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Real energy relief - now

Posted: April 11, 2012 - 11:07pm

The Legislature is rapidly approaching its April 15 terminal date, and while there’s been much discussion of possible solutions to the dauntingly high cost of our energy, there has been little to no talk about what separates Alaska from the other 49 states: The state, on behalf of the people, owns oil (see Alaska Constitution, Article 8).

We all know we have an energy crisis, not just in the Interior but throughout rural Alaska, even on the Kenai; we all rely upon diesel derivatives for heating and electrification. The staggering monthly bills to the homeowner and business person are taking their toll; Interior Alaska cannot continue in its present form without a dramatically different approach to the current discussions.

I applaud the Thomas/Thompson initiative of providing vouchers for one-time relief. The benefit is that it at least provides some help to the residents. But two-thirds of the people who receive a PFD don’t need relief — they live in areas served by inexpensive natural gas for heating and electricity or are served by low-cost hydroelectricity.

Don’t get me wrong, I need the help, but more, we need to stabilize our economy. If our residents can’t spend extra money because every month, especially in the winter, they’re scrimping just to pay for heating and lighting their homes, then many of our businesses will also be hurting for lack of sales. Interior Alaska’s stores and restaurants were brutalized over this past winter; more people will be out of work soon.

Additionally, every year the state spends more than $30 million to provide Power Cost Equalization (PCE) to the 80,000 people spread out across 185 communities in Alaska. This assistance is a vital life-line to those communities, but the assistance doesn’t create an economy. Unfortunately, the 2010 census shows that there’s been a large out-migration from rural to urban Alaska.

How can the governor or Legislature use state controlled assets to invigorate the economy, stabilize the family budget and not take a huge one-time bite out of the state’s savings account?

The guidebook is the Alaska Constitution — too few of us have read it to understand we don’t have to be living in crisis mode.

Let’s do something that makes sense, but doesn’t use cash: use royalty oil. Royalty oil is a percentage of all the oil brought out of the ground in any particular field which becomes the property of the state (i.e., you and me). A small percentage of this royalty oil is currently sold in-state and made into commercial jet fuel. A small fraction is used to manufacture diesel products that are sold as heating oil and for generating electricity, such as at Golden Valley Electric Association’s North Pole diesel driven turbines which are capable of generating 180 megawatts of electricity.

Using the principle of “Charge owners (i.e. you and me) at cost, sell to everyone else what the market will bear,” here’s my suggestion: Until we get affordable energy relief, the Governor should authorize the discounted sale of royalty oil to any refinery willing to contractually accept a fixed profit on the sale of only two types of product: 1) Heating Oil, and 2) fuel for electric generation. The discount should cut home heating oil and electricity generation costs by half of current expenses when it reaches the consumer.

What are some of the benefits?

• No state dollars are actually spent;

• Every in-state refinery is eligible;

• In-state demand will increase the economies of scale allowing in-state refineries to maximize their production;

• It stabilizes the Interior Region and provides cost relief to rural Alaska, increasing the ability to live and work in any community in Alaska;

• Increase jobs and incentivizes investments in Alaska — we will import less refined products made by workers Outside of Alaska;

• It will provide real energy relief using something we all own — our oil.

Can this work? Yes. We’ve got smart people to work out the details. Hold off on spending cash, let’s reduce costs — and do it now.

• Isaacson is mayor of the City of North Pole.

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