Special Session Update

Dear Neighbors,

Here’s a quick update from the capitol as the legislature wraps up our third special session of the year. 

Third Special Session

The primary purpose of this special session was to consider the State’s option to buy out TransCanada’s share of the Alaska Liquefied Natural Gas (AKLNG) project.  I’m happy to report that Senate Bill 3001, which appropriates approximately $160 million and allows the State to take full 25% ownership in the gasline, passed unanimously out of the House on Wednesday.  This followed 12 days of presentations (here and here), hearings, and debate.

The AKLNG gasline project represents an unprecedented cooperation among the State of Alaska and four major oil companies.  However, while ExxonMobil, BP, and ConocoPhillips are full partners in the project, the State and TransCanada agreed to share 25% of the project.  There are upsides to this agreement for the State, namely that we pay less up front and benefit from TransCanada’s many years of expertise in this area, which is why we entered the agreement in the first place.  However, as the project has progressed, and AKLNG moves closer to being a reality, the benefits of buying out TransCanada and owning the entire 25% share of the project are becoming more apparent. 

It all comes down to money.  Even though the State will be responsible for moreinitial, upfront costs, there are several good reasons to invest. 

• The state is accepting all of the risk of failure of the project prior to the construction phase of the project.  With TransCanada as a partner, if the project did not go to construction, the State would be responsible for paying TransCanada’s costs, plus 7.1%.  Without TransCanada, we will still be responsible for the costs, but will not have to pay a premium if the project does not make it to construction.
• With changes in the project, TransCanada would have had the primary function of financing a portion of Alaska’s involvement in the project.  We will be looking for funding for the balance of our share when we approach construction, so finding additional financing partners will not be a significant additional burden.
• Our consultants forecast that the State could earn up to $360 million a year in additional revenue when the project is completed, adding up to the possibility of an additional $10 billion to the state over the life of the project.
• Owning our full 25% share of the project will give us a full voting partner share of the project, as opposed to sharing a single vote with TransCanada as our partner. 
  

TransCanada is expected to continue providing assistance during the transition, and may very well play a role in the project, but it will be in a more appropriate role commensurate with their expertise as an operator of pipelines around the world. 

This special session truly was special in that there was extraordinary bipartisan alignment on the issue.  Alaskans from all over the state agree that advancing with the AKLNG project as a full owner and decision-maker is the best way to move toward Alaska’s future.  I am confident that we can continue to work together to achieve the successful completion of what promises to be a monumental and historic project. 

As always, please contact my office with any questions, comments or concerns.

Best,

Sam Kito III