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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

 

Commentary

1-13-16 Getting Alaska's Financial House In Order

13 January 2016 5:21am

Meera Kohler, AVEC, Photo by Dave Harbour(Yesterday Anchorage reader Meera Kohler (NGP Photo) told us about an error and Ottawa reader Tom Harris informed us of an addition to include.  We are always quick to make necessary changes.  For the 15-year life of NGP, we have asked readers to help us make this a valuable research resource.  Accuracy is critical and for your continuing help, we are grateful.  -dh)


Alberta, Alaska's natural resource sister in Canada is facing it's own fiscal challenges.  The revered Fraser Institute says Alberta's problem has more to do with over spending than with low oil prices.  Some Alaskans are nodding their heads in understanding and agreement.  -dh

Getting Alaska's Financial House In Order

Alaska's Fiscal Crisis

More reference to this subject here, includes BPs announcement today, and the Alliance's AK-Headlamp opinion:

(More coming....)

Today we bring you Bob Kaufman's commentary on preparing Alaska's financial house for long term revenue challenges.  It earlier appeared in the Alaska Dispatch News (ADN).  He suggests we have much to learn from the private sector.  He is right.  -dh

*     *     *

Bob Kaufman.  Let’s face it: Low oil prices mean that Alaska is about to fall off a fiscal cliff. And that’s a scary thought. But a lot can be done to minimize the damage.

Early in my career, I led numerous turnarounds of private companies in financial distress, and while public-sector cost cutting is more difficult, I believe there’s a lot that government can learn from the private sector. Here are four insights.

Plan for the worst — it can lead to big ideas

In the early stages of turnarounds, things usually get far worse before they get better. Why? Because enterprises in financial distress often get there by not paying attention to early warning signals, and usually don’t know the true extent of their problems. Even after the crisis hits, they typically remain in a state of denial about how bad things really are. 

The best way to break the cycle is to construct the worst imaginable scenario — and put together a viable plan if that happens. Unfortunately, in many cases, the “worst imaginable scenario” turns out to be closer to reality than most people think.

In Alaska’s case, the worst imaginable scenario would be one in which oil prices stay low for most of the next 10 years — not unreasonable given the U.S. alone has hundreds of billions of barrels of recoverable shale oil that can quickly meet new demand at prices in the $60-per-barrel range.

So the question we need to ask ourselves is, “What is a sustainable long-term model of government services and revenue in such a scenario?”

It sounds ugly at first, but forcing people to confront Draconian scenarios actually frees them up to think big and creatively. They contemplate ways of doing things that were previously unimaginable. For this reason, it’s often easier to cut costs by 20 percent than 5 percent. In fact, my experience managing many turnarounds taught me that the prospect of change is worse than the change itself. The hardest part of any turnaround is taking initial action. People fear change. Our brains are wired to exaggerate the effort or cost involved in switching from the status quo.

Reduce costs and improve productivity

Traditional, incremental cost cutting simply won’t work when the underlying operating model remains in place. Once the low-hanging fruit has been harvested, it may appear as if there’s nothing left to cut.

The truth is that enormous savings — up to 30 percent or more — can be reached by eliminating non-obvious waste: an overly complex organizational structure, unnecessary requirements imposed by one part of the organization on another, a lack of root-cause problem solving, poorly designed processes and an ignorance of other underlying cost drivers.

Communicating the need for efficiency improvements is not enough to realize these larger gains. A skilled change manager or facilitator needs to engage the workforce, take an end-to-end view of the process and solicit ideas to fundamentally re-engineer it.

How do you get people to share restructuring ideas that might cost them their job? Have an explicit conversation about what happens to anyone impacted by the changes. Ideally, you would offer generous severance packages, so participants are less concerned about the potential of moving on. In the long run, what you spend in short-term transition activities is far less significant than evolving to a sustainable, lower-cost operating model.

Stop the bleeding immediately

Cash is a huge asset in engineering a successful turnaround. You don't want to use it to postpone the inevitable hard choices, but rather to invest in transitioning to and implementing your long-term plan. 

In private turnarounds, organizations are usually hemorrhaging cash, and it’s often necessary to immediately suspend all non-critical disbursements. This buys time to put together a long-term plan and shows the bank — which is your lifeline — that you can correct the situation.

Fortunately, Alaska’s cash reserves make our current situation appear less desperate. However, while Alaska does not have a bank, we do rely on credit markets, and they are not dissimilar. We need to instill confidence in them so they don’t downgrade our bond rating. If that happens, debt payments go up, squeezing your budget even further. Money that would have gone to services goes instead to bondholders in the Lower 48. People who have been through difficult situations will all tell you they would give anything to get back cash they frittered away before taking bold action.

