Alaska Dispatch by Alex DeMarban.
Unemployment in Anchorage has dropped to one of the lowest levels in years, thanks in large part to a "mini-boom" in Cook Inlet and steady growth in other key areas, according to an official with the Anchorage Economic Development Corp (AEDC).
Unemployment in Anchorage fell in May to the "crazy low" figure of 4.7 percent -- the lowest in five years, according to Bill Popp (NGP Photo), the group's president. ... "We are the envy of much of the nation," Popp said of Anchorage. ... The most noticeable growth came in the oil and gas industry, which added 460 jobs through May to grow 15 percent. ... "It's a combination of several factors aligning at same time," Popp said. "Cook Inlet is taking off in ways we haven't seen in decades. The rest of the growth in Anchorage employment (in the oil and gas sector) stems from North Slope development," including Exxon Mobil Corp.'s Point Thomson gas-cycling project east of the Prudhoe Bay oil field.
Pay Attention to RDC
Our Reaction To Yesterday's Annual Meeting of the Resource Development Council for Alaska (RDC).
Lest readers think, "Oh, the RDC is just another business organization", we would say: "Pay attention: this group represents the core of Alaska's economy!" The group's membership includes oil & gas, mining, airline, trucking, education, communications, food, forestry, beverage, fishing, retail, hospitality, tourism, Alaska Native enterprises and a variety of other industries. Together, these are the heart beat of Alaska's present and future economies.
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We'll return to the RDC later in this commentary but turn our attention now to the AEDC story (right). In it, we see that Anchorage's economy is doing wonderfully and seems 'healthy'. This is due partly to earlier state legislation which provided oil & gas exploration and production incentives in the populous, Cook Inlet Region of Alaska.
However, all humans know that the slip from 'healthy' to 'sick' can occur without warning, very quickly. And this can happen to cities and states just as it can happen to people.
Alaska's overall economy may seem healthy today. But this is not a diversified, sustainable powerhouse at the moment--as those with good jobs and low debt might be tempted to think.
Alaska's economy is actually fragile
This is because it leans precariously on the health of one industry: petroleum. And the political leaders of Alaska over the years have assured that the state is almost totally dependent on the health of the petroleum industry while illogically attacking the health of that industry. The attacks, most recently initiated during Governor Sarah Palin's (NGP Photo) administration, emerged through enactment of predatory, high taxes. In other words, politicians have discouraged the industry investments that support the lifestyles, lives and futures of all Alaskans.
Politicians have also created one of the biggest entitlement / welfare economies in the nation (i.e. big government).
Alaska's government is about 90% dependent on the remaining oil moving down the TransAlaska Pipeline System (TAPS) and the overall economy is more than 50% dependent on this oil production. Today, the TAPS dipstick is approaching the 3/4 empty mark. (Note: "Dipstick" term: credit to Tom Barratt.)
Federal politicians have further restricted Alaska's economic potential by creating gauntlents of regulatory obsticles blocking natural resource development, as we have documented ad nauseum in Northern Gas Pipelines over the years. The federal assault on Alaska also includes impeding activity on state, Native and other private lands--as well as federal land.
So we have a situation wherein the state government costs are steadily growing as the oil production to support government costs is steadily shrinking. Don't forget that local governments and the private economy are similarly dependent on the diminishing economic nourishment the TAPS umbilical cord is able to provide.
A few months ago, the Alaska legislature began to view this unsustainable situation so seriously that they adopted a tax reform designed to encourage more oil and gas investments. The conservative side of the aisle said, "Lower taxes will increase investment and production." The liberal side of the aisle said, "Lower tax revenue is not fair to Alaskans."
After the tax reform act passed, Governor Sean Parnell (NGP Photo) signed it.
Soon after, liberal coalitions began promoting a voters' referendum to repeal the tax reform act. We note that the effort is headed by Pat Lavin, "...who works on climate change and energy issues in the Anchorage, Alaska office of the National Wildlife Federation". Taxing the oil industry out of Alaska (if not the Nation) would obviously be quite an attractive vision for the several dozen enviro-extremist groups that have established offices throughout Alaska. A number of free-market related organizations are opposing repeal of tax reform.
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Yesterday, we witnessed two presentations relevant to the issue of Alaska's economic future--at the RDC annual meeting in Anchorage. RDC presented the CEOs of a large ANS oil and gas producer and of a large, national consumer energy organization to a room filled with a thousand interested citizens, the Governor, Speaker of the Alaska House of Representatives and a huge assortment of other Alaska business and governmental decision makers.
BP Exploration (Alaska), Inc. President Janet Weiss (NGP Photo), reported that tax reform had created a more attractive investment climate. She said that reforming oil taxes improved the chances for an Alaska LNG (i.e. liquefied natural gas) export project since oil production is critical to gas production. She then enumerated projects planned and occurring as a result of tax reform efforts. (View Weiss' entire presentation here.)
