"Wrong every step of the way."
In the wake of the latest self-inflicted challenge for the AKLNG project, the Alaska Journal of Commerce published an editorial chronicling Gov. Bill Walker's (NGP Photo) failings and hypocrisies dating back to his time on the campaign trail.
This is a time of low energy prices and severe industry cost cutting, right?
Why, under these circumstances, would Alberta's new Premier be attacking carbon on her way to the Paris Climate Change Conference?
*Why would the Governor of Alaska have recently threatened investors interested in monetizing Alaska's vast gas reserves with a 'reserves tax'?
Indeed, why wouldn't these leaders be taking extra steps to provide an inviting investment climate for those who sustain the very government that attacks them?
Yes, these are rhetorical questions, answers to which diminish one's confidence in one's government. Alaska's governor has demonstrated a visceral dislike for industry and a desire to take control of the means, allocation and distribution of production. Alberta's premier is going, "all in" with the global warming agenda whose real objective is to, "destroy capitalism".
*No, we don't give Alaska's governor a 'pass' on this one solely because he later rescinded / postponed the gas reserves tax threat. First, he's not expressed any remorse for initiating the threat, implying that the threat is ongoing. Second, the mere threat of a new tax in a low price environment when investors are considering a $45-65 billion investment either pollutes the investment climate intentionally, or stupidly.
In either case, the result is the same: a governor and a premier -- charged with husbanding vast resource wealth and protecting the public interest -- acting in ways that will increase consumer utility / energy costs, while diminishing investment, employment, economic vitality, and government royalty/tax income.
Alaska's industry layoffs have not yet taken hold in force. But absent wiser gubernatorial leadership, an economic recession could be just around the corner. After all, Alaska's government and economy are much more dependent on oil income than Alberta is, and the ultimate pain in the 49th state could be much worse. -dh
11-24-15 On Being Positive About Alaska's Investment Climate - Big Pipelines Alberta Carbon Policy "Winners"?
|Here is our archive reference to the Resource Development Council's important, 36th ANNUAL
ALASKA RESOURCES CONFERENCE
Seeking Alpha: Enbridge and TransCanada seen as winners from Alberta's carbon policy
Comment: "On Being Positive"
This ADN piece (Left column) by Nathaniel Herz provides additional insight into the attitude and leadership style of Alaska's governor.
Readers will be interested, as well, in this compelling essay on gubernatorial leadership written by retired BP pipeline executive, Al Bolea (NGP Photo).
At times, we have lamented on how our work these days tends to fall on the negative side. We are, therefore, delighted that Al has produced such a positive piece, the blueprint for an Alaskan governor desiring to successfully run the large and complex State of Alaska - and provide the necessary leadership that could lead to construction of an Ak-LNG project.
Meanwhile, we continue to look for positive signs that Alaska's investment climate is positively supported by both Alaska's elected leaders and the Washington D.C. players.
While we are forced to note that ours is an investment climate long ignored or abused, and that may seem to some to reflect negativity on our part, there are rays of hope and Bolea has offered one of them.
Another occurred this weekend when a dear friend and former colleague, Tom Brennan (NGP Photo), described the enormous contribution being made by ConocoPhillips under the leadership of longtime Alaska energy executive Joe Marushack (NGP Photo).
...other rays of hope and light which we are quick to acknowledge.
While we celebrate "hope" in approaching Thanksgiving Day, we are also reminded of the sage advice given by a longtime friend, energy analyst and utility manager Joe Griffith (NGP Photo) who gently reminds fellow Alaskans that, "Hope is not a strategy", a precept to which we believe Al Bolea and Joe Marushack would also subscribe.
To our American readers: Happy Thanksgiving Wishes for Thursday!
(And...remember the reason for the season!)
ADN by Nathaniel Herz. ... Larry Persily (NGP Photo), the former federal gas pipeline coordinator who now serves as an oil and gas adviser to the Kenai Peninsula Borough mayor, said that a new executive with more technical expertise and experience seems to match Walker’s vision for an expanded role for Alaska in the pipeline project.
