Alaska Governor Proposes State Equity Partnership in LNG Project

on January 21, 2014 at 10:00 AM

Oil Prices Rise As BP Shuts Pipeline

Alaska Governor’s latest plans to advance Alaska’s long-sought natural gas pipeline calls for state ownership share in the state’s LNG export project.

On January 10, 2014, Alaska Governor Sean Parnell announced a proposal to establish state equity partnership in the Alaska Liquefied Natural Gas (LNG) project. To this end, the state will terminate its 2008 license agreement with TransCanada and enter into a commercial agreement, called Heads of Agreement, subject to public review by the state legislature. The commercial agreement will include the three major North Slope producers (ExxonMobil Corp., BP PLC, and ConocoPhillips), TransCanada, the Alaska Gasline Development Corp., and the Departments of Revenue and Natural Resources.

The 2007 Alaska Gasline Inducement Act (AGIA) intended to expedite natural gas pipeline construction to facilitate commercialization of North Slope gas. In 2008, TransCanada won a license to pursue with a pipeline project and entered into an agreement with ExxonMobil to form the Alaska Pipeline Project.  In January 2012, Governor Parnell called on the major North Slope producers to align on a project under the AGIA framework, setting a series of benchmarks to advance the project. Since then, the project team has made significant progress on the proposed project, including an approximately 800-mile pipeline from the North Slope to south-central Alaska, a gas treatment plant, liquefaction and storage facilities, and marine terminals, estimated to cost $45B to $65B.

Conceptual Layout of Alaska LNG Plant (arcticgas)

Governor Parnell also announced that he would introduce legislation to provide guidance for resource and revenue management and facilitate participation in shipping agreements to transport and sell gas. The legislation proposes a transition from a variable net tax to a flat gross tax and allow for certain leases to remit production tax with gas.  In April 2013, the Alaska Legislature passed an oil-tax reform legislation replacing a monthly progressive surcharge feature with a flat base tax rate and altering the tax credit system to encourage investment. According to Governor Parnell, state ownership stake will protect Alaskans’ interests and reduce costs.

January 13, 2014 via Energy Solutions Forum.

Energy Solutions Forum is an energy policy research and data company based in New York City. Follow @EnergySolForum for policy research and stay plugged in with ESF Calendar, the industry’s go-to resource for energy business events in and around NYC.