Alaska Taxes

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See Senator Cathy Giessel's Investment Climate Commentary

See Steve Forbes' Alaska Investment Climate Commentary

See CEA Energy News Links - Congressman Doc Hastings Says Obama Rhetoric Wrong

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Commentary by

Alex Gimarc

Earlier this week, Senator Hollis French (NGP Photo) gave a floor speech expressing his views on a repeal of the ACES tax on oil produced from North Slope oil fields.  In the speech, he demanded that the producers specifically provide a list of all projects that they are unable to do under the existing tax structure.  Along with that list, they are to provide how much each project will cost and how much oil it is intended to produce.   

Essentially, French proposes burying the producers under yet another requirement to provide a pile of paperwork detailing what they want to do an what they expect to get out of new projects.  After creating the paperwork, the producers are expected to show up, hat in hand, and await a ruling from on High.   (Cartoon by Chad Carpenter, for this webpage, 1-27-12)

Not to be outdone, Representative Les Gara (NGP Photo) is proposing legislation that will get the State into the business of industrial planning in the oil patch.  He has proposed the Alaska Oil Production Enhancement Act, which has provisions that require the producers to make new investments in the State in return for tax cuts.

Sen. Cathy Giessel (NGP Photo), R-Anchorage, yesterday addressed the State Senate about the just-released jobs study by Juneau-based McDowell group, which compares Alaska North Slope job numbers with production.

 

“The McDowell report confirms that, yes, employment numbers are up on the North Slope, but unlike in past decades, production per worker is way down,” Giessel said. “At peak production of more than 2 million barrels per day in the pipeline, the ratio of what each worker produced was 200,000 barrels per year. Now, the ratio has dropped to 27,000 barrels per worker per year. In other words, it takes nearly eight times as many workers to produce that 200,000 barrels of oil.

 

“The argument that all is well on the North Slope, based on employment numbers, is specious,” Giessel said. “Production is what brings wealth to state government. Production is declining by 7-8 percent per year. Our focus must be on increasing production. Increased production brings with it more job opportunities for Alaskans, in good-paying jobs.”

 

Senator Giessel also noted that, even though North Slope job numbers are up a modest number, other oil producing areas have added tens of thousands of jobs. She cited Alberta, where tar sands production is fueling a huge boom, has 60,000 openings.

 

“This is oil that would have filled the Keystone pipeline, if the Obama administration had not rejected that project,” Giessel said. “The pipeline itself would have generated tens of thousands of construction  and operating jobs.”

 

The study, requested by the Senate Labor and Commerce committee, was paid for by the Senate Finance committee, at a cost of $175,000. Find the McDowell report here:

 

http://www.legis.state.ak.us/basis/get_documents.asp?chamber=SL!C&session=27&bill=&date1=20120124&time2=1330

 

Listen to Sen. Giessel’s comments under Special Orders here:

 

http://gavelalaska.org/media/?media_id=SFLS120125A

Yesterday, at the Annual Anchorage Economic Development Corporation economic forecast luncheon, Forbes Magazine publisher, Steve Forbes (NGP Photo),  said, "The Alaska energy tax structure is (among) the worst in the world; I could only find one worse, North Korea."  We will provide a more detailed report of that meeting tomorrow.  -dh

Oil & Gas Journal: SOTU: Obama pledges to open more offshore acreage, promote gas **David Holt & CEA mentioned in article**

US President Barack Obama will direct his administration to open more than 75% of the nation’s potential offshore oil and gas resources for development, he said in his 2012 State of the Union address. “We have a supply of natural gas that can last America nearly 100 years, and my administration will do everything it can to safely develop this energy,” he added.

 

Big Government: Obama’s State of the Union Energy Claims Undercut by Record **Op-ed by David Holt**

Tuesday’s State of the Union address is noteworthy because it appears to signal a change in the Administration’s approach to US energy development. If so, this is welcome news. Truly embracing an “all of the above” energy strategy that allows for the robust development of our oil and natural gas resources in the immediate term would boost economic development, lessen our dependence on hostile oil regimes, and save American consumers from record-high fuel costs.

