Gardner: LNG exciting, not sure thing

Anchorage Democrat says state’s fiscal crisis should be ’15 focus; won’t sign LNG project confidentiality — wants to speak freely

Steve Quinn

For Petroleum News

State Sen. Berta Gardner has spent 10 years in the Legislature, the first eight in the House. That’s long enough to endure an ongoing debate over oil taxes, a cloud of corruption hanging over the Legislature for two years beginning late 2006 and long enough to review four plans to market the state’s natural gas reserves.

On election day, the Anchorage Democrat ran unopposed. Gardner spoke to Petroleum News about her views on where the state is with its resource development strategies and what she what she would like to see happen in the upcoming two-year Legislature.

Petroleum News: So when you return to Juneau next year what do you see as the priorities, especially as it’s connected to resource development?

Gardner: In my mind there is absolutely no question. It’s Alaska’s fiscal crisis. We really have a crisis on our hands and it’s been coming for a long time masked by high oil prices. But today, there is no masking anything. That is going to be our issue. I’m in the camp in saying we need to be swift and definitive and really firm in our response. The more we wait and the more we dilly-dally, the harder and harder it’s going to be. We cannot develop our way out of it. We just cannot.

Even in the most rosy scenario in resources development - and I’m just going to really be talking about oil and gas because we have very little state income from mining or from timber. We could make adjustments but they are not going to save us. We are really talking about oil and gas. Even at the best-case scenario, we may get more oil in the pipeline but it’s not going to put much more money in the state coffers because it’s going to be from federal lands or from offshore and we don’t r get significant amounts.

There may be shale oil developed but that has a very high cost structure, so the profit will be less. We have to do something with spending and we have to have other sources of income. What that should be I think will be the main argument to date in the coming years, in the coming two years certainly. Our choices are sales tax, income tax, Permanent Fund Dividend, the corpus of the Permanent Fund.

So I’m planning a survey of my constituents at the beginning of the year to talk about that. We need to be proactive in getting Alaskans all across the state to talk about that and find out what kind of changes people will support. There is no doubt to have to do things very differently than we already are.

Petroleum News: What about other priorities that will come out like the gas line? Even though the next meaningful development isn’t until the end of next year, is there anything the Legislature can do during the upcoming session?

Gardner: I think it’s a little premature to participate in that. The information just isn’t there yet. When it’s available, we’ll have a special session and I think we should have a road show (just as the Legislature did during the review of a license for TransCanada to advance a project) and engage as many Alaskans as we can about it. I still have some concerns about the deal, about the state’s level of participation and what the state is giving up in terms of sovereignty - terms of the deal.

The state’s participation and cost is something all Alaskans should be aware of and I’m not saying it’s a good or a bad thing. I won’t sign the confidentiality agreement for two reasons. One is I oftentimes don’t always remember where I learned something, and I fear inadvertently releasing some information that I shouldn’t have. The other thing is I have to justify my votes and explain them to my constituents, and if I do it based on documents I can’t share with them then it hinders me as a representative.

These big earthshaking deals have some good stuff and some bad stuff, but my concern about it is that we all want a pipeline and we all want a pipeline for export because that is the only way we will get in-state use of our resource in an affordable way to homes and all across the state, and also put money in our state’s coffers. But we don’t do it in a way that gives away the state’s sovereignty and has disputes settled in Delaware and where the state is a partner that doesn’t get to make any kind of changes. It’s sold to us of being a quarter owner, but it’s a quarter owner - maximum - with TransCanada and we would be at best a minor partner in that 25 percent ownership. I think it hampers us in some respects. That’s one of my big concerns.

Petroleum News: Given what you’ve said so far, can Alaska afford to be a partner?

Gardner: I suppose there’s a scenario under which you can ask can we afford not to be a partner if our participation is the piece that gets it over the hump and makes it happen. How would that happen? That’s why I say we don’t have enough information on that. So let’s say I’m skeptical of the plan, but I do want a pipeline and a pipeline for export. There were degrees of support, but it in the end you have to vote yes or no, but it rarely means you’re 100 percent onboard. So we’ll see.

Petroleum News: What more would you like to know then either before a contract comes before you and when it comes before you for a special session?

