l P I P E L I N E S & D O W N S T R E A M

l F I N A N C E & E C O N O M Y

Vol. 25, No. 52 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of December 27, 2020 • $2.50

see AIDEA BID page 11

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

Sale of BP Alaska assets to Harvest/Hilcorp closes Dec. 18

Following conditional approval by the

Regulatory Commission of Alaska on

Dec. 14, on Dec. 18 BP and Harvest

Alaska completed the acquisition by

Harvest — a Hilcorp Energy affiliate —

of BP’s midstream assets in Alaska, BP’s

stake in the trans-Alaska oil pipeline and

Valdez Marine Terminal and in Alyeska

Pipeline Service Co. as well as BP’s

share of the Milne Point and Point

Thomson pipelines.

The upstream portion of the sale — BP’s share of the

see ACREAGE WITHDRAWN page 11

FERC approves Marathon’s Kenai LNG Terminal import project

On Dec. 17 the Federal Energy Regulatory Commission

approved a proposal to bring the Kenai LNG export terminal

in Nikiski back online as a limited-use import facility for nat-

ural gas from a “foreign location.”

Trans-Foreland will return to an active state the terminal’s

existing storage tanks, marine dock, transfer piping, boil-off

gas management system and ancillary facilities.

The application was filed on March 29, 2019, by Marathon

Petroleum subsidiary Trans-Foreland Pipeline, which also

owns and operates the adjacent Kenai Refinery. Trans-

Foreland proposed to “bring parts of the Kenai LNG Plant out

of current warm idle status by importing LNG and using the

LNG to cool existing LNG storage tanks and associated LNG

see LNG TERMINAL page 11

see BP SALE page 10

Happy holidays & best wishes in the New Year!

475K acres withdrawn from ANWR sale; Porcupine calving considered

The Department of the Interior’s Bureau of Land

Management has reduced the acreage available in its Jan. 6 oil

and gas lease sale within the Coastal Plain of the Arctic National

Wildlife Refuge, BLM said in a Dec 18 amendment to the

detailed statement of the sale.

BLM pulled 10 tracts totaling approximately 475,000 acres —

about 30% of the 1.56 million-acre coastal plain — after consid-

ering nominations and comments timely submitted in response to

a Nov. 17 call for nominations published in the Federal Register.

The withheld tracts, tracts 1 through 8, tract 11 and tract 12 are

in the southeast portion of the Coastal Plain.

BLM said the most substantive comments from organiza-

tions such as Canadian governmental entities, Audubon Society

ANS hits post-COVID high Markets shake off fears of US stimulus delays to focus on 2021 demand recovery

By STEVE SUTHERLIN Petroleum News

Despite a downward turn at the beginning of Christmas week, Alaska North Slope crude and Brent crude managed a nine-day streak priced above

$50 per barrel, with ANS closing Dec. 22 at $50.56,

down 95 cents and Brent closing at $50.08. West

Texas Intermediate closed at $47.02, off 72 cents.

Markets were rattled as the week opened on win-

ter solstice Monday Dec. 21 by a new strain of

COVID-19 identified in the U.K. which launched

new travel restrictions in Europe, including bans on

travel from the U.K. The U.K. government imposed

tighter restrictions in London and other cities, saying

the new strain exhibited a 70% faster spread than ear-

lier mutations.

ANS gapped down 2.4% to $51.51 Dec. 21, while

Brent dropped 2.6% to $50.91 and WTI lost 2.8% to

close at $47.74. The losses were the steepest since

Nov. 6.

On Dec. 18, ANS had closed up 68 cents at

Playing a new hand Set of pipeline options disclosed by Enbridge offer alternative link to Gulf Coast

By GARY PARK For Petroleum News

Calgary-based Enbridge, which owns North America’s largest oil pipeline network, has figured out that the uncer-

tain Keystone XL project is not the only

way to deliver hundreds of thousands of

incremental barrels of crude from

Alberta to the U.S. Gulf Coast.

Operating away from the harsh glare

of public attention, the company is assembling the

pieces that suggest it doesn’t need a transportation

system on the grand scale of Keystone XL to

achieve the same results.

A combination of Line 3, which is under con-

stant attack from Indigenous and envi-

ronmental activists despite having

obtained a full slate of regulatory

approvals, and Southern Access, which is

scheduled to start service in 2021, could

be the key link in Enbridge’s hopes of

optimizing its entire Mainline system

from Alberta to Ontario.

If the extension of Southern Access

does meet its latest startup date, six years

behind the original timetable, it will

carry 300,000 barrels per day on the US$765 mil-

lion, 167-mile route down Illinois from Flanagan

to Patoka.

Line 3, which replaces an aging pipeline, is

HEX CI still moving forward Focused on improving Kitchen Lights sustainability, but also looking at opportunities

By KAY CASHMAN Petroleum News

Since taking over operator-ship of the Cook Inlet Kitchen Lights unit on July 1

with its purchase of bankrupt-

cy debtor Furie Operating

Alaska LLC and related

firms, HEX Cook Inlet LLC

touts a surprisingly hefty list

of accomplishments.

The company, a joint venture between HEX

LLC (80%) and Rogue Wave AK LLC (20%), was

founded in 2020 by Alaskan John Hendrix, its pres-

ident and CEO. Hendrix, who was raised in Homer

and is an engineer, has close

to four decades of experience

in the energy industry in

Alaska, the Lower 48 and

internationally with Apache,

BP and Schlumberger.

In a Dec. 18 presentation to

a Commonwealth North study

group, Hendrix listed HEX

CI’s accomplishments, the

most recent being record natu-

ral gas production in 2020 of 15.4 million cubic

feet per day, as compared to about 12 million when

HEX took over on July 1. The others included:

• Timely and early payments on AIDEA loan.

see OIL PRICES page 12

see PIPELINE OPTIONS page 10

see HEX CI page 8

AIDEA might bid in ANWR lease sale; project in line with mission

At the Alaska Industrial Development

and Export Authority’s monthly board

meeting on Dec 23 a resolution allowing it

to bid in the Jan. 6 federal oil and gas lease

sale for the coastal plain of the Arctic

National Wildlife will be discussed in exec-

utive session and could then come up for a

vote in the public portion of the meeting.

The newly drafted Resolution G20-31

points out that one of the purposes of

AIDEA is to develop and provide financing

for industrial development and facilities that “are essential to the

development of the natural resources and the long-term economic

ALAN WEITZNER

JASON REBROOK

But the consultancy expects oil demand to resume its upward trajectory, at least for the rest of the decade. “Predictions that 2019 would turn out to be the peak for world oil demand seem unlikely to be

fulfilled.” Wood Mac said.

AL MONACO

JOHN HENDRIX KEVIN SMITH

http://www.petroleumnews.com

2 PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020

Petroleum News Alaska’s source for oil and gas newscontentsANS hits post-COVID high Markets shake off fears of stimulus delays to focus on recovery

Playing a new hand Pipeline options by Enbridge offer alternative link to Gulf Coast

HEX CI still moving forward Focused on Kitchen Lights sustainability; also eyeing opportunities

ON THE COVER

AIDEA might bid in ANWR lease sale; project in line with mission

Sale of BP Alaska assets to Harvest/Hilcorp closes Dec. 18475K acres withdrawn from ANWR sale; Porcupine calving consideredFERC approves Marathon’s Kenai LNG Terminal import project

ENVIRONMENT & SAFETY6 Update on Trading Bay slop oil release

3 Western coastal area open for tundra travelEXPLORATION & PRODUCTION

4 US drilling rig count climbs 8 to 3466 Corps issues Willow gravel work permit

5 NMFS OKs incidental take for Eni, Hilcorp

6 AEA completes transmission line purchase

GOVERNMENT

UTILITIES

3 Canada’s hydrogen strategy falls flat Government offers mere C$1.5B to stimulate investment in hydrogen lands; critic says Canada lags behind rival countries

2 Planned solar farm asks utility exemption Energy 49 asks RCA to exclude proposed 6 MW Houston facility from utility regulation; power will go to MEA, RCA will review contract

4 Comments due Feb. 8 on regulation changes BOEM, BSEE, propose changes to 2016 Arctic OCS exploration drilling rules for burdensome regs, to reflect new technology

Alaska’sOil and GasConsultants

GeoscienceEngineeringProject ManagementSeismic and Well Data

3601 C Street, Suite 1424Anchorage, AK 99503

(907) 272-1232(907) 272-1344

www.petroak.cominfo@petroak.com

l U T I L I T I E S

Planned solar farm asks utility exemption Energy 49 asks RCA to exclude proposed 6 MW Houston facility from utility regulation; power will go to MEA, RCA will review contract

By KRISTEN NELSON Petroleum News

E nergy 49 LLC has petitioned the Regulatory Commission of Alaska for exemption from regulation as a public utility for a proposed 6 megawatt solar farm in

the Houston area which would sell all energy generated to

Matanuska Electric Association through a special contract.

