FERC completes environmental review of Alaska LNG Project

  • The Federal Energy Regulatory Commission issued a final environmental impact statement for the $40 billion Alaska LNG Project on March 6. The milestone in the permitting process was welcomed from elected officials but whether the project can attract investors as an economic effort remains uncertain. (Photo/Courtesy/Federal Energy Regulatory Commission)

Alaska is a major step closer to securing the key federal license to build a long-sought North Slope natural gas pipeline and export project.

The Federal Energy Regulatory Commission on Friday issued the final environmental impact statement, or EIS, for the roughly $40 billion Alaska LNG Project, a massive document that largely affirms the plan proposed by the state-owned Alaska Gasline Development Corp.

The Alaska LNG Project is the latest attempt to commercialize the large volumes of North Slope natural gas. State and energy company officials have tried since the late 1970s to put together a plan to produce and sell the gas that is considered “stranded” based on the location lacking infrastructure to access global or even local markets.

However, frequently changing market and political conditions, combined with the tremendous expense of developing a North Slope gas project, have scuttled prior efforts. To that end, it’s also unclear at this point if the Alaska LNG Project is economically viable, especially at current low prices amid a global oversupply.

At its core, the project consists of a large North Slope gas treatment plant; an 807-mile buried natural gas pipeline from the Slope to the Kenai Peninsula; offtake points for state use, and a three-train liquefaction plant at Nikiski capable of producing up to 20 million metric tons of LNG per year for export to Asian markets.

If developed, the project would generate upwards of 18,000 jobs during construction and roughly 1,000 new jobs during its 30-year operational life, according to AGDC and state Labor Department estimates. It would also provide natural gas to the Fairbanks area and other communities along the pipeline route that currently rely on fuel oil for heating and in some cases power generation.

The final EIS documents support AGDC’s conclusion that the project should terminate in Nikiski despite prior objections from officials in the Matanuska-Susitna Borough and the City of Valdez who contend their areas were not adequately considered. The end-point location was chosen way back in 2013 when the project was led by a consortium of North Slope producers.

Mat-Su officials in particular have argued the borough’s Port MacKenzie was dismissed based on inaccurate information submitted to FERC.

The EIS authors wrote that information provided by the Mat-Su Borough regarding the wetland acreage at Port MacKenzie was added to the final EIS but did not change the final decision.

AGDC officials have said locating the LNG plant at Port MacKenzie — farther up Cook Inlet than Nikiski — would require more tanker trips over the long-term as well as additional dredging to accommodate the large tankers in the shallow waters of the upper inlet.

FERC officials rejected siting the LNG plant at Anderson Bay near Valdez in part because it would require 113 miles of spur pipelines to get gas to Fairbanks and Anchorage, which would have additional environmental impacts, although Valdez leaders insisted the spur lines should not be evaluated as part of the overall project, according to the EIS.

Ending the project in Valdez would additionally require building the pipeline through an “exceptionally rugged stretch of terrain” through Thompson Pass as AGDC concluded there is not enough room in the parallel Richardson Highway and Trans-Alaska Pipeline System corridors to accommodate another pipeline, the EIS states.

Gov. Mike Dunleavy called the final EIS a “milestone” for the project and commended the work of AGDC officials throughout the three-year permitting effort in a formal statement.

“We look forward to reviewing the EIS and receiving the record of decision from FERC, at which point we will evaluate our next steps,” Dunleavy said. “FERC licensure is an important component in determining if Alaska LNG, which must be led by private enterprise, is competitive and economically advantageous for development.”

AGDC President Frank Richards said the EIS collates more than 150,000 pages of data. Richards, a longtime engineering executive for the quasi-state agency, was appointed as president by the AGDC board of directors Feb. 28 after interim president Joe Dubler announced his retirement.

“Such a rigorous, comprehensive environmental analysis provides assurance that the merits and impacts of Alaska LNG have been carefully vetted by numerous federal regulatory authorities,” he said in a formal statement.

Dunleavy has been sharply critical of the state leading the project through AGDC — a structure championed by former Gov. Bill Walker — but has followed the recommendation of the large North Slope producers and others who urged the administration to finish the permitting that was already well underway when Dunleavy took office in late 2018.

Many observers and insiders view securing the FERC construction license as a way to de-risk the project for potential investors and developers. As Dunleavy mentioned in his statement, his administration is in the process of refining the project’s costs and economic viability.

Several lawmakers also commended the AGDC team on its work to get to the final EIS in official statements. Republican Sen. Peter Micciche, who represents Nikiski, said reducing risk in the project is “key to attracting capital” for the project and ensuring that it generates revenue for the state if it is built. Since the current iteration of the project began in 2013, the three major Slope producers and the state have spent more than $600 million to reach this point, with the state share about $237 million of that total.

AGDC leaders have said they will attempt to sell the project to a private developer once FERC issues its final record of decision, which is expected in June and, based on the final EIS, is likely to be a favorable ruling for the project.

“Once we have the final approval from federal regulators — expected later this year — Alaskans will know the true marketplace potential for this monumental LNG export project,” Micciche said.

A state-led project was touted as a way to reduce costs by capturing the state’s federal tax-exempt status for LNG sales when AGDC took it over from BP, ConocoPhillips and ExxonMobil in early 2017 following the collapse of world oil and LNG markets.

BP and ExxonMobil signed gas sales term sheets with the state in 2018, but those were allowed to lapse under the Dunleavy administration. The companies, which hold the rights to the majority of the gas in the Prudhoe Bay and Point Thomson oil and gas fields, subsequently agreed last May to commit up to $10 million each to help AGDC finance the rest of the complex FERC permitting process. They are also assisting the state in its economic review of the project plan.

Elwood Brehmer can be reached at [email protected].

03/06/2020 - 4:40pm