A Citizen’s Guide

It’s tough for the Fairbanks North Star Borough Assembly to pay attention to the progress or failures of the Alaska Gasline Port Authority. Assembly members are generally too busy with financial and economic issues directly affecting the borough. However, given the role the port authority is playing in the statewide gas pipeline debate, it might be time for local officials to ask the port authority for some answers.

The port authority project is competing with the Alaska Highway pipeline project, which is the focus of the gas contract negotiated by the governor. Port authority supporters, including the borough mayor, believe their project is best for the state of Alaska. Conceptually, as an idea, perhaps it is, but its Achilles’ heel is that it is not economical.

There have been a number of studies from experts that identify the core problem the port authority faces: It is the most expensive option to develop our gas.

A May 11, 2005, study by Tristone Capital on the Mackenzie Delta and Alaska North Slope reviewed three gas production projects: The Mackenzie Valley pipeline, the Alaska Highway pipeline, and the port authority project. The report is quite sobering in that it doesn’t paint a rosy picture for any of the projects. The Mackenzie Valley project is the smallest and least expensive of the options at under $10 billion, and the port authority’s project is the most costly. All three projects are competing to serve markets that will, to varying degrees, be affected by increased liquefied natural gas import capacity on all coasts of the United States. A window of opportunity for our land-locked gas will not stay open forever, as domestic LNG ports become operational in 2008.

Tristone Capital described the port authority project as “having the lowest possibility of fruition among any of the alternatives.” Its capital costs were highest.

A second study by PFC Energy, dated March 17, 2006, came up with similar cost findings. PFC concluded “the complex nature of the proposed Alaska LNG project and the multitude of pieces required to make the project work” bring uncertainty to the viability of the project.

A third study, dated May 10, 2006 by Information Insights Inc. concluded the Alaska Highway project is best for Alaska because it brings “the highest revenues” and creates the highest number of jobs.

This study also described the value to Alaska that would be destroyed if a port authority or Y-line project were required by the state. Further, it estimated it would take until 2020 to bring gas to market, with construction after 2015, because of the litigation and related delays from removing ownership from the existing leaseholders.

Since Information Insights Inc. is locally owned, the assembly should consider having them attend a work session to explain their work and conclusions. They could help the public understand the economics of the port authority project.

The community expects the assembly to have some oversight responsibility over the port authority, which was created by voters in Fairbanks, Valdez and the North Slope, and it may be time to exercise it. The studies have been done.

Here are questions I’d like the assembly to ask:

1. When would the port authority project deliver gas? When would construction begin?

2. Can the port authority explain how it intends to obtain gas from the current leaseholders?

3. How does the port authority intend to finance this $24-30 billion mega-project?

The voters put the port authority into existence in 1999, and by doing so voted for a gas line, with details to be worked out later. If the port authority can’t produce because of high costs and because it doesn’t have any gas or financing, most voters would expect it to fold its tent and get out of the way.

Garry Hutchison lives in Fairbanks and is a former member of the Fairbanks North Star Borough Assembly.