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Working with FERC
Officials say AGDC is working to understand agency’s new info request
Kristen Nelson Petroleum News
Alaska Gasline Development Corp. officials told the Senate Resources Committee Feb. 28 that they will be responding to the Federal Energy Regulatory Commission’s request for additional information and will also be meeting with FERC staff to make sure they understand the extent of some of what the agency is requesting.
Frank Richards, AGDC senior vice president project management, and Lieza Wilcox, vice president commercial and economics, responded to questions from senators on the FERC request and on progress on the Alaska LNG project.
AGDC responded to FERC’s Feb. 15 request for additional environmental data March 7, a tabulated response which Richards said in a cover letter included either a response or the date upon which AGDC anticipates filing the information.
Richards told the committee that after AGDC filed its application for the Alaska LNG project with FERC in April 2017, the agency responded over the summer with 801 questions, questions which AGDC answered over the fall and finalized in January.
Then in February, he said, came another request.
Richards said AGDC has been pressing FERC to publish its National Environmental Policy Act schedule, and also pressing the agency to leverage work AGDC has done for the Alaska Stand Alone Pipeline project, for which the U.S. Army Corps of Engineers is the lead agency.
The new questions Of the data requests in FERC’s Feb. 15 letter, Richards told the committee there were three levels of information. Some, he said, were refinements on information AGDC has provided. The second level, he said, requires some new information AGDC would have to compile. And the third is a request for detailed data, similar to an alternative analysis, for a Port MacKenzie liquefaction plant site and for a portion of a pipeline route to Valdez.
He said AGDC’s response to FERC would provide a schedule on the first two categories and said AGDC would follow up with a face-to-face meeting with FERC staff to get clarification on what will be required for the third category.
In response to a question from Sen. Cathy Giessel, R-Anchorage, chair of Senate Resources, Richards said AGDC does have access to site selection analysis done in the past, citing 2012 work done by Southcentral LNG Project, a predecessor to Alaska LNG. At that time the project team made the determination that Port MacKenzie was unsuitable because it was a working port with a goal through its master plan for import and export capabilities, he said. The team in 2012 felt, Richards said, that you couldn’t have a working dock face co-located with an LNG plant.
He said he thinks FERC wants to make sure that the same analysis was followed for Port MacKenzie as was followed for Nikiski and other sites.
Asked by Sen. Bert Stedman, R-Sitka, about potential delays in the project which could come from the alternatives’ analysis, Richards said there would be work required. On the line to Valdez, FERC has asked that AGDC look at a small segment of that route where it intersects with two wild and scenic rivers, which will require looking at land-use issues around a small segment of the route. That might take several months, he said.
On the Port MacKenzie request, Richards said AGDC needs to find out how much information FERC will require. If they want on-site field work, borings and bathymetric data, what will have to be done in the summer. He said AGDC had met with the Matanuska-Susitna Borough Feb. 27 on this issue, which the borough had raised with FERC. The borough also made a late request to become an intervenor in the project. FERC granted that intervenor status, Richards said, and also the borough’s request for alternatives analysis.
Richards said that when AGDC met with the borough it offered to provide AGDC access to information the borough has compiled.
Litigation issue Sen. Natasha von Imhof, R-Anchorage, noted FERC’s Feb. 15 statement that AGDC had been refusing to provide some information. Richards said some of what FERC has requested wouldn’t normally, under NEPA, be developed at this stage. He said AGDC has identified that it will do these studies, but FERC is saying they want them now. FERC has said that the previous partners agreed to provide them at the time of filing.
Richards said AGDC will develop plans for those and talk to FERC about a minimal standard for what they would expect now. We don’t have everything fleshed out, he said.
Von Imhof asked why FERC was asking for these items now, and whether in fast tracking the application AGDC has missed important hurdles.
Richards said AGDC’s FERC attorney has said the agency is now getting litigated on almost every decision they make and wants to make sure they have information that will form the basis of a legally defensible document.
He said his understanding of the agreement the previous project management had with FERC staff is that it was a commitment to provide outlines of plans that would come in later and what those plans would include.
FERC wants to make sure those plans will meet their standards, Richards said, and that AGDC will follow through and provide the information needed.
Receipt authority Both von Imhof and Stedman asked Richards about AGDC’s request for receipt authority - the ability to accept funds for the project from third parties.
Wilcox said the commercial focus of the project has been on marketing the project, making potential customers aware that it exists. We’ve done the marketing, she said, have identified interested parties and are working on agreements with those parties.
AGDC is now starting to look for money, and to the extent we can accept money from outside sources it would help equity investors decide whether they’ll be willing to invest, she said.
Those investors will also be asking whether they’ll be able to invest just in FEED, front-end engineering and design, or if they will be able to invest in the project later - and whether further decisions from the Legislature will be required for that investment to take place.
Those are key questions the state has to resolve, Wilcox said: how to attract investors into the project early on and will there be the ability to invest as the project moves forward.
She said there are a number of approvals the Legislature would have to make, such as whether the state’s royalty-in-kind natural gas will be committed to the project. Without RIK gas the project won’t work, she said. There are other issues on which the state must decide, Wilcox said, including a number of upstream issues.
AGDC doesn’t want unlimited receipt authority so it can just walk away. But, she said, to be able to make definitive agreements the project will need to know what it’s able to offer in terms. She said AGDC anticipates active engagement with the Legislature to flesh it out so we know what we can offer equity partners that would be coming into the project.
The Chinese issue Stedman noted that legislators heard from a consultant recently about the synergy created in the project if some Chinese companies came forward, noting that China has both an interest in retiring coal plants to clean up its air and in supplying modules for the project. He asked if discussions included things such as module construction.
Richards said working with China wasn’t just an opportunity to commercialize gas, but also for China to produce materials and equipment for the project and how that might reduce project costs.
The previous joint venture under ExxonMobil leadership looked at China as one of the places where plants could be modularized and costs reduced. China is producing large modules now, Richards said, and meeting standards set by large international oil companies.
Fluor looked at sourcing as a way to reduce project costs and identified potential savings of some $1.4 billion, he said.
China can produce modules and steel plate that can be rolled into pipe, although the concern now is with potential tariffs. U.S. plants can’t produce the grade of steel needed for the project’s pipe, Richards said, adding that AGDC has engaged with the Trump administration on this issue.
There are U.S. pipe mills that can roll 42-inch pipe, he said, and AGDC is working with them to make sure they can meet project standards.
Right of way Stedman asked if there were any sections of the right of way AGDC didn’t have access to.
Richards said that under legislative direction the state gave AGDC right-of-way leases across state land at no cost.
The federal right of way is tied up in the EIS. Once a record of decision is issued, the Bureau of Land Management will grant the federal right of way.
That leaves about 40 miles, Richards said, 38 miles of which south of Denali are controlled by a large Native corporation, Ahtna. Richards said AGDC has met with Ahtna and will be negotiating that right of way with them.
There are also some private parcels on the Kenai Peninsula before you get to the LNG plant site.
Then there is the 400 acres acquired by Alaska LNG LLC - the producer parties to the project - to which AGDC is not a party. When AGDC was one of the partners in Alaska LNG the plan was for the producer partners, through Alaska LNG LLC, to acquire that acreage and for AGDC to become a partner in the LLC later.
Richards said AGDC is required to have control of that land before FERC will issue its authorization and said AGDC in discussions and negotiations with the LLC to acquire rights to that land.
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