FERC, AKLNG, AGDC, MSB and any other Alaska Natural Gas Line acronyms you can think of

The back and forth between Alaska Gasline Development Corporation and the Mat-Su Borough through the Federal Energy Regulatory Commission process really boils down to both wanting the same result. The 42-inch, approximate 802-mile pipeline ending at the best port location. According to Mat-Su Borough Assembly Member Jim Sykes the Borough isn’t stating that Port MacKenzie is the best site, all it’s asking for is a fair shake in the process and more importantly accurate information filed with FERC. Mat-Su Borough Internal Auditor James Wilson agrees. He believes that if the information given to FERC is accurate and all things being equal in what is reported to FERC. Then in his opinion the least environmental impact site is Port MacKenzie. That being said both Sykes and Wilson state the borough’s position is if Port Nikiski or any other port is named by FERC the best site for the AKLNG project then the Borough will be in full support of the decision. It sounds simplistic but it’s not. The willingness to acquiesce to the final decision will depend on whether the information being considered by FERC is accurate as far as Port MacKenzie is concerned.

We know that Gov. Mike Dunleavy’s administration has pumped the brakes on the AKLNG and ASAP pipeline and appointed former Gov. Sean Parnell to oversee a review of the project.

During the Parnell and former Gov. Bill Walker administration, according to the former Chairman of Board of AGDC Dave Cruz, both projects ASAP and AKLNG were going through the process and whichever project was deemed best would then move forward. The Dunleavy administration has made it clear the 42-inch AKLNG project is the only project being considered to move forward. But instead of a target date of 2025 that was set under the Walker administration, the project has moved to stage-gate review. It has been 8 years since the project has had this type of review. This means it will go through each stage from pre-FEED to FEED (Front End Engineering and Design) to FID (Final Investment Decision). At each stage AGDC will return to the State Legislature to review the project progress and recommend either the continuation or abandonment of the project.

Why is AKLNG the pipeline being considered over ASAP?

ASAP which was originally being designed to feed Natural Gas to Alaska’s interior and South Central Alaska has been deemed economically not viable. The most cost effective pipeline has to have an export factor involved. Ethically speaking ASAP would be considered as a cleaner and cheaper fuel alternative to diesel. There was a case for the economical equation when diesel fuel was extremely expensive but with oil prices down significantly at this time a standalone pipeline is not economically feasible. There is also the cost of conversion for home and business owners in interior Alaska. Does the conversion pencil out to a real savings. As the EPA is learning you can’t force private citizens in the interior to use cleaner alternative fuels.

Let’s review the AKLNG project and what it would look like. Currently oil, gas and water are extracted from the ground in which they are each separated. Oil goes into the TAPS line, the gas and water is then injected back into the ground minus a small amount of gas for field operations. Prudhoe Bay gas contains about 12.5 percent CO2 with Point Thompson is around 4 percent. While Cook Inlet methane has a very low amount of CO2 so it doesn’t have to be cleaned like the gas on the North Slope. Every field is different.

The AKLNG project would have a Gas Treatment Plant (GTP) which would remove any CO2, impurities and water from the gas. CO2 is removed prior to the gas being transported through the pipeline and to the processing plant at the pipeline’s destination. The liquification of the gas is performed in simple terms by freezing the gas at a temperature of around -260 degrees. CO2 frozen at that temperature turns it into dry ice. Dry ice would then clog up the machinery and the process would be shut down. CO2 can’t be vented in the pipeline because CO2 is considered a greenhouse gas and releasing it in the atmosphere would never pass the EPA permitting process. CO2 must be removed at the processing plant at the front of the pipeline. Water and other impurities have to be removed because of corrosion to the metal pipe line. Once the process turns the gas into liquid natural gas then it would be exported to contracted customers from the most desirable port. AGDC through the data provided by the original project partners has deemed Port Nikiski as the final destination for liquification.

The contested issue between the Mat-Su Borough and AGDC isn’t whether Nikiski is the right choice or not. For the Mat-Su Borough it does not believe the information submitted to FERC in the original filing is accurate. The Borough also believes that despite their pleas, corrections have not been made or if the have they are not accurate. It isn’t just important for consideration from FERC that Port MacKenzie would be the optimal site for the final destination processing plant and shipment of product. The other concern is the accuracy of the public record with FERC if another potential customer were to research Port MacKenzie.

I recently sat down with Sykes, who was not officially representing the borough but has researched the issue extensively, and Wilson. Despite the stage gate process the FERC timeline remains in place.

Wilson’s position requires him to ensure the information submitted to FERC is accurate.

“We’ve taken a look at five major issues that AGDC had very wrong. One is the location. AGDC identified a place known as the Mule Creek Mud Flats three miles north of the port. Well nobody would build a port there. The other issues are the size for availability, how much dredging would be required, the amount of wet lands and the comparison between all sites,” Sykes stated. “In 2016 AGDC released draft documents of what they intended to file in their resource reports. The borough got a hold of those reports after a couple of months. Mark Van Dongen then Port Director and James Wilson invited Keith Meyer then AGDC President out to the port. He went out there, they gave him a presentation and a copy of the documents with the corrections. Meyer told them he would go back and correct the information. When they filed in 2017 everyone thought they were on the same page but not a word was changed. We initially assumed it was just a mistake in the national resource database and AGDC would go back and correct the record. Our concern was accurate information.”

According to Wilson. More than 20 sites were reviewed. FERC requires a comparison during the permitting process.

“To get the permit you have to be the least environmental damaging practical alternative. It’s called LEDPA,” Wilson explained.

The borough has been accused of not promoting or marketing Port MacKenzie.

“The former Port Director (Van Dongen) was sure committed to selling our port. It wasn’t the best port in the Cook Inlet, or North America but perhaps the world in terms of Van Dongen going out and selling the port. He would have paperwork at a cocktail party. He was going through process of any new port to try and reach out to customers where ever they were. The challenge was that the port was built really before it’s time. We even hired former Governor Parnell to try and reach out to people after Mark left,” according to Sykes

“You can set aside any marketing when comes down to permits to build a liquefaction facility FERC is going to look at a comparison of engineering and environmental factors. Marketing is not really relevant.” Wilson added. “It’s good for a company to propose a project and say here is where we want to run the pipeline and here is where we want to put the liquefication plant. I would say there is nothing wrong with that. The reality is that if you fall under the environmental laws you then have to do a comparison. So, there is nothing negative about AGDC or the producers back in 2013 to pick Nikiski. I don’t see anything wrong with that.”

“I don’t know what is going on internally at AGDC but I know we have to do our own due diligence. The other reason to get accurate information filed is because it will be a permanent record and it could affect future business.”, Sykes added. “FERC has asked AGDC twice in the request they issued, we want you to examine the optimal site that the Mat-Su Borough has designated. Well AGDC says they did but they didn’t. If you look at the map it’s not within the boundaries. Some of it is north of the site and some is south of the site, some of it is west of the site but it’s not within the site. So, they haven’t even met FERC’s request.”

On Jan. 25, the Mat-Su Borough who has intervener status with the FERC process on this project filed more than 140 pages to FERC with requested corrections to the AGDC filings.

“The problem is if FERC actually looked at the optimal site for Port Mac, I don’t think Port Nikiski will get its environmental permits. Port Mac is much less environmentally damaging to the environment than any other site that I’ve seen.” Wilson added.

Well it’s not that simple and anything that has over 60,000 pages of documents submitted needs a deeper dive. AGDC will be filing a response to the corrections submitted by the Mat-Su Borough in the next few days. I’ll have column coming soon that delves into the MSB corrections and AGDC’s response.