Legislature(2021 - 2022)BUTROVICH 205
04/06/2022 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Alaska Gasline Development Corporation Liquefied Natural Gas | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 177 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 228 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
April 6, 2022
3:34 p.m.
MEMBERS PRESENT
Senator Peter Micciche, Vice Chair
Senator Gary Stevens
Senator Natasha von Imhof
Senator Jesse Kiehl
MEMBERS ABSENT
Senator Joshua Revak, Chair
Senator Click Bishop
Senator Scott Kawasaki
COMMITTEE CALENDAR
ALASKA GASLINE DEVELOPMENT CORPORATION LIQUEFIED NATURAL GAS
(LNG) PRESENTATION
- HEARD
SENATE BILL NO. 177
"An Act relating to microreactors."
- RESCHEDULED TO 4/8/2022
SENATE BILL NO. 228
"An Act requiring the designation of outstanding national
resource water to occur only by statute; relating to the
management of outstanding national resource water by the
Department of Environmental Conservation; and providing for an
effective date."
- SCHEDULED BUT NOT HEARD
WITNESS REGISTER
FRANK RICHARDS, PE; President
Alaska Gasline Development Corporation
Anchorage, Alaska
POSITION STATEMENT: Co-presented a PowerPoint on Alaska LNG.
NICK SZYMONIAK, Manager
Venture Development
Alaska Gasline Development Corporation
Anchorage, Alaska
POSITION STATEMENT: Co-presented a PowerPoint on Alaska LNG.
ACTION NARRATIVE
3:34:00 PM
VICE CHAIR PETER MICCICHE called the Senate Resources Standing
Committee meeting to order at 3:34 p.m. Present at the call to
order were Senators Stevens, Kiehl, von Imhof, and Vice Chair
Micciche.
^Presentation: Alaska Gasline Development Corporation Liquefied
Natural Gas
Alaska Gas Development Corporation
Liquefied Natural Gas
3:34:45 PM
VICE CHAIR MICCICHE announced the consideration of the Alaska
Gasline Development Corporation Liquefied Natural Gas
presentation.
3:35:49 PM
NICK SZYMONIAK, Manager, Venture Development, Alaska Gasline
Development Corporation, Anchorage, Alaska, introduced himself.
3:35:51 PM
FRANK RICHARDS, PE; President, Alaska Gasline Development
Corporation, Anchorage, Alaska, stated that when the AGDC
enabling legislation passed the legislature, it directed AGDC to
provide updates three times per year to the House and Senate
Resources Committees.
3:36:16 PM
MR. RICHARDS reviewed slide 2, Alaska LNG System, consisting of
a map of Alaska showing the location of the North Slope Gas
Supply & Gas Treatment Plant (GTP), the Natural Gas Pipeline,
and the Alaska LNG Facility, and bullet points.
[Original punctuation provided.]
North Slope Gas Supply
• 40 Trillion cubic feet (tcf) of discovered,
conventional, and developed North Slope associated
gas from Prudhoe Bay and Point Thomson
• This gas is stranded and can be produced at a low
incremental cost
Gas Treatment Plant
• Located in Prudhoe Bay adjacent to existing gas
plants
• Removes and uses/sequesters carbon dioxide (CO2)
and hydrogen sulfide (H2S) from raw gas stream
Natural Gas Pipeline
• 807-mile pipeline from Prudhoe Bay to Nikiski,
following TAPS and highway system
• Provides gas to Alaskans and LNG facility
Alaska LNG Facility
• 20 Million tonnes per annum (Mtpa) LNG facility
located in Nikiski, near existing infrastructure
and legacy Kenai LNG plant
• Converts natural gas to LNG for export to Asia
3:36:13 PM
MR. RICHARDS reminded members that the Alaska LNG Project speaks
to an LNG system that has the ability to commercialize the
natural gas resources found on the North Slope. He stated that
this consists primarily of methane that comes from Prudhoe Bay
and Point Thomson units representing about 40 trillion feet
(tcf) of proven reserves, or gas produced on a daily basis. It
comes up with oil and water, is captured, compressed, and pumped
into the reservoir for gas cap pressurization. He highlighted
that Point Thomson hydrocarbons are stripped out and the gas is
repressurized and pumped into the reservoir. He indicated the
state's goal was to commercialize its gas to enhance state
revenues but ultimately to provide for lower-cost energy for
Alaskans for Southcentral and Interior Alaska, including the
Fairbanks North Star Borough. Further, those not able to tap
into the pipeline would receive benefits from a revenue stream,
through an In-state Energy Fund that could meet the needs of
energy projects not part of the gas pipeline route.
3:38:01 PM
MR. RICHARDS stated that the 40 tcf represent the 20 million
tonnes per annum (Mtpa) that could be produced at a liquefaction
facility. However, to do so requires removing carbon dioxide
(CO2) and hydrogen sulfide (H2S) impurities from the oil
reservoirs. He indicated that would be captured in a gas
treatment plant (GTP) at the Prudhoe Bay operating complex,
piped to the reservoir and reinjected. Other jurisdictions allow
the CO2 to be vented, but in keeping with the environmental
"green" perspective, it was always envisioned and designed to be
sequestered and reinjected.
MR. RICHARDS explained that the Natural Gas Pipeline would
parallel the Trans-Alaska Pipeline System (TAPS) for the first
407 miles, turn south and parallel the Alaska Railroad and Parks
Highway before crossing Cook Inlet and terminating in Nikiski at
the site of a new LNG facility. The facility would produce up to
20 Mtpa destined for Asian markets. He highlighted that they
would have a seven to nine day shipping window so it is not
effective to ship elsewhere. The legislature directed AGDC to
make gas available to Alaskans so 500 million cubic feet (MCF)
would be reserved to meet Alaska's energy needs at lower costs.
3:40:21 PM
MR. RICHARDS reviewed the bullet points on slide 3, Alaska LNG
Status. The slide depicted a globe showing the proposed shipping
route from Alaska to the Asia Pacific.
Strong Economics
• Alaska LNG has lower costs than its key
competitors
• Cost of supply independently verified
Fully Permitted
• Federal government has approved construction of
Alaska LNG
• Acquiring permits took significant effort and
they are valuable
Environmental Benefits
• Alaska LNG will reduce global greenhouse gas
emissions
• LNG will continue to be an important energy
source
3:40:40 PM
MR. RICHARDS stated that the Alaska LNG project has been deemed
an economic and competitive project. Wood Mackenzie, a global
research and consultancy firm, provided their independent
economic analysis to the legislature yesterday, and deemed the
Alaska LNG project as an economic, competitive project for the
Asian market.
