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Oil and gas produce hot air: Look carefully at the mix of issues in this election

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Posted: Sunday, October 28, 2012 12:00 am | Updated: 11:52 am, Mon Jan 21, 2013.

Community perspective

Politicians have many ideas on how to spend “our” money from Alaska’s oil and natural gas. Some of these ideas are just hot air.

Oil and hot air

Governor Parnell’s oil tax plan is not a good plan — it’s a bad plan (supported by Interior politicians Steve Thompson, Tammie Wilson and John Coghill, along with the Make Alaska Competitive Coalition). Until the governor’s administration reduces the oil tax while ensuring increased oil production, it remains a bad plan. Most Alaskans want increased oil production, but not at the expense of giving our oil away. Increased flow in the pipeline is a “must” or Alaska cannot sustain its ever-increasing operating/capital budgets. The state should consider modifying its oil and gas tax to entice the industry to reinvest its profits in the state. The industry has not done so in the past; it has taken its profits to foreign countries, North Dakota, Texas, etc., and that needs to change.

Alaska is a cash cow to the oil industry. It needs Alaska as much as Alaska needs it. The state should consider loaning the oil industry $2 billion and when the industry has increased production to a timely, specified and sustainable level, Alaska would forgive the loan.

Shale oil — the future looks promising for the development of Alaska’s shale oil. Nonetheless, this would include fracking, a process that has not gone without difficult environment impacts.

Oil vouchers — a controversial topic wherein Alaska would issue an energy rebate to each permandent fund dividend recipient for 250 gallons of fuel oil or its equivalent. We should support a program similar to this, especially for Fairbanks and rural residents who are in urgent need of energy relief. But why provide it to Anchorage residents who have access to low cost natural gas? We need to quit worrying about Anchorage and instead focus on what’s good for Fairbanks. Fairbanks won’t get an energy rebate program without Anchorage’s support.

Gas and hot air

Since the early 1970s, there have been many plans to bring our natural gas to market.

In 1973, Alaska had the Arctic Gas Study Group’s proposal to take gas across northern Alaska to Canada’s McKenzie River Delta and down to the U.S. at cost of $5.7 billion. This plan left Fairbanks, and most of Alaska, out in the cold.

In 1977, the U.S. passed the Alaska Natural Gas Transportation Act, which resulted in the El Paso Plan for an all-Alaska pipeline with a cost of $6.6 billion.

More recently, the Alaska Gasline Inducement Act of 2007 contracted with TransCanada Corp. for $500 million of seed money to build a $26 billion pipeline to transport Alaska gas to the Lower 48 via Canada. And, most recently, the projected costs have escalated to between $45 billion and $65 billion.

Astounding! We’ve gone from*$6 billion to $65 billion in 40 years and we’re not much closer to success.

So what? There are optimistic, pessimistic and realistic outlooks for a gas pipeline. A realistic outlook suggests that the economics do not justify the industry moving forward. It is doubtful that we will see a large-scale Alaska gas pipeline in the next 10 to 20 years — if that. How about the Asian market? It’s not realistic at this time because of high costs of liquefied natural gas.

What about a small pipeline to Fairbanks or trucked LNG? This has short-term potential, but Fairbanks is a small market faced with furnace conversions and distribution difficulties. The state needs to do a careful analysis to see if any of these make economic sense or are if they just more hot air. If a small gas line is deemed economically viable, a Fairbanks distribution system will be very expensive.

Oil, gas and hot air

Back to hot air. Other questions we might wish to ponder about our natural resources include: Do we really want to see our natural gas shipped to the Asian markets, or should we save it for the U.S.? Do we have to market this natural gas in the near future or should we wait until the economics improve for Alaska? Do we need to consume all of our fossil fuel resources during our lifetimes or should we save some for future generations?

This is an election year, so expect a lot of hot air on oil and gas issues. Study the issues carefully and support legislators who do not rubber stamp Gov. Parnell’s oil tax giveaway.

Tim Tilsworth, of Fairbanks, is a 42-year Alaska resident and professor emeritus of civil and environmental engineering at the University of Alaska Fairbanks.

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