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Commentary

8-20-14

20 August 2014 5:30am

 

Yesterday's Election Results: Scroll down for yesterday's analysis.

KTUU.  The outcome of Ballot Measure 1 decided whether Alaska should keep changes the Legislature made earlier this year to the state's oil tax structure.  Controversy surrounded the divisive issue from the time legislation was proposed through the days leading to the election.

Categories:

8-19-14 Today Alaskan Voters Determine Their Future!

19 August 2014 5:34am

Primary Election Day In Alaska

A Historic Day Whereupon Alaskan Voters Will Determine the Future Of Their State and Their Country!

by

Dave Harbour

​(Responses to commentary)

Alaska: Where A Deal Is A Deal?

Last Spring we wrote a four part series, here, on Alaska's oil tax history going back to forty years.  We also explored Alaska's current status as a competitive investment climate and coined a phrase: "In Alaska, Is A Deal A Deal?", and variations on that theme.

In one column, below, we explored the concept of a competitive investment climate/tax policy in an ideal world, which, on this Primary Election Day, might interest our gentle readers.


So, question: rather than just be relegated to the critics' peanut gallery, what would we be inclined to do were we to have absolute power?

Answer: We would sell oil and gas leases in the private market for the highest price.

We would loudly proclaim that, "in reliable Alaska, a deal is a deal and we put great value on protecting our reputation".  

While our constitution gives us the sovereign power of taxation, we are loathe to use that power selfishly, negatively or in ways that diminish our integrity as a respected, sovereign state.

We would endeavor to never change the tax/royalty/regulatory rules of the game affecting an investment for at least 20 years--except to moderate the impact of those burdens in response to logic and our competitive position with respect to competing markets.  

We would control the nearly insatiable appetite for increased spending beyond our means, knowing that run-away spending could force us to raise tax burdens and decrease our competitive ability to attract investment.

We would not impose any unnecessary costs (i.e. "must haves") on energy projects that diminished the maximum monetary returns; we would then be free to consider use of those maximum returns for social or capital needs of our citizens.

In this way, we would seek to not add an unnecessary and burdensome straw to the back of a project that needed every possible advantage to compete in the world energy marketplace.  

We would not risk adding one single incremental project cost that could kill a project.  

We would not flirt with disaster.

And that, Dear Reader, would lead us to become a place in the world where investors have confidence that, "a deal is a deal".  -dh

Today is a historic Alaska Primary Election Day whereupon voters will decide their own future and, more importantly, the future of their children. 

Our position has always been that high Alaska oil taxes may increase short term gains for this generation but cause a withdrawal of investment at the expense of our children’s generation.

We have written extensively on this subject (i.e. see sidebar links).  We have concluded that for this and future generations our goal should be a reliable and competitive investment climate that produces maximum natural resource and employment returns for this and future generations. 

But there are those who would skim as much as possible from our natural resource potential today no matter what ill effect that might have on future Alaskans.

Today, voters will decide whether to repeal SB 21, a reform bill passed a year and a half ago.  That bill reforms many of the most objectionable aspects of an oil & gas production tax increase passed after little debate by the Legislature and applied RETROACTIVELY nearly a decade ago.  We’ve seen over the past year of reform, how investment to keep the Alaska economic lifeline (i.e. the Trans Alaska Pipeline System {TAPS}) functional has been increasing.

Now, put yourself in the place of a legislator who supported SB 21.

It must be very hard for a politician to avoid temptation. 

Temptation to bow to constituent demands for subsidy.

Temptation to bow to business and campaign supporters for tax moderation.

Temptation to bow to economic realities and a sense of, “doing the right thing”.

Fairbanks Senator “Click” Bishop is an example of a fellow caught between a rock and a hard place.

Some of his union constituents want to repeal reform which could siphon more money into government and public utility unions that could expect to profit from taking maximum oil tax money now in spite of any effect that might have on the future.

Some of his union constituents depending on business generated jobs support reform and the effort to “Vote No On One”, the slogan for pro-SB 21 reform advocates.

Some of Bishop’s constituents are directly depending on oil company investment and jobs while some are involved with Interior Alaska, subsidized utility projects requiring huge expenditures of capital dollars from a diminishing state treasury.

