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      This is your public service 1-stop-shop for Alaskan and Canadian Arctic energy commentary, news, history, projects and people. We update it daily for you. It is the most timely and complete northern energy archive anywhere — used by media, academia, government and industry officials throughout the world. Northern Gas Pipelines may be the oldest Alaska blog; we invite readers to name others existing before 2001.  -dh

 

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Alaska Taxes

7-21-15 Presidential Candidate Kasich Wants High Oil Taxes To Cover Ohio Overspending

21 July 2015 7:16am

Calgary Herald by Alicjaa Siekierska.  Carbon & dust emissions from oil sands activity stimulates forest growth.

 “...a pillar in President Obama's energy legacy of failure.”  

-Congressman Rob  Bishop

 

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BP Hires Vets

 

Consumer Energy Alliance Relevant Energy Links

 


John Kasich, presidential candidate, ohio governor, severance tax, oil tax, predatory taxation, failure to communicate, tax and spend

Commentary: Today, 2-term Ohio Governor John Kasich announced his presidential bid (Photo credit: LA Times).  He began his term with a multi-billion dollar deficit and now enjoys a $2 billion surplus.  

But Kasich's embrace of Medicaid could put more pressure on the budget every year as federal support diminishes.

Aside from freedom itself, energy production is the basis of wealth and prosperity in America.

Kasich has recently reflected a propensity to offset tax decreases and spending with higher sales and oil & gas severance taxes.  (Here is our earlier report and commentary.)

Kasich has many admirable qualities: good family man, plain talking, faith, patriotic and more....  

Sarah Palin, Alaska governor, oil tax, Kasich, Photo by Dave HarbourBut some of our readers will detect in his presidential announcement a turn toward populism reminiscent of former Alaska Governor Sarah Palin's (NGP Photo) anti-industry rhetoric.  After all, big oil has fewer voters than everyone else who enjoys Kasich's income tax decrease and the beneficiaries of increased Medicare subsidies.

And his failed push for higher Ohio energy taxes could be a troubling characteristic of a new president, a propensity that could lead to a further weakening of America's job force, wealth, national security and future prosperity.  

-dh   


Weak energy production on federal land will serve as “a pillar in President Obama's energy legacy of failure,” the top Republican on the House Natural Resources Committee said.

Rep. Rob Bishop (R-Utah) slammed the Obama administration over a Friday report from the Energy Information Administration (EIA) that shows energy production on federal and Indian lands increasing just 0.2 percent in 2014. 

Bishop said the government should encourage more energy production on those lands, especially given the prospect of Iranian oil entering the market after sanctions on the country are lifted.

“The government's report on energy production on federal lands is astonishingly dismal,” he said in a statement. “The EIA found minuscule growth in oil and natural gas production on federal land — less than a percentage point — the same week that the President welcomes Iranian oil to the market with open arms.”

The EIA reported an overall decrease in energy production on federal land in 2014, primarily in natural gas offshore and in Wyoming. That decrease was offset by a 5.7 percent increase in fossil fuel production on Indian land and a 7 percent rise in oil production, primarily in the Gulf of Mexico, North Dakota and New Mexico.

The small increase in federal land production comes as energy extraction on private land is booming. According to an April Congressional Research Service report, production of oil (an 89 percent increase since 2010) and natural gas (37 percent increase) on private land has surged even as federal land production has fallen.  

“Producers operating on private and state lands are powering our energy economy, but we deserve better from the federal government,” Bishop said. 

“The Obama administration should be expanding access to federal lands and offshore waters and opening up American oil markets — not only for the sake of our economy but for the sake of national security.”


CEA's Energy News Links:

Washington Examiner: Fight over Atlantic drilling wells up *CEA Mention
The governors of all those states want offshore drilling. So, too, do most of their federal lawmakers. That's certainly true. A May poll by industry group Consumers Energy Alliance found 85 percent of the state supports offshore drilling, viewing it as a potential boon to the economy.
 
ShaleMag: Energy Day *CEA Mention 
With the need for students to be knowledgeable in science, technology, engineering and mathematics (STEM) more important than ever, the Consumer Energy Alliance (CEA) and Consumer Energy Education Foundation (CEEF) are hosting the fifth annual Energy Day on Saturday, October 17, from 11 a.m. to 4 p.m. at Sam Houston Park in downtown Houston.
 
Associated PressObama plans Alaska trip for climate change conference
The White House has confirmed that President Obama will travel to Alaska next month for a climate change meeting. White House spokeswoman Hallie Ruvin in a statement says the president on Aug. 31 will visit.
 
MSNBCWhy Shell had the worst week ever
This should have been one of Shell’s best weeks ever. Instead, it shaped up like the corporate equivalent of “The Hangover Part III.” And a happy ending is nowhere in sight.
 
Fuel FixShell-contracted drill ships begin final Arctic journey
Two Arctic drilling rigs have sailed away from Dutch Harbor, Alaska, beginning the final leg of their journey to the Shell’s drilling sites in the Chukchi Sea. The Noble Discoverer left Dutch Harbor on Thursday, and the Transocean Polar Pioneer followed suit on Friday. Both will take about a week to reach their destination: Shell’s Burger prospect in the Chukchi Sea.
 
Alaska Dispatch News: Cold receptions for Shell in Lower 48 ports mean opportunity for Alaska
A dynamic event is underway in Arctic Alaska today: one that, if successful, could have a profound effect on our state's economy. Shell Alaska is preparing to drill for oil this summer in Alaska's offshore continental shelf. To date, Shell has expended over $7 billion in gearing up for their effort. They anticipate substantially advancing their delineation effort by the end of this year's drilling season.
 
