The Gulf of Mexico oil spill is a jolting reminder of how unexpected accidents and events can radically affect us. Alaskans should be acutely sensitive to this, given our own experiences with a tanker accident in 1989 and an earthquake in 1964.
We know we can't live risk-free lives. Pushing into the deep waters of the Gulf of Mexico carries risk just like drilling in the Arctic. The blunt truth, however, is that we need oil to run our economy and the nation's onshore oil reserves are being depleted. Either we take precautions -- and we should strengthen those -- and accept risks, or we import more oil and fatten the wallets of Hugo Chavez and Middle East interests who wish us ill.
We also need to use less oil and to develop alternative fuels and new energy technologies. For example, we could run our transportation system now with clean liquid fuels made from coal. We can eventually use hydrogen if we focus our resources on the task.
Closer to home, however, there are strengthened precautions we can take here in Alaska. I'll leave industry oversight to the responsible government agencies because my main concern is how well our state is prepared for an unexpected accident, natural or industrial, that could disrupt our state's financial lifeline.
Accidents happen. Do we have contingency plans? We're dangerously close to running out of natural gas in Cook Inlet. Our utilities and the Municipality of Anchorage are developing contingencies for short-term disruption. Good work is being done. But we know we may flat run short of gas in 2014, not just experience temporary disruptions. Where's our contingency for that?
OIL CRISIS LOOMING
On a state level we're so dependent on one revenue source, oil and gas, that our only contingency if there were a major disruption to oil production is to drain our immediate cash reserves and then the Permanent Fund. And what then?
What's striking is that many Alaskans don't realize, or won't accept, that there's a very slow-moving disruption under way right now in our oil production that we can see coming, just like the 2014 gas problem in Cook Inlet. It's because our oil fields on the North Slope are running down.
A 5 percent annual decline in oil moving through the trans-Alaska pipeline (the state estimates 6 percent less this year) gets us quickly to a place where the pipeline faces mechanical problems because so little oil is moving.
This is something we know is happening. What are we doing about it?
It's not that our governor and legislators are clueless, but I sense an eerie deer-in-the-headlights quality about this, a kind of denial.
The first, most common-sense contingency we should take is to get more oil flowing through the pipeline. Can more oil be found onshore on the North Slope? Industry says yes, but the economics are tougher and the state's tax system impairs its development.
What are we doing about that? Not much. The Legislature and Gov. Sean Parnell showed little interest in this during this year's legislative session. The excuses: It's complicated. It's a short session. It's an election year. It's hard work. So another year goes by with another 6 percent decline.
Another way to get more oil into the pipeline is to help Shell drill promising offshore prospects in the Arctic. One area Shell wants to test this year in the Beaufort Sea could provide new oil for the pipeline in just a few years. These areas have been drilled before, in the 1980s, and oil and gas have been found in the Beaufort near where Shell wants to explore this summer.
Shell needs our support -- we need the oil moving through the pipeline -- but let's be vigilant about precautions and considerate of Alaskans in Arctic coastal communities who are now more worried after the events of the Gulf.
HOOKED ON OIL
I should dispel one myth now about solving the problem of our long-term prospects. Too many believe building a natural gas pipeline will save our state's finances. It will not. Gas production will help, but the unfortunate fact is that gas will not bring a great deal of new royalties and taxes into our treasury. Oil is where it's at.
I believe our goal should be to just get off our oil addiction, which will be tough because we've been seriously hooked on oil since the 1970s. But we need to do it.
We have a plan to do it. They've been doing fiscal plans for years and they're sitting around on shelves.
They all involve cutting spending, saving our cash and using it in a transition, then using some of our ample Permanent Fund annual income and, finally, developing new revenue sources. That means people paying taxes for public service. A diversified fiscal system is our best contingency plan.
We've been little piglets too long.
Tim Bradner writes for an Alaska economic reporting service. He also consults for private clients and writes for business publications. His opinion column appears monthly in the Anchorage Daily News.
TIM BRADNER
ECONOMY