In any other time, the headline of this piece would be absurd. But with President Donald Trump, anything is possible.
On Monday, President Trump signed a memorandum for the Secretary of Energy that invoked the Defense Production Act for “Natural Gas Transmission, Processing, Storage, and Liquefied Natural Gas Capacity.”
The order ends with:
I have declared a national emergency under Executive Order 14156, and I further determine that action to expand domestic natural gas transmission, processing, storage, and LNG capacity is necessary to avert an industrial resource or critical technology item shortfall that would severely impair national defense capability. Therefore, pursuant to section 303(a)(7) of the Act, I waive the requirements of section 303(a)(1)-(a)(6) of the Act for the purpose of expanding such capability.
You are authorized and directed to implement this determination, including making necessary purchases, commitments, and financial instruments to enable these projects, and to publish this determination in the Federal Register.
The order does not specifically mention Alaska or the Alaska gasline project. But the day after Trump issued the memorandum, U.S Secretary of Energy Chris Wright told Senator Lisa Murkowski (R – Alaska) in a Senate Energy and Natural Resources hearing that the Alaska gasline project is his number one domestic energy priority.
Wright told Murkowski, “For energy infrastructure, I would say number one. Number one. This is a gigantic project that transforms the state of Alaska. Because of where people live in Southcentral Alaska, we have an energy problem, even though we have abundant resources nearby. It’s awesome for U.S. allies in Asia. It’s a short run to all the major LNG consumers in East Asia.”
Wright ended by saying, “The problem is the pipeline is hard to finance, and you have to build the pipeline first. The LNG export terminal is not hard to finance, but we can’t finance that without financing the pipeline. So, we are just working every avenue we can, and a growing amount of our team is on it. It’s important for our country and critical for Alaska. We will not rest until we have that project completed.”
So what does Trump invoking the Defense Production Act mean for the Alaska gasline project? It’s hard to say for sure but there are a few considerations.
Trump has been talking about the Alaska gasline for nearly a decade. In November 2017, Trump and former Governor Bill Walker went to China to meet with Chinese President Xi Jinping where a major non-binding Joint Development Agreement for Alaska LNG between the State of Alaska, the Alaska Gasline Development Corporation, and Chinese firms (Sinopec, Bank of China, and China Investment Corporation) was signed.
That deal fell apart for many reasons, but the nail in the coffin was when Bill Walker was defeated by Governor Mike Dunleavy in 2018.
The chances are high that Democrats will take control of the House of Representatives after the November election. Republicans currently hold a razor thin majority, and the opposing party of the president traditionally picks up seats in the midterm election. If that happens, the last two years of Trump’s presidency will be contentious and unproductive.
The Alaska Legislature and former governors have all failed a getting a gasline built. Former Governors Frank Murkowski, Sarah Palin, Sean Parnell, and Bill Walker all tried and failed. Dunleavy cast his lot with Glenfarne a year ago, but a Final Investment Decision (FID) has failed to happen even though they said it would likely be made by the end of 2025.
There is less than a month left in the legislative session and less than eight months until Dunleavy leaves office. Who knows who will replace Dunleavy. The Legislature and Dunleavy have little to no relationship. The odds of them agreeing on a framework to help make a gasline possible are low.
The mayors of the North Slope Borough, Fairbanks North Star Borough, and Kenai Peninsula Borough are attempting to run a shake down operation in the scenario the gasline actually gets built. They are all sitting at the trough making fabulous demands for revenue during the construction phase.
Other issues to consider are the national security implications of importing LNG to a state with a significant military presence, the lack of alignment and agreement from the utilities on what to do, the inability to get more gas out of Cook Inlet, and the global LNG crunch due to the war in Iran.
Trump’s impatience combined with the possibility of losing the U.S. House, infighting between the Legislature and Dunleavy, and borough mayors acting like the mafia could just be the recipe for the federal government taking over the project.
If that came with a large financial commitment, the producers would be incentivized to agree to reasonable gas sales agreements and Asian buyers would be incentivized to sign gas purchase agreements to get access to the gas.
Crazier things have happened.