Alaska legislators have few firm facts as they consider a proposed trans-Alaska natural gas pipeline
- Alaska Beacon
- 1 hour ago
- 5 min read
Long planned, the pipeline and accompanying infrastructure would be the biggest natural gas project in American history — and possibly the most expensive
By James Brooks
Alaska Beacon
In a speech to the Alaska Legislature this week, Alaska Rep. Nick Begich III urged state lawmakers to boost the development of a proposed trans-Alaska natural gas pipeline.
“The federal path is largely cleared, but investors also need state-level clarity, fiscal predictability and simplicity,” Begich said. “Scrutinize it carefully, model it thoroughly. But my request to you is not to become a roadblock.”
But legislators who are dealing with the pipeline on a daily basis say they don’t have answers to basic questions, including how much the pipeline will cost and whether the gas it carries will be affordable to Alaskans.
“I have not seen any figures,” said Sen. Cathy Giessel, R-Anchorage and chair of the Senate Resources Committee.
Senate President Gary Stevens, R-Kodiak, said legislators are not going to be a roadblock.
“We’re not going to throw sand in the works. Everybody wants a pipeline. We all hope that it comes about, but it’s got to be done properly and make sure that we know what’s going on.”
Sen. Bill Wielechowski, D-Anchorage, said he has heard “from very credible sources” that the price of gas through the pipeline could be $50 per million cubic feet by 2046.
The current cost of gas from Cook Inlet for Southcentral Alaska is about $10 per MCF.
“Just imagine if you have utilities locked into 30-year contracts for gas at $50 an MCF. That would be catastrophic,” Wielechowski said. “That’s the sort of thing that we’re trying to protect Alaskan consumers all up and down the Railbelt from — an absolute catastrophe to our economic system.”
As currently proposed, the pipeline project consists of two phases. The first phase includes an 807-mile pipeline from the North Slope to the west side of Cook Inlet, with a tie-in to existing natural gas infrastructure around Anchorage.
The second phase would extend the pipeline to the Kenai Peninsula, where an export terminal would be built. The second phase would also include a processing plant on the North Slope.
One year ago, the state-owned Alaska Gasline Development Corporation sold 75% of the trans-Alaska natural gas pipeline project to Glenfarne, an international developer.
Since the acquisition, Glenfarne has signed a number of nonbinding agreements with potential gas purchasers and gas sellers, but it has not disclosed estimates for the project’s cost, and it hasn’t disclosed what it expects the cost of gas to be.
Last year, company officials said they expected to make an investment decision by the end of 2025. In a subsequent filing with the Federal Energy Regulatory Commission, they said they would make the decision in February. A new timeline hasn’t been made public.
The lack of data is particularly problematic because legislators are considering whether to offer a property tax break to pipeline developers.
Those taxes are significant. Because Alaska does not have a statewide income tax or sales tax, its state budget suffers when people move into the state. More people means more demand for things like schools, parks and roads, but no increased revenue to pay for those things.
Economists have called that the “Alaska disconnect.”
Alaska has a 2% property tax on oil and gas infrastructure. Most of that money is passed on to municipalities, which use it for local needs.
In December, Alaska Gov. Mike Dunleavy said he was considering a proposal to cap that property tax at 0.2% for the natural gas pipeline, creating a payment in lieu of taxes system.
“That bill should be next week,” Dunleavy said during a Thursday news conference with U.S. Interior Secretary Doug Burgum, confirming the 0.2% rate will be part of the new legislation.
“Last couple weeks, we’ve been working with municipalities, getting their input as to what this should look like before (we) put the bill out,” he said. “So look forward to probably next week on that PILT bill, so that we can look at the economics of this line and also ways to ensure that municipalities benefit from this directly.”
This week, Begich expressed some support for a lower property tax rate, saying it could encourage people to invest in the pipeline.
“The classic 2% tax burden that would apply, say, to a $50 billion asset, would be a billion dollars in cash flow early in the project’s life cycle,” Begich said. “If that cash flow coming out of the project lowers the rate of return for investors, they’re not going to show up and invest. And so we need to make sure that our tax policy is A, doing what’s right for Alaskans. B, is not impeding the ability for the project to move forward. And I think we can do both of those things with some creative thinking and conversations with the industry.”
While a lower tax rate would benefit pipeline developers, it has the potential to harm residents who live near the pipeline.
If pipeline construction and operation mean more people moving to Alaska and municipalities are unable to raise revenue to meet the resulting demand for services, local governments could be forced to raise taxes or cut basic services in order to pay for the pipeline subsidy.
Last week, the Senate Resources Committee introduced Senate Bill 275, which imposes some transparency requirements on the pipeline project, eliminates a tax exemption relevant to the project, and imposes a new surcharge on gas processing plants.
That bill was introduced just days before Begich urged lawmakers not to be a “roadblock.”
Giessel, who chairs the resources committee, said she didn’t think Begich’s comments were directed at her or her committee’s bill.
“We’re not being a roadblock. We’re doing exactly what we’re supposed to do according to our constitution,” she said.
Asked whether he was thinking of Giessel’s bill during his speech, Begich said, “It was not my direct intention. No, I think it’s always worth having the conversation about the tax structure, about the incentive structure, though that’s an ongoing discussion that happens at the state legislature in Alaska. I think it’s important that when we have those conversations, they’re done in a way that is going to encourage, rather than discourage, industry from coming in and saying, ‘Yes, this is a good place for us to invest in.’”
Speaking to reporters after his speech, Begich said the state would benefit by getting more information from Glenfarne.
“I welcome more information,” Begich said. “I recognize that they’ve got certain restraints on what they can share. But look, I’d like to see more information shared. I’d like to see more of the economics of the project shared so we can understand what the full potential is and what’s on the table. I believe that’s going to come with time, but more information is better.”
• James Brooks Cascade is a longtime Alaska reporter who lives in Juneau. He previously worked at the Anchorage Daily News, Juneau Empire, Kodiak Mirror and Fairbanks Daily News-Miner. Alaska Beacon is part of States Newsroom, the nation’s largest state-focused nonprofit news organization.