In a Dec. 3 filing, Jenn Miller, CEO of Renewable IPP as

manager of Energy 49, said the commission has approved

similar petitions in the MEA service area for Southfork

Hydro LLC and Fishhook Renewable.

Miller said the 6 MW AC solar farm would sell all the

power generated to MEA at wholesale prices. “The project

is slated to begin construction summer 2021 and begin oper-

ation by year end 2021,” she said, and is expected to “oper-

ate for 30 years, providing clean energy and will not increase

electricity cost to MEA members.”

Miller told the commission that compliance with its full

regulation would be “burdensome and redundant on this

small project.” The commission will approve Energy 49’s

power purchase agreement with MEA “through a special

contract filing, which provides regulatory oversight of the

project,” she said. “Energy 49 is also required to meet

MEA’s technical interconnection requirements to ensure

safe and reliable operations,” Miller said, and it would be an

unnecessary administrative burden on the commission to

also oversee regulation of the project.

Energy 49 also requested that RCA expedite its decision

on the project and issue a decision by March 31 “as this

enables funding to be released in time to support 2021 con-

struction” allowing private investors to qualify for 2021

Federal Investment Tax Credit of 22% before that rate steps

down in 2022.

“The 22% ITC is critical to support investible project

economics,” Miller said.

A Dec. 18 order from RCA designating a panel and

appointing an administrative law judge denied the request

for an expedited decision, saying it would issue a final order

no later than June 1, based on statutory requirements.

Renewable IPP operates solar power as a partner in the

Willow Solar Farm, which came online late last year and at

1.2 megawatts was then the largest solar farm in the state.

The expansion of that project to its 1.2 MW size was

financed by the Alaska Energy Authority.

A June report from the University of Alaska Fairbanks’

Center for Energy and Power said at the end of 2019 there

were some 8 MW of solar photovoltaic installations in the

state, including 5.6 MW net metered on the Railbelt, the 1.2

MW Renewable Independent Power Producers installation

in Willow and a 563 kilowatt utility installation in Fairbanks.

“In the last year alone, the installed capacity on the

Railbelt has nearly doubled,” the UAF report said.

Energy 49 is an Anchorage-based limited liability com-

pany managed by Renewable IPP LLC, the company told

RCA. It described Renewable IPP as “an ‘Alaska Grown’

small business which develops, constructs and operates util-

ity scale solar farms in Alaska,” and said Energy 49 was

see SOLAR FARM page 5

To advertise: Contact Susan Crane

at 907.250.9769

http://www.petroak.com

By GARY PARK For Petroleum News

T he goals are high flying: A gain of 350,000 jobs over 30 year, a lowering of Canada’s carbon emissions by 45 mil-

lion metric tons a year by 2030 and a com-

bination of public and private investment

of C$5 billion to C$7 billion over the next

five years.

Those are three visions laid out in a 104-

page Hydrogen Strategy for Canada

unveiled by the federal government on

Dec. 16, which one observer said could

have been covered in four pages.

But it’s unclear whether the government

believes as strongly in its claims as it does

in its argument that hydrogen could under-

pin a domestic market of C$50 billion a

year and produce a clean-burning fuel that

Natural Resources Minister Seamus

O’Regan estimates could meet 30% of

Canada’s energy needs by 2050.

For many observers the long-touted

plan amounted to someone pouring water

on a fireworks display — lots of fizzing

and spluttering, but not enough details to

represent a commitment.

Regional hubs Among its vague ideas, the government

proposes to establish several regional hubs

across Canada in areas where expertise in

hydrogen already exists — in other words

a potential vote-catching move beyond the

core natural gas supplies that would under-

pin the industry.

The hubs would be located in British

Columbia, Ontario, Quebec and the

Atlantic region which have ports that could

become export outlets for hydrogen, and at

the high-traffic corridor on the Windsor,

Ontario-Detroit border crossing — the

busiest between Canada and the U.S. —

where hydrogen could meet fuel demands

for heavy equipment and transport.

Despite all O’Regan’s grand declara-

tions that “hydrogen’s moment has come”

and that Canada is ready to harness the

global momentum powering demand for

hydrogen — which one study quoted in the

strategy estimated hydrogen energy could

become a C$12 trillion industry by 2050 —

the government offer to stimulate spending

amounted to a mere C$1.5 billion from its

Low Carbon and Zero Emissions Fund,

fueled by carbon taxes.

“Spread across all technologies, that’s

not a large investment compared with other

jurisdictions,” said Simon Dyer, deputy

executive director at the Alberta-based

think-tank Pembina Institute.

However, he expected intense competi-

tion for the money, which would ensure

that only the best projects were funded.

Temporary support The government said that “while the

sector must ultimately be self-sustaining,

temporary support is needed in the next

five to 10 years to attract and de-risk indus-

try investment.”

That includes spending on infrastruc-

ture, such as gas pipelines and subsidies to

persuade industrial and transport sectors to

pivot to hydrogen, while rail, aviation,

mining, oil refining and ammonia and steel

production are all identified as industries

that could use the gas to help lower carbon

output.

“Ultimately, the market will decide

where best to deploy hydrogen once

greater supply becomes available in

Canada,” said the strategy. “The two big

drivers will be cost competitiveness com-

pared to alternative energy sources that can

serve each end-use, and decarbonization

potential which will ultimately be linked to

the economics as carbon pollution pricing

reflects the true price of emissions.”

The Alberta government offered only a

subdued response, with Energy Minister

Sonya Savage suggesting the strategy

will rely heavily on “our natural resource

production and emissions reduction tech-

nology.”

Canada’s Environment and Climate

Change Minister Jonathan Wilkinson, seen

as an equal partner with O’Regan in craft-

ing the strategy, said that as countries

around the world strive for net-zero green-

house gas emissions by 2050, Canada is

“well positioned to be among the global

leaders on hydrogen production (which

could) put Canada on a path to exceeding

our 2030 Paris (climate change)

Agreement target.”

On the environment front, the docu-

ment notes that the European

Commission is already creating a meas-

urement system that takes into account

the total GHG emissions associated with

hydrogen so that clean produces can be

granted a certification.

The next goal for Canada in its so-called

“call for action” is to work on developing

and adopting national definitions and stan-

dards for “clean” hydrogen based on car-

bon intensity thresholds.

It starts down the road far behind 20

countries around the world that have devel-

oped their own hydrogen strategies, many

of which have spent or earmarked billions

of dollars to accelerate hydrogen technolo-

gies within their borders.

British Columbia success story So far, one of the few success stories

in Canada is British Columbia’s hydro-

gen fuel cell manufacturer Ballard Power

Systems, which has accumulated more

than 1,400 patents and patent applica-

tions, with annual revenue of more than

US$100 million from sales of its fuel cell

stacks that are used in thousands of

buses, trucks and warehouse forklifts

around the world.

l G O V E R N M E N T

Canada’s hydrogen strategy falls flat Government offers mere C$1.5 billion to stimulate investment in hydrogen lands; critic says Canada lags behind 20 rival countries

PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020 3

229-6000

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EXPLORATION & PRODUCTIONWestern coastal area open for tundra travel

The western coastal area of the North Slope opened for winter season tundra trav-

el Dec. 17.

