Meyer analyzes session developments

Senate president, Anchorage Republican, navigating surprises from federal government, Alaska Gov. Walker and Washington Gov. Inslee

Steve Quinn

For Petroleum News

Senate President Kevin Meyer arrived for the current legislative session hoping the little things would fall in place to advance a liquefied natural gas project to the front end engineering and design - or FEED - phase.

While that seems to be happening, Meyer remains concerned about the credence Gov. Bill Walker is placing on a backup plan, one of several surprises to hit the Anchorage Republican this session.

In January, those espousing oil and gas exploration in the Arctic National Wildlife Refuge and offshore drilling got stunned by announcements from the Obama administration of orders to curb those efforts.

This prompted leadings members of the Legislature to visit Interior Secretary Sally Jewel during her visit to Kivalina and Kotzebue.

As Meyer and his colleagues still struggle to understand Walker’s intent with a gas line project, he learned of a letter from Washington Gov. Jay Inslee, a Democrat who was critical of any Arctic exploration.

Meyer, who believed Inslee had no business “butting in,” spoke to Petroleum News about all these issues facing the Legislature now and once session ends.

Petroleum News: Where do you see the state right now with the gas line project and what had you hoped for when session started?

Meyer: Our expectations were to try to keep the Alaska LNG project on track and schedule. I think for the most part it is on schedule. There are a few things that needed to be done that the governor has met. The right of way is one of them as well as the PILT (payment in lieu of taxes) bill. Now granted the PILT bill doesn’t have much substance to it, but at least we’ve got it on the table for discussion. I think the Alaska LNG is on schedule and moving forward.

We would like to see a little more commitment from the governor to that project. Over the last 80 days he’s given us reason to be concerned for the backup plan, the ASAP. He wants to expand that now. There was some concern - and still some - that it would almost be a competing plan. We would like to see more details on what he envisions on the backup plan. We’d like to see what that is and what that costs. Who is going to build the LNG plant? Who is going to build and pay for the gas treatment plant?

He’s come out with his op-ed saying he would prefer 51 percent. Well, we know a project that size is going to be at least $60 billion. How are you going to pay for it? Who is going to pay for it? If you are going to get a utility company like a Tokyo Gas to help pay for it, is that in the best interest of the state because they obviously are going to want to get gas as cheap as possible? Whereas our constitution says we have to maximize our return.

He created a lot of uncertainty with us. Our partners have voiced some concerned but not too much that the main line is off track, which is our main goal: keep that main line on track. But that was a concern this session and still is. That’s why the speaker did his legislation, HB 132.

Petroleum News: The public disagreements have been largely between the speaker and the governor. Do you feel caught in the middle of that?

Meyer: No. I don’t. I support Alaska LNG. I think we all do. The ultimate vote on that one when we did vote on that was 52-8. Most of the Legislature does. His HB 132 just says we are committed to Alaska LNG, SB 138, until FEED, which hopefully is in about a year.

Petroleum News: Are you concerned that there is something else in the works that could undermine SB 138 and what’s already in place?

Meyer: Yeah, I think we are. Gov. Walker has always wanted to build a pipeline via the Port Authority. If you look at the Port Authority concept, it is what he suggested he prefers. It’s an independent line if not 100 percent owned by the state, a majority-owned. Now you see him putting in place folks from the Port Authority: His chief of staff (Jim Whitaker); his attorney general from his law practice (Craig Richards). If you look at the people he’s putting in place and you know where he’s coming from, yeah, it’s a concern.

Petroleum News: Is having Jim Whittaker, given the past between him and three lawmakers (Meyer, Chenault and Mike Hawker) hindering any progress?

Meyer: I don’t think that was the best choice for the governor as far as working with the Legislature. That is the governor’s choice. We’ve either got to accept it or not work with Jim. We haven’t had a whole lot of interaction with Jim now that he has Darwin (Peterson) as the legislative liaison who has a great reputation with the Legislature. I know there have been people who approached the governor about Jim and said we’ve got to work together. At least have Whittaker apologize to the speaker and the president. He hasn’t done that and he doesn’t have to do that. In my case, I’m going to work with whoever the governor puts there. It’s just that ... it’s not the best working relationship.