UPI: TransCanada uses legacy to explain touted benefits of Keystone XL
The shipment of the 1 billionth barrel of oil through the Keystone oil pipeline system shows commitment to U.S. energy security, TransCanada said.
 
Reuters: Canada provinces agree to strategy on pipelines, climate change
Canada's provinces reached a long-sought deal on Friday over an energy plan for the country, agreeing broadly to curb greenhouse gas emissions while also promoting the use of pipelines.
 
Washington ExaminerBills on tap from House, Senate energy panels
The energy committees of both chambers of Congress expect to offer draft energy bills before the August recess, committee leaders said. The bills are expected to cover oil and natural gas infrastructure expansion, energy efficiency and other concerns.
 
Fox News: EPA 'secret science' under the microscope as GOP lawmakers seek ban 
The Environmental Protection Agency for years has issued costly clean air rules based, in part, on two '90s-era studies linking air pollution with death. But, critics say, the same agency has stymied efforts to access the data behind them. The transparency concerns have Republican lawmakers on a new campaign to end the use of what they dub "secret science."
 
Roll Call: Iran deal may give Americans a break at the gas pump
The tentative deal designed to limit Iran’s nuclear program led to a quick — though modest — decline in oil prices, raising the possibility American drivers may see a prolonged break from high gasoline prices and creating an opening for Republican lawmakers to step up efforts to end a ban on exporting oil produced in the U.S.
 
Roll Call: API: Iran deal another signal for U.S. to end crude-exports ban
The congressional campaign against the ban on crude oil exports is gaining momentum after the U.S. and other countries reached a tentative nuclear deal with Iran, according to the American Petroleum Institute. "By lifting self-imposed sanctions, we can give U.S. producers access to global markets and protect our competitive edge," said Eric Wohlschlegel, a spokesman for API.
 
Fox News: As US energy output surges, Republicans lead effort to lift decades-old oil export ban
Congressional Republicans are leading a bipartisan effort to lift a decades-old ban on oil exports, arguing the recent surge in domestic-energy production and other factors have pushed the embargo past its prime.
 
CNN: Super-charge the solar power boom  
There's a solar power boom in America. But so far, not enough Americans are seeing the benefits of clean energy.
 
Associated Press: More unused oil, gas wells linger without permanent seals increasing risk
Five years after the Obama administration promised to move swiftly to permanently plug unused oil and gas wells in the Gulf of Mexico, even more shafts are lingering for longer periods with only temporary sealing, an investigation by The Associated Press shows.
 
Fuel Fix: Schlumberger CEO: New technology appetite growing amid oil downturn
The CEO of Schlumberger says American oil producers are purchasing a lot more new technology in this year’s oil downturn than in previous rough patches, with new tools making up almost a quarter of the company’s revenue. That’s because the oil bust happens to intersect with a change in what the oil companies want to get out of new technology.
 
The Oklahoman: Investors keep funding oil, natural gas development
A survey this month from the Federal Reserve of Kansas City found that energy companies reported that private equity was more available than it had been in recent months, while financing from banks and other sources were less available. “They’re still confident in the long-term prospects for the oil industry.
 
The Oklahoman: A quiet milestone that's worthy of celebrating
But it also makes sense to use more of the cleaner natural gas, along with policies that encourage the development of renewables, the conversion of more vehicles to compressed natural gas and the facilitation of natural gas exports. Most of these aren’t on the agenda of our garden-variety environmentalist. Let him tilt at his windmills. We’ll celebrate the gas milestone.
 
MIT Technology Review: Where is the global shale revolution?
The United States is not alone in having massive shale gas resources: shale formations rich in gas can be found all over the world. But so far no other country has come close to replicating the U.S. boom that has led to relatively cheap natural gas and helped curb yearly carbon dioxide emissions.
 
OilPrice.com: Can U.S. Nuclear Plants Operate For 80 Years?
The nuclear industry in the United States has been at a standstill for several decades. After an extraordinary wave of construction in the 1960s and 1970s, the nuclear industry ground to a halt. A confluence of events killed off new construction, including high interest rates, cost overruns, delays, and the Three Mile Island incident that scared the public and turned it against nuclear power.
 
The Hill: Court dismisses Oklahoma lawsuit against Obama climate rule
A federal judge on Friday dismissed Oklahoma’s second lawsuit against the Obama administration’s climate rule for power plants.
 
Houston Chronicle: Oil industry critical of planning offshore drilling rules
The oil industry is taking aim at an Obama administration plan to better safeguard offshore exploration, arguing the Deepwater Horizon-inspired proposal imposes costly and "ill-advised" mandates that could make some wells impossible to drill.
 
BloombergAnalysis: Saudi Arabia oilfield is a Bakken competitor
Oil production in the Bakken Shale costs nearly six times as much per barrel as the Ghawar oilfield in Saudi Arabia. This makes the Saudis a formidable competitor, although production is affected by the country's budget concerns, which seek a market price of at least $89 per barrel.
 
The Union: HF and the California drought
There are certain measures being considered in California that would ban fracking or at least keep the water from being put back into the water supply. Groups like the Natural Resource Defense Council and Environment California are working to get voters motivated and to put pressure on the state’s legislators. Get involved or even send a letter to your representative and urge them to deal with this fracking issue.
 
Imperial Valley News: Toward cheaper water treatment - HF matters
Hydraulic fracturing, or “fracking,” produces a lot of wastewater. Drilling one well requires millions of gallons of water that’s injected into the ground to loosen rocks and release oil. While some is reused, much of the produced water is discarded into deep injection wells, and clean water is purchased again and again.
 
