Vol. 7, No. 48 $1 • www.PetroleumNewsAlaska.com Alaska’s source for oil and gas news Week of December 1, 2002

“There comes a time when one must take aposition that is neither safe, nor politic, nor

popular — but one must take it simplybecause it is right.”

—MARTIN LUTHER KING, JR.

■ A S S O C I A T I O N S

■ G O V E R N M E N T

■ G O V E R N M E N T

I N S I D EEvergreen: 8 wells in 30 days 4

State revenue forecast released 3

EIA expects Alaska gasline in 2021 7

Pipeline renewals, permit get signed 12

ConocoPhillips buys Amerada's share of TAPS 3

Independents’ Day

Bill Armstrong, president of Denver-based independent Armstrong ResourcesLLC, was one of several independent oil and gas company executives whospoke at the Resource Development Council for Alaska's annual conferencein Anchorage on Nov. 21 and 22. Speeches from that conference are thesource of several articles throughout this edition of Petroleum News Alaska-- the rest, including Armstrong's presentation, will be featured in the Dec. 8edition of PNA. RDC's Carl Portman said this year's conference attracted551 registrants; the largest number in the association's 23-year history ofsponsoring the event. Most of the presentations on Nov. 21 were made by,or about, independent oil and gas companies.

Judy

Pat

rick BP drops out

One of the two companies that hold leases in ANWR has discontinued its membershipin Arctic Power, saying it does not want to get involved in the upcoming debate

By Kay CashmanPNA Publisher

BP Exploration (Alaska) Inc. has “discontinuedits membership” in Arctic Power, theAnchorage-based association formed to pro-mote drilling in the coastal plain of the Arctic

National Wildlife Refuge, BP’sPat Presley told PNA Nov. 22.Presley heads up the compa-ny’s external affairs depart-ment.

BP decided “some time ago… to leave the debate of the(ANWR) issue to the Americanpeople as we focus our atten-tion on other business opportu-nities in Alaska. We are notengaged in the public debate and, as such, we are notfunding the debate,” Presley said.

In March, BP’s chief executive, Lord John

New NPR-A stipulations,offshore incentives in worksBLM and MMS officials upbeat about what agencies can do toencourage oil and gas development on federal lands in Alaska

By Kristen Nelson PNA Editor-in-Chief

The oil and gas industry in Alaskacould soon see changes in stipula-tions for leases in the NationalPetroleum Reserve-Alaska and

incentives for exploration and develop-ment in the outer continental shelf portionof the Beaufort Sea.

Henri Bisson, Alaska state director ofthe U.S. Department of the Interior’sBureau of Land Management, and RanceWall, regional supervisor for resource

evaluation at Interior’s MineralsManagement Service, told the ResourceDevelopment Council’s annual confer-ence in Anchorage Nov. 21 that theiragencies are looking for ways to stream-line processes and encourage explorationand development on the federal lands theymanage in Alaska.

Changes in NPR-A stipulations

Land ownership in Alaska continues tochange, Bisson said, as BLM implementsits Alaska land transfer program, but

Popp finds permitting ‘seriously flawed’ Analysis of oil and gas issues for Kenai Peninsula Borough says Cook Inlet gasreserves declining; Redoubt, possible second Cosmopolitan well bright spots for oil

By Kristen Nelson PNA Editor-in-Chief

What can the Kenai Peninsula Borough do toensure continuing supplies of natural gas —used not only for heat and energy, but todrive two major borough industries? Bill

Popp, the borough’s oil and gas liaison, said chiefamong issues that must be addressed to encouragefuture oil and gas development is the regulatory per-mitting process.

Popp noted that reform and streamlining of the

regulatory process has become a prominent issue inrecent years. He said in a Nov. 7 report to the KenaiPeninsula Borough Assembly that industry represen-tatives have told him “that the regulatory and permit-ting processes of the state of Alaska have become socumbersome, capricious and confusing that it isdeterring new development rather than guiding andcontrolling it as was originally intended.”

Henri Bisson, Bureauof Land Management

Rance Wall, MineralsManagement Service

Forr

est

Cra

ne

TotalFinaElf opening Alaska office,appoints Bergeron local manager

Mike Sangster,vice president of busi-ness development forTotalFinaElf in theUnited States, toldattendees of theResource DevelopmentCouncil for Alaska’sannual conferenceNov. 21 that his com-pany has named JackBergeron as managerof Alaska operations. Bergeron is relocating from Houston toAnchorage in January.

The company, Sangster said, is opening an Alaska office after thefirst of the year. An exact location has not yet been chosen.

TotalFinaElf re-entered Alaska in June with its successful bid for20 leases in the National Petroleum Reserve-Alaska. Sangster saidthe company is interested in partnering with other NPR-A lease-holders to explore and develop its leases.

TotalFinaElf, he said, is the fifth largest oil company in theworld.

—Kay Cashman, PNA publisher

Mike Sangster, vicepresident of businessdevelopment

Jack Bergeron, man-ager of Alaska opera-tions

see INCENTIVES page 20

see PERMITTING page 21

■ Cosmopolitan sidetrack in works PAGE 23

BP re-packages Alaskaexploration leases for sale

Over the last year BP Exploration (Alaska)Inc. has been marketing, prospect by prospect, itsexploration acreage on the North Slope ofAlaska. The company has significant operationselsewhere in the world, including the Gulf ofMexico, where it has been investing explorationcapital.

On Nov. 22, BP’s head of external affairs, PatPresley, confirmed rumors the company was re-packaging its lease offering and submitting amore comprehensive list of prospects outside ofNorth Slope producing units for sale to a quali-fied list of bidders.

Excluded from the offering was acreage inthe coastal plain of the Arctic National WildlifeRefuge, the National Petroleum Reserve-Alaska

see BP page 16

Roger Herrera

see LEASES page 16

Judy

Pat

rick

pho

tos

Judy

Pat

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RIG REPORT2 Petroleum News • Alaska Week of December 1, 2002

Rig Owner/Rig Type Rig No. Rig Location/Activity Operator or Status

North Slope - Onshore

Doyon DrillingDreco 1250 UE 14 (SCR/TD) Prudhoe Bay, Drilling on W-Pad, W-32i BPSky Top Brewster NE-12 15 (SCR/TD) Prepping for January Drilling at Endicott BPDreco 1000 UE 16 (SCR) Stacked, Deadhorse AvailableDreco D2000 UEBD 19 (SCR/TD) CD2-37, Production drilling at Alpine ConocoPhillipsOIME 2000 141 (SCR/TD) Warm stacked, Kuparuk 1C-pad.

Expected spud December 8, 1C-pad ConocoPhillips

Nabors Alaska DrillingTrans-ocean rig CDR-1 (CT) Stacked, Prudhoe Bay AvailableDreco 1000 UE 2-ES (SCR) Prudhoe Bay, 01-32A BPMid-Continent U36A 3-S Stacked, Prudhoe Bay AvailableOilwell 700 E 4-ES (SCR) Prudhoe Bay, F-06 BPDreco 1000 UE 7-ES (SCR/TD) Kuparuk, 18-07 ConocoPhillipsDreco 1000 UE 9-ES (SCR/TD) Prudhoe Bay, Borealis Field V-103 BPOilwell 2000 Hercules 14-E (SCR) Stacked, Prudhoe Bay AnadarkoOilwell 2000 Hercules 16-E (SCR/TD) Stacked, NPR-A, Teshekpuk Lake ConocoPhillipsOilwell 2000 17-E (SCR/TD) Stacked, Point McIntyre AvailableEmsco Electro-hoist -2 18-E (SCR) Stacked, Deadhorse AvailableOIME 1000 19-E (SCR) Stacked, Deadhorse ConocoPhillipsEmsco Electro-hoist Varco TDS3 22-E (SCR/TD) Stacked, Milne Point AvailableEmsco Electro-hoist Canrig 1050E 27-E (SCR/TD) Prudhoe Bay, Stacked AvailableEmsco Electro-hoist 28-E (SCR) Stacked, Deadhorse AvailableOIME 2000 245-E Stacked, mid August through end

of year ConocoPhillips

Nordic Calista ServicesSuperior 700 UE 1 (SCR/TD) Prudhoe, Drillsite 14 well 8 BPSuperior 700 UE 2 (SCR) At R-14 BPIdeco 900 3 (SCR/TD) Cold stacked at 1-Q, Kuparuk ConocoPhillips

North Slope - Offshore

Nabors Alaska DrillingOilwell 2000 33-E (SCR/TD) Northstar Is., NS-22 BP

FairweatherDreco 147 SDC On location - EnCana McCovey #1

Preparing rig for spud in late November EnCana

Cook Inlet Basin – Onshore

Marathon Oil Co.(Inlet Drilling Alaska labor contractor)Taylor Glacier 1 Rig maintenance Marathon

Inlet Drilling Alaska/Cooper ConstructionKremco 750 CC-1 Stacked, Kenai Available

Nabors Alaska DrillingRigmasters 850 129 Stacked, Swanson River AvailableNational 110 UE 160 (SCR) Stacked, Kenai AvailableContinental Emsco E3000 273 Stacked ConocoPhillips

Aurora Well ServiceFranks 300 Srs. Expolrer III AWS 1 Stacked, Nikiski Available

Evergreen ResourcesFinished drilling its eighth well of eight scheduled for this year.(Rig and well information not available at this time.)

Cook Inlet Basin – Offshore

XTO Energy (Inlet Drilling Alaska labor contract)National 1320 A Idle AvailableNational 110 C (TD) MGS well 13-13LN, TD 10,640’

running 7” casing. XTO Energy

Nabors Alaska DrillingIDECO 2100 E 429E (SCR) Osprey, Redoubt Shoal RU1 Forest Oil

Unocal (Nabors Alaska Drilling labor contractor)Oilwell 2000 E Idle, Steelhead Platform UnocalNational 1320 OUE 54 Idle, Grayling Platform UnocalNational 1320 OUE 55 Idle, Grayling Platform UnocalOilwell 860 56 Idle, Monopod UnocalDraw works removed 57 Idle, Granite Point Platform UnocalNational 1320 UE 58A Idle, King Salmon Platform UnocalDraw works removed 58B Idle, Granite Point Platform UnocalOIME SD8M 60 Idle, Bruce Platform UnocalNational 1320 OUE 76 Idle, Dolly Varden Platform UnocalNational 1320 OUE 77 Idle, Dolly Varden Platform UnocalCudd Hydraulic King Salmon, K-12IDECO 2100 E (Unocal’s only mobile rig) 428 Stacked, Baker platform, northern

most platform in Middle Ground Shoal Available

Mackenzie Delta-OnshoreAkita EqutakDreco 1250 UE 63 (SCR/TD) Stacked at Swimming Point Petro-Canada

Alaska Rig ReportThe Alaska Rig Report as of November 26, 2002.

Active drilling companies only listed.

Rig start-ups expected in next 6 monthsAkita63 Rig 63 will move to a Mackenzie Delta location, NUNA-J-30,

for Petro-Canada, probably in late December depending on iceroad construction

FairweatherSDC MODU on location at EnCana’s McCovey prospect off

Prudhoe Bay. Drilling on McCovey to begin in lateNovember.

UnocalDolly Varden Rigs will start several workovers on January 15, 2003.

TD = rigs equipped with top drive units WO = workover operations CT = coiled tubing operation SCR = electric rig

This rig report was prepared by Wadeen Hepworth

Baker Hughes North America rotary rig counts*

November 22 November 15 Year AgoUS 826 830 986Canada 287 271 254Gulf 102 14 129

Highest/LowestUS/Highest 4530 December 1981US/Lowest 488 April 1999Canada/Highest 558 January 2000Canada/Lowest 29 April 1992

*Issued by Baker Hughes since 1944

The Alaska Rig Report is sponsored by:

Courtesy Judy PatrickNorthstar Island, Nabors 33-E

ON DEADLINEPetroleum News • Alaska 3Week of December 1, 2002

Petroleum News Alaska, ISSN 10936297, Week of December 1, 2002Vol. 7, No. 48

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EDITORIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5FINANCE & ECONOMY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7GOVERNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9NORTHERN GAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15ON DEADLINE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3PIPELINES & DOWNSTREAM . . . . . . . . . . . . . . . . . . . . . . . . . .6, 12WORLD OIL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Index

Kay Cashman, PUBLISHER

Dan Wilcox CHIEF EXECUTIVE OFFICER

Kristen Nelson EDITOR-IN-CHIEF

Steve Sutherlin MANAGING EDITOR

Gary Park CANADIAN CORRESPONDENT

Wadeen Hepworth COLUMNIST

Alan Bailey CONTRIBUTING WRITER

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Petroleum News • Alaska and its supplement, Petroleum Directory, are owned byPetroleum Newspapers of Alaska LLC. The newspaper is published weekly. Several of theindividuals listed above work for independent companies that contract services to PetroleumNewspapers of Alaska LLC or are freelance writers.

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PIPELINES & DOWNSTREAM

Revenue boosts average projectedoil price to $22 a barrel

Department of Revenue Commissioner Wilson Condon says the most importantchange in the department’s fall revenue forecast is the increase in the long-term forecastprice for Alaska North Slope crude delivered to the West Coast to $22 a barrel. The newprice is some $5 a barrel above the previous long-term average, $16 to $17 a barrel,which represented what the state experienced from 1986 to 1999, Condon said.

The $22 a barrel also lines up, he said Nov. 26 as the fall forecast was released, withthe bottom of the Organization of Petroleum Exporting Countries’ target price band of$22 to $28 a barrel. The department believes, Condon said, “that OPEC will continueto be successful at managing the market and holding prices at that level.”

see BOOST page 15

ConocoPhillips picking up AmeradaHess share of trans-Alaska pipeline

Amerada Hess Corp. is selling its entire 1.5 percent interest in the trans-Alaskapipeline system to ConocoPhillips, whose interest will grow from 26.7953 percent to28.2953 in the pipeline and from 25.7445 to 27.2445 in terminal tankage assets.

The companies have asked the Regulatory Commission of Alaska to approve thetransfer by Dec. 27. The RCA is asking for comments by Dec. 22.

Current owners of the trans-Alaska pipeline are: BP Pipelines (Alaska) Inc. 46.9percent; Phillips Transportation Alaska Inc. 26.79 percent; ExxonMobil Pipeline Co.20.34 percent; Williams Alaska Pipeline Co. L.L.C., 3.08 percent; Amerada HessCorp. 1.5 percent; and Unocal Pipeline Co. 1.36 percent.

FINANCE & ECONOMY

ON DEADLINE4 Petroleum News • Alaska Week of December 1, 2002

■ E X P L O R A T I O N & P R O D U C T I O N

Evergreen finishes drillingMat-Su pilot projectsCoal seams in the Cook Inlet basin could contain several trillioncubic feet of gas, enough to double existing reserves, company says

By Steve Sutherlin PNA Managing Editor

Less than 30 days from the Oct. 28 spudof its first well in its Pioneer unit, theAlaska subsidiary of EvergreenResources Inc. has finished drilling its

eighth and final well in its two-pilot, shallowgas, exploration project.

The 70,000 acre Pioneer unit is 30 milesnorth of Anchorage between Wasilla andHouston in the Matanuska-Susitna Borough.

Evergreen President and CEO MarkSexton told PNA Nov. 20, prior to drillingthe eighth well, that the first seven wells are2,600 to 3,700 feet deep and contain 80 to100 feet of coal seam.

