The AK LNG Project is still alive, but its prospects for moving forward in 2020 are slim. The Alaska Gasline Development Corporation, the state agency that’s been spearheading the project since 2016 when the big oil companies got out, saw another large cut to its budget this year.
I spoke with longtime industry analyst Larry Persily, who has a new piece out in the Anchorage Daily News, about how activities are ramping down, as AGDC continues to seek federal authorization for the project.
Larry Persily: Alaska Gasline Development Corporation’s plan is to get FERC authorization and then just hold on to it, if it ever is needed.
Shaylon Cochran: Looking down the road, I’m curious how that process works. There’s a lot of value in that (authorization). How does that translate to a new owner or operator?
LP: Let’s say in five years, Warren Buffet approached AGDC and Warren Buffet said ‘I want to build the project, so I’ll basically buy your building permit from you. Or hey, how about I make you a partner and if you contribute your building permit, I’ll give you five percent ownership and you don’t have to pay me anything, just let’s use your permit.’
So, yeah, if someday a project was going to be built there, there is value in having that building permit. If it’s never going to be built, there is no value. There’s the value that you learn more about permafrost and stream crossings and tidal flows in Cook Inlet doing all the research for it, but if that project is never built, there’s no commercial value to the work that’s been done.
SC: You look at a lot of the environmental work that’s been done, looking at permafrost and some of those things; five, ten years down the road, how good is that information going to be?
LP: When FERC issues an authorization for a project, they put a timeline on it and I think AGDC has asked for eight years. So there’s a limit. Though it’s not uncommon for a developer to ask for an extension. I think this one would be harder to get an extension on, if you go too long. If you go ten years and some streams have changed flow and global warming, permafrost is started to melt even more, you may have to a lot more work.
SC: Looking at the AGDC budget for next year, a little over $3 million, they’re still trying to court investment. That doesn’t seem like a lot to do what they’re trying to do, especially when there’s darkness at the end of the tunnel and not light at the end of the tunnel.
LP: I think it’s more than they need. There is no market for the Alaska LNG Project for the foreseeable future and there are no serious customers out there, that I can see, signing long-term contracts. So it seems to me, once your done with your FERC authorization, my advice would be shut it down. Put the phones on forward so if someone calls to buy gas, someone will answer the phone, but that’s all you need.
SC: And as usual, it’s another case where the attorneys are making out like bandits.
LP: Oh yeah. The Kenai Borough has an attorney in Washington D.C. The Matanuska-Susitna Borough has an attorney in Washington D.C. The Alaska Gasline Development Corporation has an energy specialist attorney in Washington D.C. and the City of Valdez has an attorney in Anchorage. So yes, the attorneys are doing well. It’s a specialized field. They’re charging hundreds of dollars an hour to fight over something that doesn’t exist. I think in the end, there’s no question in my mind that the final EIS will concur with the choice of Nikiski. I think Valdez and Mat-Su are wasting their money and I don’t see why the Kenai Borough feels the need to spend that much more to argue a point that is really not in dispute, other than from a couple sore-loser municipalities, but not in dispute from the federal regulators perspective.
Attorney fees for the Kenai Peninsula Borough are this week’s number. The Assembly approved an additional $150,000 to retain its representation on the matter this week. With that expenditure, the borough has now spent $250,000 to make its case to regulators that the gasline, if it’s ever built, should end in Nikiski.