The Morning Headlamp—A more realistic budget and government gas won’t be cheap in Fairbanks

December 16, 2015 | Posted in : News

“We don’t have a choice but to cut.” Republican legislative leaders say they’re looking at deeper cuts than the $100 million in reductions Gov. Bill Walker laid out in his state budget last week, with proposals likely to target health and education spending. The governor is arguing for a new income tax and a restructuring of the Permanent Fund to help cover the state’s $3.5 billion deficit. But GOP legislative leaders, and some of their supporters, say they plan to find more savings, and view the fiscal crisis as an opportunity to scale back the size of state government. GOP Senate leaders say they think that another $500 million or more in savings can be found. They’ve released few specifics so far about how they’d reach that goal, and Sen. Mike Dunleavy and others said they likely wouldn’t be unveiled until legislative staffers finish a detailed analysis of Walker’s proposal. “Some folks will not like that — I understand that,” Dunleavy said. But, he added: “If we’re looking at this purely as a mathematical issue, your largest cost drivers are education and health and social services. It’s an inescapable fact.” Dunleavy, who chairs the Senate Education Committee, wouldn’t identify any specific cuts, but the question, he added, is “where we can find significant savings without destroying certain aspects of the system.”

Merrick Pierce, a Port Authority pal of Governor Walkers points out that the Governor’s campaign promise to bring cheap gas to Fairbanks won’t work as planned “The cost of gas from the AIDEA scheme for most consumers would be more than $20 per MMBtu. Why? AIDEA has ignored all common sense and Gov. Walker’s campaign promise to bring Fairbanks energy parity with Anchorage. AIDEA has promoted the idea of a meter price of natural gas of $15 dollars per MMBtu. The problem is that is not what consumers here would pay. Even if gas was delivered at $15 per MMBtu, home owners would have to spend a considerable amount of money to convert to natural gas. If a boiler replacement cost only $6,000, then that cost, amortized at 2 percent”

During public comment period that largely addressed AKLNG concerns, Kenai Peninsula Borough mayor Mike Navarre highlighted what good AKLNG would bring to his borough “While operations at the LNG plant will affect the area’s traffic, economy, population and demands for public and private services long term, it is the thousands of workers during construction, along with the accompanying traffic and demands for services that are of more concern to the borough and its residents because of the concentrated impact,” borough mayor Mike Navarre wrote in the comments.

Making the best of a bad situation. Royal Dutch Shell is fighting to preserve U.S. drilling rights in Arctic waters three months after halting exploration indefinitely there because it failed to find meaningful oil or natural gas deposits. The Obama administration has backed away from selling new leases and canceled two planned auctions, citing low industry interest. Shell said in October it was considering options “to protect the remaining value of our assets and leases” in the Chukchi and Beaufort seas north of Alaska. Shell argued in its 2014 request that “circumstances beyond its control” prevented exploratory drilling on its leases, citing regulations that restrict operations, the limited availability of Arctic-viable rigs and uncertainty about new federal rules for drilling in the region. Headlamp applauds Shell’s commitment to Alaska’s energy and economic future despite less than favorable economic conditions.

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First Reads

FERC comments debate LNG location, impact
Peninsula Clarion, Elizabeth Earl, December 16, 2015

Alaska GOP lawmakers want steeper cuts, eyeing health care and education
Alaska Dispatch News, Nathaniel Herz, December 15, 2015

Shell seeks to preserve U.S. drilling rights in Arctic Ocean
Fairbanks Daily News Miner, Jennifer Dlouhy, December 15, 2015

It’s time for Alaska legislators to grow up and face fiscal reality
Alaska Dispatch News, Elise Patkotak, December 15, 2015

AIDEA not getting job done on gas
Fairbanks Daily News Miner, Merrick Peirce, December 16, 2015

 

Alaska Legislature News

Alaska GOP lawmakers want steeper cuts, eyeing health care and education
Alaska Dispatch News, Nathaniel Herz, December 14, 2015

 

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AGDC Board Meets Friday – What To Expect and How We Got Here

