Heinze steps down at ANGDA; group's future is uncertain


Harold Heinze announced his resignation as chief executive officer of the Alaska Natural Gas Development Authority, Nov. 21, marking an important transition not only for Heinze, who has had several careers in the state, but also for the independent state gas corporation.

Heinze doesn’t leave the job until Jan. 23 to allow for transition. He will be working to help Matanuska Electric Association develop its planned new gas-fired power generation plant. Still, there is a lot of uncertainty about a replacement and also the future of ANGDA.

Heinze’s  career in Alaska reaches back decades. Named engineering manager during the initial development of Prudhoe Bay, Heinze went on to become president of ARCO Alaska and ARCO Transportation in Los Angeles. Considered an “engineer’s engineer,” Heinze had more than 30 years of leadership roles in Alaska’s oil and gas industry before taking on the CEO position at ANGDA.

When Heinze left ARCO then-Gov. Walter Hickel appointed him commissioner of Natural Resources to finalize the land selection of 100 million acres granted to Alaska at statehood. Heinze later became Hickel’s special envoy to Asian gas markets to work on LNG export options.

Reflecting back on almost nine years at ANGDA, Heinze said, “We have stayed consistent with the people’s directive – the initiative creating ANGDA passed two to one – and ANGDA has always championed bringing natural gas in a spur line from Glennallen into the Cook Inlet area. That linkage is a key part of any Valdez natural gas export (LNG) project and one that I worked on with Governor Hickel.”

Scott Heyworth, ANDGA’s board chairman who also spearheaded the 2002 ballot initiatives, said, “Harold’s vision and guidance is unsurpassed. He has served the people of Alaska, through the ANGDA initiative, with exemplary leadership and he has always acted in the best interest of Alaskans. His departure will leave a void. His knowledge and intellect will be sorely missed by the board of directors,” Heyworth said. 

Pipeline competition

There are two state entities formed to pursue gas projects, which has created confusion in the public and even the Legislature and the state administration.

ANGDA was created by a 2002 ballot initiative with a broad grant of authority that including an initial objective of developing a large Valdez-based natural gas liquefaction (LNG) project and a secondary objective of enhancing access to natural gas for Alaska communities.

Another state gas corporation now active, the Alaska Gas Development Corp., was formed by state legislation in 2010. House Bill 369 gave the AGDC specific direction to develop a plan for a small gas pipeline by the most economical route from the North Slope to Southcentral Alaska. Unlike ANGDA’s broad grant of authority, ADGC is directed to focus only on the so-called bullet line from the Slope.

The distinctions between the two are important. ANGDA’s broad grant of authority in the language of the ballot initiative gives the organization a great deal of flexibility. Its board can approve the purchase and sale of gas, for example, and ANGDA also can sell revenue bonds, possibly tax-exempt bonds in some cases, to finance projects or purchases, although repayment of any bonds must be linked to the projects with no recourse to the state itself.

AGDC, in contrast, does not have this kind of flexibility. Its charge is narrowly focused to planning of the bullet line. That could always be changed by the Legislature, but the same is true for ANGDA’s enabling statute.

There are also some political distinctions between the two corporations, mainly resulting from the manner in which they were created.

ANGDA was crated by a citizen initiative, while AGDC was created by the Legislature. In political terms, this means that because the politicians didn’t create ANGDA, there is less “buy in” from the political establishment, the executive and legislative branches.

Also, the administrations and Legislatures that have come and gone since ANGDA was created in 2002 have been wary of the independence of the authority, although the governor does appoint the board and the Legislature must approve ANGDA’s annual budget.

At the outset, former Gov. Frank Murkowski was hostile to ANGDA because he wanted all of the state’s attention focused on the large Alaska Highway gas project.

The small-diameter bullet line on the Parks Highway, as a state project (it was originally proposed by Enstar Natural Gas Co.) was initiated by former Gov. Sarah Palin. Palin was irritated when Heinze and ANGDA stuck with their recommendation of a Glennallen spur line and came close to replacing ANGDA’s board, but backed away from it.

Current Gov. Sean Parnell has been basically ambivalent to ANGDA, but ultimately backed the Legislature’s creation of ADGC through HB 369.

Despite the uncertainty of support, all administrations and Legislatures have supported annual budget appropriations to ANGDA, although they have been small. Much more substantial appropriations are now being made to the AGDC for its bullet line work.

