The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (6.15.2026)
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Welcome to The Weekly Top 3 — our look at the top 3 things on our mind here at Alaskans for Sustainable Budgets — for the week of June 15, 2026.
This week, our top 3 issues are these: 1) we explain the reason why the Bullet Line (now called Phase 1 of the #AKLNG project) has never been built and question why some think #AKLNG overcomes it (2:12), 2) we dive deep into the #AKLNG bill and discuss why we think Alaska will be at significant risk if we build Phase 1 without the Phase 2 commitments in hand (19:15), and 3) we shift over to the federal side to discuss the looming problems with Social Security and explain why we are concerned they may hit Alaska harder than most (39:33).
The Weekly Top 3 is a regular weekly segment on The Michael Dukes Show. The Show broadcasts on Facebook and YouTubeLive as well as via streaming audio from the Show’s website weekdays from 6–8am. We join Michael weekly in the first hour of Tuesday’s show, from 6:25–7am, for a discussion between the two of us about our three issues.
Welcome And Where To Listen
SPEAKER_00This is Brad Keithley, Managing Director of Alaskans for Sustainable Budgets. Welcome to the Weekly Top Three, the Top Three Things on Our Mind here at Alaskans for Sustainable Budgets for the week of June 15th, 2026. The Weekly Top Three is a regular segment on the Michael Duke Show. The show broadcasts on both Facebook Live and YouTube Live, as well as via streaming audio from the show's website weekdays from 6 to 8 a.m. I join Michael weekly in the first hour of Tuesday's show from 6.10 to 7 a.m. for a discussion between the two of us about our three issues. We post the podcast of our discussion following the show on the Alaskans for Sustainable Budgets Facebook, YouTube, SoundCloud, Spotify, and Substack pages, also on the Alaskans for Sustainable Budgets website, as well as the projects page on national blog site, Medium.com. You can find past episodes of the weekly top three also at the same locations. Keep in mind that in addition to these podcasts during the week, you can also follow and participate in the discussion with us of these and other issues affecting Alaska's fiscal and economic condition by following us on the Alaskans for Sustainable Budgets Facebook page and through our posts on Twitter. This week,
Three Issues For The Week
SPEAKER_00our top three issues are these. First, we focus on phase one of the proposed AKLNG project. There's a reason the bullet line, now called phase one, has never been built. We ask why some think AKLNG changes that. Second, we dive deep into the AKLNG bill and ask what happens if Alaska builds phase one without the phase two commitments in hand. Is Alaska being set up? And third, we shift over to the federal side to discuss the looming problems with Social Security and explain why we are concerned they may hit Alaska harder than most. And now, let's join Michael. All right, the weekly top three, Brad.
SPEAKER_01So let's start off with number one. There's a reason that the bullet line, that's phase one, has never been built. Does the new AKLNG with its two phases change that? Hit me with the hard stuff here, Brad.
SPEAKER_00So,
Why The Bullet Line Never Penciled
SPEAKER_00Michael, we've talked about forever, it seems like forever, about a bullet line down from the North Slope. And by bullet line, what people have always meant has been a line that came from North Slope, from the North Slope oil and gas fields down to South Central to supply South Central. Um and that has has been a goal that some people have talked about since I don't know, since the 1970s when we first had uh when we first had gas supplies. Uh 1960s, 1970s, anyway, somewhere in there. Uh it all fades. Um, but we've talked about the bullet line forever. And it's never, it's never gone. I mean, it's never, never gone. And it's never been built. And there's a reason for that. Um, and and and it has to do with the economies of scale of pipelines. If you've got that chart, I think that I think that may be the best way for me to help explain that this morning. This is a chart. Well, not if you take it off the screen. There we go. This is a chart uh that that looks at the unit costs delivered of gas delivered to South Central. Uh the the the vertical line, the vertical axis are the prices per MCF or MMBTU. For this purpose, it doesn't make that big a difference. The the horizontal line, the horizontal axis is the volumes, the volumes involved, uh, the volumes being delivered. And what you can see is that at volumes that are low, at the we start at 200 um million cubic feet a day, at volumes that are low, the prices historically that the people have historically looked at have been very high. The green line at the top is a line that comes from a presentation by Gaffney Klein uh early in the early in the regular session and early in the special session, uh discussing uh uh phase one, focusing on phase one and the per unit costs of gas coming out of phase one. And the reason that the per unit costs are so high is the costs are high. Uh, the cost of building the line, not so much the cost of operating, but the cost of building the line are high. The divisor, when you when you do per unit, it's cost divided by volume. The divisor is relatively low. And so the per unit cost uh is high. And the green line traces what Gaffney Klein said about the costs uh per unit in this early chart. For those who are listening to it on the radio, the the green line starts at 300 million cubic feet a day, uh which is the lowest that the Gaffney Klein analysis goes, and that's $31 per MCF. For to give you a comparison, the current price of gas into the in into the N-Star line is about $10. And these are all prices into the N-STAR line. So the current price of gas into the N-Star line is about $10. The per unit cost at 300 million cubic feet a day is $31. That comes down dramatically, according to the Gaffney Clyde analysis, comes down dramatically at $500 million a day. Uh it gets down to $19, and then it's sort of then it sort of evens off uh as additional volumes are added. Ultimately, all of these uh analyses are targeted at 3 billion cubic feet a day, uh, which is the the full export volumes, uh, and ultimately you get down to down to $5. But the but but the reason the the the key to understanding phase one, understanding the bullet line are the