“That’s plenty to work with,” he said. The eight wells are situated in groups of

four to test the ability of the local coal to pro-duce gas. Interference from one well to thenext actually enhances coalbed methaneproduction, Sexton said.

The wells were drilled with Evergreen’sD.L. Smith No. 1 rig.

After completion, the wells are cementedand cased; then the company hydro fracturesthe wells several hundred feet outward fromthe bore using nitro gel foam under highpressure, Sexton said. After hydro fracture,sand is injected into the cracks as a proppant,using the nitro gel foam as a medium.

Typically, coalbed methane wells pro-duce as much as 95 percent water to 5 per-cent gas at first, but that ratio can reverse infive years to a level of 95 percent gas and 5percent water, he said. The methane, afterdewatering, is generally quite pure.

“It could easily be pipeline quality gascoming right from the well head,” Sextonsaid. “It’s the leanest, cleanest form ofmethane.”

No flies on them

The Pioneer test project will set the com-pany back $6 million this winter, Sextonsaid. The company plans to spend $10 mil-lion in Alaska next year.

Evergreen has moved its own drill rig tojobs in Ireland, the United Kingdom, theRaton basin of Colorado and now Alaska,because it can control the pace of drilling,and the rig works fast. The air hammer drillcan bore 100 feet per hour, and Evergreencrews typically complete each well within48 hours.

“It’s very cost effective for us to own ourown equipment,” Sexton said. Coalbedmethane production requires a lot of wells.Evergreen has drilled more than 900 wellson its 200,000-acre Raton Basin propertyand has identified 800 additional drillinglocations there. If the Pioneer field provesup, it will have a 20 to 30 year productionlife and could likely employ as many as 500people, including contractors, Sexton said.

Permitting reform critical

Enstar has a pipeline a few miles south ofPioneer, he said.

“Enstar would be happy to take quite abit of gas tomorrow if we could produce it,”Sexton said. Coal seams in the Cook Inletbasin could contain several trillion cubic feetof gas, enough to double existing reserves inthe basin, according to Jack Ekstrom,Evergreen director of government and pub-lic affairs. The catch? Permitting reform isneeded to efficiently produce the area’sunconventional gas, Ekstrom said. Alaska’srules are for deep oil wells, overkill for thecompany’s water-well type rig.

“It’s equivalent to regulating a pickuptruck the same way you do 18-wheelers onhighways,” he said. ◆

Evergreen drill site at Pilot 1 in the Pioneer unit comprises .7 acres. This photo was taken inmid-November.

Judy

Pat

rick

EDITORIALPetroleum News • Alaska 5Week of December 1, 2002

■ W A S I L L A

Oil and gas industry: Key to Alaska’s economic prosperity The newly named chairman of the House Special Committee on Oil and Gas says he will focus on three areas: leasing,streamlining the permitting process; maintaining low industry taxes

By Rep. Vic Kohring, R-WasillaFor Petroleum News Alaska

My colleagues in the House ofRepresentatives have recentlyappointed me chairman of theLegislature’s Special Committee on

Oil & Gas beginning in January and con-tinuing until 2005. This is a pivotal positionbecause the majority of Alaska’s economyis based on the oil and gas industry.

Major industry expansion

With a Republican President,Congress, Governor and Legislature,chances are good that a major expan-sion of the industry will take place. Asan advocate of responsible developmentof Alaska’s natural resources, now isthe time to act.

We can start by removing unneces-sary regulations and restrictions on theindustry. Rational, limited and consis-tent laws and regulations should charac-terize our relationship with oil compa-nies, indeed all private enterprise.

Let the regulation fit the activity, notforce the activity to fit the regulation.

As head of the Oil & GasCommittee, I will focus on three majorareas:

1. make plenty of high potentiallands available for leasing;

2. streamline the regulatory and per-mitting process by removing all but themost necessary steps to exploration and

development; 3. create indus-

try confidence inthe Legislature bymaintaining a con-sistent policy oflow taxes. Low taxrates stimulate eco-nomic activity, justas high tax ratesdiscourage devel-opment.

Competitiveness essential

If we don’t change the way we dobusiness, we may suffer the same fateSeattle did when Boeing pulled outthousands of employees and relocatedthem to Chicago where it could act in amore favorable regulatory environment.

In addition, opportunities for devel-oping oil and gas abound throughoutthe world such as China, Russia andIndonesia, so Alaska faces fierce com-petition.

Governor-elect Murkowski has stat-ed his desire to spur growth in theindustry. I agree with him that theanswer is not to introduce new taxes,but allow Alaskans to create wealthunhindered. In other words, we willachieve prosperity if the goal is not totax anything that moves but ratherencourage private enterprise, includingoil companies, to invest their dollarshere.

If we keep taxes low and lessen gov-ernment controls, industry will come tous. So will classes of people who are

industrious and creative. To simplify, we should discontinue

the failed policies of the past. Insteadwe should work closely with the oil andgas industry and be thoughtful in ourapproach to and assist it in improvingand becoming the centerpiece of astrong economy.

If a stable and reasonable businessclimate is created,over time we canbecome a desirableplace to do business.We ought to find waysto work in harmonywith Alaska’s producers and let the freemarket process work its magic. We’llsucceed if we’re vigilant and pursuelong-term stable policies.

I love Alaska and want to keep itclean, beautiful and prosperous as anyreasonable man would. But oil compa-nies do not have to be regarded as the“bad guy” and always the polluter. Theyhave been good to Alaska both econom-ically and environmentally, and continu-ally strive to improve and innovate.

It’s most revealing that in Alaska’stwo most dramatic oil spills, the ExxonValdez and the pipeline shooting, it wasthe irresponsible use of alcohol that wasinstrumental in both cases.

It wasn’t the industry’s fault. Oilcompanies have been careful with theirproduct and have done a good job overthe years in keeping their activities

environmentally safe.Lest I be criticized

for “caving in” to BigOil, I wish to say forthe record I havealways maintained my

faith in free enterprise and with limitedgovernment interference.

We should, as regulators, see that oilextraction is safe for workers and theenvironment, but not to egregiouslengths. Oil and gas developmentshould be treated like any other busi-ness — fairly and with minimal inter-vention.

Editor’s note: This guest editorialwas written Nov. 21.

Let the regulation fit theactivity, not force the activity

to fit the regulation.

Rep. Vic Kohring, R-Wasilla

• GUEST EDITORIAL

PIPELINES & DOWNSTREAM6 Petroleum News • Alaska Week of December 1, 2002

■ J U N E A U

State closes three-yeargasoline price investigationDepartment of Law says it couldn’t prove antitrust violationbetween companies selling gasoline in Alaska; ‘tacitagreement’ must be proved, department says

By Petroleum News Alaska

The Alaska Department of Law hasclosed a three-year investigation intothe pricing of petroleum products inAlaska after finding no evidence of

price fixing at the pumps, AttorneyGeneral Bruce Botelho said Nov. 21.

“The investigation was initiated in1999 in response to public complaintsabout the high price of gasoline in Alaskain comparison to other states,” Botelhosaid. “I am closing the investigationbecause there is insufficient evidenceindicating a violation of the antitrustlaws.”

Historically, the price of gasoline onthe West Coast of the United States hasaveraged 11 cents per gallon higher thanthe average retail price throughout thenation. The price of gasoline in Alaskahas tended to be 9 cents per gallon higherthan the price of gasoline on the WestCoast.

Price differential higher 1995-98

The Department of Law said the inves-tigation was prompted when gasolineprices in Alaska rose to as much as 17cents a gallon higher than West Coastprices between 1995 and 1998. Beginningin 1999, the spread between prices inAlaska and the West Coast narrowed dra-matically, more closely tracking the his-torical spread between Alaska and theother states.

The department said that in order toestablish a violation of Alaska’s antitruststatute or the comparable federal law,there must be evidence that two or morecompanies entered into an express or tacitagreement to fix petroleum prices. Ashowing that companies charged prices inexcess of the competitive level, or raisedand lowered prices in a parallel fashion, isnot enough to establish the existence of atacit agreement.

Instead, evidence of uniform pricingmust be accompanied by additional evi-

dence demonstrating that two or moreparties agreed to engage in cooperativepricing behavior. Evidence of this couldinclude actions contrary to an entity’sindependent economic interests; depar-ture from normal business practices;motive to conspire; opportunity to con-spire; high level of inter-company com-munications; or past antitrust violationsinvolving collective action.

Investigation began in 1999

The Department of Law began theinvestigation in 1999 by requiring refin-ers and distributors of petroleum productsin the state to produce documents. Thethousands of pages of internal companydocuments produced in response to thestate civil investigative demands — hun-dreds of boxes — remain confidential bystate statute.

In addition to reviewing internal com-pany documents and detailed analysis ofpricing data, the department also inter-viewed witnesses and potential witnessesand took formal depositions of severalcurrent and former oil company employ-ees and executives.

The department said its investigationfound that Alaska’s gasoline industry ishighly concentrated and that four mar-keters accounted for the vast majority ofgasoline sales.

“When there are few sellers in a mar-ket like Alaska it is easier for them toobserve how competitors react to deci-sions regarding output and prices, andeach may take into account the potentialimpact of its own actions on marketprices and the potential responses fromother sellers,” Botelho said. “This type ofinterdependent behavior on the part ofsellers often leads to parallel pricing, butthat is not, in the absence of an express orimplied agreement to set prices, a viola-tion of the antitrust laws so long as eachbusiness develops and implements itspricing and output decisions independent-ly. The investigation has not producedevidence of an express or implied agree-ment to set prices or to otherwise violateantitrust laws.”

In closing the investigation withoutfurther action, Botelho said he expectedthe Department of Law to continue tomonitor retail gasoline prices. ◆

In closing the investigation withoutfurther action, Botelho said he

expected the Department of Law tocontinue to monitor retail gasoline

prices.

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FINANCE & ECONOMY

Petroleum News • Alaska 7

ANCHORAGEAlaska union leader resignsto take bigger job

Mano Frey, a leader of organized labor in Alaska for a quartercentury, is leaving the state to accept a new and more powerful jobin Seattle.

Frey, 53, will resign in January as the executive president of theAlaska AFL-CIO and business manager forLaborers’ International Union Local 341.

Frey will take over as vice president andregional manager for the Laborers’, oversee-ing union operations in eight Western states,Alaska and four Canadian provinces.

Frey’s wife, Eileen, a teacher, will finishthe school year before joining him in Seattle.The couple’s two grown children, who live inAlaska, will stay behind.

Frey has helped shape policy and has beenat the forefront of virtually every major battlebetween management and labor since being elected head of theAFL-CIO in Alaska in 1984.

Rode pipeline boom

Frey rode the oil boom, arriving to Alaska in 1970 with SteveMcAlpine, a former lieutenant governor. The two buddies, taking asemester off from university, showed up in Valdez and worked aslaborers building the pipeline. McAlpine went back to school and

Mano Frey

■ W A S H I N G T O N , D . C .

EIA expects natural gas from MackenzieDelta in 2016, from Alaska in 2021Unconventional Lower 48 gas, other Canadian gas and LNG imports will comeon first; prices will increase in uneven fashion, predicts federal agency

By Petroleum News Alaska

Domestic natural gas demand is expected togrow 54 percent by 2025 and increases indomestic supply to help meet that demandwill come from both unconventional natural

gas production and an Alaska natural gas pipeline. But, the U.S. Department of Energy’s Energy

Information Administration said Nov. 20, an Alaskanatural gas pipeline isn’t expected to begin deliver-ing until 2021, and will be preceded by a MackenzieDelta pipeline, expected to begin deliveries in 2016.

Large new domestic and imported supply pro-jects be needed to meet the demand, the EIA said inthe forecast for its 2003 annual energy outlookreport.

Domestic sources of natural gas supplies will befrom Alaska and unconventional gas. Production ofunconventional natural gas — tight sands, coalbedmethane and shale — will grow from 5.4 trillioncubic feet in 2001 to 9.5 tcf by 2025. Alaska pro-duction, 0.4 tcf in 2001, will grow to 2.6 tcf by

2025, the agency said.

LNG imports, terminals to increase

Imported natural gas supplies will depend onexpansion of liquefied natural gas imports andpipeline imports from Canada, which combined areprojected to increase from 3.6 tcf in 2001 to 7.8 tcfby 2025 (22 percent of total natural gas demand in2025). For existing LNG terminals (Everett, Mass.;Cove Point, Md.; Elba Island, Ga.; and LakeCharles, La.) will expand and three additional LNGfacilities will be built serving Florida and the Gulfof Mexico states. Another facility, built in BajaCalifornia, Mexico, will serve the California mar-ket, the EIA said, and total net LNG imports are

ExxonMobil to invest $100million in global energy project

Exxon Mobil Corp. said Nov. 20 that it plans to invest $100million in a Stanford University project researching new optionsfor commercially viable, technological systems for energy sup-ply and use which can substantially reduce greenhouse emis-sions.

ExxonMobil said the Global Climate and Energy Project, G-CEP, will be led by Stanford University and involve world-renowned academic research institutions and global companies,including ExxonMobil, General Electric and Schlumberger.E.ON, Europe’s largest privately owned energy serviceprovider, has also signaled its intention to join the project.ExxonMobil said other academic and corporate sponsors areexpected to join.

“We are convinced the Global Climate and Energy Projectwill make significant academic and private sector contributionsto the development of practical technologies to address the

TEXASsee FREY page 8

see EXXONMOBIL page 8

… after 2002 gas prices are expected to rise,reaching $3.90 per mcf by 2025 (the

equivalent of $7.06 per mcf in nominal dollars).

■ C A N A D A

EnCana not fazed by reserves cut Pipeline deals push asset disposals to C$2.1 billion for 2001; sets cap-exfor 2003 of C$5 billion in pursuit of 10 percent growth in daily oil, gas sales

By Gary Park PNA Canadian Correspondent

As EnCana Corp. rolls towards the firstanniversary of its creation, the high-flyingCanadian independent is not easily divertedfrom President and CEO Gwyn Morgan’s

declared goal of building a “best-in-class” compa-ny on a global scale.

What might have been a jolt to EnCana’sstature when it announced proven reserves hadbeen trimmed by 4 percent was lost in a welter ofsimultaneous upbeat news.

Stakes in two pipelines were sold for C$1.6 bil-lion; a whopping capital budget of C$5 billion wasset for 2003; 2002 daily sales of oil and natural gasare expected to grow by 10 percent and develop-ment programs worldwide are anticipated to sus-tain that pace.

The pipeline deals “mark another important

milestone in further defining EnCana’s focus onexploration and production,” Morgan told a com-pany-run Investor Day Nov. 20.

Proceeds from the pipelines, which will yield aC$250 million after-tax gain tin the first quarter of2003, lifted EnCana’s dispositions to about C$2.1billion for 2002, more than double the target set atthe time of the merger of Alberta Energy Co. Ltd.and PanCanadian Energy Inc.

But the company offered few specifics on howthe money will be spent beyond financing drillingin “large, long-life resource properties.”

Not looking for large acquisitions

However, Morgan told the Financial Post “oneof the things we are not looking at is a big, majorcorporate deal. We are going to show that thismerger is really adding value. We are going to hitour targets. We are not going to try and complicate

see EIA page 8

see ENCANA page 8

FINANCE & ECONOMY8 Petroleum News • Alaska Week of December 1, 2002

became a lawyer. “I was satisfied working,” Frey said. He joined the Laborers’ in 1971 and

became business agent, a staff position, sixyears later, Frey said. He moved toAnchorage in 1978.

