Will the house majority kick Alaska when it’s down? Alaska’s gross domestic product declined for the fourth year in a row in 2016, the longest downward slide since records began in 1963, according to a new report released this week by the Alaska Department of Labor and Workforce Development. Alaska’s GDP in 2016 fell 5 percent compared to the previous year, down to $50.7 billion. The figure has been on the decline since its peak of $60.9 billion in 2012, according to the report, which uses figures from the U.S. Bureau of Economic Analysis. That drop last year is due to Alaska’s recession, which took hold in late 2015, and “nearly all of the loss has been attributable to the oil and gas sector,” the report said. Alaska has never before had a slide in GDP — the value of goods and services the state produces — that lasted more than a year.
From rags to riches. What were things like in Alaska before oil? They were pretty tough. Taxes were high; jobs were scarce; the economy was dicey, and the young state of Alaska was basically broke. “Alaska was a wonderful place to live, and you could leave your doors unlocked, but we needed everything: schools, hospitals, roads, sewer, water, power, docks. Mostly we did without, unless the federal government had already built it,” recalls Judy Brady, who arrived in Fairbanks in 1963 from Idaho. She went on: “We had the highest infant death rate in the nation, and the highest incidence of tuberculosis. We had at least 2,000 high school-age rural students with no school to go to, so they just didn’t.”
E Pluribus Unum (aka Out of Many One.) The Alaska Native company, ASRC Exploration hopes to succeed where Shell didn’t. It’s currently asking federal regulators not to cancel a block of leases once held by Shell in federal waters at Camden Bay about 15 miles off the North Slope coast northwest of the Arctic National Wildlife Refuge. ASRC Exploration acquired the leases from Shell in 2016. The company recently cleared one hurdle when the U.S Bureau of Safety and Environmental Enforcement approved its request, combining 20 leases into a unit, Mark Fesmire, the agency’s Alaska region director, said on Friday. The “unitization” allows regulators to treat the group of leases as a single, large lease, so that activity in one lease can keep all the leases alive. “ASRC Exploration is encouraged by the decision to approve the unitization,” said Ty Hardt, a spokesman with Arctic Slope Regional Corp. The exploration company “”remains hopeful” the extension request will be approved.
ICYMI. IMO. The United Nations agency that sets rules for international shipping said Friday it will develop rules about the use of heavy fuel oil by ships in Arctic waters. A committee of the International Maritime Organization, meeting in London, agreed to a proposal submitted by seven IMO members, including Canada, the U.S. and Norway, to start the rule-making process. It will take up the issue at the committee’s next meeting in April 2018, according to TradeWinds. The use of heavy oil fuel has been targeted by environmentalists and indigenous groups, which hope to see an Arctic HFO ban added to the Polar Code, a list of environmental rules put together by the IMO.
Barron’s sees $60/bbl. in 2017. Accelerating world oil demand and reduced supply from the Organization of the Petroleum Exporting Countries (OPEC) could push crude prices up to $60 a barrel before the end of the year, according to a report from Barron’s. The report cites research from Citigroup senior energy analyst Eric Lee, who previously called for a bear market in oil when the price was above $100. The decline in recent weeks to a low of just over $44 for Brent crude LCOc1, the international benchmark, has made Lee a short-term bull, Barron’s notes.
Alaska Dispatch News, Annie Zak, July 8, 2017
Before oil, things weren’t that easy in Alaska
Fairbanks Daily News-Miner, Tim Bradner, July 8, 2017
Native Corporation makes move toward exploring for oil in Arctic Ocean, where Shell failed
Alaska Dispatch News, Alex DeMarban, July 10, 2017
Arctic Now, Kelsey Lindsey, July 7, 2017
Oil could hit $60 before year-end: Barron’s, citing Citi analyst
Reuters, Dion Rabouin, July 9, 2017
Memoranda won’t get Alaska a gas line
Alaska Dispatch News, Paul Jenkins, July 8, 2017
Obama fought the law and the law won. On Thursday, Secretary Ryan Zinke signed Order No. 3354, which pushes the active Interior Department staff to construct new strategies to speed up and streamline the permitting process, and increase the frequency of leasing sales for federal lands. A clear reflection of the Trump Administration’s efforts to expand oil and gas drilling in Alaska, the new order will push further into regions that were ruled off-limits by the Obama Administration. Vowing to abide by the National Environmental Policy Act, Zinke believes that this order will help cut down the average number of days it takes to obtain a permit from the current 257 to the 30 days that the law dictates. A firm believer in the NEPA process, Zinke wants to send a “signal” to the oil and gas industry that his department is “going to be a fair and prudent partner.”
