1. Town Hall Meeting
March 26, 2014
Fairbanks, Alaska
1

2. Voter mandate to AGPA:
The Voters Were Exactly Right!
Build or cause to be built a large diameter gas line from Prudhoe Bay to
Valdez- for in state gas use and LNG export.
•Board Members:
– Chairman, Dave Cobb – City of Valdez
– Vice-Chairman, Bert Cottle– City of Valdez
– Secretary, Steve Haagenson – Fairbanks North Star Borough
– Treasurer, Merrick Peirce – Fairbanks North Star Borough
– Board Member, Dave Dengel – City of Valdez
– Board Member, Jim Whitaker – Fairbanks North Star Borough
•Project Manager / General Counsel, Bill Walker – Walker Richards,
LLC
2

3. AGPA Timeline
3
1999 2000 2003-2005
Creation by North Slope
Borough, Fairbanks North
Star Borough & Valdez
ASIA Market Valdez LNG Summit /
Amended Federal
Legislation to include LNG
Federal Loan Guarantee
Began working with
Yukon Pacific Corporation
Sempra Sempra JDA
SGDA
Bechtel Corporation –
SFO Board of Director
Governor’s Highway Policy
Council “My Way is the
Highway”
Protocol Agreement w/State;
Meeting with Gov. Murkowski
Tax Exempt IRS Ruling Sempra Offers to purchase
gas from XOM/CP/BP then
withdraws

4. AGPA Timeline
4
2006-2008 2009-2011 2012
PTU – challenge
Option on YPC Permits
Bechtel Withdraws
FNG / GVEA
JDA – Sempra & Mitsubishi
McDowell Group
Safeguard Marine LLC
Lloyd Engineering
OHA-Office of Hawaiian
Affairs;
Wood MacKenzie
Mitsubishi & Sempra to JNU
Korea: KOGAS; SK Energy;
GS Energy; KEPCO;
POSCO
Sinopec / Tokyo Gas /
Tokyo Electric/MC Corp.
Hawaii Meetings
Northern American Gas
Forum (DC)
Japan: Resource Energy;
Nippon Oil & Energy
AGIA process / withdrawn
partners
World LNG Summit (Rome)
Presentations in Asia
World Gas Conference;
Hawaii; POSCO visits AGPA;
LNG Summit Valdez & AGIA
Open Season Nominations

5. The Gasline Route Voters Asked For
• Voters asked for a gasline Route that runs from the
North Slope to Valdez.
• The Voters picked the only route that makes sense
• The route through Fairbanks- not around us- ensures
PROXIMATE (CHEAP) gas to this community and the
major industrial users- like GVEA, Flint Hills, Petro Star,
Eielson AFB, Pogo Mine, Ft. Greely.
• Richardson Highway routing ensures low cost gas for
future mines in that region. Dr. Paul Metz of the
University of Alaska has documented significant
resource potential there.

6. Cheap, Clean Energy
• Fairbanks would see a reduction in
heating costs by 80% with proximate
access to a large pipeline with economy of
scale. PDC Harris Study, AGPA 2011.
• With distance sensitive tariffs Fairbanks
would have the cheapest gas in Alaska.
• Cheap gas and a cost of service model for
getting that gas to homes (IGU) would
ensure Fairbanks would have clean air.

7. Affordable, clean energy will solve our air
quality issues.
7

8. AGIA Had Two Options
Under the Alaska Gasline Inducement Act, passed in
2007, two concepts were to be studied.
1. A large diameter gasline to convey gas to Canada
and the Lower 48.
2. A Gas pipeline to Valdez for LNG export.
Years of time and hundreds of millions of dollars was
spent on a gasline to the Lower 48 study that never
made any economic sense. The shale gas revolution
ensures that it will always be cheaper to provide gas to
customers with local gas that has a fraction of the capital
expenditure, and a fraction of the operational expense to
deliver to customers.

9. Rex Tillerson, ExxonMobil CEO, Charlie Rose
interview. 3/6/2013

10. What ExxonMobil Knew
• Rose asked Tillerson when Exxon knew about the
massive amounts of natural gas being discovered.
Tillerson responded that Exxon knew (of the gas) a
decade ago. (11 years ago now).
http://www.charlierose.com/watch/60189811
Exxon, our AGIA "partner" was content to see Alaska
spend years of time and considerable money studying a
pipeline project (to the Lower 48) that Exxon knew four
years BEFORE AGIA was signed into law made no
economic sense.

