The Power of Siberia gas pipeline; if the Russians can do it, how hard can it be?/Wikimedia Commons

Alaska’s gas pipeline versus reality

While delusional Alaska politicians cling to a now nearly 57-year-old fantasy of a natural gas pipeline from Prudhoe Bay to tidewater at Cook Inlet or the ice-free Port of Valdez, the Chinese are charging ahead with a nearly 1,666-mile-long ultra-high voltage (UHV) electric transmission line to carry power across that country from north to south.

The cost?

“Roughly 7.5 billion U.S. dollars,” according to the State Council Information Office of the People’s Republic of China. That’s less than a fifth of the latest, low-ball, $38.7-billion cost estimate for an Alaska pipeline that would go about half the distance to Nikiski on the Inlet.

China’s leaders are today focused on building renewable energy resources – with their promise of cheap, future power – and establishing the infrastructure necessary to distribute that power across their country while Alaska’s leaders, or at least most of them, remain focused on producing fossil fuels, the real value of which are declining, for export to foreign lands.

Why the difference here?

It’s this simple: The leaders of China see their country as a global industrial power and recognize they need access to relativley inexpensive energy for the large-scale manufacture of pretty much anything. And the leaders of Alaska, at least most of them, see their state as a third-world entity lacking in both manufacturing capacity and intellectual capital, and thus with nothing left to sustain the economy other than the export of natural resources:

Minerals, fish, fossil fuels, and maybe a little timber.

Minerals are now the biggie, though few Alaskans have noticed. The Alaska Department of Labor reported $2.96 billion in “mining ores and related” shipped out of the state last year, followed by $2.13 billion in “fish and seafood products,” and $459.4 million in “oil and gas related.”

The timber, primarily shipped to Asia, was worth $56.9 million, which was less than half of the $140.1 million in exports of “aerospace products,” which comprise just about the entire state tech industry.

And as good as these exports might look on paper, there are some big caveats that need to be recognized, the first being, as Labor notes, export data is “based on where the goods start their journey to the port of export.”

This greatly inflates the value of Alaska’s seafood exports because much of the value is lost at sea to catcher-processor vessels that funnel their products through the state’s farthest west major port.  As the Alaska Seafood Marketing Institute (ASMI) reports, “pollock catcher-processors typically deliver their processed products to Dutch Harbor where goods are loaded onto container ships for export to Asia and Europe or on other vessels for delivery to North American markets.”

In the case of pollock, the processed product, as reflected by what is called the “first wholesale price,” tends to be 10- to 13-times more valuable than the value of the raw, as reflected by what is called “the ex-vessel price.” 

The pollock fishery, which takes place out of sight far from where most Alaskans live, is valued at $2.5 billion, and it accounts for a big chunk of the state’s $2.13 billion in fishery exports. The Alaska commercial salmon fishery, nearest and dearest to the hearts of Alaskans, has a value largely built around ex-vessel prices because the fishery is now focused on shipping headed and gutted salmon elsewhere to be processed.

This is the cheapest way to do business in the 49th state, and it helps explain why the Alaska Department of Fish and Game valued the 2025 harvest of nearly 195 million salmon, the 12th largest harvest in state and territorial history, at $541 million or about $0.541 billion. 

The Alaska commercial salmon fishing industry has become an economic loser for the 49th state in the new millennium. The state now spends more to manage and police the fishery than it collects in taxes from the fishery, and most of the industry’s jobs – nearly 22,000 in fish processing and about 2,500 in harvesting – are filled by nonresidents.

Labor reports 82.8 percent of those employed in processing are nonresidents, many of them seasonal foreign workers. And it says this about the harvesters:

“Self-employed fish harvesters aren’t included in the worker residency data for this report, (but) the department estimates their numbers each year from other data sources. In 2023 (the last year for which there is complete data), nonresidents were an estimated 49 percent of the harvesting workforce, which includes permit holders and their crew, and nonresidents took in 59 percent of gross harvesting earnings.”

Overall, well more than 80 percent of those employed in Alaska fisheries are nonresidents, who take most of their income back to where they came from. Thus, the state is, as a whole, largely in the business of exporting its wealth.

Labor’s report on the value of Alaska’s exports pretty well sums things up when it says that “Switzerland’s purchases are a good example of what many foreign businesses seek from Alaska: raw materials to which they presumably add value through resale in their own countries or further trade internationally.”

Switzerland, according to Labor, last year imported most of the $323 million in “nonmonetary refined gold” shipped out of the state. These kinds of exports are what one would expect in a colony, which might be fine in those situations where the state is netting at least some significant value on the exports as is the case with crude oil.

