Frozen Fuel: Alaska Eyes Another Epic Pipeline

The answers lie hundreds or even thousands of miles away, among lawmakers in Juneau, in oil and gas company executive suites in New York and Texas, and in capitals of potential buyers spread across the Asian rim. The solutions are being sought while warfare has erupted against Iran, which makes Alaska’s supply even more attractive, and the pockets of natural gas that state residents currently draw on are dwindling.

“Yet again, Alaskans are wondering why, with a huge amount of North Slope natural gas, we are going to increase our dependence on some of the world’s most unstable regions,” Republican Gov. Mike Dunleavy and former Sen. Mark Begich wrote in the Juneau Empire on March 30. “The answer, in part, is that we have failed to develop our own energy resources.”

Dunleavy’s pitch, which he has been making for more than a year, is for the construction of a natural gas pipeline that would run nearly 800 miles, from the frozen edge of Prudhoe Bay to new processing and shipping facilities on the Kenai Peninsula. At a time when energy demand is growing and energy markets are roiled by instability on several fronts, the pipeline, whose notable backers include President Trump, would seem to come at an ideal moment. Instead, it faces multiple hurdles that illustrate how complex it has become to pull gas from the ground, and how expensive it will be to get it out of such a remote spot and across such a formidable landscape.  

“Alaska does need it,” state senator Robert Myers told RealClearInvestigations. “It’s not a done deal yet, but we are definitely seeing some progress.”

Alaska Knows Pipelines

Alaska has done it before. When the Trans-Alaskan Pipeline System (TAPS) opened in 1977, it was an engineering marvel and an important source of oil. At a cost of $9 billion, it stood then as the most expensive private construction project in American history.

Running atop tundra, under mountains, through snow in winter and clouds of mosquitoes in summer, the Trans-Alaskan Pipeline pumped more than 2 million barrels of oil a day at its peak, an output that has fallen below 500,000 barrels a day as the rich pots of black gold have been sucked out.

Both the famous TAPS and the proposed natural gas pipeline also fall under Alaska’s unique constitution, which essentially gives residents an ownership stake. Initially, the gas pipeline was under the aegis of the Alaska Gasline Development Corporation. Last year, however, the state struck a deal with Glenfarne Group, making the multinational energy firm a majority owner and lead developer of the project, with the state retaining a 25% stake.

Glenfarne, a privately held company with an executive board dominated by Australians, is headquartered in New York and Houston, but most of its energy portfolio, aside from one LNG operation in Louisiana, is based in Latin America. Now, Glenfarne and Alaska are seeking to replicate, with methane, what’s already been accomplished with oil. Like TAPS, its pipes would also begin along Alaska’s North Slope, with the gas line tapping one of the world’s great stranded reserves. 

“There are 35 trillion cubic feet there and that’s just the proven reserves, there’s probably more than that,” state senator Jesse Kiehl said. Indeed, some estimates have put the potential total as high as 200 trillion cubic feet. 

That’s a considerable field, although the U.S. currently produces around 118 billion cubic feet of natural gas per day.

“Will Alaska change the world – no,” said David Victor, a professor of innovation and public policy at the School of Global Policy and Strategy at UC San Diego and fellow at the Brookings Institution. “Thirty-five trillion cubic feet is a huge amount of gas, but there’s a lot of gas in lots of places. What is needed is the mix of gas below ground and the investment environment above ground.”

Unlike the TAPS system, which green groups continue to attack in courts, the natural gas line is not facing serious environmental opposition. While a fossil fuel, natural gas is cleaner than oil, and there won’t be any Exxon Valdez if something goes wrong – the methane is simply lost in the atmosphere.

The engineering challenges are largely solved already because the new pipe would closely follow the path of the Trans-Alaskan Pipeline for much of its length. Yet challenges remain. Because oil is warmer than natural gas, parts of the TAPS Pipeline were built above ground to prevent melting the tundra and destabilizing the tube. The proposed gas pipeline, on the other hand, will run entirely underground.

Builders can simply go around deep water, which adds miles but is cheaper, faster, and safer, according to lawmakers and energy experts. At some point, however, the pipe will have to run beneath the Yukon River, a mighty glacial drain that is a mile wide in places. 

That will be a monumental piece of construction. While most of the river is quite shallow, its deepest point measures 130 feet by Rampart, Alaska, right by the pipe’s path. Wherever they cross, builders must have a launch point and a receiving pit on each riverbank, then use a remote-controlled tunneling head to drill a path under the river, dragging the attached pipe with it.