Frey also serves on the executive com-mittee of the Resource DevelopmentCouncil and is co-chair of Arctic Power.

Frey’s likely successor is Jim Sampson,a former state labor commissioner and for-mer mayor of the Fairbanks North StarBorough. Frey said he will recommendSampson.

—The Associated Press

continued from page 7

FREY

projected to increase from 0.2 tcf in2001 to 2.1 tcf by 2025.

Growth in pipeline imports fromCanada will be in part dependent oncompletion of the Mackenzie Deltapipeline, which is forecast to be com-pleted in 2016 and expanded in 2023.Initial full flow rate into Alberta is pro-jected at 1.5 billion cubic feet per day.

Prices will rise unevenly

The EIA said that natural gas priceswill rise unevenly because completionof new projects will temporarily driveprices down. As an example the agencycited the Alaska pipeline, which at fullcapacity is expected to deliver 4.5 bcfper day. The impact of new projects isexpected to be short-lived, the agencysaid, as markets adjust and demandincreases.

“Despite the short-term impact, aver-age natural gas prices are projected tomove higher as technology improve-ments and new supply sources proveunable to completely offset the effectsof resource depletion and increaseddemand,” the EIA said.

The average Lower 48 price for nat-ural gas for 2002 is projected at $2.75per thousand cubic feet (in 2001 dol-lars), but after 2002 gas prices areexpected to rise, reaching $3.90 per mcfby 2025 (the equivalent of $7.06 permcf in nominal dollars).

Prices volatile in 2002

In 2002 natural gas prices rangedfrom about $2 per mcf in January tobetween $3 and $4 an mcf by fall.

Crude oil prices also rose in 2002,

“mainly because of reduced productionby the Organization of PetroleumExporting Countries and, to a lesserdegree, fears about the potential impactof military action in Iraq,” the EIA said.Crude oil prices began the year at about$16 a barrel and were between $25 and$30 a barrel by fall.

Economic growth projected at 3percent

The EIA said that from 2001 to 2025the gross domestic product is projectedto grow at an average annual rate of 3percent.

As with natural gas, prices for crudeoil are expected to rise from an averageof $22.01 per barrel in 2001 to roughly$26.50 a barrel in 2025 ($48 per barrelin nominal dollars).

World oil demand is expected toincrease from 76 million barrels per dayin 2001 to 123.2 million barrels a day in2025, but growth in both OPEC andnon-OPEC production is expected tolead to relative slow growth in pricesthrough 2025.

OPEC production is expected toexceed 60 million barrels a day in 2025,more than double the 28.3 million bar-rels a day produced in 2001 and non-OPEC oil production is expected toincrease from 45.5 million to 58.8 mil-lion barrels a day from 2001 to 2025.

“A 1.0 million barrel per day declinein production in the industrializednations (United States, Canada,Mexico, Western Europe, Japan,Australia, and New Zealand) is morethan offset by increased productionfrom Russia, the Caspian Basin, Non-OPEC Africa, and South and CentralAmerica (in particular, Brazil),” theagency said. ◆

continued from page 7

EIA

potential long-term risk of climatechange,” said ExxonMobil Chairman andCEO Lee Raymond.

Project as ambitious as Apollo

The announcement of the projectcomes as some scientists have begun call-ing for a research effort as ambitious asthe Apollo project to address both energyneeds and emission reductions,ExxonMobil said.

“We believe that G-CEP will play acutting-edge role in pushing the frontiers

of technology into new generations ofenergy systems. For ExxonMobil, G-CEPrepresents a powerful vehicle by whichenergy science will move forward to findeconomically attractive technologies thatwill be successful in the global marketand vital to meeting energy needs in theindustrialized and developing world,”said Raymond.

ExxonMobil said the complex natureof the issues being addressed under G-CEP requires a long-term commitment toenergy research and development, an areain which it has proven experience.

Additional information about theGlobal Climate and Energy Project canbe found at http://gcep.stanford.edu.

continued from page 7

EXXONMOBIL

our lives.” Conscious of the difficulties multiple

large purchase have created for U.S. com-panies, EnCana would restrict any acqui-sitions to the C$500 million to C$1 bil-lion range, likely in some of its core oper-ating bases — Western Canada, the U.S.Rocky Mountains, the Gulf of Mexico,the U.K. North Sea and Ecuador.

A consortium formed by BC Gas Inc.will pay C$1.18 billion, including theassumption of C$582 million in debt, tobuy the 1,700-mile Express PipelineSystem, which consists of two majorlinks — Express and Platte.

The 24-inch Express system runs1,717 miles from Alberta’s Hardisty hubto Casper, Wyo., with capacity of172,000 barrels per day serving Montana,Wyoming and Utah. Express can beexpanded to 280,000 barrels per day.

The 20-inch Platte line delivers up to150,000 barrels per day from Casper toWood River, Illinois.

Inter Pipeline Fund, former KochPipelines Canada L.P., will pay C$425million in cash for EnCana’s indirect 70percent stake in the Cold Lake PipelineSystem, Canada’s largest heavy-oil gath-ering system which operates two primarylegs — a 145-mile link carrying 235,000barrels per day from Cold Lake toEdmonton and 260 miles south from ColdLake to Hardisty, with capacity of200,000 barrels per day.

No details on Alaska plans

EnCana’s cap-ex budget for next yearincludes C$3.5 billion for conventional

North American oil and gas and C$500million each for offshore and internationaloperations; offshore and new venturesexploration; and midstream and market-ing. There is no detailed outline yet ofwhat the company has in mind for itsexploration opportunities in Alaska andthe Mackenzie Delta.

The budget is C$100 million higherthan this year’s original target, althoughasset sales we expected to reduce netspending for 2002 to C$3.5 billion.

Daily sales for this year are forecast toreach as high as 2.79 trillion cubic feet ofgas and 264,000 barrels per day of oil, fora peak combined output of 728,000 barrelsof oil equivalent per day. The target for2003 is 770,000 to 831,000 barrels of oilequivalent.

Morgan said that objective will not beaffected by the company’s decision to cutreserves by 110 million barrels followingan independent evaluation of the reservebase.

The new assessment gives EnCana esti-mated prove reserves of about 2.89 billionbarrels of oil equivalent year-end 200, withdiscoveries, extensions to existing poolsand net acquisitions totaling 500 millionbarrels of oil equivalent.

Morgan said he was not surprised thatthe first “completely full evaluation” sincethe merger, which was based on morestringent criteria, resulted in a lowering ofreserves.

He said the figures should build confi-dence among investors, noting: “You justcan’t afford to have your U.S. shareholdersconfused.”

The cut had already been anticipated byanalysts and on the day it was announcedEnCana shares rose C$1.39 on the TorontoStock Exchange to C$44.85. ◆

continued from page 7

ENCANA

Week of December 1, 2002

GOVERNMENT

Petroleum News • Alaska 9

ANCHORAGEKnowles bids adieu to RDC

In his last address as governor to the Resource DevelopmentCouncil, at its annual conference in Anchorage Nov. 22, Gov.Tony Knowles thanked the group and its members for much hardwork over the past eight years on Alaska resource developmentissues.

Access to resources, development of a responsible long-termfiscal plan, regaining state management of fish and game andstreamlining state permitting were the major resource issuesfaced by his administration, Knowles said.

“I don’t pretend that these issues have allbeen resolved, but I think there has been sig-nificant progress on each of them as a resultof a lot of courageous Alaskans out theretrying to make a living and create jobs,” hesaid, adding that Alaska has had eight yearof consecutive economic growth, 30,000new jobs, the lowest unemployment in ageneration, and the fourth fastest per personincome growth in the nation.

Knowles said the state recently celebrated the 25th anniversaryof the trans-Alaska oil pipeline, and said it has largely completedwork required by federal statute to extend the trans-Alaskapipeline lease for another 30 years.

“Nothing has been more important to Alaska’s economicstrength over the past generation than the trans-Alaska pipelinesystem,” he said.

Question is when, not if, for ANWR

Knowles also touted the Arctic National Wildlife Refuge andPoint Thompson as potential bright stars for future oil and gasdevelopment.

“ANWR is not a question of if, but when it will happen,” hesaid.

“Next on the horizon is Point Thompson,” Knowles said.“After 25 years, and 19 abandoned development plans, the stateand ExxonMobil concluded intensive negotiations with a mile-stone agreement calling for development drilling in the long-dor-mant Point Thompson field.”

The state has agreed to provide “one-stop shopping” for PointThompson permitting, and it will act as co-leader with theEnvironmental Protection Agency on the federal environmentalassessment in order to help expedite and streamline the permit-ting process, Knowles said.

“If developed, the billion-dollar investment in PointThompson could produce hundreds of Alaskan jobs and 75,000barrels per day for shipment down the trans-Alaska pipeline.”

North Slope gasline

Knowles said he still believes in the Alaska Highway route foran Alaska natural gas pipeline.

“My way is still the highway,” he said. “This route gives

Gov. Tony Knowles

see KNOWLES page 10

■ A N C H O R A G E

Griles blasts the ‘cell phone naturalist’ Alaska development decisions should be made with local input, deputyInterior secretary tells annual RDC conference

By Steve Sutherlin PNA Managing Editor

Steven Griles, deputy secretary of the U.S.Department of the Interior, says Alaska devel-opment decisions should be made byAlaskans rather than outside forces.

To illustrate, he posed a riddle, describing a vis-itor to Alaska who is wearing a parka with doublerip-stop nylon, polyurethane seams and clothingwith various pieces made from micro fibers, microfleece and other fibers, carrying a cell phone, usinga high-tech watch, and using a laptop to stay con-nected with the Internet. His canoe is made ofDupont-patented Kevlar, on the top of the largest,dirtiest SUV he can find.

“Why is he here?” Giles asked. “To protestmining and oil and gas drilling in Alaska.

“The cell phone naturalist sees no conflicts interms of the products he uses that are made from

petroleum products and mined ores,” Griles said inremarks to the annual conference of the ResourceDevelopment Council Nov 22 in Anchorage. “Themore energy he uses to run his high tech gadgets,the more we need.”

Domestic energy supply-demandimbalance

A North Slope natural gas line is essential to

see GRILES page 10

■ A N C H O R A G E

Legislative leaders talk about ‘movingAlaska forward,’ oil and gas industryNew Senate President Gene Therriault and Speaker of the House PeteKott call for systemic changes in permitting process

By Steve SutherlinPNA Managing Editor

Leaders of both houses inthe upcoming 23rdAlaska Legislature,Senate President Gene

Therriault and Speaker of theHouse Pete Kott, said sys-temic changes are needed inthe state’s permitting process.Under the header, “MovingAlaska Forward,” Therriaultand Kott told attendees of theResource Development Council’s annual confer-ence Nov. 21 that the permitting process has beenassembled piecemeal, and while there have beenrecent improvements, they are hopeful theLegislature can work with industry and the incom-ing administration to make a sweeping overhaul.

Therriault said RDC has been involved in look-ing at ways other states have dealt with permitting

and the coastal zone system, to see if there is amore reasonable way of processing permits.

“Having met with Sen.Murkowski earlier thissummer with a group fromthe resource community,he’s very interested inlooking at the entire systemto see where we can makechanges that make sense,”Therriault said.

Therriault said heexpected to see legislationearly in the upcoming ses-

sion to eliminate public funding for so called “pub-lic interest lawsuits,” allowing environmentaliststo sue developers and be reimbursed by the state.

“That legislation almost went through the legis-lature last year. … I believe it will be reintroduced,it’s almost a surety,” he said.

“BLM and MMS have authority to offer landsunder their jurisdiction to produce mineralsand natural resources, both on and offshore,in an environmentally sustainable manner.That’s what we’re going to do.” —Steven

Griles, deputy secretary of the U.S.Department of the Interior

see LEADERS page 16

Pete KottGene Therriault

Judy

Pat

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GOVERNMENT10 Petroleum News • Alaska Week of December 1, 2002

Alaskans access to the North Slope gasfields, puts Alaskans to work andensures a fair share of revenues.”

Knowles said his administration hasprovided the incoming administration adetailed gas line transition paper outlin-ing, in its best judgment, how to movethe project forward.

“(The paper) highlights the impor-tant work of the gas pipeline office,which has the state prepared to movequickly and efficiently in the permittingprocess, once an application from aproject sponsor is submitted,” Knowlessaid, adding that the paper includes keyfindings of the Alaska Highway NaturalGas Policy Council, such as using

Alaska Railroad bonding authority tohelp finance the line.

The state has made significantprogress toward the sale of its royaltygas, a key issue that will need to beaddress to ensure proper access to theline and to promote additional explo-ration, Knowles said.

“It has been my privilege and honorto serve as your governor these lasteight years,” Knowles said. “Thank youfor your support, your friendship, andthe best to each of you, and to Alaska,whose best years are yet to come.”

—Steve Sutherlin PNA Managing Editor

“My way is still the highway.” —Gov. Tony Knowles

continued from page 9

KNOWLEShelp meet domestic demand, Griles said.

Over next 20 years, he said, U.S. nat-ural gas consumption will increase by 50percent while domestic production willincrease by only 14 percent.

Construction of an Alaska natural gaspipeline and new unconventional naturalgas production are the only significantnew future sources for domestic gas,according to the Department of Energy’sEnergy Information Administration, hesaid, adding that figures suggest short-term spikes in natural gas prices are com-

ing, particularly if economic recoverycontinues or there is a shock of weather inthe Midwest.

There is less natural gas drilling in theUnited States than two years ago, withless success, and in successful wells, welldecline is greater, he said.

Oil will face reductions in domesticproduction also. If domestic oil produc-tion follows the pattern of the last tenyears, it will decline by one and one-halfmillion barrels per day in the next 20years, but demand will increase by 6 mil-lion bpd, Griles said.

Energy bill delay may be goodthing

Griles said that delay in passage of theenergy bill might prove to be a goodthing, now that Republican control of theSenate is a reality.

“Despite the lack of the energy billgetting passed, in hindsight, I think we’regoing to get a much better energy billthan we would have if we had acceptedwhat had been negotiated,” he said.

The nation needs a national energybill which includes exploration anddevelopment of the Arctic NationalWildlife Refuge, Griles said, adding thatthe president and the secretary of theInterior both have demonstrated theircommitment to drilling in the refuge.Griles said the position of Interior wouldcontinue to reflect that of InteriorSecretary Gale Norton as evidenced byher remark, “An energy bill that does nothave ANWR is not a true energy bill.”

The Bureau of Land Management, theMinerals Management Service and theOffice of Surface Mining are undertakingsignificant incentives to comply with therequest of the president’s the president’snational energy bill, and Alaska is a veryimportant player in the plan, he said.

“BLM and MMS have authority tooffer lands under their jurisdiction to pro-duce minerals and natural resources, bothon and offshore, in an environmentallysustainable manner,” Griles said. “That’swhat we’re going to do.”

Accelerated land conveyances,lease sales

“We need to quickly and aggressivelyconvey lands to Natives, and to the stateof Alaska,” Griles said, adding that as aresult of meetings between chief execu-tive officers of several Native corpora-tions and the Interior Secretary severalweeks ago, BLM is working on a radicalproposal to significantly expedite theconveyance of the lands.

