Larry Persily

Mat-Su Borough seeks ‘fair and accurate’ analysis of port site

The Matanuska-Susitna Borough alleges the state-led Alaska LNG Project team has presented “numerous factual errors and willfully misleading statements” to federal regulators and failed to perform “a good faith and unbiased analysis” of borough land at Port MacKenzie for the proposed gas liquefaction plant and marine terminal. The borough filed 193 pages with the Federal Energy Regulatory Commission on Sept. 14 supporting its property as a possible site for the multibillion-dollar investment and extensively rebutting information the Alaska Gasline Development Corp. presented to FERC in July. But more than just debating the site’s attributes — or detractions — the borough urged the commission “to refrain from further action” on the Alaska LNG Project. “FERC must not proceed with its review of AGDC’s application” until the state team “has presented a fair and accurate analysis of Port MacKenzie as an alternative site,” the borough said in the first page of its filing. The borough did not file a motion seeking formal commission action, and FERC is not required to respond to the borough’s comments. FERC is five months away from its published date for for releasing the project’s draft environmental impact statement, or EIS. The exhaustive review, as required by federal law, will consider alternatives for multiple aspects of the project, such as pipeline routing, vegetation clearing and restoration, temporary construction roads, waterway crossings — and the location of the LNG plant and marine terminal, estimated to cover as many as 900 acres. AGDC for the past year has been working to answer hundreds of questions from FERC and other federal agencies about project construction and operations, filling in information gaps for the EIS. The state corporation’s most recent responses were submitted Sept. 14, addressing an alternative pipeline routing just inside the eastern boundary of Denali National Park and Preserve, visual impacts of the pipeline at multiple points on the route and air quality issues. The state team expects to answer the last of FERC’s requests in October, though follow-up questions are anticipated as the commission staff and EIS contractor work toward their February 2019 timeline for release of the draft EIS for public comment. FERC authorization is required to construct and operate the gas pipeline from Prudhoe Bay on the North Slope due south through the state and the coastal terminal for LNG exports. The Mat-Su Borough owns the seldom used Port MacKenzie property across Knik Arm from Anchorage and has long promoted the site for industrial development. The land is about 65 air miles northeast of AGDC’s preferred location in Nikiski, on the eastern shore of Cook Inlet, in the Kenai Peninsula Borough. Both the Kenai and Matanuska-Susitna boroughs have hired expensive Washington, D.C., law firms to represent their interests at FERC, and both municipalities have been granted intervenor status at the federal agency, giving them the legal ability to seek a rehearing of FERC decisions and, if unsuccessful at that stage, to challenge the commission in federal court. Producers selected Nikiski in 2013 The Alaska LNG team in fall 2013 selected Nikiski as its preferred location for the terminal and stayed with Nikiski when the project entered pre-file status with FERC in September 2014. In its Sept. 14 filing with FERC, the Mat-Su Borough said failure to recognize Port MacKenzie as a feasible or preferred site goes back six years. In 2012, North Slope oil and gas producers ExxonMobil, BP and ConocoPhillips initiated a review of a potential LNG project, with the state joining the effort in 2014 as a minority equity partner. The producer-led team settled on Nikiski as the best alternative after considering more than two dozen sites in Southcentral Alaska. The producers pulled out in 2016 after declining to spend $1 billion or more on further permitting and full engineering and design work in a weak market. AGDC then took over management of the $43 billion project and applied to FERC in April 2017, using state funds to cover its costs. The Mat-Su Borough elevated its challenges after the state took over the project, filing objections with FERC. The borough alleged Sept. 14 that the alternatives analysis included with AGDC’s application 17 months ago was flawed, unfairly excluding Port MacKenzie. “AGDC’s continued delay in providing accurate information to the commission regarding Port MacKenzie serves no purpose but to further delay” the EIS, the borough said. FERC asked the state in February to answer specific questions — not a full economic and engineering review — about Port MacKenzie for the EIS alternatives analysis. AGDC submitted its answers in July. The borough accused the state project team of purposefully presenting FERC with information on two sites that “likely would maximize environmental impacts,” including high impact to wetlands, ignoring a wetlands-free “optimum site” identified by the borough. “AGDC chose to make no effort to find a least-damaging site,” the borough alleged in its notes of a June 7 meeting with state project officials. Rail extension, Knik Arm bridge caught in dispute In addition, the borough dismissed as contrived AGDC’s July assertion to FERC that a proposed rail line at Port MacKenzie would be in the way of the LNG project. “Future rail development … does not even exist at this time,” the borough said in its Sept. 14 filing. In July, the state team told FERC that federally-mandated safety zones around the liquefaction plant and storage tanks would require relocating the proposed railway and the existing port access road. But while criticizing AGDC for raising the issue of the unbuilt railroad extension, the borough has promoted the potential rail connection as a sales point for the site. It said in a January 2018 filing with FERC: “In addition, a 32-mile rail link connecting Port MacKenzie to the main line of the Alaska Railroad is under construction. The link will shorten the distance between the Interior and tidewater, enhancing opportunities for the development of new industries with low transportation costs.” A 2017 engineering report prepared for the borough, and submitted to FERC, also highlighted the potential rail connection: “Port Mackenzie is an ideal site for the Alaska LNG facility site. … Favorable criteria include easy access to port, rail and truck infrastructure.” The state has spent more than $180 million in the past 10 years on building segments of an Alaska Railroad extension to the port but the line is unfinished and the project needs an additional $120 million or more to complete the job — with no ready cash available and little political support outside the borough. As for the existing port access road, AGDC looked to avoid safety and security concerns presented by the road running through the LNG plant site. The borough’s recommended “optimum site,” however, shows a significantly longer stretch of the road passing through the property’s northern and eastern acreage. The Mat-Su filing also challenged AGDC’s contention that ship traffic at the port to move logs from a recently approved borough timber harvest contract would conflict with the LNG project’s construction and operations. The borough said it believes there is enough room at the port to accommodate multiple users. Besides, the borough said, “There is great likelihood that timber exports will not occur given current import tariffs by foreign countries.” Another contentious point is the proposed Knik Arm Bridge to connect Anchorage and Port MacKenzie. AGDC told FERC the nearby bridge could affect LNG carrier traffic to and from the loading berths. The borough argued that AGDC based its concern on a bridge that may not be built. “There are no current plans for an orbital launch and recovery complex in Anchorage, and no current plans to construct a giant mermaid statue in the middle of Cook Inlet,” the borough said in what it called an “absurd analogy (that) demonstrates the meaninglessness of AGDC’s assertion.” The borough added: “These examples are outlandish, but AGDC raising the specter of some potential unknown is likewise outlandish.” The state has abandoned the bridge project, long promoted by the Mat-Su Borough, though advocates continue to push for its development and critics equally push to ensure that never happens. Other disputes between the borough and AGDC include: • The borough said it is willing to sell the land to AGDC, arguing that the state team reported the land was available only for lease. • The borough said significantly more acreage is available at Port MacKenzie than AGDC reported to FERC. • The borough said the project would not need to construct protective ice-management (deflection) structures at the LNG carrier loading berth; AGDC said otherwise. • The project could use the existing barge facilities at the port, the borough said, contrary to AGDC’s position that the barge dock and trestles would need to be replaced. • And while AGDC said the additional 116 miles round trip from Port MacKenzie to Asian markets, rather than Nikiski, would add costs by requiring one more LNG carrier in the fleet to handle the project’s constant output, the Mat-Su Borough said it is a non-issue — the ships could just run a little faster during the week-long voyage to make up the difference. Most of the contested information was included in AGDC’s detailed filing with FERC on July 13, where the state corporation cited “significant issues” favoring Nikiski over Port MacKenzie, including: • Conflicts with other actual and proposed uses of Port MacKenzie. • The need to move the port’s access road and proposed railroad extension away from the LNG plant site. • Wind, current and sea-ice conditions that would hamper winter operations at the port site. • The extreme tidal range at Port MacKenzie. • Additional dredging that would be required to widen the shipping channel through the Knik Arm Shoal to allow safe two-way ship traffic through the area. • Port MacKenzie’s location within Cook Inlet’s most protected beluga whale critical habitat area. As to Port MacKenzie and its proximity to critical habitat for beluga whales, which are sensitive to underwater noise, the borough responded Sept. 14 it is “taking a proactive approach with beluga recovery,” including helping to fund beluga research efforts. “New research suggests improvements to management or marine construction techniques. … Port MacKenzie will set a new standard for port development … and (will) be the local government leader in the recovery of beluga whales.” Valdez weighs in A third Alaska municipality, the City of Valdez, also has filed with FERC in support of its community’s waterfront as the best site for the LNG terminal. Like the Mat-Su and Kenai boroughs, Valdez is an intervenor in the proceedings, but its filings have been less confrontational than the Mat-Su’s submissions. In a May 2017 filing, Valdez said it would be a lower-risk, lower-cost option than Nikiski, with less “environmental degradation.” In addition, the city told FERC that bringing the project to Valdez would ensure that “its citizens and businesses have access to inexpensive natural gas.” Valdez, about 170 air miles east of Nikiski, is on Prince William Sound, and is the location of the Alyeska oil terminal. The producer-led project team in 2012 considered Valdez, Nikiski, the Matanuska-Susitna port area and about two dozen other potential LNG plant sites in Cook Inlet and Prince William Sound. The state Legislature in 2010 created AGDC to promote and participate in development of a North Slope gas project. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

