Morning Headlamp — “Pretty darn sure” of a special session

April 19, 2016 | Posted in : News

“Pretty darn sure.” Governor Bill Walker said he is “pretty darn sure” there will be a special session following Alaskan lawmakers’ inability to reach common ground on a number of issues. “These are significant times. These are significant structural changes in Alaska that will determine the future of the state one way or another,” he said. “What happens here and doesn’t happen here, I believe, is going to chart the course of the state. Alaskans should be able to witness that and be part of that, and there’s no better way than with Gavel to Gavel.” Headlamp thinks the best way for most Alaskans to witness and be part of a special session is for that session to be held on the road system where the vast majority of the state’s population lives. Headlamp is glad that we can agree on one thing: a mountain of work lies ahead of Alaskan lawmakers.

Upon state approval, BlueCrest energy will begin offshore drilling activity. BlueCrest Operating Alaska, applied to the Alaska Division of Oil and Gas to change its operating plan, adding an extra well and change its drilling method. If approved, the company would drill one well in 2016 and the remaining two in 2017. If there are delays, two may be drilled in 2017 and the third drilled in 2018. One well has already been drilled from onshore. With $525 million sunk into developing the Cosmopolitan field with no revenue yet — oil production is estimated to begin in April — BlueCrest representatives have spoken out strongly against efforts to change the tax credit system.  This is exactly the type and scale of private investment we are putting at risk through any reduction in tax credits. 

 

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First Reads

Gov. Walker says he’s ‘pretty darn sure’ he’ll call a special session
Fairbanks Daily News Miner, Matt Buxton, April 18, 2016

BlueCrest applies to drill offshore
Peninsula Clarion, Elizabeth Earl, April 18, 2016

Alaska Extends Deadline to Reach Deal to Close Deficit
Wall Street Journal, Jim Carlton, April 18, 2016

Legislature focuses on oil and gas tax credits in session overtime
KTOO, Andrew Kitchenman, April 18, 2016

Plunging Oil Prices Have Forced Alaska to Consider a Desperate Option
Fortune, Lucinda Shen, April 18, 2016

 

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Extra Edition: Thumbs Up, Thumbs Down

April 18, 2016 | Posted in : News

Senate Finance April 17, 2016

When we launched Headlamp, we promised to tell you what the mainstream media wouldn’t. We further promised to be honest about who was helping the economy and who was hurting it. So today we bring you a recap of this weekend in “Thumbs Up, Thumbs Down.”

The last 15 minutes or so of the Senate Finance committee discussion on SB 130 in yesterday’s meeting provided a window into the souls of several key committee members. See the excerpts below with Headlamp’s responses and ratings:

Thumbs Down – Senator MacKinnon:

  • “They are laying down rigs, they are reducing their workforce and we are reducing our workforce at the state level and reducing our budget just like they are.”
    • The industry is reducing their workforce by 20-30%;
    • The state, with 21,500+ full time employees may end up laying off 50…and adding back 52 to administer the income tax that is being proposed.
  • “I don’t want to touch the oil tax regime…”
    “I reject that we are trying to touch oil tax policy because that’s not the discussion…we are not trying to take it out on their hide. We are trying to balance the current system that we have.”

    • HB 247/SB 130 represent the 6th change to the oil tax structure in 11 years and are projected to take hundreds of millions out of industry’s hide when they are already cash-flow negative.

Thumbs Down – Senator Micciche:

  • “…even though you’ve settled on a system that doesn’t mean you shouldn’t periodically evaluate and adjust blatant and significant flaws in that policy and I think that’s where we are today. I think it’s a healthy evaluation. I don’t think it means we’re fickle any longer.”
    • See Senator Kelly’s comments.

Thumbs Up – Senator Kelly:

  • The State hasn’t responded. “They’ve [industry] laid off thousands and we’ve laid off 37 at last count. We might be up to 50…if you were going to take a measurement on whose responding you’d say the oil companies are and we are not.”
  • “…you can say we’re not being fickle, we can say it 100 times in here, but changing our tax regime six times in 11 years is fickle. By definition.”
  • “If I’m chairman of the board somewhere…and I see what Alaska is doing and what we are doing I’m going to say ‘boy, those guys are fickle’ and I’m going to look for somewhere else to invest. It’s just the reality of it.”
  • “We get royalty, we get production tax, we get property tax, we get income tax, we get severance tax, we get jobs.”
  • “The only jobs we’ve been trying to protect have been state jobs.”
  • “Nothing we’re doing here is going to increase production.”
  • “We’ve been under SB 21 for about 15 minutes and we’re changing it again. And we shouldn’t be doing that.”

