar Natural Gas
Co. to discuss LNG storage and distribu-
tion system design options for an inte-
grated Fairbanks gas distribution net-
work. Following further meetings, final
system build out models are expected by
the end of June, the report says.
$14.3 million spentSo far AIDEA has spent $14.3 million
of a $57.5 million capital appropriation
by the state Legislature on the Interior
Energy Project, the report says. $14.1
million of that expenditure went into an
initiative to build an LNG plant on the
l N A T U R A L G A S
Interior Energy Project reports progressMoving toward decision on LNG supply for Fairbanks from either the North Slope or Cook Inlet; prototype LNG trailer being tested
PETROLEUM NEWS • WEEK OF JANUARY 24, 2016 5
Anchorage: (907) 248-0066Prudhoe Bay: (907) 440-0084
Fax: (907) 248-44295631 Silverado Way, Suite G
Anchorage, AK 99518www.pesiak.com
is proud to represent Weatherford Casing Accessories
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see INTERIOR ENERGY page 6
6 PETROLEUM NEWS • WEEK OF JANUARY 24, 2016
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North Slope, including $6 million for the
construction of a gravel pad on the Slope
for the proposed plant. The current initia-
tive, involving the request for proposal
for a Fairbanks LNG supply, came about
after engineering work and associated
cost estimating had shown the original
initiative to be uneconomic.
So far AIDEA has issued $53.7 mil-
lion in loans under Sustainable Energy
Transmission and Supply, or SETS, fund-
ing to the Fairbanks utilities for the build
out of the storage and gas distribution
system in Fairbanks. Total available
SETS funding for the project is $125 mil-
lion. The legislature has also authorized
the issue of $150 million in bonds for the
project, but no bonds have yet been
issued, the report says. l
continued from page 5
INTERIOR ENERGY
the court ruling.
“We’re running out of coffin nails
now,” said Gitga’at spokesman Art
Sterritt.
“The reality is that if Northern
Gateway wants to try going ahead after
all of this, you’re looking at a whole new
process whereby British Columbia is
going to have hearings and sit down with
First Nations ... and meet the conditions
that they put in place,” he said.
Sterritt said the British Columbia gov-
ernment was “playing a bit of politics” by
handing over its power at the environ-
mental assessment stage, then opposing
the project.
Now, he said, British Columbia must
accept that it must listen to First Nations
and work with them “even when they
don’t like a project.”
“You’re talking about a whole new
review process here,” he said. “I’m not
sure that Northern Gateway or anyone
else would have the appetite for that.” l
continued from page 4
GATEWAY
l P I P E L I N E S & D O W N S T R E A M
BC rejects Trans MountainProvincial government says Kinder Morgan has failed to meet its safety conditions, but company insists pipeline plan isn’t dead
By GARY PARKFor Petroleum News
R elations between Canada’s two most western
provinces threaten to turn sour with the British
Columbia government stunning its Alberta neighbor by
calling on the National Energy Board to reject Kinder
Morgan’s bid to triple capacity on its 60-year Trans
Mountain pipeline to 890,000 barrels per day.
Just weeks before the NEB is scheduled to deliver its
verdict on the project in March, British Columbia, in a
final submission, said Kinder Morgan has not provided
an adequate plan to prevent or respond to an oil spill on
land or in the ocean.
B.C. Environment Minister Mary Polak said the com-
pany has failed to meet her government’s standards, but
added the door has not completely closed on the compa-
ny “to meet our test potentially in the future.”
Ian Anderson, president of Kinder Morgan Canada,
said his company still hopes to satisfy the province’s
demands by August, in hopes of obtaining a go-ahead
from the federal cabinet this fall for the C$6.8 billion
plan — one of four designed to open offshore markets
for Canadian crude.
“I’m optimistic we will satisfy the conditions” for a
“world-class” system to handle oil spills, he said.
“Clearly we have more work to do, (but) it’s not over
until I’ve got the NEB decision. We continue to make
progress.”
Anderson asked the province to specify gaps in his
company’s response plan, while pressuring the federal
government to step up its participation by increasing the
number of Coast Guard stations along with Transport
Canada’s role.
Other conditions British Columbia listed as unre-
solved require Kinder Morgan to obtain First Nations
support and to provide the government with a fair share
of economic benefits.
“This is about the test that would allow this pipeline
to move forward,” Polak said. “The company has been
vocal in saying they believe they can meet the condi-
tions. They are welcome to work toward that.”
In the meantime, she said her government is develop-
ing marine- and land-based standards to prevent and/or
respond to spills.
Polak said legislation will be introduced this spring
on a land-based emergency response system, while the
province works with the Canadian government on the
marine element.
“These are real conditions, they are not a straw man
put up to make sure no one can ever meet them,” she
said.
Refusal praisedHowever, the government’s refusal to endorse the
“The NEB does not look at provincial orterritorial interests. It looks at Canada’snational interests” and the related social,
environmental and economic factors. —Gaetan Caron, a former chairman
of the NEB
see TRANS MOUNTAIN page 7
PETROLEUM NEWS • WEEK OF JANUARY 24, 2016 7
pipeline expansion was hailed by environmental and
municipal officials in the Metro Vancouver area.
Vancouver Mayor Gregor Robertson said the
province’s stance “reflects the strong opposition to this
project throughout Metro Vancouver and British
Columbia.”
“A seven-fold increase in oil tanker traffic through
Vancouver’s local waters is simply not worth the
immense risks posed to our economy and environment in
the event of a major oil spill,” he said.
Burnaby city councillor Sav Dhaliwal said the
province should not have waited until the 11th hour to
make its submission.
“I’ve always believed they weren’t doing their part”
by joining others in taking court action against Trans
Mountain.
Alberta: nothing newAlberta Premier Rachel Notley said that “fundamen-
tally there is nothing new” in the British Columbia filing.
She told reporters she believes there is “still a path
forward” to get the project approved.
“We will not get pipelines built by picking fights with
other provinces through the media,” Notley said, adding
that will only happen when Alberta demonstrates “clear-
ly and calmly why pipelines help every economy in
Canada (and) by taking real action on climate change.”
But so far Alberta’s strategy to gather support for
diversifying Canada’s oil markets has fallen flat, with
every proposal — Trans Mountain, Northern Gateway,
Keystone XL and Energy East — stalled by government,
regulatory, environmental and First Nations resistance.
What frustrates Alberta and its petroleum industry is
that the province’s efforts to trade approval for access to
offshore markets by introducing a sweeping climate
change policy late last year appears to have backfired
and is now unravelling.
The best Notley could offer was a pledge to “keep
talking (to pipeline proponents and other governments)
until the door is closed.”
BC support not criticalGaetan Caron, a former chairman of the NEB, said
support or the lack of it from British Columbia is not
critical in determining whether Trans Mountain should
be approved.
“The NEB does not look at provincial or territorial
interests. It looks at Canada’s national interests” and the
related social, environmental and economic factors, he
said.
The Alberta government submission on Trans
Mountain to the NEB quoted the Conference Board of
Canada’s latest impact estimates that the expansion
would generate C$46.7 billion in government revenues
and 820,000 person years of employment over more than
20 years, with British Columbia enjoying 12 percent of
the fiscal returns and 24 percent of the jobs.
“The economic benefits from dividend payments, oil
and gas investment and tanker traffic, can be added to the
impacts previously estimated by the board from the con-
struction and operations of the pipeline, as well as higher
netbacks (for oil sands crude),” the group said.
It said the additional 348 Aframax size tankers would
support 1,300 jobs a year and bring in C$2.5 billion in
spending over the first 20 years of operation.
Economics vs. risksGlen Hodgson, the board’s chief economist, said the
economic benefits of the pipeline expansion outweigh
the environmental risks of a system that has operated
almost trouble free on a reduced scale from the planned
890,000 bpd.
“If this project does not proceed, we’re leaving a lot
of money on the table, foolishly,” he told a Calgary ener-
gy conference.
Brian Jean, leader of the opposition Wildrose Party in
the Alberta legislature, said Notley has until now failed
to advocate strongly for pipelines.
“This premier is building a habit of making the case
for pipelines either after they’ve been rejected, or once
they face strong opposition,” he said.
Liberal Party leader David Swann said it is possible to
build industrial projects that benefit all of Canada while
being environmentally responsible and maintaining good
relationships with First Nations and affected communi-
ties.
“This project carries the least risk of all the pipelines
by following an existing route. If it can’t be built, it is
unlikely that any other will be,” he said. l
continued from page 6
TRANS MOUNTAIN
l E X P L O R A T I O N & P R O D U C T I O N
Hilcorp requests changes at Deep CreekRequests 400-acre expansion of Happy Valley Beluga/Tyonek gas pool, also vertical extension; hearing tentatively set for Feb. 24
By KRISTEN NELSONPetroleum News
Hilcorp Alaska LLC has asked the Alaska Oil and
Gas Conservation Commission to expand the areal
extent and vertical limits of the Happy Valley
Beluga/Tyonek gas pool in the Deep Creek unit as
described in the commission’s Conservation Order 533.
Hilcorp is the operator and sole working interest
owner in the unit, which is on state and Cook Inlet
Region Inc. leases on the southern Kenai Peninsula.
In a Jan. 12 letter, Hilcorp told the commission the
expansion of the pool’s boundary would encompass
“recently discovered and anticipated productive zones”
of the gas pool. The expansion includes some 400 acres.
Hilcorp asked for administrative action from the com-
mission because the proposed modifications do not
require changes to any substantive pool rules, but simply
seek to modify the legal description of the pool “to
match the latest geologic interpretation of the pool’s
location.”
In a Jan. 15 supplement to the original proposal
Hilcorp also asked for a change in the vertical description
of the Happy Valley Beluga/Tyonek gas pool. The current
vertical description is the interval between measured
depths of 2,997 feet and 10,046 feet in the Superior
Happy Valley No. 31-22 well. The proposed definition
would include gas-bearing intervals correlating with the
interval between measured depths of 2,246 feet and
10,046 feet of the Superior Happy Valley No. 31-22 well.
“Data supporting this request was obtained through
the drilling of the recent HBV-17 well, as correlated to
the HV 31-22 well,” the company said.
The participating areaHilcorp said the Deep Creek unit is jointly managed
by the Alaska Department of Natural Resources and
CIRI. Maps accompanying the application appear to
show that approximately half of the Deep Creek unit is
on state leases and half on CIRI leases. The Happy
Valley participating area, the portion of the unit currently
producing, includes one state tract, some 155 acres, and
three CIRI tracts, almost 1,085 acres.
Hilcorp said it has provided pre-application briefing
material to DNR and CIRI. “As a result of this consulta-
tion, Hilcorp will initially test and produce HBV-17 on a
tract basis until such time as it is appropriate to expand
The Happy Valley participating area, theportion of the unit currently producing,
includes one state tract, some 155 acres, andthree CIRI tracts, almost 1,085 acres.
see DEEP CREEK page 8
8 PETROLEUM NEWS • WEEK OF JANUARY 24, 2016
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the Happy Valley Participating Area,”
the company said. “Doing so will expe-
dite production (and thus prevent
waste) and adequately protect the
respective correlative rights of both
CIRI and the state.”
Producing since 2004Standard Oil Company of California
explored at Deep Creek in 1958 and
Union Oil Company of California, fol-
lowing up on that exploration work,
brought the Deep Creek unit online in
2004. Between 2003 and 2009 13 wells
were drilled.
Since Hilcorp took over it has
drilled three development wells and
acquired some 50 square miles of 3-D
seismic over the unit.
