Burning more state money on a mythical North Slope gas pipeline

Unbelievable as it may sound, the state is preparing to burn up more public dollars in the fire pit of the mythical Alaska North Slope gas pipeline.

But unlike a real fire pit, which warms those who gather around, spending more money on a gas line dream will leave Alaskans in the cold and the state a little poorer.

The Alaska Industrial Development and Export Authority, aka AIDEA, last week decided in a bout of fiscal foolishness and pro-development fervor to put up $50 million to ensure completion of engineering work on the line.

It’s essentially the same pipeline the state has lusted over for more than 50 years; the same hundreds of miles of north-to-south steel that the state, North Slope oil and gas producers and others have spent a couple billion dollars on engineering, permitting and financial analysis over the decades; yet the dream always ends the same. The project is too expensive, too risky, the market doesn’t want to pay for it and investors have better places to spend their money.

But the AIDEA board knows better, or so it thinks. Or maybe it’s just gullible.

And when the final round of engineering is done, and if the project fails to go ahead, the state would own the blueprints.

Whoopee.

The state already owns all the paperwork and maps and engineering drawings from when it took over the project after North Slope oil and gas producers walked away in 2016. Owning even more data files, even if they are the final calculations, estimates and drawings, would be like buying the finished blueprints for a lavish mansion you can’t afford and will never build. Both expenditures are equally pointless.

The Alaska Gasline Development Authority, which the Legislature created in a fit of hope 14 years ago, says it has a secret North American pipeline company willing to spend $50 million of its own private money to complete the engineering work — but only if the state promises to repay the $50 million if the project fails to move ahead.

So in steps AIDEA to save the day, or at least save the dream. With minimal public discussion and with a resolution that is mostly “whereas” justifications, the decision-making document says the state development agency is ready to guarantee the $50 million just as soon as its staff can negotiate the terms.

It’s a nifty way for the pipeline development authority and AIDEA to evade seeking legislative approval to commit $50 million in state money. And it is state money, even if it is in AIDEA’s name. The agency is required to pay a dividend to the state general fund every year, based on its profits. Writing off a failed $50 million pipeline investment will trash the agency’s profits, and thus equally trash its dividend.

The two state agencies say this time is different for the pipeline. A downsized project is now proposed to bring North Slope natural gas to Railbelt utilities and industries that face a gas supply shortfall from aging Cook Inlet fields. The second, more expensive phase of the project to export gas overseas could come later.

The agencies figure that a $10 billion to $15 billion project looks better than the $40 billion to $50 billion export-focused development — and is worth $50 million of state money to see how it looks. Never mind where the billions to actually build the line will come from.

All it really looks like is poor judgment. There are less expensive options to solving Southcentral Alaska’s gas needs than taking on a multibillion-dollar long-term pipeline mortgage charged to utility customers or underwritten by the state.

Larry Persily is a longtime Alaska journalist, with breaks for federal, state and municipal public policy work in Alaska and Washington, D.C. He lives in Anchorage and is publisher of the Wrangell Sentinel weekly newspaper.

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