Why did BP support the governor’s AK-LNG project?

BP drilling rig / BP photo credit
BP drilling rig, Doyon 25, Prudhoe Bay / BP photo 


During two days of legislative hearings that concluded Thursday on the Alaska gasline project, also known as AK-LNG, the three private-sector partners had a chance to tell legislators where they think the massive $55-65 billion project is going.

Sen. Cathy Giessel, co-chair Senate Natural Resources Committee
Sen. Cathy Giessel, co-chair Senate Natural Resources Committee

“The Legislature strongly supported the gas project, passing SB 138 by a vote of 52 to 8,” said Sen. Cathy Giessel, who co-chairs Senate Natural Resources Committee. “Along with our producer partners, we evaluated the cost and competitiveness of the project. Now we have learned that the project is not economic in today’s price environment, and should slow down.”

ConocoPhillips said energy markets are flooded with natural gas and the project doesn’t look like a “go” to CP at this time, although the company would be agreeable to shipping its gas through the line.

ExxonMobil, the lead partner in the project, said it’s ready to hand it over to the state, and will ensure a smooth transition. Like former partner Trans Canada, it may be ready to step back for a while.

And then there’s BP. The company took a curious stance.

BP said it “supports” the state-led option that Governor Walker is pursuing.

Saying so makes sense, since Governor Walker has not approved BPs plan of development for its Prudhoe Bay leases and has threatened to essentially foreclose on the leases within a few short weeks. Those leases provide the lion’s share of oil into the Trans Alaska Pipeline System.

Observers asked whether BP was fully in support of the governor’s gasline proposal or if it was being essentially blackmailed by the governor.

Walker has insisted that BP release its marketing plans for natural gas; the company has said that sharing that information would violate anti-trust laws. Publicly traded companies have a duty to their shareholders and cannot simply give over competitive information that could hurt the company. In this matter, you have a government asking a private business for its highly speculative marketing plans.

The state Division of Oil and Gas rejected BP’s 2016  plan for Prudhoe Bay, but then extended the deadline until Sept. 1, just a few days from now. The governor is pressuring BP, with an absolute drop-dead date of Nov. 1. After that, it’s an “or else” situation, and no one knows if the governor will simply “nationalize” the leases.

After all, this is the governor who decided to sue Exxon this week over global warming. He’s the governor who grabbed half of Alaskans Permanent Fund dividends and is paying his consultants millions of dollars. Such a governor might do anything.

BP and the Oil and Gas Division have had volleys of letters arguing whether BP’s plan is complete, and even ConocoPhillips and ExxonMobil weighed in on behalf of BP, saying the company’s plan is complete. The governor won’t speak of it to the media, but companies say that he’s making demands that have never been made before.

Gov. Walker has referenced that there is a legal “duty to produce” gas that the companies must meet, but the companies say they have no duty to produce anything if there’s no gasline to put it in.

Prudhoe Bay is operated by BP on behalf of ConocoPhillips and ExxonMobil. It has as much as 30 trillion cubic feet of recoverable natural gas.

“The governor wishes to press on, with the State going it alone,” said Sen. Giessel. “We in the Legislature must conduct due diligence – just as a person would do before building a house – by asking the tough questions, and that’s what we did this week.”