Dunleavy replaces two AGDC members amid project review

Gov. Michael J. Dunleavy has begun to put his stamp on the $43 billion Alaska LNG Project. The governor’s office announced Jan. 7 that Hugh Short and Joey Merrick were removed from the Alaska Gasline Development Corp. Board of Directors in favor of Doug Smith, a longtime Alaska oil and construction industry player and former Anchorage assemblyman and mayoral candidate Dan Coffey. AGDC is in charge of the ambitious state-led gas pipeline and LNG export plan. Dunleavy additionally appointed Department of Labor and Workforce Development Commissioner Tamika Ledbetter and Environmental Conservation Commissioner Jason Brune to the AGDC board. Ledbetter and Brune fill the two cabinet-level appointments to the seven-member board required by statute. Those seats were previously held by former Transportation Commissioner Marc Luiken and Labor Commissioner Heidi Drygas. The new appointments are subject to confirmation by the Legislature, which typically occurs near the end of the legislative session each spring. Public members of the AGDC board serve five-year terms. The governor said in a formal statement that the AGDC leadership changes continue to advance the ultimate goal of broadly lowering energy costs in the state and monetizing North Slope gas resources while also allowing his administration to conduct a “diligent review of the project.” “AGDC is tasked with a very complex mission — and I look forward to seeing how the state can assist in moving a (gasline) project forward. Each one of our appointees bring a wealth of knowledge and experience to the table, including in areas of resource development, labor and workforce, regulatory issues and oversight, and I look forward to working with them closely in the future,” Dunleavy said. More specifically, Smith was previously the CEO of the comprehensive oilfield service provider ASRC Energy Services, a subsidiary of Arctic Slope Regional Corp. and has served on the boards of the Resource Development Council and Alaska Support Industry Alliance, according to the governor’s office. Coffey is a longtime Anchorage attorney, small business owner in addition to posts on other state and local boards and commissions. Most recently Coffey served on AGDC’s Community Advisory Council. He ran an unsuccessful campaign for Anchorage mayor in 2015. Short is a finance expert, former mayor of Bethel and leads the Arctic-focused investment firm Pt Capital. Merrick is a union leader with the construction trade Laborers’ Local 341 and has been involved with various Alaska resource development organizations. Former Gov. Bill Walker appointed both to the AGDC board of directors and had appointment terms through at least September 2020. Chairman Dave Cruz — first appointed to the AGDC board in 2013 by former Gov. Sean Parnell — former Alyeska Pipeline Service Co. CEO David Wight and Warren Christian, president of the Alaska pipeline construction firm Doyon Associated remain on the AGDC board. Dunleavy was sharply critical while in the state Senate and during his gubernatorial campaign of Walker’s push for AGDC to lead the Alaska LNG Project in 2016 after former equity partners BP, ConocoPhillips and ExxonMobil decided to back out or slow-walk the project amid globally depressed energy markets. He has said the private sector should have a much larger role in the $43 billion project. Officials in the governor’s office said Coffey’s significant experience leading complex organizations would be beneficial for oversight of the quasi state agency’s operations, specifically noting concerns Dunleavy has regarding the board’s December approval of $296,000 in performance bonuses for AGDC President Keith Meyer while the state continues to face large budget deficits. Cruz told the Anchorage Daily News Meyer had earned the bonus pay. AGDC spokesman Tim Fitzpatrick told the Associated Press that Meyer offered to take his bonuses as stock in a corporation subsidiary at a future date when the subsidiary would issue stock. But Fitzpatrick said the board opted to award the cash bonuses. Industry insiders have noted that aside from the bonus, Meyer’s $550,000 base salary is commensurate with industry norms for those leading endeavors as large and complex as Alaska LNG. Under Meyer’s leadership since mid-2016, AGDC has secured formal expressions of interest from 15 potential Alaska LNG customers in the Asia-Pacific region. Most notable among those is the joint development agreement, or JDA, signed in November 2017 with three nationalized Chinese companies to potentially provide an anchor customer and the bulk of the financing needed for the project. However, AGDC and the Chinese JDA parties the Bank of China, China Investment Corp. and oil and gas giant Sinopec Corp. missed a soft Dec. 31 deadline to finalize the specific terms of the agreement, which Walker said in November would be likely given the change in administrations. The JDA negotiations are ongoing, according to AGDC officials. A draft environmental impact statement is scheduled to be released by the Federal Energy Regulatory Commission in February. Elwood Brehmer can be reached at [email protected]

