Alaska Governor Bill Walker's June 8 Letter To AK LNG Participants Doesn't Exactly Radiate Cooperation
by
Dave Harbour
(In fairness, we wish to provide this comment from an anonymous reader. -dh)
Today, we ask if Alaska Governor Bill Walker (NGP Photo) is seeking cooperation with participants in the AK LNG project, or is he seeking to control those free market participants, or is he angling toward a separate, government owned project?
Here is a letter Walker sent yesterday to House and Senate resource committee leaders which included the copy of a letter he dispatched back on June 8 to producer leaders of the AK LNG project.
We hate to be judgmental; after all, we all have our own ways of doing business. And, we should grant the Governor some leeway for lack of experience in dealing in the world of business and free enterprise.
If it were our call, we'd have met with Ak LNG on a regular basis to resolve ongoing issues; after all, there will be plenty more hurdles for participants to cooperatively overcome over the years if the project goes.
In meeting with participants regularly, we'd have engineered a process like the governor "proposes/unilaterally mandates" in this correspondence, sought concurrence among the parties and made a joint announcement on how the project will proceed. "Peace to all in an atmosphere of cooperation"….
Instead of a cooperative joint announcement, we now have a Governor presuming to call the shots, dictate the process.
In less formal circumstances, we would likely ask, "who in the blazes does this guy think he is?"
Readers will find one of the dictated matters occurring in the Governor's correspondence, item #3. In it he acknowledges that one of the big issues to be resolved is "fiscal stability" (See our 4-part series).
Government bullying can turn a reasonably profitable project into a loser. The bigger the investment, the more need there is for assurance that property will not be expropriated by fiat, as in the case of Argentina, or more indirectly taken by predatory taxation occurring after investments have been made. Just think about this: if an investment goes south on a manufacturing plant or commercial fishing boat, there are often plenty of potential buyers. But when you bury a pipeline into the earth and the investment goes south, statutes require you spend billions more dismantling and removing the asset, and restoring the right of way. In our opinion, the AK LNG investors have no choice but to seek full fiscal certainty on all of their oil and gas assets in return for the big gas transportation system investment. If the Governor wishes not to use his bully pulpit supporting that need with the Legislature and the citizenry, we think it obvious that he either does not believe that full fiscal certainty is needed or he holds back on offering fiscal certainty knowing participants will have a difficult time justifying the investment. |
This does not mean "fiscal stability" of the oil companies. It means, basically, that if the investors pour $45-$60 billion into the state of Alaska to build a gas pipeline/LNG project, they need to know that they will not be treated here like Repsol was treated in Argentina less than a decade ago.
Alaska has demonstrated in the past that in the 49th state, "A Deal Is Not Necessarily A Deal". Readers can explore the link for background. Basically, Alaska's elected officials have taught investors that they don't mind raising taxes after an investment decision is made and they don't mind doing it RETROACTIVELY.
Being hopeful, but not stupid, Alaska's oil industry has said for a generation that when and if a gas transportation project is built, the state will have to guarantee fiscal stability of the project.
In the June 8 letter, Walker, agrees that fiscal stability should be part of the process, but that it will exclude oil.
In other words, he is saying, "I'll agree to not tax gas after the investment is made but you'll get no guarantee from me regarding the oil."
So if one is trusting enough in Alaska's state government to invest scores of billions in a gas pipeline, one is not concerned that oil taxes will be raised after the gas project is built?
We have talked to no one about this correspondence, either in the Administration, Legislature or oil industry. If we had, we'd have undoubtedly been smarter.
But we are compelled based on an independent reading of the correspondence to conclude that the Governor thinks he can charm or coerce industry into investing billions into a gas transportation project by providing only half a loaf of fiscal stability. Either that, or he is trying to infiltrate so many skunks into the gasline parade that any rational investor would say, "Sorry, not today". By multiple skunks, I refer to but do not have space to explore other troubling provisions of the correspondence, including gas marketing, government ownership and pipe routing issues.
If you are an investor hoping for a cooperative government partner, read the June 8 letter and weep.
The June 8 letter, causes one to wonder if the Governor — a lawyer who spent a undistinguished, quixotic career advocating a government owned LNG project — will finally get his wish to be Master and Commander of some imagined, but not yet real, government-owned, Alaska LNG project.
We hope this is not Walker's motivation for the June 8 letter, nor his pipe dream.
If it were, we fear that to the innocent citizens of Alaska the dream will morph into a pipemare.
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See reader comments below with my responses in red….
(Note: Editors are welcome to reprint our opinion pieces; attribution should occur and we would appreciate being sent a link. Readers may send any thoughtfully written responses to this address and we will reprint them alongside this editorial for the Archives.)
Dave Harbour, publisher of Northern Gas Pipelines, is a former Chairman of the Regulatory Commission of Alaska and a Commissioner Emeritus of the National Association of Regulatory Utility Commissioners (NARUC). He served as NARUC's official representative to the Interstate Oil & Gas Compact Commission (IOGCC). Harbour is past Chairman of the Alaska Council on Economic Education, former Chairman of the Anchorage Chamber of Commerce, and past President of the American Bald Eagle Foundation and the Alaska Press Club. He is Chairman Emeritus of the Alaska Oil & Gas Congress. Opinions or viewpoints expressed in this webpage or in our email alerts are solely those of the publisher and in no way reflect the opinion(s) of any affiliated company, person, employer or other organization. |
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