The Alaska gas pipeline project involves complex economic negotiations between the state legislature and private developers, where the state's 25% ownership stake requires significant capital investment, and the project's viability depends on balancing tax revenue (potentially $80 million vs. $800 million annually) against the long-term economic benefits of lower-cost natural gas supply for Alaskans, with federal support and carbon capture tax credits playing crucial roles in project feasibility.
Install our extension to search inside any video instantly.
OversightLIVE Alaska Legislative SPECIAL SESSION BroadcastAdded:
The Rockets and Knicks were in game five when OJ started that fateful drive. His four-way hazard lights were blinking and no one knew what the Jews was thinking.
I've been to Reno, Chicago, Fargo, Minnesota, Buffalo, Toronto, Winsow, Sarasota, Witchah, Tulsa, Ottawa, Oklahoma, Tampa, Panama, Madawal, Laaloma, Bangor, Baltimore, Salvador, Amarilla, Chocilla, Barquilla, Amadilla.
I'm a goat. I've been everywhere, man.
I've been everywhere, man. Cross the desert bear, man. I breathe the mountain air, man. Of travel, I've had my share, man. I've been everywhere.
This is Oversight Live, your advocate for good governance. We're putting the site back in Oversight. Here's the watch on the wall, your host, Ben Carpenter.
Hey, good evening. Welcome to Oversight Live. I am Ben Carpenter. This is uh what is it? Uh Wednesday, Thursday. It's Wednesday, isn't it? Um time flies when you're having fun.
Welcome.
This is Oversight Live and this is your road to Juno until one can be built. We are we are in deep into the uh first week of a special session in our legislature and we're um going to be previewing or not previewing, we're going to be reviewing a meeting that happened today in Senate Finance which is um I think you'll find it refreshing because there were actually some good questions answered and the whole concept of uh doing due diligence on a pipeline tax bill and trying to get to an uh to an end.
It's refreshing to see.
Uh let's see. I don't always agree with what comes out of Senate Finance, but today was refreshing after what we the month we witnesses with Senate resources. This is this is uh refreshing. Anyway, thanks for joining us. Look, we're streaming on YouTube, Facebook, and and X, as you know, because you're watching.
Uh, if you're watching live and you've got questions about what you see or what you hear, then feel free to chime in on your uh on your chat there and I'm going to get the I'm going to get your question. I'll be able to attempt to answer it live um on during the broadcast. And if you're watching the recording, you can drop me an email and I will do my best to answer your your question by by email producer oversightlive.com and that will come directly to my phone and I will do my best to answer your question. Don't be surprised if I use your question on air because if I mean everybody's if you've got a question everybody else somebody else has got that question. So, this show is all about edifying and increasing our knowledge as as voters, as Alaskans, as Americans.
Look, this is self-government.
This is oversight live because we are supposed to provide oversight of those who we elect to represent us. So, if I can help you understand what's going on or or what the what the significance is that we're we're hearing and I'm I'm not doing a good enough job, then ask the question. I'll if I can't if I can't find the or if I don't know the answer, I'll find it. I'll try to find it and get you the the answer. So, anyway, I served six years in the legislature. I went there attempted to do things that I thought were important. Uh was known for championing a fiscal plan. The legislature was not interested in a fiscal plan. So I understand how what the process is to get bills passed and what the challenges are to get large things done in the legislature. Very easy in some cases to get the simple things done.
Most people only attempt to do the simple things anyway. Um, so let's get started. We're we're continuing to have this conversation. It's probably the the most important, most consequential conversation and and series of decisions that are going to be made in this decade. probably has to do with this pipeline, this natural gas pipeline that is um that the the legislature has spent a lot of money, hundreds of millions of dollars permitting up to this stage. And the company that we established, AGDC, we the legislature, we the people of Alaska established to shepherd this pipeline into existence, uh, brought on a private company to help build this. 75% of this project is owned by Glenfarn and they have come to the legislature with an ask to restructure the taxes to make the project economical.
As we saw in the regular session, Senate resources, House resources did their best to scuttle the project and didn't really didn't get to a final solution. All right.
Now, we've got another crack at at the uh at the another bite at the apple.
Apple, another bite at the apple. The governor called us into a special session, called the legislature into special session, and now they have one bill before them, one concept, one thing to focus on, and that is the gas line.
No other bills, no other concepts, no other things are pertinent to be discussed in this legislative session.
And largely you're going to see action in two committees, House Finance and Senate Finance because that's where the bills were reported from the body and those are the only two committees that are going to do work on this at this point.
Okay. So simplifies things down to a handful of people. I I suspect that the entire legislature is not even in Juno right now. those that need to be here with regard to leadership and those that are on the committee on the finance committees are probably the only ones with the with a few exceptions that are in Juno right now.
Uh House Finance met in Anchorage and they were at the LIO. So if you are on the road system and you want to go participate, you may show up at the House finance meetings when they're being held in Anchorage. And I don't know whether they're going to continue to hold those in Anchorage or or what the plan is there. I I have not researched that, but Senate Resources is still meeting in Juno, and that's what we're going to review tonight.
Um, a good question, Frank. Frank asked a great question right off the bat. If the governor called a special session to be held in Juno, why was there a finance meeting held at the LIO in Anchorage?
That's because the legislature can hold their meetings wherever they want to hold their meetings.
He called a special session in Juno, but that doesn't mean they can't. I mean, they gave in in Juno. There is a special session occurring in Juno. They can choose to hold a meeting anywhere they want to hold it. And that's what they did. House Finance went to to Anchorage to the LIO and held their meeting there.
I don't know that that means all of them the remaining meetings are going to be held in in Anchorage. Maybe maybe every other week. I don't know.
Let's rack up the air miles. I don't know. I don't know what their plan is.
Um, but they can meet wherever they want to meet.
They don't have to ask governor for for permission. And the special session doesn't because it was called in Juno doesn't tie them to only meeting in Juno. Remember number of years ago, the governor called a special session in Wasilla and the legislative leaders were like, "No, we're not going to we're going to Juno." And that's where they gave in. Some of us met in Juno and the rest is history.
Uh, don't blame me, Christopher.
Although, um, I am I I am I'm looking at the buds coming out on the trees right now and and realizing that that global warming is a nonsense, right? This this is a very cool spring. Um, but you know what? for for somebody who's got peies and wants to sell peies to lower 48 buyers, this is actually really good for us because the further further toward towards summer uh it delays the peies coming up, the the warm weather, the further it's delayed into the summer, the later our peies are going to bloom and the later the market is for us is is better for us. So, if we don't start harvesting peies until mid July, we've never started harvesting at the end of July, I don't think. But if we were, then that would mean that we'd have peies available all the way through uh Labor Day, and we've never really had a a successful crop all the way through Labor Day. That would be something special. July and August are usually the the months that we have um good crop able to send. So anyway, cool weather now should mean that we have a a good PE season the timing wise for the heat arriving. Now if the heat never arrives, that might be a problem. We're going to assume that we're going to have some heat in June and July. All right. Oh man, heaven help us if we do not.
Okay, I haven't even gotten started yet and there's lots of questions. Kevin's asking a question.
Representative McCabe, I have a question. Do you think the Democrats will kill the gas line because they want to transition away from fossil fuels? I think that's exactly what Senate Resources was doing.
I don't know for sure if that's exactly the bent that House resources had just given the makeup of the committee, but the makeup of Senate resources was 100% trying to kill the bill, trying to kill the pipeline because they have ulterior motives. Yeah.
Uh oh, thanks Kevin. Look at that. Ask and you shall receive. uh next session in Juno for the house anyways is a technical on for June. Technical just means that minimal not even a not even a quorum shows up. So they can't really do any business. Usually it's just the speaker and the majority leader maybe the rules chair a handful maybe nobody else. They just have those people to gavel in receive the mail gavel out.
Uh Craig, I'm not going to be uh harvesting peies in November. I can guarantee that. Guarantee it. We We might be. See, when we planted peies, we were planting them basically on the first day of snow in October. They they came in in pallets and we unboxed them and were hurry putting them in the ground before the ground froze and there was snow falling on the tail end of our our planting uh time that it took us to plant. So, um, then they were dormant for the for the winter and up came the peies next year. You're like twiddling your thumbs all winter hoping that the money you just buried in the ground uh was going to come up the following the following winter. Talk about uh gambling. Uh anyway, no, we we will not be harvesting in November.
Uh Frank has got a statement here. He heard that that that like Giesel some with ties to state unions that the unions believe that they will lose their control of the pipeline and have less importance as a state as state unions because they will not be able to supply the workers needed. Well, they aren't going to supply the workers needed.
There aren't enough around unless they're pulling them from out of state.
It's an all hands on deck and we will import workers and if the unions see I I think that the um I I think that that is a possibility, Frank. And you're you're the reason for the sabotage is the is of the gas line is because of the unions. So, this isn't this isn't exactly there wasn't a lot of um stuff talked about in the press and and written about this back when Glenn Farn was selected.
Okay. AGDC selected Glenfarn to go forward. There was another group of people. I don't think that it was organized in into a company yet, but it was another group of people who are trying to put together a project that AGDC could hand over um the the reigns to the project to them. So, they were they were trying to get their ducks in a row to be Glenfarn, right? But they weren't Glenfarn, they were something else. And that was that was a unionled initiative.
And I think I don't have any proof and I don't have any any I don't have anything to back this up but just based on um what certain legislators who are pro- union legis legislators back then the this is this is uh 2024 right so what was said the the attitudes the the way people acted upon the Glen Farn announcement that they had been selected for taking on this project indicated to me that there was a behindthe-scenes um frustration from the unions for whoever it was that was pushing the union um alternative to Glenfarn that they didn't get selected. And so I don't know whether it is tied I I doubt it's tied as much to union control over this project as it is if we could show Glen Farn the door then the union plan would be the next one in the in the waiting in the wings. It's on the bench, right? Glen Farn couldn't do it. So here we are. We're going to be able to make it happen. Okay. I I may be oversimplifying. And I maybe uh maybe I don't understand all the facts correctly, but that's what I uh was told and kind of intuited from actions and things that people said a couple years ago.
Whether that h whether that has any bearing today or not, I don't know. But that is that's what makes sense to me.
So could it could it have something to do with with control over the pipeline and and union representation on the pipeline? Sure. My understanding is that Glenfarn is working with the unions to put um union contracts together to make sure that unions have um a part in this to play in the in the project. So uh I don't know whether they're Yeah. I Anyway, all I know is that that's water under the bridge.
