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Parnell budget includes road to Umiat Governor calls Alaska storehouse of resource wealth, but feds keep ‘changing the locks’; says state litigates when persuasion fails Kristen Nelson Petroleum News
Alaska Gov. Sean Parnell presented his fiscal year 2012 budget to the Anchorage Chamber of Commerce Dec. 15, saying that with disciplined and strategic spending, “Alaskans can have economic opportunities for years to come.”
The proposed operating and capital budgets total $11.1 billion, with a capital budget of $1.6 billion.
The governor said “Alaska is a storehouse, not a warehouse, of resource wealth,” and said both the state’s monetary wealth and its resource wealth can be leveraged to its benefit.
Parnell said the state “will move aggressively to tap the vast energy potential of our waters and other renewables,” starting with $65.7 million for the Alaska Energy Authority to conduct planning, design and permitting for the Susitna hydroelectric project, estimated to meet half of the Railbelt’s electricity demand.
For “too long Alaska’s abundant resources have been locked up,” Parnell said: “We must have access to our own lands … it’s time to put Alaska’s resources to work for Alaska.”
One way to do that is to build roads to resources.
The governor said he wants to see the road from the Dalton Highway to Umiat finished within five years, and has included $8 million in the budget to finish environmental work for “a 90-mile transportation and pipeline corridor from the Dalton Highway to the gas fields at Gubik and ultimately this road would provide access to hundreds of millions of barrels of high-quality oil reserves at Umiat.”
The budget includes oil and gas exploration tax credits of $400 million, $160 million for the Alaska Gasline Inducement Act reimbursement fund and $5.5 million for in-state gas development.
Issues with federal government Parnell told the chamber audience that there are increases in federally mandated programs where the state has to pay its share, and “it’s kind of ironic since the same federal government that expected us to pay these increases shuts down or delays our revenue opportunities from natural resource development.”
Alaska is “a storehouse of natural resource wealth,” Parnell said, including oil, natural gas, precious metals and rare earth elements.
“The storehouse is there. But the federal government keeps changing the locks,” he said.
But the day will come, Parnell said, when the country’s deficit “comes home to roost — when foreign countries finally call on us to pay our tab as a nation, or our raw materials or commodities are shut down by other countries through trade barriers.”
On that day the nation will turn to Alaska, he said: “And we’re going to be ready.”
By building roads to resources, energizing our own homes and businesses and growing a private sector, “we can use our cash reserves wisely to make this transition.” Parnell said his budget “represents Alaskans taking back our own future,” and called on Alaskans to work together and rekindle “the spirit of the founders.”
Lower progressivity Asked about changes in oil taxes, Parnell reiterated earlier statements that he will propose legislation to reduce progressivity and provide incentives for technically difficult fields.
Prior to the discovery of Prudhoe Bay there was exploration for oil and gas around the state, he said, but when Prudhoe Bay was discovered, “all that capital got sucked to the North Slope.”
Parnell says geologists believe there’s still a lot of oil in other places in Alaska.
“What I want to do is incentivize and make us more competitive on an international basis with the tax regime.”
He said his administration has been meeting with oil companies, asking for their ideas, and has asked legislators to join the discussion.
“You will see legislation from my administration related to reducing the tax burden on the oil industry,” he said.
But industry will be asked to talk about how reduced taxes “will increase investment and create more jobs here in Alaska.”
“If Alaskans are going to trade tax revenue, we’re going to trade it for more investment and more jobs,” Parnell said.
The administration will submit a bill and Parnell said he also expects to see bills submitted by legislators.
OCS barriers On the issue of federal restrictions on outer continental shelf development, Parnell said the state has tried to persuade the Department of the Interior on OCS and has submitted comments.
And the state has also litigated, “and we continue to be involved in litigation to open the OCS,” he said.
Parnell said the state has a unique role because while its jobs are at stake, it doesn’t run the risk a company does of being retaliated against in the same way a company could be when it challenges the federal government.
He said the role the state has taken is to challenge the federal government when Alaska’s jobs or economic opportunities are being diminished.
“That’s the role we’ve taken: If we can’t persuade with written comments, by personal visits, then we litigate.”
Asked what the business community could do to help unlock the state’s natural resources, Parnell said “I think we have to sell it not just as Alaska’s opportunity, but America’s.”
“If we start talking about what’s in it for the rest of America, instead of just ourselves, we will unlock it for everybody.”
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