HOME PAGE SUBSCRIPTIONS, Print Editions, Newsletter PRODUCTS READ THE PETROLEUM NEWS ARCHIVE! ADVERTISING INFORMATION EVENTS PETROLEUM NEWS BAKKEN MINING NEWS

Providing coverage of Alaska and northern Canada's oil and gas industry
March 2010

Vol. 15, No. 12 Week of March 21, 2010

Co-op looking to partner in LNG plant

Natural Gas Supply Co., cooperative formed by ANGDA, wants to buy Cook Inlet natural gas, keep LNG plant going for peak gas

Kristen Nelson

Petroleum News

The Alaska Natural Gas Development Authority is looking at a number of projects that could require bonding, ANGDA CEO Harold Heinze told the Senate Resources Committee March 15.

Among those are gas purchase, ownership of cushion gas in a storage field, partnering in the Kenai liquefied natural gas plant and expanding its operational capabilities, open season commitments in the big pipe from the North Slope to market and in a spur line and development of a North Slope wholesale propane facility.

Heinze was testifying on House Bill 44, referred to Senate Resources last April after it passed the House. He said two parts of the bill affect ANGDA (the bill also includes $100 million in energy efficiency and conservation program bonding authority for the Alaska Housing Finance Corp.): a clarification of the authority’s statutory authority and authorization for $250 million in revenue bonds “to acquire a gas supply, develop the Cook Inlet and Fairbanks markets, and plan, permit, and design gas transmission systems to mitigate gas shortfalls, the effect on consumers, and the economy of high cost energy, and ensure energy efficiency for Alaskans.”

Statutory clarification

Heinze said the Alaska Attorney General has found, in reviewing ANGDA contracts, that as long as there is some linkage to North Slope gas, even if not immediate and overpowering, that it is within ANGDA’s authority.

ANGDA was created by a voter initiative in 2002 and HB44 would amend its statutory authority by adding “or other regions of the state” to its authority to bring natural gas from the North Slope to market; add “including markets in the state” and remove Southcentral Alaska in its authorization to design, construct and operate facilities necessary for delivering gas to market; and add “and other regions of the state, including the Alaska outer continental shelf,” to ANGDA’s authority to acquire natural gas from the North Slope.

Heinze said clarification of ANGDA’s statutory authority was driven by advice received from the financial community, because bankers want everything perfect in terms of statutory language.

The $250 million in bonding, he said, was chosen as the largest nontrivial number appropriate for legislature approval at this time and would be indicative of legislative support for doing this kind of bonding.

Natural Gas Supply Co.

Since last year ANGDA has formed the Natural Gas Supply Co., a cooperative of electric utilities formed under the state’s general cooperative statute, Heinze said.

The backstopping of any bonds would be consumers through the electric utilities, which have a bankable monthly cash flow coming in from payment of utility bills, he said. This approach helps the electric utilities, which are cash strapped, allowing them to use their credit for other things.

ANGDA’s bonding does not have the full faith and credit of the state behind it, Heinze said, but is modeled after a fairly successful financing in which the state was helpful, the Bradley Lake hydroelectric project. The state doesn’t pledge its full faith and credit, but instead has what is called a moral obligation. As Heinze described it, the state stood next to the electric utilities and smiled when the bonds were signed.

The combination of a moral obligation on the part of the state and the monthly cash flow from the electric utilities is expected to achieve the lowest interest rate for bonds, he said.

Acquisition of gas

Heinze said acquisition of gas is the highest priority for the electric utilities. The utilities have also expressed “significant concern” over the future of the LNG plant, and are sensitive to the fact that if the LNG export license is not renewed then wells would begin to be shut down in Cook Inlet in the summer of 2011. In the following winter, 2011-12 as wells came back on they would have lost production and deliverability, a situation that would only get worse.

He said the electric utilities believe that working as a co-op with ANGDA as a partner it will be possible to strike a deal with ConocoPhillips and Marathon, providing those companies with a basis for continuing to operate the plant and making the plant more valuable for meeting local needs. The plant would operate as a peak shaver, re-gasifying some LNG to meet local needs.

Heinze said ANGDA and the co-op have written to the plant owners, ConocoPhillips and Marathon, offering to meet and negotiate whatever it takes to get that plant to stay open. So far, he said, there has not been any assurance that the owners will apply for license renewal.

Resources Co-Chair Lesil McGuire, R-Anchorage, said U.S. Sen. Lisa Murkowski’s office is looking at taking a leadership role in export license renewal. McGuire called it a “public relations challenge” just to apply for renewal because of the public perception that we’re exporting gas when we’re short of gas. But, she said, without the ability to export we might be dependent on imported LNG.

McGuire suggested that ANGDA might be a voice the public would listen to on the need to extend the license.

Heinze said the “really powerful folks” in this case are the electric utilities. They mail out monthly statements, he said, and have the ability to barrage people every month. “They can play a major role in helping people understand why continuance plays a major role,” he said.

And the electric utilities in the co-op with ANGDA as a member provide “a goodwill factor that has to be important” in going before federal regulators for a license renewal. “I see it as very hard for the federal government to not renew that … (license) if the electric utilities back it,” he said.






Petroleum News - Phone: 1-907 522-9469 - Fax: 1-907 522-9583
[email protected] --- http://www.petroleumnews.com ---
S U B S C R I B E

Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA)©2013 All rights reserved. The content of this article and web site may not be copied, replaced, distributed, published, displayed or transferred in any form or by any means except with the prior written permission of Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA). Copyright infringement is a violation of federal law subject to criminal and civil penalties.