As reported in part 1 of this story in the May 22 issue of Petroleum News, Alyeschem LLC is planning to build a petrochemical plant that produces methanol and ultra-low sulfur diesel on the North Alaska of Alaska. The company’s 23-acre lease is located within active oil and gas lease ADL 28312 in the Hilcorp-operated Prudhoe Bay oil field, approximately one-half mile east of Drill Site 14 and 100 feet south of Flow Station 3, immediately adjacent to the Spine Road.
Alyeschem’s odd lot lease, ADL 421055, is required by state statute to be used in support of North Slope oil and gas activities and cannot be used for mineral extraction.
Methanol is used as a freeze protectant for wells and pipelines. As a good solvent with a very low freezing point, methanol is also blended with corrosion inhibitor, so it won’t turn to wax and drop out of the oil.
Currently, all the methanol used on the North Slope is imported from outside the state.
When asked whether he has talked with any North Slope oil producers about purchasing methanol, Alyeschem’s owner, Walter Wilcox II (also known as JR Wilcox), told PN that he has a letter of agreement in place but because of a confidential agreement with that potential buyer, was not allowed to say which company it was.
Wilcox hired Craig Graff as Alyeschem’s chief operations officer.
“As far as I’m concerned, my ability to hire Craig was the best thing that came out of Hilcorp’s acquisition of BP.
“Graff is a chemical engineer and was responsible for implementing and managing chemical programs at various BP operated assets in Alaska, working as a production chemist and corrosion engineer.
“He was the guy that bought all the methanol for BP on the North Slope. Really sharp. Super good dude,” Wilcox said.
Fourth generation Alaskan
So who is JR Wilcox?
He is married to Lieza Wilcox, former commercial and economics vice-president at the Alaska Gasline Development Corp. They have three “really smart and lovely daughters,” he said.
When JR and Lieza married, they made a deal: She would take his last name, but their children’s first names would all be Russian.
The family lives in Anchorage but Wilcox was raised in “Fairbanks, then Haines, Juneau, and then back to Fairbanks for college. … I have a have a bachelor’s in chemistry and a master’s in environmental chemistry,” he said.
“My great grandfather, Howard Wilcox, was the first Dean of Engineering and Mines at UAF.
“My grandad was a coal miner, a minerals engineer. He ran the coal mine out there in Chickaloon, supplying coal to Anchorage for heat.
“I remember when my grandmother was 90 or so and lived right next to Simon & Seafort’s. When I was president of Cook Inlet Energy, she told me: ‘You know you Cook Inlet guys you put your granddad’s coal mine out of business.’
“Grandpa was sitting there and said, ‘Nobody misses all that coal ash anyway.’”
Cook Inlet Energy and more
“I went to work as an environmental scientist, did a lot of permitting and plans for resource development companies, especially with gas,” Wilcox said.
“I did a lot of stuff on the North Slope and in Cook Inlet. Went to work for BP.
“I gave a lot of thought to where I needed to go to do the most good.
“Then went to work as HSE manager for Pacific Energy Resources,” Wilcox said.
Pacific Energy was a small oil and gas producer based in Long Beach, Calif. It entered Alaska in 2007, buying the Alaska assets of Forest Oil Corp. for $464 million.
But Pacific Energy faced some of the same challenges that Forest Oil had and filed for bankruptcy in 2009.
“When Pacific Energy was going out of business and abandoning their assets in the Cook Inlet basin, the volcanos were erupting,” Wilcox said. “Everyone was, like, ‘last one out of Cook Inlet, please turn out the lights.’”
But Wilcox didn’t give up on Cook Inlet.
“David Hall and I just looked at each other. It was like, we said, you know, between the two of us we probably know how to run an oil company, so let’s just start one.”
So in 2009 they started Cook Inlet Energy LLC.
They were interested in purchasing the Cook Inlet assets of Pacific Energy, but “we had to convince somebody that the Cook Inlet wasn’t over and that was a major endeavor. We got the deal done with Miller Petroleum of Tennessee.”
By late 2014 “creative differences” had arisen between Wilcox and Miller.
“Basically, we disagreed on how much risk was acceptable. I had to move on,” Wilcox said.
“I did other things in the meantime. I started Baxter Senior Living, which is the largest senior living facility in the state.
“Sold that last year to Sabra Health Care REIT, which is a big publicly traded real estate investment company.
“That was a big side project of mine.
“I started Quantum Laundry Lounge, the finest laundromat in the country - newest technology on the market. While you wait for your laundry, you can enjoy free high-speed Wi-Fi, flat screen TVs, and our upscale lounge and espresso bar,” he said.
Most important project
Wilcox has been working on the North Slope petrochemical project since the end of 2014 or early 2015.
