|
AKLNG project online for 2016 FEED decision Legislators hear from sponsors of North Slope natural gas project — BP, ConocoPhillips, ExxonMobil, TransCanada, state entities Kristen Nelson Petroleum News
Two committees of the Alaska Legislature, House Resources and Senate Resources, heard an update Feb. 18 from the sponsor group for the Alaska LNG project.
The parties are working together, legislators were told, based on the heads of agreement signed last January and Senate Bill 138 which authorized the state to take an equity share in the project.
The sponsor group includes BP, ConocoPhillips, ExxonMobil - who collectively hold the majority of known North Slope natural gas - pipeline company TransCanada and, for the state, the Alaska Gasline Development Corp., the departments of Natural Resources and Revenue.
Bill McMahon, senior commercial advisor with ExxonMobil, said the representatives of the sponsor group meet regularly, focused on alignment between the parties and on using the stage-gate process to get to the next decision point. The project is in pre-FEED, the preliminary front end engineering design, phase of the project, with a decision on whether to move into FEED set for early next year.
Joint venture, LLC Two other groups are involved in the project.
The joint venture parties, responsible for pre-FEED work, and the Federal Energy Regulatory Commission applicants group, include AGDC, BP, ConocoPhillips, ExxonMobil and TransCanada.
A third group, the Alaska LNG Project LLC, is the applicant to the Department of Energy for export authority. The LLC includes BP, ConocoPhillips and ExxonMobil. McMahon said the DOE application for export also covers any potential state royalty-in-kind and tax as gas volumes. He said that the state’s representative in the LLC is up to the administration, but is envisioned as someone who controlled the state’s gas.
Dan Fauske, president of AGDC, said there are discussions with the working group and with DNR and DOR and while no decision on state membership in the LLC has occurred yet, they are actively talking about it.
Needed state decision Dave Van Tuyl, regional manager for BP in Alaska, told legislators the state will decide whether to take royalty in kind or in value. If the state takes RIK, each producer can choose to pay production tax in kind or in value. He said the expectation is that producers would pay tax in kind, but the state hasn’t made the RIK decision yet.
With RIK and tax as gas, the state’s interest in the project would be 25 percent.
McMahon said RIK and state ownership in the project are key enabling factors because that would avoid traditional disputes in paying royalty, value for royalty, deductions for transportation and shipping.
When the heads of agreement was negotiated, RIK and state ownership were viewed as key enablers for the project.
Darren Meznarich, ConocoPhillips integration manager for Alaska LNG agreed, told legislators the HOA envisioned state participation, which is seen as key to a successful project.
Van Tuyl said the state taking RIK and directly participating makes all the parties look similar commercially, creates alignment and helps avoid potential conflicts in the future.
He said state participation also provides a strong voice to potential LNG buyers about host government support.
DNR will make the state decision on RIK and McMahon said getting that decision this year is critical to a FEED decision in 2016.
Working on commercial agreements McMahon said commercial work under way includes lease modifications under SB 138 to address royalty in kind and royalty in value switching and leases which need to be standardized.
He said commercial foundation agreements among the state, AGDC, TransCanada, ExxonMobil, BP and ConocoPhillips need to be sufficiently completed before fiscal action by the Legislature.
A long-term firm transportation services agreement is also needed between TransCanada and the state, providing for the state to repay TransCanada for the funds it is contributing to the project on the state’s behalf by paying tariffs for shipment of its natural gas.
Vincent Lee, director of major project development for TransCanada, said TransCanada is working with the administration and believes the deadline for that agreement can be met.
View from DNR, DOR DNR Deputy Commissioner Marty Rutherford, the administration’s gas team lead, told legislators she returned to DNR Dec. 1 and on Dec. 2 started to receive briefings from the gas team on non-confidential aspects of the project. Shortly after that she was allowed to sign the seven-party confidentiality agreement and in-depth briefings on confidential issues began.
She said she is impressed with the project structure through SB 138 and the heads of agreement, and impressed with the quality of the people on the technical team.
She noted that the new administration has kept five individuals within DNR, employees and contractors, who were working on the project under the previous administration and said the Walker administration continues with the same principles of protecting the state’s interests.
All parties continue to progress the project under SB 138 and the HOA, she said, allowing the decision on whether to proceed to FEED to be made.
Commissioner of Revenue Randy Hoffbeck said there has been some concern about progress of the Municipal Advisory Gas Project board, which is working on recommendations for the administration on payments in lieu of taxes to deal with the issue of property taxes for an LNG project. He said the board is committed to PILT, but felt it was too generic and asked the Department of Revenue to put some structure around PILT.
That proposal will be presented to the group in a meeting Feb. 20 in Anchorage, Hoffbeck said.
| 