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Republican lawmakers spar with Alaska Gov. Walker's administration over plans for North Slope gas

  • Author: Nathaniel Herz
  • Updated: July 19, 2016
  • Published July 19, 2016

Top officials from Gov. Bill Walker's administration sparred Tuesday with Republican legislators who questioned whether Walker was improperly pressuring North Slope oil producers to cooperate with the state's effort to build a natural gas pipeline.

At issue at a Senate Resources Committee hearing was the administration's decision to hold up approval of the annual Prudhoe Bay development plan, normally a routine document submitted by BP on behalf of the companies that lease the field from the state.

At the hearing in downtown Anchorage, lawmakers peppered newly appointed Natural Resources Commissioner Andy Mack and a pair of his deputies with questions and criticism about the administration's demands for information about potential natural gas production from lease holders BP, ConocoPhillips and ExxonMobil. An attorney contracted by the state, Mark Cotham, emerged as a defender of the Walker administration.

Cotham, who's based in Houston, Texas, told lawmakers by phone the Walker administration is simply asking how the companies plan to advance gas sales around 2025 — the point at which a state regulatory agency says the gas should be sold.

"Do you have a market? Do you have a plan to market it? And if your own plan is dependent upon you, producers, building a pipeline, do we have a firm commitment from you to build that pipeline? And if you're not going to give us a firm commitment to build that pipeline, can we obtain information from you with respect to what you're doing to try to get other third parties to build a pipeline?" Cotham said, describing the state's questions. "It seems to me only reasonable that the state ought to be asking for information of: Do you have a plan? And share that information with us."

While oil has been flowing down the trans-Alaska pipeline since 1977, the natural gas on the Slope has been "stranded" there. Some Alaskans, including Walker, have long sought to spur construction of a separate pipeline to bring the gas to market.

Over the years, gas has been reinjected into Prudhoe's oil formations to help keep up pressure and produce more oil, which is more valuable than natural gas.

But an official with the Alaska Oil and Gas Conservation Commission, Cathy Foerster, told lawmakers at Tuesday's hearing that as oil production at Prudhoe declines, more value can be extracted by producing the gas. The commission last year approved a one-third increase in the allowed gas production rate from the field in anticipation of the completion of a pipeline a decade from now.

The Walker administration is now embroiled in a fight with the Prudhoe lease holders over what's called the "plan of development" for the field — an annual review by the state Department of Natural Resources that asks companies to describe their short- and long-term operations.

The administration has withheld approval of the 2016 plan, saying it needs more information about the producers' plans to market Slope gas.

In a prepared statement Tuesday, a spokesperson for BP wrote that lease holders believe the 2016 plan is finished and "should be approved."

The state's demands come as Walker begins a push for a state-led gas pipeline project separate from the pipeline partnership that the state was pursuing with Exxon, Conoco and BP that has faltered in the face of low oil prices.

Republican lawmakers have been skeptical of Walker's state-led gas-line plan. At Tuesday's hearing they suggested the administration's requests for information were antagonizing the oil industry — one of the state's most politically and economically powerful.

"What is the endgame here? What are you trying to do with Prudhoe Bay's oil production?" Rep. Dan Saddler, R-Eagle River, asked Corri Feige, director of the state oil and gas division.

In an interview, Saddler pointed to the decision by the Walker administration to hire Cotham, the Houston attorney, who told committee members he specializes in "failure-to-develop" cases.

Cotham also worked with Walker a decade ago when the governor — then a private attorney working for the Alaska Gasline Port Authority, an entity of municipalities along the projected pipeline route — was pressing for the development of a separate field, Point Thomson, which is believed to have huge reserves of gas.

"We have an attorney that the governor has hired who has extensive experience in forcing producers to deliver the resources they haven't released, whether they want to or not," Saddler said in an interview after the hearing.

An attempt to force the oil companies to produce Prudhoe gas, Saddler added, could take a "legal path" that interrupts oil production at the field.

While Republican lawmakers were critical of Walker, one Democratic lawmaker, Anchorage Sen. Bill Wielechowski, praised administration officials, saying they were doing "what any prudent resource owner in the world would do" by asking for the gas marketing information from the Slope lease-holders.

"I don't think this request is disconcerting. I don't think it's troubling at all. This is you doing your job," he said. "The Constitution requires the state of Alaska to get the maximum value for the resource."