Should be anyway. We've got a company that's moving forward and if we want a gas line, we should be getting behind this company and help them be successful to to Alaska's benefit, to the nation's benefit, to our allies benefit.
There's a lot of win-win wins here if we can make it economic, and the legislature is kind of standing in the way right now about making it economic.
So today we're going to hear from this um oh Frank that that's an interesting I I have no knowledge about outofstate unions making a stink about this but 100% I I believe there are people who do not want Governor Dunlevy to have a win and they do not want uh President Trump to have a win and that is the level of politics that we have in our nation right now. It is it is um it is destructive and counterproductive, immature.
It is it's horrible. I don't put it past folks in this nation to be trying to stop a project in Alaska. I mean, the lower forier, what do they care? This has no nothing to do with them, right?
They don't benefit in any way from the natural gas that would be piped down the pipeline. So why would they why would they care that this thing gets done?
They don't. If they could stop it and and give Trump a black eye if they could stop it and give Senator Sullivan a black eye, if they could stop it and and take on take on a Democrat into the Senate, US Senate, beat Sullivan in the in the uh election, why not? I mean, that would make complete sense. So yeah, are is politics being played here?
Undoubtedly.
Undoubtedly.
Okay. Um, let's get started on Yeah.
Uh, Representative McCabe says it was Bill Walker and Joey Merrick. Yeah, it is no secret. That is that is the uh the case.
Um, all right. Let's let's get productive here.
All right. Tee it up. We're we're in Juno. This is the uh the Senate Finance Committee and the Legislators Legislaturator's paid consultant Gathne Klene uh is before the committee presenting information to the committee. And that's where we're going to pick up a few minutes into the committee. Um basically the the agenda that is going to be taking taken um be carried forward. Here it is talking a little bit about the the overall scene of the project. the differences between Senate Bill 138 and today's project which Senate Bill 138 is the thing the bill that was passed that gave us AGDC and the the whole initiative to get a a pipeline project permitted.
Um the consultant is going to talk about uh you know economic benefits LG market and competitiveness phase one gas line considerations and competition with Canada. Those are all the things that are on the agenda. Uh this is actually a two-part uh meeting. Senate resources met twice today. We're going we're only going to be able to get through part one and maybe only part of that uh this evening. So if you want to afterwards or or if you want to uh jump in some other time, you can go to the KTO Gavl Alaska website and both of them both of the full meetings are recorded there and you can watch at your heart's content. I will not be participating with you because it'll be on their website and not mine. So, this is what you get today. All right, we're going to move without further ado to um to Senate resources earlier today.
>> Think about the um the project as a whole. It's um as it's planned, it's 20 million tons peranom of LNG. That's out of a global market today of about 400.
>> It's it's actually a billion mmtus. It's my British upbringing is mistyping it as the >> uh Daina. Yes. So some of this is information that has been presented to other committees. The difference is you have different committee members and these committee members it will be telling to us by what questions they are asking what direction the committee is headed right so very early on this is the first committee hearing for Senate finance uh in this special session and they're just setting the stage here with the with the basics um this is a good recap for those who are maybe just joining us and haven't heard some of the other meetings earlier in the in the year. Um, and then we're going to get to some good questions. So stay tuned.
>> So it's a billion MMB use peranom, which makes some of the maths a lot easier in terms of the revenues and the the money.
So if you multiply a billion mmtus by what was the prevailing price in Asia before the conflict in the Middle East, you you you get about 11 billion dollars peranom of of revenue.
The the other interesting feature I I think which you know perhaps puts into context just how important this is for the state. If if you look at the al the uh forecasted LG revenues in the context of the Alaskan economy, it's it's about a 20% ratio of revenues to current GDP.
And if you look at uh Texas, for example, it's less than half a percent.
And you know if you look at other jurisdictions the LG Canada project boosted the uh BC economy by 3%. With um estimated provincial revenues of 78 billion by the60s and certainly in their case the the uh assessment is that it created some 71,000 jobs.
Moving on to the other end of the scale, the resource. Uh we have 35 trillion cubic feet of proven gas up on the North Slope, much of which has been produced already and reinjected.
And e even that multiplied by our $11 price um just as an example, you get to about $400 billion worth of gas um once it's delivered.
And then if you look at the other gas on the slope, even a connection into Arctic Canada, what you see is that there are, you know, years worth of relatively lowc cost gas which could come through this plant ultimately. So some estimates talk about 200 trillion cubic feet of of gas in that region. Um, which would be the equivalent of $2 trillion when it's delivered. So really the the volumes the numbers they're they're really quite eyewatering. Um but to get there obviously requires a huge investment as we've discussed.
The the other feature which sets the Alaska Energy Project apart is the is the emphasis on capital investment because unlike the Gulf Coast projects which involve um smaller capital investment but higher operating costs for for example gas purchase and shipping, Alaska is quite the opposite.
And al although it's a gas project, um it's almost easier to look at it as if it were a um a toll road or an airport or some kind of infrastructure project because most of the value for ALNG is going to be in that midstream in the processing plant, the pipeline and the liquefaction.
um once you've put those facilities in that the running costs of the project if you like are relatively low and you know you'll often read in the press that you know Alaska LG is too expensive it's you know it's never going to fly because of that in actual fact I think as you'll see later on in the presentation you know the economics are perfectly feasible under certain conditions it's just that the emphasis is on the upfront capital as oosed opposed to the money required to make the project run.
So just to illustrate the um preponderance of capital in the project, I put together this chart based on some generic assumptions. But what you see here is that um out of the delivered price to Asia for for Alaska probably about 85 you know 80 to 90% certainly of of that value as in the delivered gas is completely attributable to the upfront capital investment. Um for the Gulf Coast it's about a third.
So that that shows I think just how much of an infrastructure project this is. um which revolves around you know initial very large outlays of capital and steady revenue to pay for it. LG Canada sits somewhere in the middle about 75%.
Okay, we're going to I'm going to jump ahead to uh a a question that is asked and I've heard this I've heard this um we're going to get plenty of time to talk about the structure of the bill and what's going on that'll that'll continue to have a conversation going forward.
All right. Um there is a there is a comment out there there's a a general theme that says you know what because Glenarm broke this up into two pro two um phases phase one phase two we're only going to get a phase one pipeline and then they'll just not build the phase two and then we'll be stuck with high-cost gas okay there's that there's that thinking out there that says that's a possibility well I mean if you're looking just at a calendar and a and a on a technical nature you're you say well phase one is it can happen and then once there's a like there's FID for example phase one is going to have an FID a final investment decision and then later there will be a phase phase 2 FID so theoretically you could have a phase 2 FID that that is a negative and then you'd be stuck with a pipeline okay so that question gets asked and answered at least partially here and I want to I want to jump to that real quick give me just a second here to um figure out where where the cursor needs to be.
Right about there.
>> Thank you. Thank you, Senator Stman.
Senator Kaufman, thank you. I I've heard folks com consider the possibility that we only get phase one, but it seems to me like phase one is the hurdle. And so if you just consider phase one creating the reality of gas essentially at tidewater in these volumes that the economic incentive to grab that gas, liquefy it and transport it becomes a pretty compelling economic case. So I guess it have you seen anything that would suggest that there could be a situation where we would get the stage one pipeline that far, basically solve the 800 mile problem and and get the gas to a point where it could be picked up and used um you know transported. Does that seem like a likely possibility considering the economics that would be involved once we got the gas to that point?
>> Uh, thank you, Senator Calfman, and through the chair.
I think it's helpful to kind of step back and consider what that phase one gas line represents.
Um, and and in effect, it it's it's a it's a very large option.
the for for South Central customers, it represents an option or a or a line of sight to considerably lower gas prices to to those that exist today. Um with all the economic um benefit that was result from that. Um for the producers, it it's an option to sell, you know, a billion billion and a half dollars worth of gas every year. So again for them that that option is very very valuable and for Glenfan it's an option on essentially launching the rest of the project as as you were as you were indicating. So I think if if that phase one gas line project were built there would be a very very compelling economic case to to complete the project and build the liquefaction.
Um but obviously there's no guarantee but certainly you know for you've got three sets of stakeholders if you like you've got the gas customers you've got Glenfon you've got the producers all of whom would be very highly incentivized to ensure that that full project were built subsequently.
>> Thank you. Yeah. A follow-up question that needs to be asked here is are investors, the financers of phase one, ever are they ever going to consider giving money to just build the pipeline if there's a chance that that the phase two doesn't ever happen, right?
If the investors believe that there is a chance that only phase one gets built, then the only way to recoup the their money back to to earn to earn interest on their on their loan is for Alaskans, you know, the couple hundred thousand of us that buy gas to foot the bill for that. And that means a un uh untenable cost of gas, right? It's it's untenable.
So the reality is I think I know that there's a final investment decision for the second phase later. And that's the the the thing that has to the way that they're sequencing this.
There's got to be some sort of assurance that phase two is going to happen.
It may be a backroom handshake handshake in a in a whatever whatever whatever it has whatever communication has to happen. I don't know. I don't build pipelines for a living. I I don't put billion-dollar mega projects or giga projects together, right? I don't know.
But it doesn't make sense to me that the investors who would who would have a higher likelihood of being able to get their money back only if phase two and the liquefaction plant and the export facility if that gets built if that's the only way that they can get their money back. Why why would they not have some kind of strings attached to say that that has to happen? I I just it doesn't make sense to me. So that's what we heard. There's very very compelling reason to believe that phase 2 is going to happen if you get an FID on phase one.
>> Senator Kaufman, Senator Keel, thank you, Mr. Chairman. Um, I guess I'll ask questions about cost overruns and fiscal structures and who pays maybe later when you look at the some of your phase one slides. On on on the slides in front of us now, the 11 and 12, you have a last bullet about the tax consequence of fixed price as compared to uh netback price. Um, and you didn't spend much much time on those. Could you talk us through a little bit what the implications would be for the taxing authority there?
>> Uh thank thank you Senator and through the chair.
The um as I say one of the considerations is that um the North Slope producers they they are in the business of producing oil and gas and their shareholders and their investors are accustomed and and attracted by the idea of commodity price risk. So I think it would be it would be un unusual for those companies to enter into a major sales contract which didn't include some kind of commodity price exposure.
Further than that um Exxon Mobile and Konica Phillips are one of a small two members of a very small group of sort of preeminent global LG companies.
They they both have multi-million ton LG portfolios and they they've both stated LG growth as being a major part of their strategies.
