The Alaska LNG Project provided draft environmental and socioeconomic reports to the Federal Energy Regulatory Commission (FERC), which is responsible for conducting the environmental review of the project. www.ferc.gov.
US/Canadian Pipelines And A Call For Market Freedom
Free enterprise, like water, always seeks a way out of containment in a natural quest for liberation.
In recent months, we have reported extensively on President Obama's improper (i.e. and totally rational, if one is a no growth advocate) blocking of TransCanada's Keystone XL pipeline.
|Town Hall Op-ed by David Holt (NGP Photo), President, Consumer Energy Alliance.
In less than a decade, the one-time feeble U.S. energy sector has accomplished a record-breaking 180-degree turnaround thanks to advancements in new technologies. In fact, at the current rate, the nation is likely to hit production marks not seen since the 1970s.
As such, we now live in a more energy self-sufficient nation, one that is inching closer every day to energy independence.
(We might add to Holt's commentary that the rapid growth of the U.S. toward energy independence is largely the result of exploration and production on private lands. The federal government, as we have demonstrated in these pages, has seemingly done everything possible to block oil, gas, coal and mining activity on private as well as federal lands. -dh)
That project would grant Alberta's oil sands crude oil transit into the free market and provide tens of thousands of jobs in the bargain.
In Canada, political forces in Eastern provinces are attempting to block TransCanada's Energy East project -- another way to liberate oil sands crude.
Canadian officials led by Alberta Premier Jim Prentice (NGP Photo) are putting up a valiant fight against both Canadian and American, political, pipeline roadblocks.
Alaskans are understandably interested in TransCanada's fortunes because the company is a major player in the effort to liberate Alaska North Slope gas -- in today's low oil & gas price market -- by transporting it via pipeline and LNG tankers to Asian markets.
(Meanwhile, some Alaska politicians are seeking to force -- through loans and subsidies -- a gas distribution system into existence whether the underlying feasibility is solid or squishy. But we digress....)
With all the head winds Alberta oil sands crude faces, it is still desperately seeking freedom.
Yesterday, we reminded readers of a concept we reported on two years ago: freeing Alberta crude via shipment through an Alaskan port--in absence of the most obvious transportation routes and modes.
Today, we see Northwest Territories (NWT) Premier Bob McLeod (NGP Photo) is renewing his desire to see Alberta crude head North, rather than South or West, to find freedom via Arctic transport into the world market.
All of this market chatter should convince other elected leaders (i.e. as it has convinced the more enlightened Premiers of NWT and Alberta) that if they truly wish their economies to be strong and if they wish to see jobs created -- other than legions of government employed bureaucrats and regulators that ultimately burden a country -- they should quit trying to contain, delay and over regulate the free market.
If politicians simply can't resist the attraction of manipulating the free market, let them provide incentives to enable its success -- not tons of new regulations and restrictions that limit market freedom.
If our leaders don't begin to respect the wasted resource of a dammed up market, they can expect to see the free market trying to invent more and more ways of liberating natural resources, even though the resulting project(s):
- may be less profitable,
- provide fewer jobs,
- contribute fewer national and local taxes, and
- be much delayed and possibly abandoned or left in a state of bankruptcy.
Holt Op-ed here, and below:
Even Amidst Low Oil Prices, Staying the Course Will Ultimately Benefit Consumers, Producers
2/11/2015 12:01:00 AM - David Holt
In less than a decade, the one-time feeble U.S. energy sector has accomplished a record-breaking 180-degree turnaround thanks to advancements in new technologies. In fact, at the current rate, the nation is likely to hit production marks not seen since the 1970s.
As such, we now live in a more energy self-sufficient nation, one that is inching closer every day to energy independence. While we utilize roughly 25 percent of the world’s oil on a daily basis, about 40 percent of the petroleum we consume is imported, down from 60 percent not too long ago.
Consumer Energy Alliance (CEA) has advocated for years that if the U.S. continues to develop and explore new energy opportunities in economically and environmentally friendly ways, production would not only escalate, but the economy would also strengthen, as would job growth. Most important, consumers would keep more of their hard-earned money in their pockets – and much of that has indeed unfolded.
With oil prices hovering around the $50 mark recently, gas prices have plunged, much to the delight of motorists. Lower oil prices have also been a welcome sigh of relief for other parts of the economy, because when American consumers spend less filling their tanks, they spend more elsewhere, like dining out, shopping, and going on vacations that were once on hold.
But we also know that our emergence in the shale industry has had massive geopolitical consequences. The reduction in the cost of oil is not just an American phenomenon – it’s a worldwide event. Prices are down around the globe for an assortment of reasons – reduced demand and increased supply top the list – and the U.S. fracking as played a large role in this pendulum swing, upping supply and lowering prices.
It has certainly rocked the boat at the Organization of the Petroleum Exporting Countries (OPEC), which has seen its influence on the global oil marketplace weaken dramatically. For the first time in decades, the whims of the OPEC oil cartel are of little consequence to Americans. In response, OPEC, led by Saudi Arabia, decided late last year not to cut production, keeping prices low. Their thinking is this: Since shale production – which has grown to 4 million barrels a day – is more costly than regular extraction, keeping oil prices low will eventually drive out U.S. shale producers.
It’s a strategic – and expensive – attempt by the Saudis and OPEC to reclaim its market share from the U.S. Saudi Arabia is willing will have its first budget deficit since 2011 and the largest in its history. The billions the kingdom has in reserve are expected to help ease the burden of this short-term pain.
This means that the U.S., even in the face of low crude prices, must continue it years-long winning streak in the global energy sector by diversifying their energy resources and increasing, not decreasing, access to natural resources. While we also start expanding market opportunities for those resources.
Make no mistake: Numerous onshore and offshore resources remain untapped, like an estimated 27 billion barrels of oil and 132 trillion cubic feet of natural gas in the Arctic waters off Alaska. These resources, and countless more, could heat every home in America for more than 30 years. It would also generate billions in additional revenue, create jobs nationwide, and reduce costs for households across the country.
What goes down must come back up, oil prices included. While crude prices have fallen more than 50 percent since June, causing many American producers to second guess their plans to drill and explore additional resources onshore and off, the drop is temporarily, as prices are still expected to rise later this year.
When they do, we need to make sure that our energy policies and markets are still at the head of the line worldwide, just as they are today. By staying the course and continuing to promote an all of the above energy approach in the U.S., we can help to support the nation’s future economic growth, job creation, self-sufficiency, and national security.
Alaska's Challenge of Cash & Energy Shortage: Part III
Are we for an agreeably priced, desirable and stable source of home heating fuel for Fairbanks? Absolutely. The question is whether a state-of-the-art LNG transportation/gas distribution system is better done:
1. by a state government agency owned and operated/or supervised city gas utility, or
2. by an open process which invites competitive, private sector proposals from qualified proposers in order to achieve the most cost effective possible project?
In this series, we have tried to construct a background for this discussion so that our readers will have a basis for decision making. We do encourage all citizens to become informed and make their views known.
Lastly, we seek accuracy. Please contact us here with any factual corrections. Just as we provided Business Leader Buzz Otis' opinion at the outset, and Ray Latchem's so will we provide space in our archives for your own responsibly framed comments. Thank you for reading! -dh
USA Today: "Drill With Care In ANWR and Everywhere" (Thanks to Parish Braden in Congressman Don Young's office for this link....)
NPR. Jim Prentice, the premier of Alberta, Canada, says ...., "if President Obama vetoes a bill that would approve construction, the issue would not necessarily go away."
Calgary Herald. Premier Jim Prentice is optimistic the fiery debate around the long-delayed Keystone XL oil pipeline is finally coming to a head, but one prominent U.S. senator says Canadians shouldn’t be holding their breath just yet.
And, NGP Readers, CBC now Reports a development that gives President Obama a 'plausible' reason -- other than politics -- to delay approval of the Keystone XL pipeline project. Is there anyone who seriously believes that the White House did not call EPA and say, "Hey, we need some cover on this Keystone thing...." -dh
In Part I we described the history of Alaska's fiscal challenges, its worsening cash shortage. In Part II, we devoted more focus in particular on Interior Alaska's energy shortage which is really a challenge more of price than scarcity.
After all, at some price, almost anything is available and what Fairbanks is experiencing is a lack of an affordably priced, stable supply of a desirable fuel for home heating and power generation. (Note: we normally find that the term "affordability" in public dialog usually refers to the word "subsidy". Public officials find it difficult to define the term "affordability" because the definition truly varies from the eye of one beholder to another's. As a result, there is commonly a consensus that something needs to be made -- in general -- more "affordable" for a certain group at the expense of another group. In between the groups, politicians hear testimony, test the wind, calculate what is most desirable for their own constituents and for themselves...and then go about amending/supporting/opposing whatever legislative bill becomes the solution for "affordability" and -- in the end -- the majority rules.)
In this case, we see a nexus coming as Alaska's cash shortage (described in Part I) runs headlong into Fairbanks' desire to have subsidized support of a desirable and stable supply of agreeably priced fuel (Described in Part II).
