Alaska Legislature: Senate Finance, 6/3/26, 1:30pm

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Call Center Finance Committee Back to order State Capitol 135 we're continuing with a presentation by Glenn Farn Laska LNG. We have the President Alan Bestridge. Please continue with governances. Thank you Chair Hoffman. We'll continue our presentation talking about the joint venture structure between Glenfarn and Alaska Gas Line Development Corporation.

The segment we have now really the last of the slides that we have to discuss go to essentially the llc. The joint venture governance provisions that we have in the agreement between Glenfarn and agdc. What I'll talk about are, what I'll aim to impress is the balance of decision making and governance that sits between what is essentially a majority partner, Glenfarn at 75% and AGDC a minority partner at 25%. Typically there are typical ways that you would structure kind of a joint venture with a majority and minority component like that. The distinction here is that recognizing the importance of AGDC's role representing the State of Alaska, there are additional components and rights and, and principles that benefit the AGDC minority share and require certain things from Glenfarn which we're happy to talk about on a very.

This is a very simple slide talking about the essentially the board of eight Star Alaska. So this is, and pardon me, I want to correct the typo here. This is the governance of Eight Star Alaska LLC, not Eight Star Pipeline LLC, the joint venture. When we're talking about the entity Eight Star Alaska, that's the entity that is owned 75% at Glenfarn, 25% AGDC. That entity is governed by a board of directors and also has a managing member that runs the day to day activities.

The managing member is Glen Farn Alaska LNG LLC and the board is made up of four individuals. Two of those board members are appointed by Glenn Farn. The first, the chair of the board is Brendan Duvall, the CEO and founder of Glenfarn Group. And the second board member appointed by Glenn Farn is myself, Adam Prestage. AGDC has the right to appoint one board member and they've appointed Frank Richards the president of of agdc.

In addition we have an independent non voting board member that sits on the board. That person at all times needs to be an Alaska resident. That person, that position is appointed by the mutual agreement between Glenfarn and agdc. That role, that board seat is currently held by Janet Wiese who was formerly the president of BP Alaska. She also sits on the boards of public companies.

Halliburton Tourmaline oil and gas producer out of Canada and also First National Bank Alaska. And so she provides an additional board board support and oversight for the project. In terms of operations before we go. On, are these board members paid positions by by the Governance 8 star Alaska. Chair Hoffman, the Glenfarn and the AGDC positions are not compensated.

There is I would say a modest and industry standard compensation for the independent board member role. Thank you. In terms of operations, I would call it pretty standard board board governance operations. There is a requirement for the board to meet at least once per quarter. Three out of four of those annual quarterly meetings must be held in person in Alaska in order to have a a quorum of the board to convene a meeting.

In attendance must be the chair of the Board Brendan Duvall and and the AGDC representative Frank Richards. Essentially the board takes major decisions which we'll talk about here in a moment and includes the. There are a number of things that require the approval of the AGDC board members. We call those minority minority rights. The day to day kind of matters that don't arise to the level of requiring a board consent are operated and determined by Glenn Farn, the managing member.

And so really the board provides kind of your high level corporate oversight. Questions on this slide. Please proceed.

Again, apologies, same typo. This is approval rights. These are board. These are matters that require board approval approval including the AGDC member for eight Star Alaska llc. And just given the fact that these are inherent to AGDC's rights.

I'll ask Matt Kissinger to talk through this slide. Yeah, this is Matt Kissinger. For the record you'll have noticed on the previous slide that Glenn Farn have the majority of decision making at the board level. And so and of course they're also the managing members so they have kind control of the day to day activities. That is really to allow that managing member to move on and progress with the project.

However, there are certain elements protecting the state primarily where AGDC has clear approval rights. Meaning that these can't be done without AGDC's consent. The first one is non Alaska aligned contracts. So we have the Alaska Advantage principles that we'll talk about next and we get to review every key contract that is progressed through eight Star and ensure that they're all in line with those principles. Any structural changes to 8 Star Alaska.

Mergers and acquisitions, dissolution, bankruptcy. So major things that would happen to eight Star can only happen with AGDC approval. Additional capital asks of AGDC or of the state have to have AGDC approvals. That's a really important one. There are no more capital asks of AGDC into 8 star without AGDC's consent.

Same with asset distributions. They're not allowed to distribute the assets of eight Star without our approval. So that protects eight Star and the assets within it. That especially the permits and the right of way and things that we've contributed to it. New restricted investors.

