Gasline woes: Senate strips $50 million from agency

The Alaska Senate just found $50 million to help defray the state’s fiscal gap, at least this year.  It’s at AGDC, the gasline agency.

While passing a capital budget that is $35 million smaller than Gov. Bill Walker’s proposal, the Senate stripped money out of the Alaska Gasline Development Corporation, leaving the agency with just enough money to get through the end of this calendar year on fumes — at the current burn rate.

Meanwhile, AGDC President Keith Meyer is in China trying to line up customers and investors for the project.

Sen. Mike Dunleavy offered the amendment to remove $50 million from the Alaska Gasline Development Agency’s LNG fund and appropriate it to a variety of State program needs:

• $5 million to the Department of Law for prosecuting attorneys
• $10 million to Department of Transportation for road maintenance and plowing
• $10 million to the Department of Public Safety for hiring more troopers, and
• $24 million to the public school trust fund.

Dunleavy’s amendment passed without objection.

“What this means is that 100 percent of the senators felt that there are more important needs right now than the AGDC’s LNG funds,” said a source in the Capitol who watched the proceedings. “And it means the governor doesn’t have a friend in the Senate who will stand up for him and his gasline.”

In 2016, Dunleavy went on the record with his doubts about the gasline: “I have yet to be convinced that the overall project is economically viable. There are a lot of moving parts in this project, and with the world currently drowning in oil and gas I question the economics. In order for me to be supportive of the project I will need to be convinced by the administration that we have more than a reasonable prospect that the project will return above and beyond the amount of money the state will need to invest. With a price tag of $45-$65 billion dollars, this project needs to be scrutinized thoroughly.”

AGDC LNG fund had about $100 million in two funds before today’s cut. It’s not known how much is already obligated but $30 million had been set aside for work by various state agencies, such as Natural Resources, and $40 million had been appropriated for “cash calls” for the AK-LNG work plan and budget, things that are not likely to be needed soon.

The agency has a $102 million spending plan for Alaska’s gasline project, which was expected to drain the two gasline funds it holds over an 18-month period.

AGDC has three offices to support — one in Anchorage, one in Houston, and one in Tokyo. And it will need major funding to complete its work for the Federal Energy Regulatory Commission application it filed last month.

AGDC formally launched its application for federal permits to build what is expected to be the largest project ever reviewed by FERC, a proposed integrated gas infrastructure project in three segments: A gas treatment plant at Prudhoe Bay, an 800-mile pipeline to Nikiski, five offtakes for Alaska communities, and a natural gas liquefaction plant at Nikiski to produce LNG for export to Asia.

Now, with barely enough funds to make it until the end of 2017, those gasline plans and the agency advancing them could be in peril.

It’s among a series of setbacks for Walker’s gasline. The gasline project in March lost a potential new partner, REI of Japan, which said the timing is just not right.

Less than a year ago, the major partners, BP, ExxonMobil, and ConocoPhillips pulled out of the project, saying the economics were just not right. Knowledgeable sources inside the joint working group go a bit further.  They say not only are the economics not right, but Gov. Walker’s confrontational and erratic approach with them did not justify continued investments, even at a much smaller level.

The capital budget now goes to the House of Representatives, where it remains to be seen if the Democrat majority will try to restore the money for the governor’s gasline by taking from public safety, roads, and schools.