Despite Port/Point Mac error, Kenai destination for LNG plant unlikely to change

PALMER — The Mat-Su Borough’s request for reconsideration of Port MacKenzie as a site for a large natural gas liquefaction plant in lieu of Nikiski, on the Kenai Peninsula, may cause a hiccup in regulatory proceedings for the large Alaska LNG Project, but is unlikely to result in a change of the plant site.

That’s the opinion of Larry Persily, an independent energy analyst and a former federal Alaska Natural Gas coordinator. Until recently, Persily was also energy advisor to the Kenai Borough.

The LNG plant will also be at the terminus of an 800-mile, 42-inch pipeline built from the North Slope. The pipeline would be built through the Mat-Su Borough and beneath Cook Inlet to the proposed Nikiski plant site.

The borough has filed a request to intervene in the U.S. Federal Energy Regulatory Commission’s approval of a certificate for the $43 billion gas project, arguing that the Alaska LNG Project technical teams analyzed the wrong location on upper Cook Inlet as they prepared resource reports supporting the FERC application.

Alaska LNG’s analysis was of Point MacKenzie, a geographic location on the west side of the Inlet that is four miles from the actual location of Port MacKenzie. Alaska LNG concluded that the physical characteristics of Point MacKenzie, particularly the high bluffs, disqualified it for the LNG plant. The borough argues that the site at Port MacKenzie is different and far more favorable and deserves a new look.

The error apparently occurred when Alaska LNG was led by an industry consortium. It has since been taken over by Alaska Gasline Development Corp., the state gas corporation.

However, AGDC has not corrected the faulty analysis despite requests by Mat-Su, which led the borough to file a formal intervention.

Persily doesn’t think a new analysis will change the conclusion that Nikiski is a better location, however.

“Alaska LNG’s filings with FERC have consistently cited several reasons that the project did not select Point MacKenzie for the LNG plant, including traffic conflicts in the waterway that also serves the Port of Anchorage, shallow water in the area of the borough location, high bluffs at shoreline and the difficulties of working in critical habit,” Persily said in a report published Jan. 15.

In its filing, Mat-Su argued that the present port has solved the high bluff problem and that the navigation problems are overstated, since large vessels have called at Port MacKenzie and demonstrated its suitability.

From an economics point of view, the near-completion of a rail spur connecting the port to the Alaska Railroad creates important advantages that are not present at Nikiski, which has only water and road access.

In an interview, Persily said the borough’s intervention, if it is accepted by FERC, would likely result in the regulatory commission asking AGDC, as the project proponent, to do a new analysis of the upper Cook Inlet option.

“FERC will want to do this because it doesn’t want inaccuracies in an application or materials supporting one,” Persily said. “An inaccurate application opens the door for a challenge to the Environmental Impact Statement, which FERC does not want,” he said.

Even if it doesn’t change the final decision of the LNG plant site, Mat-Su’s application could cause FERC to pause in its work in preparing a schedule for the Alaska LNG Project EIS, which AGDC has been pushing for.

“FERC may want to wait until they get the updated information, although I don’t think this will affect the overall EIS schedule,” Persily said.

Mat-Su is also unhappy because the selection of Nikiski caused the routing of the pipeline to be 30 miles west of the port site and also the populated areas of the borough, which means that a lateral pipeline would have to be built to bring gas to Mat-Su communities or industrial users of gas.

A lateral pipeline will add to the cost of the gas since the customers, in this case Mat-Su residential or Industrial gas users, would likely have to pay for the pipeline.

If Port MacKenzie were the location of the LNG plant, the 42-inch gas pipeline would follow a route closer to residential areas, with the gas also available to industrial customers at the port.