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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.  -dh

 

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Commentary

3-13-15 Apology to Canada (and the world)

13 March 2015 2:17am

See Alaskanomics Posting of Mike Bradner's Column Re: State Spending.  Why do we at Northern Gas Pipelines often focus on the importance of a 'sustainable Alaska budget'?  Because if the state cannot control spending and continues deficit spending, no infrastructure project in the future will be safe from sudden, unplanned, predatory taxation to stave off bankruptcy: hence, no gas pipeline.  That's why.  -dh


Apology To Canada And To The World

by

Dave Harbour

Back in the olden days, 1979 or thereabouts, I had just finished my assignment as public affairs director for the U.S. portion of the grand, 27-member Canadian / American Arctic Gas Pipeline consortium.  I had an office and secretary in both our Anchorage and D.C. offices.  I traveled weekly between the two locations and Canada for six years--often with company president, Bob Ward, former Alaskan Lieutenant Governor.  Working with my Canadian public affairs counterpart, author Earle Gray, was another of many important cross-border relationships.

Anyway, that experience came to an end and, impressed with the entrepreneurial genius of T. Boone Pickens, I wrote him offering my corporate and grass-roots communications services.  

Pickens never wrote back, but, happily, three members of the former Arctic Gas consortium did provide me with continuing U.S./Canadian energy challenges.

First, Cy Orlofsky of Columbia Gas Transmission Company asked me to consult with the Alcan Project controlled by John McMillian Northwest Energy Company, and Bob Blair of Alberta Gas Trunkline, Ltd.  Northern Natural Gas of Omaha -- thanks to a recommendation of VP Dan Dienstbier​ -- brought me on as public affairs director to reorganize that department (i.e. before the company morphed into Internorth and then Enron).  After that brief assignment, Atlantic Richfield's Robert O. Anderson hired me as government affairs director in Alaska and, later, Washington D.C.

T. Boone Pickens as the world has learned, has done just fine in the communications area without Dave Harbour's help.

Nevertheless, my own experience with Arctic Gas and ARCO enabled me to share with Pickens a knowledge of Canadian / American energy interdependence.  Just as Canadian oil and gas flows through the U.S., so do American pipelines move through Canada.  Our oil and gas industries benefit from the experience and technology shared by company employees rotating between U.S. and Canadian project assignments.  We are each other's largest trading partner.  ...not to mention our shared interests in the Arctic and North American military defense.

In 2000-2001, when we created the Northern Gas Pipeline blog, we were determined to encourage greater understanding and rapport between the two great North American neighbors.

Sometimes this was a struggle, as when the U.S. took an ill-considered tariff position regarding the import of Canadian softwood.  Then there were those associated with Alaska energy concepts (i.e. El Paso Natural Gas, Yukon Pacific, Alaska Gasline Port Authority, Backbone, etc.) that often demeaned Canada as a tool for leveraging less-economic or infeasible, "All-Alaska" energy projects.

Fast forward to this era.  TransCanada Pipe Lines, Ltd. has grown into a much bigger energy entity in Canada and the United states.  Its pipelines crisscross North America.  It is a major player in the Ak-LNG project.  And, its Keystone XL project has been front page business news for over a half decade.  

Keystone: Obama's slow-motion Kabuki theatre (See This Edmonton Sun Commentary of March 3) by Kenneth P. Green

The Obama Administration's political rejection of the Keystone XL project was a monumental decision that could shift tens of thousands of energy jobs to other countries; diminish the entire U.S. economy, injure relations with Canada, further demonstrate lack of solid American leadership to the world and seriously damage our efforts to achieve energy independence and stronger national defense capability.

In response to Obama's veto of the Keystone XL project, T. Boone Pickens produced this Op-ed piece in today's Calgary Herald.

In it, Pickens apologizes for Obama's irresponsible Keystone XL veto.  Our readers can join in that apology as we interact with our fellow Canadian and U.S. families, business partners and politicians.

But the purpose of this column today -- after providing a little U.S./Canadian historical and personal background -- is to extend America's apology to not only Canada but the world in general: for the loss -- or, hopefully, just the delay -- of this great project.  