Gas pipeline opponents finding success halting projects

Though oil pipelines have attracted bigger protests — Keystone XL from Canada’s oil sands into the United States and Dakota Access to move Bakken crude to the Midwest — opposition to natural gas pipelines is growing. While many of the challenges are focused against hydraulic fracturing for shale gas and in support of renewable energy, others are specific to local land and water issues, Much of the opposition is in the mid-Atlantic states, where the boom in shale gas drilling in Appalachia’s Marcellus Basin has elevated the visibility — and controversy — of pipelines in an area generally unaccustomed to the oil and gas industry. Opponents have held rallies, pushed local politicians for support, gone to court — even illegally camped out in trees to block pipeline construction. “It’s definitely not getting easier to build a new pipeline,” Stan Chapman, TransCanada’s president of U.S. gas pipelines, told Reuters during June’s World Gas Conference in Washington, D.C. The 600-mile Atlantic Coast gas pipeline — from West Virginia through Virginia and into North Carolina — has drawn significant community opposition, including its plan to tunnel under the James River in Virginia. Construction is underway even as opponents continue to challenge regulatory approvals for the $6.5 billion project. A federal appeals court on Aug. 6 vacated permits issued by two federal agencies for the pipeline. The court told the U.S. Fish and Wildlife Service to impose more protections for threatened or endangered species, including mussels, bumble bees, crustaceans and bats. The court also told the National Park Service to better explain why a pipeline crossing under the Blue Ridge Parkway in Virginia is consistent with the conservation and preservation purpose of a national highway. The project developer said it expects the agencies to quickly address the court’s concerns. Meanwhile, construction will continue in areas unaffected by the court action. Completion is planned for late 2019. The $3.7 billion Mountain Valley gas line could be delayed past its scheduled 2019 completion after the Federal Energy Regulatory Commission — prompted by a court ruling against the project — on Aug. 3 ordered all work to stop on the 303-mile West Virginia-to-Virginia pipeline. The court ordered the U.S. Forest Service and Bureau of Land Management to take a closer look at the line’s environmental impact. Changes in the pipeline route could require “further authorizations and environmental review,” FERC said. Pipeline opponents were successful with their legal strategy in stopping the proposed $1 billion Constitution Pipeline to transport Pennsylvania shale gas into New York. Section 401 of the federal Clean Water Act gives states the right to review projects to ensure they don’t harm local waters. “It essentially gives states veto power over federal decisions,” said Daniel Estrin, advocacy director for the Waterkeeper Alliance. The U.S. Supreme Court on April 30 denied a request from the pipeline developer to review the New York state decision that denied a permit under the Clean Water Act, emboldening other pipeline opponents to go after the same tactic in their states. Also in New York, the New York City Comptroller this month came out against the Northeast Supply Enhancement Project, a $1 billion gas pipeline that would cut across 23 miles of lower New York Bay to meet demand growth in Brooklyn, Manhattan and Queens — especially as consumers switch from fuel oil to gas for heat. “Allowing the construction of the pipeline risks damage to many of New York’s most precious habitats and natural assets,” the city official said. Though FERC’s draft EIS said environmental impacts during construction would be temporary, the comptroller said the EIS did not sufficiently account for climate change and rising sea levels. He wants a re-do. Also on the Atlantic Seaboard, the Alamance County Board of Commissioners in North Carolina on Sept. 4 unanimously adopted a resolution opposing a 72-mile connecting line to bring Marcellus gas into the distribution system. The board’s opposition focused mostly on water quality issues. The commissioners, who have no authority to stop the pipeline, sent their resolution to FERC. Even Texas is not immune to gas controversies. Two groups in the Rio Grande Valley — the Save RGV from LNG and the Lower Rio Grande Valley Sierra Club — oppose three LNG terminals proposed for the Port of Brownsville. FERC is scheduled to release draft environmental impact statements for the projects late this year. Several communities in the area have adopted resolutions against the LNG facilities. In Colorado, voters will decide in November whether to ban oil and gas drilling and flowlines within 2,500 feet of homes, businesses, playgrounds, waterbodies and drinking water sources. The state estimates that 85 percent of non-federal land in Colorado would be off-limits to new drilling. The current limit is 500 feet from buildings. Fracking opponents collected signatures to put the issue on the ballot, citing the increase in drilling amid the growing suburban communities north of Denver. The initiative is widely expected to face legal challenges if it passes. In the Pacific Northwest, the Puyallup Tribe of Indians has asked the city of Tacoma to re-examine whether a $310 million liquefied natural gas plant and storage facility — now under construction — is safe. The plant would liquefy gas and store the LNG in an 8-million-gallon tank to meet peak demand from utilities and serve as a marine fueling depot. The Tribe wants a supplemental analysis of the plant’s impact. The facility is scheduled to start service in 2020. Opponents to the proposed $10 billion Jordan Cove LNG project in Coos Bay, Ore., have long challenged land clearing for a pipeline, the risk to waterways and safety of the LNG plant. Now the developer is having trouble with the state Department of Energy, which last month recommended denial of the developer’s request for a waiver from a full review of the project’s power-generation plant. Calgary-based Pembina Pipeline is behind the Jordan Cove LNG terminal, which would provide an export outlet for gas from the Western U.S. and Canada. FERC is reviewing the project, including a 229-mile pipeline to link the LNG plant with the North American gas supply. The final environmental impact statement is scheduled for November 2019. ^ Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

