The entrance to the Alaska Gasline Development Corp.'s Anchorage office is seen on Aug. 11, 2023. The state-owned AGDC is pushing for a massive project that would ship natural gas south from the North Slope, liquefy it and send it on tankers from Cook Inlet to Asian markets. The AGDC proposal is among many that have been raised since the 1970s to try commercialize the North Slope's stranded natural gas. (Photo by Yereth Rosen/Alaska Beacon)
When it comes to developing Alaska’s private-sector energy industry, certain members of Alaska’s Senate majority have misunderstood or misrepresented the Alaska Gasline Development Corporation’s plans. From our perspective, members of the Senate and their “leave it in the ground” environmentalist backers are trying to choke the life out of the Alaska LNG Project in the name of protecting Alaskans.
By wrapping layers of economically unviable mandates in the flag of “protecting Alaskans,” Senators in the majority successfully injected “poison pills” into legislation that was meant to enable the largest infrastructure project in state history.
They claim that Glenfarne, the project developer, doesn’t need legislation to build the project. This betrays a fundamental ignorance—or deliberate misrepresentation—of how mega-project financing works. International investors are very highly unlikely to commit tens of billions of dollars to a state with a volatile fiscal regime without long-term tax certainty.
What the Senate actually did was take a predictable tax framework and append unnecessary and arbitrary penalties, micromanaged timelines and aggressive corporate restructuring demands to it. No private entity can secure global financing when a state government mandates statutory completion deadlines under threat of asset forfeiture. By demanding a final investment decision on a rigid, state-imposed timeline, the Senate didn’t protect Alaskans; they created a framework that looks as though it were designed to ensure the project fails before it starts.
After gasline tax bill, pipeline corporation plans to ask Alaskans for a few billion dollars
The agreement between AGDC and Glenfarne is carefully designed to propel this project forward while at the same time protecting the state’s interests. One example is the option for the state to invest in Alaska LNG. AGDC has consistently and clearly identified the investment as an option and not a request or an ask despite reporting in the Alaska Beacon to the contrary. State policymakers, not AGDC or Glenfarne, will have to weigh benefits and risks of investment.
The centerpiece of their defense is their sudden crusade on the back of Alaska LNG to close the “S corporation loophole,” driven by a jaw-dropping misrepresentation of basic accounting. They claim that Glenfarne will make “$5 billion in profits per year.” This is flatly untrue, and the Senators should know it. They are muddling gross project revenues with net corporate profits. To generate those revenues, Glenfarne and its partners must first service the debt on an estimated $54 billion construction bill, cover pipeline operating costs and pay upstream producers for the actual gas. To tell Alaskans that a developer is pocketing $5 billion in pure, untaxed profit when they haven’t even cleared the hurdle of paying off their initial investment is economic illiteracy at best, and intentional deception at worst.
Using a targeted infrastructure bill to wage an ideological war on major producers like Hilcorp—the very company keeping Southcentral Alaska warm right now—is a reckless gamble with our energy security. Senate Democrats and their anti-industry allies see the need for Alaska LNG as a vehicle to open Pandora’s Box for an ever-expanding web of personal income tax in Alaska.
The Senate rhetoric surrounding Alaska hire and a $5 natural gas cap takes a universally popular concept and weaponizes it into unworkable statutory mandates.
Glenfarne and Alaska’s Building Trade unions already voluntarily signed a binding historic memorandum of understanding for a project labor agreement with Alaska trade unions. The market was already aligned to protect local workers. By twisting market-driven solutions into rigid statutory pretzels, the senators aren’t helping labor—they are killing the very project that would provide thousands of union jobs. The same goes for the $5 gas cap. Dictating market prices in state law is an absolute non-starter for private capital.
You cannot tax, mandate and regulate a project into existence. If the economics don’t work, the gas stays in the ground—which is precisely what the Senators’ most vocal supporters want.
Alaskans need to look past the populist theater. We face a looming energy crunch in Southcentral Alaska. We need real solutions, private capital and reliable partners. What we do not need are partisan politicians treating a multi-billion dollar lifeline for our state as a political football.
The Senate’s bill didn’t ask Glenfarne to keep its promises. It would force Glenfarne to accept terms that make the project completely unbankable. Whether or not this is by design is anyone’s guess. It’s time to call this strategy what it is: a coordinated effort to kill Alaska energy under the guise of defending it.
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Courtesy of Alaska Beacon