 

In Alaska’s case, the most immediate, obvious way to preserve cash would be to cut or eliminate the Permanent Fund dividend while we assess the long-term picture. The challenge with this is that some people will be disproportionately impacted — which brings me to my last insight. 

Leadership matters

It’s a rare leader who can get people to buy into lasting, transformational change. After all, this process usually involves asking people to take big risks and sacrifice things they’ve gotten used to.

Fortunately, our current governor is not explicitly identified as a Democrat or Republican. That could help him overcome the mistrust that would result from being associated with a specific set of partisan values. But he also needs to hold himself to the highest standards of honesty and impartiality.

I’ve found that most people are willing to do their part, as long as they perceive an equitability of sacrifice across the board. The more they see others concede, the more they will concede. The minute they perceive that others are gaining ground at their expense, that virtuous cycle ceases, and they will viciously fight for their own interests. In the public sector, that could quickly deteriorate into a political stalemate and lack of action.

I’ve also found that people don’t give up their old ways unless called to a higher purpose — one that goes beyond improving profits or performance. In Alaska's case, many of us fear our way of life may be at risk due to low oil prices. The cause needs to transcend partisan differences and focus on our common values.

Fortunately, most Alaskans share two core values that are relevant now. First, we’re resilient. We’ve met great challenges before. It’s true that years of fabulous oil riches may have made us a bit soft. But now we’re being asked to summon the determination and creativity that have allowed us to thrive up here. And second, we’re compassionate. Alaska is a small enough state that we still look out for one another.

The question we should be asking ourselves now is this: “In a world where oil prices will never rebound, how can we draw on these qualities to still build a great state, with a good education system and good public services?” Getting to that sustainable end goal will inevitably and sadly require cuts in government and to certain beneficiaries. But the sooner we confront these challenges, the more cash we’ll have to help those affected in the transition.

Bob Kaufman is the founder of Alaska Channel, an Alaska video and stock footage company. He also is a business consultant and venture capitalist who worked in turning around struggling companies while at Bain & Company and as an interim CEO.

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1-12-16 Weak Energy, Etc. Policies = Lackluster Last State Of The Union Speech

12 January 2016 3:46am

Calgary Herald by Dan Healing.  ... Seven Generations Energy Ltd., considered one of the bright lights of the Calgary oilpatch, announced it would postpone about $200 million of planned capital investment in 2016....


David Holt Commentary, FuelFix.  ...a second major oil company was forced to abandon plans to drill in the Arctic Ocean off the coast of Alaska...for those who live close by..., the news is devastating.

ON EVE OF AMERICA'S "STATE OF THE UNION" SPEECH, WE SEE A WEAKER NATION BECAUSE OF WHITE HOUSE ENERGY POLICIES

After rejecting the Keystone XL pipeline for the U.S., the Obama administration is now encouraging construction of an oil pipeline in Kenya, according to a WSJeditorial.

U.S. Ambassador Robert Godec reportedly told Kenya’s energy minister last week that the administration would help the African country raise $18B to finance its PowerAfrika pipeline project.

Meanwhile, TransCanada (TRP +0.4%) is bringing an international arbitration case against the U.S. for not treating the Canadian company the way it would a U.S. company as it is seeks to recover $15B in costs and damages

Today we have more evidence (Column right, lower story) that White House disapproval of Keystone XL was based, pure and simple, on politics -- not on environmental considerations.   Remember, our first evidence was that the State Department (i.e. the jurisdictional agency since the pipeline would cross the international border) released multiple determinations that the project should be approved.

Such presidential policies cannot produce much of a record to be proud of during tonight's last State of the Union Speech.

Note as well that last year's disapproval of Keystone XL coincided with the administration's continuous delay and the eventual demise of Shell's Arctic Alaska oil and gas exploration program.  

Killing of these high profile energy projects was perfect preface to the President's participation in the United Nations' Paris Climate Change conference in December, 2015.  This negative, domestic energy policy strategy surely delighted the United Nations climate change cabal, whose leader* admitted that the goal of environmental activism is not to improve the environment but to destroy capitalism.  (*Christiana Figueres {Photo} Executive secretary of U.N.'s Framework Convention on Climate Change)  Note: Figueres has now added another goal: depopulating the earth, except for her family, US funded UN coworkers and friends, we assume. -dh

Blocking these and other major fossil energy projects -- which would have been good for American jobs and consumers -- would also have pleased Arab countries intent on diminishing American energy competition.  

These dots may eventually connect to possible efforts of the outgoing president to purchase a Dubai mansion.  Could this possibly happen while bidding to become Secretary General of the United Nations?  