 

Observer-Reporter: Shale group encouraged by Obama mention **CEA mentioned in article**

The region's largest natural gas trade group has expressed optimism about President Obama's support of shale gas production he mentioned Tuesday night in his State of the Union Address. Prior to the president's address, Kathryn Klaber, president of the Southpointe-based Marcellus Shale Coalition, which has nearly 300 members from the natural gas drilling, production and supply chain, told reporters from the news and trade media she was pleased Obama was including natural gas as part of a strategy to make America energy independent.

Meanwhile, Congressman Doc Hastings (NGP Photo-r-above) says Obama's Rhetoric is not matched by action.

Politico.  North Dakota Public Service Commissioner Tony Clark (NGP Photo-r) is being nominated for an opening on FERC.  Sen. John Hoeven tells The Associated Press that President Barack Obama will nominate Clark later Monday.  Clark would have to be confirmed by the Senate to take the job. FERC has five members; the commission now has one opening that's reserved for a Republican.  The agency regulates interstate oil and gas pipelines, electric transmission lines and sales of natural gas and wholesale electric power.  Clark's term on the North Dakota commission ends this year, and he's not running for reelection. If he resigns before his North Dakota term ends, Gov. Jack Dalrymple (NGP Photo) will appoint his successor.  *   See Bismarck Tribune Story by Dale Wetzel.  President Barack Obama on Monday nominated North Dakota Public Service Commissioner Tony Clark for an opening on a federal regulatory board that oversees natural gas pipelines, electric transmission lines and the reliability of the nation's power grid.  (Comment:  Your author has had the pleasure of knowing Commissioner Tony Clark for a number of years.  He is highly respected by his colleagues and currently serves as President of the National Association of Regulatory Utility Commissioners (NARUC).  He represents a state with varied natural resources, including oil and gas production, expected to surpass Alaska's declining output within a few years, and is sensitive to Canadian-American energy relationships.  -dh)

 
ADN/PNA by Westly Loy.  The topic for the day is Point Thomson, a heavyweight legal struggle between the state and the oil giant for control of a lucrative oil and gas field on Alaska's North Slope.  The Alaska Supreme Court is ready to hear oral arguments from the two sides, with West High School in Anchorage as the venue. The justices occasionally take their proceedings out of the courtroom and into the community under an initiative called "Supreme Court Live."
 

Brad Keithley Op-Ed (NGP Photo-L).  In an interview published in this week’s Petroleum News (“Wielechowski remains critical of HB 110 “), Senator Bill Wielechowski (NGP Photo) argues that, under their state oil & gas leases, producers are required to undertake additional drilling when they can make a “reasonable profit.”     This repeats an argument I first heard the Senator make repeatedly at a debate earlier this month with Senator Cathy Giessel (NGP Photo) and which he then repeated in a subsequent, extended exchange on Facebook  following that debate.  (“The leases … say they must produce, drill, develop when they can make a reasonable profit.”).  The problem?  The leases which cover the vast majority of the existing North Slope fields don’t say what Senator Wielechowski says they do.

 
 
 
The Hill: Ben Geman CRS Report: Congress can require Keystone pipeline approval
The Jan. 20 CRS legal analysis notes that while the executive branch has historically handled the approval of border-crossing facilities, it doesn’t have to be that way. “[I]f Congress chose to assert its authority in the area of border crossing facilities, this would likely be considered within its Constitutionally enumerated authority to regulate foreign commerce,” the analysis states.
 
Calgary Herald: Rebecca Penty TransCanada considers new plans: Keystone pipeline may be built in stages in U.S. first
TransCanada Corp. is considering building U.S. portions of its Keystone XL pipeline and later seeking approval of an Alberta link to circumvent the Obama administration's rejection of the $7-billion project.
 
Bloomberg Businessweek: Jim Efstathiou Keystone XL pipeline seen moving ahead on alternative route
TransCanada Corp.’s $7 billion Keystone XL oil pipeline still will move ahead with an alternate route after President Barack Obama’s decision to deny a permit, investors, public officials and analysts say.
 
