Morning Headlamp—Rent is due for AK lawmakers & ConocoPhillips wins big with LNG

February 10, 2016 | Posted in : News

The Rent Is Too Damn High. Alaska’s budget problems made national headlines this week, landing on Wall Street Journal’s Money Beat. With regards to the recent debate circulating around breaking the lease on the Legislative Information Office, some analysts said the willingness of lawmakers to break the agreement is an unfortunate signal to investors at a time when Gov. Bill Walker has proposed measures that include borrowing to balance a state budget that saw revenue fall 50% last year. Not honoring that obligation “will likely impact the state’s credit worthiness and the cost of borrowing in the future,” wrote Steve Lundgren, president of the Alaska Bankers Association. “Any noise is bad in this situation,” Randy Hoffbeck said. “We’re hoping the legislature will reach a resolution with the landlord.” Headlamp agrees. It’s a bad sign to potential investors if lawmakers are struggling to literally keep a roof over their heads. Alaska lawmakers must honor contracts they have entered into or risk long-term credit score impacts.

A “hybrid” proposal for Alaska. Sen. Lesil McGuire told the Senate State Affairs Committee Tuesday that use of the Permanent Fund earnings during the current fiscal crisis is necessary, but that her “hybrid” proposal will preserve the Permanent Fund dividend. Yesterday, she finally unveiled the proposal, which could halve the state’s nearly $4 billion deficit in a single year. In form and function, McGuire’s plan (formally, Senate Bill 114) resembles the one brought forward by Gov. Bill Walker earlier this year. State revenue commissioner Randy Hoffbeck said the governor’s staff and McGuire’s staff used the same financial models and budget figures, and that any similarities aren’t coincidental. The mechanics of McGuire’s plan are relatively simple. Right now, investment earnings from the $50 billion Permanent Fund end up in the earnings reserve account. That account pays dividends but otherwise accumulates interest and grows. Right now, it contains about $7 billion. The Senate State Affairs Committee will meet again on Thursday to hear legal analysis of the governor’s Permanent Fund earnings plan. On Tuesday, it will hear public testimony on the proposed prison reform bill, and on Tuesday night, starting at 5:30 p.m. in the Capitol, the committee is expected to take public testimony on McGuire’s proposal. Headlamp applauds the initiative of Sen. McGuire. “Hybrid” plans and compromising will be required of Alaska lawmakers as budget discussions progress.

The U.S. Department of Energy approved ConocoPhillips’ application to export about 40 billion cubic feet of natural gas from its Kenai liquefied natural gas export terminal in Alaska over the next two years starting Feb. 19. ConocoPhillips last received an export license from the federal government for the Kenai plant in April 2014. It also authorized the company to export about 40 bcf of gas over a two-year period. ConocoPhillips sought that license after the plant’s old export license expired in March 2013. Great news for Alaska resource development! Hopefully this pro-LNG and pro-resource development trend will continue despite oil price climate.

According to the Alaska Dispatch News, President Barack Obama signed the 2015 Coast Guard reauthorization bill Monday night, a law that will transfer two tracts of land in Alaska out of the hands of the federal government. Alaska Sen. Lisa Murkowski, who pushed the provision forward along with Alaska Sen. Dan Sullivan and Rep. Don Young, said Tuesday that the Point Spencer provision “is a great step towards future investment in Alaska’s Arctic, giving Alaskans the ability to speed up the timetable for economic investment in the Arctic region.” Headlamp is happy to see lawmakers fighting to give Alaskans increased control over policies impacting the Arctic.

 

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First Reads

The Rent Is Too Damn High…for Alaska Lawmakers
Wall Street Journal, Aaron Kuriloff, February 9, 2016

U.S. approves ConocoPhillips LNG exports from Alaska
Reuters, February 9, 2016

Legislator’s plan promises to halve state’s swelling deficit
Juneau Empire, James Brooks, February 10, 2016

As Oil Prices Plummet, Mounting Debt Catches Up With U.S. Producers
Alaska Dispatch News, February 10, 2016

Sen. Lesil McGuire Debuts Alternative ‘Hybrid’ Fiscal Plan
Alaska Commons, Craig Tuten, February 9, 2016

President Obama signs Coast Guard bill that includes Alaska land transfer
Alaska Dispatch News, February 9, 2016

Alaska congressional delegation on Obama budget: Thanks … you shouldn’t have
Alaska Dispatch News, Erica Martinson, February 9, 2016

 

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HEADLAMP ALERT: House votes to suspend all work and focus only on budget.