Oil taxes and royalties have declined in Alaska over the years, but the state reported collecting about $2.5 billion from oil companies in fiscal year 2024. 

Natural gas has, on the other hand, been nothing but a drain on state resources for a decade. The state has now spent an estimated $600 million on studies and joint ventures trying to jump-start a gasline project that has not turned over one shovel full of dirt in five decades.

The gas has stayed in the ground where all it has done is become less and less valuable in export terms.  Global gas prices peaked at more than $13.64 per million metric BTUs in Oct. 2005, according to the Federal Reserve Bank of St. Louis, but had fallen to $4.80 per million by June 2010. Since then, they have averaged closer to $4 per million aside from a brief uptick early this decade due to Russia’s war in Ukraine.

The price at the moment is under $4 per million, and no one is expecting any major increases in the near future. In terms of real dollars – those corrected for inflation – gas is now worth about a sixth of what it was worth in 2005, largely because of huge new gas discoveries in or off Africa, Australia, South America, Europe, the Middle East, Brazil, Iran, and North America.

“The world is rich in terms of natural gas resources, with production exhibiting a steady upward trend,” researchers reported in the Natural Gas Industry journal in October. “Global reserves are substantial, as evidenced by a reserves-to-production ratio exceeding 40 years.”

And nearly all of this gas is to be found in areas with production costs significantly lower than on Alaska’s cold and remote North Slope. And yet the Alaska gas export fantasy lives on.

True believers

Former Alaska Gov. Bill Walker, arguably the man with the biggest Alaska gas pipeline fantasy of all and the predecessor to Gov. Mike Dunleavy, saw the Chinese as the big market for gas pumped south from Prudhoe Bay to the Inlet.

Eight years ago, the Juneau Empire reported that Walker had signed a “landmark gas pipeline deal.”

This followed on one of his predecessors – former half-term Gov. Sarah Palin – in 2008 promising the Republican National Convention that work had begun on a “nearly $40 billion natural gas pipeline to help lead America to energy independence.”

That promise proved as dead as Palin’s hopes of becoming the country’s first female vice-president. That honor went to Kamala Harris a dozen years later, and Walker, a Republican turned independent, hooked up with her Democrat running mate, global-warming-activist President Barack Obama, to help get the Alaska gasline moving.

In a 2015 column in the Anchorage Daily News, then run by Walker’s good friend Alice Rogoff, who helped set up the meeting with Obama, Walker claimed that Obama told him, “Gov. Walker, you build that gas line for Alaska and don’t let anyone stand in your way of getting that done.”

Walker went on to claim this was “the same directive the late-Gov. Wally Hickel gave me five years ago, a month before he passed away.” Hickel was conveniently dead and unable to confirm whether he’d said this or not.

And if Walker was good at anything, it was gasline propaganda.

“Walker traveled to Beijing with a president. He may be returning to Alaska with a pipeline,” the Juneau Empire reported in November 2017 after Walker claimed to have signed that landmark gas deal.

“At 7:15 p.m. Alaska time Wednesday evening,” wrote then Empire reporter James Brooks, “Walker sat at a table in front of President Donald Trump and Chinese President Xi Jinping. He sat next to Keith Meyer, president of the Alaska Gasline Development Corporation. With him were the general manager of China’s version of the Alaska Permanent Fund, the chairman of the Bank of China, and the chairman of China’s state petroleum corporation.

“Together, all five men signed a joint development agreement worth up to $43 billion. The agreement is intended to help Alaska build an 800-mile trans-Alaska natural gas pipeline bookended by a pair of industrial plants.”

Or so said Walker and Brooks.

The reality was that Walker got played by the Chinese in a move that helped them drive down the costs of the gas being moved from Russia to China via the Power of Siberia gas line, which was then underway and largely completed two years after Walker’s big claim.

Walker actually got taken even worse than friend and sometimes policy adviser Rogoff, who bought the Daily News from The McClatchy Company for an unbelievable $34 million in 2014. Not long after, she privately accused the California-based McClatchy of selling her “a dead baby” before proceeding to steer the newspaper into bankruptcy. 

Walker fared better only in that there was never a gasline to bankrupt. His great China gas deal, which was from the beginning destined to go nowhere, never went anywhere.

And yet the gasline dream lived on.

Dunleavy has now picked up the baton and is proposing a bargain basement property tax on lands underlying the pipeline route to grease a path toward construction. The proposal would save companies involved in the gasline construction “$1 billion in property taxes in the first year alone,” a state gasline consultant told Alaska’s News Source.