Alaska Mental Health Trust Authority approves land exchange

JUNEAU (AP) — A state agency plans to swap land in southeast Alaska for federal land that can be developed for timber sales. The Alaska Mental Health Trust Authority board on Jan. 3 approved a land exchange with the U.S. Forest Service that will trade 18,000 acres of trust lands for 20,000 acres of federal land, the Juneau Empire reported . The trust lands are scattered throughout southeast Alaska and the exact amount to be traded must be worked out. Wyn Menefee, director of the Trust Authority Land Office, said the land exchange will be the biggest in the trust’s history. The trust was created to provide leadership in services for trust beneficiaries, including Alaskans with mental illness, developmental disabilities, chronic alcoholism and traumatic brain injuries. The trust is endowed with about 1 million acres of land. The trust hopes to earn money off its newly acquired lands with timber harvesting. The acreage could yield $40 million to $60 million over the next 20 years, according to the trust. Lands received by the U.S. Forest Service will be protected under terms of the trade, Menefee said. The overall aim is to protect “viewsheds” while logging less-sensitive lands to earn money for the trust. The trust will give up nearly 2,700 acres of land on Douglas Island that includes the Mount Bradley Trail, known locally as the Mount Jumbo Trail. The Forest Service as part of the deal will not allow logging on lands it’s receiving, Menefee said. “The Forest Service won’t be doing any timber cuts on it,” Menefee said. “It will most likely be managed for recreation.” Forest Service representatives could not be reached for comment because of the partial federal government shutdown. The amount of land received by the trust will depend on appraisals. Appraisers have not completed their work. It’s also not clear whether all the land the trust gains will be used for timber, Menefee said. If there are more lucrative uses, trust officials will consider them. “Timber harvest is one of the primary ways that the trust can monetize its assets but other potential revenue generation options will always be considered,” Menefee said by email. An initial land exchange is planned for January. A second phase, including the parcel on Douglas Island, is planned for 2020. The board’s approval was one of the last steps in a process that has taken more than a decade. The exchange required both state and federal legislation. President Donald Trump signed a federal bill into law in May 2017. Former Gov. Bill Walker signed Senate Bill 88 into law in October 2017. Both bills authorized the exchange. The federal bill states that the primary goals of the exchange are to preserve the natural beauty of Southeast while creating jobs and serving the goals of the trust. Menefee said the deal is a “win-win” for the trust and the Forest Service.

Italian major secures full ownership of North Slope field

Italian oil major Eni has reached a deal with Caelus Energy to buy the small independent out of the Oooguruk North Slope field. Eni announced Jan. 3 that it will acquire Caelus’ 70 percent in Oooguruk and take over as operator of the near shore oil development. The deal, for undisclosed terms, will make Eni the sole owner of Oooguruk as the company already holds a 30 percent stake in the field, according to a Jan. 3 release. Oooguruk sits in state waters about 2 miles off the North Slope. Oil production started in 2008 from a manmade island and the small field currently produces about 10,000 barrels per day from 25 production wells, according to Eni. The field also contains 15 gas-water injection wells. A statement from Eni says the company — which also owns 100 percent of the Nikaitchuq field, another small, near shore oil development — will work to synergize operations at the fields. Nikaitchuq’s Spy Island drill site is about eight miles northeast of Oooguruk. Eni plans to drill additional wells at each field to increase oil production by several thousand barrels per day. In late 2017 the company began drilling ultra-long reach angled exploration wells roughly 35,000 feet long from Spy Island to reach targets in its federal leases further offshore. Last August Eni also bought the rights to 124 onshore state leases from Caelus covering about 350,000 acres of exploration acreage on the eastern North Slope. Caelus Energy bought Oooguruk and other Alaska assets for $550 million in cash from Pioneer Natural Resources in a deal announced in late 2013. At the time, Caelus CEO Jim Mussleman said he planned to invest about $1.5 billion in Alaska over the next five to six years. Mussleman and other Caelus officials have said the company came to Alaska in large measure due to the state’s revised oil production tax structure known as SB 21 and the generous but now defunct refundable oil and gas tax credit incentives the state offered to small explorers and producers for working in Alaska. Caelus made national headlines in October 2016 when company leaders announced they had discovered upwards of 6 billion barrels of oil at the remote Smith Bay prospect in shallow, state-owned waters about 125 miles northwest of other Slope oil developments on the edge of the National Petroleum Reserve-Alaska. However, the company has not done any significant work at Smith Bay since. Caelus has also postponed further development of its onshore Nuna oil project near Oooguruk estimated at $1.2 billion, which currently consists of a 22-acre gravel pad. Company leaders have blamed more than $100 million in unpaid state tax credits for hampering Caelus’ ability to further development of its Slope prospects. The company was granted reduced state oil royalty payments at Nuna in January 2015 in exchange for prompt development of the project but the Division of Oil and Gas denied an extension of those terms in April 2016. Caelus Alaska Vice President Pat Foley said in a brief interview that the company has been actively marketing Nuna to potential investors or buyers for a couple years. “We think those (marketing activities) are going to be coming to an end fairly soon,” Foley said. He also said at this point there are no plans for more work to appraise the Smith Bay prospect. “We continue to try to secure funding,” Foley said of Smith Bay. “We’re hopeful that we can conduct more activities but nothing is yet firm.” ^ Elwood Brehmer can be reached at [email protected]

Supreme Court upholds LeBon win in District 1

Republican Bart LeBon has won a disputed state House race after the Alaska Supreme Court on Friday upheld the recount results that gave him a one-vote victory over Democrat Kathryn Dodge. The court issued a brief order affirming the decision by Alaska's former elections director following arguments heard by the court Friday morning. The court said a full opinion would follow. Dodge had challenged the results of a recount that showed her losing the Fairbanks House race to LeBon. She argued the Division of Elections wrongly counted two ballots and wrongly excluded two, including one belonging to a man whose voter registration was updated based on his application for an Alaska Permanent Fund check. A superior court judge who was appointed a special master in the case had recommended upholding the division's decisions during the recount. 10:35 a.m. Arguments in a disputed Alaska House race focused partly on a ballot cast by a voter whose registration was changed by the state. The Alaska Supreme Court, which heard arguments in Anchorage, took the matter under advisement. Democrat Kathryn Dodge challenged the results of a recount that showed her losing a Fairbanks House race by one vote to Republican Bart LeBon. She argued the Division of Elections wrongly counted two ballots and wrongly excluded two, including one belonging to a man whose voter registration was updated based on his application for an Alaska Permanent Fund check. Dodge had argued the man lived in the district but the division incorrectly changed his record to an address outside the district. An attorney for the state argued the division acted within the law.

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