So, what does Bishop do?  He supports SB 21…conditionally.  In this August 17 Op-Ed he assured his local readers that he voted for tax reform but didn’t trust investors and would make them pay dearly if they didn’t invest what he expected, though his expectation is undefined.

He says, “Here’s how my concerns were reported on the night I voted in favor of SB 21: "Bishop was cautiously optimistic the cuts would result in a change on the North Slope, but was adamant that he needs to see a ‘marked investment’ of billions of dollars per year if the industry hopes to hold onto SB 21’s changes. 'Do I trust the oil industry? No, they haven’t proven it to me yet,’ he said. ‘I’m just putting them on notice, right here and right now. They got one free pass with me tonight, and if I don’t see increased production, I’ll be the first one to file a bill to put it back on them, end of story.’ When asked when he would make that determination, he said three years."'

*     *    *

“But”, Bishop continued, “I want to stress -- the burden of proof is not on me or any other Alaskan -- it's on the industry. I want to see increased spending and I want to see increased production. So, I am on the record, just as I was on the record during my campaign and my time in the Legislature. I will take this leap of faith, but if it's not producing the promised results within three years, I will lead the charge to change it.”

“I will also note that if we have to return to ACES or something like it because the producers have not produced, I will be leading the charge for that too, including a claw-back provision to return those dollars to Alaska,” he concluded.

In short, Bishop is like other public officials who kowtow to the public in the quest for reelection by demonizing investors.  It is unfortunate that even if today's effort to repeal tax reform fails, and even if resulting industry investment is massive, the Senator's hostility will remain a matter of public record and a matter of investor concern.

We might have been more understanding had the good Senator opposed SB 21 and courageously stood by his guns or supported and defended reform because he believed the policy best for Alaska--for certain well-articulated reasons.

But Bishop's “on-the-one-hand/on-the-other-hand” rhetoric makes him appear to be unstudied, incapable of decision and far short of the wisdom required of one elected to analyze and act decisively on complex matters affecting the lives of all Alaskans, if not all Americans.  We have seen Bishop in action, like him and appreciate his best of intentions.  We don't mean to pick on the man but his attitude attracts critique.  Why would you support reform for the very investors whom you attack and threaten?

Bishop’s psychology is not unique.  In his defense, he probably does faithfully follow the diverse pressures of constituents.  He has likely chosen to be a “follower of constituent concerns” rather than a, “leader of Alaska”.  That approach might be best calculated for popularity and reelection but falls short of true leadership, diplomacy and business acumen.

Where does this leave Alaska on this historic, Primary Election Day?

We believe that should Ballot Proposition #1 fail (i.e. thus reaffirming passage of SB 21), Alaska will continue to see its investment climate attract more investment.  That investment will lengthen the life of TAPS and thus best secure economic prosperity for this and future Alaska generations.

Should Proposition #1 pass (i.e. thus repealing SB 21 and tax reform), we believe the event will be followed by investor statements indicating, “disappointment” that a well-studied plan by the Legislature and Governor to improve Alaska’s investment climate has failed through operation of a voters initiative.

We believe that under either scenario, the citizens of Alaska and the nation have big challenges to overcome.

