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Oil and gas earnings wrap-up

ExxonMobil 1Q profit drops 11 percent It was an especially tough quarter for ExxonMobil. The company produced less oil and natural gas. Profits dropped at its chemical plants and U.S. refineries. And its overall net income fell 11 percent, the first decline in quarterly earnings since late 2009. The results, announced April 26, signaled a tough year ahead for Exxon and the rest of the petroleum industry. Even after spending billions of dollars hunting for oil at the bottom of the ocean, in the frigid waters of the Arctic and deep underground in North American shale rock, Big Oil is failing to keep up with growing world oil and gas demand. On top of that, the cost of oil, which rose 14 percent in the U.S. during the quarter, kept Exxon from earning bigger profits on the chemicals and gasoline it sold. There was some positive news for investors. The company sold oil for higher prices around the world, and international natural gas prices rose by 16 percent. Profit rose for its international refining operations. Exxon also plans to boost its quarterly dividend by 21 percent, the largest increase since it 1975, making it the biggest corporate dividend payer. Even so, Exxon shares fell 78 cents to $86.07 Exxon isn’t alone in its struggles. Its production of oil and natural gas was flat last year. Chevron Corp., BP and Royal Dutch Shell also produced less. In the first three months of this year, Exxon’s output fell 5.5 percent, twice the rate expected for the year. A handful of trends are keeping oil companies from pumping more oil and gas. Existing fields produce less as they get older. New wells are tougher, and more expensive, to find. And some of the world’s best resources are controlled by foreign governments that want to keep their oil revenue at home. They typically offer contracts that limit the amount of oil and gas that partners, such as Exxon, can sell as prices rise. Exxon must find new sources of crude to get its production back up. It will plow $185 billion into capital projects over the next five years. That’s up 29 percent from the previous five-year period, and much of the budget is devoted to finding more oil. Exxon says production will eventually grow about 2 percent to 3 percent annually over the next several years. The company expects production soon from oil fields in Canada and wells in Angola and Nigeria. It’s also boosting production in Iraq, and it’s expanding its drilling operation in parts of North Dakota, the Midwest and Appalachia. Exxon also recently signed a deal with Russian oil giant Rosneft to search for oil and gas in the Arctic and the Black Sea. Drilling could begin as early as 2014, The Russian Arctic is in such a remote and frigid part of the world, however, that moving quickly will be difficult, the company said. It “will require all of the technological and operational capabilities to explore,” said David Rosenthal, Exxon’s chief of investor relations. Exxon, America’s largest energy company earned $9.45 billion, or $2 per share, from January to March. Revenue rose 8.8 percent to $124.1 billion. The results were short of Wall Street expectations. Profit declined 10 percent for Exxon’s exploration and production business and it dropped 54 percent for its chemical business. Profit fell 13 percent at Exxon’s U.S. refineries, though profits more than doubled at overseas refineries. Rosenthal wouldn’t comment about reports that the company has been banned from bidding for more contracts in Iraq next month. Iraq’s state run oil company said it will turn away future offers from Exxon after the company signed deals with the self-ruled Kurds last year against the wishes of the Iraqi central government. ConocoPhillips 1Q profit drops 3 percent ConocoPhillips said April 23 that its first-quarter profit dropped 3 percent because it produced less oil and natural gas from a shrinking pool of assets. America’s third-largest oil company has been selling pieces of its global operation. It planned to split into two smaller companies May 1. One company will keep the ConocoPhillips name and focus on exploration and production. The other, Phillips 66, will specialize in refineries and pipelines. CEO Jim Mulva will retire following the split. Since 2010, ConocoPhillips has moved in the opposite direction of its Big Oil peers, shedding oil fields and investments in companies like Russian oil giant Lukoil. Overall, it has sold more than $20 billion in assets and investments since 2010, and it expects to divest another $8 to $10 billion over the next 12 months. With fewer producing assets, ConocoPhillips’ oil and natural gas production dropped by 3.8 percent to 1.64 million barrels of oil equivalent per day in the first quarter. The company’s oil platforms also were temporarily suspended off the coast of China because of an oil spill. ConocoPhillips expects overall production in 2012 to continue to lag last year’s pace. From January to March, ConocoPhillips reported earnings of $2.94 billion, or $2.27 per share. The exploration and production business contributed $2.55 billion of that amount. A year earlier, the company earned $3.03 billion, or $2.09 per share. Revenue was flat at $58.4 billion. Excluding special items, ConocoPhillips said adjusted earnings were $2.02 per share. Analysts, who typically exclude such items, were expecting earnings of $2.08 per share on revenue of $60 billion, according to FactSet. Morningstar Inc. analyst Allen Good said a number of hurdles will remain following the split. Both companies will struggle to grow as swiftly as their peers, and they’ll continue to be saddled with unprofitable assets. More than a third of ConocoPhillips’ natural gas production comes from fields in the United States, where prices have plunged to 10-year lows. The company has reduced natural gas production this year in hopes that prices will eventually rebound. But Good said overall U.S. production continues to rise, which will keep the value of ConocoPhillips’ natural gas assets low. The refining business continues to look for suitors for a Trainer, Pa., refinery that has struggled to generate profits as oil prices rose this year. During the quarter, ConocoPhillips’ refineries also sold less gasoline, diesel and other petroleum products. Total refining sales dropped by 11.2 percent. Refining profit fell by 6.2 percent overall. Its midstream business, which includes pipelines, increased profits 27.4 percent, and its chemicals business boosted profits by 13 percent. Shares fell 55 cents to close at $72.33 April 23. Production rise helps Shell beat forecasts in 1Q Royal Dutch Shell PLC delivered forecast-busting first quarter earnings on April 26 as it benefited from higher oil prices, and said it is looking for ways to exploit the current low cost of natural gas in North America. The oil company’s earnings on the industry standard CCS or “current cost of supplies” measure, which strips out changes in the price of oil, and excluding one-time charges, were $7.30 billion, up 16 percent from $6.29 billion. Earnings were higher than anticipated — the consensus in the markets was that the company would post something around the $6.5 billion mark. Shares in the company were 3.3 percent higher in early afternoon trading in London at 22.61 pounds. “Underlying cash flow has improved markedly,” said analyst Tony Shepard of Charles Stanley. “Upstream earnings were ahead of expectations ... reflecting higher prices and slightly improved volumes.” Selling prices on average were $111.5 per barrel in the quarter, against $97.2 per barrel a year ago, while volumes rose 1.4 percent to 3.55 million barrels a day as new projects came on line. The company has been investing heavily in new production and is targeting 4 million barrels per day production by 2018. Chief Financial Officer Simon Henry said the company is also considering several ways of taking advantage of low natural gas prices in North America. U.S. natural gas production has soared in recent years as drillers use techniques such as hydraulic fracturing, or “fracking” to gain access to wells that were hard to reach in the past. “Clearly gas is selling at about $12 per barrel of oil equivalent, and oil is selling at $112,” Simon said on a conference call. “Anybody who can arbitrage that gap has potential value opportunity.” The company is already investing in a relatively small facility on the west coast of Canada for shipping Liquefied Natural Gas, or LNG, to Asia. It is also looking at converting gas to chemicals in “the Pennsylvania area,” and more LNG transport capacity in Canada. But most importantly, Shell is considering a plant on the model of its new “Pearl” facility in Ras Laffan, Qatar, which converts natural gas to transportation fuels. It is by far the largest of its kind in the world and cost at least $18 billion to build by the time it began producing in 2011. Henry said the company is considering sites in Texas or Louisiana to build a similar facility, improving on its Pearl design, but that it is at least a year away from making a “final investment decision.” If the idea goes ahead, the facility wouldn’t come on line until the “latter half” of this decade, he said. A major factor will be whether Shell believes that a significant discrepancy between natural gas and oil prices will persist for at least 20 years. “It’s potentially a very profitable way of turning low-cost natural gas into very high value diesel, kerosine, jet fuel and lubricants,” Simon said. A more detailed look at Shell’s earning statement shows that first quarter earnings, including one-off items, fell by less than 1 percent to $8.72 billion. In the fourth quarter of 2011, Shell made $8.78 billion, including proceeds from selling some gas assets in Texas. Sales were $120 billion, versus $110 billion. At the company’s upstream, or production, operations, earnings were $6.71 billion versus $5.76 billion. Downstream operations, which include refining operations and chemicals sales, earnings rose 13 percent to $1.32 billion, entirely due to one-time charges last year and one-time gains this year. Stripping out those effects, downstream profits would have declined 32 percent. Shell blamed a “weaker global refining environment.” Chevron sticks with oil, and it pays off Chevron never bought into North America’s natural gas boom the way Big Oil peers like Exxon did. That decision appears to be paying off. The San Ramon, Calif., energy giant reported April 27 that profits increased 4.2 percent from January to March as oil sold for higher prices. Meanwhile a plunge in U.S. natural gas prices contributed to an 11 percent profit decline at ExxonMobil. ConocoPhillips, another major U.S. natural gas producer, saw profits fall 3 percent. Chevron’s reliance on oil “turned out to be a really good decision,” Argus Research analyst Phil Weiss said. “And it could serve them well. They have a lot of cash on hand.” New technologies set off a rush to explore the continent’s vast shale gas deposits that eventually drew in the major oil companies. ExxonMobil Corp. made a big splash in 2010 with a $35 billion acquisition of XTO Energy that made it America’s largest natural gas producer overnight. Exxon now produces more natural gas than oil. Royal Dutch Shell spent about $11 billion to acquire large tracts of natural gas-producing assets in North America. Chevron’s only major move in North American natural gas was a $4.3 billion deal last year to acquire Atlas Energy of the U.S. Oil still makes up more than two-thirds of Chevron’s total production. Chevron, the second-largest U.S. energy company behind Exxon, reported net income of $6.47 billion, or $3.27 per share, for the first quarter. That compares with $6.21 billion, or $3.09 per share, for the same part of 2011. Revenue increased less than 1 percent to $60.7 billion. The results met Wall Street expectations. From January to March, Chevron sold crude and other liquid hydrocarbons for an average of $102 per barrel in the U.S. and $110 per barrel internationally, up 15 and 16 percent, respectively. That boosted revenue even as overall production dropped 4.7 percent. The major oil companies, including Chevron, are struggling with a slowdown in production. New fields are tougher to find and expensive to develop. And many of the best reserves are owned by foreign governments that reduce the amount of oil that companies can sell as prices rise. Chevron also suffered a reduction to production in Brazil. The Brazilian government ordered Chevron to shut down operations at its offshore Frade field after an oil leak at one of its wells. Prosecutors are now seeking $11 billion in environmental damages and have filed criminal charges against executives from Chevron and rig owner Transocean Ltd. Pat Yarrington, Chevron’s chief financial officer, said in a conference call that production in the area will stay offline while the company conducts a “technical study” of the field’s underlying geology. “We will resume production in the Frade field only when we are completely satisfied we can restart production safely, and when we have obtained the full support of our partners in the Brazilian regulators,” Yarrington said. Profits at Chevron’s refining business rose 29 percent, but mostly because it sold its Pembroke Refinery in the United Kingdom and other assets for $200 million. Chevron shares fell 2 cents to close at $106.20 April 27. TransCanada reports a drop in 1Q earnings Pipeline and utility company TransCanada Corp. reported a decline in first-quarter profit April 27, citing a mild winter and low natural gas prices as contributing factors in a net earnings report that missed analyst expectations. TransCanada, which is involved in building the southern leg of the Canada-Texas Keystone XL oil pipeline, said net income attributable to common shareholders in the three months ended March 31 was CA $352 million (US $357.7 million) or 50 Canadian cents per share. That compared with CA $411 million (US $417.6 million) or 59 cents per share in the same 2011 period. Revenue was CA $1.91 billion (US $1.94 billion), up from CA $1.86 billion (US $1.89 billion). Analysts were on average expecting earnings of 54 cents per share and revenues of about CA$2.2 billion (US $2.24 billion). “A very warm winter, historically low natural gas prices and planned maintenance outages at Bruce Power (nuclear plant in Ontario) impacted earnings in the first quarter of 2012,” said president and CEO Russ Girling said in a statement. UBS Investment Research analyst Chad Friess said anything natural gas-related weighed heavily on TransCanada’s first-quarter results. Natural gas has recently hit 10-year lows below US $2 per 1,000 cubic as new supplies from prolific shale formations outpace demand. TransCanada, North America’s largest natural gas shipper with a vast network of pipelines criss-crossing the continent, has proposed the US $7.6 billion Keystone XL pipeline — an expansion to a system that currently delivers Canadian crude to the U.S. Midwest. The pipeline, which would connect Alberta crude to refineries along the Texas coast, has become a major political flashpoint as U.S. President Barack Obama seeks re-election in November.   Stories compiled from AP reporters Chris Kahn and Toby Sterling  