The commission has tentatively set
a public hearing for Feb. 24 at 9 a.m.
and said written requests for the hear-
ing must be filed no later than Feb. 5. If
there are no timely requests filed for
the hearing, the commission said it
would consider issuance of an order
without a hearing.
The commission also said written
comments on the petition may be sub-
mitted to the commission and must be
received no later than Feb. 22, or, if a
hearing is held, by the end of the Feb.
24 hearing. l
continued from page 7
DEEP CREEK
EXPLORATION & PRODUCTIONState approves Pikka unit plan
The state has approved a year of studies at the Pikka unit.
In early November 2015, the Division of Oil and Gas approved a plan of explo-
ration for the North Slope unit calling for seismic licensing and analyzing recent
drilling results.
When former operator Repsol E&P USA Inc. handed over control of the unit
to its minority partner Armstrong Oil & Gas Inc. in mid-October 2015, immediate
exploration and development plans for the unit became cloudy. The companies
announced the decision just as Repsol was preparing to submit an updated plan of
exploration.
With the transfer of the unit came the possibility of Armstrong revising the
plan of exploration. Instead, Armstrong appears to be using the existing plan of
exploration.
The new plan calls for licensing and reprocessing the existing North Island 3-
D seismic survey, conducting rock physics studies and performing stratigraphic
analysis and special core analysis on the three exploration wells that Repsol
drilled at the unit in early 2015.
—ERIC LIDJI
Since Hilcorp took over it hasdrilled three development wellsand acquired some 50 squaremiles of 3-D seismic over the
unit.
l L A N D & L E A S I N G
Houston Willowexploration licensecomments soughtOil and gas exploration license proposal from 2007 again outfor public comment; this part of best interest finding procedure
By KRISTEN NELSONPetroleum News
A 2007 exploration license proposal
for the Houston Willow area is out
for public comment for the third time. The
Alaska Department of Natural Resources
Division of Oil and Gas said Jan. 19 that
the division solicited competing bids and
gave public notice of its intent to evaluate
the Houston Willow exploration license
proposal in late 2007 and solicited public
comments again in 2008.
The current request for comments
closes Feb. 26.
The 2007 proposal came from Samuel
H. Cade of Dallas, Texas, Daniel K.
Donkel of Daytona Beach, Florida, and
LAPP Resources Inc. of Anchorage.
David Lappi, president of LAPP
Resources, died in 2011. He had been
working to develop natural gas in the
Matanuska-Susitna area since the 1990s.
The application has recently been shown
as pending on the division’s website
under the names of Cade and Donkel.
Exploration licenses are issued for
areas where the state does not hold areaw-
ide oil and gas lease sales. Instead of bid-
ding money upfront for acreage, appli-
cants for exploration licenses commit to
spend an amount of money working on
the acreage. Once work commitments are
met, a license holder has the option to
convert acreage to regular oil and gas
leases.
Before the state accepts an application
for an exploration license it provides an
opportunity for other bidders on the
acreage and prepares a finding that the
exploration license is in the state’s best
interest.
In the April 2007 application, from
LAPP Resources, the applicants request-
ed a 10-year exploration license “cover-
ing approximately 21,240 acres near the
town of Houston, Alaska” and said the
area is “prospective for natural gas as
demonstrated by gas shows in various
wells drilled in the area by prior opera-
tors.”
A map accompanying the division’s
new request for comments shows the
acreage to be a block largely east of the
George Parks Highway beginning just
north of Houston.
In a supplement to the 2007 applica-
tion Lappi told the division, “The appli-
cants plan to explore for conventional nat-
ural gas, although if shallow natural gas is
discovered it will be evaluated.”
When the 2007 application was filed
Lappi had been trying to develop coalbed
methane and shallow gas in the state for a
number of years, working initially to pro-
duce coalbed methane near Houston
where he acquired state leases in the early
1990s and then drilled exploration wells
between 1998 and 2000.
He said initial work under the explo-
ration license would include community
relations work “since local landowners
are in one sense involuntary participants
in whatever we do”; satellite and airborne
remote sensing; geological studies includ-
ing a literature review and new fieldwork
on outcropping bedrock; geochemical
studies “seeking evidence of new hydro-
carbon accumulations”; geophysical stud-
ies — literature review and new data
acquisition; drilling, “including explo-
ration drilling (and if successful), apprais-
al and production drilling” and, also with
the “if successful” caveat, facilities engi-
neering and construction.
Cade and Donkel do not hold any
exploration licenses, but do hold conven-
tion state oil and gas leases. Cade holds
more than 38,000 acres according to the
division’s latest reports; Donkel holds
more than 53,000 acres. In both cases the
bulk of the acreage is North Slope and
Beaufort Sea. l
page11
www.MiningNewsNorth.com The weekly mining newspaper for Alaska and Canada's North Week of January 24, 2016
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NEWS NUGGETSCompiled by Shane Lasley
Ketchikan-based Orca Holdings nabsa 10% stake in Ucore Rare Metals
Ucore Rare Metals Inc. Jan 15 said two U. S.-based
investors have exercised their right to convert their investments
in a royalty related to the processing of rare earth elements and
other specialty metals into common shares of the company. The
royalty would have been paid on sales and income associated
with the Ucore’s first installation utilizing molecular recogni-
tion technology. The US$5.3 million the investors paid for the
royalties will be converted at a rate of C25 cents per Ucore
share, resulting in a total of 30,470,760 shares being issued.
The majority of those shares (81 percent) are owned by Orca
Holdings LLC, a Ketchikan, Alaska-based enterprise controlled
by Ucore advisory board member Randy Johnson. The transac-
tion resulted in Orca becoming a 10 percent shareholder of
Ucore, and Johnson is now a reporting insider of the company.
Johnson believes the best way for Orca and its shareholders to
benefit coming from the upside of Ucore, especially at current
U. S.-Canadian dollar exchange rates, is to convert its royalties
into company shares. “Orca has elected to convert its royalty
into shares for many reasons, all of which have to do with our
very strong belief in Ucore as an emerging leader in the global
rare metals business,” explained Johnson. "”Orca is going long
on Ucore, and we believe that the most effective way to obtain
appreciation in our investment is via equity as opposed to a
debt (royalty-based) position.” Johnson said Orca is committed
to retaining its position in Ucore over a number of years.
“We’re extremely pleased to welcome Mr. Johnson as a report-
ing insider of Ucore,” Ucore President and CEO Jim McKenzie
said. “Randy has built an impressive industrial resume in
Alaska and beyond, and his experience in company-building
will be a significant asset and resource to us as Ucore enters its
early production phase.”
Usibelli employees end 2015 unscathedUsibelli Coal Mine Inc. Jan. 15 commended its 115 employ-
ees for reaching the important milestone of no lost-time injuries
during 2015. “The employees of UCM have dedicated them-
selves to safety awareness and communication. Every employ-
ee practices it every day, resulting in achieving a year and a half
without any lost-time accidents. It’s a true team effort and a
milestone we’re all proud of,” UCM President Joe Usibelli Jr.
said. This milestone sits in the midst of a run of more than 550
consecutive days without a lost-time injury. “To reach this goal
requires an enormous amount of time and energy to implement.
We have established a safety culture in the workplace and
encourage the same awareness on the home front,” explained
UCM General Manager Alan Renshaw. While proud of the cur-
rent safety milestone, UCM Safety Director Matt Nelson has
loftier targets for employees of the Usibelli Coal Mine in Healy,
Alaska – break the 797-day record set by the company in 2006.
Usibelli Coal Mine, a fourth generation, family-owned, all-
Alaskan business, said it will produce 1.3 million short tons of
ultra-low sulfur, subbituminous coal in 2016.
IG finds no evidencePebble says EPA watchdog’s findings belie record of bias, predetermination
By SHANE LASLEYMining News
After 17 months of investigation, the U.S.
Environmental Protection Agency Office of
Inspector General said it could find no evidence
that the federal agency was unfair while conduct-
ing an assessment of the Bristol Bay Watershed.
The conclusion, however, runs counter to those of
others who have reviewed the case.
The EPA’s Bristol Bay Watershed Assessment is
a study of the potential risks large-scale mining
might pose to the abundant fish resources in the
Bristol Bay region of Southwest Alaska.
“Based on available information, we found no
evidence of bias in how the EPA conducted its
assessment of the Bristol Bay watershed, or that
the EPA predetermined the
assessment outcome,” the IG
office penned in the 30-page
report.
Pebble Partnership CEO
Tom Collier said the findings
sharply contrast with the
reams of evidence that the
State of Alaska, his company
and others provided to the
watchdog.
“I have never seen an IG report that I thought
was as poorly done as this one,” the longtime
Washington D.C. insider told Mining News Jan.
18.
The publication of the brief report by the EPA’s
internal investigative body sets the stage for argu-
ments in an ongoing federal trial as well as contin-
ued U.S. Congressional committee probes into the
EPA’s potentially illegal activities.
No bias found?Though EPA IG office said it found “no evi-
dence of bias or predetermination” in the EPA’s
conduct, a number of documents uncovered by the
U.S. House Oversight and Government Reform
Committee and turned over to the inspector gener-
al prior to its investigation appeared to show that at
least some upper level officials in the EPA had
decided as early as 2010 that development of a
mine at Pebble needed to be stopped and was look-
ing for the best avenue to achieve this goal.
One such document brought to light by the
House watchdog is a December 2010 request for
funds to “initiate the process and publish a CWA
404(c) ‘veto’ action for the proposed permit for the
Pebble gold mine in Bristol Bay.”
In making the request for 2011 funds, the EPA
Office of Water budget wrote: “While resorting to
exercising EPA’s 404(c) authority is rare (only 12
actions since 1981), the Bristol Bay case repre-
sents a clear and important need to do so given the
nature and extent of the adverse impacts coupled
with the immense quality and vulnerability of the
fisheries resource.”
Of the thousands of pages of documents handed
over to the EPA Inspector General Office, this is
one of only a handful referred to in the report. The
watchdog, however, said this is evidence that
though EPA staff were discussing the potential of
initiating a Section 404(c) review of Pebble, it
does not demonstrate that a conclusion to this
process had yet been determined.
“There were EPA staff and managers who were
considering a CWA Section 404(c) process prior to
the EPA’s official announcement to conduct the
assessment, but we did not uncover any evidence
of a predetermined outcome in any of the docu-
ments or emails we reviewed or interviews we
conducted,” according to the report.
An internal EPA worksheet listing the pros and
cons of a pre-emptive CWA Section 404(c) review
of Pebble versus letting the project go into permit-
ting, however, seems to show that upper level EPA
officials were discussing the best way to stop
development of the enormous copper project using
this process.
The top drawback listed in the con column of
this 2010 “discussion matrix” was that a proactive
404(c) determination had “never been done before
in the history of the CWA.”
The agency listed political backlash and litiga-
tion risks as other potential negative outcomes of
attempting to use 404(c) to stop Pebble prior to
permitting. The document suggests that some form
of public process would help deflect some of this
backlash, which is the route the agency ultimately
took in the form of the Bristol Bay Watershed
Assessment.
The document also said that a pre-emptive
404(c) decision at Pebble could serve “as a model
of proactive watershed planning for sustainabili-
ty.”
Pebble CEO Collier said this statement sheds
some light into EPA’s motivation.
“They want to zone watersheds,” he explained.
North acted alone?One thing that the Pebble Partnership and the
EPA Inspector General agree on is that Phil North,
a former Alaska-based EPA biologist, worked
inappropriately closely with parties opposed to
developing a mine at the Pebble deposit.
“We did find that an EPA Region 10 employee
used personal non-governmental email to provide
comments on a draft Clean Water Act Section
404(c) petition from tribes before the tribes sub-
mitted it to the EPA,” the EPA Inspector General
wrote.
