Morning Headlamp – New Tax Proposal on Lobbyists Gets Pushback

February 17, 2017 | Posted in : News

State Rep. Sam Kito III wants to close a $200,000 gap at the Alaska Public Offices Commission which oversees the activities of candidates, political groups and lobbyists. According to Kito the solution is a selective income tax on lobbyists. The revenue, he says, would help with accurate and timely oversight of lobbying activities. Kito wants to replace the $250 registration fee that lobbyists currently pay per contract with a 2.5 percent income tax on lobbyists. The tax would allow APOC to meet its receipt authority and provide some extra revenue for hiring staff.

A new LNG project emerges. A new option for liquefying and marketing natural gas from Alaska’s Cook Inlet has emerged in the form of a proposed liquefied natural gas plant located in Houston, Alaska, to produce LNG for shipment on the Alaska Railroad. Consultants have been working with a major corporation with worldwide LNG experience for the construction of the plant on a 20-acre site belonging to the Knikatnu Corp. at an existing railroad spur at Millers Reach…The idea is to ship LNG by cryogenic container to rural communities. Initial operation would use about 3 million cubic feet per day of gas, resulting in the production of 30,000 gallons per day of LNG. However, the modular design of the LNG plant would enable future expansion to meet growing demand, as required.

Following orders. An Oklahoma judge on Thursday ordered Scott Pruitt, the state’s attorney general and President Donald Trump’s nominee to lead the Environmental Protection Agency, to turn over thousands of emails related to his communication with the oil, gas and coal industry. Judge Timmons gave the attorney general’s office until Tuesday to release the records, meaning they likely won’t come to light until after he is sworn in to his new position. “Attorney General Pruitt has been more thoroughly vetted than any nominee for EPA administrator,” Sen. John Barrasso, R-Wyo., chairman of the Senate Environment and Public Works Committee, said in a statement. Pruitt told lawmakers that as EPA administrator, he would steer the agency away from what he called an era of overzealous and unlawful regulation during the Obama years. He said the EPA under his leadership would respect the authority of states and be open to a “full range of views.”

A golden opportunity. Mining’s contribution to Alaska’s economy starts with the hefty paychecks being issued to the 4,350 miners that work in the state, according to recent study completed by the Alaska Miners Association and McDowell Group. The average miner working in Alaska during 2016 received a whopping US$108,000 for the year, about double the average income across all sectors in the state.

Today, Alaska hosts six large-scale mines, hundreds of family-sized placer gold operations and more than 20 active mineral exploration projects. Hecla Mining’s Greens Creek silver mine south of Juneau and Coeur Mining’s Kensington gold mine north of the capital city are the top two property taxpayers and for-profit employers in the city and borough of Juneau.

Red Dog, Alaska’s largest mine in terms of the value of the metals it produces, is the main driving force for the economy of Northwest Alaska. So far, NANA has received US$1.3 billion in royalties from its involvement in Red Dog.

The Donlin Gold Mine being considered in an environmental impact statement, currently under review by the U.S. Army Corps of Engineers, includes a 53,500-metric-ton-per-day mill that is expected to produce an average of 1.1 million ounces of gold annually over the first 27 years. Donlin Gold anticipates an annual payroll of US$375 million to pay the roughly 3,000 workers during the three- to four-year construction phase. Once in production, the company expects a payroll of more than US$100 million per year for the minimum of 800 workers that would be needed at the mine currently being considered. In addition to this direct employment, Donlin Gold is expected to spur about another US$60 million a year worth of jobs.

 

First Reads

Lobbyist tax gets pushback in Alaska state House
KTOO, Caroline Halter, February 16, 2017

Another LNG option
Petroleum News, Alan Bailey, February 17, 2017

Judge orders EPA nominee Pruitt to release emails with oil, gas, coal industry
Chicago Tribune, Brady Dennis, February 17, 2017

Mining News: A growing workforce
Mining News, Shane Lasley, February 17, 2017

 

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Bad Bill of the Week: We’re switching it up!

