AJOC EDITORIAL: Time for governing, not grandstanding

The state may technically own 25 percent of the Alaska LNG Project, but Gov. Bill Walker now owns all of it.

With his decision to fire three Alaska Gasline Development Corp. board members and his instruction to new cabinet members on the board to not sign confidentiality agreements regarding the Alaska LNG Project, Walker has injected an unnecessary level of uncertainty into the most critical endeavor impacting the state’s future.

The state no doubt has a spending problem, but with oil prices in the tank and not projected to recover anytime soon, it also clearly has a revenue problem.

State savings are sufficient to weather the price storm for now, but the Alaska LNG Project is the only thing on the horizon that can both generate billions in new revenue annually and benefit Alaskans with a low-cost source of energy.

During his campaign, one of Walker’s pledges was to continue the path set forward in Senate Bill 138, which passed by a wide, bipartisan margin in 2014 and has advanced the goal of North Slope gas commercialization further than any previous effort with hundreds of millions in spending already by the major producers.

Walker has the right to shape the AGDC board membership as he sees fit, but the order to not sign confidentiality agreements in the absence of revealing an alternative method of protecting proprietary information for both the state and the private companies is troubling.

Taken in isolation, Walker’s action regarding the AGDC board is disturbing enough, but industry has good reason to once again question the stability of the state investment climate in combination with other recent moves by the new governor.

There was his op-ed in the Alaska Dispatch News in which he ginned up lingering resentment over the oil tax reform passed in 2013 and upheld by the state’s voters last Aug. 19. Walker wrote that the state would pay out more in tax credits than it will take in through the production tax during the current fiscal year.

However, that is a function of collapsing prices, not a deficiency in the tax code. Walker did not write that under the current system that he also pledged to abide by during the campaign, the state is taking in more revenue at current prices and paying out less in credits than it would have under ACES. Production is also better than forecast two years ago thanks to the new investments spurred by oil tax reform.

Painting such an incomplete picture of the state revenue situation — Alaska will take in about $2 billion from other revenue sources tied to oil — needlessly generates populist anger against the oil producers and the previous administration.

After calling the credit system “irresponsible” and “unsustainable” in his op-ed, his response to a question from APRN reporter Alexandra Gutierrez about whether he planned to introduce any changes to the state tax system was classic Walker: “Nothing maybe.”

That is hardly reassuring.

Walker’s only press conference so far has been to announce a memorandum of understanding with Japanese consortium REI, which is seeking natural gas supplies to replace nuclear power.

REI’s interest in buying Alaska’s gas is welcome, but as a potential customer it is seeking the lowest price possible while the state’s responsibility — along with the producers’ to their shareholders — is to get the best possible price.

Then there is the abrupt firing of Transportation Commissioner Pat Kemp after he submitted reports on the Juneau Access road and the Knik Arm Crossing that included the merits of the projects and the potential federal repayment penalties if the projects were canceled for what could be deemed “political” reasons.

Kemp was unceremoniously dumped days later after putting off his retirement at Walker’s request to serve the state during the transition from Sean Parnell.

Walker’s spokesperson Grace Jang told reporters that Walker wanted commissioners who “align” with his priorities and that Kemp knew the projects were being targeted for cancelation.

If Walker wanted a report to explain why the Juneau road and Knik bridge should be killed, he should have asked for that. What it appears is that Kemp was fired for not telling Walker what he wanted to hear. It is especially ironic given Walker’s claimed dedication to transparency that Kemp was fired after presenting the merits of the projects and the costs of terminating them to the public.

Again, it may serve a populist purpose to chop $8 million from the Ambler road permitting process or $20 million for Susitna dam studies from Parnell’s budget, but those cuts achieve nothing in fixing the state budget problem that is being driven by formulaic increases in the operating budget tied to Medicaid, education, personnel costs and pensions.

Those are the fiscal realities Walker should be presenting to the public rather than implying that our deficit is the result of oil tax credits.

For someone who touted 30 years of attempting to commercialize North Slope gas during his campaign, we wonder why he hasn’t outlined his plan to finish the job and allay concerns among the state’s private partners and the Legislature.

It is hoped that Walker is not rearranging the Alaska LNG Project parameters simply because he doesn’t want to follow the path left to him by Parnell, who would naturally share credit if the gasline eventually gets built.

That would hardly live up to his campaign motto to put “Alaska First.”

Updated: 
01/15/2015 - 8:28am

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