Gov. Sean Parnell: Alaska must become partner in LNG project

By GOV. SEAN PARNELLJanuary 11, 2014 

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.

Over the years, a great deal of time has been spent dealing not only with the economics of gas but also how to merge private and public ownership interests.

Questions included an administration's authority to negotiate fiscal terms, levels of legislative input and public scrutiny and what sort of "must haves" Alaskans should require.

In 2011, I laid out a new plan for a gas line to supply gas to Alaskans and then to markets beyond. We challenged North Slope producers and TransCanada to back one project, the Alaska LNG project. They met our benchmark.

Then my administration fought for Alaskans' interests through the Alaska Supreme Court and resolved the Point Thomson litigation -- something that had eluded the state for years.

That settlement included incremental, verifiable performance. In other words, "You take a step, we take a step; you make a commitment, we make a commitment," and along the way, we verify commitments and progress. For the state, that means doing so through public legislative hearings at critical junctures.

By 2012, I called on the producers and TransCanada to harden their numbers and identify a single pipeline project and work schedule. They met that benchmark, and have now identified an Alaska LNG project with gas off-takes for Alaskans -- a pipeline to Nikiski.

With AGDC's board voting to create a subsidiary to participate in the commercial process, the Alaska LNG project has all the necessary parties.

Now, what role should the state play going forward?

I intend for Alaska to control our own destiny and become a partner in the Alaska LNG project.

Ownership or participation ensures the state will receive a share of profits over the entirety of the project. It also ensures that we either pay ourselves for project services or, at the very least, negotiate the lowest possible costs.

With the state as a partner, Alaskans stand to gain more.

Above all, the path forward will be on Alaska's terms and in Alaskans' interests.

• We amicably terminated the license under the Alaska Gasline Inducement Act (AGIA), and we have a more traditional, commercial arrangement on Alaskans' terms.

• Next, we will seek legislative approval for state entities to align with the producers and TransCanada in a traditional commercial gas line arrangement that protects Alaskans' interests.

• Shortly, we expect a commercial agreement with a transparent set of terms and road map. Known as a Heads of Agreement, the document is anticipated to be signed by Exxon, BP, ConocoPhillips, TransCanada, AGDC and by state commissioners of Revenue and Natural Resources. The Heads of Agreement will be subject to public review by the Legislature this session.

• We will submit legislation asking lawmakers to switch from a variable net tax to a flat gross tax for North Slope gas, and enable the departments of Revenue and Natural Resources to manage state gas revenues together.

• Finally, I will ask the Legislature to review changes made to AGDC in House Bill 4 and support revisions needed to carry the state's interests.

Unlike previous gas line efforts, the public and Legislature will have the basic ingredients of a deal in front of them as they consider legislation.

Alaskans have seen past gas project efforts fail for various reasons. This time is different. AGDC is our "ace in the hole," meaning AGDC will stay on track with its smaller volume Alaska Stand Alone Pipeline (ASAP) Project.

We have parties aligned who can move a project forward, and we have protection of Alaskans' interests through steps that can be publicly scrutinized.

We're moving forward on the promise of getting Alaska's gas to Alaskans first, and then to markets beyond.

Sean Parnell has served as Alaska's governor since 2009.


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