Arctic Grift: Alaska Energy Policy Goes Biden
By Kassie Andrews -- October 30, 2023“Why is a conservative pro-development governor pushing for policies that are counterproductive to natural resource development?”
“The Alaska Energy Security Task Force report does not mention maximizing the use of the abundant energy sources we have in our state today, such as coal, in-state refining, or the incentivization of production in the Cook Inlet where, according to the USGS, we are not in a natural gas shortage situation.”
Alaska grift is reaching new levels to comport with the Inflation Reduction Act (aka Green New Deal). Alaska Governor Mike Dunleavy, all-in with Green Globalism, has appointed a energy security task force of cronies who lack real experience in or affinity with the state’s oil and gas sector. Instead of inciting investment in Alaska’s prolific resource base, Biden’s obstruction and subsidy bribery will risk making the state a federal enclave, with its top import being federal dollars. With the feds owning 60 percent of the land in the state, they have a club in the closet.
“I think what we’re seeing from the federal government is an elevation of climate change and other sorts of ideological considerations over an acknowledgement of the need for energy security and affordability in Alaska,” stated Department of Natural Resources Commissioner John Boyle, who pointed to the feds as “squarely responsible” for the lack of investment in the state and for “intimidating industry.”
Governor Dunleavy followed up by saying:
What we are seeing is a forced conversion to another type of approach to energy that is not being market driven.
and
When you sell uncertainty across the board, it shouldn’t surprise anyone that investors are hesitant to invest, especially in a place like Alaska.
These quotations sound nice, but on closer examination Governor Dunleavy is of a different stripe, and certainly out of step as a Republican in the state. In fact, Alaska politicians are working with Washington to implement Biden’s whole-of-government approach to climate and energy. At the same time, the state faces a growing scarcity of natural gas and increasing energy prices because of a lack of incentives for reinvestment in Alaska’s huge resource base.
Both the Governor and the Commissioner referenced the federal cancellation of leases in 2021 in the Arctic National Wildlife Refuge as a factor in industry hesitation to move forward with investment in the Cook Inlet. The two faces of the administration are on full display.
A good portion of a press conference last Thursday discussed the need for more Cook Inlet gas.
Background
On February 23, 2023, Governor Dunleavy issued an administrative order establishing the Alaska Energy Security Task Force to
develop a comprehensive statewide energy plan that will evaluate energy generation, distribution, and transmission for the State of Alaska and its communities. The development of this plan will include collaboration with public and private stakeholders.
This task force, and the subcommittees within it, held a series of meetings between April 25 and October 3, 2023, when the initial draft was first published.
Although it was not written into the administrative order, Dunleavy charged the task force with creating a plan that gets Alaskan electricity rates to 10¢/kWh. (The 10¢/kWh goal is referenced in the draft plan.)
Much of the concern around Alaska’s energy security has been centered on the notion that the natural gas supply in the Cook Inlet, supporting 80 percent of the power generation for the largest population center in Alaska, is declining.
The report is broken into 6 different focus areas – Railbelt, Coastal, Rural, State Energy Data, Incentives-and-Subsidies, and Statutes-and-Regulations.
- The Railbelt proposed actions include adopting clean energy standards and significantly increasing load to drive down energy rates.
- Within the Coastal areas: Actions include integrating heat pumps, moving industrial data centers near to hydropower facilities, incorporating battery energy storage systems, strengthening net metering, streamlining regulatory and land use administrative processes, prioritizing state funding to match federal dollars, establishing another bureaucratic entity “Alaska/Federal Renewable Energy Policy Force” to advance renewable energy transmission lines in federal lands and to foster, support and assist hydropower development.
- Within the Rural areas: Actions include funding and constructing opportunities to connect rural communities through transmission lines and other shared projects and exploring opportunities to modernize rural grids.
- The State Energy Data, Incentives-and-Subsidies, and Statutes-and-Regulations sections make up a little less than half of the entire report. The State Energy Data section proposes more government, e.g., a new Data Department and a data governance committee. Incentives and Subsidies has the highest count of action items listed under it and includes Establishing a state and/or federal Alaska Clean Energy and Transmission Line Fund or Alaska Energy Transition Fund to “Overcome the tyranny of distance.” It also includes the suggestion to “strengthen state and local procurement policies to provide preference for affordable and clean energy projects,” as well as establishing a Green Bank.
