MARCH 27, 2014

Representing District 15:
Midtown, University, and East Anchorage

I Answer to You!

Contact my office:
State Capitol Room 430
Juneau AK, 99801
(907) 465-4939
(800) 465-4939
 
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submit your 175 word letter to the Anchorage Daily News via e-mail letter@adn.com, or fax them to 258-2157, attn: letters to the editor.

Contact other elected officials

Governor Sean Parnell
907-269-7450
EMAIL: Gov. Sean Parnell

Senator Mark Begich
907-271-5915
EMAIL: Sen. Mark Begich

Senator Lisa Murkowski
907-271-3735
EMAIL: Sen. Lisa Murkowski

Congressman Don Young
907-271-5978
EMAIL: Rep. Don Young

Gasline Talks: Part 2: What have we committed and to whom?

Dear Friends and Neighbors,

In this second installment about the gasline, I would like to provide you with some basic information about some of the agreements that will allow the project concept to move forward. I have been following the gasline project very closely and will continue to pay close attention as session starts to wind down. Please let me know if you have any questions or would like to offer comments on this incredibly important decision.

A graph of predicted global LNG energy demand through the year 2030

As I described in my previous newsletter, the basic concept of this gasline project is to ship gas from the North Slope, where it will go through a treatment process, then through a large diameter pipeline to a liquefaction plant on the Kenai for shipment to Asian gas markets. There are also opportunities to take the gas from the line for local use throughout the state. A gasline is crucial for the future of our state: to fill our coffers and provide affordable energy to Alaskans.

A slide from a presentation to the House Resources committee by the Department of Natural Resources and Department of Revenue on how to understand the two agreements the State has currently entered

The state has currently entered in to two non-binding and temporary agreements that were signed in January, before the Governor introduced his gasline bill. If the bill passes this session, these two agreements will be the framework for negotiating binding contracts that will govern the ownership and operation of the pipeline and LNG plant.

“Heads of Agreement” (HOA)

• Signed by the state, all three major producers (BP, ConocoPhillips, and Exxon), TransCanada, and the Alaska Gasline Development Corporation.

• Outlines the main issues relevant to a tentative partnership.

• After passage of enabling legislation (SB138), the parties will negotiate final contracts.

• The producers propose to own percentages of the project equal to their percentages of the gas.

• The state will also own a percentage of the gas:  both “Royalty in Kind” and “Tax as Gas” (production taxes paid for with gas instead of money).

• Like the producers, the state will pay for and own a percentage of the project equal to our share of the gas. The percentage, which will be between 20-25% is not yet decided.

• How the project will be managed: The pipe itself is jointly managed but everyone is responsible for their own gas through the pipe.

• Since the state will be an owner of gas, we will also be responsible to sell the Liquefied Natural Gas. The producers agree to negotiate to sell our share of gas on our behalf. The cost of this service is not yet decided.

• Each of the pipeline owners (including the state) has the ability to expand the pipeline to make room for new shippers.

• Fixed property tax based on throughput (thus none paid before pipe is in operation), also payments to municipalities for impacts of construction.

“Memorandum of Understanding“ (MOU)

• Signed by the State and TransCanada, the pipeline construction company who is currently our partner in the Alaska Gasline Inducement Act (AGIA) license.

• Once the bill passes and the final contracts signed, the (AGIA) license with TransCanada will be terminated and the state’s remaining obligations to TransCanada will end. The HOA anticipates the state owning 20-25% of the project. In the MOU, TransCanada agrees to pay for, own, and operate Alaska’s share of the pipeline and Gas Treatment Plant.

• The state has an option to buy back up to 40% of TransCanada’s share, thus up to 10% of the pipeline (we will own a much larger share of the LNG plant in Nikiski). At the end of the initial shipping contracts in 25 years we will have the ability to buy the entire project back at its depreciated value. We sign long-term shipping contracts for our gas through their pipe. These will be “ship or pay” contracts meaning we would be liable for payments even if the flow of gas was interrupted for some reason.

• TransCanada will not be involved in the proposed liquefied natural gas plant.

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PERMANENT FUND DIVIDEND DEADLINE!
Don’t forget!

Join the 500,000 Alaskans who have applied for their PFD. The deadline to apply is March 31st! Please also consider donating to one of the over 400 local non-profits participating in the Pick.Click.Give. program.

As always, if I can be assistance to you or your family, please let me know,

I Answer to You!

Sincerely,

Representative Andy Josephson
State Capitol Room 430
Juneau AK, 99801
Phone: 907-465-4939
Rep.Andy.Josephson@akleg.gov