You can’t tax a pipeline that never gets built

Zero times any tax rate is zero.

That’s the whole arithmetic of Alaska’s gas line, and I want to start there because it’s the part that survives every version of the argument. You cannot collect revenue from a project that does not exist. Whatever the right tax treatment turns out to be, it applies to a pipeline that got built. On the one that didn’t, every rate produces the same number.

Right now Alaska is having the other argument. This summer the Legislature has met in special session three times on this single subject. A compromise cleared one chamber and collapsed in the other. Another session opened at the end of July, and as I write this there is still no bill. Three sessions, one subject, nothing produced.

I’m not going to relitigate a clause here, partly because by the time you read this the clause may have changed again, and mostly because the clause was never the problem. Alaska has now failed at this five separate times, under six governors, across fifty years. Five different frameworks. Five different sets of terms. One identical cause of death.

Nobody could make the terms hold still long enough for the money to commit.

The five funerals

Run the tape, because the pattern only shows up when you see them together.

In the 1980s, Yukon Pacific carried export permits around Asia and could never firm up economics anybody would underwrite. In 1998 the state passed a law with a name that tells you everything, the Stranded Gas Development Act, built specifically to negotiate fiscal terms. It produced negotiations. In 2007 Alaska offered up to half a billion dollars to induce a builder, paid out hundreds of millions of it, and got paper. In 2014 the state went into partnership with the producers themselves, and within a few years they handed the project back.

Not one of those died because the gas wasn’t there. There are roughly 35 trillion cubic feet of it, sitting where it has always sat, about 800 miles from the people who need it. Not one died on engineering. We built 800 miles of pipe across the same ground, over three mountain ranges and permafrost nobody had built on before, in about three years, in the 1970s, with slide rules.

They died on certainty.

What the money actually asks

I ran the Department of Revenue, so I have been across the table from the people who finance things this size, and I can tell you the first question is never the geology and it’s never the weather.

A project like this runs somewhere north of $40 billion. Nobody writes that check out of a vault. It gets financed by pension funds and banks and bond buyers, people who do exactly one thing for a living, which is price risk. And the question they ask isn’t “what’s the rate?” Any rate can be modeled. The question is “will the rules I underwrote still be the rules in year 20?”

If the answer is maybe, the money goes somewhere the answer is yes. It always has somewhere else to go. The gas doesn’t.

That’s the part fifty years of Alaska politics has never internalized. We keep treating the terms as the thing we’re negotiating, when the terms' durability is the thing being bought. A slightly worse deal that holds for thirty years is worth more to a builder than a better one that might not survive the next election, and it is worth more to Alaska too, because one of them produces a pipeline.

The other half of that, which is not optional

Now the part that keeps this from being a giveaway, because I have no interest in one.

Terms that hold have to hold in both directions. If the state’s rules stay put, the builder’s commitments stay put: the schedule, the in-state gas, the Alaskan hire. A deal where only one side is bound isn’t stability, it’s a subsidy with better manners. If the project stalls, whatever the state extended should stall with it.

That isn’t hostility toward a developer. It’s how serious people close a deal meant to outlive everyone signing it. And it’s the piece Alaska has skipped in every framework we ever wrote, which is why we have paid for this pipeline more than once and still don’t have it.

Why the clock is different this time

For most of those fifty years the gas line was an economic development project. Something we’d get to. That changed.

Cook Inlet, the basin that heats most of the people in this state, is forecast to fall short as early as 2027. The plan on the table if nothing changes is to import liquefied natural gas, arriving around 2029. Alaska, importing gas.

Read those two dates again, because they are two different dates for two different things, and the gap between them is the problem. The shortfall arrives first. The fix arrives later, and it’s somebody else’s gas at somebody else’s price.

That’s no longer a development question. It’s a heat-and-lights question, and it has a delivery date.

What I’d actually do

Not another framework. We have five of those.

The state’s job was never to build this thing. It was to make it buildable and then collect for fifty years, which is precisely what we did with the oil line. Prudhoe was discovered in 1968. The state auctioned the leases in September 1969 and collected about $900 million in a single afternoon, many times its entire budget at the time. Then the project sat for four years in lawsuits and Washington. What finally moved it was not a study. Congress cleared the legal path, and private capital did the rest. Those collections built the roads and the schools and seeded the Permanent Fund itself. Every October, that pipeline still pays you personally.

So: settle the fiscal terms once, in writing, with a duration that outlasts an election cycle. Bind both sides to them. And then get out of the way of the people whose job is building things.

I’d rather sign a deal I have to defend than preside over another decade of almost. Fifty years of almost is the most expensive agreement Alaska ever entered, and we signed it by never signing anything.

The first pipeline built nearly everything this state has. I’d like my daughters to see what the second one builds.