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Legislators have concerns
AGDC addresses issues including confidentiality, Glenfarne, state obligations
Kristen Nelson Petroleum News
Alaska Gasline Development Corp. officials and board members have been spending a fair amount of time in Juneau this session addressing concerns of legislators on plans to move the Alaska LNG Project forward.
The Legislature was heavily involved in earlier incarnations of plans to move North Slope natural gas to market.
Then the Legislature turned the project, and a lot of the Legislature's previous oversight, over to a corporation of the state, the Alaska Gasline Development Corp., AGDC, authorized in 2013 with House Bill 4 and in 2014 with Senate Bill 138.
Frank Richards, AGDC president, has been leading the presentations to legislators, seconded by Matt Kissinger, AGDC's venture development manager, with AGDC board Chair Warren Christian, Vice Chair Janet Weiss and Director Mike Chenault also presenting at some of the hearings.
Statutory issues AGDC's authorities as established under HB 4 and SB 138 have been the focus of considerable attention, and the Legislative Budget and Audit Committee heard a review of those authorities from Emily Nauman, director of Legislative Legal Services.
Based on how active the Legislature was in previous attempts to commercialize North Slope gas, legislators have a lot of questions about why more legislative approval hasn't been required, as in the selection of Glenfarne to be the private party developer and the negotiation of an agreement with that company.
Nauman told legislators that the history and statutes around the formation of AGDC indicate the Legislature intended that the corporation was to have considerable autonomy in pursuing pipeline projects. There is, she said, very little oversight.
AGDC is required to consult with the commissioners of Natural Resources and Revenue prior to entering into contracts for an Alaska LNG project and the Attorney General acts as the primary legal counsel for AGDC.
Confidentiality around AGDC has been an issue for legislators, and Nauman said AGDC statutes give it very broad authority, with confidentiality of agreements allowed to the extent necessary for the corporations' functions. Confidentiality is also allowed where disclosure would cause AGDC commercial or competitive harm. She said while statutes provide for very little legislative oversight, some reports are required including an annual accounting of assets from the board.
AGDC was asked if legislators willing to sign confidentiality agreements could get access to AGDC's agreements with Glenfarne, the private developer brought on to move the Alaska LNG Project forward and was told that probably would be possible.
Risk to state Legislators asked about risk to the state if Glenfarne completes FEED, front-end engineering design, but does not move to construction.
AGDC said there are provisions in its agreement with Glenfarne that if Glenfarne completes FEED but fails to move to a final investment decision, FID, and abandons the obligation to move ahead diligently with project development, AGDC could advance the project.
The state acquired 75% of the Alaska LNG Project when the producers -- ExxonMobil, BP and ConocoPhillips -- stepped away in 2016; up to then the state had been a 25% partner. The work to date became the property of AGDC, which established 8 Star Alaska as a subsidiary to hold project assets.
Glenfarne acquired 75% of 8 Star in exchange for funding all costs of taking the project through FEED and to FID, work AGDC has estimated at $50 million for the pipeline alone and $150 million for the entire project.
Glenfarne questions Legislators had questions about Glenfarne and its ability to take on the project.
Glenfarne does not have any operating LNG facilities although two, one in Texas and one in Louisiana, are under development.
AGDC described Glenfarne's role as that of a quarterback, bringing in experienced partners to take on the pipeline initially, and then other partners with specific skills for the gas treatment plant and the liquefaction facility.
The phased project In response to the looming natural gas shortage in Southcentral, AGDC decided to phase the project, beginning with the 42-inch diameter gas pipeline from the North Slope, but initially building it only as far as a connection with the Enstar system on the west side of Cook Inlet. Gas would be delivered for use in Southcentral and, once a lateral is constructed, for use in Fairbanks. AGDC has said it is in discussions with an Alaska company to build the lateral line into Fairbanks, which is not part of the project AGDC took over in 2016 from the producers.
Part of the phasing involves delaying construction of the gas treatment plant on the North Slope, needed to remove CO2 from Prudhoe Bay and Point Thomson gas. AGDC plans to use natural gas with a very low CO2 content from Great Bear Pantheon, and has a preliminary agreement for that gas, but because Great Bear Pantheon's gas is not yet online, AGDC said it continues to negotiate for gas supplies with the major North Slope producers.
Compressor stations, needed to move the large volumes of gas needed to feed a liquefaction facility would be deferred to a later phase, as would the Cook Inlet crossing and the liquefaction facility at Nikiski.
Project timelines include FEED completion this year; financing in 2026; pipeline construction beginning in 2027; first gas in 2031.
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