Final budget deletes receipt authority for state gasline corp.
The Legislature left plenty of items in Gov. Bill Walker’s budget and added to others, but it took out a key provision in the Alaska Gasline Development Corp.’s effort to bring the Alaska LNG Project to fruition.
Lawmakers pulled language allowing the gasline agency to accept outside funds from investors, known as receipt authority, for the $43 billion project in the 2018 and 2019 fiscal years.
AGDC President Keith Meyer said in a statement to the Journal that he and his team look forward to working with the Legislature on the important aspects of the project as it advances.
But lacking a substantial injection of new money could potentially challenge the ability of the corporation to stay on its desired schedule.
AGDC leaders expect to have $52.5 million at the start of the 2019 state fiscal year that starts July 1, according to documents from its May 10 board of directors meeting.
The state-owned corporation took over control of the Alaska LNG Project in January 2017 with $106 million remaining from prior gasline appropriations.
An austerity program instituted by AGDC leaders at that time has helped them under-spend on their budget by $35.7 million since, Finance Manager Philip Sullivan said at the meeting. As a result, the corporation should be able to continue operating on its existing funds through June 2019, according to Sullivan.
Senate Resources chair Sen. Cathy Giessel said in an interview that she believes AGDC can continue to advance the project’s environmental impact statement being drafted by the Federal Energy Regulatory Commission.
Senate Republicans by and large have been the most skeptical legislators about the administration’s plan for the state-led gasline.
FERC is expected to issue a record of decision on the project in March 2020.
Meyer said May 10 — before the final operating budget was passed — that the corporation would soon initiate work drafting contracts for engineering, procurement and construction, or EPC, management firms to finish designing and build the project.
The different aspects of the complex project — a North Slope gas treatment plant, 807 miles of buried, 42-inch pipeline, a very large LNG plant and marine terminal — will likely require multiple firms with varying areas of expertise to complete, according to Meyer.
He has said AGDC has been in discussions with EPC firms for some time.
Additionally, AGDC will soon be getting ready for an equity offering, Meyer said May 10.
Giessel said she wouldn’t expect the corporation to secure EPC firms with its remaining funding, adding that third-party receipt authority shouldn’t be confused with financing for the corporation.
“AGDC has plenty of revenue to continue on with the FERC process,” she said. “That’s what they need to focus on.”
With AGDC seeking non-recourse debt and equity to finance the vast majority of Alaska LNG from banks and third-party investors, many legislators are concerned granting the corporation the ability to accept those funds would be ceding most of lawmakers’ oversight of the project.
Giessel said AGDC leaders have yet to answer questions regarding how much equity ownership the state will have to give up and for how substantial an investment return among others.
“These questions have to be answered before the Legislature gives up its appropriation authority on this project,” she said.
The Legislature could revisit funding the project when it convenes next January if AGDC can provide more details on it, Giessel suggested.
AGDC spokesman Jesse Carlstrom wrote that as corporation officials work with Goldman Sachs and Bank of China to arrange third party funding they will continue to keep legislators informed on all aspects of the project.
“AGDC understands Alaska’s lawmakers are committed to making decisions that are in the best interest of all Alaskans,” Carlstrom said via email. “Throughout the remainder of 2018 and into 2019, AGDC will continue to present the Legislature with the information lawmakers need to make appropriate decisions for the responsible development of Alaska’s vast amounts of proven, stranded, North Slope natural gas.”
The House originally limited the receipt authority to $1 billion per year rather than the open-ended language in Walker’s budget. However, some in the Legislature were still concerned the administration could use a procedural maneuver to request unlimited receipt authority through the Legislative Budget and Audit Committee outside of the regular session — a request the Legislature would have no authority to deny.
Giessel also noted the Legislature did approve AGDC to use $12 million previously committed to the smaller, in-state Alaska Standalone Pipeline, or ASAP, project for the larger Alaska LNG export plan as the corporation had previously requested.
House Resources co-chair Rep. Andy Josephson, D-Anchorage, said he shares AGDC’s concerns about the appearance of the Legislature’s hesitancy to support the project.
“Markets and investors may be squeamish that we wont even agree to accept someone else’s money,” Josephson said. “I’ve been told it puts AGDC in a light they don’t want to be in.”
He said Walker could call a special session to resolve the matter if he feels it warrants such an action, but Walker said after the session ended May 13 he had no intention to do so for any reason.
Josephson noted further that if the Legislature would have acted before this year to implement a fiscal plan and drastically reduce the multibillion-dollar budget deficits it covered with the state’s savings for four years, lawmakers would have more flexibility to control the project.
“With $10 billion in savings we could’ve done it ourselves,” Josephson added.
Elwood Brehmer can be reached at [email protected].