We do have a clause on non allowed investors. These would be sanctioned parties such like this. And so AGDC has that approval, right as well to make sure that we don't transact with investors that you know, would do harm to the project or to the state. Same with affiliate transactions. So this is an important one.

Glenn Farn are all over the project, right. They're in each of the subsidiaries or in the eight Star level. But there are no affiliate transactions allowed within the structure anywhere without AGDC approval approval. So that's the check on that to make sure everything is arm's length unless it gets approved by us. Same with the tax decisions.

And then anything that would change AGDC's rights, obviously we have the right on any question on this slide. Questions on this slide from finance members, please proceed.

I'll continue with the Alaska Advantage principle. So these are the overarching principles that we put in place to truly protect the key issues of importance to Alaskans. So the first one is establish and maintain a substantial operational presence in Alaska. And again, if we see contracts coming through that don't achieve that aim, then AGDC has the right to disapprove of those contracts. Any interconnection requests?

We were asked I think on Monday in this forum about an interconnect at the Yukon river, for example. And so there is a requirement to accept these interconnection requests, though they have to prove that they're economic. There has to be a proof of that in state. Customers get the priority right for the first 500 million. And this is really how the project was designed.

So the pipeline and the GTP were always designed, designed to deliver more gas than the LNG facility needed and that was to serve Alaska's needs. This just established that in agreement with Glenfarn as they took over that we have that priority to that extra gas. And then capacity will be expanded to accommodate increased demand over the 500 million. And then finally this last one is lost on a lot of people. I think it's important to truly highlight it is the project may utilize differential rates only where they both help maximize the flow of gas through the project and achieve the lowest possible cost of gas for Alaska utility customers.

And this gets down to us growing that demand within Alaska and bringing on some of these industrial customers, like someone rightfully said that the Nutrien ammonia plant or the Kenilng plant wouldn't be able to operate at $1316 per MMBtu. They wouldn't be able to sell their product competitively into the market. You can use differential rates to get around that where you find the threshold that they can pay and charge them that and that helps at least bring down the utility customers costs by helping dilute it. And you're not allowed to cut a special deal with them, so to speak. So yes you can provide these differential rates but they need to be at almost a throat threshold to them starting up so that you can ensure that the cost to utility customers comes down and not just comes down to a lower cost, but as we said in the agreement, it comes down to the lowest cost possible.

I'm happy to take any questions on these principals. Any questions on these principles. Senator Coffman, thank you. I've gotten a few folks emailing me or otherwise communicating. They're worried about the durability of the the supply of the total volume that would be deliverable.

So if as in this slide where we get a priority right, just what's the current estimate of what the continuity of that would be over time? Senator Coffman, through the chair. There is enough resource up on the North Slope right now known proven producing resource protection between Prudhoe Bay and Point Thompson alone to supply the project including phase two for 30 years. A real easy rule of thumb is that this project consumes about 1 trillion cubic feet per year. A little bit more than that when you increase in state demand up on the North Slope.

And this is in one of our resource reports that was provided through the Department of Energy Application for Export Authorization. They've identified around 40 tcf of gas. So we feel quite confident that we're able to supply 30 year agreements even in the phase two case just with the known gas. And that's before adding on potentially 10 TCF or more of Great Bear Pantheon Gas and then of course all the other gas that would be explored simply because there's now a market for gas. Senator Kaufman, thank you.

Further questions? Senator Kelly Merrick. Thank you Chair Hoffman. Thank you gentlemen, this has been very helpful for me. Do Glenn Farn and AGDC support this version of the bill and are there any changes you would like to see made?

Senator Merrick, through the chair, we believe this version of the bill is very close. There are a few kind of technical changes that we would advise on and that's something we would be very happy to advise on. Kind of a more specifically enumerated list as a follow up, if that's okay. Thank you. Thank you, Senator Merrick.

Senator Coffman, thank you. The interconnects. So my understanding is that the way those are being handled, the cost of the interconnection is kind of being rolled into the total cost. They're not a cost allocation to like build a spur for certain. And so I guess as you go forward to fid, you want to know what all of those are, the extent of them and have the value case for them.

Senator Kaufman, through the chair, there are interconnect points, most notably an interconnect point to serve Fairbanks that are already part of the project design and those are incorporated. Having pre building those potential interconnects is part of the original. It's part of the project design and the cost that's been discussed here. Kind of what spurs off of those interconnect points would be a separate economic analysis in each case. Senator Coffman, thank you for the questions on slide number 28.