The Alaska Department of Natural Resources’ Division of Mining, Land and

Water, said Dec. 17 that it had documented that soil temperatures and snow cover

within the western coastal area have met criteria for opening — 6 inches of snow and

colder than minus 5 degrees C at 30 centimeters depth.

In a Dec. 21 status report the division said the western coastal area continued to

be the only area to have met the division’s requirements.

The opening applies only to operators with valid off-road vehicle travel permits

for operations on state-owned lands on the North Slope.

While overall snow cover is good, it may be thin in some areas, the division said

Dev. 17, and those areas should be avoided or special construction methods used to

protect the tundra surface. The division’s off-road winter vehicle requirements

include adequate frost and snow cover and approval of individual routes of travel.

“Site inspections will be conducted periodically by state personnel to ensure com-

pliance,” the division said.

DNR staff will be on the Slope the week of Jan. 4 to continue monitoring snow

conditions and soil temperatures, with the next off-road travel status report expected

out around Jan. 11.

For question contact the division’s Northern Region Land Section in Fairbanks at

907-451-2740.

—PETROLEUM NEWS

see HYDROGEN STRATEGY page 5

The government said that “while the sector must ultimately be self-sustaining, temporary support is

needed in the next five to 10 years to attract and de-risk industry

investment.”

http://www.denaliuniversal.com

4 PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020

ADDRESS P.O. Box 231647 Anchorage, AK 99523-1647 NEWS 907.522.9469 publisher@petroleumnews.com CIRCULATION 907.522.9469 circulation@petroleumnews.com ADVERTISING Susan Crane • 907.770.5592 scrane@petroleumnews.com

OWNER: Petroleum Newspapers of Alaska LLC (PNA) Petroleum News (ISSN 1544-3612) • Vol. 25, No. 52 • Week of December 27, 2020

Published weekly. Address: 5441 Old Seward, #3, Anchorage, AK 99518 (Please mail ALL correspondence to:

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Petroleum News and its supplement, Petroleum Directory, are owned by Petroleum Newspapers of Alaska LLC. The newspaper is published weekly. Several of the individuals

listed above work for independent companies that contract services to Petroleum Newspapers of Alaska

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Kay Cashman PUBLISHER & FOUNDER

Mary Mack CEO & GENERAL MANAGER

Kristen Nelson EDITOR-IN-CHIEF

Susan Crane ADVERTISING DIRECTOR

Heather Yates BOOKKEEPER

Marti Reeve SPECIAL PUBLICATIONS DIRECTOR

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Alan Bailey CONTRIBUTING WRITER

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Forrest Crane CONTRACT PHOTOGRAPHER

Renee Garbutt CIRCULATION MANAGER

ANWR: No Seismic? No Problem.

Learn about an alternative land valuation strategy using our proprietary modeling system

for undiscovered oil.

Explore a demo scenario in the ANWR 1002 Area here: https://bit.ly/3m0EBok

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EXPLORATION & PRODUCTIONUS drilling rig count climbs 8 to 346

The Baker Hughes U.S. rotary drilling rig count continued to increase, up by eight

the week ending Dec. 18 to 346, still down substantially, by 467, from a count of 813

a year ago.

When the count hit 244 the week of Aug. 14, it was not just the low for 2020, but

the lowest it has been since the Houston based oilfield services company began issuing

a weekly U.S. rig count in 1944.

Prior to this year, the low was 404 rigs in May 2016. The count peaked at 4,530 in

1981.

At the beginning of the year the count was in the low 790s, where it remained

through mid-March, when it began to fall, dropping below what had been the historic

low in early May with a count of 374 and continuing to drop through the third week of

August when it gained back 10 rigs.

The Dec. 18 count includes 263 rigs targeting oil, up five from the previous week

but down 422 from 685 a year ago, 81 rigs targeting gas, up by two from the previous

week but down 44 from 125 a year ago, and two miscellaneous rigs, up by one from

the previous week and down one from a year ago.

Twenty-one of the holes were directional, 308 were horizontal and 17 were vertical.

Alaska count unchanged New Mexico (66) was up by six rigs from the previous week, while Texas, with the

most active rigs at 158, was up three from the previous week, although still down 260

from 418 a year ago.

Wyoming (4) was down one rig from the previous week.

Rig counts were unchanged in the remaining states: Alaska (3), California (6),

Colorado (7), Louisiana (40), North Dakota (11), Ohio (5), Oklahoma (14),

Pennsylvania (19), Utah (3) and West Virginia (9).

Baker Hughes shows Alaska with three active rigs Dec. 18, unchanged from the pre-

vious week but down by three from a year ago.

The rig count in the Permian, the most active basin in the country, was up by six

from the previous week at 174, but down 240 from a count of 414 a year ago.

—KRISTEN NELSON

l G O V E R N M E N T

Comments due Feb. 8 on regulation changes BOEM, BSEE, propose changes to 2016 Arctic OCS exploration drilling rules to remove burdensome regs, reflect new technology

By KRISTEN NELSON Petroleum News

P roposed revisions to Arctic exploratory drilling regulations, announced Nov. 19 by the U.S.

Department of the Interior’s Bureau of

Ocean Energy Management and Bureau

of Safety and Environmental

Enforcement, were published in the

Federal Register Dec. 9, with commits

due by Feb. 8.

Interior’s November statement said

the purpose of the changes was “to

remove unnecessary, burdensome provi-

sions while ensuring that energy explo-

ration on the Arctic Outer Continental

Shelf remains safe and environmentally

responsible.”

“As countries like Russia increase

their presence in the Arctic — including

the use of U.S. technologies to develop

their seabed resources, it is increasingly

important to ensure that the United States

has a strong presence in the Arctic OCS,”

said Deputy Secretary of the Interior Kate

MacGregor. “The Beaufort and Chukchi

Seas have a long legacy of oil and gas

development — we believe these pro-

posed revisions will better harness new

technological innovation and best science

to allow for responsible domestic energy

development off the coast of Alaska.”

Executive Order 13795, issued by

President Donald Trump in 2017, directed

Interior to review the 2016 Arctic

Exploratory and Drilling Rule and report

recommendations, Interior said.

The department said the revision team

included career subject matter experts and

regulatory specialists who looked to addi-

tional research in the review, including a

BSEE-commissioned technology assess-

ment program study, National Petroleum

Council reports and consultations with

“leaders of more than 23 Alaska Native

tribes, Alaska Native Claims Settlement

Act (ANCSA) corporations and munici-

palities throughout Alaska.”

The department said the revision team

also addressed an issue not in the 2016

rule, lease suspensions for seasonal

weather-related constraints.

2016 rule The Federal Register notice said the

2016 rule was a response to BSEE- and

BOEM-initiated environmental and safe-

ty reviews based on experience in the

Arctic OCS “gained from Shell’s 2012

and 2015 Arctic operations, and concerns

expressed by environmental organiza-

tions and Alaska Natives.”

The notice says the 2016 rule was

“narrowly focused, applying solely to

exploratory drilling operations conducted

during the Arctic OCS open-water

drilling season by drilling vessels and

‘jack-up rigs’ (collectively known as

mobile offshore drilling units or MODU)

in the Beaufort Sea and Chukchi Sea

Planning Areas,” designed to ensure those

exploration operations were safe “while

taking into account the unique conditions

of the Arctic OCS, as well as Alaska

Natives’ cultural traditions and their need

for access to subsistence resources.”

The BSEE and BOEM review of the

2016 rule takes into account a congres-

sional declaration in the Outer

Continental Shelf Lands Act that policies

and procedures for managing oil and gas

development in the OCS be “intended to

result in expedited exploration and devel-

opment of the Outer Continental Shelf in

order to achieve national economic and

energy policy goals, assure national secu-

rity, reduce dependence on foreign

sources, and maintain a favorable balance

of payments in world trade.”

The bureaus have also reviewed new

information on technological develop-

ments in an ice environment and based on

that review are proposing revisions in the

2016 rule to “reduce unnecessary burdens

on stakeholders while still maintaining

safety and environmental protection.”

