It's An Uphill Road For An Alaska LNG Project
Whether most Alaskans appreciate it or not, the best hope for a successful, Alaska LNG project is that Alaska's largest producers support it. Today, we analyze why that so.
Alaskans have consistently supported higher taxes on Alaska's oil companies and higher spending on social services -- with some exceptions.
The Alaska tax and spend model is not unlike the model employed nationally, in Washington D.C., except national leaders are capable of spending more than they take in by merely printing more money.
Ultimately, that model taxes the public via inflation rather than directly, diminishing the value of the money as it lowers the value of individual savings and paychecks.
The beauty of that model is that a future generation pays for the votes attracted by this generation of politicians.
As politicians increase tax levels, their overspending redistributes wealth to some individuals and to supporters able to maintain investments in real estate, land, capital projects and enterprises producing recurring revenue -- investments that benefit from inflation.
It can be and often is an intellectually dishonest, but effective formula for gathering reelection votes from some at the expense of others.
Logically, that concept is unsustainable. The concept is unsustainable because more and more taxation must end at some finite point and because ever higher government spending depends on that finite tax revenue.
As the unsustainable economy approaches, liberal lawmakers have historically found it quite tempting to unfairly demonize companies for not, "paying their fair share", and to embarrass fiscally responsible lawmakers for being, "uncaring and insensitive to the needs of...."
As we'll explain, the day of reckoning has now caught up with Alaska. The state imposes high taxes, is depleting its remaining savings accounts while continuing its spending spree. (No one can say Alaska's leaders were not warned!)
Alaska's elected leaders tasted an addictive elixir of $900 million in bonus bids from the 1969 Prudhoe Bay Lease Sale.
In 1971 Congress approved the Alaska Native Claims Settlement Act, critical to the approval of a project to transport the immense Prudhoe Bay oil reserve to market.
Congressional approval of the Trans Alaska Pipeline System (TAPS) in 1973, by the tie breaking vote of Vice President Spiro Agnew, coincided with mid eastern turmoil, including the Arab oil embargo and a later takeover of Iran's monarchy by Islamic extremists, still in power.
So, oil prices remained high, for a time.
Alaska's government spending and tax policies were mostly controlled by democrats and a few liberal republicans during the decades of the seventies and eighties, when the high oil prices magnified the value of high production, around 2 million barrels per day.
Yes, the former 'pioneering state' had now become addicted to a growth in income and spending phenomenon that is probably unique in the history of American states. (Other states, because of the blessing of advanced 'fracking technology' are encountering tax and spend challenges, too.) We believe none have reached the level of tax and spend excesses adopted by Alaska -- though Alaska could serve as a role model for the need to avoid unsustainable tax and spend policies.
When oil prices began to fall in the mid-eighties, many oil field and support industry employees -- and those dependent upon them -- left the state. However, production was still strong and the state pretty much continued its march toward becoming the most attractive welfare state in the nation. We are not aware of any significant social program anywhere that is not replicated in Alaska, and, at a high per capita cost.
From the 80s onward, Alaska has became the highest per capita taxing and spending state and with the highest number of not-for-profit organizations per capita in the U.S., a vast number of which came to depend on government largess -- 90% funded by oil taxes.
- more moderate climate and terrain
- more inexpensive logistical costs
- better proximity to the markets
- gas reserves closer to LNG tidewater facilities (i.e. no cost for an 800 mile Arctic/Sub Arctic pipeline)
- lower labor costs
- lower political risks
· There are many global players trying to enter the market, including over 35 projects seeking ground-breaking in North America
· Prices of the underlying commodities have slipped dramatically. This includes crude oil (Far Eastern LNG is linked to oil prices), natural gas for LNG, and land-based gas deliveries
· Japanese nuclear power is re-emerging after being shut down, and China (among others) are seeking more nuclear plants
· The rate of demand for power appears to be slowing, in keeping with slower global economic growth (see charts below)
A report CITI crossed our desk today, which underlines (and adds to the count of) growing pains being felt by the global LNG market. In particular, this raises serious questions about the ability of LNG exports from the US to have much impact on raising the price structure for domestic natural gas.
Dave Harbour, publisher of Northern Gas Pipelines, is a former Chairman of the Regulatory Commission of Alaska and a Commissioner Emeritus of the National Association of Regulatory Utility Commissioners (NARUC). He served as NARUC's official representative to the Interstate Oil & Gas Compact Commission (IOGCC). Harbour is past Chairman of the Alaska Council on Economic Education, former Chairman of the Anchorage Chamber of Commerce, and past President of the American Bald Eagle Foundation and the Alaska Press Club. He is Chairman Emeritus of the Alaska Oil & Gas Congress.
Opinions or viewpoints expressed in this webpage or in our email alerts are solely those of the publisher and in no way reflect the opinion(s) of any affiliated company, person, employer or other organization.
Committee on Natural Resources Chairman Rob Bishop commented this morning on a decision by the U.S. District Court of Wyoming to grant a stay of the Bureau of Land Management's (BLM) hydraulic fracturing rule. As a result of the decision, compliance with BLM's rule, which was originally intended to go into effect on June 24th, has been delayed until early August.
“This is a rule based on fear not facts that favors Washington bureaucracy over progress and science. The DOE and the EPA have both found fracturing safe yet the propagandist scare tactics go on. The ballooning lawsuits are an obvious sign of flawed policy. Back to the drawing board for BLM would be an understatement. The regulation is fundamentally wrong and should be ended entirely. The U.S. District Court of Wyoming’s decision to grant this stay is a positive step in that direction.”