Gardner: I think part of my concern is that Alaskans tend to treat oil companies as this monolith, as if the oil companies are one being. We need to be sophisticated and understand they don’t all have the same needs, goals and strategies, especially as Alaska is concerned. The way the deal is structured now is you need all three that are onboard. But they have investments, cash flow problems and or cash coffers, either way that influence their decision-making.

I’m not convinced that all three of them really are in favor of moving forward. Exxon has special circumstances because of the Point Thomson settlement and I don’t know how committed they really are to a major project. It begins to look more and more likely to me. I just don’t have full confidence that all three of them are going to move forward and that anything happens if the three of them are not aligned, let alone if the state is aligned. I don’t know. We’ll just have to see how things develop and how far they go before they come to us and then let them persuade me that the state can invest or not.

Petroleum News: There’s a sense and feeling if Exxon publicly says it’s going to do something, it gets done and Exxon is the most crucial component to make this work. With all the fieldwork they are doing at Point Thomson and even the due diligence on the Kenai Peninsula - does that tell you what you need to have confidence?

Gardner: It’s always been said if Exxon is not on board, it’s not going to happen, and I think that’s absolutely true, but to some degree it’s true for all of them. If ConocoPhillips is not happy with it, it’s not going to happen. And how do you make all three of them happy and the state happy in a way that is reasonable for the state and for Alaskans in the long term? So we’ll wait and see. That’s my attitude for right now. Wait and see. It’s way too early for celebration. And I will tell you I’ve got a family member working on the project. He doesn’t tell me anything about it but still all of us are impacted by this for sure.

Petroleum News: There still seems to be more cooperation among lawmakers with this project, even with those who voted down the project, than other resource issues such as oil tax or even the AGIA licensing debate. Why do you suppose that is?

Gardner: I think it’s because everybody is excited about even the possibility of getting Alaska’s gas to market. It’s difficult to oppose anything that might happen. They are predisposed to being enthusiastic supporters, but at the same time we can’t assume if it happens at all that it’s automatically a good deal.

Petroleum News: Speaking of debates within the Legislature, with the oil tax vote behind us, can it free up lawmakers in looking ahead and moving forward as this debate has been pretty intense these last eight years?

Gardner: I certainly hope so. But I also hope if the Legislature moves on other things, they are things I like because if we are moving forward on privatizing our schools, that’s not a good thing in my view. I’m guardedly optimistic but a lot of things can go bad, too.

Petroleum News: What about the competitive review board that’s designed to keep an eye on SB 21. Do you have confidence in it?

Gardner: I don’t know yet. We’ll see. I don’t close my mind to it yet. We’ll see how they do their work, how they go about their work, how open the process is and how much confidence we can have in their results. Part of the problem I’ve had with the recent debate on taxes and credits and such is who was under contract and who was available to us as consultants.

We, as a minority, we asked for other consultants, and didn’t have the money or opportunity to talk to people who would have been available to us. That process makes me skeptical when we can’t reach out to others who have a slightly different perspective. If the process is open and we are able to ask questions of whomever we wish and have people at our disposal, then I’ll have confidence in the outcome. I feel like the debate was kind of stymied.

I’m talking about how much confidence you have in the results of something. If the process is open and the information is easily available to Alaskans, and the process allows dissenting voices to be heard, then I will have more confidence in the conclusions. We’ll see how that goes.

Petroleum News: Those not confident in SB 21, they feel that’s their safeguard out there.

Gardner: Right, and I don’t yet know how much I trust it. Let’s put it that way.

Petroleum News: ConocoPhillips recently announced a new drill pad being put into operations. Do you believe that can be attributed to SB 21?

Gardner: Any new drill pad is good news for Alaska. It’s possible that it did. Maybe. Maybe not. I don’t think we’ll ever know with full confidence. I also think it’s possible people held off on decision making, willing to hold off until it’s more profitable. I mean if I were in business, it would certainly be something I would consider. I wouldn’t fault them for that, but I don’t have confidence that this new fiscal regime is the reason for investments.

Petroleum News: You’ve been around for 10 years, which includes a period of a corruption cloud hanging over your head, whether any lawmaker was directly tied to it or not. What would you like to see as far as any kind of collaboration when you have this kind of gas line project at your feet?

Gardner: I think that in some ways things work better than people on the outside realize. The minority does have a voice. We have a role that’s very important. We had a bi-partisan majority at one time, which works very well. The important thing is to make sure we have access to the sources of information that we want: If that means hiring people to advise the Legislature that should be allowed because it builds confidence in the outcome. It’s such a big, big issue and with so much potential money spent and so much potential profit for the state that we just want to do things right so we can move forward with one voice.

