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page Palin drops FY10 revenue, spending; 9 nearly $17 shaved from oil forecast Vol. 14, No. 8 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of February 22, 2009 • $2 PIPELINES & DOWNSTREAM February Mining News inside Pricing not illegal Two reports say high gas prices last year didn’t break the law; a pair of proposed bills would tie Alaska gas prices to Washington state rates By ERIC LIDJI started to fall across the Petroleum News country. In the early months of pair of reports say mar- SARAH HURST 2008, Anchorage paid less ket forces, and not ille- than Seattle for a gallon of A gal activity, caused high gas, but by fall, the average gasoline prices in prices in Anchorage were Alaska last year, but consid- more than a dollar above erable public outrage about those in Seattle. pump prices above the JAY RAMRAS BILL WIELECHOWSKI The growing difference national average and a pair of between Alaska and the bills working through the Legislature guarantee Lower 48 prompted two investigations, one by the the issue isn’t over. Attorney General’s office and another by the High gasoline prices last year caused national House Judiciary Committee. frustration, but the mood was heightened in Alaska The two reports describe similar market condi- as prices at the pump stayed high, even as they see GAS PRICES page 25 NATURAL GAS Looks like a gas pipline Prentice: Mackenzie has ‘never been closer’; hint of Deh Cho breakthrough By GARY PARK to proceed. I continue to be optimistic.” For Petroleum News In January Prentice said an offer of The February issue of North of 60 Mining News is enclosed federal financial support had been made he Mackenzie Gas Project has to the MGP proponents to support infra- received a double dose of good structure and preconstruction costs along AGIA coordinator Myers shares T news, with Environment Minister with unspecified incentives to share the Jim Prentice declaring that Canada risks and rewards. thoughts on gas line; Obama, has “never been closer” to moving ahead He said the MGP is a vital part of Harper taking the high-tech route with the Arctic venture at the same time Canada’s environmental agenda and fits that a major barrier to construction of a in with President Barack Obama’s goal of AS PREVIOUSLY REPORTED in Petroleum News, on JIM PRENTICE pipeline across aboriginal land showed reducing greenhouse gas emissions from Jan. 21, Gov. Sarah Palin named Mark Myers coordinator signs of toppling. coal, which accounts for about 70 percent of U.S. for the Alaska Gasline Inducement Act. Increasingly upbeat about the MGP in recent power generation. In a recent interview with Petroleum weeks, Prentice told a CTV program in Canada he However, Prentice said an Alaska gas project is News, Myers answered the following is confident the environmental phase will be com- lagging far behind the MGP, with environmental questions about the proposed North pleted late this year and the federal government is and other regulatory processes yet to start. Slope natural gas pipeline, and his role “working with the proponents to make sure we in making it a reality. have a fiscal framework that will allow the project Q. Who do you think will ultimately see MAC LINE page 28 own the gas line? TransCanada through LAND & LEASING TC Alaska or North Slope producers BP and ConocoPhillips, who own the com- petitive Denali project? A. “Certainly the state’s committed to Certification dispute grows build it through the AGIA contract with TransCanada. Whether or not the producers will own part of that pipeline, Industry disputes division’s determination for BRPC North Shore well see INSIDER page 22 By KRISTEN NELSON Previous certifications — many dat- Petroleum News ing from decades ago — contain no time limit for the lease extension, although the BREAKING NEWS hat was something of a side issue state does have the authority to order a when the State of Alaska termi- well certified capable of producing in nated the Point Thomson unit in 3 Juggling environment, economy: Alberta revises oil W paying quantities into production. late 2006 for lack of development Banks told Petroleum News Feb. 19 sands strategy with 20-year blueprint; focuses on environment, benefits is starting to draw more attention. that it was not the state’s intention to That issue is certification of wells allow certification to hold leases indefi- 4 Coastal districts want ACMP control: Administration, capable of producing in paying quanti- KEVIN BANKS nitely, but as a step in moving a prospect industry oppose proposal to form board with authority to OK plans ties. into production. Current focus is around a July 10, 2008, letter The July letter apparently went unnoticed last from Alaska Division of Oil and Gas Director 10 More Cook Inlet gas storage: New storage leases for summer, but was challenged by ConocoPhillips, Kevin Banks. Judging from that letter, the division ExxonMobil and Chevron when they became