Governor Sean Parnell (NGP Photo) is former Chairman of the OCS Governor's Coalition. This week we learned that Virginia's new governor, democrat Terry McAuliffe, has joined the coalition. The governors are urging Interior Secretary Sally Jewell to open OCS areas for oil and gas leasing that the Administration has, to date, kept closed.
Our friends at the Resource Development Council (RDC) for Alaska have asked Alaskans (and our Canadian readers, too; why not?) to make their voices heard in support of the Keystone XL Pipeline.
Because North American citizens in the US and Canada need to support proper development whether it be in our northernmost areas, or in the South.
A State Department evaluation of environmental impact of the Keystone XL Pipeline again finds the pipeline’s construction and operation will have minimal impact on the environment. Michael Whatley (NGP Photo), who has been following the Keystone XL Pipeline project for Consumer Energy Alliance, had this reaction:
If we expect support support from our friends in the South, we should support their projects as well. Enlightened self interest.
So, we urge our dear readers to join us in commenting on Keystone XL before the comment period ends and the opportunity fades into history.
Below is the RDC analysis. Please join us. Protect our nations' wealth and job producing energy sectors on both sides of the border! -dh
The U.S. Department of State is in the process of determining whether TransCanada’s proposed Keystone XL Pipeline (KXL) is in the national interest. The pipeline would run from the Canadian border to connect to a pipeline in Steele City, Nebraska. The Department’s determination involves consideration of many factors, including energy security, health, environmental, cultural, economic, and foreign policy concerns.
The public comment period on the national interest determination will close on Friday, March 7th. RDC encourages its members to send brief comments urging the Department of State to expeditiously approve KXL. There are two ways to submit comments. The public is encouraged to submit comments to regulations.gov. Comments may also be mailed directly to:
U.S. Department of State
Bureau of Energy Resources, Room 4843
Attn: Keystone XL Public Comments
2201 C Street, NW
Washington, DC 20520
For those who prefer to send in a prepared letter to the federal agency (which you can edit), please click on the following link:
Click here to view RDC's comments.
Point to consider in your comments:
• By supporting domestic production and oil imports from our close ally Canada instead of politically unstable countries, we will strengthen both our national and energy security.
• The 800-mile Trans-Alaska Pipeline is positive proof that a project the magnitude of KXL can be built and operated safely, putting tens of thousands of people to work and strengthening the economy.
• The Keystone XL Pipeline will have minimal impact on the environment. Studies have found KXL will be less invasive than if oil was transported by rail car or barge. The pipeline’s pumping stations are powered by electric motors which have little direct emissions.
• The U.S. Department of State found the KXL project would not cause “substantial impact on the rate of development in the oil sands, or on the amount of heavy crude oil refined in the Gulf coast area,” meaning the project would not have a direct effect on the greenhouse gas emissions from the production and consumption of oil.
• TransCanada has agreed to an additional 57 safety requirements and has routed the pipeline to avoid any potential environmentally-sensitive areas. In the U.S., over 170,000 miles of liquid pipelines transport 11.3 billion barrels of petroleum each year. American pipelines maintain the lowest spill rate per volume than any other transported method available.
• KXL will provide U.S. refineries with upwards of 830,000 barrels of crude each day, decreasing overseas imports by 43 percent and increasing the overall supply of oil.
• This stable long-term supply of energy from Canada would make the U.S. more energy self sufficient and help mitigate supply disruptions, which ultimately means greater price stability for American consumers.
• KXL is expected to create 42,000 manufacturing and construction jobs in the U.S., as well as provide billions of dollars in property tax revenue to Montana, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma, and Texas. The project will add $3.4 billion to the U.S. economy, including over $2 billion in salaries.
• KXL will transport more than 830,000 barrels of oil per day from domestic and Canadian sources, resolving infrastructure constraints for Bakken oil in North Dakota.
|Today, we learned that the Board of Directors of Bristol Bay Native Corporation has urged shareholders to support Alaska's tax reform bill, SB21 and vote against repeal in the August primary election. (Website). -dh|
Globe & Mail. Spanish oil major Repsol SA says its board of directors has approved a definitive $5-billion (U.S.) settlement from Argentina. Repsol is a new Alaska North Slope company which, after the Argentina adventure, are seeking a more productive experience in the far North. As we wrote in October, the jury is still out on Repsol's Alaska venture, though we remain hopeful. -dh
|AP. A bill aimed at advancing a liquefied natural gas project in Alaska has moved from the Senate Resources Committee.|
Part II: Has Alaska Become A Place Where A Deal Is A Deal?
With a third of Alaska's economy based on oil, with oil production declining, and with the entire state economy over a third dependent on oil, repealing Alaska's new tax reform law poses a clear and present danger.
Earlier this month in Part I, we asked if "Alaska has become a place where a deal is a deal."
The most recent evidence that in Alaska, a "deal may not be a deal", can be found by reviewing this month's Alaska Supreme Court decision affirming a lower court's decision to uphold a new assessment methodology, thus increasng the property taxes applying to oil company property in Alaska.
We sympathize with the court about the difficulty of adjudicating property value among distinguished litigants--even when a taxing method is not at issue.
But when a court supports a change in the rules of the game, it makes investors less likely to be attracted to that jurisdiction.
The Journal of Legal Issues and Cases in Business, penned by one of Alaska's, most distinguished, retired Senior Economists, Roger Marks (NPG Photo) identifies this problem: "In 2005 the state changed the assessment method from an income approach to a cost approach.
"Under the income approach assessed value was based on production depreciation. Under the cost approach value was based on replacement cost new less straight-line depreciation.
"When the assessment means was changed there was no adjustment for past depreciation.