To dream the impossible dream. Laura Nelson, energy advisor to Utah Governor Gary Herbert recommended to the House Natural Resources Committee’s Energy and Mineral Resources Subcommittee that Congress develop a process to give states primacy in managing federal oil and gas resources within their borders. Nelson’s key reason? To comply with the Energy Policy Act that mandates approval of drilling permits within 30 days. The Interstate Oil & Gas Compact Commission (IOGCC) is asking the same. They passed Resolution 17.051 step at their 2017 business meeting in Oklahoma City. Alaska is a member of the IOGCC and Governor Sean Parnell chaired the organization in 2012.
“As common as a legislative pledge for a long-term fiscal plan.” That’s how Larry Persily describes the new MOU that the Alaska Gasline Development Corporation has signed with a major South Korea buyer. The agreement is nonbinding, and the potential buyer, Korea Gas Corp., made similar deals with other U.S. gas-export projects. A statement Thursday by the Alaska Gasline Development Corp. called the agreement a “positive signal” for the project. According to Kristy Kramer, head of America’s gas research for the analysis firm Wood Mackenzie, “there’s not enough information available to objectively evaluate Alaska’s chances of landing a firm contract with KOGAS.”
Interior secretary’s new order aims to speed Alaska’s oil and gas permit process
Alaska Dispatch News, Erica Martinson, July 6, 2017
Korean buyer eyes Alaska LNG but also signs deals with competitors
Alaska Dispatch News, Alex DeMarban, July 6, 2017
Give states primacy to manage federal oil and gas, Utah official says
Oil & Gas Journal, Nick Snow, July 7, 2017
Oil prices fall 2 percent on signs market still oversupplied
Reuters, Karolin Schaps, July 7, 2017
Take a look inside the new power plant in East Anchorage
Alaska Dispatch News, Devin Kelly, July 6, 2017
Fairbanks water service adding 17 homes
Fairbanks Daily News-Miner, Kevin Baird, July 7, 2017
Politics and the price of oil. President Donald Trump is moving forward with a campaign promise to reopen federal waters in the Atlantic, Pacific and Arctic oceans for oil and gas drilling. But he and his administration still haven’t fully answered the question: How much interest is there, really, in opening these waters to fossil fuel exploration? On Monday, the Interior Department published notice in the Federal Register that it is seeking public comment on the effects offshore drilling would have on 26 areas in U.S. waters in the Gulf of Mexico, North Atlantic Ocean, Arctic Ocean and Pacific Ocean both off the coast of Alaska and the lower 48 states.
What goes up… A number of investment banks in the last two weeks have reduced oil price outlooks, citing worries that the glut could extend into next year. U.S. gasoline stocks dropped 3.7 million barrels in the most recent week, far exceeding the expected drop of 1.1 million barrels. Still, gasoline inventories remain about 6 percent above seasonal averages, so investors will watch for July data to see if demand is strong enough to whittle down those stocks. Brent crude futures were up $1.19 to $48.98 a barrel, a 2.5 percent gain, as of 11:19 a.m. ET. The previous session, Brent settled down 3.7 percent, its biggest daily drop in a month. U.S. West Texas Intermediate crude futures were up $1.15, or 2.5 percent, at $46.28 a barrel. The price of oil has tumbled from one-month highs just below $50 as evidence showed rising exports and increased production from OPEC, even as the group has pledged to cut output. Bank of America Merrill Lynch this week joined a chorus of analysts that have cut their outlook for crude prices.
Fossil fuels still first! The rapid expansion of wind and solar power in the U.S. can often obscure another reality: the country still leans heavily on fossil fuels. Fossil fuels have been the dominant source for energy consumption for more than a century, and in 2016 they accounted for 81 percent of all energy use. Petroleum remains the fuel used most in homes and businesses, and petroleum consumption has increased every year since 2012.
Facebook CEO Mark Zuckerberg “basic income” comment misses the point. After spending the holiday weekend in Homer, Alaska, the renowned co-founder and CEO posted to Facebook, noting that Alaska’s subsistence fishing and Permanent Fund dividend set a good example for the rest of the country. For a funny take from our friend Craig Medred, click here.
It was over before it started. At midnight, July 4, just three days after opening, the Alaska Department of Fish & Game shut down southeast commercial wild king salmon fishing. Early projections indicate fishermen caught roughly 63,000 salmon—a colossal first weekend, and close enough to the Department’s 64,000 salmon limit for them to close the fishery. Due to the expected second half opening in late July, ADF&D has set a 90,000 fish limit for the southeast troll fleet, allotting space for only 27,000 more fish.