December 16, 2015 | Posted in : News

This Friday the Alaska Gasline Development Corporation’s Board of Directors will hold a meeting  at 9am.  There have been a lot of changes recently at the Alaska Gasline Development Corporation, including: the departure of AGDC president Dan Fauske, the removal of five board member this year, the appointment of new board members, and the end of the contract for Rigdon Boykin, the Governor’s $100,000/ month consultant. This Friday, more changes are expected.  Specifically, Headlamp expects the Board to appoint a new, interim president for AGDC to replace Dan Fauske.   Actions taken in the special session gave, the state of Alaska, literally, a seat at the table with the AKLNG management committee.  Joe Dubler, VP of Commercial Operations, was the person designated to sit in that chair.  Dubler is no longer with AGDC – so it is likely that an interim President wil take his spot.   Who will that be?  Dubler’s experience in project management, contract negotiations, etc… made him a well-qualified representative of the state.  Headlamp hopes his replacement is as worthy.  There’s been a lot of change to AGDC over the past year.  There’s also been a number of changes to the Governor’s broader state gas team, which we have discussed before.  How did we get to where we are today?  Let’s review:

Alaska-State-Gas-Timeline-1024x512-b_D4

  • In January Gov. Walker dismissed three AGDC Board Members and replaced them with Rick Halford – a former legislator from Dillingham, Joe Paskvan – a former Senator and litigator from Fairbanks, and Hugh Short – former mayor of Bethel. Paskvan was not confirmed by the legislature.  His open seat was eventually filled by Joey Merrick, Alliance member and Business Manager of Laborers Local #341.
  • In June, Audie Setters – a consultant from Texas, replaced DNR Deputy Commissioner Marty Rutherford on the state’s gasline negotiating team.
  • After only two months on the job, Setters was replaced by Rigdon Boykin, a South Carolina consultant
  • In October, at the beginning of the special session, the state released a new flowchart of the integrated gas team.
  • In November, Rigdon Boykin was removed as the lead negotiator for the state. Gov. Walker then replaced two more AGDC board members with Luke Hopkins – former mayor of Fairbanks, and Marc Liukens – Transportation Commissioner. At the same time, Dan Fauske, president of AGDC, resigned.
  • This Friday, December 18th, the AGDC Board meets again where more changes are expected.

We’ve seen the leadership plan that the state outlined in October, Senator Micciche commented that it looked like the state was “trying to act like industry.   How will new changes at AGDC impact the state gas team structure? More importantly, how will those changes impact the AKLNG project’s ongoing negotiations?

Headlamp hopes that the AGDC changes mean a return to progress.  Follow us on Twitter and read our morning Headlamp as we look ahead to Friday.

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The Morning Headlamp—Feds could be ready to support AKLNG

December 15, 2015 | Posted in : News

Could Ex-Im Help Finance AKLNG? The U.S. Congress has reauthorized the Export-Import Bank of the United States, after a five-month period when the bank was prevented from issuing loans while congress wrangled over its reauthorization.   The bank has been used to  boost trade by helping finance operations of American companies overseas. With the bank operating again, it could now be available to play a role in financing AKLNG, according to an article by the Dispatch News’ Pat Forgey.  As Forgey notes, “Among the companies using [the bank] are Alaska LNG partners ConocoPhillips and Exxon Mobil, in the Australia and Papua New Guinea LNG projects respectively. State officials say that while they have not yet developed a financial plan for AKLNG, the Export-Import Bank could be considered as a source of financing should the project be found viable for a final investment decision.

Alaska Writes to FERC. About 60 individuals, citizen councils, nonprofits, Alaska Native tribal organizations, federal, state and municipal offices provided federal regulators with their lists of concerns they want to see covered in the environmental impact statement for the proposed AKLNG project.  As detailed In a written update from the Kenai Peninsula Borough’s Larry Persily, comments have come from entities such as the State Division of Forestry stewardship office, The North Slope Borough, The Tanana Chiefs Conference, Concerned Citizens of Nikiski, The National Park Service, and The Environmental Protection Agency. Most of the comments were suggestions on how to make the project better for the affected communities and the environment, such as protecting wildlife habitat, avoiding damage to wetlands and scenic views, providing affordable energy for Alaskans, and minimizing noise and lightning. Only a handful of comments — all from outside Alaska — were in opposition to any construction of the LNG project.

