Phase 1-only gas pipeline break-even price would be more than double the full AKLNG project, state analysis shows

A pipeline built without LNG exports would carry a break-even gas price of roughly $12.65 per thousand cubic feet in 2033, more than double the $4.76 projected under the full Alaska LNG project, according to state analysis sent to the Alaska State Legislature last week.

The Alaska Department of Revenue laid out the gap in a July 7 letter to the House Resources Committee, responding to questions posed in May about HB 381, the legislation that would set the tax framework for the project. Acting Commissioner Janelle L. Earls signed both that letter and a companion response to the HB 381 conference committee.

Why the Scenario Gap Matters

The numbers explain why the choice between scenarios matters directly to ENSTAR customers in Southcentral. Under the full project, LNG export revenues help spread the fixed cost of the pipeline across a much larger volume of gas, pulling the in-state toll down. Strip out the exports and the pipeline toll alone reaches $9.88 per mcf in nominal 2033 dollars, dwarfing the gas commodity charge of $1.81 per mcf. The gas treatment plant adds another $0.96 per mcf, bringing the Phase 1-only break-even total to $12.65.

DOR set its delivery cost assumptions using ENSTAR's May 2025 rate case. Earls wrote: "We assume delivery costs of $3.67 per mcf in 2026 dollars, inflated to $4.36 per mcf in 2033, based on delivery costs from ENSTAR's latest rate case, as of May 2, 2025." Those figures are layered on top of the break-even prices in the consumer projections the department provided through 2062.

The July 7 letter also addressed a higher-capital-cost scenario for the full project. Under a 20% increase above DOR's $46.2 billion baseline, the estimated 2033 in-state break-even price rises to approximately $5.28 per mcf and cumulative state revenues through 2062 fall to approximately $25.4 billion. The letter also noted that incremental AKLNG production tax revenues are projected to be negative from 2029 through 2032, because upstream producers are expected to incur additional lease expenditures at Prudhoe Bay and Point Thomson during that period. Under the Phase 1-only scenario, cumulative municipal revenues are estimated at approximately $1.403 billion through 2062.

The letter notes that "the full project providing low gas prices for in-state customers" is the consistent trend across bill versions, even as specific numbers shift with legislative changes.

Competing Voices on the Phase 1 Price

The Alaska Gasline Development Corporation has made the same argument in project materials, saying that additional pipeline demand from new industrial load or LNG exports dramatically reduces the cost of gas for Alaskans. Critics, including the environmental nonprofit Inletkeeper, have put the Phase 1-only delivered price in a $9 to $13 range, which the DOR's $12.65 break-even figure largely confirms at baseline assumptions. Alaskans for a Sustainable Budget has warned that building only Phase 1 could strand the state with pipeline costs but without the export revenues that make the economics work.