Alaska LNG Project buying land, securing access

  • By Tim Bradner
  • Thursday, July 31, 2014 9:58pm
  • News

The Alaska LNG Project LLC has purchased 120.4 acres of land from private landowners for a large liquefied natural gas plant at Nikiski, has an additional 97 acres under contract for purchase and is also working with the Kenai Peninsula Borough on conveyance of 29.9 areas of borough-owned lands.

That’s according to the export application the project developers have filed with the U.S. Department of Energy.

BP, ConocoPhillips and ExxonMobil Corp. are identified as the partners in the Alaska LNG Project LLC but the overall project will also include the state-owned Alaska Gasline Development Corp. and pipeline company TransCanada Corp in its ownership.

“The project would be the largest integrated gas/LNG project of its kind ever designed and constructed,” the applicants wrote in their filing with the U.S. DOE.

One of the requirements of the federal agency is that proponents of an LNG export project specify what property rights have been established in an application for an export permit.

About 400 acres are needed for the plant but the project would like to have additional lands because of the requirements for equipment and material storage, project manager Steve Butt of ExxonMobil has said in interviews.

The purchasing of land is in addition to $500 million committed to do pre-Front End Engineering and Design work on the large gas pipeline and LNG export project, estimated now to cost $45 billion to $65 billion.

The bulk of the land purchased so far is small parcels typically just larger than one acre, but one 40-acre tract has been bought along with a 15- and 9-acre parcels, according to documents filed with the application. Most of the purchases were done in May and June, according to the application. The transactions are on file in the Kenai Peninsula Borough Recorder’s Office.

“Approximately 10 contract land brokers are continuing to work in the Nikiski area to acquire additional land rights for the LLC, both for fee title land for the liquefaction facility site and shorter-term land access rights for studies within a corridor surrounding the lands anticipated to be acquired for project facilities,” the application stated.

Land access rights have also been acquired for environmental, geological and geophysical surveys along the 800-mile pipeline corridor, including about 460.5 miles of state lands, 234.2 miles of federal lands managed by the U.S. Bureau of Land Management; about 33.8 miles of land owned by municipalities and approximately 31.6 miles of privately-owned lands.

“ExxonMobil (the company managing the project) is in the process of acquiring additional land access rights for conducting further environmental and geological/geophysical due diligence studies at specific locations along the pipeline and transmission line routes,” the application stated.

The company is also working with BP Exploration Alaska, one of the participants in the LLC and the operator of the Prudhoe Bay Unit, to gain access rights for environmental and geological/geophysical studies within the unit that are related to the large gas treatment plant that will have to be built on the North Slope.

The application requests permission from the government to export up to 20 million tons per year of LNG for 30 years. The applications have previously said exports might total 15 million to 18 million tons per year but 20 million tons was used in the application so that the project has room to expand under an export permit, Butt said in an interview.

The Alaska LNG group has also asked the DOE to handle its application in a separate process from the DOE’s consideration of Lower 48 projects.

“The proposed Project is unlike any lower 48 export project and should be processed differently,” the companies’ filing stated. “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.”

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, according to an analysis of the application by the Office of the Federal Coordinator.

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, according to the analysis.

In May, the department also 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 are filed, the department would deal first with those projects that have completed federal environmental reviews, according to the Federal Coordinator’s analysis.

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.

An exemption for Alaska from that policy would be important, said Larry Persily, the federal coordinator, because if the Alaska project was required to complete its EIS and secure other major permits before receiving an export permit it could add costs and possibly complicate financing.

The coordinator office’s analysis also said the project sponsors 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 analysis said. 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, Persily said in his statement.

 

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

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