Energy

Future uncertain for voter-approved 'all-Alaska' natural gas pipeline agency

With its board gutted, its staff reduced and the longtime director leaving, the future of a state agency created by voters to build the fabled "all-Alaska" natural gas pipeline seems increasingly uncertain.

The dream of a decades-old effort to build that gasline reached a high point in 2002, when 138,000 voters passed, by a nearly 2-to-1 margin, a citizens' initiative creating the state corporation.

The initiative was clear: The Alaska Natural Gas Development Authority (ANGDA) would build a multibillion-dollar pipeline running 800 miles from the North Slope to Valdez, selling natural gas from the largest conventional gas reserves in North America.

But from the outset, the authority has lacked political support, steady funding and consistent direction from the governors who select its board and some of the lawmakers who approve its funding. As a result, the authority seems to have focused on everything but the massive pipeline voters wanted.

Not that the authority's staff -- down from four to three following a self-imposed hiring freeze -- ever had much to work with.

In recent years, the authority has received little more than $300,000 a year in operating funds. That's not enough to cover salaries, forcing it to stay alive by tapping savings from past projects.

'Rain clouds out there'

Now, the authority's always-dubious future seems even more so, what with key legislators supporting their new and different state-pipeline corporation -- the Alaska Gasline Development Corp. -- and the governor reviewing the authority's role, and what it might do in the future in light of numerous gasline proposals on the table.

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Authority employees at the group's headquarters in the bright-yellow Sunshine Plaza in downtown Anchorage are trying to remain optimistic. They've got enough funding to keep the office running until July, and they're hopeful Gov. Sean Parnell will recommend more money in the proposed budget he'll release Dec. 15.

"There are rain clouds out there for sure, but we're far from dead and gone," said Scott Heyworth, the board's chairman and the longshoreman who wrote the initiative creating the authority.

But some signs seem ominous.

Three of the board's seven seats have gone unfilled for six months to a year, though the authority has submitted the names of candidates for the governor to pick from, including a list of eight names forwarded two months ago, Heyworth said.

"No word," is what Heyworth said he's heard from the governor's office, though he's asked about the prolonged vacancies. In fact, Heyworth's own three-year term as chair expired this summer, but he hasn't stepped down. "They're not firing, they're not reappointing, so everyone just keeps working," he said.

Why aren't the seats being filled?

The governor's spokeswoman, Sharon Leighow, said in an email, "It is doubtful that the governor will be appointing new members to the ANGDA board until the review is complete."

Unsure what the future will hold, the staff has stayed at three since May, when the publications specialist resigned. "We decided not to fill it until we know how the world's going to shape up," said Kristen Sikora, administrative specialist. They're staying busy, though, doing things like paying contractors, preparing paperwork for budget requests, and refining their latest proposal to develop a plan to get propane -- a component of natural gas -- to areas around the state.

The authority's future, Sikora said, "is in someone's hands, maybe God's."

What's authority's role?

Actually, the future seems mostly in the governor's hands. He's not saying much, but Leighow said the governor's office has been in regular communication with the authority.

Not really, said Heinze, at least not in any sort of meaningful way. There's a difference between chatting and conversations that offer guidance, Heinze said. And despite inquiries and letters to the administration about the authority's future role, the board doesn't know what to tackle next.

"I have no idea what our role is," said Heinze, the authority's first and only chief executive, who recently announced that he's resigning after eight years. "I don't know what the governor has divined for us."

Leighow said Parnell is reviewing the authority's operations and evaluating what role it can play in efforts to commercialize Alaska's natural gas.

Heinze, 69, knows where he's going. But as of last week, he hadn't signed a contract for his future job, so he wasn't saying where he was headed. He plans to stick around until mid-January to help the authority transition to the next phase, whatever that might be. A former state commissioner and former head of ARCO Alaska, Heinze said he received an attractive offer to pursue a very different job in Alaska, and he's taking it.

While optimistic, he noted it's possible the governor could "subject the authority to death by no funding."

"We'll be looking very carefully at whatever shows up on Dec. 15," he said.

This year, Heinze submitted a $90 million capital budget request to the governor -- the largest by far ever submitted -- that gives Parnell several projects to choose from that would allow the authority to continue working.

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One project includes advancing the authority's plan to barge and truck propane off the North Slope to coastal and road communities, which the authority believes could lower energy costs in much of the state. Another would allow the authority to continue planning for a spur line to Southcentral stemming off the large gasline that Parnell supports.

Does Parnell now support ANGDA's pipeline?

The project Parnell supports falls under the state's Alaska Gasline Inducement Act, which provides up to $500 million in state subsidies as an incentive to Calgary-based TransCanada Corp. and Exxon Mobil Corp. to study the creation of a large-diameter pipeline off the North Slope.

