Alaska LNG export project requires further massive public subsidy

Sponsors for the proposed 807-mile Alaska gas pipeline and liquefied natural gas processing and export facilities are seeking additional massive public subsidies to make the project viable. Even fallout from the largest “oil disruption in history” isn’t enough to overcome the need.

Although President Trump initially boasted that the Alaska LNG export project would be a signature accomplishment of his administration, theproject appears vastly over budget and shrouded in secrecy.

The project is being advanced by a partnership of the private firm Glenfarne Group, which has a 75% share, and 8 Star Alaska LLC, a private subsidiary of the state-owned Alaska Gasline Development Corporation,with a 25% share. AGDC gave 75% of 8 Star Alaska’s assets, including permits, rights of way, research and data, to Glenfarne in exchange for a commitment to pursue the project to a “final investment decision” on whether to build it. The final investment decision, due at the end of 2025, is still pending and months behind schedule.

Legislation introduced by Republican Gov. Mike Dunleavy would institute a massive tax break for the project and forgo billions in future revenues for the State of Alaska and local municipalities.

The Alaska Department of Revenue estimated Dunleavy’s proposal would equate to a roughly 90% reduction in property tax revenue, once the pipeline is at full capacity. Dan Stickel, an economist with the Department of Revenue, told the House Resources Committee on March 25 that AGDC and Glenfarne have said the project will not move forward without property tax relief.

The often cited $44 billion cost estimate for the 807-mile pipeline from the North Slope to Cook Inlet is 10 years out-of-date. Efforts to build it have been unsuccessful for decades due to high costs and competition from sources of gas closer to tidewater. The Alaska Department of Revenue recently updated its cost estimate to $46 billion, a number still far below what observers expect the true cost to be. Project sponsors have updated cost estimates but refuse to release them. 

Recent surges in inflation mean the already expensive project is now much more costly; sales prices for the gas are also likely much higher, as high as $20 per thousand cubic feet or about ​​​double today’s import prices and even more uneconomic compared to alternatives. Despite the recent cease fire, the war in Iran is further driving up prices of everything.

Letters of Intent from potential purchasers of Alaska LNG continue to be signed but are not binding commitments. A Letter of Intent by TotalEnergies to purchase 2 million tons per year of Alaska LNG for 20 years is subject to the final investment decision. Although Glenfarne still maintains that construction will begin this year, it doesn’t have a single binding contract with buyers. Thus, imminent construction appears unlikely except possibly as a photo op.

Legislators are concerned, Alaskans should be too

The Alaska Senate Resources Committee recently introduced Senate Bill 275 that makes significant revisions to the statutes governing AGDC. The bill would enact a surcharge on exported LNG and put new conditions on any direct state investment in projects.

Sen. Resources Chair Cathy Giessel, the author of the bill, said in a newsletter to constituents:

“Glenfarne was unknown until 18 months ago. They have not completed N. America projects. But they want a 92% reduction in our local property taxes. They are holding all financial information about the project confidential. This is not a good business position for our state to be in. We get to find out the cost of the gas for Alaskans after the project sets the price in secret.”

Even AK LNG proponent, Alaska House Majority Leader Chuck Kopp, R-Anchorage, who recently urged Alaskans to speak with a unified voice in support of the project, noted growing ambivalence.  “What [investors] cannot model is political incoherence. From the perspective of Washington and Wall Street, confusing or contradictory signals from Alaska’s elected leadership are more destabilizing than permitting hurdles. No financier commits billions into a jurisdiction that sounds ambivalent. No federal partner prioritizes a state that publicly undercuts itself,” Kopp wrote in a recent op-ed in the Anchorage Daily News.

More than four decades of effort to build a North Slope gas line for export have produced only failure, exorbitant costs and public subsidies of almost a billion dollars. This deal is bad for the climate and bad for Alaska. Alaska’s leaders should call it what it is, an uneconomic pipe dream, and walk away.

Alaska Beacon is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Alaska Beacon maintains editorial independence. Contact Editor Claire Stremple for questions: [email protected]. Follow Alaska Beacon on Facebook and X.