Legislature(2017 - 2018)BUTROVICH 205
03/17/2017 03:30 PM Senate RESOURCES
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| Presentation on Potential Lng Opportunities in Houston, Alaska | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
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ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
March 17, 2017
3:30 p.m.
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator John Coghill, Vice Chair
Senator Shelley Hughes
Senator Kevin Meyer
Senator Bill Wielechowski
MEMBERS ABSENT
Senator Natasha von Imhof
Senator Bert Stedman
OTHER LEGISLATORS PRESENT
Senator Mike Dunleavy
COMMITTEE CALENDAR
PRESENTATION: POTENTIAL LNG OPPORTUNITIES IN HOUSTON, ALASKA
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
ROGER PURCELL, Senior Consultant
East-West Pacific Consulting, LLC
Knikatnu, Inc.
Wasilla, Alaska
POSITION STATEMENT: Testified on the cost and environmental
benefits of cogenerating gas systems.
EDWARD WOODS, Territory Sales Manager
Dresser-Rand of Siemens AG Power and Gas
Germany
POSITION STATEMENT: Proposed building a natural gas facility in
Houston, Alaska, and distributing gas to multiple Alaska
communities and industries.
ANDRE' GONTHIER, Director of Special Projects
Northstar Industries, LLC
Liberty Energy Trust
Conshohocken, PA
POSITION STATEMENT: Proposed building a natural gas facility in
Houston, Alaska, and distributing gas to multiple Alaska
communities and industries.
ACTION NARRATIVE
3:30:03 PM
CHAIR CATHY GIESSEL called the Senate Resources Standing
Committee meeting to order at 3:30 p.m. Present at the call to
order were Senators Hughes, Meyer, Wielechowski, Coghill, and
Chair Giessel. The committee was also joined by Senator
Dunleavy.
^Presentation on Potential LNG Opportunities in Houston, Alaska
Presentation: Potential LNG Opportunities
in Houston, Alaska
3:31:20 PM
CHAIR GIESSEL said the only order of business today was the
presentation on a proposal to bring liquified natural gas (LNG)
to the Interior and other parts of the state, at the request of
Senator Dunleavy. She noted that Dave Nufer and former mayors
Roger Purcell and Verne Rupright were also present. She recalled
that SB 23, passed in 2013, proposed moving LNG by truck from
the North Slope to Fairbanks, and SB 50, passed in 2015,
expanded the scope of AIDEA [Alaska Industrial Development and
Export Authority] to look at other basins for sources of gas,
such as Cook Inlet. Since the passage of the bill, the committee
has been awaiting an update from the administration, which will
come later this session. In the meantime, there are several
proposals of different methods to convey natural gas to the
Interior, and today the committee will hear one of them.
3:31:40 PM
ROGER PURCELL, Senior Consultant, East-West Pacific Consulting,
LLC, Knikatnu, Inc., Wasilla, said this he is a former mayor. He
stated that this a very important issue for the City of Houston
and the entire state.
EDWARD WOODS, Territory Sales Manager, Dresser-Rand, Siemens AG
Power and Gas, Germany, said he is proposing LNG for Alaska and
is supporting the statewide transition from imported diesel to
domestic energy for the state.
3:33:53 PM
MR. WOODS said natural gas is domestic, and diesel is imported.
Gas is also more cost effective and has lower emissions. He
referred to his slide and said natural gas has virtually zero
particulate emissions when compared to coal and diesel. He
explained that LNG is liquified natural gas. A "beach ball"
volume of natural gas chilled to minus 260 degrees would reduce
the volume to the dimensions of a ping pong ball. In its liquid
state, it can be easily transported; it can then be re-vaporized
to its natural gas state for use in natural gas engines and for
cooking and heating appliances.