The Denver Post: Stop the EPA's carbon power grab, Colorado
When the U.S. Supreme Court remanded the Environmental Protection Agency's (EPA) Mercury and Air Toxics Standards recently, it set a clear precedent that costs matter and that the EPA does not have a blank check on the wallets of energy consumers. The EPA's claim that the $10 billion pricetag was "irrelevant" failed to withstand judicial review.
 
Durango Herald: Gas overtakes coal
Energy companies in Southwest Colorado say hydraulic fracturing and looming carbon-pollution regulations are responsible for natural gas overtaking coal for the first time. The Energy Information Administration’s monthly report for April revealed this week that natural gas surpassed coal as the primary source of electrical power generation in the United States. The monumental moment marks the first time ever that natural gas has powered more electrical generation than coal.
 
Reuters: Okla. regulators expand scrutiny of disposal wells
The Oklahoma Corporation Commission has issued a directive expanding the state's earthquake "areas of interest" with regulations for 211 disposal wells. Well operators will need to show they are not performing water injections under the Arbuckle formation, while some will need to reduce the depth of their wells. The Oklahoma Oil and Gas Association said the directive would lead to positive results.
 
Observer ChronicleThe Texas town that banned HF (and lost)
Denton Law enforcement Sgt Scott Jenkins warns protesters at the web-site of a new fracking properly. When a Texas town voted to ban fracking within city limits, it was a shock to the oil-pleasant condition. But the reaction from the Texas legislature and power business has people questioning what electricity they have remaining. The hydraulic fracturing has started out yet again in Denton, and so also have the protests.
 
San Antonio-Express News: Permian's pancaked rock layers make it the U.S. oil patch king
In West Texas, the king of the U.S. oil fields is proving to be the safest investment for explorers.
 
Midland Reporter-Telegram: Permian Basin petroleum contraction continues
The Permian Basin petroleum industry continues to contract amid crude prices that are sharply lower than year-ago levels.
 
Big Ten NetworkNorthwestern researchers drill into HF
It’s been driving rapid job creation and an investment boom for a few years now in the Midwest. And experts say it has the potential to make the U.S. energy-independent within the next couple of decades. You and other researchers at Northwestern have spent several years now examining the shale gas production process and how it can be improved. And they recently shared a few ways in which the environmental effects can be mitigated in a study published in the June issue of the scientific journal ACS Sustainable Chemistry & Engineering.
 
The Courier JournalKentucky wins a battle, but War on Coal ongoing
Kentucky has won a battle in the War on Coal. Last month, the U.S. Supreme Court decision said the Environmental Protection Agency violated the Clean Air Act when it issued burdensome new regulations on power plant emissions.
 
The Columbus DispatchODNR sets rules for HF well pads
The Ohio Department of Natural Resources announced on Thursday that it is implementing new rules for the construction of horizontal well-pad sites. Horizontal well pads are used for fracking, when a well is drilled vertically but then goes horizontally underground, allowing for more than one well.
 
Athens MessengerAthens County and Ohio deserve better HF regulation
And guess which of Ohio’s 88 counties is going to be getting the most — Athens County. This is made possible by the opening of an injection well at Torch by S&H Partners. It will more than double the amount of wastewater brought into Athens County to something in excess of 6 million gallons a year.
 
Pennsylvania Business Daily: Lawmakers call on Wolf to end pursuit of higher taxes
State Reps. Jeff Wheeland (R-Dist. 83) and Garth Everett (R-Dist. 84) vehemently called on Gov. Wolf to end his quest for higher taxes and cooperate with legislators to create a realistic budget.
 
Tribune-Review: Public being misled on projected use of shale tax funds, critic of Gov. Wolf argues
The Wolf administration and its allies are misleading the public by implying a proposed severance tax on natural gas would exclusively fund education, the president of an industry group said Friday.
 
Pittsburgh Post-Gazette: Put kids first, not gas companies
The venerable Pennsylvania Republican, portrayed so vividly in the movie “Lincoln” by Tommy Lee Jones, was a man ahead of his time. He helped establish tax-financed public education in our commonwealth — a massive expansion of government at a time when many believed government had no obligation to educate its citizenry.
 
Scranton Times-Tribune: House returns to budget impasse
The House returns to session Tuesday as the stalemate over the state budget starts to resemble trench warfare.
 
York Daily RecordRep. Gillespie: Natural gas impact fee stands to help York County
York County is in the process of receiving more than $420,000 in revenue from the collection of an impact fee on natural gas drilling activities in the Marcellus Shale. Pennsylvania's abundance of natural gas and the fees required by Act 13 of 2012 are the reasons we as a county stand to benefit, even though we are not part of the formation. The four-year total distributed to York County comes to more than $1.5 million.
 
Bradford EraBill looks to Marcellus Shale drilling for economic boost
Looking to parlay the Marcellus Shale drilling boom into even greater economic gains, one state representative has announced new legislation promising a decade of tax breaks to Shale adjacent businesses willing to give Pennsylvania a try.
 
Times Herald-Record: HF studies show the fight must continue
Just because fracking is prohibited in New York is no reason to let your guard down. Those who want to keep their skills sharp should consider some news from California where protecting the water supply is an honest-to-goodness crisis. According to a study just conducted by the California Council on Science and Technology, fracking in the state consumes about 2.6 billion gallons of fresh water each year, an impressive amount at any time, a sure attention-getter in the fourth year of a drought with no end in sight.
 
Albany Bureau: E. Rochester lawyer challenges NY HF ban
A legal challenge to New York’s ban on large-scale hydraulic fracturing has been hidden in plain site since May. East Rochester attorney David Morabito quietly filed a lawsuit two months ago against the state Department of Environmental Conservation, challenging the agency’s decision to prohibit him from fracking on land he owns in Allegany County.
 
