Walker starts over on AK LNG

 “I’ll follow the process in place now, you bet I will. But at the first sign of delay, or someone says ‘we’re going to slow this down,’ that’s when the state needs to have a governor who understands what to do and has the guts to say, ‘we’re going to finish this project as Alaskans.’” Candidate Bill Walker, Oct. 28, 2014, Anchorage Dowtown Rotary Club debate.

“What I’ve said is that I will finish the project. I will not start over. I’m not interested in another start-over effort.” —Walker to Associated Press, Sept. 13, 2014.

“In the 30+ years I have worked on gasline development no entity has been more of an impediment to a gasline project than Exxon. Not only has Exxon refused to engage in the process, it has directly blocked efforts to advance it.” — Walker, op-ed, July 31, 2014.

“SB 138 begins yet another pre-election 18 month study and is an example of Alaska being taken advantage of and shortchanged.” — Walker statement on Alaska LNG Project, May 8, 2014.

Now that Gov. Bill Walker has upended virtually the entire structure of the Alaska LNG Project, it is worth revisiting his commitment during the 2014 gubernatorial campaign that he would not start over.

As is clearly apparent now — after he’s replaced six of the seven members of the Alaska Gasline Development Corp. board of directors and orchestrated the ouster of its President and CEO Dan Fauske — Walker had every intention all along of starting over.

What Walker has done is move the Alaska Gasline Port Authority he started in 1999 from Valdez to Juneau and into the offices of the governor and the attorney general, who happens to be his former law partner.

It started barely a month after taking office when he unceremoniously fired three members of the AGDC board, including two with decades of major project experience that is one of the legal criteria for serving under the legislation that created the state-owned entity. Walker said he didn’t care about the loss of expertise and favored Alaskans who understand the state’s needs.

At the same time, Walker told his new appointments to the board not to sign confidentiality agreements and his AG Craig Richards said Jan. 14 that new regulations would be developed within two months. (It turned out to be August before the first draft was released.)

A month later, Walker surprised legislators and members of his own administration when he announced in a newspaper column that he wanted to pursue a gas pipeline fully owned by the state as a competing back-up plan to AK LNG.

That idea went nowhere fast as the Legislature reappropriated more than $100 million from AGDC coffers into funding an increase for education to prevent Walker from spending money on his competing project.

Over the summer, Walker put additional demands on the project producers. He said he wanted a 48-inch pipeline studied instead of the more standard 42 inches that had already been chosen based largely on its availability and well-established engineering specifications. That decision alone has added $30 million to the preliminary work.

Walker further began seeking the producers to help pay for in-state gas offtake infrastructure that was always intended to be Alaska’s responsibility to deliver gas to its citizens.

We’ve also learned that Walker wants the producers to sell some of their gas in-state in order to relieve the political pressure that will be inevitable when Alaskans demand cheap energy should AK LNG ever go into production.

Finally, in the biggest obstacle Walker has thrown up to progressing the project, he is demanding withdrawal agreements from the companies that would require them to sell their gas to the project in the event they decide to exit the endeavor.

In the meantime he’s changed the lead negotiator on commercial agreements three times, tossing away more than a million dollars of scarce state funds on an old buddy, Rigdon Boykin, who brought the state no closer to staying on schedule than when he started his high-priced gig.

Now with the canning of Fauske — and the clock is likely ticking on interim AGDC president and board chair Dave Cruz, the last holdover from the Parnell administration — another search begins for another high-priced position that will surely demand a more lucrative salary than the $360,000 per year for Fauske that Walker found so offensive during his campaign.

What was more offensive to Walker than Fauske’s salary was his public criticism of the confidentially regs that emerged from Richards’ office that led the three producer partners to state unequivocally that AGDC would be shut out of project meetings if its staff signed them.

It is quite ironic that after Walker has spent so much time demanding a seat at the table — or alternately, to be in the “driver’s seat” — that his own office would produce regulations that would allow the companies to effectively pull AGDC’s chair.

The producers don’t have to agree to the rules, and they don’t have to allow AGDC into project meetings if they don’t believe its staff members are sufficiently bound by confidentiality agreements, plus their stated refusal to publicize commercial agreements they believe will put AK LNG at a competitive disadvantage.

It’s also worth revisiting how Walker has missed the mark over the 15 years since he formed the Alaska Gasline Port Authority.

For one thing, if a gasline had been constructed 20 years ago, Prudhoe Bay would have produced a billion fewer barrels of oil. Had it been built in the 1980s, the field would already be tapped out as an oil realm.

So while Walker claims routinely that the companies have been warehousing gas or deliberately stalling a gasline, it turns out they knew what they were doing and have produced billions of barrels of oil and billions more in revenue to the state through gas reinjection. Those methods will be reaching a point of diminishing returns by the mid-2020s, which is why the producers are ready to build AK LNG.

As noted above, Walker also opposed the bill that created the Alaska LNG Project. Despite his election year critique, it turns out that SB 138 was a heck of a lot more than “just a study.”

Had Walker had his way when he sued to overturn the Point Thomson settlement reached under Gov. Sean Parnell, it wouldn’t be set to begin production next year or be poised to supply 25 percent of the gas to AK LNG, to say nothing of the hundreds of Alaskans hired and billions of dollars that ExxonMobil and BP have spent in the state to build it.

Had Walker had his way to overturn the oil tax reform in SB 21, we wouldn’t have ConocoPhillips building (and now producing at) Drillsite 2S in Kuparuk or sanctioning Greater Moose’s Tooth-1. In fact, there was no decline in the first year of SB 21, drilling reached an all-time high, and production will increase this year over last despite the crash in oil prices.

In short, Walker has been wrong nearly every step of the way on oil and gas policy: from the timing of gasline construction, to the right oil tax regime, to the very legislation and settlements reached under Parnell that have progressed this effort further than it ever has before.

He’s betting Alaska’s future on finally being right. We’ll know before too long if he is.

Andrew Jensen can be reached at [email protected].

12/06/2016 - 6:46pm