Because of Obama's Keystone XL action:

  • thousands will not have jobs, and
  • U.S. energy prices are likely to be higher, and 
  • government unemployment and social expenses will be higher, and
  • scores/hundreds of local, state and national governments will not have badly needed project tax revenue, and
  • because of the arbitrary and capricious nature of Obama's veto, the country's "rule of law and reliance on due process" is further shaken (Ref: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, etc.), and
  • uncountable personal lives will have been affected in negative ways as unemployment, involuntary transfers, divorces and marriages, home ownership, manufacturing, health, and other human conditions are affected, and
  • project demand for foreign goods and services will affect the economy beyond North American borders, and
  • countries wishing and planning for aggression against North America's people and economies will be given indirect aid and comfort.

Reader letter today: 

Dave, I met Mr. Pickens at a cocktail party in Saratoga Springs in 2008.  He was charming, impressive and extremely credible.  He was advocating natural gas as a way to break America’s dependency on oil, and a substantial portion of my portfolio is dedicated to natural gas investments. 

Lawrence Hamilton

So yes, we join with T. Boone Pickens in apologizing to Canada for America's indefensible delay or killing of the Keystone XL pipeline project.  

But we would go on to extend that apology to America's allies and the people of the entire world.  The U.S. owes this apology to the world for failing to live up to the high standards our fellow humans have come to expect from the "shining city on the hill" that was once the United States of America.  

Once America could say, "We are dedicated by our Constitution and by tradition. to upholding a citizen's right of due process and the rule of law emanating from that guarantee."

We are optimistic that the country can once again regain, embrace, protect and defend its traditional high standards.

We are not optimistic that this return to the Constitution will be easy.

_________________________________________

 

Courtesy of: Alaskanomics.

A Terrible Constitutional Amendment; Constitutionalizing the Dividend

Alaska Legislative Digest- Supplemental Commentary

By: Mike Bradner

Sen. Bill Wielechowski has introduced a proposed constitutional amendment, SJR-1, that would constitutionalize the Permanent Fund dividend. This would essentially take Fund income off the table for spending on the basic purposes of government, such as schools, health and social needs, public safety, and transportation that might be needed under emergency fiscal conditions. 

We’re not picking on Sen. Wielechowski, but he volunteered to be part of this discussion!

 

Basic Politics 101: What’s the primary purpose of government?

The primary purpose of government, Sen. Wielechowski, is to provide public services, not to pay the public a cash dividend. The latter may be feel good politics, but it lacks a place in the fundamental role of government.

None of us know how this fiscal crisis we’re mired in is going to work out. The odds are we’re not going to get through it without some significant budget reductions, harsh enough that they will also put revenue necessities on the table.

Revenue necessities - taxes!

These “revenue necessities” are polite words for “taxes,” money we will have to pay-citizen taxes they’re called. In the agenda of revenue, use of Permanent Fund income, is also a revenue, citizens surrendering a portion of their dividend for public services.

State lawmakers, as well as governors, in recent years have lived in a political environment where taxes have not been part of the discussion with the public.

Taxes is a political “choke word”

Alaskans seem to have a speech impediment. They can say Tanana, Tutatuliak, Tallahassee, Texas, Tatalanika. But ask them to say “taxidermy,” but hold everything after the “x” and they’ll choke up, and perhaps go into apoplectic shock. On the state level, taxes have simply been off the table for decades, not discussable. As a result, the “political culture” of such discussions is also a blank.

Politicians have to “facilitate” bringing taxes to public discussion

This isn’t to be taken lightly. Politicians have to work up to a dialogue about taxes, as well as use of Permanent Fund income. No one has to rush the barricades. But politicians do have to facilitate “this language,” gradually bringing the public into the discussion. Notice we used the word “facilitate.”

One of the political skills of politicians, especially when they face politically hazardous, and unavoidable, issues is to use their political skills to insure that such issues get on to the table. If they can’t personally touch the issues, then the skill is getting less vulnerable parties to push the issues on the table.

We have not had to deal with revenue issues within the institutional memory of most of our present lawmakers, so it should be no surprise they are reluctant to engage such discussion.

No one yet has put revenue discussion on the table!

• In the aftermath of the 2008 financial crash, and subsequent recession, the first action of many states across the country was to put all their revenues, fees, tax exemptions, and etc. on the table for review (not necessarily advocacy).

• Such a review of our revenues options has yet to occur.

• The recent Commonwealth North report (by people who don’t have to stand for election) managed to do a volume of work without putting revenue issues on the table. They had the opportunity, but made only a reference to such future work.

Talking taxes is politically hazardous, to be sure!

Talking taxes is a hazardous process to be sure. By nature, politicians avoid being first to grab the “third rail” of new and controversial issues. Nurturing revenue issues forward is a delicate dance between legislative leaders, majorities, minorities, and individual lawmakers. Many lawmakers come from districts where such issues may be far more hazardous than others. Then there is the governor, who has a singular constitutional responsibility to lead.

