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AGDC staff nervous Walker will slash pipeline project

  • Author: Alex DeMarban
  • Updated: July 7, 2016
  • Published November 25, 2014

Gov.-elect Bill Walker on Monday began the thorny task of meeting with officials from the Alaska Gasline Development Corp., an entity he targeted during his campaign as ripe for cuts, with its high salaries and the state's dueling gas pipeline projects.

Employees at the agency are "a bit nervous" but hopeful that as Walker familiarizes himself with the agency he'll understand why it's important to advance two gas line projects simultaneously, said Kathy Day, communications director for the state agency.

Walker is set to be sworn in as governor on Monday. He has said he'll finish the job on the massive $55 billion Alaska liquefied natural gas pipeline project initiated by his predecessor, Gov. Sean Parnell.

On the other hand, Walker has said he'll halt funding as soon as possible for the Alaska Stand Alone Pipeline, Alaska LNG's smaller $8 billion cousin that Walker has said is redundant and not economic.

Asked on Monday after meeting with AGDC officials if he still plans to stop the project's funding, Walker said he is continuing to dig into the project's details, more of which will become available after he's governor.

It's widely expected that just one of the two pipeline projects will be built. AGDC supporters say the smaller line is, in fact, economic and provides crucial competition that is spurring along the larger project being advanced by a consortium of the state, pipeline builder TransCanada, and oil giants ExxonMobil, ConocoPhillips and BP.

The goal of both projects is unlocking the North Slope's long-trapped reserves of natural gas. That would benefit Alaskans with lower energy costs and provide for overseas sales to diversify the Alaska budget, now facing a $3 billion deficit with oil prices on the decline.

The meeting with AGDC director Dan Fauske and others, initiated by Walker, provided a high-level overview that helped bring him up to speed on the agency and the projects, said Day.

"We're hopeful that once he has the newest information that we're not much of a target, since we're not asking for funding," she said.

The Legislature has appropriated $419 million for the small pipeline project, which will last the corporation through 2016 when a sanctioning decision is scheduled to be made.

Rep. Mike Hawker, R-Anchorage, has played a lead role in advancing the stand-alone pipeline. He said he is concerned Walker will kill the small-pipeline project and jeopardize the larger Alaska LNG project.

Hawker said Walker can stop or frustrate progress on the small-diameter pipeline by removing and replacing AGDC board members, who serve at the governor's pleasure, or "impounding" funds appropriated by the Legislature.

Hawker criticized Walker Monday, saying he had not fully explored or understood public details of the projects or the state corporation before bashing them during the campaign.

"I'm very worried about the future of the gas line project considering the rhetoric I have heard over the past months," Hawker said. "Saying the (Alaska LNG) project is 'fatally flawed' was horribly premature. The first rule of good governance is to listen to all sides of the issue and get the facts straight."

Hawker said the state needs to maintain work on the small line in case the bigger effort falls through. It's a small-diameter pipeline because of the limitations of the Alaska Gasline Inducement Act contract with TransCanada, signed in 2009. That contract was terminated by Parnell earlier this year. With that out of the way, the small line can be enlarged to deliver much more gas, enhancing the project's economics.

"It's a project we can guarantee to happen to get energy to communities and resources to Alaskans who need them," Hawker said.

Hawker said the projects are not redundant. Instead, they are complementary, building on the work the other has done. Both call for a roughly 800-mile-long route from the North Slope in the Arctic to a terminus in Southcentral Alaska.

Day said the small-pipeline project is gathering important data that can be sold to other projects, giving it additional value.

Hawker said: "With all respect, our governor has a 30-year history in failed projects."

Hawker was referring to Walker's advocacy of an LNG project since the late 1970s, including his work as project manager for the municipality-led Alaska Gasline Port Authority.

"We have a very successful project on the table, a project that is closer to becoming a reality than ever before," Hawker said, referring to Alaska LNG. "I certainly hope the governor does not turn our success into failure."

Walker said he has been studying the two projects since their inception and has read key documents as they were released, such as the Heads of Agreement publicized early this year that lays out the framework for the Alaska LNG effort.

Asked if he would stop the small line, Walker said he remains very concerned about it. He said he has launched a discussion with AGDC to learn more about the project, a process that will continue after he becomes governor and has access to additional information.

"Today we started a discussion, and I need to look in more detail and they explained once I become governor I'll have access to much more information," he said.

"We need to make sure it makes sense to continue funding two parallel projects," he added.

He said his "fatally flawed" comment about Alaska LNG relates to his concern about the state not having control of the project or the timeline. The current plan says a final decision to build won't be made until 2018. The gas is not expected to begin flowing until at least 2024.

Walker relayed his concerns to AGDC officials and will continue doing so.

"I'll certainly convey to those involved in Alaska LNG -- and I have -- that I'm highly sensitive to the timeline and the potential for some delay of some sort," he said.

Walker said his concerns about the paychecks at AGDC being too high have not changed either. "It does puzzle me that we have salaries over there at the level they're at," he said.

He plans to have those looked at more closely, too.

With AGDC staff uneasy about what Walker will do, Fauske recently met with employees, Day said. She said the project employs some of the most experienced talent in the business.

"Dan said last week his staff is his No. 1 priority," Day said. "He's got the best people here and he's going to fight for them."

The agency's salaries are designed to compete with the oil and gas industry and prevent turnover so a gas line project is completed, she said.

"(Other projects) won't steal a person away without offering very competitive salaries," she said. "We're here to do a job to make projects happen."

Fauske was the state's top-paid employee in 2013, earning a total of $516,000 a year, with $366,000 in salary and the rest in the form of health and pension benefits.

AGDC has seven employees with salaries of $190,000 or more. Day said her salary is $120,000 a year.

Day, who has three decades of experience in public relations, TV and radio reporting, said she closed her public relations firm after 14 years to join the project a few months ago so she could help get a gas line built. She said she believes her salary is on the lower end compared to her counterparts at Exxon, BP and Conoco.

"I'm raising kids here (in Alaska)," she said. "I want to see this happen."