Extra Edition: Bonfire of the Subsidies; A New Economic Plan for Alaska
Viability of governor's diversification trifecta
In response to the Senate passing legislation that would restructure the Permanent Fund and use money from the Earnings Reserve Account (ERA) to pay for state government, Governor Walker announced his plan to move forward to diversify Alaska's economy.
The highlights of that plan are agricultural exports, renewable energy and a gas pipeline. Let's take a look at those three things and consider their viability.
Observation #1 Renewable Energy: You cannot replace oil, coal, and natural gas with windmills or solar panels. To quote a favorite blogger, "Hobbits may be able to live poetically, generating energy from the wind, the sun, and the soil. Real human beings living in an industrialized civilization need highly concentrated nonrenewable energy sources to survive." Headlamp is thankful that Alaska is blessed with abundant oil, coal and natural gas resources and companies who, against all odds, develop them responsibly. If only we had elected officials who wanted the people of Alaska to fully access our resources…
With current technology renewable energy sources, like wind and solar, cannot stand on their own merits without substantial government subsidies. Furthermore, these energy sources are sub-par when compared to traditional energy sources, at providing abundant, reliable, affordable, and scalable energy to large populations. So, Headlamp would ask, how much will the state subsidize these projects and what will we get in return?
Observation #2 Agricultural Exports: There are only about 500 farms in Alaska. In terms of revenue generated, Alaska's top five agricultural products are greenhouse and nursery products, hay, dairy products, potatoes, and cattle.
These projects also exist on government subsidies. Once again, Headlamp would ask, how much will the state subsidize these projects and what will we get in return?
Observation #3 A gas pipeline: Since February of 2015 the Walker Administration has acted as if a state-backed pipeline is a serious alternative to the LNG mega-project driven by the private sector. Hiring the majority of his allies from the Alaska Gasline Port Authority indicates the Governor still prefers a gasline project constructed, financed, and owned primarily by the state.
If Alaska miraculously built a large diameter gas pipeline on its own, all Gov. Walker would lack is the vast quantities of gas needed to fill the pipe to make it commercially viable and the money to fund the project.
At the risk of being repetitive, this project would have to be subsidized by the government if the state were to go-it-alone. Headlamp is watching HB 246 – the governor's bill to set up a fund within the Alaska Industrial Development and Export Authority (AIDEA) to fund oil and gas projects. Headlamp will also be watching the AGDC board meeting this week to see if a new President is appointed. We hope AGDC's new President is not one who believes the state can build an LNG pipeline on their own.
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