Regulatory Uncertainty Hinders Business in Alaska and Nationwide

ANCHORAGE - Alaska is a big state, with big mountains, big wildlife, and big development projects.  It’s also a place of big changes: the state has warmed more than 4 degrees, creating tremendous pressures on the natural environment and society.  But in a place where the people are always looking for the next big economic driver, like a $40 billion Alaska natural gas pipeline, uncertainty about carbon regulation is an Alaska-sized problem.

Everywhere I’ve been in Anchorage this week, I’ve asked people whether they think some form of carbon reduction program will likely be instituted in the United States.  Given the effects that climate change has already had on Native communities, urban dwellers, the oil and gas industry, the fishing industry, and everyone else, most Alaskans want to see some type of mitigation actions taken and think that it’s likely to happen in the near future.  However, the uncertainty about what those measures will look like can have just as serious of an effect on the business climate of the Last Frontier as in the Lower 48.

Take, for example, the Alaska natural gas pipeline proposed to bring Alaska’s vast natural gas resources to North American markets.  Our latest TechBook brief on natural gas explains that natural gas is a lower-emitting energy source than other fossil fuels and can be an important bridge fuel to our clean energy future.  Fiscal and regulatory certainty for this gasline have long been discussed as needed to begin construction on this massive project.  Of course, there are many questions that have to be answered that are specific to this project, but regulatory certainty regarding climate regulation is one serious outstanding issue.

Not knowing what the coming carbon regulation will look like leaves a lot of questions unanswered for planners of a massive undertaking like this one.  How will the national natural gas market be changed by legislation?  What types of emission controls will the project need?  What types of new technologies can be implemented to meet new standards?

These questions don’t even address the effects that environmental uncertainty has on a project like the gas  pipeline.  Industry on the North Slope of Alaska is already contending with climate changes, and climate change will affect design requirements for projects—for example, due to the infrastructure impacts of melting permafrost and the reduced number of extremely cold days when companies are authorized to undertake certain activities.  Facilities and projects like the gas  pipeline will have to be engineered to contend not only with the extremes of today’s Arctic environment, but also with the altered environment of decades from now.  All of this flexibility will be costly to include.

Backers of the gas pipeline are excited about its prospects to bring about a new round of growth in the local and national economies.  Yet the project needs regulatory certainty to move forward, and national climate legislation this year is an important step in that direction.  It should be no surprise that major companies involved in discussions over a gas  pipeline, including USCAP members BP and ConocoPhillips, are, for a variety of reasons, looking for certainty in climate regulation; without this certainty, investment will almost certainly be stalled.  Congress needs to act this year in order for business to move forward with new projects, innovate, and grow our economy.

Michael Tubman is a Congressional Affairs Fellow