Congressional budget cutters have come down hard on the small federal agency created to expedite permitting and construction of an Alaska natural gas pipeline.
In the consolidated appropriations act, H.R. 2055, that President Obama signed Dec. 23, the coordinator’s office received $1 million for fiscal year 2012, which runs through next September.
The agency received about $4 million in each of the two preceding budget years, Larry Persily, the federal coordinator, told Petroleum News.
It means Persily now must take steps to cut the agency’s expenses and its 11-person staff, which is split between Washington, D.C., and Anchorage.
No one will be laid off immediately, but Persily said he’ll make staffing decisions in the next couple of weeks.
The cuts will hurt, but Persily said he has a plan for keeping the agency on track with its work in coming years.
Waiting for a project
Congress created the coordinator’s office with the Alaska Natural Gas Pipeline Act of 2004.
Its job is to work with numerous federal agencies, as well as the state, the Canadian federal government and tribal governments to smooth the road toward an Alaska North Slope gas pipeline.
Since its creation, the coordinator’s office has been waiting to really swing into action on a firm pipeline project.
While one project proposed by a partnership of TransCanada and ExxonMobil remains on the table, the Denali project teaming BP and ConocoPhillips has faded away.
With natural gas prices running relatively low, and an explosion of shale gas coming into the market, prospects for a multibillion-dollar Alaska gas line seem to have dimmed recently.
That didn’t escape the notice of some in Congress, with many members looking to cut federal spending and reduce the national debt.
“Let’s face it — there are some members of Congress who are skeptical about the project,” Persily said.
The Alaska delegation tries
Persily said his office talked with the offices of all three members of the Alaska congressional delegation — Democratic Sen. Mark Begich, Republican Sen. Lisa Murkowski and Republican Rep. Don Young.
All worked to salvage the coordinator’s budget, but the delegation is under pressure to prevent postal, military and other federal spending cuts in Alaska, Persily said.
Now Persily is moving to reduce expenses in the coordinator’s office, as well as staff.
“As I told the delegation, yes, it will be painful,” Persily said.
He already has approached the General Services Administration, which acts as landlord for government agencies, about getting out of an expensive office lease in a private building only a few blocks from the White House.
The lease cost is $750,000 per year, and at 13,000 square feet, the office space is much larger than what the six staffers working in Washington really need, Persily said.
Persily said he inherited the lease when the Senate confirmed him as the second coordinator in March 2010.
The agency still intends to have an office in Washington, he said.
Stretching out funds
The House had approved a coordinator’s budget of just over $4 million, but Senate budget writers proposed $1 million, and that’s what prevailed in a conference committee.
Report language from the Senate budget bill in September noted that “only one joint venture is still pursing the design and construction of a natural gas pipeline from Alaska to the Lower 48,” and cited the state’s “extensive financial support” for the project.
A bright spot for the coordinator’s office is that coming into this fiscal year, it had about $2.25 million in leftover funds from previous appropriations.
“My plan is to stretch out that $2 million over the next couple of years to lessen the effect of the budget cut,” Persily said.
The savings will supplement the agency’s $1 million annual appropriation, assuming Congress continues that level of funding for fiscal years 2013 and 2014, he said.
Persily said he’s confident that, even with the spending and staffing reductions, the coordinator’s office “can still remain effective at our job” and the pipeline project won’t suffer, Persily said.
In addition, the coordinator’s office has a cost reimbursement agreement with TransCanada and ExxonMobil, and Persily said he intends to “discuss with them the congressional intent that we pass along more of our costs to them as the project applicant.”
The Senate language urged the coordinator’s office to “take greater advantage” of its legal authority to receive funding from the companies for its work.
FERC application
The coordinator’s office could become increasingly busy, assuming TransCanada and ExxonMobil stay on track to submit a project application in October 2012 to the Federal Energy Regulatory Commission, Persily said.
Assuming the application is complete, the hope is that FERC will develop an environmental impact statement and make a certificate decision by late summer of 2014, he said.
The coordinator’s office will look to tighten expenses and “do our job through the conclusion of the FERC process,” Persily said. Longer term, the office has oversight responsibility through construction.
In the coming year, the agency’s work will include reviewing thousands of pages of draft resource reports expected to come in from the TransCanada-ExxonMobil partnership.
The 11 draft resource reports will examine air and water, wetlands and soils, fish and game, socioeconomic and other issues associated with the proposed pipeline route from the North Slope to the Canadian border, Persily said.
The reports, which form the basis for the EIS, could come in sometime during January, he said.
“Our office, just as other federal and state agencies, will be looking for data gaps in the reports so that the applicant can go out and fill those gaps during summer 2012 field work, in time to submit final resource reports and a complete application to FERC in October 2012,” Persily said.
The coordinator’s office also intends to continue “our aggressive public outreach work, getting information to Alaskans on subjects related to the project and other natural gas issues,” he said.