FERC shaves a month off timeline for Alaska LNG decision

The Federal Energy Regulatory Commission on Aug. 31 moved up by one month its schedule for the Alaska LNG project’s environmental impact statement and commission decision. FERC now expects to issue the project’s draft impact statement in February 2019, instead of March, assuming the state-led project team provides “complete and timely responses to any future data requests” and cooperating regulatory agencies “provide input on their areas of responsibility on a timely basis.” The commission’s Aug. 31 notice set Nov. 8, 2019, for issuance of the project’s final EIS, a month earlier than the Dec. 9, 2019, schedule issued in March of this year. Under the revised timeline, FERC’s deadline to decide on the Alaska Gasline Development Corp. application would be no later than Feb. 6, 2020, instead of the original timeline of March 8, 2020. AGDC filed its application with FERC in April 2017. Commission authorization is required to build and operate an onshore natural gas liquefaction plant and export terminal in the United States. The state corporation took over the project almost two years ago after North Slope oil and gas producers ExxonMobil, BP and ConocoPhillips declined to proceed with spending the hundreds of millions of dollars required over the next couple of years on permitting and further engineering for the project. As proposed by the state, the $43 billion venture would pipe North Slope gas 807 miles to a liquefaction plant and marine terminal at Nikiski, on the Kenai Peninsula. The location of the LNG plant, however, is contentious, and will be considered in the federal EIS. The Matanuska-Susitna Borough has intervened in the FERC proceeding to promote its Port MacKenzie as a better site than Nikiski, and the city of Valdez also has filed as an intervenor in support of its community as a better option. The Kenai Peninsula Borough earlier this month told FERC that it, too, wants intervenor status to protect its interests. • The state-led project team is nearing the end of its work assignments from FERC, submitting more details Aug. 15 of project design and operations. The filing provided more information on:The project’s preferred three-mile route to relocate the Kenai Spur Highway around the LNG plant site for safety and security reasons. • A noise analysis of the new Kenai Spur Highway route. • Alternatives for routing several miles of the 42-inch-diameter gas pipeline just inside the eastern edge of Denali National Park and Preserve rather than running the pipe through a steep hillside outside the park boundary. • Sediment transport modeling to help predict how open-cut installation of the gas pipeline across waterways could affect fish habitat in 11 anadromous streams selected by federal regulators for further review. • Visual impacts at five selected sites along the pipeline route near Denali National Park and Preserve. • Turbidity in Cook Inlet that would be stirred up by dredging — and disposal of dredged material — required for construction and operation of a barge landing and ship dock that would be used for offloading equipment at Nikiski. In addition to fulfilling FERC’s data requests, the state corporation continues working toward possible gas supply agreements with North Slope producers, long-term sales contracts for the project’s output, financing and lining up investors for the venture, which would produce 20 million tonnes of LNG at full capacity. AGDC expects to spend about $4 million per month of state funds during the fiscal year that started July 1. The corporation is planning what it calls its “equity road show” for later this year and early 2019 to introduce and promote the project with potential investors. Goldman Sachs and the Bank of China are assisting AGDC in that effort. ^ Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

