Energy has emerged as one of the hottest of the hot-button issues in this year’s US presidential elections. Americans are in a tizzy about gasoline prices, and presidential candidates John McCain and Barack Obama are trading heated barbs about each other’s energy policies. Most of the political establishment is engulfed in a debate about the merits of offshore drilling.
The national angst about energy prices is frustrating for Alaska, which is sitting on top of untapped oil reserves in the Arctic National Wildlife Refuge (ANWR or Anwar) in the northeast corner of the state that cannot be exploited because the area is under federal environmental protection.
Energy has always been an exceptionally emotive issue for Alaskans: it was oil that allowed Alaska to become a state nearly 50 years ago, by convincing Congress it would have the means to support itself, and the Permanent Dividend Fund – now an untouchable holy grail of Alaskan politics – pays an annual oil-royalties dividend to each resident (typically about $1500).
To add insult to injury, Alaska has some of the highest oil prices in the US; a flood of ‘energy refugees’ have moved from the rural interior of the state to the urban areas because they cannot afford fuel and heating costs.
And, from a national security perspective, governor Sarah Palin, a strong supporter of drilling recently tapped as the vice presidential running mate for Senator McCain, points out how it rankles to see the president “having to fly to the Middle East to beg the Saudis to increase production” when domestic energy reserves, such as those in Alaska, are not being fully utilised.
Calls to drill
As the gas-pump issue hits Americans in their wallets and gains political prominence, advocates of Arctic oil development have stepped up their cries to commence drilling. As Governor Palin observed at a press conference in Anchorage in July, on US television news channels, “it is all Anwar all the time, all Alaska all the time, as people realise Alaska has a solution to the nation’s energy needs.”
The energy crunch, she believes, “is going to get worse before it gets better unless we open up Anwar”. The area in dispute, she says, “is just a sliver of land” of about 2000 acres – less than the footprint of Los Angeles airport – but could produce 16 billion barrels of oil a day.
Opening up Anwar to development “would be good for our economy and good for America – all positive, all good in our opinion”.
But it is only one small part of the energy puzzle. Mike Sodrell, who is running for US Congress in Indiana’s ninth district and who joined a fact-finding mission to the North Slope in July, says: “Anwar is not the solution; it is part of the solution. We also need to develop renewables. We need conservation and innovation. We need it all, not just one part.”
Alaska feels it can meet many of those needs. The state has more than just the extra oil that lies beneath the frozen tundra of Anwar: there are also vast reserves of natural gas in the North Slope (see below) and renewable energy projects are coming onstream as well.
“We are not an oil and gas state; we are an energy state,” says Anchorage mayor Mark Begich. “Alaska has some of the largest diesel-to-wind energy development projects anywhere.”
The development potential is evident on a visit to windswept Fire Island off the coast of Anchorage, reachable only by private plane, or, when the tide is high enough, by boat. Native corporation Cook Inlet Region, Inc (CIRI) and its partner enXco Development Corp are planning to build Alaska’s first large-scale wind project on the island and are studying the development of wind energy projects on other sites in south-central Alaska (see Margie Brown, President and CEO of CIRI, Alaska).
Fire Island wind turbines could generate 30 to 50 megawatts (MW) of clean, renewable energy within two years if the project goes forward, says CIRI, and the wind farm could eventually generate 100MW or more.
Future energy sector development – particularly in hydrocarbons but also in mining and renewables – will pump hundreds of millions of dollars into the state economy, but it will also put a major strain on the workforce capacity. Anchorage is in its 20th year of consecutive job growth, with a moderate, steady rate of 2% to 3% a year. The state estimates that 21,000 new jobs will open up by 2015.
“Workforce development is a major issue for the state of Alaska,” says Bill Popp, president and CEO of Anchorage Economic Development Corporation. There are, after all, only so many Alaskans to go around. “There are only 680,000 of us up here – you could fit all of us in [the Washington port city of] Tacoma and still have room left over,” says Mr Popp.
Anchorage has a younger-than-average population and a skilled workforce. But in rural areas where so much of the fieldwork for energy development takes place, workers are fewer on the ground – and older. The average age of workers on the North Slope is 50.
“One of the major problems we have with the workforce is a renewal issue,” says Dave Rees of BP, one of the companies involved in the Alaska Process Industry Careers Consortium, aimed at developing the necessary workforce to meet the state’s looming oil, gas and mining projects.
The state is spending tens of millions of dollars on workforce development and training. The private sector is also stepping up: ConocoPhillips just set up a $15m endowment at a local university. Denali, ConocoPhillips’ joint venture with BP, will make available $30m to fund job training programmes, as well as in-state gas feasibility evaluation and infrastructure upgrade studies.
Efforts are being made to entice highly skilled ‘expat’ Alaskans back home – or to keep them from leaving in the first place. “There are more people staying and living here than ever before,” says Mr Begich. “We’ll have a learning curve and some gaps as we go along, but we’ll get there.”
In the pipeline
In what is estimated as one of the largest private sector construction projects ever in North America, ConocoPhillips and BP are pairing up to build a pipeline that will deliver four billion cubic feet of natural gas a day from Alaska’s North Slope to North American consumers, supplying as much as 8% of US consumption.
The two energy companies formed a joint venture (known as Denali – The Alaska Gas Pipeline), which intends to invest $600m in the project over 36 months and a total of $30bn over 10 years. Construction will start assuming completion of a successful ‘open season’ by year-end 2010 and will wrap up by 2018.
The large-diameter, high-pressure buried pipeline will extend 2100 miles from the North Slope to Alberta following main transportation corridors. Should it be required, the project will also include a further 1500 miles of buried pipeline from Alberta to the lower 48 states. The aim is to get the gas to market in Chicago, where it can be sold across North America.