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February 2010
Much Gas Talk In Juneau This Week - The Bill Streever Story (BP) - We'll Report Next Monday From Washington D.C. (We'll tell you tomorrow what big oil and gas news is coming!)
Rena Delbridge Stories (NGP Photo):
Alaska Dispatch, re: Cook Inlet Gas Storage. The Cook Inlet Recovery Act, designed to boost natural gas storage in Cook 
Inlet, had its first hearing in the House. Absent a severe cold spell this winter in Southcentral, the availability of natural gas to meet peak demands for home heating and electricity may be far from consumers' minds.
Alaska Dispatch, re: Alaska Permanent Fund to bankroll a gas pipeline? One of the most influential legislators in the state House says he's sick and tired of plans, studies, and spending, and wants some action on natural gas for in-state use -- and moreover, he thinks plenty of Alaskans feel the same way and wants those voters to have a say.
ADN (AP). Point Thomson drilling begins (i.e. and could access up to a third of the gas required for a 48" Alaska North Slope gas transmission system. -dh)
The Greening of Oil, by Kay Cashman. — Why is ecologist Bill Streever, author of the New York Times bestseller “Cold: Adventures in the 
World’s Frozen Places,” working for Big Oil? Because he is making a difference. “You can … influence company policy from within an oil company, more so than working from the outside,” he told Greening of Oil, a new online magazine. Streever, who works in Alaska’s Arctic for London-based BP, wants to see more biologists working for industry. Check out his story, a young man’s adventure come true, in Greening of Oil.
Alaskan-Canadian-Russian Projects All Feeling Shale Heat -
No Hot Air by Guru. Russia also has significant, undeveloped shale gas reserves; the question is where these are relative to existing infrastructure, as well as the cost of development. If, in fact, the shale gas plays are proven to be as prolific as they are in North America, it's not out of the question these will be developed ahead of the Shtokman field, which is thought to contain almost four trillion cubic feet of natural gas.
Environmental Attacks Threaten Canadian and Alaskan Arctic Activity
See how Alaska's own government threatens Arctic investment!
See today's Alaska Dispatch story on Alaska tax issues.
1. Mackenzie Delta. CBC News. An environmental review panel's recommendation to impose noise limits on any Mackenzie Valley pipeline facilities built inside a bird sanctuary could scuttle the $16.2-billion project, its backers have told the National Energy Board. Globe and Mail Story.
2. National Petroleum Reserve Alaska. (Note: We observe that Alaskan officials are rightfully upset at the Federal actions below--beyond their control--that deter investment in the State. We also observe that this is all the more reason politicians should act now to improve the investment climate policies over which they do have control. As we editorialized Friday, they should moderate the state petroleum production tax and cruise ship law resulting from a damaging voters initiative. -dh)
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Governor Sean Parnell (NGP Photo-r with Senator Lisa Murkowski) issued the following statement Friday on the Corps of Engineers decision to deny ConocoPhillips
and Anadarko a permit to construct a drill pad known as CD-5 in the National Petroleum Reserve-Alaska. “Just in the last six months, we’ve fought the federal government for tying up Outer Continental Shelf leasing, and for adding bureaucratic nightmares and costs with Endangered Species Act listings and critical habitat area designations. We’ve seen the U.S. Fish and Wildlife Service and the Environmental Protection Agency show reluctance to approve anything related to jobs in Alaska. “And then -- first, by delay, and now, through their decision -- the Corps of Engineers continues to set back our nation's chances for economic recovery, domestic energy production, and Alaskans' prospects for jobs. -
U.S. Sen. Lisa Murkowski, reacted Friday to the Obama administration’s denial of Conoco Phillips’ permit to construct a bridge to access what would have been the first oil and gas lease in Alaska’s National Petroleum Reserve (NPRA), insisting the company instead use directional drilling for the development. For decades, those who oppose developing ANWR or Alaska’s offshore fields have continually cited the 23 million-acre NPRA as the area where development should occur instead. If a producer cannot get across the Colville River, however, NPRA’s resources are effectively off-limits. “I am alarmed and amazed by this short-sighted decision, which totally ignores the economics of future energy development in all of northern Alaska,” Murkowski said. “Directional drilling can work in ANWR because the oil is concentrated in the northwest corner. That is an entirely different situation than the vast and widely distributed deposits in the NPRA, however, and the administration knows it.” While the one oil deposit that Conoco is trying to access may be within reach of directional drilling, the known deposits that are next in line for development are more than 10 miles away from existing infrastructure and far outside of the technological scope of extended reach drilling. The bridge and the related pipelines are essential for additional oil and gas development from the petroleum reserve. “If allowed to stand, this myopic decision will kill all future oil development from the nation’s largest designated petroleum reserve and probably stop all future natural gas production from the area as well,” Murkowski said. “The loss of energy potential is staggering for the nation and it would happen for absolutely no environmentally sound reason.” “America is dangerously reliant on foreign oil. Restricting access to even more of our domestic resources is simply unacceptable,” Murkowski said. Although Conoco Phillips may reapply for the permit, it is clear that they have lost another drilling season because of this regulatory overreach.