Legislators need to think about the fact that they don’t have to be elected forever.

There is life after politics. They may well have to stand up among flying political bullets. They may survive, they may not. The history of such revenue/tax combat is that the voters, of course, do react. They come down hard on a “tax legislature.” In fact, voters in reaction often don’t distinguish between those who voted for taxes and those who did not - they just whack them all.

However, even where there is a quantum shift in makeup of a Legislature, the new body rarely repeals such taxes. They may move some decimal points, and make political noise, but the revenue enactments generally remain “in place” – they were necessary. However, we are told that many lawmakers who bite the bullet often later get elected again. They apparently were respected for their courage.

Facing up to tough issues, not passing the buck!

Politicians are elected to do what? They are elected to look at complex issues, and at a greater depth than the general public, being busy with their daily personal lives can possibly do.

However, there are many of the elected willing to duck such issues, pass the buck to the public. We’re talking about putting a revenue issue out at public referendum - let the public decide. The result of such a political dodge is that there will be only one answer by the public - that will be an emphatic “no.”

Once putting a tax issue to a public vote, lawmakers are stuck with that as “precedent.”

The odds are repeated efforts will just bring repeated rejection.

 

Income tax, sales tax, or use PF income

The question for such lawmakers who dodge responsibility and pass the buck to the public is:

• “Why the Hell do we elect you.” We elect people to make the tough decision.

The best test of the necessity of a tax is when politicians lay their futures on the line and “do it.”

In the future, like it or not, lawmakers will likely face choices that involves enacting an income tax, a sales tax, and use of Permanent Fund income.

What we “are not” as a state!

We need to remember we are not a “usual state,” we are not Maryland, Delaware,

New Jersey, Connecticut, New Hampshire, Vermont, which you can walk across in a day. Nor are we Ohio, Indiana, Illinois, Iowa , Wisconsin that you can easily drive across in a day. These are states where a kilowatt of electricity can flow border to border, where the tax bases of local governments are relatively uniform, where local governments can support many services without state assistance.

As a state “what we are”

We are is a state that superimposed over the contiguous United States would stretch coast to coast, a fifth the size of the contiguous states. We have two-thirds of the shoreline, an extensive fishery, 82 percent of our communities are connected only by air, the state operating 247 airfields. One marine highway system stretches 1,619 miles along our coastline.

We operate school systems unconnected by roads, and where individual school sites are unconnected from each other. The densities of school populations and school costs defy efficiency in Many of these areas lack a local tax base in the traditional sense. Costs for electricity and heating oil is prohibitively high, climate restricts fuel deliveries to once a year. Community infrastructure is costly and difficult to maintain- water, sewer, waste treatment, and solid waste.

We have gained in our core regional efficiency!

Today the good news is that the costs of our railbelt region (Seward to Fairbanks) are pretty good in comparisons with elsewhere. The same is true for our Southeast Alaska cities and boroughs. The bad news is that a lot of “other Alaska” still has a high cost profile.

All this being said, our windfall of oil revenues due to the 2008 ACES tax, and the escalation of oil prices worldwide, has allowed our budgets to soar.

We can reduce budget, but also have to have a mix with new revenues. A good end result comparison might be with similar core areas in other states.

The same goes regarding what people pay for their services in these ad hoc comparisons.

So what’s going to happen now?

Somewhere here lawmakers have choices to make regarding budget reductions and balancing reductions these with a mix of different kinds of new revenue. Our budget spending is still constrained by oil prices. While we may adopt new revenues that are more predictable, our reliance on oil prices will remain, and oil price will likely remain volatile for some time to come.

There’s a lot more ahead of us!

There is a lot more ahead of us regarding a host of issues that revolve around budget situation. We will have ongoing special reports exploring the shadows of emerging policy. Right now lawmakers are pretty much just looking at budget reductions, disregarding revenue. They are assessing what is structurally possible and over what kind of time span. Cuts take time to implement, programs time to dismantle and phase out. There are also contracts. Likewise new revenue take time to put in place.

For information on subscribing to the Alaska Legislative Digest, email akdigest@gmail.com


Calgary Herald Op-ed by T. Boone Pickins.  To my friends in Calgary and across Canada: I apologize on behalf of my fellow Americans for the United States government’s actions.

