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January 2010
Alliance Seeks To Save State Economy!
Alaska's Investment Climate and Her Children
Commentary by
Dave Harbour
Publisher, Northern Gas Pipelines
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A week ago, Alaska Support Industry Alliance (Alliance) members heard a chorus of industry voices commenting on Alaska's oil and gas tax regime at their annual Meet Alaska Conference (Some of 
those presentations may be found in the box-right. See Tim Bradner's opinion-NGP Photo. Find Alliance Meeting and Vendor photos here.)
Those voices to me seemed to be saying, "Here is the effect your highest-in-the-free-world-tax-system is having on our Alaska investment policy," contrary to the more sophomoric understanding some Alaskans have that such a message is, "pure propaganda".
The Alliance has taken a position calling for more moderate oil and gas taxes, and is attempting to communicate the importance of that message to Alaskans. Here is why we support the Alliance's call for tax restructuring.
God blessed Alaska and her residents with bountiful natural resources. Over time, residents have alternatively respected and abused their blessings. Alaska is currently in a cycle of abusing her non-renewable resource blessings because of a fundamental misunderstanding of her constitution and of economics. That abuse is creating lower investment and a 4-6% annual decline in oil production at the same time the state is increasing its budgetary spending by about 9%. This is a formula for economic disaster in the private sector, as the Alliance illustrates with its, "Faces of Aces" communications program. A decimated private sector will carry the State's bureaucracy down with it, together with a lot of dreams.
Last September, Governor Sean Parnell correctly reminded an Alaska audience that Alaska's constitution requires resources to be made available, "...for the maximum benefit of the people." Our main problem today is that laws seem to define "people" as today's generation, meaning that we strip every dime we can from Alaska's resources for today's generation. If we more wisely defined "people" to include our kids and grandkids, we'd forego some rather greedy taking for benefit of the current generation in favor of creating a more sustainable and attractive investment climate that could benefit future generations as well. If we were thinking of our kids, we'd also resist government welfare for ourselves. This would minimize the size of a growing government that the kids will someday inherit, if they stay in Alaska.
Alaska has become a "maximum tax"/"maximum spend"/"banana-like" jurisdiction more interested in greedily soaking every tourist with a head tax and every oil investor with a back breaking production cost burden.
Whereas Roatan, Honduras charges a cruise ship head tax lower than $10, Alaska charges $50 and adds cruel and unnecessary regulatory burdens on top of that. Whereas Alberta, Canada learned that high petroleum taxes repelled investment and is now moderating oil and gas taxes, Alaska is still learning the hard way. Alaskans are on a sure path toward the most severe depression of our modern history. Our legislative acts show we are determined to leave behind a sour investment climate to chase away generations of outmigrating Alaska kids. With an oil pipeline that is 2/3 empty, oil exploration on hold in a state 90% dependent on oil, environmental action slowing all prospective resource projects...legislative policies are putting a nail in the coffin of natural resource investment. Cruise ships are sailing away from Alaska for friendlier climates leaving in their wakes the stranded investments of vendors, empty hotel rooms and vacant municipal coffers.
Nonaligned economists agree that Alaska has one of the worst investment climates in the entire world. Surely the adults in our state will think of the kids. Surely the adults will begin to look at sustainable, long term natural resource investments as a product of our own wise development of tax and regulatory policies.
The Legislature should treat tax reform of the oil and gas and cruise ship industries as its highest priorities this year. We believe that--without going into boring detail here--the Legislature should roll back the "progressivity" feature of the production tax and reduce the percent of the take...and the complexity! They should provide constitutional or contractual fiscal certainty to gas pipeline and other investors. Legislators should also cut the cruise ship head tax to no more than $5 and eliminate all of the regulatory complexity and burden that accompanied its imposition by a 2006 voters initiative. These things should be done now, to avoid the economic perils which are fast approaching our drifting ship of state.
The Anchorage Daily News posted a story by Becky Bohrer this morning on this subject. It revealed some Legislators to be truly concerned about Alaska's investment climate. Sadly, it revealed a larger sentiment for not acting to improve Alaska's investment climate this year.
We believe that policy makers should begin to more wisely view Alaska's constitutional mandate for using our resources to benefit Alaskans. They should begin to vote on tax and spend legislation as if the lives of Alaskan children and grandchildren depended on those votes. If they don't, schools, municipalities, social programs, public safety, roads, transportation and quality of life will become casualties of today's greed.