Russia paying cost to be an LNG boss

Russia started as a bit player on the liquefied natural gas stage less than a decade ago but is not content in that role and wants to share top billing. In 2009, when Russia’s first LNG export terminal went online, the Sakhalin-2 project in the Far East provided about 4 percent of the world’s liquefaction capacity. When the country’s second liquefaction plant, Yamal LNG, reaches full capacity early next year, Russia will have moved up to 26 million tonnes annual capacity, 7 percent of the world’s total. If gas producer Novatek, which operates Yamal LNG, goes ahead with its plan for a second project in the Siberian Arctic, Russia could climb to 46 million tonnes in the 2020s, in the No. 4 spot behind Qatar, Australia and the United States. Plans to expand Sakhalin production would further bolster Russia’s position in Asian markets, where it holds a decided geographic advantage. The Sakhalin terminal is just 750 miles north of Tokyo Novatek’s own long-term goal is to produce 55 million to 60 million tonnes of LNG per year by 2030, company CEO Leonid Mikhelson said earlier this month. Government financing, tax breaks, building infrastructure and providing icebreakers are part of the plan. “Don’t think of these as commercial projects,” a global energy analyst foretold at a Washington, D.C., conference six years ago. Rather, he said, accept that Russian politics are part of the equation. The government might be willing to subsidize a project to promote economic development or to gain momentum in the growing Asian market. That same summer as the Washington conference, Russian President Vladimir Putin signaled the gradual end of state-controlled Gazprom’s monopoly on gas exports, opening the way for rivals, including Novatek, to do business in Asia. Gazprom has long profited from its exclusive position in pipeline gas sales to Europe, which Putin did not touch. The easing of export restrictions applied only to LNG. As part of the decision to promote LNG exports, the government’s 2013 actions included reducing its mineral extraction tax and canceling export duties on new Arctic offshore oil and gas projects. The government further assisted in Yamal by financing construction of a port, airport, pipelines, icebreakers and dredging to create a navigable channel to the port, at a cost of at least $9 billion. The regional government contributed a property tax exemption and lower corporate profits tax rate. Just five years later, two of three liquefaction trains are now in production at Yamal, with the third train scheduled to start up early 2019, bringing the $27 billion project’s capacity to 16.5 million tonnes per year. The partners are Novatek (50.1 percent), France’s Total (20 percent), China National Petroleum Corp. (20 percent) and China’s Silk Road Fund (9.9 percent). China also provided $12 billion in financing for Yamal, after U.S. sanctions blocked other lenders. Novatek and the country’s top oil producer, Rosneft, both lobbied for LNG export rights. Rosneft and its partner ExxonMobil for years have considered adding a gas liquefaction plant to their Sakhalin-1 project, which started producing oil in 2005. Though the companies continue to plan their own LNG plant, Gazprom would prefer that they pay to run their gas through its Sakhalin-2 project. Reuters this spring reported that ExxonMobil and Rosneft had invited companies, including China National Petroleum Corp.’s engineering arm, to submit construction bids by October for their $15 billion LNG project with an initial capacity of 6 million tonnes per year. The news service reported a final investment decision is due next year. Gazprom, meanwhile, is looking at adding a third train at its Sakhalin plant but lacks enough gas reserves for the expansion. Reaching a deal with ExxonMobil/Rosneft for supply would be the fastest option using existing infrastructure because some of the gas is being pumped back into reservoirs, Sakhalin-2 commercial director Andrey Okhotkin told a Russian LNG conference this summer. While oil and gas giants Gazprom and Rosneft are active in the Far East, Novatek wants to expand in the Arctic. The company is targeting mid-2019 for a final investment decision on its Arctic LNG-2 plant, which would be built east of Yamal. Estimated at $25.5 billion, the plant is proposed at 19.8 million tonnes per year, with start-up in 2022-23. In June, Total agreed to buy a 10 percent stake in the venture, and Novatek has signed a memorandum of understanding with Korea Gas expressing “mutual interest for KOGAS to enter into the Arctic LNG-2 project.” Talks also are underway with Saudi Arabia’s Aramco, China National Petroleum Co. and Japan’s Marubeni Corp. In anticipation of going ahead with Arctic LNG-2, Novatek is building a shipyard in the port city of Murmansk for construction of the production modules that would be towed to the plant site on the Gydan Peninsula. Ice-class LNG carriers move Yamal gas through the Northern Sea Route to East Asia and also westward to Europe, but the ships are significantly more expensive to build and operate than the usual LNG tankers. Novatek is pursuing an answer to that costly dilemma — trans-shipment terminals to transfer the fuel to less-expensive, traditional carriers after the ice-class ships have reached open water. The company wants to build an LNG trans-shipment terminal by 2023 on Russia’s Kamchatka Peninsula, about 1,500 miles north of Tokyo. Trading house Marubeni and shipbuilder Mitsui O.S.K. Lines are among the Japanese companies considering participation in the project. Tokyo also might help through public institutions such as the Japan Bank for International Cooperation and Nippon Export and Investment Insurance, according to a report in the Nikkei Asian Review. And if one trans-shipment terminal is good, two might be better. Novatek is considering building an LNG trans-shipment terminal near Murmansk, CEO Mikhelson said Aug. 20. The location will be determined “in the nearest future,” Mikhelson said. The use of Ura Bay, 25 miles from Murmansk, is under discussion with Russia’s Defense Ministry, which operates a submarine base nearby. The transfer terminal, on the route from Yamal to Europe, would strengthen the company’s positions in the global LNG market, Mikhelson said. “We are losing,” he said, “and will continue losing in transportation with ice-breaking tankers.” ^ Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

LNG tariffs could be self-defeating move for China

In the short term, China may have to pay more for liquefied natural gas imports though longer term it has several other supply options if it goes ahead with its threatened 25 percent tariff on U.S. LNG, analysts reported in the week after China’s announcement. There could be a lot more LNG coming from expansions in Qatar, Australia and Papua New Guinea over the next several years, with new projects moving toward final investment decisions in Mozambique and Canada’s West Coast. And there is the scheduled late-2019 start-up of the 2,500-mile Power of Siberia pipeline to move Russian gas to China. The line’s capacity of 3 billion cubic feet of gas per day could fulfil more than 15 percent of China’s import demand in 2023, based on the International Energy Agency’s 2018 forecast report. Neither Gazprom nor China has announced pricing terms for the gas. As a near-term reaction if the tariff takes effect, U.S. gas would become uneconomical in China and traders would shift their cargoes to send U.S. LNG to other buyers like Japan and South Korea, while redirecting non-U.S. gas to China, Trevor Sikorski, with Energy Aspects in London, told Bloomberg. China would probably end up paying about 10 percent more for spot cargoes after the swaps, he said. Spot-market pricing fluctuates much more than contract prices linked to oil or other fixed indices. The tariff would not reduce overall U.S. LNG export volumes, but would reorient trade flows, pushing more U.S. gas to Europe and other markets, while Mideast and African cargoes would be pushed to Asia, driving up prices, Neil Beveridge, an analyst with Sanford C. Bernstein &Co., was quoted in the Australian Financial Review. A 25 percent tariff could hit the next wave of U.S. projects with a “real impact on prospective deals … it certainly adds to the risk of delay,” David Lang, global head of LNG at law firm Baker &McKenzie, told Bloomberg. “This is a pretty dramatic move.” “At least in the short term any Chinese buyer looking for long-term supply would have to drag their feet on signing a U.S. contract,” Jason Feer, head of business intelligence at Poten &Partners in Houston, told Bloomberg. It could hit U.S. developers seeking long-term contracts to underpin financing of their export projects, Giles Farrer, research director for global gas and LNG supply for research firm Wood Mackenzie, was quoted by the Houston Chronicle. As much as the threatened tariff may hurt U.S. project developers, there will be a price to end-users in China. “This action is more likely to hurt Chinese buyers than U.S. exporters,” Katie Bays, an analyst with Height Securities in Washington, D.C., was quoted by Bloomberg. China said it would impose the tariff if President Donald Trump follows through with his Aug. 2 threat of more duties on goods imported from China. “So long as the U.S. places no barriers on exports of its own, such barriers … by importing countries would be potentially self-defeating,” CNBC quoted Citigroup analysts. “This coming winter for example, China is likely to be short on both LNG and soybeans, two U.S. commodities on which it has placed barriers.” However, a tariff war could cast doubt on the dependability of U.S. gas supplies, Citigroup added. China’s gas consumption is rising dramatically as the country — as a matter of government policy — tries to clean its air of coal pollution by burning more gas. Warren Patterson, commodity strategist for ING Bank, said he was “quite surprised” to see LNG show up on China’s list. “Given the transition we are seeing in China, with a move away from coal toward natural gas, I would have thought that the government would have wanted to ensure adequate supply,” Patterson told Bloomberg. The importance of U.S. gas to help meet that demand may mean the threatened tariffs don’t last, said Vivek Chandra, chief executive of aspiring exporter Texas LNG, which is working to develop a 2-million-tonne-per-year terminal in Brownsville, Texas. “Imports of U.S. LNG and oil into China represent one of the best ways for both countries to balance their trade balances,” Chandra told the Australian Financial Review. “Thus, we do not expect these tariffs to prevail in the long term.” Beveridge, with Sanford C. Bernstein &Co., shared a similar view with Reuters: “LNG is one of the most obvious ways to lower a trade deficit between the U.S. and China, and if there is a trade deal to be done LNG will be involved. … The latest rhetoric smacks of a negotiation being played out in a very public way.” But politics could make it harder. Hugo Brennan, senior Asia analyst at consultancy Verisk Maplecroft, told CNBC: “Geopolitical dynamics will undermine American exporters’ bid to become major gas suppliers to China.” There are other suppliers “eager to fill the gap,” Charlie Riedl of the Center for LNG, which represents the U.S. industry, told the London Financial Times. “This … would have very real effects on the U.S. LNG industry.” China could turn to Australia and Qatar, the world’s two biggest exporters, to supply its needs, ING’s Patterson said. Australia is nearing the end of a massive build-up of LNG capacity, with its sixth and seventh new export projects to come online this year, providing several opportunities for lower-cost expansions of existing liquefaction plants. The partners in Papua New Guinea’s 4-year-old LNG project are looking to make an investment decision on a major expansion next year. In Mozambique, Anadarko, the leader of the largest of several gas projects, has targeted the first half of next year for its investment decision. The world’s largest LNG producer, Qatar, already has decided to expand its 77 million tonnes of annual capacity by 30 percent, with a 2023-2024 start-up. The $40 billion (Canadian) Shell-LNG project in Kitimat, British Columbia, is scheduled for a final investment decision later this year. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

