Marleanna Hall, Executive Director, Resource Development Council for Alaska. Northern Gas Pipelines file photo by Dave Harbour

Late yesterday we heard from two longtime readers.

Carl Portman sent us Marleanna Hall’s testimony and his own, on pending oil tax legislation; and, former Attorney General John Havelock sent us a response to our Sunday commentary on government ownership of energy projects.

We respect and appreciate the critical thinking of our readers! We appreciate our readers who send important industry data for us to safeguard in our searchable archives for the future reference and edification of policy makers and influence leaders.

And, yes, we are indebted to former Federal Coordinator Larry Persily for his excellent work on behalf of the Kenai Peninsula Borough to educate the public on North Slope gas project efforts.

We all strive to make sense of a rather chaotic, politicized and highly controversial effort by Alaska’s bureaucracy to design, market, finance, own and eventually operate (i.e. indirectly, we’re told) the huge, socialized Alaska gas pipeline/LNG project … all being done as Alaska’s economy suffers under multi-billion dollar deficits and as LNG prices plunge in response to a flood of competing worldwide LNG projects.

As the fella said, “You couldn’t make this stuff up!” -dh

Reference: from Venezuela’s to Alaska’s experiments with energy socialism…our Sunday commentary on socializing energy facilities. -dh

Response to our Sunday commentary linked above: from former Attorney General John Havelock:

John Havelock, Former Alaska Attorney General. Northern Gas Pipelines file photo by Dave Harbour, Circa. 2002.

Dave, as you know, you and I don’t generally agree on public issues but we sure have common ground on this one. I have a memory footnote for you.

Back in 1971, while TAPS was still being organized, Governor Egan got it into his head that the State should build the pipeline and, as his AG, I became his lead public advocate. In exploring the possibilities, I spent a good deal of time with Wall Street operatives and determined, in the face of widespread skepticism at home and resistance from the oil owners, that it was entirely doable. The reason was that the TAPS project was without question, a feasible project. Millions of barrels a day meant an incredible flow of money and TAPS would be the first to tap it. Wall Street was ready to lend the state whatever it took to build it because it was about a solid investment as you could find anywhere.

The politics at home, however, and owner resistance meant that it was not to be. Even Egan’s own Democrats could not work up enthusiasm. Incidentally, the oil owners offered to let the state come in for a 25% share but Egan would not have any part of it, seeing, correctly in my view, hopeless conflicts of interest in common ownership. In the end, advocate or not, I was hugely relieved that it did not come off. As you know, the original cost was a fraction of the final $9.6 billion. No more of a whimper of complaint since so many Alaskans got a piece of that cost, particularly the Teamsters.

Could you imagine what would have happened if the state had done it? Sure, it would have been built. The state would have been as owner, the intermediate financier. The same companies that built the line for the oil owners would have built it for the state. Can you imagine the furor over any cost overrun? Egan and I would both have been tarred and feathered and run out of state. So I am very happy the state ownership didn’t get off the ground.

As for Governor Walker’s line, it fails the first test. Instead of overwhelming feasibility this line doesn’t pass the first analytical test. The profits are not there; more likely, a running loss. Governor Walker needs to figure out that neither the facts nor the people of the state nor the leaders in its institutional framework are behind him.

Best wishes,

John

Our response to Havelock:

John:

This anecdote verified our Economics 101 AGDC thesis and also explained why many of the projects you and I have seen come and go over the years … have gone forever.

You are very kind and thoughtful to have taken the time to write and, with your approval, I’d love to include it in tomorrow’s posting.

I have some very fond memories of my time with Bill Egan, too, as well as one very challenging experience. Someday, when you have time we could meet for coffee and compare notes. That is another case where we, “…didn’t generally agree on public issues…,” but came together on other matters. All said, I still hold Governor Bill in high regard and liked him almost as much as I revered Neva.

Best wishes always, John, to you as well.

Dave

Personal endnote: Readers over the years have often asked, “what has drawn you to support this northern energy coverage for so long?”

Well, I’ll tell you.

For over 15 years I’ve had the pleasure of being in contact with thousands of friends via Northern Gas Piplines (i.e. northerngaspipelines.com and arcticgaspipeline.com). Many of the friendships, like those represented by John Havelock and Carl Portman, were forged over decades of policy debates, wars, decisions and resolutions going back to my arrival in the 49th State in 1971.

As a communications professional, it’s been an additional joy to work on various sides of the policy table: first, as a spokesman for international pipeline and energy production companies; and second, as a regulator of utilities and pipelines; as corporate CEO; and, as Chairman of state economic and business not-for-profit corporations.

After a career, as noted in the biography below, involving Alaska natural resource, management and regulatory experience, I felt compelled to use the new Internet/webpage technology to document as much of the energy history of northern North America as possible.

I covered the U.S. and Canada because the two countries had been each other’s largest trading partner when the web page began, and because each country sold energy to the other and because the two had long been involved in the effort to monetize Arctic Gas, from the Alaska North Slope to the Mackenzie Delta…and points South. I also thought that in some small way this page could lend some logic to an Alaskan bias against Canada when we ought to be working together to solve common problems most efficiently, and in the self interest of each country.

In the course of that effort, I began developing a mailing list of those focused especially on oil and gas policy in both countries. That list of over 10 thousand has included readers throughout the world, largely in the obvious categories: industry, government, non-profit, academic and media.

As a result of the webpage, I have been honored and delighted to:

provide articles and interviews to U.S. and Canadian radio and television audiences, as well as to local, regional and national newspapers and magazines.
assist dozens of college students and researchers in the search for reference material.
provide for our archives tens of thousands of pages of searchable material

There is no one who would like more to see a successful Arctic gas transportation project materialize, than I am.

