The Morning Headlamp, 54 days until Juneau: Gov. Walker’s promises don’t match his actions …AKLNG project at risk…
“Wrong every step of the way.” In the wake of the latest self-inflicted challenge for the AKLNG project, the Alaska Journal of Commerce published an editorial chronicling Gov. Bill Walker’s failings and hypocrisies dating back to his time on the campaign trail.
“I’ll follow the process in place now, you bet I will. But at the first sign of delay, or someone says ‘we’re going to slow this down,’ that’s when the state needs to have a governor who understands what to do.’”—Candidate Bill Walker. This statement was made on the campaign trail but apparently was quickly forgotten. During the summer, Gov. Walker put additional demands on the state’s partners in the AKLNG project. Rather than trust the producers who have significantly more experience and expertise in developing large-scale energy development projects, the governor inexplicably urged a 48-inch pipeline to be studied instead of the more standard 42 inch pipe that had already been chosen based largely on its availability and well-established engineering specifications. That decision alone has added $30 million to the preliminary work.
“What I’ve said is that I will finish the project. I will not start over. I’m not interested in another start-over effort.” —Gov. Walker. In the meantime he’s changed the lead negotiator on commercial agreements three times, and replaced 6 of 7 members of the AGDC board, directed AGDC staff not to work on critical commercial agreements and asked the management committee to go back to the drawing board on pipe size and route.
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Walker starts over on AK LNG
Alaska Journal of Commerce, Andrew Jensen, November 24, 2015
When it comes to Alaska resources, president can’t see the forest for the tree
Alaska Dispatch News, Sen. Cathy Giessel, November 24, 2015
Alaska Buys TransCanada Stake in LNG Project — Energy Journal
Wall Street Journal, Christopher Harder, November 24, 2015
Alaska Energy News
Despite LNG, 2016 promises to be a grim year for B.C. oilpatch
Alaska Highway News, Johnny Wakefield, November 23, 2015
Oil companies lose pipeline case that could be worth hundreds of millions to Alaska
Alaska Dispatch News, Alex DeMarban, November 24, 2015
55 days until Juneau: Walker’s “consolidation” of leadership raises more questions for state gas team while Dec 4 vote approaches
Drama and Mega Projects-an odd couple. Coverage continues to focus on Walker’s leadership changes in the Alaska Gasline Development Corporation, as emphasized by the Alaska Public Radio News piece that focused on the Governor’s consolidation of the state’s gas team decision-making at AGDC. More and more lawmakers have begun to criticize the Walker administrations behavior, including State Sen. Anna MacKinnon (R-Eagle River) who confessed, “I have no idea who’s leading this project, absolutely not.”
In addition to Sen. MacKinnon, House Speaker Chenault said, “I’m worried the Governor’s recent moves and indecisiveness has jeopardized our relationships with our partners and is bringing a real cloudy outlook as to whether the project will continue after Dec. 4.” The project has always had resounding support from the legislature for obvious reasons, but recent leadership drama and the administration’s distrust of standard business practices, has Alaska’s lawmakers growing increasingly more concerned with the project they once knew.
On December 4th, the state and its industry partners in AKLNG will vote on whether to approve funds for next year’s work on the project. Until the recent shake-up at AGDC, it was thought that the state’s vote, in favor, was a foregone conclusion. But at the press conference Saturday, Walker said the state isn’t yet ready to cast that yes vote. First, he says, he wants assurances from the state’s partners that if any company pulls out, it won’t then withhold gas it controls from the project. “By approving the work plan and budget today, there’s no incentive for us to receive those assurances or not,” Walker said. “We do have leverage. Leverage is not a bad thing.”
