Alaska Legislature: Senate Finance — June 4, 2026 10:00am

Around that today. So in 2019 we had an inflection at AGDC. We had been first pursuing this producer led model until 2016. The producers backed out and we started what's referred to as buyer led here. But also you could see it as a state led model where it was thought this AGDC could lead the project, bring in the buyers from Asia and move forward that way.

In reality, that didn't lack sufficient alignment and there wasn't enough confidence in the Asian market that AGDC could lead that project. And so we shifted in 2019 to an alignment first model which is really about allocating risks to the entities that are best capable of managing those risks. For example, the upstream really needs to be managed by Hilcor as the operator along with the working interest owners, Exxon, ConocoPhillips. But you really needed to bring in a developer who's focused on developing large infrastructure projects to work the pipeline and allocate risks down towards the EPC contractors as well and then bring credit support up from the buyers into the project. So it's almost like a blend of the earlier two models.

At the end of the producer led model, there was a Wood Mackenzie report done on the competitiveness of the project. And that report said that it ranked poorly in terms of competitiveness, competitiveness and it set out some structural changes that we could pursue in order to improve that competitiveness. One of those was to use debt funded third party tolling structure. In other words, bring project finance into the project as they had done across the lower 48. What this does is it has the impact of bringing a lower cost of debt and a lower cost of equity into the project because you have a different risk profile.

We adopted that advice and we also went through a engineering efficiency project in 2019 where we brought in BP and Exxon. They supported us, they funded us that year as well. And they brought in their subject matter experts who had learned a lot about modularizing facilities in the US Gulf coast and ways to make LNG projects a lot more efficient. And we took what was a $44 billion cost estimate in $2016 down to a $38 billion cost estimate in $2019. And that was also supported by Floor, a major EPC company who did the engineering work and brought in, you know, the advice of Exxon and BP into that.

We then went through an economic stage gate with that new cost estimate. And the point of the economic stage gate was really a go, no go. Is it worth our time to continue trying to pursue this project at all? Can it Stand on its own. Go to the next slide.

Mr. Chairman, if I may, Frank Richards, again, this was direction from the board who asked us to again look at the project, determine whether or not it was economically viable or not. And, and that's with the economic stage gate that Matt's referring to. We developed a model. The model was peer reviewed by Gas Strategies. It was peer reviewed by Exxon and dp.

When you switch speakers, can you re identify yourself? Apologies, Matt Kissinger, for the record. So we had developed a model. Really it is the same as what's become the DOR model, but limited to the midstream aspects of the project, the cost of supply model. This is similar to how Wood Mackenzie had approached it in that Competitiveness analysis of 2016.

Looking at can we supply LNG into the Asian market at a cost that's competitive with the other projects that are trying to supply LNG into Asia. And you can see in this slide, after we went through these changes of the structure, did these cost reductions and then inferred a lower gas price because we felt that the producers had been taking through a gas price that was unreasonably high. And the reason that we felt it was high is because this is unprocessed raw gas. It can't be used even by utilities as it comes out of the ground. And so we have to take that gas and turn it into a marketable product and then ship it down the pipeline.

And that's what the gas treatment plant really does.

When you added these three things up and we came to what was called the unoptimized cost of supplies. So this is, if we didn't do anything else, where did we stand? Go on to the next slide.

We have a question here. Senator Coffman. I did. Thank you. On the previous slide I just wanted to address there's a chorus of folks out in the public that are characterizing the considerations of the legislation before us as a, a giveaway that somehow we're not getting our fair share.

And the other things that get said with people feeling that somehow we're not getting what we should out of revenue or out of resource development and any associated revenue. Could you just speak a little bit of how you considered the various Items in Article 8 of our Constitution as far as, you know, maximum use consistent with public interest. And just how are your efforts grounded in that and how did that inform your approach to the recommendations that you're making? I think that's a good thing to get on the record for people who have those concerns. Mr. Chairman, Frank Richards, for the record, I'll take a first stab at it and then hand it off to Matt.

But in regards to the maximum benefit clause of the Alaska Constitution, we take that very seriously with the policy, with the powers and duties that were granted to us under our legislation and the mission that was provided to us by the legislation. It was to commercialize the North Slope natural gas resources and bring gas to Alaskans at the lowest possible cost. So you have tension right there is that you want to be able to purchase the gas at the lowest cost, to be able to deliver at the lowest cost for Alaskans. Yet on the same hand, you want the royalty production or severance taxes that will be paid on that produced gas to come to the state treasury to provide for the revenues that Alaska deserves as the owner. So that's always been a push pull with us in regards to advancing the project and in our discussions with the producers on the gas sales agreements.

Now what we see is that, and we'll get into this a little bit further in our presentation, that it's always, it has been recognized really for decades that Alaska's oil and gas property tax rate is very high. And so we've looked through independent verification on where Alaska sits in comparison to other jurisdictions that have LNG projects. And so, so we've gone and we'll present some of that information today. But literally it is that Alaska is approximately 10 times higher than other jurisdictions in terms of our oil and gas property tax. So the economics of the Alaska LNG project have always been challenged, meaning it's very thin margins, very thin profits on this.

And so the goal has been to be able to work with the legislature, work with the developer and identify what is going to be a rate that is going to be to keep the project economic and moving forward. So Matt, Matt Kissinger, for the record, Senator Coffman, through the chair, Looking at Article 8, the statement of purpose of Article 8 is to maximize the use of our natural resources for the benefit of the people. And then of course, it follows on in the next article or the next section about maximizing the value of that resource. And so we start with maximizing the use of, of the resource. Alaskans on a per capita basis, we have more gas than anyone else in the world other than Qatar.

And we're only separated from that gas by 800 miles of pipeline. If you look across the Lower 48, there are probably around 40 pipelines that are longer and bigger than that that people don't know the names of and don't even recognize because they were never a big deal. So the first, our first objective was to maximize that use by finding out how to get this project built. It is a marginal project, as I'm showing here. And so when it comes to the gas price, that was always an interesting tension because we do want to maximize the value of that gas.

But in our view, you don't maximize the value of that gas unless you bring it to market. So you have to achieve that first hurdle first and then you can focus on the second. Senator Coffman, thank you. Sometimes I think there was a cartoon I saw a long time ago, it was a couple spiders and they were building a web across a kid's swing set. And the one spider was saying to the other, we can pull this off, we'll live like kings.

And so I think of high challenge, high reward projects as that. And this one has a lot of challenges with distance and duration and the value of the commodity. So in the charter of agdc, would you say that you have fiduciary responsibility to return maximum value for the asset? Do you think of that as a component of the charter of AGDC through. The chair, Senator Coffman?

I would say yes. Again, in our statutes, it is to provide and make determinations on the best interest for the state. Mr. Speaker, anything to add? That was Frank Richards.

Mr. Speaker. No comments. Mr. Questions? Senator Coffman?

I'm sorry, sir. Any further questions? Well, no, I just. I thank you for that. I think it's a good thing to get out on the table.

We've got the pro gas line folks, we've got anti gas line folks. And some of the anti are, are anchored in the idea that somehow we're giving away, you know, the resource and we're not really maximizing it. But I think it's. If there's no pie, there's no slice of pie for anyone. So step one is get busy making pie.

So thank you. Thank you, Senator Coffman. Senator steadman. Thank you, Mr. Menk. And this project that we have in front of us is we need to remember that the gas is being sold at the wellhead.

It's not being sold at taiwater or sold in Tokyo. Our gas is being sold at the edge of Point Thompson, our gas field and engine or star. And we have a severance tax that's in place to get the value of the state with royalties and income tax and property tax. And I think the question on the table is this pipeline, to get it constructed as reference is marginal. And the 20 mils tax rate that was set in 1973 for the oil and gas industry would affect the conditioning plant and the pipeline.

The conditioning plant, the major one would be phase two. What we're referring to phase two and the liquefaction plant which is outside the 20 mils. So we have an archaic property tax rate created in 1973 before any development on the books. That makes the makes a very difficult hurdle to put. A 18 to 20 billion dollar project building a gas line across the state.

Economic. It's one of the hurdles. There's several more. And it doesn't mean if we made a zero property taxes pipeline's gonna get built. But we need to remember that this sale is on the field itself, not at Tidewater.

That'll come with another discussion later on, I think just for clarity for those watching at home. Thank you, Senator Steadman, Mr. Kissinger, Senator Cronk. Thank you, Mr. Chair. And I guess I come back to the maximum benefit.

