Abracadabra: The more things change the more they stay the same.

March 30, 2016 | Posted in : News

Everyone loves a good magic trick, but the one the State of Alaska is trying to play on us isn’t so great.

When the ad below ran in 2007, government spending was skyrocketing in response to increased petroleum revenues due to high oil prices and taxes. Fast forward almost 10 years and state spending is still out of control and the money grab continues, but the biggest difference is oil prices have plummeted leaving the industry struggling.

Like the ad says, “we’d rather have our ‘fair share’ of investments that will keep Alaskans working than bigger state government.” It was true in 2007 and it’s true today. Increasing taxes on a cash-flow negative industry will only make a bad situation worse.

Taxing income that doesn’t exist? That’s the real magic trick.

ASA022 Abracadabra 1200x688

 

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Morning Headlamp — Former lawmakers discuss Alaska’s future

March 30, 2016 | Posted in : News

Surviving the “famine.” About 40 former Alaska lawmakers convened in Anchorage for a meeting yesterday with the hope of hearing different ideas on how to solve Alaska’s $4 billion budget deficit. “We need a solution now,” and one that is broad-based, said Gail Phillips, a Republican Speaker of the House from 1995 to 1998. Oil prices were low and budget concerns were high when she served as well, she said. Phillips said there wasn’t a lot of support for Walker’s proposal to retool how the Permanent Fund is structured. Former Senate President Chancy Croft who helped create the Permanent Fund said the idea was to use the earnings to smooth out periods of “feast or famine” as the state generated income from unpredictable lease revenues to the oil and gas industry. Headlamp is happy to hear that former lawmakers took precaution and reason when planning around Alaska’s oil and gas industry. The state needs policies that can accommodate both prosperous and difficult climates for Alaska’s primary industry.

Reinbold puts AK spending under the microscope. Rep. Lora Reinbold penned an op-ed in the Alaska Dispatch News in which she criticized the “burden of big government.” According to Reinbold, “the state of Alaska, needs to go through every department, every function, and every state-owned entity, and ask, “Do we really need this function?” and, “Is it government’s role to provide this service?…We need to benchmark the cost of state government by comparing the total operating cost for state government in Alaska to other states across the nation. As a starting point, we should target operating our state government at the national average.” Headlamp applauds Rep. Reinbold’s call for a closer examination into government spending.

The Senate Resource Committee examined the appointment of former Fairbanks North Star Borough Mayor Luke Hopkins to the AGDC Board. Lawmakers recently proposed adding two members to the AGDC board to help guide the AKLNG megaproject to completion. Committee members noted that Hopkins was involved with Alaska Gasline Port Authority, which wasn’t successful in completing some of the natural gas projects it pursued. Hopkins said it wasn’t the authority’s decisions that stopped these projects, but market conditions. The Legislature now has the opportunity to refuse the appointment as Hopkins’ appointment was made outside of the legislative session. Headlamp is pleased to see that Hopkins now recognizes the role market conditions play concerning major projects, and hopes that he can help the Governor understand this concept as the state works on a $50 billion LNG project that can’t be forced into existence.

 

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First Reads

Former Alaska lawmakers join ex-governors in urgent call for fiscal solution
Alaska Dispatch News, Alex DeMarban, March 29, 2016

Alaska Legislature has yet to get serious about budget cuts
Alaska Dispatch News, Rep. Lora Reinbold, March 29, 2016

Senate committee grills Hopkins on AGDC appointment
KTOO, Andrew Kitchenman, March 29, 2016

Trends 2016: Cook Inlet producers continue with scheduled plans
Peninsula Clarion, Elizabeth Earl, March 29, 2016

Nonprofit announces heating oil help for 20 Alaska villages
Associated Pres, March 29, 2016

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Will Rogers on Gara, Guttenberg and Government

March 29, 2016 | Posted in : News

“I don’t make jokes. I just watch the government and report the facts.”
Will Rogers , Saturday Review, Aug. 25, 1962.

