In the latest sign of the dramatic changes in global energy markets wrought by the oil and gas boom in the United States, officials in Alaska have asked the Federal Energy Regulatory Commission (FERC) to approve a project to develop infrastructure for transporting natural gas from Alaska’s North Slope to Asia.
Under the plan, known as the Alaska LNG Project, the state would build a natural-gas processing plant in Prudhoe Bay on the energy-rich North Slope. From there, the gas will be shipped south through an 800-mile underground pipeline to a state-of-the-art export terminal in the Kenai Peninsula. There, it will be converted to liquefied natural gas and transported on tankers to markets in Asia, including China, Japan, and South Korea.
The project targets 35 trillion cubic feet of proven natural-gas reserves on the North Slope. Alaska officials say the project will create 9,000 to 12,000 design and construction jobs and an additional 700 to 1,000 long-term jobs once fully operational.
Overseeing the estimated $45 billion to $65 billion integrated gas infrastructure project is the state-owned Alaska Gasline Development Corporation (AGDC). Originally, AGDC was part of a four-party consortium that included BP, ConocoPhillips, and ExxonMobil. Citing concerns about the project’s cost and commercial viability, the three oil companies pulled out of the project in August 2016.
Long Road Ahead
The exit of energy giants is a reflection of the substantial financial, bureaucratic, and legal hurdles standing in the way of the project. A global oversupply of natural gas is keeping prices low, which may be a concern for potential investors in the project worried about receiving a return on their money.
The process of getting the necessary approvals from FERC, the agency charged with authorizing the siting, construction, and operation of LNG export projects, is likely to be lengthy and expensive in complying with the National Environmental Policy Act (NEPA) review process. Alaska officials say they hope FERC will produce a draft Environmental Impact Statement (EIS), required by NEPA, in about one year, with a final EIS taking another year.
In addition to these roadblocks, if the past is any guide, environmental groups are likely to challenge the project at each regulatory step, possibly stalling it for years or blocking it entirely.
Moving Ahead
Despite these challenges, Alaska government officials are moving ahead with the project and say they hope to have it in operation by 2025.
In March, Gov. Bill Walker (I) sent a letter to President Donald Trump requesting the project be exempted from two-dozen environmental mandates. Walker followed the letter up in April with a meeting between him and several of his aides with Vice President Mike Pence in Alaska. Walker is seeking a $40 billion loan guarantee from the federal government for the project, to be included as part of Trump’s infrastructure initiative.
Expanding U.S. Gas Exports
James Taylor, president of the Spark of Freedom Foundation, questions whether there is a global glut of natural gas.
“Most of Asia relies on coal for electricity,” said Taylor. “China and India, in particular, would like to address serious air pollution with natural-gas power, but the fracking revolution is currently a U.S.-only phenomenon.
“Russia remains the world’s largest exporter of natural gas, because we currently have only one LNG export terminal,” Taylor said. “As a result, Russian natural gas sells at twice the price of American natural gas.”
Taylor says the Alaska project could expand U.S. economic ties with Asia and improve the region’s air quality in the process.
“A natural-gas export terminal in Alaska would allow America to gain substantial market share in Asian energy markets,” said Taylor. “This will bring tremendous economic benefit to Americans while also empowering people in high-pollution countries like China and India to breathe cleaner air.”
Craig Rucker, executive director at the Committee for a Constructive Tomorrow, says the Alaska project would be consistent with Trump’s promise to improve and expand U.S. infrastructure.
“The Alaska LNG project fits well into President Trump’s goal of upgrading U.S. infrastructure,” Rucker said. “To be sure, Gov. Walker is going to have to figure out how to pay for his initiative. But one of the returns on this investment will be solidifying America’s position as a global energy powerhouse.”
‘Totally Uneconomical’
David Boyle, executive director of the Alaska Policy Center, sees the project as a boondoggle.
“The Alaska gas line is not what it appears to be,” Doyle said. “One could call it the ‘gas line to nowhere,’ like Alaska’s bridges in the past. There are no buyers for our gas because the world is flooded with this resource.
“Gov. Walker has been obsessed with building ‘his’ gas line despite the fact it is totally uneconomical,” Doyle said. “Walker wants to tax Alaskans to pay for his gas line through a 15 percent adjusted gross income tax and various other taxes on natural resources.”
Doyle says he hopes the Trump administration will reject the project.
“The State of Alaska would have to pay customers to buy our natural gas,” said Doyle. “Now, Gov. Walker wants the Trump administration to fold this into its $1 trillion infrastructure program.
“Let’s hope the White House says no,” Doyle said. “Otherwise, this will become Alaska’s ethanol scheme for Americans.”
Bonner R. Cohen, Ph. D. ([email protected]) is a senior fellow at the National Center for Public Policy Research.
Bonner R. Cohen is a senior fellow with the National Center for Public Policy Research, a position he has held since 2002.
