Opportunity slips from Alaska's grasp

August 16, 2008 

Gov. Sarah Palin and the Alaska Legislature have decided to allocate to the TransCanada Corporation up to $500 million and the power to negotiate a deal with the North Slope producers to build an Alaska gas pipeline through Canada.

This was a terrible blunder. There are not many Alaskans who believe that a Canadian company will do a better job than we would in looking out for Alaska's interests. At a time of high energy costs in Alaska and a national economy threatened with recession, we need action. This decision will only cause delay.

Gov. Palin's gas line team announced its support for the TransCanada proposal on May 22. Then the Legislature met in special session to study the administration's findings and make a "yes or no" decision.

When it came time to vote, the House Democrats were united. Led by Minority Leader Beth Kerttula and Reps. Les Gara and Harry Crawford, they voted unanimously for TransCanada. They mistakenly thought that the Canadian company was the only alternative to the producers they fear will monopolize and control North Slope natural gas.

The Republicans in the House were divided. Speaker John Harris led a group that voted against TransCanada because they favored the all-Alaska LNG project from Prudhoe to Valdez. Other Republicans voted against TransCanada because they supported a producer-owned Canadian pipeline, while several chose to vote with the Democrats, tipping the scales for TransCanada.

Concerned by the outcome of the vote in the House, I flew to Juneau to urge the Senate to change direction. I testified in opposition to both Canadian gas lines and called on the state to build an all-Alaska gas line itself.

This is one of the great opportunities in Alaska's history. We can start immediately and build an in-state line in half the time, and by shipping Liquefied Natural Gas (LNG) to the world, we can generate twice the financial return than a pipeline to Alberta.

I urged the Senate not to fear the producers. As the owner of the gas, the state can require them to commit the gas from their leases to an Alaska-owned line.

The senators heard me but didn't listen and voted 14-5 for TransCanada on Aug. 1. Then, 48 hours later, Hal Kvisle, the CEO of TransCanada, dropped a bombshell.

"Nothing goes ahead until Exxon is happy with it," Kvisle told the Toronto Globe and Mail. He explained that the TransCanada plan is "about the five key players getting together and crafting something." He was referring to the producers, TransCanada and the state.

Here's the catch. The producers are adamant there will be no pipeline until "fiscal certainty" (a locked-in tax rate) is agreed to by the state, something our constitution forbids. That means delay, delay, delay.

As a result, unless Gov. Palin makes a dramatic turnaround, there will be no gas line construction during her administration or during the tenure of today's legislators.

It's time our leaders admitted that the South 48 doesn't need Alaska gas. As the Wall Street Journal reported earlier this month, thousands of wells are being drilled in Texas, Louisiana and Oklahoma, and analysts are talking about a "gas glut."

And they need to be honest that the motivation for a Canadian line is not to get Alaska gas to America after all. The oil producers want to use our gas to heat up the Alberta tar sands to produce crude oil, an environmental disaster in the making.

It may take a future governor and a future Legislature to wake up to reality.

Meanwhile, Alaskans will be faced with sky-high prices for energy and be forced to beg state government for higher and higher energy rebates.

Alaska is in danger of becoming a nonproductive welfare state as it tries to outsource a project that, if kept within our boundaries, would put thousands of Alaskans to work, some for decades.

The summer of 2008 may be remembered as the summer when we missed the opportunity of a generation.


Walter J. Hickel served as governor of Alaska from 1966 to 1968 and 1990 to 1994 and as U.S. Secretary of the Interior from 1969 to 1970. His latest book is "Crisis in the Commons: the Alaska Solution."

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