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AK-LNG & ASAP: A citizen considers risks of continuing government ownership

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BY DAVE HARBOUR
NORTHERN GAS PIPELINES

How would you cope with the smorgasbord of problems/challenges Gov. Mike Dunleavy assumed upon being sworn in this December?

Some of the challenges blocking Alaska’s road to economic recovery include: a fiscal crisis and annual budget deficits, billions of dollars in state employee unfunded pension liability, the highest unemployment rate in the nation, an amazingly burdensome array of “entitlement” programs, high utility rates and one of our country’s most ineffective state educational systems.

On Gov. Dunleavy’s list of challenges, is the question of what to do with the government owned, Alaska North Slope (ANS) natural gas monetization project, AK-LNG.  Should he let it quietly go into the night and allow its current funding to lapse?  Should he try to terminate the project as soon as possible and reclaim remaining dollars? Or, should he support continued public funding of the effort to create a profitable, government-run natural gas/LNG hybrid transportation project for export and for intrastate use?

Since Gov. Dunleavy will seriously consider the opinion of citizens when making such critical decisions, it may be of some value to review the risks involved in continued government ownership of this project.  After fully considering these and other matters, citizens might feel more qualified to offer their legislators and the Governor valuable counsel.

The previous Alaska administration led the effort to expropriate the AK-LNG project from private parties when those parties, the three major ANS producers, concluded that it was not time to move the project forward.

While the administration expropriated [1, Scroll down for end notes] the project, the three producers did not object.  After all, from that point forward, they would be “off the hook” should an apparently uneconomic project fail to attract either/or gas purchasers and financing.

In short, the administration led the citizens of Alaska into an uneconomic, risky, tens of billions of dollars energy project in the midst of a state fiscal crisis because the past governor was proclaiming it would be Alaska’s financial “get-well card”.

At the time, we tried for our local and international readers to inventory the risks of such a venture.

[Read this column in full at Northern Gas Pipelines]

Fairbanks throws The Party of the Year for the new governor

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Gov. Mike Dunleavy roared into the Fairbanks Inaugural Celebration Sunday night on a 2019 Can-Am XMR 1000 all-terrain vehicle.

Lt. Gov. Kevin Meyer was right behind him on a Can-Am Defender XMR side-by-side, with two ladies on board. It was quite the entrance.

Over 800 Fairbanksians attended the Carlson Center celebration to greet the new governor and lieutenant governor and their wives, Rose Dunleavy and Marti Meyer, both of whom were on the Can-Am side-by-side with the lieutenant governor.

In addition to a photo booth with a reindeer and another photo booth for portraits with the governor, there were dog sled rides outside, ice sculptures, and lots of activities for children.

What knocked everyone out was the program. Emcee Craig Compeau kept it light and moving along. Jim Sackett, director of the Fairbanks Office of the Governor, introduced Dunleavy and Meyer.

The Interior Athabaskan dancers gave a dance and drum performance.

Craig Compeau, emcee of the Fairbanks Inaugural Celebration.

Singer-songwriter David Wilcoxson sang a version of Lee Greenwood’s song “I’m proud to be an American,” but the words were: “I’m proud to be an Alaskans,” which brought the house down, especially the line about being “twice the size of Texas.” A former music teacher who is retired from the Fairbanks North Star School District, Wilcoxson is always in demand for his version of the National Anthem at Nanooks Hockey Games.

Popular Fairbanks singer Willa Watts sang the Alaska Flag Song and everyone joined in; she also led the crowd in singing happy birthday to Glenn Hackney, surprising the icon of Fairbanks, who turns 94 on Saturday.

As he arrived in the arena, Gov. Dunleavy found a very welcoming crowd. Even Democrats Don Gray and Scott Kawasaki attended and appeared to have a good time, along with a smattering of other Democrats.

Alaskans asked “Should I vote?” on Google in 2018

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Google is where we ask important questions about life, such as “What is the Keto diet?” and “What’s a good Christmas movie?” It’s our 21st Century encyclopedia and Ouija board rolled into one.

In 2018, when Alaskans started a search-term question with the phrase “Should I…” they ended that sentence with “vote?”

