Miss a day
Miss a lot

Northern Gas Pipelines is your public service 1-stop-shop for Alaska and Canadian Arctic energy commentary, news, history, projects and people. It is informal and rich with new information, updated daily. Here is the most timely and complete Arctic gas pipeline and northern energy archive available anywhere—used by media, academia, government and industry officials throughout the world. Northern Gas Pipelines may be the oldest Alaska blog; we invite readers to suggest others existing before 2001.  -dh

 

ConocoPhillips ad, Northern Gas Pipelines, Logo

AGDC

3-31-15 Legislative Leaders Focus On Gasline Details

31 March 2015 2:30am

We want to work with our new Governor to progress this great State forward, especially knowing

Our Commentary:

The two legislators above created the Alaska Gasline Development Corporation (AGDC) concept as an insurance policy for transporting Alaska North Slope (ANS) gas to citizens and to an export facility. 

The current governor - who opposed the AGDC/ASAP gasline concept before he supported it - now wants to double down on this alternative project, in essence competing with the larger project which he once supported before he decided to compete against it. 

We believe that the Governor and his supportive Juneau Empire editorial writer  misjudge the prospect -- no, the likelihood -- that this illogical action will further alienate, interfere with and possibly cause the state's largest investors to the complicated challenge of developing a world class LNG project to the amateurs in the Office of the Governor. 

We wonder if Alaskans truly want government to discourage the world's most competent energy explorers, producers, creators, distributors, and marketers from monetizing Alaska's gas.

We think that, upon reflection, Alaskans are at least somewhat smarter than that - though we do recall that tens of thousands of them, along with the current governor, supported an ill-conceived voters initiative to snatch defeat from the jaws of victory by supporting last year's effort to repeal oil industry production tax reform.

The spectacle might be funny if it didn't reflect so embarrassingly on Alaskan incompetence. 

We believe it likely that if the Administration pursues this quixotic gasline ownership fantasy, the end result can only be political, social and economic chaos, memories of a wonderful opportunity lost and a sharing by this governor of the same public derision following a similar quest by another hopeful, hopeless conqueror: Don Quijote de la Mancha.

And for those who think they elected a brilliant governor with decades of gasline experience just consider this:

He make a lot of money promising the taxpayers of Valdez, Fairbanks and the North Slope that he would get them new oil and gas property to tax if only they would continue sending the retainer.

He didn't create a project, but he did create a good deal of animosity against Alaska's most important investors--a demonization of a group along with their supporters that continues to this day.

He never did produce a gasline, but he always had a ready answer: it was the producers' fault.

We believe he did not intentionally mislead his municipal taxpayer clients over the years.  We believe he must have meant well, otherwise he could not have been so convincing.

But as governor, he is now responsible for actually taking advantage of the current market and interest of the investment dream team that is Ak-LNG, support them to the fullest and not deter them with pesky, sophomoric boastings of becoming a competitor.

As we have said before, we do wish this Governor well, for his intellect, his emotional makeup and his decisions will affect tens of thousands of lives in the next few months.

We hope his pride and judgment will allow him to reconsider the dangerous path upon which he has caused the entire state to embark.

We hope he also remembers that Cervantes', Don Quijote, became an unapologetic hero in his own mind.  That sort of leadership will not survive modern times with any more pubic adulation than it did in the Medieval era.

the difficult times before us. We respect that he is our Governor, duly elected by Alaskans, and we appreciate the respectful acknowledgement that we, too, are representatives duly elected by Alaskans. We all have Alaskans’ best interests at heart, and want a future of prosperity and opportunity in our State.

While we believe we share many of the same goals and values as the Governor, we differ as to the approach to natural gas development that will deliver the greatest benefits to Alaskans.

