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      This is your public service 1-stop-shop for Alaskan and Canadian Arctic energy commentary, news, history, projects and people. We update it daily for you. It is the most timely and complete northern energy archive anywhere — used by media, academia, government and industry officials throughout the world. Northern Gas Pipelines may be the oldest Alaska blog; we invite readers to name others existing before 2001.  -dh

 

1-15-16 Canada and Alaska Struggle With Conflicting Forces: Prosperity and Jobs vs. Nothing

15 January 2016 2:54pm

Commentary by Dave Harbour on the eternal struggle between wealth producers and wealth takers.

Canada struggles with the need for oil revenue countered by the political pressure to subjugate everything, and everyone, to the concept of global warming (excuse us....  "climate change").  See the articles below.

Alaska struggles are also between those supporting jobs, good faith and fair dealing with antagonists like a state senator who believes that in a low crude oil price environment gasoline prices should be lower in Alaska than they are.   (See today's robust, Alaska Headlamp editorial for commentary on this and much more....)

We wonder if some of our elected officials fully understand oil marketing economics.  We certainly don't and are, therefore, slow to express opinions about oil and gas marketing economics.

We do know, however, that Alaska refiners compete with Lower 48 refiners who must add the cost of transportation north to Lower 48 prices.  Counter-intuitively, that tends to set the general price ranges in Alaska.  If Alaska refiners were to increase their prices too much above that range, outside refiners would sell even more product in the state than they now do.

(The free market works, if we'll let it; and, when we occasionally find a bad actor, there will be evidence and a trial and punishment.)

We also know that costs to operate in Alaska are higher than most Lower 48 refining areas.  And we must not neglect the reality of a 3/4 empty Trans Alaska Pipeline System.  The shippers transporting via the remaining 1/4 capacity of TAPS also have to pay the cost of the 3/4 spare capacity.  

In recent years, populist legislators have called for audits of gasoline prices, proving that local Alaska fuel prices are not unreasonable.  

It would be nice for a change if public officials would do a little homework, visit refineries, talk with economists and use a little judgment before "calling for an investigation".  

This is typical behavior, however, of some.  That hostility toward anyone connected with the state's largest benefactor-investors does nothing to encourage more investment in oil, or gas, pipelines, or LNG export projects.  

In fact, hostility by elected leaders injects more uncertainty into Alaska as an investment destination.  

Let's think twice before making the statement ring truer and truer, that "Alaska is sometimes its own worst enemy."    -dh


Yeaaaa for the Calgary Herald Editorial Board!  dh

It would be tempting to crack a smile at Environment Minister Shannon Phillips’ speech to a Calgary oil and gas summit if the remarks weren’t so sad.

The NDP minister told the crowd that the government’s controversial climate change plan is essential, but — wait — she hopes it won’t be permanent. People have heard this sort of thing before. One can only imagine the naivete of Canadians who were assured that the imposition of income tax in 1917, to fund the First World War effort, was also only a temporary measure.

Phillips underestimates the intelligence of Albertans if she thinks (more....)

CBC.  Natural Resources Minister Jim Carr of Manitoba acknowledges there's considerable urgency to building new Canadian pipeline capacity to tidewater, even as new roadblocks continue to appear.

A B.C. Supreme Court ruling this week and discouraging signals from B.C.'s provincial government have further undermined the prospects of two proposed oil pipelines to the Pacific coast, just as Carr is taking part in intense briefings on his new portfolio in Justin Trudeau's Liberal government.

Carr's mandate includes expanding Canada's market access for oil and gas — a highly polarizing public policy debate — and his challenge comes amid a global oil glut that is cratering international prices and killing investment in Alberta's oilpatch.

The natural resources minister is also charged with re-tooling the National Energy Board (more....)

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1-14-16 ISIS Needs (FEARLESS) Oil Workers

14 January 2016 5:16am

Larry Persily, LNG, Alaska, Federal Coordinator, Copyright Dave Harbour 2012Please enjoy Larry Persily's (NGP Photo) Alaska gas/LNG related links TODAY!

From our anonymous Aussie energy analyst today, several points of interest re: oil and gas prices and the state of LNG..., and, ISIS NEEDS (FEARLESS) OIL AND GAS EMPLOYEES....


ADN by Yereth Rosen.  A coalition of environmental groups filed a motion Wednesday to intervene in support of the Interior Department’s decision to reject Royal Dutch Shell's request to extend its offshore Arctic leases.

The groups filed their motion with the Interior Department’s Board of Land Appeals, an agency tasked with reviewing disputed department rulings.

Our comment: The agency appeal process generally tends to side with the agency's position.  But going through it is a step toward a court appeal, which is more objective and whose decision is more honestly based on the record, hopefully.  We wish Shell well in this process and to the enviro-activist groups seeking to impose more delay or roadblocks, we say, "Enough is enough; go away."  -dh

 

From our anonymous Mid Atlantic energy analyst comes word today that low energy prices are creating deficits among middle eastern producers as the cost of production exceeds the value of oil produced.  -dh


OP-Ed by Rich Coleman, BC Minister of Natural Gas Development.  British Columbia’s liquefied natural gas industry made unprecedented progress this year.

The first final investment decision was made by Pacific NorthWest LNG, marking their commitment to move forward with construction and operation. That pledge had two conditions; with the first requiring government to finalize a project development agreement with them, which we did.

The other outstanding condition – environmental approval by the Government of Canada – is scheduled for a decision in 2016.  ...  That could all happen while the expansion of FortisBC’s Tilbury LNG facility continues in Delta which has already provided $50 million in contract work to over 100 companies in neighbouring communities like Vancouver, Langley, Abbotsford, Coquitlam, and more.

These are positive developments for just three of the 20 facilities now proposed in our province. Other exciting news included LNG Canada finalizing the very first substituted environmental assessment in our province, keeping their proposal on track to be one of B.C.’s most promising export operations.   Full story here....