Why? Because after years of poring over the engineering, design, geology and the contents of the proposed Keystone XL pipeline, President Barack Obama chose to make a political statement and vetoed a bill to allow construction to begin.

I feel bad about this. I lived in Canada in the 1960s. You have a great country, and it’s a great place to operate in the oil and gas sector. We should have done better by you.

You may not follow the ins and outs of the U.S. Congress as much as we do, but you probably know Keystone was a bipartisan bill. Republicans and Democrats in the U.S. House and Senate voted for it. That was big news, as Democrats and Republicans working together on anything over the last 10 years has been rare.

There was no good explanation for Obama’s decision to veto the bill. The U.S. Department of State reported previously the environmental effects of the pipeline would be minimal. In its January 2014 report, the department stated: “emissions (from pipeline activities) would be equivalent to greenhouse gas emissions from approximately 300,000 passenger vehicles operating for one year.”

There are 250 million passenger vehicles operating in the U.S.

Keystone would have the effect of adding about 1/10th of one per cent to the fleet.

Because the pipeline crosses national boundaries, the State Department is charged with producing reports. Yet, after State made its report, the White House went “agency shopping” and asked the Environmental Protection Agency (EPA) to take another look at Keystone. To no one’s surprise, the EPA fired off a letter objecting to pipeline construction, citing concerns of increasing greenhouse gas emissions.

Where the EPA went wrong, however, was calculating the effects on greenhouse gases “from the extraction, transport, refining and use of the 830,000 barrels per day of oilsands crude that could be transported by the proposed project at full capacity.”

The problem with the EPA’s math is that Canadians don’t need permission from the U.S. to recover that oil and sell it. Canadians will extract it and ship it overland by train or via pipeline and tanker, not south to the United States, but west to Asia, or elsewhere. When oil prices come back up, Korea, Japan, China and others will benefit from the Canadian oilsands, not the U.S.

It is no surprise to Canadians that Canada is the U.S.’s largest oil-trading partner. But it is a surprise to many U.S. residents. I have long been a supporter of the idea of building on the North American Free Trade Agreement by establishing a North American energy alliance to include Canada, the U.S. and Mexico.

The reason oil prices are not bouncing up and down with every piece of news out of Iraq, Iran and Israel is the U.S. and Canada are using the latest innovative technology to recover oil and natural gas — from sands and shale. Additional production from those sources has provided an international energy price shock absorber. For U.S. consumers, lower gasoline and diesel prices have been like getting a $300-billion bonus. The effect in Canada has likely been similar.

So, why is Obama so opposed to the Keystone XL pipeline? As my dad used to say, “Son, it’s kind of like murder. It’s tough to explain.”

Politics is the most likely answer. The veto lets the president throw a bone to his political left while thwarting a win for the Republican-controlled House and Senate on their bill.

The silver lining is this: Obama’s veto didn’t kill the Keystone XL pipeline. He delayed it. Sooner or later, good planning will trump bad politics and the project will get the green light — we hope.

My Canadian friends, please have patience. The Keystone pipeline will happen.

T. Boone Pickens is the architect of the Pickens Plan, an energy plan for America. He is also chairman and CEO of BP Capital.

 

Categories:

3-1-15 Senator Murkowski Uses Bully Pulpit to Educate America

12 March 2015 12:34pm

Landlocked: Murkowski Explains Alaskans’ Access Frustrations

The Governor and Entire Congressional Delegation Recently Vowed to Fight the Administration's Overreaching Action to Shut Down Alaska Resource Development and Her Economy.  Senator  Murkowski Has Acted to Create A YouTube Video to Highlight Growing Federal Restrictions in Alaska.  Thank you, Senator Murkowski for Effective Work And Quick Action!  We believe that some educational entity could take that map video and expand it into a one hour lesson plan framework for elementary, high school and college students.  -dh

WASHINGTON, D.C. – Senator Lisa Murkowski today released a video to help broadcast the Alaska #ThisIsOurLand movement’s agenda to a wider national audience.

With Alaskans reeling from the Obama administration’s ongoing efforts to block off millions of onshore and offshore acres from energy development, Murkowski produced the two-minute film to speak plainly to Americans who may be unaware of the federal government’s costly, ever-growing overreach in Alaska.