The money would be saved at the cost of municipalities faced with the social and economic costs of pipeline construction. Construction of the oil pipeline in the 1970s brought what has been called “boom town chaos” to those municipalities, and a 289-page Socioeconomics report prepared for Alaska LNG in 2016 suggested construction of a gasline would bring the same.

The report predicted madness if and when construction began on the Kenai Peninsula, an area now home to a booming tourism industry and the great escape for tens of thousands of Anchorage residents on weekends.

So maybe it’s time for Alaska to take a look at what China is doing and why, and maybe even consider making something more of the state than it was as a territory when the “termination dust” sent a significant portion of the Alaska population fleeing for warmer climes with the economy largely shutting down for the winter with the exception of some trappers, caretakers at salmon canneries and othe remote properties, and gold miners who decided to ‘winter in.’

Electrifying!

China is in the midst of a massive, nationwide electricification project, which includes building a whole system of high-voltage DC (HVDC) powerlines to efficiently move power from remote sources around the country to China’s cities.

“Over long distances, HVDC (energy) losses can be up to 30 to 50 percent lower than comparable HVAC systems, reducing long-term costs,” according to the U.S. Department of Energy, which notes this technology is not exactly new.

Since the 1970s, the Pacific Direct Current Intertie has been moving power from the 
Dalles Dam, about 90 miles east of Portland, to the Sylmar Converter Station on the
northern outskirts of Los Angeles 846 miles to the south.

This is a distance only 19 miles longer than the road distance from Anchorage to Prudhoe Bay.  Road access is important in the context of both powerlines and pipelines because easy access drives down the cost of any construction project.

The U.S. Energy Department in 2023 began a push for national HVDC links because of their efficiency, but the U.S. is way behind China in embracing this technology considered vital for shifting power output between renewable energy sources with their environmentally dictated outputs.

Managing renewables to maintain steady power supplies is not easy, but China is big on renewable energy.

“In 2024 alone, China installed 360 gigawatts (GW) of wind and solar capacity. That’s more than half of global additions that year, and it brings total installed capacity to 1.4 terawatts (TW) – that’s roughly a third of the entire world’s 4.5 TW,” according to the World Economic Forum (WEF)

Wind and solar are now “the country’s largest sources of new power. This transformation has also driven the rise of new technologies and business models, from battery storage and virtual power plants to electric vehicles and ‘zero-carbon’ industrial parks,” the WEF concluded.

The Australian Broadcasting Corporation this year described China as on course to become “the world’s first electrostate” after the country in April “installed more solar power than Australia has in all its history.”

“This isn’t a story about Australia’s poor track record on solar; Australia is a global leader,” reporter Jo Lauder added. “Rather, this shows the astonishing rate at which China is embracing renewable technologies across every aspect of its society.

“But don’t make the mistake of thinking this transformation is driven by a moral obligation to act on climate change. China’s reasons for this are less about arresting rising temperatures than its desire to stop relying on imported fossil fuels and to fix the pollution caused by them.”

Reducing the use of fossil fuels and cleaning up the notoriously bad air in some Chinese cities is, however,  only the short-term goal of the Chinese communist regime. As Lauder recognized, the real goal “is accelerating the end of the fossil fuel era and bringing about the age of the electrostate.”

“The whole modern industrial economy is built around fossil fuels,” Muyi Yang, the lead China analyst at energy think tank Ember, told the Australian reporter. “Now the whole world is moving away from that, and that means that we are rebuilding our economy around emerging clean tech sectors.

“Once the new direction is set, the momentum will become self-sustaining. It will make reversal impossible. I think China now has set its direction towards a clean energy future.”

Exactly how clean that future will be is debatable. China is still burning a lot of coal to generate electricity, according to the International Energy Agency and looks destined to be tied to considerable coal consumption for electricity for years to come.

But there is no doubt that China is helping drive a global shift from fossil fuels to electricity because the latter can be obtained from renewable resources and because almost every country on the planet is now equipped with the infrastructure needed to move electric energy from point to point.

Natural-gas-fueled power plants remain a bridge to even cleaner renewables, but the value of the gas sold to these power plants is destined to fall as renewables continue to increase.

“Renewables turn LNG glut into a sinkhole,” Antony Currie, an editor at Reuters, warned in a commentary the day after Christmas. He noted that the energy storage problem that has long plagued wind and solar power is starting to solve itself.

