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      This is your public service 1-stop-shop for Alaskan and Canadian Arctic energy commentary, news, history, projects and people. We update it daily for you. It is the most timely and complete northern energy archive 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 name others existing before 2001.  -dh



7-20-15 BC LNG Moves Forward

20 July 2015 5:21am

Vancouver Sun by Dirk Meissner.  


Could the Alaska gas pipeline/LNG project's need for fiscal certainty be modeled after BC's attempt to provide a 25 year window of certainty for investors?

Alaska Governor Bill Walker, gas pipeline, LNG, ak-lng, oil gas taxes, aces, Photo by Dave HarbourAlaska Governor Bill Walker (NGP Photo) has pledged to seek a fiscal certainty for Alaska's gas.  But we have observed that since the major producers own both oil and gas facilities in the state, providing certainty for only the gas still leaves investors vulnerable to predatory taxation.

Unfortunately Alaska has a long history of increasing or enacting oil taxes over the years.  It has even demonstrated an unjustifiable greed in enacting RETROACTIVE oil tax increases.

Therefore, we believe that the only effective fiscal certainty that will provide a proper investment environment for a $45-65 billion Ak-LNG project will be creation of tax certainty for both the investors' oil and gas holdings -- and property.  -dh

A liquefied natural gas industry: the British Columbia government fought an election on it, launched an extraordinary summer legislative session and made financial concessions, but it still isn't enough for the companies that want even lower taxes and have expressed concerns over the availability of workers.

The Liberal government's LNG dream is expected to move towards reality this week when a bill is adopted for a 25-year agreement on what could be B.C.'s first LNG plant.

B.C.'s politicians were recalled this month to debate and pass a single piece of legislation that aims to provide certainty to LNG investors and revenues to the province.

"I think there's more work to do in terms of making sure we are in fact globally competitive," said B.C. LNG Alliance president David Keane. "I think the government has more to do."

Pacific NorthWest LNG, a joint venture backed by Malaysian state-owned energy giant Petronas, plans to build a US$36-billion LNG plant at: http://www.vancouversun.com/business/pass+year+industry+wants+more/11226540/story.html#ixzz3gRB8smIT


7-12-15 Our Iranian Nuclear Negotiations: Hopelessly Incompetent, Naive, Pro-American Or Pro-Enemy?

12 July 2015 12:40pm

Our Iranian Nuclear Negotiations: Hopelessly Incompetent, Naive, Pro-American or Pro-Enemy?  You Be The Judge.


Dave Harbour

Image result for cartoon iran

Today and perhaps tomorrow comes another deadline extension in, and maybe an ending of, the Iranian nuclear negotiation.  It is one of the most important -- and dangerous -- energy and world security issues in history.


The current process is alienating the United States from all of our 'former' Middle Eastern allies who, together, have helped provide significant security to the region.  Israel, Jordan, Saudi Arabia, Egypt and other countries in the area recognize Iran for the supporter of terrorism and threat to their own sovereignty that it is.  

They also know that regardless of the American-led negotiation's outcome, the Iranians will continue with their nuclear weapon program.  This will cause neighbors to engage in an "arms race" to become similarly armed.  

Why do our readers care?

The end game could result in continuing sanctions on Iranian oil sales, supporting higher oil prices.  The end game could also find Iran free of sanctions, causing the legal and unrestrained trade of Iranian oil -- pressuring oil prices to go lower.  Both results will impact Alaskan and Canadian local governments, companies and their national economies.

Russian and Chinese mischief also surrounds the Greek financial crisis -- which may be coming to a head any moment.  See this Calgary Herald article by Deborah Yedlin.

North American and European security could be affected by the outcome of the Iranian nuclear talks.  A lifting of sanctions could refill Iran's coffers with billions, sure to be shared with terrorist organizations. 

