Category Archives: Energy

Oil and alternative energy in Alaska

Shell Oil suspends Arctic drilling plans for summer 2014

Royal Dutch Shell announced on Thursday that it was suspending Arctic drilling plans for summer 2014. The company is reporting a 71 percent decline in fourth-quarter profits and is undertaking a $15 billion asset sale. Shell did not indicate that it was selling its Alaska assets.

The company has spent about $5 billion and more than eight years of work for its Arctic oil exploration off Alaska’s coast in the Chukchi and Beaufort seas. Much of that work has been fraught with mistakes and mishaps.

The decision follows a federal court decision that said that the government used “inadequate information” in the process of awarding licenses for exploration in the Arctic. Part of that process was an environmental impact statement. The Bureau of Ocean Energy Management, the agency that awarded the licenses, did so based on a much lower amount of oil than will likely be produced in the Arctic, the court found.

“This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” Shell Chief Executive Ben van Beurden said, according to news reports. “We will look to relevant agencies and the court to resolve their open legal issues as quickly as possible.”

Many environmental groups will be overjoyed. Alaskans less so, many of whom are in favor of oil exploration and production. In addition to jobs and community investment, it was hoped that oil from the Arctic was going to help keep the trans-Alaska pipeline full. In 2013, an average of 534,480 barrels of oil a day flowed down the pipeline, down from more than 2 million barrels a day in the 1980s.

Although the federal court’s decision appeared to have more to do with sloppy bureaucrats than with a Democratic administration, U.S. Sen. Mark Begich will likely take a hit from his Republican challengers. He recently released an ad touting Shell’s activities in the Arctic and last week said that he remained “confident that we will see continued safe exploration in the Arctic this summer.”

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Alaska gas: We might finally be on a path to getting it to market

road forward Ken Cohen, vice president of public and government affairs for ExxonMobil Corp., wrote a blog post about Alaska’s natural gas pipeline entitled, ‘Will the energy revolution go ‘North to the Future?’”

His answer: Yes, if the producers including Exxon and the State of Alaska, can get along and pass “fiscal terms” in the upcoming legislative session.

“Though Alaska has long been considered a leading energy-producer, it hasn’t been regarded as a key part of the current, largely shale-driven supply revolution that is creating a new era of American energy abundance,” Cohen wrote. “An agreement that Alaska officials brokered with a number of industry participants last week could go a long way to changing that perception.”

The agreement that he’s referring to was signed on Jan. 14 by Gov. Sean Parnell’s administration and the producers–ExxonMobil, BP, and ConocoPhillips–as well as TransCanada, which would build the line. Among other things, it involves the state taking between a 20-25 percent equity stake in the project, which is expected to cost between $45 and $65 billion.

The fact that Cohen, one of Exxon’s most public and prominent executives in the company, is writing about it means that Exxon is anxious to get this project going, which has not always been the case.

For more than 30 years, Alaskans have watched as plans to build the more than 800 mile pipeline have come and gone. The market simply wasn’t ready.

People bought property based on a headline in 2008, proclaiming that the pipeline project was all but a done deal. It wasn’t.

I wouldn’t yet buy property based on the current plan, but it is different than any of the previous plans. The last time, under Gov. Sarah Palin, the big producers–including, initially, Exxon–were cut out of the building process, and therefore had less control over the profit margins and at what price smaller companies paid to ship their gas. TransCanada had the license to build the line, but the producers weren’t playing and wouldn’t commit their gas.

So, it failed. Call it unfair and anti-competitive, but the producers have rights over the leases. (It might be our gas and oil, but barring a huge court challenge–one that would make the Exxon Valdez court challenges look expeditious in comparison—they are lease terms that we agreed to.)

This time, for the first time ever, BP, ConocoPhillips, Exxon and the state all agree on a path forward.

In the blog post, Cohen calls for the legislature to iron out “certain fiscal terms” this legislative session.

Such terms involve the state moving from a net to a gross tax. Currently, the state taxes gas much like it does oil and at about the same rate, even though oil is much more profitable than gas.

Parnell deserves credit for working diligently and quietly behind the scenes to get the state this far. But this is a hugely capital intensive investment, unlike anything the state has ever dealt with. The stakes couldn’t be higher, and he will need a groundswell of public support behind him.

Parnell hasn’t yet proven that he’s adept at reaching out to the public to get that kind of support. He’s not yet had to, and without it, it could very well fall apart, particularly because it’s an election year. It’s happened before: just ask Govs. Frank Murkowski and Sarah Palin.

