PHOENIX - Facing a $3.5 billion deficit, Alaska Gov. Bill Walker is calling the state's legislature into special session Oct. 24 to discuss measures to monetize Alaska's untapped natural gas resources.
Alaska and various energy companies have been exploring the possibility of a natural gas pipeline since the mid-1970s, but the efforts have stalled.
Last year the state enacted Senate Bill 138, which established a negotiating framework between Alaska, TransCanada, ExxonMobil, BP, and ConocoPhillips to develop a pipeline from Alaska's North Slope.
Walker, who assumed office in December and inherited that framework, now wants to move it forward and otherwise start generating revenue from the natural gas beneath the ground.
"With a $3.5 billion budget deficit, this gasline project has gone from a wish-list item to a must-have," Walker said in a statement late last week.
"Under the negotiation process I inherited, very little has been accomplished on the commercial agreements," he said. "It is time to make the necessary legislative changes so a single party cannot delay the production of Alaska's natural gas resources and sway our destiny."
The stakes are high because the Alaska's government's revenues, almost entirely dependent on oil extraction taxes, have bottomed out in recent months as oil prices have sunk.
Walker and other state officials have repeatedly said that budget cuts cannot offset the budget gap, and that more revenue has to come from somewhere.
The gasline project, known as Alaska LNG and bearing a cost estimated to exceed $45 billion, includes facilities for cleaning and liquefying natural gas as well as a roughly 800 mile pipeline. Walker has complained of repeated delays and the need to iron out the governance structure of the parties involved in the project.
Walker said that he plans to introduce a legislative package prior to the start of the special session that will include a proposal to buy TransCanada's share of the gas pipeline and gas treatment facility.
Walker said this "is absolutely critical to ensure Alaska has a seat at the negotiating table."
Under the current framework, TransCanada would ship the gas under an agreement with Alaska.
The legislation package will also include a bill to reinstate a reserve tax on North Slope resources in the ground that are not developed, Walker announced.
In 1975, Gov. Bill Egan signed a similar piece of legislation allowing the state to collect oil revenue prior to the Trans-Alaska Pipeline being built.
Energy companies haven't been tapping Alaska's natural gas reserves because it is easier to get the gas in the lower 48 states, said Fitch Ratings analyst Marcy Block.
Alaska's natural gas is trapped beneath frozen ground, in contrast to the natural gas reserves that released from shale rock by hydraulic fracturing (fracking) in many Lower 48 states where gas production is booming.
"The natural gas up there is more expensive to develop," Block said.
Walker said energy producers have been treating Alaska's gas like milk with no expiration date, and that his legislative package would both improve the chances of the pipeline project being built and provide a revenue insurance policy if there are more delays.
"It ensures that, if one or more producers delay construction of the gasline, Alaska still receives critical tax revenues from our natural gas resources, Walker said. "But only if we have the political will and courage to do so."
