The Morning Headlamp — ConocoPhillips will continue to invest in AK and lawmakers’ travel bills

Governor’s Latest Budget Plan Summarily Shot Down. The Senate State Affairs Committee examined another fiscal plan put forth by Gov. Bill Walker, this time it concerned using the Permanent Fund dividend to fill in state deficits. The plan was met with tough criticism from local Alaskans. “This is basically asking for Alaskans to hand over the keys to this multibillion-dollar Permanent Fund lockbox,” said speaker Pam Goode. “I request it be tabled as unconstitutional because it is the most costly, offensive and uncompassionate source of revenue among those proposed,” said Tom Lakosh. More than 200 Alaskans submitted written testimony, and another 106 people signed up to speak Thursday night. Mike Swanson of Palmer said he appreciated the governor’s effort to jump-start the conversation, but said the bill should be rejected. He offered a balanced approach that included using Permanent Fund earnings with sizable government cuts. Headlamp knows that for some politicians using Permanent Fund dividends to fix the fiscal crisis is a tantalizing idea. Fiscal expert Dr. Scott Goldsmith of ISER, consistently says gutting the dividend program will have significant negative economic impacts. Pulling money out of the private economy, by slashing dividends, to protect government programs will only contribute to Alaska’s growing economic uncertainty. Headlamp implores lawmakers to follow the best path toward fiscal certainty: scale back government spending to $4.5 billion this year and craft policies that incentivize people to help grow the economy.

Why Fly When a Phone Call Will Do?  According to a new State Department of Administration report, the Alaska Legislature cut its overall travel spending last year by 25% from $660,000 in 2014 to $500,000 in 2015. Top officials in Gov. Walker’s administration spent more than their predecessors. Headlamp is glad to hear some lawmakers are tightening their belts in lieu of the state’s massive fiscal problems. While certain duties and opportunities certainly require a physical presence, Headlamp asks all state officials to consider calling into the next meeting, or thinking long-and-hard about attending that conference. We hope Gov. Walker and the legislature remain committed to their travel freezes this year.  

Thanks to SB 21 ConocoPhillips’s Investment Remains Comparatively High in Alaska. Despite a global drop in oil and gas prices, AKLNG partner ConocoPhillips earned $482 million from oil and gas production in Alaska. According to fourth quarter earnings reports, ConocoPhillips has maintained a relatively high level of capital spending in Alaska, compared with significant reductions at fields around the world. Natalie Lowman, communications director for ConocoPhillips Alaska, said in an email that in the big picture, ConocoPhillips had a “negative cash flow” of more than $100 million in Alaska in 2015. She included an estimated $665 million in taxes and royalties paid to the state, as well as capital expenses that amounted to $1.4 billion in 2015. Lowman also said “We still anticipate levels of spending higher than our capital budget in 2012 — prior to oil-tax reform and when oil prices were in excess of $100 per barrel.” She said Senate Bill 21, the production tax overhaul kept as law by voters in 2014, has created a “positive investment climate.” The company previously said it would spend $1.3 billion on Alaska projects in 2016. The company now expects to see a “slight decrease” in that estimate because oil prices have continued to slide, Lowman said. Headlamp hopes that policymakers take serious notice: even though oil prices are low ConocoPhillips is investing in Alaska because of SB 21. If policymakers wish to see sustained investment in Alaska, they should not disrupt the current oil tax regime. In the face of record low oil prices Alaska cannot afford to drive away private investment that helps create new jobs and yields new revenue to the State. Headlamp encourages lawmakers to respect the will of the public; stay the course on SB 21 because it is working.  

President Obama Needs New Advisors. Maybe President Obama didn’t get the memo about record-low oil prices. Maybe he didn’t see the reports that over 86,000 U.S. workers in the oil and gas industry have been laid off since June 2014. Even if President Obama had seen these reports, there is no excuse for suggesting a $10 per barrel tax for green energy projects – that will be passed on to consumers. The horrendous idea was summarily dismissed by Republicans in the U.S. House and Senate. It seems tone deaf to propose a roughly 30 percent tax on oil given the budget struggles states throughout the country are dealing with in light of the historically low energy prices. Headlamp is not surprised by President Obama’s radical proposal. After coming to Alaska last August, and enjoying the wonders of our great state, Headlamp finds proposal by President Obama to be especially insulting. In this record low oil price environment, this proposal would kill thousands of high paying jobs across America. This proposal would directly raise the cost of living for all Americans, and hurt those least fortunate among us disproportionally. Headlamp knows President Obama wants to fundamentally transform America and see our energy prices more like Europe’s. We trust his proposal is dead on arrival in Congress.


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First Reads

Governor’s bill picked apart as Alaskans debate Permanent Fund changes
Alaska Dispatch News, Alex DeMarban, February 4, 2016

Legislature’s overall travel spending down 25 percent
Alaska Dispatch News, Nathaniel Herz, February 4, 2016

ConocoPhillips shows healthy earnings in Alaska, keeps capital investment up
Alaska Dispatch News, Alex DeMarban, February 4, 2016

Obama to propose $10-a-barrel oil tax to fund rail and highway projects
The Washington Post, Steven Mufson, February 4, 2016

Obama oil tax proposal would cost motorists
USA Today, Nathan Bomey, February 4, 2016

LNG Exports: An Easy Fix for Economic Growth
Morning Consult, William Shughart II, February 4, 2016