“Let’s Hang In There Together”
At the signing of the Declaration of Independence – in the face of political oppression -- founding father Benjamin Franklin urged his fellow countrymen to, “…all hang together, or assuredly we shall all hang separately.”
|See last week's report and photos: Alaska Mining Day!|
Today, the enemy of freedom and economic stability – as we have demonstrated – is a dedicated enviro-industrial-governmental cabal perhaps more menacing than King George’s foot guards, fusiliers and lancers.
Why is this so?
Today's Wall Street Journal Joins Us In Documenting The Lawless EPA. -dh
A basic precept of American democracy is that petitioners before their government receive a full and fair hearing. The Obama Environmental Protection Agency is in urgent need of that remedial civics lesson.
The EPA inspector general's office last week announced it will investigate the agency's February decision to commence a pre-emptive veto of the Pebble Mine project, a jobs-rich proposal to develop America's largest U.S. copper and gold mine in southwest Alaska. EPA Administrator Gina McCarthy says her decision to strike down Pebble before it received a hearing shouldn't worry other developers because Pebble is a "unique" threat. She needs to say this because the truth might chill billions of dollars in investment in the U.S.
The IG is looking into internal EPA documents that we've also obtained that show agency officials were maneuvering to kill Pebble more than five years ago, and that EPA's main concern was building a façade of science and procedure to justify it.
EPA's decision to initiate a veto process before Pebble had even received an Army Corps review is a disturbing first—and a flouting of the law.
Emails show that EPA biologist Phillip North, based in Alaska and working on Pebble, was in 2008 advocating that his agency bring down the 404c hammer. "The 404 program has a major role" with Pebble, wrote Mr. North to Patricia McGrath, EPA's regional mining coordinator for Alaska, in August 2008.
By early 2010 EPA staff made a Power Point presentation for former EPA Administrator Lisa Jackson about Pebble that lists a "pre-emptive" veto under "future options." Emails also show that Mr. North was actively engaging outside critics of Pebble. When the Bristol Bay Native Corp. filed a veto request in August 2010, Mr. North responded in an email to the group's lawyer: "Hi Peter, We have been discussing 404c quite a bit internally at all levels of EPA. The letter will certainly stoke the fire."
America’s current enemies of the free market, economic sustainability, capitalism and constitutional principles are, indeed, enemies from within. They are narrowly focused on redistributing political power from a fair and balanced, democratic vote and due process, to themselves.
Their weapons are federal government overreach, erosion of the Rule of Law, regulatory abuse and creating alternative business/industrial allies through economic seduction: transferring taxpayer wealth via subsidies to favored enterprises.
Sadly but truly, it is much easier to summon resources to fight a foreign belligerent than a domestic anarchist with networks of fellow citizen supporters.
Until recently, citizens have been more or less consumed with day-to-day pursuits: getting, spending, caring for families, reveling in recreation.
But to thinking Americans, crises in the mid-East, Asia and Europe along with a failing US economy and deteriorating national defense capability are creating a new focus on reality. The new reality: ideals upon which our founders created America’s great Petri dish of freedom are under attack—jeopardizing the entire experiment in freedom.
In Alaska and Northern Canada alike, environmental activists -- with billionaire / governmental / grass roots support -- seek every opportunity to work against, not with, the industries that enable the country to provide the amenities upon which everyone depends, including activists.
Focusing for the moment on Alaska, we hearken back to Franklin’s admonition and apply it to our current circumstances.
Alaska’s constitution and Congress’ statehood vote nearly 55 years ago rested on the principle that the 49th state could survive only through development of its natural resources.
That is, Alaska’s founders knew that all of Alaska’s resources were included in the bargain. Since 1959, however, Alaska’s ability to both survive and provide critical natural resource wealth to the country has been threatened by both overreaching federal and state statutory and regulatory policies. The first sign of a bureaucratic attack on our resource base occurred against Alaska’s forestry industry, made virtually extinct 30 years ago.
The most critical of current issues include both state and federal threats to the sustainability of Alaska’s economic lifeline, the Trans Alaska Pipeline System (TAPS). TAPS survival is critical since over 90% of the state’s operating budget and almost half of its economy depends on the Alaska North Slope oil production that it transports.
