Editorial: Cuts to rail are a betrayal of federal commitments

For those of us among the vast majority of Americans who believe the current national debt and budget deficit are an immediate threat to our future prosperity, nothing is quite so maddening as the unending stream of red ink pouring out of Washington, D.C., and the political cowardice that allows it to continue unabated. We’re told that actual, tangible budget cuts are impossible and the best we can hope for is a cut in the rate of growth even as we spend $4 billion more per day than we take in as revenue. Nearly as infuriating is that when Congress isn’t wildly spending money we don’t have, its members are proposing cuts that don’t make any sense, are meant to score political points or are just flatout intended to settle old grudges. The current funding cuts facing the Alaska Railroad Corp. certainly fit into a couple of those categories, most notably in the Doesn’t Make Sense Department. The future of the Alaska Railroad — and by extension vast realms of the state economy and freight system — is in jeopardy because the Senate stripped out nearly all of the Federal Transit Administration funding it has received since 2005 in a two-year surface transportation bill passed in March. The cuts, which could amount to $30 million per year and could take effect this summer if the Senate language passes, leave the railroad without the ability to pay off its capital improvement bonds or comply with an unfunded federal mandate to install Positive Train Control by 2015. If the Alaska Railroad doesn’t have Positive Train Control, or PTC, installed by 2015 it will no longer be able to offer passenger service. ARRC has already spent $40 million on the $100 million PTC installation. (PTC was required in 2008 legislation passed after three deadly rail accidents. It is a GPS-based system that can override the train controls if the operator is unresponsive or an accident is impending.) Alaska Sens. Lisa Murkowski and Mark Begich voted for the transportation bill that cuts the railroad funding, but not without introducing amendments that would have prevented such deep reductions. The amendments failed to pass, partly on the mistaken belief that the Alaska Railroad funding is an earmark. Alaska doesn’t have a lot of room to point fingers about earmarks after the success its powerful former committee chairmen led by the late Sen. Ted Stevens and Rep. Don Young had in steering billions of federal dollars into the state. However, the only reason the Alaska Railroad is mentioned specifically in the existing surface transportation law is because it receives money for fewer track miles — not more — than other rail systems even though it qualifies by providing year round public transportation from Seward to Fairbanks. After only 10 percent of the railroad’s track miles (those around Anchorage) were considered eligible for FTA funding in 2000, Young, as Transportation Committee chairman, attempted to get 100 percent of its track miles eligible for federal grant funding in 2005. The wrangling over the railroad funding apparently got pretty ugly in the Senate between Stevens and then-Banking Committee Chairman Sen. Richard Shelby, R-Ala., before a compromise was hammered out to make 60 percent of the Alaska Railroad track miles eligible for annual grant funding. Since then, the railroad has received $36 million per year, of which $16 million services the debt on the $137 million balance in capital improvement bonds, $9 million goes toward operating expenses and the other $11 million to capital projects. Based on the passage of the Senate bill alone, the bond rating for the Alaska Railroad Corp. was downgraded by Moody’s to negative in April. There’s no immediate impact on the debt service costs, but all other financial activities by ARRC such as obtaining short-term credit or using revolvers will now be more expensive if not impossible to obtain. This is just outrageous. The FTA approved the capital improvement bond sale in 2007 and the use of annual grant funding to service the debt. The bondholders bought the debt on those guarantees, and now Congress may force the Alaska Railroad to default on the bonds through no fault of its own by refusing to provide the funding it was promised. So to sum up: the Alaska Railroad already receives less money than it should be eligible for, it sold bonds based on assurances from the federal government that it would receive annual funding, and on top of that has an unfunded, $100 million federal mandate to install Positive Train Control or lose its passenger service by 2015. Makes a lot of sense, doesn’t it? Especially from a government that spent $10 billion-with-a-B in the 2009 stimulus bill on high-speed rail that’s going nowhere. Imagine what Alaska would look like without the rail system as it operates today. Just picture the 11,000 buses it would take to transport cruise ship passengers who now travel to Denali and Fairbanks every summer by rail. There is still time for Congress to do the right thing, and now is a good time to make your voice heard. Perhaps the fact that ratings agencies are now examining other rail bonds backed by federal guarantees will be the kick in the pants the conference committee needs to fulfill the obligations the government has made to the Alaska Railroad. The current extension of the surface transportation bill expires June 30. Congress comes back to session this week after the Memorial Day recess. Knowing how Congress works, if an agreement can’t be reached, another short-term extension that preserves the Alaska Railroad funding may get it through the end of the 2012 fiscal year Sept. 30. But even with a temporary reprieve, this fight isn’t going away. Alaskans need to keep vigilant to ensure the commitments made to the railroad and its creditors are honored.

