|Today we heard this tax reform 'thank you' commercial on a local radio station, sponsored by the Alaska Support Industry Alliance -- illustrating the many dimensions the controversy covers. The point about sustainable policy benefiting many generations -- not just this one -- is a cultural value we have stressed for years and we thank the Alliance for its message. -dh|
Status of Alaska In-State Gas Pipeline:
|Alaska Dispatch Op-Ed by Representative Les Gara (NGP Photo). No one who knows natural gas pipelines disagrees with this point: a line that delivers a vastly higher volume of gas does it more efficiently, for less cost. Alaska is in the middle of a shell game with a lot of potential, but not perfect, pipeline prospects. Some people say “just pick something.” Here’s why that’s not so easy, and picking the wrong project can harm the state with high natural gas prices.|
Status of Alaska Oil Tax Reform: (Here is the status of Alaska production compared with other states, including Texas and North Dakota.)
- Today's House Resources hearing video.
- Yesterday's House Finance Committee consideration of SB 21. Below is testimony prepared by Steve Pratt, Consumer Energy Alliance - Alaska.
- Yesterday we offered an "April Fools" update and commentary. Part of that commentary revealed that Alaska has virtually no savings -- aside from the Alaska Permanent Fund -- when one deducts outstanding liabilities. Here is a letter dated March 27 from Jay Dulany, President of the Retired Public Employees of Alaska. Among his many relevant points is this: " based on calculations of the Alaska Retirement Management Board (“ARMB”), the State’s annual appropriation to PERS/TRS will soon exceed $1 billion. Payments at this level, which will only continue to grow as the UL (i.e. unfunded liability) advances beyond its current $12 billion level, will simply not be sustainable, by neither the state nor by local government employers. A benefits crisis may not be right around the corner; an employer contributions crisis is." If Alaska is to fulfill its public employee obligations, the $12 billion liability should be paid off now while Alaska has the savings available. Otherwise, public employees can expect to have their annual income reduced by a judge someday, as retired employees in Detroit and Stockton can attest. This is because the state's fiscal house is in disorder, a fact which we believe the bond rating agencies will soon discover. We also believe the rating agencies have not competently assessed the gravity of Alaska's fiscal crisis for bond holders and future investors. Any decrease in Alaska's credit worthiness will result in higher rates paid on public debt, further exacerbating Alaska's pending, economic decline. We believe this challenge is a requirement for increased investment and oil tax reform. Keeping a predatory tax policy in place is a short term solution to a looming fiscal crisis. Reforming the oil production tax to create a more attractive investment climate is a long term solution. The short term model benefits this generation at the expense of the next while the long term approach can make the economy sustainable for this and future generations. -dh
- Here are results of a poll on this subject. Dittman Corp. surveyed 800 Alaskans last week (March 13-14), resulting in a 3.4-percent margin of error. All regions of the state were represented and balanced to the 2010 Census. The House traditionally commissions a poll to help inform members and the public on priority issues before the Legislature.
“Alaskans, generally, feel our economy is stable, and support many of the issues we have identified,” Alaska Speaker of the House Mike Chenault, R-Nikiski, said. “They agree with us that we need to modify our oil tax system to make us competitive, and build an in-state gasline for in-state use. Alaskans, also, want the chance to decide whether we amend our constitution to allow parents the right to choose where to send their kids to school. Dittman Research and staff have provided us with another top-shelf document we can add to our discussions over the course of the next three weeks. It’s a valuable and informative tool to help us understand where Alaskans stand on issues before the legislature.”
AK urges North Slope producers to grow LNG commitment - Gas Business Briefing - A pending bill would give the state-owned Alaska Gasline Development Corp, which is planning the project, more flexibility in doing engineering along with ...
Commentary: Just for Alaskans
Normally, our commentary is designed for consumption of Alaskans, Canadians and decision makers in the Lower 48--and our readers in other countries who are interested in how Alaskans and Canadians are confronting Northern energy challenges.
Today, we direct a comment to fellow Alaskans.
Most of us know that Alaska's economy hangs on by a thread. Elected officials talk about billions in various savings accounts in addition to the Alaska Permanent Fund. But the Public Employee and Teachers' Retirement fund liability is bigger than Detroit's at an amount approaching $15 billion. This doesn't include hundreds of billions of dollars of state and municipal bond indebtedness -- that also requires 24/7 gigantic pipeline gushing a reliable torrent of currency.
