Southcentral community leaders want in on AKLNG site selection studies

  • The industrial area of Nikiski, featuring a refinery and currently mothballed LNG and fertilizer plants, was selected by the producer-led consortium of the Alaska LNG Project before the state took over in 2017. The three major North Slope companies have already purchased more than 600 acres in the area for an LNG plant site, and the state is currently negotiating a deal to access that property. (Photo/File/AJOC)
  • This map shows the erroneous location of “Point MacKenzie” rather than the actual Port MacKenzie in resource reports submitted to the Federal Energy Regulatory Commission. Not only is the location three miles from the actual port, but it is six miles away from the actual Point MacKenzie. (Map/Alaska Gasline Development Corp. Resource Report No. 10)
  • The Valdez Marine Terminal at the end of the Trans-Alaska Pipeline is seen in this file photo. Valdez officials are pleased that federal regulators have ordered the Alaska Gasline Development Corp. to evaluate the town for a possible LNG plant and export terminal. (Photo/File/AJOC)
  • The Anchorage skyline is seen from Port MacKenzie across the Knik Arm of Cook Inlet. With its 60 feet of water officials cite as ideal for massive LNG tankers, Matanuska-Susitna Borough officials claimed they were surprised to learn that the shallower “Point” MacKenzie location was evaluated instead of the actual port in studies seeking a site for the plant at the terminus of the Alaska LNG Project gasline. (Photo/File/AJOC)
  • Japanese government officials from the Kyoto Prefecture and Maizuru City are seen during a tour of Port MacKenzie May 30, 2016. Resources Energy Inc., a Japanese consortium considering the site for a small LNG export project, was heavily courted by Matanuska-Susitna Borough officials but the company ended up abandoning its effort in April 2017 and closed its Anchorage office. (Photo/Courtesy/Resources Energy Inc.)

Nearly five years after Nikiski was chosen as the terminus for the $43 billion Alaska LNG Project, the leaders of other Southcentral communities are now questioning the process behind that decision.

On Jan. 9, the Matanuska-Susitna Borough sought intervener status in the Federal Energy Regulatory Commission’s drafting of an environmental impact statement, or EIS, for the Alaska LNG Project.

The state-owned Alaska Gasline Development Corp., which is leading the project, did not object to the borough’s intervener petition even though it came well after the formal May 2017 deadline for intervener petitions on the EIS.

FERC granted the borough request Feb. 27.

Mat-Su officials contended to the regulatory agency that not only were years of requests to have the borough-owned Port MacKenzie considered as an alternative to Nikiski humored and then dismissed, but a location fictitiously dubbed “Point MacKenzie” was instead evaluated and ruled out.

Mat-Su Borough Internal Auditor James Wilson, tasked by Manager John Moosey to be the borough’s point-person on the project, said in an interview that he came across a photograph last fall when reviewing documents AGDC submitted to FERC that revealed the discrepancy in locations.

Wilson said that AGDC President Keith Meyer met with borough officials shortly after he was hired in spring 2016 and told them that the state corporation would evaluate the port and resolve the borough’s concerns.

ExxonMobil — part of a consortium including BP, ConocoPhillips, pipeline company TransCanada and the State of Alaska — led the project from its informal inception in 2012 until AGDC took over management early in 2017.

Mat-Su officials were told for several years that project managers were using “Point” and “Port” MacKenzie interchangeably and the actual port would be given a fair shake, according to Wilson.

He detailed what he found in a Dec. 29 letter to FERC’s Dispute Resolution Service.

“To MSB’s astonishment and surprise, the aerial photograph showed that ‘Port’ MacKenzie was NOT ‘Point’ MacKenzie. This photograph completely contradicted what MSB had been told for several years that Port MacKenzie was included in the FERC Alternative Analysis,” Wilson wrote to the federal agency. “This revelation leads to the decision by MSB to make a formal request to include ‘Port MacKenzie’ in the Screening and Feasibility Analyses.”

AGDC leaders and others that have closely followed the project note the map Wilson saw and the associated site evaluation information has long been publicly available.

However, it is part of 13 voluminous Resource Reports and other documents — roughly 60,000 pages of environmental, engineering and socio-economic data — gathered over several years by the ExxonMobil-led Alaska LNG team and submitted to FERC for the 800-mile long project.

