Alaska’s Natural Gas Megaproject Under Review

Published December 31, 2018

A $44 billion liquefied natural gas (LNG) export project planned by the state of Alaska to sell natural gas to Asian markets could be upended by the November election of Mike Dunleavy as the state’s new governor.

The megaproject includes construction of a gas treatment plant on Alaska’s North Slope, a feeder pipeline from natural gas fields at Point Thomson, and an 800-mile pipeline to carry gas from Prudhoe Bay to the Cook Inlet, where the gas would be converted to LNG for export to Asian markets.

The project was initially planned as a joint public-private partnership. Outgoing Gov. Bill Walker continued the project with the state as the leading participant after the major industry partners pulled out of the project in 2016.

Questioning State’s Role, Cost

During his gubernatorial campaign, Dunleavy said he had a long list of questions he wanted answered before he would commit to continuing the state’s involvement in the multibillion-dollar project.

Dunleavy said private oil and gas companies, not the state, should fund and manage the project. He also said he wasn’t satisfied with explanations given to date concerning why Alaska’s top oil producers withdrew from the project, or with the estimates of the cost of the project to the state’s taxpayers.

As one of his first actions as governor-elect, Dunleavy announced former governor Sean Parnell will serve as his special assistant for the natural gas project.

High Costs, Hidden Information

Although Alaska taxpayers have spent a great deal of money on the project, information about its costs, net benefits, and progress have been kept from the public, say Larry Barsukoff, director of operations at the Alaska Policy Forum.

“A fair number of people are asking why Alaska is spending so much to continue this project when people looking at the numbers and the price of gas they could ship through the pipeline to the outlet are saying it isn’t worth the expense,” said Barsukoff. “Each of the four industry partners Alaska initially had in the project—the companies who owned the leases, and by rights the natural gas on the North Slope—pulled out of the project one by one, after deciding the project did not make financial sense.

“After the last partner dropped out, Walker decided the state should continue the project on its own, resulting in Alaska already spending an estimated $500 million on the project, just for studies, permitting, and everything else,” Barsukoff said. “Because of confidentiality agreements, all the internal documents are off-limits to both the public and legislators for now, but Dunleavy says he wants to waive these agreements and share the information with the state and the public, letting them in on a true assessment of whether this project is worthwhile.”

Kenneth Artz ([email protected]) writes from Dallas, Texas.