With 'skin in game,' Homer hopes for Parnell approval on gasline

After a weekend of teeth grinding by city of Homer officials when the Alaska Senate failed to include in its capital budget sent to the House an $8.1 million grant to build a natural gas pipeline from Anchor Point to Homer, locals breathed a sigh of relief when the House of Representatives added the grant and both houses approved the revised capital projects budget. “I’m really pleased,” Rep. Paul Seaton, R-Homer, said Monday. “It’s really tough to get an $8 million project on the House side when it’s not in the budget coming over.” Of the city’s top-15 items on its capital improvement project list, only two other items survived. One, a $1.1 million grant to fix the Homer High School track, also was a Kenai Peninsula Borough priority. The Legislature also approved a $100,000 grant to dredge the Nick Dudiak Fishing Lagoon, a popular local and tourist fishing spot on the Homer Spit. Not making the cut were sewer treatment plant and harbor improvements. “It’s good news over all,” said Homer City Manager Walt Wrede. “We’re disappointed in some ways. There’s always something we wish were in there, but I think the gas pipeline is a big deal.” One obstacle remains in getting funding for a long-awaited natural gas service line to Homer: getting Gov. Sean Parnell to sign off on it — or, not veto it. In the first year the grant was passed by the Legislature, Parnell cut all but $450,000, which built a pressure reduction section and a line from the North Fork Road to Chapman Elementary School on the Sterling Highway in Anchor Point. Last year, Parnell vetoed the whole grant. Officials sought a grant that would avoid another veto. Parnell said he wanted to see some “skin in the game” with local contributions. Part of the project, to be built by Enstar, will be financed with a $1 per million cubic foot tariff on Homer gas customers. Anchor Point does not pay the tariff. The city of Homer also passed resolutions supporting the tariff, as well as changes to creating special assessment districts and using rights-of-way for a gas line, all actions showing a local commitment. “I’m hopeful,” Wrede said of Parnell approving the grant. “I think there’s a good chance. (Parnell is) sending out positive signals. I’m optimistic the third time is going to be the charm.” Local officials also made a calculated decision not to ask for any other big-money projects. In making his veto last year, Parnell noted Homer got grants for a new solid waste transfer facility and cruise ship passenger facility improvements. The lower peninsula did well in projects outside the city, including $2.5 million for Sterling Highway road rehabilitation, $1.2 million for borough road improvements, $1 million for Seldovia harbor improvements, $100,000 for a Kachemak Emergency Services fire truck storage building on Diamond Ridge Road, $2 million for a Ninilchik fire station and $244,000 for improvements to the Anchor Point Senior Center parking lot. The city had hoped that Homer Harbor Deep Water-Cruise Ship dock improvements would have been included in a proposed bond for port projects around the state. That didn’t happen. Harbor improvements could have been funded by a harbor improvement fund if the city had put together proposals that had a 50-percent funding match. Wrede said the city wasn’t prepared to make that application because it would have had to identify the 50-percent match from the harbor depreciation fund — something the city didn’t feel comfortable doing, he said. The city is preparing a proposal to fund harbor improvements, and apply for the 50-percent funding match for next year, that would come out of a bond resolutions and increased harbor fees. The city has to make sure a bond sale would go through and mariners will support fee increases. As for the gas line, the next step for the city council is to seriously discuss if it wants to finance a build-out — if Parnell doesn’t veto the grant — and how the council wants to go about doing that.  

Apache, Furie keep up exploration activity in Cook Inlet

Apache Corp. has submitted plans for two Cook Inlet exploration wells to the state of Alaska although it is likely only one well will be drilled this year, a company official said April 18. Also, Furie Alaska Operating, the company that brought the first jack-up rig to Cook Inlet and drilled a well in late summer 2011, was scheduled to be back on location with the rig in late April to finish the well. Apache and Furie are among several companies that will be active this year in the Southcentral region. Smaller companies are also exploring, including Australia-based Buccaneer Energy, and NordAq Energy, an Alaska-based independent company. Buccaneer and Denver-based Armstrong Oil and Gas, another independent, are also producing gas and selling to Enstar Natural Gas Co., the regional gas utility. Cook Inlet Energy, a subsidiary of Huntsville, Tenn.-based Miller Energy, is producing oil as well as exploring. Cook Inlet is redeveloping the small Redoubt Shoals producing field on the west side of Cook Inlet and plans onshore exploration on leases it holds on the Inlet’s west side. Apache’s first well will be is an onshore test on the west side of the Inlet, company spokeswoman Lisa Parker said. The second proposed well location is on the Kenai Peninsula, on the east side of the Inlet. “A final decision on our drilling plans will be made in the near future,” Parker said. The company is now engaged in negotiations for a drill rig, most likely one to be brought from outside Alaska, she said. Meanwhile, a region-wide seismic survey by Apache is ongoing. The company has completed about 55 square miles three-dimensional seismic on the west side, Parker said, and is seeking permits to do a marine survey in Cook Inlet and an onshore survey on the Kenai Peninsula later this year. Apache’s three-year seismic program had a goal of obtaining data on 1,200 square miles. “How much we actually get will depend on obtaining permits and, of course, Mother Nature,” Parker said. State officials have said Apache’s seismic survey is the largest to date in the Cook Inlet Basin. Apache’s entry into Cook Inlet has attracted a great deal of attention in Alaska because of the company’s reputation for entering and rejuvenating mature producing basins. Meanwhile, after the Blake 151 jack-up rig was back on location in Cook Inlet in late April, Furie Alaska will be working to test what could be a significant gas discovery made last fall at the Kitchen Lights Unit No. 1 well. Although the discovery was made the rig had to move off location because of the lateness of the season and before testing could be done. The plan for 2012 is to drill the well to its planned total depth of about 16,000 deep and to also conduct tests. While gas was found at the shallower levels it is believed that there may be oil at the deeper levels. When the KLU No. 1 work in done, probably in mid-to-late June, the Blake 151 will move to a second well location, KLU No. 2, about a mile and a half away. The prospect to be tested at KLU No. 2 is similar to that in KLU No. 1. Buccaneer Energy will be drilling more onshore test wells at its new Kenai Loop gas field near the city of Kenai, which is now producing gas from one well. The company will also be drilling Cook Inlet offshore exploration wells with a second jack-up rig being brought to the Inlet from Asia in mid-summer. Two wells will be drilled by that rig. In another development Buccaneer has agreed to purchase the Glacier No. 1 drilling rig owned by Marathon Oil subsidiary Glacier Drilling Co. for Buccaneer’s Alaska operations, the company announced Thursday. The rig, a mobile unit used for shallow land wells, has been working for Marathon in Alaska for several years and has recently been leased out to others including Buccaneer for exploration drilling on the Kenai Peninsula. Buccaneer spokesman Dean Gallegos said the purchase price is $7.5 million and the acquisition will close on June 7. The company will use the rig on its own drilling, including three new wells planned this summer at Buccaneer’s new Kenai Loop gas field, but will also make the rig available to other, Gallegos said. “The company expects there will be high demand for the rig services,” he said. The Glacier rig is capable of drilling to 12,000 feet but its small size and mobility is ideal for drilling production wells on pads, minimizing the surface “footprint,” the press release said.