As Headlamp watches government we have this to report in light of a recent commentary by two legislators:

  • Fact: Reps Gara and Guttenberg join the administration and other legislators as they continue to mislead the public into believing that oil companies will get more money from the state than they pay to the state by only talking about 1 of the 12 revenue streams that come from oil to the state.
  • Fact: Reps Gara and Guttenberg claim that oil companies don’t pay “their fair share” to help with the state’s deficit, when in reality at extremely low oil prices, oil companies are paying 55-60% of the unrestricted revenue for the state budget.
  • Fact: Reps Gara and Guttenberg claim they supported cutting the budget last year to the tune of $700 million, while in reality their caucus forced two special sessions that cost nearly $1 million, because they demanded the state increase spending by tens of millions of dollars.
  • Fact: Reps Gara and Guttenberg claim that “we should all work together for a fair and balanced approach…” but in reality only are looking to the oil industry (which, for 30+ years has provided the overwhelmingly majority of Alaska’s general fund revenue) to solve the budget deficit.
  • Fact: Reps Gara and Guttenberg claim that abiding by a law which 90,000 Alaskans voted to uphold, a law that was passed by the legislature, and signed by the governor, is a “special interest exemption” for an industry that is, again, paying 55-60% of the unrestricted revenue for the budget.
  • Fact: On a day when the private sector was laying off hundreds of people, the State of Alaska gave their employees a paid day off. 21,753 full time employees who cost the state $422.98/day.* In other words, the state spent  $9,201,052.44 yesterday on….nothing. The number is actually higher, since many of the people who did have to work got extra pay. Is this the fair and balanced type of budget that Reps Gara & Guttenberg support?

*Numbers taken from FY 2016 approved budget.

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Morning Headlamp — Murkowski meets with industry leaders

March 29, 2016 | Posted in : News

“Welcome to our world.” In the face of Alaska’s multi-billion dollar budget deficit Sen. Lisa Murkowski hosted a panel with oil and gas industry stakeholders in Fairbanks to discuss potential economic solutions for the state. Panelists included ConocoPhillips Alaska president Joe Marushack; Lorali Simon, of Usibelli Coal Mine; Alyeska Pipeline Service Company head Admiral Tom Barrett; AHTNA president Michelle Anderson; Arctic Slope Regional Corporation vice president Richard Glenn; Fairbanks Chamber of Commerce president Lisa Herbert; and others. “Really, our hardest task is not in finding the resources or developing the know-how or recruiting the manpower needed to responsibly produce them,” Murkowski said. “Instead, it’s really overcoming the restrictions that are imposed, oftentimes by our own federal government.” “When there’s success for the explorer there’s success for our communities’ residents,” Arctic Slope Regional Corporation vice president Richard Glenn said. “If we were just victims of development, that’s the opposite end of the spectrum…the way we create alignment is investing in the only industry that’s been around in our region long enough to pay taxes.” Headlamp thanks Sen. Murkowski for discussing the issues being argued in Juneau with the communities and business who will actually be affected by such decisions.

According to a recent study from George Mason University’s Mercatus Center which examines the impact of federal regulations on each state, Alaska ranked as the 2nd most regulated state behind Louisiana—both LNG producing states. In fact, the top states all represented energy producing states.

The state is considering selling an additional 20,000–25,000 barrels per day of its royalty-in-kind oil to Tesoro Refining & Marketing Company as a way to prop up its finances. Alaska Department of Natural Resources Commissioner Mark Myers’ office has negotiated a five-year contract with the company to sell some of the state’s North Slope royalty oil to be refined at Tesoro’s facility in Nikiski. The five-year contract is shorter than contracts in the past, giving the state more flexibility to respond to the changing market for North Slope oil. Tesoro will have a choice in how much royalty oil it purchases from the state each month. If Tesoro chooses to purchase the maximum amount from the state, between 45 and 68 percent of the total forecast North Slope royalty oil will go to the company, according to the Best Interest Finding.