Senator Cronk, thank you, Mr. Chair. I can see this is our last page, so I'll just get. I just want to say thank you for the transparency today. I think it helped, you know, a lot of people especially and I know Senator Steadman always says for the public watch and I don't know how many people are really watching us, but I think it really, it does help ease some of those things.

But if we could go Back to page 22, that third bullet right here says today Alaska receives zero energy benefit from North Slope Gas. I think that statement alone tells shows Alaska that it's time for us to do something transformative for Alaska. It's been 50 years since taps. This actually will bring some revenue, but it's going to lower our energy costs. And that to be me is the most important thing for the next 50 years across Alaska.

So thank you, Senator. On that same page, Mr. Petridge, can you expand on the statewide, statewide rural energy investment of 1.4 billion.

Senator Hoffman, through. Yes, again, I want to make clear that these are numbers that have been provided by the Department of Revenue. That's their estimate of the additional revenues that would be provided to the Rural Energy Fund through this, through this tax program with the alternative volumetric tax as it is currently proposed in the bill. But that program is in current laws. That.

Correct. I'm sorry, that program is in current law. It is. It is in current law. Yes, yes.

So the 1.4 billion is a number over 30 years? I believe so. I will confirm. Senator Steadman, I know I got no questions. You have questions?

No, I'm out of questions. You're out of questions? That's unbelievable. Senator Coffman, I have a concern on. It's slide 25.

There you go. That's it. I'm worried. Pour pipe sitting in, lay down, stack like that for too long, it'll start to oval. Then what's going to happen, you, your fitters and your welders are going to get really mad at the material manager and there's going to be a big fight.

So we need to get going so that we don't flatten out that fight. Thank you, Senator. Well said. So if members have further questions, they should submit them to my staff. We are going to have additional questions in writing to both of you for.

For response. Some may materialize in the next couple of days, but expect the letter of questions that come from this committee for response as soon as possible. Further questions. Senator Coffman, thank you. I just have a few questions for the chair and for the committee going forward.

So I see the meetings that we have this week, and I'm figuring maybe next week we'll be having producers possibly at each end of the line, as well as the various users. I mean, we've got utilities, not just gas transmission or distribution, but also electricity production, all that. So I guess we'll have some of those entities in here next week. That will be the minimum. There will be dialogue with administration, dialogue with the other body, negotiations to try to get this project and this piece of legislation moving forward.

It's the intent, at least of this chairman to work with the committee to get. Get a bill drafted that can get 21 and 11. I'm a little bit concerned that the current piece of legislation that is before the committee may not result in that end. So I know that takes a lot of interpretation to see where people are. And I'm sure that the Senate caucus at least will be discussing this before it goes to the floor and before it leaves this committee.

So are there further questions that Senate Finance members have of Glenn Farm at this time?

Mr. Prestridge, do you have closing comments? I do. Thank you, Chair. Mr. Chair Hoffman.

I want to just highlight that I think the Alaska Advantage principles you see on the screen here are unique. And you wouldn't normally find this in a typical private equity type investment or your average petrochemical plant on the Gulf Coast. This is a project that has very unique components and a level of importance to the state of Alaska. That's something that we, Glenn Farn, have recognized from our very first bit of involvement in the project. I can tell you that the Alaska Advantage principles or concepts that AGDC put forward very, very early in our discussions with them and we've honored them and been willing to incorporate them into our agreement, they are principles that dictate how we take this project forward.

And I think our willingness to adhere to those, to accept and adhere to those principles is a real exception. And I think it underscores, as I've said all along, our intent to be a good partner to the state. And so I want to thank this committee for the willingness to hear our discussion today. Obviously we've endeavored to be as transparent as we can and we've shared the capital cost today and obviously I'm sure some would have preferred those to come come a little sooner, but I've highlighted kind of the challenge that we wrestled with to be able to get to this point here today. So again, our commitment is to do this project the right way to deliver low cost gas to Alaskans as quickly as possible.

And appreciate your support. Thank you for those comments, Mr. Prestridge. Mr. Kissinger, do you have closing comments? Chair Hoffman I would just echo what Adam said. You know, I'm glad that we got to this point of further transparency and look forward to advancing this with the committee.

Thank you. Thank you with that. That concludes this afternoon's meeting. Our next meeting is tomorrow morning, June 4th at 9am we will have a presentation by the Alaska Gas Line Development Corporation. Is there anything else to come before the committee at this time?

Seeing none. We are adjourned.