Warming up the Interior. During the years the state has worked on bringing natural gas to Fairbanks, attempting to  refine and lower prices of just about every part of the project except for trucking. A new, 75-foot, five-axle, 13,000-gallon capacity liquefied natural gas trailer, owned by Alliance member Heil Trailer , was on display at the Pipeline Training Center on Monday night as it begins a months-long trial in the Fairbanks Natural Gas utility’s fleet of trucks. “It’s a proven platform,” said Nathan Langford, a Heil engineer of the one-of-a-kind trailer system. “The axle layout and everything is proven. The new technology here is tailoring it just for the Alaskan market.”

The International Business Times covered Alaska’s ongoing financial woes as a result of free-falling oil prices. Coverage highlighted the now astronomical deficit as well as a background of Alaska labor statistics that are compounding the issue. The article concludes by discussing the current economic climate with Richard Murphy, the Snedden chair of journalism at the University of Alaska Fairbanks. Murphy, who lived through the great Alaska recession of the mid-1980s when oil dipped to $10 per barrel, said that seeing unfinished infrastructure projects at the university “looks like the future.”

 

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First Reads

Feds help competing LNG projects, but could now also help Alaska gas exports
Alaska Dispatch News, Pat Forgey, December 14, 2015

Public submits wide-ranging comments to FERC
Alaska Business Monthly, Larry Persily, December 14, 2015

New tanker designed to haul natural gas across Alaska is under evaluation
Fairbanks Daily News Miner, Matt Buxton, December 15, 2015

Falling Oil Prices Spell Dark Times For Alaska’s State Finances, And Even Bleaker Days For Its Residents
International Business Times, Craig Medred, December 15

Interior legislators, Fairbanks officials meet to talk about state funding for projects
Fairbanks Daily News Miner, Matt Buxton, December 15, 2015

 

Alaska Politics News

Native corporations contribute much to Alaska’s prosperity, and there’s potential for more
Alaska Dispatch News, Gerad Godfry, December 14, 2015

 

 

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The Morning Headlamp—What does Gov. Walker’s budget really look like?

December 14, 2015 | Posted in : News

What does cutting $100 million actually look like?   Its’ actually not clear – as the budget document released by the administration leads to more questions than answers.  The $100 million Gov. Walker proposes to slice from state spending next year would be felt across Alaska – from $2 million slashed from pre-kindergarten grants to $9 million heating assistance program. There’s also $750,000 in assistance cut for public radio to $11,000 that could be saved by no longer paying for cable television in each private room at Juneau’s state-run Pioneer Home. The cuts the governor is proposing appear to range from 28 percent to the $30 million taken out of the Commerce Department budget as well as  4 percent of the $1.2 billion state Health Department budget – but those numbers seem to apply to two budget cycles – not just the FY 2017 budget.  . “Wow”. In its budget documents the Education Department concedes that “evidence overwhelmingly shows” the pre-kindergarten program increases student achievement. But it says the money only serves a small portion of students and can’t be maintained when the department’s primary responsibility is to local school districts and students in kindergarten through high school. Informed of the proposed cuts, Rep. Les Gara, D-Anchorage, responded in a text message: “Wow.”

“You’re talking heating homes, keeping families warm — women and children, wives and fathers, grandparents. I think it’s a pretty heartless thing to do,” he said in a phone interview Friday from Dillingham

In addition, Gov. Walker is also proposing $2.5 billion in borrowing for pension obligation bonds, to pay annual costs towards the state’s unfunded liability. If the Legislature chooses not to use pension obligation bonds to fund this year’s extra retirement payment, there’s no alternate version of the budget showing how much would be needed to be taken from the general fund.