Alaska oil and gas supports the financial strength of Alaska – and a third of all jobs -- with TAPS oil responsible for the lion’s share. But the tourism and commercial and Sport Fishing industries provide thousands of jobs throughout urban and rural Alaska. Alaska non-profits per capita may be the most abundant in the country. And educational institutions employ tens of thousands directly and indirectly as do labor unions. All are dependent on oil production.
And yet: a majority of the legislature passed an exorbitant oil tax bill during the Palin administration which the Alaska legislature finally reformed a year ago. Oil investment is again increasing but another voters’ initiative to be decided this coming August proposes to dump the legislature's reform bill. Thankfully, many other industries are working to defeat the initiative.
Still, the fact that Alaska’s constitution gives life to the referendum process makes the prospect of investing in Alaska less attractive.
So what is to be done?
Keeping Alaska economically viable and TAPS providing economic wealth requires an outpouring of support from consumers as well as fellow producers of wealth. Indeed, to capture the long term loyalty and votes of the electorate requires the activism of leaders of education, labor, tourism, retail services, fishing and more.
We therefore urge our friends in the nonprofit, education, retail, labor and related industries to ask producing industries to talk to their boards of directors, their members. Interview producers for articles in nonprofit newsletters. Give them awards and accolades – not just for the many contributions of money they give directly to these activities!
Education is the key. A truly informed electorate will overcome the loud harangues, harassments and fundraising bases of activist groups which thrive on the economic discontent of the majority of citizens.
Energy is life. Trucks bring us virtually everything in our homes, schools and businesses—and trucks run on fossil fuel. Aircraft fly business, education, government, environmental, media and nonprofit leaders and employees here and elsewhere—but only when affordable energy is available. Ships bring Alaska toilet paper, food, manicure supplies, milk, fruit, frozen fish, fishing lures and winter clothes -- all dependent on fossil fuel, mines and mineral production and resource harvesting of one kind or another.
To ignore the reality is to separate ourselves into shadowy little silos of self interest.
If more and more citizens secret themselves into solitary silos, our ability to hang together as a state and nation weakens.
President Lincoln (NGP Photo), before the other great war within, spoke to us through the ages with the ageless wisdom that, “A house divided against itself cannot stand.” Then, after half of America dominated the other half, he observed that, “It has long been a grave question whether any government, not too strong for the liberties of its people, can be strong enough to maintain its own existence in great emergencies.”
In our time, as in Franklin’s, if we don’t hang in there together we shall certainly hang separately as dedicated enemies from within continue to – almost imperceptibly -- unravel the fabric of freedom so dearly won and held, little by little.
God save us from reaching a point of no return.
You likely read it here first:
Report Card For Legislators and Governor Released Today; Today...White House To Review oil export ban; REI gets $240k for Alaska LNG study; Pedro van Meurs (NPG Photo) seminar on World Fiscal Systems for Unconventional oil and gas, June 4-6; preliminary bid results, Cook Inlet and Alaska Peninsula oil and gas lease sale.
ADN by Pat Forgey. Exxon Mobil Corp. and its partners in the Alaska natural gas export pipeline began work on its summer field season this week.... Exxon's Steve Butt (NGP Photo), now reassigned to the AKLNG project, met Wednesday with the Alaska Gasline Development Corp., the state agency through which some of the state's interest in the project will be managed. (More....)
Today Is Alaska Mining Day!
(Before The Meeting; See After the Meeting Report)
Before the oil and gas industry's rise to prominence following Richfield Oil's 1957 Swanson River discovery and Atlantic Richfield's 1967-68 winter discovery of Prudhoe Bay, the mining industry was an economic backbone of the state.
Today's miners are providing new power to Alaska's economy and are celebrating their past this morning in downtown Anchorage.
The Alaska Miners Association and friends are celebrating Alaska Mining Day and the 75th Anniversary of Alaska Miners Association today with a breakfast program featuring: Senator Cathy Giessel (NGP Photo), sponsor of SB1, an Act establishing every May 10 as Alaska Mining Day; JP Tangen, AMA Director Emeritus, on Mining Law of 1872; Ed Fogels, DNR Deputy Commissioner, on the future of Alaska's mining industry; Dave Heatwole, a look back at 75 years of Alaska Miners Association. Deantha Crockett: will unveil AMA's new logo and later today that logo may be seen on a public service sponsor ad on this website.
