Governor's Announcement Underlines The Importance Of The Alliance's "Meet Alaska" and Other Energy Conferences

Part I

by

Dave Harbour

ADN by Governor Sean Parnell (NGP Photo).Sean Parnell, Meet Alaska, Alliance, ACES, Oil Tax Reform, SB 21, referendum, gas pipeline, AGIA, state ownership, Photo by Dave Harbour  

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.

We have 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 Corp.) and state agencies responsible for royalties and taxes.

See Parnell's prepared speech here.

Alaska and Canada are fortunate to host a number of northern energy/mineral natural resource conferences throughout the year.

These events bring government, industry, the media and public together providing updated information and technology advances along with networking opportunity.

In Alaska, the major natural resource conferences include the Alaska Support Industry Alliance's annual Meet Alaska conference; Resource Development Council for Alaska's annual Alaska Resources Conference; the Alaska Miners Association annual conference; and, the annual Alaska Oil & Gas Congress, among others.

We have seen major natural resource announcements flow from many of these meetings and last week's Meet Alaska gathering was no exception.

By now the public is pretty well aware of Governor Sean Parnell's announcement at Meet Alaska last Friday, that the state would seek equity participation in a pipeline/LNG project, that an earlier agreement with TransCanada would be discontinued and that all the major parties have aligned their interests.

While we joined most in the room — responding enthusiastically to the Governor's announcement and initiative — astute observers of gas pipeline politics over the years know that he and the Legislature face a number of remaining hurdles.  

  • The details of 'major party alignment' can only be reviewed and digested after an actual document is agreed to and made public.
  • The alignment of parties is surely contingent on Alaska not repealing the tax reform act its Legislature passed last year.   (See Stoel Rives, LLC bill analysis.)
  • One would further expect alignment of interests among the major parties to depend on the structure of any new natural gas tax statute that might be created.
  • For over a decade the major, potential gasline investors have reasonably reminded the public and public officials that fiscal certainty guarantees must be in place before a multi billion dollar gasline project can be sanctioned and financed.
  • Will the state provide cash equity from its savings accounts, when those accounts even now cannot satisfy the unfunded liability of state pensions plus projected state spending/income deficits over the next few years?  Or, will the state provide equity financing by selling revenue bonds (i.e. not putting the full faith and credit of the state on the line, requiring a higher interest payment), or via a voter approved general obligation bond, with a lower interest payment at the cost of the state's full faith and credit pledge?
  • To know a project is real, observers generally expect some verification from buyers that a market exists –particularly with the Asian markets being wooed by multiple LNG projects from Australia, Russia, Indonesia, the Lower 48 and Canada.  While market demand will be better known following a formal 'Open Season' process, when state financing is involved citizens might expect more in the way of affirmation that markets exist that fit the volumes and timeframes of this particular project.
  • Do pipeline planners count on a certain amount of demand from in-state markets?  Will utilities begin to plan for 'take or pay' agreements that obligate pipeline capacity?  How will this affect existing relationships between Cook inlet gas sellers and utility gas buyers?
  • Has any party petitioned the Alaska Oil & Gas Conservation Commission for its projection of North Slope gas volumes that will be available at the projected time of an LNG/pipeline project completion?  Under Sec. 31.05.030 the AOGCC regulates "for conservation", "Environmental Conservation", and "for public health and safety purposes": "the quality and rate of the production of oil and gas from a well or property."  

We are delighted to see the forward movement provided under Parnell's leadership with support from a majority of legislators.  With Alaska's potential for equity investment in the project, however, we also know that such challenges as those noted above must be anticipated and resolved on the way to successfully monetizing Alaska North Slope Gas.

Tomorrow, we look forward to bringing readers our take on other Meet Alaska presentations — and event photos — from last Friday!