Fox 8: Geologist: Samples show signs of shale in Walnut Cove
John Skvarla, the secretary of N.C. Commerce Department, pushed for more spending on shale-gas exploration during a state energy-panel meeting this week after state geologists said samples recently taken from Walnut Cove property indicated unconfirmed signs of shale gas, according to conservationists and commerce officials.
 
Valley News: Prehearing on Valley Green Natural Gas Proposal Slated for Concord
The New Hampshire Public Utilities Commission has set a prehearing conference for late this month to review a proposal to provide natural gas to customers in Hanover and Lebanon via a pipeline. If approved, the franchise petition before the Public Utilities Commission would grant Valley Green Natural Gas authority to provide regulated natural gas service in the two municipalities.

Categories:

7-20-15 BC LNG Moves Forward

20 July 2015 5:21am

Vancouver Sun by Dirk Meissner.  

Commentary:

Could the Alaska gas pipeline/LNG project's need for fiscal certainty be modeled after BC's attempt to provide a 25 year window of certainty for investors?

Alaska Governor Bill Walker, gas pipeline, LNG, ak-lng, oil gas taxes, aces, Photo by Dave HarbourAlaska Governor Bill Walker (NGP Photo) has pledged to seek a fiscal certainty for Alaska's gas.  But we have observed that since the major producers own both oil and gas facilities in the state, providing certainty for only the gas still leaves investors vulnerable to predatory taxation.

Unfortunately Alaska has a long history of increasing or enacting oil taxes over the years.  It has even demonstrated an unjustifiable greed in enacting RETROACTIVE oil tax increases.

Therefore, we believe that the only effective fiscal certainty that will provide a proper investment environment for a $45-65 billion Ak-LNG project will be creation of tax certainty for both the investors' oil and gas holdings -- and property.  -dh

A liquefied natural gas industry: the British Columbia government fought an election on it, launched an extraordinary summer legislative session and made financial concessions, but it still isn't enough for the companies that want even lower taxes and have expressed concerns over the availability of workers.

The Liberal government's LNG dream is expected to move towards reality this week when a bill is adopted for a 25-year agreement on what could be B.C.'s first LNG plant.

B.C.'s politicians were recalled this month to debate and pass a single piece of legislation that aims to provide certainty to LNG investors and revenues to the province.

"I think there's more work to do in terms of making sure we are in fact globally competitive," said B.C. LNG Alliance president David Keane. "I think the government has more to do."

Pacific NorthWest LNG, a joint venture backed by Malaysian state-owned energy giant Petronas, plans to build a US$36-billion LNG plant at: http://www.vancouversun.com/business/pass+year+industry+wants+more/11226540/story.html#ixzz3gRB8smIT

Categories:

7-14-15 Alaska Gas Pipeline Commentary

14 July 2015 5:11am

Global LNG Markets: Implications for Alaska (Our Canadian readers can 'read between the lines'.)  A presentation provided by Doug Rotenberg, BPs Chief Commercial Advisor, June 24, 2015.  Note: "Demand uncertainty by certain, key Asian markets."

Alaska Gas Pipeline Commentary:

by

Dave Harbour

On the links list, lower right column, readers will find a link to Alaska's Economy, First National.  

Following that link, our readers will find this exchange among two commentors and your publisher:

  • First Commentor:
    I hope parents share this (1st National economic information) with their teen age children. Alaska's future needs to be a topic of conversation with all Alaskans.
     
  • Second Commentor:
    Yeah, well, if the oil companies want to warm the cockles of Alaskan hearts they need to build a gas pipeline that is big enough to deliver affordable gas in-state. We are sick of having all the resources and none of the benefits.

Dave Harbour Comment. 

Note: Since our goal is accuracy for our archives, we invite readers to send us any factual additions / corrections / comments that will improve accuracy of the statements made.  Please distinguish between statements of fact (which depend upon accuracy for credibility), and statements of opinion (which may vary from person to person and, in part, depend upon the logic employed for credibility.

We respectfully suggest that oil companies have not delayed the building of a gas pipeline.  Nor do they or any other private sector company make major project investments to warm the cockles of anyone's heart.  

Politics in the 1970s derailed the first viable Alaska North Slope gas project (i.e. Arctic Gas route), while the FPC derailed the El Paso LNG project and Canada favored the Alcan project. ​  

Economics in the 80s and 90s delayed the second one (i.e. Alcan route), and third one (i.e. various Alaska LNG Asian export projects).  

Alaska politics, with coming of the new Century, delayed the next serious attempt when economics improved (i.e. Murkowski's fiscal certainty effort rejected).  

Alaska politics (i.e. Governor Palin's ACES impact on economics and her 'must have' approach with AGIA) along with the new shale phenomenon and growing Asian demand  (i.e. making LNG, for the first time in history, more economically feasible than a Midwest pipeline) gave rise to the Ak-LNG project.  

The producers have gone all-out to tailor favorable economics for the current AK-LNG project but, again, politics threaten the economics.  

  • First, Alaskans demonstrated via the failed referendum attempt a year ago to repeal SB21 oil tax reform, that any investment in Alaska is always subject to a political/populist referendum that could kill otherwise favorable economics after the investment is made.  
  • Second, the current governor (i.e. Bill Walker) has signaled his priority support for a successful gas pipeline project -- a priority diminished by conflicting signals that higher oil taxes and a reduction in oil tax credits are another priority.  (Note that an unsustainable state operating budget increases pressure for higher taxes.  A Greece-like distaste for any austerity that could support gas pipeline economic feasibility and investor confidence pervades Alaska's current political environment.) 
  • Third, soon after taking office, The governor began to signal that his impatience with the Ak-LNG project was causing him to want to put full support behind an expanded AGDC project (i.e. threatening to create competing gas projects does not reflect fiscal certainty, logic, or wisdom on the part of Alaska's chief executive).  
  • Fourth, Walker has expressed support for some sort of 'fiscal certainty' regarding taxation of natural gas but is refusing to consider a way of providing fiscal certainty to oil investors.  Surely gas pipeline investors must be, on the one hand, encouraged by the idea of having a stable investment climate for gas.  If the oil taxation climate is unstable and even hostile, as now, politics once again threatens the pipeline dream becoming reality.  

