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AGDC updates legislators on its Alaska LNG and phase 1 proposal
Kristen Nelson Petroleum News
Frank Richards, president of the Alaska Gasline Development Corp., provided an update to the Alaska House Finance Committee Jan. 28 on AGDC's $44 billion Alaska LNG Project and on the corporation's phase 1 plan, which would start by building the pipeline so natural gas could be shipped to Southcentral to meet the area's upcoming shortage.
At House Finance, and earlier at Senate Finance, the cost of AGDC to the state has raised concerns.
House Finance co-chair Andy Josephson noted that AGDC had already come up in budget presentations, and said the corporation is also in the fast track supplemental.
Funding for AGDC, subject to legislative approval, drew comments from Senate Finance co-chairs Lyman Hoffman and Bert Stedman when the administration presented its budget proposal to that committee Jan. 27, with Sen. Hoffman noting how much money the state has spent on an Alaska LNG project over the years with no results and Sen. Stedman asking the administration to provide a cost estimate for dismantling AGDC.
AGDC in the budget Two AGDC items were highlighted in the administration's overview of the operating budget: the first is $50 million in UGF, undesignated general funds, to provide backstop for front end engineering work toward a final investment decision. This amount is for the Alaska Industrial Development and Export Authority, whose board voted at its December meeting to provide up to $50 million in backstop funding for AGDC.
Richards said the backstop is meant to reimburse front end engineering design work if the project doesn't reach final investment decision. The $50 million would be parked in an account and only used in the event FID isn't reached.
The operating budget also includes $2,487,500 to restore AGDC's operating funding in support of continued efforts on Alaska liquefied natural gas development.
It was the operating budget presentation and the $2.5 million that drew comments from Hoffman, who also objected to the backfill amount and said the state has spent close to $900 million on an Alaska LNG project with no insight on whether it will be built. He said the state needs to take a step back and access where it is on the project.
There is also $4.2 million for AGDC in the capital budget, to meet ongoing capital needs. It was this amount which drew the request from Stedman that the administration provide the cost of shutting down AGDA, both operating and capital costs.
The AIDEA issue House Finance explored the issue of the $50 million budget request for AIDEA, with Josephson asking AIDEA Executive Director Randy Ruaro whether AIDEA could go forward with the backstop without the appropriation.
Ruaro stressed that the amount was up to $50 million and said the amount could be significantly less.
He said the proposed final investment decision in June 2027 would trigger any backstop obligation, and said it probably wasn't necessary to have the amount in the fast track supplemental.
Josephson asked Richards about the timing of that appropriation and Richards said it wouldn't be negatively viewed by the market if the amount was not fast tracked.
Ruaro was asked why, if AIDEA approved the amount, it wasn't funding it out of its reserves.
He said the agency is starting to get stretched, that while it has $400 million in its revolving fund, the board has already approved $200 million in projects and tries to keep $100 million in the revolving fund as reserves for bonding large projects.
AIDEA could provide the backstop funds, he said, but likes to be able to keep funding liquidity.
Plans going forward Last session the Legislature requested third-party verification that natural gas from phase 1 of the Alaska LNG Project would be economic compared to imported LNG, and that study, by Wood Mackenzie, was completed in October. It showed that phase 1 of the project, the pipeline from Prudhoe Bay to a junction with Enstar on the west side of Cook Inlet, could deliver gas at or below the cost of imported LNG.
Matt Kissinger, AGDC's venture development manager, reviewed the evolution of the project from its producer-led beginning in 2013, to a 100% state project from 2017-2022, and then to a developer-led project from 2023 forward, with the state going from a 25% equity owner under the producer-led project to 100% equity owner, with a goal of turning over 75% equity to private parties under the current plan, reserving its 25% equity until a final investment decision is made, at which point the state would have the option to continue a 25% ownership role or relinquish its ownership completely.
FID is expected in 2027, which is when the backstop would come into play, in the event FID was not reached.
--KRISTEN NELSON
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