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OPINION: Oil and gas likely to dominate discussion in 2012

December 3rd 6:48 pm | Neal Foster Print this article   Email this article   Create a Shortlink for this article

Hello I hope you all had a Happy Thanksgiving and are looking forward to a Merry Christmas.

It's now December and the second session of the 27th Alaska Legislature is right around the corner. We will be convening next month on the 17th. Tempers ran hot at the end of the last session and we will have to see if time back home has softened some of the animosity that plagued us last year. I'm hopeful that differences in the House and Senate can be overcome and that compromise on the issues at hand will be found, but most of the wedges dividing us are still in play. The issues remaining are difficult and we will only have a short time to address them (90 days). Bearing these factors in mind I think the scope of major legislation will be limited. I do want to clarify that while the press and others have focused on the conflict between the House and Senate, Senator Olson and I maintain a great working relationship and cooperate when it comes to looking out for House District 39's best interests.

The largest issue before us is the Governor's proposed oil and gas tax reform, House Bill 110. The Bill passed the House last year mostly unchanged from the Governor's proposal. The Senate is now in charge of its fate and has made no secret that they intend either to kill it or give it a major overhaul. While the differences in our respective bodies has been highlighted over the last year I think it's important to point out that everyone in the House and Senate, regardless of party, is trying to get to the same place. Oil production is declining and it is imperative that we halt or reverse this decline in order to ensure the Trans Alaska Pipeline's continued service. It has been said that oil is the lifeblood of the State of Alaska, and while I wouldn't characterize it that way I would say that oil has given most Alaskans a standard of living that we would not otherwise have. Without oil revenue we would not be able to build or maintain roads and airports, we would not be able to help rural residents with Power Cost Equalization (PCE), and we would not be able to support schools and social programs in the manner we've all become accustomed to. All sides in the legislature want to see sustained and sustainable oil production. The difference lies in how we get there.

We may see a new push to revive the state's Coastal Zone Management Program. It died last session when a compromise could not be found that all parties could live with. The proposed ballot initiative to reconstruct the program may motivate all parties to resolve this issue via the deliberative process. The initiative in its current form is seen as unduly burdensome to development by some members. They may prefer trying to pass a bill that would be more industry friendly. Others, who see the initiative as having the right balance of development and local input, might prefer passing a compromise bill now rather than gambling on a statewide initiative: "A bird in the hand is worth two in the bush."

It is likely that we will be dealing with a gas line bill in some form. There has been significant interest in a "bullet line" from the North Slope to Anchorage. As the production in Cook Inlet decreases, south central residents are desperate to find a cheap replacement for their energy needs. Fairbanks is also trying to find a new and economical way to power its utilities and provide heat. This is important to the Bush because the price of power in these urban centers sets the level of PCE we receive. Should the cost of power in Anchorage skyrocket we will end up paying more in our utility bills. If the price of power in Fairbanks falls then we will share in the benefit in our utility bills as well. Lately there have been promising developments in the revitalization of the Cook Inlet Field. If this exploration should prove out we may see a proposal to run a bullet line from south central to Fairbanks instead. Both of these proposals have certain challenges involved, including the lack of economies of scale and possible issues with the current AGIA line that Trans Canada is working on. Another possibility we may see is the scraping or reworking of AGIA to look at a large diameter in state line that would run to tidewater. This line would have off-take points to provide gas to Alaska communities while the majority of it would be shipped to markets abroad. The benefit of this line is that it allows our Alaska communities to take advantage of the economies of scale and export line provides and would result in lower unit costs than a bullet line. The disadvantage of a large diameter line is that it is exponentially more expensive to construct and involves much more intricate market forces. This issue will not be entirely resolved this session but will remain a concern in the foreseeable future.

As with every year the main event will be the Operating and Capital Budgets. While the Operating budget is the larger of the two it is unlikely to be as controversial as the Capital budget. The Operating Budget provides for the day-to-day operations of the State: keeping the runways plowed, funding social programs, keeping light and heat on in the schools etc. The Capitol Budget focuses on building infrastructure: building new schools, water/sewer systems and runways. My focus is to maintain the states operations in the district and to try and maximize maintenance and construction of new infrastructure for our communities.

My office is available to answer questions or to help with issues related to the state. Please feel free to contact me or my staff.

 


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