The investigative body said it could find no evi-
dence that North’s involvement in editing the peti-
tion was known by his superiors.
“The report concludes that no one at EPA knew
that Phil North was engaging in this improper con-
duct with environmental activists; we have emails
that show almost a dozen people did,” Collier said.
This evidence indicates that EPA management
as high as Dennis McLerran, the administrator for
region 10, which includes Alaska, was aware of the
close relationship between North and Pebble
antagonists.
A January 2010 briefing for then EPA
Administrator Lisa Jackson shows that during the
same time that North was helping Pebble antago-
nists draft the petition, officials in EPA’s
Washington D.C. office were already discussing
see PEBBLE REVIEW page 12
TOM COLLIER
Ketchikan, Alaska-based Orca Holdings now owns 10 percent ofUcore Rare Metals, the company hoping to develop a mine at theBokan Mountain rare earth project located about 40 miles south-west of Ketchikan on Prince of Wales Island.
UC
OR
E R
AR
E M
ETA
LS I
NC
.
10NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF JANUARY 24, 2016
Shane Lasley PUBLISHER & NEWS EDITOR
Rose Ragsdale CONTRIBUTING EDITOR
Mary Mack CEO & GENERAL MANAGER
Susan Crane ADVERTISING DIRECTOR
Heather Yates BOOKKEEPER
Bonnie Yonker AK / INTERNATIONAL ADVERTISING
Marti Reeve SPECIAL PUBLICATIONS DIRECTOR
Steven Merritt PRODUCTION DIRECTOR
Curt Freeman COLUMNIST
J.P. Tangen COLUMNIST
Judy Patrick Photography CONTRACT PHOTOGRAPHER
Forrest Crane CONTRACT PHOTOGRAPHER
Tom Kearney ADVERTISING DESIGN MANAGER
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ADDRESS • P.O. Box 231647Anchorage, AK 99523-1647
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FAX FOR ALL DEPARTMENTS907.522.9583
NORTH OF 60 MINING NEWS is a weekly supplement of Petroleum News, a weekly newspaper.To subscribe to North of 60 Mining News,
call (907) 522-9469 or sign-up online at www.miningnewsnorth.com.
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North of 60 Mining News is a weekly supplement of the weekly newspaper, Petroleum News.
Contact North of 60 Mining News:Publisher: Shane Lasley • e-mail: [email protected]
Phone: 907.229.6289 • Fax: 907.522.9583
NORTHERN NEIGHBORSCompiled by Shane Lasley
Yukon's only operating lode mine set to close;re-opening dependent on copper market outlook
Capstone Mining Corp. Jan. 18 said it plans to temporarily halt operations at
its Minto copper mine in Yukon Territory in 2017. The planned closure is part
of an overall cost-cutting initiative by the company. “In light of the current
commodity price environment our 2016 guidance and five-year outlook focuses
on financial flexibility, while maximizing the cost efficiency of our existing
operations,” explained Capstone President and CEO Darren Pylot. For 2016,
the Minto Mine is expected to produce 27,000 metric tons of copper at an all-in
cost of US$1.30-US$1.40 per pound. Capstone said the low 2016 production
and operating costs at Minto reflect a significant contribution from the high-
grade Minto North open pit. Head grade is expected to average 1.3 percent in
the first quarter, ramping up to over 2.6 percent in the second half of the year,
resulting in significantly lower costs. Surface mining of the Minto North pit is
expected to be completed in August, with the mill continuing to process Minto
North material until the end of the first quarter of 2017. The company said
underground mining will be stopped by the end of March and the rest of the
operation will be temporarily closed once all the ore from Minto North and the
remaining stockpiles are processed by mid-2017. Future decisions will depend
on a number of factors, most notably an improvement in the copper market out-
look. Capstone is not planning any exploration at Minto in 2016 and limited
sustaining capital expenditures are budgeted for the mine due to the expected
closure. Minto is the only currently operating hard rock mine in the Yukon
Territory.
TMAC forms C$325 million tactical plan aimedat increased gold for coming Hope Bay Mine
TMAC Resources Inc. Jan. 14 plans to invest C$325 million on a tactical
plan budget that aims to have its Hope Bay gold project in Nunavut ready to
ramp to an operation that averages 1,000 metric tons per day in 2017. This new
plan, which involves a C$35 million increase over a previous “path to produc-
tion” budget, includes the accumulation of an ore stockpile sufficient to support
ramp up to 2,000 metric tons per day by 2018. The tactical mine development
plan, which runs for the period from the beginning of 2016 to the end of 2018,
contains several changes in scope from a 2015 pre-feasibility study, including:
increased underground development in 2016; larger low-grade stockpile for mill
commissioning; 55,600 ounces of gold (at 15.2 grams per metric ton) in high-
grade stockpile for mill start up, 30,200 ounces greater than the PFS; de-risking
production ramp up; increased in gold production in 2017; and drilling to
potentially extend Doris deposit below current reserves. “We are pleased with
our progress in moving the Hope Bay Project to production, and delighted that
the project remains on schedule for first production in late 2016,” said TMAC
CEO Catharine Farrow. The exploration and geoscience budget for 2016 totals
C$10.8 million. The 2016 exploration drilling program comprises surface and
underground diamond drilling targeting both near-term (one- to three-year) pro-
duction areas and longer-term expansion of resources at Doris. The main objec-
tives are to facilitate detailed stope design within certain areas of the current
see NORTHERN NEIGHBORS page 12
l O P I N I O N
For miners, tomorrowis another dayThe economy is crashing, commodities are down, the White Househates us; but other than that, how do you feel about the future?
I wanted the gold and I sought it,I scrabbled and mucked like a slave;Be it famine or scurvy, I fought it;I hurled my youth into the grave…
“The Spell of the Yukon,”by Robert Service
By J. P. TANGENSpecial to Mining News
Ido love metaphors and aphorisms;
there’s one for every occasion. For
instance, it is often noted that, on the one
hand, it is always darkest before the dawn
and, on the other, that the light at the end
of the tunnel is another train. It would be
folly to believe that in today’s environ-
ment, things will be better, economically,
in Alaska, any time soon; however, experi-
ence teaches that the current disaster will,
like all others, one day pass.
Here’s the scenario: Alaska is a
resource state heavily dependent upon its
resources, primarily oil, but also to some
degree mining, for its well-being. The
President, in his wisdom, chose to elimi-
nate sanctions against Iran. The Saudis
don’t like Iran, so they have caused the
price of oil to drop, ensuring that Iran does
not make as much money as it might hope
selling oil into the open market. That also
stifled the global price of other commodi-
ties, such as gold.
Some supporters of the President intu-
itively feel that mining is a bad thing, so
they have burdened the mining industry
with burdensome sanctions. The President
is supportive of exotic sources of energy,
but they also contribute to the energy glut.
China, in an ambitious quest to foster its
own unique brand of capitalism, has
repeatedly devalued its currency and has
halted trading in its newly re-organized
stock exchange.
There is a tremendous influx of people
in the world, not just in North Africa and
the Levant, but also in North America,
who are moving north. While certain ele-
ments of the receiving communities are
resisting such migrations, “opposition is
futile.” Most of the countries targeted by
refugees are either below zero population
growth or are close to it. Migrants stereo-
typically are seeking opportunity, whether
in the form of resource development or
other forms of productivity, and the current
influx is no different.
Obviously, that’s not just one train com-
ing at us, it’s several.
No matter how long the current politi-
co-economic siege lasts, there is good
news for us Alaskans and for those of us
who support resource development around
the world. The good news is that those
who come after us, whether our progeny or
newly-minted citizens from foreign lands,
will want the benefits of life in an emer-
gent world.
Pause long enough to contemplate how
the world changed in the 20th Century
from beginning to end, and then extrapo-
late that over the years past and yet to be
in the current century. Notwithstanding the
social hiccoughs that we are currently
enduring, it is an odds-on certainty that the
world before us will be extraordinarily dif-
ferent from the world we know, and every
detail of that new world will require the
resources we, in Alaska, produce.
It has always been a given premise that
the minerals with which Alaska is
endowed, whether metallic or hydrocar-
bons, will be demanded for the balance of
the 21st Century and by the ensuing gener-
ations which, whether by birth or by
migration, want not just a safe haven to
live in peace, but also electricity and run-
ning water.
Alaskans are currently in a tight corner,
and many will not be able to withstand the
challenges; but, to paraphrase Robert
Service: “It’s hell, but [we]’ve been there
before.”
I take heart from the changed vision of
the visitors to Alaska whom I encounter
share. Gone are the heady days of crap-
shooters who came to Alaska with a
dream, borne of an echo of the gold rush
days that rarely “pans out.” Instead, I, at
least, am seeing among the newcomers a
sense of reality and an awareness that min-
ing and other forms of resource develop-
ment can be conducted in ways that feed
the needs of our civilization without pol-
luting our world.
Service was right: “When I am skinned
to a finish, I’ll pike to [Alaska] once
more.” l
Mining & thelaw
The author,J.P. Tangen hasbeen practicingmining law in J.P. TANGENAlaska since 1975. He can be reached [email protected] or visit his Web site atwww.jptangen.com. His opinions do notnecessarily reflect those of the publishersof Mining News and Petroleum News.
By SHANE LASLEYMining News
The Red Dog Mine in Northwest Alaska is highly
regarded as an example of a mining company and
local aboriginal interests sitting down at the negotiating
table and working out a deal that serves the economic
and social interests of both.
A steep tax hike, however, threatens to shorten the life
of the world-class zinc mine and thereby the partnership
forged between Teck Resources Ltd. and NANA
Regional Corp. The tax increase was introduced recently
by the Northwest Arctic Borough, the regional govern-
ment that blankets the area where Red Dog is located.
“This tax increase could impact the longevity of Red
Dog and put the jobs, revenues and economic opportuni-
ty it creates in the region at risk,” said Red Dog General
Manager Henri Letient.
The hefty tax burden for Red Dog comes alongside
zinc prices that are at lows not seen since the market col-
lapse of 2009.
“This massive tax hike could not come at a worse
time, as the mining industry is in the midst of the biggest
downturn in decades,” the mine manager added.
In a move aimed at getting Northwest Arctic Borough
officials to the negotiating table, Teck Alaska has filed a
complaint over the tax hike in Alaska Superior court.
“All we are asking is for the borough to come to the
table and negotiate a reasonable payment that supports
the region and the continued operation of Red Dog,” said
Letient.
Economic generatorSince 1989, the Red Dog Mine has been an important
economic engine in Northwest Alaska – providing rev-
enue for NANA, the Alaska Native regional corporation
and the local government as well as providing jobs for
many of the residents of the remote region.
“For more than 25 years Red Dog Mine and the
Northwest Arctic Borough have cooperated in a unique
way, working together to ensure that the benefits of min-
ing reach borough residents and communities and allow
for our continued operation,” Teck explained in a Jan. 11
letter to Red Dog employees, of which 64 percent are
NANA shareholders.
Prior to Red Dog going into production, Teck and
NANA reached a mutually beneficial agreement that
allowed the Vancouver, B.C.-based miner to mine one of
the richest zinc deposits on the planet and provided the
Alaska Native corporation an opportunity to establish a
strong economic base for its more than 13,800 Iñupiat
shareholders whose ancestors settled the northwest cor-
ner of Alaska thousands of years ago.
Over the ensuing 26 years, NANA and its sharehold-
ers have enjoyed more than US$1.7 billion in royalties,
wages and tax payments from the Red Dog Mine.
“To us, Red Dog is an example of how Arctic devel-
opment can work to the benefit of Arctic communities,”
NANA CEO Wayne Westlake said during a November
presentation at the Resource Development Council
Convention in Anchorage.
