01/23/2026 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB75 | |
| Presentation(s): Megaproject Risks, Alaska Lng, Pegasus Global | |
| Presentation(s): Key Issues and Recommendations, Alaska Lng & Phase 1, Gaffneycline | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 75 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
JANUARY 23, 2026
3:30 P.M.
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator Bill Wielechowski, Vice Chair
Senator Matt Claman
Senator Scott Kawasaki
Senator Robert Myers
Senator George Rauscher
MEMBERS ABSENT
Senator Forrest Dunbar
OTHER LEGISLATORS PRESENT
Senator Bert Stedman
COMMITTEE CALENDAR
SENATE BILL NO. 75 "An Act relating to timber on state lands;
relating to timber management leases; and providing for an
effective date."
- HEARD & HELD
PRESENTATION(S): MEGAPROJECT RISKS~ ALASKA LNG~ PEGASUS GLOBAL
- HEARD
PRESENTATION(S): KEY ISSUES AND RECOMMENDATIONS~ ALASKA LNG &
PHASE 1, GAFFNEYCLINE
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 75
SHORT TITLE: TIMBER MANAGEMENT LEASES
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/27/25 (S) READ THE FIRST TIME - REFERRALS
01/27/25 (S) RES, FIN
02/07/25 (S) RES AT 3:30 PM BUTROVICH 205
02/07/25 (S) Heard & Held
02/07/25 (S) MINUTE(RES)
05/02/25 (S) RES AT 3:30 PM BUTROVICH 205
05/02/25 (S) Scheduled but Not Heard
01/21/26 (S) RES WAIVED PUBLIC HEARING NOTICE,RULE
23
01/23/26 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
SENATOR JESSE BJORKMAN, District D
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SB 75, sponsored by the Senate
Rules Committee by request of the governor.
JEREMY CLARK, Chief Operating Officer
Pegasus-Global Holdings, Inc.
Seattle, Washington
POSITION STATEMENT: Delivered the presentation: Megaproject
Risks, Alaska LNG, Pegasus Global.
JOE MILLER, President
Pegasus-Global Holdings, Inc.
Seattle, Washington
POSITION STATEMENT: Assisted with the presentation: Megaproject
Risks, Alaska LNG, Pegasus Global.
NICHOLAS FULFORD
Senior Director
LNG and Energy Transition
GaffneyCline Energy Advisory
Houston, Texas
POSITION STATEMENT: Provided the Presentation: Key Issues and
Recommendations, Alaska LNG & Phase 1, GaffneyCline
ACTION NARRATIVE
3:30:32 PM
CHAIR GIESSEL called the Senate Resources Standing Committee
meeting to order at 3:30 p.m. Present at the call to order were
Senators Myers, Kawasaki, Rauscher, Wielechowski, Claman and
Chair Giessel.
SB 75-TIMBER MANAGEMENT LEASES
3:31:31 PM
CHAIR GIESSEL announced the consideration of SENATE BILL NO. 75
"An Act relating to timber on state lands; relating to timber
management leases; and providing for an effective date."
3:32:50 PM
SENATOR JESSE BJORKMAN, District D, Alaska State Legislature,
Juneau, Alaska, provided an overview of SB 75. He emphasized
that the state, the Department of Natural Resources, the
legislature, and the people of Alaska needed a clear and shared
vision for the management of public lands. He stated that
Alaskans value public lands and rely on them for hunting,
fishing, recreation, hiking, and camping, and that maintaining
access to these lands was essential to the state's way of life.
He argued that misunderstandings had arisen during a proposed
State Forest rollout on the Kenai Peninsula, partly due to
insufficient communication about what state forests are and are
not. He explained that state forests are not meant to lock up
land like state parks but instead allow the state to hold land
in public trust while maintaining public access, supporting
timber harvest, reducing wildfire fuel loads, and improving
access for fire suppression.
3:33:46 PM
SENATOR BJORKMAN encouraged the Department of Natural Resources
(DNR) and the committee to clarify the long-term vision for how
public lands should support Alaska's economy and land management
goals. He noted that recent wildfires on the Kenai Peninsula
mostly on federal land but also on some state landdemonstrated
the need for active forest management, including thinning
operations, road access, and other practices that could help
prevent large, uncontrollable fires. He discussed the need for
clearer and more consistent expectations for public access
across different types of public lands, including trust lands
managed by entities such as the University of Alaska and the
Alaska Mental Health Trust. Although these lands are technically
not considered general public lands, he argued that they are
government-owned, and that the public should have guaranteed
access to them.
3:37:06 PM
SENATOR BJORKMAN referred to Gravina Island as an example of how
different land ownership typesfederal land in the Tongass
National Forest, the Southeast State Forest, and university
trust lands resulted in significantly different management. He
said SB 224 could support active forest management that reduces
wildfire risk, protects forests from pests such as spruce bark
beetles, improves wildlife habitat, and promotes healthier
forests. He stressed, however, that any legislation should
include safeguards to ensure continued public access and prevent
destructive logging practices. He concluded by expressing
appreciation that SB 224 would receive further consideration
rather than being rushed through the legislative process.
3:38:56 PM
CHAIR GIESSEL held SB 75 in committee.
^PRESENTATION(S): MEGAPROJECT RISKS, Alaska LNG, PEGASUS GLOBAL
PRESENTATION(S): MEGAPROJECT RISKS, Alaska LNG, PEGASUS GLOBAL
3:39:01 PM
CHAIR GIESSEL announced the presentation: Megaproject Risks,
Alaska LNG, by Pegasus Global Holdings. She said the
presentation was based on a 2019 report prepared by Pegasus
reviewing the construction of the Trans Alaska Pipeline System
(TAPS). Commissioned by Senator Stedman, the report discussed
project mistakes, cost overruns, and lessons learned to help
inform the committee as it considered a natural gas pipeline
project.