Hearing raises questions about Point Thomson settlement

A former director of the Alaska Division of Oil and Gas who took part in the effort to recover state control of the Point Thomson development leases said he would not have signed the agreement announced by Gov. Sean Parnell in March and questioned whether it surrenders long term control of field leases to the working interest owners. “If I had been the commissioner, I would not have signed this deal,” said Mark Myers, at a Senate Judiciary Committee hearing April 27. Now vice chancellor for research at the University of Alaska Fairbanks, Myers told the committee that the deal appears to surrender Department of Natural Resources authority to manage field development and could cost the state billions of dollars in lost revenues. The four-hour informational session reviewed the final settlement of all litigation on the massive oil and gas field announced March 30 by Parnell. Attorney General Michael Geraghty defended the settlement as beneficial to the state but also final and inviolate. Joe Balash, deputy commissioner of the Department of Natural Resources, also endorsed it but presented the committee with the same PowerPoint used by DNR Commissioner Dan Sullivan in March. “I support each and every one of the decisions leading up to this and without reservation would stipulate the settlement is in the best interest of the state,” Balash said. He said Sullivan would not appear before any committee on the issue because of the “slight possibility” that he may be required to rule on a pending an administrative appeal of the settlement. Myers was director of the Division of Oil and Gas from 2001 to 2005, the year he declared ExxonMobil in default on its Point Thomson lease development requirements. “I was one of a long line of frustrated oil and gas directors,” he said. DNR estimates suggest Point Thomson may hold eight trillion cubic feet of gas and hundreds of millions of barrels of oil. Myers said that equates to roughly $12 billion in royalties and taxes to the state. Myers warned that the settlement says DNR preapproves the working interest owners’ development plans and will not challenge them before the Alaska Oil and Gas Conservation Commission. He said two of the plan’s three primary options are not in the state’s best interest. “The requirements are basically waived for most of the critical issues,” Myers said. The “blow down” development option, which Myers compared to shaking and opening a can of cola, would immediately produce and recover 70 percent of that resource, but only 26 percent of gas condensates and just 3 percent to 16 percent of as much as 150 billion barrels of oil. A development plant that cycled gas for 20 years to maximize oil production would produce 43 percent, or up to 400 billion barrels of oil, 76 percent of the condensate and 56 percent of the gas, according to Myers. He also said even a large diameter export pipeline would probably not require gas from the Point Thomson field for some 30 years, including pipeline construction and sales of Prudhoe Bay gas. That left him uncertain why the blow down option would even be considered in light of the resource value that would be lost. Myers said he had found, as director, that penalizing working interest owners, or WIO, with loss of acreage for failure to meet development deadlines, “is often not enough.” One Point Thomson development plan included a $20 million fine, which ExxonMobil violated and paid. “I put penalties into the agreement for good reason. I’m a big believer in belts and suspenders,” he said. The agreement also requires the state to take royalty gas from Point Thomson in kind, rather than in value, prior to any major gas sale and says DNR will not challenge whatever development plans the WIO propose to the Alaska Oil & Gas Conservation Commission. Myers’ comments were followed by even more critical testimony by Bill Walker, the former gubernatorial candidate and export gasline advocate who filed an administrative appeal, shortly after the settlement was announced, challenging Sullivan’s authority to sign it. The appeal was summarily rejected by Geraghty. In an April 26 letter to Walker, Geraghty said court settlements entered by the state are “not subject to administrative challenge, by reconsideration or otherwise.” Walker and Craig Richards, a partner in his law firm, said Sullivan may have acted beyond his legal authority, but also acknowledged that they did not have full knowledge of the agreement. “There are just major things and major issues that aren’t defined with clarity,” Richards said. He pointed to a requirement that the working interest owners invest $2 billion in development work to retain full control of leases. Richards said it counts spending since 2007 and is so broad, “it was unclear whether you’d already met the $2 billion. Geraghty said he would file more thorough written comments with the committee and emphasized that the settlement concluded litigation that could have continued for decades. “The Point Thomson litigation was a major impediment in the commercialization of Alaska’s natural gas. I believe the agreement achieves that goal and there are milestones and consequences that must be met,” Geraghty said. The attorney general referred Myers’ technical questions to Balash and questioned Myers’ “sweeping conclusions” based on what he inferred were equally broad findings in the 2005 decision withdrawing the Point Thomson leases. Geraghty openly mocked the complaints raised by Walker and Richards calling some elements, “silly.” “It sounded as if only Mr. Walker and his attorney were at the table the state would have negotiated a better deal,” Geraghty said. Balash also emphasized that the AOGCC has independent authority to protect the state’s best interest, regardless of DNR action, or inaction. Chairman Hollis French, D-Anchorage, said Myers’ presentation “would give any rational human being, including myself, cause for deep concern about whether we got a fair deal on this Point Thomson settlement.” Sen. Joe Paskvan, D-Fairbanks, said “as a gut feel I’d have to go with our attorney general’s statement as to the legality, but I can’t ignore, also, the points that have been made ... I’m not prepared to say whether we’ve got a good deal or bad deal.” North Pole Sen. John Coghill, chairman of the Senate Republican minority caucus, also said more research is necessary but Myers appeared to make the case that the settlement hands control of Point Thomson back to ExxonMobil. Myers, director of the U.S. Geological Survey before his current post, said he negotiated the 2004 plan of development for Point Thomson during his term as Division of Oil and Gas director. He emphasized that he was working only from publicly available material and that he meant to cast no aspersions on the administration. Balash repeated Sullivan’s offer to provide confidential briefings to any lawmaker. Sen. Bill Wielechowski, D-Anchorage, said he had made six requests for the briefing between September and November of last year and received no response.

House gives in, blames Senate for stalling gasline

The Alaska Legislature’s special session ended April 30on its 13th day with an almost traditional scenario of closed caucuses, multiple delays in public events and a news conference filled with angry denunciations and warnings of dire consequences. Although the House had planned to introduce a new version of House Bill 9, Speaker Mike Chenault’s bill to advance an in-state natural gas pipeline, the Senate’s declaration April 30 that it would not return to active session forced the House to admit defeat. “At this point, the Senate doesn’t see any reason to spend any more time or money on issues that won’t produce a different outcome at the end of the 30-day session,” said Senate President Gary Stevens in a prepared statement following a perfunctory “technical session.” “Once again the House has taken Alaska’s most pressing need, and that’s the high cost of energy, and we’ve taken everything we can to address the issue and the other body has taken and chosen to do nothing,” Chenault said at a post-adjournment news conference. Rep. Craig Johnson, R-Anchorage, said he was angered by the Senate’s secretive decisions on HB 9. The bill passed the House on a 27-12 vote March 27 but was ignored by the Senate for the remainder of the regular session. It got one brief hearing, without action, in the Senate Community and Regional Affairs Committee April 26 where a revised version added a requirement, opposed by Chenault, that required legislative approval before construction could begin. “Had they gone through the process and at any point a committee said, ‘we’re going to vote this down, it doesn’t make sense,’ then we would we know they didn’t have the votes. No one over there got a chance to vote on it. No one got a chance to weigh in. This was killed for what reason? I don’t know,” Johnson said. Gov. Sean Parnell had no apparent involvement in session activities since his withdrawal of oil and gas taxes from its agenda prompted the Senate to adjourn sine die on April 26. “I put House Bill 9 on the call to continue advancing a natural gas pipeline project. Instead of problem-solving with the House, the Senate ignored the bill,” Parnell said in a prepared statement the evening of April 30. Few senators were at the Capitol, or in Juneau as the session ended, but those who were said they simply refused to pass a bill that would have spent a small fortune on a project that could have locked retail customers into energy prices even higher than they now pay while subsidizing a major oil producer. “This was the state subsidizing hundreds of millions of dollars or billions of dollars to build a gasline so that ConocoPhillips could export their gas from the North Slope to the people of Japan. I think that’s what was really going on here and by the way the people of Southcentral get to pick up the tab of having their heating costs doubled,” said Sen. Bill Wielechowski, D-Anchorage, in an interview after the House news conference. Wielechowski was the target of Rep. Mike Hawker’s particular ire after an aide brought him a smart phone during the House news conference. “I was just shown a Twitter that just went out and I’m going to call a name on it,” Hawker said. “Sen. Wielechowski just put out a Twitter. He’s gloating about HB 9 dying because he claims that HB 9 was going to cost the state billions and it was going to triple the cost of energy in Anchorage. Sen. Wielechowski, that is not true. Not one of those statements is true and I would like to have you come in here and talk about it with us.” That prompted Johnson to quip, “I wouldn’t.” Hawker said a pipeline could cost up to $10 billion to construct, but emphasized that the legislature still controlled overall spending through its appropriation powers. “It was never, ever proposed in this bill to pay that money out of the state coffers,” he said. Hawker acknowledged that HB 9 allowed AGDC to issue revenue bonds, but again emphasized that bond buyers would take the financial risk. Wielechowski, who had been watching the televised news conference, said later that he stood by his Tweet. He said the open season AGDC could have held this year would likely have cost hundreds of millions of dollars in environmental impact research and other preparatory costs. He emphasized that even best case scenarios projected transportation tariffs as high as $9 per million cubic feet of gas and potentially half again more. Wielechowski also rejected suggestions by Hawker, among others, that HB 9 would merely set the stage for a private sector project. “If the free market thought this was a good deal, thought this was a great deal, where is everyone out there going to do an open season?,” Wielechowski said. “It’s not an economic project unless the state subsidizes it to the tune of probably billions of dollars.” The Senate never got answers to its questions on the gasline or oil tax bills, according to President Gary Stevens, R-Kodiak. “I don’t feel bad about what the Senate did,” he said. “Timing is everything here. I think the timing was not right,” for HB 9, he said. Confirming the size of Cook Inlet reserves is “the most important question. We should have the answer to that before we rush ahead and build a very expensive pipeline.” When April 30 dawned, all indications from the House majority were that they planned to continue work on HB 9 with the expectation the Senate would eventually respond. House Resources Committee hearings on the new measure were scheduled for that afternoon, May 1 and tentatively on May 3 in Fairbanks, according to Rep. Paul Seaton, R-Homer. The April 30 hearing was cancelled when a revised HB 9 was not introduced during the first House floor session, but Chenault, afterward, gave no hint that the end was near. “We do have a bill drafted. We’re determining whether that’s the bill we want to introduce or not,” he said. Seaton, co-chairman of the Resources Committee, also announced at the April 30 news conference that the panel was going to continue discussions on HB 3001, the oil tax reduction bill, “just to reiterate the point that we still had possession of that vehicle.” His statement indicated House agreement with the Senate’s position that, regardless of a governor’s unquestioned authority to set the agenda for a special session, the chief executive has no control over any bill once it has been introduced. Before its April 26 adjournment, the Senate had indicated with the adoption of a “sense of the Senate” resolution that while Parnell had no authority to stop legislative work on any bill, his withdrawal of the oil tax question from his agenda effectively terminated the special session. Doug Gardner, the legislature’s chief attorney, said in an April 26 memo that requiring lawmakers to halt consideration of a bill by withdrawing it meant a governor could, in effect, force the legislature to adjourn by removing every item from the agenda. Gardner said that raised constitutional separation of powers questions. Responding to a request from Chenault, Gardner wrote a contradictory opinion, April 27, that said there is no legal support for the “proposition” that the governor’s April 25 withdrawal of oil and gas taxes from the agenda ended the session. The House Judiciary Committee had scheduled a May 1 afternoon session to consider the opinions, but it was also cancelled after the session’s demise.  