“For those lands that are retained infederal ownership, we need land use

planning to include considerations ofminerals potential: BLM currently isdeveloping an activity plan to considerpotential oil and gas development inNPR-A,” Griles said.

BLM is talking to ConocoPhillipsAlaska Inc. about a proposal to developNational Petroleum Reserve-Alaska oiland gas discoveries announced in 2001,he said.

MMS has proposed eight offshoresales between 2002 and 2007, Grilessaid. The sales will open up areas withproven reserves, such as the BeaufortSea, Cook Inlet, and the frontier areaslike Chukchi, Hope Basin and NortonSound.

Interior’s duty to keep the sales onschedule and offer ample notice for plan-ning on the part of bidders, he said.Interior will also expedite the leasingprocess by insuring that industry interestexists before putting acreage on the mar-ket. He said that would save all partiesfrom arguing about development in areasfor which no interest exists, as has hap-pened in the past. First MMS will see ifthose in industry have an interest, then itwill design a sale that reflects that area ofinterest.

“Next year, MMS regional directorJon Goll will take a road show to theheadquarters of the major developers thathave expressed an interest in doing busi-ness in Alaska, to start that special inter-est evaluation,” he said.

MMS working on incentives

MMS is also developing incentives tospur Alaska offshore drilling, includingmodified lease terms, rental rates, bonusbids, and royalty rates, Griles said.

“We know that Alaska offshore is notthe cheapest place to do business,” hesaid.

MMS has developed an incentivepackage to promote offshore drillingsimilar to programs that have workedwell in the Gulf of Mexico, creating athriving deepwater exploration anddevelopment program there, Griles said.MMS will coordinate federal lease saleswith those of the state, and will offerlands near the edge of federal stateboundaries.

Northstar is in both state and federalwaters, and it is a successful example ofthe kind of federal and state cooperationthat can exist, he said. Northstar pro-duced the first oil from Alaska’s outercontinental shelf program and nowaccounts for 7 percent of the oil flowingthrough the trans-Alaska oil pipeline.The department is also pleased withresults at McCovey, another state andfederal project that brought in a newplayer, EnCana.

No new delays

Griles said Interior is committed toprovide timely access to federal lands forthe purpose of development.

“We can take your money for leases,which we have historically done, but thatdoes not do any good if you cannot get apermit to operate,” he said.

He said the department is also com-mitted to an atmosphere of certainty,with clear standards, so industry has aclear idea of costs.

“Too many projects in the past havebeen nibbled to death with requests forinformation, and regulations that are onthe fly,” he said.

The Department of the Interior isseeking ways to create a high potentialrate of return for offerings in Alaska, tocompete with opportunities worldwide,Griles said, adding that all levels of thedepartment have the talent and a direc-tive to partner with the state for develop-ment on federal lands. ◆

continued from page 9

GRILES

“Despite the lack of the energy billgetting passed, in hindsight, I thinkwe’re going to get a much better

energy bill than we would have if wehad accepted what had been

negotiated.” —Steven Griles, deputysecretary of the U.S. Department of

the Interior

By Kristen NelsonPNA Editor-in-Chief

State Division of Oil and Gas DirectorMark Myers says “Mother Naturesmiled on us” in Alaska, giving us theresources to increase state revenues

through the drill bit, not the tax bill. As production decreases and tax rev-

enues drop, he said, one way to keep rev-enues up is to increase taxes on oil. Butthat’s not the only option.

“There is a totally win-win solution outthere between government and industry,”Myers, told the Resource DevelopmentCouncil’s Nov. 21annual conference.Alaska has 20 per-cent of the nation’soil production and asignificant portion ofits gas reserves, plusan “incredible upsidepotential for naturalgas.”

But to get a “long-term increase in pro-duction we’ve got to get more explorationactivities going. We have to find thatpipeline of new discoveries,” Myers said.

Exploration drilling peaked in thePrudhoe Bay discovery-development time-frame and again when offshore basinswe’re being explored, but has never recov-ered since the oil price crash in the mid-1980s.

“We need to see a third spike there tohave that long-term goal of production. Andthat’s going to take concerted efforts by allof us.”

Role of government?

Myers said he thinks one role of govern-ment is to recognize the needs of all players— from majors to independents. The major,he said, have information. Independentscoming into the state “don’t have basic geo-logic data and engineering and seismic anda full understanding of the regional geolo-gy.”

Government, he said, can provide accessto that information.

Some is available now on the Divisionof Oil and Gas web page, he said, and thedivision, in conjunction with the Alaska Oiland Gas Conservation Commission, isworking with a grant from the U.S.Department of Energy to get all public welldata available for downloading.

“So in two years, we hope someonefrom Houston can push a button and down-load all the well curves for critical well datathroughout the state.”

The state is also working on basic geo-logic mapping, Myers said, including “thework of Gil Mull, sort of a legendary North

Slope geologist, and other folks who areassisting him.” The state needs to makethose kinds of products available, he said.

The state should do baseline research, hesaid, and “really needs to focus its researchdollars, I think, on things that matter: Andoil and gas, sedimentary geology and struc-tural geology, really matters.”

The state is already providing an oppor-tunity for independent geologists to get outinto the field. Myers said the Division ofGeologic and Geophysical Surveys has afield visitation every year, “a few dayswhere independent geologists can actuallycome up to the North Slope and see therocks.” Myers said this is difficult to do onyour own because you need a helicopterand the proper permits.

Leasing effective

Access to land is another state responsi-bility, Myers said, and with areawide leas-ing the state has an effective program.

“The process is working very well. Andwe have, because of that, a record amountof acreage under lease,” he said.

The state has also looked at future poten-tial. About 10 years ago the state looked atwhat was going on elsewhere and did somepreliminary work on coalbed methane,including getting money from theLegislature to core a well near Wasilla. TheLegislature created a shallow gas leasingprogram and now, Myers said, EvergreenResources is on the way to what he hopeswill be a successful coalbed methane devel-opment in the Matanuska-Susitna Borough.

The state also did basic gravity researchin Interior basins, “basic technical work, putthat data out there.” Exploration licensingwas created and now there are two licensesissued and two more in the works, almost 2million acres that will be under license inInterior basins, basins overlooked for thelast 10 or 15 years, Myers said.

“Again, the role of government is impor-tant to get the land out there, do the basicresearch.”

Permitting a difficult path

The state also has a responsibility toensure safety and do permitting, Myerssaid, and “that’s one of our greatest areas ofchallenge.”

Just the list of agencies to permit a win-

ter seismic shoot on the North Slope is long. “It’s a huge process for things that seem

to be relatively intuitively obvious and Iagree with Ken (Boyd), we’ve got to auto-mate the program,”Myers said.

The path to apermit needs to besimpler, he said.

“We believe itcan be simpler andstill provide thenecessary environ-mental protection.We have a lot of cooks in the broth, it’s timeto get a chief chef.”

Stipulations and mitigation measures, hesaid, “need to be supported by data. Theyneed to be scientifically sound. They don’tneed to be based on hearsay or political per-suasion.

“We have to manage the resource scien-tifically and efficiently, fairly and consis-tently.”

Acceptance of some risk

One other thing the state is not doing aswell as it could has to do with best avail-able technology, he said: “adapting andembracing new technology that minimizes

environmental impact and at the same timeallows for development in sensitive areas.”

Myers said there is new technology thatis revolutionizing the way development is

done, and “govern-ment has to be outfront and be willingto take a certainlevel of risk inemploying this newtechnology.”

A n a d a r k oPetroleum Corp.’sproposed onshore

drilling platform is such new technology,he said.

“It’s a very simple idea. It’s one ofthese things that I struck my foreheadwhen I saw it and thought, why didn’t Ithink of that? We need to extend the win-ter drilling season, we need to minimizeenvironmental impact, here’s a system thatcan do that, and probably can be done socost effectively, obviously with a lowerabandonment cost after production. It’s sosimple, it’s so brilliant at the same time.Government needs to embrace and encour-age these sorts of revolutionary ideas whenthey come along. We need to be in theforefront.” ◆

GOVERNMENTPetroleum News • Alaska 11Week of December 1, 2002

■ A N C H O R A G E

Myers: Alaska has the resources to increase the size of the pieState Division of Oil and Gas chief says increasing taxes not only way to deal with decreasing production: state, blessed byMother Nature, can increase production

The path to a permit needs to besimpler. “We believe it can be simpler

and still provide the necessaryenvironmental protection. We have alot of cooks in the broth, it’s time to

get a chief chef.” —Mark Myers,Division of Oil and Gas

Mark Myers

Judy

Pat

rick

By Kristen Nelson PNA Editor-in-Chief

State and industry officials celebratedthe state renewal of the trans-Alaskapipeline and five North Slope feed-er lines Nov. 26 in Anchorage.

Alaska Commissioner of NaturalResources Pat Pourchot said concernsexpressed in the public process includedthe long-term integrity of the pipeline,safety, future public involvement and theremoval of the facilities and rehabilitationwhen the line is finally decommissioned.

The state has addressed these con-cerns, he said. “We found that thepipeline continues to work as designedafter 25 years of use, and that it can con-tinue to operate safely for an additional30 years or longer.”

Pourchot said that in response to con-cerns for public input, the JPO will “reen-ergize the executive council to hold morefrequent meetings at locations along Tapsto facilitate enhanced public participationin Taps-related issues and to providemore information on Taps operations tothe public.”

The lease renewals, he said, also“ensure full parent company guaranteesfor the ultimate removal of facilities andthe rehabilitation of state land.”

“You haven’t aged a day”

Alaska Gov. Tony Knowles called thesigning a landmark event, and said tothose in the audience who were involved30 years ago: “You haven’t aged a day.”

The governor said one of the forecastsat the first 30-year lease signing was thata renewal wouldn’t be necessary,“because Prudhoe Bay would be finished.

We certainly know that isn’t true, he

said. “I would venture to say that we willbe just at the half-way point: not just thehalf-way point in chronology, with anoth-er 30-year lease, but the half-way pointperhaps in terms of the hydrocarbons thatare going to go down that pipeline.”

Knowles said that in spite of bulletholes and earthquakes, “the trans-Alaskaoil pipeline has performed safely, as it

was designed to do so, 30 years ago.” Alaska has “the world’s safest trans-

portation of oil from production to finalport destination,” Knowles said. “Everybarrel of oil that is produced here, is doneso through the safest environmental mea-sures anywhere in the world. … We havea record to stand on and we’re proud ofit.”

Asset has improved with age

David Wight, president of AlyeskaPipeline Service Co., said materialobjects 25 years oldare generally con-sidered to be out ofdate, replaced bysomething new andbetter.

“In this case Ithink we’re lookingat an asset that hasimproved with ago.It’s in its prime andthere’s an opportu-nity to serve you well for the next 30years.”

Wight said the trans-Alaska pipelinesystem “has met operating standards,either internally driven or required in

GOVERNMENT/PIPELINES & DOWNSTREAM12 Petroleum News • Alaska Week of December 1, 2002

■ A N C H O R A G E

State renews trans-Alaska pipeline, North Slope feeder lines

Department of Natural Resources Commissioner Pat Pourchot signs 30-year extension of state’s right of way lease for trans-Alaska pipeline withGov. Tony Knowles attesting; in background, John Kerrigan, state pipeline coordinator, Joint Pipeline Office; Carl Marrs, president and CEO ofCook Inlet Region Inc.; Jerry Brossia, federal authorized officer, Joint Pipeline Office; Kevin Meyers, president of ConocoPhillips Alaska Inc.; andChuck Pierce, vice president, Unocal Alaska.

David Wight, AlyeskaPipeline Service Co.

see RENEWAL page 13

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s

GOVERNMENT/PIPELINES & DOWNSTREAMPetroleum News • Alaska 13Week of December 1, 2002

state and federal law, that are demandedof no other pipeline in the world.”Employees and the system, he said, havebeen tested by the bullet hole and therecent earthquake and “the day-to-daychallenges of a pipeline’s passage

through the Alaskan environment.” “We continue our partnership with

Alaskans and our regulators, who chal-lenge and question us on a daily basis in acollaborative way that began more than30 years ago,” he said.

“This process, meeting the publicexpectations and the highest of operatingstandards, will serve us well for the next30 years,” he said. ◆

The Kenai-Kachemak pipeline right of way lease was also signed Nov. 26. Shown, RonKaltenbaugh, president & CEO for KKPL LLC, representing Unocal, and DNR Commissioner PatPourchot signing; on far left, Ben Schoffman, project manager for KKPL, representing Marathon.

continued from page 12

RENEWAL

Helvi Sandvik

Henri Bisson

Al Bolea

Meg Yaege

Chuck Pierce

Jack Williams

The trans-Alaska pipeline “owners formed a task forcein 1998 to prepare the renewal. Since then tens of

thousands of man hours have been dedicated and $30million has been invested in reviewing every aspect of

the system. As the governor mentioned, in recentweeks we even ordered a once-in-700-year earthquakejust to make sure that the pipeline could withstand a

good shake.” —Al Bolea, BP Pipelines

“Taps has operated safely for 25 years. This level ofcontinuous safe operation was achieved through a pro-active maintenance program and continued investmentin new technologies. The Taps owners have spent moreon Taps during the last 16 years than it originally cost

to construct the system. With our continuedcommitment to invest in it, Taps will operate safely and

efficiently for another 30 years.” —Meg Yaege,ConocoPhillips vice president of pipelines

Carl Marrs

Orie Williams

“I was a junior in high school when the trans-Alaskapipeline original lease was signed and in my entire

working career I’ve had the opportunity as a result ofthe economic prosperity that was brought to our stateto stay here in Alaska and offer my contributions. Andtoday, I think, sets the stage for the next generation. Ihave three children that I hope will have the opportunity

to work in this state and because of today and theactions of all of you I believe that they will.” —Helvi

Sandvik, president, NANA Development Corp.

“The BLM is finalizing its renewal process and weanticipate the secretary’s formal record of decision for

Taps right of way renewal early in 2003.” — Henri Bisson, Alaska state director, Bureau of Land

Management

“I think leadership, collaboration, and respect for allview points were critical in bringing this together andit’s the way to get things done in Alaska and I’m very

proud Unocal could play a small part in that. … Alyeskarepresents a unique company in which competitors who

… don’t always get along in all fronts … havecollaborated in an exceptional way.” — Chuck Pierce,

vice president for Alaska for Unocal Alaska

“The trans-Alaska pipeline crosses … traditional andhistorical subsistence hunting and fishing grounds of

our ancestors and the people who live near the pipelinetoday. I can tell you that Taps and the oil companiesare good neighbors. We watch them — our peoplewatch them — on a daily basis.” —Orie Williams,

president and CEO of Doyon Ltd.

“The 30-year extension of Taps… will ensure a stabletransportation route for oil resources available now andthat will be developed in the future of the North Slope.”… Reauthorization of the Taps right of way is important

to the economic basis of (Point Thomson) which isestimated to cost over $1 billion.” —Jack Williams,

Alaska production manager, ExxonMobil

“Alaska’s history was forever altered three decades agowhen two dreams became forever linked with t he

passage of the Alaska Native Claims Settlement Act.Although seemingly diverse, both the pipeline and

ANCSA share common roots and will continue to havegreat impacts on Alaska’s overall economy.” —CarlMarrs, CEO and president of Cook Inlet Region Inc.

