Building a pipeline between the North Slope and Southcentral Alaska would be more economic for the state than importing gas from other countries. That was the conclusion of an independent firm hired by the Alaska Gasline Development Corp. to study the economics of both options amid projected natural gas shortfalls in the Cook Inlet basin.
The firm presented the study results to state lawmakers of the House Resources Committee during a special meeting last month in Anchorage.
Costa Swift is the vice president of consulting for Wood Mackenzie Limited, an analytics firm brought on by the Legislature. He said the firm’s analysis found new natural gas development in the Cook Inlet basin won’t be enough to meet consumer demand in the coming decades.
“These discoveries have not been enough to help arrest the decline we’re seeing in Cook Inlet gas production,” he said.
Wood Mackenzie projects a natural gas shortfall of roughly 2.3 trillion cubic feet between now and 2070. That’s eight times as much gas that’s been discovered in the Cook Inlet basin over the last 15 years. Of the 34 new wells drilled during that time, roughly 9% were successful.
Hilcorp first warned utilities in 2022 that it may not be able to fill future gas contracts without new development in the Cook Inlet basin. That set off alarm bells for utilities now exploring other energy sources and for ratepayers worried about paying more to heat their homes.
State lawmakers have considered importing natural gas to address those short-term concerns, but they’re also looking for long-term solutions. Some say that solution is the Alaska LNG Project.
The proposed 800-mile pipeline between the North Slope and Nikiski has been floated for decades.
Proponents say it would deliver cheap and reliable gas to Alaskans and foreign buyers while boosting the state’s economy. Skeptics doubt there’s really foreign demand for Alaska gas and question the practicality of the project’s scope and timeline.
If it’s built, the full pipeline project would move natural gas from the North Slope to Nikiski, where it'd be prepared for shipment overseas. It’s expensive, though. The latest estimates put the price tag at more than $40 billion.
AGDC, which is overseeing the project, announced earlier this year it would break it into phases. Phase I includes the pipeline between the North Slope and Southcentral Alaska with an estimated cost around $11 billion. And Swift said that’s on par, or a bit higher, than other pipeline projects currently in the works or recently completed that are being built in more populous areas.
“But Alaska and building in Alaska – there are other challenges that other pipelines that we see … do not have,” he said. “Just the weather and the harsh conditions. So it being slightly higher than that is a reasonable assumption to use. And it’s a conservative assumption to use.”
In an earlier analysis of the Alaska LNG Project, Wood Mackenzie found it was too expensive to be profitable. In this new report, the firm found that the economics are better for just the first phase of the project. The report assumes in-state demand for natural gas would increase, that gas could be available as soon as 2031 and that building the pipeline would create over 2,200 new jobs. And the cost of delivered gas could be lower.
But some lawmakers were skeptical.
Rep. Dan Saddler, R-Eagle River, said Wood Mackenzie’s analysis clearly shows the per unit cost of gas would be cheaper if Phase I of the Alaska LNG Project is built. But, he said it fails to consider the whole picture.
For instance, Saddler said the state doesn’t have the nearly $11 billion needed to build the project. And it doesn’t know where that money would come from. He compared building the pipeline to buying a car.
Alaska Gasline Development Corporation spokesperson Tim Fitzpatrick says the corporation is seeking private investment to pay for the pipeline, not state funding.
“Buying a new car rides you lower maintenance cost, higher gas mileage, better resale value, more comfort, etc., local jobs,” he said. “Used cars (are) inefficient, old, plunky, they look ugly. But there's the initial entry cost. It costs a lot of money to build Phase I.”
Rep. Donna Mears, D-Anchorage, said she’s worried about putting the pipeline’s financial burden on Alaskans.
“My big concern here is that if all this risk of this cost is put on Alaskans, if we are not getting to the LNG part, we are locked into this capital project and these costs … and the only thing that relieves us is getting imports,” she said.
Swift said importing is likely to cost less upfront, but be a more risky investment. None of the infrastructure needed to import gas is permitted yet, and imported gas wouldn’t be available until three to four years after those permits are secured. The firm also said the cost of gas acquired through foreign imports would be higher, and Alaska would be subject to price volatility in other markets.