AJOC by Tim Bradner With about two weeks left on the clock, the 2015 session of the Legislature seems set to end with a big bang. A collision is shaping up between legislators and Gov. Bill Walker (NGP Photo) over the governor’s vision of a large state-led gas pipeline.
Notes from the road: We have little time to write while traveling (Today in L.A. on the way to Anchorage). We do note that as the Alaska legislative session comes to an end our greatest concerns are:
- Administration interference with Ak-LNG project by even talking about government involvement in a competing project; and
- Administration support for a poorly thought out, government sponsored Interior Energy Project; and
- Administration not using bully pulpit to support adequate spending cuts (i.e. the State Chamber calls them 'cosmetic') to create a sustainable government going forward...along with legislative proclivity to not cut spending due to last day 'trading' of special interest projects; and
- Legislative initiative to create requirements for Regulatory Commission of Alaska to approve expensive, non-economically feasible alternative energy projects, subsidized by utility ratepayers (HB 78); and
- In wake of low oil prices, lack of will to cut government spending, hostility of governor toward industry/legislature/Ak-LNG project, we anticipate the Governor working with certain constituencies to increase oil taxes within the next year or two. Hoping this to be incorrect but fearing it isn't, we could foresee an "economic death spiral" wherein lack of spending discipline begets higher oil taxes, which begets lower oil industry capital spending, begetting lower production, which begets even lower state revenue, resulting in higher oil taxes, and so forth.
- Faced with such challenges, we believe Alaska's bright future can only unfold with leaders possessing wisdom, a spiritual connection with our creator and a commitment to become honest, effective communicators.
Governor Bill Walker today stated his support of two recent announcements on Arctic offshore oil and gas exploration.
On Tues., March 31, the U.S. Department of Interior issued a Record of Decisionaffirming Chukchi Sea OCS Oil and Gas Lease Sale 193 and the remaining oil and gas leases issued in 2008 as a result of the sale.
“I’m pleased Interior Secretary Sally Jewell has taken a thoughtful and balanced approach to oil and gas leasing,” Governor Walker said. “This is an important step toward responsible Arctic exploration.”
Governor Walker also said he is encouraged by the National Petroleum Council’s report to the U.S. Secretary of Energy. The 500-page report contains a series of recommendations that reflect the Walker-Mallott administration’s goals for sustainable and responsible development of the outer-continental shelf and greater Alaskan engagement.
“As the United States assumes chairmanship of the Arctic Council this month, I’m pleased to see NPC recommends more investment in and coordination of offshore Arctic oil and gas research,” Governor Walker said. “The U.S. is an Arctic nation because of Alaska. This detailed and non-advocacy report underscores the importance of Alaska’s oil and gas resources to the nation.”
Department of Natural Resources Commissioner Mark Myers and Senator Bert Stedman are the only two Alaskan members of the NPC, an oil and natural gas advisory committee to the U.S. Secretary of Energy.
(National Petroleum Council report: http://www.
(Readers will understand the importance of this alert after reading today's commentary, below. -dh)
Related Commentary: "The Sting"
"Today, we are releasing the first Report on the Implementation of the National Ocean Policy, which highlights the progress we’ve made since we released an action plan last year. From supporting the ocean economy to ensuring the security of our ports and waterways, and from improving coastal and ocean resilience to providing local communities with tools to plan for a better future, we’ve made tremendous strides in undertaking our role as responsible stewards of this Nation’s great oceans.
"Among the activities described are a host of steps to promote sustainable energy development and aquaculture practices—including ensuring that permitting processes for these activities are...."
This massive undertaking -- which will ultimately affect all waterways feeding the Great Lakes and Oceans -- is a regulatory monster created by President Obama early in his first term. See our original, 2009 report here. See strategy of NOAA support here.
The oceans, Great Lakes, and all waterways and lands surrounding them are destined to be regulated under a new regime called, ecosystem-based management (EBM).
Our astute, NGP readers can just imagine the havoc that Obama, Kerttula and their massive grass roots constituencies can bring to America's traditional use of our waters.
Not only does this effort threaten any natural resource activity in Alaska (i.e. which has 3/4 of America's coastline and over 3 million lakes, rivers and streams), but can severely affect every single American.
The direct effects will be felt by commercial fishermen and others who make a maritime living--and even farmers whose activity on private land can be deemed to affect waters leading into lakes and oceans.
