Miss a day
Miss a lot

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

9-26-13 Appearing As A Guest On Terzah's Alaska Political Insider Show

26 September 2013 3:52am

From Michael Soukup in Governor Sean Parnell's office: 

Alaskan trucking companies have a renewed sense of optimism as new opportunities are being created across the state. According to Scott Hicks of Alaska West Express, things like more jobs, more production, and more cash to the state are why he’s excited about the More Alaska Production Act and its impact on the trucking industry. To view his testimonial, please visit:
http://gov.alaska.gov/parnell/priorities/resources/more-alaska-production-act/testimonials.html

We have made careful note over the years of many instances of "Federal overreach" in Alaska.  We have organized those examples into a category (below left) called "Federal Obstruction".  Reviewing the video below reminds us that we may sometimes miss instances where a Federal agency has efficiently moved due process to a rational conclusion benefiting Alaska.  Moving in a timely way to grant a right of way over federal lands for the Alaska Gasline Development Corporation might be one example that seems to reflect Federal regulatory competence benefiting Alaska; kudos to the Bureau of Land Management.  We invite readers to submit a paragraph describing other instances of Federal natural resource decisions benefiting Alaska--either with or without your identity. Submit those ideas anytime and we will archive them under our story category of "Federal Progress."  -dh

Categories:

9-11-13 "Lest We Forget"

11 September 2013 4:13am

Chris Smith Nominated to be Assistant Secretary for Fossil Energy

Many of us recall September 11, 2001,” said Governor Sean Parnell (NGP Photo). “It’s a day that will live forever in our memories. We observe this day in honor of those who were injured or who died, when our homeland came under attack by terrorists.”

CBC.  TransCanada Corp.'s proposed west-east pipeline could create 10,000 jobs and generate $10 billion in additional GDP during the development and construction phase...

Today, we provide our energy column, "Decision", sent to tens of thousands of households every week.  This week’s column features the decision citizens will be making on Alaska oil tax policy in an a referendum appearing on next summer’s primary ballot.  Readers may scroll down to read the column or click here for a .pdf.


On the same subject (i.e. Oil Tax Reform), the Alaska Support Industry Alliance will be exploring the subject at its weekly meeting tomorrow morning (Thursday) at Anchorage's Petroleum Club, 7 a.m.

This Friday Commonwealth North’s (CN) Energy Action Coalition will hear a briefing from John Lau (NGP Photo), ENSTAR’s Director of Engineering.  Lau will discuss the gas pileline infrastructure in the Cook Inlet.  The meeting will be from noon – 1pm in the first floor conference room at the CIRI building at 2525 C Street.  The goal of Commonwealth North’s Energy Action Coalition is to continue discussion on CN’s most recent energy reports Energy for a Sustainable Alaska: The Railbelt Predicament & The Rural Conundrum and highlight and identify challenges and opportunities in Alaska's energy environment in order to bring informed Alaskans to the table and come to solutions that will benefit all Alaskans and ensure these complex energy issues are understood. If you are interested in the public policy issues facing Alaska, you should be a member. Commonwealth North membership information is available on at www.commonwealthnorth.org.


Chris Smith, Department of Energy, Fossil, Assistant Secretary, Photo by Dave HarbourThe DOE Senior Program Manager in the Office of Oil and Gas, Christopher Freitas, reports this morning that The White House nominated Chris Smith (NGP Photo) to be Assistant Secretary for Fossil Energy last night, seven months after the former Chevron official took over the position in an acting capacity. 

President Obama announced his intent to nominate Smith as part of a batch of more than two dozen other high-level nominees. “I am grateful that these talented and dedicated individuals have agreed to take on these important roles and devote their talents to serving the American people. I look forward to working with them in the coming months and years,” Obama said in a Sept. 10 statement.

Former Energy Secretary Steven Chu promoted Smith to be Principal Deputy Assistant Secretary, FE’s No. 2 position, in February after Chuck McConnell stepped down as Assistant Secretary, leaving Smith to serve in the office’s top position in an acting capacity at a time of major transition at the Department following the November election. Upon taking the helm of FE earlier this year, Smith made a point of emphasizing that he would change little in terms of program direction compared to his predecessors. Smith did, however, quickly reshuffle the Office’s organizational structure, centralizing FE’s leadership chain so that all three Deputy Assistant Secretaries, as well as the director of the National Energy Technology Laboratory, report directly to him. Smith tapped Lawrence Livermore National Lab alum Julio Friedmann and top American Gas Association official Paula Gant to be FE’s Deputy Assistant Secretaries for Clean Coal and Oil and Natural Gas, respectively, last month.

Smith had served as FE’s Deputy Assistant Secretary for Oil and Gas from 2009 to 2013. Prior to his tenure at DOE, Smith spent most of his career at Chevron, working in a variety of positions there between 2002 and 2009. He also worked at Texaco before its refining operations merged with Chevron’s. Smith graduated from the United States Military Academy at West Point and the University of Cambridge and also served as an Operations Officer and Task Force Engineer in the U.S. Army.

 



Decision!

“Most discussions of decision making assume that only senior executives make decisions or that only senior executives’ decisions matter.  This is a dangerous mistake.”  Peter Drucker

By

Dave Harbour

Tell me: what was the greatest learning experience of your life?

Mine happened thirty years ago sitting on a lawn chair under a palm tree beside a swimming pool at Claremont Graduate School.   A half dozen of us spent an exclusive, historical, sunny week basking in the wisdom of legendary management guru, Peter Drucker.   

The quotation above crystallizes one of his ‘take away’ messages to us: good managers know that the day to day decisions of regular folks are critical to a successful operation.    

Decades after that week-long seminar with Drucker, I still apply his “management by objective” and related principles to many situations.   In public policy decisions, for example, one recognizes that citizens play a critical role—by deciding to vote, to participate in the community, to write letters to the editor or deciding to donate to worthy causes.

Drucker also placed a premium on integrity.  “Never mind your happiness; do your duty,” he once said.

*     *     *

Next summer, during our primary election, citizens will have a duty to make big decisions on candidates for public office.  Voters will also decide whether or not to repeal an oil tax reform law (SB 21) passed this year by the Legislature and signed into law by the Governor. 

Do any of us want to make an unwise decision on oil taxes?  Of course not.  So we are agreed then that we need to make wise decisions on oil taxes!   That leads us to the question of, “what is the wisest decision”, and it’s not too soon to be thinking about it right now.

Having wrestled with this issue for several years now, I would offer our readers these thoughts.

  1.  What do oil taxes have to do with me?   Oil companies are like newspapers, banks, commercial fishermen or grocery stores: they must make a profit to survive.  To make a profit, they must make more money than they spend on expenses.  One of their expenses is taxes.  If taxes and other expenses are too high, they must invest elsewhere.  Alaska’s oil and gas royalties, property taxes, income taxes and production taxes pay over 90% of Alaska’s state operating budget.  Meanwhile, citizens pay no state income or sales tax and get a Permanent Fund check.  If oil companies didn’t pay for state government, we would.   With some of the highest oil taxes in the world, the Legislature and Governor acted to make Alaska more competitive -- to keep the Alyeska oil pipeline from closing down.  The Alyeska pipeline takes Alaskan oil to market but we are producing less and less.  If Alyeska goes down for lack of oil, the state government will implode.  We wouldn’t have money for roads, airports, public safety or a jillion other state programs – including municipal revenue sharing and support for schools and rural Alaska programs.  Economists say that without more oil investment, the pipeline’s days are numbered.  Over half of Alaska’s jobs are at risk along with our futures.
  2.  Do lower oil taxes guarantee more oil?  At a legislative hearing on the subject longtime Alaskan employer Maynard Tapp said, “I guarantee you that no money you take away in taxes will be used for resource development.”  Can we agree that keeping high taxes in place will not logically lead to more oil?
  3. Long term or short term?  Let’s ask ourselves, “Do we make decisions for our immediate benefit, or for the long run?”  Of course, most would agree we make decisions with the future in mind, especially if we have children.   Voting next August to repeal tax reform and keep high taxes in place will benefit us for a little while, as oil in the pipeline continues to drop below ¾ empty.  But in the long run, can we agree that even though lower taxes are no guarantee of more oil, it is a logical way to encourage more production?  More production will mean a longer life for the pipeline and more economic support for our kids in the long run.

As we seek wisdom, what have other Alaskans said publically about the oil tax issue?

Northrim Bank Chairman Mark Langland testified, “The oil industry is carrying the primary burden of supporting state government, but government’s appetite for money is unlimited.  When the oil industry can no longer feed that appetite Alaska’s citizens will have to fill the gap.”

Steel worker Peter Macksey told legislators that, “The oil industry supports the lifestyle and programs that this state has become accustomed to.   I am telling you that you are asking too much from this group and strangling all associated with it.”

Local manufacturer, Lynn Johnson, said his employee strength is down 10% and income is off 40% due to less oil industry purchasing.

The late Governor Walter J. Hickel’s Commonwealth North organization told the legislature that it had studied the issue and concluded that, “without increased production Alaska’s economy is in jeopardy,” and that, “…trading some current oil tax revenue for longer-term production…is in the best interest of all Alaskans.”

Alaskan father Tom Maloney testified, “I have an 18 year old son majoring in welding…at UAA who is very concerned about future employment activities in Alaska.”

Service High graduate Jeff Lentfer is a successful, small business owner in Anchorage.   After studying the issue himself, he testified to the Legislature that he has, “…absolutely nothing to do directly with…oil development,” but, “the state needs to encourage oil development…, not next year or the year after.”

*     *     *

President Theodore Roosevelt observed, “Nine-tenths of wisdom is being wise in time.”  With oil rapidly depleting can we summon the wisdom in time to return to healthy production? 

Drucker might have advised that in a democracy, we all share the duty and responsibility for the final decision on oil taxes —but it is our children who will experience the result. 

-30-

Two weeks ago, Alaska North Slope Borough Mayor Charlotte Brower sent letters to Governor Sean Parnell and Commissioner Dan Sullivan, inviting them to attend groundbreaking ceremonies last week for a new water and wastewater treatment facility at Prudhoe Bay.  Brower’s letter also expressed her pleasure, "...with the actions undertaken by ...Governor Parnell and the Alaska Legislature as it relates to SB 21."  SB 21 is the "More Alaska Production Act" supported by Parnell and a majority of Legislators to make Alaska more competitively attractive for oil and gas investors.   "The North Slope Borough recognizes that the tax relief provided under SB 21 relieves some of the obstacles experienced by the oil and gas industry," Brower wrote…."

Categories:

9-6-13 North Slope Borough Breaks Ground For $90 Million In Utility Improvements At Prudhoe Bay

06 September 2013 4:45am

"US Leadership In An Emerging Arctic" is the lecture topic next Tuesday in Anchorage, when Ambassador David Balton (NGP Photo) and former Lieutenant Governor Fran Ulmer (NGP Photo) will address the World Affairs Council.  Reservations here. Various Arctic energy issues are certain to be addressed, including Arctic shipping, resource development, and sovereignty issues.  -dh

 

"Alaska's Troubled Romance With LNG", by Dave Harbour.  Here is this week's Xtra column, submitted for distribution to tens of thousands of households.  

Note that these columns (see them all, here) are limited to about 1,000 words.  Accordingly, it grieves us that much must be left out.  With that limitation in mind, we encourage readers to support our goal of 100% accuracy by sending us additions/corrections here and we will make necessary adjustments to the archived story below.

 

 

 


North Slope Borough Breaks Ground For $90 Million In Utility Improvements At Prudhoe Bay

by

Dave Harbour

On Wednesday several dozen Alaska North Slope Native residents, service company managers and oil industry officials gathered at Prudhoe Bay to 'break ground' on for new utility facilities serving the large oil field.

Improvements now in the design stage will involve replacement and upgrading of the North Slope Borough's water and wastewater treatment plant and expansion of the landfill.

...more coming next week.  We confess that priorities and a desire to provide readers with a good story required that we take the weekend to complete our work.  Have a nice one....  -dh


Alaska’s Troubled Romance With LNG

By

Dave Harbour

After the Prudhoe Bay discovery (“the discovery”) in the winter of 1967-68, Alaskans learned that their great, Arctic oilfield was also the largest natural gas find in American history.

Then, in 1969, a Kenai Peninsula Liquefied Natural Gas (LNG) plant began cooling Cook Inlet gas to almost -260 degrees Fahrenheit, compressing it to 1/600th of its gaseous volume, transporting it by tankers to Japanese utilities.  The Kenai plant introduced Alaska to its love affair with LNG.  It was only U.S. LNG export facility for over four decades.

