Alaska is well positioned to take gas off in-state under an initial open season for a North Slope natural gas pipeline project. But if for any reason potential in-state users don’t take capacity on the main line in that initial open season, they are not well positioned to ask to take gas off later.
It’s the way the Federal Energy Regulatory Commission’s open season rules for Alaska work, Harold Heinze, chief executive officer of the Alaska Natural Gas Development Authority, told the Regulatory Commission of Alaska Dec. 13.
“We have an outstanding position during the initial phase,” he said. “If we speak up, then it’s very clear” that in the initial open season, requirements for in-state Alaska gas have to be accommodated both in pipeline design and in tariff structuring.
“It is also clear that if we miss the window and we come back, say, a year later” requesting to take off 100 million cubic feet a day in Delta Junction, “they’d say … sorry, but you have to pay the full fare to Chicago because you’re asking me to let gas off early and I have … financed it on the basis of all the gas going to Chicago.”
That initial open season window is six months long.
And it could come soon. In response to a question from Commissioner Dave Harbour, Heinze said an open season could come as soon as six months after somebody decides to move a gas project forward, “because the first thing that will happen, logically, is some sort of open season.”
Heinze said he thinks “it’s realistic to say you absolutely have to be prepared for say, a year from today,” for the opening of that open season. “It might occur under certain circumstances quicker than that, but I wouldn’t count on it being a lot further out in the future than that.”
It’s the six-month window
Commission Chair Kate Giard said six months seemed like an awfully short time and asked if the FERC regulations don’t allow for an extension.
Heinze said the initial draft of the FERC open season rules for the Alaska gas pipeline project had a 60-day open season. He said he and Tony Izzo, then president of Enstar Natural Gas Co., the Southcentral local gas distribution company, both pleaded for more time.
The regulations FERC adopted call for six months, and Heinze said he reads that as “a balance of their giving us more time.”
He said it is ANGDA’s intention “to try to open some sort of dialogue with FERC on this issue from the point of view of the enormity of the decision faced by our utilities,” but said he had a chance to plead for a longer open season before FERC before they adopted rules and “I think they’ve given us all we’re going to get.”
Heinze said Alaska could always ask for more time, “but I think that would be a real risk you don’t want to take.”
It’s the bet your utility decision
Heinze has talked about the decision facing utilities before, and he reviewed this for the commission.
The value of the commitment utilities would have to make for natural gas in an open season is in the range of $6.5 billion for 75 percent of the gas needs of Alaska utilities for heating and power over a 15-year period.
“It’s a bet your company two or three times over type decision,” Heinze said.
And what if not all the utilities are willing to commit?
First, as noted above, in-state users are not in a good position to come back after the open season and ask to have gas taken off in the state.
And it impacts the economics of a spur line to Southcentral Alaska.
At 100 million cubic feet a day — about the volume Enstar uses — a spur line into Southcentral Alaska is not economic, Heinze said. If one of our major utilities, or the gas company, says it’s not willing to make a billion-dollar decision, and there are no industrial partners, “then we don’t get a spur line.”
ANGDA is working with utilities now to help them understand what is coming and wants to do a practice open season, Heinze said.
As for the RCA, “you could be faced within a six-month period with a dozen or two dozen applications” for the purchase and transmission of gas, “and I can assure you that if only half of those decisions get made, we won’t have a (spur line) project.”