Indirect effects will descend upon every American who will ultimately pay for the cost of this regulation and with more jobs exported to countries which do not have such regulatory obstacles.
The final insult to our way of life is that this whole, massive effort is unapproved and unfunded by Congress.
Obama has done it all by Executive Order and memorandum. It is run under the cover of the White House's Council on Environmental Quality and by his order, dozens of government agencies are indirectly funding the effort -- redirecting their own congressionally approved funds and people to this dangerous activity.
We believe that this is one of the greatest examples to date of Obama's unconstitutional usurpation of Congressional powers.
We also wonder why more Governors and Congressional Delegations are not literally handcuffing themselves to the White House fences until this sort of illegal activity ceases.
Until and unless relief from such usurpation comes from some as yet unidentified champion, we can only conclude that America's rule of law is finished and that we have entered a new era of elected fascists who create law out of thin air by the memorada edicts and Executive Orders.
Oh, and about DOI's affirmation of Lease Sale 193 yesterday, good luck.
Yes, we have been set up and stung again and again; and this is the latest sting by this administration.
American citizens have, indeed, been played for fools by those they elected.
Commentary: "The Set Up".
Yesterday, the Department of the Interior issued a Record of Decision affirming Chukchi Sea OCS Oil and Gas Lease Sale 193 and the remaining oil and gas leases issued in 2008 as a result of the sale. Press release (Comment: Now that DOI has finally validated its own lease sale (i.e. and long ago accepted payment by industry), observers will now watch carefully to see if the regulators deny access through the permitting process. We hope the outcome is not a statement months or even weeks from now to the effect that, "Our policy is that exploration and development should occur in these areas, but only under responsible conditions. To date, those applying for permits have not demonstrated that exploration -- much less development -- can occur responsibly in these areas. Accordingly, the applications for permits are denied." -dh)
The Alaska Senate passed a bill Tuesday that would temporarily restrict participation by a state-sponsored corporation in an alternate gas pipeline project proposed by Gov. Bill Walker.
The vote followed a failed attempt by legislative leaders and Walker to reach an agreement.
The vote was 13-7, but notice of reconsideration was given, meaning the bill could be voted on again before advancing. It passed the House last week.
Walker has said he would veto the bill. A legislative override would require the support of at least 40 legislators.
Our Quick Takes On Current Alaska Journal of Commerce Headlines:
Legislation introduced to level playing field on utility tariffs - Don't be deceived; a trick to get ratepayers to pay more for subsidized, alternative energy schemes. -dh
Several options on table for delivering gas to Fairbanks - The government presence and subsidies required make this more an experiment in socialism than a valid, market-driven project. -dh
ConocoPhillips moves ahead with Slope project at Kuparuk - Kudos to COP for patiently dealing with a difficult regulatory environment. -dh
Resources Committee takes up gasline board appointments The lack of experience of the new board members, compared to the ones Governor Walker fired, could make for troublesome confirmations. -dh
Caelus Energy sanctions development of Nuna - Could this be a much bigger find than is now known? -dh
Hilcorp Energy keeps up spending despite oil price slide - More respect and kudos to one of Alaska's great new companies. -dh
From Brent Greenfield, National Ocean Policy Coalition (Mentioned in commentary, right column. Please act today. Note that our preference would be to defund the entire, ocean policy process completely and surgically remove all funding from all agencies devoted to supporting this unfunded government program. You can support the NOPC letter but we would recommend separate letters to your Congressional delegations recommending total defunding. -dh)
Newsmax by Ken Mandel. The Keystone pipeline project transports oil from Canada to refineries in Illinois and Texas via eight U.S. states. Completed in 2014, a shortcut known as the Keystone XL was approved by Congress the next year, but vetoed by President Barack Obama.
The debate continues to rage. Here are eight quotes from oil company executives, who stand to benefit from the pipeline's construction:
1. "Anything could happen, we don't know, but we remain confident that when Keystone is ultimately built, it will be the safest pipeline that has ever been constructed in this country." — Andrew Craig, TransCanada's land manager for Keystone projects and development, told NBC News.
