Can Alaska And Washington Learn From Alberta and Ottawa?
Yes. But Are They Likely To Learn. No.
|1. Calgary Herald by James Wood. As Prime Minister Trudeau and Premier Notley hosted a roundtable meeting (Video) in his first visit to Calgary since becoming prime minister, he told a group of top energy executives the government wanted to hear ways Ottawa “can be a better partner in helping you through this difficult time.”
2. Alaska Headlamp. ... Rep. Mike Hawker, asked why Governor Bill Walker wants the Legislature to completely reverse its tax credit policy. A Senate working group convened last year by Sen. Cathy Giessel, recommended careful adjustments to protect advancing projects. Headlamp agrees with Sen. Giessel—protecting ongoing projects should be a principal goal of any tax plan the Governor puts forward this session. Pulling the rug out from....
3. Politico by Michael Grunwald. ...the president will propose more than $300 billion worth of investments over the next decade in mass transit, high-speed rail, self-driving cars, and other transportation approaches.... To pay for it all, Obama will call for a $10 “fee” on every barrel of oil, a surcharge ... paid by oil companies but ... presumably ... passed along to consumers.
In the sidebar (1.), readers will first note that Canadian provincial and federal leaders are asking the oil industry how the two interests can cooperate in the current low-price environment.
Farther down (2.), readers will appreciate Alaska Headlamp's viewpoint; Alaska officials who have created a more oil-dependent government than Alberta are less inclined to support the rejuvenation of that economic engine.
At the bottom of the sidebar (3.), we note that the U.S. federal administration continues its harsh and hostile attack on America's principal, bedrock creator of wealth.
The Canadian politicians, though liberal and heavily biased in favor of 'climate change energy policies', seem at least to realize that without fossil fuel wealth producers, the entire Canadian economic infrastructure is threatened.
Alaska's governor, in contrast, has shown a propensity to attack and dictate to the oil industry -- even in a low oil price environment -- rather than reaching out to identify areas of cooperation.
And the U.S. president's whole term of office has been identified with blocking access to energy exploration, over regulating energy and natural resource wealth production in general and disapproving the massive, multi-billion dollar job producing Keystone XL Pipeline. And now, as if that assault were not sufficient economic assault to totally kill the traditional energy industry -- the president proposes a $10/barrel oil tax increase, thus increasing the current per barrel cost by a third -- a new, de facto fuel tax on consumers that will actually make American crude oil less competitive on the world market.
We don't know whether Canadian provincial and federal outreach efforts will produce workable policies going forward for the oil and gas industry. But we and Canada's oil and gas producers are hopeful.
On the U.S. side, we are less hopeful. With the type and intensity of opposition and hostility aimed at America's oil and gas industry, the current Alaska and Washington leadership legacies can only be characterized by historians as "intentionally anti-development or downright unintelligent".
Wake up, U.S.!
Why Shouldn't The State Take Control of Oil & Gas and Other Natural Resources?
We're not saying Alaskan politicians are beginning to control everything. However, controlling oil and gas is a big step toward socialism and controlling a gas export project (and a municipal distribution project) are decisive first steps in that direction. Alaska became great because of a free market, not because of dictator-governors who wanted to, "fundamentally change Alaska's freedoms". dh (Photo: Alaska Governor Bill Walker)
Today's Commentary: "This is big"
Below is part of an email blast from a Matanuska Valley business woman named Beth Fread. She has arranged for one of Alaska's most effective, liberal activists, David Gottstein (NGP Photo) to make a presentation on his ideas for forwarding the marketing of Alaska North Slope Natural Gas.
We encourage readers to attend the Friday meeting.
Why? Because we believe Gottstein has long been involved in oil and gas taxation issues and that his ideas are not inconsistent with the direction Governor Bill Walker is taking toward controlling the means, transport and distribution of natural resource production in Alaska, beginning with natural gas.
Understanding Gottstein's position, therefore, will enable listeners to more carefully define their own reasonable reactions to it.
Knowledge is power.
Here are links to two documents that Ms. Freid mentions in her meeting invitation:
Below is information on Ms. Freid's meeting:
"Mr. David Gottstein has a different opinion and an alternate set of research criteria for the LNG pipeline than has been put forth in the other news sources I am using. He has offered to come out here this Friday for a presentation of this information. Some of it is based on the attached documents. Please be warned, this perspective may rock your boat!
