Lawmakers considering a buyout of Canadian pipeline firm TransCanada are preparing to advance a plan that allows a buyout before an important Dec. 4 vote.
On Sunday, members of the House and Senate finance committees heard testimony about a new version of the buyout bill that is the sole topic of the ongoing special session. The new version increases accounting oversight and allows the buyout to happen by the start of December.
“Fundamentally, it will be an earlier date” than previously expected, said Mark Myers, commissioner of the Alaska Department of Natural Resources.
On Dec. 4, the companies involved in the AKLNG natural gas project will vote on their schedule of work for 2016. Lawmakers want to ensure the state has a full one-quarter voting share of the project in time for that vote.
Without special consideration, the buyout wouldn’t happen in time, hence the need for an accelerated timeline.
The Legislature has convened in special session as it weighs whether to allocate $157.6 million to pay for the state’s share of the first phase of AKLNG, a megaproject that would take gas from the North Slope to Cook Inlet at a cost of between $45 billion and $65 billion.
To avoid paying up front for its one-quarter share in the project, the state entered into a contract with TransCanada. Under the terms of the agreement, TransCanada pays all of the state’s direct costs until construction begins, then half of the state’s share of construction costs. In return, the state gives TransCanada a cut of its revenue once gas starts flowing.
If the pipeline deal falls apart for any reason, or if TransCanada wants to walk away from it, the state must repay TransCanada every dollar plus 7.1 percent interest.
That’s a high interest rate compared to the open market, which is why the state is considering a buyout and has earmarked $68 million of the legislative request to take an “offramp” built into the TransCanada contract. If the state doesn’t act by Dec. 31, its next offramp is years (and hundreds of millions of dollars) later.
The Legislature is expected to approve the buyout and end its special session by the end of the week.