MR. RICHARDS reviewed the permitting status and environmental
benefits as shown on the bullet points. AGDC received federal
permitting authorizations from the Federal Energy Regulatory
Commission authorization to construct the project, and the
Department of Energy's approval to sell Alaska's LNG to free-
trade and non-free-trade countries. AGDC was granted the rights-
of-way from the Bureau of Land Management, National Park Service
and the Alaska Department of Natural Resources. The project is
one of the lowest carbon-intensive projects in the world. LNG
will replace coal in Asia as a power source, which could
substantially reduce CO2 emissions from their power plants.
3:42:28 PM
SENATOR VON IMHOF inquired about the map on slide 3 showing an
ice-free arctic.
MR. RICHARDS answered that it shows the Arctic Ocean and the
Beaufort Sea but it was not ice free yet.
SENATOR VON IMHOF suggested that drawing a line between Prudhoe
Bay and Scandinavia, the distance would be about the same as the
Asia Pacific route. She wondered if using icebreakers would
result in a much faster trip.
MR. RICHARDS replied that it would take substantial icebreakers
to use that route.
3:43:44 PM
MR. RICHARDS reviewed slide 4, Strong LNG Market, including the
line graph and bullet points. He noted that Gas Strategies, a
natural resource consulting firm based in London, forecasts
mirrored work done by BP, TotalEnergies, and other international
oil companies. He directed attention to the gray area depicting
the supply and the line graph projections of the future LNG
demand. The two scenarios incorporate the net-zero targets that
Asian countries need to reduce their CO2 emissions. The green
line shows the decarbonization demand scenario Asian countries
would meet by their 2050 target dates. The black line shows a
partial transition to the decarbonization, and the horizontal
bar shows how the Alaska LNG project fits in the demand curve.
He highlighted that it represents a small amount of the demand.
[Original punctuation provided.]
LNG Market is Still Growing
• Demand growth will outpace current and planned
LNG capacity
• LNG growth expected as part of energy transition
as natural gas emits half the greenhouse gasses
as coal
Investors and Buyers want LNG
• New LNG projects expected to be sanctioned in
2022
• Most new projects have some degree of energy
transition planning
"?raising capital for these very capital-intensive
[LNG] projects has not really been that much of a
challenge to the industry. I think that sends a strong
signal of confidence that this [LNG] is going to be
around for a while." -Dan Brouillette, President of
Sempra Infrastructure on NPR's Marketplace (Jan 3,
2022)
3:46:11 PM
MR. RICHARDS directed attention to a quote on the slide from Dan
Brouillette, President, Sempra Infrastructure that signaled the
company's confidence that LNG has growth opportunity.
3:46:57 PM
SENATOR VON IMHOF commented that some projects yield higher
returns because they are less complicated. Having served on the
committee for six years, she had seen AGDC's LNG presentation.
She said global supply and demand appears more promising than
ever, although it is still costly in Alaska. She indicated it
was significant that rather than solely relying on China's
funding, the Alaska LNG project would provide a mixture of
public and private and domestic and international funding
sources from federal government loans.
MR. RICHARDS suggested that she was referring to the federal
loan guarantee program.
SENATOR VON IMHOF said borrowing is expensive. She indicated
that she did not like AGDC's prior reliance on China's
financing, so she found the financing changes significant.
MR. RICHARDS responded that a later slide would demonstrate the
non-recourse toll model. Mr. Szymoniak would explain how this
has reduced costs making the project competitive.
3:48:35 PM
VICE CHAIR MICCICHE commented that he recently attended some
meetings in New York City and learned that while the largest
banks are no longer lending on heavy oil, Arctic natural gas was
not included in their policy statements.
3:49:35 PM
SENATOR VON IMHOF asked whether the concern was about the
commodity being extracted but not about the infrastructure
required to extract either commodity.
VICE CHAIR MICCICHE characterized the lending issues as anti-
Arctic National Wildlife Refuge related to a single commodity:
oil.
3:51:21 PM
SENATOR KIEHL stated that natural gas is an effective fuel to
replace coal-fired power, the highest carbon-intensity power.
Thus, bringing gas on to replace coal in the US or China can
obtain a significant benefit. He surmised that was the reason
banks were willing to consider participating in gas projects but
not oil projects.
VICE CHAIR MICCICHE responded that when he tried to permit
projects in the Lower 48 in his previous career, intervenors
such as the Sierra Club were equally against natural gas
projects and oil projects. He offered his view that there are
levels of oil and gas production opposition, with some against
everything, and others only opposed to heavy oils. He
acknowledged that not all projects have the same carbon
footprint.
3:53:21 PM
MR. RICHARDS reviewed the future of Asia Energy Security.
• As a result of the war in Ukraine, the US LNG
destined for Asia has been diverted to Europe.
• Europe is rapidly building new LNG import capacity
to reduce its dependence on Russian gas, new LNG
from the Gulf Coast will meet this future demand
• This dynamic increases the need for US supply from
Alaska to meet the long-term energy security needs
of Asia
MR. RICHARDS highlighted that the market would rebalance and may
provide an opportunity for Alaska to meet the needs of US allies
going into the future.
3:55:31 PM
MR. RICHARDS reviewed the graph and bullet points on slide 6,
LNG Prices in Uncharted Territory. This slide depicted a graph
showing the Japanese Korea Marker (JKM), showing the spot price
in Asia, and Title Transfer Facility (TTF), which provides a
Netherlands-based spot price. He pointed out that these markers
were parallel until December, then diverged. The LNG spot prices
were $8 in January 2021 but rose to $36 in Europe and $34 in
Asia and continue to rise, which creates an opportunity for gain
for those producers.
Fear of Cuts to Russian Gas Supply
• The push to shift LNG to Europe drove LNG spot
prices higher
• On March 7, LNG into Europe was trading at over
$70/MMBtu (over $400/bbl oil equivalent)
• Prices remain above $30/MMBtu ($170/bbl oil
equivalent)
• This is driving buyers back to the long-term
contracts needed to underpin Alaska LNG
3:57:31 PM
MR. RICHARDS reviewed slide 7, Focus on US LNG for Energy
Security, consisting of a US map. He reviewed the status of
North American LNG Export Terminals that were approved but not
yet built.
[Original punctuation provided.]
US LNG Can Replace All Russia Gas to Europe
• 15 Billion cubic feet/day (Bcfd) of gas delivered
from Russia to Europe
But It Will Take Time
• 3.7 Bcfd of LNG is under construction in the Gulf
Coast
• Another 24.9 Bcfd is permitted for construction in
the Gulf Coast
• Alaska, at 2.63 Bcfd, is the only Pacific Basin
project permitted for construction that stands
ready to meet the needs of Asian buyers.