Google Trends tracks the usage patterns for searches, and you can find out for yourself what Alaskans are concerned about by performing your own queries here.

Here’s one that was an obvious search: the timeline on the U.S.-based search term “Alaska” since mid-November. Can you tell when the earthquake occurred?

As for “Should I vote?” ATT performed the research found that in addition to Alaska, that question was asked most by people in Delaware, Montana, North Dakota, South Dakota, Vermont, Wyoming.

The ATT methodology and other trivia they discovered can be viewed here.

For the search term Alaska, the top 10 other topics related to it in 2018 were:

  • Earthquake
  • Tsunami
  • San Francisco International Airport
  • Airport lounge
  • Airport terminal
  • First class

And in the top “related queries” category, “Alaska Mike Dunleavy” made #9 on the list of terms associated with “Alaska” when people were making “Alaska” queries over the past 12 months. “Alaska cruise 2019” made item #6.

You can also find out on Google Trends that Alaska was #5 for people interested in the learning what “Bitcoin” means, and #10 for interest in the term “government shutdown.”

Absolutely no interest could be gauged in Alaska for the question “How to apply magnetic lashes,” however. The states that dominate that question are Texas and California.

Obamacare ruled out of order by Texas judge

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RULING TO BE APPEALED TO SUPREME COURT

The Affordable Care Act, once ruled constitutional because of the “individual mandate” provision, has been now ruled unconstitutional by a Texas judge — due to that provision being eliminated.

Since the individual mandate penalty was dropped to $0, the Supreme Court’s ruling of the law is now a different one than was upheld by the U.S. Supreme Court, the judge reasoned.

U.S. District Court Judge Reed O’Connor’s ruling came one day before the Friday deadline to sign up for 2019 health care coverage through the ACA’s marketplace. It was an answer to a lawsuit brought by Republican governors who said that without a penalty, there is no “tax.”

And without the “tax,” the Supreme Court’s 2012 decision that the “tax” made the law constitutional is no longer valid, argued the plaintiffs, a coalition of Republican-led states.

“[the] Individual Mandate can no longer be fairly read as an exercise of Congress’s Tax Power and is still impermissible under the Interstate Commerce Clause—meaning the Individual Mandate is unconstitutional,” O’Connor wrote.

The White House expects that the ruling will be appealed to the U.S. Supreme Court, but meanwhile, President Trump has called on Congress to replace the law that was signed by President Obama on March 23, 2010.

SIGN-UP DEADLINE ENDED DEC. 15

The sign-up deadline for coverage under the ACA for 2019 ended on Saturday. Across the nation, enrollment appears to have dropped for the second year in a row except for in a few pockets, (notably Connecticut) if numbers released as of Dec. 8 are an indication. The final enrollment numbers won’t be released until later this month by the Centers for Medicare and Medicaid Services (CMS).

Last year, 8.8 million people signed up for coverage under the federally run health insurance marketplace by the deadline. That  number represents those signing up in the 39 states participating in the federal exchange. Adding the state-run exchanges, that number exceeded 11 million. In the prior year, the total enrolled was 12.2 million.

During open enrollment last year for coverage in 2018, some 21,000 enrolled, with 17,676 of those Alaskans eligible for financial assistance in paying for premiums. Over 5,000 applicants were enrolled in Medicaid or CHIP due to their lower incomes.

Earthquake 2.0

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By WIN GRUENING
SENIOR CONTRIBUTOR

On Nov. 30, Alaska’s southcentral region experienced a magnitude 7.0 earthquake ranked as the second most damaging in our state’s history in the last 50+ years.

Fortunately, despite extensive property damage, there were few injuries and no lives were lost. Largely, this was due to lessons learned after Alaska’s massive 1964 (9.2) quake that claimed 131 lives and caused billions in property damage.

The 1964 Good Friday Earthquake was over 150 times bigger than last month’s earthquake. Who can forget the pictures of destruction in downtown Anchorage or the devastation caused by the ensuing tidal wave that destroyed Chenega, and caused destruction in Kodiak, Whittier, Seward, and Valdez? Coastal cities as far away as Washington, Oregon, and California were also damaged and are stark reminders of the unbelievable forces that can strike without warning.