numbers at the beginning of the chart. The current volume in South Central, the current uh combined NSTAR Chugatch, MEA, uh, Homer uh volume in South Central is 200 million a day. It's off the chart in terms of what Gaffney Klein did, it's off the chart to the left. And the unit costs uh at 200 million a day would be exponentially higher than $31 an MCF. So when people have looked in the at the bullet line in the past, they've said, how does it you can't make this work because the prices of deliver of gas delivered down the bullet line are so high that they that they exceed that they exceed the the alternatives, they exceed the competition, and they exceed any even reasonable estimate of what Alaskans could stand in terms of of their energy costs. What everyone has always said, which is true, and you look at the Gaffney Klein line, you can see that, is if we had export volumes, if we had a huge number of volumes that we were moving through that line, you would see you would see the the unit cost decline down to at $3 billion a day, which is full export volumes, down to $5. And so that would be economic. But but at the at the volumes that we currently have in South Central, even if you add Donland, which adds like $50 million a day, so we'd be at $250, even if you add Fairbanks, which frankly doesn't add much, but it'd add a little bit, even if you add those things, you don't even get to the $300 million a day, which is where Gaffney Klein's analysis starts at $31. So it's so the bullet line has always been viewed as as too risky, too costly to pursue all these decades that we've looked at it. The question is so the bullet line is now called phase one. I mean, phase one of the AKLNG project is essentially the old bullet line. So the so the question is, has the bullet, has the has AKLNG somehow changed what we're looking at here in a way that makes phase one economic? Because remember, phase two is not guaranteed. Phase two is what what Lenfard and the others have said is once we get the once we get the bullet line built, then we'll try to you know lock up the contracts for phase two and build the additional facilities necessary for liquefaction. It's not guaranteed. They they don't have any signed contracts for phase two. So so when you're looking at phase one, and we might get stuck in phase one, we have to analyze that. When you're looking at phase one, is there something in the in the AKLNG project that has that has made it economic when it wasn't before?
The 16 Dollar Price Promise
SPEAKER_00The thing that people point to is something that Glenn Farn is something that both Glenn Farn and NSTAR said last week in their testimony or the week before last, I guess, in their testimony before in during the special session. And that was an agreement, Glenn Farn's agreement to fix the price of the phase one volumes at $16 per MCF. And I've tried to replicate that on this chart as the red line uh as showing at $16. So that's considerably lower, uh uh lower than what we get at uh than what we get under just the old bullet line analysis at $31. So that so that starts making it look economic. Now the dashed line below the red line is the LNG import price from the latest, uh, from the latest LNG uh from the the latest uh uh uh Asian Pacific uh uh LNG uh markets is sort of the LNG import price at what it would be into South Central, including the kit, the the the gas, the regasification facility that we would need in South Central and what John Sims refers to as additional uh shipping costs. So that would so that dashed line is what the LNG price would be. The $16 is still above the LNG line. So if we the imported LNG line, so if we get stuck in phase one at $16, then then we're paying above, uh, we're paying above what the alternative would be by importing LNG uh according to the according to the current futures markets, the current projections of where LNG prices are going. So we're still paying more than we would under the alternative, uh, but we're paying we're paying significantly less than we would have under the old uh under the old bullet line analysis. What really, what I think is really motivating people is is the is the hope that phase two lands, that all of the all of the uh all of the export volumes commit and and phase two lands, and so you know we ultimately get down to the $5 because we add in the additional export volumes and it drives the the price of of the of the pipeline down. But there's no guarantee we do that. And so I we need to be analyzing phase one as a standalone. What if we get stuck in phase one? Is that a good place to be? I would I'll I'll I'll add this uh and then and then stop for a while. But I'll add this the $16 is artificial. There's no cost basis for the $16. It is it is it is a price that that NSTAR and and Glenn Farn have come up with through contractual negotiation and and and is one that looks like it's pegged to sort of be competitive with the imported LNG price. So it so you can say, look at that price, it doesn't matter if we're importing LNG or if we're getting it through the pipeline, we might as well get it through the pipeline because that opens up the optionality of phase two. Sort of looks like that's where that price comes from, but it's artificial. And and if there's one thing I've learned in my career, it's not to trust artificial prices because people go bankrupt. Uh people uh uh things change out there in the future, and artificial prices, non-cost-driven prices, prices that don't reflect fully costing the service, uh tend to go away. Um, you know, it's like sales prices. Right. Uh I I put something on sale today to try to you know motivate the market, but I'm not committed to it, and that sales price can go away, or I can go bankrupt, or all sorts of things could happen to make that artificial price go away. So that this is, I mean, so so the quandary I'm having is is there enough enough to trust the $16 price? And even and is the $16 price good enough compared to where we otherwise might be in phase one if we or whether we otherwise might be if we have to import uh all of our uh gas or LNG?
Getting Stuck In Phase One
SPEAKER_01So bottom line it here, what's your biggest fear? Is your biggest fear that we get phase one, we get locked into phase one, no phase two materializes, and Alaska is stuck paying at this artificial $16 rate, which is still higher than the imported price. Not by much, buck or two, but in the long run, that does cost us.
