Morning Headlamp — Alaska gets another credit downgrade

An inevitable step backwards. Alaska Dispatch News reported that credit ratings agency Fitch Ratings downgraded the state one notch from AAA to AA+. Fitch’s downgrade, the agency said in its own report, reflects Alaska’s substantial budget deficit combined with “modest reform efforts” taken by lawmakers to match state spending with its “stressed” revenue structure. “We had put them on rating-watch negative earlier this year in February, and we were waiting to see what the outcome would be in the budget session,” said Marcy Block, a Fitch analyst. “And now in the current special session, we have not seen the full Legislature enact sufficient measures to stem the tide. There will be another very large draw on reserves in the upcoming fiscal year.” We wish we were surprised.  Matching spending with revenue means you must make meaningful efforts to reduce spending.  Maybe next year…

A Senate Committee on Energy and Natural Resources hearing chaired by Sen. Lisa Murkowski focused on the important but often unrecognized benefits that oil and gas pipelines provide for our nation. Murkowski reiterated that strong infrastructure is essential to keeping energy abundant, affordable, clean, diverse, and secure. “Without infrastructure, we cannot move vital resources from Point A to Point B. And while some would contend otherwise, we know for a fact that pipelines are the safest and most efficient way to move those resources,” Murkowski said. Among the witnesses who testified in support of pipeline infrastructure was Mr. Sean McGarvey, the President of North America’s Building Trades Unions. Yet again, Headlamp must applaud Alaska’s Sen. Murkowski on her continued support of Alaskan, and American, energy security. Curious about what else Sen. Murkowski said? Check out her testimony here.

The science of job loss. According to the Associated Press,  Nearly 400 scientists have signed a letter urging President Obama to eliminate the possibility of Arctic offshore drilling in the near future by taking the Arctic Ocean out of the next federal offshore lease sale plan. The 388 signees include scientists from 13 countries and 25 current or emeritus professors at the University of Alaska. Their opinion runs counter to Alaska elected officials and the Alaska public, who strongly support opening Alaska waters to drilling as a new source of oil for the trans-Alaska pipeline. The letter was released by Pew Charitable Trusts. Pew’s Arctic science director, Henry Huntington, said the Obama administration has been clear that it wants decisions to be science-based. The letter is a chance for scientists to weigh in on decisions in the Arctic, a region that’s rapidly changing. The Alaska oil and gas industry prides itself on safe, sustainable resource development. Not including Arctic leases will economically marginalize a third of Alaskans.  

One day left! The comment period on the Bureau of Ocean Energy Management (BOEM) outer continental shelf proposal closes on Thursday! Tell the BOEM what you think here.

AKLNG chatter. According to Platts, BP, ConocoPhillips, ExxonMobil and the state of Alaska are discussing possible new ownership structures for the large Alaska LNG project, a state official acknowledged in an interview. Talks involve each company’s willingness to take an equity share in the project or to sell its gas, Natural Resources Commissioner Marty Rutherford said. “There are different perspectives [among the companies] on the best path forward, to bring the highest value for the gas, and what role in the project each company will feel most comfortable with,” Rutherford said. Rutherford said there is enough flexibility in the schedule that a delay in the FEED decision could still allow completion in 2024 or 2025. As we’ve repeatedly warned, private sector collaboration will be essential to AKLNG’s success. We hope that these ‘talks’ aren’t the start of a “go-it-alone” strategy.

Alaska Dispatch News’ Alice Rogoff penned a commentary calling for action on the budget. According to Rogoff, “postponing changes in the fiscal restructure and the Permanent Fund earnings will just make the size of the structural, long-term problem significantly larger and unmanageable.” Unfortunately for Rogoff, who is not an Alaskan, supporting the Governor in his demand for more revenue and his failed promise to reduce the budget is a message that doesn’t resonate with Alaskans.

 

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First Reads

3rd ratings agency downgrades Alaska credit as lawmakers debate budget proposals
Alaska Dispatch News, Nathaniel Herz, June 14, 2016

Murkowski: We Must Boost Alaska Pipeline Throughput
Senate Committee on Energy and Natural Resources, June 14, 2016

Senate’s Permanent Fund bill shortchanges schools and other services far into future
Alaska Dispatch News, Rep. Les Gara, June 14, 2016

Alaska, producers in talks on new commercial terms for LNG project
Platts, Tim Bradner, June 15, 2016

Alaska will pay dearly if we don’t act on budget now
Alaska Dispatch News, Alice Rogoff, June 15, 2016

Scientists: Drop Arctic from plans for offshore drilling
Associated Press, Dan Joling, June 15, 2016