ADN Opinion: The truth about LNG -
Gasline Port Authority misleads Alaskans on several key issues
adn.com
Published: August 27, 2006
Last Modified: August 27, 2006 at 01:49 AM
If you're negotiating to sell your house and have other legitimate offers, you can afford to take a tough bargaining stand. The same applies to the state's negotiations for a North Slope natural gas pipeline.
So Alaskans need to know the truth -- whether there is a viable option or merely a misleading dream -- as they consider a deal with the major North Slope oil and gas producers to build the pipeline.
The Alaska Gasline Port Authority is committed to its option -- a pipeline from Prudhoe Bay to Valdez, where an expensive plant would liquefy the gas for shipment aboard tankers to West Coast ports. The port authority is so devoted to its cause that it has taken leave of the truth in trying to sell it to the public. In doing so, it has managed to convince far too many Alaskans that the LNG project is an immediate, legitimate option to a North Slope line to mid-America.
The risk is that Alaskans will tell the producers to take a hike while expecting that the port authority can build its project. Negotiating business deals on bad information is dangerous.
But bad information is what comes out from the port authority, a seven-year-old effort led by the City of Valdez and Fairbanks North Star Borough. Recent port authority ads say its successes include "obtaining congressional approval for $18 billion in federal loan guarantees." That's false. Federal legislation in 2004 gives the port authority -- and any other eligible applicant -- merely the right to apply for federal loan guarantees. There is no guarantee that the port authority would get the guarantee.
Before the U.S. Energy Department could even consider issuing a loan guarantee for the port authority, the law says, the project first would have to obtain Federal Energy Regulatory Commission approval -- a process FERC estimates would take two years after it has an application on its desk.
And the Energy Department cannot approve a loan guarantee until a real lender first agrees to put up the billions of dollars for construction. Only then would the federal government be willing to consider backing up the loans.
The law also could require the port authority to put some of its own cash into the project -- not an easy task for a municipal agency that has no assets and has claimed it can build the line without putting up any cash. How will the port authority, which owns no property and has no source of income other than the proposed gas line, guarantee repayment of any loan?
The law also limits how much the federal government can pledge to an LNG project loan guarantee, without the same limitation on a pipeline project.
The port authority also claims it has succeeded in "securing Jones Act-compliant LNG tankers." That, too, is false. Federal law requires the use of U.S.-flagged ships for moving commodities from a domestic supplier to a domestic buyer. The port authority claims it has talked with the foreign company that owns several 25-year-old, U.S.-built LNG tankers. The ships were re-flagged under foreign ownership years ago, but the port authority claims they can be re-flagged back to U.S. registration and used to move North Slope gas to Lower 48 consumers. But what it doesn't say is that it would take an act of Congress to re-flag the tankers.
There are other misleading statements about the port authority's tax-exempt status (it's questionable), whether there are any West Coast terminals committed to accepting Alaska LNG (none built and none under contract to take Alaska gas) and what role Sempra Energy might play in the deal (the San Diego-based company has never offered to buy all of Alaska's gas, only to market it and collect a fee).
Alaskans need to know the truth about the options as they decide in the months ahead how to negotiate with the North Slope producers. That doesn't mean accept whatever the producers offer. It just means don't think there is another pre-qualified, legit buyer, waiting outside with checkbook in hand to sign an earnest money deal.
BOTTOM LINE: Don't be misled by the port authority's statements. |