So we are really living from paycheck to paycheck with Alaska North Slope (ANS) oil paying for almost 95% of the state budget. That undiversified budget revenue, in turn, depends on the price of oil growing at rates exceeding $100/barrel in order to compensate for oil production declining at an annual rate of 5-7%. Meanwhile, no matter what the politicians say publicly, the state budget continues to creep higher. Even we optimists should view this situation realistically: as frightening, unsustainable and requiring immediate action.
What immediate action could rescue such foolish fiscal planning and such an unsustainable economy?
The near term step: stop digging the hole deeper and cut spending dramatically--say, by 5-7% annually to make up for oil production declines (Note, the cuts would have to be deeper if the price of oil begins to decline.) In doing so, lawmakers will have to decide if Alaska can continue to afford to be the most attractive magnet state in the nation to those coming North for entitlement benefits rather than benefits associated with free enterprise, self sufficiency and procreation of the pioneering spirit.
The medium term step: since Alaska's oil taxes are among the highest in the world, higher taxes are now proven to not be the answer. In fact, the experiment of exorbitant oil taxes has failed to sustain -- and even threatens -- Alaska's long term future.
Accordingly, this is now the time to view the future through a different lens: the lens of competition. In recent weeks, opponents of tax reform have argued:
April Fools.... The best of the April Fools emails we received today were one from a Canadian environmental organization describing a project to use injected dry ice to bind cracks in the Arctic icepack due to global warming. Another announced that the President of the United States had hired one of our readers (a distinguished, think tank energy executive) as a special advisor. With all the crazy happenings abounding everywhere, we give this warning so our readers will not to confuse trickster efforts to fool us today with normal, foolish policy initiatives. -dh
The Resource Development Council for Alaska's Deputy Director, Carl Portman (NGP Photo, at earlier hearing), reminds us that Governor Sean Parnell¹s oil production tax reform bill, SB 21 is now "front and center in the House", having passed the Senate by an 11-9 margin. The House Resources Committee will be taking public testimony on the bill Today, April 1 from 1:00 to 3:00 p.m. Testimony will be taken statewide and the preference is for people to testify in person at local Legislative Information Offices (LIO). Comments should be limited to two minutes. ... The State House Majority released its annual statewide survey last week that found Alaskans support modifying ACES and want the Legislature to stop studying the issue and act this session. The survey found that 56 percent believe ACES should be modified and 63 percent say its time for the Legislature to take action to stem the decline. For additional information ... see RDC's updated Action Alert at: http://www.akrdc.org/alerts/
Likewise, some oil lobbyists say the current tax reform being considered is too little, too late. This is a dangerous position to take since it begs the question, "OK, fine, what production will you guarantee for what level of tax reform?" That would stop them short since no lobbyist can predict what a board of directors will allocate to Alaska exploration or development years from now. It also ushers forth the specter of a state embracing concepts of blackmail or bribery depending on who is on the offering or accepting end of the transaction.
One adult position to take over these squabbles might simply be this:
If lawmakers took this less emotional and more logical approach, they wouldn't argue with lobbyists about what amount of tax relief was 'too little' or 'too much'. They could still collaborate on issues like how to make the tax and regulatory environment more clear and predictable.
The long term step the country could take to make Alaska more productive to itself and to the Nation at large, is to make Arctic Offshore, Arctic National Wildlife Refuge and National Petroleum Reserve Alaska more friendly to reasonable development and permitting processes more reliable and timely.
* * *
We referred to three steps above as solutions for Alaska's imminent fiscal crisis. Most will require several years to mature and bear fruit--even if the seeds of reform are planted this spring.
That leaves cost cutting as the only effective near-term tool available. Though tax reform, is critical to long term survival, it will require courageous lawmakers willing to run over constituent fires and through the gauntlet of entitlement program beneficiaries who see reform as an immediate threat to their subsidized lifestyles.
But even that challenge will be easy compared with the challenge of curing this year's budget and succeeding budgets in proportion to declining oil production and volitile oil prices.
One's view of human nature leads to a conclusion that politicians, by nature, will not be able to successfully confront these short and long term challenges.
One's optimistic nature aches for the courageous Alaskan leadership which believes that, "The future of our Children is more important than my reelection." While we see signs of such courage, we are not sure it exists as a majority favoring meaningful spending and taxing reform.
While we hope for courageous leaders, we know that Jesus, the Beowulfs and Medal of Honor recipients typically represent a minority and not a majority of spiritual or physical warriors. Furthermore, we have been told that hope can never be a wartime or political strategy.
But we also remember others who have shared our challenges with dignity and reason and had reason to be optimistic. Through the awful political struggles of early 17th Century England, we are thankful for Alexander Pope's message to us amid today's unrest, that, still, "Hope springs eternal in the human breast".