Too, legislators, particularly those in the opposing party, will have to do their best to resist taking politically-expedient pot shots, which they haven’t been adept at doing either.

Gubernatorial Democratic candidate Byron Mallott said on Saturday that although a lot more work needed to be done, it appeared that the agreement was a “step forward” in getting the pipeline built.

Mallott was being a statesman. Maybe it will catch on.

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Parnell’s plan to delay gas taxes also delays pipeline. Walker calls it all ‘maddening.’

To the surprise of some, and maybe the amusement of others, Gov. Sean Parnell announced on Tuesday that he’s not planning to introduce natural gas tax legislation to be considered in the upcoming legislative session. Currently, natural gas is taxed at roughly the same rate as is oil, but it’s only worth a fraction of what oil is.

Parnell says he’s not doing so because the companies that have the lease rights to the natural gas, and who would build the line that would carry the gas from the North Slope to tidewater, haven’t met all of the benchmarks he set out for them in his 2013 state of the state address.

Apparently, Parnell’s refusal to introduce gas taxes signals some sort of punishment. What kind of punishment, however, is unclear. What is clear is that the world is awash in natural gas, and other projects —  potentially more profitable projects —  await the companies.

Another thing that’s clear: Parnell’s announcement signals another delay in the decades-long dream of getting a large diameter natural gas pipeline.

Bill Walker, who is running as an independent candidate for governor, had a visceral reaction to Parnell’s statement. He said that Parnell is just playing into the hands of the producers. “It’s perfect for them,” Walker said. He has been an advocate for an LNG project for more than a quarter of a century, and has long advocated that the state get tough on the companies by either building the line itself or negotiating with the companies that are willing to do it.

“Parnell is trying to get tough. He’s trying to be a negotiator. But they’re just laughing at us,” Walker said. “They’re just on the floor rolling.” He said that the producers want the delay so that they can work on other projects and wait out Alaska as oil production declines, as the state’s coffers shrink, and as the state becomes increasingly desperate and increasingly willing to negotiate.

Walker ran for governor in 2010. He came in second place in the Republican primary, winning more than 33 percent of the vote on a campaign primarily advocating the construction of a gas pipeline project.

Since the 1970s, Alaska has tried to entice, and at various times demand, that the lease holders of the vast reserves of natural gas on the North Slope build a pipeline to get the gas to market.

The market for natural gas is a fickle one, however, say nothing of Alaska’s political climate. And throughout the years, every time it looked like it might actually begin to materialize, the market either crashes, or the political winds change, or a governor tries to flex his or her muscles and punish the companies, which happen to be the among the largest, most powerful, private companies in the world.

“It’s maddening,” Walker said, expressing a sentiment shared by many who have followed the long, illusive gas line story.

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Up next: Natural gas taxes?

Natural gasLate last week at lunchtime, members of the Alaska state Senate leadership team were seen going into a private dining room at the Glacier BrewHouse in Anchorage. They were there for a meeting with Department of Natural Resources Acting Commissioner Joe Balash and Department of Revenue staffer Mike Pawlowski, also known as “Fish.”

The Senate Rules Committee Chair Lesil McGuire was noticeably absent. Was she busy with official legislative duties? Was she campaigning for her bid for lieutenant governor? Or was she simply not invited? Why do people call Pawlowski “Fish”? What was the group discussing? They weren’t likely discussing an oil tax overhaul. That, after all, is so last year. Natural gas taxes? Probably.

On Monday, ExxonMobil, BP, ConocoPhillips and TransCanada announced that the terminus to the mythical natural gas “big line” would be in Nikiski. Say what you will about the project bypassing Valdez, the fact that the three producers who don’t often agree on anything, agreed on this is kind of a big deal.

Embedded in the announcement was a message to the state: “A competitive, predictable and durable oil and gas fiscal environment will be required for a project of this unprecedented scale, complexity and cost to compete in global energy markets.” Translation: They also all agreed that they need a tax break on gas to build the line.

Currently, natural gas is taxed at an effective rate of 35 percent prior to credits, roughly the same rate as oil. But it’s much less valuable and the producers aren’t going to invest up to $65 billion on a project that won’t result in a hefty profit.

However, even if all the evidence points to the fact that the producers actually do need a tax break to move forward, it’s unclear if legislators have the stomach for more talk of tax breaks for the producers.

