Alaska LNG Project
Alaska Gasline on Alaska’s Term and in Alaskans’ Interests
The mission remains the same: Gas to Alaskans first, and then to markets beyond.
With this mission in view, Governor Sean Parnell charted a new course for Alaska’s natural gas pipeline in the fall of 2011. He called for North Slope producers to align with TC-Alaska and put their efforts behind building a large-diameter LNG (liquefied natural gas) project with off-takes for Alaskans to get their gas. The project would include a gas treatment plant, a pipeline, and a liquefaction facility at tidewater (Alaska LNG Project).
In 2014, for the first time ever, all the necessary parties have aligned to make the Alaska LNG project go: three producers, a pre-eminent pipeline builder, the Alaska Gasline Development Corporation (AGDC), and the State agencies responsible for the people’s royalties and taxes.
Alaska will control her own destiny as Governor Parnell insisted Alaska should become a partner in the Alaska LNG Project.
Ownership, or participation, allows the State to receive a share in the profits from the Alaska LNG Project. Without ownership, the State would, in essence, pay for others’ profits, reducing the State’s revenue from taxes and royalties. With Alaska owning a piece, Alaskans stand to gain more.
To promote accountability, the State will employ a phased approach, making commensurate, proportionate steps with its partners and commitments along the way. While the companies will return to their boards of directors, the State of Alaska will return to the people’s elected board of directors, the Legislature, for review and approval at key decision points.
In January 2014, the Governor submitted guidance documents for review by the Legislature, and introduced legislation (SB 138) that would allow Alaska to move through the Pre-FEED (front-end engineering and design) phase of the Alaska LNG Project – a 12 to 18 month process that requires a $500 million commitment shared among the parties. The State’s portion of Pre-FEED will be between $70 and $90 million.
Senate Bill 138 passed the Alaska Legislature in April 2014. The legislation maximizes Alaska’s gas for Alaskans by:
- • Providing the framework for Alaska to become an owner in the project.
- • Empowering the AGDC to carry the State’s ownership interest in the project, particularly liquefaction and marine facilities.
- • Authorizing the Department of Natural Resources to modify certain leases and allowing the State to enter into shipping agreements to move and sell Alaska’s gas.
- • Protecting the State by simplifying the tax structure from a net tax rate to a gross tax rate for North Slope gas, and allowing the State to take a larger share of the gas instead of taxes.
- • Ensuring AGDC will continue pursuing the Alaska Stand Alone Pipeline (ASAP) and in-state gas deliveries.
- • Serving as the enabling legislation for any gas development project.
Pre-FEED will further refine the cost and engineering challenges that must be addressed before the parties commit the billions of dollars necessary to complete the project. After the Pre-FEED work is complete, another decision point will await the Alaska Legislature - whether to advance Alaska's commitment to the FEED (front-end engineering and design) stage of the project with the other entities.
Ace in the hole: If work falters on the Alaska LNG Project, AGDC is uniquely positioned to get gas to Alaskans with the ASAP project. The way forward will be on Alaska’s terms and in Alaskans’ interests.