100 demonstrators protest Pacific Trails Pipeline - CBC.ca - The pipeline will run more than 450 kilometres through the BC Interior from Prince George to Kitimat, transporting liquefied natural gas to be sold to ...
Ewart: Pipelines proving to be industry's Achilles heel - Calgary Herald - By Stephen Ewart, Calgary Herald March 9, 2013. Tweet. Comment. ... Oilpatch historian David Finch calls pipelines the Achilles tendon of the oil and gas industry - critically important to movement and a complete nightmare if they rupture. From ...
Message from Governor Sean Parnell:
Harper Tanker Safety Plan Changes Nothing in Pipeline Debate - Huffington Post Canada. When Kinder Morgan bought the Trans Mountain pipeline in 2005 there were ...
Alaska Tax Forum tomorrow night in Anchorage sponsored by Political Science Association Alaska and Alaska College Republicans: "The Taxes of Our Future". Please come and support Alaska's/America's future leaders. Speakers include Dr. Scott Goldsmith (NGP Photo), Dr. Forrest Nabors, Anchorage Chamber of Commerce President Andrew Halcro and Northern Gas Pipelines publisher, Dave Harbour. (Program Details)
From Governor Sean Parnell's Office:
|Juneau Empire/AP, by Becky Bohrer. Both sides are ratcheting up the rhetoric on oil taxes ahead of this week’s expected vote in the Alaska Senate.|
Until next time,
Governor Sean Parnell (NGP Photo)
Please Put This Event On Your Calendar If You Will Be In Anchorage Next Wednesday! (Note: this informative presentation follows a recent oil tax debate sponsored by the Anchorage Chamber of Commerce. -dh)
Wednesday, March 20th
UAA Consortium Library 307 6-8PM
Program Introduction – Dave Harbour
Panel Introduction and Moderator- Andrew Halcro (NGP Photo)
Local and State Taxes- Dr. Scott Goldsmith (NGP Photo-R)
1. Income Oil and Gas Productivity
2. Oil and Gas Income
3. Oil and Gas Royalty
4. Oil and Gas Production (ACES)
The Oil tax Issues – Roger Marks (NGP Photo-Below)
1. The Oil tax issue
2. Perspectives from the State Legislature
Federal Taxes- Dr. Forest Nabors
1. Basic federal ax structure
2. Progressive tax vs. Flat tax
Summary: Andrew Halcro
Coordinated by Portia Watson (NGP Photo below, of College Republicans following Candidate Forum, 9-20-12; Watson upper right in red)
Sponsored by Alaska College Republicans
Comment: While the net profit production tax listed is impressive enough, it doesn't represent the whole story. Alaska also takes a 15% royalty as a product of Prudhoe Bay lease sale agreements, a discriminatory statewide property tax paid by no other industry in addition to a significant corporate income tax. If lawmakers truly want to make Alaska's oil tax regime compeititve, they should modify taxes and further discount them based on Alaska's uniquely high costs that include labor, logistics, climate, transportation and geological risks. -dh
Fairbanks News Miner. A bill to allow a major natural gas pipeline cross the eastern end of Denali National Park and Preserve passed the U.S. Senate Energy and Natural Resources Committee on Thursday. The Denali Park Improvement Act, sponsored by Sen. Lisa Murkowski, R-Alaska, also would allow construction of a small hydroelectric dam near Wonder Lake. The dam would be built by Doyon, Limited, Interior Alaska’s regional nonprofit Native corporation, to provide power to the Kantishna Roadhouse.
CBC News. Prime Minister Stephen Harper announced a final Northwest Territories devolution deal at the territory's legislature in Yellowknife Monday. ...The final agreement, as it stands, gives the Northwest Territories more control over its natural resources — it stands to get half the money collected from oil, minerals and diamonds. Based on last year's numbers, that would have added about $69 million to the territory's budget. Five of the territory's seven aboriginal groups signed a consensus document, including Nellie Cournoyea (NGP Photo), a former N.W.T. premier and the current chair of the Inuvialuit Regional Corporation.
Yesterday U.S. Sen. Lisa Murkowski (NGP Photo) said in response to the Department of the Interior’s assessment of Shell’s 2012 Arctic exploration program, “There’s a history of safe drilling in Alaska’s Arctic waters going back to the 1970s. While Shell’s exploratory drilling program maintained that record of safety, they did experience problems with transportation and in other areas that need to be addressed before Shell proceeds. However, I want to review the full report to ensure that stricter oversight is not code for prohibiting access to our resources.
The Beaufort and Chukchi seas are estimated to contain 27 billion barrels of oil and 132 trillion cubic feet of natural gas.