A repeal of last legislative session’s oil tax break is still in the works and won’t be voted on until the primary election in August 2014. Taking this one on next legislative session might invigorate those who would repeal that tax.

Besides, creating the kind of “competitive, predictable and durable” tax regime takes tons of political capital from the governor’s office. And it’s unclear, in an election year, if Gov. Sean Parnell will have that much to spare.

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Rumor alert: Exxon is poised to take over BP

According to people who keep track of such things, there’s “chatter” that ExxonMobil Corp., is poised to make a bid to take over BP. There’s also chatter that the chatter is bunk, but it was enough to make BP’s stock take a jump, if only temporarily.

Rumors that one company or another was going to take over BP have abound since the Deepwater disaster. In Alaska, there’s been chatter for longer. There may be nothing to all of this, but stack enough rumors atop each other, and they begin to mean something.

And in Alaska, where three majors — BP, Exxon, and ConocoPhillips – have the lease rights to nearly all the producing oil fields in the state, we should watch such rumors closely.

The last big oil takeover in Alaska was in 2000, when BP bought Arco, the company that discovered the Prudhoe Bay gusher. Tony Knowles was the governor then, and it was a major battle. After some heated lobbying, the Federal Trade Commission got involved over market consolidation and potential anti-trust issues.

FTC regulators required BP to sell its Arco Alaska assets. ConocoPhillips bought them, leaving BP with about a 30 percent stake on the North Slope. Exxon has about the same stake.

The deal was better for Alaska after the FTC’s involvement. If Alaska lost one of its majors and the competition that it spawned, the state would lose in both tangible and intangible ways. Back then, Alaska had a governor that was willing to fight, at least a little, for the state’s interest.

If talks of a merger prove to be valid, Alaska’s leadership will need to step up to insure that the state’s interests are protected.

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OMG: Congress, environmental movement and Obama working together for Alaska

CooperationYesterday, the U.S. House of Representatives passed a bill that will, among other things, authorize potential builders of a natural gas bullet line to meander through seven miles of Denali National Park. The bill passed the Senate, where it was first introduced by Sen. Lisa Murkowski in 2009 at the request of ENSTAR Natural Gas Company, reintroduced with Sen. Mark Begich in 2011, and is now in front of the president, who is expected to sign it.

Let me repeat this: Congress actually passed a bill that will allow a pipeline to go through seven miles of Denali National Park, one of the largest, most remote and protected national parks in the country.

This is not a small development. For one, because cutting through the park could save millions of dollars in construction costs and eliminate a whole heap of headaches, it brings the idea of the bullet line closer to reality. But secondly, and most importantly, the bill required cooperation between energy companies, environmentalists, Republicans and Democrats. The route through the park was arguably a more environmentally responsible route, and the environmentalists recognized this and ultimately supported it.

The media, by and large, missed the story. The country was Syria crazed, for one. Secondly, it’s not all that exciting to report a story where the plot line is that people acted rationally and that Congress, the environmental community, and business functioned like the nation wants them to function.

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Parnell’s communication team needs to get out more

5475643_mThere are many people in Alaska who believe that cutting taxes on oil companies is something that is necessary for the state’s economy. I’ve met many, from small shop owners to waiters to teachers. They know that more than 90 percent of Alaska’s economy is dependent on oil. They believe the oil companies when they say that the only way to stem the decline of production is to make Alaska a more fiscally attractive place to do business.

These are people who have no direct ties to the oil industry, but somehow they’ve internalized enough of the debate to be able to make up their minds.

I don’t know if I agree with them, but I have at least heard these people talk, and felt the pull of their stories. Apparently, nobody in Gov. Sean Parnell’s communications office has, because if they had, they would have put these people on camera to share their opinions instead of the people they chose to try to help gain support for Parnell’s tax bill and to try to buttress support against a repeal.

The governor’s press office sent out an email today, urging the media to take note of what people are saying about the tax bill. “Alaskans from across the state are speaking up about the opportunities they are seeing in their communities as a result of the More Alaska Production Act,” the press office said.

It then sent readers to the “More Alaska Production Act,” website, where four Alaskans talk about the impact the tax cut is having on their businesses and places of work.

All four Alaskans work for businesses that provide services to oil companies.

Don’t get me wrong. These are important businesses that put people to work. These are businesses that have huge effects on our economy, and the people who work for them are likely good people. Their voices should be heard.