State agency wants in on EIS review for Alaska LNG project

The Alaska Department of Natural Resources has asked federal regulators if its permitting office can join the environmental review team for the Alaska LNG Project as a “cooperating agency,” promising not to share anything with the project applicant, its colleague in state government, the Alaska Gasline Development Corp. The Federal Energy Regulatory Commission has been working toward an environmental impact statement, or EIS, for the state-led North Slope natural gas project since AGDC filed its application in April 2017. The commission is scheduled to issue its draft EIS in March 2019. Federal offices with permitting authority over a project are required to assist as cooperating agencies, such as the Army Corps of Engineers and U.S. Fish and Wildlife Service for the Alaska LNG Project. FERC is the lead for the federal EIS for the Alaska gas development. The law also allows non-federal agencies to participate, if they have “special expertise with respect to the environmental impact of the proposal.” Cooperating agencies must cover all their own costs of participating in the review. The Office of Project Management and Permitting at Natural Resources coordinates between multiple state agencies with such environmental permitting expertise, Department of Natural Resources Deputy Commissioner Heidi Hansen wrote in a July 13 letter to FERC, asking the commission to accept the state office as a cooperating agency in the federal review. The DNR office “routinely enters into agreements with the lead federal agency as the single point of contact for state regulatory agencies … participating in the deliberative process and compiling state agency comments,” Hansen wrote. The state’s letter included a draft agreement for FERC to consider, modeled on a 2011 agreement from a previous state-supported Alaska gasline effort. The draft commits DNR’s Office of Project Management to hold confidential any material in the federal environmental review not available to the public. “To the extent permitted by law,” the July 13 draft agreement said, the office would not release any confidential or deliberative information outside of state agencies that have permitting or regulatory authority over the project. The ban would prohibit sharing with the project applicant, AGDC. “There is clear separation between AGDC and the State of Alaska’s regulatory agencies for conducting the permitting process,” Hansen wrote in her letter to FERC. The state Legislature created AGDC in 2010 to promote, permit and finance a North Slope gas pipeline project. It has the power of eminent domain to acquire private property, and it has authority to borrow money for construction. Although federal regulators are far along in their environmental review, “we see significant value in participating in the EIS process to assist FERC and other cooperating federal agencies by providing additional information and data needed for their analyses,” the deputy commissioner wrote. To further address the potential conflict for an Alaska state agency to cooperate on a federal EIS for a project led by the state, DNR’s project office “acknowledges that it is FERC’s policy that an agency cannot be both a cooperating agency and an intervenor in the same proceeding.” In the draft agreement presented to federal regulators, DNR’s Office of Project Management agreed “to forego its right to seek intervention in the Alaska LNG Project EIS proceeding with FERC.” An intervenor in a FERC proceeding has the legal right to challenge not only the EIS but also any commission decision. However, the draft agreement continued, “this will not disqualify the State of Alaska or the Office of the Governor and other principal departments of the state … from actively participating as intervenors in the Alaska LNG Project certificate proceeding before FERC One state entity sitting on the review team for another state entity’s federal EIS is not unique — for Alaska. In 2011, when the state was an advocate and partial funder for a different North Slope gas development project, FERC accepted the State Pipeline Coordinator’s Office at Natural Resources as a cooperating agency for the environmental review. However, FERC rejected a request from the Fairbanks North Star Borough to participate as a cooperating agency. The state pipeline coordinator’s office joined the effort several months before FERC held public meetings in early 2012 — called scoping sessions — to learn what issues people and organizations wanted covered in the EIS. (The pipeline office closed in 2015 and its duties were reassigned within the department.) This time around, the state asked for cooperating-agency status almost three years after the FERC-led scoping sessions for the Alaska LNG project. Federal regulations instruct cooperating agencies to participate in the process “at the earliest possible time.” The 2011 proponents ExxonMobil and TransCanada, operating as the Alaska Pipeline Project, never advanced beyond the pre-file stage at FERC and formally withdrew their application in 2014 before regulators started drafting an EIS. The pipeline would have carried Alaska gas through Canada and into the North America pipeline system. Prolific U.S. shale gas production and low prices put an end to the effort to sell Alaska gas in the Lower 48 states. About the same time as the file closed at FERC on the North American pipeline project, Alaska oil and gas producers ExxonMobil, BP and ConocoPhillips turned their focus to the export market. The companies started the pre-file process at FERC in September 2014 for a project to pipe North Slope gas to Nikiski on Cook Inlet, where the methane would be liquefied and loaded aboard ships for delivery to Asian buyers. When the producers decided to slow down spending on the LNG project in 2016, due to weak market conditions and low oil and gas prices, the state took over and went ahead with the application to FERC. AGDC continues answering questions AGDC and its contractors have been working the past year to answer questions and data requests from federal regulators, filling in gaps for the environmental review. In its latest filing, the state project team on July 24 presented FERC with the same material it gave the Army Corps of Engineers a few months earlier, addressing wetlands, dredging and fill issues. The Clean Water Act requires AGDC to obtain a permit from the Army Corps. In addition to ensuring preservation or restoration of wetlands and identifying appropriate Cook Inlet disposal sites for dredged material from the Nikiski marine terminal, the Army Corps and FERC review will look at the state’s plans for streambed and bank restoration efforts at temporary bridges over waterbodies. AGDC plans 54 temporary bridges for construction access roads and pipeline work, ranging from a 20-foot-long span over an unnamed creek to two 300-foot spans over the Deshka River. Included in the state’s July 24 filing with FERC, the state team said it is “not practicable” to restore to their original condition and function all wetlands affected by the project, such as areas of gravel fill placed during construction. Some wetlands will be re-established with revegetation. “These wetlands could have a functional value that is equal to, better than, or less than the value of the wetlands they replace,” AGDC has told the Corps and FERC. Some property owners may not want the wetlands restored after construction, if the owner sees more value in retaining the gravel fill, the state team said. And, in some cases, removing fill placed during construction could “introduce open water and erosion” and “can do more harm than good.” Impacts to wetlands and other waterbodies “will be discussed in a Wetlands Compensatory Mitigation Plan, which will be provided after the draft EIS is issued,” AGDC told FERC. “The plan will be refined in coordination with the Corps, leading up to the final EIS.” As soon as the Army Corps decides what areas covered by the project would qualify as wetlands, AGDC will provide more detailed mapping of terrain and boundaries. The state team also noted that wildfires can turn areas “of discontinuous permafrost wetlands into uplands,” reporting that the pipeline would cross “several areas of discontinuous permafrost that were previously burned.” AGDC is waiting for the Army Corps to issue its determination of what still is considered wetlands. ^ Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