The project team studied more than 20 sites across Cook Inlet, Resurrection Bay and Prince William Sound.

Mistaken identity

Borough Manager Moosey said the map in Resource Report 10 confirmed what he and others at the borough had been worried about since Nikiski was selected in 2013.

“Every time (AK LNG managers) came back they came back with information that just didn’t jive with the details of our port. At practically every turn they said, ‘We’ll look at it’; We’ll make adjustments’ or ‘We have experts on this who really understand this so there’s some things you just don’t know,’” Moosey said in an interview.

The site evaluated and dismissed by the Alaska LNG consortium is private land about three miles north of Port MacKenzie. It has extensive tide flats that would require a 1.6-mile trestle or a massive dredging operation to access water that is continuously 50 feet deep, which is necessary for the large LNG tankers that would berth at the dock.

Borough leaders have long touted the naturally 60-foot deep water at the end of the 500-foot Port MacKenzie dock trestle as a major selling point for the port they hope can be an industrial center. Additionally, the borough owns 8,940 acres of adjacent uplands.

The Alaska LNG Project plant will need roughly 800 acres for facilities that would produce 20 million tons per year.

The geographical feature more commonly known as Point MacKenzie is about another three miles south of the port, or six miles from the “Point MacKenzie” evaluated for the Alaska LNG Project.

“After we had these conversations (with project managers) and then we see the documents it was like ‘You got to be kidding me,’” Moosey said. “At least that was my attitude. We’ve asked for this stuff to be corrected in their reports for seven years. If they would’ve taken any time along the way I don’t think we’d be where we are right now.”

Interestingly, the maps submitted to FERC as official documents detailing potential LNG plant sites near Anchor Point and on Kalgin Island in west Cook Inlet site the plant in a state game refuge and critical habitat area, respectively.

FERC assigns work

On Feb. 15, FERC and cooperating federal agency officials asked AGDC to respond to 570 questions or data requests; that was after the state corporation announced Jan. 22 it had finished answering the first round of 801 questions.

Among the February queries were directives to do environmental and engineering analyses for locating the plant at Port MacKenzie and Valdez.

The two are likely alternatives to be evaluated in the environmental impact statement FERC is drafting but at this point there is little reason to believe the pipeline will end somewhere other than Nikiski if it is approved.

FERC issued a schedule for the project March 12 indicating the agency expects to have the draft EIS out for public comment in about a year, with the final document published in December 2019.

AGDC has advocated having the final EIS done this year to stay on the fastest-possible construction schedule.

Meyer, who took over at AGDC after the data gathering was largely complete, said in an interview the corporation would evaluate Port MacKenzie as requested by FERC, but added the Mat-Su port is not an ideal place for large-scale LNG operations, in part because of its proximity to the Port of Anchorage and its designation as a multi-use facility in the borough’s master plan.

“You can’t really put an LNG terminal in the middle of a multi-use port,” Meyer said. “No one will argue that you can’t build an LNG terminal in Nikiski.”

The Mat-Su Borough was working to develop Port MacKenzie into an industrial district back in 2012 and 2013 when the Alaska LNG Project team was evaluating LNG sites. The port was also a site of interest to other, smaller LNG projects such as an export effort proposed by Japanese consortium Resources Energy Inc. that was courted by borough officials.

At the same time, the state’s budget deficit led to slashed capital spending and funding stopped flowing for the half-finished Port MacKenzie rail spur intended to spark further development. Today, the port remains mostly quiet.

AGDC regulatory Vice President Frank Richards noted being farther north in Cook Inlet would add miles to tanker trips and the area is also listed as critical habitat for the Inlet’s endangered population of Beluga whales, who feed on the salmon and herring that return to the area’s many large rivers.

Wilson, of the borough, said space and 10,000 feet of shoreline could be dedicated to the plant.

“We’re still open for business but the bottom line is the area is 1,000 acres along what we call the waterfront dependent area — that acreage is 100 percent exclusive Alaska LNG,” he said.

As for the “point” versus “port” confusion, ExxonMobil’s Steve Butt, who led the project until 2017, would not provide any information beyond what was in the public filings, according to Wilson and Moosey.