When our policies begin to benefit this AND future generations of Alaska's people, prosperity will return, prospects for our children will flower and the world will respect Alaska as a decent destination for investment.
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Additional Alliance References: 1. Legislative Program: "Faces of Aces." 2. News Archive 3. "It's Time to Fix Aces", Standard OpEd by Paul Laird (NGP Photo). 5. Alliance Q-1 Newsletter, p. 10.
Photo: Paul Laird, Alaska Support Industry Alliance Executive Director |
TransCanada and Mackenzie in the news today - Alaska Support Industry Alliance Engages Tax Issue
CNBC Video. This morning, Governor Sean Parnell discusses Alaska's conflict with the Federal government 
over naturalresouces policy...but compliments President Barack Obama's gas pipeline statements. * Reuters, by Yereth Rosen (NGP Photo-l) TransCanada Corp <TRP.TO> and partner Exxon Mobil Corp <XOM.N> boosted their cost estimates for a planned line to carry Alaska gas to southern markets by up to 58 percent on Friday, as the two ready plans to sign up shippers for the massive project. The companies said the cost of the 1,700 mile (2,700 km) pipeline carrying at least 4.5 billion cubic feet of gas daily
from Alaska’s North Slope to Alberta will range between $32 billion and $41 billion, up from a previous $26 billion forecast. * ADN by Elizabeth Bluemink (NGP Photo-upper right). * The Alaska Dispatch by Rena Delbridge (NGP Photo-Lower right). TransCanada Corp. officials said they'll hold a press conference on Friday with partner ExxonMobil - one of the North Slope's three biggest oil and gas producers - to go over its plans to 
file 
paperwork with the Federal Energy Regulatory Commission for an open season. * KTUU by Rhonda McBride (NGP Photo-l). For decades, Alaskans have wondered if a natural gas line to the Lower 48 is but a pipe dream. Friday, we reach an important milestone. TransCanada will talk about the paperwork it will file with federal regulators to kick off its open season process, a major step towards building the line. The open season is a six-month, highly technical and bureaucratic process, but necessary to get the pipeline financed. * Downstream Today. As the developers of competing Alaska natural-gas....
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* CBC News. NWT Finance Minister Michael Miltenberger said things are looking up for the N.W.T.'s diamond mining industry, and the government is hopeful that a natural gas pipeline will eventually be built through the Mackenzie Valley.
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Alliance Story in Progress...with many photos.... See Weekend Story Here! Paul Laird, Alaska Support Industry Alliance, writing for The Alaska Standard: "It's Time To Fix ACES"
A week ago, Alaska Support Industry Alliance members heard a chorus of industry voices commenting on Alaska's brutal oil and gas tax regime at their annual Meet Alaska Conference. This week the Alliance launched an....
Analyzing Gas Pipeline Projects - See Harbour's Alaska Standard Op-Ed On Environmental Extremism
The Alaska Standard by Dave Harbour: "Not Evil, Just Wrong".
Alaska Advocate Blog by Steve Porter (NGP Photo). When analyzing a specific proposal, and especially when comparing two alternative proposals, the proposed debt/equity ratio and the return on equity are two of the most important factors in comparing the projects. Some might say that the cost of the pipeline is an important factor, but what one company estimates for the cost of the project versus what another company may estimate for the cost of the project is not really material unless it can be determined why one estimate is more than the other. For example, a forty-eight inch pipeline made out of the same grade of steel from the North Slope to Alberta should cost roughly the same whether it is constructed by Denali or TransCanada. Any substantial differences in costs should be able to be identified by some unique benefit one company brings to the table over the other. But debt/equity ratios and returns on equity create substantial financial impacts to the tariff and to the amount of revenue received by the State of Alaska from a proposed pipeline.
Statoil Enters Alaska - Alliance Launches Oil Tax Moderation Program - Not Evil Just Wrong
Commentary, by Dave Harbour. The "Not Evil Just Wrong" premiere at the Wendy Williamson auditorium on the University of%201-26-2010%209-45-42%20PM%202185x1745.jpg)
Alaska-Anchorage campus last night--presented by the Young Republicans Club but also attended by a number of democrats and environmentalists--was a GREAT educational experience. It addressed several environmental issues of the day in an even-handed way that--in being fair and balanced--will surely inflame those with environmentally extreme agendas. Every middle school, high school and college student should see it...along with the rest of us.