3:58:25 PM
SENATOR KIEHL pointed out that Alaska was not the only country
developing LNG. He wondered about the global supply outlook and
the growing need in Europe or other markets.
MR. RICHARDS answered that a later slide would compare the
competitiveness of the Alaska LNG project with greenfield
projects coming online.
SENATOR KIEHL asked whether he could also discuss the quantity.
MR. RICHARDS answered that he could do so in general terms.
3:59:08 PM
MR. RICHARDS reviewed the Market Impact on Alaska LNG, including
the record high LNG prices, the role of LNG in national
security, and how using natural gas as bridge fuel has created
an impact on Alaska LNG
MR. RICHARDS stated that AGDC attended CERAWeek hosted by
Cambridge Energy Research Associates (CERA) in Houston, Texas,
where he discussed the Gulf Coast Projects. He stated that the
LNG investors and developers have had increased interest in
Alaska LNG's fully-permitted project on the West Coast. He noted
that the recent interest indicates that these investors have
been conducting due diligence on the Alaska LNG project.
4:00:19 PM
SENATOR VON IMHOF related her understanding that natural gas is
considered a bridge fuel to hydrogen. She noted that blue,
green, and gray hydrogen all require separating and liquefying
at extremely low temperatures, which are subsequently shipped
via a pipeline. She related a scenario in which the state built
a natural gas pipeline, but 10 years from now, the state wants
to switch it to green hydrogen. She asked if technology was
being considered regarding natural gas as a bridge fuel. She
wondered if it made sense to build a pipeline that can
accommodate multiple fuels.
MR. RICHARDS answered that AGDC has been considering hydrogen.
He explained that it was it easier to move the methane molecules
to Cook Inlet tidewater since it is ice-free water for shipping,
and adjacent to the Cook Inlet Basin. He explained the process,
using the methane molecule to create blue hydrogen by stripping
off one of four carbon atoms, which could be sequestered into
the Cook Inlet Basin. He said a readily available carrier of
hydrogen is ammonia, so an existing urea ammonia plant, Agrium
Ammonia Urea Plant in Kenai could be restarted to create a
supply of methane. It could be expanded to produce ammonia or
methanol to meet the customer's needs. Ultimately, shifting to
green hydrogen, which is essentially the electrolysis of water,
would mean using a renewable energy source to break the water
into its molecules. The infrastructure would be in place to pipe
it to a ship to move to market or for producing energy in
Alaska.
4:03:14 PM
SENATOR VON IMHOF noted the hydrogen blue energy would be
located at Cook Inlet tidewater rather than at Prudhoe Bay. She
surmised there was substantial natural gas in Cook Inlet, but
Prudhoe Bay also has natural gas. She wondered if the state
wanted to extend the life of the investment beyond 30 years if
the technology exists to move ammonia or methanol in an LNG
pipeline.
VICE CHAIR MICCICHE answered that cryogenic pipelines are
immensely expensive to construct. He related his understanding
that Mr. Richards had indicated that the gas would move from the
North Slope to Cook Inlet to process it into ammonia or
hydrogen. He noted that tankers could move the cryogenics at a
reasonable cost but pipelines cannot.
4:05:13 PM
MR. SZYMONIAK reviewed slide 9, Wood Mackenzie Cost of Supply.
He provided background information, such that in 2016, the state
partnered with Conoco Phillips, Exxon, and BP to advance Alaska
LNG. The group jointly hired Wood Mackenzie to do a third-party
independent analysis of the project economics. In 2016, those
economics for a producer-led project, producer capital and
equity, using a traditional LNG business model indicated that
Alaska LNG was uneconomical with the cost of supply ranging from
$11 to $12. The producers turned over the project to the state
and the state has continued to advance the project. The main
achievement was securing major permits to construct the project,
refine the capital cost and modernize the business structure.
AGDC adopted a Non-Recourse Finance, which is a well-proven
financing model. It has been used to finance every major
pipeline other than TAPS in many generations. However, it was
relatively unusual for LNG plants at that time. Since 2016, the
Tolling Model has been used to finance every new LNG plant in
the US. The US became the world's largest exporter of LNG in
December. AGDC has spent the last year bringing this project to
the point of seeking private investors. Further, AGDC has
brought in a pipeline party to lead the pipeline portion of the
project. AGDC decided to hire Wood Mackenzie to update their
independent economic analysis of the Alaska LNG project. He
reported that the Alaska LNG project is economically viable due
to changes in the cost refinement and the business structure.
4:07:23 PM
MR. SZYMONIAK directed attention to the green bar on slide 10,
Wood Mackenzie Cost of Supply (CoS) representing the 2016 Alaska
LNG cost.
MR. SZYMONIAK said CoS is now 43 percent lower than in 2016 due
to lower capex and feedgas price, and the use of a non-recourse
debt funded third-party tolling structure.
MR. SZYMONIAK stated that the big difference is the oil and gas
companies like to earn a high return and are willing to take on
risk. The investors understand that in years of high prices,
they will make more money, but it's possible that prices will be
low.
4:08:00 PM
MR. SZYMONIAK reviewed slide 10, Wood Mackenzie Cost of Supply.
Slide from 2022 Wood Mackenzie Alaska LNG Competitiveness
Analysis.
MR. SZYMONIAK noted that pipeline companies have much lower risk
and are paid for pipeline capacity, whether the product prices
are high or low, or if the product is moved. Oil and gas
companies built every LNG plant until 2016. In 2016, Wood
Mackenzie decided to apply the pipeline business model to LNG
plants, which dramatically brought down the cost of LNG plants.
The buyers paid the same amount to the LNG companies regardless
of the product price or if the LNG was used. This dramatically
reduced the cost of liquefying the natural gas, which is shown
in the first red bar. The second red bar represents the capex
cost reduction to $38 billion, and the third red bar represents
the reduction of feed gas costs. He noted that Wood Mackenzie
had estimated the cost of gas on the North Slope would be over
$2. Since then, AGDC has worked closely with the producers,
including signing binding agreements with BP and Exxon and
advancing discussions with Conoco Phillips. The assumption that
the price of purchasing raw gas from Prudhoe Bay and Point
Thomson would be $1 per metric million British thermal unit
(MMBtu) is being negotiated and is not firm, and the $1 - $1.50
sensitivity analysis Wood Mackenzie used is indicative of the
prices that the producers committed to in the past.
MR. SZYMONIAK highlighted that shipping costs of $.066/MMbtu
were largely unchanged, resulting in LNG delivered to Asia at
$6.70.
