Walker: ‘We’re TransCanada now’
If 2015 was Alaska’s “year of the budget,” Gov. Bill Walker is looking forward to 2016 being the “year of the gasline.”
Walker said he hopes his administration can present the Legislature with a virtually complete Alaska LNG Project fiscal package sometime in the second half of the upcoming legislative session, which begins Jan. 19.
The portfolio of Alaska LNG documents the governor wants to take to Juneau includes the project’s fiscal terms, governance agreement and tax policy, and the associated constitutional amendment.
The Department of Law has indicated an amendment will be needed to exempt the project from limitations the state Constitution puts on lawmakers preventing them from locking the state into long-term tax policy.
The terms of the Alaska LNG Project gas production contracts, essentially gas tax contracts, will likely bind the state for up to 25 years and therefore need to be exempted from constitutional limitations.
Walker said he is excited about being able to spend more time on the North Slope natural gas project — a cause the governor has championed in various forms for decades — and he has committed to attending each project sponsor meeting.
“Now that we’ve sort of ripped all the Band-Aids off on all the different areas of the budget and all the other stuff now we can get down to the gasline,” he said in a Dec. 22 interview with the Journal.
Having the tentative agreements in place as soon as possible should give the Legislature time to critique them during the regular 90-day session before another gasline-dedicated special section later in the spring.
The special session is when the fiscal terms of the $45 billion-plus North Slope natural gas export pipeline project the state is in with BP, ConocoPhillips and ExxonMobil would be debated and voted on by the Legislature.
Walker said he expects to hold the gasline session immediately following the regular session because legislators will want as much time as possible in late spring and summer to campaign in their districts, as 2016 is an election year.
However, when the session is held will depend on what legislators want as well as when the regular session wraps up.
Typically 90 days, Alaska’s annual winter-spring session can be extended up to 120 days if pressing issues — the state budgets, taxes and Medicaid expansion and reform this year among others — remain unresolved in late April.
The Legislature took just 13 days to adjourn its most recent gasline special session that began Oct. 24; but that was for whether the state should buy out TransCanada Corp.’s share of the Alaska LNG Project. It amounted to an up or down vote.
TransCanada, a pipeline company, previously held the state’s 25 percent interest in the North Slope gas treatment plant and the 800-mile gas pipeline. Now, the State of Alaska is a 25 percent partner in the entirety of the project with the three producer partners owning shares equivalent to their in-ground gas holdings devoted to the project.
Prior to taking on TransCanada’s role of the project, the State of Alaska held a quarter-share of the LNG plant planned for the Nikiski area on the Kenai Peninsula — a $25 billion operation itself.
The special session Walker is anticipating would have multiple, complex financial agreements that, if approved, could have tremendous impacts on the state for decades to come.
Regardless of the other moving parts, the constitutional amendment needs to be approved by legislators and shipped off to the Division of Elections by June 24 for inclusion on the November general election ballot.
If the late June deadline were missed, the project would likely be delayed two years until the next general election.
Walker transformed the leadership of the Alaska Gasline Development Corp., or AGDC, in 2015 by appointing six new members to the seven-member state corporation board. He also asked for, and got, a new AGDC president when financier Dan Fauske resigned the position Nov. 20.
The governor said at the time that AGDC needed executive leadership with pipeline expertise to reflect the state’s growing role in the project.
He reiterated that sentiment to the Journal.
“AGDC does look different now than a year ago,” Walker said Dec. 22. “But a year ago we weren’t in the pipeline business. A year ago we were looking at a portion of an LNG project and we’re looking at a pipeline, at the upstream conditioning. So now, we’re TransCanada; we need to look like TransCanada.”
While the State of Alaska will not be expected to match the expertise of TransCanada or ExxonMobil, the project’s pipeline manager, the state will have to provide a “fair representation” of a pipeline company to make its contributions to the Alaska LNG Project, Walker said.
Finally, getting gas supply commitments from at least two of the producers, BP and ConocoPhillips, was a significant hurdle cleared, according to the governor.
Walker said one of his biggest concerns with Senate Bill 138, the legislation that maps out the project’s structure passed under former Gov. Sean Parnell, was the lack a provision to move forward if a partner withdrew.
He noted that, as far as he knows, Alaska LNG is the only project the industry giants are collaborating on — a uniquely challenging aspect given each company has other plans for other investments around the globe. The proof of the challenge lies in the fact that Alaska’s North Slope gas is still in the ground, according to Walker.
“The economics have always been in this (AK LNG) project, yet it has not been done to date,” he said.
Elwood Brehmer can be reached at email@example.com.