Alaska Project Files to Export LNG

Alaska LNG project sponsors filed July 18 for federal permission to export liquefied natural gas for 30 years from a $45 billion to $65 billion development that includes a pipeline across Alaska and an LNG plant in the Nikiski area.

"The Project would be the largest integrated gas/LNG project of its kind ever designed and constructed," their application said. "With the granting of the authorization sought here, (the department) has the potential to unlock the vast natural gas resources on the North Slope. Absent granting of the requested export authorization needed to facilitate construction of the Project, the ability to meet Alaska in-state gas demand will continue to be very challenging."

In an application to the Department of Energy, Alaska LNG, a partnership of ExxonMobil, ConocoPhillips and BP, asked that the export authorization's 30-year clock begin with the date of the LNG plant's first shipment or 12 years from the date permission is granted, whichever comes earlier.

The three North Slope Alaska oil and gas producers are working with the state of Alaska and pipeline company TransCanada to develop the Alaska LNG export project. The development team has started preliminary front-end engineering and design work, with a decision anticipated late next year whether to proceed to full engineering, design and permitting.

Their 212-page filing on July 18 seeks permission to export up to 20 million metric tons a year of LNG. That is a greater volume than the 17 million to 18 million-ton capacity plant they have discussed building. The larger volume provides flexibility as they polish designs for their LNG plant. A 20 million-ton-capacity plant could superchill about 2.5 billion cubic feet a day of vaporous natural gas into LNG.

The application asks for two levels of export permission.

The first involves exports to any of the 18 countries with which the United States has free-trade agreements covering natural gas. Under federal law, such permission is automatically and quickly given because the trade is considered to be in the national interest. The Energy Department has approved such exports within a few weeks to two months for Lower 48 projects.

Except for South Korea, most Asia-Pacific countries that the Alaska LNG project would target do not have such free-trade agreements. South Korea received that designation in 2012.

The second level of permission seeks authority to export to non-free-trade countries, which include such big customers as Japan and China.

Much stricter laws apply to exports to these countries. The Energy Department opens a proceeding to consider whether the exports would be in the national interest. After considering the evidence, the department grants export permission unless opposition makes the case that exports would be bad for the United States.

Since 2010, amid the rise of North American shale-gas production, the department has been deluged with applications for LNG exports from Lower 48 sites.

As of mid-June, the Energy Department had approved 36 applications for exports to free-trade countries, and seven of 33 applications for non-free-trade exports. The remaining 26 are pending. So far, of the seven approved projects, just one is under construction.

In May, the department proposed a new procedure for handling export applications for projects in the Lower 48 states. Rather than processing applications in the order in which they're filed, the department would deal first with those projects that have completed federal environmental reviews. In its June 4 notice of the proposed change, the Energy Department said it had not decided whether it would apply the policy to an Alaska LNG export application.

The Alaska LNG filing asks that the DOE handle its application in a separate process from the department's consideration of Lower 48 projects.

"The proposed Project is unlike any lower 48 export project and should be processed differently," the Alaska LNG filing said. "Due to the unique factors facing this Project, a conditional authorization will facilitate Alaska LNG Project LLC's ability to continue the ongoing substantial commercial and engineering activities and expenditures necessary to develop and construct the Project."

Besides the Nikiski LNG plant and marine terminal, the Alaska LNG project includes a gas treatment plant on the North Slope, a roughly 58-mile pipeline connecting the Point Thomson gas field to the Prudhoe Bay field, and a roughly 800-mile pipeline from Prudhoe Bay to Nikiski.

For the Alaska LNG project, Department of Energy authorization is just one of many approvals needed before exports can begin.

The entire project would take years to construct, involving dozens of federal and state permits for construction of the LNG plant and pipeline as well as for air emissions, river crossings, wetlands disruptions, endangered species disturbances, water channel dredging, rights-of-way usage, gravel mining, and many other activities of the project.

The project sponsors also are expected to "pre-file" this year with the Federal Energy Regulatory Commission to begin that agency's multi-year oversight of the project. FERC is responsible for siting, construction and operation of LNG plants and related facilities, and would take the lead in crafting an environmental impact statement on behalf of multiple federal agencies.

Pre-filing would include developing a work plan with FERC for filing the baseline "resource reports" that FERC uses as a foundation for the environmental review. The project developers already have started gathering information for many of those required reports.

In addition to Department of Energy approval required for all U.S. gas exports, shipments of North Slope gas to somewhere other than Canada or Mexico, under a 1976 law, need a presidential finding that the exports "will not diminish the total quantity or quality nor increase the total price of energy available to the United States."

In 1988, President Ronald Reagan issued such a finding, without referring to any specific Alaska export project. In its July 18 application to the Department of Energy, Alaska LNG said it believes the 1988 finding is still valid and applies to its project.