"The presentation will be made in the back room at Mat-Su Family Restaurant. No-Host dinner at 6:00 pm, meeting at 6:30 pm.
Looking forward to seeing you there ...
Our Opinion: "How the Ak-LNG project and Alaska's fiscal crisis are related"
As we direct readers' eyes to the right column commentary, we restate our opinion: Spending a moderate amount of public official time and public debate on supporting private sector efforts to monetize Alaska gas is prudent.
Spending inordinate amounts of time, as Alaska's governor is, attempting to control resource development in Alaska is a fool's errand to deliver the state into socialism and chaos.
Exacerbating the foolishness of current "I want government to control the gas pipeline since, 'IT'S OUR GAS'", is the continuous negative meddling of the governor causing project delay.
Since any LNG export project cannot provide significant economic support to the state before 2025, the state's deficit spending culture will be defunct before a gas project can even partially resuscitate it. Although, we note, the state probably can deficit spend long enough to complete the current governor's term and the pension sensitive terms of all current Legislators.
The citizens most adversely affected by current "government should own and control the gas pipeline," are rural residents, mostly Alaska Natives, who will find it harder to 'go South' as the economy heads South.
Also, everyone knows that rural residents' somewhat idyllic "subsistence lifestyles" are heavily subsidized by government provided checks, food stamps, health care (including air transport to Anchorage Native health facilities), roads, airports, education, ports and fuel subsidies.
Those beneficiaries could likely learn the hard way that poor financial policy decisions being concocted in Juneau today -- particularly the many poor decisions affecting the petroleum wealth feeding Alaska's economy -- will hurt rural residents more than those in the state's largest cities.
And this relates to Alaska's fiscal crisis.
Some politicians seem to be trying to mesmerize citizens with shiny objects like 'controlling' 10-year-away, distant gas pipelines. When citizens are distracted by a far away project, it is easier for them to ignore such critical, here-and-now issues as solving Alaska's huge fiscal crisis.
Alaska's fiscal crisis can only be solved by creating a 'sustainable economy'. A sustainable economy in a remote, climate and geographically-challenged state like Alaska, can only be achieved by constantly supporting oil and gas, mining, commercial fishing, timber and other natural resource, wealth producing industries...and, by controlling public spending.
- Dramatically cut government spending, especially the doubling of costs added in the last decade, and
U.S. News by Pete Sepp. Punitive taxes on the oil industry will not fix Alaska's budget problems, but will hurt its economy....
not taxing the wealth producing natural resource industries -- including oil -- any more than they are paying now, and
- supporting, not interfering, with efforts of private industry to invest in oil and gas (i.e. especially gas pipeline) and mining and fishing and timber activities in the state, and
- not demonizing the very natural resource industries that the constitution and statehood act depended on to sustain Alaska's economy, and
- only considering additional, job killing taxes and fees when the above actions have been taken.
For over four decades I never knew you to be other than dedicated to reasonable but robust resource development, consistent with the theme of Alaska's Constitution and the Statehood Act.
I will always treasure your wisdom, Chuck, your friendship, honesty and tireless dedication to the Great Land. -dh
Charles C. Hawley
On January 14, 2016, Alaska lost a great. Charles (Chuck) C. Hawley was a loving husband, father, geologist, musician, pilot, historian, teacher, author, and, for decades, leader of Alaskan policy and development.
Chuck was born in Evansville, Indiana to William McKinley Hawley, a Presbyterian minister, and Evelyn Barnes nee Caldwell, a dedicated minister's wife and accomplished artist. He enjoyed football in high school and college, but the trumpet would be a lifelong love, second only to Jenny Lind, whom Chuck met while studying geology at Hanover College in Indiana. The two married in 1951. They had three sons - David, Ted, and Andrew, and alas (for Jenny), no daughters.
Chuck began his geology career with the US Geological Survey in Colorado where he worked on Uranium exploration and geophysical support for the Nevada Test Site. After completing his PhD in economic geology at the University of Colorado Boulder, he won an assignment to the USGS Heavy Metals program in Alaska in 1966 where the family spent the next two field seasons. By 1969, he had fallen for the North; and left the USGS to make the move to Anchorage. There, he and his family built their home and Chuck began his first mineral exploration business.
Geology may have been his calling, but for Chuck, geology was always more than rock science. Over the next 45 years, Chuck became familiar with not only nearly every mineral prospect but nearly every prospector or miner in Alaska. He made life long friends in towns and villages across the state. His business concerns never came at the expense of others, and he and Jenny worked with state, federal, and native communities to ground the designation of lands for development or preservation in Alaska's geological and societal realities, playing a pivotal role in the implementation of the Alaska Native Claims Settlement Act.
Never slowing, Chuck resurrected the Alaska Miners Association as a volunteer and, in the eighties, formed the Coronado Mining Company, which operated Independence / Willow Creek mines and brought the Golden Zone Mine from a neglected property to a pre-development project. Only in 2014 did Parkinson's disease force Chuck to "retire". That same year, he published his second book, A Kennecott Story, which earned him the Alaska Historical Society's award for Historian of the Year in 2015. Parkinson's would eventually take his life at his home with Chuck comforted by his family and faith.
Amidst his wide-ranging accomplishments, Chuck will be remembered for his ability to see and, more importantly, bring out the best in people. He gave chances to many whom others overlooked and and they were endlessly rewarded. Experienced miners and cooks were recruited from Anchorage dives, inexperienced school students got first jobs, both natives and hippie bush exiles as well as experienced geologists were employed. Children and adults alike will remember him for his ability to explain difficult concepts - from science, to politics, to religion, to music theory. His legacy lives on through the hundreds of young men and women he mentored and made into extended family, Charles Caldwell Hawley was a true Alaskan legend.
He is survived by his two siblings, Frances Sims (of Arkansas) and John Hawley (of New Mexico), his wife Jenny and their three sons, and numerous grandchildren and great-grandchildren.
My Pipe Dream At Any Cost?
First: An Auction Story
You have been waiting for the big auction and this is the day.
The most famous artist in your great land created an oil painting decades ago that happened to feature the big black and white husky which begat the great, great, great, great, great grandson which fathered your constant companion, "Jake".
Your emotional attachment to the estate sale painting of that famous sled dog sire has captivated your attention for weeks, since the passing of your neighbor and best human friend.
Owning it would be a dream come true.
And the painting's value is enhanced as you recalled the countless hours you and Jake spent at the next door home of, old Robert, the last male descendent of the revered artist.
You two would sit there by the fireplace, beneath the large painting, with your faithful huskies sitting at your feet, a cup of black coffee or a libation in hand.
You would talk endlessly of youthful adventures on the sea, in wild forests, avoiding 'sweepers' while floating down some salmon stream in an old air-filled raft, dealing with dangerous winter sled dog races through sub zero winter storms.
You save for the auction. You hope no one else has the attachment you do, or values the painting as you do.
The bidding begins and, to your surprise, the action is robust. Hands raise and the auctioneer catches every outcry, wink and nod. The price swiftly moves from $250 by one hundred dollar increments to $3,000, then with $250 increments to $5,000...well past your savings and pre-determined bidding limit.
A crowded and animated room -- full of friends, neighbors, local business leaders, the museum director and the largest local art gallery owner -- begin chasing $1,000 increments to a final sales price of $26,250.
You wish with all your heart -- as you say good-bye to everyone and turn to walk home -- that the familiar painting and its image could have hung over your own fireplace. It would have been so comforting to sit in your own family room with Jake and a million memories, fire blazing under that familiar image.
How you wish you could have returned home with the prize!
Should you have forgotten your savings limit and simply captured that beloved image with credit card debt? Wouldn't it have been worth it to make payments for something so dear?
But then, reality settles in. "I established the limit at what I knew I could have afforded", you say to yourself.
"I knew that if the bidding took the price higher, I would be tempted to go into debt," you thought.
You knew that debt at your age -- and the effect of indebtedness on your family -- would far outweigh the selfish satisfaction the prize would have given you.
Rational thought seemed to comfort you.
"I knew that sitting under the painting would provide fleeting satisfaction as I contemplated the impact of debt for the next five years", you reminded yourself.
You knew that the simple joy of being with Jake -- without the presence of the painting and its cost -- would continue to be quite enough.
And, so it was, that while you coveted and wished for a thing that became unattainable, you soberly recognized the truly valuable elements of life.
And, I'm guessing that your last thought was one of gratitude to the great Creator who had given you a wonderful life, loving family, friends like Robert and a faithful companion.
Actually, your dreams have come true, haven't they?
Second: A Gas Story
The efficient Arctic Gas Pipeline of the 1970s failed when a National Energy Board Decision upheld Justice Berger's (See 6-14-02 entry) recommendation for a Mackenzie River Valley, 10-year pipeline moratorium. (Canada can be its own worst enemy, too.)
