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Alaska gas line setback is all but certain, Walker administration officials say

  • Author: Nathaniel Herz
  • Updated: September 28, 2016
  • Published February 16, 2016

JUNEAU — A pair of top officials in Gov. Bill Walker's administration said Tuesday that a critical step in the state's proposed natural gas pipeline megaproject could be delayed by as much as two years, possibly stalling the project.

The hitch: the timing of a citizen vote on a constitutional amendment providing "certainty" on taxes and other financial matters for the state's oil company partners.

Before the $55 billion project enters its final design stages, the three oil producers — ExxonMobil, BP and ConocoPhillips — want a constitutional amendment that would ensure that their taxes and other financial terms wouldn't change after the companies make their massive investments to design and build it.

The state and the oil companies were initially planning for a vote on the proposed amendment in this year's election. But top officials in the companies and the Walker administration have been increasingly pessimistic about the likelihood that they'll be able to deliver key project agreements in time to get them on the 2016 ballot.

And at a public meeting of municipal officials on Tuesday recorded by the state, revenue commissioner Randy Hoffbeck and natural resources commissioner Mark Myers said it was all but certain that a vote would be delayed until the next general election, in 2018.

"The contracts just have not progressed far enough," Hoffbeck told members of the Municipal Advisory Gas Project Review Board. "That timeline is not going to happen."

The proposed pipeline would run from the North Slope to the Kenai Peninsula town of Nikiski, and it's a top priority for Walker's administration. Walker has been promoting a pipeline for decades, and politicians see the project as a potential source of cash to help fix the state's massive budget deficit — though there's no guarantee it will ever be built.

Walker wrote a letter in January to the oil producers saying he was growing "increasingly concerned" about the slow pace of negotiations. And he threatened to pursue unspecified "other options" for selling the state's gas if key contracts and agreements weren't reached by the end of the legislative session in April.

Marty Rutherford, the deputy natural resources commissioner, said at the time that Walker was trying to keep negotiations on pace so that the amendment could still go before voters in the 2016 election. But that possibility now appears remote.

"It's a very, very small probability," Myers said at Tuesday's meeting.

One municipal official who was listening said he was surprised at the blunt assessment offered by the Walker administration Tuesday.

"I was half paying attention — it's like, 'Whoa.' That was news to me," said Larry Persily, a former federal pipeline official who now works as an oil and gas adviser to Kenai Peninsula Borough Mayor Mike Navarre.

Walker administration officials, Persily added, had delivered gloomy assessments earlier this year. "But it seemed to be more of a definitive announcement that this is just not going to happen this year," Persily said.

Walker's office late Tuesday announced that the governor would hold a news conference to discuss the pipeline project in Anchorage on Wednesday, along with executives from the three oil companies. A large group of legislative leaders and staff held a briefing with Walker in his cabinet room Tuesday evening, but they wouldn't comment afterwards.

A spokeswoman for Walker, Katie Marquette, wouldn't offer any more details about Wednesday's news conference, and she wouldn't comment on the statements by Myers and Hoffbeck to the local government officials.

If the timeline for the constitutional amendment slips back to 2018, there are several different paths for the project, Hoffbeck said.

The state and the companies could still decide to enter the final engineering and design phase as planned. Or they could proceed with that phase, but move more slowly and spend money less quickly, which could delay a final decision on whether to build the pipeline.

"I can't tell you which one's going to happen," Hoffbeck said.

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