By Gary ParkPNA Canadian Correspondent

Canada’s Kyoto showdown is movinginto high gear with less than a monthremaining before the federal govern-ment forces a Parliamentary vote to

ratify the climate-change accord.

Revised plan tabled

In a bid to placate its strongest critics,the federal government tabled a revisedplan Nov. 21 that did little to silence theindustrial leaders and provinces who fearthe current strategy for cutting greenhouse-gas emissions will cripple the economy.

Environment Minister David Andersonand Natural Resources Minister HerbDhaliwal promised to cushion the impacton major industries — notably the petrole-um producing and refining sectors — thatare seen as the main sources of pollutinggases.

Plan greeted with skepticism

But the 75-page document, whileacknowledging there are major concerns,cost impacts and problems with implemen-tation, was greeted with skepticism.

Alberta Environment Minister LorneTaylor described the plan as “lipstick on apig. It’s a clear breach of trust. They (thefederal government) are not working oncollaboration with the provinces when theyrelease it to the press and the public with-out even discussing it.”

Gwyn Morgan, chief executive officerof EnCana Corp., warned the federal gov-ernment faces “years and years” of courtbattles if it starts interfering with provincialjurisdiction over natural resources.

Canadian Natural Resources Ltd. vice-president Real Doucet said his companyhas already reallocated C$100 million ofplanned spending on its C$8 billion oilsands project to its operations in IvoryCoast and could soon shelve another

C$202 million.

Huge impact estimated

The newest strategy to fight climatechange was unveiled against the back-ground of a study by Industry Canada, afederal department, that warned govern-ment estimates that Kyoto’s total impactwould be less than 0.4 percent on GrossDomestic Product underestimated the costsby as much as 300 percent in some sectors.

Industry Canada said crude petroleumand natural gas could see investment slumpunder Kyoto by 48 percent and employ-ment drop by as much as 14 percent by2010, two years before the accord was to befully implemented. For refined petroleum,investment could be down by 55 percentand employment by 27 percent.

“Energy sectors are the most affected,”the study said. “These sectors undergolarge contractions.”

The paper cautioned that the govern-ment should compare whether the econom-ic costs of compliance will outweigh thebenefits of having a lower level of carbondioxide — the chief greenhouse gas — inthe atmosphere.

Government calling forimplementation specifics

Anderson said “it’s time put the debateover ratification behind us” and startedworking out the specifics of implementa-tion, including voluntary agreements withindustrial sectors to be sure the burdens areshared fairly rather than imposed caps onemissions.

He said the largest emitters will not beasked to lower emissions by more than 55million metric tonnes a year, or less thanone-fifth of the projected 240 million met-ric tonnes needed to achieve the Kyoto tar-get.

“Any further reductions will beachieved through use of incentives,” hepromised.

The latest federal estimates of Kyotocosts include an added 3 cents per barrel ofconventional light crude, 1.5 cents per bar-rel of heavy crude and 12 cents per barrelfrom the oil sands. Industry projectionshave puts the oil sands costs as high as C$5per barrel.

Even at the federal level, however,Suncor Energy Inc. said its current produc-tion of 220,000 barrels per day from itsAlberta oil sands operation could translateinto a bill of C$10 million a year, or anextra 1 percent a year.

“This is a hit, but it’s not a killer if thosenumbers are correct,” said Neil Carmata,vice-president of oil sands at Shell CanadaLtd., which is just about to open Alberta’sthird oil sands plant. “One percent matters

WORLD OIL14 Petroleum News • Alaska Week of December 1, 2002

■ C A N A D A

Canada’s revised Kyoto plan ‘lipstick on a pig’Government promises to cushion impact on major industries, but federal department warns energy sectors would experience‘large contractions’ under climate-change treaty

Other Kyoto-related developments In other developments: • In an unexpected twist, the Alberta government tabled legislation Nov. 19

declaring greenhouse gases to be natural resources that automatically come underits jurisdiction.

The bill, which won’t be passed until next spring, provides the ammunition forAlberta to take its case to the Supreme Court of Canada if the federal governmentratifies the climate-change treaty, said Alberta Premier Ralph Klein.

Under the legislation, gases such as carbon dioxide and methane would acquirethe same constitutional status as Alberta’s oil and natural gas, which are owned bythe province.

• Klein told reporters Nov. 21 the new plan fails to address a key demand ofthe provinces — a guarantee they will be compensated for any economic losses asa result of the accord.

He suggested the provinces and territories should band together and defy fed-eral attempts to impose Kyoto, a tactic that has some support from BritishColumbia, Saskatchewan and Nova Scotia, but is opposed by Manitoba andQuebec.

• The Canadian Association of Petroleum Producers, in a Nov. 18 letter to fed-eral and provincial energy and environment ministers, warned that unreasonableemissions targets would “simply be a tax on production in Canada” that mighthave to be met by shifting production outside Canada.

Consistent with its opposition to the Kyoto process and its support for a “made-in-Canada” solution, the association called for negotiated sector plans for actionon emissions by Canadian industry that would “begin as soon as is practical andwould be sustainable over the medium- and longer-term.”

• Bob Hill, president of the Canadian Energy Pipeline Association, andEnbridge Inc. President and CEO Patrick Daniel said in recent presentations thatthe deadline for Parliament’s ratification vote is unrealistic, although both saidthey support the concept of Kyoto.

But Daniel said on Nov. 4 that the accord makes some of Canada’s mostpromising energy frontier opportunities — the Arctic, the oil sands and the EastCoast offshore — too expensive because of the capital costs of investing in evengreater emissions reductions.

He said that if consumers are hit with the costs of Kyoto they could turn tocheaper oil from countries such as Venezuela, in which case global greenhousegas emissions would actually increase.

Hill said developing new pipeline technology that would make a meaningfulcontribution to achieving Kyoto goals would d be “very, very expensive and verydifficult (to implement). There has to be a balance between the cost of Kyoto andthe cost of doing business.”

—Gary Park, PNA Canadian correspondent

see PLAN page 23

The latest federal estimates ofKyoto costs include an added 3cents per barrel of conventional

light crude, 1.5 cents per barrel ofheavy crude and 12 cents per barrel

from the oil sands. Industryprojections have puts the oil sands

costs as high as C$5 per barrel.

By Patricia JonesPNA Contributing Writer

Pat Stevenson starts nearly every yearhundreds of miles from his home inWatson Lake, working in the oilfields of northern Alberta.

Owner of Watson Lake Motors Ltd.and Rudy’s 24 Hour Towing, Stevensontakes a crew of four men south, startingthe end of December. Using his big semi-tractor trailer trucks, Stevenson’s men

move oil rigs through early April. He’d rather use that oil field experi-

ence locally, providing service to explo-ration crews in the Yukon and northernBritish Columbia. While just a dreamnow, Stevenson thinks it could happen inthe future, if a natural gas pipeline werebuilt along the Alaska Highway.

“If it comes down the highway, they’llopen up northern British Columbia forexploration,” he said. “There’s no accessto the markets right now.”

Not only could such developmentspark oil and gas exploration locally, gov-ernmental regulators could require thatlogs be harvested from those newlydeveloped areas. “There’s no logging inthe Yukon right now — it’s all been shutdown,” he said. “Exploration leases couldforce them to use logs.”

Natural gas is cleaner burning thandiesel, he added. “The tree huggersshould even love it.”

Stevenson objects to a pipeline being

buried under the Arctic Ocean, then tra-versing south through the MackenzieRiver Valley. “Twelve years down theroad — how do they detect and fixleaks?”

Few people in Mackenzie area

In addition to environmental reasonsfor building along the Alaska Highway, hecites economic reasons. Few people liveand work in the Mackenzie River Valley.More people in Canada and in Alaska willbenefit from the highway route, he said.

“It won’t be a boom, but it will besteady growth,” he said.

Watson Lake would likely become atransportation hub, as the community nearthe Yukon-British Columbia border alsoserves as a crossroads of sorts. TheCampbell Highway leading north to theRoss River intersects with the AlaskaHighway at Watson Lake, and just north-west of town a few miles, the CassiarHighway cuts south towards Dease Lake.

Trucks hauling freight north on theAlaska Highway must purchase Yukontags, if driving any further north thanWatson Lake. Freight companies couldstage in the community, switching loadsand avoiding the extra licensing costs,Stevenson said.

He anticipates a decision on the natur-al gas pipeline project soon after nationalelections in Canada.

“I’ve never seen a big natural gas pro-ject announced before an election,” hesaid. “Usually it’s afterwards — if it goesbadly, there’s lots of time to forget aboutit until the next election.”

The delay and indecision is part of thepolitical game, he added.

“There’s a whole bunch of lawyers thatain’t going to have a job when they sayokay,” he said. “They’re benefiting, butwe aren’t.” ◆

NORTHERN GASPetroleum News • Alaska 15Week of December 1, 2002

The ANS delivered price has averaged$25 a barrel for the last three years, hesaid, and has averaged $22 a barrel overthe last four years.

OPEC managing market

Chuck Logsdon, the state’s chiefpetroleum economist, said the price ofcrude oil has remained “remarkably high”over the last four years compared to theaverage of $16 to $17.50. The departmenthas discussed whether the average shouldbe changed, he said, and there is nowenough information for some statisticalanalysis. “Quantitatively you can demon-strate that there is evidence of a structuralchange in the oil market that hasoccurred,” Logsdon said.

The reason for this change is thatOPEC has been very successful in man-aging the market. In 1999, he said, therewas an entire year when oil prices aver-aged $12 a barrel, the Legislature had totake over a billion dollars out of theConstitutional Budget Reserve and the oilindustry began using very low hurdlerates to evaluate investments.

In a reaction to the low prices, OPECtook some oil out of the market and alsogot the cooperation of non-OPEC nationsto reduce production.

“They have made, since 1999, sevenchanges in quotas and it’s all been in thedownward direction,” Logsdon said.Today, the quota is 5 million barrels a dayless than it was in 1999, although OPECproduction is only down some 2.3 millionbarrels a day.

Because OPEC can’t behave as a per-fect cartel — i.e. members cheat on pro-duction quotas — and given some of thestatistical information, Logsdon said thestate “opted to choose as a long-run pricethe low range of the OPEC target whichis $22 to $28.”

He said the OPEC basket price, overtime, is quite close to the price of ANS

crude delivered to the West Coast, “so it’sa very nice target variable for OPEC, butit’s also very nice for us because we canlink up ANS with it.”

Logsdon said the forecast also con-tains two alternate scenarios: $17.70, theaverage price from 1986 through the cur-rent period; and a high-price scenario of$25, the mid-point of the OPEC range.

Price forecast up, productionforecast down

Condon said the department has raisedthe price forecast for each of the next fis-cal years above last spring’s forecast. Forthe current fiscal year, FY 03, the forecastlast spring was $20.50 a barrel, and thedepartment is now forecasting $25.94 abarrel. For FY 04, the spring forecast was$19.50 a barrel, and the department isnow forecasting $23.25. The spring rev-enue forecast for FY 05 was $19.50 andthe new forecast is $22 a barrel.

Unlike the price forecast, the produc-tion forecast is down from spring,Condon said. “Over the next three yearsour production forecast instead of beingjust a little over a million barrels a day, isjust a little bit under a million barrels aday.” The average of decline is about60,000 barrels a day, he said.

In the spring revenue forecast thedepartment said its “short-term ANS pro-duction forecast has been reduced inanticipation of a slower than expectedpace of heavy oil development, a slowerpace of developing new Greater KuparukArea opportunities, delays in offshoreBeaufort Sea developments, and uncer-tainty in facility expansion plans at theColville River Unit.”

Production is expected to get backabove 1 million barrels a day in fiscalyear 2008.

The combination of changes in theforecast also changes the projection ofwhen the Constitutional Budget ReserveFund will run out of money, Condon said:that estimate now stands at June 2005.

—Kristen Nelson, PNA editor-in-chief

continued from page 3

BOOST

Stop playing politicsEighth in series: Oilfield worker sees Watson Lake as possibletransportation hub for gasline project, related exploration

“I’ve never seen a big natural gasproject announced before an

election,” he said. “Usually it’safterwards — if it goes badly, there’s

lots of time to forget about it untilthe next election.” —Pat Stevenson

■ W A T S O N L A K E , Y U K O N

Pat Stevenson

Pat

rici

a Jo

nes

THE REST OF THE STORY16 Petroleum News • Alaska Week of December 1, 2002

House to move slowly, quickly

With 14 freshman representatives,there will be a great learning curve toclimb in the House in the coming session,Kott said. The Republican majority willestablish its priorities and objectives at anAlyeska retreat Dec. 3 and 4.

“We want to proceed diligently, slow-ly and very cautiously,” Kott said. “Wedon’t want to get out in front of theadministration too far, we know that theyare going to have a great learning curve aswell.”

But Kott said the House can’t afford tolinger.

“We have in the House two years tomake a difference, the administration hasfour years, and the Senate has four years,”he said. “I believe the House will take thelead on most of the major issues that facethe state.”

The first thing that’s going to be oneveryone’s agenda is the fiscal gap, hesaid.

“We have to wrestle that problem andcontrol it this time.”

Kott estimated there would be an $800million draw on the constitutional budget

reserve this year, leaving, at that rateabout a year and a half reserve in the fund.

He said as a partial solution, the Housewould create a committee on economicdevelopment charged with boosting exist-ing industries, and development of newones.

Finally, Kott cautioned against unbri-dled optimism for synergy between theRepublican-controlled legislature and theadministration.

“This whole idea of this administra-tion working with the legislature, certain-ly we are going to work hand in glove, butdon’t get too excited, there’s going to bedifficulties,” Kott said. “We each haveour own individual ideas, we each haveour own individual agenda, certainly wewill work toward a common goal, buthow we get there may be a little differ-ent.” ◆

continued from page 9

LEADERS

Browne, unveiled a new worldwide policyof not funding political activities or politicalparties. The announcement was in keepingwith BP’s new, greener image which hasinvolved advertising the fact it has changedits focus from oil to gas, has a solar energysubsidiary and has changed its motto to“Beyond Petroleum.”

But BP is not surrendering its lease posi-tion in ANWR’s coastal plain where it holdsapproximately 92,000 acres in equal owner-ship with ChevronTexaco USA. Thatacreage includes the KIC well south of thevillage of Kaktovik. The well was complet-ed by Chevron in 1986; its results are stillconfidential.

“It’s not a message about ANWR at all,”BP Alaska spokesman Paul Laird told PNANov. 25 in regard to the company’s decisionto pull out of Arctic Power. “It should not beconstrued as sending a signal of a lack ofinterest ANWR or a lack of commitment tothe North Slope. … It simply means we arenot going to participate in the debate. Thatdecision needs to be made by the Americanpeople. When and if they decide ANWRshould be opened for exploration and devel-opment, we will review that opportunity onthe basis of its commercial and competitiveattributes.”

No more money

The last contribution BP made to ArcticPower was in 2001: “Our dues last yearwere $50,000. We have not made any con-tributions this year,” Presley said, althoughArctic Power representatives contend anoth-er $50,000 from BP was expected as part ofits 2002 budget.

Karen Cowart, BP’s representative onArctic Power’s board, resigned her seateffective Wednesday, Nov. 20, Presley said.

Even though the $50,000 the organiza-

tion expected from BP is comparativelysmall portion of its funding, the group wasexpecting BP’s 2002 dues to help pay staffand other overhead.