February 17, 2017 | Posted in : News

It’s opposite day at AK Headlamp and instead of railing on yet another piece of time-wasting nonsense coming out of Juneau, we’re going to highlight a GOOD idea.

Freshman Representative DeLena Johnson has sponsored House Concurrent Resolution 6 (HCR 6) that would limit House committees to holding hearings on bills that “have as their primary purpose appropriating, raising, or allocating state revenue” until the House passes an operating budget. In other words: DO THE ONE THING YOU ARE CONSTITUTIONALLY MANDATED TO DO BEFORE YOU DO ANYTHING ELSE.

Representative Johnson’s press release read like music to Headlamp’s ears, echoing our sentiments and leaving us thankful someone down there “gets it!” In fact, a slew of legislators “get it” based on the 11 cosponsors thus far. In Rep. Johnson’s words:

“Stop with the frivolous bills. We have a duty to address the state’s multi-billion-dollar deficit which is currently our state’s most pressing issue.”

“I am eager to dig into the many bills put before me but first I want to focus on right-sizing government. Future Alaskans are depending on the work we do here today.”

Headlamp would be remiss if we failed to note that HCR 6 mirrors HCR 23 introduced last year. The one curious difference being that last year, HCR 23 received broad bi-partisan support. Something HCR 6 has yet to enjoy.

For those who love Bad Bill of the Week, fear not! Bad legislation that does not solve our financial situation and does not strengthen the private sector is still being introduced each day. We’ll be sure to highlight some next week!

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Morning Headlamp – Tax Proposals Receive Frosty Reception from Taxpayers, Businesses

February 16, 2017 | Posted in : News

Gov. Bill Walker’s proposal to triple the state’s jet fuel and aviation gasoline taxes by 2018 was met with a chilly reception by some of Alaska’s largest air carriers. If enacted by the Legislature, the proposed taxes in House Bill 60 and Senate Bill 25 would raise up to $80 million more per year by increasing state taxes on all motor fuels — gasoline and marine diesel as well as aviation fuel.  Alaska Airlines regional vice president Marilyn Romano said the company’s own calculations indicate that Alaska Airlines alone would pay 45 percent of all new taxes collected if either HB 60 or SB 25 pass the Legislature.

As Winston Churchill once said, “There is no such thing as a good tax.” You might not be surprised to hear that consumers ends up paying for increases to motor fuel taxes in the end. Researchers at the National Bureau of Economic Research found in “both federal and state diesel and gasoline taxes [are fully passed on] to consumers… [and] are reflected immediately in retail prices.”

Following public backlash against a new proposed studded tire tax, Sen. Cathy Giessel, R-Anchorage, has scaled back her proposal. Giessel’s original legislation would have increased the state user fee to $75 a tire, up the current $5 fee, or $300 for a set of four instead of the current $20. In a new “sponsor substitute” introduced Wednesday, Giessel is now calling for a $50 tax instead — or $200 for a full set, which would come on top of a $2.50 fee for all tires – studded or non-studded.

Taxes, taxes, and more taxes. Anchorage Democrat Les Gara debuted his bill, called the “Fair Share for Alaska’s Oil Act,” on Wednesday, calling for an increase in the state’s current minimum oil tax, from 4 percent up to 10 percent, as oil prices rise.

Headlamp is disappointed as Rep. Gara had just acknowledged in his constituent newsletter that taxing the oil industry more would not solve the budget problem. On February 13, 2017 Gara penned the following: “I want a much fairer share for our oil, but that’s not a deficit-eraser unless we adopt taxes so high they ensure oil companies lose billions a year.” Headlamp notes that Gara’s bill has not yet been read across the House floor, and therefore technically does not exist or have a bill number.

Permanent fund dividends are at risk if the state doesn’t get its fiscal house in order. According to Legislative Finance Director David Teal, by 2027, whether Alaskans receive Permanent Fund dividends each year would depend on annual Fund earnings. The House Finance Committee will hear public testimony on the proposed income tax and Permanent Fund bill (HB 115) on Friday.