So who gets to determine what the maximum benefit is? Like, you know, oil brings in a lot of revenue. And is this project the maximum benefit of this project? Would it be bringing cheap energy to Alaskans for the next 50 years? I mean who gets to determine that?

Is it, is it a money value or is it a value that it brings to everybody across the state with providing the cheap energy that we don't have right now?

Mr. Richards. Frank Richards. For the record, Mr. Chairman, Senator Cronk, again the legislature empowered AGDC with that best interest determination for this project. And as you identified, there are the gas is currently stranded. Yes, there has been value to that gas in terms of the production out of Prudhoe Bay over the decades.

It has allowed for additional oil to be removed from Prudhoe bay. But as Mr. Kissinger identified yesterday, the AOGCC has made the determination now that gas from Prudhoe Bay may be used for this project. And again, 8.5 billion standard cubic feet a day is being recycled on a daily basis. The AOGCC provided an offtake of approximately 3.9 billion. So not all of the gas from Prudhoe Bay.

So it'll still be utilized for gas cap pressurization on oil development. And therefore that determination by AOGCC that allowed then gas offtake from Prudhoe Bay and Point Thompson essentially gave us the green light to be able to move forward with the goal of providing revenues from those gas seals on the North Slope and lower cost energy prices for Alaskans in the state. And then ultimately the volume, I call it the volume discount as you move from low volumes to high volumes through the pipeline. Alaskans are the ones that will then benefit from lower cost gas in terms of dollars per million btu. Senator Cronk, thank you.

Thank you Senator Cronk. Senator Coffman, thank you. Thanks. So with respect to those goals, do you feel that the respective pieces of legislation in the House and Senate have adequate legislative safeguards to assure that? I think before we get done, we hope to have that written in the best possible way.

We don't want to do anything to harm the prospect of the project, but we want to be sure that that those aspirations are effectively captured in the legislation that we produce. Mr. Richards, Matt Kissinger for the record. Senator Coffman, through the chair. We actually feel like the current statutes with relation to AGDC provide those safeguards. We have our requirements to consult with the Department of Revenue and the Department of Natural Resources before we enter into contracts.

We have our own statutory requirement to maximize the benefit of the resource for Alaskans. And so there is attention which we take to our board and as we, as we talk about trying to push for a lower gas price even though we also want the highest possible gas price. And we manage that in AGDC through our board effectively. Thank you. Thank you.

Senator keel. Thank you Mr. Chairman. It's been a really great little sub discussion and of course the determination of the maximum benefit of the people is something we struggle with all the time. And of course, you know, there's no question that Fairbanks needs help and Anchorage is heading there. There's also no question this gas, this pipeline won't deliver any gas to Kotzebue, Kalskag, Catch can Kodiak.

So we've got to hit the balance. And zero revenue from it doesn't work either because it doesn't happen or because the tax rate is crazy low. But I don't think anybody's talking about that. So as we work forward, we've got to hit that balance so that there's gas for Alaskans to burn at reasonable prices. And there's also a rational amount of revenue for all Alaskans to get that benefit as well who won't get the gas.

So that's a balancing act we're all, I think all trying to do. Thank you senator.

Mr. Richardson, Mr. Chairman again, senator Kiel again. One of the mechanisms that members at this table created in the enabling legislation was called the Energy Relief Fund. I believe that was through Senator Hoffman and Senator Olson at the time. That then creates an opportunity for a percentage of the royalty gas payments to the state of Alaska to be set aside to be used for those communities that are not have direct access to the pipeline gas. And that I think is will generate approximately $2.4 billion over 30 years.

That will then be up to the legislature to appropriate to those communities that have energy needs or projects that will help them in terms of reducing their energy costs. And so I compliment the forethought of the co chairs to have that energy relief fund in place because it will allow communities again the opportunity to benefit from the North Slope resources that they will not have direct access to. Mr. Schnault, as a board member, do you feel the current proposal on the table that has been presented to this committee by the administration is supported by you and will be accepted by all factions of the of the state of Alaska? Thank you Mr. Chairman. I won't speak for the full board of directors, but this is the direction that the board of directors have taken.

I think that it picks up and complements the project and moves the project forward.

Thank you Senator Steadman. It's getting kind of complicated. I think it's pretty hard to argue that this wouldn't be a generational changing project if done successfully. Pretty hard to argue that. It's hard to argue that it would be detrimental to our oil and gas basin because it's just the opposite.

It's going to stimulate it. It's going to extend our oil pipeline where the money's in the oil for decades longer.

What we're looking at, Mr. Chairman, if I can refer back to yesterday's estimate on the cost of this gas line, not the conditioning plant, not the liquefaction plant, just phase one is about 19 billion. It's not 12 and that's with a 20% contingency and you can use 15 or whatever contingency you want or 10. And it does not include cost overruns. So under the current tax scenario, if you had the full tax implied on day one, which you wouldn't, because it be phased in over 10 or over five years through construction is about 380 million a year, year or over the five year construction about 1.9, almost 2 billion. That's what we're talking about.

Not burdening the project with an extremely expensive property tax to lower one of the hurdles to get it to be economical. And there's no guarantee that this does not move it into the positive economics. It's a step towards that. There's multiple other issues that have to be resolved. But even if those numbers were, you know, 50% off because of the phase in it's still a billion dollars.

And by lowering the cost of this project by a billion dollars or some wouldn't be quite that because we're going to have to have, you know, some property tax issue either through volumetrics or directly through millage. But it won't be at a cost of a billion or $2 billion. That's what we're talking about here. So we'll get into the meat of that later on after we get through all the fluffy stuff. But let's keep, let's keep our eye on the money and what we're doing.

Mr. Richards, do you have any comments on Senator Steadman's statement through the chair,. Frank Richards, AGDC to Senator Sedman's statement? I completely agree. This is the topic of discussion is really around the oil and gas property tax and what is truly going to allow this project to remain as an economic project that will move forward in this very competitive environment. Articles today were identifying that Canada LNG is looking at expanding to a phase two of their project to get to 28 million tons per year.

So that's the direct competition just south of us. And the opportunities that were afforded that project by the provincial and federal governments were very beneficial to allow them to move forward to execution and now ultimately production of lng. So I concur with Senator Steadman. Again, the meat of this discussion is around what, what is the appropriate alternative? Volumetric taxes, which we hope is the structure that the legislature will work towards to keep this project moving forward where Alaskans will benefit from energy, but also from revenues.

Thank you for that, Mr. Kissinger. Please continue with your presentation. This is Matt Kissinger. For the record, once we did the modeling, after we had done the cost optimization. Optimization, sorry, the cost reduction exercises and restructured it and lowered the gas price, it put us right in the middle of the pack of the competing projects.

You can see LNG Canada phase one was slightly worse than us, but LNG Canada phase two, their expansion that they're now looking at, it was actually quite favorable. And that's a great example. Just as a sidebar, it's a great example of phasing of these major projects working. And there have been a lot of discussions about have these major projects been phased before? We phased this one to deliver gas to Alaskans faster.

That's the whole reason that we phased it. But one of the other benefits of phasing it, as you can see with LNG Canada, is if you can get through your first tougher hurdle, it makes the following hurdles a lot Easier. So we sat in the middle of the pack. 2, 20, 20. That wasn't sufficient for a project of this magnitude.

This project is a lot more complex than these other ones that we're competing against. And so we really felt like we had to optimize this project further and bring it further down if it was going to be worth pursuing. And we identified a number of levers. You can go to the next slide. We identified a number of levers that would bring that down further to what we called the potential optimized cost of supply.

But the three biggest ones that we identified were state and federal support options that we broadly conditioned as loan guarantees. Maybe capacity commitments, maybe fiscal stability from the state. But the one we really focused on was the loan guarantees. These loan guarantees originated from the Alaska Natural Gas Pipeline act of 2004. There were $18 billion worth of loan guarantees provided to a project that would take Alaskan gas down to the North American market.

And they sat on the books from October 2004 all the way until this date. But they couldn't be used on this project as they were originally authored. When the bipartisan infrastructure law was passed, the Alaska congressional delegation amended that original ANGPA language to allow it to be used on this project. And those loan guarantees are now worth over $30 billion, more likely to be used on phase two. But what they do is they offer the potential to lower your cost of debt.