facilities would bolster winter gas supplies, improve gas field economics is changing how it certifies wells judged capable of producing in paying quantities. see CERTIFICATION page 20 2 PETROLEUM NEWS • WEEK OF FEBRUARY 22, 2009 contents Petroleum News A weekly oil & gas newspaper based in Anchorage, Alaska ON THE COVER GOVERNMENT Pricing not illegal 3 Juggling environment, economy Two reports say high gas prices last year didn’t Alberta takes new stab at oil sands strategy, break the law; a pair of proposed bills would focusing on environment, benefits tie Alaska gas prices to Washington state rates 4 Coastal districts want ACMP control Looks like a gas pipeline 15 British Columbia enters deficit country Prentice: Mackenzie has ‘never been closer’; 15 LB&A OKs renewable fund program hint of Deh Cho breakthrough Certification dispute grows LAND & LEASING Industry disputes division’s determination 12 DNR concludes Point Thomson hearing for BRPC North Shore well ExxonMobil moving ahead with ice roads; Nabors OIL PATCH INSIDER says rig will be ready to move out by mid-March; five to seven days to location 1 AGIA coordinator Myers shares thoughts on gas line 13 Potential Alaska state and federal oil and gas lease sales 22 Financial Times reports oil output near peak 23 Obama, Harper agree to pursue ‘green energy’ NATURAL GAS ALTERNATIVE ENERGY 8 Open house for Beluga-to-Fairbanks EIS 10 More Cook Inlet gas storage needed 7 Looking for biomass fuel alternatives DOG wants to issue new storage leases for facilities that Could wood and other biomass fuels become would boost winter gas supplies, improve field economics a more significant part of the Alaska energy mix? 11 Where from here on Cook Inlet gas? 14 Separating airplanes from wind turbines OUR ARCTIC NEIGHBORS EXPLORATION & PRODUCTION 17 Group analyzes Barents oil spill response 6 Rampart applies for Nenana access permit Workshop participants make 22 recommendations 9 BP has Flow Station 2 flow line spill to improve Norwegian-Russian cooperation 14 MGSC starts carbon disposal well in disputed area after an incident FINANCE & ECONOMY 17 Industry works with Russian reindeer herders 5 UK independent to acquire Bow Valley 17 StatoilHydro funds education in northwest Russia Dana Petroleum to buy Calgary-independent for C$240 PIPELINES & DOWNSTREAM million, assume nearly C$200 million in debt; 6 Enbridge gives Arctic gas cold shoulder impact for Alaska uncertain 8 More oil spill payments expected 9 Palin drops FY10 revenue and spending 18 US Supreme Court to hear Valdez case 16 Oil prices surge on falling inventories PETROLEUM NEWS • WEEK OF FEBRUARY 22, 2009 3 G GOVERNMENT Juggling environment, economy Alberta government takes new stab at oil sands strategy, focusing on environment and benefits By GARY PARK with oil sands development, including For Petroleum News cooperation with the industry to develop public infrastructure, he said his group he Alberta government has put out a members welcome any proposals to build 20-year blueprint to better manage its communities that offer employees a “quali- T oil sands, four years after its own initial ty of life that attracts and retains the kinds of missteps in getting to grips with the people we need to operate our facilities.” challenges of exploiting a vast resource — Neil Shelly, executive director of the a blunder that gave the formidable oil sand- Alberta Industrial Heartland Association — s’ critics free rein to influence public opin- a collection of municipalities north of ion. Edmonton where an upgrader-refining cen- Even the industry, through the Canadian ter has been taking shape — said the report Association of Petroleum Producers, made builds on a vision contained in last fall’s a belated concession a month ago, based on provincial energy strategy. the results of its own survey that it needed The focus it puts on creating a value- to do a “better job” of engaging Canadians added industry is a “step in the right direc- and policymakers in a debate on the future tion,” by taking bitumen-in-kind to encour- of the oil sands. age development of upgraders and petro- The government was equally culpable, to foster and encourage value-added devel- chemical facilities and by tackling heavy oil having tried in 2005 to impose a policy that opment to achieve the value chain’s full tolls to discourage shipments to the Chicago gave priority to development of the oil potential; promoting heavy oil pipeline tolls or Houston refinery areas. sands over everything else — the environ- that accurately reflect the costs of shipment; ment, social and health concerns and com- • Marketing and promoting Alberta’s Pace, scale criticized munity infrastructure. energy and environmental expertise on a On the flip side, Simon Dyer, director of For a province unaccustomed to back- global scale to “realize a knowledge-based the Pembina Institute’s oil sands program, lash against resource exploitation this might economy”; said the plan fails to address the No.