LNG projects ramp up in response to growing market

Oil and gas companies are responding to the growing market for liquefied natural gas by ending their hiatus from new projects, while more liquefaction capacity is coming online in Russia, Australia and the U.S. Gulf Coast. LNG projects under construction or anticipated to reach a final investment decision within the next 12 months total more than 125 million tonnes of annual output capacity — more than a one-third boost to global capacity as reported by the International Gas Union’s 2018 annual report. Not sitting still as the market grows, world leader Qatar plans to expand its LNG capacity by 23 million tonnes by 2023 — jumping to 100 million tonnes per year. Qatar Petroleum has signed a contract for front-end engineering and design of three new liquefaction trains — the world’s largest — and drilling could start next year to develop additional gas reserves, S&P Global Platts reported. Qatar last year lifted its 12-year-long moratorium on new gas production. Nigeria, the world’s fourth-largest LNG exporter, is taking steps to expand its LNG production capacity by a third, Bloomberg reported. Nigeria LNG, a venture of the state-owned oil company and three oil majors, signed engineering and design contracts July 11. A final investment decision could be taken late this year. The plan would boost annual capacity to 30 million tonnes by 2024. Nigeria’s seventh liquefaction train could cost as much as $6.5 billion to build, with an additional $5 billion for the wells and pipelines to supply the expansion. Working to add Mozambique to the list of 20 LNG-exporting nations, ExxonMobil plans to expand its proposed Rovuma project to cut production costs as the company and its partners prepare to formally tap lenders this fall, Bloomberg reported. ExxonMobil looks to build two liquefaction trains — at 7.6 million tonnes each. “The larger train design will lower the unit cost … and ensure a competitive new supply for the global LNG market,” a spokeswoman said. Under plans submitted to the government, Exxon proposes a 2019 final investment decision with a 2024 start-up. Anadarko plans to raise $14 billion to $15 billion from banks and export credit agencies as it lines up long-term sales to guarantee loans for its own LNG project in Mozambique, Reuters reported. The facility would start at 12.88 million tonnes a year. Partners include Mitsui of Japan and ONGC Videsh of India. Anadarko said it has made enough progress with customers, government approvals, financing and preparing for construction to make an investment decision within 12 months. In addition, Italy’s Eni also is investing heavily in Mozambique. It leads a consortium that last year gave the go-ahead for an $8 billion floating LNG project called Coral, with a capacity of 3.4 million tonnes per year and a planned 2022 start-up. ExxonMobil is looking to possibly double output at its four-year-old Papua New Guinea LNG project, adding 8 million tonnes annual capacity, Interfax Global Energy reported. The Australian Financial Review reported the cost of expanding gas production and LNG capacity could reach $12 billion. Much closer to Alaska, Shell and its partners in LNG Canada are expected to decide later this year whether to start construction in Kitimat, B.C. The first phase would provide 13 million tonnes a year of capacity, with a potential expansion to double that, Canada’s Globe and Mail reported. Shell’s partners include Malaysia’s Petronas, PetroChina, Mitsubishi and Korea Gas. Petronas bought into the venture in May after it abandoned its own multibillion-dollar LNG terminal in British Columbia last year. Including a 415-mile gas pipeline from northeastern B.C. and other costs, LNG Canada could total C$40 billion. Also looking at the Asia market, the $27 billion Yamal LNG project in Russia’s Arctic expects to complete construction of its second and third liquefaction trains by early 2019, reaching full production capacity of 16.5 million tonnes. The Yamal leader, Russian gas producer Novatek, already is making plans for a second Arctic project at almost 20 million tonnes, with an investment decision by 2019. China National Petroleum Corp. is a 20 percent partner in Yamal LNG. It also is in talks to take an equity stake in Arctic LNG-2, according to TASS, the Russian news agency. In addition to taking an equity stake in production, China is signing up for new supplies. The Australian Financial Review reported that PetroChina signed a three-year contract with Papua New Guinea LNG for 450,000 tonnes per year, starting in July. The deal turns PetroChina from a regular buyer of spot cargoes from the terminal into a firm customer and could pave the way for a larger, longer-term contract to help underpin the proposed expansion in Papua New Guinea. “This could be the getting-to-know-you deal,” said Tony Regan, a director of LNG consultancy DataFusion Associates in Singapore. Meanwhile, $200 billion of LNG investments in Australia is coming near an end, with the last two projects — Shell’s Prelude and Inpex’s Ichthys — expected to start production late this year or early 2019, with total capacity of 12.5 million tonnes. On the U.S. Gulf Coast, most of the activity has involved adding liquefaction and export to underutilized or unused LNG import terminals. • Cheniere is continuing to expand its Sabine Pass, La., plant, building a fifth train to add another 4.5 million tonnes of capacity, while marketing a proposed sixth unit. • Cameron LNG in Louisiana, led by Sempra Energy, has three trains under construction at almost 13 million tonnes and a fourth with all its permits. Developers need only to secure buyers for the train before taking an investment decision. • Three trains are under construction at Freeport LNG in Texas, totaling 15 million tonnes, while plans for a fourth have been submitted to regulators. • Reuters reported that start-up of the $2 billion, 2.5-million-tonne Elba LNG export terminal in Georgia is delayed to late 2018. • Three more Gulf Coast projects have federal approval but lack investment decisions. Two would be repurposed LNG import terminals – the 16-million-tonne Lake Charles project, led by Shell and a Texas pipeline company, and 15-million-tonne Golden Pass terminal, led by Qatar and ExxonMobil. And though a greenfield project, without an LNG import terminal, Cheniere is developing its Corpus Christi plant in Texas in a similar phased approach to the brownfield projects, with two trains under construction, at 4.5 million tonnes each, while a third reached final investment decision in May after China National Petroleum Corp. signed on as a buyer. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

