REI reassures port commission about LNG plant’s future

PALMER — Representatives from Resources Energy, Inc. (REI), the Alaska office of the Japan-based energy company ERI, updated the Mat-Su Borough Port Commission at its monthly meeting on Monday of its company’s plan to one day build a $1 billion liquefied natural gas (LNG) plant at the shipping port at Point MacKenzie.

Brian Murkowski, Vice President, and Toru Ishihara, Executive Vice President of REI told the commission that progress is currently in a ‘holding pattern’ because of the recent announcement by ConocoPhillips that it was selling its Nikiski LNG facility, the oldest of its kind in the nation, dating back to 1969.

Murkowski said that bids for the Nikiski plant close on or around March 21, after which time his company’s future at Point MacKenzie will become clearer.

“We believe the better option is to let that plant operate until it’s usefulness runs out while we construct a greenfield project at Port MacKenzie,” Murkowski said. (A greenfield project is one that begins without the constraints of pre-existing buildings or infrastructure.) “If the competition throws, say, $500 million at it, we’d be basically competing for the same gas source and that would be very problematic.”

Murkowski said prospective buyers only not only big players in the private sector, but in the Alaska public sector, too.

“We’ve heard that AGDC wants to acquire the plant and we consider it to be a threat to the project,” Murkowski said of the Alaska Gasline Development Corp., an independent corporation working on behalf of the state.

Murkowski reassured, however, that both the business and engineering sides of the REI house are fairly confident no competitor will step up to take that gamble.

“Our belief is that if somebody were to come in and acquire that Kenai facility, they’d almost have to tear it out whole,” Murkowski told the commission. “The liquefaction system there is so outdated, it’s got maybe five to seven years left.”

Ishihara pointed out that while REI is in a holding pattern on Port MacKenzie, soon-to-be-enacted legislation is prepping companies like ERI and its parent company Atami Industries in Japan to acquire as much natural gas as possible in the coming months.

“The Japanese government is going through a deregulation of power (sources),” Ishihara said, adding that the announcement is expected in April. “At this moment, utilities are segregated regionally, but (after April) there will be no barriers… So companies are trying to secure natural gas supply now… It’s a big opportunity for an aggressive company and Atami is one of them.”

While everyone waits on the fate of Nikiski, Murkowski said, the ERI office in Japan, last week, reached out to the Mat-Su Borough to establish a one-to-one relationship and, Murkowski said, Borough Manager John Moosey responded ‘positively.’

“My sense is that the Japanese (investors) have long been very happy with the Port MacKenzie site,” Murkowski said. “They would rather, essentially build their own greenfield than re-engineer someone else’s problem.”

Murkowski added that if all went according to plan, REI could begin producing and shipping LNG to Asia as early as 2021 to 2022, and would begin by sending one ship with a turnaround time of approximately 14 days. For five days the ship would be at the port, but for the other nine, the port could be used for shipping other items.

“There are no other multi-purpose docks with LNG in North America,” Murkowski said. “You can’t have LNG and other stuff, because of security and safety, but just because nobody else does it, it doesn’t mean it can’t be done.”

Among the other products companies are inquiring about shipping from the port include wood chips and scrap metal.

Port Director Marc Van Dongen informed the commission that currently, Moosey and Mat-Su Borough Assembly member Randall Kowalke were in Oregon, working on a deal that would allow Astoria Forest Products to produce and ship wood chips from the port mostly to Asian markets.

“There’s a potential solution to accommodate both,” Van Dongen said, adding that Astoria Forest Products hopes to be operating at the port this calendar year. “REI is a lot bigger than the wood chipping, but we do have room for both at the port.”

Van Dongen said that another company, Alaska Metal Corp., out of Wasilla, is interested in sending out one ship per year in the first year, and two ships per year thereafter, again targeting mostly Asian markets.

As for the health of the dock itself, Van Dongen said that surveys of the damage and designs for repair should be completed by today.

If the information from the survey, being conducted by AECOM, an independent third-party, can be gathered in time, advertisements for the work could go out as early as Monday.

In that case, the commission would go before the assembly Feb. 21 for an initial reading and March 7 for a public hearing and vote to appropriate $850,000 of the $1.6 million price tag for the repair.

The repair will be similar to one attempted in May of 2016 that did not prove very reliable.

“The initial repair only lasted about five months, when a hole showed up inside the dock,” Van Dongen said. “First a sheet on the tail wall tore, and subsequently (everything new) split. So we have a similar problem to where we were (last May).”

Van Dongen said the work last year was done in such an emergency mode, no warranty for the work was acquired, though the company that did the work did refund $169,000 as requested by the borough.

“We were in danger of losing the trestle… all the electrical components, etc.,” Van Dongen said of last year’s haste. “We were losing 10 feet a day or more.”

In administrative business at Monday’s meeting, current chairperson Steven Borrell was re-elected for the same post, and former borough mayor Tim Anderson was elected vice-chair.

Bryan Scoresby was welcomed as the newest commission member, replacing the outgoing Christopher Gates, whom it was agreed, should be commended for his nearly two years of service at the next assembly meeting.