Feeling crabby? The Alaska Department of Fish & Game announced Thursday the season will close on July 25 this year. This announcement came after the first week’s catch measured in at 605,000 pounds; and while 2.25 million pounds are required to maintain the full two-month season, current estimates indicate that the combined summer and fall harvest will only measure out to 1.68 million pounds. Joe Stratman, a crab biologist for the Southeast region, claims that this is the largest reduction the ADF&G has made to the fishing time for the summer season.
Hilcorp staying busy in Kenai. Hilcorp Alaska plans to lay a new pad, “Pearl,” which will be the southernmost in a string of Hilcorp pads on the coastline north of Ninilchik. The purpose is to drill a delineation well that measures the volume of an underground reservoir. Before the building begins, the company must do some construction work to make the area accessible. Drilling is set to begin this October, and completed by October 2018.
Mark Zuckerberg spent the holiday in Alaska. Here’s what the Facebook CEO Learned.
Alaska Dispatch News, Annie Zak, July 5, 2017
King Salmon fishing over after 3 days
Juneau Empire, Bjorn Dihle, July 5, 2017
Dungeness crab season in Alaska shortened by 3 weeks
Fairbanks Daily News-Miner, July 4, 2017
Alaska’s Marijuana Industry Tax Revenue Reaches $1M
US News, July 6, 2017
Hilcorp plans new pad and well near Ninilchik
Peninsula Clarion, Ben Boettger, July 5, 2017
The two problems with Trump’s offshore drilling push
The Washington Post, Dino Grandoni, July 6, 2017
Oil rises 2 percent after big draws in U.S. crude, gasoline
Reuters, David Gaffen, July 6, 2017
U.S. still leans heavily on fossil fuels for power
Houston Chronicle, Ryan Maye Handy, July 5, 2017
With North Korea missiles possibly in range, Alaska wants more protection
Newsweek, Jason Le Miere, July 6, 2017
Folly of forecasting. Oil production on the North Slope increased during the past 12 months as new wells more than made up for declines at older wells, said Ed King, a special assistant to the commissioner of the Alaska Department of Natural Resources. The increases came from ConocoPhillips Co. operations primarily, and an Exxon Mobil Corp. project to a lesser extent. At the same time, BP Plc has slowed the decline at the super-giant Prudhoe Bay Oil Field. The spring 2017 forecast from the Alaska Department of Revenue projected a decade of decline in North Slope output, without the benefit of enough information to include significant volumes from recent discoveries.
New Lease on Life. A federal agency has approved a plan to unitize, or combine, former Shell leases in Alaska’s Beaufort Sea that are now held by a subsidiary of an Alaska Native-owned corporation, the first step toward resumed exploration in the area, officials said Monday. Mark Fesmire, Alaska director of the US Bureau of Safety and Environmental Enforcement, said ASRC Exploration Inc., a subsidiary of Arctic Slope Regional Corp., now has an approved unit and has also applied for a Suspension of Operations on the former Shell leases. This is an action that temporarily halts the pending expiration of the lease terms, Fesmire said. If granted, the suspension would allow ASRC Exploration to conduct exploration, and if a discovery is made, the leases are automatically extended.
DC Pruitt can do it. In the four months since he took office as the Environmental Protection Agency’s administrator, Scott Pruitt has moved to undo, delay or otherwise block more than 30 environmental rules, a regulatory rollback larger in scope than any other over so short a time in the agency’s 47-year history, according to experts in environmental law. “Just the number of environmental rollbacks in this time frame is astounding,” said Richard Lazarus, a professor of environmental law at Harvard. “Pruitt has come in with a real mission. He is much more organized, much more focused than the other Cabinet-level officials, who have not really taken charge of their agencies. It’s very striking how much they’ve done.”
No money for Russia’s Arctic Program. A revised funding scheme for Russia’s Arctic program, which is to cover the period until year 2020, is far lower than the original sum, reports. The country’s Ministry of Economic Development wanted 209 billion rubles (€3.1 billion) for the new national Arctic Program. It might get only 12 billion (€177 million). That is a serious blow to Russia’s ambitious development plans for the region.
Arctic success for Statoil. Statoil’s new Kayak well in the Barents Sea is believed to hold up to 50 million barrels. Kayak is the first of a string of Arctic wells to be drilled by Statoil this year. “We are very pleased to have made a good discovery in our first completed well in the Barents Sea this year,” says Jez Averty, senior vice president for exploration, Norway and the UK.
No vetoes this time for Operating Budget. Alaska Gov. Bill Walker signed Alaska’s annual operating budget into law Friday without line item vetoes — a sharp contrast from last year, when he used the veto to slash more than $1 billion for Permanent Fund dividends and other programs.