February 9, 2016 | Posted in : News

AK Legislature clears its schedule. Yesterday, the Alaska House of Representatives voted 38-1 to suspended all work not related to the state budget. The resolution takes effect immediately. The resolution formally suspends several rules in the House, restricting the body’s work and permitting members to reschedule bills on short notice. Rep. Charisse Millett, and the House Majority Leader, said the House has used similar resolutions before, but never for the budget. With the state’s annual deficit approaching $4 billion, the situation “calls for extraordinary measures,” said Rep. Craig Johnson chairman of the House Rules committee. “What we’re trying to do is focus it down, take some of the things off our plate by not allowing some legislation to be heard and trying to concentrate on the budget itself,” said Speaker of the House Rep. Mike Chenault.

Headlamp is happy to know how serious our lawmakers are taking the budget debate. In the past, a limited number of legislators have been given the opportunity to understand budget detail. The drastic measure taken yesterday gives every House member the opportunity to really understand budget. Headlamp expects all House members will suspend travel, roll up their sleeves and get to work on the budget.

Headlamp was also happy to hear that lawmakers seek increased bipartisanship in the coming weeks.
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First Reads

Alaska Has A Bigger Problem Than Low Oil Prices
Forbes, Travis Brown, February 8, 2016

At current prices, neither the oil industry nor Alaska can take more
Alaska Dispatch News, Roger Marks, February 8, 2016

Obama’s budget shows Alaska’s on the president’s mind
Alaska Dispatch News, Erica Martinson, February 9, 2016

Democrats in Alaska Legislature propose power-sharing as path to budget fix
Alaska Dispatch News, Nathaniel Herz, February 8, 2016

Nothing but the budget, House says
Juneau Empire, James Brooks, February 8, 2016

Environmental group protests AK LNG Project at state forum
KTUU, Patrick Enslow, February 9, 2016

Utilities purchase share of Beluga gas field from ConocoPhillips
Alaska Journal of Commerce, Elwood Brehmer, February 8, 2016

 

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The Morning Headlamp — Alaska doesn’t want Walker’s Permanent Fund plan

February 8, 2016 | Posted in : News

To fill roughly three-quarters of the deficit, Gov. Bill Walker has proposed using some of the earnings reserve from Alaska’s $48 billion Permanent Fund. That proposal, Senate Bill 128, was the subject of Thursday night’s hearing, which brought Alaskans a rare opportunity to speak to the Legislature after working hours. Hundreds of residents took that opportunity, with 109 signed up to speak by phone and another 217 submitting comments by email, according to counts provided by the Senate State Affairs Committee, which conducted the hearing. About 85 percent of comments were against the idea of using the Permanent Fund to balance the budget. Alaskan’s didn’t pull any punches in their testimonies, many stressing the need for cuts to government spending before any changes are made to the Permanent Fund    

The Walker administration hopes to generate at least $10 million more annually in revenue and reduce imports into the state of Lower 48 crude oil by sharply boosting the amount of royalty oil it sells to in-state refiners.  As part of the effort, the state Department of Natural Resources released a proposed contract on Thursday that could roughly double the amount of royalty oil sold to Tesoro Alaska, the state’s only gasoline refiner. “If you can ever get to a win-win in the oil and gas world, I think we got one, at a time when we really need it,” said Myers, of the draft contract with Tesoro. Sen. Cathy Giessel, and chair of the Senate Resources Committee, said the DNR has done a good job maximizing the value of the state’s crude oil and protecting Alaska jobs. “This in turn provides a stable fuel source for Alaska,” she said. Headlamp is glad to hear lawmakers are focusing on the stability of Alaska’s oil and gas industry during a tumultuous economic climate. Smart policies like these represent the type of thinking Alaska needs more of.

State officials had a hard time explaining the broader impacts of doubling the tax on gasoline earlier this week, and now the House Transportation Committee is turning to the public for input. As proposed by House Bill 249, the doubling of motor fuel taxes would increase the tax from 8 cents per gallon to 16 cents per gallon. A similar doubling is also proposed for marine fuel and aviation gas. The jet fuel tax is proposed to triple. Officials say would cost the average driver about $80 per year and bring $49 million in new revenue to the state.

 

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First Reads

Alaskans urge lawmakers to not sink the Permanent Fund
Juneau Empire, James Brooks, February 7, 2016

Committee to take testimony Saturday on proposed hike in Alaska motor fuel tax
Fairbanks Daily News Miner, February 5, 2016

Alaska hopes to makes millions more selling extra oil to local refiners
Alaska Dispatch News, Alex DeMarban, February 7, 2016

 

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Friday’s Fast Five

February 5, 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 effecting you.

