Legislature Winds Down Without Improving Alaska's Investment Climate - More On Yesterday's Sinopec-COP Report

(Comment: We note that COP is one of Canada's and one of Alaska's largest producers, that China has been an increasingly active investor in Canada, and that China has tested Alaska's investment waters.  If the Government of Canada approves COP's asset sale to China, we may expect to see more interest in Chinese investments in North America, including Alaska.  See our Story of Chairman Wu Bangguo's visit to Anchorage (NGP photo, w/Governor Sean Parnell).  -dh)  Maritime & Energy.  Chinese firms have been scouring the globe for investments in energy assets to feed the country's booming economy, BBC News reports.  Last year, Sinopec's paid $7.2bn for Addax Petroleum, a company with oil assets in West Africa and Iraqi Kurdistan.  Syncrude, the largest project in Canada's tar sands industry, pumps an estimated 350,000 barrels a day, about 13% of Canada's overall oil output.  Tar sands projects, in which oil is extracted from bitumen deposits, require big investments in technology.  But the rising oil price gas has made such investments more economically viable. Tar sands make up the largest crude oil deposits outside the Middle East.  Analysts said that the price paid by Sinopec for the Conoco stake was about $2bn more than was expected. "It just shows that the Chinese are a different kind of buyer," said Phil Skolnick, an analyst with Genuity Capital Markets.  US-based Conoco said in a statement that the sale still needed Canadian regulatory approval. The company had announced a programme of asset sales to raise about $10bn. 

Comment:  We wonder how the following legislative items will stimulate oil and gas investment into an economy that is almost COMPLETELY dependent on oil and gas.  Since rural Alaskans are even more dependent than urban citizens on state oil and gas revenue, we wonder how Senator Lyman Hoffman's harsh words encourage oil and gas investments which will enable the subsistence way of life to be sustained.  We wonder how Senator Bert Stedman's bill to 'save the state billions' in natural gas taxes--if there ever is a way to commercialize ANS gas--is not a bill to simply 'tax the industry additional billions'.  We fail to understand how lawmakers cannot understand that increasing taxes on gas producers--when and if gas is ever produced--does not improve the chances gas producers will find investment in a gas pipeline attractive.  We just shake our heads in wonderment as another legislative session, another window of opportunity, commences to close forever as Alaskans continue to defy the reality that, "We are an oil state and should be unashamed of that indisputable fact: grateful for it and proud of it!"  -dh

• Alaska Dispatch by Rena Delbridge.  As promised (read more here), a key bill for Alaska's western and northern coastal communities got a hearing this afternoon in Senate Finance - a hearing that decided little, but provoked angry words from Sen. Lyman Hoffman, one of the most powerful men in the Capitol.  Hoffman, typically quiet, is one of those legislators who people really stop and listen to when he chooses to speak. Clearly frustrated by what he sees as the administration's refusal to accept an olive branch offered by North Slope leaders, Hoffman raised his voice and took a state employee to task.  Randy Bates, head of the state's coastal management division, calmly stuck to his guns, laying out the administration's opposition and asking for more time to thoroughly weigh the latest version. Hoffman wasn't pleased.
  "It seems as though the department is taking a stall tactic regarding this legislation," Hoffman blasted, adding that people who live along the coast want a say in the big decisions others are making that could affect their daily lives. He pointed several times to concessions the sponsors made in a new version, including allowing the governor to appoint the entire board that would weigh district policies for approval.  "That is the ultimate compromise," Hoffman said. "You get to pick your own team ... And yet, the compromise isn't good enough. Give you a winning hand, and you don't even look at it. The people out there, you're affecting their daily lives with what happens."
• ADN/AP.  A House committee has moved out its version of a bill that would change Alaska's system of taxing oil and gas production together. This followed at-times tense meetings, some of which went late into the night and left some in the room more confused than when the hearings began.  Those backing a change want to guard against what they say could be the loss of billions of dollars in revenue, once gas flows through a proposed major pipeline. This is due to a potential "dilution effect" under the current regime, when oil prices are high relative to gas.
• Journal of Commerce by Tim Bradner.  Sen. Bert Stedman, R-Sitka, says the current tax on natural gas is dysfunctional and could cost the state as much as $2 billion a year in lost revenues under certain conditions. Sen. Joe Paskvan, D-Fairbanks, who flanked Stedman at a Feb. 26 press conference, said the tax leaves Alaska at risk of "being plundered" by large multinational companies once gas production starts.  Gov. Sean Parnell has a more laid-back view. He believes the concerns are overblown and that the revenue impact won't be what Stedman says it could be.