3:40:32 PM
JEREMY CLARK, Chief Operating Officer, Pegasus-Global Holdings,
Inc., Seattle, Washington, explained that Pegasus provided
expertise on planning and delivering complex construction
projects worldwide. Drawing on its experience with mega
projects, Pegasus advised clients on avoiding common problems,
improving efficiency, managing risk, and reducing disputes. He
said the presentation would highlight key points from the
company's 2019 report, including common planning and execution
challenges, as well as lessons learned from the Trans Alaska
Pipeline System (TAPS) and related strategic reconfiguration
projects.
3:41:36 PM
MR. CLARK moved to and narrated slide 2:
[Original punctuation provided.]
Pegasus's 2019 Report Overview
• Engaged by the State to provide advice concerning
the risks associated with megaprojects, including
specifically the proposed Alaska LNG project.
• Reviewed the Trans-Alaska Pipeline System (TAPS) and
Strategic Reconfiguration project execution and
issues encountered.
• Identified issues commonly realized on megaprojects.
• Discussed impact of cost overruns.
• Provided examples of contract tools to mitigate
risks.
3:42:40 PM
MR. CLARK moved to and narrated slide 3:
[Original punctuation provided.]
Megaprojects Defined
• Typically have costs in excess of $1 billion USD.
• Comparably high benefits and correspondingly high
risk.
• Multi-year construction, often longer than a decade
from feasibility planning through execution.
• Many diverse stakeholders that can have substantial
impacts on the project (strategically,
environmentally, economically).
• Unique aspects/scopes (i.e. not a bigger version of
a smaller project).
• Conventional project management processes and
priorities often not sufficient.
3:43:06 PM
MR. CLARK moved to slide 4. He explained that mega projects
inherently faced greater execution challenges than typical
projects due to their scale and complexity. He observed that the
Alaska LNG project illustrated this dynamic: it was effectively
initiated in 2014 with the passage of Alaska Senate Bill 138 and
the creation of the Alaska Gasline Development Corporation
(AGDC). Twelve years later, the project was only approaching a
final investment decision (FID) for its first phase:
[Original punctuation provided.]
Megaproject Challenges
• Inherent risk exposure due to long
planning/execution horizons and complex interfaces.
• Technology/components that are often not standard
(including FOAK).
• Decision-making and planning involves multiple
parties with conflicting interests.
• Unplanned events (black swans) are often not
accounted for, but megaprojects have high exposure
and high resulting impacts.
• Over optimism on costs, benefits, and risk
treatment.
MR. CLARK concluded that such long timelines increased project
risk in two primary ways: they made it more difficult to
accurately plan and estimate future conditions, and they
heightened exposure to rare, high-impact disruptions. He further
noted that when risks materialize on mega projects, their scale
and complexity often amplified secondary or ripple effects
across multiple aspects of the project.
3:44:08 PM
MR. CLARK moved to and narrated slide 5. He emphasized that
project execution issues, particularly design and construction,
often received heightened attention as projects moved into the
execution phase, however, all risk categories must be considered
and addressed:
[Original punctuation provided.]
LNG Project Risks
Risk Category Risk Factors
Economics
• High project costs
• Changing market conditions
Design
• Defective design
• Design changes
• Delay in approvals
HSE
• Force majeure (earthquake,
pandemic)
• Adverse weather
• Site safety
• Permit compliance
• Accidents (human, vehicle)
Security & Social
• Sabotage/protest
• Labor strike
Supply Chain
• Invalid materials/poor quality
• Supplier monopoly
• Delays in material/equipment
supply
Financial
• Supplier/contractor bankruptcy
• Inflation and interest rates
• Tax burdens
Construction
• Unforeseen site conditions
• Low productivity
• Equipment failure
• Quality/rework
• Missed execution windows
3:44:48 PM
MR. CLARK moved to and narrated slide 6:
[Original punctuation provided.]
Cascading Project Risks
Examples
Realized Risk Immediate Impact Ripple Effects
Weld failure Hydrotest stop Rework >
schedule slip >
in-service delay
Slope failure Safety hazard Reroute with new
design >
new permits >
resequencing >
schedule slip
Equipment/ Resequencing Schedule slip >
material delay contractor claims >
in-service delay
Environmental Stop work order Regulatory reset >
violation stakeholder
backlash > schedule
slip
Low Less work Schedule slip >
productivity completed than contractor claims
planned
Contractor Work stops Secure site >
bankruptcy source replacement
contractor >
schedule slip>
claims from
original contractor
3:45:59 PM
SENATOR WIELECHOWSKI asked who would ultimately bear the risk in
the event that costs rise, or the market softens.
3:46:27 PM
MR. CLARK asked that the question be repeated.
3:46:32 PM
SENATOR WIELECHOWSKI asked, in this [AKLNG] project, who bears
the downside risk, if costs rise or markets soften.
3:46:47 PM
MR. CLARK restated the question for clarity and answered that
there was not yet enough information to fully determine that. He
said all stakeholders involved in the project would have some
degree of exposure with the various contracts and agreements
defining who ultimately has that exposure.
3:47:11 PM
SENATOR WIELECHOWSKI said the legislature was told that the
project costs would remain confidential and asked Mr. Clark for
his perspective on that. He emphasized the legislature's
obligation to protect the rate payers and the state of Alaska
and the treasury. He asked whether Mr. Clark had thoughts or
ideas on how the legislature can protect the state and the rate
payers when the costs are confidential and unknown to lawmakers.
3:47:44 PM
MR. CLARK acknowledged the unique situation and said he did not
recall a project where the costs were kept confidential. He
deferred to Mr. Miller.
3:47:58 PM
JOE MILLER, President, Pegasus-Global Holdings, Inc., Seattle,
Washington, concurred.
3:48:14 PM
MR. CLARK moved to slide 7:
[Original punctuation provided.]
The "Iron Law" of Megaprojects
"Over budget, over time, under benefits,
over and over again."