“With battery costs falling – by 40 percent in 2024 alone – all-in renewable generation and storage in 2030 could be up to 56 percent cheaper than gas…” he wrote. This, he added, “is already having an impact on the world’s biggest LNG importer, China, which is rapidly expanding its wind, solar and hydroelectric generation. By October, Beijing’s LNG imports had fallen 11 months in a row year-on-year, per data provider Kpler. The People’s Republic is also likely to increase (LNG) purchases from Russia rather than from the U.S. and Qatar, which are responsible for most of the planned expansion of global supply.”

China isn’t the only place busy electrifying by shifting to renewables or nuclear power, either. Europe, led by Norway, has been at this for a while.

Norway, which made itself rich by selling North Sea oil while promoting the steady growth in renewable energy generation at home, is on the way to ridding its roads of fossil-fuel-powered cars and trucks in favor of electric vehicles (EVs).

Nearly a third of the cars on the country’s roads in 2024 were electric, according to the BBC, and the transition to EVs is poised to rapidly accelerate. The Norwegian Road Federation has reported that 2024 sales of EVs comprised 88.9 percent of new vehicle sales, up from 82.4 percent in 2023 and 79.3 percent the year before. 

Eighty percent of the country’s railways were being powered by electricity as of 2023, according to RailFreight.com, and efforts were underway to upgrade the heavy-haul line from  Bodø in the country’s north to Trondheim, the country’s “tech capital”, to the south.

Most of Europe is following Norway’s lead toward an electric future, and the shift is on in this country as well.  Once an oddity on American roads, EVs can now be seen everywhere, even in Alaska’s largest city.

“Electric car sales topped 17 million worldwide in 2024, rising by more than 25 percent,” according to the International Energy Authority. “Just the additional 3.5 million cars sold in 2024 compared to 2023 outnumber total electric car sales in the whole of 2020.” This included 1.6 million of the cars sold in the U.S. 

Despite what some climate-change activists might like to believe, these sales remain little more than a trickle in the global flood of annual motor vehicle sales. But this is a trickle from a crack in a dam.

One of the most important realities of the 21st Century, something observed by Microsoft co-founder Bill Gates back in the last century, is worth repeating here:

“We always overestimate the change that will occur in the next two years,” Gates said, “and underestimate the change that will occur in the next 10.”

The Alaska salmon fishing industry could be the poster boy for this underestimation. Fearful of the change being brought by net-pen salmon farmers in the last years of the 1980s, it pushed the Alaska Legislature to in 1990 ban net-pen salmon farming – as opposed to open-ocean ranching – in Alaska.

Alaska commercial fishing interests were then confident that their “wild caught” salmon – a mix of wild and hatchery fish – would forever dominate the global market for quality salmon.

They were proven wrong even as the annual, average harvest volumes of Alaska salmon climbed to never imagined numbers, and an industry that once provided most of the tax revenue for the Alaska Territory became a state-subsidized business. 

Imagine the mess the state would be in if the oil and gas industry declined to such a level that it had to be subsidized in the name of maintaining jobs. Thankfully, that is unlikely to happen.

Oil and gas will be valuable commodities for a long time to come, but they are destined to become less and less valuable, which is not good news for Alaska gas exports.

Alaska’s future

Alaska is obviously not in a great position to directly follow the electrification lead of China either. The far north is a less than ideal place for solar given the long, dark winters. In parts of the state, one can for much of the year still squeeze more energy out of sunlight than one might think, but the solar potential is by no means great.

Wind is better, and Alaska has a bounty of coal, but that is unfortunately the dirtiest of fossil fuels and will hopefully never be needed for in-state energy generation because Alaska also has a bounty of clean-burning natural gas still trapped beneath the North Slope.

The Slope now holds 35 trillion cubic feet of proven natural gas reserves and the potential for another 200 trillion cubic feet, according to Alaska Gas Line Development Corp. numbers.

The state owns a royalty share of 12.5 percent and in some cases up to 33 percent of that gas. At the lowest rate, this would give the state the rights to about 4.4 trillion cubic feet of natural gas.

That’s a lot of gas. Alaska’s statewide consumption of gas is now under 100 billion cubic feet per year. A billion is one one-thousandth of a trillion. So, at current Alaska consumption levels, the Alaska royalty share could theoretically meet the current consumption demand for 4,400 years.

The state also has the right to take this gas “in kind.” The administration of late Gov. Jay Hammond saw to that in the 1980s.

“The rationale included how delivery of gas to tidewater improved the chances of using the gas for industrial purposes in Alaska,” according to Matthew Berman, an economist with the University of Alaska’s  Institute of Social and Economic Research.

The in-kind provision applied to crude oil as well, but Berman noted the in-kind provision of state law has been little used.

