AGDC shares new plans for LNG pipeline

Editor's note: This story has been changed to clarify that realtor Katie Uei has based her sales price estimates on conversation with Nikiski residents and has not seen sales contracts for land sold to the LNG project. 

 

Representatives of the Alaska Gasline Development Corporation were in Nikiski on Wednesday evening to present a state-led pipeline mega-project with a different economic approach but few technical changes from its previous incarnation, and few answers to questions of how the project could affect Nikiski.

AGDC, a state-owned corporation, was a 25 percent partner in the previous plans to build an approximately 800-mile pipeline to move liquified natural gas (LNG) from the North Slope to an export terminal in Nikiski. After the project’s other partners — oil companies BP, Exxon Mobile, and ConnocoPhillips — decided not to invest in it after an unfavorable economic analysis in September 2016, the state became the sole participant in Dec. 2016. On April 17, AGDC filed an application for the project with the permitters of the Federal Energy Regulatory Commission.

AGDC Vice President for Communications Rosetta Alcantra said AGDC plans to be finished permitting by Dec. 2018.

“Once we get the authorization, we are going to be moving forward with construction,” Alcantra said. “Where does that leave your community and other communites? That has still to be defined. The goal is we’re going to have an eight year construction period.”

Fritz Krusen, Vice President of AGDC’s Alaska LNG project, said the project aspires to start construction by Jan. 21, 2019.

Property acquisition

AGDC will need about 800-900 acres to build its LNG liquefaction plant and export terminal on the Nikiski beach. Of these, the previous partners of the AK LNG project acquired about 600 acres, which AGDC is now negotiating for possession of. The land presently belongs to a subsidiary company — Alaska LNG, LLC — that Krusen said ConocoPhillips, BP, and ExxonMobile had created to own the project’s land, website, and Department of Energy export license.

Setnetter Jan Kornstad fishes on the beach near the proposed location of the plant. She said her home is within a mile of the project site, but she hasn’t yet received an offer for it.

“If I’m going to have to move, I need to know that pretty soon,” she said.

Krusen said that AGDC would continue seeking new land after finishing negotiations for the previously acquired land. Krusen said the negotiations were “going reasonably well,” though AGDC had originally planned to conclude them in late 2016. The wooing of investors will also play a role in AGDC’s land-buying schedule.

“We have to conclude with the producers, and then we have to get our commercial spark, to convince whoever’s going to fund us — the legislature, separate investors, that sort of thing — then we’ll get back in the saddle on land purchases,” he said. The agreement AGDC is pursuing with Alaska LNG, LLC would give them the option to buy the land once someone actually commits to it.

Though AGDC Vice President of Communications Rosetta Alcantra said AGDC retained many of the contractors who worked with AK LNG, the company that had acquired the 600 acres of Nikiski land, Paragon Properties, was not among them. Nor has AGDC brought in a new contractor for land acquisition.

Though the state legislature never granted AK LNG the power of eminent domain — the legal ability to force the sale of property — the state code that created AGDC gives it that ability.

“We have been granted those powers, but we have not contemplated whether or not we’d use them for this project,” Krusen said.

Realtor Katie Uei was at Wednesday’s Nikiski meeting, carrying a map of properties affected by the project plans and talking with attendees who own those properties. Based on conversations with Nikiski residents, Uei doesn’t believe that the LNG project has been buying land for true fair market value and has offered to represent at reduced rates property-owners at the prospective plant site. Uei knew of about 20 properties that the project has yet to acquire, and said many of the owners have taken up her offer.

Unlike some states, Alaska doesn’t require property buyers or sellers to disclose the selling price of a property. Uei said she hasn't seen any of the sales contracts, but has been told they allow the company to renege if the seller discloses the price. After conversing with Nikiski residents, she said she’s estimated the prices of about a third of the lots acquired by the LNG project, and believes they are “pretty significantly all over the board.”

“I notice that the people who were getting significantly less all seemed to be out-of-state owner addresses, and the people that were getting significantly more seem to be more in-state,” Uei said. “Maybe LNG — I like to think they’re an amazing company and an amazing idea, and part of me does — but maybe they’re relying on the fact that maybe there might not be as much knowledge with the person who lives out of state, and the person who lives in-state, right around the corner, knows what’s going on.”

Uei believes the pricing has been sporadic in other ways as well — properties with useful material such as gravel seem to have sold for less than those with the gravel extracted, she said. In future negotiations, Uei said she intends to use her estimates of prices the LNG project has paid in the past to establish a consistent fair value for future negotiations with AGDC.

“It’s not about trying to get millions of dollars from LNG, it’s about the fact that you can’t determine a fair market value if LNG’s not going to disclose what they’re paying for properties,” Uei said. “So I think the nondisclosure they’re using to their advantage, and in return people are getting much less than they deserve — people deserve fair market value.”

