Alaska’s LNG future requires creative thinking

Pump Station 1 is seen on Monday, June 2, 2025, located near Deadhorse, on Alaska’s prodigious North Slope, with the start of the Trans-Alaska Pipeline at bottom center. (AP Photo/Jenny Kane)

By Frank Murkowski

Many Alaskans have grown increasingly skeptical that the proposed liquefied natural gas (LNG) pipeline is not moving forward because of its escalating cost. Early estimates placed the project near $44 billion; more recent figures — though unofficial — suggest costs approaching $60 billion or more. When projects reach this scale, uncertainty alone can stall even the most ambitious development plans.

That uncertainty is reflected in the caution shown by Alaskan major energy companies such as Exxon, ConocoPhillips, and BP. Their hesitation is not surprising: projects of this magnitude carry significant capital exposure, and investors require a clear path to profitability before committing. In practical terms, that means LNG prices would need to be high enough to recover costs and provide returns, even in a global market where competing supply—including underdeveloped reserves in Russia and elsewhere — continues to exist.

This cost pressure is also evident in current negotiations with prospective project partners. Currently, one example is Glenfarne, which has reportedly emphasized that state corporate taxes would need to be waived as part of any development agreement. While tax incentives are common in large infrastructure deals, the scale of the requested waiver raises legitimate questions about long-term public benefit and fiscal sustainability.

Alaska has faced similar debates before. During the Trans-Alaska Pipeline negotiations, tax structures were part of the broader discussion, but they were not treated as a condition that undermined the project’s feasibility. More recently, companies such as Hilcorp — now a major operator in Cook Inlet following acquisitions from BP — have benefited from favorable operating conditions, as a subchapter S Corp, and therefore tax-exempt. Yet declining natural gas production in Cook Inlet has already raised concerns about long-term energy security for the Anchorage region, underscoring the need for new reliable supply sources.

The central question is: if a project is only viable with extensive tax waivers and escalating public concessions, does it truly serve Alaska’s long-term economic interests? The state relies heavily on a limited set of revenue streams to fund education, transportation, and public services, including the Alaska Highway System. At the same time, Permanent Fund Dividend levels have become increasingly constrained. Against that backdrop, LNG development is often presented as one of the few significant new revenue opportunities on the horizon.

However, waiving broad categories of taxation for a single project could set a dangerous precedent with long-term consequences. Alaska must balance the need to attract investment with the responsibility to maintain a stable and equitable revenue base.

Infrastructure costs are only part of the challenge. Alaska’s unique land ownership structure — where the federal government controls roughly two-thirds of land within the state — adds complexity to large-scale development. This makes innovative approaches to transportation and energy export even more important.

It has been suggested that the proposed LNG line from the North Slope to Kenai be built in two phases. The first would be to build the line to initially serve the Fairbanks and Anchorage metro areas. Later, the final section, including the export dock, would be constructed on the Kenai. The drawback with this approach is the first section would not distribute enough LNG to cover operating costs or debt reduction. 

An interesting group that continues to research the Arctic proposal of LNG by icebreaking tanker to Asia, is Oilak associated with Lloyd Energy Company, estimates of nearly 40% cost savings in transportation by the Arctic tanker route are suggested. 

Icebreaking LNG tanker technology is already in use in Arctic regions, including Russia. Similar approaches could allow North Slope gas to reach Asian markets more directly. This would involve specialized loading facilities and seasonal shipping strategies designed around Arctic conditions. 

During the 1967-68 period I worked in state government and during that time, we maintained a state office in Tokyo, Japan. The purpose was to promote Alaska resource potential to the Asian countries. This resulted in stimulating Alaska’s timber and fisheries industry, resulting in pulp mills in Sitka and sawmills in Ketchikan, Wrangell, Haines and Metlakatla, as well as several fish processing plants throughout Alaska. 

I believe there is an opportunity to consider international equity partnerships in any LNG proposal. Countries such as Japan, South Korea, the Philippines and Taiwan, as well as other major LNG importers, could potentially participate as investors in infrastructure development in exchange for long-term supply agreements. Similar models have been used in Alaska’s resource history, including earlier investment in timber, pulp and sawmills and fisheries operations across Alaska. Our state’s presence in Tokyo, as I’ve indicated, helped facilitate trade relations and market development.   

These kinds of partnerships are not without complexity, but they reflect a broader truth: large-scale resource development increasingly requires creative financing structures and shared risk models.

Ultimately, the most expensive component of any LNG strategy is not just production; it is transportation to market. Whether through pipelines, rail systems, or Arctic shipping corridors, the chosen infrastructure path will determine the project’s viability more than resource availability itself.

Alaska should be cautious about allowing enthusiasm for a single project structure to override broader fiscal considerations. The goal should not be development at any cost, but development that strengthens the state’s long-term economic foundation.

I believe if consideration of the potential of the Alaska Arctic tanker route were given genuine support by our governor and the Legislature the Arctic route would advance far beyond the current debate over foreign tax forgiveness. The state would generate greater revenue from the cost savings on transportation alone. Let’s take a look at how they are doing it from the Russian Arctic. 

• Frank Murkowski is a former Alaska governor and U.S. senator.