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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.

 

Commentary

2-14-14

14 February 2014 11:07am

What: Alaska Miners Association 2014 Biennial Conference 

When:  April 7—13, 2014

Where: Carlson Center: 2010 2nd Ave.  in Fairbanks, Alaska. 

About: The event will feature a multitude of lectures and workshops from industry experts; field trips to the Pogo and Ft Knox Mines; and the opportunity to network with individuals involved with all aspects of Alaska’s mining industry.

How: Register at www.alaskaminers.org, or by contacting Alicia Amberg: e-mail alicia@alaskaminers.org; tel: 907-563-9229

 

This morning, the Alaskanomics Blog posted and distributed (here) our February 10 commentary: "Has Alaska Become A Place Where A Deal Is A Deal?"  Copied below for reader convenience.  Of that commentary, on Tuesday we are honored that one of our more critical, fact-oriented readers sent this review: Just a quick note to offer you my 'standing ovation' for your commentary yesterday.  You should ask the xxxx and xxxx to run it ... after all, both claim to be willing to express points of view different from their own, the bunk they've both been peddling needs to be debunked.  (TK)       -dh


Kaye Laughlin, Alaska, Photo by Dave HarbourReader Kaye Laughlin (NGP Photo) alerts us to appearance of "the FIRST DIGITAL ATLAS of HISTORICAL SEA ICE CONCENTRATIONS in the BEAUFORT, CHUKCHI AND BERING SEAS", just released by UAF researchers and the Alaska Ocean Observing System. This web-based tool allows users to view and download sea ice concentration data from 1850 to the present. The atlas uniquely provides digitized historical sea ice data compiled from more than 10 sources, including the satellite record, various U.S. Naval and National Ice Center compilations, Canadian records, Danish and Norwegian ship records, and whaling ship reports. The interactive map allows users to select a date or a location to visualize how open water seasons have varied in a particular place. An animation shows changes in ice extent and concentration through time, year by year and decade by decade. The atlas also offers a glossary that defines different types of sea ice and provides information about the original data sources and how the data were compiled. The atlas provides coastal communities, industry, and state and federal agencies, among others, an objective, historical record of sea ice conditions during the past 160 years and is also a potential educational tool in the classroom. Anyone with a modern web browser and Internet access is able to use it. The sea ice atlas will be presented in a webinar hosted by ACCAP Feb. 18 at 10 a.m. Alaska Time. For webinar information, go to http://accap.uaf.edu/node/1048 or contact Tina Buxbaum, 907-474-7812

Thursday, February 13, 2014

Has Alaska Become a Place Where a Deal is a Deal?

In August, we'll find out

Commentary by Dave Harbour

Last Sunday’s Anchorage Daily News contains a 'news' article describing how Alaskan oil companies are "pouring" millions of dollars into an effort to stop repeal of the State's oil tax reform law.

Citizens should be applauding the companies for upholding a law approved less than a year ago by Alaska's Governor and a majority of the elected representatives of the people.  A number of groups representing the bulk of Alaska's private sector economy are responsibly recommending a sound "No" vote to repeal tax reform.

Here's why citizens should join the fight against activist minority and political groups (12345) trying to repeal the recently passed reform:

1.  Alaska's government operating budget is over 90% dependent on Alaska North Slope (ANS) oil production.  Over a third of our entire economy would collapse without ANS oil.  The Trans Alaska Pipeline System (TAPS) that carries ANS oil is 3/4 empty.  It is becoming dramatically emptier: 6-8% per year.  Massive new capital investment is needed to stem and reverse the production losses.  In the most highly taxed, highest cost "oil patch" in the free world (i.e. and we would be happy to discuss Norway anytime, for it is a place where 'A Deal is A Deal'), our leaders last spring decided to reform the tax burden.  Their objective was to increase capital investment, following several years of study and careful analysis.

2.  The Constitution and our kids.  Politicians are fond of quoting Alaska's Constitution requiring that natural resources be developed for the "maximum benefit" of the people.  Trouble is, as we observed in this 2012 editorial, greedy constituencies want the "maximum benefit" of anything now...today...for themselves...and to heck with long term, wise decisions that provide a sustainable economy for their children.  We see this disturbing trend played on the national stage as well as in Alaska.

3.  Alaska's integrity is at stake.  There is no citizen who thinks, "I want our state to be irresponsible".  There is no investor who would say, "I would prefer to invest my money in an insecure area." But when Alaska began increasing its already high oil taxes nearly a decade ago (i.e. after investments had been made), future investment became less secure here. When Alaska made higher tax collections retroactive, Alaska became a riskier, less reliable place to invest. Now, when Alaska's leaders have concluded after years of study that reform is required to save Alaska's economy, special interest efforts to repeal that effort a year later would put a nail in the coffin of Alaska's reputation as a reliable place to do business.

4.  The oil companies' fight is our fight.  Without more investment TAPS throughput inches closer to a disastrous closing of the pipeline and Alaska's whole house of economic cards gets wobblier by the year.  When the cards fall and TAPS oil slows to a trickle -- perhaps even causing closure of the pipeline -- every man, woman and child still here will suffer...a lot.  

  • The subsistence lifestyle in rural Alaska will become unaffordable as fuel, airport, social service, transportation, communication and public safety programs and subsidies evaporate.  Over two hundred Alaska Native village corporations and their non profit affiliates along with Alaska Native Regional corporations should be defending tax reform--or live to see their own non profit efforts diminish as their profit making entities face the prospect of increased taxes and fewer contracts. Huge North Slope Borough, Fairbanks and Valdez oil property taxes can be collected only when oil property is present and viable. Less investment produces less local tax revenue.
  • Subsidized health care from the smallest village to Alaskan cities will diminish in at least two ways: as direct subsidies diminish and as those with insurance coverage leave Alaska or lose coverage which, in part, pays for charity health care. Advocates for the poor, disabled and sick should be opposing repeal of oil tax reform with every spare spark of energy they can spare.
  • Education will be one of the hardest hit areas, as state funding of local and statewide elementary, secondary and university programs decreases. School boards, superintendents and teachers should start appreciating and defending where their funding comes from, in our view.