“Between 1969 and 2003, slightly more than one-half of all Alaska state royalty oil
was taken in-kind,” he wrote in 2005. “Relatively little gas was taken in kind, however, despite
several attempts. The state sold 10.4 billion cubic feet – about one-half of one-year’s
worth of Cook Inlet royalty gas –  to the local gas distributor, Alaska Pipeline Company
(Enstar), from 1977 to 1984,” but that ended as Cook Inlet production declined.

Most of that royalty oil was refined in North Pole, a community near Fairbanks, before the Flint Hills Refinery was shut down in 2014. Some is still refined to jet fuel, heating oil and low-sulfur diesel by the Petro Star refineries in North Pole and Valdez, along the oil pipeline route.

As for the natural gas production, the U.S. Energy Information Administration (EIA) reports Alaska is “fifth in the nation in natural gas gross withdrawals of more than 3.5 trillion cubic feet, most of which are reinjected into oil fields to help maintain crude oil production rates” on the North Slope.

Were the state to take a 12.5 percent share of its gas every year, and use it to power reliable, gas-fired electrical power plants on the North Slope, it would be able to generate more than enough electricity to power the entire state at a relatively low cost, given that the gas is nearly free and gas-fired electric power plants are relatively cheap to build.

The EIA pegs natural-gas plant construction costs at $920 per kilowatt – $508 per kilowatt cheaper than wind farm energy and $641 per kilowatt cheaper than solar farms.

If one does the math here, it quickly becomes clear the state could electrify all of Alaska’s major population centers for a fraction of the cost of building a pipeline to move gas to Cook Inlet and liquify it there for shipment elsewhere.

Electrification would immediately yield big benefits for Alaskan home and business owners who now face the second-highest electric rates on the West Coast.

Only California is higher at 33.6 cents per kilowatt hour. The average Alaska rate in October was 26.46 cents, 77 percent higher than the average 14.91 cents per hour paid in the mountain states and well above the 14.06 cent rate for Washington state and the 16.16 rate for Oregon, according to the EIA. 

These differences are even greater when it comes to commercial and industrial rates with Alaska industries charged 19.41 cents per kilowatt hour – well more than twice the national average of 8.65 cents – and businesses charged 22.23 cents – 66 percent above the national average of 13.41 cents per kilowatt hour.

Industries gravitate toward states with low energy costs and away from those with high energy costs. Tech industries, which have created most of the new high-paying jobs in the country, are especially now interested in low electric costs because of their need for massive quantities of electricity to power “artificial intelligence” (AI).

“Meta and Microsoft are working to fire up new nuclear power plants,” MIT Technology Review reported in May. “OpenAI and President Donald Trump announced the Stargate initiative, which aims to spend $500 billion – more than the Apollo space program – to build as many as 10 data centers (each of which could require five gigawatts, more than the total power demand from the state of New Hampshire). Apple announced plans to spend $500 billion on manufacturing and data centers in the US over the next four years. Google expects to spend $75 billion on AI infrastructure alone in 2025.”

Meta and Microsoft appear to be players in what the World Economic Forum calls a “world nuclear revival.” Wouldn’t it be better to use clean-burning natural gas to provide them power than push them toward nukes?

Just think of the potential for Alaska if it had in place a UHVDC power distribution system connected to clean-burning, natural gas power plants on the North Slope capable of delivering cheap electricity to the state’s Railbelt.

Yes, the techies filling AI jobs might prefer to live in California, Texas or other states where the weather is a lot friendlier than the 48-degree-below-zero temperatures in Fairbanks a couple of nights ago that had some Alaskans wondering where the hell global warming went.

But some tech companies and tech workers could surely be lured to the warmer, climate-change refuge of the Anchorage Metro Area, especially given an airport with easy access to almost anywhere on the planet if someone with a high-paying job needs a break from the weather.

But then getting to this point would require some vision on the part of Alaska politicians, and the vision appears to have died with the late Wally Hickel, who – were he alive today – would recognize the world has changed, and that people and their economies face the choice of adapting to change or fading away.

Alaska will forever be a nice place to visit in the summer, but there is at this time no reason to doubt the state Department of Labor’s projection that if things keep going as they are “Alaska’s population will decrease from 736,812 in 2023 to 722,806 in 2050.”

Why? Because people gravitate toward states with good jobs and away from states with a lack of good jobs, and if those states have friendlier climates, all the better.

But, hey, if the state can only find the Alice Rogoff of oil and gas willing to pony up $44 billion to upwards of $70 billion to build a gas pipeline from Prudhoe Bay to Cook Inlet to sell increasinlgy less valuable natural gas to Asia, the job market might see at least a temporary boom. And Lord knows, Alaskans love their booms.