So, so further than that, you know, I think um the their interest in the gas as it moves downstream into the LG market, you know, will be significant and they will be looking at ways in which they can um leverage that with their broader LG. So from a from a tax point of view, depending on how how far down that road you go, you you could go down the road such that the the Glenfond project receives a a relatively stable fixed income for for the infrastructure and all the price risk moves to the upstream in in which case you could get, you know, uh supernormal profits in for example at the moment you know with LG prices being extremely high um you would see under that scenario you would see all that profit moving to the upstream and being taxed you know as as production tax and royalty for for the gas. Um equally you know in sort of 202021 when we saw a big dip in allergy prices you you would see quite considerable losses in in that area. So um so this this question of of how the profits flow and how they get taxed is you know is is a material one and one which could you know significantly change the the tax outcome for the state.
Senator Ke.
>> So um I I noticed in the slide you you talk about whether or not um whether a portion of the the the benefits from the project and thus the profits are are pushed to that that midstream owner, that pipeline and LNG facility owner. And you talk about corporate income tax. Um when it comes to royalty and production tax, all of our North Slope operators uh pay that.
But uh when it comes to corporate income tax, we a company almost gets to choose um how ought we think about the project in front of us um and and the legislaturator's uh duty um in that environment.
>> Uh thank you Senator Ke and through the chair.
the um most jurisdictions will apply a corporate income tax to to operations, you know, in their in their jurisdiction.
Obviously, there are some historical anomalies which which apply here in Alaska and and how they get dealt with is probably outside the scope of today's discussion. But from an LNG perspective, uhoh, buffering on my end or on Gavl's end.
Bear with me for a second here.
um clearly appropriate capturing of corporate income tax going forwards um might be something that you would want to consider given that um I think the the do projections suggest it will be 60 70 million peranom depending on where the taxes are set um by the sort of 2040 time frame. So the these are fairly significant revenues from corporate income tax which um may or may not be captured as you mentioned.
>> Thank you.
>> Thank you Senator Keel. Senator Thank you.
>> Thank you Senator Ke. Senator Steman just >> you're you're asking a good question here. Uh Frank, you've asked two me two questions here. Maybe I can take just a brief minute to answer uh both of them.
Uh you had asked earlier um if I was in the legislature would my answer change and you don't know me very well because I'm my answer is not going to change because I'm on the on the air here or sitting at that table. You're you're going to get the same answer with me.
I'm I'm not uh I'm not I'm not savvy and smart enough to be able to lie here and tell the truth there or vice versa. like I I can't I'm I'm not that I'm not built that way. You're you're going to get the straightforward response for me in either circumstance to a fault, right? Don't send me somewhere where I've got a got a lie because it's not going to it's not going to go well. Um your question is there anybody on Senate Finance that has negotiated a mega project?
Um so let me just um let me just set the stage here and I the reason I paused this here to answer the question is we take a peek at who is sitting at the table. Okay. And for those, you know, that maybe don't know who the members are here, right? So, from the the right uh right side of the table, this is uh Senator Kron, Mike Kronck, and he represents the interior of Alaska. He's a retired school teacher.
Uh Senator Kaufman is representing uh portion of Anchorage. He's retired um oil man. So, he was involved in the oil industry. Forget exactly what job it it was that he was doing, but I think it had to do with um process improvement.
The chair that's not occupied is Senator Olsen, and he represents the uh Gnome area, the um Northwest.
The chair is Senator Hoffman from out west, Bethl.
Uh, Senator Steedman is from the uh, panhandle, Sitka. Senator Keel next to him is from Juno. And Senator Merik is from Eagle River. Okay. Um, Senator Hoffman and Senator Steedman have been in the legislature since um, I don't know, since God created the Earth. Like they've been there forever. Uh, Senator Hoffman's been there longer than Senator Steedman, but they've been there many, many years. So, if there's anybody here that's negotiated mega projects uh or large projects of some sort, it would be those two. They're the only ones that have the experience here. I don't know whether um Senator Kaufman has any private sector experience in in uh negotiating large projects. I I don't know.
Uh, Senator Merrick is the wife of Joey Merik who was the other half or a part of the enterprise that wanted this uh project instead of Glen Farn. So, there's that.
Um, and I forget what Senator Ke's claim to fame is, but it isn't negotiating mega projects. All right. So that's that's the players at this table here.
You've got Republican Kron, Republican Kaufman, Republican uh Steedman, Republican Merrick, Democrat uh Keel, Democrat Hoffman, Democrat Olsen. And that's the makeup of the Senate Finance Committee. All right.
For for what it for what it's worth, labels don't necessarily mean what you think they mean.
got to know the people.
Okay. Uh so that's the answer to that question. I don't think I don't think so. But the two two co-chairs and Senator Olsson's the other co-chair of finance of Senate Finance. So uh Senator Hoffman and Senator Steedman are the co-chairs with uh Senator Olsen.
Um, Represent Mabe is chiming in here. He says, "I can tell you that Frank uh Ben has always had the same answer to any question I have had, even when it I did not like it."
Thank you for backing me up, brother.
Um, yeah. Uh, Senator Kaufman is a process improvement guy and that's what he did with, uh, within his, uh, his industry. Um, yes. So the merics are state union that is p um both both proublic and and private unions right all right okay that might be helpful to people who are looking at uh the decision makers with with respect to this project again we don't have oil executives sitting on this committee who or gas executives that have any experience in in the oil and gas sector that I am that I am aware of other other than other than Senator Kaufman who worked for an oil company when he was in the private sector.
Nobody else does. Senator Steedman has finance background um investment management background and Lyman Hoffman I think has just been a senator forever. I don't remember what his his claim to fame was. Um maybe um executive of uh native corporations would be my guess. I I think my memory that is what is in my memory.
Um anyway, so no, not a lot of experience on Senate Finance. And to be honest with you, you're not going to find any committee in the legislature that's got experience in the oil industry.
thinking off the top of my head and and maybe uh Representative McCabe can chime in here if he corrects me here, but you you don't have members of either body, the House or the Senate, that are that are experienced in oil and gas development.
I'm just trying to do a quick think here. I I don't think so. Nope.
All right.
Um, so Nick Falford, the rep here from GL Gaffne Klein, is going to talk about other economic benefit here in just a few minutes, about four minutes. I'm going to fast forward to that in the interest of uh time here.
>> There we go.
>> Senator Steman.
>> Thank you, Senator Steman. Please proceed.
Thank you.
Uh yeah. So uh thank you. Just um I wanted to spend just a couple of slides on other sources of economic benefit because we've heard a lot in the different hearings in the legislature over the last uh few weeks now about property tax and the ABT.
But uh similar similar order of magnitude in terms of value to the project is whether or not uh federal loan guarantees um materialize.
As I think many of you will know the legislation, the federal legislation to enable these federal loan guarantees was put in place some decades ago. The precise regulatory framework in under which that would happen I think needs needs some work as I understand it. And of course now you have the energy dominance fund and various other federal initiatives which ultimately could help to lower the cost of financing the project. Um but quick back of the envelope if you if you assume a cost of debt of 6.5% which is not untypical in the LG area without the federal loan guarantees if you say it's maybe 5% with them the the flow through is hundreds of millions of dollars in saving and from a delivered cost of gas in Asia it it represents quite a material saving which could help to push the pro project into economic territory.
So it remains to be seen what will happen on this but um it it is a material factor um which ultimately will hinge on federal government policy.
So on this topic since it has been decades since this loan guarantee was um brought forward and the president of the United States has said that the development of this project is um is important to the nation. Wh why haven't we heard anything from the federal government saying certain things that they could actions that they could take to push this along? It it just seems to be a just a general resolution.
>> Uh thank you.
>> I I think this is a very telling question.
Part of the part of the challenge that the state legislature, let me back up, part of the challenge Alaskans have, it's not just the state legislature, part of the challenge that we have as Alaskans.
We have this mindset that says if we've got a problem, the federal government's got a solution.
If we just wait long enough, we can ask Uncle Sam to take care of it.
if we just get our ducks in a row or if we just flounder enough, if we just get the right senators and representatives to go do their thing in in Washington DC, we can get federal money to come take care of that problem.
And I think this question represents that kind of thinking. Now, I understand where it's coming from because President Trump just passed uh just signed some uh they weren't um sorry, just blank. It's not a law. It's a executive order. um uh authorize the uh Department of Energy to cut some corners or or uh sidestep some red tape or however you want to say it, right? To prioritize support for this project or support for uh gas, natural gas and and other development projects. Okay?
Forget exactly which what what executive order it was or whatever, but it was it was in the last 30 45 days that this happened. Okay. So, it's a legitimate question because everybody wonders what does that mean? The the the president signed this these um statements and the bureaucracy can go and do what the bureaucracy is going to do because of those statements, but we don't have a we don't have a a result that came from them. This that we can tie to it to say, okay, well, that's the benefit that we're going to get from that signature.
Okay, we don't have that yet. So, I get what he's asking, but if the takeaway is to say with regard to the federal government's influence on the cost effectiveness of the project, if the if the narrative continues to be or we keep pushing this narrative that says, well, we need to wait on President Trump or we need to understand what the what the federal government's actually going to do to to, you know, through the Department of Energy for this, right? We got to wait on the federal government because that'll that'll materially affect our decision on whether we're going to adjust the tax burden or not.
Okay. This is what we we the the so what of this is what we heard from Doug Bergam uh from the press conference. He's like, "The federal government is not going to just come in and fund a project and allow the state government to keep their their tax rate at where it's at. They're not going to they're not going to subsidize Alaskans, right? They're not going to put a bunch of federal dollars in while the state maintains an excessive property tax regime." Okay, that's not going to happen. But this line of questioning leads down that path that says, "Well, if the federal government's going to give money and make it more profitable, then we don't really have to adjust our taxes because the federal government's going to going to take up the slack, right? That line of thinking needs to needs to cease. We need to figure out Alaskans need to take care of our business. And to the extent that the federal government is able to assist, that's great.
>> You chair and certainly as as you'll recall um Glenfon entered into the U transaction with AGDC just before the election last year or was it two two years ago now? Um and subsequently we saw a number of executive orders and so forth which um came out very positively in support of developing Alaska's resources.
Clearly there are many features of of federal policy under you know constantly being developed and and evolved. But um but I I think all one can say is that as yet none of the moves from the federal side appear to have resulted in in a kind of a material agreement relating to the AKG project. There's been a lot of support for um trade missions to Asia and so forth. And certainly I think Asian countries are being encouraged to um enter into agreements for American LG and including Alaska, but currently there doesn't appear to be a a tangible federal step to help the project.
