The Valdez Star - Serving Prince William Sound and Copper River Basin

 
 

By LEE REVIS
Editor 

Special session on natural gas development in full swing

What project means to Valdez will be determined far in the future

 

They say it takes money to make money and Alaska lawmakers are tasked with deciding if the state will be willing to part with millions of dollars in a quest to make billions in a project that is far from certain.

The special legislative session called by Gov. Bill Walker gaveled in Saturday to debate whether or not Alaska should buy out the contract the state signed with TransCanada Corp. during the Palin era.

The Walker administration has been stymied in its efforts to develop the state's natural gas reserves on the North Slope partly because of competing projects that have been written into law for the past two decades.

The Walker administration has been developing strategies to meld Alaska's existing contracts and legislation to get an actual project started.

Current development plans by the state's main leaseholders on the North Slope call for a pipeline to run to Nikiski.

Valdez, which fought for decades for the right to become a home port for natural gas export - at a time when Walker was the city's attorney and legal council to the Alaska Gasline Port Authority - have largely fallen by the wayside. Valdez now pins its hopes on a possible spur line from the main gas pipeline to supply natural gas to the area, which would theoretically reduce high energy costs.

The current contract with TransCanada allows the state to buy out the company's interest in developing the state's natural gas. TransCanada was originally contracted to hold the state's interest in a gas pipeline and gas treatment plant. If the state buy's out TransCanada's interest, it will be liable to reimburse the company for its costs to date plus interest of 7.1 percent.

The current projected cost to buy out TransCanada's interest and shouldering the state's increased roll in development is $158 million. Of that amount, $68 million would go to TransCanada. However, the proposal would also increase the state's development costs, estimated to be $7 to $8 billion.

Deepa Poduval, a consultant with Black and Veatch, which is working with the administration, told lawmakers and state administrators that a buyout could mean an additional $400 million to state coffers per year during the lifetime of a gas pipeline, and additional savings could be realized with less expensive financing options available to the state.

The Associated Press reports that during a 2014 legislative debate surrounding the pipeline project, TransCanada's involvement was cast as a way for the state to not have to bear as much in upfront costs. It also gave the state and TransCanada a way out of a prior, failed gas line arrangement.

Walker dropped a proposed reserve tax on natural gas that was on the original agenda for the special session.

"The commitment Governor Walker received from ConocoPhillips and BP means AKLNG will progress, but should either company decide to pull out of the project, the gas will still be made available for a project," the administration said Friday when it announced it was pulling the reserve tax off the table for the special session. "Having the Prudhoe Bay and Point Thomson gas commitment will significantly enhance the ability to finance and build an Alaska liquefied natural gas project."

The Walker administration said Saturday that natural gas is Alaska's ticket out of crippling deficits caused by the state's reliance on crude oil and its depressed prices.

Source: Governor's office

A copy of a letter from BP to Gov. Walker, committing natural gas resources for development.

"As our State faces a $3.5 billion budget deficit, building a gasline is our number one get-well card," the administration said in a prepared statement Saturday. "By replacing TransCanada with the Alaska Gasline Development Corporation as the holder of our equity interest in the gas treatment plant and pipeline, we will ensure greater State control of the project components and provide the State with lower transportation costs over the life of Alaska LNG."

JUMPLINE: NATURAL GAS: Walker hopes to buy out TransCanada contract

BREAKOUTS:

The Walker administration has been stymied in its efforts to develop the state's natural gas reserves on the North Slope partly because of competing projects that have been written into law for the past two decades.

 

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