All-Alaska Governor

BY TODD L. DISHER
Frontiersman
Published on Monday, January 25, 2010 7:53 PM AKST

WASILLA — With a yellow line running down a blue map of Alaska, it’s clear from Bill Walker’s campaign logo what issue No. 1 is for this gubernatorial candidate.

“I am very concerned about the economic future of the state,” Walker said on a recent stop at the Frontiersman office. “We are a state 85 percent dependent on oil and the pipeline for our revenue. But that is declining every year. … An all-Alaska gas line will replace that 85 percent.”

ROBERT DeBERRY/Frontiersman Bill Walker, a candidate for Alaska governor, during a recent visit to the Mat-Su Valley Frontiersman.

While this concept is certainly not novel, Walker said he would like to see the state pay for the in-state pipeline’s construction. This could be done, he said, by putting 20 percent upfront and financing the remaining construction costs using bonds paid for with revenues generated once the pipeline is operational.

With 15 years as an oil and gas attorney in Anchorage, Walker said he has met with all the major energy executives around the world. He has seen how other countries build and operate their pipelines and said the state is typically the one who constructs the lines.

He likens it to any other infrastructure project. California built aqueducts that now support an agricultural industry. Alaska built a road to Fort Knox Mine, he said. You would not expect Princess Tours to build the Parks Highway in order to take tours to Denali National Park. Even more so than roads, he said, it’s to the state’s advantage to build the pipeline, as the state owns one-eighth of all the gas in Alaska.

“That’s the role of government — to step in and do infrastructure where the private sector doesn’t,” Walker said.

The fact that the private sector has not built the All-Alaskan line does not mean it is not a good investment, he said. The rate of return on the construction investment is set by the Federal Energy Regulatory Commission at 12 percent, Walker said. In all honesty, he said, the major producers don’t what that much capital tied up in a regulated return.

If the state puts $4 billion to $5 billion upfront, it is guaranteed that 12 percent return on the initial investment, Walker said. Additionally, he said the lease contracts the producers have with the state say they must ship their gas if there is a feasible way to do so.

“We really have a dime holding up a dollar here,” Walker said.

Walker said the state has the rights-of-way necessary to build the line. All the permits and environmental work has already been done. He compares the situation to a job site in a 40-degree below zero Fairbanks winter. The foundation is done, the building materials are sitting around the property. Alaskans are huddling around a fire pit asking why won’t someone build a house for them to warm up in, he said.

The need for the All-Alaska pipeline will be even more apparent after the 2010 open season for the pipeline running to the Lower 48 fails, Walker said. Bids will come in, he said, but the conditions will unreasonably high.

“We are going to wait for the phone ring, and wait and wait and wait,” Walker said.

This is because the producers are looking at the project that has the greatest risk and highest likelihood of failure, he said. Canada has not resolved the right-of-way issues with its First Nations, the project is waiting in line behind another pipeline project in Canada, and shale exploration is upsetting the price of natural gas, he said.

Not only would the All-Alaska pipeline provide cheap energy to the Railbelt, but it could be compressed and shipped to villages off the road system by barge. Other businesses would spin off by creating products from natural gas byproducts. The gas coming out of the line would not be subject to price volatility from shale, as it would be liquefied in Valdez then sold at a price set through 30-year contracts.

Other than a natural gas pipeline, Walker said he is committed to supporting the educational and tourism infrastructure. But all of this depends on Alaska having an economy, he said. The price of oil is rising faster than the decline in production. This has insulated the state from the fact that oil is drying up, he said. But at some point, the producers will turn off the tap.

A gas pipeline needs to be in place before that happens, Walker said. He said an in-state line could be up and running within seven years, and he would be committed to it from Day One, if elected.