Pipeline skepticism

If Gov. Bill Walker and his administration are going to pay attention to anyone when it comes to the iffy Alaska LNG Project, perhaps they should take a moment and listen to Larry Persily.

Persily, in his latest iteration, is Kenai Peninsula Borough Mayor Mike Navarre’s chief of staff. He has served as director of the Office of the Federal Coordinator of the Alaska Natural Gas Transportation Projects. He also was a former deputy commissioner for the Alaska Department of Revenue for governors on both sides of the political aisle.

He says even as the Alaska Gasline Development Corp., leading the project, applied to the Federal Energy Regulatory Commission for a permit, “lingering questions cover pipeline routing, construction methods, wetlands fill, river and stream crossings, dredging disposal, water and air quality, community impacts, even the fuels used in construction equipment — a long list of environmental issues.”

While the AGDC is saying it expects a quick scheduling of an Environmental Impact Statement, it may take some time before FERC issues a schedule for its EIS on the massive project because of the questions, he said.

The time line suggested by the AGDC is well intentioned, but unrealistic, and could mislead property owners, contractors, job-seekers and others, Persily said.

The AGDC told FERC it wants a 2024 in-service date for the project and would like federal approval “no later than December 31, 2018” – about 21 months away, to begin construction in 2019.

He says he is skeptical because of the project’s size and “the lack of financial partners or customers for the project.”

“FERC has questions, too, he said. “The staff cautioned AGDC in several conference calls in February and March to stay in pre-filing status as long as possible to ensure a complete application.”

While FERC has until mid-July to set its EIS schedule or request more information from the applicant, and “I expect the information request will be substantial,” he told the Alliance.

He says the AGDC has been working hard, “but after listening to multiple pronouncements of unrealistic schedules over the years in Alaska — whether a gas line, Susitna dam, bridges, roads or trucked LNG to Fairbanks — I suggest you should invest in a few more years of wall calendars, because you’re likely going to need them.”

He also notes LNG has several advantages. It is closer to Japan than many other suppliers, it has a history of LNG delivery history between the Nikiski plant and Japan, liquefaction plants are more efficient in cold climates and the state and federal governments’ politics are stable.

“But the problem for Alaska and other hopefuls dependent on long-term sales contracts is that short- and medium-term deals are approaching one-third of global trade as buyers enjoy low prices in an oversupplied market.”

And there is plenty of competition in an already intensely competitive market and more is coming online all the time, he said.

“Buyers worldwide are bargaining from strength – and getting stronger.  Many of Japan’s largest gas and power utilities are banding together in LNG procurement joint-ventures to push for lower prices and better terms. This the not the stable, boring, long-term binding contracts LNG market of decades past.”

The Alaska LNG Project is not impossible, he said, and Alaska has some significant advantages. It will take time, more work and a better market.

“I believe we’ll get there, but not a 2018 federal EIS and 2019 construction start,” he said.

We suggest that without financing or partners or customers, it may take even longer.


2 Responses to Pipeline skepticism

  1. Marlin Savage May 17, 2017 at 1:54 pm

    Just got my latest Marcellus Checks. One paid $2.64 MCF, the other $2.79 MCF. Walker and the AGDC group must be smoking
    some really powerful stuff.

  2. Will Gay May 17, 2017 at 3:30 pm

    If this group keeps going they will lock in to some stupid deal at low prices that will amount to a give away just so they can say they did a deal. That’s what politicians and government idiots do. That’s why the oil companies got away from them. To proceed with market conditions as they are and the risk of a project this size is lunacy.
    Taking the money away from them and applying it to fixing our roads and providing public safety is the right idea.


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