Toronto Sun: Simon Kent Harper will clear the decks on oil
Harper’s government recognizes venture capital follows opportunity and unless Canada can ensure the development and sale of product from the oil sands, it will be left behind.
 
Startribune.com: Canada's oil: What goes around
Soon after President Obama chose to delay a U.S. decision last year on a proposed Alberta-to-Texas oil pipeline called Keystone XL, Stephen Harper, Canada's prime minister, warned that his country would not be left at the altar.

Comment.  Yesterday SB 167 appeared as a new bill though it appears to be the same decoupling bill (SB305) that Senators Bert Stedman (L) & Joe Paskvan (NGP Photos) sent to the Governor in 2010, and was subsequently vetoed by the Governor.  It appears to do nothing to improve Alaska's investment climate by reducing oil taxes, reducing progressivity, or increasing credits (like HB110).  Some are predicting that it could morph into the Senate's own version of an oil tax bill this session (eventually).        -dh

Fairbanks News Miner by Jeff Richardson.  The Greater Fairbanks Chamber of Commerce renewed its push to reform the state’s oil tax system Tuesday, hosting a panel of business leaders to discuss the looming problems behind declining North Slope production. ... “The momentum is slowing,” Northrim Bank President Joe Beedle (NGP Photo) said. “As we look at our budgets and growth for the future, we’re concerned.”

ADN by Sean Cockerham.  Regulators have approved a deal for Chugach Electric Association to buy Fire Island wind power, a move that should allow Cook Inlet Region Inc. to go ahead and build a windmill farm on the island.

New York Times (10/11/11) reports: Vladimir V. Putin has shown an uncanny mastery of the politics and economics of oil. On his watch as president and prime minister, Russia ascended to the top of the global business, surpassing Saudi Arabia as the world’s largest oil producer… Yet in a series of meetings over the past two years, more or less, aides have confronted Mr. Putin with evidence that Russia’s pre-eminence in the world of oil will not last if the current imposition of exceptionally high taxes on oil companies is left in place over the next decade.

Real Clear Energy (10/10/11) reports: “The trendy belief that China is switching to renewables for its electricity generation is a myth.” 

The Seventh Annual Alaska Oil and Gas Congress convenes tomorrow in Anchorage (Agenda).  Your author and Platts' Director of News, John Kingston (NGP Photo), will co-chair the conference.  The agenda covers virtually all oil & gas issues at play today in Alaska and northern Canada.  We will bring you a few reports from the conference.  -dh

Petroleum News.  Norwegian oil major Statoil is still figuring out its continuing plans for Chukchi Sea exploration, determining the resources it needs and deciding on the timing of any exploration drilling, Lars Sunde, the head of Statoil Exploration Alaska's Anchorage office, said this month.

Petroleum News by Eric Lidji.  Repsol is planning to conduct one of the broadest single-season North Slope exploration campaigns in recent memory, according to recently filed documents.

Comment:  Both of these stories have to do about the possibility of or planning to perform

Here is last week's video presentation by the Commissioner of Natural Resources, Dan Sullivan (NGP Photo), on throughput status of the Trans Alaska Pipeline System (TAPS), Alaska's economic lifeline and one of America's critical sources of domestic production, jobs and national security.  -dh

exploratory drilling.  For Alaska citizens, the challenge remains:  Supporting government policy that leads to production that will fill Alaska's economic lifeline, the Trans Alaska oil pipeline.  Filling a now declining pipeline requires production of huge new reserves of oil.  The sources of huge new reserves rest beneath state and federal lands.  State tax policy currently encourages exploration but discourages production.  Federal policy currently discourages exploration without which there cannot be production.  Citizens are logically left with the conclusion that their future and the fortune of their children rests with an Alaska government addicted to double digit growth while its income dwindles and a federal government that continuously delays the granting of permits that would lead to production, jobs and economic recovery.  Yes, from a citizen perspective, the government looks broken at worst.  At best we watch the spectacle of one generation trying to transfer wealth and opportunity to itself from the next.  

