Alaska News

State should fund smartest investment: education

There is a great fever abroad in Alaska, fed by the super revenues of the era, to build stuff. This week it is pipelines. Last week it was dams and bridges. "All Alaskan" sounds pretty good as a tag on any project. "Socialism," as a politically loaded epithet, does not improve the quality of debate but surely a useful distinction can be made between those projects that have historically been considered public projects, serving a general public purpose, and those that are ordinarily carried out by private enterprise.

Some decades ago, Governor Egan proposed that the State of Alaska finance and build the trans-Alaska pipeline. At the time, you could not have asked for a surer bet on profitability. The issue was only whether the leases' owners on the North Slope could stop Egan. Though the state's lease form required a producer to produce if economic to do so, the owners refused to contractually commit oil to a line they did not own.

Could the state borrow without that commitment? Litigation to force it would take forever. The wisdom of Egan's proposal was also debated in the Legislature. Criticism of the state's competence to build the line was misleading since the same contractors would build the line, similar banks would arrange the financing and similar personnel, via an operating agreement, would operate the line whoever owned it.

The industry's real issue was that the nominal owner held first place on net profits. Afterward it became apparent that if the state had built the line its advocates would have been tarred and feathered since the huge cost overruns that TAPS experienced would have been blamed on its government sponsors.

Current gas line proposals are equally subject to the charge of socialism. In America, government does not build oil or gas pipelines, though strangely this complaint is muted. There is a reason. TAPS was so risk free that it could swallow a 900 percent cost overrun and still be immensely profitable. Any gas line is financially risky. Industry is happy to pass on risk. Should a state government be in the business of assuming risk for profit-making organizations?

The federal pipeline coordinator, Larry Persily, says that an Alaska gas line can deliver gas to the Midwest cheaper than any imported gas that must be produced, compressed, tankered, decompressed and piped to a Midwest market. Is the U.S., via a pipeline, the best market for gas or should Alaska's piped gas be in the same market with all companies that produce at tidewater for a volatile international market?

Will the continental U.S. always have plenty of fracked gas for growing energy demand, not withstanding environmental impacts? Opposing experts are persuasive; the average Alaskan can only wonder. This is not TAPS. Maybe the issue is better decided by those who own the gas and who put up the money, keeping the state treasury out of it.

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At the same time as the state considers multibillion dollar investments, it tightens its belt on investments traditionally within the realm of government responsibility. Recently Scott Minerd, who oversees investments of around $42 billion as the chief investment officer for Guggenheim Partners, told the Alaska World Affairs Council how he sees our state in the global investment environment.

Guess what his number one priority was? Alaska, he said, was "woefully underinvested in education." That's where we ought to be putting our money. When people like him are looking around for sites for long-term investment, he said, they look first at education, "the infrastructure of the future."

For many years, Alaska will continue to be a place where outside investors will come to extract nonrenewable resources. But where will we be when those with the biggest payoff, the oil fields, have been depleted? Mr. Miner cited resource-poor Taiwan to the luncheon guests. Investments in education, in a great university producing a stream of first-class research and development from a battalion of Ph.Ds, will be the key to an exciting and challenging future for our children and grandchildren.

Otherwise, look for a forced exodus.

John Havelock is a former Alaska attorney general.

JOHN HAVELOCK

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John Havelock

John Havelock is an Anchorage attorney and university scholar.

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