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Northern Gas Pipelines is your public service 1-stop-shop for Alaska and Canadian Arctic energy commentary, news, history, projects and people. It is informal and rich with new information, updated daily. Here is the most timely and complete Arctic gas pipeline and northern energy archive available 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 suggest others existing before 2001.

 

Alaska Taxes

11-25-14 Alaskanomics' Northern Energy Report (RDC)

25 November 2014 9:26am

RDC Alert! (Send us your ARCTIC OCS comment for our archives!)  Petroleum News reports what the Russians are doing in the OCS!


Reader Steve Borell provides this link: Germany overreacted by diminishing nuclear power in wake of the ​Fukushima ​disaster--and now is desperate for more coal fired power!  -dh
Calgary Herald by James Wood.  Alberta Premier Jim Prentice sees opportunity trumping obstacles.  -dh
Today's Consumer energy Alliance energy links.
Pebble Partnership's short term judicial victory; but the jury is still out on the long term result of EPA coordinating with environmental activists to pre - emptively block development projects in violation of Constitutional, due process rights.  -dh

Resource Development Council (RDC) Conference Part I, II

by Katie Bender (NGP Photo), Alaskanomics

​(Complete conference agenda with videos and presentations)

The Resource Development CouncilKatie Bender, Northrim, Alaskanomics, Alaska, RDC, Resource Development Council for Alaska, Photo by Dave Harbour hosted the 35th Annual Alaska Resource Conference last week. ... Alaskanomics ... highlight(s) the presentations from the conference.

The two-day event allows the resource industry to gather and look back at the past year, while planning for the coming year. There were many things to celebrate at this year’s conference, but participants and speakers were decidedly cautious about the State’s fiscal future.  

As is the tradition, the conference started out with an outlook for the coming year by Alaska Department of Labor Economist, Neal Fried. With the exception of 2009, the Alaska economy has been growing for the past 25 years. The growth has not always been by leaps and bounds, but it has been moving in the right direction. In 2014, it is predicted that there will only be about 900 new jobs in Alaska, which is only 0.6 percent. This is not as strong as many would hope and there will be a breakdown of the employment categories in January when the annual wrap up is published. Fried continued with brief updates of the various resource industries.

  • Timber has had very little change and is down with record lows
  • Mining is largely unchanged as well and has slowed and growth has flattened out
  • Fishing grew in both processing and harvesting this past year
  • Oil keeps hitting new highs, North Slope employment has doubled in the past decade
  • The Visitor Industry is up for the third year in a row

Alaska earnings have grown since a dip in the late 1990s and we currently have the second highest household income behind Maryland. The population grew in the past year, but the growth is starting to slow down.

Kara Moriarty of the Alaska Oil and Gas Association gave the update for the oil and gas industry. She shared the usual numbers that more than one third of all Alaska jobs are tied to the oil and gas industry and for every one industry job, 20 other jobs are generated through industry spending. The oil industry paid $6.9 billion in taxes and royalties and luckily the current tax policy generates more revenue at low prices than the old regime. This is very good since the price of oil has dipped below $80 a barrel. There has been a lot of new development on the North Slope and in Cook Inlet. Moriarty finished with the reminder that while we cannot control the price of oil or Alaska’s high cost environment, we could all be “Resource Proud”.

Stephanie Madsen of the At-Sea Processors Association shared that the fishing industry continues to grow and is currently the number one private sector employer in the state. The value of Alaska’s fisheries fluctuates because of the global market. The industry continues to be challenged by environmental non-governmental organizations (NGOs) calling for protected areas. Madsen continued by noting that Alaskan fisheries historically have been managed conservatively and are continually adapting to the varying definitions of sustainable.