Leverage: increased means of accomplishing some purpose. Headlamp hopes that the Governor’s purpose is to move the AKLNG project forward, as he promised to do in his campaign, and not to derail Alaska’s best opportunity for a strong economy. Help us spread the word. AK Headlamp is growing quickly, but we need your help to spread the word. Tell your friends, colleagues, family and more to sign up today for the latest in AK energy, politics and industry. Tell them to sign-up online now here: http://bit.ly/1OdpLVY
Tesoro buys some Flint Hills assets but not polluting North Pole refinery
Alaska Dispatch News, Alex DeMarban, November 23, 2015
With replacements and resignation, Walker consolidates control of gas line project
Alaska Public Radio News, Rachel Waldholz, November 20, 2015
Senate Majority Anticipates ‘Yes’ Vote Natural Gas Pipeline’s Future
Sit News, November 24, 2015
Alaska Energy News
Independent power producers praise regulatory decision they say gives broad access to power distribution
Alaska Dispatch News, Suzanna Caldwell, November 23, 2015
Energy Downturn Spreads Beyond the Oil Patch
Wall Street Journal, Chester Dawson, November 23, 2015
Today, in the United States Supreme Court, nine Alaska organizations, representing thousands of Alaska businesses, filed an Amicus Brief in support of petitioner John Sturgeon.
At issue, for all Alaskans’ and the businesses represented by each of these trade organizations, is whether Section 103(c) of the Alaska National Interest Lands Conservation Act of 1980 prohibits the National Park Service from exercising regulatory control over State, Native Corporation, and private Alaska land physically located within the boundaries of the National Park System.
As noted in the brief, if the Ninth Circuits decision is upheld, consequences will be far-reaching, paving the way for federal agencies to curtail development on inholdings in all conservation system units in Alaska.
The following organizations are participating in the brief: the Alaska Miners Association, the Alaska Chamber, the Alaska Conservation Trust, the Alaska Forest Association, the Alaska Support Industry Alliance, Associated General Contractors of Alaska, the Alaska Oil and Gas Association, the Council of Alaska Producers, and the Resource Development Council for Alaska.
In addition, the following organizations have already provided amicus briefs in support of the petitioner: Arctic Slope Regional Corporation, Ahtna Corporation, Aleut Corporation, Bristol Bay Native Corporation, Calista Corporation, Doyon, NANA, Gana Yoo, Tihteet’ Aii, the State of Alaska, the Safari Club and the Pacific Legal Foundation.
To read the brief in its entirety, click here
The Morning Headlamp: Gov. Bill Walker replaces AGDC Prez Dan Fauske and other board members, bringing grand total to 4 AKLNG fires, 6 AGDC board changes…House lawmakers “gravely concerned”…
Business as usual. Northern Gas Pipelines covered the increasingly troubling fiscal situation in Alaska, specifically highlighting the current budget deficit facing the state in contrast to the increasingly dire investment climate. The coverage emphasized the fact that despite continued growth of the state’s fiscal and private sector job losses, the state seems to be conducting business as usual with their hiring practices and the AKLNG project is being delayed and distracted at every opportunity.
Yet another AKLNG shake up. Friday saw the departure of yet another Alaska Gasline Development Corp. member at the request of Governor Bill Walker. Dan Fauske, now former president of AGDC abruptly submitted his resignation to the board on Saturday morning and provided no explanation for the sudden departure. When asked about the leadership change, Gov. Bill Walker explained that he “felt we needed a change.”
This move occurred one day after Gov. Walker removed John Burns and Commerce Commissioner Chris Hladick from the AGDC’s board. Gov. Walker appointed former Fairbanks North Star Borough Mayor Luke Hopkins and Transportation Commissioner Marc Luiken to replace Burns and Hladick.
Lawmakers were quick to lament yet another significant change to the AKLNG megaproject and are starting to see a trend in Gov. Walker’s decision making. Majority leader Charisse Millett (R-Anchorage) described herself as “gravely concerned” and that “Firing everyone isn’t a good business strategy for such a complex project.” The shakeup means that six of the board’s seven members are now Walker appointees.
House Speaker Chenault also weighed in, remarking that, “It is bringing a really cloudy outlook as to whether the project will continue after Dec. 4.” Speaking on behalf of his colleagues, Chenault also bluntly stated, “We’re watching, Governor, and we don’t like what we’re seeing.”
Senator Cathy Giessel was in attendance at the Saturday AGDC board meeting and testified, asking the board to stay on track, and to move forward with their vote to approve the 2016 workplan and budget for AKLNG. Senator Mike Dunleavy testified, via phone, asking that the board publicize the results of the voting for the 2016 work plan and budget.