And lowering that cost of debt can have a significant impact. Not quite as big as the property tax impact, but a fairly substantial impact. The next one was the lower gas price. We had lowered it in our modeling and in our conversations with the producers, but we really felt it could. It could go lower.

And we started putting out into the public this number of $1.50. And we still feel like that's, you know, one of the. That around that price, the project begins to work. I should say that's where you reach that spot, that tension between maximizing your value but making it sufficient for this project to move forward. But then finally, was the property taxes in line with competition?

And this is not the first time it had been pointed out in 2020. It had been pointed out many years before as a hurdle that just hadn't been addressed yet.

We followed this work with then benchmarking because we knew we needed to work on this property tax, but we didn't know where we stood with respect to other jurisdictions. So we brought Gas Strategies in. It's an intelligence firm out of London. And we asked them to look at all the different jurisdictions across North America and even abroad and try and do a comparison of where we sit versus them. And this is where this whole order of magnitude statement comes from is their view.

And some of, I'll admit some of the tax concessions that are given do have limited times with extensions, et cetera, but when you really looked at it on face value, the property taxes that we were faced with were about 10, 10 times higher than the next highest, which was Cove Point in Maryland we'd be looking at 600 to 800 million a year, possibly a billion a year once you factor in the potential risk of cost overruns. Whereas in LNG Canada I believe that they're paying somewhere around 27 million a year. So you can just see it's a massive difference that we were faced with. And that really helped us then identify where we wanted to try and go to. And that's where we first started modeling what does this look like with a 2mil rate rather than a 20mil rate.

And that 2mil rate has since morphed into this alternative volumetric tax which we feel also brings a lot more alignment.

Mr. Richards, at prior meetings of this committee it has been stated that final investment decision is imminent and could happen in the fourth quarter of this year. Do you concur with that statement, Mr. Chairman? Frank Richard, for the record, my goal is that this project is able to reach a final investment decision for phase one sooner than that. It's really the opportunity that the developer talked to yesterday about what are those existing actions that must be undertaken to complete and have a final investment package, a decision support package that they would then make their decision on. Part of it is again around the property tax.

And so that's why we're wanting to work with the legislature in all maximum ways to be able to accomplish that to a reasonable rate to achieve the best economics for the state and for the developer. Thank you. Please proceed, Mr. Kissinger.

So Mr. Chairman, Frank Richards, for the record, again what we just described to you was that economic stage gate that we, that the board requested us to be able to present to them in 2020. And so the outcome of that presentation was again the nod by the board, the approval by the board to continue forward and working on those efforts that Matt just described. Federal support through the loan guarantees, cost optimization on the project, working with the producers on gas sales, looking for a developer to come in and bring their expertise, but also a lower rate of return than what we were previously looking at under the producer led model. So that's where we again developed now a new Execution strategy in conjunction with the board in our policies, to be able to go out to seek a developer, private investor, to be able to come in to the project, to be able to take on that leadership role. Because we knew AGDC in the state of Alaska in and of itself was not going to be able to achieve this ourselves.

So we put together a strategy, we were working with the likes of Goldman Sachs to be able to help us in going out into the marketplace and identifying this opportunity called the Alaska LNG Project. And that's where we then developed a confidential information memorandum that we would then present to interested parties, whether they be infrastructure funds, whether they be LNG developers, whether they be financiers that had LNG interest in their portfolio, to be able to bring them to the table or entice them to be able to come in and look at the project. And so there were several iterations where we again entered into confidentiality agreements and presented the options or the opportunity of the Alaska LNG Project to investors to be able to, to bring them forward. Some elected to pass and we kept moving forward. And with the identification to the legislature that we were again out in the marketplace looking to accomplish that.

And what the board directed us to also do is to create a subsidiary which we call eight Star Alaska. And it was in that subsidiary that we placed the assets of the Alaska LNG project. The reason for that is that AGDC as a state corporation, 100% owned by the state, could not be diluted, subsidized, divested. Divested. Thank you, Matt.

So by the creation of a subsidiary, we could place the assets. And that's where the enticement of a private sector developer into the subsidiary, called a Star Alaska was the ultimate goal. And that's what we were able to accomplish in this. We had received from the producers in 2016 a 75% ownership right that they had in the Alaska LNG project. So when the producers elected to leave the project, they handed that ownership right to AGDC for the State of Alaska.

So that 75% ownership is what we were then marketing to as the enticement to the entity to come forward and take this project to FID at their expense. So. So no additional state dollars were to be used for completing the feed on the project, moving forward and sending up the contracts and getting to a final investment decision. So that was the avenue, and that was the proposal that we had put out on the street. Anything to add,.

Senator kiel? Thank you, Mr. Chairman. Love. To clear up one thing, I heard an interesting comment. I got A little confused by it about ownership of the FERC certificate.

And I just invite you to put on the record and make clear. Are there any owners of the FERC certificate or interest in the FERC certificate other than AGDC or do you hold. That in its entirety through the Chair? Senator Kiel, the Federal Energy Regulatory or FERC authorization granted to the Alaska LNG project was in the name of AGDC because in 2020 or actually 2017 when we applied we we were the sole owner of the project. That asset, the authorization by FERC became and went into eight Star Alaska.

So there has been a name change then from AGDC as the owner to Eight Star Alaska. And the ownership structure of Eight Star Alaska is 75% Glenn Farm, 25% AGDC.

So no residual. We started this with Transcript Canada. No residual from them or the producers in the producer led project. It's 100% through the chair. Senator Kiel, it is 100% owned by East Star Alaska.

Thank you. Thank you Senator Kiel. Please continue. This is Matt Kissinger. For the record, this is really just carrying on from the earlier messages.

We went from producer led to state led to developer led. The important thing to note is the risk around costs. So when we had the lead party as Exxon Mobil under the producer led model, the state through AGDC were on the hook for 25% of all the costs, all the risk, all the construction costs, etc. As we morphed into the state led effort, AGDC took ownership of everything. We still had paid 25% of pre feed, but we would have been on the hook for 100% of feed, 100% of construction and 100% of cost risk under that model.

As we went into the Glenfarn model, because of the way we structured the carry, we removed a lot of the upfront risk that the state would have otherwise continued to carry. So we still obviously we'd already paid 25% of the pre feed but we didn't have to pay for any of the feed. We're carried through feed we have an opportunity to invest in construction which of course would carry cost risk as well. But now that is an opportunity and it's an opportunity at each issuance of equity. So it's not a single time opportunity where we have to elect.

So we feel like we took this from something that was a lot riskier to the state to something that actually had more optionality to the state where we could shed risk. Senator Richards, Director Richards. Thank you Mr. Chairman for the elevation in my position. I appreciate that. I Wanted to again just reiterate what Matt said because we heard after many years sitting at this table from the co chairs the concern about the placing the state at risk through any agreements and that we recognized that was not the role and responsibility of AGDC to be able to put the state of Alaska at risk.

That was going to be a state decision through again an option to buy into equity in the sub projects. So it was only at the point when final investment decision is taken that we have reserved the option for the state of Alaska to elect to invest or not. The project will proceed forward without the state investment. But we wanted to give the state that opportunity. Opportunity should it elect to eyes wide open that if you invest in equity there will be risk associated with it and allow that and bring that back to the legislature for that decision.

But for the general public the decision for the 25% option is with the legislature. Mr. Chairman, we've reserved that for the for the legislature between 5 and 25% equity option is what we've reserved within our agreements with Glenn Farm. And the goal would be that the state of Alaska may not have to elect the full 25% if it chooses not to. Then that option will then be extended to Alaskans and Alaskan corporations.

Further questions on this slide. Senator Keel and Senator steadman. Thank you Mr. Chairman. The 5% minimum buy in, is that going to match all other potential equity investors? Is there any chance that anybody else gets in at 2%?

Two and a half through the chair. Senator Kiel Again the equity raised will be run by Glenn Farm and I don't know if they have a specific minimum investment amount in our agreements with them. Our goal was to obtain the option for up to 25% but they wanted a minimum threshold of 5%. Senator Kiel if that's not a minimum for all equity buyers why would that be a minimum for the state of Alaska? This is Matt Kissinger for the record.

Senator Keel through the chair. So there is no contractual limit requiring Glenn Farn to limit everyone else to 5% but that was the direction that they'd indicated not having anyone in under 5% so that you don't have investors that are coming in with a marginal amount just to get data out of the project. And so there is no actual contractual limit but that has always been their stated objective. Senator Keel, thank you. I missed the reason why it would be a different limit.

