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Legislators get biannual report on AGIA
Kristen Nelson Petroleum News
As required under the Alaska Gasline Inducement Act, legislators have received the second biannual report on the Alaska Pipeline Project licensed under the act.
Alaska Commissioner of Revenue Pat Galvin said at a Nov. 3 press briefing that when the project was first discussed two years ago the date for first gas was 2018, and today the first-gas date continues to be 2018.
He said the Alaska gas project licensed under AGIA continues to meet deadlines, and, while getting to an open season is important, getting to project sanctioning is critical.
There will be a lot of talk about the open season over the next few months, Galvin said, and it’s important to understand that a determination of whether bids for capacity in the pipeline made during the open season are acceptable is a decision between the potential shipper and the pipeline company after the official close of open season.
That is a normal part of the pipeline development process.
Asked about getting financing to build a line without a full shipping commitment, Galvin said AGIA is a strategic tool for the State of Alaska to achieve its goal of getting a pipeline. A core element of AGIA is that the state cannot allow the events of an open season to dictate the forward progress on the pipeline.
If there are conditions placed on open season commitments based on the state’s fiscal system, the state can address those questions after the open season, Galvin said. Meanwhile under the requirements of AGIA the project will continue forward to certification by the Federal Energy Regulatory Commission.
Always critics Commissioner of Natural Resources Tom Irwin said there will always be people looking critically at what’s going on.
“That’s fine; we do that ourselves,” he said.
Critics said AGIA wouldn’t draw a qualified bidder, but we got TransCanada, Irwin said.
Then it was said that the withdrawn partners issue would kill the project, he said, referring to concern over withdrawn partners from a previous project. TransCanada professionally took care of that, Irwin said.
“Then we heard TransCanada would never get interest from a producer,” but then ExxonMobil signed on with TransCanada.
TransCanada and ExxonMobil worked on that agreement professionally, Irwin said, and because of the companies’ “desire to make this work they have formed a seamless team” working on the pipeline and the gas treatment plant.
By the end of January the cost estimates that are part of the open season package for FERC will be available and “you can judge the project by the quality of the cost estimates,” Irwin said.
If FERC stays on schedule the open season will start as scheduled and end July 31, he said.
Fiscal certainty issue Asked about the possibility of a successful open season without state fiscal certainty, Galvin said the question comes down to the relationship between the fiscal terms discussion and the open season.
He said it is critical for both the producers and the state to have the information that becomes available in open season in order to have a full discussion about the state’s fiscal system.
That information will provide the difference between what is wanted and what is needed, Galvin said: The companies have stated for years what they want; what remains to be seen is what they need, he said.
The open season is not a litmus test of the success of the project; the open season is merely a step in the process and what is needed out of either open season is a project that is continuing to move forward, he said.
Alignment needed AGIA Coordinator Mark Myers said the state knows there isn’t alignment between the North Slope producers. There needs to be alignment but that only happens when discussions are occurring between pipeline companies and all shippers. That provides the opportunity to build alignment in open season, which is a process that is designed to facilitate that.
On the expected results from an open season, Galvin said he is not aware of any pipeline that got full open blanket commitment at an open season. The parties are looking for risk sharing to move the project to the next step, he said, and looking for different levels of commitment. The open season is part of the pipeline industry and, Galvin said, it is important for Alaskans to understand that part of the open season is the relationship being created between the pipeline and the shippers: how much gas; what the pipeline is offering in terms of who pays the costs — how capital costs are being spread over the gas; and what other concerns need to be addressed.
From the state’s perspective, Galvin said, identifying concerns to be addressed is an important part of the process.
The open season isn’t a question of success or failure, it’s an important part of the process — it’s just clarifying the playing field, he said.
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