“Arctic Power has been working underthe impression it would receive the moneyfrom BP. They have $50,000 worth of bills,or commitments, they will have to pay, findmoney for elsewhere,” Roger Herrera toldPNA Nov. 25. Herrera is Arctic Power’scoordinator in Washington, D.C.

“These next few months until Februarywhen Congress starts back are critical. Weespecially need money during next fewmonths,” he said.

Timing of the decision

BP’s decision to pull its public supportcomes at a time when Arctic Power is gear-ing up for what many in the Republicanparty consider will be its best chance inmany years to persuade Congress to openthe coastal plain to drilling.

The 19 million-acre refuge in northeast-ern Alaska is closed to oil and gas explo-ration, but in 1980 Congress designated the

1002 area — 1.5 million acres along thecoastal plain — a study area, to be evaluat-ed for its oil and gas development potential.The resource evaluation, conducted by theDepartment of Interior, was released in 1987and recommended that Congress open thecoastal plain for oil and gas exploration anddevelopment.

In 1995, the U.S. House and Senateapproved coastal plain development as partof a balanced budget act, but the entire mea-sure was vetoed by President Bill Clinton.

The House last year passed a bill openingANWR, but the Democrat-controlledSenate did not. The debate will begin againin 2003, but this time with Republicans incontrol of the Senate, the House and theWhite House.

Cheered by environmental group

The news of BP’s resignation fromArctic Power was welcomed by AthanManual of the Washington, D.C.-basedU.S. Public Interest Research Group.Manual, director of the group’s Arcticwilderness campaign, called PNA afterreading a Nov. 22 PNA news bulletinannouncing the withdrawal of BP fromArctic Power.

Manual claimed partial responsibility forBP’s decision, saying U.S. PIRG has beenpushing BP to live up to its green image bypulling support for refuge drilling.

Herrera analyzes BP’s decision

Herrera, a former BP geologist, does not

think the company’s withdrawal fromArctic Power will impact the upcomingdebate in Congress; in fact, it was made at atime when, if you can believe Sen. TedStevens’ recent comments, legislation toopen the refuge to drilling is likely to passin the first or second quarter of 2003.

BP’s defection will cost the other sup-porters of Arctic Power — the state ofAlaska, ChevronTexaco, Native companiesand associations, and the North SlopeBorough — but it is unlikely to change theoutcome of what happens in Congress in2003.

“BP knows there is oil there. They nego-tiated with Bruce Babbitt to see what theycould do,” Herrera said, referring to BP’sinfluence behind the Knowles administra-tion’s attempts to convince the formerSecretary of Interior under the Clintonadministration to directionally drill into thecoastal plain from BP’s Sourdough discov-ery a few miles west of the coastal plain.Babbitt reportedly agreed with the conceptbut Clinton administration lawyers shot itdown, saying it would have to go in front ofCongress and be signed by a presidentreluctant to publicly support refuge drilling.

“Sourdough is screaming out for politi-cal exploitation. … I would have used it toleverage open the 1002 area simply becauseit proves there is oil under it,” Herrera said.

“They know that. Half the (Sourdough)accumulation underlies the federal acreageto the east (in the coastal plain). They don’thave any seismic on the eastern side of theCanning River; just those old 2-D lines. Butthey do on the Sourdough side. … There isknown oil there. While Sourdough in itselfwas kind of marginal, double that with theoil in the federal acreage, and you havesomething,” he said.

But if BP does not tout its Sourdoughdiscovery, which is now part of the PointThomson unit, the company can pick up theeastern Sourdough acreage as soon as thefirst coastal plain oil and gas lease sale isheld, Herrera said.

“They could bring it onto production(ahead of others) … because the first pro-ducer in the coastal plain has an advantagein terms of both facilities and pipeline (con-trol). BP has a hidden gem there, whichgives rise to an immediate leasing strategythat probably nobody else can take advan-tage of,” he said. ◆

and the Brooks Range Foothills, BPspokesman Paul Laird told PNA Nov. 25.

Later in that day, Laird said BP’s off-shore Liberty prospect was also not on thesale list.

“Were exploring development optionsfor Liberty right now, so it is beingexcluded from acreage that were lookingat giving other companies the opportuni-ty to acquire and explore,” he said.

BP’s sale list, Laird said, has not yetbeen finalized, so other exploration leasescould still be excluded from the finaloffering.

“Earlier in the year we said we werediscontinuing frontier exploration inAlaska. … We’re focusing our efforts onour existing infrastructure, on viscous oiland working hard on prospects for gas,”Presley said.

When asked if BP was interested in anoutright sale of the acreage or was willingto take on partners to develop someprospects, he said: “We will look at andconsider all options … to see how thatacreage might be made available to otherparties who might be interested in invest-ing in them in a way we are not. We’remaking (oil and gas acreage) available toothers more interested in taking explo-ration risks than we are.”

—Kay Cashman

continued from page 1

LEASES

continued from page 1

BP

With 14 freshmanrepresentatives, there will be agreat learning curve to climb in

the House in the comingsession, Kott said. TheRepublican majority will

establish its priorities andobjectives at an Alyeska retreat

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CLASSIFIEDSPetroleum News • Alaska 17Week of December 1, 2002

Process Operator - Field-Based -Alaska. Alaska Process Operator Roles andResponsibilities: The Operations Technicians are expected to assist during pre-com-missioning and commissioning activities, performing pressure/leak tests, equipmentflushing/cleaning, functional checkout of equipment/instrumentation, and valve taggingand operating procedure development. The Operations Technicians will be required

to perform both Control Room and field duties and be willing to undergo flexibility training to performlight maintenance tasks. Control Room duties will include: Plant operation via a DCS(Fischer/Rosemount Delta V) system to maintain safe operation at all times. Compiling daily produc-tion and environmental reports. Start up and shutdown of the facility. Operation and control trou-bleshooting. Assisting the technical support team with the demonstration program and technologydevelopment. Field duties will include: Operational troubleshooting, sample taking, instrumentationand equipment monitoring, routing blow down and maintenance tasks. The field technician will berequired to man the DCS panel for short periods. It is expected that this will be a very demanding andchallenging role working with cutting edge technology, including equipment, instrumentation and con-trol, and analytical equipment, developing and optimizing the operating envelope and gathering thedata necessary for commercial plant scale up. The successful candidates will work to a 12 hour shiftpattern but also be flexible enough to accommodate call out to provide absence and sick cover. Theselected candidates will be required to work within at team environment that is comprised of both shiftand day personnel and be accountable for the safe, reliable operation of the facility. Experience:·Minimum of Five (5) years experience in facility or production operations. ·Maintenance technicianswill to train in Operations encouraged to apply. ·DCS Operations experience preferred. ·Research,technology development experience would be an advantage. ·Steam Methane Reforming,Hydrocracking or other chemical/refinery operations experience would be an advantage. ·Strong oral,written and basic mathematical skills. ·Demonstrated ability to work well in a team and respond effec-tively to changing situations. ·Proven ability to learn quickly and utilize newly acquired skills. This is aRegular Full-time position, located in Kenai, Alaska. Please submit your resume to: RecruitingDepartment 949 E. 36th Avenue Suite 500 Anchorage, AK. 99508 Email Resume to:Careers@VECO.com or fax (907) 762-1040 VECO Alaska Job Website: www.veco.com Emailattachments should be in Microsoft Word or Rich Text format. VECO Alaska is an Equal OpportunityEmployer that Supports a Diverse Workforce. Positions Require U.S. Work Authorization Pleasequote the Job Title and Recruiting Authorization No. (if applicable) in all correspondence.

Tax Accountant/Analyst Responsibilities - Responsible for com-pletion of all U.S. corporation and/or partnership income tax returns forvarious ConocoPhillips legal entities and branches with operations in

Alaska, and later worldwide. Will be expected to learn tax partnership software system and later beable to train others on system. Duties may also include: providing support and assistance to CorporateTax with respect to income tax audits; providing data for preparation of monthly income tax accruals;special projects, as assigned. At completion of initial work assignment in Anchorage, will be relocat-ed to Bartlesville, Oklahoma at company expense to assume position with Corporate Tax department.Qualifications - Candidate should be well organized and possess good knowledge of accounting prin-ciples and strong analytical skills. Also, must have ability to interpret partnership agreements and taxregulations. Good interpersonal skills, strong oral and written communication skills, and the ability tohandle multiple tasks simultaneously and to work under deadlines are essential. Experience withMicrosoft WORD and EXCEL is required; experience with ICOR, SAP. Brio, helpful, but not required.BS degree in Accounting / Finance or related degree required; 2-4 years related work experience pre-ferred. CPA also desirable, but not required. Applicant must be willing to relocate upon completion ofAlaska assignment. Work Location - Anchorage through approx Fall 2003 with relocation toBartlesville, Oklahoma to assume position with Corporate Tax department. To Apply: Qualified appli-cants must apply on line by December 6, 2002 at: www.conocophillipsalaska.com/jobs.ConocoPhillips Alaska, Inc is an Equal Opportunity Employer ConocoPhillips Alaska, Inc.

Geotechnicians: Experiencein gridding, sampling, powerauger drilling drill sampling andGPS navigation preferable.Salary DOE If you are interestedin learning more aboutEmployment opportunities inAlaska with AvalonDevelopment, submit a resumealong with references. Resumes

may be emailed to:avalon2@alaska.net, Faxed to907-455-8069 or mailed toAvalon Development, attn: AV-Jobs2002, PO Box 80268,Fairbanks, Alaska 99708

Alaska Equipment Appraisers

Machinery and equipmentappraisals. Mike Tope 250-9083mrtope@yahoo.com

HEAVY CONSTRUCTIONEQUIPMENT FOR LEASECAT 245 Excavator, CAT D5BDozer, GROVE 25 ton HydraulicRT Crane, CASE 621B Loader,KELLY EQUIPMENT CO.

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Alaska Independent needsoperator to explore anddevelop prime NorthSlope/Cook Inlet prospects.Call Rick 907-456-2300 or emailbluemax@gci.net.

AVCG looking for qualifiedpartners for 104,000 acres onNorth Slope. Call Bo 316-263-2243.

Resource DevelopmentCouncilThursday, December 5thThe speaker is Roger Herrera,President, Northern Knowledgeand Washington, DC

Coordinator, Arctic Power. Thetopic is "ANWR in the NewCongress." Reservations arerequired: 276-0700. The meet-ing will be held at the PetroleumClub, beginning at 7:30 a.m.

Alaska Support IndustryAlliance events:R.S.V.P (907) 563-2226Thursday, December 12:Alliance breakfast forum 7:00am. Petroleum Club ofAnchorage. Featured guestspeaker: John Goll (MMS)$13.00/members,$15.00/non-membersTuesday, December 17:The Alliance–Kenai Chapter lun-cheon 12:00 (noon). Paradisosspeaker TBDThursday, December 19:Alliance lunch forum 12:00(noon), Sheraton AnchorageHotel. Featured guest speaker:James Dodson (AndexResources).Friday, January 24, 2003:Meet Alaska 2003 at SheratonAnchorage Hotel. Plan for a day-long conference! For informa-tion/registration, please call(907) 563-2226

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Miscellaneous

PNA CLASSIFIEDS18 Petroleum News • Alaska Week of December 1, 2002

Doyon Drilling, Inc. is currently accepting resumes for Electricians, Pitwatcher(Solids Operator), and Mechanics. Doyon Drilling, Inc. accepts resumes fromindividuals with direct on or off shore drill rig experience at the floorhand level

and above. You may fax, mail or e-mail your complete resume to our Human Resources Department.Our mailing address is: Doyon Drilling, Inc., 101 W. Benson Blvd., Suite 503, Anchorage, AK 99503Phone: 907-563-5530, Fax: 907-561-8986, Email: jobs@doyondrilling.com Attachments should be inone of the following standard formats: Microsoft Word (Windows) or RTF. Resumes should containa listing of employment experience on oil and gas drilling rigs and should have a minimum of three ver-ified references. Other application paperwork will be provided at the time of hire.Electricians: Summary: Installs, maintains and repairs drill rig electrical systems, apparatus and elec-trical and electronic components of drill rig machinery and equipment. Essential Duties: Maintains andrepairs the electrical and electronic equipment associated with drill rig top drives, draw works, ironroughnecks, SCR's AC motor controllers, DC motors, AC generators, air conditioners PLC's and oil-field mud and gas monitoring systems. Installs power supply wiring and conduit for newly installedmachines and equipment such as mud pumps, motors and conveyors.Pitwatcher (Solids Operator): Summary: Performs drilling fluid mixing operations, drilling fluidproperty sampling, monitoring of well bore returns, maintenance of mud pumps and drilling fluid cir-culation system. Essential Duties: Maintain drilling fluid solids control and circulation equipment, Carryout routine drilling fluid property sampling, Mixing of drilling fluid chemicals and maintenance of drillingfluid properties, Cleaning and maintenance of rig drilling fluid pits, Follow DDI and customer operat-ing and reporting procedures, Maintain clear communications with relief, mud engineer, Derrickmanand Driller.Mechanics: Summary: Responsible for the operability, maintenance and repair of all drill-rig relatedmachinery and support equipment such as engines, motors, pumps, winches, pneumatic tools andconveyor systems as directed by the rig toolpusher. Essential Duties: Works on the following: Drill rigtop drive systems, Drill rig draw work systems, Drill rig mud pumps, SCR systems, Caterpillar andDetroit Diesel engines, Allison transmissions, air conditioners, glycol, hydraulic and pneumatic sys-tems, Drill rig heating and heat distribution systems including boilers and fans.

