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Valdez LNG summit ends in the Land of Make Believe

Andrew Halcro

All that was missing was the clang, clang, clang of the Neighborhood Trolley on Sunday to transport Alaska’s natural gas pipeline dreams to the Land of Make Believe.

On the final day of an LNG summit in Valdez, proponents dusted off old and tired arguments to once again push the state into taking a harder line on Alaska’s oil and gas industry as it relates to building a natural gas pipeline.

Craig Richards, an attorney for the Gasline Port Authority, told a crowd on Sunday that the state is taking the wrong approach in working towards a gas pipeline. The problem is his legal arguments with regards to what state government can do, are just as Governor Sean Parnell said, “outdated.”

Let’s be honest, the only tools the state has when it comes to the North Slope producers are taxes and permitting. How much longer do we have to entertain such lofty and misleading rhetoric from Valdez LNG supporters that we have any other option besides waiting until the legal leaseholders deem the project economical?

According to KTUU news, Richards said the oil and gas industry are only tenants up on the North Slope, and as the land owner the state should be exert its ownership to force the pipeline into being. And while Richards is right that the state is the land owner, over four decades ago Alaska contractually assigned the right to develop the oil and gas resources to their tenants.

Richards' speech was so filled with misinformation and skewed facts it’s hard to know where to begin.

First, the state has not been waiting 35 years for the oil and gas industry to build a natural gas pipeline. Over the last three decades, that same gas has been used to extract billions of barrels of oil, which is far more valuable. In legislative testimony after testimony, the Alaska Oil and Gas Conservation Commission has testified that if the producers had constructed a gas pipeline in the 1980’s, the state would be broke from the loss of oil revenues.

Second, his landlord and tenant analogy is extremely tortured. Richards compared the situation with a landlord who owns a three story house and rents out the first two floors, then must ask permission from the tenants to rent out the third floor. That is just gibberish. Closer to the truth, it would be as if a landlord owned a two story house, leased it to the tenants and then came back and demanded they build another story, regardless of the economics, so the landlord could enjoy the revenue risk free.

While Richards makes it sound so easy by simply asserting state control and negotiating with the marketplace for gas commitments, it smacks of AGIA that was supposed to do exactly the same thing. AGIA, which was strongly supported by LNG advocates in the beginning, was advertised as finally giving the state control over our resources. So, what the hell happened?

AGIA, like the Gasline Port Authority is running head first into the fiscal and legal realities of what the state can and cannot do. The state can negotiate with as many utilities or countries as they like, but until they negotiate terms with the oil and gas industry, including a stable tax regime and fiscal certainty, it’s just another ride on the Neighborhood Trolley

Clang, clang, clang.

Andrew Halcro is the publisher of AndrewHalcro.com, a blog devoted to Alaska issues and politics, where this commentary first appeared. He is president of Halcro Strategies and Avis/Alaska Rent-A-Car, his family business. Halcro served in the Alaska House of Representatives from 1999 to 2003, and he ran for governor in 2006 as an Independent.

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