Parnell recently announced that he now prefers an in-state pipeline running to tidewater, perhaps along the existing trans-Alaska oil pipeline and to the deepwater port of Valdez. Many people believe the Valdez option is on the table, making the AGIA pipeline virtually identical to the pipeline the authority was supposed to create. One major difference: AGIA wouldn't be run by a state corporation.

Because Parnell backs a pipeline under the AGIA umbrella, it seems unlikely that the authority will be asked to pursue the big pipeline outlined in the initiative.

Uncertainty has been the authority's watchword from Day One.

In the authority's first year of 2003, former Gov. Frank Murkowski appointed the board, gave the authority money from his governor's account and told the board: Don't focus on the large-diameter pipeline because it makes the major oil producers mad, Heinze said.

"By God, you listen to the governor when he sits down and has a conversation with your board of directors," said Heinze.

Those major companies, Exxon Mobil, BP and ConocoPhillips, hold leases to produce much of the gas from the North Slope, with ExxonMobil holding the largest stake.

Through the years, they've participated in projects studying the feasibility of creating one gas pipeline or another to reach market. That essentially makes them a competitor of what the authority calls "the people's pipeline," created by the ballot.

At any rate, the new authority marched to Murkowski's orders. Instead of looking at the big line, the authority focused on smoothing the way for the creation of a small spur line off a larger line, if one was ever created, from Glennallen to Southcentral Alaska.

"It turned out the ballot measure, fortunately, had included a provision to work on the spur line. So we did. We didn't work that hard on (the big gasline), but we worked really hard on the spur line," said Heinze.

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Then along came Sarah Palin. With energy prices soaring in 2008, she told the authority to team up with Enstar gas utility to create a reverse-flow pipeline to carry gas from Cook Inlet to reduce energy costs in Fairbanks. This idea wasn't even in the original initiative language.

But attorney generals have interpreted the authority's enabling statute -- which tasks the authority with the broad description of getting North Slope gas to market -- as saying the authority can legally pursue any project that sells Alaska natural gas, Heinze said.

So, as Palin requested, the authority spent two years creating the Beluga-to-Fairbanks gasline plan, which lost political support when politicians realized they'd have to spend millions of dollars to take it to the next level. Like other authority projects, that's basically shelved, Heinze said.

Before she quit two-and-a-half years into her term, Palin launched her biggest baby, the Alaska Gasline Inducement Act, and TransCanada (and later Exxon) began doing preliminary studies to create a big pipeline and gas treatment facility that would take Alaska's gas through Canada to Lower 48 market.

That set the stage for Parnell, formerly Palin's lieutenant governor, to support an instate line, under AGIA. That line, he said, should not go to Canada, but tidewater in Alaska. From tidewater, the gas could be super-chilled into a liquid and shipped on special tankers to a booming Asia market.

Another gasline corporation

The other big rain cloud hanging over the authority's head: A new gasline agency created by the Alaska Legislature in 2010. The Alaska Gasline Development Corp. is also located in the yellow Sunshine Plaza, down the hall from the authority.

That corporation came about because House Speaker Mike Chenault wants to lower energy costs for Alaskans, and he got fed up with all of the delays and political wind-shifting surrounding the various pipeline plans, he said.

He said he doesn't favor any particular proposal, but he created the new corporation to pursue a small-diameter instate gasline to carry gas from the North Slope to Southcentral, with spur lines to lower energy costs in other regions of Alaska. Lawmakers have pumped about $22 million into that project, and set aside another $200 million that can be accessed once the Legislature creates a proposed fund for the new corporation, which could happen this year. The money will help pay for the permitting, studies, and rights-of-way approvals this 737-mile gasline will need.

By comparison, the people's pipeline has received a pittance, with the Legislature giving ANGDA only $15 million since its creation eight years ago.

Chenault sees a future for the authority. He's long supported it, even sticking up for it when other lawmakers wanted it dead. Now he wants to capitalize on some of the authority's past work.

He plans to introduce a bill in the coming legislative session to address how the state can "get the most mileage out of ANGDA and the talent they have, and how to incorporate them into a bigger project," Chenault said. That could include a partnership between ANGDA and the new, better-funded corporation.

Chenault said he doesn't think the governor will axe the authority by withholding funding, in part because it could lead to political blowback from voters who supported the all-Alaska project.

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"That's his privy, but with them being formed by an initiative and constituents in Alaska, it's hard to get rid of," he said.

Contact Alex DeMarban at alex(at)alaskadispatch.com

Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or alex@adn.com.

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