AGDC says Port MacKenzie ‘not feasible’ for LNG terminal

Several months of additional review did not change the opinion of the state’s North Slope natural gas project development team that Nikiski is a better site than the Matanuska-Susitna Borough-promoted Port MacKenzie for a multibillion-dollar gas liquefaction plant and marine terminal. The Federal Energy Regulatory Commission had instructed the state team to conduct a more thorough analysis of the borough site on Knik Arm as an alternative to the project’s preferred choice of Nikiski, on the east side of Cook Inlet about 65 air miles southwest of Port MacKenzie. The analysis will be incorporated into FERC’s environmental impact statement for the proposed Alaska LNG project. The Alaska Gasline Development Corp. responded to federal regulators July 13 that it would not be possible to build and operate the LNG plant and marine terminal at Port MacKenzie “without constraining either existing or planned uses of the complex, or of the proposed LNG facility and its marine terminal.” The Alaska LNG project team in 2013, when it was led by North Slope oil and gas producers, selected an industrial area of Nikiski as the best location, a decision which the state stuck with for its 2017 application to FERC after the producers left the project. The producer-led team acquired more than 600 acres of private land at the site — about two-thirds of the acreage required for construction of the LNG plant, dock and freight landing facility. The Matanuska-Susitna Borough in January 2018 filed a formal complaint and request with federal regulators, pressing for a better look at Port MacKenzie, which the municipality has long promoted for industrial development. The borough owns the port property. AGDC cites beluga habitat, currents, tide “Significant issues have been identified which make the Port MacKenzie site not favorable over the proposed … site in Nikiski,” AGDC said in its July 13 filing with FERC. Those include: • Work restrictions during construction and terminal operations because of the site’s location within Cook Inlet’s most protected beluga whale critical habitat area. The upper Cook Inlet area provides foraging and calving habitat for the endangered species. • Conflicts with other actual and proposed uses of the port, and the need to move the access road and proposed railroad extension away from the LNG plant site. “The area identified by the borough currently used for port operations is not feasible in conjunction with existing facility operations,” AGDC reported. • Wind, current and sea-ice conditions could hamper winter operations at the port site. • The wider tidal range at Port MacKenzie — with an average difference between high and low tides of 26.2 feet, as opposed to Nikiski’s 17.7-foot average range — would reduce by 25 percent the opportunities for unloading construction barges, adding a full work season to the project, AGDC said. • Twice the current dredging volume would be required to widen the shipping channel through the Knik Arm Shoal to allow safe two-way ship traffic through the area. Strong currents in the area necessitate a wide berth for ships to move safely in and out of the port, AGDC said. Even with the additional dredging and wider channel, LNG carriers still would be limited to crossing the shoal only at high tides, AGDC said. • The longer travel distance for LNG carriers to reach Port MacKenzie would add 12 voyages per year, requiring an additional ship — and higher costs — to move the same volume of LNG as the shorter route to and from Nikiski. Reaching Port MacKenzie instead of Nikiski, however, would save 55 miles of pipeline, AGDC said. Although Port MacKenzie offers an existing dock and barge landing, AGDC said the deep-water dock at the site is inadequate for berthing and loading LNG carriers, and would have to be demolished and replaced. In addition, the barge dock would be unable to accommodate the heavy demand of offloading construction materials, the state team said, requiring a new facility. The Nikiski site also would require construction of a new deep-water dock for LNG carrier loading, and a roll-on/roll-off barge and freight dock for delivering plant modules and construction equipment. However, AGDC said, winter sea ice at Port MacKenzie is thicker and builds up in heavier concentrations than at Nikiski, requiring construction of “ice mitigation structures” — large concrete structures (95 feet across) set on the seabed and reaching to the surface — to protect the dock and LNG carriers from ice damage. Borough says AGDC is wrong The Matanuska-Susitna Borough does not accept AGDC’s analysis, writing to FERC on July 20 that the borough “has already identified several aspects of AGDC’s response with which it disagrees.” The borough did not provide any details in its one-page letter but said it “intends to file substantive comments to highlight the incorrect information.” It said it would provide the information by Sept. 1, just six months before FERC is scheduled to release its draft environmental impact statement, or EIS, for the Alaska project on March 8, 2019. In addition to reviewing a project’s effects on the environment and communities, a federal EIS is used to determine the “least environmentally damaging practicable alternative” for multiple decisions in project construction. As such, the Alaska LNG impact statement is required to consider not only the location of the LNG plant but also pipeline routing, river crossings and other environmentally sensitive project decisions. The proposed Alaska LNG project includes 62 miles of pipeline to move gas from the Point Thomson field west to a gas treatment plant at Prudhoe Bay, where gas from the two fields would be cleaned before going into an 807-mile pipeline running through the middle of the state to Cook Inlet. The design capacity for the plant is 20 million tonnes of LNG per year, or about 7 percent of total LNG worldwide trade last year of 293 million tonnes, according to the International Gas Union’s June 28 annual report. AGDC met with borough representatives in February, May and June during its review of Port MacKenzie. The state team analyzed two possible locations for the LNG plant on borough property: One on the waterfront, and an option almost 1.5 miles inland. AGDC said the waterfront property “is not feasible in conjunction with existing facility operations” at the site. Because of federally required safety zones required around the plant, the state said, the LNG project would need to control even more property, displacing the proposed railroad extension to the waterfront and an access road. And while the inland property would solve the problem of a buffer zone displacing other users, it would complicate the project by separating the liquefaction plant and its LNG storage tanks from the loading dock and would require a 1,400-foot-wide exclusive safety corridor between the plant and the dock. The state team, in its filing with FERC, pointed to planned and proposed uses for the port area as possibly incompatible with construction or operation of the LNG terminal, including a five-year contract for loading timber at the port under a harvest contract and port lease the borough approved in April. AGDC has said it wants to start construction in 2020, though it is not scheduled to see a final EIS until December 2019, and lacks firm customers for the LNG, financing for the $43 billion project, and binding contracts to buy gas from North Slope producers. The state corporation told Alaska legislators July 11 that is spending about $3 million a month on permitting, finance, commercial negotiations and promotion, with expenses to move closer to $4 million a month next year. AGDC’s July 13 filing also responded to several other questions and data requests from FERC. AGDC prefers modeling over drilling Regulators had recommended the state team collect sediment cores from a sampling of 15 rivers and creeks that the 807-mile pipeline would cross to help in determining the environmental risks of open-cut trenching AGDC has proposed for waterbody crossings. AGDC has balked at that recommendation. “To achieve the requisite core depth to match pipeline burial depth, such sampling would require the use of drilling equipment in the anadromous stream, and permitting requirements would likely place operation of the drilling equipment in the winter of 2018/2019,” the state team told federal regulators. “To avoid such delays, transport of such equipment into remote sites, and impacts to spawning or juvenile fish,” AGDC said, the project team has decided to use terrain mapping and modeling, which includes data from more than 3,000 boreholes along or near the pipeline route. “A final report detailing the methods, data inputs, results and application to other crossings will be prepared and submitted to FERC on or before Aug. 30,” AGDC said. The state team also responded July 13 to several questions federal regulators had asked about how the pipeline and its compressor stations, LNG plant and vessel traffic could affect air quality along the route, including in Cook Inlet. The approximately 250 LNG carrier calls per year at Nikiski would add about 50 percent to large-vessel traffic in the inlet, AGDC said. “The increase in vessel traffic that would occur due to the project is not expected to substantially increase regional haze levels in the Cook Inlet region or cause a violation” of air-quality standards, according to its response. Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.