The Alcan pipeline project failed with advent of the 1980s, as gas prices plummeted and the project became infeasible. Producers like ARCO studied LNG export options but those alternatives then were also infeasible.
Then the late 1980s recession made virtually all oil and gas projects infeasible.
As gas prices recovered in the early 2000s, industry and governments began once again pursuing projects to monetize Mackenzie Delta and Prudhoe Bay gas -- with separate overland pipelines to Canadian and Lower 48 consumers.
Then, a half-decade later, with the advent of new shale oil & gas technology and low, domestic prices, Arctic gas pipelines south became infeasible.
Arctic gas proponents then shifted their focus on LNG export options that had grown in feasibility.
By the mid 2010s, LNG feasibility had become more popular with the evolution of more LNG import demand, local distribution systems, shifts from other fossil fuel power generation projects and growing populations.
The Mackenzie Delta gas seemed more permanently stranded while Prudhoe Bay gas owners again began reviewing LNG alternatives.
The gas owners and large gas transportation companies seriously studying feasible ways to market gas from the 1970s forward, had always concluded that pipelines were cheaper after studying ALL alternatives, including LNG.
And, they had never delayed development of Alaska gas, from our first-hand knowledge, based on some allegation of bias against LNG export projects.
During those decades, Alaska LNG advocates, who did not own the gas, sought to use political influence to cause gas to be marketed via LNG transport through their own marketing organizations -- with insufficient attention to project feasibility.
To use the left column analogy, they seemed to want to buy the dream at any cost, as long as someone else shouldered the major cost.
The gas owners, however, were not careless enough to allow gas to be marketed via -- what was over those years -- inefficient, self-serving LNG transportation project feasibility.
To this day, early advocates of LNG, continue to be upset with and demonize the gas owners. The gas owners are North Slope producers, who have paid for leases and have the right to market the gas they discovered.
Alaska's North Slope producers are among the most important companies in their industry, with LNG and pipeline expertise and oil/gas marketing expertise and world wide contacts.
They are best suited to create the most feasible projects and market gas most profitably. Since Alaska's oil & gas tax revenue rests on a percentage of value, the greater value obtained by producer experts will enhance the value of Alaska's tax and royalty revenue.
The producers continue to professionally and diligently work this year. Their effort will determine the feasibility, once again, of exporting Alaska North Slope gas.
But this time, there are nearly a hundred LNG projects hoping to compete for the limited demand in a very competitive market.
And Alaska is not one of the lower cost projects; that is, Alaska is attractive because of its vast reserves but unattractive because of its market remoteness, climate, logistical challenges, high labor costs and an unreliable investment (i.e. political) climate.
What is competitive? Whereas LNG used to sell in Asia at a price range in the high teens per million Btu, the price now hovers, miserably, in the mid single digits in today's abundant, shale-stimulated gas market.
It is also a reality that any investor in major Alaskan projects must know that once an investment is made in a jurisdiction with an unsustainable budget, the investment risk -- the risk of wealth expropriation via predatory taxation -- is great, perhaps too great.
Alaska LNG diehards, like the neighbor lusting after a long coveted painting (Above, column left), desperately want ownership in an LNG project -- if they can get government to assure the project is built. But at what cost? At any cost?
We citizens and consumers are pretty objective. We want to monetize Alaska North Slope gas profitably. We don't want to be in debt. We don't want to waste public money. We want a stable economy. We want and desperately need new oil and gas investments -- from investors who trust us -- to sustain falling production on top of rock bottom oil prices.
The LNG diehards, like Alaska's governor who advocated infeasible LNG projects for their own special interests, now try to convince Alaskans something to the effect that, We will make a lot more money if we are equity owners in a gas pipeline.
But Alaska's citizens and consumers are not stupid. They have seen many (i.e. actually, "all") Alaska North Slope gas projects die because of changing markets and technologies.
They know that while a gas project might be built at just the right time, it also might fail, as others have.
No one can predict today whether in 2025, when the Alaska LNG project is scheduled to go on line, it will be making money or losing money.
If Alaska's government (and citizens) are equity owners of an economically feasible gas pipeline, they might make more money than they would as passive acceptors of 1) royalties, and 2) a severance tax, 3) a property tax, and 4) an income tax.