But the shakeup in the corporation’s board and management, he added, is creating turmoil for the project. So are other recent changes made by the Walker administration, including to the positions held by a pair of highly paid consultants who were heading Alaska’s efforts to negotiate the details of the project and sell the state’s gas.
“Markets (and) buyers don’t care for turmoil,” Persily said in a phone interview. “It needs to be settled; the market needs to be reassured that this isn’t going to happen on a frequent basis.”
One other source of uncertainty was a move by the state corporation’s board Saturday to postpone a vote on the pipeline project’s budget for next year.
A key meeting to approve that budget is scheduled with the oil companies for Dec. 4, and the board rescheduled its own vote to Dec. 3.
Walker said at his news conference that he is “very optimistic” that the board will approve the budget at its Dec. 3 meeting. But he said that he views the state’s authority over the budget as leverage to make sure the oil companies sign formal agreements making their gas available to the pipeline project if they decide not to continue as participants.
“By approving the work plan and budget today, there’s no incentive for us to receive those assurances,” he said. “We’ll see what we get. We’ll make that decision when we get to that point.” (Full story here)
Analysts are betting that renewable energy developers such as Enbridge (ENB+1.2%) and TransCanada (TRP +1.9%) will be among the best placed to make the shift to Alberta's new carbon policies, Bloomberg reports.
As the government boosts the province’s share of renewable electricity to 30% from 9% by 2030, "renewable power contracts are going to go to the bidder that needs the least amount of government support, developers with most financial flexibility and overall lowest cost of capital” such as ENB and TRP, says National Bank Financial's Patrick Kenny.
The two companies already are among Canada’s largest renewable power operators: ENB owns 2,065 MW of wind power across Canada, enough to power 650K homes, while TRP operates wind, hydro and nuclear plants as part of its 11.8K MW of power generation.
|Comment: Honestly, we do keep looking for good news, but in this case must temper the Governor's enthusiasm with a state senator's suspicions. Investment climates are not hurt when criminal acts are identified and prosecuted. But when politicians make allegations, stimulating investigations based on a 'desire' for lower prices, honest investors can be hurt and the investment climate is not helped. -dh
Today (From September 9, 2015), Senator Bill Wielechowski (NGP Photo) sent a letter to Alaska Governor Bill Walker and Attorney General Craig Richards requesting an update of the Attorney General’s report on Alaska Petroleum Products Pricing Investigation to examine the reasons behind the high gas prices in Alaska as compared to the lower 48 states.
“One of the benefits of low oil prices should be a decrease in prices for gasoline and heating fuel. That’s the case around the country,” said Sen. Wielechowski. “With the closing of the Flint Hills refinery, we’ve been seeing a narrowing of the players in the refinery industry in Alaska allowing for less and less competition. Alaskans deserve to know if the near-monopoly in the refining business in Alaska is the cause for their pain at the pump.”
Currently, Alaska has the highest gas prices in the country. These high prices coupled with the high cost of living in Alaska is hampering economic development and taking money out of the pockets of hard-working Alaskans.
