Alaska LNG Project gets major federal approval

Alaska has cleared the biggest regulatory hurdle to developing a long-sought North Slope natural gas pipeline project.

The Federal Energy Regulatory Commission on Thursday issued a record of decision authorizing construction of the state’s plan for the many-billion-dollar Alaska LNG Project, concluding a three-year-plus environmental impact statement process.

AGDC President Frank Richards called it a “momentous day for the project” and thanked FERC for largely sticking to its timeline for the EIS during a Thursday morning meeting of the AGDC board.

AGDC submitted its application for the massive project to FERC in April 2017.

“As anybody in the infrastructure development process knows, to go through the (National Environmental Policy Act) process in three years is an exceptionally fast time,” Richards said.

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 $240 million of that total.

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.

Gov. Mike Dunleavy and the members of Alaska’s congressional delegation commended AGDC for securing the construction permit in formal statements.

Sen. Lisa Murkowski, who chairs the Senate Energy and Natural Resources Committee, called it a “capstone moment” for the project and said the FERC certificate and order are extremely valuable assets for the state.

Sen. Dan Sullivan, who was Department of Natural Resources commissioner when the state, BP, ConocoPhillips and ExxonMobil began early-stage work on the project, said getting North Slope gas to world markets through the LNG export plan would benefit not only Alaska but also the entire country.

“Producing more energy responsibly strengthens our economy, is good for the environment, and dramatically increases our country’s national security. I thank FERC for their diligence in completing this work, and thank all of the Alaskans who, throughout the years, have worked to move this project forward,” Sullivan said.

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 and the tremendous expense of developing a North Slope gas project — the cost of the pipeline — 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.

While Alaska Gasline Development Corp. officials still have several other state and federal authorizations to secure, the favorable record of decision, or ROD, means confirming Alaska LNG’s economic viability is the next major task for the state-owned corporation.

Dunleavy said an ongoing economic review of the project will go a long way toward determining where it goes from here. The governor 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.

In April AGDC board approved a strategic plan calling for the state to find a new project sponsor by 2021 or put the project assets, such as its permits and engineering work, up for bid.

According to Richards, Flour, an international engineering and construction firm, has completed an updated class 4 cost estimate for the project, which AGDC — with help from BP and ExxonMobil — is running through economic models.

In 2016 AGDC pegged the project at about $43 billion including significant contingencies. Many industry experts believe the $43 billion estimate to be high given the rapid expansion and technological evolution of the LNG industry.

A better picture of the project’s economic viability should be available in June, Richards said.

Elwood Brehmer can be reached at [email protected].

Updated: 
05/21/2020 - 11:58am