Resource Development Council for Alaska Report Below
Our friend, Alaska Salmon Alliance Executive Director Arni Thomson (NGP Photo) provides us with this link to the Seattle Times: "North Dakota is booming, and its largest city has reinvented itself, attracting creative types and energetic entrepreneurs."
Recently, we pointed out that Alaska had the lowest domestic product gain of any state, during 2013...in sharp contrast to other oil producing states that are moving ahead of Alaska, including North Dakota, Texas and even California.
Our friend from Senator Lisa Murkowski's Energy Committee Staff, Robert Dillon (NGP Photo), today gave us perspective on this week's federal approval to export lightly refined product.
Dillon wrote, "over at the Houston Chronicle's Fuel Fix blog: Jennifer Dlouhy has a nice summary of the Commerce Department’s decision yesterday to allow Pioneer and Enterprise to export condensates that have been lightly processed or 'stabilized' in a distillation tower, thereby turning them into 'refined products.'
"While the decision does not end the outdated policy that bans most crude oil exports," Dillon said,"it is a step in the right direction. Sen. Lisa Murkowski, the ranking Republican on the Senate Energy and Natural Resources Committee, has been pressing the Obama administration to lift the 1970s-era export ban since January. She has suggested a three-step road map to ending the ban, including allowing the export of condensates and a presidential finding that modernization of our export policy is in the national interest."
The oil export ban issue is important to Alaskans since the ability to export crude oil broadens the market for and improves the price of Alaska oil.
It is important to all Americans, since the ability to export improves US balance of payments, can assist our allies in becoming less dependent on unfriendly sources and enhances job creation.
It is important to Canada since a lifting of the US oil export ban could expand displacement and other economic strategies for most efficiently using North American energy supplies -- including throughput of the Obama-administration-delayed Keystone XL Pipeline project.
While we acknowledge local statistics of low unemployment in Alaska, we also know that can be a temporary condition unless Alaska's investment climate continues a one-year improvement trend since passage in 2013 of SB 21, the oil production tax reform bill.
If that job creating trend is killed by an ill-informed voter repeal of SB 21, Alaska will resume its slide past investment climate mediocrity toward insolvency. This is because Alaska is so dependent on oil production and sustainable oil production requires sustainable tax and regulatory treatment--among other things.
We would draw reader attention to the Resource Development Council for Alaska (RDC) story below.
Yesterday, speakers were confident in the economic future of the State, if...
...if, Alaska can become a more stable investment climate. It can do this by 1) soundly rejecting (i.e voting 'no' on) the August primary election proposition to repeal the state's improved, reformed production tax law that is already creating more investments ... and, 2) by giving investors confidence in the durability of fiscal certainty that could lead to a $40 - $60 billion LNG Export project. "It is up to us," as former legislator and incoming RDC president, Ralph Samuels (NGP Photo) said. -dh
(Find Ralph Samuels' complete presentation here.)
"...we're back in the game!"
ConocoPhillips Alaska President Trond-Erik Johansen (NGP Photo-L) pretty well summarized the theme of yesterday's Resource Development Council for Alaska Annual meeting.
In his introduction of company Chairman and CEO, Ryan Lance (NGP Photo), Johansen said, “I’m sure many of you are aware that since oil tax reform legislation was signed into law a year ago, ConocoPhillips has announced new projects and increased investment in Alaska.
“We are hopeful”, he said, that “SB21 will stay in place so we can continue to build on the momentum that is here now. This is Alaska’s time – and it feels like we’re back in the game.”
In today’s Alaska, the two big political issues du jour both concern “Investment Climate”.
Calling on a background as former government relations director for ARCO years ago, I continue to think that a “good investment climate” exists when the tax and regulatory rules are competitive with other areas, and when those “rules of the game” are stable, predictable, and durable.
In short, after you invest your money in good faith, you are harmed and deterred from future investment when government authorities change the rules of the game –- to take more of the money you make, or to make it harder for you to get a return on your investment -- after the investment is in place.
Over a decade ago, the governor and legislature raised the production tax IN EXCHANGE FOR assurances of investment climate certainty that would permit large gas pipeline investments.
The severance…or, production tax was raised, sure enough, but the oil company investors were then "rope-a-doped" -- denied investment climate certainty. It was becoming crystal clear that, after several decades of relative investment climate stability (i.e. since 1981), in Alaska “A deal was no longer a deal”.
So, the first issue du jour dealing with a “good investment climate”, is the upcoming effort by some citizens to trade away long-term stability – by repealing the recently passed tax reform bill, SB 21 – for higher taxes in the short term. The second issue is whether investors have sufficient faith in the durability and reliability of Alaska’s fiscal policies, to plunk down $40- $60 billion on a gas pipeline and LNG export project.
* * *
The 2013-14 RDC president, Phil Cochraine (NGP Photo-L), opened RDC’s 39th Annual Meeting at the Dena’ina Convention Center in Anchorage by introducing Anchorage's host mayor, Dan Sullivan, who with his Energy Advisory Counsel over the years, detected the need and successfully lobbied for improved oil industry investments in the Cook Inlet area of the state.