SPEAKER_00What's the big fear here? I think I think the big fear is we're stuck in phase one, uh, that we get stuck in phase one. I'm gonna talk more about how that fear sort of plays out in the second segment of today's show. But I'm the the biggest fear is we're stuck, we're stuck in phase one. And and we're and we're relying on this artificial price of $16 to to to you know to to make us feel okay about phase one. $16 will be a hell of a lot higher than what's being paid in the lower 48, it'll be a hell of a lot higher than what's being paid elsewhere in the Pacific Rim. So Alaskans will be paying more for their energy at that price level than anybody else. I mean, more than the Canadians, more than anybody else. We'll be stuck at that at that higher price in phase one. Now, the the the response is, yeah, but the alternative is is imported LNG, and you can't trust imported LNG. You've got a dashed line on there that may change tomorrow. Gulf of Hormons may get closed again, you know, all sorts of things may happen out there. And and I guess that's true, but the $16 is our also artificial. It's a it's a it's a non-cost-driven contract price that that could go away tomorrow. And and and it's just it it it it bothers me to be sitting the concern is to be sitting in phase one, depending upon that artificial price.
SPEAKER_01Brian asks uh interesting question. Remind me again who concocted this phase approach. This is a Glenfarn thing, right? I mean, this is how they broke it down to make it more palatable, or is this uh No, this is an AGDC.
SPEAKER_00AGDC did it before they before they entered into this agreement with uh with Glenfarn. And they did it. I'm gonna talk about this a lot more in the second segment because I I I have another worry out there. Um, but they did it because they they found that there was market pushback on on the on the export customers buying into a whole project. The export customers said, yeah, we'll we'll help pay for the LNG plant or we'll help play pay for the the treatment plant up on the north, but we don't want to pay for this whole pipeline. Um and and so they decided to go to this phased approach and get the uh get the pipeline built first and then negotiate with the with the export customers. Uh that exposes us to another big risk, but right that's where it came from. You'll get into that here in the next one.
SPEAKER_01Um, hey, Harold agreed with you. That's the key. They have some interest in the purchase agreements for exports, not enough of Pennsylat to build out a 48-inch export project. This idea that there's a viable phase one is lunacy. The risk of phase one only is so huge it would be endless court litigation for decades. This is kind of what you're talking about, this this risk of being stuck stuck or trapped in that phase one, where you're the pricing is again um is uh you know, again, problematic when you look at that and you see that the the dashed line is the import price at 1480 or whatever it is, and we get stuck at $16. Uh, I mean, even if we got to half volumes, it's okay, but it's not great, right? I mean, even at half volumes, it's not it's not great.
SPEAKER_00Well, there is no half volumes. You either you're not gonna build phase two on half volumes. You're gonna, you're gonna so there's one other thing I ought to say about this dashed line about the red line. The red line, this is locked in time at 20 2030. The red line is escalated for inflation. So the red line, the $16 keeps going up. You know, it hits $18, then it hits $20, then it hits $22. It keeps going up. The the the what's been going on in the in the energy markets is the energy market outside of Hormuz, outside of the the interruption of Hormuz, what's been going on is the energy markets is that in real terms, prices have been declining. Energy prices, oil and gas prices haven't gone up with inflation. So what what you see over time, what you potentially see over time, is that $16 going up, that $16 line moving up with inflation, and the dashed line going down as additional LNG supplies come on and as the market gets gets more competitive. So it there is a there's a spread now. The the danger is that spread or the the concern is that spread becomes bigger over time as those two factors work to to drive the wedge bigger.
SPEAKER_01Right. It's uh problematic to say the least, uh, with all this uh uh with all this uh this stuff going on. Um because again, we're already worried about, I mean, I've already seen an increase in uh you know our electricity uh bills and usage down here by almost uh 12% in just the last year. What does it look like if it goes up another 20 or 30 percent?
SPEAKER_00Well, it's gonna go up, Michael. I mean, that's that's one of the consequences of cookinglet running out of gas. It's gonna go up. Question is how high it goes. Question is whether it goes up to being driven by the imported LNG price or it goes on up and being driven by the phase one price. That's so the question is how high we go. It's not whether we're gonna go up, it's how high we go. And and there's a and and as I say, over time, because of the because of the growth in the red line uh by inflation and the decline in the LNG line by by competition, over time, uh that the the the how high do we go keeps getting higher and higher and higher as a result of if we're stuck in phase one.
SPEAKER_01David says, what happens when the import prices jump to $18 if they go? I mean, I guess if they go up.
SPEAKER_00How does that look? Then then you're you're you're looking at a at different lines, but you know, what happens if the uh what happens if the LNG prices go down to $12? I mean the the the LNG market is growing, the liquidity of the market is growing, the volumes are growing, so it's it's likely to become lower rather than higher.
SPEAKER_01Brad
AKLNG Bill And Phase Two Leverage
SPEAKER_01Keithley, Alaska's four sustainable budgets, the weekly top three continues. We move on to number two, which is tangentially connected to number one. Um, and uh so the question is what are we really setting up with the AKLNG bill? This new the bill that the House just passed, uh it's still got to go over to the Senate. The Senate's got to have its way with it, uh et cetera, et cetera. But what are we really setting up here? And it raises some more concerns for you.