4:09:58 PM
SENATOR KIEHL stated that there is one other owner of North
Slope gas, the royalty owner, who is accustomed to reviewing the
market value of hydrocarbons. He asked whether this proposal
would require the state to agree to roughly $1.15 per MMBtu,
regardless of the market price.
MR. SZYMONIAK indicated that question has to be resolved with
the state and the producers. He noted that in terms of market
value, it was possible to calculate the well head price based on
the LNG price. However, with independent third parties owning
the entire system, they will buy natural gas from the three
producers on the North Slope but not market their own LNG. That
creates an arms-length transaction on the North Slope that
results in a fair market price. If the three producers feel like
the market price of their raw natural gas is $1 - $1.50, it
establishes the market price of the value of the North Slope
gas. It could potentially help streamline the valuation process
for DOR.
4:11:35 PM
MR. RICHARDS commented that the state would ultimately decide
whether it wants to receive its royalty in-kind or in-value.
SENATOR KIEHL suggested that the producers may have an interest
in the state using the same rules they use. It would be
interesting to evaluate the finances of the new proposal and
determine how it impacts the treasury. On the one hand, if it is
on the North Slope, there is no royalty value to the treasury,
but if is sold at less than market value, Alaskans may object.
MR. RICHARDS commented that Alaskans also like to receive their
natural gas at the lowest cost possible.
SENATOR KIEHL expressed his interest in ensuring that the
natural gas would be available to rural Alaskans and residents
in Kotzebue, Kodiak, and Ketchikan.
4:13:06 PM
VICE CHAIR MICCICHE commented that a reduced value of zero is
pretty low. He said it is something that will need to be
discussed as any projects move forward.
4:13:19 PM
SENATOR VON IMHOF commented that it would be good if it came to
fruition because LNG could provide an excellent asset and an
economic boom for this state. She pointed out that in the past
24 months the cost of labor and materials, such as steel, have
gone down, but prices are going up because of supply chain
issues. She expressed concern that the costs are volatile and
could easily change. She wondered if AGDC could develop best and
worst case cost scenarios and who is responsible for rising
costs. She asked whether AGDC negotiated the property taxes for
the pipeline and if they could be set aside or suspended.
MR. RICHARDS answered that Wood Mackenzie's report included a
tornado chart that addressed cost overruns. He recalled that a
15 percent cost overrun would add $.70 to the cost of supply,
going from $6.70 to $7.40. The outlook going forward still was
$1 - $2 below the market, so there would still be an opportunity
for the state. All other greenfield projects would be facing the
same types of inflationary impacts.
4:15:57 PM
VICE CHAIR MICCICHE asked whether the state would have to beat
the price of every producer of LNG in the world in order to be
competitive.
MR. RICHARDS answered that AGDC wanted to develop an economic
project as least risky as possible. The project capital costs
projections include contingencies for cost overruns. It would
also depend how risk would be allocated for the cost overruns.
If the state wants to retain ownership it would be subject to
some risk. However, Alaska does not have to beat the best price.
As the Asian buyers of LNG looked for diversity and supply, they
would be able to determine AGDC has a project that fits within
their supply and cost goals.
VICE CHAIR MICCICHE stated that there is X amount of demand
and the lowest cost LNG can only supply a portion of that
demand. He asked if it was correct that as long as AGDC was
within a profit of margin, it would have a marketable project.
MR. RICHARDS answered that was correct.
4:17:24 PM
MR. SZYMONIAK added that it was the cost of supply but it was
not necessarily AGDC's selling price for its LNG. For instance,
if the eventual investors taking over the project are able to
sell at a higher price; that is to their advantage, the state's
advantage, and potentially increasing the well head price. For
instance, if the state could sell Alaska's LNG above $6.70 per
MMBtu it should do so.
MR. SZYMONIAK reviewed the breakdown of the new optimized CoS of
$6.70 bard chart cost shown on slide 11, Wood Mackenzie Cost of
Supply. He said shipping costs of $.76 is one of the state's
best advantage since shipping costs for US Gulf Coast LNG to
Asia can reach $2.00. The $2.24 in liquefaction costs was
comparable to liquefaction costs of other LNG plants in the US
Gulf Coast using the same business model. Since Alyeska Pipeline
Service Company verified and valuated the pipeline costs of
$1.50, AGDC feels comfortable using them. The GTP costs of $1.16
were based on the LNG Plant and Alyeska Pipeline's business plan
model. He pointed out the $1.15 cost of feed gas includes the $1
purchase price and $.15 for fuel. The new optimized cost is
estimated to be US $6.7/MMBtu.
MR. RICHARDS directed attention to the three key elements shown
on the lower portion of the bar graphs, the raw gas and fuel
price, the GTP, and the pipeline costs of $4 represents the cost
of gas to Alaskans. He emphasized that the lower cost of gas to
Alaskans was beneficial.
4:19:18 PM
MR. SZYMONIAK reviewed slide 12, Wood Mackenzie Cost of Supply,
which consisted of three bar chars comparing Alaska LNG, US Gulf
of Mexico Low End, and US Gulf of Mexico High End. With the cost
optimization and new debt structure, Alaska LNG is competitive
against US Gulf Coast LNG Projects. He stated that Wood
Mackenzie used US Gulf Coast for comparison because it is
largely recognized that the US Gulf Coast is the marginal
supplier of LNG in the world.
MR. SZYMONIAK highlighted that because the Alaska LNG MMBtu
capacity charge or liquefaction charge of $2.25 falls between
the $2 - $2.5 MMBtu charges for the US Gulf Coast low end and
high end, it means AGDC can deliver LNG to Asia for
significantly less. He offered his view that this margin is a
bit wider since the price of Henry Hub has increased from $3 -
$4 to over $5 - $6 today.
4:20:07 PM
MR. SZYMONIAK reviewed slide 13, Gas for Alaskans, which
included a line graph showing the Alaska LNG versus historic
Cook Inlet Natural Gas prices. He said that AGDC was created to
supply natural gas to Alaskans. He reviewed the bullet points.
Low-Cost Gas for Alaskans
• The Alaska LNG in-state price is estimated to be
between $4 - $5 per MMBtu
• Significant reduction from current prices, saving
Alaskans hundreds of dollars per year
Enough Gas for Alaskans
• The pipeline is designed to supply more natural gas
than the LNG plant needs
• Enough capacity for in-state demand to more than
double
MR. SZYMONIAK stated that the heating bills for Anchorage,
Matanuska-Susitna Valley (Mat-Su), and Kenai Peninsula residents
would be reduced by half and their electrical bills would also
be significantly reduced. Savings for Fairbanks residents would
be even higher for those residents who could access natural gas.