We would agree to a different limit than other investors might.

Senator Kiel through the Chair. I don't think that it's that we agreed to A different limit. It's that we agreed to a limit first.

Senator Keel.

No, Senator steadman. Thank you, Mr. Chairman. And we're kind of jumping ahead a little bit because the last few slides in the slide deck dealing with the Eight Star Alaska and then Eight Star Pipeline that comes in. But maybe we can have them kind of clarify who owns Eight Star Pipeline, which is a subsidiary of the holding company, which is Eight Star Alaska, and just remind us of the board of directors of 8 Star Alaska and how that works. But then the ownership of currently 8 star pipeline.

Through the chair, Senator Steadman. Again, we have some slides coming up at the end that we were going to talk about in detail. But in general, Eight Star Alaska owns right now 100% of each of the three sub projects. Eight Star Pipeline, Eight Star Gas Treatment and Eight Star LNG. Again, they have not gone to final investment decision on any of those.

And at that point in each of those there will be the opportunity for an equity raise. And that's where we'll talk about the dilution potential for AGDC's current ownership within H Star Alaska, where we have a 25% ownership stake. Again, that was Mr. Richards, for the record. Senator Stedman.

No, that's fine because we need to wait and go through the slides. The point I wanted to make is currently we, we own 25% of the pipeline company. It's not built yet. There's nothing built yet. You know, and in the event that it gets built, somebody's going to have to come up with some equity and it's probably pushing 4 billion, 3.8, 3.7, 3.5, who knows?

A big number. That entity, whoever makes up that equity position is going to end up owning the vast majority of that pipeline company. Through the chair, Senator Steadman. The short answer is yes, we will go through that in detail and be able to talk about in a specific example. Please continue.

Again, for the record, Frank Richards.

When we went out to the market, we went out and we ultimately received interest from Glen Pharm. And we again went through a process with Glenfarm. We signed confidentiality agreements. They came in to look at the project. They saw something that they felt was an attractive investment.

And so we went through the opportunity with them to give them more information to present, to allow them to do their due diligence and to look at what it is that the state of Alaska has in terms of its resources as well as its risks, but also what the benefits would be for Alaska. So we wanted to make sure that this investor met the criteria that we had set out for. Do they have the necessary capital to cover the spend through feed and through our analysis? Yes, they did. We wanted to be able to retain the 25% interest in HStar Alaska utilizing, as the Chairman has described, a billion dollars of cost that the state of Alaska has put forward in developing this project.

And we wanted to make sure that there were milestones, firm milestones that were set for the project developer to meet and that agdc, through the Board of Directors of AG Alaska, would have governance and ownership rights as a true minority member. And as Mr. Kissinger identified yesterday, that the Alaskan Advantage principles that we built into the agreements would be followed. And so all of those objectives that the board had asked us to assure them have been met with Glenn Farm. Questions on Slide 5 12. Please proceed.

So just a little bit more history again. When we were out seeking a private Investor from the 2019 through the 2024, we had multiple, multiple engagements with entities around the world and through Covid multiple zoom and teams meetings to be able to represent what Alaska had in this project. We worked again and brought back Goldman Sachs to work with us for the capital raise. And at that time we were seeking $150 million ultimately to move the project through feed to an FID for the entire Alaska LNG project. And during this time we had very strong support from the Alaska delegation.

As Matt described, the loan guarantee language that Senator Sullivan and Senator Murkowski pushed through was extremely helpful and allows the Alaska LNG project now to be eligible to utilize those. We worked on multiple trade missions going to Asia, the Asian countries that would be the customers of the gas, with Senator Sedman, with Governor Dunleavy, met with the heads of those countries, met with the energy ministries of those country as well as the buyers with within those countries. In particular in Japan. At the time, the US Ambassador was a guy by the name of Rahm Emanuel and he took up the charge that the Alaska LNG from his perspective, was a strategic energy asset for the country. And so he, in his role as the U.S. ambassador, pitched the country of Japan and the buyers to be able to engage and participate with us.

In addition to that, we continue to have our public engagement with the major stakeholders, including the legislature. We work with our native corporations, we've worked with community councils, we've worked with advisory councils to AGDC to keep them informed of how we are progressing. We have quarterly board meetings that are publicly noticed and present the information on our progress to the board as well as coming to the legislature three times a year to represent to the resources committees on the advancement. So over that time frame, literally hundreds of meetings and outreach events to be able to move this project forward.

In our formal engagement, as I described earlier, again, we had originally met glenn farm in 2022. They looked at us, they passed at the time, Goldman Sachs in their work efforts had an investment outreach list that included Glenn Pharm. So we re engaged. There was also the introduction by Exxon Mobil to AGDC for Glenn Farm. So that was very helpful.

And that then worked towards advancing discussions in face to face meetings in 2024, ultimately leading to a letter of intent that we signed and then ultimately an amendment to the letter of intent that put forward draft term sheets for definitive agreements that were going to be executed within 60 days to move forward.

This is Matt Kissinger for the record.

So in line with what we'd set out in the 2023 President's Report, through this process, AGDC divested 75% ownership of Eight Star, the entity advancing the project. Glenn Farn's now the majority owner. They're leading all the funding. They're funding the entire project. At this point, AGDC has our own operating costs and that's what we're limited to.

H Star Alaska, as you asked earlier, they have now all the permits, all the engineering, environmental data authorizations and the right of way.

By June 30th of 2025, we had completed all this transition and then we embarked on pushing forward the project. We have our formal engagement that we'll talk about here with respect to our governance. But we also have a very good relationship between AGDC and Glenfarn. And this is one thing that we've been concerned about in this whole process as we look to changes with respect to agdc. Through our ability to work confidentially with our partner and reporting up to our board, we've been able to build a tremendous amount of trust.

And so there's information that's required to be shared and then there's information that's further to that that gets shared through trust. And as it stands right now, we would posit that, that there is a tremendous amount of information of extra information and insight that we still retain because of the incredible level of trust between AGDC and Glenn Farn.

So when you talk about Glenn Farne owning the entire project, can you describe the entire project?

Pardon me, Chair Hoffman, but I should have said HSTAR owns the whole project, meaning that they own all the authorization, the rights of way, et cetera. But that project is phase one. It is both phase one and phase two, it's the whole Alaska LNG project.

Thank you.

All right, Mr. Chairman for Frank Richards. For the record again, as we move forward and entered into these agreements with Glenn Pharm, they took on the true developer role for the Alaska LNG projects. And one of the mechanisms that we have to monitor them is the use of what we call diligent development efforts. And these are essentially industry standard practice that a developer, an international oil company or major infrastructure developer would use to be able to work towards a product project. We previously talked about a stage gate process.

They're using stage gate process. We talk about the various streams of work that they have to accomplish from gas sales to gas purchases to engineering, procurement and construction contracts to compliance and keeping our regulatory authorizations up to speed and available to use for construction as well as the financing and the debt financing necessary for the projects. So from our perspective, Glenn Farm is working forward with due diligent development efforts and they're putting in good faith and timely pursuit of the project developments. There will be and needs to be again continued investment of sufficient resources to be able to accomplish this. In particular, the we as AGDC originally developed this phasing of the project.

And phase one has been the priority taken on by Glenn Farm based on the energy crisis that South Central and Interior Alaska are facing. So they are accomplishing that. The Federal Energy Regulatory Commission as well as the other 38 major federal permits that was granted to AGDC in 2018 and then put into a Alaska, they are keeping those current and compliant with the requirements, reporting requirements, updating the materials necessary to have those authorizations ready to move forward. The rights of way through both state and federal lands are also being maintained and worked with what was the Bureau of Land Management and now the land that is being transferred to the State of Alaska through the Department of Natural Resources. In our role as a HSTAR board member, we are one of four.

As was described by Mr. Prestage yesterday. Two are Glenn Farm members, one is AGDC myself and one is a non voting Alaskan public member. That governance we'll go into a little bit farther. But the key point, and you asked earlier Mr. Chairman, about the language in the bill. One of the challenges that we see, as Matt just described, was that in the bill it talks about restricting our confidentiality abilities.