By the numbers: Updating Alaska LNG Project construction

Editor’s note: 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. Persily is a special assistant for oil and gas issues to borough Mayor Mike Navarre. Alaska LNG project teams played it by the numbers — really big numbers — in a presentation on construction plans to federal, state and municipal officials. Site preparations for the proposed liquefied natural gas plant and massive LNG storage tanks in Nikiski would require stripping up to 4 million cubic yards of loose soil, soft peat moss and other vegetation. That’s more than enough to cover a rough trail 10 feet wide, a foot deep from New York City to Houston. Crews would then need to excavate as much as 6 million cubic yards of frost-susceptible material — up to 6 feet deep in some areas — to prepare the site for construction. Some of the material could be reused as fill, while other material would need to be trucked in to complete the base. The two domed LNG storage tanks would each measure 305 feet in diameter, more than large enough for a Boeing 747 to spin around inside without scraping its wings. All of the numbers are approximate and subject to change as the project teams refine the design, they reminded participants at workshops held Sept. 2 and 3 in Anchorage. More than 20 Alaska LNG project team members were at the workshops to brief government agency officials and answer questions. Add in the jetty, the twin loading berths for LNG carriers and other components of the Nikiski project, and the preliminary numbers continue adding up: The project would use 800,000 cubic yards of gravel, 300,000 cubic yards of concrete, 300,000 cubic yards of armor rock, 100,000 tons of structural steel, 6,500 pilings, 7 miles of electrical wiring, almost 200 miles of aboveground piping, and 20 miles of buried pipe. The trestle to reach the loading berths could be as much as 3,200 feet long — more than half a mile — to reach water deep enough for the LNG carriers to safely maneuver. Though no substantial dredging would be needed for the jetty and loading berths, an estimated 1 million to 2 million cubic yards of dredging would be required at the temporary dock that would be built for offloading materials from barges and heavy-lift vessels during construction. The 250-megawatt, gas-fired power plant at the LNG plant site would generate enough electricity to run a city of several tens of thousands of homes. Peak construction workforce at the Nikiski site would be 4,000 to 6,000 workers. Planning work continues The LNG team reported that ongoing engineering and construction planning includes several goals: Limit truck traffic in the area as much as possible, limit dredging as much as possible, and maintain public access throughout the area as much as possible. The informational workshops were part of a series provided by Alaska LNG for regulatory agencies. The project partners — ExxonMobil, BP, ConocoPhillips, TransCanada and the State of Alaska — plan to submit their second draft of environmental and engineering reports to the Federal Energy Regulatory Commission in first-quarter 2016. The final reports and complete project application could come third-quarter 2016 as the partners work through regulatory and permit issues for the $45 billion to $65 billion project to move Alaska North Slope gas to market. In addition to the LNG plant at Nikiski, the project includes 806 miles of pipeline to reach the plant site from North Slope gas fields and a gas treatment plant to remove carbon dioxide and other impurities before the gas enters the pipeline. Alaska LNG has been buying up property around the proposed plant site in Nikiski, accumulating ownership or options on about 600 acres of the 800 to 900 acres needed for the operation. Team members reported that demolition could start later this month on some structures. They also are doubling their security patrols in the area in response to community concerns. The actual footprint for the LNG plant, storage tanks, power plant and other support buildings would total approximately 200 to 300 acres. The teams explained that the rest of the land is to provide a safety, noise and light buffer for neighboring property owners, plus work space to support the construction effort. Offloading facility comes first There is a lot of work to get to that first cargo. Before significant construction could begin, the material offloading facility would need to be built. The current plan, subject to change, has it just north of the LNG carrier jetty. With a 1,500-foot-wide frontage for offloading from heavy-lift vessels (called lift-on, lift-off) and a side facility with a 500-foot face for roll-on, roll-off deliveries, the freight dock could see 250 LNG plant modules delivered by 60 ships over a three-year period. Riprap — heavy rocks stacked atop each other — would be installed on either side of the facility to protect the shoreline. Each prebuilt module could weigh as much as 6,000 tons. Self-propelled modular trailers would haul the huge pieces to the plant site. The freight dock would be dismantled at the end of the project. Water depth at the proposed site for the offloading facility is only about 15 feet and would need to be dredged to 30 feet, the teams said. Estimates are that would require moving 1 million to 2 million cubic yards from the seabed. “We are continuing to study how we can minimize that,” a team leader said. The dredged area would measure about 3,200 feet by 1,500 feet, depending on the final design and seabed slope. The project continues to collect data on currents, waves, sediment, sea floor bathymetry and other conditions in the area. There are plans to excavate a sample pit in the seabed in the second quarter 2016 to measure how much and how quickly it fills in. Disposal sites for any dredging material are still being considered, including upland and at sea. Upland disposal could be used to protect the shoreline from erosion or for fill at the project site. Any decisions on disposal sites will be based on the composition of the dredged spoils and in close consultation with government agencies. In an effort to limit truck traffic on heavily traveled Kenai Peninsula highways, the teams reported that as much as possible construction materials arriving in Anchorage or Seward would be barged to Nikiski. Construction site services Even before the material offloading facility is under full construction, Alaska LNG would build “pioneer camps” at the plant site, the first housing for the first work crews. During construction, until the project builds its own power generating plant, Alaska LNG may buy electricity from a local provider — that’s one of the issues still undecided. Currently, Alaska LNG plans to drill its own water wells, estimating its maximum needs during peak construction at almost 400,000 gallons a day, or enough for 4,000 to 5,000 people, according to U.S. government water-use estimates. Current plans indicate no water would be withdrawn from Cook Inlet for plant operations, the teams said. The liquefaction equipment would be air-cooled, not water-cooled. Alaska LNG plans to build a secondary-level treatment plant on site for domestic sewage, and is still looking at options for proper disposal of industrial waste. The mission statement for handling construction waste is “reduce, reuse and recycle,” with the teams reporting there could be an estimated 7,500 tons of wood waste in addition to the 4 million cubic yards of vegetation from site clearing. The teams are working to determine “what can be handled locally, what can be handled on site, what has to be hauled away.”
Subscribe to RSS - Larry Persily