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Alaska okays gas line switch to exports, in-state use

TransCanada Alaska (TCA), the state’s licensee to build a natural gas pipeline from Alaska’s North Slope, received state clearance on May 2 to change the project’s focus to a large-diameter pipeline to an Alaska tidewater site for in-state use and for liquefaction and export. Natural Resources Commissioner Dan Sullivan and Revenue Commissioner Bryan Butcher issued a letter approving a project plan amendment (PPA).

The move came after TransCanada Corp. and the North Slope’s three major producers—BP PLC, ConocoPhillips, and ExxonMobil Corp.—announced on Mar. 30 that they would work together to commercialize ANS gas by focusing on large-scale exports from south-central Alaska as an alternative to a pipeline through Alberta to markets in the US Lower 48.

“A key benefit of the PPA is that it enables all parties—the North Slope producers, the state, and the [Alaska Gas Inducement Act] 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 (AGPPO), which oversees work by TransCanada Alaska on the project.

The PPA not only lays out an orderly transition for the project, but also describes the state’s significant, near-term expectations for TCA and the ANS producers in the timetable for work on an LNG export project that Gov. Sean Parnell outlined in his state-of-the-state address, according to the Alaska Gas Pipeline Project Office.

It calls for TCA to complete its initial work on an LNG project by September and conduct a comprehensive market solicitation by yearend to all potential market participants, including ANS producers, explorers, LNG terminal developers, and entities seeking to export Alaska gas to Asia and elsewhere. In early 2013, the state said it expects TCA to provide an updated, more-comprehensive PPA request that will reflect the details of the LNG project and its associated timeline, AGPPO said.

FERC filing deferred

To accommodate the transition, the commissioners agreed to defer filing a certificate application for an Alberta line with the US Federal Energy Regulatory Commission until October 2014. AGPPO said that about half of the work TCA has done so far on the Alberta option, including environmental and engineering studies, could apply to an in-state LNG export line. 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, AGPPO explained.

It said the commissioners’ letter authorizes TCA to perform its share of the LNG work as part the AGIA license it received from Alaska’s legislature in 2008. The license requires the project to be developed in a manner that maximizes in-state benefits while facilitating large-scale export.

In return for following these requirements, the license entitles TCA to reimbursements for its work on a gas pipeline and related midstream facilities, AGPPO noted. It does not authorize reimbursement for work by the producers on other aspects of the LNG project, such as an export terminal or upstream mitigation work that may be necessary in advance of a major gas sale.

The announcement came a day after US Sen. Lisa Murkowski (R-Alas.) discussed the potential of her state’s providing a stable, long-term energy supply to Japan with Prime Minister Yoshiko Noda and other officials of that country during a state dinner in Washington. “Alaska’s gas is the perfect fit to meet Japan’s energy needs,” Murkowski said following the dinner. “An LNG line from the North Slope could deliver long-term, stable energy supplies to Japan at a reasonable price.”

A study examining issues connected with increased US LNG exports, which was issued May 2 by the Brookings Institution, said while the Kenai export facility in Alaska has been temporarily idled, there has been interest in large-scale exports to Asian-Pacific markets from a terminal that would be built on the state’s southern coast.

Contact Nick Snow at nicks@pennwell.com.


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