  1.  Scenario: Initiative Fails.  Celebration will and should be muted.  Oil tax reform will continue forward.  More investment can be expected.  But investors will remain cautious for several reasons:
    1. The subjective, demanding and hostile attitude of, “invest to my satisfaction”, projected by Senator “Click” Bishop and a large percentage of other Alaskans will be calculated when future investment decisions are discounted for political variables.  Yes, tax reform is safe for the time being, but a large block of voters and elected officials remain hostile to investors—and they know it.
    2. Investors have just witnessed how Alaska’s voter initiative process can emasculate the carefully developed policy of elected officials.  While the initiative may fail today, the process remains alive and well for another day—and investors know it.
    3. With reaffirmation of tax reform, expectations will be high for the oil producers to, “make the gas pipeline/LNG project reality”.  The big producer investors have always said that a durable, reliable “fiscal regime” is required before investors commit $40 to $60 billion into marketing the 35 Tcf + of  Alaska North Slope natural gas reserves.  A decade ago, Governor Frank Murkowski developed an agreement with producers that provided ‘fiscal certainty’ for their big gas pipeline investment in return for a production tax increase.  The Legislature balked and, instead, gave investors no fiscal certainty but rope-a-doped them a tax increase that is the subject of today’s SB 21 tax reform repeal ballot question.  In short, once today is done, the North Slope producers’ gas pipeline project will be under increased scrutiny, accompanied by residual hostile attitudes which surfaced during the SB 21 debate process.  Investors, therefore, know that while production tax reform is real (at least for the time being), new challenges await them.
    4. If Alaskan leaders do not restrain their appetite for continuing, increased spending the pressure will soon build to again increase oil taxes—and, investors know that, too.
  2. Scenario: Initiative Passes.  Governor Sean Parnell (NGP Sean Parnell, No On One, Production Tax, ACES, reform, sb 21, Photo by Dave HarbourPhoto), some legislators, business leaders and oil companies will express varying degrees of disappointment.  Expect to see somewhat restrained comments by oil company taxpayers.  After all, they will once again be living under one of the worst investment climates in the free world—and their assets and operations will still fall under dominion of an unreliable taxing sovereign with regulatory muscle to boot.
    1. We believe investors will throttle back on LNG gas project planning or put the project on hold.  They will, however, be careful about their public responses knowing Alaska is capable of mobilizing further hurtful voters’ initiatives, including a natural gas ‘reserves tax’.
    2. Alaskans can expect to see some projects now being constructed, abandoned.
    3. Real estate investors will be hard hit, beginning this coming fall and winter, as producer companies engage in reductions in force and terminate or downgrade scores or hundreds of service agreements with Alaskan contractors.  New “big box” retail investors will be facing a dangerous, demographic slide.  Nonprofit organizations heavily dependent on general business donations can expect to see a dry desert appearing before their eyes, with few oases of private financial support in view, other than the occasional mirage.  Hoped for new oil and gas investment will fade away, adversely affecting the state and municipal budgets depending on income from the (i.e. discriminatory, since no other business pays it) special oil and gas property tax.
    4. Less oil, than with tax reform, will be transported down TAPS.   This will lead to an earlier shutdown, removal and restoration of the great oil conduit, than would have occurred with tax reform.  This will cause increased prices for oil shippers and their customers at Alaska refineries and on the U.S. West Coast.   The end of TAPS will end oil and gas exploration and development on the Alaska North Slope for, at least, the remainder of our generation.
    5. Finally, one has to ask: If SB 21 is repealed and the negative investment climate produces an outmigration of citizens, will massive state subsidies still be spent to produce the multitude of new energy projects now on the drawing board—in preparation for a growing population.  If so, it is likely that much of that spending will be wasted.  If not, many state employees and their contractors will also experience reductions in force.

Finally, whether the initiative passes or fails, Alaska will still have to contend with two very big challenges:

  1.  Alaska will still face the overreaching, hostile and anti-development actions of a federal government that controls most of the land in Alaska directly, and all of the state, Native and other private lands indirectly.
  2. Alaska will still have to resolve whether it wishes to encourage investors with a truly positive attitude.  Or, will we continue to reflect a small-town, suspicious and hostile attitude toward the very investors whose perseverance and treasure produced for Alaska and her citizens a 50-year age of prosperity?

Tomorrow we’ll know.  Today will be history.


Responses to above commentary:

  • Dave,
     
    My comments from the other side of Pacific (i.e. one of our Australian readers.  -dh).
     
    From a country which is normally considered more collectivist than the U.S. I find the implicit belief of the “high taxers” (including Commisar Palin) to be surprising, but like all socialists everywhere, they believe: "the economy just happens and all of its output belongs to the State other than the bit we chose to leave to you.”    A "Yes" vote will kill the Alaska LNG Project - perhaps forever (though the Producers will be too polite to say so) - and that’s a $50B project!
     
    Cheers,
    N.
  • Our email alert drawing attention to this commentary was entitled: "This Primary Election Day Will Change Alaska's History".  Our first response came from highly respected Alaskan leader, A.G.C., who replied, "Hopefully for the better, but I doubt it."
  • Dave, really good job on the editorial today.  I think you have fairly depicted either outcome, which I fervently hope is a no vote. Looking forward to seeing what you write tomorrow…  -N
  • Thanks, Dave; I voted on Saturday.  -K.E.
  • Looking at the Vote Yes on One Campaign I see the same tunnel vision that I experience on the highways every day. A driver only looks forward in the lane he occupies and comes up behind another driver, tailgating, thinking this will make the trip faster. When this doesn’t happen the driver swerves into another lane without looking to both sides and rear to see what danger may lurk. Many accidents and near accidents occur because of this behavior.  Voting Yes is exactly the same where the voter only looks at the immediate rewards and not the risks and damage to others their actions may bring. The trickle-down effect from discouraging investors will be a severe blow to Alaska’s future.