Mining.com by Cecilia Jamasmie.  New climate change regulations, fraud in e-payment systems, “poison pills”, privacy class actions and cybersex in the workplace are among the top 10 legal risks companies operating in Canada will face this year, according to Canadian law firm Borden Ladner Gervais LLP (BLG).   --  and -- Canadian Oil Sands is claiming victory over Suncor Energy’s $4.3 billion hostile takeover attempts 


 

 

 

 

 

 


From our anonymous Mid Atlantic energy analyst comes word today that low energy prices are creating deficits as the cost of production exceeds the value of oil produced.  -dh

Comments, from Bernstein Research today, summarize well the current financial state of Saudi Arabia (SA), relative to its cash reserves. They also show why SA is considering an IPO in the depths of the current oil price decline: THEY NEED THE MONEY.

We are strongly in the camp that Saudi Aramco will only include downstream assets (or at best throw in a small amount of dedicated production from some minor upstream capacity). There are a host of reasons:

·        Large-scale upstream assets within a public entity would involve disclosures and fiduciary compliance to which they would never agree

·        Such an offering would be wildly unpopular within the country, and the House of Saud has always to consider its actions in the eyes of the Wahabis

·        The company is adding significant gas production and processing capacity over the next couple of years, which will require capital infusions that cannot be taken out of normal cash flow in these troubled times.

·        The Saudis find themselves in the classic “Run Away From the Bear” race. They do not have to outrun the bear; they just have to outrun the others who are also trying to outrun the bear. As dire as their draw on their cash reserves might seem, they are in much better shape than a lot of others in the race.  


The similarities between the current oil price crash and that experienced in the mid 1980s has been remarked upon by many.  This is illustrated by the following quote from Daniel Yergin’s The Prize, commenting on the sector in 1986: “Many oil companies were unprepared for this latest crisis, their executives having been convinced that “they” – OPEC – would not do something so silly as to eradicate a large part of their own revenues”.


The Wall Street Journal reported yesterday that Asian LNG demand in 2015 declined (including a first ever decline from China).  This was notwithstanding the very substantial spot and contract price falls and increased regional supplies.


The EIA weekly report issued yesterday was largely negative.  Crude stocks increased by 0.2 mmbbls – and worse news came from a substantial build in product stocks (gasoline by 8.4 mmbbls and distillate by 6.1 mmbbls).

Reuters recently noted that the US oil and gas industry itself was a cause of declining demand for distillate (in the form of diesel).  Less drilling activity, by more efficient rigs, had reduced total diesel demand in the US

As we noted yesterday (Note new KTVA story), BP is shortly to add another 4,000 souls to the swollen ranks of redundant oil and gas workers that have fallen out of the industry since the November 2014 OPEC meeting.

However, we have come across one organisation in the sector that is currently actively seeking engineers of all stripes: ISIS.

Last week the International Business Times said it had seen documents from ISIS seeking staff to assist it in bringing back to production various assets it had "acquired" in Libya.

It did not disclose the fringe benefits it was offering - perhaps low taxes; multiple wives; a free knife; company uniform (black); etc.  (Note of caution to our job hunting friends in Canada, Alaska and the Lower 48: failure to meet daily ISIS production quotas could result in decapitation.  -dh)


 

Global LNG production rose in 2015, but sales to Asia dropped
 
(Wall Street Journal; Jan. 13) - Liquefied natural gas shipments to Asian economies that are the world’s biggest gas importers dropped in 2015, according to a report published Jan. 13, including a first-ever decline in China. The decline in Asia came as global LNG global production rose 1.6 percent to 250 million metric tons, or 32 billion cubic feet a day, energy consultant Wood Mackenzie said in an annual report on the industry.
 
The increase in LNG supply comes amid a steep drop in spot-market prices in Asia over the past year to below $7 per million Btu. Prices may remain depressed with the start of shipments this year from the U.S. Gulf Coast and a ramp-up in exports from Australia. The new supplies will help boost global LNG production by an estimated 50 percent over the next five years, which is beyond the capacity of Asia to absorb, Giles Farrer, Wood Mackenzie’s research director for global gas and LNG, said in an interview.
 
Asia represents more than 70 percent of worldwide demand for LNG, but Wood Mackenzie said demand from the region’s largest buyers dropped in 2015, including a first-ever decline in shipments to China, which fell about 1 percent after years of double-digit growth. South Korean imports of LNG fell 11 percent on the year and shipments to Japan declined 4 percent, the report said. That was offset by growing demand from newer importers such as Egypt, Jordan and Pakistan, the report said. And lower prices for LNG will likely spur increased demand from other markets, Farrer said.
 
 
 
Korea Gas wants to reduce its stake in proposed LNG Canada project
 
(Platts; Jan.12) - South Korea's state-owned Korea Gas Corp. will press ahead with a long-delayed attempt this year to sell part of its 15 percent stake in the proposed LNG Canada project, a company official said Jan. 12. KOGAS aimed to sell the stake by the end of 2015, but the plan was delayed due to the falling price of natural gas and some delays to the LNG project, a company official said. However, KOGAS will continue the plan to sell the stake this year as part of its efforts to improve its finances, he said.
 
The official declined to disclose how much the company would sell, but it most likely will be one-third of its stake. KOGAS currently holds a 15 percent interest in Shell-led LNG Canada after selling a 5 percent slice to Shell in May 2014. KOGAS and its partners in May 2013 launched LNG Canada, a project to produce 12 million metric tons per year of LNG from two trains at Kitimat, B.C. Shell holds a 50 percent stake, China National Petroleum Corp. 20 percent, and Japan’s Mitsubishi 15 percent.
 
