Alaska’s governor goes to China

There are very different rules for resource projects depending on which side of the border you’re on

Editor’s note: This column was written before the announcement that three Chinese oil companies have signed on to the Alaska LNG project. According to a report by Reuters, the project is still not guaranteed to go ahead.

* * *

Keith Halliday | Yukonomist

It’s like Alaska is a foreign country, a Yukoner once remarked to me.

This was sharply illustrated recently by how Alaska’s governor and the N.W.T.’s premier reacted to their respective federal governments’ policies on Northern oil and gas. Both are facing tough economic times and look to the energy sector for jobs and tax revenues.

Premier McLeod went on national TV after issuing a press release that said “Today I am issuing a red alert and calling for an urgent national debate on the future of the Northwest Territories. The promise of the North is fading and the dreams of Northerners are dying as we see a re-emergence of colonialism.”

McLeod shared a passionate personal statement about the importance of Northerners making decisions about the North, reminding me of past Yukon leaders when they spoke about the Yukon getting responsible government in 1979 or devolution in 2003.

His cri de coeur was provoked by what he called the “unilateral decision by the federal government, made without consultation, to impose a moratorium on Arctic offshore oil and gas development.” He noted that he and and majority of the N.W.T. cabinet are indigenous, and said the moratorium was “but one example of our economic self-determination being thwarted by Ottawa.”

He and the N.W.T. cabinet then proceeded to Ottawa to meet with the Working Group of Ministers on the Review of Laws and Policies Related to Indigenous Peoples to discuss the matter further.

Meanwhile, in Alaska, Gov. Bill Walker got on the plane to join President Trump’s trade mission to China, seeking investors for Alaska’s proposed US$43 billion liquefied natural gas (LNG) export project.

The Trump administration is, as you might expect, fully supportive of Alaskan offshore oil and gas development. The governor’s problem is not with his federal government, but with the economics of the project.

The project has seen tough sledding, despite being a top priority for Walker according to the Alaska Dispatch News. The big oil companies dropped out last year after an independent report flagged its potential high costs and competition from other LNG projects around the Pacific.

It’s a big project. It would involve 1,300 kilometres of pipeline from the Beaufort Sea to the Kenai peninsula, moving a whopping 3.5 billion cubic feet of gas per day. The liquefaction plant would fill 15-20 LNG tankers per month. There would be at least five off-ramps so Alaska communities could use some of the gas too.

The economic report ranks various LNG projects around the world by cost competitiveness, saying that “the Alaska LNG project is one of the least competitive.” However the report also noted that if the state takes over a bigger share of the project, garners some federal tax exemptions, and makes concessions around the price it charges for state-owned gas it would help the business case.

The report notes some precedents from competing countries. The Snøhvit project in the Barents Sea off the northern coast of Norway, for example, got tax concessions that enabled the project to proceed. And the Russian government exempted the Yamal project from export duties and gave it a 12-year mineral extraction tax and property tax holiday. This is the project whose new “ice-class” LNG tankers went into service in the Arctic earlier this year.

We shall see how Walker’s investment mission to China goes. Some have discounted the likelihood of a deal, since the Alaska LNG project has challenging economics and is not yet fully ready to launch. However, others have asked why Chinese President Xi Jinping dropped in on Anchorage last April on his way back from visiting President Trump.

Was it really just to refuel, see the scenery with First Lady Peng Liyuan and enjoy — according Alaska Dispatch News sources — Kachemak Bay oysters and Alaska king salmon with Walker and his wife Donna in the Crow’s Nest restaurant at the Captain Cook Hotel?

Clearly, the game is played very differently on either side of the Canada-Alaska border. We shall see whether the governor’s approach or the premier’s works better. Or if both Canadian and American offshore Arctic gas stay underwater as Norwegian and Russian production ramps up.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He is a Ma Murray award-winner for best columnist.

alaskaoil and gas

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