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AGDC ready to disband if Alaska LNG a ‘no-go’

New Alaska gasline officials are prepared to break up the band if an internal review concludes the current iteration of the $43 billion Alaska LNG Project doesn’t pencil out.

Alaska Gasline Development Corp. President Joe Dubler told legislators during a Feb. 27 Senate Finance subcommittee meeting that the quasi-state corporation holding Alaska’s longtime hopes for a large natural gas pipeline project is in the process of scaling back while evaluating the technical and commercial viability Alaska LNG.

Dubler, who officially took the helm at AGDC Feb. 1, emphasized that Gov. Michael J. Dunleavy replaced four board members and hired him to “refocus the corporation.”

“What (Dunleavy) wanted us to focus on was the Alaska LNG Project to determine if the larger project with the export capacity could meet economic hurdles without undue execution risk,” Dubler said to members of the Senate subcommittee for the Department of Commerce, Community and Economic Development budget, which AGDC falls under.

“If it is (viable) we’re going to solicit world-class partners for FEED, which is front-end engineering and design and completion of regulatory efforts,” he continued. “If we do all of our work and we determine that the project does not look like it’s going to be viable we will wind the project down, close the corporation up and return all the current funds that remain to the General Fund.”

The message is a sharp contrast to what former AGDC President Keith Meyer — whom Dubler replaced after leading the corporation since June 2016 — often stressed.

Meyer and former Gov. Bill Walker emphasized the state would only go forward with an LNG pipeline and export plan if it was economical, but there was never an indication the corporation would give up on finding a path forward for Alaska LNG if the current plan ultimately didn’t work.

Dunleavy was highly critical of Walker’s state-led gasline plan while he was in the Senate and while campaigning for governor. He has said he wants to bring Alaska’s major oil producers back into the project if the administration ultimately decides to keep it moving forward.

Dubler added that AGDC has closed its office in Houston and is in the process of consolidating its main Midtown Anchorage office by nearly half. A small, one-person office in Tokyo remains open, according to Dubler.

He said the corporation’s $10.1 million budget proposed in Dunleavy’s fiscal year 2020 budget should be sufficient to complete the Alaska LNG Project environmental impact statement.

AGDC spokesman Tim Fitzpatrick said after Dubler’s comments that it continues to be “business as usual” at the corporation. Fitzpatrick highlighted that there is no internal timeline to complete the Alaska LNG review; it will take as long as it takes, he said.

While the $10.1 million covers corporate operations such as payroll and office leases, AGDC spends additional money on the project from the Alaska LNG fund, which held $34.1 million at the end of January, according to corporation officials.

That spending is largely for technical contractors hired to gather information for project permitting.

To date, AGDC has spent more than $260 million on the Alaska LNG Project.

Also, while the governor could veto appropriations to AGDC, disbanding it and transferring remaining Alaska LNG funds to the General Fund would require legislative approval.

Corporation officials are still in commercial negotiations with several parties that signed preliminary agreements to purchase LNG, Fitzpatrick said, including the three Chinese companies that signed a joint development agreement with AGDC in November 2017 to be potential anchor customers and financiers of the project.

The Federal Energy Regulatory Commission, which is writing the Alaska LNG EIS, was expected to publish a draft of the document in February; however, the agency on Thursday revised that schedule for a June release.

It’s generally believed the extended partial government shutdown affected FERC’s ability to meet the original schedule in addition to having many technical questions for which AGDC is still providing answers; FERC historically has been one of the best federal agencies in terms of meeting its self-imposed permitting schedules.

The revised Alaska LNG schedule calls for a final EIS to be published in March 2020 with a record of decision coming shortly thereafter.

Sen. Chris Birch, R-Anchorage, who chairs the Resources Committee and the subcommittee Dubler testified to, said in a brief interview there is a general consensus among legislators that AGDC should complete its current Alaska LNG permitting effort regardless of whether or not other aspects of the project are advanced.

“You might be back asking (FERC) for another LNG license down the road,” Birch said, noting that he will be interested in seeing AGDC’s updated spending plan during a presentation to the joint House and Senate Resources Committees set for March 22.

AGDC is also waiting on a joint record of decision on its original, smaller Alaska Standalone Pipeline, or ASAP, project from the Army Corps of Engineers and the Bureau of Land Management. The ASAP project, estimated at roughly $10 billion, is a smaller gas pipeline plan to get natural gas off of the North Slope strictly for in-state use.

It does not include the large LNG plant needed for gas exports, which accounts for about half of the $43 billion Alaska LNG price, but experts also doubt the economics of any trans-Alaska natural gas pipeline without the LNG export component.

The ASAP decision was likely also delayed because of the government shutdown that ended in January.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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