No guarantees for progress on AK LNG in 2019

Dec 28, 2018

 

A number of hurdles remain, both regulatory and financial, before work like rerouting the Kenai Spur Highway will begin.
Credit Redoubt Reporter

The Alaska Gasline Development Corporation spent a lot of 2018 talking about how much progress it was prepared to make on an instate gas line in 2019 and beyond. But investors are still being sought and an environmental impact statement due in February is no guarantee that permits will be issued.

 

 


KDLL’s Shaylon Cochran spoke with former Federal Coordinator of Alaska Natrual Gas Transportation Projects and Kenai Peninsula Borough Chief of Staff Larry Persily about the hurdles the project needs clear in the coming year:

 

What sort of progress does an environmental impact statement from the Federal Energy Regulatory Commission, expected in February, represent for the AK LNG project?

“First we need to remember, FERC has said they plan to issue the draft EIS in February, but that’s not a requirement under law or the constitution. It’s not binding. That’s predicated on the assumption they get all the information they need from the state, from the Alaska Gasline Development Corporation.

What it means is for the third time, an Alaska liquified natural gas project has moved to the environmental impact statement (phase). You had one called Western LNG back in the 70’s. They wanted to build an LNG plant in Nikiski using Cook Inlet gas to send to California utilities. They got an environmental impact statement. The project didn’t go anywhere. Back almost 30 years ago, Yukon Pacific got an environmental impact statement, federal authorization from FERC to build an LNG plant in Valdez. We know that didn’t go anywhere...It’s good to have a draft environmental impact statement, it sets the stage, but it doesn’t mean you have a project.”

What can we expect out of a report from former Governor Sean Parnell about the project, anticipated this spring?

“I have not talked to former Governor Parnell or Governor Dunleavy or his team. But Governor Dunleavy, when he was a state senator, certainly talked in support of an Alaska LNG project, but strongly believed it should not be led by the state…I would not be surprised at some point in the new administration to see Governor Dunleavy and his team talk about 'hey, we like it, we support it, we’re all in favor. We just don’t like the idea of the state taking the lead. We’d like to get the band back together', being the producers, private investors, which I think is probably going to happen anyhow because the state doesn’t have money to proceed with this project nor does the market need the project.

Considering the ongoing trade war with China, to what degree does a project like this represent an international political football that might be kicked around a lot, but never moved toward the goal?

“If you look at what’s going on in this country, what’s going on in the world economy, what’s going on with trade between the United States and China; if you’re banking on President Trump to deliver something and sticking to his word and not changing his mind and negotiating in good faith and that’s what you’re betting your investment dollars on? I don’t think that’s a solid bet.

Look, U.S.-China trade eventually, we hope, will get resolved. Regardless where it is today, I don’t think this project is ready. I don’t see in the near future it getting customers or financing, particularly, given the state of U.S.-China trade, the reluctance of Chinese buyers to sign long term contracts for U.S. LNG, not knowing where tariffs are going to be. That is an impediment this year. Maybe that impediment will be resolved next year. That sort of depends on Trump. Given the federal government shutdown, who knows what motivates that guy.

I’m bullish that someday we’ll get gas off the North Slope and sell it to someone for a profit, but I don’t think 2019 is going to be that year. If we can get the environmental impact statement from FERC, that is an achievement, but people should not be looking for anyone to start breaking ground on anything in 2019 or 2020.”