March 2011 Archives

Anchorage readers can attend a rally-luncheon today aimed at improvement of Alaska's investment climate.  Almost 1,000 citizens are already registered  Information here!  Scroll down to read our stories over the last few days.

Calgary Herald by Dave Cooper.  ...it is no secret the oilsands are a growing contributor to provincial coffers...CERI paints a picture of declining production and royalties from Alberta's natural gas industry for the rest of the decade, but sharply rising oilsands royalties....   (Alaska State Officials Take Note:  When Alberta increased its royalty take, revenue declined; when it reduced its royalty take, the investment climate improved and revenues increased.  -dh)

Commentary.  While the Alaska House of Representatives is poised to pass investment climate improvement legislation, Alaska's State Senate is like a doubting Thomas who can only learn from hard-won personal experience--a doubting Thomas who has no faith in the free market, who only believes in government controls.  -dh   *    ADN by Sean Cockerham.  Senate leaders said Tuesday the governor has failed to sell his plan to cut oil taxes by billions of dollars, and they're not interested in taking the gamble that it's going to lead to more drilling.  "It does seem to me like the administration has not done a particularly good job of defending its bill. They have not explained the repercussions of the bill. They have not been able to delineate specifically the advantages that we get if we do away with those taxes," said Senate President Gary Stevens (NGP Photo).

On the Federal Investment Climate Front:

The feds have placed a deadline of March 31 on commenting about its proposed 2012-2017 leasing program.  Readers may  click here to the Consumer Energy Alliance website for a 10 second, painless way to comment.   *     Our good reader, Richard Berkowitz, sent us this NYT link, by William Yardley.  Yet nothing seems to generate more legal work here than Alaska’s wildlife. The more federal protections for wildlife there are, the harder it can be for the state to develop natural resources. And while the Parnell administration has attacked the growth of the federal government, it has grown a bit itself in fighting back. It recently created a new position for a lawyer who deals specifically with issues involving the Endangered Species Act.

E&E Daily News: Dems, enviros critical of GOP energy proposal.  A sweeping House GOP proposal to accelerate oil and gas drilling in the Gulf of Mexico and open new areas for future leasing and development drew praise from industry groups but garnered early jeers from Democrats and environmental groups.   *     Los Angeles Times Blog: Gas prices spur move to open offshore drilling in California, Alaska, East Coast.  With high gas prices once again becoming a high-octane political issue, House Republicans on Tuesday launched a drive to open up more coastal areas to oil drilling, including a stretch off Southern California.   *     Commentary:  Our U.S. House of Representatives hero is Eastern Washington State's Doc Hastings (NGP Photo).  Hastings is Chairman of the House Natural Resources Committee and held a press conference yesterday to announce the introduction of 3 bills related to offshore energy.  

While Fairbanks' -- And All Of Alaska's -- Economy Approaches Catastrophe, Fairbanks Senator Joe Paskvan (NGP Photo),  Resists Efforts to Change Production Tax to Fill Pipeline Lifeline.  (-dh comment)

Petroleum News 

• Alan Baily and Kristen Nelson.  In February Alyeska Pipeline Service Co. President Tom Barrett told the Alaska House Resources Committee that the trans-Alaska oil pipeline system, known as TAPS, had come close to the brink of a major outage when forced into a winter shutdown following an oil leak in January at pump station one, at....
• On March 31 the Anchorage Economic Development Corp. will present its annual 10-year projection of potential resource extraction projects in Alaska. And, with various projects uncertain or on hold thanks to a variety of factors including taxation, environmental permitting, high development costs and...
• Alan Baily.  Senator Mark Begich (NGP Photo) proposes Arctic Coordinator.  (Comment.  We credit the good senator for trying to clean up after the leader of his party.  However, if the Obama Administration were doing its job, a "coordinator of regulators" would be unnecessary.  Since the Administration is not doing its job, pretext is given to establish a new bureaucracy which may, but likely will not, create more competence within the Federal regulatory structure.  One guesses that the new position -- like that of the gas pipeline Federal Coordinator -- will be extremely sensitive to direction from the President, whose Administration has created such energy policy chaos in the first place.  In short, if Obama wanted to stimulate more domestic production he could easily do so without manufacturing another bureaucracy over which he exercises control.  In truth, Obama is the Federal Coordinator and no shuffling of people or creation of new positions will change that raw fact.  -dh)

Calgary Herald, by David Finch.  In 1971, the federal government said we had plenty of petroleum.  By its estimates, Canada had a 392-year supply of gas and enough oil for 923 years. But the OPEC crisis of the 1970s proved otherwise.  Today's prognosticators are saying the price of natural gas will stay low forever, that we can use it instead of coal, and that the recently discovered supplies of shale gas will keep prices depressed indefinitely.

