Freight Waves: Alaska LNG exports proposed to fund Arctic icebreakers and ports

Revenues generated from Alaskan energy exports could be the key to closing a wide infrastructure gap that some assert has left the U.S. a decade behind its competition.

Testifying on Capitol Hill on May 8, Mead Treadwell, an Arctic policy expert from the Woodrow Wilson Center in Washington, D.C., predicted liquefied natural gas (LNG) the “next big wave” of economic activity in the region that could help fund ice-breaking ships and deep-water ports.

“[The Russians] are bringing 16.5 million tons of LNG from the Yamal [LNG project] through the Bering Strait [en route to Asia] 2,600 miles through the ice, while we’ve got big fields in Prudhoe Bay [Alaska] that are lying fallow” that would require just 600 miles through the ice zone, Treadwell asserted to lawmakers at a maritime subcommittee hearing in the U.S. House of Representatives.

“With that opportunity, I predict that sometime by the end of the next decade, you’re going to see maybe as much as 50 million tons of LNG per year moving out of Russia, and maybe as much as 30-40 million tons out of Alaska” and Canada, he said. “Economic activity in the North will help pay for infrastructure in the North.”

The U.S. Coast Guard testified in April that Russian tankers filled with Yamal LNG and oil products destined for foreign markets has doubled the cargo tonnage moving across Arctic routes over the past five years. The agency noted that China – which isn’t an Arctic nation – has major infrastructure expansion planned in the region through investments in its “Polar Silk Road” initiative.

The threat from Russia and China is even more impressive when considering how the two countries are partnering in some of their Arctic plans. Chinese companies own 29.9 percent of the $27 billion Yamal LNG project – “an ‘anchor’ investment that can translate into future ‘cluster’ infrastructure investments such as port, rail, and telecommunications projects,” Heather Conley, an Arctic expert with the Center for Strategic and International Studies, testified at the May 8 hearing.

The two countries’ combined LNG power “will undoubtedly spur an increase in use by LNG carriers of the Bering Strait,” Conley said, warning that with more frequent transits of larger vessels through the passage, “U.S. Coast Guard resources will be increasingly strained, inhibiting their ability to protect America’s coastline.”

But paying for the ice-breaking ships and port infrastructure needed to ensure both environmental protection and economic security in the Arctic has not been a priority among lawmakers or within the executive branch. Both sides of the political aisle have tended to focus on shorter-term policy objectives.

A way to generate funding – in addition to harnessing LNG – is through a tariff system based on the St. Lawrence Seaway, the import-export waterway on the U.S. and Canada border, Treadwell said. The framework for the system is outlined in the “Shipping and Environmental Arctic Leadership (SEAL) Act,” proposed in April by U.S. Senator Lisa Murkowski (R-Alaska).

The legislation would create a congressionally chartered seaway development corporation with power to collect voluntary shipping fees in exchange for providing access to icebreakers, ports and port-side facilities.

“It sets up a system to go out and work with other nations to use the icebreaker capabilities across the Arctic – really across the world – to offer a reliable service across the Arctic and to charge a tariff for it,” Treadwell said.

Treadwell took issue with comments made by U.S. Secretary of State Mike Pompeo in a speech he gave in Finland earlier in the week, where Pompeo criticized Russia for requiring ships to pay for ice-breaking services through the Northern Sea Route, at a cost reportedly as high as $500,000.

“That tariff is paid because the route saves [vessel operators] more than $500,000,” Treadwell countered. “The Suez Canal serves about 18,000 ships per year. If we were to divert five percent of those ships to the Arctic [and charge a similar tariff], $450 million per year could cover the operational needs of a lot of icebreakers.”

By:  John Gallagher
Source: Freight Waves