Future of natural gas, oil bright but fiscal plan still needed

Posted: Friday, June 25, 2004

People say you can't get where you're going unless you know how to get there. Clearly, Alaskans want to get to a point where they don't have to worry every day about the price of oil and its effect on public services. And they want to get to a prosperous long-term future for their children.

The answer comes in two parts: 1) Build a stronger natural resource industry in our state, and 2) Put our public finances on a stable footing to meet our needs until those new oil and gas revenues start to flow.

Dealing with the first part of the answer, my single most important initiative is to push for construction of a North Slope natural gas pipeline.

That gas has been stranded far too long, and it's not doing anyone any good when homeowners and utilities and industries need it across the nation.

I know it's not New Year's Eve, but I believe this state is entering a new era of opportunity, so I'd like to add my predictions for the next 10 years. Despite my years of political experience and good eyesight, 10 years is about far enough not to cloud one's vision.

By 2014, Alaska natural gas will be flowing south. I see the new pipeline following the highway route to connect in Alberta, where Alaska gas will feed existing lines to move clean-burning energy to anxious consumers across the nation.

Along with the main line, I see spur lines to Valdez, Kenai, Anchorage and the Matanuska Valley to provide affordable gas for Southcentral and Railbelt residential and industrial consumers, and possibly export sales.

And with a gas pipeline to market, I expect significant exploration on the slope as companies look further inland for additional gas reserves.

By focusing so much attention on gas, I do not mean to ignore the oil industry that has fueled our economy for several decades. My vision for an even stronger oil industry includes:

1. Convince oil companies to invest in Alaska. And if the companies are already here, they need to reinvest more of their profits in the state. Responsible tax policies can help with that convincing.

2. Use that investment to explore for more oil and, when they find it, produce it.

I predict oil prices for the next 10 years will average higher than they have in the past 27 years of North Slope production. On this prediction, I had a little help. Check out this month's National Geographic cover story on "Cheap Oil is Gone."

By 2014, I expect North Slope heavy oil fields will make an increasingly important contribution to pipeline throughput.

I predict a major discovery in state waters offshore from the Arctic National Wildlife Refuge, requiring the Department of Interior to drill from its side to delineate the reservoir.

I also predict more discoveries in the National Petroleum Reserve-Alaska, allowing us to talk of boosting the flow in the trans-Alaska oil pipeline instead of merely holding steady.

But all this will be harder if we don't put the state's fiscal house in order. Oil and gas investors don't like financial risk, and neither do most Alaskans. To get there, I have called a special session to resolve our fiscal problems as a key step to long-term fiscal certainty for Alaska.

We need a plan to help sustain public services until gas line revenues and new oil production come online to build even stronger financial opportunities for Alaska.

We should not pin the future of our educational system on a prayer for record oil prices. I urge the Legislature to adopt a fiscal plan that resolves our structural deficit this year so that we can move forward, building on a solid financial base.

We have our work cut out for us. The industry needs to keep working as hard as possible to put together a gas line project, while also working with my administration to reverse the downward curve in North Slope production.

And I need to convince the Legislature to adopt a fiscal plan that works.



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