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AGIA report favorable on gas needs Semiannual report to Legislature says North Slope gas will be needed; reviews TransCanada progress, state’s work on regulations Kristen Nelson Petroleum News
The semiannual report on AGIA progress delivered to legislators April 30 includes an analysis of Lower 48 natural gas needs and says national forecasts projecting natural gas needs “suggest that Alaska gas is a necessary and expected component of the national gas picture.”
The report also reviews the state’s monthly reports on progress on the Alaska Pipeline Project licensed under the Alaska Gasline Inducement Act and summarizes regulations which the state has put in place under the Alaska Gasline Inducement Act.
AGIA passed in 2007 and TransCanada Alaska was awarded the AGIA license at the end of 2008. In June 2009 ExxonMobil became a partner with TransCanada in the Alaska Pipeline Project and APP submitted an open season plan to the Federal Energy Regulatory Commission in January of this year. The open season for the project began April 30.
The schedule for the project, which projects first gas in 2020 and full gas delivery in 2021, is based on a number of assumptions, the report said:
• The open season is fully subscribed and “conditions precedent in negotiated precedent agreements are satisfied including any shipper/producer issues;”
• FERC meets timelines mandated under the Alaska Natural Gas Pipeline Act of 2004;
• Land rights are acquired in a timely manner;
• The project is fully funded in 2015 so that purchase orders for pipe may be placed; and
• Work begins on gas treatment plant modules to meet the 2017 sealift window.
State AGIA regulations Regulations implemented by the state include qualifications for resource inducements: a bid for firm transportation capacity in initial open season; a precedent agreement executed within 180 days of close of initial open season; transportation services agreement executed within five years of open season or within two years of FERC certification, whichever is later; and copies of documents filed with commissioners of Alaska Department of Revenue and Alaska Department of Natural Resources.
Royalty inducement regulations apply to lessees committing to ship gas in the first binding open season for a project licensed under AGIA and “base royalty value on fair market value at the first destination markets for Alaska gas,” including the TransCanada Alberta System, the Alliance Pipeline and possible destinations through the Spectra Pipeline. The regulations also provide “additional notice of the state’s decision to switch between taking royalty gas or royalty payment.”
Tax inducement regulations establish “a methodology for calculating a person’s gas production tax obligation, attributing a portion of the state’s current combined production tax obligation to just the gas qualified for the AGIA tax inducement,” and clarifying that the AGIA inducement does not apply to gas committed to the AGIA line after the first binding open season.
Regulations established for inducement vouchers allow the Revenue and DNR commissioners “to issue an inducement voucher to individuals who acquire firm transportation commitments during the first binding open season, but who do not hold a North Slope lease and are not affiliated with a North Slope lease holder.”
GTP design optimization The report said the project team for the gas treatment plant is focused on optimizing the design concept, with engineering work under way “to improve module configurations, overall site layout and minimize the required plot area for the plant.” Alternate sites for the GTP are being evaluated.
The report said maximizing the British thermal unit content of the gas is also being evaluated, along with studies of “turbine driver types and waste heat recovery to lower fuel consumption and emissions.”
On the pipeline side, the project footprint is being refined, along with technology development programs “including frost heave and uplift resistance testing, tensile and compressive strain capacity and demand.”
In the February monthly report it was noted that 10 active seismic faults have been identified in Alaska that might intersect with the pipeline route and field investigations of some of these fault lines will be part of the 2010 summer field program.
“At the moment the Project’s assumption is that at all crossings of active fault lines the pipeline will be above ground,” the February report noted.
The March report said the project has been in discussions with government officials in Alaska on infrastructure requirements and holding discussions with the Truckers Associations in Alaska on the capabilities of the Alaska based trucking industry.
Need for gas “National energy forecasts projecting future production, demand and price for natural gas suggest that Alaska gas is a necessary and expected component of the national gas picture,” the report said.
While the Energy Information Administration expects shale gas “to be the most significant incremental contributor to domestic gas production during the next 25 years,” the report said issues with shale include: protecting water resources; the low porosity and low permeability quality of shale reservoirs, requiring stimulation to produce economic quantities; and based on the example of shale oil wells, which “tend to drain a smaller area than many traditional reservoirs, more wells have to be drilled to develop the resource in the ground, which means a significant surface footprint exists in many shale activity areas.”
The report said that “shale gas recovery technologies show significant promise for buttressing our national energy needs in the coming years, but shale gas should not be considered as an alternative to Alaska natural gas.”
While transportation costs for Alaska natural gas will be “significant … those costs should be acceptable in comparison to the production and potential environmental offsets for producing shale gas,” the report said.
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