Federal approval for Alaska LNG, once gained, good for eight years

After years of work, and more than a billion dollars of expenditure by the state of Alaska and North Slope producers, the Federal Energy Regulatory Commission is on track to complete the Final Environmental Impact Statement for the big Alaska LNG Project next March. The FERC order granting federal authorization to build the project is due in June, AGDC executive vice president Frank Richards told an Alaska business group last week.

Once the certificate for the project is issued it will be good for eight years, Richards said.

Dirt won’t turn soon, however. The world is still awash in inexpensive natural gas. But the state gas corporation has time to line up customers, and future energy prices are impossible to predict.

For now, however, things don’t look so good. Alaska must sell LNG at $6 to $8 per million British Thermal Units (btus) for its $40-billion-plus project to be viable. Lower 48 gas, however, is selling at $2 per million btus, which means gas producers on the U.S. gulf coast can make LNG and sell it in export markets at prices lower than what Alaska needs to be competitive.

There could be latitude for even more time. “FERC has the ability to extend the authorization for a limited period due to exceptional circumstances,” Richards said. Those are not uncommon for large and complex projects, Richards told the Resource Development Council, an Anchorage development advocacy group.

The state corporation applied for the FERC authorization in 2017, after which the federal agency started work on the EIS.

Getting the FERC certificate, a key federal permit for major energy projects, is a huge advance and Alaska LNG because it means the project is almost shovel-ready. It will have the key federal and state permits as well as state and federal rights-of-way for an 800-mile pipeline, Richards told the RDC. Thanks to efforts by Alaska’s congressional delegation the pipeline right-of-way will include a corridor through Denali National Park at its eastern end.

If built, the project would allow the 35 trillion cubic feet, or tcf, of proved, but stranded, gas reserves on the North Slope available to world markets. It would also encourage companies to explore for an additional 200 tcf of conventional gas that geologists believe exist on the slope,Richards said.

More oil will be discovered, too, because once companies begin exploring for new gas on the slope they ill also discover oil, which is commonly found in association with gas.

Alaska LNG would involve construction of an 806-mile, 42-inch pipeline from Prudhoe Bay, on the North Slope, south through Interior and Southcentral Alaska to a large gas liquefaction plant planned to be built at Nikiski, south of Anchorage on the Kenai Peninsula. A large gas treatment plant would also be built on the slope, at the entry point to the pipeline, to remove carbon dioxide and impurities from the raw natural gas.

The gas plant would process 3.5 billion cubic feet per day of gas to be shipped through the pipeline, with 2.7 billion cubic feet per day used to make up to 20 million tons of LNG to be shipped to export customers, most likely in Asia, from the liquefaction plant at the southern end. The remaining 500 million cubic feet per day of gas delivered through the pipeline would be reserved for use by Alaska communities and in-state manufacturing that could be based on gas, Richards said.

Building the project would be an immense undertaking if it moves ahead. About 11,000 would be employed in construction with a huge amount of work needed for barge services, trucking and unloading at several ports in southern Alaska. About $7 billion would be spent for materials and services in Alaska, Richards told the RDC.

Once in operation, the project would require 980 operations employees.