Alaska LNG Overview Alaska LNG Overview For the first time in our history, the destiny of Alaska’s gasline is in the hands of Alaskans. This project has not been successful to date because all three producers have traditionally each been given the final say over every aspect of the project, and they have been unable to agree amongst themselves on conditions necessary to advance. These companies are global competitors in this market; creating an inherent internal conflict that has caused the project to stall for decades. Each producer has other natural gas opportunities/projects all around the world that compete for its limited pool of capital. These companies have fiduciary obligations to their shareholders that require them to invest in projects that can provide the highest possible rates of return; or in projects where there is the greatest risk of losing control of their gas resources. Therefore an Alaskan project may very well be profitable and economic, just not as profitable as some of the producers’ other options; or just not as high of a risk for losing control of the gas. The current market conditions that have caused the major producers to step back as controlling entities of the project creates a very good opportunity for Alaska. As the producers testified before the joint House Senate Resources committee on August 25th, the project itself is not dead; only some of the prior assumptions regarding structure, control, and ownership have been invalidated. The recent Wood Mackenzie report validates the Administration’s view that the multi-producer owned and financed project model will not work. Under state leadership, project decisions can now be based on objective economics and what is in the best interest of Alaska. The Wood Mackenzie report highlights many challenges with the previous project structure, but also outlines significant opportunities for new approaches. Using this information, free of the inherent conflicts of the former producer-led model; we can finally pursue a truly objective analysis to determine project viability. Advantages of a state-led project include: more traditional methods of project financing third party investors who do not have competing projects and can accept lower rates of return than required by the producers potential state and federal tax advantages the ability to negotiate, sovereign to sovereign, in the world market Other advantages of an Alaskan LNG project include: huge proven reserves strategic location exemplary reputation for honoring long term contracts out of Nikiski long term political stability Global supply of natural gas has grown rapidly in recent years and is in fact anticipated to outstrip demand in the near term. However, most respected industry analysts forecast a new demand window opening in the mid 2020’s. An Alaskan project structured to meet this next demand window, and using the advantages of a state-led project, along with Alaska’s other inherent advantages; offers a unique opportunity that wouldn’t present itself again until the late 2030’s. All projects include some risk, and Alaska should never accept risk beyond its tolerance. However, there’s no way to know the risks involved unless we continue to evaluate these options to enable a truly valid risk verses return analysis. An uneconomic project would never be financed, and therefore there is little risk in continuing to evaluate the market potential of using Alaska’s advantages to see if a viable project is possible. The real risk we should be concerned about is the risk to Alaska’s future if the billions of dollars of gas resources on the North Slope are not monetized. Low cost financing available through a state-led effort will make a significant difference in the economics of this project. This financing will have nothing to do with Alaska’s Permanent Fund, but will come from third party lenders/investors and paid for solely from the revenues of the project. What is most needed right now is a collaborative, cooperative spirit by all decision-makers and stakeholders to adapt to changing conditions and work together to determine if there is a viable path forward. It would be irresponsible to not take the next step to determine the market acceptance and financial viability of a project that could be so crucial to Alaska’s best interest. Monetizing Alaska’s vast stranded gas via a gasline/LNG project would be Alaska’s most significant and most immediate financial and economic get well card, one that would bring generations of benefits to Alaskans. The generational benefits to Alaska from this project go far beyond the billions of dollars of revenues into state coffers. The value of low cost energy on the Alaskan economy is enormous. These benefits would spur new industries and significantly facilitate existing ones, especially mining and value added manufacturing. To the average Alaskan, this project would mean: Lower energy bills, resulting in higher standards of living New and growing industries, resulting in more jobs and higher wages Reduced pressure on tax revenue while preserving key public services Increased state royalties, resulting in larger dividend checks It is time for Alaska to act as the sovereign we are. As other sovereigns around the world control their own economic destinies by taking their gas resources to the world markets, we must not put Alaska’s future on pause to allow competing LNG projects to move their gas to the Asian markets. We have the opportunity to work collaboratively with the producer companies in a different role to finally monetize the incredible opportunity for Alaska.