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February 2018

Vol. 23, No. 5 Week of February 04, 2018

Senators have numerous questions for AGDC

Joint Finance, Resource committees hear update from corporationís management; have concerns with spending, legislative approvals

Kristen Nelson

Petroleum News

A joint meeting of the Senateís Finance and Resources committees heard an update from the Alaska Gasline Development Corp. Jan. 25. There were numerous questions about the projectís status and spending levels.

AGDC President Keith Meyer said the corporation had scaled down its spend to stretch out the remaining monies AGDC has from the Legislature. Expenditures last year were significantly under budget, he said, with AGDC doing a lot of activities in-house that would otherwise be done by contractors.

Sen. Cathy Giessel, R-Anchorage, chair of Senate Resources, said she was concerned that if the project has actually advanced to a place itís never been before, that so little can be spent with so much accomplished.

Meyer said a significant amount of work had already been done by the team, referring to the previous partnership of BP, ConocoPhillips, ExxonMobil and AGDC. That team was very expensive, he said, and when AGDC took over the project it had an in-house team from the ASAP project, the Alaska Stand Alone Pipeline, and has done a lot of work in-house. There is commercial and regulatory work left to do, he said, but the engineering work done under the joint team for pre-FEED, front-end engineering and design, was expensive.

The final investment decision is slated for the front end of 2019, he said, with the beginning of construction at the end of that year.

Source of spend

Sen. Bill Wielechowski, D-Anchorage, asked how much AGDC was spending compared to partners in the project.

Meyer said AGDC doesnít currently have any partners, although it may later in the year. Right now, he said, AGDC is engaged with potential customers, not partners, and those customers arenít engaged as owners and are not investing in the project.

He said AGDC doesnít currently have the ability to receive funds from third parties: Itís one thing weíre asking for, Meyer said.

Wielechowski asked what consideration AGDC would be giving partners in exchange for funds, whether that would expose the state to future liability and whether the Legislature would be privy to terms of such agreements.

Meyer said the Legislature would be privy to terms. It would be investors investing in project infrastructure, he said. AGDC now owns 100 percent of the project and would be giving up some of that ownership in exchange for funds.

Sen. Anna MacKinnon, co-chair of Senate Finance, asked about losing tax-exempt status for that portion owned by partners, and Meyer said that to the extent AGDC sells ownership it would lose tax exempt status for that portion.

Sen. Peter Micciche, R-Soldotna, noted that the current arrangement was different from when AGDC was in partnership with the producers. He said AGDC is now looking for investors, hoping to have partners bringing in money, rather than coming back to the Legislature.

Meyer said that was correct, that AGDC was asking for receipt authority.

Sen. Natasha von Imhoff, R-Anchorage, asked it AGDC would be approaching the Alaska Permanent Fund Corp. for investment and Meyer said he didnít anticipate that, but also said in his mind the state has the first option to invest, wherever that investment comes from, and said he would encourage the Permanent Fund to look at it.

Von Imhoff asked if Meyer would be actively pursuing Permanent Fund investment. Meyer said AGDC would actively pursue all third-party investors, including the Permanent Fund, but said he thinks they are aware of the project and should come take a look.

The $12 million

MacKinnon noted that AGDC was also asking to move money from the ASAP project.

Meyer said, yes, they were not asking for additional funding, but reallocation of about $12 million from the in-state project to the Alaska LNG project.

Micciche noted that legislators would like to be partners and had compartmentalized receipt authority (AKLNG vs. ASAP) in order to give the Legislature a vote in each segment.

Micciche said removing the Legislature from any further approval would hand authority to the administration, but Meyer said he thinks that can be addressed. The structure is such that the state would always have the first option to invest and if the state said it didnít want to go forward the partners would have the ability to go forward without the state funding.

He also said the deal would have to be approved before AGDC finalizes it, so thatís the final check.

MacKinnon said she was concerned that by reallocating the $12 million from ASAP to AKLNG the state was forgoing a backstop: We had a backup plan for Alaskans that we could transfer to the small line, she said. Meyer said that ASAP work is coming to a conclusion and slides prepared for the presentation noted that a final record of decision for ASAP is expected this summer.






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