Rep. Jonathan Kreiss-Tomkins recently proposed an idea to create an 800-mile trail parallel to the trans-Alaska pipeline. He hopes that one day the trail will be similar in scope to trails in the Lower 48 like the Pacific Crest Trail or the Appalachian Trail — trails that showcase large swaths of America and are major tourism attractions. However, in a letter sent to Kreiss-Tomkins in February, Alyeska President Tom Barrett wrote there are “significant concerns” about safety to the public and pipeline if a trail were to open. People already have the ability to use the pipeline right-of-way. They can apply through Alyeska for a letter of non-objection or a right-of-way use guideline. That includes limited recreational use, according to Barrett’s letter. “As long as (the trans-Alaska pipeline) is an operating system, we believe that inviting public use of the right-of-way beyond these programs would be ill-advised,” Barrett wrote. Headlamp is concerned that a sitting legislator views the pipeline as a tourist attraction rather than the life-blood of Alaska’s economy.

 

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First Reads

Sen. Murkowski holds oil and gas development panel in Fairbanks
Fairbanks Daily News Miner, Weston Morrow, March 29, 2016

New study names America’s most regulated states
CNBC, Scott Cohn, March 29, 2016

State banks on selling more oil to Tesoro
Peninsula Clarion, Elizabeth Earl, March 28, 2016

Could a ‘trans-Alaska trail’ parallel the pipeline? A state lawmaker hopes so
Alaska Dispatch News, Suzanna Caldwell, March 28, 2016

 

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Got Milked?

March 28, 2016 | Posted in : News

It’s déjà vu all over again.

If the ad below looks familiar, it should. It’s from 2007 – nearly 10 years ago – yet the message is as relevant and true today as it was then.

Change some of the figures and the chart and you would think this was a brand new 2016 advertising campaign. Back then, we were pointing out the rapid growth of state spending, and how the legislature was trying to “squeeze” more taxes out of the companies and actively discouraging investment through bad policies. Fast forward to present day, and we’re doing the same thing. It wasn’t the right move then and it isn’t the right move now. Treating the industry like a “cash cow” is bad for Alaskan jobs and Alaskan companies. The state needs to reign in its spending rather than trying to use the industry to balance their own checkbook.

This week, we’ll be bringing back a series of 2007 ads like the one below, highlighting the fact that the arguments and the situation in Juneau hasn’t changed. We’re still fighting the same fights. Headlamp doesn’t know whether to laugh or cry.

GotMilked_Headlamp

 

 

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Morning Headlamp — Oil tax fight continues & EPA still not cooperating

March 28, 2016 | Posted in : News

Media misses the mark. Again. Alaska’s lawmakers continue to wrestle with various tax plans amid ongoing rock bottom oil prices. Critics of the current oil tax system claim that oil companies will be able to convert a portion of their losses into credits that won’t be applied until prices go up—meaning those credits will potentially be paid long into the future. Resources committee member Rep. Craig Johnson, said the new version of the bill still closes some loopholes that could otherwise give individual companies huge tax deductions for new oil development. “We did some of that while protecting our long-term investment and being able to get the oil out of the ground in the future,” Johnson said. “The policy is: We need a healthy industry. And I think the bill we put forward keeps us having a healthy industry while taking away some of the problems that we’ve got with the big fields and potential billion dollars in credits.” In a recent newsletter, the Alaska Support Industry Alliance has asked “should the oil industry remain a vital part of Alaska’s economy, or should the government use it as a slush fund to balance their checkbook?” Many groups have fought any reductions to the credit program, arguing that low oil prices are already causing companies to lose money. BP, for example, reported a $194 million loss for its Alaska operations in 2015. Headlamp Is not surprised, but disappointed that the Alaska Dispatch would intentionally mislead readers about oil tax revenue. Simply put: the state is receiving more in oil tax revenue than they are paying out in credits.