Due diligence will certainly reveal to any gas investor that after investing billions to bury a refrigerated gas pipeline into the permafrost, a predatory government could once again undermine its gas investment on the one hand by engineering higher oil taxes on the other.

To provide true fiscal certainty that supports investments by companies in gas (and other major) projects, Alaska needs to provide some convincing evidence if not a constitutional guarantee that what is invested in good faith will not be expropriated later in bad faith.  

(Lastly, on the comment above, "...affordable gas in-state. We are sick of having all the resources and none of the benefits...," I'm almost embarrassed, as a 44-year resident, to respond; embarrassed in being aware that this conversation is bound to verify any negative opinions our 'outside' readers may have about the wealth and even the spoiled nature of some Alaskans.  But we are compelled to observe that Alaskans have gotten a lot for nothing during this incredibly blessed oil and gas era, including:

  • In return for massive hundreds of billions in state infrastructure and financial support for municipalities and villages, Alaskans pay no statewide income tax, property tax or sales tax.
  • Oil companies on the other hand pay for 90% of the state operating budget and their capital intensive work supports over a third of the entire economy.  They pay oil royalties, agreed upon when they bid on oil leases.  In addition, the legislature has the power -- and has in the past -- created, changed and increased oil taxes after investments have been made.  The government has even taxed Alaska's largest investors retroactively.  Oil companies pay a corporate income tax, a 'severance' or 'production' tax and a discriminatory oil and gas statewide 'property tax' that other companies or citizens do not have to pay.
  • As some Alaskans complain about not having subsidized natural gas, they are being paid annual dividends from a $50 billion 'Permanent Fund' financed 100% by oil industry taxes and royalties.
  • As fellow citizens throughout the country struggle for financial survival, Alaska has created the highest spending per capita state in the nation and has the highest number of non-profit organizations per capita in the nation; most supported in various direct and indirect ways by the oil industry.
  • As a small number of the incredibly rich Alaskans complain about not having enough 'free stuff' from oil investors, they might pause from time to time to consider:
    • Their state subsidized airports -- and thus their inter- and intra-state travel -- financed in large part by oil; and  
    • All of their couple hundred non-taxed rural villages provided with state subsidized, oil supported: schools, health facilities, sanitation, water, port, road, State Trooper, fire fighting and other services; and
    • A lavishly financed state university system, enabled by oil; and
    • hundreds of thousands of jobs supported directly and indirectly by oil companies.

Yes, I'm embarrassed to recount Alaska's riches before our thousands of readers in North America.  But, on the other hand, if the facts listed here can help other uninformed citizens to better understand the economy of their state and better support that economy, it has been an exercise well worthwhile.

Lastly, it is possible for Alaskans to not be embarrassed about the God-given natural resource wealth accorded it.  That can best be accomplished by considering what productive contributions we can make to fellow citizens, rather than what increased financial and social benefits we can lobby from government.   

Alaska now finds itself in a very low price oil environment, with a federal government doing everything possible to stop natural resource work on federal (and state) lands and with a state administration that seems both anxious to increase oil taxes and reluctant to trim spending.   

It is critical that Alaskans join together to support a stable investment climate for our largest investors, to create self-disciplined spending polices and engage in rhetoric that does not demonize the economic engine supporting a half century of unbelievable prosperity.  

Respectfully, dh

 

 

Dave Harbour, publisher of Northern Gas Pipelines, is a former Chairman of the Regulatory Commission of Alaska and a Commissioner Emeritus of the National Association of Regulatory Utility Commissioners (NARUC).  He served as NARUC's official representative to the Interstate Oil & Gas Compact Commission (IOGCC).  Harbour is past Chairman of the Alaska Council on Economic Education, former Chairman of the Anchorage Chamber of Commerce, and past President of the American Bald Eagle Foundation and the Alaska Press Club.  He is Chairman Emeritus of the Alaska Oil & Gas Congress.


Opinions or viewpoints expressed in this webpage or in our email alerts are solely those of the publisher and are not intended to reflect the opinion(s) of any affiliated company, person, employer or other organization who may, in fact, oppose the views stated herein.  -dh

 

Categories:

7-10-15 "Alaskan and Canadian Leaders: Investors Matter."

10 July 2015 10:24am

Could Saskatchewan become more oil investor friendly than Alberta?

Alaska Support Industry Alliance Analysis


Dave Harbour, Fraser InstituteOur Commentary

(Reference today's articles below)

Alaska and Canada Pay Attention: To investors, costs matter and costs include the cost of taxes and royalties and regulatory requirements and reneging on tax credits.  

Go ahead and demonize the goose that lays golden eggs.  Try to popularize the 'taking' of more private wealth for public redistribution using tired, old and untrue "fair share" arguments.  Sure, you'll rip off investors for a short period of time but you will deter future investment and injure the sustainability of natural resource industry jobs and government revenue and the prosperity of your children.  

Just be on notice that when you do that, and when investment dries up and when you try to wrongly blame the poor economy on the "big bad rich people" for your pathetic decisions, we'll be here to call your bluff, you terrible, intellectually dishonest public officials!  