GAS EXPORTS: Interest from Japan propels another Alaska LNG project (Wednesday, May 7, 2014)
Margaret Kriz Hobson, E&E reporter
A Japanese business consortium has secured Alaska support to study construction of a medium-scale liquid natural gas export terminal that would ship Alaska's Cook Inlet gas to energy-hungry Japan beginning in 2020. Resources Energy Inc. (REI), which represents Japanese businesses, utilities and government units, recently received $240,000 from the Alaska Industrial Development and Export Authority for a prefeasibility study on the proposed LNG export project. Under that agreement, the Japanese group will repay 75 percent of the cost of the study, which is expected to be completed by March 31, 2015.
Northern Miners Celebrate History and Prepare For Future
Last Thursday in Anchorage, Alaska’s mining community celebrated one of Alaska’s oldest wealth producing job sectors.
Jason Brune (NGP Photo), chapter chairman of the Alaska Miners Association (AMA) launched the business meeting breakfast with the admonition that, “’No On 1’ is one of our most important issues, because without a strong oil industry we don’t have a strong mining industry.” This referendum is referred to in next Monday’s column and is one of the many ties drawing the various industries together in Alaska to face economic opposition of various types. (We note that while almost all oilfield tools come from mined sources, all mines require energy to power vehicles and equipment. All alternative energy sources require both carbon fuels and mined minerals for manufacturing and operations.)
Brune introduced Alaska State Senator Cathy Giessel (NGP Photo) who sponsored SB 1 a year ago, creating Alaska Mining Day in the state. In the same year, Giessel introduced and the Governor signed into law, SB 2, authorizing Alaska’s full participation in the Interstate Mining Compact Commission, a sister group to the Interstate Oil & Gas Compact Commission, of which Alaska is also a member. Giessel acknowledged longtime mining advocate and leader JP Tangen (NGP Photo) with providing her with the background so critical to passage of both laws.
In his presentation, Tangen said that, “The mining law of 1872 is what we really celebrate today.” He then provided a brief history of the 1872 law (earlier slide pack) and how its provisions have provided so much economic benefit to Alaska and the nation. Then he quoted one of America’s most beloved Presidents. A few years before the 1872 law was passed, Tangen said, on the last day of his life before the evening assassination at Ford’s Theater (NGP Photo), President Abraham Lincoln (NGP Photo) paid tribute to the nation’s mining industry and its ability to rejuvenate the wealth of a war-beleagured nation. “"Tell the miners from me, that I shall promote their interests to the utmost of my ability; because their prosperity is the prosperity of the nation, and we shall prove in a very few years that we are indeed the treasury of the world."
In response to those urging repeal or anti-mining amendments to the 1872 act because of its 142 year age, Tangen recalled that those same advocates would never advocate repeal of an 1872 act creating Yellowstone National Park.
Alaska’s Deputy Commissioner of the Department of Natural Resources, Ed Fogels (NGP Photo), congratulated the Legislature on the SB 2 legislation in 2013 authorizing his agency to represent Alaska in the Interstate Mining Compact Commission. That participation, he said, has confirmed that Alaska is consistent with all other mineral producing states in its views of federal government overreaching jurisdiction.
He briefed the group on Alaska’s enormous minerals and resulting wealth and job potential for the state and nation. “If Alaska were its own country,” he said, “it would be wealthier than most countries of the world.”
Fogels stressed the importance of streamlining the permitting process, saying the department had a “culture of continuing permit processing improvement” in the Department of Natural Resources.
“We have huge mineral resources that can only grow”, he said, as more areas are mapped and explored. (Reference: Fraser Institute Report)
Council of Alaska Producers Executive Director, Karen Matthias (NGP Photo), emphasized the importance of public perceptions affecting the ability of producers to be successful. She pointed that most of Alaska’s new residents are not aware of Alaska’s six large mines along with the local jobs and taxes that benefit so much of Alaska. To affect public perceptions, she advocated more robust use of social media. Citizens need to know, she said, “…that we can do it right . In Alaska we are doing it right!”
In the 1980s when Atlantic Richfield Company had acquired the Anaconda Company, your writer had the pleasure of representing both companies as ARCO’s Director of Government Affairs. In the course of that assignment, Dave Heatwole (NGP Photo) became a trusted friend and client as manager of the company’s mining activity in Alaska. He was a superb manager with government relations and communication skills that contributed to the excellent reputation ARCO/Anaconda enjoyed at that time among the general public and government officials as well.