Nice try, EPA. According to the Alaska Dispatch News, the EPA is pushing back in a court fight over the stalled Pebble mine, suggesting that the project’s troubles stem from falling gold and copper prices, not government actions. Pebble filed a Freedom of Information Act request in 2014 to secure the documents, but the EPA did not hand over all of what it was looking for. Pebble sued, and Alaska U.S. District Judge Russel Holland ordered the agency to review the documents the company was seeking. The federal agency apparently withheld 10 of the 130 requested documents. Now the EPA is pushing for records from Pebble. The agency is asking U.S. District Judge Russell Holland to force Pebble to provide documents on its mining plan, finances, lost investors and payments to select Pebble advocates and groups connected to the Bristol Bay region. There was nothing ambiguous about Pebble’s request, the agency’s lack of compliance, or Judge Holland’s ruling. The federal agency cannot avoid its misdoings by putting the blame back on Pebble. This will be an ongoing story—stick with Headlamp as we cover the latest.

 AKLNG facing hard times—and opportunity. According to a recent Forbes commentary, Alaska certainly has to tread carefully to not risk the future of the AKLNG megaproject. The ongoing low-price environment and industry pullback present a myriad of hurdles for the megaproject. However the commentary also notes that AKLNG has some advantages over its Lower 48 counterparts. The gas stream coming out of the North Slope will be richer (higher Btu value) than U.S. utility-grade gas out of the Gulf Coast and also higher than coal-seam gas out of Australia, another competitor. This makes Alaska’s gas more attractive to Asian buyers. Sanford C. Bernstein analyst Neil Beveridge said last week that “gas is structurally going to be in demand long term.”

 

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First Reads

Alaska’s general fund is paying the oil industry more than it’s getting back
Alaska Dispatch News, Nathaniel Herz, March 26, 2016

EPA tries to extract wealth of records from stalled Pebble mine
Alaska Dispatch News, Lisa Demer, March 27, 2016

Oil Firms Slow Exploration to Weather Low-Price Era—Energy Journal
Wall Street Journal, Christopher Harder, March 28, 2016

My Turn: When dealing with low oil revenues, Alaskans should come first
Juneau Empire, Jack Rafuse, March 28, 2016

Alaska Has Hard Decisions To Make Amid Oil And Gas Price Plunge
Forbes, Tim Daiss, March 28, 2016

All eyes on Furie as company unveils oil-drilling plans in Cook Inlet
Alaska Dispatch News, Alex DeMarban, March 27, 2016

Alaska offshore oil and gas lease hearings scheduled
Fairbanks Daily News Miner, March 28, 2016

 

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Friday’s Fast Five

March 25, 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. Bill Walker’s proposal to increase taxes on oil production and reduce tax credits for the industry as a whole was met with criticism from a House committee. The replacement legislation would equate to roughly $50 million in total savings. The savings and new revenue claimed in the original bill – $400 million in from the elimination of tax credits and $100 million in new taxes – is being questioned by the legislature.  A new fiscal note with more accurate numbers could appear in House Finance next week.

Top Reads of the Week

U.S. top court backs moose hunter in Alaska hovercraft case
Reuters, Lawrence Hurley, March 22, 2016
The Supreme Court on Tuesday sided with an Alaska moose hunter who contended the federal government overstepped its authority in banning hovercraft on National Park Service land in the northernmost U.S. state.

Judge: EPA ‘improperly’ withheld Alaska mining documents
The Hill, Devin Henry, March 22, 2016
A federal judge has ordered the Environmental Protection Agency (EPA) to give the court documents related to its consideration of a controversial mining project in Alaska, ruling he has “no confidence” in the agency’s ability to decide which documents should become public following an open records request.

Alaska fiscal forum focuses on working together
Fairbanks Daily News Miner, Robin Wood, March 24, 2016
A majority of participants at a Fairbanks economic forum addressing Alaska’s multi-billion dollar budget deficit seem to support both raising revenue through taxes and using part of the Alaska Permanent Fund to pay for state services, potentially putting them at odds with the Alaska Legislature.

