Delaware law, not Alaska law, would govern any Glenfarne buyout

One of the secret agreements between Glenfarne and the Alaska Gasline Development Corporation deals with what the state would be required to pay Glenfarne if AGDC decides the company needs to go.

“The repurchase price is based on the value Glenfarne has added to the company,” according to a document that says Delaware law would govern, not Alaska law.

“If there is a dispute on the price, an independent investment bank will have 20 days from the date they are engaged to determine the final price,” it says.

Take this to the bank—there would be a dispute on the price and any investment bank that would be forced to decide in 20 days might be tempted to split the difference at best—a situation that would lead Glenfarne to aim as high as possible.

Legislators and the public have not been allowed to see the full text of the “Repurchase Option Side Letter,” the existence of which was revealed in the leaked document that some legislators reviewed in the late spring.

This is just one of the pipeline planning problems created by the Dunleavy administration’s mismanagement and lack of transparency. The state needs to take the time to get to the bottom of this.

One of the key issues is whether the monetary benefits to Glenfarne of a tax cut would be part of the “value Glenfarne has added to the company” that it could expect to get paid for.

A tax cut would add value to the company because it would increase the expected profits from the project. There are lots of ways this could become part of the calculations.

When this became a political issue in June, Glenfarne President Adam Prestidge testified to legislators that the company would not ask for “the monetary value of any tax arrangement to be reflected in terms of any repurchase.”

But I’m not sure that guarantee is something to rely upon even if the Alaska Legislature makes it a matter of state law, as members of the bipartisan Senate Majority have insisted.

Here’s why.

The secret agreements between AGDC and Glenfarne follow Delaware law, not Alaska law. They require binding arbitration to settle disputes.

Jury trials are not allowed and AGDC has waived sovereign immunity, “meaning it can be sued if it breaches the agreement.” That leaves Glenfarne in a powerful position to make the case that all sorts of things that improve the rate of return can be interpreted as adding value.

The leaked document does say that “If AGDC proves that Glenfarne entered the agreement in bad faith and never intended to complete the project, AGDC can force Glenfarne to return its ownership shares.”

In that case AGDC “only needs to repay Glenfarne’s initial capital investment.”

It would be nearly impossible to prove there was never a pipeline plan, assuming there is no Glenfarne document in which the company confessed that at the start.

The agreements between Glenfarne and AGDC are secret and the Legislature and the public would not know if a tax cut is counted as value that Glenfarne brings to the project. Remember, an independent bank would decide this under Delaware law.

In addition, the existing contract between AGDC and Glenfarne makes no mention of not counting a tax break as value added, so passing an Alaska state law after the fact could be argued as breach of an existing contract with AGDC. The Legislature and the public wouldn’t know about this in time for it to matter.

“Confidentiality and publicity rules remain in effect for 2 years” after Glenfarne is bought out, the leaked document says.

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