15.03.12.Landlocked

In the video, Murkowski points out that 61 percent of Alaska’s lands are controlled by the federal government – and that almost none of those lands are truly open to energy production.  Instead of allowing Alaskans to responsibly develop the State’s vast resource potential, the Obama Administration has converted an additional 12.2 million acres within ANWR into de facto wilderness; withdrawn 9.8 million additional acres in the offshore Arctic; removed roughly half of the National Petroleum Reserve (NPR-A) from leasing; planned a 685,000-acre “Area of Critical Environmental Concern” in the Fortymile Mining District; proposed sweeping critical habitat designations; and preemptively targeted potential development on State lands.

All of this and more has occurred in conjunction with a series of major federal rules – from the “Waters of the United States” expansion to EPA’s climate regulations – that will bring additional costs and consequences for energy development in Alaska.     

Text of Senator Murkowski’s Remarks

“Hi this is Lisa Murkowski, Senator for Alaska. And I want to talk you about the state of my State. 

“Alaska is about one-fifth of our country, by land mass.  We’re twice as big as Texas, with North Carolina thrown in for good measure.

“If Alaska was overlaid on the Lower 48, we’d stretch from California to South Carolina.  That’s a lot of land – but what you may not know, is who controls it.

“The National Park Service manages about 15 percent. The Bureau of Land Management controls another 20 percent. The Fish and Wildlife Service administers 19 percent. The Forest Service controls another six percent down in Southeast. Then you add one percent for the Department of Defense, and the federal government controlling about 61 percent of Alaska’s lands. 

“That’s more land than Texas and Utah combined. So who controls the rest?

“The State of Alaska has 27 percent. Alaska Natives have 12 percent. And that leaves just one-quarter of one percent of Alaska as private land - barely even noticeable on a map.

“And while the State and Alaska Natives do their best to foster economic development, the federal government has taken the opposite approach. 

“All of the non-yellow lands are federal lands that are now off-limits to resource production. Even the yellow federal areas are hardly “open” to development. All of the dark blue offshore areas have serious development restrictions.  Most recently, the Obama Administration is trying to permanently restrict development in the red and orange areas.  It’s also targeting the area in pink for new limitations.

“When you add it all up, the federal government is now blocking development on our most resource-rich lands and waters.  That’s depriving Alaskans of our ability to produce energy, minerals, timber, and more for the good of our nation.  And it’s depriving our nation of jobs, revenues, security, and prosperity. 

“That’s the state that we’re in, in Alaska.  And that’s why we’re asking for greater access to our lands and waters.”

Categories:

Mackenzie Valley Oil Pipeline? Cook Inlet Gas For Fairbanks?

09 March 2015 8:03am

Watch live hearing  today @ 1 p.m. ADT re: HB 105, AIDEA BONDS; PROGRAMS; LOANS; Fairbanks LNG PROJECT (Note increased C.I. reserve estimates) ... Friday, Gas Larry Persily, Federal Coordinator, Kenai Peninsula gas pipeline, LNG, Photo by Dave HarbourPipeline Federal Coordinator's Office Closed; Larry Persily (NGP Photo) now Kenai Borough Gas Pipeline Coordinator ... AJOC, Midwest Utility Coming North To Alaska?

Alberta Oil Magazine by Richelle Wiseman.  (Mackenzie Valley Oil Pipeline?  See our earlier stories.  Photo, Invuik Church, Circa. 2002)

Inuvik, NWT, Church, Dome, Dave Harbour PhotoIt took nearly 40 years, one national inquiry and thousands of hours of negotiations, but in 2011 the National Energy Board finally approved the Mackenzie Valley gas pipeline. By then, there was just one problem: nobody really wanted to build it anymore. A massive pipeline that was once described as “the biggest project in the history of free enterprise” had been waylaid, ironically enough, by free enterprise. Gas prices were too low to justify the expense or generate a reasonable return for investors. And yet, there’s a movement afoot, driven by both government and industry officials, to build another major oil project in the North. Who said Canadians weren’t capable of optimism – or irony?  

Wall Street Journal -- Stupidity of Oil Export Ban....

Commentary: As Obama squashes TransCanada's Keystone, an army of Interveners seek to quash TransCanada's Energy East exit for oil sands crude.  And, more recently, Alaska's governor transfers support for the TransCanada/producer/state Alaska LNG project to a 100% government controlled gas pipeline, imperilling the former.  -dh    


Larry Persily, former federal coordinator for Alaska gas line projects, has accepted a position with the Kenai Borough government to include sharing information with the public about the Alaska LNG project and oil and gas issues in general. He will distribute the twice-a-week summaries in his new capacity. The update service will continue free of charge to readers.