Do you really want us to help our fellow citizens remember that it was you who sharpened your state's or your province's reputation as an unreliable investment destination where, sadly, "a deal is not a deal"

Investors matter.  -dh 


Alaska Public Media.  Are North Slope oil tax credits a good investment for the State of Alaska? That’s the question asked by a recent report from the Department of Revenue. The researchers answer: No, not compared to other options. But some experts say the paper doesn’t give the tax credits a fair shake.  (Go ahead Alaska, change the rules of he game, delay and veto tax credits.  See where that gets you!        -dh)  

Quotation From Alaska Support Industry Alliance Analysis:  Tax credits were created to encourage a desired behavior by industry. 

Fraser Institute.  If history is any indication, the NDP government’s review of Alberta's energy royalty regime could serve as a deterrent to new investment in that province’s oil and gas industry, finds a study released today by the Fraser Institute, an independent, non-partisan Canadian policy think-tank.

“While the Notley government is delivering on a campaign promise to review royalty rates paid by the province’s oil and gas producers, it must tread carefully. When the Ed Stelmach government launched its review in 2007, there was an immediate plunge in investor confidence,” said Kenneth P. Green, Fraser Institute senior director of energy and natural resources and author of Fallout from the 2007 Alberta Royalty Review Panel.  


 

Legislators, Governors and Premiers note: Saskatchewan and BC have learned from history and are seeking to attract investors. 

Alberta and Alaska, however, recently voted out leaders who attracted investment and are now considering a repetition of past policies.  Past policies  increased tax (Alaska) royalty (Alberta) costs while deflecting investment.  -dh


Petroleum News.  The British Columbia government of Premier Christy Clark wants to tie the hands of current and future administrations over 25-year periods by shielding projects against any changes to provincial taxes and regulations.

A 37-page project development agreement signed in May with Malaysia’s Petronas, operator of the Pacific NorthWest consortium, is designed to establish the “rules of the game” for Pacific NorthWest that will carry over to any other projects, Finance Minister Mike de Jong said.

He said the deal provides a “measure of stability.”

(Measures of stability are what all mega-project investors need in order to pass 'due diligence' hurdles.  Are you listening, Alaska and Alberta?  -dh)

Petroleum News by Gary Park.  No Canadian province has experienced longer rule over the past 60 years under the left-wing New Democratic Party than Saskatchewan and no province has been more averse to the NDP than Alberta.

The tide turned in 2007 when Saskatchewan elected Brad Wall as its premier and installed his conservative-minded Saskatchewan Party as its government.

That might have been a mild shock, but it was nothing compared with the May landslide election of the NDP in Alberta, ending 44 years of unbroken Conservative Party rule.

Nervous tremor in Alberta

Under Premier Rachel Notley, the new Alberta government has sent a nervous tremor through its mainstay oil and gas sector by pledging to conduct a review of royalties, possibly starting late this year.


 

Categories:

7-1-15 Alaska Governor Reneges On Oil Tax Credit

01 July 2015 12:30pm

Our Commentary

Bill Walker, Alaska, Governor, Alaska Oil Taxes, Tax Credits, Investment Climate, ACES, Photo by Dave HarbourADN by Pat Forgey.   Alaska Gov. Bill Walker (NGP Photo) announced Tuesday that he had signed state operating and capital budgets, approving $9.8 billion in spending sought by the Legislature but vetoing a possible $200 million worth of controversial oil tax credits.      ...

 Alaska Kevin Meyer, Senate President, ConocoPhillips, Oil Taxes, Tax Credits, Investment Climate, ACES, Photo by Dave Harbour"It is apparent the current oil and gas production tax credit system is unsustainable," Walker said in a letter Monday to Senate President Kevin Meyer, (NGP Photo), telling him of the veto. He signed the budgets Monday, but didn't publish the final documents or announce his actions until Tuesday afternoon.     ...

"I'm glad the governor took appropriate action" on the tax credits, said Rep. David Guttenberg, (NGP Photo), a member of the budget-writing House Finance Committee.

By limiting payment of credits, he said, oil companies will share the pain that Alaskans are facing due to budget cuts.   (As if the oil companies weren't already paying the lion's share of state taxes.   -dh)

 AlaskRepresentative David Guttenberg, Alaska State Legislature, House of Representatives, Farbanks, Oil Taxes, Tax Credits, Investment Climate, ACES, Photo by Dave Harbour

"It makes everybody involved in this budget crunch that we're dealing with," he said.   ....     


Our comment:

The Governor and his democrat allies would rather raise taxes and stop/delay agreed-upon credits than make meaningful spending cuts.  We have also seen signs that odd coalitions involving "moderate republicans" could support that effort.  

Alaskan producers (and explorers and refiners) have tried over the past year to maintain a positive, optimistic attitude.  However, they are mindful of Alaska's history with ACES; with retroactive taxation; with anti-oil voters' initiatives; with the governor's vow to not include oil in gas pipeline fiscal certainty policy; with "revenue enhancement" signals for increased oil taxes; and, with this week's credit veto action as they finalize corporate, CY 2016 investment decisions in a low oil price environment.  
 
It's looking more likely that legislative positions could become solidified much farther in advance of the next legislative session than in previous years.  Government spending supporters will be putting more and more constituent and financial pressure on lawmakers in the coming months. 
 
Rep. Guttenberg has already sounded the rallying cry (See ADN quote above).
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6-25-15 Uphill Road For An Alaska LNG Project

25 June 2015 8:18am

It's An Uphill Road For An Alaska LNG Project

Whether most Alaskans appreciate it or not, the best hope for a successful, Alaska LNG project is that Alaska's largest producers support it.  Today, we analyze why that so.

by

Dave Harbour

Alaskans have consistently supported higher taxes on Alaska's oil companies and higher spending on social services -- with some exceptions.  

