The developer of the Alaska LNG project released its first specific public cost estimates Wednesday for the proposed 800-mile gas pipeline and associated infrastructure.
The developer, Glenfarne, told state senators it estimates the full project will cost between $44.5 billion and $54.5 billion.
The first phase of the project, the pipeline itself, is likely to cost between $13.2 and $16.9 billion, according to the company’s estimates.
Glenfarne Alaska head Adam Prestidge presented the figures to the Senate Finance Committee on Wednesday, as lawmakers considered tax breaks for the project in a special session called by Gov. Mike Dunleavy.
“What we've done here is present the numbers that we think represent actual construction costs for the project,” Prestidge said.
Cost projections have been a sticking point for skeptical legislators, who say they’re not willing to advance the tax breaks the governor and Glenfarne have requested without confidence the project will broadly benefit Alaskans and the state’s troubled finances.
As recently as Tuesday, Glenfarne refused to release its internal estimates, saying that doing so could compromise negotiations with suppliers and customers.
Lawmakers have questioned inflation-adjusted estimates released by the Department of Revenue pegging the project’s cost at around $46 billion.
Consultants with the firm Pegasus-Global told legislators Tuesday that other large LNG projects routinely ran well over budget, sometimes by many billions of dollars. Two-thirds of LNG projects came in over budget, with cost overruns averaging 70%, according to a 2014 study by the firm EY that the consultants cited in their presentation.
But on Wednesday, after meeting with the co-chairs of the Senate Finance Committee, Prestidge said he’d agreed to share a range of estimates in an attempt to “thread the needle of appropriate disclosure.” Prestidge said the estimates were based on engineering studies, bids from vendors, economic conditions and the company’s experience developing smaller projects in other regions.
Glenfarne has repeatedly said the state would not be on the hook for cost overruns. But because the first phase of the project is slated to provide gas primarily for in-state use, legislators have said they’re concerned cost overruns could translate into higher gas and electricity bills for homes and businesses on the Railbelt.
“People ask, ‘Well, why do you even care? That's Glenfarne’s problem,’” said Anchorage Republican Sen. James Kaufman. “I guess there's kind of a, ‘Yeah, but,’ there. It's true in a way, but then the impact of that is the cost of the consumer.”
In an attempt to reassure lawmakers, Prestidge told legislators Glenfarne supported adding a provision to the tax relief bill that “prohibits cost overruns on the project from being borne by either the state or the regulated ratepayers who are buying gas off the pipeline.”
During the regular legislative session, the governor’s office told lawmakers that caps on the price of gas that Alaska utilities would purchase from the project — one way to ensure that ratepayers don’t bear the cost of overruns — were unworkable. But in an interview with Fairbanks public radio station KUAC on Tuesday, Dunleavy said he supported modifying the bill to ensure “the state will not be on the hook for any overages, and that the people of Alaska, the ratepayer, won't be on the hook.”
Glenfarne also told legislators it had agreed with Southcentral gas utility Enstar on a maximum price for gas from the Alaska LNG project: $16 per 1,000 cubic feet, indexed to inflation. Enstar told legislators in an earlier presentation that that’s likely less than the cost of imported gas and in line with new contracts for gas from Cook Inlet. That price, though, is significantly higher than current gas prices, and prices wouldn’t drop until major new natural gas customers come online.
Sen. Cathy Giessel, an Anchorage Republican who as chair of the Senate Resources Committee repeatedly pressed Glenfarne to share its cost estimates to help lawmakers devise a workable tax for the project, said the $44.5 billion to $54.5 billion range the company presented still strikes her as low, and she said the wide range meant the estimate was still “pretty loosey.”
“Remember, these are billions,” she said.
Giessel said she still had numerous unanswered questions about the project: how Alaska labor unions fit into the planned workforce, how the developer plans to house pipeline construction workers, the impact of gas drilling on oil production, and even things as specific as the coatings that would be applied to the steel used in the pipeline.
Giessel said she thinks the Legislature is “rushing” the tax proposal.
“I think we need to continue this work in 2027, when we can spend more time on it, when Glenfarne themselves can get more secure numbers, and we just all have more details,” she said.
The special session is set to continue through June 19. Dunleavy said last month he’d call special sessions repeatedly until lawmakers passed an acceptable bill.