Punish the producers seems to the mantra in Juneau. Robert Dillon, Vice President of Communications for the American Council for Capital Formation, writes that increasing the tax burden on the government’s number one source of revenue when the industry is struggling with declining production, increased regulatory costs, and falling profits is likely to collect less, not more for the state’s treasury.

Staff at the EPA have been told that President Donald Trump is preparing a number of executive orders related to the agency which will be signed once the new administrator is confirmed. Trump has promised to cut U.S. environmental regulation as a way to bolster the drilling and coal mining industries, but has vowed to do so without compromising air and water quality.

The Alaska Gasline Port Authority (AGPA) wants federal regulators and state proponents of a large natural gas pipeline project to conduct a new assessment with Valdez as the terminus for the pipeline. AGPA is seeking this despite a determination made in 2013 that the Alaska LNG Project will terminate at a port facility in Nikiski. North Slope producers have purchased about 650 acres of land in Nikiski to site the massive natural gas liquefaction plant and marine export terminal. AGDC is now negotiating an access agreement for the producers’ property and the key LNG export permits tied to the Nikiski location.

 

First Reads

Tax hike idea gets a turbulent reception from big airlines
Juneau Empire, James Brooks, February 15, 2017

Anchorage GOP Sen. Giessel scales back her fee hike for studded tires
Alaska Dispatch News, Nathaniel Herz, February 15, 2017

Reserves, dividends would be gone in 10 years without action, lawmakers told
KTOO, Andrew Kitchenman, February 15, 2017

New bill from House lawmaker would hike minimum tax on oil industry
KTOO, Rashah McChesney, February 15, 2017

Increasing Taxes on Alaska Oil Producers Might Not Go Well
Real Clear Energy, Robert Dillon, February 16, 2017

U.S. EPA staff told to prepare for Trump executive orders -sources
Reuters, February 15, 2017

Port Authority resurfaces seeking Valdez route
Alaska Journal of Commerce, Elwood Brehmer, February 16, 2017

Group unveils video and intent to sue Hilcorp for Cook Inlet natural gas leak
Alaska Dispatch News, Alex DeMarban, February 16, 2017

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Alternative Facts, Alaska Style

February 15, 2017 | Posted in : News

A big AK HEADLAMP shout out to Rick Boyles for his piece in the Juneau Empire countering false claims, presented in Juneau as “facts,” during the debate over HB 111 – this year’s version of oil taxes.

Click here to read his thoughts.

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Morning Headlamp – Oversized State Government Threatens Long Term Fiscal Stability & State Infrastructure Projects

February 15, 2017 | Posted in : News

With oil hovering at $54 a barrel, Alaska has burned through $13 billion of savings over the past four years and is facing a $3 billion shortfall for the year that starts in July. An emergency fund is projected to run dry in mid-2018. Without a long-term fix, S&P Global Ratings warns that it may downgrade the state’s bond rating again, which would raise borrowing costs for projects such as a natural-gas pipeline aimed at reviving the economy. State Revenue Commissioner Randall Hoffbeck has called for a “quantum shift in people’s thought process,” which takes into account a legislative plan for a state income tax and reductions in Permanent Fund Dividends checks for state residents.

Headlamp would posit that a “quantum shift in people’s thought process” should equally apply to those in state government who have been resistant to cost saving reductions and reforms that realign the scope of government to fit our long-term revenue streams.

Office of Management and Budget Director Pat Pitney warned against deep cuts to the state budget because it would shift the state’s fiscal crisis to local communities, a burden she said could result in higher local property taxes while speaking at an event in Fairbanks. Pitney highlighted state spending on education, school construction debt reimbursement, school transportation, public employee retirement accounts and the state’s community revenue sharing program, which directly sends state revenue to the cities and boroughs.