Highway Reroute

Some of the land that the LNG plant would need is currently occupied by miles 19.5 to 21 of the Kenai Spur Highway. The AK LNG partners had planned about 11 possible paths for rerouting the Kenai Spur Highway around the future plant. At meetings in Nikiski, the project’s “spaghetti map” showing the superimposed tangle of possible future highways became a target of questioning and concern from nearby property owners, unsure of whether or not a new road might run through their land.

AGDC is no closer to choosing its highway reroute than AK LNG was, but Krusen said the path should be chosen by the time the permitting concludes. Though the highway route is not being permitted by FERC or in the NEPA process, Krusen said it is a “connected action” that will likely have to be made before permitting can finish.

Krusen said planning the highway reroute would follow resumption of land-buying, stressing again that it would be contingent on investment.

“When we get the lands behind us, it will become a very open process, similar to what (the Alaska Department of Transportation) does with a highway,” Krusen said.

Nikiski concerns

Some Nikiski residents at the meeting urged the gasline developers to communicate more closely with local groups. Nikiski resident Alan Bute said AGDC should keep the Nikiski Community Council — a not-for-profit community organization with a seven-member leadership group — informed of its permitting process.

“It’s just kind of another local resource of ours, to keep us in the loop,” Bute said the Nikiski Community Council.

Nikiski Community Council vice-president Katrina Nelson said AGDC had given two presentations to the group since the project had been turned over to state control, the most recent on April 17, which she estimated had drawn about 20 people.

As an unincorporated area, Nikiski is represented through the Kenai Peninsula Borough, one of the nine borough and municipal governments officially involved in the project’s permitting. Some Nikiski residents believe the community should have a more direct involvement.

Vice co-chair Paul Huber of Citizens For Nikiski, a group which in October 2016 applied to Alaska’s Local Boundary Commission to incorporate Nikiski as a municipality, spoke with the AGDC officials after the meeting. Huber said he was “very passionate about the fact that we should have some form of representation for Nikiski,” and believed incorporation would accomplish this goal.

“I’m not convinced the borough would adequately represent us as well as a cross-section of Nikiski,” Huber said. “The borough has a responsibility to the entire borough, and for any one particular area, for them to give it preferential treatment wouldn’t be good, so they’ll have to avoid doing that. Whereas an advisory group from here has the Nikiski community as their sole purpose and sole reason to be here… We do have a unique perspective — if they’re going to plan a route to Kenai, which is our lifeblood into town, I don’t think you should ask someone from the borough in Soldotna how it’s going to affect us.”

In addition to the governments officially participating in the permitting, the LNG project also has a 12-member statewide community advisory committee chaired by Tim Navarre, a Kenai City Council member and Kenai Peninsula Borough School Board member.

ConocoPhillips LNG plant

In a Jan. 23 meeting of the Alaska Senate Resource committee, chair Senator Cathy Giessel (R-Anchorage) asked Krusen whether AGDC is negotiating to buy the existing ConocoPhillips LNG export terminal in Nikiski. The plant began exporting LNG to a pair of Japanese utilities in 1969, but after its long-term contracts with those utilities ended in 2010, the plant’s activity had been sporadic. ConocoPhilips offered it for sale in November 2016.

Krusen called the potential acquisition a “touchy subject,” according to the meeting’s minutes, and did not give Giessel a direct answer, instead speaking on benefits such as an increased standing with buyers and with FERC, if AGDC were to own the facility.

Though the 200 acres of the ConocoPhilips plant overlap with the planned Alaska LNG site, the ConocoPhillips plant is more to the north and has about one thirteenth of the Alaska LNG plant’s projected processing capacity. On Wednesday, Krusen said the ConocoPhillips plant could be advantageous in other ways.

“If it were part of the project, it gives early production possibilities,” Krusen said. “If you get the pipe in before everything else, then you’ve got this existing facility which could make money before the great big facility gets finished.”

Standalone pipeline

Alongside the Alaska LNG project inherited from the previous partnership, AGDC has also planned for a smaller pipeline focused on in-state use rather than export. The Alaska Standalone Pipeline would carry about a sixth of the daily volume of the Alaska LNG pipeline to a tie-in with ENSTAR’s gas system near Wasilla, rather than to a Nikiski export facility, with off-take points in between.

Though Krusen said AGDC doesn’t have a fixed set of criteria for shifting its focus to the Stand-Alone pipeline, it may do so if the Asian LNG market is unfavorable for the larger project, and if Cook Inlet’s local gas supply continues to dwindle.

Reach Ben Boettger at ben.boettger@peninsulaclarion.com.

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