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Borough mayor casts doubt on Alaska LNG project

Kenai Peninsula Borough Mayor Charlie Pierce joins an Alaska energy expert in casting doubt on the proposed Nikiski LNG pipeline.

At Friday’s Seward Chamber of Commerce meeting, Pierce said he agreed with Larry Persily, former federal official for Alaska gas pipeline projects and chief of staff for former borough mayor Mike Navarre, who said last week that there is “no possible way” that the Alaska Gasline Development Corporation would make a final investment decision by the end of 2019.

“I think Persily is right,” Pierce said. “When you look at the LNG project coming to the peninsula, standing on its own on an economic basis … There is no return on investment at this present time.”

At a Kenai/Soldotna Chamber Luncheon last week, Persily argued that a lack of customers, investors and capital will keep the Alaska LNG Pipeline from becoming a reality. He also said an increase in competition and decreased demand from China will hinder the project.

Competition is heightened by Alaska’s high investment costs. Different markets throughout the world are able to offer incentives or are nearby larger natural gas supplies, while Alaska has higher prices and smaller reserves. Persily pointed to examples from across the world, like Qatar or the continental U.S.’s Gulf Coast, of other LNG projects already underway or due to be started soon that have either higher profit margins or are more worthwhile to investors than the one proposed for Nikiski.

Pierce said he recognizes the competition and how it will hinder the Kenai Peninsula’s chances of seeing the LNG project come to fruition.

“They’re already in the marketplace with tankers full of gas headed to the customer and we’re still haggling over our strand of gas on the North Slope and how to build infrastructure, who is going to pay for it and how the agreements are going to be written,” Pierce said.

The Kenai Peninsula is also facing competition from within the state including Valdez and the Matanuska-Susitna Borough.

The Kenai Peninsula was chosen as the preferred location in 2013, but Mat-Su recently added 145 pages to its ongoing argument that Port MacKenzie would be a better location than Nikiski for the liquefaction plant and marine terminal.

Despite the complex outlook, Pierce said that the mayor’s office is still looking through all the impacts to the Kenai Peninsula, including the project’s presence in Seward through its harbor and nearby roadways. Pierce added that he does believe the project could be saved.

“We’re in the (Federal Energy Regulatory Commission) process, we’ve intervened, we have a place at the table,” he said.

Pierce’s statement, in conjunction with Persily’s, are a departure from recent Alaska LNG pipeline news that shows a fast tracked timeline, with an investment decision being made by the end of this year followed shortly after by construction and liquefied natural gas production by 2024.