Beyond the progressive partnership forged between
NANA and Teck, a local government was established to
“improve the quality of life for all residents” living with-
in the more than 40,000 square miles of Northwest
Alaska that the borough covers.
Over the past 26 years, the Red Dog Mine has paid
more than US$140 million to the borough, accounting
for more than 70 percent of the local government general
fund revenue. This revenue has come in the form of pay-
ments in lieu of taxes.
Traditionally, these “PILT” payments are the result of
agreements negotiated between the Red Dog Mine and
Northwest Arctic Borough every five years.
Over the past five years, these negotiated payments to
the borough have averaged nearly US$11.5 million per
year, a total of US$57.5 million for that span.
The Northwest Arctic Borough, however, decided not
to renegotiate the PILT payments prior to them expiring
at the end of 2015. Instead, the assembly opted to imple-
ment a severance tax that would be assessed on the ore
extracted in the borough and is expected to more than
triple the payments Red Dog pays to the regional gov-
ernment.
Discriminatory, opportunisticTeck contends that the US$30 million to US$40 mil-
lion per year that it will pay to Northwest Arctic Borough
under the new tax scheme will be roughly seven times as
much as the sum its nearest peer in the state, Kinross
Gold Corp.’s Fort Knox Mine, pays out in comparable
taxes.
Fort Knox paid the Fairbanks North Star Borough
US$5.24 million in taxes during 2014.
Teck said that under that borough’s taxing system, the
Red Dog Mine would only pay about US$3.67 million in
taxes, or about 10 percent of what Northwest Arctic
Borough is levying against the mine.
The mining company characterizes the tripling of an
already healthy tax structure as unreasonable, unconsti-
tutional and unfair.
The only business that is currently subject to the sev-
erance tax is Red Dog, which is already, by far, the
biggest taxpayer in the Northwest Arctic Borough,
accounting for 70-80 percent of the municipal govern-
ment’s general funds. Teck argues that this targeted tax
hike is discriminatory.
The company also contends that the steep tax increase
is opportunistic, taking advantage of the fact that Red
Dog can’t be moved to a jurisdiction with a more favor-
able tax structure, which would be anywhere else in
Alaska.
While Teck officials say they have a strong legal
argument, they do not want the courts to decide what is
best for Red Dog and the region.
“It is our hope that, rather than continue the legal
process, the NAB will agree to come to the table and
work cooperatively to achieve a reasonable new agree-
ment,” company officials wrote in a paper laying out
their position.
Providing a bridgeNANA, which has strong business and personal ties
to both Teck and Northwest Arctic Borough, is doing its
best to get both sides of this taxing issue back to the
table.
“We understand the perspectives of both parties, and
we believe we can help provide a bridge to reach a long-
term, or interim, agreement. We want to come together,
in the spirit of cooperation, and resolve this issue
through structured mediation,” the Native corporation
commented when questioned about the tax hike.
NANA owns the Red Dog deposit and is 30 percent
owner of the operation.
On the flipside, the Northwest Arctic Borough covers
exactly the same area as the NANA region and the vast
majority of the some 8,000 residents of the region are
NANA shareholders, as well as beneficiaries of any tax
the borough takes in.
Despite the overlapping interests, NANA says the
financial benefits the mine already provides to the area
outweighs by far the added revenue the borough hopes to
get through the steep tax increase.
Since mining began, NANA has received roughly
US$1.3 billion in net proceeds payments from Red Dog,
of which it has distributed about US$820 million to other
regions and at-large shareholders via the 7(i) sharing
provisions of the Alaska Native Claims Settlement Act.
Of the US$480 million that NANA has kept, some
US$221 million has been paid in dividends to sharehold-
ers.
This is on top of the more than US$469 million in
wages Red Dog has paid to NANA shareholders working
at the mine over the past 26 years, including the US$39.3
million paid to 604 NANA shareholders that either
worked full- or part-time at Red Dog in 2015.
“We are concerned about jobs. A reduced operating
budget for the mine will mean fewer jobs for NANA
shareholders,” the Native corporation said in a state-
ment. l
l F I S C A L P O L I C Y
A taxing dilemma for Red DogNorthwest Arctic Borough levies steep tax hike that threatens longevity of world-class zinc mine; Teck pressures for negotiations
11NORTH OF 60 MINING
PETROLEUM NEWS • WEEK OF JANUARY 24, 2016
“This massive tax hike could not come at aworse time, as the mining industry is in themidst of the biggest downturn in decades.”
–Henri Letient, general manager, Red Dog Mine
SHA
NE
LASL
EY
Over the past 26 years, the Red Dog Mine has been an economic generator in Northwest Alaska, providing revenue for NANA Corp., supporting the municipal government and providingjobs to many of the residents of this remote region.
the possibility of a pre-emptive 404(c)
veto of Pebble. While it is unclear
whether or not EPA’s highest office was
considering this plan separately from
what was going on in Alaska, this briefing
comes several months prior to requests
for such actions by Bristol Bay Native
groups, which EPA said was its impetus
to consider using the unprecedented
method of stopping a project ahead of
permitting.
The stage is setThe EPA Inspector General Office’s
findings are in sharp contrast to conclu-
sions to the recently completed investiga-
tion by former U.S. Secretary of Defense
William Cohen, who was hired by the
Pebble Partnership to complete a review
of EPA’s actions surrounding the Bristol
Bay Watershed.
Cohen said his investigation turned up
evidence of questionable activities by
EPA and urged federal watchdog groups
such as the EPA Inspector General and
U.S. House Oversight Committee to
probe further into EPA’s actions at
Pebble.
“After an analysis of thousands of doc-
uments and discussions with more than
60 stakeholders, I conclude that EPA’s
actions were not fair to all stakeholders,”
Cohen wrote in a 346-page report outlin-
ing his findings. “The statements and
actions of EPA personnel … raise serious
concerns as to whether EPA orchestrated
the process to reach a pre-determined out-
come.”
Collier was somewhat surprised at the
large chasm between the thoroughness of
the inspector general and Cohen reports,
considering they were tasked to investi-
gate the same topic and had access to the
same evidence.
“I think it is the single most embarrass-
ing piece of work by an inspector general
that I have seen in my 40 years of work-
ing with inspector generals,” the Pebble
CEO told Mining News.
The Pebble Partnership, however, was
not caught off-guard by the findings.
“One of the reasons we initiated the
Cohen report is there was a great concern
that there might be a whitewash in the
inspector general investigation,” Collier
said.
The contrasting conclusions also has
set the stage for the continuation of a law-
suit in which the Pebble Partnership
alleges EPA worked secretly with anti-
Pebble groups in pursuit of the goal of
banning or restricting development of
Pebble prior to the permitting process.
“We are by no means through making
our case that EPA acted inappropriately
and perhaps illegally with respect to
Alaska’s Pebble project,” Collier said.
“We will have the opportunity to depose
as many as 35 senior EPA officials, insid-
ers and others in the environmental com-
munity as part of our FACA discovery,
and we continue to gain new information
and fresh insights through the investiga-
tive efforts of Congress.”
Supported by the growing piles of
email conversations and other incriminat-
ing evidence, Collier said he expects the
trial “questioning will be dramatically
more intense than what the IG did.”
Depositions are expected to be sched-
uled within the next month, setting up the
next stage of the trial.
Collier said the findings of the inspec-
tor general report parallels the arguments
made by EPA in the case, but this stance
is not enough for the agency to prevail
considering the massive amount of evi-
dence to contrary.
Federal Judge H. Russel Holland, who
is presiding over the case, has already
found Pebble’s allegations credible
enough to issue a preliminary injunction
ordering the regulator to halt efforts to use
Section 404 (c) of the federal Clean Water
Act to pre-emptively block or restrict
Pebble permits.
A number of U.S. Congressional com-
mittees – including House Science, Space
and Technology and House Oversight and
Government Reform – have been critical
of EPA’s attempt to use the 404(c) process
to pre-emptively restrict the Pebble mine
project.
Science, Space, and Technology
Committee Chairman Lamar Smith, R-
Texas, said his committee will continue
its probe into EPA’s actions
“The Inspector General’s report on
EPA’s actions to block the Pebble Mine
draws misleading conclusions without
having all the facts,” Lamar responded to
the report. “It also appears that the IG
failed to review a significant body of pub-
lically available information brought to
light by the Science Committee that
demonstrates clear instances of bias and
predetermination on the part of the EPA.”
Collier expects that the EPA Inspector
General Arthur Elkins, Jr. will be called
before these committees to testify on the
quality and content of the report.
“This issue is just too important to be
swept under the rug – not only for us and
for the State of Alaska, but for the integri-
ty of objective, science-based decision-
making in this country,” the Pebble CEO
said. l
12NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF JANUARY 24, 2016
continued from page 9
PEBBLE REVIEW
Doris mine plan and to potentially add
significant high-grade gold ounces to the
Doris Mineral Resource base. A total of
12,000 meters of underground diamond
drilling are budgeted for 2016, with
6,000 meters focused on infill drilling
and 6,000 meters focused on resource
expansion. A planned 8,000 meters of
surface drilling will be focused on
resource expansion and exploration in
the southern portion of the Doris trend.
GJ resource updated; Spectrum estimate next
Skeena Resources Ltd. Jan. 14
released an updated resource estimate for
the Donnelly and North Donnelly cop-
per-gold deposits at its recently acquired
GJ property in the Golden Triangle of
northwestern British Columbia. The
Donnelly and North Donnelly deposits
now host 133.67 million metric tons of
measured and indicated resource, using a
0.2 percent copper cut-off, grading 0.32
percent (940.23 million pounds) copper
and 0.36 grams per metric ton (1.56 mil-
lion ounces) gold. In addition, 53.69 mil-
lion metric tons of inferred resource
grading 0.26 percent (312.53 million
lbs.) copper and 0.33 g/t (570,000 oz.)
gold has been estimated for the deposits.
Contained pounds of copper and ounces
of gold in the measured and indicated
categories have increased by 12 percent
each, in comparison to the previous esti-
mate calculated in 2007. Inferred pounds
of copper and ounces of gold have
increased by 200 percent and 280 per-
cent respectively. The Donnelly and
North Donnelly zones are meters wide,
1,600 meters long and an average of 200
meters deep. Skeena says there is good
potential for resource expansion to the
west and at depth on the Donnelly
deposits. It is recommended that drill tar-
gets be selected following a detailed
review of available geological, geophysi-
cal and geochemical data. The report
authors also recommend resource model-
ing the nearby GJ deposit which is not
included in the current resource estimate,
and completing a property-wide target
review to evaluate exploration potential
of other porphyry and high-grade vein
prospects. The GJ property, which was
acquired by Skeena in October, is locat-
ed adjacent to the company’s Spectrum
gold project where 17,350 meters of
drilling in 61 holes was completed in
2015. A resource estimated that will
include that drilling is expected to be
released by the end of the first quarter.
Walter Coles, President and CEO of
Skeena commented, “The deposits at GJ
in conjunction with the Spectrum
deposit, all of which are open for expan-
sion, form the foundation of a district-
scale development project, located close
to electrical power and roads in a mining
friendly jurisdiction,” explained Skeena
President and CEO Walter Coles.
“Although metal prices are not favorable
for development of the GJ property at
this current time, we view the deposits at
GJ as an inexpensive long term call
option on copper and gold prices, with
very low holding costs.” l
continued from page 10
NORTHERN NEIGHBORS
TMA
C R
ESO
UR
CES
IN
C.
TMAC Resources' Hope Bay gold mine project in Nunavut is on track to begin production thisyear. The plant is scheduled to process 1,000 metric tons of ore per day in 2017, much ofwhich will come from a high-grade stockpile averaging 15.2 grams of gold per metric ton.
