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Gasline: On Alaska's terms in Alaskans' interests

Posted: January 12, 2014 - 1:10am
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For the first time in Alaska’s history, we have the framework in place to build the Alaska liquefied natural gas (LNG) project on Alaska’s terms and in Alaskans’ interests.

Further, we have all the necessary parties to make the Alaska LNG project go: three producers, a pre-eminent Arctic pipeline builder, an entity that will carry Alaskans’ interests (Alaska Gasline Development Corporation), and State agencies responsible for royalties and taxes.

It’s truly historic to see this level of consensus around a unified project.

Over the years, a great deal of time has been spent dealing not only with the economics of gas, but also with how best to merge the private and public ownership interests.

Additionally, questions were raised about what an administration’s authority to negotiate fiscal terms ought to be, what level of legislative input and public scrutiny is appropriate, and what sort of “must haves” for Alaskans should be included.

In 2011, I laid out a new plan for an Alaska gasline to supply gas to Alaskans and then to markets beyond. We challenged North Slope producers and TransCanada to get behind one project, the Alaska LNG project. They met our benchmark.

Then, my administration fought for Alaskans’ interests through the Alaska Supreme Court and resolved the Pt. Thomson litigation — something that had eluded the State for years.

Included in the settlement is the principle of incremental, verifiable performance. In other words, “You take a step, we take a step; you make a commitment, we make a commitment,” and along the way, we each verify our commitments and progress. For the State, that means doing so through public legislative hearings at critical junctures for the project.

By 2012, I called on the producers and TransCanada to harden their numbers and identify a single pipeline project and work schedule. They met that benchmark, and have now identified an Alaska LNG project with gas off-takes for Alaskans — a pipeline that runs to Nikiski.

With AGDC’s Board of Directors recently voting to create a subsidiary to participate in the commercial process, the Alaska LNG project has all the necessary parties.

But the question remains: What role should the State play going forward?

I intend for Alaska to control our own destiny and become a partner in the Alaska LNG project.

Ownership or participation ensures the State will receive a share in the profits over the entirety of the project. It also ensures that we either pay ourselves for project services or, at the very least, understand and negotiate the lowest possible costs.

It’s simple: With the State as a partner, Alaskans stand to gain more.

Above all, the path forward will be on Alaska’s terms and in Alaskans’ interests. Here’s what to expect:

• We amicably terminated the license under the Alaska Gasline Inducement Act (AGIA), and the State is partnering in a more traditional, commercial arrangement on Alaskans’ terms.

• Next, we will seek legislative approval for State entities to align with the producers and TransCanada in a traditional commercial gasline arrangement that protects Alaskans’ interests.

• Shortly, we expect a commercial agreement with a transparent set of terms and road map. Known as a Heads of Agreement, the document is anticipated to be signed by Exxon, BP, ConocoPhillips, TransCanada, AGDC, and by our commissioners of the Departments of Revenue and Natural Resources. The Heads of Agreement will be subject to public review by the Legislature this session.

• Additionally, we will submit legislation asking lawmakers to switch from a variable net tax to a flat gross tax for North Slope gas, and enable the Departments of Revenue and Natural Resources to work together to manage the State’s gas revenues.

• Finally, I will ask the Legislature to review changes made to AGDC in House Bill 4 and support revisions needed to carry the State’s interests in a project.

Unlike previous gasline efforts, the public and Legislature will have the basic ingredients of a deal in front of them as they consider legislation moving the project forward.

Alaskans have seen past efforts to develop a large gas project falter for various reasons. This time is different. AGDC is our “ace in the hole,” meaning AGDC will stay on track with its smaller volume Alaska Stand Alone Pipeline (ASAP) Project.

We have parties aligned who can move a project forward, and we have protection of Alaskans’ interests through steps that can be publicly scrutinized at multiple points.

Alaska’s foundation is strong and our future is bright. We’re moving forward on the promise of getting Alaska’s gas to Alaskans first, and then to markets beyond.

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