These past 15 months have been disappointing for LNG export licenses for Alaska. While for decades Alaska was the only state with two LNG export licenses to Asian countries, by the end of this month, Alaska will be without any LNG export license to Asia. The first export license was obtained for the Nikiski LNG export facility in 1969, which has been shipping LNG to Japan ever since. On March 6th, it was announced that that facility, now owned by ConocoPhillips, will not be filing for an extension of the export license. This is not because of the decline in market interest, but rather due to decline of natural gas supplies in Cook Inlet. That license will expire on March 31, 2013. A ConocoPhillips spokesperson acknowledged the possibility of that LNG export terminal being converted into an LNG import terminal to meet the natural gas needs for South Central Alaska.
The second license issued to Alaska was issued in 1989 to the Yukon Pacific Corporation (YPC). This is the company formed by former Governors Bill Egan and Wally Hickel. Over its ten plus years of work, YPC was successful in securing significant Federal and State permits for a gasline to tidewater in Alaska’s energy corridor alongside TAPS to tidewater. These permits included State and Federal Rights of Way, Final Environmental Impact Statements, FERC Approval of an LNG terminal site in Port Valdez, Air Quality permits and a Department of Energy (DOE) LNG Export License. YPC was also successful in securing LNG buyers from the Asian markets. However, its project was not successful due to lack of engagement by the North Slope leaseholders to sell gas for its project. YPC moved to vacate its export license authority, which was granted by the DOE.
More recently, on March 7th, 2013, the DOE took action on the export license application submitted by the Alaska Gasline Port Authority. DOE explained that it did not believe the AGIA process in Alaska had advanced far enough to ensure a gasline would be built. It also referenced a lack of gas sales contracts from the North Slope leaseholders. However, the Port Authority had submitted a full project nomination for gas from Asian customers at the September 14, 2012, AGIA (TransCanada/ExxonMobil) Solicitation of Interest open season as part of its export license application. DOE also requested more specificity on the LNG terminal site location in Port Valdez. DOE explained that the export license application may be re-submitted upon addressing the three areas of concern about the project. The Port Authority will continue to work with the DOE in the resubmittal of its export license application.
It is a sad day for Alaska that LNG projects in the lower 48 are moving forward and obtaining LNG export licenses, some of which are owned by North Slope leaseholders (ExxonMobil). The very same leaseholders refuse to engage in discussions, much less negotiations, to sell Alaska’s gas to the market risk free at the well head. To the contrary, the leaseholders continue to use Alaska’s gas as negotiating fodder for lower oil taxes.
ON POINT WITH BILL WALKER
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General Counsel/Project Manager
Alaska Gasline Port Authority