Currently, fuel oil is higher than $30 per MMBtu. Low-cost
energy is essential but equally important is long-term energy
security. New businesses and industries moving to Alaska need to
know that energy costs would be consistently low for the next 50
years and any risks of Cook Inlet natural gas decline would be
mitigated.
4:21:37 PM
MR. SZYMONIAK reviewed slide 14, Alaska LNG vs Competitors. Some
of the LNG projects on the right side of the slide show that
some competing LNG projects have a much lower cost of supply,
but typically sell an oil-indexed link and Alaska can come in at
a lower price. He offered his view that AGDC is competitive and
has a lower cost than the margin supplier for most other LNG
projects in the world.
MR. SZYMONIAK stated that most LNG is based on the cost of crude
oil. A typical percentage would be 12 percent times Brent
resulting in $12 gas. Sometimes it fluctuates above or below the
$6.70 price. The US Gulf Coast is based on Henry Hub plus a
differential for the liquefaction plus shipping.
MR. SZYMONIAK directed attention to the chart on slide 14 that
was received positively by potential LNG buyers who would like
to have a portion of their LNG purchase portfolio not be exposed
to oil and gas pricing.
4:22:55 PM
MR. RICHARDS responded to Senator Kiehl's question about
competitors. He stated that Qatar's LNG expansion would increase
its liquefaction capacity to about 100 million tons per year
(MTPA) of new production, which is why it has a low cost. The US
Gulf Coast production has about 220 MTPA that has been permitted
but is not under construction.
4:23:26 PM
SENATOR VON IMHOF asked why most of the bar graphs on the right
side of slide were higher than Alaska LNG and if it meant PNG,
Western Canada, and US Gulf Coast competitors had higher
construction or shipping costs.
MR. RICHARDS answered that this chart shows the LNG Cost of
Supply (CoS) to Asia, which is the landed cost. He noted that
some competitors have higher shipping costs, construction costs,
or gas costs in the ground.
4:24:11 PM
VICE CHAIR MICCICHE commented that if geopolitical stability was
also considered, it would affect two or three of these projects.
Other than diversification of supply, is there a quantifiable
value to LNG buyers to have the political stability of US LNG
suppliers compared to the political stability of other
countries, such as Mozambique.
MR. RICHARDS pointed out that Arctic LNG 2 in Russia might not
move forward. He offered his belief that Asian buyers recognize
the US political stability as a positive because of its
reliability. He stated that the Conoco Phillips Kenai LNG plant
operated for 50 years.
4:25:33 PM
MR. RICHARDS recalled Senator von Imhof's earlier comments on
loan guarantees. He credited then-Senator Ted Stevens for his
support that led to passage of the Alaska Natural Gas Pipeline
Act. The project was to take North Slope gas and deliver it by
pipeline to the US Midwest.
MR. RICHARDS stated that the bill created a federal loan
guarantee for the developers of that specific project. The
recent passage of the Infrastructure Investment and Jobs Act
(IIJA), signed by President Biden, amended the language in the
bill so the Alaska LNG project would become eligible for loan
guarantees. This means the Biden administration pledges to
guarantee loans with the full faith and credit of the US to pay
the principal and interest on $26.3 billion of Alaska LNG debt
in the event of a default. The benefits of the loan guarantees
from this backstop will be a lower rate of return for financing
costs ranging from 1 2.5 percent. Thus, the loan guarantees
could reduce the cost from potential 5 percent to either 4
percent or 2.5 percent.
MR. RICHARDS reviewed slide 15, Federal Loan Guarantee.
The full faith and credit of the United States will be
pledged to pay the principal and interest on $26.3
billion of Alaska LNG debt in the event of a default.
The Infrastructure Bill includes a loan guarantee for
Alaska LNG
• Principal amount of debt guaranteed up to $26.3
billion (adjusted for inflation)
• Up to 80% of the capital cost
• Term of up to 30 years
• Loan guarantee will be subject to credit terms and
requirements of the loan program
Benefits of the loan guarantee
• Reduced cost of supply
• Completion risk mitigation
• Federal government support and "skin in the game"
MR. RICHARDS directed attention to the waterfall chart on the
right hand side of the slide that shows the impacts on the CoS
from the rate reductions. He stated that initially AGDC had
identified a 20 year period for debt financing, which could be
expanded to 30 years resulting in even lower costs. It could
cover up to 80 percent of the capital costs. The waterfall chart
shows that the project's current $6.70 base case could be
lowered to a maximum of $5.59, allowing more significant margins
for the developers.
4:27:42 PM
SENATOR VON IMHOF asked if the principal amount of debt
guaranteed up to $26.3 billion was solely for Alaska LNG or if
the funds would need to be shared with other US LNG projects.
MR. RICHARDS answered that this is for the Alaska LNG project
and for the pipeline project from the North Slope of Alaska to
the US Midwest. He noted that two projects are eligible for the
funding, but the US Gulf Coast projects or West Coast projects
were not eligible.
4:28:15 PM
SENATOR VON IMHOF asked why the Biden Administration would
support this project but not Keystone.
MR. RICHARDS answered that Alaska LNG is a natural gas project
and not a crude oil project. It relates to a US-producing state
where the supply had been produced for 40 years. It would not
necessarily require an expansion of drilling. It would allow
natural gas to replace coal, so it has a green environmental
benefit. It would also meet the needs of producing lower energy
costs to Alaskans.
4:29:27 PM
MR. RICHARDS reviewed Property Tax Benchmarking on slide 16.
The property taxes that Alaska LNG would pay under
current statute are 10 times higher than Alaska LNG's
competitors.
Most of Alaska LNG is subject to 20 mill property tax
• Equates to almost $800 million per year over 10s
higher than other projects
• Equates to 10% of cost of supply
• The LNG plant may be subject to lower property tax
rate but higher municipal taxes
MR. RICHARDS referred to the chart on the right of slide 15,
which shows some of the tax regimes and tax holidays that have
been provided to other projects by other states, such as Texas,
Louisiana or Virginia, including Payment in Lieu of Taxes (PILT)
of $1 million per year, factoring in property tax abatements, or
a 10-year tax holiday with depreciation. These jurisdictions
recognized the economic activity associated with the projects
that resulted in more jobs and other benefits to their
communities so they had a willingness to provide lower tax
regimes. He highlighted that the state could consider ways to
make the project more economically viable such as property tax
changes.
Property Tax Changes
• As contemplated in SB138 (2013), changes to property
taxes are expected prior to project sanction
MR. RICHARDS noted that the bill charged the state, communities,
and boroughs to consider PILT to reduce property taxes. That
effort ended in 2016 with the producers, so it was never
concluded, but that law provision still stands and will need
consideration.