I urge all Alaskans to Vote NO on One to keep the Alaska economy moving forward now and in the future.

Ken Bauer, Operations & Sales Manager

Spill Shield Inc.

2000 W International Airport Road, D-2

Anchorage, Alaska  99502


 

 

 

 

 

Categories:

8-14-13 Yes, Russian Eyes Are On Canada, Alaska and the Lower 48

14 August 2014 2:01am

Commentary: We can't help wondering about wandering Russian eyes, now turned more than ever toward the Arctic, shared by Canada and U.S., among others.  With more incursions of Russian bombers into our airspace, with Russian aggression and energy blackmail occuring in Ukraine, with Russian interest in Exxon's Point Tompson Field, with increasing Russian involvement in North American energy projects, and, now, with Russia lobbying against exports to Europe, we wonder -- as do our good readers -- at how entangling energy alliances involving Russia will affect Alaskan and Canadian energy colleagues.   

So what is our purpose?  Our purpose today is to remind ourselves to be ever alert, "lest we forget" the chilling days of the cold war.  We cannot afford to ignore movements of the Russian bear in this direction, due to his proclivity toward hostility and not peace--particularly when U.S. leadership is more inclined toward diplomatic appeasement than serving as freedom's guardian.    -dh


   
Spyglass sells assets, cuts dividend by a third
Calgary Herald, By Dan Healing.   Spyglass Resources says second quarter output continued to be reduced by pipeline leaks ... formed in a three-way merger last year of Calgary juniors Pace Oil and Gas ...
 
Categories:

8-8-14

07 August 2014 10:04pm

See Our Commentary On Federal Government Comment Periods Now Underway


Calgary Herald by Dan Healing.  Pengrowth Energy Corp. will deliver output from its Lindbergh thermal oilsands project starting next year on a pipeline operated by heavy oil rival Husky Energy Inc., it reported Thursday after markets closed.


Tim Bradner, Nikiski, Land Acquisition, LNG, Alaska, Dave Harbour PhotoHomer News by Tim Bradner (NGP Photo, Nikiski, Circa 2002).  The Alaska LNG Project LLC has purchased 120.4 acres from private landowners for a large liquefied natural gas plant at Nikiski, has an additional 97 acres under contract for purchase and also is working with the Kenai Peninsula Borough on conveyance of 29.9 areas....


Is the Federal Government Destroying America's Economy?

What do federal comment periods have to do with this question?

by

Dave Harbour

We arrived at a difficult conclusion many months ago.

Any child could see that the rising level of federal government lies, hypocracyattacks on economic enterprises and willing participation in the Enviro-Industrial-Governmental Cabal could only reflect the most stupid and clueless leadership in the history of the world or, a carefully designed program to destroy the United States -- as we know and love it -- from within.  

It's not about energy, carbon emission, NPR-A, ANWR, Pebble Mine, health care, EPA/NSA/IRS overreach, etc., we concluded.  It's not about any of these issues.  Normal, free citizens need to understand: it's about the accumulation of power.  As the Administration's power increases, so do constituencies supporting the Administration: paycheck dependent bureaucrats and government program beneficiaries.  As free enterprise projects are blocked, delayed and diminished, the resources, political and voting power of wealth creators is diminished.

There is no big secret here.  The Administration and its spokesmen over time have been very clear about an agenda to, "fundamentally transform the United States of America."

...from Saul Alinsky's, "Rules for Radicals" comes this nihilist philosophy studied by Hillary Clinton and Barack Obama:

 “The man of action views the issue of means and ends in pragmatic and strategic terms.

In other words, Alinsky’s radical is not going to worry about the legality or morality of his actions, only their practical effects. 

If they advance the cause they are justified. “He asks of ends only whether they are achievable and worth the cost; of means, only whether they will work.”


