BP, ExxonMobil commit $10M apiece to Alaska LNG

BP and ExxonMobil are contributing $10 million apiece to help get the $43 billion Alaska LNG Project get its federal construction authorization, Lt. Gov. Kevin Meyer said Thursday. Meyer made the announcement at the Alaska Oil and Gas Association’s annual conference in Anchorage. The state-owned Alaska Gasline Development Corp. estimates it will take roughly $30 million to complete the environmental impact statement the Federal Energy Regulatory Commission is currently drafting. FERC is scheduled to release a draft version of the Alaska LNG Project EIS in June; the agency pushed back from February earlier this year. AGDC officials said at a May 22 board meeting they expect the draft document to be roughly 4,000 pages. The major producers signed a memorandum of understanding with AGDC in March to provide technical assistance on the project. They also signed separate confidential gas sales precedent agreements with AGDC last year that outline the terms — including price — under which they would sell gas from the Prudhoe Bay and Point Thomson North Slope fields into the project. The state capital budget that passed the Senate in early May authorizes AGDC to accept up to $25 million from outside sources to support the Alaska LNG Project. AGDC officials expect to have approximately $22 million remaining for the project at the end of the 2019 fiscal year, which is June 30. Gov. Mike Dunleavy has stressed a desire to bring the producers back into the project after they stepped away in 2016 amid poor oil and gas market conditions. The state has since focused on advancing the regulatory and marketing aspects of the project. “All future decisions on Alaska LNG will be rooted in world-class LNG experience,” Meyer said. The companies are also currently assisting AGDC in reevaluating the overall economics of the project and its $43 billion cost estimate amid new global LNG market conditions. BP Alaska Vice President of Commercial Ventures Damian Bilbao said in an interview that the company continues to be excited about monetizing Alaska natural gas because the company’s share of North Slope reserves are still its “single largest undeveloped resource on the planet.” On the $43 billion estimated cost of the project — a figure calculated in 2016 that includes $9 billion in contingencies — Bilbao said he believes there are avenues in supply procurement and other areas to bring the cost down. Alaska LNG officials have always cited the cost of the 800-mile gas pipeline from the North Slope to the Kenai Peninsula as the main cost obstacle to developing the long-sought project. “Four years is a long time in this industry; it’s a technology-driven industry so our experts feel very confident that the number that was delivered at the end of (the preliminary design period), that $43-$44 billion — they can really look at some opportunities to bring that into the high 30s and we’re going to look at some opportunities to take that down even further,” he said. As for North Slope oil, Assistant Secretary of the Interior Joe Balash, a former Alaska Department of Natural Resources commissioner, said during remarks at the conference that a draft environmental impact statement should be published by the end of summer for ConocoPhillips’ large Willow prospect in the National Petroleum Reserve-Alaska, with a final EIS coming in 2020. ConocoPhillips estimates Willow, with a cost of $4 billion to $6 billion, could produce more than 100,000 barrels of oil per day. Balash also said the Bureau of Land Management, which he oversees, just completed consultation with Canadian officials over the potential impacts to the Porcupine caribou herd from possible oil and gas activity in the Arctic National Wildlife Refuge; the herd migrates across the border. A final EIS analyzing industry development in the ANWR coastal plain should be ready in August and a lease sale will follow towards the end of the year, according to Balash.   Elwood Brehmer can be reached at [email protected]                  

