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Northrim Bank and its President, Joseph Beedle (NGP Photo), hosted a packed house economic briefing yesterday at the Dena'ina Convention Center in Anchorage featuring Economists Mark Edwards and Bill Conerly. We'll have more for readers by Monday. -dhOpportunity For Alaskans In Canada?
Petroleum News: British Columbia Premier Christy Clark, supported by a delegation of top cabinet ministers and petroleum leaders, has persuaded the Canadian government to declare that the LNG sector is a potential “nation-builder” which could create 100,000 jobs.
Although the accord signed in Ottawa earlier in April is non-binding, it includes a commitment to promote the active use of temporary foreign workers, TFW, which could ease one of the deepest concerns among investors in the industry.
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CBC News. Comment: The Northwest Territories government hopes to bury a high speed, 1,100 km fiber-optic cable from Fort Simpson to Inuvik. It proposes using the Mackenzie Valley Pipeline route and much of the pipeline filing data to justify a light, environmental review. What is the practical difference between cleared rights of way, using the same real estate, for a buried gas pipeline or fiber cable? We are sure that this question will arise during the permitting process and that the answer will not be very satisfying to Inuvik citizens, small businesses and aboriginal corporations that, for two generations, fought for and failed to have approved the routing for a Mackenzie Valley Gas Pipeline. Countless hopes, dreams, and lives of every NWT and YT resident were affected by the loss of the pipelines' opportunities–one way or another. Hopefully, an easier permitting process awaits a buried cable using the same right of way. Perhaps the lessons of gas pipeline failure and fiber-optic cable success will not be lost on more logical, future decision makers. -dh |
The Publisher and the Professor Opine: You Decide!
SitNews, Ketchikan Alaska. Reprint of Dave Harbour's editorial, "Does Alaska's Pension Liability Threaten Gas Pipeline Viability?" (Original here). See reader comment and our response below:
Reader Comment: A highly accomplished university professor, a friend for over 20 years, sent this comment in response to the above editorial on Alaska's underfunded pension program, which we are delighted to bring to you below, along with a response.
Dave: As usual a sound analysis of the underfunded pension liability.
However, I read that you suggest that we return various spending or taxing to the Median levels of other states. That point is where 50% of the states would lie above and 50% below.
Would those states above the median in spending and taxing be obviously thwarting business growth and profit? I doubt it.
Stability is probably the key in my mind. Also, corporate America charges us more or it cost us more to acquire those goods and services. Kids who depend of “welfare” to eat, go to school on a bus, or get health care don’t eat 50% of the meal, ride halfway there or only get kinda well. And if our “bureaucracy” is more expensive, I am not surprised.
I wonder if you checked to see how much higher engineers, doctors, accountants, oil execs, etc. earn compared to those in “median states”. I suspect they would howl in indignation if you suggested that they all get less.
But your analysis of the problems created by the underfunded pension liability is well stated and I wish we had more leaders in our legislature who understood the realities of our financial system as well as you.
Professor B.
(Note: I don’t think we pay our bureaucracy enough. We ask someone making $100k to negotiate with and regulate industries and executives making millions, with staffers and lawyers making outrageous salaries as well. And maybe if we paid the Legislators more, we could find some independent minds who could work in everyone’s best interest, including the oil industry.)
Harbour's response to the Good Professor's comment above.
We appreciate the good professor's two observations: his compliment for our view on the underfunded pension liability of the state; and, his thoughtful comment on why the remedies to Alaska's unsustainable budget which we offered are, in his opinion, wrong.
This is why we followed our recommendations for solving Alaska's fiscal challenges, with the further acknowledgement that, "Of course, there are as many suggestions as there are people with opinions."
Professor B. did not offer his own suggestions for solving Alaska's fiscal challenges; he only attacked our recommendations.
His further comment was that Alaska should spend more money on executive salaries so that those who "negotiate with and regulate" industry could, presumably, more ably do so.
The beauty of a oil & gas lease sale is that the private market produces for Alaska the highest value for a natural resource that the market will pay. The highest.
Most of our current investment climate problems occur as a result of changing the rules of the game for investors after a lease sale has taken place. Politicians are tempted to greed once they see that an investor is profiting from a lease sale bid that he had first put at risk. They are tempted to relieve the investor of the profit "reward" earned by the lease sale investment, subsequent exploration, capital investment and development (i.e. because the investor is 'greedy, makes outrageous salaries, etc.'). The point of investor success is where the good Professor would hire high priced bureaucrats to extract even more from investors than their own due diligence had determined valid at the time of the lease sale.
This is why we have always held that Alaska should spend within its means — so that the temptation to change the rules for investors is not exacerbated by a desperate need for cash to cover undisciplined spending.
If Alaska, as we have editorialized, becomes a state where "a deal is a deal", then decision makers will spend and tax with prudence and restraint. Life will be simpler. The need to demonize investors will diminish as will the temptation to discriminate against them. Since lawmakers won't tolerate rule changes after investor commitments have been made, there will be no need for a new cadre of highly compensated bureaucrats to "negotiate and regulate" in ways that extract more from investors than they themselves thought prudent when investment decisions were made.
The good professor argues for 'stability' for government beneficiaries. While beneficiaries of taxpayers (i.e. including educators) will always want the guarantee of stable taxpayer income, it is easy to forget that those who risk their own money tend to invest more and more confidently when they work in a 'stable' tax and regulatory climate.
We appreciate reader comments, especially from those who are highly educated and thoughtful about the issues — and, especially when they disagree with us. It gives us a chance to reevaluate our own logic and conclusions.
In this case, we emerge from the additional thought and dialog more convinced than ever that Alaska's real secret to a bountiful future is learning to treat investors as we wish to be treated when we are considering a personal investment.
Hold a lease sale for natural resources to VOLUNTARILY extract the highest value from investors that a competitive bidding process will yield. Then, try to MINIMALLY interfere with — and even safeguard — the metrics upon which an investor based the lease sale bid, for the life of the project.
It is the Golden Rule applied in a different way than we normally do … but the principle is the same. And it is that principle that will most likely lead to sufficient investor confidence for a multi-billion dollar gas pipeline investment to be made.
That is why, for years, industry has told the state and its residents that big investments require assurance of "Fiscal Clarity".
Rejection of the Golden Rule of treating others as we would wish to be treated can only lead to a life of misery and greed…and a lower likelihood of significant investments.
Can anyone dispute that this enduring principle applies to states as well as it does to families and individuals? -dh
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