Dostoevsky famously wrote that, “if God does not 
exist then everything is permitted.”  p. 38


Energy and other natural resource investors an employees need to read and understand what is going on:

Barack Obama's Rules for Revolution: The Alinsky Model, By David Horowitz 
2009, and

The Shadow Party and the Shadow Government: George Soros And The Effort To Radically Change America, by By David Horowitz and John Perazzo
2011, and

Discovering the Networks

Since the President and the socialist and anarchist mentors (12, 3, 4, 5) upon whom he relies are not stupid, we are left with the sole conclusion that regulatory assaults like the ones noted here are intended.  

Citizens, at this point, have few options but to aggressively participate in the public comment period of these issues.  Little to no opposing comment of these proposed government actions gives future courts no choice but to say, "Well, the preponderance of comment supported the Administration proposal and we are not inclined to substitute our judgment for that of a regulatory agency which has abided by its notice requirements."  

Chances are, as in the case of the National Petroleum Reserve Alaska, the Administration will go on and promulgate the rules it wished to enact, anyway.  

But it would be helpful to future litigation were this Administration to promulgate unpopular rules that had been opposed by a strong constituency throughout the various comment periods.  

Please read and Act On This US Chamber Warning that could be a death knell to economic recovery, a "climate change" issue earlier articulated by the President -- and this Resource Development Council For Alaska Warning that a precedent of preemptive project blocking could threaten all municipal, state and private projects on public and private lands!

Regarding the latter: preemptive action against project planning gives America the 'rule-of-law' status of a banana republic whose leaders would be empowered to make decisions without providing citizens with their constitutional rights of due process.  By this action, citizens would be denied the right to petition their government and receive a fair hearing leading to a just decision.

This situation is both treacherous and heartbreaking.  But the handwriting is on the wall and it is reality.   

While we're at it, faithful NGP readers should also be heard on the Feds' comment period regarding an upcoming five-year Outer Continental Shelf leasing plan.  Consumer Energy Alliance provides this helpful portal.  -dh

The most dangerous position a person or company can now take is to deny the highly coordinated assault which is upon us and, therefore, refuse to participate, prepare and defend.    

 


US Chamber Warning OF EPA Attack On American Economy!

The Environmental Protection Agency (EPA) held a series of hearings last week on its controversial effort to impose sweeping new regulations on carbon emissions. This unprecedented wave of regulations on affordable energy will result in higher electricity bills, fewer jobs, and slower economic growth. 

If you weren’t one of the 1,600 people who attended one of the hearings held in Atlanta, Denver, Pittsburgh, or Washington, D.C. last week, it’s critical that you still make your voice heard.

 

Think the EPA regulations won’t directly impact you? Think again. Here are a few things you need to know about the EPA’s massive regulatory overreach and attack on affordable energy:

  • By the EPA’s own estimates, the regulations will impose nationwide electricity cost increases by 6-7% and up to 12% in some locations.
  • Rising electricity costs will place America’s job creators at a disadvantage with foreign competitors,forcing more businesses and jobs to move overseas.
  • EPA projects annual compliance costs between $5.4 and $7.4 billion in 2020, rising up to $8.8 billion in 2030.
  • The regulations will decrease reliability in our energy supply and increase the potential for blackouts at times Americans rely on electricity the most.
  • The regulations will impose billions in costs on the U.S. economy and threaten thousands of jobs. And for what? Upon full implementation in 2030, global carbon emissions will only be reduced by a mere1.3% -- the equivalent of just 13.5 days of emissions from China.

Despite the magnitude, cost, and incredible complexity of the EPA’s proposal, the agency plans to finalize and implement the regulations on a rushed and arbitrary timeline after only four public hearings, limited review of the proposal, and a brief 120-day comment period. 

We can only stand up to the EPA’s job-killing regulations if we make our voices heard. 

It will only take a minute of your time. Will you add your name? 

Click here to weigh in with the EPA and demand additional public hearings, an extended comment period, comprehensive analysis by independent organizations, and additional time for states to review the proposal.

This is your chance to have a say in sweeping regulations that will impact entire communities, threaten our energy supply, increase electricity bills, and cost jobs and economic growth. 

We also encourage you to personalize the comments to tell the EPA how these regulations will directly impact you, your family, and your community. 