Governor Bill Walker's Response To Tesoro Alaska's Announcement
“I congratulate Tesoro on its announcement that the company will be acquiring a portion of Flint Hills Resources’ Alaska-based assets. Tesoro has had a long and successful history working in our state, and this acquisition will allow them to better serve their customers and communities across Alaska. This news further proves that business is alive and well in Alaska, and investors are optimistic about the opportunities that lie ahead in our state.” – Governor Bill Walker
ALASKA RESOURCES CONFERENCE
November 18-19, 2015
Dena'ina Civic & Convention Center
WEDNESDAY, NOVEMBER 18TH
Eye-Opener Breakfast in Exhibit Area – Sponsored by Wells Fargo
Ralph Samuels, RDC President, Vice President, Government and Community Relations – Alaska, Holland America Group
State of Alaska Update: From Alaska LNG Project to State Fiscal Plan
Governor Bill Walker (video forthcoming)
Alaska Economic Trends: 2016 Outlook
Neal Fried, Economist, Alaska Department of Labor video
Alaska Industry 2015 Year in Review and 2016 Outlook
Oil & Gas: Kara Moriarty, President and CEO, Alaska Oil and Gas Association video
Fisheries: Ricky Gease, Executive Director, Kenai Sportfishing Association pdf video
Forestry: John Sturgeon, President, Koncor Forest Products video
Mining: Karen Matthias, Managing Consultant, Council of Alaska Producers pdf video
Tourism: Scott Habberstad, Director of Sales and Community Marketing, Alaska Airlines pdf video
Keynote Luncheon: Sponsored by Northrim Bank
It’s Still North to the Future: Moving Ahead in the Arctic
Wayne Westlake, President and CEO, NANA Regional Corporation pdf video
Rex Rock Sr., Chairman and President, Arctic Slope Regional Corporation video
Alaska Can’t Quit Now: Why the Arctic Still Matters
Randall Luthi, President, National Ocean Industries Association video
Gourmet Break – Sponsored by Colville, Inc.
Pebble vs. EPA: Finally Some Real Progress
Tom Collier, CEO, Pebble Partnership video
THURSDAY, NOVEMBER 19TH
Eye-Opener Breakfast in Exhibit Area – Sponsored by BP
Real Solutions to Alaska’s Budget Crunch
Moderator: Ralph Samuels, RDC President, Vice President, Government and Community Relations – Alaska, Holland America Group
Cheryl Frasca, Former Director State of Alaska Office of Management and Budget, 2002-2006 pdf video
Mike Navarre, Mayor, Kenai Peninsula Borough pdf video
Give the State Some Credit: How Oil Tax Credits Are Changing Alaska’s Investment Game
Moderator: Kara Moriarty, RDC Executive Committee, President and CEO, Alaska Oil and Gas Association Benjamin Johnson, President, BlueCrest Energy, Inc. pdf video
Casey Sullivan, Director, State Public Affairs, Caelus Energy Alaska, LLC pdf video
Gourmet Break – Sponsored by Stoel Rives LLP
10:30 Communities and Mining: Why it Works
Moderator: Lorna Shaw, RDC Vice President, External Affairs Manager, Sumitomo Metal Mining Pogo LLC
Eric Hill, General Manager, Kinross – Fort Knox Mine pdf video
Jan Trigg, Manager, Community Relations and Government Affairs, Coeur Alaska – Kensington Gold Minepdf video
Wayne Hall, Manager, Community and Public Relations, Teck pdf video
Rosie Barr, Vice President, Lands, NANA Regional Corporation pdf video
11:30 Networking Break
Noon Keynote Luncheon: Sponsored by Holland America Line Navigating Alaska’s Inside Passage and Policy
Moderator: Ralph Samuels, RDC President, Vice President, Government and Community Relations – Alaska, Holland America Group
Linda Springmann, Vice President, Deployment and Tour Marketing, Holland America Line pdf video
1:30 p.m. Progress Report on the Alaska LNG Project
Moderator: Jeanine St. John, RDC Executive Committee, Vice President, Lynden
Steve Butt, Senior Project Manager, Alaska LNG Project pdf video
Dan Fauske, President, Alaska Gasline Development Corporation pdf video
Mike Navarre, Mayor, Kenai Peninsula Borough video forthcoming
3:00 Grand Raffle Drawing Send-off Champagne Toast – Sponsored by CLIA Alaska
Northern Gas Pipelines: Video References
Someday, we will align Alaska gas pipeline historical events with political, social and other major mileposts in the state's history.
Included in our sources will be a video produced by the State of Alaska under Governor Wally Hickel's direction (i.e. Broken Promises); and, an important documentary created by legendary, Alaska talk show host and commentator, Dan Fagan (i.e. Alaska Under Seige).
