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State to terminate TransCanada agreement under AGIA

Pipeline builder to remain partner, state will take equity interest in LNG line

Posted: January 10, 2014 - 2:42pm  |  Updated: January 12, 2014 - 1:11am

The state will terminate its partnership with TransCanada under the Alaska Gasline Inducement Act, Gov. Sean Parnell announced Friday at an Alaska Support Industry Alliance gathering in Anchorage. Parnell also said the state will pursue an equity stake in the Alaska gas line.

“As a partner in the gas line project, Alaska will control its own destiny,” he said. “Ownership ensures we either pay ourselves for project services or negotiate and ensure the lowest possible costs. As a partner, Alaskans stand to gain more.”

Parnell said taking an equity stake in the gas line project would allow the state to receive a share of the profits throughout the entirety of the project.

“Ownership ensures we either pay ourselves for project services or, at the very least, understand, negotiate and ensure the lowest possible costs,” Parnell said.

A report commissioned by the state last year supported the idea of the state taking a 20 to 30 percent stake in the project. With an estimated cost of $45 billion, that would mean an investment of at least $9 billion from the state.

The governor said that North Slope producers are on board with the idea of Alaska having ownership of the gas line because it reduces their capital costs.

Kim Jordan, a spokeswoman for ExxonMobil, said the company is currently working with the state on technical, regulatory and commercial issues related to the project. She said the company welcomed today’s announcement.

“We continue to be encouraged by the progress being made,” Jordan wrote in an email.

Parnell said instead of working with the pipeline builder under AGIA — which he said is no longer working in the state’s favor — TransCanada will stay involved in the project “in a more traditional commercial arrangement.” He said the termination of TransCanada’s lead role in the project was amicable.

“Our way forward will be on Alaska’s terms and in Alaska’s interests,” Parnell said.

Parnell said he would ask the Legislature to consider a new commercial agreement with Exxon, BP, ConocoPhillips and TransCanada. He said he’d also propose legislation that would enable the state to negotiate gas shipping agreements. He said the legislation would also ask to change the tax on North Slope gas from a variable net tax to a flat gross one.

“We’ll have an investment-quality project when this is complete,” Parnell said.

During his speech, Parnell was sure to give AGIA a fond farewell. He said that while AGIA didn’t bring actual construction of a gas line, it provided the framework necessary to bring together the elements of the project.

“AGIA contained timeless principles and benefits for Alaska, and we will retain them,” Parnell said. “Gas for Alaskans on reasonable tariff terms, exploration of Alaska’s gas acreage, gasline expansion potential, and local hire, to name a few. The way we get there is by working with a party or parties who will meet Alaska’s terms.”

Over the next four months, Parnell said he expected public review of project outlines, a signed agreement of all stakeholders and passage of authorizing legislation. Once those things are complete, Parnell said the project will move into an 18-month engineering and design phase.

As Parnell neared the end of his major gas line policy speech, he broke away from his script to address the quiet crowd.

“You guys should be really happy at this point. This is huge progress,” Parnell said, laughing. The crowd laughed and applauded.

“Pardon me if I didn’t make that clear.”

• Contact reporter Jennifer Canfield at 523-2279 or at jennifer.n.canfield@juneauempire.com. Follow her on Twitter at https://twitter.com/canfieldjenn.

 

Juneau delegation reacts

 

“I like the idea of Alaska having an equity interest in the pipeline. If done correctly, this could put Alaska in greater control of our resource wealth than ever before. But we must have a meaningful, real role. And we must have safeguards that make sure it’s a good deal for Alaska.”

-Rep. Beth Kerttula, D-Juneau

 

“This is exciting news. I hope the $300 million already spent to advance a gas pipeline under AGIA will help us in the next round, and that we also can address the needs this session of other regions of the state, such as Southeast Alaska.”

-Rep. Cathy Muñoz, R-Juneau

 

“I think we should explore an equity stake. It’s probably going to make the most sense in the long run, but I want to hear the actual proposal. We’ll see if there’s a devil in the details, or a good deal. What I care most about is getting gas to Alaskans, including Alaskans who live on the coast.”

-Sen. Dennis Egan, D-Juneau

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