Providing coverage of Alaska and northern Canada's oil and gas industry
December 2013
Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA)©1999-2019 All rights reserved. The content of this article and website may not be copied, replaced, distributed, published, displayed or transferred in any form or by any means except with the prior written permission of Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA). Copyright infringement is a violation of federal law subject to criminal and civil penalties.
Vol. 18, No. 48 Week of December 01, 2013

Kerttula praises Arctic commission work

Juneau Democrat, House minority leader, favors equity position for state in gas pipeline project, pushes defeat of SB 21 in August

Steve Quinn

For Petroleum News

House Minority Leader Beth Kerttula lives about as far away from the Arctic as an Alaska lawmaker can without leaving the state, yet she has a burning interest in that region and prospective policy. The Juneau Democrat has spent much of the interim with the Arctic Policy Commission and its efforts to give Alaska a voice as the state and country craft a policy covering resource development, governance, and transportation.

Kerttula, now in her eighth term in the House, also remains a vocal critic of Senate Bill 21, Gov. Sean Parnellís oil tax reform that goes into effect next year. She remains steadfast as the new law faces a repeal vote at the polls next August.

Kerttula is among a few in the Legislature whose father served in the House. She grew up a legislatorís child, splitting time between Juneau and Palmer. Before entering public service, she worked as an attorney in Alaskaís Attorney Generalís office in the Oil, Gas and Mining Section. She often looks to that experience when gauging resource development situations such as oil taxes and prospective natural gas pipeline projects.

Kerttula sat down with Petroleum News to discuss the Arctic Policy Commissionís work, the SB 21 referendum and a recent consultant report suggesting the state take an equity stake in an LNG gas line project.

Petroleum News: Letís start with the Arctic Policy Commission. Donít take this the wrong way, but why is a Juneau lawmaker so interested in Arctic policy, at least enough to want to be on the commission?

Kerttula: Well, we are all one state. What happens in the Arctic affects us no matter where we are in Alaska. Actually, arguably, where we are in the world. The world is beginning to recognize that the Arctic is a critical part of the worldís future. The way that the Arctic is opening so rapidly has ramifications for the entire world. Global climate change is happening quickest in the Arctic, so itís setting a pace for research. The University of Alaska is one of the premier places for climate change and resilience studies. Of course all of our oil and gas exploration and the impact it will be to the Arctic is important. Itís a key place in the future of governance. What is the role of Arctic peoples? How are we going to be respectful of our Arcticís culture and indigenous people? Itís a critical place not for Alaska but also the world. Itís just absolutely fascinating in so many ways.

Petroleum News: You folks have had meetings throughout the state, so what are your takeaways from these meetings so far?

Kerttula: The issues are tremendous, everything from shipping lanes, the fisheries to governance and energy issues. Getting to learn about the real nitty-gritty energy issues and what would make sense for the Arctic, which of course rolls over to help the whole state. There are research thatís been going on and what we should be doing to encourage that so we could be getting answers and know how adapt for the future. Again, the governance issues are important, like how do you involve people. This is particularly important because, now, of course, we donít have a coastal zone management program, so we donít have any formal way of hearing from communities on development that takes place in their backyard. Weíve had amazing presentations, everyone from the Coast Guard to researchers to our local groups. Weíre also beginning to learn how the Arctic Policy Council and the U.S. Arctic Research Commission that Fran Ulmer chairs works. Just seeing how the interaction works and how the global policy is moving is exciting. We are coming out with a draft report in January, so that is meaningful progress on our end.

Petroleum News: I hear a lot of lawmakers say that Alaska needs a seat at the table when it comes to crafting policy. Why?

Kerttula: Itís important for our security, for oil and gas development, for shipping, for our environment. Everything is connected. With the Arctic, everything will always be connected. Itís how do we have a say how the Arctic is run? Where are we going to have tankers? Whatís the potential for spill? How are we going to work in conjunction with other countries? How are we going to work with the other Arctic nations? Youíve got other countries very involved with the Arctic like Singapore. Why Singapore? Because they have ships wanting to use the Arctic passage lanes. So they are very involved and interested in whatís happening in the Arctic even though they arenít an Arctic nation. Then there are the mammals and the birds. Whatís the impact going to be on the bears? On the whales? On the seals? How are we going to protect the environment? We arenít really. Everything is changing so fast. Climate change alone will drive that change.

