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Pipeline backers draw a plan in numbers

Posted: February 26, 2014 - 1:04am
From left to right, Bill McMahon of ExxonMobil, David Van Tuyl of BP Exploration Alaska, Pat Flood of ConocoPhillips, Dan Fauske of the Alaska Gasline Development Corporation and Tony Palmer of TransCanada discuss the business interests of each party in the Alaska LNG project with Senate Finance committee members Tuesday.  MATT WOOLBRIGHT | JUNEAU EMPIRE
MATT WOOLBRIGHT | JUNEAU EMPIRE
From left to right, Bill McMahon of ExxonMobil, David Van Tuyl of BP Exploration Alaska, Pat Flood of ConocoPhillips, Dan Fauske of the Alaska Gasline Development Corporation and Tony Palmer of TransCanada discuss the business interests of each party in the Alaska LNG project with Senate Finance committee members Tuesday.

Leaders from the private partners in the proposed Alaska LNG project urged lawmakers Tuesday to support the plan that they call a good business venture for everyone involved.

The Senate finance committee is meeting every day this week to grasp the concepts contained in SB138, the bill that would establish a joint public-private partnership to develop a large natural gas pipeline across the state. The pipeline would end at a liquefaction plant where gas could be loaded onto tankers and sold on the world market.

“We think we got a really good shot at this market. We do think (the project) can be competitive,” ConocoPhillips’ Pat Flood told the senators. “It’s time to stake the next step — to move into the Pre-FEED phase and find out if that’s true or not.”

The Pre-FEED, or preliminary front-end engineering and design, phase is when project development “takes the project from its concept and moves it forward,” ExxonMobil’s Bill McMahon explained.

Flood, McMahon and representatives from BP, TransCanada and the Alaska Gasline Development Corporation converged on the committee room to answer a simple question from committee co-chair Sen. Pete Kelly, R-Fairbanks.

“Why is this a good business decision?” Kelly asked the industry leaders.

All those testifying pointed to the recently adopted Heads of Agreement document as an indicator that now is the time to press forward.

That document is “enabling unprecedented commercial alignment which is possible with the state’s participation” in the project, BP Exploration Alaska’s David Van Tuyl said.

McMahon called the agreement a milestone for the project because it “lays out principals and road map by which all parties of principal believe we can move forward.”

“We’ve made good progess,” he said. “We’ve reached a consensus on selecting a concept, we’ve selected a preferred location for the LNG plant and we’ve made good progress in our field work.”

“If SB138 is enacted, ExxonMobil is ready to move into Pre-FEED,” McMahon said.

Van Tuyl echoed the endorsement of the bill that “moves all the parties forward together.”

“We found the best way forward was to combine our interests with all the parties,” he said of BP’s decision to join the state after the failed Denali Project. That pipeline project, an effort of BP and Conoco/Phillps, collapsed in 2011.

Tony Palmer, an executive with pipeline builder TransCanada, told the committee that major undertakings like the Alaska project need two things to succeed: permission to build and the ability to find customers.

Those pieces are in place, he said.

“There’s no guarantee that this project will succeed, but we are highly encouraged,” Palmer said. “TransCanada is confident this project can succeed. That’s why we’re supportive of the bill and this project.”

Should the project fail for any reason — such as if natural gas prices drop significantly or a party decides to withdraw — invested dollars could be lost, he said.

“BP believes the Alaska LNG can compete in the world market, but there’s still a lot of work we have to do to confirm that,” Van Tuyl said.

Much of that work is slated to be done in the next phase if the Legislature opts to move forward, he added.

Dan Fauske, president of the AGDC — a state-created entity tasked with delivering natural gas to Alaskans via a pipeline project at the lowest possible cost — said the alignment and work done to-date is reason for confidence going forward.

“We’re a whole lot further down the road than we used to be,” he said.

The Senate Finance committee was set to meet with the same group of industry leaders for questions at 9 a.m. this morning.

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