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State signs deal to advance LNG line

Alaska would have 20 to 25 percent equity stake

Posted: January 16, 2014 - 1:10am

The State of Alaska entered into a commercial agreement Tuesday with three major oil producers and a pipeline builder to advance a liquefied natural gas line. The agreement comes after an announcement last Friday by Gov. Sean Parnell that the state would be terminating its contract with TransCanada under the Alaska Gasline Inducement Act to pursue a more “traditional commercial arrangement.”

Parnell also said the state would pursue an equity state in the gas line, the details of which are included in Tuesday’s agreement.

ExxonMobil, BP, ConocoPhillips and TransCanada, along with the state’s revenue and natural resources commissioners and the president of the Alaska Gasline Development Corporation, are all signers to the agreement. The agreement outlines conditions to be met as the process for constructing the gas line moves forward.

The agreement says the state anticipates taking a 20 to 25 percent share in the project, which is expected to require a total capital investment of $45 to $65 billion. TransCanada would receive a portion of the state’s share.

“As an equity partner, the state will play a critical role in setting the terms for decades-worth of gas production from the North Slope,” Natural Resources Commissioner Joe Balash said in a statement Wednesday. “In setting these terms, our goal will be to maximize the royalty value of the state’s gas on behalf of all Alaskans.”

Another document released Wednesday is a memorandum of understanding with TransCanada. The memorandum outlines TransCanada’s exit from its contract with the state under AGIA. TransCanada will provide the state with transportation services for its share of royalty and tax share of gas from the pipeline. TransCanada will also work with the state to expand the gas treatment plant and gas line to additional third-party producers on the North Slope.

“This commercial agreement, with its transparent set of terms, is Alaska’s roadmap to developing our vast gas reserves,” Parnell said in a statement.

Parnell’s administration still needs to ask the Legislature to change the tax on North Slope gas from a variable net tax to a flat gross one. The Legislature would also need to agree to allow the state to continue negotiating details of related contracts and shipping agreements.

TransCanada was originally brought into the gas line project by way of AGIA, a law championed by Gov. Sarah Palin and passed by the Legislature in 2007. The plan under AGIA was to construct a gas line from the North Slope to the Lower 48. That plan was scrapped after shale oil production in the states increased enough to make the international gas line economically unfeasible.

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

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