Relations with Russia and China will be affected, for whereas they might have supported Iranian sanctions earlier, today they would most assuredly not do so in the likely event that Iran would soon begin violating the terms of any 'deal'.   Moreover, today they are, respectively, challenging the resolve of the United States with: provocative and imperialistic movements against Europe; bomber probes of North American air space; and threats to countries and international sea traffic in the South China Sea.

Forgive us for our own naiveté, but we do not understand why any but the most incompetent, inexperienced or unpatriotic administration would even consider negotiating with a fascist, Islamic regime that is a master of breaking agreements, holds American hostages, and also publicly wishes "death to America" and to America's best Middle Eastern ally, Israel.   This is occurring at the same time the administration is downgrading the U.S. military and upgrading onerous natural resource regulations throughout America and calling, "global warming a top national security priority".  On second thought, we are not naive; we have put the puzzle together logically and the picture is one of either the American leadership's incompetence or deceit.

Sitting next to Secretary of State John Kerry, a Vietnam Veteran who publicly threw his military medals away, is Energy Secretary Dr. Ernest Moniz.  He has enjoyed a distinguished career in previous lives, a physicist who served in academic leadership at the Massachusetts Institute of Technology, as Under Secretary of the US Department of Energy and as Associate Director of the White House Office of Science and Technology Policy.  

Neither, however, is known for negotiating high stakes positions in the international big league.

We believe Kerry is executing orders bound to endanger the national security of the United States.  We believe that while Dr. Moniz is a nuclear expert, neither he nor Kerry know when America should not negotiate, nor how to negotiate.

So when we awaken tomorrow, we hope that as Monday unfolds we'll not see any agreement.   We hope that we will see sanctions continue and be made even more robust until -- and not before -- Iran:

  • pleads for peace,
  • agrees to destruction of weapon related nuclear equipment and material,
  • agrees to unannounced and unfettered inspections of both military and nuclear facilities,
  • demonstrably ceases all funding and other tangible and intangible support for Islamic terrorism,
  • releases all American hostages, and
  • recants its threat to destroy Israel.

Without such common sense conditions being agreed to and successfully implement for at least 12 months, no lifting of sanctions should even be considered, much less discussed or negotiated.

The fact that the United States is bowing so low to such low life savages and transmitting such weakness during such perilous times is an affront to the entire foundation and history of the United States of America and poses a clear and present danger to all free people at home and abroad.  Our leaders are giving comfort to our enemies and alienating our allies.

Today, Senate Majority Leader Mitch McConnell weakly stated that the Senate would not approve a "bad deal".  We ask: Why in the name of millions of fallen patriots should he not have said, "The President is on a fool's errand.  The United States should not negotiate with an enemy, a proven liar, a terrorist state.  Sanctions will continue and increase until the road to a nuclear Iran is permanently destroyed.  From our viewpoint any nuclear "deal" brought to this body is DEAD ON ARRIVAL if it does not represent a complete capitulation of Iran's imperialistic, untrustworthy ways to our COMPLETE SATISFACTION."

The administration SHOULD BE ashamed of its performance and our Congressional representatives SHOULD NOT BE ashamed to remind the country of this misrepresentation loudly and daily lest their lack of powerful objection be interpreted as weak acquiescence.


Dave Harbour, publisher of Northern Gas Pipelines, is a former Chairman of the Regulatory Commission of Alaska and a Commissioner Emeritus of the National Association of Regulatory Utility Commissioners (NARUC).  He served as NARUC's official representative to the Interstate Oil & Gas Compact Commission (IOGCC).  Harbour is past Chairman of the Alaska Council on Economic Education, former Chairman of the Anchorage Chamber of Commerce, and past President of the American Bald Eagle Foundation and the Alaska Press Club.  He is Chairman Emeritus of the Alaska Oil & Gas Congress.

Opinions or viewpoints expressed in this webpage or in our email alerts are solely those of the publisher and in no way reflect the opinion(s) of any affiliated company, person, employer or other organization.