Let us be very clear about what we want: We want to commercialize natural gas for the highest value possible, for the Permanent Fund and for the Treasury, so that every Alaskan may share in the wealth of our resources. We want affordable natural gas to flow to our communities that still suffer under the fluctuating prices of fuel oil. And we want a project that includes the necessary elements — including participation of the North Slope producers and the State — for real success, as soon as responsible project engineering and -permitting allows.

The Legislature found that project with the Alaska LNG Project, in which the state is a 25 percent owner.

But we also preserved our ability to pursue a different project, if the Alaska LNG Project does not progress into the next development stage. We have that in the 36-inch line that the Alaska Gasline Development Corporation has developed. It is in prime position to alter if necessary — and if the Alaska LNG Project does not prove viable, we’ll know what adaptations we must make in order to offer a viable project. To increase its size now, to an arbitrary, unsupported volume, is not a prudent use of funds. That does not provide us a viable alternative should Alaska LNG not progress.

The Governor has indicated he sees success in a different framework. Unfortunately, to date, neither he nor his administration have shared those details with us and with the Alaska public. He submitted a letter to the Senate Resources Committee on Friday with some explanations for his alternative approach, and we appreciate that. But Alaskans need to know details. What about the LNG component — who owns that? And the pipeline — is the state to shoulder 100 percent of the risk and cost? Who will ship gas, if one or more of the producers remain engaged in Alaska LNG? If all 3 producers are not partners, how will the state determine its gas share — and is it enough to support our level of equity ownership? We want to better understand the terms and structure of his proposal in order to conduct the rigorous vetting and analysis that will allow us to make an informed, responsible decision on a forward course.

The government process is about thorough, open review of ideas, in the form of legislation, that leads to policies. We hold hearings; explore details; call for experts to analyze and model impacts; vet each and every aspect; hear from the public; undertake legal review; and, finally, debate on whether a policy should be adopted.

It is how Alaskans came to be owners of the Alaska LNG Project; through a deliberate, well-investigated decision.

Certainly, we would have preferred not to have introduced legislation — House Bill 132 — to temporarily restrict an alternative, conflicting approach and to keep Alaska LNG on track. However, we were compelled to, out of grave concern that the Administration’s approach would threaten the viability of the tremendous opportunity before Alaska in the Alaska LNG Project. A project that is on time, on budget, and on track to success. And unfortunately, the few details offered by the Governor’s letter reaffirm that it is more imperative than ever to pass HB 132, as his approach clearly creates a competing alternative that threatens the state’s investment in and the success of Alaska LNG.

The details of any project are crucial. At stake are the value of our royalty gas, which feeds the Permanent Fund; our state share in production, property and income taxes that support the treasury; the availability and cost of gas for Alaskans; and future North Slope resource development. Variations on the SB 138 framework can have significant consequences. These details were not part of the Governor’s letter — and we must have these details in order to make a deliberative decision on natural gas policy, and the responsible fiscal choices our constituents demand.

We want to work together on a path forward that is responsible, allows for public understanding and input, and does not recklessly waste state money pursuing options that lack a proven, commercial foundation. Competing with ourselves, while confusing our partners and the markets, is not in our best interests.

Speaker of the House Mike Chenault represents Niksiki and Rep. Mike Hawker represents Anchorage in the Alaska House of Representatives.

Categories:

3-29-15 NPC Says Develop Arctic Energy

29 March 2015 7:38am

Hearst Newspapers by Jennifer Dlouhy.  

The United States should move swiftly to harness the tremendous oil and gas reserves locked under its Arctic waters while the industry improves the equipment used to drill wells and sop up spills, according to a government advisory committee report released Friday.

The analysis, conducted by the National Petroleum Council at the request of Energy Secretary Ernest Moniz, makes the case for the United States to aggressively develop Arctic oil and gas that can help supply the country with energy long after production tails off from onshore fields.   More....


Juneau  Empire Editorial.  