Petroleum News: Getting back to governance, the state has not and does not have a very amicable relationship with the federal government, particularly on resourced development issues. Can this help or will it further drive a wedge?

Kerttula: Everything has been good. Weíve had great cooperation from the federal government as we have progressed with the Arctic Policy Commission. Weíve had Brendan Kelly (assistant director, polar sciences for Office of Science and Technology Policy) who is an Alaskan and very intelligent, a Ph.D. He was at the National Science Foundation and is now at the White House. He is the person in charge with coming up with the overall federal White House policy. Heís been working with our state policy commission to be able to, as much as possibleó there will be boundaries because there are different sovereigns ó but as much as possible share information, to be helpful to us, to get us access with federal agencies. Also to bring in people when we need them as experts. Iím not going to say itís perfect, but I would say itís worked a lot better than many other circumstances.

Petroleum News: So do you see Alaska having a meaningful voice in Arctic policy and the stateís Arctic Policy Commission driving it?

Kerttula: This commissionís report, when itís been worked through, will have a lot of people focusing on it, so yes it should help. Itís been really good not just for the legislators, but our public members of our commission who are experts in many different fields, for us to be able to work together. Iíll give you an example. I was on a team with a representative from the mining community and the oil and gas community on governance. I went in with the presupposition there was not going to be any way we were going to be able to agree on how our visioning document would be. It wasnít a big thing but still I didnít think we would be able to agree. It was really wonderful, though. We came together very quickly on how we thought things should work, what our vision was. It was heartening for people from so many different perspectives and expertise coming together and trying to do what we would hope to be best.

Of course youíve got tremendous leaders from the Arctic. Youíve got (former House Rep. and current Northwest Arctic Borough Mayor) Reggie Joule; youíve got Jake Adams and youíve got (House Rep.) Bryce Edgmon, people who have real knowledge and who have the trust of their people, and who have done a great job helping people understand the issues.

Lesil McGuire and Bob Herron have worked very hard with a very big group of people. I donít envy them the task because itís really too big a group. Itís not like youíre dealing with four or five people. They and their staff have worked hard to make this productive. Just the topic itself can be overwhelming and then the logistics on top of it. In the long run, itís going to be worthwhile.

Petroleum News: The commission ramped up right around the time the issue of the Kulluk grounding was still being discussed. Did that prove to be ill timed?

Kerttula: No. We have discussed oil spill. I should call out and thank Commissioner (Larry) Hartig who has come to some of the meetings and worked hard at getting us information. He has been great to work with. Heís been knowledgeable; I know how much he cares about it. So no, it hasnít been disruptive. I think all of us recognize the concern. Something like the Kulluk shows a whole state that we better be paying attention how anyone is doing business in the Arctic needs to be careful.

Petroleum News: OK, on to LNG. A recent consultant report suggested that the state may want to take an equity position into a large-diameter LNG gas line. Itís not a new idea but itís being reprised. What are your thoughts?

Kerttula: Democratic legislators for a long time have said we need to be taking a look into an equity stake into a gas line. The lessons from TAPS are that it would have helped immensely to have had information we could have gotten as an equity owner in TAPS. Iím glad itís being revisited. I think itís an important idea. The devil is going to be in the details like you canít believe with this. Thatís what we are going to have to wait and see. Iím glad we are talking about it and Iím glad we are talking about it early in this whole plan. You canít do it for the sake of just getting a project.

Hereís the good side. If we are a real equity holder and we are at the table making key decisions and getting all the information the shippers would have. If we have all of that information, then we can make a reasonable decision. If we donít get that information and we just sink our money into it that would be a horrible mistake. The risk to the state would be very high without any benefit. Because you would share liabilities, too, not just the benefit. Youíve got to make sure we are getting a tremendous benefit to be able to share that liability.

The other thing it would do for us if we did it right. It pushes the state into an owner-state concept in a way that we havenít done yet. That harkens back to Wally Hickel. It goes back to what Harry Crawford always stood for. It goes back to my caucus saying weíve got to have key information, weíve got to understand and weíve got to have benefits when we do things. That goes back to SB 21 when we gave away the stateís benefits for no guarantee, so it would push us into this realm where we would maybe for the first time have a deep understanding inside the industry and whatís necessary to work for all Alaskans, and that would be a good thing, if that could happen.