- The Statutes and Regulations section recommends: “Maximize future optionality for use of Alaska sourced fossil fuels by monitoring and evaluating third party development of carbon capture and sequestration technologies and passing legislation establishing a regulatory framework for the geologic storage of carbon.” And of course they want to codify the clean energy standard, as well as codify the additional state spending to “Create a Data Department with the Alaska Energy Authority (AEA), using statute as necessary.”
Aside from the mention of an extraordinarily expensive long-shot LNG export pipeline, the Alaska Energy Security Task Force report does not mention maximizing the use of the abundant energy sources we have in our state today, such as coal, in-state refining, or even the incentivization of production in the Cook Inlet, where, according to the USGS, we are not in a natural gas shortage situation.
Inner Debate
The meeting minutes captured some of the disconnect between means and ends.
Mr. [Tony] Izzo [of Matanuska Electric Association] explained that he understood the discussion of 10 cents per kWh energy by 2030 to be a vision, similar to the vision of putting a man on the moon safely by the end of the decade.… Mr. Izzo gave the example that he believes that 10-cent power could be achieved for the majority of the Railbelt in 2024 with a large down payment of over a billion dollars to pay off debt and an annual subsidy of approximately $500 million to pay for the fuel.
He gave as another example that if MEA no longer had employee payroll, including himself, the price per kWh could decrease by 1.7 cents, from 20 cents to 18.3 cents, but the lights would probably not be on very often because no one would be there to run the plant or to conduct maintenance. He discussed that the more common sense recommendation could be to use the borrowing power of the annual payment to build an infrastructure….
So there is an imaginary billion dollars laying out there to do this? How does this result in 10¢/kWh power? I would love to have a $20 house payment if someone would just give me $600k.
The first round of public testimony on this plan was held on October 10, 2023. It was a two-hour session in the middle of a workday and only three members of the public testified. There were concerns about the condensed timeline and the unrealistic expectation of the public reading a one-hundred-and-thirty-page document over the weekend to present meaningful comments by the following Tuesday.
On October 20th, the draft plan was updated with significant changes, again leaving only a weekend for the public to figure out what had changed from the original.
The second round of testimony on October 24th, held after the workday, had far more participation. Much of the testimony centered around the timeline for review, with others (including myself) calling out the absurdity of missing cost analysis, any resemblance to the real world, and hypocrisy of leaving out maximizing the use of abundant sources of energy we have in our own state. This is nothing other than Inflation Reduction Act implementation plan based on wild suppositions and conditions that do not exist.
State residents are obviously not very interested in “energy transition investments” (coming in at #13 out of #17) versus affordable, reliable energy for economic and personal progress.
One notable testifier, John Hendrix, owner of the only Alaska-owned oil and gas company currently operating and largest acreage position in the Cook Inlet, commented that he had not been approached by the committee to talk about the looming gas shortage in the Cook Inlet. He expressed concern on the makeup of the task force – appointed members that are not part of the production process. He spoke about renewables and all the federal money as a threat and asked the committee why he should invest if they – Alaska and the feds – want to get rid of us? He commented for the record that 65 percent of the world’s fertilizer comes from natural gas and asked – “who dies and who doesn’t?”
Two-faced Governor
Governor Dunleavy’s press conference materials mentioned a Cook Inlet volume gap only to say that production would be incentivized to a profit share (from a royalty share) and only for new development, not existing.
Considering the plans from his State of the State address in January when he introduced the carbon management legislation, he made his intentions clear on the fate of the Cook Inlet: hydrogen and carbon sequestration. [1]
Governor Dunleavy has never stated he would change his mind if presented different facts. He sells his Biden bias with talk about an ‘all in’ energy strategy. Make no mistake: all-of-the-above is code for politically correct energies crowding out the economic. And who other than our governor gave a keynote speech at the SuperReturn International Conference for Private Equity in Germany on Environmental, Social & Governance (ESG).
Dunleavy blames the feds for overreach and on the other hand appoints a task force all about gobbling up federal dollars from the IRA in the name of Alaska’s energy security, not to mention the carbon management legislation. His dog whistle is in part damage control with the average voter. Why is a conservative pro-development governor pushing for policies that are counterproductive to natural resource development?