Lately, the Alaska Legislature has been talking a lot about the gas pipeline. Under Gov. Sean Parnell, Alaska signed a deal with Big Oil that would build one from the North Slope down to the Kenai Peninsula. By all accounts, that pipeline’s looking like the best way to keep Alaska from going broke in the middle term. 

Of course, we’ve thought the same thing before. We thought it about the El Paso proposal, the Foothills Gas Pipeline, the Yukon Pacific Corp. pipeline, the Alaska Gasline Inducement Act and the Denali Gas pipeline. We’ve thought it about bullet lines and small-diameter lines.

The AK LNG — Alaska Liquified Natural Gas — pipeline might yet turn out to be another broken dream. If that happens, the state will be in true financial trouble.

With so much at stake, doesn’t it make sense to have a spare tire?

Categories:

3-28-15 Governor and Legislature Clash

28 March 2015 3:33pm

 
 
Walker and legislators can't bridge their divide over Alaska natural gas pipeline
“No one's going to take care of Alaska better than Alaska, and we just have to ... It bars the state's Alaska Gasline Development Corp., or AGDC, from ...
 
Categories:

3-26-15 Major Alaska Legislative Hearing: Ak-LNG North Slope Gas Project

26 March 2015 6:59am

Senator Cathy Giessel, AGDC, ASAP, Ak-LNG, HB 132, Photo by Dave HarbourCommentary: Yesterday, the Senate Resources Committee's Chairman, Cathy Giessel (NGP Photo) scheduled testimony on HB 132 clarifying the mission of the state-owned Alaska Gasline Development Corporation. 

ON THE FEDERAL SIDE:

Randall Luthi, Alaska OCS, National Ocean Industries Association, IOGCC, DOE, Photo by Dave Harbour ADN Commentary by Randall Luhi (NGP Photo).  We need to take our country and economy to the next level in terms of energy security. The only way to do this is to safely and responsibly explore our own offshore energy resources, particularly off Alaska.


SHELL DECISION CLOSE!

ADN by Jennifer Dlouhy.  The Obama administration is set to announce within days whether it will reaffirm a seven-year-old government auction of oil leases in the Chukchi Sea — a decision critical to Shell's plans to resume drilling in those Arctic waters this summer. 

As our readers know, Governor Bill Walker once opposed AGDC's sponsorship of the medium diameter so-called ASAP gas line from Prudhoe Bay, past gas-hungry Fairbanks to South Central Alaska.  

Walker now proposes that AGDC's project be expanded in some as yet undefined way to accommodate high gas volumes. 

This would put AGDC's ASAP project in direct competition with its partnership position in support of the Ak-LNG project.

We'll provide a more complete report later; meanwhile, here is a link to the actual video archive of that hearing.    -dh


Today's American Energy Alliance links:

Special deals for Tesla:
 
The Wall Street Journal (3/25/15) editorializes: “California has tried to solve this problem for Tesla with its zero-emissions vehicle mandates, which have other makers buying ZEV credits from Tesla. But the sheer idiocy of these subsidies is a continual risk to Tesla. A ZEV car in California is one with zero emissions at the tailpipe, no matter how much environmental degradation it causes upstream. Toyota, for one, has recently switched its attention to hydrogen-fueled cars, which emit only water and warm air at the tailpipe, never mind that 95% of the world’s hydrogen is manufactured from fossil fuels. Policies that are so transparently stupid and perverse, like the policy of subsidizing rich people with $7,500 tax credits to indulge themselves with Tesla’s products, would not seem a sound basis for a scale auto manufacturer, which Tesla aspires to become.”

Bright Bulb Award:

"Rather than issuing standards and rules to which new wells must conform, the BLM instead has invested itself with the power to either sign off on or block each individual well, operating on a case-by-case basis. (Based on what statutory authority? Are we still even asking that question?) Which is to say, satisfying the letter of the law will not be enough — BLM bureaucrats still will have the final say, employing whatever whimsical standards leap into their perverse little minds. This is a recipe for outright corruption..."