>> Uh Desaina, you ask a really good question. Why do people continue to think the federal government needs to bail us out of everything?
It it is it it is um it goes back to economics incentives matter. Okay.
our our state legislature, the institution I'm talking about and the decision makers sitting at the tables of our finance committees, the lobbyists that are coming and asking for things, certain constituencies within the state looking to our federal delegation for solutions.
All of those all of those uh relationships are incentivized to continue what we have always done.
We have the state has always been in a situation where the federal government is appropriating money for issues in in the state in the in the state of Alaska.
We are we have been for for I don't know if there was ever a time when we weren't but we are currently a net positive recipient of federal dollars. Meaning that means is the amount of federal taxes that we pay as taxpayers both private private taxpayers individual income taxes and corporate income taxes or business taxes. All of the taxes that are paid out of the state of Alaska are less than the money that's coming into the state of Alaska from federal receipts from money that's appropriated by Congress for things that benefit Alaskans. Right? So in essence, what this means is there are taxpayers in other states, both private income taxpayers and business taxpayers that are that are some of their tax dollars are coming to Alaska so that we can have our roads paid for it. our our um all of the things that healthcare, everything everything that we receive the federal dollars from. Some of it is our federal dollars that we paid in and we get it back and then some those those um taxpayers in other states are very generous with their money and it gets finds its way to our state. There are other states that are exactly the opposite. Okay?
they they don't receive as much money as they pay in taxes. And we thank them very much, right? But this is the incentive that we have established in our government and in our our culture, if you will, within the state of Alaska is to look to the federal government as the piggy bank. We don't look to a private economy.
We don't we might look towards the oil economy, but in the in the context of oil is cyclical up and down and and largely the price of oil is out of our control. When it's down, we're not like there's not a there's not an incentive for our our legislature and our leaders and our lobbies to look to economic growth within the state of Alaska to solve our problems.
the much it's much easier even though it's a challenge, but it's much easier to just go to the federal government and ask for money.
That's the culture. That's that's the systems and the incentives that we have established in our state.
We reward people who go to Washington DC and bring home more and more money to us. It's what we do. It's not a Republican or Democrat thing because they all do it.
just so happens now that we haven't ever had we haven't had a balanced budget in at the federal level forever that 25% of that money they're bringing in is all debt that are that future generations are going to have to pay as well to to compound the problem. Right?
So anyway, that's why that's why members uh sitting at a committee will be looking in the in their the the thought process that they're that their questions represent is well what what part is the federal government going to play in this?
It's a legitimate it's it's because we have that incentive baked into our system of government in in the state.
And in this case, it is subsidizing because it's taking tax dollars from one taxpayer in another state and spending it here in the in the state of Alaska.
Now, we're talking about loan guarantees. Loan guarantees don't get paid unless the unless the project doesn't work, unless there's a failure.
Then the loan guarantee, the loan kicks in, right? That's the whole risk reduction piece. It's not like the federal government is giving $30 billion, looking at that slide, giving $30 billion to the project. That's that's not being subsidized. It is being subsidized in the risk reduction category where the government says okay if the thing fails the investors get the money to the tune of whatever the the uh dollar figure is that the the Congress appropriated. I think it was somewhere around 30 $30 billion 30 or 45 something like that. So that the in the case that the project failed and that loan guarantee was paid, that's going to be subsidized by other taxpayers because Alaskans aren't are aren't footing that bill. Like we don't we don't pay that much in taxes. We're net positive recipient, right? There's that's somebody else is helping us pay that. And it also includes future taxpayers that that aren't even born yet.
So yes, true subsidy, but only in the sense that it it gets paid if the project fails.
Um Frank, um yes. Why do we not have economic development in the state in the private sector?
Could it be that we don't elect people who care about private economic growth?
really. I mean, it's not like I expect the legislature to wave a magic wand or pass a bill and there is economic growth, right?
I don't I don't expect that to happen.
That's not something that you do. But things like this are exactly why we have a challenge with economic growth because the legislature, look at what happened in Senate Resources. The only thing that Senate resources cared about was how much money state budgeters, state legislature is going to get from this project. Not even concerned about what it means to the private sector, what it means to the business down on the corner that makes sandwiches for people. It means that they have that their cost of doing business comes down because it costs less to heat the heat the building, right?
that that that isn't entering into the equation because it doesn't matter.
Economic growth doesn't matter. It doesn't matter. If you grew oil, you you put in a new um new well and you pumped more oil, that matters to the legislature because it has an economic impact. There's dollars associated with that that come into the state government to the legislature. But if to to carry on with my example, if the the store owner sells more sandwiches, it has zero impact on the on the state budget. Doesn't matter whether it's sandwiches or whether it's the only thing, you know, if they're selling more fish.
No, not the retailer, the landing. If you produce more fish, the fish industry produces more fish. That private industry will result in more money to state government because there is a fish tax. You you catch more fish, you land more fish, you process more fish, you pay more fish tax.
Does the legislature care that we have a a vibrant fish industry?
You bet. Because it brings money in. Do they care whether we have a good sandwich industry? No, because the more sandwiches you make doesn't matter.
The more mouths to feed actually is a detriment, right? If there are more mouths to feed, that means likely they've got more kids. And more kids means more students in school, which means more cost. Where do you get the money to pay for that? because more people that's not unless they're working in the oil industry or fishing, there's no connection to those people generating wealth and in it benefiting the state budget. It's exactly the opposite. It's a drain on the budget. That's the this is the incentive problems that we have.
So, yeah, why do we not have a gasoline project? Why do we not have economic development in in the private industry?
It's because we got the wrong people elected to the legislature. We they don't think about that.
the voters when they go to select the people, they're like, "Yeah, I want to send the guy that's gonna gonna get me money from state government." That's who they send.
It's good question.
Um, Shaina says, "But don't forget we want the money, but don't want federal oversight or control." Don't they call that wanting your cake? and eating it too. Yeah, exactly.
Just give us the money. I don't need the lecture, Dad.
Yeah, exactly.
Uh, outofstate residents paying out of state out of state Alaska residents paying federal taxes. Yeah, I mean, if they are, but the the dollar I mean, I I guess if you're an out of state resident, you're probably counted in the state's portion of your uh federal income tax that gets spent or gets paid from the state, even if you're out of state. So, I I'm not sure we're say I think we're talking apples and apples there.
Um, okay.
Okay, Craig, we're gonna stick to the pipeline. Uh, not about solar farms right now.
Uh, okay. Let's um let's get back to the >> So, it would seem as though this is this loan guarantee could potentially be critical and um the with the inflationary uh numbers that we have, the purchasing power of $20 billion is substantially been reduced.
Please proceed.
>> Thank you, Mr. So the the other interesting element of additional uh value for the pro okay all you here's a trigger warning I should have I should have gotten it trigger warning for the uh for the right I'm I'm being sarcastic here uh or uh yeah sarcasm I guess it is Um, trigger warnings usually happen before the event, right? Sorry, I failed in that respect. We're going to talk about carbon capture because that's part of this project and I have a question that I asked and answered and we'll see if it gets answered the same way and I'll share it with you here in a minute.
>> Project is the uh gas treatment plant which is there to treat the gas to LG quality as I think many people will be aware. uh carbon dioxide in in the gas to be liquefied um can't be tolerated even down to a few parts per million. So one of the key prerequisites for the LG is to remove the CO2 because of the changes in federal policy around um tax credits and so forth since the original project. One of the additional benefits which didn't apply to the the original project is the ability to collect these um tax credits.
So they they currently stand stand at $85 a ton of CO2.
Um I think from AGDC testimony I think the target CO2 removal from the North Slope would be around 7 million tons.
So, um, you know, clearly we're looking at, um, you know, a fairly significant, uh, saving as well. Sim similar order of magnitude. So, 60 cents per MMBTU of delivered gas. So, around about $600 million per year of, um, of tax credit.
One of the interesting features around these tax credits is that often you have to sell them to people who can use them. So there's an element of commercial structuring around that gas treatment plant and and who might own it which are relevant here. And of course the other feature of the CO2 is that it can be used for um enhanced oil recovery. Now, exactly which oil fields on the slope could be candidates for EO using CO2 remains to be determined, I think. But nonetheless, um I think for every for every ton of CO2 injected, there's the potential for a three to five um barrels of oil additional production. So I think it's quite conceivable that that CO2 will have a value to some of the North Slope producers and that too could generate some revenue for the project. Okay. Uh there are two questions that I asked uh back in oh I don't know was like 22 23 2022 2023 maybe even as early as 2020 I don't remember. Um very early on I wanted to know two things. one does does this project make sense if you don't export gas meaning does it make sense if it's just instate gas and the second one I wanted to know is does this make sense if you are not using uh 45q tax credits does it still make economic sense in other words if if if this project which is going to take many years to to get going Right? The next administration comes in and does away with 45Q tax credits.
What happens to the project then? Right?
It was important. So the answer that I received from that question is no. The project is is not dependent on 45Q tax credits. It is not reliant upon 45Q tax credit. Meaning they could go away and the project would still be financable.
it'll still be um uh financially sound.
Okay. So, that's a number of years ago.
I'd like to have that question answer asked and answered again. I'm not sure whether it it does sometime in the next couple hours here. I I would like to see that question asked again. Okay. Um as far as the first question, we already know the answer to that. Glen Farn has already announced that somehow the project is feasible if you only do phase one. Well, I think they can say that because technically it could be feasible if they jack up the price of gas and force us to buy $30 MCF gas.
I don't I don't think that that's what's actually going to happen, but um I don't know.
I don't know, but I think that's not likely to happen. Okay. Um, yeah. So, here we go. Since we're talking carbon, can't ship gas down the pipeline with carbon in it. Uh, carbon dioxide, I'm sorry, without carbon without carbon dioxide. So, you got to remove the carbon dioxide. So, even if there isn't this crazy uh carbon sequestration, carbon footprint management nonsense that's going on in the world, okay, even if there wasn't that, they would still have to have a facility to pull out carbon dioxide. The benefit to them in doing that, I mean, there's a cost to doing that. And the benefit is not just, you know, because the carbon dioxide gets blood out into the air, which I guess technically you probably could do.
The carbon dioxide can also be used in lie of the gas to reinject into the well to help with extraction. Okay, so it's already been done. We're we're we are already doing this whether there were tax credits or not. Okay, so now in comes this crazy uh ESG nonsense and got to save the planet from carbon dioxide even though plants thrive on carbon dioxide.
Um, and now we've got this scheme built up that's just a just a a Ponzi scheme.