The sooner the United States withdraws funding, support and even participation in the United Nations, the better.  With China, Russia, Arab and liberal coalitions in charge, the interests of America -- including energy interests -- cannot be achieved.  

Tom Harris

From reader Tom Harris we have this commentary on tonight's State of the Union Speech: "...But what Obama did not tell Americans, and will undoubtedly not admit tonight, is that the accord is dangerously flawed. It is, in effect, another Kyoto Protocol since, like all United Nations greenhouse gas (GHG) emission reduction agreements, it provides an opt-out clause for developing nations, the source of most of today’s man-made GHG.   More

Think about it: the U.N. energy producers wish to diminish North American oil and gas production, purely to reduce competition.  The liberal countries vote and work against (i.e. the climate change activist states) coal, oil and natural gas production to reduce supply and increase costs so consumers will use less.  The world's poor countries cast their votes in favor of the climate change agenda so long as the U.S. pays its taxpayer dollars VIA THE UNITED NATIONS to their officials who may or may not responsibly transfer those dollars to the intended alternate energy projects.

There is also another beneficiary of diminished North American oil and gas wealth and economic strength: ISIS.  ISIS has oil money.  The stupid or devious (i.e. take your choice) action of United States leaders is unfreezing billions in cash to terrorism state sponsor Iran.  These facts logically lead to a weaker North American defense capability and a stronger terrorism capability.  

Accordingly, we do not look forward to a very pithy, last State of the Union performance this evening.

Putting the nail in the coffin are current Canadian and U.S. leaders who wholeheartedly endorse the anti fossil fuel, transfer of North American wealth programs.  

With such leadership, can economies be expected to perform better than they now are?

-dh


Original Story Here, with videos.  Christiana Figueres, the Executive Secretary of the United Nations Framework Convention on Climate Change, recently stated in an interview that the Earth is already over burdened with people and that we should look at depopulating the planet.

“There is pressure in the system to go toward that; we can definitely change those, right? We can definitely change those numbers,” Figueres stated.

“Really, we should make every effort to change those numbers because we are already, today, already exceeding the planet’s planetary carrying capacity.” she claimed.

“So yes we should do everything possible. But we cannot fall into the very simplistic opinion of saying just by curtailing population then we’ve solved the problem. It is not either/or, it is an and/also.” Figueres continued.

Figueres also blatantly stated earlier this year that the true purpose of the entire global warming scare is to kill off capitalism. Now, even after this admission, she’s claiming we need to get rid of a large percentage of the world’s population due to climate change. Of course, most of the sheeple in the world will ignore her admission as well as the undeniable evidence that climate change is the greatest science scandal of all time – as illustrated by the fact the someone has been ‘fudging the numbers’ that give credit to this scam.

The other great lie is that we have a problem with the Earth’s population. Actually fertility rates are falling. More below the video.

 

Climate One is a self described public affairs forum which advocates extreme action to combat climate change. It is a branch of The Commonwealth Club of California based in San Francisco, essentially a talking shop visited regularly by heads of government and corporate business.

Figueres is no stranger to controversial statements when it comes to climate change. The UN official previously described the goal of the UNFCC as “a complete transformation of the economic structure of the world.”

She has also repeatedly said that a Chinese style communist dictatorship is better suited than the U.S. constitutional system to fight “global warming.”

Figueres told Bloomberg News last year that the Chinese government (which continues to enforce forced abortions, infanticide and compulsory sterilization) is “doing it right” when it comes to climate change, even though China is by far the biggest emitter of greenhouse gasses.

Figueres noted that a partisan divide in the U.S. Congress is “very detrimental” to passing climate related legislation, while the Chinese Communist Party, sets policies by decree. President Obama clearly agrees given that he continues to bypass Congress by issuing executive orders on climate change.

As InfoWars has continually noted, there is a fundamental flaw in associating climate change with overpopulation.

Populations in developed countries are declining and only in third world countries are they expanding dramatically. Industrialization itself levels out population trends and even despite this world population models routinely show that the earth’s population will level out at 9 billion in 2050 and slowly decline after that. “The population of the most developed countries will remain virtually unchanged at 1.2 billion until 2050,” states a United Nations report. The UN’s support for depopulation policies is in direct contradiction to their own findings.

Once a country industrializes there is an average of a 1.6 child rate per household, so the western world population is actually in decline. That trend has also been witnessed in areas of Asia like Japan and South Korea. The UN has stated that the population will peak at 9 billion and then begin declining.

In addition, as highlighted by the Economist, global fertility rates are falling.

