First things first. Accumulate Energy Alaska is launching an effort to determine the production potential of crude oil locked in North Slope shale. The company will begin drilling an exploration well along the Dalton Highway about 40 miles south of Prudhoe Bay. In June, it plans to hydraulically fracture that vertical well, using water, chemicals and sand to crack and hold open rock so oil flows from the shale. A production test to determine how the well oil flows is also expected this summer. Headlamp wishes Accumulate well in their endeavors as more oil in the pipeline benefits all Alaskans.
Fracking is good business. Schlumberger plans to bring its entire fleet of hydraulic fracturing equipment back into service this year and ramp up hiring as it seeks to capitalize on the renewed shale boom. The company managed to swing back to profitability in the first quarter of the year thanks to its US fracking business.
More offshore drilling, please. President Donald Trump will sign a series of executive orders this week on offshore drilling, cybersecurity, veteran’s affairs and agriculture, according to sources familiar with the administration’s plans. Between the President and Alaska’s congressional delegation, Headlamp is crossing our fingers and hoping to see offshore drilling opportunities back on the horizon soon.
Much ado about nothing. The Alaska Gasline Port Authority told federal regulators Monday that Hilcorp Alaska’s problems over the winter support the argument that it would be a mistake to end the proposed 800-mile pipeline in Nikiski along the inlet. Larry Persily, oil and gas adviser to Mayor Mike Navarre of the Kenai Peninsula Borough said the Authority’s comparison is off-base. Hilcorp’s gas line was installed in the 1960’s. The Alaska LNG project has planned to coat the large gas pipeline with about 6 inches of protective concrete for its Cook Inlet crossing. Headlamp reminds AGPA, just because you want something to be, doesn’t make it so.
One fish, two fish. Public pushback persuaded Chugach Electric Association to punt on its proposal to build a $500 million-plus hydropower project on the Snow River only four months into a decade long process. The Anchorage electric cooperative announced late Thursday that it is canceling further study of a concept to dam the Snow River near Seward, which is the feeder system to Kenai Lake and the upper reaches of the Kenai watershed.
Alaska Dispatch News, Alex DeMarban, April 24, 2017
Alaska Journal of Commerce, Elwood Brehmer, April 24, 2017
Alaska Dispatch News, Alex DeMarban, April 24, 2017
Politico, Andrew Restuccia, April 23, 2017
Fuel Fix, Collin Eaton, April 21, 2017
EPA delay on methane rule. New EPA Administrator Scott Pruitt has delayed implementation of a 2016 Obama rule related to methane. “American businesses should have the opportunity to review new requirements, assess economic impacts and report back, before those new requirements are finalized,” Pruitt said in a statement.
You can’t always get what you want…The differences of opinion between the House and Senate majorities on the big bills, broad-based tax, FY2018 operating budget, Permanent Fund draw, an oil tax and tax credits are basic differences in political philosophy. The House majority is pushing for taxes to support current spending while the Senate majority is demanding less spending to promote industry investment and keep Alaska the last personal tax-less frontier. None of the major proposals from the House Majority have been received well by the Senate. Senate President Pete Kelly called the House’s income tax proposal “absurd on its face,” given the state is already in a recession.
When does the spend end? The Matanuska-Susitna Borough Assembly approved $500,000 in repairs to the Mat-Su port barge dock on Tuesday night at a meeting where the word “mothball” surfaced for the first time in reference to the future of the port on Point MacKenzie. Port officials say the short-term fix approved during the meeting will protect the dock eroded by swirling Knik Arm tides and currents. But another, more permanent fix estimated at as much as $1.9 million is still in the design stage. The borough already fixed the 16-year-old dock once, only to have those repairs fail again months later. Port MacKenzie runs at an average $600,000 annual net loss.
A New Cold War? Courtesy of the Russian Defense Ministry you can now take a tour of Russia’s newest military base. A virtual tour.
Russian LNG project attracts financing. An LNG project in the Arctic, north of Russia, receives European support via financing according to Russian gas producer Novatek.
