Peninsula Clarion file photo Tugs pull the Spartan 151 jack-up drilling rig up Cook Inlet in August 2011. New oil and gas development in the inlet, along with major projects planned for the area, could mean a boom for the Kenai Peninsula economy.

Peninsula Clarion file photo Tugs pull the Spartan 151 jack-up drilling rig up Cook Inlet in August 2011. New oil and gas development in the inlet, along with major projects planned for the area, could mean a boom for the Kenai Peninsula economy.

Energy industry projects expected to bring economic boom to area

  • By KAYLEE OSOWSKI
  • Sunday, February 16, 2014 4:33pm
  • News

In the fall of 2013 a wave of announcements for development in the Nikiski industrial area began making its way to shore.

With Nikiski as the top choice for a liquefied natural gas plant for the Alaska LNG Project and Agrium and ConocoPhillips applying for permits to restart operations, an economic boom is in the Kenai Peninsula’s forecast.

Rick Roeske, Kenai Peninsula Economic Development District Executive Director, said he followed the local oil and gas industry’s decline in the 1980s, but lately there has been a definite upswing.

“From what I’ve seen (the local industry has) definitely picked up the pace and it’s definitely moving forward,” Roeske said. “It’s not like (companies are) just spending money to be static. … There’s a vibrancy to it, and you can kind of feel it.”

Alyssa Shanks, economist with the State of Alaska, has predicted what she calls a “conservative” 2 percent increase of growth for the area for 2014. However, she said if all the projects come together, they could bump up that growth, but likely the bigger increase would be seen in 2015.

“There’s a lot more positive, upside activity opposed to a pulling down,” she said.

With that upswing comes a need for laborers. Roeske said he has heard process technology students from Kenai Peninsula College express interest in the local opportunities on the horizon because instead of working on the North Slope, they can work on the peninsula and establish a life here.

However, he’s also noticed a lack of workers with certain skills, specifically welders and truck drivers. He said potential employees need fiscal certainty, and he expects with wages like those Agrium historically paid, people will be drawn into the community.

“If you bring those younger people in, and they’ve got that stable job situation for a period of time, they have families, they buy here,” Roeske said. “This is a great place to live.”

The project announced in October that Nikiski was the top choice for the LNG plant and terminus for the 42-inch pipeline about 800 miles long running from the North Slope.

Steve Butt, senior project manager, said in an October interview Nikiski was chosen for its existing industrial area, proximity to a gas grid and manageable environmental issues.

At the 2014 Kenai Industry Update Forum, Butt said three places have been identified as top choices for where the pipeline could enter Cook Inlet to make its way to Nikiski.

The LNG plant would receive 2.2 to 2.5 billion cubic feet of gas per day to liquefy, Butt said. The peak workforce for the LNG plant is estimated to be 3,500 to 5,000 people and the marine facility is projected to see a peak workforce of 1,000 to 1,500 people.

Butt said the hundreds of sites under consideration for the LNG plant were quickly narrowed down to 21, looking at in-depth site characteristics. He said ice is a big risk in the inlet and studies are still being conducted to alleviate that risk.

Metocean data gathering devices were installed in December, Butt said, to study the current, tide, temperature and other characteristics of the inlet to know what it would take to move LNG carriers in and out of the inlet.

Alaska Support Industry Alliance Kenai Chapter President Al Hull said he doesn’t foresee Nikiski losing its place for the plant site.

“The LNG plant is going to be six times the size of the (ConocoPhillips LNG plant), I think it’s going to be pretty exciting,” Hull said.

And not only will the plant itself bring in new laborers, but Hull expects the local industry support businesses to grow as well.

ConocoPhillips, ExxonMobil, TransCanada and BP are working together to develop the Alaska LNG Project. The pipeline is projected to transport 3 to 3.5 billion cubic feet of gas per day and manufacture and ship 16 to 18 million tons of LNG annually, primarily to Asian markets.

Construction costs for the project are estimated between $45 and $65 billion.

Also in October 2013, Agrium Corp. applied for an air quality operations permit with the Department of Environmental Conservation.

