Gov, challengers square off for support at oil and gas conference debate
Two challengers for governor took their swings at the incumbent during the Alaska Oil and Gas Association’s gubernatorial debate on May 31 yet the mood was generally light and there was even a fair amount of laughter.
But then again, it is still early in the campaign and the full field wasn’t yet set as former U.S. Senator and Anchorage Mayor Mark Begich entered the race on June 1, sending Walker out of the Democrat primary and into an independent bid for reelection with running mate Lt. Gov. Byron Mallott. Later that day, former Lt. Gov. Mead Treadwell also announced he was entering the GOP primary.
Journal Managing Editor Andrew Jensen moderated the hour-long debate that focused on oil and gas production, government regulation, the Alaska LNG Project and a few non-related topics submitted from the audience and those watching on Facebook Live.
Republican hopefuls Scott Hawkins, an Anchorage businessman, and former state Sen. Mike Dunleavy of Wasilla also stressed continued budget cuts and the prospect of growing the state’s resource development economy by making permitting more efficient.
Walker noted the reduction in future deficits via the passage of his landmark legislation to employ a 5 percent structured annual draw on the Earnings Reserve Account of the Permanent Fund and his efforts to lobby federal officials on behalf of ConocoPhillips regarding the company’s North Slope projects.
“We closed 80 percent of the fiscal gap. That’s a significant step for the future of (the oil) industry and the future of this state,” Walker said in his opening remarks, adding that he ran for governor in 2010 and 2014 on a resource development platform.
Dunleavy and Hawkins are vying for the Republican nomination.
Gubernatorial candidate and longtime Republican Kenai Peninsula Rep. Mike Chenault was unexpectedly absent from the debate and announced late Thursday night he is withdrawing from the race.
Dunleavy and Hawkins also questioned the role Chinese state-owned companies might play in the $43 billion Alaska LNG Project if it is built.
In November Gov. Bill Walker and Alaska Gasline Development Corp. President Keith Meyer signed a nonbinding framework agreement to have oil and gas giant Sinopec buy LNG from the project with the Bank of China and China Investment Corp., the country’s sovereign wealth fund, financing up to 75 percent of the project’s cost. The deal also leaves open the prospect of Sinopec having engineering and construction roles in the project.
Dunleavy said he voted for gasline legislation in 2014 that made the state a partner in the project with BP, ConocoPhillips and ExxonMobil, but he questioned how Walker’s administration has handled it now that the state is leading the gasline effort.
“I don’t have faith in the administration that they’re going to be able to pull it off,” Dunleavy said of Alaska LNG.
He added that if the state is not cautious in negotiating contracts with the nationalized Chinese companies “they’ll tie us in knots.”
Hawkins said it is very important for the private sector to lead construction and management of the gasline.
Walker responded that China is already Alaska’s largest trading partner, buying much of the state’s seafood, minerals and timber.
“When we start drawing lines and saying ‘you can invest, you can’t invest,’ I think that’s a dangerous road to go down,” the governor said.
Hawkins, the former CEO of the Anchorage Economic Development Corp. and the owner and founder of Advanced Supply Chain International, a logistics firm, contended the state has a “toxic reputation on Wall St.” because Walker vetoed full payment of oil and gas tax credit certificates in 2015 and 2016.
The vetoes, totaling $630 million — and followed by the Legislature’s statutory minimum tax credit appropriation in 2017 — caused small explorers and producers that took out loans underpinned by the credits to default on their payments, ostensibly leading to a credit freeze on the industry in the state.
Hawkins called the credits a “tremendously successful” program. He said the credits, which in some instances had the state fund more than two-thirds of oil and gas projects, were probably overly generous but he would be open to a similar program in the future.
In response to a question regarding whether the state’s royalty share of North Slope gas should be sold to in-state consumers at a discount to maximize the public benefit if the gasline is built, Hawkins said it would need to be sold at market rates.
“Generally, it’s a bad idea to subsidize things,” he added.
Walker noted that his administration led the push to pass House Bill 331 this year, allowing the Department of Revenue to sell bonds to pay off the nearly $1 billion outstanding credit obligation once the Legislature passed a long-term solution to the state’s deficit. HB 331 requires the companies to accept a discount of up to 10 percent on the value of the certificates they hold to prevent the state from incurring additional interest costs.
A lawsuit has been filed against the administration challenging the constitutionality of the tax credit bonds, as well. Walker hasn’t signed the bill yet.
Hawkins also expressed concern over the Alaska Industrial Development Authority’s strategy for getting more natural gas to the Fairbanks area since Walker took office. AIDEA purchased Fairbanks Natural Gas for $52 million in 2015, a deal that set the stage for consolidating the area’s gas utilities, which Interior Energy Project leaders believe will result on operational efficiencies, economies of scale and ultimately lower gas prices to consumers.
He said the project is important but it’s become “too government driven.”
Dunleavy called it a “work in progress,” while Walker highlighted that regardless of the economic challenges of the project brought on by lower oil prices it is a fundamental way to improve air quality in Fairbanks, which is often the worst in the country during the winter months.
Elwood Brehmer can be reached at [email protected].