Gasline news coverage echoes distortions from Dunleavy administration

It’s understandable that Frank Richards, whose salary was $388,000 in 2023, wants to keep his state job as president of the Alaska Gasline Development Corporation.

But what’s not acceptable is that Richards has chosen to mislead Alaskans about what is happening with the proposed natural gas pipeline project.

He did that on Monday during a press conference with Gov. Mike Dunleavy in which Richards acted as if a major milestone has been achieved with a pipeline company.

“Today, after 10 years of planning, engineering and permitting, I’m announcing that AGDC has reached an exclusive framework agreement with a qualified energy company to privately lead and fund the development of the Alaska LNG project,” Richards said.

The predictable news coverage that followed repeated that misleading and exaggerated claim, taking it to mean that a major pipeline company is on the verge of leading and funding the development of the gas pipeline.

The exclusive framework agreement was portrayed in news accounts as evidence of private industry support for the gas pipeline. Tens of thousands of Alaskans may now mistakenly believe that a private company is ready to put pipe in the ground.

The Alaska Beacon put it this way: “The state-owned corporation in charge of developing a trans-Alaska natural gas pipeline said Monday that it is in secret negotiations with an energy company to lead and fund the project.”

But stripped of double-talk and vague phrases, what’s really happening is not the landmark that Richards suggested and the news coverage echoed.

The real milestone, if there is one, is that the state has agreed to pay a major pipeline company up to $50 million to complete the next stage of pipeline planning work, the so-called front end engineering and design. The private company insisted on that commitment by the state.

The state claims that the company will spend its own money, up to $50 million, to complete the work. But that is not really the case.

The company will use its own $50 million up front to pay for the work. But the state will pay back the $50 million to the company if the firm decides not to pursue a pipeline.

That decision would be made in 2026, at which time AGDC hopes it would have long-term promises in hand from Alaska utilities to buy natural gas for 20 years, contracts that would underlie the financing.

A month ago, Richards described the situation in meetings with the AIDEA board and AGDC board of directors in a far different fashion than the picture he gave at Dunleavy’s press conference.

He said that a private company would not undertake the front end engineering and design—updating design and cost figures—without an assurance from the state that the company could get its $50 million back.

“Because it’s really just looking at the initial phase of the project they would like to make sure that there is a backstop, meaning that they would be paid should the project not take the next logical step, which is final investment decision,” he told the AIDEA board.

“The outcomes of the FEED (front end engineering and design) is that the pipeline company could take final investment decision. And if so, then the backstop would not be used and it would be released back to AIDEA. Or conversely with the pipeline company does not take final investment decision, then they would be reimbursed for their costs up to $50 million. And all of the activities that they have undertaken and used would then come back to AGDC, who would have an updated pipeline” plan, Richards told the AGDC board.

“The agreement is conditioned on a $50 million line of credit from AIDEA,” he said.

“This FEED (front end engineering and design) backstop that AIDEA has provided is again a milestone for us to be able to advance the Phase 1 project and execute the work with that pipeline company to make sure that we are now getting the latest cost estimates, optimizations, but also the necessary materials to make an informed final investment decision,” he said last month.

I’ve asked AIDEA for a copy of the agreement with AGDC, but the corporation says it may take up to four weeks to reply with a denial or approval of that request.

Another thing missing from the Dunleavy press conference and the news coverage is that a year and a half ago AGDC presented a completely different plan to get the front end engineering and design work updated.

In 2023, AGDC officials told the Legislature that Goldman Sachs was working on a contingency basis to line up investors that would put $150 million into the project to get it to the point where a final investment decision could be made.

After that, there would be no more state money needed to move the project forward, AGDC said.

The $150 million would essentially transfer 75 percent of the AGDC project from the state to a private company or companies. Goldman Sachs would get paid by the buyers for completing the deal.

The companies putting up the $150 million would get control of the project in exchange for a promise to move forward to a final investment decision, the point after which builders would start to spend tens of billions.

“We are looking to the private sector to fund that,” Richards testified. Richards said he had high confidence that Goldman Sachs could raise that money.

After getting the $150 million in development capital, the state would no longer control the project.

“After closing on the $150 million the investor or consortium of investors will be the operator and manager of the Alaska LNG project through 8 Star Alaska LLC, and AGDC will be a minority 25 percent non-operating partner within the project,’ said Nick Szymoniak, the venture development manager for the state gas company.

“So we are truly handing the project to private ownership, while maintaining a minority interest with the expectation that there is no commitment or obligation for the state to fund going further, though we will preserve the opportunity for the state to invest in up to 25 percent of the project,” he said.

Szymoniak repeated that after companies put up the $150 million, there would be no need for the state to put any more money into the project, though it would have the option in the future. “Opportunity but no obligation,” said Szymoniak.

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