DC Pruitt Can’t Do It? A federal appeals court in Washington ruled Monday that the head of the Environmental Protection Agency overstepped his authority in trying to delay implementation of an Obama administration rule requiring oil and gas companies to monitor and reduce methane leaks. EPA Administrator Scott Pruitt announced in April that he would delay by 90 days the deadline for oil and gas companies to follow the new rule, so that the agency could reconsider the measure.
American icebreakers on the horizon? The Senate Armed Services Committee on Wednesday passed the National Defense Authorization Act for fiscal year 2018, a bill that sets policy objectives and determines how the U.S. military can spend much of its later-allocated funding. The bill includes a provision for procurement of up to 6 polar icebreakers. But, Congress still has to appropriate the funding and icebreakers cost about $1 billion each. Currently, the U.S. has two polar icebreakers in working order, one heavy-duty ship and one a medium-duty research vessel. Reports indicate Russia has 41 icebreakers and 11 more in development.
Alaska Gov. Walker signs budget, leaves dividends at amount set by lawmakers
Alaska Dispatch News, Nathaniel Herz, July 1, 2017
Senate could authorize up to 6 icebreakers – when there’s money for them
Alaska Dispatch News, Erica Martinson, July 1, 2017
Russia makes new big cuts to Arctic spending
The Independent Barents Observer, Atle Staalesen, July 5, 2017
Statoil finds more Arctic oil
The Independent Barents Observer, Atle Staalesen, July 3, 2017
Discoveries Boost Hopes for Alaska Oil Output
Bloomberg BNA, Alan Kovski, June 28, 2017
D.C. appeals court orders EPA to move ahead with methane rule
The Denver Post, Michael Biesecker, June 3, 2017
US BSEE approves plan to combine Beaufort Sea leases; could renew exploration
Platts, Tim Bradner, July 4, 2017
Counseled by industry, not staff, EPA chief is off to a blazing start
The New York Times, Coral Davenport, July 2, 2017
The average wage in Alaska fell last year for the first time since the mid-1990s. Recently released state data demonstrated that the average wage in Alaska went down in the first time in twenty years following the elimination of thousands of jobs in oil and gas. An economist at the Institute of Social and Economic Research at the University of Alaska Anchorage, Mouhcine Guettabi, explained that, “It’s certainly a metric that matters because the economy depends on people spending to a great extent and wages comprise a significant portion of total income.”
Headlamp would emphasize that losing more than 3000 jobs with an average wage of $135,000/year impacts every sector of our economy. The governor and the legislature could take action to stop the hemorrhaging – the question is, will they?
This is not sustainable. U.S. shale oil pioneer Harold Hamm on Wednesday warned that sub-$40 crude would cause many U.S. producers to stop drilling and warned fellow CEOs to exercise discipline. “This price … is not sustainable,” Hamm, CEO and chairman of Continental Resources, told CNBC’s “Squawk Box.” “It needs to be north of $50 for sure to be sustainable in the world.”
Murkowski ally nominated to FERC. U.S. President Donald Trump intends to nominate Senate aide Richard Glick to be a member of the Federal Energy Regulatory Commission, the White House said in a statement on Wednesday. Glick, who is general counsel of the Senate Energy and Natural Resources Committee, would serve the remainder of a five-year term expiring in June 2022, the statement said.
More oil in the pipeline!!! Brooks Range says Mustang will produce in ’17. Anchorage-based Brooks Range Petroleum Corp. is set to receive $70 million from the State of Alaska in order to bring its Mustang project to fruition this winter. It is expected to produce up to 15,000 barrels of oil a day at its peak, drawing from around 22 million barrels of “proven reserves.”
Headlamp is thrilled with the news that Brooks Range can move forward with their project and put more oil in the pipeline. This is the type of ingenuity between the private sector and the state that can get our economy back on track.
Sun hasn’t set yet on ANWR. After Interior Secretary Zinke directed “federal agencies to reevaluate the oil and gas potential within the National Petroleum Reserve-Alaska and the coastal plain of the Arctic National Wildlife Refuge,” Alaska oil advocates applauded.
Discoveries boost hopes for Alaska oil output. Oil discoveries in the past couple years in the North Slope of Alaska have improved conditions for the “economy of the region and the state.” These developments appease concerns over the Trans-Alaska Pipeline, termed North Slope’s oil lifeline. The resource is there, the companies are there, the federal government is there – is the state of Alaska there?