Only one tsunami warning center existed in the United States then. The 1964 earthquake reinforced the need to better educate the public about tsunami hazards and to more quickly issue tsunami warnings to local authorities.

While no significant tsunami was generated this time, Alaska’s warning system worked as advertised. A tsunami warning was issued within minutes based on initial projections and then cancelled shortly thereafter as information was obtained from sensitive ocean sensors.

The Good Friday quake also changed the way the state rebuilds and responds to disaster. More stringent building standards were mandated later to help prevent structural damage.   A broad earthquake-monitoring system was created to gather data and help seismologists predict future earthquakes and their potential damage.

Better preparedness, improved building standards, and faster response all worked together to help mitigate the impacts of this latest event and Alaskans should be proud of their resilience and orderly response to disaster.

While this is reassuring, the Alaska Earthquake Center reported over 150,000 earthquakes in Alaska over the last five years. Thirty-one of those had magnitudes of 6.0 or greater, and four had magnitudes of at least 7.0.

So what lessons can be gleaned from this latest seismic event?

First, we must remain vigilant in the event a similar earthquake impacts a populated area in the future.

Since events like these, which, despite our best efforts, can be unpredictable, we shouldn’t lose sight of the importance of maintaining and improving critical infrastructure throughout the state along with the equipment and resources that support it.

What am I talking about? Roads, water, and sewer systems. Our electrical grid and communication systems.  Ports, harbors, and airports.   Are our bridges, runways, control towers, tank farms and pipelines strong enough?

Are they all being maintained and sufficiently protected against major damage in the event of a catastrophic event?

Do our first responders have the necessary training and funding to maintain effectiveness?

And, in the worst-case scenario, do we have backup plans, redundancy, and emergency preparedness procedures in place that will fulfill basic needs until repairs, reconstruction, or replacement can be accomplished?

These are questions for our city and state administrators and our elected officials.

This kind of self-examination isn’t often popular with politicians or the public because it usually doesn’t result in shiny, new buildings or another trendy government program.  Yet we must recognize that conserving and maintaining existing infrastructure and resources truly is a core function of government.

Alaska’s pioneer spirit and self-sufficiency were on full display during and after this earthquake.

There were many stories of Alaskans coming together to rescue or help others.  Schools, local governments, and organizations were prepared and responded rapidly.  Amazingly, despite the widespread damage, authorities were able to re-open many buildings and roads within days.

All without Federal help.

The rest of the country watched in awe.

Indeed, Alaska’s response to this earthquake is a hopeful metaphor for limited government focused on its proper role and a herald of our new incoming administration.

This was nothing less than an example of what we can do for ourselves instead of becoming more and more reliant on an ever-larger government bureaucracy.

Win Gruening retired as the senior vice president in charge of business banking for Key Bank in 2012. He was born and raised in Juneau and graduated from the U.S. Air Force Academy in 1970. He is active in community affairs as a 30-plus year member of Juneau Downtown Rotary Club and has been involved in various local and statewide organizations.

 

 

 

Breaking: Zinke to leave by end of year

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One of Alaska’s best friends in the Trump Administration will be leaving by the end of the year. The announcement was made by the president on Twitter this morning.

Ryan Zinke, secretary of the Interior, has been investigated on multiple fronts over the past two years, but most of the investigations have discovered nothing of substance. With Democrats taking control of Congress, it appears that the investigation of a land deal with Halliburton Chairman David Lesar will only intensify and hobble Zinke’s work.

The investigation was spurred by Rep. Raúl Grijalva, who called for an inquiry into the Great Northern Veterans Peace Park Foundation that Zinke had set up over 10 years ago near his hometown of Whitefish, Montana.

Suggestions have been made by Democrats that Zinke would benefit from a nearby development that could have raised the value of property he owned in the area. That, and suggestions that he planned to open up a microbrewery at some point in the future, were also part of what has become a persistent attack on Zinke by Rep. Grijalva of Arizona, who is poised to take over the chairmanship of the House Natural Resources Committee, now that the House has flipped to Democrats’ control.

