Alaska U.S. Republican Rep. Nick Begich’s annual address to the Alaska Legislature this week included an unusually direct order to legislators: Get on board with the natural gas pipeline project.
“The federal path is largely cleared, but investors also need state-level clarity, fiscal predictability and simplicity,” he told legislators, using language that has long been associated with tax cuts the project is expected to ask for. “Scrutinize it carefully, model it thoroughly. But my request to you is not to become a roadblock.”
The message comes as Gov. Mike Dunleavy and the private developers behind the AKLNG project, Glenfarne, are expected to request a slate of changes to state law and tax policy to advance the proposed mega project that would link the North Slope gas fields with an export terminal in Southcentral to sell to buyers in Asia.
The project has come with big promises of new jobs, affordable gas for in-state utilities and revenue for the state treasury.
But actual details backing up those claims have been scarce.
In response to Begich’s comments, several senators said on Wednesday that they are not interested in blocking the project but need their questions answered before they sign away millions of dollars in local property taxes or commit other state resources.
“My response is we’re not being a roadblock,” said Senate Resources Committee chair Sen. Cathy Giessel at the Senate Majority’s weekly news conference. “We’re doing exactly what we’re supposed to do, according to our constitution… It’s our responsibility to make sure that we are getting value for this gas.”
Giessel has been leading the Senate’s effort to review the project ahead of the presumed legislative ask. That’s included hearings with consultants and state officials, but she said it’s been markedly different from previous pipeline efforts, where legislators had access to detailed project costs, including in-state gas costs.
“Well, we don’t have the ability to make those kinds of calculations this year with this project,” she said. “Everything is hidden behind confidentiality. And so what we’re looking at is how to ensure that this pipeline actually brings gas to Alaskans that we can afford, and that it doesn’t leave us with a tremendous debt or infrastructure that’s only partially completed because a company went bankrupt and left the state.”
Sen. Bill Wielechowski, an Anchorage Democrat who has long been critical of the oil and gas industry, said the pipeline can be built under the existing state law from the last push for a pipeline project. He said he’s worried this is, instead, the latest in a long line of oil and gas companies asking for tax cuts to boost their profits.
“What I think he’s referring to is tax breaks. That’s what I took from it,” he said, pointing to a suggestion from Gov. Dunleavy to cut local property taxes on the pipeline by 90%.
The proposal was met with alarm by local governments, who warned that such a sharp cut in revenue, without a replacement, would leave them without the funding to handle the additional infrastructure and public service needs that would come with the project.
And one of the biggest outstanding questions is precisely who will be buying the gas.
The project has courted utilities in Asia, but has yet to ink a firm commitment to gas. Instead, Wielechowski said he’s worried the project could be relying too much on in-state utilities to be the first to sign long-term contracts to buy gas, which would leave Alaskans shouldering the costs of a massive pipeline if Asian buyers don’t materialize.
“I’m hearing from very credible sources that the utilities are being pressured to sign contracts to buy gas and if that’s the case, and phase one is the only thing that’s built, then I’m also hearing from very credible sources that they could end up, in 20 years, paying $50 per MCF for that gas,” he said, noting that that’s about five times higher than the current costs for natural gas. “That would be catastrophic. That’s the sort of thing that we’re trying to protect Alaskan consumers all up and down the Railbelt from.”
Giessel noted that, with the mid-2010s push for a natural gas pipeline, work was done showing that building such a large pipeline solely for in-state utilities was prohibitively expensive. She said she hasn’t seen any modeling that suggests anything would be different for the latest project.
And for all the claims that the pipeline project would be a good source of economic growth for the state, Giessel said she was similarly skeptical, given recent reports that about 40% of the state’s oil and gas workforce doesn’t live in Alaska.
“People say to me, ‘You know, this is so many jobs. You know, building a gas pipeline would be so many jobs.’ That would be true if we had a population that could fill those jobs,” she said. “This pipeline, the import facilities, these would all bring jobs, but are they Outsiders coming up and taking revenue out of our communities?