July 2023, Vol. 250, No. 7
Editor's Notebook
Editor’s Notebook: Alaska’s Long Road Back
By Michael Reed, Editor-in-Chief
(P&GJ) — With the Biden administration’s recent approval of exports from a proposed LNG project and the rejection a lawsuit challenging construction of related infrastructure, prospects may again be looking up again for the Final Frontier.
Like the state itself, the proposed Alaska LNG project, or projects if you prefer, is massive in scale, also featuring an 800-mile pipeline, from the North Slope to south central Alaska, bisecting the state from north to south and carrying an overall $39 billion price tag.
As you know, building a pipeline of this length has never been a small feat, even prior to the era of never-ending litigation and regulatory delays, but these latest judicial and administrative moves may at least provide a glimmer of hope that such projects are still worthy of consideration. (If placed in service, the Alaska pipeline would be the longest to become operational since Phillip 66’s success with the 850-mile (1,3680-km) Gray Oak gas pipeline in 2020).
Supporters of the Alaska infrastructure say the projects would go a long way toward making the United States more competitive with Russia by allowing the shipping of natural gas from the Arctic to Asia, though, realistically, it is unlikely any gas will be produced prior to 2030. And, we don’t have to look back very far to know that a lot can change in a lot less time.
One long-time proponent of Alaska energy infrastructure and former federal coordinator of the Alaska Natural Gas Transportation Larry Persily told P&GJ recently that despite the recent positive developments he feared these projects were still facing significant uphill battles.
“What it comes down to is that the DOE [Department of Energy] reviewed the project again and said, ‘Sure, go ahead.’ I don’t really think that was ever really in doubt,” Persily said. “It was no surprise.”
Nor is the fact that funding the effort, despite the presence of state money, is a far greater challenge than the regulatory go-ahead.
“For most [finance] people, it’s just too big of a risk, especially since it can’t produce gas until 2030,” Persily said. “We’ve talked about a window of opportunity on something like this [infrastructure project] for years. Well, the window has never been opened.”
One thing working in the projects’ favor, according to a Wood Mackenzie analysis from January 2022, is that, beginning in 2028, continued strong LNG demand is expected to have created a gap in supply – a gap new projects will need to fill.
According to Alaska LNG, North Slope fields are expected to deliver an average of 3.5 Bcf/d of gas, much of it for an international market. Alaskans would gain a long-term and affordable source for home heating and industrial needs as well.
Additionally, Alaska Gov. Mike Dunleavy points to a new independent analysis, which estimates that the pricing of Alaska’s LNG project would be lower than pricing for other U.S. projects that are competing for the same Asian markets. Alaska’s proximity to Asia also provides a shipping cost advantage.
“The Alaska LNG project is well positioned for Alaska to realize the decades-old dream of bringing our natural gas off the North Slope for the benefit of Alaskans and worldwide markets,” Dunleavy said recently. “With key permits and federal loan guarantees in place, the Alaska gasline is moving forward.”
Legal Upshot
The ruling by the three-judge panel from D.C. Circuit Court of Appeals seems to be in line recent decisions by U.S. federal courts, which have been less inclined of late to specify how the Federal Energy Regulatory Commission (FERC) goes about satisfying its legal mandates.
The judges said, in part, that the possible effects of noise and shipping traffic on native beluga whales, along with how construction might impact wetlands, had been adequately considered by the federal agency, despite the protests of environmental groups.
The court also said the agency’s method of analyzing greenhouse gas emissions from the project by looking at data from state and nationwide emissions was sufficient. The decision added that FERC was “under no obligation” to rely on the “social cost of carbon metric” put forward by the plaintiffs.
This, in and of itself, could be huge for the industry, whether the Alaska project gets built or not.
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