Commentary: Yesterday, the Senate Resources Committee's Chairman, Cathy Giessel (NGP Photo) scheduled testimony on HB 132 clarifying the mission of the state-owned Alaska Gasline Development Corporation.
ON THE FEDERAL SIDE:
ADN Commentary by Randall Luhi (NGP Photo). We need to take our country and economy to the next level in terms of energy security. The only way to do this is to safely and responsibly explore our own offshore energy resources, particularly off Alaska.
SHELL DECISION CLOSE!
ADN by Jennifer Dlouhy. The Obama administration is set to announce within days whether it will reaffirm a seven-year-old government auction of oil leases in the Chukchi Sea — a decision critical to Shell's plans to resume drilling in those Arctic waters this summer.
As our readers know, Governor Bill Walker once opposed AGDC's sponsorship of the medium diameter so-called ASAP gas line from Prudhoe Bay, past gas-hungry Fairbanks to South Central Alaska.
Walker now proposes that AGDC's project be expanded in some as yet undefined way to accommodate high gas volumes.
This would put AGDC's ASAP project in direct competition with its partnership position in support of the Ak-LNG project.
We'll provide a more complete hearing report tomorrow; meanwhile, here is a link to the actual video archive of that hearing. -dh
Today's American Energy Alliance links:
Special deals for Tesla:
The Wall Street Journal (3/25/15) editorializes: “California has tried to solve this problem for Tesla with its zero-emissions vehicle mandates, which have other makers buying ZEV credits from Tesla. But the sheer idiocy of these subsidies is a continual risk to Tesla. A ZEV car in California is one with zero emissions at the tailpipe, no matter how much environmental degradation it causes upstream. Toyota, for one, has recently switched its attention to hydrogen-fueled cars, which emit only water and warm air at the tailpipe, never mind that 95% of the world’s hydrogen is manufactured from fossil fuels. Policies that are so transparently stupid and perverse, like the policy of subsidizing rich people with $7,500 tax credits to indulge themselves with Tesla’s products, would not seem a sound basis for a scale auto manufacturer, which Tesla aspires to become.”
Bright Bulb Award:
"Rather than issuing standards and rules to which new wells must conform, the BLM instead has invested itself with the power to either sign off on or block each individual well, operating on a case-by-case basis. (Based on what statutory authority? Are we still even asking that question?) Which is to say, satisfying the letter of the law will not be enough — BLM bureaucrats still will have the final say, employing whatever whimsical standards leap into their perverse little minds. This is a recipe for outright corruption..."
The RFS has a fever. And the only cure is full repeal.
The Wall Street Journal (3/25/15) editorializes: "At the Iowa Agriculture Summit earlier this month, most of the prospective Republican presidential candidates embraced the renewable-fuel standard, one of the worst examples of corporate welfare in America. This federal mandate props up the U.S. ethanol industry by forcing refiners to blend biofuels into gasoline. Despite the fact that it is an obvious business handout, White House hopefuls rarely attack the standard, lest they harm their chances of winning the Iowa caucuses."
Handouts breed corruption, as the Oregon DOJ is about to discover.
The Oregonian (3/24/15) reports: “The Oregon Department of Justice has opened criminal and civil investigations into the award of $11.8 million in state tax credits for a series of solar arrays installed at Oregon State University and the Oregon Institute of Technology. The agency acted after The Oregonian/OregonLive reported earlier this month that developers of the arrays missed deadlines to qualify for subsidies under the state's business energy tax credit. The news organization's investigation found that backers submitted phony and misleading documents to the state to demonstrate construction was underway by the deadline - documents that officials at the Oregon Department of Energy failed to check.”
Does the hypocrisy of it all even remotely cross his mind?
The Washington Free Beacon (3/25/15) reports: “Leftist actor Mark Ruffalo, best known for his supporting role in 13 Going on 30, has not let his crusade against fossil fuels get in the way of his mass consumption of them…Though Ruffalo has committed himself to divesting from fossil fuels, he is far from committed to reducing his own fossil fuel use. Ruffalo is currently offering to fly (presumably on a fossil fuel-burning jet) the winners of a raffle he is running to the world premiere of Avengers: Age of Ultron...The winners of Ruffalo’s raffles will be burning just a fraction of the fossil fuels burned during the filming of the latest Avengers movie, which was filmed at 23 locations across the globe. He and the rest of the Avengers filmed in locations ranging from England to South Korea to Bangladesh to South Africa to Italy.”
