From Ak-Headlamp this morning:

AGDC president Keith Meyer challenged the idea that Alaska LNG isn’t the best path forward for the state in an Alaska Dispatch News op-ed. According to Meyer, “Everyone wants to monetize their gas, but we want to open the project to broader market participation. AGDC welcomes producer investment but also recognizes that investing in the project assets as an equity owner may not generate the return they need. Setting up a transparent tolling structure allows the project to provide access to unbundled services, typical of other transportation pipelines, maximizing upstream revenues.”

Our comment:

The deceptive rationale above cannot overcome the fact that in a low price environment gas customers are demanding and receiving low cost LNG.  Someday, when prices begin to rise, more exploration and production are likely to keep gas prices moderate.  

Accordingly, the many world LNG projects that have gas sources at tidewater, in more moderate climates, closer to markets, with lower logistical and labor costs have the odds to trump a government-owned, bureaucrat controlled pipeline/LNG project in Alaska.  

The bitter icing on that cake is that while Alaska’s governor didn’t want to give a constitutional guarantee of fiscal certainty to Ak-LNG producer “partners”, neither do potential gas purchasers or sellers have certainty that governmental fees and mismanagement of one kind or another will not be risks accompanying any long-term gas sales arrangement.  

A politically controlled gas project*, such as the one which AGDC president Keith Meyer refers has a huge liability Alaska’s citizens will surely consider:  a publicly owned project’s CITIZENS will absorb the myriad risks of non-completion, price volatility, ship-or-pay liability, broken gas sales contracts, force majeure,  etc.  

We, therefore, believe that should the current administration continue its effort to socialize** the Alaska oil and gas industry citizens will someday look back and lament, “if we had just waited for the private companies to build the project when they believed the time was right, our state would have enjoyed hassle-free royalties and taxes without the risk associated with government ownership.”

*Note: is there any dispute of the fact that this administration has exercised political influence and control over the “Independent” Alaska Gasline Development Authority (AEDC), the “Independent” Alaska Industrial Development and Export Authority (AIDEA), TransCanada, oil and gas tax credit payments, the Interior Energy Project (IEP) and Prudhoe Bay development plans?  We rest our case.

**Some supporting government control over traditionally entrepreneurial free enterprises will argue that: 1) Alaska is an “Owner State”, by virtue of the constitutional reservation of subsurface resources to public ownership; and 2) that Alaska is a “sovereign” state.  We would humbly observe that just because the founders (i.e. wisely or mistakenly) reserved subsurface resources does not mean that those resources should be developed by ventures owned and influenced by government, rather than simply leased out at little risk to citizens.  Secondly, Alaska is not “sovereign” in practice.  The federal government owns most of the state and exercises restrictive, colonial, regulatory control over all of the state.  Accordingly, potential gas purchasers, upon study, will find that while Norway calls itself “sovereign” and Alaska calls itself “sovereign”, Alaska is not Norway.  Alaska is a state.  Norway is a country.  Alaska’s projects — even those on state and private lands — as the Pebble Gold project demonstrated, can be thwarted by environmental/federal governmental strategy.    When Norway makes a “sovereign” decision, it sticks.  We urge citizens to be discriminating readers and listeners for the state’s future hangs in the balance and even weighs heavily on the future of the United States as well.  -dh

$65 Billion Alaska LNG Project Crashes and Burns
Alaska’s proposed $45-$65 billion liquefied natural gas (LNG) project that was supposed to help the state refill its coffers from decades of dwindling crude oil production…


DAVE HARBOUR KNOWS:  The expert, commenting on the gasline is not giving it good odds.
PAT RACE KNOWS: The hippie cultural phenom of Juneau predicts the gasline is dead, so it must be so.
JOHN HENDRIX GETS OUT THE DEFIBRILLATOR PADDLES: The newest cabinet member of the Walker Administration gave it his best at Resource Development Council. The video here.

KEITH MEYER SHOT ON GOAL: The new head of the Alaska Gasline Development Corp. promises prosperity for Alaska with a gasline.

OUR TAKE — IT’S STILL OIL IN ALASKA: At the end of the day, oil fuels Alaska’s public employees and the state’s economy. All credible experts point to the fact that gas from Alaska is just not competitive for the foreseeable future.

Alaska should work on oil, not gas. Case in point, Armstrong Energy  just found one of the largest oil discoveries in North Slope history, enough to put 120,000 barrels into the Trans Alaska Pipeline every year for the next, say, 25 years. That will put $1.2 billion per year into our state budget. Then there’s Liberty, Pikka Unit-Nanushuk, Oooguruk and Nikaichuq — all oil plays that resulted from good tax policy.  Oil that brings taxes and royalties.

But Gov. Bill Walker has waved the white flag on oil.