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My Turn: Alaska has given away the oil and gas farm - again

Posted: April 26, 2014 - 11:10pm

Although the passage of Senate Bill 138, Gov. Sean Parnell’s gas line bill, was less contentious than the passage of SB21 (last year’s oil tax giveaway), there are several developments that make me equally nervous about Alaska’s fiscal future. When Sen. Bert Stedman, R-Sitka, one of the few consistent fiscal conservatives in the Alaska Legislature votes no on major legislation, I pay attention.

Stedman said his “vote against SB138 was not a vote against a natural gas pipeline. My vote was a statement against the fiscal structure in the bill and misalignment for the state.”

In his prepared statement, Stedman explained, “Beyond any doubt, this gas line will be the largest financial commitment in the history of the state. There are many troubling risks to the state from the megaproject including: low gas prices due to a potential oversupply from competing international projects under development; the state’s lack of expertise and ability to market its share of the gas received in lieu of royalties and taxes; and handing over the state’s ownership share of the pipeline and gas treatment plant to TransCanada. Unfortunately, it looks to me like the state of Alaska as a sovereign and the owner of the oil and gas resource is assuming the most exposure and risk.”

Does this last line sound familiar? Remember Gov. Frank Murkowski’s attempt to negotiate a deal with the three large oil companies that committed Alaska to tens of billions of dollars in oil concessions with no commitment to build a gas pipeline? Alaskans then got angry about the state’s exposed financial risk, the FBI arrested several legislators for being bribed by an oil company lobbyist and Gov. Sarah Palin got elected on a platform for standing up for Alaska. I know the terms are different now with TransCanada in the game, but how does giving the state a one-time option to buy back up to 40 percent of its one-quarter ownership interest from TransCanada work out to be a good deal for Alaska; particularly if you look at this deal through Gov. Walter Hickel’s “owner state” lens? Why are we, the owners of the gas, the ones on the hook to repay all of TransCanada’s costs, plus 7.1 percent interest, if the project is not sanctioned?

Making this situation more problematic is the composite effect of SB21. The state will be facing reduced revenues from oil taxes resulting in year after year of deficit spending to balance the budget. Savings will be depleted around the same time pipeline construction will begin. Is the financial risk and budget pain worth betting on the chance that by 2024 the state might receive $4 billion annually from natural gas revenues? After reading Stedman’s statement on the Governor’s gas line bill, I now have some serious doubts. Stedman closes, “A sole source, non-competitive bid resulting in a multi-generational contract with TransCanda is not in the state’s best interest. The Legislature should put SB138 on the shelf and work on it over the interim. We have the time and the obligation to do it right.”

Although SB138 passed the Legislature it is not too late to have this conversation in our upcoming elections, and I applaud Stedman for being true to his fiscal conservative nature and in posting his concerns. If we do not have this honest conversation we risk becoming the next Oklahoma, a state that despite a booming oil patch is wrestling with a self-inflicted budget crisis.

According to an Associated Press story by Sean Murphy in the April 23 Juneau Empire, “the problem is that lawmakers over the last decade have created and expanded so many tax breaks and earmarked so much money for special projects that there’s no longer enough for basic services.”

Does this not sound familiar, considering how we watched the Alaska Legislature struggle with education funding? The struggle to fund education today should be enough of a warning to make sure we get the state’s largest financial commitment done right.

• Troll is a long-time Alaskan with more than 22 years of experience in fisheries, coastal policy and energy policy. She resides in Douglas. She serves on the Juneau Assembly. The views expressed above are her own and do not necessarily reflect the opinions of other assembly members.

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Bill Burk
Bill Burk 04/27/14 - 10:57 am

NICE article Kate!

John McDowell
John McDowell 04/29/14 - 01:33 am
Great letter. It says what so

Great letter. It says what so many of us think about SB138 and the risk the state takes on,..for far less than an actual 25% ownership like the THREE PRODUCERS who are supposed to be working for us...if we are truly "aligned" in a good business relationship. SB138 certainly isn`t it for Alaska. And neither was SB21. That`s why it was so easy to get 55,000 Alaskan voters to put a SB21 repeal measure on the primary ballot. And you can bet by the end of the debates leading to the primary, those same 55,000 Alaskan voters, plus new supporters who have seen the damage we face with SB21. The fate of SB21 is certainly the main question leading to the primary season,..that`s for certain,.. no matter how good the industry spin is that taking less state revenue than the fair owner`s share ACES) is somehow Alaska`s "only hope" of future resource development that is supportive of a healthy state tax base. That is exactly what a "cartel" would tell a sovereign. That is exactly what an industry enjoying :basin control" would threaten to do if it didn`t extract ever more concessions to "keep producing" on their leases. Unbelievable. Even as they make more profit per-barrel (123% Internal rate of return!!!) here in Alaska than they do anywhere else in the world! And our legislature is saying we should trust the motives of these companies towards Alaska and Alaskans? Vote YES on 1 in August and help take Alaska back. Back to fairness for Alaska. And it will do that.

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