Quote of the Week

“It’s a viable project at this point but we’ve got to get to a point where we know whether it’s really economical or not”— Sen. John Coghill, R-North Pole

 

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Fact Check: Trust, but verify.

March 25, 2016 | Posted in : News

Over the past week Governor Walker, multiple Alaska media outlets, Tax Division Director Ken Alper, and Democratic legislators have repeated the same false narrative that in FY2017 the State of Alaska will spend more money on oil and gas credits than it will receive in petroleum revenue. They claim the state will pay out $825 million for oil and gas credits, versus bringing in only $690 million from oil and gas revenues. This is wrong, and misleads the Alaskan public into thinking that we should raise taxes on the industry.

Headlamp is here to set the record straight. According to the Department of Revenue Spring Forecast book, the state is projected to bring in $1.0128 billion in TOTAL PETROLEUM REVENUE in FY2017. It must be stated that the $825 million figure for oil and gas being thrown around is a projection; and in fact is $200 million higher for FY2017 due to Gov. Walker’s “kick the can down the road” veto of oil and gas tax credits last year. Given the low price of oil, and cutbacks in industry activity, Headlamp is doubtful of this large figure.

The Walker administration is focused only on unrestricted general fund petroleum revenue ($690 million) instead of the whole picture which shows, once again, the oil and gas industry providing the overwhelming majority of the state’s revenue. Headlamp is severely disappointed in the statements made by members of the Walker administration, and the media. We hope Governor Walker and the media correct their statements and will tell the Alaskan public the truth.

Healthy public dialogue can only occur when people are given the facts. This seems to be a recurring theme, so maybe it’s the administration’s strategy?

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Morning Headlamp — More letters from Gov. Walker

March 25, 2016 | Posted in : News

According to the Associated Press, in a letter to legislators Wednesday, Walker said three things must happen this year for a sustainable balanced budget: reduced spending; restructuring of Alaska Permanent Fund earnings and the dividend program that provides an annual payout to most Alaskans; and new revenues that include some form of a broad-based tax. House Speaker Mike Chenault said Thursday talks are underway with the chamber’s Democratic-led minority in an effort to craft a spending and revenue package that can garner broad support. Chenault said he told Walker early on he doubts each of the bills in Walker’s revenue package will pass. But he said the bills will be vetted in committee and legislators will look at what level of support there might be for them. Gov. Walker’s letters have said that not agreeing on a plan is “wholly unacceptable.”

“I don’t know if that letter did anything except give you guys something to write about,” House Majority Leader Charisse Millett told reporters Thursday. “He doesn’t need to communicate by press.”

Headlamp would encourage the administration to stop blaming others and start contributing to the solution. The budget introduced by the Governor barely touched the operating budget. The public has demanded significant cuts but those demands have fallen on deaf ears in the administration.  There is no courage in taking money from the private sector to feed an already bloated government. 

Governor Bill Walker will be holding a “fiscal crisis” town hall in Fairbanks today to talk about the budget. The deficit just this week grew by more than $500 million, to about $4 billion, with the release of a revised outlook at new revenues. The event comes a day after Plan4Alaska, a Rasmuson Foundation-funded group, hosted a fiscal policy forum at the Carlson Center.

 

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First Reads

Talks have begun between Alaska House majority, minority
Associated Press, Becky Bohrer, March 24, 2016

House Majority Responds to Gov. Walker’s Call for New Revenues While Senate Prepares for Special Session
Alaska Commons, Craig Tuten, March 24, 2016

Walker to lawmakers: Putting off sustainable budget is ‘wholly unacceptable’
Fairbanks Daily News Miner, Andrew Kitchenman, March 24, 2016

Canadian company seeks to ship oil sands crude through trans-Alaska pipeline
Robert Hannon, KTOO, March 24, 2016

 

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Morning Headlamp — Tough crowd for Walker’s ‘solution’ & Australia’s LNG megaproject shelved

