Federal agency orders AGDC to consider other gas line terminal locations

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ANCHORAGE (KTUU) - Port Mackenzie, located just north of and across an inlet from Alaska's largest city, may seem at first glance like a fine option for the terminal facility of the Alaska Liquefied Natural Gas project.

That's what some local community members will tell you, too, if not give even better reviews.

"Our dock has handled the largest vessel that's ever set foot in Cook Inlet," said Vern Halter, Mayor of the Mat-Su Borough. "So that's a non-issue. We can handle the LNG plant itself, plus the ships coming in."

However, whether Port Mackenzie is indeed a viable location for an LNG facility or not, when it comes specifically to the Alaska LNG project - the backbone for which is an 800-mile-long, 42-inch diameter pipeline with the capacity to deliver 3.3 billion cubic feet of natural gas daily - Port Mac has hardly been considered by the project's leader.

That is, until now, as the Alaska Gasline Development Corporation has been officially ordered by the Federal Energy Regulatory Commission to evaluate Ports Mackenzie and Valdez - the latter already being the southern terminus of the Trans-Alaska oil pipeline - as potential terminal locations for the state's proposed gas line.

This is despite the AGDC having long touted that the line is set to run from the North Slope to Nikiski.

In a letter dated Feb. 15, 2018, within a series of data request correspondences, FERC officials wrote to AGDC Pipeline Engineering Manager Frank Richards also "reminding" the state group that FERC regulations in implementing the National Environmental Policy Act require applications filed under the Natural Gas Act to include certain information. According to the letter, AGDC has appeared to intentionally have left out the info, though AGDC President Keith Meyer maintains otherwise.

"A letter from FERC is typically a formal thing," Meyer said. "They want to make sure the applicant understands that they want answers to these questions. A number of the questions we feel could be answered during application review, and don't have to be answered now. Some have already been answered. Some we feel we've provided enough info already.

"To the extent they want more info, we can provide that," Meyer said. "But the requests are very detailed."

Federal permit approvals, depend on identifying the least-environmentally damaging, practical alternative for projects like Alaska LNG, known as AKLNG under its previous ownership. The potential benefits of the project, which include but are not limited to the creation of up to 10,000 jobs during design and construction; additional export revenue; and long-term affordable gas supply for power generation, home heating, and other needs, do not exclude any project from that requirement.

"Per these regulations," the FERC author wrote, "I am informing you that any response from AGDC that states, 'the information is not required by the state or other agency and will not be provided' will be considered incomplete and reissued. Incomplete responses and the reissuances of requests for information will affect the schedule for completing the environmental review."

Another section of the letter states that in AGDC's previous responses to requests for study results, "AGDC has stated that because these studies are not required by the state or other entities, AGDC will not provide the information (e.g., sediment modeling, health impact assessment, etc.)."

So what is it about Port Mackenzie that apparently caused it to be entirely omitted from the site selection list? The port in the Matanuska-Susitna Borough underwent neither environmental nor engineering analyses in the AGDC's pursuit of a terminus location.

Meyer said Friday that this is specifically because it's a multi-use port.

"Under the previous joint venture, they discounted Port Mac, because you can't have a multi-use port living in harmony with an LNG facility," Meyer said, referring to the now-dissolved deal between the state, British Petroleum, Exxon-Mobil and ConocoPhillips.

But the mayor of the Mat-Su Borough isn't buying that reasoning.

"This thing about - we're a community port, so we're disqualified? There's nothing in FERC rules that says that," Halter said. "So I think it's kind of a false assertion."

AGDC did evaluate a site near Port Mackenzie, referring to a spot about three miles north up the shoreline as Point Mackenzie, not to be confused with the census-designated place in the Mat-Su Borough.

"There was a fair amount of confusion," said Mat-Su Borough Assemblyman Randall Kowalke. "I was talking to people in Juneau today, and they were bouncing from 'point' to 'port.' I think there was confusion there.

"Again, there's a Point Mackenzie, and it's the other direction from where was evaluated," he said.

The Mat-Su Borough has referred to the so-called Point Mackenzie - again, not the region within the borough, but a small geographical feature up the shoreline from Port Mac - as "arbitrarily named" and "the wrong site." In a Jan. 9 filing, Mat-Su officials also protested the omission of Port Mackenzie from the AGDC's site selection, saying it was "in spite of the fact that AGDC, on numerous occasions over several years and multiple site visits, insisted that Port MacKenzie would be studied as an alternative for the liquefaction facility."

But AGDC officials have said that Point Mackenzie was not the "wrong" site.

"It was certainly not a mistake in the minds of the product developers of AKLNG, when they chose Point Mackenzie, because they'd ruled out Port Mac because of its definition as a multi-use port," Meyer said. "So it was a conscious decision.

"I believe, though, that maybe the Port Mackenzie folks thought that Port Mackenzie and the Port Mackenzie site were being evaluated," he said. "But in fact, it was ruled out early on because of its multi-use nature."

Meyer was unable on Friday to tell Channel 2 what the monetary cost of evaluating Point Mackenzie was, nor could he tell Channel 2 the financial impact of an official evaluation on Port Mackenzie.

Mat-Su Borough officials, though, have cited that the potential LNG facility at Port MacKenzie evaluation could mean the proposed gas pipeline itself would be shortened by 50 miles, avoid the environmental risk of crossing Cook Inlet, and could cost up to $3 billion less.

FERC has requested that a complete response to their own requests be returned to them within 20 days, and noted in its Feb. 15 letter to AGDC that the information requested is necessary in order for FERC to continue preparation of the environmental impact statement draft.

Still, Meyer said, the AKLNG project remains on the straight and narrow, and his hope is that the project is well underway by the end of the year, to the point where third-party funding and investors can be considered. Construction start dates remain projected for the back half of 2019.

"That means we have to get a lot lined up in the front half," Meyer said. "There will be lots of challenges, but we've got a plan and we are marching forward.

"It's a lot of work," he said. "We've got a great team on it, though, so things so far are going very well."