Alaska Dispatch News, Jeannette Lee Falsey, June 29, 2017
Alaska Journal of Commerce, Elwood Brehmer, June 28, 2017
Alaska Journal of Commerce, Elwood Brehmer, June 28, 2017
Bloomberg BNA, Alan Kovski, June 28, 2017
CNBC, To DiChristopher, June 28, 2017
Reuters, Eric Beech, June 29, 2017
Morning Headlamp – UAF Professor asks Secretary Rick Perry for a loan; House Majority throws in the towel
Show us the $. A University of Alaska Fairbanks economist has asked Energy Secretary Rick Perry to sanction a federally secured loan to construct a natural gas pipeline in Alaska. Douglas Reynolds, a professor of petroleum economics at UAF, sent a letter to Perry requesting the loan and citing the Alaska Natural Gas Pipeline Act of 2004 as a means for Alaska to secure those funds. In his letter, Reynolds asked Perry for a public statement on his opinion of building a natural gas pipeline in Alaska. Reynolds said he believes a liquefied natural gas pipeline would clean up the Interior’s air quality problem, boost the Alaska economy and enhance national security.
House Majority throwing in the towel. According to the House Majority, its members are weary and demoralized after two months of extra work with little to show for it, is increasingly likely to take the summer off before taking up its unfinished work of righting the state’s unstable finances, according to legislative leaders. “People have to get on with their lives,” said House Speaker Bryce Edgmon, D-Dillingham, in a phone interview from Juneau, where he’s still camped. “It’s just a really hard time of the year having people be in the Legislature, especially how long we’ve been down here.” With the exception of the budget, the Legislature’s to-do list is still essentially unchanged from January, when members arrived in Juneau for what was supposed to be a 90-day regular session. The session stretched on for an extra month, followed by the two consecutive special sessions called by Walker.
Headlamp is amused that after just one session in power, the House Majority is tired, wanting to “get on with their lives” complaining about how hard it is to be in the legislature. #doyourjob
Increased investment, increased production. BP is betting tens of billions of dollars on the prospect that it can slash the costs of offshore drilling, in the gulf, by half or more – just as shale oil producers have done onshore. BP’s Gulf platforms are key to a global strategy calling for up to $17 billion in annual investments through 2021 to increase production by about 5 percent each year.
Does AKLNG = American job loss? Large, industrial users of energy are frowning on the Trump administration’s attempt to make natural gas exports a key part of its pro-growth agenda, warning that it will hurt U.S. manufacturing and reduce jobs in the long run. “Excessive [liquefied natural gas] export approvals by the U.S. Department of Energy (DOE) to countries with which the U.S. does not have a free trade agreement is inconsistent with President Trump’s ‘America First’ and ‘fair-trade’ policies, and poses a significant long-term threat to energy-intensive trade-exposed (EITE) industries’ competitiveness and jobs,” said Paul Cicio, president of the Industrial Energy Consumers of America, in a Wednesday letter to the secretaries of energy and commerce, Rick Perry and Wilbur Ross, respectively.
China makes a move. Last week China formally incorporated the Arctic into its plans for maritime cooperation under the Belt and Road Initiative, also sometimes called One Belt, One Road. The Vision for Maritime Cooperation under the Belt and Road Initiative, released on June 20 by China’s National Development and Reform Commission and the State Oceanic Administration, explains that a “blue economic passage” is “envisioned leading up to Europe via the Arctic Ocean.” This “blue economic passage” would be along Russia’s Northern Sea Route, the Arctic shipping lane that hugs the country’s north coast.
Island Living. In a speech in Washington, D.C., last week, Senator Lisa Murkowski proposed that the United States establish a consular presence in Greenland. A prominent voice in Arctic affairs, Murkowski suggested the move — “even if it’s just kind of a one-person shop.” Greenland is autonomous within the Kingdom of Denmark and has recently seen a stepped-up push for full independence. “If they do become independent, then we will have established a political representation on the island and we’ll have had some for several years and we’ll be in a good position to move forward with a new relationship,” Murkowski said. “And if they don’t: no harm, no foul.”
Budget cuts and tuition increases for UA. The UA budget unanimously approved by regents Tuesday totals about $879 million, $317 million of that from state funding. That’s down about $21 million from the roughly $900 million current operating budget and amounts to a $61 million cut in state funding over the past four years. UA said a $3 million increase in fixed costs in the upcoming budget effectively widened the funding gap to $11 million.