Petroleum News: Would you like to see movement like this to get closer to those answers you spoke of next session?

Kerttula: I would like to see a thorough explanation of exactly how we would do this before I said whether I said it was worthwhile or not, so I think we should be talking about it. The Black & Veatch report does a quick rundown of how other countries make it work. But Iíd like to know more about that as well. How does it actually work in Norway? How do they actually have their equity share? I know a little something about it. I know they have a separate corporation from the state. One of the things I understand in Norway, even though thereís a firewall, people do move back and forth. One of the great benefits to Alaska, is you can grow your expertise in the gas line. Those people could then come work directly for the state so you would have a deeper understanding of those problems. I spent years of my life underneath thousands of boxes of TAPS tariff cases because you donít have that kind of information. Itís literally a warehouse full of thousands and thousands of boxes you have to go through to figure out why a tariff works a certain way, when if you had somebody at the table, they would know.

Petroleum News: Still on LNG, what are your thoughts on whatís happened?

Kerttula: I still have so many questions about the whole picture. The big obvious one is what happens with AGIA? In a broad way what does it mean? In specific way, what does it mean for the $500 million? What role is TransCanada going to play, if any? Does involving TransCanada, does that take care of our obligations? I donít know. These are just questions that at first hearing the whole idea, I started thinking of. How do we use a subcontractor? How do we have that other company come in and represent the state? The greatest thing about this is this opens up the discussion rather than have it be a close, in-house kind of a thing. It opens up the discussion to a whole new way of doing things, which I think itís maybe what we have to do so we get our proper return for our resources and that we donít just put everything at risk, and we step forward to a new way of doing things. What will be the final way of making this work with the fact that we already have AGDC (Alaska Gasline Development Corp.)? I donít agree with the project, the small line. Itís not that I donít agree with AGDC, just the small line.

Petroleum News: You noted SB 21 a few minutes ago. Are you still a proponent of the referendum? Is this still a priority; do you still support it?

Kerttula: Yes. Even more so. The more I think about it, the more I look at it, and what I think we are facing, itís critical that every Alaskan get out and vote for it. You can actually look at this gas line proposal of equity interest as a great example of why SB 21 is so lousy. If we had a real equity interest and we actually understood the inside of whatís happening with the gas market and the line and what we are doing, we would get something for the state, right? Whereas SB 21, we have absolutely no guarantee whatsoever. We just gave up $500 million to $2 billion of the stateís resource wealth, which we are constitutionally mandated to get for the people, without any guarantee. Thatís abhorrent to me.

Petroleum News: Now those critical of the referendum say this will have a chilling effect on investment and advancing a gas line. Do you believe that?

Kerttula: Thatís always what they are going to say. Itís what they have said. Itís like, donít do what we want to do or weíll leave. That hasnít proven to be true. We have tremendous geology in Alaska. Out of ACES we had record jobs on the North Slope. What we have is a monopoly. Weíve got three big companies holding down the North Slope to the vast detriment of the state. This is classic capitalism, right? Donít create a monopolistic system and expect everybody else to benefit. So unless we really encourage the exploration and production, we are going to get nowhere. We had a bill that encouraged production. Youíve got to have a baseline. Youíve got to decide where are we going and where do we start. If you go above that, then you can get a break. If you donít have any way of measuring that, and we donít, then we are just at a loss. The other reason why I feel more strongly is this very difficult way of trying to figure out whatís new oil versus the old oil, and with that, the real risk of why we should be incentivizing something that doesnít need a new incentive. Thatís a real mistake. I think the regulators are doing everything they can. My dad used to call it lazy law and it is. That gets us into enough trouble.

Petroleum News: Do you see this part of the new law being revisited in the upcoming legislative session?

Kerttula: I think they are revisiting it right now, trying to figure out how to do it. I donít know that it can be done. This punts to regulators an almost impossible question. Itís something the Legislature itself should have taken the time and energy and look to outside expertise so they could make a good decision. This bill literally got crammed through with hardly any time with the key expert from the administration. I think there has to be better way to figure out how to do the incentives. This isnít right.

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Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA)©1999-2019 All rights reserved. The content of this article and website may not be copied, replaced, distributed, published, displayed or transferred in any form or by any means except with the prior written permission of Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA). Copyright infringement is a violation of federal law.