We must add our own documentary, Pioneering, featuring a number of Alaskan influence leaders from many sectors of our society.
Today, we add our most recent, political documentary reference, Unpredictable Finishes (i.e. shown in box), by a dedicated Alaskan and good friend, Dorene Lorenz.
Comment: Premier Notley, like President Obama is taking actions that can be touted at the upcoming Paris Climate Change Conference where the top UN climate change official has said the true goal of environmental activism is to "destroy capitalism". -dh
Calgary Herald by Stephen Ewart.
Alberta Premier Rachel Notley effectively put the first limits on unchecked growth in the oilsands — through a 100 mega-tonne annual cap on greenhouse gases....
Can A "Business As Usual Attitude" Overcome Alaska's Financial Crisis?
Can Alaska be known as a place where, "a deal is a deal" and as a state not known to be, "its own worst enemy"?
At a time of Alaska state fiscal crisis, maintaining high state and local government employment is counterintuitive if not obvious.
Additionally, the Governor has brought in a new Medicaid entitlement program whose costs may ultimately be supported by Alaskan businesses and perhaps individuals -- and which will be sure to attract even more "ne'er-do-well" beneficiaries to the state at unknown additional costs.
Additionally, the governor is working with the Obama administration to bring dubiously vetted Syrian immigrants to the state, five year resettlement expenses of which are estimated to cost taxpayers almost $65K each. For Alaska, because of its remoteness and high costs, that number is probably understated.
"You Can't Make This Stuff Up"
Then, last month, the Governor called the Legislature into special session.
To deal with an enormous annual operating budget deficit? No.
To work toward a sustainable annual budget by cutting low priority programs and trimming others? No.
To pass "fiscal certainty" legislation, providing Constitutional protection to the Ak-LNG project sponsors? No.
He called legislators into session to have them consider a new tax on those wishing to invest in one of the world's largest ever LNG export projects, then withdrew that proposal.
And, he had them consider increasing the state's equity stake in a risky pipeline/LNG project whose feasibility is unproven, whose customers are uncommitted and whose cost to the state, conservatively, would ultimately exceed $15 billion.
And, he provided legislators with no packet of information clarifying the purpose of their special session.
And, he neglected to inform them that he had dictated to the 'independent' Alaska Gasline Development Corporation board his desire to form subsidiary corporations.
And, he refused to permit certain state officials to sign acceptable Ak-LNG confidentiality agreements -- a defiant act that could well stop progress on the entire project.
And, this was on top of his earlier 'request' of the patient producer-sponsors that the Ak-LNG project study the option of building a 48" vs. the planned 42" pipeline, an initiative that likely cost the project 6 months of delay and an overall price increase.
Here are the most recent monthly employment statistics posted by the Alaska Department of Labor (AKDOL).
Today we will explore some relationships between responsible / irresponsible state budgeting vs. energy and other investments.
We note in these AKDOL statistics, the familiar, annual Alaska trend of increased school employment as summer ends and decreased commercial fishing, processing, construction and tourism employment as winter begins.
We are not economists, but have absorbed AKDOL stats for many years.
Anyone who has, knows that Alaska is a very seasonal place of employment for "labor intensive industries" like tourism, commercial fishing, construction, etc.
Therefore, to see post-summer season declines in these categories is no great shock though we know that a continuing, gloomy world economy could affect demand for their products and services as well and affect Alaska's economic health in a coming season.
Oil and gas industries are "capital intensive" and typically have fewer albeit more highly compensated employees filling positions that are not very 'seasonal' at all.
We never forget that those few employees create great wealth for the state and national economies, as well as for their employers.
In fact, these employees' labors pay for most of the infrastructure used by the "labor intensive industries" ... also, the education and local government sectors.
As world wide commodity demand decreases, Alaska can be hit hard where it hurts. Fewer, highly paid non seasonal oil and gas jobs affect the year-around economy.
