Economic Analysis: Opportunity Cost and Comparison of Subsidizing an In-State Gas Pipeline vs. the Benefits to Alaska of a Mainline to the Lower 48 States

Release Date: 
February 2, 2011
Economic Analysis: Opportunity Cost and Comparison of Subsidizing an In-State Gas Pipeline vs. the Benefits to Alaska of a Mainline to the Lower 48 States

"The direct and indirect benefits to the State of Alaska and its residents of a large-volume North Slope natural gas pipeline to serve in-state and Lower 48 markets would be substantial. Tax and royalty revenues would be significantly higher than from a small in-state-only gas pipeline; a large-volume mainline to Lower 48 markets would spur increased investment in new oil and gas exploration in Alaska; and the pipeline tariff for gas deliveries within Alaska would be substantially less with the economies of scale of a mainline. This paper reviews the opportunity cost to the state of a potential subsidy of a small in-state gas line vs. the option of possibly applying the same amount of state leverage to a larger mainline project." 

Roger Marks, oil and gas economics consultant, prepared this economic analysis for the Office of the Federal Coordinator for Alaska Natural Gas Transportation Projects.

Syndicate content