EDITORIAL: Remember the fallen — today, and always

Everybody has an enemy, but I didn’t know anyone who didn’t like Brian. — John Cosato, Lucerne Valley, Calif.   Sgt. Brian L. Walker did have enemies, but they weren’t at Juan Cosato’s barbershop in his hometown of Lucerne Valley. Walker’s enemies were the ones who planted the improvised explosive device along a road in Bowri Tana, Afghanistan, that exploded on Mother’s Day while the 425th Brigade Special Troops Battalion was on patrol under his command. The battalion is attached to the 4th Brigade Combat Team (Airborne), 25th Infantry Division out of Joint Base Elmendorf-Richardson in Anchorage. The IED killed Walker and the vehicle’s driver, Pfc. Richard L. McNulty III, of Rolla, Mo., and wounded three other JBER soldiers. Walker was 25. McNulty was 22. It was the second deployment of Afghanistan for Walker, who joined the Army in 2007. It was the first for McNulty, who shipped out of JBER in December and was scheduled to return home in three weeks. McNulty’s wife since February 2010, Hannah, is due to give birth to their first child in June. He leaves behind his parents, a brother, four sisters and a heartbroken town of fewer than 20,000 that lost another native son, Sgt. Tyler Smith, on April 3 in Afghanistan. According to a friend quoted in Walker’s hometown California paper, the Army sergeant had also recently gotten married. Excruciating as it must be on any day to learn of the death of a loved one fighting 10,000 miles away, the pain of such news on a day we honor our moms is unimaginable. Mother’s Day will never be the same for the parents of Walker and McNulty. Nor will it be for McNulty’s wife Hannah, or his daughter Ella who will grow up without ever celebrating a Father’s Day with her dad. The tragic deaths drive home a powerful reminder: The enemies of Walker and McNulty — and of us back home who enjoy the freedom they are fighting for — don’t care what day of the week it is. And unfortunately, sometimes back home we don’t care about what day of the week it is either. We just know we have a three-day weekend. The stories of Walker and McNulty break our hearts because of the day their deaths occurred, and for that we are guilty of going about our daily lives without very often thinking about the men and women who serve, the risks they face and the sacrifices they and their families endure. Alaskans have plenty to celebrate over this long weekend with the return of long days and time with family and friends. We also should celebrate the safe return home of some 4,000 troops to Fort Wainwright in Fairbanks. But we also need to remember Brian Walker and Richard McNulty, and all of their band of brothers who don’t get the day off — or don’t make it back at all. Join the Wounded Warriors project to help the mates of Walker and McNulty who survived the attack. Support a veterans’ scholarship program for children like Ella McNulty who never get to meet their fathers. But whatever you do to celebrate, make sure to put the “Memorial” in Memorial Day — and give thanks for all those who serve year round.

Time to make voices heard on halibut bycatch

Something big is coming up, and I don’t mean a halibut. After years of study and foot-dragging, the North Pacific Fishery Management Council is finally considering reducing the outrageous amount of halibut bycatch in the Gulf of Alaska. What’s halibut bycatch? It’s what happens when a commercial trawler or long-liner tries to catch cod, pollock or some other species and, in the destructive, unsustainable process, the vessel catches halibut and other fish. Under current regulations, the trawl and long-line fleet can catch more than 5 million pounds of halibut bycatch, all of which must be thrown back, a rule meant to prevent them from profiting from bycatch. Many of these halibut are dead. Reduced to an acronym — “PSC,” for prohibited species catch — they sink to the bottom, utterly wasted. The NPFMC should’ve reduced halibut bycatch years ago. This bycatch is now affecting fishing opportunity and, more importantly, halibut productivity. A recent study found that 1 pound of halibut lost to bycatch equates to a loss of about 1.5 pounds of halibut in the halibut spawning biomass. Let’s put it another way: Trawlers, mainly targeting Pacific cod, are incidentally killing halibut, cutting into the number that you and I could be catching, whether we fish for halibut for sport, subsistence or commercially. What’s worse, the trawlers are killing a great many halibut before the fish are mature enough to reproduce. Most of us don’t see many trawlers, but they’re out there. Sometimes called draggers, they pull large nets through the water, either on the bottom or at mid-water depths. Some are small boats, operated by families out of Alaskan ports. Others are huge factory ships owned by foreign corporations and based in Seattle. The current regulation that allows a bycatch of 5 million pounds of Gulf of Alaska halibut hasn’t significantly changed since 1986 for trawl fisheries, where most of the halibut bycatch occurs. While that regulation remains unchanged, the portion of the halibut biomass available for harvest has declined by more than 50 percent in just the past 10 years. This decline has resulted in stricter regulations for fishermen and higher costs for everyone who eats halibut. In Southeast waters, it led to charter-boat anglers being able to harvest only one halibut less than 37 inches in length per day. Charter operators in Homer, Seward, Whittier and Valdez fear the same thing will happen here. At its June 6-12 meeting in Kodiak, the NPFMC will be considering cutting the halibut bycatch by a range of 5 to 15 percent. Let’s hope council members do the right thing and choose the 15 percent reduction. It’s time they stopped talking and studying and took action. What can you do to help? Visit the Alaska Marine Conservation Council’s Web page (www.akmarine.org), and sign onto their letter to the Council. Add a note, telling the Council to reduce the bycatch by 15 percent. Tell your friends to do the same. If you can, attend the NPFMC meeting in Kodiak. If you want to continue catching and eating halibut, here’s your chance to prove it.