“Secretary of the Interior @RyanZinke will be leaving the Administration at the end of the year after having served for a period of almost two years. Ryan has accomplished much during his tenure and I want to thank him for his service to our Nation,” Trump wrote on Twitter. His tone indicates he was happy with Zinke’s performance.

So was the entire delegation representing Alaska in Washington, D.C. Zinke made a trip to Alaska quickly after becoming Interior Secretary and has maintained warm relations with Sens. Lisa Murkowski, Sullivan and Congressman Don Young, with whom he had been a colleague in the House.

Zinke acted quickly to reverse Obama-era restrictions on federal land in Alaska, and also opened more acreage to oil and gas exploration. It was a welcome relief after Sally Jewell led Interior and took a restrictive approach, going to far as to deny the people of King Cove an 11-mile road to the airport at Cold Bay.

“Over the past two years, Alaska has had no better friend than Ryan Zinke. He joins the ranks of Gov. Wally Hickel as one of the great Secretaries of Interior,” said Sen. Dan Sullivan.

“From assembling an all-star leadership team led by talented Alaskans, to unleashing American energy dominance — by reversing the previous Administration’s illegal lock ups of Alaska lands which hurt thousands of working men and women and their families, and approving the King Cove Road, Secretary Zinke’s impact at the Department of Interior has been immense. He epitomizes a federal government that is willing to work with Alaska, instead of creating obstacles.

“I am very sad to see him leave. His service to our nation, including multiple combat tours as a Navy Seal, has been exceptional. I have no doubt his contributions to our country will continue.”

Gov. Mike Dunleavy issued his own statement: “I met with Secretary Zinke just this week and was deeply impressed with his grasp and understanding of Alaska and its people. Consider for a moment what he accomplished in less than two years. A road to King Cove that can prevent the needless loss of lives, our country’s reemergence as the world’s leading producer of energy, opening ANWR to safe exploration and forging a new relationship between western states and the interior department based on mutual trust and respect. I want to express my deepest gratitude to Secretary Zinke for all he has done for Alaska.”

[Read: Ryan Zinke tours Alaska]

WHO WILL REPLACE HIM?

David Bernhardt is Deputy Secretary at Interior. Nominated by Trump in April 2017, he was sworn in that August and is the second-highest-ranking official at the Interior Department. A lawyer, his expertise includes regulations and rule-makings, the Endangered Species Act, Outer-Continental leases, mining royalties, and Indian Affairs.

David Bernhardt

Bernhardt is a natural to serve as the secretary. He was in Alaska in March, attending a North Slope Borough Assembly meeting in Utqiaġvik, and speaking at an assembly at Barrow High School. He also visited Fairbanks and Nome. On his agenda was a listening session concerning oil drilling in the Arctic National Wildlife Refuge.

Bernhardt led the International Boundary Commission between the United States and Canada and was responsible for maintaining the 5,525 mile international boundary. He also served under former Secretary of the Interior Gale Norton as deputy solicitor, deputy chief of staff, and counselor to the secretary, and as director of congressional and legislative affairs.

Although Trump has made no indication of who he will replace Zinke with, Bernhardt is as likely a choice as any.

 

Tax by ordinance coming soon?

ANCHORAGE DAILY PLANET

The Anchorage Assembly has scheduled a work session this afternoon on the proposed ordinance that would lead to imposition of a flat 5 percent retail sales tax on all alcohol sales in the city.

The proposal would, in the case of this particular tax, do away with the city charter’s mandate that a sales tax requires a voter-adopted 60 percent supermajority – and replaces it with a 50 percent-plus-one requirement – and allows the Assembly to implement the tax by ordinance.

The ordinance – predicted to raise about $13 million a year – was proposed by Mayor Ethan Berkowitz, Assembly Vice-Chairman Eric Croft, Assemblymen Dick Traini, and Felix Rivera.

It receipts purportedly would be “dedicated to alcohol and substance misuse prevention and treatment, community behavioral health programs, public safety, and homelessness prevention and response, including abatement of prohibited campsites.” A memorandum detailing the proposal says it also would allow use for capital projects and “construction activities for a potential Alaska Center for Treatment, or secure private investment by providing guaranty funds in the Pay for Success initiative.”