4:31:05 PM
SENATOR VON IMHOF asked if the previous numbers [on the
waterfall chart on slide 15] contemplated and incorporated PILT.
MR. RICHARDS answered that it included property taxes at 20
mills, representing approximately $800 million per year, so the
$6.70 CoS included the benefits of improving property tax. The
tornado chart from Wood Mackenzie will show the benefits of
producing the property tax, which reduces CoS by $.50 - $.60.
4:31:44 PM
MR. RICHARDS reviewed slide 17, Transition to Private
Developers. He commented that AGDC advanced this project by
seeking private-sector developers, not international oil
companies, but utility or pipeline companies with the systems
and ability to execute and operate a project. These companies
would partner with the state if the state would like to retain
25 percent ownership to move this project forward. He reported
that AGDC is currently negotiating with companies using the
project finance model.
4:32:22 PM
MR. SZYMONIAK turned to slide 18, Project Finance. He commented
that the graph on the bottom of the slide visually captures what
the committee previously discussed for project financing. He
related that no LNG was exported from the US when Wood Mackenzie
produced its original study in 2016. The idea of using project
finance had been contemplated, The Cheniere/Sabine Pass LNG
project was under construction, but it was far from proven. In
the last five years, this project finance model has been
verified.
Non-recourse project financing under a tolling model
was not widely used for LNG prior to 2016. Since, it
has been used for almost all US LNG capacity.
Prior to 2016
• Virtually all LNG projects developed by oil and
gas companies without true project financing
• No tolling/capacity charge included in LNG
price, LNG sold indexed to oil
• No US LNG exports
After 2016
• The US LNG industry grows to nearly the largest LNG
export in the world
• All LNG plants built by developers with project
finance model, not oil and gas companies
• LNG prices include tolling/capacity charge
4:33:09 PM
SENATOR VON IMHOF asked whether developer-led projects were a
tolling model.
MR. SZYMONIAK answered yes.
SENATOR VON IMHOF asked for a description of a tolling model.
4:33:29 PM
MR. SZYMONIAK answered that a tolling model is the pipeline
business model. He explained that pipelines are built because a
valuable resource located in one region needs to be moved to the
location the resource is needed. He stated that to preserve the
maximum amount of value for the resource producer and to
minimize the costs to the buyer, the pipeline must operate as
inexpensively as possible. Since capital costs represent the
highest cost of moving oil or gas through a pipeline, reducing
them would directly affect the total pipeline cost. The
producers enter into long-term contracts to fully use the
pipeline capacity. The producers take out loans based on the
contracts rather than obtaining a loan based on their balance
sheets. The loan ranges from about 70 - 75 percent and the
remainder represents the equity that the pipeline developer
invests. Although they want to turn a profit, their investors
understand the low risk, so they are willing to accept a lower
rate of return ranging from 10 - 12 percent, knowing that no
matter what happens, the return is consistent. The tolling model
was applied to LNG projects for the first time in the US Gulf
Coast in the last seven years.
4:35:25 PM
SENATOR KIEHL expressed concern that it sounded very much like
TransCanada's proposal under the Alaska Gasline Inducement Act
(AGIA). He related that TransCanada exited. He asked for an
explanation of how this happened.
4:35:50 PM
MR. SZYMONIAK answered the TransCanada model was for the
pipeline. The major shift is applied through the LNG Plant and
the GTP. He highlighted that no one had used the tolling model
with an LNG plant at that time. LNG plants had been owned,
built, and operated by oil and gas companies that sold the LNG
linked to oil prices. The shift to project financing with a
capacity charge on the LNG plants represented a significant
change. He related a scenario where LNG prices cratered during
the pandemic. The LNG plant's customers stopped buying LNG but
continued to pay their capacity charge, which allowed the LNG
companies to continue to generate revenue at their LNG plants.
This allowed them to continue to make money, pay their debt
service, and repay their investors. He said that is why they can
achieve a lower cost of capital.
4:36:56 PM
SENATOR VON IMHOF asked what happens with a capacity loan when
the buyer refuses to pay. She compared not selling LNG to a car
loan, where the owner wrecks the car, but must still pay the car
loan.
MR. SZYMONIAK answered that it would result in a lawsuit. If the
buyer breaches the contract, the lender has recourse to the
buyer. The key to making this work is credit-worthy buyers
pledging their credit to the entire system, which flows up to
the bank. When the buyer doesn't pay the toll, the lender has
recourse against the buyer instead of the infrastructure. He
indicated that if the state owned 25 percent of the project,
under this model, the state would earn a 10 - 12 percent return,
but it would be a relatively low-risk investment.
4:38:45 PM
MR. RICHARDS reviewed slide 19, Timeline, which consisted of a
chart showing the timeline for negotiating the project
development agreements and the construction phase from 2024 to
2031.
MR. RICHARDS indicated that Alaska LNG would focus on securing
LNG Lead parties, signing Memorandums of Understanding with
AGDC, and working towards project development agreements that
allow them to enter into privately-funded Front End Engineering
Design (FEED). He stated that the Alaska LNG project would reach
FEED in 2023, reaching a final investment decision in 2024,
followed by six to seven years of construction, and the target
for the first gas in 2030.
4:39:22 PM
MR. RICHARDS briefly noted slide 20, Fully Permitted Project.
Completed
• Federal Energy Regulatory Commission
• (FERC) Authorization to Construct
• All 36 Major Federal permits & authorizations
• Federal ROWs: Bureau of Land Management,
National Park Service
• Alaska State Land Leases and Gas
• Treatment Plant Air Permit
Supplemental EIS
• Upstream analysis of potential environmental impacts
associated with natural gas production on the North
Slope
• Lifecycle analysis calculating greenhouse gas
emissions from the Alaska LNG Project
4:39:44 PM
VICE CHAIR MICCICHE asked to return to slide 20. He asked for
AGDC's process to attract developers to Alaska because the
project has been discussed for over 40 years. He wondered what
changed that would motivate developers to sign MOUs when other
undeveloped projects might be more lucrative.
MR. RICHARDS acknowledged that it has not been easy. Developers
around the world know about this project, but view it as a
large, challenging project in Arctic conditions that will be
costly to construct and require taking substantial risk.
MR. RICHARDS stated that AGDC has worked to educate developers.