Bent Flyvbjerg
92% of megaprojects come in over budget, over
schedule, or both!
MR. Clark said mega projects often exceeded budgets and
schedules but still delivered their intended benefits. The
Vogtle nuclear project in Georgia illustrated this pattern:
although costs rose from about $14 billion to over $36 billion
and completion was delayed by seven years due to challenges such
as COVID-19 and a partner bankruptcy, the plant ultimately began
producing over 2,000 megawatts of electricity, enough to power
more than two million homes for the next 6080 years.
3:49:28 PM
MR. CLARK moved to slide 8. He explained that project cost
overruns were typically shared among the project owner, main
contractors, and end users. Construction contracts determined
how overruns were allocated between the owner and contractors,
while tolling agreements governed how costs were distributed
between the owner and end users. He described how risk was
managed for the Trans Mountain Expansion Project in Canada using
capped and uncapped pipeline segments. He said contractual
agreements served as the primary mechanism for dividing cost
responsibility, though their effectiveness varied depending on
their design and quality:
[Original punctuation provided.]
Who pays for Project Cost Overruns?
Owner
Construction Contracts Tolling Agreements
Contractors User
[derived from Venn diagram, slide 8]
3:50:48 PM
MR. CLARK moved to slide 9:
[Original punctuation provided.]
[Engineer, Procure, Construct/ Engineer, Procure,
Construction Management] EPC/EPCM Contracting
Approaches
[Slide 9 is a table comparing the elements and
outcomes of various contracting approaches to Mega
Projects.]
3:51:51 PM
CHAIR GIESSEL asked for definitions of acronyms on slide 9.
3:51:58 PM
MR. CLARK said "EPC" stood for Engineer, Procure and Construct
and EPCM was for Engineer, Procure and Construction Management.
He said these were the typical contracts for vendors engaged to
deliver mega projects.
3:52:20 PM
SENATOR WIELECHOWSKI asked whether it was common for lenders to
bear the exposure of cost overruns.
3:52:32 PM
MR. CLARK said it was not unheard of, but that there was usually
a balance. He said the agreements usually contained some nuance.
3:52:56 PM
MR. CLARK moved to slide 10 and explained that an effective
contracting approach supported the strategic vision of project
owners while promoting alignment among project partners and
allowing flexibility to address project complexities and
uncertainties. Risk allocation was clearly defined and assigned
to the parties best positioned to manage and mitigate those
risks, while risk management remained active throughout project
planning and execution with broad partner participation. He said
integrated project delivery methods were often applied to large,
complex, or first-of-a-kind projects because they encouraged
collaboration, streamlined decision-making, and reduced
construction risk. He said this approach emphasized early
stakeholder engagement, shared governance, collaborative
practices, shared financial incentives, and open communication
within a no-blame culture:
[Original punctuation provided.]
Construction Contracting Considerations
• Size and complexity of megaprojects can require
multiple delivery methods and contracting
approaches.
• Risk should generally be assigned to the party best
able to manage/mitigate it.
• For a contractor to assume a risk, additional costs
and/or contingencies are expected.
• Cost-plus and time and materials contracting
approaches run the risk of the contractor low-
balling the bid to win the award, leading to
extensive change orders.
• Firm price/lump sum contracting approaches run the
risk of the contractor adding excess contingency
and still has the risk of disputes if major issues
are encountered.
• Alliance/collaborative contracting can benefit
complex, highly uncertain projects by balancing risk
allocation and supporting alignment on project
objectives.
3:54:13 PM
SENATOR MYERS expressed concern that assigning risk to the party
best able to manage it could create perverse incentives. He
suggested that risk should instead be assigned to the party most
likely to cause it to prevent actions that benefit one party
while imposing risk on others.
3:54:45 PM
MR. CLARK explained that risk was commonly allocated to the
party best positioned to manage it because they had the greatest
awareness of the risk and its impact. He said collaborative
agreements often supported this approach by aligning parties on
objectives and risk perspectives, sometimes through shared risk
registers used by owners and contractors. This allowed all
parties to maintain a common understanding of risks while
assigning mitigation responsibilities to those best able to
manage them.
3:55:47 PM
SENATOR CLAMAN expressed concern that the confidentiality
surrounding the Alaska LNG project made it difficult for
legislators to understand how risks were allocated among the
parties involved, including the state.
3:56:23 PM
MR. CLARK concurred. He said there was a lot of information and
data that would typically be available, if not publicly, at
least to the key stakeholders that had not been shared to this
point.
3:56:44 PM
SENATOR CLAMAN noted that lending institutions financing a large
project would receive full access to confidential information
about risk allocation due to confidentiality agreements, while
public sector representatives would not have access to that same
information.
3:57:19 PM
MR. CLARK explained that while some contract details are
typically kept confidential due to proprietary or competitive
concerns, it would be unusual for a large amount of information
to be withheld from the public or the legislature.
3:57:48 PM
SENATOR WIELECHOWSKI noted concern about legislating municipal
tax reductions without knowing the financial details. He
questioned whether rate concessions would support project
viability or simply boost investor profits and asked what
information legislators would need to make that assessment.
3:58:24 PM
MR. CLARK said all parties would have access to the same
economic model used by Glenfarne, ensuring a shared
understanding of variables and assumptions. Sensitivity analyses
would then be conducted to assess how factors such as property
taxes affected project economics. He said access to this
information was essential for evaluating the project on behalf
of Alaskans.
3:59:06 PM
SENATOR WIELECHOWSKI questioned whether, in the absence of
necessary information, the legislature should simply trust
project stakeholders and approve requested tax cuts.
3:59:26 PM
MR. CLARK said it would be difficult to advise that in this
situation.
3:59:34 PM
CHAIR GIESSEL raised questions about the involvement of 8 Star
Alaska, LLC, which held a 25 percent stake in the project,
asking who they were, whether they had access to confidential
information, and whether they represented the state, suggesting
these issues could be addressed in the upcoming presentation.
