Wednesday, April 9, 2014

$44M arrogance; ExxonMobil trumps Alaskans

I will have to disagree with Rep. Hawker that he is the smartest guy in the room, and that he knows "best." Reminder, he is the man who is responsible for the Anchorage $44M Legislative Information Office fiasco. Not exactly Rep. Hawker's "best" work.

Today, House members voted "yes" on appointing out-of-state residents to Alaska's boards and commissions.  This "yes" vote makes room for a retired ExxonMobil executive to occupy a seat on the Alaska Gasline Development Corporation's (AGDC) board.

I guess, Alaskans are not good enough for the AGDC board. ExxonMobil trumped Alaskans today.

District 27
Party: Republican
Toll-Free: 800-478-4950

Session Contact
State Capitol Room 502
Juneau AK, 99801
Phone: 907-465-4949
Fax: 907-465-4979

Below is a clip of Rep. Mike Hawker's arrogant words on the House floor this afternoon. His arrogance was witnessed by children in the gallery.

Tuesday, April 8, 2014

And now a word from our Alaska Oil and Gas Conservation Commission (AOGCC)

Alaskans finally heard from Cathy Foerster, Commissioner with the Alaska Oil and Gas Conservation Commission (AOGCC) during a Senate Special Committee hearing on TAPS Throughput this afternoon.

All roads to a natural gas pipeline lead through the AOGCC, and there is no pipeline without their blessing. The Commissioner's testimony was educational, and informative. The burden of proof still remains in the oil producers' court. In addition, we learned that the TAPS decline rate has been reduced and Alaskans should be very excited.

I hope you take the time to watch the Commissioner's testimony because this is a responsible step on behalf of the Senate to get AOGCC's input because the legislature did not seek AOGCC's input during the AGIA debate. A $500M oversight.

Monday, March 31, 2014

Exxon Valdez oil spill; the scab that never heals

Deborah Brollini

I thought I had moved on from the Exxon Valdez oil spill. Then Governor Parnell ripped the scab off by appointing a retired out-of-state oil executive to the Alaska Gasline Development Corporation (AGDC) board. I do not have a problem with ExxonMobil being a part of a project. However, HELL NO on being on the AGDC board. The Governor yanked off the scab and the memories started flooding back.

On the day the Exxon Valdez grounded on Bligh Reef I was working for the law firm Tugman, Clark and Ray foreclosing on homes. I have learned since the oil spill that Chuck Ray is one of the best maritime lawyers in the country. As an employee, and Alaskan our little law firm was thrown on the front lines representing fishermen, and I did not know what to think of it. I left the law firm shortly after the oil spill and began working for CACI, a litigation firm representing the federal government as a party in the Exxon Valdez litigation.

I was the first employee and Alaskan hired as a senior paralegal with CACI representing the federal government setting up an Exxon Valdez litigation center in the building where McGinleys now resides.

I walked to both state and federal courts twice a day everyday to obtain court dockets. I sat in on federal and state hearings. I reviewed and summarized documents, reports, and hearings for high-level officials. I supervised paralegals on the front lines. I was present when the jury convicted Hazelwood. Judge Johnstone summoned me to his chambers during the Hazelwood trial. (Talk about scaring the hell out of a 20 something young professional with a judge who wants your head on a stick, and a room full of powerful suits). I know more than any Alaskan should ever know about the Exxon Valdez oil spill.

I coordinated scientific meetings which are now housed in the PWS Advisory Council. It was not an environmentalist frenzy at the time. I sat in a room with the best of the best in scientific knowledge, and Alaskans who cared deeply about our state. I am proud of being part of these scientific meetings. I never cared about birds, fish, otters, killer whales, or the Prince William Sound ecosystem prior to the oil spill. Alaska learned a lot since the oil spill, and we have a come a long way in oil spill response preparedness

Unfortunately, the Exxon Valdez oil spill born an environmentalist movement that uses our state, and uses the oil spill to fundraise, and to shut down resource development in Alaska.

I remember vividly like it was yesterday fishermen wailing during meetings and trying to hold back tears, and crying inconsolably after meetings. ExxonMobil needs to settle its litigation with Alaskans for me to move on.

The Exxon Valdez oil spill impacted me profoundly deep into my soul. I no longer wanted to work as a paralegal, and I changed my major to business in college, and I eventually left my job with CACI. I ended up taking a year off to concentrate on college, and went on to work for Dr. Ted Mala who was the Commissioner of Health and Social Services during the Hickel administration.

Saturday, March 29, 2014

TransCanada big issue; Consultants talk to committee about value of partnership in Alaska LNG Project

Kristen Nelson
Petroleum News

Senate Bill 138, Gov. Sean Parnell’s enabling legislation for state equity participation in a North Slope liquefied natural gas project, is in House Resources, its first stop of three committee assignments in the House.

Resources co-Chair Eric Feige, R-Chickaloon, said in a press availability March 20 that the committee would be meeting almost every day, with the goal of moving the bill April 4. The bill then goes to House Labor and Commerce before it reaches the Finance Committee.

Resources co-Chair Dan Saddler, R-Eagle River, said they’d been studying the bill prior to receiving it from the Senate. House Resources held hearings on the memorandum of understanding and heads of agreement while SB 138 was in the Senate.

