If you’re going to pursue a new business opportunity, you want a partner who can balance a checkbook.
That’s why we have second thoughts about the possibility of the state of Alaska taking sole responsibility for a trans-Alaska natural gas pipeline.
The state has spent $11 billion in savings in the last three years, and the Alaska Legislature has been unable (or unwilling) to bring expenses and revenues in line.
Now, the new head of the Alaska Gasline Development Corporation, Keith Meyer, is indicating the state may go it alone on one of the biggest gas pipeline projects in the world.
That’s a scary proposition given Alaska’s track record. Going down this path alone will incur more risk and debt than the current partnership. We also don’t trust our government and state leaders to handle this responsibly.
The Alaska Legislature has already proved itself incompetent at balancing the state’s regular budget. Through an unchecked system of oil and gas tax credits and a refusal to raise new revenue, lawmakers have become deficit accomplices. When Alaska received a windfall from the 2008 surge in oil prices, it should have kept the brakes on the natural inflation of government. It did not. Oil prices have plunged, and we are feeling the consequences.
Unfortunately, falling oil and gas prices have also caused our state’s pipeline partners to question their involvement in the multibillion-dollar Alaska Liquefied Natural Gas pipeline.
It appears interest is waning from BP, Exxon and ConocoPhillips. A ConocoPhillips official said recently it’s doubtful the oil giant will commit money to the front-end engineering and design (FEED) phase scheduled for early 2017. About $2 billion would be due from all parties involved in the $45-$65 billion project. He added, however, that ConocoPhillips would still make its share of North Slope gas reserves available.
The 800-mile pipeline wouldn’t produce gas under the best-case scenario until 2025, and our estimate of gas prices in the future is as good as yours. If oil prices’ plunge has left the North Slope giants without the funds to pursue a natural gas pipeline, it might seem logical for the state to pick up the burden. After all, most Alaskans believe that a natural gas pipeline is the only thing that might come close to replacing the receding tide of Alaska oil production.
But we fail to see how the state can afford to bankroll such a massive project with dwindling savings and a collapsing credit rating. We can’t even afford to keep our ferries running adequately.
We need AK LNG more than ever to replace lost oil revenue, but a project this size can’t be forced without financial consequences. The open market will ultimately decide when the time is right. If several of the most successful for-profit corporations in the world are showing doubt, the last thing our state should do is charge ahead without caution.