Port authority’s LNG project doesn’t qualify

Port authority’s all-Alaska gas project doesn’t meet Alaska Stranded Gas Development Act requirements, says Revenue

The Associated Press

The all-Alaska natural gas pipeline proposal does not meet requirements of the Alaska Stranded Gas Development Act, according to the Department of Revenue.

The Alaska Gasline Port Authority has not provided proof it possesses the finances to build the project and the ability to market the gas, Revenue officials said Nov. 28.

The port authority is a consortium of the Fairbanks North Star Borough, the North Slope Borough and the city of Valdez. Its application is one of three competing to move the state’s 35 trillion cubic feet of known natural gas reserves to market.

The authority is pursuing a plan to build a pipeline from the North Slope to Valdez, where natural gas would be liquefied and shipped south by tanker to markets on the West Coast and overseas.

Revenue officials accepted the port authority application in May with the stipulation that it provide proof that it possessed the finances to build the project and the ability to market the gas. The port authority had 90 days to meet the requirements.

When the group failed to meet the conditions, its application was disqualified, said Steve Porter, deputy Revenue commissioner.

The disqualification was revealed in a paper released by the Institute of Social and Economic Research at the University of Alaska Anchorage. The state acknowledged that negotiations were stalled because the port authority failed to meet the requirements of the act.

“This in no way means the Department of Revenue isn’t ready to work with the port authority to correct the deficiencies in their application,” said Chuck Logsdon, administration spokesman on gas line negotiations.

Disqualification surprise to authority

The authority responded to the Revenue Department conditions in June, maintaining that it had met the intent of the act.

“We answered the questions and received no response back, and now to get this from a third party is unacceptable,” Whitaker said.

Porter acknowledged the port authority had not been notified of its disqualification. He said the state would continue to hold discussions with the port authority with the aim of developing a project after it first reached an agreement with the producers.

The governor has said the producers have an advantage over proposals by the port authority and TransCanada because they hold leases to the gas and have the resources to complete the $20 billion pipeline.

“We have been told that our negotiations with the state are on hold until they reach an agreement with the producers,” Whitaker said. “We think that’s the wrong approach and we’re going to continue to pursue a project that’s in the best interest of the state.”

Whitaker said the port authority applied under the Stranded Gas Act only at the request of the administration. It had previously negotiated with the administration under a separate agreement.

“We weren’t asking for anything, so we thought it was strange that we were negotiating under the Stranded Gas Act,” he said.

The essence of the state’s Stranded Gas Act was to offer fiscal concessions in taxes and royalties to make a project more feasible, but the port authority does not believe those concessions are necessary under the current economic conditions, Whitaker said.

“From our assessment of the Stranded Gas Act, we are a legal applicant,” the port authority’s Jomo Stewart said.

Goldsmith: ISER paper doesn’t advocate

“This is such a big issue economically for the state that it’s important for people to understand what the issues are,” he said. “We wanted to try to boil something very complex down to a four-page document.”

What ISER did not set out to do was cause a controversy, Goldsmith said. The paper did not advocate for any particular plan and made no determination about what the state should do.