Senate drains savings account to cover oil subsidies

Plan would transfer $288 million more than the minimum required by law

Alaska’s Senate voted Thursday to drain one of the state’s remaining savings accounts to make a big down payment on a pile of promised drilling subsidy payments.

 

The 13-7 vote on an amendment covering those subsidies came as part of the Senate’s overall debate and vote on Alaska’s $1.4 billion capital construction budget. That budget later passed by a 13-5 vote with two members absent.

“This capital budget is fair. It is austere. It uses limited amounts of state dollars to support and leverage federal dollars,” said Sen. Anna MacKinnon, R-Anchorage and co-chairwoman of the Senate Finance Committee.

The capital budget is distinct from the state’s operating budget, which is already in negotiations between the House and Senate, and the proposals lawmakers have suggested to balance Alaska’s $2.7 billion annual deficit. It is nevertheless expected to figure as a side dish in the overall negotiations about the budget and deficit in the days to come.

While 12 Republicans and one Democrat voted in favor of Senate Bill 23 on Thursday, five Democrats voted ‘no’ and two Republicans were excused absent.

“I don’t believe it’s the best product for the state of Alaska,” said Sen. Tom Begich, D-Anchorage.

Begich and other minority Democrats offered 10 amendments to restore funding for various programs, including Alaska’s Pioneer Home program.

While an amendment restoring Pioneer Home funding was defeated, Senate Majority Leader Peter Micciche, R-Soldotna, promised that the homes will be protected when budget negotiations begin in earnest between the House and Senate.

The biggest disagreement, however, was the Senate Majority’s plan to spend more on subsidy payments.

Sen. Bill Wielechowski, D-Anchorage, proposed an amendment that would have canceled the majority’s plan to direct $288 million from one of the state’s savings accounts to pay drilling subsidies.

“In what world is that OK?” Wielechowski said about the transfer. “Explain to the people of Alaska. I hope they’re watching. I hope the people of Alaska are watching this vote right now. … I hope this is talked about on talk radio, on social media because people are going to judge this body.”

After Wielechowski rhetorically asked, “Do you stand for the people of Alaska?” he was interrupted by a break called by discomfited senators.

“If that’s uncomfortable for people, it should be,” Wielechowski said after the break.

For the past two years, the amount of unpaid subsidies has risen. The Legislature has failed to fully end the state’s practice of offering cash subsidies to drillers (legislation last year ended most), and Gov. Bill Walker has twice vetoed legislative attempts to pay more than the minimum required by law.

Lawmakers this year are required to make only $74 million in subsidy payments, and the Senate’s version of the state operating budget already contains that amount. The $288 million approved Thursday would be above and beyond the minimum.

Members of the Senate Majority have repeatedly said they believe the health of the oil industry — which pays 11 percent of the state’s total wages and still provides much of Alaska’s state revenue, according to the Alaska Department of Labor’s February “Alaska Trends” report — should be of paramount concern.

The Senate came close to passing an amendment that would have required the state to pay a supplementary Permanent Fund Dividend equivalent to the amount vetoed by Walker last year. That proposal, from Sen. Mike Dunleavy, R-Wasilla, failed 9-11.

While the Senate’s Republicans and Democrats disagreed on oil and gas subsidies, they agreed on an amendment stripping $50 million from the effort to build a trans-Alaska natural gas pipeline and redirecting that money to various efforts.

Both Republicans and Democrats said they do not believe the amendment will harm the effort to build a pipeline.

Asked by email, the Alaska Gasline Development Corporation did not directly answer the question, but in an emailed statement, corporation president Keith Meyer said, “Now is the time to send a strong message that Alaska is united on this project that will generate thousands of much needed jobs for Alaskans and boost our struggling economy.”

Under the terms of the amendment, $5 million would pay for additional prosecutors, $10 million for additional state troopers, $10 million for road maintenance, and $25 million would go to the public school trust fund.

Senate Bill 23 now advances to the House, where the House Finance Committee has scheduled hearings Saturday and Monday.

The capital budget, like the state’s operating budget, is likely bound for a conference committee, where House and Senate negotiators will iron out the final details as part of an overall agreement.


• Contact reporter James Brooks at james.k.brooks@juneauempire.com or call 419-7732.


Topics

Earl Richards 4 months ago
Alaska owns the oil. Alaska does not owe the oil industry anything. If these free enterprisers cannot make a profit on their own, without pilfering the government, then, they should not be allowed in Alaska.
Daniel Donkel 4 months ago
Dear Alaska Dept. of Natural Resources Division of Oil & Gas 

Please find Daniel K. Donkel substantial new information below. 

