Alaska LNG Pipeline Faces Tight Economics as Costs Climb

New estimates suggest Alaska’s long-planned LNG pipeline project may face a shrinking path to profitability as lawmakers weigh tax incentives and rising construction costs.

(P&GJ) — Alaska lawmakers are reviewing whether proposed tax incentives could help keep the state’s long-discussed LNG pipeline project financially viable as development costs continue to rise, according to Alaska Beacon.

Analysts told legislators this week that the project may have only a narrow margin for profitability under current market conditions.

The proposed project would transport natural gas from Alaska’s North Slope to a future LNG export terminal in Southcentral Alaska. Early estimates from 2018 placed the cost of the pipeline and related infrastructure at roughly $43 billion, though some lawmakers now believe inflation could push total costs closer to $60 billion. Glenfarne Group, which now owns a majority stake in the project, has not released updated cost figures.

Consultants advising the Alaska Legislature said the economics become increasingly difficult as construction costs rise. According to modeling discussed during hearings, LNG exported to Asian markets could struggle to compete if delivered prices exceed prevailing contract prices in countries such as Japan. A tax proposal backed by Gov. Mike Dunleavy is intended to improve project economics by replacing parts of the state’s existing property tax structure with a volumetric gas tax.

Even with the proposed tax changes, uncertainty remains around future LNG pricing, construction expenses and upstream gas costs, as reported by Alaska Beacon. Legislators are also debating how to offset potential losses in local property tax revenue tied to the project. Some proposals under discussion include mandatory payments to affected municipalities and possible future gas connections for Interior Alaska communities.

Project developers have argued that a revised tax structure is necessary to secure financing for the multibillion-dollar development. Lawmakers, however, said many key financial assumptions remain unresolved as they continue evaluating whether the project can remain competitive in global LNG markets.