Air Force leader: Some pilots want to avoid F-22

HAMPTON, Va. (AP) — Some of the nation’s 200 F-22 Raptor pilots want to be moved into other jobs because of oxygen-deficit problems with the stealth fighter, an Air Force leader said Monday. Gen. Mike Hostage, commander of Air Combat Command at Langley Air Force Base in Hampton, Va., told reporters that a “very small” number of pilots have asked not to fly the fifth-generation fighter jets or to be reassigned. “Obviously it’s a very sensitive thing because we are trying to ensure that the community fully understands all that we’re doing to try to get to a solution,” Hostage said. He did not provide exact figures on the number of pilots who have asked to not fly the jets and said each pilot’s request would be handled individually. Air Force officials believe the airplane is safe to fly — Hostage noted that he’ll fly soon because he won’t ask a pilot to do something that he will not. “I’m going to check out and fly the airplane so I can understand exactly what it is they’re dealing with. The day we figure out what the problem is I will stop flying (the plane) because we don’t have enough sorties for all of our combat aviators to get as much training as they need,” he said. The nation’s F-22 fighter jets were grounded for four months last year after pilots complained of experiencing a lack of oxygen that can cause dizziness and blackouts. Air Force officials said they have taken steps against the problem, but still haven’t pinpointed what’s causing the hypoxia-like symptoms. Hypoxia is when the body doesn’t receive enough oxygen. An Air Force panel is meeting weekly to investigate the problem and has enlisted the help of NASA and the Navy to learn more about what happens to the body under extreme conditions, among other things. Hostage spoke during a media day event at the base, highlighting the nation’s most advanced fighter plane. After being introduced in 2005, the last of nearly 190 jets are scheduled to be delivered to the Air Force this week. At a price tag of $143 million each, the Raptor has come under some criticism for not being used in place of older and less-sophisticated jets in Iraq or Afghanistan. Hostage said the plane is critical to maintaining the nation’s air superiority in the future and that he wishes he had more of the jets at his disposal. On Monday, Iran’s defense minister said that reports of the stealth fighter jet being deployed to the United Arab Emirates would damage regional security, the semiofficial ISNA news agency reported. Without saying which country in the region the F-22s were deployed to — or which base or bases they were deployed from — Hostage said there’s a reason other nations take note of the plane’s movements. “People pay attention to where this airplane goes and what it does because, regardless of the furor in our press and public about the suitability or the safety of the airplane, they’re very worried about its capability. That, to me, means we’re on the right path with this capability,” he said. The planes are stationed at five other bases besides Virginia: Joint Base Elmendorf-Richardson, Alaska; Joint Base Pearl Harbor-Hickam, Hawaii; Nellis Air Force Base, Nev.; Holloman Air Force Base, N.M.; and Tyndall Air Force Base, Fla.  

Parnell picks former Gatto aide to fill House seat

JUNEAU (AP) — Gov. Sean Parnell has chosen a former legislative aide to the late-Rep. Carl Gatto to serve the remainder of Gatto’s term. Parnell announced his selection of Shelley Hughes as Gatto’s replacement on Tuesday while appearing via video at a gathering in Palmer. His choice still must be confirmed by a majority of state House Republicans. Gatto died in April at age 74 from complications related to cancer. Hughes had earlier filed with the Alaska Public Offices Commission, signaling her intention to run for his seat. She said she had gotten the blessing of members of his family. Hughes, 54, served as an aide to Gatto from 2003 to 2005. Hughes’ name was one of three sent by Republicans from Gatto’s district in Palmer to Parnell to consider. The others were David Eastman and Marvin Yoder. Parnell said all three, whom he interviewed, were qualified to do the work. But he said he believed Hughes could begin the work without on-the-job training. He said she also has a desire to serve the district and the people of the district. Hughes, who describes herself as a conservative Republican on her campaign website, has said her first career was as a busy stay-at-home mom. Her second included working for Gatto and as the government affairs director for the Alaska Primary Care Association from 2005 to 2011. She resigned from that job to run for office. Hughes received a bachelor’s degree in English from the University of Alaska in 2002 and is affiliated with organizations including the Alaska Outdoor Council, the National Rifle Association, the Alaska State Fair and the Resource Development Council, according to a biography released by the governor’s office. Hughes said that while she’s mindful and respectful of Gatto’s legacy, she plans to chart her own course. She said she’s been getting “robust support” as she’s been out in the community. And she noted she is already hearing from local residents that infrastructure is important in the Matanuska-Susitna Borough, which, according to the 2010 census, was the fastest-growing region of Alaska between 2000 and 2010. She also said she supports efforts to change Alaska’s oil-tax structure and move forward on a natural gas pipeline project.  

Drilling his own river ice pays off for Ice Classic winner

ANCHORAGE (AP) — And the winner is ... a man who drills his own holes in a frozen river to study the best conditions for hitting the jackpot in Alaska’s biggest annual guessing game. The hands-on research paid off handsomely for Tommy Lee Waters in the Nenana Ice Classic. The Fairbanks man bested more than 250,000 other entrants in a contest to see who could guess when the ice would give way on the Tanana River in the tiny community of Nenana, about 55 miles south of Fairbanks. Organizers announced the winner Tuesday, but Waters won’t receive his winnings until June 1. This year’s jackpot was a record $350,000. Of that, $252,000 will go to Waters after federal taxes, Ice Classic manager Cherrie Forness said. Waters was the only person to correctly guess that a tripod set up on the river would tip over and stop the official clock at 7:39 p.m. April 23 — which happened to be his 55th birthday. Waters, a mental health technician, has won in two other classics. But he had to split the jackpot in those contests with multiple people making correct guesses. Not this time. For the latest classic, he went so far as to buy a guess for each minute of each hour for the winning afternoon. “That’s the way to do it,” Waters said Tuesday. Waters also spent time drilling holes in the area to measure the thickness of the ice. Altogether he spent $5,000 on tickets to submit his guesses and spent an estimated 1,200 hours working out the math by hand. Try as he might to not be influenced by his birthday, the numbers kept landing on that date. “I’m just glad it’s over, so I can get started on next year’s classic,” Waters said. Forness couldn’t recall any other three-time winner of the classic. For $2.50 a guess, ticket buyers try to predict when the ice will go out. The jackpot usually is about $300,000. The game has been a tradition since 1917, and records show the ice goes out anywhere between April 20 and May 20. The black-and-white tripod, which actually stands on more than three legs, trips the clock when it shifts on the river banks as the ice melts. Waiting for the ice to move is hugely popular in a state that doesn’t participate in lottery drawings or have any sanctioned gambling beyond bingo and pull-cards. The classic has come a long way since it was founded by engineers surveying for the Alaska Railroad 95 years ago. They charged $1 a guess as to when the ice would go out, and the winner pocketed $800. The game is operated by a nonprofit organization, and after splitting out the winners’ take, expenses and staff salaries, proceeds help charitable organizations like the city’s library and senior center, a Fairbanks rescue mission and Special Olympics Alaska. Waters said he has long played the game seriously. He said he usually spends around $2,000 on tickets, but last year bought only 10, coming within a minute of a correct guess. That prompted this year’s hardest push ever. “I take this very seriously,” he said. “It wasn’t just a guess.” Such was his zeal in the latest classic that he skipped a visit to Hawaii waiting for the ice to move. With his winnings, he is now mulling ways to spend some money. He might get a new car or a motorhome. One spending target is certain for Waters, who said it was cold and snowing in Fairbanks on Tuesday. That visit to Hawaii is in order. “I’m going to rebook the trip,” he said.  

