Here is A Link For Readers To Our Latest Column In Xtra, Anchorage's Community Newspaper. Here Is Our Unedited Submission: "Responsibility"
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
Note: 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 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.
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.
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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.
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.
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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.
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.
- Locally Owned Alaskan Bank Economic Analyses:
Governor 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
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.
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
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.
Fairbanks News Miner by John Coghill (NGP Photo). Coghill provides answers to questions about oil and gas tax reform legislation and the current attempt by referendum to repeal tax reform.
We compliment Senator John Coghill this morning for two reasons: 1) his insight on oil and gas issues, and, 2) his political courage.
First, on the issue. Sunday's News Miner featured his Opinion piece wherein he provided 'Questions and Answers' about the recent passage of oil and gas tax reform legislation and the current effort to repeal the law by referendum. The questions were the main ones touted by the opposition and Coghill's answers were credible. Coghill came across as the adult in the room, supporting the 'long term good' for Alaskans as opposed to supporting the more selfish, 'short term gains' espoused by blog commenters who responded to his column.
Second, on courage. The News Miner, like other publications, permits blog commenters to opine on articles and issues without identifying themselves. Accordingly, we hear from the most vicious array of special interest commenters every time a common sense, free enterprise commentary is offered. These anonymous folks are often very impolite and their comment seems designed to intimidate, make fun of, or demonize more conservative voices. I almost always see this coming from the left side...seldom from the right. Since many of the commenters seem to be employed as interns, trainees, apprentices, or employees of special interest non-profit organizations with self-serving agendas, it is relatively easy to scare up a couple dozen nasty comments anytime someone from the pro-investment climate side of the aisle expresses an opinion. Faced with a barrage of such responses every time a conservative, elected official politely expresses an opinion, one can only conclude that leaders like Senator Coghill truly are courageous.
Voters are always saying, "I wish we had someone in there who would do the right thing rather than the expedient thing." Interior Alaska is lucky to have such a leader in John Coghill. -DH
Today's headlines from Energy in Depth:
Colorful, middle-aged women at the core of anti-HF campaign. Associated Press. Victor Furman, head of a pro-gas landowners’ group in Chenango County, said Rapp and Scroggins are part of a “fringe group” that relies on emotion rather than science to build opposition. “They hold meetings that are full of lies and misinformation,” said Furman, a retired technical writer for IBM.” Energy In Depth sometimes sends its own camera-toting representatives to tail Scroggins’ tours and rebut what she says. The group posted video on its website of Scroggins shouting personal insults and obscenities at Phelim McAleer, a filmmaker who tried to talk to Ono and Sarandon during their January tour. “I admit that I lost it that day,” Scroggins said. “It wasn’t my finest hour.”
'Gasland' sequel claims drillers corrupting gov't. Associated Press. "The real reason that shale development has expanded is not because of some nefarious plot on the part of industry leaders wearing black robes," said Steve Everley of Energy In Depth. "Rather, it's because people across the United States have recognized that there are massive environmental and economic benefits to be reaped. ... Both political parties are pushing for increased responsible natural gas production, and it's because of the facts, not because they've been `captured.’”
Petroleum News by Kristen Nelson. Alaska North Slope crude oil production dropped below 500,000 barrels per day in June, averaging 497,582 bpd, down 6.95 percent, from a May average of 534,741 bpd, while much smaller Cook Inlet production volumes saw a 5.4 percent increase to 13,571 bpd in May over April.
Note: Legislators have given Cook Inlet Producers favorable tax incentives for several years--resulting in more exploration and infrastructure investment. North Slope producers have been given punishing taxes until this Spring when the legislature enacted tax reform. However, that reform -- and the rejuvinated exploration that could materialize from it -- remains caught under a cloud of uncertainty caused by those now seeking to repeal the law via referendum. -dh
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.)