December 30, 2012

To solve debt problems, let's sell Alaska

Steven Mufson

That's right. Put the entire state -- from Juneau to Deadhorse, from the Bering Strait to the Beaufort Sea -- on the auction block.

Absurd? No more absurd than the spectacle taking place right now as we skid closer to the "fiscal cliff."

Selling real estate at top dollar is all about timing, and now's a great time to unload the Klondike state. The federal government, which owns 69 percent of Alaska, could cash in on the vast, resource-rich state at a time when oil prices are high and wild salmon is flying off the shelves at Whole Foods.

Selling Alaska could fetch at least $2.5 trillion and maybe twice that amount, enough to lop off a huge chunk of the national debt and perhaps as much money as President Barack Obama and House Speaker John Boehner hope to save or raise over the next decade.

The return on investment would look great, too. Secretary of State William H. Seward -- you might know him as the handsome fellow played by David Strathairn in the new Steven Spielberg movie, "Lincoln" -- bought Alaska from Russia in 1867 for $7.2 million, drawing ridicule. One New York newspaper that year called Alaska a "sucked orange," saying Russia had already drained all the value out of it. But even after adjusting for inflation, the price paid for "Seward's folly" or "Seward's icebox," as it was known back then, looks pretty cheap -- about $114 million.

What is Alaska worth today?

There are 3.7 billion barrels of proved oil reserves and 9 trillion cubic feet of proved natural gas reserves in the state, according to the Energy Information Administration.

Oil companies are eyeing even bigger potential reserves in unexplored areas. The Interior Department estimates that the Chukchi Sea alone could hold up to 12 billion barrels, equal to half of the country's proved reserves, and Cook Inlet and the Beaufort Sea as much as 8 billion barrels. The state has large shale areas where new hydraulic fracturing techniques could yield new supplies.

In the mid-1980s, Michael J. Boskin, a Stanford University economist, estimated that Alaska's oil and gas reserves alone were worth at least $200 billion. But new discoveries have outstripped production, and Boskin was assuming a price of $26 a barrel for oil, less than a third of today's prices.

Alaska has countless other natural resources, some in areas we hold off limits, such as the Arctic National Wildlife Refuge, and others on state lands.

Mining companies are salivating at the prospect of more than $300 billion worth of copper, gold and molybdenum at their proposed Pebble mine in the southwestern part of the state. The state's forests could also be exploited.

I emailed Alaska Lt. Gov. Mead Treadwell, a Republican, to ask him how he would feel about having his state sold out from under him.

"I can't talk down our value," he replied. "It's a great piece of property. We love this place. Great views."

He proposed that Alaskans themselves try to buy their state. I thought it sounded like an employee buyout; Treadwell said he preferred to think of it as a "citizens' buyout." He said, "I don't think we want to leave the country to help save it, but if it comes to that, I'm sure we'd bid."

There would be a lot of competitors. Imagine how many nations, even individuals, would rush to bid on the sale of the century, which would be held in the Treasury's ornate Cash Room -- whose very architecture of Italian-palazzo-style ceilings, bronze chandeliers and marble floors are a lavishness we can no longer afford.

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