By ALAN BAILEYPetroleum News
A laska’s Division of Oil and Gas has
issued a permit allowing Doyon
Ltd. to conduct a seismic survey on state
land in the northern part of the Nenana
basin in the Alaska Interior. The 2-D sur-
vey, which will extend about 172 line
miles across a broad area of the basin, to
the northwest of the city of Nenana, is
planned for the 2016 winter season. The
permit covers the period Jan. 1 to April
30.
In addition to state land, the survey
area includes Native land and Mental
Health Trust land. Doyon holds both
state and Mental Health Trust oil and gas
leases within the area, the DOG decision
document says.
Access to the project area will mainly
be by helicopter and fixed wing aircraft,
with equipment and crews mobilized
from Nenana Airport and field staging
areas on private land or one of the local
roads, the decision document says.
Charges used as seismic sound sources
will be placed at 330-foot intervals in
holes drilled by a heli-portable drilling
rig. Wireless, nodal data receivers placed
55 feet apart will be used for recording
the seismic signals — the cutting of seis-
mic lines through the surface vegetation
will not be required.
Exploration programDoyon has been exploring for oil and
gas in the Nenana basin for several year
and conducted 2-D seismic surveys
across wide areas of the basin in 2005
and 2012. The corporation drilled the
Nunivak No. 1 exploration well in the
central part of the basin in 2009 and the
Nunivak No. 2 well, also in that central
area, in 2013. While not encountering
viable oil or gas pools, the wells provided
tantalizing evidence for an active petrole-
um system, with indications that the
basin may contain oil as well as gas.
In the winter of 2014-15 Doyon con-
ducted a 3-D seismic survey in the cen-
tral part of the basin to add detail to the
results of previous 2-D surveys. And the
corporation has announced a plan to drill
a third well, the Toghotthele No. 1, dur-
ing the summer of 2016 at a location
about two miles north of the previous
wells.
James Mery, Doyon vice president for
lands and natural resources, has previ-
ously told Petroleum News that the new
2-D seismic survey will fill in gaps in the
previous reconnaissance surveys in the
area. The corporation anticipates follow-
ing up with a 3-D survey in a subsequent
season, to upgrade promising leads into
prospects, Mery said. l
l E X P L O R A T I O N & P R O D U C T I O N
State approves Doyon Nenana seismic surveyNative corporation plans to infill some previous reconnaissance surveying as part of a search for oil and gas in the basin
PETROLEUM NEWS • WEEK OF JANUARY 24, 2016 13
(907) 562-5303 | akfrontier.com
Safety Health Environment Quality
THE TEAM THAT
DELIVERSD
OYO
N L
TD.
In addition to state land, thesurvey area includes Native landand Mental Health Trust land.
Doyon holds both state andMental Health Trust oil and gas
leases within the area...
LAND & LEASINGNo substantialnew informationfor lease sales
The Alaska Division of Oil and
Gas has issued a decision of no sub-
stantial new information for the
upcoming Cook Inlet and Alaska
Peninsula areawide oil and gas lease
sales.
The best interest finding for the
Cook Inlet areawide oil and gas lease
sales was issued in 2009 and the find-
ing for the Alaska Peninsula sales was
issued in 2014.
State statute requires supplement-
ing the most recent finding if the
director of the division determines
that substantial new information has
become available. The Cook Inlet best
interest finding was supplemented in
2010 and 2011; the Alaska Peninsula
finding has not been supplemented.
A call for new information was
issued Sept. 30, with the submission
period ending Nov. 6.
The division said it received three
timely comments and requests and
one comment submitted after the
deadline.
—PETROLEUM NEWS
A call for new information wasissued Sept. 30, with thesubmission period ending
Nov. 6.
14 PETROLEUM NEWS • WEEK OF JANUARY 24, 2016
EXPLORATION & PRODUCTIONConoco plans Kuparuk drilling annex pad
ConocoPhillips Alaska has applied to the U.S. Army Corps of Engineers to
build a drilling annex pad and access road to support continued development at
the Kuparuk River unit.
The proposed support pad is close to the western edge of the Kuparuk River
unit, near the 2L pad, and southwest of the Mustang Pad, according to a map
included in the application.
The pad would require placement of 129,500 cubic yards of fill material on
16.5 acres of wetlands for construction of a pad and access road. The pad, 1,040
feet by 628 feet, would require 122,911 cubic yards of fill and would have space
for three rig camps, vehicle parking, bullrails, a tanker truck loading area with fuel
tank, bulk storage tanks, equipment staging and a safety station. The access road,
500 feet long and 35 feet wide, would require placement of 6,589 cubic yards of
material in 1.27 acres of wetlands. The project map shows the access road coming
off the existing Tarn Road southwest of the 2L pad.
The corps said there would be no new drill sites, cross country pipelines or
overhead power lines. Electricity would be supplied to the camps from existing
infrastructure and power cables would be buried. Existing Kuparuk road infra-
structure would be used for access to the project site and material source.
If permits are received work would begin in April and be completed in August.
The corps said no tundra disturbing activities would take place during the bird
nesting season from June 1 through July 31.
The corps is taking comments on the proposal through Feb. 16.
—KRISTEN NELSON
Suncor lands COS deal Peace has broken out in the Canadian oil patch, with Suncor Energy and
Canadian Oil Sands coming to terms on a C$4.2 billion shareholder deal plus
C$2.4 billion of debt ending a nasty public battle between the two oil sands giants.
If the deal announced Jan. 18 gets approval from shareholders, regulators and
courts, Suncor will control close to half of Syncrude Canada or about 175,000
barrels per day of capacity at the consortium’s bitumen mine, on top of the
400,000-425,000 bpd targeted by Suncor for 2016.
The latest bid will give COS shareholders 0.28 of a Suncor share for each of
their shares, a 12 percent bump from the early October offer of 0.25-for-one, but
lagging behind Suncor’s offer last April of 0.33.
With no hope of making money at current oil prices, and the prospect of further
weakness, COS had more than ample reason to agree to friendly terms.
AltaCorp Capital analyst Nick Lupick said the freshened offer is “effectively
the same” as the October bid when Suncor offered C$4.3 billion for COS equity
and estimated debt at C$2.3 billion.
COS Chairman Don Lowry said his board has been able to “remain steadfast”
in its commitment to maximize value for its shareholders despite a 37 percent
decline in spot oil prices over the past three months.
Suncor Chief Executive Officer Steve Williams said he was pleased to have the
support of the COS board of directors and major COS shareholder Seymour
Schulich, who owns 5 percent of the six-company consortium, who took out full-
page ads in two national Canadian newspapers to oppose what he called Suncor’s
“giveaway price.”
—GARY PARK
FINANCE & ECONOMY
l I N T E R N A T I O N A L
China sets trade rulesCanada told free-trade pact hinges on pipelines to Pacific Coast, removal of ban on Chinese oil asset ownership; Trudeau plans trip
By GARY PARKFor Petroleum News
Opening energy pipelines to the Pacific Coast is sud-
denly emerging as vital to Canada’s hopes of nego-
tiating the first bilateral free trade deal between China
and any North American country.
And that would likely need to be accompanied by an
end to Canada’s restrictions on Chinese state-owned
investments in the oil and gas sector, Han Jun, Beijing’s
vice minister of Financial and Economic Affairs, told a
briefing earlier in January at an Ottawa law firm.
He set those conditions about two months before
Prime Minister Justin Trudeau is due in China and India
to explore trade opportunities and the chances of free
trade pacts beyond the proposed Trans Pacific
Partnership.
That would follow Trudeau’s expected bilateral meet-
ings with President Barack Obama as Canada seeks to
re-establish cordial and working relationships with the
United States in the wake of Obama’s rejection of the
Keystone XL pipeline.
At stake for Canada is an estimated incremental rise
in exports to China of C$7.7 billion a year on top of the
current C$17 billion, still leaving a huge trade imbalance
compared with C$49 billion in Chinese imports in 2015.
Sinopec purchases US crudeThe need for urgency by Canada, especially if it gives
priority to the shipment of crude bitumen from the oil
sands, got a sharp jolt with reports that China’s state-
owned refiner Sinopec has purchased its first batch of
U.S. crude oil since sporadic shipments in the late 1990s
from Alaska.
Traders say a cargo is due to leave the U.S. Gulf
Coast in March and could set the stage for a sustained
flow from the U.S.
Although the Gulf has shipping limitations, Unipec,
China’s trading arm, has leased oil storage tanks in the
Caribbean, which would allow it to blend U.S. shale oil
with heavy Latin American crudes, which would suit the
refining facilities in China.
If there was any need for a further prod to action by
Canada it has come with the lifting of sanctions on Iran
and the certain prospect of resumed oil exports from that
country.
Han, who held discussions with senior officials in the
Canadian government, said that any free-trade agree-
ment with Canada could open the door to a “flood” of
energy products as well as fertilizers and agricultural
products, as well as offering an outlet for green technol-
ogy to reduce carbon emissions.
Concern with banBut he emphasized that China is “highly concerned”
about Canada’s ban on outright ownership of oil sands
producers by foreign state-owned enterprises, which he
said is seen as discrimination against China.
The tightened rules were imposed in 2012 after the
federal government approved the US$15 billion takeover
of Nexen by China National Offshore Oil Corp.
Colin Robertson, with the Canadian Global Affairs
Institute, said the Chinese want a re-examination of
those rules.
Han said his government also wants to extend talks
begun with the government of former Prime Minister
Stephen Harper on establishing a maritime energy corri-
see TRADE RULES page 15
l G O V E R N M E N T
Coast Guard publishes
icebreaker specificationHopes for funding in 2017 federal budget to address shortfallin U.S. strategic heavy icebreaker capabilities in polar regions
By ALAN BAILEYPetroleum News
In the latest development in a lengthy
debate over the inadequacies of the
U.S. icebreaker fleet, on Jan. 13 Adm.
Paul Zukunft, U.S. Coast Guard comman-
dant, announced that the Coast Guard was
posting a polar heavy icebreaker specifi-
cation on the FedBizOpps website, to
give industry a head start on a potential
opportunity to bid on icebreaker con-
struction, should Congress appropriate
the necessary funding. Speaking during
an event organized by the Center for
Strategic and International Studies,
Zukunft commented that the Coast Guard
hopes that the 2017 federal budget will
include funding to move forward with an
icebreaker project but that, at this point,
there is no federal appropriation for ice-
breaker acquisition.
Sen. Lisa Murkowski, chair of the
Senate Committee on Energy and Natural
Resources and member of the Committee
on Appropriations, who spoke at the same
event, commented on President Obama’s
statement during his recent visit to
Alaska, in which the president mentioned
an intention to accelerate the replacement
of the country’s only operational heavy
icebreaker, the Polar Star.
“An announcement is good, but what
you really need is money to go behind the
announcement,” Murkowski said. “You
need to make sure that it’s more than just
words.”
While the 40-year-old Polar Star is
reaching the end of its operational life, its
sister ship, the Polar Sea, is laid up in
port. The only other U.S. icebreaker, the
Coast Guard Cutter Healy, is a medium
duty icebreaker, unsuitable for year-round
operations. And the Polar Star is currently
operating in the Antarctic, supporting
strategic infrastructure there, Zukunft
said, referencing U.S. staffed Antarctic
research stations.
Murkowski commented that the
Russians are currently in the process of
constructing 14 new icebreakers of vari-
ous designs.
Consultation with stakeholdersZukunft said that, in preparing its new
polar icebreaker specification, the Coast
Guard had consulted a wide variety of
stakeholders in the Arctic region to devel-
op a set of operational requirements that
would drive the icebreaker design.
