Memoranda won’t get Alaska a gas line

Reading the breathless news that Korea Gas Corp. and the Alaska Gasline Development Corp. have inked yet another in a long line of memorandums of understanding for the proposed $45 billion Alaska LNG Project, one could be forgiven for thinking things were going just swimmingly.
In reality, the memorandum was little more than state officials putting lipstick on their favorite pig. The non-binding agreement — and the administration, some say, expected much more — amounts to diddly.

The Walker administration is pressing hard to build the massive project aimed at moving North Slope gas south through a pipeline to a liquefaction plant in Nikiski and then to Asian markets by ship. This, despite its three partners, ExxonMobil, BP and ConocoPhillips, bailing out after spending hundreds of millions of dollars. The project, they said, did not pencil out.
The announcement of the MOU — an informal agreement signifying little more than an exchange of business cards and a free drink – smacks of public relations spin.

The truth is Korea's state-owned Korea Gas Corp., or KOGAS, is seeking investments in potential LNG projects not only in Alaska, but in Texas and Louisiana. Why the push?

[State gas line agency applies for permit to build Alaska LNG project]

South Korea, the ninth-largest importer in the world, is Asia's fourth-largest economy. It is the world's second-largest LNG buyer, with Qatar and Australia providing most of it, LNG World News reports. KOGAS is the world's largest LNG-importing company and operates four LNG regasification terminals and 2,900 miles of natural gas pipelines in South Korea. KOGAS is hustling to ensure future supplies — and has been busy.

Energy Transfer Partners, a Fortune 500 pipeline giant, for instance, announced last month KOGAS and Houston-based BG LNG Services want product from its proposed Lake Charles LNG export project in Louisiana. The three parties signed an MOU last month. The project already has Department of Energy and Federal Energy Regulatory Commission approvals.

S&P Global Platts reports KOGAS is talking to U.S. LNG exporter Cheniere Energy about getting additional capacity that could prod Cheniere — the only LNG exporter in the U.S., so far – into building additional liquefaction facilities that already are permitted. That announcement last month came at Cheniere's Sabine Pass, La., terminal and marked a 20-year sales-and-purchase deal with KOGAS for up to 3.5 million tons of LNG annually — or more than 10 percent of South Korea's total demand.

Sempra Energy and Woodside Petroleum subsidiaries, Sempra LNG & Midstream and Woodside Energy (USA) also signed an MOU with KOGAS regarding development of the proposed Port Arthur LNG liquefaction project in Port Arthur, Texas, World Maritime News reports. It identifies "KOGAS as a potential purchaser of LNG from, and equity participant in, the Port Arthur LNG project."

Some are questioning why KOGAS is signing so many MOUs. They postulate it is seeking better deals by playing potential LNG projects and sales against each other. Others wonder whether it is simply trying to curry U.S. favor as President Donald Trump touts "energy dominance," which includes selling U.S. energy around the world.

[Thar she flows! It's the Alaska gas line… Can you see it? Can you?]

At this point, a rational person must question the efficacy of Alaska's continued pursuit of its decades-old LNG dream. The state, facing budget deficits, has no signed agreements for anything concrete, no customers, no contracts, no financing, and, no gas to sell. Then, there is the question of how Alaska can expect to get the best price for gas it does not have if it hooks up with a gas buyer seeking the lowest price. Oh, then there is the tricky and more-than-a-little-prickly question of how the state can own and regulate such a project.

It is time for a hard look at Alaska LNG. Yes, there have been the requisite junkets. Yes, we have MOUs — reams of them as governor after governor chases the state's unicorn — but they have produced, and mean, nothing.

To add insult to injury, the state gas line corporation is spending scores of millions of dollars chasing Federal Energy Regulatory Commission approval of the proposed project and is holding a non-binding  "open season." What is a non-binding open season? you might ask. It is, the Alaska Dispatch News reports, a "lighter version of an 'open season,' a process to gauge who might participate in a project if one is built."

The state would do as well asking passersby on Fourth Avenue whether they would like a piece of the action.

Memos and promises are nifty, but there is nothing like an enforceable, signed-on-the-dotted-line contract to buy or sell gas, and Walker has set a Sept. 1 deadline to line up critical business partners — or kill the project. Alaskans should demand he produce a contract instead of a nod and handshake that would not pass muster on "People's Court."

Anything less is unacceptable.

Paul Jenkins is editor of the AnchorageDailyPlanet.com, a division of Porcaro Communications.

The views expressed here are the writer's and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com.