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Energy Department approves Alaska LNG exports
By Larry Persily email@example.com
May 29, 2015
(This update, provided by the Kenai Peninsula Borough mayor’s office, is part of an ongoing effort to help keep the public informed about the Alaska LNG project.)
Acknowledging that the Alaska LNG project is different from 32 other export applications on file, the U.S. Department of Energy May 28 granted conditional approval for liquefied natural gas exports from the proposed terminal at Nikiski, Alaska.
Approval for exports to nations lacking free-trade agreements with the United States — including major LNG buyers Japan, Taiwan, China, India and other Asian nations — is a big step for project developers looking to make sales calls on prospective customers. The Alaska LNG partners applied for export authority 10 months ago; some Lower 48 projects have been waiting three years for Energy Department approval.
Alaska LNG received approval for exports to free-trade nations in November 2014, but other than South Korea, none of the 20 nations on the U.S. free-trade list are significant LNG customers.
In granting conditional approval for sales to non-free-trade nations, the Energy Department said Alaska LNG is different from Lower 48 proposals because North Slope gas is stranded, unable to reach domestic or foreign markets. As such, exports of Alaska gas overseas would not diminish the amount available to Lower 48 consumers — a major consideration for the department in its review of proposed export projects on the U.S. Gulf, East and West coasts.
The department in August 2014 amended its procedures and stopped issuing such conditional approvals, instructing applicants that they needed to complete their full environmental review at the Federal Energy Regulatory Commission before a decision would be taken on their export application. That rule change did not apply to Alaska, which the department said it would consider separately.
In its May 28 order, the department noted the Alaska project “is substantially more capital-intensive and will require substantially greater expense toward environmental review than any project that has been proposed for the Lower 48.” As such, the regulatory certainty of export approval — even conditional approval — “will be of greater benefit” for the Alaska project, which the sponsors told the department could cost $1.5 billion for environmental and engineering work to reach FERC approval.
Energy Department approval of Alaska is conditioned on FERC completion and acceptance of an environmental impact statement for the project. The partners are working with federal regulators on gathering environmental and engineering data that will go into the EIS, with the project expected to file its formal application with FERC in late summer 2016.
Alaska LNG, under its current work schedule, hopes for a final EIS and FERC decision by fall 2018, putting the partners in a position to make a final investment decision on the $45 billion to $65 billion development. The sponsors include North Slope oil and gas producers ExxonMobil, BP and ConocoPhillips, along with the state of Alaska and pipeline partner TransCanada.
Construction could take four or five years, with first gas deliveries possible by 2024-2025.
The boom in U.S. shale gas production has sparked a push to build liquefaction plants to ship the fuel to overseas buyers. LNG export terminals are under construction in Texas (one), Louisiana (two) and one on Chesapeake Bay in Maryland. The department has granted export approval to an additional four projects, though each lacks either FERC approval to proceed or an investment commitment by project sponsors.
The Energy Department granted Alaska LNG’s request for 30 years of exports, at a maximum of 20 million metric tons per year — averaging 2.5 billion cubic feet per day of natural gas liquefied and loaded aboard specially designed ships to keep the LNG cold during the voyage overseas. At 30 years, the approval is 10 years longer than the department has granted most export applications.
Under federal law, natural gas exports are generally considered to be in the public interest unless challengers can prove otherwise or the department determines the public would be harmed. The only significant opposition to the Alaska LNG application came from the Sierra Club, which cited alleged environmental damages. The department dismissed the group’s objections.
Among the conditions imposed on Alaska LNG, the Energy Department required:
- Project updates April 1 and Oct. 1 each year, including reports on the status of any long-term sales contracts.
- Alaska LNG partners must file with the department any long-term sales contracts, though the companies may request confidentiality of proprietary information.
- Department approval for any change in management control of the project.
First draft environmental reports for the Alaska LNG project http://www.arcticgas.gov/first-environmental-reports-informative-but-more-come
Federal permits, authorizations required
Searchable database of federal permits and authorizations
Department of Energy docket for Alaska LNG exports application (no instructions needed, the link goes right to the project)
Federal Energy Regulatory Commission Alaska LNG docket search
From , enter PF14-21 in the “Docket Number” box, then complete the date range you want to search, then click the “Submit” box at the bottom of the page.
A searchable library of Alaska North Slope natural gas pipeline efforts going back 40 years
1970s effort for a large-volume LNG plant in Nikiski
ALASKA PROJECT AND GENERAL LNG INFORMATION
Timing is right for North Slope gas project
Cold climate an advantage for Alaska LNG
LNG trades differently than oil
The history and workings of LNG carriers
The making of liquefied natural gas
The Alaska LNG project would be among the world’s largest natural gas development projects. And the single largest component — the gas liquefaction plant and marine terminal — would be built in Nikiski, on the Kenai Peninsula.
Though a construction decision by the project sponsors is at least a few years away, the Kenai Peninsula Borough is devoting significant time to understanding the project’s potential impacts on residents, services and the local economy. The borough mayor’s office is working with the project sponsors and state and federal regulators to ensure community needs are addressed.
The mayor’s office prepares regular updates for posting to this website, sharing information about the project and also global gas markets so that residents can better understand the issues affecting the megaproject — its design and construction planning, permitting and economics.
The project sponsors are North Slope producers ExxonMobil, ConocoPhillips and BP, as well as pipeline company TransCanada and the state of Alaska. The companies estimate the cost at $45 billion to $65 billion (2012 dollars), which includes a massive plant on the North Slope to cleanse the gas of carbon dioxide and other impurities; approximately 804 miles of 42-inch-diameter pipeline from Prudhoe Bay to the west side of Cook Inlet and across to Nikiski; and the liquefaction plant, storage tanks and shipping terminal at Nikiski.
The pipeline would be built to carry 3 billion to 3.5 billion cubic feet of natural gas per day. Alaskans would use some of this gas, and running the compression stations along the pipeline and LNG plant would consume some. The liquefaction plant would have the capacity to make up to 20 million metric tons a year of LNG (about 2.5 billion cubic feet a day of gas).
The project is in the pre-front-end engineering and design phase, which is expected to be completed in 2016. The sponsors could submit their project application and final environmental and engineering reports to the Federal Energy Regulatory Commission in late 2016. The sponsors’ schedule — subject to change — shows FERC issuing its draft environmental impact statement in late 2017, a final EIS in 2018, and an investment decision by the partners in 2019 whether to proceed with construction.
First production at the LNG plant could come in 2025.