The bill passed the Senate March 18; House Resources held its first hearing on the bill March 19, and beginning the week of March 24 has met every day, taking testimony from the administration, Legislative Budget & Audit consultants and the administration’s consultants.

TransCanada a big concern

A big concern aired in House Resources was the value to the state of partnering with TransCanada, rather than going it alone to finance and manage its approximately 25 percent share of the proposed Alaska LNG Project.

The MOU and HOA presented by the governor in January, and enabled by SB 138, propose that the state would take its royalty and production tax in kind rather than in value, giving the state a 20-25 percent ownership in natural gas from the Prudhoe Bay and Point Thomson fields, the variation based on the production tax imposed on natural gas. The state would then take a comparable equity share in the project, which includes a gas treatment plant on the North Slope, a gas pipeline from the North Slope to Nikiski and a liquefied natural gas plant at Nikiski.

TransCanada has been involved with the state through AGIA — the Alaska Gasline Inducement Act — and a license which TransCanada took under that legislation for a pipeline into Canada to deliver Alaska North Slope natural gas to the contiguous United States. New natural gas development in the Lower 48 made that project uneconomic, and Parnell asked the North Slope producers and TransCanada to collectively consider an LNG project to take natural gas to Asian markets, while also providing natural gas for use within the state.

Parties representing the state — the departments of Natural Resources and Revenue and the Alaska Gasline Development Corp. — then negotiated with the North Slope producers — BP, ConocoPhillips and ExxonMobil — and TransCanada, producing the two agreements which would be ratified by SB 138, the heads of agreement or HOA and the memorandum of understanding or MOU.

Going it alone

The MOU provides the basis for the state and TransCanada to exit the AGIA agreement, with TransCanada holding the state’s equity interest in the gas treatment plant, or GTP, and the pipeline; the Alaska Gasline Development Corp. would hold the state’s interest in the liquefaction facility.

The MOU provides that the state could buy back up to 40 percent of the GTP and pipeline interests from TransCanada, leaving TransCanada with minimum interests of 14 percent in those portions of the project. In committee discussions in both the House and Senate consultants have told legislators that the state will likely have opportunities to sell part of its interest in the LNG facility as it negotiates the sale of its gas, since LNG buyers frequently want to hold an equity position in the project.

If the state were to back out of the MOU it would be faced with exiting AGIA, and could face arbitration and possibly litigation over the issue of whether the project is uneconomic; it would also have to pay TransCanada for information that company has developed which would be contributed to the AKLNG Project if the MOU is signed.

If the state goes it alone it would have to fully fund its participation in the pre-FEED, pre-front-end engineering and design portion of the project, estimated at $104 million and $486 million for FEED, as well as fully funding its share of construction costs, some $12 billion (estimates by enalytica, the LB&A consultants) and at $108 million and $450 million, respectively for pre-FEED and FEED (estimates by the administration’s consultants, Black & Veatch) and an estimated $13.2 billion in construction costs.

If the project did not continue beyond pre-FEED, the state would owe TransCanada some $50-60 million for work done to that point, and if the project were abandoned after FEED, the state would owe TransCanada $150-400 million, with the variations — these are from enalytica estimates — based on whether the state allows TransCanada to carry all of its GTP and pipeline interest, or buys back 40 percent of that interest.

Both consultants have said that all numbers at this early stage of the project are certainly wrong, and are useful for showing direction.

Advantages of TransCanada

Estimates from enalytica show that state equity leads to higher government take on average, with the state taking a larger proportion than the producers combined, due to its dual role as equity participant and sovereign — the state would still collect corporate income taxes and property tax — and the fact that the state would not pay federal income tax. These estimates show the state taking up to 35 percent at high gas prices while the combined producer take would be less than 30 percent at the same gas price. That was for a 25 percent state equity share, and was higher than the state’s take at 20 percent. Compared to the state’s take in-value, i.e. without an equity stake, at high gas prices the state would take more — although it would take much less at low gas prices — but without state equity participation there might not be a project.

TransCanada’s share of the cash from the project ranges from 1-7 percent, based on enalytica modeling, varying dependent on price levels and the level of buyback which the state exercises. TransCanada’s cash share is lowest with buyback and at high gas prices.

Black & Veatch, the administration consultants, said the economic impact to the state of partnering with TransCanada include TransCanada investing 60-100 percent of the state’s upfront capital costs for the GTP and pipeline (the variable is buyback by the state of up to 40 percent).

Once the project is in operation, the state would pay TransCanada a negotiated tariff for 60-100 percent of the GTP and pipeline capacity used to move state gas, again dependent on whether the state exercises its buyback option.

Black & Veatch concluded that the economic impact to the state from TransCanada’s involvement would be a reduction of some $4 billion in total cash flows. But the firm said the net present value impact would be marginal because upfront money carries more weight than cash flow over 25 years of operation.

Black & Veatch said TransCanada could reduce the state’s investment in the project by $4-7 billion (depending on buyback), said the state might hit debt limits going it alone and also noted TransCanada’s value as a partner, citing experience, keeping momentum going and the pipeline company’s bias toward expansion of the project, something it shares with the state.

TransCanada has committed to a tariff for state gas based on financing, and a change in TransCanada’s ability to get financing could lower its return on equity and net present value, Black & Veatch said.

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