David Holt (NGP Photo), Consumer Energy Alliance's president (NGP Photo), discussed his theme that the path to American energy independence (i.e. possible by 2030) flows through Alaska. He demonstrated why the dramatic increase of domestic shale production does not diminish Alaska's potential. He also noted the importance of a federal government that viewed the natural resource industry more as a partner than an adversary. (View Holt's slides here and the video here.)
RDC President Phil Cochrane (NGP Photo) thanked Governor Sean Parnell, and a number of state legislators attending, for their support of tax reform legislation. He urged members to remain vigilant and involved in energy issues at both the state and federal levels.
Prior to the noon presentation, both keynote speakers met with Cochrane and the RDC board to answer their questions and, earlier, Holt provided a briefing on state and national consumer energy issues to the Regulatory Commission of Alaska at a scheduled public meeting.
A crowd like that, listening to leaders like that, attended by decision makers like that, gathered in support of issues like that ... all attests to the value of all citizens paying close attention to RDC. After all, what is said in such meetings and done as a result is designed to further our way of life by those with the resources to do it.
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(ENDNOTE: For citizens who do, "pay attention to the RDC", we at Northern Gas Pipelines will join you in supporting continuing tax/regulatory reform and improvement of Alaska's investment climate.
Always remember that accuracy is our goal and that we always seek your comments, additions or corrections.
We will support your efforts to thwart federal government overreach that seeks, along with its environmentally extreme allies, to kill Alaska's economy.
We want nothing extreme ourselves: we just advocate for a free market, reasonable policies, honesty, freedom itself.
We advocate that Alaska become a place where "A deal is a deal"; where "need" takes priority over "greed"; where the rule of law is unchallenged by political agendas.
We also stand behind citizens from whom great courage will be required to rise and tell an imperial, intimidating, aggressive and intolerant federal government, "You must return to your proper constitutional role."
We believe the greatest courage will come from Federal regulatory and law enforcement employees who see the waste, abuse and oppression occuring around them, and who then step forward to right the wrong. For those who so sacrifice, we shall reserve special respect, support and admiration.)
Alaska Gasline Development Corporation: Governor seeks qualified individuals to serve on the inaugural governing board of the Alaska Gasline Development Corporation, a state corporation tasked by the Alaska Legislature to advance a large-scale natural gas pipeline project. (Our earlier lead.)
This morning's headlines are for those who believe Alaska can have the highest oil taxes and still remain competitive in the world market. Wouldn't the evidence below be enough to prevent any critical thinker from signing a petition to repeal Alaskan oil tax reform? -dh
1. EIA estimates now that there may be 10 times more recoverable shale oil than projected in 2011.
2. Money Morning. Thanks to the technological innovation that is "fracking" shale gas, North America is dealing with a supply glut. That has weighed on natural gas prices in this part of the world, keeping them at multi-year lows, currently trading at $4 per million cubic feet (Mcf). In contrast, Asian spot LNG prices have held around $14 per Mcf, and South Korean demand could well push them to the $15 - $16 per Mcf range. Europeans are paying about $10-$11 per Mcf.
CBC. Alberta Premier Alison Redford brought her sales pitch for her province's oil to New Brunswick on Friday as she addressed the legislative assembly and the business community in Saint John.
Commentary: In an Anchorage Daily News Op-Ed this last weekend, columnist Tim Bradner (NGP Photo) provided a current shapshot of gas pipeline projects.
Clearly, the gasline momentum today flows from government investment and incentive whereas the projects of the past were privately rooted.
He concluded the column with a concern as to what would happen were Cook Inlet explorers to discover significant new gas reserves that could be less costly for consumers than LNG hauled down from the Alaska North Slope (ANS), or gas molecules transported nearly 800 miles from the ANS to Southcentral Alaska.
One answer is fairly obvious, any duplication of facilities, or facilities surplused by future events would involve costs to be borne by either the government or utility ratepayers.
While Bradner's review of the situation and questions are logical, we would suggest readers keep a focused eye on an even more important priority.
Trans Alaska Pipeline System (TAPS) throughput is the keystone supporting the entire economic superstructure of Alaska. If TAPS fails, the massive engine of government, fueled 90% by TAPS enabled revenue, would be in crisis as would the oil industry in general. The outmigration from Alaska would make the late 1980s seem blissful. With massive outmigration comes massive reduction in demand for energy. With much less energy required to run a state in economic ruin, the remaining Cook Inlet reserves could very well be enough to sustain remaining consumers. That, in turn, would strand all Alaska North Slope investment designed to move natural gas to consumers south of the Brooks range.
And. someone would have to pay at a time when the ability of government and ratepayers had reached a new low point.
So, what is the point of this observation. While it may be politically expedient for government to invest and try to manipulate all current gasline projects on the table, it would be wise to place top priority on TAPS throughput.
How does one put maximum emphasis on a healthy TAPS:
- Fight relentlessly against environmental activism and the Obama Administration's overreaching jurisdiction. From federal lands come long term hope for TAPS throughput (i.e. ANWR, OCS, NPR-A).
- Fight relentlessly against overtaxing and overregulating natural resource companies that provide the primary source of revenue and jobs to the state. The most immediate potential source of new TAPS throughput is from investment in existing ANS reservoirs.