7-1-15 Alaska Governor Reneges On Oil Tax Credit

01 July 2015 12:30pm

Our Commentary

Bill Walker, Alaska, Governor, Alaska Oil Taxes, Tax Credits, Investment Climate, ACES, Photo by Dave HarbourADN by Pat Forgey.   Alaska Gov. Bill Walker (NGP Photo) announced Tuesday that he had signed state operating and capital budgets, approving $9.8 billion in spending sought by the Legislature but vetoing a possible $200 million worth of controversial oil tax credits.      ...

 Alaska Kevin Meyer, Senate President, ConocoPhillips, Oil Taxes, Tax Credits, Investment Climate, ACES, Photo by Dave Harbour"It is apparent the current oil and gas production tax credit system is unsustainable," Walker said in a letter Monday to Senate President Kevin Meyer, (NGP Photo), telling him of the veto. He signed the budgets Monday, but didn't publish the final documents or announce his actions until Tuesday afternoon.     ...

"I'm glad the governor took appropriate action" on the tax credits, said Rep. David Guttenberg, (NGP Photo), a member of the budget-writing House Finance Committee.

By limiting payment of credits, he said, oil companies will share the pain that Alaskans are facing due to budget cuts.   (As if the oil companies weren't already paying the lion's share of state taxes.   -dh)

 AlaskRepresentative David Guttenberg, Alaska State Legislature, House of Representatives, Farbanks, Oil Taxes, Tax Credits, Investment Climate, ACES, Photo by Dave Harbour

"It makes everybody involved in this budget crunch that we're dealing with," he said.   ....     

Our comment:

The Governor and his democrat allies would rather raise taxes and stop/delay agreed-upon credits than make meaningful spending cuts.  We have also seen signs that odd coalitions involving "moderate republicans" could support that effort.  

Alaskan producers (and explorers and refiners) have tried over the past year to maintain a positive, optimistic attitude.  However, they are mindful of Alaska's history with ACES; with retroactive taxation; with anti-oil voters' initiatives; with the governor's vow to not include oil in gas pipeline fiscal certainty policy; with "revenue enhancement" signals for increased oil taxes; and, with this week's credit veto action as they finalize corporate, CY 2016 investment decisions in a low oil price environment.  
It's looking more likely that legislative positions could become solidified much farther in advance of the next legislative session than in previous years.  Government spending supporters will be putting more and more constituent and financial pressure on lawmakers in the coming months. 
Rep. Guttenberg has already sounded the rallying cry (See ADN quote above).

6-25-15 Uphill Road For An Alaska LNG Project

25 June 2015 8:18am

It's An Uphill Road For An Alaska LNG Project

Whether most Alaskans appreciate it or not, the best hope for a successful, Alaska LNG project is that Alaska's largest producers support it.  Today, we analyze why that so.


Dave Harbour

Alaskans have consistently supported higher taxes on Alaska's oil companies and higher spending on social services -- with some exceptions.  

The Alaska tax and spend model is not unlike the model employed nationally, in Washington D.C., except national leaders are capable of spending more than they take in by merely printing more money.  

Ultimately, that model taxes the public via inflation rather than directly, diminishing the value of the money as it lowers the value of individual savings and paychecks.  

The beauty of that model is that a future generation pays for the votes attracted by this generation of politicians.

As politicians increase tax levels, their overspending redistributes wealth to some individuals and to supporters able to maintain investments in real estate, land, capital projects and enterprises producing recurring revenue -- investments that benefit from inflation.

It can be and often is an intellectually dishonest, but effective formula for gathering reelection votes from some at the expense of others.  

Logically, that concept is unsustainable.  The concept is unsustainable because more and more taxation must end at some finite point and because ever higher government spending depends on that finite tax revenue.

As the unsustainable economy approaches, liberal lawmakers have historically found it quite tempting to unfairly demonize companies for not, "paying their fair share", and to embarrass fiscally responsible lawmakers for being, "uncaring and insensitive to the needs of...."

