Jenkins: Let’s set an Alaska LNG deadline – and stick to it
By Paul Jenkins |
When will Gov. Bill Walker and the guys at the Alaska Gasline Development Corp. get around to admitting the handwriting may be on the wall when it comes to the massive Alaska LNG project?
With Alaska going broke, the public corporation, despite little tangible interest from gas buyers or investors, is ripping through $3 million a month in pursuit of Federal Energy Regulatory Commission approval for the $40 billion project. That would include a pipeline to move North Slope gas to Nikiski for liquefaction and transport to Asian markets.
AGDC Board of Directors Chairman Dave Cruz recently told members of the House and Senate Resources committees the corporation hopes to have a letter of intent from an Asian utility or industrial gas buyer by year’s end. Not a contract signed on the bottom line by a buyer or an investor, mind you, but a letter of intent. He conceded there likely will be no signed contract by the year’s end.
What’s missing in all that is the obvious: What happens if there is no such letter? What if nobody signs up and the so-called deadline, characterized by one observer wryly as a “flexible, weenie” deadline — is broached? What will the corporation do?
AGDC has enough dough squirreled away — an estimated $70 million, but who really knows — to go merrily on its way until the middle of next year. My guess is that if it fails to meet its self-imposed, self-servingly elastic “deadline,” it will chug along, eating cash by the truckload.
Its successes so far are nothing to write home about. What it is seeking by year’s end is not much either. In the world of deals, a letter of intent is just that: a letter of intent. Not a contract. It is slightly up the scale from having drinks, exchanging business cards, calling each other by first names, getting telephone calls returned or signing memorandums of understanding, but only by a sliver.
The AGDC does claim to have 17 signed confidentiality agreements in the bag and was reviewing 13 draft letters of intent. It inked a non-binding memorandum of understanding with Korea Gas Corp., but state-owned KOGAS has been signing toothless MOU’s with anybody who pays for dinner. Analysts say KOGAS plays off potential LNG projects against each other to wrangle better deals.
Alaskans have little idea of what AGDC is doing. It plays its cards close to its vest, not offering much detail, leaving Alaskans to ponder whether nebulous terms such as “engaged” with “potential buyers,” “opportunity,” “upside potential,” and “collaboration” mean anything or amount to pie-in-the-sky weasel-wording.
To be fair, it’s not all that much different from when the state’s former partners were in on the deal. The oil industry is notoriously tight-lipped, but that is private industry, not a corporation funded by state government.
The AGDC, apparently believing it is a private entity, is perhaps a little more pushy than the industry. Cruz even took a moment to chide lawmakers checking on the project’s progress for yapping to the media because negative stories affect project marketing. Loose lips sink LNG projects. He said it makes selling the line tougher.
But there are legitimate questions. After the expenditure of $500 million or so, BP, ConocoPhillips and ExxonMobil bailed out of the project late last year, leaving Alaska in charge or holding the bag, depending upon your point of view. They said the project was a loser. When Alaska took over, Walker gave Alaska LNG a deadline — Sept. 1 — to put up or shut down.
The AGDC offered what the Alaska Dispatch News described as a “lighter” version of an open season from mid-June through August, seeking non-binding deals to gauge interest.
After the Sept. 1 deadline came and went, Walker crowed there was “unprecedented” interest, that it would be “irresponsible” to kill the project. There is still, mind you, not the first signed agreement to buy gas or invest in the project. That is not unprecedented for this project; that is the history of this project.
As this expensive monstrosity chugs along, Alaska is facing a $2.5 billion budget deficit, lawmakers are going into their fourth special session to find some way to fix the mess, Walker is pushing for a 1.5 percent “wage” tax — an income tax on those with jobs — and Alaskans have been forced to give up half their Permanent Fund dividends to help fund government.
Nobody wants Alaska LNG to succeed more than I, but there comes a time when enough is enough, when wishes, dreams and squishy deadlines must be cast aside. Walker should chisel a contract deadline — not a pinky-swear deadline, either — in stone.
And stick to it.