We continue to be surprised at how few non profit organization leaders testify to the Legislature in support of oil companies, how few write letters to the editor.  Yes, non profits are professional, profligate writers of corporate grant requests, but how many stand up to support oil company investment -- which directly and indirectly affects their own prosperity?

  • Alaska has more non-profit organizations per capita (i.e. 6,000) than any other state. While a third of their funding comes from federal sources, much federal and foundation and corporate funding is given on a matching basis. Certainly, non-profits providing youth, arts, education, disabled and dports programs will be badly affected as business giving dries up--as we believe it will with repeal of recently passed oil tax reform legislation.   

We do wonder at the motivation of those who argue more money will flow into Alaska's coffers by repealing oil tax reform.

Two years ago during a private luncheon with a well known liberal leader, she agreed that the state's economy was in peril.  Then, she agreed that the natural result of an imploding oil industry and economy would be that Alaska could once again become a ward of the federal government where houses are cheap, the population diminishes and where the dozens of federal programs and environmental activist organizations would prosper.  I know that she is well intended and believe her to be not evil, just wrong -- at least for my network of friends and coworkers.

A well intended citizen could oppose the tax reform law and support a political party's numbers simply because he or she is loyal to that party.  In that case, the party's economic projections may be trusted on faith -- however rational or irrational they might be.

A not so well intended politician might simply think, "Hey, opposing tax reform as a 'give away' makes me popular with my constituencies, likely to be reelected, more marketable when I retire --  with an oil subsidized retirement check to boot."

On the other hand, one might think certain constituencies -- like Alaska Native oil field contractors -- that make more money when the oil industry makes more investments -- are biased.

Chambers of commerce throughout the state might be biased in favor of the law which they believe will result in more economic prosperity for their members.

In short, all participants in the growing SB 21 repeal effort -- not just supporters of repeal -- will be pursuing their own economic and social agendas.

Citizens will listen to the messages amid the din of rhetoric and vote one way or another, or not vote.

As for this editorial writer, free enterprise wins the argument at day's end.  

We would like to see the 49th state adopt a new slogan: "Alaska, where a deal's a deal!"  After all, Repsol's relatively new investment here results, in part, from an expectation of tax reform.  We therefore align ourselves with the majority of our elected officials who are charged with protecting the public interest.  

We further align ourselves with the major employers and taxpayers of Alaska, who have certainly paid their dues, in spades, and at least deserve to operate in a state that establishes and defends fair and predictable tax and regulatory rules.

We will be voting "No" on the August primary ballot measure asking for repeal of Alaska's oil tax reform legislation.

We believe Alaska's future will dramatically depend on the outcome of that vote.  And in August, the world will know whether Alaska has matured into a place where a deal is a deal.

________________________________________________________________________

This editorial piece appeared February 10, 2014 on thehttp://www.northerngaspipelines.com website.  Northern Gas Pipelines publisher, Dave Harbour, is former Chairman of the Regulatory Commission of Alaska, Former Chairman of the Alaska Council on Economic Education and former Chairman of the Anchorage Chamber of Commerce.  He has served as chairman of numerous oil and gas conferences, including the annual Alaska Oil & Gas Congress.  His articles have appeared in hundreds of newspapers, magazines and websites throughout the U.S. and Canada.

 

 

 

 

 

 

 

 

Categories:

2-13-14 Jim Prentice Looks Beyond Obama For Energy Issue Coordination - Mystrom Comments On Alaska Oil Tax Reform

13 February 2014 9:31am

Canadian Press by Mike Blanchfield.  It's high time Canada Jim Prentice,Keystone XL, Photo by Dave Harbourstarted looking beyond the Obama era if it wants to push economic integration with the United States to a new level, says former Conservative cabinet minister Jim Prentice (NGP Photo).    ...   New gas discoveries in both countries have transformed North America's economic landscape, said Prentice, who urged the federal government to set its sights on 2017 when Barack Obama's successor arrives in the White House.


Commentary.  "Tis the season!"  Yes, a legislative session in an election year tells us it's the season for discussion of the most important issues facing our state and nation.  

As our readers know, we have consistently supported pro-free enterprise and reasonable economic development policies flowing from Washington and Juneau.  

For several years, we have urged public support for oil tax reform, to correct a very predatory and anti-investor tax policy that was eroding economic strength and Rick Mystrom, SB 21, Alaska oil tax reform, Dave Harbour Photoopportunity from Alaska's economy.  We posted the last of many of our commentaries earlier this week.  Even our commentary yesterday on LNG is linked to the issue of Alaska's investment climate and dependable tax policy.

Since then, we have received several opinion editorials.  Former Anchorage Mayor Rick Mystrom (NGP Photo) wrote the one below, which we submit for your consideration.  It deserves thought since Mystrom was elected to oversee the health of our largest city and since his family security depends -- like everyone else's -- on a state that can pay its bills and support the educational, social and business amenities everyone depends on in both rural and urban Alaska.   -dh

Rick Mystrom

"Why I Support The Current Oil Tax Reform Law: SB 21"

Few issues affect Alaskans more than the health of our economy. During the 42 years my family and I have lived here, we’ve experienced both good and bad economic times. As a two-term Anchorage mayor, as a businessman, as a parent and now as a grandparent, I know and appreciate the benefits of a thriving economy.

Since the beginning of Alaska’s partnership with the oil industry we’ve had long periods of healthy economic times accompanied by prosperity in both the private and public sectors of our economy. Schools have been built around the state, our university system has grown dramatically, and health and human services facilities have been built debt-free, all largely funded by the oil industry/State of Alaska partnership.

In Anchorage alone, we built the Sullivan Arena, the Loussac Library, the Alaska Center for Performing Arts, the Egan Center and the Dena’ina Convention Center—all without any debt. The partnership has worked well for Alaska and has given us an unmatched quality of life. All of this was accomplished with an oil tax rate that was more competitive and far lower than the old tax system, ACES.

In addition, that partnership has allowed us to accumulate over $76 billion in liquid assets including $50 billion in the Permanent Fund. The fund has paid every Alaskan who has lived here since its inception more than $35,000 in dividends—that’s $175,000 for a family of five. And that fund has nothing to do with taxes. It’s funded with 25 percent of Alaska’s fixed royalty. If production increases, our royalty share goes up. If production goes down, our royalty share into the Permanent Fund goes down.