It’s just that neither the engineer working for Ch2M Hill, the company that bought VECO, nor the CEO of Little Red Services, an oil services business, are going to win the hearts and mind of Alaskans who need to be won over.

What the “fiscally prudent” administration has seemingly done, once again, is to waste government money by preaching to the choir about the tax bill.

But what’s more disturbing is that the communications office, the one office that is supposed to actually communicate with the public, couldn’t seem to find anybody who isn’t directly tied to the oil industry to appear on camera. Perhaps stepping out of their cushy government offices and popping out of their tiny social bubbles would require too much work, to say nothing of answering media questions in a direct and timely manner.

Perhaps it’s easier to sit among themselves, chalking up to media bias the 50,000 signatures gathered to repeal the tax bill.

Contact Amanda Coyne at 


Conoco applies to drill a new well in NPR-A

Reuters is reporting that ConocoPhillips has applied for permits to develop a new field in the Mooses Tooth unit of the National Petroleum Reserve. It also applied for permits to build roads and other infrastructure needed to access the site.

The company hasn’t yet decided whether to sanction the project, however. That decision will come in the second half of 2014.

According to Reuters:

“The plans to expand in the reserve come after Conoco put ambitious offshore Arctic plans on the back burner. It said in April it would not seek to drill in 2014 in the remote Chukchi Sea off northwestern Alaska, where it spent more than $500 million in 2008 to acquire leases. Other companies also have plans to drill in the reserve. Three permits are held by Australia-based Linc Energy and two by Houston-based Hilcorp, both relatively new operators in Alaska.”

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Roundup of super exciting local utilities news

Utilities aren’t the sexiest of subjects to write about. But they do keep the lights on, the heat running, text messages coming, etc…And there’s a lot of big money at stake for those who run them. So, though the subject makes me nearly soporific, the past week or two have been busy times for many of our local utilities. And some of it’s actually interesting enough to wake me up. Here’s a rundown of the highlights:

    • The FCC approved the ACS/GCI wireless deal, forestalling what some predict as the imminent death of ACS, the one that’s been coming since Liane Pelletier took the reins, over-inflated the value of the stock by guaranteeing high dividends, and then left the company with an unsustainable business model. She was either a hero or villain, depending on when you bought or sold your stock in the company. One thing’s for sure: private equity puts her in the former category. In any case, both of the companies have done well with the announcement, and will need to continue to do well if they want to compete against Verizon and AT&T. GCI’s stock closed on Tuesday at $9.43, up from $7.69 on June 26, a week before the FCC approved the merger. ACS’s stock was as low as $1.55 this year. Tuesday it closed at $3.40.
    • Speaking of AT&T: the company announced yesterday that it has invested $45 million in its wireless and wired network in Alaska during the first half of 2013. Among other things, the investment now provides mobile AT&T broadband to Healy, Whittier, Hope, Gustavus, Angoon, Hydaburg and other sites along Sterling, Glenn and Richardson Highway
    • ML&P requested that the RCA consider and approve a 22 percent rate increase and it’s rumored that Chugach Electric maybe also looking at a rate increase. I’ve overheard people saying that the ML&P rate increase could provide an avenue of attack if for whatever reason at ambitious politician wanted to go after Anchorage Mayor Dan Sullivan. But then again, ambitious is the operative word here.
    • FCC Commissioner Ajit Pai toured the state meeting with regulated industry types and policymakers. I don’t know if he learned anything about, say, how important the Universal Services Fund is to Alaskans and a certain high profile, politically connected telecom business in Alaska. But I’m told he did learn quite a bit about how silver salmon run.
    • ENSTAR had a ribbon cutting ceremony in Homer commemorating the first delivery of gas to the community. Dozens of business leaders were there. Gov. Sean Parnell showed, as did a handful of local elected officials. After the speeches the ENSTAR meter was turned on and the crowd cheered for the community’s first delivery of natural gas. Unfortunately, the contractor was behind schedule, the invited guests we’re already committed and the decision was made to move forward with a commemorative event knowing that gas was just days away.

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Bye bye oil taxes. Hello gas taxes.

Most of us have been enjoying the glorious summer and trying to forget the last two oily legislative sessions. Trying to forget the endless committee hearings, the excruciating testimony from oil executives. Progressivity. Hyperbolic curves. Internal rates of return. Capital expenditures. New producer areas, etc …

While we have been catching fish and amnesia, ExxonMobil is rumored to be hard at work trying to convince Gov. Sean Parnell to call a special session this fall to create a statutory framework to establish and provide authorization to negotiate issues related to gas commercialization.

