Making the Public Sector Private… Or the Private Sector Public? Confidentiality in AKLNG – An Overview

With the Special Session winding down, the Headlamp now looks into the next issue facing AKLNG: proposed confidentiality regulations before the Alaska Gasline Development Corporation (AGDC). The case made by the administration for the new regulations is to promote transparency, and Headlamp thinks this is an excellent example of how public vs. private sectors view issues that are critical to project success.

Transparency at the expense of Alignment?

A strong case, made by the administration, for the termination of TransCanada was alignment. As noted by Dave Harbour in his public testimony, “how can there be alignment of the parties if one is bound by rules designed by the state…not to promote efficiency of the project, but to promote political transparency?”   Headlamp agrees with Harbour’s assessment that if we are going to be an aligned party on a $65 billion project, we must be able to execute the same confidentiality agreements as the private sector.  AGDC management also recognizes the problems this misalignment can cause.  When asked if they thought the proposed regulations would speed up or delay project progress, they answered that it would slow the project.

Moreover, the state already operates in this manner where government equity is participating in private sector  projects with other state-owned corporations, like AIDEA , the Alaskan Energy Authority and the Permanent Fund – entities that have industry standard confidentiality agreements.    The State also has departments that have confidentiality provisions, like DNR, DOR, and others which is a necessary part of maximizing the value of Alaska’s resource development.

Additionally, if all of our discussions are public, it puts our potential gas buyers in a great position to negotiate against us in gas pricing.

Headlamp wonders: if AGDC is going to be operating in the open, unable to negotiate in good faith in confidential discussions with the state’s business partners, will all their deliberations go through the AG?  And who exactly is the AG’s “client” when he invokes privilege – AGDC, or the people of Alaska?  It’s a little more than ironic that the AG is pushing for “transparency” at AGDC but will not answer to the people’s elected leaders.  Senator  Peter Micciche expressed concern about a “firewall” being put up between the people and their government where there had never been one before.

What about Alaska Businesses?

Let’s remember that the AKLNG project isn’t, ultimately, a partnership between only the State of Alaska and its producer partners.  It’s a project that has, and will continue to involve, many Alaska businesses.  Alliance members have   been working for AKLNG more for than a year.  In fact, hundreds of Alaska entities have been involved in logistics and labor studies for AKLNG this summer alone, according to AKLNG.

Removing confidentiality makes Alaska businesses’ intellectual property and technological know-how open to the general public.  While some disclosure is absolutely necessary, a broadly defined definition could put Alaska businesses working on AKLNG at a competitive disadvantage in the future.  Headlamp understands that the intent behind the move for transparency may be good, but the reality of it could hurt Alaska businesses – many of them members of the Alliance.

Where do we go from here?

Confidentiality is a common business practice for megaprojects like AKLNG that necessitate such an immense scope and represent such monumental financial commitments.  In the case of AKLNG for example, altering industry standard Confidentiality Agreements threatens the project’s ability to get the best prices for its gas.  Partner companies ExxonMobil, BP, and ConocoPhillips have already expressed concerns, stating the rules are “unnecessary and harmful,” as confidentiality is an “essential part of doing business.” Headlamp hopes that the AGDC gets this issue right.  There’s a lot on the line for Alaska’s future.