Mayors feel left out of natural gas pipeline negotiations

Four mayors from across Alaska sent a letter to Gov. Sean Parnell dated Feb. 11, expressing concern about their lack of involvement in the ongoing natural gas pipeline negotiations, and what those negotiations mean to their respective communities, particularly regarding taxation. (Read the letter here: Gasline Letter)

Although the mayors write that they are encouraged by the project, “we have become concerned about the lack of information provided to municipalities regarding the impacts of the ongoing negotiations, particularly local government concessions that may be considered during pending gas pipeline negotiations with the North Slope producers,” the letter says.

It is signed by Kenai Peninsula Borough Mayor Mike Navarre, Valdez Mayor Dave Cobb, North Slope Borough Mayor Charlotte Brower, and Mayor Luke Hopkins from the Fairbanks North Star Borough.

The state has been negotiating terms with the major producers and TransCanada under which a large diameter pipeline would be built. The pipeline, one of the largest projects in the world, would snake from the North Slope to tidewater in Southcentral Alaska and is estimated to cost up to $65 billion. Legislation is currently being considered which would give the state power to further negotiate fiscal terms. Among them are terms that could involve local property and infrastructure taxes, which are the charge of local governments.

“We are willing to be a party to such agreements provided that we have the opportunity to participate in the discussions, and to negotiate and agree to terms that will directly impact municipal tax structure and revenues,” the mayors write.

Contact Amanda Coyne at


20 thoughts on “Mayors feel left out of natural gas pipeline negotiations

  1. Ready

    Note how many are ready to go back to the old days of dog sledding. Must be the Iditarod Syndrome ad nauseum.

  2. Danny G.

    Anyone who runs out and buys real estate waiting for the economic boom from a gas pipeline being built is a fool. I learned this. The hard way myself the last time the state and the producers were in discussions. Let’s hope this time is different. I think including some of the mayors makes sense.

  3. Jon

    Lynn if you listened to Steve Butt’s testimony you would have heard about all of the work and money they have spent on all three components of this project. You cannot transport Alaska gas without treating it at Prudhoe. The gas treatment plant will cost north of $10 billion dollars. The companies have done a significant amount of work on the plant. The companies have also done a considerable amount of work on the pipeline – at least north of livengood. And unlike AGDC they have made progress on the LNG plant. They havr also spent close to $2 billion at Point Thomson – which is a project that only makes econlmic sense if there is a big gas pipeline….The producers and TC still have a ways to go to get a handle on the costs of the project, but one cannot deny that they have done a considerable amount of work. It is only after they have a handle on the costs that they can figure out how much they need to sell the gas for to make the project economic. Only in an insane world would someone think a company should sanction a project this massive and complicated without knowing the costs and permitting requirements.

  4. Jon

    Amanda – First of all, the state has met repeatedly with REI. REI initially said it needed LNG by 2018 or so but nobody could deliver by 2018 so there wasn’t much the state could do other than encourage REI to meet with the producers and Fauske. To the extent that REI is still interested in Alaska gas, the legislation that the Administration is trying to get passed will allow the state to begin real negotiations so it can engage with REI and others to sell the State’s gas.

  5. Lynn Willis

    I am a consumer who, like many Alaskans, cannot afford gas at any price. If importation is cheaper, so be it.
    If Steve Butt’s consortium has actually spent all this money to date they need to tell Joe Balish and Michael Pawlowski of the Parnell Administration unless they spent that money since February 7, 2014. According to the administration’s 7 February presentation to the legislature from their slide (page 3) “Where We Are Today” the State has already spent 330 million in payments to Trans Canada and another 130 million has been spent to date by Trans Canada. This does not include serious bucks for breach of the AGIA contract if we don’t partner with Trans Canada and payment of that last 130 million. The presentation also indicates that BP and Conoco have spent to date 200 million on the ill fated Denali plan. Neither of these proposals resulted in a project. These expenditures would account for the millions you correctly observe have been spent to date; however a lot of that money has been spent by the people of Alaska. Also, who really knows what caused BP and Conoco to separate themselves from Exxon and Transcanada to attempt the Denali project and is that animosity going to return? Again, no producer applied to the AOGCC to send gas off the slope during these efforts.
    Now we face another 4 years and hundreds of millions for AKLNG with “off ramps” aplenty for the participants while the expiration date of the Cook Inlet contracts approaches. Fauske’s AGDC is further along – it has an open season date.
    I did watch most of Steve Butt’s presentation at the lunch and learn. He presented a interesting and encouraging scenario with yet again, no commitment to apply to the AOGCC to release the gas for the AKLNG project. As I understand he situation, when the producers announce the volume of gas they want to release for the AKLNG or AGDA and the date that they will apply for that gas then they are serious. Why would we spend another state dime without that commitment?
    The ADGC line is still bound by the AGIA restriction of 500 million cubic feet per day. AGIA is still very much in effect until we pay to exit them to dissolve the contract or pass SB 138. Is the AGIA restricted volume now much less likely to not interfere with future oil production than the much greater AKLNG volume? Who knows what the AOGCC will say until they are asked formally.
    Now I also understand we are going to be delivered gas that has had the valuable liquids removed. I thought the liquids are what are used for plastics and other chemicals. So what does that absence of these liquds portend for any future development of a petrochemical industry in Alaska including the re-opening of the Agraium plant?
    Many issues need to be resolved. All Alaskans need to pay attention to this issue.
    P.S. Wasn’t Ayn Rand a TAPS welder dispatched from Tulsa?