Let's not kid ourselves: The PTC isn't about developing new technology. It's about lining AWEA's pockets.
The Daily Caller (3/25/15) reports: “Sen. Lamar Alexander has a proposal for Democrats: End subsidies to wind power producers and use that money to double funding for federal energy research at the Department of Energy. “Washington has a bad habit of picking winners and losers, and an addiction to wasteful subsidies of all kinds – we need to end these policies,” the Tennessee Republican said during a hearing on DOE’s 2016 budget request Wednesday. For years, many Republican lawmakers have been looking to end the Wind Production Tax Credit (wind PTC) which has been extended nine times since 1992. The wind PTC pays wind farm operators for the first 10 years of electricity produced. The wind lobby has fought hard to reinstate the subsidy after it expired at the end of last year.”
Ever the good little lemmings, Marylanders are following New York's lead. Over a cliff.
The Baltimore Sun (3/24/15) reports: “Both chambers of the Maryland General Assembly separately passed measures Tuesday that mark the most aggressive action the legislature has taken to curb natural gas extraction in the state. The Maryland House of Delegates passed a three-year ban on fracking and the Senate approved tough new legal standards for drillers. Each bill must still clear the other chamber, but the actions signaled the legislature was willing to go further than it has before to limit natural gas drilling.”
Do you have something to hide, Gina?
The Washington Examiner (3/25/15) reports: “A House committee Wednesdaysubpoenaed Environmental Protection Agency Administrator Gina McCarthy for her cell phone billing records and emails. The subpoena by the Committee on Science, Space and Technology was issued at 1 p.m. Wednesday and seeks the records after the agency failed on at least 10 prior requests from the panel for documents on whether an estimated 5,000 text messages were improperly deleted from McCarthy's device.”
Why the hell is the government giving Alcoa a $259 million loan?
Bloomberg (3/26/15) reports: “ A $25 billion U.S. Energy Department loan program that funded flops like Fisker Automotive Inc. and successes such as Tesla Motors Inc. resumed lending after a four-year hiatus to retool the lending project’s focus. Alcoa Inc. has been approved for a $259 million loan from the Advanced Technology Vehicles Manufacturing program to upgrade a factory making high-strength aluminum that can improve automobile gas mileage.”
At least the Japanese are putting that money to some good use.
The Associated Press (3/26/15) reports: “Despite mounting protests, Japan continues to finance the building of coal-fired power plants with money earmarked for fighting climate change, with two new projects underway in India and Bangladesh, The Associated Press has found. The AP reported in December that Japan had counted $1 billion in loans for coal plants in Indonesia as climate finance, angering critics who say such financing should be going to clean energy like solar and wind power. Japanese officials now say they are also counting $630 million in loans for coal plants in Kudgi, India, and Matarbari, Bangladesh, as climate finance.”
1-25-15 Gasline Bill Passes - Alaska Economic Update - Arctic Residents Take Place At Arctic Policy Table
By Mark Edwards (NGP Photo)
In our last post, we discussed the falling oil prices and the possible impact on the economy. Today we will look at jobs, unemployment, and population.
Payroll jobs increase only 0.3% in 2013 and 2014. No growth predicted in 2015 - Alaska's payroll job count increased by 1,000 jobs or 0.3% last year, similar to 2013 results. This slight increase is much lower compared to 5,300 jobs added in 2012 and 4,900 in 2011. The total number of payroll jobs, not including uniformed military and the self-employed, is about 336,700 on average throughout the year. It is important to note this is a preliminary estimate by the Alaska Department of Labor using nine months of actual data from employer tax returns and three months of estimates. The final numbers will be revised in March of 2015. (Economic Update continued below...)
(Economic Update continued...) The Alaska Department of Labor’s forecast for 2015 is no change in employment levels. They predict continued large losses in the government sector. This has been occurring in federal government as budgets have tightened and are now predicted to decline in state and local government due to low oil prices.
These public sector job losses will be balanced out by equal growth in the private sector. Continued gains of 200 new jobs are expected in the health care industry due to the continued demographic situation where Alaska has both an aging baby boomer population and a young, under 20 generation. People require the most health care at the beginning and end of their lives.
Oil and gas is expected to grow by 200 jobs despite low oil prices because of several large projects underway like Exxon’s work in Point Thomson and off-shore investment by Shell. Newer entrants like Repsol, Hilcorp and Calleus Energy are also making significant investments in the state.