The RFS has a fever. And the only cure is full repeal.

The Wall Street Journal (3/25/15) editorializes: "At the Iowa Agriculture Summit earlier this month, most of the prospective Republican presidential candidates embraced the renewable-fuel standard, one of the worst examples of corporate welfare in America. This federal mandate props up the U.S. ethanol industry by forcing refiners to blend biofuels into gasoline. Despite the fact that it is an obvious business handout, White House hopefuls rarely attack the standard, lest they harm their chances of winning the Iowa caucuses."

Handouts breed corruption, as the Oregon DOJ is about to discover. 

The Oregonian (3/24/15) reports: “The Oregon Department of Justice has opened criminal and civil investigations into the award of $11.8 million in state tax credits for a series of solar arrays installed at Oregon State University and the Oregon Institute of Technology. The agency acted after The Oregonian/OregonLive reported earlier this month that developers of the arrays missed deadlines to qualify for subsidies under the state's business energy tax credit. The news organization's investigation found that backers submitted phony and misleading documents to the state to demonstrate construction was underway by the deadline - documents that officials at the Oregon Department of Energy failed to check.”

Does the hypocrisy of it all even remotely cross his mind?

The Washington Free Beacon (3/25/15) reports: “Leftist actor Mark Ruffalo, best known for his supporting role in 13 Going on 30, has not let his crusade against fossil fuels get in the way of his mass consumption of them…Though Ruffalo has committed himself to divesting from fossil fuels, he is far from committed to reducing his own fossil fuel use. Ruffalo is currently offering to fly (presumably on a fossil fuel-burning jet) the winners of a raffle he is running to the world premiere of Avengers: Age of Ultron...The winners of Ruffalo’s raffles will be burning just a fraction of the fossil fuels burned during the filming of the latest Avengers movie, which was filmed at 23 locations across the globe. He and the rest of the Avengers filmed in locations ranging from England to South Korea to Bangladesh to South Africa to Italy.”

Let's not kid ourselves: The PTC isn't about developing new technology. It's about lining AWEA's pockets. 

The Daily Caller (3/25/15) reports: “Sen. Lamar Alexander has a proposal for Democrats: End subsidies to wind power producers and use that money to double funding for federal energy research at the Department of Energy. “Washington has a bad habit of picking winners and losers, and an addiction to wasteful subsidies of all kinds – we need to end these policies,” the Tennessee Republican said during a hearing on DOE’s 2016 budget request Wednesday. For years, many Republican lawmakers have been looking to end the Wind Production Tax Credit (wind PTC) which has been extended nine times since 1992. The wind PTC pays wind farm operators for the first 10 years of electricity produced. The wind lobby has fought hard to reinstate the subsidy after it expired at the end of last year.”

Ever the good little lemmings, Marylanders are following New York's lead. Over a cliff.

The Baltimore Sun (3/24/15) reports: “Both chambers of the Maryland General Assembly separately passed measures Tuesday that mark the most aggressive action the legislature has taken to curb natural gas extraction in the state. The Maryland House of Delegates passed a three-year ban on fracking and the Senate approved tough new legal standards for drillers. Each bill must still clear the other chamber, but the actions signaled the legislature was willing to go further than it has before to limit natural gas drilling.”

Do you have something to hide, Gina?

The Washington Examiner (3/25/15) reports: “A House committee Wednesdaysubpoenaed Environmental Protection Agency Administrator Gina McCarthy for her cell phone billing records and emails. The subpoena by the Committee on Science, Space and Technology was issued at 1 p.m. Wednesday and seeks the records after the agency failed on at least 10 prior requests from the panel for documents on whether an estimated 5,000 text messages were improperly deleted from McCarthy's device.”

Why the hell is the government giving Alcoa a $259 million loan?