Hearings planned on proposed road in Alaska refuge

The Pacific brant is a small sea goose that likes to forage a mile or more offshore, far from bluffs, where eagles launch attacks from the air. Brant are also herbivores, and to get enough calories, must eat during nearly 80 percent of its waking hours. So it’s no surprise that Pacific brant migrating from breeding grounds to Baja Mexico choose to lard up at Izembek Lagoon, 10 miles of shallow, sheltered ocean near the tip of the Alaska Peninsula, the long finger of land at the start of the Aleutian Islands. The lagoon offers protection from predators and a giant buffet — one of the world’s largest beds of nutritious eelgrass. Virtually the entire 150,000 population of Pacific brant stops at Izembek. So do 70 percent of migrating Steller’s eiders, an endangered species that eats tiny invertebrates — clams, shrimp, and copepods — clinging to eelgrass leaves. So it’s also no surprise that environmentalists are fighting a proposal by an Aleut village to build a road through the Izembek National Wildlife Refuge for land access to an all-weather airport. “It’s really kind of this gathering place for these enormous numbers of birds,” says Beth Peluso of Audubon Alaska. “It’s such a rich area and it’s fairly unique. It’s the size of the eelgrass beds that are drawing a lot of these birds, so you just can’t switch it for some habitat somewhere else because it’s not equivalent.” The U.S. Fish and Wildlife Service begins hearings this week on a draft environmental review of road proposals for King Cove, home to one of the largest salmon canneries in Alaska. Access to the community of 948 is by sea or air — if a plane can make it onto the 3,500-foot gravel runway. Surrounded by mountains, and often besieged by strong wind, scheduled flights are delayed or canceled 50 percent of the time, according to the Aleutians East Borough. In medical emergencies, patients’ lives depend on getting to nearby Cold Bay and its all-weather airport. In the last 14 months, there were 21 emergency flights for villagers, said Agdaagux Tribe spokeswoman Della Trumble. That means a white-knuckle ride on a fishing boat, or if harbors are iced in, a call to the U.S. Coast Guard on Kodiak Island 425 miles away for an emergency helicopter flight. A better solution, according to villagers, state officials and Alaska’s congressional delegation, is a road. Five access options under review include two configurations of a single-lane gravel road from King Cove to Cold Bay that crosses nine miles of refuge. King Cove residents acknowledge the wildlife — they’ve depended on subsistence resources for decades — but in the debate between birds and human health, believe people should be getting more consideration, said city manager Gary Hennigh. Fish and Wildlife Service officials, Hennigh said, have become indignant on the occasions when he summarizes his perspective with a question: “Just how many tundra swans equal one dead Aleut?” “That is basically the theme that is going to keep coming back around, that this is for the human environment of the people in King Cove,” he said. Pacific brant were the rallying cry against the road five years ago, Hennigh said. Studies have indicated the effect of the road will be negligible and minimal, he said, so the focus has shifted to other species. “All the hype and crap that we went through about the black brant, the Steller’s eider, the tundra swan, the caribou, the bear, we are now confident that the final environmental impact statement will say these are not going to be that big of an impact,” he said. Federal officials thought they had a road alternative in place 14 years ago. Congress in 1998 appropriated $37.5 million to improve King Cove access. The centerpiece was a $9 million hovercraft, but the Aleutians East Borough announced in November it was grounding the big boat. It cost more than $1 million annually and didn’t come close to operating six days per week as promised, Hennigh said, mostly because of dangerous waves. Congress in 2009 reopened the door for a road. It authorized the secretary of the Interior Department to exchange lands within Izembek refuge a single-lane gravel road if the secretary concluded it was in the public interest. The only commercial use would be taxis, Hennigh said, and 15 to 20 vehicles per day are likely to use it. The village and the state of Alaska are willing to pay a steep price in land. The federal government would give up about 200 acres of Izembek refuge for the road corridor and 1,600 acres on Sitkinak Island south of Kodiak. In return, the federal government would receive more than 56,000 acres — 43,093 from the state north of the refuge and 13,300 acres from King Cove’s village Native corporation. Ultimately, the Interior secretary will decide if a land exchange and road is in the public interest based on Fish and Wildlife Service environmental review. The agency’s first hearing is Thursday in Anchorage. Environmentalists don’t like the precedent set by allowing a road in a refuge. They question whether traffic limits will be enforced. Despite the whopping difference in acreage of the exchange, Peluso said, not all habitat is equal. “It doesn’t mean it has the same qualities,” Peluso said. “The reason why Izembek is important is that it has this specific habitat, and you can’t just draw another line somewhere else. It doesn’t have the same thing.” Trumble said King Cove was not consulted over creation of the refuge. Her sympathies are with patients who have to endure a boat ride across heaving sea water and a walk or a trip by stretcher up an icy dock on top of their medical condition. “It’s very dangerous,” she said. “It’s very uncomfortable for the patient, adding on to the problems that they’re going through, without having to go through that extra stress of being offloaded in Cold Bay, or a bad boat ride to Cold Bay.”  

Exploration company shares timeline for Niblack prospect

KETCHIKAN (AP) — An aggressive timeline for mineral exploration, planning and permitting work at a Prince of Wales mineral prospect could lead to the beginning of mine construction by 2015, according to its owner. Heatherdale Resources will resume surface exploration drilling in late May or early June at its Niblack site 27 miles from Ketchikan, said Chief Executive Officer Patrick Smith. The company hopes to construct a mine that will extract copper, gold, zinc and silver. A major upcoming decision will be where to build a mill to process ore concentrate. The company has been looking at possible mill sites for eight months. “What we’d like to move (the ore) to is a site that maybe has some industrial prior activity, that’s on the water ... That has cheaper power — because here at Niblack we’d have to pay for diesel power — that is close to a community where people can go back and forth to work,” Smith said. “They can have a nice job ... and they can drive home at night, and we don’t necessarily have to build big crew facilities.” The company considered potential sites in Canada. “I tell you today, it’s definitely going to stay in Alaska,” Smith said. “There’s no worries there.” Heatherdale is looking at Revillagigedo Island, home to Ketchikan, Gravina Island, the site of the community’s airport, and Tolstoi Bay sites owned by the Alaska Mental Health Trust and Sealaska Corp. From the mill site, mineral concentrates would be shipped to smelters elsewhere, such as Japan or China. Niblack’s current estimate of mineral resources is about 9 million tons. Heatherdale officials hope summer exploration work will expand that by 1 to 2 million tons. “The (resource) numbers look good,” Smith said. “They would look really, really, really good with about another million or two million tons. So that’s our focus this year.” Heatherdale likely will start pre-feasibility work next year. “That pre-feasibility study work means we have to start nailing down where the mill’s going to be, exactly how we’re going to mine it, (and) what are the costs,” Smith said. The pre-feasibility process also will determine permitting aspects and make sure the company is preparing necessary baseline environmental studies, he said. By the end of 2013, Smith said, Heatherdale would begin feasibility work and permitting process. The time for the latter is uncertain, he said, but he estimates two years. Heatherdale, based in Vancouver, British Columbia, became a joint-venture partner in 2009. Other companies had spent about $51 million on exploration. Heatherdale acquired its joint venture partner in January, and now owns 100 percent of the Niblack project. Heatherdale, Smith said, has invested about $30 million in exploration and geological study work since late 2009. “We’ve been drilling pretty much nonstop from underground since then, about 185,000 feet of underground core drilling up ‘til last November,” Smith said. The current estimated amount of resources would provide for a mine life of 10 to 12 years, based on mining 1,500 tons a day. Heatherdale estimates that 130 people would be employed at the mine site and 65 at the mill site. He spoke last week to the Ketchikan Chamber of Commerce.  

Group plans Alaska Territorial Guard memorial park

ANCHORAGE (AP) — Federal validation took decades for Harold Bahr and the other members of a largely Native militia that was created to defend the immense territory of Alaska from the threat of Japanese aggression during World War II. All the more reason for the western Alaska town of Bethel to push quickly forward with its plans for a memorial park honoring those who served in the 6,400-member Alaska Territorial Guard, whose members were formally recognized by the Army as U.S. military veterans just eight years ago. For Bahr, a memorial park dedicated to the ATG has been a long time coming. “I’m just happy that they’re doing it, finally,” he said. The crowning focus at the site will be a bronze statue of a territorial guardsman surrounded by placards naming 1,130 ATG members from the 56-village, largely Yup’ik Eskimo region. But planners say the spirit of the statue and the project extends to all members including Bahr, who lives in Anchorage 400 miles to the east. Bahr, an energetic 80-year-old with a hearty laugh, is among an estimated few hundred ATG veterans still living. Funding for the whole project is uncertain, although the state is providing a $140,000-grant to build a monument incorporating the statue. A Bethel planning committee is also asking for rocks from around the state to construct borders for walking trails around the park, which would be adjacent to the regional veterans cemetery there. With at least 200 volunteers involved, one of the committee members, Vietnam veteran Fritz Grenfell, has no doubt the park will become a reality, full funding or no. “It doesn’t make any difference,” he said. “Us vets will get it done.” Bahr, who is part Eskimo and Athabascan, was living in the old coastal Gold Rush town of Nome when at age 11 he joined the unit in 1942 — 17 years before statehood. The unit was activated after Japan’s attack of Pearl Harbor and points along Alaska’s Aleutian Islands. The unpaid members of the new militia stepped in to watch over the 586,000-square-mile territory, which was vulnerable to further attack with the Alaska National Guard already called into federal service The possibility of more attacks by the Japanese was very real for the territorial guards, who took their roles with utmost seriousness, Bahr said. “We were the first line of defense,” he recalled during an interview in Anchorage. Bahr and some other younger ATG members used non-shooting wooden replicas during their military drills, but practiced shooting real weapons at an Army firing range. Some of the guns used were World War I era Enfield rifles. At night, Bahr would climb into the attic with his stepfather’s Enfield, hoping in his young mind to see some action. “We expected the Japanese to land,” he said. The territorial guards, nicknamed Uncle Sam’s Men, were organized by Army Air Corps Maj. Marvin “Muktuk” Marston. Marston traveled by dog sled across the frozen tundra. A charismatic speaker, he recruited boys as young as Bahr was then, as well as men of fighting age who were exempt from war duty. People were happy to serve, even though there was no pay. Their duties ranged from supply deliveries and scouting patrols to repairs of emergency shelter cabins and construction of military airstrips and other infrastructure. The ATG was disbanded with little fanfare in March 1947, almost two years after the war ended. Federal recognition may have been slow, but within Alaska the ATG’s contribution has long been recognized. In fact, volunteers in Bethel are hoping a formal dedication ceremony scheduled at the memorial park site July 3 will draw a large crowd from across the region. The Bethel project is unusual in that so many in the community are involved in seeing it through, said Verdie Bowen, director of the state Division of Veterans Affairs. He said its $140,000 grant for the project will be administered by the city for the work involving the statue, one of eight identical statues around the state. “I believe that whatever dollar that is spent in that area over there will be more than honored and the product will be better than what you or I could ever imagine,” he said. As it did with the veterans cemetery, the city donated the memorial park site, said city manager Lee Foley. The city will help anyway it can with the building of the park, but the project itself is driven by volunteers, he said. “They’re doing tremendous things for people that should have been honored many years ago,” he said.  