Close to Fairbanks is a stable supply of reasonably priced coal local citizens could use if they are willing to convince the EPA that emissions will improve rather than detract from air quality, and if they are willing to keep the boilers burning with shovelfuls of coal throughout most of the year. Of course, the city's coal fired, downtown hot water heating system could be expanded but then the cost might not be acceptable.
And, Fairbanks could continue to import a stable supply of heating oil whose price varies with world commodity supply and demand. But the price of fuel oil is the very reason citizens have motivated their elected officials to 'do something'.
Fairbanks' electric cooperative generates some electricity from the Wind. But wind generated power only works when the wind blows and requires a back up source of reliable power--which sort of defeats the rationale for wind power in the first place (unless one happens to be located in a place where the wind blows almost all the time, where consumers are willing to pay premium rates, where government subsidies make wind generated electricity more "affordable", and where weather, bird migrations, FAA flight patterns and other factors are favorable).
Insufficient hydro power from ice free areas exists to be of much assistance right now to Fairbanks, though the AIDEA controlled Susitna-Watana Dam and Hydro Project could provide some relief, someday. And, its price could be reasonable. Federal air quality concerns might be replaced, however, with water quality and other issues conceived by environmental activists. Plus, electricity is more efficiently employed for power and light than space heating.
And, there are other options farther down on the list of viable possibilities, including biofuels, nuclear and geothermal.
That brings us back to the current proposal now on the table.
Yesterday (in Part II) we saw how former Governor Sean Parnell's Alaska North Slope LNG trucking/gas distribution system failed while current Governor Bill Walker proposes with AIDEA that it be refashioned into an LNG trucking/gas distribution system with an, as yet, unidentified source of gas.
Alaska LNG expert Ray Latchem explained in an email to us and a letter to Governor Walker how the private sector could more efficiently manage the complex project based on the original Alaska North Slope LNG construction site. Meanwhile, one of Alaska's most important producing companies, Hilcorp, with assets in both Cook Inlet and on the North Slope began a process for supporting an Interior LNG project staged from the Cook Inlet producing area. Some observers have alleged that the administration has used its regulatory and legal power to stop or delay that project in favor of the one proposed by AIDEA.
Fairbanks News Miner. To the editor:
I would recommend the reader look up the definition of socialism. Our state already owns the railroad, a lot of land, property and I don’t know what else. Now Fairbanks Natural Gas is next.
State of Alaska, please stay away from our Permanent Fund Dividend.
We expect to see all of these concerns answered in coming weeks both as Walker faces the press and as the Legislature begins to question the administration.
As those in responsible positions prepare their strategies, we would offer a few questions and comments from this not very knowledgeable observer who is very high up here in the grandstands. But if we attended a press conference tomorrow with all the executives quoted in the news release, these are the sorts of questions we would expect could be asked. One hopes there are easy, informative, non defensive. transparent answers to such honest questions dealing with the disposition of public funds.
In absence of an actual press conference event, then, here is a variety of questions coming immediately to mind:
- We reported yesterday that when one adds up the savings assets (aside from the Permanent Fund) and deducts from those 1) this year's savings subsidy to the operating budget and 2) Alaska's retired employee unfunded pension liability, Alaska is virtually broke -- with the exception of the "rainy day Permanent Fund". Problem is that as another 'rail' of Alaska politics, few citizens and no politicians want to suggest dipping into the Permanent Fund in support of state operating or capital projects. Question: where would AIDEA get $52.5 million to fund a Fairbanks LNG transportation and scores or hundreds of miles of natural gas distribution lines, as this news release suggests? Is it money left over from Parnell's earlier LNG trucking project? If so, does use of it for another project require legislative approval?
- The state of Alaska has already allocated hundreds of millions of dollars toward potential ownership in either 1) an in-state gas pipeline or, 2) an LNG/pipeline project to move gas primarily to Asian markets...and also to Alaska markets. Questions: Since both of those pipelines run right by Fairbanks and since both plan for community access to the gas, what happens to AIDEA's proposed LNG trucking project if cheaper gas becomes available right at Fairbanks' front door? Will the trucking and gas conditioning facilities be made surplus, and sold? Will the state pay the outstanding LNG Project debt (i.e. with what money?) or will gas utility rate payers be on the hook for both the surplus LNG assets and the cost of service of the gas pipeline project?
- The AIDEA release begins with the phrase: "In conjunction with Governor Bill Walker, the Alaska Industrial Development and Export Authority (AIDEA) has signed a Letter of Intent to purchase Pentex Alaska Natural Gas Company, LLC and its assets, including Fairbanks Natural Gas (FNG). Questions: Where can we find AIDEA board minutes/transcripts from a public meeting indicating approval of the board to 'work in conjunction' with the Governor on a project and to 'intend' to purchase a gas utility for a specific price? What does "In conjunction with Governor Bill Walker" mean? And, in what form does AIDEA have his commitment? Is a copy of the "Letter of Intent posted on the Internet?
- The news release says, "AIDEA will immediately commence due diligence on the proposed Pentex purchase at the Letter of Intent price of $52.5 million." Questions: Have Pentex and AIDEA agreed to this price? Can AIDEA produce any correspondence between itself and Pentex affirming all the 'intended' details of the sale? In what board meeting were the price and conditions approved, or is this a violation of Alaska's public meeting law? How could AIDEA, as a responsible project manager, agree on an 'intended' price before conducting a 'due diligence' investigation? What due diligence was undertaken to assure the board and Governor that $52.2 million was a just and reasonable market price to put in an 'intent' letter? Why would it have been inappropriate to have the letter of intent merely signify a willingness of the parties to perform sufficient due diligence to create an agreed upon price with specific purchase terms and conditions and then proceed only if the results were acceptable to the parties?
- AIDEA's news release goes on to say, "If AIDEA’s Board approves the purchase, the investment will enable AIDEA to effectively advance the goal of bringing affordable natural gas to Interior Alaska." Questions: How can AIDEA commit to the public that a project "will" bring "affordable" energy to a community without completing an acceptable series of engineering, environmental, economic, distribution, marketing studies--much like AGDC has done? What is AIDEA's definition of "affordable"? Did AIDEA also believe that the previous Alaska North Slope LNG trucking project would be 'affordable'? What makes the outlook for this project more attractive to AIDEA than the previous effort?
- The release claims that, "AIDEA’s acquisition of Pentex would promote an integrated gas distribution system that can be built and operated in a more efficient manner for the benefit of Fairbanks and North Pole residents and businesses?" Questions. Is AIDEA claiming that its experience as an LNG transportation and gas distribution managing owner can produce a "more efficient" gas distribution system? Can AIDEA describe what system against which its conceived project would be comparably, "more efficient"? How will AIDEA organize itself to either manage or supervise management of a Fairbanks LNG transportation and gas distribution system?
- The release quotes Governor Bill Walker as stating that, "AIDEA’s initiative to help streamline gas distribution systems in the Interior is a positive development.” Questions. Why would this effort streamline gas distribution when the previous effort failed? What exactly does 'streamline' mean when there is currently no gas system covering most of the city? Without engineering and cost studies and nothing more than the confidence of news release statements, how can any conclusion be drawn at this time that AIDEA's "initiative" will "streamline" gas distribution any better than the previous effort? Speaking of "AIDEA's initiative", was it AIDEA that asked the Governor to support a new attempt to provide a government-owned Fairbanks distribution and supply system, or, did the Governor ask AIDEA to explore this new effort? In either case, where are there public meeting records or emails affirming that AIDEA's adoption of the effort is a lawfully approved activity of the agency?
- AIDEA's board chairman stated in the release: "Pentex, under AIDEA ownership, will work closely with the community and utilities to reduce construction and operation costs for both natural gas distribution systems,” said AIDEA Board Chairman Dana Pruhs. “This efficient approach will lead to lower cost energy for consumers.” Questions. Will the current gas utility operate independently of the new service area, or do you envision combining the two into one? Do you anticipate City or Borough ownership of any or all of the facilities either from the beginning of operations or at a later time? Is it your vision that AIDEA will own and Pentex will be contracted to operate all or part of one or two utilities? Where does AIDEA intend to get the proposed $52.2 million purchase price? Why not let Mr. Britton continue serving his certificated area with +- 1 thousand customers while you apply the $52.2 million and other resources to a competitively bid project serving the rest of the city and allow a proposals to be submitted that are open to all qualified proposers and any project that will most efficiently meet Fairbanks needs? Wouldn't having two certificated areas promote price and efficiency competition? After the purchase will AIDEA put management of the utility out to bid, or is it AIDEA's intent to grant Pentex/FNG with a sole source contract? If the latter is the plan, what are the conditions and what are the triggers for replacing the manager if the management does not produce an efficient system leading to, "lower cost energy for consumers?" What is "lower cost" compared to; lower than comparable BTU of delivered fuel oil or lower than Pentex/FNG currently charges customers? Does Mr. Pruhs support the RCA's economic regulation of the new system? If it does not wish to submit to cost of service regulation, how can AIDEA show that the gas distribution system is either efficient or that customer rates are just and reasonable? Has AIDEA discussed with Mr. Britton compensation packages for management assuming AIDEA purchases and owns the system and contracts with Pentex to operate it?
