Opinion: Alaska LNG's gas price promise banks on industrial-scale unknowns

The Marathon Kenai Refinery is seen beyond the shuttered Agrium fertilizer plant in Nikiski. (Loren Holmes / ADN) Through a marathon of legislative sessions, Alaska LNG's developers have tried hard to sell the idea that an in-state gas line will provide Alaskans with affordable gas. The claim hinges on hypothetical industrial gas customers quickly signing up to buy gas, helping distribute its astronomical cost and lowering per-unit prices for customers, including Alaskan households. The unworkable economics — especially those of the Phase 1 pipeline-only version — are often described with euphemisms such as 'marginal' or 'challenged.' Boosters hold up the proposed Donlin Gold mine as a large gas consumer that would make a significant difference, as they did in a July Anchorage Daily News commentary. While anything that increases gas demand theoretically helps lower prices, the devil is in the details: Compared with the huge sales volume Alaska LNG would need to recover its cost, Donlin's gas demand isn't actually that great. And under the deal Glenfarne is offering utilities, Alaska consumers would be locked into a set price anyway until total pipeline flow is more than double the entire annual gas demand of Southcentral Alaska today. Donlin doesn't help much there, either. In a June hearing, Glenfarne representatives told legislators that prices would be fixed at $16 per million British thermal units (MMBtu, a measurement of heating energy) until pipeline flow hits this threshold. In reality, $16 is just the starting point. The price will be adjusted for annual inflation, which has averaged 3% over the last decade. That means that by the time ENSTAR's contract with Hilcorp runs out in 2033, the base rate for gas will likely start at around $20 per thousand cubic feet, $6 to $10 more per thousand cubic feet than Cook Inlet gas costs now. The threshold for lower prices is 500 million cubic feet of gas flowing through the pipeline per day. So how close are we? Let's count the existing and known potential sources of gas demand to see if we can hit 500 million. Today, the gas that Southcentral Alaska burns for heat and electricity amounts to 191 million cubic feet per day. Gas demand would need to increase to about 2.6 times its current level to begin lowering prices under Glenfarne's deal. Two more sources of potential demand — at least on paper — are Fairbanks, which presently has no Cook Inlet gas connection and uses only a small amount of gas trucked from the North Slope, and an old fertilizer plant in Nikiski that once used natural gas as a feedstock for ammonia production before shutting down in 2007. Getting roughly 90% of Fairbanks connected to gas within a few years was a key assumption in a 2024 analysis commissioned by the Alaska Gasline Development Corp. The region's anticipated gas consumption would be 31 million cubic feet per day. But as with the Donlin Gold mine, a separate spur line would be required to actually deliver that gas. A recent estimate from the governor's office put the potential price tag at $250 million, a cost Glenfarne suggested Alaskans should pay. There are a few other hefty expenses before Fairbanks can be part of the equation; estimates for converting homes to gas range from $10,000 to $40,000, and there are currently no utility-scale power plants that use gas, meaning new construction or costly conversions would be necessary. The old fertilizer plant in Nikiski, which LNG advocates talk about restarting as a source of gas demand, would consume about 136 million cubic feet per day. But even with Glenfarne's plan to offer significantly discounted gas at a rate of $6 per MMBtu, legislators questioned the economic viability of the fertilizer plant and the assumption that the facility could be a large-scale gas customer for the pipeline. ADVERTISEMENT Either of these projects would face huge hurdles, and both together would bring Railbelt gas demand to only 358 million cubic feet per day, well short of the necessary 500 million. But assuming they pan out, adding Donlin's anticipated gas use doesn't get us much closer to 500 million. Donlin told the RCA in January that the mine's gas demand would equal 30 million cubic feet per day. Its nonbinding agreement with Glenfarne suggests it could be up to 50 million cubic feet per day. Even with all of those optimistic assumptions, that still adds up to only 408 million cubic feet per day, tops. It's not nothing, but it means nothing unless the total crosses the critical threshold of 500 million cubic feet per day. Alaska LNG representatives have been asked several times where they think approximately a fifth of this hypothetical demand will come from. They talk vaguely about data centers. In one hearing, Sen. Bert Stedman responded, 'They're going to want to have hard numbers to finance, not hypotheticals.' Alaskans should demand hard numbers too. We cannot justify projects like Donlin or data centers simply because they could theoretically inch the Railbelt closer to a price break on gas from the North Slope. These elusive promises are an excuse to disregard the real impacts of rushing development forward indiscriminately. Donlin is the largest proposed pure gold mine in the world. The mine and its toxic tailings facilities would be built directly within a salmon system that sustains local diets, livelihoods and the cultural traditions of Kuskokwim River communities. ADVERTISEMENT Proponents of these industrial projects seem to think they appear more viable if they are all tied together. In reality, when this house of cards collapses, Alaskans will be living with the consequences. Ben Boettger is an energy policy analyst for the Kenai Peninsula-based nonprofit Cook Inletkeeper. • • • The Anchorage Daily News welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)adn.com. Send submissions shorter than 200 words to letters@adn.com or click here to submit via any web browser. Read our full guidelines for letters and commentaries here.