$50 million budget cut latest indicator of waning support for state gasline project

Sen. Cathy Giessel, R-Anchorage, and Sen. Mike Dunleavy, R-Wasill, listen to Alaska Gasline Development Corporation President Keith Meyer, aduring a Senate Finance meeting focusing oncorporation’s budget on Tuesday, February 14, 2017, in Juneau, Alaska. (Photo by Rashah McChesney/Alaska’s Energy Desk)

The head of Alaska’s Gasline Development Corporation (AGDC) is in China this week, working to attract buyers and woo investors into supporting a state-run LNG export project. Meanwhile, political support in Alaska for the ambitious project is waning.

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Earlier this session House Republicans fired a warning shot, threatening to cut millions from the corporation’s budget. Last week, the Senate unanimously voted to strip $50 million from its gasline budget.

The budget isn’t done yet, but if the Senate’s cut stands the state corporation tasked with building Alaska’s massive liquid natural gas pipeline will be tackling the $45 billion project with only $45 million in the bank.

Last week, the Senate moved to divert money set aside for the gas pipeline and instead use it to hire more state troopers and prosecutors and fund road maintenance.

Alaska Gasline Development Corporation President Keith Meyer, Alaska Gov. Bill Walker and Department of Natural Resources Commissioner Andy Mack discuss meetings with potential buyers of Alaska’s LNG during a press conference on Friday Sept. 30, 2016 in Anchorage, Alaska. (Photo by Rashah McChesney)

AGDC spokesperson Rosetta Alcantra said the cut could send a mixed message to potential investors.

“You know, there’s a lot of positive movement out there and from the perspective of potential customers, I don’t think that helps the message,” Alcantra said.

Alcantra said if the cut stands, the corporation will have to prioritize how it spends it money as it pursues the federal permitting, customers and financing it needs to build the project. She said it would be difficult to prioritize any one thing over the other.

“You can’t move forward without a (Federal Energy Regulatory Commission) license. You can’t move forward without a commercial interest either,” Alcantra said. “I can’t say one is more important over the other. I think they’re complementary and need to be operated on a parallel path,” Alcantra said.

Lawmakers on the House Finance committee told the Alaska Journal of Commerce earlier this week that they will reverse the cut.

But it’s another setback for the state’s ambitions of a gasline project.

The Alaska LNG project would connect two oceans and pipe natural gas from Prudhoe Bay to the Kenai Peninsula, then ship it to buyers in the Asia Pacific.

But there has been bipartisan doubt about the project since the state took the lead in late 2016.

Lawmakers grilled the corporation about its budget this session, questioning the wisdom of an Iditarod sponsorship and its decision to open offices in Tokyo and Houston.

Between the two lawmakers who created the state corporation — one launched an audit of it in December and the other, Rep. Mike Chenault, R-Nikiski, said he understands the legislature’s frustration with the corporation and the project.

“I know the people in my community, a number of them are frustrated because they’ve been told this stuff is happening and in all reality it’s not … We’re not checking things off the list in order to move forward,” Chenault said. “The list just keeps getting bigger.”

Chenault said he supports an LNG project, but he said the corporation has to prove that it makes good economic sense for the state to continue to invest millions in developing the project.

“Maybe they’re huckeldy-buck and everything is going hunky dory but that’s not the vibes that I get from talking to people around and people in the industry,” Chenault said.

Chenault said he’s heard a lot of confusion and complaints from constituents in his Kenai Peninsula District and hometown of Nikiski. The unincorporated town sits at the end of the proposed pipeline. Residents have seen several hundred acres carved out of the middle of the town to be potentially used as a site for a liquefaction plant.

Kenai Peninsula Borough Mayor Mike Navarre sent a letter to the corporation earlier this week criticizing its assertion that it will take just two years to make it through the federal permitting process and start construction on the project. He said the corporation could be building up false hope for property owners, contractors and job seekers in the communities that would be impacted by the project.

The House and the Senate will have a conference committee on the budget.  If the cut stands, Gov. Bill Walker could still veto it.

Grace Jang, the governor’s spokesperson, said he won’t comment on the pending cut until it reaches his desk.