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Alaska gas producers file for DOE LNG export license

Highlights

The partners behind a proposed Alaska gas pipeline and LNG export project have submitted an application to the US Department of Energy for permission to export up to 20 million mt/year of LNG from the state.

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The application covers a 30-year period and seeks approval to export both to countries that have existing free trade agreements with the US, and to non-free trade agreement countries, according to a statement released Monday.

"This is a significant milestone for the Alaska LNG project and demonstrates continued progress toward developing Alaska's resources," Steve Butt, senior project manager, said in the statement. "Filing of an export application is a critical step in commercializing North Slope natural gas."

Separately, Butt said in an interview that the project specifications of exporting 15 million-18 million mt/year have not changed, but that the consortium asked for permission to ship 20 million mt/year to leave a margin for growth.


The filing to the DOE, made Friday, follows the signing of a joint venture agreement among the parties on July 2 to fund $500 million in pre front-end engineering and design work for the project, which is now expected to cost a total of $45 billion-$65 billion. The pre-FEED study, which is expected to be completed in late 2015 or early 2016, would provide an updated cost estimate, Butt said. The project would include a liquefaction plant and terminal in the Nikiski area on the Kenai Peninsula, a gas treatment plant on the North Slope, a 42-inch-diameter, 800-mile pipeline, and various compression stations and take-off points for in-state gas delivery. The partners in the project are North Slope producers BP, ConocoPhillips and ExxonMobil, pipeline company TransCanada, and the state's Alaska Gasline Development Corp.

Larry Persily, federal Alaska natural gas project coordinator for the US Department of the Interior, said the project filing is for largest LNG export project made so far in a single filing.

Cheniere Energy is now proposing to expand its planned Sabine Pass liquefaction capacity in Louisiana and would be larger than the Alaska project if expanded but Cheniere will be filing a new application for its expansion, Persily said.

Persily also noted the Alaska LNG group asked DOE in its 212-page submission to handle its application in a separate process from the DOE's consideration of Lower 48 projects.

"The proposed project is unlike any lower 48 export project and should be processed differently," the companies' filing said. "Due to the unique factors facing this project, a conditional authorization will facilitate Alaska LNG Project LLC's ability to continue the ongoing substantial commercial and engineering activities and expenditures necessary to develop and construct the project."

Since 2010, amid the rise of North American shale gas production, Interior has been deluged with applications for LNG exports from Lower 48 sites, Persily said in a statement.

As of the middle of June, the Department of Energy had approved 36 applications for exports to free-trade countries, and seven of 33 applications for non-free-trade exports. The remaining 26 are pending. So far, of the seven approved projects, just one is under construction, Persily said.

In May, the department also proposed a new procedure for handling export applications for projects in the Lower 48 states. Rather than processing applications in the order in which they are filed, the department would deal first with those projects that have completed federal environmental reviews.

In its June 4 notice of the proposed change, DOE said it had not decided whether it would apply the policy to an Alaska LNG export application.

An exemption for Alaska from that policy would be important, Persily said, because if the Alaska project were required to complete its EIS and secure other major permits before receiving an export approval it could add to the cost and possibly complicate financing, he said.

Persily said the project sponsors are also expected to "pre-file" later in 2014 with the Federal Energy Regulatory Commission to begin that agency's multi-year oversight of the project.

FERC is responsible for siting, construction and operation of LNG plants and related facilities, and would take the lead in crafting an environmental impact statement on behalf of multiple federal agencies.

Pre-filing would include developing a work plan with FERC for filing the baseline "resource reports" that FERC uses as a foundation for the environmental review. The project developers already have started gathering information for many of those required reports.

In addition to the DOE approval required for all US gas exports, shipments of North Slope gas to somewhere other than Canada or Mexico, under a 1976 law, need a presidential finding that the exports "will not diminish the total quantity or quality nor increase the total price of energy available to the United States."

In 1988, President Ronald Reagan issued such a finding, without referring to any specific Alaska export project.

In its July 18 application to DOE, Alaska LNG said it believes the 1988 finding is still valid and applies to its project, Persily said in his statement.

--Tim Bradner, newsdesk@platts.com
--Edited by Keiron Greenhalgh, keiron.greenhalgh@platts.com