Northwest Arctic Logistical Concerns for Arctic Natural Gas Pipeline Planners

1. Northwest Arctic Logistical Concerns for Arctic Natural Gas Pipeline Planners November 18-19, 2002 Jack Eidson

2. Contents • A glimpse back to TAPS • A glimpse ahead to the ANGP • What must be done this time - before and during and after the construction period • The Bottom Line

3. A Glimpse Back To TAPS • At its peak TAPS was the largest commercial logistics project to date, consuming the following in logistics: • Over 300 truck movements a day out of Fairbanks • Over 300 leased aircraft, including C130s with wet bladders for diesel fuel • Over 22,000 people to feed and house each day up and down the 800+ miles of pipeline in 18 camps; plus Fairbanks, Anchorage, Seward, Whittier, Seattle, Stockton (CA), North Slope, and Valdez • 1066 bed hotel in a barracks on Fort Wainwright to support the R&R movements in and out of Fairbanks • Over 7000 pickups and support vehicles, over 15,000 pieces of heavy equipment • Not enough supply anywhere – i.e., two years of the world’s supply of grass seed for re-seeding the right-of-way • 14 unions, various native corporation contractors, 5 section pipeline contractors, pump stations contractors, not to mention the Valdez facilities and North Slope facilities preparation • Over a 1,000 purchase orders a week and many times that of invoices

4. A Glimpse Back at TAPS • In 1974-5 there were not enough facilities, spare parts, or trained and certified maintenance personnel for construction, or to handle support services or line equipment; unions had to start their own training and certification programs in the lower 48 to create enough labor to do the job • There was not enough rolling line equipment available in the world to outfit all the construction contractors; old equipment had to be refurbished and new imported at top dollar from all over the world (effecting world prices, not just Alaska prices) • There were not enough support and maintenance equipment, supplies, spares, and maintenance shops, warehouses, or storage yards • TAPS traffic ruled the Trans Alaska Highway and had to develop maintenance and support facilities and services along the way. With all the big trucks roaring up and down the roads, local and tourist traffic not only endangered, but squeezed down to a trickle

5. A Glimpse Back at TAPS • There was inadequate planning for logistics • Only cursory logistics planning prior to permitting approval - primary interest in achieving permit and securing financing and partnership arrangements • Producers concentrated funds on permitting and finance issues, with only limited overall planning efforts, basically just enough to support the above overall above threshold objectives • Contractors were not going to spend money planning unless they were paid by the producers for the effort • Pipeline operators were not a factor since it was a private end-to-end Alyeska pipeline • State and Federal government groups were not set up to assess or determine logistics or even in-depth procurement supply/union type policies or requirements • Once the permit was approved by Congress, it was imperative to get to market with the revenue-producing oil as soon as possible, so no time to delay construction and plan first • Interesting economics – how much money do you have to save to justify delaying the production of 1.5 million bpd at up to $30 per barrel?

6. A Glimpse Back at TAPS • Mobilization was confused and hurried • Fort Wainwright had unused post-war barracks and facilities that had not been maintained • Some barracks had dirt floors on the bottom floors and heating systems that had not been turned on in 20 years • There was no housing or office space to meet initial, much less peak, contractor, suppliers, government, and producer personnel in Fairbanks; almost as bad in Anchorage • The phone systems were so inadequate that you could not call across Fairbanks reliably, too few phones for business or otherwise; radios and CBs had to be used • There were no heavy or light equipment maintenance or storage facilities • There was not enough facilities, equipment, consumables or trained personnel to maintain and support the fleet of private and leased aircraft pressed into service • Camp and support facilities (living areas, recreational areas, offices, warehouses, lay-down yards, fuel storage, airfields, security and safety infrastructures, telecommunications, work pads, access roads, etc.) construction was hurried and sometimes out of synch with timing of needs

7. A Glimpse Back at TAPS • Processes had to be developed for permitting with local, State, and Federal authorities (which also had to mobilize to meet the new demand) • Native corporations had to be hired for security to maintain order in the camps and keep wild critters away • There were not enough top notch arctic parkas and other arctic gear available for employees, much less their families and local constituents • Computers were rare, and difficult to maintain (1% humidity inducing dangerous static electricity, dust, dirty power, extreme temperatures), communications almost non-existent unless built and supported by the producers and the contractors

8. A Glimpse Back at TAPS • The impacts of Fairbanks and surrounding area alone was profound: • New town homes apartments, and houses had to be rapidly build for senior managers and project worker families; there was not enough available housing (new or used) so prices sky-rocketed pricing locals out of housing • Hotels were turned into rental dorms at exorbitant rates • Schools had to go to two shift per day, there were not enough teachers, materials, busses, support personnel (TAPS was paying top prices for all tradesmen, technicians, and equipment) • TAPS was hiring everything that rolled or flew to support their logistics at top dollar, so the local community had trouble getting groceries and basic goods • Retailers went wild, new stores opened buoyed only by the artificial, short-termed demand that drove them quickly out of business when the boom was over

9. A Glimpse Back at TAPS • There was pressure to “buy Alaska” wherever possible, but the local suppliers could not meet the demand and delayed invoice payments nearly bankrupt the small businesses • The TAPS accounting systems could not keep up so fraud was rampant; vendors sent invoices in for bogus shipments and were paid immediately since the pressure to pay small companies promptly was highly political • Some of the unions used the opportunity to pressure the producers and contractors for lucrative work agreements, pressure local politics, build new union facilities • Crime, drugs, fraud, and black market activity surpassed law enforcements ability to respond to the special needs and hoards of outside laborers and workers who were earning 3 to 4 times their normal incomes with plenty of money to spend and appetite for good times in the rough-and-ready arctic

