Morning Headlamp – Who blinks first? Budget Reductions or an Income Tax?

Comprehensive fiscal reform no longer in sight. As the Alaska Legislature continues to stumble toward the final days of the special legislative session with no resolution to budget woes in sight, long term plans for fiscal stability are also slipping away. “Political realities may not allow for a comprehensive plan. It may be that we just have to continue working piecemeal toward a plan over a long period of time,” said Mike Navarre, the Kenai Peninsula Borough mayor who’s been lobbying for long-term fiscal reforms. The legislative impasse has dragged on for nearly five months, with Gov. Walker’s administration last week warning of a huge array of impacts if lawmakers can’t agree on a budget by July 1 and the state government shuts down.

A silver lining in the cloud of low oil prices…Eni US Operating Co. has filed a plan of operations amendment with Alaska’s Division of Oil and Gas proposing the drilling of two extended reach exploration wells from Spy Island into the Nikaitchuq North prospect. The well location is situated in the federal outer continental shelf of the Beaufort Sea. The proposed well site lies immediately north of the operating Nikaitchuq field. The drilling would take place from an existing Nikaitchuq field pad on Spy Island. Headlamp would jump for joy if it could. Drill rigs bring jobs – high paying jobs! 

Will the Governor like us for $50 million? The House Majority has decided that giving $5O million back to AGDC may curry favor with the Governor – which is more important to them than troopers, prosecutors and road maintenance. Sunday, members of the House’s finance committee approved a capital construction budget that reverses a Senate move to divert funding from the pipeline to other state needs, including the hiring of more Alaska State Troopers. The committee kept the money with the pipeline after Gene Therriault of the Alaska Gasline Development Corporation told its members that “the loss of that funding for the effort would be severely detrimental to moving forward.”

Who will blink first? Both the House and Senate must pass a budget compromise, but, the House wants new revenues first — like oil tax legislation and a broad-based tax. Meanwhile, the Senate wants deeper cuts, and to use some of the Permanent Fund’s earnings — as outlined in a percentage of market value plan (POMV) for state funding. Senate Majority leader Peter Micciche says the Senate is now willing to give up some of those key pieces if it could just get the one cornerstone of the puzzle — a budget. “At this point, the Senate has retracted to passing and funding a budget, which includes the POMV, right, from the earnings reserve, which has never been done before. The Senate is not asking for anything else,” Micciche said. The Senate has rejected the idea of a broad-based tax, which is where crafting a compromise gets tricky.

All plugged up? State inspectors are launching efforts to require oil and gas companies to properly close hundreds of unused wells scattered across Alaska that stopped producing long ago. Cathy Foerster, the Alaska Oil and Gas Conservation Commission chairwoman, acknowledged that the agency has sometimes been lax about requiring operators to permanently shut down the old wells, some of which date back to the 1960s. But the agency is initiating a two-part effort that is expected to lead to the permanent shutdown of some wells and requirements for bigger surety bonds to protect the state if the wells aren’t properly plugged with cement before they’re abandoned.


First Reads

Hope for a comprehensive fiscal plan for Alaska appears to be slipping away

Alaska Dispatch News, Nathaniel Herz, June 13, 2017

Uber and Lyft are coming to Alaska, but they won’t be coming to Juneau’s most popular tourist destination

Juneau Empire, James Brooks, June 11, 2017

Hundreds of unused oil and gas wells dot Alaska. The state wants many closed.
Alaska Dispatch News, Alex DeMarban, June 12, 2017 

House committee reverses Senate, plans to keep natural gas pipeline funded

Juneau Empire, James Brooks, June 13, 2017

Alaska lawmakers optimistic about passing budget by Friday
KTVA, Liz Raines, June 12, 2017

Italian giant Eni proposes two extended reach wells in Alaska
Oil Pro, Oil Pro Staff, June 13, 2017