Legal NoticeSTATE OF ALASKA DEPARTMENT OF NATURAL RESOURCES STATE PIPELINE COOR-DINATOR'S OFFICE 411 WEST FOURTH AVENUE, SUITE 2C ANCHORAGE, ALASKA99501 (907) 257-1300 PUBLIC NOTICE KENAI-KACHEMAK PIPELINE RIGHT-OF-WAYAPPLICATION ANALYSIS AND COMMENT PERIOD ADL 228162 The Department of NaturalResources, State Pipeline Coordinator's Office, hereby gives notice to the public of the opportunity toprovide comments on the following proposed action: - Approval of the Kenai-Kachemak Pipeline right-of-way application (ADL 228162) and offer of the right-of-way lease. Pipeline Right-of-Way ApplicationSubject to the provisions of AS 38.35, and pursuant to regulations promulgated thereunder, the StatePipeline Coordinator's Office has received a right-of-way lease application from Kenai-KachemakPipeline, LLC (KKPL LLC) a limited liability company formed by Marathon Oil Company and GUT LLC,a wholly-owned subsidiary of Union Oil Company of California, dba Unocal Alaska, for the Kenai-Kachemak Pipeline (ADL 228162). KKPL LLC proposes to construct a buried pipeline to transport nat-ural gas. The proposed Kenai-Kachemak Pipeline Project would be located on the Kenai Peninsula,between the communities of Kenai and Ninilchik, Alaska. The pipeline would extend from the AlaskaPipeline Company 500 Master Meter Building (located east of Kalifonsky Beach Road) located withinSection 30, Township 5 North, Range 11 West, Seward Meridian, to approximately Milepost 128 ofthe Sterling Highway, located within Section 5, Township 1 South, Range 13 West, Seward Meridian.This southernmost point of the line is approximately 13 miles north of the community of Ninilchik. Thepublic notices required under AS 38.35.070 were published in newspapers in Homer, Kenai andAnchorage. Public notices were sent to post offices, libraries, communities and ANCSA corporationsin the vicinity of the project area. No party requested a public hearing within 30 days of those notices.Copies of the right-of-way lease application were provided to coordinating agencies, local libraries, andother interested state and federal agencies. Pursuant to AS 38.35.080, the State Pipeline Coordinatorprepared a Commissioner's Analysis and Proposed Decision for the right-of-way lease application anda draft Right-of-Way Lease for the Kenai-Kachemak Pipeline. The public may obtain copies of theCommissioner's Analysis and Proposed Decision and draft Right-of-Way Lease at cost or view at thefollowing location: State Pipeline Coordinator's Office 411 West 4th Avenue, Suite 2C Anchorage, AK99501-2343 Open Monday thru Friday Hours: 7:30 AM to 5:00 PM The Commissioner's Analysis andProposed Decision and draft Right-of-Way Lease may be viewed on-line athttp://www.corecom.net/JPO/kkpl/kkpl.htm Additionally, these documents will also be available forviewing at the following locations: Kasilof, Public Library Kenai, Community Library Ninilchik,Community Library Soldotna, Public Library Comment Period and Decision Persons desiring to sub-mit written comments on the Commissioner's Analysis and Proposed Decision, and the draft Right-of-Way Lease are invited to do so. Any comment, objection or expression of interest pertaining to the pro-posed actions must be received in writing by the State Pipeline Coordinator's Office at the aboveaddress on or before 5:00 P.M., November 14, 2002. Comments may be provided at a public hearingon the right-of-way lease application to be held pursuant to AS 38.35. The hearing will be held inSoldotna at 6:00 P.M. on November 13, or the next available date, at the Kenai Peninsula BoroughAssembly Chambers, 144 N. Binkley. The scope of the hearing will be on the Kenai-Kachemak Pipelineapplication (ADL 228162). The Commissioner's Analysis will form the basis of the final decisionrequired under AS 38.35.100. If the Commissioner, in his discretion, after review of commentsreceived during the public comment period, does not find cause to amend his Analysis or ProposedDecision, the Analysis and Proposed Decision will become the Commissioner's final decision underAS 38.35.100 without further notice, and KKPL LLC will be offered a right-of-way lease for the Kenai-Kachemak Pipeline. A copy of the Commissioner's final decision and a copy of the right-of-way leasewill be available at cost from the department. If public comment indicates the need for substantialchanges or additional analysis, additional public notice will be given on or about December 16, 2002.It is anticipated that the Commissioner will issue a final decision within approximately 30 days of theclose of the period of public comment. The State of Alaska, Department of Natural Resources, StatePipeline Coordinator's Office, complies with Title II of the Americans with Disabilities Act of 1990.Individuals with disabilities who may need auxiliary aids, services, or special modifications to participatein this review may call (907) 257-1300 or 269-8411 TTY/TTD. Please provide sufficient notice in orderfor the department to accommodate your needs. The State Pipeline Coordinator's Office reserves theright to waive technical defects in this publication. John Kerrigan, State Pipeline Coordinator Publish:October 20, 2002

Equipment

InvestmentOpportunities

Leases/ProspectsAvailable

Meetings/Events

upper management in Alaska’soil and gas industry. Your ad willbe viewed on-line and in ourweekly paper for only $4/line forEmployment ads and $8/line forall other categories. Please call907-644-4444 or visit us on-lineat petroleumnewsalaska.com.

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Join us for the flyfishing trip of alifetime! We specialize in guidedflyfishing and multi-day rivercamping trips with gourmet rivercuisine. Float trips are in the pur-suit of rainbow trout in the upperSusitna Valley, on rivers like theTalkeetna, Willow Creek, andmore. We also enjoy salmonfishing for reds and silvers on theRussian River, on the KenaiPeninsula. We offer custom-designed trips for all of ourguests. Whether it's a day trip,or a 5-day fly-in fishing trip, wecan arrange the trip that's rightfor you. The best time for fishingis from May til October, withpeak trout opportunities during

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Recreation/Lodging

PNA CLASSIFIEDSPetroleum News • Alaska 19Week of December 1, 2002

Real Estate/Commercial

Real Estate/Fine Homes

Legal NoticeNotice of Public Hearing STATE OFALASKA Alaska Oil and GasConservation Commission Re:Polaris Oil Pool, Prudhoe Bay Field PoolRules and Area Injection Order BPExploration (Alaska), Inc Alaska, Inc. byapplication dated October 31, 2002, hasapplied for an area injection order andpool rules under 20 AAC 25.460 and 20AAC 25.520, respectively, to governdevelopment of the Polaris Oil Pool,Prudhoe Bay Field, on the North Slope ofAlaska. The Commission has set a publichearing on this application for December9, 2002 at 9:00 am at the Alaska Oil andGas Conservation Commission at 333West 7th Avenue, Suite 100, Anchorage,Alaska 99501. In addition, a person maysubmit written comments regarding thisapplication to the Alaska Oil and GasConservation Commission at 333 West7th Avenue, Suite 100, Anchorage,Alaska 99501. Written comments mustbe received no later than 4:30 pm onDecember 9, 2002. If you are a personwith a disability who may need a specialmodification in order to comment or toattend the public hearing, please contactJody Colombie at 793-1221 beforeDecember 4, 2002. Cammy OechsliTaylor Chair Published Date: November8, 2002

Legal NoticeREQUEST FOR TECHNICAL PROPOSAL (RTP) AIR TRANSPORT AND APPLICATION OFDISPERSANT MATERIALS Scope of Work: Companies engaged in the transportation of crude oilby tanker from the Trans-Alaska Pipeline System (TAPS) marine terminal in Port Valdez are required tomaintain a vessel response plan for oil spill prevention and response services. Proposed new USCGregulations are requiring vessel response plans to include the capability of spraying oil dispersant byair at certain volumes and intervals to meet regulatory requirements. On behalf of the owners of thesecompanies BP Pipelines (Alaska) Inc. is soliciting proposals for the air transport, delivery, and applica-tion of dispersants. Technical specifications for this proposal are identified in the Dept. ofTransportation Coast Guard Notice of Proposed Rulemaking, 33 CFR Parts 154 and 155 at the fol-lowing website: http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2002_register&docid=02-25462-filed.pdf Respondents do not need to do a detailed bid package with costs for the entiresystem; however, the cost of meeting the 7-hour on-scene requirement in the regulation should bedetermined. On-scene requirement options of 8 hours and 10 hours are to be determined and includ-ed as part of this package. Vendors whose capability can only partially meet the total requirements arewelcome to submit a technical proposal as the final solution may require a combination of approaches.Required Qualifications: Provider shall be required to meet the following regulatory standards at a min-imum to be considered for this request for proposal: a) aircraft staff must meet all FAA and applicablefederal and state requirements and must possess current certifications and licensing required specificto this type of air support activity; b) provider must have IFR "transit capability;" c) maintenance recordsshall be made available for review on aircraft to be used for air support; d) aircraft must meet volumeand frequency air dispersant requirements for spill response; e) crew members must meet all FAAlicensing requirements and have a clear contractual relationship with the provider; f) provider must sub-mit a Health, Safety, and Environment plan for approval by the owner companies. Provider shall furnishto BP Pipelines (Alaska) Inc. a technical proposal covering the execution plan for implementing the AirTransport and Application of Dispersant Materials according to the requirements in the NPR, and shallinclude compensation requirements for recall and mobilization for the project. Request for TechnicalProposal Solicitation Package: The RTP will be made available on or approximately November 1, 2002;technical proposals will be accepted until 5:00 A.S.T. on December 13, 2002. Requests for the pack-age should be directed to Nancy A. Moses, Contracts Specialist, BP Exploration (Alaska) Inc. via e-mail at Mosesna@bp.com, via telephone at (907) 564-4612, or via mail at P.O. Box 196612,Anchorage,Alaska 99519-6612. An informational meeting will be held November 15, 2002 in the BPPipelines (Alaska) Inc. headquarters building at 900 East Benson Boulevard, Anchorage, Alaska99508. Contact Wendy Van Ryn at (907) 564-5717 by November 13 if you plan to attend or will par-ticipate via teleconference. Published 10/22/02.

BLM will still control 18 percent of Alaskawhen the transfer is complete.

“Next to the holdings of the AlaskaDepartment of Natural Resources, BLMwill have the second largest economicengine in this state. The pistons that powerthat engine are maintaining or improvingopportunities to develop those resources.And that’s what we’re trying to do on theNorth Slope,” Bisson said.

The agency is making a major effort toupdate its land use plans, he said, becausethey “are the basis for all of our actions,including oil and gas leasing and develop-ment.”

NPR-A

A draft of the plan for the northwestNPR-A is on schedule, he said, and BLM islooking at mitigation measures and stipula-tions that “will be more adaptive to differentways to get the job done — and they aresubstantially different than those that werein the NPR-A northeast record of decision.”

BLM is also “strongly consideringamending the NPR-A northeast plan,”Bisson said, and if the decision is made to

proceed it would begin early next summerand be complete by the end of 2004.

“We would propose to revisit severalissues, including the areas that are currentlyavailable for leasing in NPR-A northeastand we would propose to change the explo-ration and development stipulations and mit-igation measures to be identical to the onesthat are being developed in the ongoingNPR-A northwest plan.”

For existing leases in NPR-A, BLM islooking at “a performance based process”where the agency would outline the goals ithas to protect resource values “but leave thedetails to be developed and proposed byindustry in terms of how best to meet thosechallenges through their activities.”

More timely permitting, unitizationrules

Bisson said BLM is working at a nation-al level to expedite processing applicationsfor drilling permits and is also working onimproving its processes through the use ofelectronic commerce. The agency is part ofa multi-agency congressionally mandatedinventory of oil and gas resources. That pro-ject, he said, includes identifying “impedi-ments and restrictions to assessing, leasingand developing those resources.” Results ofthat inventory are due to be released soon, he

said. BLM put new NPR-A unitization regula-

tions into effect last spring. Those regula-tions “have caused a great deal of concernhere in Alaska and I started hearing about itbefore I ever got here,” he said.

In an effort to do something about thatBisson said BLM will host a Dec. 12 work-shop with industry, the Alaska Oil and GasAssociation and North Slope landownersincluding the Arctic Slope Regional Corp.and DNR, “to try and reach consensus onchanges that may be necessary to improvethe regs.” Representatives from MMS,BLM’s Washington, D.C., office andBLM’s solicitor’s office will also attend.

“I promise,” Bisson said, “that if we canreach consensus I’ll be the first one on theplane back to D.C. to brief” BLM’s nationalofficials on the need to change the regula-tions.

“We will protect the public trust relativeto our royalties, but there is a lot of room fordiscussion,” he said.

Future in NPR-A

Proposed lease sales in NPR-A include afirst sale for NPR-A northwest and a thirdsale for NPR-A northeast in 2004, Bissonsaid.

“Despite rumors to the contrary, we at

this time do not have a firm proposal in handfor full scale development of some of theexisting leases in NPR-A,” he said. BLMhas been having preliminary discussionswith one company and expects a decisionsoon on whether that company will initiate adevelopment proposal.

“If a plan was submitted within the nextmonth, we are committed to completing theenvironmental impact statement and permit-ting process by next July,” he said.

“If the decision is made to allow devel-opment, BLM would anticipate the first pro-duction from NPR-A to be in 2007.”

MMS working on access, permitting,incentives

“MMS is very eager to help get morecompanies to come up here and explore,”Rance Wall said, and is working on access,permitting and incentives.

MMS has Beaufort Sea, Cook Inlet,Chukchi-Hope basin and Norton Soundsales in its current five-year plan, and hasrevised its process for those sales in an effortto stay on schedule.

In the Beaufort, he said, the agency isdoing an environmental impact statementnow which will work for three sales, withthe second and third sales requiring onlyenvironmental assessments “unless thingshave changed substantially.” The samewould be true for Cook Inlet: one EIS willbe done for both sales with only an EA forthe second sale.

“This is similar to what BLM has done inNPR-A with its sales and what the state cur-rently does with its program,” he said.

Permitting and streamlining

Wall said MMS is working with otherDepartment of the Interior agencies toimprove the permitting process. He saidboth state and federal agencies have beenresponsible for problems with permitting inAlaska that “have hurt oil and gas activities,both onshore and offshore in the last fewyears” and have to work together to solvethem. “We have to demonstrate that explo-ration and development activities can bepermitted in a timely manner.”

Once work is complete within theInterior agencies, MMS will move on towork with other federal agencies such as theCorps of Engineers, the EnvironmentalProtection Agency and the National Oceanicand Atmospheric Administration, Wall said.

“We believe that better coordinationbetween the agencies will result in more pre-dictable permit timeframes,” he said.

MMS has also been working with stateagencies on permitting issues, in particularwith the Division of GovernmentalCoordination with on coastal zone manage-ment issues.

Incentives for Beaufort

On the incentive side, Wall said theDeepwater Royalty Relief Act had a bigimpact on activities in the Gulf of Mexico,turning “what was then called the dead seainto one of the most active oil and gas explo-

THE REST OF THE STORY20 Petroleum News • Alaska Week of December 1, 2002

continued from page 1

INCENTIVES

see INCENTIVES page 21

THE REST OF THE STORYPetroleum News • Alaska 21Week of December 1, 2002

ration and development areas in theworld.”

MMS doesn’t expect the sameresults from incentives in the Beaufort,he said, but hopes “that they will helpjumpstart our program.”

The agency didn’t want to wait forCongress to pass incentives, so itlooked at current OCS laws and regu-lations to see what incentives could beoffered without new legislation. Lawsand regulations in place “are very flex-ible in allowing for a broad range ofincentives on a sale-by-sale basis” andMMS is evaluating incentives thatcould be used in next fall’s BeaufortSea sale. The incentives under consid-eration include reducing the 12.5 per-cent royalty rate, the $5 rental rate andthe $25 an acre minimum bid. MMScould also use a price floor: if oil pricesfell below a threshold the royaltywould be reduced or eliminated.

“We’re also looking at deferredbonus bids,” Wall said, allowing “bid-ders to defer paying a bonus bid if theydrill an exploration well within a cer-tain number of years. … The bonuscould be deferred as long as out intoproduction … but they have to pay iteventually even if they give up thelease.”

Royalty holidays are another possi-bility: “companies would be allowed toproduce a fixed amount of oil up frontwith no royalty paid.” This was includ-ed in the Deepwater Royalty ReliefAct, he said, but can also be offered ona sale-by-sale basis.

Wall said incentives selected willappear in the Beaufort Sea proposedsale notice in February. ◆

He said industry told him that the per-mitting process has “become too complex,contradictory and illogical” and that there isa “lack of clear process lines to follow.” Alack of educated agency personnel “resultsin erroneous information being disseminat-ed that eventually derails the permittingprocess of a given project and costs theapplicant thousands of dollars in lost timeand duplicated efforts to obtain necessarypermits.”

Incomplete information, abuse ofprocess

What Popp heard from agency represen-tatives confirmed some of what he heardfrom industry: there was agreement, hesaid, that the process is “very complex” andthat there are often conflicting permit stipu-lations from one agency to the next.

But, he said, a frequent theme that heheard from the agencies was that applicantsdid not submit complete informationrequired for applications, and that theyabused the permitting process “by using itas a strategic tool to misdirect competitorsby submitting multiple drilling or explo-ration permits for areas the applicant has nointention of ever using, which… has at timeclogged the system with frivolous applica-tions that waste limited agency resources.”