3:34:07 PM
MR. WOODS said that natural gas is safe and non-flammable in its
liquid state. One could put a lit cigarette into it without
creating a fire, he explained. It requires an intense spark to
ignite. It is non-toxic, and a cookie could be dropped into a
glass of LNG and then eaten. "It vaporizes," he said. It can be
put on water, and when it vaporizes, the water can be drunk.
MR. WOODS said he is here to talk about the technology developed
by Siemens, originally Dresser-Rand. Siemens has a modular gas
liquefaction facility that uses the modular format for gas
clean-up, power generation, and liquefaction, and then "that
liquid gets taken into storage and dispensing, and we're
proposing into ISO-storage tanks," which he will explain later.
3:35:13 PM
MR. WOODS said the bottom line is that it's a scalable platform.
Each "LNGo system" consumes a 100-foot by 100-foot footprint and
can start making liquids within one year of papers being signed.
The system will produce 30,000 gallons per day, he said. When
the need for LNG rises, modules can be added. For engineering,
development, and operation, Dresser-Rand has a relationship with
Northstar Industries of Boston, which is a leader in natural gas
and LNG; "natural gas in the form of metering and manifolding
natural gas compressor stations and so forth." On the LNG side,
they are experts in looking at proposed operations and
dispersion models and safeties for the site development, as well
as the cryo-equipment needed for the hoses to load the ISO-
containers. Northstar Industries is 51 percent owned by Liberty
Energy Trust, an energy equity firm that is looking at projects
such as this for private investment.
MR. WOODS said Houston is the ideal location. It has 1,000 acres
that are zoned heavy industrial, which is appropriate for their
system. He said the LNGo system is quiet; at 72 decibels at 3
feet, his speaking voice is likely louder. It has low emissions,
as it is a half-gram engine driving and powering the site. Also,
the gas that comes in is cleaned up and that clean gas goes into
the liquefaction, so it's high-purity methane, and it is great
for engines and allows stable engine operation over time. The
tail gases are consumed in the power generation, he said, and
they are burned in the half-gram engines. There is no venting or
flaring, he explained.
MR. WOODS said his project would use a portion of the heavy
industrial zone in Houston, and there is rail for transporting
the gas, which will come from multiple sources. "We're looking
at a couple of firms that are operating in the Cook Inlet area
as well as some local coalbed methane resources on the property
and adjacent to it." The presence of the rail doesn't take away
from the availability of the road access where LNG can be put on
trailers and distributed out.
3:38:13 PM
MR. WOODS sees Houston as a hub and the Alaska Railroad as being
the primary spoke for getting the gas to market. He sees
Fairbanks as storage, he said, to support phase 1 and 2
expansions. Phase 1 expansion is targeted be 1 billion cubic
feet per year, he stated, and that is approximately 30,000
gallons a day, which is appropriate to onea LNGo system.
MR. WOODS said worked on power generation with Caterpillar. He
understands that lives depend on those diesel engines for
creating power and keeping people warm. With that in mind,
Dresser-Rand is looking at installing a second LNGo unit into
this project for when components need to be brought down for
service and maintenance. The project would include taking the
LNG to Fairbanks, using that rail as the primary spoke, and
supporting Fairbanks with their phase 1 and 2 expansions to
allow additional customers on that gas network but also use it
as a hub to take LNG out via the road spokes to remote mines and
communities. The LNG could also go south on the rail to the
ports of Whittier and Seward and be put on marine vessels to go
to other mines and communities.
3:40:18 PM
MR. WOODS said that Hitachi has been very instrumental in
supporting the development of ISO-format containers for LNG
tanks. Hitachi has been supporting the distribution of LNG by
rail in Japan for over 30 years and is bringing that experience
to Alaska, he explained. Mr. Woods said he covers the entire US
for Dresser-Rand on the LNGo, and he is very excited to help
support Alaska in being the leader in getting LNG distributed by
rail. He welcomed the opportunity for this to be the model for
the rest of the US.