The larger, Prudhoe Bay discovery injected vigor into the 49th state: new jobs, new public services and amenities, and countless new business opportunities for a new age of pioneers.

Prosperity also produced political tensions.  Politicians wanted tax money for constituent projects.  Proliferation of social services increased state spending.  Environmental activists sued developers.  Petroleum investors –and the state treasury--wanted the lowest possible capital and operating costs to secure profitable returns. 

*     *     *

After that discovery 45 years ago, companies began planning transportation alternatives for Prudhoe’s oil and natural gas reserves. 

Investors wanted the most efficient transportation system, but politicians wanted a say, too. 

In the early 1070s Congress concluded the oil line should run through Alaska to Valdez while a gas pipeline could move Arctic gas to Midwest and other markets. 

Alaskan oil producers completed the Trans Alaska Pipeline System (TAPS) in 1977.

To build a gas pipeline, twenty-seven U.S. and Canadian oil and gas companies formed Alaskan Arctic Gas Pipeline Company in the early 1970s led by former Lieutenant Governor Bob Ward.  Former TransCanada President Vern Horte led the sister company, Canadian Arctic Gas Pipeline Limited. 

Arctic Gas chose a Mackenzie River Midwest pipeline route for Alaskan and Canadian gas, and rejected inefficient alternatives including LNG trucks, tankers, trains, dirigibles and submarines.  It spent $250 million on technical studies and the most extensive environmental study in history.

Arctic Gas was well into its planning when El Paso Natural Gas began promoting a Gravina Point LNG project near Valdez.  Alaskans loved it and a new LNG romance began.

A third challenger entered the fighting cage in the mid-1970s when Northwest Energy Company and Alberta Gas Trunk Line defected from Arctic Gas’ Consortium to promote a separate Alaska Highway routing for Alaska gas.

All three projects fought for Federal Power Commission (FPC, now “FERC”) approval in the United States while Alcan and Arctic fought for Canada’s National Energy Board (NEB) blessing.

Alaska’s governor, William A. Egan, and a budding grass roots organization called Organization for the Management of Alaskan Resources (OMAR) supported El Paso’s LNG Project.   Most Lower 48 Governors and influence leaders favored Arctic Gas.

In 1977, FPC Administrative Law Judge Nahun Litt said, “The Arctic Gas application is superior in almost every significant aspect when compared to El Paso.” 

The FPC decision supported either Alcan or Arctic; El Paso’s LNG scheme was dead!

Canada’s NEB rejected Arctic Gas and approved Alcan’s project which, ironically, was eventually taken over by TransCanada PipeLines Ltd. TransCanada now leads the Alaska gas project, along with Alaska producers.  Its goal – also an ironic twist of fate -- now seems to favor moving Alaska’s gas, not via the Alaska Highway route which it had adopted, after opposing -- but via a pipeline-LNG system to Asian markets. 

*     *     *

America and Canada had dismissed the Arctic and El Paso LNG alternatives but successive Governors worked to commercialize North Slope gas.

Governor Jay Hammond appointed Governors Hickel and Egan to co chair a gas task force.  The 1982 group embraced LNG marketing of Alaska’s gas.  Hickel later formed Yukon Pacific Corporation to sponsor an LNG project. 

Governor Tony Knowles issued Administrative Order 188 forming another gas pipeline advisory group in 2001.  His theme was, “My way is the highway”.   Though a noble effort, a project could not go forward without producer ‘buy-in’ and producers hadn’t completed their own pipeline and LNG feasibility studies.

After Congress passed the Alaska Natural Gas Pipeline Act of 2004 to expedite an Alaska gas project, Governor Frank Murkowski negotiated a contract with producers to increase taxes in return for giving them “fiscal certainty”.  The Legislature increased their taxes but didn’t deliver the fiscal certainty necessary to finance a giant, 30-year project.

Governor Sarah Palin’s “Alaska Gasline Inducement Act” (AGIA) in 2007 demanded benefits for Alaska from a pipeline project in return for subsidies.  TransCanada became the State’s AGIA partner.  But Palin also sponsored increased oil taxes that made Alaska investments very risky.

Meanwhile, back at the LNG ranch, two main suitors continued their own quest for an enduring relationship with Alaska.