Alaska Dispatch News, Zaz Hollander, April 21, 2017
Alaska Dispatch News, Erica Martinson, April 21, 2017
Alaska Journal of Commerce, Elwood Brehmer, April 21, 2017
EPA chief delays methane rule at behest of oil and gas firms
APnews.com, Michael Bieseker, April 21, 2017
Fox News, Jason Kopp, April 20, 2017
UPI.com, Daniel Graeber, April 21, 2017
Fish On! The statewide salmon catch forecast of 204 million is up by a million fish, and the world’s biggest sockeye salmon fishery at Bristol Bay is breaking records for chilling its fish. Last year nearly 40 percent of Alaska’s total salmon value came out of Bristol Bay. The 2016 Bristol Bay harvest of 37 million sockeye salmon from the region’s five river systems was the second-largest in 20 years, and both drift and setnet harvesters chilled the largest amount of raw product in the history of the fishery.
Leaving on a jet plane? The state’s proposed increase in jet fuel taxes, which are included in Senate Bill 25 and House Bill 60, would triple the state tax when it is fully implemented, from 3.2 cents to 9.6 cents per gallon and have caused concerns for cargo carriers. That compares with a 2.4 cents per gallon jet fuel tax at Seattle-Tacoma, 3 cents per gallon tax in Portland and 2 cents per gallon tax in Vancouver, British Columbia, three west coast airports that are competitors with Anchorage for air cargo business. No fuel-flow fee is charged at those airports. Once again, Headlamp implores the Legislature to consider what message we send to businesses and investors when we become the most expensive place to do operate.
More job loss detail. Alaska saw a dip in mining jobs during 2016, numbers attributed to losses in the oil patch as well as hard rock mines when commodities prices took a dive. Employment numbers are tallied in different ways by various agencies. Alaska Department of Labor statistics show Alaska went from 17,400 mining jobs in 2015 to 14,200 jobs in 2016. That number lumped in petroleum jobs, said Alaska Economist Neal Fried, with “mom and pop” placer mines and large entities such as Usibelli coal. The Alaska Miners Association separates out minerals and construction materials mining to get its tally: Jobs went from a high of in 2012 of 10,000 to 8,600 in 2016, said AMA President Deantha Crocket. Continued reductions in some of the highest paying jobs in the state are of great concern. Headlamp hopes those in Juneau who want to add more cost to doing business fully comprehend these numbers.
Slow and steady wins the race. CEO for ConocoPhillips, Ryan Lance, spelled out the company’s efforts to reduce debt by selling some assets and reshaping the company. In spite of some skepticism, Lance said, “I don’t worry about production and reserves in the company.”
Let’s make a deal! The owner of Red Dog Mine and the North West Arctic Borough appear to have reached a settlement on the payment-in-lieu-of-tax (PILT) paid by Red Dog’s operator, Teck Alaska, to the borough. The agreement, ranging from $18 million to $26 million per year for 10 years, must now be approved by the assembly. Headlamp wishes Red Dog years of continued success.
Alaska Dispatch News, Nathaniel Herz, April 20, 2017
Alaska Dispatch News, Annie Zak, April 20, 2017
Alaska Journal of Commerce, Lanie Welch, April 20, 2017
Alaska Journal of Commerce, Tim Bradner, April 20, 2017
Alaska Journal of Commerce, Naomi Klouda, April 20, 2017
Reuters, Gary McWilliams, April 20, 2017
Morning Consult, Jack Fitzpatrick, April 19, 2017
Alaska Journal of Commerce, Rebecca Logan, April 19, 2017
Alaska Journal of Commerce, Tim Bradner, April 19, 2017
Two birds, one stone. As Alaska marks the 40th anniversary of the Trans Alaska Pipeline System (TAPS) increased oil production is needed for not only the state budget, but for the health of TAPS. Alyeska President Tom Barrett has said ““More oil is the best long-term solution for sustaining TAPS, from a technical and operational standpoint.” New discoveries by Repsol and Caelus could bring more revenue to the state and help increase throughput in TAPS. Headlamp hopes that our elected officials in Juneau take a long-term approach to oil and gas legislation that encourages more exploration and production rather than passing punitive taxes that could kill these projects and threaten the future of TAPS.