Bloomberg (3/26/15) reports: “ A $25 billion U.S. Energy Department loan program that funded flops like Fisker Automotive Inc. and successes such as Tesla Motors Inc. resumed lending after a four-year hiatus to retool the lending project’s focus. Alcoa Inc. has been approved for a $259 million loan from the Advanced Technology Vehicles Manufacturing program to upgrade a factory making high-strength aluminum that can improve automobile gas mileage.”

At least the Japanese are putting that money to some good use.

The Associated Press (3/26/15) reports: “Despite mounting protests, Japan continues to finance the building of coal-fired power plants with money earmarked for fighting climate change, with two new projects underway in India and Bangladesh, The Associated Press has found. The AP reported in December that Japan had counted $1 billion in loans for coal plants in Indonesia as climate finance, angering critics who say such financing should be going to clean energy like solar and wind power. Japanese officials now say they are also counting $630 million in loans for coal plants in Kudgi, India, and Matarbari, Bangladesh, as climate finance.”

Categories:

3-15-15

15 March 2015 6:21am

AJOC by Tim Bradner.  

Despite Gov. Bill Walker’s threat of a veto, House leaders are pushing ahead with a bill that would put sideboards on the governor’s plan to expand a state-led backup gas pipeline into a large project that could be seen as a competitor to the Alaska LNG Project, the industry-led gas project in which the state is also a 25 percent owner. ...In a related development, Alaska Gasline Development Corp. Public Affairs Manager Miles Baker said the U.S. Army Corps of Engineers informed AGDC on March 2 that it was pausing work on a revised supplemental environmental impact statement on the state’s backup Alaska Stand-Alone Pipeline, or ASAP, until the governor’s intentions for the project are more clear.  More...

Categories:

2-2-15 "Alaska's Challenge of Cash & Energy Shortage: Part I"

02 February 2015 1:30am

 "Alaska's Challenge of Cash & Energy Shortage: Part I"

See Part II and Part III

Additional references and historical background In "Alaska LNG Challenges"

by

Dave Harbour

First, there is the Challenge of Cash Shortage.  

In the early 1980s, Alaska was feeling its oats.  

Second, there is the Challenge of Energy Shortage, which we shall more fully address tomorrow in Part II,  and it involves gas pipelines, distribution systems, state funded project competition and more....

To begin that discussion, below is a letter from one of Buzz Otis, Fairbanks, energy shortage, Alliance, HiPow, Photo by Dave Harboura number of good, long-time Fairbanks friends, Buzz Otis (NGP Photo), and my initial response.  In Part II we will examine a State Energy Shortage issue in more detail and provide what we hope are useful questions for decision makers to answer in their quest for solutions.  Read more....

-dh


References:

Elected officials were sitting on a cash dowry created by a decade of about a dozen tax increases levied on Alaska's infant oil industry.  

The tax increases were primarily aimed at the unbelievably productive Prudhoe Bay oil field -- a 2 million barrel per day elephant field, the largest in North America.

But concerned citizens throughout the state were not unaware of this new phenomenon and where it might end if not properly handled.

State leaders and the citizens had in 1976 created the Alaska Permanent Fund in partial response to the question of, "What if we encountered a rainy day".  Since that time the fund has been largely thought of as a source of annual payments to Alaska citizens of a Permanent Fund Dividend rather than a rainy day fund.  The thought of actually using it for the purpose it was created -- to fund government operations on a "rainy day" -- is an anathema to most citizen beneficiaries and their elected representatives.

In the early 1980s a number of business, social, academic and political leaders from all regions of the state assembled for the most important forum of that day, called "The Challenge of Plenty".  There citizens discussed the possibility of a constitutional amendment to control spending based on a population growth/CPI formula, and other ways of wisely preparing for the future.

Your writer played a role in organizing that conference and it was truly heartwarming to see all political parties and regions of Alaska participate courteously, collegially and in a true spirit of joint problem solving.