Retail growth is reemerging after the national recession as many franchise businesses that were preparing to enter Alaska in the last five years are finally following through with their expansion plans now that the US economy has rebounded. Lower oil prices are also helping consumers by providing more disposal income. This area is predicted to grow by 300 jobs. Other forecasted contributors to positive labor growth include seafood (+200) and leisure and hospitality (+300). We are likely to have a record number of tourists visit the state this year. Declines of 100 jobs are expected in construction due to low oil prices and lower government spending. This also impacts professional and business services which is forecasted for a 200 job decline in 2015.
US unemployment rate improves, now better than Alaska - Alaska's seasonally adjusted unemployment rate finished the year at 6.3%, compared to 6.4% at the end of 2013. The comparable national rate in December was 5.6% an improvement of over 1% from 6.7% at this time last year.
As seen in the graph below by the Alaska Department of Labor, for over five years Alaska had been doing better than the U.S. in terms of unemployment. The rate in Alaska in blue has been relatively stable, despite the national recession and the U.S. rate spiked much higher. Now the U.S. rate is improving relatively faster than Alaska. This appears to already be affecting population migration trends as jobs are more easily found in the lower 48.
The unemployment rate is better in Alaska’s largest communities. The preliminary, not seasonally adjusted, rate for Anchorage was 4.7%, Juneau 4.8%, and Fairbanks at 5.6%. The Mat-Su rate improved from 8% in 2012 to 7.1% in December of 2014, but is still higher than the national unemployment levels.
Anchorage and Juneau’s rate is in the range of what economists call “full employment.” At these low levels a majority of those unemployed are due to seasonal, frictional, structural or cyclical reasons. For example, some seasonal workers only plan to work part of the year and collect unemployment benefits for the remainder of the year. The frictional part is the natural short-term movement of workers between jobs and first-time job seekers. The most important issue for employers is these low rates inevitably lead to a scarcity of qualified workers and upward pressure on wages.
Ketchikan and Sitka are the two newest markets for Northrim. They show moderate rates of unemployment at 6.6% and 5.4% respectively.
High levels of unemployment still persist in several rural areas of Alaska. The worst situations are the Hoonah-Angoon Census Area at 21.6%, Wade Hampton Census Area 21%, Municipality of Skagway at 21.2%. However, the North Slope Borough has the lowest unemployment levels in the state at 3.7%.
Population remains virtually unchanged in 2014, first net loss since 1987 - The most recent Department of Labor estimate for Alaska's population is 735,601. That is a loss of 61 people net for the year. It is significant because it is the first year since 1987 that the state did not grow. Since that time there have been 13 years where the net in and out migration of people was negative and 13 years where it was positive. However, in all the negative migration years, the rate of natural increase (births minus deaths) was larger than any migration losses.
Over the last decade we have been averaging about 11,000 births and 3,500 deaths for a net natural increase of about 7,500 per year. Natural increase was 7,427 in 2014. Last year there was a much larger than normal net out migration of 7,488 people. This is the highest level seen since there was a net loss of 19,245 people between 1986-87 and 15,710 people from 1987-88. The driving factor is likely to be the relative improvement of the U.S. and world economy compared to Alaska. Also, the aging baby boom population may be slowly retiring out of Alaska.
The 61 person net loss in 2014 is compared to a 4,471 population gain in 2013. To put these last two years in perspective, the average population growth for the prior decade was 8,946 per year from 2002 to 2012.
Join us for our next discussion about personal income and longer term interest rates.
ConocoPhillips Announces Funding Approval for Kuparuk
ConocoPhillips Alaska Inc. yesterday announced that the Kuparuk viscous oil development 1H NEWS (Northeast West Sak) has been approved for funding by ConocoPhillips and the Kuparuk co-owners.
Plans for engineering have been ongoing, and construction will now move forward. This is the largest investment in viscous oil at Kuparuk since 2004, and it is expected to add about 8,000 barrels of oil per day (BOD) gross at peak production. (See the full ConocoPhillips release here.)
Whether President Obama is bribing or blackmailing governors, either way, it's wrong (and just one more way to establish a pretext for more regulatory restrictions on fossil fuel exploration and development) -dh.
Washington Times by Dave Boyer.
The Obama administration has issued new guidelines that could make it harder for governors who deny climate change to obtain federal disaster-preparedness funds.