Keith Coulter with Koncor Forest Projects gave the update for the timber industry, which by far has seen the largest decline of other resource industries. He noted that both fishing and forestry are sustainable and renewable and are not mutually exclusive. Rural communities that have lost timber are having a hard time replacing the jobs and income that were seen with the timber industry. Coulter shared that he felt that Federal Forests should be managed in the same way that private forests are and Alaska should resist efforts to adopt federal forest practices. He warned that changes to the Alaska forest practice should be informed by contemporary science. Coulter also urged the need for reform of federal overreach in the Tongass and elsewhere through fewer environmental regulations and restrictions.

Karen Matthias with the Council of Alaska Producers gave the update for the mining industry. She was proud to share that both Red Dog and Greens Creek Mines were celebrating their 25th anniversary of operation. She said the industry needed to do a better job at sharing success stories from around the state. An example is that Usibelli Mine has been in operation for more than 70 years and is mining responsibly. There are more than 5000 direct mining jobs in Alaska with an average annual wage of $100,000. Donlin Gold is in the permitting process and other mines could bring many new jobs to the state. Alaska is number one in the world for pure mineral potential and holds incredible potential in the mining industry. It was no surprise to conference attendees that permitting is consistently the biggest challenge in mining and is a very slow process. The outlook is bleak right now, but the industry can redouble efforts to fight against those trying to block responsible development and educate the public on the positive impact of mining so that things might improve.

Gideon Garcia with CIRI Alaska Tourism wrapped up the year in review with the tourism industry update. This past year, Alaska saw 1.96 million visitors, who spent $3.9 billion. The tourism industry adds 46,000 jobs for Alaskans. The projections for the 2015 season look good. Cruise traffic is predicted to have a 2.8 percent increase and overall visitor traffic is expected to jump 2-3 percent in 2015.

The year in review and 2015 outlook is a staple to the RDC conference and while presenters were proud to share accomplishments within their individual industries, it was obvious that the challenges of federal overreach, commodity prices, and regulations weighed heavy in the room.

Alaskanomics will continue to highlight the conference with Investment in Action by Trond-Erik Johansen of ConocoPhillips Alaska and Investing in Alaska’s Future with Janet Weiss of BP Exploration (Alaska).

 Posted by  at 04:10 PM in Alaska's EconomyFishing IndustryJobsMiningNatural ResourcesOil & GasPopulationTaxes,TimberTourism | Permalink  


RDC Part 2

The first day of the RDC conference continued with discussions from the heads of ConocoPhillips Alaska and BP Alaska about their investment in the North Slope. Both companies have had a busy year and are continuing the trend of investment in Alaska.

Trond-Erik Johansen of ConocoPhillips kicked things off, assuring the crowd that there are many good things happening in Alaska. There have been some challenging debates over the past few years, but ConocoPhillips will continue to move forward and will stay the course of investing on the North Slope. ConocoPhillips is very focused on converting resources that are in the ground into real oil in the Trans-Alaska Pipeline System (TAPS). The 2014 capital budget was up 50 percent from 2013 and is double the 2008-2012 average. The CD5 project, that was announced prior to SB21, is on schedule and on budget ($1 billion). The first oil from the project is estimated to flow at the end of 2015 with peak production at an estimated 16,000 BOPD in 2016.

The Alaska projects that were announced since SB21 hit the books are also still on track. Two new rigs were added at Kuparuk and are producing an additional 8,000 BOPD per rig. Each rig also added an additional 100 direct jobs for the state. Kuparuk production has flattened with the additional rigs. There are new projects in the Western North Slope/Alpine area that will help slow the production decline. A new Kuparuk drill site 2S (Shark Tooth) has been approved for construction. Peak workforce during construction will be 250+ jobs in 2015. The project has a budget of $500 million. An additional 8,000 BOPD is predicted to start in late 2015. Greater Moose’s Tooth is in the permitting stage. If permits are received by February 2015, the project will add 30,000 BOPD in 2017. Johansen wrapped up his presentation with a note about the Cook Inlet Assets and Natural Gas Sales. It is the only LNG plant to export from the US. Exports only occur in the summer because the gas is needed in Alaska during the cold, winter months.