The continental divide. House majority leaders held a news conference on Tuesday where they declared themselves unwilling to make concessions on their deficit-reduction plan, which includes a restructured Permanent Fund, an income tax, and higher oil taxes. Senate President Pete Kelly, R-Fairbanks, meanwhile, took to Facebook to blast the House’s “left-leaning majority” for its “whopping income tax bill” that he said would set up an “Alaskan-style IRS.” “They’re coming for your money because they want to grow government at the expense of working Alaskans,” said Kelly. The “taxes, taxes, taxes” approach of the House doesn’t appear too popular with the Alaskans based on the public testimony we’ve heard of late. Perhaps they should reconsider.
Don’t believe everything you read. Alaska’s U.S. Senators Lisa Murkowski and Dan Sullivan have introduced legislation to open Arctic Waters to oil and gas development and are being attacked in a recent press release by the Center for Biological Diversity. Unfortunately for CBD, the Senators have Alaskans in their corner with a recent poll showing 76 percent of Alaskans support offshore oil and gas development. Headlamp applauds our U.S. Senators for proposing legislation to move Alaska forward. Offshore development could bring new jobs and restore our healthy economy. Bravo!
OilPrice.com, Tsvetana Paraskova, April 18, 2017
Alaska Dispatch News, Nathaniel Herz, April 18, 2017
Arctic Energy Center, April 18, 2017
120 is the new 90. With the 90-day legislative session passed, the Alaska State Legislature has entered overtime. There are two budget proposals from the House and Senate which have not yet reconciled, and as of yet there is no sign of an impending deal between the two bodies.
There’s got to be a morning after. The number of people in Alaska receiving unemployment insurance benefits rose last year, according to a new state report, though spiking claims from the oil sector and industries closely tied to it “appear to be subsiding.” In 2016, the state’s first year with a net jobs loss since 2009, the number of people collecting unemployment was up 2.1 percent. Though many regions of the state saw a rise in unemployment claims, Southeast and the combined area of Anchorage and Mat-Su saw a drop. The total amount of benefits paid out in 2016 was $136 million, the report said, up from $123.5 million the year prior.
Spill contained. Crude oil from a leaking BP well on the North Slope was contained to the gravel drilling pad and didn’t reach the surrounding snow-covered tundra. The gravel pad supports heavy rigs and other hardware atop the tundra. The source of the release, Well 3, is at the Drill Site 2 gravel pad at Flow Station 1, about 5 miles from Deadhorse Airport. Officials have said there were no reported injuries to people or wildlife. DEC is coordinating with BP and AOGCC to investigate the cause of the release.
What’s in a number? DNR’s Ed King clarified for the record that the state does not anticipate a 12% oil decline as was reflected in the Spring Revenue Forecast. Finance Co-Chair Anna McKinnon took King to task stressing the need for accurate numbers as the House considers taxing Alaskans.
Sold to the highest bidder? ConocoPhillips is evaluating bids received for their mothballed LNG Plant in Nikiski. The plant could be attractive to developers in the Cook Inlet looking to export LNG to Asia.
Lease sale coming in June. The Alaska Department of Natural Resources is planning a lease sale. DNR’s Division of Oil and Gas announced the Alaska Peninsula Areawide 2017 (APA 2017) and the Cook Inlet Areawide 2017W (CIA 2017W) competitive oil and gas lease sales will be held June 21st.
Alaska Dispatch News, Nathaniel Herz, April 17, 2017
Alaska Dispatch News, Annie Zak, April 17, 2017
Alaska Dispatch News, Alex DeMarban, April 18, 2017
Bloomberg, April 17, 2017
Offshore Mag, Offshore Staff, April 17, 2017
Platts, Tim Bradner, April 17, 2017
Alaska Public Media, Rashah McChesney, April 17, 2017
More Oil, More Money. Better than expected oil production and price figures mean the State of Alaska should have an extra $191 million in revenue when the 2017 fiscal year ends. A 20% increase in the spendable portion of the state’s overall petroleum-sourced revenue.
