The state agency involved with two gas line megaprojects began taking steps to "upsize" one of those projects on Thursday, following proclamations by Gov. Bill Walker that the state will beef up the smaller line in case the larger, industry-backed effort fails.
The new board of the Alaska Gasline Development Corp. also requested that the governor lift his ban on new spending, placed on the smaller line and other state megaprojects in late December because the oil-dependent treasury is facing a $3.5 billion deficit.
That ban will be removed for the gas line project, said Grace Jang, the governor's press secretary. "He has no problem with it," she said.
Walker wrote in an editorial last month that he supports the larger project, known as Alaska LNG, but said Alaska needs a viable option in case that project falters. Calling the smaller, state-run effort uneconomic -- it's called the Alaska Stand Alone Pipeline -- Walker said the state will boost its volume to increase its revenue potential.
That put him in conflict with top lawmakers, who fear that the industrial sponsors of the big line -- especially ExxonMobil, ConocoPhillips and BP -- will back off the $45 billion to 65 billion Alaska LNG project because they view the smaller-line upgrade as competition. The state, including AGDC, is also a partner in that project with TransCanada pipeline builders.
Officials with ExxonMobil, the lead in the Alaska LNG project, did not immediately return calls seeking input for this article on Thursday. An Exxon spokeswoman said last month that the governor's plans are in "direct competition" with the Alaska LNG project and that Exxon is assessing future plans.
On Thursday, the seven-member AGDC board -- with five new members appointed by or working for Walker -- unanimously asked staff to begin working on two "upsizing" scenarios for the smaller pipeline.
The board wants staff to produce a work plan estimating how much money and time will be needed to acquire detailed cost estimates for stand-alone gas lines that carry 1.4 billion cubic feet and 2.4 billion cubic feet.
That's less than the 3 billion to 3.5 billion cubic feet the Alaska LNG project might move. But it's three to five times more gas than the smaller pipeline is currently designed to ship.
Moving more gas will have a ripple effect on other aspects of the project. Thicker, stronger steel will be required for the line, the gas treatment plant will need expansion and more facilities will be required to compress the additional gas.
The agency has $200 million in reserves and is not asking for additional resources, officials said.
"We're not asking the Legislature for dime one. We have the money," said Dave Cruz, an AGDC board member and owner of Cruz Construction, an oil field service provider.
Discussions about the state's dire fiscal situation -- and decades of failed efforts to commercialize the North Slope's colossal quantities of natural gas -- were front and center in the meeting.
Board members stressed that the expansion shouldn't be seen as competition to the larger project. But they said the state needs to consider alternatives for raising future revenue if the Alaska LNG project does not advance to the next stage. That step, when the partners decide whether to spend billions of dollars in advanced engineering studies, may not be made until late 2017.
"Having options ensures we're in the best position we can be in order to do what's right for Alaskans," said John Burns, AGDC chair.
AGDC officials are scheduled to meet with the House Resources Committee on Friday to discuss a bill introduced by House Speaker Mike Chenault that would stop Walker's pipeline expansion plans.
Cruz said AGDC does not believe that's a good idea.
"It's not a prudent project decision at this time," said Cruz, of the bill. "It's prudent to have options and know everything we can."
Much of the board's discussion centered on whether information will continue to be shared among the two projects in order to keep costs low. Board members pressed AGDC staff to ensure that continues.
AGDC president Dan Fauske, saying he's "not the head of the fan club for the petroleum industry," pointed out that the companies will likely be reluctant to share their data. They spend billions of dollars gathering information, and have said they won't share it if they feel there's competition.
"We will aggressively pursue that but I'm warning the board it will be a bumpy ride," Fauske said.