This inconsistency in depreciation treatment caused assets to be depreciated more than once over time, with the result being a double taxation of the property."
In fairness, we note that Marks was one of the oil companies' "expert witnesses".
Used to be that a handshake was sufficient between honorable Alaskans to confirm a deal.
Old timers tell us that in the 40s and 50s and even to the mid 60s, Alaska used to be a place where you didn't need to lock your doors at night--even in the cities.
If you trusted your house to be secure in the evening, you surely trusted the word of friends and other fellow Alaskans.
Then came the great Prudhoe Bay discovery in the winter of 1967-68. Our leaders then could have raised oil and gas taxes to a level they thought to be consistent with the Constitution's admonition to obtain the maximum benefit of resource development for citizens. The rule in place, they could then have reasonably conducted the 1969 lease sale. The oil company bidders could then have bid with the more reasonable certainty of knowing the rules would not likely change after investments had been made.
Instead, Alaska became greedy, we believe, having lived through those times. Folks started locking their doors. In the twelve years following the 1969 lease sale, the governor and legislature increased industry taxes dramatically, about a dozen times in that many years--after the lease sale had locked in company investment decisions. Then followed a period of dramatically increased cost estimates caused by increasing environmental, legal, political, labor and tax burdens.
Yes, Prudhoe Bay was big and could sustain a lot of abusive tax attacks. But when they bid, the companies did so contemplating the risks known at the time. Then they found in short order that the rules of the game would be changing before, during and after vast new investments in Alaska occurred.
This commentary does not quibble with whether or not any of the decisions made were 'right' or 'wrong'.
We do conclude without much fear of contradiction that by changing the rules of the game so often and so dramatically after it was too late for investors to reevaluate, Alaska was beginning to develop for itself a reputation with early signs of tarnish.
Then after a decade of changing rules, Governor Hammond and both the Republican and Democratic leadership of the House and Senate convened a press conference -- 33 years ago next month -- to signal that a landmark bill had passed which created for Alaska -- in general -- a "Fair Share" of resource development revenue.
A rather peaceful investment climate ensued for a generation -- until the early 2000s when Governor Frank Murkowski (NGP Photo) attempted with good intent to bargain to give gas pipeline investors fiscal certainty in return for increased oil company production taxes. The companies, in good faith agreed. The legislature honored part of the bargain by increasing their taxes but neglected to provide the necessary fiscal certainty to permit the creation of a viable gas pipeline project. The companies were rope-a-doped after two decades of improved relationships that even survived the desperate oil price drops of the late 1980s.
Governor Sarah Palin (NGP Photo) replaced Murkowski in the next election of 2006 and, with legislative acquiescence, increased industry taxes which were applied with no real or feigned pretense of good intent. To add insult to injury Murkowski's tax increase was increased further and applied retroactively.
Last spring, the legislature and governor acted to more reasonably reform the state's production tax and immediately thereafter, legislative foes, environmental groups and others initiated a voters referendum designed to repeal the new law, (SB21). Now, as we said in Part I, investors await the outcome of Alaska's August 19 primary election. If SB21 is affirmed by a majority voting "NO" to repeal, Alaska will have improved its investment climate reputation.
Our astute readers will also note that a mid year primary election is often lightly attended, usually by those who are determined to support or oppose a particular candidate or ballot proposition. In this case, in addition to primary candidates, voters will be adopting or rejecting very controversial propositions to advance widespread marijuana use in Alaska, to increase and provide a cost of living increase for the minimum wage in the state and an environmental initiative to block mining development.
Mathematicians and odds makers among us agree on one thing: a determined voter base of those supporting drugs, labor increases and anti-development forces could, in general, be more likely to vote to repeal an improved corporate investment climate than to keep the new oil tax reform law in place. (Note: these three propositions were moved to the November 2014 ballot, somewhat lowering the chances that oil tax repeal legislation will be repealed on August 19. -dh)
Accordingly, those opposed to all the initiatives will need to mount a big and unusually creative campaign if they are to stimulate a turnout of pro-free enterprise supporters and have a hope of balancing the scales.
So picture this. In Alaska's late summer a great tug of war will occur with big stakes. In the middle, we have a great chasm. On the left is an army of environmentalist activists, some labor union activists, and marijuana proponents and their supporters pulling, sweating, grunting, polling, going door-to-door, advertising, and writing letters to the editor for all they're worth. On the right side of the chasm, pulling the rope in the other direction are those opposed to drug use, anti-business tactics and policies that repel investment and natural resource development.
One set of policies will be pulled into the chasm.
If the left side is pulled down, Alaska's reputation as a good place to live, work and play might be on the way to repair--except that there would be always the threat of another, similar referendum, year after year.
If the business side goes down, we'll know that in Alaska, a deal is for sure not a deal--until further notice!
In that case, expect dramatic reductions in investment, significant out-migration, decreasing oil production, less employment, fewer government services, lower real estate prices and overall economic malaise. Alaska would, in this fix, be more likely to become a ward of the federal government than living up to its former reputation as the Last Frontier, the Pioneering State.
And, finally, just as natural-resource-rich Alaska retreats from resource development, Russia, Canada and other Arctic nations are aggressively seeking to develop their far North resources and exploit the Northwest Passage while protecting and expanding their Arctic sovereignty.
Reforming Alaska's tax policies that have put it behind California in production, therefore, is not a local issue, but an international event that affects the security and economies and people of both the United States and Canada. (Commentary updated slightly, 8-19-14. -dh)
Opinion Editorial: A Lifelong Fairbanksan Opposes Efforts To Repeal SB21
Leslie Wien Hajdukovich
Alaska’s oil and gas industry has been the biggest driver in our state’s economy for 50 years. Responsible development of our oil and gas reserves has fueled our schools, roads, airports, government, our grocery stores, coffee huts and car dealerships. As a fifth generation Alaskan, I am thankful for an industry that allows me, and my family the opportunity to live in Alaska.