“I want to make sure I have stable
requirements, so that I can then turn to
industry and say ‘this is what we need,
and we’re not going to change our mind
halfway into this process,’” he said.
The specification requires the ice-
breaker to be capable of breaking through
8-foot-thick ice at a continuous speed of 3
knots and through 21-foot ridged ice. The
vessel must be able to leave in its wake a
channel at least 83 feet wide. And the ves-
sel, which needs cargo handling and heli-
copter operation capabilities, must have a
minimum range of 21,500 nautical miles
at 12 knots in ice-free waters, with the
capability of a sustained speed of 15
knots.
Zukunft commented that, while the
U.S. Navy sees a strategic need to recap-
italize its fleet of ballistic missile sub-
marines, each of which costs some $8 bil-
lion, the Coast Guard sees a strategic
need for polar icebreakers. It will be nec-
essary in the short term to decide whether
to restore the Polar Sea, or whether to
mothball that vessel as a source of spare
see ICEBREAKER SPECS page 15
PETROLEUM NEWS • WEEK OF JANUARY 24, 2016 15
dor in Canada.
Robertson said China, Japan and India
are eager to buy Canadian oil and gas, but
they can’t access the resources without
pipelines.
Survey sees positive resultsA survey released earlier in January by
the Canada-China Business
Council/Canadian Council of Chief
Executives explored whether a free trade
deal with China would make sense.
The answer was a resounding “yes,”
with up to 25,000 new jobs being created
over the next 15 years, reinforcing pre-
liminary results from a 2012 study that
concluded there was “untapped potential
for further growth” in a wide range of
sectors.
Sarah Kutulakos, executive director of
the Canada China Business Council, said
Canada is suddenly at the “back of the
(trade) bus” following the completion of
a free trade pact that was 10 years in the
making between China and Australia.
She said that deal gives Australian
resource companies and banks — two of
the underpinnings of Canada’s economy
— tariff-free access to the Chinese mar-
ket for 95 percent of its exports.
But critics of free trade with China
note that the World Bank governance
indices rate China as a medium-range risk
for corruption, regulatory quality and rule
of law. l
continued from page 14
TRADE RULES
parts for the Polar Star, to ensure the con-
tinuing operation of at least one heavy
U.S. icebreaker until a new icebreaker
can be constructed, Zukunft said.
The Coast Guard’s roleAs the United States currently chairs
the Arctic Council of the eight Arctic
nations, the Coast Guard has a crucial role
to play in enabling diplomatic maneuver-
ing room in the Arctic, in a way that big
navies cannot, Zukunft said. The Arctic
nations have formed an Arctic coast guard
forum, in which the U.S. Coast Guard
commandant sits next to the equivalent
Russian four-star general for a strategic
dialogue, setting aside disputes elsewhere
in the world to focus on the Arctic.
“We do not want the Arctic to be the
next military front, but if we stay
entrenched in our isolated mindsets that is
exactly what we will have,” Zukunft said.
Currently, the U.S. Coast Guard only
sends its vessels into the Arctic seas dur-
ing the summer ice-free season. And, with
32 vessels traversing the Northern Sea
Route last year around the northern coast
of Russia, does the United States need to
send an icebreaker around that route, to
exert freedom of navigation, Zukunft
wondered.
Meanwhile, the Healy has been map-
ping the waters of the U.S. extended
Arctic continental shelf, a region that is
more than twice the size of the state of
California and which holds major oil, nat-
ural gas and mineral resources.
“These are technically sovereign
waters of the United States,” Zukunft said.
Arctic safety concernsMoreover, with the recession of Arctic
sea ice, the increasing frequency of ship-
ping transits of the region is raising the
stakes on the possibility of an Arctic
marine accident. This year, 1,000 passen-
gers have booked on a marine tour in
August and September, on a vessel with a
crew of 600, scheduled to go north
through the Bering Strait, pass around the
north of Alaska and transit the Northwest
Passage before returning to port in New
York City, Zukunft said. This voyage will
entail sailing through semi-charted
waters. The ability of the Coast Guard to
launch a rescue operation in the high
Arctic is limited to non-existent, Zukunft
commented.
“People look to the United States as a
global leader, but where are we in the
Arctic?” he asked. l
continued from page 14
ICEBREAKER SPECS
INTERNATIONALGo ahead on Barents offshore fields
Despite the oil industry gloom over the
low price of oil, two new Arctic offshore
oil fields are moving ahead. Norway’s
Petroleum Safety Authority has approved
the imminent startup of Eni SpA’s Goliat
field in the Barents Sea. And Statoil has
announced that is going to proceed with
development of the Johan Castberg field,
also in the Norwegian Barents.
According to a report in the Wall Street
Journal, following multiple delays in field
startup oil could start flowing from the
Goliat field as early as February. The investment of about $6 billion that the part-
ners in the field have put into the project represents a 52 percent cost overrun rel-
ative to the original development plan — analysts have assessed that the
breakeven oil price for the field is more than $100 per barrel, the Wall Street
Journal says.
Reuters has reported that Statoil’s decision to develop Johan Castberg follows
a rework of the design for the field. The company had previously deferred a final
investment decision but according to Statoil CEO Eldar Saetre now has a devel-
opment plan that cuts development costs by half. With a design concept involving
a floating production, storage and offloading concept, production could start in
2022, Reuters said. Apparently a Norwegian consultancy firm has estimated the
breakeven oil price for Castberg to be $56 per barrel.
—ALAN BAILEY
Norway’s Petroleum SafetyAuthority has approved the
imminent startup of Eni SpA’sGoliat field in the Barents Sea.And Statoil has announced that
is going to proceed withdevelopment of the JohanCastberg field, also in the
Norwegian Barents.
targeted credits”; strengthening the mini-
mum tax for North Slope oil and gas;
focusing the state’s purchase of oil and gas
tax credits on small companies hiring
Alaska residents; and making changes “to
promote good governance in tax adminis-
tration.”
The second bill, Senate Bill 129 and
House Bill 246, would, the governor said,
“establish a new oil and gas infrastructure
program and fund” for AIDEA, a “tool for
AIDEA to use in assisting the oil and gas
industry in the state by proposing an oil and
gas infrastructure development program to
allow AIDEA to assist in supporting small
or medium-sized oil and gas producers that
are dependent on outside financing.”
Tax change specificsA fiscal note for the tax change bill pre-
pared by Ken Alper, director of the
Department of Revenue’s Tax Division,
says the bill is described as “a comprehen-
sive attempt to reform and reduce the cost
of Alaska’s current program of providing
direct tax credit rebates and other advan-
tages to oil and gas companies.”
Alper said that through the end of fiscal
year 2015 companies received some $7.4
billion in tax credits, including credits used
against tax liability and credits repurchased
by the state.
Goals of the legislation include reduc-
tion of the state’s annual cash outlay; pro-
tecting net operating loss credits “especial-
ly for exploration activity”; limiting repur-
chases to companies who need the support;
strengthening the minimum tax and pre-
venting abuses to the system; being more
open and transparent; and honoring and
paying credits earned to date and through
any transition period.
Fiscal impactAlper said the Department of Revenue
estimates the legislation would have an ini-
tial impact of $500 million per year, with
$400 million “saved through reduced oper-
ating budget expenditures” and $100 mil-
lion from increased revenues.
Of the savings, about $200 million
would come from tax credit certificates
which would no longer be earned and
about $200 million from some tax credit
certificates that would continue to be
earned but, in most cases, would have to be
held until the companies had tax liability.
The $100 million earned would come
about half from hardening the minimum
tax floor, reducing the ability of companies
to offset the 4 percent payment, and about
half from increasing the minimum tax rate
to 5 percent.
Alper said the department’s oil price
forecast indicates that by fiscal year 2019
oil prices will likely have recovered
enough that “it would be unlikely that one
or more of the major oil producers would
have a net operating loss.”
It would cost about $1.5 million to
implement the changes in the bill as the Tax
Revenue Management System and
Revenue Online tax portal would require
“substantial reprogramming,” but no addi-
tional costs are estimated to administer the
tax program.
AIDEA John Springsteen, AIDEA director, said
in a fiscal note that establishment of the Oil
and Gas Infrastructure Development pro-
gram and fund would provide AIDEA
continued from page 1
TAX CHANGES
see TAX CHANGES page 20
16 PETROLEUM NEWS • WEEK OF JANUARY 24, 2016
Oil Patch Bits
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TOTE Maritime successfully performs first LNG bunkeringTOTE Maritime Puerto Rico success-
fully loaded LNG bunkers aboard theworld’s first LNG powered container-ship, MV Isla Bella. Approximately100,000 LNG gallons transported by 12TOTE-owned LNG ISO containers wereloaded on schedule. The bunkering wasconducted under strict U.S. CoastGuard oversight while Isla Bella wasalso undergoing cargo operations.
The LNG was transferred from theISO tank containers using a speciallydeveloped transfer skid developed byTOTE’s partner Applied CryogenicsTechnologies of Houston, Texas. Thetransfer skid is designed to allow fourISO tanks to be transferred to Isla Bellaat once, dramatically reducing transfertime.
The LNG was sourced by TOTE’spartner, JAX LNG, LLC, from AGLResources’ LNG production facility inMacon, Georgia. Genox Transportation,a specialized LNG trucking partner of TOTE, transported the fuel to Jacksonville. PivotalLNG, a subsidiary of AGL Resources, also provided transfer expertise to TOTE Maritime withits highly trained LNG experts, ensured the operation was conducted safely and in accor-
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Fluor named 2016 best company for leaders Fluor Corp. announced that it was named to the 2016 list of best companies for leaders
by Chief Executive Magazine. Fluor was No. 13 on the list and the only publicly tradedengineering-construction company recognized.
“Fluor is proud to be recognized as a Best Company for Leaders and especially as theonly publicly traded engineering-construction company on this year’s list,” said DavidSeaton, Fluor’s chairman and chief executive officer. “People who are familiar with Fluorknow we have a 100-year history and culture that values employees. We understand thepower of people and know that our positive culture, combined with leadership processesand systems, ensure we have talented, engaged and aligned professionals serving ourclients across the globe. That differentiator enables us to have a competitive advantage inthe marketplace.”
Chief Executive seeks to identify companies that excel in leadership development, can-vassing world-class companies through a questionnaire and interviews to learn what theyare doing to identify and nurture people three or more levels down the chain from thechief executive officer. Rankings are determined by a number of factors including the com-pany’s reputation among its peers as a source for well-rounded talent and the percent ofinternally recruited senior management.
Editor’s note: All of these news items — some in expanded form — will appear inthe next Arctic Oil & Gas Directory, a full color magazine that serves as a marketingtool for Petroleum News’ contracted advertisers. The next edition will be released inMarch.
CO
URT
ESY
TOTE
MA
RIT
IME
They would like to have some things in
place before they move forward. We
talked about the municipal tax exemp-
tion and an extension. They are working
with the city of Juneau now to see if the
city would support the tax exemption to
their project if the Legislature were able
to extend the number of years that the
opportunity would happen.
Petroleum News: Did he say wherethe gas would come from? BritishColumbia perhaps?
Munoz: We didn’t get into the details
of where the gas would come from. I
would assume it could come from
Canada. It could come from the Lower
48 but they are committed to bringing
natural gas to Juneau and they need to
see certain statutory modifications to
make the project possible or successful.
Petroleum News: So are they lookingat this as a regional investment withJuneau being the hub?
Munoz: My understanding is that
Juneau would be the hub and once
Juneau is built out then the opportunity
would be extended to other communities.