Proposed changes Proposed changes include:

•BSEE proposes to eliminate reference

to capturing water-based muds and cut-

tings where subsistence values might be

impacted because the requirement

appears to overlap with regulation by the

U.S. Environmental Protection Agency

see DRILLING RULES page 5

http://www.tanks-a-lotinc.comhttp://www.petroleumnews.com

PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020 5

l G O V E R N M E N T

NMFS OKs incidental take for Eni, Hilcorp By KRISTEN NELSON

Petroleum News

T he National Marine Fisheries Service has approved applications from Hilcorp Alaska and Eni US Operating allowing issuance of letters of authorization for

the incidental taking of small numbers of marine mammals

incidental to ice road and ice trail construction, maintenance

and operation on Alaska’s North Slope from 2020-25.

In a Dec. 22 Federal Register notice the agency said the

takes authorized would be incidental to ice roads and ice

trails construction and maintenance.

“Hilcorp and Eni plan to conduct necessary work,

including use of heavy machinery on ice, to facilitate access

to North Slope offshore oil and gas facilities. The action

may incidentally expose marine mammals occurring in the

vicinity to elevated levels of sound, human presence on ice

habitat, and interactions with heavy machinery, thereby

resulting in incidental take, by Level A and Level B harass-

ment and serious injury or mortality,” the agency said in the

Federal Register notice.

Hilcorp conducts oil and gas operations at Northstar pro-

duction facility and Eni conducts oil and gas operations at

Spy Island drill site.

Hilcorp constructs annual ice roads and trails allowing

access between West Dock at Prudhoe Bay and Northstar,

while Eni constructs annual ice roads and trails between the

Oliktok production pad and the Spy Island drill site. Eni also

builds an annual ice road from shore to the Oooguruk drill

site.

Hilcorp’s Northstar ice road is built to transport person-

nel, equipment, materials and supplies, and allows standard

vehicles to be used, but depending on operational needs and

weather, in some years Hilcorp may build only a primary

ice trail which can support only tracked, lighter-weight

vehicles.

Eni builds a single ice road and three ice pads each year,

with two floating ice pads used for parking areas at Spy

Island and one grounded ice pad at the Oliktok Point end of

the ice road.

On Jan. 17, 2020, NMFS published a proposed rule and

regulations to govern takes of marine mammals incidental

to Hilcorp and Eni’s ice roads and trails construction and

maintenance, requesting comments.

NMFS made some changes in response to comments,

including revised buffers for seal avoidance and an addi-

tional monitoring and reporting measure requiring Hilcorp

and Eni to engage local hunters through the Ice Seal

Committee to gather recommendations on methods for

ringed seal detection along sea ice roads and trails and

incorporate the recommendations into training materials for

personnel and “include the methods used for detection of

seals and seal structures with an assessment of their effec-

tiveness in the final reports.” l

The strategy has pinpointed several

transport, power generation and industri-

al sites that could become regional proj-

ect hubs over the next five years, includ-

ing Alberta’s Industrial Heartland near

Edmonton, which already has access to

plentiful supplies of natural gas and car-

bon capture and storage facilities.

One issue the strategy seems destined

to stir up is the emerging debate led by

environmental groups who argue that pro-

moting “blue” hydrogen, derived from

natural gas, with resulting carbon emis-

sions trapped carbon capture and storage

technologies, would amount to subsidies

for the oil and gas sector. A group of envi-

ronmental and non-profit groups recently

urged the federal government instead to

focus on greener options. l

continued from page 3

HYDROGEN STRATEGY

and “might result in BSEE issuing requirements that

contradict EPA’s requirements.”

•Source control and containment equipment would con-

tinue to be required when the operator is drilling or working

below surface casing, but BSEE proposes to allow the oper-

ator to adjust the point during operations when it must posi-

tion its capping stack “so that it is available to arrive at the

well location with 24 hours after a loss of well control.” If

the operator can demonstrate that operations would not

encounter any abnormally high-pressured zones or other

geological hazards before reaching the last casing point

prior to penetrating a zone capable of flowing hydrocarbons

in measurable quantities, “then BSEE will allow the opera-

tor to delay its positioning of the capping stack until reach-

ing that casing point.”

•BSEE also proposes to eliminate the requirement that

containment dome and cap and flow system be positioned

to arrive at the well location within seven days of loss of

well control because a study shows meteorological condi-

tions in the Beaufort and Chukchi seas are “key factors lim-

iting the time periods when SCEE may be safely deployed

throughout the Arctic OCS,” and it isn’t practical for the

agency to prescribe that certain SCEE “be positioned within

proximity to a well location when the conditions for safely

deploying this equipment in the Arctic OCS are limiting.”

•Same season relief well and subsea isolation devices

requirements would be revised to provide the operator the

option of using an SSID or having access to a relief rig by

providing an operator the opportunity to adjust when during

operations it must stage its relief rig from when working

below surface casing to when drilling or working below

“the last casing point prior to penetrating a zone capable of

flowing hydrocarbons in measurable quantities” if the oper-

ator can demonstrate no abnormally high-pressured zones

or other geological hazards would be encountered before

reaching the last casing point.

•BSEE proposes to clarify when mudline cellars are

required since the existing regulations can be read to require

use of mudline cellars in all cases except when the cellar

would present an operational risk “and that was not BSEE’s

intent,” the agency said.

•BOEM proposes to eliminate the requirement for an

integrated operations plan because the information required

in the IOP overlaps that required in an exploration plan “and

the IOP’s early information sharing is unnecessary in light

of BOEM’s practice for reviewing and coordinating review

of the EP.”

Additional issue The proposed rule also considers an issue not addressed

in the 2016 rule — seasonal weather-related constraints in

the Arctic OCS.

BSEE is proposing to add a new provision to its regula-

tions which would provide operators who are conducting

operations but prevented by seasonal constraints from com-

pleting the operations to obtain a suspension of operations

which “would suspend the running of the lease term and

effectively extend the term of the affected lease by a period

equivalent to the period of such suspension,” providing

operators who are “otherwise ready and able to conduct

drilling operations with additional time to diligently explore

their leases, without facing lease expiration due to interfer-

ence by seasonal constraints unique to the Arctic.” l

continued from page 4

DRILLING RULES

formed so that private investment could fund and own the

Houston solar farm. Houston is the only project planned by

Energy 49 at this time “and exemption (from utility regula-

tion) is requested solely for the Houston Solar Farm project

rather than the entity of Energy 49,” the company said.

The Willow Solar Farm Pilot, a 100 kW project, and the

900 kW Willow Solar Farm Expansion are Renewable IPP’s

two completed solar projects.

“Both of these projects were delivered under budget and

sell power to MEA at their avoided cost,” the company said.

The Willow expansion is owned by AK Renewable

Energy Partners and managed by Renewable IPP; AK

Renewable Energy has a contract, approved by RCA, to sell

power to MEA.

Energy 49 is working with MEA on a contract for power

from the Houston solar farm and estimates that contract will

be submitted by MEA to RCA for approval in January.

Renewable IPP is in the development stage for the

Chugach Solar Farm, which would be a 9.6 MW Anchorage

installation selling power to Chugach Electric Association.

Renewable IPP said in a November fact sheet on the

Chugach project that it is in the process of leasing land, com-

pleting detailed grid studies, agreeing on power purchase

terms with Chugach Electric and finalizing private invest-

ment.

That project, representing $12 million of private invest-

ment, is planned for 2022. l

continued from page 2

SOLAR FARM

6 PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020

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UTILITIESAEA completes transmission line purchase

The Alaska Energy Authority has completed its $17 million purchase from Homer

Electric Association of the 39.3-mile electricity transmission line between the Sterling

Substation and Quartz Creek on the Kenai Peninsula. The transmission line, referred

to as the SSQ line, is critically important for the shipment of power from the Bradley

Lake hydroelectric plant in the southern Kenai Peninsula to electric utilities elsewhere

on the Alaska Railbelt electricity system.

Bradley Lake supplies the least expensive power available on the Railbelt electric-

ity grid. The facility is owned by AEA, operated by HEA and managed by a commit-

tee with members from the Railbelt utilities and AEA. The objective behind the pur-

chase of the SSQ is to align the management of the line with the operation and use of

Bradley Lake.