Heatwole is a former Chairman of the Alaska Miners Association and the Alaska State Chamber of Commerce. He closed the meeting with a number of stories – including our encounter with then Secretary of Interior Cecil Andrus. That encounter, among others, may be one reason why he reaffirmed Matthias’ focus on public perceptions.
“I hope that my message is that we do need to be engaged,” he said. “The public needs to know that we are small miners and larger miners and we speak with the same voice,” he said.
So while the miners and those supporting them celebrated a proud history, they were also preparing for the challenges of an uncertain future.
Event Photos (High Resolution Images Here):
Goldsmith Reviews Oil Tax Study: Institute of Social and Economic Research
Report Courtesy of Katie Bender
Scott Goldsmith (NGP Photo) presented his interpretation of a recent ISER report on the More Alaska Production Act (SB21) to a packed house Thursday morning at the Resource Development Council’s (RDC) Breakfast meeting (Video link here). Goldsmith, introduced by RDC's Leonard Horst, (NGP Photo) outlined his presentation by covering four main points from his research.
- The so-called $2 billion “giveaway” this year under SB21 does not exist.
- Without enhanced production, future tax revenues could be higher under SB21 than ACES if recent price and cost trends continue.
- Under reasonable future market conditions, a modest increase in investment and oil production would create more state revenues under SB21 than ACES.
- New money into the oil patch creates long lasting jobs and increased consumer purchasing power.
Critics of SB21 have stated that the new tax structure is a $2.1 billion giveaway to the oil companies. Goldsmith illustrated that the revenue loss was mainly due to the $1.29 billion reduction in production tax revenue. The shift to the new tax structure accounted for only 4 percent of the lost revenue. The $90 million difference from ACES to SB21 is nowhere close to the $2.1 billion difference in the expected oil revenue for fiscal year 2014.
The tax liability under SB21 is sensitive to both oil prices and lease costs. This will allow for higher tax revenue even without enhanced production. The price of oil has stabilized over the past couple of years and Goldsmith noted that analysts do not see much upward movement from the current price.
Even a small investment in new oil production will create more state revenue under SB21 than it did under ACES. New investment will not only generate new revenue, it will create additional employment. This includes direct jobs in the oil industry and indirect jobs that help individuals and families throughout the state.
The opportunity for increased production is here in Alaska. There are opportunities to develop marginal fields under SB21 and if the size of the revenue pie is increased, the state and its citizens win.
To watch Goldsmith’s presentation, visithttp://www.akrdc.org/membership/events/breakfast/1314/050114.html
The full report is available athttp://iser.uaa.alaska.edu/Publications/webnote/2014_05_01_WebNote17WhereD
RDC Event Photos (High Resolution Versions Here):
Leonard Horst, Marc Langland, Scott Goldsmith, Rick Rogers (above left); John Norman and Tony Knowles (above right)
Photos: Marc Langland (L); Scott Jepsen with Tony Knowles (R); and, middle photo: Knowles (l) with Scott Goldsmith and Langland (R)
4-22-14 Deadline TODAY For NPR Project Comment - Dan Fauske Briefs Sitka Chamber On Alaska Gas Project
Calgary Herald by Dan Healing. Oilsands company reports 13,400 barrels per day in Q1. Calgary Herald by Deborah Yedlin. Will there ever be an end to the largely uninformed commentary and analysis about the oilsands and the evils of the Keystone XL pipeline? ... former U.S. president Jimmy Carter, ..., sent Barack Obama a letter urging rejection of the project.
|See comment of one of our readers, submitted today!|
Today is the last day to show support for ConocoPhillips' Moose's Tooth draft, supplemental environmental impact statement regarding Unit 1 (GMT1) oil and gas development project in the National Petroleum Reserve-Alaska (NPR-A). Please take a moment to comment TODAY before COB. Thanks to the Resource Development Council for Alaska, here's how.... (Photo with apologies to the book and, in recompense, this link. -dh)
Register now, before it's too late, for the May 29, 2014 Alaska Oil & Gas Association Annual Luncheon featuring Jack Gerard, President and CEO of the American Petroleum Institute.
APRN by Robert Woolsey. ("Gas will never replace oil, from a revenue viewpoint.")
Alaska Dispatch by Suzanna Cauldwell.
The natural gas of Cook Inlet does a lot for the hundreds of thousands of Alaskans who live in Southcentral.