As an active member of the Fairbanks community, I have served on the Fairbanks school board for six years, three as president, and in other volunteer capacities that have benefitted our youth. It is important to me that every child in Alaska receive a quality education – an education that prepares them for the work force, and for future employment in our great state. Upon being elected to the school board, I quickly learned that our school district’s funding is heavily dependent upon the success of the oil and gas industry in Alaska.
Last October, I was asked to be a statewide co-chair for the effort to defeat the oil tax referendum that is on the ballot this August. I felt it too important an issue to say no. Over the last three months, I have become informed and carefully studied the issues around new oil tax reform. I have a clear understanding of why oil tax reform is good for Alaska.
The state budget shortfall is not due to oil tax reform, but rather to declining oil production in our state and falling oil prices. Oil prices are not something we can control in Alaska, however we can influence decisions that affect production. That is exactly what new oil tax reform does. Because of provisions in the new law, the outlook for Alaska is much brighter in the long term. With oil tax reform, state revenues from oil will be more balanced, predictable and beneficial to our state.
Since new oil tax reform passed, oil companies in Alaska have announced billions of dollars in new investment. In just one example, ConocoPhillips has announced a 54 percent increase in investment in Alaska over 2013, and most of that increase is due to the change in the tax structure. This investment is tied to new exploration and increasing oil production. The Trans-Alaska Pipeline has tremendous value to Alaskans, but only if it has oil flowing through it. Right now, it is flowing at one quarter of its peak capacity and still declining. Oil tax reform is about taking the steps necessary to add more oil to the pipeline.
As a Fairbanksan, I have high hopes that a gas line is in our future. We need the financial relief of heating our homes, businesses and institutions with cheaper and cleaner burning gas. Investment in North Slope oil actually increases our chances of gas exploration and a gas line. They go hand in hand.
One thing I’ve learned over the last few months is that new oil tax reform offers great opportunity for Alaskans, not only by boosting our economy, but offering a long-term, sustainable funding source for our state coffers. It promises our children and grandchildren a brighter future. This is the right tax reform at the right time. I encourage Alaskan voters to get informed, and to please Vote No on 1 this August.
BBNC Opposes Ballot Measure 1
- Published on Tuesday, February 25 2014 10:19
FOR IMMEDIATE RELEASE
February 25, 2014
Bristol Bay Native Corporation Opposes Ballot Measure 1
On Friday, Feb. 21, the Bristol Bay Native Corporation (BBNC) Board of Directors passed a resolution opposing Ballot Measure 1, which is a veto referendum seeking to repeal the Alaska Legislature’s oil tax bill passed during the 2013 session. Ballot Measure 1 seeks to repeal Senate Bill 21, also known as the Oil and Gas Production Tax, which modified the state’s oil tax regime in a manner designed to increase oil and gas exploration, development and production, and stimulate greater investment in Alaska. Ballot Measure 1 will appear on the August 19, 2014 primary ballot in Alaska.
BBNC has made significant investments in the Alaska oilfield services industry through its subsidiary companies Kakivik Asset Management, CCI Industrial Services and Peak Oilfield Service Company. These subsidiaries provide substantial benefits to BBNC shareholders in the form of employment, wages, and profits that contribute to dividends. The operations also provide over 1,000 high paying jobs primarily to Alaskans. The continued growth and success of these subsidiaries, as well as Alaska in general, is dependent upon a fiscal environment that encourages investment and economic growth in the Alaska oilfield services industry.
In the past year, under the current Oil and Gas Production Tax, BBNC has seen a dramatic increase in oilfield activity. BBNC is concerned that if Ballot Measure 1 were to pass, and Alaska returns to the prior tax structure, it will result in decreased oil and gas investment activity in the state; this would have an immediate and negative impact on BBNC’s subsidiaries and its shareholders, as well as the state of Alaska as a whole.
BBNC’s prudent support of Alaska’s oil and gas industry aligns with its balanced approach to the development of state resources. “Alaska’s oil and gas sector provides our shareholders with significant employment opportunities and makes major contributions to our ability to pay dividends,” said BBNC President and CEO Jason Metrokin. “BBNC strongly supports the industry that makes it possible to provide such benefits to its shareholders and opposes Ballot Measure 1.”
Bristol Bay Native Corporation (BBNC) is a responsible Alaska Native investment corporation dedicated to the mission of “Enriching Our Native Way of Life.” Established through the Alaska Native Claims Settlement Act of 1971, BBNC works to ensure the continuation of the life and culture of its over 9,400 shareholders – the Eskimo, Indian and Aleut Natives of Southwest Alaska’s Bristol Bay region.
Now in its second decade, the Inuvik Petroleum Show or “IPS” takes place every June in Inuvik, Northwest Territories. Host to over 500 participants including delegates and exhibitors from across Canada and beyond , this three day tradeshow and conference is a must-attend event for the oil and gas sector. (NGP Photo: author chaired 2002 oil & gas presentation. Don't miss local restaurant specialties, surf and turf: musk ox and char! The nighttime sing-alongs in lounges and friendly locals will make the trip memorable!)
|North Slope Borough and ConocoPhillips develop Alaska North Slope emergency response transportation process to safeguard village residents. (Photo: NSB Mayor, Charlotte Brower)|
Supporting Both Academic Freedom and The Right to Criticize Academic Activists
Last Thursday, University of Alaska - Fairbanks (UAF) Chancellor Brian Rogers (NGP Photo) addressed members of the Alaska Support Industry Alliance in Anchorage on the subject of the University's Fairbanks coal fired power plant. (We have an interesting personal story to tell here for readers who may be interested.)
