Walker right to say no to Chenault, Hawker on gas line bill

Any person who has followed the antics of House Speaker Mike Chenault and his sidekick Rep. Mike Hawker shouldn't be surprised by their latest effort to thwart the desire of Alaskans to get a gas line built.

On Monday they announced House Bill 132. This legislation is designed to tie the hands of Gov. Bill Walker. The bill limits Alaska involvement in a gas line project by ensuring that Alaska cannot be involved with a pipeline unless the project is uneconomic, or controlled by global corporations with projects that compete with the state.

You'd think these guys would have other things to worry about. They created the largest budget deficits in state history while at the same time massively growing state spending. They gifted us with oil tax legislation that ensures Alaska has net negative return on severance taxes at current oil prices. They've wasted hundreds of millions on various boondoggles such as the Anchorage legislative office remodel that has increased the rent six-fold.

The sponsors of HB 132 have exhausted their credibility.

When Chenault and Hawker were wasting years of time and hundreds of millions studying an uneconomic boondoggle gas line project to the Lower 48, it was Walker who consistently stood with Alaska voters, economic sense, and the LNG markets in pursuing a large diameter gas line with economy of scale to tidewater.

Walker has correctly explained that the bullet line is highly uneconomic -- a key point in this discussion -- but Chenault refuses to acknowledge reality. If that project costs $8 billion, and the project is financed with 75 percent debt, and 25 percent equity, the annual debt and equity payment to investors would cost each Railbelt resident an amount equivalent to the current Alaska Permanent Fund dividend, about $2,000 annually. The cost of the gas would be extra. But there is an even more fundamental problem with the bullet line. Cook Inlet has lots of natural gas -- 19 trillion cubic feet, according to the U.S. Geological Survey. This gas is close to the Railbelt, and is much cheaper to deliver to Alaskans' homes.

Understanding the Heads of Agreement that is the basis of the state participation in the Alaska LNG project is important, and why the direction Walker has selected is correct. Here is what the agreement says: "13.4.1 Nothing in this HOA requires any party to reach or execute any legally binding or enforceable agreement(s) or to refrain from engaging in any business whatsoever, nor does any party have any liability in connection with the subject matter of this HOA."

That language allows ExxonMobil to pursue LNG projects that directly compete with Alaska. Those projects exist in Canada, Russia, Australia, Papua New Guinea, the Gulf Coast, and even Qatar. Alaska has no agreement of any kind that binds Exxon to build an LNG project in Alaska. In this HOA, Alaska is a junior partner with no control of any of the key aspects of the project.

Here is one example of my firsthand experience with Exxon refusing to advance a gas line project because it did not want Alaska LNG to compete with its other LNG projects. In 2012, Walker, at the time working with the Alaska Gasline Port Authority, aggregated 2.5 billion cubic feet of gas per day in potential market demand. A Solicitation of Interest, which Exxon was required to hold under the terms of AGIA, was held in the fall of 2012. We participated in that solicitation with six different Asian gas buyers. So, how did Exxon and Chenault respond? They ignored this significant development, and pretended like it never happened. Chenault was more than happy to ignore that the markets wanted enough gas to build a large-diameter gas line. He was also happy to ignore the fact that the markets wanted first gas in 2019. Chenault and others decided to support a new study, with a new route, with first gas (best case) in 2025, with Alaska being a junior partner with no control of the project.

Walker is trying to walk us back from that sort of nonsense, some would even say sabotage. With a deficit of nearly $4 billion this year we will have exhausted all the money in the Constitutional Budget Reserve and Statutory Budget Reserve in about three years. Placing Alaska's future in the hands of Outside interests is not just stupid, and unconstitutional, it is a betrayal of the best interests of all Alaskans.

All Alaskans should be as outraged as Walker by the actions of Chenault and Hawker.

Merrick Peirce is a board member and chief financial officer of the Alaska Gasline Port Authority.

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