Petroleum News: Let’s go offshore for a minute. Shell is looking to get operations back under way and has asked for some extensions. You spoke earlier of offshore oil; do you think these extensions can help?

Gardner: I’ve kind of fallen away from some of that most recently, but I think it’s very exciting. It’s something that needs, what’s the phrase, moving forward with full speed and great care. I know there is discussion about changing the terms of the leases for allowing more time. I don’t know the ins and outs of it. If it means taking time to get things right, why would we not want to support that? If it’s time for stalling, which I don’t think it is as I haven’t heard that, I think it’s a different matter.

Petroleum News: In the spring, the country will become the chair of the Arctic Council, putting Alaska as what some call the hub of that position. Do you see the Legislature engaged in that if not during session, certainly immediately after?

Gardner: I don’t know about the timeline for it, but certainly it’s critical for Alaska, whether it’s this session or at some point. (House Rep.) Bob Herron and (Senate Rules Chair) Lesil McGuire are 100 percent correct that Alaska is a voice that needs to be heard. It’s not just their work. I think the administration recognizes Alaska’s role here. Fran Ulmer has been actively engaged in the Arctic. It isn’t just one form.

One of the concerns on my mind, is that my understanding is because we don’t have a coastal zone management program, then we can never get approval for a deepwater port in the Arctic. One of the conditions of approval is that we have a coastal zone management program. To me it’s absurd that as a state with one-third of the nation’s coastlines, we are the only state without one.

Petroleum News: Do you think this should be addressed by the Legislature at some point?

Gardner: You can change federal law, but it would seem to me to be easier for the state to put one in place. We will simply have to if we want a deepwater port in the Arctic unless we can get a variance in the law. Maybe I’m missing something about it because other people don’t seem to share that concern in the law. I also think that even though there are people opposed to any development in the Arctic because of the fragility and the conditions there, the United States still needs to be a big part of what’s going on to protect our interests and to be a leader in standards and regulations for doing things right. We can’t close our eyes to the things we don’t want to see and allow them to go on. We need to be there at the table as much as possible for every single decision. I’m talking about the United States, but Alaska is well placed to be representative in many forms.

Petroleum News: So with the issue of coastal zone management and a deepwater port, there seems to be a prevailing thought that Arctic infrastructure seems to be a priority. Is that how you’re seeing it?

Gardner: I think so yeah. I don’t know how to give weight to the things I’ve heard. I know there is some enthusiasm for Port Clarence near Nome. Is that the best place? I don’t know, but Nome would sure like it and Alaska would sure like it.

Petroleum News: So with the U.S. taking over as chair of the Arctic Council next year, what would you like to see done, especially as Alaska being the hub central to these discussions? Some believe this is a chance for Alaska to really assert itself.

Gardner: I’m not intimately involved, but I’m gratified for Sen. McGuire’s leadership on that issue. She saw it early and has been engaged all along, before others, so it’s good news for Alaska, let’s put it that way. I think all of us will be more involved. Having the development, the standards and the safeguards will be critical to not only Alaska and the United States, but the world.

Petroleum News: Let’s go to your backyard, Cook Inlet, and get your thoughts on what’s going on there and how it can play a role in Alaska advancing resource development.

Gardner: What we have to do is do everything we can to support exports of energy resources. That’s the only way we are going to have any new or big developments in Cook Inlet, and that’s how we protect Anchorage absent a big pipeline going right by. It’s tricky for the state to use money to change behavior. We try it all the time. Really if the profits are there, companies will do it. It’s the same decision we have to make with the big gas line. At what point does state financial participation make a difference. I’m never certain really when it’s effective and when it would have happened anyway. If somebody is saying sure I’d like to do this project and if you’re willing to pay for part of it I’ll like it better. But would they have done it anyway? That I don’t know. It would be great for Alaska if Cook Inlet became such an export hub because if our gas is flowing in volumes enough to export, then it’s good for us and it’s also gas we cannot use here. To the extent that the nation may or may not want to export gas, Alaska is separate in that calculation because of our unique circumstances that our gas is not available to the Lower 48. So exporting I would argue is a good way of working on our country’s trade balance in a small way.