Rashah McChesney

The legislative committee tasked with auditing the state’s gasline corporation released the results of a two-year inspection on Monday.

The Division of Legislative Audit was charged with determining how the Alaska Gasline Development Corporation spent nearly $480 million the Legislature has appropriated to it over the last eight years.

Alaska’s gasline development corporation is a quasi-public state corporation tasked with developing a gasline. Currently, it oversees development of two potential projects: One is an in-state natural pipeline known as ASAP; the other is the $45 billion Alaska LNG project that would pipe natural gas from the North Slope to Cook Inlet for export to Asian markets.

Auditors found that, generally, the corporation’s spending followed the conditions that the Legislature put on it. But there were a few issues.

First, the corporation’s board is supposed to be notified of contracts worth between $1 million and $5 million. But there were nine times over the past two years that didn’t happen.

And over the last four years, the board has seen operating budgets but hasn’t voted on or formally approved two of them.

Auditors recommended fixes to those problems and made one other recommendation: that the board follow state law and establish a preference for Alaska veterans when soliciting contracts for goods and services.

There’s a shakeup going on at Alaska’s gasline development corporation. Earlier this week, Gov. Mike Dunleavy dismissed two board members. Now, there are four new Dunleavy appointees on the seven-member board.

At the top of that new board’s to-do list? Fire the man who has been running the Alaska LNG project for the last two years.

Keith Meyer, the state’s gasline corporation president, has been the highest paid employee of the state since 2016. That’s when he was hired to lead the state’s efforts to bring natural gas from the North Slope into the world market.

In the last few days of 2018, he got a set of performance bonuses from the gasline corporation board that brought his total compensation for last year up to nearly $1 million dollars. Those bonuses were meant to reward him for things like raising awareness of the project on the global LNG market, overseeing project management and communicating with the Legislature about how the state-led effort to get a gasline was working. 

On Thursday, he got different feedback from his board of directors when they convened for an early morning board meeting and quickly went into executive session. 

When they came out half an hour later, Jason Brune had this directive: “Keith M Meyer is hereby relieved of his duties as Alaska Gasline Development Corporation, AGDC.”

Brune is the commissioner of the state’s Department of Environmental Conservation and is one of four new members on the seven-member gasline corporation’s board of directors appointed by Dunleavy. 

And it’s not surprising that they removed Meyer from his position. Dunleavy weighed in on his compensation package during a Tuesday press conference.

“I was surprised with that. It’s not reflective of the priority of this administration,” he said.

But it’s not clear what direction Dunleavy’s administration wants to take the gasline project. When asked for clarification, Dunleavy’s press secretary, Matt Shuckerow, emailed Alaska’s Energy Desk a statement from Brett Huber, a policy advisor for the governor.

In it, Huber writes, “Today’s actions by the AGDC Board were both decisive and welcomed. We look forward to working closely with the new AGDC leadership to better align our shared priorities of reducing energy costs, bringing our rich energy resources to market and monetizing our North Slope gas.”

There are two key directions the gasline project is headed this year. The first is the regulatory side. That’s the federal permitting required to build the $45 billion megaproject.

The second is the commercial side, lining up investors and buyers for the project.

Up until the end of 2018, the gasline corporation was negotiating with three potential Chinese partners who could buy the gas, finance the project and invest in building the project. But those negotiations were supposed to end on Dec. 31. The gasline corporation announced that the parties are working on a 6-month extension to their original agreement.  A corporation spokesperson said those negotiations are ongoing. 

Meyer’s replacement is a man named Joe Dubler. His official start date is Feb. 1. 

Dubler was a former vice president of the gasline corporation when the Alaska LNG project was led by the three North Slope producer:, BP, ConocoPhillips and ExxonMobil. Those three companies stepped away from the project in 2016, citing unfavorable market conditions. That’s when the state took over the project. Meyer was leading that effort.

But board chairman Doug Smith said Dubler’s appointment doesn’t mean the state corporation is pivoting away from a state-led project.