Following the presentation, a member asked Rogers about the policy of professors signing a controversial letter/petition "applauding" the EPA's assessment of a proposed Pebble mine project (here) -- while identifying themselves with the University (For those interested, we explain the controversy here). Rogers said that of the many who claimed a University of Alaska relationship, less than half were actual university professors. The rest had honorary titles or persons who might have taught a class one time and one signer who was not affiliated with the University at all.
We have written extensively on the subject of the Pebble project's constitutional right to file for permits to operate on state leased lands--and the catastrophic effect on the public interest were activist organizations and federal agencies to preempt that project before it is availed the guaranteed right of due process. We think the rule of law evaporates if due process can be denied in this case and that determined activism will have precedent for stopping all natural resource, construction, agricultural, industrial, or housing projects anywhere in America. We also believe the EPA, with support from its supporters, has attacked the Constitution and Sovereignty of the State of Alaska by denying due process to a project lawfully granted leases on Alaska state lands. And, we think that a citizen can personally oppose the Pebble project for any reason but strongly support our call to protect "due process".
- Integrity. Having served as a university vice president, a high school and university English teacher; a regulatory commission chairman; a spokesman for oil, gas, mining and pipeline companies; an Army officer and a Washington Post newspaper delivery boy, I would never have thought of hiding behind some supposed, "Free Speech" defense while trumpeting a political viewpoint and pretending to represent my employer. Professors, like others, who use their official affiliations to give credence to their personal, political convictions have deviated from science and fact into the world of politics--at the expense of their own reputations and that of the institution(s) they presume to represent. On the other hand, we respect the integrity of some signers of the attached letter who represented themselves as retired or who did not otherwise use current state or university titles to enhance the impact of their petition signature. While we may oppose their politics, we do not criticize those who exercised their freedom of speech to sign the political petition--only those who seek to enhance their importance at the expense of their claimed affiliation. (I have to insert that it seems really amazing how some Academics can so blithely create a double standard. When one of them publishes a research paper, the "Academy" is expected to "peer review" it, to vigorously test it for scientific validity. But when a politician writes a letter on an environmental subject, a professor who works every day demanding peer review of scientific methodology, doesn't hesitate to sign his or her name ... even while invoking the unapproved use of his institution's name ... even when he or she has a degree totally unrelated to the letter/petition subject ... and even when he or she has not necessarily ever studied the topic in greater detail than skimming the contents of the biased letter/petition. In my farewell remarks before the Regulatory Commission of Alaska, I identified this same difficulty with other 'professionals', like regulators.)
- What's a governor to do? Some suggest that university systems throughout the country are heavily influenced by leftist professors. In fairness, others deny the allegation. In any case, one observes that money motivates much human action, including the actions of professors. Accordingly, one almost always finds it useful to "follow the money". If, as UAF professors have testified, Alaska Arctic OCS oil, gas and other human development should be suspended for a decade or so, until they get funding to complete a base line inventory of Arctic coastal and ocean ecology, one sees at least one motivation for professorial researchers who oppose development. It takes a great deal of money to prove or disprove the thesis that development should be permitted. One can, therefore, sympathize with excellent university leaders going back to Dr. William Wood, and more recently, Brian Rogers, Generals Mark Hamilton and Tom Case and Pat Gamble. How do they keep peace in the academic family and run an institution by taking a stand against activist professors who advocate under cover of university titles -- and who, presumably, are inculcating their own version of "Science" to impressionable students? Furthermore, the University of Alaska some years has leveraged about $6 in research grants from outside sources for every $1 of Alaska budget contributions. This has brought in hundreds of millions of dollars to the Alaska university systems and those benefiting from them. This gives incentive to professors to support federal government and private granting agencies politically. It gives perverse incentives to administrators to support professors who bring home the grant bacon. In turn, Legislators' constituents and campaigns are partly funded by such activity. And, what's a Governor to do?
- What we can do? We note that several of the letter/petition signers profess to represent Alaska's private university, Alaska Pacific University (APU). APU thrives on private contributions, particularly those originating from natural resource extractive industries and those affiliated or doing business with them. We note that if University of Alaska and Alaska Pacific University professor advocates named in the letter/petition got their way, there would be no money in Alaska to support either a public or a private university. Therefore, truly, we also observe that while we do not oppose a professor's right to speak against Alaska's economic survival, we do not have to pay for his or her right to do so. What can we do? We can tell the public and private institutions when they come calling for donations that we do not support their anti-development activist professors whether they officially or unofficially represent the institution. We can say, "Not this year". We can suggest to Legislators and the Governor when university lobbyists go to Juneau that we do not want to give them funding for research that produces armies of Academics intent on destroying the economy. We can say, "Not this year". Lastly, we can be a little more courageous about telling it like it is. All of us have the freedom of speech. If someone or some institution is contributing to the economic death of Alaska, each one of us has the right if not the responsibility to object. Right?