4:00:37 PM
MR. CLARK moved to slide 11. He explained that LNG and similar
infrastructure projects progressed through structured pre-
execution phases, each improving project definition and estimate
accuracy before a final investment decision. These stagesFEL-0
through FEL-3/FEEDused milestone reviews to determine readiness
to advance. Early phases identified opportunities and refined
solutions with broad cost accuracy, while later phases developed
detailed technical scope, execution strategies, and risk plans.
By the final FEL-3/FEED phase, projects were fully defined with
detailed engineering and a Class 3 estimate, achieving
significantly improved cost and schedule accuracy to support
execution:
[Original punctuation provided.]
LNG Project Pre-Execution Phases
FEL-0
(+/- 50 percent)
• Defines need/opportunity (business case)
• Preliminary assessment of solutions and major
challenges
• Initial stakeholder engagement
• Rough-order-of-magnitude cost and schedule
estimates
FEL-1
(+/- 30-40 percent)
• Evaluates options to address need/opportunity
• High-level technical assessment of feasibility
• Refined estimates
• Selects preferred solution for further
development
FEL-2
(+/- 20-25 percent)
• Project scope defined
• Preliminary designs developed
• Detailed risk assessment and mitigation
strategies developed
• Initial execution strategies for procurement,
construction, commissioning
• Updated cost and schedule estimates
FEL-3 & FEED
(+/- 10-15 percent)
• Advanced designs
• Procurement strategies, including bid packages,
developed
• Detailed construction execution plans developed
• Validation of risk mitigation strategies, updated
risk profiles
• Final cost and schedule baseline for FID &
execution
Increasing level of project definition and estimate
accuracy
4:03:04 PM
CHAIR GIESSEL asked whether reaching a final investment decision
(FID) meant that the project should already have achieved a high
level of detail and definition.
4:03:24 PM
MR. CLARK affirmed that it was common industry practice that a
final investment decision (FID) was typically made at the stage
of a Class 3 estimate, with established standards defining the
level of detail and inputs required to reach that level of
project definition.
4:03:46 PM
CHAIR GIESSEL asked for the definition of "FEL".
4:03:52 PM
MR. CLARK said FEL was front end loading. He said it was an
industry term referring to the early pre-execution planning and
development phases.
4:04:07 PM
SENATOR WIELECHOWSKI asked what happened when FID was reached
before key regulatory or legislative processes were complete and
whether that was common.
4:04:21 PM
MR. CLARK said that making a final investment decision with key
project aspects still undefined introduced additional
uncertainty, which could significantly impact the project either
positively or negatively once those factors became clear.
4:04:58 PM
SENATOR WIELECHOWSKI asked what project terms would become
locked in at FID.
4:05:09 PM
MR. CLARK said at the time of a final investment decision (FID),
projects typically had a well-developed scope supported by
engineering and studies, but the level of completeness could
vary. Some projects engaged contractors and partners early under
planning-phase agreements that transitioned into execution,
resulting in different approaches and degrees of readiness at
FID.
4:06:08 PM
MR. CLARK moved to slide 12. He said a Class 3 estimate
typically had an accuracy range of about plus or minus 1015
percent, though in the pipeline industry it could range from
roughly minus 10 to minus 20 percent on the low end and plus 10
to plus 30 percent on the high end, based on [Association for
the Advancement of Cost Engineering] (AACE) standards and an 80
percent confidence level. He said accuracy was influenced by
factors such as project characteristics, quality of planning,
stakeholder pressures, and broader systemic risks, including
market, economic, and geopolitical uncertainties over long
project timelines:
[Original punctuation provided.]
Factors Influencing Project Definition & Estimate
Accuracy
• Project site in remote locations with unique
logistical and environmental issues.
• Feasibility studies often focus on technical issues
and less on business or project delivery issues.
• Stakeholder pressure for a predetermined value
(biased estimate).
• Systemic risks, including:
• Uniqueness of project vs. reference data
available
• Project execution complexity
• Quality of estimate data/experience of estimate
team
• Market and economic conditions
• Accuracy of geotechnical data
• Geo-political, environmental, and regulatory
circumstances
4:07:28 PM
MR. CLARK moved to and narrated slide 13:
[Original punctuation provided.]
Risks of Delayed FID
• Escalating project costs
• Market opportunity loss
• Supply chain disruptions
• Regulatory/permitting challenges
• Erosion of stakeholder confidence
• Project team attrition
4:08:50 PM
MR. CLARK moved to and narrated slide 14. He pointed out that
the Trans Alaska Pipeline System (TAPS), built in the 1970s,
faced many of the same challenges seen in today's Alaska LNG
projectespecially difficult ground conditions and reduced
productivity in extreme cold. Although initially estimated at
just over $4 billion, the final cost doubled to about $8 billion
(roughly $40 billion today):
[Original punctuation provided.]
Trans-Alaska Pipeline System
GAO Report Findings Challenges and Cost Overruns
Site-specific Challenges:
• More groundwater than anticipated.
• Underground construction required deeper/wider
trenches than planned.
• Wide variations in soil conditions.
• Permafrost more difficult to move and drill than
planned.
• Less backfill material sites available, requiring
additional hauling.
• Tolerances for valve support structures far more
critical than planned; temperature changes and
settlement required realignment.
• Productivity impacts in cold weather.
Construction Cost Overruns:
• Feasibility estimate contained no allowance for
escalation (also experienced 4-year delay to
start of construction).
• Insufficient contingency (10 percent) compared to
status of engineering and project risks.
• Underestimated amount of elevated pipe.
• Additional infrastructure required, but not in
initial scope.
• Underestimated support structure (camps,
airstrips).
• Underestimated scope for environmental
requirements (vapor recovery, ballast water
treatment system).
