Governor Walker calls for discussion on Alaska LNG project

Governor Bill Walker called the legislature into a special session on October 24 in Juneau to address gasline issues and Alaska LNG project.

“With a $3.5 billion budget deficit, this gasline project has gone from a wish-list item to a must-have,” said Governor Walker.

Part of Governor Walker’s legislation package, which will be introduced before the start of the special session, includes a proposal to buy TransCanada’s share of the gas pipeline and gas treatment facility. Governor Walker said this is absolutely critical to ensure Alaska has a seat at the negotiating table.

The legislation package will also include a bill to reinstate a reserve tax on North Slope resources in the ground that are not developed. In 1975, Governor Bill Egan signed a similar piece of legislation allowing the state to collect oil revenue prior to the Trans-Alaska Pipeline being built.

Governor Walker said that without this insurance policy, Alaska runs the significant risk of never monetizing its gas resources.

Governor Walker also released his administration’s review of the Alaska LNG project, which provides a brief history of the state’s prior efforts to produce North Slope gas, and explains why Alaska must take a more aggressive role in future gasline negotiations.

The majority of challenges are structural and commercial in nature rather than technical. The report shows that there is no alignment on when the AKLNG project should begin FEED or construction.

The state intends to reach a position in which it has the ability to prevent any AKLNG partner from causing unreasonable delay to the project schedule, or to proceed without an AKLNG partner who unreasonably delays.

Also, if one or more producers, ConocoPhillips, BP or ExxonMobil withdraw at any point from the project, the state must have the ability to acquire that party’s interest in the project and get a reasonable commitment from the withdrawing party to toll gas through the gas pipeline and liquefaction facilities, or sell its gas to the state so that it can proceed with moving forward without delay.

The state is currently in the process of negotiating a withdrawal agreement and milestones to deal with these points.

The report also shows that a 42” pipeline is unlikely to incentivize future exploration and development by third parties, and that the ownership interests in PBU and PTU are significantly different among the three producers, and the two fields are at very different stages of development.

The state is also uncertain regarding the role of TransCanada that currently owns 25% of the gas treatment plant and 25% of the AKLNG pipeline.

Among other issues, the producers are unwilling to move forward without more fiscal certainty than the state is willing to provide. The report shows that the current project structure is making the financing more difficult.

Governor Walker said it intends to create cohesion between the administration and the legislature, which is essential for gaining better leverage to pressure development of the project.

LNG World News Staff; Image: Alaska LNG