JUNEAU — It's something of an annual ritual for the state officials at the head of Alaska's 800-mile gas pipeline project to appear before lawmakers in Juneau and ask them to leave their budget alone.
But this year's stakes seem as high as ever. The project's boosters, like Gov. Bill Walker, cite the agreement to advance the liquefied natural gas export project that the Chinese and American presidents signed in November in Beijing.
Critics point out that the deal contains no binding commitments, and they say that the state, with its $2.5 billion deficit, can't afford to spend cash on a project that has no guarantee of being built.
The state-owned Alaska Gasline Development Corp. has about $70 million left in its accounts. It's not asking lawmakers for more money this year, but it does want them to give the corporation more flexibility in how that cash is spent. And the corporation's president, Keith Meyer, says he's trying to solicit investments from financial institutions that can be used to advance the LNG project once his current budget runs out.
Meyer wants a final decision on whether to build the project to come in the first half of next year, with construction to start before 2020.
In a 35-minute interview last week between committee hearings in Juneau, Meyer walked a reporter through the project's recent history and its next steps, and described some of the tensions that come when a public entity tries to execute a major business deal.
Meyer, who's paid $550,000 a year, has been on the job nearly two years. In 2017, on the state's behalf, he traveled to Asia a half-dozen times to meet with potential customers and foreign dignitaries, with total annual travel expenses of $140,000, according to state records.
Before moving to Alaska, Meyer spent nearly 15 years in Texas working on the LNG industry.
ADN: If you were to point to two or three things that have happened in the past year that you're excited about, what would they be?
KM: Well, I think one would be the signing of our joint development agreement in front of President Trump and (Chinese) President Xi (Jinping).
The Federal Energy Regulatory Commission (permit) filing was one last year as well. We filed, on April 17, 36,000 pages. We've answered 801 questions; we now top just about 100,000 pages.
ADN: When you look ahead to the next year or two, what's going to keep you up at night?
KM: We step into 2018 with a lot of focus on our dance partners — China, Korea, Japan and Vietnam. And so now what we're doing is putting together the paperwork for the large purchase agreements; we've got debt agreements that we're going to have to put together.
We've got equity investment agreements. We want to set up a structure that allows third parties to invest in the project, including Alaska citizens, municipalities and the Native corporations. So all that has to come together. Meanwhile, we've got this FERC process that's going to take all year, into the front part of 2019.
ADN: The way this project is currently envisioned, is Alaska — whether that's residents or state retirees or people who have a stake in the Permanent Fund — going to have to take on debt?
KM: We don't envision that. We're looking at what we call non-recourse debt, which means the lenders would have to look to the project company, which would be a new company created just to do the project. That company will hold the assets of the project — so, the pipeline, the LNG plant. But it's not going to be guaranteed by the state.
ADN: So what does the guarantee come from?
KM: Well, it really comes from the sanctity of the commercial contracts.
ADN: So that's, like, China, or Japanese or Korean utilities promising to buy gas?
KM: Right. They agree to make regular payments. These would be long-term contracts, like 20-year contracts, where they will agree to pay a certain amount every month.
ADN: Is there any scenario you're envisioning in which the Permanent Fund or the state retirement funds would be either directly investing in the project, or put up as collateral?
KM: Only if they wanted to be an investor. They're certainly going to be welcome. We are not expecting — I don't want to say we're not expecting them, because I'd love to have them. But none of our plans focus on them being an investor.
ADN: So much of the discussion about the pipeline used to be about the oil companies and their participation, but that was when they were direct partners in the project. They're not anymore, but are they prepared to sell their gas into a pipeline if someone else builds it? Is that still pretty far from being worked out?
KM: There's work to do — I wouldn't say a lot. I would say we're getting very close on the gas supply agreements, which are the main agreements. Each of them has pledged, at least orally, their support for the project. But we've got some paperwork to do.
ADN: How far in the future is a signed agreement?
KM: I don't want to give a date. But we're hoping to wrap that up relatively soon.
ADN: Was that connected with the governor's recent meetings with oil company executives?
KM: That was part of a kickoff to those discussions, and was quite well-received by all of them.
ADN: Has AGDC's level of access and transparency to the public and to the Legislature been sufficient so far? Or is that something you acknowledge you guys could be working on and maybe doing better?
KM: It's something that we are working on and continue to do better, I hope. We do issue a legislative report twice a month. We've never missed one. We have these (legislative) hearings. We're trying to be as transparent as we can without impinging on our commercial sensitivity.
ADN: Tell me more about that sensitivity.
KM: It's a very competitive industry. There are lots of projects, and lots of projects in Texas and Louisiana alone, much less the rest of the world. Russia's out there trying to compete. And everybody wants to find a way to knock down their competitor. And so for us, we say, "Look, Alaska's for this project, we've got lots of support." When they read in the paper that there's maybe a legislator or somebody that says, "Oh no, I don't know about this project," or, "We may pull funding," that can be detrimental to our efforts.
Because the buyers here are large utility companies that have millions of customers. These are long-term decisions (where) the product doesn't show up for five years. Everybody's got to be really, really sure that when they commit to this that this project is going to happen.
If we look at Canadian projects, they basically died because of the local opposition. Nobody wants to sign up for a project that ends up getting opposed and canceled.
ADN: So, it's probably been a new experience for you working for a public corporation, where there's a balance between expressing confidence and stability while also respecting the public's expectation of transparency. Is it fair to say you don't have to deal with that tension in the private sector?
KM: That's very true. It is a different aspect with this project. But a healthy level of inquiry, I think, is good for a project. We would have that kind of inquiry with a board or shareholders in a publicly traded corporation.
ADN: It just wouldn't all be made public at the end of the board meeting.
KM: That's the thing. The difference is it's on TV. And right now the world is watching this project. The big buyers and bankers in China, Japan, Korea, they're aware of this project.
ADN: Do you think they're tuning into Senate Finance Committee hearings?
KM: I know they are. And I know they occasionally tune into the board meetings, which are also public. It's a big purchase; they've got a lot riding on this. Reputational risk, as well, which is a big thing in a lot of those countries.
ADN: How skeptical should Alaskans be of this entire enterprise, understanding that on the one hand there's tremendous upside of employment, of investment in Alaska, of natural gas for Alaskans — and on the other, the state doesn't have money that it can be affording to throw to something that is not a good investment?
KM: The skepticism to me is justified, because of past attempts. However there should be a lot of excitement on the progress that we've made, because we've never really had the state out there leading the development. We've never had the president of the United States, the president of China, saying, "We want this." We've never had these large buyers this engaged.
ADN: Have you been back to China since the deal was signed?
KM: Oh yeah. We've been back and we're going next week.
We have now set up different work teams focused on the various aspects of the project. We've got a technical team, a financing team, a distribution team. We've got other discussions in Japan, Korea and Vietnam.
ADN: Where do you stay?
KM: In Beijing, there's a hotel that's within a walk to (Chinese oil company) Sinopec, so that's sort of become our camping grounds.
ADN: Is there special stuff that you have to do? Does the government mind you, and do you have to do special things with your cellphone so you're not surveilled?
KM: Whether we have to or not, I don't know. We do anyway. I have a special traveler phone. They give me a special laptop that gets cleansed by our IT folks when I come back.
ADN: Does President Xi have, like, a specific gas line point person in China that you deal with?
KM: There's certain people in the big companies that we deal with and there are certain people that have been assigned to our project. But there's not, I would say, a point person. However, we have been in the press quite a bit in China — we've been on TV. The governor's been on about seven times. And they're all quite friendly — no offense, again, but it's a little bit different over there.
This interview has been edited and condensed for clarity.