MR. CLARK emphasized the importance of:
• Accurate and validated cost estimating (including third-party
reviews)
• Strong risk assessment processes
• Adequate contingency planning
He said modern best practice now uses quantitative risk
analysisstatistical modeling and simulationsto better predict
cost and schedule outcomes and improve confidence in project
estimates.
4:10:38 PM
MR. CLARK moved to and narrated slide 15:
[Original punctuation provided.]
Trans-Alaska Pipeline System
GAO Report Findings Lessons Learned
• Initial and subsequent cost estimates should be
viewed with skepticism.
• As much site-specific data as is feasible should
be obtained.
• Technical and geological uncertainties should be
thoroughly investigated.
• Government approval should be contingent on
detailed planning for management control,
including cost controls.
• Future project expenditures should have an
ongoing government audit to protect the public's
interest.
4:11:35 PM
MR. CLARK moved to slide 16, summarizing the findings of a
Federal Energy Regulatory Commission (FERC) prudence review of
the 2004 strategic reconfiguration project that involved
installation of new pumps and upgraded technology to improve
operations. He said the initial estimate for this project was
$249 million compared to actual cost of around $786 million:
[Original punctuation provided.]
Strategic Reconfiguration Project (2004)
Prudence Review Findings
• Project engineer lacked Alaska experience, failed
to effectively manage the project.
• Poorly defined scope at sanction, leading to poor
cost/schedule estimates.
• Reduction of project contingency to an
unrealistic level to improve project economics.
• No meaningful oversight by project owner.
• Failure to rely on internal project risk
assessments.
• Assumed control of project at Supplement 1
decision point, despite insufficient resources to
do so.
4:12:10 PM
MR. CLARK moved to and narrated slide 17. He said that a recent
update from Glenfarne highlights that Phase One is advancing,
with a target pipeline completion date of 2028. He said key
elements are already in place, including conditional
construction contracts, pipe supply agreements, and gas supply
agreements. However, updated total project cost figures have not
yet been disclosed.:
[Original punctuation provided.]
Brief Background on the Alaska LNG Project
Public Cost Estimates
$45 to $65B > $38.7B > $44B > $10.8B (Phase 1)
• 2014: SB 138 establishes the framework for
commercialization and development of North Slope
natural gas.
• 2014-2016: Preliminary agreements reached with
North Slope producers, AGDC and partners advance
preliminary design and permitting.
• 2016-2017: Change in administration shifts
emphasis towards more state control, private
partners scale back involvement.
• 2018-2019: AGDC files applications with FERC.
• 2020-2022: Global LNG market downturn slows
progress; continued permitting and environmental
reviews.
• 2023-Present: Renewed interest in the project;
Glenfarne acquires majority ownership of 8 Star
Alaska, leads FEED development efforts towards a
FID.
MR. CLARK noted that historically, cost estimates have varied
significantly. Early projections ranged from $45 billion to $65
billion, reflecting high uncertainty. More recent estimates
place Phase One at just under $11 billion. The use of cost
rangesrather than single-point estimateshas become standard
practice for early-stage megaprojects, as it better captures
uncertainty and potential risk outcomes.
4:13:47 PM
CHAIR GIESSEL noted that Phase One does not include an LNG
export facility, which would account for the more economic cost.
4:14:07 PM
MR. CLARK concurred and noted that he was not sure earlier cost
estimates envisioned Phase One and Phase 2. He said it would
make a fair comparison of estimates difficult.
4:14:25 PM
SENATOR WIELECHOWSKI noted that Phase One was described as
solely providing gas for Alaskans. He asked whether, if Phase
One costs increased significantly, higher tariffs would shift
the burden of cost overruns onto Alaska consumers or whether
Glenfarne, equity owners, and lenders would bear the cost.
4:15:03 PM
MR. CLARK assumed that costs would be passed through the
tariffs.
4:15:17 PM
MR. MILLER said the Regulatory Commission of Alaska (RCA) would
have significant input at that point.
4:15:27 PM
SENATOR WIELECHOWSKI asked whether there was a recommendation
for legislation or whether the RCA would allow a pass-through
for consumers to pick up [the additional costs].
4:15:46 PM
MR. CLARK said recommending legislation was beyond the scope of
his experience. He deferred to Mr. Miller.
4:15:56 PM
MR. MILLER noted that in some states, statutes require companies
to justify overruns above a target price by demonstrating the
expenses were prudent and reasonable.
4:16:31 PM
MR. CLARK moved to slide 18. He suggested that as the Alaska LNG
project approached a final investment decision (FID), additional
legislative oversight and information were needed, particularly
regarding project readiness, Phase Two planning, and unresolved
uncertainties such as scope, including the Point Thomson lateral
pipeline, front-end engineering and design (FEED) completion
status, and the timing of the FID:
[Original punctuation provided.]
Open Questions on the Alaska LNG Project
• Status of preliminary planning (e.g.
geotechnical, constructability, and environmental
studies).
• Scope of the FEED Study efforts.
• Strategic approach to Phase I/Phase II.
• Robustness/quality of current estimate supporting
FID.
• Status of program management plans.
• Status of the project's risk management program.
• Availability of contractors/laborers to support
the project needs.
• Oversight of Glenfarne.
4:17:38 PM
MR. CLARK moved to slide 19. He said Pegasus recommended
enhanced state oversight as the project advanced, particularly
if the state retained a minority ownership stake. Specific
recommendations include targeted independent assessments to
inform the FID and execution strategy, as well as ongoing
independent monitoring or an advisory committee to track project
performance during execution:
[Original punctuation provided.]
Recommendations
• Detailed review of the FEED Study (including
updated cost estimate).
• Readiness reviews prior to FID and prior to
execution.
• Perform a contract risk review for the EPC/EPCM
contract.
• Independent project monitor/advisory committee
during execution.
4:18:41 PM
SENATOR MYERS raised concern that reviewing the FEED study may
be difficult if it remains confidential to Glenfarne. He
questioned how such a review could be conducted.
