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Arctic Energy Center Weekly Roundup 8/19/16-8/26/16

This week on AEC, In the News, Weekly voices


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This Week on AEC

In the News

Papp hopes next president will carry on U.S. Arctic policies. Alaska Dispatch News. A year ago, President Barack Obama became the first sitting U.S. president to travel above the Arctic Circle. The president's historic three-day visit to Alaska, where he met with Native villagers and saw effects of climate warming first-hand, was a milestone that cemented his deep commitment to the Arctic and the circumpolar north, the State Department's top Arctic official said Thursday. … Even though Royal Dutch Shell and other oil companies have dropped most of their offshore Arctic leases and pulled out of the territory, Arctic and Bering Strait traffic by cruise ships and other vessels unrelated to the oil industry is likely to grow, he said. "These cruise ships, this is not going to be a one-time event," he said in his speech. Within the U.S. government and internationally, in the Arctic Council and other bodies, Arctic shipping safety is a big concern and cause for action, Papp said. He cited the ongoing Coast Guard project to designate shipping lanes in the narrow Bering Strait as one example of such action. The Obama administration and Arctic Council are continuing their focus on climate change and science, Papp said.
 
Oil producers balk following new study calling Alaska’s LNG project uneconomic. Alaska Dispatch News. Even as Alaskans were digesting a new report asserting that Alaska's liquefied natural gas project wouldn't be competitive with other projects in the world, one of Alaska's partners in the project dropped its own bomb Thursday: ExxonMobil said in an interview it's not planning to invest in its next big phase, preparing the final engineering and design plans. Meanwhile, ConocoPhillips and BP indicated that as things stand, they're also not likely to move into the detailed engineering phase of the project's complex facilities, such as an 800-mile pipeline and a plant in Nikiski to turn natural gas into a liquid for shipping. "It's not economic right now," said Darren Meznarich, Alaska LNG project integration manager for ConocoPhillips, citing the economic winds buffeting the oil companies after a long stretch of low oil and LNG prices. The executives spoke on the second day of a state House and Senate Resources Committee hearing held this week in Anchorage. That next phase, known as FEED, or front-end engineering and design, was set to start in 2017. It was expected to cost up to $2 billion.
 
Alaska LNG Project submits second draft of resource reports to FERC. Alaska Journal of Commerce. Members of the public can get another look at the results of years of fieldwork conducted by the Alaska LNG Project now in the reports submitted to the Federal Energy Regulatory Commission. The resource report drafts, which detail everything about the project from a general overview to where potential workers’ children would go to school, are the culmination of about three years of summer geotechnical and geophysical work as well as public meetings and comments. The project managers submitted the second draft of the 10 reports, totaling more than 33,000 pages, to the federal government on July 15. There are two other drafts as well, detailing reliability and safety and PCB contamination, that have not been made available yet. FERC requires the resource reports to be submitted and reviewed before beginning the environmental impact statement, or EIS, process, which the project needs before proceeding. The first drafts of the resource reports were submitted in the first quarter of 2015.
 
Uptick in oil prices helps Alaska’s bottom line, but not much. Alaska Public Media. In Alaska, North Slope crude rose to nearly $50 a barrel by the end of the week. That’s much higher than the $40-a-barrel price the state based this year’s budget on. But, the price isn’t nearly high enough to fill the state’s massive $3.2 billion budget deficit. Ken Alper, director of the state’s tax division, said each dollar increase in the price of oil works out to about $25-$30 million in revenue for the state. And while that’s helpful, it’s not going to balance the budget. Alper said the rebound in prices is good for oil companies. In Alaska, low prices have caused the state to dip into its $8 billion constitutional budget reserve to close the deficit this year. And, while more revenue from the bump in oil prices will cause the state to draw less on its savings, the problem is far from resolved.
 
The Coast Guard's flawed icebreaker plan. Politico. As ice melts in the Arctic, military and business leaders increasingly worry that the U.S. is falling behind Russia and other countries seeking to exert influence in the region. The issue has important economic and national security implications that the United States can no longer ignore. The only working U.S. icebreaker, the Polar Star, will reportedly go out of service in the next five to seven years. If the U.S. chooses to construct a new icebreaker under the current 10-year timeline, it will face a three- to five-year gap with no working icebreakers—and that’s assuming the new icebreaker is completed on time. Given the speed at which the Arctic ice is melting, such a gap could leave the country without a ready capability to promote navigation and ensure open access to the Arctic waters. The U.S. has at least five options that could address the challenges of cost and time to procurement, each of which could put the country on a path to more responsive, robust and potentially less expensive ice-breaking capabilities. We presented them last summer at a conference of government officials and business leaders—including the president of Iceland and the governor of Alaska—called “The Alaskan Arctic: A Summit on Shipping and Ports.”  


Weekly Voices

Surrender In The Arctic: The DOI Five-Year Plan. (Column) Forbes. As Russia gears up to dominate the Arctic region, having created the world’s largest fleet of ice-breaking ship and even going so far as to plant its national flag at the North Pole, DoD officials have let it be known that they see no conflict between energy exploration in the Beaufort and Chukchi and their own military operations.  Indeed, there is a strong case to be made that oil and gas operations in the region can actually coordinate with and help to strengthen the U.S. military’s presence there. Every DOI five-year plan for development of energy resources in federal waters is important to the nation’s future.  These plans set the parameters for the exploration and development of a significant share of our oil and natural gas, which have long been the main drivers of the U.S. economy, such a significant portion that the collection of royalties from oil and natural gas produced on federal lands is the federal government’s second largest source of revenue. But, as current and former military officials alike have pointed out, this five-year plan is even more vital to the nation’s future, because it will set the parameters for potentially massive investment in the Arctic region by U.S. oil and gas producers, investment that can be tremendously helpful to U.S. military and national security interests.
 
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