Petroleum News: You and the speaker tried working out a deal with HB 132. Did you think you were getting close?

Meyer: I did. We had a letter we were all going to sign to say we agreed to these things and had a joint press release ready saying here is how we are going to go forward. I was really shocked. Then the day after he said, “this ties my hands too much. I can’t agree with this. I need flexibility. I need leverage in working with the oil companies. You take that away from me when I can’t market the gas or I have to come back to the Legislature and tell you what my plan is. The oil companies won’t agree to anything because they know I have to go back to you each time.”

Our backup plan was done through HB 4 where we were able to have a public hearing process, have deliberations, get public input. It was all open and transparent.

Our concern here is he is doing something in background that creates suspicion in our minds and it should in the public, too, but I don’t know if they have connected the dots. His backup plan may be his real plan but we don’t know that. We’ve got to hope it isn’t. Again, I’ve heard him publically state that he is committed to Alaska LNG, so I feel good about that, but that isn’t to say one little thing he disagrees with and he goes to the backup plan, which is what he wanted all along.

We just don’t know. We don’t have any say on that. He’s got a pretty big pot of money at his disposal without having to come back to us and getting our concurrence on it. Nor does he have to come back to us and say here is the new revised backup plan and here are our new partners. So that’s all worrisome. You can say $180 million isn’t going to get you very far. It’s not going to build a pipeline. If you spent that much money you’re probably not going to walk away from it unless it’s a really bad idea.

We did walk away from $300 million with AGIA. Although TransCanada is still our partner, we feel like we are getting some of that information that TransCanada obtained through AGIA. We just don’t money to waste, not that we would waste it, but money is tighter now that it ever has been.

Petroleum News: What’s different between this new administration and the Palin administration when it was new? Parnell really wasn’t a wholesale change.

Meyer: I think with Gov. Palin, you at least knew a lot of the people she put in place. You may not have necessarily have agreed with her but the people she put in place we kind of had worked with. We knew them. They knew us. They knew the process. Gov. Walker is bringing people who are new to the process. Some don’t have governmental experience, which is OK. It makes it a little slower going. We have to almost educate them on how things work.

What they should and shouldn’t be doing. For example, the Medicaid expansion: Neither the governor nor the commissioner were familiar with when you have something as big as this, you really should do a bill and have a hearing. As you know it was just in the operating budget just to expand. We may still expand Medicaid. I don’t know. It took us to introduce a bill kind of on his behalf. Then he introduced one.

Petroleum News: Does that speak to your concern about his gas line plan. You want a bill brought forth?

Meyer: We are here for the public. If the public doesn’t have a chance to weigh in, speak their mind and see what we are doing, I think we are doing a public injustice.

Petroleum News: With going to FEED and the deadline not until next year, what would you like to see accomplished by then?

Meyer: The right-of-way access bill we have and I think we will pass this session. Working with the municipalities over the interim and get their concurrence on the PILT bill. The royalty in kind versus the royalty in value should be resolved during the interim. (Resources chair) Sen. Giessel has a list she is keeping an eye on. At least we know two of the three are in progress. I haven’t heard much on the royalty in kind versus the royalty in value.

Petroleum News: Switching gears a little, you arrived in Juneau and pretty soon thereafter got a surprise from the Obama administration with the ANWR wilderness designation and redrawing lines for OCS development. It even prompted several of you to take an unplanned trip to Kotzebue to meet with Secretary Jewell. What do you make of all that?

Meyer: I think we were blindsided at the federal level that they were even contemplating doing those things. It seemed strange that she picked the method she did to come to Alaska to explain. We were worried that she was purposely using Kivalina as a backdrop to illustrate climate change, and that’s why we can’t have ANWR and all of these other areas for oil and gas because look what it’s doing to the climate.

Then she kind of surprised us by giving Shell its last permit. Everything I’m told is that Shell is going to go forward, which is great news. Obviously it doesn’t help the state’s revenue anytime soon, if at all. It does help the overall economy when Shell is up here spending millions of dollars.

I don’t know why they haven’t made a public announcement yet, but they have made a discovery and they will be working on that over the next three to four years. We know ConocoPhillips, even though oil prices are low, they are moving forward. So we’ve got some good things happening in our economy, which is needed.

