Alaska's energy needs are too important to allow decisions to be made without careful consideration of the alternatives. With that thought in mind, will everyone who cares please sit tight and wait until all of the alternatives are reasonably well understood before urging decision-makers to plunge ahead and build an in-state natural gas pipeline.
Alaska's multibillion-dollar longer-term economic and energy problems only become harder to solve when potent voices add to the torrent of semi-informed opinion that rains down daily on today's Alaska decision-makers. When it comes to the comparative economics of in-state gas pipelines and other options for meeting Alaska's in-state energy needs, everyone is, of course, free to have an opinion. But as yet, no one has enough information to justify a firm "GO!" on any of the energy options facing Alaska decision-makers.
Building an in-state gas pipeline might seem like a natural next step to take if the proposed TransCanada or Denali pipelines fall through. The operative words here are "may seem" because there is a major analytical difference between the projects that is not often acknowledged. To be specific, the in-state line is directed at meeting Alaska's in-state energy needs, whereas the TransCanada and Denali lines are directed at meeting national energy needs. Because there are many competing ways of meeting the nation's energy needs, the TransCanada and Denali pipelines have properly been cost-compared to other ways of solving those needs.
Parallel reasoning suggests that an in-state pipeline needs to be compared with other ways of solving Alaska's energy needs.
Two months ago consulting firm Black & Veatch completed a study of alternative ways of providing electrical power to the Railbelt and Southcentral Alaska. New dams could in part substitute hydro power for gas turbine-driven power and in part provide for increased electricity demand. Four years ago the National Energy Technology Laboratory completed a preliminary study of Beluga coal gasification. The economic results of those studies have yet to be extended and compared with the economics of delivering North Slope natural gas via an in-state pipeline.
Then, of course, there is Cook Inlet gas. Although it might seem heretical to even broach the subject, the Kenai Agrium facility may or may not be restarted. An e-mail that I recently received from an Agrium company spokesman used the words "limited life of our plant" (now that it has been shut down). He also noted that Agrium "will continue to pursue every possible option for our assets including relocation." Agrium used more gas five years ago than did Enstar, Southcentral's supplier of natural gas to homes and businesses. A continued Agrium shutdown would free Cook Inlet gas for residential and business uses in the long run (at a cost, of course).
Oh yes, and then there is the issue of the expiring export permit for the aging Conoco Phillips-Marathon LNG facility. Loss of that facility would create a short-run peak-demand problem for utilities but in the long run would release considerable natural gas for in-state use (again, at a cost).
For sure, permanent loss of either Agrium or the LNG export facility would be bad news for the Alaska economy; but the situation would be much worse if the loss of either was coupled with the financial burden of prematurely constructing an in-state gas pipeline from the North Slope with public funds. Yes, I know, there are those who hope that North Slope gas will renew processing at Agrium and extend the life of the Conoco-Marathon facility; but at what cost? And what if the line is built at the expense of better options and the facilities go away and stay away anyway?
There is no problem with initiating an engineering and cost analysis of an in-state pipeline from the North Slope to Southcentral Alaska. But those who urge that decision-makers simply plunge ahead with construction are rashly putting all of their eggs in an uncertain basket.
David M. Reaume is a Washington state-based economist who was based for many years in Juneau. His opinion column appears every fourth Sunday.
DAVID REAUME
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