Whether Alaskans develop an in-state gasline to meet demand in the state’s Southcentral region with supplies from the gas-rich North Slope remains to be seen. Also uncertain is whether FERC would have jurisdiction over such a line as it may be used to transport some gas that would be liquefied for export to the Lower 48 and abroad.
Earlier this year Robert Swenson, project manager for Alaska’s in-state gasline project, sought an opinion from Federal Energy Regulatory Commission staff on whether an in-state gasline would be FERC-jurisdictional. He outlined three scenarios for such a gasline and last week FERC Chairman Jon Wellinghoff delivered staff’s three responses with the caveat that commissioners would “have to reach their own decisions on the matters presented to them.”
According to FERC staff, the first in-state gasline scenario — in which all North Slope gas would be transported and consumed in Alaska — would not trigger FERC jurisdiction. Jurisdiction under the other two scenarios is less clear.
Under the second scenario Swenson described a pipeline through which “some, and potentially a majority of, the gas would be sold to parties who would have it delivered, via connections with the existing intrastate grid, to the Kenai [AK] LNG [liquefied natural gas] facility for export to foreign markets.”
Staff suggested that the Regulatory Commission of Alaska (RCA) likely would have sole jurisdiction over such a line as the impetus for its construction would be to supply in-state demand and the pipeline apparently would have “no economic consequences for any U.S. ratepayers outside of the State of Alaska.” Still, the Commission would need to make the final decision, staff noted.
In the third scenario, Alaskans would consume some of the gas and some of it would ultimately travel as LNG to a yet-to-be-constructed U.S. West Coast receiving terminal as well as to terminals in foreign markets.
“The distinction between scenarios two and three is that in the former case, gas not used in Alaska is shipped to foreign markets, while in the latter some gas may be transported in domestic markets,” FERC staff wrote. “The fact that some of the gas in scenario three might be transported in interstate commerce (from Alaska to one or more of the Lower 48 states) could result in the proposed in-state pipeline becoming fully subject to the Commission’s NGA [Natural Gas Act] jurisdiction.”
Staff noted that in cases where FERC jurisdiction is established “it begins at upstream points wherever NGA gathering ends.
“It is also possible that the Commission would exercise limited jurisdiction over the interstate service posited by scenario three, but not the facility itself, under Section 311 of the Natural Gas Policy Act [NGPA] of 1979.”
Staff noted that commissioners might question the jurisdictional nature of a new pipeline company that began service as an intrastate “only to undertake the provision of a substantial amount of service in interstate commerce shortly thereafter under Section 311 of the NGPA.”
Opinions vary about how much natural gas is left in the Cook Inlet area that can serve utilities and consumers in Southcentral Alaska (see Daily GPI, Dec. 23, 2009; Feb. 6, 2009). Chugach Electric Association and Enstar Natural Gas have both had trouble in the past securing supplies (see Daily GPI, Sept. 3, 2009), and development of an in-state gasline to serve local demand is a priority of those who have been frustrated while they wait for a long-line pipeline to the Lower 48 from which a spur pipeline could deliver in-state supply.
State lawmakers are currently weighing a proposal to place the construction of an in-state gasline in the hands of the Alaska Railroad. Meanwhile, competing gasline projects that would deliver gas to the Lower 48 are preparing for their open seasons (see Daily GPI, March 19).
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