Since radical environmentalists are pushing to de-industrialize the world in the face of the so called carbon threat, this will reverse the trend that naturally lowers the amount of children people have. If climate change fanatics are allowed to implement their policies, global population will continue to increase and overpopulation may become a real problem – another example of how the global warming hysterics are actually harming the long term environment of the Earth by preventing overpopulated countries from developing and naturally lowering their birth levels.

Even if you play devils advocate and accept that humans do cause catastrophic warming and there are too many of us, and if you can skip past the eugenics connotations of population control and depopulation policies, those methods are fundamentally still not a valid solution to the perceived climate change threat.

The real solution would be to help increase the standard of living of the cripplingly poor third world, allowing those countries to industrialize, and seeing the population figures naturally level out.

Instead, the third world has seen a doubling in food prices owing to climate change policies such as turning over huge areas of agricultural land to the growth of biofuels.

In addition, Climate legislation continually pushed by the developed world has those nations taking on less of a burden than anticipated demanding more of poorer countries, despite the fact that any further cuts in CO2 emissions will further cripple their flimsy economies and poverty-stricken people.

Previous legislation, such as the Copenhagen agreement, allowed people in developed countries to emit twice as much carbon per head than those in poorer countries, who have not caused the rise in emissions said to be threatening our existence on the planet. The revelations have led third world leaders to accuse the developed world of “climate colonialism”.

Linking environmental policy to depopulation agendas opens the door to eugenics and it is no surprise that through that door have come pouring hordes of elitist filth just begging to be on the front line of the extermination policy.

One example is UK-based public policy group The Optimum Population Trust (OPT), which has previously launched initiatives urging wealthy members of the developed world to participate in carbon offsets that fund programs for curbing the population of developing nations.

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1-11-16

11 January 2016 12:46pm

A New News and Policy Analyst In Town

Describes

A New Team Of Alaska Oil and Gas Exploration Companies

Below we bring you excellent policy commentary on issues related to the Alaska gas monetization project, www.AkLNG.com, and the state's related fiscal crisis.  Alaska Headlamp also describes efforts by Alaska's Regional Native Corporations to explore for oil and gas in rural Alaska.

We've monitored Alaska Headlamp in these pages since it appeared late last year.  Now, we officially welcome it to the public dialog!  

Today's Alaska Headlamp analysis and commentary:

New wildcats. Alaska Native regional corporations are wildcatting for oil and gas in the state's frontier basins, eyeing little-explored prospects after dusting off old studies by major oil companies. They aren't seeking the huge petroleum discoveries like those on the North Slope. Instead, they say smaller finds will serve their goals of creating jobs for local residents, while providing affordable energy in villages beset with crippling gasoline and heating oil costs. Native corporations eyeing frontier basins include Ahtna, who's planning to drill a gas well this spring near its headquarters in Glennallen. Further north, NANA wants to conduct seismic surveys not far from its Northwest Alaska headquarters in Kotzebue. The exploratory work is eligible for the state tax credits that some lawmakers want to eliminate to help counter a massive budget deficit caused by sliding oil prices and historically low oil production. A Senate working group that held hearings on the tax credits last fall cited Native corporations' unique role in Alaska as one reason frontier exploration should continue to receive a benefit if the $500 million program is scaled back. Created by the 1971 Alaska Native Claims Settlement Act, the corporations and nine other regional Native corporations are supposed to use their large land holdings to promote "economic health" in their regions, said the summary report from the Senate working group. They also return profits to their Alaska Native shareholders.Headlamp fully supports the new exploratory work being conducted by the Alaska Native corporations. Resource development, no matter the scale, is an ever-important aspect of Alaska's economy. Such development projects should be pursued across all corners of the state to create new jobs, especially in regions with high unemployment rates.

Sen. Kevin Meyer, R-Anchorage, has signaled to his majority caucus that it's time to consider finding new revenue to balance the state budget by putting a statewide sales tax on the table. This move follows Gov. Bill Walker's proposal that included a state income tax. When Walker declared his candidacy for governor in April 2013, he told reporters, "Alaska has gone from an owner state to an owned state, and we have no one to blame but ourselves." One thing he was referring to was SB21, the new oil tax law that the Legislature had just passed. He believed it compromised the state's resource development interests.Alaska absolutely needs a bipartisan solution to the fiscal crisis it is facing. That said, Headlamp, and most Alaskans know, that taxing our way out of the hole we're in is not a solution. Headlamp reminds policy makers that every dollar taken out the private sector, which is being hit the hardest in this era of low oil prices, through taxes, to support government, is a dollar that could have been better invested or spent. Increasing taxes will continue to hamper Alaskan businesses and families already plagued by declining oil prices. There are plenty of ways to balance a budget without more taxes. Headlamp hopes that when the legislature reconvenes next week solutions, that inflict the least harm on the private sector and Alaskan families, will be found.