11. Alaska’s Competition for Asian Markets
ExxonMobil
– Qatar – North Field
– Papua New Guinea
– Australia
– Golden Pass (U.S. Gulf Coast)
ConocoPhillips
– Qatar
– Australia and Timor-Leste
BP
– Trinidad (Atlantic LNG)
– North West Shelf (Australia)
– ADGAS (Abu Dhabi)
– Tangguh (Indonesia)
– Bontang (Indonesia)
11

12. Incredible Foresight, And Wisdom
•
A little more than a half century ago, Bob Bartlett had
this to say:
"The first, and most obvious, danger is that of
exploitation under the thin disguise of development. The
taking of Alaska’s mineral resources without leaving
some reasonable return for the support of Alaska
governmental services and the use of all the people of
Alaska will mean a betrayal in the administration of the
people’s wealth.
http://www.alaska.edu/creatingalaska/constitutional-conventio

13. Bob Bartlett, continued
“The second danger is that outside interests, determined
to stifle any development in Alaska which might compete
with their activities elsewhere, will attempt to acquire
great areas of Alaska’s public lands in order NOT to
develop them until such time as, in their omnipotence
and the pursuance of their own interests, they see fit.
If large areas of Alaska’s patrimony are turned over to
such corporations the people of Alaska may be even
more the losers than if the lands had been exploited."

14. What does Alaska own for the $300
million spent under AGIA? Zip.
$300 million is a staggering amount of
money. To have nothing to show for it is
inexcusable.
For perspective, $300 million would buy:
1. 12,000 new pick up trucks. (At $25,000
each).
2. 2,000 new homes. (At $150,000 each).
3. It would more than pay for the FNSB
budget for two years. (No property taxes
due for two years).
4. It would have bought two Flexsteel
pipelines that could convey gas to Fairbanks
from Cook Inlet- so Fairbanks had gas
below $10 per MMBTU.
Yet, the Parnell administration has nothing
to show for our money.
Now, under SB-138 that want more
money, and more authority.

15. Redundant?
"The Department of Natural Resources is asking for
almost $9 million next budget year, including close to $2
million to create a highly paid team of in-house experts
whose main job would be marketing Alaska's gas. Four
team members would make about $200,000 a year and
one would earn $250,000, DNR Commissioner Joe
Balash said.
Team members might travel four time a year to Asia,
DNR says."
http://www.adn.com/2014/03/14/3375505/gas-line-bill-ready-fo

16. Letters of Intent signed with AGPA
EAST-WEST POWER CO. LTD. (KOREA)
GS ENERGY (KOREA)
POSCO (KOREA)
KOGAS (KOREA)
PTT INTERNATIONAL (THAILAND)
PGN LNG (INDONESIA)
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17. AGPA’s Aggregated Volume for ExxonMobil’s
Non-Binding Solicitation of Interest
KOGAS (Korea)
POSCO (Korea)
GS Energy (Korea)
PTT International (Thailand)
PGN LNG (Indonesia)
East-West Power Co. Ltd. (Korea)
Total Export: 2.8 bcf/d
In-state: .250 mcf
Total 3.05 bcf/d
(Not all of the above companies have designated off-take volumes)
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18. 18

19. Point Thomson Issues
• Point Thomson contains about 1/4 of known
North Slope gas resources
• Exxon and other owners have refused since
1965 to develop the field
• Governors Murkowski and Palin sought to
reclaim it
• Governor Parnell returned Point Thomson back
with limited work commitments (2 wells)
• Exxon gave Rosneft an option to take a 25
percent share in Point Thomson

20. Russia is a competitor
• Rosneft- a Russian corporation- has a
option for a 25% interest in Pt. Thomson-
a gas field critically important to a gas
line.
• Russia has an economic interest to:
Develop its own gas and oil reserves.
Maintain high prices by limiting supply into the
world markets (as does OPEC).
Russia needs oil at an estimated $117 dollars
per barrel to maintain a balanced budget.
Economic sanctions against Russia for its
invasion of a sovereign country will impact
Pt. Thomson development, but to what
degree?
Igor Sechin, Vladimir Putin.

21. Alaska’s Financial Situation
SB-21 went into effect January, 2014. This legislation ensures that in times of windfall profits
(high oil prices) Alaska will not derive the revenues we enjoyed under ACES.
Because of ACES we have about $10 billion more in savings than we would otherwise
have. Alaska would have approximately $6 billion in state savings accounts instead of the $16
billion we hold today.
The budget deficit for this Fiscal Year- 2014 is estimated to be close to $3 billion. Next year it
could be $4 billion. If not for ACES we would be out of money in the next fiscal year.
Thousands of jobs will be lost as the capital budget will be decimated.
Voters could approve the SB-21 referendum this August. It they do so, we will return to ACES
and Alaska will enjoy significantly more revenue- in accordance with Art. VIII when oil prices are
very high.
It is clear that Alaska must have a diversified revenue stream, and the only significant, new
source of substantial revenue will be from a gasline, LNG export project.

22. 22

23. ANGDA and AGDC
What happened?
•
ANGDA. Alaska Natural Gas Development Authority. Created by voter initiative in 2002.
138,000 votes "yes" passed by a 2 to 1 margin.
• Frank Murwkoski told the board, as reported by ANGDA Project Manager Harold Heinze:
• Heinze: “About September 2003, when we got started, was also when the newly-elected Gov.
Frank Murkowski was starting to deal with the producers and other people, and he said, "I don't
want you to do the LNG thing because it makes them (the producers) mad."
• Sean Parnell further sabotaged their work by refusing to meet with the board, or to appoint board
members when board member's terms expired. Parnell then finally killed the voters initiative
when he signed legislation last year that killed ANGDA.
• Alaska Gasline Development Corp. AGDC. Proposed “bullet line” gasline project limited to 500
MCF/D with no economy of scale. Capital cost is estimated at approximately $8 billion.
• Is this something we can afford?
• 72/25 debt to equity. 12% equity return on $2 billion = $240 MM per year. 6% interest on $6
billion = $360 million per year, for a total of $600 million per year. $1,800 to $2,000 dollars per
capita cost of each Alaskans in the Railbelt using this gas. The cost of the gas is extra!

