Alaska's Fiscal Crisis and Four Other Reasons to Stop Wasting Public Funds to Dam the Susitna River

By Monty Schmitt and Susan McGuigan

Alaska's budget deficit requires focusing on essential public needs

Earlier this week Governor Walker finally signed the State of Alaska's 2016 budget, which was extremely challenging and required two special legislative sessions to achieve. The global crash in oil prices significantly reduced the state's available revenue, creating a budget crisis that has severely impacted the people of Alaska. Perhaps the only good thing to come of the budget deficit is that the Governor and Alaska legislature cut funding for wasteful and unnecessary "mega projects," including the proposed Susitna Dam in order to provide funding for essential public services (e.g. schools and transportation). Unfortunately, this will not stop the inefficient use of public funds. The Alaska Energy Authority (AEA), the state agency studying the proposed dam, intends to limp along (hoping to get more money when the economy improves) by using millions of unused prior appropriations - money that could be used for more pressing needs. Even when the state budget was flush with oil revenues, AEA's attempt to build the costly Susitna Dam made no sense. The dam, which would be America's second largest, threatens to destroy one of Alaska's iconic wilderness rivers that is the backbone of the commercial salmon fishery and a tourism industry that provides thousands of jobs and millions in revenue.

History repeats - a costly mistake

This is AEA's second attempt to complete required studies for a permit from Federal Energy Regulatory Commission (FERC) to construct the facility. Their previous attempt to get a construction permit for a dam in the '80s was terminated when oil prices dropped - but only after spending millions of dollars. Now history seems to be on verge of repeating itself. So far, AEA has spent $200 million on studies that have been plagued with problems and delays and AEA says they still need another $100 million. However project delays, study problems and increasing costs likely mean the final amount of money needed just to complete the permit application will be much higher. Given Alaska's fiscal crisis, impacts to fishing and tourism, and cost overruns, it makes sense for Governor Walker to direct AEA to cease all efforts to build the dam and redirect remaining funds to support critical public services.

Five reasons why Governor Walker should direct the AEA now to cease efforts to build a mega-dam 1. The huge cost of the project is growing at a time of budget deficits

AEA estimates the cost of constructing the Susitna Dam to be $5.65 billion - a huge sum of money that has caused many to question the value of the project. However, a recent estimate by an economist from the University of Alaska, Gregg Erickson, suggests the cost to build the dam is more likely to be $10.3 billion, and will take more than two additional years to build. This is because AEA did not take into consideration at least $880 million to construct transmission lines, did not include the cost to lease or buy Native American lands on which the dam will be built, and uses an "exceedingly optimistic" interest rate on debt. Dr. Erickson concludes that the project does "not survive any plausible market test and substantially underestimates the cost to build." Furthermore, the legislature's decision to not fund AEA's study efforts this year will result in significantly higher costs related to delays and restarting the studies if and when they get more money. Ending the proposed project now will stop further waste of taxpayers' dollars.

2. The dam will degrade the river and impact commercial fishing and tourism industries

The Susitna River, which runs freely from its glacial source near Denali National Park to the Cook Inlet, supports Alaska's 4th largest king salmon population and one of the top ten sockeye salmon populations in the world. The proposed operation of the dam will turn the river's flow and ecosystem upside down by releasing powerful surges in the winter (up to five times the normal flow), and then release a fraction of the normal flow in the summer months. This dramatic change in seasonal flow patterns will impact formation of river ice (a concern for public safety and migration corridors for game species), seriously alter the sediment transport regime important to fish and wildlife habitat, significantly degrade conditions for salmon spawning and juvenile rearing, and substantially impair riparian and wetland ecological function. In March, the American Fisheries Society declared in a letter to AEA and FERC that the Susitna dam project is "both economically and environmentally untenable."

The health of the Susitna River and its fisheries is vital to Alaska's economy and way of life. The river and its fisheries support a $30 million commercial fishing industry. Furthermore, residents and tourists are estimated to spend up to $163 million in sport fishing goods and services in the Matanuska-Susitna Basin, which creates up to 1,900 jobs. Many Mat-Su residents, including Native Alaskans, also rely on these fisheries to put food on the table.

3. The dam permit studies are plagued with problems and will require more time and money

After three years and $193 million spent on planning studies, federal agencies and other scientists that have reviewed AEA's first round of results have found many of the studies are incomplete or poorly conducted. Among other problems, the studies misidentify juvenile fish species; provide unreliable estimates of fish populations; do not adequately evaluate the impact on brown or black bears; are missing critical data due to incomplete studies and equipment failure; and do not provide sufficient data to effectively model and predict potential impacts of proposed operations. The former head of Alaska Fish and Game, Sterling Miller, found that some of the wildlife studies performed by AEA are "not consistent with generally accepted scientific practice" and will have to be redone.

FERC can require AEA to redo poorly performed studies and undertake new studies. If so, the cost just to complete the studies could far exceed the $100 million AEA previously predicted before being denied funding in this year's budget. However, the estimate also does not take into account the additional costs related to on-going delays due to the lack of funding, including AEA's plan to expend millions of dollars from prior years' appropriations.

4. The dam would have an adverse impact on Alaska's climate

Contrary to the notion that large dams produce "clean" energy, recent studies have found there are significant emissions of carbon dioxide and methane (the two most destructive greenhouse gases) that are associated with large dams. The proposed dam would likely generate significant emissions from the massive amounts of cement used in construction, while removing important carbon sinks from the landscape by drowning forests, drying wetlands, and creating a reservoir that submerges biomass.

The effects of climate change in Alaska have been particularly pronounced over the last fifty years. According to scientists, Alaska has warmed at more than twice the rate of the United States' average and has seen a reduction in sea ice, and increased glacial retreat and permafrost warming. A massive Susitna Dam would produce destructive greenhouse gasses and thereby contribute to Alaska's climate change-related impacts.

5. There are better clean energy alternatives to meet Alaska's future needs

Currently, small hydro-electric projects in Alaska supply almost 20% of the state's energy without the adverse environmental impacts associated with mega-dams. More importantly, energy conservation could achieve about half the electricity that would be created by the dam. Renewables such as tidal, wind, solar and geothermal are opportunities to meet future energy needs for Alaska as the technologies advance. The relatively small amount of energy that will be supplied by the dam (600MW) can be met by alternative options which do not adversely impact local communities and the environment.

Times are changing

The trend in the U.S. is to remove dams, not build new mega-dams. Over 850 dams have been removed in the country in the past 20 years (72 in the past year alone), and no new large dams have been built in over 30 years. A recent Oxford study assessing 245 hydropower dams in 65 countries found that "even before accounting for negative impacts on human society and environment, the actual construction costs of large dams are too high to yield a positive return."

A 735-foot-tall dam across the salmon-rich Susitna River does not make sense for Alaska. Governor Walker can end this fiscally wasteful and environmentally destructive endeavor by directing AEA to cease all activities to advance the Susitna Dam project and terminate the FERC license application process.