In other words, just when you thought it was all over, now gas taxes are going to again rear their gaseous heads.

Currently, gas is taxed at an effective rate of 35 percent prior to credits, roughly the same rate as oil. But it’s much less valuable.

According to sources, Parnell isn’t going for the special session idea. He’s upset, they say, that Exxon hasn’t committed enough resources this summer to advance the fabled, up to $65 billion large diameter natural gas pipeline.

In a press release sent last month, Parnell said that although there was progress being made, the companies aren’t “moving as quickly as Alaskans expect.”

Still, Exxon, the North Slope’s biggest gas lease holder, continues to push, and is trying to convince the other major producers — BP and Conoco Phillips – – to push with them.

The Department of Natural Resources has engaged a contractor to model various tax regimes. Acting Commissioner Joe Balash and Department of Revenue’s Mike Pawlowski are said to be working with the contractors and meeting with the producers.

It’s unclear if Exxon’s push has to do with the large diameter line, the one that has been dreamed about for more than 30 years. Or if the push is about the bullet line that’s supposed to bring natural gas to Alaskans if the big line doesn’t.

Or if has to do with the 200 million barrels of liquid condensates at Point Thomson. By 2016, Exxon expects to be producing 10,000 barrels of condensates per day at the Point Thomson site. Condensates are kind of a liquid gas. As it stands, when they are produces they will be treated like gas for royalty purposes but will be taxed like oil.

Perhaps it’s all of the above. One thing’s for sure: if it there isn’t a special session to deal with gas taxes they will be dealt with in the next session. And the committee hearings again will be endless and excruciating.

Contact Amanda Coyne at


Pioneer Natural Resources looking to sell Alaska assets

Industry insiders have confirmed what has been speculated off and on for almost a year that Texas-based Pioneer Natural Resources might be looking to get out of the Alaska oil and gas market. Pioneer has opened a data room for parties that might be interested in acquiring their Alaska assets to review and examine their leases, well reservoir data and related confidential information.

Pioneer entered the Alaska market in 2002, as an independent oil company with a mindset of more efficiently operating in an area dominated by major oil companies who passed on and left many medium-sized prospects undeveloped. Their first Alaskan development was the Oooguruk oil field. The company was the first independent to operate a producing field on the North Slope.


Thank God it’s Friday’s random facts

LET THERE BE TALK: The First Long-Distance Telegraph Message, Sent on May 24, 1844: ‘What Hath God Wrought?’  Sent from the Supreme Court chamber in the Capitol in Washington, D.C., to the B & O Railroad Depot in Baltimore, Maryland. Source:

WHILE ALASKA WAS DREAMING OF PASSING GAS: Last week, the Energy Department approved Freeport LNG terminal — in which ConocoPhillips has a 50 percent stake — to export domestic liquefied natural gas to countries without a free trade agreement.  It was the second LNG project to gain such approval. Nineteen other projects are in the waiting. Source: The Associated Press.

TALLEST PLAYER IN THE NHL: The Boston Bruins’ Zdeno Chara is the tallest player in the NHL standing at 6’9″. Source:

MOST EXPENSIVE US SENATE SEAT IN 2012: Massachusetts. The two candidates, Scott Brown (R) and Elizabeth Warren (D) spent a total of over $82 million. Source: Center for Responsive Politics,

NARROWEST MARGIN OF ELECTORAL VICTORY FOR A CURRENT SITTING MEMBER OF THE ALASKA LEGISLATURE : In 2006, Bryce Edgmon tied incumbent Representative Carl Moses after all ballots were counted and the race was decided by a coin toss that Edgmon won. Representative-Elect Edgmon asked for the coin as a souvenir and was told it was headed for safe keeping to the Alaska State Museum. Source: Alaska Division of Elections.

LATEST ABC NEWS/WASHINGTON POST POLL RESULTS: This week’s poll shows, despite growing criticism of the most recent IRS scandal and concerns surrounding Benghazi, President Obama’s approval ratings are stable at a tepid 51 percent. Obama’s support is aided by accelerating economic optimism and as well by comparison with a much less popular Republican Congress. Americans by a vast majority, 74 percent – 20 percent see the IRS’ recent behavior of investigating and auditing conservative groups as inappropriate. Further, on the attack on the U.S. Mission in Benghazi, Lybia, 55 percent of Americans feel suspicious of a cover-up. And only a third of those polled believe that the Obama administration is disclosing honestly what it knows about Benghazi. Despite these feelings of concern and ill-will, Hillary Clinton’s reputation appears to remain intact with 62 percent of the respondents approving of her job performance as Secretary of State. Source: ABC News.