With an oversupply of natural gas in the country, Alaska is exploring the construction of a relatively small, low-pressure gasline within the state’s borders – while still holding out hope for a much larger project should prices improve.
Dan Fauske (NGP Photo) is the president of the Alaska Gasline Development Corporation – or AGDC. He spoke to Sitka’s Chamber of Commerce last week about when and where Alaskans may see gas. (More here, including audio....)
Our friend, Pedro van Meurs (NGP Photo-L, with author), reminds us that the course, "World Fiscal Systems for Unconventional Oil & Gas" is still accepting registrations for the June program.
"The course", van Meurs says, "will deal with International and North American fiscal systems for shale oil and shale gas, coal bed methane, oil shales and oil sands."
We understand that the software used during the course simulates the economics of the unconventional systems of Algeria, Argentina, Australia, Brazil, Bulgaria, Canada (various provinces), China, Colombia, France, Germany, India, Indonesia, Morocco, Poland, South Africa, Spain, Turkey, UK and the United States (various states). Participants will be able to keep this advanced software. (Here is the detailed agenda.)
Comment of reader, Mary Ann Pease (NGP Photo), in support of Moose's Tooth Development:
Dear Ms. Psarianos,
I am writing to you today in support of the Proposed Greater Mooses Tooth Oil and Gas Development - Alternative A in NPR-A!
This project brings long term Economic Benefits for Alaskans. Alaska and this nation needs an increase in production (Peak production from GMT1 is estimated at 30,000 BOPD), which would help offset our declining North Slope production.
As with many sustainable economic development opportunities- Development would provide benefits to local, state, and national economies through jobs creation during construction and operations, tax revenues, royalties, and new US sourced resources to help meet U.S. domestic energy demand.
I also support from environmental safety perspective (as proposed in Alternative A, GMT1), the gravel road connection to the main Alpine facilities. The road is necessary to ensure that the operator can respond to any environmental and safety issues in an adequate and timely manner.
It is also relevant to note that Environmental /Subsistence Issues are minimized with a road.
Finally, the time for action is now! This Project Was Previously Approved! We do not need any more delayed actions by the Federal Government to adversely impact economic development opportunities to Alaska.
Mary Ann Pease, Owner, MAP Consulting
The Bureau of Land Management (BLM) held public hearings in March to gather comments on the proposed Greater Mooses Tooth Unit 1 (GMT1) oil and gas development project in the National Petroleum Reserve-Alaska (NPR-A). Hearings were held in Anchorage, Fairbanks and in the NPRA villages.
The BLM released a Draft Supplemental Environmental Impact Statement (DSEIS) for the proposed project last month, launching a public comment period, which ends on Tuesday, April 22. In July 2013, ConocoPhillips, Alaska, Inc. (CPAI) submitted an application to construct a drill site, pipelines, road and other facilities to support development of petroleum resources within the Greater Mooses Tooth (GMT) Unit.
The project is approximately 14 miles west of the CPAI-operated Alpine field. The GMT1 drill site would be operated and maintained by Alpine staff and supported by existing Alpine infrastructure. The project would include construction of an 11.8-acre drill pad, an 8-mile access road, above-ground elevated pipelines, and an electric power line connecting the GMT1 drill pad to CPAI’s CD-5 drill pad currently under development. The GMT1 pad would have a capacity for up to 33 production wells, including several injection wells, and be located on a federal oil and gas lease previously issued by BLM.
The project proposes to access federal oil and gas resources, as well as resources owned by the Arctic Slope Regional Corporation and Kuukpik Corporation. The proposed development was originally analyzed in the BLM’s 2004 Alpine Satellite Development Plan (ASDP) (then referred to as CD6), and is also subject to the 2012 NPR-A Integrated Activity Plan (IAP).
The BLM has prepared a draft supplement to the ASDP to evaluate any relevant new circumstances and information which have arisen since 2004. The draft plan is available on the BLM website at http://www.blm.gov/ak/GMTU1.
RDC has submitted comments in support of Alternative A, view full letter at http://www.akrdc.org/alerts/
RDC members are encouraged to submit written comments by April 22nd. Public comments can be submitted by any of the following methods:
Fax: (907) 271- 3933
Mail: GMT1 Draft SEIS Comments, Attn.: Bridget Psarianos, 222 West 7th Avenue, Stop #13, Anchorage, Alaska 99513.
