The Challenge

Does the State of Alaska have gas to sell?  It sure does, and plenty of it.  Oil too for that matter.  So, why don’t we have a gas line already?  Why hasn’t oil throughput in the pipeline increased?  Why is the State facing a deficit upwards of 3.5 billion dollars?  Why is the State not rolling in resource extraction revenue money?  It is a combination of past political actions.  Bottom line, former Governor Parnell and his cronies sold the farm.

The Factors

Oil tax reform commonly known as Senate Bill 21 (SB21), government bloat under Parnell, state spending increases under Parnell, a naturally increasing need for public services due to population growth, and the political smoke and mirrors served up by the super majority the last few years resulting in a potential gas line commonly known as Senate Bill 138 (SB138) all combined to result is a 3.5+ Billion dollar deficit.  The deficit necessitates extreme cuts to state spending – much too fast.  Extreme cuts to state services alone will never resolve this deficit.

The Conundrum

The State needs a gas line to generate a new revenue stream, create jobs, and provide affordable energy to homes or businesses. The State has no mode of delivery to move gas to market on its own terms, nor the resources necessary to build a gasline.

To meet this need, the super majority, under former Governor Parnell’s leadership, passed legislation bringing the State into a very inappropriate partnership with the Big 3 oil producers and TransCanada, a pipe line builder, under Senate Bill 138 (SB138).

How SB138 moves the State from a pipedream to a pipeline reality is now very political issue.

The Political EnvironmentWaiting is over 

Voters are split on its chosen leadership as evidenced in the very narrow margin of victory from last November’s general election.  The majority of voters, 48.10%, chose Governor Bill Walker to former Governor Parnell’s 45.88%.  A small share of votes, 6.02%, went to others.  The majority of Alaska’s voters chose Unity as the path forward.

However, Unity does not reign in the Legislature.  Not much changed in the House and Senate where political division is alive and well.  Only eight new Representatives were sent to the House to sit with 32 others.  Governor Walker won the popular vote in 12 out of 20 senate districts, leaving 8 districts that wanted the Parnell administration to continue.

To make matters worse, only six senators come up for re-election in 2016.  Two are from districts where the popular vote was for Parnell.  If either of these two senators want to get re-elected, it is their constituency that must like what they do now, during Session 29.  Those two are Senators Charlie Huggins, GOP Leadership – Rules, and Senator Lesil McGuire, Judiciary Chair.  It will be interesting to see how these two senators cooperate, or resist, the ideas put forth by Governor Walker this session.

Almost all House representatives will come up for re-election in 2016, so, how cooperative the representatives from districts where Parnell won in the general election will be interesting.

Adding to the State’s political environment, and impacting the current critical need for affordable energy in the Interior, is a voter initiative passed in 2002 when 138,000 Alaskans said they wanted Alaska to build a gasline to tidewater.  Since then, the State was redistricted (some say gerrymandered, some say engineered by Parnell).  In any case, redistricting effectively killed the initiative and the project.

This year, oil prices took a nose dive, and that brings us to the current state of affairs.

The Challenge

The State finds itself with a crippling fiscal deficit, natural gas is still stranded, and it is neck deep in an inappropriate partnership with the Big 3 oil producers and TransCanada to build a gasline.  Communities are still in critical need of affordable energy, especially home heating fuel.  The Interior is currently in the news.

The Crazy Partnership (SB138)

State issues are exacerbated by its sovereign responsibilities to tax and regulate every industry in the best interests of its people.  This public responsibility is not shared by for-profit entities.  Therein lies the root of my problem with the SB138 partnership; where the state sidles up for a minority share with the private sector to build the Alaska Gasline.

We can all agree we need a pipeline to generate public revenue.  However, when one connects the dots from SB21 (the revenue side) to the budget (the spending side), one can see what causes the current paralyzing deficit dominating the news.  This is a reflection of past legislators’ disregard for responsible fiscal management as it relates to the oil tax revenue established by Senate Bill 21.  This legislation as related to state spending needs was shortsighted at best.  Most of the legislators that passed SB21 still sit in the House and Senate.

That brings us to now, Legislative Session 29.  It is a session critical to our future.  It will be a pivotal in state history.  It is time for vision and leadership from the elected body.

Senate President Kevin Meyer recently announced that all items to address the deficit are on the table.  I say, prove it.  Legislators, open oil tax and tax credit legislation and fix it.

