Kenai Borough Mayor Mike Navarre presented at public meetings in Kenai, Seward and Homer on April 1, 5 and 6, 2017.  The town hall meeting focused on the state's fiscal problems and options for a healthy long-term fiscal future, including the issues of economic development and new revenues for public services.  The Mayor's presentation can be viewed here.

Energy Department approves Alaska LNG exports

 

By Larry Persily lpersily@kpb.us

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.

 

 

 

PIPELINE ROUTE

If you could tour the entire pipeline route

 

PERMITTING INFORMATION

Alaska Gasline Development Corp. April 2017 application to the Federal Energy Regulatory Commission: Application and environmental reports

Federal permits, authorizations required for the Alaska LNG project: Tall stack of authorizations await the Alaska LNG project

Summary and matrix of required federal permits and authorizations: Permit matrix and summaries

Department of Energy docket for Alaska LNG exports application: LNG export authorization docket

Federal Energy Regulatory Commission Alaska LNG docket search

From FERC’s eLibrary docket search, enter CP17-178 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.

http://elibrary.ferc.gov/idmws/docket_search.asp

 

PROJECT HISTORY

A searchable library of Alaska North Slope natural gas pipeline efforts, government reports and research papers going back 40 years: The Pipe Files

A research paper - The 40-year effort to develop an Alaska natural gas pipeline: Looking for a market: A 40-year search

Unsuccessful 1970s effort for a large-volume LNG plant in Nikiski: Forgotten Nikiski LNG proposal had full environmental review

 

GLOSSARY

Glossasry of project and LNG terms

 

ALASKA PROJECT AND GENERAL LNG INFORMATION

Timing is right for North Slope gas project: Prudhoe Bay gas sales in the 2020s could be timed well

Cold climate an advantage for Alaska LNG: Alaska's cold climate could be advantage

LNG trades differently than oil: Why doesn't LNG trade just like oil?

The history and workings of LNG carriers: LNG carriers called floating pipelines

The making of liquefied natural gas: Cold facts about a hot commodity

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 sponsor is likely a few years away, depending on the development's economic feasibilty and permitting, the Kenai Peninsula Borough is working to understand the project’s potential impacts on residents, services and the local economy. The borough mayor’s office is working with the project sponsor 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.

 

North Slope oil and gas producers ExxonMobil, ConocoPhillips and BP led the project development team 2013-2016, but then individually decided to slow down spending toward permitting, engineering and design as a global oversupply of LNG and weak prices led to unfavorable market conditions for such a large investment. By the end of 2016, the companies collectively had spent more than $500 million on preliminary engineering and design, but were reluctant to spend substantial additional money in the weak market. In late 2016, the state of Alaska, led by the legislatively created Alaska Gasline Development Corp. and encouraged by the governor, took over management of the project in hopes of keeping it on schedule to a mid-2020s in-service date.

 

The state development corporation believes Alaska LNG may be able to succeed in a competitive global marketplace with federal tax breaks, lower-cost loans and a different financial structure than a private-sector managed project.

 

The Alaska LNG development, estimated in 2016 at $45 billion, 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 operating the LNG plant would consume more of the fuel. 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 Alaska Gasline Development Corp. in April 2017 filed an application with the Federal Energy Regulatory Commission to start the environmental impact statement process, which could last at least two years. The corporation hopes for a FERC decision by December 2018, to allow a final investment decision by the state -- and any partners -- in 2019, with construction to start later that year. The state's timeline assumes it is able to sign up customers, investors and financing on long-term contracts to underpin the multibillion-dollar development.

 

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