Alaskans Have Not Found Common Ground With Industry In the Midst of Fiscal Crisis — But Canadians Are Getting There

We prefer good news but cannot ignore reality….  Below is a comment from a longtime Kenai Peninsula, Alaska reader.  It refers to our commentary last Friday.  Perhaps a good way to start the week, absent wonderful news, is to consider what steps must be taken to create good news.  After all, isn't the first step in a 12 step recovery program simply to admit fault?  -dh


From our Mid-Atlantic energy analyst friend:

As we mentioned recently, our information from sources has underscored an apparent concern on the part of the Fed regarding capitalization levels of the nation’s banks. It is perhaps self-serving to the Fed (at least to a cynic such as this writer) that it keeps pushing the notion that interest rates could rise perhaps four more times this year. Such moves, if implemented successfully, could serve to raise the earnings potential of the banks and provide an opportunity for increased capital levels through operations. However, a quick glance at the 10-year bond yield (1.85%, lower than a year ago), gold (up 10.7% since the December rate rise), the 4Q GDP (0.7%), and the trend of job numbers indicates there is not a snowball’s chance in hell of the economy supporting a series of interest rate increases as of now.

 

Thus, the current economic morass in the Oil Patch presents the overseers of the banking system with a growing major problem. While not talking much about it publicly, there are solid drum beats coming out of the brush that the regulators (the Fed and the OCC) are very focused on the growing debt problems being created by the E&Ps and market participants related to them. This is no small dilemma: theoverseers do not want act is such a way that elevates public concern, but they are being pushed hard to DO SOMETHING. As noted in the third article below about the actions being taken by the credit agency Moody’s (and others), they also are focused on the credit situation of Energy companies; our conversations with those who have interfaced with the ratings agencies would indicate the raters are getting external pressure, likely including from the Fed.

From a reader email received this morning:

Referencing 2nd of Your paragraphs:    We see no such cooperative efforts on behalf of the Alaska and U.S. Federal administrations.  We see hostility, demonizing, lack of due process, land access restrictions, constricting regulations and higher energy tax rhetoric.  

In a low price environment like this, we can only observe today that history will show such acts — West and South of Canada's border — to be either, "intentionally anti-development or downright unintelligent".

Dear Dave –  Went to lunch after church and thought I’d check my emails when I saw your Friday report and  I was especially SAD to read the 2 paragraphs at the beginning of our email.    I REALLY  hope it changes because I NEVER LIKE HOSTILITY AND RESTRICTIONS that are imposed by our government when our businesses are trying so hard to succeed. 

And it is quite inspirational that you shared that we actually received this offer =è=è that politically liberal Canadian Provincial and Federal governments are extending olive branches to oil industry executives.  They are asking, "What can we do to help you be successful in a low price environment?"  

I will keep the Northern Gas Pipelines and its STAFF and LEADERS – –  in our daily prayers.  I will ALSO pray that our Alaska and U.S. Federal Administrations become COOPERATIVE AND SUPPORTIVE.  OH MY GOSH. . . YOU ALL TAKE CARE!  I will be printing this for my husband to read. . . I know he’s going to wonder what is going on with our government!  We look forward to hearing GOOD NEWS!


CBC, by Andrea Ross. Canadian Government and Industry Are Reaching Common Ground On Pipeline Policy….

Alberta energy companies and the NDP government don't always see eye to eye, but they seem to agree on one thing – the province needs more pipelines to carry its most valuable commodity to global markets.

A consistent problem facing the industry is that most of Alberta's oil — around two and a half million barrels per day — is sold to U.S. customers at prices well below that of global crude oil, resulting in billions of dollars in lost revenues every year, according to Natural Resources Canada.

In September, Premier Rachel Notley told an audience at an Alberta Urban Municipalities Association convention that she wants at least one new "drama-free" pipeline built to carry Alberta's oil to world markets.

Her comments came after premiers signed a Canadian Energy Strategy in July, with the intended goal, at least in part, to help energy producers reach wider markets.