Thank you,


Rob Engstrom
SVP and National Political Director
U.S. Chamber of Commerce

 

 

U.S. Chamber of Commerce 1615 H Street, NW Washington DC 20062-2000
To learn more about our network, visit Friends of the U.S. Chamber of Commerce.
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RDC Warning!

The Environmental Protection Agency (EPA) has released a Proposed Determination of the U.S. EPA Region 10 Pursuant to Section 404(c) of the Clean Water Act on the Pebble Deposit Area.  The document attempts to assess the effects of a potential mining project, without the project plans. 
 
The proposed determination is a flawed, conclusion-driven document, does not contain site-specific development and mitigation plans, and is based on a hypothetical project that is misleading and inaccurate.
 
RDC maintains that any project in Alaska should be vetted through existing permitting processes, and be properly evaluated through the National Environmental Policy Act.
 
Beyond projects in the Bristol Bay region, the EPA's actions set a dangerous precedent for any development project in Alaska, as well as across the nation.
 
Action requested:
RDC encourages its members to “save the date” for upcoming public hearings:  
 

August 12th 2:00 p.m. • Anchorage

 

Categories:

8-7-14 NIMBY and "palpable tensions" among stakeholders

07 August 2014 4:46am

A Fairbanks columnist (i.e. below) admits a conflict of interest -- then opposes a pipeline gravel site possibly needed for a gas pipeline that could lower Fairbanks consumer energy costs.  

It is a classic example of NIMBY, "Not In My Back Yard".  We do not suggest it is improper for a columnist to pen commentary.  Neither do we proclaim NIMBY to be a 'bad' thing.  We do suggest NIMBY is a reality upon which pipeline 'stakeholder relations' professionals must concentrate.  

There is a palpable tension among various special interests: affected neighbors, consumers-at-large, pipeline engineers, local and state politicians and the ticking clock which calculates rising costs of delay just as surely as it tells the time.  -dh

Fairbanks News Miner by Kris Capps.  Two areas in the borough are being considered as possible material sites, or gravel pits, for an in-state gas pipeline, and the Denali Borough wants to know what residents think about it.  ...  In the interest of full disclosure, readers should know this is my neighborhood, and I own a home on Karma Ridge.  ... The thought of our one-lane neighborhood road becoming a major route for truckloads of materials causes me great concern.


Doc Hastings, Natural Resources Committee, EPA Overreach, Dave Harbour PhotoYesterday, Natural Resources Committee Chairman Doc Hastings (NGP Photo) sent a letter to the U.S. Army Corps of Engineers voicing strong concerns over the Corps’ settlement this week with Columbia Riverkeeper, a group that for years has sued the federal government and favors removal of Northwest dams. The settlement, which involves payment of over $140,000 in taxpayer-funded attorneys’ fees to the plaintiff, would vastly expand the regulatory authority of the Environmental Protection Agency (EPA) over Army Corps’ dam operations nationwide. These dams, especially those in the Pacific Northwest, are the major source of clean, renewable electricity, irrigation, flood control, and navigation.

“Incredibly, I understand that no one other than U.S. Department of Justice or Army Corps lawyers were made aware of the terms of this sweeping settlement before it was finalized, and signed by a judge.  Like an increasing number of the Obama Administration’s ‘sue and settle’ agreements over the past few years, this settlement was negotiated behind closed-doors by the Justice Department with a litigious group without consultation or input from those most directly impacted,” wrote Chairman Hastings in the letter. Of great concern is the likely precedent that this decision could have relating to the EPA’s enforcement of the Clean Water Act, relating to the operation and maintenance of federal and non-federal dams, irrigation and maintenance of a vital navigational link on the Columbia and Snake Rivers in Washington, Idaho and Oregon. This comes amidst the EPA’s hugely controversial ‘Waters of the U.S.’ proposal, which could shut down a host of water development projects and make it easier for litigious groups to sue to block them. I would request an immediate and thorough explanation of the Army Corps’ rationale and details of its actions relative to this settlement, not just to Congress, but also to all affected state, local tribal and other stakeholders that have an interest in the Army Corps’ dam operations nationwide.”

Categories:

7-10-14 Respecting The Duty To Consult

10 July 2014 8:49am

See the LNG Project's Public Meeting Schedule here.  News Miner Story: Gasline Advisory Board         

See Senator Cathy Giessel's 5-year OCS Lease Sale Comment Letter, here. Here is how our readers can comment.