IMPORTANT UNIVERSITY OF ALASKA STATISTICS:  Number of winning hockey season’s under UAA athletic director Steve Cobb’s 12 years of leadership – 0. Number of University leaders willing to take a stand against coach/player assaults – 0. Source: Me and members of the hockey community who have decided to befriend me.

DROWNING NOT WAVING: More Alaskans die in recreational boating accidents than die commercial fishing. Nine out of 10 involve boats under 26 feet in length. Three of four are power boats. Nine of 10 are adult males. Five of six experience sudden cold water immersion as the result of a capsize or fall overboard. Source :

DRILL BABY DRILL: BP has allocated $2.85 billion to develop Iraq’s Rumalia oilfield in 2013, up from $2.2 billion from last year, with plans to drill 300 more oil wells over the next five years. Source:

PRICE FIXING?  Last week, the European Commission raided offices of BP, Royal Dutch Shell, and Statoil part of an investigation into alleged oil price fixing. Source: The Guardian.

COST OF OBAMACARE IN CALIFORNIA:  Numbers are out for how much insurance under Obamacare will cost residents of California next year. In Los Angeles, health insurers will charge 25-year-olds between $142 and $190 per month in premiums for a bare-bones health plan. For a “Cadillac plan,” a 40-year-old in San Francisco will pay anywhere from $451 and $525. Source:

MONTHLY PREMIUMS THE STATE OF ALASKA PAYS FOR STATE WORKERS: For each state employee, the state of Alaska pays $1389 in monthly premiums for health insurance. Source: Alaska Department of Administration. 


Thank God it’s Friday’s random facts

NICE GOVERNMENT WORK IF YOU CAN GET IT: There are ten state workers that together have approximately 35,000 hours of leave, worth $1.8 million. And they get to cash this out anytime they want. Source: Alaska Department of Administration

THINGS YOU DIDN’T KNOW ABOUT OUR PRESIDENTS: Grover Cleveland was a hangman prior to moving into the oval office. The S in Harry S. Truman’s middle name didn’t stand for anything. Richard Nixon proposed to his wife on their first date. The 38th president was named Leslie Lynch King Jr. at birth and later renamed Gerald Ford. Source:

THE SPOILS OF ALASKA WATERS: In 2010, Alaskans held 76 percent or 15,477 of all 20,275 Alaska commercial fishing permits. However, Outside permit-holders earned about 55 percent of the roughly $1.5 billion gross earnings from Alaska’s fisheries in both state and federal waters. Source: Alaska’s Commercial Fisheries Commission.

SIZE MATTERS: The University of Tennessee’s. Neyland Stadium currently has a seating capacity at 102,455 seats, which makes it the largest stadium in the Southeastern Conference. You can just imagine how that might upset Texas football fans because they’re always are talkin’ about how they have the biggest this and that. Anyhow, to make those cowboys happy, Texas A&M has announced that they intend to expand seating at Kyle Field to 102,500. That means Texas A&M’s stadium will soon be the biggest in the Conference, boasting a whole 45 seats more than the Tennessee Volunteers. Source: Texas A&M University, University of Tennessee.

TEENS AND SOCIAL NETWORKS: 33 percent turn to Facebook, 30 percent prefer twitter, 20 percent choose YouTube and 17 percent use Instagram. Source: Piper Jaffray.& Company (Investment Bankers).

ANOTHER NAIL IN THE ALASKA’S BIG LINE COFFIN: Exxon Mobil and Qatar Petroleum announced on Thursday that they reached an agreement to move forward with construction of a $10B natural gas export terminal in Texas. The partners reportedly plan to ship as much as 15.6M metric tons of gas annually from the Golden Pass facility. Source: Bloomberg News.

TELL THEM HOW YOU REALLY FEEL: In Nevada, you can vote for “none of the above.” Source: Nevada Division of Elections. 