University of Alaska leaders approve $879 million operating budget
Alaska Dispatch News, Tegan Hanlon, June 28, 2017
Yes, the Alaska Legislature will likely quit for the summer without a fiscal plan, or even a capital budget
Alaska Dispatch News, Nathaniel Herz, June 28, 2017
China’s Belt and Road Initiative moves into the Arctic
Arctic Now, Mia Bennet, June 28, 2017
Alaska senator proposes US consulate in Greenland
Arctic Now, Krestia DeGeorge, June 28, 2017
In disaster’s wake, BP doubles down on deepwater despite surging shale
Reuters, Jessica Resnick-Ault, June 27, 2017
Big energy users: Trump’s natural gas exports will take away jobs
The Washington Examiner, John Siciliano, June 28, 2017
UAF professor pushes Energy Secretary Rick Perry for natural gas pipeline loan
Fairbanks News-Miner, Kevin Baird, June 28, 2017
The Resource Development Council (RDC) is hosting its 42nd Annual Membership Luncheon tomorrow in Anchorage. The keynote speaker for the event is Hal Quinn, President & CEO of the National Mining Association who will speak on the “New Direction for American Mining and Energy Policy.”
Mr. Quinn sent an email this morning about the global increase in electric cars and the materials required to build those cars – most of which come from mining. He says, in part:
“The good news is the U.S. has abundant minerals required to meet this demand. For example, the U.S. Geological Survey estimates that one million tons of cobalt resources exist across states like Minnesota, Alaska, California, Idaho, Missouri, Montana, Oregon, Pennsylvania and Michigan—some of which could be produced directly and some in the form of byproducts to other metals.
In fact, Tesla’s Nevada Gigafactory has committed to sourcing the raw materials used to make its electric vehicle batteries strictly from North America.
While using U.S. mined minerals and metals is an important supply chain consideration and environmentally advantageous for Tesla, domestic production remains low. Why? The U.S. mine permitting process stands in the way of timely access to U.S. mineral resources by creating protracted delays that can last up to 10 years.”
That’s right, Alaska has some of the minerals we need. IF we are allowed to responsibly develop our resources.
Click here to read the blog post on the National Mining Association’s website and to learn more about the mining permitting process.
“If it can’t be grown, it must be mined.”
House Majority plays Battleship – or maybe Chutes and Ladders? Even after threats of a state-wide shutdown were averted by the state legislature, some significant items remain for Alaska to address. A capital construction budget and the multi-million dollar budget deficit facing the state have yet to be resolved. Despite a continuance of the special session, little work is being done in Juneau. “I think that one thing that all of us in the Capitol can agree on is this has probably been the single most contentious legislative session that most of us have experienced,” Speaker of the House Bryce Edgmon said Thursday night. “I think we have more work to do. I think both sides understand that,” said Senate Majority Leader Peter Micciche, R-Soldotna, shortly afterward. “I think the Legislature needs to take some time off, cool down, come back together and work out solutions to the remaining issues that have to be dealt with this year.”
Headlamp would note that Rep. Geran Tarr has the ability to move things forward by calling a conference committee meeting on HB 111 – oil and gas tax credit legislation – but has refused to do so. Alaskans are tired of the games – do the job you were elected to do.
The last time I saw Paris. The Trump administration intends to define what it means by “clean energy” during a week-long series of discussions, media appearances and discussions with businesses to explain its ideas for an America First energy plan, according to Energy Secretary Rick Perry. “This week will also reaffirm our commitment to clean energy,” Perry said. “The binary choice between being pro-economy and pro-environment that was perpetuated by the Obama administration, it set up a false argument,” he said. “We can do good for both, and we will.”
Epic Battle: Oil vs. Natural Gas. President Trump has uncorked yet another controversy over energy vs the environment and it promises to be a heavyweight battle. The White House budget proposal includes a revenue line of almost $2 billion from selling oil and gas leases in the richly oil-prospective northeastern coastal plain of the Arctic National Wildlife Refuge (ANWR) in Alaska. Until the climate change debate came along, leasing and drilling in the ANWR (pronounced an-war) Coastal Plain was arguably the most ferociously contested item on the oil and gas industry’s wish list at the national level.
Global domination Trump style. President Donald Trump will promote surging U.S. exports of oil and natural gas during a week of events to highlight the country’s growing energy dominance. Trump also plans to emphasize that after decades of relying on foreign energy supplies, the U.S. is on the brink of becoming a net exporter of oil, gas, coal and other energy resources.
Investors should prefer oil companies who can prove profitable in challenging times. BMO’s Brendan Warn and Nikolas Stefanou contend that major oil producers like Exxon and Chevron can survive at $40 oil, but life is a heck of a lot easier at $60 a barrel. At ~$40/bbl, the sector’s operating cash flows fail to cover current capex and dividend expectations, even with the aid of scrip, whereas at >$50/bbl, the majors should, on aggregate, be able to match full cash outflows. Note to legislators considering tax increases at current prices: when operating cash flows are negative, raising taxes doesn’t help anyone.