The LNG Canada consortium plans to make a final investment decision on the project this year. KOGAS is under pressure from the government to reduce its debt, which has grown after massive overseas projects in the past few years. KOGAS is owned 54.55 percent by the state — 26.15 percent by the central government, 20.47 percent by state power monopoly Korea Electric Power Corp. and 7.93 percent by local governments. 
 
 
 
China’s push to cut air pollution could help boost natural gas demand
 
(Nikkei Asian Review; Jan. 11) - The serious and endemic air pollution that has engulfed major Chinese cities in recent years is not only a growing health threat, but may well have a significant impact on the global market for cleaner-burning natural gas. The formidable environmental challenge forced the government to issue its first-ever air pollution red alert in December. Under the five-year economic development plan that begins this year, Beijing is set to make a concerted effort to reduce air pollution.
 
The government intends to curb growth in oil and coal use, while promoting renewable energy. Efforts to slash coal consumption, the main contributor to pollution, have barely begun, but there have been some encouraging signs. The International Energy Agency says China’s coal use in 2014 was down 3 percent from 2013, marking the first decline since 1999. And China's maritime imports of coal for power generation fell about 30 percent in 2015 from the previous year, according to Bank of America Merrill Lynch.
 
Driven by the government's efforts to promote its use, China's natural gas imports will triple from 2014 to 2020, according to British financial services company Barclays. In November, the Chinese government lowered wholesale prices of natural gas for nonresidential users by about 30 percent in Beijing and other major markets, in a move to boost flagging growth in demand for natural gas. The measures taken to push up natural gas consumption also include allowing third parties to use liquefied natural gas import terminals and private-sector companies to build such terminals.
 
 
 
This could be the year for investment decisions on B.C. LNG projects
 
(Canadian Press; Jan. 10) - After much anticipation, Canada could see final approval of the first liquefied natural gas export projects on the West Coast this year. Proponents behind some of the 20 proposed LNG projects in B.C. say they should be in a position to make final investment decisions this year as environmental approvals, permits and First Nations support fall into place. And while a supply glut has pushed down natural gas prices and reduced short-term prospects, some experts say projects remain viable.
 
“These are long-term, multi-decade projects,” said AltaCorp Capital analyst Mark Westby. “Current gas prices are only one factor.” However, spot prices for LNG have dropped by more than half in Asia over the past two years. Westby sees the Shell-led LNG Canada facility in Kitimat, and the much smaller barge-mounted Altagas-led Douglas Channel project also planned for Kitimat, as most likely to proceed this year.
 
LNG Canada’s final barriers are securing assurances from First Nations and a permit from Fisheries and Oceans Canada, while Douglas Channel still needs to settle a 25 percent excise duty being levied on its LNG facility, Westby said. Another possibility is the Pacific NorthWest LNG project led by Malaysia’s Petronas. But Westby said while it remains promising, it faces uncertainty. An environmental assessment should be done by March, but Petronas still has to resolve significant fisheries issues with First Nations.
 
Mary Hemmingsen, global head of LNG at KPMG, said the drop in oil and gas prices has diminished the likelihood of multibillion-dollar projects going ahead. She said low oil prices have reduced cash flow at project developers, while also making alternatives to LNG cheaper. The “gold rush mentality” that was in place the past couple of years has been replaced by a somber, realistic outlook, she said. “What everyone was chasing two years ago was volume, volume, volume. … Now it’s about value, value, value.”
 
 
 
Australia LNG project ships first cargo; Conoco one of three partners
 
(Houston Chronicle; Jan. 11) - The first cargo of liquefied natural gas has sailed from the Australia Pacific LNG facility in Queensland, Australia, ConocoPhillips and its partners in the project announced Jan. 11. For the companies behind the project, the cargo is an important first step toward transitioning from a cash-sink to cash-generator after years of construction and more than $17 billion (U.S.) in investment to develop the facility capable of making 9 million metric tons of LNG per year.
 
ConocoPhillips and Australia’s Origin Energy each own 37.5 percent of the venture; China’s Sinopec owns 25 percent and is its largest customer. Japan’s Kansai Electric Power also has signed contracts for some shipments. The Australia Pacific LNG plant takes coal-seam gas through a 330-mile pipeline from Eastern Australia, liquefies it and then ships the fuel to customers in Asia. The initial shipment came from the plant’s first liquefaction train; a second production train is due online in the second half of 2016.
 
The project’s backers have continued to pour billions into APLNG despite a collapse in oil prices that has crimped cash flow and dragged down LNG prices across the globe. That collapse has left immediate profitability of the project uncertain — Origin has said it needs oil prices at between $38 and $42 per barrel before it will see positive cash flow from its investment, according to the Sydney Morning Herald. ConocoPhillips said it expects the project to be self-funding after the second train comes online later in 2016.
 
 
 
Oregon LNG developer withdraws lawsuit over proposed plant site
 
(Daily Astorian; Astoria, OR; Jan. 11) - Oregon LNG has voluntarily withdrawn from litigation with the U.S. Army Corps of Engineers before a federal district court judge could officially dismiss the developer’s claims. The company wants to build a liquefied natural gas plant and export terminal in Warrenton, Ore., near the mouth of the Columbia River, but the Army Corps has asserted its exclusive rights to the proposed plant site under a nearly 60-year-old easement to deposit dredging spoils.
 
In late December, Magistrate Judge John V. Acosta ruled against Oregon LNG in a lawsuit the company filed against the Army Corps. Oregon LNG failed to prove, Acosta said, that the Corps has abandoned property. Acosta’s ruling still needs to be signed by Anna J. Brown, a federal district court judge, to become official. By choosing to drop its lawsuit ahead of Brown’s signature, the company preserves its ability to refile its complaint against the Army Corps at a later date.
 
Opponents of the $6 billion terminal and pipeline project welcomed the move as another setback for the company. “The direct implication is that there won’t be an official court judgment saying that Oregon LNG ‘loses,’” said Miles Johnson, a lawyer for Columbia Riverkeeper, an environmental group opposing the project. “It’s just one more legal defeat for Oregon LNG in kind of a long string of them,” he said. “It makes it harder for them to see how they’re going to get this project off the ground.”
 
