OPINION: Industry stability hangs on Fairbanks outcome
What’s a little more uncertainty among friends?
If there’s anything the Alaska resource industry has been certain about over the past four years, it’s uncertainty.
There was a huge sigh of relief Nov. 6 as the ill-conceived Ballot Measure 1 known as the Stand for Salmon initiative was shot down by a 2-1 margin and it appeared at the time that Republicans would regain control of the House of Representatives following a chaotic two-year rule by a Democrat-led coalition most notable for its endless tax proposals and three freshmen members either resigning or not seeking reelection for their unacceptable conduct toward women.
That pair of election results combined with the decisive win by Mike Dunleavy against Mark Begich seemed to cement at least a two-year respite from the constant trips to Juneau for resource industry representatives to deal with every hare-brained attempt by House Resource Committee co-chairs Geran Tarr and Andy Josephson to raise oil production taxes.
Gov. Bill Walker, who introduced a few oil tax increases of his own, never tamped down the worst inclinations of the House majority to keep fiddling with a tax system that not only produced revenue even as prices bottomed out but encouraged the industry to keep investing even as it lost billions of dollars.
Most of the GOP House members quickly assembled on Nov. 7 to declare themselves the majority and Rep. Dave Talerico of Healy as the Speaker of the House.
That started unraveling almost immediately as Valley gadfly Rep. David Eastman — who was censured by the House in 2017 for comments about rural Alaska women on the floor and stripped of his Ethics Subcommittee post in 2018 for leaking the existence of a confidential complaint to a reporter for this newspaper — declared he hadn’t decided whether to cast his vote for Talerico as Speaker.
The caucus became even shakier as votes continued to be tallied in House District 1 in Fairbanks, where Republican Barton LeBon’s 79-vote lead on Election Night turned into a 10-vote deficit to Democrat Kathryn Dodge on Nov. 13 with the count to resume Nov. 16.
A LeBon loss would produce a 20-20 split and set off a storm of wheeling and dealing by both sides to assemble a majority caucus.
On the federal level, the Democrat takeover of the U.S. House of Representatives will no doubt produce gridlock, a flurry of subpoenas for the Trump administration and brinksmanship on government shutdowns, but for the resource development industry the effect should be fairly muted as there is little they can do to stop deregulation, the Executive Branch push for energy dominance or the pending opening of the Arctic National Wildlife Refuge.
Pending projects such as Greater Mooses Tooth-2, Hilcorp’s Liberty offshore development and the Donlin gold mine have their key federal permits in hand, and a large-scale plan is being crafted for ConocoPhillips’ promising Willow prospect in the National Petroleum Reserve-Alaska.
All in all, Alaska has about 400,000 barrels per day of production in some stage of permitting or construction that could come online in the early- to mid-2020s.
Prices have been slipping lately, but the roughly $10 spread between Brent crude — to which Alaska North Slope oil is pegged — and West Texas Intermediate appears to be holding steady and makes the state an attractive place to invest by more than offsetting the transportation costs for getting it to market.
If the Dunleavy administration follows through with its plans for real budget reform and sets a tone that restores credibility with the investor community, Alaska has a chance to set itself on a sounder footing while buoyed by an increase in oil prices that could considerably narrow the budget gap, at least temporarily.
The state’s resource industry has good reason for optimism, and if LeBon pulls out the win in District 1 the state business climate will be well positioned for a way out of this lingering recession.
Andrew Jensen can be reached at [email protected].