Alaska-Anchorage campus last night--presented by the Young Republicans Club but also attended by a number of democrats and environmentalists--was a GREAT educational experience. It addressed several environmental issues of the day in an even-handed way that--in being fair and balanced--will surely inflame those with environmentally extreme agendas. Every middle school, high school and college student should see it...along with the rest of us. The documentary was produced by veteran, Irish producers Phelim McAleer and Ann McElhinney who also appeared on the Dan Fagan and other radio talk shows yesterday in Anchorage.
Among the many pro- and anti-environmental spokespeople and vignettes were the several appearances of the Congress for Racial Equality's Roy Innis, who marched with Dr.Martin Luther King during the civil rights movement. Innis described how the bad science promoted by Al Gore and the environmental extremists was resulting in increasing hardship for the poor and those on fixed incomes--with little to no measurable environmental gain. The film provided United Nations statistics and other data verifying that Gore's fraudulent claim of a 20 foot sea level rise by the end of the century could only happen, possibly, in many hundreds of years.
The film also documented the unintended consequence of the banning of DDT: its frequent and thorough use throughout the United States before being banned eliminated much disease and did not produce the severe harm that had been predicted. On the other hand, its banning has caused the deaths of millions of Africans who have succumbed to the scourges of malaria.
Other lessons the movie documented include: 1) The science supporting the claim of polar bear population losses is in some cases wrong and in other cases absent. 2) The earth has not been warming over the last decade. 3) Energy projects denied in America end up exporting equivalent energy project jobs and allied manufacturing to countries with lax--or more lenient--environmental laws, like China and India.
Understanding environmental issues du jour is important to Americans, Alaskans, Canadian northerners and gas pipeline issue followers in general; for, as climate change legislation, EPA air emission regulations, White House Oceans Policy, endangered species designations, Canadian environmental and Aboriginal policies and carbon-to-renewable wealth distribution plans proliferate, so does the future and lifestyle of Arctic peoples hang--and sway unpredictably--in the balance.
Knowledge is power but does not come effortlessly. Leaving a warm living room last night to traverse icy roads on the way to the theater took effort, but the lessons passed on by McAleer and McElhinney far outweighed the effort.
ADN/AP. Norwegian oil company Statoil ASA said Monday that its U.S. subsidiary has acquired a 25 percent share in 50 Conoco Phillips oil leases in the Chukchi Sea off Northwest Alaska in exchange for an undisclosed sum and shares in Statoil's Gulf of Mexico operations.
ADN by Sean Cockerham. The oil industry has launched a $100,000 ad campaign aimed at convincing the Legislature that Alaska needs to roll back its oil taxes. (Comment: Sean usually does pretty good work but whoever wrote the headline for his story did him a disservice. The story describes how service companies which compose a significant part of Alaska's total, private workforce is initiating an education program aimed at improving Alaska's investment climate and related employment. The headline gives the impression that Alaska's oil companies are kicking off a propaganda program. It is a typical example of how the news media sometimes manipulates headlines to communicate something other than what the story actually says. -dh)
See Alaska Dispatch Feature On Our Digs - Tom Brennan Teaches Tax Economics to State Rep.
The Alaska Dispatch's Josh Saul (NGP Photo coming) came over for an 'interview' and walked away with video footage. Josh is a long-time Alaskan; with roots deeply entrenched here while waving in the breezes of wanderlust, his branches yearn to touch other places. He is a traveler, a writer, a videographer, a philosopher-in-the-making and one of the nicest guys you'd want to meet. During our afternoon together I was reaching a conclusion that his folks had done a great job raising him when he disclosed that they are, indeed, the owner operators of Fire Island Rustic Bakeshop, at 1343 G Street. Having visited them soon after they opened, I was a confirmed customer. So...here's to Josh and his family! -dh
Anchorage Daily Planet, by Tom Brennan. Rep. Harry Crawford, a Democrat who hopes to unseat long-time Republican Congressman Don Young, likes to point out that ConocoPhillips earned almost $7 billion from its Alaska operations between 2006 and 2008. But he doesn’t mention that the state of Alaska collected $13 billion in oil and gas taxes and royalties during that same period, a significant chunk of it from ConocoPhillips. That is a big chunk of change, people. Crawford is complaining because ConocoPhillips made $7 billion on its Alaska operations in 2006-2008, but the state of Alaska took in $13 billion from oilpatch activities. Anybody want to give Crawford a hankie to cry into.
