When Trust Is Trussed In Webs of Abuse

(Forbes: Hope For Massive Alaska Energy Project Crashes and Burns ***** Clarion: Hope springs eternal – but the money won’t)

Sir Walter Scott’s, “Oh! What a tangled web we weave, when first we practice to deceive”, contains a principle of trust essential to the survival of a free state.

We have seen what a tangled web the U.S. federal administration has spun by its pattern of lawlessness and overreaching jurisdiction justified by complex alibis (i.e. IRS, Keystone, Pebble, Dakota Access, Alaskaetc.)  We have also seen a new Alaska administration claiming trustworthiness when its actions appear to belie that claim.  Such deception from Washington and Juneau endangers both freedom and free enterprise.

In short, how can citizens trust politicians to honestly represent them when trust is trussed in webs of abuse?

Please Note: the commentary above relates to the policies and actions of federal and state governments and is not meant to criticise a particular advisor to decision makers, like Mr. Hendrix, below.  We believe Hendrix to be a highly accomplished engineer and oil company manager of operations — a dedicated Alaskan of great worth and integrity.

We also believe him to occupy an assignment requiring personal courage.  That is, when an honest, science-trained manager is put in a position requiring defense of distasteful political policies, he will inevitably encounter uncomfortable challenges that resemble a “fork in the road”.

In the reports below, we have a glimpse of Hendrix’s industry expertise as he describes Alaska’s resource potential.  When he is questioned about policy decisions to which he did not offer counsel, he encounters a web others have woven.  While we wish for long-time Alaskan, Hendrix, a pleasant and satisfying second career with government, we also appreciate the various challenges with which he may likely become increasingly acquainted.  We can envision challenges that have more to do with political expediency than the more comfortable environment of a science based job whose success flows from fact-based decisions.

Finally, we would also note that an assignment to privately serve as a chief oil and gas advisor is much different than a similar job also requiring the person to serve as a chief energy spokesman.  The latter job involves an external affairs expertise; it would be a role to publicly explain, promote and/or defend the organization’s policies, programs and actions; the former involves providing candid, private and expert advice to decision makers that contribute to formation of appropriate policies and actions.

Mixing the two roles could result in the “spokesman” having to publically defend policies and actions that the “advisor” had privately opposed in the course of giving advice.  -dh


John Hendrix (NGP Photo), Chief Oil and Gas Advisor to Governor Walker, was the guest speaker discussing what the future could be for oil and gas in Alaska.

John Hendrix - 9-19-12 - by Dave HarbourKey points:

1.  Exploration is needed to obtain wealth, and

2.  Being competitive requires: Pro-industry government and residents; Predictable, consistent and stable environment; Financial Resources; Ready skilled workforce; Long term development planning

3.  Monetizing our Assets means: Maximizing ultimate recovery in our fields; Managing Alaska’s reserve replacement ratio; Encouraging new technology; Minimizing the time from exploration to production; Ensuring assets are not stranded; North Slope gas is our largest stranded asset – we need to be in the game to fill the future (global) void; Sharing of infrastructure is smart

During Q & A, Rep. Dan Saddler noted that oil and gas tax credit vetoes, the rejection of the Prudhoe Bay plan of development and the recent legal actions taken by the AG contradicted Hendrix’s description of a healthy environment for the industry.

To view the presentation in its entirety –go to www.akrdc.org, right column, for your convenience.

Sept. 15 Breakfast Forum


Some of our observations of the presentation:

  • The presentation was filled with statements to the effect that “We should” do this or that.  Many of his suggestions, like a repeated invitation to fellow Alaskans that “We should work together”, were pure common sense.  However, getting 60 legislators, the governor and a diverse citizenry “together”, is precisely what the perennial governing challenge is.  We have observed a pattern in the Alaska governor’s actions to “go it alone” come heck or high water, regardless of what other leaders think.
  • As to Alaska’s North Slope gas monetization future, Hendrix’s theme was, “do you want to be in the game or not?”  (Although, the state’s governor has made it crystal clear that he’s already answered the question with a loud, “YES!”)  Hendrix pointed out that in the 2021-22 timeframe gas demand would be back, good timing for completion of an Alaska LNG project.  However, that timeframe is now well known to be optimistic if not unrealistic based on 1) the scores of LNG projects that might be more advanced and more economic than Alaska’s at that time, and 2) the fact that the world’s most knowledgeable LNG players (Alaska’s major North Slope Producers) believe now is not the time for the Ak-LNG project to proceed; and  3) new information from the International Energy Agency suggesting that low prices and demand may not increase as soon as earlier believed; and, 4) Alaskan political leaders’ often hostile reception given to both new and longtime energy investors.  We have also observed herein, that there is great reason for the governor to be focused 100% on dealing with Alaska’s current fiscal crisis, on focusing like a laser on making Alaska’s economy sustainable.  By wasting precious time and treasure on the shiney object of an as yet unproven LNG-pipedream, Alaska’s ability to deal with its operating budget losses and crashing economy will find the state without savings to subsidize deficits within two years, far before any LNG project could come to the rescue.
  • Hendrix addressed how attractive Alaska must be to potential markets that have avoided committing to long term, take-or-pay Alaska gas contracts for four decades.  He spoke about Alaska’s benefits of a cold environment that decreased the cost of converting gas to LNG, of the historical Nikiski LNG export terminal that has never missed a shipment.  However, Alaska’s climate and geography also create huge logistical, operating and labor costs not encountered by LNG competitors.   No other major LNG export competitor has the additional burden of amortizing the cost of an 800 mile Arctic gas pipeline into its tariff.  The elusive, government-owned project interest rate benefit of tax exempt bonding is not proven and is disputed by some experts.  The Nikiski project’s success cannot be compared with an Alaska North Slope pipeline/LNG project’s risks.  The Nikiski LNG is converted from adjacently produced Cook Inlet area gas reserves.  Logistics are better.  Labor is cheaper.  Risks are fewer.  We are sad, but bound to note for our readers, that the government ownership risks, financing risks, market risks, non-performance risks by buyers and project non-completion risks — among others — are hardly comparable.
  • In the area of common sense communication, Hendrix suggested that “master planning” could expedite projects and make them more efficient and cheaper.  We agree it is a noble concept.  In fact, it is a utopian concept!  But who’s putting the odd, multi-dimensional assortment of environmental activists, federal and state bureaucrats, politicians, laws and regulations into place to do that: Alaska’s government of bureaucrats and elected leaders?  We sure hope that they can pulled it off!
  • Hendrix emphasized the importance of education and he is right.  For decades Alaska’s Resource Development Council, the Alaska Support Industry Alliance and Alaska Miners Association have worked to better educate our young progeny about the key role natural resources plays in the the circle and quality of life.  The Alaska Council on Economic Education has worked the issue. So has the late Hugh O’Brian’s Youth Leadership Foundation Program, and others.  But these brave efforts have mostly been based on volunteer citizen experts and teachers volunteering to support the programs and work them into their already crowded lesson planning requirements.  If this administration can act on Hendrix’s suggestion and actually create required natural resource curricula, we’ll be ecstatic.  But is this an actual program the administration is pursuing and preparing to present in January as the new legislature convenes?  If so, we look forward to reviewing the details?
  • At the end of Hendrix’s formal remarks, he answered questions (humbly paraphrased; for accuracy, please rely on the video*).  We’ll let readers judge the relevance of both the questions and the answers:
    • Q. from an audience member.  How far along are you on these programs?  A.  We need to work on this…federal state permitting, how to make that happen.   …everyone wants conversation on a “master plan”…could be a can of worms, evergreen process….
    • Q. from Rep. Dan Saddler.  Re: “consistency and trust”, Governor has taken many actions against “trust”: …advocated and withdrawn gas reserves tax…. TransCanada out of Ak-LNG….   …vetoes oil tax credits….  …joined in climate change lawsuit against Exxon….  I understand need for consistency and trust but the words and actions have to match, Sir.  A.  Message taken (applause).  We need more communications together….  Communications is the key….  Met with every oil company here and governor is very much supportive of my role….  We have to start working together as Alaskans….  We’re spending $1.2 billion every hundred days to run this state….
    • Q.  From Alaska Oil & Gas Association President/CEO, Kara Moriarty.  Last week, Commonwealth North….  …former Attorney General Craig Richards said he thought the tax structure hadn’t attracted much capital to Alaska over the last 3-4 years and that he preferred a different tax system.   Wondering if you agreed, if we’re going to see something along this line in the upcoming session.  A.  Hendrix said he didn’t approve that viewpoint.  He generally responded, “I think Alaskans need to come together and say, ‘this is a new world order we’re in,’ and say, ‘we’re hurting and we need to fix this state, and what’s it going to take to fix this state.’  There are tax credits that have been very good and there are tax credits that have been very bad, but they have revitalized Cook Inlet and we have to have a healthy…need always to think about where we were when we did things…see what worked well and what didn’t work well….  I would rather see the oil companies spend their money and we don’t spend a dime…and we should take a royalty….  The key, Kara, is how do we put ourselves in the market?  How do we make ourselves competitive?  …I’m not a tax credit expert like maybe I should be right now, but I’m learning.”     (Applause)
    • -dh

      * We always prize accuracy.  We will gratefully accept any reader-supplied, factual additions or corrections to our work.  As to opinion comments on our editorial positions, readers may offer comments, below.  -dh

“I sincerely wish we could see our government so secured as to depend less on the character of the person in whose hands it is trusted. Bad men will sometimes get in and with such an immense patronage may make great progress in corrupting the public mind and principles. This is a subject with which wisdom and patriotism should be occupied.” —Thomas Jefferson to Moses Robinson, 1801.

Interfax Global Energy.  Alaska Railroad Corp. will become the first railway to ship LNG in a trial project to deliver gas to the Alaskan city of Fairbanks, local news reported.