EDITORIAL: With time right for LNG exports, Alaska is playing catch-up

Amid the rubble of the week that began with the collapse of the legislative special session was a piece of expected yet welcome news. The state approved a project plan amendment May 2 for TransCanada to formally shift its focus to an in-state, liquefied natural gas export project instead of a gasline connecting the North Slope to Alberta. The amendment — anticipated after the March 30 announcement by North Slope producers to pursue an LNG export line to Alaska tidewater — defers the requirement under the Alaska Gasline Inducement Act for TransCanada to file an application with the Federal Energy Regulatory Commission, or FERC, by this October. In terms of incremental progress toward the decades-old goal of commercializing North Slope gas, this announcement would surely be measured in inches. However, anything that moves this effort forward is a good thing because while Alaska geographically has a head start on its North American competitors to serve Asian markets, it is still playing catch-up in the race to export LNG. With the expanded Panama Canal set to handle massive LNG tankers beginning in 2014 and a glut of natural gas pushing domestic prices to a 10-year low, Lower 48 producers and their counterparts on the Canadian coast are angling to serve the Asian markets. On April 16, FERC issued an approval for Cheniere Energy to convert its import terminal in Cameron Parish, La., for exports. The next day, Sempra Energy Inc. announced a $6 billion LNG export project, also in Cameron Parish, and the third LNG export project planned for Louisiana. Two of the companies who have signed on to develop and market the Sempra facility are Mitsubishi Corp. and Mitsui & Co. Ltd. of Japan, a country Alaska has exported LNG to since 1969. Japan is a vast potential market as it moves toward conversion to natural gas in the aftermath of the Fukushima nuclear accident that followed the devastating March 2011 earthquake and tsunami. All but one of the nation’s 50 nuclear reactors are now idled, and imports of LNG surged 18 percent in 2011. That’s according to an April 27 Reuters report on Tokyo Gas Co. Ltd. and Sumitomo Corp. negotiating a 20-year deal with Dominion Resources Inc. to buy from its planned LNG export facility in Cove Point, Md. All in all, there are nine pending LNG export permits in the U.S. and another handful of potential projects in British Columbia that could compete with Alaska for Asian markets. A Brookings Institute study released May 2 recommended approving them all and letting the market sort itself out. One of those Canadian LNG projects is being contemplated by Imperial Oil Ltd. On the same day Alaska approved the TransCanada amendment, Imperial Oil CEO Bruce March said his company is considering LNG exports. The twist is that Imperial is 70 percent owned by ExxonMobil, which is partners with TransCanada under AGIA, and one of the Slope producers who have agreed an LNG export project is the most viable way to commercialize Alaska natural gas. The latest news coming May 8 is that the U.S. Export-Import Bank has approved a $3 billion loan to facilitate an LNG export project in Queensland, Australia, that would serve markets in China and Japan. The Ex-Im Bank action will allow American companies Bechtel International and North Slope producer ConocoPhillips to export equipment and services for the project Down Under. In short, Alaska does not have time to waste. That’s what was most frustrating about the state Senate refusing to even hold hearings on House Bill 9, which would have empowered the Alaska Gasline Development Corp. to pursue an in-state “bullet” line with a target of a 2013 open season and given AGDC a seat at the table for discussions on the LNG export project where it could leverage its work and the 417 miles of right-of-way it possesses. If Alaska’s state senators have an alternative way to get gas to state residents and relieve crippling energy costs, they have yet to present it. They appear content to place the destiny of the state in the hands of others, namely the North Slope producers some legislators so enjoy vilifying. The only thing this Senate appears to celebrate more than doing nothing is doing something shortsighted instead. Some criticism of HB9 was the cost of environmental impact studies required to prepare for an open season in 2013, yet the Senate voted 15-4 to spend as much as $430 million on one-time energy vouchers dispersed to Alaska residents regardless of need. It appears to escape the majority in the Senate that the high price of oil they depend on to justify keeping the status quo when it comes to production taxes is the very thing that is devastating the pocketbooks of so many in our state, or that indiscriminately shoveling $400+ million out the door without a long-term plan is the height of irresponsibility. So rather than do the hard work required to find solutions for the state’s energy needs, the Senate took the easy way out and tried to put a bandaid on a bullet wound that is bleeding Alaskans dry. Now that the North Slope producers and TransCanada have aligned on a vision to pursue LNG exports, the companies have additional benchmarks to reach by the end of September — identifying a project and a timetable. TransCanada is also required under the project plan amendment approved May 2 to submit a more detailed work schedule by early 2013. If the companies meet those benchmarks, natural gas taxes must be on the table for the 2013 legislative session. A stable, predictable fiscal regime is vital to making a large-diameter gasoline possible. Further, the current tax structure couples oil and gas production taxes and the state could stand to lose billions in revenue if gas is commercialized. Energy consultant Pedro van Meurs, who’s been retained by the legislature to advise on tax policy, said in February that the current regime is “the most nonsensical system in the world.” It won’t be a simple task to restructure Alaska’s production tax regime to facilitate a large-scale LNG project, and based on the last two years, the current composition of the Senate leaves little reason for optimism One encouraging event is on the horizon, though. There is an election in November.

