Parnell's Plight

Governor Sean Parnell has dug himself a hole that is deep and wide. Parnell has enough trouble brewing that would cause any sitting governor to start looking at the Help Wanted ads in the local papers. There are four primary areas of concern.

Parnell’s first problem is AGIA.

AGIA was pronounced as DOA by Parnell himself with respect to any expected success of the Open Season. Parnell’s refusal to answer rival Bill Walker’s FOIA request for disclosure of the Open Season is proof that Parnell is playing a delaying game without any expectation of success.

Against AGIA is the reality of the shale gas developments in Canada and the U.S. The Outside gas reserves are estimated to be enough for a 150 year supply of natural gas. The fact of the lack of any permitting to show in the 3 years since the passage of AGIA belie his current assertions that AGIA is alive and well.

AGIA, like Conoco/BP’s Denali project, takes our gas and gas liquids to Canada, thereby benefitting Canada, not Alaska.

Is Parnell acting in the best interests of Alaska by pushing AGIA?

Parnell’s second problem is his contempt for the law with the growing controversy over his appointments of Nancy Dahlstrom and Gene Therriault as his Military Advisor and Oil and Gas Advisor, respectively.

This situation would not be so remarkable were it not for the fact that both Dahlstrom and Therriault were sitting legislators at the time of the creation of the positions to which they were appointed. As ‘advisors’ their appointments did not have to be approved by the Legislature. The problem for Parnell arises with the fact that both appointments were in violation of Article II of the Constitution of the State of Alaska:

“Section 2.5 - Disqualifications.
No legislator may hold any other office or position of profit under the United States or the State. During the term for which elected and for one year thereafter, no legislator may be nominated, elected, or appointed to any other office or position of profit which has been created, or the salary or emoluments of which have been increased, while he was a member. . . .”

There was little comment about former Sen. Gene Therriault’s appointment, except by yours truly and a few others. With the second appointment of Rep. Nancy Dahlstrom, the pundits and the press finally figured out that our governor was ignoring the law.

Is our Governor above the law?

Another indication of the contempt that his governor and his appointees have for the law is the conduct of Gov. Parnell’s MG Katkus in requiring a subordinate to appear in uniform to testify to the House Military and Veterans Affairs Committee in support of Katkus’ appointment as Commissioner DMVA and Adjutant General. This act was unprecedented, and constituted a blatant act of undue influence. This situation was akin to Gene Therriault filling in for the Governor at a campaign function in Fairbanks earlier this summer. Both situations constitute at the very least undue influence on the part of the Governor and by Katkus as Parnell’s appointee.

Parnell’s third problem is the contradiction to any claim that he is working to resolve the Cook Inlet gas supply crisis.

Parnell’s Oil and Gas Division refuses to timely renew expired Cook Inlet oil and gas leases to exploration and development companies. This failure by Parnell’s Oil and Gas Division is incredible in the face of the alleged purpose of the bullet line.

Is Governor Parnell playing politics with a critical gas supply issue to the detriment of Alaska’s largest population segment?

Parnell’s fourth problem that is indefensible and, perhaps, the least recognized by the media, is Gov. Parnell’s decision to virtually eliminate the Alaska State Defense Force as a viable emergency response asset under DMVA.

In 2006, many of the Army National Guard assets were called to federal active duty in Iraq, Afghanistan and Kosovo, leaving the ASDF to perform disaster response. ASDF was called to State Active Duty three times in 2006.

How is reducing the State’s ability to respond to a disaster a showing of leadership?

Are we voters going to let Governor Sean Parnell’s open contempt for the law and his failure in leadership stand?

AGIA IS A SCREW OVER IF THE PIPELINE GOES TO CANADA!

