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Northern Gas Pipelines is your public service 1-stop-shop for Alaska and Canadian Arctic energy commentary, news, history, projects and people. It is informal and rich with new information, updated daily. Here is the most timely and complete Arctic gas pipeline and northern energy archive available anywhere—used by media, academia, government and industry officials throughout the world. Northern Gas Pipelines may be the oldest Alaska blog; we invite readers to suggest others existing before 2001.

 

3-18-14 Senate Adopted Gas Pipeline Legislation Tonight

18 March 2014 10:27am

KTUU.  The Alaska Senate has passed legislation aimed at advancing a major liquefied natural gas project, over nagging concerns about the role of TransCanada Corp.  The vote was 15-5. 

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3-17-14 Is Alaska Flirting...?

17 March 2014 4:53am

Is Alaska Flirting With The Last Gas Pipe Straw?

Competition Perspectives: Part IV (Part IPart IIPart III)

by 

Dave Harbour

We had written a very long commentary which tried to shed light on the effect of currently discussed issues on Alaska investment climate competitiveness.  We then delved into the effect various pending decisions could have on prospects for an economically feasible gas pipeline.

And we concluded that, as in Canada's MGM case, investors would do the best they could until the day a straw "broke the camel's back," resulting in an unhappy press conference that catches everyone off guard.

Acknowledging to ourselves today that the whole political structure of Alaska is focused on resolving gas pipeline issues, we decided to not add our voice to the suite of cacophonous debates.  After all, the symphony of special interests will sing and toot for their own ends no matter what we may think.   

Instead, we will offer to readers who may find them interesting, rationale applying to current sub issues of the gas pipeline debates:

1.  Efforts to force use of gas pipeline project labor agreements (PLAs), by LAW, will have at least several major effects:

  • Even if investors were to want PLAs, forcing them to use PLAs by law makes their bargaining position with unions weak.  To get the best deal for shareholders and the lowest transportation costs for consumers and the highest royalty and tax returns for government requires the investors to secure the most reasonable and competitive possible employee costs  (i.e. which we are told could approach a third of the $45-65 billion project cost).  If unions which will negotiate PLAs with investors, know there will be no pipeline without PLAs they can hold out for exorbitant hourly rates and benefits.  Indeed, their negotiations could push the project into a competitive wilderness from which no viable project would emerge.
  • PLAs will not, as advocates claim, further the hiring of Alaskans.  Virtually all competent and qualified oil & gas  backgrounded Alaskans in this lightly populated state are now employed.  It would be in the interest of investors to hire as many long time, qualified Alaskans as possible.  Having a several year boom-time of pipeline jobs will -- as with the Trans Alaska Pipeline System (TAPS) in the 1970s -- suck much qualified talent away from existing Alaska employers forcing them to hire 1) less qualified Alaskans, and/or 2) immigrants to Alaska.  After construction, the long term, qualified Alaskans who left normal, private sector jobs will be faced with taking less attractive jobs in the normal market or moving away from the state to oil and gas projects that demand more experienced talent.  The real beneficiaries of government-forced prevailing wage/PLAs are unions that can expand membership, collect dues and use that wealth, in part, to support their favorite political candidates.  Accordingly, lawmakers should be wary about interfering too much with the invisible hand of economics and free enterprise less they reap unintended -- rather than utopic -- results.  In political debate, union apologists, claim that a union negotiated PLA still allows non-union companies to bid on pipeline work.  While true, the larger effect is to raise the hourly wage scale of employees to an artificial, negotiated level above competitive market rates which both union and non-union employers would have to pay.  It certainly does "even the playing field" between union and non-union companies, making it no more advantageous to hire competitive non-union than union contractors.

2.  "Pay-offs".  We have warned over the years that the singular focus of "monetizing Alaskan resources" is in the constitutional best interest of Alaskans.  With maximum monetary value derived from natural resources, the legislature and governor can then allocate the money to public uses.  However, special interest advocates claim that the gas resource must --by law -- provide more than monetary benefit to Alaska.  Some rural politicians have even said they would only support current gasline legislation if their remote communities receive a direct benefit of the pipeline.  Monetizing Alaska's gas to help the state continue delivering programs throughout Alaska is not enough.  This is where politicians encounter a thousand rabbit trails, seducing them into tempting areas far removed from simply monetizing the gas.  For example:

  • Alaska communities not near gas pipeline facilities will argue for funding socialized energy programs in their areas.  
  • Some might ask for propane to be split off from the gas stream and provided to them via subsidized projects.  
  • Some will ask for subsidized LNG/barge distribution projects to serve coastal communities.  
  • Some will want subsidized LNG storage and local distribution facilities, because their cost will be exorbitant.
  • The pipeline project involves a state agency (i.e. Alaska Gasline Development Corporation {AGDC}).  That will usher in other challenges, including both subtle and bold requests from public officials, friends, family and private influence leaders to provide employment, contracts and other favors involving public funds.  Without a formal audit procedure, public monies and project performance are at risk.
  • Then, there will be those who will politically harass investors (i.e. oil and gas companies) to subsidize the cost of natural gas, LNG and propane to their communities in return for not molesting them with tax bills during legislative sessions or tax referenda at any time.
  • Many of these unanticipated burdens accompanying state participation in a private project can not only lower state income but also increase state operating costs.

Our Gentle readers can see why we decided against publishing a longer treatise on this matter today, as the Alaska Senate and then the House approach decisions on Alaska gas pipeline Senate Bill 138.  There is much more that could be said, but it could only add to an impression that we are "just being negative", rather than what we believe we actually are: optimistic by nature, but realistic.

Even after reading this summary of current challenges, we believe reasonable minds will conclude that the weight of government interference in a private enterprise project inversely affects the project's efficiency and competitiveness. 

So, question: rather than just be relegated to the critics' peanut gallery, what would we be inclined to do were we to have absolute power?

Answer: We would sell oil and gas leases in the private market for the highest price.  We would loudly proclaim that, "in reliable Alaska, a deal is a deal and we put great value on protecting our reputation".  While our constitution gives us the sovereign power of taxation, we are loathe to use that power selfishly, negatively or in ways that diminish our integrity as a respected, sovereign state.  We would endeavor to never change the tax/royalty/regulatory rules of the game affecting an investment for at least 20 years--except to moderate the impact of those burdens in response to logic and our competitive position with respect to competing markets.  We would control the nearly insatiable appetite for increased spending beyond our means, knowing that run-away spending could force us to raise tax burdens and decrease our competitive ability to attract investment.  We would not impose any unnecessary costs (i.e. "must haves") on energy projects that diminished the maximum monetary returns; we would then be free to consider use of those maximum returns for social or capital needs of our citizens.

In this way, we would seek to not add an unnecessary and burdensome straw to the back of a project that needed every possible advantage to compete in the world energy marketplace.  

We would not risk adding one single incremental project cost that could kill a project.  

We would not flirt with disaster.

And that, Dear Reader, would lead us to become a place in the world where investors have confidence that, "a deal is a deal".

(We invite comments!)


Today's gas pipeline related energy links from the Office of the Federal Coordinator:

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3-16-14

15 March 2014 10:54am

KTOO by Ed Schoenfeld.  Gov. Sean Parnell wants to look for ways to get natural gas to Alaska’s coastal communities. He says a gas line and LNG plant could benefit more than Railbelt communities.

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3-15-14

15 March 2014 10:47am

ADN by Lisa Demer.  Bethel's senator opened up the governor's natural gas pipeline legislation Friday and successfully inserted a new special energy fund that would bring cheaper energy to rural Alaska or any part of the state that wouldn't get natural gas directly.       .   .   .     Senate Bill 138 now is scheduled for debate, the possibility of more amendments and a vote before the full Senate on Tuesday. The measure sets a path to state investment in a liquefied natural gas project and pipeline estimated to cost $45 billion to $65 billion, and makes the state a partner with oil and pipeline companies.      ....     The measure's impact was broadened Friday when Sen. Lyman Hoffman, D-Bethel, engineered a change that would set aside a percentage of the state's natural gas ownership share, or royalty sales, for rural Alaska energy projects. Hoffman estimated $100 million a year could go into the new rural capital energy fund, starting a decade or so from now.     .....     "This is going to go a long way to make Alaska a more affordable place for most Alaskans," Hoffman said.  (Note: When politicians talk about making something more 'affordable' they are talking about taking something from someone to subsidize something for someone else.  It is total, Orwellian doublespeak.  -dh)

 

3-13-14 Is Alaska Flirting With The Last Gas Pipe Straw?

14 March 2014 2:59am

Is Alaska Flirting With The Last Gas Pipe Straw?

