All the high-level attention to aiding Alaska’s Oil and Gas industry through tax breaks brings to mind Mark Twain’s comment about having more than one way to skin a cat. As strange as it might sound, one pragmatic way to aid Alaska’s oil and gas industry and create more jobs is for Congress to act on a market-based solution to climate change. I know this appears counterintuitive but hear me out.
The first step to understanding how carbon pricing helps is to recognize that not all fuels are created equal when it comes to greenhouse gas emissions. Natural gas generates about 55 percent of the carbon dioxide emitted by coal on a British thermal unit basis. If carbon is priced either through a tax or a ‘cap and trade’ program, then those fuels burning less carbon dioxide are preferred by energy producers. Many energy experts view natural gas as the bridge fuel to the clean energy economy. But without the economic incentive of a price for carbon, coal-generated electricity will remain king.
Steve Colt, an economist with the Institute of Social and Economic Research, confirmed this positive outlook for natural gas in 2007 when he examined the possible effects of the Lieberman-Warner bill. Using an analysis provided by the National Association of Manufacturers, Colt estimated that when carbon is priced the wellhead value of Alaska North Slope natural gas increases by $4-9 billion a year. While this analysis may be dated, it does show the likelihood that carbon pricing is good for Alaska’s gas producers. Certainly oil development would not be as favored as natural gas, but all of Alaska’s producers hold tremendous amounts of natural gas assets and their bottom line would likely be enhanced significantly.
This assessment tracks with what we hear from Alaska’s major oil and gas producers. For example, in March 2010, BP’s CEO, Tony Hayward told Congress that instead of building more coal plants, they should be promoting natural gas, which emits as little as half the carbon emissions that coal does. He said the effort in the Senate to write new climate legislation appeared to be more equitable to the natural-gas industry. In May of 2010, Shell Oil, signed on to a letter to Barack President Obama urging action on “a comprehensive energy and climate policy that will get us back on track by creating American jobs in the new, low-carbon economy”.
We even have Exxon weighing in favorably for a carbon tax. “A carbon tax is also the most efficient means of reflecting the cost of carbon in all economic decisions — from investments made by companies to fuel their requirements to the product choices made by consumers,” said Rex Tillerson, Exxon’s chief executive in a 2009 speech to a Washington audience.
While these statements by Alaska’s major oil and gas producers should not be viewed as unequivocal support for climate legislation, they do suggest the possibility that properly constructed climate legislation can be beneficial to Alaska’s economic interest. In fact, with a little bit of creativity, climate legislation could even be the answer to another worry facing the oil and gas industry — more and more ice-dependent species being declared threatened and endangered under the Endangered Species Act.
The real solution to the decline of polar bears, walruses, ringed seals etc. is to reverse the impacts of a warming Arctic by robustly addressing climate change. As such, why not take a page from what Sen. Ted Stevens did under the Pacific Salmon Treaty, and add a provision that provides some relief from the ESA requirements for consultation and recovery plan for the specific species of concern. Back then the species of concern was Columbia River Chinook salmon. Now the species of concern are those ice-dependent species whose habitat is rapidly diminishing. Adding such a provision to a comprehensive climate bill not only benefits the operators on the North Slope but more importantly implements the real solution of reducing greenhouse gases. We can tinker at the edges with adaptation and monitoring of activities or we can take the bold steps necessary to halt the demise of these iconic species.
Why not get creative and seek solutions that work both for the environment and the economy? Why not put a market-based structure in place that enhances natural gas as the bridge fuel to a clean energy economy? Why not seize the moment of visionary leadership when industry is all ready leaning that way?
Addressing climate change is more than responding to one of our most pressing environmental challenges; it is a series of economic opportunities waiting to be seized. Alaska with its wealth of natural gas and renewable energy is primed more than any other state to reap these benefits. Unfortunately, as the Nation’s only Arctic state we also have the most at risk.
As Shell and other industry leaders said in their letter to Obama, “It is time for Democrats and Republicans to unite behind bipartisan, national energy and climate legislation that increases our security, limits emissions, and protects the environment while preserving and creating American jobs.”
• Troll is a long-time Alaskan with more than 22 years of experience in fisheries, coastal policy and energy policy.