The recent announcement by the state’s bank AIDEA, the Alaska Industrial Development and Export Authority, and the Alaska Gasline Development Corp. warrants close examination not only by the Legislature but every Alaskan who might become a ratepayer utilizing the natural gas.
The AIDEA proposal commits up to $50 million as a backstop in support of engineering work on the proposed pipeline to move North Slope gas to Fairbanks and Southcentral Alaska. The work would be conducted and initially funded by an unnamed private company. If the study concludes that the project is not economically viable, then the state will be on the hook to reimburse the $50 million.
This in effect creates a contingent liability for the state without oversight or approval from the Legislature.
The first phase of the project is estimated to cost $11 billion to $13 billion. The second, much more expensive phase would export liquefied natural gas to markets in Asia.
The proposal approved by the AIDEA board and AGDC represents a significant financial risk to the state. History tells us we are almost certain to end up paying out $50 million.
The combined efforts to bring Alaska gas to the markets of the world as well as supplying Alaska’s needs has consistently run up against the hard economic test of rate of return versus the risks. It is very difficult for this former banker to contemplate amortizing an $11 billion project with less than half-a-million Alaska ratepayers.
Like many others, I don't see the pipeline as a viable or affordable option. Now is the time to consider other opportunities, of which there are several.
Importing liquefied natural gas to help meet the needs of Southcentral Alaska, while maybe necessary in the short term, is not a viable long-term solution from either a financial or philosophical perspective to fuel the state.
Burning the gas on the North Slope to generate electricity and building a transmission line to deliver the power to the state’s population core would cost less than a gas pipeline but would present a single point of failure if the lines went down, something unacceptable to utilities.
While the state should continue to support gas exploration but there is little hope that the impact will be meaningfully beyond a few years.
Of course, we all want clean power, wind, solar, tidal, even small modular nuclear are increasingly viable, but without sufficient natural gas supplies to provide baseload power or advancement in battery energy storage, this option is only a piece of the overall puzzle.
A more realistic option is the estimated $11 billion, 471-mile rail extension from Fairbanks to the North Slope. It could be funded through bonds issued by the Alaska Railroad and repaid by operating revenue.
A railroad extension could also support the Ambler Road project to help open more land in the Interior to mining, and aid in the development of a petrochemicals industry for export. A railroad could reduce North Slope oil exploration and operating costs, stimulating the development of marginal fields.
It would be a major leap forward in connecting the Alaska Railroad with the Canadian/U.S. transcontinental system near Prince George, British Columbia. This would relieve our state’s sole dependance on marine transportation.
Let's examine all the potential options. Instead of throwing $50 million after one alternative, let’s ask the Institute of Social and Economic Research at the University of Alaska to evaluate several approaches and see which one rises to the top. Then we can focus our financial commitment on the alternative that makes the most sense for the next generations of Alaskans.
Frank H. Murkowski is a former governor (2002-2006) and former U.S. senator (1980-2002) from Alaska.
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