“It has always been the BIG project I wanted to do.
“We’ve spent years on it; we’ve really refined it. We’ve done multiple rounds of front-end engineering and design. We have changed a lot of things since we initially started talking about this,” he said.
When asked whether there are any major federal permits needed for the project, Wilcox said no.
But the word petrochemical is a dirty word to environmentalists, isn’t it, PN asked him.
“Only to ones who aren’t really paying attention,” Wilcox replied. “The input to our plant is natural gas. The output is water and methanol. … I think methanol is 1/16 thousand as toxic to marine life as gasoline. You can dilute it to where the microbes eat it. Methanol is injected into wastewater treatment systems to feed bacteria. It is a pretty environmentally benign substance.
“The most hazardous thing we will be working with from an environmental standpoint is whatever diesel we have on-site,” he said.
The many possibilities
Methanol itself is an “amazing alternative fuel. … It is a realistic alternative to hydrocarbon fuels. Formula 1 races on methanol. It’s been used on internal combustion engines probably longer than hydrocarbons have. And it’s something you can make out of natural gas, coal, old banana peels; I mean it’s something you can make over and over again, and it works great as a liquid fuel,” Wilcox said.
“And when it burns there’s no soot, there’s no carbon monoxide, there’s no sulfur oxides. The NOX is cut by some 70%. There’s less CO2 emissions,” he said.
But you still have the one carbon atom, “which is why methanol hasn’t been just embraced by the green push with both arms. It’s not zero carbon emissions, but compared to our traditional fuels it’s like, wow. It’s the one alternative out there that works better in an engine than what we’ve got currently. And it’s an interesting way to start monetizing Alaska’s gas.”
Methanol, Wilcox said, is a very popular emerging marine fuel. (Shipping giant) “Maersk is now building methanol-powered ships. Stena Bulk is also going to methanol-fired ships.
“If you’re looking at fuel transition, methanol is infinitely sustainable because you can make it out of anything. Ultimately you can make it out of CO2 and water if you have enough power.
“So if you start looking at this future where you’re making all this energy from solar, wind, geothermal, nuclear or big hydro dams or whatever. So we’ve got a bunch of power that’s got low carbon emissions. It’s going to have high capital costs, but a low marginal cost of power … but how do we move it around? How do we get it (solar, wind, other such power) to cars, planes and boats and stuff? Well you can take CO2 and water and make methanol, so the downstream user doesn’t bear a lot of cost converting to new systems - you’re still going to a gas station and filling up at the pump with your car,” Wilcox said.
“With methanol you can start worrying about carbon emissions at the point of production instead of saying, for example, ‘oh we’re switching everything to hydrogen and now everybody’s going to need to use a compressed, detonating gas with a low energy density in their car or boat or plane.’”
“Or we can say ‘we’re switching everything to batteries, and you’ll all need to buy electric vehicles and massively rework the electrical distribution system and change the way you live.’ That puts a lot on the downstream user,” Wilcox said. “Whereas with methanol you can start with methanol from natural gas, then move to methanol from a mix of gas and renewables, then ultimately be making it entirely from renewables.”
“We’re trying to work with methanol engine manufacturers and the EPA so we can bring them into Alaska for testing, and ultimately get EPA approval for them to be sold in the U.S. It’s cost-competitive with diesel today,” he said.
“Methanol is not a gas; it’s a liquid but if it spills it just dissolves into the water and the microbes eat it,” Wilcox said.
“And it doesn’t gel up in the winter. And it burns clean. … I can talk about this stuff all day,” he said with a chuckle.
Working on drilling’s problem
Alyeschem’s envisioned development would only take up one-third of the 15-acre pad in its 23-acre lease, so Wilcox intends to work with other potential users of the pad to possibly sublease space as permitted by AS 38.05.070 and approved by the Alaska Department of Natural Resources.
These could include gas processing, product storage, power generation, a data center, or any other operation that is complementary to Alyeschem’s use, and to oil and gas operations on the North Slope.
“We can actually make a lot of different things,” Wilcox said.
“One thing I would love to do is to start working on drilling’s problem with their air permit requirements, which relate to emissions of the particulate matter and NOX.
“Wouldn’t it be cool if we were selling them cheaper fuel and they didn’t have to worry about aftertreatment systems. They could just buy the methanol and burn that and say ‘okay, don’t worry, here’s our mitigation measure. We don’t have to buy an expensive new engine; we’re just going to buy a cheaper fuel with no soot! Here we go.’”
If you’re curious, here’s a description of an aftertreatment system, complete with diagram that Wilcox sent PN: https://www.cummins.com/components/aftertreatment/how-it-works.