It’s black and white. HB 247/SB 130 are tax increases, and won’t increase production.  Legislators have failed to significantly reduce the operating costs of government, and are copping out by once again turning to the industry to pay for their mistakes.  The industry they all claim to support.

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Morning Headlamp — AK Lawmakers extend session beyond 90 days, still looking for consensus

April 18, 2016 | Posted in : News

“We’re moving.” After failing to come to consensus on many outstanding issues in the 90-day legislative session, Alaskan lawmakers have extended the session ultimately in search of a budget agreement. In addition, lawmakers hope to find common ground—or at least manufactured common ground—on Governor Bill Walker’s legislation to reform Alaska’s oil tax credit subsidy program, to restructure the Permanent Fund to help pay for state government, and to institute a personal income tax. “What you don’t see is the behind-the-scenes negotiations going on,” Rep. Charisse Millett, said in an interview Sunday afternoon. “We’re moving.” The key issue for lawmakers remained Walker’s legislation to reform the state’s oil tax system. Millett, the House majority leader, also said the floor votes and debate weren’t stopping progress on the oil tax bill. She said putting together a deal on the complex legislation takes time because of back-and-forth needed with subject experts. Headlamp hopes that behind-the scenes negotiations on the oil tax bill don’t include raising taxes on an industry that is cash-flow negative. 

According to the Peninsula Clarion AKLNG managers are moving forward on field work planned for this summer, including water tests, offshore work and borehole drilling onshore in Nikiski. “The purpose of this year’s program is really to hone in on the equipment locations,” project advisor Jeff Raun said. “We’re getting those site-specific geotechnical data and information by drilling more holes in the proposed locations of the major equipment for the facility, and we’ll be providing that information to FERC so they can review it and say, ‘Yep, looks good.’” The one new component will be water tests. Residents have raised concerns about the proposed plant’s water use, worrying that such a large plant will reduce the amount of water available for locals. Geotechnical information has shown three aquifers beneath Nikiski, two shallower and unconfined, the third deeper and confined, Raun said. Headlamp is happy to see progress being made somewhere in the state. Amid gridlock in state politics, the private sector continues to chug along through a low-price climate.

Marleanna Hall, executive director of the Resource Development Council penned a commentary in the Alaska Dispatch News disputing claims made by a recent op-ed from Charles Wohlforth purporting the “twilight” of fossil fuels. According to Hall, “Wohlforth’s claim that Alaska’s fossil fuels are “entering their twilight” is just not realistic. With some of the richest deposits of oil, gas, and mineral reserves in the world, our future of developing these natural resources remains bright. According to the 2015 BP Statistical Review of World Energy, Alaska’s oil and gas reserves represent a full one-third of the reserves in the U.S., and according to a 1986 report to the Alaska Division of Geological and Geographical surveys, Alaska is home to about 19 percent of the world’s known coal reserves.”

 

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First Reads

Alaska Legislature extends session with only hints of progress on key issues
Alaska Dispatch News, Nathaniel Herz, April 17, 2016

Alaska’s Permanent Fund Loses Its Sacrosanct Status
Wall Street Journal, Jim Carlton, April 16, 2016

Alaska LNG plans water testing, drilling for summer work
Peninsula Clarion, Elizabeth Earl, April 17, 2016

Fossil fuels have a great future in Alaska, despite the wishes of some
Alaska Dispatch News, Marleanna Hall, April 17, 2016

Alaska income tax delayed until 2019 under new House proposal
Alaska Dispatch News, Nathaniel Herz, April 17, 2016

 

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Morning Headlamp — Chenault pulls oil and gas tax bill

April 15, 2016 | Posted in : News

House Speaker Mike Chenault pulled the bill overhauling Alaska’s oil and gas tax credits, saying that it didn’t have enough votes to pass. With just four days left in the session, a separate bill is advancing in the Senate. The bills still face substantial opposition and a time crunch with just three days left in the legislative session. Stick with Headlamp as we cover the latest.