...by releasing a report making the case that sanctions on Iranian oil should not be lifted without also lifting the current ban on U.S. crude oil exports. Thereport, Cross-Currents: Iranian Oil and the U.S. Export Ban, connects the dots between Obama Administration statements to support this argument.
“We are letting Iran export its oil to markets that we prevent our own companies from accessing,” Murkowski said. “Any deal that lifts sanctions on Iranian oil will disadvantage American companies unless we lift the antiquated ban on our own oil exports. The impending deal with Iran is at the center of the nexus between national security and energy policy.”
The release follows another Senate Energy and Natural Resources Committee report released earlier this month, Rendering Vital Assistance: Allowing Oil Shipments to U.S. Allies, which laid out the regulatory basis for other nations to request exemptions from U.S. oil export restrictions. Earlier this year, Murkowski and Sen. Heitkamp, D-N.D., introduced S. 1312, the Energy Supply and Distribution Act, which received a legislative hearing at the Energy Committee on June 9.
Enbridge transfers liquid pipelines business in $30B deal – Business – CBC News
Enbridge Inc.is planning more investments in Canada's natural gas and power sector as well as pursuing global opportunities after freeing up cash ...
Calgary Herald, opinion by Peter Breedyeld. ... the royalty review should change its focus from getting more dollars per barrel, cubic foot or tonne, to getting fossil fuels out of the ground faster.
This means giving royalty discounts to companies that can get new fossil fuel projects up and running faster, and streamlining the approval process to get projects approved faster.
Alberta is in a race against time. The G7 has made our great fossil fuel resources an economically perishable commodity, which we need to extract and export as fast as possible in order to maximize the value Albertans get from our fossil fuel bounty
Fraser Institute. It’s been a difficult couple of weeks for Kinder Morgan’s proposed expansion of the Trans Mountain pipeline. The Santa Barbara oil spill has irritated already-sensitive public concern about oil pipelines. And as the pipeline’s review before the National Energy Board continues, several new reports commissioned by municipalities and groups in the region have expressed serious concerns about the potential effects of an oil spill.
One study found that more than one million birds might be affected by a spill and 100,000 could possibly be killed as a result. Another assertedthat millions of barrels of oil could erupt into flames, start a forest fire on Burnaby Mountain, stranding 30,000 students at Simon Fraser University. The latest report concluded that a 16 million-litre spill in the Burrard Inlet could deliver a $1.2 billion blow to Vancouver’s economy. Alarming scenarios indeed. But a focus on worst-case scenarios loses sight of what’s vastly more likely to happen, which can only be assessed by looking at the overall performance of pipelines, where progress in controlling spills has been tremendous.
According to Transportation Safety Board data, from 2009 to 2013 there were 770 pipeline accidents and incidents in Canada. Of this number, 654 resulted in some sort of release of product. Again, this mayseem large, but during this period Canada’s federally regulated pipeline system moved more than 11 billion barrels of petroleum and natural gas products, making the per barrel accident rate remarkably low.
More telling still is that only five accidents or incidents in this period resulted in any sort of environmental damage. This means.... (More)
Homer News by Tim Bradner (NGP Photo). The state-owned Alaska Gasline Development Corp. has developed preliminary designs for “offtake” facilities that would allow communities to take natural gas from a large-diameter gas pipeline, if one were built.
The designs were presented to AGDC’s board of directors at its June 11 meeting.
CANADA'S ENERGY CITIZENS. Canada’s oil and gas industry strives to continuously improve our safety record and the safe transportation of our energy products. When it comes to tanker safety we have a record to be proud of and we are always trying to improve.
Here are some facts you may not hear every day:
-Oil tankers have been moving .... (Read More)
Under legislation allowing the state to participate in the large Alaska LNG Project, the state has the responsibility to designate up to five gas “offtake” points for communities along the pipeline route, and to assist in developing facilities including lateral pipelines, such as one planned to be built to Fairbanks from the route of the large gas pipeline.
The Hill by Timothy Cama.
A Senate spending panel advanced a bill Tuesday to block or weaken key Obama administration environmental rules on climate change, water and other subjects.
The bill would fund the Environmental Protection Agency (EPA), the Interior Department and other related agencies at $30.01 billion for the 2016 fiscal year, about $400 million less than what Congress passed for this year.
The Hill by Deven Henry.
The House Appropriations committee approved a $30.17 billion Interior and Environment spending bill on Tuesday that cuts Environmental Protection Agency (EPA) funding by 9 percent and blocks key Obama administration climate rules.
Lawmakers approved the bill on a mostly partyline vote, and much of the debate centered on measures in the bill targeting EPA policies. Republicans said the measures are necessary to rein in what committee Chairman Hal Rogers (R-Ky.) called an “unnecessary, job-killing regulatory agenda.”
“This administration has been hell-bent on implementing all sorts of regulations that are harmful to both our economy and our energy security,” Rogers said.
It would overturn the EPA’s rule asserting power over small waterways like wetlands and streams and prevent it from writing a strict new rule on ground-level ozone pollution.
Under the bill, administration officials would not be allowed to enforce the EPA’s carbon limits for power plants in states that object, or enforce the Interior Department’s regulations on hydraulic fracturing in states that already have such rules.
It is the first time the Senate has passed an Interior and EPA spending bill through subcommittee in six years.
“This bill aggressively deals with the EPA’s regulatory overreach on both the funding end and the sensible policy provisions,” Sen. Lisa Murkowski (NGP Photo), chairwoman of the subcommittee responsible for writing the bill, said at the Tuesday meetings to consider it.