Top Story of the Week

Governor Bill Walker’s administration finally posted details online of state expenditures after a seven-month hiatus. The new posting lists thousands of expenses across state agencies, including payments to high-priced consultants for the governor’s office that have made headlines recently, such as $50,000 paid to federal lobbyist Jack Ferguson. The expenditures can be viewed here.

Top Reads of the Week

Paying the Price in the Last Frontier
US News and World Report, Pete Sepp, February 2, 2016
There seems to be a prevailing belief in Washington that any fiscal problem can immediately be fixed through “revenue enhancements.” Like waving a magic wand, imposing punitive tax measures on certain industries supposedly conjures up money from thin air, without any kind of drawbacks. The favorite target of the left – and sometimes even on the right – is the oil and natural gas sector.

Alaska LNG snatches up land, buoying a local economy
Alaska Dispatch News, Alex DeMarban, January 31, 2016
The three oil company partners in the $55 billion Alaska LNG project have acquired more than 150 tracts of land on the Kenai Peninsula as they piece together an expanse that could one day house a massive plant and shoreside facility where liquefied natural gas would be processed and exported.

Despite downturn, Hilcorp continues to buy
Peninsula Clarion, Elizabeth Earl, February 1, 2016
As other oil and gas companies seek to trim expenses with layoffs and stalling development, Hilcorp Alaska has no plans to stop acquisitions.

Quote of the Week

“We still anticipate levels of spending higher than our capital budget in 2012 — prior to oil-tax reform and when oil prices were in excess of $100 per barrel”— Natalie Lowman, communications director ConocoPhillips Alaska.

 

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The Morning Headlamp — ConocoPhillips will continue to invest in AK and lawmakers’ travel bills

February 5, 2016 | Posted in : News

Governor’s Latest Budget Plan Summarily Shot Down. The Senate State Affairs Committee examined another fiscal plan put forth by Gov. Bill Walker, this time it concerned using the Permanent Fund dividend to fill in state deficits. The plan was met with tough criticism from local Alaskans. “This is basically asking for Alaskans to hand over the keys to this multibillion-dollar Permanent Fund lockbox,” said speaker Pam Goode. “I request it be tabled as unconstitutional because it is the most costly, offensive and uncompassionate source of revenue among those proposed,” said Tom Lakosh. More than 200 Alaskans submitted written testimony, and another 106 people signed up to speak Thursday night. Mike Swanson of Palmer said he appreciated the governor’s effort to jump-start the conversation, but said the bill should be rejected. He offered a balanced approach that included using Permanent Fund earnings with sizable government cuts. Headlamp knows that for some politicians using Permanent Fund dividends to fix the fiscal crisis is a tantalizing idea. Fiscal expert Dr. Scott Goldsmith of ISER, consistently says gutting the dividend program will have significant negative economic impacts. Pulling money out of the private economy, by slashing dividends, to protect government programs will only contribute to Alaska’s growing economic uncertainty. Headlamp implores lawmakers to follow the best path toward fiscal certainty: scale back government spending to $4.5 billion this year and craft policies that incentivize people to help grow the economy.

Why Fly When a Phone Call Will Do?  According to a new State Department of Administration report, the Alaska Legislature cut its overall travel spending last year by 25% from $660,000 in 2014 to $500,000 in 2015. Top officials in Gov. Walker’s administration spent more than their predecessors. Headlamp is glad to hear some lawmakers are tightening their belts in lieu of the state’s massive fiscal problems. While certain duties and opportunities certainly require a physical presence, Headlamp asks all state officials to consider calling into the next meeting, or thinking long-and-hard about attending that conference. We hope Gov. Walker and the legislature remain committed to their travel freezes this year.  

Thanks to SB 21 ConocoPhillips’s Investment Remains Comparatively High in Alaska. Despite a global drop in oil and gas prices, AKLNG partner ConocoPhillips earned $482 million from oil and gas production in Alaska. According to fourth quarter earnings reports, ConocoPhillips has maintained a relatively high level of capital spending in Alaska, compared with significant reductions at fields around the world. Natalie Lowman, communications director for ConocoPhillips Alaska, said in an email that in the big picture, ConocoPhillips had a “negative cash flow” of more than $100 million in Alaska in 2015. She included an estimated $665 million in taxes and royalties paid to the state, as well as capital expenses that amounted to $1.4 billion in 2015. Lowman also said “We still anticipate levels of spending higher than our capital budget in 2012 — prior to oil-tax reform and when oil prices were in excess of $100 per barrel.” She said Senate Bill 21, the production tax overhaul kept as law by voters in 2014, has created a “positive investment climate.” The company previously said it would spend $1.3 billion on Alaska projects in 2016. The company now expects to see a “slight decrease” in that estimate because oil prices have continued to slide, Lowman said. Headlamp hopes that policymakers take serious notice: even though oil prices are low ConocoPhillips is investing in Alaska because of SB 21. If policymakers wish to see sustained investment in Alaska, they should not disrupt the current oil tax regime. In the face of record low oil prices Alaska cannot afford to drive away private investment that helps create new jobs and yields new revenue to the State. Headlamp encourages lawmakers to respect the will of the public; stay the course on SB 21 because it is working.  