- The gas system seller said, in conclusion, "We have appreciated working with AIDEA on the Interior Energy Project and look forward to a seamless transition,” said Pentex President Dan Britton. The Letter of Intent announcement happened rather suddenly last week following the statewide, November election and termination of the previous project. Is it your expectation now that instead of operating a +-1,000 customer distribution system, you will now preside over an AIDEA owned system, or two systems, covering the whole city? Have you discussed potential compensation, terms and conditions that could develop formally between yourself and AIDEA? Can you provide documentation in the form of emails or draft papers that give insight into any matter discussed in these questions? We believe that you have resisted the RCA's economic regulation of FNG over the years; now, under AIDEA ownership, would you support economic, cost of service regulation of the IEP?
We are always inclined -- if not required -- to give the benefit of the doubt to those engaged in great projects. Indeed, we applaud those who work tirelessly and unselfishly to coordinate and construct great works. We also remind readers that were this project entirely in private hands, we would probably ask nary a question unless some news event or public interest matter arose.
However, readers must also realize that from the tenor of the AIDEA news release, a publicly owned project is envisioned, fed with public monies. That elicits a very different array of questions designed to create transparency of the real and anticipated costs, nature and purpose of publicly funded efforts.
* * *
Please remember that we provide our news links, maps, presentations, documents and commentary for the archives so that those who follow us will have access to decades of data on Northern North American gas pipelines and the energy related policies affecting them.
We are especially concerned with accuracy in our own commentary, for while we follow these issues closely, we depend upon the eyes and brains of dozens of experts who regularly correspond with us.
Whenever a correction or addition to one of our commentaries is merited, we make the change so that the archives have the best possible information. Of course, we do not normally change our editorial position, but will even do that if a factual error is the basis for an editorial opinion. Accordingly, your input is invited all the time.
Thank you for your readership!
|CEA President David Holt (NGP Photo) was the guest on several radio interviews discussing the Arctic for All campaign, America's energy revolution, Alaska's role in domestic energy production and the importance of offshore energy resources.
Anchorage's KBYR featured Holt on the Mornings with Michael Dukes Show. He was also a guest on the nationally syndicated Radio America: Neal Asbury’s Made in America Show. Hear the interviews here!
|The Hill Op-ed by Mead Treadwell (NGP Photo). ...the Obama administration is in a tizzy to solidify its Arctic strategy. January in particular has been quite busy for the administration: an executive order to better coordinate U.S. Arctic policy, a proposed drilling ban in the Arctic National Wildlife Refuge (ANWR) and now a proposed leasing plan that excludes significant areas of the Arctic Ocean for development. These actions all have two things in common. Treadwell FB Page.|
"Alaska's Challenge of Cash & Energy Shortage: Part II"
Yesterday, we reviewed Alaska's fall from fiscal grace: how Washington created a great state in 1959 from territorial status, based on the state's ability to achieve independence and economic parity with other states through development of natural resources.
Then we briefly reviewed how that promise soured, for two reasons: 1) a more and more hostile federal government, with cadres of grassroots environmental activist armies, have steadily removed land access and blocked projects using a variety of statutory, regulatory and judicial techniques; and 2) citizens and their elected officials allowed the productive 1968 Pudhoe Bay discovery to seduce them into overspending and creating an unsustainable, hungry bureaucracy whose appetite is sapping away state savings and threatens to devour the entire economy within a few years.
Yesterday's was a review of Alaska's challenge of cash shortage. That summary serves as a basis for understanding the challenge of energy shortage faced by the Interior Alaska community of Fairbanks today.
Most business, political and community leaders there are engaged in a controversy which today consumes the political dialogue in that city. This may be due to the oft-cited fact that in a city mostly dependent on heating oil derived from $100/barrel crude oil, an average heating bill exceeds the amount of the average mortgage payment.
As our business leader contributor, Buss Otis (NGP Photo) pointed out yesterday many folks find themselves on the edge of economic survival and the sudden, world oil price drop over the last several months is not very fully represented in local fuel bills.
Accordingly, citizens in that northern, Alaska city seek relief.
* * *
Fifty years ago, ENSTAR natural gas company began developing a distribution system designed to serve a brand new market with newly discovered Cook Inlet area natural gas supplies.
Before the arrival of natural gas home heating and cooking, Alaskan Natives and pioneers relied upon fuel sources ranging from firewood to coal to coal- and then gas-generated electricity.
ENSTAR's system evolved over the years as residential, business and commercial customers paid for the cost of the system in the rates they paid.
In 1902 Fairbanks, in the much colder climate of the state's interior, experienced a gold and population rush, soon accompanied by coal mining operations. Coal mining evolved in the South Central and Fairbanks areas, culminating in opening of the Usibelli Coal Mining in the 1940s, providing a heating and power source to Fairbanks and to the nearby Ladd Army Air Field (now Fort Wainwright).
Also in the mid-1940's local residents created an electric cooperative; Golden Valley Electric Association (GVEA) now operates and maintains over 3,000 miles of transmission and distribution lines for its customers. It has generated its electricity from coal, naptha, natural gas, hydro and wind and maintains an intertie capability of receiving peak supplies from the Anchorage area Electric Cooperative, Chugach Electric Association.
* * *
Last year Fairbanks' Flint Hills refinery closed. The refinery took crude oil from the Trans Alaska Pipeline System (TAPS), refined it into various fuels -- including products used for power generation, motor fuel and home heating. While a smaller Flint Hills refined fuel terminal remains, it distributes imported products refined by others. Local residents remain concerned that the local refinery once offering a degree of independence from 'outside' sources is now gone.
Shortly after Flint Hills ceased refining operations last summer, the price of oil began to fall but Otis noted the complete drop in crude pricing is not fully reflected in imported, refined product pricing in Fairbanks.
As anxiety about high priced, home heating fuel increased, the Interior Alaska political representatives became -- over the last few years -- more pressured to "do something". While the private market in all previous Alaska energy challenges has shown itself to be a superior arbitrator of supply and demand, elected officials seem drawn to the prospect of 'helping with public money' as constituent voice levels rise.
During the 2013 legislative session lawmakers joined then Governor Sean Parnell in approving a government solution. The Alaska Industrial Development and Export Authority (AIDEA) would be tasked with an assignment to facilitating the spending and transfer of hundreds of millions of dollars to create an Alaska North Slope LNG trucking project designed to provide Fairbanks with a new, 'affordable' and stable source of natural gas for home heating.
The advantages would be many, perhaps. Natural gas produces fewer air quality issues than coal or heating oil. Perhaps it could be cheaper, with help from the state coffers.
However, we are not aware that AIDEA has the in-depth technical and managerial expertise qualifying it to design, finance, build, own, operate, and/or market an LNG and gas distribution operation--or even properly supervise those who do. Oh, and, by the way, for the project to work a new natural gas distribution system would have to be installed throughout the 30k population "Golden Heart City" since the existing utility only serves about a thousand customers.
In short, this was to be a very complex piece of work involving many moving parts, many disciplines and the creation of a whole new distribution system.
When Governor Bill Walker took over his new office in December, it soon became obvious that the AIDEA sponsored, North Slope LNG trucking project would cost vastly more than projected.
With that development other parties began expressing interest in continuing the Fairbanks project with gas either originating from the North Slope, as previously planned, or from the gas producing fields of Cook Inlet.
Last week Governor Walker surprised many when we reported on a AIDEA news release disclosing that it would be undertaking a new, Cook Inlet-based LNG project that would likely displace interested private parties, including Ray Latchem, a highly experienced and successful Alaskan entrepreneur and Hilcorp a leading Cook Inlet oil and gas producer and an important, new Alaska North Slope operator with ability to assume risk and acquire all the LNG/gas distribution expertise that might be required for such a project.
No sooner had one AIDEA-sponsored Fairbanks LNG Trucking Project expired than a new administration ordered it to, Phoenix-like, raise a new government project from the ashes of the old rather than reaching out for an expression of private interest and investment.
By pure happenstance yesterday, we received an extremely detailed email from Latchem, a man who is, arguably, the most experienced small LNG plant developer in the State's history and perhaps one of the best in the world. We think our readers will find both his email to us and his letter addressed to Governor Bill Walker to be highly informative, filled with history and facts.
We would like to have a similar document from Hilcorp. Having been a regulator and worked for producing oil and gas companies I can understand should its management have any reluctance to defend whatever plans it may have had -- or still might have -- in a way that might be perceived as offensive to the State of Alaska, the Lessor, the Regulater.
Tomorrow, we'll close with a brief, Part III.
* * *
Please remember that we provide our news links, maps, presentations, documents and commentary for the archives--so that those who follow us will have access to decades of data on Northern North American gas pipelines and the energy related policies affecting them. We are especially concerned with accuracy in our own commentary, for while we follow these issues closely, we depend upon the eyes and brains of dozens of experts who regularly correspond with us.