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House Speaker Mike Chenault, R-Nikiski, and House Resources Committee Co-Chair Craig Johnson, R-Anchorage, released the following statements Friday expressing their frustration and outrage at the U.S. Army Corps of Engineers decision to deny ConocoPhillips Alaska and Anadarko Petroleum a bridge permit to begin exploration on leases in the National Petroleum Reserve – Alaska, or NPR-A.
Thursday in Anchorage was another big day for discussion of taxes and economics 101. Steve Hites and the investment-repelling cruise ship tax for breakfast. Dan Fagan and a blue ribbon panel debate petroleum tax policy over lunch.
Opinion: Two Tax Events Today Underscore Need for Legislative Action THIS YEAR!
By
Dave Harbour
Yesterday's tax discussions kicked off with a 7:30 a.m. presentation at the Resource Development Council for Alaska (RDC) meeting by Steve Hites (NGP Photo), owner of the Skagway Streetcar Company. Hites could easily qualify for the 
national speakers' circuit with his humorous and sardonic touches on history, current events and public policy. (See speech text and video here.)
national speakers' circuit with his humorous and sardonic touches on history, current events and public policy. (See speech text and video here.)Hites recited the history of the Alaska cruise ship industry, posing a case for how the entire, modern cruise industry found its origin with Alaska’s early cruise pioneers like Stan McDonald, Chuck West of Westours and Fairbanks’ riverboat pioneer, Jim Binkley. He established how the dynamic and precedent-setting, Alaska cruise ship industry served as the foundation for the world’s modern cruise industry. (Author’s note: in the early 1970s I had the pleasure of managing the State’s tourism and economic development advertising programs at the direction of Connel Murray; at the same time, I volunteered to provide the marketing program for the Alaska Visitors Association and came to know and respect many of these famed pioneers. They would not be pleased to see how Alaska’s government has responded to their dedicated and historical work.)
There was a time, Hites recalled, when competing, foreign cruise destinations studied the Alaska model and made offers to cruise lines to make themselves more competitive. Now, he said, Alaska is among the most uncompetitive of cruise ship
destinations. “This summer there will be a 17% drop in cruise visitors to Alaska”, he said. “We have lost three big ships from the three largest cruise lines, representing the loss of 140,000 passengers in 2010.”“The largest number of independent travelers to Alaska first came here on a cruise ship,” he said, underlining the importance of cruise ship investors to Alaska’s overall economy. With recent cruise ship industry promotional budgets allocating as much a $75 million/year to Alaska, he said that lower 48 images of Alaska have shifted from icebergs and igloos to fishing, sightseeing and sports.
Hites linked the passage of a 2006 Cruise Ship Voters Initiative with unattainable environmental standards, unnecessary regulatory burdens and a high, punitive head tax that was costing Alaska the world class cruise ship advertising program, tens of millions in lost payroll, the loss of thousands of tourism jobs, not counting indirect losses. See additional links here.
There is no reason for the Legislature and Governor to not repeal the initiative this year, or at least the most onerous aspects of it. I take that back, sadly acknowledging that many Legislators know repeal is the right action while they place populism and reelection above a desire to do the right thing.
In the Q&A session I asked Hites what he thought of Legislators who used “the shortage of time” to justify taking no action on onerous cruise ship and oil industry tax and regulatory issues. Hites observed that they should do what was right for Alaska if it took working nights and weekends. “We have to hang together,” he said, “or we’ll all hang separately.”
The noon 'Town Meeting With Dan Fagan (NGP Photo with panelist, Carol Comeau) began with entertaining video clips, 'man in the street' interviews illustrating how little citizens know about current affairs and their government. (Paraphrased Question to lady, "Do you think the country's becoming more socialist? Paraphrased Answer, "No, I don't think people know HOW to socialize anymore.")
