| Today we heard this tax reform ‘thank you’ commercial on a local radio station, sponsored by the Alaska Support Industry Alliance — illustrating the many dimensions the controversy covers. The point about sustainable policy benefiting many generations — not just this one — is a cultural value we have stressed for years and we thank the Alliance for its message. -dh |
Status of Alaska In-State Gas Pipeline:
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The Alaska House of Representatives last night passed legislation enabling the state’s gasline development corporation to continue progressing towards building its Alaska Stand Alone Pipeline (ASAP) project. Here is a session late yesterday wherein the House Finance Committee discussed the bill and amendments. Of particular interest is the back-and-forth regarding responsibilities accorded the Regulatory Commission of Alaska by the legislature. -1.jpg) Alaska Dispatch Op-Ed by Representative Les Gara (NGP Photo). No one who knows natural gas pipelines disagrees with this point: a line that delivers a vastly higher volume of gas does it more efficiently, for less cost. Alaska is in the middle of a shell game with a lot of potential, but not perfect, pipeline prospects. Some people say “just pick something.” Here’s why that’s not so easy, and picking the wrong project can harm the state with high natural gas prices. |
The Alaska Gasline Development Corporation is planning a 500 million cubic feet per day buried natural gas pipeline from the North Slope to tidewater in Southcentral. House Bill 4, sponsored by Representative Mike Hawker (NGP Photo above-L) and Alaska House Speaker Mike Chenault (NGP Photo-R), empowers AGDC to connect Alaskans with the Arctic gas. According to the sponsors, "The legislation establishes AGDC as an independent state corporation; provides a clear, strong regulatory framework; and calls on the state to assist AGDC in getting gas to Alaskans within six years. The Legislature created AGDC through passage of House Bill 369 in 2010."
Status of Alaska Oil Tax Reform: (Here is the status of Alaska production compared with other states, including Texas and North Dakota.)
- Today’s House Resources hearing video.
- Yesterday’s House Finance Committee consideration of SB 21. Below is testimony prepared by Steve Pratt, Consumer Energy Alliance – Alaska.
- Yesterday we offered an "April Fools" update and commentary. Part of that commentary revealed that Alaska has virtually no savings — aside from the Alaska Permanent Fund — when one deducts outstanding liabilities. Here is a letter dated March 27 from Jay Dulany, President of the Retired Public Employees of Alaska. Among his many relevant points is this: " based on calculations of the Alaska Retirement Management Board (“ARMB”), the State’s annual appropriation to PERS/TRS will soon exceed $1 billion. Payments at this level, which will only continue to grow as the UL (i.e. unfunded liability) advances beyond its current $12 billion level, will simply not be sustainable, by neither the state nor by local government employers. A benefits crisis may not be right around the corner; an employer contributions crisis is." If Alaska is to fulfill its public employee obligations, the $12 billion liability should be paid off now while Alaska has the savings available. Otherwise, public employees can expect to have their annual income reduced by a judge someday, as retired employees in Detroit and Stockton can attest. This is because the state’s fiscal house is in disorder, a fact which we believe the bond rating agencies will soon discover. We also believe the rating agencies have not competently assessed the gravity of Alaska’s fiscal crisis for bond holders and future investors. Any decrease in Alaska’s credit worthiness will result in higher rates paid on public debt, further exacerbating Alaska’s pending, economic decline. We believe this challenge is a requirement for increased investment and oil tax reform. Keeping a predatory tax policy in place is a short term solution to a looming fiscal crisis. Reforming the oil production tax to create a more attractive investment climate is a long term solution. The short term model benefits this generation at the expense of the next while the long term approach can make the economy sustainable for this and future generations. -dh
- Here are results of a poll on this subject. Dittman Corp. surveyed 800 Alaskans last week (March 13-14), resulting in a 3.4-percent margin of error. All regions of the state were represented and balanced to the 2010 Census. The House traditionally commissions a poll to help inform members and the public on priority issues before the Legislature.
“Alaskans, generally, feel our economy is stable, and support many of the issues we have identified,” Alaska Speaker of the House Mike Chenault, R-Nikiski, said. “They agree with us that we need to modify our oil tax system to make us competitive, and build an in-state gasline for in-state use. Alaskans, also, want the chance to decide whether we amend our constitution to allow parents the right to choose where to send their kids to school. Dittman Research and staff have provided us with another top-shelf document we can add to our discussions over the course of the next three weeks. It’s a valuable and informative tool to help us understand where Alaskans stand on issues before the legislature.”
AK urges North Slope producers to grow LNG commitment – Gas Business Briefing – A pending bill would give the state-owned Alaska Gasline Development Corp, which is planning the project, more flexibility in doing engineering along with …
Members of the House Resources Committee –
My name is Steve Pratt, Executive Director of Consumer Energy Alaska, a regional chapter affiliated with the national Consumer Energy Alliance. We believe the greatest economic threat to Alaska energy consumers is declining TAPS throughput as state spending increases. We need to reverse these decade long trends. Consequently your focus on declining throughput and fiscal issues this legislative session is critical.
As energy consumers, we all have a direct interest in obtaining competitively priced domestic energy. We also have a direct interest in robust overall economic activity to maintain livelihoods and at least 30% of working Alaskans are dependent upon oil and gas exploration and development for employment.
Unfortunately, Alaska oil production has declined from a peak of over 2 million barrels a day to a little over 500 thousand barrels, and is in freefall at the rate of 5 – 7% per year. What is especially remarkable is that these declines have occurred during times of high and increasing oil prices.
Alaska is capable of making a substantially greater contribution to U.S. domestic oil production and the nation’s energy and economic security than it does today. Five weeks ago CEA met with Adam Sieminski, the head of the Energy Information Administration in the U.S. Department of Energy. Mr. Sieminski gave us a presentation on the agency’s draft 2013 Energy Outlook. To me, Alaska was a disappointment. In the Energy Outlook, Alaska’s contribution to the nation’s energy supply will never return even to 2011 levels let alone increase unless state fiscal and federal regulatory changes occur. We are not doing our part to secure US energy security or fulfill our constitutional mandate to develop our resources.
A sustainable increase of only 500,000 bbls/day from today’s levels, at $100/bbl., would add $1.5 Billion per month to overall U.S. economic activity. It might also reduce the export of 1.5 Billion U.S. consumer dollars per month to OPEC nations.
However, new, risky exploratory and development drilling is necessary to stem the decline in Alaska oil production. Alaska students need to compete globally for jobs. Alaska natural gas needs to compete globally to secure markets. And Alaska oil field development needs to compete globally for investment dollars. Your work here can enable that ability.
The rates and Progressivity structure of Alaska’s current tax regime provide a disincentive to attracting risk capital to the state as evidenced by declining production during times of high oil prices. As demonstrated in the EIA’s Energy Outlook, increased prices and new technologies have resulted in substantial increases in oil production in other locations around the United States, but not in Alaska, and not because more oil is not available.
Alaska’s remoteness from the markets, Arctic climate, high labor and logistical costs argue for a more competitive tax and regulatory structure.
Consumer Energy Alliance – Alaska, along with a solid majority of Alaskans, is in favor of the Alaska State Legislature reviewing and approving revisions to the Alaska Tax Code that will improve the investment climate in Alaska.
In closing I will simply note that something is terribly wrong here, and I thank you, members of the Resources Committee, for taking on the task, with the Governor, of coming up with useful changes to the tax code.
The point about sustainable policy benefiting many generations is one we have stressed for years.
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