“TransCanada's inclusion of an LNG option throws a curve into Alberta's hopes to expand its petrochemical industry, which is relying on Alaska gas volumes, especially the liquids contained in the gas stream, for feedstock. According to the Industry Canada website, there are currently insufficient volumes of feedstock to support big new investments in Alberta's petrochemical sector”.—Shaun Polczer, Calgary Herald 1/30/2010

http://www.calgaryherald.com/Alaska+could+bypass+Alberta/2502872/story.html

There it is in black and white from a Canadian source for those of you who still feel that there is any upside to allowing our gas to be transported to Canada.

What does Alaska get out of AGIA to Canada or Denali? SCREWED, THAT’S WHAT!!!!!!!

Any Alaska politician who supports either of the Canadian options should be voted out of office, if not outright impeached!

There is it is, Governor Sean Parnell.

Walker Responds to Parnell's State of State Address

Follows is Bill Walker, Republican Candidat for governor's response to the Gov's State of the State address. Parnell's address can be viewed at :
http://www.examiner.com/x-2968-Alaska-Gubernatorial-Examiner~y2010m1d21-Gov-Parnells-State-of-the-Union-Address


FOR IMMEDIATE RELEASE

BILL WALKER RESPONDS TO STATE OF THE STATE ADDRESS

January 20, 2010

Today Bill Walker released the following statement regarding Governor Parnell’s state of the state address.

“With his support of AGIA, Governor Parnell continues to ignore the economic realities of a changing world. While he recognizes that bringing Alaska gas to market is the biggest opportunity ahead of Alaska, he has committed to stay the course in a process that everyone knows will fail.

As an Alaskan, I am deeply troubled by the Governor’s willingness to place our fragile future in the hands of outside interests and foreign governments. If the State does not take control of the process and construct an all-Alaska pipeline to Valdez there will not be a gas pipeline.

The Governor’s “permit and they will come approach” has repeatedly failed to secure an Alaska natural gas pipeline. Both TransCanada predecessors in the 1980’s for a line through Canada, and the Yukon Pacific Corporation in the 1990’s for an All-Alaska project, expended hundred of millions of dollars securing final regulatory approvals hoping to attract producer participation with that strategy. It failed then and will fail now.

Further, since AGIA passed, the U. S. Department of Energy has estimated that the United States has sufficient gas for the next 100 plus years due to recent proven shale gas reserves. Yet the Governor continues to tell the people of Alaska that there is demand for our gas in the lower-48, even going as far as to suggest we will soon become American’s next great ‘gas province.’ Let me be clear – his misrepresentation of the facts about shale gas is beyond out of touch, it is out of line.

Planned gas import terminals in western Canada have reversed course and are now being developed as gas export terminals (Kitimat, B.C.). Billions are being spent to ramp up production all across North America in the newest energy gold rush, and Exxon Mobil has even acquired the second largest shale gas company for $41 billion. Companies, states and countries have reacted around the globe, yet we continue to pursue the AGIA process knowing it charts a course into Canada that leads nowhere.

As governor I will keep Alaska’s jobs, gas and future within Alaska, develop a pipeline on our timeline and under our control, and will sell Alaska gas to world markets. Our Gas, Our jobs, Our Future.”

Parnell and coming Alaska Recession

Alaska has thus far avoided the immediacy of the impact of the recession arising from the outrageous mismanagement of our financial sector. The reason for this is that most of the money in this State from oil revenues goes to the State, and then is trickled down to the communities through welfare and public works projects. A process where the governor and the Legislature compete for dwindling funds to promote their respective reelections through oil revenue largess to their constituency.

In his endorsement of offshore drilling, Gov. Sean Parnell mentioned that he wanted the ‘billions’ in wages and services for Alaska’s economy that would be generated by private sector companies which would be supporting companies like Shell in pursuing offshore oil and gas deposits. This is a radical departure from the ‘it must all come to the State first’ approach of the post TAPS construction era: 1978-present.