3:41:16 PM
MR. WOODS said Fairbanks is one potential consumer and may use
[LNG] to generate power. The diesel engines are a trusted source
for the community, he noted. Earlier in the week he talked with
energy managers from over 80 Alaska villages and communities,
and he proposed using Dresser-Rand micro-grid services from
Germany to help better integrate the natural gas power
generation systems as a side-by-side with the diesel generator
sets, leaving the diesel set until it is demonstrated that LNG
can be a source of energy for those communities. To better use
natural gas, he said, they are also proposing that hot water
from the engines be used in a combined heat and power format to
heat community buildings and to support clean water and sewage
treatment plants in the communities.
3:42:52 PM
MR. WOODS said that once LNG is in the communities, a gas line
can be installed for residential use. Industries like mining,
fisheries, and forestry can also use natural gas, he stated.
Diesel prices are volatile and are very high compared to natural
gas. "Coming from a welding shop in Montana, supporting the
mining industry," he surmised that a mine may be looking at
shuttering because diesel prices are too high. Stable natural
gas prices could extend the life of that mine, or it could allow
a new one to open in Alaska.
3:44:19 PM
MR. WOODS said he is proposing the use of a Yanmar natural gas
generator set, 35-kilowatt output, for the smaller communities
and a Dresser-Rand Wascore generator set for larger ones.
3:44:33 PM
MR. WOODS summarized that the technology is available, and there
is this wonderful hub-and-spoke system with a prime location in
Houston, which has cost effective rail to transport that LNG
throughout the state, leading to demand and efficient use for
domestic energy within the state. The benefits are economic, as
well as improved health by reducing the soot and particulate
pollution from diesel engines. From an environmental standpoint,
natural gas has less impacts than diesel. "The pieces are in
place, and we ask for your support in the statewide transition
from imported diesel to the domestic fuel of natural gas."
3:45:37 PM
SENATOR DUNLEAVY asked if he needs funding or tax credits from
the state.
ANDRE' GONTHIER, Director of Special Projects, Liberty Permit
Energy Infrastructure Fund, Northstar Industries, said they are
not asking for financial support now. He said that with the
right contracts, the project can use private investments. As the
business plan is firmed up, the project may consider available
tax benefits, but they are not asking for any special treatment
now. If the use of diesel decreases, subsidies are reduced, and
lower-cost natural gas can enhance the lives of many Alaskans,
he stated.
SENATOR COGHILL said it looks like some of this is contingent on
road and rail access, which are things that the state gets
involved in. He asked if the presenters have talked to the
department of transportation and the railroad. "It looks like
you would have to have some completion on that."
MR. WOODS answered that there is a railroad siting adjacent to
the property, and there is a letter in the committee packet from
the Alaska Railroad that expresses interest in supporting this
project. He said the primary distribution of the LNG is through
railroad, and roads to the site will be used to bring in
equipment. In supporting the Fairbanks natural gas expansions,
there would be zero additional trucks transporting LNG from the
south to Fairbanks with this proposal.
3:49:11 PM
SENATOR COGHILL noted that the railroad is already working on
this, "but there would be a completion factor." He asked about
the sources of gas. Gas supply has been one of the question
marks in Fairbanks.
MR. GONTHIER replied that they have ongoing discussions with
Hilcorp Pipeline Transmission Company, but the negotiations are
still progressing. He has spoken with other land holders who
hold rights to coal bed methane.
SENATOR COGHILL said the Interior Energy Project always says
that gas supply and contracts are imminent, but that talk has
been going on for several months. "That's going to be one of the
tougher points," he added. He said he likes private investments.
He asked about the ISO containers and the current market. What
is available now and what is the lead time to get something that
a railroad could carry? He said he will have to compare the cost
of storing diesel versus gas.
3:50:47 PM
MR. WOODS answered that they are looking at a one-year lead time
from signing of the project to first liquids. They see phase 1
expansion of Fairbanks plus mining and village demand to support
two 30,000-gallon LNGo systems. He said that upon signing of the
project and while preparing the ground; getting the iron in
place, including storage tanks; working with the railroad to get
that completed, which is all very achievable within the stated
timeframe, they would be working with Hitachi to ensure
sufficient ISO containers are available.