  6. admin

    Amanda here. Please tell me if I’m wrong, but REI has for years trying to enter into official negotiations for years. They want to deal with the state, not so much with the producers. But they can’t seem to get anybody’s attention. At least that’s been my impression. Again, tell me if I’m wrong. Thanks.

  7. Jon

    You need to let go of this concern about the AOGCC. There is ZERO chance that the state is going to let offtake rules kill a project that will create thousands and thousands of jobs and generate billions in revenue for ths state every year…..But this issue does provide part of the explanation for this time may be different – if a gas project went forward years ago the state would have lost a ton of oil at Prudhoe. This is no longer a concern given the life of the field.

  8. Jon

    Lynn, we are not at square one with the AK LNG project. Watch Steve Butt’s testimony from several weeks ago – the progrss has been substanial. The companies have spent hundreds of millions of dollars advancing the project which includes three main components: gas treatment, pipeline, and LNG terminal. They have done a significant amount of work on the gas treatment plant, which will have to reinject 400 Tcf of CO2 over the life of the project back into the ground. This gas treatment plant will be one of the largest in the world. The companies have also completed significant amount of engineering and permitting work on the pipeline and the LNG plant and they are currently in the process of acquiring about 600 acres of property in Kenai for the LNG plant. Please do watch the testimony – Steve Butt testified before Senate Resources and House Resources and then explain to me how you can say this project is at square one.

    Also I’m curious: Why do you have so much faith in a govt run project that is driven by timelines instead of economic realities and lead by someone who has zero expertise in this world? Why is someone like mike Hawker, who is a big fan of Ayn Rand, such a big proponent of a government run pipeline project that makes little economic sense?

    Finally, do you think REI is interested in making sure Alaska receives a fair share of value from this project? My hunch is that they will want the state to heavily subsidize the project and receive as little as possible in value. I’m not sure why you have little skepticism for REI and its intentions.

  9. southsider

    I think the oil companies are playing the state like a fiddle. Geewhiz, the state starts making progress on the ASAP gas line and CHAZANG now the producers are talking like DUDE, let’s build a big line. Reality is that the producers are all talk. Thank goodness for the mayors or for anyone who has the smarts to question what Parnell and his F-Troop style of commissioners are doing. Alaskans should rise up and tell state officials to build the ASAP line now. Fauske’s team is ready to go. They even have an investor and buyer. But, the state will be fooled by the producers and once again an opportunity will be lost. Remember this at the ballott box.

  10. Lynn Willis

    Currently two pipelines are on the drawing board. What could be called “son of AGIA” or AKLNG and the AGDA/ASAP line formerly known as the bullet line. Obviously both will not be built. We are at square one with AKLNG. According to the Administration’s briefing of 7 February titled “Introducing SB 138” perhaps 4 years must pass and upwards of 300 million dollars must be paid to proceed to the final investment decision and construction phase.

    If we don’t include Trans Canada in the arrangement and fail to pass SB138 (or the house version of the same bill) we are on the hook for possible damages to Trans Canada for breech of contract from AGIA and to pay them an additional 130 million dollars for technical data, some of which is not germane to the line to Nikiski.

