Governor’s actions on natural gas raise concerns for Republican majority
There’s speculation Gov. Bill Walker’s latest move on natural gas development was part of a political strategy to divert anticipated criticism from the Republican majority over his three appointments to the Alaska Gasline Development Corporation (AGDC).
The night before he made his announcement, his opinion piece, published on the Alaska Dispatch News website, generated buzz at the State Capitol.
In it, the governor did an about-face on a project he had campaigned against — the Alaska Stand Alone Pipeline project, known as ASAP, or the “Small Line” — as opposed to the “Big Line,” the Alaska Liquefied Natural Gas project, which so far has been the main focus of getting North Slope gas to market for both in-state use and export.
AGDC has been tasked with overseeing both of these projects — and where possible, trade information between the two of them to help them both move forward.
With many uncertainties in the market, and the cost of the “Big Line” estimated at more than $45 billion, lawmakers funded work on the $10 billion ASAP project, a line designed to carry a smaller volume of gas for in-state use. They called ASAP the state’s insurance policy in case the large-volume gas project never comes to fruition.
In the opinion piece, the governor promoted ASAP as a viable alternative, in contrast to his previous criticism of the project during his campaign as redundant and not economically viable — because as originally envisioned, the project didn’t move enough gas to create the necessary economies of scale.
ASAP even wound up on the governor’s list of megaprojects to be shelved.
So what’s different now?
The governor wants to expand the ASAP project, so it can move more gas — and even have it compete against the larger project.
Under the state’s old agreement to build a natural gas line to the Lower 48 with TransCanada, the volume of the smaller line was capped to prevent competition. But after lawmakers passed legislation to advance the Alaska Liquefied Natural Gas project, or AKLNG, the volume limit on ASAP went away.
Although the option of expanding capacity on ASAP has been available since June of last year, Walker has not expressed interest in doing that until now.
At a Thursday news conference, the governor didn’t say exactly how much gas this line should carry, but said it might be a better option because the state would own 100 percent of the project and have better control of its future. He also wanted to add liquefaction capability to the project, a process in which gas is compressed and converted into liquefied natural gas, so it can be shipped across the ocean in tankers.
“I don’t look at competition as a bad thing,” Walker said. “The preferred line for me is one that gets built.”
“I’m not sure that betting everything on AKLNG is the right approach,” added Walker who also believes the project should be market driven.
AKLNG is a partnership between the state, three major oil producers, and TransCanada, a pipeline construction company — in which the state would hold a 25 percent stake in the project.
Republican majority leaders say the souped-up version of ASAP could be a setback for AKLNG, which has been moving forward on schedule.
During legislative hearings on AKLNG Wednesday, oil company executives testified, offering progress reports and assurances they remain committed to the project.
Although the governor said he’s talked with the industry about his desire to expand the ASAP project and that there were no immediate objections, House Speaker Mike Chenault said Walker’s change in direction has now created confusion and uncertainty. He also said the ASAP project, although intended to be the fallback, is not preferable and is riskier for the state because it has no partners with industry right now.
“I do have concerns about Alaska taking 100 percent of the risks, any multiple billion dollar project, especially with the revenue constraints we have,” Chenault said.
The governor says those revenue constraints might warrant the state taking more control of the project to ensure it’s built as quickly as possible. With a growing budget gap for the current fiscal year potentially as high as $4 billion — and with similar shortfalls projected for the next year — royalties and taxes from North Slope gas are seen as increasingly important for the state treasury.
“We’re doing what we should do. We’re starting to act like an owner,” said the governor, referring to Alaska’s unique status as an “owner state,” in which natural resources are held by the state rather than in private ownership.
But Republicans say while owning the gas is one thing, it’s the producers who bring it out of the ground. They say the governor is putting the cart before the horse, should he decide to bypass producers in favor of the ASAP project.
“Where’s the gas? Where does the gas come from? There is no gas to sell from any project until the producers produce it,” said Rep. Mike Hawker, who is one of the lawmakers who pushed for the ASAP project as a fallback.