 
 
Chevron-PetroChina venture starts production at gas field in China
 
(Bloomberg; Jan. 10) - Chevron and PetroChina started gas production in China’s southwestern regions of Sichuan and Chongqing, eight years after signing a production-sharing agreement. The well in Chongqing’s Luojiazhai gas field began commercial gas production Dec. 30, China National Petroleum Corp., PetroChina’s parent, said Jan. 11. PetroChina in 2008 signed the 30-year agreement with Chevron, under which the U.S. producer took a 49 percent stake in the parcel and became the operator.
 
The Luojiazhai project, the first phase of development, will produce at its peak an estimated 300 million cubic feet of gas per day, according to the PetroChina statement. China currently consumes almost 18 billion cubic feet of gas per day. Both parties will work on two more phases in the same area. Chevron beat Shell, Statoil and Total to win the right to develop the so-called sour-gas reserves at Chuandongbei. Sour gas refers to natural gas that contains a high level of hydrogen sulfide.
 
 
 
Gulf of Mexico tugboats to benefit from start of LNG exports
 
(Bloomberg; Jan. 11) - Somewhere in the Gulf of Mexico right now, the Energy Atlantic is headed for Louisiana to collect the first exports from America’s shale gas revolution. Waiting to steer the tanker into Cheniere Energy’s Sabine Pass terminal is a fleet of tugboats that’s spent the past seven years killing time — some days holding emergency exercises, some days racing each other. They were ready to escort ships for natural gas imports, but that never arrived. Now, they will work escorting ships for LNG exports.
 
“The boats are beautiful — you could eat off the floor in the engine room,” said Richard Ennis, head of natural resources at ING Capital. With the switch to exports, the tugs will at last have a job to do — even if it’s not the one they expected. The surge in oil and gas output from U.S. shale drillers has the potential to transform world markets. At home, it left a chain of idle LNG import facilities from the Northeast to the Gulf Coast. Now, some of those facilities will go to work exporting liquefied natural gas.
 
It’s about putting to use for export what was not being used to import gas. At Sabine Pass, empty LNG storage tanks designed for the import terminal will be repurposed for exports. And, at last, there’ll be work for the ochre-colored tugboats with their fire-engine-red hulls. They’ll no longer be waiting for phantom ships.
 
 
 
B.C. government will oppose oil pipeline expansion project
 
(Vancouver Sun; Jan. 10) - The B.C. government will formally oppose the Trans Mountain oil pipeline expansion in a written submission to the National Energy Board. Environment Minister Mary Polak told The Vancouver Sun that the provincial government believes that pipeline proponent Kinder Morgan has failed to provide the NEB with an adequate plan to prevent or respond to an oil spill. “We are asking them not to recommend approval,” Polak said of the Alberta-to-B.C. coast pipeline project.
 
The B.C. government laid out in five conditions in 2012 that it said all oil line projects would have to meet before they would be allowed in the province. The second and third conditions require “world-leading” prevention and response plans if a pipeline fails on land or if oil is spilled into any rivers, lakes or the ocean. “As far as we’re concerned, we have not seen the evidence in the hearings to support a conclusion that they’ve met our conditions,” Polak said. “So we won’t be supporting their approval at this time.”
 
The $6.8 billion Trans Mountain project would involve twinning Kinder Morgan’s existing 715-mile pipeline from the Alberta oil sands to its costal terminal in Burnaby, B.C. It would increase capacity between Edmonton and Burnaby from 300,000 barrels a day to 890,000 barrels, and lead to as much as a seven-fold increase in tanker traffic. Kinder Morgan has said it will mitigate increased risks of oil spills by increasing tug escorts in inland ocean waters and beefing up spill-response capacity. “They did not submit evidence of their ability to respond in a world leading way on the land,” Polak said.
 
 
 
Hard to see ‘any company making money’ at $30 oil
 
(Calgary Herald; Jan. 12) - Crude proved it can indeed go “lower for longer,” falling briefly Jan. 12 to below $30 per barrel before closing at $30.44. “At these prices, I can’t think of any company making money,” said Gary Leach, president of the Explorer and Producers Association of Canada. At a conference in Calgary, meanwhile, a panel of commodities experts agreed that prices will come back — eventually — but no one sees West Texas Intermediate ever getting back to above $105, where it was in June 2014.
 
Martin King, an analyst with FirstEnergy Capital in Calgary, pointed out that Canadian crudes are being hit particularly hard, with Western Canadian Select, a heavy oil and oil sands blend, recently falling below $20 per barrel. “Prices remain under pressure,” said panelist Michael Wittner, global head of oil research for Societe Generale, listing China’s market turmoil and currency uncertainty around the world as recent influences on the price. But he did predict that oil could return to the $70s by 2020 as cheap oil cannot keep up with demand growth, forcing the market to call on costlier supplies.
 
Meanwhile, Ed Morse, global head of commodities for Citi Research, said new production from Iran as sanctions are removed in the next month or so will cause ripple effects on global oil markets. “It’s hard to be optimistic over the short term when you have as much inventory being put into storage as we’ve seen happening right now and when Iran is going to put out a significant amount of oil into the market,” he told reporters.

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1-13-16 Getting Alaska's Financial House In Order

13 January 2016 5:21am

Meera Kohler, AVEC, Photo by Dave Harbour(Yesterday Anchorage reader Meera Kohler (NGP Photo) told us about an error and Ottawa reader Tom Harris informed us of an addition to include.  We are always quick to make necessary changes.  For the 15-year life of NGP, we have asked readers to help us make this a valuable research resource.  Accuracy is critical and for your continuing help, we are grateful.  -dh)


Alberta, Alaska's natural resource sister in Canada is facing it's own fiscal challenges.  The revered Fraser Institute says Alberta's problem has more to do with over spending than with low oil prices.  Some Alaskans are nodding their heads in understanding and agreement.  -dh

Getting Alaska's Financial House In Order

Alaska's Fiscal Crisis

More reference to this subject here, includes BPs announcement today, and the Alliance's AK-Headlamp opinion:

(More coming....)