    Meanwhile, while not an assured deal, AGDA/ASAP has proceeded much further. On Wednesday of this week, Amanda Coyne (her article appears on this web site) published the news that AGDA has been contacted by Japan Resources Energy Incorporated (REI) who is showing interest in the AGDA/ASAP line.. Of paramount interest was the statement by Dan Fauske of AGDA ” “REI would be an excellent anchor tenant” for the project as it heads to open season in 2015. and: “Today’s presentation reaffirms our belief that we have a commercially viable project capable of delivering gas to Alaskans by 2020,”

    Several valid questions need an answer before we proceed any further including the issues raised by the local Governments. The most critical question is will the producers now request the AOGCC to approve release of the volumes of gas necessary to support the AKLNG or ADGD/ASAP projects? If the producers will not request release of the gas and AOGCC doesn’t agree this is the best use of the gas rather than using it to extract oil, we are wasting a lot of time and effort other than for perhaps a poltical gesture to appear we are making progress. Never forget, gas supply contracts based on proven reserves in Cook Inlet expire in 2018 so importation is still a very real possibility.

  11. Jon

    Because the state already has a contract w Transcanada and much of the work that they have done to date can be used on this project. The question is whether we want to continue to build on the the substantial progress or start over w a new pipeline company, waste years and pay Transcanda for all of its work. Moreover they are one of the best at building pipelines in arctic environments. Seems smart to me to leverage this expertise and keep the momentum moving forward.

  12. Pipe Dreams 101

    How is this dance different than all the others. The oil comppanies will do it when they are good and ready. To me this is all an ct of imsanity. They’ll build it when they are good and ready and not one second before hand.

  13. yahoo subscriber

    Can someone explain to me why Trans Canada is getting a sole source deal ? Aren’t there other pipeline companies, maybe even American ones, that could do the same work ?

  14. TUK

    This article and some of the comments left illustrate the sad state of affais associated with the administration’s handling of the MOU. If nothing else, it demonstrates the lack of confidence people have in the Parnell administration, namely his commisoners. While the Parnell cabinet has some outstanding commissioners, some are better than others and a few are just simply either over their heads or grossly incompetent. Losing DNR Commissioner Dan Sullivan, at this critical time, certainly created a void. This is no criticism of the current DNR commissioner; rather, just an observation commenting on Sullivan’s expertise. The Governor and the legislature needs to do more to create additional trust with the public and create greater transparency and room for public input and participation. The level of questioning the folks presenting information on the project less far leaves a lot of doubt. Some of the questions appear to show that individuals either weren’t paying attention or are unable to grasp the issues before them. God help Alaska.

  15. Jon

    What questions would you be asking that the legislators are not? How exactly has Cheniault advanced this project?

  16. Jon

    People need to understand that the Parnell adminisitration is asking the legislature to agree to a process that will address these issues at a later date. Moreover the legislature, and not the administration, will be responsible for passing legislation that sets the tax rates. The focus really needs to be on one question: what can the state do to help make this project become a reality? We know that there are a LOT of projects competiting for a limited market. Instead of snipping at each other and playing politics we need people to ask what needs to be done to make a large scale LNG project succeed. To that end, the local govnermente need to start thinking about how properly taxes on this project can be structured in a way that makes the Alaska project more competitive than rival projects in Australia, Canada, the lower -48, Russia, east Africa, etc. Otherwise all of this talk about how much revenue this project should generate for local governments is just pointless chatter.

  17. Soldotna Salmon Fisherman

    Been watching the legislative hearings on the gas pipeline on gavel-to-gavel. The questions our state legislators have been asking are sophomoric at best. I have real concerns about this administration’s ability to competenntly manage the negotiations to insure Alaska’s interests are well served and protected. I do have confidence in some of the leadership from the Kenai Borough and am glad Mayor Navarre is a signatory to this letter sent to Governor Parnell. I have a lot of respect for Speaker Mike Chenault and Senator Pete Micciche to understand and do the right thing. I think that Navarre, Chenault and Micciche can be counted on to do the right thing for Alaska. Also, I don’t think the media or the public fully recognize the significant role that Chenault has played in advancing this project. Now, my greatest fear is that the state gets bamboozled at the negotiating table.
    Local governments will be impacted. Their inclusion into the process, in some capacity, will make for better public policy.
    One final point directed to Democrats, Senator Pete might work for an oil company but he is an Alaskan first and has the kind of integrity that will do the right thing when it comes to the gas pipeline.

  18. Brave the Winters in Valdez

    Governor Parnell should pay attention to the concerns of the mayors impacted by the gas pipeline. Their inclusion is not only right, it also makes for good politics. The more Alaskan eyes on the negotiations and contract, the better the document will be for Alaskans. While I have tremendous respect and trust for Governor Parnell, I think that Exxon’s lawyers out class our staffs at the department of natural reouces and that of our attorney general’s office. On a deal as big as this, likely the biggest deal in the world, the governor should be careful to insure that we are not out classed at the negotiations table. , especially for the sake of political expediency.

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