Personal comment: During the Great Eastern Blackout of 2003 your author was taking courses at the University of Michigan in Lansing on principles of utility and pipeline, economics and regulation. On the late afternoon of August 14, classmates (NGP Photo, 8-8-03) were walking from the parking garage to our graduation dinner/ceremony when the lights all over town began going dark as the sun began to recede. Everywhere ... except where we were, in the middle of the University Campus. Ironically, a day or two earlier, campus guides had taken us on a University tour, including a detailed briefing of the University's coal fired power plant. The University was quite comfortable with having this facility on campus because as our guide said, "we can use the grid in an emergency, but if the grid has an emergency, we remain independently powered." So on the related question of whether or not the University of Alaska should maintain an ageing coal fired powered plant on its far north Fairbanks campus, we would say: "the rationale for doing so is compelling, especially in view of the fact that the Campus is close to a nearly infinite supply of coal!" -dh
Q. Why is it so controversial for University of Alaska and Alaska Pacific University Professors to 1) sign this attached letter/petition, and 2) to do so while using their own university titles, presumably without permission from their universities to do so?
A. The letter/petition is controversial because professors advocating the EPA position are supporting a major violation of the American Constitution and of the rule of law; because they are doing so with the presumed support of the institution whose name they boldly use without approval; and, as Alaska educational service providers, the unlawful practice they condone erodes the economy of Alaska upon which their own and other great and small institutions and enterprises survive.
As we have explained, we support the Constitution's guarantee of free speech. We further support the freedom of all citizens, including professors, to 'petition their government'. We also agree that, citizens have the right to personally support and/or express opinions for or against projects, such as the proposed Pebble Mine in Southwestern Alaska.
However, we also embrace other, traditional principles:
- When an institution depending on public financing, permits activities designed to harm the public, the public has the freedom to withdraw financing of that institution.
- When employees act against the interests of the employer or taxpayers, they may be censured or dismissed if they use unapproved titles, resources, time and affiliations of the employer.
- When America's rule of law is threatened, all Americans are threatened and those threatening it, even while engaged in the act of speaking freely are subject to criticism and censure.
- With freedom comes responsibility.
- Those endangering the public interest must be willing to accept responsibility for loss of public support.
Note: Some of Alaska's most influential leaders whose businesses and eleemosynary activity would be harmed by liberal and/or misguided professorial activism serve on the Alaska Pacific University Board of Trustees and the University of Alaska Board of Regents. We sympathize with these public spirited, well intended citizens -- many of whom are dear and respected friends -- who also face difficult challenges when overseeing the policies of their institutions.
"I will observe a caution that I have for my colleagues regarding NARUC and urge them to watch the organization closely. Look, the job of regulatory commissioners is to carefully adjudicate proceedings based on a legal record with an absence of tainting, tarnish, bias. But somehow, when finding themselves in a public setting like a national organization, commissioners are sometimes led or tempted by a siren call of some group of Commissioners that wants the rest to take political positions based, not on a record, but on the emotional issue du jour. And that is inappropriate in my view. NARUC--just like a local Commission--ought to be taking positions based on a record even though it is a modified record."
What: Alaska Miners Association 2014 Biennial Conference
When: April 7—13, 2014
Where: Carlson Center: 2010 2nd Ave. in Fairbanks, Alaska.
About: The event will feature a multitude of lectures and workshops from industry experts; field trips to the Pogo and Ft Knox Mines; and the opportunity to network with individuals involved with all aspects of Alaska’s mining industry.
This morning, the Alaskanomics Blog posted and distributed (here) our February 10 commentary: "Has Alaska Become A Place Where A Deal Is A Deal?" Copied below for reader convenience. Of that commentary, on Tuesday we are honored that one of our more critical, fact-oriented readers sent this review: Just a quick note to offer you my 'standing ovation' for your commentary yesterday. You should ask the xxxx and xxxx to run it ... after all, both claim to be willing to express points of view different from their own, the bunk they've both been peddling needs to be debunked. (TK) -dh
Reader Kaye Laughlin (NGP Photo) alerts us to appearance of "the FIRST DIGITAL ATLAS of HISTORICAL SEA ICE CONCENTRATIONS in the BEAUFORT, CHUKCHI AND BERING SEAS", just released by UAF researchers and the Alaska Ocean Observing System. This web-based tool allows users to view and download sea ice concentration data from 1850 to the present. The atlas uniquely provides digitized historical sea ice data compiled from more than 10 sources, including the satellite record, various U.S. Naval and National Ice Center compilations, Canadian records, Danish and Norwegian ship records, and whaling ship reports. The interactive map allows users to select a date or a location to visualize how open water seasons have varied in a particular place. An animation shows changes in ice extent and concentration through time, year by year and decade by decade. The atlas also offers a glossary that defines different types of sea ice and provides information about the original data sources and how the data were compiled. The atlas provides coastal communities, industry, and state and federal agencies, among others, an objective, historical record of sea ice conditions during the past 160 years and is also a potential educational tool in the classroom. Anyone with a modern web browser and Internet access is able to use it. The sea ice atlas will be presented in a webinar hosted by ACCAP Feb. 18 at 10 a.m. Alaska Time. For webinar information, go to http://accap.uaf.edu/node/1048 or contact Tina Buxbaum, 907-474-7812.
Thursday, February 13, 2014
Commentary by Dave Harbour
Last Sunday’s Anchorage Daily News contains a 'news' article describing how Alaskan oil companies are "pouring" millions of dollars into an effort to stop repeal of the State's oil tax reform law.
Citizens should be applauding the companies for upholding a law approved less than a year ago by Alaska's Governor and a majority of the elected representatives of the people. A number of groups representing the bulk of Alaska's private sector economy are responsibly recommending a sound "No" vote to repeal tax reform.
1. Alaska's government operating budget is over 90% dependent on Alaska North Slope (ANS) oil production. Over a third of our entire economy would collapse without ANS oil. The Trans Alaska Pipeline System (TAPS) that carries ANS oil is 3/4 empty. It is becoming dramatically emptier: 6-8% per year. Massive new capital investment is needed to stem and reverse the production losses. In the most highly taxed, highest cost "oil patch" in the free world (i.e. and we would be happy to discuss Norway anytime, for it is a place where 'A Deal is A Deal'), our leaders last spring decided to reform the tax burden. Their objective was to increase capital investment, following several years of study and careful analysis.