Today we bring you Bob Kaufman's commentary on preparing Alaska's financial house for long term revenue challenges.  It earlier appeared in the Alaska Dispatch News (ADN).  He suggests we have much to learn from the private sector.  He is right.  -dh

*     *     *

Bob Kaufman.  Let’s face it: Low oil prices mean that Alaska is about to fall off a fiscal cliff. And that’s a scary thought. But a lot can be done to minimize the damage.

Early in my career, I led numerous turnarounds of private companies in financial distress, and while public-sector cost cutting is more difficult, I believe there’s a lot that government can learn from the private sector. Here are four insights.

Plan for the worst — it can lead to big ideas

In the early stages of turnarounds, things usually get far worse before they get better. Why? Because enterprises in financial distress often get there by not paying attention to early warning signals, and usually don’t know the true extent of their problems. Even after the crisis hits, they typically remain in a state of denial about how bad things really are. 

The best way to break the cycle is to construct the worst imaginable scenario — and put together a viable plan if that happens. Unfortunately, in many cases, the “worst imaginable scenario” turns out to be closer to reality than most people think.

In Alaska’s case, the worst imaginable scenario would be one in which oil prices stay low for most of the next 10 years — not unreasonable given the U.S. alone has hundreds of billions of barrels of recoverable shale oil that can quickly meet new demand at prices in the $60-per-barrel range.

So the question we need to ask ourselves is, “What is a sustainable long-term model of government services and revenue in such a scenario?”

It sounds ugly at first, but forcing people to confront Draconian scenarios actually frees them up to think big and creatively. They contemplate ways of doing things that were previously unimaginable. For this reason, it’s often easier to cut costs by 20 percent than 5 percent. In fact, my experience managing many turnarounds taught me that the prospect of change is worse than the change itself. The hardest part of any turnaround is taking initial action. People fear change. Our brains are wired to exaggerate the effort or cost involved in switching from the status quo.

Reduce costs and improve productivity

Traditional, incremental cost cutting simply won’t work when the underlying operating model remains in place. Once the low-hanging fruit has been harvested, it may appear as if there’s nothing left to cut.

The truth is that enormous savings — up to 30 percent or more — can be reached by eliminating non-obvious waste: an overly complex organizational structure, unnecessary requirements imposed by one part of the organization on another, a lack of root-cause problem solving, poorly designed processes and an ignorance of other underlying cost drivers.

Communicating the need for efficiency improvements is not enough to realize these larger gains. A skilled change manager or facilitator needs to engage the workforce, take an end-to-end view of the process and solicit ideas to fundamentally re-engineer it.

How do you get people to share restructuring ideas that might cost them their job? Have an explicit conversation about what happens to anyone impacted by the changes. Ideally, you would offer generous severance packages, so participants are less concerned about the potential of moving on. In the long run, what you spend in short-term transition activities is far less significant than evolving to a sustainable, lower-cost operating model.

Stop the bleeding immediately

Cash is a huge asset in engineering a successful turnaround. You don't want to use it to postpone the inevitable hard choices, but rather to invest in transitioning to and implementing your long-term plan. 

In private turnarounds, organizations are usually hemorrhaging cash, and it’s often necessary to immediately suspend all non-critical disbursements. This buys time to put together a long-term plan and shows the bank — which is your lifeline — that you can correct the situation.

Fortunately, Alaska’s cash reserves make our current situation appear less desperate. However, while Alaska does not have a bank, we do rely on credit markets, and they are not dissimilar. We need to instill confidence in them so they don’t downgrade our bond rating. If that happens, debt payments go up, squeezing your budget even further. Money that would have gone to services goes instead to bondholders in the Lower 48. People who have been through difficult situations will all tell you they would give anything to get back cash they frittered away before taking bold action.

 

In Alaska’s case, the most immediate, obvious way to preserve cash would be to cut or eliminate the Permanent Fund dividend while we assess the long-term picture. The challenge with this is that some people will be disproportionately impacted — which brings me to my last insight. 

Leadership matters

It’s a rare leader who can get people to buy into lasting, transformational change. After all, this process usually involves asking people to take big risks and sacrifice things they’ve gotten used to.

Fortunately, our current governor is not explicitly identified as a Democrat or Republican. That could help him overcome the mistrust that would result from being associated with a specific set of partisan values. But he also needs to hold himself to the highest standards of honesty and impartiality.

I’ve found that most people are willing to do their part, as long as they perceive an equitability of sacrifice across the board. The more they see others concede, the more they will concede. The minute they perceive that others are gaining ground at their expense, that virtuous cycle ceases, and they will viciously fight for their own interests. In the public sector, that could quickly deteriorate into a political stalemate and lack of action.

I’ve also found that people don’t give up their old ways unless called to a higher purpose — one that goes beyond improving profits or performance. In Alaska's case, many of us fear our way of life may be at risk due to low oil prices. The cause needs to transcend partisan differences and focus on our common values.

Fortunately, most Alaskans share two core values that are relevant now. First, we’re resilient. We’ve met great challenges before. It’s true that years of fabulous oil riches may have made us a bit soft. But now we’re being asked to summon the determination and creativity that have allowed us to thrive up here. And second, we’re compassionate. Alaska is a small enough state that we still look out for one another.

The question we should be asking ourselves now is this: “In a world where oil prices will never rebound, how can we draw on these qualities to still build a great state, with a good education system and good public services?” Getting to that sustainable end goal will inevitably and sadly require cuts in government and to certain beneficiaries. But the sooner we confront these challenges, the more cash we’ll have to help those affected in the transition.