Forbes (3/27/15) editorializes: “This Saturday marks the seventh annual observance of “Human Achievement Hour,” a celebration of technology and prosperity hosted by my organization, the Competitive Enterprise Institute. Originally created as an alternative to the World Wildlife Fund’s “Earth Hour” campaign (which urges people to turn off their lights in the name of environmental conservation), Human Achievement Hour counters widespread predictions of environmental and societal doom.”
Posted: 31 Mar 2015 11:21 AM PDT
By Mark Edwards
Today we wrap up our series on the Alaska Economic Update. Over the past three posts, we have looked at oil prices, jobs, and population. We wrap things up today with the housing marketing and the building environment. For the complete Alaska Economic Update as well as other important studies, visit our ‘Resources’ section.
Home lending activity flat - The Alaska Housing Finance Corporation (AHFC) released its third quarter report on Alaska housing indicators. It tracks new loan activity for single family homes and condominiums in Alaska. The data is based on a survey representing approximately 95% of mortgage lenders in Alaska and also includes AHFC loans. The survey covered mortgage lending activity in the first nine months of 2014.
It reported 6,889 loans were originated statewide for single family homes and condominiums for a total amount of $1.8 billion. This is nearly identical to the volume in the first 9 months of 2013. Loans were done with an average down payment of 11% for the last five years. Single family homes accounted for 87% of statewide mortgage lending activity with 52% of those loans occurring in Anchorage. The Mat-Su contributed 18% of the volume, 10% in Fairbanks, 8% in Kenai, 5% Juneau, 2% Kodiak, and 1% in Ketchikan.
10% of total mortgage activity for the quarter was for condominiums and only 3% was multi-family. 91% of condominiums were financed in Anchorage. Juneau accounted for 5%, and the Mat-Su, Kenai and Fairbanks 1%.
Refinance activity slowed rapidly in 2014, but may rise as interest rates are falling again - 30 year conventional fixed interest rate mortgage loans have been getting less expensive for three decades. In 1981 they peaked at 16.6% and have undergone a slow and steady decline ever since. In early 2009 rates dipped under 5% on average for the first time and a surge in refinance activity began.
According to AHFC statistics, there was less than $200 million in refinance loans completed per quarter in Alaska in 2006 and 2007. In 2008, the average rose to $400 million. Then in the first quarter of 2009 the activity spiked to $1.4 billion, followed by $1.2 billion in the second quarter. During this time, the average 30 year interest rate declined nearly 1.5% in six months.
The refinance pace slowed somewhat in the last half of 2009, but still finished the year with $3.7 billion in refinanced mortgage loans according to AHFC statistics. In 2010, the refinance volume declined to $2.4 billion, followed by $2.1 billion in 2011. 2012 saw an unexpected decrease in interest rates again to an all-time historic low of 3.3% by the end of the year. This led to an increase to $3.1 billion in refinance activity.
Rates increased throughout 2013 and you can see on the far right of the graph, the result has been a steep drop off in refinance activity. Rates began declining again last year and finished 2014 at 3.86% on average. AHFC data is only available through the third quarter of 2014 at this time, so we have not yet seen the year end results. Rates continued lower in February to 3.71%. This should be a positive trend for both home sales and refinance activity this year.
Housing statistics still good relative to the U.S. – The recently released survey by the Mortgage Bankers Association shows that Alaska continues to have some of the lowest levels of foreclosures and delinquencies on residential mortgage loans in the United States. Through the third quarter of 2014, Alaska ranked 5th and 7th best in the nation out of 50 states in foreclosures and delinquencies of all loan types.
The total inventory of foreclosures in process is 0.9% in Alaska, while the country has a much larger lingering foreclosure inventory at 2.4% due to higher rates during the recession and longer resolution times. These rates are an improvement from four years ago when Alaska’s rate was 1.4% and the U.S. foreclosure rate was 4.6%.
Delinquent loans are more than 30 days past due, but not yet in foreclosure. Alaska is fifth best behind North Dakota, South Dakota, Montana and Hawaii in the overall level of delinquent loans. Alaska’s delinquency rate is 3.6%, while the U.S. average is 6% for all loan types. This is an improvement for Alaska from 4.8% four years ago. The U.S. delinquency rate has also come down more dramatically from 9.4% at this time four years ago.