“What I would say is, our emphasis is to keep the project moving,” he said. “We certainly would like to see a project that eventually has commercial terms and viability that brings back producer engagement. And what that looks like in the future is uncharted territory, but we certainly see and know there’s value in producer alignment and participation.”

For now, Smith said, it’s business as usual for the project team.

Editor’s note: This story has been updated.

Correction: A previous version of this story listed Meyer’s total compensation package in 2018 as being just over $1 million. That is incorrect. It was just under at $982, 253.79. Additionally, a previous version of this story listed a salary figure for Joe Dubler as reported by the gasline development corporation.  That figure is not correct, the corporation and Dubler are still negotiating his compensation. 

The state’s gasline corporation was supposed to have a deal with three Chinese partners, a buyer, an equity partner and a lender by Dec. 31.

But this is a deadline the Alaska LNG project is likely to miss.

In late 2017,  Alaska Gasline Development Corporation head Keith Meyer and then-Gov. Bill Walker flew to Beijing and inked a deal with three entities in China to explore options for financing, building and buying gas from the Alaska LNG project.

At the time, Meyer told a group of reporters that they had been trying to woo the Chinese companies for months.

“So we’ve been through the courtship. We are now engaged,” he said.

The “engaged” phase was supposed to last about a year, and the parties would come to a decision by Dec. 31, 2018 on whether to get hitched.

Now, the state corporation wants a six-month extension on that original agreement.

Jesse Carlstrom, a spokesperson for the gasline development corporation, said sometimes the commercial deadlines on big, complex projects have to be flexible.

“So, reaching a little ways back, but if you remember the SATs, there’s a time set. You’ve got a lot of work to get through. You hustle, make as much progress as you can, and the buzzer rings and you’ve got to put your pencils down. Well that’s not the case for a large energy infrastructure project like Alaska LNG,” Carlstrom said. “Maybe that’s not the best analogy. What I want to get across is just because we’ve reached the end of the year, that does not mean we all have to put our pencils down and walk away and say, ‘Hey guys, that was a great effort and time’s up.'”

 The key, Carlstrom said, is that all of the partners are still negotiating — so it’s not time to end the engagement yet.

 This isn’t the first deadline the project has missed.

First, there was the soft deadline that Walker gave the project to find its footing and a market for North Slope gas reserves. That was September of 2017.

While the project generated some interest, it didn’t get any firm commitments from customers or investors.

Then they were operating under a Dec. 31, 2017, deadline to find a customer for the project.

That didn’t happen either, though the state corporation did sign a non-binding agreement to explore possibilities with three businesses in China.

If this latest six-month extension goes through, that pushes the deadline to get these key commercial deals to June of 2019.

That’s well after lawmakers will have to decide whether to give the gas line corporation more funding for the project.

But some lawmakers are more focused on the regulatory process — that is, federal environmental review and go-ahead to build from the Federal Energy Regulatory Commission, or FERC.

“To me, a greater factor is to further analyze the positive potential impacts of having a FERC permit in hand for AKLNG. That’s compelling to me,” said Senate Finance Committee co-chair Natasha Von Imhof, R-Anchorage.

Von Imhoff said her focus is on the regulatory side because, when it comes to commercial agreements like finding buyers and investors for the mega-project, things don’t look good.

She points to recent headlines from the Permian Basin. There so much natural gas in parts of Texas and New Mexico that it’s sometimes worthless.  The Wall Street Journal reported that some producers are even paying to have it taken off of their hands.

“So I look at that, and I think to myself, ‘Why would any buyer at this point lock in a long term contract when the price of gas potentially could go down?'” she said. “It’s just a tough market for Alaska at this point.”

Von Imhof isn’t the only one with an eye on the federal permitting.

Another finance committee member, Sen. Lyman Hoffman, D-Bethel, told Bethel’s KYUK that over the last eight years, the state has spent over $1 billion on studies and working toward permits. So it needs to see that process through to the end.

One other complicating factor? Oil prices have taken a nosedive, and Alaska is still struggling to close a budget gap that’s at least a billion dollars.