As we'll explain, the day of reckoning has now caught up with Alaska.  The state imposes high taxes, is depleting its remaining savings accounts while continuing its spending spree.  (No one can say Alaska's leaders were not warned!)


Alaska's elected leaders tasted an addictive elixir of $900 million in bonus bids from the 1969 Prudhoe Bay Lease Sale.

In 1971 Congress approved the Alaska Native Claims Settlement Act, critical to the approval of a project to transport the immense Prudhoe Bay oil reserve to market. 

Congressional approval of the Trans Alaska Pipeline System (TAPS) in 1973, by the tie breaking vote of Vice President Spiro Agnew, coincided with mid eastern turmoil, including the Arab oil embargo and a later takeover of Iran's monarchy by Islamic extremists, still in power.

So, oil prices remained high, for a time.

Alaska's government spending and tax policies were mostly controlled by democrats and a few liberal republicans during the decades of the seventies and eighties, when the high oil prices magnified the value of high production, around 2 million barrels per day.  

Yes, the former 'pioneering state' had now become addicted to a growth in income and spending phenomenon that is probably unique in the history of American states.  (Other states, because of the blessing of advanced 'fracking technology' are encountering tax and spend challenges, too.)  We believe none have reached the level of tax and spend excesses adopted by Alaska -- though Alaska could serve as a role model for the need to avoid unsustainable tax and spend policies.

When oil prices began to fall in the mid-eighties, many oil field and support industry employees -- and those dependent upon them -- left the state.  However, production was still strong and the state pretty much continued its march toward becoming the most attractive welfare state in the nation.  We are not aware of any significant social program anywhere that is not replicated in Alaska, and, at a high per capita cost.  

From the 80s onward, Alaska has became the highest per capita taxing and spending state and with the highest number of not-for-profit organizations per capita in the U.S., a vast number of which came to depend on government largess -- 90% funded by oil taxes. 

