Walker withdraws gas reserves tax from call for special session

Citing a successful negotiation with the state’s producer partners in the Alaska LNG Project, Gov. Bill Walker has withdrawn the gas reserves tax from his call for a special session of the Alaska Legislature.

He said in an Oct. 23 press availability that the change to the session’s agenda came following “constant negotiations” with the producers over that the governor called “must haves” for the state on availability of natural gas for the project. The governor’s concern is that if one or more of the producers withdraws from the project it wouldn’t be viable without their natural gas.

Walker said Oct. 21 that he was delaying the rollout of the gas reserves tax bill because the producers had requested as much time as possible on the withdrawal provision. He said he began discussions on the issue within a week of being sworn in last December and negotiated right up to the deadline for the call for the special session, which included a gas reserves tax bill.

Walker said assurance of gas availability is a very high priority for the administration. With the producers asking for fiscal certainty, it’s only fair that the state should have some asks as well, Walker said. And the state is asking that gas be available for the project.

Letters received

He said he hadn’t received a letter from ExxonMobil, but had been talking to ExxonMobil and was hopeful that company would join BP and ConocoPhillips in the commitment, which will give the state assurance that if someone withdraws, the gas stays committed to the project.

Walker said the companies asked him if he would stand down on the reserves tax in response, and the governor said as a result of the assurances he had received he would be taking that off the table for the special session beginning Oct. 24.

He said the big hurdle will be Dec. 4, the date Alaska must sign up for another year, providing funding for its share of additional AKLNG project work.

BP Exploration (Alaska) President Janet Weiss said “in the unfortunate event that the Alaska LNG Project does not progress, or BP does not participate in this project, BP has and continues to be willing to commit its Prudhoe Bay and Point Thomson natural gas to the Alaska LNG Project, or a substantially similar project that commercializes North Slope natural gas, on terms that are mutually and commercially reasonable.”

ConocoPhillips Alaska President Joe Marushack said “ConocoPhillips has been and would continue to be willing to enable a natural gas project by working with the State to make our share of Prudhoe Bay Unit and Pt. Thomson Unit natural gas that would have been available for AKLNG available to another project on mutually agreeable and commercially reasonable terms.”

Both letters say the companies are focused on the Alaska LNG Project, and both say will work with the state to “incorporate these terms into withdrawal and gas sales agreements” by Dec. 4.

Walker said in a statement that the goal was that a gas commitment to an Alaska project would endure should either producer withdraw from the current AKLNG project or should the AKLNG project fail to move ahead.

Walker called the reserves tax proposal “appropriate leverage for Alaska in response to a situation where known, producible gas could be withheld from a state project because it does not meet the commercial strategy of a particular producer.”

In addition to the withdrawal agreement, the governor said the state, BP and ConocoPhillips have agreed to complete project continuity and gas sale terms by early December.

“The continuity agreement will contain specific dates for the completion of the various commercial agreements that will enable this project to move forward,” Walker said.

The governor thanked ConocoPhillips and BP “for their commitment to address the state’s legitimate concerns regarding the assurance of a gas supply. I look forward to achieving the completion of the commercial agreements that will underpin the state’s fiscal commitments. Based on a call I received today from ExxonMobil, I am hopeful they will join ConocoPhillips and BP with a similar commitment,” Walker said.

- KRISTEN NELSON