Ding Dong AGIA is dead. Any predictions on the degree of State participation? I'm guessing an eighth or more. An eighth would equal $7.5 billion which should be a manageable figure for the state.
Why this is Good:
1. AGIA may have worked in a shale gas free world,but it was absolutely doomed after shale gas gathered momentum in the lower 48.
2. State participation gives the project better financing options and terms.
3. Alignment - State interest are better served as partners.
4. Revenue - as an investor the State stands to receive a return on the investment.
5. Agreements are forthcoming - I have to assume the Governor wouldn't make this announcement unless the grand deal was about to signed.
6. A Flat Gross Tax on gas sounds like fiscal certainty at long last?
What would make this better:
1. LNG Buyer participation - nothing says that won't happen, but LNG customer participation could strengthen the project.
What could go wrong:
1. Just about anything and everything can go wrong at this stage. The problem with grand deals is that somebody or group will feel left out or abused by the deal, then the lawsuit phase of the project begins. I hope the project survives that stage but hang on to your hat.
Good luck Governor, this is a big step in the right direction.
Press Release from Alaska Governor Sean Parnell (LINK), text:
January 10, 2014, Anchorage, Alaska – Governor Sean Parnell today
announced that the State of Alaska will pursue becoming an equity
partner in the Alaska LNG project. The governor also announced the state
will terminate its involvement with TransCanada as its licensee under
the Alaska Gasline Inducement Act (AGIA), and partner with the company
in a more traditional commercial agreement.
“For the first time in our state’s history, the framework is in place
to build an all-Alaska gasline on Alaska’s terms and in Alaskans’
interests,” Governor Parnell said. “We have all the necessary parties to
make an Alaska gasline project go - three producers, a pre-eminent
pipeline builder, an entity in AGDC that can carry Alaskans’ interests,
and state agencies responsible for the royalties and taxes.”
The governor stated he soon expects a commercial agreement, known as a
Heads of Agreement, for the Alaska LNG project. The agreement is
anticipated to be signed by Exxon, BP, ConocoPhillips, TransCanada, the
Alaska Gasline Development Corporation (AGDC), and by the commissioners
of the Departments of Revenue and Natural Resources. The Heads of
Agreement will be subject to public review by the Legislature.
“As a partner in the gasline project, Alaska will control its own
destiny,” Governor Parnell said. “Ownership ensures we either pay
ourselves for project services, or negotiate and ensure the lowest
possible costs. As a partner, Alaskans stand to gain more.”
Governor Parnell also intends to introduce legislation addressing how
the state will manage its gas resources by authorizing the Department
of Natural Resources to modify certain leases, and enter into shipping
agreements to move and sell the state’s natural gas. The legislation
will propose moving from a variable net tax to a flat gross tax for
North Slope gas, allow certain leases to pay production taxes with gas,
and enable the Departments of Revenue and Natural Resources to manage
the state’s gas revenues.
“While most Alaskans have seen past efforts to develop a large gas
project falter for various reasons, this time is different,” Governor
Parnell added. “AGDC is our ‘ace in the hole,’ meaning we can still opt
for the smaller volume ASAP project.”
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