Whenever a correction or addition to one of our commentaries is merited, we make the change so that the archives have the best possible information. Of course, we do not normally change our editorial position, but will even do that if a factual error is the basis for an editorial opinion. Accordingly, your input is invited all the time. Thank you for your readership! -dh
"Alaska's Challenge of Cash & Energy Shortage: Part I"
Additional references and historical background In "Alaska LNG Challenges"
First, there is the Challenge of Cash Shortage.
In the early 1980s, Alaska was feeling its oats.
Second, there is the Challenge of Energy Shortage, which we shall more fully address tomorrow in Part II, and it involves gas pipelines, distribution systems, state funded project competition and more....
To begin that discussion, below is a letter from one of a number of good, long-time Fairbanks friends, Buzz Otis (NGP Photo), and my initial response. In Part II we will examine a State Energy Shortage issue in more detail and provide what we hope are useful questions for decision makers to answer in their quest for solutions. Read more....
Elected officials were sitting on a cash dowry created by a decade of about a dozen tax increases levied on Alaska's infant oil industry.
The tax increases were primarily aimed at the unbelievably productive Prudhoe Bay oil field -- a 2 million barrel per day elephant field, the largest in North America.
But concerned citizens throughout the state were not unaware of this new phenomenon and where it might end if not properly handled.
State leaders and the citizens had in 1976 created the Alaska Permanent Fund in partial response to the question of, "What if we encountered a rainy day". Since that time the fund has been largely thought of as a source of annual payments to Alaska citizens of a Permanent Fund Dividend rather than a rainy day fund. The thought of actually using it for the purpose it was created -- to fund government operations on a "rainy day" -- is an anathema to most citizen beneficiaries and their elected representatives.
In the early 1980s a number of business, social, academic and political leaders from all regions of the state assembled for the most important forum of that day, called "The Challenge of Plenty". There citizens discussed the possibility of a constitutional amendment to control spending based on a population growth/CPI formula, and other ways of wisely preparing for the future.
Your writer played a role in organizing that conference and it was truly heartwarming to see all political parties and regions of Alaska participate courteously, collegially and in a true spirit of joint problem solving.
Suffice to say that while the highly cooperative leaders agreed upon the problem and potential solutions, they were never able to obtain legislation as the group recommended (i.e. though there was a constitutional spending limit effort in the early 90s which fatally eliminated or diluted the most critical provisions; and another effort by a minority of far-thinking legislators in the late 1990s.)
While Challenge of Plenty participants were highly concerned about unsustainable state spending, they also focused on the Federal Government's actions since statehood to steadily remove from the reach of citizens, access to resources on federal lands -- best illustrated by passage of the Alaska National Interest Lands Conservation Act.
A series of federal governments also succeeded in using various environmental Acts of Congress (i.e. ESA, CWA, CAA, NEPA, etc.) to restrict reasonable and traditional multiple use -- and wealth production -- on federal lands as well as reasonable ownership activity on private land.
Readers can thus appreciate how Alaskans have been caught between the charybdis of over spending and scylla of shrinking opportunity for natural resource revenue generation. -dh
Like Joseph of old interpreting the Pharaoh's dream to compel saving during years of plenty for the coming years of drought and famine, Alaska's political leaders were not unaware of the challenge. Like Pharaoh, they created a "Joseph"--the Alaska Permanent Fund--so savings during good times could allow for a sustainable economy during the lean years coming.
But the constantly changing demographic profile of voters and elected officials could not enforce management of the savings in modern times as the dictator, Pharaoh did in his era.
The University of Alaska-Anchorage's 50-year-old Institute of Social and Economic Research (ISER) has studied the importance of a "safe landing" for Alaska's economy and the discipline required to make that happen. Professor Scott Goldsmith (NGP Photo) has led this effort for over two decades, issuing "Fiscal Policy Paper #1" on August 1, 1989. That first paper states what has now become a long term, perhaps economically fatal challenge: "Alaska faces a problem that will be very tough to solve but is easy to explain: state government is spending more than it collects."
The challenge of sustainability has worsened over two and a half decades: for, as Prudhoe Bay production declined, spending never sufficiently declined to reach a sustainable equilibrium and, now, oil commodity prices (i.e. at half what they were last summer) are exacerbating the challenge for this highly oil-dependent state.
ISER's most recent analysis of the situation shows how to obtain a sustainable glide path for the Alaskan economy, but so far elected officials have found it impossible to convert that wise counsel into sustainable reality. (Other Fiscal Policy Papers in archive here)
Alaska now has the greatest debt per capita of any state and the greatest per capita spending along with the greatest dependence on a volatile commodity and the most expensive oil and gas operating area in the country. Some have tried to make these facts the fault of an oil industry whose productivity has provided Alaska with the opportunity to make its own wise or unwise taxing, debt and spending decisions.
But state leaders are now seriously facing the cash shortage issue as a matter of imminent, not theoretical, danger. ISER has clearly demonstrated that the cash flow runs into default in a few years, without dramatic budgetary changes.
Furthermore, from a balance sheet viewpoint, the picture is somewhat more bleak when citizens realize that the unfunded state employee retirement fund is short just under $10 billion, balancing out a similar amount of non-Permanent Fund savings accounts acting as subsidies for annual operating budget deficits.
So, in effect, the day of reckoning is not a few years 'down the pike', but is here TODAY.
In Parts II and III (Scroll up), you will be considering whether increased state government debt (even AIDEA revenue bond debt) or use of depleted savings for a Fairbanks gas utility is either rational or necessary.
Email received yesterday, 2-1-15, from Buzz Otis, Fairbanks businessman and community volunteer:
On Feb 1, 2015, at 2:33 PM, Buzz Otis <buzz@xxxxx> wrote:
Morning Dave, I wrote this late last night.... Any suggestions are welcome. With respect, Buzz
Good evening Dave,
(Answering Buzz's email, received yesterday. How can anyone with a heart not be drawn to his heartfelt and articulate description of Fairbanks' Energy Challenge? Tomorrow, we'll go into much more detail, in Part II.)
You've written a thoughtful, compelling piece. Thank you for sharing it with me. I will run your message Monday.
As a former regulator I try to look at all sides of issues like this and believe my best role is to help educate fellow citizens without becoming an advocate or project opponent before all the facts are known.
I also urge you and our very smart mutual and respected friends there to think strategically about the long term, and answer to your satisfaction every possible question--including those both identified and inferred in the News Miner article. I'll try to help by providing some of my own questions in Part II, tomorrow.
I will make two more observations to you and my Golden Heart friends.
1. I completely understand the gravity of the situation. We agree that where possible the private sector is best equipped to respond to economic supply and demand issues. While Alaska has many examples of failed government projects, it also has a number of public facility projects that are in the public interest. Bradley Lake Hydro, certain roads and bridges come to mind--although a stable energy supply project like hydro is hard to compare to an energy supply governed by commodity pricing and variable costs subject to regulatory 'cost of service' reviews.
2. The trick for those requiring (and may I even say, "desperately needing") a successful Interior energy project not fully appreciated by private investors, is to make sure government applies the same due diligence discipline as you would apply to a new company project before you stake family and company money on it. The questions the News Miner and I and others have raised seem mostly like simple due diligence questions to me. They are the type of questions your banker might ask you about your proposed project. And, they are the type of questions th which the Governor and Legislature will likely wrestle as the initial and continuing due diligence phase begins.
That said, we all agree Fairbanks is in dire need of an efficient energy remedy. Many would also agree that the solution could merit government assistance. In support of these propositions, it might be helpful if:
1. Project advocates approached all questions and concerns as you have: eagerly, positively and non defensively. Successfully doing one's homework, cheerfully and knowledgeably answering all concerns would avoid conflict and best prepare for statewide consensus. Having the other party's (Hilcorp's) concerns quickly addressed are probably also in Fairbanks' interest due to that company's significant investment in production that supplies gas (for both heating and power generation) to both South Central and to Interior Alaska consumers in household, business and commercial sectors.
2. As questions are answered, it might be well to encourage public forums -- not for the purpose of beating the drums for or against the project--but for the purpose of helpfully answering all reasonable questions and concerns.
I join others who would love to see Fairbanks' longstanding energy needs responsibly met, quickly. If it is wholly or partly done with public funds, I am sure Fairbanks would agree that those in charge of turning the dream into reality will best encounter public consensus when they've done sufficient due diligence to face the public confidently, with well studied answers.
Since the due diligence stage is not complete, it would be to everyone's advantage if the questions that are answerable at this early date -- and future mileposts -- are timely addressed.
Sent from my iPhone
I do hope this finds you and your family well. I appreciate your correspondence on a regular basis and yesterday’s article that the state of Alaska, through AIDEA would purchase Pentex Alaska Natural Gas Company, LLC and its assets which include Fairbanks Natural Gas for 52.5 million.