SPEAKER_00Yeah, so let's let's imagine the scenario. Let's step out to the scenario where we've built phase one. And and we've built phase one without phase two commitments. That's the way the deal is set up right now, that's the way the statute's set up right now. We've built phase one without phase two commitments. So I'm an export customer, and I've already said all along, I don't like the total cost of this project. One of the reasons I haven't contracted with you is because of the total cost of the project. Um, and so I'm I'm still skeptical. I mean, you've you've built phase one, good for you, but it's still, but you're still telling me I have to pay the total cost of the project. I have to pay for the the GTPC, the GTP facilities on the north, the gas treatment facilities on the north, the liquefaction plant on the south, and I still have to pay a proportionate share of the cost of the pipeline. That's still that's still the all-in cost. And I and I don't like those costs. That's the reason I have never contracted with you before. So we've built phase one. What happens then? And this is this is where I this is where things get get interesting. I think what happens then is the is the export customers, the Japanese and the Koreans and the others say, look, if you only charge me half the cost of the pipeline instead of a proportionate share of the pipeline, you get the delivered price of the LNG down to where it's economic for me and I'll and I'll buy from you. I'm not gonna pay full price. I'm gonna pay, I'm gonna pay half price, or I'm gonna pay a quarter of the of the LNG price. We've or the quarter of the pipeline price. We've already built the pipeline. Alaskans are already stuck with the pipeline. And so it's already a fixed cost. And so what the export customers are saying is I'm not gonna pay full cost for it. You build it, you you pay for it, um, and and I'll pay you for the liquefaction plant and I'll pay you for the GTP facilities, but I'm not gonna pay you for a proportionate share of the pipeline. Let's go back to the chart um uh that was that we did in the first segment, because I can show what's going on here. So we show we show the the prices declining at bigger volumes, we show the prices declining until you get down to the three billion a day, the three thousand in. Million cubic feet a day, we pro we show the prices declining down to $5. And that's that's sort of the nirvana. That's what Alaska is targeting. But that $5 depends upon the export customers paying their proportionate share of the costs of the pipeline. If the export customers come in and say, look, I'm not going to pay the full cost, I've never liked this project at the full cost. I don't like this project now, even though you've built phase one. I don't like this project now. I'm not going to pay full cost for it. I want a discount on what I've got to pay on the pipeline. What happens is Alaskans get stuck with the remainder of the price with the remainder of the cost of the pipeline. So we've been depending that $5 is depending on, depends on the export customers paying 90% of the cost of the pipeline. And Alaskans only paying 10% of the cost of the pipeline at that volume. If the export customers come in and say, I'm not going to pay 90%, I'm going to pay 50%, or I'm going to pay 40%, or I'm going to pay 30% or 20%. They have all the bargaining power because we we've now built this oversized pipeline, depending upon them coming. And they say, look, I'm not going to come. I'm not going to pay for it unless you unless you discount the price. So what happens then is that is that we never reach that $5. What happens is we start trending back higher up the curve uh on uh on on the price curve and start and start ending up with higher prices. If when you think through the negotiation of all this, what the Japanese are telling themselves is look, these guys were happy to pay $16. They were happy to go into phase one at $16. So I'll just reduce the amount I'm willing to pay for the pipeline until they still pay $16. They were happy to do it before. Why should they, why, why, why am I going to pay to help them lower the price down to down to $5? And the negotiations on phase two become around a price discount. Now, some people say, oh, well, that's not going to happen because we put it in the statute or we put it in the contract that that the export customers will pay a fully allocated share of the cost. The export customers say, well, fine. I'll just go buy my LNG from Mozambique or I'll buy it from Qatar or I'll buy it from Australia or I'll buy it from you know any of the other 20,000 projects that are Kidamet that are under development right now. And they'll say, look, you know, fine. You know, you don't want to discount the price to me, I'll just go buy it elsewhere. That's fine. I mean, it's more economic elsewhere. Anyway, if you're going to charge me the full price, and I'll just go price. So anything you put in the contract or anything you put in the statute is meaningless because it all depended on the export customers agreeing to pay their fully allocated share of the costs when they come in. If they say they ain't coming, if they have to pay fully allocated share of the costs, then all of that stuff that's in the statute are in the contracts, meaningless. And I think I think these negotiations, I mean, it's once we build phase one, once we're stuck in phase one, once we've built that pipeline, put the pipeline in the ground, and we have to pay for it. I think I think we've put ourselves at risk, even if there are additional export volumes that come on in phase two. I think we put ourselves at risk of being stuck at 16 or near 16 for the duration uh of the of the pipeline because the export customers said they won't pay their their allocated share of the costs.
SPEAKER_01This
What We Would Change In Senate
SPEAKER_01uh obviously is troubling. If Brad Keithley was king for a day, what would you do to what would you do to fix this? What what's the answer here? Uh is the Senate still has this new bill in its hand. What could the Senate do to make this uh more viable?
SPEAKER_00I'd never build phase one. I I would I would never build phase one ahead of phase two, ahead of the commitment of the export volumes. I mean, so the export customers still may come in and say, look, I'll pay 80%, 80% on the dollar of the phase two costs. And phase one, and and so the project still may make sense. Even though we don't get to $5, we may get to $750, we may get to $8, we may get to $10. All of that may make sense and we go ahead with it. But if we go with phase one first, I think we're running the risk of getting stuck at $16 or maybe higher over the life of the in-state volumes over the life uh of the project. So I would never, I would not build if I were king of the day, I would not build phase one first. I would not build phase one without having the LNG, without knowing what the export market is going to pay, what they're willing to bear of the total costs without having that in hand and then seeing what the impact's gonna be uh on the in-state customers.
SPEAKER_01What's the
State Exposure If Exports Stall
SPEAKER_01exposure to the state if phase one gets locked in and we have problems with phase two? Um they're slow to respond, or like you said, they want some kind of discount or they just don't show up. What is the what's the exposure to the state? What is the danger there, other than we're paying, you know, uh a premium on our own electricity? But what what's what's the danger here?
