With both bodies in agreement on the final bill, the Alaska Legislature has voted the money needed by Gov. Bill Walker to sever the state’s relationship with TransCanada. That gives the state the full 25 percent vote, based on its expected share of North Slope natural gas, on both the midstream and downstream portions of the Alaska LNG project.
TransCanada has held the state’s share in the midstream portion of the project - the North Slope gas treatment plant and the pipeline - while the Alaska Gasline Development Corp. holds the state’s share in the liquefied natural gas facility to be built at Nikiski. That meant TransCanada met cash calls for the midstream portion of the project on the state’s behalf and also voted on AKLNG midstream issues.
The Senate voted 16-3 Nov. 3 to approve Senate Bill 3001; the following day the House approved SB 3001, voting 39-0.
The bill authorizes some $68.5 million to the Alaska LNG project fund to repay TransCanada for the money it has spent on the project on the state’s behalf, as well as for TransCanada’s internal costs related to the project and 7.1 percent interest. It also provides $75.6 million for the state to meet cash calls for the remainder of the pre-front end engineering and design phase of the project, and some $13 million for the state agencies which will now pick up work TransCanada has been doing.
Substantial legal help
The largest share of the agency money, $10.1 million, goes to the Department of Law for contractual services with law firms to assist the Department of Natural Resources in drafting and reviewing AKLNG contracts and providing support for state AKLNG participation. DNR receives $1.85 million for administration and support services, North Slope gas commercialization, a marketing lead position, a marketing analyst position, work related to Federal Energy Regulatory Commission resource reporting, facilities review for commercial aspects, commercial analysis and support and audits associated with termination of the agreement with TransCanada.
The Department of Revenue receives $1.05 million for administration and support services, natural gas commercialization, personal services for work on financial analysis, project financing, governance and the revenue aspects of revenue and taxes.
Legislative concerns
But the administration failed to meet concerns of legislators on all issues: Both the Senate and the House passed resolutions following their votes on SB 3001 which reflected some of those concerns.
The Senate resolution, SR 301, urges all parties in AKLNG “to continue to honor the Heads of Agreement commitments” if the state terminates TransCanada’s participation in the project.
The resolution urges signatories to the project to support the funding of the work plan and budget for 2016 - a vote is scheduled Dec. 4 on the work plan and 2016 budget for AKLNG - and urges that transition of the TransCanada ownership interest in the midstream occur as specified in state statute and “maintain alignment within the various state departments and corporations.” It passed 16-2.
House Resolution 301, however, produced considerable floor debate and a much closer vote, passing 21-17.
As amended on the floor the House resolution urges the governor to “clearly designate” AGDC “as having the primary responsibility in the Alaska liquefied natural gas project and the state’s voice in the decision-making process” for AKLNG and urges the governor “to identify the persons in the administration or the persons acting on behalf of the administration” who will advise AGDC and urges “the governor to be open and transparent by providing a clear description of the organizational structure and authority of individuals authorized to assist and support” AGDC in development of AKLNG.
The resolution reflects issues which came up in committees during the special session.
Who’s in charge?
While the Alaska House and Senate Finance committees had the lead role in the special session on AKLNG issues, House Resources got an overview from AGDC Oct. 29-30, and spent a good deal of time looking for clarity on who is the overall lead for the state’s role in the Alaska LNG project. Similar questions had been asked in other meetings, such as Oct. 28 in Senate Finance (see story in Nov. 1 issue).
There were also questions raised in House Resources as to whether the administration could place TransCanada’s share of the project elsewhere than in AGDC.
Rep. Mike Hawker, R-Anchorage, said he was concerned that AGDC wasn’t playing the primary role for the state.
AGDC President Dan Fauske told the committee that the corporation works in concert with the departments of Natural Resources and Revenue, the administration, the Department of Law and others.
Asked by Rep. Craig Johnson, R-Anchorage, if he was in charge, Fauske said he’s in charge of AGDC, but is not in charge of the state’s AKLNG team overall.
The governor responds
Gov. Bill Walker, responding to questions about who’s in charge which arose during the special session, sent legislators a letter Oct. 30 reviewing responsibilities of AGDC, the Department of Natural Resources and the Department of Revenue.
He said AGDC is statutorily authorized to “acquire and hold TransCanada’s interest in the AKLNG Project.”
The authority of DNR for marketing the state’s gas is recognized in statute, the governor said. He said he fully supports the authorities and obligations of DNR and DOR “to negotiate the associated commercial agreements and dispose of the gas from an LNG export project,” noting that DNR currently markets the state’s royalty oil, and in consultation with DOR “will make the determination on how the State’s Royalty and Tax Gas will be marketed.”
On the issue of “who’s in charge,” Walker said: “Finally I wish to clarify that as the Chief Executive and Governor, I am the person in charge of the Executive Branch responsibilities associated with the AKLNG Project.”
The governor also sent legislators a memo from DNR Commissioner Mark Myers which said that under the precedent agreement the state signed with TransCanada, DNR is entitled to terminate TransCanada’s services, and once a termination amount is paid, DNR may elect to have TransCanada’s assets “conveyed to DNR or its designee affiliate. AGDC is an ‘affiliate’ of DNR for purposes of the Precedent Agreement,” Myers said.
If the Legislature approves the appropriation in SB 3001, Myers said, DNR would provide a termination notice to TransCanada and would then “designate AGDC as its affiliate to take an assignment of the TP LP partnership interest.” He said the Department of Law has drafted the legal instrument to convey the TransCanada interest to AGDC.
Legal authority
The governor also included an Oct. 26 memo from Assistant Attorney General Martin Schultz affirming that under SB 138 AGDC has the authority to acquire TransCanada’s interests in the AKLNG project.
Schultz said SB 138 expanded AGDC’s authority “to include developing and advancing an Alaska liquefied natural gas project.”
As for the monies authorized to pay what the state owes TransCanada, Schultz said SB 138 “established the Alaska liquefied natural gas project fund in AGDC.” AGDC is authorized to “use money appropriated to this fund for future AKLNG Project cash calls and expenses associated with the TransCanada interest it acquires,” he said.
Fund capitalization to the “Alaska liquefied natural gas project fund” is specified in SB 3001 to acquire AKLNG interests held by TransCanada and to fund the state’s share of pre-FEED costs for the project.
