What others say: A dwindling appetite for megaprojects

  • Tuesday, December 9, 2014 5:08pm
  • Opinion

The Ambler road. The Juneau road. The Knik Arm bridge. The Susitna Dam. The Alaska Stand Alone Pipeline (ASAP), known colloquially as the “bullet line.” The large-diameter natural gas pipeline.

Alaska has no shortage of capital-intensive megaprojects in the works, but now the state is scrambling to find funds to cover the basic needs for state operating expenses. As oil prices continue to dip, the fortunes of Alaska’s megaprojects are waning precipitously. The question of how many such projects the state can afford — if any — should be a focus of budgeting efforts in the coming months.

As oil prices soared during the past decade, there seemed to be money for everything. The Susitna-Watana hydroelectric dam had been shelved during Gov. Bill Sheffield’s tenure in the 1980s — the victim of another downturn in the oil market. In 2008, surging revenues prompted Gov. Sarah Palin’s administration to restart work on the project. Gov. Sean Parnell was a strong supporter of the project, which promises to bring cheap, renewable electricity to half the state’s residents. But even before the price of oil began to drop like a stone, legislators started backing away because of the project’s $5 billion price tag.

The proposed Ambler road would stretch 200 miles west from the Dalton Highway, providing access for mining companies to harvest copper, zinc, lead and silver on the south slopes of the Brooks Range. At an estimated cost of around $400 million, the road doesn’t have quite the sticker shock as bigger-ticket items like Susitna and the gas line projects. But it also would have less financial benefit to the state and its residents, as mineral extraction doesn’t provide substantive tax revenue for the state (mining provides tens of millions of dollars to state coffers, compared to several billion dollars in oil tax revenue) and use of the road would be restricted to commercial traffic and otherwise closed to the public.

Each of the major capital projects the state is pursuing has trade-offs. The Juneau road could provide more reliable access to the state’s capital, but it’s also a lot of money to spend to shorten a ferry trip, as a link-up with the rest of the state road system still would be unfeasible. The Knik Arm bridge would ease Anchorage’s growing pains, but is a shorter commute to the Matanuska-Susitna Valley a more pressing need than, say, doing something about high energy prices in the Interior and rural communities? Natural gas line projects could provide a big payoff both in revenue, jobs and affordable energy for the state, but low oil prices make developing gas less attractive to producers, and the state must negotiate with North Slope leaseholders, a stumbling block for decades of efforts to build the line.

With money and time both at a premium, it’s time to take a hard look at which of the state’s proposed mega-projects will provide the best return to the state and the greatest benefit to its people. We no longer have the luxury of having enough money to proceed down the track of constructing all projects at once — Gov. Bill Walker and the Legislature must weigh each carefully and continue forward with only those that pass the cost versus benefit test.

— Fairbanks Daily News-Miner,

Dec. 8

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