Governor Walker is changing the momentum of the deal, according to two analysts writing for the The Weekly Standard. Their article comments on the continued modifications in regulations, taxes, and prior agreements with the oil companies investing in Alaska to develop our LNG resources, that such re-negotiations are harming investor stakes, causing uncertainty, and certainly pushing down into the future escalating costs, whenever this project does get done.
Via The Weekly Standard Politically, it is understandable that a new governor would want to assess and perhaps tweak the framework for a project he inherited from his predecessor. But taken together, the actions by this current administration are increasingly troubling.
First, Walker sought to expand the state’s in-state gas back-up project, the Alaska Stand Alone Pipeline, into a large-scale LNG export project. To many eyes, this seemed to put the state’s backup project in direct competition with the producer-backed AlaskaLNG gambit.
More recently, the state sought to increase the size of the pipe in the AlaskaLNG project from 42 to 48 inches. The move, which project-backers say could delay the project by 6 to 8 months, would not change the project’s projected gas volumes. And with two years of study done to date on sourcing, moving, placing, and burying the 42- inch pipe, the change to a 48-inch pipe could mean major restructuring of the project.
Walker also wants lawmakers to appropriate $100 million buy out Canadian pipeline maker TransCanada from the project, insisting that this was the best way to ensure the state has a seat at the negotiations table along with other project partners. This would, however, also put Alaska on the hook for $13.1 billion of construction costs, double its current obligation.
To be clear, there still remains a great potential for the state to develop its North Slope natural gas for in-state communities and export to markets abroad. But many worry that Walker is receiving questionable advice on how to make the project work.
But in this climate of uncertainty, the LNG project remains stuck on the drawing board. And the longer it takes to get the project underway, the more it costs. Estimates in 2005 were in the $25-$30 billion range. Now the expected cost is double that.
To move a project of the scale of AlaskaLNG to success requires diligence, cooperation, and momentum. There remains a great potential for the state, but its leaders must not squander it by reopening negotiations again and changing the structure of an immense and historic deal that’s already been reached.