February 17, 2009 - Week in review

AP Photo/Mark Lennihan

Several bills were active in legislative committees in Juneau last week as the 2009 session slowly gathered momentum. Hearings were held on bills to change the state’s coastal management program, to increase the state’s minimum wage and to impose "price-gouging" penalties on Alaska refineries selling gasoline.

These particular proposals are being pushed by Democrats, who have clout in the Legislature by virtue of a coalition organization in the state Senate that puts Democrats in positions to advance their proposals.

The coastal management bill changes the program to where coastal communities would control approvals of a state coastal consistency determination, a form of permit, for projects in the "coastal zone" (which is interpreted to include inland areas with watersheds that affect coastal regions) or in the federally-managed Outer Continental Shelf. Federal law requires projects in the OCS to be "consistent" with a state coastal management program, and the key here is who controls that consistency determination.

Currently the program is controlled by the state Department of Natural Resources, with the coastal communities playing an advisory role. This is an important bill because if it were enacted, coastal communities would have a form of control over development of natural resources on state lands and federal offshore lands.

The gasoline price-gouging legislation is in response to high gasoline prices in Alaska that remained high through the fall and early winter as crude oil prices fell sharply and gasoline prices in the Pacific Northwest, and the rest of the U.S., declined. Economists retained by the Judiciary Committee of the state House last summer documented the "stickiness" of the Alaska gasoline price relative to Seattle-area prices last fall (and in previous times where crude oil prices fell) but also noted periods when Alaska prices were even or not far above Seattle prices and at times even below Seattle. A report by the Judiciary Committee released recently, and written mainly by its chairman, Rep. Jay Ramras, R-Fairbanks, and the committee staff, described the economic and technical issues facing Alaska refineries and notes the possibility that refiners "cross-subsidize" their sales of jet fuel with higher profits taken on gasoline (jet fuel is sold in a more competitive market, where gasoline is sold to an essentially captive Alaska market) but also recommends against the Legislature acting to intervene in a private market.

Last week a long-awaited report from the state Attorney General’s office on an anti-trust investigation of the gasoline market was released. It found no illegal activity, but noted the same issues as did the House committee report (a small market geographically isolated, a few number of sellers, technical and economic challenges faced by refiners, etc.)

The advocates of the price-gouging bill were not swayed by these reports, however. Their proposals would impose penalties on refiners if the price difference between Alaska and the Seattle area exceeds 10 percent.

There is a fair amount of consumer angst over this issue, and public support for the legislation. Prices for gasoline and others fuels have come down, however, which may take some of the steam out of the issue.

This week legislators are awaiting Gov. Sarah Palin’s amendments to her Fiscal Year 2010 budget, as well as a revised revenue forecast. These are due Feb. 18. The governor is expected to propose a somewhat reduced spending plan for the next budget year, which begins July 1. The revenue forecast is also expected to be reduced.

There are concerns by legislators as to how large the gaps between revenues and spending will be. In January the governor estimated the gap for the current FY 2009 could be $1.36 billion, but it may be greater. The Senate Finance Committee estimates the FY 2010 gap at $2 billion if oil prices average $50 per barrel through the fiscal year. This number will undoubtedly change, to be greater or lesser.

Given these circumstances, withdrawals from savings of $3.36 billion or more will be needed to cover revenue gaps for FY 2009 and FY 2010. The state has reserves of about $7.7 billion. The concern is that even if the national and world economy recovers in the next year and a half, the state will be left with thinner reserves to cushion the years until natural gas could flow through a gas pipeline (2018 or 2020) if the pipeline is even built.

Mike and Tim Bradner publish the Alaska Legislative Digest and Alaska Economic Report.

11/15/2016 - 3:13pm