With negotiations delayed, Administration proposes $7M cut to gas line budget

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State officials have put a number on how much they will trim from next year’s budget for marketing liquefied natural gas from the proposed pipeline: $7 million.

Gov. Bill Walker at a press conference in the Capitol, Oct. 23, 2015. He announced that he was dropping a proposed natural gas reserves tax from the special session agenda. (Photo by Jeremy Hsieh/KTOO)
Gov. Bill Walker (File photo by Jeremy Hsieh/KTOO)

That’s the cut Governor Bill Walker’s administration will make to its budget request. It reduces the number of companies marketing gas to customers in Asia from three to one.

Deputy Natural Resources Commissioner Marty Rutherford told the House Finance Committee Tuesday the change reflects slow negotiations with the state’s three pipeline partners. As well as the low price of gas.

“The commercial negotiations have not moved as expeditiously as we would have wished, um, and recognizing the reality of the environment we all are living in,” Rutherford said.

The state originally asked for $35.7 million for the AK LNG project in the coming budget year. Now it’s asking for $28.7 million.

While negotiations are slow, the state still faces a tight window for completing the project.

Between seven and nine years from now, many contracts in Asian countries will be up for renewal.

Rutherford said some of these contracts won’t be renewed because the current suppliers are tapped out.

“And growth for LNG demand is fairly flat,” said Rutherford. “It’s not forecast to grow at a very strong rate over the next 10 years. So trying to respond to that market window, if you will, is a very critical issue for the state of Alaska.”

Walker and leaders of ExxonMobil, BP and ConocoPhillips announced last week that they’re exploring options to advance the pipeline. They said they’ll provide more details next month.