Alaska News

As Alaska lawmakers debate how to build pipeline, some ask: 'Should we?'

JUNEAU -- Gov. Bill Walker and the Alaska Legislature have fought over budgets, health care policy and appointments to the state Fish Board.

But one thing the two branches of government agree on: Alaska should be trying to build the $55 billion gas pipeline that's currently under discussion at a special legislative session here.

While there's often discord over how, exactly, the project should move forward, it's rare for an Alaska politician to question outright the merits of the pipeline.

In interviews this week, however, a pair of legislators said they expect to start hearing more questions about whether the project is truly feasible. The state is facing multibillion-dollar budget deficits, and market prices for natural gas have recently plunged along with oil.

"I think you're going to see us start talking about it," said Rep. Lynn Gattis, R-Wasilla. "Can we afford it and should we? Who's got the plan?"

Sen. Bill Wielechowski, D-Anchorage, meanwhile, said it was a "legitimate question whether we should continue to pour money and time and effort" into the project.

"The problem with this pipeline is it's going to cost money -- you can't build it for free," he said.

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Wielechowski, who works as an attorney for a union -- labor has long supported a pipeline because of the jobs it would create -- made clear that he wasn't arguing that the state should abandon the project. But he pointed to comments made by his Republican colleagues in news conferences Saturday, where several lawmakers questioned the $150 million Gov. Bill Walker is requesting for the project's next steps.

At one of those news conferences, House Finance Committee co-chair Mark Neuman wondered how the state would find the money for its share of the project's costs.

"Until we find out where we're going to come up with $15 billion dollars at the end of the day for the project, should we spend a dime?" said Neuman, a Republican from Big Lake.

Alaska has been pursuing a natural gas pipeline for decades, and close to $1 billion had already spent on the effort by 1983.

Walker's current $150 million funding request for the pipeline amounts to more than double the annual budget of the state Department of Fish and Game; it's equal to annual state spending on public assistance programs like welfare and payments to needy seniors.

The full cost of the latest pipeline concept, if it's built, is estimated at between $45 billion and $65 billion. The project, which Alaska is pursuing with three oil producers and a Canadian pipeline company, is currently in a preliminary phase that will cost around $700 million; the next step, engineering and design, will likely cost another $2 billion.

The state would be responsible for a fourth of the cost, which matches the proportion of the pipeline, and the gas, it would own. The gas is expected to be sold to Asian markets; Walker said he hoped buyers would sign long-term contracts that would underwrite construction costs.

One of the central planks of Walker's gubernatorial campaign last year was his assertion that he could push a gas pipeline project to fruition.

In an interview Monday, he deflected questions about whether the pipeline might not be feasible, saying that further study was needed and that gas prices were expected to rebound.

"It's really like building a house -- you have to build up one block at a time," Walker said. He added: "It's a matter of having a vision and having a goal, and not letting anything deter you along the way because of a price decline in a commodity."

The state does have alternatives to investing its money in the pipeline project. The $53 billion Alaska Permanent Fund has earned 6.4 percent returns over the last 10 years, and the state could warehouse its money there and live like "coupon clippers," said Gregg Erickson, an economist who used to publish the Alaska Budget Report.

But despite their small-government rhetoric, Alaska politicians have traditionally favored investing in infrastructure and other projects with a broader public purpose -- a philosophy Erickson described as "red-state socialism."

"What makes the gas line so appealing is that it leverages the state's natural resources to produce jobs and economic activity, business profits," Erickson said.

In an interview Monday, Sen. John Coghill, R-North Pole, described what he views as an array of benefits if the pipeline is built. It would provide decades of revenue from gas sales, he said. It would create an incentive for oil companies to invest in more North Slope projects, since they'd have a way to sell natural gas they discover.

And, he added, the project could supply gas to communities along its route -- or as he put it, it could "light up Alaskans."

As the project moves through its phases of study design, Coghill added, the question of whether the project is viable "is the question we're trying to ask."

The pipeline's ultimate payoff to the state will depend on how much it ends up costing to produce and deliver the natural gas, and the price buyers will pay for it, said Larry Persily, the former federal pipeline coordinator who now works as an oil and gas adviser to Kenai Peninsula Borough Mayor Mike Navarre.

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But the project needs further study and more work before those questions can be answered, Persily said.

As House Speaker Mike Chenault, R-Nikiski, put it in an interview: "We don't know that answer, because we don't know the cost."

"We're going through a known process that brings successful projects to fruition," he said.

For skeptics who worry that even the preliminary investment is too costly, Persily pointed out that the oil companies working on the project -- ExxonMobil, ConocoPhillips, and BP -- are investing their own money in the development and aren't interested in "throwing money away."

"They didn't put money on the Cubs to make the World Series," Persily said. "And they're not going to spend $800 million on design and permitting that the majority of their analysts say wouldn't work."

Gattis, the Wasilla legislator, said she thought the project is closer to being built than it has ever been. But she also acknowledged that "there's a world where it doesn't pencil out."

Ultimately, she added: "If it doesn't make financial sense, we have to raise our hand and say that."

Nathaniel Herz

Anchorage-based independent journalist Nathaniel Herz has been a reporter in Alaska for nearly a decade, with stints at the Anchorage Daily News and Alaska Public Media. Read his newsletter, Northern Journal, at natherz.substack.com

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