Wednesday, May 2, 2012

State agencies approve shift to large-diameter LNG line

Alaska Journal of Commerce

The State of Alaska has approved a project plan amendment to allow TransCanada to shift its focus from a gasline to Alberta to a large-diameter line from the North Slope to Alaska tidewater.

State approval by Department of Revenue Commissioner Bryan Butcher and Department of Natural Resources Commissioner Dan Sullivan was necessary under the Alaska Gasline Inducement Act, or AGIA, because TransCanada was required under the law to file a certificate application with the Federal Energy Regulatory Commission this October.

Under the project plan amendment approved Wednesday, that date has been deferred to October 2014 and according to a statement from DNR, “In early 2013, the state expects TransCanada to provide an updated, more comprehensive PPA (project plan amendment) request that will reflect the details of the LNG project and its associated timeline.”

That PPA will also require approval by Butcher and Sullivan.

“A key benefit of the PPA is that it enables all parties – the North Slope producers, the State and the AGIA Licensee – to come together for the first time to work on commercializing North Slope gas,” said Kurt Gibson, director of the Alaska Gas Pipeline Project Office, which oversees work by TransCanada Alaska on the Alaska Pipeline Project.

TransCanada, ExxonMobil, ConocoPhillips, and BP announced March 30 that they will work together on commercializing North Slope gas, focusing on large-scale liquefied natural gas exports from Southcentral Alaska.

The glut of natural gas in the Lower 48 made the Alberta pipeline uneconomic, and surging Asian export markets such as Japan and China make a large-diameter line to Alaska tidewater the most viable project.

The DNR, in its release, noted a report released Wednesday by the Brookings Institution that found Alaska was in a strong competitive position for a global LNG project.

TransCanada, had $500 million worth of its expenses covered under AGIA, and according to DNR “approximately half” of the work it has already done on the route to Alberta would be applicable to a large-diameter LNG line.

The DNR release stated that, “some of the Alberta work will continue under the current PPA, either as dual use for an LNG project or to preserve work on the Alberta option for potential transfer to the State under terms of the license. This PPA will prevent unnecessary spending on the Alberta option while the LNG project is being developed.”

Under the Point Thomson litigation settlement also announced March 30, the Slope producers can earn additional acreage at Point Thomson if they sanction an LNG project between now and 2016. If the producers don’t agree on a gasline concept before then, they will be required to increase liquids production at Point Thomson.

“The agreement does not guarantee a major gasline, but moves us a significant step forward,” Sullivan said at the time.

Gov. Sean Parnell said March 30 that part of his commitment to the CEOs in exchange for their alignment on commercializing Slope gas through an LNG export project was to address natural gas taxes in the 2013 legislative session.

The March 30 letter from the Slope producer CEOs stated, “Unprecedented commitments of capital for gas development will require competitive and stable fiscal terms with the State of Alaska first be established.”

This article appears in the April Issue 5 2012 issue of Alaska Journal of Commerce

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