It's just a man-made valuation. This is a man-made scheme to sell tax credits of to people who are putting carbon dioxide down in the ground. This this is just a a scam to get money from one company to a bunch of other people, right? That's it. Let's just how do we get more money from from these people? Well, let's just let's create a demand for carbon credits and move it on. Okay, we'll we'll market them. Yay, we're going to make a money. All right, so it's a scam. But here's the thing.
until until somebody stands up to those scammers and puts them out of business somehow.
Those scammers are your investors.
They're they're the ones that are holding the strings to the money that the company needs to grow economically.
So the shareholders of the company, they're like, "You know what? We need money. We want to expand. We want you to go build another dig another well. Okay.
Well, we're not going to use the capital, the cash that we have on hand.
We're going to go get a loan for it.
Let's go talk to the investor. The investor says, "Yeah, I'll give you that money, but you got to lower your carbon footprint. You got to you that smoke stack over there that you've got on your plant, it's it's uh emitting too much carbon dioxide. You need to you need to do something to um reduce that carbon dioxide. You got to shrink your carbon footprint.
and the board of directors says, "Oh, wow. That's expensive. Uh, I don't think we want to do that." Well, we're not going to give you the money unless you manage your carbon footprint. This is a reality, right? This is this is the way things are and the way they have been for pertinent the last decade.
Well, somebody comes up comes along and says, "Hey, you know what? I think I can you I can solve your problem. We've got these credits. So if you just pay me for the credits, I'll find some credits for you and those credits can be in lie of you actually changing your smoke stack and polluting less.
Okay? So we'll get somebody to put some carbon dioxide down in the ground or we'll get to them to not cut down a tree and we'll call that carbon sequestration and that will that will be creditable.
So, we've we've saved the Earth to a certain amount, right? Because we know how much carbon dioxide that tree is holding. We know how much carbon dioxide they're they're shoving down in the earth. And we'll we'll call it a credit.
It's like $85 per ton. Okay? That's the value of the credit.
So now the the company that wants the investment, they can say, "Okay, investor, um, we've purchased enough credits that equal the amount of pollution, the amount of carbon dioxide of our size of our our footprint." Okay? So, we've shrunk our footprint by purchasing credits.
And the investor says, "Ah, okay, good.
You're doing the right thing. we'll go ahead and give you the loan.
And that in a nutshell is why we have a demand from industry that says, "Hey, we've got to have carbon sequestration.
We got to have because somebody is making money off of it and somebody is holding hostage the private industry with the money that private industry needs.
That's the that's the Ponzi scheme.
That's the the scam that's being run on the world right now. So until somebody stands up to the and provides an alternative to the the people with the money, you don't what's the option? The option is not getting those funds. You got to find the money from somewhere else.
So that's a long way to have a a carbon capture conversation about this. This project is relying upon 45Q tax credits which are which are the federal government saying we're going to give credit tax credits for lower carbon footprint.
Um, and the project is going to reinject uh separate carbon dioxide from the gas and reinject it into the ground. And then they benefit by selling credits to some other schmuck who wants money from an investor. So that that company that has nothing to do with oil and gas, they could be in San Francisco. They'll be like, "Hey, there's a company up there on the North Slope that's uh injecting gas into the carbon dioxide into the ground and they're selling credits. Go buy some of those credits.
Now we won't have to change our operations. We'll get social credit.
We'll get credit for saving the earth.
Okay? They're not saving the earth.
They're not doing anything about saving the earth. All they're doing is is facilitating the exchange of money.
So somebody else is getting rich, right?
If you're really smart, you create the mechanism by which you lock away carbon and you create the the you own the mechanism by which you're selling carbon credits. So, you can lock it away and you can sell the credits.
It's a win-win for you.
It's a scam.
There's no value changing hands. There's no wealth being there's no uh uh wealth being created, right? I mean, somebody's getting richer, but it's not it's not creating anything.
You pump oil out of the ground, it's creating something.
This carbon sequestration crap is is just wealth transfer. It is extortion.
It's what it is.
But that is what we have. That's the system we have right now. So until you until you end that system, you kind of got to play in it as much as we don't want to.
So that's how I rationalize this because that's reality.
Okay. Um let's move on.
>> Um but that's that's a topic which remains to be seen. But the one thing we do know is that under current federal law, there would be a 12-year period uh over which this $85 a ton inflated would be available to the project.
>> Senator Keel. Thank you, Mr. Chairman.
Uh Mr. Fulford, I'm I'm interested in the notion uh that I hadn't thought through that these credits affecting the the ownership structure of a gas treatment plant. Um can you just uh build out a little more the notion that uh I can't I can't quote what you said, but it's going to affect who can who can uh own this thing? What are we talking about?
>> Uh thank you, Senator, and through the chair.
looking at the lower 48 where these um carbon capture projects are are quite significantly under development um because the tax credits are quite material in the context of of the investment um using them monetizing them is is the is the key. So, uh, the the favored ownership structure for these plants is is using a tax partnership.
>> And all all I know is that tax attorneys look very carefully at these structures to ensure that the that the way the credits flow results in $85 of value.
Uh, another way of doing it is to facilitate a mechanism whereby the credits can be sold to somebody else and then used in in which case you'd probably get maybe 80 90 cents on the dollar for the credits. But but the way in which the ownership structure around the CCUs plant is established um is is kind of pivotal to the whole project and making sure that those credits are are monetized. So the credit needs to be monetized, right? That is that is similar to saying my peie my my flower needs to be monetized. I've got this thing of value somebody somewhere else like I can't eat it.
I can put it in a on a vase. I can I can uh cut it off and put it in a vase in my on my table and I can watch it and there's value because it's beautiful. I can leave it on the bush outside and watch it because it's beautiful and there's value, right? I can actually cut it, put it in a box and ship it and somebody else is going to pay me to do that. They're going to cover the shipping cost and then they'll pay me a premium for the flower because they can't get pianies where they live for their special event. There's value.
Something was grown out of the ground.
It's valuable to somebody who wants it and they're going to give me money in exchange.
They're creating credits. The credit is the pe.
It has no intrinsic value. It you can put it on the table. You can put that credit on the table and use it as a coaster for your coffee cup or or your beer. That's the only value it has.
There's there's no other intrinsic value of this carbon credit. All right.
But people want them. They're in demand because we've got this we've got this uh we've got this idea that we're all going to die if we don't save the earth from man-made global warming, which is nonsense.
If we stopped buying into that, this whole carbon credit nonsense would dry up because there would be no value.
There would be no need for us to be spending money and and transferring credits. Like there's it's it's completely man-made scam.
There's no value being handed over.
Where was I going with this?
Oh, here's the here's the thing. It has nothing to do with the pipeline.
You want to you want to weigh So, let me back up.
Not all carbon credits are created equal.
the investor that's going to give money.
They know that there's this racket, but there's they also know that other people are trying to get in on the market.
So some unscrupulous people if there's like these are even more unscrupulous people have this design for carbon capture and they they do it and say okay here's my carbon credit but it's it's completely bogus.
It doesn't have as it isn't actually doing anything but they call it a carbon credit. Okay it's a scam in itself but they sell the carbon credit. It's a black market carbon credit. Let's call it that. Right? So, you get the picture.
The company goes and buys that and then goes to the investor and says, "Hey, look, here's my carbon credits." And the investor actually looks at the carbon credits and says, "Oh, you bought those on the black market. Those are those aren't worth anything. You should have bought them from these people over here because we're doing business with them.
We we get a kickback when you buy them from them. You need to buy real carbon credits. Like this company that's putting carbon dioxide down in the ground, you got to buy them from them."
So, not all carbon credits are created equal.
They actually there's actually quality carbon credits and lower quality carbon credits. Okay, this is nonsense, but this is the way it is.
What could Alaska do?
This is simple e economics, right?
$48 is what the federal government is uh giving away or or setting the stage or or um not giving away, but they're that's what the value is. $48. Okay. So what happens when you have a market that it has a certain price for a product and the market is flooded with that product?
Let's call it wheat or cattle or cars, whatever, whatever the product is. If the if the value of that product is set at a certain point and it is the market is then flooded with that product, the value of that product goes down. It becomes cheaper. Okay. So, you want to benefit all of the companies out there, all of the companies that are being forced to buy carbon credits by the investors.
The way to get at this, to beat them at their own game, is to find the high high quality carbon credits and produce them for next to nothing so that the company doesn't actually have to spend a whole lot of money.
Because again, somewhat down another rabbit hole, if a company has to go and buy, let's say Walmart has to go buy carbon credits, it's kind of like a tax. It's an additional cost of doing business. And who pays that additional cost? The consumer does. Walmart is going to increase prices somewhere to recoup their cost for the carbon credits. So you and I end up paying the cost for the carbon credits for that company that's having to buy them. All right? So how do you help that company out? You produce carbon credits, highquality, lowcost carbon credits, and you flood the market with them so that anybody that's out there can buy these lowcost highquality carbon credits. You certify them as high highquality so that the investors can't say no.
And you beat them at their own game. You flood the market with high high quality lowcost carbon credits and that drops the price of the carbon credit. So all of business then is it benefits them if they're being forced to buy credits.
They can you can choose to buy one that's $48 or you can choose to buy one that's a dollar. Which one do you want to do? They're both the same quality.
The investor will recognize either one of them. So we've got the opportunity in Alaska to produce highquality carbon credits in this crazy world that we live in.
So produce as many lowcost, highquality carbon credits as you can. And every business out there is going it's going to be in high demand because every business out there is going to want your carbon credits because they're inexpensive. And what you're doing is you're forcing the the people who are holding the cards to to not be able to profit as much.
I think that's wiser in the end. That's how you beat the you beat the system at their own game. Anyway, legislature doesn't want anything to do with that. The left doesn't want anything to do with that.
That's crazy talk. But that's where I think we should go. Um until we can get rid of this whole mess, right? Is until we can do away with this. and and the the comments in the in the chat room here identifying that the reason that we're in this mess is because boards of directors who are the controlling entity in a corporation that owns a whole bunch of cash that they give out in loans, your investors, they're the ones that are requiring this. The board of directors is the one that's requiring it. So if you want to change the policy, you got to change the board of directors. Just like if you want to change the direction of the legislature, you got to change the players in the legislature.
you don't want to participate in your processes in life, then you're going to be ruled by others who will. That's that's plain and simple. It doesn't matter whether it's legislature or whether it's uh the the governing governing bodies of other entities like corporations.
That's it.
