Qatargas 4 LNG plant/Shell Qatar photo

By Larry Persily
Special to craigmedred.news

The Matanuska-Susitna Borough is alleging the Alaska LNG project and federal regulators may have violated the National Environmental Policy Act and the federal Clean Water Act by “improperly and intentionally excluding” the borough’s Port MacKenzie as a  “reasonable alternative” for a proposed liquefied natural gas plant.

The Alaska LNG project leadership team more than four years ago selected Nikiski on the Kenai Peninsula as the preferred site for a plant and marine terminal pivotal to state plans for entry into the natural-gas-export business.

The decision came after analysis of more than two dozen possible locations for the facilities in Southcentral Alaska. The $43 billion, state-led LNG project is waiting for the Federal Energy Regulatory Commission (FERC) to set a timeline for an environmental impact statement (EIS) to analyze project alternatives, including LNG plant sites, pipeline routes and river crossings.

One of the key roles of an EIS is to determine the least environmentally damaging practicable alternative for development. The Mat-Su Borough, in a Jan. 9 filing with FERC, asks that the EIS include an accurate assessment of Port MacKenzie, which the borough says is missing from the project’s application.

If done properly, the Borough contends, a LNG study would determine the port is the best option among the alternatives. In a 52-page filing, the borough argues that the Alaska LNG teams erred by analyzing Point MacKenzie instead of Port MacKenzie.

The Borough port property is three miles south of Point MacKenzie on the southeastern edge of the Mat-Su Borough just across Knik Arm from Anchorage. The Borough said the port site, with deeper water and more developable land, is far superior to Point MacKenzie. The Borough included with its filing  a December 2017 report it commissioned from Millcreek Engineering Co. in Salt Lake City.

“Based on this review,” the company’s report said, “it is our recommendation that Port Mackenzie be considered as a viable and possible preferred site.” Millcreek worked on a 2016 update of the borough’s master plan for Port MacKenzie.

The 2013 Nikiski selection

Alaska LNG in October 2013 identified Nikiski on east side of Cook Inlet about 65 miles
southwest of Port MacKenzie as its preferred site for the natural gas facilities needed to liquefy and then export natural gas moved south by pipeline for more than 800 miles from Alaska’s North Slope.

Nikiski was home to the first LNG plant to serve the Asia-Pacific market and for decades exported Cook Inlet gas to Japan. In the 1970s, it became the preferred site for an unsuccessful attempt to export more LNG. FERC in 1978 issued a final EIS for the Western LNG project, a partnership of two California utilities, but the project never went anywhere.vLater, in 1995, FERC issued a final EIS for a LNG project in Valdez proposed by a company called Yukon Pacific. That project also faded away.

No developer has ever applied to FERC for a gas liquefaction plant at Port or Point MacKenzie.

As now planned, about 180 miles of Alaska LNG’s proposed 807-mile natural gas pipeline south from Prudhoe Bay would cross Borough lands on the way to the Inlet. But the project’s preferred route would stay more than 30 miles west of underused Port MacKenzie.

That has been a point of contention for the borough, which wants industrial development at the port.. The port includes a dock and 1,000 acres that could be developed as a LNG plant site, the borough said in its FERC filing.

“This is a formal complaint regarding the Alaska LNG project, whereby the Matanuska-Susitna Borough repeatedly raised a number of issues that were completely ignored and not addressed in any manner,” the borough said in a Dec. 29 letter to FERC’s Dispute Resolution Service.

The borough said it first raised issues with the oil-and-gas producers who led the LNG team. After the companies stepped aside in 2016 and the state took over,
the same issues  were brought up with the state-owned Alaska Gasline Development Corp. (AGDC).

By analyzing the uplands, tidelands and offshore characteristics of Point MacKenzie rather than the superior Port MacKenzie site, the project failed to fairly and adequately consider all options as required by the Clean Water Act and National Environmental Policy Act, the borough charges.

Alaska LNG filings with FERC have consistently cited several reasons the project did not
favor Point MacKenzie for the LNG plant, including vessel traffic conflicts with the Port of Anchorage just across the Arm, shallow water, high shoreline bluffs, and the difficulties of working in a crticial habitat for endangered beluga whales.