4:19:15 PM
CHAIR GIESSEL concurred. She expressed appreciation for the
recommendations and the presentation.
^PRESENTATION(S): KEY ISSUES AND RECOMMENDATIONS, ALASKA LNG &
PHASE 1, GAFFNEYCLINE
PRESENTATION(S): KEY ISSUES AND RECOMMENDATIONS, ALASKA LNG &
PHASE 1, GAFFNEYCLINE
4:20:24 PM
CHAIR GIESSEL announced the presentation: Key Issues and
Recommendations, Alaska LNG & Phase 1, GaffneyCline. She
suggested that a review of a recent letter addressing conflicts
of interest and confidentiality be addressed prior to beginning
the presentation.
4:21:31 PM
NICHOLAS FULFORD, Senior Director, LNG and Energy Transition,
GaffneyCline Energy Advisory, Houston, Texas, explained that the
presentation and analysis were conducted with strict
independence, objectivity, and reliability, emphasizing that
these principles are central to GaffneyCline's longstanding
reputation. He noted that, since GaffneyCline's acquisition by
Baker Hughes in 2008, formal safeguards have been in place to
restrict access to client data and ensure project work is
isolated to dedicated team members.
MR. FULFORD emphasized that although Baker Hughes entered into
an agreement with Glenfarne shortly before their initial Alaska
LNG presentation, none of the GaffneyCline personnel involved in
the report had any involvement in or awareness of those
discussions, and no related communications had occurred. He
affirmed that their work was completed without influence from
other Baker Hughes business units, and that no information was
shared across the corporate group except where legally or
contractually required.
4:23:44 PM
MR. FULFORD underscored GaffneyCline's commitment to
transparency given the legislature's reliance on their analysis
and invited questions about their processes and the safeguards
ensuring independence.
4:24:11 PM
CHAIR GIESSEL questioned whether GaffneyCline could truly
operate independently given its ownership by Baker Hughes, which
is affiliated with Glenfarne. She noted difficulty seeing clear
separation between the entities and raised doubts about whether
the advice provided by GaffneyCline was fully in Alaska's
interest rather than influenced by the parent company.
4:25:50 PM
MR. FULFORD acknowledged that when GaffneyCline and Baker Hughes
had overlapping involvement, clients often sought reassurance
about data privacy and separation. He explained that additional
internal safeguardssuch as stricter controls on data handling
and storagecould be implemented when necessary. Considering the
relationship between Baker Hughes and Glenfarne, he emphasized
that protections beyond those already outlined could be put in
place.
4:26:59 PM
CHAIR GIESSEL requested written clarification of the proposed
separations and asked how Mr. Fulford would handle a potential
conflict of interest. Specifically, she questioned whether, in a
situation where advice benefiting the State of Alaska might harm
Baker Hughes or Glenfarne, GaffneyCline would prioritize the
state's interests or those of Baker Hughes and Glenfarne.
4:27:52 PM
MR. FULFORD explained that, like their role as expert witnesses
in international arbitrations and courts, their duty had been to
provide objective, independent advice. He emphasized that this
commitment to independence was a core company value, noting that
they had at times worked against major clients but remained
guided by principles of objectivity and impartiality.
4:28:57 PM
CHAIR GIESSEL noted that GaffneyCline was a wholly owned
subsidiary of Baker-Hughes.
MR. FULFORD affirmed that GaffneyCline had been a subsidiary of
Baker Hughes since 2008.
CHAIR GIESSEL asserted that Mr. Fulford had fiduciary
responsibility to Baker Hughes as an employee of GaffneyCline.
4:29:23 PM
MR. FULFORD said that interpreting fiduciary duty in that
context was complex. He explained that GaffneyCline was
fundamentally evaluated on the quality of its independent
advisory work. He stated that his fiduciary responsibility had
been to preserve the integrity and value of that independent
advice, as it was essential to GaffneyCline's success and that
of its parent organization.
4:30:06 PM
CHAIR GIESSEL emphasized the unique and complicated situation,
involving a mega project with confidential documentation,
fiscals, and contracts, while GaffneyCline, as a wholly owned
subsidiary of Baker Hughes, was expected to advise the State of
Alaska on securing the best deal. She noted that courts had
recognized a unity of interest between a parent company and its
subsidiary and questioned how the state of Alaska could maintain
confidence in GaffneyCline's independence given the overlap with
confidential project involvement.
4:31:19 PM
MR. FULFORD expressed appreciation for the concerns raised and
the open discussion. He said the topic had extended beyond his
area of expertise. He noted that his legal colleagues had
supported the opinions shared and deferred to them for further
guidance.
4:31:51 PM
CHAIR GIESSEL expressed appreciation that GaffneyCline had
initiated the discussion by sending a letter and acknowledged
that both GaffneyCline and Baker Hughes had recognized the
concern raised as valid. She allowed the presentation to
continue but emphasized that the issue remained unresolved and
that she wanted greater legal clarity.
4:32:41 PM
SENATOR WIELECHOWSKI recalled using GaffneyCline in 2007 during
[Accelerating Clean Energy Savings] (ACES) and found its
analysis very helpful. He noted that GaffneyCline also
represented oil companies at the time and asked whether there
were other sovereign clients where potential conflicts of
interest with Baker Hughes might exist.
4:33:10 PM
MR. FULFORD noted that Baker Hughes equipment was present in
roughly 8090 percent of LNG plants globally, meaning there was
often some level of overlap when advising investors, lenders, or
sovereign states. He noted that this overlap had become more
visible in this case due to active discussions between
Glennfarne and the Alaska legislature. He emphasized that
similar interactions, particularly involving the Baker Hughes
division that supplies LNG plant equipment, occurred in most LNG
projects worldwide, and that this instance stood out mainly
because of press coverage.