I would like to applaud Governor Walker for taking such bold and quick action to address interior Alaska’s energy needs. Being a private businessman in the interior since 1976, this may come as a surprise to my friends and colleagues, so I will attempt to explain my position in the hopes that you and others can understand the strangle hold we have had on our economic neck with the outrageous costs of energy here in Fairbanks and the surrounding area.
First of all, I am a staunch private enterprise advocate and will continue to fight for the freedom that private enterprise gives to so many Americans until the good Lord decides it is my time to leave here. I have been proactive over the years, encouraging various plans, through my involvement in the Fairbanks Chamber, Fairbanks and North Pole Economic Development Corporations, and the Support Industry Alliance, that promised to lower the cost of energy in Alaska and particularly Fairbanks, to no avail.
When I worked on the Alyeska Pipeline in 1975 we were told the next big project was a gas line that would surely start within a year or two of the oil lines completion.
I remember many gas line projects starting and stopping as you have. I remember when Ray Latchem came to Fairbanks with Fairbanks Natural Gas, I remember touring Point McKenzie with Ray and looking at his small plant there and him telling me how we were going to have lower energy costs in Fairbanks as a result, and we did. However, that only lasted a short while and as the economics of shipping small amounts of gas north by truck, gas contracts renegotiated out of Cook Inlet, and the cost of doing business always having an upward bias, plus wanting to maximize profitability, our natural gas prices came up to par with fuel oil.
In the Fairbanks area, we are heating our homes 7 to 8 months out of the year. Up until recently, we were paying close to $4.00 per gallon for # 2 heating oil. Even today with the price of crude dropping 50 to 60 % our price of heating oil only dropped 25 to 30 %.
As a result, folks here are burning wood, coal, or pellets trying to make it by. Many of our residents are using state of the art wood or coal burning stoves or boilers, with clean dry fuel. Others aren’t doing that. Many oil fired boilers aren’t tuned correctly which when added together, and coupled with our geography, it puts Fairbanks and North Pole air quality out of compliance with EPA on certain days throughout the winter. Not particularly attractive for business or personal health.
I remember Bill Popp, at ADEC, telling me a few years ago that he likes to see a prosperous Fairbanks because it is great for Anchorage’s economy, after all, just about everything that comes to Fairbanks comes through the port of Anchorage! Bill Popp gets it!
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Dave, on top of the high cost of fuel can you believe the cost of electricity for my small commercial buildings is over .21 per kilowatt hour?!
Unfortunately, private enterprise hasn’t delivered low cost energy to Fairbanks! Our energy costs are some of the highest in the nation. It is costing us economic opportunity and causing people to leave our community! We have a US Air Force base that we have had to fight to keep open on two separate occasions, in the past 7 years. Even though we enjoy an extremely strategic location, the military costs are driven by outrageous energy prices. Next month we will be doing our best to keep our Army troops here. I can’t help but believe that if we enjoyed low cost energy like our neighbors to the south we would be in a better position to grow business here.
Our past and present legislative members and past governors, many of which question Governor Walkers intentions, when he put forward the proposal to have AIDEA purchase Fairbanks Natural Gas, are the same individuals that have insisted that every barrel of crude oil is monetized, rather than using some of our royalty oil to ensure economic stability in Alaska. Fairbanks has a crude oil line and until recently had two refineries in North Pole and we pay some of the highest energy prices? Just think what a lower cost of refined product, done through proper negotiations with the refiners, could do for our industry here. Marginal projects become viable. Citizens have disposal income to spend elsewhere! Abundance and positivity would be on every business person’s tongue!
To sum up we need low cost natural gas to fuel our homes, businesses, schools, mines, and military installations while providing a lower cost for electrical generation. PRIVATE ENTERPRISE HAS NOT PROVIDED LOW COST ENERGY! WE CAN’T WAIT ANY LONGER Personally, I have built energy efficient buildings, burn coal at one facility and burn wood in my home and in my shop. These buildings also have oil backup for security. Without energy efficient buildings and burning alternative fuel sources our bottom line would be negligible.
This is no time to divide and conquer. We need your support. Please consider helping Interior Alaska find its way out of these high energy costs and support a more timely solution. I believe the only way forward in a timely manner, if at all, is with state participation. We don’t have such a fiscal crisis that we can’t invest in the future of Alaska. Please find a way to support the governor.
1-30-15 NWT Reviews Another Mackenzie Pipeline Option As Financially Strapped Alaska Moves To Purchase A City Utility
In conspicuous contrast to President Obama and environmental extremists on both sides of the border, Northwest Territories Premier Bob Mcleod (NGP Photo) joins Alberta Premier Jim Prentice, as a longtime proponent of prudently constructed and managed pipelines.
In fact, McLeod sees pipelines for oil and gas as being one way of increasing the wealth and stature of his people as well as the NWT's economic independence from Ottawa. See story below. -dh
Toronto Sun by DAVID AKIN, The Northwest Territories announced Thursday it will begin a feasibility study that could be the first step towards construction of an oil pipeline along the Mackenzie Valley to the Arctic Ocean.
The study will be done with the backing and co-operation of regional aboriginal governments, according to N.W.T Premier Bob McLeod in a speech, the text of which was provided to reporters ahead of the announcement.
"Our resources have been stranded for too long.
After reading the commentary below, be sure to review our 3 part series on the Interior Energy Project (IEP)
Below: See our Friday Commentary regarding Dave Stieren's KFQD interview with Governor Bill Walker (NGP Photo) and today's Fairbanks News Miner story on the current, confused status of converting Fairbanks from fuel oil home heating to natural gas. More here.... -dh
Globe and Mail by BILL CURRY AND SHAWN MCCARTHY. New Brunswick Premier Brian Gallant is aiming to ease provincial concerns over the proposed Energy East pipeline during his first premiers’ summit at a time when other provinces are pushing for agreement around a national energy plan focused on climate change. Even with the price of oil’s dramatic plunge, Mr. Gallant said there is still a strong business case for the pipeline that would deliver western crude to New Brunswick refineries and ports for shipping abroad.
Both TransCanada's Energy East oil pipeline, converted from an underused gasline, and TransCanada's Keystone XL would move Oil sands production into the world market.
To the extent that oil prices remain low, all transportation projects are fiscally strained. But consensus is seeming to build in Canada -- with notable exceptions of gas utility managers who perceive a loss of gas transport options through conversion of the existing gasline -- for the Energy East project. (Although, we are sure they would not like to ask their customers to reimburse TransCanada for maintaining surplus gas pipeline capacity.)
At the same time, President Obama seems intent on defying the will of the people, the will of Congress and the economic needs of America. He seems also willing to sacrifice or dilute the friendship with our greatest trading partner and our formerly outstanding diplomatic, social, economic and military relationships, by continuing to block the Keystone XL project.
Apparently, the President's Keystone XL blockade is just fine with his environmental allies and middle eastern OPEC friends. The one wants no US economic development and the other wants to minimize North American competition.
If low oil prices remain and provide sufficient economic feasibility to support only one new exit conduit for oil sands crude, and if Obama does not relent on Keystone XL, the Canadian economy and TransCanada might still be still be winners with Energy East.
The good news for the U.S.: America's greatest trading partner will benefit from another export project that also could supply its east coast refineries...and, unemployed U.S. workers with pipeline expertise might find a few job opportunities by leaving their homes and taking their expertise to Canada.
This week we have reviewed the White House abuse of authority, overreaching jurisdiction and war on Alaska.
|Fairbanks News Miner by Matt Buxton. The state’s plan to buy Fairbanks Natural Gas and its parent company answered the question of “what’s next?” after a state bid to build a processing plant on the North Slope fell apart, but it’s also raised a whole new slew of questions.|
Listen to Dave Stieren's (NGP Photo) recent Radio interview with Governor Bill Walker.
In it, Walker places appropriate priority, we believe, on gaining control of state spending and a daily revenue drain of $10 million.
Then, Dear Readers, consider the Governor's initiative to buy a privately owned utility in Fairbanks, within a Borough where his Chief of Staff once served as Mayor. The Fairbanks North Star Borough was a paying partner in the Alaska Gasline Port Authority's (AGPA) proposed LNG project that paid attorney Bill Walker before he was governor to turn the project into reality. Against "baseless" criticisms, Borough Mayor Jim Whitaker has defended walker. Sadly for sponsors, no pipeline project appeared. (i.e. 'Sadly for the sponsors since they would have reaped the reward of millions per year in gas pipeline property taxes.)
Then consider the misgivings noted in today's Fairbanks News Miner column. Those misgivings include questions about why the state should be competing with private parties to buy a utility, what the State's $52.5 million purchase price would actually purchase, various misgivings of Legislative leaders, and at least a dozen 'unknowns' we could list if necessary.
We give the Administration the benefit of the doubt, accepting that its motives are noble and that there really are no conflicts. However, political figures need to be very careful about the optics, the 'perceptions of impropriety'. A slip up of this nature so early in the life of a new Administration could injure the productivity and effectiveness of an entire four-year term.