If Alaskans aren't willing to undertake the above two efforts, they will receive as reward, a state devoid of means to make a living and a very real possibility the state will become a ward of the federal government.
Hopefully, with united effort, Alaskans will work together to improve federal and state investment climates. A strong, sustainable economy would be an important gift for our kids and would support the state's continuing prosperity.
That in turn would provide financial support for new sources of energy and energy projects.
Support Tax Reform Law!
From our friends at the Resource Development Council for Alaska (RDC).
"...there is currently a signature gathering referendum effort taking place to repeal SB21, the oil tax reform bill signed in to law by Governor Parnell.
In an effort to give the thoroughly vetted new tax structure time to work, the Alaska Support Industry Alliance is using its independent expenditure group, "We Are Alaska," to run a campaign educating Alaskans on what SB21 has accomplished and explaining why signing the referendum could be extremely harmful for the future of Alaska.
RDC and other business associations across the state support the new tax regime, the More Alaska Production Act (MAP Act), and have a high level of confidence that it will result in new investment, production, jobs, and revenues to fund education and a wide range of public services.
To learn more, visit the We Are Alaska website and be sure to like them on Facebook, as well as Twitter.
Take action now to prevent the repeal of Alaska Senate Bill 21--say our friends at Consumer Energy Alliance.
Alaska's contribution to the nation's energy supply has been in decline since the 1980's.
While the resource is there to stem the decline, and perhaps even reverse the trend, Alaska's investment climate has been unfriendly to attract the major investment dollars needed to do so.
After extensive review, analysis, and research, Governor Sean Parnell and the Alaska Legislature passed SB 21 to reform our tax system to make it more competitive. It will help will help invigorate Alaska's energy production and bring jobs and investment to our state.
Don't let a small minority take us two steps back when it comes to Alaskan jobs and competitiveness. Show your support for Senate Bill 21 and the Alaskan economy.
The Federal Government Has Broken Its Word Many Times As It Has Sapped Sovereignty From America's States (Commentary)
Earlier this week at an IOGCC (Interstate Oil and Gas Compact Commission) meeting in Alabama, Utah Representative Roger Barrus (NGP Photo) provided the nation's oil and gas conservation commissioners with a high level history lesson.
The founders and their successors made it clear that the states were to manage state resources.
He noted that on October 10, 1780 Congress passed a Resolution affirming that it will hold title to western lands only “to create new states” and to pay the national debt “and for no other use or purpose whatsoever”.
Country's founders and their successors supporting state control over state lands. Here is his PowerPoint presentation containing the useful history of references.
Today's dispatch comes via Shangri-La Hotel in Shanghai, China. -dh
Today's Energy Links From The Office of the Federal Coordinator:
- Analyst says Asia LNG trading hub unlikely to succeed
- India struggles with new pricing formula for natural gas
- BP suggests new natural gas pricing system to Indian government
- Japan-Korea LNG price for June deliveries falls to $14.85
- National oil companies not as dominant in LNG as in oil
- Rosneft, Marubeni agree to consider LNG plant
- Energy Department working through comments on LNG exports
- Canadian regulators adopt new pipeline safety rules
- Western Canadian oil not guaranteed to lower pump prices
CBC News. China's largest bank will be helphttp://www.northerngaspipelines.com/sites/all/modules/fckeditor/fckedito...); background-position: 0px -528px;" alt="" />ing to finance the proposed Kitimat refinery, which would process oil from the Alberta oilsands in B.C., instead of the raw bitumen being shipped overseas. B.C. media mogul David Black said he has signed a memorandum of understanding with the Industrial and Commercial Bank of China (ICBC) for the proposed refinery that is estimated to cost $25 billion.
Shooting Oneself In the Foot
Commentary by Dave Harbour
Certain left leaning Alaskans are intent on shooting Alaska's economy in the foot.
They are promoting a voters' referendum that would repeal the oil tax reform recently enacted. Just as the Legislature and Governor acted to improve the investment climate through oil tax reform, these people are acting to maintain the uncertainty of the investment climate--adversly affecting all Alaskans, particularly the future of the coming generations.
Readers can bet that this group will be composed of an odd assembly of socialists, environmental extremists, publicity seekers and ex-public officials who see the oil industry as enemies and not the strong supporters of Alaska's way of life.
One can envision investors gathered around a breakfast or boardroom table in coming days, concluding that Alaska is still too uncertain and risky to merit a major new financial commitment.
So, what should Alaskans do now? Do not sign the anti oil petition. Those who do sign it will be telling investors: "Stay out; we can do just fine without your money and commitment!"
Meanwhile, Alaska's economic lifeline, the Trans Alaska Pipeline, continues its steady throughput decline from 1/4 capacity toward zero. Only a change in Alaska's investment climate can produce a greater flow of investment. Repealing tax reform will drive a stake through the heart of investor confidence, perhaps for a very long time. (References: Fairbanks News Miner, SB 21 and the Petition to repeal it.) -dh