Alaska: On the Wrong Side of History. Again

Don’t mistake WC: he loves Alaska. WC has lived in Alaska – except for attending undergraduate and law school – since 1954. A little bit better planning by WC’s parents and he might have been born here.

But Alaska and a majority of Alaskans are on the wrong side of history and the wrong side of reason in their solutions to the State’s woes. We’ll look at two examples.

The Susitna River Dam.

Alaska’s government’s latest solution to the high cost of energy is a proposed Watana Dam on the Susitna River in the southcentral part of the state. A 735-foot high dam, creating a 42-mile long reservoir, it is projected to generate 600 megawatts of electricity, about half of the current Railbelt demand. The estimated cost is $5.2 billion.

Data from Alaska Energy Authority, Map by Alaska Center for the Environment

Data from Alaska Energy Authority, Map by Alaska Center for the Environment

Here’s a link to a larger version of the map. But a recent study of mega-dam projects like the proposed Watana Dam sounds a critical cautionary note. A distinguished panel of economists at the University of Oxford recently published a paper on the economics of large hydropower projects. The study should inform any decision on Watana Dam. Here’s the abstract:

We find overwhelming evidence that budgets are systematically biased below actual costs of large hydropower dams — excluding inflation, substantial debt servicing, environmental, and social costs. Using the largest and most reliable reference data of its kind and multilevel statistical techniques applied to large dams for the first time, we were successful in fitting parsimonious models to predict cost and schedule overruns. The outside view suggests that in most countries large hydropower dams will be too costly in absolute terms and take too long to build to deliver a positive risk-adjusted return unless suitable risk management measures outlined in this paper can be affordably provided. Policymakers, particularly in developing countries, are advised to prefer agile energy alternatives that can be built over shorter time horizons to energy megaprojects.

The key phrase there is “In most countries large hydropower dams will be too costly in absolute terms and take too long to build to deliver a positive risk-adjusted return.” The full study documents that most large scale hydroelectric projects are economic failures. They cost twice as much and take half again as long to build as projected. And that’s before you add in the costs of environmental damage, damage to salmon fisheries, and geotechnical hazards. The proposed dam is, after all, quite close to the epicenter of the ML 7.9 Denali Fault earthquake.

The proposed dam is strongly opposed. The concerns of the opposition are real. But WC’s major concern is the Alaska Energy Authority’s own admission that “Current projections indicate Susitna-Watana power will be competitive with other energy sources at startup.” Not less expensive; competitive. At “current energy prices” no one in their right minds heats their home – the largest demand for energy in Alaska – using electricity. Watana Dam won’t shift energy use away from fossil fuels except for the small fraction of power currently generated by fossil fuels. And that’s at “current projections” of cost. Readers are directed to the Oxford study on cost overruns above.

But, the Watana Dam’s sponsors say, Watana Dam will stabilize energy prices going forward. Whether it will and when depends on the true cost of construction. And the reality that, in the case of most recent mega-dams, exactly the opposite has happened. Watana Dam supporters will also point out most of the examples in the Oxford study are from other countries, and usually third world countries. But Alaska’s economy is quite close to that of a third world model: we support ourselves exporting natural resources. We don’t have much real industry. Crude oil fuels more than 90% of our revenue: think Saudia Arabia.

At a time when the United States is tearing down dams, Alaska is proposing to build North America’s second highest dam. The Watana Dam puts Alaska once again on the wrong side of history.

Increased Oil Field Development.

Then there’s the issue of increased oil field development. Governor Sean “Captain Zero” Parnell’s long term economic development model is to extract more crude oil and natural gas, and export it for sale. As we know from the recent fight over repeal of SB 21, there’s no consensus on how to tax that resource extraction, but both sides agree that Alaska must put more oil in the Trans-Alaska Pipeline.

The problem is that each barrel of petroleum Alaska produces will inject an additional 0.43 metric tons of CO2 into the atmosphere.1 CO2, of course, is a greenhouse gas and promotes global warming and attendant climate change. And the impact of climate change falls first and hardest on the polar and sub-polar regions. So Captain Zero’s solution to Alaska’s economic woes will in the middle- and long-term gravely injure Alaska.

Villages will have to be relocated as erosion and sea level arise continues. Fisheries stocks may sharply diminish or disappear as ocean water chemistry alters ocean life. Infrastructure will be damaged by thawing permafrost. Increased rainfall will cause more frequent flooding. At a time when Americans are finally beginning to recognize the risks of climate change,2  the State of Alaska’s economic plan is to make the problem worse. By producing more crude oil now, we create an even bigger problem for our children and grandchildren later. Sweet!

WC may be unreasonable in expecting long-range vision in Alaska’s leaders. But, seriously, if you saw this kind of self-destructive behavior in a friend, wouldn’t you intervene?

  1. 5.80 mmbtu/barrel × 20.31 kg C/mmbtu × 44 kg CO2/12 kg C × 1 metric ton/1,000 kg = 0.43 metric tons CO2/barrel. 
  2. Well, except for fools like Senator James Inhofe (R, OK).