In a low demand, commodities environment, the investors make less but they also pay less tax and royalty revenue to the state, due to slowing production and lower prices per unit.
In a state choosing to become 90% dependent on oil and gas taxes and royalties, small changes in the price per barrel of oil can lead to large government deficits (i.e. as now), or unexpected, windfall surpluses.
Elected officials, therefore, need to be particularly concerned about and protective of the health of this oil and gas category--the very source of state wealth.
Alaska is in a challenging position now with oil prices hovering at below 50% the price levels of 18 months ago.
Thus, we would have expected responsible state and local government leaders to have begun cutting significant numbers of employees as well as shaving program costs to a sustainable level nine months or a year ago. Some have said, "You can't cut yourself out of this predicament!" What we've seen, however, is an increase in government employment from the beginning of the fiscal year to the present time--whose relationship to seasonal employment is not clear. A minimal effort would be to -- at least -- not add any new programs or employees.
For the most part, this AKDOL report, viewed in isolation, seems to reflect a 'business as usual' attitude on the part of state and local budget policy makers. They* are confronting a huge budget deficit by spending the last dollars in the State's available savings accounts--and counting for the long term on current, short-term low interest rates to fund debt. (*We say, "they" because so much of certain local municipal operating and capital projects are funded from the unsustainable state operating and capital budgets.)
Perhaps a budgetary discipline escaping our untrained eyes has already been put into motion and will become more visible in future AKDOL reports. However, the annual state operating budget shortfall ($3.5 billion, v. 750k population) is so serious and public news releases of government cuts and fiscal discipline are so muted that we fear the worst.
We fear that insufficient steps are being taken to create a balanced, sustainable state budget and at the same time retire a nearly $10 billion unfunded liability of the state employee pension program.
We fear that this scenario -- if not immediately and decisively corrected -- creates a toxic, anti-investment climate in Alaska that could repel investment of all kinds for decades at a time when government needs to build an investment climate based on logical and not political economic principles.
As to a major Alaska north slope gas monetization project, such as Ak-LNG, one logically concludes: The producer proponents of the Ak-LNG project have demonstrated extraordinary patience, diligence and dedication in dealing with government while trying to evolve the project into feasibility. We also observe that while the Ak-LNG project, if proven feasible, could someday begin transforming gas reserves into wealth, it could not do so before 2025. This economic injection would come too little and too late to be of much help in facing the current financial crisis.
As we evaluate State of Alaska actions related to the Ak-LNG project, we believe most of that activity would fall into categories like 'not helpful' and 'self serving' and 'time wasting'.
The best, good faith effort Alaska could now contribute to the Ak-LNG project, would be to get its own financial affairs in order -- and not at industry's expense.
It could also begin cooperating with Ak-LNG sponsors in meaningful ways:
- conforming to private confidentiality agreement terms
- eliminating threats of increased taxation
- not being the cause of project delays
- providing a Constitutionally protected cloak of fiscal certainty to gas and oil producers that invest in the Ak-LNG project.
In short, why wouldn't Alaska want to become a reliable investment climate that transforms its 'Business As Usual Attitude' into a focus on 'Can Do!'
Anchorage Daily Planet Editorial. Acolytes of the new climate-warming religion so embraced by President Barack Obama and other believers must be in a tizzy today.
A team of prominent scientists gathered at a Texas Public Policy Foundation climate summit in Austin, Texas, pooh-poohed all that as “nonsense,” Marc Morano of ClimateDepot.com reports. They say fears of man-made global warming are “irrational” and “based on nonsense”; that the claims have “nothing to do with science.”
They warned “we are being led down a false path” by the upcoming UN climate summit in Paris, the website reported. You can read the entire story here.
Climate Scientist Dr. Richard Lindzen, an emeritus Alfred P. Sloan Professor of Meteorology at the Department of Earth, Atmospheric and Planetary Sciences at MIT, even derided what he termed climate “catastrophism.”