The Alaska Gasline Port Authority (AGPA) is asking state officials to reconsider their disqualification of its proposal to tap North Slope gas reserves. In a letter to commissioners of the departments of natural resources and revenue, AGPA Chairman Jim Whitaker describes a pre-application ordeal that can most succinctly be described as Kafkaesque.
The AGPA's All Alaska Gasline project proposal was disqualified from consideration, along with three other projects, under the state's Alaska Gasline Inducement Act (AGIA) earlier this month for lack of completeness (see NGI, Jan. 7). The state is currently only considering a proposal from TransCanada Alaska Co. LLC and affiliate Foothills Pipe Lines Ltd. Whitaker maintains that AGPA's proposal would result in higher netbacks to the state than a Canadian gasline, as proposed by TransCanada.
"Nonprejudicial, one-time multi-billion-dollar procurement decisions should not be based on technical bid nonconformities where the law grants the commissioners power to remedy the deficiencies," Whitaker wrote the state in a Jan. 10 letter recently posted to the AGIA website. "...[T]he people of Alaska will suffer a grave injustice if the All Alaska project is not included as an option in the AGIA process."
AGPA was formed in 1999 by two Alaska boroughs and a municipality to build or cause the building of an all-Alaska gas pipeline. The project it is proposing includes an 806-mile pipeline from Prudhoe Bay to tidewater at Valdez with an initial capacity of about 2.7 Bcf/d. The pipeline would run parallel to the existing Trans-Alaska Pipeline System. It is to be designed to allow for the tie-in at Delta Junction (550 miles south of Prudhoe Bay) of a spur line to the Alaska-Canada border. The project would include an integrated liquefaction and fractionation facility at Valdez that would produce liquefied natural gas (LNG) in three trains for export to North American and/or Asian markets.
Whitaker's 10-page letter provides significant insight into behind-the-scenes machinations he says took place prior to AGPA's application. A spokesperson for Alaska Gov. Sarah Palin said Friday the AGPA request was under legal review. AGPA did not respond to a request for comment.
"Extenuating factors designed to thwart the AGIA process impacted the Port Authority's Nov. 30 application. The Port Authority has learned there has been significant pressure applied to various companies to dissuade them from submitting AGIA bids," Whitaker wrote.
AGPA last year thought it had formed a consortium along with "a major U.S. pipeline company" and "a major LNG company." These two companies then told the AGPA they didn't want AGPA to be "an active participant" in the AGIA application. AGPA reluctantly bowed out and agreed to share with the two-company consortium proprietary project data previously prepared for it by Bechtel Corp., which was valued at more than $8 million.
"An agreement between the parties specified that in the event the consortium decided not to submit an application under AGIA, all of the project-related Bechtel data, including any updated work performed and all other materials connected with the application, would be immediately made available to the Port Authority to enable it to conclude the bid work for its own submittal," Whitaker wrote.
Citing a "business decision," the pipeline company told AGPA on Oct. 17 that it was dropping out of the AGIA application. Then the LNG company dropped out.
"In fact, [the LNG company] stated on Nov. 2, 2007 that one option it was considering was to 'allow AGIA to fail' and then see what options are available from the state following that failure," Whitaker wrote in his letter to the state. "The Port Authority expressed strong disagreement with this approach. A few days later, the Port Authority was informed by the LNG company that it would submit an AGIA application."
It was at this point, Whitaker wrote, that AGPA decided to submit an application on its own under AGIA "to absolutely guarantee that an all-Alaska gasline project was represented." To do this, though, AGPA needed the revised Bechtel data from the pipeline and LNG companies, and they refused to provide the data prior to the Nov. 30 application deadline, Whitaker wrote.
So AGPA went ahead with its application, incorporating the revised Bechtel data by reference to its inclusion in the AGIA application that it expected the LNG company to file.
"The Port Authority was stunned to learn that after the expiration of the application due date on Nov. 30, 2007 that the LNG company had not submitted an application, contrary to statements to the Port Authority that it planned to do so," Whitaker wrote. "The Port Authority immediately began a very aggressive campaign to obtain release of the Bechtel data to which it was entitled and had attempted to incorporate into its application by reference."
The state then asked AGPA for clarification of items in its application on Dec. 11, and in order to respond by the Dec. 18 deadline AGPA needed the Bechtel data. In order to get it, Whitaker told the commissioners, AGPA was forced to "execute an unconscionable agreement made under duress whereby the updated Bechtel data would be made available if the Port Authority waived its legal claims against the consortium companies."
To make a long story somewhat shorter, the AGPA got the Bechtel data and made the Dec. 18 deadline to respond to the commissioners' query. But its application was ultimately deemed to not be in conformance with AGIA.
"[T]he supplemental information the Port Authority submitted on Dec. 18, 2007, in reply to the commissioners' Dec. 11, 2007 clarification request is not responsive to the request and contains significant new information that was not included in the application the Port Authority submitted on Nov. 30, 2007," the state wrote Whitaker on Jan. 4. "Consequently, the supplemental information submitted on Dec. 18, 2007 will not be considered with the application."
In AGPA's appeal, Whitaker claims that commissioners could consider the supplemental information if they want to, and for the sake of Alaska they should.
"Anything less will have the effect of the sole source project consideration so soundly rejected by Alaskans and the legislature through the Stranded Gas Act," he wrote.
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