SPEAKER_00So the danger to the state is that the economics of living in Alaska sort of spiral out of control. The energy costs go up because now we've locked ourselves into high priced, uh, a high price bullet line that we've never been willing to do before. All of a sudden we've locked ourselves into a high price bullet line, and the energy costs in South Central and every and every place else sort of sort of spin out of, sort of spin out of control. And so the economy, the underlying economy of the state uh becomes problematic. And so all the social welfare welfare costs become higher uh as we're as we're trying to trying to deal with that. The other thing that happens to the state is we never get AVT because AV because property taxes depend upon phase two. We never get any any property tax out of the out of the deal ever. Uh, the what we're getting off the slope in terms of royalties and production taxes, very minor. The phase volume, phase one volumes are very minor, and the revenues from that are very minor. So we have a state that has high energy costs that doesn't isn't getting offsetting, any sort of offsetting revenues from the construction of the phase one line.
SPEAKER_01And it makes it that much more difficult, obviously. All these questions make it that much more difficult to get investment for FID. I mean, right, that's where we're that's where we're at here. Because that's what these are the these are the calculations that the investors are going to be doing.
SPEAKER_00Yeah, I mean, people, I don't think, I don't think we uh well, I don't know if we got anybody in the legislature who's been involved in a negotiation like this before. Maybe Bert would say he has, but I'm not sure. Um and and what what you're not counting on is we have ruthless people who engage in ruthless economics on the other side. The export customers engage in ruthless economics. And so they're saying, look, I can get X price from another LNG project. If you match that, I'll go with you because fine, I want to buy from Alaska for some reason, but but I can get X price from another LNG project, and and and you know, somebody will say, Oh, but our statutes and our contracts say you have to pay the fully allocated share. And they'll sort of stare at you like for a few minutes and go, Are you nuts? I I don't have to pay anything, I don't want to. Right. And and so I will I will pay you X. Right. I'm the buyer, I'm the buyer, you're the seller, I'll decide whether I want to buy or not. Yeah, exactly right. And I don't I don't think anybody in the legislature has really been involved in one of these deals where you're up against a roof of somebody on the other side who thinks that way. And and and it's tough. I mean, you're sitting there, you you've you got sunk costs. I was involved in one of these once. You got sunk costs in a project that you've counted on recovering by fully allocating the cost to the additional volumes, and the additional volumes aren't showing up. And you say, Why aren't you showing up? Well, your price is too high. Cut your price, and I'll and I'll and I'll uh and I'll buy from you, and you're going, but but but but my economics are based on you paying the fully allocated cost. Right. And so they're saying, I don't care, you know, I'm fine, I'll go someplace else. And so you end up because of the way utilities work, you end up shifting those costs to the to the in-state customers. You shift it shift shift those costs to the utility customers, and that's that's what we're setting ourselves up for. And um so when people say, Oh, it's $16 now, but it'll be $5 once we get phase two, no, it won't. It'll be it's $16 now, and it may be $16 even when we get phase two, maybe 12, maybe $10, maybe eight, and maybe all that's better than where we otherwise are going to be. But I think it's foolish to be sitting there and making making judgments based on the premise that we're gonna get to $5 in phase two, because I don't think I don't think we are if if we do these, if we do these two phase, if we do this two-phase deal.
SPEAKER_01But Chris says Glenn Farner's ready to build this pipeline into the private project, and they have investors.
SPEAKER_00Um no, they they don't. I mean, they've said, I mean, uh how many times do people have to say something until you finally understand what they're saying? They've said they don't have commitments to phase two yet. They want to go ahead and build phase one, they want to lock in Alaskans, the in-state market in Alaska, and and hope that we get the phase two volumes. All they have investors for, uh, Chris, maybe is phase one. They don't have investors, they don't have contracts, they don't have commitments for phase two yet. Maybe, maybe, maybe he was being sarcastic.
SPEAKER_01But I I don't think he was being sarcastic, but I mean, you know, maybe, maybe. Again, we're still looking for the investors out there, and that's why the economics of it matter. And Barbara makes a point, but at the same time, like you're talking about those hard-nosed economic terrorists, don't I mean they're not going to care about it? She says so much focus on export prices, not enough focus on how it helps economic development. But again, you've got to build it to have the economic development. And if the cost is twice what it would be to import it, how's that economic development working out? And why would it care? Why would the legislature care?
SPEAKER_00I I don't I don't think $16 per MCF is gonna be is a huge bump to economic development. We're paying 10 now, and we're having trouble with economic development in the state. I don't think bumping it up to 16, and again, that's an artificial price that we'd hope would stick. Uh, I don't think bumping it up to 16 or whatever it becomes is gonna is gonna be a huge spur to economic development. What you know, what when people talk about economic development, oh, we get to construct the pipeline, we have all those jobs around the pipeline, they go away. I mean, yeah, we construct the pipeline, but we have to live with the costs of it after. And and and whatever happens around the construction of the pipeline, we're essentially subsidizing by if we get stuck in phase one, we're essentially subsidizing by the higher energy costs we have to pay the remainder of the life of the of the project.
SPEAKER_01I mean, it may be, and she just made a point that said, well, we're trucking it now. I mean, so it may be beneficial to fare banks to have it in a gas line at $16 versus trucking it down. That may be economical overall, but if the whole thing gets stuck and the prices around the entire state increase by another, you know, 40%, that again, that still puts a real kibosh on economic development overall. I mean, for the whole state. I mean, again, it may be maybe more beneficial for fair banks to have it accessible right there at the at the at the well head or at the at the trunk line that they're gonna drop into fair banks, but it's still overall problematic.
