By: Margie Brown, CIRI president and CEO
Gov. Sean Parnell and Alaska state legislators are focused on revitalizing our state’s energy industry to increase oil and gas production for export and in-state consumption, as well as considering non-traditional sources of power production. That analysis is long overdue. But I fear that with so many competing projects being proposed, with so many different variables, and without a systematic plan prioritizing the competing interests at play, it will be extremely difficult for our elected officials to choose the most practical, profitable and effective project from a long-term perspective.
I am not arguing against any of these projects. In fact, CIRI is in a good position to profit if any of them succeed. Nevertheless, I sympathize with the legislators who are trying to make sense of the projects, many of which are asking for substantial public underwriting. Some mega project proponents are government entities themselves, making it even harder for legislators and for the public to distill the merits of the projects.
Government, acting alone, is ill-suited to be a proponent or developer of large energy projects. The Alaska Constitution directs the legislature to “provide for the utilization, development, and conservation of all natural resources belonging to the State….” I read this to enable a free market that enables private investors to use their special skills, resources, ideas and hard work to pick and responsibly pursue the best resource development opportunities. A well-regulated free market system builds value for everybody by rewarding financial risk-taking with profits while also creating jobs and economic growth. This system also punishes bad decision-making, and sometimes just plain bad luck, with financial loss or even financial ruin.
Understandably, well-meaning legislators struggle to pick and choose between mega projects because the projects themselves are often highly complex and require a long-term view of projects that can last 25 years or more. I know from my own work at CIRI that the long-term view can be challenging to maintain with many shorter-term demands that need to be addressed. I imagine this tension between holding the long-term view and addressing the exigencies of the short-term is the case for elected officials doing the state’s work.
There is a vital role for the government in the process of delivering energy solutions for Alaska. The question is what should the administration and legislature do to encourage new Alaska energy development?
They must first agree on a set of statewide energy priorities. For example, should state action focus on providing cheap energy to Alaskans or to maximize revenue? What about sustainability? What is the proper balance between current and future energy and economic drivers and environmental considerations? How should the revenue generated by energy development be utilized? And how should energy resources be distributed in a regionally equitable manner, considering rural deliverability challenges and needs?
The governor and legislators should then use these energy priorities to finish and implement a statewide strategic energy plan. I expect this plan will generally favor responsible development that can provide sustainable energy supplies for local use and export. These goals align with local and national economic and security interests. I also expect the analysis to favor those projects that promote:
- High-quality, modern infrastructure including roads, ports, communication and power transmission grids. Alaska’s energy development challenges are complicated and state officials will have to collaborate with federal and local governments to effectively support new energy development. After all, federal, state and local roads and infrastructure are more useful if they interconnect.
- A consistent, predictable and expedient regulatory system that balances long- and short-term costs and benefits. Government cooperation is needed to reduce or eliminate the regulatory morass that now amplifies the financial risk of most energy developments without harming public interests.
- Education and training to produce a world-class work force with necessary technical skills. Directing funds to the education and training of a productive work force is beneficial to all energy projects, mega or otherwise, and is crucial to keeping Alaska competitive.
Over time, I have found myself writing more and more about the need for government to create conditions that enable, foster and promote private enterprise. Private enterprises like CIRI do best when we have government assuming its proper role as offering a predictable regulatory purview with appropriate development incentives. Working together, with government and private enterprise each assuming their appropriate roles, the risk and reward equation comes into balance and we can solve our energy issues.