The tax man cometh. The Alaska House voted on Saturday to institute a state personal income tax. 22 House majority members — 17 Democrats, three Republicans and two independents — voted for House Bill 115, with 17 Republican minority members opposed and Big Lake Republican Rep. Mark Neuman absent. The Alaska income tax was approved the same day federal income taxes would have been due had it not been a Saturday. HB 115 would raise an estimated $700 million a year. HB 115 would leave Alaska with an effective tax rate of 1.66 percent. The bill would take effect in 2019. Taxes would be withheld from wage-earner paychecks beginning in January of that year. The first taxes would be due in early 2020.
Headlamp would note the bill would ADD a minimum of 60 new state employees to implement the tax, the majority of the taxes paid would come from the Railbelt (72%) according to DOL numbers, the $700 million estimate does not recognize the recent lay-offs from the state’s highest paying industry, and less than 300,000 Alaskans will actually be paying an income tax. In other words, it increases the size of government, revenue estimates are bad and it isn’t broad based.
VP hears about LNG. Alaska officials are lobbying the White House for federal support for the Alaska LNG project. On Saturday, Gov. Walker met with Vice President Mike Pence when Pence’s plane made a refueling stop in Alaska. The governor used the opportunity to promote the Alaska LNG project, as well as the state’s strategic location for military operations in the Asia-Pacific region. In submitting the Alaska LNG application to federal regulators, AGDC officials are asking FERC to complete work on a draft environmental impact statement in the second quarter of 2018, and to issue the final EIS by the end of 2018. Under that schedule, the state hopes to make a final investment decision on the project in early 2019. But given the size and complexity of the ambitious project, energy experts suggest the state’s proposed timeline is unrealistic.
EnergyWire, Margaret Kriz Hobson, April 17, 2017
Alaska Dispatch News, Nathaniel Herz, April 17, 2017
Alaska Dispatch News, Michelle Theriault Boots, April 17, 2017
Alaska Journal of Commerce, Elwood Brehmer, April 14, 2017
Focus, Focus, Focus. Acknowledging that legislators won’t finish work on time, Senate President Pete Kelly sent a letter to House Speaker Bryce Edgmon, asking him to narrow the legislature’s focus. “We believe we must act to define the scope of legislative work if we are to proceed beyond Day 90,” Kelly wrote. “Consideration of a range of other legislative issues is a distraction from a timely resolution to our fiscal problems.”
Something’s Fishy. The push by a group of fisheries activists made to get a section of Alaska law overhauled is making its way through the Legislature, but won’t pass this year. House Bill 199, sponsored by representatives Louise Stutes and Andy Josephson, would overhaul Alaska Statute Title 16, which sets out the procedures for the commissioner of the Alaska Department of Fish and Game to issue permits for operations in fish habitat. Headlamp wrote about HB 199 a few weeks ago and is glad to see that the bill will not move this year.
One Giant Step. On Thursday, Alaska Gasline Development Corporation officials formally launched their application for federal permission to build a pipeline and other facilities to export North Slope gas. 58,000 pages of documents will be delivered by truck to the Federal Energy Regulatory Commission’s (FERC) headquarters in Washington, D.C., on Monday. FERC officials have said this will be the largest application they have ever received, involving the largest and most expensive project they have ever studied. Current plans call for North Slope natural gas to be shipped in an 800-mile pipeline to Nikiski, where it can be chilled into liquefied natural gas and loaded into oceangoing tankers. FERC will take public comment associated with a draft environmental impact statement, and later issue a final impact statement. The documents, to be published by FERC, will spell out the project’s effects on the environment and would provide the basis for permitting decisions.
Nothing lasts forever. For the first time in state history, the Alaska Legislature has chosen to spend the Alaska Permanent Fund on something other than dividends. On Wednesday, the Alaska House of Representatives voted 22-18 to approve Senate Bill 26, which takes a portion of the Permanent Fund’s investment earnings and applies that money to Alaska’s $2.8 billion annual deficit. As a side effect, the Permanent Fund Dividend would drop to $1,250 starting this year.