Petroleum News: Back to the Alaska,the gas line, what would you like to seeaccomplished next for the gas line?What piece of the puzzle is next in yourmind?
Munoz: Well the next big issue is of
course fiscal certainly. Before we move
to the FEED process, the producers have
indicated that they need fiscal certainty
before they move forward to construc-
tion. That would require the Legislature
passing a resolution to put the language
on the November ballot.
I believe that is going to be a signifi-
cant undertaking to get public buy-in to
create fiscal certainty at a time when we
are talking about reduced dividends and
possibly implementing broad-based
taxes.
I believe we need to be looking at
concessions or opportunities for compa-
nies to cover more of the state’s upfront
costs, the pre-construction costs, in
exchange for having that fiscal certainty.
The public is going to want to see some-
thing in exchange for locking in the
long-term tax rate, especially at this time
of budget concerns.
Petroleum News: So is there anythingparticular you need to learn from thegovernor on this issue?
Munoz: OK, I understand the impor-
tance of fiscal certainty and the impor-
tance it has for the success of the project,
getting to the construction phase. What
I’m concerned about is getting the pub-
lic’s buy-in. Recognizing that what can
the companies offer that makes that pub-
lic support possible. That’s what I will
be focusing on. I will be focusing on
whether or not to get the companies to
commit more of the upfront cost, then
when we get to the point where we know
construction is happening, then possibly
we could work out a deal where those
costs are covered through our portion of
the construction costs. What we’ve seen
happen over and over again is that we’ve
seen the state of Alaska has initiated a
number of gas line projects or ideas, put
up a lot of money up front then never
seen a project come to fruition. Taking
that experience under our belt, I think
it’s really important to see whether we
are able to reduce the state’s risk at this
point before we get to the certainty of
the construction of the project.
Petroleum News: So would the advo-cating of a constitutional amendmentcome from the people in this building, beit the administration or Legislature, orthe industry because some people mayjust see this as a perk for the industry.
Munoz: That’s my concern. The pub-
lic, especially at a time when we are
talking about broad-based taxes and talk-
ing about reducing the permanent fund
dividend, will be very circumspect on
whether or not the oil companies deserve
fiscal certainty for the project. Of course
there is enormous benefit if the project
goes to construction. But I think we want
to be looking very closely at the risk-
reward. Expending those upfront costs
will determine our success to get support
for a constitutional amendment. Can’t
the state reduce its risk in this stage of
the game and in the process get public
support for a constitutional amendment
that would provide fiscal certainty and
more of a likelihood for a project in the
future.
Petroleum News: There is still a lot ofskepticism over whether the state canreally get a gas line at all. Various planshave been set aside for re-written plans.What makes you think the state is headedon the right path this time?
Munoz: The fact that this project is
integrated, that the four aspects of the
project — the gas, the treatment plant,
the pipeline, the export facility — they
are all integrated as one project. It’s still
going to be difficult. There is no doubt
about that because there are so many
international factors that will affect
whether or not we move forward. What I
was talking about earlier was the impor-
tance that we reduce our risk until we get
to construction phase because of the his-
tory the state has of unsuccessful gas line
projects. I think we need to look at histo-
ry and protect the state moving forward.
Petroleum News: Do you see yourselfas bullish on the project or is that a bittoo optimistic?
Munoz: I don’t know about bullish.
I’m more optimistic though because the
partners — the holders of the gas — are
all at the table together working on a
project from the extraction of the gas all
the way down to the shipment of the gas.
This is the first time in the history of our
state that it’s happened. So I think from
that standpoint it’s the most well thought
out, the most well developed. Whether or
not it goes forward depends on interna-
tional commodity prices, cost of financ-
ing, construction costs and many other
factors. I think the fact that we are work-
ing at the table with all the partners on
the project, on all aspects of the project
gives this project the greatest chance
we’ve had so far.
Petroleum News: Do you see that as apriority for the 90 days?
Munoz: I understand the governor is
looking at the possibility of a special ses-
sion just on this topic and it may happen
right after this session.
Petroleum News: Do you think youwould get more accomplished during theregular session if you can focus on oneor two items during a special session?
Munoz: This session is going to be
primarily about the budget and putting
into place a long-range sustainable plan
for the state of Alaska. That is going to
be the elephant in the room if you will. It
is going to take precedence over all the
other issues. So to that degree yes, it
would be nice to have an opportunity to
dig into just this issue.
Petroleum News: So as this session isgoing to largely be about budget, oil taxcredits will be part of that debate. Whatis your take on all of that?
Munoz: My constituents are telling
me that the oil and gas credits are where
we need to look for revisions. My feel-
ing is if we reduce or revise the current
credit program, it should be going for-
ward, not going back. In other words, I
don’t think we should take away credits
to projects that have already been com-
mitted, that are already in the develop-
ment phase. The governor has an innova-
tive idea — the idea of putting together a
loan fund is I think worthy of discussion.
Again, I’m looking at credits going for-
ward not retroactively taking them away.
Petroleum News: What questions thendo you have for the administration onthe oil tax?
Munoz: Well, we know that many of
the credits are going to small companies,
$700 million on the books last year. The
governor reduced that to $500 million.
My concern is these credits are paid to
companies that do not have a tax liabili-
ty. So at a time when we are struggling
to close our budget deficit, I think it’s
logical that we look at that. It needs our
focus. Having said that, I don’t want to
harm projects that already depend on the
availability of those credits, so it’s going
be a fine balance, and I look forward to
the discussion.
Petroleum News: These tax creditsare drawn from several tax regimes, be itACES or SB 21, but as SB 21 is the mostrecent change, is there anything youwould like to see revisited in SB 21?
Munoz: One issue was on the new oil,
getting the more favorable rate for new
oil. We looked at a seven-year sunset. I
think that is one area that could be
looked at. I like the idea of looking at
the floor and making sure that’s solid at
4 percent, maybe even 5 percent. That’s
logical. I think we need to look at the
qualified credits. Maybe 35 percent isn’t
an appropriate rate.
Petroleum News: So as you look atthese features — oil tax credits, the taxesthemselves, gas line — what is your pri-ority?
Munoz: My priority is to balance the
budget and implement sustainability in
our budget planning, spending versus
what we bring in. It’s going to take
reductions in the price of state govern-
ment. All the departments will be taking
reductions. We are going to be looking at
the oil and gas credit area. We’ll be look-
ing at whether we can afford to inflation
proof the corpus of the Permanent Fund
account. We will be looking at the possi-
bility of using excess earnings of the
Permanent Fund. There are a number of
ideas and models that are sustainable
that will be on the table. The governor’s
sovereign wealth will be the focus of a
great deal of discussion; the ISER model
will be on the table as well as the percent
of market value model, so we have a
number of good ideas to work with.
Time is of the essence for us to put a
sustainable plan forward.
Petroleum News: One of the otheritems that could come up for review isthe state’s payment in lieu of taxes(PILT) plan.
Munoz: I know the governor and his
representatives are working diligently
around this issue. There is a lot of work
with the mayors throughout that region.
We have not seen a specific proposal on
PILT yet but I’m encouraged that
progress is being made and the adminis-
tration is committed to completing their
end of the work. l
PETROLEUM NEWS • WEEK OF JANUARY 24, 2016 17
continued from page 3
MUNOZ Q&A“Whether or not it goes forward
depends on internationalcommodity prices, cost of
financing, construction costs andmany other factors. I think thefact that we are working at the
table with all the partners on theproject, on all aspects of theproject gives this project the
greatest chance we’ve had so far.”—Rep. Cathy Munoz, R-Juneau
18 PETROLEUM NEWS • WEEK OF JANUARY 24, 2016
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possibility of shipping relatively cheap
hydropower from the southern Kenai
Peninsula, for example, or gas-fired
power from Southcentral Alaska, to wher-
ever it may be needed.
General agreementThere seems to be general agreement
that appropriate grid upgrades could sig-
nificantly decongest the system, while
system wide economic dispatch, to make
use of the cheapest available power source
at any moment in time, could significantly
reduce overall power costs.
Different portions of the grid are cur-
rently owned and operated by five inde-
pendent utilities and the state of Alaska.
The concept behind grid reform is to facil-
itate necessary investments in grid
upgrades and enable economic dispatch
through some form of grid unification.
Grid unification could also eliminate the
“pancaking” of transmission rates, a
mechanism whereby each utility adds its
transmission fees to the cost of shipping
power across multiple sections of the grid.
During the Alaska Energy Authority
board meeting on Jan. 13 David Gillespie,
CEO of the Alaska Railbelt Transmission
and Electric Company, talked to the board
about the potential benefits of having a
transmission company, or transco, manage
the grid, while also having a unified sys-
tem operator, or USO, set the rules under
which the transco operates. ARCTEC is
an entity formed by some of the Railbelt
utilities to pursue the USO concept.
Complex issuesGillespie and Tony Izzo, general man-
ager of Matanuska Electric Association,
discussed with AEA board members
some of the questions that the complex
issue of grid reform faces. MEA, while
actively engaged with the other utilities
in the grid reform efforts, is questioning
assumptions that the transco is necessari-
ly the optimum solution for the Railbelt
grid and wants to see a thorough
cost/benefit analysis completed and
assessed before any final decisions are
made.
A transco is typically a private for-
profit company, operating as a govern-
ment regulated utility. The company
makes money by investing capital in the
transmission grid infrastructure and then
earning a return on that capital invest-
ment. The return on investment would
come from the fees that the transco
charges for shipping power over its trans-
mission network. Provided that the bene-
fits in power cost savings that come from
transmission system upgrades exceed the
return on the investment in those
upgrades, electricity consumers should
see a net reduction in their electricity
rates.
The cost of financeGillespie said that, typically, a transco
would finance grid upgrades using
around 80 percent debt and 20 percent
equity, with an expectation of a 10 per-
cent rate of return on equity. He likened
the formation of a transco to the creation
of a toolkit, with the possibility of vari-
ous forms of financing, including private
equity and state-backed bonds. However,
because the cost of energy dominates the
overall cost of electricity in the Railbelt,
differences in the rates of return on capi-
tal for transmission upgrades would have
minimal impacts on electricity rates, he
suggested.
However, there was a lengthy discus-
sion on potential financing costs. The
current utilities are non-profit, member-
owned cooperatives with relatively mod-
est requirements for return on capital.
And Alaska state loans may be available
through the Alaska Industrial
Development and Export Authority, with
a rate close to 4 percent being a possibil-
ity.
Izzo expressed caution that, by com-
parison, current rates of return on the pri-
vately owned gas pipelines in the Cook
Inlet region are 12.5 percent. And, if
applied to transmission costs, “12.5 per-
cent is a big, thick pancake,” he com-
mented.
There is also a debate over how much
money actually needs to be invested in
the grid, to achieve the required reduc-
tions in grid congestion. Based on a 2013
Alaska Energy Authority analysis into
desirable grid upgrades, people have
been using a figure of about $900 mil-
lion. That level of investment would
encompass major improvements to the
southern section of the grid, enabling the
flexible transmission of power off the
Kenai Peninsula, and improved capacity
and reliability for the transmission sys-
tem in the northern part of the grid,
between Southcentral and the Fairbanks
region, in the Interior.
MEA has suggested that a substantial
portion of the anticipated transmission
benefits could be achieved at a much
lower cost, perhaps for as little as $200
million.
Changing the business modelA primary justification that has been
put forward in the past for grid unifica-
tion is the apparent inability of the elec-
tric utilities to invest in the grid, given
the balkanized nature of the grid owner-
ship and management. And Gillespie
commented that the current Railbelt busi-
ness model does not support interregion-
al planning or investment. It is very diffi-
cult for the utilities to plan inter-regional-
ly when costs that appear in one utility’s
territory generate benefits for one of the
other utilities, he said.