With its initial charge in the ballot initiative to pursue a Valdez LNG project, ANGDA did some preliminary work, including a capital cost estimate but because others were focusing on the Valdez project, mainly the Alaska Gasline Port Authority, the authority’s board shifted the emphasis to enhancing access to gas by communities.

Since its inception in 2002, ANGDA has pursued a number of projects, with one significant accomplishment being the securing of capacity for Alaska utilities or others with a guaranteed discounted tariff in a large 48-inch gas pipeline, if one is built.

This is important because the discounted tariff is available only to companies or organizations submitting bids for capacity during an 2010 open season held by Trans-Canada Corp. and ExxonMobil Corp. on the Alaska Pipeline Project, the two companies’ plan for a 48-inch pipeline from the North Slope to Alberta.

ANGDA’s status of “shipper” on behalf of the Alaska railbelt utilities on the Alaska Pipeline Project allowed it a status that will secure a 30 percent savings for Alaska gas consumers, Heinze said.

ANGDA’s capacity bid was for a small volume — the exact amount is confidential — but the volume can be expanded with the advantage of the discounted tariff.

“This could be worth hundreds of millions of dollars in savings to Alaska consumers,” Heinze said.

Most important, the discount is available if ANGDA uses some of its capacity to transport gas for in-state industrial customers, even an LNG export project. The discount also applies if the scope of the Alaska Pipeline Project changes, for example from a pipeline through Interior Alaska to Alberta to a pipeline though the Interior to Valdez.

A second achievement is a conditional right-of-way and other work on a possible Delta-to-Palmer spur pipeline to bring gas off a large pipeline and transport it to Southcentral Alaska through Glennallen. The conditional state right-of-way is across about 150 miles of mostly state-owned lands from Glennallen to Palmer. The Delta-to-Glennallen segment, also about 150 miles, would follow the existing Trans-Alaska Pipeline System corridor, which has an established right-of-way.

As an alternative, ANGDA considered the Parks Highway route for a spur line, a route now being studied by the other state gas corporation, AGDC, but concluded that, as a spur line, the Delta-through-Glennallen route was more cost effective because it was somewhat shorter and would leave open the possibility of still building a pipeline to Valdez, even as a spur from Glennallen.

The Slope-to-Southcentral pipeline being pursued by AGDC via the Parks Highway could also become a spur line from the Fairbanks area if the large-diameter pipeline is built.

Heinze argues, however, that the Delta-to-Palmer spur line route via Glennallen would be a less expensive option, mainly because the gas can ride along in the large-diameter pipeline for a longer distance, enjoying the lower costs of transportation.

However, an important advantage is that it would leave open the possibility of serving Valdez, which would be precluded if a spur line went along the Parks Highway.

Other works

Other projects undertaken by ANGDA include, most recently, a propane project, working with potential private developers of a system to truck or barge propane from the North Slope; a design for a connection to a large-diameter pipeline for a community to take off gas and possibly liquids like propane; a high-level look at what kinds of investments might be needed to expand the existing ConocoPhillips LNG plant in Nikiski (although the plant is privately owned, because of its importance, ANGDA wanted to have some information on possible costs available to the public); and a variety of smaller projects, including discussions with ConocoPhillips on equipment to load LNG onto trucks for regional delivery at the Nikiski plant.

The propane project would take advantage of the fact that large quantities of propane are available now on the North Slope, at the Central Gas Facility operated in the Prudhoe Bay field by BP. The propane is separated along with other gas liquids like butane from gas now produced with crude oil. The vast bulk of the gas and liquids are injected back into the underground reservoir to help maintain pressure but a small volume of propane is taken off for use in oil field operations.

Heinze said it would be a small matter for BP, the field operator, to increase the amount of propane taken off.

A separate facility to store the propane would be needed, which could either be owned and operated by the field owners or by a private investor. Heinze said there are several interested, but this is not a huge investment.

Propane could be trucked to Fairbanks for use in home heating or even for power generation by Golden Valley Electric Association or as a source of energy for the Flint Hills Resources refinery in North Pole.

Also, propane could be moved by barge from Prudhoe Bay to Western Alaska communities, or to Interior villages along the Yukon River by trucking to the Yukon River bridge on the Dalton Highway and barging the propane along the river.

Although private companies are interested in the propane project BP has been reluctant to discuss making propane available at Prudhoe Bay, Heinze said, reasons of which are unclear to him.

Tim Bradner can be reached at [email protected].

11/07/2016 - 12:36pm