As Biden looks to increase natural gas, Alaska is poised to step forward
Linda F. Hersey, P. A1
Fairbanks Daily News-Miner, March 27, 2022
Alaska’s plans for a $38 billion liquefied natural gas project have gained new momentum with President Biden’s pledge last week to increase European exports to replace Russian fossil fuels.
“Global developments have created a sense of urgency for new projects like Alaska LNG,” said Tim Fitzpatrick, spokesperson for the Alaska Gasline Development Corp.
“Europe has depended on Russia for 40% of its natural gas, and Russia’s invasion of Ukraine created a sudden global energy crisis, as our allies seek energy from the U.S. and other non-adversarial nations,” Fitzpatrick said.
America is the world’s largest exporter of liquefied natural gas (LNG), but existing U.S. production is inadequate to meet new demands by Europe. Alaska’s LNG could help to change that. Alaska’s LNG project would provide cleaner-burning natural gas from the North Slope for domestic use and a rapidly expanding global market, supporters say. Alaskans also would benefit from in-state use.
The state-owned Alaska Gasline Development Corp. projects that North Slope fields can deliver an average of 3.5 billion cubic feet of gas daily, with much of the supply for an international market.
“That is the estimate for our project,” Fitzpatrick said. “The volume of the North Slope is even greater than that.”
Lower development costs for the LNG project may lower the cost of fuel from previous estimates. “Alaska LNG is expected to deliver LNG for approximately $6.70 per MMBtu (one million British thermal units), below the expected price from Gulf Coast projects targeting the same Asian markets,” Fitzpatrick said in an email to the News-Miner.
For gas customers in the Interior and Southcentral, Fitzpatrick estimated Alaska LNG could be delivered for less than $5 per per MMBtu.
Driving the price down are projected lower construction costs for the project and a new finance structure, among other factors, he said.
Supporters say that Alaska LNG can play a role in replacing coal and oil in Asia and Europe as the United States and other nations transition to more use of renewable energy and clean technologies. It also can have a role in moving Europe away from Russian fossil fuels.
“The U.S. has no LNG export facilities on the West Coast, a critical energy infrastructure vulnerability, and all LNG is exported from the Gulf of Mexico or the East coast,” Fitzpatrick said in an interview with the News-Miner. “Bringing Alaska LNG online will enable the U.S. to effectively serve allies in both Asia and Europe.”
Russia is China’s second-largest oil supplier and third-largest gas supplier. Biden said this week that China realizes its economic future is with the West. Biden also warned China against siding with Russia in its attack on Ukraine.
Fully permitted LNG project
Currently, there is no natural gas pipeline to move North Slope gas to market. Gas produced on the North Slope is re-injected to maintain pressure in oil reservoirs.
The long-planned Alaska LNG project is now fully permitted for an 800-mile gas pipeline at an estimated cost of $12.7 billion.
Fitzpatrick said permitting was “an arduous process that took many years and hundreds of millions of dollars in engineering and environmental design.”
Plans for the project call for a $9 billion North Slope gas treatment plant with a liquefaction facility and export terminal in Nikiski to condense the gas for shipment.
An 80% federal loan guarantee included in the newly adopted Infrastructure and Jobs Act that Sen. Lisa Murkowski helped lead through Congress eases the risks for developers.
Fitzpatrick described the Alaska LNG project as one of the most important energy developments planned in the United States. The project, which would support 10,000 Alaska jobs, will take approximately six years to complete. An energy analyst recently lowered the estimated construction cost for the project by $7 billion from an original estimate of $45 billion.
Fitzpatrick said that the Alaska Gasline Development Corp. is quickly working to form a team of infrastructure developers in the private sector to lead the construction and operation of Alaska LNG.
Backed by $26 billion in federal loan guarantees, Fitzpatrick said the Alaska LNG project is both “economically viable and competitive.”
Asked whether Alaska LNG developers will be fossil fuel companies, Fitzpatrick said that large-scale, complex energy projects are most often financed and developed by a “consortium of well-capitalized parties with worldwide experience.”
