8-28-13

Here is A Link For Readers To Our Latest Column In Xtra, Anchorage's Community Newspaper. Here Is Our Unedited Submission: "Responsibility"

Another Abuse of Endangered Species Act

Relevant to our essay, above, on 'Responsibility', Canada's Globe & Mail piece by Jeffrey Jones notes the importance of tax policy to energy project investors. We believe that all decision makers will want to take heed. Those who support higher taxes and regulatory barriers, in essence, wish for fewer energy jobs and investment while those who seek moderate taxes and rules will create more attractive energy investment climates. By their works ye shall know them. D'accord? -dh

Note: We compliment Northrim Bank and www.alaskanomics.com for producing a report of Senator Lisa Murkowski's (NGP Photo) speech Monday to the Anchorage Chamber of Commerce–by Katie Bender. We plan to provide more detailed notes on her speech tomorrow which offers other gold nuggets of interest to Alaskans, Americans at large and our Canadian friends as well. -dh

Another Abuse Of The Endangered Species Act.

PLF. The U.S. Fish and Wildlife Service has labeled more than 1,500 acres of private land in St. Tammany Parish, Louisiana, as “critical habitat” for the dusky gopher frog. This designation would force the owners to jump through so many bureaucratic hoops that they would be barred from making productive use of their property.

Dusky Gopher Frog.

There’s one small problem with the attempt to safeguard the frog on this land: the area isn’t suitable for the species. There aren’t any dusky gopher frogs on the property.

…the Anchorage Chamber hosted US Senator Lisa Murkowski at its weekly, Monday Forum.

Murkowski shared that there was a large number of high ranking visitors that we have seen in the state this month and how the visits were important to the political climate.

In August, the Chief of the US Forest Service, Administrator of the EPA, the acting Under Secretary of Commerce for NOAA, the Air Force Chief of Staff, the Commandant of the Coast Guard and the Secretary of the Interior have all visited, or will visit, Alaska and learned how their respective agencies work within the Alaskan environment.

Murkowski continued by discussing the importance of the military in regards to Alaska’s economy. Alaska has strategic military value and the Pentagon is beginning to realize the potential across the state.

She spoke in depth about economic concerns and the Affordable Care Act (ACA) and how each affected the State of Alaska and its residents.

Murkowski noted that even though we don’t know a specific date, we will bump up against the debt ceiling in the coming months. She feels it is important to figure out a solution to the problem before it is too late and feels that Congress can do a better job of finding ways to fix the current budget. She stated that the sequestration does not provide solutions to the problem of the $16.9 trillion debt that the US currently holds.

Murkowski agreed that the US needed healthcare reform but did not feel that the ACA addressed the true problems of needing increased access and decreasing the cost of healthcare. She believed that defunding the act was not the solution because it would leave the law on the books and would burden individuals and families. She agreed that there were good parts to the new law, including the provision to allow dependents to remain on a parent’s plan until age 26, as well as the changes to insurers being able to limit coverage to individuals with pre-existing conditions. She stated that change will come when there is a reduction in cost of healthcare to individuals and families.

Murkowski wrapped up her presentation with a note that she felt that it was time for the Congress to start governing. Too much time was being spent on messaging and working to secure votes for the next election. She wanted Congress to lead the way and start to create laws that would make a difference, rather than blaming the other side for the Nation’s problems.

Murkowski is the first Alaskan born senator and the 6^th to represent Alaska in Congress. She was re-elected in 2010 and holds a number of committee positions, including being a ranking member of the Committee on Energy and Natural Resources.

Posted by Katie Bender

Dave Harbour's Xtra Community Newspaper Column, Week of 8-28-13.

Responsibility!

Dave Harbour

Teenagers hate it when people tell them to be “responsible”. It’s another way of saying, “You should change your ways,” when one is perfectly happy with the status quo.

* * *

For Alaskan citizens, the status quo has been pretty sweet. We were once America’s largest oil producer. We put a ton of dough into a Permanent Fund. We spent more per citizen than other states. We passed a blizzard of social and public works programs. We repealed the state income tax on ourselves and have no state sales tax.

With oil production falling at a 5-7% annual rate things don’t look so sweet right now.

Our oil production is down by nearly ¾ and we lag behind Texas, North Dakota and even California.

Who cares?

We should all care about oil tax and spending policy if we are involved in education, government or nonprofit work. If we are rural residents, our subsistence way of life is supported by oil. If we are into health, transportation, wholesale, retail or professional services, we depend on Alaska’s oil production.

The Trans Alaska Pipeline System (TAPS) is like an umbilical cord giving life to Alaska. TAPS oil pays for ninety percent of our state government. It directly and indirectly supports over half of our entire economy. Yet as our production declines, our elected leaders continually increase spending.

