Dunleavy allies tap AIDEA slush fund for $50 million for gas pipeline study, bypassing the Legislature
Two state-owned corporations that don’t act without the blessing of Gov. Mike Dunleavy have cooked up a plan to tap into a slush fund to provide a $50 million guarantee to pay for a gasline study.
The corporations excluded the Legislature Wednesday and avoided the sometimes messy process of holding public hearings and seeking testimony when dealing with public money.
The corporations in question are the Alaska Gasline Development Corporation and the Alaska Industrial Development & Export Authority, both run by boards appointed by Dunleavy.
AGDC said it needed a $50 million pledge to finish the so-called “front-end engineering and design study” or FEED on the gas pipeline dream.
The cash would only have to be paid if the gas pipeline company that will do the work decides against moving forward to the next stage and invests in a pipeline.
In other words, the gas pipeline company will do the $50 million of work at no risk. The $50 million risk falls to AIDEA.
AIDEA has money and its executive director, Dunleavy ally Randy Ruaro, put forward a resolution that the AIDEA board unanimously approved Wednesday to commit $50 million.
AGDC wasted no time issuing a press release to celebrate the deal.
There was no public hearing. And no real discussion by the board. It is clear that the decision was preordained.
Ruaro said he has been meeting regularly with AGDC for a few weeks on the “backstop” plan.
AIDEA will provide “a credit instrument, guarantee, or other form of debt issuance backstop not to exceed $50 million to be extended to and used, possibly in connection with a private source of capital, to facilitate the Front End Engineering and Design study” of a gas pipeline from the North Slope to Southcentral, the resolution said.
The lack of advance publicity and public involvement is typical of AIDEA’s desire to avoid public questions.
The $50 million request should not have been decided by the unelected members of the AIDEA board, all appointed by Dunleavy, but by the Alaska Legislature.
AGDC president Frank Richards told a Fairbanks group November 19 if the corporation can get the $50 million pledge early in 2025, an unnamed North American pipeline company would complete the so-called FEED in early 2026, with four years of construction starting in 2027.
The pipeline company will use its own $50 million for the FEED costs, Richards said. But it’s not really its own money.
The private company demanded a promise from the state of getting $50 million if the pipeline company decides to drop the gas pipeline project after finishing the $50 million study.
The pipeline now envisioned would cost $11 billion or more, founded on the notion that gas reserves that have yet to be proven and drilled by Pantheon will be available for next to nothing and will not require a massive conditioning plant.
Richards said the $50 million backstop would help “unlock” private funds, a dubious claim endorsed by Adam Crum, the state revenue commissioner.
I believe the need for a state guarantee shows a lack of confidence in the pipeline project by the unnamed pipeline company.
This AGDC/AIDEA deal looks like Dunleavy’s effort to keep the corporation from going under in the next Legislature.
AIDEA says it had a net income of $66 million in the last fiscal year and is required by state law to provide between 25 percent and 50 percent of that amount to the state treasury as a so-called dividend for the next fiscal year. The Legislature decides how to spend that money.
The AIDEA board unanimously set the dividend amount at $20 million, which is about 30 percent of the net income.
The AIDEA board members praised AIDEA for the dividend largesse, saying it proves that AIDEA is a great organization, one that helps the state, and said the dividend is higher than it has been in previous years.
But the board members did not explain why they did not bump up the dividend to the full 50 percent envisioned in the law—$33 million, which would be of greater value to Alaskans than directing more money into the AIDEA slush fund.
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