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Regulators facing LNG overlap Spectrum Alaska and Flint Hills Resources looking to build similar LNG systems on the same parcel of North Slope land Eric Lidji For Petroleum News
With two liquefied natural gas systems proposed for the same parcel of North Slope land, one of the project sponsors is asking state regulators to coordinate oversight efforts.
In October, Spectrum Alaska LLC applied for a right of way and a certificate of public convenience and necessity to build a small pipeline to a proposed LNG plant in the Prudhoe Bay unit. In early November, two Flint Hills Resources Alaska LLC subsidiaries proposed a similar system located in the same place: just south of Flow Station No. 2.
The State Pipeline Coordinator’s Office handles right-of-way applications, which request permission to build and maintain a pipeline on state-owned land. The Regulatory Commission of Alaska handles certificates of public convenience and necessity applications, which request permission for a company to operate a natural gas pipeline.
Under state guidelines, a competing project is required to file a notice of intent within 30 days of the original application. Koch Alaska Pipeline Co. LLC — one of the two Flint Hills subsidiaries, alongside Caribou North Slope LLC — claims Spectrum LNG forgot to announce this provision in its original public notice, as required by state regulations.
Because of the omission, Koch risked missing the deadline for filing its competing application. As a result, Koch asked the RCA to extend the deadline for a company to submit a competing project until 30 days after the SPCO makes it right-of-way decision.
“While the Regulatory Commission of Alaska is the right entity to determine which of the two applicants is best qualified to receive a CPCN, neither of the proposed pipelines can be built if the SPCO does not award a ROW for it,” a Koch attorney wrote to the RCA in a Nov. 28 motion, requesting the delay. “Because DNR will decide whether and to whom it will be awarding a ROW lease, and because the ROW lease is a prerequisite to either pipeline being constructed, it does not make sense to ask the Commission to spend its time and resources evaluating and adjudicating two potential CPCN applicants when it is probable that only one of them will be awarded the necessary ROW lease.”
Could impact Interior The issue could have larger ramifications.
Spectrum Alaska originally described an LNG system designed to serve North Slope industrial customers, but said it would also consider any economic market in the state.
Speaking recently before the Fairbanks Chamber of Commerce, Spectrum Alaska President Ray Latchem said the system could also be used to ship LNG to Fairbanks by truck and to Anchorage by rail, according to a report in the Fairbanks Daily News-Miner.
The Flint Hills effort was originally part of a joint venture with the electric cooperative Golden Valley Electric Association to bring an “at-cost” supply of natural gas to the Interior to serve the refining and power generation segments. But shortly after the permitting documents went out for public review, Flint Hills announced it had terminated the partnership, citing its improved economics and the increasing scope of the project.
While Flint Hills wanted natural gas for internal use, Interior policymakers want to make the fuel available to everyone in the region. The existing local distribution company in Fairbanks, Fairbanks Natural Gas LLC, is also permitting a North Slope LNG system, proposed for a different Prudhoe Bay location than the Spectrum and Caribou projects.
The Parnell administration has expressed a willingness to help fund an LNG trucking operation, but only within certain perimeters. Specifically, the administration wants any facility to be open to third-party buyers and configured to also supply rural markets.
While Fairbanks Natural Gas and Golden Valley Electric Association support state funding for the North Slope plant, Flint Hills and Spectrum Alaska oppose public funding for the project. Instead of building the processing plant, Latchem believes the state should only help fund the expansion of local distribution systems, the News-Miner reported.
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