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Walker halfway to state takeover of AKLNG Project Two of four required agreements signed; AGDC says completion of FERC application has slipped from first quarter to sometime in 2017 TIM BRADNER For Petroleum News
Gov. Bill Walker is halfway there in his plan for the state to take over development of the $45 billion Alaska LNG Project. The state-owned Alaska Gasline Development Corp., or AGDC, has signed two of four agreements needed for the state to assume control of the project, an AGDC spokeswoman said Dec. 28.
A formal announcement of the signing is expected soon, according to Rosetta Alcantra, spokeswoman for AGDC. The original timetable for the full transition was Dec. 30, but this has obviously slipped.
Gov. Walker ordered the AGDC to take over the project last spring after three industry partners in a consortium, North Slope producers BP, ConocoPhillips and ExxonMobil, informed the governor that they wanted to pause activity given a dismal outlook for LNG markets in Asia.
The Alaska LNG Project involves an 800-mile 42-inch pipeline from the North Slope to Nikiski, near Kenai, a large natural gas liquefaction export plant at Nikiski, a large gas treatment plant on the North Slope and a 62-mile gas pipeline from Prudhoe Bay to Point Thomson, a gas field east of Prudhoe.
Contractor work suspended In a related development, work has been suspended for a third-party contractor hired by the Federal Energy Regulatory Commission in late 2014 to assist with preparation of the environmental impact statement for the big gas project, according to a Dec. 28 report by Larry Persily, oil and gas advisor to the Kenai Peninsula Borough, which closely tracks the Alaska LNG Project.
Persily said he expects the contractor to resume work when AGDC begins responding to 420 pages of agency questions filed during a FERC certificate pre-application process, but when that happens the state will have to pay the expenses.
Under normal procedures a federal agency leads the EIS but the independent contractor is paid by the project application, in this case the Alaska LNG Project, Persily said in a Dec 28 report.
“Until now these costs have been paid for by the industry consortium,” with the state paying one-fourth, Persily said, but with the Alaska LNG consortium disbanding AGDC will be solely responsible for the costs. “The contractor won’t do work until it is assured that payment will be made,” he said.
Two agreements signed Meanwhile, two agreements have been signed so far between the state corporation and the consortium of three North Slope producers, BP, ConocoPhillips and ExxonMobil, as well as AGDC that have sponsored work on the big gas project to date.
Two other agreements are still pending and there is no timetable as to how soon they will be completed, AGDC’s CEO, Keith Meyer, told the corporation’s board Dec. 21.
Agreements signed so far include one that will give AGDC full access to $600 million in preliminary engineering work developed by the joint-venture group to date as well as work related to a pre-application to the Federal Energy Regulatory Commission for the FERC certificate needed for Alaska LNG.
The industry partners still retain ownership of the engineering and pre-application information but AGDC will be able to use it to advance a state-led project, Alcantra said.
Under the previous joint venture the state paid a one-fourth share of the preliminary engineering and regulatory costs, or $150 million of the $600 million total cost, she said.
The second agreement completed so far requires the Alaska LNG industry project partners to formally notify the FERC that the state is assuming the project and will be responsible for answering federal agency questions submitted during the pre-application and submitting a completed application.
Application date has slipped Meyer had said earlier that he hoped the completed application could be submitted in the first quarter of 2017 but the date has slipped. AGDC now says it will be done sometime during the year.
Still pending are two agreements, one that would give AGDC an option to purchase about 650 acres for the LNG plant at Nikiski, near Kenai, that was purchased by BP, ConocoPhillips and ExxonMobil for the project. AGDC was not a party to those purchases.
The plan for this is not for the state to buy the land but to have an option to purchase it if the project moves forward. FERC requires that a project application have “control” over sites for all facilities including in this case the LNG plant. The option arrangement would satisfy that requirement.
The final agreement needed is for AGDC to assume ownership of the LNG export license granted by the U.S. Department of Energy to BP, ConocoPhillips and ExxonMobil. Again, AGDC was not a party to the DOE export application and does not now hold any part of the license.
Having the export license is another FERC requirement for an application.
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