The Alaska Dispatch News published a profile of Attorney General Craig Richards. Richards has taken on high-profile lead roles on Walker's plan to fix Alaska's huge budget deficit, and on state efforts to develop a $55 billion natural gas pipeline from the North Slope -- two items at the top of the governor's wish list. Walker recently placed Richards on the board of trustees of the Alaska Permanent Fund Corp., and also appeared in a Fairbanks courtroom last month for the announcement of a settlement that freed the men known as the Fairbanks Four from prison. Richards also has his day job of being in charge of the Alaska's 550-person Department of Law. Randy Hoffbeck, now Alaska's Revenue Commissioner, described Richards as "supremely smart and "confident" based on legal cases in which he was involved prior to Walker's election. Nonetheless, some lawmakers question whether Richards has taken on too much. "He's been delegated a tremendous amount of responsibility in areas that you wouldn't typically expect," said Sen. Bill Wielechowski, an Anchorage Democrat and also an attorney. He added: "It's a little worrisome from a workload perspective, because the attorney general is the top attorney in the state -- now you're putting on top of that the gas line, and now you're putting on top of that the Permanent Fund, basically the crux of the state's fiscal plan." Anchorage Republican Rep. Charisse Millett, the House Majority leader, said some of the animosity toward Richards stems from what she described as "maybe a little bit of an attitude that he's above, that the administration is above the Legislature -- and we're on a need-to-know basis…That's not the way government was designed." Headlamp hopes to see more cooperation and dialogue between the Walker administration and the Legislature in 2016.

Subscribe to Alaska Headlamp here.

 

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1-10-16 Brennan Is Right About 2016: A Year Of Great Testing

10 January 2016 10:25am

Anchorage Daily Planet

Full editorial here....  Posted: 10 Jan 2016 01:27 AM PST

By

Tom Brennan

Tom Brennan, Anchorage Daily Planet, Copyright Dave Harbour 2009This will be a year of great testing for Alaska’s political leaders.

If this state is going to dig its way out of the financial hole in which it finds itself, some incredibly important legislation must be passed and made law, legislation that will be unpalatable to many voters. And that electoral fete will have to be accomplished in an election year.

Did you see our commentary yesterday: Gasline/LNG Project State Ownership Gamble, Greed Not Need?

Mr. Brennan is right; it will be a, "great year of testing."

But what is the test?

To us the question is whether today's adults decide to make mature and wise decisions that contribute to a sustainable budget and economy, or whether decision makers will kick the fiscal can down the field for their kids to deal with.

That would be intergenerational inequity.

In yesterday's commentary we also pointed out what a gamble of public funds it is to purchase equity in an energy project.

That is also a circumstance wherein today's adults will risk savings account money -- along with their kids' future on a high stakes game of chance.  

Since a number of legislators now serving plan to retire soon as public employee pensioners, they leave the potential of a financial risk gone wrong to their children...along with other fiscal dangers...while not hesitating to collect a retirement check during the trying years before us.  (Their retirement check, of course, also depends on the health of the PERS/TERS retirement account, whose unfunded liability approaching $10 billion threatens the future of the program.

Ironically, some of these have freely admitted in public that they should have done much more to control government growth.

But that is water under the bridge, at this point, and we at least appreciate their honesty.  

The question now is whether, this year, those who had a hand in creating the current budget crisis through inability to control spending will now cut spending before transferring the weight of the financial crisis to citizens via new or increased taxes.

From our viewpoint, then, the reason Mr. Brennan is right that this will be a year of great testing is that lawmakers and the Governor will be making a decision affecting the prosperity of their children.

Will they bite the bullet and pass the test by successfully and courageously reforming the state budget during this legislative session.  

Or, will cosmetic changes be adopted as teams of elected officials attempt to shift blame while effectively kicking the can down the field, again this year, toward the goal post of the next generation?

    -dh

...leaders will somehow have to convince voters that the state needs to slash state spending, bring back an income tax (and perhaps also pass a sales tax) and dip into the earnings reserve account of the Alaska Permanent Fund.

...

A few things are happening to improve the financial picture. Gov. Bill Walker’s hiring freeze and crackdown on state employee travel was a good one. He should have done it long ago, but even now it’s not too late.

Next, the Legislature needs to do something similar. Some of the travel by members of the House and Senate is ridiculous. Some of their members are in the million-mile airline award class, with legislators frequently hopping onto international flights at state expense to make brief appearances at conclaves of limited value to Alaska.

The Legislature should also cut way back on the number of aides each member has on payroll. The numbers vary from one post to another, but each legislator has at least a few and some have more. At times like these, most legislators should be limited to one aide and only those in top leadership positions, where there is a proven need to meet the demands of the position and constituents, should have more.