President Obama Needs New Advisors. Maybe President Obama didn’t get the memo about record-low oil prices. Maybe he didn’t see the reports that over 86,000 U.S. workers in the oil and gas industry have been laid off since June 2014. Even if President Obama had seen these reports, there is no excuse for suggesting a $10 per barrel tax for green energy projects – that will be passed on to consumers. The horrendous idea was summarily dismissed by Republicans in the U.S. House and Senate. It seems tone deaf to propose a roughly 30 percent tax on oil given the budget struggles states throughout the country are dealing with in light of the historically low energy prices. Headlamp is not surprised by President Obama’s radical proposal. After coming to Alaska last August, and enjoying the wonders of our great state, Headlamp finds proposal by President Obama to be especially insulting. In this record low oil price environment, this proposal would kill thousands of high paying jobs across America. This proposal would directly raise the cost of living for all Americans, and hurt those least fortunate among us disproportionally. Headlamp knows President Obama wants to fundamentally transform America and see our energy prices more like Europe’s. We trust his proposal is dead on arrival in Congress.

 

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First Reads

Governor’s bill picked apart as Alaskans debate Permanent Fund changes
Alaska Dispatch News, Alex DeMarban, February 4, 2016

Legislature’s overall travel spending down 25 percent
Alaska Dispatch News, Nathaniel Herz, February 4, 2016

ConocoPhillips shows healthy earnings in Alaska, keeps capital investment up
Alaska Dispatch News, Alex DeMarban, February 4, 2016

Obama to propose $10-a-barrel oil tax to fund rail and highway projects
The Washington Post, Steven Mufson, February 4, 2016

Obama oil tax proposal would cost motorists
USA Today, Nathan Bomey, February 4, 2016

LNG Exports: An Easy Fix for Economic Growth
Morning Consult, William Shughart II, February 4, 2016

 

 

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Can you trust polling results? Good Polls vs. Bad Polls

February 4, 2016 | Posted in : News

It seems in the midst of Alaska’s budget crisis, we’re hearing a great deal about polling from various groups in Alaska. These polls are often intended to drive policy makers in one direction or another as determined by the polling results. But what makes a good poll? How are Alaskans to know whether they can trust a poll or not?

As Headlamp frequently stresses, accurate information is key to making good decisions. As lawmakers face a number of fiscal and political challenges, accurately knowing where the public aligns on issues matters.  But for every poll out there designed to provide a glimpse into the mind of the voter, there is one intended to skew the information and provide a specific outcome.

When you read polls, here are some questions you should be asking:

  • Who conducted the poll?
  • Who paid for the poll?
  • Who was sampled?
  • Is the sample population representative and randomly selected?
  • What is the sampling error?
  • How is the question worded?
  • How are the questions ordered?

Unfortunately, results from flawed polls are being widely touted as accurate representations of the Alaskan public’s opinion concerning our state’s fiscal crisis. Such actions don’t help foster an open and honest dialogue needed during these difficult budget discussions. For example, recent polls claim majority support for the governor’s plan, but used vague and sometimes leading questions, while another had questionable sampling and is being widely touted as representative. Lawmakers, and the public, need to be confident in the results of polls if they are to be used to craft meaningful answers to our budget situation.

Up next: Representative Sampling – why it’s important

 

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The Morning Headlamp — Walker’s Tax Credit and Permanent Fund Plan Get Questioned

February 4, 2016 | Posted in : News

Walker’s bill raises concerns. Gov. Bill Walker’s bill to reduce tax credits to the oil and gas industry, worth $500 million to the state primarily through reduced spending, underwent tough questioning during its first hearing in the House yesterday. House Bill 247 would reform a program that is expected to pay out $625 million next year, which the administration says is no longer sustainable now that the state’s petroleum-based income has collapsed with the price of oil. The bill also calls for raising the veil of secrecy that has surrounded the credits by disclosing companies that receive them. Rep. Mike Hawker, asked why Walker wants the Legislature to completely reverse its tax credit policy. A Senate working group convened last year by Sen. Cathy Giessel, recommended careful adjustments to protect advancing projects. Headlamp agrees with Sen. Giessel—protecting ongoing projects should be a principal goal of any tax plan the Governor puts forward this session. Pulling the rug out from current projects not only defeats the purpose of the tax credits, but also threatens to inflict considerable economic harm and disruption in how the financial industry views Alaska’s trustworthiness. Incentivizing sustained investment will keep Alaska’s head above water as lawmakers attempt to remedy the fiscal crisis. It is also interesting that the Governor is calling for “raising the veil of secrecy” just two days after finally posting the state’s online checkbook, despite it being offline for roughly seven months.

Arizona lawmakers propose new U.S. 12th Circuit Court; Alaska to be Included. A Sen Jeff Flake and Rep Matt Salmon of Arizona have introduced legislation to break up the 9th U.S. Circuit Court of Appeals. Flake and Salmon, both Republicans, want to move Arizona, Nevada, Montana, Idaho and Alaska into a newly established 12th Circuit. Arizona Gov. Doug Ducey supports the effort. Currently, the U.S. 9th District Circuit Court has jurisdiction over the State of Alaska. The bill introduced by Arizona Sen. Jeff Flake and Rep. Matt Salmon, would place Alaska, and four other western states, under the jurisdiction of a new U.S. court of appeals. Given the uniqueness of Alaska, the vast territory the 9th Circuit Court covers, and the excessive workload consistently faced by the Court, Headlamp thinks this is a bill to watch.

Rep. Hawker weighs in on PFD plans Gov. Bill Walker has proposed using the Permanent Fund earnings to pay for much of the state’s annual budget, but Rep. Mike Hawker has proposed another Permanent Fund bill that’s drawn attention, House Bill 224. It would appropriate an annual percentage of the Permanent Fund for the budget. He cited a provision of the Alaska Statehood Act that says the state’s natural resources should benefit communities, not individuals. “Direct, indiscriminate redistribution of that money, from the resource to people … that is pure socialism,” he said. “It’s confiscating wealth and redistributing it without any public purpose, and that’s just simply wrong.” “My bill respects the Permanent Fund for what it was intended for when it was established,” Hawker said. Hawker’s measure allows for much lower dividends, $250 or less in years where there’s a budget shortfall. “My bill respects the constitution, it respects the Statehood Act, and it utilizes our existing budget reserve funds for the purposes they were established. I don’t believe we need to re-engineer everything just to give it a different name, just to get the same outcomes.” Another key difference between the governor’s and the legislators’ proposals is revenue. Legislators want to see at least $500 million in budget cuts, while Walker has proposed $100 million in cuts over a two-year period.

Headlamp commends Rep. Hawker for putting together his own plan to address the state’s fiscal deficit. Rep. Hawker and other legislators are right to question the merits of Gov. Walker’s Permanent Fund Protection Act (his bill to ‘re-plumb’ state finances). Headlamp also has many questions and concerns with the Governor’s fiscal package. Is the Governor right to raise taxes on Alaskans by $400 million, while only cutting the budget by $100 million over two years? Do Alaskans know that the Permanent Fund dividends would be roughly $300-400 per year given current oil prices under Gov. Walker’s plan? Do Alaskans know that the Governor’s fiscal plan leaves the state with a roughly $400 million deficit this year? Many questions remain unanswered regarding the Governor’s plan. Headlamp hopes Alaskans provide their input today on SB 128 (Gov. Walker’s Permanent Fund Protection Act), by going to their local LIO and testifying.

Murkowski hit the nail on the head. As Sen. Lisa Murkowski continues to promote her bipartisan energy bill, she used a case study close to her heart—Alaska. “Alaska is an energy producer for the rest of our country and for the rest of the world. That’s our legacy and our future because we are blessed with an abundance of resources that most states and countries can barely dream of,” Murkowski explained, “As we produce more of our natural resources, Alaskans will benefit significantly. New jobs will be created. New revenues will be generated for our state treasury. And local energy costs will decline sharply allowing Alaskans to keep more of their hard-earned money.” Headlamp couldn’t have said it better ourselves. We’re thrilled to hear Sen. Murkowski continually promote Alaska’s energy opportunities.

