Opinion: A rail extension from the North Slope is a viable option

The recent announcement by the Alaska Industrial Development and Export Authority and the Alaska Gasline Development Corp. (”Alaska development agency moves to provide $50M commitment to LNG project,” Dec. 6) warrants close examination not only by the Legislature but also by every Alaskan who could become a ratepayer.

The AIDEA proposal commits up to $50 million as a backstop in support of an economic feasibility study on the proposed bullet gas line. The study would be conducted and initially funded by an unnamed private company. If the study concludes that the project is not economically viable, then the state will be on the hook to reimburse up to $50 million expended on the study. This effectively creates a contingent liability for the state, bypassing legislative oversight and approval.

The first phase of the so-called bullet line is estimated to cost $11 billion to $13 billion. It would deliver North Slope gas to Alaska’s Interior and some Western Alaska communities. The second phase would be larger in scope to accommodate the LNG export markets of Asia.

The proposal, which was approved by the AIDEA board and AGDC, represents a significant financial risk to the state. History tells us we are almost certain to end up paying out $50 million.

The combined efforts to bring Alaska gas to the markets of the world, as well as supplying Alaska’s needs, has consistently run up against the hard economic test of rate-of-return and risks. It is very difficult for this former banker to contemplate amortizing an $11 billion project with fewer than a half-million Alaska ratepayers. I wonder how many times we go to the well before acknowledging that it’s empty. Like many others, I don’t see the bullet line as a viable or affordable option.

Now is the time to consider other opportunities:

• Importing LNG: While it may be necessary in the short term, it is not a viable long-term solution, either financially or philosophically.

• Transmission line from the North Slope: The cost is likely to be lower than a bullet line and could deliver sufficient power to the grid but has a single point of failure, something unacceptable to utilities.

• Additional investment in gas in Cook Inlet: We should continue to support gas exploration but there is little hope that the impact will be meaningfully beyond a few years.

• Significant scaling up of renewables: We all want clean power. Clean power from wind, solar, tidal and even small modular nuclear is increasingly viable. But without sufficient natural gas baseload or advancement in battery energy storage, this option is only a piece of the overall puzzle.

A more realistic option is the estimated $11 billion, 471-mile rail extension from Fairbanks to the North Slope. A true revenue generator, it could supply all the gas needed from the Slope. This project would be funded through Alaska Railroad bonding authority and not on the backs of the ratepayers as in other scenarios. It could also support the Ambler Road project and the development of a petrochemicals industry for export, reduce exploration and operating costs for the North Slope, and stimulate the development of marginal fields, thus allowing the producers to book more reserves and increase activity at reduced costs.

One could also contemplate rail evacuating remaining oil reserves via rail someday in the future and turning the trans-Alaska pipeline into a dry gas line, finally exporting Alaska’s gas to the world via Valdez. This would also enable a major leap forward by connecting the Alaska Railroad with the Canadian and U.S. Transcontinental System near Prince George, B.C. This would relieve our state’s sole dependence on marine transportation.

Let’s examine all potential options, rather than committing $50 million to a single alternative. Let’s ask the Institute of Social and Economic Research at the University of Alaska to do a back-of-the-envelope evaluation of several approaches and see which one rises to the top. Then, we can focus our financial commitment to the alternative that makes the most sense for the next generations of Alaskans.

Frank Murkowski is a former U.S. senator and Alaska governor.

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