Janet Weiss of BP Alaska shared Johansen’s optimism for the future of Alaska’s North Slope. As of November 18, BP and Hilcorp closed the deal that transferred a portion of BP’s North Slope assets to Hilcorp. The transfer allows BP to focus on the major fields and to remain competitive at Prudhoe Bay. BP will add a rig in 2015 and another in 2016, which will increase activity by 40 percent. They will also add an additional 25 miles of pipeline to bring more oil to TAPS in 2017. BP will also expand their current pads at Prudhoe and add a new drilling pad in the near future.

BP continues to invest not only in production, but also in Alaskans and education. As a company, BP has invested $28 billion in education and workforce programs in Alaska. They will continue their focus on growing the resource space that includes the people of Alaska and not just the capital.

Both ConocoPhillips and BP were cautiously optimistic about being able to slow the production decline on the North Slope. They are both working to move projects forward. Production is still far from the levels of the past, but both leaders felt that Alaska was moving in the right direction and that there are still plenty of resources to develop.

Governor Parnell stopped by the conference for a brief thank you to the resource industry. He highlighted the growth that has been seen during his time in office. Southcentral Alaska has new economic possibilities, especially along the Kenai Peninsula. The Governor thanked everyone in attendance for their support and their work to create more economic opportunities and growth. He concluded by saying how thankful he was for the opportunity to serve Alaska and its citizens and looked forward to getting back to work as a regular citizen.

More RDC highlights will be posted throughout the week.

 Posted by  at 11:52 AM in Alaska's EconomyJobsOil & Gas | Permalink


 

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11-14-14 Can Alaska Avoid A Perfect Economic Storm?

14 November 2014 3:59am

12:15 p.m. EST.  A few minutes ago the Keystone XL approval bill passed the U.S. House of Representatives.  It should be interesting to see what the outgoing Senate leader does with that bill.  See relevant story below.  -dh

Gretta Van Susteren, Senator Dan Sullivan, Alaska, Keystone, Energy, Dave Harbour PhotoCBC alerted us that the U.S. House of Representatives is scheduled to vote on the Keystone XL Pipeline today.  (Note: Watch Senator-elect Dan Sullivan's interview with Greta Van Susteren (NGP Photo) last night and, in particular, his remarks about Keystone and other energy issues. -dh)


Dianne Blumer, Commissioner, Labor, job projections, Alaska, SB 21, gas pipeline, LNG Project, Dave Harbour PhotoKatie Bender, publisher of Alaskanomics.com, reports today that, "...(Labor and Workforce Development) Department Commissioner Dianne Blumer (NGP Photo) highlights that Alaska is expected to gain more than 36,000 jobs by 2022. This will increase the state’s total job count to more than 370,000. In the projections, health care and mining jobs will have the largest increase with 25 percent and 24.8 percent, respectively.  

(Insert our commentary: "Can Alaska Avoid A Perfect Economic Storm?"  These pleasant job projections are based on history.  

More comment.  Alaska is in the midst of exhaustive vote counting exercises to determine the winner of the November 4 vote for governor.

We would alert NGP readers that Governor Parnell has played key roles nationally in, among other groups, the Interstate Oil & Gas Compact Commission (i.e. IOGCC) and the OCS Governors Coalition.

The IOGCC work, in particular, has placed him in close contact with Canadian provincial premiers whose interests sometimes coincide with Alaska's.

If a new governor should begin representing Alaska in a dramatically different way, national -- and even international -- energy policies will be affected.

We hope that if a close vote finally confirms that Alaska has a new governor, that person will be mindful of not only the big statewide responsibility, but the broader impact of his words and actions as well.

-dh

Over the past year and a half, the state's largest investors -- who directly and indirectly propel the majority of non-federal employment -- have based investment decisions on the passage of SB 21 oil tax reform and state support for gas pipeline efforts.  

We have it on good authority that before the election, companies were committed to billions of dollars of new investments in Alaska due to improved state policies.  

