“State 1” at Prudhone Bay in 1968/U.S. Fish and Wildlife Service photo

UPDATE: This story was updated at 10:47 p.m., June 24, 2016 to include a biography of the staff at MustReadAlaska.com

The possibility Alaska Gov. Bill Walker is preparing to declare Prudhoe Bay in default on its oil production requirements in an attempt to force Big Oil into going along with his plans for an Alaska gasline is being reported by MustReadAlaska.com.

Rumors of a Walker administration plan to somehow “leverage” Prudhoe to help jump-start the governor’s coveted gasline have been circulating for some time. And Alaska Public Media earlier this week reported the state was considering ending its relationships with ExxonMobil, BP and ConocoPhillips to go it alone on a pipeline project that could cost upwards of $50 billion.

“So this is significantly different from the way it was done [to date],” Keith Meyer, the newly appointed president of the Alaska Gasline Development Corporation told APM. “However, it’s very similar to the way that most of the pipelines in the U.S. have been built, and also the way most of the LNG facilities now have been built.”

Meyer suggested the state might go looking for investors other than the oil companies, who now hold contacts to most North Slope gas, to fund the project.

Former Department of Natural Resources Commissioner Mark Myers said Thursday in a telephone interview that such a move could increase the state’s risk and lower its potential for earnings on a gasline. A DNR study found the sweet spot for state ownership at 25 percent, he said.

Above that level, the risks associated with investing state money in the mega-project increase and the size of state returns  on gas moved through the pipeline decrease.

“The value is in the gas not in the pipeline,”  Myers said.

Myers unexpectedly retired from DNR on March 1. He cited personal reasons, but friends say he privately confessed to frustrations with Walker’s single-minded focus on getting a gasline built no matter the cost.

A Walker supporter, Myers had earlier headed gasline development efforts under former Gov. Sarah Palin. Palin tried to bully the oil companies into building the gas line.

She was so confident she’d succeeded in doing that she bragged to the 2008 Republican National Convention that “I fought to bring about the largest private-sector infrastructure project in North American history. And when that deal was struck, we began a nearly $40 billion natural gas pipeline to help lead America to energy independence.

“That pipeline, when the last section is laid and its valves are open, will lead America one step farther away from dependence on dangerous foreign powers that do not have our interests at heart.”

The only problem with the claim made by the then vice-presidential nominee of the Republican party was that not a shovel full of dirt had been turned on plans for a natural gas pipeline connecting Alaska to the lower 48, and not a shovel full of dirt would be turned.

Market economics killed the project. The gasline has since shifted to a plan to build a pipeline to a  liquefied natural gas (LNG) plant on the Alaska coast from which gas could be shipped anywhere. But pipeline construction remains hindered by high construction costs, weak gas markets, and lack of capital available to oil companies facing profit slumps due to a global oil glut.

The same oil glut has left Alaska state government, which is almost wholly dependent on oil taxes and royalties, nearly  $4 billion in the red. The state Senate has approved a plan to tap the earnings of the state’s Permanent Fund to help pay for some of the cost of government but the House has balked at that idea.

Both the governor and his friend Alice Rogoff, the publisher of the Alaska Dispatch News, have warned that the state’s budget crisis could force its bond ratings lower, fueling speculation in some quarters that Walker and Rogoff, the founder of an investment firm named PT Capital,  might have a plan for the state to float bonds to finance the gasline Walker has been talking for about two decades.

Walker was a key player in the Alaska Gas Line Port Authority formed by the North Slope Borough, the Fairbanks North Star Borough and the city of Valdez in 2000. Valdez is Walker’s old hometown. He was mayor there in 1979-80.

Since becoming governor, he has been pulling the old Port Authority gang back together. Walker named as his chief of staff Jim Whitaker, a former mayor of Fairbanks and old port authority sidekick.

Andy Mack, who Walker just named the new Commissioner of Natural Resources, comes from the North Slope Borough via PT Capital where he was a managing director. Hugh Short, the vice-chair of the state’s gasline development corp, is the co-founder and CEO of PT Capital.

Mack replaces acting DNR Commissioner Marty Rutherford, who left for reasons that remain unclear. Her departure came shortly after she told the Dispatch News that Exxon, BP and Conoco had reservations about moving ahead with the next step in plans for gasline construction at this time.

Rutherford could not be reached for comment. She was not answering her phone, and her voice mail was full.

Another of those Walker brought back from Palin’s old Alaska Gasline Inducement Act (AGIA)-team, Rutherford reportedly shared Myers’ view that state ownership of more than 25 percent of the gasline is not a wise investment for Alaska.

Engineers familiar with North Slope gas say that preparing it for shipment south in a pipeline necessitates the cooperation of the producers. Some 15 to 20 percent of the product coming out of the ground is carbon-dioxide, the prime greenhouse gas.

The CO2 needs to be stripped out of the gas and disposed of before the gas heads down the pipeline. The easiest way to get rid of the CO2 is to reinject it deep underground into North Slope oil fields, but that costs money.

Unless the producers are partnered with the state on a gasline, one industry observer said, they could well decide to charge the state so much for prepping gas and reinjecting CO2 that the gas would become virtually worthless to Alaska. Any profit to be made by shipping it to market would be offset by the costs of preparing it for shipment.

In such a scenario, investors in an Alaska natural gas pipeline might stand to get paid, but the state could be left making little or nothing off the gas.

MustReadAlaska.com is written and edited by Suzanne Downing, who is employed as a spokesperson for the Alaska GOP. Walker is one-time Republican who ran for governor as an independent teamed with longtime Democrat Byron Mallott as his lieutenant governor. Downing is the former managing editor of the Juneau Empire and the former editorial page editor of the Augusta (Ga.) Chronicle. She is married to Pat Yack, a former Atwood Chair of Journalism at the University of Alaska Anchorage and now the content manager for Alaska Public Media, part of the government-funded Corporation for Public Broadcasting.

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