“AGDC is in discussions with infrastructure developers and owners that build and operate projects like Alaska LNG,” Fitzpatrick said.
Meeting long-term natural gas needs
The Alaska LNG project will meet long-term energy goals that President Biden outlined in Brussels last week.
The U.S. just formed a joint task force with the European Commission with the goal to help European nations reduce dependence on Russian gas. Biden pledged to work with domestic and global partners to make sure that the European Union has the natural gas it needs for next winter.
Natural gas supplies are projected to increase in the U.S., Europe and Asia to meet demand through at least 2040.
“Meeting growing Asian LNG demand with Alaska’s natural gas will enable U.S. Gulf Coast LNG suppliers to focus on serving our European allies,” Fitzpatrick said. “Bringing Alaska LNG online will enable the U.S. to effectively serve allies in both Asia and Europe.”
Prior to Russia’s invasion of Ukraine, Sen. Dan Sullivan released a plan that focused on expanding domestic gas production, including in Alaska, as the U.S. developed its clean energy portfolio.
America leads the world in the decline of carbon emissions since 2005, powered by a greater reliance on natural gas.
Carbon Brief, which covers energy policy, reports that the drop in U.S. CO2 is driven by coal-to-gas switching in the power sector, as well as wind generation, among other factors.
Sullivan called for promoting natural gas exports with China, India and other major polluters that heavily rely on coal. China produces more than a quarter of global carbon emissions, with 60% of its power generated by coal.
Court challenge over Alaska LNG
In 2022, the Alaska LNG project is nearly ready to go. Organizers are working to resolve legal challenges in federal court.
The Sierra Club and Northern Alaska Environmental Center in Fairbanks questioned the U.S. Energy Department’s approval of an environmental impact statement that did not fully examine carbon dioxide emissions.
A supplemental life cycle review was ordered to estimate the project’s impact starting from North Slope extraction and production to consumption by export customers. That work is expected to be done by December.
An initial study by the Alaska Gasline Development Corp. concluded that an Alaska LNG project would have significantly fewer emissions for gas exports than Gulf Coast LNG projects, which have longer shipping routes.
Natural gas on the North Slope would be drawn from existing wells in the Prudhoe Bay and Point Thompson fields, which is less intensive and produces fewer emissions than drilling shale gas wells in the Lower 48.
“Here we sit in Alaska, with the largest stranded conventional gas field in North America. No new wells need to be drilled because we re-inject more gas — that comes out with the oil — back into the ground on the North Slope every day than is consumed in California, Oregon and Washington combined,” Joey Merrick II, a former board member of the Alaska Gasline Development Corp., wrote in an editorial about Alaska’s natural gas resources.
Increase in demand for natural gas is not expected to ease anytime soon. Even before Russia’s invasion, energy analyst Wood Mackenzie forecasted that global demand for natural gas will double through at least 2040, widening a gap between what’s available and demand by consumers.
“Alaska’s LNG supply is the equivalent of about 30% of Japan’s LNG imports or 45% of South Korea’s imports,” Fitzpatrick said. “Meeting growing Asian LNG demand with Alaska’s natural gas will enable U.S. Gulf Coast LNG suppliers to focus on serving our European allies.”
Click here to view or download a PDF of the article.
Contact Linda F. Hersey at 907-459-7575 or at lhersey@ newsminer.com. Follow her at twitter.com/FDNMpolitics.
The Hill: America’s National Security Solution — Energy
An Op-Ed by Alaska Governor Dunleavy
The Hill, March 3, 2022
Alaska is the answer to a number of critical national security questions in our nation’s history. For example, during World War II, the 1,800-mile Alaska highway was built in just eight months to pry open military access to the North Pacific theater. In 1973, the OPEC oil embargo drove up the price of gasoline more than 40 percent; Congress quickly authorized the Trans-Alaska Pipeline and Alaska went on to start producing 20 percent of the nation’s oil.
Energy security equals national security and now Russia’s invasion of Ukraine threatens the world’s energy supply. Europe draws 40 percent of its natural gas from Russia, perhaps why Russia chose to invade in the dead of winter.
