Gas line should pipe up and pay its own way

By Larry Persily

I don’t believe the proposed multi-multibillion-dollar Alaska North Slope gas project will be built. It’s too expensive. The risk of construction delays and overruns are too much for investors to accept. The prospects of sufficient long-term demand growth for liquefied natural gas delivered by tanker to Asia are too uncertain. The competition from less risky gas projects is too much to overcome.

Other than that, sure, it could be great for Alaska. Think of the jobs, the state tax and royalty revenues, and the profitable fact that selling the gas would extend the economic life of North Slope oil and gas fields.

My compliments to the efforts by the project’s lead developer, Glenfarne — a New York-headquartered, privately owned company that develops energy projects — and its dedicated supporters who believe it’s all possible.

The endeavor would include an expensive plant to remove the climate-damaging carbon dioxide from the gas stream for safekeeping deep underground; 870 miles of pipeline from Point Thomson to Prudhoe Bay on the North Slope and then south and across Cook Inlet to the Kenai Peninsula; and a giant refrigeration plant that would supercool the gas into a liquid for loading aboard giant thermos bottles built into ships to deliver the fuel to buyers in Asia.

It’s a massive undertaking, with a construction schedule stretching at least seven years and employing close to 10,000 workers at its peak, with about half coming from out of state during the busiest construction years, according to the environmental impact statement prepared by the Federal Energy Regulatory Commission, which authorized the project in 2020.

All that work and all those workers would put a burden on the communities in the project path, including trucks hauling 115,000 pieces of 40-foot-long steel pipe and tons of equipment and supplies; traffic through the ports in Seward and Anchorage and on Alaska’s highways; and the possible hit to tourism businesses that could lose customers if hotels and other rentals fill up with people coming to Alaska to work or look for work, crowding out tourists.

The jobseekers “could create an added burden on local governments,” the federal EIS said, “because they would increase the demand for local community services and facilities.”

Whether street repairs, ambulance and police calls, adding staff to accommodate new students, increased pressure on social services, more demand on trash, water and sewer services, there will be direct costs to the communities.

Which is why the Senate Resources and House Resources committees are working to come up with legislation to ensure that the communities don’t pay the bill.

The governor’s proposed gas line legislation does nothing to require that the project developer pay anything to cities and boroughs during construction. And then it significantly reduces municipal and state revenues when the project enters service by eliminating property taxes and substituting a minimal charge based on the volume of gas moving down the line.

The municipalities deserve to be made whole for their added costs when the communities are swarmed by the mega project. Promises of future revenue don’t do much to balance a city budget putting out real cash during years of construction.

The federal EIS says it in one sentence: “A lag time could exist at the beginning of the construction phase when the amount of government expenditures incurred would increase rapidly before government revenues generated by the project would expand.”

The Legislature is right to expect that the project developer pay the costs. Although Glenfarne is talking with cities and boroughs about the issue, it should be addressed in state law to ensure it happens.

• This column originally appeared in the Wrangell Sentinel.