The current deficit resulting from SB21 and other factors needs to be addressed this session under “Unfinished Business.” If the legislature would address the tax/revenue side and cooperate with downsizing of government, already initiated by Governor Walker, it would take care of the deficit without crippling the state.

There really is no other long term future for Alaska without adjusting oil industry taxes and/or tax credits.  In three years the State savings will be gone, and the state could enter into a severe depression.

We have a bloated government and an economic bubble that is about to burst with this year’s budget cuts, a situation which has landed squarely on Governor Walker’s shoulders.  This is not fair, and the Legislators need to step up to the plate and do their part.

The State’s thinking must run independently from the private sector.  The State must define its needs, know its revenue streams, and approve its spending plan within the parameters of self-governance; not in partnership with the private sector.

The private sector is beholding to its shareholders and must produce the best bottom line possible.  It is all about profits; that is what corporations do.  Oil industry spin would have us believe it has been a good corporate citizen.  I say it is foolhardy to expect industry motives to be about anything other than profits.

I remember with great sadness the Exxon Valdez oil spill when Prince William Sound was befouled with crude oil.  I remember birds and sea animals blackened and dying from oil pollution.  Since then, Exxon (a partner under SB138) has not settled up with all Alaskans over damage claims for the last 20 years and counting.  Pay up Exxon, settle your debts.

I also remember a day not that long ago when television news crews showed the FBI storming and confiscating bankers’ boxes full of evidence from Legislative offices in Juneau.  The industry and the Corrupt Bastards Club stole away our representative form of government with bribes.  Small bribes.  It was an embarrassing and sickening scandal.

More recently, oil industry giants spent millions to buy the vote on the referendum “Vote No on #1”.  Major industry contributors wanted to insure the favorable taxes secured under SB21 remain the law of the State.  The State deficit is not their problem, rightfully so.

The State, on the other hand and unlike the private sector, has public responsibilities.  For example, this State cannot stand by and watch a village run out of fuel exposing village residents to freezing temperatures in the winter – and do nothing.  The State cannot stand by knowing people are being forced to choose between buying fuel or groceries – and do nothing.  The State cannot knowingly allow small economies to dry up because of unaffordable energy – and do nothing.

As public servants, state officials cannot, or should not, do things common in the private sector, like enter into secret agreements.  Furthermore, the state should not compromise its sovereign role as it applies to all industry taxation, property assessments, or the development of regulations needed to protect workers, general public, or environment.

It is my expectation that elected leadership maintain a robust vision for all Alaskans as it looks for solutions to these and other issues in its precious role of governance and public service.

This brings us back to the critical need for affordable energy in the Interior.  As good example of the state’s responsibly to its citizens, Governor Walker is currently exploring alternatives aimed at easing home heating costs in Fairbanks.  When accused of state overreach, the Governor said it best in this Newsminer a article   “We don’t believe we’re in any sort of overreach situation,” he said. “It’s time that somebody reaches out to Fairbanks, and that’s what we’re doing. Any reaching we’re doing is reaching out to the Interior energy consumers to bring some relief to them.”  I agree Governor.

Now that is leadership and that is what I want from leadership.  Thank you Governor Walker!

Alaskans know the devil is in the details of a big project like this.  Alaska has many subject matter experts to work out the details if this goes forward.  Many questions come immediately to mind.  I’m sure thousands more will come.  All the alternatives must be vetted; a thousand questions must be answered.

The first questions about this project, or any big project, always go to the costs versus benefits issues.

  • Will the proposed gas grids ever pay for themselves? If not, will the utility forever remain a publicly subsidized utility?  Is that okay with voters?
  • Will the proposed gasline infrastructure produce clean convenient gas cheaply enough to compete with free wood and/or low cost wood pellet heating for a relatively small pool of potential customers?

Home conversion costs for the customer is a subject unto itself.

  • If ever natural gas is available at an attractive price, what is the estimated cost of home conversion from wood and/or propane to natural gas?
  • If the cost of home conversion is prohibitive to individuals (thousands $$), might the state provide individual grants to offset the costs; much like the federal weatherization subsidies? Are agency specialists looking into this option?

It is my hope the general public pays attention, stays involved, connects the dots, asks important questions, and supports the needs of community. What’s good for the Interior, is good for the rest of us.  In reality, we are a very small state.

I support affordable energy for the Interior.  The next community in crisis may be my own.


LeadDog Alaska

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