AKLNG competition? Cheniere is looking at new ways to finance more terminals that chill gas to a liquid and ship it across the globe, including skipping banks altogether and seeking out other capital sources, Chief Executive Officer Jack Fusco said in an interview at the company’s headquarters in Houston. The company has room to grow: It’s leased additional acres at its flagship Sabine Pass terminal in Louisiana and has the option to purchase more land at a Corpus Christi, Texas, site, where another export project is under construction.
MORE AKLNG competition? A gas company from Korea, one of the largest buyers of liquefied natural gas in the world, said it commenced a sales agreement with a U.S. supplier. The Korea Gas Corp. commenced a 20-year sales and purchase agreement with Cheniere Energy Inc., which operates the only facility in the United States with the permits necessary to export super-cooled LNG.
Big Oil: Surviving at $40, Thriving at $60
Barron’s, Ben Levinsohn, June 26, 2017
Legislature averts shutdown, but more work remains
Alaska Journal of Commerce, James Brooks, June 26, 2017
Perry: Trump doesn’t need Paris to advance ‘clean energy’
The Washington Examiner, John Siciliano, June 26, 2017
Trump’s ANWR move could spawn epic oil, natural gas battle: Fuel for Thought
S&P Global Platts, Bob Williams, June 26, 2017
Trump to call for US ‘dominance’ in global energy production
Bloomberg, Jennifer A. Dlouhy, June 26, 2017
Cheniere Gets Ready for ‘Next Round’ in Global Gas Export Market
Bloomberg, Ryan Collins, June 26, 2017
U.S. now supplying LNG to South Korea
UPI, Daniel Graeber, June 17, 2017
Shutdown averted – now what? Despite passing stop-gap measures and averting a state-wide shutdown of government services, the Alaska Legislature’s special session continues until July 16, though most lawmakers say they are done for now. They were packing up Friday for their home districts. Legislative leaders wanted to adjourn but Walker told them to keep working, said Sen. Lyman Hoffman, a Democrat from Bethel who is part of the Republican majority and one of the architects of the budget deal. That means they will hold what’s known as technical floor sessions every few days with only a few members. Lawmakers have yet to pass a capital budget, but say they will get to that eventually, maybe in another special session. Capital projects such as roads and buildings won’t shut down if that budget isn’t approved by July 1, said Hoffman, who co-chairs the Senate Finance Committee. The operating budget now goes to Walker, who can veto or lower any of the spending particulars. Last year, Walker vetoed more than $1 billion in spending, most of it for dividends. Late Thursday night, Walker added one more item of unfinished business to the Legislature’s agenda for the special session. Some lawmakers said they expected it to be the capital budget, but in fact Walker said he wanted them to address the state’s “unsustainable oil and gas tax credit system” through House Bill 111. The bill could end payments of cash tax credits to oil companies, though about $1 billion from the past is still owed. Both chambers want to end those tax breaks. But the House also wants to increase the effective tax rate on oil.
If you build it…The energy infrastructure deficit is preventing the US from achieving energy independence as East Coast and West Coast markets continue to rely on imported oil due to a shortage of pipelines moving oil from US shale fields to refineries, writes David Gaffen. To achieve energy independence, the US must expand and upgrade its aging pipeline.
It’s a First! Lithuania buys US LNG – Lithuania’s state-owned gas trader Lietuvos Duju Tiekimas (LDT) said on Monday it had signed a deal to buy liquefied natural gas (LNG) directly from the United States for the first time and expects to receive a delivery in the second half of August. The deal is with a unit of Cheniere Energy and is part Lithuania’s efforts to diversify its gas suppliers and reduce its reliance on Russia’s Gazprom. LDT, part of state-owned energy group Lietuvos Energija, signed a deal last year with Koch Supply & Trading for LNG supplies throughout 2017. Cheniere Energy was expected to supply LNG from a U.S. field, an LDT spokesman told Reuters. “It will be the first time Lithuania imports gas from the U.S.,” he said.
Qatar back in the game. Iran’s rapid development of the shared North Field has caused Qatar to lift its 12 year development moratorium on the field. Production has been averaging around 20 billion cubic feet a day.
Boroughs depend on State more than a decade ago. The average share of revenues a borough received from the state more than doubled between 2005 and 2015, from about 12 percent to 28 percent. There are three main kinds of state aid to communities: general government operating money, public works project grants, and school aid. These are the main findings in a new report released this week by the Institute of Social and Economic Research at the University of Alaska Anchorage.
Alaska borough governments depend much more on state money now than a decade ago
Alaska Dispatch News, Annie Zak, June 26, 2017
The Alaska Legislature passed a budget and avoided a government shutdown. What happens now?
