Fairbanks Senator Pete Kelly has asked his fellow legislators to have the state build a coal-fired power plant on state land to ensure energy security and affordability for the Railbelt, and to hell with federal regulations against doing so!
Apparently, the senator either did not get the memo about the abundance of proposed energy megaprojects or believes you just can't have too many of these projects in the works.
The state of Alaska is already pursuing four other projects, each with the goal of ensuring Railbelt energy security, affordability, and reliability:
• North Slope LNG plant, $400 million.
• Susitna-Watana hydropower project, $6 billion.
• "Alaska Stand Alone Pipeline," $8 billion.
• "Producers' Pipeline," $65 billion.
Each gas pipeline would provide far more energy than the Railbelt presently requires. The 750-foot-high Susitna dam will provide one-fourth the energy used for electric power and heating, while the North Slope LNG plant will provide an eighth of the need.
Dan Fauske, the Legislature's handpicked CEO of the Alaska Gasline Development Corporation, recently assured legislators a pipeline will be built. So, why are the dam and LNG facility still in the running? There is certainly no reason to entertain Sen. Kelly's misguided and inappropriate resolution to build a coal-fired power plant.
Yet, notwithstanding Mr. Fauske's confidence in securing North Slope natural gas for the Railbelt, the state has not ceased funding for licensing the Susitna dam (to be owned and operated by Alaska Energy Authority) nor for the North Slope mini-LNG plant (to be owned and operated by MWH Americas Inc.). Clearly, the Legislature is not convinced a North Slope pipeline is a done deal, and has decided to hedge its bet on the North Slope gas pipeline by placing side bets on the Susitna dam and the North Slope LNG facility.
The problem is that these side bets are a sub-optimal hedge, because, at best, Susitna hydroelectricity and LNG trucked to Fairbanks will supply slightly less than half of the energy for electric power and heating required by Railbelt consumers, which is also why Railbelt electric and gas utilities are also hedging their bets by planning for LNG imports.
During all the time that these four projects have been steaming along parallel tracks, the state has neglected the best bet of all for secure and affordable energy -- the Cook Inlet gas resource lying offshore, estimated to be at 7.5 trillion cubic feet, a 100-year supply for the Railbelt.
Of course, the state would dispute it is neglecting this option: the Department of Natural Resources routinely asserts the various financial incentives from the state to the industry have catalyzed a veritable Cook Inlet "Renaissance," with new gas fields just around the corner.
It is true there has been increased investment in the existing gas fields: more gas is being eked out of the Kenai Peninsula's legacy gas fields, which has pushed back the date when supply from existing gas reserves will not be sufficient to meet demand to sometime between 2018-2020. At that point, supply will decline steadily until there is no gas left, sometime in the 2040s.
Only one new natural gas field is on the horizon -- Furie Oil's offshore Kitchen Lights unit, which was first discovered in the 1960s. To justify investment in developing this gas field, Furie, however, will need to sell most of the gas to foreign markets.
The one major investment by the state in Cook Inlet -- $23 million in Buccaneer Oil's jack-up drilling rig -- has the rig exploring for oil not gas. Still, DNR would have us believe the increase in exploration in Cook Inlet is aimed mainly at finding and developing the gas resource, when the truth is the exploration is actually targeting oil, much more profitable than gas in the world market.
Since the state's strategy of financial incentives to find and develop new Cook Inlet gas fields has been a losing bet, the optimal bet to secure a long-term, secure, truly affordable gas supply would be for the state to develop the Cook Inlet gas resource it owns.
Rather than be compelled to sell the gas in the export market as would a private company, the state would restrict the gas for use in Alaska and recoup its development, construction, and operating costs over an extended period of time, just as it would with the proposed Susitna hydropower project and the other proposed energy mega-projects.
The price of state-owned and produced Cook Inlet natural gas could be as low as $3 per thousand cubic feet (Mcf) if sold at cost, which is how Susitna electricity will be priced (at cost).
By way of comparison, the price of Susitna electricity is the equivalent of $13 /Mcf gas; the price of gas from North Slope LNG is $15 /Mcf; North Slope pipeline gas is $9 /Mcf, and the price of imported LNG is about $13 /Mcf.
Yet, with state-produced Cook Inlet gas beating the price on all the other options, the state rejects the option of a state gas utility as downright un-American!
On the other hand, establishing a state gas utility to provide the maximum conceivable benefit to Alaska residents from the use of the state's natural gas resource in Cook Inlet would seem quite in keeping with the Alaska Constitution.
After all, the state is already partnering with oil and gas companies in exploration and development, as in the aforementioned investment in Buccaneer Oil's drilling rig and the MWH America's Inc. LNG facility, which in effect makes AIDEA the state oil company.
If the state is willing to spend millions on seismic surveys in the Arctic National Wildlife Refuge, finance a multi-billion dollar dam to turn its water resource into hydroelectricity, as well as invest billions to ship natural gas, then why shy away from the best option to provide the Railbelt with a secure and truly affordable energy supply?
Jan Konigsberg manages Alaska Hydropower Project with support from the Hydropower Reform Coalition.
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.