Changes are coming to state plans for a liquefied natural gas pipeline, but the governor and the state’s three pipeline partners aren’t ready to say what those changes will be.
At a news conference Wednesday in Anchorage, executives with ExxonMobil, BP and ConocoPhillips joined Gov. Bill Walker to announce that they are “exploring options” to advance the pipeline.
Walker emphasized the importance of keeping the project on track.
“We know that most likely there needs to be some modifications in some way and so we sort of come back to the drawing board a bit on how to look at this project a bit differently,” Walker said.
The executives said they would complete preparations for front-end engineering and design work — also known as “pre-FEED” — on schedule by this fall.
But ConocoPhillips Alaska President Joe Marushack didn’t offer assurances beyond a commitment to explore options.
“What we’re trying to do is get through the pre-FEED process,” Marushack said. “Clearly the economic headwinds are pretty tough right now, but we’ve got to see what the project costs before we can make a statement if we should participate and go forward or not.”
Energy industry experts have said the project doesn’t make economic sense at today’s natural-gas prices.
The announcement put into doubt the state’s timeline for the project.
State Natural Resources Deputy Commissioner Marty Rutherford says everything is on the table ahead of another pipeline announcement next month.
“It’s sort of a nexus of problems that have happened — this economic situation on the value of oil and gas as well as slow negotiations — which has caused everybody to begin to discuss: ‘Well, as we continue forward on AKLNG as currently envisioned, are there other alternatives we should be looking at so we don’t have a delayed feed decision?’ ”
Walker earlier said he would seek a state constitutional amendment to lock in tax rates for the energy companies who are working with the state on the project.
The governor said Wednesday he isn’t ruling out the amendment, but the state may be able to provide cost certainty without an amendment.
The project has an estimated cost of $45 billion to $65 billion.
Speaker of the House Mike Chenault said he wished there was something more concrete from the announcement.
The Nikiski Republican added that he welcomes greater scrutiny of the cost of the project, which is the largest proposed infrastructure project in the world.
“I don’t know whether to take it as a sign of good or bad,” Chenault said. “I think we take it as a time that they’re still talking and, you know, in the economic times that we’re in, with the price of a barrel of oil, I think that it might do us well to step back and look at it and make sure that we haven’t missed something that may cost us in the future.”
Kenai Peninsula Borough oil and gas adviser Larry Persily said the options may include changing the percentage ownership each partner has in the pipeline.
Persily previously was the federal coordinator for natural gas projects in the state. He said if some of the partners decide to scale back their participation in the project, it will present a dilemma for the state.
“Right now, the state, I think, wants it more than the others, but when it comes down to it, the state is not in a position to take on more risk than the companies can afford,” Persily said. “We have enough of a financial hole in our budget.”
Persily said if the state wants to borrow money, it will have to show lenders it can pay the bills it already has. He said the announcement is a reminder that the state must be financially self-supporting before it can think of new options for the gas line.