With a new administration, critical of both SB 21 and the manner in which the Parnell administration has pursued monetization of Alaska North Slope gas, there is significant risk that investment flows could reverse along with the optimistic job projections Commissioner Blumer has released.  

We also note that Alaska is already using depleting savings accounts to balance a state budget deficit that is based on the assumption of Alaska oil production priced at above $100/barrel.  In recent months, the price of oil has been dropping to new lows -- over 25% lower than the budget requires.   This is due to the prolific new streams of shale oil and gas production, to Middle Eastern oil production policies and to the more efficient use of energy around the world.  

Cutting state spending can reverse positive job projections very quickly.  Oil company spending reductions could combine with state cuts to produce a 'perfect economic storm' for Alaska along with many winters of discontent and out-migration rivaling what we experienced in the late 1980s.  

A new Administration had better approach these issues with a great deal more respect as it governs, than when it was engaged in political campaigning.  -dh)

The projected gain of just over 36,000 jobs by 2022 is a 10.8 percent growth rate for Alaska. This follows the projected population growth of 10 percent during the same period. The health care industry will see the largest increase of jobs due to the increasing age of Alaska residents. Between 2012 and 2022, the number of Alaskans who are 65 or older will increase 79 percent.

The mining industry, minus oil and gas, will be right behind health care in job growth. The expected increase of 24.8 percent will be due to higher-than-average mineral commodity prices and the expansion of existing mines. Many existing mines are expected to grow and there are multiple projects in various stages of permitting and planning. Because of the volatile nature of the mining industry, experts are not able to predict which projects will move forward and there could be significant changes to the forecast depending on mineral prices.

Not only are jobs expected to grow by 36,000 before 2022, there will also be 95,000 jobs that will need to be filled due to employees retiring or changing jobs. As noted earlier, the number of people over 65 will increase significantly in the next 8 years. In comparison, the number of people under 65 will only see a 3.6 percent increase. This will put high demand on healthcare jobs and related services as the population ages.

Alaska Economic Trends gives specifics in a variety of industries and occupations and expands on the forecast through 2022. The full issue can be viewed at http://labor.alaska.gov/trends/oct14.pdf    

Commentary: Note that in the Senator-Elect  Sullivan interview below the question arises as to whether the Keystone XL project will adversely affect marketing of ANS crude carried by the Trans Alaska Oil Pipeline.  In our opinion, the answer is, "no", for a number of reasons.  Crude oil, unlike natural gas/LNG, is a much more fungible, world commodity.  It's like asking, "If I poured a million barrels per day of water in the ocean at Key West, wouldn't that adversely affect coastal structures in Northwest Alaska?"  Also, Alaska's oil has its traditional markets which rely on the particular quality of Alaska crude, which is different than oil sands product from Alberta.  Lastly, if the Alberta oil is not marketed through the gulf coast, it will still find its way into world markets, by rail or pipeline, to Canada's East or West coast.  -dh

 

 


 

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10-25-14 What To Do About The Alaska Budget?

25 October 2014 8:42am

Katie Bender, Alaskanomics, Alaska State Budget, Northrim Bank, State Spending, oil price effect on state budgets, Dave Harbour PhotoAlaskanomics, by Katie Bender (NGP Photo).  There is a lot of discussion regarding the State’s budget and the crunch that is coming in the near future if things do not change. In the October 13, 2014 issue of the Bradners’ Alaska Economic Report, three trends are discussed that will cause an issue for the state after 2020.

It should be no surprise that the decline in oil production is of concern to many in Alaska. This is nothing new for the state, as the decline started in 1989. The past fiscal year saw the decline go from 6 percent to zero percent and there is hope that the new and increased activity on the North Slope will keep the decline flat for a few years. Scott Goldsmith, from UAA’s Institute of Social and Economic Research (ISER), predicts that production would have to increase 2 percent each year to make a dent in reducing the state deficit.  One year of flat production is good, but far from the needed increase make a difference for the state budget.  More here....

