Governor: ‘Significant’ issues must be resolved before gasline session

Negotiations on Alaska LNG Project agreements with the state of Alaska are at a critical juncture, Gov. Bill Walker said in an interview Friday.

“We’re not as close as I wish we could be. There are a number of significant issues we have to get closure on,” before legislators can be notified of a special session to ratify the gas agreements, the governor said.

Walker must inform lawmakers 30 days in advance of a special session, so the notification for a mid-October session, which is the governor’s and legislators’ goal, would be mid-September.

Meanwhile, negotiations on critical items were to continue through the Labor Day weekend, the governor said.

Among the key issues still unresolved is a “gas balancing” agreement among the three North Slope producers BP, ConocoPhillips and ExxonMobil, as well as the state, Walker said. This agreement would set out terms for handling gas supply to the LNG project if there is an upset in production or some other operational problem.

Walker said a priority for the state is a “withdrawn partner” agreement that would be a contingency in case one partner decides not to move forward at a critical point, such as a decision planned in 2016 to begin final engineering, or a Final Investment Decision that could come in 2018.

The governor said he doesn’t want the project halted if one partner balks, and an agreement on how other parties, including the state, would handle that if it were to happen is vital, he said.

There is no agreement on fiscal terms either, a must-have for the North Slope 

producers, Walker said. However, there is now a general agreement on the structure of a Payment-in-Lieu-of-Tax, or PILT, that would provide an alternate way of paying property taxes imposed on the project by municipalities and the state.

The PILT is part of the fiscal terms deal because the property tax, under current conditions, could impose a $1 billion annual tax burden on the project and that could vary if there are disagreements and lawsuits, which has happened with property taxes levied on the Trans Alaska oil pipeline.

The governor also said that a consensus has been achieved with the producing companies on enlarging the pipe diameter from 42 inches to 48 inches, and that the industry partners would pay their respective shares of increased costs.

Walker proposed enlarging the pipe diameter earlier this summer to build in more capacity for increased shipments of gas.

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