LNG

The Alaska LNG project has emerged as South Korea’s likely first U.S. investment under a $200 billion trade deal, with Seoul signalling a possible announcement in late August or early September.

Alaska Governor Mike Dunleavy has just concluded a trade mission to Japan where he met executives of leading energy companies and utilities as well as government ministries about the Japanese companies procuring long-term Alaskan LNG supplies.

The Alaska Gasline Development Corporation (AGDC), owner of the proposed Alaska LNG project, has started replying to regulatory questions on environmental mitigation measures as its main partner in the venture, ExxonMobil Corp., has sent a supporting letter.

The US Federal Energy Regulatory Commission has issued the draft environmental impact statement on the Alaska LNG project proposed by the Alaska Gasline Development Corp. and concluded that it would have significant impacts on the state offset by many economic benefits.

The project was launched nine years ago and LNG would be produced and exported by 2025 after engineering, construction and production costs estimated at around $43 billion.

The FERC conclusions were that the venture's significant environmental impacts would also bring an economic boost from export revenues in commercializing the natural gas resources of Alaska’s North Slope.

Alaska’s project would comprise several pipelines, including a 807-mile main line of 42-inches in diameter and with associated above-ground facilities.

These include eight compressor stations and a liquefaction facility with output of 20 million tonnes per annum at Nikiski on the eastern shore of Cook Inlet on the Kenai Peninsula.

The main pipeline would deliver peak capacity of 3.9 billion standard cubic feet per day of natural gas from companies such as US major ExxonMobil and BP of the UK.

The publication of the three-volume FERC report marks a key step in the state’s efforts to secure a permit leading to construction.

A public comment period has now started as part of the permit process and would last until October 3.

The FERC draft report said that the project would have significant environmental impacts if it goes ahead, though most impacts could be minimized with mitigation measures.

“However, some of the adverse impacts would be significant even after the implementation of mitigation measures,” stated the regulator.

The President of the state-owned AGDC, Joe Dubler, said the FERC report represented substantial progress for the Alaska LNG project.

“Alaska LNG holds the potential for significant energy, economic and employment benefits for Alaskans,” said Dubler.

“We will now begin to thoroughly examine this comprehensive document to understand the Commission’s recommendations,” he added.

“The ongoing permitting process incorporates 150,000 pages of data and should give Alaskans confidence that the project’s merits and impacts are being rigorously scrutinized,” he explained.

The gas treatment facilities comprising a main plant at Prudhoe Bay and the Point Thomson gas transmission line would be on state land designated for oil and natural gas development within the North Slope Borough.

“We conclude that project construction and operation would result in temporary, long-term, and permanent impacts on the environment,” said the FERC report.

“Most impacts would not be significant or would be reduced to less than significant levels with the implementation of proposed or recommended avoidance, minimization and mitigation measures, but some impacts would be adverse and significant,” explained the regulator.

“We conclude that constructing the project would have significant impacts on permafrost due to granular fill placement, particularly for the Mainline Pipeline facilities,” it said.

“The project would have significant adverse impacts on wetlands from granular fill placement resulting in substantial conversions of wetlands to uplands,” added the report.

“Significant adverse impacts on forest would result from permanent losses or conversions from installation of above-ground facilities, granular fill placement and vegetation maintenance in the Mainline Pipeline right-of-way,” it stated.

The FERC also gave details of impacts on wildlife in the state.

“For caribou, the impacts on the Central Arctic Herds would likely be significant due to the timing of impacts during sensitive periods, permanent impacts on sensitive habitats, and the project location at the center of the herds’ range,” said the FERC.

“During the years of simultaneous construction, start-up, and operational activities at the liquefaction facilities, as well as during flaring events, impacts on air quality could be significant,” said the FERC.

“Operational noise associated with the liquefaction facilities at the two nearest noise sensitive areas would likely double due to facility operation, which would be considered a significant increase,” the report added.

However, it also stated that the project would result in positive impacts on the state and local economies, though adverse impacts on housing, population, and public services could occur in some areas.

Alaska Gasline Development Corp. the developer of the Alaska LNG project, has scheduled a board meeting in Anchorage for May 22 when future key decisions on the venture will be discussed and cost-reduction and other reports considered.

Alaska Gasline Development Corp., the state company now in charge of the Alaska LNG project, said it entered into a cooperation agreement with BP of the UK to collaborate in the development of the financial and tolling structure intended to advance the venture.

Alaska Governor Bill Walker has told the Joint Senate and House Resources Committee hearing on the status of the Alaska LNG project that there remains strong potential for an economically viable venture even with oil prices as low as $45 per barrel.

The state of Alaska is expected to take over full control of the Alaska LNG project at the end of 2016 to allow any of the three energy majors who are also shareholders to pull out in the future.

Alaska Governor Bill Walker has appointed a former BP executive as his chief advisor in energy projects, including the Alaska LNG venture with estimated costs of $45-$65 billion and the start of construction scheduled for around 2020.

Alaska LNG has given US regulators a second round of draft resource reports and details of alternatives routes and sites it had previously examined as part of the preliminary environmental review process, with start-up now expected in 2025 and estimated costs still at $45-$65 billion.