The Hickel inspired, Yukon Pacific, closed its doors in 2011 after a valiant effort to collect permits and unsuccessful work to attract LNG buyers.  Municipal entities, including the City of Valdez, formed the Alaska Gasline Port Authority in 1999 supporting another Valdez LNG project which many Alaskans still love to support to this day.  But last March, the Energy Department rejected the Authority’s gas export application.

After 2007, US markets for Alaska’s gas evaporated with skyrocketing Lower 48 shale gas production.  Today’s domestic gas prices seem too low to support a multi-billion dollar Arctic pipeline to the Midwest.

Happily, Japan’s catastrophic tsunami and nuclear meltdown of March 2011 did stimulate demand for more natural gas.

But Canadian, Russian, Indonesian, Middle Eastern and Australian gas producers are also hungrily eyeing Asian markets.  Once Asian utilities have signed long term LNG contracts, latecomers will be locked out.

Will Alaska be locked out?  

*     *     *

Competition increases and most of Alaska’s competitors don’t have to build an 800 mile Arctic pipeline -- on top of LNG costs.  Most have lower costs of labor.  Most operate in low cost temperate zones – except Russia.

Will Alaskans enthusiastically unify behind the AGIA gas project, helping it achieve the lowest possible costs in our high cost environment?

Or, will Alaskans continue fighting over routes, taxes and regulations as federal government rules proliferate and environmental opposition to all energy projects becomes more intense?

Alaska’s troubled romance with LNG continues. 

One wonders, as opposition grows and competition mounts, if the aging romance will give birth to an LNG project or lead to a final break up.

Stay tuned.

-30-


Dave Harbour has directed external affairs for a variety of oil and gas companies in Alaska and consulted with many others.  He is former Chairman of the Regulatory Commission of Alaska, the Anchorage Chamber of Commerce, the Alaska Council on Economic Education and the Hugh O’Brian Youth Foundation.  He assisted in founding Arctic Power, Saturday Market, the Anchorage Downtown Partnership and the Alaska Support Industry Alliance.

Categories:

8-28-13

28 August 2013 5:45am

Here is A Link For Readers To Our Latest Column In Xtra, Anchorage's Community Newspaper.  Here Is Our Unedited Submission: "Responsibility"

Another Abuse of Endangered Species Act


Relevant to our essay, above, on 'Responsibility', Canada's Globe & Mail piece by Jeffrey Jones notes the importance of tax policy to energy project investors.  We believe that all decision makers will want to take heed.  Those who support higher taxes and regulatory barriers, in essence, wish for fewer energy jobs and investment while those who seek moderate taxes and rules will create more attractive energy investment climates.   By their works ye shall know them.  D'accord?  -dh


Lisa Murkowski, Anchorage Chamber of Commerce, US Senate, IRAN, Syria, Federal Overreach, Photo by Dave HarbourNote:  We compliment Northrim Bank and www.alaskanomics.com for producing a report of Senator Lisa​ Murkowski's (NGP Photo) ​speech Monday to the Anchorage Chamber of Commerce--by Katie Bender.  We plan to provide more detailed notes on her speech tomorrow which offers other gold nuggets of interest to Alaskans, Americans at large and our Canadian friends as well.  -dh

Another Abuse Of The Endangered Species Act.

PLF.  The U.S. Fish and Wildlife Service has labeled more than 1,500 acres of private land in St. Tammany Parish, Louisiana, as “critical habitat” for the dusky gopher frog. This designation would force the owners to jump through so many bureaucratic hoops that they would be barred from making productive use of their property.

Dusky Gopher FrogDusky Gopher Frog.

There’s one small problem with the attempt to safeguard the frog on this land: the area isn’t suitable for the species. There aren’t any dusky gopher frogs on the property.

...the Anchorage Chamber hosted US Senator Lisa Murkowski at its weekly, Monday Forum.

Murkowski ​shared that there was a large number of high ranking visitors that we have seen in the state this month and how the visits were important to the political climate.

In August, the Chief of the US Forest Service, Administrator of the EPA, the acting Under Secretary of Commerce for NOAA, the Air Force Chief of Staff, the Commandant of the Coast Guard and the Secretary of the Interior have all visited, or will visit, Alaska and learned how their respective agencies work within the Alaskan environment.

Murkowski continued by discussing the importance of the military in regards to Alaska’s economy. Alaska has strategic military value and the Pentagon is beginning to realize the potential across the state.

She spoke in depth about economic concerns and the Affordable Care Act (ACA) and how each affected the State of Alaska and its residents.