NO SPECIAL SESSION REQUIRED:  The legislative session in Iowa is either 100 days or 110 days, depending on the year. This year, state legislators were supposed to gavel out on April 17 but they didn’t get all their work done. So they’re still going at it in Des Moines, the state capital. And they’re doing so without receiving per diem, something unheard of in Alaska. Source: Amanda Coyne reporting from Iowa.

NICE GOVERNMENT WORK IF YOU CAN GET IT II: Alaska legislators are paid an annual salary of $50,400 and they get $238 or $253 per diem, depending on the time of year. That’s the highest per diem rate in the country. Iowa legislators are paid $25,000 a year and get $135 a day in per diem while the legislature is in session. Source: National Conference of State Legislators.


This is the way the oil tax debate ends: not with a bang but a whimper

The session that finally put an end to the current chapter of the decades-long tax debate, the one that has seen political careers ruined, millions of dollars spent, a state fractured. The one that’s pitted Alaskans against Alaskans, party member against one another. The one that began when former Gov. Sarah Palin took the help and helped her rise to the national stage. The one that since, has stoked fear in the hearts of some Alaskans, and the one that made long time Alaskans who were here before oil wonder what had happened to their state.

The one that will now give billions of dollars back to some of the largest companies in the world in hopes that they will stay in the state and produce more oil and continue to nearly completely fund state government.

That very debate officially ended when both chambers gaveled out at midnight Monday morning—the first time since 2010 that it wrapped up in time–to relatively little fanfare. All told, the legislature passed 71 bills, including a controversial 737-mile in-state gasline that had been debated for years. (Read more on that here).

But the real story of the session was the oil tax bill, which for all intents and purposes ended when it passed the in the wee hours of Sunday morning.

In prior years on a night like that, as politicians grandstanded in the chamber, as amendments were offered and killed, hallways would be chalked full of lobbyists and citizens showing up for the spectacle. Pizza boxes would have piled up. Soda cans tipped. Harried aides would have been flitting about carrying stacks of paper to harried legislators.

This time it was different. As Saturday night turned into Sunday morning, there were only a few scattered observers in the hall outside of the chamber. As the last business was wrapping up at 2 a.m., the only person left was the security guard roaming a long empty hall.

The lack of excitement was due to many things, the first being that the votes were locked in early. This, in part, was thanks to Senate President Charlie Huggins, House Speaker Mike Chenault and House Finance Chair Bill Stoltze, all three of whom herded the cats and kept trouble, real trouble at bay. (Gov. Sean Parnell, it should be noted, kept his distance, which is one way of putting it. Others in the Capitol building weren’t nearly as kind when referring to his absence.)

It was also probably due to an electorate that chose to usher in Republicans in both chambers. The Republican Senate Majority’s motto is “Time to Act,” and act they did. Sen. Fred Dyson probably said it best when he said, “What a difference an election makes.”

Mostly everybody just seemed wary from the battle. On the surface, and when the cameras were on them, it looked like the Dems and others opposed to the tax bill were fighting vigilantly. Off camera, they looked defeated. They knew the score, and they knew that it was not in their favor.

Some of them who have lived this battle session after session, year after year, knew that you can only fight so hard against that which you have allowed yourself to become so dependent.

That’s not to say that the oil companies, the majors at least, got what they wanted. (The independents got all they wanted and more. More on that later.) The tax break will cost the state, at current projected prices and at current production, somewhere between $650 million to more than $1 billion a year. During committee testimony, the companies said that it was too little of a tax break to really stem production declines.

They all said the flat 35 percent tax is too high, the $5 per barrel exempted for all produced oil too low, and the tax credit for new oil not generous enough. In fact, there was talk that at least one of the major hated the bill and wanted to kill it through amendments offered in House Resources, chaired by Rep. Eric Feige but controlled by Rep. Mike Hawker.  Among other things, the amendments offered in Resources by Hawker lowered the base rate, and significantly decreased state accounting oversight.

Had those amendments survived the bill would not have passed the Senate. (Rep. Bill Stoltze, who knew that, stripped out the amendments in Finance and kept the capital budget in committee until he was assured that those amendments wouldn’t make their way back into the bill.)

You could heat Juneau with the paper that was printed this year alone devoted to charts and graphs and powerpoints. Citizen legislators worked extraordinarily hard to figure it all out. And still nobody really knows—in this state at least– what the tax break does or how it’s going to work.

But what is clear is that since the state raised oil company taxes in 2007, Alaska has been used by the majors as a cautionary tale around the world of what happens when an oil province dares to take on an industry that feeds it, literally. Raise our taxes and we’ll decrease production, the majors said. We’ll starve you out, they warned. Just look at Alaska, they said.