Help Us Spread the Word. AK Headlamp is growing quickly, but we need your help to spread the word. Tell your friends, colleagues, family and more to sign up today for the latest in AK energy, politics and industry. Tell them to sign-up online now here: http://bit.ly/1OdpLVY
Chair of Alaska gas line board is fired, replaced by ex-Fairbanks borough mayor
Alaska Dispatch News, Nathaniel Hertz, November 20, 2015
Alaska Faces Deficit While Labor Costs Seem Unscathed
Northern Gas Pipelines, Dave Harbor, November 23, 2015
Alaskan Governor appoints new AGDC board members
LNG Industry, November 23, 2015
Alaska Energy News
Italy’s Enid Plans to Pump Arctic Oil, After Others Abandon the Field
The Wall Street Journal, Eric Silvers, November 23, 2015
Following the Right Timeline – Speed Kills
While a number of factors including declining oil production amid low global oil prices has put a spotlight on Alaska’s struggling fiscal reserves, gas development projects like AKLNG represent a significant opportunity for the future of the state. But like any good thing, these things take time.
That brings us to Deadly Mistake #2: “I Want it Yesterday!”
With complex projects like AKLNG, there is a direct relationship between timing and project costs. The problem then becomes finding a balance between these two factors that ultimately have the ability to kill a projects future development. As we discussed in our last post, multi-billion dollar projects are fragile and need to be thoughtfully blueprinted and mapped out. Therefore it is imperative that we keep a methodical pace that doesn’t cut corners to quickly receive end gains.
According to IPA, pushing for a speedier process can result in a project potentially outrunning a number of key factors in their development, including:
- Basic technical data development
- Stakeholder alignment
- Permitting requirements
- Even the business deal
Large projects are tightly interconnected and cannot easily recover from a mistake made while cutting corners and “work around” strategies just simply don’t exist. But the worrisome part about this tactic is that an aggressive schedule seems to be exactly what the state’s team is pushing for- to move the project on a faster schedule. Rushing can increase the overall cost of the project, which would leave Alaska footing the bill.
This ties directly into IPA’s Deadly Mistake #3: “We’ll Just Work Out the Deal Details Later”
In addition to the nuts and bolts of the project, the contours of the business deal, especially between the resource holders and the project sponsors, must be thoughtfully worked out and decided on before finalization. According to IPA, what is done (and not done) on the front-end has more bearing on megaprojects outcomes than anything else.
Essentially the deal must shape the project; the project cannot shape the deal
Alaska’s project, which is the largest infrastructure project in North America, needs certainty and management that is best left to the private sector to lead. All parties must collaborate in good faith and take the necessary time to make thoughtful decisions that aren’t beholden to artificial deadlines and schedules.
Stay tuned for the next “Deadly Mistakes” post on Managing Costs and Accountability – Right Cost, Right People
The most recent monthly employment statistics posted by the Alaska Department of Labor (AKDOL) paint a disturbing picture.
17 private sector industries show job loss from August to October. 3 of those 17 sectors produce the highest paying jobs in the state.
Alaska state government, however, shows a gain of 900 jobs in that same time period. August – 24, 600; September – 25, 600; October 25,500.
Could this be true? At a time when we are facing a significant budget deficit – is the state really adding jobs to their payroll?
State education grew from 6,400 jobs to 8,100 in that same time period and local governments across the state added 4,600 jobs.
A growing government and a shrinking private sector. Stay tuned for updates. Headlamp hopes there is an explanation.
The Morning Headlamp, 59 days until Regular Session begins: Steve Butt at AKRDC conference gives his two cents
AKLNG official gives a status check. Yesterday marked the final day of the annual Alaska Resource Development Council conference featuring remarks from AKLNG senior project manager, Steve Butt. Butt explained that over $350 million has already been spent on the project’s Pre-Feed stage despite distractions and legislative complications. Butt went on to emphasize that all successful megaprojects like AKLNG have alignment to manage risk and reduce cost. Headlamp couldn’t agree more and hopes alignment is a priority for all parties involved.
