'Must-have' LNG project will just stretch Alaska tighter over a barrel

In his first inaugural address, Ronald Reagan famously stated that "government is not the solution to our problem; government is the problem" -- hence the subsequent conservative mantra that unfettered capitalist free enterprise is the solution to our problems, and the only proper course for government is to get out of the way of private business. Strangely, our present conservative state government is now prepared to jettison conservative dogma in favor of transforming Alaska's government into the private sector via the "mother of all" projects: the Alaska Liquefied Natural Gas project.

Why is the project a worrisome undertaking, you may ask? Well, never mind that the state of Alaska has no real expertise in drilling, producing and marketing natural gas; never mind the conservative admonition for government to get out of the way of private enterprise; never mind that in spite of decades of incessant pressure from past administrations and legislatures for oil companies to get off the dime and build a gas pipeline, nothing has happened; never mind that the likely reason that nothing has happened is that Big Oil knows this project has simply not been economically attractive; never mind that now is possibly the worst time in the state's history to force-build a gas pipeline given historic low prices for natural gas and intense competition from Russia, Australia and East Africa to find an Asian market for their gas; and never mind that fracking of American natural gas engenders claims of a "300-year supply."

Wow! That sounds like a lot to contend with. But Gov. Bill Walker tells us that the AKLNG is a "must-have" project and that "this gasline project is our number one get-well card" in reference to our $3.5 billion fiscal shortfall in state budgeting. Having declared that AKLNG is a "must-have," one might conclude that any hard-boiled cost-benefit analysis will be put aside in favor of a got-to-do-it attitude. After all, we don't have a choice -- do we?

Walker tells us that a four-way deal with ExxonMobil, ConocoPhillips and BP gives us a seat at the negotiating table. Now, our seasoned-veteran partners know our "must-have" position means real facts don't matter. Never fear, our partners will be looking out for our interests in this high-stakes realm of Big Gas. Imagine that our "seat at the table" will be occupied by the player with the least experience in gas project development, the least knowledge of legitimate versus spurious costs of operation, the least understanding of competing in the global marketplace and the least experience with placing "high-stakes gambles" on huge investment decisions.

Our desire for an "equity" position ignores the fact that Alaska already owns all of the natural gas. Don't we already have considerable leverage in any proposal to market our own resource? The most troubling question of all, however, is how will we balance our conflicting functions as the taxing authority over the extraction of our last big state-owned resource versus our profit-making objective in a joint venture of high-stakes liquefied natural gas marketing in Asian markets?

Alaska legislatures have always been plagued by the problem of maximizing the return on the production and sale of Alaska-owned oil. Finding the right taxing regime for Alaska oil has been the subject of unending controversy and reform for nearly every legislature since oil was discovered at Prudhoe Bay. Now, we are apparently unconcerned how we will balance the public interest of maximizing the return to Alaskans on gas development through our taxing powers while simultaneously reassuring our gas project partners that we are "all about" maximizing the profitability of this joint venture. Or perhaps our partners more clearly see this joint undertaking is the most effective means of applying pressure on the state government to keep taxes under the producers' control.

Perhaps the more prudent course of action for state government would be to leave the private sector to the private sector. Let us concentrate on managing the return on our massive "equity position" as owners of the gas resource through traditional taxation and royalties. The great benefit of this approach is that our government would then be free to concentrate on our legitimate and awesome responsibility of figuring out how to balance our "out-of-control" state budget.

Alexander Hoke is a 40-year Alaska resident, currently engaged in property management and construction. He has also worked as a legislative policy analyst, president of a rural electric utility (GHEA) and served as a City and Borough of Juneau assemblyman.

The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com or click here to submit via any web browser.