March 24, 2016 | Posted in : News

In a letter to legislators yesterday Governor Bill Walker said lawmakers must come up with “a complete solution” to the $4 billion budget deficit and that they could find themselves in a special session unless they pass a budget funded in part by a “broad-based tax. “There’s been some tendency on the part of the administration to start throwing around orders to the Legislature, and we just don’t respond to that,” Fairbanks GOP Sen. Pete Kelly, a committee co-chair, said at the time. He added: “I’m not getting into the tax business while I know government is still too big.” If Walker is looking for a ‘complete solution’ why is he consistently turning his back on an industry that touches every part of Alaska’s economy? Headlamp would like Governor Walker to keep his word about reducing the operating budget and include that as part of the “complete solution”. 

Does anyone beyond Headlamp see the irony in Alaskans supporting an income tax on those who earn more than $100,000 at the same time that the industries that pay those type of salaries are laying off thousands of workers? Hundreds of residents attended the Rasmuson Foundation’s Plan4Alaska town hall meeting on state finances at the Carlson Center on Wednesday. Attendees took polls on the state’s fiscal challenges. About 90 percent of participants said budget shortfalls should be addressed by both cuts and new revenues, about 70 percent supported an income tax on people who earn more than $100,000, and almost 100 percent supported smaller dividends from the Alaska Permanent Fund. Plan4Alaska is a $2 million educational campaign funded by the Rasmuson Foundation. Panelists consistently talked about the need to diversify Alaska’s economy, create and invest revenue without hindering businesses and work together on all available options. Similar town hall meetings are planned in Palmer at 5:30 p.m. today and in Kenai at 11:30 p.m. Friday.

Down under. Woodside Petroleum Ltd. has shelved proposals for its $40 billion liquefied-natural-gas project  off Australia’s west coast due to belt-tightening and the slump in oil prices. Last year, an analyst from the International Energy Agency warned that some $200 billion in Australian LNG projects, even at $60-a-barrel oil prices, wouldn’t break even for investors. With other LNG projects faltering around the world, Alaska has to react before it’s too late. We need smart, long-term policies that can help keep AKLNG on track in a low price environment.

And the winner is…..James Brooks of the Juneau Empire for the most misleading headline and gross misrepresentation of the facts by a major news outlet. Under the headline Committee approves bigger subsidy for oil… the Juneau Empire described the actions taken by the House Resources Committee as if they were giving the industry new credits. Headlamp is happy to help the Empire and Brooks understand – the credits were already in place, the Governor introduced a bill to take them away and raise taxes on the industry, the committee modified some of the cash grab to reduce what the Governor was taking.   In plain English; the committee approved more credits than what the Governor proposed, but still cut the amount of credits available for industry. Instead of going with Walker’s plan (that the Alliance fully opposed), members of the House committee decided to emphasize potential future production instead of immediate cost savings that would jeopardize industry investment and activity. Their revised bill saves $45 million to $60 million per year over the next three years and preserves more of the state’s credits which have led to more production and more jobs.

 

Help us spread the word. AK Headlamp is growing quickly, but we need your help to spread the word.  Tell your friends, colleagues, family and more to sign up today for the latest in AK energy, politics and industry.  Subscribe here: http://bit.ly/1OdpLVY

 

First Reads

Gov. Walker to lawmakers: We need a new tax this year
Alaska Dispatch News, Nathaniel Herz, March 23, 2016

Fiscal forum focuses on working together
Fairbanks Daily News Miner, Robin Wood, March 24, 2016

 Big Oil’s Next Big Energy Problem
Wall Street Journal, Spencer Jakab, March 23, 2016

Committee approves bigger subsidy for oil and gas drillers
Juneau Empire, James Brooks, March 23, 2016

Savings on tax credits for oil and gas not as high as proposed
Alaska Public Radio News, Andrew Kitchenman, March 23, 2016

State projects $2B investment loss
Alaska Journal of Commerce, Elwood Brehmer, March 23, 2016

 

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