The Federal Energy Regulatory Commission, in its latest report to Congress Aug. 29, said that of the two major projects competing to deliver natural gas from Alaska’s North Slope, only one likely will be built, and it is urging that the sponsors work together to build that single line.
“It should be abundantly clear that all stakeholders involved must work together with the shared objective of getting a project built,” FERC reported. “We believe it to be in the public interest to avoid the consequences of a prolonged, duplicative regulatory review in a competitive situation, especially during the application phase.”
Some members of Congress apparently agree. A bill (HR 6515) was introduced in the House July 16 that would charge the US president with persuading the various stakeholders to join together in a single effort, FERC said.
Projects progress
Meanwhile one of the two competing proposals has advanced to the early, but detailed, planning and project development stage, and the other has received preferred status by the state of Alaska. Another related project, still under consideration, would move some of Alaska’s gas to an LNG export terminal in southwest Alaska for export, and an intrastate system also is under consideration.
“We have seen substantial progress on development of the Alaska pipeline over the past 6 months, more progress than in any other reporting period,” said FERC Chairman Joseph T. Kelliher.
“This competition for the project is a positive indication of serious interest by major industry players,” Kelliher said, adding: “This should all be resolved, ultimately, in the energy and financial marketplaces, and FERC stands ready to act once that takes place.”
FERC outlined the major developments that have occurred since its February report:
• Alaska Gas Pipeline LLC (Denali). The Office of Energy Projects on June 25 approved Denali’s request to begin the prefiling process, and the company has begun field work. The 4 bcfd system, which it says would deliver 6-8% of US daily consumption, is sponsored by BP PLC and ConocoPhillips.
Denali plans to build and operate 750 miles of 48-52-in. pipeline from Alaska’s North Slope, generally following the Trans-Alaska oil pipeline to Fairbanks, where it would branch off following the Alaska Highway to the Alaska-Yukon border. Compressor stations of 40,000 hp each would be built every 100-200 miles, the company says. The pipeline would operate at 2,500 psi.
Another 1,000 miles of transmission line, to be built by Canadian affiliates, would extend from the Alaska border to Alberta.
Denali says if additional capacity is needed to transport these volumes to the Lower 48, the affiliates would build an extension through Alberta to the US border, and Denali would construct a mainline across parts of North Dakota, Minnesota, Iowa, and Illinois to the Chicago area. These sections would add another 1,500 miles to the system.
Denali also would build a gas treatment plant on the North Slope, at least five off-take points in Alaska for in-state distribution, and gathering lines from production areas to connections with other portions of its system.
Initial pipeline routing surveys and environmental resource studies began this summer, and the company plans to spend $600 million over the next 3 years before applying for a FERC certificate in fall 2011. Denali proposes to hold its open season before yearend 2010 on the open access pipeline, and its construction schedule calls for bringing gas to market by mid-2018.
• TransCanada Corp. affiliates TransCanada Alaska Co. LLC and Foothills Pipe Lines Ltd. (TC Alaska). Alaska Gov. Sarah Palin on Aug. 27 signed a bill passed earlier in August by Alaska state legislators designating TC Alaska the state’s preferred applicant under its Alaska Gasline Inducement Act (AGIA) and granting it an exclusive AGIA license.
The award authorizes the state to contribute as much as $500 million toward TC Alaska expenditures for planning and preparation leading to federal and other permit applications. It also represents an agreement to settle various project issues between the state and the applicant.
Denali Pres. Bud Fackrell said the AGIA license award to TC Alaska would not impede the Denali project.
“The granting of the AGIA license will not affect the Denali work program and as long as the state ensures a level playing field should not affect Denali’s steady march toward its first major milestone, an open season by the end of 2010,” said Fackrell. “Denali is continuing to move forward.”
The route of TC Alaska’s proposed 5 bcfd gas delivery system is similar to Denali’s with 750 miles of 48-in. pipe extending from the existing central gas treatment plant on the North Slope, following the same route in Alaska, and 1,000 miles of pipeline from the Alaska-Yukon border to Alberta’s existing gas distribution hub. TC Alaska said it has no plans to build a gas treatment plant on the North Slope, but it is prepared to do so if necessary.
TC Alaska has not yet begun the prefiling process, but FERC says the company could request that many of the prefiling activities for TC Alaska be combined with existing prefiling activities for Denali and that both could benefit by coordinating some prefiling activities that would be similar or the same.
Under the AGIA, TC Alaska would hold an additional open season every 2 years, and it has designed its project to be expandable to 5.9 bcfd by adding 16 more compressor stations to the original 16 in Alaska-Canada.
Having anticipated that it would receive the AGIA license last April, TC Alaska may see its schedule slip somewhat, FERC said. Originally it planned to conduct open season in 2009, to begin the FERC prefiling process in June 2010, and apply by December 2011 for a FERC certificate.
• The Alaska Gasline Port Authority (AGPA). This project contemplates delivering Prudhoe Bay gas by pipeline 800 miles to Valdez where it could be liquefied and shipped on carriers to the Asian market, Hawaii, and the west coasts of the US and Mexico. AGPA has added new partners—Mitsubishi Corp. and Sempra LNG—and Alaska state is assisting AGPA with project development.
Palen issued an administrative order Aug. 20 directing state agencies to continue assisting the LNG project sponsors in the feasibility and permitting process for an LNG project “consistent with TC Alaska’s mainline under AGIA.” FERC would also regulate this gas export project.
Other gas projects
In addition to the interstate projects, on July 7, Palin announced the formation of a public-private partnership of the Alaska Natural Gas Development Authority, Enstar Natural Gas Co., and the state of Alaska to consider building the first phase of an intrastate pipeline to serve Alaskans within the next 5 years.
This system would not fall under FERC’s jurisdiction; nor would the 750-mile, 30-in. Mackenzie Gas Pipeline in Canada that would transport 1.2 bcfd of Arctic gas to market. Planned to be in operation by 2016, it would cost $16 billion and would be regulated by Canada’s National Energy Board.