Alaska is in a scary place financially. The challenges in front of us put difficult decisions on the table. With dividends at stake, it is easy to become desperate, and seek action we would never rationally choose to do. As a nurse for over 40 years, I have seen acts of desperation by well-meaning people that resulted in their health situation only becoming worse.
It’s understandable to grasp for any remedy, at whatever cost, and consequences be damned. However, the actions state leaders take affect friends, neighbors and communities, for many years. We don’t have the right to take the convenient path just because times are tough.
For the better part of three years, I have been privileged to work shoulder to shoulder with many of the best and brightest Alaskans. Our goal was simple: craft the world’s largest gas project into a long-term goldmine for our children and grandchildren.
To achieve that goal, we painstakingly pieced together a partnership founded on the best engineering and scientific data possible. We built in safeguards, exit ramps, and structured a working partnership with the most successful companies in the world. We did all this because Alaska, and the partner producers in the Alaska LNG, had the same objective: to get as high a price as possible for Alaska’s large supply of natural gas.
Price matters, because unlike hydro power or wind energy, natural gas is a nonrenewable resource. We sell it on behalf of Alaskans today and tomorrow. Because each sale is a one-time opportunity, we must work to keep costs down and the prices high to realize a meaningful profit that won’t leave our children empty handed.
This past Wednesday, the House and Senate Resources committees heard an update from the project team, including the new President of the Alaska Gasline Development Corporation. What we heard took Republicans and Democrats aback: Alaska was considering a go-it-alone strategy.
The whole point of a partnership was to share the risk, ensuring that no one partner was left facing a bill that could sink their ship. Committee members asked how Alaska could pay for a project that is estimated to cost between $45-65 billion. The response seemed like good news – investors in Asia would gladly come on board and help the state with financing.
If we heard correctly, the state would keep full control of the Alaska LNG mega-project and never have to worry about footing the entire bill. It sounded too good to be true.
So what is wrong with having our customers be our investors? Well, have you ever seen a commercial fisherman buying fresh salmon at Costco? I haven’t. Why would a fisherman pay a middle man for the privilege of eating the salmon he delivered just a few days ago?
In the same way, if Tokyo Power owns a piece of our LNG project, they are going to demand the lowest possible cost. Why should they pay Alaska, the middle man, a significant profit?
Our customers having a partnership standing in the project would give them the right to know exactly how much the gas costs to produce and deliver. With this information, and knowing Alaska was dependent on their business to stay afloat, our buyers will be holding all the cards.
For many years, Alaska has had a great relationship with utilities in Japan. The LNG export terminal in Nikiski has powered Japanese homes and businesses for two generations. And if Alaska LNG is constructed, those same cities and power companies would be just the buyers we want to attract.
But having a good relationship does not mean that our interests align. Why should ratepayers in Tokyo or Seoul pay extra so Alaska can fund schools, clinics and better roads? If their utility company is funding Alaska LNG, you can bet your bottom dollar their goal is to get cheaper gas. Why else would they invest?
I want the jobs, the gas, and the revenue for Alaska as badly as anyone else. However, the Alaska go-it-alone plan we are hearing is full of well-intentioned desperation. How can a pipeline funding by someone else come with no strings attached?
If there was a significant profit to be made with an Alaska LNG line, I am confident that Exxon would be chasing it. They aren’t. And if Exxon’s shareholders don’t want them losing money in an Alaska LNG mega-project, why should the shareholders in Alaska’s future, you and me, take such a risky gamble?
Senator Cathy Giessel is Chair of the Alaska Senate Resources committee.