Alaska Dispatch News, Lisa Demer, Tegan Hanlon, June 26, 2017
Alaska’s 40 Years Of Oil Riches Almost Never Was
NPR, Elizabeth Harball, June 24, 2017
ANALYSIS-Clogged oil arteries slow U.S. shale rush to record output
Reuters, David Gaffen, June 26, 2017
Lithuania signs first deal for U.S. LNG
Reuters, Andrius Sytas, June 26, 2017
Qatar’s foot off the brake
Petroleum Economist, Gerald Butt, June 20, 2017
Shutdown Averted. The legislature has reached a budget compromise averting a statewide shutdown of government services and layoffs of thousands of state workers. The deal cleared the House and Senate late Thursday. The budget totals more than $4.1 billion in unrestricted general fund revenue spending, not including dividends, which is $179 million less than in the current budget year. The total operating budget is $8.8 billion. A House-Senate conference committee charged with resolving Alaska’s state budget agreed Thursday to fund public schools at the same level as this year and to pay Permanent Fund dividends of $1,100. The sole “no” vote in the Senate was Senator Shelly Hughes who gave up her seat on the finance committee with the vote. “No” votes in the house came from Reps Eastman, Johnson, Neuman, Rauscher, Reinbold, Sullivan-Leonard, Tilton and Wilson.
Governor adds oil taxes to the call. “I thank legislators for reaching a compromise on the operating budget to ensure government services continue after July 1,” Governor Walker said. “In doing so, they also appropriated a $1,100 permanent fund dividend (PFD) for each eligible Alaskan. Earlier today, legislators indicated in conference committee their intent to correct the state’s unsustainable oil and gas tax credit system. That’s why I am amending the call so legislators can complete work on House Bill 111. The conference committee for oil taxes: Senators Giessel, Stedman, Olson and Reps Tarr, Josephson and Talerico.
Norway follows Alaska’s lead. Norway‘s $960-billion wealth fund, the world’s largest, should be split from the country’s central bank, which has managed the fund since its launch in 1996, a government-appointed commission said on Friday. “The Commission proposes that (an) investment management company be established as a separate statutory entity,” it said in a statement. The recommendations will be closely examined by Norwegian politicians, who had said ahead of the publication they were waiting for the report’s conclusions before deciding what new asset, if any, the fund could invest in.
LNG Oversupply. Some US natural gas liquefaction capacity likely will be temporarily shut before the end of the decade to try to balance an oversupplied global LNG market, a BP executive told Argus. “It’s very hard to say if capacity will shut down, but, based on what we know, I don’t see how else the market clears,” BP chief commercial officer Jimmy Straughan said on the sidelines of CWC’s LNG Americas Summit in Houston. One of the advantages of US LNG is that customers have the option to not take LNG if they don’t want it, leading to the possibility that US liquefaction trains would sometimes be shut when global LNG prices are low.
Mat-Su Dock Gets Another Cash Injection. Another $1.6 million will flow to the little-used and failing barge dock at Port MacKenzie after the Matanuska-Susitna Borough Assembly grudgingly approved the money this week. Several Assembly members voiced deep concern during a Tuesday meeting but voted 6-1 to move money from several borough accounts to pay for the repairs. The money is just the latest spent on a failing dock that saw just one barge call last year amid ongoing repairs. The Assembly previously approved $2.3 million for a 2016 repair to a large gap in a piece of steel that let seawater undermine part of the dock. The repair failed in October, triggering the need for the new repairs.
Tax Reformers Should See House Tax Proposal As Cautionary Tale. Sensible Tax reform is a very good thing. But the debate underway today in Alaska shows just how important the nuts and bolts of the reform process are, and how vital it is that significant tax policy shifts be handled thoughtfully. Poorly structured tax changes – such as the House oil tax measure proposed during the legislative session – could have left the state in even worse financial shape. The oil industry’s importance to Alaska is difficult to overstate. Analysts from the McDowell Group recently assessed the statewide and local impacts of the oil and gas industry, examining factors ranging from employment, to taxes, to royalties paid. Studying Alaska’s 14 major oil and gas companies and considering direct, indirect induced economic effects, McDowell found that in 2016 the industry employed 45,575 workers and paid $3.1 billion in wages; those same companies also paid $2.1 billion in taxes and royalties last year. A tax that targets job creators and income generators cannot be a strong long term fiscal policy.
Alaska Dispatch News, Tegan Hanlon, June 23, 2017
Alaska Dispatch News, Zaz Hollander, June 22, 2017
Reuters, June 23, 2017
Argus Media, June 23, 2017
Real Clear Markets, William Shughart, June 23, 2017