Respecting both "Due Process" and the “Duty to Consult"

by

Dave Harbour

Canada's "Duty to Consult" (1,2) and America's similar concept are not and should not be just legal requirements for natural resource companies.  Consultation is a basic principle of good communications, responsible corporate citizenship, or, at the least, enlightened self interest.

Bill Gallagher

We have known and respected the work of Bill Gallagher (NGP Photo) for over 20 years.  

A serious, fair minded man, he was one of the first counselors to begin publicly speaking about the importance of Canadian project managers communicating in good faith with local stakeholders.

Of his book (NGP Photo with our Alaskan Anaktuvuk Masks), “Resource Rulers: Fortune and Folly on Canada’s Road to Resources”, Bill says his is, "the definitive book tracking the rise of Native empowerment and their remarkable legal winning streak in the Canadian resource sector. Understanding the Native interconnections, eco-activist linkages, and government responses is essential for planning successful resource strategies."     

Readers may order his book from Amazon.   -dh

To consult, cooperate and communicate with the public in general and stakeholders specifically, is a responsibility to shareholders and the obligation of a responsible project manager -- as we have discovered in both Alaska and Canada.

In short, project consultation with all relevant parties is as important to the success of an investor's project as good design, engineering and construction.

Corporate managers who fail to embrace this reality will be more likely to take superbly engineered project blueprints to their graves than to ribbon cutting ceremonies.

On the flip side, stakeholders who take advantage of project managers through intimidation or by making unreasonable demands can, likewise, kill projects that would otherwise sustain local, regional and even national economies and families.

Thus, an effective process of consultation can only work well in an honestly regulated environment where the government and all parties respect due process and the rule of law is faithfully upheld.

We would add this opinion.  

Good project managers should always consult with local stakeholders.  The relatively little time and money spent in demonstrating friendship, open communication and good corporate citizenship ultimately saves shareholder dollars and minimizes dispute.

However, when the common sense requirement of good communication becomes a legal "duty" (i.e. applied differently in the US and Canada) complete with years of court precedent, two phenomenon may begin to occur.  First, investors can become tempted to invest minimally in good communication and for the primary purpose of meeting the letter of the law.  Second, distant stakeholders, like environmental and social activists may attempt to use the legal "duty" of consultation as a tool to delay or block projects for political, fundraising or other reasons.

In Alaska's case, the Pebble Partnership mining project has provided jobs and economic support to local communities while investors develop a mining plan upon which it can base future permit applications.  Though the project did not labor under a "duty to consult" law exactly like Canada's, it did recognize that surviving a challenging permit process would require local stakeholders to be both knowledgeable about and beneficiaries of the project.  The project's public outreach program has been exceptionally executed.

The permit process to follow, would then allow public comment on each phase of the project as it pursued the permitting requirements.  A final decision on the permit applicant's project would be based on an objective review by regulators of the record of evidence collected from filings and testimony.  That decision, in turn, can be administratively appealed or appealed through the court system.  This is known as "due process", a key provision of America's 'Rule of Law', memorialized in the 5th and 14th Amendments of the US Constitution.

The Pebble mining project would occur on Alaska state lands leased to the partnership.  But after one lodge owner began spending millions of dollars to oppose the project -- in concert with environmental activists and some local residents -- the Environmental Protection Agency (EPA) stepped in and is now in process of attempting to preemptively block the project.  No application exists, nor does a record of decision based on an application; and, the potential applicant holding valid Alaska state leases is denied an opportunity to appeal a decision on an actual application based on a record.

The EPA rational is based on grounds that the project could cause environmental harms that it imagines will occur even before the project has filed for a permit and been allowed its constitutional right of due process.

But if the EPA can preemptively strike down a mining project without allowing it due process, no highway, oil and gas, municipal utility, agricultural, transportation or commercial fishing project is safe from a preemptive, arbitrary and/or capricious government shutdown.

Yes, we strongly support local stakeholder consultation by project investors.  We also caution our fellow citizens that to properly balance opposing viewpoints, an impartial government regulator is essential.  

If citizens either in Canada or the United States perceive that regulatory authorities do not base decisions on an objective legal record achieved through due process, the rule of law itself is jeopardized.