Points to consider in your comments:
- Peak production from GMT1 is estimated at 30,000 barrels of oil per day and would help offset declining North Slope production.
- Development would provide benefits to local, state, and national economies through local hire for jobs created during construction and operations, tax revenues, royalties, and new resources to help meet U.S. domestic energy demand.
- Development will also provide significant economic benefit to Alaska Natives on the North Slope as well as throughout the state through direct payment of royalties and revenue sharing among the Alaska Native Regional Corporations.
Alternative A is the Preferred Alternative
Road Needed for Emergency Spill and Safety Response
- As proposed in Alternative A, GMT1 will include a gravel road connection to the main Alpine facilities. The road is necessary to insure that the operator can respond to any environmental and safety issues in an adequate and timely manner. Alternative D, the aircraft and ice road access alternative, would not allow adequate access (on bad weather days, there would be no access) to emergency response resources and creates significant environmental and safety risk.
Environmental/Subsistence Issues are minimized with a road
- CPAI’s proposed project, Alternative A, has been modified to reduce environmental impacts and lower the overall footprint. In support of subsistence resources and access, the proposed project drill site location was moved out of the Fish Creek buffer to provide additional protection to this area. Road access will avoid the need for air traffic to the drill site, which is the number one complaint of subsistence hunters. Additionally, the project will be subject to various lease stipulations and the new Best Management Practices Adopted by BLM in 2013.
- The overall gravel footprint of Alternative A is the smallest of all the options. Alternative D has a larger gravel footprint than Alternative A because of the need to construct an airstrip and a larger gravel pad to accommodate more production equipment and a camp.
- Alternative A has the lowest estimated emissions because it requires the least amount of new infrastructure and eliminates the need for airplane support.
This Project Was Previously Approved
- The currently proposed GMT1 project (formerly CD6) is essentially the same as that approved for permitting in the 2004 ASDP Record of Decision.
- A review of new data and information shows there are no appreciable changes in the physical, biological, or social resources associated with the project study area. New data includes multi-year studies on hydrology, birds, and caribou.
Comment Deadline: Tuesday, April 22, 2014
Alaska Dispatch. The Alaska Legislature endorsed Gov. Sean Parnell’s gas pipeline negotiations Sunday, approving plans to spend close to $100 million in the short term and agreeing to collect future taxes in the form of a share of the natural gas, instead of in cash.
Northrim Bank and its President, Joseph Beedle (NGP Photo), hosted a packed house economic briefing yesterday at the Dena'ina Convention Center in Anchorage featuring Economists Mark Edwards and Bill Conerly. We'll have more for readers by Monday. -dh
Opportunity For Alaskans In Canada?
Petroleum News: British Columbia Premier Christy Clark, supported by a delegation of top cabinet ministers and petroleum leaders, has persuaded the Canadian government to declare that the LNG sector is a potential “nation-builder” which could create 100,000 jobs.
Although the accord signed in Ottawa earlier in April is non-binding, it includes a commitment to promote the active use of temporary foreign workers, TFW, which could ease one of the deepest concerns among investors in the industry.
CBC News. Comment: The Northwest Territories government hopes to bury a high speed, 1,100 km fiber-optic cable from Fort Simpson to Inuvik.
It proposes using the Mackenzie Valley Pipeline route and much of the pipeline filing data to justify a light, environmental review.
What is the practical difference between cleared rights of way, using the same real estate, for a buried gas pipeline or fiber cable? We are sure that this question will arise during the permitting process and that the answer will not be very satisfying to Inuvik citizens, small businesses and aboriginal corporations that, for two generations, fought for and failed to have approved the routing for a Mackenzie Valley Gas Pipeline.
Countless hopes, dreams, and lives of every NWT and YT resident were affected by the loss of the pipelines' opportunities--one way or another.
Hopefully, an easier permitting process awaits a buried cable using the same right of way.
Perhaps the lessons of gas pipeline failure and fiber-optic cable success will not be lost on more logical, future decision makers. -dh
The Publisher and the Professor Opine: You Decide!
Reader Comment: A highly accomplished university professor, a friend for over 20 years, sent this comment in response to the above editorial on Alaska's underfunded pension program, which we are delighted to bring to you below, along with a response.
Dave: As usual a sound analysis of the underfunded pension liability.