Reducing and restructuring state government does not necessarily mean slashing services. It means delivering these services in innovative and more cost-efficient forms. It’s odd for an administration that last year introduced a litany of taxes on all Alaskans, to warn against reducing the size of government under the auspice that new taxes will necessarily follow.

State Sen. Mike Dunleavy, R-Wasilla, has launched a petition and campaign against efforts to fix Alaska’s budget deficit with money that would otherwise go to residents’ Permanent Fund dividends. Dunleavy this week has been advertising his website, SaveYourPFD.com, which asks visitors to sign a petition “If you believe you are the best person to decide where the other half of your PFD should be spent.” The question was a reference to last year’s veto by Gov. Bill Walker of roughly half the $1.4 billion set aside by the Legislature for dividend payments.

 

First Reads

Alaska Oil Bust Threatens Life of Few Taxes and Dividend Checks
Bloomberg, Romy Varghese, February 15, 2017

Alaska budget director warns against deep cuts
Fairbanks Daily News Miner, Matt Buxton, February 15, 2017

PFD fraud detection program falls short of promised savings
Alaska Dispatch News, Nathaniel Herz, February 15, 2017

Wasilla lawmaker launches online PFD-restoration petition
Alaska Dispatch News, Nathaniel Herz, February 15, 2017

State outlines costs for income tax implementation
Juneau Empire – AP, February 14, 2017

Lawmakers grill Alaska’s gasline corporation on its budget
KTOO, Rashah McChesney, February 14, 2017

Cue the debate
Craig Medred, February 13, 2017

Keeping the oil industry healthy
Rick Boyles, Juneau Empire, February 13, 2017

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Morning Headlamp – First Your Dividend, Now Your Income!

February 14, 2017 | Posted in : News

Anchorage State Senator Cathy Giessel said she wants to raise the “user fee” to cover the steep costs of re-paving roads. To do so Giessel introduced Senate Bill 50 last week. It would bring the total tax on four studded tires to $300, up from the current rate of $20. Early estimates peg the number of Alaskans using studded tires at 12%. Yet, the Alaska Department of Transportation & Public Facilities (ADOTPF) estimates that road repair due to rutting for a two-lane stretch of road costs 1 million dollars per mile.

Under the proposed statewide income tax bill, Alaskans would have a choice when they apply for their annual Permanent Fund dividend: whether or not to set aside money to pay for their next year’s state income tax liability. Employers have the option to deduct the proposed state income tax payments from workers’ paychecks. But if workers prefer to pay with PFDs, they could ask their employers to deduct less money each pay period.

More local push back and public testimony opposed to passing an Arctic National Wildlife Reserve (ANWR) drilling resolution has threatened a nearly 25 year tradition of the Alaska state legislature calling for Congressional action. Rep. Dean Westlake, is chairman of the House’s Arctic committee. His district covers the North Slope and includes the refuge, he doesn’t dispute that the environmental concerns of some of his constituents are important, but his district desperately needs an economic boost. And he’s looking toward an industry that has provided that surge to the North Slope.

According to a report from the Department of Energy, U.S. shale oil production will increase to more than 6 million barrels per day in the coming decade, making up most of total U.S. oil production. But a report by the Energy Information Administration now says tight oil production will flat line after 2026 as drillers move into less productive oil fields and well productivity decreases.

Canada faces a “jobs mirage” as projects cycle on and off through the downturn in oil prices. Workers in Northern Alberta face year-long layoffs and uncertain work schedules as prices remain low.