The Alaska tax and spend model is not unlike the model employed nationally, in Washington D.C., except national leaders are capable of spending more than they take in by merely printing more money.  

Ultimately, that model taxes the public via inflation rather than directly, diminishing the value of the money as it lowers the value of individual savings and paychecks.  

The beauty of that model is that a future generation pays for the votes attracted by this generation of politicians.

As politicians increase tax levels, their overspending redistributes wealth to some individuals and to supporters able to maintain investments in real estate, land, capital projects and enterprises producing recurring revenue -- investments that benefit from inflation.

It can be and often is an intellectually dishonest, but effective formula for gathering reelection votes from some at the expense of others.  

Logically, that concept is unsustainable.  The concept is unsustainable because more and more taxation must end at some finite point and because ever higher government spending depends on that finite tax revenue.

As the unsustainable economy approaches, liberal lawmakers have historically found it quite tempting to unfairly demonize companies for not, "paying their fair share", and to embarrass fiscally responsible lawmakers for being, "uncaring and insensitive to the needs of...."

As we'll explain, the day of reckoning has now caught up with Alaska.  The state imposes high taxes, is depleting its remaining savings accounts while continuing its spending spree.  (No one can say Alaska's leaders were not warned!)

Background

Alaska's elected leaders tasted an addictive elixir of $900 million in bonus bids from the 1969 Prudhoe Bay Lease Sale.

In 1971 Congress approved the Alaska Native Claims Settlement Act, critical to the approval of a project to transport the immense Prudhoe Bay oil reserve to market. 

Congressional approval of the Trans Alaska Pipeline System (TAPS) in 1973, by the tie breaking vote of Vice President Spiro Agnew, coincided with mid eastern turmoil, including the Arab oil embargo and a later takeover of Iran's monarchy by Islamic extremists, still in power.

So, oil prices remained high, for a time.

Alaska's government spending and tax policies were mostly controlled by democrats and a few liberal republicans during the decades of the seventies and eighties, when the high oil prices magnified the value of high production, around 2 million barrels per day.  

Yes, the former 'pioneering state' had now become addicted to a growth in income and spending phenomenon that is probably unique in the history of American states.  (Other states, because of the blessing of advanced 'fracking technology' are encountering tax and spend challenges, too.)  We believe none have reached the level of tax and spend excesses adopted by Alaska -- though Alaska could serve as a role model for the need to avoid unsustainable tax and spend policies.

When oil prices began to fall in the mid-eighties, many oil field and support industry employees -- and those dependent upon them -- left the state.  However, production was still strong and the state pretty much continued its march toward becoming the most attractive welfare state in the nation.  We are not aware of any significant social program anywhere that is not replicated in Alaska, and, at a high per capita cost.  

From the 80s onward, Alaska has became the highest per capita taxing and spending state and with the highest number of not-for-profit organizations per capita in the U.S., a vast number of which came to depend on government largess -- 90% funded by oil taxes. 

So now, TAPS' North Slope crude oil throughput has diminished by about 3/4, even though companies are working hard to find and produce Arctic oil.  
 
Because of its spending policies, Alaska's government operating budget has become about 90% dependent on TAPS' North Slope throughput.
 
Unlike the 80s when throughput remained high during a low price period, Alaska is now experiencing low TAPS throughput and low prices for that throughput.
 
This double whammy, though it would not have been unexpected by prudent planners, has caused chaos in Alaska's political model that requires ever higher oil revenue for ever higher costs of government.  Unfortunately, such circumstances can lead to a phenomenon known as an, "Economic Death Spiral", wherein higher and higher taxes produce less and less revenue.  While Alaska has not reached that level of hopelessness, the fact that the condition exists is sobering incentive to make the best possible decisions, early enough.
 
The 48" TAPS oil pipeline traces a path from the Arctic, over the mountains of Alaska to the Valdez seaport, some 800 miles.  TAPS was built mostly above ground, and insulated against the cold, so it could move the otherwise viscous oil in a warm-fluid state...even during many sub-zero months.  (In contrast, a gas pipeline would be mostly buried in the cold ground with cold gas flowing through it.)
 
But the day surely approaches -- says the 'prudent planner' within us -- when the warm oil throughput is so little and maintenance costs are so high and winter temperatures are so cold, that production must cease.
 
Who would be the first to suffer?  Not the oil companies.  They would dismantle TAPS, revegetate the right of way and transfer exploration and production budgets to more attractive areas.  
 
Those suffering from a TAPS shutdown would be citizens dependent on programs funded by oil tax and royalty revenue.  Especially vulnerable would be Alaska Native villagers who value 'subsistence' lifestyles, lifestyles which have become tethered to the benefits of oil money: health clinics, schools, airports, ports, SUV's, snow machines, fuel subsidies and myriad social programs.
 
The foregoing demonstrates why Alaskans are so focused on the need to both find and produce more oil...but also to market Alaska's North Slope natural gas reserves.
 
From Oil to Gas
 
For decades Alaskans have lusted over a project that would monetize the huge natural gas reserves on the Alaska North Slope, at least 35 Trillion Cubic Feet (tcf).
 
In other places, we have documented the history of Alaska's gas projects, all of which have failed to prove economically feasible.
 
Today, Alaska's three major producers have committed to creating a feasible gas project but have maintained their position over decades that any multi billion dollar gas pipeline project must have fiscal certainty.
 