24. AGDC Compensation
While the administration has created multi-billion
dollar budget deficits- lavish compensation.
• Pres- $576,434
• VP- $346,840
• Pipe Dir. $339,927
• PR $285,525
• Admin. Dir. $237,936
• Gas Mkt. $405,406
• An. Gas M. $301,962
• Fin. Dir. $294,006
• Hum Res. $285,131
• IT Mgr. $183,743
• PR Spec. $150,629
• Plus a dozen others
compensated over $100,000 per
year.
• DCCED FY2015

26. Building A Pipeline Is Not Hard
Except in Alaska.
• Rockies Express Pipeline was built in 3
years- from first permit filing to
completion. $6 billion dollars. 1,679
miles. 42" maximum diameter, 2 BCF/D
max throughput. Crosses six US states.
Number of miles of gas transmission
pipeline USA? 305,000 miles. (Its not
hard)

27. Gas Transmission Pipelines- USA
Source EIA

28. 2828

29. SB-138- No equal treatment under the law.
Your home or business will be assessed at full market value. The
property of trans-national corporations will not.
• This amendment OFFERED IN THE SENATE
• TO: CSSB 138(RES) (v. 28-GS2806O) Was
REJECTED:
• (B) may not change the taxation of property
taxable under AS 29.45 or AS 43.56 except
that used exclusively for a North Slope
natural gas project if the change is
consented to by the municipality in which
property used exclusively for a North Slope
natural gas project is located;"

30. SB-138
• Since the 1990’s the ANS producers have refused to
allow Alaska gas resources to be developed until we
rewrite our laws
• They demand “fiscal certainty”
• This means Alaska:
– Reduces and locked in tax and royalty payments on oil and gas
– Cedes the right to regulate Alaska infrastructure
– Dispute resolution outside of Alaska courts

31. SB-138
• In 2006 the leaseholders and Murkowski
Administration agreed to a global deal to
accomplish fiscal certainty
• It was a bad deal for Alaska
– About 10% of our legislature was convicted in
related corruption charges
• In 2014 the Parnell Administration reintroduced
SB 138 to allow it to negotiate a similar deal

32. SB-138
• Idea is meet leaseholder demands:
– negotiate Alaska’s share of oil and gas revenues
down;
– lock in tax structure for life of project; and
– waive parts of Alaska lease rights and oversight role.
• Two major problems with SB 138
– “Alignment” as contemplated by SB 138 does not
work
– “Alignment” as demanded by the ANS producers is
unconstitutional and is unlikely to result in pipeline
construction

33. SB-138
• The ANS producers want to “align” State participation as
a contractual partner and not as a regulating/taxing entity
• This approach is a common global model, although not
in North American leasing/taxing regimes
• SB 138 fails to achieve alignment
- Upstream
- TransCanada
• Contractual alignment unconstitutional in Alaska and
other states
- Alaska Const. Art. IX, § 1 – “The power of taxation
shall never be surrendered.”

34. SB-138
• The better approach is to bring in other
international energy companies to build the
infrastructure
– AGIA attempted to do this, but was fundamentally
flawed
• Asian buyers have offered to purchase the full
capacity delivered, or build it themselves
– But ANS producers won’t sell them gas…
• So what are we going to do about it?

35. 17 Attempts to Assert State Sovereignty were offered on the Senate
floor. All were rejected.
• Senate Minority Gasline Amendments (3/18 Floor Debate)
• Amendment #2 Issue: Sovereignty and control
• Require 51% state ownership of project. (4-16) Amendment was a
simple “shall not unless.” This could also be done with a 44% gas
production tax.
• Amendment #3 Issue: Sovereignty and control
• Enforce the “duty to develop” in existing oil and gas leases. (5-15)
• Amendment #4 Issue: TransCanada relationship
• Require competitive bidding for the state’s pipeline partner.
Specifically, the AGIA licensee can’t be a party to a contract negotiated
under this paragraph unless it is competitively offered (7-13).

36. Republican Senator Bert Steadman explains why he voted
against SB-138
Some excerpts:
• “A sole source, non-competitive bid resulting in a multi-generational contract
with TransCanada is not in the state’s best interest.”
• “…our own legislative consultants hired by the Legislative Budget
and Audit Committee warned, “In its totality, however, the proposal
will result in a radical departure from the State’s historical position
and role as a Sovereign, as a Royalty Owner, as a Taxation
Authority and as a Regulator which raises a number of issues and
presents substantial risks.”
• “the Legislature should put SB 138 on the shelf
and work on it over the interim.”

37. Thank You!
Your
Questions?