Ire over profits another sign of an unserious debate

In the days before Gov. Sean Parnell abruptly pulled oil tax reform legislation from the special session he’d called barely a week earlier, the Big News of the week was the April 23 earnings report from ConocoPhillips. ConocoPhillips — the only one of the North Slope producers that reveals the results of its Alaska operations — reported $616 million in profits for the first quarter of 2012. Opponents of Parnell’s plan to slow the rate of decline in Alaska’s aging Slope fields through lower production taxes leapt on the report as proof that oil companies are doing just fine without it. It “blows a hole” in Parnell’s argument to lower production taxes, said Sen. Bill Wielechowski, D-Anchorage. So ConocoPhillips made $7 million per day in Alaska in the first three months of the year. So what? During the second quarter of 2010, ConocoPhillips made $381 million from its Alaska operations, or about $4 million per day. Is that OK? Still too much, or just right? What would it prove if ConocoPhillips was making $5 million per day, or $8 million? If the company can make it on $7 million per day, surely it can make it on $6 million. Perhaps legislation is in order to raise taxes further. That self-appointed arbiters of What’s Fair in the legislature and the media are still obsessing over Big Oil profits in the name of cheap soundbites and easy headlines in the second year of this debate shows a fundamental unseriousness about what the discussion should be about. (It’s also more than a little inconsistent that the legislature has no qualms about subsidizing a multi-national like Repsol with exploration credits while politicos like Wielechowski make hay out of the ConocoPhillips profits that pay for them.) The issue isn’t about how the state can best maximize its take at high oil prices or how much profit is enough in a volatile global market, and it shouldn’t be about atoning for real and perceived past sins of politicians and producers. A tax structure that is confiscatory, punitive, or both, is quite simply a terrible basis for public policy. The state should want ConocoPhillips to be highly profitable. The legislature should want the state to be the most profitable, best place in the world to do business. That can be done without handing over state sovereignty, and without creating a system where producers can benefit more from increasing their upstream costs by $1 than they do from a $1 increase in the price of oil. Instead, we’ve heard time and again that Alaska’s oil taxes aren’t nearly as bad as Parnell and the companies have argued, and that the state actually ranks somewhere in the middle among oil-producing jurisdictions in terms of government take. In a state where 90 percent of the budget is funded by oil, the goal of our leaders should not be to just have a middling to decent tax climate for producers. The goal should be to have the very best, and nobody, not even Parnell’s most vociferous critics, have asserted that Alaska is at the top of any rankings when it comes to oil tax policy. It is beyond bizarre to witness the spectacle of ConocoPhillips executives being called to the dock and shamed by state legislators for the sin of earning $13 million per day for the state and feds in tax revenue. Yes, the state and feds take $2 for every $1 ConocoPhillips makes. You don’t have to be an overpaid Big Oil honcho, or even a modest business owner to recognize the inherent lack of incentive when growing your operation brings far more tax liability than it does return on investment. Setting aside the oil issue, it has been demonstrated time and again that individuals and businesses respond to tax policy. It’s a part of human nature that the legislature itself recognizes by serving up tax credit after tax credit and touting their effects on attracting film producers and independent explorers to the state. On the other hand, the most consistent effect that flows from high taxes is tax avoidance. If the U.S. didn’t have the highest corporate tax rate in the world, it wouldn’t have so many companies parking their profits offshore. (And it’s hard to blame them when the U.S. government blows billions of tax dollars collected from productive companies like ConocoPhillips on “green jobs” fiascos like Solyndra.) Critics of tax reform can point to a large number from an earnings report to advance their position if they wish, but it is precisely that upside from periods of high prices that fund the investments necessary to stem the production decline on the North Slope. Taking away that upside is one of the reasons a 2011 Department of Interior report ranked Alaska’s onshore regime dead last in North America from an investor perspective and next-to-last between Venezuela and Russia globally. The blessing of Alaska’s wealth of natural riches is a whim of nature. The technology, expertise and capital necessary to extract it are not. Many in Alaska are excited about Shell finally getting the go-ahead to explore in the Arctic this summer. The company has spent more than $4 billion between leases and two false starts that halted plans in 2007 and 2010 without, to date, sinking a single well into the areas it purchased more than half a decade ago. In the magic bean theory of economics, Shell must have found that $4 billion stuffed between some couch cushions by of one of its executives looking for a fresh $100 to light a stogie wrapped in a page from a Gutenberg bible. Or, more likely, Shell had to risk billions to earn that money as profit somewhere else so the company could spend it in Alaska. House Bill 110 may have gone too far in lowering tax rates without encouraging new investments. The governor’s special session legislation may have been “half-baked” as one of his own allies described it. None are blameless. But the Senate, with a mega-majority of 16 out of 20, couldn’t even come up with a plan after more than a year of harping over what was wrong with everybody else’s. It’s pretty easy to criticize someone else’s plan when you don’t have to defend your own. In the end, the state still lacks a comprehensive plan for increasing production and is still on the magic bean program hoping prices stay high or that companies will invest billions to benefit ballooning state budgets, unfunded pensions and the legislators who dole out the windfall. The Senate wants to look everywhere else for blame. Its members should try looking in a mirror.  