“This acquisition furthers AEA’s mission to reduce the cost of energy in Alaska,”

said AEA Board Chair Dana Pruhs. “The addition of these assets results in the SSQ

line becoming part of AEA’s Bradley Lake Project with better cost alignment and will

facilitate upgrades benefiting Alaska ratepayers.”

“This purchase marks a pivotal moment in the history of our partnerships,” said

AEA Executive Director Curtis Thayer. “The transaction brings significant benefits to

customers today and into the future — including better cost alignment, increased reli-

ability, and future prospects for upgrades to the line, which would decrease line losses

and allow for increased power transmission north, and unconstraining Bradley

power.”

“This transmission line is key in delivering consistently low-cost renewable hydro-

electric power to some of the largest population centers in the state,” said Tony Izzo,

chair of the Bradley Lake Project Management Committee and CEO of Matanuska

Electric Association. “We applaud the Alaska Energy Authority’s leadership in part-

nering with the utilities to provide energy security and stabilize costs for ratepayers

throughout the region.”

—ALAN BAILEY

To advertise in Petroleum News, contact Susan Crane

at 907.250.9769petroleumnews.com

EXPLORATION & PRODUCTIONCorps issues Willow gravel work permit

ConocoPhillips Alaska has received a permit from the U.S. Army Corps of

Engineers for gravel work at Willow.

The final environmental impact statement for the project was released by the

federal Bureau of Land Management Aug. 14, followed by a record of decision

on the final EIS on Oct. 26.

The Corps permit, dated Dec. 18, is for the discharge of clean fill and associ-

ated work in waters of the U.S. for construction of the Willow master develop-

ment project at portions of the Bear Tooth and Greater Mooses Tooth units in the

National Petroleum Reserve-Alaska. The permit expires Dec. 31, 2025.

The company said in July that it expected a final investment decision on

Willow this year and first oil in 2025-26.

ConocoPhillips Alaska spokeswoman Natalie Lowman told Petroleum News

by email in October after the Willow ROD was released that it allowed the com-

pany to move forward with project planning.

“A decision on moving into FEED (Front End Engineering and Design) will be

made later this year, but project construction could begin in 2021 subject to

receiving regulatory approvals,” she said.

In the company’s Oct. 29 third quarter earnings conference call, Matt Fox,

ConocoPhillips executive vice president and COO, said the company is moving

forward with the Willow project, but that “assumes taxes will not increase,” refer-

ring to Ballot Measure 1 on Alaska’s November general election ballot. “If it pass-

es, we might want to reconsider the timing,” he said.

That ballot measure was defeated.

—KRISTEN NELSON

Update on Trading Bay slop oil release In a Dec. 17 situation report on the Dec. 15 slop oil release at Hilcorp Alaska’s

Trading Bay production facility, the Alaska Department of Environmental

Conservation’s Division of Spill Prevention and Response said Hilcorp and Cook

Inlet Spill Prevention and Response Inc. personnel were on site Dec. 17 continu-

ing to recover oil from the containment area, with 17 barrels of the 190-barrel

release recovered.

The release occurred during a transfer of slop oil from Tank 4 to the slop oil

tank, TK-9500. As that was occurring the operator noticed the TK-9500 tank level

was not increasing proportionately to the decrease in the level of Tank 4, and after

visual inspection, the operator observed oil under and around the edges of the sec-

ondary containment liner.

The division said the operator immediately isolated tank TK-9500 and the

leaking line.

Hilcorp describes slop oil “as oil that includes more water than their specifica-

tions for selling that oil,” the division said, with the slop oil going through addi-

tional treatment to remove excess water, after which it put back into the oil pro-

cessing system.

In a final situation report, issued Dec. 22, the division said that as of Dec. 21

115 barrels of slop oil had been recovered.

“Response personnel continue to recover oil from the containment area with a

vac truck,” the division said, and Hilcorp and its contractor Chosen Construction

are working to remove snow and ice in preparation to excavate the site of impact-

ed soils and inspect the ruptured line.

The division said Dec. 21 that CISPRI personnel were being demobilized and

Chosen Construction has installed heaters to thaw certain areas within the con-

tainment area.

“Once the collection of oil with a vac truck is complete, personnel will work

on small sections to scrape up contaminated soil. Excavation of the compromised

line is anticipated to begin soon to uncover the pipeline point of failure,” the divi-

sion said, with response actions, sampling and waste disposal continuing to be

coordinated with Hilcorp and DEC.

—KRISTEN NELSON

ENVIRONMENT & SAFETY

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PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020 7

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• Majority of field operations contract-

ing turned over to Alaska-based

Udelhoven Oilfield Services, which was

founded in Kenai in 1970 by Jim

Udelhoven who Hendrix said July 7 is

“one of those men

whose word you

can trust with a

handshake.”

• Hired Alaskan

Kevin Smith (first

employee ever for

Furie in the field),

who had retired

from BP after a 25

year-plus career on

the North Slope to

take the position.

• Brought in production safety man-

agement coach Daryl Leech on Aug. 21.

• Anchorage office functioning vs. a

Houston office.

• Anchorage local employees up

500%, field employees up 1000%.

• Established data management con-

trol.

• Performing well surveys on A1 and

A2A (two of the field’s four production

wells).

• Entered A4 well, fishing attempted,

punched tubing, production achieved.

“When we took over, we basically had

to go in and fix everything,” Hendrix

said. “There was not one Alaska person

working in our field (including contractor

personnel). There was only one person in

the Anchorage office. … Well files were

in boxes. … We’re going to have to go

back and work all of the wells over to

have access to all the original reserves

because in a lot of it you have tubing

inside the well covering up the flow,” he

said.

Praised AIDEA When HEX took over operations on

July 1, there were three wells in the unit

that weren’t producing as much as they

could be and a fourth well, A-4, the

newest well, which was offline because

the company was not allowed to produce

from the Sterling formation. There were

two wireline fish and a tubing plug in the

well which prevented HEX from access-

ing it and adding perforations to the

Beluga formation.

“It was a journey, it was a challenge to

get where we are today,” Hendrix said,

more than once thanking AIDEA — the

Alaska Industrial Development and

Export Authority — for providing

financing.

“It was the only financial institution at

the time in the state that would help us —

even across the United States and North

America it was very tough to get financial

backing for a project in Alaska.”

This, in part, is due to Alaska’s lack of

credibility in financial markets because

the state has not met its oil and gas tax

credit obligations.

“We continue to say we are open for

business, but we must demonstrate it,”

Hendrix said, starting with “paying our

tax credit obligations.” However, he did

praise Gov. Mike Dunleavy for proposing

the FY22 budget fund oil and gas tax

credits at the statutory minimum of $60

million — and the governor’s decision to

introduce legislation requiring state

departments and agencies to end existing

relationships and partnerships with finan-

cial institutions that have chosen to stop

financing oil and gas exploration and

development in the Arctic.

Furie’s creditors are owed approxi-

mately $103 million dollars against

unpaid state tax credits and although once

the credits are paid HEX won’t get much

from them, he wants to see those creditors

paid.

Also on Hendrix’s list of must-dos for

the State of Alaska is improving “permit

timing.”

Finally, he wants to see more educa-

tion of Alaskans on the benefits of

responsible resource development.

Room for growth In addition to the offshore Kitchen

Lights unit, which is the largest unit in

Cook Inlet with more than 83,000 acres,

Furie’s main assets include an offshore

natural gas production platform. The

Julius R. is the newest platform in Cook

Inlet. Structured to have six wells online,

there are four wells in its slots now, he

said.

“And there is a subsea pipeline that

goes to our onshore facility at Nikiski

from the Julius R. platform. … It’s 16

miles long and 16 inches in diameter,”

Hendrix said.

In the seventh plan of development for

Kitchen Lights, submitted to the Alaska

Department of Natural Resources’

Division of Oil and Gas in September,

HEX said Kitchen Lights gas production

was restored in April 2019 by the former

owners of Furie after water in the subsea

pipeline created hydrate plugs.

Production is now limited to the

Beluga formation to restrict the amount of

produced water entering the pipeline.