Bob Kaufman is the founder of Alaska Channel, an Alaska video and stock footage company. He also is a business consultant and venture capitalist who worked in turning around struggling companies while at Bain & Company and as an interim CEO.

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1-12-16 Weak Energy, Etc. Policies = Lackluster Last State Of The Union Speech

12 January 2016 3:46am

Calgary Herald by Dan Healing.  ... Seven Generations Energy Ltd., considered one of the bright lights of the Calgary oilpatch, announced it would postpone about $200 million of planned capital investment in 2016....


David Holt Commentary, FuelFix.  ...a second major oil company was forced to abandon plans to drill in the Arctic Ocean off the coast of Alaska...for those who live close by..., the news is devastating.

ON EVE OF AMERICA'S "STATE OF THE UNION" SPEECH, WE SEE A WEAKER NATION BECAUSE OF WHITE HOUSE ENERGY POLICIES

After rejecting the Keystone XL pipeline for the U.S., the Obama administration is now encouraging construction of an oil pipeline in Kenya, according to a WSJeditorial.

U.S. Ambassador Robert Godec reportedly told Kenya’s energy minister last week that the administration would help the African country raise $18B to finance its PowerAfrika pipeline project.

Meanwhile, TransCanada (TRP +0.4%) is bringing an international arbitration case against the U.S. for not treating the Canadian company the way it would a U.S. company as it is seeks to recover $15B in costs and damages

Today we have more evidence (Column right, lower story) that White House disapproval of Keystone XL was based, pure and simple, on politics -- not on environmental considerations.   Remember, our first evidence was that the State Department (i.e. the jurisdictional agency since the pipeline would cross the international border) released multiple determinations that the project should be approved.

Such presidential policies cannot produce much of a record to be proud of during tonight's last State of the Union Speech.

Note as well that last year's disapproval of Keystone XL coincided with the administration's continuous delay and the eventual demise of Shell's Arctic Alaska oil and gas exploration program.  

Killing of these high profile energy projects was perfect preface to the President's participation in the United Nations' Paris Climate Change conference in December, 2015.  This negative, domestic energy policy strategy surely delighted the United Nations climate change cabal, whose leader* admitted that the goal of environmental activism is not to improve the environment but to destroy capitalism.  (*Christiana Figueres {Photo} Executive secretary of U.N.'s Framework Convention on Climate Change)  Note: Figueres has now added another goal: depopulating the earth, except for her family, US funded UN coworkers and friends, we assume. -dh

Blocking these and other major fossil energy projects -- which would have been good for American jobs and consumers -- would also have pleased Arab countries intent on diminishing American energy competition.  

These dots may eventually connect to possible efforts of the outgoing president to purchase a Dubai mansion.  Could this possibly happen while bidding to become Secretary General of the United Nations?  

The sooner the United States withdraws funding, support and even participation in the United Nations, the better.  With China, Russia, Arab and liberal coalitions in charge, the interests of America -- including energy interests -- cannot be achieved.  

Tom Harris

From reader Tom Harris we have this commentary on tonight's State of the Union Speech: "...But what Obama did not tell Americans, and will undoubtedly not admit tonight, is that the accord is dangerously flawed. It is, in effect, another Kyoto Protocol since, like all United Nations greenhouse gas (GHG) emission reduction agreements, it provides an opt-out clause for developing nations, the source of most of today’s man-made GHG.   More

Think about it: the U.N. energy producers wish to diminish North American oil and gas production, purely to reduce competition.  The liberal countries vote and work against (i.e. the climate change activist states) coal, oil and natural gas production to reduce supply and increase costs so consumers will use less.  The world's poor countries cast their votes in favor of the climate change agenda so long as the U.S. pays its taxpayer dollars VIA THE UNITED NATIONS to their officials who may or may not responsibly transfer those dollars to the intended alternate energy projects.

There is also another beneficiary of diminished North American oil and gas wealth and economic strength: ISIS.  ISIS has oil money.  The stupid or devious (i.e. take your choice) action of United States leaders is unfreezing billions in cash to terrorism state sponsor Iran.  These facts logically lead to a weaker North American defense capability and a stronger terrorism capability.  

Accordingly, we do not look forward to a very pithy, last State of the Union performance this evening.

Putting the nail in the coffin are current Canadian and U.S. leaders who wholeheartedly endorse the anti fossil fuel, transfer of North American wealth programs.  

With such leadership, can economies be expected to perform better than they now are?

-dh


Original Story Here, with videos.  Christiana Figueres, the Executive Secretary of the United Nations Framework Convention on Climate Change, recently stated in an interview that the Earth is already over burdened with people and that we should look at depopulating the planet.

“There is pressure in the system to go toward that; we can definitely change those, right? We can definitely change those numbers,” Figueres stated.

“Really, we should make every effort to change those numbers because we are already, today, already exceeding the planet’s planetary carrying capacity.” she claimed.

“So yes we should do everything possible. But we cannot fall into the very simplistic opinion of saying just by curtailing population then we’ve solved the problem. It is not either/or, it is an and/also.” Figueres continued.

Figueres also blatantly stated earlier this year that the true purpose of the entire global warming scare is to kill off capitalism. Now, even after this admission, she’s claiming we need to get rid of a large percentage of the world’s population due to climate change. Of course, most of the sheeple in the world will ignore her admission as well as the undeniable evidence that climate change is the greatest science scandal of all time – as illustrated by the fact the someone has been ‘fudging the numbers’ that give credit to this scam.

The other great lie is that we have a problem with the Earth’s population. Actually fertility rates are falling. More below the video.

 

Climate One is a self described public affairs forum which advocates extreme action to combat climate change. It is a branch of The Commonwealth Club of California based in San Francisco, essentially a talking shop visited regularly by heads of government and corporate business.