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.  

Bulletin 5/6/12

Permanent Fund shows strong third quarter The Alaska Permanent Fund returned 6.9 percent for the third quarter of fiscal year 2012, reclaiming ground lost last fall and bringing the year-to-date return to 1.9 percent. The Fund ended March with a value of $41.5 billion, the highest month-end closing value in its history. The Fund’s U.S. stock portfolio returned 13.3 percent for the quarter, while the non-U.S. and global portfolios returned 11.9 percent and 11.5 percent respectively. Private equity investments returned 4.5 percent for the quarter, bringing the year-to-date returns to 4.7 percent. The real return program showed similar results with 4.3 percent and 5.6 percent for the respective periods. The absolute return funds’ recent performance returned 2.9 percent for the quarter but was flat for the fiscal year-to-date. Infrastructure was also flat for both the quarter and the fiscal year-to-date. The Permanent Fund’s investments produced $485 million in statutory net income for the quarter, bringing the year-to-date total to $1.3 billion. APFC adds investments The Alaska Permanent Fund Corp. Board of Trustees approved additions to current investments and changes to its Investment Policy at a special board meeting on April 23. The Board approved the construction of new office, residential and hotel space at property it owns at Tysons Corner Center outside Washington, D.C. In a shift within the $980 million absolute return mandate managed by Mariner Investment Group, the Board reallocated up to $500 million to a fund that will focus on new securities management firms with experienced investment professionals and attractive strategies. Mariner will identify promising firms and take them through two stages of evaluation over several years. The Board also approved a change to APFC’s Investment Policy, clarifying that concentration tests applied to absolute return managers will apply at the time of investment. The next regular Board of Trustees meeting will be held in Anchorage May 22 through May 24. DOWL HKM celebrates 50 years DOWL HKM is celebrating its half-century mark and is holding an open house at their office at 4041 B Street in Anchorage to commemorate the event on May 3 from 4 p.m. to 8 p.m., All three of DOWL HKM’s presidents: Lew Dickinson, Mel Nichols and current president Stewart Osgood, will be in attendance. DOWL HKM started in Anchorage in 1962 and has grown to 18 offices in 6 western states. The Alaska Native-owned company provides civil, transportation and structural engineering as well as environmental services, land use, transportation planning, geotechnical engineering, water resources planning and design, materials testing, special inspections, landscape architecture and real estate services. NANA Development Corp. owns 51 percent of the company.  

Movers and Shakers 5/6/12

Anna Castillo is the new Learning Center manager for Credit Union 1. Castillo is responsible for the overall organization, operation, and on-site management of the Credit Union 1 Learning Center, which provides day care to employees. Castillo comes with 17 years of experience from the Providence Center for Child Development, where she has worked as a teacher and supervisor. She also has a bachelor’s degree in occupational education and human services with a specialty in early childhood development from Wayland Baptist University.   The 2012 Horatio Alger Association Alaska Scholarship recipients are: Anne L. Calhoun, Ketchikan High School, Ketchikan; Bryana Garcia-DeLaCruz, Effie Kokrine Charter School, Fairbanks; Mary E. Keele, Ketchikan High School, Ketchikan; TeoLani R. Lynch, Haines High School, Haines; and Megan R. Tuttle, Ben Eielson High School, Salcha. Since 1989, the Association has provided $318,000 in scholarships to high school seniors from Alaska. Students will receive $5,000 that will go toward their college tuition, fees, books, on-campus room and board, and other education-related expenses.   Alexei Desatoff, who heads the physical therapy program at the SouthEast Alaska Regional Health Consortium S’áxt’ Hít Mt. Edgecumbe Hospital in Sitka, has been notified that he will be awarded the U.S. Public Health Service Therapist Junior Officer of the Year Award this June. Desatoff, who holds the rank of Lieutenant Commander in the USPHS Commissioned Corps, also won this national award in 2004 and is the only person listed who has won the award twice. Desatoff won his 2004 award as a clinical instructor for Doctor of Physical Therapy students, and he will be awarded the 2011 award for co-authoring and implementing a business plan that brings significant upgrades and increased services to the hospital. Desatoff earned his doctor of physical therapy degree from the University of Southern California in Los Angeles. Desatoff has been with SEARHC since 2000 and was promoted to department manager of physical therapy in Sitka in 2010.   Dr. Bruce Chandler, pediatrician with the Anchorage Neighborhood Health Center, has been named by the national Centers for Disease Control and Prevention as the 2012 CDC Childhood Immunization Champion for Alaska. The award is given to honor individuals who are doing an exemplary job to promote or foster childhood immunizations in their communities.   Margaret (Mel) Langdon has joined USKH Inc. as a senior water resources engineer/hydrologist. Langdon provides USKH’s clients with more than 15 years of experience in water resources engineering, specifically on water resources investigations, water supply planning, advanced detention design, storm water quality, low-impact development and risk assessment. Langdon returns to Alaska after one year working in Oregon. Langdon’s previous Alaska experience includes four years working as a watershed hydrologist for the Municipality of Anchorage and three years working as the storm water and wetlands program manager for the Alaska Department of Environmental Conservation. Langdon is a member of the American Society of Civil Engineers / Environmental and Water Resources Institute and the American Water Resources Association. Langdon is a graduate of the University of Washington, and she received her master’s degree in civil engineering from the University of Colorado. She is licensed in Alaska, Oregon and Colorado.   Joshua Harrod recently joined Denali State Bank as a loan officer and was appointed assistant vice president. Bonnie Roland recently joined Denali State Bank as loan collections manager and was appointed assistant vice president. Harrod brings almost 10 years of banking experience to Denali State Bank and has occupied various positions in the local financial services sector. A longtime Fairbanks resident, Roland has more than 10 years of banking experience, most recently in a managerial capacity at another financial institution. In her appointment as loan servicing and collections manager, Roland is responsible for oversight of the bank’s collections activities, including both the mortgage and consumer loan departments.  