Legislature preps for lawsuit against Dunleavy

After returning from Memorial Day weekend activities across the state, legislators promptly doubled down on their belief that they have properly funded education for the coming year by preparing for a lawsuit against Gov. Michael J. Dunleavy’s administration. The House voted 23-14 and the Senate voted 14-4 May 28 to authorize the joint Legislative Council to file a lawsuit against the administration for withholding more than $1.2 billion in K-12 formula funding approved last year in House Bill 287. The move is presumptive, given the money cannot be dispersed until after the July 1 start of the 2020 state fiscal year. Legislative Council chair Sen. Gary Stevens, R-Kodiak, said during a rare joint House-Senate press briefing that a suit would not be filed until after July 15, which is when the first round of formula-based yearly K-12 state funding is set to be dispersed to school districts. The 14-member Legislative Council handles business and legal matters for the overall Legislature. Dunleavy insists the Legislature’s actions last year to forward fund education violate the Alaska Constitution because, according to a legal opinion from Attorney General Kevin Clarkson, they improperly dedicate state revenue and attempt to usurp the governor’s line-item veto authority over budget matters. Based on those conclusions there is no K-12 funding for the administration to legally disperse, administration officials stress. Dunleavy — who has repeatedly mentioned the prospect of vetoing portions of the budget the Legislature passes — has also vowed not to veto any education funding as long as it is added to the budget for the coming year. Members of the minority House Republican caucus have sided with the governor on the issue and collectively voted against allowing the Legislative Council to consider a lawsuit. The governor cannot sue the Legislature in this instance, according to legal experts. The current iterations of the state operating budget being settled in a conference committee similarly forward fund education for the 2021 fiscal year. Legislative leaders are adamant last year’s forward funding is legal; it’s something lawmakers did for 10 years before declining oil revenues led them to stop the practice in 2015. For them, it’s a separation of powers issue. The issue has largely united Democrat and Republican leaders in the Legislature who for years have been at odds over how to fix the state’s large structural budget deficits. “We have stood firmly on the forward funding that we appropriated last year for this coming year and we are hoping very much that no lawsuit will be necessary,” Senate President Cathy Giessel, R-Anchorage, said during the briefing. “Education funding has been a political football over these past years when we haven’t forward funded. We want to take that football, put it on the ground and settle this issue.” Legislators last sued the governor as a group in 2015, when former Gov. Bill Walker accepted federal Medicaid expansion funds without the Legislature’s approval. That lawsuit was dismissed by a state Superior Court judge in early 2016. In an impromptu May 28 counter-press briefing Dunleavy said he has talked extensively with legislative leaders about the stalemate. He suggested the Legislature could add the 2020 education money to the budget and the administration could distribute the nearly $1.2 billion meant for the base student allocation, or BSA, payments to districts while withholding the $30 million, one-time supplemental payment also approved in HB 287 to spur “almost a friendly suit just so we can get clarification on things moving forward,” Dunleavy said. “I’d ask the House and Senate to fund education and we can agree on an amount that can be withheld that would initiate a suit so we can get clarification; that way the school districts are certain that they’ve got funding,” the governor added. The administration also submitted bills during the special session to make the BSA and $30 million supplemental appropriations outside the budget. While they seem to have little chance of passing, school administrators from across the state testified during Finance Committee hearings that forward funding education is very important as it allows them to make longer term plans and keeps districts from having to issue layoff notices to teachers each year lawmakers struggle to agree on a budget. Districts are expected to issue “pink slips” if the current situation is not resolved by mid-July, and the year-to-year job uncertainty can make it difficult to retain teachers in a state where teacher turnover is already a pervasive issue, according to school district officials. “Stable and predictable — that’s what our industries ask for. It seems reasonable to assure that to our education system as well,” Giessel said. At the heart of the administration’s claim is the fact that forward funding of education in prior years was done with surplus existing revenue, while HB 287 draws anticipated revenue from the General Fund. Legislators contend all budgeting — particularly for the State of Alaska where income streams are based on volatile oil and financial markets — is anticipatory. The administration’s bills to repay forgone Permanent Fund dividend amounts over multiple years rely on the expectation that money currently in the roughly $19 billion Permanent Fund Earnings Reserve Account will be available when the draws would be made up to three years away, many have noted. However, those funds could dissipate if markets falter. Sen. Bill Wielechowski, D-Anchorage, said during floor debate on the Legislative Council authorization that he believes the administration’s argument could apply to most appropriations the Legislature makes, but this situation is unique since the Supreme Court has determined lawmakers have a constitutional obligation to fund public education. On other issues, the Legislature sent the omnibus criminal justice reform rollback legislation, House Bill 49, to the governor for his signature May 28, which Dunleavy thanked them for. That leaves budget issues and the PFD outstanding in the 30-day special session that is quickly approaching its halfway point. Legislators are close to finishing a budget as the House and Senate versions of the operating budget were similar to start the conference committee — with overall cuts in the $200 million-plus range — but a final version has yet to be released. The House is considering the capital budget that passed the Senate and will likely be minimal again this year, which leaves the PFD as the big hurdle for the Legislature. House Finance co-chair Rep. Tammie Wilson has proposed legislation to pay a full, roughly $3,000 per person PFD this year according to the statutory formula with additional draws of roughly $1.4 billion from the Earnings Reserve and $500 million from the Constitutional Budget Reserve, while halving the PFD formula for future years. The idea was roundly dismissed during public testimony. With the Senate approving a $3,000 PFD — but in an unbalanced budget — the House without a dividend appropriation and Dunleavy firm in his demand for a full payment, it remains unclear as to how the situation will be resolved before the June 15 end of the special session. ^ Elwood Brehmer can be reached at [email protected]


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