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Alaska governor plans to recommend buy-out of TransCanada in liquefied natural gas project

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JUNEAU, Alaska — Gov. Bill Walker said Monday that he plans to recommend to legislators that the state buy out TransCanada Corp.'s position in the major liquefied natural gas project that Alaska is pursuing.

Under an agreement that predates Walker's administration, TransCanada, a Canadian pipeline company, would hold the state's interest in the pipeline and gas treatment plant, with the state having an option to buy back part of that interest. During the legislative debate on the issue in 2014, it was cast as a way for the state to not have to bear as much in upfront costs as it would without that partnership.

But the agreement also contains language allowing the state to terminate that arrangement, though the state would have to reimburse TransCanada for its development costs, plus 7.1 percent.

In an interview with The Associated Press, Walker said the pipeline is an important piece of the project, and the state needs to be more involved in that work.

"We need a seat at the table," he said. "Right now, they have our seat."

He estimates the buy-out costs in the range of $100 million.

Shawn Howard, a spokesman for TransCanada, said by email that the company continues to work with the state and the project partners to advance the liquefied natural gas effort. The other partners are Exxon Mobil Corp., BP, ConocoPhillips and the Alaska Gasline Development Corp., which would hold the state's interest in liquefaction facilities.

Walker's administration has been involved in negotiations aimed at advancing the mega-project, which Walker called the state's "strongest get-well option fiscally." Alaska relies heavily on oil revenues to pay for state government and is facing large deficits amid low oil prices. It is using savings to help balance its budget.

No decision has been made yet on whether to build the project, which is in a phase of preliminary engineering and design.

The goal has been to have a fall special session for legislators to consider project-related contracts, perhaps in October. Walker said the further into August that talks go the more concerned he is about being able to meet that target. But he said he wants to get the best deal that he can for Alaska.

Kim Jordan, a spokeswoman for Exxon Mobil, said by email that the company is committed to project negotiations, but it doesn't comment on the status of those talks. BP Alaska spokeswoman Dawn Patience said the company "remains committed to pursuing a successful Alaska LNG project that includes the State of Alaska as an equal participant and co-investor." ConocoPhillips Alaska spokeswoman Natalie Lowman said the company continues to work through project talks and to target a possible 2016 decision on moving the effort to the next phase.

While Walker noted that the companies have sought certainty on issues like taxes, something he has suggested could be addressed through a constitutional amendment, he wants assurances that the state would be able to continue pursuing the project if one of the companies pulls out — that a withdrawing company, for example, could be replaced.

"I just can't have a situation that any one company, for any reason whatsoever, could block this project from going forward," he said.

The governor said he's spoken in the past about the state having a 51 percent interest in the project. But he said the issue comes down to the state's ability to advance the project.

"I'm comfortable with the arrangement we will have once we buy out TransCanada's position, assuming that the Legislature approves that," he said. "We'd have a 25-percent interest, and I'm very comfortable with that, as long as no one can block us from doing a project."

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