We appreciate the lucid and studied comments of our readers, including this one reflecting our last Friday’s editorial:
Author: Donald M. Bullock Jr.
Very well written Mr. Harbour. It is painful watching the Alaska Gasline Development Corporation (AGDC) going down the same unproductive path as the dead Alaska Gasoline Port Authority (AGPA). At this time, AGDC has no gas to sell. The State of Alaska also has no gas to sell until those lessees that have the exclusive right to produce the gas actually produce and convey gas to the State as royalty and production tax. AGDC has described the market price the gas must hit with a fixed $1 per barrel equivalent for gas. Any cost overruns will reduce that dollar with the leaseholders taking the hit. Seems a better approach would be to assure a gas supply before selling an interest in an empty project.
Should the State ever have gas to sell, the worst thing would be to have the State contractually commit an American valuable natural resource to any foreign nation, particularly a nation such as China with a track record of very poor international business practices. Any default by China or a Chinese entity would be hell to enforce and would lock up the resource indefinitely.
The Walker administration is spending money for a no gas project that the State can’t afford and is approaching it backwards. A better approach would be to engage the leaseholders in potential gas sales that are subject to reasonable transportation costs (pipeline, LNG plant, and LNG vessel transportation). I fear the administration will repeat another misstep of AGPA, that is to sue the leaseholders in an effort to force them to produce. The State may end up with the gas leases returned to the State, with the lessees continuing to hold oil and gas leases that are producing oil consistent with lease terms. The companies can be expected to produce only if production is economically viable. The “commitment” letters waved by the governor commit to no more than commercially economic production.
Engaging a country like China in the development of an empty project is the least of concerns with this project.