 

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First Reads

Walker’s oil tax credit bill seeks more transparency, fewer loopholes
Alaska Dispatch News, Alex DeMarban, February 3, 2016

Flake, Salmon introduce bill to split 9th Circuit court
Associated Press, February 3, 2016

Three pitches for closing state budget deficit with the Permanent Fund
Alaska Public Radio Network, Andrew Kitchenman, February 3, 2016

Walker administration submits supplemental request
Associated Press, February 4, 2016

Murkowski touts Alaska benefits in bipartisan legislation
Homer Tribune, February 2, 2016

 

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The Morning Headlamp —Don’t try to “wave a magic wand” in AK

February 3, 2016 | Posted in : News

A Tax WarningUS News and World Report columnist and National Taxpayers Union president Pete Sepp stresses the fact that punitive tax measures on Alaska’s oil and gas industry is “bound to backfire.” Sepp highlights the fact that proponents of such measures believe that much like, “waving a magic wand, imposing punitive tax measures on certain industries supposedly conjures up money from thin air, without any kind of drawbacks.” Sepp argues that lawmakers cannot resort to “knee-jerk reaction” policies when faced with seemingly insurmountable fiscal problems. Sepp closes by arguing that “gas development appears to be the only real opportunity to create economic growth for the future, thereby bolstering the state’s flagging revenues. But if additional taxes are introduced during this time of lower production and lower prices, they could cripple a large investment in Alaska’s natural gas future.”

Headlamp applauds Sepp on his accurate and timely analysis of the challenges facing Alaska. As we have repeatedly stressed, reactionary policies have no place in Alaska’s fiscal plan, especially when Alaskan lawmakers could risk permanently damaging its largest revenue stream—the oil and gas industry. It is Headlamp’s belief that Gov. Walker’s proposal to raise taxes on the oil and gas industry by hundreds of millions of dollars, especially his proposal to raise the minimum production tax after promising not to touch SB 21, should be reconsidered.

Lawmakers, please use realistic budget numbers. In his Alaska Dispatch News column, Dermot Cole discusses the fact that the idea of a $4.5 billion “sustainable budget” is just not in the cards for Alaska. Instead, Cole agrees with the 2016 revised budget model put forth by ISER economist Scott Goldsmith, who proposes the state’s new target be $3.6 billion with a gas line or $2.8 billion without one. According to Cole, vague budget discussions without specifics is, “wishful thinking, founded on prayers that world oil prices will quadruple in four years and the gas line will be built a decade from now. Trusting that the future will save us from ourselves is hardly a sustainable plan.” Headlamp rarely agrees with Dermot Cole, however, on this instance we do. Alaska’s operating budget needs to undergo real cuts, and we believe many lawmakers are actually serious about reaching a spending level of $4.5 billion this year. Instead of rushing to tax Alaskans, lawmakers should pursue further efficiencies, real cost saving reforms to major programs, and wisely use our savings.

Through our “Would you Rather?” series we have presented different options for legislators to consider cutting the budget. We will continue to do this throughout the session. Goldsmith’s budget model is the most realistic plan Alaska can afford to follow, so Headlamp suggests we get to work. Also, it is worth noting how big or small the budget should be when a gas line is factored into Goldsmith’s figures.

The federal government will officially hand over two tracts of land in Alaska for Native use thanks to a bill passed by the U.S. House late Monday. One provision, sought for years by Alaska Rep. Don Young, hands over 2,500 acres of federal land in Point Spencer to the Bering Straits Native Corporation and the state. The bill also includes small steps aimed in the direction of acquiring a new icebreaker — a provision that would enable the Coast Guard to pay for an icebreaker in multiple payments, rather than requiring all the funding up front. While the terms of the icebreaker aren’t exactly to Rep. Young’s liking, he is hopeful that President Barack Obama’s promises for icebreaker funding would play out in the near future.

LNG exports move forward in Washington. The Senate is approaching a final vote on another sweeping piece of legislation that would strengthen the nation’s energy future by, in part, streamlining the federal approval process of U.S. liquefied natural gas exports. Similar to forecasts for crude, LNG exports, if expedited, are projected to deliver strong economic advantages from coast to coast including more jobs and bolstered economic revenue. The bipartisan “Energy Policy Modernization Act” was introduced last summer by Senator Lisa Murkowski, Chairwoman of the Senate Committee on Energy and Natural Resources, and Senator Maria Cantwell (D-Washington). Significantly, this bill is the first major overhaul of policies effecting the U.S. energy sector since 2007. But in a sea of hotly debated amendments, the provision on LNG exports continues to hold strong with steadfast bipartisan support. The goal is simple: alter a federal review process riddled with bureaucratic delays.

Sen. Lisa Murkowski has introduced an amendment to the Senate omnibus energy bill (S. 2012) that would give developers of the Alaska LNG Project greater flexibility to decide where to route a proposed 800-mile gas pipeline project. Murkowski’s amendment could be brought to the Senate floor for a vote this week as the lawmakers conclude work on the broad energy package. Supporters of the amendment say the change would give project developers greater latitude in choosing the safest and easiest route to build the pipeline. (“Reprinted from E&E Daily with permission from Environment & Energy Publishing, LLC www.eenews.net. 202-628-6500”)

With this amendment, Sen. Murkowski has helped the AKLNG megaproject significantly! Allowing industry leaders to do what they do best—build megaprojects—without unnecessary restrictions will make for a safer, more efficient, and cheaper energy system in the long run.