Hopefully not another can to kick. Gov. Bill Walker won’t appoint anyone to fill a long-vacant seat on the state’s oil and gas regulatory board before the Legislature’s confirmation session on Friday, raising concerns among Republican lawmakers who say it will be another year until they are able to finalize an appointment. A spokeswoman for the governor said that Walker intends to fill the position soon. The yearlong vacancy has complicated the board’s efforts to oversee the oil and gas industry, lawmakers have said.

Department of the Interior Secretary Sally Jewell announced new regulations yesterday that she says will decrease the likelihood of blowout oil spills in offshore rigs. Jewell says the well control regulations will ensure safe and responsible offshore oil and gas development. The lengthy list of regulations included in this final rule by the DOI include third-party equipment checks and real time data reporting. The new regulations also require drilling rigs have two shear rams, devices designed to cut and seal drilling pipe if there’s an emergency or equipment failure.

 

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First Reads

Bill to overhaul oil, gas credit systems stalls
KNBA, Joaqlin Estus, April 14, 2016

Long-open seat on Alaska oil and gas board won’t be filled\his legislative session
Alaska Dispatch News, Alex DeMarban, April 14, 2016

Alaska House moves tax bills toward floor vote
Alaska Dispatch News, Nathaniel Herz, April 14, 2016

Interior Department announces new regulations for offshore oil rigs
KTUU, Mallory Peebles, April 14, 2016

 House merges Gov. Walker’s taxes on fishing, mining and gas
Alaska Dispatch News, Nathaniel Herz, April 14, 2016

 

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Friday’s Fast Five

April 15, 2016 | Posted in : News

Headlamp wants our followers to always be up to date with the developments in Alaska’s economy, politics, and industry. Check out this week’s rundown of the stories affecting you.

Top Story of the Week

This week, Gov. Walker’s oil and gas tax credit legislation faced opposition and further delay. With only three days left in session, it will be a photo finish if any new tax system is voted on.

Top Reads of the Week

Caelus Energy announces major cuts, sharply criticizes Walker oil tax bill
Alaska Public Radio News, Rachel Waldholz, April 9, 2016
North Slope oil producer Caelus Energy announced Friday it will lay off 25 percent of its 80-person work force and suspend drilling at the Oooguruk oil field, potentially affecting hundreds more contractor jobs.

18-year-low LNG price attracting new customers
CNBC, Matthew Taylor, April 12, 2016
Weaker than-expected demand has hit the once-buoyant liquefied natural gas (LNG) market, but 18-year-low prices have their upside, as the slump is attracting new customers.

Industry calls Senate oil tax credit bill “bad for Alaska”
Alaska Public Radio News, Rachel Waldholz, April 13, 2016
As the Alaska House continues its marathon debate on the oil and gas tax credit bill, the Senate is moving its own version forward, hoping to beat the clock with just four days left in the legislative session.

Quote of the Week

“DON’T PANIC” – Mark Edwards, Northrim economist on the Alaskan fiscal crisis

 

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Fact Check

April 14, 2016 | Posted in : News

With 4 days left in the legislative session discussion is focused on new revenue from three main areas:

  • Income Tax
  • Restructuring the Permanent Fund
  • Oil and Gas Tax Credits

Lots of numbers are being tossed around – many of them inaccurate or misleading, especially with regard to what revenue/savings can be generated from restructuring Alaska’s Oil and Gas Tax credit system.

The Administration and the proponents of increasing taxes on the industry are telling the public that the Governor’s original bill, SB 130, will have a $785-million-dollar impact between reductions in spending and increased revenue in FY 17. Once again, Headlamp reminds our readers, don’t believe everything you hear or read. Consider the following:

  • The new disclaimer on the Department of Revenue’s summary analysis of the different versions reads “Actual impact of Governor’s bill would likely be less due to need to clarify effective dates regarding when credits are earned vs. cashed.”
  • $550 million of the projected “savings” come from deferrals, meaning the money eventually has to be paid, just not this year (A.K.A. kick the can down the road)
  • The increased revenue attributed to the bill is based on the assumption that companies will continue to invest as they have under SB 21 and that positive production trends will continue. Yet all of the companies testifying on the proposed legislation have indicated this is unlikely if the bill passed.