Murkowski noted that even though we don’t know a specific date, we will bump up against the debt ceiling in the coming months. She feels it is important to figure out a solution to the problem before it is too late and feels that Congress can do a better job of finding ways to fix the current budget. She stated that the sequestration does not provide solutions to the problem of the $16.9 trillion debt that the US currently holds.

Murkowski agreed that the US needed healthcare reform but did not feel that the ACA addressed the true problems of needing increased access and decreasing the cost of healthcare. She believed that defunding the act was not the solution because it would leave the law on the books and would burden individuals and families. She agreed that there were good parts to the new law, including the provision to allow dependents to remain on a parent’s plan until age 26, as well as the changes to insurers being able to limit coverage to individuals with pre-existing conditions. She stated that change will come when there is a reduction in cost of healthcare to individuals and families.

Murkowski wrapped up her presentation with a note that she felt that it was time for the Congress to start governing. Too much time was being spent on messaging and working to secure votes for the next election. She wanted Congress to lead the way and start to create laws that would make a difference, rather than blaming the other side for the Nation’s problems.

Murkowski is the first Alaskan born senator and the 6th to represent Alaska in Congress. She was re-elected in 2010 and holds a number of committee positions, including being a ranking member of the Committee on Energy and Natural Resources.

 Posted by Katie Bender 


Dave Harbour's Xtra Community Newspaper Column, Week of 8-28-13.

Responsibility!

By

Dave Harbour

Teenagers hate it when people tell them to be “responsible”.  It’s another way of saying, “You should change your ways,” when one is perfectly happy with the status quo

*     *     *

For Alaskan citizens, the status quo has been pretty sweet.  We were once America’s largest oil producer.  We put a ton of dough into a Permanent Fund.  We spent more per citizen than other states.  We passed a blizzard of social and public works programs.  We repealed the state income tax on ourselves and have no state sales tax. 

With oil production falling at a 5-7% annual rate things don’t look so sweet right now.

Our oil production is down by nearly ¾ and we lag behind Texas, North Dakota and even California.

Who cares?

We should all care about oil tax and spending policy if we are involved in education, government or nonprofit work.  If we are rural residents, our subsistence way of life is supported by oil.  If we are into health, transportation, wholesale, retail or professional services, we depend on Alaska’s oil production.

The Trans Alaska Pipeline System (TAPS) is like an umbilical cord giving life to Alaska.  TAPS oil pays for ninety percent of our state government.  It directly and indirectly supports over half of our entire economy.   Yet as our production declines, our elected leaders continually increase spending.

In modern words, “This is an unsustainable situation”.  In other words, “It’s our responsibility to do something”.

Alaska has the world’s largest commercial fishing industry.  It employs nearly 80 thousand mostly seasonal workers.  But its business leaders know oil provides most support to the state budget.  Without oil paying the lion’s share of government, fishermen would shoulder responsibility for more taxes.

Alaska’s tourism industry provides over 35 thousand mostly seasonal jobs.  But its hundreds of entrepreneurs know if oil didn’t pay for state promotions, transportation infrastructure and other amenities, tourism would have to pony up more taxes.

Alaska’s 44 thousand oil industry employees support most other Alaska jobs .

Oil companies like Atlantic Richfield Company (ARCO) risked a lot to first discover the Swanson River field on the Kenai Peninsula in 1957… and then Prudhoe Bay in the winter of 1967-68.  Their investment into this remote, high cost area was encouraged by a low tax environment.

Following the Prudhoe Bay discovery, Alaska’s Governors and Legislature began increasing oil taxes – in fact, about a dozen tax increases, year after year.

In 1981, the Governor and Legislature created an important oil tax reform package while repealing the individual income tax.  That day, March 18, 1981, marked the first day of roughly 20 years of oil tax stability for Alaska.  No significant tax increases marred oil company investments in new exploration and production even though oil prices remained low during a large part of those two decades.

A few years ago, with oil and gas prices increasing, elected leaders decided to increase taxes again.  The tax change was called “ACES”, Alaska’s Clear and Equitable Share.  It made Alaska the highest oil taxing jurisdiction in the free world.

Alaskan exploration slowed as oil exploration boomed in North Dakota, Texas, Australia and Canada.

