Alaska’s Revenue and Infrastructure Needs Can Be Met by Arctic Exploration

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February 17, 2017 in Blog, Featured

The latest infrastructure report card from the American Society of Civil Engineers (ASCE) gave Alaska low marks across multiple categories related to transportation, waste management, and public services. These marks, coupled with Alaska’s current budget deficit problem, do not bode well for the state and its residents. Thankfully, Alaska possesses massive energy resources that have the potential to help solve both its budget and infrastructure problem; but only if the federal government will allow them to be developed.

ASCE’s gave Alaska a C- grade on its overall infrastructure but in the ports and marine highways categories the state received an unimpressive D grade. The Arctic region of Alaska is also hugely important to national security and domestic energy production. A strong infrastructure system of functioning ports, roadways, and airports ensures that our military can address any regional security issues at a moment’s notice.

As shipping routes and waterways open up in the Arctic, the U.S. becomes more exposed to national security threats in the region. As the report card highlighted,

“Alaska lacks deep water Arctic ports. An emerging Arctic Ocean poses both opportunity and risk for trans-shipment, destinational shipment and future resource extraction requirements along coastal Alaska. Enhancing port infrastructure – including deep-draft port facilities currently unavailable north of Unalaska/Dutch Harbor – would meet the State’s goal of encouraging economic development in remote areas.”

In addition to regional infrastructure challenges, the state is grappling with a major fiscal crisis brought on by low oil prices. Bloomberg recently summarized the bleak crisis the state currently faces:

“With an economy in recession, Alaska has burned through $13 billion of savings over the past four years and is facing a $3 billion shortfall for the year that starts in July. An emergency fund is projected to run dry in mid-2018.”

While the situation seems bleak, Alaska possesses the means to improve both its infrastructure and economic situations. Arctic energy exploration could provide revenue via taxes and job creation and will decrease the state’s budget deficit, while also facilitating infrastructure projects that could improve the state’s military and emergency response capabilities.

A new report from the Alliance for Innovation and Infrastructure made this exact point:

“Arctic offshore oil and gas activity – if allowed – would bring sufficient physical and financial resources to the region to support these major infrastructure investments, plus an estimated $19 billion in state and local revenues.”

The report argues that the deep-draft expansion at the Port of Nome, transformation of Port Clarence into a Maritime Support Base, expansion of the dock at Cape Blossom, and enhancement of critical military and maritime infrastructure would all benefit from energy development in the offshore Arctic. The report also discussed profoundly negative consequences Alaska could see from the recent ban on drilling in the Arctic:

“Obama administration’s decisions to first remove the Arctic from the 2017 – 2022 Outer Continental Shelf leasing program and then ban energy development in 115 miles of the resource rich Beaufort and Chukchi seas, is likely to create a chilling effect on capital investment, significantly threatening the viability of critical infrastructure projects.”

Alaska’s infrastructure system ranks poorly in the latest ASCE report card, but that doesn’t have to be the case in the future. Alaska is fortunate to harbor massive oil and gas opportunities across the North Slope and throughout much of the Outer Continental Shelf. It is in the best interest of the nation and the state of Alaska to allow exploration companies to develop these resources. Removing the recent ban on offshore energy drilling in the Arctic would give the state a way to address its infrastructure and budget shortfalls.