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Gas board says no to special session Says legislative session not needed to pursue LNG deal with Sempra Larry Persily Petroleum News Juneau Correspondent
Members of the Alaska Natural Gas Development Authority board of directors voted unanimously that a special legislative session is not needed to deal with the authority’s request for $2.5 million to study the costs and feasibility of building a liquefied natural gas export project.
Instead, the authority said it would work with the governor and legislators to find whatever sources of money might be available to complete as much of the work as possible before the Legislature convenes in January.
The authority had asked for the money at the end of August, saying it was running out of time to gather information and prepare cost estimates in its rush to win a contract to supply LNG for Sempra Energy’s proposed receiving terminal in Mexico, just south of the California border. Board members said they needed a decision on the funding request in September, or the state risked losing out to other potential suppliers that also are courting Sempra.
The vote to drop the push for full and immediate funding came at the authority’s Sept. 22 board meeting in Anchorage, 72 hours after the entire seven-member board met in private with Alaska Gov. Frank Murkowski.
“I think we can find ways to get the money without a special session,” Harold Heinze, the authority’s chief executive officer, told board members after the meeting with the governor.
State agencies may help with work The first step will be to meet with administration officials to review the authority’s work list, to determine “if there is some way to fit this in with existing state resources,” Heinze said. Then, if state agencies cannot help pay for the work or help actually do the work, he said, the authority would turn next to the Legislature with the same request.
Alaska Senate President Gene Therriault, participating in the authority’s Sept. 22 meeting by phone, said the Legislature might be able to help by loaning staff to the authority or possibly transferring legislative funds to the agency and then repaying itself when lawmakers return to session in January.
The North Pole Republican specifically asked the gas authority board at its meeting to announce whether it believed a special session was necessary.
Board member David Cuddy of Anchorage supported backing away from a special session, which would have meant bringing all 60 House and Senate members together for public hearings and floor votes on the gas authority’s funding request and a possible Sempra contract.
“Personally, I think it’s premature to need a special session,” Cuddy said.
The gas authority itself never specifically asked for a special session, though Heinze did mention it as a possibility at the board’s August meeting. The actual call for a special session came from legislative Democrats, who sent a letter to Republican leaders Sept. 15 asking for a poll of members on the call. A two-thirds majority in each chamber is required to call a special session, and it’s expected the Democratic request will fall far short of the votes needed in the GOP-dominated Legislature.
The gas authority’s decision not to support a special session will further weaken the Democrats’ call. Authority could borrow money The authority believes it could obtain financing for its studies if it can’t get enough money from the administration or the Legislature. Board Chairman Andy Warwick, in a Sept. 18 letter to Therriault, said, “If we have the demonstrated political will, we can borrow the funds.”
The new authority’s budget for its first year of operations is $150,000, and Heinze has told board members the money is quickly running out.
Board member Scott Heyworth told his colleagues perhaps the authority could borrow money from the Alaska Industrial Development and Export Authority or Alaska Housing Finance Corp. to carry the budget until lawmakers can approve additional funding in January.
The entire board met with the governor four days after his chief of staff sent them a six-page letter, listing the governor’s detailed questions about the rush to strike a deal with Sempra, the authority’s financing options, cost estimates, contract terms, gas supply and several other items. “I think he felt as they left the meeting … reassured they would do their due diligence and come back with a more realistic proposal,” said John Manly, Murkowski’s press secretary.
“It wasn’t an official meeting of the board,” Manly said. “They chatted about the Sempra proposal.” Meeting likely violated state law Official or not, the meeting likely violated the state’s public meetings law, says an attorney who has handled media law cases in Alaska for 25 years.
“It seems pretty clear, like hit-you-over-the-head obvious,” said Anchorage attorney John MacKay. “If it’s a meeting, the law requires that reasonable notice be given.” It doesn’t matter if the board did not take action, what they talked about or who they met with, MacKay said.
“If they’re talking about the business of the agency, it’s a meeting,” he said. There is no exemption from the open meetings law for the gas authority.
The board at its Sept. 22 meeting directed Heinze to prepare a response to the chief of staff’s letter, answering as many questions as quickly as possible. The authority’s work list to prepare for a possible deal with Sempra includes requests for the following consultant contracts:
• VECO Corp., of Anchorage; almost $440,000 to study pipeline and compressor station costs.
• ASRC Energy Services, of Anchorage; $981,000 to study costs for the gas liquefaction plant at Valdez.
• Peratrovich, Nottingham & Drage, of Anchorage; almost $500,000 to study Valdez marine terminal costs.
• Northern Economics, of Anchorage; $151,000 to study in-state gas uses and economic benefits of the $12 billion project to move North Slope gas to Valdez for export.
• Wood Mackenzie, a global energy consulting firm; $120,000 for market analysis to determine how Alaska LNG might compare to competitors’ costs.
• And $150,000 for legal opinions and $200,000 for authority staff and administrative costs.
Work to start soon Heinze presented the board with detailed proposals from the companies, explaining the contracts could proceed quickly after the authority obtains funding. “I would like to get on with that work as soon as we can.”
One of the questions raised in the chief of staff’s letter to the authority was why it was in such a hurry to get the money, considering it would have to wait to award any contracts while it moved through the state’s procurement process and solicited competitive proposals for the work.
“I would recommend to the board sole-sourcing some of this work,” Heinze said after the Sept. 22 meeting. “The board has the authority to conduct its business.”
The statute establishing the board, however, does not include an exemption from the state procurement code, meaning any effort to award a contract without competitive bid would require justification and advance approval from the state contracting office and the Department of Revenue. Project decision next year The authority’s work schedule calls for negotiating an agreement with Sempra before the end of the year, assuming Sempra will wait that long. Assuming the state can sign a tentative supply deal with Sempra, Heinze told the board, the authority would need to decide whether to proceed with the project by July 1, 2004.
Although Sempra officials say Alaska is still in the running for the contract, Indonesia’s oil and gas industry regulator announced several weeks ago it had signed a memorandum of understanding with Sempra to start supplying between 800 million cubic feet and 1.3 billion cubic feet a day of LNG to the company’s Baja Peninsula terminal in 2007.
That volume would fill most if not all of Sempra’s proposed 1 bcf a day West Coast terminal, leaving little room for Alaska gas.
Industry skeptics have speculated that Sempra is just using Alaska in an effort to negotiate a better price with Indonesia or other supplier.
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