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Exxon crosses the line in linking gas line to oil tax vote

Bill Walker
OPINION: Candidate for governor Bill Walker says Exxon -- with a long history of blocking a gas line -- tries to intimidate Alaskans to vote its way on oil taxes. Pictured: ExxonMobil's facility at Point Thomson on the North Slope. Business Wire

I have respected the effort of those who oppose repealing SB 21. The campaigns for and against Ballot Measure 1 reflect the modern face of direct democracy. However, on July 15, 2014, Steve Butt, head of the Alaska LNG project for Exxon, stated publicly that there was a direct link between SB 21 and the LNG project studies it is conducting with the state. Then, on July 28, the Vote No representative at an Anchorage debate stated, “If SB 21 is repealed, the gas line is toast.”

That crossed the line. It is one thing to lobby for beneficial tax treatment on oil, it is quite another for Exxon to threaten that the fate of a gas line is linked to lower oil taxes. On the 30-plus years I have worked on gas line development no entity has been more of an impediment to a gas line project than Exxon. Not only has Exxon refused to engage in the process, it has directly blocked efforts to advance it.

Let me be specific.

In the early 1980s, Govs. Bill Egan and Wally Hickel, together with the CSX Corp., created the Yukon Pacific Corp. to move North Slope gas to tidewater. While YPC successfully obtained all senior permits including an export license and ready Asian buyers, Exxon would not sell them gas and after almost two decades YPC folded.

In 1999 I helped form the Alaska Gasline Port Authority. AGPA obtained an IRS ruling granting federal tax exempt status for a gas line project done in conjunction with AGPA. At the board’s direction, I presented this opportunity to Exxon. When it was rejected, I then met with the Bechtel Corp. board and persuaded Bechtel to undertake the engineering and cost estimate work for the All Alaska gasline/LNG project. Bechtel spent millions supporting the effort at no charge for about three years. All work done by Bechtel assumed that there would be no shared use of the existing infrastructure on the North Slope.

Later, international energy firm, Wood Mackenzie, estimated revenue to Alaska from an LNG project could be $419 billion over just the first 30 years of the project's life. Moreover, under all reasonable Asian LNG price and Alaska tax scenarios it was highly profitable for the North Slope producers.

In April of 2005, I delivered, on behalf of the California utility giant Sempra Energy, an offer to purchase enough gas from Exxon and others to move forward with a project. That offer included a guaranteed wellhead price that transferred project risk onto other creditworthy parties. That offer was also rejected by Exxon with no engagement. 

In 2008, AGPA helped one of their consortium members, Mitsubishi Corp., one of the largest LNG buyers in Japan, submit an offer to purchase gas from Exxon at the wellhead on the North Slope. Mitsubishi offered to build the project if Exxon would not. After we presented that proposal at the Exxon headquarters in Houston, the Mitsubishi representatives notified me that they had been visited by Exxon representatives in their Houston office following our meeting, and Mitsubishi decided to drop its Alaska effort. Shortly thereafter, Mitsubishi announced its intention to purchase LNG from one of Exxon’s Australia projects. We never heard back from Exxon.

Under the Alaska Gasline Inducement Act, Exxon joined with TransCanada and was required to hold a solicitation of interest from potential gas pipeline shippers in 2012. I spent a year meeting with the world’s largest buyers of LNG in Japan, Korea, Taiwan and Indonesia. In September of 2012, we submitted to Exxon/TransCanada a written nomination from six large Asian LNG buyers for more than 100 percent of the volume needed for a large diameter gas line to tidewater. I later learned a Japanese consortium also submitted nominations for close to 100 percent of large project volumes. I was elated with the 200 percent Asia market response. We never received any response from either TransCanada or Exxon regarding the 200 percent market nominations under AGIA.

It is untenable that Exxon is now making threatening statements that it will not undertake the next round of LNG studies, which are unrelated to taxes on oil, if it does not get its way on Ballot Measure 1. Exxon has been the single largest impediment to an Alaska gas pipeline that would deliver the revenues to help balance our budget and provide cheap energy for Alaskans. 

We fought for statehood to free ourselves of outside corporate dominance, and it is time we make it clear to Exxon that we will develop our resources, on our schedule, in the manner that is in our best interests. I have to ask, where is the outrage from our governor at this bold attempt by Exxon to blackmail Alaska and warehouse our valuable gas resources in the ground for lower oil taxes?

Bill Walker is an independent candidate for governor. He's a lifelong Alaskan and owns a law firm in Anchorage that focuses on oil and gas law.

The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com.