Getting back to Secretary Jewell, yeah we were kind of upset with her ever since she announced there would be no road out of King Cove, then when she announced ANWR and then took off areas from OCS, yet the federal government hasn’t cleaned up their own mess.

NPR-A was another area of concern because ConocoPhillips was having a hard time getting its permit, which they ultimately got but they had to agree to a mitigation fund, which the feds are using that money to clean up the legacy wells. That doesn’t look good.

Petroleum News: Do you feel like there is some hypocrisy there that they won’t clean up their own mess?

Meyer: Secretary Jewell seems like she was so concerned about the negative effects of additional oil and gas development in the Arctic and the state of Alaska, and what my happen, but they haven’t cleaned up their own mess form the 1950s, so yeah, hypocrisy is a good word for it.

I think if we can just stop any more negative damage to our state, our state economy and our state’s future economy by not allow 1002 Area to be shut down and not take any more land off with potential oil and gas development, especially NPR-A, which was set aside for that purpose.

I think that is the best we can hope for the next two years under the Obama administration. We’ve got good people working for us back there: Don Young, Dan Sullivan, Lisa Murkowski.

Petroleum News: One person can’t do it all, but how much does it help to have Lisa Murkowski as Energy chair?

Meyer: It helps a lot. Nothing will get done in a negative way through the legislative process, but again no one is exactly sure what he will do through the executive process.

Petroleum News: OK, getting back to Shell for a minute, what do you think this means for the Arctic and future development should they proceed without incident and show they can operate safely.

Meyer: I think it’s a huge positive sign. First of all, it breaks the ice so to speak, and that we can safely drill for oil and gas. We’ve been doing it for sometime in Cook Inlet. That’s part of the Arctic. Most people look at the Chukchi and the Beaufort as the true Arctic. It’s pretty much virgin area. The fact that they are coming back now is a good sign, a positive sign. I think they are thinking it’s mostly gas, but they may find oil. The bottom line is you’re going to need both for a long time in the near future.

Petroleum News: If it goes as Shell hopes, do you think that bodes well for Conoco and Statoil?

Meyer: I think so. I’m not going to speak for ConocoPhillips or Statoil or any of the others, really. But I think they are laying low, watching Shell pave a trail and once they are successful, I think you will see others. That is the future. It’s better us than the Russians are already out in that area.

Petroleum News: Would the last piece of the puzzle be getting an increased share of federal revenues the way the Gulf receives a share? I know that’s out of your hands.

Meyer: That would be nice. We will keep pursuing it. Whether we actually get it or not, I don’t know. Even if we don’t we still get the economic benefits of having that activity. They will have to build a port and have ice breakers on hand. That will lead to other activities up there we currently don’t have.

Petroleum News: You got another surprise recently: Word that Washington Gov. Jay Inslee reached out to Secretary Jewell expressing concern over Shell working in the Arctic this summer, among other things.

Meyer: We knew there were issues there with Shell having a rig at the Port of Seattle. I guess some environmental groups are suing over it. Now I hear environmental groups are climbing on it. Then when we saw the letter from Gov. Jay Inslee secretary Jewell, yeah, we were surprised.

(Meyer reading from the letter) “I cannot in good faith support this new oil and gas development given the low and insufficient progress that countries have made to date in limiting carbon pollution. In the absence of that progress, the nation should not invest of new long-term infrastructure for Arctic production that will increase and further entrench our use of fossil fuels. The federal administration should not enable new oil and gas drilling in these untouched areas that host such a fragile environment.”

This is very concerning. We are going to write a letter to the governor. We’ll give a copy to our governor and hopefully he’ll write a similar letter. Even if he chooses not to, we at least want the state of Alaska’s concerns to be heard. We also have a resolution in the works.

Basically, he’s butting in, and we don’t like it.

Petroleum News: Were you surprised because it’s not as if you have regular dealings with a Democratic governor?

Meyer: A little bit. We don’t interfere with what the state of Washington or the city of Seattle does with its economy. Or what they want to do, or not want to do. So we prefer they not intervene in ours as well. Certainly, I’m going to be a New England Patriots fan in the future.