Skip to main Content
Energy

Tensions rise between Alaska, Exxon as governor heads to Japan to pitch natural gas

  • Author: Alex DeMarban
  • Updated: September 28, 2016
  • Published September 11, 2015

Gov. Bill Walker is headed to Japan for a weeklong trip to strengthen relationships with companies that could one day buy Alaska's natural gas as the state pursues what is considered the largest liquefied natural gas project on the continent.

The purpose of the eight-day trip that begins Saturday (which will include first lady Donna Walker and three members of the Walker administration) is to make sure utilities and other Asian entities know the state is aggressively advancing efforts to produce and sell its vast reserves of North Slope natural gas, Walker said.

Walker said he won't be looking for investors in the $55 billion Alaska LNG project that combines the state, ExxonMobil, BP, ConocoPhillips and pipeline builder TransCanada. But the meetings Walker has lined up with multiple companies attending a big LNG conference in Japan could one day be useful if a partner ever decides to back out.

"Right now we have partners, we don't have anybody that has backed out, so it would be premature for me to go out and try to solicit additional partners because it's not necessary at this point," Walker said Friday. "However, should that become necessary, I want to have sort of laid the groundwork for those relationships."

Concerns that Alaska LNG may be delayed have recently cropped up, with a letter from the administration to lawmakers noting that a special session anticipated for this fall may not happen because of differences among the partners on key issues.

Alaska 'Its own worst enemy'

Which partners may be dragging their feet is difficult to determine, in part because officials involved in the project are careful not to point fingers.

But words are heating up between the state and ExxonMobil, the lead for the Alaska LNG project and the largest leaseholder of the state's gas reserves.

The trade publication Natural Gas Week recently published an interview with ExxonMobil CEO Rex Tillerson in which he called Alaska "its own worst enemy."

Tillerson, while discussing the company's LNG projects around the world, blamed shifting governors and shifting plans for the state's inability to complete gas line projects.

"Every governor that comes in decides they've got a different way of doing this, which is why it never happens," Tillerson said in the interview. "You can't take a project that is going to take five, six, seven years to execute and require $50-60 billion of capital and decide every two years you've got a different way to do it. We've had two good chances in the last 10 years to get it done, and as soon as you had an election that ended it."

Walker, who has proposed that Alaska hold a bigger stake in the project, said he didn't create the Alaska LNG process. Instead, he inherited it from his predecessor, Gov. Sean Parnell.

But he said he's trying to expedite that process with the state facing a deficit of up to $10 million a day in part because of low oil prices.

"Unfortunately ... the slowest mover sets the pace," he said. "That's not something I would have created."

Asked if he was referring to ExxonMobil as the "slowest mover," Walker replied that he's pleased with the pace being set by BP and ConocoPhillips.

"I know that some companies are not comfortable with how aggressive I am with representing Alaska, but that's my job and that's what I'm going to do," Walker said. "So if Mr. Tillerson -- if it makes him uncomfortable, I don't represent him, I represent 730,000 Alaskans. ... It's time we act like the owner we are rather than sit back and let companies fit us into their portfolio as appropriate," Walker said.

Walker said the project has not reached an "impasse."

Rebecca Logan, general manager for the Alaska Support Industry Alliance, said the trade association appreciates Walker's passion for the project. But she said the new administration has created uncertainty in part because of changes Walker has made or sought.

For example, the state's Alaska LNG team has had three different lead negotiators in eight months, she said. First, it was deputy Natural Resources commissioner Marty Rutherford, who was replaced by Alaska LNG marketing director Audie Setters, who has now been replaced by South Carolina consultant Rigdon Boykin, Logan said.

Also, "the state now wants to revisit two-year old decisions" that led to the selection of 42-inch pipe, with Walker calling for a larger pipe to be studied. Walker also sought changes to the pipeline route on its way to Nikiski, she said.

"There's so much good progress being made but there's just this confusion that is disheartening to see," Logan said.

Republican Cathy Giessel, chair of the Senate Resources committee, said she's "optimistic at this point" that the differences between the two sides will be worked out. She sees them as part of the normal course of action for a project of this size.

"They are both people leading large entities, the state and a large oil company, and the fact they are not aligned out of the gate is not surprising," she said.

Japan trip

Walker also told reporters in a press conference on Friday that during his trip to Japan he will meet with representatives of Asian companies he's dealt with before, when he pitched the state's gas opportunities while representing the public entity Alaska Gasline Port Authority.

Walker has been invited to speak publicly at the LNG conference in Tokyo.

The trip will also take him to Kyoto.

"My message in Japan is Alaska is assuming a different role in the development of our resources, much more of a role as a sovereign and the owner of our resource," Walker said.

Walker said he'll take advantage of the state's "five-star" reputation for providing gas to Asia, referring to the ConocoPhillips LNG plant that shipped gas to Asia for more than four decades without interruption starting in 1969.

Walker said he'll meet with ConocoPhillips in Tokyo after receiving an invitation.

He'll travel with Rutherford, Setters and Grace Jang, his communications director.

First lady Donna Walker will also be traveling with the group, but she will cover some of her costs, according to an emailed statement from Katie Marquette, Walker's press secretary.

"At her request, the first lady will be traveling coach and is paying for half of her airfare," Marquette said, adding that it's customary for first ladies to accompany governors on foreign travel because they also act as state ambassadors.

"Mrs. Walker was the governor's law partner and key adviser for over 30 years, and will also attend the LNG conference. In addition to the conference, Mrs. Walker will be attending a number of other events, including speaking to a chamber of commerce board in Tokyo and meeting with students at a Japanese elementary school," the statement said.

The governor plans to meet with companies that include KoGas, the world's largest LNG buyer, Japan Oil, Gas and Metals National Corp., Tokyo Electric Power Company, Tokyo Gas, Japan Bank for International Cooperation, Osaka Gas and others.

Members of the Parnell administration made an LNG marketing trip to Japan, China and South Korea last year.

In an effort not being coordinated with the state's trip, a delegation from the Mat-Su Borough, which is hoping to attract an LNG project to Port Mackenzie on Cook Inlet, will also be going to the Tokyo conference.

REI, the American arm of a Japanese company, is one company pursuing that small-scale project at Port Mackenzie. Also, Valdez Mayor Larry Weaver is going to the conference at the invitation of REI.

Walker said he did not know how much his trip will cost.

"I know what the cost of not going would be in regard to the future of the state," he said.

-- An earlier version of this article misidentified Marty Rutherford as deputy Revenue commissioner. She is deputy commissioner for Natural Resources.

Local news matters.

Support independent, local journalism in Alaska.

Comments