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Rodell: Risks high in pursuing gas line alone

Published on NewsOK Modified: February 26, 2014 at 9:50 pm •  Published: February 26, 2014

JUNEAU, Alaska (AP) — The state could face some difficult decisions, and tight budgets, as it pursues a major liquefied natural gas project.

Revenue Commissioner Angela Rodell told the House Resources Committee on Wednesday that if the state pursues the gas treatment plant and pipeline project without TransCanada Corp. as a partner, Alaska's share of project costs could be more than half the state's unrestricted general fund revenue near the start of construction, around 2020.

With TransCanada involved, the state could be giving up about $300 million in annual revenue once gas started to flow, Rodell said. While there's more upside to going it alone, she said that option presents high risks. The cost of that lost revenue, she said, "is worth the insurance policy basically."

Lawmakers are considering legislation aimed at moving the mega-project into the phase of preliminary engineering and design. The state is mulling an equity stake of 20 percent to 25 percent, which would be determined by its royalty share and the gas tax rate, which would be set in the bill.

The bill speaks to terms already agreed upon by state officials and TransCanada, the Alaska Gasline Development Corp., or AGDC, and the major North Slope players: BP PLC, ConocoPhillips and Exxon Mobil Corp. The agreements are subject to passage of enabling legislation deemed acceptable by the parties.

The state has signed a separate agreement with TransCanada to manage its interest in a gas treatment plant and pipeline. While the state would have an equity buy-back option, the arrangement is seen as a way for the state to not have to shoulder as much in upfront costs as it would without TransCanada.

The agreement also would serve as a transition from the Alaska Gasline Inducement Act. TransCanada has been pursuing a pipeline with Exxon Mobil for years under that law, but Gov. Sean Parnell has said it no longer fits with the current situation.

For a project estimated at $45 billion to more than $65 billion, the state's share will be significant. While estimates have been somewhat fluid, information provided to the committee Wednesday showed that with a 20 percent stake, the state was looking at a potential equity investment of $5.6 billion to $11 billion. The lower end reflected TransCanada's involvement and the higher end is if the state goes it alone.

While the cash terms look daunting, Rodell said, the project is worth pursuing because of the potential revenue it could bring the state. She said the state can mitigate its exposure through different financing options and possibly even bringing in new partners.

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