How much does a pipeline cost? Glenfarne says it is a secret

In the 24th meeting of the Senate Resources Committee on the Dunleavy tax cut plan for the LNG project last week, Sen. Bill Wielechowski asked a simple question of Adam Prestidge, the president of Glenfarne Alaska LNG.

The simple question is the single most important question.

“What’s the cost of your project?” Wielechowski said.

Glenfarne claims it has no intention of ever answering that question in public until the Legislature acts on a tax cut. Later on, when the state decides if it should invest in the project, all will be revealed, Glenfarne claims.

Prestidge wouldn’t give Wielechowski and the other committee members the latest number on what Glenfarne thinks the pipeline and LNG project might cost.

“The cost of the project hasn’t been . . . Well, I should revise that. The most recent historic, the most recent published cost of the project has been around, has been approximately $46 billion. We conducted a FEED (front end engineering and design) process to re-estimate the cost of the pipeline itself. That was completed in December. And we have not released the results, the economic results of that FEED process publicly,” said Prestidge.

The governor has proposed a tax of 6 cents per thousand cubic feet of gas. The Senate has raised that to 55 cents. The company favors 6 cents, though Dunleavy said last week that 10 cents would also be OK with him.

At full capacity, the governor’s original plan could generate about $74 million a year in taxes, while the Senate version would be about $600 million.

To get the right tax numbers, legislators need to know the cost.

Glenfarne and the Dunleavy administration claim the Legislature can make a good decision on taxes without that information, but they have never given a good explanation.

“In order for us to come up with the number that we think is fair to the people of Alaska and to you, we need the numbers,” Wielechowski told Prestidge.

“I’m not gonna vote on a bill without numbers. I’m not gonna vote on a bill that’s going to take away $1 billion in potential future taxes and revenue . . . from communities across Alaska without having firm numbers,” Wielechowski said. “And so, we can wait all summer if we have to.”

If Glenfarne or the Dunleavy administration refuse to provide numbers that could impact Alaska for decades, the bill should not go to a full Senate vote, he said.

“We gotta get the numbers from somewhere. And we all know it’s not $46 billion. I think we all know that. It’s not $46 billion is it?” Wielechowski said.

“What we’ve said is that the DOR’s (Department of Revenue) numbers are a good representation of the construction costs of the project. The assumptions that have gone into, into those numbers and those estimates are good assumptions. And the escalation that they’ve applied is the same escalation that we have applied in our estimates. And so when it comes to estimating kind of the impact of this tax, the DOR numbers are generally representative of the, of the, I guess, the quantum of kind of the tax adjustment that we’re seeking,” he said.

So legislators can use $46 billion?

“I’m saying that it’s not an unreasonable starting, an unreasonable place to calculate that from, yes,” Prestidge said.

Glenfarne claims it can’t reveal the real cost of the project for competitive reasons. Disclosure of that number would make it harder to negotiate with contractors and keep secrets from them.

Disclosure would also make it harder to negotiate with the Legislature, but Glenfarne and the Dunleavy administration want Alaskans to think that is not the case.

Prestidge said he does not view this “as a negotiation where Glenfarne is trying to get the most that we can out of this. I think that would not be a successful way to take this project forward.”

He claimed that if the company wanted to make more money it could plan to charge more to Alaskans for gas. Well sure, Glenfarne could do that and destroy any chance of getting political support.

What’s happening now is a negotiation, one that is unbalanced.

Meanwhile, the chorus of voices being assembled by Dunleavy and his lobbyists to say that the tax cut has to be approved or else should be greeted with skepticism.

Anyone who claims that the Legislature will be killing the gas pipeline if it doesn’t follow Dunleavy’s directions is not trustworthy.

The same goes for those who insinuate that the only thing standing between Alaska and the giant LNG project right now is the Legislature.

The scare tactics on display in this Anchorage Daily News column by four former Anchorage mayors, one of them, Mark Begich, a lobbyist employed by Dunleavy, are typical. The column is noteworthy for its lack of specifics and reliance on hyperbole. What the four former mayors didn’t mention is how much the pipeline will cost.

It is absurd for the four of them to claim that if legislators don’t approve the Dunleavy tax cut, “Anchorage and all Southcentral Alaska will be forced to rely on imported gas for decades.”

The action or inaction of Japan, Korea, Taiwan, Thailand and Trump are more likely to be decisive. Without binding contracts for decades from overseas buyers or a giant federal subsidy from Trump, the project is going nowhere. It is dishonest for the former Anchorage mayors to pretend that is not the case.

The best idea I’ve heard so far is for the Legislature, probably in a special session, to enact a tax cut of some level that has a expiration date of two or three years.

That way the Legislature will be better able to make adjustments when the information now being withheld, including the cost of the project, will be understood.

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