And unlike oil, which can be pumped directly into tankers and moved across the oceans, the methane gas must be cooled to -260 Fahrenheit to become liquid – the “L” in LNG – and transported. 

Consequently, an expensive liquification plant will have to be built at the pipeline’s terminus, in Alaska’s Nikiski area. The facilities at LNG ports typically consist of 2 or more trains, the high-tech units that perform the supercooling liquefaction. Each train can cost anywhere from $5 to $10 billion to construct.

Then, only specialized ships can handle cargoes of super-cooled liquid gas. In fact, there are currently no big tankers meeting the strict requirements of the Jones Act, a law passed in 1920 that requires ships moving between U.S. ports to be built in America and crewed by the U.S. Merchant Marine. That means the biggest markets for Alaskan gas will be exclusively foreign ports. 

Asian Markets

And of those, destinations in Asia, where industrial countries like Japan, South Korea, or Taiwan must import most of their energy, are the most attractive. On a trip to the Asian rim last year, Gov. Dunleavy pitched potential buyers on the benefits of linking with Alaska: shorter distances and crossing routes not subject to the vicissitudes of war and instability that can impact operations and prices of energy from the Middle East. Tokyo, for example, is 1,200 miles closer to Alaska’s Kenai Peninsula than it is to the Strait of Hormuz.

The attacks on Iran by the U.S. and Israel are thus seen as potential game-changers for Alaskans. On March 13, Dunleavy declared the action in Iran “a strategic master stroke” in the Wall Street Journal, and supporters like Kiehl noted that “the instability in the Middle East might juice this project.”

With the market for natural gas in flux – around 20% of the world’s current supply is bottled up in the Strait of Hormuz due to insurers’ reluctance and Iranian belligerence – it is difficult for sellers to lock in deals at prices that would guarantee profitability after laying out tens of billions on a new pipeline.

But several experts said this isn’t just politicians talking, telling RCI the project does make financial sense. “If I were betting, I’d say Japan will likely step up to guarantee the funding of Alaska LNG,” said Mark Mills, executive director of the National Center for Energy Analytics. said Mark Mills. “The war in the Middle East has reanimated the urgency of non-choke-point sources because of the now obvious security, or risk premium, of getting LNG from the Persian Gulf.”

Glenfarne said it isn’t confining the search for buyers to Asia, although that remains the main target. The company said it has already closed enough deals to bring the project close to the point needed to complete financing. Among companies inking deals thus far are TotalEnergies, a French outfit, Tokyo Gas, and others, according to Glenfarne.

“As with any energy project, long-term agreements with customers are a key part of financing, and we’ve made significant progress on that front,” a company spokesman told RCI. 

Financing Questions

Alaskan politicians are heavily involved in the pipeline not only as hosts, but as representatives of the state’s 25% ownership. That leads back to the legislature’s questions about the financing. 

It’s not clear just how much it will cost to burrow the pipe under hundreds of miles of tundra and arctic waters. In 2020, the figure was put at $38.7 billion, although now Alaskan lawmakers say estimates have jumped to $44 billion.

“And I think it would cost more than $100 billion when all is said and done,” Kiehl said. “Of course, Glenfarne will tell you I’m crazy, that they can do it for $60 billion.”

The fear is that if the project is too expensive – and/or the price of gas drops too low – the pipeline project could be abandoned, or another attempt to build it will have to be made essentially from scratch in terms of attracting developers.

Glenfarne acknowledged it had received a final report on financing costs at the end of 2025, but neither that report nor the figure has been made public. Indeed, a demand for more information has been a hot topic during the recent session in Juneau, which ends in May.

The state’s two senators and one representative in Washington, all Republicans, have addressed the legislature this session with the first two, Sen. Dan Sullivan and Rep. Nick Begich telling lawmakers that approval of what’s needed for the pipeline should be their top priority. Republican Sen. Lisa Murkowski, however, did not feature the pipeline in her prepared remarks and cautioned the legislature to move carefully on the matter when a questioner brought up from the floor, according to Alaskan media.

“My encouragement to you is to do the homework that you need to do as representatives for people around the state to make sure that this is going to be right,” Murkowski said. “Not for one project developer. Not just for one administration, but this is going to be right for the people of Alaska going forward.” 

Further confusion has come after Gov. Dunleavy proposed a new tax basis last month. Rather than the 20 mills property tax currently in place – that is, $20 on each $1,000 of assessed property value – the governor favors a tax based on the pipe’s volume, called an “alternative valuemetric tax,” that would start at 6% and then increase by 1% a year.