Everyone hates the thought of cutting the education budget. That has the ring of killing the puppies at midnight. But with tight money Alaska should be ....

State Senate President Kevin Meyer has already raised the possibility of a statewide sales tax. Meyer said this week that “in light of the taxation legislation package recently submitted by the governor, it seems a statewide sales tax should also be part of the discussion.”

...the international credit rating services are already giving Alaska a poor rating for its failure to address the budget crisis. Poor credit ratings can make borrowing expensive and — with a gas pipeline hopefully on the horizon — Alaska has some large-scale borrowing in its future.

It may be too much to expect that all these problems could be addressed in a single year. But this state’s current leadership ....    (Full editorial here....)

Categories:

1-9-16 Government Gasline Ownership Based On Greed Not Need?

09 January 2016 10:27am

Les Gara, Alaska Gas Pipeline, Stay the Course, Photo Copyright by Dave Harbour 2013SUBSCRIBE TO PETROLEUM NEWS.  Gara: AKLNG needs to stay the course.  House Rep. Les Gara  (NGP Photo) has been around for several plans to advance a natural gas pipeline and believes the state is on the right track, but adds there are unknown variables that could still derail future progress. The Anchorage Democrat who serves on the House Finance Committee says the state made the....

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Our Commentary.  We have a hunch that as time marches on, more and more legislators will conclude that purchasing equity in an Alaska gas pipeline/LNG project is not justified at this time, if ever.  The state is in a fiscal crisis and every dollar spent on non essential costs drags the state closer to insolvency.  

In all fairness, we don't know what motivates any particular politician on a particular issue.

We would note, however, that legislators favoring socialism and Davis Bacon income streams for organized labor will be likely to continue supporting public ownership of energy projects for reasons having little to do with the actual merits of ownership.

Q.  Why is equity ownership in http://ak-lng.com/ a non essential government function?  

A.  Because it is gambling, plain and simple.  It puts the public treasury at risk and in the hands of both unelected bureaucrats and part-time, elected officials motivated by reelection more than due diligence management of a complex, technical project.  Furthermore, even if the equity position were to, by chance, produce more wealth than without the equity, the project could not be completed before 2025 and the odds are against even that optimistic timing.

But there is more:

  • If the project moves forward, but is not feasible, all public money invested to that point could be lost.
  • Alaska has painfully proven to itself on multiple occasions that state ownership of free enterprise projects is foolish, and not a proper role for government.
  • Even if the project is built after 2025, the state would already have become insolvent at the current rate of subsidies required to fund government operations. 

Any way we look at it, government ownership of private projects is wasteful, risky and endangers the very enterprises it hopes to exploit.

As longtime observers of Alaska politics, we believe the only reason Alaskan politicians have strayed down the pathway of socialized, energy industry ownership is a shared motivation of greed, not need -- rationalized by public declarations of good intent.

Public policy based on greed can only prosper in the absence of wise leadership.

Categories:

Yea for TransCanada! Prepare For The Alliance Tomorrow!

07 January 2016 3:37am

Rebecca Logan, Alaska Support Industry Alliance, Meet Alaska, 2016, Photo by Dave Harbour
 

Considering our editorial Tuesday, Tomorrow's ALLIANCE MEET ALASKA conference may be the year's most important meeting for readers living in/visiting Anchorage.  Agenda.

Following Tuesday's editorial on the rating agencies' downgrades of Alaska's creditworthiness, see these reader comments by: an Alaska couple, an Alaska university professor, and our anonymous, Australian energy analyst friend (We hope his tough but realistic predictions are ameliorated by a successful TransCanada suit, as described below.  -dh


Speaking of the Alliance (i.e. upper right), our Mid Atlantic anonymous energy analyst friend has this to say about the plight and the future of petroleum industry service companies.  Hopefully, the better support industry environment in Alaska will sustain it!.  -dh


Tom Barrett, Alyeska Pipeline Service Company, TAPS, Trans Alaska Pipeline System, 3/4 empty, Photo by Dave HarbourOil Voice by Tim Bradner.  ​'Our operations in winter are becoming increasingly complex,' Alyeska CEO Thomas Barrett (NGP Photo) said in a briefing.  ...   'The real solution for us is finding more oil on the North Slope and adding new production and throughput,' Barrett said.


TransCanada will sue the Obama administration...

Image result for transcanada pipeline logo

...for $15 billion for violating NAFTA because the President disapproved the Keystone XL pipeline by fiat, and because he overreached his authority on multiple occasions.  (Read the Calgary Herald story here, and subscribe!)