SPEAKER_00Yeah, it's marginal, it's it's marginally better for for fair banks. I mean, fair banks is being things around fair banks right now are sort of are sort of bizarre because of Hormuz and because of the price spike of of oil. It's marginal over over time, it's marginally better for Fairbanks, maybe to have that that coming in, but it's a whole lot worse for South Central, a whole lot worse for Anchorage than uh than you know the the alternative of imported LNG.
SPEAKER_01Uh Rick said, Mike, did you and Brad watch the Senate meeting last night? Some questions they asked were so it's like they just came in and sat down and started with no knowledge of the project.
SPEAKER_00Yeah. I mean we don't have I mean, part of part of my part of my concern about this is we don't have a whole lot of experienced people uh dealing with these issues in anywhere in the legislature. Um and it really takes someone who's lived through these wars to understand what you're in, to to really, you know, think through the issues. Now, the Senate has advisors, they have Daphne Klein, they have all sorts of people available who have lived through some of these wars and can can make recommendations and can give them advice. But but they themselves, the senators, I mean, I they're all good people. They got elected, you know, you we need to we need to to give them respect because they they put their lives on the on the line and they went out and got went ran through an election, got elected. I I give them due respect, but they don't have the experience to be dealing with this stuff. And so, and so yeah, I'm I'm I'm paying a lot more attention to what Gaffney Klein says and a lot more pay paying a lot more attention to to the to what Glenn Farn's actually saying about phase two than than I am to the senators.
SPEAKER_01Um yeah, Brad's Brad's right. Not enough horsepower in the Senate, right? There's not enough knowledge uh in pulling these things together uh in the Senate. Barbara goes on to say, I'm not talking about economic development from the pipeline directly. I'm talking about other industries where development is stalled due to lack of electricity. Uh, I mean, there is something to that, but again, it doesn't equal out the price for everything overall.
SPEAKER_00But but again, but again, I mean, there's not going to be much economic development at $16 escalated uh uh uh uh gas. I mean, we we are not competitive with the Lower 48, we're not competitive with Canada, we're not competitive with other places in the Asian Pacific. We're sort of living up here by ourselves, and and or we're and we're not even competitive with Hawaii, believe it or not. And so, and so yeah, uh, it's it's maybe lower for Fairbanks than where we are now, but it's not overall, it's not improving the economics of the state as an economic development location.
SPEAKER_01Brad Keithly, Alaskans for sustainable budgets, the weekly top three. No one understands LNG and energy better than Brad. That's why we have him on every week, because he's that kind of guy. He gives us
Preliminary Deals And Missing Pricing
SPEAKER_01the hard truths even when we don't want them. Um, Jeremy Bynum said it something interesting we didn't get to, and I wanted you to touch on it real quick. He said, Glenn Farn indicates they have approximately 13 of 16 MTPA through preliminary commercial agreements needed for the project. I'm not sure what MTPA is, but I'm assuming metric tons per annum. Okay, so that they have the annual, they have 13 of 16 uh metric tons of what they need. Um, what do you what's your what's your take on that?
SPEAKER_00Yeah, I've heard I've heard that, but there it's preliminary. Underscore the word preliminary in um in that and underscore and and and talk about the fact that there isn't any pricing disclosed in those preliminary agreements. Again, I'm telling you, if we build phase one, if we become locked into the fixed to the fixed costs on phase one, uh the export customers are gonna say, I'm not paying all that, I'm not paying my my my share of that. And and I, you know, I don't care what those preliminary commercial agreements say, they will say that. Uh the export customers will say that and they will they will drive the price down. That is how these things work. So yeah, I mean, they're they're preliminary commercial agreements, whoopee. They're preliminary commercial agreements, and and there's a long way to go before we lock those down. If you're betting that that that those preliminary agreements turned into fully priced, uh uh full agreements automatically uh at some point, um, you're betting the wrong way.
SPEAKER_01Yeah, absolutely. Brad, final thoughts here as we watch. I mean, is there s is there a way to save this in the Senate side? What happens? What's your what's your what's your your thoughts here this week?
SPEAKER_00I don't know. Uh I don't know. I I the if we if the Senate approves phase one, going at forward with phase one uh without having the phase two commitments in hand, they're putting Alaska at a lot of risk. It will it will it work out in the end? Yeah, no, it won't because because the the export customers will drive hard bargains. They will see that Alaska's already committed to those fixed costs, and they will drive hard bargains. So I think I think a big issue to watch in the Senate is whether they divide whether they commit to going forward with phase one. The House did. Um whether the Senate commits to going forward with phase one without having the export uh volumes locked in.
SPEAKER_01Well, you're just full of good news today, Brad. I don't know why we do this. It just feels so it feels so dirty by the time it's all said and done.
Social Security Clock Hits 2032
SPEAKER_01Brad Keithley, Alaskans for Sustainable Budget, number three of the weekly top three. This is the fastest two hours in radio. It really is. Brad's just over here shaking his head. Um, all right, Brad, uh you've got a you've got a uh a national issue uh that you want to focus on uh that I touched on earlier this week because I just had to shake my head and be like, I know I don't normally touch on these things, but it's indicative of what's happening uh in the future, and that has to do with the latest report coming out of Washington, D.C. on social security, or I should say, for those of my generation, social insecurity. Uh that's what we're facing. Give me your thoughts here, Brad, on why we should be paying attention to this.
