Former federal pipeline coordinator outlines costs, market limits of Alaska LNG exports

Larry Pearsley, a former federal pipeline coordinator for Alaska North Slope gas projects, told a noon legislative briefing that turning North Slope natural gas into liquefied natural gas (LNG) for export is technically possible but financially and logistically difficult.

“I’m not gonna talk about specific legislation or politics or specific projects,” Pearsley said at the start of his remarks, framing his presentation as a technical and market overview based on four decades of experience. He asked attendees to interrupt with questions so he could address practical concerns.

Pearsley explained basic reservoir practice: “oil, gas, water all come out of the same well generally,” and said mature North Slope fields now produce higher water cuts that raise production costs and often lead operators to reinject gas and water to maintain pressure when there is no market for the gas.

On industry scale and safety, Pearsley contrasted oil and LNG markets. He said a crude oil supertanker carries roughly four times the BTU of an LNG tanker and that oil markets remain far larger. He pushed back on lay fears about LNG safety, saying, “People are worried that LNG is [an] explosive time bomb. It’s really not,” while citing a rare historical accident in 1944 in East Cleveland in which leaked LNG traveled into sewer lines and later ignited.

Pearsley outlined the technical and cost hurdles to turning Alaska gas into exported LNG. He said gas destined for liquefaction must be treated—removing water and carbon dioxide to protect pipes and liquefaction equipment—and that “most LNG plants consume 15% of the gas running their equipment,” a material loss that reduces the value remaining to producers. He also noted boil‑off during shipping and the need for specialized (and more expensive) tankers to operate in icy Arctic conditions.

On pricing and market structure, Pearsley described how oil prices are quoted on exchanges, while LNG historically moved on long-term purchase contracts often pegged to oil. He explained a U.S. shift to a tolling model, where liquefaction developers sell capacity (a reservation fee) rather than gas supply itself: “They run what’s called the tolling model,” Pearsley said, explaining that buyers reserve capacity and pay even if market prices move against them. He cited projects such as Golden Pass and Cheniere as examples of that approach.

Pearsley also stressed compositional and pipeline-compatibility issues: Alaska North Slope gas is “richer” (higher BTU, more ethane/propane) than lower‑48 pipeline gas and may require dilution or additional processing to match destination specifications, which affects marketability and price.

During questions, Pearsley answered technical and policy queries. On spot pricing he noted market indicators such as the Japan‑Korea Marker (JKM) exist but differ from contractual pricing mechanisms; on renewables he said growing renewable generation and storage create additional uncertainty for long-term LNG demand; and on transport he compared the tradeoffs of building a multibillion‑dollar pipeline versus using ice‑capable tankers, saying tankering saves pipeline capex but raises shipping, icebreaking and environmental costs.

Asked about the Jones Act, Pearsley said the U.S. law bars use of foreign-flag ships for domestic carriage without a waiver and observed that no LNG carriers have been built in the U.S. since the 1970s, so either a waiver or new domestic ship construction would be necessary for certain domestic movements.

Pearsley repeatedly framed many points as tradeoffs rather than definitive answers: high near‑term prices or supply disruptions can make LNG projects appear attractive, but long‑term demand, contracting structures and heavy upstream processing and shipping costs mean a smaller share of the buyer’s price typically reaches upstream producers than for oil. He encouraged follow-up questions and offered to meet with attendees after the briefing.

The session closed with the Moderator inviting members to contact Pearsley for further discussion.