In his December presentation, Hendrix

explained that with the Beluga reservoir

in decline the upside prize for the new

owners is returning the Sterling reservoir

to production, which will require a water

handline permit for overboard discharge

of water.

Hendrix mentioned the company is

waiting on that permit from the Alaska

Department of Environmental

Conservation and expects it at any time.

HEX’s plan of development for

Kitchen Lights said all four of the wells

on the Julius R. platform have been perfo-

rated in both the Sterling and the Beluga.

“Obtaining the platform water han-

dling permit more than doubles our

remaining reserves and revenue,” HEX

said.

The onshore gas processing facility

can reportedly handle five times what it is

doing today.

HEX’s way forward “The way forward is to continue to be

a sustainable Cook Inlet producer. We’ve

got to continue to increase our produc-

tion. We’ve got to think about jobs for

Alaska and about economic development

in Alaska,” Hendrix said, noting the

ADEC permit was needed to accomplish

these things.

The company also has a bonding chal-

lenge with the Alaska Oil and Gas

Conservation Commission, which

Hendrix is working to resolve. “We have

8 PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020

-8200517-907

TIME

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t NSTIAK.comLearn more aTION.ATAND INSTALLA

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continued from page 1

HEX CI

see HEX CI page 9

JIM UDELHOVEN

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PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020 9

Oil Patch Bits

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

Lynden VP Dennis Mitchell joins Airforwarders board As reported by Lynden News Dec. 17, Lynden International

Senior Vice President Dennis Mitchell was elected to the board of the Airforwarders Association on Nov. 16.

The AfA serves as the voice of the air forwarding industry and represents nearly 400 member companies dedicated to moving cargo throughout the supply chain. The association’s members range from small businesses with fewer than 20 employees to large companies employing more than 1,000 people and business models varying from domestic to worldwide freight forwarding operations. The AfA helps freight forwarders move cargo in the timeliest and most cost-efficient manner whether it is carried on aircraft, truck, rail or ship.

“Dennis is a highly respected member of the AfA that was selected by our membership for a board position. His skills and expertise in the transportation industry will help guide the AfA in its ambitious agenda toward continued success,” says Brandon Fried, AfA execu-tive director.

Mitchell will be sworn in on Jan. 5 to serve a three-year term as one of eight AfA board members. Lynden International Vice President Laura Sanders also served a 12-year term on the AfA board from 1999 to 2012. Lynden International has been a member of the AfA for more than 25 years.

Mitchell brings 26 years of Lynden experience to his board position as well as back-ground as a business owner. He owned his own customs brokerage firm from 1986 to 1994 prior to joining Lynden in Anchorage. He holds a bachelor’s degree in Business

Administration and Supply Chain Management from the University of Alaska and is a licensed customs broker. Mitchell is also the former chair of the board of directors for the Anchorage Economic Development Corp.

Little Red Services receives ConocoPhillips award Little Red Services said Dec. 18 that during a virtual ceremony in late November its

team received the ConocoPhillips 2019 Supplier Recognition Award for the company’s “focus on execution.”

The 13 recipient companies were chosen from a worldwide network of suppliers. Recipients were honored for exhibiting exceptional leadership in observance of the ConocoPhillips SPIRIT values. Suppliers were recognized for two distinctions: focus on exe-cution and doing business better. ConocoPhillips global business units generated nomina-tions internally and winners were carefully selected by a cross-functional committee of senior managers.

“Since the 80s we’ve been partnering with ConocoPhillips Alaska on the North Slope,” said Jerry Webre, president of LRS. “ConocoPhillips Alaska asked if we could double our exploration well testing capacity for the 2019 exploration season. Our team did an out-standing job of pulling together a second full kit in a few months. I’m proud of how this team engaged with our client and suppliers to secure, prepare, and modify equipment to deliver exceptional well testing.”

Editor’s note: Some of these news items will appear in the next Arctic Oil & Gas

Directory, a full color magazine that serves as a marketing tool for Petroleum News’ contracted advertisers. The next edition will be released in March.

DENNIS MITCHELL

multiple overlapping bonds” with the various agencies,

including AOGCC. “All we’re asking for is, let’s be sen-

sible about this overlap bonding. Let’s get it right.”

“Right now we are out there working on our water

handling equipment to get it up and running,” Hendrix

said. “We don’t have a permit to operate it, but they did

give us a permit to construct. … It’s worth it to us to

spend a million or two in hopes we will get the operating

permit because if all of a sudden we get it and the

equipotent is not running, we could lose six months of

production,” Hendrix said

Udelhoven is in the process of pre-installing the

equipment. They have been “out there with about 14

people for two weeks, welding, and setting new separa-

tors.”

The end result, he said, is improved operation effi-

ciency, “better than we’ve ever seen in this field.”

Another thing HEX has been doing is looking “very

diligently” for additional drilling and production oppor-

tunities “above the base,” Hendrix said. “Where can we

next drill? We only have two slots unless we sidetrack a

well. … What else is out there? What gives us the

biggest bang for a buck? What is the lateral extent of our

field?”

“We’re getting a good handle on that,” he said. “We

hope in the near future to have a drilling program.”

But right now the company is in fixing mode.

For example, “there is so much opportunity out there

to cut costs,” Hendrix said, such as the $500,000 or so a

year the company spends on electricity just for its

Nikiski plant, when it could make its own electricity

with its gas.

Alaska’s way forward Going back to the subject of making Alaska competi-

tive near the end of his presentation, Hendrix said the

state must have a stable fiscal regime.

If there is another ballot initiative, he would like to

see one that makes Alaska’s fiscal regime stable for at

least the next four years “and then they can change it.

But every year? Who’s going to put money in a state that

moves every year?”

“We’re turning into a Third World state with First

World regulations,” he said, referring to his dissatisfac-

tion over the most recent attempt to raise taxes that was

introduced in Ballot Measure 1 with “no public process.”

(The measure was voted down by Alaskans on Nov. 3.)

And we must move Alaska from a raw product pro-

ducer to a value-added producer, he said.

If we want to keep our children in Alaska with paying

jobs, and “stop the brain drain, “we need to basically

expand from being a raw producer … to a producer of

product with by-products.” That will mean more jobs,

Hendrix said.

It will also mean more revenue to the state.

Our oil and gas, he said, is worth more as a by-prod-

uct than as a raw product. l

continued from page 8

HEX CI“We hope in the near future to have a drilling

program.” —John Hendrix

10 PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020

Prudhoe Bay, Milne Point and Point

Thomson fields and related assets —

closed June 30. Hilcorp took over as

Prudhoe Bay operator on July 1. The

company already operated Milne Point;

Point Thomson is operated by

ExxonMobil Production.

The $5.6 billion sale of BP’s Alaska

assets to Hilcorp was announced in

August 2019.

RCA’s decision on the midstream was

conditional on some additional filings by

Dec. 28 (see story in Dec. 20 issue). The

companies provided the required filings

electronically on Dec. 18, telling RCA the

electronic filings would be followed by

original paper copies upon their arrival in

Alaska on or before the required Dec. 28

date.

In a Dec. 18 statement Harvest

Midstream, the parent company of

Harvest Alaska, said with the RCA deci-

sion Harvest acquires BP’s approximately

49% interest in the Trans-Alaska Pipeline

System and 49% of Alyeska Pipeline

Service Co.

“The completion of this acquisition is

a critical milestone for Harvest,” said

Jason Rebrook, chief executive officer of

Harvest Midstream. “TAPS is an icon of

American ingenuity and has a proven

track record of safe and responsible oper-

ations with strong relationships in the

communities it touches. We are commit-

ted to positively building upon this great

legacy and we look forward to partnering

with Alyeska, other TAPS owners and the

State of Alaska for years to come.”

A Dec. 18 statement from BP said the

company had completed the sale of its

midstream Alaska business to Harvest

Alaska, following the August 2019

announcement by the company that it

would exit Alaska.

Dave Lawler, chairman and president

of BP America, said: “BP deeply appreci-

ates being a guest of Alaska and its

Native communities for over six decades,

and we thank the government of Alaska

for its professionalism as we worked to

finalize this sale. BP is a better company

because of our time in Alaska.”