It may be true. It may not be true. The oil is indeed running out, as it was bound to. Prudhoe Bay—the largest oil field in North America– began pumping from its vast reservoir in 1977. Most of the easy oil from that field is gone. New technology is supposedly available to squeeze more oil out of the ground, but that could only happen if the tax rates were lower, oil companies argued. And argued, and argued. And they did that here in the state with enough Chinese-water torture type insistency that the citizens here said enough.

Now eyes, both here and around the world, are going to be on the industry, to see if those companies will make good after such a large tax break. The testimony that it wasn’t likely big enough to stem decline will be lost on most. All the public will remember is that Alaska reached out its hand. If they don’t take it, then they’ll likely be punished, again, as they were in 2007 after Palin took over.

And it will happen sooner or later. The pendulum will swing back. And forth. Again and again, as it has been swinging since Prudhoe was discovered in 1968. Whole legislative sessions will be devoted to oil taxes. The best minds in the state will be busy working on it. Bumper stickers will be plastered on cars and slogans will be used to further careers, and the state, as it has been, will be consumed. We will all be consumed with oil taxes as our schools continue to be some of the worst performing in the country, as our sexual and domestic violence rates are some of the highest in the country, as our citizens continue to be divided. We will all be consumed with oil taxes as the oil steadily runs out, and we will be consumed with oil taxes as we don’t try other things, don’t try to get our money elsewhere, as we don’t plan for what happens when that day comes.

Indeed, even before the Senate concurred with the House changes to SB 21 on Sunday afternoon, there was already talk about plans being made by the majors to come back next year to get some additions and changes that they were hoping for. That will likely be another fight. It will likely last for years.

Contact Amanda Coyne at


The session that dismantled Palin’s legacy

It took awhile to purge Gov. Sarah Palin. It took longer than people expected. After all, what could one governor do to a state in less than two years?  Ask those who are busy in Juneau dismantling her two big initiatives, ones that she ran on as a vice presidential candidate: oil taxes and her attempt to incentivizing the building of a large natural gas pipeline.

Palin, for better or for worse, was an active governor at a time when the public was ready for action. As most know, she swooped in on the heels of what appeared at the time to be an Alaska-sized corruption scandal. She swooped in on the heels of a split in the Republican Party between the more urban chamber of commerce Republicans and their more ideological brethren. She swooped in during record high oil prices. She swooped in as the first female governor. And swooped with the public firmly on her side.

That gave her a lot of leverage to do big things, for what at the time seemed to many like really good reasons. She pounded the oil industry with a huge tax increase, and she passed law to get a large diameter natural pipeline built by sidestepping the industry. Now Palin in the rear-view mirror, oil production on the decline, and a large diameter pipe dream once again sound asleep within the arms of the industry–those so-called good ideas don’t seem so great anymore.

None of the alternatives are perfect — any policy in reaction to another piece of policy won’t be — particularly ones that’s been leveraged on the state. More specifically, the oil tax revamp probably gives too much away to the big producers — ConocoPhillips, BP and Exxon. It will likely result in budget deficits before production increases, if production does indeed increase. And it has, once again, showed how weak the state has become by allowing itself to be nearly completely dependent on oil revenue. (It should be noted that if oil prices drop, which many predict, this bill gives the state more protection than current law.)

And then there’s House Bill 4 which will facilitate the development of a small diameter pipeline running from the North Slope to Southcentral Alaska. The bill provides funding to bring the project to open season, at which time the economics will dictate if it makes sense, or at least tell us what kind of state dollar infusion it will need. In other words, it’s not a done deal yet, but it’s a big statement that the big dream of a big pipeline is all but dead, as is Palin’s big pipeline plan, AGIA.

HB 4 too is less than perfect and it only passed in tandem with, SB 23, the LNG trucking bill, which has its own problems. The plan to truck LNG to Fairbanks is just a band aid. Everyone knows that, and an expensive one at that. There are likely cheaper, more efficient ways to help solve Fairbanks’ energy crisis. But state leadership is so weak, ideas have been put off for so long, it’s the only short-term, politically palatable solution left.

In any case, no matter the flaws in the bills, this legislative session put the last nail in the Palin-regime coffin. And she’ll never again be able to point to what she did in Alaska to further any political aspirations she has left.

Contact Amanda Coyne at