And so we feel that that would make it more challenging to work as a minority partner with Glenn Farm as Matt described, the positive benefits of that because we are working hand in hand with them and we're essentially aligned when Glenn Farm is the project developer, has success, then the State of Alaska through AGDC will have success and we hope to be able to retain the ability to help them move this project forward. I might state that this committee also has fiduciary responsibilities to meet. And you said that you believe your due diligence has been met, but we do not abrogate our responsibility of due diligence. So that should be noted on the record. Thank you, Mr. Chairman.

Questions on the slide. Next slide. Slide 17. Mr. Chairman, again, Frank Richards. For the, for the record, our role now has shifted from 100% ownership rights of the Alaska LNG project to 25% minority owner of Eight Stars Alaska.

So here's where we represent the State of Alaska's interest. Again based on the enabling legislation and now in statute AS3125, we were granted those powers and duty, or I should say the board was granted those powers and duties to be able to act in the best interest of the State of Alaska, not and certainly not in any way taking away from the role of the Finance Committee.

One of the key issues that we negotiated was that we wanted this opportunity to acquire ownership if the State of Alaska through appropriate legislation would be available to us. And so we reserved that option. However, if that option does not proceed forward, there will still be some what we call developer economics returns. And as owner of HSTAR Alaska, because of the development cost that the State of Alaska through AGDC and now Glenn Farm working towards FID will have expended and want to have some return on the investment. So as Glenn Farm retains equity positions in any of the sub projects and has developer economics return coming up to them for fees to those sub projects, then AGDC without any more additional funding would receive 25% of those returns to the State of Alaska.

In terms of obligations, we as a board member have the responsibility for governance. But we also in working with Glenn Farm, have the opportunity to provide them with support. Matt, myself and our team have worked this project now for a very long time. And so we have a lot of expertise and Alaskan experience that we bring to bear to help them. In doing that, we looked for the opportunities for Alaskans to be able to not only contract on this project, but also to invest on this project.

And we look for the opportunities beyond the Alaska LNG project as the legislature gave us. If there are additional pipelines or energy transfer systems that would be an economic opportunity for the State of Alaska to move forward with. And then as we described our adherence to diligent development efforts in Alignment with our agreements and the milestones that we had set out with Glenn. Farm Finance members have any questions on AGDC's role as a minority owner? Senator Steadman thank you, Mr. Chairman.

I think it's been made pretty clear on the, the ownership to 7525 and then on the sub components, the pipeline, the treatment plant, liquefaction plant. But there is some other concerns that some of us have at the table when it's referenced to the state. You know, a lot of it's really easy to assume it come into the legislature, but there has been some interest in accessing other entities of the state if it's the Alaska Railroad, if it's ada, if it's a permanent fund. So there is concern on the structure and how that would be executed. There's also, it appears to be significant risk level differences between the first phase, the pipeline and then the second phase, which would be the liquefaction and the conditioning plant on the North Slope.

It's been expressed by our consultants and other presenters many times that the bottleneck is the pipe, the pipeline, phase one. And if we can get that economic, it's highly likely we would move through phase two and end up with our big export and high volume. And I don't think that's in much disagreement. The concern I have, Mr. Chairman, just to lay it out early, is if we're going to look at investment opportunities and we classify and take a look at the risk levels, it seems to me to be substantially more risk in the pipeline. And that might be something we need to be very careful with when we do this legislation and ensure that we don't have authority to invest in something that we weren't aware of.

We use the elected officials because there's several major risks here, one of which is gone far and with all due respect have never built anything of this scale anywhere close. This is a high risk project for cost overruns, regardless of all the testimony of how much work's been involved in calculating estimations and so on and so forth.

Those type of, that type of work with similar consultants and sometimes similar, same consultants and firms are done in other projects that have gone way overboard. And we've had the presentation by Pantheon here the other day dealing with cost overruns. So I guess the point I want to make if we need to be very careful with this pipeline as an investor and once the pipelines ended up and running, we still have huge opportunities in the liquefaction plant, which is a huge component in percentage of the total overall value and the conditioning plant on the North Slope. Because I know that there's been many groups that have looked at the state as the big fat piggy bank and if they can market the risk is low level and it's good for everybody accessing these fund sources we have in the billions. So I just want to put that on the table.

This is not putting money in your local savings bank for the rank and file Alaskan. And I'm not even sure what companies in Alaska can handle the exposure of equity call if it goes underwater. So we need to be careful with that. So I just want to put that on the table. So on that, on that topic, Mr. Richards, you said that FID may be more imminent in the third quarter of this year.

What do you see as the likelihood on time frame for the state to make a decision on whether or not they want to decide to invest or not to invest? Will it be later on this year or will there be a change of administration and a change of the composition of the committee structure in the legislature when that decision is made? Mr. Chairman, for the record, Frank Richards, as we've described previously, but also with Glenn Farm yesterday, what we've reserved for the state of Alaska is once final investment decision is taken, we'll have 180 days to present the option to present the economics, the risks of inequity participation to the state of Alaska. So for an example, if there is a final investment decision in the fourth quarter, let's say the beginning of the fourth quarter quarter of this year, then that would start the 180 day clock to be able to provide the information to the legislature and to the Alaskans that would be interested in it to address Senator Steadman's concerns. Yes, this project, there is a definite risk profile associated with this project that has to be taken into consideration by any investor, including the state of Alaska or individual Alaskans or corporations to see whether or not it meets their investment criteria.

And that will be truly a decision that they get to make. We just wanted the after many discussions here at the table, we wanted to make sure that we provided that opportunity to the State of Alaska as an option but not an obligation. So that was key that we weren't committing the state to this obligation. This is completely different than the structure that we had under the joint venture agreement where we would have the obligation to be able to cover any cost overruns through direct appropriations. So I was well aware of the 180 day or 6 month requirement.

It's been presented before. But you made a statement earlier on that to my comment that FID is imminent and may be made as early as the fourth quarter. You said that could be even much earlier than that. So if the legislature is going to be making, if that decision is making much earlier to gather the legislature later on this year together to make those decisions, I find highly unlikely that could possibly happen. But in that process, what type of information does AGDC contemplate prepare presenting to the legislature to make that decision through the chair?

Again, Frank Richards, if I gave the impression that I thought that FID was any day now, I apologize. I said it was my goal or hope that it would be sooner than later. That being really is because I want Alaskan to be able to have the opportunity to have that North Slope gas available for us to meet our energy needs. The information that will come and be presented to the state of Alaska through the legislature will be the same information that will be provided to equity investors by Glenn Farm at their equity raise. So there will be a series of information, some of which will come through a virtual data room that will provide the economics and the risk associated with it with the, the cost profiles and the opportunities.

There will be, you know, financial considerate reviews that will be provided by some of the other equity investors. I think it's key to note that when Glenn Farm seeks an equity investment, they're going to put the information out to very large industrial infrastructure and equity participants who will do their due diligence, do a deep dive, look at independent third party analysis of the cost estimates and the execution plans. They will have done that, they will have made that decision. And then with our option, the state of Alaska will be able to gain the benefit of these entities having done their due diligence. And then the state of Alaska looking at what they have done and what they have accepted as reasonable equity terms.

So I bring this up because that 180 day timeline makes much sense. But what triggers that timeline, to me it would make more sense when the legislature convenes that that clock would start ticking so that we would have ample time to make major decision on the amount of funds that the legislature may invest in. And I wonder if you might comment on that. This is Matt Kissinger for the record. Chair Hoffman.

Let's first just be realistic about fid. Developers have a habit of setting very aggressive FID dates and they do this because it's really the only way to drive everyone who's actually working on a project to a common target. But the knock on effect is it sets this unrealistic FID date out in the public and slowly credibility erodes. And so as agdc, we don't want to forecast when the FID is. We want to talk about what the path is to FID and then people can make a credible judgment themselves.

We have a lot of work still to do ahead of FID for phase one. We have come a long way, there's no doubt. But we have to take these agreements with the upstream and we have to turn them into definitive agreements still. So we have the tough stuff negotiated price and term take or pay provisions. But we still have to paper these agreements into long form agreements.

And that same goes true for the gas sales to NStar, to other utilities and to industrial customers in Alaska. And all that has to come together further. You have episodes APCM contract with Worley. We understand that that is also a preliminary contract. So that has to be finalized along with all the knock on construction contracts below that and supply of pipe and camps.