We know that Walker heavily courted Fairbanks and Interior Alaska during the campaign. We know that energy for Interior Alaska was a major platform issue. We just find it odd that now, when a nearly $10 billion public employee pension unfunded liability is being augmented by a $10 million dollar per day deficit, Walker's new austerity strategies would even permit considering the purchase of a gas utility to serve a market of unknown size, at an expansion cost of an unknown amount, in competition with the private sector. Perhaps all this can be explained, but to some it could look shady without further transparency and explanation.
This is not to say that all government owned monopolies are inefficient. It is to say that Alaska's financial position can hardly afford additional spending--even when that spending is funneled through a so-called 'independent public corporation of the state of Alaska'.
Actually, if the corporation, the Alaska Industrial Development and Export Authority (AIDEA), has a surplus of $52.5 million available to pay cash for a city utility when the state is operating in the red, the Legislature might consider an AIDEA contribution of $52 million to the state treasury to be more prudent; after all, it could counterbalance 5 days of state deficit spending.
If, on the other hand, AIDEA, would finance the utility purchase by acquiring new debt for itself with revenue bonds, we believe the Legislature would have to consider whether or not adding debt to the state and its 'independent' corporations at this time is a good idea. Even though an AIDEA revenue bond debt does not technically commit the full faith and credit of the state, any bond attorney will likely opine that a state corporation's revenue bond default could sure affect rating agencies' evaluation of a state's credit worthiness.
We hope above all that the Legislature and new Administration can be successful in avoiding the traps and snares that could compromise an otherwise successful effort to face Alaska's budget challenge.
To that end, we urge other citizens to join us in pointing out potential advantages and disadvantages of the various state policy decisions coming before us at a fairly rapid rate.
We also encourage courteous and respectful exchanges of ideas and concerns, for our best chance of resolving tax and spending issues lies in cordial debates and interpersonal communication.
As Homer, Alaska's late Brother Isaiah would say, "Peace, Brothers and Sisters ...."
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Note: The author is publisher of this webpage, former Chairman of the Alaska Council on Economic Education and former Chairman of the Regulatory Commission of Alaska whose duties involved adjudication of city utility rate issues and pipelines.
Please email your thoughtful additions, corrections or observations to: firstname.lastname@example.org. Through your feedback, we strive to preserve the most accurate possible archives. Your comments will be considered for publication unless you request that they be regarded as personal communications.
WSJ YESTERDAY: Obama’s Trans-Alaska Oil Assault
He’s slowly starving the current pipeline so it will have to shut down.
Washington’s energy debate has been focused on President Obama’s endless opposition to the Keystone XL pipeline, but maybe that was only a warm-up. His new fossil fuel shutdown target is Alaska.
Refer also to Monday's editorial re: A Good Father Figure
another layer of anti-development complexity courtesy of a new Arctic Executive Order....
President Obama announced Sunday that he’ll use his executive authority to designate 12.... Read More
TODAY. From Robert Dillon, Senate Energy & Natural Resources Committee:
NPR Morning Edition host Renee Montagne spoke with Sen. Lisa Murkowski, (NGP Photo), this week about the impacts on Alaska of the president’s decision to designated 12 million acres of Alaska’s Arctic National Wildlife Refuge as wilderness.
Alaskanomics: Alaska's Leaders Stand Strong Against Proposed ANWR Designation
Arctic Slope Regional Corporation: "We are staunchly opposed to this relentless and coordinated effort to designate the Coastal Plain of ANWR as Wilderness."
White House Calls Alaska Voices "Overreaction"....
Fed plans for OCS also overreaching
Sen. Murkowski, the chairman of the Senate Energy and Natural Resources Committee, reminded NPR listeners of the oversized role the federal government has in Alaska – where more than 60 percent of the land is under federal control – and the restrictions that can place on the state government’s ability to build a robust economy.
Murkowski also said the sharp reaction from her and the entire Alaska delegation was prompted not just by the president’s announcement on ANWR, but on the restrictions placed on energy exploration in Alaska’s arctic waters and in the National Petroleum Reserve. Sen. Murkowski called the administration’s actions “a one, two, three kick to the gut of Alaska’s economy.” Click here to listen to the interview--then scroll down to read the very similar, vindictive comments.
Latest Federal/Political Overreach Endangers Alaska's Future and Threatens U.S. Economy
If you read the comments at the end of the NPR interview story above, you'll understand how truly well organized the Enviro-Industrial-Governmental Cabal is in America today (i.e. Click and scroll down for many references).
We would love to see the emails that Soros/Podesta-supported websites and organizations dispatch whenever a story occurs that runs counter to the democrat/socialist party line. Virtually 100% of a landslide of comments to the NPR interview are negative and we have seen the talking points used by these 'seminar indoctrinated blog responders' repeated on various sites. (Reference: 1, 2, 3, 4, 5)
Either left-comment writers are mobilized to write or call in whenever the community organizers ask them to, or virtually all of NPR listeners are left-leaning and extremely activist writers. I prefer to think the latter, especially our tax money and corporate funds support NPR. But reality tells me it's a combination of the two: a mostly left-leaning audience supported by professional community organizing communication professionals.
We often ask our private sector friends, "Why don't you appear at more hearings, write more letters to the editor, etc." Answer: "Hey, may, I've got a job." Nevertheless, we continue to inform our readers, urging them to take the time to participate as well. If we with greater knowledge of the industry issues do not comment, the public and/or regulatory records are left with nothing but negativity toward the development that sustains our way of life.
Apparently the "job" or at least hobby of many activists is to become serial, seminar blog and letter writers.
(In fact most of the emails we at NGP receive that attack economic development are written during business hours from folks employed by universities, and local, state or federal governments.)
Having lived in Alaska for most of a lifetime, this writer has found that, if anything, Senator Murkowski's view of the Obama Administration's anti-Alaska efforts understates the danger to our republic.
The Administration, by its actions, has demonstrated a consistent and determined effort to defrock Alaska of its constitutional dependence upon natural resource development.
Having now accomplished that, in large part, it could only be a matter of time before private industry begins a withdrawal from Alaska. As federal executive and regulatory assaults continue, the state and municipal governments will become economically unsustainable--at least in their current form. This is because 90% of the state's operating budget is based on transporting oil through the Trans Alaska pipeline, whose continued life is threatened by the current, federal administration. In addition, over a third of Alaska's entire economy is based on that single, trans Alaska oil economy lifeline.
And, we should not underestimate the damage to America's entire economy and future resulting from a loss of access to Alaska's critical oil, gas, coal, timber and strategic metals.
Readers have questioned, "Why would the administration do these things; it is not logical."
It is not logical from an ordinary, honest citizen's viewpoint that just expects his elected government to conform to the rule of law and "do the right thing" for the country.
But the executive branch's hostile actions to Alaska are logical from the viewpoint of a left-leaning political strategist whose goal is not preserving the "right", but in amassing the "might".
That professional, left-leaning strategist advises the administration and its leftist allies throughout the country to put up every possible barricade against oil and gas shale development ... because that is where mostly free enterprise (and, shall we say, mostly republican) jobs are created?
The strategist recommends against timely approval of great, private controlled projects like the Keystone XL, because that is where mostly free enterprise jobs are created.
The strategist can demonize -- and attempt to liquidate -- one of America's great, wealth producing industries, COAL, even as it has become the "clean coal industry". This is because it sponsors wealth producing, mostly free enterprise jobs from the Rocky Mountains to the job-starved eastern states.
Washington strategists over the years have decimated thousands of timber jobs throughout the country and killed Alaska's major timber employers, all private sector 49th state pioneers.
The strategist recommends that the administration hamper all sorts of private projects using the Endangered Species Act, the Clean Water Act and the Clean Air Act. In this way, the lizards, frogs, fish, sage grouse, beluga whales, steller sea lions and polar bears can take the heat for proclaiming millions of acres of public and private lands to be off limits to any wealth producing activity that might strengthen the economy or the national defense--even when that activity will have no ill effect on the critter the regulators seek to employ as scapegoats (i.e. Beluga Whale, Steller Sea Lion, etc.).
These devices are used to prevent employment of private sector Americans, as efforts are made to increase the ratio of Americans employed by government or those indebted to federal entitlement, subsidy, loan, transfer, social or immigration programs.
Yes, the Administration is not stupid. Alaska is currently a red state, with republicans dominating most of the statewide elected positions.
But it takes a majority of conservative voters to achieve that representation.
By administrative action, the federal government seems determined to change the voting ratio in Alaska.
When and if that happens, the population will be lower and economic activity greatly reduced. But following a potential exodus of private sector workers, the remaining federal and state bureaucrats, entitlement beneficiaries, elected officials, center-left and mostly green non-profit organizations and a majority of voters will be highly supportive of progressive state and federal administrations.
While that may threaten the economic stability of the state, there is always the possibility that those who 'know best' in Washington, will exercise paternal generosity and, once again, make Alaska a ward of the federal government--a new entity that we suggest could be known as, "an Entitlement State".
