AGDC: refocus on AKLNG economic hurdles under new administration
Under new leadership provided by the Dunleavy administration, plans have changed at the Alaska Gasline Development Corp. Interim AGDC President Joe Dubler told a Senate Finance subcommittee Feb. 27 that the focus at AGDC is now to determine if the Alaska LNG project could meet economic hurdles without undue execution risk. If we can’t do it economically then it doesn’t make sense to do it at all, Dubler said.
But we’re not winding down the corporation, he told the AGDC board March 6 in a discussion of what steps AGDC will take next while making fiscally responsible reductions to align AGDC with the mission.
AGDC is reinitiating the stage-gate process, with stops at certain points in the timeline and decisions at those points on whether to move forward, Dubler told the board. Spending will be refocused on the core parts of the process, with the aim to complete the Federal Energy Regulatory Commission process. And on the technical side, he told the board, AGDC is recommitting to the original Alaska LNG project of a 42-inch pipeline as what makes the most economic sense, with transmission lines from Prudhoe Bay and Point Thomson, a three-train LNG plant at Nikiski and in-state offtake points.
As for a final investment decision, Dubler said that looks to be about two years out with FEED, front-end engineering design, needing to be completed first.
On the technical side, that team is looking at the design to see what could lower the total installed cost for the project, improving project economics, he said.
On the commercial side, the economic model and financing options and strategies are under review.
Dubler said the proposed model was 75 percent investment by a single firm, but AGDC now feels that’s too much investment by one firm and wants to diversify and expand investment.
He said updated costs and assumptions are being used to assess the project’s economic viability; when such a study was done three years ago, the project wasn’t viable.
And AGDC is continuing to foster commercial relationships with potential LNG buyers. Dubler said AGDC has heard concerns about changes in management and board membership and has been reassuring potential buyers.
AGDCCreated to study the feasibility of an in-state line from the North Slope, the Alaska Stand Alone Pipeline, AGDC’s purpose changed in 2014 to representing the state’s interest in the Alaska LNG project, Dubler told the Senate Finance subcommittee. AKLNG was the producer-led effort to get natural gas to Fairbanks and Anchorage, and market LNG internationally.
The ASAP and AKLNG projects were funded in advance, he said, and annual appropriations were not needed. In 2016 the producers turned AKLNG over to the state and AGDC continued to work on both projects for the next two years. The ASAP project received a joint record of decision March 4 (see story in this issue).
In January newly elected Gov. Mike Dunleavy replaced four board members, Dubler said, and brought him onboard to refocus the corporation to determine if the project could meet economic hurdles without undue execution risk.
Dubler said he’s looking at where the corporation is and where the project is, evaluating both technical and economic issues. If viable, AGDC will solicit world-class partners for FEED, front-end engineering and design.
The FERC process is underway, Dubler said, with the draft environmental impact statement originally expected in February, and now rescheduled.
If the project doesn’t look viable, we’ll wind it up, Dubler said, close the corporation down and return remaining funds to the state’s general fund.
AGDC will be in Juneau March 27 to provide a full status report on the project to the Resources Committee as required by law, he said.
FERC delayFERC said in a Feb. 28 statement that its staff had revised the schedule for the completion of the EIS for AGDC’s Alaska LNG Project. The previous schedule, issued Aug. 31, had indicated Nov. 8, 2019, would be the date for issuance of the final EIS for the project, but FERC said, “the forecasted schedule was based upon AGDC providing complete and timely responses to any data requests.”
In partial responses to the data requests filed in January and February, AGDC said it would provide all remaining data in stages through July. “As a result, staff has revised the schedule for issuance of the EIS,” FERC said, with the revised schedule based on AGDC meeting its commitment to provide data by the dates it has set.
The draft EIS is now scheduled for June, FERC said, with issuance of a notice of availability of the final EIS on March 6, 2020, followed by a 90-day federal authorization decision deadline of June 4, 2020.
The anticipated final order issuance had been Feb. 6, 2020, FERC said.
After issuance of the FERC notice of schedule change, AGDC said in a statement:
“FERC’s comprehensive analysis of Alaska LNG now includes more than 150,000 pages of environmental and engineering data, including responses to more than 1,700 FERC queries submitted since AGDC initiated this permitting process twenty-two months ago. Previous FERC scheduling changes accelerated the permitting calendar, and we believe that today’s revision does not affect the prospects for Alaska LNG. We look forward to working with FERC to complete this process and obtain the permits required to bring Alaska’s North Slope natural gas to market.”
Budget changesDubler told the subcommittee the proposed operating budget for fiscal year 2020 was a decrease of about $250,000, with $107,000 coming out of the corporation’s travel budget. Dubler said the reduction in travel isn’t expected to impact its business.
There is also a $143,000 reduction to lease expenses. Dubler said the Houston office has been closed and the staff there cut to two, who will be working from home. At its Anchorage headquarters in the Calais Building, AGDC is giving up the entire sixth floor and consolidating onto the second floor. He said the Houston office was cleared out in January and AGDC has an agent attempting to sublease the space. Most of the sixth floor at the Calais Building has already been vacated he said, and AGDC has given notice on the board room on that floor.
- KRISTEN NELSON