Fagan roamed the audience in an entertaining “town meeting” style, first challenging panelists with reactions to state taxing and spending policies…then probing the audience for questions.
to state taxing and spending policies…then probing the audience for questions. Talk show host, Mike Porcaro (NGP Photo-r), spoke of the obsession politicians have for creating studies. “We have created the 
field of Xerox Engineering,” he said. “We could create buildings with all the plans that have been completed here.”
field of Xerox Engineering,” he said. “We could create buildings with all the plans that have been completed here.”Former KTUU news anchor, John Tracy (NGP Photo-l), is now one of Alaska’s leading advertising executives. He observed that, “The pipeline is 1/3 full and Alaska has no plan,” going on to urge state leaders
to begin thinking and planning for the future. “I want to speak in favor of planning,” he said. “Companies plan. Our goal should be to assure that we are a part of the plans of investors! We need to determine whether or not we wish to play a role in the company investment plans.” Anchorage School Superintendent Carol Comeau (NGP Photo) agreed: “We need to create a long range fiscal plan.”
to begin thinking and planning for the future. “I want to speak in favor of planning,” he said. “Companies plan. Our goal should be to assure that we are a part of the plans of investors! We need to determine whether or not we wish to play a role in the company investment plans.” Anchorage School Superintendent Carol Comeau (NGP Photo) agreed: “We need to create a long range fiscal plan.”.jpg)
“The main problem,” cruise ship executive and former state legislator, Ralph Samuels, said, “is that Legislators think in election cycles…. We need more private sector investment.” Lieutenant Governor Craig Campbell (NGP Photo-r) seemed to be walking a fine line between defending the Administration’s.jpg)
policies and proclaiming his own, independent platform as the August primary election approaches. In response to 
Fagan’s repeated probing about whether the state’s production tax law should be modified to reduce the tax, Campbell said that government should tax only to fund necessary government expenses and not for the sake of taxing. While not specifying changes to be made, he observed that, “The State of Alaska taxes too much. Our government is too big,” he said. “We need to stop growing. We need to privatize more government operations.” Porcaro added that, “The way you make anything smaller is to give it less. This is the cure. Do we 
have the political leaders in place with the ability to do the job?”
policies and proclaiming his own, independent platform as the August primary election approaches. In response to Fagan’s repeated probing about whether the state’s production tax law should be modified to reduce the tax, Campbell said that government should tax only to fund necessary government expenses and not for the sake of taxing. While not specifying changes to be made, he observed that, “The State of Alaska taxes too much. Our government is too big,” he said. “We need to stop growing. We need to privatize more government operations.” Porcaro added that, “The way you make anything smaller is to give it less. This is the cure. Do we have the political leaders in place with the ability to do the job?”“We’re in a situation,” said Becky Hultberg (NGP Photo-l, with father, Rick Baldwin), wherein 85% of our state budget and 1/3 of our jobs come from one place. We want our politicians to come together and resolve these challenges together.” She agreed that the state’s oil and gas production tax was too high when the exploration activity begins slowing down.
Lobbyist Jim Lottsfeldt (NGP Photo-r) highlighted the difficulty in recruiting competent citizens to elective office. “We just keep electing career politicians,” he said. “We need to look beyond the political community for our leaders.” Samuels added that, “We need more employers who will support candidates.”
From the audience, former Cordova Mayor Margy Johnson (NGP Photo) noted that, “Before the oil industry, we in Alaska were cold and dark and wet.” Steve Hites, the morning speaker, added that while the cruise ship tax will, “…collect $50 million in taxes, Southeast Alaska will have $93 million worth of business losses.Alaska Support Industry Alliance Executive Director, Paul Laird (NGP Photo, with former legislator Norm Rokeberg) announced initiation of a
‘Faces of ACES’ information/advertising program and criticized legislators opposed to tax moderation by demonizing the businesses.
‘Faces of ACES’ information/advertising program and criticized legislators opposed to tax moderation by demonizing the businesses.One audience member said the oil industry ought to commit to invest any tax savings in Alaska. Your author responded that such an attitude was the problem in Juneau. Legislators are too concerned with what companies make and are not concerned enough about creating a sustainable and competitive investment climate.
In review, we conclude here that in this election year, there is insufficient, committed leadership in Alaska to make the investment climate more inviting. As a result, the state—over 85% dependent on oil income—will continue to experience a decline of income as its government budget increases. This trend toward calamity will not be felt by today’s generation of elected officials and they will successfully ‘kick the can’ down the trail for the next generation to confront.