But there is also no one more determined to uncover the evil scheming of those who might seek to profit from a promotional effort to convince citizens that a sow’s ear really is a silk purse.

We must assume that false prophets could be as alive and well now in an era of Arctic energy exploration, development, marketing, transportation and distribution as they were when the Apostle Paul encountered 1st Century charlatans during his 10 thousand mile quest to spread the gospel around the known world surrounding the Mediterranean Sea.

How might we suspect an energy project advocate as being a false prophet?

Our suspicions are aroused when we see one gifted with the skills of a snake oil salesman enriching himself and overpaying his friends with taxes extracted from others over a long period of time without successfully delivering value in exchange for his bounty.

Our suspicions are heightened when such a person looks you in the eye and says, “I’m not your enemy”, as he proceeds to relieve you of your jobs, wealth and power.

Our suspicions approach confirmation when we see that person’s influence accrue more money, power, public employment and and entitlement constituencies at the expense of an ailing private sector, lost private sector jobs and diminished private sector constituencies.

Yes, we value our readers for their focus on critical thinking.

You will, therefore, understand now why part of our motivation to press on with the development of this archive is to record and remember for those who follow us, the history of how we met and overcame challenges, or why we did not.

-dh

Oil tax testimony: Marleanna Hall, Executive Director, Resource Development Council for Alaska

Senate Finance Committee • HB 111 Oil Tax Bill
April 29, 2017

Good morning. My name is Marleanna Hall, and I am the executive director for the Resource Development Council.

RDC is a statewide trade association comprised of individuals and companies from Alaska’s oil and gas, mining, forest products, fisheries and tourism industries, as well at the 12 land owning Alaska Native corporations.

This version of HB 111 achieves the policy set by the Governor and his administration to eliminate refundable cash credits without compromising Alaska’s competitiveness to attractive future investment.

While this bill increases the total government take on industry it is less harmful than the bill passed by the house that would have pushed Alaska to the bottom of the competitive scale. In addition, the committee substitute maintains SB 21, legislation affirmed by voters in 2014.

New discoveries by Conocophillips, Caelus, and Armstrong could increase TAPS throughput by adding up to 550 thousand new barrels of oil per day into the pipeline, with measureable economics benefits throughout the State. Alaska must maintain a stable and durable tax policy with incentives to invest, which is key to see these projects come into production.

We must celebrate the recent gains like the first oil production increase in 14 years, billions of dollars in new investment since 2013, and optimism about recent multi-billion barrel oil discoveries on the North Slope. When you incentivize something, you get more of it. We need to incentivize the industry to drill more, create more wealth, increase activity, and aim for next year’s production to be even higher than this year’s.

In conclusion, RDC supports leaving the underlying voter-approved oil tax structure in place. In the spirit of compromise and “pulling together,” however, RDC understands the changes to cashable credits. It is important to note that eliminating cash credits will increase total government take, which could potentially impact future investment and production.

Madame Chair and members of the Senate Finance committee, I thank you for the opportunity to testify.

Carl Portman’s personal oil tax testimony, 4-29-17: HB 111 Portman Testimony SF.

News – AK HEADLAMP. https://akheadlamp.com/news/page/4/ – There are many reasons why HB 111 is Headlamp’s Bad Bill of the Week, … Yesterday, the Alaska Senate approved a bill to open the state to car and …. The House Finance Committee dove head first into the Democrat-led majority’s oil tax …

Larry Persily, former Alaska gas pipeline Federal Coordinator. Northern Gas Pipelines file photo by Dave Harbourt

From Larry Persily, former Alaska gas pipeline project Federal Coordinator, now representing the Kenai Peninsula Borough’s interest in a controversial, state government-owned, gas pipeline-LNG project.

Alaska LNG project application files available online

April 25, 2017

(This update, provided by the Kenai Peninsula Borough mayor’s office, is part of an ongoing effort to help keep the public informed about the Alaska LNG project.)

The Alaska Gasline Development Corp.’s LNG project application and accompanying resource reports are available online at the Kenai Peninsula Borough website:http://www.kpb.us/mayor/lng-project/lng-project-updates/1028-lng-project-application-files-available-online.

The state corporation filed its application with the Federal Energy Regulatory Commission on April 17, 2017. The more than 140 files include the latest project overview, proposed construction and operational plans, environmental reports and maps for the North Slope gas treatment plant, 807-mile pipeline through the center of the state, and the natural gas liquefaction plant and LNG export terminal proposed in Nikiski.

Some of the files are large and download time will vary with your Internet connection speed.

The Kenai Borough later this week will distribute to this email list (and post to its website) a project update and summary of the application.

The state of Alaska has taken over management of the project from North Slope oil and gas producers ExxonMobil, BP and ConocoPhillips, with the intent of proceeding to a construction decision by 2019 and first LNG exports in 2024. In addition to FERC’s preparation of an environmental impact statement and regulatory decision, that schedule is dependent on the state corporation’s success in signing up investors and customers, securing financing for the multibillion-dollar project, and favorable global LNG market conditions.

A few of the appendices to the reports (mostly data sheets) are too large to easily accommodate on the Kenai Borough server. If you are interested in these documents, contact Larry Persily in the mayor’s office at lpersily@kpb.us. All of the reports also are available from the FERC website at http://elibrary.ferc.gov/idmws/search/fercgensearch.asp. Enter CP17-178 for the docket number.