Energy

After financing competing LNG projects, could the U.S. also help Alaska's?

JUNEAU — While Alaska struggles to put together a plan to export liquefied natural gas to Asian markets, a federal agency is already subsidizing competing LNG projects in two foreign countries targeting the same potential buyers. And those projects are likely to be in production, perhaps with long-term contracts, years before Alaska would be able to get its gas to Asian customers — if Alaska's project is built.

Helping out the two projects, one in Australia and one in Papua New Guinea, is the federal Export-Import Bank. That bank is part of a national economic development effort that began in 1945 to help American companies do business overseas, providing direct loans, loan guarantees, and other financial help to take some risk out of foreign operations.

But the bank has recently become the focus of the internal Republican Party divide, with tea party Republicans splitting with traditional Chamber of Commerce Republicans.

The Ex-Im Bank is no longer in operation. Its authority to do business lapsed in August when Congress failed to reauthorize it. Its existing loans, such as for the Australia and Papua New Guinea LNG projects, remain in force, but applications for new financing are suspended.

Alaska's all-Republican delegation was divided on supporting the bank measure, with Sen. Dan Sullivan voting against, saying it puts taxpayers at risk should creditors fail and involves the federal government picking winners and losers in the business world.

"Sen. Sullivan is concerned about risking the taxes of hard-working Americans to continue to fund a federal agency whose loans in terms of overall volume only benefit a few American companies," said Mike Anderson, Sullivan's spokesman.

But among those companies are some based elsewhere which employ Alaskans, or can in the future, said Karina Petersen, press secretary for Sen. Lisa Murkowski.

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"Alaska companies have utilized the bank, but have not taken advantage of Export-Import to the extent that other states have," she said.

One important Alaska project that might be able to benefit from help from the Export-Import Bank, she said, is Alaska's own LNG project, called Alaska LNG, which would export the state's vast North Slope natural gas reserves to Asia.

Such huge projects often need governmental financial support, even when they're led by private industry.

At one time Alaska had federal loan guarantees of $18 billion to back a gas pipeline project, but those are no longer available, said Miles Baker, external affairs manager for the Alaska Gasline Development Corp., which is managing the state's share of the Alaska LNG project.

"Those were specific to a project that was going to be providing energy to the Lower 48," Baker said. The guarantees expired without being used, and now there's no plan for the line to feed the U.S. market.

Now, said former federal gas line coordinator Larry Persily, there's no federal assistance program for Alaska LNG other than the Export-Import Bank -- if it is available.

"In the U.S. there's only the one, and that's only if Congress reauthorizes it," he said.

But while the Export-Import Bank might help back the Alaska gas project, or at least a share of it for some of its participants, it can't do the whole thing.

"They just don't do loans that big, or guarantee loans that big," Persily said.

The assistance for the Australian and Papua New Guinea projects was $3 billion and $2.9 billion, respectively, mostly in the form of direct loans, and each project is smaller than Alaska LNG.

Even those smaller projects have needed multiple financing sources, Persily said.

"I've seen more than two dozen banks and other lenders all take little slices of a project," he said.

But that governmental assistance, in the form of low-interest loans or loan guarantees, can help a project be financially viable.

"The more guarantees, the more assurances you have for lenders, the better rates you are going to get," Persily said.

The state Department of Revenue has been studying financing options for the Alaska LNG project, and has hired consultants to help.

If the federal Export-Import Bank is available to assist the project, it's but one option for Alaska, said Jerry Burnett, deputy revenue commissioner.

"It's not only the U.S. Export-Import Bank, it's the Japanese Development Bank and other Asian banks that might be interested in this project because their customers will be buying the gas," Burnett said.

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The financing of the Australian LNG project, called APLNG, and the Papua New Guinea project, called PNGLNG, shows the complicated financing needed to make such projects happen.

For APLNG, both the U.S. bank and the Export-Import Bank of China helped finance the project. Among APLNG's primary customers and financiers is Sinopec, the big Chinese oil and gas company that has in the past expressed interest in Alaska natural gas.

APLNG's primary U.S. backer is ConocoPhillips and the operator at PNGLNG is ExxonMobil, according to filings with the U.S. Security and Exchange Commission and company publications. Both are also Alaska's partners in Alaska LNG.

The Export-Import Bank cites those American companies' involvement with the projects as its reason for assisting them.

Also working on the PNGLNG project is Anchorage-based Lynden Air Cargo, which has a Papua New Guinea-based subsidiary, said President Rick Zerkel. The company also serves Alaska's North Slope.

Zerkel said Lynden Air Cargo doesn't directly use the Export-Import Bank, but praised its ability to help other exporters, and said that was good for the country.

"We believe the reauthorization will have a positive impact on the economy," he said.

While reauthorization of the U.S. Export-Import Bank was voted down in the Senate during the summer, with Sullivan voting against the bank and Murkowski voting for it, it has since been resurrected in the U.S. House of Representatives.

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There, Congressman Don Young voted for it last month because of its ability to create U.S. jobs, said spokesman Matt Shuckerow. He added that the bank covers its costs through its fees, and returns excess funds to the U.S. treasury.

The reauthorization is included in the transportation bill now in conference committee, to which Murkowski has been named as a member.

Sullivan's spokesman Anderson said that even with possible Alaska use of the Export-Import Bank, the senator didn't support reauthorization.

"If you are looking for someone to defend the Ex-Im program, I would advise you to look elsewhere," Anderson said.

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