Borough wants dispute resolution

The Borough asked for a thorough feasibility analysis of the Port MacKenzie site and the assistance of the federal agency’s Dispute Resolution Service. The dispute office offers voluntary mediation services to help settle disagreements involving environmental, contractual, landowner, and tariff and rate disputes.

This is the first time the Borough has formally raised the dispute with FERC.

In the Jan. 9 motion, the Borough asked that FERC grant it formal status as an intervener in the project application. Such motions were technically due in May 2017, but the Borough argues its late request should be accepted because it believed AGDC would redo its analysis to give fair consideration to Port MacKenzie.  As that did not occur in the Borough’s opinion, it decided to go to FERC for help.

“The borough has consistently argued that siting the liquefaction facility at Port
MacKenzie is the best practical location because it would achieve the objectives of the project and would cause the least environmental disruption,” the Washington D.C.-based attorney for the Borough contends.

As of today, FERC had not ruled on the motion to intervene nor had the Dispute
Resolution Service posted a response in the Alaska LNG public docket.

“Unless AGDC corrects the erroneous facts and analysis contained in Resource Report No. 10 (Alternatives), the commission’s draft environmental impact statement will be based on false and inaccurate information that does not reflect the real world environmental impacts of the project,” the Borough warned.

Granting the last-minute motion to intervene, it also argued, would not delay the FERC process. According to the Borough, there would be “minimal, or no, negative impact to the construction schedule.”  Alaska LNG is, however, reported to be in the latter stages of project design and engineering, and it has done no detailed work on a Port MacKenzie option.

Not the only complaint

The Borough is not the first municipality to challenge the proposed $43 billion project in the planning stage since 2012.

The Fairbanks North Star Borough in 2015 complained the proposed gas pipeline route is too far west of the Central Alaska community’s developed area, thus raising the costs of  bringing gas to residents and businesses.

The City of Valdez in 2015 and again in 2017 challenged the selection of Nikiski as the
best site for the LNG plant and argued that Valdez would be a better location. Valdez, 170 miles east of Nikiski, was the only Alaska municipality to file a formal motion to intervene, however, until the Mat-Su Borough request.

Home to the Alaska oil pipeline terminal, Valdez believes it offers a lower-risk, lower-cost option than Nikiski. Valdez was among the two dozen sites earlier analyzed and rejected by  Alaska LNG.

In a February 2017 filing, the Alaska Gasline Port Authority, an entity backed by Valdez and Fairbanks, also told FERC that Valdez is the better site for a LNG plant. The port authority was created in 1999 in hopes of furthering a plan for a gasline to the Port of Valdez.

The AGDC defended itself against the Port challenge, arguing that it strongly felt “that the site evaluation process was systematic, thorough, and resulted in the selection of liquefaction facility site that best meets the needs of the project.”

The gas liquefaction plant and accompanying marine terminal are the most expensive pieces of the  project. Costs are more than twice that of the pipeline, according to AGDC estimates.

AGDC data collection nears end

Though now forced to deal with the Mat-Su Borough’s heightened push for a change in plans, AGDC is nearing the end of a six-month effort to fill  data gaps and respond
to questions from federal regulators putting together the draft EIS.

After the state submitted a pipeline application to FERC in April, regulators began sending back a stream of questions about the project. They ended up totaling 801 in all.

In its responses to FERC on Dec. 29, the state reported it was down to 13 unanswered data requests. Those have been promised  by Feb. 1. But FERC has consistently reminded the AGDC that it “may be subject to additional data requests.”

The project has taken on a  new urgency since the state took over in 2016. When the formal project application was filed with FERC in April 2017, the state asked for an expedited environmental review in hopes of starting construction in 2019.

With FERC due to begin that review, the AGDC and Gov. Bill Walker have been busy trying to line up investors, partners, customers and a gas supply for the project — all of which are needed before construction could begin.

Once federal regulators decide they have sufficient information to set out a timeline for
the EIS, FERC will issue a Notice of Schedule for Environmental Review to  include a date for issuing as final impact statement. The state is pushing for FERC to issue the final EIS by December 2018.

“To allow for the construction of the project to meet that in-service date (2024), AGDC requests FERC to grant the requested authorization no later than December 31, 2018,” the state corporation said in its cover letter accompanying the application.