But we’ve also had shorter periods of unhealthy economic times accompanied by hardship for tens of thousands of Alaskans. In the mid-80s when the price of oil dropped from $30 to $9 a barrel, the state, the oil industry and our citizens all suffered. Thousands of our neighbors lost their homes, businesses went bankrupt, banks closed and left the state and citizens left our state. Anchorage lost 13 percent of its population and 25 percent of its assessed value. The Interior, the Mat-Su Valley, the Kenai and the rest of Alaska suffered equally. But the State of Alaska/oil Industry partnership survived, and in the late 80’s we began a long period of sustained, gradual growth.

The continuation of our economic growth is now threatened. We’re facing a $2 billion deficit. This deficit is the direct result of lower oil prices and decreased production. The claim that this deficit is a result of the new tax structure is a myth. The deficit would be virtually the same under either the old tax structure (ACES) or the new tax structure now in place.

We can’t do anything about oil prices but we can do something about production. We can discourage it or encourage it. ACES discouraged production. We’ve watched our oil partners’ investments and oil service companies’ employees move to Texas, California, North Dakota, and other states who welcome their investment dollars and our employees. The tax structure now in place, created by Senate Bill 21, encourages production. Our North Slope partners have already committed to $4.5 billion in new projects since Senate Bill 21 was passed and signed by the governor.

Now comes another very important decision point for Alaskans—a decision that will determine Alaska’s future for years to come. In August we will vote on a ballot issue that asks whether we want to encourage our healthy partnership that provides 90 percent of our state government’s funding or discourage it. Do we want to keep the new tax passed by the Legislature last year which has already resulted in new investment and new jobs, or do we want to return to the failed tax of the previous administration that contained some of the highest taxes in the world and it did nothing to encourage production of a single, new drop of oil on the North Slope?

If we vote to repeal our current tax and return to the old tax, not only will our oil partner’s investments go to other states and our production continue its decline, but it would also be likely to end plans for a large-diameter natural gas pipeline and LNG plant to get North Slope natural gas to Alaska communities along a pipeline route and to profitable markets in Asia.

In August, I’m voting to keep our economy and our permanent fund healthy. I’m voting against repealing our tax structure.  I’m voting “no” on Ballot Measure 1.

Rick Mystrom is a former two-term mayor of Anchorage, a former member of the Anchorage Assembly, and a successful businessman.

Categories:

2-12-14 Alaska LNG Challenges

12 February 2014 11:13am

Alliance Profile: M-I SWACO a Schlumberger Company: From Drilling through Production, Focused on our Customers


Alaska LNG Project Faces Market Challenges...And Political Challenges

Competition Perspectives: Part I (Part II, Part III)

by 

Dave Harbour

Alaska and Mackenzie Delta producers are eyeing LNG exports to Asia as this generation's best option for monetizing Arctic gas.  

Previous generations were close: with the Arctic Gas project in the 1970s (i.e. including TransCanada); displaced by the Alcan project in the 1980s (i.e. vigorously opposed by TransCanada); and the Alaska Highway gas pipeline project given new life with higher gas prices and passage of the Alaska Natural Gas Pipeline Act of 2004 (i.e. led by TransCanada). 

Sarah Palin, Alaska Governor, AGIA, ACES, Photo by Dave HarbourEvolution of Arctic gas projects continued with Governor Sarah Palin's (NGP Photo) support of the Alaska Gasline Inducement Act (AGIA, 2007), giving a subsidy to TransCanada just as the great North American shale gas phenomenon began eliminating that market for expensive, Arctic energy.

Sean Parnell, Alaska LNG, Governor, AGIA, Photo by Dave HarbourHowever, with subsequent support from the Legislature and Governor Sean Parnell (NGP Photo), TransCanada's project evolved into a duet consortium with ExxonMobil, and more recently achieved significant alignment of interests with the State's Administration, Legislature and other producers.

Meanwhile, the state's operating budget is increasingly unsustainable, depending as it does on drawing down savings accounts in response to its 90% dependence on diminishing oil production.

With the Obama Administration seemingly doing everything possible to prevent oil, gas and mining activity on federal AND state lands (i.e. Readers are welcome to challenge us on this accusation and we will be happy to document it), Alaska's economic prospects are at further risk.

To add to the lack of optimism, in a diminishing oil production environment, a coalition of minority activist and anti-business groups is promoting repeal of Alaska's oil tax reform law (See yesterday's commentary)--though the majority of Alaska's private sector leaders oppose repeal.  

The Senate Bill 21 reform effort was passed into law less than a year ago after years of analysis and debate about how to increase investment and natural resource production, royalties and taxes.  Repealing SB 21 would send a dramatic signal to the investment world that in Alaska, "A deal is not a deal".

Now, the state's economic hopes are focused like a falcon's gaze on hopes for a gas pipeline and LNG export project whose prime market would be Asian consumers.

However, just as changing domestic gas markets over the last 45 years have killed hopes and plans for monetizing the huge Arctic gas reserves, so now do the furies appear to be conspiring against Alaska's export hopes.

In Canada, a number of LNG projects have been approved or are in mature permitting stages -- by a supportive federal government -- and seem to be mostly targeting Asian markets.

Even though Japan's Fukushima tragedy resulted in more demand for LNG, Japan is also considering lower cost coal as a competitive alternative, which diminishes consumer appetite for more expensive LNG imports.  We note that Japan has been one of the most prospective markets for Arctic gas.

Meanwhile, members of Congress who have studied the issue are telling the Administration that unless the Department of Energy increases the approval rate -- and decreases the backlog -- of LNG project applications, markets could be lost Christopher Smith, LNG, DOE, Alaska gas, Photo by Dave Harbour, NARUCto other energy sources.

The Department of Energy's LNG export function -- under direction of Assistant Secretary for Fossil Energy, Christopher Smith (NGP Photo) -- seems to be increasing its approval activity

Fuel Fix.  Oil industry and business groups have formed a new coalition to make the case for expanded exports of American natural gas.

