The state’s partner in the AKLNG natural gas project says it’s ready to be bought out.
Vincent Lee, director of major projects development for Canadian firm TransCanada, told lawmakers Wednesday that if they don’t approve a buyout of its position then TransCanada will consider leaving on its own.
“We would definitely seriously consider that as an option,” Lee said during a House Finance Committee meeting, though the final decision would be left to the pipeline corporation’s board of directors.
The revelation came as lawmakers debate whether to allocate $157.6 million to pay for the state’s share of the first phase of AKLNG, a $45 billion to $65 billion project that would bring natural gas from the North Slope to Cook Inlet for export.
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.
In a morning hearing, the Senate Finance Committee sharply criticized the administration of Gov. Bill Walker when it failed to make the Alaska Gasline Development Corporation president Dan Fauske available for comment.
“We feel like we’re being stonewalled,” Sen. Peter Micciche, R-Soldotna, said.
After the committee recessed for a short time, Fauske was made available by phone to answer questions that continued in an afternoon hearing.
“We’re not here to torture folks from AGDC. We’re not. Really,” Micciche said after another round of at-times intense questioning.
In the House, things were calmer as Lee told lawmakers that yes, TransCanada has confidence in the AKLNG project, that it has confidence the state can proceed without it, and that AGDC is capable of taking over.
“We’re a strong believer of this project,” Lee said. “We think this is a good project. We think this project has a lot of potential.”
Even if the state-owned AGDC didn’t have the necessary expertise, Lee said the state’s other three partners in the project — BP, ConocoPhillips and ExxonMobil — do have those skills.
“Personally, I believe the three producers, with the depth of experience and knowledge of megaprojects would be able to carry out this project … without any difficulties,” he said.
Lee acknowledged that TransCanada’s interest in leaving the project began after the Walker administration made it clear starting in May or June that it was interested in buying out the company.
“The current administration has a different philosophy of how they see the role of the state of Alaska in the project,” Lee said, which led TransCanada to start looking for the exit. “I think we both decided this is probably the right thing to do.”