State gasline corporation to miss key deadline with Chinese partners

Sen. Cathy Giessel, R-Anchorage, and Sen. Mike Dunleavy, R-Wasill, listen to Alaska Gasline Development Corporation President Keith Meyer, aduring a Senate Finance meeting focusing oncorporation's budget on Tuesday, February 14, 2017, in Juneau, Alaska. (Photo by Rashah McChesney/Alaska's Energy Desk)

Sen. Cathy Giessel, R-Anchorage, and then-Sen. Mike Dunleavy, R-Wasilla, listen to Alaska Gasline Development Corporation President Keith Meyer during a Senate Finance meeting focusing on the corporation’s budget on Feb. 14, 2017, in Juneau. (Photo by Rashah McChesney/Alaska’s Energy Desk)

The state’s gasline corporation was supposed to have a deal with three Chinese partners, a buyer, an equity partner and a lender by Dec. 31.

But this is a deadline the Alaska LNG project is likely to miss.

In late 2017,  Alaska Gasline Development Corporation head Keith Meyer and then-Gov. Bill Walker flew to Beijing and inked a deal with three entities in China to explore options for financing, building and buying gas from the Alaska LNG project.

At the time, Meyer told a group of reporters that they had been trying to woo the Chinese companies for months.

“So we’ve been through the courtship. We are now engaged,” he said.

The “engaged” phase was supposed to last about a year, and the parties would come to a decision by Dec. 31, 2018 on whether to get hitched.

Now, the state corporation wants a six-month extension on that original agreement.

Jesse Carlstrom, a spokesperson for the gasline development corporation, said sometimes the commercial deadlines on big, complex projects have to be flexible.

“So, reaching a little ways back, but if you remember the SATs, there’s a time set. You’ve got a lot of work to get through. You hustle, make as much progress as you can, and the buzzer rings and you’ve got to put your pencils down. Well that’s not the case for a large energy infrastructure project like Alaska LNG,” Carlstrom said. “Maybe that’s not the best analogy. What I want to get across is just because we’ve reached the end of the year, that does not mean we all have to put our pencils down and walk away and say, ‘Hey guys, that was a great effort and time’s up.'”

 The key, Carlstrom said, is that all of the partners are still negotiating — so it’s not time to end the engagement yet.

 This isn’t the first deadline the project has missed.

First, there was the soft deadline that Walker gave the project to find its footing and a market for North Slope gas reserves. That was September of 2017.

While the project generated some interest, it didn’t get any firm commitments from customers or investors.

Then they were operating under a Dec. 31, 2017, deadline to find a customer for the project.

That didn’t happen either, though the state corporation did sign a non-binding agreement to explore possibilities with three businesses in China.

If this latest six-month extension goes through, that pushes the deadline to get these key commercial deals to June of 2019.

That’s well after lawmakers will have to decide whether to give the gas line corporation more funding for the project.

But some lawmakers are more focused on the regulatory process — that is, federal environmental review and go-ahead to build from the Federal Energy Regulatory Commission, or FERC.

Sen. Natasha Von Imhof, R-Anchorage, questions representatives from the Alaska Gasline Development Corporation during a Senate Finance meeting focusing on the corporation's budget on Tuesday, February 14, 2017, in Juneau, Alaska. (Photo by Rashah McChesney/Alaska's Energy Desk)

Sen. Natasha Von Imhof, R-Anchorage, questions representatives from the Alaska Gasline Development Corporation during a Senate Finance meeting focusing on the corporation’s budget on Feb. 14, 2017, in Juneau. (Photo by Rashah McChesney/Alaska’s Energy Desk)

“To me, a greater factor is to further analyze the positive potential impacts of having a FERC permit in hand for AKLNG. That’s compelling to me,” said Senate Finance Committee co-chair Natasha Von Imhof, R-Anchorage.

Von Imhoff said her focus is on the regulatory side because, when it comes to commercial agreements like finding buyers and investors for the mega-project, things don’t look good.

She points to recent headlines from the Permian Basin. There so much natural gas in parts of Texas and New Mexico that it’s sometimes worthless.  The Wall Street Journal reported that some producers are even paying to have it taken off of their hands.

“So I look at that, and I think to myself, ‘Why would any buyer at this point lock in a long term contract when the price of gas potentially could go down?'” she said. “It’s just a tough market for Alaska at this point.”

Von Imhof isn’t the only one with an eye on the federal permitting.

Another finance committee member, Sen. Lyman Hoffman, D-Bethel, told Bethel’s KYUK that over the last eight years, the state has spent over $1 billion on studies and working toward permits. So it needs to see that process through to the end.

One other complicating factor? Oil prices have taken a nosedive, and Alaska is still struggling to close a budget gap that’s at least a billion dollars.

Von Imhof said the state’s gasline corporation will have to justify any new spending — and prove that it can run a lean operation.

 

 

 

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