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December 2010

Vol. 15, No. 52 Week of December 26, 2010

Auditors recommend sunset for ANGDA

Agency argues its record of working for the consumer, tells LB&A it brings a unique perspective to the state’s gas line issues

Kristen Nelson

Petroleum News

The Alaska Legislature’s Division of Legislative Audit has completed a performance audit of the Alaska Natural Gas Development Authority for the Legislative Budget and Audit Committee, and recommends that the Legislature consider ANGDA for sunset once uncertainties about development of Alaska North Slope natural gas are addressed.

Legislative Audit said ANGDA does not play a lead role in acquiring and conditioning North Slope natural gas, or in constructing a pipeline to transport the gas. Those plans are being developed by other private or public entitles, the audit report said, with the Alaska Pipeline Project and Denali working on large-diameter lines and the Joint In-state Gasline Development Team guiding development of a small-diameter pipeline.

House Bill 369, which created the in-state team, designated ANGDA’s CEO as part of the five-member team, but essentially “made ANGDA a support agency rather than a lead agency in the development of an in-state pipeline.”

ANGDA board disagrees

In a response to Legislative Audit’s preliminary report, the ANGDA board summarized its major concerns with the audit.

The board said ANGDA plays “a unique and key role in the acquisition and delivery of North Slope natural gas to in-state markets, communities and citizen-consumers,” and said ANGDA has remained true to the original goals set by Ballot Measure 3 which passed in the November 2002 general election, establishing ANGDA, while avoiding duplicate efforts with agencies and private groups involved in in-state energy issues.

The board said “ANGDA’s pursuit of projects separate from the mainstream gas supply projects is meaningful to a significant minority of Alaskans and is essential to ensuring statewide energy solutions,” while providing “for an evenhanded distribution” of the state’s resources.

The board said ANGDA plays multiple roles in working to get North Slope gas to market, and noted that improving the state’s efforts on gas lines “requires more than a simplistic elimination of an organization, particularly one that has consistently and steadily represented the interests of Alaska’s citizens as consumers,” especially since “many other gas supply initiatives funded with substantially more dollars have come and gone over the last 5 years.”

The board said “ANGDA remains the only organization that consistently measures alternative opportunities in terms of the consumer’s monthly energy bill,” and said “the loss of ANGDA’s objective voice would be a costly and potentially irrevocable mistake.”

Open season participation

The board said ANGDA is the only entity participating on behalf of in-state gas in the Alaska Pipeline Project and Denali open seasons and is negotiating with both projects for shipping capacity on behalf of the Railbelt electric utilities.

Because of the open season participation by ANGDA, the Railbelt utilities are eligible for negotiated shipping rates that provide “an estimated one-third discount on future natural gas purchases,” a discount estimated at a minimum of $75 million in savings to Alaska consumers.

The board noted that it has advised LB&A that “these sensitive negotiations are clearly jeopardized by any threat to ANGDA’s continuity and creditworthiness.”

The board said the audit made no attempt to gauge success and therefore is “incomplete as a basis for judging the public’s best interest.”

While ANGDA’s records were analyzed, the audit did not provide the same level of scrutiny to counter views.

“We sense that the conclusion on ANGDA’s future may have been written before the audit started,” the board said.

The board also objected to an interpretation that ANGDA operated outside its statutory framework, noting that the Department of Law has been involved in all ANGDA project decisions and “has consistently held that the actions are proper.”

On the issue of how its assets are presented in financial statements and note disclosures, the board said it is working with the Department of Revenue to restate its asset accounts to reflect new accounting standards.






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