The “Our Energy Moment” campaign, which is described as a grassroots organization, aims to counter the arguments of export foes, as the Obama administration weighs applications to widely sell liquefied natural gas overseas.

An increased approval rate for Canadian and Lower 48 LNG projects is certainly good for North American economies.

Logically, a larger number of LNG exporters means more competition for an Alaska project.

Most projects will be attempting to secure long term supply contracts with utilities and/or large industrial users.  As those markets become satisfied with the growing number of current LNG projects, Alaska North Slope and Mackenzie Delta gas will surely have a more challenging time -- as later comers -- elbowing their way into market niches that will pay top dollar for long term contracts.

We suspect that one saving grace of current Arctic gas projects is the high degree of expertise focused on their successful outcome.  In particular, we note that many if not most of the Alaskan and Mackenzie Delta producers have LNG experience and some affiliated interests with each other and even with Canadian west coast and Lower 48 LNG exporters.

Where does this leave Alaskan citizens and investors? 

  • In six months, Alaskans will vote on whether to stabilize or destabilize their investment climate.  Depending on the referendum's outcome, we can envision either massive new investment in the state or massive withdrawals of capital investment plans, over time.
  • If the August plebiscite favors investment, we can envision all parties attempting to fast track gas pipeline timetables.  If the vote repeals tax reform, we see a gloomy end to this generation's plans for monetizing Alaska gas.
  • In the next three years, the Obama Administration will either ease up on Alaska or continue its nearly perfect record of opposing, slowing and/or stopping every major development they can in the state.  If projects can be sanctioned under the federal assault, more oil and gas can contribute to a sustainable economy.  If federal pressures continue and even increase, prospects for more oil, gas and mining production are limited.

In conclusion, we cannot overstate the importance of the August referendum vote on whether to repeal Senate Bill 21.

This is because repeal of SB 21 would recreate an investment climate that has minimized what could have been sufficient investment to stabilize if not reverse waning, North Slope oil production.

As we have demonstrated above, Arctic gas LNG projects will have a challenging enough time finding a market niche even in the best of circumstances.  But repeal of SB 21 will, in our view, totally emasculate the investment climate along with plans for a gas pipeline.

We would also offer this additional perspective on the highly lauded, state financed, in-state gas pipeline project, under control of the Alaska Gasline Development Corporation.  That project was designed to meet growing demand for natural gas as a heating and power supply for the majority of Alaska's population.

But with 90% of the state budget depending on oil production -- along with a third of Alaska's economy -- repeal of SB 21 would result in growing job losses and a massive, lemming-like out-migration of citizens from the state over the next five years.

In such circumstances, existing natural gas supplies will be more than sufficient to supply the survivors without the need for or expense of a new, in-state gas pipeline.

Finally, we invite those seeking optimism to find it by joining us in seeking a stable tax environment and for more powerfully exercised state's rights in the face of an overreaching and predatory federal government.

Categories:

1-23-14 - Rule of Law Comment From "On the Road" Washington D.C.

23 January 2014 6:07am

A Pebble Tossed In The Pond...

...does it simply produce ripples--or a tsunami threatening to ruin the rule of law?

by

Dave Harbour

Ibrahim was the Lebanese cab driver who picked my son and me up at Washington's Reagan International Airport yesterday and gifted us with his view of America.

We now see that U.S.. Senator Mark Begich (NGP Photo) has decided to oppose due process and the rule of law. 

Mark Begich, US Senator, Pebble Mine, Watershed, EPA, rule of law, due process, Photo by Dave Harbour, banana republic, Steve BorellWe have not criticized Begich or anyone else for not personally supporting a particular natural resource project.

We do find it unsettling that a Member of Alaska's Congressional Delegation -- or any Member of Congress -- would become a Member of Congress, swear to uphold the Constitution, and then deny the Federal due process guarantees of the Fifth Amendment (i.e. closely related to the Fourteenth Amendment protections applying to the states).  How could any lawmaker or administrator of law try to deny protections of the law and Constitution to any citizen?

Among other ways, due process is attacked when a regulatory agency acts to prevent a lawful lease holder of state (or federal) land with the right to create a plan and apply for state and/or federal permits even before a legal record has been created to justify any regulatory action.  

Those wishing to not see a project like Pebble develop -- including a U.S. Senator -- are bound under the Constitution to became a party to a legal proceeding, argue their case and hope that the final decision based on the legal record and merits of the case falls in their favor.  And, if it doesn't, due process allows for any party to appeal to a higher tribunal.

We find it equally offensive and likely an impeachable offense that the President would support the EPA's effort to deny due process to the lawful lease holder of Alaska state lands.

Steve Borell, Alaska Miners, Pebble Mine, Watershed, EPA, rule of law, due process, Photo by Dave Harbour, banana republic, Mark Begich, US Senator, Other citizens are also concerned about this violation of a Constitutional guarantee:

Former Executive Director, Alaska Miners Association, Steve Borell (NGP Photo) points out that the EPA's attack on Pebble more resembles the act of a Banana Republic than the United States.

(See later Juneau Empire Op-Ed by Rep. Eric Feige, 2-6-14.)

As we crossed the Potomac, driving by the Lincoln, Jefferson and Washington Monuments we asked our new friend when and why he came to America.

He had been a doctor decades ago and with other educated citizens in the 1980s spoke out against heavy handed government treatment of citizens.  He was appalled at Syrian influence and violence in his country and over time his voice and that of other Lebanese patriots resulted in their expulsion or escape from the country.

"There are hundreds of thousands of us all over the world, working hard in our new lands.  Lebanese expatriates in Africa are among the wealthiest on that continent.  Many of us chose America because of its freedom," he said.

He double-parked in front of our rented townhouse on C Street NE, a few blocks from the capital.

The huge snowstorm had left the ground blanketed in sparkling whiteness and as other cars went around us, we continued to talk.

"In Lebanon," he said, "the politicians tried to divide the people--the Sunnis the Shiites and the Christians--so that they could control them.  I don't blame the politicians as much as I blame the people for being so stupid, so gullible."