But if the pipeline costs more than shippers are willing to pay for transporting gas -- or ends up with few or no credit worthy customers -- Alaska could be in the disastrous position of being an part-equity owner that must PAY the difference between the cost of transport/financing vs. transportation income.
It has been said and pretty well confirmed that in energy and economic matters, "Alaska is its own worst enemy". How could any thinking person disagree, based on Alaska's history? This earned reputation lives on today, because of its history of predatory taxation, retroactive taxation, attempts to pass a reserves tax, and irrational, political hostility toward the state's largest investors.
But now, citizens and legislators know the risky history of:
- The Arctic Gas 1970-era project ; and
- the 1980-era failure of the NW Natural Gas/Alberta Gas Trunk Line, Ltd. Alcan project; and
- Failure of several generations of LNG advocates, including: El Paso Natural Gas; Yukon Pacific; Alaska Natural Gas Development Authority; Alaska Natural Gas Port Authority; and
- the 1990-early 2000 Alaska Highway Gas Pipeline project (owned by TransCanada) and Mackenzie Valley Gas Pipeline failures (in which TransCanada participated with Canadian aboriginal groups).
The vast Alaska natural gas reserves certainly may justify investment by private energy companies in a new effort to monetize their gas.
The success of energy companies for well over a century has entailed risk. But the risks are often acceptable because they are risking their own capital and because they are experts in the business.
In today's world of increasing socialism, Alaska seeks to take equity risk, without having commensurate expertise, perhaps knowing that it can always just burden individual and corporate citizens, with new taxation, to keep government whole when the investment sours.
|ADN by Alex DeMarban. In December, 1,020 Alaskans who had been working in the oil and gas industry collected $1.1 million in unemployment benefits. That compares to 518 in December 2014, Lennon Weller, a state Department of Labor economist, said Friday.|
Alaska faces a bleak economic future wherein its decision makers have allowed the state to become dependent on the fortunes of a volatile and risky oil business. And that risk has led to an unsustainable economy destined for bankruptcy in less than ten years. Of course, disaster could be averted with a "eureka discovery" of newfound wealth or a harsh, disciplined expense cut...so we need not be completely demoralized by the options.
Unfortunately, the governor whose experience rests on failed, self serving LNG advocacies, now advocates risking public money on equity risk in an LNG project when immediate economic realities threaten the state's economic survival:
- a state operating budget almost 90% dependent on Prudhoe Bay oil; and
- a state economy over a third dependent on the oil industry; and
- a Trans Alaska Pipeline System (TAPS) transporting Prudhoe Bay oil which is 3/4 empty; and
- oil prices that are 3/4 lower than they were 18 months ago; and
- oil production diminishing; and
- a nearly $4 billion annual operating budget serving a population of fewer than 800 thousand folks, and
- a multi-billion dollar state employee retirement unfunded liability; and
- the highest per capita spending and debtor state in the nation; and
- government constituencies seeking to impose new taxes and fees on the private sector so that the public sector can remain as unharmed as possible; and
- impartial New York rating agency creditworthiness announcements revealing an increasingly dark, Alaska economic outlook, exacerbated by a higher cost of borrowed money.
No one wants to see the economically viable construction of a gas pipeline project more than this writer, having worked directly and indirectly for or with a number of them since 1972.
But we join fellow citizens in not being willing to support public money being invested in any company's ownership, much less one involved in the highly complex, highly risky field of oil and gas.
As we walk away from the idea of paying more for pipeline risk than we can afford, like the neighbor in the other column, we can nevertheless comforted, if:
- we have endeavored to act like adults, and
- if we tried to be prudent custodians of public money, and
- if we tried to restrain our zeal for a gas project in light of economic realities, and
- if this is the heritage we should look back on later, once the present has become prologue.
We take final comfort in knowing that with many decades of gas pipeline experience, North American energy investors have the best chance of developing an economically feasible project.
Alaska's North Slope producers have the best chance of succeeding, that is, if they can be treated reasonably and fairly in a prudent state -- with malice toward none -- that finally learns how to balance a budget based on a volatile but provident source of natural resource wealth.
Sure, we may not have had the gas monetization project I wanted, or you wanted, or the governor wanted.
But, acting now with intelligence and honor, and knowing our own limitations in expertise, we and the next generation may escape from a dreary outlook, into the bright light of a prosperous future featuring a feasible, profitable Alaska North Slope gas pipe dream turned into reality.