Alaska Governor Continues Career-long "Brawl" With Alaska Oil Industry
ADN, Op-Ed by Paul Jenkins, Anchorage Daily Planet. If reasoned leadership in this state sold for $1 billion a gram, we would have to scratch like chickens in a dusty barnyard to come up with a penny’s worth. If we could peddle ineptitude for a dime a ton, we would be rich.
Let’s review: Our Swiss cheese fiscal ship is belly-up and sinking like a stone. Alaska suffered a $3.5 billion deficit last year; it faces $3 billion in red ink next year. Oil pays the bills. Its prices are skidding and may crater. Credit-rating agencies are circling like vultures. There is talk of taxes, using Permanent Fund earnings, almost anything to raise money. There is little — make that no — good revenue news on the near horizon. In short, we are well and mightily hosed.
The only glimmer: Alaska is partner to ExxonMobil, ConocoPhillips, BP and TransCanada in building a proposed $65 billion Alaska LNG Project. The idea is to pump North Slope gas through an 800-mile pipe to Nikiski for liquefaction and shipment to Asian buyers. The project is in its earliest phases, and even if completed, will not pull the state’s fiscal fat out of the fire. In fact, according to Larry Persily, former federal Alaska gas line coordinator, it likely would generate only $1.5 billion in net revenues annually to the state general fund when operational — not enough to fully fund state government, but a nifty start.
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Gov. Bill Walker has apparently spent so much of his professional life as a lawyer brawling with the oil industry he sees conflict as de rigueur. Since election, he seemingly has spent as much time and energy trying to sink the LNG project as he has trying to make it fly.
Hey, he announces in a commentary published in Alaska Dispatch News, let’s expand the $10 billion Alaska Stand Alone Pipeline to compete with the LNG project — just in case the companies do not do what we want. He wants to bleed off $100 million or so from the Constitutional Budget Reserve, buy out TransCanada, expanding Alaska’s ownership — and risk — to 25 percent of the entire project, not just 25 percent of the LNG plant. Now, he wants to expand the project’s pipeline diameter to 48 inches, adding $40 million to the price tag for studies and possible delays.
His kibitzing finally set off ExxonMobil Chairman Rex Tillerson, who fumed Alaska is its own worst enemy, changing horses in the middle of every stream it crosses.
For his part, Walker says it is unthinkable producers may not market their gas and he demands “project certainty” from them, ignoring business reality: It must make economic sense no matter what he wants. (Regardless of the governor’s skepticism, an Alaska Oil and Gas Conservation Commission filing by BP and ExxonMobil last month seemed to indicate they are dead serious about the project.)
Yet, there is his most recent insanity — the call for a reserve tax on gas not earmarked for the project.
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“It’s time Alaska acts like the sovereign that we are, and make sure we have some leverage and act as an owner state,” Walker told The Associated Press.
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Look at it from the companies’ perspective: The state is a partner in the project — until it wants something. Then, it becomes a sovereign taxing authority and steps back to flex its muscles. Afterward, it comes back to the table as a partner. How is a company with fiduciary responsibility to its shareholders supposed to deal with that?
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Alaska, indeed, is a sovereign state, but Walker is not king. He cannot muscle private companies — any companies — into something uneconomic. Threats, heated rhetoric, taxes, bullying, state-funded competition — none of it gets us closer to a gas line. It may, in fact, get the state closer to losing partners….
Paul Jenkins is editor of the AnchorageDailyPlanet.com, a division of Porcaro Communications.
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