SPEAKER_00So we've talked about this before on the show, and I think that's when you told me that we don't talk about federal issues. I talked about it a few times. Right. Um, but but we've talked before on the show about a long time ago, maybe five years ago, about uh about the Social Security and the problems that we're facing with Social Security. It's coming nearer. There's a recent um recent report uh this past week out of the trustees, the Social Security Trustees, that says that the the Social Security Fund, the excess fund that's been built up over time is expected to uh is expected to run dry uh now by 2032. And when the and in what social security social security is really funded in two different ways. It's funded in part by the Social Security payments made by everybody who's working um uh along the way. And it's funded in part by a trust fund that's been built up over the years, by excess payments that have been made by everybody working during the baby boom, excess payments that's been made by everybody, above and beyond what was needed to fund ongoing Social Security. So we build up this excess fund uh over time. Um, but as the baby boom generation has moved into retirement, we've started drawing down the excess fund. The funds being generated by workers today are not near enough to pay the Social Security that's going out the door. The the tax is being paid by the workers today is not near enough to pay the Social Security that's going out the door to the to the current retired population. And so we've been drawing down with pulling down on this on this excess fund. Um, and and we're the Social Security trustees now tell us we're gonna hit hit the end of it in 2032. The excess fund is gonna be drained by the end of 2032. What that means at that point is all that Social Security is able to pay is going to be the funds that are coming in the door, in the door from current workers. Um, and that will result that's not enough to pay the full benefits that that that have have been paid and are currently set up by statute. All what but all that the that the current revenues will be sufficient to pay is about 80%. Will it be a 20% drop, maybe a little bit more than a 20% drop in the uh in the benefits being paid to Social Security. And so we're facing this huge problem in 2032 around the baby boomer generation, um, in terms of the potential drop in Social Security benefits by 20%. We're facing a huge problem. The the other generations, the working generations, are facing a huge problem in that the baby boomers are going to say, I was promised these higher, these higher benefits, you need to pay for them. And so the potential transfer of addition of the potential need to raise social security rates on the remainder of the population to continue to pay these pay these payments.
Why Alaska Takes A Bigger Hit
SPEAKER_00Alaska, reason I want to talk about this, and the reason I'll probably talk about it more over time, is Alaska is sort of particularly hit by this because our population has aged and we have such such a high share of retirees uh sitting in the state right now that is sort of supporting the economy and sort of supporting uh a variety of things uh up here. Um, and and so if you see this drop in so it's gonna hit all the states because all the states have retirees, but it's gonna hit Alaska proportionately higher, a bit higher, because we have a proportionately higher share uh of retirement. Of retirees in the state. I think I saw one figure that we have about 120,000 retirees out of the 750,000 population. But we have about 120,000 retirees, people on Social Security in the state. And so we're going to get, we would be affected by this drop. Conversely, if the solution to this is to maintain benefits, but to charge current the current generations, current working generations higher in order to pay those benefits, then we're going to get hit by increased taxes, federal taxes, on the working population in the state. Right. The state's already, I mean, we're already marginal in terms of our economics for the working population. We're already seeing out migration in the working population. So any elevation of taxes or any elevation of government take on the working population affects Alaska probably disproportionately, also because we're sitting on this ragged edge of the economics for the working age population. It doesn't really matter. I mean, it matters if it comes from the state level, um, uh matters because it's focused on Alaska if it comes from the state level, but it also could come from the federal level and have an impact on us because we're just sort of sitting on this ragged edge of economics for our working population. So it's a it's an issue to Alaska to me. It's an issue to Alaska to from the from the two different directions. There are solutions
Options Like Ages Caps Taxes
SPEAKER_00that people have been talking about. They've been talking about, you know, increasing the age or upping the age at which Social Security benefits become available. That sort of has a marginal impact. I mean, depending upon how far you move it up, that sort of has a marginal impact because the baby boomer population is the baby boomer generation is the one causing this problem and the and or causing, creating the the issue with with the you know the benefits being paid. And and so the baby boomer generation is largely moving into retirement now. And so even if you up the age, you wouldn't you wouldn't reverse somebody out. You wouldn't say, oh, you've been taking social security, you can't have it any longer until you until you get to the next age. We've sort of, we've sort of, all the baby boom boomer generation has sort of moved into retirement. So, you know, upping the age helps at the margin, but it, but it's not a long-term solution to to the issue we're facing. So it's an issue that we need to dig into in in uh that we need to understand Alaska because it's going to have an impact on and and become advocates about in Alaska because it's gonna have an impact on us, both on our retirement age population and on our working age population as we uh as the federal government tries to deal with it.
SPEAKER_01No, we talked about this, you and I talked about this previously, and again, you know, when you look at the numbers and you figure that 20 years ago there was 14 workers for every recipient uh paying the paying the the take for every Social Security recipient, and that that's now been whittled down to two workers for every recipient. That math just doesn't math at this point. I mean, you can't just keep even if you pushed it out, like you said, and you bumped it from 62 to 65 or 65 to 70, it still doesn't matter because again, you still have fewer workers in the long run because of the differences in birth rates, et cetera. So it's a real problem. Two minutes here, Brad, two and a half minutes. Final thoughts on the Social Security problem.
