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Vol. 15, No. 20 Week of May 16, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Yukon Pacific still in gasline hunt

One of the most enduring of contenders for developing an Alaska natural gas pipeline remains alive and aims to keep kicking.

Yukon Pacific Co., whose parent is transportation giant CSX Corp., in April filed a request with the Federal Energy Regulatory Commission for a three-year extension of the deadline to commence construction of a liquefied natural gas project.

If granted, this would be the fifth such extension Yukon Pacific has received for its Trans-Alaska Gas System, or TAGS, project, which contemplates piping North Slope gas to Valdez for liquefaction and shipment aboard LNG tankers to Asia.

The FERC on May 22, 1995, approved Anderson Bay near the city of Valdez as the LNG export site, and specified that construction was to start within three years of the commission’s order.

Yukon Pacific’s latest extension request would push the construction deadline out to May 22, 2013.

Yukon Pacific’s attorney, Patrick Rock of Washington, D.C., told Petroleum News on May 13 he expects the commission will act prior to the upcoming May 22 expiration date for the most recent extension, which the FERC’s Office of Energy Projects granted in May 2007.

Rationale for extension

In a 13-page motion filed April 16 with the FERC, Rock argued significant developments over the past three years justify the latest extension request, and give rise to new optimism for Yukon Pacific’s LNG project.

“Since the Commission’s 2007 extension, industry efforts to commercialize North Slope gas have increased dramatically,” Rock wrote. “The most visible and meaningful of these are the ‘pre-filing’ steps taken by the two leading projects for delivering North Slope gas to Alaska and Lower 48 markets. The implementation of either project would greatly facilitate LNG exports by, among other things, creating pipeline infrastructure that can be leveraged. Given these developments, it is important that the LNG option represented by Yukon Pacific’s proposal remains viable as the ‘open-season’ and other market-related activities for these projects play out.”

Two partnerships – one involving BP and ConocoPhillips on a venture called Denali, and another, The Alaska Pipeline Project, pairing TransCanada and ExxonMobil – are holding open seasons this year to recruit shippers to their respective North Slope gas line projects through Canada. BP, ConocoPhillips and ExxonMobil are the top holders of proven North Slope gas reserves.

Both efforts are good news for Yukon Pacific, Rock told the FERC.

“The TC Alaska plan … includes the option of delivering gas to Valdez for liquefaction and export by third parties,” Rock wrote. “Denali does not include a Valdez option, but it would offer delivery points (e.g., Delta Junction) that would greatly reduce the length of pipeline required for the TAGS project.”

Recent interest in the concept of a small pipeline, or “bullet line,” from the North Slope to Southcentral Alaska to supply local gas needs also is a positive development, Rock said.

“Taken together, these various intrastate and interstate gas pipeline projects represent a heightened interest from the marketplace in accessing North Slope gas reserves,” he wrote. “Though distinct from the LNG exports proposed by Yukon Pacific, each project holds promise for a symbiotic relationship that would enhance the prospects for TAGS’ near-term commercial viability.”

Trying since 1982

In addition to the site approval from FERC, Yukon Pacific holds an export license secured in 1989 from the U.S. Department of Energy.

Yukon Pacific got its start around 1982, and once maintained a significant office in Anchorage. For many years Wally Hickel, the late former governor of Alaska, was involved with the company.

CSX continues to hold a 90 percent interest in Yukon Pacific, Rock told Petroleum News.

In 2001, Yukon Pacific downsized its Alaska staff, and today no longer has a local office.

In 2008, the company took a hit when the state Department of Natural Resources took away the company’s conditional pipeline right of way. Commissioner Tom Irwin held that the company had not shown enough progress for a renewal.

“Though this is obviously a disappointing development, Yukon Pacific is not prejudiced from seeking a new lease, and will in fact do so when market conditions dictate,” Rock wrote in the FERC motion.

Rock said Yukon Pacific has spent more than $300,000 since 2007 to maintain federal and state right-of-way leases, and continues to maintain licenses, bonds and insurance and engage consultants “to preserve its regulatory approvals and further the TAGS project.”

During 2008, he said, Yukon Pacific consultant Three Parameters Plus Inc. conducted briefings with North Slope gas stakeholders on Yukon Pacific’s permits, engineering and other assets. For the briefings, the consultant updated Yukon Pacific’s geographic information system database incorporating “thousands of site photographs.”

Rock implored the FERC to grant another extension, noting investors have put in more than $100 million to date.

“A Commission denial of this motion would be a serious setback for the TAGS project, and possibly even force its abandonment,” he wrote.

—Wesley Loy

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