The $16 MMBtu Cap: A Shield for Alaska Consumers

As the Alaska legislature considers a tax break for the Alaska LNG pipeline, developer Glenfarne has proposed a fixed price cap for in-state natural gas sales to shield consumers from potential construction overruns.. The $16 per MMBtu cap, part of a negotiated deal with Enstar , aims to secure affordable energy while addressing legislative concerns about project risk and affordability.

The proposal emerges while lawmakers negotiate the specifics of the tax break, including its duration and magnitude, and address compensation for municipalities impacted by the influx of up to 12,000 construction workers.

Natural gas is essential for heating and electricity in Southcentral Alaska . However, local production from Cook Inlet gas fields is declining, leading to rising prices and prompting consideration of import projects.

Enstar's $16 MMBtu Guarantee

Enstar President John Sims confirmed to the House Finance Committee that their agreement guarantees a price no higher than $16 per MMBtu, regardless of pipeline construction expenses. This fixed price, equivalent to approximately $16.59 per thousand cubic feet, would be insulated from cost overruns.

Glenfarne Alaska LNG President Adam Prestidge told the Senate Finance Committee that the company is finalizing a 30-year contract with Enstar. the $16 per MMBtu cap represents a maximum; if the project proceeds within budget and exports generate revenue, the in-state price could drop as low as $5 per MMBtu.

Price Cap Inflation Adjustment: A Point of Discussion

The price cap's inflation adjustment mechanism remains under discussion. Alaska Department of Revenue Chief Economist Dan Stickel compared the cap to projected 2033 import costs of around $17 per thousand cubic feet.

Enstar's current cost is $10.80 but is expected to rise, with future imports estimated between $16 and $22.

Legislative Concerns and Municipal Compensation

With half of the 30-day special session elapsed, resolving the tax break details, municipal compensation, and the final terms of any price cap remains critical to advancing the multi-billion dollar pipeline project.

Members of the Alaska Senate Finance Committee convened as the legislature remains in a special session focused on a major tax incentive for the Alaska LNG pipeline project.