Despite Falling Oil Prices, Alaska LNG Going Forward
The recent free-fall of crude oil prices has affected markets across the globe. Energy companies have responded by scaling back investments as their available capital shrinks. In British Columbia, delays are hampering the Pacific Northwest LNG project. Likewise, in Texas, a liquefaction project has been suspended off its coast by Excelerate Energy. Yet, meanwhile, Alaska is moving forward on an ambitious infrastructure project to develop and export its North Slope gas reserves.
Alaska’s resources are unique. The state receives approximately ninety percent of its revenue from taxes on oil production, leaving the budget vulnerable to price fluxes. Amid tumbling oil prices, Alaska could now face a projected deficit of almost $3.5 billion, opposed to a projected $1 billion deficit last year. State leaders have responded by tightening the state’s fiscal belt, with the newly elected Governor Bill Walker announcing projected cuts to six ongoing state projects.
Despite those cuts, however, state leaders are wisely continuing the Alaska LNG project. This project would be the first to capitalize upon the vast Alaska North Slope gas reserves at Prudhoe Bay and Point Thomson. With the necessary investment upwards of $65 billon, the effort would be the largest infrastructure project in North American history and would create thousands of construction and long-term operations jobs for hardworking Alaskans. And, perhaps most important for the state, the Alaska LNG project will provide a longstanding stable source of revenue.
Nonetheless, recent actions by Governor Walker are stirring concerns for project supporters. During his campaign, the Governor promised support for the project. Yet last week, he announced the unexpected dismissal of three Alaska Gasline Development Corporation (AGDC) board members, the state body charged with moving negotiations with major producers forward to build the Alaska LNG project. Moreover, he penned a recent article suggesting the state’s recently reformed oil tax structure was unfair, despite perpetual assurances during his campaign to respect the will of his constituents who voted in August to approve the reformed tax.
Most distressing, however, is his broken promise to drop the lawsuit over the Point Thomson project settlement. As a state political writer noted, “Despite what he said…Walker has not dropped the suit, and is in ‘no hurry’ to remove himself, he said through his spokesperson Grace Jang.” (Read more about the Alaska LNG going forward HERE)
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