The question during the Jay Hammond Administration was ‘how best to benefit Alaskans from the oil wealth from the royalties and taxes’ on the North Slope development. It was decided that to give Alaskans the most benefit, the mechanism of a Permanent Fund was created. This fund was to accomplish two goals. One was to distribute a benefit to Alaskans from the oil wealth through the mechanism of the earnings of the Permanent Fund through a dividend program paid out yearly based upon a percentage of the earnings of the Permanent Fund. The Permanent Fund itself was established to provide for a time when revenues from oil production fell to such a level that State and local government would need help in meeting services. The PF was a rainy day fund.

The revenues that did not go into the Permanent Fund were used to fuel a State government that quickly demonstrated that it was incapable of restraining itself when it came to overspending. This tendency was adopted by local governments.

Former Gov. Jay Hammond and the Legislature at the time never intended for the Permanent Fund Dividend checks to individual Alaskans to go on forever. It was intended that the program would be terminated when revenue from oil fell to such a level that ending the PFD program would be necessary. The alternative was to tax the PFD so that government gave and then recouped that benefit through taxes.

Since Hammond’s administration in the late 1970s, the largess from oil revenues fuel a growth of State and local government that is unparalleled elsewhere, given the low population of the State of Alaska—approximately 650,000.

With this program, revenues were no longer generated at the local level; everything came from the State to the communities. This new super welfare state mentality soon extended itself beyond oil and gas into the mining sector.

The Mining Law of 1872 provided for a requirement for $200 in development and exploration to be accomplished on the mining claims, state or federal, each year. Congress and the State amended the law in the mid-1980s to allow a payment per acre in lieu of the development work. The $200 was something spent directly to the benefit of many Alaska communities for services and labor. Now, a company or individual with mining claims pays $2 per acre per year for each mining claim directly to the State without having to do anything as far as developing or “proving’ the claims as being viable. This has led to big companies coming into Alaska and simply claiming all around a promising prospect and eventually, through water rights issues, and other mechanisms freezing out the small claimholder.

Payment directly to the State bypassed the community benefit and is slowly eliminating the little guy in Alaska’s mining industry.

The picture is now of a State government from which all monies from resource development flows downward to the localities from the State. Yearly state budgets are upwards of $8 billion with federal sharing funds.

What are the indicators of any recession in Alaska?

For the last 5 years, residential and commercial construction have slowed by as much as 30% per year for new construction starts.

Alaska’s entry into the recession has been relatively slow compared to other States, because of our oil revenues. Oil production is declining, however, and sooner or later even high oil prices will not produce the revenue that was once enjoyed by the State government from North Slope oil development.

Parnell’s speaking of direct benefits from wages and business reflects an awareness of the potential impact of oil and gas offshore exploration and development to Alaska’s economy and communities. Obviously, the communities closest to the development will benefit the most. It is these Alaska coastal communities that are in need of such development. One only has to look to Kotzebue and its relationship with the Red Dog mine to see potential benefit.

It is even possible that Alaska might see a rise in oil field support businesses to support increased oil and gas exploration offshore. This gives Alaska the opportunity to benefit in much the same manner as have the western Canadian provinces from the oil and gas development there. Alaska would be in the position to redevelop a bottom up economy, reducing the focus on the current top down, mother state.

What is it that can accelerate Alaska’s descent into an economic depression, the likes of which has not been seen since the post TAPS construction ended? Alaska’s tax structure on the oil industry.

With the completion of TAPS back in late 1977, people working on the project left. Property values plummeted. Unemployment in the Matanuska Valley where I grew up peaked at 26%.

Most of our Legislators are post that experience and lack the perspective that those of us where there and experienced this time possess. Hence, they act as if there is not derogative to Alaska’s economy with their oil and gas tax policies.

The harbinger of what’s to come is British Petroleum’s very recent announcement of serious cutbacks on the North Slope amounting to a major slow down of activity for this company. It has reported that the decrease in spending by BP is going to be $100,000,000 or greater this year. BP has given notice to its subcontractors that they will have to reduce their contract costs or risk losing their work.