4:34:28 PM
SENATOR WIELECHOWSKI concurred with the concerns expressed by
Chair Giessel and would have preferred a [consulting] party
entirely unaffiliated with Baker Hughes, though he was unsure if
that was possible. He acknowledged that GaffneyCline had worked
with the State of Alaska for around 20 years and expressed
interest in hearing the testimony while reiterating his
concerns.
4:35:05 PM
MR. FULFORD moved to and narrated slide 3. He noted property tax
issues and requests for mitigation or concessions and said the
presentation would address how such matters had been handled in
Texas, Louisiana, and Maryland. He said the presentation would
highlight LNG-related developments on the Canadian coast,
including projects such as LNG Canada. He also proposed
reviewing the outcomes of Senate Bill 138, passed in 2014. He
noted that his colleague, Andrew Duncan from GaffneyCline, would
contribute insights into FID readiness:
[Original punctuation provided.]
Agenda
Topics to be covered
• Lessons from other LNG projects
• Property Tax comparison with Lower 48
• LNG Canada and other Canadian projects
• Comparison with previous project framework
agreements
• Path to FID ?Progression of cost estimate
classifications
4:36:43 PM
MR. FULFORD moved to slide 5 and explained that Louisiana had
addressed property tax issues through a broad statute offering
relief for large industrial developments. He noted that the
statute allowed up to 80 percent property tax reduction for as
long as 10 years, with considerations sometimes tied to job
creation. He noted that LNG projects typically generated
relatively few jobs. He explained that Louisiana's property tax
system differed from Alaska's due to its ongoing valuation
approach, and that standard tax rates resumed after the
concession period. He described how major LNG projects had
benefited from these incentives. He emphasized that such
concessions could amount to hundreds of millions of dollars and
had been a central feature of LNG development in Louisiana.
Finally, he noted that while the statutory relief was capped at
80 percent, some projects had negotiated additional concessions,
in some cases reducing property taxes to near zero for a decade:
[Original punctuation provided.]
Property Tax Incentives (Louisiana)
• Nominal property tax rate is 100 mills
• LNG property tax reductions are achieved through the
Louisiana Industrial Tax Exemption Program (ITEP)
• Up to 80 percent reduction in property tax for 10
years
• Louisiana State audit estimates exemptions valued at
$21 Bn
Project Sponsor Value
Sabine Pass Cheniere $4.9 Bn
Cameron LNG Sempra $3.7 Bn
Calcasieu Pass Venture Global $2.9 Bn
Plaquemines LNG Venture Global $834 M
Magnolia LNG Glenfarne $501 M
Note: Operating LNG projects, except for Magnolia LNG
which is planned. Source Sierra Club, GaffneyCline
Analysis
4:40:38 PM
SENATOR KAWASAKI said he was trying to make an apples-to-apples
comparison, noting that there was currently a 20-mill rate on
oil and gas property taxes across Alaska, and asked what the
equivalent rate was in Louisiana, specifically whether that
figure reflected the rate with or without incentives.
4:40:57 PM
MR. FULFORD explained that one way to view it was comparing a
100-mill rate with a slower decline to a 200-mill rate that
declined with depreciation, noting that the key difference lay
in discount rates and the time value of money. He said upfront,
near-term costs had a disproportionately large impact,
especially for private investors, due to how those financial
factors were evaluated. He concluded that while the mill rates
mattered, the more significant factor was the property tax
profile over time.
4:41:53 PM
SENATOR KAWASAKI said he believed property taxes increased
during construction, peaked at a certain point, and then
declined, using a home as an example. He asked whether that was
accurate and sought to compare his own experience as a property
taxpayer [to the consideration of property taxes for AK LNG
development] on an apples-to-apples basis.
4:42:22 PM
MR. FULFORD said it was an excellent question and explained that
HB 4, passed around 2014, had reduced the property tax burden by
delaying it until first gas. He added that under the current
arrangement, property taxes would become payable once the
project began producing LNG.
4:42:56 PM
SENATOR WIELECHOWSKI said he supported building a gas line but
was reluctant to ask communities to reduce property taxes
without access to the project's financial details. He questioned
whether such reductions would constitute necessary investment,
inflate investor profits, or be required to meet a hurdle rate,
and emphasized that his fundamental concern was how to make an
informed decision without seeing the underlying numbers.
4:43:28 PM
MR. FULFORD noted that legislative and regulatory processes
ideally required significant disclosures about costs and project
profiles. He mentioned that while confidentiality limits some
details, some disclosures were appropriate for public interest.
He explained that projects often use an open-book economic
model, allowing stakeholders to analyze the project with their
own assumptions while keeping proprietary data private,
providing a common basis for discussion given the large sums
involved.
4:45:22 PM
CHAIR GIESSEL asked whether Mr. Fulford recommended [the
legislature] request an open book economic model from Glenfarne.
4:45:33 PM
MR. FULFORD said he thought it would be an appropriate request
and noted that an open book economic model was used for the
previous version of the AK LNG project in 2014.
4:46:01 PM
CHAIR GIESSEL noted that the third bullet on slide 5 showed a
property tax reduction limited to 10 years and found it
interesting because she had heard suggestions that reductions
could last indefinitely. She asked whether the 10-year period
was typical.
4:46:29 PM
MR. FULFORD explained that the 10-year limit was set by
Louisiana law for major capital projects and noted that tax
relief in the first 10 years was far more significant for
developers than in later periods. He added that LNG projects
often balance mitigating near-term costs, which strongly affect
project economics, with longer-term benefits that governments or
stakeholders can leverage to create value.
4:47:32 PM
MR. FULFORD moved to slide 6. He explained that property tax
[reductions] were distributed among local entities, with school
districts contributing the largest share. He noted that after
reforms in 2022, school district taxes were excluded from
concessions, effectively reducing available tax relief. He
highlighted examples like Corpus Christi LNG, where large relief
amounts reflected its much bigger scale, and added that project
size significantly influenced these figures. He also noted a
general cost rule of thumb for Gulf Coast LNG projects and
explained that smaller projects, like Texas LNG, showed lower
tax concession amounts due to both their size and the newer tax
framework:
[Original punctuation provided.]