Competition Perspectives: Part IV (Part IPart IIPart III)

by 

Dave Harbour

​(Read More)


John Hofmeister, energy policy, Shell, Oxford Club, Photo by Dave Harbour

Our friend, John Hofmeister (NGP Photo), former Shell President, offered this "quotable quote" on the energy situation during his interview with the Oxford Club's Energy and Infrastructure Strategist Dave Fessler:

 

Please Consider Testifying TodayFriday, March 14 on HB 77: Improve Alaska's Permitting Efficiency (We at NGP believe this is one rather small but important way citizens can improve Alaska's investment climate--rather than our usual challenge to fight off additional investment climate attacks!  -dh)

Our friends at the Fairbanks Chamber of Commerce are encouraging citizens to testify in support of  House Bill 77 during the Senate Resources Committee meeting tomorrow. The Chamber's Board of Directors has adopted, as one of the Chamber's 2014 legislative priorities, to increase responsible resource development through the permitting process.  (Read More Here)

"...if we keep the current level of government, where we have the executive branch with 13 agencies governing energy, plus the White House, 26 Congressional committees and subcommittees in Congress, both the Senate and the House, 800 federal judges, 50 states, 50 state governors, 50 state legislatures, 50 state court systems. Then you get to the municipalities and the counties of the country. You have thousands and thousands of governmental units that are fragmenting what it is that the energy industry is trying to do to bring molecules and electrons to the American people for their use. And that governance is so fragmented it can't work."


Is Alaska Flirting With The Last Gas Pipe Straw?

Competition Perspectives: Part IV (Part IPart IIPart III)

by 

Dave Harbour

Earlier this week, the folks at Alaska Public Media reminded us that the republican-led Legislature is dealing with another dimension of gas pipeline competition, an added cost: legislated labor rates.

More coming...!

 


Please Consider Testifying TODAY, Friday, March 14 on HB 77: Improve Alaska's Permitting Efficiency (We at NGP believe this is one rather small but important way citizens can improve Alaska's investment climate--rather than our usual challenge to fight off additional investment climate attacks!  -dh)

Our friends at the Fairbanks Chamber of Commerce are encouraging citizens to testify in support of  House Bill 77 during the Senate Resources Committee meeting tomorrow. The Chamber's Board of Directors has adopted, as one of the Chamber's 2014 legislative priorities, to increase responsible resource development through the permitting process.

Friday, March 14

Senate Resources - 3:30pm

CSHB 77 - Land Use/Disp/Exchanges; Water Rights 

PUBLIC TESTIMONY

Fairbanks Legislative Information Office
1292 Sadler Way, Suite 308
*You must go to your local LIO to testify
 
Comments will be limited to 2 minutes. 
 
You can also send your comments to Senator Cathy Giessel, Chair of the Senate Resources Committee. 
 
OVERVIEW: CSHB 77 is an omnibus bill that seeks to improve the Department of Natural Resources (DNR) timeliness and efficiency in issuing land and water use authorizations. The bill focuses on agency process and does not seek changes in environmental standards or laws protecting fish and wildlife habitat. Nor does the bill make changes to the law governing water rights.

The CS includes changes that limit DNR's authority to issue a general permit, define the process for issuing a general permit to include public comment, allows individuals, tribes and others to be able to apply for water reservations, but clarifies that the certificate will be issued to an appropriate state agency rather than a person. In times of declining budgets, general permits are an appropriate tool to efficiently authorize routine activities such as mooring buoys. 

The bill allows "persons" to apply for instream flow reservations, but if granted the in stream flow certificates are held by a State agency. CSHB 77 solves the problems with the current system, which focuses on who gets paperwork in first. For large projects that are multiple years in the planning, the decision on how to withdraw water, protect the fish, and promote economic development should be made with all the data, and with an understanding of all the environmental and social effects. It should not be based on who gets their paperwork in first. But, recent court decisions and environmental groups' legal claims are making it a paperwork race.

DNR has received over 300 applications for an instream flow reservation. The vast majority are from public agencies. In contrast to the almost 300 agency applications, the state has received 34 applications from other groups. Of the 34 applications, over 85% were from groups opposed to a development project. Their purpose is at least partially to use the application to change or stop the agency permitting process.

Decisions about these projects should be made by Alaskans through their government - not by environmental groups, nor even by individual Alaskans. CSHB 77 solves the problem with the current instream flow permitting system with minimal changes, and does not affect public notice or any other part of the process.

