Alaska Gasline Development Corporation President Keith Meyer updated the House Natural Resources Committee last week on the status of the gasline project, which is in a new incarnation under Gov. Bill Walker: It has gone from a private sector project to a state-owned one, and is now proposed to be a Chinese-led project that will send 75 percent of the gas to China, and the rest to other countries in Asia.
Must Read Alaska asked questions before that meeting, and some of those were answered by Meyers’ presentation. Others were not, especially involving who takes the risk on the state-owned project.
But the presentation raised new questions:
- How much can AGDC promise the Legislature it will actually generate for the State to spend on actual State services once gas is flowing? Is it $250 million?
- If the gasline is going to make “payments in lieu of taxes” (PILT) to local communities — worth $450 million or so, as Meyer indicated — how does that work, since the State is not a taxpaying entity? It has nothing to pay in lieu of, does it?
- Why would the State make PILT payments on a gasline asset but not some other state-owned asset, such as the State Office Building?
- How much of the expected revenue will go into the cost of operations? Is it $1.1 billion?
- Will the employees operating it be state employees? Managed by executives from China?
- If the Chinese are going to finance 75 percent of the $43 billion project, how is the State going to come up with the $10 billion or so that it will need?
- Which entity is bearing the risk for cost overruns or catastrophes?
- Meyers said there would be numerous agreements that would need to be completed by May and December. What is the list of agreements that need to be done by May? By December? Who are the lead staff members, and who are their team members?
- Why do these negotiations have to be secret, when governor said three years ago that all AK-LNG documents had to be made public? These will be the similar documents, just different owners.
- If the governor isn’t planning on using the Permanent Fund to pay for the State’s share, where will the State’s investment come from?
Gov. Bill Walker is planning on a 2024 start date for shipping gas. Here are 10 points relating to the status today:
- No investors.
- No funding.
- Nothing beyond conceptual designs.
- No significant permits.
- No export license.
- No right of way through federal, private or Native land.
- State does not own land where LNG terminal would go.
- Project has not procured any steel, or entered into a queue for facilities or pipe fabrication.
- Project does not have an engineering or construction firm for the gas treatment plant at Prudhoe Bay, the pipeline itself, compressor stations, LNG plant or any other component.
- AGDC does not have significant competent staff with project management experience on a similar project.
Earlier this year, the governor’s anchor tenant, REI of Japan, left the project without comment.
What about the price spread between now and an economically viable project? What’s the go/no go price at what gate / when?
Your questions and points are right on, Suzanne. Sadly, there is not a hint of a contract between a buyer and a person with gas to sell. All of this furor over an empty project. Ideally, I would like to hear about a buy/sell gas agreement contingent on acceptable project tariffs. As it stands after last Monday’s presentation, the priority is $8 MMBtu delivered cost with net back on the Noth Slope, before taxes and royalties, of $1. If project costs increase, the North Slope net back would be even less. Time to get out of this futility.
Another 10…
What is the risk of:
11. Alaska losing sovereignty by having to concede economic control to China, the 75% buyer?
12. Chinese currency manipulation reducing Alaska’s “profit” to zero or to loss?
13. China backing out at last minute to force concessions from Alaska?
14. Alaska being contractually required to resolve disputes in Chinese court?
15. trade suspension, possible Alaskan bankruptcy if China goes to war with a U.S. ally?
16. unenforceable legal protection against Chinese breach of contract or non-payment?
17. China imposing a contractual lien if for any reason the required volume is not delivered?
18. Alaskan bankruptcy when China finds new, viable, cheaper sources closer to China?
19. national security compromise when China insists on a role in pipeline command, control, and communications?
20. Alaska losing the Permanent Fund as a predictable result of state government’s historic inability to manage projects, successfully, profitably, and transparently?
”Gov. Walker has another problem: He has stated that the only way the project would be viable is if the State of Alaska owns it, because the State doesn’t have to be as profitable as private companies”. Well the state doesn’t need to make a profit at all, we the tax payers can just fund it and we can give away all our resources free to all foreigners. Chinese, Japanese, and Korean, the French , the Brits, and of course the Germans. I thought he was elected Governor? Since when did we authorise him to interfere in private industry? re there not sufficient commercial enterprises who are more than capable of handling production and distribution? Our Governor is only authorised to raise revenue to finance his budget. to run state affairs. Let private industry only run commercial affairs.
Now in Alaska we have a renewed successful Hindenburg type Air transportation which can deliver large containers of Natural Gas from point of Production to point of Destination. No pipeline needed, Huge expense saved. Immediately available, no delay in the commercial enterprise undertaking. Immediate profits and tax revenue.Any of our existing oil companies can operate the system and agree to taxes under ACES. Rescind SB 21 which has defrauded the public. The whole world is now an open market. Don’t delay. Yes the world is full of gas, but delivery via pipelines increases the cost.So deliver via Air transportation.
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