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Vol. 20, No. 48 Week of November 29, 2015
Providing coverage of Alaska and northern Canada's oil and gas industry

Overturn at AGDC

Walker replaces 2 board members; board accepts Fauske’s resignation

KRISTEN NELSON

Petroleum News

The head of the Alaska Gasline Development Corp. and the head of its board are both out.

On Nov. 20 Alaska Gov. Bill Walker, citing a need for a municipal voice on the AGDC board, replaced John Burns.

On Nov. 21 the AGDC board, composed of six Walker appointees and one remaining appointee of former Gov. Sean Parnell, accepted the resignation of Dan Fauske, who has been president and CEO of AGDC.

Walker replaced three members of the AGDC board after he took office.

On Nov. 20 the governor said he was replacing Burns, who has served as AGDC board chair, with former Fairbanks North Star Borough Mayor Luke Hopkins. Burns had served as attorney general in the Parnell administration. Hopkins has been involved in the Alaska Gasline Port Authority, a project to take a pipeline to Valdez and ship LNG to the Far East with which Walker was involved for many years.

Fauske resigns

At a Nov. 21 meeting the AGDC board, under acting board Chair Dave Cruz, voted to accept the resignation of AGDC President and CEO Dan Fauske. Under Fauske’s lead AGDC developed the in-state Alaska Stand Alone Pipeline project, and represented the state on the liquefied natural gas plant portion of the Alaska LNG project. AKLNG is designed, in concert with the major North Slope producers, to take Prudhoe Bay and Point Thomson natural gas to Nikiski for liquefaction and shipment to the Far East as LNG.

The board said in a statement after the meeting that Fauske had tendered his resignation prior to the start of the morning’s meeting. It also said it had “directed its governance committee to engage an executive recruitment firm to initiate a worldwide search for a new corporate president” and would appoint an interim president to facilitate an orderly transition between Fauske and his successor. “Until then, Mr. Cruz will perform those responsibilities,” the board said.

In his resignation letter Fauske said he had a lot of personal leave and requested that his resignation take effect Jan. 1. “In the meantime,” he said, “I will take my leave so that my successor can begin his or her term.”

Walker’s role

Asked at a press availability the afternoon of the board meeting if Fauske was asked to submit his resignation, Walker said he wasn’t sure of the exact process, but said he’d made no secret that he wanted someone in that position who’s done many major pipeline projects.

He said Fauske had done a good job, but the state is moving into a new stage with the acquisition of TransCanada’s share.

Walker also said he communicated with the board and let them know he thought they needed a person with different qualifications to head AGDC. He said he didn’t give a directive that they must do that, but said board members knew his belief that they needed to thank Fauske and get to the next step.

Board changes

Walker said in the press availability Nov. 21 that he had long felt that vertical alignment was needed on the AGDC board, with someone at the table with a strong municipal connection. Hopkins, Walker said, brings that strong municipal experience.

“As the mayor of the Fairbanks Borough, Luke was instrumental in creating a new municipal gas utility for the Borough, and directing major funds to develop lower cost natural gas supply for Fairbanks residents,” Walker said in a Nov. 20 statement announcing the board changes.

Hopkins has served on the Municipal Advisory Gas Project Review Board, the Association of Defense Communities, the Alaska Municipal League and the Alaska Gasline Port Authority.

The governor also replaced Commissioner Chris Hladick of the Alaska Department of Commerce, Community and Economic Development with Commissioner Marc Luiken of the Alaska Department of Transportation and Public Facilities.

On the replacement of Hladick with Luiken, Walker gave two explanations. He said Hladick served on 22 boards, Luiken on only one, the Alaska Railroad board. He also said that for a large infrastructure project it was appropriate for DOT&PF to be represented.

Frustration

Burns told legislators at the recent special session that he was frustrated by lack of administration leadership on AKLNG, a sentiment in which Fauske concurred.

Legislators, called to Juneau to vote monies for the state to buy out TransCanada’s share in AKLNG, asked AGDC presenters why Dan Fauske was not making the presentation and were told he wasn’t invited to present.

While Fauske wasn’t part of the original AGDC group presenting to legislators, but he and Burns later testified by phone.

The administration organized the presentations on the proposal to buy out TransCanada, something for which Walker has been pushing. The governor has long argued for the state having a stronger voice in the project, and the elimination of TransCanada provides the state a 25 percent share of voting power on the entire project. TransCanada had provided funding and held the state’s share - and its vote - on the North Slope gas treatment plant and on the pipeline, while AGDC held the state’s share in the liquefied natural gas plant. The state had an opportunity to buy out TransCanada by the end of the year. If TransCanada had continued to provide funding on the midstream portion the state would have repaid the company’s investment in a tariff when gas was shipped.

Vote delayed

At its Nov. 21 meeting the AGDC board also voted to delay a vote on approval of the 2016 AKLNG work plan and budget. An AKLNG meeting scheduled for Dec. 4 requires a unanimous vote of the four partners - the state, BP, ConocoPhillips and ExxonMobil - in order for the project to continue work in 2016.

The AGDC board said it would hold a meeting Dec. 3 on the work plan and budget vote.

Asked why the vote was delayed, Walker attributed the delay to leverage.

The governor noted that he had included a gas reserves tax on the call for the special session, but removed that item after BP and ConocoPhillips in writing, and ExxonMobil verbally, agreed to meet the governor’s demand for a commitment that their gas would be available for a project even if they withdrew.

The governor is waiting for final commitments from the companies, and said if the vote had taken place at the Nov. 21 meeting there would have been no incentive for the state to receive those assurances.

Legislators concerned

The Alaska Senate Majority said in a Nov. 21 statement that senators “remain optimistic but vigilant” following the vote of the AGDC board on TransCanada.

Sen. Cathy Giessel, R-Anchorage, chair of Senate Resources, said the Legislature’s direction was clear - “they want a yes vote to approve the project’s program and funding for next year.”

Sen. Anna MacKinnon, R-Eagle River, co-chair of Senate Finance, said that after speaking with Walker and seeing the actions of the AGDC board, she continues “to have great concern with the leadership of the state’s ownership of the AKLNG project.”

Senate President Kevin Meyer, R-Anchorage, said that while it was the governor’s prerogative to appoint new board members, “six of seven board members have been replaced just this year, and the turnover rate is somewhat disconcerting.”

House Speaker Mike Chenault, R-Nikiski, said he was worried about the project after the governor’s actions on the AGDC board and on Fauske.

“It’s a dark day in Alaska history when we replace the president of a corporation and two more board members who were doing critical work to ensure we make the best decisions on a huge cash call, when we are getting closer to a FEED decision,” he said.

Chenault also said he was worried that Walker’s “recent moves and indecisiveness had jeopardized our relationships with our partners and is bringing a real cloudy outlook as to whether the project will continue after Dec. 4.”

House Majority Leader Charisse Millett, R-Anchorage, called the shakeup at AGDC “significant,” said the project was “dangerously veering from the successful path” established by the Legislature and said she was “quite frankly, nervous” about Walker’s next move.



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