Although Hawker says he is glad the governor no longer wants to scrap ASAP, he says it’s a mistake to put it in competition with AKLNG.
As partners with the industry, Hawker says, the state is more likely to get a major project.
“With that alignment, we were able to create common interests, rather than competing interests, where the state is not competing with producers,” Hawker said.
The governor’s approach has been: find the market first.
“You can have the greatest plan in the world, but if you have no customers, it really doesn’t do you any good,” said Walker, who has said that’s one of his top priorities – finding customers for Alaska’s gas.
“May the best project win,” said Sen. Bill Wielechowski, an Anchorage Democrat who has been critical of the AKLNG project because the state doesn’t have a majority ownership.
“If the big line wins on the merits, because of low cost — if it’s in the best interest of Alaskans, that’s great,” Wielechowski said. “But if the smaller line is able to produce more economic benefit for the people of Alaska, more revenue for the people of Alaska, get it built in a shorter time, I think most Alaskans would agree that’s a good thing and we should pursue this route.”
Wielechowski also praised the governor’s appointments to the AGDC Board, which include two former state senators — Rick Halford of Dillingham and Joe Paskvan of Fairbanks. Both, during their time in the Legislature, focused intensively on oil and gas issues. Paskvan also advocated for more state ownership of any natural gas project.
A third appointment, Hugh Short, is currently an investment banker and once served as mayor of Bethel. He’s also the son-in-law of Bethel Sen. Lyman Hoffman.
Last year, Wielechowski and other Democrats argued then-Gov. Sean Parnell had broken the law when he appointed Richard Rabinow to the AGDC Board. Rabinow is a retired Exxon pipeline construction executive who lives in Texas.
Walker recently removed Rabinow and two other board members because he felt they were too closely tied to the industry.
“I think that’s a big victory for Alaska,” said Wielechowski about the new appointments. He said the new members would lead to “an Alaska gasline corporation that’s being run by Alaskans, as opposed to being run by executives from the oil industry, who may or may not have our interests at heart.”
A joint session of the Legislature must ultimately confirm the governor’s appointments to the AGDC Board. It will take a majority of 31 lawmakers out of 60 to confirm or reject the appointments.
Senate President Kevin Meyer says confirmation of these appointments are not a given.
“It’s really hard to turn someone down, but we’ve done it,” Meyer said. “We want the most qualified people we can possibly find.”
To decide whether or not the governor’s appointees get their vote, Republican House leaders say, they’ll consider the state statute on AGDC board members, which says:
When appointing a public member to the board, the governor shall consider an individual’s expertise and experience in pipeline construction, operation and marketing; finance; large project management; and other expertise and experience that is relevant to the purpose, powers and duties of a corporation.
Rep. Hawker said two of the board members the governor dismissed — Al Bolea, a retired BP executive and Rabinow, who built pipelines for Exxon, had that experience and were actively sharing it with the AGDC staff.
“I’m certainly going to be looking to make certain that the folks replacing our board members have the technical skills commensurate with those they’re replacing,” Hawker said.
The governor has said he would rather see AGDC hire consultants to gain such expertise. Instead, he wants the Board to reflect Alaskan interests with members from communities suffering from unusually high energy costs — the common denominator between the governor’s new appointments.
Sen. Cathy Giessel, chair of the Senate resources committee, one of the committees that will vet the AGDC appointees, also echoed other majority members in a statement.
“For me, it is critical that members of the board not only have the passion for the mission, but also the skills needed to formulate and implement that strategy,” said Giessel, who also said the committee would remain objective when interviewing the appointees.
Some who are skeptical about the governor’s proposal call it “ASAP on steroids” and wonder if the industry will continue to be willing to share information beneficial to both ASAP and AKLNG, if ASAP grows in size and competes for the same market.
The post Governor’s actions on natural gas raise concerns for Republican majority appeared first on KTVA 11.