I asked if he didn't sometimes feel like going back to help his people.  "No way", he said.  "Here, we may not like one another sometimes, but we still live together.  We have whites, blacks, Asians, and immigrants from every place, much more diverse than Lebanon, but we have the rule of law.  If you step over the line, the law will get you. Over there, terrorists step over the line every day and the law does not stop them.  Ordinary people have freedom here; most other countries do not."

"The one thing America has done better than other countries is protect ordinary citizens with the law," he concluded.  While we spent less time discussing rule of law in America, he also expressed displeasure with politicians who used wealth, religious, political or racial issues to divide and conquer citizen support here.  

We took Ibrahim's cell number, paid him and agreed to call him for other rides while we were in town.  

In these pages over the years -- especially over the last five years -- we have mourned over America's diminishing "rule of law" which, as Senator Tom Coburn recently put it, is increasingly becoming "rule of rulers".  (Note: In the right hand column we have a Google search engine confined to our own thousands of pages.  Search for 'due process', 'rule of law', or 'let me count the ways'.)

We have seen the rule of law debased by Administration regulators who settle with environmental litigants with an alarming trend of "wink, wink, nod, nod" settlements.  The conflict of interest is jaw dropping when one witnesses settlements between social activists who sue and former social activists hired by the Administration to regulate.  A "sue and settle process" has in many ways replaced or hijacked "due process", a foundation of our Constitution and of the rule of law.  The new process erodes Constitutional protection for all citizens while enriching and further encouraging other citizens to disrupt lawful activities with frivolous but lucrative lawsuits and other delay tactics.

One might say, "Well, Dave, if there truly is something bad going on here, why wouldn't a company just sue the government?"  Good question.  Answer, companies find it unsavory and bad business to sue their regulators, generally.  The thinking is that while one has to compromise principle, it's cheaper for the shareholders to quietly pay the settlement blood money today and satisfy the regulators and litigants than to upset them just prior to the initiation of some new project requiring their support.

That is why it is so important for citizens to become aware of what is happening to their country's eroding status as a world icon for due process, fairness and citizen protections under a rule of law.

If regulators and their allies can stop a lawful lease holder, like the Pebble Project (which has leased Alaska land) from filing permit applications, receiving a fair regulatory hearing of issues, and being able to appeal a fully adjudicated issue, we have truly lost freedom.

And if we let our hard won and dearly protected Constitutional freedoms erode into the deep space of history, will there ever again be a place for the Ibrahims of a lawless world be able to seek asylum and peace?  Indeed, as our own freedoms recede, what options to American citizens have?

Tomorrow, we'll have another cab ride with our Lebanese friend and will ask him these questions.

Maybe Ibrahim, as one who has suffered so much to obtain what we have so callously taken for granted, can shed new light on why American citizens must resist attacks on our Constitution as if our families depended on our courage, insight and action.

Maybe our humble cab driver, named after the great prophet, Abraham, can lead us to a better understanding of the future awaiting us all.

And maybe we'll all come to better appreciate the tsunami-like impact on one's homeland that could begin with a pebble's splash, a landslide, a distant earthquake or the slow collapse of a great country's rule of law.

 

 

 

Categories:

12-25-2013 "ALL I WANT FOR CHRISTMAS"

25 December 2013 5:54pm

"All I Want For Christmas!"

Or, "The Loss of Self Reliance"

On December 24, 2001 we wrote an editorial satirizing the human greed and mismanagement that was interfering with gas pipeline project advancement.

In those days, Alaskan leaders and their supporters were engaged in the beginning of a decade-long fest of spending gluttony and tax increases to support self gratification of one generation at the expense of those to follow.   -dh

12-24-09 (Christmas Eve):  Gas pipeline news this week is light as all gas pipeline stakeholder thoughts turn to home.  Before news afresh begins breaking after the holidays, perhaps it would be well to spend a quality moment or two reflecting on where we've been this year and where we wish to be in 2002.  After all, our millions of individual decisions in the coming year will produce some grand, cosmic formula revealing the future of northern gas pipelines.  -dh

"All I Want for Christmas"

Dear Santa:

I'd like an Alaska gas pipeline for Christmas. 

It should be in place, producing money by 2004, please, in time to supply 1/4 of Alaska's $1 billion+ budget deficit; and let our politicians balance the rest without increasing my taxes or reducing my services. 

I'd like the pipeline to be 'diversified', too.  It should go to a Fairbanks 'HUB' (where I'd like a new petrochemical industry established by someone for some market). 

I'd also like someone to put an inexpensive gas distribution line to every home in Fairbanks. 

To be fair, I'd like someone to take propane from the HUB and ship it to 230 Alaska villages at a reasonable cost, somehow. 

Then, I'd like someone to build a line from the HUB on down to Valdez and arrange for Tokyo Gas to sign a 20 year, "take or pay"  contract at a price high enough to pay for the pipeline as well as another petrochemical facility in Valdez. 

To take care of my friends in Southeast Alaska, I'd like propane and maybe LNG to be provided by barges or small cryogenic tankers to all our coastal citizens at a reasonable price, by someone. 

Since Southcentral Alaska may be running short of Cook Inlet gas, I'd like someone to build a branch of the pipeline from the Fairbanks HUB down to Anchorage.  See, that would displace enough gas that the Kenai Peninsula would retain adequate supplies for its residential / industrial users for another 20 years. 

Lastly, I would like for most of the gas to move from the HUB on down the Alaska Highway to make sure that the folks in the Lower 48 have plenty, but I'd want to make sure there were enough liquid gasses in the high pressure line that we could profitably supply Alberta with some of the petrochemical feedstock she needs to be supportive. 

Oh, and I almost forgot, please make the price of gas high enough so we can afford subsidies, generous rights-of-way payments to 10,000 landowners, and still have plenty of money for our state government and please build a separate Mackenzie Valley Pipeline for Canada. 

And, I'd rather not have the gas produced at all unless it's done my way. 

Sincerely,

"Wishing"

P.S.  If you have money left over, could we have some to invest as equity in the gas pipeline and would you please make sure we get at least a 12-15% return on our investment?

Dear Wishing:

All fathers, including Father Santa, instinctively want their children to have all that they wish for. 

However, one responsibility a father has is to lovingly tell his children that we don't always get everything we wish for at Christmas.  Sometimes, you get a present you think you'd rather not have and it turns out the be the best one after all.  (See P.S., below.)  I don't know if that will be the case this year, but on this Christmas Eve, I can now divulge your gifts.