SPEAKER_00Well, it's a it's it's an issue that that that that we have to address. And it's there aren't any good solutions to it. I mean, part of the solution, but it's at the margin. Part of the solution is increasing the the age. Part of the solution is capping the benefits. I mean, benefits get paid sort of regardless of your of your other income right now. And so high income earners are high wealth individuals uh who've worked and who paid into Social Security. They're they're pulling their Social Security even though they're high wealth individuals. Part of it is sort of capping the benefits uh uh by by income bracket. Part of it is increased contributions, part of it is perhaps increasing the contribution, becoming a bit more progressive in the contributions, uh uh and so that you're not affecting the the working, the working age, working class. Um but you we've we've got to think through these solutions. It's in it's important to Alaska that the federal government think through these solutions in a way that doesn't adversely uh impact us, Alaska, uh, more than uh more more than we can more than we can stand. Because as I say, you know, we've got a hot huge, we've got a high number of retirees, and we've got a working age population, a working age population, working class population that's sitting on the ragged edge of economics right now, anyway. So we need to we need to work through that.
SPEAKER_01Uh I mean, as somebody who's paid into Social Security my whole life, I mean, I really don't care how much I make. I I want my money back, right? I mean, that's kind of the I want my portion of the money back. That's what the that was the promise, is that if I paid it in there, you'd give it back to me, even if it's just what I paid in. Not don't even don't even up it for interest. Just pay me what I paid in.
SPEAKER_00Yeah, I hear that often. That's not how Social Security works. I mean it didn't it didn't go into an individual retirement account. No, or you you you paid for retirees that you you paid for your dad. You paid for your dad's retirement.
SPEAKER_01It's a it's a Ponzi scheme.
Generational Squeeze And The Math
SPEAKER_01That's that's the whole thing. It's a Ponzi scheme. We know it. And uh, and now the House of Cards is starting to get real shaky at this point. So I'm in my late 30s. Social Security won't be worth anything once I'm retirement age at this rate. They are again this thing is supposed to go sideways when I'm become what when I hit 62. 30 some 2032, I hit 62. That's gonna be the year that they're already I'm screwed already.
SPEAKER_00I'm just I'm screwed, is you know, uh when it's all said and done. So, Michael, what are your generation X? I I I lose I lose track. I'm Gen X, yeah. I'm Gen X. So yeah, so Gen X is the ones that's they're really, I mean, Gen X really doesn't come out well.
SPEAKER_01No, Gen X takes it in the ass every time on these things, and we're the ones that are gonna we're left holding the bag. Like, what happened to my shiny? You were supposed to, you know, what's going on?
SPEAKER_00Yeah, Gen X is gonna, they're still in their working years, and so they're gonna be part of the of the population that's gonna have to pay more, uh, contribute more to keep uh to keep the the scheme going. And they're gonna be part of the generation that gets the gets the the you know the the bell or whatever it is pushed back more and more and more and more right uh uh in order to uh in order to reduce reduce the number of people that are pulling pulling from social security. Uh Jen X is uh and you know and that's that's just the way the system has been has been set up to work in that way. So Ponzi scheme.
SPEAKER_01I stand by that statement. It's a Ponzi scheme. Leakes says, why are there only two taxpayers for Social Security now? Well, it has to do with one baby boomers. I mean, the gen, you know, the boomer generation. That was a huge influx of people post-World War II. Uh Gen X, Millennials, Gen Y, uh, you know, the IGen, I mean, everybody that's going on now, they're having babies at a much lower rate. Um, and so there's much less participation in the workforce. And so that's where you're seeing there, you had more workers during the boomer generation than you did during Gen X or any subsequent generation. And so there's fewer people paying into it. And of course, you have inflation and everything else. So it's a it's a problem, Brad.
Immigration And The Worker Base
SPEAKER_00There's one other factor, uh, immigration. Uh, a big part of what was going on up to this point was immigrants, uh, legal or illegal, we're we're paying into Social Security. I mean, one of the things about Social Security is taken from your paycheck, right? So even if you're an illegal immigrant, if you're getting paid by someone who's not in jail, if you're getting paid by an employer who's paying his Social Security taxes, withdrawal, pulling from your paycheck, the Social Security taxes, paying with the government, uh, legal or illegal, you were helping to support the Social Security system. As we have contracted immigration, we've reduced the number of people paying into the system. And so we've put a greater burden on those people remaining uh in the system. One one of the one of the biggest advocates for immigration, legal immigration, increasing legal immigration, are those who think about Social Security. Because immigration is a factor, a not insignificant factor in increasing the working population and uh and and helping uh helping pay off the Social Security obligations. All right.
SPEAKER_01Um tough stuff. Uh final thoughts, Brad. 30 seconds, 20 seconds here.
SPEAKER_00Anything left? It's uh it watch the, I mean, go back to LNG, watch the LNG debates. It's uh it's gonna be uh it's gonna be interesting, and Alaska is, in my opinion, is a significant risk uh if we go forward with phase one without having the phase two contracts locked in.
SPEAKER_01Brad Keithly, Alaskans for Sustainable Budgets, the weekly top three. We're out of time, hour two, dead ahead, the Michael Duke Show.
SPEAKER_00Well,
Final Warnings And Sign Off
SPEAKER_00that's a wrap for another week's edition of the weekly top three from Alaskans for Sustainable Budgets. Thank you again for joining us. Remember that you can find past episodes on our YouTube, SoundCloud, Spotify, and Substack pages, and keep track of us during the week on Facebook and Twitter. This has been Brad Keithley, Managing Director of Alaskans for Sustainable Budgets. We look forward to you joining us again next week on the next edition of the weekly top three.