Editorial: Regulators hold first joint meeting on halibut bycatch; herring updates

Brainstorming over halibut bycatch was the theme of a two-day workshop this week in Seattle. Topping the discussions: the methods used to collect bycatch numbers and the accuracy of the data. The meeting between the International Pacific Halibut Commission and the North Pacific Fishery Management Council is an unprecedented effort to work together to reduce the estimated 10 million pounds of halibut taken as bycatch and discarded in Alaska’s fisheries. “As far as I know, this meeting represents a first ever joint effort by the two bodies to meet together to discuss current science and/or research,” said Duncan Fields of Kodiak, a member of the North Pacific Fishery Management Council. The NPFMC sets halibut bycatch limits in federal-water fisheries, which produce 80 percent of Alaska’s seafood landings. The IPHC tracks and studies the stocks and sets annual catch limits for commercial halibut fisheries in the U.S. and Canada. It has been more than two decades since bycatch levels were soundly re-evaluated by the NPFMC; two years ago, the IPHC reconvened a task force to study how bycatch removals affect halibut stock assessments and, ultimately, fishery management. Fields said he has “high hopes” that the joint meeting, “will be informative and further more co-operative public presentations.” The North Pacific Council plans to reduce halibut bycatch limits in Gulf of Alaska fisheries at its June meeting in Kodiak. Alaska seafood is tops The seafood industry not only provides the most jobs in Alaska — more than oil/gas, mining, timber and tourism combined — seafood also is Alaska’s top export. State numbers show that Alaska’s total exports increased by more than 26 percent last year valued at $5.2 billion, the highest ever. Half of the value, $2.5 billion, came from seafood exports, a 35 percent increase over 2010. Last year also marked the first year that China ranked first for Alaska exports with seafood also topping that list ($836 million). China was followed by Japan, South Korea, Germany, the Netherlands, Canada, France, Thailand, Spain and Portugal. Europe accounted for more than 22 percent of Alaska seafood exports last year. Other Alaska exports included mineral ores, which increased 31.7 percent to $1.8 billion; precious metals (primarily gold), were up 24.7 percent to $266.4 million. Forest products exports increased 1.9 percent to $119.3 million. Energy exports decreased 7.3 percent to $387.7 million. Herring watch Big roe herring shortfalls at Southeast have boosted fishing and buying interest at Kodiak. The fishery began on April 15 and 25 to 35 boats are signed on compared to 17 last season, said James Jackson, a fishery manager at Alaska Department of Fish and Game in Kodiak. As many as seven major companies are buying the fish valued for its roe. “I think a lot of that has to do with the large harvest that did not get taken down in Sitka,” Jackson said. The Sitka herring fishery in late March produced less than half of its nearly 29,000-ton quota, and a small fishery at West Behm Canal was canceled all together. That puts Kodiak’s 5,355-ton herring harvest in a good spot for interested buyers, and hopes are high that the fish will fetch more than the disappointing $200 per ton last year. Unlike other Alaska regions where herring fisheries can be over in a few short openers, Kodiak’s fishery can occur in up to 81 different sections around the island, and the fishery lasts through June. “Kodiak is a big complicated fishery and it is very different,” Jackson said. “At Sitka and Togiak, those places have large spawning aggregates and they tend to come in usually all at once and you can catch the harvest limit really fast. At Kodiak there are so many different separate spawning aggregates, and they spawn at different times, sometimes in mid-April and sometimes in late June.” Kodiak also is a “stop over” for boats heading to the state’s largest herring fishery at Togiak in Bristol Bay. Alaska’s herring fisheries will continue along the westward coast all the way to Norton Sound. The statewide fisheries bring in more than $20 million to coastal communities. Fish bills United Fishermen of Alaska, the nation’s largest commercial fishing trade group, is claiming “success” with the passing of several measures during the regular session of the state legislature. They include bills that would increase commercial fishing loan limits, support entry of young fishermen into commercial fishing careers. Funding increases UFA also supported include: $9 million in general fund for Alaska Seafood Marketing Institute as a match to industry contributions; a $60,000 increase from the governor’s recommendation for Alaska Marine Safety Education Association trainings; and $489,000 for ADFG Sport Fishing Division Invasive Species response. UFA-supported measures that did not pass include: Sea Otter Management Resolution (held in Senate Rules); labeling of farmed fish and genetically modified fish (Did not move from first committee referral, House Fisheries); prohibiting growing or cultivating genetically modified fish (was not heard in House Resources); R&D tax credits (held in Senate Finance Committee); crew data and statistics (held in House Finance); coastal management (heard but not passed in first committee, House Resources). Also not passing was a bill on Bristol Bay large scale mines: “An Act requiring legislative approval before the issuance of an authorization, license, permit, or approval of a plan of operation for a large-scale metallic sulfide mining operation that could affect water in or flowing into or over the Bristol Bay Fisheries Reserve” (was not heard in first committee of referral, Senate Labor and Commerce). Find a complete update on all fish bills at www.ufa-fish.org.   Laine Welch lives in Kodiak. Visit alaskafishfactor.com for more information or contact [email protected]