3:52:09 PM
SENATOR COGHILL said that was great. They need to be ported in,
he said, and he asked if it would be through Port MacKenzie.
MR. WOODS answered that equipment and ISO tanks would be brought
in by barge, most likely from Seattle to Whittier or Seward, and
trucks or railroad would take them to the job site. The ISO
containers would come from Japan where Hitachi has manufacturing
operations. He added that it would be appropriate to have enough
storage to support the seasonal demand swings, and no storage
volume has been identified yet, but that would be determined by
Northstar Industries.
MR. GONTHIER added that earlier this week, Dresser-Rand
discussed a plan with FNG [Fairbanks Natural Gas] to have an
energy center in Houston with LNG storage, and that it may make
sense to help FNG with their five-day storage requirement. It
would be wise to have one field-directed tank at the hub and a
smaller one up north. The volumes that FNG talked about are much
larger than the ISO container, so it wouldn't make sense for
them to have five-day storage just stacking up those containers.
It would be more economic to have it in a larger vessel.
SENATOR COGHILL said it is nice that the state wouldn't have to
figure out the nuts and bolts; a private investor would. "If
you're willing to take the risk," he said, "I'm game." He liked
the idea of generator sets. He asked about servicing a whole new
storage set and generator set.
3:55:18 PM
MR. WOODS said service, maintenance, and support is in place.
The Yanmar generator set impresses him. It has a one-year
service interval, so it can run one year before it is taken down
for an oil and spark plug change. A larger generator set
requires maintenance every 1,000 hours. For the smaller remote
communities, that one-year service interval is ideal, he stated.
It can be at a time of convenience, at a point of low use, with
minimal or no impact to the community.
MR. WOODS said the larger generator sets have configurations of
"N plus 1," meaning the number of generator sets that are needed
plus one that can be brought down for service. Dresser-Rand has
field service personnel based throughout the state and has rapid
dispatch for support. There is a service team now that takes
care of combustion turbines on the North Slope and have been
known to respond within one day, he said.
3:57:21 PM
SENATOR COGHILL said having natural gas in Alaska is great, but
it is painful for the Interior, because Fairbanks is between two
gas fields. Trying to get a secure supply that is not the last-
in and first-out will always be a problem. He said that FNG has
a contract now, and he asked if Dresser-Rand is in direct
competition with them or in synergy. He said he is fine with
competition to bring down prices, but he is curious.
3:58:14 PM
MR. GONTHIER replied that the project can work with them and
would love to have them as a customer. There are opportunities
to work with them using their existing contracts for supply and
do a tolling-type model, where Dresser-Rand could take FNG's
supplies and liquefy them and deliver them back. Or they can use
the model of being the supplier from start to finish and have a
turnkey delivery back to them. "Right now, we don't want to come
in and say we want to take these guys off the map; we want to
work with them. Our interest is for everyone to benefit here."
MR. WOODS added that Fairbanks is receiving a supply of LNG
right now, but Dresser-Rand is looking at supporting and
facilitating the phase 1 and 2 expansions of FNG. They currently
have a source, but Dresser-Rand is offering additional capacity
so FNG can expand their customer base. The pipe is in the ground
and they are ready to make connections. "So, we can support the
expansion of that gas network, connections within the Fairbanks
gas network, helping bring down the emissions that are plaguing
that area, as well as provide a competitive natural gas for that
community."
4:00:17 PM
SENATOR DUNLEAVY said Roger Purcell asked to meet, and he has
heard a thousand variations of gas projects. He asked Mr.
Purcell what it will cost the state and was told, "Nothing." It
is hard to believe, but the project won't cost the state
anything. He said they talked about the ISO shipping containers
that have been used in Japan for 30 years, and the concept
became even more intriguing, because gas does not have the 12
percent CO2 like on the Slope-it's almost pure gas. Houston is
not that far from the source of the gas, and it is an industrial
area. He said he liked the idea of moving propane to villages on
barges, but he doesn't know how long the containers would last.