However, I read that you suggest that we return various spending or taxing to the Median levels of other states. That point is where 50% of the states would lie above and 50% below.
Would those states above the median in spending and taxing be obviously thwarting business growth and profit? I doubt it.
Stability is probably the key in my mind. Also, corporate America charges us more or it cost us more to acquire those goods and services. Kids who depend of “welfare” to eat, go to school on a bus, or get health care don’t eat 50% of the meal, ride halfway there or only get kinda well. And if our “bureaucracy” is more expensive, I am not surprised.
I wonder if you checked to see how much higher engineers, doctors, accountants, oil execs, etc. earn compared to those in “median states”. I suspect they would howl in indignation if you suggested that they all get less.
But your analysis of the problems created by the underfunded pension liability is well stated and I wish we had more leaders in our legislature who understood the realities of our financial system as well as you.
(Note: I don’t think we pay our bureaucracy enough. We ask someone making $100k to negotiate with and regulate industries and executives making millions, with staffers and lawyers making outrageous salaries as well. And maybe if we paid the Legislators more, we could find some independent minds who could work in everyone’s best interest, including the oil industry.)
Harbour's response to the Good Professor's comment above.
We appreciate the good professor's two observations: his compliment for our view on the underfunded pension liability of the state; and, his thoughtful comment on why the remedies to Alaska's unsustainable budget which we offered are, in his opinion, wrong.
This is why we followed our recommendations for solving Alaska's fiscal challenges, with the further acknowledgement that, "Of course, there are as many suggestions as there are people with opinions."
Professor B. did not offer his own suggestions for solving Alaska's fiscal challenges; he only attacked our recommendations.
His further comment was that Alaska should spend more money on executive salaries so that those who "negotiate with and regulate" industry could, presumably, more ably do so.
The beauty of a oil & gas lease sale is that the private market produces for Alaska the highest value for a natural resource that the market will pay. The highest.
Most of our current investment climate problems occur as a result of changing the rules of the game for investors after a lease sale has taken place. Politicians are tempted to greed once they see that an investor is profiting from a lease sale bid that he had first put at risk. They are tempted to relieve the investor of the profit "reward" earned by the lease sale investment, subsequent exploration, capital investment and development (i.e. because the investor is 'greedy, makes outrageous salaries, etc.'). The point of investor success is where the good Professor would hire high priced bureaucrats to extract even more from investors than their own due diligence had determined valid at the time of the lease sale.
This is why we have always held that Alaska should spend within its means -- so that the temptation to change the rules for investors is not exacerbated by a desperate need for cash to cover undisciplined spending.
If Alaska, as we have editorialized, becomes a state where "a deal is a deal", then decision makers will spend and tax with prudence and restraint. Life will be simpler. The need to demonize investors will diminish as will the temptation to discriminate against them. Since lawmakers won't tolerate rule changes after investor commitments have been made, there will be no need for a new cadre of highly compensated bureaucrats to "negotiate and regulate" in ways that extract more from investors than they themselves thought prudent when investment decisions were made.
The good professor argues for 'stability' for government beneficiaries. While beneficiaries of taxpayers (i.e. including educators) will always want the guarantee of stable taxpayer income, it is easy to forget that those who risk their own money tend to invest more and more confidently when they work in a 'stable' tax and regulatory climate.
We appreciate reader comments, especially from those who are highly educated and thoughtful about the issues -- and, especially when they disagree with us. It gives us a chance to reevaluate our own logic and conclusions.
In this case, we emerge from the additional thought and dialog more convinced than ever that Alaska's real secret to a bountiful future is learning to treat investors as we wish to be treated when we are considering a personal investment.
Hold a lease sale for natural resources to VOLUNTARILY extract the highest value from investors that a competitive bidding process will yield. Then, try to MINIMALLY interfere with -- and even safeguard -- the metrics upon which an investor based the lease sale bid, for the life of the project.
It is the Golden Rule applied in a different way than we normally do ... but the principle is the same. And it is that principle that will most likely lead to sufficient investor confidence for a multi-billion dollar gas pipeline investment to be made.
That is why, for years, industry has told the state and its residents that big investments require assurance of "Fiscal Clarity".
Rejection of the Golden Rule of treating others as we would wish to be treated can only lead to a life of misery and greed...and a lower likelihood of significant investments.
Can anyone dispute that this enduring principle applies to states as well as it does to families and individuals? -dh