Subprime lending to traditionally non-qualified borrowers was a large contributing factor to the national mortgage problems. The survey covers 95,176 mortgages in Alaska. 6,110 or 6% were considered subprime, compared to 9% nationally. The rate of delinquencies and foreclosures on subprime loans is significantly higher. However, Alaska is in a far better position and again leads the nation as having the lowest level of foreclosures and is second in delinquencies for this important category. Subprime foreclosures in Alaska are at 2% while the national average is 9.8%. Alaska’s subprime delinquency rate is 9.4% compared to the national average of 19.3%.
Building permits up 430 units in 2014, but still historically low - According to the U.S. Census Bureau, the number of building permits for new, privately owned housing of 1 to 5 unit buildings remained low for the 8th straight year. It had been under 1,000 units since 2007, but in 2013 it grew 9% to 1,081. Last year saw a dramatic jump up to 1,509. However, this is still half the level seen 10 years ago.
Growth in single family homes increased from 877 to 1,114 last year. The number of duplexes permitted fell from 66 to 50. The number of structures with three or four living units decreased slightly from 49 to 45.
The other major growth area beyond single family homes was in multi-family. The number of structures with five or more units climbed from 10 in 2013 to 33 in 2014. In terms of housing units that meant a growth from 87 to 300 last year. The biggest challenge has been making new construction affordable enough to meet buyer’s income levels. There is a shortage of low cost housing in Anchorage. Vacancy factors are very low and the number of existing homes under $350,000 is in short supply. It appears builders have started to take more risk in this market segment, likely aided to some extent by government subsidy programs. Anchorage is expected to follow other growing cities by becoming denser, building vertical and redeveloping older properties.
We want to work with our new Governor to progress this great State forward, especially knowing
The two legislators above created the Alaska Gasline Development Corporation (AGDC) concept as an insurance policy for transporting Alaska North Slope (ANS) gas to citizens and to an export facility.
The current governor - who opposed the AGDC/ASAP gasline concept before he supported it .... more coming....
...en route from South America to a stop in Mexico City, then two days in LA, then home to Anchorage.
We apologize if the posts are a little more infrequent than usual.
the difficult times before us. We respect that he is our Governor, duly elected by Alaskans, and we appreciate the respectful acknowledgement that we, too, are representatives duly elected by Alaskans. We all have Alaskans’ best interests at heart, and want a future of prosperity and opportunity in our State.
While we believe we share many of the same goals and values as the Governor, we differ as to the approach to natural gas development that will deliver the greatest benefits to Alaskans.
Let us be very clear about what we want: We want to commercialize natural gas for the highest value possible, for the Permanent Fund and for the Treasury, so that every Alaskan may share in the wealth of our resources. We want affordable natural gas to flow to our communities that still suffer under the fluctuating prices of fuel oil. And we want a project that includes the necessary elements — including participation of the North Slope producers and the State — for real success, as soon as responsible project engineering and -permitting allows.
The Legislature found that project with the Alaska LNG Project, in which the state is a 25 percent owner.
But we also preserved our ability to pursue a different project, if the Alaska LNG Project does not progress into the next development stage. We have that in the 36-inch line that the Alaska Gasline Development Corporation has developed. It is in prime position to alter if necessary — and if the Alaska LNG Project does not prove viable, we’ll know what adaptations we must make in order to offer a viable project. To increase its size now, to an arbitrary, unsupported volume, is not a prudent use of funds. That does not provide us a viable alternative should Alaska LNG not progress.
The Governor has indicated he sees success in a different framework. Unfortunately, to date, neither he nor his administration have shared those details with us and with the Alaska public. He submitted a letter to the Senate Resources Committee on Friday with some explanations for his alternative approach, and we appreciate that. But Alaskans need to know details. What about the LNG component — who owns that? And the pipeline — is the state to shoulder 100 percent of the risk and cost? Who will ship gas, if one or more of the producers remain engaged in Alaska LNG? If all 3 producers are not partners, how will the state determine its gas share — and is it enough to support our level of equity ownership? We want to better understand the terms and structure of his proposal in order to conduct the rigorous vetting and analysis that will allow us to make an informed, responsible decision on a forward course.
The government process is about thorough, open review of ideas, in the form of legislation, that leads to policies. We hold hearings; explore details; call for experts to analyze and model impacts; vet each and every aspect; hear from the public; undertake legal review; and, finally, debate on whether a policy should be adopted.
It is how Alaskans came to be owners of the Alaska LNG Project; through a deliberate, well-investigated decision.
