Here’s the most terrifying chart of the day, courtesy of Business Insider, illustrating a story about how crude dropped below $80 a barrel on Monday. Please tell me again why anyone wants to be governor?
Most terrifying chart of the day: Crude drops below $80
After blowing a few hundred million studying how to pass gas in Alaska,
Parnell’s team of brilliant boondogglers have finally decided on a design of their new AGDC/ASAP administrative headquarters >>>
http://t.wallpaperweb.org/wallpaper/miscellaneous/1024×768/MCEscherAscendingDescending1960.jpg
…….. ;-P
Amanda,
I cannot control what has been done to us by the current crew in Juneau. Remember a single political party has absolutely controlled the House and Governor’s office for the past four years and the entire state government for the last two years. They have hyper- inflated the economy as did their predecessors in the 1980’s and I fear with falling oil prices the state economy will again hollow itself out. You would think they would learn. This time the situation is much more perilous because in the 80’s we had the production levels so we only needed an increase in price. Now we have to realize both increased production and price and that will be much more difficult.
I hope you can afford a home. Perhaps you shoule wait patiently. I bought a condo in 1983 for $83,000. Then the price of oil collapsed and when I moved to Bethel in 1989 and turned it into a rental the fair market value was $21,000. Lost money on that place when I finally sold it but somebody got a deal. Alas, the pressure on the middle class is unrelenting. Yesterday I got notice that another 5% increase to my Enstar charges has been requested and I can add that to over 50% cost of gas incurred over the last year.
Any damn fool can spend money yet that seems to be the chief qualification we want in our politicians and to be reminded that they have those “God given, rock solid conservative family values”. Maybe next time around we should expect more.
Forecast you are wrong. A customer cannot purchase a product or commodity without knowing its price. This in turn requires the seller to get a reliable cost estimates To get a credible and reliable cost estimate, somebody has to do a ton of engineering and design work and they need to go through the permitting process to get a handle on where and how they can build the project and to understand how the mitigation measures and stipulations will impact the project. This process costs well over a billion dollars and takes years of methodical work. Currently under Parnell’s leadership we are well on our way to get a reliable cost estimate and the necessary permits.
Walker lives in a fantasy world where a $50 billion or so mega-project can forego engineering and design work because somebody did a study back in the 1990s. Study hall is over baby! Time to get building. This thinking is insane.
Answer this: how does Walker know what price to sell Alaska’s gas if we don’t have a final cost estimate on the project? And how do they Asian customer’s know if the project can be constructed if we don’t have the permits – i.e., why would they offer to buy something if they don’t even know if the federal government will issue permits?
I will eagerly await your answer.
Of course the tax rate absolutely matters. But we need to look at the entire picture. Tax rates + credits + deductions = net revenue. Right now it is a verifieable fact that we are bringing in more revenue with SB 21. Byron Mallot gets it. Dermott Cole even conceded it.
But my main point is that ACES was a ticking time bomb. We provided a ton of subsidies on the front end for the Big 3 which simply was not sustainable given production declines, falling prices (but nobody could predict this), cost rising, and spending increasing. In the current price and cost world that we inhabit we would have gotten creamed with ACES. This was one of the selling points of SB 21 – but the press never covered it: ACES was not sustainable. We were heading off a cliff – we couldn’t keep covering between 50-75 percent of Exxon, BP, and Conoco’s capital cost.
We also had to change the system because we simply weren’t attracting enough capital and companies to Alaska. This has all changed – especially on the capital market side. The markets saw the change and they now want in. This is great for independent companies who now have access to much, much cheaper capital, which in turn allows them to drill and develop, which in turn means more jobs, production, and revenue. In fact, 15 companies are pursuing exploration and development programs on the North Slope. This is great news.
There is nothing that can begin to support the large state and municipal government Alaska has except crude oil. Absent some event that drives prices to $150 we can expect smaller government in the future.
Government has grown so large that debating a state sales tax and/or a state income tax is not worth the time and strife. Our state economy is just too small and our government too large for a broad-based tax to matter all that much, particularly net of bureaucracy costs. It would take 700 new state employees to collect a $400 million income tax when we just provided a larger amount than that to the IRS as the tax on the $1884 PFD each of us received. The IRS is the single largest recipient of the PFD. Remember, the gas line promoters are telling us that the gas line will bring in ten times the unrestricted general fund revenue that a personal income tax would.
Smaller government is not the end of the world but municipal governments in particular will make their residents think it is. There is probably no other state in which combined state and municipal government employment exceeds all agricultural, manufacturing, transportation and construction employment. Clearly we cannot replace crude oil by taking in each other’s washing.
Will local government services in the unorganized borough continue to be paid entirely by state petroleum revenue? What will the state decide between eliminating state programs and continuing to give cash to organized boroughs and cities? Will the state remain in the residential mortgage business, the ferry business, the college business, the campground business, the railroad business, the salmon ranching business, the business finance business, the commercial fishing and fish processing banking business, the municipal government investment banking business, etc. etc? Will the state cut loose the myriad of employers in the public employee retirement systems and pay only its own unfunded pension liability? Or will the imagined scarcity of energy in the Far East cause the Natural Gas Gods to save us in the nick of time?
Jon, A project begins with the customers. When Bill Walker brought the customers here Parnell Ignored them.
You must not be in the private sector. When you ignore your customers, you go broke. Just like what Parnell is doing to Alaska.
Deficit spend much?
Wups.. all thumbs… sorry for the double post
Amanda, You are quite correct in your estimation of general economic impact that falling crude price will have.
The question of the day is what should we do about it and the obvious four answers are:
1. Exit the oil business and replace that income with [ fill in the blank ]
2. Rob the Permanent Fund and pretend that every thing is Ok…
3. Double down. Go into oil and gas production and minerals production in a very big way.
4. Depend on “tourism” and “green” economy to pay the way. (It’ll be a first since it never has)
What’s the right answer?
Beats me but I can assure you that while number 2 above is the one you will hear the most about in the near future it is really not a solution and number 4 above is also highly suspect since I’ve been hearing all about how workable a green tourism based economy would be since Mo Udal and Jimmy Carter locked up half of Alaska and to be frank, It just don’t pay the bills.
Amanda, You are quite correct in your estimation of general economic impact that falling crude price will have.
The question of the day is what should we do about it and the obvious two answers are:
1. Exit the oil business and replace that income with [ fill in the blank ]
2. Rob the Permanent Fund and pretend that every thing is Ok…
3. Double down. Go into oil and gas production and minerals production in a very big way.
4. Depend on “tourism” and “green” economy to pay the way. (It’ll be a first since it never has)
What’s the right answer?
Beats me but I can assure you that while number 2 above is the one you will hear the most about in the near future it is really not a solution and number 4 above is also highly suspect since I’ve been hearing all about how workable a green tourism based economy would be since Mo Udal and Jimmy Carter locked up half of Alaska and to be frank, It just don’t pay the bills.
Lynn, never mind that in reality there is no cheaper gasoline or heating oil to be purchased……
Nome: $5.94
Fairbanks: $3.70
Anchorage: $3.43
Juneau: $4.29
@Lynn. Maybe I’m speaking for myself here. I’m considering buying a myself a nice little house–I envision a funky little cabin in Spenard, but will probably have to settle for a sterile condo someplace–and my little business here depends on a strong economy. And there is no denying that Alaska’s economy is tied to the price of oil. I suspect oil prices will continue to decline, if nothing else because some OPEC countries get really nervous when the US talks energy independence.
And Jon Katchen is it?
From a public policy perspective, i.e. net revenue, the tax rate absolutely matters in this context.
The amount of revenue we collect directly affects the state’s fiscal status.
And it’s ability to service proposed gasline debt.
Game over.
There are still deductions and credits under SB21 and in fact they’ve increased!
The Juneau Empire today endorsed Governor Sean Parnell. Their choice didn’t seem to come easily; however their process seemed deliberative, unbiased and rational. They made the right choice for the right reasons. Like me, they recognized that Walker was a man without a plan and had little or no specifics behiind his political rhetoric. Furthermore, they recognized hiis gas pipeline plan as being perilous, particularly in relation to Parnell’s progress. I would urge people to read it:
http://m.juneauempire.com/opinion/2014-10-28/empire-editorial-governor-alaska-parnell-right-pick#gsc.tab=0
That is a valid question Amanda because the character of the office of Governor of Alaska is now changing. It is no longer the fount of money for all, especially those who are poltically connected. This news might be “terrifying” to our Legislators and Governor – as it should be. That terror is a self inflicted wound; however, I am not terrified when I can purchase cheaper gasoline nor or those who can purchase cheaper heating oil.
The Federal Energy Regulatory Commission turned Walker’s plan down. Nuff said.
Your numbers are not right. The tax rate is based on the Production Tax Value of a barrel of oil – not the price of oil. At today’s prices, the PTV would have set the tax rate at 25 percent under ACES. But ACES also allowed companies to spend down their tax liability with deductions and credits, which in turn means that we were giving Exxon at least 45 cents for every dollar spent. With the billions being spent on the North Slope this is a huge amount of money that we pushed across the table. The point is you cannot just look at the effective tax rate when comparing the two systems, you also need to take into account ACES’ subsidies / incentives.
Forecast – Walker brought non-binding expressions of interest in 2012. This isn’t a plan. It is meaningless PR. He had nobody lined up to build an LNG facility and without one, there was no way to get an accurate cost estimate. This why nothing happened in 2012 – Walker couldn’t deliver.
Parnell didn’t kill a gas line – Walker never had a gas line. Walker had no permits, no credible buyer, and no gas. The only thing to come about Walker’s empty pipe-dream was a hefty salary, courtesy of the City of Valdez tax payers.
That’s BS.
DOR estimates $475 million at these prices, that’s with $26 per barrel taxable value.
And only a 10.4% tax rate — BEFORE credits which DOR estimates to be $1 billion.
Under ACES the rate never dropped below 25% and at around $70 ANS price was closer to 30% before credits.
You guys are bumbling fools. Let me guess… homeschooled?
All I can say is that its a good thing SB 21 is in place. If ACES were still in place we would have lost more than 200 nillion dollars in revenue. Why doesn’t Hollis French, his buddy Les Gara and the other liberals opposed to our resource extraction economy ever point this out?
If only Parnell had not killed a gas line. Bill Walker brought the markets here in 2012. And Parnell refused to do anything. We need that gas line revenue!
Bill Walker also brought the market here in 2011. And in 2005. We need a governor that is not a sock puppet of Big Oil.
http://www.interiorenergyproject.com/Resources%20and%20Documents/12182013AKRR.pdf
Crude Oil is obsolete & Big Oil is Stuck on Stupid
http://www.sfgate.com/business/article/Natural-gas-to-1-gasoline-5701521.php
Walker/Mallott-2014