AGDC narrows CEO search; AK LNG sticks with 42-inch pipe

The Alaska Gasline Development Corp.’s search for a new CEO appears to be winding down.

AGDC board member Hugh Short, who has led the board’s hunt for a new president and CEO, said in an interview that the board has winnowed its list of candidates down to one finalist and a secondary candidate.

From a broad perspective, the depressed nature of worldwide oil and natural gas markets has been a concern during the process, but Short said the near-term uncertainty regarding the status of the $45 billion-plus Alaska LNG Project has not challenged the search.

Rather, the State of Alaska needs someone with the experience and expertise to market the project and maintain its prominence worldwide in the minds of potential LNG buyers, he said.

There is no timetable for when a new president will be named.

Former AGDC President and CEO Dan Fauske abruptly resigned in late November at the request of Gov. Bill Walker. At the time the state had just approved the buyout of TransCanada Corp., which previously held the state’s share of the 800-mile pipeline and the North Slope treatment plant.

After the buyout, the state now owns a full 25 percent share of the entire project.

Walker said then he wanted more pipeline experience in AGDC’s top role as a result. Fauske, who had led AGDC since its inception as a subsidiary of the Alaska Housing Finance Corp. in 2009, has significant experience in the finance industry.

Fritz Krusen, previously a vice president, has been AGDC’s interim president since mid-December.

The Alaska LNG Project has been AGDC’s primary focus in recent years, but the corporation is still sitting on the design for the smaller, in-state Alaska Stand Alone Pipeline project, or ASAP, the project for which AGDC was originally formed.

Specifically to the Alaska LNG Project, it appears the pipeline size is staying the same.

Project spokeswoman Kim Fox of ExxonMobil wrote in an email that the project team has recommended it stick with the current 42-inch design after a five-month study process in which the 42-inch and 48-inch pipe sizes were evaluated.

Walker pushed for the larger pipe study — which cost $20 million to evaluate — contending added capacity in the pipeline would encourage more natural gas exploration on the North Slope and could give companies searching for gas along the pipeline corridor — Doyon Ltd. is exploring near Nenana — a better opportunity to get their gas to market.

The 42-inch pipeline would be dominated by North Slope gas owned by BP, ConocoPhillips and ExxonMobil, as well as the state’s gas, for about the first two-thirds of the project’s 25-year design life, before depletion from the Prudhoe Bay and Point Thompson fields is expected to start gas throughput decline at about year-18.

Legislators on AGDC board

A bill that would add three legislators to the AGDC board of directors is on its way to the governor’s desk.

Senate Bill 125 passed the House April 9. It would put three nonvoting members of the Legislature — a senator appointed by the Senate president, a representative selected by the House Speaker and a member of the joint minority caucus — in oversight positions on the gasline corporation board.

The AGDC board currently consists of five public members appointed by the governor and two state commissioners other than the heads of Natural Resources and Revenue.

Sponsored by Anchorage Republican Sen. Mia Costello, the bill’s intent is to better inform the Legislature on AGDC’s work and increase collaboration between the corporation and the Legislature, which must approve any long-term contracts AGDC enters into.

 “Having legislators participate in an advisory, nonvoting capacity adds experience and continuity to the board,” Costello’s sponsor statement reads. “Legislators understand they type of budget decisions that will be needed to meet the state’s cash calls for a gasline project, and would be helpful for discussions on project financing.”

House Speaker Rep. Mike Chenault, R-Nikiski, also sponsored a similar bill this session.

There are questions surrounding the constitutionality of SB 125, however.

Assistant Attorney General Jerry Juday said to the AGDC board at its April 8 meeting that he thinks the bill is unconstitutional because a provision in the state constitution prevents dual office holding and having legislators serve on the board of an executive branch corporation could violate the separation of powers between the branches, Juday said.

A March 30 memo from Legislative Counsel Emily Nauman to Chenault notes, as Costello’s sponsor statement does, that legislators already serve in similar roles on other state boards, such as the Knik Arm Bridge and Toll Authority and Alaska Seafood Marketing Institute.

Nauman wrote that the nonvoting role may not violate the separation of powers doctrine, but also acknowledged that legislative positions on any state board might stand today simply because they haven’t been challenged.

“What is clear is that the issue of nonvoting legislative members on executive branch boards is unsettled,” Nauman wrote. “The only sure resolution is a decision by the Alaska Supreme Court. I would certainly warn that there is a risk involved in placing nonvoting legislative members on the AGDC board, as the board is serving an executive branch function.”

Gasline budgets

The agencies working on the Alaska LNG Project are waiting just like everyone else to see what comes out of the House and Senate budget conference committee.

AGDC’s $10.4 million budget request for fiscal year 2017 made it in the House version of the operating budget but was omitted from the Senate version. Corporation officials said at an April 8 board meeting that they are anticipating being funded in the resolved budget but are in “standby mode” until it is finalized.

AGDC had a budget of roughly $13 million in previous years; the reduction to about $10 million is a result of eliminating 13 positions always vacant from its budget request. The corporation has never had more than 25 employees but was established with 38 potential positions.

The Department of Natural Resources cut its final funding request for the North Slope Gas Commercialization Office by $18.7 million from the $35.7 million that was in the governor’s original budget to $16.9 million as progress on the commercial side of the project has all but stalled.

Most of the money in the remaining request would be used by the Department of Law to pay for the state’s outside counsel in ongoing contract negotiations with the project partners — BP, ConocoPhillips and ExxonMobil — through reimbursable service agreements between the departments.

DNR eliminated $2.6 million from its ask to fund new marketing lead and marketing negotiator positions, but the department is still looking to add seven high-level positions to the Gas Commercialization Office at a cost of nearly $1.6 million. Walker’s original budget request, made late last fall, would have added 21 positions to the state’s Gas Commercialization team with a personnel cost of $11.1 million.

Slower-than-expected progress in negotiations between the producers on lynchpin agreements to determine how and when natural gas can be pulled from the Prudhoe Bay and Point Thomson fields has held back progress on other contracts needed to move the project into the front-end engineering and design, or FEED, stage, according to DNR officials.

A decision to move to FEED in the gated process of the project is roughly set for early next year.

At one point it was expected those agreements would be in place by last fall, or by the end of the current legislative session. However, with DNR still reporting a lack of progress on the commercial terms of the project that timeline could be muddled.

Elwood Brehmer can be reached at [email protected].

Updated: 
04/13/2016 - 3:11pm