Conclusion: The Legislature should amend a current bill or introduce a new one which 1) at the least, eliminated the oil production tax progressivity feature and lowered the net tax rate from 25%, and 2) repealed the cruise ship tax and burdensome environmental requirements or, at the least, reduced the head tax from $50 to $5 and eliminated all other burdens established by the cruise ship voters initiative. –dh * KTUU Coverage by Rhonda McBride. *Related: Alaska Dispatch by Rena Delbridge. Unless changes are made to Alaska's natural gas tax by May 1, the state could lose out on lots of revenue during the first 10 years of a large diameter natural gas pipeline's life -- and could lose crude oil revenue as well. * ADN by Elizabeth Bluemink. Conoco's Alaska profits looked more impressive last year because low natural gas prices in the Lower 48 and overseas pulled down profits in those places, said Brian Wenzel, Conoco Phillips' Alaska vice president for finance. * KTUU by Ted Land. The debate over Alaska's oil taxes continues in the state capital.
"I don't do vision statements very well." (Gas Pipeline Federal Coordinator) - We Comment on Legislators' Criticism of Alliance Effort to Save Alaska
1. ADN. On Tuesday, Sen. Lisa Murkowski asked Larry Persily (NGP Photo), the president's nominee to be federal coordinator 
of the Alaska gas line project, how he would apply his knowledge of oil and gas through a "federal lens." "I just deal in reality," Persily said. "I don't do vision statements very well." (Commentary: Good answer, Larry. Too many are speculating; too few are speaking with restraint based on facts. - dh)
2. ADN, by Sean Cockerham. (See our Alliance story.) State House Democrats today were assailing the industry ads calling for a rollback in state taxes on oil company profits. “The Alliance ads are dishonest,” said Anchorage Democratic Rep. Les Gara. “When jobs are up, it’s not OK to lie to Alaskans in seeking a tax break. When investment is up it’s not OK to lie to Alaskans to get a tax break. When profits are up, it’s not OK to lie to Alaskans to get a tax break.” Gara cited the recent Alaska Department of Revenue report saying that oil industry jobs and investment have risen in the state since Alaska increased its oil taxes in 2007. Conoco Phillips has taken $6 billion in profits from the state since the tax change, the Democrats said, describing it as the company's most profitable oil province in the world.
It's Not O.K. For Public Officials to Hurl Insults and Demonize Citizens
by
Dave Harbour
Certain Legislators are complaining that oil companies are making so much money and investing so much in Alaska that citizens have no right to petition their government for more moderate taxes. Let's look into it.
According to the Alaska Department of Labor, the number of Alaskan unemployed claimants in the oil and gas support sector is dramatically increasing--after decreasing until 2006: 2003-2,229, 2004-1,198, 2005-914, 2006-773, 2007-997, 2008-1,356, 2009-2,205. Support industry jobs are like the canary in the coal mine; beware when they begin falling.
Meanwhile, as the oil sector responsible for over 85% of the state general fund decreases along with the annual 4-6% decline in Trans Alaska Pipeline throughput, state government jobs and the state budget continue to increase without restraint. This trend is unsustainable.
One cannot ignore certain legislators' efforts to criticize our oil industry neighbors and investors for making money at the same time that the state--without taking a risk or investing money--is marching away from the Prudhoe Bay wellhead with truckloads of largely unearned, million dollar bills (i.e. Royalties are 'earned' in the sense that companies agree following a bidding process to pay the state, as owner of the resource, for the right to develop that resource. An oil investor would always hope that the taxes--as opposed to royalties--would remain stable for the life of the investment but that has never happened in post-pipeline Alaska history):
We are mindful that while oil company profits logically increase as the price of oil increases:
· companies also pay more state and federal income taxes, and
· companies pay more royalty dollars to Juneau, @ 12.5% of the wellhead value, and
· Even under the old, flat 15% gross severance (production) tax, as prices increased, the state share increased in precise response (Then came the infamous and Draconian progressivity feature added onto the Alaska Legislature's 2006 shift to a 25% net production tax. Furthermore, our progressivity model is probably the most severe in the world).
We also note that when the price of oil decreases the state and local governments still collect the same—not a lower--amount of oil and gas property taxes.
Alaska's investment climate more closely resembles that of a third world country than that of a freedom loving country. A major reason for this is the amount of taxation and the unpredictable rate of increase of taxation. Add those factors--along with an unfriendly government--to our economic liabilities of remoteness from the markets, harsh and expensive operating conditions and high transportation, procurement and labor costs.