Now they have worked a ton on that and we've come a long way. But let's be realistic about when FID is. I think fourth quarter would be a great FID date if we can hit it. And I understand all of that. I'm questioning when does the clock start ticking for the 120 days and what will be an optimum date for that time to start.

And from my viewpoint it would be when the next legislature convenes. So maybe you can, Mr. Richards can contemplate that and we will proceed. But I think that it makes it more complicated because right now we are under one administration and one organization and it may cause problems. Senator Coffman and Senator Steadman,.

Thank you. So the, the FID decision, I assume that, that y' all have a, like a decision support checklist of everything that you know that that needs to be in place. And is any of that confidential of the things that you're considering or evaluating? Could. Is that something that we could see so that we, we understand what, what the go no GO checklist is or the statusing of different things?

I don't know if that breaches any confidentiality, but that might be a good point of discussion at some point through. The chair, Senator Coffman, again there will certainly be again a decision support package that will be developed. And so for those that are not engineers, that is again a listing of the major items that are necessary to take this decision or pass through this stage gate. Some of that will be in the public realm already as Matt described, when the gas sales agreement to NStar is then put forward as a rate case to the rca that will be a public document. Glenn Farm again presented a range of cost estimates yesterday.

The actual detail and information, you know, we will be presenting to our board. But again, we would like to be able to put out into the public record as much as we can what will be again helpful to the decision makers on making a final investment decision. Senator Kaufman, thank you. Yeah, I didn't mean all of the products that you're considering, the, the deliverables, but it was just nice to see what the matrix, the table of contents, these are all the things, this is the diligence that we're doing to get to this point. So I'm not saying the decision support package, which is everything, I'm saying the decision support checklist, which is the evaluation guide and maybe even the status of, hey, we're good on this, we're not good on this.

We're waiting TBD two weeks or whatever. That's the type of evaluation, evaluation process. But I love checklists. But that brings me to the other question. Your decision support tree, the matrix of decisions and verifications that you're doing, is it properly articulated for this two stage project where we're building essentially an in state gas delivery utility that's going to exist for a while while before we get into the next phase, which is the higher value added activities.

So what I'm interested in, especially in this part of the discussion, is are your planning and verification processes, are they adequately aligned for that two stage process? Is there anything that we're not doing that we should be doing that we're not thinking of because of the switch to a two stage execution plan. And then the other piece of that is if there's anything that we're missing in the legislation that we're considering. Because right now the bill before SB 2001 is treating the project holistically and there may, there may be points, things that need to be done at step one, and then step two, there's something that's referred to as sequence risk. If we're doing the wrong thing before we have all the information, then we could realize risk.

So I think we need some risk management tools to look at what we're considering as a piece of legislation against this plan and how does the legislature address those risks in forms of avoidance or mitigation expressed in the legislation that we're preparing? So what sideboards do we need in order to navigate this two stage process? And I'm happy to talk offline with further considerations for what that might look. Like Mr. Richards through the chair. Senator Coffman, to your initial question around again the decision support package versus Phase one versus Phase two.

Yes, there's an integrated decision process and that has been built into the execution strategy and structure. What I heard Mr. Prestage speak to yesterday was again kicking off the pipeline in the phase one approach initiates this, this major piece of infrastructure. What we have heard from our communications with the Asian markets is that in and of itself will be a major positive from their perspective that this project is advancing now with what from their perspective was the highest risk element of the project. For some reason they feel that pipelines in Alaska can't be built even though we have built one. So if in that regard, with the advancements of the LNG sales agreements, they're fast approaching that threshold of 16 million tons, which will allow them to advance forward with the feed for the LNG and gas treatment plant and march towards that final investment decision for the second phase of the project.

So ideally it would be initiation of the pipeline, completion of those LNG projects, completion of the feed and then final investment decision within a year or more of the gas treatment plant and the liquefaction which would essentially condense the timeframe. And it was again always envisioned that there would be a phasing of this project in terms of execution of the project that was built into the original construction planning effort. Because there's time sequences between the plant construction and the pipeline construction and the LNG plant construction. So aligning those together ultimately will bring us to the lowest cost of gas for Alaskans. I believe that there will be a gas line built and we've had presentations by Donlin Creek and their 330 mile line, I think quite confidently will be built.

Senator Coffman, thank you. And I guess that takes me back to the next piece of with the two stage process and all considerations of the protections that we need as a state around that. Considering your role in all of this, as our designated statutorily declared representatives in all this, I want to be sure that we have, in the final piece of legislation, legislation that we have everything we need to assure the many things that have been discussed as far as cost overrun protection as far to the degree that it needs to be in the legislation, the framework is there or the framework is elsewhere and we can point directly to it and say no, we've got this. And so I guess what I'm asking is continued discussion, some help with making sure that, you know, right now we've got two bills there's one in the House, one here, and they're different, different evolution. But when we come together, that final piece, we need to be sure for Alaska that we've got that expressed adequately.

So the fid, the investment decision, is all that articulated for stage one versus stage two.

Do we maintain our opportunity without prematurely adopting more state exposure than what we would need to do in order to maximize benefit for Alaskans per the Constitution? Mr. Richards, through the chair, Senator Coffman, again, happy to work with you on again, what we envision will be the process going forward, the legislation. Again, as you said, we have two different versions of the bill. Some contain provisions that aren't contained in the other and vice versa. When we began this process with the governor's bill, there was the alternative volumetric tax proposal.

There was a threshold that gas had to reach a certain volume throughput to be able to start the trigger of that AVT or alternative volumetric tax payment to the state and to the communities. We just need to see again where that is. I think what I heard from Mr. Prestige yesterday is that, you know, they support paying the alternate volumetric tax again as it becomes responsibility of theirs to be able to do that. The real reason around this bill and the structure is around the cost of that payment in lieu of tax, I'll call it. But it's an alternative volumetric tax because the existing rates were so high.

Now, please remember when the legislature created agdc, they also gave an exemption to any project that AGDC was working on that there would be no property taxes during construction. So what you hear from the developer is they're willing to pay a property tax, an alternative volumetric tax during construction. Even so, they've made some concessions to be able to address what the needs are going to be in the communities in the state of Alaska during that construction period. Thank you, Mr. Richards. Senator Stedman thank you, Mr. Chairman.

I'd like to revert back to the equity issue. So we've had previous testimony dealing with the gas line that most likely the equity raising of equity would come in stages. There might be a particular window open to bring in equity and maybe you don't quite get enough. So you go do another one several rounds, and the folks that come in or the investors that come in first ends up getting a majority of the pie and is in a better position than the, than the entity that maybe come in second, third or fourth rounds, which is a little different discussion than what we're having today. Because what I hear being said today is for the pipeline, it'd be like one round of equity.

You're going to raise your three and a half to four and a half billion depending on how big the project is. Right. And all that other stuff somewhere in that range and then move on and live happily ever after with a successful project. So can you help me with that? Is this a one and done deal or is it going to be multiple rounds of raising equity or do you have any idea through the chair, Senator.

Steadman, Frank Richards, There will be multiple rounds and offers to the, the, to agdc. Again we're talking about phase one of the project. So that will be the first equity raise. There will be a second phase for the pipeline project as the second phase of the LNG and the gas treatment plants proceed forward because we have to again complete the pipeline under Cook Inlet all the way to the Nikiskie location as well as provide for the compressor stations. Okay, so look, Senator Steadman, if I could let me clarify the question.

It's preference by this is going to be a two stage project. We're going to do the pipeline. Hopefully it's going to be successful and start underway and then we're going to go ahead and with the liquefaction in the treatment plan. Okay, so let's take those two off the table for the discussion because what we're talking about today is relieving some cash flow strains on the pipeline project to get it to the hurdle rate, rate of return hurdle and get the other things that have been mentioned today to fruition and get the project built. So all I'm doing is looking at this pipeline, right?

Some of us want to have quite a separation between the two in case there's inadvertent errors in what we're doing doing today for the pipeline, we can correct it. We don't get backed into a corner. So when we look at raising equity to build a pipeline, is it going to be one and done and you're going to raise your three and a half to four and a half billion and you know, go on and hope there's no, you know, additional equity calls or cost overruns or do you vision it as it's going to be, you know, several windows of opportunity as you try to bring in investors. This is Matt Kissinger for the record. Senator Steadman, through the chair.