He said AGDC frames Alaska LNG by identifying one of the most
significant project risks as the federal regulatory agencies
environmental process. It includes the public process of taking
public and stakeholder comments. The process considers impacts
on flora and fauna, and the project managers must work with
federal agencies on mitigation measures for reasonable and
economically achievable goals. He said that AGDC had completed
that process, so that risk has been averted. AGDC has a
supplemental environmental impact statement (EIS) undertaken by
the Department of Energy in the Biden administration. While it
includes risk, it is a lower risk because the environmental
process provides greenhouse gas emissions analysis to ensure
that enough molecules are upstream to meet the 30-year project
life. He reported that the independent analysis shows the
molecules are there. This greenhouse gas analysis will be
released next month. It demonstrates a 54 percent reduction of
CO2 compared to coal in Asia, representing 77 million tons of
CO2 removed from the environment. He characterized the green
component of the project as a positive one.
4:43:22 PM
MR. RICHARDS explained that the buyers want LNG to meet their
needs as a transition fuel but are looking towards future
hydrogen. Alaska's methane provides for both, providing
immediate and future opportunities. Buyers seek a diversity of
supply. The West Coast projects are LNG Canada and a small
Mexico project. Everything else is shipped through the Panama
Canal, which means time, cost, and delay. He highlighted that
buyers view Alaska geopolitically, as part of the US, with a
significant military presence, with a 50-year record of
supplying LNG to Asian markets. In terms of constructing and
building modularization for the major plants, Alaska had already
built a pipeline in Arctic and sub-Arctic conditions, so it has
the experience and infrastructure, including previously-built
roads and pipeline pads. Thus, it is not the new frontier like
it was for TAPS. AGDC dispels misconceptions by indicating that
Alaska is part of the first world and regularly produces oil and
gas reservoirs. AGDC has federal authorizations, and the state
and its citizens support the Alaska LNG project advancing. It
means that Alaska doesn't have stakeholder risks like other
projects like Keystone or North Dakota Access experience that
halts their projects.
4:45:18 PM
MR. SZYMONIAK commented that AGDC has the full support of the
producers: Hilcorp, Conoco Phillips, and Exxon Mobil. He stated
that AGDC meets with the producers regularly, and these
companies provide strategic guidance. When AGDC brings in a
developer to look at the project, the developers sign
confidentiality agreements and meet with the producers. He
offered his belief that having developers build relationships
with the producers is critical. The Alaska LNG project requires
developers to have long-term relationships with the producers.
AGDC wants producers to sell gas to the project on the North
Slope but does not want them to take over the project. The
producers' cost of capital is too high, and it is not a priority
for them in the midstream, but they have all been clear that it
is a high priority for them to sell the gas.
4:46:33 PM
MR. RICHARDS reviewed slide 21, Greenhouse Gas Emissions.
A life cycle analysis of Alaska LNG shows it reduces
greenhouse gas emissions for electric power generation
by more than 77 million metric tons of CO2 per year in
comparison to Asian coal derived power
MR. RICHARDS stated that the chart on the right shows emissions
of CO2 from an Asian coal-fired generation versus electricity
produced from LNG, which would result in over 54 percent
reduction in emissions from LNG. The box on the left shows that
it would be equivalent to eliminating 19 coal-fired power plants
or constructing 16,000 wind turbines.
4:47:31 PM
VICE CHAIR MICCICHE asked whether the calculation included the
potential for sequestration or other technologies or if it is
based on conventional production, shipping, and liquefaction.
MR. RICHARDS characterized it as a full life cycle analysis of
Alaska LNG. He stated that it considered oil and gas production
on the North Slope, the gas treatment and sequestration of the
CO2 on the North Slope, the pipeline, liquefaction, shipping,
and delivery to the Asian market, as well as consumption in an
Asian gas-fired power plant.
4:48:27 PM
MR. RICHARDS reviewed slide 22, Alaska Hydrogen Opportunity. He
stated that AGDC refers to the potential use of methane in
Alaska as an Alaska hydrogen opportunity. He related that the
Kenai LNG plant paved the way for LNG from Alaska to Asia 50
years ago. For many of the same reasons, clean hydrogen industry
can also be created in Alaska. He reviewed the reasons shown on
the slide:
[Original punctuation provided.]
Carbon Storage and Sequestration at the Project Site
at Tidewater
Cycle GHG Emissions for Natural Gas vs. Coal Power
Low GHG Natural Gas from Conventional Supply
Short Distance to Expanding Clean Hydrogen Markets in
Asia
Existing Ammonia Plant well Positioned to be First
Mover in Market
4:49:02 PM
MR. RICHARDS briefly reviewed slide 23, Clean Hydrogen Overview.
He stated that the chart on the left shows the methane molecules
composition. He explained that ammonia could be a carrier of H
atoms and meet the needs in Asia. He noted that Asia would like
to spike their coal generation with ammonia, which reduces the
amount of CO2 emissions coming out of the stacks.
Conversion of Natural Gas
• Natural gas can be converted into hydrogen and then
into ammonia
• The existing Nutrien ammonia plant in Nikiski uses
this process
MR. RICHARDS reported that Cook Inlet Basin reservoirs has 50
gigatons of CO2 sequestration. He stated that Cook Inlet Basin
is world class and has the best carbon sink on the West Coast of
North America. Alaska has an opportunity to capture the carbon,
create hydrogen or ammonia to sequester in Alaska, and obtain
the green category associated with it.
CO2 Sequestration
• The process to convert natural gas into hydrogen and
ammonia produces CO2
• If this CO2 is captured and sequestered, the
resulting "Blue Ammonia" is a clean fuel
MR. RICHARDS said Alaska has an opportunity to capture the
carbon, create hydrogen or ammonia to sequester in Alaska and
obtain the green category associated with it.
Hydrogen vs Ammonia
• Both hydrogen and ammonia are clean fuels and do not
emit CO2 when burned
• Hydrogen is converted into ammonia to make storage
and transportation easier
• Ammonia can be exported to Asia to meet their future
clean energy demands
4:50:44 PM
VICE CHAIR MICCICHE asked if the GPT was for hydrogen and if
post liquefaction is for secondary carbon sequestration in Cook
Inlet.
MR. RICHARDS answered that it is not currently in the design. He
explained that Vice Chair Micciche was speaking about the Gas
Treatment Plant (GTP) on the North Slope. The natural gas stream
from Point Thomson and Prudhoe Bay goes through a process at a
GTP that separates the CO2 from the methane molecules, is
captured, and pushed back into the Prudhoe Bay reservoir for
sequestration.
MR. RICHARDS reviewed the liquefaction process to capture the
carbon atoms from the emissions ultimately. He indicated that
this technology is expensive, but new technologies are coming
online and being developed, making it cost-effective to capture
the flue gases and sequester them.
4:52:29 PM
SENATOR KIEHL asked about the potential to store carbon or CO2
in the Cook Inlet depleted reservoirs. He wondered how the 50
gigatons capacity relates to the throughput on the pipeline or
what it would cost per unit.
