Walker requests acceleration on AK LNG talks

  • By Tim Bradner
  • Saturday, June 6, 2015 9:45pm
  • News

Gov. Bill Walker said May 29 he’s about “half-way” through a 45-day review of the Alaska LNG Project partnership terms and said he’s pleased at what he’s seen so far of the details, which are confidential.

The state is a partner in the Alaska LNG Project along with North Slope producers BP, ConocoPhillips and ExxonMobil, as well as pipeline company TransCanada.

Walker also said he has requested that negotiations between the state and industry partners be “accelerated” so to have agreements concluded in time for a November special session of the Legislature, which he said will be needed for approval by lawmakers.

The quickened pace means some groups of state and industry people will be meeting on a continuous rather than intermittent basis, Walker said.

The governor made his comments May 29, following an address to the Alaska Oil and Gas Association’s annual luncheon in Anchorage.

“There are a lot of moving parts to this. We need to focus in getting to a FEED (Front-End Engineering and Design) decision no later than mid-2016,” Walker said.

The priority given by the governor on the Alaska LNG Project negotiations also means that a plan to ramp up a state-backed gas pipeline as an alternative to the big project is on the shelf, at least for now.

In a budget move, state legislators in April re-appropriated $158 million from the Alaska Gasline Development Corp. to public school budgets. This was money the governor had intended to use for engineering studies in the scale-up of a smaller state gas project.

The governor has asked to get $118 million of the money back but so far legislators have not agreed to that. Since then Walker has said little about the backup pipeline and appears now to be putting most of his effort into finalizing the negotiations with the industry partners.

For the Alaska LNG Project, agreements still to be finished include a deal on fiscal terms for gas production between the state and North Slope producers as well as a gas “balancing” agreement, basically a plan for managing capacity if there are shortfalls or upsets in gas production.

The state must also sign a long-term commitment to TransCanada to ship state-owned gas, which amounts to about 25 percent of total production, through TransCanada’s share of the large gas conditioning plant on the North Slope and the 800-mile gas pipeline.

Municipalities along the pipeline route and the state must also agree to a proposed Payment-in-Lieu of Tax plan for property taxes on the project. This is an important item because property taxes will amount to about $1 billion per year, state Revenue Commissioner Randy Hoffbeck has said.

A proposed PILT deal now being studied by municipalities would not reduce property taxes as much as making their administration more flexible. Finally, the state must also conclude agreements with North Slope producers on how the state’s share of gas, in the form of LNG, would be marketed. The state could choose to market the LNG itself, which would require setting up a state LNG marketing organization, or the state could forge agreements with the three producers to sell state LNG.

Meanwhile, the governor has said very little about the 45-day review since he announced it at an April 1 luncheon speech to Commonwealth North, an Anchorage business group. The starting and ending date for the review have been hazy, the governor acknowledged.

Walker had hoped to initiate it at the end of the 2015 legislative session, he said, but the postponed adjournment and subsequent special sessions, and the budget gridlock, have preoccupied administration officials.

The administration has also been silent on who is doing the review, although the name of Rigdon Boykin, a special advisor to Walker on natural gas, and the Washington, D.C., law firm, Greenberg Traurig, were released shortly after Walker spoke at Commonwealth North.

The governor has said the results of the review will be made public. Industry partners in Alaska LNG have said the state, as a partner, has the right to review terms of the deal at any time.

On another issue related to AGDC, the governor has so far not named a replacement to former state Sen. Joe Paskvan, who was nominated earlier for one of three vacant seats on the state corporation board but who was turned down by the Legislature.

Two other nominees by Walker, Hugh Short, a financial specialist, and former state Sen. Rick Halford, were confirmed by lawmakers.

AGDC’s board has not meet since March 12 but a meeting is now planned for June 11; the board is required to meet every three months by law.

The corporation has been carrying out directions of the board at that March meeting, according to Miles Baker, spokesman for AGDC. This is mainly a $60-million work program designed to benefit both the Alaska LNG Project and the smaller in-state backup gas project if it is built, Baker said.

The state corporation is also carrying out certain technical work, such as geophysical testing, on behalf of the Alaska LNG Project consortium.

Items tentatively on the June 11 agenda for AGDC’s board include updated engineering estimates on the cost of pipeline connections and lateral pipeline to supply gas to communities along the 800-mile Alaska LNG Project route as well as an updated study of in-state demand for North Slope natural gas delivered through the 42-inch pipeline.

Pipeline connections for communities is a state responsibility under the Alaska LNG Project partnership, and this has been assigned to AGDC.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

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