Suffice to say that while the highly cooperative leaders agreed upon the problem and potential solutions, they were never able to obtain legislation as the group recommended (i.e. though there was a constitutional spending limit effort in the early 90s which fatally eliminated or diluted the most critical provisions; and another effort by a minority of far-thinking legislators in the late 1990s.)

While Challenge of Plenty participants were highly concerned about unsustainable state spending, they also focused on the Federal Government's actions since statehood to steadily remove from the reach of citizens, access to resources on federal lands -- best illustrated by passage of the Alaska National Interest Lands Conservation Act.

A series of federal governments also succeeded in using various environmental Acts of Congress (i.e. ESA, CWA, CAA, NEPA, etc.) to restrict reasonable and traditional multiple use -- and wealth production -- on federal lands as well as reasonable ownership activity on private land.  

Readers can thus appreciate how Alaskans have been caught between the charybdis of over spending and scylla of shrinking opportunity for natural resource revenue generation.  -dh 

Like Joseph of old interpreting the Pharaoh's dream to compel saving during years of plenty for the coming years of drought and famine, Alaska's political leaders were not unaware of the challenge.  Like Pharaoh, they created a "Joseph"--the Alaska Permanent Fund--so savings during good times could allow for a sustainable economy during the lean years coming.  

But the constantly changing demographic profile of voters and elected officials could not enforce management of the savings in modern times as the dictator, Pharaoh did in his era.

The University of Alaska-Anchorage's 50-year-old Institute of Social and Economic Research (ISER) has studied the importance of a "safe landing" for Alaska's economy and the Scott Goldsmith, Institute of Social and Economic Research, Dave Harbour Photodiscipline required to make that happen.  Professor Scott Goldsmith (NGP Photo) has led this effort for over two decades, issuing "Fiscal Policy Paper #1" on August 1, 1989.  That first paper states what has now become a long term, perhaps economically fatal challenge: "Alaska faces a problem that will be very tough to solve but is easy to explain: state government is spending more than it collects."

The challenge of sustainability has worsened over two and a half decades: for, as Prudhoe Bay production declined, spending never sufficiently declined to reach a sustainable equilibrium and, now, oil commodity prices (i.e. at half what they were last summer) are exacerbating the challenge for this highly oil-dependent state.

ISER's most recent analysis of the situation shows how to obtain a sustainable glide path for the Alaskan economy, but so far elected officials have found it impossible to convert that wise counsel into sustainable reality.  (Other Fiscal Policy Papers in archive here)

Alaska now has the greatest debt per capita of any state and the greatest per capita spending along with the greatest dependence on a volatile commodity and the most expensive oil and gas operating area in the country.  Some have tried to make these facts the fault of an oil industry whose productivity has provided Alaska with the opportunity to make its own wise or unwise taxing, debt and spending decisions.

But state leaders are now seriously facing the cash shortage issue as a matter of imminent, not theoretical, danger.  ISER has clearly demonstrated that the cash flow runs into default in a few years, without dramatic budgetary changes. 

Furthermore, from a balance sheet viewpoint, the picture is somewhat more bleak when citizens realize that the unfunded state employee retirement fund is short just under $10 billion, balancing out a similar amount of non-Permanent Fund savings accounts acting as subsidies for annual operating budget deficits.

So, in effect, the day of reckoning is not a few years 'down the pike', but is here TODAY.

In Parts II and III (Scroll up), you will be considering whether increased state government debt (even AIDEA revenue bond debt) or use of depleted savings for a Fairbanks gas utility is either rational or necessary.

 

 


 
Buzz Otis, Fairbanks, energy shortage, Alliance, HiPow, Photo by Dave Harbour

Email received yesterday, 2-1-15, from Buzz Otis, Fairbanks businessman and community volunteer:

 

On Feb 1, 2015, at 2:33 PM, Buzz Otis <buzz@xxxxx> wrote:

Morning Dave, I wrote this late last night....  Any suggestions are welcome.  With respect, Buzz

Good evening Dave,

(Answering Buzz's email, received yesterday.  How can anyone with a heart not be drawn to his heartfelt and articulate description of Fairbanks' Energy Challenge?  Tomorrow, we'll go into much more detail, in Part II.)


