Alaska LNG backers lobby Murkowski
Backbone II asks governor for enthusiastic endorsement of state liquefied natural gas project from North Slope to Valdez
Petroleum News Juneau Correspondent
Promoters of a state-owned liquefied natural gas project have asked Alaska Gov. Frank Murkowski to answer 21 questions that appear to challenge his administration for not aggressively supporting an LNG project.
“Can we look forward to your public endorsement and enthusiasm for Alaska’s LNG option?” asks the five-page Oct. 31 letter from Backbone II. Instead of waiting for North Slope producers to build a gas line from Alaska through Canada to the Lower 48, Backbone II believes the better project is a pipeline from the North Slope to Valdez, where the gas would be liquefied and loaded aboard tankers for markets in California or the Far East.
“Why shouldn’t Alaska develop its own project to tidewater, a project that is already permitted and is within our own country?” is another of the group’s questions to the governor.
Backbone II in September sponsored a full-page newspaper ad in Anchorage and Fairbanks calling on the Alaska legislature and governor to support a massive reserves tax against North Slope gas producers if they refuse to sell their gas for a state LNG project. Even if the state decided to risk the estimated $12 billion needed to build an LNG project, it would still need to either buy gas from the producers or convince the companies to pay to ship and liquefy their gas through the state project.
Getting gas to fill the pipeline a key issueGas supply is a key issue facing supporters of state-owned LNG project. “Will your administration take aggressive action to secure our gas?” the letter asks. “Is the attorney general examining the state’s options so that we can be prepared to take such action?”
The letter also asks Murkowski if North Slope producers are more motivated to develop their gas reserves elsewhere in the world rather than Alaska. The group raised the same accusation in its newspaper ads.
The three major North Slope producers — BP, ConocoPhillips and ExxonMobil — have spent millions of dollars studying the LNG option and have been unanimous in their statements that the project cannot compete with bountiful, cheaper gas available in Russia, Indonesia, Australia and elsewhere around the Pacific Rim. The producers believe a pipeline to the larger mid-America market is the best option. ConocoPhillips and BP, however, say they need federal tax incentives before they could afford to take the risk of the $20 billion pipeline.
In addition to sending the letter to the governor, Backbone II sent copies to Alaska’s congressional delegation, and to Alaska legislative officers — House Speaker Pete Kott, R-Eagle River, and Senate President Gene Therriault, R-North Pole.
Neither the governor’s press secretary, Kott or Therriault returned phone calls to Petroleum News in time for this story.
Bill Walker, the lead organizer of Backbone II, said the group intends to raise money and start a radio, television and newspaper ad campaign in the next few weeks to get its message to the public.
Group reminds governor of election campaignThe letter writers also took the opportunity to remind Murkowski of his victorious election campaign last year. A state-owned LNG project, the letter said, “could be the most promising project to use resource development to close the state’s fiscal gap — a key component in your winning election campaign.”
The letter was signed by eight members of Backbone II who met with Murkowski in Anchorage in late October:
• Walker, an Anchorage attorney who serves as city attorney for Valdez. Walker also was a member of the original Backbone group, which worked in 1999-2000 to oppose BP’s takeover of ARCO’s Alaska assets, arguing that the state’s interests would be better served by more, not fewer, companies competing for development on the North Slope.
• Dave Dengel, city manager of Valdez.
• Paul Fuhs, a lobbyist for Yukon Pacific Corp., which has been working for years to build a gas line across Alaska and an LNG terminal at Valdez. Fuhs also served as Alaska lobbyist for CSX Corp. in 2002. CSX, the Jacksonville, Fla.-based transportation company, owns 88 percent of Yukon Pacific. CSX and Yukon Pacific paid Fuhs a combined $96,000 in fees in 2002.
• Former Alaska Gov. Wally Hickel, one of the founders of Yukon Pacific. Hickel’s remaining interest in the company is held in a charitable trust.
• Former Hickel staff members Malcolm Roberts and Mead Treadwell, who now work for the Institute of the North at Alaska Pacific University in Anchorage. Hickel was a founder of the northern issues institute and is one of its primary financial supporters.
• Mike Gallagher, business manager of the Laborer’s Union International Local 341 in Anchorage and a former Valdez resident.
• Jack Roderick, Anchorage Borough mayor 1972-1975 and deputy commissioner at the Alaska Department of Natural Resources 1976-1978. Roderick, as Walker, was part of the original Backbone group that opposed BP’s takeover of ARCO’s Alaska operations.
Group member says there are more supportersThe letter signers are not an all-inclusive list of Backbone II supporters who want to see a state-owned LNG project, Roderick said. “There are a lot more people than just us who are supporting the idea.”
Dengel said he signed the letter as a private citizen, not as city manager for Valdez, though he said he has discussed the issue with the city council. “They’re supportive of what Backbone II is doing.”
Valdez has long supported an LNG terminal in the community, seeing such a project as a source of property tax revenue and jobs. The city joined with the North Slope Borough and the Fairbanks North Star Borough in 1999 to create the Alaska Gasline Port Authority, looking to help finance, build, own and/or operate a pipeline from the slope and an LNG plant at Valdez. The port authority did not succeed in getting gas to sell or securing financing, and Dengel said Valdez spent about $200,000 as its share of the effort.
Group looks to state gas authority“It needs to be someone,” he said of the campaign to build a natural gas project in Alaska. If not the port authority, then perhaps the Alaska Natural Gas Development Authority will succeed, he said. Voters created the state authority by a better than 2-to-1 margin in the November 2002 statewide general election.
The citizens’ initiative directs the state authority to prepare a project development plan for the Legislature by next summer for a state-owned-and-operated pipeline and LNG plant at Valdez. The authority has been asking for more money to add to its first-year budget of $150,000. The administration and Legislature gave the authority an additional $200,000 at the end of October, taking the funds from a one-time pot of federal aid to the state.
Even with the additional funding, the authority is far short of the $1.5 million to $3 million it and its backers wanted this year. That subject also is among Backbone II’s questions to the governor: “Will you support adequate funding to (the authority) so that they can perform the work necessary to make a serious offer to purchase and sell Alaska gas?”
Others offer to help state authorityThe state authority will get some free help from the Valdez-led port authority. Dengel said the port authority is willing to share all of its information with the state agency.
Yukon Pacific also is looking to share its 20 years of data and permits with the state gas authority, though not necessarily for free. “We have permits,” Ward Whitmore of Yukon Pacific testified at a Sept. 10 legislative hearing in Anchorage. “We would like to monetize our permits.”
The state gas authority, like the port authority and Yukon Pacific, faces the problem of getting the producers to sell gas to the state. Dengel said he fears the authority lacks credibility with the producers or some state officials. However, it is not all discouraging news, he said. “There may be some state folks who think that we’re on to something.”