Gov. Walker calls Alaska Legislature into special session to address LNG project
Updated: Thursday, Sept. 24 at 10:18 p.m.
ANCHORAGE — Gov. Bill Walker issued a proclamation Thursday announcing the start date for the fall special session that has been in the works between his office and legislators.
The special session will gavel in on Oct. 24 in Juneau, according to a statement from the governor’s office. The session will focus on gasline issues, including the governor’s Alaska Liquefied Natural Gas Pipeline project.
“With a $3.5 billion budget deficit, this gasline project has gone from a wish-list item to a must-have,” Walker said in a statement.
Gov. Walker will introduce a legislative package before the special session that will propose reinstating a reserve tax on North Slope gas that is not committed to any projects. A proposal to buy out TransCanada Corporation’s share of the pipeline and gas treatment facility will also be included.
The governor also announced he will seek a gas reserves tax, which would tax any gas in the ground that has not been committed to a pipeline project.
“This legislation will vastly improve the probability of an Alaska gasline being built,” Walker said in a video. “It ensures that, if one or more producers delay construction of the gasline, Alaska still receives critical tax revenues from our natural gas resources. But only if we have the political will and courage to do so.”
Senate President Kevin Meyer says Walker’s announcement came as a surprise to legislators, who met with the governor three days earlier to discuss the topics of the special session.
“We talked about the PILT — property in lieu of taxes — we talked about the purchase of TransCanada, we talked about a constitutional amendment,” he said, noting the governor never mentioned the reserve tax. “It’s not a real popular item and I don’t think it’s going to be really popular with us. You don’t tend to tax or punish your partners you’re doing business with.”
Rep. Les Gara, less surprised about the tax, says the governor is playing hard ball with one of the state’s partners in the project.
“There’s obviously one of the major oil companies is refusing to put its gas on the line,” he said. “That’s reading between the lines.”
Gara wouldn’t say which one, ExxonMobil, ConocoPhillips or BP is dragging its feet, but he is supporting the governor’s bold move to keep the project going.
“I think the public would support a reserves tax because they know a big company out there that’s trying to kill a gas pipeline project, and the only way to get their gas is to say, ‘Look, if you don’t play ball, we’re going to tax you for warehousing our gas,’ and so the public will agree with that this time,” he said. “Last time I think the public said, ‘we’ll give the oil companies one free pass with this.’”
But the Alaska Oil and Gas Association says our state’s oil and gas market is already uncertain, and calls the governor’s actions “a signal of instability,” not the way to show Alaska, is open for business.
“That gas has been utilized to re-inject pressure back into the ground to increase oil production, so that gas has had a use,” said Kara Moriarty, CEO and president of AOGA. “It may not have been sold on the market, and nobody wants to have an economical project more than the companies themselves, so for us and the industry, we just don’t see this as the proper tool in the toolbox to get us a gasline.”
The governor’s office sent out reports highlighting the progress and unresolved issues with the project. Walker outlined concerns with other partners in the project who were less incentivized than the state to move along with construction and production.
“Because all AKLNG parties must agree on every issue of every commercial agreement, the party that most wants a project is pressured to make the most concessions to advance the project,” Walker explained in a summary report for the project. “As the party with the strongest interest in an Alaska project progressing, the State is the party with the strongest incentive to make concessions to progress the project… It is time to make the necessary legislative changes so a single party cannot delay the production of Alaska’s natural gas resources and sway our destiny.”
The size of the pipeline was also a point of contention. The 42-inch pipeline design was considered “the best option” for low-cost transportation capacity of gas, but was not considered capable of allowing access to the system from areas outside the Prudhoe Bay and Point Thompson units until they were depleted. However, upgrading the pipeline’s size from 42 inches to the alternative 48 inches could add six to eight months to the end date of the project.
Other issues were pointed out in the summary report, including what the governor’s office called unrealistic expectations on the part of other project members who requested fiscal certainty before any commercial contracts were made.
The governor was also critical of Senate Bill 138, gas pipeline legislation adopted in 2014.
“The project process adopted by S.B. 138 poses serious challenges that make AKLNG very difficult to progress in a manner, and on a timeline, that can maximize benefits to Alaskans,” the report noted. “A fundamental issue is the underlying assumption that governed the drafting of S.B. 138: that all parties would be equally motivated to get a project done in a reasonable time. This assumption has been proved by history, and within the current process, to be invalid.”
The bill also gave “little to no negotiating leverage” to the state, the report noted.
Walker made the announcement Thursday, but won’t answer questions until Friday during a press conference at 11 a.m. You can watch it live on KTVA.com
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