On the road again. There’s more time to provide input on what should be considered in an environmental impact statement for the proposed Ambler Road project. The Bureau of Land Management has extended the EIS scoping period for the over 200-mile state proposed mining access route in the southern Brooks Range.
Alaska Dispatch News, Alex DeMarban, April 14, 2017
Alaska Journal of Commerce, Elwood Brehmer, April 15, 2017
Alaska Journal of Commerce, Elwood Brehmer, April 14, 2017
Alaska Journal of Commerce, James Brooks, April 13, 2017
Alaska Public Media, Dan Bross, April 13, 2017
Senate asks House to narrow focus on Day 87 of session
KTVA, Liz Raines, April 13, 2017
Peninsula Clarion, Elizabeth Earl, April 13, 2017
As we wind up the last week of the regular session with no adjournment in sight, we reflect on the creation of Bad Bill of the Week and hope it has both informed and horrified loyal Headlamp readers.
The majority of our Bad Bills have been easy to pick. They have offended us at Headlamp for a myriad of reasons, not the least of which were they don’t solve our financial situation or strengthen the private sector. But this bill has EVOLVED into Bad Bill of the Week. It is CSSB 26.
SB 26 was originally Governor Walker’s bill that included a percent of market value (POMV) approach to the Permanent Fund. When the Senate considered the bill, it added a spending cap and other levers to help address Alaska’s fiscal crisis. But SB 26’s story didn’t end there.
Last week, the House Majority got ahold of CSSB 26 and in Headlamp’s opinion, destroyed it and likely the chances of its passage. Anyone who follows politics in Juneau isn’t surprised by the gamesmanship that takes place at the end of session. Broadly titled bills have been known to end up with entire pieces of legislation added in the waning hours. But the actions of the House Majority this week take the cake.
Perhaps it should come as no surprise that the House Majority, acting like a petulant child, hijacked CSSB 26, adding “conditional language” amounting to extortion in Headlamp’s view. The leaders in the House are trying to jam bad legislation down the throats of the Minority and the Senate, and they’re being met with vocal resistance.
The latest version of CSSB 26 that passed the House says the POMV will only go into effect if the Legislature enacts a broad-based tax dedicated to education and the House version of HB 111 (oil taxes) is passed into law. HB 111 was already Bad Bill of the Week in late March, and let’s just say, if we thought the earlier version of HB 111 was bad, the final version passed by the House earlier this week would be the Terrible, Horrible, No Good, Very Bad Bad Bill of the Week.
Headlamp is concerned, to say the least, with the poison pill the House Majority has added to SB 26. It’s clear they did it because they can’t get their economy killing, anti-private sector garbage passed on merit, so they’re resorting to extortion. We’ll pass CSSB 26 if you give us what we want. It’s like we’re in an appalling real-life episode of the Sopranos. Well, House Majority, Headlamp believes Alaska deserves better. That said, it’s clear we won’t be getting it from the so called “leadership” in the Alaska State House.
Don’t let the evolution of this bill from good legislation to Bad Bill of the Week fool you – it most definitely deserves the designation. Headlamp will keep you posted as we head to extra innings.
Deadline Looms. Bill Walker continues to attempt to entice world leaders’ support for the Alaska LNG project. On Tuesday he said he would personally put in a word with President Donald Trump and is now trying to meet with Japan’s prime minister, following recent talks with the Chinese president. Whether the high-level efforts boost the fortunes of the $45 billion liquefied-natural-gas project, known as Alaska LNG, is yet to be seen. Walker had proposed a Sept. 1 deadline to line up critical business partners before pulling the plug on the costly undertaking. On Tuesday, he said he was hopeful the prominent attention would lead to financial commitments to push the proposal into construction. He didn’t back off the deadline, though he seemed to keep his options open, “it’d be great if we had someone by then, we’ll have to evaluate by then where we are, what we’ve received, and how the world has changed.”
More money coming. Oil and gas companies in Alaska owe the state $194 million in unpaid taxes and interest from 2010, according to a summary of recently completed audits of that year’s oil and gas production tax returns. The back-taxes assessment comes atop the roughly $3.5 billion collected that year from the production tax that has usually provided Alaska with most of its general fund revenue. The income from the tax has fallen dramatically in recent years with the collapse in oil prices. The audits assessed an additional $131 million in production taxes for 2010, along with $63 million in interest. The audits are confidential under state law, as are the tax returns. The 12 companies whose returns were audited were not named in the summary.