Last Spring, lawmakers reformed ACES to make Alaska more competitive with other oil producing areas.  Since then, we have seen signs of greater oil investment in the state. 

However, some Alaskans still advocate a return to status quo with a repeal of the oil tax reform.  We can expect this issue to be widely debated in the months ahead.

How should readers think responsibly on this subject?  Here are a few credible sources that underscore the importance of tax and spending reform:

First, we rely on the University of Alaska’s Institute of Social and Economic Research (ISER).  In a February 27 report to Commonwealth North, ISER ‘s Scott Goldsmith said that Alaska has $60 billion in savings (i.e. including the Permanent Fund) and $89 billion of oil assets still to be produced, for a total of $149 billion.  To manage those assets for the long run, he said the state could spend approximately $5.5 billion/year.  But he noted that the 2013 General Fund budget of $7.6 billion resulted in overspending $2.1 billion. 

Second, Alaska banks have financial and economic expertise.  These locally owned institutions also have, “skin in the game.”   Northrim’s Alaskanomica.com published a piece on August 9, a couple weeks ago, noting that the oil tax reform bill, “…allows Alaska to be globally competitive in the industry….”   The First National Bank of Alaska’s, Alaskaseconomy.org webpage, portrays Alaska’s economy as a three-legged stool.  One leg is oil, but that leg also supports the other legs indirectly.  In a link to an Anchorage Daily News Column by oil economist Roger Marks, the Bank highlights, “10 things to consider about oil taxation.”  In the column, Marks points out that high oil taxes make Alaska less competitive and hurt chances for a natural gas pipeline.

Third, our State’s Revenue Department, in last year’s “Alaska’s Oil and Gas Fiscal Regime” analysis, illustrated Alaska’s need for tax reform to compete globally for industry investment.

Fourth, Canada’s Fraser Institute surveys petroleum industry investors.  The most recent survey reveals how over 600 investor companies react to investment opportunities in nearly 150 taxing jurisdictions.  Alaska is not at the bottom of the list but ranks behind 60 areas including Oklahoma, Texas, North Dakota, Canada, Australia, Tasmania, the United Kingdom, and Norway.

Fifth, Wood Mackenzie, a leading world energy industry research firm, ranked Alaska as one of the least attractive places in North America for investment. Only New York ranked lower than Alaska.

*     *     *

Would a responsible person think that controlling Alaska’s spending and increasing our oil investment competitiveness is essential to all of our futures?

Or, should we be confident that the status quo will continue to supply all of our economic needs?

Either way, we are responsible.  History will tell how we exercised our responsibility.

-30-


Dave Harbour is Publisher of www.northerngaspipelines.com.  He is a former Chairman of the Regulatory Commission of Alaska, the Alaska Council on Economic Education, the Anchorage Chamber of Commerce and the Hugh O’Brien Youth Foundation-Alaska.  He is also Co-Chairman of the 9th Annual Alaska Oil and Gas Congress held in Anchorage this September.

Reference notes:

  1.  ISER
  2.  Locally Owned Alaskan Bank Economic Analyses:

  3.  Alaska Department of Revenue ​

  4.  Fraser Institute

  5.  Wood Mackenzie quote

Categories:

8-16-13

16 August 2013 5:23am

See This Week's Mining News, Bakken News, Petroleum News


Sean Parnell, Alaska Governor, Photo by Dave HarbourGovernor Sean Parnell's (NGP Photo) website features Alaskans from across the state speaking on the effect oil and gas taxes have on the State's investment climate.  Our readers may find those testimonials here.  

Calgary Herald by Graham Thomson.  I’m not sure anybody looks forward to the end of summer. But I would hazard a guess that of all those not looking forward to it, nobody is dreading the end of summer more than Energy Minister Ken Hughes. Not even schoolchildren and road construction crews.  The “end of summer” is the deadline for Hughes to release the report of an independent review into pipeline safety. 


From Energy In Depth: Mucho Friday News

NATIONAL

North Dakota sets oil, gas production records. UPI. North Dakota broke records in June with more than 821,000 barrels of oil and 930 million cubic feet of natural gas per day produced, a state agency said.
 
HF Debate Divides Britain. New York Times. Over the years, Britain has shown itself to be cozy enough in its trans-Atlantic ties to follow the United States into all kinds of dangerous spots, from Iraq to Afghanistan. Now, eyeing the American energy revolution that has come with “fracking” to unlock a bonanza of oil and natural gas, Prime Minister David Cameron has again lofted his banner to tread where America has led.
 
