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Heyworth, Condon square off on gas authority costs
Petroleum News Alaska Staff
Scott Heyworth of Our Gas Our Future and Commissioner of Revenue Wilson Condon squared off over the start-up costs for a proposed Alaska Natural Gas Development Authority March 14 at a House Special Committee on Oil and Gas hearing on House Bill 410. The bill mirrors the gas authority initiative Heyworth had certified for the November ballot.
Heyworth’s group — and the 42,105 Alaskans who signed petitions supporting the initiative — want to create a State Gas Authority which would oversee the construction of an all-Alaska gas pipeline from Prudhoe Bay to Valdez.
At the hearing Heyworth said he had not seen state’s estimate of start-up costs for a gas authority, but he’d heard they would run in the neighborhood of $3 to $3.5 million, which he thought was more than twice as high as he thought it should be: The authority wouldn’t “incur any debt until the bonds are bought and we start the project,” Heyworth said. “…We’re not investing in the project before it’s been decided by Wall Street that it’s a viable project.”
Committee Chairman Scott Ogan said the committee had received the start-up estimates from the Department of Revenue that morning.
The price tag according to Revenue? Somewhere between $175 million and $250 million over a two-year period to do the up front work for a gas authority, Condon said. Revenue sees real money Condon said the objectives of HB 410 and of the ballot initiative are “to get the project done quickly.
“And what’s it going to take to put this project together quickly? It’s going to take money. Somebody’s going to have to come up with some money at the front end.”
Revenue’s start-up estimate is not, he said, just based on funding an authority board and support staff that “could go out and talk to people and see what you might put together.”
Real money will have to be spent, Condon said: to buy the gas; to engineer the project; to get permits or buy them from Yukon Pacific; to negotiate contracts with customers.
Condon acknowledged the work would be done by contractors, but they’ll expect to be paid, he said: and the development authority will be responsible for paying them.
Until the development authority “has the contracts in place, until it has the project engineered, it’s not going to be able to borrow that money on Wall Street,” he said. Revenue’s number “preposterous” Revenue’s start-up cost estimate was based on a $16 billion project. When Ogan asked for the source of the $16 billion price tag, Condon said he didn’t know, but indicated there are different sizes of projects proposed.
“And if there is a specific sized project and a specific cost project that you would like us to model, we’d be glad to do that. … The point we wanted to make is that if we’re really serious about doing this, whatever size project it is, we’ve got to be prepared to come up with a lot of cash right now to get going.”
Heyworth told PNA March 20 that $250 million in start-up costs is “preposterous.
“Mr. Condon and his Department of Revenue have no idea how this gas project is put together. He assumes one must buy the permits, engineer the entire project and apparently make a down payment on the gas at the well head to come up with this preposterous number of $250 million in start up costs,” Heyworth said.
An experienced LNG team would be hired, he said, and they would negotiate permits and negotiate a gas price and negotiate with purchasers. Construction cost estimates are done on computer and as for the engineering, companies would be interested in doing that on a contingency basis, just as they have for the Alaska Gasline Port Authority.
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