Spend money to save money. A committee of Alaska legislative leaders Wednesday unanimously approved a $400,000 computer upgrade for lawmakers and staff — a step that could ultimately save $150,000 on annual moving costs. The “workstation mobility” project will pay for new monitors, color printers and docking stations in Juneau and legislators’ home districts that will plug into a laptop or small computer that can be easily carried between the two offices. Currently, the state pays for lawmakers to move desktop computers and other equipment between Juneau and Anchorage — a process that takes weeks and involves hundreds of boxes.
Two become one? In a letter to the Chugach Electric Association and Municipal Light & Power, Anchorage Economic Development Corp. President Bill Popp said the utilities and stakeholders should have “substantive discussions” about a merger. The suggestions are the product of a working group, convened by Anchorage Economic Development Corp, of 10 companies and organizations that have “significant property investments in both ML&P and CEA service areas,” AEDC said in a news release. Those include the Alaska Railroad Corp., GCI, JL Properties, Alaska Regional Hospital and others. ML&P and Chugach do not compete for the same customers because they both serve distinct, different areas of Anchorage.
Alaska Dispatch News, Alex DeMarban, April 13, 2017
Alaska Dispatch News, Alex DeMarban, April 13, 2017
Alaska Dispatch News, Nathaniel Herz, April 13, 2017
Alaska Dispatch News, Nathaniel Herz, April 13, 2017
Alaska Dispatch News, Annie Zak, April 13, 2017
Back to Work! Conditions for continuing work at the Pebble Mine were announced Tuesday by the Alaska Department of Natural Resources and immediately drew a favorable reaction from Bristol Bay tribes, environmental groups and fishing interests. Pebble said its work this summer will be as DNR has directed, and will protect the public interest. Pebble Limited Partnership applied in October for a land-use permit to continue monitoring and care of mining claims spread over 266,000 acres in the Bristol Bay region. The developers aren’t planning exploration work this summer, but say they intend to move forward and eventually seek major permits to develop the site. The summer work, with permission now in hand, will include inspections, upkeep of facilities, and reclamation including filling of holes drilled into the earth to remove core samples. The state estimates it would cost $1.9 million to remove all of Pebble’s equipment from state land and another $100,000 to do the inspection and restoration required under this year’s permit. Since 1988, some 1,355 exploratory holes have been drilled on the Pebble prospect. About 600 have been filled, DNR says. The new permit requires Pebble to fill another 138 holes, including plugging them below the surface and cutting off any exposed well or pipe, which Bristol Bay residents say have been exposed in the past, creating hazards. Another 612 boreholes can remain open for the next year, but Pebble must inspect 300 of them, under the permit. The state required Pebble to commit $2 million to ensure disturbed land is eventually restored.
The consequences of courage. The Alaska Senate has removed Wasilla Republican Sen. Mike Dunleavy from his key committee posts following his vote last week against the caucus’s budget proposal. Dunleavy’s seat on the key finance committee went to Palmer Sen. Shelley Hughes. They also gave Dunleavy’s gavel as chair of the Senate State Affairs Committee to Anchorage Republican Sen. Kevin Meyer, the previous Senate president. Kodiak Sen. Gary Stevens, the Senate president from 2011 to 2012, will take over Hughes’ old job as chair of the Senate Education Committee. Dunleavy said in a brief interview Tuesday that he wasn’t surprised to lose his finance seat or his chairmanship. “I knew what the ramifications were of my decision,” he said. “There’s no animosity.” Headlamp applauds Dunleavy for standing his ground and his belief that the size and scope of government could be further reduced.
Alaska Dispatch News, Lisa Demer, April 12, 2017
Alaska Dispatch News, Nathaniel Herz, April 12, 2017
Alaska Public Media, Rashah McChesney, April 11, 2017
Forbes, David Blackmon, April 11, 2017