                                                                                                                                 

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First Reads

Where would Gov. Walker’s proposed cuts come from?
Alaska Dispatch News, Nathaniel Herz, December 12, 2015

Walker looks at borrowing to balance Alaska budget
Alaska Dispatch News, Jeannette Lee Falsey, December 10, 2015

 

Alaska Energy News

Shell may be gone, but quest for Arctic offshore oil continues
Associated Press, Dan Joling, December 13, 2015

Trailer built for LNG comes to Fairbanks
Fairbanks Daily News Miner, Matt Buxton, December 14, 2015

Company Plans Gravel Island to Extract Arctic Offshore Oil
Associated Press, December 14, 2015

 

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Looking Ahead to Juneau: The Power of a Competitive Tax Regime

December 11, 2015 | Posted in : News

With 39 days until Alaska’s elected leaders return to Juneau for the 2016 regular legislative session, Headlamp is focused on the issues and policies that are likely to be addressed – and what they could mean for Alaska’s businesses and economic future.

As it stands today, our state faces considerable headwinds.

“Gunnar Knapp, director of UAA’s Institute of Social and Economic Research, told a demographics forum in Palmer the state is ‘probably already in or entering into at least a mild recession….Knapp’s assessment was based on two straight months of declining employment. He also factored in the state’s first population drop since a major recession in 1987-88, and a $1.9 billion cut in state capital spending over the past three years.” (Alaska Dispatch News, 11/13/2015)

And, Alaska faces a multi-billion dollar deficit for the coming year.

So how are Alaska’s leaders preparing to address that deficit?  Governor Walker has introduced a blockbuster fiscal plan that would see a restructuring of the Alaska Permanent Fund and a slew of new taxes on a broad range of industries in the state as well as income and sales taxes.

The new budget proposes about $500 million in cuts:   $400 million from oil and gas tax credits, and $100 million from the operating budget.  In addition, the proposed budget increases the base rate for oil taxes from 4 to 5% to generate $100 million in new revenue.

In light of that, Headlamp is taking a trip down memory lane to the last two times Alaska has changed its oil tax structure. 2007’s ACES and 2013’s SB21.

In 2007, then Governor Palin’s ACES plan raised taxes hugely on industry. What happened?

  • Jobs were lost; the number of in-state unemployment claimants in Alaska’s oil & gas support sector increased 144% after ACES was adopted -from 914 at YE 2007 to 2,229 at YE 2009. That’s the highest level since the Alaska Department of Labor had begun compiling the data in 2003. Source: Alaska Department of Labor & Workforce Development, Research & Analysis Section.
  • The only sector that grew because of ACES was state government. State government employment increased by more than 1,000 jobs – about 4% — from 2007-2010.
  • The opportunity to slow our production decline was also lost.
    • From 2009 to 2010, BP’s rig count on the North Slope dropped from 17 to 10
    • The number of exploratory and development wells completed dropped steadily after ACES was adopted.
    • Capital Spending also declined:

AK chart

In 2013, the legislature sought to undo that  damage – to increase production by establishing a competitive tax regime, all while protecting the state in a low oil price environment.  They passed SB 21.

We can’t control oil prices, but we can incentivize production, and we did, with SB 21.  Petroleum Economist Roger Marks makes this observation:

         “If we compare the recent production forecast from the Department of Revenue, an unbiased assessment, to the last forecast under ACES, the production forecast is 50,000 barrels a day more in 2020.  I find this remarkable that getting rid of a bad tax system would have such a profound effect.  With the extra 50,000 barrels per day the state would make more money under SB 21 than ACES even at oil prices exceeding $120/barrel.  This should not be lost on the public.”

The Governor is attempting to dismantle our competitive tax regime through the budget.  Alaska is currently making more under SB 21 than they would have under ACES, in a low oil price environment, and with more production forecasted under SB 21 compared to ACES, Alaska will be making more under SB 21 than ACES, even in a high oil price environment.

That is, unless we repeat the same mistakes from years past, and eliminate our competitive tax regime.

Alaska needs to reduce its budget to a sustainable level, but should all of those reductions come at the expense of the oil and gas industry?  In the coming days and weeks, AKHEADLAMP will provide detailed information about the proposed budget, and the opportunities to reduce the budget without damaging our economic stability, permanently.

