Alaska gas line project likely in for big changes as low oil prices persist

Gov. Bill Walker on Wednesday announced the framework for Alaska's massive proposed natural gas pipeline would likely have to change later this year, as the state's three corporate partners on the project continue to face low oil prices that challenge their bottom lines.

"We will be looking at different options, different structures of how that would work," Walker said at a news conference, flanked by executives from BP and ConocoPhillips, with an ExxonMobil official linked by phone from Houston.

The state and the companies, which each own stakes in the proposed project, would examine whether there's "another ownership structure that makes more sense," though he and the oil company executives didn't get much more specific.

"We had thought about waiting a bit to have this announcement until we had more details," Walker said. But, he added: "We didn't want (there) to be a lot of misinformation. And so, the best way to do that, I think, is to talk to the public, talk to the Legislature, talk to the market."

The news conference came a day after a pair of top Walker administration officials announced at a public meeting that the gas line project was almost certain to miss a key deadline: a public vote in November on a constitutional amendment to lock in taxes and other financial terms.

The oil companies want that vote to take place before they're willing to spend the billions of dollars required to bring the pipeline project through a final engineering and design phase. But the Walker administration officials — Revenue Commissioner Randy Hoffbeck and Natural Resources Commissioner Mark Myers — said Tuesday there's almost no chance the contracts and agreements would be negotiated in time for a November vote.

Instead, the vote will likely have to wait until the next general election, in 2018 — creating a "very real possibility" of a slowdown, Hoffbeck said.


The delay comes with oil prices at their lowest level in a decade, putting pressure on ConocoPhillips, ExxonMobil, and BP, which together with the state would invest an estimated $55 billion in the Alaska LNG project. If it's built, the gas line would run from the North Slope under Cook Inlet to the Kenai Peninsula community of Nikiski.

"All of the major companies are delaying projects in oil and natural gas, especially big dollar ones, due to price uncertainty," Brian Youngberg, a senior energy analyst at the investment firm Edward Jones, said in an email Wednesday. "ConocoPhillips is running tight cash flow already, so hard to see them wanting to commit too much right now. ExxonMobil and BP have more flexibility, but they are also looking to mind their pocketbook."

Walker said Wednesday the announcement came after the producers brought up a discussion: "How do we advance a project given the difficult, difficult times that we're in?"

One of the key questions, Walker said in a phone interview after the news conference, is how work on the pipeline would move forward once preliminary engineering and design work, or pre-FEED, is finished in the fall.

That's when the state and the oil companies would have to decide whether to proceed into final engineering and design — a far more expensive phase of the project that's expected to cost billions of dollars.

"I want to make sure that when we get there, at the end of pre-FEED, that we have looked at everything possible, and (if) there's another ownership structure that makes more sense," Walker said in the interview. "Right now, all partners are in — nothing's changed in that regard. But I think we have to anticipate, 'What if?'"

More definitive details about the alternative options for developing the project are expected to be released in early March, Walker's office said in a prepared statement.

Wednesday's news conference left at least one lawmaker, House Speaker Mike Chenault, R-Nikiski, wanting more details. Chenault was one of the architects of the legislation setting up the existing pipeline project, and he said in a prepared statement Wednesday: "I wish there was something more concrete coming from today's event."

"I don't understand, other than maybe that they were getting information that there were some of our partners, one of our partners, or all of our partners looking at maybe pulling out of the project," Chenault said in an interview. "There's things that we can bring to the table that they can't, and we'll look at those options and see if any of those would be viable in driving the cost of this megaproject down."

Alaska Dispatch News reporter Alex deMarban contributed to this report.

Nathaniel Herz

Nathaniel Herz is an Anchorage-based journalist. He’s been a reporter in Alaska for nearly a decade, with stints at the Anchorage Daily News and Alaska Public Media. Read his newsletter, Northern Journal, at