The additional filings RCA required

from Harvest reflect that when filings

were originally made with the commis-

sion Harvest Alaska was a wholly owned

subsidiary of Hilcorp Alaska; it is now a

wholly owned subsidiary of Harvest

Midstream.

The required BP filings are related to

DR&R obligations: BP retains those for

the system as it existed at the time of the

sale.

RCA required filings affirming that

“BP Pipelines (Alaska) Inc. remains

bound as a lessee under all right-of-way

leases for which BP Pipelines (Alaska)

Inc. is obligated to perform dismantle-

ment, removal, and restoration,” and con-

firmation that BPPA would be invoiced

by Alyeska for the full share of BP and

Harvest DR&R. BP is to pay invoices and

then bill Harvest for that company’s

share. DR&R costs for the system as it

existed prior to the sale remain the

responsibility of BP; costs for work done

after the sale are the responsibility of

Harvest.

RCA said this requirement is a

response to concerns expressed over

Harvest’s financial ability to meet TAPS

DR&R obligations.

—KRISTEN NELSON

continued from page 1

BP SALE

designed to ship 760,000 bpd from

Alberta through Illinois to Wisconsin, is

now expected to ship its first oil by late

2021.

“We can probably optimize by another

200,000 to 300,000 barrels per day” from

those ventures, said Vern Yu, Enbridge’s

executive vice president and president of

liquids pipelines, told the Financial Post.

He said that volume is equivalent to the

types of crude Enbridge feeds into its

pipelines and “how we can maximize the

pumping capacity of all five Mainline net-

work pipelines. We can do all of this without

needing to invest any further capital or to get

more permits.”

Enbridge currently operates the Flanagan

South and Seaway Twin pipelines which

provide a connection from the U.S. Midwest

to the Gulf Coast and has declared it is look-

ing to capture more of the Gulf Coast mar-

ket, where refineries are equipped to handle

heavy crudes.

Yu conceded the Line 3 and Southern

Access projects were part of that strategy,

which would offer more outlets for trans-

portation-strapped Alberta oil sands produc-

ers.

“It could be a partial mitigation to other

pipelines if they don’t go forward,” he said.

‘Under the radar’ Phil Skolnick, a New York-based analyst

at Eight Capital, said the pipeline develop-

ments along a route from Alberta to

Wisconsin on Line 3 and from Illinois to

Texas on Southern Access have been

advancing “under the radar.”

Included in the package is the reversal of

the 1.2 million bpd Capline Pipeline, owned

by Marathon Pipe Line and Plains All

American Pipeline.

Capline is the largest northbound

pipeline from the oilfields of Texas and the

Gulf Coast to inland U.S. refineries.

Skolnick said a teaming up of Line 3,

Southern Access and Capline could offer

Canadian producers a multi-destination

alternative to the 830,000 bpd Keystone XL.

He said that “kind of insurance” would

be perfect for producers if it could offer 1.2

million bpd of capacity from the Alberta

trading hub to Louisiana.

However, TC Energy is not about to

walk away from its shipping commitments

for Keystone XL.

A company spokesman said the project

has been “fully contracted short of the min-

imum capacity required by regulators to be

set aside for walk-up shippers.”

The challenges facing Enbridge were

laid out in early December by Chief

Executive Officer Al Monaco, who told

investors it has become more difficult to

build major oil pipelines which now carry a

higher “risk premium” to account for longer

lead times.

The company has already had a taste of

that new world with Line 3, whose costs

have soared from US$2.9 billion to US$6.7

billion and face another revision in the first

quarter of 2021. l

continued from page 1

PIPELINE OPTIONSThe challenges facing Enbridge were laid out in early December

by Chief Executive Officer Al Monaco, who told investors it has

become more difficult to build major oil pipelines which now

carry a higher “risk premium” to account for longer lead times.

http://www.calistacorp.com

facilities,” as well as minor modifications

to prevent environmental and economic

waste from boil-off gas. The modifica-

tions are collectively referred to as the

“Kenai LNG Cool Down Project.”

The project will allow the Kenai LNG

Terminal to import of up to four tanker

loads of LNG per year and provide up to 7

million standard cubic feet per day of boil-

off gas to the refinery.

During periods when boil-off gas gen-

eration is insufficient to meet the Kenai

Refinery’s needs, a portion of the LNG

would be vaporized and delivered to the

refinery along with the boil-off gas.

The existing export terminal includes a

pretreatment facility, a 0.2 billion cubic

feet per day liquefaction unit, three

35,000-cubic-meter LNG storage tanks, a

boil-off gas management system, a marine

loading/unloading dock, and ancillary

facilities. The terminal has not exported

LNG since 2015 and has been maintained

in a warm idle state since 2018.

The U.S. Department of Energy Office

of Fossil Energy’s authorization to export

LNG from the Kenai terminal expired in

2018, and Trans-Foreland does not pro-

pose to return the liquefaction portion of

the plant to an active state.

Construction activities To convert the terminal for import,

Trans-Foreland said it will construct the

following:

(1) a skid-mounted, electric-powered

trim LNG vaporizer module consisting of

10 trim LNG vaporizers;

(2) a 1,000 horsepower electric-driven

boiloff gas booster compressor; (3) a

vaporizer feed pump; (4) an LNG circula-

tion pump;

(5) twelve new valves and minor pip-

ing rearrangements; and

(6) appurtenant facilities.

The project, which has two years under

the FERC authorization to complete, will

require about 35 workers during peak con-

struction and average about 20 workers,

most of whom are operations personnel at

the Kenai LNG Terminal.

All construction will occur within the

boundary of the terminal.

Approximately one month prior to in-

service, Trans-Foreland plans to apply for

authorization from the DOE’s Office of

Fossil Energy to import LNG at the Kenai

LNG Terminal.

—KAY CASHMAN

PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020 11

Holiday Savings Offer

By KAY CASHMAN Petroleum News

On Oct. 1, operator Brooks Range Petroleum Corp., or BRPC, and Finnex LLC filed the

eighth annual plan of development for the

Southern Miluveach unit on behalf of the working

interest owners with Alaska’s Division of Oil and

Gas. Sustained oil production from the unit’s

Mustang field is planned by third quarter of next

year.

The eighth POD, which will run from Jan. 1 to

Dec. 31, 2021, takes up where work in the 8,960-

acre, five-lease, unit left off in December 2019.

Note: As previously reported in Petroleum News,

on Sept. 16 the Alaska Industrial Development and

Export Authority passed a resolution approving the

negotiation and execution of a debt settlement

restructuring agreement, or DSRA, and authorized

the sale of the Mustang oil field leases to Finnex.

Finnex is the special purpose vehicle, or SPV,

page 5

l F A C I L I T I E S

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

Vol. 25, No. 40 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of October 4, 2020 • $2.50

August ANS down marginally; Cook Inlet production off by 2%

see INSIDER page 11

Parks redo hangs on offshore O&G; Rivalry for oil investment heats up CONSERVING NATURAL RESOURCES

has “long been tied to and directly support-

ed by oil and gas development in the United

States,” Walter Cruickshank, Ph.D., acting

director of Interior’s Bureau of Ocean

Energy Management, wrote in a recent

release.

“This may seem counterintuitive to some,

but offshore energy development revenues

from qualified leases go right back into conservation initia-

tives throughout the United States via the Land and Water

Conservation Fund,” Cruickshank said in the story, which

was first published by The Vindicator.

Established in 1964, the LWCF supports federal, state and local land, water and wetlands purchases to expand public

access to public lands, “so more Americans can experience

see ICEBREAKER page 11

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

Russia’s new nuclear icebreaker completed, heads to Murmansk Construction of the Arktika, Russia’s newest nuclear ice-

breaker, has been completed and the vessel is heading from St. Petersburg to Murmansk, according to Rosatom State Atomic Energy Corp. Russia claims that the new vessel is the world’s largest nuclear icebreaker. Rosatom reports that the vessel is 173 meters in length, with a displacement of 33,540 tons. Two nuclear reactors power the vessel’s propulsion system. The ves-sel is the first of a series of four similar icebreakers, planned to

be built in a program referred to as “project 22220.”