Gov. Sean Parnell needs to change the paradigm of taxing the oil companies in Alaska, if there is to be any real “black gold rush” for Alaska’s offshore potential. To do that, he needs to give the Legislature a reality check that the good old days of 1.2 million barrels per day flowing down the Trans Alaska Pipeline to market are gone forever if something does not change and change quickly.

Parnell has the lesson to be learned from Albert, Saskatchewan, and British Columbia with respect to envigorating Alaska’s oil and gas development.

Parnell has a valuable tool in the Alaska Natural Gas Development Authority. Hopefully, he will not let his predecessor’s rhetoric and open hostility towards the oil companies in Alaska guide his policy decision. Otherwise, Alaska’s economy will “tank” and make post TAPS look like a picnic by comparison.

Blackouts in South Central this winter!

It was very recently reported in the Frontiersman that Matanuska Electric Association is now warning of the high probability of rolling blackouts this winter.

With 35tcf of NG reserves, known and estimated, the most populous region in the State is now facing a third world power crisis in the dead of winter?

Why?

The primary issue is not so much a lack of natural gas in Cook Inlet, but the lack of infrastructure to deliver the gas in Cook Inlet to market and to store the excess for use during peak periods. Lacking is the storage infrastructure and the pipelines necessary to move the gas from the well to a storage facility. The storage facility may be above ground tanks or old gas wells. Lacking also are the needed storage facilities.

This lack of infrastructure is a travesty. This situation is the result of a serious lack of planning on the part of our leaders, and industry. However, industry cannot build the facilities needed without the permits to do so. The Regulatory Commission of Alaska (RCA) allegedly has been a major impediment to this process, not a facilitator.

Where was the leadership on the part of our government to prevent a crisis that has been building for many years, now?

For at least the last 10 years, this situation has been talked about, debated, pooh-poohed, and largely ignored. In the last gubernatorial election, it was a topic of concern, and a topic all admitted was serious, and if not addressed soon, would result in power interruptions at the very least.

Sarah gave lip service during the campaign, but did nothing to promote a solution. Knowles and Murkowski largely ignored the situation. Mark Begich and his predecessors complained of the looming situation, but did nothing other than the occasional public pronouncement..

The harbinger of this situation? The shutdown of Agrium’s ammonium nitrate plant at Nikkiski, resulting in the loss of over 60 jobs and the money they brought to businesses in the area.

Recently, the Regulatory Commission of Alaska held a public session in which the power utilities were castigated for not having any plans for such a contingency. Yet, this august body was the primary focus of a complaint by Marathon Oil regarding a lack of exploration and production permits during the last 10 years, having a great bearing on the short fall in available natural gas that will very likely result in your lights going out this winter.

The choice will be your lights or heat. Heat wins every time.

We voted to create the Alaska Natural Gas Development Authority to insure we had gas for use in Alaska and to get our North Slope gas to market. Yet, since its creation, ANGDA has been hindered, impeded, and stifled in effecting its voter created mandate. Both Sarah Palin and Frank Murkowski restricted ANGDA’s funding to the detriment of our natural gas development priorities.

An aloof Legislature has not aided in providing some modicum of a solution in the absence of the governors’ indifference, either through legislation making it easier for the oil companies to construct the needed infrastructure.

I just spent 5 months in Canada on an oil field services related project in British Columbia and Alberta. You can bet that what is going to happen this winter in Alaska cannot happen there. Socialist governments, with B.C. being the most restrictive, somehow manage comprehensive oil and gas development. Pipeline construction is ongoing.

Yet, south central Alaska is now facing the specter of rolling blackouts. Our North Slope natural gas still remains stranded. The Canadians rapidly move forward with a LNG port at Kittimat, B.C. to export natural gas to Asia. Meanwhile Alaska’s Rep. Jay Ramras says the coming Open Season will be a bust—meaning no forward progress on any pipeline proposal.

Alaska’s leadership has a terminal case of “can’t”.