10. A Glimpse Back at TAPS • But a “Can Do” attitude and lots of top dollar contracts, prompted the producers, vendors, contractors, government personnel, military, all responded to the needs and on-the-fly solved the logistics and arctic problems rapidly, decisively, and with a great amount of ingenuity like no other project in history • It was almost a “money is no object” urgency though, due to the future production economics • Engineering challenges were met, construction and arctic challenges were met, quality control was achieved, environmental requirements were met, delays due to logistics were minimalized, and safety was reasonable • Labor established schools, labs and certification courses to recruit and train the needed army of workers

11. A Glimpse Back at TAPS • However, when the pipeline construction was over, much or most the learning experiences and skills and products developed were forgotten, lost, or left with the contractor and producer personnel, lost to the Alaska and diluted to intellectual property segments in many companies throughout the country • The University of Alaska was not as active as it probably should have been during the TAPS construction • They did not chronolog the history, events, politics, learning experiences, documentation, methods, arctic specialties, advances during the permitting, engineering, and construction to any great extent • They rarely actively supported research or development of solutions, methods, products, or tools to support the effort and develop an educational product line specialty for the U of A

12. A Glimpse Ahead To The ANGP • The new Arctic Natural Gas Pipeline, compared to TAPS, will be • Over twice as long, in two countries with different laws, regulations, labor agreements, native authorities and agreements, permitting, and laws • Will much more environmentally sensitive, regulated, and concerned with the collateral impact on the local culture, economy, and environment • Will require more equipment, consumables, materials, skilled labor and management, business systems, communications, and temporary/permanent facilities than are available in the surplus production capabilities in the entire world - it will not so much be a competitive winner as a supplier, but it will take all available suppliers • Pressed as much or more to compress construction schedules once a permit is achieved and has had less logistical planning than TAPS…so far • We cannot individually or collectively “throw money at the solution” this time – it is already estimated at above $20B and the operation economics are tight as it is!

13. What Must Happen This Time • The Nature of the Problem • Multiple projects must be planned simultaneously • Systems Integration and synergies across projects • Coordination with collateral projects and local programs • Competition for available resources with other arctic projects and the local ambient demand

14. What Must Happen This Time • Strategic Planning must address: • Permitting, ROW, Access • Construction Direct and Mobilization • Construction Logistics and Support Services and Mobilization • Permanent Operations/Maintenance and Mobilization • Collateral Impacts • Demobilization, Salvage, and Return To Sustainable “Normal”

15. What Must Happen This Time • Strategic Planning must also take a pro-active and in-depth commitment to the Alaska Natural Gas Pipeline project this time • Collect an independent and unbiased knowledge bank • Represent the full constituency of Alaska and the University of Alaska • Pro-active role to document, research, and assess current stakeholder proposals and counter positions on each mode to determine: • Identify and define stakeholders and primary affected/impacted sets, key players and decision makers • Positions of each stakeholder – objectives, drivers, incentives, resources, limits, their view of competition or adversaries (and their similar positions identified as a stakeholder), schedule parameters, economics • Accomplish research and assessment, planning that would not be accomplished by the stakeholders • Chronology/historical documentation of events, publications, reference documentation and links to other information sets

16. What Must Happen This Time • Strategic Planning must also: • Reach out and establish and define methods, organizational modes, and liaisons with Canadian government, commercial, First Nation groups, populace constituencies, and stakeholders • Rebuild, re-construct, and solicit the access to and documentation of the learning experiences and useful products that were developed on and for TAPS • Use the opportunity to develop and enhance the curricula, resources, and value of the documentation, knowledgebase, informational reference, and relevance of the University of Alaska in such areas as: • Arctic linear and general engineering, construction, and logistics management, mobilization and demobilization, sustainable collateral optimization • Mega-project systems integration, planning, management and control • Linear engineering and construction methods, systems, simulation and planning, compliance management, training, feasibility/business plan development and assessment

17. What Must Happen This Time • The real challenge and risk, after the permit is achieved, will be Logistics Management and it must include: • Construction Materials and Equipment Maintenance, Spares, Consumables, Asset Management, Licensing, Operations and Maintenance Facilities • Construction Support Maintenance, Spares, Consumables, Asset Management, Licensing, and Maintenance Facilities • North Slope and Terminal Facilities Construction Equipment Maintenance, Spares, Consumables, Asset Management, Licensing, Operations and Maintenance Facilities • Permanent Operations Facilities Materials and Equipment Maintenance, Spares, Consumables, Asset Management • Collateral Industries Facilities Materials and Equipment Maintenance, Spares, Consumables, Asset Management • Logistics Management must span more than just ANGP

18. The Bottom Line • We can not run this project the way we ran TAPS : • Can’t just throw money at it • Can’t damage the local economies, determine and manage the maximum sustainable local contribution and growth, all else temporary and salvageable • Must maximize the collateral impacts to all stakeholders in a way that benefits both the project and the other stakeholders • Must use the opportunity this time to document and develop the learning experiences, research and science/technical/industrial products; develop permanent curricula for later arctic projects

19. The Bottom Line • PLAN, PLAN, PLAN • Understand the importance of Systems Integration • Understand the challenge and need for sophisticated and integrated Logistics Management and Control • Understand that planning must involve all the potential stakeholders, including planned suppliers and vendors, in strategic planning • START NOW!