You'll just have to let things happen to you because you don't have an alternative. All right. We have gotten way down that we I have gotten way down that rabbit hole. Let's um let me check my notes here. So, we we're talking about carbon capture. Uh we need to get to what does 25% ownership mean because that is really important. Let's jump to uh Oh, we're almost there.
Right. Somewhere right in here.
It's probably a little too much, but we'll start there.
>> The of of the three units, the the equity around the treatment plant is probably the most complex because of the reasons I've mentioned.
Um, >> oh, you know what? You probably need to hear the question.
you know the state can elect to >> if we ought not be an equity owner in a gas treatment plant would we have a greater equity stake in some some other piece of the project how how would that be structured then >> uh thank you uh through the chair the the fact that um each sub project has been set up with a separate ownership structure around the kind of eightstar holding company does mean exactly that you know the state can elect to take equity or not.
Um I I think the of of the three units the >> everybody in the legislaturator's ears perked up take we can take what are we going to take does that mean we get more money means exactly the opposite >> the equity around the treatment plant is probably the most complex because of the reasons I've mentioned um but I wouldn't be in a position to comment really on what the the broader implications might But it's something that'll need to be looked at.
>> Thank you, sir.
>> Thank you, Senator Keale. Senator Steedman, >> don't we already own 25% of that?
>> 7525 is a split between us and Glen Farm is my understanding. So my understanding is that the 7525 split relates to the holding company and that as and when FID is taken on the sub companies capital will be you know put into those companies who will then potentially pay a dividend up to the the holding. So, so my understanding is that the state has 25% in the holding company, but as and when FID is taken on these other three units that there will be a further election that will have to be made.
>> Senator Steedman, >> who owns the three sub companies in >> currently uh they are owned by eightstar the holding company but then they have no assets. I think at at the point they they they have assets assigned to them then equity in those uh subcontracts sub projects will be set and we talked earlier about the likelihood that potentially other equity investors will participate in the project. So you know they would probably be present in those sub project companies as well.
>> Senator Steman >> it gets into the delilution question. So in essence we own through eightar 25% of the sub companies because we own 25% of eight star is my understanding and then when they go out to bring in other investors um we'll suffer a dilution issue and the question is how big is the dilution issue? We have no idea. um we could be diluted down without taking u uh an equity position as a new investor.
So Steman is a uh a finance guy, right?
He's a uh an investor guy. So he's speaking lingo terms that you and I are may not fully understand. What does take an equity position mean? Anybody?
What does it mean if the legislature, the state of Alaska, right, the the legislature controls the purse strings.
So the state takes an equity position.
The legislature authorizes an equity position to be taken.
What does that mean?
It doesn't mean you're getting anything.
It means that you're giving.
It means that you are giving money to have that equity position. Equity being capital of some sort, right?
So, we've already got a legislature that has uh no money except for stealing more of the dividend, right? We we know this. We're fighting over the crumbs on the table, the scraps on the table in our in our annual budget.
And and in order to have 25% ownership, I've been asking this question for a couple years. What does it mean to have 25% ownership? It means that the state government, if you want to have that ownership, you're going to have to cough up money, equity position. You're going to have to take an equity position, which means you're going to have to give money. You're going to bring money to the table to help finance the operation.
That's what you're going to have to do.
So, you're going to have to take where the rubber meets the road is you're going to have to bond for it. If you want to go into debt, you got to take it out of the CBR, you got to take it out of the SB, you got to take it out of the general fund, or you got to take it out of the permanent fund earnings. Them is your options.
I may have missed some other funds out there.
That's what you're going to have to do.
The legislaturator is literally going to have to say, "We're going to give you," and it's not just like a couple hundred thousand dollars, right? I mean, you're talking millions, tens of millions of dollars, hundreds of millions of dollars to buy into this, right?
You don't. Other people buy in and your 25% ownership means nothing. You don't have an equity position. You you don't you don't get a say >> in one of those three sub companies, then we're uh eightstar will be diluted and we'll own 25% of whatever the diluted value of eightar is. Is that not correct?
>> Uh thank you Senator through the chair.
I think I've followed your logic and um certainly once FID is taken on those three subunits um the states 25% of the holding company um may or may not have significant value.
>> Senator Steman, >> my concern it will have no value or virtually no value.
>> Eight star in the end. Uh, thank you, Senator. I think I think that's a valid question. Maybe one to address to Glenn Faugh GDC.
>> The majority owner. Address it to the majority owner, the 75% owner. What's your plan here?
Okay. So, just so that we're we're clear here, Alaskans, the legislature is is looking at this and they're saying, "Hey, you know what?
We got this badge on us. We're we're 25% owners. So, what are we going to get from this?" Huh? Huh? We get low cost gas, huh? Oh, you mean if if we actually go to final investment decision and other people start putting in money, the 75% owner is bringing debt money that they're putting on their balance sheet.
As 25% owner, we got to bring money, too. Like, that's that's what it means to be an owner.
Oh, how do we not do that? Okay. We don't want to do that. Okay. Okay. Well, then you're not going to be a 25% owner.
Like other people who want to invest in this project, who've got money to invest, they're going to be the owners.
You're not because you're not you're not putting any money in.
I've never put together a billion dollar pipeline project, right? So, maybe I'm missing something. But if but if you're being told that you've got to take an equity position, you got decide to spend money to play to be an owner. That's what it means. So the legislaturator is literally going to have to give up their ownership because they're not going to they're not going to fork over tens to 20s to hundreds of millions of dollars to the project. They're not going to do that. They're not going to do that.
Ask Glenfarn what it means.
Sitting there at the table of people.
Anyway, >> thank you. Senator Steman, >> please proceed.
>> Thank you. Well, at this juncture, and I know we're getting fairly short of time, so I can probably go through the slides fairly quickly, but for illustrative purposes, um, >> take as much time as you need.
>> Okay. Thank you, Mr. Chairman.
>> We got to delay this project. Um so what I've uh set out on this slide is um the the the gas supply cost that would have to apply um for the pipeline element of the project to reach uh a 10% rate of return under different scenarios. So I've taken uh three levels of capital invol in investment uh 10 12 and 14 billion and I've looked at it using two flow rates and what you can derive from that slide I think is that without a significant increase in the forecasted flow rate through the pipeline the ultimate cost to um really the gas utility buying the gas would be relatively high. So I I know you know a $12 price has been put out there as being the um the sort of notional price of gas through the pipeline. And you'll see from that that with a a relatively conservative $10 billion um capital cost and with a 500 million standard cubic feet per day flow rate, you you can just about get down to the $12 per million BTU. But in all the other scenarios, you're looking at something something more.
So on the next slide, I've uh re reversed the question and said, well, if if the um price paid by the gas utility is $12, what does that mean in terms of the rate of return on the pipeline?
So what what you note here is as before with the 500 million standard cubic feet per day and the um the the lower capital then um you can just about get to a 10% rate of return but if it's a lower rate 300 million standard cubic feet for example uh and a higher capital cost then the return on the pipeline is very low. So, so that sets out the okay challenges of phase one.
>> I I um it's taken me a while to understand what he said and I suspect that people watching are like, "Yeah, I still don't get it. There's a whole bunch of numbers and lines and I don't get it." So, I'm going to back this up and explain my understanding of this.
Okay? And maybe maybe I'm the only one that doesn't understand it and everybody else got it. But uh >> what what you note here is as and what >> let me let me do my best to explain this right here. Okay.
There's an assumption there's an assumption that the cost of gas that nstar is going to pay okay let's just use nstar as an example or it's your utility your electric utility is going to be $12 an MCF. Okay, $12.
That's what they're going to pay.
But and and that's to the but to in ensure that you get a 10% return on investment for the for Glen Farm.
If the throughput is 500 or if it is 300, this is what the actual cost is going to be for a given gas price.
Okay? So, you're actually talking about 15, 20, 25, $30 in MCF, not $12 in MCF.
Okay, this is this is for phase one. This is my understanding. Somebody correct me if I'm wrong.
This is why that uh I have to show you one other thing. So, let's let's say worst case scenario, you end up with uh 30 $30 MCF to to your utility. Okay, let's just make that assumption for the minute. Okay, I'm going to share something with you here that I've sh I've shared with other people before just for your understanding.
Okay, this is provided to me by our friends down here at Hex in the Cook Inlet, gas producers in the Cook Inlet.
And this I'm going to blow this up so you can see it.
This is reported by our federal government, EIA.gov, so you can go fact check me, fact check them. Okay, this is rankings and this is as of September 2025. Okay, so not too long ago.
rankings of natural gas residential prices September 2025 thousands of cubic feet MCF per MCF and there's only 43 states that are reporting okay the highest cost of gas per MCF in was in Hawaii at $56 okay we just saw on the slide worst case that they're they're projecting on this particular slide is $30 where does $30 put you $30 puts you right at Texas rates this is what they're they're selling gas for it in Texas. 30 $30 MCF. Now, why does it why does it become there's so many more buyers?
There's so many more rateayers. Alaska's a small number of ray pairs. $30 MCS means we all pay more. If you had twice or three times as many people, we would all pay less at the same $30 an MCF. Get it? If you have a a um AI data center move in and that would be the equivalent of oh let's say a thousand rate payers. No, it' be more than that. 100,000 rate payers, then that means it would be equivalent to 100,000 rateayers moving in and it would reduce the cost of your of your electricity being generated from that same $30 MCF. You following? Okay. So when Glenfarn says phase one can be can be um uh feasible, financially feasible, it's because they could charge $30 in MCF and we would then be paying $30 in MCF. Our utilities would they would mark that up. Instar would mark it up a little bit and then we would that's our gas price would go up. our utilities, HA, MEA, all all of the utilities would buy the gas, generate electricity with it, and our copa on our bill would go up because the price of gas just went up.
It's coming out of the pipeline coming to the North Slope. It's not being exported, so it's not at export rates.
It's at instate rates. And those instate rates are comparable to the rates that are down in the lower 48.
Where's Alaska right now? Well, we think we're at 1395. That's what this chart says as of September in 2025. But this winter, Hill Cororp charged NSAR $16 in MCF. Okay. So, we're technically the floor, the new floor is somewhere up here.