Editorial: Alaska needs wise oil tax policy built on compromise

For the second time in two years, oil taxes have prompted a special session of the Alaska Legislature. Or, to put it another way, state Senate leaders outsmarted themselves and were unable to get to the negotiating table with their counterparts in the House during regular session. Here is what happened. In March of last year, the House passed an oil tax reform bill to roll back some of the most damaging aspects of the ACES (Alaska’s Clear and Equitable Share Act) tax increase of 2007. That bill, HB110, has since been languishing in the Senate, bottled up in committee. In two sessions it has not been given a floor vote or even amended in committee more to the Senate’s liking. Usually, amendments are how compromises get started. Not this time. Senate leaders spent two legislative years, untold hours of hearings and big bucks on consultants coming up with a different bill that, in the end, could not draw enough votes in their own 16 of 20 super majority to pass. One reason for the failure was that their bill, SB192, was too clever by half. It had been given a ridiculously long, two-page title that prevented much compromise under the rules of the Legislature. My way or the highway, in other words. When that failed, Senate leaders who had been lecturing anyone who would listen on the virtues of going slow and being cautious, pulled an obscure bill out of legislative oblivion, grafted certain sections of SB192 onto it in a single committee meeting, rammed it through the Senate a few hours later, then sent it back over to the House for action with only a day left. To their credit, House leaders were not stampeded. Hence, the special session. All the trickery aside, what matters most is what happens next. There is still an opportunity to get this right. The bill that the Senate rushed over to the House has constructive relief for new oilfields, a step in the right direction. However, it is far too narrow. It leaves Alaska with a Chilkoot Charlie’s tax policy – “we gouge the other oil field and pass the savings on to you.” The private sector is generally not fooled by such trickery. Today’s new oil will become tomorrow’s old oil, in annual peril of being “reclassified” by politicians hungry for more pork to hand out. A good compromise bill will have two simple elements to it. First, it will alleviate the extreme progressivity that causes Alaska government “take” to become confiscatory as oil prices climb. This is important. Oilfield economists know that prices go up and down over time. They assume that high profitability during periods of high prices offset losses when prices are low. Any taxing region that takes away the upside for industry will find itself underperforming, as Alaska has. Second, a good bill should not try to skim off the vast majority of profits from existing fields. At today’s oil prices or higher, the incremental government “take” on existing oilfields is between 70 percent and 90 percent. That is too greedy. It reduces the incentive to invest in existing fields, which is where most easily recoverable oil lies. The old Chilkoot Charlie’s joke is just that, a joke. It is not wise tax policy. In order to address this issue successfully, our state Senators must do what successful policy makers have always done: don’t be greedy, set aside the trickery and negotiate in good faith. The next generation of Alaskans is counting on it.   Scott Hawkins is president of Advanced Supply Chain International, an oilfield services firm headquartered in Anchorage that employs more than 200 Alaskans. He serves on the board of the Alaska Council on Economic Education and is chairman ProsperityAlaska.org.

Editorial: State spending on energy should look to long term

The twists and turns of legislative attempts to address high energy costs probably left many Interior residents shaking their heads in wonder. On the one hand, the state Senate approved a bill to spend hundreds of millions of dollars on energy cost vouchers across the state, including in many areas where those costs are not particularly high. Yet the same body, at the time of this writing, had abandoned a proposal to spend $30 million on a natural gas storage system for Interior Alaska because of disagreement about how to deliver the money, whether through a direct appropriation or a tax measure that would amount to the same thing. And a much larger request of $100 million or more, which could have delivered dramatic and lasting energy savings across the region where it’s actually needed, also went nowhere. These choices are hard to fathom. Jump-starting a natural gas system would be a real step toward reducing the cost of heating and electricity in the Interior in the long term. The benefits would begin within a few years, and they would compound indefinitely as more people and businesses switched to gas. It would prepare the community for natural gas if a pipeline is ever built. The alternative — spending $330 million to $465 million on energy cost vouchers — is far less forward-thinking. The money would be gone in a year, with nothing done to address the long-term problem of high energy costs. Vouchers perversely reduce the incentive people have to conserve through steps such as switching to cheaper fuels, insulating their homes, using less electricity or taking other steps to address the problem individually. Vouchers also do nothing to reduce business costs, a serious problem illustrated by the recently announced shutdown of a crude refining unit at the Flint Hills refinery in North Pole. The voucher route is certainly easier. A statewide distribution has appeal for legislators everywhere, even in areas where heating costs are not stressing family and business budgets. Few of their constituents are going to complain too loudly about free money. Yet putting the state’s money into infrastructure is clearly the better choice, even for Alaska residents who wouldn’t seem to benefit directly — residents of Southcentral Alaska, for example. There is much talk of building either a small-scale or large-scale natural gas pipeline from the North Slope to Southcentral.