The utilities have in the past also com-
mented that they are stretched financial-
ly, given their recent major investments
in new power generation facilities.
Izzo has commented to Petroleum
News that while $900 million in trans-
mission system upgrades is probably
beyond the borrowing capabilities of the
utilities, a question remains over whether
significant benefits could be achieved a
step at a time at a lower and more afford-
able cost. And issues will arise over the
relative merits of specific transmission
upgrades for different utilities, regardless
of whether or not a transco is implement-
ed, Izzo said.
Izzo emphasized that MEA is fully
committed to the USO and transco effort
that the utilities are pursuing but, without
discounting the transco arrangement, the
utility wants to make sure that all options
for the grid are fully considered.
Gillespie told the AEA board that at
the highest level all of the utilities are
trying to accomplish the same thing,
making the best use of assets that cus-
tomers have paid for. He said that he was
hopeful that over the coming months the
utilities would narrow down those areas
where there are differences of viewpoint.
—ALAN BAILEY
continued from page 1
GRID DEBATE
included the West McArthur River oil field and the off-
shore Redoubt unit. The SEC, and some of the compa-
ny’s shareholders, alleged Miller grossly overstated the
value of the assets, which it obtained in late 2009 out of
the bankruptcy of the prior operator.
Penalty treatmentMiller disclosed back in August 2015 that a settlement
with the SEC was coming.
Miller isn’t “admitting or denying the findings” in the
order, the document says.
The SEC appears unlikely to collect the full $5 million
penalty. The order says the penalty would be placed in a
class of general, unsecured claims in Miller’s bankruptcy
plan of reorganization. The plan estimates a 10 percent
recovery on those claims.
A hearing is set for Jan. 27 in the bankruptcy court to
consider confirmation of Miller’s reorganization plan,
which lays out how the company aims to deal with its
heavy debt and other matters and continue as an Alaska
oil and gas producer.
Ultimately, holders of claims and equity interests will
vote on whether to accept the plan.
After consummation of the plan, Miller would be a
private company, no longer publicly traded as it is now.
ComplicationsMiller has asked the court to approve the SEC settle-
ment.
But the company is encountering some problems in
pushing its reorganization plan through.
The Internal Revenue Service on Jan. 20 filed an
objection to confirmation of the plan.
And one of Miller’s creditors, All American Oilfield
LLC, has filed a side suit known as an “adversary pro-
ceeding.” The complaint seeks payment for drilling done
in the North Fork natural gas field on the Kenai
Peninsula.
Miller’s subsidiary, Cook Inlet Energy LLC, operates
North Fork and other properties in Alaska.
“Even though Cook Inlet has failed to pay All
American’s invoices, it used All American’s invoices …
as the basis for receiving tax credits from the State of
Alaska,” the adversary complaint alleges.
—WESLEY LOY
continued from page 1
MILLER ENERGYMiller’s subsidiary, Cook Inlet Energy LLC,operates North Fork and other properties in
Alaska.
seeps nearby. Caelus has commented that,
at Smith Bay, it is seeking oil in Brookian
turbidites. Turbidites are rocks consisting of
sandstone layers and channels, laid down as
a consequence of periodic submarine sand
flows in ancient marine basins. The
Brookian refers to the youngest and shal-
lowest of the major rock sequences under
the North Slope.
Caelus has already mobilized the equip-
ment it needs to spud the first well. The
equipment, including the Doyon Arctic Fox
drilling rig, has been transported by barge to
a staging area at Point Lonely, to the east of
Smith Bay. The company has also planned
a snow road from the central North Slope to
a staging area and camp near the southern
shore of Smith Bay. The staging area and
camp will be on an ice pad adjacent to a
frozen lake with an ice airstrip. An ice road
will run 6 miles from the staging area to the
CT-1 well location and then another 5 miles
to CT-2.
The camp will be able to accommodate
approximately 213 workers during the
drilling season, according to the operations
plan.
Drilling will take place from circular ice
pads, with maximum diameters of 500 feet,
in an area where water depths are 4 to 6 feet.
If an assessment of a well indicates value in
conducting a vertical seismic profile, vibro-
seis will be used as a seismic sound source,
the operations plan says. Vibroseis equip-
ment imparts controlled vibrations into the
ground or ice surface.
Drilling scheduleIn November Casey Sullivan, Caelus
director of public affairs, told the Resource
Development Council’s annual conference
that his company hopes to start drilling the
CT-1 well in early February. The newly
approved operations plan says that Caelus
expects to drill the CT-2 well between
March 7 and March 28.
Off-road tundra travel on state land
opened about three weeks later than was
envisaged in Caelus’ Smith Bay schedule,
but it is not clear whether that delay will
impact the drilling program. The state says
that, regardless of any changes to the sched-
ule early in the winter, the target timeframe
for finishing drilling and demobilization
will remain fixed. Overland demobilization
and site cleanup is scheduled to take place
between the end of March and May 11.
The plan of operations says that the
drilling operations will use water-based
drilling fluids, and that the fluids will either
be injected or transported to a disposal facil-
ity at Prudhoe Bay. Well cuttings will be
transported to Prudhoe Bay for disposal in a
grind and inject facility.
To be commercially viable, an oil dis-
covery in an area as far from existing infra-
structure as Smith Bay would presumably
need to be very large. Sullivan characterized
Smith Bay as a 1 billion barrel opportunity
for his company. l
PETROLEUM NEWS • WEEK OF JANUARY 24, 2016 19
O U R P A S S I O N I S
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continued from page 1
SMITH BAY
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CT-2
CT-1
Content may not reflect National Geographic's current map policy. Sources: National Geographic, Esri, DeLorme, HERE, UNEP-WCMC, USGS, NASA, ESA,
METI, NRCAN, GEBCO, NOAA, increment P Corp.
NPRA
"
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Fairbanks
Anchorage
¯ Overview Map
2015 - 2016 Tulimaniq Exploration Program
Figure 1
0 6 12 18 243
Miles
Legend
Proposed Well Locations
!A Thermistor Position
$+ Camps and Cabins
2P to Lake M0654 Overland Snow Route
Point Lonely Overland Snow Route
Smith Bay Ice Road
Alternative Routes
Existing Gravel Roads
Caelus Oil and Gas Leases
NPRA Boundary
Native Allotments
Existing Facilities
start of 2017.
A spokesman for Energy Minister
Margaret McCuaig-Boyd said the review
and the government’s assessment of roy-
alties has been slowed indefinitely, while
the administration addresses “disincen-
tives” facing Alberta’s faltering petrole-
um sector.
Pumping although losingThat coincided with the startling dis-
closure by analyst Martin King of
Calgary-based investment dealer
FirstEnergy Capital, who told a
Conference Board of Canada summit that
oil sands operators have little choice but
to keep pumping regardless of losing
money on every barrel they produce.
Although West Texas Intermediate
prices have been dipping under US$30 a
barrel and Alberta’s benchmark Western
Canada Select, a heavy blended crude
consisting mostly of bitumen, has tested
sub-US$16 levels, he said the prospect of
oil sands shut-ins is “extremely limited.”
For one thing, hitting the shut-off
switch in a thermal-recovery project
could damage the reservoir, King said.
He also noted that the billions of dol-
lars invested in facilities that usually have
a projected lifespan of 40 years or more
keeps the pressure on operators to ride out
low prices.
“I know it sounds contradictory, but
given the long time span over which these
projects are supposed to operate, they
have to keep them running,” King told
reporters.
Some production curtailedEven so, some heavy oil producers
have already curtailed production —
10,000 barrels per day by Canadian
Natural Resources, 3,000 bpd by
Connacher Oil and Gas, 2,400 bpd by
Baytex Energy and 500 bpd by Gear
Energy, which had earlier targeted gains
of 6 percent this year.
“We essentially put our drilling plans
on hold and, ultimately, it’s batten down
the hatches. It’s survival mode for us,”
said Gear Chief Executive Officer Ingram
Gillmore.
He said lenders have already lowered
his company’s borrowing limit to C$60
million from C$90 million.
Mark Oberstoetter, an analyst with
consultant Wood Mackenzie, adopted a
hard line, suggesting “less well-capital-
ized companies will eventually start to
take the longer-term, riskier look at shut-
ins.”
No increase in costsCaught in this bind, Notley conceded
that “no one is going to see a royalty
review that increases anyone’s costs in
the near future.”
Without directly answering a question
on whether the industry might need
incentives, rather than royalty hikes, she
told a news conference that her govern-
ment is aware of the industry’s plight.
“Certainly, disincentives to growth
will hopefully be minimized to some
extend in the new process that we look at
bringing forward,” Notley said.
“We’re very, very conscious of the sit-
uation that we (face) in Alberta, both in
the oil sands and well as in more conven-
tional and tight oil situations.
“What we are going to do is bring for-
ward a process that is predictable, more
transparent and that will give developers
a good understanding of what they can
expect.”
Greg Clark, leader of the Alberta Party
and the only member of his party elected
to the provincial legislature, has repeated-
ly called on Notley to implement policies
to bolster the energy industry rather than
contemplating a bigger share of oil and
gas revenues.
He said the risk for Alberta is that
higher royalties could drive investment
out of the province.
Drillers: historic lowsMark Scholz, president of the
Canadian Association of Oilwell Drilling
Contractors, said he was unclear what
Notley meant by “disincentives,” but
hoped that implied the government will
be “incredibly sensitive” to the industry’s
plight.
“We’re sitting at historic lows for
drilling activities ... and for employment
opportunities,” he said. “This is not a time
for uncertainty.”
The Canadian Association of
Petroleum Producers said the government
“has an opportunity to adjust royalties to
offset increasing costs in other areas,
which would encourage more activity in
these economically uncertain times.”
As late as December, Peter Tertzakian,
chief energy economist at ARC Financial,
warned that given the magnitude of
change being contemplated by the review
panel “there’s always elements in the
industry that cannot be competitive.”
That thinking underlies many of the
130 submissions made to the panel from
oil and gas producers and lobby groups.
But the bluntest came from citizens,
under subject lines demanding to know
“Why Now?” and “Stop the Madness”
and essentially telling Notley to postpone
the review until “the global economy
turns and settles to normal again.”
CAPP, in its 200-page submission,
covered the full spectrum of royalties for
horizontal wells, deep oil and gas, shale
gas, enhanced recovery waterfloods, re-
stimulating wells and mature high water-
to-oil ratios.
“CAPP urges the royalty review panel,
and the government to re-establish
Alberta as a place that attracts capital
investment, to pursue market access, to
recognize that cumulative costs work
against competitiveness and to support
innovative technology,” the organization
said. “It is critical that province undertake
budget, climate and royalty policy
reforms that not just maintain, but
enhance competitiveness and grow the
economy.” l
20 PETROLEUM NEWS • WEEK OF JANUARY 24, 2016
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“with new tools to support the develop-
ment of the oil and gas sector of the econ-
omy,” providing the agency the authority
“to finance oil and gas infrastructure devel-
opment through project financing, issuing
bonds, bond guarantees, and other benefi-
cial financial mechanisms.”
In his transmittal letter the governor
said “the bill would require that AIDEA
make sure the participants in an AIDEA oil
and gas infrastructure development pro-
gram do not take, apply for, or accept a gas
exploration and development credit or a
production tax credit from the State.”
Walker also said projects eligible for
AIDEA financing would be those already
explored and with “established proven
reserves.” He said the agency “would
establish processes for financing and con-
firmation of proven reserves. Speculative
developments that are still in the explo-
ration stage would not be eligible under the
program.” l
continued from page 1
ROYALTY PLAN
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