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April 2015

Vol. 20, No. 16 Week of April 19, 2015

Governor sets out LNG plan in April 10 letter to legislators

Leaders in the Alaska Legislature have been asking Gov. Bill Walker what his plan is for moving forward with the Alaska LNG project. Former Gov. Sean Parnell negotiated an equity position for the state in the project, which the previous Legislature approved; that project is in the pre-front end engineering design phase.

Walker has said he wants to expand the state-owned Alaska Stand Alone Pipeline plan from the 500 million cubic feet per day project the Alaska Gasline Development Corp. has been studying to a larger project which he believes is needed as a backup, should the AKLNG project not move forward, and also as leverage in negotiating with the state’s equity partners in AKLNG - BP, ConocoPhillips and ExxonMobil.

Legislators have asked the governor to put his proposal in a bill so hearings can be held on the plan.

He hasn’t done that, but did lay out his plan going forward in an April 10 letter to legislators.

As he has said previously, the governor plans a “45-day due diligence review” by a state gas line team of all material related to AKLNG. Walker said he would be the first governor “who does not start over” on a new gas line plan for the state, but also said he needs to “fully understand the AKLNG project details,” and noted that most of the AKLNG project material negotiated last year was confidential.

He said it is possible that the terms of the joint venture agreement negotiated last year “are such that with some modifications, there may not be a need for a backup plan.”

“The requested terms I would like made have already been conveyed in meetings I have had with the AKLNG partners, so they will come as no surprise. However, my team’s ability to successfully negotiate any modifications to the JVA depends on Alaska having an economically viable backup plan.”

The governor did not specify in his letter to legislators what modifications he is seeking.

House Bill 132

Legislative leaders objected when the governor said he wanted money appropriated for the 500-million-cubic-feet ASAP plan to be used to study expanding that project. House Majority Leader Mike Chenault, R-Nikiski, introduced House Bill 132, which prohibits use of funds appropriated for the original ASAP to study expanding the project. That bill has passed both bodies.

Legislators have argued that expanding ASAP would put the state - an equity partner in AKLNG - in competition with itself.

In his April 10 letter the governor thanked both Chenault and Senate President Kevin Meyer, R-Anchorage, “and their respective staff for the many hours working with me and my staff on a way forward on HB 132.”

He said they share the same goal of getting North Slope natural gas to Alaskans and to world markets, but “we were unable to resolve significant points of disagreement on HB 132, which I am therefore vetoing.”

Expanded ASAP

The governor told lawmakers it would take an estimated $85 million to get to a FEED decision for an upsized ASAP line, with funds used to re-engineer the pipeline for increased throughput; re-work the plans for gas conditioning facilities on the North Slope and begin work for designing compressor stations; continue permitting under the National Environmental Policy Act; and cover project-related costs.

Walker said those efforts would take 12-14 months, through the second quarter of 2016.

AKLNG is projected to reach a point where the partners could decide to move to FEED in the second quarter of 2016, so presumably the two projects would be on a similar timeline.

The governor said the pipeline route for an expanded ASAP would terminate in Cook Inlet.

The state would be in control of the financing strategy for ASAP, “and will be in a position to attract funding from buyers interested in investing in our project,” he said, adding that ASAP would not be competing with the producers for financing sources, nor would the state be dependent on alignment among the producers.

Walker concluded his letter by asking that legislators vote no when asked to override his HB 132 veto.

HB 132 was transmitted to the governor April 1 and is due back April 18; this session of the Legislature is scheduled to end April 19.

- Kristen Nelson






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