Buzz:

You've written a thoughtful, compelling piece.  Thank you for sharing it with me.  I will run your message Monday. 

As a former regulator I try to look at all sides of issues like this and believe my best role is to help educate fellow citizens without becoming an advocate or project opponent before all the facts are known. 

I also urge you and our very smart mutual and respected friends there to think strategically about the long term, and answer to your satisfaction every possible question--including those both identified and inferred in the News Miner article.  I'll try to help by providing some of my own questions in Part II, tomorrow. 

I will make two more observations to you and my Golden Heart friends.

1.  I completely understand the gravity of the situation.  We agree that where possible the private sector is best equipped to respond to economic supply and demand issues.  While Alaska has many examples of failed government projects, it also has a number of public facility projects that are in the public interest.  Bradley Lake Hydro, certain roads and bridges come to mind--although a stable energy supply project like hydro is hard to compare to an energy supply governed by commodity pricing and variable costs subject to regulatory 'cost of service' reviews.

2.  The trick for those requiring (and may I even say, "desperately needing") a successful Interior energy project not fully appreciated by private investors, is to make sure government applies the same due diligence discipline as you would apply to a new company project before you stake family and company money on it.  The questions the News Miner and I and others have raised seem mostly like simple due diligence questions to me.  They are the type of questions your banker might ask you about your proposed project.  And, they are the type of questions th which the Governor and Legislature will likely wrestle as the initial and continuing due diligence phase begins.

That said, we all agree Fairbanks is in dire need of an efficient energy remedy.  Many would also agree that the solution could merit government assistance.  In support of these propositions, it might be helpful if:

1.  Project advocates approached all questions and concerns as you have: eagerly, positively and non defensively.  Successfully doing one's homework, cheerfully and knowledgeably answering all concerns would avoid conflict and best prepare for statewide consensus.  Having the other party's (Hilcorp's) concerns quickly addressed are probably also in Fairbanks' interest due to that company's significant investment in production that supplies gas (for both heating and power generation) to both South Central and to Interior Alaska consumers in household, business and commercial sectors.

2.  As questions are answered, it might be well to encourage public forums -- not for the purpose of beating the drums for or against the project--but for the purpose of helpfully answering all reasonable questions and concerns.

I join others who would love to see Fairbanks' longstanding energy needs responsibly met, quickly.  If it is wholly or partly done with public funds, I am sure Fairbanks would agree that those in charge of turning the dream into reality will best encounter public consensus when they've done sufficient due diligence to face the public confidently, with well studied answers.

Since the due diligence stage is not complete, it would be to everyone's advantage if the questions that are answerable at this early date -- and future mileposts -- are timely addressed. 

Dave

Sent from my iPhone 

I do hope this finds you and your family well.  I appreciate your correspondence on a regular basis and yesterday’s article that the state of Alaska, through AIDEA would purchase Pentex Alaska Natural Gas Company, LLC and its assets which include Fairbanks Natural Gas for 52.5 million. 

I would like to applaud Governor Walker for taking such bold and quick action to address interior Alaska’s energy needs.  Being a private businessman in the interior since 1976, this may come as a surprise to my friends and colleagues, so I will attempt to explain my position in the hopes that you and others can understand the strangle hold we have had on our economic neck with the outrageous costs of energy here in Fairbanks and the surrounding area.

First of all, I am a staunch private enterprise advocate and will continue to fight for the freedom that private enterprise gives to so many Americans until the good Lord decides it is my time to leave here.  I have been proactive over the years, encouraging various plans, through my involvement in the Fairbanks Chamber, Fairbanks and North Pole Economic Development Corporations, and the Support Industry Alliance, that promised to lower the cost of energy in Alaska and particularly Fairbanks, to no avail. 