It's not is $16 an MCF is not out of it's not crazy uh expensive, right? I mean, crazy expensive is what you see in in other jurisdictions. But the problem is all these other jurisdictions have a tremendous a larger number of people to spread that cost over. So each one of the people ends up spending less than they would if there was a a smaller number of people. That's the problem that we have in Alaska is we've got small numbers of rateayers. So that higher cost of per MCF of gas means each one of us has a larger share of the cost. Now, this is why it's so damn important to have economic development, and you have large consumers of electricity, large consumers of gas to help shoulder the burden. This is why this the um the state buildings down in Juno don't turn their lights off. They run 24/7 because they're consuming electricity in those big government buildings. And it's a cost to the building. it's could cost to the building owner, which is the state, and that helps reduce the cost of electricity to all the homeowners, all the private private residences in this in the Juno area. Now, they're already benefiting from from a alpine lake and a hydro dam. So, they've got really c lowcost gas or electric already, but that's that's the equivalent, right? You put a data center on the on the grid in the uh along the rail belt and it takes that that higher cost gas and it drops the the um the rate that you and I would pay because they're going to consume more of it.
This is simple economics.
So this is why they can say this is why Glenfarn can say that it is still feasible for them to be able to charge or for them to have phase one and and still make an make it economic sense.
They just jack the price of gas up to somewhere where I mean what's the average if you're looking through the numbers here? Uh lowest lowest is in Idaho $8 in MCF. Highest is 56. So I don't know what are you 23 25 something like that is what the average cost is going to be.
Now enter into the conversation those that say oh well you know what we could just import gas. We'll import gas at um at 16 or at 17 or 20.
It's it's less than what we'll pay if the if the rate is $30 from the pipeline.
It's all immaterial because phase two is going to get built.
Phase two is what the investors need.
Phase two need they need the invest.
That's how they're going to get their money back. That's what President Trump needs. That's what all of your buyers need for out out of state, right?
And that drops the cost down below and and it's probably down somewhere below $13 in MCF, whatever whatever it ends up being. The governor's saying five. I don't I don't think it's going to be five. Just just my hunch. I think it's going to be somewhere between five and where we are now. That's what what I would guess.
Maybe between five and 16 somewhere in there.
Okay, that's that's the bigger picture.
All right, let's uh let's end that and go back to Senate Finance.
I hope that's helpful.
Fast forward.
This is about where we left off.
>> Um the the lower capital then um you can just about get to a 10% rate of return. But if it's a lower rate 300 million standard cubic feet for example uh and a higher capital cost then the return on the pipeline is very low. So so that sets out the challenges of the phase one pipeline if if the there aren't any mechanisms to bring up the flow rate. Um, conversely, if you look at it from the other side of the equation, >> meaning meaning exportation, right? If there's no phase two that brings up the flow rate, the three and 500 is what instate consumption would be, not export would be. Export would be significantly more.
>> Senator Steman, >> yeah, we're moving a little too fast for my small mind coming from an island that we buy oil and we buy electricity.
Um, so when we look at these prices, $12, that's roughly a$150 oil if I'm not mistaken in equivalency at 80% efficiency of oil. Uh, around $4 or 4 cents per kilowatt. I think it would be >> very informative, Mr. Chairman, as we go through this to help people understand what we're talking about in dollars, equivalency of kilowatts and price per oil. And you could use 80% or 90% efficiency conversion on oil, whatever you want to do if you got a monitor stove or old boiler.
>> Um, so we can get a a benchmark of what we're talking about here. Um because $17 um per mm BTU well $20 doesn't even get to $3 oil.
So, it'd be nice to take a look at these conversions um because I think the spin rate on a hydro is 4 cents somewhere in that range and that would be fairly close to that $12.
And one of the concerns that we all have sitting at the table here is I think in this building is that we don't um make a mistake and we end up um putting a rail belt in a position where they have excessively high energy costs and really hurt our economy. But it's hard to do the conversion unless we see a scale of equivalency. So that would be helpful as we go forward.
I don't know what Fairbanks is, you know, cost of oil at $4 oil, that's $30 natural gas, M or BTU, just to give a scale of what we're dealing with here.
That's important. And for the committee's information, uh first delivery of uh fuel barges in Dillingham, Alaska this last weekend, the prices of gas were posted at $99 a gallon and heating oil is probably going to be around that if not slight little slightly higher than that. So just for the for everybody to digest that number, >> Mr. Chairman, >> Senator Steman, >> that's $65 per MMBTU.
>> I'll take 12.
But I think it would be helpful and then I think too as we get on in this subject later on, it'd be nice to get a cash flow breakdown of the project in more detail through the construction when they're asking for concessions from the state and I recognize that, you know, we have a very high millage rate, but it would be nice to look at the the cash flow through the construction to first gas so we can actually see when the cash calls come into play for property tax.
>> Yeah. Uh Desa has really hurt our economy. Is it not hurting now? I'm confused. Yeah, there is some uh amount of disconnect between wealthy people sitting at the table who can weather the storm of increased costs and you and I who don't weather it so well, right? So, there is kind of a disconnect here. True Juno bubble, right?
while they're sitting there at the table and they're paying their residence down there. They have a high high cost for res maintaining a second residence in Juno, but their utility bills real small electricity like sub 12 cents or something like that. It's it's ridiculous. It's uh maybe it's 12 cents.
I don't remember. Anyway, it's a whole lot less than what you and I pay on the rail belt, right? They've got a hydroelectric dam that's generating their electricity and it's inexpensive.
So while they're sitting there, while the decision makers in Juno are feeling the pinch of of their bills for the time that they're sitting in Juno, they don't feel it because it's inexpensive.
Senator Steedman is from Sitka. He has oil. He has hydroelectric power generated somewhere or he's got uh diesel generated electricity. I think Sika probably gets uh has power lines that that bring power from the the Juno area. I don't know that to be certain though. Anyway, the point is for for Senator Steedman, the pipeline means nothing to him. He's not going to benefit one bit from it. Okay.
So high cost is relative, but you can see with the with the comparison of numbers with regard to instate rates with a in-state pipeline, meaning no export facility, comparing it to what other utilities, rate payers, utilities pay out in the in the lower 48, that the prices are comparable.
Glen Farn is looking at it from that perspective. you and I and Alaskans are not looking at it from that perspective because we haven't had to suffer the same um I was about to say the same same rates as what those what the other uh jurisdictions other states pay but they because they have such larger population such larger demand they don't pay the same individual t uh individual cost of like the rateayer the their cost isn't as high as it will be for Yes.
Uh why are we talking about property tax? Uh Frank says, "Why are we talking about property tax?" We're talking about property tax because the project uh developer says that the project is not economical if they have to pay 20 mil property tax.
That's why we're talking about it.
So, this is I'm gonna make myself really big for this because this is where we where the people sitting at the table are going to have to make a decision.
Glen Farn comes saying, "You know what?
Current tax rate 20 mills gets you somewhere around $800 million a year in taxes."
With that legislature, we cannot build a pipeline. So, we're asking you to drop it to two mills.
You get 80 $80 million.
Okay.
Legislature says, uh, we like $800 million more than $80 million.
So, we're going to call your bluff. We think you're bluffing. We think you can build the project on uh current tax structure. You just don't want to because you're making too much profit. We know you're f you're factoring in 10% profit.
We suspect I don't know whatever whatever profit you are making. We think it's too much cuz we need our 800 million. So Glenn Farn, build it or don't build it, we don't care.
got an alternative? I mean, if you're the legislature, do you have an alternative to Glen Farn? Oh, you know what? Some of the members do. Those that are tied to the unions would love to see Glen Farn go away.
Are we delayed a couple years in getting a gas pipeline? Yeah. Are we going to have to import gas? Yeah, we're probably going to have to do that anyway. And then Glenfarn goes away because we wouldn't give them their project. the the the financing for their project. We wouldn't help them with that. No project, no pipeline. And in comes this other group that says, "Hey, you know what? We're going to do it." Probably along the same similar financials, they're not going to be able to afford $800 million a year in taxes either.
Another decade goes by and maybe we have a pipeline. Maybe we don't.
And it's all because the legislature doesn't want to accept $80 million instead of $800 million or raise it to $100 million. So it's not a two two mill, it's a 3 mil. Whatever the whatever the the sweet spot is there, whatever the negotiated rate is where Glen Farn says, "Okay, fine. We'll go ahead and and build the pipeline with that tax that that will work.
We're negotiating, right?
whatever it is, whatever that ends up being, the legislature has to say yes and then Glen Farn can go forward. But if the legislature doesn't want to play ball and they just want to say no, we're going to hold hold to it. We don't want to we don't want to give away. We saw how much money is is in this, how many how many trillions of cubic feet of gas exist in the North Slope and how many how much money the gas companies on the North Slope are going to make over the life of of this pipeline. and we're going to only get $80 million a year.
They get billions and we get $80 million. This isn't fair. We're not we're not going to do this. We're not going to we're going to not going to set the stage for the project to be able to go forward with under those conditions.
That's literally what the legislature is saying. If they don't go forward, we'll just we'll just punt the project to the next developer waiting in the wind. Well, we don't have another developer waiting in the wind. Except maybe there's a theoretical one. See, the union group that came with Walker and and Merrick, my understanding, couldn't come up with the money.
They could not come up with the money.
They were not a legitimate uh organization to take this forward.
Okay?
So, there's nothing saying that they're legitimate. Now, I personally I think if Glen Farn fails, the next guy coming in is like no investor is going to want to touch the project with a 10-ft pole. They're like, "Yeah, we saw how the legislature treated this last time. We're not getting involved. There's no way this pipeline's being built.
Go away. We're not going to talk to you." Korea, Japan, they're like, "Uh, we're not wasting our time." those Alaskans, they don't want to get rid of their oil bad or their gas bad enough.
Nothing of what the legislature is having the conversation about is what does what does North Slope Gas exported plus $80 million equal to economic development in the rail belt to Fairbanks, to Anchorage, to Kenai, to the valley? What does it mean to the majority of Alaskans?
Is it worth the difference between 80 million and 800 million to us?
Just theoretically, if the project could get built at and at 20 mills, is it worth that? If we have the pipeline built and we have lower cost gas, like we're actually able to facilitate lower cost gas because we're exporting.
Is is that worth it? if the state government doesn't get their their uh 80 uh 20 mills, like I'm I'm of the opinion that the the pipeline is not going to get built at 20 ms, it's got to be somewhere less than that. So, if you're going to stick to 20 ms, then you just you just doomed the pipeline.
And maybe that's what your ulterior motive is.
But Alaskans who aren't tied to government spending, who are operating in the private sector, we're like, you know what, legislature, don't dick this up. Do not screw this up.
The higher value, the the higher reward here, the the the bigger thing to keep in mind is being able to have consistent long-term supply of lowcost gas for Alaskans. The tax benefit is secondary.
coming from that position, $80 million, $100 million a year, that's all good.
Do I need $500 million? Do I need $800 million? No, I don't. I don't. I don't want my government to have that much more money. They're just going to spend it on projects that I don't need anyway. Right?