Energy Department Expands LNG Exports As Shale Gas Soars. Forbes, Column. Natural gas production from the Marcellus Shale region of Pennsylvania and West Virginia has risen by 50% over the past year, producing the equivalent of 550 million barrels of oil.

Categories:

7-31-13

31 July 2013 7:06am

Calgary Herald by Graham Thomson.  ...a new pipeline to pump Alberta bitumen to the West Coast for shipment to Asia is just a matter of time. At least that’s the impression you get reading between the lines in comments made by Alberta Premier Alison Redford and British Columbia Premier Christy Clark Friday afternoon.


Alaska and Saudi Arabia Face Similar Challenges Under Vastly Different Conditions

by

Dave Harbour

Our readers know that 90% of Alaska's operating budget flows from the Alaska North Slope (ANS) through the Trans Alaska Pipeline System (TAPS) which, in turn, is about 3/4 empty.  

Oil and Gas Daily reports that in letters published Sunday on his Twitter account, Saudi Arabia's prince Alwaleed bin Talal, warned that it was alarming that "92 percent of the government budget relies on oil".  He went on to discuss competition in the world and the need for diversification.  Sounds familiar.

Fairbanks News Miner Editorial.  The rejection by the U.S. Fish and Wildlife Service of a plan to conduct research about oil and gas potential in the Arctic National Wildlife Refuge was expected, but the Parnell administration is appealing the move. 

In Alaska's case, we have potential to fill TAPS with waiting reserves on the ANS--on state and federal lands.  The majority of the state Legislature has acted to increase investment on state lands by enacting oil tax reform, though some citizens and a minority of legislators are seeking to repeal that reform through referendum.  

On massive, potential reserves lying under federal lands on the ANS and off-shore, the federal government has acted on behalf of the extreme environmental agenda -- and lobbyists supporting that agenda -- in such a way as to delay, block or forever close off access to that potential.

But while Alaska and Saudi Arabia face similar oil dependency challenges, their political and natural resource conditions differ as extremely as do their climates.

The Saudi Kingdom is a monarchy capable of enshrining most policies by edict.

Alaska and America are democracies with decision makers put into place by the electorate; and, any edict-like executive orders or statutes or rules are created by officials whom the people freely elect.

The Saudis' main if not sole, significant economic asset is oil and its hope is to diversify by putting its wealth into income producing activity elsewhere in the world and in local manufacturing, among other alternatives.

Alaska is blessed with many natural resources and had access to most of them at the time of Statehood in 1959.  Over the years, more restrictive and confiscatory state and federal policies have killed the timber industry, are threatening the mining industry and have severely limited the enormous potential of the oil and gas industry.

So, Saudi Arabia's principle challenge is the dependence on one major resource that is under competitive siege.

Here are two chances to become involved--easily, with minimum effort.  

1.  Federal.  Attend an August 12-13,  state organized, “Federal Overreach Summit”.

2.  State.  Also, speak against the effort to repeal Alaska's oil tax reform: those who support repeal of this investment climate legislation would have short term gain over long term sustainability!

Alaska's principle challenges are self inflicted.  

Its 1959 statehood promise foreshadowed unparalleled opportunity, based on laws of the day.  

Thanks to state and federal government tax, statutory and regulatory policy since 1959, Alaska is a only a shadow of the state it could have been.

With 90% state operating budget dependence on oil production which is a quarter of what it once was, and with governmental handcuffs on future potential, America and its largest state will have no one to blame for Alaska's coming economic insolvency but the people themselves.

Citizens can make more of a big difference in Alaska than in Saudi Arabia.  We can act to support improvement of Alaska's oil tax reform policy.  We can fight the federal government's continuing encroachment on Alaska's sovereignty and we can encourage more moderate state and municipal spending in order to keep in line with our declining ANS production.  There is hope for a bright future for our Alaska families, if we work for it! 

But if we don't improve state and federal behavior, we won't have a king to blame for disastrous policy.  We won't have lack of resources to blame.  We won't even have a bad president, governor, legislature or congress to blame.  

We will have ourselves to blame for voting certain very poor decision makers into office over the last 54 years--or, for not voting at all.

Categories:
Syndicate content