Editor's note: This commentary was written in response to a recent Alaska Dispatch posting of a commentary by Andrew Halcro titled "Moving public opinion: A hard sell."
The answer to our current economic dilemma is not, as Andrew Halcro would have it, to give the oil companies a few extra billion dollars as a going-away present.
The answer is to build our own gas pipeline system and use it to replace 70 percent of the oil income we will be losing when the Trans-Alaska Pipeline System (TAPS) goes away.*
That will give us enough money to squeak by until we successfully join with other similarly impacted states and demand that the federal government release access to our oil.
Here's the situation. TAPS, our oil pipeline, is functioning 16 years beyond anyone's wildest expectations. It's worn out. It's also functioning with only one-third of the oil throughput it was designed for. It has been run on an "operate to failure" basis since 2007.
Last week, Lisa Murkowski suggested 2017 as a likely shut down date. Many of us think that is an optimistic estimate.
Without access to ANWR, NPR-A, or major offshore development, there is no justification for the oil companies to spend billions rebuilding TAPS.
There simply isn't enough available oil left on the Slope to make it pencil out.
So, absent federal action, TAPS is going down.
The oil companies will be stuck with the cost of removing the TAPS pipeline and doing remediation work on the pipeline corridor, so they are making a good faith effort to keep it going, but we all know the truth -- we are between a rock and a hard place and the federal government is putting us in that position.
The AGIA gas pipeline to Canada offers no relief. It sells our gas into a market that is glutted with gas and which will stay glutted for decades according to the USGS and the Energy Information Administration. It guarantees the lowest prices imaginable, and it costs us $40 billion for a pipeline to deliver our gas to this dismal market.
Say what?
At first glance, such a pipeline makes no sense at all. Why would we even consider it? The fact is that "we" aren't considering it. The oil companies are considering it, and they stand to gain something very substantial from it.
They can use our money to build the pipeline to Alberta. Once the gas is delivered to that market, they can buy it for almost nothing (cutting us out of the equation) and then, they can strip the natural gas liquids from our "wet" gas for use in their Alberta petrochemical refineries, and use the remaining methane to melt oil out of their Canadian Tar Sands.
In 2009, Senator Murkowski already slipped in an amendment to the Energy Bill that allows the oil companies to sell oil from the Tar Sands to our Defense Department at an inflated price as "alternative" oil.
It's a brilliant development plan for the oil companies, and for the Canadians, too.
Unfortunately, it is all funded at our expense.
We get nothing but the bill for the pipeline and very, very low profits guaranteed, and then, our Defense Department gets socked double on the backside of this arrangement.
The oil companies don't care how they make a buck. The Canadians are happy. It's just the angry old Alaskans like me kicking up a fuss and not happy with the deal.
Let's recap -- new oil development depends on the federal government, and they aren't budging an inch to release access to our remaining oil. That means that there is no justification to rebuild TAPS, and TAPS is going down somewhere around 2017 -- if it lasts that long.
The AGIA pipeline to Canada doesn't plan to start until "somewhere" around 2020 to 2030, years after TAPS gives up the ghost. And when it does get started, it will take another 7-8 years to build, and once it is functioning, it will give us back very little profit.
We are between a rock and a hard place, indeed.
There is one other option: the All-Alaska Gas Pipeline that Wally Hickel championed is large enough and far enough along to get going immediately, pumping jobs and revenue into the state of Alaska's coffers. We could, if we build it, avoid an oil bust and replace 70 percent of the oil income with one gas project. It would give us a survivable economic future and buy us the time to get other income-generating projects going.
So far, the Alaska Legislature isn't getting the message. The whining of the oil industry lobbyists is too loud, and the legislators are too busy spending money to think of making any, but Andrew Halcro is right about one thing -- the necessity of making money is coming home to Alaska, and soon.
*(author's note to second paragraph) The original ISER Modeling Study (2005) for the All Alaska Gas Pipeline project assumes that LNG is the primary product, but includes the value of the Natural Gas Liquids in Alaska's gas as part of the 70 percent replacement income estimate. The projected percentage varies with current prices, use assumptions, and declining oil production, but the message is clear -- natural gas can replace a very sizeable chunk of the oil money we stand to lose.
Anna von Reitz is president of Gas for Alaskans.
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch. Alaska Dispatch welcomes a broad range of viewpoints. To submit a piece for consideration, e-mail commentary(at)alaskadispatch.com.