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10-18-14 Journal of Commerce's Andrew Jensen Fact Checks State Senator Bill Wielechowski

18 October 2014 4:46pm

Bill Wielechowski, Alaska State Senator, Union lawyer, Alaska Oil Taxes, SB 21, ACES, Andrew Jensen, Alaska Journal of Commerce, Dave Harbour PhotoJournal of Commerce, 8-7-14, by Andrew Jensen.  If there is one thing Anchorage Democrat Sen. Bill Wielechowski (NGP Photo) is good for, it is providing column material with his reactions to ConocoPhillips earnings reports.

This quarter is no different, and he definitely isn’t making the task any more difficult.

• “Yesterday ConocoPhillips announced $627 million in 2nd quarter profits from their Alaska operations or nearly $7 million per day from Alaska alone. On an hourly basis that equates to almost $300,000 in profits each and every hour.”

So? Here Wielechowski is simply trying to appeal to the dark impulse of envy in his audience. According to the report, the company paid an effective tax rate of 50.3 percent in Alaska for the quarter, so the government also made about $7 million per day and $300,000 per hour.

Unlike ConocoPhillips, however, it didn’t have to do anything to make that money other than sit back and collect the checks.  More...

(Note that while this article is about two months old, we provide it this weekend as an addition to our archives since Jensen did such a precise job of researching actual facts and correcting the myths some are trying to perpetuate.  -dh)

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9-29-14

29 September 2014 8:20am

ADN by Alex DeMaban.  Scott Hawkins (NGP Photo), founder Scott Hawkins, Prosperity Alaska, Ecnomist, Supply Chain, SB 21, Initiative Process, ballot propositionof Prosperity Alaska, believes the voting public should not decide complex tax questions or other measures that increase regulations or permitting of businesses.  

“Oil taxation is an incredibly technical, complex, arcane subject. It does not belong on the ballot,” said Hawkins, president of Advanced Supply Chain International in Anchorage, providing support to oil and gas, mining and other industries. “Our elected officials spent years and thousands of hours in hearings and hired experts and oil taxatiConon is not a suitable subject for the ballot.”

_______________________________________

Consumer Energy Alliance Energy Links for TODAY:

Omaha World-Herald: Willie Nelson, Neil Young lend their talents to Keystone XL fight*Michael Whatley Mentioned

Music legends Willie Nelson and Neil Young delivered Saturday on a promise to comfort opponents of the Keystone XL pipeline while also pleasing a few project supporters who ventured into a crowded Nebraska farm field.

*Unique Visitors Per Month:379,880

 

Norfolk Daily News: Keystone XL foes sing out, call on U.S. to stand up *Michael Whatley Mentioned

Music legends Willie Nelson and Neil Young delivered Saturday on a promise to comfort opponents of the Keystone XL pipeline while also pleasing a few project supporters who ventured into a crowded Nebraska farm field.

*Unique Visitors Per Month:43,158

 

Nebraska’s NET- NPR: Behind The Singing, Anti-Pipeline Stars Clash With Pipeline Promoters *Michael Whatley Quoted

On stage in front of an estimated 8,000 concertgoers, Neil Young was sweetly singing “Heart of Gold” one minute. But a short while before, he’d been harshly berating the industry that wants to build Keystone XL to pipe oil from the sands of Alberta, Canada to Texas.

 

Build KXL Now: Harper: KXL Approval is “Inevitable”

In a meeting in New York earlier this week, Canadian Prime Minister Harper assured attendees that U.S. approval of the Keystone XL Pipeline is unavoidable. Harper said that despite delays in the approval of the project, the need for the KXL hasn’t gone away.

 

The Florida Times-Union: JEA seeks collaboration amid debate over Obama pollution reduction plan*Kevin Doyle Quoted

JEA officials insist they are seeking collaboration — not political debate — over the Obama administration’s plan to reduce pollution from the nation’s power plants, a proposal that would in some cases require utilities to make big changes to the way they’ve done business for decades.

