State nears finish for smaller gasline permits

  • Sections of 36 inch oil & gas pipeline in a storage area near near Shaunavon, Saskatchewan, on Aug. 26, 2016. (Larry MacDougal via AP)

While much attention has been given to the large Alaska LNG Project in recent months, the Alaska Gasline Development Corp. is closing in on federal permits needed for the state’s smaller plan to access North Slope natural gas.

Final regulatory approval to build the 36-inch Alaska Stand Alone Pipeline project, or ASAP, with an estimated cost of about $10 billion, is still probably about a year away, but that’s not bad considering the timeline to study an Alaska megaproject is usually measured in years and can take closer to a decade.

The U.S. Army Corps of Engineers is expected to have a draft supplemental environmental impact statement, or SEIS, out for public review by mid-May, according to AGDC Vice President of Program Management Frank Richards.

Following that, the state-owned corporation could have a record of decision to from the Corps supporting the project by March 2018 if the SEIS process finishes out smoothly.

AGDC will also be seeking a Section 404 Clean Water Act wetlands permit from the Corps as the SEIS is in its final stages.

The ASAP project is commonly referred to as the state’s “backup plan” to pull natural gas off the North Slope. Its genesis predates even the concept of the $45 billion commercial export Alaska LNG Project being pursued by Gov. Bill Walker’s administration with support from BP.

Accessible Cook Inlet natural gas reserves that heat and power much of Southcentral Alaska were dwindling in 2009 when the Legislature formed AGDC as a wing of the Alaska Housing Finance Corp. The subsidiary of the state mortgage bank was tasked with developing a project plan to provide North Slope gas for in-state use.

The AGDC-AHFC in-state pipeline work culminated in late 2012 with a design and final EIS for a 737-mile, 24-inch high-pressure pipeline also capable of carrying natural gas liquids from the North Slope to a tie-in to Southcentral’s gas network just north of Wasilla at rough cost of $7.7 billion.

The capital cost for the pipeline, a 12-inch offshoot line to Fairbanks and a gas conditioning facility on the Slope did not fully address financing mechanisms that could’ve added to the $7.7 billion estimate depending on how the project was funded.

In the spring of 2013, legislation was passed to stand AGDC up as a separate state corporation. It also included a $355 million lump sum which funded a revised ASAP plan — what AGDC is working on now.

The latest iteration of an in-state pipeline is a lower pressure, 36-inch buried pipeline to carry utility-grade natural gas that is ready for a wider array of uses.

As designed, ASAP would carry up to 500 million cubic feet of gas per day. With current in-state consumption at about 250 million cubic feet per day when averaged over a year, Richards said the excess capacity could supply new resource or industrial developments along the pipeline corridor.

Or, he added, the gas could be exported through a small LNG terminal such as ConocoPhillips Nikiski plant if global market conditions improve.

High and volatile energy costs outside of Southcentral are often cited as a top impediment to economic development projects.

According to Richards, the Corps determined differences between the in-state plans — changes to the gas conditioning modules, a North Slope barge dock, pipeline route and a smaller overall footprint with fewer pipeline compressor stations — necessitate an SEIS.

“At the outset of our supplemental work we thought we were just going to be addressing the changes that we’d undertaken with the project and not have to undertake essentially a new EIS but the outcome has been a tremendous amount of work that has been extra time and extra cost that we really didn’t envision,” Richards told legislators during a Jan. 25 Senate Resources Committee hearing.

AGDC has spent about $134 million advancing ASAP over the years, according to financial statements presented at a December corporation board meeting.

The Resource Committee members were mostly interested in why the corporation is continuing to work on ASAP at the same time the administration is avidly pursuing the Alaska LNG Project.

Richards said simply the quicker the regulatory work for ASAP is done the less AGDC will have to spend on it in the long run.

Mike Thompson, an AGDC regulatory and lands manager, said the Section 404 permit and the right-of-way through the roughly 100 miles of federal land the pipeline would cross, which the corporation is seeking concurrently with the SEIS, should be transferrable to another gasline effort.

Thompson described the work that goes into determining what areas qualify as wetlands under Section 404 of the Clean Water Act as “a very significant, time-consuming process,” and once complete, “the Corp would be obligated, I think, to use that judgment or determination for another project,” he added.

“If there’s transferrable permits and we’re on the cusp of getting them that we can transfer to the big gasline, that has value, but otherwise this project seems redundant to me,” said Sen. Bill Wielechowski, D-Anchorage.

Southeast Republican Sen. Bert Stedman questioned whether the state inadvertently hurt the economics of ASAP, and the benefits it could provide to Fairbanks and other rural communities in its corridor, through the more than $1 billion investment in tax credits since 2010 to Cook Inlet producers in an effort to stabilize the Southcentral gas market.

Because the credits largely worked, there is little near-term need for a new gas supply to Southcentral — the region that would presumably provide the foundational demand for ASAP.

Going forward, Stedman said the state should review its policies to make sure “we don’t end up having one of our good intended projects impacting significantly other regions of the state. Somebody’s got to sit back and look at (ASAP) in the entirety of benefit for the Railbelt region.”

In response to a question from Resources chair Sen. Cathy Giessel, R-Anchorage, about the necessity of continuing ASAP, Richards reiterated his assertion that AGDC did not expect an SEIS would be necessary to formally amend the first vision for an in-state gasline, adding the corporation was directed to see the process through in its enabling legislation.

“We’ve been asked for a large amount of extra analysis we feel we’ve put behind us and I feel it’s really just the ability to finish and accomplish the work that you all provided us to do,” Richards said to the legislative committee.

Nikiski LNG plant

It surfaced during a Jan. 23 Senate Resources Committee hearing on the Alaska LNG Project that AGDC is at least investigating the prospect of purchasing ConocoPhillips’ seldom-used LNG plant in Nikiski.

At the time, AGDC Vice President Fritz Krusen declined to directly answer whether, or for how long, the corporation had been pursuing the legacy plant, but quickly listed numerous benefits the plant could provide the Alaska LNG Project.

“Acquisition, that’s kind of a touchy subject, but there are a lot of ways where the ConocoPhillips plant would help the Alaska LNG mission — more waterfront property; immediate standing with (the Federal Energy Regulatory Commission); immediate standing with buyers,” Krusen said.

He also said he assumed the key federal export license for the plant would be included in any sale.

FERC is the lead agency permitting the Alaska LNG Project.

A ConocoPhillips Alaska spokeswoman said the company is in the early stages of a formal process to market the plant.

AGDC President Keith Meyer and others have often said the ConocoPhillips plant, which first started producing LNG for export to Japan in 1969, built a strong LNG-business relationship between the state and nation that has intangible benefits in marketing the Alaska LNG Project to potential Japanese customers.

The 1.5 million-ton per year plant sits on about 200 acres adjacent to the roughly 650 acres BP, ConocoPhillips and ExxonMobil partnered to buy for the Alaska LNG Project’s liquefaction plant and export terminal.

Since the legislative meeting, sources have had mixed reactions about how the ConocoPhillips plant could help AGDC’s efforts.

The benefits listed by Krusen have been noted as well as the fact that the plant could provide a near-term revenue stream for the corporation as it ramps up the large project.

However, at less than 10 percent the size of the 20 million-ton per year plant planned for Alaska LNG, the ConocoPhillips facility is far from a long-term stand-in.

Additionally, the export license tied to the plant expires next year.

AGDC is also currently negotiating a sale or access agreement with the producers for their Nikiski acreage, as it is needed before FERC will transfer the Alaska LNG export license the producers hold.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

Updated: 
02/02/2017 - 9:15am