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Lawmakers up LNG exports concern In late comments to the DOE, a group of Democratic lawmakers asks that 2008 settlement agreement be extended through 2013 Eric Lidji For Petroleum News
The State of Alaska backed liquefied natural gas exports in 2008 after ConocoPhillips and Marathon contractually agreed to meet local supply needs and other terms.
Now that those companies want to continue exporting LNG through 2013, a group of Democratic state lawmakers believe they should also be forced to extend that contract.
ConocoPhillips and Marathon want the extension to be unconditional.
The Democratic lawmakers made their demand in late comments filed with the U.S. Department of Energy, the agency in charge of allowing exports of domestic oil and gas.
The group previously filed timely comments on July 8, expressing concerns about exporting natural gas from Alaska during a period of increasingly tight local supplies.
However, after filing those comments, the lawmakers “learned of a written agreement, and conditions, that governed ConocoPhillips and Marathon’s export of natural gas during the 2008-2011 period.” The lawmakers believe that the DOE should impose those conditions once again on the companies to ensure that exports are in the public interest.
Settlement reached in 2008 The “written agreement” refers to a 2008 settlement between the state and the facility owners that the Palin Administration announced in a January 2008 press release.
Under the terms of that settlement, the state agreed to support continued exports of LNG from Alaska in return for commitments from ConocoPhillips and Marathon to meet local supply needs, open the facility to third parties and drill new wells in the Cook Inlet.
If the export license is extended, the lawmakers say, then the settlement should be, too.
They pointed to the fact that Enstar Natural Gas still needs to contract some 2 billion cubic feet of natural gas for 2011 and 2012, about 3 percent of its total supply needs, and faces significant shortfalls in 2013, during the final months of the proposed extension.
“We agree the Conoco/Marathon LNG facility is important to the state, and allows a market for excess natural gas produced in Cook Inlet,” the group wrote. “All we are requesting is that these gas producers commit to make natural gas available to Alaskans at a price that is approvable by the (Regulatory Commission of Alaska).”
Enstar supports the extension request, despite those shortfalls, because the export terminal moderates extreme seasonal swings by serving as a de facto storage facility.
Reps. Les Gara, Berta Gardner, Chris Tuck and Pete Petersen, and Sens. Bill Wielechowski, Hollis French and Bettye Davis submitted the comments on Aug. 4.
Are the concerns addressed? The lawmakers believe ConocoPhillips and Marathon should be required to agree to three terms in specific in return for the right to continue export Alaska LNG to Asia: meet local needs through the extension period; keep the facility open to third-party producers; and continue to invest exploration dollars in the Cook Inlet to develop additional reserves.
Gov. Sean Parnell supports the exports, but only if the companies meet local needs and keep the facility open to third-party producers. Parnell has not asked for drilling commitments.
The companies believe they have adequately addressed concerns.
They said that three gas supply contracts negotiated this year address deliverability concerns through early 2013. The most recent of those contracts, still pending approval from the RCA, requires ConocoPhillips to divert supplies from the export facility into the local grid on extremely cold winter days, as long as doing so doesn’t harm the facility.
The lawmakers said that ConocoPhillips and Marathon have been “good partners” in the past, but also wrote “they met natural gas demand in 2008-2011 because they were required to do so by contract, not out of charity. A contract is likewise needed this time.”
Not automatic The lawmakers said they consulted with the state Attorney General’s office, which said the 2008 agreement would likely not automatically carry on through the 2013 timeline.
In the 2008 settlement, the state agreed to support future applications, but only if the local utilities had the gas they need and the plant remained open to third-party producers.
The current export license, approved by DOE in 2008, allows ConocoPhillips and Marathon to ship some 99 trillion British thermal units of LNG to Asia by April 1, 2011. Because of cutbacks in cargo tankers, the companies believe they will end up having shipped only about half that allotment by the deadline, and in June asked DOE for an additional two years, until March 31, 2013, to ship the remaining amount.
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