The Federal government is choking Alaska's economy by blocking access to what should be multiple-use as well as petroleum-designated lands.  The State government is strangling Alaska's investment climate with an illogical, suicidal tax regime.  It is the perfect, economic storm.  In recent weeks, we've urged readers to participate in federal hearings.  The Resource Development Council for Alaska (RDC) and dozens of other Alaska organizations and companies are urging Alaskans to visit their local Legislative Information Offices at 5 pm this afternoon and speak in support of HB110.  This bill will work to increase throughput in the Trans Alaska Pipeline and make Alaska more competitive. The Trans Alaska Pipeline (TAPS) is two-thirds empty and throughput is rapidly falling. This alarming trend must be stopped or the pipeline could  cease operations in just a few years!  Imagine Alaska's economy without the oil industry.  New taxes would likely be placed on every family and business in Alaska, from mining to fishing to tourism to logging just to pay for our government.  Think about the jobs we'd lose too--nearly 50% of our state's jobs are closely tied to the oil industry.  Your testimony WILL make an impact.  For points to include in your testimony, you can see RDC's most recent newsletter and talking points at:  http://akrdc.org/legislature/2011/messagepoints.pdf - http://akrdc.org/newsletters/2011/march.pdf (Commentary: RDC and DH)

Today, we hear that Anchorage's municipal utility will negotiate with Cook Inlet Region, Inc. to obtain electricity generated by a wind farm soon to take form on Fire Island, adjacent to the Anchorage International Airport. -dh  ADN.

Yesterday, the Anchorage Mayor's Energy Task Force  .... (more coming)

This week is the anniversary of Governor Jay Hammond's (NGP Photo) historic, non-partisan news conference in 1981 which produced a 'fair share' oil and gas tax plan.  It was a roughly one-third split of Prudhoe Bay's economic rent (i.e. royalty, severance tax, property tax, state and federal income tax) among the Federal Government (36%), Producers (34%) and State Government (30%).  The legislation made the oil income tax non-discriminatory, increased the severance tax and repealed the personal income tax on citizens--among other things.  While listeners will identify no love lost for producing companies, they will find it noteworthy that the press conference followed a decade of annual industry tax increases and preceeded roughly two decades of tax stability and massive, additional Alaska oil and gas investments.  Tax increases during the last decade have dramatically raised Alaska's 'take' from Prudhoe Bay at the expense of producers. This trend comes at a time when without more producer investment the Trans Alaska Pipeline will surely cease operations in a few years.  Based on testimony from the TAPS CEO (See last weekend story below), that shutdown could occur in a few years--absent increased oil production and pipeline throughput--or any day in response to mechanical problems.  In this webpage we have extensively reported on how the Federal government's hostile oil and gas policy has also contributed to a threatened shutdown of TAPS.   -dh

1.  Today: The ADN Op-Ed reflects the sense of urgency shared by most knowledgable Alaskans.   ADN Op-Ed by Tom Maloney.  ... In 2005, the state predicted TAPS production would average 832,000 barrels per day (bpd) in 2010. Actual production was 644,000, 22 percent less than forecast. In 2005, the state forecast 762,000 bpd in 2015. Yet current production is 630,000 bpd and falling.  Oil production is declining faster than expected. Could it be Alaskans have been trumped by ACES?  We cannot get new oil into the pipeline without new drilling. How much progress has Alaska made since ACES was enacted? The number of exploration wells drilled on the North Slope has fallen from 18 in 2007 to one this year, a reduction of 95 percent. Development drilling is also down. Throughput in TAPS declined by 18,000 bpd in 2008, 24,000 bpd in 2009, and 48,000 bpd in 2010. The sharp decline has raised concerns that current forecasts are too optimistic. 

2.  Yesterday:  Commentary.  The Alaska House Finance Committee yesterday heard the most impressive array of public policy testimony this writer has witnessed in four decades of "Legislature Watching" (More event photos below).  It was impressive for two reasons: 1) witnesses represented the overwhelming majority of Alaskans and 2) witnesses successfully communicated the looming economic reality we have covered for several years in this webpage: "Without decisive and immediate investment climate improvement Alaska's economy and prosperity are destined for an imminent 'crash'".  The day began with a turnout of two dozen citizens with "Pass HB 110" signs greeting legislators coming to work (Photo: Dennis Hebner, SteelFab).  Witnesses were 'invited' and all supported passage of legislation to improve Alaska's oil and gas investment climate.  One might conclude that other Alaskans might have testified against the legislation (HB 110).  However, one also notes that witnesses probably represented 90% of Alaska's population--unlike the 'hit and run' KTUU report which did not fairly communicate the true tone of the all-day event--providing unambiguous support for tax improvements.  Though the Committee heard many witnesses without questions, the questions asked could roughly be segmented into "soft ball" questions by the majority of Members favoring passage of HB 110 and "gotcha attempt" questions posed by a minority of Members appearing to oppose modification to Alaska's confiscatory severance regime.    

Our detailed story and photos are under construction and we plan to update them.   (KTUU Story)  -dh

Event Photos (more coming):