*Unique Visitors Per Month:468,775

 

Ocala Star Banner: Letters to the Editor for Sept. 27, 2014 *Kevin Doyle LTE

In response to the Star-Banner's Sept. 23rd editorial, “Florida's untapped potential,” we would like to offer an alternative perspective. The newspaper's editorial failed to consider the impact to consumers' pocketbooks. The editorial made no mention of the fact that the rates that consumers pay for electricity in Vermont are upwards of 50 percent more than they are in Florida.

*Unique Visitors Per Month:206,331

 

Herald-Tribune: Renewable, but at a cost *Kevin Doyle LTE

In response to the Herald-Tribune's Sept. 17 editorial ("Florida's untapped potential: Vermont city exposes Sunshine State's shortcomings") we would like to offer an alternative perspective.

*Unique Visitors Per Month:319,007

 

Argus Leader: Nelson, Young perform anti-pipeline concert

Roughly 8,000 people filled a northeast Nebraska farm Saturday to hear Willie Nelson and Neil Young perform at a concert organized by opponents of the proposed Keystone XL pipeline.

 

NRDC: Neil Young, Willie Nelson and 8,000 in Nebraska Stand Up to the Keystone XL Tar Sands Pipeline

Under a warm September sun, thousands spread out across the cornfield on the Tanderup family farm in Neligh, Nebraska. We sang along with Neil Young and Willie Nelson to honor the beautiful Nebraska farms and ranches, waters and traditional lands. Willie Nelson and Neil Young both have a long track record of standing up for the family farmers.

 

Nebraska Radio Network: Transportation Secretary sees no quick solution to rail car shortage

Transportation Secretary Anthony Foxx can’t promise any solution this fall to a rail car shortage threatening harvest season. Farmers need rail cars to move crops, but rail has been diverted to hauling oil from the Bakken oil fields in Montana and North Dakota.

 

USA Today: U.S. carbon emissions rise despite Obama climate plan

U.S. emissions of heat-trapping carbon dioxide have risen 6% in the last two years despite the Obama administration's efforts to curb global warming, federal data show.



CBS News: EPA approves power plant partial shut down proposal

Federal regulators have signed off on a settlement that calls for shutting down part of a coal-fired power plant in northwestern New Mexico that serves more than 2 million customers in the Southwest.

 

Tribune-Review: Pippy: Coal power plant regulations not 'realistic'

John Pippy summed up the attitude of the coal industry toward developing state and federal clean air standards by simply saying: “Oversight is good, overreach is bad.”

 

The Hill: The right option for offshore leasing

The U.S. government could learn important lessons on offshore leasing from financial markets and oil companies.

 

Wall Street Journal: Why Peak-Oil Predictions Haven't Come True

For decades, it has been a doomsday scenario looming large in the popular imagination: The world's oil production tops out and then starts an inexorable decline—sending costs soaring and forcing nations to lay down strict rationing programs and battle for shrinking reserves.

 

Washington Times: Hydraulic fracturing is the answer to global warming

The game-changer for the United States has been the shale oil and gas revolution over the past six years brought about through new smart drilling technologies. The United States is now the largest natural-gas producer in the world. We have replaced Russia as No. 1. As America has produced more natural gas, we have shifted away from coal. This, according to the Energy Information Administration, accounts for more than 60 percent of the carbon-dioxide emission reductions in the United States. Mr. Obama never mentioned that.

 

Associated Press: Gas drillers draw less water

The gas drilling industry in Pennsylvania is recycling more and more water and one river basin commission now reports drillers there are drawing less freshwater than in the past. Water use by the natural gas industry in the Susquehanna River Basin peaked at about 3.8 billion gallons in 2011 and that figure declined to about 3.1 billion gallons in 2013.

 

Bloomberg BNA: Chemical Makers Tell EPA Not to Mandate HF Fluid Disclosure

Chemical makers and energy companies have told the Environmental Protection Agency there is no need for it to require them to report information about the chemicals used for hydraulic fracturing fluids.