If you measure the value of the pipeline in the value to economic growth instead of how much revenue it brings into state government, the equation changes on what is acceptable and what is not.
If making a deal here and not accepting the current statutory amount and and it looks like we're giving up a whole bunch, but you're not really giving anything up if the pipeline never gets built, right?
If you only get $80 million a year or $100 million a year, if that's all you get, but you have lowcost gas, then that is a benefit because without the pipeline and without the exportation, you've got no chance of having lowcost gas.
No chance. Because the alternative, if the pipeline never gets built, the alternative for gas is importation of gas.
Or they find it in Cook Inlet.
Both of those alternatives are expensive.
Are they as expensive as what Glen could be charging per the chart we saw, the $30?
Maybe they could.
I mean, at that point, doesn't matter whether you're paying $30 for imported gas or $30 for cooking gas or $30 for North Slope pipeline gas. Doesn't matter. You're paying $30 anyway. The only way that you get below that threshold is if you export it. And then you've got a pathway for cheaper gas because they're not paying that price.
They're paying less. That's what keeps the cost down on this on this pipeline.
Many many purchasers outside the state of Alaska help lower the cost of gas for us and that's the only way we get lowcost gas.
Phase two, phase two has to be built if we want lowcost gas.
So how do you make sure that happens?
You make the project as as financable as as possible. You quit [ __ ] around with the the tax rate. You put a volumetric tax in. You do away with the property tax and you make sure the project gets built. That's how you make sure that phase two gets built.
And you start measuring the value of the pipeline based on the availability of gas long-term availability of gas to our private industry, not in how much it builds to brings to the government.
Okay.
I'm going to check in with you. I'm done with my rant. Okay. Um, let's go all the way.
Uh, Frank says, "No, you keep the cost lower by not taxing at a local level."
Well, it doesn't matter whether you tax a lower lower level or a local level or a higher level. A tax is a tax wherever it gets paid. But if you're going to tax at the local level and you're going to tax at the at the state level, then there's there's two different taxes, right?
The the whole point is it doesn't matter. The cumulative amount of taxation is the problem to the pipeline.
The cumulative amount of taxation is what our local municipal leaders and our state legislature is looking at. That's all they're that's all they're seeing.
That's all that's what they're val they're basing the constitutional requirement for this maximum benefit of the people that equals tax dollars. It doesn't equal consistent supplies of lowcost gas to Alaskans.
We've got things backwards.
Okay. Uh we'll play this game. What does it mean? What does it change off the road system? What does Let's make sure I understand the question. What does an export facility mean to off the road system? Is that what your question is?
Okay. If that's the question, the answer is I don't know. It doesn't immediately mean anything other than maybe a valuation at uh power cost equalization um subsidy, right? Lower cost of energy for the rail belt means more subsidization for rural Alaska, western Alaska.
Does it mean that a barge can tap into the pipeline supply in Nikkis and barge LG to at low cost barge it to western Alaska? If you already barge fuel oil out there, what's stopping you from barging LG out there?
Maybe the future uh could could um could look like all of your um electric and heating needs that are being met by oil now could be met by natural gas which would be less costly.
I don't know.
Yeah, that's that's that's exactly what's going to happen because that's the system that we created in the past.
If you're you're talking about the the power cost equalization, if if we're if we're going to benefit in and this is the the deal with the devil that was made many years ago, if you reduce the cost of electricity or reduce the cost of of power along the rail belt, then your PECE subsidi subsidization of Western Alaska goes up. If you benefit, we benefit. That's the arrangement that was made many years ago.
See, I think there are some people that might think this, Dasha, and I think you're you're responding with sarcasm.
Just let the federal government do it. I I think it's legitimate, especially when you look at the Spur Line in Fairbanks, and we're we're coming up on two hours here. Um the spur line to Fairbanks has a direct connect I think to national security.
They want if they want natural gas at the base uh bases in the interior then a spur line is a national security issue.
So the funding of that spur line I would think should have something to do with with federal government.
Maybe the entire project needs to have somebody buying in from the federal government. It's I don't know there is a national security issue here because your bases do need lowcost gas or they just need gas period. Federal government is picking up the tab.
Doesn't matter whether it's low cost or high cost, right?
Um Frank says, uh I'm not relying on gas line. I have new bumper stickers for sale, $5.
We did piss away another pipeline. Uh yeah, Dean, I think that I just brought that up. I think you could um make a case for if if the price is low enough coming out of the export facility to be able to export LG to to the bush.
That's an interesting um statement.
Craig says that the uh state paid for the bulk of uh Juno's hydro cost. Um the Senate in me says doesn't surprise me.
Uh I don't know that to be true for a fact, but I will uh trust but verify.
Okay.
Uh I uh listening to what has been said, Desenna asks if um Glen Farn could be saying that the cost per NCIFA for phase one could also be more feasible considering the the Department of Defense projects moving or coming online in the future. Um I think this is why what we've heard from the stage at the sustainable energy conference was um any of your entities that are going to be large entities uh commercial buyers like a base, a military installation or a data center or some large corporate entity that uses lots of gas. Any of those is going to help make this project more feasible.
They they highlighted that mines could also become purchases purchasers of natural gas, but they're further out. They're smaller customers and they're not part of the financing picture of this. So, if there are data centers and they could be lumped into the financing piece of this because it's a guaranteed purchase of gas, you got x number of people going to be purchasing gas. you had x number of commercial entities and bases purchasing gas. All of that can go into the financing picture and plus exported customers out um out of state, right?
All of that goes into the is this project feasible? Yes, it is because we can sell all our gas, right? So, yeah, any of any of the DoD projects would help with the the feasibility of the of the project.
Okay.
Okay.
Willie, thanks for joining us. Willie, Bethl can switch its locomotive engines to natural gas. We looked into bringing gas into Bethl. Jones act kills us.
Yeah, there's a push to get rid of the Jones Act. I think that'd be a good idea about now.
And it would. Yep.
Uh Rick says, "Thanks for joining us, Rick." And Canada just signed agreement with Europe to ship them gas from British Columbia.
Yep. Here's the other thing you got to keep in mind.
I I know that it that much of what's being said about about this project and about development in general is being influenced by the short-term here and now. You got Ukraine and you got Iran conflict and that has increased the cost of energy, right? I get that the decision makers for long-term multi-deade giga projects are not so much concerned about what's happening right now. They're concerned about what the price ends up being over the long term.
The forecast for the human race on Earth is we continue to increase in population.
The forecast is that there's an increasing demand for energy.
The forecast is that natural gas demand continues to grow over time. So long-term, it's bullish. As long as you can line up and align the stars for building a project to produce gas for a long term, it is a good bet. This is what Glen Farn told me. This is what I've heard from adi uh from from consultants.
This is why you have pension projects, pension um pension funds that want to invest their money in a project like this because over the long term, it's a pretty sure bet there's going to be somebody out there buying gas. As long as you've got all of the economics and the prices at the at the point that you they need them to be, the demand for gas is going to be there.
That's the conventional wisdom. That's the long-term thinking with regard to energy and as it relates to gas and and um to oil as well.
So even even if you take into account the transition energy transition from the the um climate religious ellets that are out there, okay, they recognize that they have to have more natural gas to make this transition happen. So even the even the transition people, even the [ __ ] people, they recognize you got to have more gas. So there's not a question about whether the demand for the gas is going to be there in the future. It's going to be it's going to be. But is your project financially feasible for those projections for how much gas is going to be in demand? Okay, this is why you look at all and this is what Glenfarn will tell you what they've told other committees. They look out at the tax structures for other jurisdictions, other countries, other states that levy taxes against a a similar or or um uh similar in the sense that it's natural gas project. There's no other there's nothing similar to an 800 mile pipeline, but similar to other natural gas projects and our 20 mil tax property tax is an order of magnitude higher than everybody else.
Right? So industry just looks at it and says, "No, we're not doing that."
Everybody else, just knocked over my beverage. Uh, everybody else, all the other jurisdictions that have natural gas projects have a tax structure that is much less than what Alaska is has on the books. So in reality, the investors are looking at it and saying, "Look, you're you're going to lower your taxes to something that that everybody else is paying. we're not going to pay higher taxes in Alaska for this. It's just we're not going to do it. So, I think that's where that's one of the pressures here is from the investor's perspective, they're not going to they're not going to fund a project that that is consumed that much by taxes when other juris when they can invest their money in another jurisdiction that has less tax um lack less tax take. So, that's what I think.
Yeah, we got to get rid of the Jones Act.
Okay, I'm going to call it a night. Thanks for joining us. I hope this was helpful. Uh there, like I said earlier, there is a second uh second Senate Finance meeting. Isn't it Isn't it completely different listening to people talk in Senate Finance as opposed to Senate Resources?
Like, it's night and day different.
Different vibe, different seriousness, different questions.
I I appreciate this a whole lot better than the uh the clown show that was Senate Resources. Okay, we're going to call it a night. Thank you for joining us. We'll be back uh tomorrow, Friday night. My daughter is having a dance recital and so I will not be here. I will be with the family, but um we'll be here tomorrow night. So, some 7:00 p.m. and we'll find out what happened in uh in Senate Finance, maybe House Finance, too.
All right, have a good night and thanks for joining us. Thanks for paying attention. Like and share, subscribe, spread the word. More people need to understand what's going on with this special session in the in the gas pipeline, right? I mean, I I learned things I learned things new tonight. I hope you did, too. More people need to learn new things.
So spread the word.
We'll see you tomorrow.
Heat. Heat.
Related Videos
Truckers Finally Seeing Higher Rates… But Carriers Are STILL Going Bankrupt
LetsTruckTribe
480 views•2026-05-28
IS THIS THE REAL REASON FOR DATA CENTERS?
PrepperDawg
7K views•2026-05-31
JPMorgan CEO JUST NUKED Mamdani... as NYC's Middle Class COLLAPSES
Englishman-In-NewYork
7K views•2026-05-30
The Dark Age Of Blue Collar Has Begun
derekpolasekofficial
4K views•2026-05-28
What has a broader economic impact, corporate downsizing or ecological collapse?
theratracejournal
1K views•2026-05-29
China Is Quietly Buying Gold, the Iran Deal Is Frozen, and Silver Is Heating Up
RichardHolloway0
694 views•2026-05-31
Why Canadians can no longer afford to survive #canada #inflation #shorts
TrueNorthInvestor-v4j
131 views•2026-06-01
Why People Pay More For Someone They Trust
financian_
66K views•2026-05-28
