WALKER PLANS TO GO IT ALONE ON GASLINE?
Governor Bill Walker has some explaining to do.
Today, through his new president of the Alaska Gasline Development Corporation, and his acting DNR commissioner, Walker Administration has finally let it be known that he intends to go it alone on the gasline. This can only mean that the partners have signaled to him that they are out.
The administration’s stealth move was broken wide open by Alaska Public Media.
But Alaskans in the know have been warning since Walker was elected that his end game was full state ownership of the gasline project. Never mind that the state only owns a bit over 12% of the gas, the state’s royalty gas.
Walker ran on the issue of the gasline back in 2014. He said he would build it himself, if he had to do it with his bare hands. Later, when pressed, he promised he would not change the route the producers had agreed on.
But little by little, Gov. Walker eroded the trust and confidence the public had in Gov. Parnell’s years that a gasline was actually advancing through publicly vetted benchmarks and through the certainty of public promises made and promises kept.
It may have been his purpose to destroy that trust and break up the partnership. After all, his long-standing animosity to the project management partner, Exxon, is the stuff of legends.
Walker is way behind in his deliverables. He still has no supply agreements, commercial terms, no decision on royalty-in-kind or royalty-in-value. He sacked the board of directors, save one, and the project has not yet completed the pre front end engineering and design. And yet, through his acting commissioner of the Department of Natural Resources, and Keith Meyer, the new AGDC president, he said he may just go it alone.
This fall is when the full engineering commitment must be made. That is a $2 billion decision — $500 million apiece for each partner, if the partners agree to move forward. If they don’t, which legislator will vote to give the governor that kind of spending authority, when he still doesn’t have commercial terms?
The June 29 meeting of the Senate Natural Resources Committee (10 am, Anchorage LIO) will include an AK-LNG update. And the Board of Directors of AGDC is set to meet on July 14. Special Session of the Alaska Legislature convenes July 11, when legislators will be asked by the governor to restructure the Alaska Permanent Fund into an endowment. Expect questions by legislators on how the pieces fit together between the Permanent Fund and the gasline.
GOVERNOR HINTED BACK IN 2015
Here’s what Walker said on Feb. 19, 2015 in a piece titled: “Taking Control of the Gasline”
I am very excited about Alaska’s prospects for finally getting our natural gas to Alaskans and the world market. We currently have two natural gas pipeline projects in the works – the Alaska Stand Alone Pipeline (ASAP) and the large-volume Alaska LNG project (AK LNG). Only one of these projects will ultimately be built. The ASAP project is 100 percent owned by Alaska and was designed as a small-volume gasline to deliver North Slope gas to Fairbanks, Southcentral and other communities where practicable. AK LNG is a liquefied natural gas (LNG) project that would pipe gas from the North Slope to tidewater at Nikiski for export to Asian markets, and include offtake points where gas can be taken for in-state use. AK LNG is owned by the three largest North Slope producers (ExxonMobil, BP and ConocoPhillips). The state has a 25 percent ownership interest in the project through TransCanada and the Alaska Gasline Development Corporation.
I’m pleased with the progress made to date on AK LNG and it is my intent that we, as a state, assist in furthering the project. However, I am concerned about what happens if the project fails to advance to the next stage of detailed engineering design, or to project sanction. The engineering decision point will occur in 2016, when the preliminary engineering and design work will be complete and the commercial structure of the project is better defined. Project sanction is anticipated in 2019. At each decision point, the three producers, TransCanada, and the state will individually decide whether the project proceeds to the next phase.
It is unknown whether the producers and TransCanada will approve moving to the next phase in the face of their other competing projects worldwide.Therefore, we will increase the viability of the ASAP project. I’ve long contended that the smaller volume in-state project as originally proposed does not make economic sense. Its small volume would generate little to no revenue for the state, would most likely require a substantial annual state subsidy, and likely increase the cost of energy for Alaskan consumers. The original small-volume limitation on the ASAP project was necessary because of conditions under the Alaska Gasline Inducement Act (AGIA). With the termination of AGIA last year, the ASAP project can now be upsized. A larger volume will make it economic to meet market needs beyond Alaska’s borders and provide affordable energy to Alaskans.
In contrast to the producer-driven AK LNG project, my intention is that ASAP be market-driven, with Alaska in control. Using existing funding, the project will explore market opportunities and financing arrangements with potential buyers of Alaska’s gas and will be designed for both in- state and export markets. Working with the buyers, the project will develop a financing plan anchored with long-term contracts for purchase of Alaska gas.
What it comes down to is this: we will work with the producers to continue to develop the AK LNG project. With ASAP, we will work with gas buyers to secure the opportunities the market offers. Whichever project is first to produce a solid plan, and conditions acceptable to the state, will get the state’s full support. Or, perhaps the two projects could be combined at some point along the way.
Given our financial situation, we can no longer afford to stand by and wait while Alaska’s future is decided in the boardrooms of international corporations that have competing global interests. It is time to develop the option for a large-volume natural gas project with Alaskans in control, with the decision-making based on what is best for Alaska. We are an Owner state and we must act like the owners we are.
I look forward to seeing the best project for Alaska emerge from this process and stand ready to help move it through to completion. This will assure Alaska that we finally build the large volume gasline that benefits all Alaskans. With diligence and hard work, Alaskans will get our natural gas to market and into our homes and businesses.
STRING OF FAILURES
A walk through historic failures: Walker was the head of the Alaska Gasline Port Authority, formed in 1999 by the North Slope Borough, Fairbanks North Star Borough, and City of Valdez. Their goal was to get a pipeline built to Valdez. Walker presented various schemes over the years, but none ever got anywhere.
Walker’s gasline plan would have benefited a few local governments, while hurting the rest of the state, the Permanent Fund, and state revenues. It was widely panned by economists at the time.
When he ran for governor, he said the AK-LNG project that was well under way was “fatally flawed,” and he said he might pull the plug on the project if elected. This is one promise he may be making good on.