October target for ROW applications

State’s standalone gas line project will permit two routes, one along Parks Highway, one along Richardson and Glenn highways

Kristen Nelson

Petroleum News

A state-directed team working on costs and feasibility for a standalone Alaska gas pipeline aims to have a summary of alternative routes complete by early September, including a Parks Highway route which would avoid Denali National Park, Harry Noah told legislators in an Aug. 21 letter. Noah, project manager for the in-state gas program, said the team is working on a route analysis for a pipeline from the North Slope, with a possible extension into western Alaska and site selection for a natural gas liquids extraction plant.

He said the team’s engineering work will allow cost estimates for gas pipeline service to Alaska’s Railbelt from the North Slope Foothills, the Nenana basin or Cook Inlet.

Noah, most recently executive director of the Trust Land Office and a former Department of Natural Resources commissioner, was brought onboard by former Gov. Sarah Palin early this year to help with a plan to supply the Railbelt with natural gas within five years.

Michael Baker Engineering has the contract for engineering work for the standalone in-state project and Noah said that team “continues to analyze the capital cost differences, environmental issues and a number of potential customers for the two routes,” one to Fairbanks and then along the Parks Highway to Southcentral Alaska and the other to Fairbanks and then down the Richardson Highway to Delta, then to Glennallen and following the Glenn Highway to Southcentral.

Noah told legislators that the route analysis report would not propose a route decision but would “set out the facts for policymakers to use in a future determination of the preferred route.”

The Baker team is analyzing capital cost differences, environmental issues and potential customers for the two routes.

Route around Denali

The team has been working on a detailed review of “a potential pipeline route around Denali National Park to avoid the obvious problems with national park lands.”

Noah said the team believes it has “identified a possible route outside the park boundary, just east of the Parks Highway,” a route which appears to offer an economic alternative to the special permission required to run a line through the park.

He said that if the National Park Service preferred to have the line closer to main infrastructure in the park, the line could run along the highway in the park.

A possible pipeline extension to western Alaska to serve the proposed Donlin Creek mine could run from the west side of Cook Inlet to Donlin Creek, or connect to the standalone pipeline south of Nenana and run west from there, Noah said. Donlin Creek is north of the Middle Kuskokwim River village of Crooked Creek, some 280 miles northwest of Anchorage.

The team is also reviewing possible sites in the Cook Inlet area for a natural gas liquids plant to extract heavier gas liquids.

Noah said the project spent $321,040 during July and $470,943 year-to-date.

Action plan

The state’s objective for the standalone project is a commercially viable in-state natural gas system, a meeting report said, with producers making a net profit equal to or greater than they would make exporting gas, industrial users served at a cost which allows them to be competitive in the world market and the state turning the project over to a private developer which would recoup costs and make a profit on operation of the pipeline.

The goal of those involved is execution of a prefeasibility study for an in-state standalone gas pipeline project.

Cost of service was defined as including three parts: production cost; treatment and pipeline cost; and distribution cost — including storage.

The report noted two assumptions, primarily that a standalone in-state gas pipeline project would only be built if a 48-inch pipeline to the Lower 48 is delayed from the planned 2019 startup date or will not be constructed. The second assumption is a focus on defining cost of service for an in-state gas pipeline project, with other aspects of the in-state gas pipeline not part of the report.

Different goals

The state wants energy supply for economic growth; a financial opportunity for the state; and provision of affordable natural gas to homeowners.

Producers want to sell natural gas at the highest possible netback and sell the largest possible volume of gas.

What potential instate gas users want varies, the report said.

Agrium could restart its Kenai operations and operate at full capacity with long-term gas service.

Residents of western Alaska, including the Donlin Creek mine, could be served by a pipeline.

And utilities require long-term, secure and reliable supply for an existing and growing customer base. The report said “there is a sense of urgency for secure supply and the pipeline option appears to be superior to current options.”

Project success could be improved if opportunities for increased gas volume requirements are developed and if the state adopts a proactive permitting approach, thus avoiding project delays.

The report said six potentially significant threats, risks or issues were discussed: ramp up might be slow, impacting the project economics; industrial users might not commit if the schedule is deferred; possible users might not materialize; if the 48-inch line to the Lower 48 materializes, the standalone line “would not be viable in the current configuration”; if there was a major gas discovery in Cook Inlet the standalone line would not be necessary; and high pricing would threaten the project’s economics.