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The Morning Headlamp—Budget reactions

December 11, 2015 | Posted in : News

Prepare for changes. According to Alaska Dispatch News coverage, Alaska industries’ response to Gov. Bill Walker’s proposal for averting a fiscal crisis ranged from condemning the plan’s industry-specific taxes to willingly making concessions — provided other industries would be required to do the same. While no one wants the state budget deficit to send the state into economic freefall, industry groups are, predictably, staking out positions that best protect their interests. “We just have a responsibility to let policy makers and Alaskans know that changing the tax policy will change investment decisions,” said Kara Moriarty, president and CEO of the Alaska Oil and Gas Association. “We believe the status quo is working.”

Lawmakers in the House and Senate majorities were quick to say their focus during the legislative session, which begins in January, would still be on budget cuts. Walker’s plan would cut the state’s $4 billion agency operating budget by about $100 million, or 2.5 percent. But Senate President Kevin Meyer, R-Anchorage, said his caucus is contemplating cuts as large as $700 million. “We want to lead with reductions and not with taxes,” he said in a phone interview. Those cuts, he added, could come from areas like the state’s oil tax credit program, the criminal justice system and Medicaid, which costs the state more than a half-billion dollars each year to provide health care for low-income Alaskans.

Headlamp is also of the mindset that the Walker administration should reign in such a tax-heavy budget proposal until they make significant reductions to the budget.   Incentivizing business to remain committed to Alaska should be at the forefront of any fiscal policy.

                                                                                                                                 

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First Reads

Business groups prepare to reshape details of Walker’s budget plan
Alaska Dispatch News, Jeannette Lee Falsey, December 10, 2015

Gov. Walker plants budget flag, but will legislators climb the hill?
Alaska Dispatch News, Nathaniel Herz, December 10, 2015

 

Alaska Energy News

Two Interior Energy Project proposals under consideration
Alaska Public Radio News, Dan Bross, December 10, 2015

Oil’s reckoning invites a U.S. mega-deal
Reuters, Kevin Allison, December 10, 2015

The Oil-Patch Bust
Wall Street Journal, December 10, 2015

Negotiations ‘very fluid’ over energy trade in spending bill
Wall Street Journal, John Siciliano, December 10, 2015

 

 

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An agreement on an agreement

December 10, 2015 | Posted in : News

Governor Bill Walker recently released a signed gas availability agreement his administration had long been pushing for from AKLNG partners BP, ConocoPhillips, and ExxonMobil. Walker praised the agreement as a “project milestone” that “ensures that there will be gas for a gasline if either partner withdraws from the project.”

A gas withdrawal agreement has been a goal of the Walker administration since October’s special session, even using it as leverage against the controversial gas reserves tax. The Walker administration should therefore be pleased that two out of three megaproject partners agreed to terms…if there were any terms truly agreed upon.

After looking into the language of the actual gas availability agreement, it becomes clear that partners BP and ConocoPhillips made no gas withdrawal promises. The language of the agreement only specifies that BP, ConocoPhillips, and the Department of Natural Resources will…

…continue to use reasonable efforts and negotiate in good faith for the purpose of entering into a bilateral agreement with the State or its designee on mutually agreed commercially reasonable terms with such commercial reasonableness to be determined by each Party at the sole discretion of such Party, regarding the availability of natural gas from oil and gas leases in the Prudhoe Bay Unit and the Point Thomson Unit…

After dissecting the legal jargon, it’s clear that BP and ConocoPhillips agreed to work toward an agreement. The agreement makes no guarantees, no promises, just establishes an understanding that all parties will pursue an amicable, commercial agreement. On a positive note, while these agreements do not provide any firm commitments they do at least memorialize the producer’s willingness to sell their gas to the AK LNG project or another gas export project if they determine the current AK LNG project does not meet their individual investment requirements.

However, the fervor with which the Governor has advertised the agreement’s signing has already caused some to misinterpret, what was actually agreed upon. According to recent Energywire coverage, the agreement indicates that “each company promises to sell its North Slope natural gas reserves to the Alaska LNG project if it withdraws from the partnership. Walker said the pact guarantees that the natural gas venture could continue even if either one of the oil giants drops out of the partnership.” As we mentioned above, the partner companies made no such guarantee.

So, before the Governor continues to tout the arrangement, Headlamp would recommend clarity on what really was agreed upon.