In other words, we could not imagine investors putting another 800 miles of pipe in Alaska, along with a tidewater LNG plant, with the risk that the state will then increase taxes on oil and/or gas.  This could dilute the value of the investment--perhaps even to the extent that politicians could render the investment infeasible after investment decisions were made based on current tax statutes.
 
The state Constitution requires that the taxing ability of the state remain unabridged and that no legislature can take action that binds a future legislature.  A Constitutional amendment is likely required in order for elected officials to be able to provide large project investors with appropriate evidence of fiscal certainty.
 
Just as the project led by Alaska's producers (AK-LNG), approaches final sanctioning decisions, the Governor and Legislature are faced with the challenge of obeying the Constitution while meeting the reasonable, fiscal certainty needs of major gas pipeline investors.  And, they must do so as dependent constituents cry out for the government to, "Feed me, feed me".
 
Recently, the Governor of Alaska presented a letter to producers stating his willingness to work on fiscal certainty for the gas project, but not for oil investments.  The letter also named other 'demands'.
 
This is troubling for a number of reasons.  One reason we are troubled, is the reality that the owners of the gas are also the owners of oil.  What's to prevent gas investors from spending $60 billion on an Alaska LNG project only to have a predatory legislature/governor swoop in for an increase of oil taxes?  The result of unpredictable oil tax increases could be equally damaging to a gas pipeline investor's bottom line.  In short, we must suggest to Alaska's governor that fiscal certainty for a gas pipeline investor not applied to that investor's Alaska oil and gas activity is -- in our opinion -- no fiscal certainty at all.
 
Meanwhile, Alaska's gas competes with everyone else's. 
 
Our mid-Atlantic energy analyst friend, who prefers to remain unnamed, warns us today that the LNG market is becoming increasingly competitive.  Many of the three dozen North American LNG projects investors are considering will simply not remain economically feasible for a number of reasons unique to those projects.  
 
How will Alaska fare with its competition when most competing projects have:
  • more moderate climate and terrain
  • more inexpensive logistical costs
  • better proximity to the markets
  • gas reserves closer to LNG tidewater facilities (i.e. no cost for an 800 mile Arctic/Sub Arctic pipeline)
  • lower labor costs
  • lower political risks 

 Conclusion

TODAY, the Vancouver Sun published this report that British Columbia Premier Christy Clark's government is recalling the legislature for a "rare summer session" to pass key legislation enabling a liquefied natural gas project.  
 
This would be BC's version of increased fiscal certainty.
 
Meanwhile, faced with this competition, Alaska continues to spend its depleted savings, allow run-away spending and make rather hostile demands on the oil/gas investors.  At the same time, the Governor and his Revenue Commissioner are hinting that oil tax increases are lurking behind the dark horizon.
 
Alaska's leaders from the Governor to every legislator better start accepting the fact that the large, North Slope oil and gas producers are Alaska's greatest economic friends.  They are the golden goose.  They are the human treasure which provides the money, technology and capability to explore for, produce and monetize Alaska's remotely located resources.  
 
Treating investors with courtesy, fiscal stability and good communication is the best way to both improve throughput of TAPS and entice a gas pipeline/LNG project investment.
 
The second best way to assure that prosperity is for elected leaders to do what they were elected to do: put Alaska's financial house in order.  Make the budget sustainable.  It may not be a pleasant job, but if today's crop of politicians can't do it they should make way for others who can do it.
 
Yes, the great, Alaska North Slope gas monetization project is on an uphill road.  Hazards abound as does competition and internal strife.  Great skill and determination are required to achieve the summit.
 
If Alaska's leaders can just rise to the occasion, summon the required diplomatic, communication and common sense attributes ... and recognize that their very best hope for success is a willing, capable and dedicated group of major producers ... great things can happen for all the participants.  
 
Otherwise, Alaska could find itself overtaken, outmaneuvered and outclassed by other oil and gas jurisdictions that have a greater ability to lead, cooperate, make wise decisions and act.
 
Will Alaskans snatch victory from the jaws of defeat, or will the gas monetization challenge be too great for this generation of leaders?
 
The AK-LNG project's window of opportunity seems still to be open.  For how long, we do not know.  We hope the state's elected leaders can muster the mighty effort required to accommodate the needs of investors to create the new gas project reality that Alaska's economy and citizens so desperately need.
 
 
 
 
 
_______________________________________
 

·        There are many global players trying to enter the market, including over 35 projects seeking ground-breaking in North America

·        Prices of the underlying commodities have slipped dramatically. This includes crude oil (Far Eastern LNG is linked to oil prices), natural gas for LNG, and land-based gas deliveries

·        Japanese nuclear power is re-emerging after being shut down, and China (among others) are seeking more nuclear plants

·        The rate of demand for power appears to be slowing, in keeping with slower global economic growth (see charts below)

A report CITI crossed our desk today, which underlines (and adds to the count of) growing pains being felt by the global LNG market. In particular, this raises serious questions about the ability of LNG exports from the US to have much impact on raising the price structure for domestic natural gas


 

Dave Harbour, publisher of Northern Gas Pipelines, is a former Chairman of the Regulatory Commission of Alaska and a Commissioner Emeritus of the National Association of Regulatory Utility Commissioners (NARUC).  He served as NARUC's official representative to the Interstate Oil & Gas Compact Commission (IOGCC).  Harbour is past Chairman of the Alaska Council on Economic Education, former Chairman of the Anchorage Chamber of Commerce, and past President of the American Bald Eagle Foundation and the Alaska Press Club.  He is Chairman Emeritus of the Alaska Oil & Gas Congress.


Opinions or viewpoints expressed in this webpage or in our email alerts are solely those of the publisher and in no way reflect the opinion(s) of any affiliated company, person, employer or other organization.

 

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