The Federal Emergency Management Agency’s new rules could put some Republican governors in a bind. The rules say that states’ risk assessments must include “consideration of changing environmental or climate conditions that may affect and influence the long-term vulnerability from hazards in the state.”
3-22-15 Cruz Announces - Obama Targets Fracking With More Regs - Alaska and Alberta Face Oil Price Challenges With Similar Diversification Temptations
National Commentary: After watching the Ted Cruz speech a few minutes ago, many might agree that he is qualified to lead the country into the sunshine -- away from our current maladies, years of malaise and dark path toward economic and social chaos--for two main reasons.
First, he understands the rule-of-law and jurisdictionally overreaching abuses of the current administration affecting energy production which, in turn, underpins the historical and future wealth of America.
Second, he articulated virtually all of the values which many of us believe are required to sustain the economy, security and national faith of the country and, indirectly, the wellbeing of entire free world.
Before the speech this viewer had considered Cruz to be smart and dedicated but too young, too inexperienced, too "extreme" for a presidential role.
With this speech, Cruz may have convinced some of us that he has the Dedication of Washington, the Wisdom of Jefferson, the Courage of Lincoln and the attractive Nature and Faith of Reagan--a tall order.
But if another candidate shows himself to be superior, more power to him or her. God knows the country needs a uniquely exceptional person to take on the challenge.
One only hopes the republic can survive the next couple years with most of our freedoms still intact -- however soiled, tattered and threatened they may now appear to be.
Meanwhile, Cruz appears to be of such value and important future impact that the faithful might do well to pray for his protection during this demanding and fragile period. -dh
National Commentary: The overreaching Obama Administration once again seeks to further restrict energy access to federal lands through onerous and duplicative fracking regulations (i.e. possibly guided by environmental activists receiving foreign money to thwart the U.S. fracking phenomenon. More below.... -dh)
See other Energy-In-Depth Fracking responses below:
Interior unveils new hydraulic fracturing rules. USA Today. Industry groups immediately filed suit against the new regulations, calling them an overreaction to unsubstantiated environmental concerns about fracking. "At a time when the oil and natural gas industry faces incredible cost uncertainties, these so-called baseline standards will threaten America's economic upturn, while further deterring energy development on federal lands," said Barry Russell, president and CEO of the Independent Petroleum Association of America. NOTE: IPAA also quoted in the Washington Post, The Hill,Bloomberg, New York Times, Washington Times, LA Times, Oil and Gas Journal,Houston Chronicle/Fuel Fix, POLITICO, UPI, Associated Press, Reuters, National Journal,Washington Examiner, E&E News, and the Durango Herald. Read IPAA’s full comments on the new rules and the lawsuit IPAA and the Western Energy Alliance have filed against the BLM HERE.
Dems say they want to regulate HF, not ban it. E&E News (sub req’d). Industry groups contend that no matter what the lawmakers say, the long-term goal of the environmentalists pushing the bills is to end domestic oil and gas production. "It's part of a two-step strategy: Give the federal government the power to shut down oil and gas development across the country, and then lobby the federal government to shut down oil and gas development across the country," said Simon Lomax of Energy In Depth.
Industry Challenges First Federal HF Rules. Bloomberg. U.S. drillers already reeling from a six-month drop in oil prices denounced new U.S. fracking regulations as costly and unnecessary, and quickly met them with a lawsuit. After three years of debate, the U.S. Interior Department said Friday that drillers on federal land must reveal the chemicals they use, meet construction standards for wells and safely dispose of contaminated water.
New HF rules too onerous, say firms. Wall Street Journal. The Obama administration has issued comprehensive rules on hydraulic fracturing, trying to set a national standard for controversial drilling practices that have helped fuel the US oil and natural-gas boom. The weekend move sparked immediate criticism from energy companies that claimed the rules were too onerous. Two industry groups filed a lawsuit minutes after the announcement, seeking to block the rules in a federal court. Environmental groups said the rules didn’t go far enough.
Do new federal rules duplicate existing state laws? Associated Press. Fracking chemical disclosure is among the federal rules announced Friday by Interior Secretary Sally Jewell. That raised speculation the federal rules might duplicate what Wyoming — a top state for oil and gas production from federal lands — already has in place. Non-necessary, duplicative rules add time and cost to oil and gas projects, said John Robitaille with the Petroleum Association of Wyoming. "Any time we add additional regulation, especially in the pricing environment we're in now, it's going to impact whether projects get implemented or not," Robitaille said Friday.