Taxes still a headache two years into debate

Anyone trying to figure out Alaska’s oil and gas taxes and the changes considered by the Legislature this spring had better reach for the aspirin bottle. The issue is complex, arcane, and if anyone needs a late-night aid to sleeping, call up a video of one of the seemingly countless legislative committee hearings held on the topic this spring in Juneau. Those feature consultants to the Legislature and Department of Revenue officials holding forth with PowerPoint after PowerPoint showing thin colored lines curving like strands of spaghetti across the screen. They mean something, of course, but not to most of us. So, here’s the bottom line: It’s about money, of course. A number of legislators, mainly in the state Senate, are loathe to reduce taxes on industry and give up any significant state revenue. The industry is meanwhile worried about declining production and a high state tax that discourages new investments, which are going instead to North Dakota and Texas. Oil and gas companies want taxes to be lowered. Gov. Sean Parnell and the state House agree with this. Last year the House passed House Bill 110, the governor’s bill that would change the state tax. The state Senate balked at HB 110, however, saying it gave away too much. Late this spring the Senate developed its own idea in a separate bill, Senate Bill 192, which would reduce taxes to some degree — the companies said it was not enough — but which also proposed some structural changes in the state tax that would provide a better framework for pursuing certain goals, like heavy oil. Here’s the monetary difference between the House and the Senate proposals: HB 110 would reduce taxes by about $1.4 billion a year in Fiscal 2017, the Department of Revenue has estimated. The department also estimated that SB 192 would reduce taxes by about $450 million in the same year. The new proposal introduced by the governor in the special session, which adopted an idea that came out of HB 276 in the final hours of the legislature, came down in the middle, reducing taxes just over $1 billion a year in Fiscal 2017, the department said. For reference, the state will earn about $10.1 billion in all oil and gas revenues in its current budget year, Fiscal 2012, and is expected to have a $2.7 billion surplus. The surplus was previously projected to be $1.7 billion for FY 2012, and legislators deposited that amount in the Statutory Budget Reserve in the 2011 session. However, an additional $1 billion in revenues for FY 2012 is now expected because of high oil prices, which brings the total surplus for the current year to $2.7 billion. Besides the money, there were significant differences in the structure of all three approaches. Bracketology House Bill 110 reduced the rate of the tax increase in the “progressivity” formula by bracketing the progressivity portion of the production tax, a formula that raises the tax rate as oil prices rise, and made two other important changes. HB 110 proposed to “bracket” the tax, similar to the federal income tax, so that as oil prices rise the higher tax rates apply only to the increments of production above certain price points rather than all of the oil production. This change would provide an important effect of reducing the overall tax. For background, Alaska has a net profits-type production tax of 25 percent on the value of the oil in the field after costs like transportation and production costs have been deducted. The progressivity formula starts ratcheting the tax rate up when oil prices climb and the net production value of the oil, after expenses, climbs above $30 per barrel, which is roughly equal to a $60 per barrel market sales price. The per-barrel expenses of production and getting the oil to market, paying the pipeline and tanker costs, are now about $20 per barrel and rising. Oil market prices are far above $60 per barrel now and the production tax rate of the state is now close to 50 percent of the net-revenue value. When state royalty and other special taxes on oil – an oil properties tax and special corporate income tax – are included, along with the federal income tax, the total government “take” is in the range of 70 percent of the net value of the oil per barrel. If oil prices go higher, the government take increases quickly. With this tax structure in place the companies are finding it difficult to get capital to invest in new projects. The adverse effect of the current tax as prices go higher is now widely agreed, even by many senators. The dispute is what to do about it. Another change would be to allow higher tax credits for certain intangible drilling and other well expenses, expenses like labor and supplies, that are allowed in Cook Inlet but not on the North Slope. There were other “levers” in the tax that could impact the tax owed. One is the oil price threshold at which the progressivity formula triggers. Currently it is $30 in net value, but there have been proposals to put the trigger at higher levels, which would reduce the tax, and to put a “cap” on the tax at different percentage points. Senate stalls The objections from the state Senate to HB 110 in 2011 were mainly the amount of the tax reduction but also that the proposal had no guarantee that added investments would be made if the taxes were reduced. The Senate struggled to develop an alternate approach all through the spring, not only to figure out how much to reduce taxes and when, but also how to build in mechanisms to ensure investments would be made. The last version of SB 192, developed unfortunately too late in the regular session, proposed a number of structural changes. However, as the regular session ended the senate was unable to muster enough votes to actually pass its proposal and send it to the House. In the final hours of the regular session the Senate inserted a provision for new fields into another bill – HB 276 – which was later incorporated into the governor’s new proposal presented in the special session. All along, an important objective for many senators was to provide incentives for new oil within the existing producing fields, but there was disagreement on how to do this. There was more agreement on a reduced tax rate for entirely new oil fields outside of existing fields. HB 110 contained something similar for entirely new fields. Setting up an incentive tax rates for new oil fields is relatively easy to establish, and for the revenue department to administer. The concept is also more accepted politically, partly because the impact on immediate state revenues is virtually zero because it takes several years to find and develop new fields. Legacies left out However, setting up a reduced tax for new oil in fields already producing proved to be more complicated. With existing fields the reduction in tax revenues will also occur more quickly, and would be significant. That translates into political problems, and that was mainly the reason the Senate wasn’t able to pass its SB 192 at the end of the session. Although many legislators resisted the tax break within existing fields, encouraging new oil from these is really the quickest way to bring significant new production into the Trans-Alaska Pipeline System, which is running at less than one-third capacity. New wells drilled from existing facilities in the producing fields can bring on new oil within two or three years, for example, compared with 10 years or much longer for new oil from a brand new field. Committees in the Senate did finally develop a way to give a tax break for new oil in existing fields, but it was complicated and in the end the Senate backed away from it when they did not pass SB 192. The mechanism that was considered was a tax break for new oil produced above an existing rate of production, but determining those numbers proved to be tricky. The method the Senate Finance Committee settled on in SB 192 was to establish a base rate of production with a decline rate that was a producer’s actual rate over three years of prior experience. Any oil produced in addition to that would get a reduced tax rate. When the Finance Committee version of the bill went to the full Senate, however, its members balked. Disagreements over the decline rate formula and the tax break to the producing fields was one of the reasons. In the final days of the session the Senate did finally vote to send another tax proposal, a concept considered in drafting SB 192 but in a different form, back to the House attached to a bill that established new exploration incentives in the Nenana Basin and other unexplored regions. The House balked at that, however. Net zero The end result was that nothing at all passed in the regular session. Parnell decided to have another go at it, and called lawmakers into special session. The governor’s proposal for the special session borrowed from the ideas the Senate developed. For new fields, the most important provision is to allow an “exclusion,” or reduction in the gross value of production of 30 percent before calculating the production tax owed, for both the base tax of 25 percent and the additional tax due to the progressivity formula. For existing fields, the exclusion would be 40 percent but only on the part of the tax obligation due to the progressivity formula. The 40 percent exclusion would not apply to the base rate of 25 percent of the net profits. The 30 percent reduction for new fields would actually do more for industry in new fields because it is 30 percent off both the base tax and the additional tax due to progressivity. In contrast, the 40 percent reduction for existing fields is only on the progressivity part. The tax reform proposal was dropped from the special session agenda April 25 because of disagreement primarily from the Senate. The issue is certain to be back in 2013, however, in the new Legislature following the November elections.

Drilling his own river ice pays off for Alaska man

ANCHORAGE (AP) — And the winner is ... a man who drills his own holes in a frozen river to study the best conditions for hitting the jackpot in Alaska's biggest annual guessing game. The hands-on research paid off handsomely for Tommy Lee Waters in the Nenana Ice Classic. The Fairbanks man bested more than 250,000 other entrants in a contest to see who could guess when the ice would give way on the Tanana River in the tiny community of Nenana, about 55 miles south of Fairbanks. Organizers announced the winner Tuesday, but Waters won't receive his winnings until June 1. This year's jackpot was a record $350,000. Of that, $252,000 will go to Waters after federal taxes, Ice Classic manager Cherrie Forness said. Waters was the only person to correctly guess that a tripod set up on the river would tip over and stop the official clock at 7:39 p.m. April 23 — which happened to be his 55th birthday. Waters, a mental health technician, has won in two other classics. But he had to split the jackpot in those contests with multiple people making correct guesses. Not this time. For the latest classic, he went so far as to buy a guess for each minute of each hour for the winning afternoon. "That's the way to do it," Waters said Tuesday. Waters also spent time drilling holes in the area to measure the thickness of the ice. Altogether he spent $5,000 on tickets to submit his guesses and spent an estimated 1,200 hours working out the math by hand. Try as he might to not be influenced by his birthday, the numbers kept landing on that date. "I'm just glad it's over, so I can get started on next year's classic," Waters said. Forness couldn't recall any other three-time winner of the classic. For $2.50 a guess, ticket buyers try to predict when the ice will go out. The jackpot usually is about $300,000. The game has been a tradition since 1917, and records show the ice goes out anywhere between April 20 and May 20. The black-and-white tripod, which actually stands on more than three legs, trips the clock when it shifts on the river banks as the ice melts. Waiting for the ice to move is hugely popular in a state that doesn't participate in lottery drawings or have any sanctioned gambling beyond bingo and pull-cards. The classic has come a long way since it was founded by engineers surveying for the Alaska Railroad 95 years ago. They charged $1 a guess as to when the ice would go out, and the winner pocketed $800. The game is operated by a nonprofit organization, and after splitting out the winners' take, expenses and staff salaries, proceeds help charitable organizations like the city's library and senior center, a Fairbanks rescue mission and Special Olympics Alaska. Waters said he has long played the game seriously. He said he usually spends around $2,000 on tickets, but last year bought only 10, coming within a minute of a correct guess. That prompted this year's hardest push ever. "I take this very seriously," he said. "It wasn't just a guess." Such was his zeal in the latest classic that he skipped a visit to Hawaii waiting for the ice to move. With his winnings, he is now mulling ways to spend some money. He might get a new car or a motorhome. One spending target is certain for Waters, who said it was cold and snowing in Fairbanks on Tuesday. That visit to Hawaii is in order. "I'm going to rebook the trip," he said.

Parnell picks former Gatto aide to fill House seat

JUNEAU (AP) — Gov. Sean Parnell has chosen a former legislative aide to the late-Rep. Carl Gatto to serve the remainder of Gatto's term. Parnell announced his selection of Shelley Hughes as Gatto's replacement on Tuesday while appearing via video at a gathering in Palmer. His choice still must be confirmed by a majority of state House Republicans. Gatto died in April at age 74 from complications related to cancer. Hughes had earlier filed with the Alaska Public Offices Commission, signaling her intention to run for his seat. She said she had gotten the blessing of members of his family. Hughes, 54, served as an aide to Gatto from 2003 to 2005. Hughes' name was one of three sent by Republicans from Gatto's district in Palmer to Parnell to consider. The others were David Eastman and Marvin Yoder. Parnell said all three, whom he interviewed, were qualified to do the work. But he said he believed Hughes could begin the work without on-the-job training. He said she also has a desire to serve the district and the people of the district. Hughes, who describes herself as a conservative Republican on her campaign website, has said her first career was as a busy stay-at-home mom. Her second included working for Gatto and as the government affairs director for the Alaska Primary Care Association from 2005 to 2011. She resigned from that job to run for office. Hughes received a bachelor's degree in English from the University of Alaska in 2002 and is affiliated with organizations including the Alaska Outdoor Council, the National Rifle Association, the Alaska State Fair and the Resource Development Council, according to a biography released by the governor's office. Hughes said that while she's mindful and respectful of Gatto's legacy, she plans to chart her own course. She said she's been getting "robust support" as she's been out in the community. And she noted she is already hearing from local residents that infrastructure is important in the Matanuska-Susitna Borough, which, according to the 2010 census, was the fastest-growing region of Alaska between 2000 and 2010. She also said she supports efforts to change Alaska's oil-tax structure and move forward on a natural gas pipeline project.

