Analysis: Governor’s firing of 3 AGDC board members may backfire

The state’s political and resource communities are still buzzing about Gov. Bill Walker’s sudden firing Jan. 6 of three Alaska Gasline Development Corp. board members and his order that new board members not sign confidentiality pledges.

Besides the political theater, the concern is whether this might impair the state corporation’s ability to make decisions — and participate–— in the big Alaska LNG Project, where the state is a partner with industry and a 25 percent equity owner.

Political transitions can be messy and firing people in government, particularly prominent citizens who are members of boards, is rarely done easily or smoothly. Each change of administration has its tales of fumbles and hurt feelings.

One memorable example is that of how former Gov. Sarah Palin fired John Bitney, her legislative director. Bitney learned he was suddenly unemployed when he discovered his state-issued Blackberry wasn’t working — it had been disconnected — while he was driving the Alaska Highway en route to Juneau.

Walker’s action Jan. 6 seemed hasty and even clumsy. The announcement went out while the board members were preparing for board meetings Jan. 7 and 8.

Legislative leaders like House Speaker Mike Chenault, who are supporters of AGDC, were not informed in advance. Neither were AGDC board members who were retained, like former state Attorney General John Burns, who chairs the board.

Drue Pearce, one of the fired board members who is a former Senate president and U.S. Interior Department official, said she learned of her termination at 5:30 p.m. Jan. 6, three hours before the press release was published, when Walker’s Chief of Staff, Jim Whitaker, telephoned.

“We had a pleasant conversation — we knew each other from having served together in the Legislature — and he told me ‘Drue, it’s not my choice, but the governor wants his own people on the board,’” Pearce said. “I told him I had enjoyed serving on the board, and said that if there was anything further I could do, I would be happy to help.”

Al Bolea, a retired senior BP manager, didn’t get the courtesy of a phone call. He learned of his termination by email. Dick Rabinow, a 34-year top ExxonMobil official and former president of ExxonMobil Pipe Line Co., got his phone call the night of Jan. 6 as his plane landed in Anchorage.

Rabinow was due to attend an AGDC technical working group meeting set for Wednesday, Jan. 7, in which new cost estimates for the ASAP 36-inch pipeline were to be finalized. Some of the information presented was confidential.

Dave Cruz, another board member retained, and who previously signed a confidentiality agreement, attended the working group session. Two new members, Labor Commissioner Heidi Drygas and Acting Commerce Commissioner Fred Parady, could not attend the technical session because they were not allowed to sign the agreements.

In his Jan. 6 press release Walker cited no reasons for firing the three board members but in an interview with a reporter the governor said he wanted greater “geographic diversification” of the board. Grace Jang, Walker’s spokeswoman, said only Alaska residents are being considered for the new appointments.

House Speaker Mike Chenault said Walker told him in a tense conversation that he would replace Rabinow, an experienced retired industry manager with extensive pipeline experience, with someone “of greater qualifications.”

Walker said in the Jan. 6 press release he was already soliciting potential new board members.

While no one argues the governor’s authority to hire who he wants for the AGDC board, there are concerns being voiced over the apparent lack of formal procedure to solicit names and vet applicants, which is customary in state government.

The governor has possibly reached out to people he knew, perhaps from his tenure as manager of the Alaska Gasline Port Authority.

Jang acknowledged the process is somewhat informal.

“The governor’s office has received unsolicited applications for the positions, as well as recommendations. Governor Walker will review all of them,” she wrote in an email.

Pearce said the big question now is what direction the governor wants to go on the gas project.

“I look forward to knowing what it is,” Pearce said.

Who is appointed to AGDC’s board may be less important than the issue over the confidentiality restriction of new board members.

In the press release, Walker said, “I am committed to transparent government in which Alaskans are part of the conversation about our resources. I cannot allow my cabinet members to sign confidentiality agreements meant to keep information away from the public.”

That sentiment is appropriate during the campaign but the day-to-day operation of government requires certain information to be held confidential and state laws provide for that, including for AGDC through its enabling legislation, House Bill 4 passed in 2013, which established the legal framework for the state gas corporation, and Senate Bill 138, which set out terms of the gas project partnership, passed in 2014.

Walker’s directive creates an awkward situation where some continuing AGDC board members, Burns and Cruz, owner of a construction company, are still under previously signed confidentiality agreements, while two commissioners who are board members, Parady and Drygas, have not signed, nor will the three new public members yet to be appointed by Walker.

That means that currently some board members will be privy to information that other board members will not. A similar situation exists in the Department of Natural Resources where Deputy Commissioner Marty Rurtherford, the department’s lead person on gas pipeline dealings, has signed an agreement, but Commissioner Mark Myers has not.

That means Myers, as commissioner and even Walker as governor, will be ultimately responsible for decisions without knowing the basis on which they must be made. 

For the near term, however, the issue unlikely will affect day-to-day decisions and interactions between AGDC and the private partners in AK LNG, said Miles Baker, spokesman for the state gas corporation.

Industry partners in the consortium led by ExxonMobil will not discuss any sensitive matters regarding the project with individuals who have not signed nondisclosure agreements, but the day-to-day contacts are handled by AGDC senior managers who are covered by agreement, Baker said.

The corporation’s board has approved a work plan for AGDC for its share of the pre-front end engineering and design, or pre-FEED, activity through to the end of calendar year 2015, Baker said, so there is no need for board decisions unless there is a revision or an authorization is needed for certain work to extend into early 2016, he said.

The AK LNG Project group hopes to have pre-FEED activity finished up in early 2016 so that a decision can be made to proceed to the full FEED activity, which will set the stage for a construction decision in 2018 or early 2019.

In day-to-day interactions, budget decisions and the periodic “cash calls” from ExxonMobil, the project leader, are of most concern. When a cash call is issued, the partner, a company or the state, must make payment within 10 days or pay substantial penalties.

Decisions on funding cash calls can be made by AGDC senior staff, Baker said.

However, there are confidential negotiations underway now between the state and industry over the commercial structure of the project if it moves from pre-FEED into FEED.

This is on the form of the governing structure, whether the FEED work will all be delegated to one company or some governing board of all the partners will be established. This is the kind of high-level decision that should involve AGDC’s board.

Another commercial-type change could come if AGDC becomes a formal party to the export license application made to the Federal Energy Regulatory Commission, or FERC.

The state is currently not a party to this application — it was made by the three producer companies who own gas — and the state may need to become a party to receive FERC approval to export state-owned LNG, which the partnership agreement provides for.

Also, the land being purchased at Nikiski, near Kenai, by the AK LNG Project partners is being done by the three producers with AGDC not involved so far, although the state corporation will directly own 25 percent of the large LNG plant to be built there. TransCanada is involved only in the pipeline and North Slope gas treatment plant, not the LNG plant.

Because land assets are being purchased to serve an LNG plant the state will partly own, AGDC will ultimately have to become a party to the transactions.

 

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

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