And although the U.S. recently became the world’s largest exporter of liquefied natural gas (LNG), serving allies across both the Atlantic and Pacific, our supply is still stretched thin. Today we have limited ability to meet additional European energy needs if the Russian spigot closes. A recent Wall Street Journal report notes “Given that U.S. LNG cargoes have Asian customers, where supply is also tight, there isn’t infinite wiggle room.”
Enter Alaska. Alaska is sitting on one of the world’s largest reservoirs of natural gas but lacks the infrastructure to deliver it to U.S. allies around the world. Every day on the North Slope, enough natural gas is produced to meet the needs of California, Oregon and Washington combined, but it is reinjected into the ground because there is no way to get it to market. Delivering Alaska’s natural gas to Japan, Korea, and other allied Asian markets along the Pacific Rim frees U.S. Gulf Coast LNG providers to focus capacity on our European allies.
Fortunately, there is a lot of recent progress on the Alaska LNG Project to report. A just-completed analysis by Wood Mackenzie concludes that, for the first time, Alaska LNG can deliver LNG to Asia at more competitive prices than LNG from the Gulf Coast. Wood Mackenzie studied improvements made to Alaska LNG over the past five years and determined that Alaska LNG has been able to reduce our cost of supply to Asia by 43 percent.
Wood Mackenzie forecasts that global LNG demand will continue to accelerate through 2050, strengthening the need for new projects like Alaska LNG. Alaska LNG is fully permitted and the state corporation leading development of the project is working with private sector parties to lead and complete the development of its main infrastructure components.
The recent federal infrastructure legislation, passed with bipartisan congressional support and signed by President Biden, includes more than $26 billion in federal loan guarantees for Alaska LNG. Utilizing these loan guarantees will further improve its cost-effectiveness. I applaud our lawmakers for deploying our natural resources for strategic, economic, and even climate reasons.
Natural gas burns cleanly, making it a preferred energy source, particularly in rapidly growing Asian markets confronting air pollution created by other energy sources. Here at home, we see the same air quality problems in parts of Alaska winter after winter. Because of these problems, the American Lung Association identified Fairbanks, Alaska as “The Most Polluted City in the Nation.”
Because energy projects compete on both economic and environmental measures, Alaska LNG commissioned a study to understand the project’s climate impacts. Third-party experts determined that replacing a portion of Asia’s coal use with equivalent energy from Alaska LNG will eliminate 77 million metric tons of annual carbon dioxide equivalent emissions, a 50 percent reduction.
According to the EPA’s Greenhouse Gas Equivalencies Calculator, 77 million metric tons of carbon emissions is the annual equivalent of taking 19 coal-fired power plants offline or removing 16.8 million passenger cars from the road for a year.
Alaska has some of the most stringent environmental regulations in the world, assuring that natural gas will be produced with minimal impacts on wildlife, air, and water versus other parts of the world with looser standards and limited enforcement. Each LNG tanker round trip from Alaska will be about a month shorter than from Gulf Coast ports, further contributing to Alaska LNG’s emissions and economic savings.
Natural gas is a key ingredient for hydrogen production, and the increasing global demand for zero-carbon hydrogen is also fueling progress for Alaska LNG. U.S. policymakers and the private sector are investing tens of billions of dollars over the next few years to drive the creation of new U.S. hydrogen production hubs and carbon capture hubs. Alaska is well situated to compete due to our vast supply of conventional, non-fracked natural gas, unique geologic formations well suited for carbon capture, and established in-state energy industry and environmental oversight.
Vladimir Putin’s unprovoked aggression in Europe will have broad energy and security repercussions well beyond Ukraine’s borders. With Alaska LNG under development, Alaska is ready to keep the U.S. well-positioned as a reliable provider of strategic clean energy for our allies for the next hundred years.
Click here to view the online article.
Elected in 2017, Michael J. Dunleavy is the 12th governor of Alaska. He previously served as a teacher, school board member, and state senator in Alaska.