 

First Reads

Lawmaker would boost Alaska studded tire fee to $75 each from $5
Alaska Dispatch News, Nathaniel Herz, February 14, 2017

Bill offers new option for PFDs: paying state income taxes
KTOO, Andrew Kitchenman, February 13, 2017

Renewed fight, but old arguments for lawmakers wanting to open ANWR for drilling
Alaska Public Radio, Rashah McChesney, February 13, 2017

Are shale’s days numbered?
FuelFix, David Hunn, February 13, 2017

Despite Black Shoots in Oil Patch, Canada Faces a Jobs Mirage
Bloomberg, Greg Quinn, February 13, 2017

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Morning Headlamp — House Majority Introduces Income Tax, Cuts to Permanent Fund Dividend

February 13, 2017 | Posted in : News

Days after introducing a plan to increase production taxes on Alaska’s oil industry, the Alaska House Majority unveiled a plan to close the remainder of the multi-billion dollar deficit by implementing a state income tax and tapping into Permanent Fund earnings. H.B. 115 would require Alaskans to pay a state income tax equal to 15 percent of their federal liability and make it so that 4.75 percent of the overall Permanent Fund’s $56 billion value is drawn annually from the earnings reserve account and put into the general fund. Two-thirds of the draw would go to government operations, and one-third would be spent paying dividends to Alaskans.

Headlamp would encourage the House Majority to remember what happened last session when legislators tried to implement taxes before they made a legitimate effort to reduce the size and scope of state government. GRIDLOCK. How does the Majority even know the size of the “gap” they have to fill if they haven’t completed the operating and capital budgets yet?   

Alaskans are near the midpoint of their window to apply for 2017 Permanent Fund dividends. Last year, more than 643,000 Alaskans received $1,022 dividends, reduced from an original total of $2,052 after Gov. Bill Walker vetoed part of the legislative transfer of money meant to pay for them. Walker said at the time that the move was necessary to preserve the future of the dividend, but was criticized by the state House’s Republican majority for taking “money from Alaskans’ pockets.”

Alaska lawmakers are examining their own budgets as they prepare to ask their constituents for a reduction in their Permanent Fund Dividend and to bear an income tax. Lawmakers have faced persistent questions about their own spending on travel and salaries, even as some legislators have called for steeper reductions to Gov. Bill Walker’s executive branch agencies amid the state’s budget crisis. House Rules chair Gabrielle LeDoux initially proclaimed a limitation on staff and salaries, however, many in the majority, including Rep. LeDoux have ignored those limitations.

 

First Reads

House Democrats introduce income tax, plan to tap Permanent Fund earnings to close deficit
KTUU, Austin Baird, February 10, 2017

Haven’t applied for your Permanent Fund dividend yet? Get it done, state says.
Alaska Dispatch News, Chris Klint, February 13, 2017

Alaska lawmakers eye their own budget for reductions
Alaska Dispatch News, Nathaniel Herz, February 13, 2017

Deficit-cutting plan from House majority uses income tax, Permanent Fund earnings
Alaska Dispatch News, Nathaniel Herz, February 12, 2017

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Morning Headlamp — AGDC to Host Summit in Search of Customers

February 10, 2017 | Posted in : News

A summit hosted by the Alaska Gasline Development Corporation (AGDC) is scheduled for March 1 to March 6, in an attempt to entice commercial customers to support its $45 billion Alaska LNG project. The summit is expected to cost about $200,000, though the state is trying to secure corporate sponsors to help share the tab. About 15 officials from roughly 10 companies in Japan, Korea and Singapore are expected to attend, with guests staying at the Alyeska Resort in Girdwood.

Headlamp notes that absent from the summit is any mention of Alaska’s highly capable support industry – the industry and companies who will actually build the pipeline should the project ever come to fruition. Asking an industry that has laid off 3,500 workers to commit to sponsorship levels of $2,500-25,000 (in hopes of mingling with potential project investors) shows an astonishing ignorance of, or disregard for, what is happening in the economy.   

Korean natural gas company KOGAS, the 2nd largest global buyer of LNG, is “interested” in participating in American shale gas projects. South Korean demand for LNG is currently declining in the short-term due to increased electricity output from nuclear and coal-fired power plants. The country is the world’s second-biggest LNG importer after Japan. The country currently imports approximately 30 million tons of LNG a year.