Perhaps one can appreciate, now, why insulting and demonizing the major economic engine in Alaska--which receives better treatment elsewhere in the world--is not O.K.: it is unfair, stupid and suicidal in an increasingly competitive world. One might also appreciate why lowering the cost of investing in Alaska by some reasonable amount might be in the long term best interest of those who hope to have long term investors employing them and their children while paying for their roads, schools, public safety, social programs, power cost equalization, permanent fund and helpful government bureaucracies.
The tens of thousands of Alliance-related employees--and the thousands more dependent on their success--are concerned about their jobs and about the withering Alaska economy. They are right to speak out. Furthermore, they HAVE a right to speak out.
Legislators who are creating this cacophony of insults directed at the workers who give life to Alaska's economy and government, should be ashamed and should apologize.
Fagan Town Hall Meeting Tomorrow in Anchorage
Tomorrow at noon, Radio talk show Guru Dan Fagan (NGP Photo, with Dave Harbour) will host at the Sheraton Anchorage Hotel what he calls a, "wild, free for all town hall meeting featuring a panel of Alaska's best minds debating the future of our state." Register here.
Canada 'Sweats' TransCanada's Valdez Option - Alaska 'Sweats' No Gasline
main sponsors -- Calgary-based TransCanada Corp. and Irving, Texas-based Exxon-Mobil Corp. KTUU by Rhonda McBride. "This is all about the shippers," said Bud Fackrell (NGP Photo-right below), the Denali Pipeline president. Some argue that the biggest threat to Alaska's gas line is huge reserves of shale gas in the Lower 48. "North America is not sitting there waiting for Alaska Gas. Shale gas and unconventional gas is being developed," Fackrell said. ADN by Sean Cockerham. "Can anyone afford to spend $41 billion and find a way to pay for that investment when natural gas is so cheap?" said Senate President Gary Stevens (NGP Photo-left above), a Kodiak Republican. "I think we all have to question that and wonder how it's going. ... There's reason to be concerned, reason to be fearful of what the future is for Alaska." That was the .jpg){kind=spacer}
environment faced 
by TransCanada Vice President Tony Palmer (NGP Photo-left below) when he came to the state Capitol Monday and assured lawmakers that the project is right on track. The company on Friday filed its plan for an "open season" during which it hopes the oil companies will commit to be its customers and ship the North Slope natural gas they produce. (Commentary: If Alaska Legislators come to believe the prospects for North Slope gas are so dim, the argument for moderating oil taxes to allow for the return of a healthy oil exploration and production investment climate increases. Without a gas pipeline, and with an oil pipeline 2/3 empty the state will soon not have a pot to spit in. Is this depressing? Of course, and without corrective action it is the omen of a coming depression. What if the Denali and/or TransCanada gas pipeline projects produced positive open season results? Alaska's election year rejection of a fiscal certainty package for gas pipeline investors would still cause further delay of a project. Election year or not, this is the year to both moderate the oil and gas tax burden and to provide fiscal certainty regarding that burden to future investors. There is no defensible reason to delay. -dh)
Ruling Could Ruin Mackenzie Project - Adult Attitudes Should Overcome Special Interests on Both Sides of the Border
CBC. An environmental review panel's recommendation to impose noise limits on any Mackenzie Valley pipeline facilities built inside a bird sanctuary could scuttle the $16.2-billion project, its backers have told the National Energy Board. Calgary-based Imperial Oil — the leader of the consortium that wants to build the natural gas pipeline — said it and its partners might not be able to conform to the noise restrictions recommended by the panel for facilities built within the Kendall Island Bird Sanctuary.
Hill Times, by JEFF DAVIS, CYNTHIA MÜNSTER. Canada's leading environmentalists say they're losing interest in lobbying federal Environment Minister Jim Prentice (NGP Photo) because the government has locked itself into an environmental policy "bunker" and is not giving their ideas serious consideration. (Commentary: We compliment Minister Prentice as being a man of principle, courage and high intellect. -dh)
Calgary Herald by Shaun Polczer. In a potential blow to Alberta's petrochemical sector, the proposed Alaska pipeline could bypass the province depending on the outcome of an open season filed Friday by the main sponsors -- Calgary-based TransCanada Corp. and Irving, Texas-based Exxon-Mobil Corp. (Commentary:Canadian advocates worry that a project might bypass them. Alaska advocates worry and williwaw that a project might bypass them. Hopefully, the adults on both sides of the border will carry the day with the attitude that, "we should quit trying to manipulate the private sector and, rather, support its effort to attain the best economic projects." -dh)