Two federal agencies have weighed in on the potential impacts the proposed Donlin Creek mine could have on subsistence along the Kuskokwim River. KYUK-FM reports that Donlin Gold LLC estimates it could excavate about 34 million ounces of gold over three decades from the proposed open pit mine near the village of Crooked Creek. Plans for the mine project include barging on the Kuskokwim River and a natural gas pipeline spanning 300 miles to Cook Inlet.

Headlamp fully supports the Donlin Gold project, and specifically their alternative (number 2) proposal laid out in the Draft EIS that is undergoing public testimony across the state. Headlamp hopes that the US Army Corps of Engineers’ assessment, that the mine would have a minor to moderate impact on subsistence practices and resources, is relied upon. The positive impacts, like high paying jobs, new affordable energy sources, and new state revenue, from Donlin Gold are likely to be enormous and would greatly benefit South Western Alaska; a region with the highest unemployment rates in the state.

 

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First Reads

Paying the Price in the Last Frontier
US News and World Report, Pete Sepp, February 2, 2016

State budgets and the false ‘sustainable’ number that never dies
Alaska Dispatch News, Dermot Cole, February 2, 2016

Congress passes Coast Guard bill transferring federal lands to Alaska Natives
Alaska Dispatch News, Erica Martinson, February 2, 2016

U.S. Energy Exports: First Comes Crude, Then Comes LNG
Forbes, Brigham McCown, February 3, 2016

Political groups that supported Walker violated law, settlement says
Alaska Dispatch News, Alex DeMarban, February 2, 2016

Questions emerge about constitutionality of governor’s Permanent Fund proposal
KTUU, Austin Baird, February 2, 2016

Federal agencies consider Donlin Creek mine impacts on subsistence
KTUU, February 2, 2016

Alaska’s education spending still outpaces the rest of the US by far
Alaska Dispatch News, Erica Martinson, February 2, 2016

 

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Alaska being hit harder than anywhere in the country

February 2, 2016 | Posted in : News

The turbulent quarter in energy prices has left many states wrestling with financial woes. According to a recent report conducted by the Rockefeller Institute of Government at the State University of New York, Alaska was one of 8 energy-producing states that saw total state tax revenues drop, averaging -3.2 percent over the four quarters leading up to September 2015. The remaining forty-two states reported an average growth of 6.5 percent

Alaska, is highlighted in the report as the state worst hit by low commodity prices, topping the list with a 67.2 percent decline in total state taxes. The report argues that these 8 states are victims of declining commodity prices “leading to cuts in production and employment, weakening mineral-state economies and likely leading to slower growth in state revenue from other tax sources.” Check out the study’s findings below.

Rockefeller Institute of Gov. Chart

While it’s comforting to know that other states are sharing in our economic turmoil, Alaska clearly faces unmatched fiscal challenges from the decline of oil prices. Though our economic situation may be dire, we cannot afford to fall victim to reactionary, short-sighted policies. As noted in the report, many of the governors of the 8 energy-states are implementing across the board cuts to their state governments. Governor Walker should follow suit. Last year the legislature gutted the capital budget, accounting for the bulk of the cuts. This year lawmakers must keenly examine the operating budget and consider fundamentally reforming the state’s major cost-driving programs in ways that are measured, proven, and have been tested by other states. Furthermore, unless we don’t want a strong private sector, we cannot tax our way out of a multi-billion-dollar deficit. Instead, Alaska needs policies that increase business and keep our economy moving before any frailties become permanent.

 

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The Morning Headlamp — State Online Checkbook & ISER economist on state fiscal woes

February 2, 2016 | Posted in : News

After months in the dark, transparency restored with online checkbook. A state website that details public spending is once again listing recent expenditures after a seven-month hiatus that prompted the Alaska Republican Party to accuse the Walker administration of suppressing information. Alaska Checkbook Online has listed payments to thousands of vendors and contractors dating back to 2007, after former Gov. Sarah Palin ordered state expenditures to be posted publicly.  New coding created complications associated with making sure that 27 confidential categories of state spending were not unintentionally posted, such as Child in Need of Aid payments and medical payments, both of which are protected under federal privacy laws. The new data covers a six-month period that ends Dec. 31. Expenses for January will be posted in the coming days, right on time.