P.S.  The Alaska Commissioner of Natural Resources' office announced sponsorship of an Alaska Strategic and Critical Minerals Summit.  That is important, well and good.  But if the oil pipeline is not sustained as discussed above, Alaska's infrastructure and ability to support the sort of resource development discussed below diminishes.  Also, if politicians kill energy production in Alaska, minerals investors have to be wondering two things: 1) "what sort of tax and regulatory changes can we expect from the unpredictable federal and state governments," and 2)  "if the big energy producers are discouraged from exploring and producing, will state politicians look to mining and other industries like tourism and commercial fishing to make up the difference to their coffers?"

 Our suggestion: evolve a smaller government and reduce costly regulations wherever possible--if we really care about passing on a sustainable economy to our children.  A second suggestion: all citizens could help determine the outcome of these issues by commenting on the federal and state energy issues noted below!  -dh

The state of Alaska and the University of Alaska Fairbanks (UAF) are sponsoring an Alaska Strategic and Critical Minerals Summit in Fairbanks on Sept. 30. This all-day event will focus on Alaska’s potential for exploration, development and processing of strategic minerals, which include rare-earth elements (REEs).

 Houston Chronicle: Offshore drilling chief to stay on the job.   The federal agency that oversees offshore drilling will be dismantled in two weeks, but the former prosecutor who now heads the office isn’t going anywhere — at least not right away. Michael Bromwich will serve as director of the new Bureau of Safety and Environmental Enforcement until a permanent director is selected, the Obama administration confirmed today. Tommy Beaudreau will take over as the head of the new Bureau of Ocean Energy Management. The two agencies — known as BSEE and BOEM — are set to replace the Bureau of Ocean Energy Management, Regulation and Enforcement on Oct. 1. Bromwich currently heads BOEMRE, and Beaudreau is a senior adviser there.

Also, the President's authority to use the Antiquities Act to unilaterally designate new National Monuments was the subject of a legislative hearing last week.

Issues begging citizen comment: 

NPG Readers: Please Comment on EPA O&G Emissions Regs  Before October 24, 2011 send comments re: unnecessary natural gas emissions rules that will further slow down America's economy and employment without significant benefit.  Federal Register notice with filing instructions

NPG Readers: Please Comment on ANWR.  Here's how. Comment Against Federal Government Lockup of ANWR’s 1002 Area Testify: Fairbanks 10-19-11, Anchorage 10-20-11 Written testimony due: 11-15-11 Governor Sean Parnell (NGP Photo) Rebukes Federal Government Petroleum News Alaska Story  (We are pleased to note House Joint Resolution 11 sponsored by by Charisse Millett (NGP Photo) in the House urging the Congress to not convert the 1002 area of ANWR to a status that prevents oil and gas development.   NGP Readers can refer to this resolution in their own comments and rely on the information conveyed by Representative Millett's resolution.  -dh)

October 14 ends the comment period for the Wishbone Hill Coal Permit Renewal and we urge readers to file electronic comments early.  Don't be technical if that's not your background; just say, "I support the Wishbone Hill Coal Permit Renewal".  Here's the state webpage and here is a very good letter penned by Alaska State Senator Cathy Giessel (NGP Photo).  We would be delighted to post other legislative and citizen comments on this and other comment period issues -- such as those coming up in the blocks above.  Write us here. We urge citizens and public officials to take just a few minutes to influence a process that will determine what kind of economy our children will inherit.  -dh

Last week the Alaska State Senate Labor and Commerce Committee held a hearing focused on the oil industry's local hire activities.  We compliment Aves Thompson (NGP Photo) Executive Director of the Alaska Trucking Association, for urging lawmakers to focus on sustaining the Alaska oil pipeline.  "My point is that, in our view, we need to focus on increasing production.  I think we all agree that Alaska’s highest priority is to put more oil in the pipeline. By focusing on that priority, we will increase oil production and we will increase jobs for Alaskans and others for that matter."  This testimony is representative of similar testimony given by many Alaskans including Deborah Brollini and of our commentary in these pages.