Likewise, AGDC was only working on a portion of the LNG plant at the time, when the producers and TransCanada owned a majority of the project, and there was what Richards referred to as a “Chinese firewall” between the project groups.

He said specific questions beyond what can be answered by the Resource Reports should be directed to the producers.

Former Gov. Sean Parnell, whose administration created the original Alaska LNG framework in parallel with reaching a settlement of the Point Thomson lawsuit on the North Slope, wrote in an email similarly that the state approved Nikiski after receiving a briefing from the producers’ team, which drove the site selection work.

Representatives for BP and ConocoPhillips said there were no individuals in the Alaska offices with that knowledge given the time that has passed and suggested contacting AGDC.

ExxonMobil did not respond to a request to speak with Butt.

Butt said in 2013 that Nikiski was chosen largely for its terrain and the ability to provide natural gas to the state’s four largest population centers along the pipeline route.

Former Federal Alaska Gas Pipeline coordinator and Kenai Peninsula Borough oil and gas advisor Larry Persily — often a critic of the state-led LNG effort — mostly concurred with Meyer and Richards on Nikiski versus Port MacKenzie.

“You cannot use a public dock for fuel tankers; for security purposes that’s not going to work,” Persily said.

He added that Nikiski is already a heavily industrial area with the smaller legacy ConocoPhillips LNG plant nearby that was recently purchased by Andeavor (formerly Tesoro). The town is also in a flat area with acceptable geotechnical characteristics and by Alaska standards is close to a suitable workforce and easily accessible by road, Persily noted.

At the same time, he said it would not be unreasonable to expect the state to have information on why the wrong site was evaluated in the Mat-Su Borough.

“You’d like to think that as a 25 percent partner you’d have paid attention to that decision,” Persily said.

The producers have also purchased about three-fourths of the roughly 800 acres the plant is expected to span and the state Department of Transportation is drafting a plan to reroute the Kenai Spur Highway, which currently bisects the property.

Next steps

Meyer said March 8 that a resolution to drawn-out negotiations with the producers over acquiring access to that acreage in Nikiski was “imminent.”

AGDC — with an uncertain funding future from the Legislature and expected to have only about $42 million in cash on hand by July 1 — would not purchase the land immediately but rather would get an option to acquire it at the appropriate time in the future.

Frustrations aside, Moosey and Wilson said the project’s success is their number one priority; they just want correct the misinformation they believe did not follow the National Environmental Policy Act process and prevented the borough from getting a fair shake.

“We think a lot of our port but this project is so important to the state that if it pencils out it’s got to go, regardless,” Moosey said. “The last thing we want to do is, if it doesn’t come to us, is to kick and scream and cause problems.”

He pitched Port MacKenzie as a staging and assembly area for the project if it is not built there.

Richards said Mat-Su officials have offered the extensive data set the borough has acquired on the port’s geophysical characteristics — down to borehole samples — which should expedite the site review FERC is requesting and hopefully prevent delaying the EIS.

AGDC asked for a public meeting to discuss the specifics of what FERC wants in its latest round of questions. The meeting is on March 22, in Washington, D.C., at 5 a.m. Alaska time.

For example, Richards said he hopes to find out if a GIS-based analysis for Valdez-route options around the Scenic and Wild River-designated sections of the Delta and Gulkana rivers will suffice, or if a more costly and time-consuming survey must be done.

Even if the Mat-Su Borough makes a New England Patriots-esque comeback and Port MacKenzie is ultimately chosen by FERC as the Alaska LNG endpoint, it would not be an insurmountable challenge to reroute the project because the smaller, in-state Alaska Standalone Pipeline, or ASAP, project is planned to end 12 miles from the port, according to Richards. Being able to use almost the entire ASAP route should preclude another major round of data collection.

The long-awaited ASAP final supplemental EIS is expected from the U.S. Army Corps of Engineers soon.

While AGDC did not object to the Mat-Su Borough intervening late because the borough is a major landowner along the Alaska LNG Project, the Kenai Peninsula Borough did.

Mayor Charlie Pierce wrote to FERC Jan. 29 that Kenai Borough officials could find nothing in the docket until the Jan. 9 intervener motion to support Port MacKenzie as the LNG plant site.

“Although we do not doubt that the Matanuska-Susitna Borough believed Port MacKenzie would receive further review, the lack of any earlier comment in the docket is a reminder to all of us the value of participating in the public record of the NEPA process,” Pierce wrote.