Pump the Brakes on Shale Regulations. National Review, editorial. In yet another Obama-administration Friday-afternoon news dump, the Bureau of Land Management announced that it is issuing broad and cumbrous new regulations on certain techniques of drilling for natural gas and oil — hydraulic fracturing, a.k.a. “fracking” — on land under its control.
We include this Economic Update because 90% of Alaska's state operating budget depends on oil production-- which also sustains over a third of the state's entire economy! Because of its dependence on oil revenue, Alaska's tax and regulatory policies affecting oil and gas also have a significant effect on the industry we feature here. -dh
By Mark Edwards (NGP Photo), Economist
Each year, Northrim Bank publishes the Alaska Economic Update. It is an opportunity to review the past year as well as look forward to the current year in regards to oil prices, jobs and housing. We will break the report into four sections and will post the full report in our ‘Resources’ section for your convenience.
2015 is generally predicted to be a flat year for the Alaska economy. Some segments like government, construction and professional services are likely to shrink, but these losses will be offset by gains in tourism, health care and retail. This will result in no growth in the job market and population will likely remain at its current levels. Historically low long-term interest rates and low levels of building activity are expected to keep the housing market stable.
The largest issue looming is the dramatic fall in oil prices. The current low price environment has many people rightfully concerned about the possible impacts on Alaska’s economy. After averaging over $100 a barrel for three and a half years, Alaska has been experiencing prices as low as $45. As of March 17, 2015, it is at $47.50. However, based on currently available information and analysts’ estimates, prices should begin to increase this year. The over-supply of oil that led to the recent price drop should moderate as higher cost producers are not able to operate profitably. Continued global demand for energy is expected to move prices higher by this summer when excess inventories are consumed. Prices in the $60 to $80 range should keep long-run capital investments from the energy industry stable. Oil production levels are expected to be stable through 2017.
Over $52 billion has been saved in the Permanent Fund and it grows despite the roughly $800 million a year spent on dividends for residents due to investment returns and continued deposits from ongoing natural resource projects in Alaska.
Additionally, the state has over $50 billion saved in other investment accounts. The largest portion, $28 billion, is reserved for the retirement system obligations for state employees. Other funds are dedicated to specific department operations, such as $1 billion for airport bonds, $1 billion in the power cost equalization endowment fund to subsidize rural energy costs, $586 million in the public school trust fund and many others. To balance an estimated $3 billion budget deficit this year the Legislature can draw from the $11 billion Constitutional Budget Reserve, $3 billion in the Statutory Budget Reserve, and $5 billion was in the General Fund at year end 2014.
The current budget deficit is expected to force the Governor and Legislature to freeze the growth in the operating budget and cut the capital budget. Research from UAA’s Institute of Social and Economic Research (ISER) has confirmed the widely held belief that the state government has been spending in excess of its long-term sustainable levels. The Gross State Product in Alaska is $51 billion. A $1 billion reduction in state spending would reduce aggregate demand in our economy by about 2%. A positive way to look at this would be despite government cuts we would still have a $50 billion economy. Most analysts predict the reduction in state spending will be lower, in the $500 million range. The new Governor has signaled he is taking the issue seriously, and will proceed with a measured approach, so as not to exacerbate the problem.
House Natural Resources Committee Chairman Rob Bishop, said the variance provision “will create an entanglement of bureaucracy previously unseen in our nation’s energy history.”
Obama administration unveils fracking rules for federal lands (San Francisco Chronicle)
(Contrast this new Obama administration, abusive attack on states' rights and energy technology with today's Cruz speech, inserted here. Also, read Energy-In-Depth reactions to new, restrictive fracking rules. -dh)
WASHINGTON — The Obama administration issued the first federal mandates governing hydraulic fracturing on public land Friday, triggering an immediate lawsuit from oil industry groups and a pledge by congressional Republicans to undo the regulation.
Fairbanks News Miner Editorial. Other than the state’s budget deficit, the state’s most important decision with regard to its future is the path it will take to a natural gas pipeline. After many years of stagnation under the failed Alaska Gasline Inducement Act, there have been signs of progress in the state’s goal of developing a large-diameter natural gas pipeline that would both supply the state’s gas needs and provide for substantial export. More....