So now, TAPS' North Slope crude oil throughput has diminished by about 3/4, even though companies are working hard to find and produce Arctic oil.  
Because of its spending policies, Alaska's government operating budget has become about 90% dependent on TAPS' North Slope throughput.
Unlike the 80s when throughput remained high during a low price period, Alaska is now experiencing low TAPS throughput and low prices for that throughput.
This double whammy, though it would not have been unexpected by prudent planners, has caused chaos in Alaska's political model that requires ever higher oil revenue for ever higher costs of government.  Unfortunately, such circumstances can lead to a phenomenon known as an, "Economic Death Spiral", wherein higher and higher taxes produce less and less revenue.  While Alaska has not reached that level of hopelessness, the fact that the condition exists is sobering incentive to make the best possible decisions, early enough.
The 48" TAPS oil pipeline traces a path from the Arctic, over the mountains of Alaska to the Valdez seaport, some 800 miles.  TAPS was built mostly above ground, and insulated against the cold, so it could move the otherwise viscous oil in a warm-fluid state...even during many sub-zero months.  (In contrast, a gas pipeline would be mostly buried in the cold ground with cold gas flowing through it.)
But the day surely approaches -- says the 'prudent planner' within us -- when the warm oil throughput is so little and maintenance costs are so high and winter temperatures are so cold, that production must cease.
Who would be the first to suffer?  Not the oil companies.  They would dismantle TAPS, revegetate the right of way and transfer exploration and production budgets to more attractive areas.  
Those suffering from a TAPS shutdown would be citizens dependent on programs funded by oil tax and royalty revenue.  Especially vulnerable would be Alaska Native villagers who value 'subsistence' lifestyles, lifestyles which have become tethered to the benefits of oil money: health clinics, schools, airports, ports, SUV's, snow machines, fuel subsidies and myriad social programs.
The foregoing demonstrates why Alaskans are so focused on the need to both find and produce more oil...but also to market Alaska's North Slope natural gas reserves.
From Oil to Gas
For decades Alaskans have lusted over a project that would monetize the huge natural gas reserves on the Alaska North Slope, at least 35 Trillion Cubic Feet (tcf).
In other places, we have documented the history of Alaska's gas projects, all of which have failed to prove economically feasible.
Today, Alaska's three major producers have committed to creating a feasible gas project but have maintained their position over decades that any multi billion dollar gas pipeline project must have fiscal certainty.
In other words, we could not imagine investors putting another 800 miles of pipe in Alaska, along with a tidewater LNG plant, with the risk that the state will then increase taxes on oil and/or gas.  This could dilute the value of the investment--perhaps even to the extent that politicians could render the investment infeasible after investment decisions were made based on current tax statutes.
The state Constitution requires that the taxing ability of the state remain unabridged and that no legislature can take action that binds a future legislature.  A Constitutional amendment is likely required in order for elected officials to be able to provide large project investors with appropriate evidence of fiscal certainty.
Just as the project led by Alaska's producers (AK-LNG), approaches final sanctioning decisions, the Governor and Legislature are faced with the challenge of obeying the Constitution while meeting the reasonable, fiscal certainty needs of major gas pipeline investors.  And, they must do so as dependent constituents cry out for the government to, "Feed me, feed me".
Recently, the Governor of Alaska presented a letter to producers stating his willingness to work on fiscal certainty for the gas project, but not for oil investments.  The letter also named other 'demands'.
This is troubling for a number of reasons.  One reason we are troubled, is the reality that the owners of the gas are also the owners of oil.  What's to prevent gas investors from spending $60 billion on an Alaska LNG project only to have a predatory legislature/governor swoop in for an increase of oil taxes?  The result of unpredictable oil tax increases could be equally damaging to a gas pipeline investor's bottom line.  In short, we must suggest to Alaska's governor that fiscal certainty for a gas pipeline investor not applied to that investor's Alaska oil and gas activity is -- in our opinion -- no fiscal certainty at all.
Meanwhile, Alaska's gas competes with everyone else's. 
Our mid-Atlantic energy analyst friend, who prefers to remain unnamed, warns us today that the LNG market is becoming increasingly competitive.  Many of the three dozen North American LNG projects investors are considering will simply not remain economically feasible for a number of reasons unique to those projects.  
How will Alaska fare with its competition when most competing projects have:
  • more moderate climate and terrain
  • more inexpensive logistical costs
  • better proximity to the markets
  • gas reserves closer to LNG tidewater facilities (i.e. no cost for an 800 mile Arctic/Sub Arctic pipeline)
  • lower labor costs
  • lower political risks 


TODAY, the Vancouver Sun published this report that British Columbia Premier Christy Clark's government is recalling the legislature for a "rare summer session" to pass key legislation enabling a liquefied natural gas project.  
This would be BC's version of increased fiscal certainty.
Meanwhile, faced with this competition, Alaska continues to spend its depleted savings, allow run-away spending and make rather hostile demands on the oil/gas investors.  At the same time, the Governor and his Revenue Commissioner are hinting that oil tax increases are lurking behind the dark horizon.
Alaska's leaders from the Governor to every legislator better start accepting the fact that the large, North Slope oil and gas producers are Alaska's greatest economic friends.  They are the golden goose.  They are the human treasure which provides the money, technology and capability to explore for, produce and monetize Alaska's remotely located resources.  
Treating investors with courtesy, fiscal stability and good communication is the best way to both improve throughput of TAPS and entice a gas pipeline/LNG project investment.
The second best way to assure that prosperity is for elected leaders to do what they were elected to do: put Alaska's financial house in order.  Make the budget sustainable.  It may not be a pleasant job, but if today's crop of politicians can't do it they should make way for others who can do it.
Yes, the great, Alaska North Slope gas monetization project is on an uphill road.  Hazards abound as does competition and internal strife.  Great skill and determination are required to achieve the summit.
If Alaska's leaders can just rise to the occasion, summon the required diplomatic, communication and common sense attributes ... and recognize that their very best hope for success is a willing, capable and dedicated group of major producers ... great things can happen for all the participants.  
Otherwise, Alaska could find itself overtaken, outmaneuvered and outclassed by other oil and gas jurisdictions that have a greater ability to lead, cooperate, make wise decisions and act.
Will Alaskans snatch victory from the jaws of defeat, or will the gas monetization challenge be too great for this generation of leaders?
The AK-LNG project's window of opportunity seems still to be open.  For how long, we do not know.  We hope the state's elected leaders can muster the mighty effort required to accommodate the needs of investors to create the new gas project reality that Alaska's economy and citizens so desperately need.

