Public Radio for the Central Kenai Peninsula
Play Live Radio
Next Up:
0:00
0:00
0:00 0:00
Available On Air Stations
Carhartts and Xtratufs Ball — get tickets here!

State remains bullish on AK LNG project

AK LNG

 

The Alaska Gasline Development Corporation will be meeting in Nikiski next month, providing an update on the Alaska LNG project. Officials are hopeful prep work can begin this year.

 

 

Back in November, the last time AGDC was in town, the big news was handshake agreements from Asian markets to buy Alaska natural gas. Fritz Krusen has been AGDC’s point man for the project. At the recent Kenai Peninsula Industrial Outlook Forum, he said the project is financially sound and will provide a sizeable return for the state at current market prices, about $8 per million BTU.

“We started at $8 (per million BTU). We’ve got 80 cents per million BTU to ship the stuff to market. We’ve got $6.20 to operate and to pay those who lent us money, to pay those of us who provided equity. That leaves a dollar per million BTU for the resource owner. Is that good enough? Well, we think so.”

Krusen says that pencils out to around $250 million a year back to the state. Other details are starting to come out, too. A reroute of the Kenai Spur Highway is in the final planning stages. One of two paths will be considered, one running inside Miller Loop, and the other running further to the east, meeting back up at mile 25.

 

Krusen was joined at the forum by Nick Szymoniak. He’s the infrastructure development officer for AGDC.  He said another competitive advantage is that, unlike some pipeline projects Outside, which have faced a lot of opposition, the 800-mile pipeline planned here has a broad range of support, in part because of its promise of access to affordable natural gas along the route. He says there’s a potential for as much as $1,000 annual savings for people who could get hooked up to gas coming off the line.

“Immediately, you start asking where did that number come from? First, it’s a nice, round number. It’s a realistic number. I think it’s a conservative number. In order to properly calculate that, one, we would need to know the price of gas coming from Alaska LNG. We don’t know what that will be in 2025 so it’s hard to calculate exactly what that (savings) number will be. Further, this is kind of a nice number for all of Alaska. For our friends in Fairbanks or other places that don’t have natural gas, that are burning heating oil, if oil goes back up to $100 a barrel, they could be saving $1,000 a month.”

“I have heard that quoted many times. I haven’t seen any backup and I find that very difficult to believe," says Larry Persily, former Kenai borough chief of staff.

He’s been keeping an eye on this project for years, and is a bit more bearish than the AGDC folks. He’s not sure about the construction estimates, which are considerably cheaper than potential gas lines in British Columbia, which are also drawing interest from Asian buyers.

“I’m looking just at the pipeline alone and saying ‘your construction estimates show you can do this for 10-20 percent cheaper than a pipeline to the British Columbia coast, which doesn’t have Atigun Pass, which doesn’t have 30 miles under Cook Inlet, doesn’t have the construction costs of Alaska. So I question their $6.20 (estimate).”

And there have been grumbles about the ability of the state to finance its quarter share of the $43 billion dollar project. A part of plan is to make equity shares available, about $10 million dollars’ worth. Szymoniak calls it an investment opportunity not just for financial markets or the state, but for native corporations, municipalities and individual Alaskans.

“We’ll offer that opportunity to invest to Alaskans first at preferential terms prior to going out to Wall Street and third parties to invest in that," Szymoniak said.

 

"The idea being that Alaskans will have first shot at it. Once third parties come in, we’ll get a true market value of what this project’s worth, we’ll get that immediate value uplift.”

Persily says that more local investment on the front end is important for really getting the wheels rolling.

“Even before you spend $40 billion to build (the pipeline), you’re going to need a couple billion just to do final drawings, to do site preparations, to move the Kenai Spur Highway, to do preliminary orders. You’re going to need some cash before the big loans start coming in.”

The state-run agency has a rosy outlook to be sure, but until the ink is on the paper, there are no guarantees.

 

AGDC will be in Nikiski for another community meeting in February. By then, another round of paper work will have been submitted to the Federal Energy Regulatory Commission and a more clear timeline for the next steps could be available.