Office of the Federal Coordinator is closed

The Office of the Federal Coordinator for Alaska Natural Gas Transportation Projects closed on March 7, 2015, due to lack of funding. Its website, Arcticgas.gov, is being maintained, but not updated, by the U.S. Arctic Research Commission, with assistance of Alaska Resources Library & Information Services (ARLIS) at the University of Alaska Anchorage.

Much of the office’s work also can be accessed online at The Pipe Files, a searchable digital library of hundreds of Alaska gas line project documents going back to the 1970s.

Congress created the Office of the Federal Coordinator in 2004 to help expedite and coordinate federal permitting for construction of a pipeline to move Alaska North Slope natural gas to North American markets. The current project under consideration by North Slope oil and gas producers involves piping the gas to a liquefaction plant in southcentral Alaska for export of LNG. More than 20 federal agencies are expected to have jurisdiction over that project.

Categories:

3-5-15 View Live Senate Arctic Hearing Now!

05 March 2015 6:08am

U.S. Senator Lisa Murkowski, Arctic, Alaska, Dave Harbour PhotoTODAY AT 10 AM EASTERN, The Senate Energy and Natural Resources Committee will hold a hearing to evaluate opportunities for the United States to build on its status as an ​Arctic nation for the betterment of the nation and those who live in the Arctic.

Charlotte Brower, Alaska North Slope Borough Mayor, Arctic Policy, Photo by Dave Harbour

U.S. Senator Lesil McGuire, Alaska Senate, Arctic Policy, Photo by Dave HarbourLisa Murkowski ​(NGP Photo-Upper L) chairs the hearing.  The hearing features North Slope Borough Mayor Charlotte Brower (NGP Photo-L.  Said federal Arctic policy works against Alaska's and America's future and is like painting a mailbox while the house burns down...."); and Alaska State Senator Lesil McGuire (NGP Photo); and Representative Bob Herron (Said Canada is key to the success of Alaska and all of America).  -dh  (View hearing here.)


TransCanada, Energy East Pipeline Map, NEB Intervenors

Today's State Spending Commentary by Dave Harbour


 

CBC News.  A New Anti-Energy Tactic: inundate TransCanada's Energy East pipeline regulatory process with nearly 2,000 requests for intervention?  If so, watch for enviro allies in the US to begin applying this technique throughout the U.S.  -dh  "The National Energy Board has received 1,805 applications to participate in the hearing for TransCanada Corp.'s proposed Energy East Pipeline...."


Alaska State Spending Commentary

by

Dave Harbour

Alaska's huge permanent fund fools everyone into thinking the state has no spending problem--including New York rating agencies that give Alaska a AAA bond rating.  

The New York analysts ignore that Alaska is basically insolvent right now -- setting aside the Permanent Fund -- when one cancels its estimated fiscal year-end savings of $9 billion with over $9 billion in the state's personnel retirement fund liability.  

Citizens in general just assume, "well, we'll have the permanent fund for a rainy day."  Rating agencies assume "prudent management" going forward when financial management has not been "prudent" for decades.  But our readers are not stupid.  They can envision a day of divisiveness ahead when every public safety and education lobbyist will be fighting retirees and unions and matching federal fund programs and revenue sharing municipalities for the Permanent Fund scraps.  

Yes, the time to control the budget is now, if not long past.  The fiscal cliff ahead comes closer, for every year of imprudent (i.e. deficit spending).  

Unfortunately, we see this independent governor and republican legislature kicking the can down the road once again, with only cosmetic operating budget cuts this year (We hope we are wrong and that courage will abound as necessary cuts are achieved.  Yet the most courageous, right-thinking elected officials are a small minority and their demands for fiscal responsibility seem muted as the legislative leadership tries to keep the ship of state from rocking too much this year.  We can envision many of these "leaders" retiring in the next year or two, hoping their own undeserved retirement checks are the first priority to fund by a permanent fund soon to be under siege.)

We believe odds are that rating agencies will soon be saying, "With its enormous Permanent Fund savings account, Alaska had the ability to weather volatile oil prices--assuming as we did that they would undertake prudent spending practices.  We regret that their lack of prudence now requires us to reevaluate Alaska's credit worthiness."  

Meanwhile, liberals and environmental activists must be rejoicing; the sooner Alaska depletes its savings, the sooner they can happily advocate higher natural resource taxes, exacerbating the death spiral of Alaska's economy and depopulation of the 49th state.

Below we provide readers with the raw data: we report.  You decide.  -dh


1.  Here is Commonwealth North's new Alaska state operating budget study ("...the state operating budget has increased 102% - from $2.2 billion in FY 2004 to $4.4 billion in 2014.")  More here....