Von Imhof said the state’s gasline corporation will have to justify any new spending — and prove that it can run a lean operation.

 

 

 

Alaska got a new governor this month. One of his first orders of business? Consolidating the state’s finances.

Gov. Mike Dunleavy quietly signed an administrative order dated Dec. 5, reassigning certain staff from each state agency to the Office of Management and Budget.

You can’t find that order on any state website, and the governor didn’t announce it. To find out more, Rashah McChesney from Alaska’s Energy Desk sat down on Friday with James Brooks, who covers the legislature for the Anchorage Daily News.

Editor’s note: After this Q&A took place, the governor’s office posted Administrative Order 302 to Alaska’s public notices website on Monday.

Rashah McChesney: Can you tell me a little bit more about this administrative order? What’s in it?

James Brooks: So this is something that affects things behind-the-scenes in how the state handles its budgets. Instead of having administrative service directors in each department handling budgets inside that department and answering to the commissioner, those people now answer to the Office of Management and Budget under the governor. So, think of it as changing the boss. Instead of each commissioner having their own budget team, those budget teams now answer to the Office of Management and Budget, which answers to the governor.

RM: And what what does an administrative services director do. What’s the big deal here?

JB: OK. So, imagine that I’m the commissioner of cheeseburgers for Alaska.

RM: OK, yep.

JB: And the governor comes in and says, “Hey you need to cut your budget by 10 percent.” If I’m the administrative services director, I’m the person that decides, “Well are we getting rid of ketchup and mustard? Or are we eliminating the top bun on everything?”

RM: Oh, that sounds dramatic.

JB: Well — and they have a lot of influence in how the impact of budget cuts affects ordinary Alaskans. I was talking to one state employee who told me a story from a few years ago — and I’ll obscure the details to protect that person’s identity — where the Department of Fish and Game had gotten a budget request cut, and instead of maybe cutting admin services they decided to close a weir. And that got a lot of public attention.

RM: OK, so they really they know the ins and outs of their individual department budgets really well.

JB: They do.

RM: And is this a new idea? What’s the practical purpose of it?

JB: This idea had been floated before and prior administrations. I had talked to the previous commissioner of Administration and Revenue under Bill Walker, and he had told me that he had floated this idea (but) didn’t really pursue it under the Walker administration, and he thinks it’s a good idea. Other former commissioners that I talked to had said it’s a good idea; they just hadn’t followed through on them on it before.

RM: The first people to report on this particular administrative order — they are both pretty critical of the Dunleavy administration for signing an order and not announcing it. And you can’t find the order on any state website. How did you find out about it?

JB: I had been told by a state employee who was familiar with the order it was dated Wednesday and became effective that date. But it still hasn’t been published as of the time we’re talking here. And I found out about it indirectly, and I have to say it: They’re starting up a new administration this week. They just got into office Monday. It’s entirely possible that they just don’t have the full staff yet and didn’t have anyone to post it.

RM: And any word on how long this administrative order is going to take to implement?

JB: Well it’s already in effect, and so — because you’re just changing a boss. It can come into effect pretty quickly. The details on how it will work — we’re still waiting to see because, as always, you change the machinery, but it’s how you use that machinery that matters most.

Correction: The transcript for this conversation has been corrected. Originally a quote from Brooks read,  “… they decided to close a year.” Brooks said “weir,” not “year.”

In this newscast:

• Eaglecrest Ski Area to open Dec. 8,
• a federal judge rules in the cruise industry lawsuit over passenger taxes,
• several Alaska Native organizations ask Gov. Mike Dunleavy to fund investigations and prosecutions of cases involving missing and murdered Alaska Native women,
• a program in Juneau helps adult learners reach their career and education goals, and
• a four-time Iditarod champion is cleared in a dog-doping scandal.

In this newscast:

• Gov. Mike Dunleavy names new cabinet heads,
• a former Alaska Senate president once investigated for corruption will work as one of Gov. Mike Dunleavy’s three policy advisers,
• cheating is discovered at a Yukon-Kuskokwim Delta boarding school, and
• Kodiak residents question their evacuation process.