LNG Project, state officials address legislators’ concerns

  • By KAYLEE OSOWSKI
  • Tuesday, September 30, 2014 11:37pm
  • News

Remarks from state legislators representing the Kenai Peninsula during an Alaska LNG Project update focused on local impact and project finances.

Alaska Department of Natural Resources Commissioner Joe Balash and Alaska LNG Project Manager Steve Butt provided an update on the project at a joint public hearing held by House of Representatives and Senate Resources Committees on Monday.

The legislative briefing was the first as required by the passage of Senate Bill 138, which calls for an update at least once every four months.

With Nikiski selected as the lead site for the project’s liquefied natural gas plant, storage and shipping terminal, Sen. Peter Micciche, R-Soldotna, asked about the infrastructure footprint, land acquisition and the possibility of eminent domain in Nikiski.

“I have to admit this is the first time in my district there’s a very large facility being looked at,” Micciche said.

The LNG plant needs 400 to 600 acres, which encompasses all aspects of the facility including storage tanks, trains, utilities and offices. Officials are trying to secure a larger area as a buffer, Butt said.

“We know to be a good neighbor, you want to have some space,” Butt said. “We want to be a good neighbor. We want durable and fair terms with all of the landowners we’ve talked with, so we’re looking to get more land than we need.”

On Sept. 5, the project sponsors — ExxonMobil, ConocoPhillips, BP, TransCanada and the State of Alaska — sent a request to the Federal Energy Regulatory Commission to begin the National Environmental Policy Act pre-file process. The request was approved on Sept. 14, which triggers community engagement and requires the sponsors to send a letter to landowners within about half a mile of the proposed plant saying, “In case you haven’t noticed, we’re planning to build an LNG plant somewhere near you,” Butt said.

He said the project backers don’t want to use eminent domain.

However, he said the project has a few other sites in mind that will work, if Nikiski proves to be an issue.

“Our community is thrilled about the potential for the project to be in the district and there are some that have some concerns,” Micciche said.

Referencing a recently published Wall Street Journal article which reported Australia’s domestic gas prices have nearly tripled due to an increase in exported gas while production levels have been fairly flat, Rep. Paul Seaton, R-Homer, asked if the Alaska LNG Project was considering that phenomenon.

Butt said that is something officials with the DNR and the Department of Revenue are working to understand.

“It is one of the top issues that the team is looking at right now because we know it’s really thorny because it is a place where all the owners aren’t as necessarily aligned as in other places,” Butt said.

Seaton also asked if any costs to the state in development of the project weren’t included.

“Do we have further costs of either capital credits or net operating loses that will occur in the development of the project?” Seaton said.

Balash said the state has attempted to do an “all in look” and will continuously refine models moving forward accounting for potential changes. He said he doesn’t think the outputs of the model are “100 percent correct today as they will be in the future.”

He said costs incurred are estimated in a range that will change.

“At this point I would say that the estimates made last year and the ranges associated with them are correct,” he said.

Balash recently went with a team of state and BP representatives to Japan, China and Korea and met with LNG consumers and potential buyers.

Rep. Kurt Olson, R-Soldotna, asked if the Asian markets are willing to pay a premium for security. He said for 40 years export out of Cook Inlet was reliable and wondered if that would have any influence on pricing.

“I don’t know how we’re going to measure that premium,” said Revenue Commissioner Angela Rodell. “I think what it’s going to do is hopefully it’s going to generate enough participants in wanting to participate because they’ll be able to see a premium.”

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

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