Q&A: Governor explains shifting plans for Alaska LNG Project

Austin Baird / KTUU
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ANCHORAGE (KTUU) - State government is considering the possibility of taking a bigger stake in a gasline mega-project that would connect North Slope reserves to market.

However, few details of the exact changes that might be on the horizon for the Alaska LNG Project have been made available so far.

A House-Senate resources panel is scheduled to receive an update from recently appointed Alaska Gasline Development Corporation executive director Keith Meyer. AGDC is currently an equal partner in the project, which is expected to cost the state, BP, ConocoPhillips and ExxonMobil $45 billion to $65 billion.

Gov. Bill Walker on Tuesday discussed the shifting plans for the Alaska LNG Project in an interview with KTUU.

AUSTIN BAIRD: What changes are you considering making to the Alaska LNG Project?
GOV. BILL WALKER: "We're continuing to look at all options to keep the project on the current time frame. On Feb. 9, when our partners said we need to look at a different structure in order to make that happen, one was a transition over to the state. We said, 'OK, we'll take a look at that.' We're in the process of looking into that now to see what that would look like. Other partners would be an option as well."

What exactly have each of the partners said they will do when pre-FEED ends and the front-end engineering and design phase begins?

"I can't foretell what each of the partners will say, but I have to thank them for coming to us in February -- literally, almost a year earlier than they're required to -- to say, 'Hey, we may not be in pre-FEED based on a number of other things that are happening around the world. For whatever reason -- they didn't give the specifics -- they just said, 'You should be aware of that, and here's an option you should take consideration of.' They gave us a heads up. We wouldn't have gone through this process if they hadn't brought that to our attention, and I really appreciate that they did that."

How much of the project is the state looking at buying out? Or how much added financial risk?

"I'm not sure there's much to buy out. We're all partners in a project that advances if it's there. There is an LLC they have, which is the land in Nikiski and the export license. That would certainly need to be negotiated, but really it would be a market-driven project like any other project. It wouldn't be financed by the State of Alaska. It would be financed by the project itself based on market contracts."

Moving into the FEED phase is projected to cost $2 billion. That's split among the AKLNG project partners, meaning the state-owned Alaska Gasline Development Corp. and the oil companies are currently scheduled to pay $500 million apiece. Let's say BP and ConocoPhillips back out. Would that mean the state is taking on another $1 billion of liability next year to move into FEED?

"That would be one option. The other option is to bring in other partners to replace them. Every trip I've made to the marketplace, they've always talked about, 'Can we get involved in the project?' They'll ask, can we get involved in the mid-stream -- which is the pipeline -- or the upstream, which is the fields and whatnot. So that's an option that the state has. Either we could take over that position, or we could go out and replace whoever is not in the project. But there's no scenario whatsoever that would involve the Permanent Fund at all. There's been a tremendous amount of misinformation spreading about that, and there's no scenario that the Permanent Fund would have a role in that at all. It's a project financed in the private equity markets. It would not be based with anything to do with the Permanent Fund."

Which private equity firms and other potential financiers have you spoken with the most about financing?

"The first thing you have to do is talk to the market. Without the market, there's nothing to talk to financiers about. That's the number one priority: it's a market-driven project. Without a market commitment for this project, there won't be a project. That's who you start with. When I was in Japan in December, presented at an LNG summit there, every major buyer of LNG in the world was there, and they all came and said they were interested in the Alaska LNG Project. At that time, we could only talk about our slice of it because we're a 25 percent interest in it."

Do you worry that taking on a bigger role in financing the Alaska LNG Project may jeopardize the state's ability to get a Permanent Fund restructure as described in S.B. 128 or your overall fiscal plan off the ground?

"Oh no. This is not financed based upon the full faith and credit of the State of Alaska at all. This is a project financed, and these are done all over the world this way, they're based upon the financial strength of the project -- based not necessarily on the parties but the contracts on the market side."

Did the departures of Attorney General Craig Richards and acting Department of Natural Resources Commissioner Marty Rutherford have anything at all to do with the direction this project is going?

"No, it really didn't. Both of them have some unique skills and backgrounds, but it is not related to the project.

We asked about this in February when we reported on the contract Andy Mack had with your office, but I think it's worth revisiting this subject today: Is there a conflict of interest given that he is leaving a private equity firm, Pt Capital, to have an important role in the AKLNG Project and also the broad range of issues DNR is involved in? Does that concern you at all?

"No, those can all be worked out. And again, the lead on this project is AGDC and Keith Meyer, so I'm not concerned about any potential problems there."



 
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