State officials on Wednesday published Cook Inlet Energy’s recently-submitted plans and right-of-way application to build a 29-mile pipeline across Cook Inlet to connect west side oil production with east side processing facilities.
The Anchorage-based oil and gas company, a subsidiary of Miller Energy, has proposed building the pipe from its Kustatan production facility to the Nikiski – Kenai Pipeline Company Tank Farm. Construction on the 8.625-inch pipe that could transport up to 90,000 barrels of oil per day is scheduled to begin in April 2014 with the project completed by August of that same year. About 26 miles of the pipe’s path — one shaped like a horseshoe to avoid a deep underwater trench and high tidal currents between the east and west Forelands area — goes through state lands, according to a public notice.
Comments on the company’s plan are being taken by the State Pipeline Coordinator’s Office through Feb. 4, 2013.
Cook Inlet Energy CEO David Hall said last week his company has made other area producers aware of the plan and he hopes they will want to use the pipeline. Hall said he expects the line will reduce the cost of getting oil to production.
“We are excited about it,” he said. “We are hopeful as time goes on and people get more familiar with the project and comfortable with it they’ll offer more support and participate in using the line.”
Currently, Hilcorp’s and Cook Inlet Energy’s oil arrives at east side processing facilities through tankers making laps between longstanding west side infrastructure. Specifically, the Drift River tank facility, along with the Christy Lee loading platform, allow those two producers to store crude oil in tanks and pump it into tankers that haul it across the inlet to the Tesoro refinery.
However, shipping oil across the inlet has risks because of tides, currents and ice conditions. According to a recent Cook Inlet Regional Citizens Advisory Council study, it poses the greatest risk to the inlet due to tankers’ great oil capacity and concentrated operations.
A July position paper penned by CIRCAC recommended Hilcorp replace use of Drift River and its tanker system with a trans-Foreland pipeline to reduce the risk of an oil spill at the terminal location. Concerns about Drift River’s safety stem from its proximity to Mount Redoubt, an active volcano.
Over the summer, Hilcorp spent $18.5 million to reinforce a berm designed to protect the facility against mud flows caused by volcanic activity, such as what occurred during the 2009 eruption.
Cook Inlet Energy estimated the cost of the pipeline in its application at $50 million — $15 million for materials, $35 million for construction and installation. It estimated the annual cost of operating and maintaining the line at $5.2 million per year. Construction would generate 130 part time jobs in addition to the 12 positions created to operate and maintain the pipe with an estimate life of 30 years, the company wrote.
Hall said the pipeline would be a safer alternative to meet industry goals of increasing oil production from Cook Inlet fields than Drift River.
CIRCAC Director of Public Outreach Lynda Giguere agreed, adding the group “whole-heartedly” supports Cook Inlet Energy’s proposal.
“We are supportive of their plans and we don’t prefer one over the other,” she said of Hilcorp’s Drift River facility to Cook Inlet Energy’s pipe. “We just think (a pipeline) is a safer way to go. We would support any responsible owners’ or operators’ plans to build a sub-sea pipeline.”
Cook Inletkeeper’s Bob Shavelson said he “applauded” the company for their initiative on the project.
“Hopefully it will lead away from the crazy idea of storing oil at the base of an active volcano,” he said. “... I think if there is going to be additional production in Cook Inlet, I think most people agree the smartest way to get it from the west side is by pipeline not by storage at the base of a volcano and increased tanker traffic.”
In recent years, numerous smaller oil and gas companies have moved into the area with hopes of reviving production from inlet fields and tapping smaller, undiscovered oil and gas pockets through exploratory drilling.
Cook Inlet oil production peaked at just over 200,000 barrels of oil per day in the 1970s. Production bottomed out at 7,000 barrels a day in 2009 but increased to about 10,000 barrels per day in 2011, according to the Alaska Department of Natural Resources.
“I know that there has been some concern that (the pipe) might be too small,” Hall said. “We look at it as, well, if it is, that’s kind of a good problem to have because you can always add a second line.”
Hilcorp External Affairs Manager Lori Nelson said the two companies have not talked about a partnership on the pipeline and there are still “too many ifs” to speculate on an agreement. However, Nelson said pipeline transmission would likely be a cheaper option as opposed to the current system if production significantly increased and is an idea “that we would take serious consideration for.”
“Clearly their developments will be something that we watch closely, and door open or door closed? I don’t know at this point,” Nelson said. “But, we’ll see where this takes us and we’ll certainly encourage their success.”
During the state’s public notice period, if no request is made for a public hearing and no objections are received about the proposal from a entity with significant financial interest, the office, at the earliest, could issue a right-of-way lease by mid to late February, said Graham Smith, public information officer for the state pipeline coordinator’s office.
The state’s process includes a commissioner’s analysis and proposed decision. In that document, Smith said, the commissioner of the Department of Natural Resources would likely look closely at the company to make sure it is “fit, willing and able” to “construct, operate and maintain a pipeline in the best interest” of the state.
“For big companies, Exxon, BP and these other folks, these are generally a matter of some extra paperwork because clearly they have the assets to take care of any spills or anything that would come along,” he said. “For smaller companies like Cook Inlet Energy, it can be a more involved process.”
In an email, Smith said public comments the commissioner deems relevant can be incorporated into the lease stipulations and “in many cases result in additional protections outside of the statute requirements.”
Comments may be submitted my mail to 411 W. 4th Ave., Suite 2, Anchorage, AK, 99501, or by email to firstname.lastname@example.org, or by fax to 907-269-6880.
Brian Smith can be reached at email@example.com.