Sound familiar?  Hopefully this will be another defeat in the growing record of so-called executive actions that the courts reject.  We are respectful of TC for standing tall, in the spirit of the old Peter Finch movie theme by saying, in effect: "I'm as mad as hell, and I'm not going to take this anymore!".  

The administration's arbitrary and capricious acts have alienated it from the Constitution its executives are sworn to protect--as Alaska and others have learned only too well (Ref. 1, 2, 3).

During Obama's last year in office, Congress, companies and individuals experiencing harm by an unlawful administration should push back very hard, lest more freedoms become lost during these last few months.  -dh

Calgary Herald/Canadian Press by Ian Bickis.  TransCanada launched a double-barreled legal salvo Wednesday against the U.S. government over its rejection of the company's proposed Keystone XL pipeline.

The company said it intends to file a claim under Chapter 11 of the North American Free Trade Agreement in response to the decision, which it called arbitrary and unjustified.

...     TransCanada alleges that, as a signatory to NAFTA, the U.S. government failed in its commitment to protect Canadian investors and ensure the company was treated in accordance with international law.

In its notice of intent to initiate the NAFTA claim, TransCanada said that the U.S. government concluded five times that the pipeline would not have a significant impact on greenhouse gas production, but still rejected the pipeline to appear strong on climate change.

"Stated simply, the delay and the ultimate decision to deny the permit were politically-driven, directly contrary to the findings of the administration's own studies, and not based on the merits of Keystone's application," TransCanada says in its notice of intent.

...     TransCanada said it has also filed a lawsuit in the U.S. Federal Court in Texas asserting that President Barack Obama's decision in November to deny construction of Keystone XL exceeded his power under the U.S. Constitution.

...     The White House and the State Department both declined to comment on the lawsuit or the NAFTA challenge.

...     Adam Barratt, a spokesman for Foreign Affairs Minister Stephane Dion, had little to say on the matter Wednesday, although he noted the lawsuit is "not entirely unexpected" and falls within TransCanada's purview.

"We're aware of recent developments with this file and TransCanada," he said. "As this is a matter which is expected to go before arbitration, or before a court, we don't have a comment at this time."

...     "This is about a foreign company trying to undercut safeguards that protect the American people," said Anthony Swift, director of Natural Resources Defense Council's Canada project.  (Note: typical, non substantive outcry by a special interest activist.  -dh)

Saskatchewan Premier Brad Wall, who supports the project, tweeted: "We support @TransCanada #KXL NAFTA challenge. Pipelines safest way to move energy in N. America, get more $ for SK oil."

Read full story here..., and subscribe!


 

 

Note from our anonymous Australian energy analyst following Tuesday's editorial

Dave,

Firstly - thanks for promoting my blog again recently!

I presume you will already have seen the story below.

Point Thomson condensate will help TAPS.  Beyond that though, things look tough.  Exploration on the NS with current oil prices (and current Governor of AK…) will not be material.  A likely Hilary win in the 2016 Presidential election will mean ANWR will remain inactive.  Offshore is dead for a “generation”.   AKLNG has great merits - but it is a tough LNG market and it is ~10 years away.  Help!

Cheers,

PS - Happy New Year! 


From an Alaska couple after reading Tuesday's piece:

A VERY HAPPY  HAPPY  HAPPY  NEW YEAR, DAVE HARBOUR……...  Stay safe and ENJOY 2016 . . . AND THANK YOU FOR CONTINUING TO INCLUDE US ON YOUR LIST OF INTERESTED ALASKANS!!!


An Alaska professor commented on Tuesday's editorial.  He writes frequently and is extremely hostile to oil companies, the biggest benefactors of education in the state.  When he retires, he will have free insurance for life and an extremely enviable defined benefit pension payment.  I'm sure if I asked him what more the state could reasonably want of oil investors, he would say, "More".

"Dave:  I agree that we have been very inconsistent with our oil tax policy, but if we would have taxed them more way back when, we would be really sitting pretty.  Just saying."  

(Our response: You know I couldn't let the last part of your statement stand without response.  

If our elected officials had taxed oil more, 1) we would likely have seen less investment, less oil over time; and, 2) the government would have started new programs with the extra money, which would have been an additional anchor around the economy's neck during volatile, low price eras -- like now.  

We should be encouraging and not criticizing oil investors, because we want them to invest more and not less.  To attract more investment, we should be a place where, "a deal is a deal". 

More investment leading to more production is essential if the state is to meet its financial obligations.  One of those obligations is eliminating the almost $10 billion unfunded liability of the PERS/TERS public employee/teacher retirement funds, of which you are a beneficiary.  

Currently, there are not sufficient, available funds to both run our subsidized government for the next few years and make the retirement fund whole.  