So, yes, Senator Murkowski has it right and so does the Wall Street Journal. If a majority of our readers also believe they "have it right", then one cannot avoid being drawn to our conclusion.
Painfully, we are witnessing a pattern of deception so powerful that absent dramatic reversals in federal policy and leadership, Alaska is headed toward entitlement statehood.
And, with the greatest oil, gas, coal, minerals, timber, fishing resources, it is worth repeating to say that Alaska's loss is America's economic loss. (We say fishing because without oil and gas, the remaining tourism, fishing, retail, and individual taxpayers will be coughing up all the money needed for the government they will wish to support. That burden will also force many of the remaining private sector endeavors out of business--as Alaska learned during the low oil price era of the late-1980s.)
And with those losses comes the specter of a more determined Arctic power, now evaluating America's weakness of will -- amply demonstrated throughout the world -- along with its downsized military. Could this adjacent Arctic power, bold enough to continually test Alaskan air space, be determining how to retake what it once sold to America for a mere $7.2 million, 2 cents/acre.
We innocently assume that a majority of NPR commenters are well intentioned, if misled. They may simply be enjoying the prospects of participating in authoritarian control of a formerly free country--"Change they can believe in".
But with weakness comes vulnerability and they may actually be playing the role of Useful Idealists who end up participating not just in the demise of freedom, but in also seeing their best laid plans go astray.
Senate Energy Committee staff representative responds to White House staff representative:
From Robert Dillon (NGP Photo), Senate Energy and Natural Resources Committee:
We are amazed to hear White House counselor John Podesta (Ref. 1, 2) claim that Senator Lisa Murkowski, R-Alaska, has “overreacted” to the White House’s decision to declare war on Alaska’s economic future.
“Overreaction” is an interesting choice of words, to say the least.
Let’s think about this for a moment. Which of the following does not deserve a strong reaction from Alaska’s senior senator?
- Is it the fact that the White House is placing 12 million more acres of the Arctic Coastal Plain into escrow and de facto wilderness, despite ANILCA’s “no more” wilderness clauses, and even though 80 percent of Alaskans support development that would cover just 0.01% of ANWR?
- Is it the fact that the White House also plans to indefinitely withdraw additional areas of Alaska’s northern waters – in the Beaufort and Chukchi Seas – from leasing in its upcoming Five-Year Outer Continental Shelf plan?
- Is it the fact that the White House is threatening to impose such steep mitigation requirements on a long-stalled project in the National Petroleum Reserve – which was specifically reserved for petroleum development – that the company seeking to develop it for the last 17 years is now on the verge of being forced to pull the plug?
- Or, is it the fact that this White House refuses to make any of the nearly 40 billion barrels of oil in Alaska’s federal areas open to development, even though the state’s oil production has declined precipitously, and the state now faces a budget crisis due to a combination of low production and low prices?
Apparently, the White House believes that the proper reaction to its week-long series of anti-Alaskan energy announcements is to nod in silence and assent. Yet, Mr. Podesta went on to prove that Sen. Murkowski’s reaction was fully warranted in his very next sentence. (We’re so glad the White House isn’t going to try to shut down production on state land, by the way. Very generous of them.)
A final question for Mr. Podesta: does this response, from Democratic Rep. Ben Nageak of Barrow, also qualify as an “overreaction”? We’d love to hear his thought. Click on link for video of Alaska State Rep. Ben Nageak of Barrow:
JANUARY 27, 2015 Robert_Dillon@Energy.Senate.Gov
Interior’s Proposed Offshore Leasing Plan Will Place
New Restrictions on Exploration of Alaska’s Waters
WASHINGTON, D.C. – U.S. Sen. Lisa Murkowski, R-Alaska, today criticized the Obama administration for its continued campaign to shut down oil and natural gas activity in Alaska.
“This administration is determined to shut down oil and gas production in Alaska’s federal areas – and this offshore plan is yet another example of their short-sighted thinking,” said Murkowski, the chairman of the Senate Energy and Natural Resources Committee. “The president’s indefinite withdrawal of broad areas of the Beaufort and Chukchi seas is the same unilateral approach this administration is taking in placing restrictions on the vast energy resources in ANWR and the NPR-A.”
Murkowski’s comments come on the heels of the release of the Interior Department’s new five-year offshore oil and natural gas leasing plan, which bans exploration in large portions of Alaska’s Chukchi and Beaufort seas.
Interior’s draft plan does include three proposed leases sales in Alaska’s federal waters – one each in the Beaufort and Chukchi seas, and one in Cook Inlet – but Murkowski said there is no guarantee those sales will ever be held.
“This administration is once again promising Alaskans that it will allow exploration sometime in the future – but not right now,” Murkowski said. “I think we all know what promises from this administration are worth. They promised Alaska multiple lease sales under the current five-year plan, but so far there have been none, as sales continue to be postponed even past when the president will no longer be in office. Promises will not fill the trans-Alaska pipeline.”
The draft 2017-2022 plan also includes a proposal to open a portion of the Atlantic to leasing off the coasts of Virginia, North and South Carolina, and Georgia.
“The proposed lease sales we’re talking about right now aren’t scheduled until after President Obama is out of office,” Murkowski said. “Forgive me for remaining skeptical about this administration’s commitment to our energy security. I look forward to working with the next administration to ensure that Americans have access to abundant and affordable energy.”
Interior Department Announces Draft Strategy for Offshore Oil and Gas Leasing
Regionally-tailored plan continues balanced approach to leasing, development; Draft proposal would protect sensitive resources, makes available nearly 80% of estimated undiscovered technically recoverable oil and gas resources on U.S. Outer Continental Shelf
WASHINGTON, DC – As part of President Obama’s all-of-the-above energy strategy to continue to expand safe and responsible domestic energy production, Secretary of the Interior Sally Jewell and Bureau of Ocean Energy Management (BOEM) Director Abigail Ross Hopper today announced the next step in the development of the nation's Outer Continental Shelf (OCS) Oil and Gas Leasing Program for 2017-2022.
The Draft Proposed Program (DPP) includes 14 potential lease sales in eight planning areas – 10 sales in the Gulf of Mexico, three off the coast of Alaska, and one in a portion of the Mid- and South Atlantic.
“The safe and responsible development of our nation’s domestic energy resources is a key part of the President’s efforts to support American jobs and reduce our dependence on foreign oil,” said Secretary Jewell. “This is a balanced proposal that would make available nearly 80 percent of the undiscovered technically recoverable resources, while protecting areas that are simply too special to develop.”
Release of the draft is an early step in a multi-year process to develop a final offshore leasing program for 2017-2022. Before the program is finalized, the public will continue to have multiple opportunities to provide input. Today’s draft proposal was informed by more than 500,000 comments from a wide variety of stakeholders and states.
“The draft proposal prioritizes development in the Gulf of Mexico, which is rich in resources and has well-established infrastructure to support offshore oil and gas programs,” added Jewell. “We continue to consider oil and gas exploration in the Arctic and propose for further consideration a new area in the Atlantic Ocean, and we are committed to gathering the necessary science and information to develop resources the right way and in the right places. We look forward to continuing to hear from the public as we work to finalize the proposal.”
The OCS Lands Act requires the Secretary of the Interior to prepare a five-year program that includes a schedule of potential oil and gas lease sales and indicates the size, timing and location of proposed leasing activity as determined to best meet national energy needs, while addressing a range of economic, environmental and social considerations.
BOEM currently manages about 6,000 active OCS leases, covering more than 32 million acres – the vast majority in the Gulf of Mexico. In 2013, OCS oil and gas leases accounted for about 18 percent of domestic oil production and 5 percent of domestic natural gas production. This production generates billions of dollars in revenue for state and local governments and the U.S. taxpayer, while supporting hundreds of thousands of jobs.
A REGIONALLY TAILORED APPROACH
The draft proposal reflects a continuation of the regionally tailored leasing strategies employed in the current 2012-2017 Program that are specific to each planning area. The options in the draft proposal involve sales in offshore areas that have the highest oil and gas resource potential, highest industry interest, or are off the coasts of states that expressed a strong interest in potential energy exploration, while still considering potential environmental impacts, stakeholder concerns, and competing uses of ocean and coastal areas.
Gulf of Mexico:
The draft proposal includes ten sales in the Gulf of Mexico, one of the most productive basins in the world and where oil and gas infrastructure is well established. The draft proposal includes a new approach to lease sales in the Gulf of Mexico by proposing two annual lease sales in the Western, Central, and the portion of the Eastern Gulf of Mexico that is not subject to Congressional moratoria. This shifts from the traditional approach of one sale in the Western and a separate sale in the Central Gulf each year.
“This new approach will allow for BOEM to more effectively balance the sales while providing greater flexibility to industry to invest in the Gulf, particularly given the significant energy reforms recently adopted by the Mexican government,” said BOEM Director Hopper
In Alaska, the draft proposal continues to take a careful approach by utilizing the targeted leasing strategy set forth in the current program, which recognizes the substantial environmental, social and ecological concerns in the Arctic. The draft proposal proposes one sale each in the Chukchi Sea, Beaufort Sea, and Cook Inlet areas.
