With a giant North Slope natural gas pipeline still unbuilt after decades of efforts, the state entity now promoting the project has a new plan intended to spur construction of the megaproject: a first phase that delivers natural gas to the isolated Southcentral Alaska market rather than the vast Asian market that is the ultimate target.
The Alaska Gasline Development Corp., the state government entity promoting the long-desired North Slope natural gas project, is characterizing the new plan as a way to address looming shortages of deliverable gas to the state’s most populous region.
Frank Richards, president of the AGDC, told state lawmakers on Monday that starting the project with an in-state phase would ultimately lead to the long-term goal of selling liquefied natural gas internationally.
“What I’m talking about here is a concept of working with the Alaska LNG project as currently envisioned but phasing it to be able to move forward with a pipeline first, to be able to utilize the North Slope gas resources through a pipeline to be able to deliver them to Southcentral Alaska to meet the needs that we hear about in Cook Inlet,” Richards said in a hearing of the House Finance Subcommittee on Commerce, Community and Economic Development, the first of two Monday hearings at which he was scheduled to explain the new idea.
Construction could start early next year, and deliveries could start in 2029, Richards said.
“It would be the first phase of the entire LNG project to be constructed to be able to meet Alaskans’ needs at the earliest possible date,” he said.
The newly defined Phase 1 would run the planned 800-mile 44-inch diameter natural gas pipeline shipping natural gas from the North Slope to the Kenai Peninsula to connect with the existing Enstar pipeline system at Beluga, on the west side of Cook Inlet, he said.
It would cost $10.7 billion, about a quarter of the estimated $44 billion cost of the full LNG project, he said.
If AGDC can start with its front-end engineering and design by July, it would be able to complete that within 12 months, a step expected to cost $50 million, Richards said.
Discussions are already underway with Southcentral Alaska utilities, he said. Also in the works, he said, is the possible securing of “a baseload industrial customer” to provide economies of scale: a reopened fertilizer plant on the Kenai Peninsula. Nutrien US LLC, which was previously called Agrium, is contemplating resuming production at the ammonia fertilizer plant that it operated for decades but closed in 2007.
The Alaska North Slope holds vast quantities of natural gas that occurs along with the long-producing oil fields. Richards, in testimony Monday, said proven resources amount to 40 trillion cubic feet. But that gas has been stranded from any market for lack of a delivery system. Despite efforts to build a natural gas pipeline that date back to the 1970s, there has never been a plan that was considered economically viable.
However, lawmakers are showing signs that they are skeptical about the value of putting state money into the endeavor – and about the prospects for the megaproject in general.
Some of that skepticism emerged on Monday.
House Finance Committee Co-Chair Bryce Edgmon, I-Dillingham, brought up what he called the “elephant-in-the-room” question about the project’s viability.
“The optimism level, as I detect it, for the project right now is lower than it was before, not necessarily a death knell by any means,” he told Richards.
Though he is a big supporter of the project, signs are not encouraging for the large project, Edgmon said. Among those signs is the inability of AGDC to get private investors to pay for the forward engineering and design work, he said.
“The LNG project is like the big fancy house on the corner nobody ever buys, nobody ever rents, but it looks good, and everybody wants that house. But here we are all those years later,” Edgmon said.
“And there’s natural gas supplies apparently, I think, awash in some parts of the globe. And are we ever going to get this thing built?”
Richards insisted, as he has in other presentations, that important progress has been made on the LNG project as a whole and that it will ultimately make economic sense.
The project has already gone through the “gauntlet” of federal regulation and is now fully permitted, much work has already been done and there are still plenty of investors who see the project’s value. Breaking it into an in-state phase to be followed by the larger project will also reduce economic risks, he said.
“There is still significant interest out there from the market, meaning our Asian partners and customers, our Asian allies. There’s strong interest from suppliers to the project but also in terms of investors to the project,” he said.
“So, it’s pulling together the right mix of investors to reach that crucial mass to be able to move us forward is really what we are continuing to strive for and are in discussions with folks on a daily basis.”