When the rule of law disappears, civilization devolves into a chaotic state wherein "Might Makes Right", as the Romans found in the 5th Century and as Germany taught the world in the 1930s through WWII.

We hope that alert citizens throughout North America will choose to support good communication and win-win outcomes between natural resource wealth producers and local citizens.

But we acknowledge that this will not be possible without courts of law, legislative bodies, presidents and prime ministers who are able to overcome political temptations and consistently support the rule of law -- and the due process upon which it depends -- to produce just and reasonable decisions.

In that way, perhaps we can pass down to our children a society that rests on solid, ethical standards demonstrating that, indeed, "Right Makes Might". 

Predecessors, like Abraham Lincoln (NGP Photo), passed that legacy to our our later generation when he said in the great Cooper Union Address, "Let us have faith that right makes might, and in that faith, let us, to the end, dare to do our duty as we understand it."

If we and our leaders properly discharge our Constitutional obligations as we understand them, perhaps our children will look back and say of our generation that, "They protected for us, the great legacy of the rule of law, wherein doing the 'right' thing makes a country 'mighty'."

Yes the duty to consult with one another is both right and good business.  But even more important is the duty to maintain a nation and society of well observed laws and the protection of due process.


 

Thanks to BP's Julie Hasquet, we hear that the Alaska LNG/Pipeline project will provide community project briefings next week (i.e. very timely with respect to our commentary today.)

We encourage our NGP readers to attend one of these community meetings to learn more about the Alaska Liquefied Natural Gas (LNG) project.

In Anchorage 

When: 

6-8 p.m., Tuesday, July 15
(Presentation begins at 6:30 p.m.)

Where: 

William A. Egan Civic & Convention Center
Lower Level - Summit Hall
555 W. 5th Avenue 

In Fairbanks 

When: 

6-8 p.m., Thursday, July 17
(Presentation begins at 6:30 p.m.)

Where: 

Wedgewood Resort - Gazebo Room
1212 Wedgewood Drive 

The Alaska LNG team will provide a project overview and share information about current studies.   It will be an opportunity to both hear about and comment on the project.

Happily, sponsors will provide refreshments.

 

 

Here is Senator Cathy Giessel's (NGP Photo) 5-year Lease Sale Comment Letter.  Senator Cathy Giessel, Alaska, BOEM OCS Lease Sale Schedule, Photo by Dave Harbour

We encourage all of our readers -- throughout the country -- to comment as well by the July 31 deadline!  Here's how.

In her letter of July 8, 2014, Senator Giessel wrote:

Ms. Kelly Hammerle

Five Year Program Manager

BOEM (HM–3120)

381 Elden Street

Herndon, Virginia 20170

Dear Ms. Hammerle:

Alaska is fortunate to be an important contributing part of our nation’s leading role in global oil and natural gas production.  Our nation has the opportunity to continue to be an energy leader if the Bureau of Ocean Energy Management (BOEM) adds currently unavailable offshore areas, such as Alaska, the Atlantic, and the Gulf of Mexico to the upcoming 2017-2022 Five Year Plan.

These additions would further boost our nation’s economic and energy security as well as create much needed tax revenue.   Alaska has experienced the continued benefit of increased jobs and revenue from oil and natural gas development, and I believe that every state with these natural resources should have the opportunity to benefit from the same economic gain.  Equally important, as part of the United States of America, other states should be contributing to our nation’s economic and energy growth and not remain stymied by policy barriers.    

I am a strong supporter of protecting our environment; Alaska, with its refined application and permitting process, is an example that oil and natural gas can be developed in a way that protects both people and its ecosystems.  Therefore, I am confident that energy companies and other states will utilize the same best practices, standards, and regulations that are in place to safely develop offshore oil and natural gas resources.

I applaud our Congressmen for passing a bi-partisan bill, the “Lowering Gasoline Prices to Fuel an America That Works Act” to support offshore oil and natural gas development and support whatever means are available to move this economic opportunity forward. 

I would appreciate your consideration and urge BOEM to include currently unavailable offshore areas, such as Alaska, the Atlantic, and the Gulf of Mexico in the upcoming 2017-2022 Five Year Plan.  We must continue to generate jobs and revenue to rejuvenate our nation’s economy and decrease our reliance on foreign energy sources.

 

Sincerely,

Senator Cathy Giessel

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