2. The Constitution and our kids. Politicians are fond of quoting Alaska's Constitution requiring that natural resources be developed for the "maximum benefit" of the people. Trouble is, as we observed in this 2012 editorial, greedy constituencies want the "maximum benefit" of anything now...today...for themselves...and to heck with long term, wise decisions that provide a sustainable economy for their children. We see this disturbing trend played on the national stage as well as in Alaska.
3. Alaska's integrity is at stake. There is no citizen who thinks, "I want our state to be irresponsible". There is no investor who would say, "I would prefer to invest my money in an insecure area." But when Alaska began increasing its already high oil taxes nearly a decade ago (i.e. after investments had been made), future investment became less secure here. When Alaska made higher tax collections retroactive, Alaska became a riskier, less reliable place to invest. Now, when Alaska's leaders have concluded after years of study that reform is required to save Alaska's economy, special interest efforts to repeal that effort a year later would put a nail in the coffin of Alaska's reputation as a reliable place to do business.
4. The oil companies' fight is our fight. Without more investment TAPS throughput inches closer to a disastrous closing of the pipeline and Alaska's whole house of economic cards gets wobblier by the year. When the cards fall and TAPS oil slows to a trickle -- perhaps even causing closure of the pipeline -- every man, woman and child still here will suffer...a lot.
- The subsistence lifestyle in rural Alaska will become unaffordable as fuel, airport, social service, transportation, communication and public safety programs and subsidies evaporate. Over two hundred Alaska Native village corporations and their non profit affiliates along with Alaska Native Regional corporations should be defending tax reform--or live to see their own non profit efforts diminish as their profit making entities face the prospect of increased taxes and fewer contracts. Huge North Slope Borough, Fairbanks and Valdez oil property taxes can be collected only when oil property is present and viable. Less investment produces less local tax revenue.
- Subsidized health care from the smallest village to Alaskan cities will diminish in at least two ways: as direct subsidies diminish and as those with insurance coverage leave Alaska or lose coverage which, in part, pays for charity health care. Advocates for the poor, disabled and sick should be opposing repeal of oil tax reform with every spare spark of energy they can spare.
- Education will be one of the hardest hit areas, as state funding of local and statewide elementary, secondary and university programs decreases. School boards, superintendents and teachers should start appreciating and defending where their funding comes from, in our view.
We continue to be surprised at how few non profit organization leaders testify to the Legislature in support of oil companies, how few write letters to the editor. Yes, non profits are professional, profligate writers of corporate grant requests, but how many stand up to support oil company investment -- which directly and indirectly affects their own prosperity?
- Alaska has more non-profit organizations per capita (i.e. 6,000) than any other state. While a third of their funding comes from federal sources, much federal and foundation and corporate funding is given on a matching basis. Certainly, non-profits providing youth, arts, education, disabled and dports programs will be badly affected as business giving dries up--as we believe it will with repeal of recently passed oil tax reform legislation.
We do wonder at the motivation of those who argue more money will flow into Alaska's coffers by repealing oil tax reform.
Two years ago during a private luncheon with a well known liberal leader, she agreed that the state's economy was in peril. Then, she agreed that the natural result of an imploding oil industry and economy would be that Alaska could once again become a ward of the federal government where houses are cheap, the population diminishes and where the dozens of federal programs and environmental activist organizations would prosper. I know that she is well intended and believe her to be not evil, just wrong -- at least for my network of friends and coworkers.
A well intended citizen could oppose the tax reform law and support a political party's numbers simply because he or she is loyal to that party. In that case, the party's economic projections may be trusted on faith -- however rational or irrational they might be.
A not so well intended politician might simply think, "Hey, opposing tax reform as a 'give away' makes me popular with my constituencies, likely to be reelected, more marketable when I retire -- with an oil subsidized retirement check to boot."
On the other hand, one might think certain constituencies -- like Alaska Native oil field contractors -- that make more money when the oil industry makes more investments -- are biased.
Chambers of commerce throughout the state might be biased in favor of the law which they believe will result in more economic prosperity for their members.
In short, all participants in the growing SB 21 repeal effort -- not just supporters of repeal -- will be pursuing their own economic and social agendas.
Citizens will listen to the messages amid the din of rhetoric and vote one way or another, or not vote.
As for this editorial writer, free enterprise wins the argument at day's end.
We would like to see the 49th state adopt a new slogan: "Alaska, where a deal's a deal!" After all, Repsol's relatively new investment here results, in part, from an expectation of tax reform. We therefore align ourselves with the majority of our elected officials who are charged with protecting the public interest.
We further align ourselves with the major employers and taxpayers of Alaska, who have certainly paid their dues, in spades, and at least deserve to operate in a state that establishes and defends fair and predictable tax and regulatory rules.
We will be voting "No" on the August primary ballot measure asking for repeal of Alaska's oil tax reform legislation.
We believe Alaska's future will dramatically depend on the outcome of that vote. And in August, the world will know whether Alaska has matured into a place where a deal is a deal.
This editorial piece appeared February 10, 2014 on thehttp://www.northerngaspipelines.com website. Northern Gas Pipelines publisher, Dave Harbour, is former Chairman of the Regulatory Commission of Alaska, Former Chairman of the Alaska Council on Economic Education and former Chairman of the Anchorage Chamber of Commerce. He has served as chairman of numerous oil and gas conferences, including the annual Alaska Oil & Gas Congress. His articles have appeared in hundreds of newspapers, magazines and websites throughout the U.S. and Canada.
