Contributed by Rep. George Rauscher, Alaska State Legislature House District 9
On November 8th at 9:00pm, Governor Bill Walker held a legislative briefing in his cabinet room, followed quickly by a press conference. The topic we were presented with was his gas-line project.
The governor, speaking to us on the phone, was in China, where he and President Donald Trump had been attending trade talks. The governor announced the signing of a joint development agreement with Chinese President Xi Jinping at the Great Hall of the People, surrounded by much pomp and circumstance.
Apparently, the governor has signed a document possibly similar to the Memorandum of Understanding that he signed with South Korea a few months ago. This time it’s a 5-party agreement, which includes the State of Alaska, the Alaska Gasline Development Corp. (AGDC), China’s state-owned oil company, Sinopec, the government-run Bank of China and the China Investment Corp. (CIC).
China Investment Corp. is the Chinese version of our Alaska Permanent Fund. Estimated value is $800 billion.
China is Alaska's largest trading partner and leads the world in projected natural gas consumption, as it seeks to reduce carbon emissions and other pollution from coal-fired power plants and diesel engines.
It is important to remember that the agreement signed with China doesn’t provide us with a real contract to purchase Alaska’s gas, or a startup date to begin construction. It doesn’t actually guarantee a gas-line either. So what does it do?
Walker explained to us legislators and later the press, that there is still work to be done before a final decision is reached. Simply put, the governor signed an agreement to work on an agreement.
Remember late last year, “The Big Three” (Exxon, Conoco-Philips, and BP) pulled out as partners in the gas-line project, due to world market prices. So basically, the governor is claiming to have found partners to take their place, and in the process, may have given away 75% of Alaska’s gas in the deal, in return for potential investment in the project.
It is important to note, that while the gas is in the ground, it belongs to Alaska, but once the Big Three and other developers bring it to the surface, it belongs to them to sell. None of the Alaska producers were present at the agreement signing in China.
The governor’s agreement does not provide any specifics which will solve the math problem of lowering the cost to deliver our gas to potential buyers, at a price which makes Alaska a player in the open international markets.
One thing it does, is we agree to give away 75% of our natural gas in exchange for getting our gas to market, which leaves 25% to the state.
I do have questions about this agreement: What did Alaska give up in the deal? How many jobs will Alaska lose to Chinees workers? How much control will the Chinese have over the project? What does going from a 25% partner in the project with the Big Three, to a 16.67% partner with five Chinese partners mean for Alaska’s potential natural resource revenue?
Remember, the Alaska Constitution requires the state’s resources to be utilized for the maximum benefit of the people.
Sinopec came to Alaska once before, under then-governor, Sarah Palin. But that deal was scrapped after public outcry regarding national security issues and China’s history of human rights violations.
We are a long way from a gas-line; it is predicted that we are 10 years away if we were given a green light today. As always, the devil is in the details and understanding the agreement will take some time.
This agreement with China, like the previous agreement with South Korea, is simply much ado about nothing.
George Rauscher represents House District 9 in the Alaska State Legislature. He is a member of the House Natural Resources Committee. He represents Chickaloon, Delta Junction, Glacier View, Glennallen, Lazy Mountain, Palmer Fishhook, Sutton, Valdez and Whittier.