·        There are many global players trying to enter the market, including over 35 projects seeking ground-breaking in North America

·        Prices of the underlying commodities have slipped dramatically. This includes crude oil (Far Eastern LNG is linked to oil prices), natural gas for LNG, and land-based gas deliveries

·        Japanese nuclear power is re-emerging after being shut down, and China (among others) are seeking more nuclear plants

·        The rate of demand for power appears to be slowing, in keeping with slower global economic growth (see charts below)

A report CITI crossed our desk today, which underlines (and adds to the count of) growing pains being felt by the global LNG market. In particular, this raises serious questions about the ability of LNG exports from the US to have much impact on raising the price structure for domestic natural gas


Dave Harbour, publisher of Northern Gas Pipelines, is a former Chairman of the Regulatory Commission of Alaska and a Commissioner Emeritus of the National Association of Regulatory Utility Commissioners (NARUC).  He served as NARUC's official representative to the Interstate Oil & Gas Compact Commission (IOGCC).  Harbour is past Chairman of the Alaska Council on Economic Education, former Chairman of the Anchorage Chamber of Commerce, and past President of the American Bald Eagle Foundation and the Alaska Press Club.  He is Chairman Emeritus of the Alaska Oil & Gas Congress.

Opinions or viewpoints expressed in this webpage or in our email alerts are solely those of the publisher and in no way reflect the opinion(s) of any affiliated company, person, employer or other organization.



6-18-15 Why Shale Critics Have It Wrong

18 June 2015 4:21am

Oil Tax Commentary


WSJ.  Video interview, "Why shale critics are wrong."

Calgary Herald by Stephen Ewart.  With the NDP government’s first throne speech Monday, Premier Rachel Notley began disappointing the party’s core supporters in the environmental community by championing exports of Alberta oil to global markets as part of a Canadian energy strategy.

Recently, we commented on the onerous similarities between oil tax perspectives of Governors Kasich of Ohio and Palin of Alaska.  

Alaska has just now, after nearly a decade of economic downturn, managed to repeal and overcome some of the damage done by Palin's populist, anti-oil tax policy.  But Kasich would apparently prefer to learn about taxation principles from personal experience and the hard knocks school rather than history.

Today, our mid-Atlantic energy analyst friend updates us on the Kasich oil tax probe.
He wrote us that: " Governor Kasich’s effort to ram through an onerous and massively flawed severance tax through by wrapping it inside the state budget was pushed aside, thanks to the stalwart efforts of House Republicans."
"The statement by Senate President Faber that “we have never had everybody in the same room together” gets to the heart of a major impediment  to resolving this issue for over four years. Until now, there have been major players who saw this issue as a potential source of a “win” for political gain, rather than trying to find common ground for both the volume level and application of tax revenues.  
"The Ohio Oil and Gas Association (OOGA} has shown it is ready to work with both the Administration and the House and Senate to develop a plan that is fair to the people of Ohio, while providing adequate incentives to properly develop Ohio’s natural resources."  (Reference)
We note that elected leaders of both parties are tempted, during trying economic times, to unreasonably tax the few to benefit the many voters (i.e. Kasich and Palin are both republicans).  Though this practice can violate Economics 101 and damage citizens and their economies in the long run, it often benefits populist politicians in the short run.  It is the modern version of, "Lynch Mob Mentality", whose psychology or lack thereof discourages critical thinking.   -dh



6-16-15 Is Alaska's Governor Seeking Control Of The Ak LNG Project; Or, A Governent Owned Project?