Figueres is no stranger to controversial statements when it comes to climate change. The UN official previously described the goal of the UNFCC as “a complete transformation of the economic structure of the world.”

She has also repeatedly said that a Chinese style communist dictatorship is better suited than the U.S. constitutional system to fight “global warming.”

Figueres told Bloomberg News last year that the Chinese government (which continues to enforce forced abortions, infanticide and compulsory sterilization) is “doing it right” when it comes to climate change, even though China is by far the biggest emitter of greenhouse gasses.

Figueres noted that a partisan divide in the U.S. Congress is “very detrimental” to passing climate related legislation, while the Chinese Communist Party, sets policies by decree. President Obama clearly agrees given that he continues to bypass Congress by issuing executive orders on climate change.

As InfoWars has continually noted, there is a fundamental flaw in associating climate change with overpopulation.

Populations in developed countries are declining and only in third world countries are they expanding dramatically. Industrialization itself levels out population trends and even despite this world population models routinely show that the earth’s population will level out at 9 billion in 2050 and slowly decline after that. “The population of the most developed countries will remain virtually unchanged at 1.2 billion until 2050,” states a United Nations report. The UN’s support for depopulation policies is in direct contradiction to their own findings.

Once a country industrializes there is an average of a 1.6 child rate per household, so the western world population is actually in decline. That trend has also been witnessed in areas of Asia like Japan and South Korea. The UN has stated that the population will peak at 9 billion and then begin declining.

In addition, as highlighted by the Economist, global fertility rates are falling.

Since radical environmentalists are pushing to de-industrialize the world in the face of the so called carbon threat, this will reverse the trend that naturally lowers the amount of children people have. If climate change fanatics are allowed to implement their policies, global population will continue to increase and overpopulation may become a real problem – another example of how the global warming hysterics are actually harming the long term environment of the Earth by preventing overpopulated countries from developing and naturally lowering their birth levels.

Even if you play devils advocate and accept that humans do cause catastrophic warming and there are too many of us, and if you can skip past the eugenics connotations of population control and depopulation policies, those methods are fundamentally still not a valid solution to the perceived climate change threat.

The real solution would be to help increase the standard of living of the cripplingly poor third world, allowing those countries to industrialize, and seeing the population figures naturally level out.

Instead, the third world has seen a doubling in food prices owing to climate change policies such as turning over huge areas of agricultural land to the growth of biofuels.

In addition, Climate legislation continually pushed by the developed world has those nations taking on less of a burden than anticipated demanding more of poorer countries, despite the fact that any further cuts in CO2 emissions will further cripple their flimsy economies and poverty-stricken people.

Previous legislation, such as the Copenhagen agreement, allowed people in developed countries to emit twice as much carbon per head than those in poorer countries, who have not caused the rise in emissions said to be threatening our existence on the planet. The revelations have led third world leaders to accuse the developed world of “climate colonialism”.

Linking environmental policy to depopulation agendas opens the door to eugenics and it is no surprise that through that door have come pouring hordes of elitist filth just begging to be on the front line of the extermination policy.

One example is UK-based public policy group The Optimum Population Trust (OPT), which has previously launched initiatives urging wealthy members of the developed world to participate in carbon offsets that fund programs for curbing the population of developing nations.

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1-11-16

11 January 2016 12:46pm

A New News and Policy Analyst In Town

Describes

A New Team Of Alaska Oil and Gas Exploration Companies

Below we bring you excellent policy commentary on issues related to the Alaska gas monetization project, www.AkLNG.com, and the state's related fiscal crisis.  Alaska Headlamp also describes efforts by Alaska's Regional Native Corporations to explore for oil and gas in rural Alaska.

We've monitored Alaska Headlamp in these pages since it appeared late last year.  Now, we officially welcome it to the public dialog!  

Today's Alaska Headlamp analysis and commentary:

New wildcats. Alaska Native regional corporations are wildcatting for oil and gas in the state's frontier basins, eyeing little-explored prospects after dusting off old studies by major oil companies. They aren't seeking the huge petroleum discoveries like those on the North Slope. Instead, they say smaller finds will serve their goals of creating jobs for local residents, while providing affordable energy in villages beset with crippling gasoline and heating oil costs. Native corporations eyeing frontier basins include Ahtna, who's planning to drill a gas well this spring near its headquarters in Glennallen. Further north, NANA wants to conduct seismic surveys not far from its Northwest Alaska headquarters in Kotzebue. The exploratory work is eligible for the state tax credits that some lawmakers want to eliminate to help counter a massive budget deficit caused by sliding oil prices and historically low oil production. A Senate working group that held hearings on the tax credits last fall cited Native corporations' unique role in Alaska as one reason frontier exploration should continue to receive a benefit if the $500 million program is scaled back. Created by the 1971 Alaska Native Claims Settlement Act, the corporations and nine other regional Native corporations are supposed to use their large land holdings to promote "economic health" in their regions, said the summary report from the Senate working group. They also return profits to their Alaska Native shareholders.Headlamp fully supports the new exploratory work being conducted by the Alaska Native corporations. Resource development, no matter the scale, is an ever-important aspect of Alaska's economy. Such development projects should be pursued across all corners of the state to create new jobs, especially in regions with high unemployment rates.

Sen. Kevin Meyer, R-Anchorage, has signaled to his majority caucus that it's time to consider finding new revenue to balance the state budget by putting a statewide sales tax on the table. This move follows Gov. Bill Walker's proposal that included a state income tax. When Walker declared his candidacy for governor in April 2013, he told reporters, "Alaska has gone from an owner state to an owned state, and we have no one to blame but ourselves." One thing he was referring to was SB21, the new oil tax law that the Legislature had just passed. He believed it compromised the state's resource development interests.Alaska absolutely needs a bipartisan solution to the fiscal crisis it is facing. That said, Headlamp, and most Alaskans know, that taxing our way out of the hole we're in is not a solution. Headlamp reminds policy makers that every dollar taken out the private sector, which is being hit the hardest in this era of low oil prices, through taxes, to support government, is a dollar that could have been better invested or spent. Increasing taxes will continue to hamper Alaskan businesses and families already plagued by declining oil prices. There are plenty of ways to balance a budget without more taxes. Headlamp hopes that when the legislature reconvenes next week solutions, that inflict the least harm on the private sector and Alaskan families, will be found.