Though FERC has not issued a timeline for its environmental review, commission staff and its EIS contractor report they have been working on state responses and additional data. Under federal guidelines, FERC staff directs a third-party EIS contractor, which sends its bills to the applicant (AGDC) for payment.

AGDC staff reported to it board of directors in December that its spending on regulatory work in 2018 would continue at about the rate of 2017 – $1.5 million a month. Total spending, it was reported, would average about $5 million a month 2018, up from a $3 million monthly average in 2017.

AGDC responses to FERC

New information the state provided FERC in December included:

Pipeline impacts. The state submitted 24 pages of schedules showing timelines for pipeline right-of-way clearing, construction and restoration activities, including revegetation. There was also a report on granular fill, such as gravel used for construction pads or temporary roads. FERC asked for more information on fill because of concerns  “the impacts could be permanent.” AGDC responded that “restoration of placed granular fill for temporary-use facilities such as camp pads and temporary roads would occur at the request of the landowner and as discussed in the right-of-way agreement stipulations” with the federal Bureau of Land Management and other landowners.

Wetlands restoration. FERC asked for more details on plans for working in wetlands with questions centering on depth of fill and surface disruptions. FERC also requested a final wetlands mitigation plan. It’s too early for the final plan, AGDC responded. According to the state, The U.S. Army Corps of Engineers, which regulates wetlands, “has advised other (Alaska) projects currently in the permitting stage…that the final
mitigation plan will not be accepted until the final environmental impact statement permitting phase…AGDC will coordinate with the Army Corps (and other appropriate agencies) to finalize the wetland mitigation plan during the final EIS/permitting phase and prior to construction.”

Wildlife. “The evaluation of potential short-term, long-term and permanent impacts on the wildlife resources caused by construction and operation of the project is incomplete, and the evaluation appears to be based on public information contained in Alaska habitat atlases that are outdated,” FERC warned last summer. AGDC defended its work in its Dec. 29 response by saying, “The applicant does not agree with the premise that outdated information was used in the development of project-related wildlife impacts.” The state team added that “the applicant will work with the Alaska resource agencies on measures to minimize impacts to important habitat through the right-of-way permitting process.”

Tourism. The Dec. 29 filing included a pledge AGDC “would work closely with the Alaska
Tourism Industry Association, Explore Fairbanks, Alaska Cruise Association, local chambers of commerce and others to discuss the project construction timeline to minimize impacts and displacement of tourists.” FERC had asked for more details on the project’s potential impact to Alaska’s substantial tourism industry during construction and operations. The state responded that it would consider reducing construction work during the tourism season “to the extent practicable,” and “coordinate with local organizations such as Mat-Su Convention and Visitors Bureau, Explore Fairbanks, Friends of Denali, Iditarod, etc. regarding timing of local activities to reduce conflicts between activities and construction.”

Ports. If the port of Anchorage cannot handle the full volume of construction material and equipment, the project could shift some cargoes to Seward, according to FERC. AGDC’s response included this statement: “There are no required modifications at any of these existing ports (Anchorage or Seward).”

Kenai Spur Highway relocation. AGDC provided detailed information on its route selection process for relocating almost 2 miles of the Kenai Spur Highway away from the LNG plant site. Included was a map showing its two preferred alternative routes. The project team is expected to meet with Nikiski residents in February to discuss the selection process, the alternatives, and the path forward. The highway relocation is controversial in the community, most notably among homeowners who would be in the path of the new highway but there are many upset about the lack of any updates on the route selection process over the past two years. “The relocation project has not advanced into detailed design,” AGDC told FERC. “Once a preferred alternative is selected, detailed design will include intersection details, driveway access, and traffic control both permanent and temporary during construction.” The two preferred alternatives would both move the highway east of the proposed LNG plant. One route is about 5 miles long and other 7 miles, both going through developed and undeveloped parcels.

About the author: Larry Persily is the former publisher and editor of the Wrangell Sentinel newspaper in Southeast Alaska, a former political reporter in the state capital, a former editoral page editor for the Anchorage Daily News, a former deputy commissioner for the Alaska Department of Revenue, the former federal coordinator for the Alaska Natural Gas Transportation Projects, a former consultant to the Kenai Peninsula Borough on taxes and natural gas, and currently the host of “Talk of Alaska” at Alaska Public Media.