Let’s play fair. Tell Alaskans, and the legislators who are making tough decisions, what the real impact is.

 

 

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Morning Headlamp — Opposition gets more critical of Governor Walker’s policies

April 14, 2016 | Posted in : News

Alaska’s oil and gas industry has had enough. The Senate is moving forward with its own version of HB247, eager to get something on the books before the session ends. This week has proved to be extremely contentious, which both sides refusing to concede to either side’s proposed version. The oil and gas industry spoke out in strong opposition this week in Juneau. “This is a nuclear bomb for Cook Inlet,” said Kara Moriarty, president of the Alaska Oil and Gas Association, speaking Tuesday morning about a provision that would zero out all cash support for small companies in Cook Inlet by 2018. “The [bill] is bad for Alaska,” Moriarty said. “It is destined to make the economic situation for the industry even worse, and when the industry suffers, the state suffers, too.” “You guys didn’t do your job,” Alaska Support Industry Alliance general manager Rebecca Logan said. “On March 15, when the budget came out of the Senate and was at $4.6 billion, I knew that you were going to come to a point where you would have to come to the oil industry, because you didn’t do your job on the budget. And so here we are…You’re elected to make policy calls, the policy call you are faced with right now is, are we going to put more taxes on an industry that is hemorrhaging?”

Alaska Gov. Bill Walker will deliver a 15-minute “state of the budget” speech on KTUU  tonight. The televised pre-recorded address will be an effort by Walker to “explain to Alaskans what is at stake and why we need to fix the problem this year,” said spokeswoman Grace Jang. Headlamp is sure this will be interesting, stick with us as we follow.

According to the Alaska Journal of Commerce, AGDC board member Hugh Short, who has led the board’s hunt for a new president and CEO, said in an interview that the board has winnowed its list of candidates down to one finalist and a secondary candidate. Progress on the AKLNG megaproject has not been impacted by the potential leadership turnover. Specifically to the Alaska LNG Project, it appears the pipeline size is staying the same. Kim Fox of ExxonMobil said that the project team has recommended it stick with the current 42-inch design after a five-month study process in which the 42-inch and 48-inch pipe sizes were evaluated. Any further progress on AKLNG will depend heavily on the remaining days in session.

 

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First Reads

Industry calls Senate oil tax credit bill “bad for Alaska”
Alaska Public Radio News, Rachel Waldholz, April 13, 2016

Alaska Gov. Walker will give televised budget speech Thursday
Alaska Dispatch News, Nathaniel Herz, April 13, 2016

Rasmuson Foundation report criticizes Walker’s budget plan
Alaska Dispatch News, Devin Kelly, April 13, 2016

Credit cuts move over industry objections
Alaska Journal of Commerce, Elwood Brehmer, April 13, 2016

AGDC narrows CEO search; AK LNG sticks with 42-inch pipe
Alaska Journal of Commerce, Elwood Brehmer, April 13, 2016

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Morning Headlamp — Another Special Session looking likely & Northrim says, “Don’t panic”

April 13, 2016 | Posted in : News

Hand in hand. The Senate Resources committee proposed phasing out credits for Cook Inlet and imposing no tax on Cook Inlet oil and gas production starting in 2018. Kara Moriarty with the Alaska Oil and Gas Association says the loss of credits even without a production tax will have an impact.

Gov. Bill Walker said Tuesday that as much of an optimist as he is, he doesn’t see state legislators wrapping up work on all the pieces needed for a fiscal plan by the scheduled end of the regular legislative session Sunday. Walker said that when he began looking at ways to fill the deficit, he didn’t have much appetite for some of the options either. “But that didn’t mean I didn’t have to delve into it because it was fiscally responsible,” he said. “I don’t have an appetite for continuing on not knowing how we’re going to fund government after we run out of savings.” If there needs to be a special session, Walker said he’ll see what lawmakers’ preference is for a location. He said the site isn’t as important to him as the work that is done. Headlamp is concerned that the Governor constantly talks about how he will fund government but ignores the task of reducing the operating expenses of government. 

