Opinions

Gas line policy? Walker is either crazy like a fox or crazy as a loon

So, there you are, Big Oil Inc. plugging away, spending hundreds of millions of dollars doing prep work for a long-awaited $65 billion liquefied natural gas project to monetize vast North Slope reserves.

After fits and starts spanning decades, a gas line finally may make economic sense, you are thinking. It would be a nice, long-term addition to your investment portfolio, and promises decades of stable returns.

Then -- kablooey! -- the public end of your public-private project partnership goes nuts.

Everything had seemed peachy. Your public partner was, well, your partner; not a pal, but a partner. Oh, he had his moments and he worked a side gig, a little gas line thingy of his own, just in case the partnership's bigger undertaking stalled, but now he is telling you he wants his project to compete with yours -- but he promises he still wants to be partners.

What to think? What to do? Like Big Oil Inc., Alaskans should be wondering, at least when it comes to Gov. Bill Walker and the $10 billion Alaska Stand Alone Pipeline project: What gives?

Walker, never an oil industry booster, says he wants a gas line; that Alaska must "have the ultimate say" -- a tough sell in the giant Alaska LNG Project where the state and TransCanada own only 25 percent while North Slope producers control the rest.

Walker apparently has decided to fix that. He dumped three members of the Alaska Gasline Development Corp. board, which oversees the smaller ASAP line. The three had about six decades of industry experience, much of it with pipelines.

Former Republican state Sen. Rick Halford, a key Walker transition team figure; former state Sen. Joe Paskvan, 62, a Fairbanks Democrat who supported repealing oil tax reform; and, Hugh Short, 42, a former Bethel mayor and co-founder and chairman of Pt Capital, a private equity firm, took their places, pending confirmation.

With a pen stroke, Walker switched the board's focus from pipeline to politics, with a different outlook and differing goals and needs.

Now, Walker wants to beef up ASAP, the Legislature's baby, and have it compete with the larger project. ASAP started life in 2010 as a small-diameter, in-state backup to the producer's gigantic Alaska LNG Project to move gas from the North Slope to Nikiski.

ASAP was bumped up to a 36-inch diameter line, but Walker considered it uneconomical -- even threatened defunding. Now, for whatever reason, he wants to boost its capacity -- and sell gas to Asian buyers.

While the state owns a minority chunk of the larger project, ASAP allows Alaska complete ownership -- and all the risk. It could sell pieces to other investors -- buyers, perhaps -- but retain control, Walker says.

The yearning to control the project reflects oddball thinking in former Gov. Sarah Palin's ill-fated Alaska Gasline Inducement Act. (Unsurprisingly, some AGIA architects have found homes with Walker.) The reasoning, and I'm being kind here, was that producers must not control a gas line -- although they were expected to build it and pay for it.

The reality is that only one of these two projects will survive. With luck, it will be the producers' Alaska LNG Project, but who knows what monkey wrench is rattling around in the works, courtesy of Walker. While the larger project is iffy enough, if ASAP prevails, neither will be built.

The first decisions come next year. Confusion and uncertainty reign for now, with ExxonMobil, reacting to Walker's ASAP announcement, saying, "we are assessing the impact on our forward plans."

Who can fault the industry for any skittishness? As with AGIA, why would producers who control the gas leases accept not being the major players in a project that could break their companies? Why would Alaska partner with buyers who want the lowest gas prices possible rather than producers who want the highest, especially when that means more tax and royalty revenues for the state?

All of this seems a trifle crazy. If Walker -- apparently channeling Wally Hickel's "owner state" again -- is hyping ASAP to energize the producers, that is one thing. If he believes Alaska can build such a line alone, he is woefully mistaken.

The business of business, after all, is business; the business of government is government. Government stinks at business because nobody -- as Palin was wont to say -- has any skin in the game. Our history of grain silos, fish plants and barley farms starkly proves that.

Why let armchair oil barons add to the inventory?

Paul Jenkins is editor of the AnchorageDailyPlanet.com, a division of Porcaro Communications.

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

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