Much has been said and written about the current energy crisis that is affecting not only western Alaska, but the entire world. Over the past two years we have seen significant increases in fuel costs and like I noted in the pervious issue, I don’t see prices dropping anytime in the future. In fact, at that time Alaska North Slope Crude had just passed the $60/ barrel price for the first time ever. Previously I thought it would be a momentary spike and I commented that I didn't think we would see prices drop below $40/barrel anytime soon. Since then it has basically stabilized at the $60/barrel range. Is this the new benchmark? Appears so.
High crude prices are a two edge sword for Alaskans. Since the majority of the State's revenue is based the price of oil, higher prices bring in more revenue for the State's coffers and the Permanent Fund. However, on the other hand it also brings higher energy costs to the residents in both gas and home heating fuel. The State is currently projecting a $1.3 billion surplus for this fiscal year and it will be interesting to see if the legislature spends it all or places part in the CRB. Will some go back to revenue sharing? With the dawn of election season coming, I'm sure we can expect some type of revenue sharing plan.
What about the Permanent Fund? It is my opinion that the Permanent Fund will never be more that a vehicle to produce the PFD. One gubernatorial candidate has already stated his platform will be to 'protect the Permanent Fund'. Because this is such as politically charged issue, don’t expect this $31 billion fund to help us in the near future.
So what is left? Do we all dry up and move to the road system or do we take things in our own hands to see how we can reduce our energy costs? NJUS is currently spending around $20 million to upgrade our electrical generation system, so they are doing what they can do. However, we need to begin looking at ways to divorce ourselves from diesel altogether and take a serious look at developing the local energy alternatives to diesel.
The first step is to identify all options that either occur naturally or what alternatives have been created by technology, then decide which one (if any) is the option we should develop. The Bering Straits Economic Development Council (our local ARDOR - Alaska Regional Development Organization) is currently organizing a region wide energy summit that will bring together local civic leaders and experts in the field of:
- Natural Gas (Norton Basin specific)
- Geothermal (Pilgrim Hot Springs & others)
- Nuclear (similar to the City of Galena)
- Hydrogen
- Wind
- Other
This summit is tentatively scheduled for the week of December 12th, in conjunction with the Kawerak Board Meetings. Our 'experts' represent agencies such as the Alaska Energy Authority, University of Alaska, Humboldt State University, U.S. Nuclear Regulatory Commission, U.S. Department of the Interior, Mineral Management Service and the Alaska Industrial, Development and Export Authority (AIDEA on finance options). The primary goal of the summit is to allow the experts to educate us on what options are available, pros and cons of each, then rank the options as to which one is most feasible. It is my understanding that the US Nuclear Regulatory Commission will take the lead in conducting a study to determine which alternative would be best for our community. As we develop the agenda, more information will be forth coming through our local media channels.
Once an alternative is selected, then we meet the ultimate challenge - how will we fund the development of the selected alternative. For example, it is estimated that it would cost in excess of $20 million to develop the Pilgrim geothermal resource (this does not include further exploration of the resource). Developing the Norton Basin natural gas resource could cost as much as $90 million based on the 2005 MMS Feasibility Study. It must be noted that the MMS study was in federal waters, 30 miles off shore. The Study did note that any further studies should also look within the State of Alaska’s three mile limit.
Where is the average community going to come up with funding for the further exploration and ultimate development of the resource? Do we look to Local, State or the Federal government? Most local communities cannot afford what they have now. State government? We are just a little voice and there are numerous communities in the same position that we are in. The Feds? They have hurricanes, wars and potential pandemics to deal with. How about the private sector? I think not. If there were a potential to develop these local resources at a profit, it would have been done by now.
Do we drop the idea and continue to be strangled by diesel? Not if we're willing to 'think out of the box'.
ENERGY INVESTMENT FUND
What I believe we need is to create an Energy Investment Fund (EIF). What is this Energy Investment Fund and how would it work? I'll admit this is where we need to get creative and 'think out of the box'. This EIF would be created to provide funding for local and regional energy projects that met a certain criteria which could include sustainability, affordability, provide for economic development etc. However, this fund would not be designed to be the 'fix all' to replace any State of Federal revenue sharing. It would only be used on projects that have the potential to lower energy cost while spurring economic development.
HOW THE FUND WOULD WORK
Currently there are a number of large potential mining projects in the exploration and pre-feasibility stages. These include the Donlin Creek gold prospect, Pebble Gold prospect, Ambler copper/gold resource to name a few. The Red Dog Mine is also looking for a cheaper energy source. One key road block in developing these projects is the lack of affordable energy. One key element of this fund is to identify local energy sources that could be tapped in order to provide the energy needed. For instance:
Donlin Creek Prospect. This 25 million ounce gold prospect could generate around 500 jobs in the Calista region. Local potential source is energy is the coal bed methane prospect located in the Holitna river valley just south of Donlin. The positive spin off of this could be a coal bed methane fired power plant to generate electricity for Donlin and a potential grid to Bethel.
Pebble Gold Mine: The Pebble gold mine prospect has the potential to create over 1,000 jobs but also lacks affordable energy. There is potential in the Bristol Bay for natural gas. A natural gas fired power plant could generate electricity for Pebble as well as provide cheaper electricity for the local villages.
Red Dog Mine: Red Dog is looking north to the coal fields of northwest Alaska for potential coal bed methane or coal to lower their operating costs. Again, a power transmission line could be constructed to provide cheaper electricity to the villages
City of Nome: The Nome area has geothermal, wind and natural gas potential to significantly cut our energy costs. The Rock Creek mine and other regional mineral deposits would benefit from cheaper energy, thus more economic development.
Road System: There are a number of small natural gas, coal bed methane and geothermal resources that could be developed and added to the grid.
Geothermal Resources: The City of Unalaska as well as a number of South East Alaska communities are located near geothermal energy sources.
These are just samples of projects that could benefit from this fund.
HOW WOULD THIS FUND BE ADMINISTERED
The fund would be managed by both the State of Alaska and the Alaska Energy Authority.
The State of Alaska, Department of Revenue would oversee the funds external investments. It is assumed that the fund will be large enough to invest funds in the market to help maintain sustainability.
Alaska Energy Authority and AIDEA would be responsible for the day to day operations of the fund including approving project funding, directing projects, repayment of funds used, etc.
Once projects have meet all the criteria, funds will be advanced similar to a construction loan. Repayment would be via a pre-determined per Kw charge over a set term.
HOW WOULD THIS FUND BE CREATED
Here is where government and the private sector need to work together. The major oil companies are enjoying their most profitable quarters in history. Third quarter profit topped $30 BILLION dollars!. Because of that, Congress has called them on the carpet and are grilling them now as to their practices and procedures. Thus the Private Sector has the cash!
Here is where we need to work with our Congressional delegation to come up with some type of tax break to invest in this fund. For example, an oil company could receive a 2-1 tax break or for $100 million invested in this fund would create $200 million in tax breaks. The goal would be to raise One Billion dollars for this fund.
HOW?
The first step is to present this concept and see where it goes from here! As a community we must take ownership in our future!
MITCH ERICKSON