Also, if the state has a large-diameter pipeline, there might
not need to be certain take-outs, which could lower costs and
increase revenue for overseas shipping. They could potentially
have two gas concepts going on in the state: one coming from
Cook Inlet going north by train and truck and one going south
for export. In the end, there is no cost. Going all the way to
North Pole with a container instead of building out pipe to
Fairbanks is an intriguing concept and kind of hard to believe
that there will be no cost.
4:03:03 PM
SENATOR HUGHES said she appreciated their presentation and asked
what they envision for the rest of the state. What percentage
might be going to Fairbanks and to other communities?
MR. WOODS said the term for moving LNG out to communities is the
"virtual pipeline." Relative to propane, LNG has important
values. Propane boils at -25F and can be used for cooking and
heating above that temperature. But with lower temperatures, the
propane tank needs supplemental heating.
NR. WOODS said that the capacity of the LNGo system is 30,000
gallons a day per unit, and the Fairbanks phase 1 expansion is
to be one billion cubic feet per year, which translates into
approximately 30,000 gallons per day. So, one system would
support Fairbanks-the anchor tenant-and a second unit would
support other communities in Alaska. There would be seasonal
swings, so there may be some up and down. Further on they may
say, "We're going to have a base demand in Fairbanks, and we're
going to look at that rail corridor, and we're going to go out
200 miles beyond that rail corridor by road. Let's call that
zone 1." It will have easy access, it will be relatively easy to
develop, he explained, and it will have year-round loads to take
care of those communities. There is then getting the LNG down to
the ports and distributing it by vessel to remote communities
out past Kodiak and 300 miles to the west, supporting coastal
communities and industries.
4:06:07 PM
MR. WOODS referred to iced-in communities, like Bethel and Nome,
which will require a strategy. That is still being modeled but
may include building a storage tank or storing ISO containers,
but every effort will be made to get LNG out to those customers.
SENATOR HUGHES asked Mr. Purcell about the monthly savings from
the system.
4:07:14 PM
MR. PURCELL said Knikatnu installed a Yanmar 35 cogeneration
power plant seven months ago, and electric bills went down from
a high of $4,500 per month to $201 last month. It produces not
just electricity, which dropped below $.08 per kilowatt hour
(kwh) from $.19, but it also creates about 200 gallons per
minute of 190-degree water, so now the building is heated with
that water. "So, actually our costs of energy for manufacturing
it did not go up substantially enough to make a difference; it's
the great decrease of the actual electricity." It is running in
Wasilla and is proving itself. It has lasted the whole winter,
he said, which was 20 percent colder than previous years. There
are also two systems in Yakutat using propane, and prices went
from $.43 per kwh down to $.10, plus the heat, he noted. That
has been running over a year now. So, these cogeneration
machines have been tested and are working well. "It is being
looked at," he said, in a lot more locations throughout the
state. He said to imagine schools, hospitals, and clinics
reducing energy consumption in rural areas or even in Mat-Su,
where more teachers could be employed with the savings.
SENATOR HUGHES said that is what she was thinking, because that
is one of the huge costs of education. "I would love to see
natural gas in these communities-and these units," she added.
4:09:23 PM
There being no further business to come before the committee,
Chair Giessel adjourned the Senate Resources Committee meeting
at 4:10 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Agenda-3-17-17.pdf |
SRES 3/17/2017 3:30:00 PM |
|
| 1. SRES - Letter on Houston AK LNG Project - 3 - 16 - 17.pdf |
SRES 3/17/2017 3:30:00 PM |
LNG |
| 2. SRES - Presentation on Houston AK LNG Project - 3 - 17 - 17.pdf |
SRES 3/17/2017 3:30:00 PM |
LNG |