“Overall, what I’d like to say is, don’t panic,” said Mark Edwards an economist with Northrim at the bank’s annual economic seminar yesterday. “There are some clear negatives in the economy,” he said, pointing to oil and gas, related construction and the state budget. “But there’s also a lot of positives as well. You can have everything from fearful panic to overconfidence.” Edwards encouraged shifting focus “from past problems to future opportunities.” Headlamp applauds the optimism and also encourages Alaska to focus on the opportunities of the future.

 

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First Reads

Senate panel draft rewrite of credits bill concerns oil industry
Associated Press, Becky Bohrer, April 12, 2016

Walker not sure legislators can wrap fiscal work by Sunday
Associated Press, Becky Bohrer, April 12, 2016

Senate unveils rewrite of Walker’s Permanent Fund legislation
Alaska Dispatch News, Nathaniel Herz, April 12, 2016

Northrim Bank’s advice to those doing business in Alaska: ‘DON’T PANIC!’
Alaska Dispatch News, Annie Zak, April 12, 2016

 

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Morning Headlamp — Another delay for HB247

April 12, 2016 | Posted in : News

For the second time in two days, House lawmakers have postponed a final vote on Governor Bill Walker’s controversial oil tax bill. Although the bill has been scaled back in various committees, the majority still cannot align to pass the amended version. The current bill would step down cash credits available to companies in Cook Inlet, limit incentives for new oil on the North Slope, and set a hard minimum oil tax at 2 percent — among other measures. House Speaker Mike Chenault said he hoped to reach a compromise Monday evening, and expected the caucus would draft several amendments to the bill. Asked how confident he was that those amendments would be ready for the bill’s next scheduled hearing, this morning — he just laughed. While Headlamp isn’t laughing, we do recognize that it is part of the process. The committee substitute for SB 130 – the companion bill in the Senate was presented last night and does much more harm to the industry. The two bills will meet in the middle…somewhere. 

Despite 18-year-low prices in global LNG, some new players are making waves in the market. South Africa and South America are looking at importing LNG to help alleviate energy shortages, said Graeme Bethune, chief executive of consulting firm EnergyQuest. “LNG at these sorts of pricing is going to be very, very competitive as an energy source,” said Oil Search chief executive Peter Botten.

John Watson, the chairman and chief executive of US oil and gas giant Chevron, told the LNG 18 conference in Perth today that the next generation of LNG projects and expansions planned for Australia would face very different market conditions than the $200 billion wave of projects built over the past decade. “The markets have evolved and customers want more flexibility. It’s a more mature business and there’s simply a lot of gas out there. The US has emerged as a competitor,” Mr. Watson said.

 

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First Reads

Alaska House postpones vote on oil tax bill – again
Alaska Public Radio News, Rachel Waldholz, April 11, 2016

Debate on oil tax credits slows progress
Juneau Empire, Rashah McChesney, April 12, 2016

18-year-low LNG price attracting new customers
CNBC, Matthew Taylor, April 12, 2016

Walker stumps his tax plan
Peninsula Clarion, April 12, 2016

Australia warned over LNG future
The Australian, Paul Garvey, April 12, 2016

 

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Live from Juneau

April 11, 2016 | Posted in : News

PASSED:  SB 125 – “An act relating to the Board of Directors of the Alaska Gasline Development Corporation; adding legislators as non-voting members of the Board of Directors of AGDC and providing for an effective date.”

The bill started in the Senate, moved to the House where a few changes were made and returned it to the Senate for concurrence. The Senate voted to concur. The key changes made by the House:

  • Increasing the number of legislators from 2 to 3, designating 1 spot for the minority.
  • Requiring 4 of the 5 public AGDC board members to have expertise in natural gas pipeline construction, operation and marketing; finance; large project management; or other experience relevant to the purpose and duties of AGDC.

PULLED:  HB 283 – “An act relating to the nomination and designation of state waters as outstanding national resource water; and providing for an effective date.”

Translation: the State comes up with a way to do this or the EPA does it for us. This was the Governor’s bill – he pulled it from the committee agenda and rumor has it he was pressured by NGO’s to do so.  

POSTPONED:  HB 247 – The Governor’s rewrite of the oil and gas tax credit system. For the third day in a row, the House vote on the bill has been postponed.

Stay tuned…

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