Japanese LNG company pulls out of Port Mac project

PALMER — Mat-Su Borough Manager John Moosey delivered some bad news to the port commission on Monday afternoon, informing them that REI, the subsidiary of the Japan-based firm ERI, had informed him it was withdrawing from its plans to build an $800 million LNG operation at Port MacKenzie.

Moosey was told that a low price for LNG on global markets was the reason for the company’s decision, a contention that commission members, including Robert Brown.

“I think it’s 100 percent due to world market prices,” Brown said. “There’s only so much work (the borough) can do without putting up $1 billion yourself.”

REI pulling out means the loss of a tenant that could have all but cured the port of its financial difficulties, but Monday’s session wasn’t all bad news, as Moosey updated the commission on the ongoing plans to bring Astoria, a wood-chipping company from Oregon, into the port, where it would chip and saw timber on site and ship the products to Asia.

“They very much want to come here and we’re very optimistic,” Moosey said. “Ironically, REI (wanting access to the port) was an issue for them, and now it’s no longer an issue.”

Moosey said if all goes smoothly, a deal could be done this summer and the Oregon company could begin moving as many as six ships a year out of port, bound for the Far East.

Of course, Astoria’s potential $2 million investment can hardly compare with the $800 million to $1 billion REI was planning on investing, an investment that naturally would have included finishing the last stretch of Alaska Railroad between Houston and the port.

Still, Port Commissioner Marc Van Dongen, was encouraged by what nearly was.

“The good news is they actually picked Point Mackenzie for where they wanted to have their plant,” VanDongen said. “Just the fact that they’d like to have their terminus here shows we’ve come a long way. One of these days, months, years, it’s going to happen.”

Bids are expected to close today on Conoco-Phillips sale of the nation’s oldest LNG plant in Nikiski. Assuming REI is out of the bidding there, Hillcorp remains the likeliest, though still unlikely bidder on that facility. As VanDongen said, “They’re scavenging half of that plant to keep the other half going.”

Should no major bidder step up in Nikiski, the group representing the Knik-Ahtnu Native Corporation in Houston, suddenly emerges as the big immediate winner from the REI pullout.

And on Friday, former Houston mayor and Knik-Ahtnu consultant Roger Purcell presented to the Senate Resources Committee about his group’s plan to begin LNG production and shipping on Native land, right where the new stretch of railroad picks up.

Purcell was joined by Edward Woods from Dresser-Rand, a subsidiary of German-based Siemens AG Power and Gas, and Andre Gounthier from North Star Industries, based in Massachusetts.

“We see Houston as the ideal location,” Woods told the committee. “It’s 1,000 acres zoned heavy industrial, very quiet with low emissions.”

Woods also pointed out that the access to the railroad was vital, not so much for supplying Asia with LNG, but in transporting it to gas-hungry Fairbanks and throughout the state.

Sen. John Coghill, vice-chairman of the committee said what he liked most about the Knik-Ahtnu plan was that it was wholly reliant on private funds, but he did wonder how the endeavor would co-exist with Fairbanks Natural Gas, which currently holds the contract to sell the resource in his district.

“I think we can work with them,” Gounthier said. “We would love to have them as a customer. As far as a business model… we could take their supplies, liquefy and take them back to them. We could use the same model as others where we would be the supplier, start-to-finish and have a turnkey operation. We don’t want to come in and say we want to take these guys off the map. We want to work with them.”

Though he isn’t part of the committee, influential Sen. Mike Dunleavy (R-Wasilla) sat in on the Senate Resources Committee’s meeting and offered his hope for the Houston project. Like Coghill, he was impressed by its apparent independence from government resources.

He said when Purcell first approached him about the idea, his first question was, ‘how much is it going to cost the state?’

“He said, ‘nothing.’ So I asked again and he said, ‘nothing’, so I figured I’d ask a few more questions and then go back to it again,” Dunleavy said. “I know it’s hard to believe, but this is one of those projects which is not going to cost the state, which is rare.”

Meanwhile, back at the Borough, the port commission was dealing with more concerns, not the least of which was replacing VanDongen, whose 17-year run as port commissioner ends at the end of April.

Moosey told the commission that he will begin advertising for the position next month, but will be in no hurry to replace VanDongen, who will be taking extraneous leave for the next 5 to 6 months.

“With REI saying we’re not moving forward and Astoria not ready to go yet, I’m looking at the slow roll on replacing Mark,” Moosey said.

VanDongen said he is more than willing to work with his eventual replacement and will gladly take a spot on the commission when one opens up.

The borough continues to work toward fixing the damage the port suffered last year after repair work done in the summer failed, virtually undoing the repairs initially done from what VanDongen believes was an earthquake on Sept. 25, 2014, but which the insurance company believes was from wear and tear on the 16-year-old dock.

As negotiations with the insurance provider continue with a two-year deadline to file a lawsuit approaching, the commission is looking to get funding available for initial dock repairs.

VanDongen said specs for the repair have been reviewed by a third party, and the commission is ready to bid out for a ‘shoring portion’ of the project, which would include welding to minimize additional damage to the dock in the meantime.

VanDongen estimated the costs for such a repair to be in the $200,000-$300,000 range and could be approved at the April 4 assembly meeting.