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What comes next? Alaska wants to start staffing for its gas pipeline ownership entity Kristen Nelson Petroleum News Editor-in-Chief
Alaska is moving ahead with fiscal negotiations for a natural gas pipeline project from the North Slope and expects to put a contract under the Alaska Stranded Gas Development Act before the Legislature this session.
The administration also wants to put money into preliminary staffing for the state entity which would be a partner in the pipeline, and there was some discussion of what that entity might look like at a Feb. 25 House Finance committee meeting.
The act allowed the state to charge applicants up to $1.5 million per application for the state’s work, but the state’s negotiators, the departments of Law, Natural Resources and Revenue, along with the Alaska Oil and Gas Conservation Commission, have gone to the Legislature for fast-tract supplemental budget requests to support the gas pipeline project work.
Deputy Revenue Commissioner Steve Porter provided the committee with an overview. He told the committee the $1.5 million has been collected from the producers’ group (BP, ConocoPhillips and ExxonMobil) and the other applicant, TransCanada, is also being billed.
Porter noted that the state has put a proposal before the producers and has received a counter-proposal and is also developing a proposal with TransCanada.
Work is still required, he said, before a contract can be brought to the Legislature, including “a substantial amount of legal support in negotiating a fiscal contract and other associated contracts and exhibits necessary to bring a contract proposal to the Legislature.”
Variations of fiscal terms negotiations may also require additional analytical contract support, he said.
Once a contract is in place a commissioner’s finding will have to be prepared, and the finding and contract will go to the Legislature and to the public for a 30-day comment period. The commissioner will respond to comments, and the process may require returning to the applicant to refine the agreement.
Then the final finding and final contract will be presented to the Legislature for ratification.
The supplemental fast-tract budget request contains a number of gas pipeline-related items: $9 million to Law; $10.6 million to the Department of Natural Resources; $5.3 million to Revenue; $2.17 million to the Alaska Natural Gas Development Authority; and $1.2 million to the Alaska Oil and Gas Conservation Commission for reservoir studies and depletion plan evaluations. When a contract is ratified Porter said some of the monies, $1.5 million, are needed to start staffing the state’s equity ownership organization.
“If we decide to take an ownership interest in the pipeline, we could almost immediately find ourselves in a partnership relationship with an applicant attempting to build a pipeline,” he said. “In order to be effective in that new entity, the state representatives need to be ready to make financial and other decisions necessary to move the project forward timely.”
The funding requested would allow the state “to begin the development of the state’s organization that will need to be in place almost immediately upon ratification of any contract.”
Rep. Eric Croft, D-Anchorage, asked if monies were being requested to actually set up a corporation.
Porter said what is needed now is to hire people who would be involved in negotiations as well as being prepared to move forward in the event a stranded gas contract is signed. Twelve positions for LLC by year-end “If this contract is approved by the Legislature in early summer we would want to fully staff this organization on the date that it was ratified by the Legislature. But in advance of that we will have a limited team that we need to have in place to negotiate the actual elements of the contract if indeed participation is part of it…”
The estimate is to have about 12 positions fully funded prior to the end of this fiscal year, Porter said.
Rep. Mike Hawker, R-Anchorage, asked about a reference to “negotiating the formation of a limited liability company which will participate in and hold the state’s interest.”
Porter said the focus of negotiations for the business agreement are around the idea “that there would be some type of a partnership which at this time we expect to be a limited liability company, which the state would be a partner in” with the entity approved by the Legislature when it ratified a contract under the stranded gas act.
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