Speakers Rap Alaska's Investment Climate
At last Friday's Alaska Support Industry Alliance meeting, a variety of experts from Alaska, the Lower 48 and Canada all characterized Alaska's investment climate as among the worst in America, North America and the World. More coming....
Whose Side Are These Alaskans On?
See our Alaska Standard column which questions the loyalty and logic of some coastal village leaders.
Governor Challenges Feds - Point Hope and Environmental Extremists Challenge Alaska's Future - Alaska Dispatch Interviews North Slope Borough Mayor Edward Itta
Governor Sean Parnell's (NGP Photo) State of the State speech last night properly challenged the Federal government for its improper attacks on Alaska's economy. "Today, however, the federal government’s actions often seem at war with Alaskan interests. The federal government has misused the Endangered Species Act as a regulatory weapon to delay development of Alaska’s resources. Now, they have proposed setting aside an area larger than the state of California as critical habitat for polar bears. I strongly oppose such overreactive ESA listings and critical habitat designations. These are job killers and beyond the feds authority."
ADN by Mary Pemberton.
Our opinion: Point Hope and environmental groups are foolishly challenging a Chukchi Sea outer continental shelf oil and gas 
exploration program in the 9th U.S. Circuit Court of Appeals this week.
These activists are aligning themselves with the Obama Administration philosophy that Governor Sean Parnell properly criticized in his State of the State speech last night. He said that, "...the federal government’s actions often seem at war with Alaskan interests," and how right he was! But some coastal village leaders have adopted the legal strategy of some of the most aggressive opponents of Alaska's economy. Those rural leaders are misleading their people into opposing the very industry that sustains their culture. Without oil and gas activity, how can the State afford to support rural schools, power cost equalization, or provide the various social service jobs in the villages?
If coastal leaders who are marching with Outside environmental activists want to return their citizens to a pre-pipeline culture, that is within their power. But if they do, they should not expect to continue receiving all of the blessings of an oil and gas supported civilization that enables them to sustain a subsistence lifestyle in relative comfort.
The Legislature should take a long hard look at this situation. Without the prospect of an OCS future, the economic outlook for the entire state is at risk. The enlightened self interest of the Bush Caucus along with House and Senate Majority and Minority caucuses should cause these leaders to carefully consider their options when faced with the reality that our children's generation may well be inheriting an economy which has been mortally wounded by a small band of well-intended northern coastal leaders possessed by extraordinarily poor judgment. -dh
Jill Burke of the Alaska Dispatch analyzed this very issue yesterday: "Last week, Alaska Dispatch ran a story about the North Slope Borough's position that oil and gas exploration, and the money that comes with it, is a now an essential element of modern Inupiaq life. This position is in contrast to oil industry opponents, who feel industry threatens the land and sea with unacceptable risks to marine mammals and the environment -- risks that threaten the traditional way of life Alaska's indigenous arctic residents are fighting to preserve. North Slope Borough Mayor Edward Itta (NGP Photo) felt our story, while accurate, failed to convey the complexities of his seemingly contradictory positions."
Big Alliance Meeting: FRIDAY!
SEE THE EXCITING AGENDA HERE, FEATURING: GOVERNOR SEAN PARNELL (Photo), EXXON PRESIDENT RICH KRUGER, SHELL EVP DAVID LAWRENCE, CONOCOPHILLIPS SVP LARRY ARCHIBALD, BP EXPLORATION ALASKA PRESIDENT JOHN MINGE, U.S. CHAMBER's POLICY VP CHRISTOPHER GUITH,
IT'S NOT TOO LATE TO REGISTER: CLICK HERE
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Alaska Dispatch Blog by Jim Behlke. According to a December 27, 2009 Toronto Star article, the proposed 760-mile Mackenzie Valley Natural Gas Pipeline from northwest Canada's Beaufort Sea coast to Alberta had an estimated cost (in 2003) of as low as C$2 billion.
