Providing coverage of Alaska and northern Canada's oil and gas industry
April 2014

Vol. 19, No. 16 Week of April 20, 2014

Legislators mull infrastructure costs

Language in heads of agreement concerns House Finance members; DOT cites its policy for roadwork around new retail developments

Kristen Nelson

Petroleum News

Construction of a natural gas pipeline from the North Slope and a liquefied natural gas facility at Nikiski will impact state infrastructure, particularly roads and bridges. Language in the Alaska LNG Project heads of agreement between the state, the Alaska Gasline Development Corp., TransCanada, ExxonMobil, ConocoPhillips and BP calls for the state to provide support in a number of ways, including “Appropriations and permitting for the construction of necessary in-state infrastructure (e.g., roads, bridges), including drafting, introducing and supporting legislation,” language which has some legislators concerned.

Members of the House Finance Committee expressed concern in mid-April hearings that the HOA language was requiring the state to pick up infrastructure needed for the project without participation by other partners in the project.

Joe Balash, commissioner designee of the Department of Natural Resources, told the committee April 15 that the language cited in article 10 of the HOA was “in many respects ministerial.” He said the article 10 language needs to be read in conjunction with article 9, which provides for establishment of impact payments to be made by parties to the Alaska LNG project “to help offset increased service and other costs borne by the state and local governments” during project construction.

DOT’s perspective

The Alaska Department of Transportation and Public Facilities told House Finance April 14 that it has been working on infrastructure issues for gas pipelines over the last 10 years.

Jeff Ottesen, DOT’s director of program development, compared this project to circumstances in the state in the 1970s when the trans-Alaska oil pipeline was built. He said the state’s population and traffic are at least triple what they were in the 1970s and the Dalton was a private road then whereas now it is a public highway, creating many more miles of road where general traffic would merge with pipeline traffic.

Safety is a concern, Ottesen said, citing 50 highway fatalities in 1973, prior to pipeline construction, compared to 137 in 1977, “so clearly the pipeline activity in the ’70s had an impact on public safety.”

There were just 50 fatalities last year, Ottesen said, and the department doesn’t want to see that number increase.

Another big difference today is use of modules, large prefabricated elements, often as wide as 20 feet and up to 20 feet high, weighing up to 400,000 pounds.

Such modules now move regularly between Cook Inlet and the North Slope and Ottesen said the expectation is that the number of modules would “go up quite dramatically,” requiring places for modules to get off the highway to allow general traffic to get around what is basically “a rolling traffic jam” often traveling at 5 to 10 mph in a very large configuration.

A third difference is that the gas pipeline is expected to be buried, requiring more earthwork and more truckloads on the highways, he said.

Ottesen said the department is in a good place today because it began 10 years ago to upgrade bridges with deficiencies and to address highway issues.

The Tanana River Bridge, just east of Tok, was upgraded for two reasons, he said: For proposed pipeline work and because it was “the weakest link for truck hauls between the Lower 48 and Alaska.” Replacing that bridge was a benefit to commerce, he said.

Work on the Parks Highway this summer will add 14 new passing lanes, he said, with another 14 scheduled to be built by the summer of 2017, helping the conflict between general and truck traffic on that highway.

DOT doesn’t know the logistics plan for the Alaska LNG project, he said, but expects turning lanes and turnouts for modules will be required, as well as airport and port work.

While much highway work benefits from federal funding, that isn’t true for maintenance projects such as gravel replacement on the Dalton Highway, or for port or railroad work. There is federal funding for airport work, he said, but what that work can be is generally federally proscribed and may not meet the needs of a gas project.

In general, Ottesen said, DOT has been dealing with major transportation issues identified when a project was proposed 10 years ago. He said the department has “gotten an awful lot done in the past decade.”

Who pays?

On the issue of why pays for the work, Department of Transportation and Public Utilities Commissioner Pat Kemp told the committee that it’s the department’s role to ensure the state’s highways “are strong enough to accommodate a load that can be permitted.”

“So within the right of way I believe the brunt of the work should be on the department.”

However, the roadway and improvements to a new intersection required by the project, “should be assigned to the entity developing the pipeline,” Kemp said, and compared it to work required if a large new store goes in — road improvements required for that facility would be paid by the store.

He said he believes passing lanes would fall to the department, while pull offs for modules “should probably be on the developer.”

Balash told the committee April 15 that the administration’s expectation is this is going to work like any other commercial entity approaching DOT for infrastructure with the commercial entity providing funds for things like turn lanes.

Balash said “the project will pay for those things that are attributable solely to the project” and where usage will be mixed “our expectation is DOT will be ... calling the balls and strikes on what things are 100 percent project and what things are partially attributable to the project.”

Deputy Commissioner of Revenue Mike Pawlowski noted that the HOA recognizes the need for impact payments to offset project impacts and said “development of an impact-payment schedule is part of the negotiations to be determined.”

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