 

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Gov. Walker’s budget has arrived—The Morning Headlamp

December 10, 2015 | Posted in : News

The Budget Is Here: After weeks of rumors and speculation, Governor Bill Walker finally released his budget plan proposal yesterday. The plan aims to close deficit spending by 2018. Walker’s proposal would dispense with the current formula for Permanent Fund dividends, based on a five-year average of investment returns. The new dividend program as proposed by Walker would be managed by the Alaska Department of Revenue and would be based on the royalties the state receives from natural resource development on state land – rather than money earned from investments by the Permanent Fund Corporation.  As the Governor was revealing his plan to cap the dividend, ISER economist Scott Goldsmith was presenting “A Game Plan for Meeting Alaska’s Fiscal Challenge” to the House Special Committee on Economic Development.  Mr. Goldsmith’s plan utilizes the earnings reserve from the Permanent Fund but does NOT cap the dividend.

Changes Would Impact ALL Alaskans. The proposal will mean big changes for the livelihoods of all Alaskans. Walker’s proposal includes the return of a personal income tax after a 35-year hiatus — of 6 percent of federal taxes, or an average of 1.5 percent of total income, which would raise a projected $200 million this year. It would cut $400 million from the state’s $500 million oil-tax credit program and replace it with a loan fund.  Another $45 million would come from an increased fuel tax; $72 million from mining, fishing, and alcohol. Finally, restructuring of the Permanent Fund to help close the budget shortfall would slice dividend checks, to $1,000 from this year’s $2,072, with the potential for them to fall even lower in the future.  Headlamp notes that implementing an income tax will require an increase in state government and take several years to realize revenue.

Increased Oil Taxes.  In addition to replacing the current oil and gas tax credit system with a new loan program, the plan would raise the minimum production tax on oil to 5% from 4%, which would raise another estimated $100 million for the state.

Reactions are pouring in. Various components of Walker’s plan have already been rejected by lawmakers and the public over the past two decades, and some legislators were quick to condemn them this time. “I’ll certainly give credit for trying,” said Sen. Bill Wielechowski, D-Anchorage. “But, I mean, does he really think he’s going to get this past the Legislature? Anchorage Rep. Charisse Millett, the leader of the Republican-led House Majority, said Walker was approaching the state’s budget problem “in reverse” by proposing new revenues instead of deeper spending reductions. “He’s throwing up the white flag of surrender on cutting the budget,” she said in a phone interview.

Before taxing Alaskans and increasing taxes on Alaskan industry, Governor Walker should focus on budget savings, efficiencies and reductions and projects that generate revenue like oil production and AKLNG. Headlamp hopes that lawmakers share this sentiment and work to create a better budget proposal.

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First Reads

Alaska Governor Calls for State’s First Income Tax in Nearly Four Decades
Wall Street Journal, Jim Carlton, December 9, 2015

Gov. Walker proposes to fix budget deficit with income tax, PFD cut
Alaska Dispatch News, Nathaniel Herz, December 9, 2015

Walker proposes Alaska income tax, $1,000 dividends to plug budget gap
KTUU, Austin Baird, December 9, 2015

Governor eyes ‘major paradigm shift’ in budget ruled by oil
Energywire, Margaret Kriz Hobson, December 10, 2015

Gov calls for permanent fund overhaul, income tax, cuts to PFD
Alaska Public Radio News, Rachel Waldholz, December 9, 2015

Alaska governor proposes income tax, PFD changes to offset budget gap
Fairbanks Daily News Miner, Matt Buxton, December 9, 2015

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The Morning Headlamp: 40 days until Juneau…ominous forecast out of dept. of revenue…Wheel of Fortune in Juneau…the Walker administration’s fiscal belt may be the one in need of tightening

December 9, 2015 | Posted in : News

An ominous prediction. According to Alaska Dispatch News and Associated Press coverage, a recently released forecast from the revenue department suggests that Alaska will see even less natural resource revenue in the coming fiscal year. If the prediction holds, Alaska will bring in just over $1 billion in unrestricted petroleum revenue and $1.6 billion in total unrestricted revenue — down from the $2.2 billion projected for the same period in the previous revenue forecast in April. The state took in $2.3 billion in unrestricted revenue last year and $5.4 billion the year before that. The revenue forecast is based on an annual average North Slope oil price of about $50 a barrel for the current fiscal year. Alaska crude closed just over $38 a barrel on Monday. Revenue Commissioner Randy Hoffbeck didn’t immediately respond to a request for comment about Tuesday’s forecast.