16 June 2015 1:11pm

Alaska Governor Bill Walker's June 8 Letter To AK LNG Participants Doesn't Exactly Radiate Cooperation 


Dave Harbour

(In fairness, we wish to provide this comment from an anonymous reader.  -dh)

Bill Walker, AK LNG, Governor, Alaska, 49th State, oil taxes, fiscal certainty, Photo by Dave HarbourToday, we ask if Alaska Governor Bill Walker (NGP Photo) is seeking cooperation with participants in the AK LNG project, or is he seeking to control those free market participants, or is he angling toward a separate, government owned project?  

Here is a letter Walker sent yesterday to House and Senate resource committee leaders which included the copy of a letter he dispatched back on June 8 to producer leaders of the AK LNG project. 

We hate to be judgmental; after all, we all have our own ways of doing business.  And, we should grant the Governor some leeway for lack of experience in dealing in the world of business and free enterprise.

If it were our call, we'd have met with Ak LNG on a regular basis to resolve ongoing issues; after all, there will be plenty more hurdles for participants to cooperatively overcome over the years if the project goes.  

In meeting with participants regularly, we'd have engineered a process like the governor "proposes/unilaterally mandates" in this correspondence, sought concurrence among the parties and made a joint announcement on how the project will proceed.  "Peace to all in an atmosphere of cooperation"....

Instead of a cooperative joint announcement, we now have a Governor presuming to call the shots, dictate the process.

In less formal circumstances, we would likely ask, "who in the blazes does this guy think he is?"

Readers will find one of the dictated matters occurring in the Governor's correspondence, item #3.  In it he acknowledges that one of the big issues to be resolved is "fiscal stability" (See our 4-part series).

Government bullying can turn a reasonably profitable project into a loser.  

The bigger the investment, the more need there is for assurance that property will not be expropriated by fiat, as in the case of Argentina, or more indirectly taken by predatory taxation occurring after investments have been made.  

Just think about this: if an investment goes south on a manufacturing plant or commercial fishing boat, there are often plenty of potential buyers.  But when you bury a pipeline into the earth and the investment goes south, statutes require you spend billions more dismantling and removing the asset, and restoring the right of way.

In our opinion, the AK LNG investors have no choice but to seek full fiscal certainty on all of their oil and gas assets in return for the big gas transportation system investment.

If the Governor wishes not to use his bully pulpit supporting that need with the Legislature and the citizenry, we think it obvious that he either does not believe that full fiscal certainty is needed or he holds back on offering fiscal certainty knowing participants will have a difficult time justifying the investment.

This does not mean "fiscal stability" of the oil companies.  It means, basically, that if the investors pour $45-$60 billion into the state of Alaska to build a gas pipeline/LNG project, they need to know that they will not be treated here like Repsol was treated in Argentina less than a decade ago.

Alaska has demonstrated in the past that in the 49th state, "A Deal Is Not Necessarily A Deal".  Readers can explore the link for background.  Basically, Alaska's elected officials have taught investors that they don't mind raising taxes after an investment decision is made and they don't mind doing it RETROACTIVELY.

Being hopeful, but not stupid, Alaska's oil industry has said for a generation that when and if a gas transportation project is built, the state will have to guarantee fiscal stability of the project.

In the June 8 letter, Walker, agrees that fiscal stability should be part of the process, but that it will exclude oil.

In other words, he is saying, "I'll agree to not tax gas after the investment is made but you'll get no guarantee from me regarding the oil."

So if one is trusting enough in Alaska's state government to invest scores of billions in a gas pipeline, one is not concerned that oil taxes will be raised after the gas project is built?

