EIA: U.S. proved oil and natural gas reserves rise in 2014
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Comment: Premier Notley, like President Obama is taking actions that can be touted at the upcoming Paris Climate Change Conference where the top UN climate change official has said the true goal of environmental activism is to "destroy capitalism". -dh |
Today, in the United States Supreme Court, nine Alaska organizations filed an Amicus Brief ….
Calgary Herald by Stephen Ewart.
Alberta Premier Rachel Notley effectively put the first limits on unchecked growth in the oilsands — through a 100 mega-tonne annual cap on greenhouse gases….
Can A "Business As Usual Attitude" Overcome Alaska's Financial Crisis?
Can Alaska be known as a place where, "a deal is a deal" and as a state not known to be, "its own worst enemy"?
Commentary by
Dave Harbour
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Comment: At a time of Alaska state fiscal crisis, maintaining high state and local government employment is counterintuitive if not obvious. Additionally, the Governor has brought in a new Medicaid entitlement program whose costs may ultimately be supported by Alaskan businesses and perhaps individuals — and which will be sure to attract even more "ne'er-do-well" beneficiaries to the state at unknown additional costs. Additionally, the governor is working with the Obama administration to bring dubiously vetted Syrian immigrants to the state, five year resettlement expenses of which are estimated to cost taxpayers almost $65K each. For Alaska, because of its remoteness and high costs, that number is probably understated. "You Can't Make This Stuff Up" Then, last month, the Governor called the Legislature into special session. To deal with an enormous annual operating budget deficit? No. To work toward a sustainable annual budget by cutting low priority programs and trimming others? No. To pass "fiscal certainty" legislation, providing Constitutional protection to the Ak-LNG project sponsors? No. No…. He called legislators into session to have them consider a new tax on those wishing to invest in one of the world's largest ever LNG export projects, then withdrew that proposal. And, he had them consider increasing the state's equity stake in a risky pipeline/LNG project whose feasibility is unproven, whose customers are uncommitted and whose cost to the state, conservatively, would ultimately exceed $15 billion. And, he provided legislators with no packet of information clarifying the purpose of their special session. And, he neglected to inform them that he had dictated to the 'independent' Alaska Gasline Development Corporation board his desire to form subsidiary corporations. And, he refused to permit certain state officials to sign acceptable Ak-LNG confidentiality agreements — a defiant act that could well stop progress on the entire project. And, this was on top of his earlier 'request' of the patient producer-sponsors that the Ak-LNG project study the option of building a 48" vs. the planned 42" pipeline, an initiative that likely cost the project 6 months of delay and an overall price increase. -dh |
Here are the most recent monthly employment statistics posted by the Alaska Department of Labor (AKDOL).
Today we will explore some relationships between responsible / irresponsible state budgeting vs. energy and other investments.
We note in these AKDOL statistics, the familiar, annual Alaska trend of increased school employment as summer ends and decreased commercial fishing, processing, construction and tourism employment as winter begins.
We are not economists, but have absorbed AKDOL stats for many years.
Anyone who has, knows that Alaska is a very seasonal place of employment for "labor intensive industries" like tourism, commercial fishing, construction, etc.
Therefore, to see post-summer season declines in these categories is no great shock though we know that a continuing, gloomy world economy could affect demand for their products and services as well and affect Alaska's economic health in a coming season.
Oil and gas industries are "capital intensive" and typically have fewer albeit more highly compensated employees filling positions that are not very 'seasonal' at all.
We never forget that those few employees create great wealth for the state and national economies, as well as for their employers.
In fact, these employees' labors pay for most of the infrastructure used by the "labor intensive industries" … also, the education and local government sectors.
As world wide commodity demand decreases, Alaska can be hit hard where it hurts. Fewer, highly paid non seasonal oil and gas jobs affect the year-around economy.
In a low demand, commodities environment, the investors make less but they also pay less tax and royalty revenue to the state, due to slowing production and lower prices per unit.
In a state choosing to become 90% dependent on oil and gas taxes and royalties, small changes in the price per barrel of oil can lead to large government deficits (i.e. as now), or unexpected, windfall surpluses.
Elected officials, therefore, need to be particularly concerned about and protective of the health of this oil and gas category–the very source of state wealth.
Alaska is in a challenging position now with oil prices hovering at below 50% the price levels of 18 months ago.
Thus, we would have expected responsible state and local government leaders to have begun cutting significant numbers of employees as well as shaving program costs to a sustainable level nine months or a year ago. Some have said, "You can't cut yourself out of this predicament!" What we've seen, however, is an increase in government employment from the beginning of the fiscal year to the present time–whose relationship to seasonal employment is not clear. A minimal effort would be to — at least — not add any new programs or employees.
For the most part, this AKDOL report, viewed in isolation, seems to reflect a 'business as usual' attitude on the part of state and local budget policy makers. They* are confronting a huge budget deficit by spending the last dollars in the State's available savings accounts–and counting for the long term on current, short-term low interest rates to fund debt. (*We say, "they" because so much of certain local municipal operating and capital projects are funded from the unsustainable state operating and capital budgets.)
Perhaps a budgetary discipline escaping our untrained eyes has already been put into motion and will become more visible in future AKDOL reports. However, the annual state operating budget shortfall ($3.5 billion, v. 750k population) is so serious and public news releases of government cuts and fiscal discipline are so muted that we fear the worst.
We fear that insufficient steps are being taken to create a balanced, sustainable state budget and at the same time retire a nearly $10 billion unfunded liability of the state employee pension program.
We fear that this scenario — if not immediately and decisively corrected — creates a toxic, anti-investment climate in Alaska that could repel investment of all kinds for decades at a time when government needs to build an investment climate based on logical and not political economic principles.
As to a major Alaska north slope gas monetization project, such as Ak-LNG, one logically concludes: The producer proponents of the Ak-LNG project have demonstrated extraordinary patience, diligence and dedication in dealing with government while trying to evolve the project into feasibility. We also observe that while the Ak-LNG project, if proven feasible, could someday begin transforming gas reserves into wealth, it could not do so before 2025. This economic injection would come too little and too late to be of much help in facing the current financial crisis.
As we evaluate State of Alaska actions related to the Ak-LNG project, we believe most of that activity would fall into categories like 'not helpful' and 'self serving' and 'time wasting'.
The best, good faith effort Alaska could now contribute to the Ak-LNG project, would be to get its own financial affairs in order — and not at industry's expense.
It could also begin cooperating with Ak-LNG sponsors in meaningful ways:
- conforming to private confidentiality agreement terms
- eliminating threats of increased taxation
- not being the cause of project delays
- providing a Constitutionally protected cloak of fiscal certainty to gas and oil producers that invest in the Ak-LNG project.
In short, why wouldn't Alaska want to become a reliable investment climate that transforms its 'Business As Usual Attitude' into a focus on 'Can Do!'
Why wouldn't citizens of the "Last Frontier" want to live in a place where "a deal is a deal" and where their government is not known for being, "its own worst enemy"?
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