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Groups challenging Roads to Resources Wilderness Society report argues that Alaska can’t afford to build three major roads to remote oil, gas and mining operations Eric Lidji For Petroleum News
The state does not have a financial plan in place to build three industrial Arctic road projects currently under consideration, according to a coalition of environmental groups.
“The projects do not have financial plans identifying how they will be paid for, nor has the state quantified expected resource-related revenue associated with them,” Lois Epstein, engineer and Arctic program director from the Wilderness Society, wrote in “Easy to Start, Impossible to Finish II,” a March 2012 report produced with help from both the Northern Alaska Environmental Center and the Alaska Conservation Alliance.
The accusation is not a revelation — the state believes the precise financial model for the projects should come later — but signals increased concern about the projects.
While the initial report in 2010 focused on a collection of proposed transportation projects from around the state, the second edition looks specifically at the proposed roads to Umiat, Nome and Ambler, all designed to improve access to Arctic resource plays.
The state shouldn’t continue to spend millions studying those three projects until it first explains where it would get the money to build and operate them, according to the report, but should focus on smaller projects that improve the existing transportation system.
Combined, the three roads would cost between $1.7 billion to $2.4 billion to build and additional millions each year to maintain, according to the Alaska Department of Transportation and Public Facilities. By expanding road access to more of Alaska, the report speculates that these roads would also require “more troopers and wildlife enforcement personnel, more accident response and emergency evacuation and medical capabilities, and additional tourism services such as sanitation and litter facilities.”
A major Parnell priority While the desire to expand Alaska’s road system into the wilderness is nothing new for policymakers, the “Roads to Resources” program dates back to the administration of Gov. Frank Murkowski and has become a major priority of Gov. Sean Parnell. The state has spent nearly $34 million since 2004 on the three Arctic projects, and the proposed fiscal year 2013 budget would dedicate another $24 million to studying those roads.
In his State of the State addresses, Parnell said the roads would increase oil production by improving access to remote resource plays and increase employment in rural Alaska.
Of the three projects, only one is specifically geared toward energy production. A road to Umiat, a staging area in the foothills of the Brooks Range, would improve the economics of two projects in the region: Anadarko Petroleum Corp.’s search for natural gas in the vast Gubik Complex and Linc Energy Inc.’s program at the Umiat oil field.
Those exploration programs aim to prove up discoveries that the U.S. Geological Survey and the U.S. Navy made in the late 1940s and early 1950s. They are generally believed to be large projects hampered primarily by their remoteness, but also by other factors, such as the geology around Umiat and the economics of bundling midsize fields at Gubik.
The roads to Nome and Ambler would improve the economics of mining projects in western Alaska, as well as connect rural population centers to the larger urban areas.
Is it corporate welfare? The state acknowledges it does not have funding nailed down for building the roads, but believes it’s worthwhile to fund preliminary permitting now in order to have something soon it can hand over to a public-private partnership for final design and construction.
The state argues that the economic development generated by these roads, particularly the increased royalties from additional oil and gas production out of the foothills, would justify their cost. With only a handful of exploration wells drilled in the area, though, it is too early to gauge the true resource potential of the region, according to Epstein.
That echoes the concerns some lawmakers expressed when Deputy Commissioner of Highways Pat Kemp testified before the Senate Finance Committee in February.
Sen. Johnny Ellis, D-Anchorage, said many of his constituents considered the Roads to Resources initiative to be “corporate welfare,” and asked, “If this is benefitting a corporation and their shareholders, mostly, where is the private money to help fund these enormously expensive projects and the enormously expensive upkeep of these roads?”
Kemp said the state could actually save money by building the $200 million to $300 million road to Umiat, because under the current system of tax credits, the state pays around 40 percent of the cost of most snow and ice roads on the North Slope, millions of dollars each year. “In that view, we are in essence paying for the roads,” Kemp said.
Without a more certainty of the economics of those plays, “it’s possible that the state could be left with the bill for road construction as well as operations and maintenance if private sector resource development projects do not materialize,” Epstein argued.
Federal funding a concern If the projects don’t materialize, Epstein believes Roads to Resources could actually harm federal funding for other transportation projects. While Alaska famously and infamously benefitted from extensive federal support in the past, Epstein pointed to a November 2009 letter where the U.S. Department of Transportation worried that “sufficient funds are not available from current recognizable sources to complete a number of large projects contemplated by the State’s program” and urged “fiscal constraint.”
The Parnell administration does not plan to use federal funds for the Roads to Resources projects, but did not respond to the concern about jeopardizing other federal funding.
Finally, Epstein noted the opposition to the projects from local communities worried about the impact of the road on their subsistence lifestyle. When accused of ignoring those concerns during the hearing, Kemp said: “There’s quite a difference between the phrase ‘they aren’t listening’ and the phrase ‘they aren’t doing what I want them to do,’” and said the permitting process was designed to collect and consider local concerns.
The U.S. Army Corps of Engineers received nearly 1,700 comments during the recently completed scoping process for the Umiat road, leading it to consider an alternative route that would utilize existing North Slope corridors and to delay permitting by a year.
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