Industry leaders talk oil and gas tax incentives
KTUU, Mallory Peebles, November 19, 2015
Alaska Energy News
Legislators to discuss Interior Alaska oil basin potential
Fairbanks Daily News Miner, November 19, 2015
Alaska LNG News
Borough officials brief Peninsula residents on AK LNG impacts
Alaska Journal of Commerce, Ben Boettger, November 18, 2015
The Morning Headlamp, 60 days until Regular Session begins: Schedule issues slow AKLNG progress…more urgency for Walker’s fiscal plan…$1 billion for Arctic investment…
Still work to be done. The Alaska Journal of Commerce covered the fact that despite the progress that has already been made on the AKLNG project, a long list of commercial issues have yet to be resolved. Gas balancing, withdrawn partners, and in-state sales agreements are just a few of the many issues still unresolved. Headlamp was surprised to learn at a recent AGDC meeting that the administration had directed their team to stop negotiations on everything but gas balancing and withdrawal agreements.
Please stick to the schedule. The Alaska Journal of Commerce covers developing reports that negotiations are causing serious delays in the AKLNG megaproject and that the team is already behind schedule. Part of that delay is due to the administration, who requested the Alaska LNG Project team reevaluate the use of 48-inch diameter pipe rather than 42-inch pipe. The decision on the pipe size must be made before the decision to move to front-end engineering and design, or FEED, which is currently estimated to cost the project partners a combined $2 billion, of which the state would be responsible for a quarter, equivalent to its ownership stake. As noted recently by a state gas team member, “it’s hard to make progress when the goalposts keep moving.”
$1 Billion into the Arctic. ConocoPhillips reportedly approved a $1 billion investment in Alaska’s North Slope, in the form of an oil production project. In fact, the recent lease sale of Alaska’s North Slope brought in several independent companies with interest of exploring the region. Headlamp is glad that the recent exits from Alaska’s North Slope haven’t totally dissuaded energy investment.
Walker’s plan is on its way. The Alaska Journal of Commerce reported that the plan state officials have been quietly working since last January on a plan to transform Alaska’s fiscal system has taken on more urgency. The plan, being labeled a “sovereign wealth” fund, would replace oil revenues with earnings from the $53 billion Alaska Permanent Fund. Legislators have voiced few opinions about the plan but some who did speak were cautious. Sen. John Coghill, R-Fairbanks, who is Senate Majority Leader, attended the Juneau briefing and complimented the governor for stepping forward with a plan, but had some mixed views.
Lengthy to-do list remains for Alaska LNG negotiators
Alaska Journal of Commerce, Tim Bradner, November 18, 2015
Administration will introduce bill to convert Fund earnings
Alaska Journal of Commerce, Tim Bradner, November 18, 2015
Lease sale on Alaska’s North Slope attracts independents, brings in $9.5 million
Alaska Dispatch News, Yereth Rosen, November 18, 2015
Schedule slipping on pre-FEED work, critical agreements
Alaska Journal of Commerce, Tim Bradner, November 18, 2015
ConocoPhillips invests nearly $1 billion on Alaska North Slope oil
KTVA, Liz Raines, November 18, 2015
Alaska Energy News
88 Energy Expands In Alaska
Oil and Gas Investor, Lauren Barrett, November 18, 2015
Alaska Financial News
Governor plans to boost community revenue sharing
Alaska Dispatch News, Alex DeMarban, November 18, 2015
The Morning Headlamp, 61 days until Regular Session begins: High salaries for Gov. Walker’s team…Final step of the TC buyout…Administration looks for validation
What Fiscal Deficit? According to an Alaska Public Radio News report, the recent revolving door of leadership within the state’s AKLNG team has led many to question the exorbitant salaries of some of the top negotiators for the state’s gas team. One negotiator has been paid about $120,000 a month since June, but doesn’t currently have a defined role on the gas team. Former lead negotiator Rigdon Boykin isn’t a state employee, yet as a consultant with the Alaska Gasline Development Corporation, or AGDC, his contract called for a salary of $120,000 a month from June through October — and $100,000 for the month of November. AGDC President Dan Fauske is slated to make $366,000 plus benefits this year. For comparison, the governor makes $145,000 a year. The Department of Natural Resources as a whole pays out only $1.1 million a year, plus benefits. Changes are coming, again, to the state’s gas negotiating team, what do four change in less than one year means for ongoing negotiations? Can Alaska afford to keep paying such large fees amid years of forecasted fiscal deficits?
Putting a bow on the buyout. The state gas line corporation will hold a special meeting Saturday to take the final steps in buying out TransCanada from the giant Alaska liquefied natural gas project considered critical to the state’s struggling economy. AGDC board members are expected to swiftly approve paying the funds, which were recently provided by the Legislature as part of a $160 million package for the state’s participation in the project.