MR. SZYMONIAK related his understanding that units are ammonia
and hydrogen. He offered his belief that 50 gigatons are enough
to sequester a large industrial clean ammonia plant in Cook
Inlet. AGDC is in the early stages of putting together a team to
perform a feasibility study to refine the actual sequestration
relative to industrial processes for exported fuels and the
cost. He indicated that AGDC is very much on the frontier.
Still, they benefited from a study performed in 2011 or 2012
funded by a Lower 48 company using the Department of Natural
Resources information that identified it. He stated that there
was some scientific basis behind the magnitude of the site.
4:54:05 PM
MR. RICHARDS added that AGDC would produce 20 million tons of
liquid natural gas annually from the GTP, and the CO2 generated
in Cook Inlet would be significantly smaller. This means there
would be generations of potential sequestration opportunity.
4:54:37 PM
SENATOR KIEHL commented that he would like a follow-up on the
potential sequestration opportunities.
VICE CHAIR MICCICHE agreed. He offered his view that there would
be a guarantee of 60 years of reasonably heavy production in
Cook Inlet with a much smaller stream of CO2. He estimated that
there would be 50 years of heavy production on the North Slope.
He pointed out that CO2 is a fraction of what would be produced
for every cubic foot of natural gas used for the project. He
acknowledged that it would be an interesting calculation of
what's been produced minus what will be produced in carbon
sequestration.
4:55:42 PM
MR. SZYMONIAK answered that there is great carbon sequestration
in the coal seams that produce natural gas.
4:55:54 PM
MR. RICHARDS reviewed slide 24, Hydrogen Feasibility Funding.
AGDC is working with partners on external funding to
develop Alaska hydrogen opportunities
Potential funding sources include:
• Private North American energy companies
Infrastructure bill funding:
• $8 billion to be spent on 4+ Hydrogen Hubs
• Private Japanese energy companies
• Japanese state entities
MR. RICHARDS elaborated on AGDC's work with partners to develop
Alaska hydrogen opportunities. He stated one emphasis of the
Infrastructure Investment and Jobs Act (IIJA) was to examine the
creation of hydrogen hubs in the US. The original bill (H.R.
3684) called for $8 billion in funding for four hydrogen hubs in
geographically distinct parts of the United States. The goal of
this funding is to ensure that private sector entities can
develop a hydrogen-based economy to meet the energy needs in the
US. From AGDC's perspective, this would also include exporting
hydrogen. Currently, buyer countries are seeking hydrogen
production, so AGDC has discussed potential funding for the
feasibility study for hydrogen production in Cook Inlet. The
potential of Asian buyers and infrastructure funding coming to
Alaska could help generate or encourage hydrogen production in
Cook Inlet. AGDC has been working with ammonia producers, buyer
companies seeking funding from their countries, and private
sector heavy industries contributing to the hydrogen project.
This week, the governor introduced an infrastructure bill that
included funding for AGDC to develop a hydrogen hub proposal. He
characterized it as seed funding to potentially bring
substantial funding from the federal government and host
countries.
4:58:13 PM
MR. RICHARDS discussed slide 25, Alaska LNG and Blue Ammonia.
The size of the current LNG market can support
construction of a 20 Mtpa Alaska LNG facility. This
LNG facility is large enough to support construction
of the Alaska Natural Gas Pipeline.
Cook Inlet Blue Ammonia demonstrates the opportunity
for expanded clean energy supply from Alaska. This
future proofs Alaska LNG investment and provides a
path to net-zero carbon energy from Alaska.
4:58:45 PM
MR. RICHARDS summarized the current status and benefits to
Alaska highlighted on slide 26, Alaska LNG.
Strong Economics
• Fully Permitted
• Environmental Benefits
Alaska Benefits
• Energy for Alaskans
• Jobs
• New Revenue
MR. RICHARDS offered his belief that the economics are showing
that AGDC has a viable project that is fully permitted with
environmental benefits not only for Alaskans but in the world.
Alaska LNG could provide lower-cost energy for Alaskans,
bringing in new jobs and revenue to the state.
4:59:10 PM
VICE CHAIR MICCICHE asked whether AGDC has performed an economic
analysis to determine if the state could qualify for one of the
Region Clean Hydrogen Hubs (H2Hubs) funded by the Infrastructure
Investment and Jobs Act (IIJA).
4:59:47 PM
MR. RICHARDS answered that AGDC had evaluated hydrogen hubs. He
stated that the language in IIJA focuses on feedstock, end-use,
geographic diversity, and opportunities to create employment.
The Department of Energy will be administering the H2Hub
proposal and carbon capture proposal. AGDC has recently
responded to a request for information by DoE to help develop
the criteria for the hubs. AGDC prepared a proposal, entering
key questions about diversity and supply, including Alaska's
Arctic gas source that an H2Hub could export. The proposal also
noted that the H2Hub project could replace the significant loss
of oil and gas jobs in Alaska and create long-term, high-wage
jobs. The funding in the governor's bill was envisioned to
develop a proposal, with AGDC working with private sector
entities, DNR, and the University of Alaska (UAA) to develop a
robust and competitive proposal for an H2Hub in Alaska. The
funding would come in tranches, with the initial phase of $4 - 5
million for each H2Hub in the first year or two to prove the
feedstock, end-use, and geographic diversity. Subsequently, the
second tranche would provide substantial funding, billions of
dollars for the hubs once the state and AGDC have a private
sector project development ready to market. In closing, AGDC put
forward the initial phase of funding to generate a proposal that
can be successful.
5:03:13 PM
There being no further business to come before the committee,
Vice Chair Micciche adjourned the Senate Resources Standing
Committee meeting at 5:03 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AGDC LNG Presentation SRES 4.6.2022.pdf |
SRES 4/6/2022 3:30:00 PM |
|
| Supporting Document Alaska LNG Competitiveness Analysis 4.5.2022.pdf |
SRES 4/6/2022 3:30:00 PM |
|
| SB 228 Fiscal Note DEC 1.25.2022.pdf |
SRES 4/6/2022 3:30:00 PM |
SB 228 |
| SB 228 Sectional Analysis 4.6.2022.pdf |
SRES 4/6/2022 3:30:00 PM |
SB 228 |
| SB 228 Tier III Waters Transmittal Letter 3.10.2022.pdf |
SRES 4/6/2022 3:30:00 PM |
SB 228 |
| SB 228 Letter of Opposition Molly Dischner 4.6.2022.pdf |
SRES 4/6/2022 3:30:00 PM |
SB 228 |