This past Tuesday in Juneau, the Alaska Senate endorsed Gov. Bill Walker's request to buy out TransCanada's portion of the Alaska LNG Project, making the state of Alaska an equal owner in the largest integrated natural gas project in North America.
This strategic investment raises Alaska's share of the Alaska LNG Project to 25 percent, increasing both our risk and benefit in what is estimated to be a $65 billion pipeline venture, should it advance to construction. It also gives the state a more direct say in the decision-making process of the project, by increasing the voting rights of the state.
After 10 days of discussion on bond ratings, credit risks, cash calls and interest payments, the Senate Finance Committee advanced a recommendation on the governor's proposal: Acquiring TransCanada's share of the project and increasing Alaska's ownership in the project made fiscal sense; it would not negatively impact our credit rating; and – most importantly – it was in the best interest of Alaskans. The measure went on to pass the Senate with bipartisan support, 16-3.
The decision to buy out TransCanada is just one step in an integrated, phased development process – a process that was ratified in the Heads of Agreement, signed by the state, BP, ConocoPhillips and ExxonMobil in January 2014. The HOA sets clear milestones to advance the Alaska LNG Project and outlined clear expectations of each party's responsibilities.
The milestones and expectations established by the HOA became the foundation for Senate Bill 138, which passed the House and Senate in 2014, again, with bipartisan support. SB 138 created the statutory framework necessary to advance the complementary purposes of monetizing Alaska's North Slope natural gas and providing gas to Alaskans. Together, the HOA and SB 138 are the blueprint to advancing a natural gas pipeline.
The Alaska LNG Project remains on schedule according to the timelines in the HOA. The project is progressing along predetermined milestones and it has more potential than ever before.
Our optimism cannot distract us from the fact that a $65 billion project comes with challenges. Many of them were highlighted during the special session. We now have a better understanding of those challenges, the administration has a better understanding of our concerns, and collectively, we are committed to addressing them in order to move this project forward.
Alaskans will not have to wait long to reach the next milestone in the project. On Dec. 4, the state, now as a 25 percent owner of the project, will have the opportunity to exercise its increased voting rights.
Every partner in the project must approve the 2016 work program and budget. If one partner (including the state), fails to approve next year's budget, the project will come to a halt and begin winding down. Dec. 4 truly is a make or break day for the Alaska LNG Project.
As the Senate completed its work during the special session, we were compelled to include a resolution, Senate Resolution 301, which encourages all parties of the project to approve the 2016 work program and budget. It is an expression of the Senate's commitment to the original HOA and blueprint established by SB 138. We believe sticking to the commitments and expectations already established with our partners is the best pathway to project success.
On Dec. 4, the governor and the state's project leaders at the Alaska Gasline Development Corp. will face a tremendous question: Will we advance a natural gas pipeline project or will we lose a great opportunity?
Our partners are proving their commitment by spending an estimated $400 million to $500 million on engineering, design and permitting during the pre-FEED stage -- averaging nearly $1 million a day. And as of Sept. 15, partners report already spending $303 million. A "yes" vote on Dec. 4 will continue the critical work that has begun. The Senate stands ready to work with the governor and our production partners in advancing what could become the backbone of Alaska's economy for decades to come.
It is a privilege to serve as Senate president during this critical time for Alaska. I am proud of the Senate's united role in the progress that has been made. I am glad to see the Senate aligned with the governor as he takes the next step forward for our great state.
I urge Gov. Walker to move forward with the confidence of an equal partner in the Alaska LNG Project, and to vote "yes" on Dec. 4.
Sen. Kevin Meyer is president of the Alaska Senate. A Republican, he represents District M in Anchorage.
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