There needs to be a serious shift in paradigms on the part of our Legislature, DNR and the Governor’s office regarding support for new oil and gas development here. Failing same, we need to replace one and all in the coming elections.

Keep sending the same tired faces back to do nothing, results in nothing being accomplished, except to spend money we no longer have.

Maybe, a few blackouts this winter will result in some needed change in Juneau?

Concoco-Phillips Denali Project

The decision by BP and Conoco Phillips to build a pipeline to take North Slope NG to Canada is a definite change of heart for two out of the three Producers on the North Slope.

I believe the reason for this change is not because all of a sudden BP and Conoco want to get NG off the North Slope, but rather because the alternatives are lacking for another high priority project.

Between unstable tundra along the proposed route due to permafrost melting to legal challenges by Deh Cho and other Native groups, and as yet unsettled right of way regulatory issues, the NG from the MacKenzie River Delta that was intended to fuel the separation of oil from the Alberta Tar Sands is not going to be available within the time frames originally envisioned for the MacKenzie River Delta pipeline project. An alternative had to be found, and Alaska’s North Slope gas reserves is that alternative.

The increasing price of oil is driving the recovery of oil from Alberta Tar Sands at an ever increasing pace. A supply of cheap NG is necessary to the economic viability of the separation process.

The only long term viable source of NG without rights of way issues at least to the Canadian border is found on Alaska’s North Slope. The rights of way and other issues would still have to be worked out to get the NG to Alberta, but, undoubtedly, BP will wield considerable influence in dealing with the Canadian side, given the Crown’s interest in BP along with the imperative to get the Tar Sands oil to market.

It is unlikely that Exxon will seek its own means to transport NG off the North Slope, especially with the promises made regarding development of the Pt. Thompson NG reserves made in order to retain those leases. Exxon is in a market it or else situation with the Pt. Thompson NG reserves. Therefore, it is reasonable to assume, that although unannounced, Exxon will eventually join with BP and Conoco Phillips.

Exxon was a player in the MacKenzie River Delta pipeline project, and a major advocate of taking Alaska’s NG over the top and plugging into the anticipated MacKenzie River Delta pipeline system.

Through a subsidiary, Exxon is also a major player in the Alberta Tar Sands project.

A major concern of those who live in the Mat-Su Valley is whether or not there will there be a provision for a spur line from Big Delta down to the Palmer Enstar NG Hub to provide NG for south central?

It is already a fact from the last round of this game under Murkowski that Alberta was all too willing to provide a ready market for Alaska’s NG liquids, such as propane and butane.

Will the Governor and the Legislature allow these valuable NG liquids to be transferred to Canada without proper consideration given to the long term benefits of value added processing in Alaska?

Stripping them out and using these gas liquids here would provide the building blocks for a petrochemical industrial base. A benefit with economic benefits far beyond just resource extraction that the pipeline represents.

Obviously, value added development of our NG resources would allow Alaskans greater opportunity beyond just the construction of a pipeline. Once the last pipe is welded into place, the pipeline jobs go away. Value added industrial development would be a lingering base upon which to ensure that the benefits from our NG resources go beyond fueling bloated, growing, and ever greedy state and local governments.

If the money goes directly to government, we all lose. If there is value added development, then we the people will benefit along with the Producers and government through jobs and infrastructure upon which to build industry.

The challenges for the Palin Administration, the Legislature and the Producers will be to balance the interests of all parties against the imperatives of the looming south central NG crisis, the economics of the proposed pipeline, and the constitutional requirement of the State to gain maximum benefit from the exploitation of this nonrenewable resource versus the interests of the Producers with respect to their profit motive.

Until there is a NG pipeline from the North Slope generating revenue, our responsibility as citizens will be to see that our elected officials do not spend revenue that is not there. And, to see that maximum benefit is exactly what is bargained for across the board.

Another blog dealing with this subject is to be found at http://www.blogged.com/about/denali-pipeline/