The Barents Observer has reported that one of the vessel’s three electrical propulsion engines is broken and will need to be

replaced.

Russia’s particular focus is the operation of the Northern Sea route, the Arctic route around the north of the country, linking the Baltic Sea with South Korea and the north Pacific. With the continuing shrinkage of the Arctic sea ice extent and thinning of the ice, there is international interest in the potential for opening

Vol. 25, No. 2 October 2020

ArcticArcticCovering Arctic oil and gas operations and the logistics, construction and service firms that support them

Oil & Gas DirectoryOil & Gas Directory

Latest Arctic Directory released

BlueCrest’s 7th POD Maintain production; trident fishbone well on hold until prices firm up

By STEVE SUTHERLIN Petroleum News

BlueCrest Alaska Operating LLC will implement well work in order to main-

tain production under its seventh plan of

development for the Cosmopolitan unit, in

effect from Jan. 1, 2021, through Dec. 31,

2021.

In a Sept. 25 letter to the Alaska

Department of Natural Resources Division

of Oil and Gas, BlueCrest said plans in its sixth POD

to drill at least one trident fishbone well in 2020,

which were delayed due to COVID-19 oil market

disruptions, will remain on hold for 2021 “until the

current market environment improves.”

Each trident fishbone well, built on the

company’s success with its single fishbone

wells, will “provide the same amount of

reservoir contact as 21-27 individual

wells.” J. Benjamin Johnson, BlueCrest

Energy CEO and president told Petroleum

News in 2019.

A complete well plan stands ready for

the company’s proposed H10 trident well,

Johnson said in a Sept. 29 interview.

“It’s on indefinite hold. We’re ready to

go but we’re waiting to have some confidence in oil

prices,” he said. “It’s a moving target; the oil prices

are down but costs have also come down.”

The company said the pause in drilling has

Trump bolsters A2A Says will issue presidential permit for Alaska-to-Alberta import and export line

By GARY PARK For Petroleum News

From the time it was floated five years ago, the lat-est version of an Alaska-Alberta rail link has

been openly scorned by many and quietly given the

brush off by others.

For 130 years, various proposals have been made

for such a project to bolster imports and exports in

Alaska and Western Canada and have just as quickly

evaporated in the absence of financial backers.

But the idea keeps resurfacing as a serious plan to

move oil and other resources to and from the Pacific

Basin through Alaska.

The current proposal involves a venture by the

Alaska to Alberta Railway Development Corp., A2A.

In mid-2019 A2A announced it had reached an

agreement with the Alaska Railroad Corp. to develop

a joint operating plan to upgrade and extend the 515-

mile Alaska Railroad mainline between Seward and

North Pole.

Apparently the mega-undertaking has attracted

the attention of President Donald Trump, who

announced on Sept. 25 that he would issue a presi-

dential permit for the A2A project, a permit which the

president signed Sept. 28.

The plan involves building a 1,600-mile track

linking Anchorage, the Yukon, the Northwest

Territories and northern Alberta at a current cost esti-

mate of C$22 billion, with Alberta’s oil sands bitu-

men exports being carried by rail to Interior Alaska,

see MUSTANG PLAN page 9

see BLUECREST page 10

see A2A RAILWAY page 10

J. BENJAMIN JOHNSON

Mustang plan filed Oil production from the North Slope Southern Miluveach unit to start 3Q 2021

BRPC/Finnex said the Mustang project lost a year in its planned development schedule, “but the project remains fundamentally sound and (capable) of being brought to fruition.”

A special offer from Petroleum News!

Purchase a one year Petroleum News subscrip�on, and receive a gi� subscrip�on for just $1! Sign up today! CONTACT Renee Garbutt I 281-978-2771 rgarbutt@petroleumnews.com (Gift subscriptions must be used toward new subscribers. Special offer ends Dec. 31)

growth” of Alaska, directly and indirectly

alleviating unemployment in the state.

The staff of the Authority anticipates it

will “need to incur or encumber up to $20

million in costs in the first year,” the resolu-

tion says.

If approved, the new project will be

known as “CP Oil and Gas Development.”

The U.S. Bureau of Land Management

has issued a detailed statement of the sale

and AIDEA meets the criteria for bidding

described in the DSS.

The resolution says because the leases

are in the Arctic and the Arctic Infrastructure

Development Fund, or AIDF, was set up by

the Alaska Legislature and can be increased

with funds from several sources with the

approval of AIDEA’s board, the authority

has the ability to finance projects or facilities

that promote and create infrastructure need-

ed to bring natural resources to market.

Opening new areas in the Arctic for

responsible oil and gas development is vital

for Alaska’s economy and to promote the

sustainable utilization of Arctic infrastruc-

ture facilities including the Trans-Alaska

Pipeline System, the resolution notes.

Furthermore, because AIDEA can “use

the AIDF to promote and provide financing

for Arctic infrastructure development, and is

authorized to enter into lease agreements

with government entities necessary to fulfill

the purposes of the program as outlined in

AS 44.88.830,” submitting “a bid or multi-

ple bids for tracts defined in the DSS would

be in furtherance of the Authority’s statutory

powers and in the public interest.”

If the resolution is passed by the board,

the authority will be able to accept new

funding in the AIDF, transfer the necessary

funding from the Revolving Fund to a sepa-

rate account within the AIDF for the project,

and “expend or encumber” up to $20 million

from the AIDF to pay for any and all project

expenses.

The resolution authorizes AIDEA’s exec-

utive director, Alan Weitzner, to evaluate

and submit bids for the January coastal plain

lease sale, and incur and pay for any project

expenses within his discretion as long as

they are “not material and do not alter the

intent” of the resolution.

AIDEA board members are: J. Dana

Pruhs, chair; Bernie Karl, vice chair; Albert

Fogle; Bill Kendig; Julie Sande; Julie

Anderson, commissioner, Alaska

Department of Commerce, Community, and

Economic Development; and Anna

MacKinnon, special assistant to the com-

missioner, Alaska Department of Revenue.

—KAY CASHMAN

chapters and Gwich’in tribal organizations, among others, differen-

tiated levels of “special concern and analysis” for various tracts.

“Particularly useful were such tract-differentiated comments

related to the core calving grounds of the Porcupine Caribou

Herd, which, as distinguished from the polar bear and migratory

birds, do not have special protections under federal statutes,”

BLM said.

The BLM Alaska State Director’s determination to withdraw

the tracts “reflects careful consideration of multiple factors,

specifically the environmental information developed as a part of

the environmental impact statement process, substantive com-

ments received, industry interest based on the tract nominations

from potential bidders, and the resource potential specifically in

light of the mandate BLM has from Section 20001 of Public Law

115-97 to conduct not fewer than two lease sales of at least

400,000 acres each within the Coastal Plain in those areas with the

highest potential for discovery of hydrocarbons,” BLM said.

The remaining tracts offered may be further amended or with-

drawn at any time prior to issuance of a written acceptance of a

bid, BLM said.

Leases issued as a result of the sale will have primary terms of

10 years, BLM said. A minimum bid of $25 or more per acre or

fraction thereof is required and the leases are subject to a fixed

royalty rate of 16.67%, with a minimum rental payment of $10

per acre.

Sealed bids must be received by the BLM Alaska State Office

on or after Dec. 21, and prior to the bid submission deadline 4

p.m. Dec. 31.

—STEVE SUTHERLIN

continued from page 1

ACREAGE WITHDRAWN

continued from page 1

LNG TERMINAL

continued from page 1

AIDEA BID

During periods when boil-off gas generation is insufficient to meet

the Kenai Refinery’s needs, a portion of the LNG would be

vaporized and delivered to the refinery along with the boil-off gas.

To advertise in Petroleum News, call Susan Crane at 907-250-9769

Contact Steve Sutherlin at ssutherlin@petroleumnews.com

http://www.petroleumnews.comhttp://www.petroleumnews.com

12 PETROLEUM NEWS • WEEK OF DECEMBER 27, 2020

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$52.78, Brent closed 76 cents higher at

$52.26 and WTI — having failed to break

the $50 mark during the day’s trading —

closed up 74 cents at $49.10. The post-

COVID h