2.  Above is the video -- along with a link -- of Governor Walker's recent presentation to New York rating agency financial analysts representing: Standard & Poor's, Moody's, and Fitch.

3.  Here are the rating agency reports accompanying the ratings they applied to Alaska.  More here....



The State’s Operating Budget: Critical Crossroads, Choices, and Opportunities  Posted: 04 Mar 2015 

Over recent years the state operating budget has increased 102% - from $2.2 billion in FY 2004 to $4.4 billion in 2014. In Commonwealth North's study on the Long Term Economic Sustainability for the State of Alaska (January 2013) they noted that the current level of spending is unsustainable and it's imperative that the state implement a long-term fiscal plan, which will require spending restraints. Fiscal discussions have primarily focused on the revenue side of the state's ledger and on capital project spending. Minimal public attention or discussion has been given to the recurring cost drivers of other state spending.

As a way to find solutions to the budget problems, Commonwealth North enlisted the help of its Fiscal Policy Study Group. The study group is co-chaired by CWN board members Eric Wohlforth and Cheryl Frasca and the group was asked to produce a study that aims to:

  • Increase the understanding of cost drivers of the operating budget over the last ten years and the forecasted impact over the next ten years.
  • Understand the impact and nature of formula-driven programs and the latitude for change.
  • Identify the effectiveness of state programs through a review of its performance measure framework in terms of results delivered and resources required.

More than 6 months of discussion and research allowed the group to produce a report that gives targeted suggestions to evaluate and reduce spending in the state’s operating budget. It is important to evaluate spending before addressing revenue because Alaskans will want to know that the state is being fiscally responsible before being asked/required to contribute to the state’s revenue. The recommendations from the report are below.

  • Immediately get Medicaid reforms underway to ensure the state can continue to provide services to those most in need. All formula-driven programs must be reviewed in terms of policy goals, results being achieved and cost effectiveness.
  • Administration, unions re-open negotiations to identify short and long-term savings in personnel and benefits costs.
  • Ensure all current revenue is available to fund highest priorities by placing all state revenue in the general fund unless external legal restrictions.
  • Undertake in-depth review of programs that examines effectiveness and appropriateness and engage citizens in these reviews. Report results to citizens and use data to inform budget decision-making.
  • Governor establish citizen-led commission to undertake such a review.
  • Establish a process similar to BRAC to implement package of recommendations that will be necessary to re-size state programs.
  • Governor and Legislature co-sponsor series of dialogues in which citizens better understand the challenge and through which they provide input on the choices they believe should be made.

Budget practices and process recommendations- Governor

Governor’s budget development

  • Citizen panels provide input into Governor’s proposed budget
  • Governor moves up budget submission to November 15 to give Legislature more time

Budget practices and process recommendations- Legislature

  • Revenue limit
    • Establish limit on savings used in any one year- provides additional pressure for spending reductions and prolongs availability of savings
    • Deposit all savings into statutory budget reserve- removes ¾ vote requirement to access Constitutional Budget Reserve
  • Create Joint Ways & Means committee
  • Establish revenue limit by defining, through resolution, amount of savings and other revenues available to fund next budget
  • Review revenue forecasting for reliability
  • Return to Constitution’s 120-day session
  • Increase interim work on budget
  • Special session(s) devoted to budget work if necessary
  • Increase time for budget work
  • Implement contingency plan for mid-year savings when significant drop in revenue

Each of these recommendations involves political obstacles and requires deliberative, thoughtful actions to ensure economic stability. Commonwealth North presented this study to public at an luncheon on February 25 and delivered the report to the Governor and the Legislature on the same day. Read the full report and presentation given by Eric Wohlforth and Cheryl Frasca.  


Rating Ag

ency Letters and Ratings

State Announcement: March 3, 2015 JUNEAU –Governor Bill Walker and Department of Revenue Commissioner Randall Hoffbeck today announced that the State of Alaska has received three separate AAA bond ratings from Moody’s Investor’s Service, Standard & Poor’s and Fitch Ratings. The announcements come after the bond rating agencies met in February with Governor Walker, Commissioner Hoffbeck and staff members of Departments of Natural Resources and Revenue. The meetings addressed growing concerns about Alaska’s declining oil revenue.

“This is excellent news,” Governor Walker said. “Three separate agencies have each given Alaska a triple-A bond rating, which will provide the state with unparalleled access to funding for future capital projects. I look forward to the opportunities this news will provide us in the years to come.”