We have talked to no one about this correspondence, either in the Administration, Legislature or oil industry.  If we had, we'd have undoubtedly been smarter.

But we are compelled based on an independent reading of the correspondence to conclude that the Governor thinks he can charm or coerce industry into investing billions into a gas transportation project by providing only half a loaf of fiscal stability.  Either that, or he is trying to infiltrate so many skunks into the gasline parade that any rational investor would say, "Sorry, not today".  By multiple skunks, I refer to but do not have space to explore other troubling provisions of the correspondence, including gas marketing, government ownership and pipe routing issues.  

If you are an investor hoping for a cooperative government partner, read the June 8 letter and weep.

The June 8 letter, causes one to wonder if the Governor -- a lawyer who spent a undistinguished, quixotic career advocating a government owned LNG project -- will finally get his wish to be Master and Commander of some imagined, but not yet real, government-owned, Alaska LNG project.

We hope this is not Walker's motivation for the June 8 letter, nor his pipe dream.

If it were, we fear that to the innocent citizens of Alaska the dream will morph into a pipemare.



See reader comments below with my responses in red....

If I were an alien drop kicked to this planet; my main takeaway of a cursory reading through is that the author implicitly dislikes the Governor. I am unable to discern the GOA's motives.  I do not dislike the governor and am as 'charmed' by him as the next citizen; but my role here is to draw logical conclusions from actions.  If that discipline is judged to be personal or subjective, so be it.
Is he trying to dictate the process, or is this type of simpleton action an honest outworking of his character; further evidence of an acute lack of understanding/experience in matters of import.
By being public, should his motive be to blow up the JV, it may grant a certain cover for future unilateral actions by the administration undoubtedly. But as to his motive, I cannot speak. 
As to the point of oil tax stability vs. a single specific large scale activity and tax implications; I don't think it is appropriate to expect similar treatment. For the SOA to execute an agreement on fiscal terms for a specific project over a specific time period would be a difference of kind rather than degree in relation to oil taxation.  Nevertheless, stability for an oil and gas producer's gas and not his oil is no stability at all.
As a sovereign we do not execute contracts on projects or with companies, we have a broad base tax system and the premise that it would remain unchanged over a period of decades is untenable. Alaska better question its premises if it wants a gas project, particularly with the competition it faces and with its unreliable, predatory tax history.  Current activity in the oil patch is resplendent with renegotiations due to a changing market dynamic, but those center around specific contracts i.e. shipments of LNG pricing being renegotiated due to market conditions in the same manner service companies have renegotiated to maintain a position with producer companies. In fact, Apache reports their earnings are now greater at $60 bbl than previously under $90 bbl pricing. Both they and their service providers are profiting.   Perhaps Alaska should re-explore the idea of a Constitutional amendment to permit a fiscal stability 'contract' under certain conditions.
Ideally, the SOA would develop a taxing scheme that would be appropriate and applicable over wide market dynamic, lasting for decades; that would be a challenge, but perhaps ELF was a good example. When Frank gained office, pundits claimed that ELF was broken. I would posit it as being outdated under the conditions at that time. Even oil companies expected changes to be made. 



(Note: Editors are welcome to reprint our opinion pieces; attribution should occur and we would appreciate being sent a link.  Readers may send any thoughtfully written responses to this address and we will reprint them alongside this editorial for the Archives.)

Dave Harbour, publisher of Northern Gas Pipelines, is a former Chairman of the Regulatory Commission of Alaska and a Commissioner Emeritus of the National Association of Regulatory Utility Commissioners (NARUC).  He served as NARUC's official representative to the Interstate Oil & Gas Compact Commission (IOGCC).  Harbour is past Chairman of the Alaska Council on Economic Education, former Chairman of the Anchorage Chamber of Commerce, and past President of the American Bald Eagle Foundation and the Alaska Press Club.  He is Chairman Emeritus of the Alaska Oil & Gas Congress.

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