[Federal Register Volume 62, Number 42 (Tuesday, March 4, 1997)]
[Notices]
[Pages 9758-9760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5257]


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DEPARTMENT OF ENERGY

Office of Fossil Energy
[FE Docket No. 96-99-LNG]


Phillips Alaska Natural Gas Corporation and Marathon Oil Company; 
Application to Amend Authorization To Export Liquefied Natural Gas

AGENCY: Office of Fossil Energy, DOE.

ACTION: Notice of application.

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SUMMARY: The Office of Fossil Energy (FE) of the Department of Energy 
(DOE) gives notice of receipt of an application filed on December 31, 
1996, by Phillips Alaska Natural Gas Corporation (PANGC) and Marathon 
Oil Company (Marathon) requesting that DOE approve a five-year 
extension of their long-standing authorization to export Alaskan 
liquefied natural gas (LNG) from Alaska to Japan. The gas would be 
liquefied at the applicants' Kenai LNG plant in the Cook Inlet area of 
Alaska and would be transported by tanker to Japan for sale to Tokyo 
Electric Power Company, Inc. (Tokyo Electric) and Tokyo Gas Company, 
Ltd. (Tokyo Gas).
    The application is filed under section 3 of the Natural Gas Act and 
DOE Delegation Order Nos. 0204-111 and 0204-127. Protests, motions to 
intervene, notices of intervention, and written comments are invited.

DATES: Protests, Motions to intervene or notices of intervention, as 
applicable, requests for additional procedures and written comments are 
to be filed at the address listed below no later than 4:30 p.m., 
eastern time, April 3, 1997.

ADDRESSES: Office of Natural Gas & Petroleum Import & Export 
Activities, Office of Fossil Energy, U.S. Department of Energy, 
Forrestal Building, Room 3F-

[[Page 9759]]

056, FE-50, 1000 Independence Avenue, S.W., Washington, D.C. 20585.

FOR FURTHER INFORMATION CONTACT:

Patrick J. Fleming, Office of Natural Gas & Petroleum Import & Export 
Activities, Office of Fossil Energy, U.S. Department of Energy, 
Forrestal Building, Room 3F-056, FE-50, 1000 Independence Avenue, S.W., 
Washington, D.C. 20585, (202) 586-9387
Diane Stubbs, Office of Assistant General Counsel for Fossil Energy, 
U.S. Department of Energy, Forrestal Building, Room 6E-042, GC-40, 1000 
Independence Avenue, S.W., Washington, D.C. 20585, (202) 586-6667.

SUPPLEMENTARY INFORMATION:

Background

    PANGC, a Delaware corporation with its principal place of business 
in Bartlesville, Oklahoma, is a wholly owned subsidiary of Phillips 
Petroleum Company, a Delaware corporation. Marathon, an Ohio 
corporation with its principal place of business in Houston, Texas, is 
a wholly owned subsidiary of USX Corporation, also a Delaware 
corporation. PANGC and Marathon are not affiliated with each other.
    The LNG export authorization held by PANGC and Marathon was granted 
originally by the Federal Power Commission (FPC) on April 19, 1967. It 
was subsequently amended by DOE's Economic Regulatory Administration in 
1982, 1986, 1987, and 1988, and by FE in 1991, 1992, and 1995. PANGC 
and Marathon are currently authorized to export up to 64.4 trillion Btu 
(approximately 64.4 billion cubic feet (Bcf)) of LNG per year through 
March 31, 2004. See FPC Order No. 1227 (37 FPC 777, April 19, 1967); 
DOE/ERA Opinion and Order No. 49 (1 ERA para. 70,116, December 14, 
1982); DOE/ERA Opinion and Order No. 49A \1\ (1 ERA para. 70,127, April 
3, 1986); DOE/ERA Opinion and Order No. 206 (1 ERA para. 70,128, 
November 16, 1987); DOE/ERA Opinion and Order No. 261 (1 ERA para. 
70,130, July 28, 1988); DOE/FE Opinion and Order No. 261-A (1 FE para. 
70,454, June 18, 1991; DOE/FE Opinion and Order No. 261-B 2 (1 FE 
para. 70,506, December 19, 1991); DOE/FE Opinion and Order No. 261-C (1 
FE para. 70,607, July 15, 1992); and DOE/FE Opinion and Order No. 261-D 
(1 FE para. 71,087, March 2, 1995) (herein collectively referred to as 
Order 261).
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    \1\ In ERA Opinion and Order No. 49A the authorization 
previously granted to Phillips Petroleum Company to export LNG was 
transferred to Phillips 66 Natural Gas Company effective January 1, 
1986.
    \2\ In DOE/FE Opinion and Order No. 261-B the authorization 
previously granted to Phillips 66 Natural Gas Company to export LNG 
was transferred to PANGC effective December 19, 1991.
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    PANGC and Marathon request that FE amend the export authorization 
granted by Order 261 to approve the continued exportation of LNG for an 
additional five years commencing April 1, 2004, and extending through 
March 31, 2009, using existing facilities. During the five-year 
extension, the natural gas to be exported would be produced from gas 
fields owned or controlled by PANGC and Marathon in the Cook Inlet area 
of Alaska. The natural gas would be manufactured into LNG at the 
existing liquefaction plant near Kenai, Alaska.3
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    \3\ The Kenai LNG plant is owned by Kenai LNG Corporation, 70 
percent of which is owned by PANGC and 30 percent by Marathon.
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    The pricing and other provisions in the applicants' current LNG 
sales contracts with Tokyo Electric and Tokyo Gas would remain the same 
during the extension period. Order 261 authorizes a market-sensitive 
pricing formula under which the monthly selling price per MMBtu of LNG 
exported to Japan by PANGC and Marathon is adjusted each month 
according to changes over a period of three months in the selling price 
of all crude oils imported into Japan as reported in Japan Exports & 
Imports Monthly which is edited by the Customs Bureau, Ministry of 
Finance, and published by the Japan Tariff Association.
    PANGC and Marathon and the Japanese buyers of the LNG have held 
discussions concerning the LNG purchase and sale to facilitate planning 
their respective operations. Pursuant to such discussions, the Parties 
negotiated and executed a Letter Agreement dated May 17, 1993, attached 
as Appendix A to the application, in which the Parties agreed to the 
contract extension. The extension is subject to PANGC and Marathon 
providing written acceptance of such extension to Tokyo Electric and 
Tokyo Gas on or before March 31, 2001.

Public Interest Considerations

    In support of their application, PANGC and Marathon state there is 
no evidence of domestic need, either regional or national, for the 
natural gas they would export during the proposed extension. According 
to the applicants, the Cook Inlet area of Alaska continues to have an 
oversupply of natural gas and, based on two studies submitted with 
their application, PANGC and Marathon conclude estimates of remaining 
gas reserves in Alaska, and the Cook Inlet area in particular, are 
adequate to supply local and regional need beyond the 2004-2009 
extension period.4 Applicants project that under the more 
pessimistic of the two scenarios examined, the low supply/high demand 
scenario, remaining reserves would exceed 1.2 trillion cubic feet (Tcf) 
at the end of 2009, a figure that climbs to 2.0 Tcf under the expected 
and less conservative supply/demand scenario.
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    \4\ See Resource Decisions, Economic Analysis of Regional and 
Local Interest Relating to Kenai LNG Export to Japan (December 11, 
1996) included as Appendix C to the application of PANGC and 
Marathon filed December 31, 1996; Schlumberger GeoQuest Reservoir 
Technologies, Proven Reserves Assessment Cook Inlet Alaska Effective 
January 1, 1996 (March 1996) included as Appendix D to the 
application of PANGC and Marathon filed December 31, 1996.
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    With respect to national need, PANGC and Marathon state that gas 
supplies in the lower 48 states are sufficient to meet demand and under 
existing economic conditions LNG could not be shipped to the lower 48 
at market clearing prices. The applicants emphasize there are no 
existing or anticipated West Coast LNG receiving terminals and the cost 
of shipping Kenai LNG to terminals on the East Coast of the lower 48 
makes that alternative improbable. Furthermore, PANGC and Marathon 
state there are extensive Canadian gas reserves available for export to 
the lower 48 states at prices lower than those necessary to support 
Alaskan LNG.
    PANGC and Marathon assert the five-year extension of their 
authority to export Cook Inlet LNG from Kenai to Japan would extend the 
current benefits now enjoyed by the Kenai Peninsula Borough, the State 
of Alaska, and the United States in general, and is therefore 
consistent with the public interest. According to the applicants, 
cessation of exports of LNG to Japan would end these benefits, forcing 
the closure of the Kenai liquefaction plant with the resultant 
estimated loss of over 800 jobs generating over $40 million 5 in 
personal income per year. The applicants also state the cessation of 
exports would reduce local, state, and federal revenue from taxes and 
royalties, revenues which totaled nearly $44 million in 1995. Finally, 
PANGC and Marathon note the potential detrimental effects on the U.S./
Japan balance of payments.
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    \5\ In 1995 dollars.
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DOE/FE Evaluation

