Alaskanomics

Video Clip: Marc Langland on Alaska's Economic Future

Northrim Bank Chairman Marc Langland issues a challenge to business leaders, policy makers and elected officials to take action to increase oil production in Alaska.

Video Clip: How does shale gas impact the viability of the Alaska natural gas pipeline?

At Northrim's Economic Update Luncheon, an audience member asked Keynote Speaker Dan Dickinson, "Do the shale gas reserves in the lower 48 affect the viability of the Alaska natural gas pipeline?" Hear Dan's answer in the clip below.

Video Clip: Housing Foreclosure and Delinquency Rates

Northrim Bank Economist and Commercial Loan Officer Mark Edwards discusses 2009 foreclosure and delinquency rates in Alaska compared to the rest of the nation.

If we don’t need a gas pipeline, we just might get one

by Dan E. Dickinson, CPA

Is a gas pipeline economic? First if investors think that commodity prices in the future won’t cover the tariff – and at today’s prices and estimated tariffs they certainly won’t – there will be no gas line.

Moreover, if investors suspect that the State has no other new sources of revenue they will be equally reluctant to invest in a gas line. Unknown future taxes on a potential gasline can be as troubling as low forecasted natural gas prices in making a project uneconomic.

A “contract” or legislative offer of fiscal stability which fixes taxes for some period have proven to be hard sells in this state politically.  And even if we could all come to an agreement, it may not be enough. In 2008, as energy prices climbed Dr. David Wood noted that  “…even in circumstances where fiscal stability is offered by contractual clause…or by legislation…it is possible for such clauses to be circumvented by governments willing to exploit increased power provided to them by changing market conditions.”

We can’t control natural gas prices. However we can create a state fiscal system that is viable even without a gas line. Obviously, we will need such a plan if there is no gasline project.  And we will need a plan to cover the State’s needs if a gasline project is built but turns out not to be the cash cow that has been officially forecast.  So if we generate a plan soon it might enable a gasline project by allowing the State to negotiate from a rational, not desperate, position for investment.

A reasonable fiscal plan might include slowing the growth of general fund spending, use of earnings from the Permanent Fund and other State investments, broad based taxes such as a personal income tax, sales tax or gross receipt tax or wider business income taxes. This type of balanced fiscal plan could help us convince ourselves, and others, that we don’t see a gas pipeline as the only place to turn for State needs.  And that could go a long way towards making our gasline dream an economic possibility.

Alaska's Economy Needs Strong Leadership

by Marc Langland

Petroleum supports one-third of the jobs in Alaska, and 90% of our state budget. Oil is still the key to our economic future, and will be for many years to come.

Oil prices are volatile, and production continues to decline. We’ve compounded the problem with an onerous tax on a single industry that undermines investment in the very engine that drives our economy. State leaders continue to choose short-term windfalls for government when what we need is a fiscal strategy that will maximize the value of our resources and provide the foundation for long term fiscal stability in Alaska.

Alaska’s stake is made strongest not by high taxes on low production, but by the highest flow of oil through the pipeline. We have billions of dollars in assets lying dormant in the ground, yet our leaders continue to support policies that stifle investment in exploration and production. A barrel left in the ground gives us nothing – every barrel that is produced generates revenue for the State and supports jobs.

When the economy is strong and business conditions are stable, private-sector companies are confident that they can make investments that create more jobs and better pay for Alaskans. Right now, uncertainty about the future of our economy is dampening investment.

Alaska’s policy decisions are in the hands of our elected officials – and those decisions will have a significant impact on our economy and jobs for years to come.  The governor and the legislature have a responsibility to create an investment climate that allows the private sector, and the citizens of Alaska, to prosper.

 

Commonwealth North Releases Railbelt Energy Study

by Joe Beedle

Commonwealth North, a non-partisan organization active in Alaska’s public policy issues, just released a report entitled “Energy for a Sustainable Alaska: The Railbelt Predicament.” The report was prepared by an energy study group of Commonwealth North members with input from energy experts.

The group listed a number of critical action items to address rising energy costs in Southcentral Alaska, including:

1. Local and state governments should implement measures to encourage conservation.
2. Regulatory agencies, utilities, and commercial interests should work together to quickly make gas storage available to help address deliverability issues.
3. With abundant and inexpensive Cook Inlet gas a thing of the past, Alaska must diversify its energy portfolio.
4. Alaska must encourage development of oil and natural gas, including construction of a natural gas pipeline.
5. Alaska’s policy markers and industry leaders should continue the energy dialogue and take a proactive approach to engage the public on energy issues.

As this year’s president of the Commonwealth North board, I encourage Alaskans to read the report and support its recommendations.