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Gas authority to focus on spur line, LNG Alaska Natural Gas Development Authority will share some contract work with Alaska Stranded Gas Development Act Kristen Nelson Petroleum News Editor-in-Chief
The Alaska Natural Gas Development Authority board was told June 14 by its chief executive officer, Harold Heinze, that some of the contract work the authority has proposed to do will be done under the Alaska Stranded Gas Development Act.
Heinze said at the board’s monthly meeting in Anchorage that while contracts specific to liquefied natural gas and a spur line to Southcentral should be signed off on by Deputy Commissioner of Revenue Steve Porter the week of June 21, a number of other proposals “related to business structure” and finance will be done as part of the state’s stranded gas studies.
Heinze said he and Porter, who must sign off on authority contract work, have sorted out which work the authority needs to do and which work will be done as part of work for stranded gas act negotiations.
The development authority has issued contracts totaling $138,600 and most of that work has been completed.
The authority was established by Ballot Measure 3 in the November 2002 election to determine feasibility of a state liquefied natural gas project at tidewater and a spur line to bring natural gas to Southcentral Alaska. Authority will share in stranded gas act Of $700,000 in the authority’s contracting plan, Heinze said he had “total concurrence from the administration” to move ahead with a number of contracts: liquefied natural gas plant concept design ($25,000); Yukon Pacific Corp. permit review ($25,000); spur line cost estimate ($25,000); Jones Act alternatives ($25,000); spur line rights of way and permits ($25,000); and spur line utility financing ($25,000).
Heinze said issues around business structure are questions the state is asking “in a much more general way” and so a lot of the fundamental work on business structure and finance will be part of what will probably be some major contracts for the stranded gas act negotiations. “It’s not worth spending $50,000 when they will probably spend a couple of hundred thousand dollars,” he said.
Heinze said he will have access to results of the stranded gas act studies, and “there are several things they are now looking at that I don’t need to look at anymore on our own initiative and our own nickel.”
Of the $700,000 in the development authority’s contracting plan, $300,000 in proposed work will probably not be done by the authority because of stranded gas work. LNG and spur line the focus The authority will focus on a spur line to bring natural gas to Southcentral Alaska and the LNG project, Heinze said.
“Steve (Porter) and I have agreed that we’re going to do everything we want to move that spur line project forward. So that is a priority,” he said. “The other thing that we are also looking at is the LNG project, and those contracts that are necessary to move it forward, and the reason for that is that all that work covers both us and the port authority,” so LNG studies will provide the state with information applicable to both projects.
Board member John Kelsey of Valdez asked Heinze if he was “satisfied that there’s not a bias in the stranded gas act work?”
Heinze said that if he isn’t comfortable with the scope of work or the contract, he has the ability to go out on his own, and he assured Kelsey that he has “been scrupulously careful to avoid the advice of any of those that have indicated a strong bias against the LNG project.”
Porter has the responsibility, Heinze said, to make sure that there isn’t duplication on contracts related to the gas issue. The state is going to spend a lot of money studying overall financing issues, and the authority will be able to share the results of that work.
“But when it comes to financing the spur line I will hire my own contractor to do that work.” Spur line issues On spur line routing issues, the development authority will focus on Glennallen to Sutton, Heinze said, because the state has on file some $1.5 million worth of work done by Mapco when it was considering a product line from Fairbanks to Anchorage. That information provides sufficient information “to define an alignment of the pipe” for that route, he said, but what is lacking is information defining an alignment from Glennallen.
Heinze said there’s a lot that isn’t known yet about a spur line, such as whether “we have to go to Glennallen, Delta, Fairbanks or Prudhoe Bay to get the gas.” The other thing that isn’t known is how much gas will be needed in the future in Southcentral Alaska. But, he said, the preliminary look the authority has taken at a spur line, “says we can deliver gas to Cook Inlet at today’s prices; nobody else is making that promise — everybody else’s promise is double,” so the authority’s spur line is “kind of an important option.”
And what’s important to the state right now, he said, is getting the spur line project to the point where a conditional right of way could be granted.
The board reviewed a draft outline of the report required under Ballot Measure 3, which called for establishment of the authority, by Mike Powalski, hired as feasibility report coordinator. The board plans to issue the report in August, and will discuss a draft at its July meeting. Warwick, Heyworth reelected The board reelected Andy Warwick of Fairbanks as chairman and Scott Heyworth of Anchorage as vice chairman. The men were first elected last June at the board’s first meeting.
Warwick asked if there was any concern by the board that the chairman be in Anchorage with Heinze, the authority’s CEO, but that did not seem to be an issue with board members. Warwick is a former state legislator and commissioner of the Department of Administration; Heyworth led the public campaign for Ballot Measure 3.
The board also held an executive session, and Heinz told Petroleum News June 15 that the board voted to give him a 20 percent raise in base pay. Heinze was hired last summer at $78,828 a year, and told the board at its May meeting that he wanted a significant raise, citing the $175 an hour the Legislature is paying its gas line consultant and the $3,500 a day the state is paying its lead negotiator in gas line talks with North Slope producers.
Board Chairman Andy Warwick appointed board members Dan Sullivan and John Kelsey to a subcommittee to discuss CEO status and compensation.
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