Vol. 28, No.22 Week of May 28, 2023
Providing coverage of Alaska and northern Canada's oil and gas industry

Court supports FERC

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5th Circuit dismisses petition against Alaska LNG Project by CBD, Sierra Club

Kristen Nelson

Petroleum News

The U.S. Court of Appeals for the District of Columbia Circuit has rejected an appeal by the Center for Biological Diversity and the Sierra Club for a review of the Federal Energy Regulatory Commission's order granting authorization to the Alaska Gasline Development Corp. to build and operate the Alaska Liquefied Natural Gas Project.

In its May 16 decision, the court said that in approving the project FERC complied with the Natural Gas Act, the National Environmental Policy Act and the Administrative Procedure Act.

"Some of the issues CBD raises were not exhausted, and we lack jurisdiction to consider them," said Judge Neomi Rao, writing for the court, in the opening paragraph of the opinion. "We reject CBD's other arguments on the merits. FERC's decision to authorize the Alaska Liquid Natural Gas Project was lawful and reasonable. We dismiss the petition in part and deny it in part."

In the concluding paragraph of the opinion Rao said:

"In approving the Alaska Liquid Natural Gas Project, the Commission complied with the NGA, NEPA, and the APA. CBD fails to provide any reason for this court to disturb the Commission's reasonable determination. To the extent the issues raised in the petition for review were not exhausted, we dismiss the petition for lack of jurisdiction. We otherwise deny the petition on the merits."

Delegation responds

Alaska's congressional delegation responded May 19 in a joint statement on the court's decision.

"We have proven time and time again that our resources are developed under the most stringent environmental standards in the world," said Sen. Lisa Murkowski, R-Alaska. "This ruling is the latest testament to the thorough vetting and review process undertaken by FERC and reaffirms that the project should be allowed to move forward without delay."

"Tuesday's ruling is more good news for the only fully permitted West Coast LNG project in the United States," said Sen. Dan Sullivan, R-Alaska.

"Over the last several months, my team and I have worked relentlessly in meeting with key stakeholders - investors, producers, engineering firms, the Biden administration, and Japanese and Korean government officials - to help advance this important project further," he said.

"Alaska's natural gas resources could provide a reliable source of domestic, lower-carbon energy for local and international use while also creating jobs and economic activity across the state," state Rep. Mary Peltola, D-Alaska. "As such, I continue to believe that the Alaska LNG project should be closely studied and considered on its merits."

Project status

In early May AGDC President Frank Richards updated legislators on the project status. He said AGDC's role is to transition the project from state to private investors, while retaining a 25% minority interest, which will keep open the option for the state to invest. AGDC is transitioning Alaska LNG assets to 8 Star, which will manage Alaska LNG through final investment decision. 8 Star ownership likely will consist of a lead party with other strategic partners taking minority stakes.

At final investment decision, 8 Star will raise construction capital for each of the three project components - the Arctic Carbon Capture facility, the 800-mile pipeline and the LNG facility at Nikiski.

Richards said Goldman Sachs is under agreement with AGDC to raise investment capital for Alaska LNG, with some $150 million in development capital targeted to get to FID. The money would cover third-party FEED - front-end engineering and design - as well as project management, legal/commercial and 8 Star Alaska overhead.

Gas supply, LNG sales

Richards said potential investors have said gas supply terms are needed prior to investing capital, with the need for gas supply terms communicated to the North Slope producers. Department of Revenue Commissioner Adam Crum and Department of Natural Resources Commissioner John Boyle have joined meetings with producers, as has Goldman Sachs.

Gas supply precedent agreements have been transmitted to the producers, with 8 Star the buyer, so agreements would bind future investors. Fully termed gas supply agreements would need to be negotiated by the private project developer prior to FID.

Engagement from producers has been mixed.

On the LNG sale side, AGDC said active negotiations are underway with multiple LNG offtakers/buyers, with negotiations fairly advanced. Potential buyers include traditional Asian utilities, LNG traders and oil and gas companies, with all byers creditworthy and large-scale market participants.

AGDC said the project is offering a combination of prices: Brent-linked, Henry Hub, JKM ad fixed price, with a 20-year term with an aggregate price floor covering system tolls and debt service.

In-state supply

For in-state supply, Richards said AGDC has offered agreements to Alaska utilities that will ensure the utilities receive gas supply on preferential terms, including gas provided to Alaska utilities from the project on priority terms; price to be no higher than that paid by LNG facility; Alaska utilities prioritized over LNG in the event of an interruption; supplies of up to 500 million cubic feet per day; and utilities able to adjust take-or-pay commitments in response to changes in demand or new renewable sources of energy.

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