Can someone check that? According to Alaska Dispatch News coverage, Gov. Bill Walker is looking for a financial consultant to review his administration’s fiscal plans for the next year, which is expected to include an overhaul of the Permanent Fund. The state Department of Revenue issued a request for proposals Friday for a firm that could give “external validation of this model and its assumptions.” The model in question is Walker’s proposed plan to convert the $52 billion Permanent Fund and other state financial assets into an endowment-like account that could generate $3.3 billion each year.
The future of Arctic drilling on thin ice. Following yesterday’s reports that Statoil will halt all Arctic drilling pursuits, many have come out against the current climate for business in Alaska. According to E&E’s Energywire coverage, Alaska’s senior US Senator Lisa Murkowski, blames recent federal regulations that “threaten to undermine Alaska’s economy, our security and our environment.”
Gas line team reshuffle puts scrutiny on high salaries
Alaska Public Radio News, Rachel Waldholz, November 17, 2015
AGDC to meet Saturday on TransCanada buyout
Alaska Dispatch News, Alex DeMarban, November 17, 2015
Walker administration seeks fact-checker for fiscal plan
Alaska Dispatch News, Nathaniel Herz, November 17, 2015
Statoil’s exit sets off alarm in Alaska
Energrywire, Margaret Kriz Hobson, November 17, 2015
Alaska Energy News
Murkowksi: White House an Alaskan oil killer
UPI, Daniel J. Graeber, November 18, 2015
The Morning Headlamp, 62 days until Regular Session begins: Bad news for AK Arctic Energy…AKLNG partner seeks cooperation from Washington…AK RDC conference looks to provide AK with more information about its future
Another Loss for Alaska: Statoil. The Wall Street Journal covered reports that Norway’s Statoil said Tuesday it had decided to exit Alaska, echoing a recent move by Royal Dutch Shell to drop plans for development in the near Arctic. Explaining its decision, Statoil said its exploration activities in the Chukchi Sea couldn’t compete with projects elsewhere.
US Senator and Chairwoman of the Senate Committee on Energy and Natural Resource Lisa Murkowski commented on the decision, expressing that she is “very concerned that, for the second time in as many months, a major company has decided to walk away from Alaska because of the uncertainty surrounding our federal government’s support for Arctic development,” and stating that “the real project killer was this administration’s refusal to grant lease extensions; its imposition of a complicated, drawn-out, and ever-changing regulatory process; and its cancellation of future lease sales that have stifled energy production in Alaska.” Headlamp laments the latest loss for AK industry, but also notes that this development highlights the need for Alaska to provide a stable investment climate.
CP Doubles Down on Cook Inlet LNG. Natural Gas Intel covered reports that ConocoPhillips Alaska Natural Gas Corp. has filed with the U.S. Department of Energy to extend LNG exports from its terminal at Kenai, AK. ConocoPhillips emphasized that approval will “provide tangible benefits to the local community by not only preserving gas well deliverability and enhancing the current supply security of Southcentral Alaska but also by providing an economic incentive and market opportunity for continued exploration and additional gas supply development in the Cook Inlet.” The plant in question significantly smaller than any associated with the AKLNG project, but represents a step in the right direction in seeking cooperation from Washington on the AKLNG project.
Alaska’s Resource Development Council’s annual Alaska Resources Conference is scheduled to begin tomorrow and last through Thursday evening. Notable events include a panel featuring Steve Butt, Mike Navarre and Dan Fauske to discuss the AKLNG project and a presentation by Governor Bill Walker. Headlamp hopes both forums will provide more details concerning the AKLNG project and the Governor’s fiscal plan.
Statoil Follows Shell in Quitting Alaska
Wall Street Journal, Kjetil Malkenes Hovland, November 17, 2015
ConocoPhillips Seeks Kenai, AK, LNG Export Reauthorization
Natural Gas Intel, Joe Fisher, November 16, 2015
Oil and gas lease sales scheduled for Wednesday
Juneau Empire, November 17, 2015
Alaska Energy News
Alaska holding out against emission-cutting policies
Alaska Public Radio News, Johanna Eurich, November 16, 2015