Permit opens up markets for Alaska LNG

The pipeline proposed by the Alaska LNG project would bring North Slope natural gas to liquefaction and export facilities being considered for construction in Nikiski.

Where the liquefied natural gas, LNG, could go from Nikiski is still to be determined, but its potential destinations increased on Friday when the Alaska LNG project was given a permit by the U.S. Department of Energy to export a maximum of 20 million metric tons of LNG per year to countries lacking a free-trade agreement with the United States.

The project was given conditional permission to export to the 20 countries with whom the United States has free-trade agreements in permits to non-free-trade countries authorized in 2014.

However, according to Larry Persily, the Kenai Peninsula Borough’s oil and gas adviser, South Korea is the only major LNG market among the free-trade agreement countries. The new export permit opens other valuable Asian markets including Japan, Taiwan, China and India.

“Basically it opens up the world,” Persily said. “There are more LNG buyers out there that are non-free-trade nations than that are free-trade. … It opens the entire Pacific rim as potential customers now.”

Nationwide, the DOE has 32 pending applications for LNG export permits, some of which are three years old, according to a press release from Persily. Alaska LNG’s permit was granted in 10 months.

The reason, Persily said, is because “under Department of Energy procedures, Alaska is considered to be separate from the Lower 48.”

“Under the law, the Department of Energy has to determine if sending gas out of the country is in the public’s best interest, and whether it affects local and domestic price and supply,” he said. “If you allow a bunch of gas to leave the Lower 48 from Texas and Louisiana, it could affect how much gas is available, so it’s a much longer process. In Alaska’s case, allowing Alaskan North Slope gas to go overseas doesn’t deny it to anyone in Michigan, or Louisiana, or Missouri, because there’s no way to get it there.”

Persily said that since the Alaska LNG Project’s pipeline will also deliver gas to Alaskan communities, the export it enables is not expected to drain the domestic market.

The term of the permit is also unusual: 30 years rather than the normal 20, a request that Persily said was made by the companies invested in the Alaska LNG project because a long-term, high-investment project like the Alaska LNG pipeline, predicted to cost between $43 and $65 million and to potentially begin operation by 2024, relies on stable long-term buying contracts to be a viable investment. 

“It gives the project developers more credibility as they make sales calls,” Persily said. “They no longer have to say ‘we think we’re going to get export approval.’ They can say ‘we have export approval.’”

The permit is conditional to the LNG partners filing reports on their exports with the Department of Energy, and on the project’s Environmental Impact Statement being approved by the Federal Energy Regulatory Commission.

“When the time comes that Alaska LNG gets its FERC EIS authorization, they can then walk it down the street to the Department of Energy and say, ‘FERC says we’re ok on the environment,’ and then FERC can remove the condition said on the export license,” Persily. “That’s routine.”

According to Persily’s press release, the only “significant opposition” that the Department of Energy receives during the permitting process was from the environmentalist group the Sierra Club, which Persily said has filed objections to every pending LNG export application. Persily said the objection was to the general burning of fossil fuels, without specific reference to Alaska.

“They didn’t say ‘oh, this with Cook Inlet,’ or ‘this, with the Yukon River.’ There’s nothing site-specific about Alaska,” Persily said.

Alaska LNG external affairs manager Kim Fox said the partners in the project, which include the State of Alaska, BP, Conoco Phillips, Exxon Mobile, and TransCanada, will each make marketing decisions separately for their own shares of the project’s LNG, and was unable to say if any definite marketing plans are being pursued by any of them.

Ben Boettger is a reporter for the Peninsula Clarion.