System flawed

Popp said he asked every industry andagency representative he spoke with todraw a flow chart of the entire permittingprocess for a new oil or gas well.

“I have emphasized that I didn’t care ifthe piece of paper needed to draw this flowchart was a foot long or 10 feet long. Todate, having posed this question to every-one I have met with from both industry and

government, no one has been able to pro-duce such a flow chart.”

If you can’t draw it out, Popp said, “howcan you understand it and how do you knowit works? And how can an indefinableprocess be deemed efficient and responsiveto both the industries involved and the pub-lic?”

Popp said he believes that until the per-mitting process can be put down on paper ina clear and logical and understandable man-ner, “permitting will continue to deter newdevelopment of oil and gas reserves in thestate of Alaska and in the Cook Inlet basin.”

New development needed

Popp reviewed published studies onCook Inlet natural gas resources and con-sumption, and said known reserves of 2.3trillion cubic feet at consumption rates of220 billion cubic feet a year represent a 10-year supply. He noted that in the Lower 48,reserves average a seven- to nine-year sup-ply.

The export license for the Phillips LNGfacility expires in 2009, as does the 10-yearnatural gas supply contract betweenAgrium and Unocal, Popp said. The LNGfacility and the fertilizer plant generatenearly 11 percent of borough property taxrevenues (nearly $3 million a year) andmore than $130 million in annual payrolland supply purchases.

“Cook Inlet is a relatively closed natural

gas market with finite local supplies of nat-ural gas that will eventually restrict the con-tinued economic growth of the localeconomies of the region unless new supplystreams and reserves are developed,” Poppsaid.

Continued exploration andproduction

Continued exploration and developmentof Cook Inlet reserves needs to be promot-ed, Popp said. There are exploration efforts,he said, but those are likely to extend cur-rent reserves only an additional five to 15years beyond 2012, “based on governmentprojected consumption patterns and esti-mated potential reserves.”

A longer-term solution will requireimports, Popp said. The North Slope is alikely source, but: “A pipeline built solely todeliver to Southcentral is not economicallyviable when potential market demands areweighed against the capital costs associatedwith this type of project.” More likely, hesaid, would be a pipeline to deliver gas toValdez or the Lower 48 states throughCanada, with a spur line to Southcentral, ora pipeline to a Cook Inlet tidewater LNGfacility.

The hurdle, he said, is the delivered costof Alaska North Slope natural gas. In 1999,Enstar’s average residential price of $3.66per thousand cubic feet, while recent esti-mates put ANS natural gas delivered toSouthcentral at prices between $5.03 and$5.71.

Coalbed methane is a possible option,Popp said, but Evergreen Resources(Alaska) Corp. is only now doing initialdrilling, “with testing and evaluation offlow rates and production costs continuingfor the next 18 months before a final deci-sion will be made on the economic viabilityof the project.”

continued from page 1

PERMITTING

see PERMITTING page 23

“Cook Inlet is a relatively closednatural gas market with finite local

supplies of natural gas that willeventually restrict the continued

economic growth of the localeconomies of the region unless new

supply streams and reserves aredeveloped.” —Bill Popp, report to

Kenai Peninsula Borough

continued from page 20

INCENTIVES

ADVERTISER INDEX22 Petroleum News • Alaska Week of December 1, 2002

AABC MotorhomesAdvancial Federal Credit UnionAir Logistics of Alaska . . . . . . . . . . . . . . . . . . .4Alaska Airlines CargoAlaska Dreams . . . . . . . . . . . . . . . . . . . . . . . . .9Alaska Interstate ConstructionAlaska Marine Lines . . . . . . . . . . . . . . . . . . . .24Alaska Railroad Corp.Alaska SteelAlaska TelecomAlaska Tent & TarpAlaska TextilesAlaska Valve & FittingAlaska WalkFit OrthoticsAlaska West Express . . . . . . . . . . . . . . . . . . .24Alliance, TheAlpine-Meadow . . . . . . . . . . . . . . . . . . . . . . . . .5American MarineAnchorage Hilton HotelAPI Systems Group . . . . . . . . . . . . . . . . . . . . .11Arctic ControlsArctic Pacific EnterprisesArctic Slope Telephone Assoc.Arctic Wire Rope & SupplyArmy/Navy StoreArrowHealth . . . . . . . . . . . . . . . . . . . . . . . . . .12ASCG Inspection (AII)Avalon Development

B-FBadger ProductionsBaroid Drilling Fluids . . . . . . . . . . . . . . . . . . . .13Brooks Range Supply . . . . . . . . . . . . . . . . . . . .4Cafe AmsterdamCal Worthington FordCameron . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Carlile Transportation Services . . . . . . . . . . . . . .3CCICentral Trading SystemsChiulista Camp ServicesChugach Technical ServicesClarion SuitesCleanaire AlaskaCN AquatrainColdwell BankerColvilleConam ConstructionConocoPhillips AlaskaContinental Auto Group . . . . . . . . . . . . . . . . . .21Cook Inlet Tug & BargeCrowley AlaskaCruz ConstructionDowland - Bach Corp. . . . . . . . . . . . . . . . . . . . .6Doyon DrillingDura-Wrap Containments . . . . . . . . . . . . . . . . . .6Dynamic Capital Management . . . . . . . . . . . . . .7Eagle EnterprisesEngineered Fire SystemsENSR AlaskaEpoch Well Services . . . . . . . . . . . . . . . . . . . .14Era AviationEvergreen Helicopters of AlaskaEvergreen Resources AlaskaExecutive Suite Hotel . . . . . . . . . . . . . . . . . . . .8F.A.T.S.Fairweather Companies, TheFirst National Bank AlaskaFMC Energy Systems . . . . . . . . . . . . . . . . . . . .8Flowline Alaska . . . . . . . . . . . . . . . . . . . . . . . .9Forest OilFrontier Flying Service

G-MGBR EquipmentGolden North Van LinesGolder AssociatesGreat NorthwestHawthorne SuitesH.C. PriceIndustrial Project ServicesInspirationsIRF GroupJava King . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Jackovich Industrial & Construction SupplyJudy Patrick PhotographyKenai AviationKenworth Alaska

KPMG LLPKuukpik Arctic Catering Kuukpik - Fairweather - VeritasKuukpik - LCMFLounsbury & Associates . . . . . . . . . . . . . . . . . .4Lynden Air Cargo . . . . . . . . . . . . . . . . . . . . . .24Lynden Air Freight . . . . . . . . . . . . . . . . . . . . . .24Lynden Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .24Lynden International . . . . . . . . . . . . . . . . . . . .24Lynden Logistics . . . . . . . . . . . . . . . . . . . . . . .24Lynden Transport . . . . . . . . . . . . . . . . . . . . . .24Lynx EnterprisesMachinery Technical SupportMapmakers of AlaskaMarathon Oil Co. . . . . . . . . . . . . . . . . . . . . . .12McLane Consulting GroupMI SwacoMIAC MaterialsMichael Baker Jr.Midtown Auto Parts & Machine . . . . . . . . . . . .10Millennium Hotel . . . . . . . . . . . . . . . . . . . . . . .11Montgomery Watson Harza . . . . . . . . . . . . . . .13MT Housing . . . . . . . . . . . . . . . . . . . . . . . . . .15

N-PNabors Alaska Drilling . . . . . . . . . . . . . . . . . . .20NANA/Colt EngineeringNatco CanadaN.C. MachineryNeeser ConstructionNEI Fluid TechnologyNew World Technology . . . . . . . . . . . . . . . . . .15Nordic/Calista ServicesNorth Coast Electric Co.North Star Terminal & StevedoreNorthern Air CargoNorthern Testing Laboratories . . . . . . . . . . . . . .6Northern Transportation Co. . . . . . . . . . . . . . . . .3Oil and Gas Supply Co.Offshore Divers . . . . . . . . . . . . . . . . . . . . . . . . .4PDC/Harris Group . . . . . . . . . . . . . . . . . . . . . . .7Pacific Rim Leadership DevelopmentPanalpina . . . . . . . . . . . . . . . . . . . . . . . . . . . .14Peak Oilfield Service Co.PencoPetroleum Equipment & ServicesPetrotechnical Resources of AlaskaPGS OnshorePinkerton SecurityPSI Environmental & Instrumentation

Q-ZQUADCORolls Royce Energy SystemsR & R Scaffold Erectors . . . . . . . . . . . . . . . . . .23Schlumberger Oilfield ServicesSECORP IndustriesSeekins FordShred Alaska . . . . . . . . . . . . . . . . . . . . . . . . .10SimplexGrinnellSnowbird ManagementSOLOCO (DURA-BASE)Sourdough ExpressSpan-Alaska ConsolidatorsSpenard Builders SupplySTEELFABTaiga AdventuresTec LabsTesting Institute of AlaskaThrifty Car RentalTOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5Totem Equipment & SupplyTravco Industrial HousingUdelhoven Oilfield Systems Services . . . . . . . . .16Umiat CommercialUnitech of AlaskaUnited RentalsUnited Van LinesUnivar USAURSU.S. Bearings and DrivesWelding ServicesWesternGecoWood Group (Alaska)XTO EnergyZY-TECH Global Industries

Companies involved in Alaska’soil and gas industry

ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS

All of the companies listed above advertise on a regular basis with Petroleum News • Alaska.

Dowland-Bach Corp.Dowland-Bach Corp. manufac-

tures and distributes control sys-tems, including UL panels, well-head control and chemical sys-tems, stainless piping, tubing andfittings, and fabricates high-endspecialty stainless sheet metal. Itreceived the Governor’s 2002Small Business Exporter Awardfor its solar-powered wellheadcontrol panels purchased by BPColombia.

President Lynn Johnsonworked in his parents’ company,Alaska Helicopters, through highschool and college, and hasbroad experience in finance, oper-ations and business administra-tion. He began Dowland-Bach in1975 with Ed Clinton and RonTharp, and enjoys being one ofAlaska’s few, true manufacturers.He and wife Terri have two sons.An avid skier and pyrotechnicsexpert, Lynn’s motto is “Ski, DoStainless and Blow UpFireworks.” Catch his next showNew Year’s Eve at AlyeskaResort.

BusinessSpotlight

Chris Humphrey, Alaska CSC manager

Lynn Johnson, president

Forr

est

Cra

neFo

rres

t Cra

ne

ENSR InternationalENSR has operated an

Anchorage office since 1977, pro-viding a wide range of environ-mental and energy developmentservices. The firm has 70 officesworldwide and 45 in the UnitedStates. In Alaska the firm’s com-mitted workforce focuses on envi-ronmental compliance, planning,and permitting; also assessmentand integrated closure of contami-nated sites for industrial, commer-cial and military clients.

Chris Humphrey, Alaska CSCmanager, has been with the firm10 years and in Alaska since1976. He previously held techni-cal and management positionswith the petroleum sector, engi-neering firms and the Air Force.Married with children, Chriscoaches soccer and is active inthe children’s sports activities.The luck of the draw helped himand a daughter snag a fishing rod,complete with rainbow trout, thisFather’s Day.

THE REST OF THE STORYPetroleum News • Alaska 23Week of December 1, 2002

Also mature oil province

On the oil side, he said, more than 907 mil-lion barrels of oil have been produced from theCook Inlet basin, but production has declinedsince 1973.

Redoubt Shoals, expected to begin produc-tion in the near future, is expected to raiseCook Inlet oil production to more than 20 mil-lion barrels per year, Popp said, “the most sig-nificant increase in oil production levels since1983.”

But new oil prospects under developmentare few.

Forest Oil faced a number of challenges inbringing Redoubt Shoals into production, pri-marily “several legal challenges” which have“resulted in delays completing the necessarydrilling and ramp up to production.”

ConocoPhillips Alaska is in the initialexploration stages at Cosmopolitan offshorenear Stariski Creek north of Anchor Point,and has drilled an initial exploration well onwhich no information has been released.

Popp said that a second exploration wellhas been proposed “and is awaiting approvalby ConocoPhillips corporate headquarters.”

That well, if approved, would likely bedrilled in early 2003 to “delineate theprospects potential for economic oil produc-tion.

“If this well provides positive results, thenConocoPhillips could begin developmentand production efforts by late 2003,” he said.

Other oil prospects are tentative, with themost likely in federal outer continental shelfwaters which begin off Ninilchik and runsouth to the entrance of Cook Inlet. The draftenvironmental impact statement is expectedto be completed in November, Popp said,and if sales are scheduled they could be heldin 2004 and 2006. ◆

ConocoPhillipslooking at secondquarter sidetrackat Cosmopolitan

A Nov. 14 letter from the U.S.Department of the Interior’s MineralsManagement Service to ConocoPhillipsAlaska Inc. says the company requesteda suspension of operation for the twofederal leases in the Cosmopolitan unitnorth of Anchor Point on Nov. 5 andsubsequently told MMS that a sidetrackto the Hansen No. 1 well could startsometime in the second quarter of 2003.

MMS said that ConocoPhillips com-mitted to drilling a sidetrack to theHansen No. 1 well as part of the first planof exploration for the unit.

The company had the option in the unit plan of acquiringthree-dimensional seismic or drilling a second well in the unit.

The Cosmopolitan unit covers some 24,600 acres in twofederal leases and seven state leases at the Starichkof fieldoffshore the Kenai Peninsula. ConocoPhillips has a majorityworking interest and is the field operator. Forest Oil Corp. andDevon Energy Production Co. L.P. also hold working inter-

ests in the unit. ConocoPhillips Alaska spokeswoman Natalie Knox told

PNA Nov. 25 that the company has not made public anyinformation on the Hansen No. 1 well at its Cosmopolitanunit. The well was spud late last year from an onshore loca-tion to a bottomhole targeting the Hemlock formation in theoffshore unit and has been suspended since early this year.

—Kristen Nelson, PNA editor-in-chief

ConocoPhillips Cosmopolitan project; photo taken Sept. 29, 2001.

Lin

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continued from page 21

PERMITTING

in the oil sands business .... but besidesKyoto, there are other risks in the oil sands— oil prices, exchange rates, capital costs,”he told the Calgary Herald.

In recent weeks, other companies withoil sands projects on the table — Petro-Canada, Canadian Natural Resources Ltd.,EnCana Corp., TrueNorth Energy Corp.and Husky Energy Inc. — have eitherslowed plans for billions of dollars worthof investment or warned they will seekrefuge from Kyoto in the United States bybuilding upgraders south of the border.

Industry concerns not answered

The updated federal plan fell short ofanswering industry concerns about costs,responsibilities and timelines and wasdescribed by Pierre Alvarez, president ofthe Canadian Association of PetroleumProducers, speaking for producers of 97percent of Canada’s oil and natural gas, as“very, very heavy-handed..”

He said there had been some importantsteps forward by the federal government inits “language about competitiveness, aboutcosts, about what’s achievable for individ-ual sectors.” But Alvarez said the plan wasstill not a basis for long-term planning ofmajor projects. ◆

continued from page 14

PLAN

The updated federal plan fell short ofanswering industry concerns aboutcosts, responsibilities and timelinesand was described by Pierre Alvarez,president of the Canadian Associationof Petroleum Producers, speaking forproducers of 97 percent of Canada’s

oil and natural gas, as “very, veryheavy-handed..”

ADVERTISEMENT24 Petroleum News • Alaska Week of December 1, 2002