1.  You will be blessed--more than most--with another year of freedom and life in the wondrous North.

2.  You will be given intelligence, courage, friends, armaments and vast resources.

3.  You will be given the freedom to break your own trail, to direct your own future path in the wonderful frontier before you.

4.  You will be blessed with the politicians that you, yourself, choose to help lead the quest.

5.  The above, basic gifts will enable you through your own wisdom, ingenuity and integrity to successfully confront your challenges.  Success, the greatest gift, will be highly savored for you will have earned it and you will pass this knowledge to your heirs.  Your failure, also shouldered by your children, will only come with misuse of the gifts.

My greatest hope for you is that you embrace the true spirit of Christmas, use well what you have been given, make good decisions, treat everyone with respect, teach your own children well, and endeavor toward 'endless progress'. 

Obtained as you have so presumptuously wished, the presents you requested would not delight you, would not eliminate the fundamental budget problems you have created, would shackle free enterprise and deliver the generations following you into debt and misery.  They represent a child's irrational thinking, depending as they do on the imprudent acts of others and requiring no effort or risk on your part.

Lovingly,

Santa

P.S.  One Christmas long, long ago, I asked for a new bicycle and a 410 shotgun.  Being a poor 11-year-old did not prevent the dreaming.  After a humble family service around our Nativity scene, wise Father gave me a snow shovel and a box of shotgun shells, my only presents.  I did not appreciate these gifts at the time, but by spring I had earned enough from snow shoveling the neighbors' driveways to buy a new bike and a used shotgun.  To this day, I love my Father as much as I respect him; and, he has never worried that I would ever confront a reasonable challenge I could not overcome.  That year I emerged into the real world, began absorbing the true Christmas message and took the first small steps toward a lifelong appreciation for free enterprise.  (Additional reference: Voice of the Times, by William J. Tobin)

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12-20-13 "Don't Forget the Mackenzie Delta!"

20 December 2013 2:12am

See Today's Petroleum News Headlines Here.

CBC: Joint review panel says Northern Gateway Pipeline project is in best interest of Canadians  -  CALGARY HERALD RELATED STORY TODAY: BY JAMES WOOD AND CHRIS VARCOE


Don't Forget the Mackenzie Delta!

Will Alaskan and Canadian Investors Merge Their Interests Into the Most Efficient Outcome for Arctic Gas?

by

Dave Harbour

Globe & Mail, TUESDAY by Jeffrey Jones.  

Before the end of the year, Imperial Oil Ltd. and its partners must inform the National Energy Board of its intentions with the Mackenzie gas project, the $16.2-billion pipeline from the Arctic which has stalled due to the flood of cheaper supplies closer to major North American markets.

The people of the Northwest Territories have waited for years for the project to get under way, but with the shale gas revolution in full swing it is doubtful that it will proceed as proposed. In October, Imperial CEO Rich Kruger told The Globe and Mail that the company is studying a revamp of Mackenzie that could see it reborn as part of a larger initiative for export of liquefied natural gas, though a plan is far from finalized.


CBC TODAY.  Imperial Oil has announced it will not go ahead with the Mackenzie Gas Project, as the market conditions are just not good right now, says a company spokesman.  ... But Pius Rolheiser, spokesman for Imperial Oil, says no construction doesn't mean the project is dead.

Will Arctic gas be monetized within our lifetimes?  If so, will we go it alone or will Canada and Alaska merge interests as they once did four decades ago?  And what about the elephant in the room: 'fiscal certainty'?

Background.  Producers, politicians and natural gas transporters and distributors began designing transportation systems in their minds' eyes even before the 1967-68 winter discovery of Prudhoe Bay's prolific oil and natural gas reserves became reality. 

Gas and oil discoveries in the Mackenzie Delta, North of Inuvik, NWT, exacerbated excitement on both sides of the border. 

The original, proven gas reserve estimates at Prudhoe Bay of 26 Trillion Cubic Feet (Tcf) have grown to about 35 Tcf, largely as a result of ExxonMobil's later discovery at Point Thomson.

The early Mackenzie Delta gas reserve estimates of less than 5 Tcf have more than doubled since the original discoveries.  Some resource (i.e. not proven) estimates suggest reserves exceeding 15 Tcf.

Currently, Alaska Native regional and village corporations, the state of Alaska and the Alaska North Slope Borough have interests in gas reserve development as do the nearby Canadian Aboriginal companies, villages and the Northwest Territories government.

Industry and political interests first debated then agreed upon west coast delivery points for Alaska oil four decades ago, with the uncodified understanding that northern gas would flow to the Midwest, through Canada.

Energy interests in both countries first worked separately at the beginning, and then together, to identify the preferred route and mode for transporting the gas.

A Canadian 'study group' merged with an Alaska 'study group' in 1971.  The new consortium carefully chose its leaders.  Arctic Gas and Competing Projects, gas pipeliineCanadian banker, William Wilder, chaired an impressive management committee including, at one time, 26 oil and gas production, transportation and distribution company CEOs.

(Map: 1970s era competing projects, courtesy of OFC.  Arctic Gas, Red; Alcan, Black; El Paso, Blue dotted)

Former TransCanada President Vern Horte became president of Canadian Arctic Gas Study Ltd. and former Alaska Lieutenant Government Bob Ward became president of Alaskan Arctic Gas Study Company--the Arctic gas consortium's two operating entities.  Famed Canadian journalist Earle Gray directed communication activity for the Canadian company from Toronto and your author handled communication and government relations functions from Alaska to Washington, D.C. under the close supervision of Ward, the consortium's American vice chairman, William Brackett, and a sub set of the management committee: the Arctic Gas Public Affairs Committee.

At the time, public lands between Prudhoe Bay and the Mackenzie Delta were available for pipeline transportation corridors.  On the American side, the Arctic National Wildlife Refuge was then the protected, but less restrictive, Arctic National Wildlife Range.

