As Harry Truman once said, “Give me an economist with one hand.” But disappointingly, I have two hands which means I can argue two sides of an issue, such as the pros and cons of the Alaska Gasline Development Corporation’s LNG plan.
That plan, or should it be called a half-plan, consists of about 500-plus miles of pipeline from the North Slope to Fairbanks plus a conditioning plant, but with no connection to — nor liquefaction plant in — the Kenai Peninsula as of yet. This half-LNG plan, then, will cost $6 billion that supposedly will be funded mainly by the U.S. government. It has some good points, mostly for Anchorage, so I can be on board with both sides of that argument. For now let me consider analyzing it from the Interior’s point of view; for our purposes the plan is half baked, not just half-sized.
The state really should have requested a competent energy economic examination and should have recommended the Biden administration and Congress fund a much simpler $2 billion small-bore roadside project. To implement such a plan, there would only need to be a relatively small low interest loan, rather than a huge grant. Not only would it have been more palatable to Congress but would have created a more robust economic development for the state and indeed the entire U.S. and it would in no way have ruined any future LNG project.
The large LNG half-plan would send primarily utility grade natural gas to fully connected natural gas grids in the Interior. While the Interior Gas Utility and military bases will be able to use that natural gas, it provides little benefit to the rest of us. You see, utility grade natural gas can only serve a citywide natural gas pipeline grid, but outside of the city, there is no grid, nor is there likely to soon be a grid in Delta Junction, Tok or Nenana. That limits what can be done with the energy that comes here, and more than that, it limits all of Northern Alaska’s ability to use energy.
Consider a village like Tanana. A $2 billion small-bore, Haul Road project would have included a dense phase, high-pressure natural gas and propane supply. You can connect an above ground line from the Haul Road all the way to such a village so that both natural gas and propane is brought in and separated. It would be easy to split the product into a natural gas base energy, for electricity and a washateria, as well as a supply of propane stored in a large tank for winter heat and extra winter power needs. With propane, you do not need a natural gas grid in the village and so you can hook many houses and buildings far and near easily. Each building would have its own small propane tank and a village centralized large tank. The large tank can be filled year-round and have supplies available as demand dictates during cold winter months. The point is, with a smaller connection, you get more flexible year-round energy supplies for the village. This would be the same year-round flexibility for mining operations and other off grid locales.
If you use utility grade natural gas, then the above ground tube-line connection has to be a slightly larger diameter and slightly larger cost of connection. Why? It has to be as large as the winter needs. More than that, you cannot use the natural gas throughout a given village unless you have a full-blown natural gas pipe grid inside the village, another expensive addition. Plus, with cheap propane brought into Fairbanks, it can be separated and made available all along the rail belt to Wasilla and all along the Central and Northern Alaska road system and riverine system, and could even power propane cars.
There is still a bigger picture perspective: my third hand if you will. Regardless of whether we end up with this half LNG project or a small-bore roadside project, we need backup. We need to retain our coal-fired heat and power because a natural gas system can also have a shutdown problem. This happened in 2008 when a snow slide caused an electrical blackout in Juneau. Suddenly, on the coldest snowiest day of the year, a large system can cut out.
Congress may not fund this LNG plan, and an LNG project may not happen for a decade or more, meaning the perfect window of opportunity for Central and Northern Alaskan economic development has been squandered, again.
Doug Reynolds, Ph.D., is an economist who has lived and worked in Fairbanks and has studied Alaska’s and the world’s oil and gas industry for over 25 years. He can be contacted at firstname.lastname@example.org.