Talking Points to Consider in your Testimony: 

  • This bill will help cut the red tape and put Alaskans back to work.    
  • The bill improves efficiencies in the issuance of General Permits, diminishes the chronic backlog in permitting, results in cost savings to the state, while protecting the environment.    
  • CSHB77 diminishes the ability of ENGOs to abuse the system and stop projects.  
  • This bill will help cut the red tape and put Alaskans back to work.   
  • CSHB77 implements changes that will provide certainty and timely response to Alaskans that obtain permits, while maintaining efficiently run state agencies.  In these times of trimming the state budget, ensuring that state agencies are able to efficiently issue and manage permits, thus keeping down the cost and time expended, is crucial    
  • CSHB77 provides for the issuance of general permits, so that minor projects can be permitted practically.  Section 1 of HB77 makes it clear there is a requirement for public notice and provides opportunity for public input on any general permit.  General permits would cover activities that are already authorized for permit under existing statute.  General permits are not unprecedented; in fact, they are widely used by federal agencies.    
  • CSHB77 requires that appeals to sales, leases, and land disposals can be done only by those who are directly and negatively impacted by the decision.  This brings accountability to the appeals process, ensuring that appeals must be brought only when a directly involved stakeholder is adversely affected by a decision, rather than a special interest attempting to block permits    
  • Thanks to special appropriations by the legislature, DNR is making positive progress on a tremendous permit application backlog.  Extra funding helps address the backlog symptom, but efficiency measures in CSHB77 help address the cause of the backlog.
  • CSHB77 ensures that Alaska's water resources are managed by those who are best equipped to do so - agency staff with science-based expertise.

Additional Information & Talking Points:  

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3-13-14

13 March 2014 6:45am

Alaska Public Media by Alexandra Gutierrez.  The latest version of a bill advancing a natural gas megaproject restores language concerning collective bargaining.  The Senate Finance Co-Chair Pete Kelly announced on Tuesday evening that the committee will scrap the less specific language they had planned to use when dealing with labor terms.


Commentary: The following post by the Pebble Project precisely reflects the editorial position we have taken for several years.  

We would add that the White House has no business lecturing Russia and other nations on the importance of respecting "rule of law" when it has taken large steps in the last five years to diminish the American "rule of law" set forth by our founders.

Other examples of Obama Administration of "rule of law" violations include "Fast and Furious", "Uninforced immigration laws", "Unpunished IRS illegal targeting", "Uninforced voter intimidation", "Unpunished Violation of 1st Amendment (i.e. Fox News and AP)", "Illegal changes by fiat in Affordable Care Act to delay deadlines and exempt special interests from enforcement", etc.  

Even if we did not 'support' the Pebble Project, we should be both offended and fearful that EPA's violation of the First Amendment to the Constitution and to the permitting process in this case allows EPA and its environmental activist allies to stop any project anywhere at any time without regard to due process.  

Is this the America we were brought up to love, respect and defend with our lives, fortunes and sacred honor?  -dh

___________________________________

On February 28, EPA Administrator Gina McCarthy short-circuited the established National Environmental Permitting Act (NEPA) process rather than allowing the Pebble Partnership to design and submit an actual mine development proposal and have it fairly and objectively evaluated. EPA is potentially preparing to preclude Pebble development without ever seeing a proposed mine plan.

The NEPA process has been sufficient to evaluate and advance major Alaska resource development initiatives since its inception in 1970. Alaskans are familiar with NEPA and are confident that it works. The possibility of EPA preemptively vetoing projects before they’re even presented has many Alaskans thinking and talking about it:

David Wight, past president of the Alyeska Pipeline Service Co, is frank in his ADN editorial: “EPA choose wrong process to vet Pebble.”

Lorene Anelon, president of Iliamna Natives Limited, argues in favor of a return to NEPA in theBristol Bay Times, stating that “EPA action on Pebble fails to consider people of region.”

And the editorial staff of the Fairbanks Daily News-Miner calls it a clear case of the agency overreaching, declaring “EPA goes too far on Pebble mine.”

 

There’s still time

EPA hasn’t issued any regulatory decision about the Pebble Project yet. The process announced by EPA Administrator McCarthy late last month began a series of steps that is still being sorted out. Alaskans who favor a predictable, reliable permitting process—one that allows responsible resource development to continue serving as a major driver of Alaska’s economy—should read these and other editorial perspectives, and stay tuned for ways to make their voices heard.

 

Related Websites

 
 

Other Resources

 

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