Property Tax Incentives (Texas)
Taxing Entity Rate
• County 0.300.45 percent
• City (if applicable) 0.400.60 percent
• Port authority 0.100.25 percent
• School district~1.00 percent (No longer available
for tax concession)
Taxable property value typically 75 percent of capital
cost of terminal
• Pre- December 31st 2022
• up to 10 years
• Up to 100 percent relief
• 2023 and after
• Relief limited to County, City and Port relief
Project Sponsor Value
Golden Pass LNG QatarEnergy / $235 M
ExxonMobil
Port Arthur LNG Sempra $694 M
(PALNG) Infrastructure
Corpus Christi LNG Cheniere Energy $1.23 Bn
(incl. Stage 3)
Freeport LNG Freeport LNG $447 M
(Train 4) Development
Rio Grande LNG NextDecade $373 M
Texas LNG Glenfarne $34 M
[Slide 6 noted that the Golden Pass, Port Arthur,
Corpus Christi and Freeport LNG projects included
school district tax reductions; the Rio Grande and
Texas project had no School District Tax reductions.]
4:50:08 PM
MR. FULFORD moved to slide 7. He explained that Maryland,
specifically the Cove Point LNG facility, served as a useful
example for Alaska. He described how the facility transitioned
from a regulated import terminal to an export terminal and
adopted a PILT (payment in lieu of taxes) arrangement in 2013 to
address concerns about tax revenue volatility while supporting
investment. He noted that after reverting to standard property
taxes, the county experienced valuation disputes and revenue
instability, which led to school budget shortfalls. As a result,
Maryland reinstated the PILT in 2024, concluding it provided
more stability, though its relative cost compared to property
taxes depended on differing state and county valuations:
[Original punctuation provided.]
Property Tax Incentives (Maryland)
• LNG liquefaction terminals in Maryland are
explicitly eligible for negotiated PILT
agreements under state law.
• This statute was written with Cove Point
specifically in mind, reflecting its unique
scale, infrastructure, and economic importance.
• Allows the county to substitute a negotiated
annual payment for standard real and personal
property taxes
• Rationale for PILT:
• Depreciation risk to county revenues
• Potential delays or cancellation of an anchor
economic project
• PILT was restructured in 2024, when the county
approved an amended PILT agreement
• fixed payment of $60 million per year
• Runs for 15 years (tax years 20232038,
expiring June 30, 2039)
• Estimated difference: PILT $11m higher than
nominal property tax (State evaluation) or $32m
less (based on consultant's valuation)
4:53:19 PM
SENATOR CLAMAN asked how much information Maryland had with
respect to economics, the balance sheets, etc. of that project
when they were making these decisions.
4:53:35 PM
MR. FULFORD said he did not have the specific information for
Maryland but believed it could be determined with further
analysis. He explained that a key difference between Alaska LNG
and LNG Canada was that LNG Canada's pipeline was privately
funded and operated under negotiated agreements, including
tariffs. In contrast, he noted that Alaska's pipeline would
initially serve public ratepayers, making transparency and
disclosure more important due to the need for public interest
determinations, and emphasized that this gave the project a
fundamentally different purpose.
4:55:23 PM
SENATOR MYERS observed the consideration of long-term change in
property tax policy, referencing a 10-year framework like
Louisiana's approach and noting a suggestion to make any
property tax reduction permanent. He expressed concern about
using payments in lieu of taxes (PILT) as a workaround,
emphasizing that constitutional limits prevent the state from
contracting away its taxing authority. As a result, even if the
current legislature and administration reached an agreement,
future governments would still have the power to modify it. He
concluded that, despite interest from Glenfarne and others in
achieving long-term certainty, the existing constitutional
language made it effectively impossible to guarantee such
permanence.
4:56:52 PM
MR. FULFORD said this issue had also arisen during [the
development of] Senate Bill 138 [in 2014], which aimed to create
fiscal stability for the AK LNG project. He noted that
constitutional limits on taxation had already been examined by
the Department of Law in that context. He explained that similar
concerns would apply again, especially since lenders prioritize
fiscal stability and closely evaluate the legal and regulatory
framework. While Alaska was seen as well governed compared to
other regions, he said lenders might still seek additional
certainty.
4:58:41 PM
SENATOR CLAMAN said he believed Glenfarne had a detailed
financial model and asked whether it would be possible to
request a version of that model without confidential data. He
suggested the legislature could input its own numbers to better
understand how the model was structured and how the overall
proposal was put together.
4:59:31 PM
MR. FULFORD said that for large global projects, the level of
information shared between developers and governments varies,
but some disclosure is usually necessary. He noted that
governments often need insight into costs and project economics
to make decisions. He added that in other jurisdictions, open-
book economic models are used to support this kind of dialogue.
5:00:50 PM
CHAIR GIESSEL thanked Mr. Fulford and directed the committee and
the public to the Senate Resources Committee website for
pertinent reports and documents
5:02:09 PM
There being no further business to come before the committee,
Chair Giessel adjourned the Senate Resources Standing Committee
meeting at 5:02 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 1.23.26 SRES Presentation, Pegasus, Alaska LNG Megaproject.pdf |
SRES 1/23/2026 3:30:00 PM |
|
| Pegasus-Report-2019-04-15.pdf |
SRES 1/23/2026 3:30:00 PM |
|
| 1.23.26 SRES Presentation, GaffneyCline, LNG Key Issues and Recommendations.pdf |
SRES 1/23/2026 3:30:00 PM |
|
| 2024 WM AGDC Alaska LNG Phase 1 Final Legisture Summary.pdf |
SRES 1/23/2026 3:30:00 PM |
|
| GaffneyCline Conflicts of Interest and Confidentiality 1.21.26.pdf |
SRES 1/23/2026 3:30:00 PM |