The following editorial first appeared in the Alaska Journal of Commerce:
There was a bit of a flare-up in the ongoing negotiations over the Alaska LNG Project last week between Gov. Bill Walker and ExxonMobil CEO Rex Tillerson.
In comments to Natural Gas Week, Tillerson said “Alaska is its own worst enemy” when it comes to building a natural gas pipeline and according to the article Tillerson made no effort to hide his frustration with the current effort begun under former Gov. Sean Parnell and now being revised constantly by Walker.
Tillerson said that Alaska’s frequent changes in direction coinciding with each new governor are the biggest obstacle to building a $50 billion-plus project.
Walker — who has appointed three different lead negotiators for the project in barely nine months in office, proposed and then abandoned a competing state-owned project, wants to buy out TransCanada and finance the state’s entire 25 percent share and floated the idea of a “gas reserves tax” to legislators — brushed aside Tillerson’s critique by saying that companies are “uncomfortable with what we’re trying to do, in taking a much more aggressive role in moving the project along.”
The trouble with Walker’s defense of his actions to date on the Alaska LNG Project is that his aggressiveness is actually not moving the project along. It is slowing it down.
Since the end of the 2014 legislative session, it was always the goal to have a special session this fall to present agreements for approval to the Legislature. According to Walker’s gasline staff, that is looking increasingly unlikely.
Further, if fiscal terms that both state and industry partners now agree will have to go before the people in the form of a constitutional amendment can’t be presented in the next session, we will lose two years before it could go on the November 2018 ballot.
Walker offered another dig at ExxonMobil by leaving it out of the companies he was pleased with on progress so far, mentioning BP and ConocoPhillips.
Walker visited the North Slope earlier this year for the first time, but perhaps he should make another trip out to Point Thomson to see the — literal — heavy lifting ExxonMobil has been doing on the Alaska LNG Project.
On Sept. 8, the company announced that gigantic gas processing modules had arrived via four barges at Point Thomson after a 4,000-mile voyage from Korea. The company remains on track for first production in the first quarter of 2016 when it will begin transporting 10,000 barrels per day of natural gas condensate via a 22-mile pipeline to the Trans-Alaska Pipeline System.
ExxonMobil owns 62.2 percent of Point Thomson (BP is the other major owner at about 31 percent) and is shouldering a corresponding share of the $4 billion project cost.
It’s important to remember that the Point Thomson settlement reached between the state and ExxonMobil in 2013 under Parnell was the first step in creating the Alaska LNG Project. Some 25 percent of the natural gas that will eventually feed the pipeline will come from Point Thomson.
Were ExxonMobil really not that interested in pursuing the Alaska LNG Project, it would have been far more cost effective to keep paying legal bills and string the issue out in court rather than commit about $3 billion in capital on this massive engineering and logistical challenge. It has spent 70 percent of that money in Alaska with 99 companies and achieved an Alaska-hire rate of about 90 percent.
ExxonMobil, along with BP, has also applied for additional gas offtake at Prudhoe Bay in order to supply the Alaska LNG Project. Again, this is not the action of a company that isn’t interested in keeping this project moving.
Every action they have taken in terms of permitting, engineering and actual expended capital indicates ExxonMobil is doing its part to advance the Alaska LNG Project. If the company is holding a tough line on fiscal terms it is only natural considering its level of investment to date and its status as the largest gas owner in the project.
Nearly every action Walker has taken indicates he is more interested in putting his stamp on the project and deviating from the path he inherited at every point possible.
The greatest enemy of this undertaking is uncertainty, and unfortunately it is Walker who is creating it.