 

First Reads

Alaska gas line agency to host $200,000 summit for potential customers
Alaska Dispatch News, Alex DeMarban, February 10, 2017

 Oil tax debate reignites in Alaska Capitol yet again
KTUU, Austin Baird, February 10, 2017

 State coffers won’t cover cost of cleanup if oil companies walk away
Alaska Public Radio, Elizabeth Harball, February 10, 2017

 South Korea’s KOGAS says interested in U.S. shale gas projects
Reuters, Jane Chung, February 10, 2017

 

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Bad Bill of the Week – Two bad bills for the price of one!

February 10, 2017 | Posted in : News

Headlamp’s Bad Bill(s) of the Week today come to us from Representative Louise Stutes of Kodiak. HB 87 “Conflict of Interest: Board of Fisheries/Game” and HB 88 “Board of Fisheries Membership,” both make the list because (say it with us now) they don’t solve our financial situation nor do they strengthen the private sector.

HB 87 would allow those with a conflict of interest to deliberate on issues before the boards. For those paying attention, the Board of Fisheries and Board of Game are rife with politics and often generate major rifts within the public (see sport fishing vs. commercial fishing interests on the Kenai Peninsula or pro-predator control advocates vs. anti-predator control groups). According to her sponsor statement, Representative Stutes wants to “allow members to deliberate on subjects for which they have a declared personal or financial interest…” She goes on to say that “allowing members with expertise in particular fields to deliberate will help the Boards make more informed decisions and lead to stronger fisheries management statewide.”

Headlamp wonders about areas of the state that aren’t represented on the boards. Are they going to get a fair deal? Or will members be able to influence the decisions to benefit their area or pocketbooks? The only good thing we see about this bill is that it has a zero fiscal note. Like usual though, Headlamp would ask readers to consider the time and resources the Legislature will spend to debate what promises to be a contentious issue.

This bill is pretty much the polar opposite of Representative Grenn’s HB 44 – of which Stutes is a co-sponsor. Headlamp wonders how the House Majority can put forth such contradictory policies. Why is transparency demanded of one resource industry and not others?

HB 88 would add two additional members to the Board of Fisheries. A seemingly benign piece of legislation, as the size of boards consistently change over time. However, Headlamp wonders what the impetus was for the bill, not to mention what the financial costs would be? The Board holds meetings throughout the state in communities such as Kodiak, Homer, Sitka, Valdez, and Anchorage – with Board member travel, lodging and per diem paid for by the State. The fiscal note for this bill is $85,300. At a time when we’re trying to trim the budget, Representative Stutes is trying to increase it. Headlamp says no.

At the end of the day, the biggest reason HB 87 and HB 88 are here this week is because they aren’t moving the state forward. Headlamp continues to be frustrated by the lack of leadership in Juneau. If legislators can’t prioritize the needs of the state during a crisis, what hope do we have?

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Extra Edition – The right process can produce the right policy

February 9, 2017 | Posted in : News

Good public policy will never be crafted by our legislators in Juneau. That is, until elected officials follow the right process.

The basic elements of developing comprehensive, effective public policy include the following elements juxtaposed against the efforts behind HB 111 – the new oil tax bill introduced yesterday. As a side note, HB 111, if passed, would be the 7th change to Alaska’s oil and gas tax regime in 12 years.

  1. An extensive inventory phase for gathering data vs. “We haven’t really modeled this legislation.”
  2. A search for alternative solutions vs. “Honoring a perceived commitment.”
  3. The preparation of a plan vs. “This is tough medicine.”
  4. A subject-oriented scope (policy that encourages continued exploration and development activity and provides revenue to the state) vs. a problem-oriented scope “We have a budget gap to fill!”
  5. A long-term vision (at least ten years) vs. “This year’s version of oil taxes.”
  6. An apolitical approach to the process of implementation vs. Introducing legislation that only some members of a committee, and the media, have seen.

Unfortunately, the quotes above came from the mouths of those who crafted HB 111. We wish we were making them up, but they’re as real as it gets.

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