The federal air permit is key to the plant reopening. A final decision on the permit is expected in the fourth quarter of 2014, Andy Kelemen, vice president of supply management for Agrium, said at the forum.

Steve Wendt, startup manager with Agrium, said he expects the permit will be approved, but there may be amendments.

Kelemen said while the process to make its ammonia and urea products will not change, Agrium is advancing its technology to produce less emissions. In full operation the facility had two production trains, a port facility as well as a cogeneration facility.

The permit is for a one-train operation, which requires about 80 million cubic feet of natural gas per day and is estimated to cost $200 million to restart and 30 months from engineering to completion of construction, he said.

With 440 workers during construction for about 18 months and 140 full-time employees for a one-train facility, Kelemen called the economic development opportunities for the peninsula “tremendous.”

He said the company expects Nikiski plant employees to earn some of the highest wages on the peninsula and doesn’t expect any hiring challenges. If everything goes as planned, Kelemen said the hiring process could begin in early 2015. The company intends to work with local schools to create training programs specific for Agrium’s employment needs.

Families brought into the area to work are estimated to bring about 130 students to attend area schools with additional education funding to the district from the state figured at about $690,000 for a single-train operation.

If the plant reopens, Kelemen said Agrium expects to pay about $2.2 million in property taxes. He said all employees would be expected to live in the Kenai Peninsula Borough and pay property taxes, which would amount to an estimated $242,000 and sales tax paid by employees is figured at $265,000 for a one-train operation. Along with bringing money into the community, Kelemen said the company expects it employees to actively volunteer in the region.

Kelemen said there are four “key drivers” to restart the plant in Nikiski:

■ Assurance of adequate natural gas preserves and deliverability at a reasonable price for a five-year period of time;

■ Refinement of cost estimates;

■ Receipt of necessary environmental permits;

■ Support from local, state and federal governments.

“We think that the recent gas discoveries are very, very encouraging,” Kelemen said.

Agrium closed its plant in 2007 due to a lack of natural gas, and, along with securing permits, Agrium needs to ensure it can get the product it needs at a desirable cost.

He said discussions about price have gone well, the question is when will reserves be available for delivery.

To maintain its mothballed facility, the company spends about $2 to $3 million per year, Kelemen said.

“It’s always been our intention that we’d be back in Kenai and bring the facility back up online when sufficient gas supply was available,” Kelemen said.

When the company was operating full-time at its Nikiski plant it employed about 264 full-time workers, most of which were local.

ConocoPhillips applied for a two-year export license from the U.S. Department of Energy to resume exports of LNG from its Nikiski-based facility in December.

While the plant has maintained 50 direct jobs and 120 indirect jobs, its previous license expired in 2012 following gas shortages for local markets.

The Alaska Department of Natural Resources requested ConocoPhillips pursue the permit in September.

Keith Farris, ConocoPhillips production operations superintendent, said at the forum if the permit is approved operations could begin in the second quarter of 2014.

He said the plant has all other permits in place.

Kaylee Osowski can be reached at kaylee.osowski@peninsulaclarion.com.

Steve Butt, senior project manager for the Alaska LNG Project, talks about the progress of the project at the 2014 Kenai Industry Update Forum at the Challenger Learning Center of Alaska in Kenai on Jan. 30, 2014.

Steve Butt, senior project manager for the Alaska LNG Project, talks about the progress of the project at the 2014 Kenai Industry Update Forum at the Challenger Learning Center of Alaska in Kenai on Jan. 30, 2014.

Andy Keleman, vice president of supply managment for Agrium, speaks about the company's desire to reopen its Nikiski plant at the 2014 Kenai Industry Update Forum at the Challenger Learning Center of Alaska in Kenai on Jan. 30, 2014.

Andy Keleman, vice president of supply managment for Agrium, speaks about the company’s desire to reopen its Nikiski plant at the 2014 Kenai Industry Update Forum at the Challenger Learning Center of Alaska in Kenai on Jan. 30, 2014.

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