After Gov. Bill Walker put discretionary work on hold for the Alaska Stand Alone Pipeline project, the Alaska Gasline Development Corp. board has approved a revised work plan.
ASAP is managed by AGDC, which also represents the state in the export-oriented Alaska LNG project.
The board received a new cost and tariff estimate for ASAP, the in-state project which would take Alaska North Slope natural gas to Fairbanks and Southcentral.
The board’s monthly meeting, held Jan. 9, included new members, Heidi Drygas, commissioner designee of the Department of Labor and Workforce Development, and Fred Parady, acting commissioner of Commerce, Community and Economic Development. Walker earlier fired three public members of the board, who have yet to be replaced, leaving two public members and the two commissioners.
At the Jan. 9 meeting AGDC released an updated cost estimate for ASAP and tariffs for delivering gas to Fairbanks and Southcentral. In a statement released after the meeting AGDC said the cost and tariff updates are the first since the project was presented to the Legislature in 2013, based on 2012 estimates. The revised capital costs are $9.97 billion, plus or minus 20 percent, higher than the 2013 estimate of $7.7 billion, which was plus or minus 30 percent, putting the new capital cost within the 30 percent margin of the original $7.7 billion - 23 percent above the inflation adjusted 2012 number, AGDC said.
The revised estimate includes a lower 30-year operating and management cost, $147 million, compared to $152 million in the 2013 estimate.
The new tariff estimates are higher, $5.50 to $6.75 per million Btu to get the gas to Fairbanks, $8 to $9.75 to Anchorage, with the burner tip costs estimated at $11.50 to $14 for Fairbanks, and $11.50 to $14.50 for Anchorage.
These tariffs assume sufficient demand to place all 500 million cubic feet per day, AGDC said, and assume a cost of gas at $2 to $3.30 and local distribution charges of $1.50 for Anchorage and $4 for Fairbanks.
The tariff estimates from the 2012 work were a tariff rate of $4.25 to $6 per million Btu for Fairbanks, and $5 to $7.25 for Anchorage, with the burner tip cost at $8.25 to $10 for Fairbanks and $9 to $11.25 for Anchorage.
A big difference here is gas and distribution costs - the 2012 work estimated $2 for gas and $2 for local distribution for both locations.
“These new estimates validate our assumption that ASAP can deliver gas in-state at prices competitive with imported LNG, which has always been our comparative benchmark,” AGDC President Dan Fauske said in a statement.
AGDC said the cost for Fairbanks is below the $15 per million Btu target there, and below recent LNG trucking estimates from the Interior Energy Project.
Data for tariff filing
AGDC said it was charged with maturing the ASAP design and engineering to a point where a recourse tariff could be filed with the Regulatory Commission of Alaska, and said it now has the major cost components it needs to proceed.
But that with the state’s decision to invest in the Alaska LNG project, AGDC said it will postpone any decision to move forward with ASAP pending a decision by Alaska LNG whether to proceed to front end engineering and design, a decision expected in the first quarter of 2016.
AGDC said the cost figures it released on ASAP would help the governor and Legislature evaluate gas line related investments and policy alternatives.
Reduced spend
ASAP was one of the six projects Walker put on hold late last year. In a Dec. 26 administrative order the governor ordered each of the projects to immediately cease discretionary spending and provide a report by Jan. 5 detailing discretionary funding subject to the order, non-discretionary funding obligations, budgeted personnel costs for the remainder of fiscal year 2015 and operating costs to date.
Fauske said in a Jan. 5 memo on ASAP that some $420 million has been appropriated for the project since 2010, “either directly, or through the In-state Natural Gas Pipeline Fund,” for project costs through FY 2016. As of December, Fauske said, some $176 million has been spent establishing AGDC and advancing the ASAP project.
ASAP aligned with Alaska LNG
ASAP is geared to provide gas to Alaskans in Fairbanks and Southcentral, and to other communities where possible. It would include gas treatment on the North Slope, a gas pipeline from the North Slope to Enstar’s line at Beluga and a lateral line to Fairbanks.
Fauske said when the Legislature approved the ASAP project the plan was to hold an open season in 2015, sanction the project in 2016, begin a three-year construction process in 2017 and deliver first gas in 2021.
For project sanctioning in 2016, AGDC planned to spend the remaining balance of $244 million by the end of FY 16.
“AGDC has now scaled and scoped plans, budgets and deliverables to align ASAP with the next major decision point on the Alaska LNG project,” Fauske said. The investment decision on whether to proceed from the current phase, preliminary front end engineering and design, to the FEED stage which would cost billions, is schedule for the first quarter of 2016, he said.
Work plans aligned
Fauske said that as a result of discussions with Walker, AGDC staff is proposing a revised plan which would significantly reduce projected ASAP non-discretionary expenditures by $90 million to $60.7 million over the next 15 months “to align with the Alaska LNG FEED decision,” a plan approved by the board Jan. 9.
The cost reduction would be accomplished by: “Optimizing core ASAP management team for efficiency, while still retaining institutional knowledge and momentum; Scaling and scoping ASAP technical and engineering work to essential tasks” while also continuing the federal environmental process, major permit acquisitions and state and federal rights-of-way acquisitions.
Fauske said all funding for this $60.7 million in work, which is non-discretionary, would come from the In-state Natural Gas Pipeline Fund, not from the state’s general fund.
The plan includes $27.6 million for contracts for existing work which are under way and $33.1 million for required future work.
The revised schedule will provide an ASAP project which retains “a core team capable of moving the project forward, a completed Supplemental Environmental Impact Statement, the receipt of 100 miles of federal right-of-way, and completed field programs valuable to both ASAP and Alaska LNG.”
Fauske said the plan would allow ASAP “to remain as the state’s viable alternative should the Alaska LNG project not proceed into FEED.”
Fauske said there are no positions at AGDC solely budgeted for ASAP. He said the corporation contracts professional personnel to manage ASAP and meet the deliverables laid out for the project in statute.
A cost allocation model shares AGDC costs between ASAP and Alaska LNG project.
