Conflict of interest dooms state gasline consulting contract

The Alaska Legislature should ignore any and all advice from GaffneyCline on the gas pipeline because the consulting company has a conflict of interest—it is owned by a Texas firm that has just signed a deal to play a significant role in the pipeline project.

On November 10, Baker Hughes announced a “strategic alliance” with Glenfarne to work on the Alaska LNG venture.

“Baker Hughes is a welcome partner for Alaska LNG because of their leadership in LNG compression technology,” said Brendan Duval, CEO and founder of Glenfarne. “Their participation reflects Alaska LNG’s momentum and its ability to attract global partners to achieve national and state energy objectives.”

Nine days later, GaffneyCline, the consulting company owned by Baker Hughes, told Alaska legislators about how a state subsidy, a property tax cut, a permanent tax freeze and other possible concessions could improve the chances of getting the pipeline built.

“State participation creates opportunities for risk sharing and value creation,” GaffneyCline said in one of its slides.

“Alaska’s property tax is one of the biggest potential burdens on project economics,” according to GaffneyCline.

All of that may be true, but GaffneyCline, a fine company that has been owned by Baker Hughes since 2008, is in no position to give independent analysis about the Alaska LNG pipeline economics.

Here is the GaffneyCline presentation.

Sen. Cathy Giessel, who writes the best newsletter of any legislator, says that it was only after the November 19 legislative meeting that she learned about the GaffneyCline conflict of interest.

She put it more diplomatically than I would have, saying the relationship “raises questions about conflict of interest and the recommended tax benefits being recommended by GaffneyCline to make the gas pipeline economic to build.”

Giessel said GaffneyCline officials did not mention their conflict of interest at the hearing and it was brought to her attention later by long-time Alaska journalist Larry Persily. She said she plans to ask legislative lawyers to dig into the matter.

Adam Prestige, president of Glenfarne Alaska, told legislators November 19 that “some of our most important project elements are currently under sensitive commercial negotiations.”

He said the company hopes to have the pipeline completed by the end of 2028 “and flowing gas to Alaskans shortly thereafter.”

Prestige mentioned to legislators that Glenfarne has contracted with Baker Hughes, but he did not say that Baker Hughes owns GaffneyCline, which also presented and had speakers at the hearing.

“Last week in Washington, D.C. we announced the execution and definitive agreements from Baker Hughes to be a partner in this project as well. Baker Hughes is the global leader in energy technology. They have invested in a number of different LNG projects. They pride themselves on only investing the projects they truly believe are going to more forward. They have made a strong commitment to this project,” Prestige said.

Glenfarne portrays the pipeline as a joint venture with the state.

“We need cooperation and communication and participation with the state to take this project,” he said.

If it’s to be a real joint venture, we need independent analysis, transparency and trust.

Glenfarne and GaffneyCline made a serious error in building trust by failing to disclose the conflict of interest at the November 19 meeting of the Legislative Budget & Audit Committee.

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