Alaska Public Media reported that Dunleavy’s tax plan would reduce from $880 million to $68 million per year, which seems an improbably huge drop. Glenfarne backs the plan.

The governor’s office did not respond to requests for comment, but Alaska media has reported his position as stark: no tax reform, no gas pipeline.

Neither Levy nor Kiehl would say where they stand on the tax proposal, and several other Alaskan legislators also declined to comment. But lawmakers have indicated that Dunleavy’s proposal is unlikely to pass in its current form, and some mayors of Alaska’s “boroughs” have also voiced concerns.

In theory, the new pipeline would also contribute to Alaska’s Permanent Fund Dividend, which was established in 1976 to share the state’s energy wealth. It was designed to pay cash every year to legal Alaskan residents of that year, but since 2016, it's become a political football, with the dividend dwindling and money instead spent by the legislature, Myers said. Nevertheless, the gas project would contribute more than $22.5 billion in taxes and royalties in the next 30 years, according to the Alaska Gasline Development Corporation.

Alaska’s Surprising Energy Crunch

Another reason Juneau looms large over the project is that it is, in fact, two projects. One is the ultimate goal of exporting gas to Asian markets, but the first phase of the project would bring more natural gas to Alaskan consumers who currently pay among the highest energy prices in the U.S.

Currently, the timetable is 2029 for the 42-inch-diameter pipe to start delivering gas to Alaskans, who are concentrated in the south-central part of the state. That might not be quick enough, according to some Alaskans, who face an uncertain energy future.

Alaska has no refineries; its oil must be shipped out, processed, and shipped back. In winter, Alaskans burn roughly 300 million cubic feet of natural gas per day, and that supply has come from fields in the Cook Inlet. Those sources have been depleted, however, and now the state with so many energy reserves faces a bizarre situation: At the same time, there is discussion about tapping a gigantic new energy source, there is also talk of importing energy.

Alaska’s need for energy is so great that there is even talk by the Trump administration and in the southern coast area of Mat-Su Valley about firing up the nation’s first new coal plant in a decade.

Similar discussions are happening about four new hydropower projects, but those, too, would not come online for years and would be an uncertain provider, said Sarah Montalbano, an analyst with Always On Energy Research and an Alaskan native.

The state has reserved 500 million cubic feet a day for in-state consumption from the new pipeline, or about 8% of its total volume, according to Glenfarne. That would “leave ample volumes for future growth across Alaska’s communities and industries,” the company said.

Political Pressures & Uncertainties

That’s a lot to sort out before the end of May, when the legislative session ends. The financial angles have proved particularly thorny here, in part, because the players have kept their figures more private than usual, Victor said.

“It seemed like it was a done deal, and then it’s not a done deal,” he said. “Here there seems to be less willingness to open the books than we see in many projects like this internationally, and I think that uncertainty is fueling a lot of the political debate.”

And political machinations may not be limited to Juneau. In 2024, the Biden administration hit a pause on American LNG exports, and should a similarly minded administration return to power in 2029, the export capability of  Alaskan gas could close.

Biden’s pause was motivated in part by concerns, now seen as imaginary, that excessive LNG exports could make the energy more expensive for American consumers. 

“We’re awash in natural gas here,” Victor said. “If the Gulf is an ongoing mess, then Alaska’s gas just looks better and better, although peace might bring the ghosts of oversupply back.”

But the Biden administration did not stand in the way of the Alaskan project, and both state lawmakers and Glenfarne are convinced a change in political power would be unlikely to doom them.

“Alaska LNG is fully permitted for a final investment decision and enjoys strong bipartisan support,” a company spokesman said. “President Trump authorized Alaska LNG in his first term. President Biden issued a separate authorization in his term and vigorously and successfully defended Alaska LNG from environmental legal challenges.”

Despite the pipeline’s positive economic indicators – construction is also expected to bring more than 7,000 jobs to Alaska – a tinge of uncertainty hovers over the project, reflecting how efforts to open Alaska’s Arctic National Wildlife Refuge to additional energy exploration have been a political football for decades. 

“The real risk is that the legislature doesn’t get its act together,” Montalbano said. “Everyone seems to be in favor of it, but then where does the tax situation fit in? They only have a month and a half to get that going.”

Myers is confident it will happen and has attributed some of the hang-ups to notions of state ownership that often run through thinking in the Last Frontier.

“This has been a dream up here for more than 40 years,” he said. “I think the companies are perhaps not used to the political climate here; we’re much more involved than is usual.”