What it does not guarantee anywhere is that the 5 percent tax would remain a 5 percent tax, and there is no guarantee its receipts will not be used for something else in the next administration or the one after that. Additionally, the proposal strips voters of their voter-approved charter protection from sales taxes in this case and hands that power  to the Assembly.

The proposed tax is just another bad idea. If the tax is a good idea – and it most certainly is not – why not let voters deal with it under the existing 60 percent provision in the charter?

 

Two added to administration’s Natural Resources team

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Department of Natural Resources Commissioner Corri Feige filled two top leadership positions with pro-economy oil and gas experts. She announced hiring Sara Longan as a deputy commissioner and Peter Caltagirone as special assistant.

“DNR has tremendous responsibilities for protecting our state’s natural resources and developing them to benefit Alaskans,” Feige said. “Gov. Mike Dunleavy has charged me with maximizing the potential of these resources, and these individuals have the professional experience and proven records of accomplishment that will help me lead ‘Team DNR’ to success.”

Longan will serve as deputy commissioner responsible for the department’s oil and gas activities, which generate the vast majority of the revenue that funds state services. Caltagirone will have special responsibilities for hydrocarbon development and regulation, including the long-sought monetization ofAlaska’s natural gas.

Longan has 20 years’ experience in the resource management, regulatory and environmental science fields in private, academic, and government settings.

With 14 years of State of Alaska service, Longan served nearly 10 years as director of the Office of Project Management & Permitting, serving as liaison to industry and coordinating the regulatory review of large energy and transportation projects including the Point Thomson development.

She returns to DNR after two years as executive director of the North Slope Science Initiative, a joint federal-state project to coordinate science priorities for federal, state and local government agencies.

Longan has three degrees from Oklahoma State University: a bachelor’s degree in natural resources, a master’s degree in environmental toxicology, and a doctorate in public health with an emphasis on health, safety and environmental issues relating to Arctic oil development.

Caltagirone is an experienced trial lawyer who has handled litigation throughout Alaska and the Lower 48. He has represented DNR as an assistant attorney general for the Alaska Department of Law in oil and gas royalty, leasing, and tax litigation. He has also served as counsel to DNR on development of the Alaska LNG project, and provided advice on proposed legislation and regulations.

He returns to State of Alaska service after briefly working with the Alaska Oil and Gas Association as regulatory and legal affairs manager. Caltagirone earned a bachelor’s degree in government and economics from Claremont McKenna College and a law degree at Villanova University School of Law. He is licensed to practice in five states.

Dunleavy budget: Three big changes so far

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BIGGER PFD, SMALLER REVENUE

Gov. Mike Dunleavy’s early budget is due at the Alaska Legislature on Dec. 15.

His budget team posted it online today with only a few significant changes, but promised more to come in amendments. Amendments are due by Feb. 15.

For expected cuts? Nothing is off the table, but nothing is set in stone.

[The link to budget documents is here.]

The three big changes are in the assumptions:

  1. Not as much revenue should be expected for state coffers as was promised in the Walker budget.
  2. The Walker budget taxed Alaskans’ Permanent Fund dividends in order to balance the budget.
  3. The Walker budget was out of balance by $1.6 billion.

Dunleavy’s revised Revenue forecast book for 2019 and 2020 says oil is not, in fact, going to sell for an average of $76 a barrel in 2019 or $75 in 2020, as was predicted by the previous governor.

The more realistic average is $64 a barrel.

The amount of money being forecasted for paying Alaska Permanent Fund dividends is now at $1.94 billion, which is a placeholder amount. It would mean dividends of about $3,000 for every eligible Alaskan. In the past, and in this Administration, the amount of the dividend is calculated in August, after the end of the fiscal year.

That means there’s an expense to the state of an additional $900 million that wasn’t accounted for in the Walker budget.

How much will need to come out of the Constitutional Budget Reserve? None so far, said Office of Management and Budget Director Donna Arduin.

But right now, there’s a $1.6 billion unallocated spending reduction, and everything is on the table for those reductions, she said.