Private companies when filing with FERC and other agencies — for energy projects or just for portions of a project regulated by a particular agency — really have to have their acts together.
Among that preparation is a reasonable degree of knowledge and proof — acceptable to the board of directors as well as convincing to the agency — that the project is real. The application must be solid: environmental research/safeguards (i.e. air, water, earth and flora and fauna, including birds, mammals, fish), geological, cultural, archaeological, logistic, climactic, continuous and discontinuous permafrost studies, environmental safeguards — among other categories — will be backed up with virtually unassailable, scientific precision. Project risks must be demonstrably acceptable. Mitigation of risk must be convincing. Project financing is a feasible and critical structure built on a plausible assembly of conventional and perhaps unconventional financing and a firm, final foundation of state-of-art FINAL engineering and design. In some cases, as in the 1976 and 2004 Alaska gas transportation acts, some degree of federal support might be provided in the form of expedited judicial and regulatory processes. Perhaps financial guarantees against force majeure or non-completion could be approved by Congress and the President as a means of enhancing the financing of debt. Perhaps advocates of Alaska’s government gas pipeline/LNG project can convince decision makers to provide certain financial guarantees as part of the President’s anticipated “Infrastructure” bill.
But would Congress and the President and regulatory agencies look at Alaska’s government energy project the same as they would a traditional, time tested, competitive, risk-adverse, privately proposed project? Upon review, how will decision makers evaluate a $40-60 billion Arctic gas pipeline/LNG liquefaction hybrid project controlled by a group of Alaska’s temporarily elected and appointed politicians and bureaucrats? Since the same officials advocating their project have local tax and regulatory authority over both that project and the private sector, how will regulatory agencies, Congress and the President evaluate such factors? China is a wonderful trading partner with Alaska’s private, risk-taking sector. So are Japan and South Korea. None of those savvy, Asian nations have committed to a long term relationship with Alaska LNG though all have signed polite, diplomatic memoranda of intent.
Will federal decision makers view the Alaska project on its own, or through the lens of diplomatic relationships in Asia? Will international events involving China’s hegemonic aggression in the South China Sea and contested Japanese islands affect an Alaska energy transportation project? What territorial disputes between Russia, Canada and the U.S. could affect a Cook Inlet LNG or a future ANS FLNG project?
We do not seek an absence of such variables and risk. What we do seek is for government to be supportive of the private sector as it risks PRIVATE dollars — not taxpayer dollars — on highly risky, multi-billion dollar energy projects.
Yes government might put taxpayer money in a relatively risk-free hydroelectric dam project, like Nevada’s Hoover or Alaska’s Bradley Lake. Risk is reduced by virtue of proven future electric utility ratepayers footing the bill…though even in those cases one could argue that the private sector could have produced a more reliable, cost-effective project.
Sometimes we hear Alaska politicians trying to justify a monstrous, politically inspired and bureaucracy-managed LNG project on the basis that, “Well, it’s just like dams and highways. There are just some projects the government ‘has’ to build.” To that, a reasonable citizen might respond: “There’s no group of local utility customers ready to pay for it. A complex, Arctic pipeline/LNG project costing scores of billions of dollars is not like a highway or a dam.”
If the private sector mishandles a big energy project, its reputation and stock price or even its survival could be affected.
If a state government project run by temporarily elected and appointed politicians and bureaucrats fails to properly husband and manage taxpayer dollars, an entire state economy could be destroyed in relatively short order.
Are Alaskans prepared to enter that arena of a high stakes, risky, multi-billion dollar project when professional, private sector investors say, “now is not the time”?
The Alaska legislature convened this month and are deliberating on countless issues. Two of the most financially important to all Alaskans are: a capital/operating budget and life support for the AGDC-China LNG/pipe scheme. How will Alaskans react to that circumstance as they witness thousands of job losses, business closings, a crippled economy and an unsustainable, subsidized state government?
We trust that as citizens begin to critically review these matters, they will reject false arguments and embrace the truth as they see it.
(Ref. “Alaska’s Pipe Policy Pursues Perfidy“)
Alaska’s Political Leaders Are Finding That Negotiating The Federal Regulatory Process — Can Be Daunting. So Can Trying To Outsmart The Invisible Hand.
(Private enterprise is equipped to confront project risks with agility, corporate survival and private investment. Government’s incentive is “public service” perverted by power accumulation, re-election, corruption and personal legacies…and handicapped by a cumbersome legislative process, elections, conflicts of interest a-plenty, and political uncertainty.)
Private Companies plan and budget for complex project challenges. Alaska is embroiled in a fiscal crisis. How stable is an energy project applicant that must depend on funding from a Legislature facing a $2-3 billion annual deficit — as socialist-leaning politicians threaten energy investors with higher taxes? How stable is an energy project owned and managed by temporarily elected and appointed politicians and bureaucrats? How reliable is an Alaska government energy project dependent on a long-term Chinese communist commitment when China and North Korea are still at war with the United States — the glooming peace protected only by a temporary Armistice agreement and a dangerous, demilitarized zone? Not to mention potential ocean transport threats in the East and South China Seas. Could Canadian anti-dumping issues be repeated re: an Alaska LNG/China project? Wise private sector investors say now is not the time for an Alaska LNG project, but politicians go where wise men fear to tread.
Yes, we admit to being critical about a politically controlled energy project. This case history, we believe, will be a warning to all future politicians who, like Nicolas Maduro and his many failed Marxist predecessors, learned that managing the means, transportation and distribution of wealth (i.e. in this case, energy) can only fail when Adam Smith’s invisible hand is the only efficient way to allocate wealth and resources. -dh
Alaska’s LNG project inching toward reality. UPI.com. The Japanese handshake was the second Asian nod for Alaskan LNG in less than a month. China Petrochemical Corp., known informally as Sinopec, agreed in November to advance discussions on the LNG potential in Alaska. That agreement was signed in the presence of U.S. President Donald …