The Alaska Dispatch News published a profile of Attorney General Craig Richards. Richards has taken on high-profile lead roles on Walker's plan to fix Alaska's huge budget deficit, and on state efforts to develop a $55 billion natural gas pipeline from the North Slope -- two items at the top of the governor's wish list. Walker recently placed Richards on the board of trustees of the Alaska Permanent Fund Corp., and also appeared in a Fairbanks courtroom last month for the announcement of a settlement that freed the men known as the Fairbanks Four from prison. Richards also has his day job of being in charge of the Alaska's 550-person Department of Law. Randy Hoffbeck, now Alaska's Revenue Commissioner, described Richards as "supremely smart and "confident" based on legal cases in which he was involved prior to Walker's election. Nonetheless, some lawmakers question whether Richards has taken on too much. "He's been delegated a tremendous amount of responsibility in areas that you wouldn't typically expect," said Sen. Bill Wielechowski, an Anchorage Democrat and also an attorney. He added: "It's a little worrisome from a workload perspective, because the attorney general is the top attorney in the state -- now you're putting on top of that the gas line, and now you're putting on top of that the Permanent Fund, basically the crux of the state's fiscal plan." Anchorage Republican Rep. Charisse Millett, the House Majority leader, said some of the animosity toward Richards stems from what she described as "maybe a little bit of an attitude that he's above, that the administration is above the Legislature -- and we're on a need-to-know basis…That's not the way government was designed." Headlamp hopes to see more cooperation and dialogue between the Walker administration and the Legislature in 2016.

Subscribe to Alaska Headlamp here.

 

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1-10-16 Brennan Is Right About 2016: A Year Of Great Testing

10 January 2016 10:25am

Anchorage Daily Planet

Full editorial here....  Posted: 10 Jan 2016 01:27 AM PST

By

Tom Brennan

Tom Brennan, Anchorage Daily Planet, Copyright Dave Harbour 2009This will be a year of great testing for Alaska’s political leaders.

If this state is going to dig its way out of the financial hole in which it finds itself, some incredibly important legislation must be passed and made law, legislation that will be unpalatable to many voters. And that electoral fete will have to be accomplished in an election year.

Did you see our commentary yesterday: Gasline/LNG Project State Ownership Gamble, Greed Not Need?

Mr. Brennan is right; it will be a, "great year of testing."

But what is the test?

To us the question is whether today's adults decide to make mature and wise decisions that contribute to a sustainable budget and economy, or whether decision makers will kick the fiscal can down the field for their kids to deal with.

That would be intergenerational inequity.

In yesterday's commentary we also pointed out what a gamble of public funds it is to purchase equity in an energy project.

That is also a circumstance wherein today's adults will risk savings account money -- along with their kids' future on a high stakes game of chance.  

Since a number of legislators now serving plan to retire soon as public employee pensioners, they leave the potential of a financial risk gone wrong to their children...along with other fiscal dangers...while not hesitating to collect a retirement check during the trying years before us.  (Their retirement check, of course, also depends on the health of the PERS/TERS retirement account, whose unfunded liability approaching $10 billion threatens the future of the program.

Ironically, some of these have freely admitted in public that they should have done much more to control government growth.

But that is water under the bridge, at this point, and we at least appreciate their honesty.  

The question now is whether, this year, those who had a hand in creating the current budget crisis through inability to control spending will now cut spending before transferring the weight of the financial crisis to citizens via new or increased taxes.

From our viewpoint, then, the reason Mr. Brennan is right that this will be a year of great testing is that lawmakers and the Governor will be making a decision affecting the prosperity of their children.

Will they bite the bullet and pass the test by successfully and courageously reforming the state budget during this legislative session.  

Or, will cosmetic changes be adopted as teams of elected officials attempt to shift blame while effectively kicking the can down the field, again this year, toward the goal post of the next generation?

    -dh

...leaders will somehow have to convince voters that the state needs to slash state spending, bring back an income tax (and perhaps also pass a sales tax) and dip into the earnings reserve account of the Alaska Permanent Fund.

...

A few things are happening to improve the financial picture. Gov. Bill Walker’s hiring freeze and crackdown on state employee travel was a good one. He should have done it long ago, but even now it’s not too late.

Next, the Legislature needs to do something similar. Some of the travel by members of the House and Senate is ridiculous. Some of their members are in the million-mile airline award class, with legislators frequently hopping onto international flights at state expense to make brief appearances at conclaves of limited value to Alaska.

The Legislature should also cut way back on the number of aides each member has on payroll. The numbers vary from one post to another, but each legislator has at least a few and some have more. At times like these, most legislators should be limited to one aide and only those in top leadership positions, where there is a proven need to meet the demands of the position and constituents, should have more.

Everyone hates the thought of cutting the education budget. That has the ring of killing the puppies at midnight. But with tight money Alaska should be ....

State Senate President Kevin Meyer has already raised the possibility of a statewide sales tax. Meyer said this week that “in light of the taxation legislation package recently submitted by the governor, it seems a statewide sales tax should also be part of the discussion.”

...the international credit rating services are already giving Alaska a poor rating for its failure to address the budget crisis. Poor credit ratings can make borrowing expensive and — with a gas pipeline hopefully on the horizon — Alaska has some large-scale borrowing in its future.

It may be too much to expect that all these problems could be addressed in a single year. But this state’s current leadership ....    (Full editorial here....)

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