Also today, President Obama – using his authorities under the OCS Lands Act – designated portions of the Beaufort and Chukchi Seas as off limits from consideration for future oil and gas leasing in order to protect areas of critical importance to subsistence use by Alaska Natives, as well as for their unique and sensitive environmental resources. In December, President Obama used this same authority to place the waters of Bristol Bay off limits to oil and gas development, protecting an area known for its world-class fisheries and stunning beauty.
“We know the Arctic is an incredibly unique environment, so we’re continuing to take a balanced and careful approach to development,” said Jewell. “At the same time, the President is taking thoughtful action to protect areas that are critical to the needs of Alaska Natives and wildlife.”
Four of the five areas withdrawn today by President Obama were previously excluded from leasing in the current 2012-2017 oil and gas program; three of the five were also excluded by the prior administration. Those areas include the Barrow and Kaktovik whaling areas in the Beaufort Sea, and a 25-mile coastal buffer and subsistence areas in the Chukchi Sea. The withdrawal also includes the biologically rich Hanna Shoal area in the Chukchi Sea, which has not previously been excluded from leasing. Extensive scientific research has found this area to be of critical importance to many marine species, including Pacific walruses and bearded seals.
The proposed Alaska sales would be scheduled late in the program to provide additional opportunity to gather and evaluate information regarding environmental issues, subsistence use needs, infrastructure capabilities, and results from any exploration activity associated with existing leases from previous sales.
The draft proposal invites public comment on one potential lease sale late in the program for a portion of the Mid- and South Atlantic OCS, which includes areas offshore Virginia, North and South Carolina and Georgia.
“At this early stage in considering a lease sale in the Atlantic, we are looking to build up our understanding of resource potential, as well as risks to the environment and other uses,” said Jewell.
The potential lease sale would require a 50-mile coastal buffer to minimize multiple use conflicts, such as those from Department of Defense and NASA activities, renewable energy activities, commercial and recreational fishing, critical habitat needs for wildlife and other environmental concerns.
The July 2014 Programmatic Environmental Impact Statement on Atlantic Geological and Geophysical activities furthered the Atlantic area strategy by establishing a path forward to update information on the region’s offshore oil and gas resources, which is more than 30 years old. Today’s proposal is in line with comments received from adjacent states and reflects the Administration’s thoughtful approach to potential lease sales in new areas, pending further public review and comment.
Areas off the Pacific coast are not included in this draft proposal, consistent with the long-standing position of the Pacific coast states opposed to oil and gas development off their coast.
“Public input is a critical part of our process and we encourage citizens and groups to provide comments to help guide our decisions,” said Hopper. “We anticipate robust dialogue with stakeholders in the coming months that will help us prepare a program that emphasizes protection of the marine environment and coastal economies and uses the best available science and technology to inform our decision-making.”
In conjunction with the announcement of the DPP, the Department is also publishing a Notice of Intent to Develop a Draft Environmental Impact Statement (EIS), in accordance with the National Environmental Policy Act (NEPA). Following significant public comment and environmental review, the Department will prepare a Draft EIS and Proposed Program, and a Final EIS with the Proposed Final Program (PFP).
The Request for Information, published on June 16, 2014, began a process of broad consideration of all 26 areas of the OCS that are available for leasing and gradually narrows as a result of many stages of public comment and environmental analysis. This DPP is the first such narrowing. Prior to any individual lease sale in the future, BOEM will continue to incorporate new scientific information and stakeholder feedback in its environmental reviews to further refine the geographic scope of the lease areas.
The Draft Proposed Program and the Notice of Intent to Develop a Draft Environmental Impact Statement will be available for public comment for 60 days following the publication of the documents in the Federal Register.
For more information, including maps, please visit: http://www.boem.gov/Five-Year-Program/
President Obama this weekend announced plans to designate 12.3 million additional acres on Alaska’s North Slope as wilderness. This new designation – which should not be possible by virtue of ANILCA’s “no more” wilderness clauses – would be on top of the seven million wilderness acres already within the Arctic National Wildlife Refuge.
The president is “very proud” of himself, but maybe you heard – most Alaskans do not share that feeling. From what we’ve heard, most Alaskans agree with Sen. Murkowski, who expressed genuine anger onSunday nightin the wake of the first of several anti-Alaska energy actions that the Obama Administration plans to take.
As is typical, the White House couldn’t imagine why anyone would disagree with its political choices. Counselor John Podesta even tried to declare that Senator Murkowski’s strong response was not “warranted”as part of a statement clearly confirming that it was.
That leaves us with a question: if Sen. Murkowski’s response was not “warranted,” what about the reactions of other Alaskans? What does the White House think when a Democratic member of the Alaska State House of Representatives, an Alaska Native who represents the Arctic, expresses his own shock and disappointment over the president’s announcement?
Ben Nageak is a Democrat. He is an Alaska Native. He is an elected representative of the people who actually live in and around ANWR. He is angry about the White House’s ANWR plans, too. And, in a post yesterday on an Alaska news blog, he told it exactly as it is.
Mr. Negeak’s entire op-ed is included below.
So, Mr. Podesta, what do you think: was Ben Negeak’s reaction also unwarranted?
KTUU: Alaska Native desires for ANWR fall on deaf ears thousands of miles away
by Ben Nageak
Alaska Natives have been fighting for access to the lands and resources within the Arctic National Wildlife Refuge since the Congress enacted the Alaska National Interest Lands Conservation Act more than 30 years ago.
President Barack Obama and his lieutenants at the Interior Department will permanently harm our people and all Alaskans with his colonial attitude and decision-making. We were promised through ANILCA and the Alaska Native Claims Settlement Act, the opportunity to self-govern and build our own futures to some extent, through the formation of regional and village corporations, and the selection of lands to manage.
My people, the Inupiaq, have been harvesting the region’s renewable resources since time immemorial, and it’s time the federal government quit tying our hands behind our backs. Let us have access to our lands, for the betterment of our people, the state and the nation as a whole.
It’s terrifying to see the extent by which our pleas for time and a fair airing of our views fall on deaf ears five thousand miles away. President Obama said ANWR has supported native communities, and he’s right. Where he is wrong, very wrong, is in his interpretation that ANWR is fragile.
Our land in the north is resilient, hard, unrelenting. We have adapted to coexist with it and its wildlife over millennia. President Obama’s decision, locking up 12.8 million acres, only serves to further reduce our stewardship role, and the 10-02 set aside, which was specifically singled out due to its rich oil and gas potential.
Now, let us better support our children and grandchildren by responsibly developing our resources. We have been careful stewards of our fish and game resources for as long as our history is recorded – the State of Alaska has some of the strictest and rigorous environmental controls on the planet. We have proven that we can and will act responsibly.
Our people and our state need access to that oil and gas to heat our homes and buildings, power our snow machines and four wheelers, and earn revenues to support our core community services. The area outlined for development is similar in size to Reagan National Airport in the president’s backyard; its impact will be less than one-tenth of 1 percent of the total Coastal Plain.
We have been advocating the opening of ANWR for decades, and our voice and our values have not changed, only the marionettes in Washington, D.C.
Our frustration grows with every passing season, as the Section 10-02 and 10-03 language is a ticking clock to when all of ANWR must be managed as Wilderness. We must establish and allow for exploration and development now, when it can help us secure our future and contribute the resource to our state and nation.
We will work with our congressional delegation and governor to continue to make our voice heard. I’m, personally, sad that proposal has come forward. It only strengthens my resolve to continue speaking out. AllAlaskans must join in and present a unified voice asking for inclusion in the process and honory our statehood and ANCSA/ANILCA promises.
From our friends at the North Slope Borough, courtesy of David (D.J.) Fauske
North Slope Borough Decries Interior Department Plans for Arctic National Wildlife Refuge Wilderness Designations
(Barrow, AK)—“Today’s announcement by the Department of the Interior represents the worst of Washington politics,” announced Mayor Charlotte Brower (NGP Photo). “These types of paternalistic, executive fiats seem to be more appropriate for Andrew Jackson’s administration than Barack Obama’s.
The people of the North Slope have been unequivocal in their opposition to further Wilderness designations in ANWR. How ironic is this decision on the heels of this week’s earlier Executive Order calling for federal agencies to consult more with Alaska Native people over arctic issues.”
Mayor Brower made her remarks shortly after reading the U.S. Fish and Wildlife Service’s announcement and watching President Obama’s video message. The North Slope Borough had expressed its opposition to any further Wilderness designations within ANWR through written comments submitted to the Wildlife Service in 2011.
“We would like to invite President Obama and Secretary Jewell to travel to ANWR and meet with the people who actually live there before proposing these types of sweeping land designations,” remarked Mayor Brower. “They might learn that the Inupiat people, who have lived on and cared for these lands for millennia, have no interest in living like relics in a giant, open-air museum. Rather, they hope to have the same rights and privileges enjoyed by people across the rest of the country.”