In pursuing its alternate routes and modes studies, the Arctic Gas Consortium, spent an unprecedented -- at that time -- $250 million, on engineering and environmental studies necessary to prepare applications to the National Energy Board (i.e. NEB) in Canada and the Federal Power Commission (i.e. The FPC is now the Federal Energy Regulatory Commission, FERC).

The study of alternate routes, included moving American gas by pipeline from Prudhoe Bay to the Mackenzie Delta.  From there the pipeline would carry both American and Canadian gas to Southern Canada.  Some gas could flow to Canadian markets, while the mainline would bifurcate, moving about a third of the remaining gas to the West Coast and intermountain states.  The majority of gas would supply mid west and eastern states.

All other alternative routes were found to be uneconomic or far less economically feasible, including two routes south of the wildlife range and El Paso Natural Gas' pipeline/LNG proposal.

The buried refrigerated pipeline through permafrost areas was found to be the most efficient, direct mode of transportation.  It would protect the tundra and have the lowest possible operating costs.  All alternative modes were found to be economically inferior, including conversion of gas to electricity and transport via high voltage transmission lines, conversion of the gas to LNG and moving it from the Arctic to southern markets using trucks, railroads, dirigibles, submarines, tankers, etc.

The Arctic Gas project failed to gain NEB approval in Canada; the FPC disapproved El Paso's LNG concept; and, the 'approved' Alaska Highway project failed to overcome economic challenges as the true estimates of its cost became known just as natural gas prices became depressed in the early 1980s.  When gas prices improved twenty years later, governments and industry again became interested in creating and Arctic gas transportation project.

Discussion.  Since Arctic Gas days, American and Canadian governments have made access over the public lands between Prudhoe Bay and Inuvik more restrictive.

One also notes that when the original Arctic Gas project was first studied, the low cost of taxation helped overcome the high cost of Arctic construction, procurement and labor.  But as the 1970s progressed, producers became more and more alarmed that in Alaska "a deal was not a deal".  That is, the Governor and Legislature demonstrated no desire to restrain spending or taxation just because companies calculated their original lease sale bids and later investments on the circumstances then prevailing.  Oil companies in the 1970s experienced almost annual tax increases.

Jay Hammond, Alaska Governor, Tax Reform, Oil Taxes, Chapter 21, Photo by Dave HarbourIn 1981, Governor Jay Hammond (NGP Photo), joined by legislative leaders in both parties, agreed upon a 'fair share' tax methodology, which provided fiscal certainty until after the turn of the century.

In 2006 Governor Frank Murkowski (NGP Photo) proposed an increase in the severance, or production tax in return for a guarantee of fiscal certainty that would protect future producer investments--including a gas pipeline investment.  The producers and Frank Murkowski, Governor, Production Tax, producer agreement, Photo by Dave HarbourGovernor shook hands, in good faith.  Then, the legislature acted to increase the production tax but denied the recommendation for fiscal certainty.  

Adding insult to injury -- from an investor perspective -- incoming Governor Sarah Palin, ACES, AGIA, oil tax increase, liberal, Photo by Dave HarbourSarah Palin (NGP Photo) then proposed a larger production tax increase which the Legislature increased to an even higher level and then decided to apply retroactively -- with Palin's support.  

Last Spring, the Legislature adopted Senate Bill 21, reforming Palin's production tax.  With over 90% of the Alaska state operating budget dependent on steeply declining oil production, elected leaders are intent on improving the climate for investing in continuing exploration and development -- and in a gas pipeline.

While an improvement in tax policy is now and will likely continue to produce more investment, it cannot overcome the cloud of distrust created by previous government decisions—and a current effort by some legislators, unions and environmental activists to repeal SB 21.  Only some sort of fiscal guarantee against inappropriate government expropriation of private revenues will serve to support an additional $40 - $60 billion gas pipeline investment -- in our opinion.

Even if the Governor and lawmakers were to favor such a guarantee, it would surely be accompanied by vigorous debate and opposition since Alaska's constitution jealously guards the State's right to modify tax policy.  

Yes, we agree there are certain valid roles for government subsidy.  Roads, bridges and docks come to mind.  

As to energy projects, the Alaska Bradley Lake Hydroelectric project is a wonderful example of a proper role for government.  

On a larger scale, the Susitna-Watana Hydroelectric project -- as Norway has found -- could use today's oil dollars to provide 50 or 100 years of inexpensive energy to citizens.  And, yes, until this long-lead-time project comes on line, Alaskans will need other energy sources.

Furthermore, tax and regulatory incentives have their place and have worked in the Cook Inlet oil and gas basin.

Our concern is that too many unprioritized projects levered into existence by public subsidy and designed to energize the same markets could waste money, deflect private investment and result in both abandoned efforts and a diminished treasury

Adding to that confusion are well intended special interest groups and politicians supporting a bewildering array of energy projects, many of which are not proven to be economically feasible.  Most persevere on the strength of past or present public subsidy, political support and a “strategy of hope”.  These include:

The Palin Administration, in our opinion, grievously erred by proposing a financial incentive for the large diameter, Alaska gas pipeline project.  Palin erred because some of her objectives (i.e. "must haves", in return for the subsidy) were already covered under terms of the Alaska Natural Gas Pipeline Act of 2004 and because her action thwarted competition, to a large degree, and limited state prerogatives in other ways.  

In any case, the large diameter pipeline is the project most likely to survive, monetize Alaska gas and provide for most foreign and domestic consumer needs in the long term.  This is because it is almost completely under private control of investors who -- under proper conditions -- will provide the funding and markets and accept most of the risk for project completion.  The other projects, surviving as they must on the tide of diminishing tax revenues and the brilliance of bureaucratic agencies are at best in competition with one another and at worst, are short term remedies accompanied by long term salvage headaches.

Conclusion.  

Had we more time and had the gentle reader more patience we surely could have put finer clothing and adjectives on the shoulders of many of today’s well-intended government energy projects.  But in fairness, had we done so, we’d have had to extend this essay further to objectively discuss the logical infirmities of each--which must be reserved for a future commentary.

For now, we offer this conclusion:

The state should establish priorities for all pending, state supported energy projects.  

For example: if Cook Inlet oil and gas incentives produce significant new gas supplies, perhaps subsidies for other gas projects should be automatically suspended.