    This export application will be reviewed pursuant to section 3 of 
the Natural Gas Act, as amended by section 201 of the Energy Policy Act 
of 1992 (Pub. L. 102-486) and the authority contained in DOE Delegation 
Order Nos. 0204-111 and 0204-127. In reviewing LNG exports, DOE 
considers domestic

[[Page 9760]]

need for the gas and any other issue determined to be appropriate, 
including whether the arrangement is consistent with DOE's policy of 
promoting competition in the marketplace by allowing commercial parties 
to freely negotiate their own trade arrangements. Parties that may 
oppose this application should comment in their responses on these 
issues.
    PANGC and Marathon assert that the gas will not be needed 
domestically during the extension period and the export is otherwise 
consistent with the public interest. Parties that oppose extending the 
PANGC/Marathon export should comment on the specific statements of the 
applicants, including conclusions in the two studies submitted as part 
of the application. Opponents will bear the burden of demonstrating the 
proposed export extension is not consistent with the public interest.
    The National Environmental Policy Act (NEPA) (42 U.S.C. 4231 et 
seq.) requires DOE to give appropriate consideration to the 
environmental effects of its proposed action. No final decision will be 
issued in this proceeding until DOE has met its NEPA responsibilities.

Public Comment Procedures

    In response to this notice, any person may file a protest, motion 
to intervene or notice of intervention, as applicable, and written 
comments. Anyone who wants to become a party to this proceeding and to 
have their written comments considered as the basis for the decision on 
the application must, however, file a motion to intervene or notice of 
intervention, as applicable. The filing of a protest with respect to 
this application will not serve to make the protestant a party to the 
proceeding, although protests and comments received from persons who 
are not parties will be considered in determining the appropriate 
action to be taken on the application. All protests, motions to 
intervene, notices of intervention, and written comments must meet the 
requirements specified by the regulations in 10 CFR part 590. Protests, 
motions to intervene, notices of intervention, requests for additional 
procedures, and written comments should be filed with the Office of 
Natural Gas & Petroleum Import & Export Activities at the address 
listed above.
    It is intended that a decisional record on the application will be 
developed through responses to this notice by parties, including the 
parties' written comments and replies thereto. Additional procedures 
will be used as necessary to achieve a complete understanding of the 
facts and issues. A party seeking intervention may request that 
additional procedures be provided, such as additional written comments, 
an oral presentation, a conference, or trial-type hearing. Any request 
to file additional written comments should explain why they are 
necessary. Any request for an oral presentation should identify the 
substantial question of fact, law, or policy at issue, show that it is 
material and relevant to a decision in the proceeding, and demonstrate 
why an oral presentation is needed. Any request for a conference should 
demonstrate why the conference would materially advance the proceeding. 
Any request for a trial-type hearing must show that there are factual 
issues genuinely in dispute that are relevant and material to a 
decision and that a trial-type hearing is necessary for a full and true 
disclosure of the facts.
    If an additional procedure is scheduled, notice will be provided to 
all parties. If no party requests additional procedures, a final 
opinion and order may be issued based on the official record, including 
the application and responses filed by parties pursuant to this notice, 
in accordance with 10 CFR 590.316.
    A copy of PANGC's and Marathon's application is available for 
inspection and copying in the Office of Natural Gas & Petroleum Import 
& Export Activities docket room, 3F-056, at the above address. The 
docket room is open between the hours of 8:00 a.m. and 4:30 p.m., 
Monday through Friday, except Federal holidays.

    Issued in Washington, D.C., on February 25, 1997.
Wayne E. Peters,
Manager, Natural Gas Regulation, Office of Natural Gas & Petroleum 
Import & Export Activities, Office of Fossil Energy.
[FR Doc. 97-5257 Filed 3-3-97; 8:45 am]
BILLING CODE 6450-01-P