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Alaska gas authority work could shift Administration says it’s time to stop planning stand-alone LNG project Larry Persily Petroleum News Government Affairs Editor
The Murkowski administration believes it’s time the Alaska Natural Gas Development Authority stopped looking at building a state-owned pipeline from the North Slope to Valdez and instead shifted its focus to seeing what value it might add by building on to a proposed gas line to mid-America.
That could include spur lines from the main trunk to serve Interior communities, bringing gas to Southcentral Alaska to supplement declining Cook Inlet supplies, and a smaller line to tidewater at Valdez for a liquefied natural gas project.
And to accompany that change in direction, the administration is asking the Legislature to increase the state gas authority’s $2.15 million funding request to $3 million, but to give the money to the Department of Revenue to allocate as needed for all of the state’s efforts to promote construction of a privately built North Slope gas pipeline and in-state gas distribution.
“We’re not talking about ANGDA (the gas authority) doing its own thing anymore,” Steve Porter, deputy commissioner at Revenue, told the authority’s board of directors Feb. 9. “We see the authority as part of a team.” Gas authority would share funding That team would include the departments of Revenue, Law and Natural Resources, which have started negotiations with two applicants for a fiscal contract covering the proposed North Slope natural gas pipeline across Alaska, through Canada and into Lower 48 markets.
The negotiations, under the state’s Stranded Gas Act, could lead to a contract for scheduled payments by either developer in lieu of all state and municipal taxes on the project. The intent is to gain a measure of fiscal certainty for the project developer and the state, while also allowing the state to negotiate other conditions into the contract — such as in-state access to the gas, resident hire and local contractor preferences.
Revenue, Law and Natural Resources may need more money for research and analysis work during contract negotiations, particularly pipeline tariff issues, financing and in-state benefits, Porter said. The $3 million allocation would be shared by all of the agencies and the authority to collect whatever information could most help the state toward its goal of moving its gas to market, putting billions of dollars into the state treasury over the next several decades and making North Slope gas available to as many communities as possible. Administration calls it a partnership Pipeline operator MidAmerican Energy Holdings Co., of Des Moines, Iowa, and a consortium of the three major North Slope producers last month submitted Stranded Gas Act applications to the state, and Porter said that’s where the gas authority could be most helpful.
“The state is offering you an opportunity to partner with us,” he told the board. “We think that is consistent with what the people of Alaska voted for.”
Voters created the authority when they approved a citizens’ initiative in November 2002, giving the authority the job of planning a state owned-and-operated pipeline to Valdez where the gas would be chilled and shipped worldwide as LNG in search of buyers. The job also includes looking at bringing North Slope gas to Southcentral Alaska, where residents, businesses and industry worry they may run short of Cook Inlet gas within the next 10 years.
The administration’s recommendation is not to spend any more money trying to build a stand-alone line from Prudhoe Bay that’s probably not economic when the authority could instead negotiate to tap into the main line as it runs south, Porter said.
That assumes either MidAmerican or the producers build the main line, and that the gas authority could prove to the administration, the Legislature and investors that any spur lines would be economic. Board members unhappy at losing budget control Several gas authority board members were not happy with Porter’s partnership message.
“Will this delay what we’re supposed to do or will it lead down some rabbit trails?” asked John Kelsey of Valdez. He objected to “backing away from what 138,000 people told us we should do,” referring to 3-to-2 victory margin for the ballot initiative.
“I want to know what our budget is, it has to be specific for me,” said board member Dan Sullivan of Anchorage, asking Porter how much of the $3 million the gas authority would get.
“I can’t define the future,” Porter said, later adding, “The Legislature will move with or without you.”
After an executive session and further discussion in public, the board voted unanimously to support the $3 million funding request, with Revenue to share the money between all of the state offices involved.
“This could be a very weak position for us to take,” said board member David Cuddy of Anchorage. “Money is power and control.”
The funding question came up the next day before the House Oil and Gas Committee, at which Rep. Cheryll Heinze, R-Anchorage, said to gas authority CEO Harold Heinze: “I’m trying to pin down what assurances you have that the money is going to go to the authority.” Neither Porter nor Rep. Heinze’s spouse provided any assurances that the authority would get all of the $2.15 million it originally requested this session. Funding request to go to Legislature Legislation to appropriate $2.15 million directly to the gas authority is before the Senate Finance Committee (Senate Bill 241) and House Resources Committee (House Bill 296), and Porter said the administration will present the new $3 million request to both chambers.
The funding, if approved, would be available immediately and would extend past the end of the fiscal year on June 30, Porter said, to ensure the money remains available even if the state cannot finish its Stranded Gas Act negotiations as it hopes this spring. The law allows the state to request reimbursement of up to $1.5 million from each applicant for the cost of consultants to assist in the negotiations, but Porter said the state needs contingency money to avoid any delays in its work.
Also, the reimbursement provision is limited to work done specifically for the contracts and does not apply to other efforts the state might want to undertake outside of the negotiations.
The gas authority has its own deadline, too. It faces a mid-June deadline to submit its LNG project plan to the Legislature, but some legislators have talked of extending the date if necessary. Cancelled sales trip an issue, too Several board members Feb. 9 also discussed their displeasure that the governor’s office cancelled an LNG marketing trip planned by CEO Heinze and board member Scott Heyworth to Japan earlier this month. Heinze said Jim Clark, chief of staff to Gov. Frank Murkowski, told him just a few days before the trip that he needed to stay in Alaska to help with the state’s gas line efforts.
“What happens when we butt heads and we decide our priority is a trip to Japan,” but the governor’s office says otherwise, asked board member Cuddy.
The governor’s ultimate authority is to hire and fire board members, said Leonard Herzog, an assistant attorney general and adviser to the authority.
At some point the board may need to think about autonomy, Cuddy said.
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