 

Financial Times: Rising shale output disrupts US gas prices

The new direction for the Rockies Express shows how pipeline companies are scrambling to keep up with breakthroughs in shale gas drilling. Unlike shale oil, which is booming in North Dakota and Texas, the strongest shale gas growth is in northeastern states.

 

Washington Post: Nation rushes to embrace natural gas

Virginia Gov. Terry McAuliffe’s attitude toward natural-gas “fracking” seems to depend on whether it occurs somewhere that would be politically inconvenient for him.

 

Mohave Valley Daily News: Judge refuses to halt HF

A federal judge has refused to block the release of oil and gas leases in Nevada that critics say will be used for hydraulic fracturing that could harm sage grouse and cause more environmental damage than the Bureau of Land Management admits.

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9-26-14 "Balderdash" Or Not, That Is The Question!

26 September 2014 11:19am

See This Week's Petroleum News Stories Here

Petroleum News Story by Alan Bailey (NGP Photo).  In a Sept. Alan Bailey, Petroleum News, HEA, CEA, MEA, ARTEC, Homer Electric, lobbying, grants, Dave Harbour Photo15 letter to state Rep. Doug Isaacson, Brad Janorschke, general manager of Homer Electric Association, said that his utility had quit the Alaska Railbelt Cooperative and Electric Co., or ARCTEC, in early 2013 because, rather than pursuing cost-saving projects that would jointly benefit ARCTEC’s member utilities, ARCTEC’s sole purpose seemed to have become lobbying for grant funding from the state Legislature. A desire of some ARCTEC members to hire a CEO for the organization had also factored into Homer Electric’s decision, Janorschke said.  *     *     *   Joe GriffithARCTEC CEO, told Petroleum News Sept. 23 that, while concerns about the cost of hiring of a CEO may well have motivated Homer Electric to leave the organization, Janorschke’s accusations that ARCTEC had become purely a lobbying organization were essentially “balderdash.”  

Observation: we may have more to say about this in a future editorial comment.  

Suffice to say, we normally default to having the 'cost causer be the cost payer.'  This means that -- in this case -- the rate payers receiving electric service have to pay for it.  

Alan Bailey's article is all about the accusation that ARTEC members are seeking to have others pay for the rate payer projects and benefits in their service areas.  

We tend to put significant credence on the Homer Electric decision and position while still leaving a little opening for valid counter arguments by the other ARTEC utilities.  We would observe that the word, "Balderdash", adds little credibility to construction of a valid counter argument.

We would ask each of the ARTEC members to answer several questions: "If your utility, under your leadership, needs an ARTEC group, and is not capable of properly serving your customers, why are you still in charge?"  

Another question might be, "If one of ARTEC's supposed values is having the member utilities coordinate with one another, why do you need a bureaucracy to communicate; why not do that as a matter of course, as good managers?"  

Lastly, if you would justify your own request for state subsidy by saying, "Well, Fairbanks is trying to get the state to subsidize its natural gas system," I would suggest that should also be the responsibility of very highly compensated utility managers, rate analysts, lawyers and employees in that service area which they have pledged to serve.  

Yes, the time honored concept of 'just and reasonable' rates arises from the foundational principle that the 'cost causer is the cost payer'.  

When we try to have the state give public money, we take that money 1) from the taxpayer, and/or 2) from the citizens elsewhere in the state whose highway, port, public safety and education projects may go begging.  

This makes ARTEC rate payers pay less for the service than it actually costs and thus creates the circumstance of 'an unjust and unreasonable' rate.  

Usually an 'unjust' rate is too high a rate; in this case, it means rate payers pay too little for their service which politicians allowed other parts of the state, or other taxpayers to subsidize.  

Lastly, being realistic, we acknowledge that politicians trade money and projects back and forth all the time, creating inequality of benefit wherever they go.  

For example, ARTEC has already received over $50 million in state money grants while the votes to get that money required trading money to other parts of the state.  Is that a 'just and reasonable' process?  Probably not.

Is it likely to see reform?  Not likely.       -dh

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