WASHINGTON — While much of the United States is contemplating a trade war with China, Alaska is banking on making the nation a closer trading partner — one day, a major buyer of liquefied natural gas.
President Donald Trump has threatened to impose tariffs on up to $60 billion in Chinese goods in an effort to rectify the trade deficit with China. In 2017, the U.S. had a $375 billion trade deficit with China, importing more than it exports to the country.
But Alaska is barreling forward with its long-held pipe dream: building a pipeline to bring natural gas down from the North Slope and exporting it to Asia, offering the state a fresh chance at a booming natural resource economy.
Project leaders and some analysts say that even if Trump's trade talk escalates to an all-out trade war with China, Alaska's LNG exports are unlikely to be caught in the crossfire.
A trade war wouldn't immediately jump to China not buying American LNG, said Kevin Book, an analyst with Clear View Energy Partners. "We have gas for export and that is a product that China needs," Book said. And China wants to "diversify away from its reliance" on gas from Russia and central Asia, he said.
"In a few words, China's energy policy is 'not running out,'" Book said. A proximate exporter of a significant resource is going to look attractive to China irrespective to other considerations such as trade," he said. "Only in the most heightened and economically devastating escalation" of a trade war would he expect a problem for exporting LNG.
China has a growing need for natural gas, according to federal calculations. Its LNG imports tripled from 2010 to 2016. Faced with dangerous levels of air pollution, China is increasingly looking to reduce emissions by using natural gas, instead of coal, to power the country.
"The United States wants to see more trade going to Asia, particularly to China," said Keith Meyer, president of the Alaska Gasline Development Corp.
Meyer has run the state-owned AGDC for two years and is the state's highest-paid employee at $550,000 a year. He has traveled to Asia a half-dozen times to meet with dignitaries and is the face of the project in Washington, D.C.
In November, Meyer, Alaska Gov. Bill Walker and others joined Trump on a visit to China. There, they signed a memorandum pledging future cooperation on the gas line with Chinese counterparts.
"The agreement was signed in front of President Xi and President Trump. … They're very seriously engaged," Meyer said.
Meyer said "the administration has been very supportive, top down, quite frankly." He called Commerce Secretary Wilbur Ross "a big champion of the project" and "instrumental in the China deal and the China trade mission."
Walker is planning a new Chinese trade mission trip in May, coordinating networking opportunities between Alaska and Chinese businesses.
Still, some are worried.
Alaska Sen. Lisa Murkowski said the steel tariffs could add $500 million to the cost of the project.
And U.S. officials say there's no doubt China is an unreliable business partner. The U.S. Department of State has called the country an "authoritarian state," and Trump has said that the country is cheating the U.S. on trade deals.
A senior U.S. trade official, in a call organized by the White House, said that it wouldn't be in China's best interest to draw back on plans to import Alaska natural gas, but it isn't out of the realm of possibility.
"So if you're asking me about the potential that they may renege on deals or not follow through with promises that they made or not do some of the things that they said they were going to do — I mean, all I can tell you is that they've already been doing that in a lot of other areas," said the official, unnamed at the insistence of the White House.
"And I would hope that instead of threatening or trying to do things to Alaska, or soybean farmers or some of the other people who are out there, that they would try to do the best thing for themselves and for their own people and for our people, which is to just let the markets work," the official said. "Can I promise you that that's what they're going to do? No. But I think it will be a mistake for them to keep going down the path that they're on."
The administration has encouraged Alaska to pursue trade with China, Meyer said. And China has been interested, in no small part because Alaska offers a direct shipping route, roughly seven to nine days.
The gas is "stranded up at the north, so it's not tied to any volatile price index," Meyer said.
"We're going to be pulling in a lot of dollars from Asia over the next decades with this project as we sell them LNG. Most of that stays within the Alaskan economy, at least within the U.S. economy," Meyer said.
Mike Dubke, a former Trump White House communications director with ties to Alaska's lawmakers and other projects in the state, is doing communications work for AGDC and accompanied Meyer on a recent ADN interview.
He said there's plenty of White House support for the project, even considering the departure of National Economic Council Director Gary Cohn, a big backer of the pipeline plans.
"The reason he was so enthralled with this project is because it's the single largest piece of the puzzle that the American government can use to lower the trade deficit with China," Dubke said.
"The deputies that Gary had that will be assisting through this and keeping the pressure for the administration on (the Federal Energy Regulatory Commission), on (the Department of) Commerce, on (the Department of) Interior, (Environmental Protection Agency), (Department of) Energy, those people are still in place. So this thing … still has the kind of 'stamp of approval' by the administration."
"Working on the premises that U.S.-China trade relations don't escalate into a tit-for-tat imposition of tariffs across a host of sectors, LNG presents a real opportunity for the U.S. and China to forge common ground (and economic benefit)," said Jamian Ronca Spadavecchia, managing director at Oxbow Advisory, where he works on business, trade and government policy analysis.
That said, a trade war is never good for energy, Book said. Prices go up with the increase in prices for raw materials, and slowing down commerce of any sort is a slowdown for energy.
It's not yet clear what will happen if and when Alaska tries to procure the huge amount of steel necessary to build a cross-state pipeline. Several countries, including South Korea, received waivers from the tariffs, but import caps could still complicate matters.
Meyer said he isn't worried about steel tariffs boosting the cost of the project, though the AGDC hasn't determined how much it might add to the price. In any event, the project has a $9.3 billion "contingency" built into the construction estimate he said.
Exporting LNG from Alaska could help with the Trump administration's "stated preference of reducing the US-China trade imbalance," Spadavecchia said. But, he added, its near-term impact would be "economically and politically de minimus."