ELECTION 2014

Gas pipeline megaproject's fate hangs in the balance of still-undecided Alaska governor race

Alaska's cliffhanger gubernatorial election is raising serious concerns about whether the state's major oil companies will continue to work with Alaska to build a proposed multibillion-dollar liquefied natural gas pipeline and export project.

Questions about the future of the Alaska LNG project emerged yesterday as the state Division of Elections began tallying roughly 22,000 absentee and early votes received thus far. An additional 16,000 absentee ballots were sent to voters and could still be on their way to the agency until Nov. 19.

As of Tuesday night, voters gave independent candidate Bill Walker a razor-thin lead over incumbent Gov. Sean Parnell (R). Walker is ahead by a mere 3,000 votes out of 224,541 ballots cast.

If Walker is elected governor, some oil industry supporters warn that the independent's pledges to renegotiate the terms of the Alaska LNG pipeline contracts could damage the state's dream of commercializing the North Slope's abundant natural gas reserves.

"The conventional wisdom amongst the oil and gas community and the business community here is that renegotiating the contract could set us back five to 10 years," said state Rep. Mike Hawker, a Republican from Anchorage.

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"Everything we've accomplished on gas pipeline development is at stake," Hawker argued.

Alaska Support Industry Alliance's general manager, Rebecca Logan, agreed, noting that Walker has described the Alaska LNG agreement as "fatally flawed."

"He would like to see the state have a 51 percent ownership [in the pipeline project] instead of the 25 percent that we have now in the enabling legislation," Logan said. "Changing the contract terms means jeopardizing where we're at right now."

At stake is a state-industry plan to build and operate a $45 billion to $65 billion large-diameter gas pipeline and export facility.

The Alaska LNG project, which is being managed by Exxon Mobil Corp. officials, would pipe North Slope gas to a liquefaction plant on the Kenai Peninsula and ship it to foreign markets. The pipeline would include five offtake points to funnel gas to local communities.

Partnering with the state on the pipeline are Exxon Mobil, BP Alaska, ConocoPhillips Alaska and TransCanada Corp. The state is represented in the deal by the Alaska Gasline Development Corp., an independent state-owned corporation.

In recent months, the partnership has filed preliminary documents with the Federal Energy Regulatory Commission for construction of the gas pipeline project and submitted a gas export application to the Energy Department (EnergyWire, Sept. 9).

Throughout the election campaign, Walker promised voters that if elected, he would make sure that Parnell's pipeline plan results in the best deal possible for Alaskans.

"The deal negotiated by the Parnell Administration puts most the decision-making in the hands of the major North Slope producers with no guarantees a pipeline will be built, or if it is, that it will be built on Alaska's terms or timeline," he noted on his campaign website.

Meanwhile, Parnell has repeatedly warned voters that a Walker victory would kill the state's long-awaited natural gas pipeline project.

Those charges were echoed by Steve Butt, project manager for the Alaska LNG alliance, who recently suggested that problems could occur if a new slate of state leaders tries to alter the legal business contracts hammered out over the last year for the pipeline plan (EnergyWire, Oct. 6).

However, Butt acknowledged that the oil companies have always understood the complications of partnering with the state. "We knew we'd have to work through multiple administrations," he said.

Not settled yet

Not all industry leaders believe that the election of Walker, an oil and gas attorney and former mayor of Valdez, would mark the end of the pipeline project.

"I don't think Bill Walker wants to mess it up or to set it back," argued Richard Rogers, executive director of the Resource Development Council.

"I'm hopeful he will recognize, 'OK, the campaign season is over. We need to roll up our sleeves and move this thing forward, because we're actually making more progress now than we have a long time.'"

Larry Persily, federal coordinator for Alaska natural gas transportation projects, observed that the Alaska LNG industry partners are unlikely to walk away from the massive project -- at least not anytime soon.

"The oil industry has people on contract doing winter work, poring over their field data and preparing their draft resource reports for FERC," Persily said. "They have 130 people in three cities, plus contractors. They're not going to instantly scrap that. Even if they wanted to, it takes time.

"I think they will be as patient as they can because they see the project as a good opportunity, assuming markets behave," he added.

"However, if Bill Walker insists on 51 percent state ownership, there will be some heated discussions at the negotiating table, I'm sure."

Meanwhile, Hawker pointed out that Parnell could still win enough absentee ballots to secure re-election. "The governor's race is not one to give up on yet," he argued. "The governor could still pick up about 54 percent of the remaining votes and come back into office."

The results of the governor's election are scheduled to be certified by state regulators on Nov. 28, with the victor to be sworn in on Dec. 1.

Twitter: @hobsonenergywire | Email: mhobson@eenews.net

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