OPINION: Young entrepreneurs dream big

All across the country, there are young men and women dreaming of opening their own businesses. Some are looking to start the next social media phenomenon, while others are focused on a business idea that fills an important niche on their campuses and in their communities. At the U.S. Small Business Administration (SBA), we know that young entrepreneurs are a valuable source of American innovation, which is why we launched our Young Entrepreneur Series (YES). Nationwide, 20 events were held, including one in Anchorage and one in Boise, Idaho. The SBA has the tools and resources to help these entrepreneurs succeed.  SBA appreciates that young entrepreneurs have different sorts of needs – they’re not just online and mobile; they’re starting all kinds of businesses while working out of cafes or even dorm rooms. We’ve launched a new set of online tools, with links to resources and online courses, geared specifically toward young entrepreneurs at www.sba.gov/content/young-entrepreneurs. And the SBA online community puts articles and advice from tens of thousands of small business owners and entrepreneurs online and available for perusing on our website. Join the community at www.sba.gov/community. SBA has many other tools available for young entrepreneurs and small businesses alike. We like to call these our “three C’s” and include capital, contracting and counseling. We provide a government guarantee on SBA loans that are given by lenders to increase access to capital. One great example is SBA’s microloan program. It provides low-cost, low-dollar loans to entrepreneurs and small business owners who require a small infusion of capital to start or expand their business. Opportunities available for small businesses in federal contracting include special efforts for women, veterans and disadvantaged businesses.  And we offer counseling and training to over a million aspiring entrepreneurs each year through our resource partner network including: SCORE, Small Business Development Centers (SBDC), Women Business Centers and Veterans Business Centers. As young entrepreneurs build their small businesses, SBA resource partners are there for them to provide mentoring, coaching and advice for every stage of their business, from starting up and writing a business plan, to accessing capital and expanding. SBA is dedicated to educating young entrepreneurs, connecting them to each other and other successful business owners and providing better access to tools, resources and information for starting, growing and managing a business. But no matter where you are, how old you are, or what your business is, SBA has resources to help you grow your business. You can get in touch with your local SBA district office in Anchorage or resource partner at www.sba.gov/direct.