For months Headlamp has been questioning the Walker administration’s handling of the state’s online checkbook; a tool meant to bring greater transparency to Alaska’s finances. Headlamp finds it ironic that the IRIS upgrade, meant to improve transparency and openness to Alaska’s finances, not only tanked a key program of the state’s transparency measures but also is slated to cost the state $87.7 million. Why are confidential payments such a big issue now, when in the past they never have been? Why was the financial information not placed online under the functioning old system, and then replaced when the IRIS system became operational? When the IRIS system upgrade is completed in 2017, Headlamp hopes to see the official payments up on the online checkbook.

UAA ISER’s Gunnar Knapp details Alaska’s fiscal crisis. According to the Alaska Dispatch News, Gunnar Knapp, professor of economics and director of the Institute of Social and Economic Research at the University of Alaska Anchorage, spoke with urgency to a room full of concerned business leaders at an Anchorage Chamber of Commerce event on Monday, emphasizing the importance of understanding the different pieces of Alaska’s financial situation before focusing on what solutions might be. “I think this fiscal challenge that we are facing is the perfect storm,” he said. “It’s critically important. It’s also very complex. We have very little time to address it. … It demands of all Alaskans that we become informed about our fiscal reality.” Without backing a specific proposal, Knapp said Alaska lawmakers will need to consider five different factors: what Alaska spends on the government, what it spends on Permanent Fund dividends, what new tax revenue the state might add, how to inflation-proof the Permanent Fund and what other growth the state might have in the Permanent Fund earnings reserve and the Constitutional Budget Reserve Fund. Headlamp agrees with Knapp that Alaska faces a plethora of fiscal policy decisions. We also agree that the challenge is not insurmountable. Alaskans have overcome tough times before. Now is the time for bold and decisive leadership, with a collective mindset focused on securing the fiscal health of our state government for the long term. It’s time for the state to tighten up its belt, and for lawmakers to make the hard choices about what size state government must be. Headlamp encourages our readers to speak with their families, friends, co-workers, and neighbors about these critical issues. We all benefit when more Alaskans are engaged, educated, and care about the fiscal future of our state. 

Chenault seeks to rein in the AG. According to the Alaska Dispatch News, Alaska House Speaker Mike Chenault launched a new salvo Monday in his battle against Gov. Bill Walker, introducing a bill to block Walker’s attorney general from serving on state boards and commissions. In an interview yesterday, Chenault said that “it’s important that we have an attorney general that’s looking out for the people of the state of Alaska, and not devoting the majority of his time to the Permanent Fund board, or any other.” Chenault’s co-sponsors for his bill include two of his close allies in House Republican leadership — Anchorage Reps. Charisse Millett, the majority leader, and Craig Johnson, chair of the House Rules Committee.

Hilcorp reiterates commitment to Alaska. As other oil and gas companies seek to trim expenses with layoffs and stalling development, Hilcorp Alaska has no plans to stop acquisitions. “Hilcorp is a growth company, acquisition-based,” said Chad Helgeson, the Kenai area operations manager. “That’s been our model.” The company’s workforce has also steadily increased. Of the approximately 520 employees statewide, 240 live on the Kenai Peninsula, Helgeson said. “As the price of oil continues to drop down, our goal is to be responsible and sustainable,” Helgeson said. “Our goal is to be here for the long-term. Our oil and gas contracts are going eight years out … we’ve got to be responsible.” This is incredibly fantastic news for Alaskan families employed in the oil and gas industry! Headlamp is thrilled to hear that despite a troubling economic climate, Hilcorp recognizes the importance of sustained private investment and resource development. This news in not only positive for Alaskans directly employed by Hilcorp, but also for the many contractors who make a living helping responsibly develop Alaska’s oil and gas resources.

In national news, Cramer says the oil price crash isn’t over yet. CNBC’s Jim Cramer stressed the fact that oil prices will determine the strength of the market as we move into February. Despite theories that oil prices have been hit hardest by a dip in Chinese demand, Cramer said there is “no evidence to pin that down at all.” Cramer went on to emphasize that “the inventory numbers are still too large. I don’t see any real demand at the $34-$35 level.

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First Reads

Amid allegations of secrecy, state restores online checkbook detailing spending
Alaska Dispatch News, Alex DeMarban, February 2, 2016

Economist: Alaska faces the choice ‘to become more like other states’
Alaska Dispatch News, Annie Zak, February 1, 2016

Cramer: Keep an eye on oil prices
CNBC, Fred Imbert, February 1, 2016

House Speaker wants attorney general off Permanent Fund board
Alaska Dispatch News, Nathaniel Herz, February 1, 2016

Despite downturn, Hilcorp continues to buy
Peninsula Clarion, Elizabeth Earl, February 1, 2016

 

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