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November 2009

Vol. 14, No. 47 Week of November 22, 2009

ANGDA advancing propane, gas co-op

Alaska Natural Gas Development Authority asks for discussion of synergy with FNG, Alaska Gasline Port Authority LNG project

Kristen Nelson

Petroleum News

The board of directors of the Alaska Natural Gas Development Authority got one meeting it’s been asking for — a closed-door session with Gov. Sean Parnell — and asked for another, this one with the Corps of Engineers and the Bureau of Land Management to discuss the progress on the environmental impact statement for B2F. B2F is the Beluga to Fairbanks gas line that former Gov. Sarah Palin charged ANGDA with developing to carry Cook Inlet natural gas to Fairbanks, providing gas to the Interior in advance of a line off the North Slope and providing an incentive for more exploration in Cook Inlet to provide that gas.

ANGDA was created by a ballot initiative with the goal of moving North Slope natural gas to tidewater for liquefaction and sale, and to bring North Slope gas south for in-state use, and has focused on getting natural gas to Alaskans by building a spur line to serve Southcentral Alaska off a main gas line going to market.

The meeting with the governor, an executive session attended by the board, the governor and ANGDA staff, was held Nov. 9 at the governor’s office in Anchorage.

Board members have been asking for a meeting with Parnell since last summer when Palin resigned and Parnell, formerly the lieutenant governor, took over. Board member Kate Lamal raised the issue in July and again in September, saying she would like clarification on the view of the current governor and the new in-state energy coordinator, Gene Therriault. At the September meeting board member Dan Sullivan, the mayor of Anchorage, undertook to talk to the governor about meeting with the board.

The meeting to discuss progress on the B2F EIS is scheduled for Nov. 23 at 1 p.m. in ANGDA’s Anchorage office.

The board also asked ANGDA Chief Executive Officer Harold Heinze to meet with Bill Walker, project manager for the Alaska Gasline Port Authority, to discuss how the two organizations might cooperate on a project to bring propane off the North Slope, a project ANGDA has been working on.

ANGDA and the port authority have a memorandum of understanding; both have been working on getting gas to Alaskans.

Walker, a candidate for governor, told the board at the Nov. 4 meeting that the port authority did not intend to be adversarial and said the port authority applauds what ANGDA is doing.

North Slope facilities

Asked by board member Brian Rogers about opportunities for collaboration, Walker said the obvious one to the port authority is propane, and noted that propane comes with liquefaction and is more user friendly for the small consumer.

The port authority got involved with North Slope facilities development earlier this year. On Sept. 29 it announced a letter of intent to buy Fairbanks Natural Gas and develop a North Slope liquefaction plant that would produce LNG to be trucked to Fairbanks. Fairbanks Natural Gas has been working on that project since 2006, when the utility acquired a land use permit from the North Slope Borough and began working on the lease of a pad from the Alaska Department of Natural Resources.

FNG trucks gas north from an LNG plant at Point MacKenzie on the west side of Cook Inlet, but in the fall of 2006 FNG started having trouble with its gas supply when Aurora Gas terminated a contract.

In 2008 FNG contracted with ExxonMobil for up to 10 billion cubic feet of natural gas a year from the North Slope.

Dan Britton, president of FNG, told the ANGDA board in April of this year that ANGDA’s plans for a propane facility on the North Slope were undercutting FNG’s attempts to sell North Slope LNG to Interior markets.

Both FNG and ANGDA were looking at Golden Valley Electric Association as a customer — FNG for LNG and ANGDA for propane.

FNG has signed a memorandum of understanding with GVEA related to the use of North Slope gas.

After the announcement that the port authority was in talks to buy FNG, GVEA said the port authority’s ability to use tax-exempt revenue bonds made preliminary cost estimates for the North Slope LNG project promising, possibly comparable to $50- or $55-a-barrel oil.

Walker told the ANGDA board the port authority hopes to have financial closure on the FNG purchase by the end of the year and to be producing LNG at the North Slope within 24 months.

ANGDA’s propane project

The ANGDA propane project would also be on the North Slope and would involve facilities “inside the fence” at the Prudhoe Bay unit to extract propane and facilities “outside the fence” to process propane for sale and shipment.

Mary Ann Pease, ANGDA’s contract propane supply coordinator, said an industrial load will make propane economically viable. ANGDA has a contract with a producer company for North Slope natural gas and Pease said that in addition to looking at updated cost information for the project they are looking at expanding the contract from 10 years to 15 to enhance the economics; there would be a price reopener after 15 years.

They are also looking at optimizing the North Slope plant location; different venues have richer propane streams, she said, and the producer has been asked to discuss this with Prudhoe Bay owners.

ANGDA is seeking a private partner to develop a North Slope processing plant and a distribution network to supply propane within Alaska.

Board member Bill Jeffress asked if there were synergies with the Fairbanks Natural Gas LNG project.

Heinze said he didn’t know what FNG’s plans were for facilities inside the fence — within the Prudhoe Bay field area — and said ANGDA’s work may be useful to FNG. Heinze said the biggest issue is that propane is more flexible than LNG because it can serve many customers at many locations.

Lamal said she’d like to see a meeting with the port authority and an alternative plan for the North Slope facilities before a board meeting in mid-December.

Natural Gas Supply Co.

Another big project ANGDA has been working on is a natural gas supply co-op, a project which grew out of a program ANGDA put on for electric utilities to help bring the utilities up to speed on what they would need to know and do to participate in an open season for North Slope natural gas.

ANGDA originally said one role it might play was as an aggregator for natural gas purchases, and bidding for space on a gas pipeline, for utility gas.

Tony Izzo, ANGDA’s contractor for the natural gas co-op, said there are three formal members of the Natural Gas Supply Co. — Homer Electric Association, Matanuska Electric Association and Golden Valley Electric Association — and there is interest from Municipal Light and Power, Chugach Electric Association and Homer Electric Association.

There is a structured offer in discussion stages with one Cook Inlet company to provide natural gas and discussions have been initiated with a second Cook Inlet producer, Izzo said.

A membership meeting for the Natural Gas Supply Co. will be held in November, he said, and the plan is to transition to a member-run co-op by the end of the year, with complete bylaws and transfer of control to the members. ANGDA then would become a member and provide whatever value it can.

Heinze said the co-op is starting to look at participation in an open season by electric utilities, which would take aggregation and money. He said school districts, the university and other large gas purchasers such as hospitals could gain by being members.






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