2-13-14 Jim Prentice Looks Beyond Obama For Energy Issue Coordination - Mystrom Comments On Alaska Oil Tax Reform
Canadian Press by Mike Blanchfield. It's high time Canada started looking beyond the Obama era if it wants to push economic integration with the United States to a new level, says former Conservative cabinet minister Jim Prentice (NGP Photo). ... New gas discoveries in both countries have transformed North America's economic landscape, said Prentice, who urged the federal government to set its sights on 2017 when Barack Obama's successor arrives in the White House.
Commentary. "Tis the season!" Yes, a legislative session in an election year tells us it's the season for discussion of the most important issues facing our state and nation.
As our readers know, we have consistently supported pro-free enterprise and reasonable economic development policies flowing from Washington and Juneau.
For several years, we have urged public support for oil tax reform, to correct a very predatory and anti-investor tax policy that was eroding economic strength and opportunity from Alaska's economy. We posted the last of many of our commentaries earlier this week. Even our commentary yesterday on LNG is linked to the issue of Alaska's investment climate and dependable tax policy.
Since then, we have received several opinion editorials. Former Anchorage Mayor Rick Mystrom (NGP Photo) wrote the one below, which we submit for your consideration. It deserves thought since Mystrom was elected to oversee the health of our largest city and since his family security depends -- like everyone else's -- on a state that can pay its bills and support the educational, social and business amenities everyone depends on in both rural and urban Alaska. -dh
"Why I Support The Current Oil Tax Reform Law: SB 21"
Few issues affect Alaskans more than the health of our economy. During the 42 years my family and I have lived here, we’ve experienced both good and bad economic times. As a two-term Anchorage mayor, as a businessman, as a parent and now as a grandparent, I know and appreciate the benefits of a thriving economy.
Since the beginning of Alaska’s partnership with the oil industry we’ve had long periods of healthy economic times accompanied by prosperity in both the private and public sectors of our economy. Schools have been built around the state, our university system has grown dramatically, and health and human services facilities have been built debt-free, all largely funded by the oil industry/State of Alaska partnership.
In Anchorage alone, we built the Sullivan Arena, the Loussac Library, the Alaska Center for Performing Arts, the Egan Center and the Dena’ina Convention Center—all without any debt. The partnership has worked well for Alaska and has given us an unmatched quality of life. All of this was accomplished with an oil tax rate that was more competitive and far lower than the old tax system, ACES.
In addition, that partnership has allowed us to accumulate over $76 billion in liquid assets including $50 billion in the Permanent Fund. The fund has paid every Alaskan who has lived here since its inception more than $35,000 in dividends—that’s $175,000 for a family of five. And that fund has nothing to do with taxes. It’s funded with 25 percent of Alaska’s fixed royalty. If production increases, our royalty share goes up. If production goes down, our royalty share into the Permanent Fund goes down.
But we’ve also had shorter periods of unhealthy economic times accompanied by hardship for tens of thousands of Alaskans. In the mid-80s when the price of oil dropped from $30 to $9 a barrel, the state, the oil industry and our citizens all suffered. Thousands of our neighbors lost their homes, businesses went bankrupt, banks closed and left the state and citizens left our state. Anchorage lost 13 percent of its population and 25 percent of its assessed value. The Interior, the Mat-Su Valley, the Kenai and the rest of Alaska suffered equally. But the State of Alaska/oil Industry partnership survived, and in the late 80’s we began a long period of sustained, gradual growth.
The continuation of our economic growth is now threatened. We’re facing a $2 billion deficit. This deficit is the direct result of lower oil prices and decreased production. The claim that this deficit is a result of the new tax structure is a myth. The deficit would be virtually the same under either the old tax structure (ACES) or the new tax structure now in place.
We can’t do anything about oil prices but we can do something about production. We can discourage it or encourage it. ACES discouraged production. We’ve watched our oil partners’ investments and oil service companies’ employees move to Texas, California, North Dakota, and other states who welcome their investment dollars and our employees. The tax structure now in place, created by Senate Bill 21, encourages production. Our North Slope partners have already committed to $4.5 billion in new projects since Senate Bill 21 was passed and signed by the governor.
Now comes another very important decision point for Alaskans—a decision that will determine Alaska’s future for years to come. In August we will vote on a ballot issue that asks whether we want to encourage our healthy partnership that provides 90 percent of our state government’s funding or discourage it. Do we want to keep the new tax passed by the Legislature last year which has already resulted in new investment and new jobs, or do we want to return to the failed tax of the previous administration that contained some of the highest taxes in the world and it did nothing to encourage production of a single, new drop of oil on the North Slope?
If we vote to repeal our current tax and return to the old tax, not only will our oil partner’s investments go to other states and our production continue its decline, but it would also be likely to end plans for a large-diameter natural gas pipeline and LNG plant to get North Slope natural gas to Alaska communities along a pipeline route and to profitable markets in Asia.
In August, I’m voting to keep our economy and our permanent fund healthy. I’m voting against repealing our tax structure. I’m voting “no” on Ballot Measure 1.
Rick Mystrom is a former two-term mayor of Anchorage, a former member of the Anchorage Assembly, and a successful businessman.
Alliance Profile: M-I SWACO a Schlumberger Company: From Drilling through Production, Focused on our Customers
Alaska LNG Project Faces Market Challenges...And Political Challenges
Alaska and Mackenzie Delta producers are eyeing LNG exports to Asia as this generation's best option for monetizing Arctic gas.
