Saturday, November 07, 2009

The Best Energy Plan for Alaska: Our National Security

When it comes to energy, first and foremost in importance is; our national security. And what I mean by national security is; the energy security of the United States as a whole.

You have heard the urgent call to “drill baby drill” with our need to become less dependent on foreign countries for our energy needs. And while it may seem that Alaska has moved ahead on finally achieving a plan to build a natural gas pipeline to the lower 48, foreign countries like Russia are moving in on the U.S. market and they are taking a big chunk of the natural gas market.

When you look at a country like Russia, you can go back a few years and see that they have been planning to expand in the world market when it comes to natural gas.

During the 2006 election cycle, I had run for State House and I was focused on what Russia was trying to accomplish.

At the time, Governor Murkowski was negotiating contracts between the energy producers, Exxon, ConocoPhillips and British Petroleum. And coincidentally, Russia was negotiating with producers Total, ConocoPhillips and a producer from Norway on developing a natural gas project in the Shtokman field which is a natural gas field in the Barents Sea being developed to supply the eastern U.S..

If you had followed both negotiations, you could see both the Alaska project and the Shtokman project were being delayed on who was awarded the contracts. The delays were within a week of each other’s supposed announcements on who would get the contracts.

On my campaign blog in 2006, I was warning of Russia’s attempts at moving in on the U.S. market and how it could have an impact on Alaska. And I had made a post on the topic and in the post, I posted an e-mail I received from Scott Heyworth.

A Lesson in Geography

The other day I had received this e-mail from Scott Heyworth in response to a thread on the Russians are coming. In fairness to Scott he came in on a portion of what I have been saying about Gazprom and have been saying it for months.

Forwarded Message [ Download File Save to Yahoo! Briefcase ]
Tue, 15 Aug 2006 06:02:05 -0800
"Scott Heyworth"
get a map pal
"Mike Porcaro" , "Rick Rydell" , "Tom Brennan"

Whoever you are,

You need to learn geography sir.

I don’t know who the idiot was that added the line that the alaska LNG project is dead to this article. The shtokman field is in the barents sea and will deliver only to the US east coast and gulf coast where it will tie directly into pipelines to the midwest. It is direct competition to the canadian highway project. Somebody better get out a map. More of the same garbage we have to put up with in trying to intelligently discuss this issue.

Nice try.

You could say Scott missed the mark, by thousands of miles. I will get to that point further in this commentary on news items.

At the time of the election, I pointed to Alaska’s geographical west, to the natural gas field Sakhalin, which is just north of Japan and was/is being developed by Shell Oil and a few other producers. And I also pointed to the Shtokman field in the Barents Sea.

The Sakhalin field I argued, was being developed to fill contracts at Sempra’s Baja Mexico facility and that the facility was going to be fully booked with contracts with the Sakhalin facility taking up the majority of the future expansion of the facility.

This was being done because Shell Oil had a contractual agreement with Sempra to get 50% of the capacity of the expansion.

At the time, the reason for the focus on Russia was; during the election cycle, former Alaska Governor Wally Hickel, Bill Walker, Scott Heyworth and their group, the Alaska Gas Port Authority (AGPA) were promoting the gas pipeline from the North Slope to Valdez.

Through their group, AGPA, they held a symposium at the Loussac library promoting the viability of the natural gas pipeline to Valdez. Part of the equation in the viability of the pipeline project was, selling natural gas to the Sempra re-gasification plant in Baja Mexico which was set up to supply the western U.S..

I had attended the symposium and I had stated to Mr. Hickel that Russia was looking at controlling the Sempra facility and that Russia was not to be trusted. At the time, Mr. Hickel viewed Russia as trading partners and Alaska a model to energy development to Russia.

I also stated to Mr. Walker that Shell Oil held 50% of the expansion at the Sempra facility and that the project was not viable. As it stands today, the Sempra facility is fully booked and as I stated back then, 50% of the expansion went to Shell Oil and Russia through Gazprom.

Now, fast forward to September 2009 and Bill Walker has now entered himself in the Republican gubernatorial race and he is leading the charge again on building a pipeline to Valdez.

But this time he wants to send the gas overseas to the Asian markets.

In an article written in the Juneau Empire, Walker states:

"If that was a gold mine, which it is, and it required a road, we would build a road," he said. "We build roads all the time. We build airports all the time."

In the article, Walker points to the lower 48 awash in gas. His comments are interesting when you consider the e-mail I received from Scott Heyworth in 2006.

I wouldn’t say the market is awash in gas as of yet. But as I pointed out in 2006, when I said the Russians were coming, they indeed were when you consider this article just recently published.

Gazprom Marketing & Trading USA, the U.S. arm of the world's largest natural gas producer — which is majority owned by the Russian government — is ramping up operations in Houston in a big way.

The company has signed deals for more than 350 million cubic feet per day of physical supply at several locations around the U.S. and is set to import Russian liquefied natural gas into the country.

“We're entering a business that's very liquid, where the margins are small, so you have to come in with a position with some size,” said John Hattenberger, president of Gazprom Marketing & Trading USA. “For us it's like joining a race starting at 50 miles per hour instead of a dead stop.”

What the article points to is; Russia is entering the U.S. Market from both the east coast and the west coast and the U.S. is becoming more dependent on Russia for energy.

And Russia has a lot of gas to sell and the margins are small, so you had better come with a lot of gas.

More so, than what Alaska has to sell.

And that raises the question on the viability of Bill Walker’s plan of competing with Russia or other countries when it comes to selling gas to the Asian markets.

A pipeline to Valdez will never be able to compete with Russia’s vast holdings of natural gas and for this reason alone, and since Walker used the analogy of a gold mine, the project would turn into fool’s gold.

But that is not the most important reason for saying nyet on the project. The most important reason, a reason Walker seems to forget is, our national security.

Because as was stated in the article on Russia entering the U.S. market; Gazprom in effect, is a political machine and there is no doubt Russia will use energy as political clout.

When you look at Russia’s behavior with countries like the Ukraine and the collective states of the European Union, we should look towards our own natural resources for energy, not Russia.

Since Russia has manipulated countries with their natural gas, we should be developing the pipeline to the Midwest in a manner that makes the project a viable one under a tax regime that is fair for all parties.

Now given the fact that Russia wants to control the energy markets, we see that Russia’s Gazprom is talking with ConocoPhillips on the possibility of partnering up with Russia on the Denali project.

The question in the near future may ask Wally Hickel et al if he and his group are going to push a partnership with Russia on building an LNG facility that is linked up with the Denali project?

If the answer is yes, then that would be bad for both Alaska and our national security.

Editor's note: Bill Walker is a gubernatorial candidate in the 2010 Republican Primary in Alaska. His website is at

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