Third Draft Revision Needed
Interestingly, Governor Dunleavy had a press conference yesterday (10/26) to discuss the energy security for the Railbelt and to incentivize natural gas production in the Cook Inlet. A release to the media included thoughts around the Cook Inlet natural gas gap due to an looming shortage, the announcement that legislation was coming next session, and shared that there was a change in the upcoming lease agreement, a change from royalty share to profit share.
Oddly, existing leases are not affected. If this was truly about increasing production, why would they exclude existing leases from this royalty change? After the hundreds of hours spent in the task force meetings and the resulting draft of a master energy plan, this issue as discussed in the press conference was not mentioned one time. Was this meant as a surprise announcement or was this a knee-jerk reaction to the scathing testimony on the draft plan? Will there be a third revision to the draft plan?
Conclusion
Alaska is on a troubled energy path. Specifically, our state government has unanimously codified promising to “coordinate governmental functions” by “actively collaborating with federal agencies to achieve the state’s energy goals and to meet emissions, renewable alternative energy, and energy production targets” (see Appendix below). A reversal is required, and transparency and publicity will awaken our citizens to achieve just that.
Action Needed – The Alaska Energy Security Task Force is taking written comments through October 30th, 5 PM AKST – info@akenergysecuritytaskforce.com
[1] After giving lip service to oil and gas, Governor Dunleavy stated “… our potential will allow us to emerge as the global leader in new forms of low- and no-carbon energy…. With support for our carbon monetization bill, we’ll change the conversation about new revenue from the tired thinking of the past. Experts in this emerging industry have informed us that we can realize revenue to the tune of billions of dollars per year by creating a carbon management system. We’ve been told by some that we can generate as much as $30 billion or more over 20 years, just from our forest lands. That’s an absolute game-changer.”
APPENDIX (AS 44.99.115)
The State of Alaska recognizes that the state’s economic prosperity is dependent on available, reliable, and affordable residential, commercial, and industrial energy to supply the state’s electric, heating, and transportation needs. The state also recognizes that worldwide supply and demand for fossil fuels and concerns about global climate change will affect the price of fossil fuels consumed by Alaskans and exported from the state to other markets. In establishing a state energy policy, the state further recognizes the immense diversity of the state’s geography, cultures, and resource availability. Therefore, it is the policy of the state to
(1) institute a comprehensive and coordinated approach to supporting energy efficiency and conservation by
(A) encouraging statewide energy efficiency codes for new and renovated residential, commercial, and public buildings;
(B) decreasing public building energy consumption through conservation measures and energy-efficient technologies; and
(C) initiating and supporting a program to educate state residents on the benefits of energy efficiency and conservation, including dissemination of information on state and federal programs that reward energy efficiency;
(2) encourage economic development by
(A) promoting the development of renewable and alternative energy resources, including geothermal, wind, solar, hydroelectric, hydrokinetic, tidal, and biomass energy, for use by Alaskans;
(B) promoting the development, transport, and efficient use of nonrenewable and alternative energy resources, including natural gas, coal, oil, gas hydrates, heavy oil, and nuclear energy, for use by Alaskans and for export;
(C) working to identify and assist with development of the most cost-effective, long-term sources of energy for each community statewide;
(D) creating and maintaining a state fiscal regime and permitting and regulatory processes that encourage private sector development of the state’s energy resources; and
(E) promoting the efficiency of energy used for transportation;
(3) support energy research, education, and workforce development by investing in
(A) training and education programs that will help create jobs for Alaskans and that address energy conservation, efficiency, and availability, including programs that address workforce development and workforce transition; and
(B) applied energy research and development of alternative and emerging technologies, including university programs, to achieve reductions in state energy costs and stimulate industry investment in the state;
(4) coordinate governmental functions
(A) by reviewing and streamlining regulatory processes and balancing the economic costs of review with the level of regulation necessary to protect the public interest;
(B) by using one office or agency, as may be specified by law, to serve as a clearinghouse in managing the state’s energy-related functions to avoid fragmentation and duplication and to increase effectiveness; and
(C) by actively collaborating with federal agencies to achieve the state’s energy goals and to meet emissions, renewable and alternative energy, and energy production targets.
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Kassie Andrews is a long time Alaska resident with a particular interest in natural resources and energy policy. Also see her earlier blog at MasterResource, Alaska Energy vs. Woke Government.