Previous generations were close: with the Arctic Gas project in the 1970s (i.e. including TransCanada); displaced by the Alcan project in the 1980s (i.e. vigorously opposed by TransCanada); and the Alaska Highway gas pipeline project given new life with higher gas prices and passage of the Alaska Natural Gas Pipeline Act of 2004 (i.e. led by TransCanada).
Evolution of Arctic gas projects continued with Governor Sarah Palin's (NGP Photo) support of the Alaska Gasline Inducement Act (AGIA, 2007), giving a subsidy to TransCanada just as the great North American shale gas phenomenon began eliminating that market for expensive, Arctic energy.
However, with subsequent support from the Legislature and Governor Sean Parnell (NGP Photo), TransCanada's project evolved into a duet consortium with ExxonMobil, and more recently achieved significant alignment of interests with the State's Administration, Legislature and other producers.
Meanwhile, the state's operating budget is increasingly unsustainable, depending as it does on drawing down savings accounts in response to its 90% dependence on diminishing oil production.
With the Obama Administration seemingly doing everything possible to prevent oil, gas and mining activity on federal AND state lands (i.e. Readers are welcome to challenge us on this accusation and we will be happy to document it), Alaska's economic prospects are at further risk.
To add to the lack of optimism, in a diminishing oil production environment, a coalition of minority activist and anti-business groups is promoting repeal of Alaska's oil tax reform law (See yesterday's commentary)--though the majority of Alaska's private sector leaders oppose repeal.
The Senate Bill 21 reform effort was passed into law less than a year ago after years of analysis and debate about how to increase investment and natural resource production, royalties and taxes. Repealing SB 21 would send a dramatic signal to the investment world that in Alaska, "A deal is not a deal".
Now, the state's economic hopes are focused like a falcon's gaze on hopes for a gas pipeline and LNG export project whose prime market would be Asian consumers.
However, just as changing domestic gas markets over the last 45 years have killed hopes and plans for monetizing the huge Arctic gas reserves, so now do the furies appear to be conspiring against Alaska's export hopes.
In Canada, a number of LNG projects have been approved or are in mature permitting stages -- by a supportive federal government -- and seem to be mostly targeting Asian markets.
Even though Japan's Fukushima tragedy resulted in more demand for LNG, Japan is also considering lower cost coal as a competitive alternative, which diminishes consumer appetite for more expensive LNG imports. We note that Japan has been one of the most prospective markets for Arctic gas.
Meanwhile, members of Congress who have studied the issue are telling the Administration that unless the Department of Energy increases the approval rate -- and decreases the backlog -- of LNG project applications, markets could be lost to other energy sources.
The Department of Energy's LNG export function -- under direction of Assistant Secretary for Fossil Energy, Christopher Smith (NGP Photo) -- seems to be increasing its approval activity.
|Fuel Fix. Oil industry and business groups have formed a new coalition to make the case for expanded exports of American natural gas.
The “Our Energy Moment” campaign, which is described as a grassroots organization, aims to counter the arguments of export foes, as the Obama administration weighs applications to widely sell liquefied natural gas overseas.
An increased approval rate for Canadian and Lower 48 LNG projects is certainly good for North American economies.
Logically, a larger number of LNG exporters means more competition for an Alaska project.
Most projects will be attempting to secure long term supply contracts with utilities and/or large industrial users. As those markets become satisfied with the growing number of current LNG projects, Alaska North Slope and Mackenzie Delta gas will surely have a more challenging time -- as later comers -- elbowing their way into market niches that will pay top dollar for long term contracts.
We suspect that one saving grace of current Arctic gas projects is the high degree of expertise focused on their successful outcome. In particular, we note that many if not most of the Alaskan and Mackenzie Delta producers have LNG experience and some affiliated interests with each other and even with Canadian west coast and Lower 48 LNG exporters.
Where does this leave Alaskan citizens and investors?
- In six months, Alaskans will vote on whether to stabilize or destabilize their investment climate. Depending on the referendum's outcome, we can envision either massive new investment in the state or massive withdrawals of capital investment plans, over time.
- If the August plebiscite favors investment, we can envision all parties attempting to fast track gas pipeline timetables. If the vote repeals tax reform, we see a gloomy end to this generation's plans for monetizing Alaska gas.
- In the next three years, the Obama Administration will either ease up on Alaska or continue its nearly perfect record of opposing, slowing and/or stopping every major development they can in the state. If projects can be sanctioned under the federal assault, more oil and gas can contribute to a sustainable economy. If federal pressures continue and even increase, prospects for more oil, gas and mining production are limited.
In conclusion, we cannot overstate the importance of the August referendum vote on whether to repeal Senate Bill 21.
This is because repeal of SB 21 would recreate an investment climate that has minimized what could have been sufficient investment to stabilize if not reverse waning, North Slope oil production.
As we have demonstrated above, Arctic gas LNG projects will have a challenging enough time finding a market niche even in the best of circumstances. But repeal of SB 21 will, in our view, totally emasculate the investment climate along with plans for a gas pipeline.
We would also offer this additional perspective on the highly lauded, state financed, in-state gas pipeline project, under control of the Alaska Gasline Development Corporation. That project was designed to meet growing demand for natural gas as a heating and power supply for the majority of Alaska's population.
But with 90% of the state budget depending on oil production -- along with a third of Alaska's economy -- repeal of SB 21 would result in growing job losses and a massive, lemming-like out-migration of citizens from the state over the next five years.
In such circumstances, existing natural gas supplies will be more than sufficient to supply the survivors without the need for or expense of a new, in-state gas pipeline.
Finally, we invite those seeking optimism to find it by joining us in seeking a stable tax environment and for more powerfully exercised state's rights in the face of an overreaching and predatory federal government.