There may be multiple rounds building up to an fid but you won't achieve a final investment decision until you have sufficient funding to construct the project along with your contingency and additional contingency for contract cost overrun. Risk, et cetera, at that point in time, once that final investment decision, and that's a single vote that happens at a single moment in time. That's what starts the clock on our 180 days. And this is actually going back to Senator Keel's earlier question around this 5% limit. Actually this is one of the other answers to it is all the investors will be in, they'll all be committed and then we'll have 180 days for the state to decide to back them out of some of their commitment.

And that's where we'll back out up to 25% of everyone's equity commitment. And so the state's participation is a little bit different because it comes as a preemption. And you wouldn't want that preemption because other investors are committed, they've lined up the capital, et cetera, and you're going to push them out. And so you wouldn't want that done for a marginal amount because it's a tremendous amount of work and it's risk on the other investors. This is not an uncommon model.

It's a somewhat common model internationally in the upstream oil business. In countries where you have state owned oil and gas companies who tend to, through a production sharing agreement structure, they avoid the upfront pre FID risk and they're able to back in at fid. And so that's kind of, kind of what we modeled that off of. That isn't to say then you won't have to issue more equity later to raise more capital to cover a worst case scenario cost overrun. And at that equity raise, the state would again have the opportunity to preempt 25% or not.

And then every time there's equity raised as you go into phase two, the same thing will happen, but there won't be be these, these rounds of equity raised and then you start building the project and then you do more rounds. It's, you have to have everything lined up in order to have that final investment decision. And really the lenders will require that. Senator Steadman. Yeah, I understand there wouldn't be multiple rounds trying to, you know, build half the project and then hope you can raise more money to build the other half.

I understand that that doesn't work. Even DOT doesn't work do that. We have all the money for DOT first before we go. At least we think we have all the money. So.

Okay, I just wanted to clarify that, Mr. Chairman. I think that's an important part because there's point, because it is a little bit different from some previous testimony years ago on how the mechanics would work. But I would say in support of the presentation today that these discussions previously, obviously the project was not near as far along.

Next slide. Mr. Richards, this is Matt Kissinger. For the record, I showed this yesterday, so I'll just sort of brush over this slide and the next. But when we created the governance for eight Star, you'll quickly notice that at the board level, AGDC does not have a tremendous amount of influence. We have 25% of the vote and Glenfarn have two of the seats, whereas we just have one.

So that's not where we get our protections from. We get our protections from these other mechanisms that each require AGDC consent. And is there anything to do really that could harm or push liability to AGDC or the state?

Next slide. And these are the Alaska Advantage principles. Again we talked about these yesterday. This governs every contract that they're allowed to enter into. We look at those contracts and we assess whether they establish and maintain a substantial operational presence in Alaska.

So we're looking for Arctic experience, we're looking for Alaskan vendors, etc. Alaskan suppliers accept Internet connection requests, ensuring that in state customers get the priority for that first 500 million and that we can increase the capacity should we have a tremendous amount of growth of demand in Alaska and then finally that we can use these differential rates and that's a mechanism to help bring on the industrial facilities that have been mothballed. Question on slide 19. Senator Coffman and Senator Keel, thank you. This goes to kind of the prior discussion I was having about so of the Alaska Advantage principle.

If we were to map those, where would we find that they're addressed and at what level? You know, my background, think about, you know, standards and specifications and there's a hierarchy there. And if you have a requirement that's being driven, it may be driven by a very high level requirement in our case, not on a project. Right now I'm legislators. So the Constitution is the tier one document.

As we go down these Alaska Advantage principles, is there an exercise we can do to assure that we're adequately mapped to where those are delineated at an enforceable level or the inadequately enforceable or assurable level? Mr. Richards, through the chair, Senator Coffman, I would say, I believe on our next slide we're going to talk about some of the, of the checklists that we use as AGDC to monitor the work of Glen Pharma as the developer as they progress in their contracting effort. We get to look at and participate and actually comment on their contracts with again major contractors, but also with Alaskan contractors. And so that is one of the key points that we utilize on a daily basis in our interactions with Glen Farm. Are they looking to Alaskan content?

Are they providing then interconnection opportunities, whether it be part of the legislation talks about a fairbank spur line, another one for Donlin, there could be others. So we want to make sure that those opportunities are available for Alaska to be able to have again gas from the pipeline and built in to the original design because, or you know, allow for a hot tap at a later point. But then also in the consideration for in state gas consumption, we recognize their work right now with NStar, their work with major potentially investors or industrial customers like Donlin Creek or the Agrim facility or even the Kenai LNG facility that are participating and moving forward. So we take this on a daily basis into our work efforts in terms of our interaction and because of the trust that Matt described earlier, our ability to see into the workings that they have in their commercial negotiations to move the project forward. Senator Coffman, and again I just go back, let's make sure that we have whatever has to be done at the legislative level is in there, that we don't somehow just leave an opening that later will cause lawsuits and you know, all the things that come of something that's not properly defined at the proper level of, you know, in your standards and specifications, where does it need to be?

Let's get the right thing in at the right level. I'm not saying there's a gap right now, but we, we just need to be sure that there's an unbroken chain of I guess clear directive on how those are applied and administered. Mr. Richards, thank you. Through the chair. Senator Coffman?

Yes. I think that in the work that we did in negotiating these contracts we wanted to put in place the mechanisms to assure that what was going to provide that tension, so to speak, between what the developer was going to be doing and what AGDC as the state's corporation would require them to do in advancing this project. I'll add. This is Matt Kissinger for the record. Senator Coffman, through the chair.

I would just, I'd add that we also do have a compliance checklist for the agreements that we've built out that we use.

Thank you, Senator Steadman. Senator keel. Thank you, Mr. Chairman. Just a simple question. Should have asked you yesterday.

Didn't think of it as we're looking at in state uses in the 500 MCF. What quantity of gas will we need to power the liquefaction liquefaction facility when we get to the export. 20 Ton million tons a year. How much gas that take? Yeah.

Senator Kiel. Through the chair, 2.8 billion standard cubic feet per day will go into the LNG facility when it's fully built. And around 7% of that would be used for fuel within that facility. Senator Keel. 7% Of 2.8 bells.

Do the math real quick. Thank you. Thank you for the question of this slide, Senator steadman. Thank you, Mr. Chairman. I missed my colleague's question, so hopefully I don't repeat it.

I had to get some water here, but wet my whistle. We're having so much fun today.

The concern of trying to get to 500 for capacities seems to be rather daunting. And the ammonia plant has come up numerous times as a potential, even as a potential anchor client a year ago. But our consultant in some of his notes to us here the other day after some testimony, this is when ammonia and petrochemicals on the Gulf coast have an approximate $3.50 price.

That's a hard number to compete against, by the way, compared to the $16 for the rail belt and even the $6 that have been assumed in other conversations to expand our capacity from 150, 200 up to 500 or whatever. How does that, how do you help me with that concept of getting the ammonia plant? Because it, you know, it comes up from time to time as another potential anchor tenant when the price differentiation is so severe relative to the Gulf Coast.

Senator Steadman, through the chair it is through using the differential rates. You know, obviously Henry Hub is quite low. Usually by the time you get into the gate of a chemical facility, it's slightly higher. And you need to look at the forward view of Henry Hub, which is moving into the four to five dollar range. Our shipping advantage does come into play in the fact that these facilities are largely depreciated, despite the fact that they'll still need some capital investment to bring them back online.

So whether that number ends up being $5, $6, $7 into the plant, what we need to find is what is the hurdle, what does get those plants started. And no matter what it is, it'll help to dilute that utility rate. Now, as you heard yesterday, the commitment is $16 per MMBtu on the utility rate up to 500. And so it's really up to the developer to put together all the other demand that they need in order to deliver on that. Their view is that they can.

That they can deliver on that though. Senator Steadman. Yeah. The reason I asked a question, I had a conversation with one of my colleagues that was more familiar with that area of the state than I am by far. But he represented that you know this agrium plant could need up to a billion dollars in retrofit because of its age and technology, dating and stuff.

It's a significant capital investment in and of itself. Right. So you know that just a little factoid because if we are stuck by happenstance, bad luck or what have you that we just end up with an in state gas line. There is concern on what happens to the rate payers along the rail belt even by law and rail belt elected officials like myself because this is a significant issue here at the table. So I just, I'm struggling with how do we get to the from and we've asked and we haven't seen seen yet Mr. Chairman but we've asked for the phase out impacts of Cook Inlet when these contracts come in for the gas line.