Best Interest Findings Alaska Dept. of Natural Resources Division of Oil & Gas 550 W. 7th Ave., Suite 1100 Anchorage, Alaska 99501-3560 By fax: 907-269-8943 By e-mail: dog.bif@alaska.gov Substantial new information must be received by 5:00 pm May 12, 2017, to be considered. Submit information only pertaining to the Beaufort Sea, North Slope, and North Slope Foothills lease sales areas. 

The Beaufort Sea, North Slope, and North Slope Foothills Areawide oil and gas lease sales are the life blood of the State of Alaska. The State of Alaska’s oil and gas leasing system is the first step toward production of oil and gas in a process that can take decades until first oil. If that first step in the process is mismanaged, then eventually, the State of Alaska’s oil and gas industry will fail. Unfortunately, The State of Alaska’s oil and gas leasing system has been mismanaged by the Department of Natural Resources, Division of Oil and Gas (DOG). The people of the State of Alaska will now suffer the failures of the DOG to sustain a healthy oil and gas business in Alaska. The DOG increased oil and gas lease bonus, rental, and royalty costs, reduced term, and reduced the number of acres in each lease, all of which are impediments to the development of oil and gas, and all of which have resulted in reduced activity by pricing competitors out of the oil and gas leasing process.  The DOG has added these outrageous impediments to production of oil and gas to Alaska’s oil and gas leasing system at the very worst time. Now, after many years of DOG mismanagement the people of the State of Alaska and the oil and gas industry face:
reducing amounts of production flowing through the Trans Alaska Pipeline System;
collapsing oil commodity price;
increasing operating costs;
failure of the State’s tax credit system leading to the Governor's vetoes of promised earned tax credits of over $600 million dollars increases in minimum bid amounts; and
State budget shortfalls which may now require the people of the State of Alaska to pay income taxes just to pay for the basics of state government.
 
The DOG ignored many attempts to warn them that their oil and gas lease terms would have long term negative impacts but these warnings have fallen on deaf ears with no response. Now is the time to repair the oil and gas leasing system so that the 2017 the Beaufort Sea, North Slope, and North Slope Foothills Areawide lease sales see more bidders and more activity to increase the probabilities of more oil and gas developments to benefit the people of Alaska. The oil and gas leases should be offered under the following standard terms which should never change:
            10 year lease term
            1/8th royalty on oil and gas produced
            $10/acre minimum bonus bid
            $1/acre annual rental payment
            2,560 acre minimum lease size
 
In support of the claim that Alaska is no longer competitive with other places to invest in oil and gas, due to its onerous oil and gas lease terms, I hereby submit as new information the following documents:
 
https://www.fraserinsti tute.org/sites/default/files/ global-petroleum-survey-2016. pdf 
 
http://dog.dnr.alaska.gov/ ResourceEvaluation/Documents/ 20170426- AllianceBreakfastPresentation. pdf . 
 
https://eplanning.blm.gov/epl-front-office/projects/nepa/68428/89960/107818/01252017_lease_sale_notice_11092106.pdf
 
 
Please quickly make these changes fast so Alaskans will not suffer further unnecessary hardship. The Beaufort Sea, North Slope, and North Slope Foothills Area-wide oil and gas lease sales are the future of Alaskans.  

Daniel K. Donkel
Individual DNR DOG oil and gas lease sale bidder since 1983
Daniel Donkel 3 months ago
Alaska lawmakers have made one bad oil and gas law after another and Alaska's oil industry has suffered oil production decline and massive layoffs.

They have slowed down all  drilling under these lawmakers bad laws so now the answer seems to be, hire the same lawmakers people like Hollis French that got Alaska in the mess it is in today to regulate the mess that Hollis French helped get Alaska into, it is a sad day for Alaskans, now that Hollis French got in!

Some say sell poor home fast because  Alaska is in a free fall as they run out all smaller oil companies and Alaskans from the oil business and the economy dies and more will lose jobs and the Permanent fund! Remember some of these law makers took $1,000 from each Alaskan and they are coming for more!

They are pricing Alaskans out of the lease sales with 8,000% rental increase when no one is bidding in many lease sales. Alaska is shooting themselves in the foot and killing oil jobs left and right, can anyone stop this insanity?
Gregory Fitch 4 months ago
I personally feel in the current budget situation Alaska has given enough to big oil. We can no longer sit back and watch our social services dwindle. This is our oil and our recourses it is for us the people not big corporations they.can pay for drilling as Far as I am concerned I am sick of corporate America getting rich off the backs of the people it's time for what is fair 

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