JUNEAU — Gov. Sean Parnell on Friday said the companies pursuing a major natural gas pipeline project in Alaska have not met all the benchmarks for progress that he has set.
While progress is being made, it’s not moving as quickly as Alaskans expect, he said. Parnell also said he was concerned the spending commitments announced by the companies did not go beyond 2013.
Given the companies missed a benchmark, Parnell told The Associated Press that he’s under no obligation to pursue another benchmark he’d set out: taking up possible gas-tax legislation this year.
On Friday, Exxon Mobil Corp., BP, ConocoPhillips and TransCanada Corp. announced summer field work in connection with a massive proposed liquefied natural gas project that could range from $45 billion to more than $65 billion. The companies said they expect to have spent up to $100 million toward the project by the end of this year. They said their field work and other activities will allow them to evaluate “major future engineering commitments.”
“Towards this goal, a competitive, predictable and durable oil and gas fiscal environment will be required for a project of this unprecedented scale, complexity and cost to compete in global energy markets,” the companies said in a release.
The Legislature in April passed an oil tax cut supported by the North Slope’s three major players — BP, ConocoPhillips and Exxon — that could cost the state up to $4.6 billion through fiscal year 2019, depending on oil prices and production levels. Kim Jordan, a media adviser to Exxon Mobil, said in an email that passage of the bill was a “significant achievement,” given a “healthy, long term oil business will be a key part of the foundation for this complex, world-scale project.”
“We will need to work together with the state to ensure we have the right fiscal environment to support an LNG project,” she said. LNG stands for liquefied natural gas.
BP Alaska, in a statement, said the project is important to the company and to Alaska. It said progress continues but the state “plays a huge role in making this project commercially viable and enabling progress.”
In an effort to jumpstart progress on a line, Parnell urged the Big Three in 2011 to get behind a project that would allow for liquefied natural gas exports to the Pacific Rim if the market had truly shifted away from the Lower 48. The companies agreed, though it was understood that there was no guarantee a line would be built.
In 2012, Parnell used his State of the State address to set out a series of benchmarks for progress, and said if those were met, the 2013 Legislature could take up gas tax legislation designed to move the project forward. They all were.
He laid out a new set of benchmarks in this year’s speech. He asked the companies for more details on the project by Feb. 15, to finalize an agreement to move into a stage that would include preliminary engineering and a financing plan by this spring and to conduct a full summer of field work.
The second of those — which would trigger hundreds of millions of dollars in additional spending by the companies, according to their own work plan — was not met.
“The reason for the benchmarks was to build Alaskans’ trust that the pipeline project was moving with sufficient progress to warrant us to take up the tax discussion at this time,” he said. “And it was about credibility for the project.”
Parnell said in an interview that all the benchmarks were “clearly linked.” He said he is evaluating whether progress made on the project and the state’s interests warrant pursuing gas-tax changes this year or next.
He’s also looking at whether the smaller in-state gas pipeline project being pursued by the Alaska Gasline Development Corp., or AGDC, to serve Alaska residents requires tax changes in 2013 or 2014. He said that project is on schedule to hold an open season next year, where officials will gauge whether there is sufficient interest to move forward, and a new gas-tax regime could be necessary for that project to advance.
If the Big Three or AGDC believe new gas fiscal terms are needed, Parnell said they will need to make the case to the public.
Bill Walker, who plans to challenge Parnell in next year’s GOP gubernatorial primary, was critical of the process under which the major line has progressed.
“As we continue to give away every piece of leverage we have by way of control, decision making and taxing authority, we further back ourselves into inescapable corners where Alaska’s resources are not being developed for the maximum benefit of our people,” he said in a statement. “Today’s failed benchmark is a consequence of handing the wheel to others whose best interests do not always align with Alaska’s best interest.”
Alaskans have long hoped for a major line as a way to shore-up revenues as oil production declines, create jobs and provide energy for residents.
Jordan said the companies are working to answer key technical questions.
Larry Persily, federal coordinator of Alaska natural gas pipeline project, said companies ramp-up spending as they feel comfortable. The best outcome for Alaskans would be for the companies to commit to hundreds of millions of dollars next year because they feel strongly about the project’s prospects, he said.
“This appears to be painfully slow to Alaskans, I understand that, but the fact is $40-, $50-, $60-billion energy projects are painfully slow,” he said.