In modern words, “This is an unsustainable situation”. In other words, “It’s our responsibility to do something”.

Alaska has the world’s largest commercial fishing industry. It employs nearly 80 thousand mostly seasonal workers. But its business leaders know oil provides most support to the state budget. Without oil paying the lion’s share of government, fishermen would shoulder responsibility for more taxes.

Alaska’s tourism industry provides over 35 thousand mostly seasonal jobs. But its hundreds of entrepreneurs know if oil didn’t pay for state promotions, transportation infrastructure and other amenities, tourism would have to pony up more taxes.

Alaska’s 44 thousand oil industry employees support most other Alaska jobs .

Oil companies like Atlantic Richfield Company (ARCO) risked a lot to first discover the Swanson River field on the Kenai Peninsula in 1957… and then Prudhoe Bay in the winter of 1967-68. Their investment into this remote, high cost area was encouraged by a low tax environment.

Following the Prudhoe Bay discovery, Alaska’s Governors and Legislature began increasing oil taxes – in fact, about a dozen tax increases, year after year.

In 1981, the Governor and Legislature created an important oil tax reform package while repealing the individual income tax. That day, March 18, 1981, marked the first day of roughly 20 years of oil tax stability for Alaska. No significant tax increases marred oil company investments in new exploration and production even though oil prices remained low during a large part of those two decades.

A few years ago, with oil and gas prices increasing, elected leaders decided to increase taxes again. The tax change was called “ACES”, Alaska’s Clear and Equitable Share. It made Alaska the highest oil taxing jurisdiction in the free world.

Alaskan exploration slowed as oil exploration boomed in North Dakota, Texas, Australia and Canada.

Last Spring, lawmakers reformed ACES to make Alaska more competitive with other oil producing areas. Since then, we have seen signs of greater oil investment in the state.

However, some Alaskans still advocate a return to status quo with a repeal of the oil tax reform. We can expect this issue to be widely debated in the months ahead.

How should readers think responsibly on this subject? Here are a few credible sources that underscore the importance of tax and spending reform:

First, we rely on the University of Alaska’s Institute of Social and Economic Research (ISER). In a February 27 report to Commonwealth North, ISER ‘s Scott Goldsmith said that Alaska has $60 billion in savings (i.e. including the Permanent Fund) and $89 billion of oil assets still to be produced, for a total of $149 billion. To manage those assets for the long run, he said the state could spend approximately $5.5 billion/year. But he noted that the 2013 General Fund budget of $7.6 billion resulted in overspending $2.1 billion.

Second, Alaska banks have financial and economic expertise. These locally owned institutions also have, “skin in the game.” Northrim’s Alaskanomica.com published a piece on August 9, a couple weeks ago, noting that the oil tax reform bill, “…allows Alaska to be globally competitive in the industry….” The First National Bank of Alaska’s, Alaskaseconomy.org webpage, portrays Alaska’s economy as a three-legged stool. One leg is oil, but that leg also supports the other legs indirectly. In a link to an Anchorage Daily News Column by oil economist Roger Marks, the Bank highlights, “10 things to consider about oil taxation.” In the column, Marks points out that high oil taxes make Alaska less competitive and hurt chances for a natural gas pipeline.

Third, our State’s Revenue Department, in last year’s “Alaska’s Oil and Gas Fiscal Regime” analysis, illustrated Alaska’s need for tax reform to compete globally for industry investment.

Fourth, Canada’s Fraser Institute surveys petroleum industry investors. The most recent survey reveals how over 600 investor companies react to investment opportunities in nearly 150 taxing jurisdictions. Alaska is not at the bottom of the list but ranks behind 60 areas including Oklahoma, Texas, North Dakota, Canada, Australia, Tasmania, the United Kingdom, and Norway.

Fifth, Wood Mackenzie, a leading world energy industry research firm, ranked Alaska as one of the least attractive places in North America for investment. Only New York ranked lower than Alaska.

* * *

Would a responsible person think that controlling Alaska’s spending and increasing our oil investment competitiveness is essential to all of our futures?

Or, should we be confident that the status quo will continue to supply all of our economic needs?

Either way, we are responsible. History will tell how we exercised our responsibility.

-30-

Dave Harbour is Publisher of www.northerngaspipelines.com. He is a former Chairman of the Regulatory Commission of Alaska, the Alaska Council on Economic Education, the Anchorage Chamber of Commerce and the Hugh O’Brien Youth Foundation-Alaska. He is also Co-Chairman of the 9^th Annual Alaska Oil and Gas Congress held in Anchorage this September.

Reference notes: