Origin of AGDC
The 26th Alaska Legislature passed CSHB 369 (FIN) on April 18, 2010, and Governor Parnell signed it into law on April 26, 2010. With the Governor’s signature, the act became chapter 7 of the Session Laws of Alaska 2010 (the “2010 Act”). Among other things, the 2010 Act authorized the Alaska Housing Finance Corporation (“AHFC”) to create a subsidiary corporation “for the purpose of planning, constructing, and financing in-state natural gas pipeline projects or for the purpose of aiding in the planning, construction, and financing of in-state natural gas pipeline projects.”
On May 14, 2010, the Board of Directors of AHFC exercised the power granted by the 2010 Act and approved the creation of a subsidiary corporation named the Alaska Gasline Development Corporation (“AGDC”).
The 2010 Act also created in AHFC the Joint In-State Gasline Development Team (“JIGDT”) and directed JIGDT to produce a project plan for the development of an in-state natural gas pipeline. The 2010 Act called for a project plan to be completed and delivered to the Alaska Legislature by July 1, 2011, and required that the project plan specify and document how an in-state natural gas pipeline could be designed, financed, constructed, and made operational by December 31, 2015.
AGDC assisted JIGDT in preparation of the project plan. AGDC and JIGDT were able to complete and deliver the project plan to the Legislature on July 1, 2011 (the “2011 Project Plan”). The 2011 Project Plan described the Alaska Stand Alone Pipeline (“ASAP” or “Alaska Stand Alone Pipeline/ASAP”) project.
On January 11, 2013, AGDC published a 2012 year-end update to the 2011 Project Plan (the “2013 Update”). The 2013 Update provided AGDC’s findings and recommendations for design, financing, construction, and operation of an optimized ASAP project design case. AGDC is now planning ASAP project as a 737-mile-long, 36-inch-diameter lean gas pipeline.
On April 13, 2013, the 28th Alaska Legislature passed SCS CSSSHB 4 (FIN), and Governor Parnell signed it into law on May 21, 2013. With the Governor’s signature, the act became chapter 11 of the Session Laws of Alaska 2013 (the “2013 Legislation”). The 2013 Legislation continues the existence of AGDC but changes it from a wholly-owned subsidiary of AHFC into a public corporation of the State of Alaska. AGDC is now located in the Alaska Department of Commerce, Community, and Economic Development for administrative purposes only. AGDC has a legal existence independent of and separate from the State of Alaska.
The 2013 Legislation created a new chapter in the Alaska Statutes for AGDC (AS 31.25) and also eliminated JIGDT, continued AGDC’s exemption from the State’s procurement code, created a new regulatory system for contract carrier pipelines (AS 42.08), and addressed other matters necessary to enable AGDC to complete the ASAP project, including preparation for and conduct of an open season.
The 2013 Legislation prohibits AGDC from developing or constructing a gas pipeline that is a competing natural gas pipeline project for purposes of AS 43.90.440 (the “AGIA Limitation”). AGDC has been, and will continue to be, careful to assure that any pipeline project it develops, including the ASAP project, will not be a competing natural gas pipeline project under the AGIA Limitation. Primarily, this means that the AGDC pipeline projects will not be designed to accommodate the transportation of more than 500,000,000 cubic feet of natural gas per day.
In addition to the 2013 Legislation, the 28th Alaska Legislature passed (and the Governor signed into law) an appropriation of money (the “2013 Appropriation”) to AGDC in the amount of $355,000,000. AGDC expects that this will be the only State appropriation needed to take the ASAP project through its open season. Assuming a successful open season, AGDC expects that further costs of constructing the ASAP project will be paid with proceeds from the sale of commercial notes. AGDC expects that the commercial notes will be repaid with proceeds from the sale of long-term bonds and that the long-term bonds will be repaid from revenues of the ASAP project. The execution of contracts at the open season sufficient to assure sufficient revenues to repay the long-term bonds will be the primary criterion for determining whether the open season is “successful.” Under this financing scenario, AGDC does not expect to request or receive any additional appropriations from the State for the ASAP project construction other than annual operating budget appropriations for salaries and other operating costs of AGDC.