A rating of AAA is the highest grade assigned by credit rating agencies. It is given to entities with an exceptional degree of credit worthiness, with little risk of loan default. As a result, Alaska will receive some of the lowest interest rates available when issuing or refinancing its bonds, saving the state millions of dollars in the coming years.

“Developing Alaska’s natural gas resources is one of the top priorities of this administration,” said Governor Walker. “Securing these bond ratings will help see such projects to fruition by attracting potential investors and allowing Alaska to get the biggest bang for its buck. I also want to thank past leaders, who had the wisdom to create large reserve funds—without which we could not have secured these coveted ratings.”

On March 10, the state is scheduled to sell its Series 2015A $162.7 million general obligation bond anticipation note to refinance its Series 2014A bond anticipation notes. In addition, on March 26 the state is scheduled to sell approximately $100 million of its Series 2015B general obligation bonds to refinance its Series 2009A general obligation bonds, saving the state an estimated $9 million in future interest costs.

Download Moody's rating here

Download the Fitch rating here

Read the S&P letter here

Read the S&P report here

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3-2-15 Here's Your Invitation To BOEM Day In Anchorage - What Do You Call It When Enviros Give Aid & Comfort To Anti-US/Canadian Energy Attacks?

02 March 2015 5:59am

CEA invitation to attend TODAY'S Pre-BOEM hearing press conference and reception:

_____________

Wall Street Journal Video: Western NY cities trying to secede from anti-fracking state to join Pennsylvania where fracking produces wealth and jobs.  Also ... Russia flowing money through anti-fracking groups to stall US fracking projects (Note that some of the groups named in these various reports are TransCanada, Keystone XL opponents).  

Does Russian and middle eastern money laundered via US environmental activist groups to oppose US Energy Independence = Foreign Aggression + US Enviro Disloyalty = Foreign/Domestic Enviro Conspiracy?   

Could this be a conspiracy that gives aid and comfort to enemies of North American energy and national security?  

With the evidence we do have, we must also ask if other leftist allies are involved in developing/executing this Anti-American strategy.   

Based on the foregoing revelations, we now wonder if any Clinton Foundation donations from Qatar, United Arab Emirates, Saudi Arabia, and Oman (some of whom have been aggressive supporters of terrorist organizations) have been funneled to hostile, anti-US/Canadian energy independence efforts by enviro-activists.  

We suspect that someday the truth will out....         -dh                                


PRE-HEARING Press Conference & Reception: Alaska and the Federal Government's New Five-Year Offshore Lease Sale Plan

Please come out to show your support for Alaskan energy before the Department of Interior's (DOI) Public Hearing on the Proposed Five-Year Offshore Lease Plan.

TODAY: March 2, 2015

RSVP HERE FOR FREE RECEPTION AND NEWS CONFERENCE
Reception: 2:00 pm-5:00 pm
Press Conference: 2:15 pm, prior to DOI public hearing at 3:00 pm
Anchorage Marriott Downtown
820 W 7th Ave, Anchorage, AK 99501

Confirmed Speakers:

David Holt, President of Consumer Energy Alliance

Andy Rogers, Deputy Director of the Alaska Chamber

Carl Portman, Deputy Director of the Resource Development Council of Alaska

Aves Thompson, Alaska Trucking Association

Former Lt. Governor Mead Treadwell

Vince Beltrami, AFL-CIO

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2-26-15 Please Review Yesterday's Commentary

26 February 2015 7:17am

What's next for Keystone XL?


We urge our gentle readers to review yesterday's posting; we cannot remember -- in well over a decade -- posting a more useful, relevant and actionable commentary for our Alaskan, Canadian and Lower 48 readers.  -dh

Alaskanomics by Mark Edwards.  

Understanding the Current Oil Price Environment - Part I  (See later Parts II and III)

Mark Edwards, Economist, Northrim Bank, Commonwealth North, Oil Prices, Photo by Dave HarbourOver the next couple of days, I will post a three part series about the current oil price environment in Alaska.

It is well known that Alaska’s economy is highly sensitive to the price of oil.  Billions of dollars in investment capital flow into the state each year as energy companies both explore for new oil and maintain their existing fields.  This activity has an enormous positive multiplier effect on the rest of the economy as major service industries including trucking, construction, finance, legal, engineering, retail and countless others see a direct benefit from the contracts and employment required to support this massive effort.   Read more....


 

 

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