Alaska legislators concerned about receipt authority for gas line project

The Walker administration is not asking for more state funding to advance the $43 billion Alaska LNG Project, but some legislators are concerned allowing the gas line developers to accept outside money could sign away much of their remaining control over the project.

Included in Gov. Bill Walker's 2019 fiscal year budget proposal is language giving the Alaska Gasline Development Corp. the authority to accept third-party funds from potential Alaska LNG investors. The provision would cover the remaining months of fiscal year 2018, which ends June 30, and fiscal year 2019.

Resources Committee chair Sen. Cathy Giessel, R-Anchorage, said legislators generally like to guard their appropriation authority, which is one of the most fundamental powers they are granted by the state constitution.

"Receipt authority is a lot like giving a blank check," she said.

Giessel, who has monitored AGDC's work as close as anyone in the Legislature, said at this point the Senate Majority still has a lot of questions about what the state-owned corporation would do with the third-party funds — or what it would have to offer to receive them.

The House Finance version of the 2019 operating budget released March 19 capped the receipt authority at $1 billion per year to give AGDC financial headroom to keep working without the freedom to commit to building the whole project without further review by the Legislature.

Giessel said the House concept might not be a bad idea.


She also noted that the Federal Energy Regulatory Commission published a schedule for the Alaska LNG environmental impact statement March 12 that likely would not have the project receive regulatory approval until early 2020 or possibly later.

"We wonder if perhaps, based on the new FERC timeline, if (AGDC) wouldn't have enough money through next year anyway," Giessel said.

The administration had been pushing FERC to have the EIS done by early 2019, but the extra year could slow the need for money to advance the project quickly. AGDC President Keith Meyer has said ideally he would like to start construction in late 2019 or at least be contracting for long-lead time items in preparation for construction by then.

Meyer and Walker said when the state took control of the project from the producers in early 2017 that AGDC would rely on the roughly $100 million it had left from prior gasline appropriations for the foreseeable future.

Corporation leaders expect to have about $43 million left when fiscal 2019 rolls around in July, according to a financial summary from the March 8 AGDC board of directors meeting.

As the proponents of the project, AGDC is responsible for funding work on the EIS and officials said it's unclear if the corporation currently has enough cash available to finish the environmental review because the extent of additional work FERC will require isn't yet known.

Spokesman Jesse Carlstrom said via email that the corporation can continue advancing Alaska LNG on its current pace with no new funds through 2019.

"AGDC is preparing to engage investors. Authority to accept funds from third-party investors will enable AGDC to build Alaska LNG without the necessity of additional state funding," Carlstrom wrote.

Absent sure-fire success on the project there likely won't be additional state funds to support AGDC as long as the state is struggling through continued budget deficits.

Legislators have exuded bipartisan skepticism in the project since AGDC took it over but have allowed the administration to keep working on it with the remaining funds.

They are now wondering what role the three Chinese nationalized mega corporations, Sinopec, Bank of China and China Investment Corp., could have in the project if they also end up being the primary funders.

The nonbinding joint development agreement Meyer and Walker signed with them Nov. 8 would have the Chinese consortium provide debt and equity to cover 75 percent of the gasline development costs in exchange for 75 percent of they system's LNG capacity.

There is concern design and construction work that could otherwise go to in-state companies and Alaskans might be offered to Sinopec, one of the world's largest oil and gas companies, instead.

As Giessel said she understands it, if legislators were to give AGDC unlimited receipt authority the only control they would have over the corporation and the project — short of disbanding AGDC — would be in approving the Department of Natural Resources to take the state's royalty share of North Slope natural gas "in-kind."

"The rest of the authority, the approvals, that were in SB 138 (passed in 2014) really went by the wayside when the state took over," she said.