Accordingly, teachers should be among the most vociferous supporters of oil investment, not some of the industry's most hostile critics. 

Happy New Year!

-Dave


 

 

Rebecca Logan, Alaska Support Industry Alliance, Meet Alaska, 2016, Photo by Dave HarbourFrom ALASKA SUPPORT INDUSTRY ALLIANCE General Manager, Rebecca Logan (NGP Photo):

"The Alaska Support Industry Alliance is once again proud to announce that our annual Meet Alaska Conference and Tradeshow is TOMORROW!

"As the largest one-day event of its kind in Alaska, Meet Alaska features more than 500 Alliance members including industry leaders from across the state. In addition to meeting fellow Alaskan industry leaders, attendees will be invited to hear a dozen presentations from economic authorities and Alaskan lawmakers on the industry climate in Alaska.

"Meet Alaska hasn’t disappointed in 33 years – and Friday will be no exception. If you are interested in joining us, click here to find registration information. Stay tuned this week to Headlamp’s blog and Twitter through #MeetAlaska16 for the latest.

"And for those joining Meet Alaska in person AK Headlamp will be on hand.  Ever wondered how you and your business can stay engaged on key political and business issues facing Alaska?  Need help signing up for Twitter?  Come find us Friday at the AK Headlamp booth."


From our Mid Atlantic anonymous energy analyst friend:

Last night, as a closing preview, we said, “In the next few days, we will deal with another major evolution to the pricing mix: Major changes for the Oil Service Industry.”  (Unnamed) immediately challenged us: “I'm going to be very interested in your next articles on the OFS industry.”  

Anyone who follows this corner knows there are few, if any, better analysts of the Oil Service business than Unnamed. He was an excellent sell-side Oil Service Analyst with CIBC for many years, and serves on the board of several Oil Service companies. Also, we are quite confident he will cover the issue soon in his bi-weekly Musings (possibly next week). Unnamed's dive into any subject is always deeper than mine, and more informative (in fairness, we cover at least ten topics in a two-week period, compared to Unnamed’s four-to-six subjects). That is why we always pass along Unnamed’s great writings.

That being said, we have decided to get into the subject of the outlook for the Oil Service industry, with an eye to what it means for the longer-term outlook for crude oil and natural gas prices. But it will take several comments over the next couple of weeks; any note too long will not get read. So bear with us.

Our Thesis: Projected cash flow for the E&P industry will likely be bleaker in to 2016 than almost all analysts have been projecting. Further, most companies have vowed to live within their opex cash flow in 2016 (mostly because they have little choice), a dramatic change from prior years. In order for the E&Ps to survive (or in the stronger cases, muddle through), they will insist that the Service Companies work for what amounts to either 1) a fixed cost, or 2) a price contingent upon the rate of production. In short, the Oil Service business will have virtually no pricing power. Further, they will be subjected to the heightened credit risks associated with their customers.  The good (?) news: There is likely to be another surge in innovative efforts to generate greater efficiency in field operations.

We have referred to our analogy of the Orlando Hotel Syndrome so often that many readers will skip past this section. But there is a specific reason for bringing it up again now. Briefly, when Disney announced it would build Disney World in Orlando, every developer, orthodontist and his brother invested in building hotels/motels in Orlando. Anyone could look up and down the streets and know it was being overbuilt. But almost no one wanted to give up his project and concede market share to the other developers. After all, the only real barrier to entry was money. As a result, by the time Disney World opened up, almost all of them were wildly overextended, and went bankrupt. Some of them went through bankruptcy twice. It was not until the cost of the projects (through forced sales) came down AND Orlando developed more attractions that the lodging industry stabilized. In the process of the overbuilding, many of the contractors were also subjected to extreme financial distress by the construction of the hotels/motels.

The point of bringing this up is that we are entering the bankruptcy phase of the Syndrome. And the Oil Service is going to feel the financial stress even more than is being projected. As a result, we have entered the bankruptcy phases for the E&Ps, but it should get much worse in the first six months of this year. In advance of this we will see many more outlooks lie this one from CONSOL Energy today:

CONSOL Energy (CNX/$8.53) reduces 2016 E&P capital budget by 40% and production guidance. Responding to challenged natural gas prices, CONSOL management significantly reduced its E&P capital budget. The E&P division budget was reduced to $205-325 million, down ~40% from previous guidance of $400-500 million and down ~67% y/y.

The Bottom Line: The Service industry will have almost no pricing power over their services. Quite the opposite; they have almost completely become price takers, to an industry teetering on the edge.

We will have more on this topic in the next few weeks. We will start with this article from Fuelfix about the ongoing shrinking of capex and opex budgets.

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