He went on to recognize board members, veterans, staff and Paula Easley (NGP Photo), long-time executive director and then board member—who received a standing ovation.
He recognized elected officials in the room, including Lieutenant Governor Mead Treadwell, Senators Anna Fairclough, Cathy Giessel, Charlie Huggins, Kevin Meyer and several State Representatives including Mia Costello, Shelly Hughes, Craig Johnson, Bob Lynn, Lora Reinbold, Dan Saddler, Bill Stoltze and Geran Tarr and (Please let us know of others so the archives may be accurately revised.)
Alaska Oil & Gas Executive Director Kara Moriarty then addressed the large crowd of some 1,200. “Alaska runs on oil,” she said. Moriarty emphasized the importance an improved investment climate leading to improved production upon which jobs, the state budget and the future of Alaska’s children depends (NGP Photo). Pointing to the assembled children, she said, “These kids are our future ... future miners, future commercial fishermen…. It’s all about jobs.”
Moriarty warned that in the weeks leading up to the August primary election, “…you will hear about the SB 21 $2 billion give-away…that DOESN’T EXIST.” She also cited a recently completed McDowell Group study emphasizing the impact of oil industry investment on jobs. (View Moriarty's slide pack. Note that the actual presentation may have deviated somewhat from prepared remarks.)
Following the introduction by Johansen, Lance (NGP Photo) addressed, “The U.S. Oil & Gas Renaissance – Alaska’s Role” (We provide his slide pack here).
He said the U.S. oil and gas renaissance is growing because of a shale revolution and affirmed that the phenomenon has “staying power”. Canada is experiencing similar production increases which, together, make possible the increased export of natural gas by 2016.
At the same time, he said, Asian consumer demand for gas is providing a market for the increased gas supply. While several dozen LNG export terminals have been proposed in the U.S. and Canada, not all can be expected to be built, he said.
Alaska has fiscal challenges and Lance noted that Canada has certain ‘infrastructure challenges’, as we have discussed in these pages. The surviving LNG projects, he suggested, will likely come from areas encompassing competitive advantages, including “reasonable fiscal terms”. Lance emphasized that Alaska had advantages in the growing LNG marketplace, including its 40-year history of exporting LNG to Japan from its Cook Inlet plant at Nikiski and Alaska’s relatively close proximity to Asian markets.
He also said that Alaska’s role in producing more crude oil could be enhanced by reasonable policies. “ConocoPhillips has a 50-year history in Alaska and remains committed to the state,” he said. He said he sensed the excitement in the economy and emphasized that maintaining the tax reforms of SB 21would be, “…good for the state, good for jobs and good for industry.”
In an interview following the meeting, we discussed the nature of fiscal certainty with Lance. We asked about the importance of reliability to a gas pipeline decision. He said, “stability and certainty are pretty important when making investments over 40-50 years. “
He added that, “We just want an understanding that we can ... say this is the kind of returns we expect out of these projects and that does require some sense of fiscal certainty and stability.
“But I tell people”, he went on, “we handle this around the world everywhere. We have fiscal stabilization clauses in our contracts … with most governments and we make big investments all around the world. So this isn’t new ground we’ve had to tread.... ...we’ve done this globally, we know what it means, what we are just asking is … when we are in these big long projects that you keep us stable through the course of that period. “
We think no reasonable person would think Lance’s request to be unreasonable. Even Russians and Chinese don’t apparently think the request for fiscal certainty to be unreasonable.
As we probed the subject further, he said, “…people ask me about Russia, China, and where we’ve been for over 20 -30 years … we haven’t changed the contract most places.”
He added that in Alaska, the fiscal terms have changed, “numerous times”. He concluded, “…that’s why the companies are talking about this issue; talking about why we need to have some sense of stability and certainty as we go forward with these investments.”
If any elected official were to ask us, “how do we make the investment climate attractive to a gas pipeline investment,” we would say, “Dear Alaskan colleagues, you have a problem.”
We would explain that Alaska has to overcome the greed mentality behind statements like, “It’s our oil”, and “They represent their shareholders and we represent ours”.
Both of those statements are employed as excuses to rob investors of money after they have made investment decisions. Oil company shareholders and boards would never condone actions by their company to represent them by violating lease terms or breaking tax laws or vilifying public officials.
Yet Alaska over the last decade has taken billions more from oil companies after investments have been made and risks undertaken in good faith; passed tax legislation demanding retroactive payment; and, vilified Alaska’s most capable investors for no defensible reason.
Alaska's elected officials have given tax breaks to film producers and small oil companies that produced few jobs and little tax revenue while unfairly taxing large petroleum investors who employ many and pay much.
If Alaska wants to attract more investment leading to more oil production and a gas pipeline it had better start doing an attitude check. Like North Dakota and Texas and Oklahoma, Alaska just might be better served by admitting it is an oil state, appreciating that blessing and becoming proud of its standing as a big “oil patch state”.
