Saturday, September 17, 2016

Jay Hammond "If there has ever been a greater waste of energy and economic potential than what Alaska and the nation paid for the All-Alaska pipeline route, I don't know what it might be."

A little history is always helpful and this view of the Alaska pipeline from Jay Hammond's Tales of Alaska's Bush Rat Governor (1994) seems useful in its succinct and clear description of how Alaska built an all-Alaska pipeline (instead of a Canadian pipeline) which had some short-term benefits, but had, in Hammond's view, much, much bigger long term costs.

He frames this argument as a clash between people who have diametrically opposed narratives about the human mission on earth.
"One type are folks who, fed up with environmental degradation and people pressures found elsewhere, flee to Alaska believing it the last redoubt of pristine wilderness and broad horizons.  Here they can indulge in lifestyles which, if not long since lost elsewhere, are at least suppressed in their native states.  Those people have read Robert Service and Thoreau.  They arrive with romantic notions of life in a remote homestead cabin away from the urban rat race.
Along with those would be rustics, however, comes another type of 'pioneer' no less determined to find a different kind of 'good life.'  Jobless or discourage by conditions 'back,' and hearing tales of common, unmanned folk striking it rich in Alaska, they flood north intent upon exploitation.  It's inevitable that the shovels and picks of those treasure seekers often bruise environmentalists' toes." (p. 167)
[I'd note these two views are highlighted in the play The Ticket which is an imagined conversation between governors Wally Hickel and Jay Hammond. It's having its world premiere run in Anchorage through October 9.  But it's so good, I'm guessing it will be extended.  But don't count on it.]

While Hammond says he sees both sides, he acknowledges that he leans with the environmentalists.

Hammond is adamant about how wrong it was to build an all-Alaska pipeline instead of sending the oil through Canada to the midwest by pipeline.  And you could hear the words on the page getting louder as he explained why.
"Almost no one in Alaska, save of course, 'preservationist extremists' dared suggest we even look at a Canadian route for fear of being branded a 'crackpot conservations like Hammond' by the state's most powerful newspaper and labor union.
Clearly, Alaska would experience far less environmental trauma with only six hundred overland miles of pipeline construction across its wilderness than nine hundred miles to Valdez - not to mention the pollution hazards of tankering via Prince William Sound and down the Pacific coast.  The fact that the planned pipeline terminal at Valdez would be erected on a major earthquake fault was also not mentioned, as I recall.
In any event, transporting our oil through a single, 2,100 mile trans-Canada line to the Midwest would clearly be less costly than tankering past  West Coast ports - which is precisely what happened when the southern pipeline fell through and inadequate West Coast refining capacity required North Slope crude to be shipped to the Panama Canal.  There, supertankers had to be unloaded onto smaller vessels able to navigate the isthmus.  These took the oil another 1,500 miles north to the gulf of Mexico, to refineries in Houston.  From there, of course, the product was piped north and east to the marketplace.  Some Alaska oil didn't ship north to Houston, but went all the way to the East coast for refining and sale.
If there has ever been a greater waste of energy and economic potential than what Alaska and the nation paid for the All-Alaska pipeline route, I don't know what it might be.  It has already cost uncounted billions of dollars and has been a major contributor to the nations's enormous trade deficit.
Most economists in 1970 agreed;  only if Alaskan oil was shipped to neighboring Pacific Rim nations, did the longterm economic impacts on the state become a wash with piping it via a trans-Canada route.  There's no doubt this was intended.  Japanese interests admitted such negotiations were under way.
This revelation only further infuriated Midwestern congressmen who wanted Alaskan oil to flow to their refineries.  When Congress threatened to halt pipeline construction until assured no Alaska oil would be sold to the Japanese, pipeline owners and proponents of the trans-Alaska route, scuttled negotiations and gave their word not to ship Alaska oil abroad.  Instead, they'd just ship it twice that distance around the coasts of North and Central American - each additional mile of transportation costs deducted from the wellhead price of the oil.  Since severance taxes on oil extraction are based on the price of oil at the wellhead, less transportation costs, obviously the lower the transport, the higher the tax revenues.  Don't even mention the additional energy wasted in this most inefficient boondoggle." (pp. 176-7)

He does acknowledge that building the All-Alaska route provided jobs for Alaskans and for Valdez, but with caveats.
"Certainly the one-third greater pipeline construction costs expended in Alaska might have provided more jobs and contracts for locals, as proponents promised.  However, since most pipeline workers were imported, and many of the bigger contracts went to Outside firms, it's hard to quantify how much more Alaskans benefited in the short term - if at all - than had much of the pipeline gone through Canada.
True, the greater length of pipe in Alaska, and the number of capital projects located in the Port of Valdez, are values added.  Yet countering these are the costs of state services required to offset population explosions in communities like Fairbanks and Valdez.  Both played for the trans-Alaska route, but were the first to come begging the state for multi-millions in 'impact money' to offset spiraling demands for government services that came with the 'boom.'  .  .  .
"Economic studies financed by Alaska Legislators John Sackett, Al Adams and Jan Faiks, indicated by 1987 Alaska had lost an estimated $15 billion as part of the price paid for the all-Alaska Pipeline.  Since Alaska crude sells at a lower price than imported oil, the higher price would bring on the world market has cost the national treasury many billions as well. " (p. 178)
Hmmm  With a $4 billion deficit this year, that $15 billion would have come in handy.

And he's not done.  He talks about the delays - he says he predicted - caused by court injunctions because of failure onto comply with EPA standards.  A delay he says that added to the national problems caused by the OPEC oil embargo.  BUT . .
" . .  rather than blame 'environmental preservationists,' far greater blame should be laid at the feet of those 'developmental preservationists' who would preserve every exploitive, 'damn the torpedoes, full speed ahead' environmentally insensitive despoiling technique of the 19th Century.  By ignoring laws of the land and the forewarnings of those who promised to force legal compliance, they, not the environmentalists, caused the costly delay.
Forgotten by many who still curse environmentalists for those woes is the fact that during the delay, construction techniques were upgraded and engineering problems resolved.  Now, even some of the pipeline's most ardent promoters admit that, without those improvements, the line might well have proved a disaster.  today they point with pride to what the environmental activists compelled them to do." (pp. 178-9)

Hammond was the Senate President for some of this period and writes about how he tried to get the legislature to require reviews of all the alternatives - basically the Canadian route.  But he was clobbered by Bob Atwood's Anchorage Times.  He does acknowledge that some of the decisions made sense when you understood the financial interests of those pushing for the all-Alaska pipeline.
He concludes talking about the ban on exporting the oil to Japan.
". . .Alaska oil, on its way eastward through the Panama Canal to Gulf states and beyond, passes Mexican oil, on its way westward to Japan.  This is ridiculous.  What we should have done, of course, is simply swap, from for drum, Alaskan oil for Mexican - and enrich the treasures of both nations.  This issue, I regret, once more demonstrates the ability of politicians to subordinate our nation's well-being to demands of local constituencies." (p. 180)
As we deal with our budget deficits now, challenges to the Permanent Fund Dividend, oil credits, and a gas pipeline, it's useful to look back and see what happened 50 years ago and consider what parts of that history might be repeating themselves today.

1 comment:

  1. "Andrew, I watch you at these debates with no notes, no papers, and yet when asked questions, you spout off facts, figures, and policies, and I'm amazed. But then I look out into the audience and I ask myself, 'Does any of this really matter?' " Palin said.

    Of course, those Republicans running things in Juneau have this very same approach to facts and analysis. Some moar red meat to keep the base riled up is what they are worried about.


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