The oil companies and the state say they hope to avoid using the power of eminent domain to acquire land in Nikiski for what could be a $20 billion gas liquefaction plant on 400 to 600 acres, the most costly industrial complex in Alaska outside of the North Slope.
But the state has already signaled that it will force recalcitrant landowners to sell in situations where the project needs land, under terms of an agreement signed early this year by the Parnell administration and the oil companies.
The Heads of Agreement between the state and the oil companies says state support for the Alaska LNG project will include "the use of eminent domain rights to facilitate implementation of the Alaska LNG project" and that the governor will draft and support "legislation where necessary."
There are limits on the use of eminent domain for economic development, but there are exceptions, and the Legislature has the authority to create new ones, a situation reflected in the language approved in the Heads of Agreement.
In a meeting this week, Kenai Sen. Peter Micciche said his district is thrilled about the LNG project, but he also asked Steve Butt, the head of the Alaska LNG project, about the possibility of an "eminent domain situation" in Nikiski.
Butt said he hopes it never comes to that.
"At this juncture we believe it is premature to talk about eminent domain," Butt said. "And it is my firm and adamant hope that we never have to pursue eminent domain." He referred to eminent domain as "a concept where state agencies need to be able to fairly compensate landowners to meet bigger goals."
Butt said the project requires a site of from 400 to 600 acres. "We know to be a good neighbor you want to have some space. We want to be a good neighbor," Butt said.
In July, the companies told the Department of Energy they had about 10 land brokers trying to acquire land rights in the Nikiski area. They had purchased 120 acres, had deals for 97 additional acres and were expecting about 30 acres from the Kenai Peninsula Borough.
Depending upon the size of the buffer, the companies could need several hundred more acres to add to the 247-acre total, either temporarily for construction or for the long term. The site is near the former Agrium fertilizer plant, the ConocoPhillips LNG facility and the Tesoro refinery.
Butt said the liquefaction plant would be in operation for 30 to 50 years and the companies are "trying to work on fair and durable deals with every person that's anywhere near the plant."
The liquefaction plant is potentially the most expensive element in the project, which would also include a gas plant on the North Slope and an 800-mile pipeline across Alaska.
The plant would chill and compress the gas into a liquid so that it uses one-six-hundredth of the space taken up by a gas. It is uneconomical to transport the gas by tanker unless it is chilled to a temperature of about 260 below zero, the point at which it becomes a clear colorless liquid. The chilled liquid would be shipped aboard tankers in insulated tanks to countries in Asia.
Butt also cautioned lawmakers that it is possible that the site could be moved if land deals can't be completed and that there are options. "If we have to move a little, that would be another part of the puzzle," he said.
Butt said the companies have tried to be as open as they can with landowners, but some have wanted to know why sale details and purchase prices have not been made public.
"One concern we've had all along is we want to make sure we honor transparency and individual information as much as possible," Butt said.
He said there are two principles guiding the land situation. One is that all agreements have to be "fair and durable." The other is that they will talk with landowners only about their own property.
"We won't talk about other people's land with anybody else and (will) honor their confidentiality," he said.