Being friendly to investors does not mean giving away the store. It does mean becoming a place where, after an investment is made, the investor does not lose sleep wondering if the state’s leaders in the morning will decide they want to take more money and saddle the investor with new tax and regulatory burdens.
Like RDC President Ralph Samuels said, “It’s up to us”.
If our decision is to become a responsible investment climate, perhaps we can certify Trond-Erik Johansen’s hope that we are, truly, “back in the game”.
* See ADN story by Alex DeMarban (NGP Photo: DeMarban at press conference following luncheon speech.)
* See RDC's video of Lance's presentation.
For Ralph Samuels
RDC’s 39th Annual Meeting Luncheon
Dena’ina Convention Center
June 24, 2014
Thank you, Phil. It is my honor to serve as President of the Resource Development Council. Alaska faces many challenges, but there are also great opportunities on Alaska’s horizon.
GOLDPAN PRESENTATION TO PHIL COCHRANE
RDC has been fortunate to have both a strong board of directors and staff over the course of its nearly 40 years of existence. Our leadership team has been second to none and Phil Cochrane is no exception. Phil has served as RDC’s president for two consecutive years and helped guide our team as Senior Vice President for the two years prior.
At this time I would like to present Phil with our traditional President’s Gold Pan in appreciation for his service to RDC. Thank you Phil for your leadership, hard work, and unending commitment to the mission of RDC – growing Alaska’s economy through responsible resource development. (Applause)
LEGISLATURE AND OIL PRODUCTION TAXES
Over the past year, the 28th Alaska legislature and Governor Parnell’s administration made significant progress in affecting positive change for Alaska’s natural resource dependent economy. RDC members engaged in a proactive way by testifying, writing, calling and visiting their elected leaders on important issues. To all of you who responded to our repeated action alerts, thank you! If you didn’t step up, there is more work to do and there will be many opportunities to make your voice heard.
The legislature and administration made progress on advancing a large-diameter Alaska gas pipeline project by passing enabling legislation that empowers the state to become an owner in the Alaska LNG project. The legislature also passed injunctive security legislation relating to industrial operations in our state – an issue RDC has been working on for several years to bring more fairness and reason into the litigation process. RDC was at the forefront of these and many other issues.
For years RDC has been advocating for the reform of ACES, the oil and gas production tax put in place in 2007 that has been hugely responsible for an accelerated North Slope production decline. As you all know, oil production tax reform finally passed the legislature last year and RDC’s top priority this year is to defeat Ballot Measure 1, which would repeal the new tax structure that took effect January 1st and bring back the old failed ACES tax regime.
The new tax policy is a significant improvement and the industry’s response is encouraging. There is good reason to be optimistic that Alaska is back in the game and that the stage is now set for a future of growth and opportunity. At this time I would like to call on RDC Executive Committee member Kara Moriarty to further address this critical issue.
INTRODUCTION OF TROND-ERIK JOHANSEN
Thank you Kara. Turning to our program, RDC is pleased to welcome both Trond-Erik Johansen and Ryan Lance to our program. Mr. Johansen will be first out of the gate, followed by our keynote speaker. Mr. Johansen is president of ConocoPhillips Alaska, a position he assumed in April 2010. He joined ConocoPhillips in 1986 and has held a variety of petroleum engineering, well engineering and leadership positions in numerous locations in the U.S. and abroad. Please welcome Trond-Erik Johansen.
(Note for Ralph: Trond-Erik will introduce Ryan Lance)
(Any personal comments and reflections on the presentation. Present to Ryan as a token of our appreciation, Judy Patrick’s new book, “Photographs of Alaska’s North Slope: Arctic Oil.”)
A big thank you once again to all of our sponsors for their generosity, and each and everyone one of you for your ongoing support of RDC. With all of us working together, we can build a prosperous economy and overcome the challenges before us.
I would like to remind everyone to visit the RDC website at akrdc.org on a regular basis for the latest industry and issue updates. Today’s presentation, as well as all other RDC events and breakfast meetings, are available online.
Please mark your calendars for RDC’s annual conference this fall, which will be held on November 19-20th here at the Dena’ina. Our breakfast forums will resume in September.
One final note, in the next decade alone, Alaska will need to fill 7,500 oil and gas jobs. And with the potential Alaska LNG project and other oil and gas projects, there will be even more jobs available for Alaskans. The Alaska Department of Labor and Workforce Development – in partnership with industry and other stakeholders – unveiled a comprehensive workforce plan to prepare for oil and gas jobs now and in the future. There are cards on the tables at the back with more information. You can also go to the department’s website at Labor DOT Alaska DOT GOV.
In addition, as you leave today, please take with you a copy of our 2014 Annual Report, which is available on the tables and at the exits.
Finally, remember to VOTE NO ON 1 come Tuesday, August 19th!
This concludes the 39th Annual Meeting of the Resource Development Council. Thank you all!