As political shenanigans continue to delay approval of the Keystone XL pipeline, Alaska voters hold the key to avoiding a similar fate for what could be North America's largest pipeline project.
At an estimated cost of at least $45 billion, the Alaska LNG natural gas pipeline project will deliver jobs and provide a boost to the economy in towns and villages all along the 800-mile route stretching from the North Slope to the Kenai Peninsula. After decades of talking about how to tap into the vast gas resources on Alaska's North Slope, this project is poised to make that reality. The project passed a major milestone last month when the Alaska Legislature approved the required legislation to start preliminary front-end engineering and design work -- legislation that was recently signed into law by the governor.
That work is scheduled to begin this summer about the same time Alaskans head to the polls to vote on a critical ballot measure that could bring all the progress and promise to a crashing halt.
Approving Ballot Measure 1 would return Alaska to an outdated tax structure, called Alaska's Clear and Equitable Share or ACES, under which major companies avoided making energy investments in the state. That oil tax structure was tied to the price of oil over a broad range of prices, and it made tax payments vary each month. Not surprisingly, Alaska saw oil production continue a known decline trend as companies sough to invest elsewhere in places around the world with a more stable and predictable tax structure.
Last year, however, the oil tax was reformed by the Legislature. The new structure enacts a higher base tax rate and sought to lessen the reliance of the state's tax on the price of oil. Companies supported -- and support -- the reform because it made the state a far more predictable environment to invest in. But that reform is now up for repeal this August.
By most accounts, the reform is working as planned. At Point Thomson on the North Slope, almost $2 billion has already been spent with more planned as the natural gas pipeline project progresses. BP and ConocoPhillips are investing billions to restore old North Slope projects and putting Alaskans to work. While local companies, like PRL Logistics, are spending millions preparing for gas. Overall, billions of dollars are planned for Alaska investment over the next several years, and the law's only been on the books for four months.
A repeal vote would return the state to the volatile ACES tax structure, which could be devastating for oil projects. But it could also imperil the new gas pipeline project. As the Alaska Gasline Development Corporation's President Dan Fauske said, an oil tax repeal could "take this gasline and put it on the back burner."
For the last six years, the State Department and the Obama administration have slow-walked the consideration of the Keystone XL pipeline. That pipeline is a $5 billion project that's expected to create more than 40,000 new jobs and thousands of dollars in fresh economic revenue. At nine times the cost, at least, the Alaska natural gas project could generate up to $4 billion annually for the state and an unspecified number of jobs. Yet, the number of jobs -- and the state's future as a leader in natural gas exports -- seems to depend on the decisions Alaskan voters make when they head to the polls this August.
Brigham McCown is a principal and managing director of Nouveau Inc. In this role he advises private sector clients with international and national issues pertaining to the transportation, energy, homeland security and logistics industries.
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch, which welcomes a broad range of viewpoints. To submit a piece for consideration, e-mail commentary(at)alaskadispatch.com.