Aside from the obvious economic benefits getting the LNG plant would offer the surrounding communities, it could also be a boon for local tax rolls. The plant and associated marine terminal account for nearly half of the cost of the estimated $43 billion project and Meyer has said repeatedly AGDC would allocate $450 million per year for payments in-lieu of property taxes to the local governments the project crosses.

Exactly how the PILT money would be divvied up amongst the cities and boroughs along the Alaska LNG route has not been settled.

Valdez chimes in

For their part, local government officials in Valdez don’t want FERC to forget about their town, either.

Valdez Mayor Ruth Knight sent a letter to FERC March 13 urging the commission to deny AGDC’s request to allow it to apply methods for wetlands assessment, mitigation and constructing the 36-inch ASAP line to the 42-inch Alaska LNG pipeline.

The ASAP project is generally seen as a backup plan if the large export project does not pan out, as it would provide a long-term supply of North Slope natural gas for in-state users. At 733 miles long, the ASAP line would be shorter than the Alaska LNG pipeline because it would tie into the existing Beluga gas pipeline near Point MacKenzie and not go all the way south to Nikiski.

It would also be substantially cheaper without the need for the large LNG plant to convert the gas into a shippable liquid; cost estimates for the first, 24-inch iteration of ASAP done in 2012 were up to roughly $10 billion. However, whether or not there would be enough demand for gas to make ASAP economically feasible is uncertain.

While the current plans for ASAP and Alaska LNG follow the same corridor across most of Alaska, they would diverge in the upper Susitna Valley where ASAP would cross the river and continue south along the Parks Highway on the east side of the river and Alaska LNG is planned to parallel the Susitna to the west.

Knight noted, among other issues, the 130 miles of differing route, the need for a wider Alaska LNG right-of-way and ASAP’s lack of compressor stations, which are needed to transport the roughly six times more gas the Alaska LNG line would carry.

“These and other differences in pipeline design will result in the AK LNG Project impacting 68,290.94 acres during construction and the ASAP Project impacting 21,237 acres during construction,” Knight wrote.

She continued to contend that AGDC has not provided any evidence that the different pipelines will have similar impacts to wetlands.

AGDC has urged FERC to apply the wetlands requirements the Corps of Engineers deems necessary for ASAP to the Alaska LNG Project because the Corps is drafting the ASAP supplemental EIS and is the lead federal agency for issuing wetlands fill permits under the Clean Water Act. The Corps also has well-established policies for mitigating construction impacts to wetlands.

Richards said the Corps has determined it has jurisdiction over roughly half of the ASAP corridor due to the existence of wetlands in those areas but to what degree the Corps will require construction mitigation in those areas is unclear.

Knight said in an interview that city officials are very happy FERC directed AGDC to study the Valdez option more thoroughly.

The Alaska Gasline Port Authority, once managed by Gov. Bill Walker, first petitioned FERC to consider Valdez for Alaska LNG in February 2017. AGPA is a longstanding municipal port authority formed by the City of Valdez and the Fairbanks North Star Borough to promote an export project for North Slope natural gas.

Following the Trans-Alaska Pipeline System, or TAPS, corridor from the North Slope to Valdez would be the most economical and least environmentally damaging gasline alternative because of the existing pipeline development, according to Knight.

“The ASAP corridor is like apples and oranges so throwing the ASAP corridor in there sort of muddies the waters,” she said. “(FERC) needs to look at the line as the state has filed it and keep the ASAP corridor out of the mix.”

She added that AGDC has touted the environmental benefits of following the TAPS corridor until the two split under current plans near Livengood north of Fairbanks.

A gasline to Valdez has been studied extensively in the past but AGDC officials contend crossing over Thompson Pass just north of Valdez presents engineering challenges. They also note the different engineering requirements for the oil-carrying TAPS, much of which is above ground, and a gasline that would be completely buried.

Whether there is nearly 1,000 acres of mostly undeveloped, flat land suitable for an LNG plant near Valdez is another question that has been raised.

“We want what’s most economical for the state. I don’t want to make it the political choice,” Knight said.

Elwood Brehmer can be reached at [email protected].

03/21/2018 - 1:21pm