What's the residual impact on Cook Inlet and as we go how much gas can we reasonably assume we're going to need to draw down that line to pay for the operations and debt service because the debt service could be a billion to a billion one a year. So we're talking significant dollars there. Mr. Kissinger, Senator Steadman, through the chair I think everything that you said is absolutely right and this is all these have to be lined up before an FID So not just those utility contracts but there needs to be at least line of sight for the investors into the industrial demand. And so we will have to see how this plays out. We understand that those plants are being looked at for restart.

Don't have much further information than that but it is apparent that that's the demand that will help buttress the utility demand. Along with the Donlin and the growth of mines in Fairbanks in the interior.

We've had a presentation by Donlin Creek Mine Group which I thought was very informative. They are going to move forward to harvest or mine into their mountain of gold which we got a mountain of oil and gas we're going after. But anyway that looks like it's highly likely to move forward. I think we Mr. Chairman we should extend an invitation or at least a request into agrium to get a response from them where what is their position directly I'd like to find out because we just if they're looking at a billion dollar capital investment, how serious actually Are they? And if they want a plant, you'd think they'd say something to us since how the pipeline is in the middle of the table right now.

We'd have a private discussion on that at a later time. Next slide please, Senator keel. Thank you, Mr. Chairman. Just one little follow up on my earlier question. So if the liquefaction plant is going to take 40% of this half a million cubic feet a day in state allocation, what's the.

Do we have a rate structure set up for the 7% or 2.8 billion is 196 million, right? So do we have a rate structure set up for that? Are they just going to buy the power from the local electric utility? Is that gas going to be generated on or going to be used on site to generate power? Specifically what are they going to pay?

Senator Kiel through the chair? First of all, this 500 does not include the fuel gas for the system. So this is 500 above. And beyond that, the fuel gas for the system is part of LNG demand as we see it. Yep,.

That's helpful. Well, thanks. Good to know. Same question on cost. So repeat your question on cost.

I apologize. What will the liquefaction plant pay? Are they going to just buy the power from the local utility? Are they going to generate on site? In which case what are we charging?

Yeah, Senator Keel, through the chair, they will generate their power primarily through the burning of gas. So these will be gas drive facilities rather than electric drive facilities. And so that that get that 7% gas. That's really what. That's really the cost, operational expense.

Yeah. And the price that they'd be paying for that would be, you know, the same as all the gas going into the inlet of the LNG facility. Senator Keel.

So. That functionally supplier price plus GTP and pipeline toll. Correct.

Thank you. Thank you. Further questions. Next slide please. Thank you.

Mr. Chairman. Frank Richards, for the record again to Senator Coffman a checklist, so to speak, of how Glenn Farm is advancing. We've talked about many of these items in terms of gas supply supply through current executed gas seal precedent agreements for the supply for phase one. So from ExxonMobil, from Hilcorp, from Conoco and initially from Pantheon Resources should they are able, are able to get to execution and then the downstream sales of gas. Again what we heard this week from Mr. Sims at NStar was that they are nearing completion of their negotiations and signing of agreements for gas sales to from the developer to NStar as well as for the Donlin Gold mine feed for the pipeline.

This initial effort of front end engineering design to be able to bring the design up to current design standards, but also updated cost estimates has been complete and as reported has provided, provided a Class 2 cost estimate for phase one of the pipeline. So beyond the normal cost estimate level, which would be class three, this is a class two. So based on the inputs that they're receiving, very much better definition in terms of the overall cost of components, the steel and the execution of that project. We've talked about the contract that they have executed with Whirly for the epcm. But more importantly they're out in terms of negotiating and working with pipeline contractors to be able to come in and actually execute the work.

The same for the line pipe, the same for working with the unions on developing memorandum understanding for project labor agreement and then lastly on the financing or the debt finance structure to be able to to make sure that they have the finances available to move the project forward. So check for all of those.

For the committee's information. After this slide we will be taking a break. But before we take a break, I'd like Mr. Richards to introduce his team back there. But Senator Stedman. Yes.

I'm just curious. So we started with phase or a cost estimate, you know, level three, I guess on the gas line and then we matured to level two. What was the dollar difference between those? And then tell me about level one. Through the chair, Senator Steadman, as Mr.

Chair, as described to the committee yesterday, these class of cost estimates are set by the American association of Cost Estimators or A ce and it goes in reverse, let's say at the feasibility level of a project, you're at a Class 5 cost estimate. So if you recall, when we started this project with ExxonMobil, there was a range of 45 to 65 billion dollars. In 2014, we kicked off what was known as pre front end engineering and design. The outcome of that in 2016 was a new cost estimate for the Entire project of $44.8 billion at a Class 4 cost estimate. However, based on the amount of engineering and effort that had been done not only by Exxon and TransCanada, but BP and Conoco.

On the two iterations of the project before this, there was a tremendous amount of engineering that had already been done. So it was closer to a Class 3 cost estimate for the entire project. That's the work effort that AGDC in the optimization that Matt talked about in working with Exxon and BP in 2019, actually came up with optimizations and the cost estimate went down to $38.7 billion in those years. Dollars. We then worked with Fluor over the intervening years to keep, keep that cost estimate up to date for the entire project by looking at cost escalation that had occurred in the market, what was their, what they had achieved from not only the projects that they oversaw, but what the industry was seeing to keep the project cost level up to 2022 dollars and 2024 dollars and ultimately 2026 dollars.

When we started looking at the phase one of the project, we were using 2024 dollars of approximately $11.7 billion for the pipeline, actually $10.8 billion for pipeline phase one. So this was the 42 inch pipeline from Prudhoe Bay south to essentially south central Alaska where it would tie into the MSTAR system. Glenn Farm yesterday provided you with an updated Class 2 cost range. And I apologize, I don't have those in front of me, but it was in the 15 to 16 billion dollars range and that was at a class two cost estimate. So what that meant was they'd advanced the engineering through feed for that level of pipeline, but they'd also gone on and gotten price quotes.

So they had the pipeline manufacturers price quotes, they had price quotes from the contractors for the pipeline execution, but also early works. So. So they felt they had a level of confidence where they reduced the range of error from minus 10% to plus 15%. Class 1 cost estimate is actually when you get the final bids in and you actually then have firm price contracts that you know the price of. And then class zero cost estimate is once you have the project complete and executed.

And so then when you look to see what the overall costs were through actual execution. Senator Steadman, just one clarification. The 15 billion, that's close enough on that scale, I think. But that did not include contingencies. You could use 10%, 15%, 20%, whatever you guys are going to use, you'd have to add that to that.

And that's where this number that I have on the table sitting here at 19 billion.

And that doesn't take cost overrun risk. Maybe it's 18 billion or maybe it's 17 billion. But we clarified that with our consultant the other day dealing with overrun risk, where overrun risk is actually calculated from, that's above the contingency put in. So I just want to make that clear that. So when we think about what this project costs, it's probably 18 to 17 to 19 million billion.

First phase is what it looks like. Not saying that's good or bad. I'M just saying that's what we're dealing with. That's why we need some assistance here with property tax. Thank you, Senator Sidman.

Senator Coffman, along with the class of the estimate, there's the level of schedule, similar scale, but on the so on the pipeline section, the phase one. So to develop your estimate.

To the. Point that you have, what would you say your schedule is currently on the pipeline, how developed is the schedule in terms of, you know, level one master schedule? That I don't know. Where are we? Through the chair, Senator Coffman.

Again, beyond just the master schedule, which has been updated based on the level of feed that was done, there's also resource planning efforts and execution plans that have been updated to reflect the latest of it. So Glenn Farm is again from our perspective and the work that Whirly has done is in line with the diligent development efforts. So they have it planned from a master level schedule down to various resource loading and predecessors for all the activities necessary for fitness. Phase one. Senator Coffman, in a previous conversation I had with Worley, they were indicating that they knew where a pickup truck would be and on what day, which tells me that they've gotten down into the granular work package level on this.

And so as a set of deliverables, so the work structure breakdown, all of that has been done. And to create that resource load, it's. To going through the chair. Senator Coffman? Yes.

Okay, thank you for the questions on slide 20 before we take an at ease till 1:30.

Seeing none were at ease until 1:30, Mr. Chairman. You want to have him introduce his staff or anything? Those are different people. With that, we will be in recess till 1:30. It.

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