Certainly, we would have preferred not to have introduced legislation — House Bill 132 — to temporarily restrict an alternative, conflicting approach and to keep Alaska LNG on track. However, we were compelled to, out of grave concern that the Administration’s approach would threaten the viability of the tremendous opportunity before Alaska in the Alaska LNG Project. A project that is on time, on budget, and on track to success. And unfortunately, the few details offered by the Governor’s letter reaffirm that it is more imperative than ever to pass HB 132, as his approach clearly creates a competing alternative that threatens the state’s investment in and the success of Alaska LNG.
The details of any project are crucial. At stake are the value of our royalty gas, which feeds the Permanent Fund; our state share in production, property and income taxes that support the treasury; the availability and cost of gas for Alaskans; and future North Slope resource development. Variations on the SB 138 framework can have significant consequences. These details were not part of the Governor’s letter — and we must have these details in order to make a deliberative decision on natural gas policy, and the responsible fiscal choices our constituents demand.
We want to work together on a path forward that is responsible, allows for public understanding and input, and does not recklessly waste state money pursuing options that lack a proven, commercial foundation. Competing with ourselves, while confusing our partners and the markets, is not in our best interests.
Speaker of the House Mike Chenault represents Niksiki and Rep. Mike Hawker represents Anchorage in the Alaska House of Representatives.
Shell rigs head to Alaska prior to possible federal permit - Royal Dutch Shell is bringing oil rigs Noble Discoverer and Polar Pioneer to Alaska as it anticipates possible federal approval to resume drilling activity in the Arctic waters, a spokeswoman said last week. "Any final decision to go forward with a 2015 season will depend on successful permitting, clearing any legal obstacles and our own assessment that we are prepared to explore safely and successfully," she added. Reuters (3/27)
Lukoil might be about to get the Kremlin’s blessing for oil drilling in Arctic waters.
The economic crisis and Western sanctions that have made Rosneft and Gazprom projects in the Arctic harder to carry out might lead to a change in Russia’s approach ... Kommersant reports.
According to the newspaper, the presidential administration supports softening the strict regime of permissions to work on the shelf. An assistant to President Vladimir Putin, Andrey Belousov, is one of the main lobbyists.
Fairbanks News Miner — The Senate Resources Committee advanced legislation Friday that temporarily would restrict participation by a state-sponsored corporation in an alternate gas pipeline project proposed by Gov. Bill Walker.
The bill, which Walker has said he would veto, could get a vote on the Senate floor next week. House Speaker Mike Chenault, the bill's lead sponsor, said earlier in the day that he was fairly confident legislators would have the votes needed to override any veto. More....
“Art Hall, who runs the Center for Applied Economics at the University of Kansas School of Business, was forced last year to file a lawsuit to try to stop a state records request from student activists demanding his private email correspondence for the past 10 years. Mr. Hall’s sins? His center got a seed grant from the Fred and Mary Koch Foundation, and he testified against green energy quotas at the state legislature last year...Disclosure is becoming the left’s new weapon. And it’s shutting down debate across the country.”
Hearst Newspapers by Jennifer Dlouhy.
The United States should move swiftly to harness the tremendous oil and gas reserves locked under its Arctic waters while the industry improves the equipment used to drill wells and sop up spills, according to a government advisory committee report released Friday.
The analysis, conducted by the National Petroleum Council at the request of Energy Secretary Ernest Moniz, makes the case for the United States to aggressively develop Arctic oil and gas that can help supply the country with energy long after production tails off from onshore fields. More....
Lately, the Alaska Legislature has been talking a lot about the gas pipeline. Under Gov. Sean Parnell, Alaska signed a deal with Big Oil that would build one from the North Slope down to the Kenai Peninsula. By all accounts, that pipeline’s looking like the best way to keep Alaska from going broke in the middle term.
Of course, we’ve thought the same thing before. We thought it about the El Paso proposal, the Foothills Gas Pipeline, the Yukon Pacific Corp. pipeline, the Alaska Gasline Inducement Act and the Denali Gas pipeline. We’ve thought it about bullet lines and small-diameter lines.
The AK LNG — Alaska Liquified Natural Gas — pipeline might yet turn out to be another broken dream. If that happens, the state will be in true financial trouble.
With so much at stake, doesn’t it make sense to have a spare tire?