No time for games. According to Alaska Public Radio News coverage, state budget director Pat Pitney has spent the past six months leading fiscal dialogues in communities throughout Alaska. And on Thursday, she brought her talking points to Sitka, along with a wooden scale to illustrate the state budget crisis. Before a crowd of 50 Sitkans, Representative Jonathan Kreiss-Tomkins played Pat Sajak. He stood a spinning wheel, which represents the price of oil, and explained, “We live on risk in Alaska. Because we don’t know what the price of oil is going to be next year and so it’s literally a game show that we’re playing.” Pitney argued if legislators don’t break the oil habit now, Alaska could drain its savings and potentially hurt its credit score. Pitney tentatively calls the strategy the “sovereign wealth model.” If the state can agree to funnel all new resource revenue – from oil royalties to petroleum production taxes – into the permanent fund, it can become a renewable pool of money to run the state. Headlamp agrees in balancing the state’s budget, but is concerned that the administration’s fiscal plan will rely on new revenue from taxes on industry that could damage our economy in the long run.

In an op-ed published by the Alaska Dispatch News, Governor Bill Walker stressed the need for “belt tightening” with regards to state spending. According to Walker, his team is “looking at everything – the way we purchase supplies, plane tickets and software, for example. We’re getting smarter about technology — eliminating paper checks for child support, and doing more videoconferencing and less travel.” Walker also confirmed that despite all efforts to minimize the pain of budget cuts, it’s impossible to cut $1 billion in a single year without some impacts to public services.

As Headlamp awaits the Governor’s budget proposal, we can’t help but think about all the times the Walker administration ignored the advice it opined. From hundreds of thousands of dollars wasted on negotiators, to a special session that burned through millions, the Walker administration has not exactly practiced the “belt tightening” it preaches over the past year As Headlamp is still waiting on the full extent of the spending, we can only assume there will be more fiscal surprises ahead.

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 now here: http://bit.ly/1OdpLVY

 

First Reads

State revenue forecast projects even less oil money this year
Alaska Dispatch News, Nathaniel Herz, December 8, 2015

Gov. Bill Walker: Alaska’s budget challenge, tightening our belts
Alaska Dispatch News, Governor Bill Walker, December 8, 2015

Continued low oil prices factor in sharp drop in Alaska revenue forecast
Associated Press, Becky Bohrer, December 8, 2015

Budget director uses money game to illustrate state’s plight
Alaska Public Radio News, Emily Kwong, December 8, 2015

 

Alaska Energy News

Economics, not just regulation, sidelined Shell’s offshore Alaska drilling plans
Alaska Dispatch News, Dermot Cole, December 8, 2015

Alaska coal has a vital role to play in the production of cleaner energy
Alaska Dispatch News, Tim Bradner, December 8, 2015

 

 

 

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How will oil and gas tax credits fare in the Governor’s Budget?

December 8, 2015 | Posted in : News

It’s no secret that the current administration is looking at oil and gas tax credits as part of the solution to the state’s large budget shortfall.  When Governor Walker introduces his budget tomorrow- Headlamp expects that a reduction or elimination of credits will be a key component.

The chart below shows some of the items the administration has considered and what the impact might be on the state budget:

 

Target

Savings Target

Notes

Exploration Credits to sunset on 7/1/16  

$0

 

Cook Inlet Drilling Credits

$150m-$200m 

Repurchase Limits

$150m-$200m

Payment Deferred, not eliminated

Interest Rate Increase

$25m

 

* These savings are targets, not hard numbers, and are assessed only on their potential savings in the state budget.  The impacts on industry investment, production, private sector jobs and the Alaskan economy have not been considered. 

When the budget details are released, Headlamp will assess what has been done with tax credits and how it might impact Alaska’ economy.

 

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