Providing coverage of Alaska and northern Canada's oil and gas industry
May 2010

Vol. 15, No. 21 Week of May 23, 2010

FERC denies YPC extension

The Federal Energy Regulatory Commission has denied Yukon Pacific Co.’s request for more time to start building its long-proposed liquefied natural gas facility at Anderson Bay near Valdez, Alaska.

“Thus after May 22, 2010, your authority to construct and operate an LNG export terminal at the Anderson Bay site will no longer be valid,” wrote Jeff Wright, director the FERC’s Office of Energy Projects, in a letter dated May 14 to Yukon Pacific’s attorney.

The FERC approved the LNG project on May 22, 1995, with a stipulation that construction begin within three years of the commission’s order. The FERC subsequently granted several three-year extensions of that deadline.

Yukon Pacific’s latest request for more time is denied because a 1995 environmental impact statement is “outdated and can no longer be used to support the authorization of this project,” Wright’s letter said.

Wright wrote, “There have also been numerous changes in regulatory requirements since 1995, from both an environmental and safety perspective, that must now be addressed,” he said in the May 14 decision. “For example, the Federal Safety Standards for LNG Facilities and the seismic design requirements have been significantly revised.”

He added this denial “will not have any direct bearing on any future consideration of an LNG export option for the eventual marketing of Alaskan natural gas outside of the state, including the refiling of an application for Yukon Pacific’s project.”

“At this point I do not know what, if anything, CSX plans to do in response,” Patrick Rock, the Washington, D.C., attorney for Yukon Pacific, told Petroleum News in an e-mail.

Larry Persily, federal coordinator for Alaska gas projects, told Platts May 19 that the project’s demise doesn’t have a bearing on the North Slope gas pipeline proposals. If buyers exist for gas exported from Valdez, either Yukon Pacific or another developer will emerge, he said.

“FERC didn’t say you could never build this, they just said if you want to do this you’ve got to start over with permitting and reviews,” Persily said. “That’s not insurmountable. It’s just time and money. The market will be the determining factor, not this FERC license.”

Alaska gubernatorial candidate Bill Walker issued a statement May 18, criticizing FERC’s decision.

“I believe their decision to now require an updated permit (after previously granting extensions) may be a sign of things to come for resource development in Alaska following the recent Gulf Coast oil spill,” said Walker, a longtime supporter of an all-Alaska pipeline route.”

“Those who have reviewed the Yukon Pacific permits have consistently said that it is the environmental data that had been collected over a period of approximately 10 years that is critical. Updating a permit to reflect changes in the regulations represents a minor road bump, not a significant detriment to the project as some are suggesting.”

Mark Myers, the state’s Alaska Gasline Inducement Act coordinator, doesn’t see any of this precluding an LNG option.

Myers said he can see elements of the proposed Trans-Alaska Gas System and major line like TransCanada Alaska is pursuing under AGIA coming together into one project. But he said ultimately the market will decide what happens.

Rock said May 18 that he hadn’t yet spoken with officials from CSX Corp. to discuss next steps, which could include an appeal or request for rehearing.

He said he hoped for a better understanding of what specifically the agency considered to be deficiencies. He hoped an option, then, might include negotiating terms that would allow Yukon Pacific to address any concerns and continue to move forward.

Transportation giant CSX holds a more than 90 percent interest in Yukon Pacific, which has been trying to put together an LNG export project for Alaska North Slope gas since the 1980s.

—by Wesley Loy for Petroleum News. The Associated Press contributed to this article.

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