Oil prices rise on improvement in US manufacturing

Oil prices rose Tuesday after a strong showing by the U.S. manufacturing sector signaled more demand for energy products. China's manufacturing also expanded last month, which could indicate its economy also may be showing improvement. Both reports offered a bit of relief from the persistent worries about the slowdown in Europe. Benchmark crude rose $1.26 to $106.13 per barrel in afternoon trading in New York. Brent crude increased 32 cents to $119.79 per barrel. The Institute for Supply Management, a trade group of purchasing managers, said that its index of manufacturing activity increased to 54.8 in April, which was the highest level since June. That compared with 53.4 the previous month. Readings above 50 indicate expansion. New orders, new export orders, production and a measure of employment all rose. Manufacturing has been expanding for 33 consecutive months, which has helped create jobs since the recession ended three years ago. In China, the state-affiliated China Federation of Logistics and Purchasing said that its purchasing managers index rose 0.2 percentage points to 53.3 percent in April from March's 53.1. The improvement comes after the world's second-largest economy slowed late last year. Chinese leaders promised more bank lending to help companies cope with slower global demand but changes have been gradual. Oil prices have traded in a narrow range about China's economic slowdown and Europe's financial problems. The uncertainty about what lies ahead for Europe's economy continues to overhang the market, said Tom Bentz, an analyst at BNP Paribas Commodity Futures. He doesn't expect a significant movement in oil prices until a strong trend materializes. Meanwhile, retail gas prices continued to fall, and most analysts believe consumers already have seen the highest prices for 2012. The national average for a gallon of gasoline fell about 1 cent overnight to $3.809, according to AAA, Wright Express and the Oil Price Information Service. That's 11.6 cents less than it was a month ago and 13.4 cents less than a year ago. Energy analyst Jim Ritterbusch said that demand remains weak because consumers continue to cut back with prices still high. In other trading, heating oil rose less than a penny to $3.1869 per gallon, gasoline futures fell 1.04 cents to $3.1142 per gallon and natural gas increased 4.1 cents to $2.326 per 1,000 cubic feet.  

Alaska House adjourns, leaves gas bill unfinished

JUNEAU (AP) — The Alaska House resignedly adjourned Monday, mirroring the Senate's action last week and marking the end of a tumultuous special session that seemed doomed from the start. Left unresolved was a gas pipeline bill that House members had looked for ways to salvage, but they found little or no support from the Senate. Lawmakers did pass a bill on the special session call regarding human trafficking, but Gov. Sean Parnell pulled an oil tax measure after his bill on the subject appeared to be going nowhere. The Senate adjourned Thursday, relying on a legal opinion that says if a bill on a special session call is removed while the session is under way, that action, in effect, ends the session. That left unresolved the pipeline bill, which was a priority for House Speaker Mike Chenault. Supporters have said inaction on a gas line bill would delay progress on a project that could serve Alaskans. A Parnell spokeswoman said the governor did not plan to call lawmakers into another special session to deal with that issue. After adjournment, members of the House's GOP-led majority expressed disappointment, frustration and anger with what they saw as the unwillingness of the Senate to compromise or even work on a pipeline bill. Rep. Craig Johnson, R-Anchorage, said the Senate had "taken away the hope for a long-term fix for Alaska's energy and that is a devastating, crushing blow." A couple hours beforehand, Chenault told reporters there was a "50-50" shot of the House introducing a gas line bill Tuesday and said there were talks under way about what may or may not work. The House Resources Committee had scheduled hearings pending the referral and introduction of a bill. Chenault, R-Nikiski, said he didn't think the House needed the Senate to give its blessing to any bill. But, "we need to try to maybe come up with a piece of legislation that they can support," he said. "With the group that they have, that they have to work with, that's a pretty hard row to hoe." Later in the day, Senate President Gary Stevens, R-Kodiak, said in a statement that the Senate didn't see any reason to spend "any more time or money on issues that won't produce a different outcome" than what happened during the regular session. An early estimate of the special session cost, given last week, was up to $30,000 a day. Chenault said he read Stevens' statement as saying, "We don't care what you do." "You know, I think once again, the House has taken Alaska's most pressing needs, and that's the high cost of energy, and we've done everything we can to address the issue. And the other body," he said, "has taken and chosen to do nothing." Parnell, in a statement, said he supported the House's decision to gavel out "after the Senate Majority failed to address the state's energy needs." "The Senate refused to work; the House did its job," he said. He said Senate inaction on a gas line bill "delayed shipping gas from the North Slope to Fairbanks and the Railbelt for at least one to two years." Stevens said he's "fed up with the governor blaming us for everything." Parnell last week blamed the Senate for his decision to pull oil taxes from the call, saying the Senate "appears incapable of passing comprehensive oil tax reform." But members of both the House and Senate said the administration hadn't made its case for Parnell's tax-cut plan. Stevens said HB9, the pipeline bill that passed the House during the regular session, was problematic, giving "enormous power" to the Alaska Gasline Development Corp., or AGDC, the group behind efforts to advance an in-state line. He said there were concerns, too, about the cost to build a line and what customers would ultimately pay. AGDC's Joe Dubler has said that the money provided to AGDC in the recently passed budget "is enough to keep the lights on but not to keep the project on schedule." AGDC had hoped to get to an open season — to gauge interest among potential shippers — next year. The proposal floated late last week by the House was the same as the one released by the sponsors — Chenault and Rep. Mike Hawker, R-Anchorage — at the end of the regular session. They said the governor's office also worked on it. By the time the Senate adjourned, the proposal had been out there for nearly two weeks, and it was never taken up by a Senate committee. There were questions about whether the House could even introduce a bill, though Chenault said history suggested there should be no problem with the House introducing a bill germane to the call. The Legislature's top attorney, Doug Gardner, said it was his opinion the Legislature could introduce a bill or a number of bills as long as they have a "rational nexus" to the subject designated in the proclamation call. But he also noted there's an ambiguity because the Alaska Supreme Court hasn't considered the issue. If the court were to find a bill outside the call, "this would probably result in the invalidation of the proposed legislation," he said in a written opinion.

Group plans Alaska Territorial Guard memorial park

ANCHORAGE (AP) — Federal validation took decades for Harold Bahr and the other members of a largely Native militia that was created to defend the immense territory of Alaska from the threat of Japanese aggression during World War II. All the more reason for the western Alaska town of Bethel to push quickly forward with its plans for a memorial park honoring those who served in the 6,400-member Alaska Territorial Guard, whose members were formally recognized by the Army as U.S. military veterans just eight years ago. For Bahr, a memorial park dedicated to the ATG has been a long time coming. "I'm just happy that they're doing it, finally," he said. The crowning focus at the site will be a bronze statue of a territorial guardsman surrounded by placards naming 1,130 ATG members from the 56-village, largely Yup'ik Eskimo region. But planners say the spirit of the statue and the project extends to all members including Bahr, who lives in Anchorage 400 miles to the east. Bahr, an energetic 80-year-old with a hearty laugh, is among an estimated few hundred ATG veterans still living. Funding for the whole project is uncertain, although the state is providing a $140,000-grant to build a monument incorporating the statue. A Bethel planning committee is also asking for rocks from around the state to construct borders for walking trails around the park, which would be adjacent to the regional veterans cemetery there. With at least 200 volunteers involved, one of the committee members, Vietnam veteran Fritz Grenfell, has no doubt the park will become a reality, full funding or no. "It doesn't make any difference," he said. "Us vets will get it done." Bahr, who is part Eskimo and Athabascan, was living in the old coastal Gold Rush town of Nome when at age 11 he joined the unit in 1942 — 17 years before statehood. The unit was activated after Japan's attack of Pearl Harbor and points along Alaska's Aleutian Islands. The unpaid members of the new militia stepped in to watch over the 586,000-square-mile territory, which was vulnerable to further attack with the Alaska National Guard already called into federal service The possibility of more attacks by the Japanese was very real for the territorial guards, who took their roles with utmost seriousness, Bahr said. "We were the first line of defense," he recalled during an interview in Anchorage. Bahr and some other younger ATG members used non-shooting wooden replicas during their military drills, but practiced shooting real weapons at an Army firing range. Some of the guns used were World War I era Enfield rifles. At night, Bahr would climb into the attic with his stepfather's Enfield, hoping in his young mind to see some action. "We expected the Japanese to land," he said. The territorial guards, nicknamed Uncle Sam's Men, were organized by Army Air Corps Maj. Marvin "Muktuk" Marston. Marston traveled by dog sled across the frozen tundra. A charismatic speaker, he recruited boys as young as Bahr was then, as well as men of fighting age who were exempt from war duty. People were happy to serve, even though there was no pay. Their duties ranged from supply deliveries and scouting patrols to repairs of emergency shelter cabins and construction of military airstrips and other infrastructure. The ATG was disbanded with little fanfare in March 1947, almost two years after the war ended. Federal recognition may have been slow, but within Alaska the ATG's contribution has long been recognized. In fact, volunteers in Bethel are hoping a formal dedication ceremony scheduled at the memorial park site July 3 will draw a large crowd from across the region. The Bethel project is unusual in that so many in the community are involved in seeing it through, said Verdie Bowen, director of the state Division of Veterans Affairs. He said its $140,000 grant for the project will be administered by the city for the work involving the statue, one of eight identical statues around the state. "I believe that whatever dollar that is spent in that area over there will be more than honored and the product will be better than what you or I could ever imagine," he said. As it did with the veterans cemetery, the city donated the memorial park site, said city manager Lee Foley. The city will help anyway it can with the building of the park, but the project itself is driven by volunteers, he said. "They're doing tremendous things for people that should have been honored many years ago," he said.  

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