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ANGDA proposes in-state changes CEO Harold Heinze: Alaska Natural Gas Development Authority premised on having big project from which to build spur Kristen Nelson Petroleum News
Alaska Natural Gas Development Authority plans are premised on having the big North Slope gas pipeline project go forward, and “if that requires the contract we need to help make that happen,” Harold Heinze, ANGDA’s chief executive officer, said at a June 12 board meeting.
Heinze got board approval for comments on the draft fiscal contract Gov. Frank Murkowski’s administration has negotiated with BP, ConocoPhillips and ExxonMobil focused on in-state use of natural gas.
He said in response to a question from ANGDA Vice-Chair Scott Heyworth, that if there is no big gas line, then none of ANGDA’s work is a throwaway. In addition to a spur line, ANGDA has looked at what it calls a bullet line, a pipeline from the North Slope to Southcentral Alaska that would be a much smaller diameter than the proposed 48-inch to 52-inch mainline pipe to the Lower 48.
Board Member John Kelsey noted that there is “a ground swell” of people trying to kill the contract and Heinze said he’s well aware there are forces pulling lots of different ways. He told the board his objective is to offer commentary on the contract to make its provisions workable for in-state gas.
The administration has asked for constructive suggestions, he said, and what he’s proposing are negotiating positions. None of these proposed changes should be deal killers, Heinze said.
ANGDA’s suggestions include:
ANGDA not named, but included under state ANGDA is not named in the contract, Heinze said, but is part of the fiscal contract because it is not excluded.
The contract defines state as “the Alaska government, but excluding its judiciary and any independent or quasi-judicial regulatory agency, such as the Regulatory Commission of Alaska or the Alaska Oil and Gas Conservation Commission.”
Assistant Attorney General Ken Diemer told the board it appeared to him that Heinze was correct, since ANGDA is a non-judicial type of agency.
The contract modifications ANGDA recommended under Article 7, state ownership, include: defining a coordinated state approach where ANGDA handles the in-state activities and Alaska Pipe (the limited liability company that would be formed to handle the state’s equity interest in the mainline pipe) handles interstate export; involving ANGDA in the development of the LLC for pipeline ownership; having the lateral line delivering gas to Cook Inlet be another element in the mainline gas project to allow use of the federal loan guarantees; providing the same tax credit to in-state gas transmission pipeline investors as given to North Slope gas gathering pipelines to encourage in-state infrastructure development; and removing ANGDA from the contract’s definition of state so there are no unintended consequences.
Heinze said the tax credit, 35 percent, would reduce the tariff for the spur line by taking one-third of the cost off the top.
Potential role in marketing In Article 9, in-state markets, ANGDA proposed that parties to the contract provide a free option on up to 5 percent of throughput capacity, similar to a pledge ConocoPhillips made for an Alabama liquefied natural gas terminal, described in media coverage as a “no-cost” option to buy up to 200 million cubic feet of gas per day at market rates, the average spot market price. It suggested the state make a statutory commitment of a portion of its state gas to in-state consumers to allow certainty of gas availability for Alaska utilities and manufacturers as they obtain financing to back their open season commitments and also recommended assigning ANGDA the commercial buy-sell role in Alaska, and requiring a study of ANGDA as an aggregator of in-state demand and royalty gas for in-state use as a potential way to facilitate the participation of smaller in-state gas utilities.
FERC and state regulatory agencies Article 8 of the draft contract, “Regulation of and access to project facilities and disposal services,” says regulation is expected to be exclusively under the Natural Gas Act, the Alaska Natural Gas Act of 2004, other applicable federal law and the contract and if federal law does not apply, regulation will be by commercial agreements. The Federal Energy Regulatory Commission and Canada’s National Energy Board shall have exclusive jurisdiction and if the Regulatory Commission of Alaska imposes regulations which cause a loss to a participant in the project, the state will reimburse the participant for the loss.
As with Article 7, ANGDA is requesting that it — and Regulatory Affairs and Public Advocacy within the Department of Law — be excluded from the definition of state. In addition it is requesting that appropriate actions for the RCA in the in-state open season process be specified; that FERC provisions governing conduct of open seasons, mileage-based tariff calculations, capacity expansions and non-discrimination be incorporated in the contract; that the contract preserve the right of any agency of the state to appeal to FERC; acknowledge RCA jurisdiction over Alaska utilities; and reaffirm the AOGCC’s preeminence on producing-field conservation issues.
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