EDITORIAL: Unfinished business: no justice in Sen. Ted Stevens case

Justice isn’t done in the federal case involving Alaska’s late Sen. Ted Stevens. The Justice Department has blamed the system’s corrupt practices for the injustice committed upon Sen. Ted Stevens. It held no one accountable. No one suffered sufficiently for the consequences of the department’s unethical behavior in the Stevens case. It appears that Justice and the people in its employ are above the law. Of all people, it should be those employed by Justice to uphold the law and to hold others publicly accountable who should be adamant about not only protecting the department’s credibility, but also the appearance of being credible. A jury convicted Sen. Stevens in October 2008 of accepting tens of thousands of dollars in home renovations and gifts. Stevens had sought — much to the surprise of Justice Department prosecutors — a quick trial in order to clear his name before that November’s election. (The timing of the charges so close to an upcoming election will prompt speculation about prosecutorial intent well into the future.) Months after the verdict, when evidence of prosecutorial misconduct emerged, U.S. District Court Judge Emmet G. Sullivan threw out the conviction. Sen. Stevens, who routinely won re-election with 70 percent of Alaska’s vote, narrowly lost his 2008 bid for re-election despite heartfelt proclamations of his innocence. Alaskans find it difficult to respect a Justice Department that betrayed them, destroyed the late senator’s career and changed the makeup of the U.S. Senate. So do other Americans. Lives changed forever, and not for the better, because of Justice’s handling of the Stevens case. Alaskans want to see evidence that the Justice Department not only recognizes that, but makes amends. It needs to take action in order to begin to rebuild the trust and confidence of the public. To date Justice has admitted it made grievous errors in the prosecution of Sen. Stevens. It has announced its intention to institute a new training curriculum for federal prosecutors to ensure ethical behavior. In other words, Justice says it will do better in the future. Federal penitentiaries are filled with those who say that — if the government just would release them from their punishment. That doesn’t begin to rebuild a sense of trust. Judge Sullivan, who seems to understand the severity of Justice’s disgraceful behavior, ordered a special investigation of the Stevens prosecutorial team. Two and a half years later, the investigator, Washington, D.C., lawyer Henry F. Schuelke III, produced a scathing 514-page critique of that team. The report says that the prosecutors withheld pertinent evidence from the Stevens’ defense team and the jury that by law they were required to provide. The evidence would have proven Sen. Stevens’ testimony to be truthful. The prosecution team was “permeated by the systematic concealment of significant exculpatory evidence which would have independently corroborated Sen. Stevens defense and his testimony,” the report concludes. The report also says that information withheld would have undermined the testimony of the prosecution’s star witness, Bill Allen. It noted that Allen, a convict on charges of bribery and conspiracy, provided information during the investigation. Allen’s initial story conflicted with his court testimony. But the prosecutors and FBI agent involved “forgot” about the earlier information. Schuelke pointed out that a “complete, simultaneous and long-term memory failure by the entire prosecution team” was “extraordinary” and “strains credulity.” The prosecution denied misconduct, or, in one case, denied intentional misconduct. All of them pointed at superiors for Justice’s failures. Schuelke wrote he couldn’t prove beyond a reasonable doubt the prosecutors’ intent in the Stevens case. As a result, he didn’t recommend criminal charges. But, undoubtedly, Judge Sullivan is reviewing the findings, and he might well come to a different conclusion. The judge who oversees a case has a view unique to all others involved or following proceedings. The Justice Department still could act beyond new training procedures, holding the guilty parties accountable. Dismissal from Justice might be an outcome. Disbarment is a possibility. Sen. Lisa Murkowski has introduced legislation, the Fairness in Disclosure of Evidence Act, to create a nationwide standard for disclosure of evidence that demonstrates the innocence of a defendant to defense attorneys in federal cases. Currently, there are almost 100 varying standards throughout the nation. The act is a response to the Justice Department’s failures in the Stevens case. “What happened in the trial of Senator Stevens is unfortunately not an isolated incident, but most Americans do not have the wherewithal that he did to push back against prosecutorial misconduct,” says Murkowski. “While I do believe most federal prosecutors are adhering to the law, it’s clear the rules in place are not preventing ‘hide-the-ball’ prosecutions in cases across the country. There are a few prosecutors out there willing to put a finger on the scales of justice to get more convictions — and this bill seeks to stop that. Justice should be blind, not blindly ignored.” Alaskans are pleased to see the Stevens case might result in improvements in the law and in the training that prepares federal prosecutors. But still the case isn’t over until guilty parties in the Justice Department — whether the lawyers in the trenches or their superiors — suffer the full consequences of their action or inaction. Then, and only then, justice will be served and the Justice Department can rebuild its credibility with the public and within the Justice Department itself.

Bedrock of economy at risk without ACES fix

Alaska continues to face a critical challenge because of our state’s oil production tax structure. Alaska’s Clear and Equitable Share is impeding our competitiveness and putting our future in jeopardy. Our economic bedrock is at stake because our oil and gas industry is being severely crippled. Our current tax structure greatly concerns me as the head of the largest Alaska-owned employer in the state. ASRC Energy Services is a subsidiary of Arctic Slope Regional Corp., and we employ thousands of Alaskans, many of whom are in their early and mid-20s and many of whom are Alaska Native. These young people are the future leaders of our companies and our state. They want to know that their company, one that is a service provider to the oil and gas industry, is going to remain in business. Lately, other states that welcome the oil industry are thriving while Alaska is failing to keep up. The professional jobs such as petroleum and drilling engineers, geologists, geophysicists, air permitters, field biologists, architects, cultural resource specialists, project managers, as well as high paying construction jobs for managers, builders, logistics managers, supply chain personnel, etc., and many businesses supporting the industry are headed south to more welcome climes. Our current tax system, that only took a few weeks to implement and seems next to impossible to change, is complex and uninviting to investment. With oil prices more than $120 a barrel, and rising, Alaska has an opportunity, and an obligation, to position ourselves now and also for a prosperous future—a future that ensures both young and old are set with a viable pipeline and revenue from an industry that is sustainable. In order to accomplish this, our state government and our legislators need to put their heads together and meaningfully change and improve the tax structure this session to welcome growth. As an Alaska-born Inupiaq, I resolve to give our youth a strong future. Together we must make our voices heard and get the message to our legislators who are making decisions on our behalf. Standing by and watching the pipeline, which employs thousands of Alaskans and supports countless businesses, continue to lag is unacceptable. Together, let’s send a clear message to Juneau—change ACES today. Taikuu Sunna Jeff Kinneeveauk is the President/CEO of ASRC Energy Services. AES is the largest Alaska-based oil and gas service company in the state, and is a wholly-owned subsidiary of the Arctic Slope Regional Corp.

Political Cartoons



Subscribe to RSS - Opinion