Gov. Bill Walker and Alaska gasline officials insisted Friday that China's immediate threat to slap an import tariff on U.S. liquefied natural gas should not impact the long-term viability of the $43 billion Alaska LNG Project.
On Friday, the Chinese government announced a proposal to put a 25 percent tariff on roughly $60 billion of U.S. goods the country imports, including U.S. oil and natural gas.
The potential tariffs are the latest move in a tit-for-tat trade dispute initiated by President Donald Trump earlier this year that has slowly been escalating through the summer.
The face-off between the economic superpowers is in sharp contrast to the trade-focused trip Trump and Commerce Secretary Wilbur Ross made to Beijing last November. That trip culminated in a ceremony in which some of the largest companies from each country signed trade deals before Trump and China President Xi Jinping.
Among those at the Nov. 8 deal-signing event were Walker and Alaska Gasline Development Corp. President Keith Meyer, who signed a non-binding joint development agreement with Chinese oil and gas giant Sinopec, the Bank of China and China Investment Corp. to advance the prospect of the three state-owned Chinese companies buying from and investing in the Alaska LNG Project.
Specifically, the agreement, or JDA, contemplates Sinopec buying up to 75 percent of the LNG produced from the project in exchange for the Bank of China and China Investment Corp. financing up to 75 percent of the project's development costs.
AGDC officials have said the Trump administration's prior tariffs on Chinese steel would at worst have a nominal effect on the project.
Exactly how a 25 percent tariff on U.S. LNG would impact the economics of Alaska LNG is unclear — it certainly wouldn't be good — but the policy battle of today doesn't upend the fundamental benefits of the project, according to Walker.
"Alaska's vast reserves of natural gas can satisfy market demand for nearly a century, and short-term trade tensions do not change this long-term value proposition. Alaska LNG would be the largest job-creating infrastructure project in the country, and would generate billions of dollars in revenue," Walker said in a statement from his office. "My team and I will continue to work with the Trump administration to ensure that Chinese and U.S. officials strike a fair compromise so that Alaska's natural gas reaches the market."
China is in the midst of a major transition away from coal to cleaner burning natural gas for electric generation. The country is expected to become the world's largest importer of LNG next year.
AGDC officials said in a corporate response to questions from the Journal about the potential impact of the LNG tariff that the project "will continue to present a win-win opportunity for both countries."
Meyer has often noted that exporting LNG to China would be a big step towards resetting the trade imbalance with China that Trump is focused on.
"The Alaska Gasline Development Corp. believes the current trade tensions between the United States and China will be resolved well in advance of Alaska LNG exports to China. The Alaska LNG Project represents a multigenerational project that matches China's 100 years of natural gas demand with Alaska's 100 years of supply on the North Slope," the AGDC statement reads.
AGDC also notes it is progressing definitive purchase agreements with other prospective LNG buyers across the Asia-Pacific region.
Though the Alaska LNG Project and the Prudhoe Bay and Point Thomson gas resources that would fuel it are currently planned for 25 years of exports, it is believed the project will spur subsequent gas exploration and development because there would finally be an avenue to get North Slope gas to market.
Walker and Meyer met with Jinping in April 2017 when the Chinese president stopped in Anchorage on his way home from a meeting with Trump in Florida. It was that evening-long dinner and discussion that spurred the eventual framework deal around Alaska LNG, the governor has said.