One also muses that high diesel fuel is the major driver for subsidized gas and electric projects for Fairbanks--but we hear virtually no discussion about the potential for Alaska to provide subsidized royalty oil to Fairbanks for local refined products.  This solution could both heat homes and generate power--a stopgap measure that protects life and property until a large diameter gas pipeline and/or Susitna-Watana hydro project can provide sufficient, reasonably priced energy.

We first offer a perspective that -- aside from the grand, Susitna-Watana Hydro dam, the energy project most likely to survive and succeed, will be the project that remains closest to the free markets.  Fast moving events can more easily confuse slow reacting bureaucratic decision makers than more agile entrepreneurs intent on making and not losing money for their shareholders by providing valuable services and products to the marketplace. 

Secondly, we observe -- without the liability of special interest influence --  that it would be eminently logical were American and Canadian companies to once again merge efforts.  By combining large volumes of Canadian and Alaskan gas, economies of scale could produce an incrementally better feasibility profile for the project.

A more efficient project would provide more royalties and tax revenue to governments.

A joint project would benefit the related Inupiat/Inuit of the Arctic Slope Regional Corporation lands and Canada’s Inuvialuit and Gwich’in aboriginal corporations through contracting opportunities, local property taxes and because some production in both areas flows from indigenous lands.  Other Alaska Natives could benefit from a more efficient project though the 7(i) revenue sharing provision of the Alaska Native Claims Settlement Act (ANSCA).  The most efficient possible project would provide the highest returns to producers, Native shareholders and the state tax/royalty income stream in a highly competitive world energy environment.

Today, the proliferation of shale gas discoveries throughout North America makes that market less attractive for Arctic gas, if not infeasible, when compared with certain Asian markets.

Since foreign markets will likely become the destination for Arctic Gas, LNG transport becomes the mode of transportation.

That leaves routing.  The Globe & Mail and CBC pieces above suggest that Imperial is considering new options for Canadian Arctic gas.  Imperial’s US brother, ExxonMobil, is an influential participant on the US side.  Other Alaska producers have interest in Mackenzie Delta gas and TransCanada has been a major supporter of the Mackenzie Valley Pipeline's Aboriginal Pipeline Group and all were once involved in the Arctic Gas Project.  One expects that the subject of a joint, American-Canadian project has at least been discussed, if not studied.

The route, on first glance would involve an approximate 750 mile straight shot from Prudhoe Bay down to the Nikiski area of Cook Inlet.  Gas could flow by pipeline from the Mackenzie Delta to Prudhoe Bay.  Logically, the two governments should allow that pipeline route to safely bury a pipeline in the permafrost on shore over currently restricted areas, like ANWR.  Less logically, a refrigerated line could be buried in the tidal lands offshore ANWR though it would be more environmentally challenging, more expensive, and subject to ice scour and certain corrosive challenges.

Those who opposed earlier "over the top" routes for moving Alaska gas to the Mackenzie Delta and then down to the midwest, could find this reversed concept for movement of Arctic gas/LNG to Asia more palpable

So will Arctic gas be monetized in our lifetimes?  Depends on how long we live.  Some of us have longer than others.  But all of us have lived long enough to know that whether the Alaskan and Canadian Arctic gas reserves are economically combined and transported together, or not, there will be permitting, financing, labor and engineering challenges galore…complicated by environmental extremist opposition, political intrigue and constituent greed. 

On top of that will be the final question: will Alaska be able to provide the financial and tax certainty necessary to assure investors that their investment will be treated, in good faith, with respect.  If Canada is involved, could that government provide fiscal certainty on its side of the border?

A bad news ending.  If government is incapable of creating a fiscal certainty guarantee, no private sector investor in his right mind will spend any more time, energy or treasure considering the feasibility of a gargantuan Arctic LNG/Pipeline project involving any route or mode of transportation. 

A good news ending.  If solid, fiscal assurance is created, a whole new world of opportunity, prosperity and promise for investors, citizens and the children of the next several generations could reward all concerned.

-End-

​Reference: Our November 2002 Commentary

(Note: We repeat for new readers that our goal is to provide accurate, useful information to readers.  Accuracy is paramount.  In support of our goal, we invite our thousands of readers to send us additions or corrections that contribute toward the accuracy of our communications.   When a valid addition or correction arrives, we try to make appropriate changes immediately.     –dh)

​Reference November 2002 Commentary


 

From the EIA: State Energy Profiles enhanced and renewables sections added

As with national trends, the energy sectors in each state continue to experience rapid changes, including increased oil and natural gas production, new renewable electricity generation, and changing motor gasoline prices. With these and other energy trends in mind, the U.S. Energy Information Administration updated its State Energy Profiles, which are available through EIA's State Energy Portal. There are new analytical narratives on the energy sectors of each of the 50 states, the District of Columbia, and five U.S. territories.

Portal users can also tap into the multilayer mapping function to show user-selected views of fossil and renewable energy resources, oil refineries, pipelines, power plants, transmission lines, and other energy infrastructure.

Policy makers, energy analysts, and the general public can access revised state-level analysis on the petroleum, natural gas, coal, and electricity sectors. In addition, the narratives feature a new section on renewable energy that details each state's renewable resources, including biomass, geothermal, hydroelectricity, solar, and wind, and how those resources are being developed.

State Energy Profiles give users detailed portraits of energy production, consumption, and energy prices at the state level. They feature almost 90 key data series, state Quick Facts, and charts for each state. Users can learn state facts such as:

  • Texas is the nation's top crude-oil producer and accounts for more than one-fourth of the nation's petroleum-refining capacity.
  • Pennsylvania natural gas production more than quadrupled since 2009 because of increased development of the Marcellus Shale, placing the state among the top producers nationally.
  • Washington ranks first in the nation in hydroelectric generation and has the lowest electricity prices.
  • Coal produced in Kentucky is distributed to about one-half the U.S. states.
  • The world's largest photovoltaic solar electricity generation facility is currently under construction in Arizona.
  • Nevada is second in the nation, after California, in the amount of geothermal power produced.

The portal also features state rankings for 10 key energy statistics, a find function to search for state data across EIA, a compare screen that allows users to look at states side by side for a variety of energy indicators, and links to additional resources.​

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