When I worked on the Alyeska Pipeline in 1975 we were told the next big project was a gas line that would surely start within a year or two of the oil lines completion. 

I remember many gas line projects starting and stopping as you have.  I remember when Ray Latchem came to Fairbanks with Fairbanks Natural Gas, I remember touring Point McKenzie with Ray and looking at his small plant there and him telling me how we were going to have lower energy costs in Fairbanks as a result, and we did.  However, that only lasted a short while and as the economics of shipping small amounts of gas north by truck, gas contracts renegotiated out of Cook Inlet, and the cost of doing business always having an upward bias, plus wanting to maximize profitability, our natural gas prices came up to par with fuel oil.

In the Fairbanks area, we are heating our homes 7 to 8 months out of the year.  Up until recently, we were paying close to $4.00 per gallon for # 2 heating oil.  Even today with the price of crude dropping 50 to 60 % our price of heating oil only dropped 25 to 30 %. 

As a result, folks here are burning wood, coal, or pellets trying to make it by.  Many of our residents are using state of the art wood or coal burning stoves or boilers, with clean dry fuel.  Others aren’t doing that.  Many oil fired boilers aren’t tuned correctly which when added together, and coupled with our geography, it puts Fairbanks and North Pole air quality out of compliance with EPA on certain days throughout the winter.  Not particularly attractive for business or personal health.

I remember Bill Popp, at ADEC, telling me a few years ago that he likes to see a prosperous Fairbanks because it is great for Anchorage’s economy, after all, just about everything that comes to Fairbanks comes through the port of Anchorage!  Bill Popp gets it!

*     *     *

Dave,  on top of the high cost of fuel can you believe the cost of electricity for my small commercial buildings is over .21 per kilowatt hour?!

Unfortunately, private enterprise hasn’t delivered low cost energy to Fairbanks!  Our energy costs are some of the highest in the nation.  It is costing us economic opportunity and causing people to leave our community!  We have a US Air Force base that we have had to fight to keep open on two separate occasions, in the past 7 years.  Even though we enjoy an extremely strategic location, the military costs are driven by outrageous energy prices.  Next month we will be doing our best to keep our Army troops here.  I can’t help but believe that if we enjoyed low cost energy like our neighbors to the south we would be in a better position to grow business here.

Our past and present legislative members and past governors, many of which question Governor Walkers intentions, when he put forward the proposal to have AIDEA purchase Fairbanks Natural Gas, are the same individuals that have insisted that every barrel of crude oil is monetized, rather than using some of our royalty oil to ensure economic stability in Alaska.  Fairbanks has a crude oil line and until recently had two refineries in North Pole and we pay some of the highest energy prices?  Just think what a lower cost of refined product, done through proper negotiations with the refiners, could do for our industry here.  Marginal projects become viable.  Citizens have disposal income to spend elsewhere!  Abundance and positivity would be on every business person’s tongue!

To sum up we need low cost natural gas to fuel our homes, businesses, schools, mines, and military installations while providing  a lower cost for electrical generation.  PRIVATE ENTERPRISE HAS NOT PROVIDED LOW COST ENERGY!  WE CAN’T WAIT ANY LONGER                                                                                                                                                                                                                                             Personally, I have built energy efficient buildings, burn coal at one facility and burn wood in my home and in my shop.  These buildings also have oil backup for security.  Without  energy efficient buildings and burning alternative fuel sources our bottom line would be negligible. 

This is no time to divide and conquer.  We need your support.  Please consider helping Interior Alaska find its way out of these high energy costs and support a more timely solution.  I believe the only way forward in a timely manner, if at all, is with state participation.  We don’t have such a fiscal crisis that we can’t invest in the future of Alaska.  Please find a way to support the governor.

Respectfully,

Buzz Otis

Categories:
Syndicate content