Nageak: Tough times must be shared

Barrow rep says financial burdens cannot be shifted to a single entity with oil prices so low, or risk losing future investment

STEVE QUINN

For Petroleum News

House Resources co-chair Bennie Nageak says tough decisions are being made by the Legislature and crafting a committee substitute for Gov. Bill Walker’s oil tax credit bill was necessary to keep from punishing an industry already suffering unprecedented losses linked to chronically low oil prices.

Nageak, a Barrow Democrat who aligns himself with the Republican majority, says he would like to see the administration, Legislature and the industry a little more aligned during difficult times, particularly with a prospective 800-mile natural gas pipeline and liquefied natural gas project at stake.

Nageak shared his thoughts with Petroleum News in a recent interview.

Petroleum News: Let’s start with HB 247. You moved it out of committee. What do you feel the committee accomplished?

Nageak: I think there is enough certainty for people who operate up there. We showed that we could work with them when times are bad, and times are bad now. You know, especially for people who operate up there. They have been doing this for a very long time. With low oil prices, it’s hard times for everybody. It’s hard times for the state; it’s hard times for producers; it’s hard time for explorers; it’s hard times for everybody.

We needed to come up with something that would help everybody, including the state, the producers and explorers - people who we rely on for revenue. The price of oil has gone down and it’s stayed down for a very long time.

Tax credits are important in times like this. For crying out loud, the big companies are losing money. They have lost a whole lot of money. They have sustained us for a very long time.

With the way things are, we should step up a little bit and help everybody go through this period together. I hope it doesn’t last much longer. It’s a worldwide problem. I hope people in other parts of the world understand what happens to us, can happen to them.

Petroleum News: Can the state afford these credits still?

Nageak: We have other revenues in the state. It’s going to go back up sometime. Now is not the time just to leave them in the dust. They have been the revenue generator for a very long time. Now they are in trouble. What else do we have? We don’t have any other industry that will sustain the state for a very long time. We’ve gotten so used to oil revenue that we are having a hard time dealing with this.

Petroleum News: News of layoffs has been emerging since the session began. What are you seeing in your communities?

Nageak: a lot of people work for the oil companies but also the airlines are a big employer. It’s hard for people who are being laid off. My wife works for Alaska Airlines and she sees all the hardships that are going on for not only the oil companies but people who depend on those jobs. Companies are laying off people at almost the worse time. At least it’s spring, so it’s not going to be as hard for people who live here in the winter time when you are struggling to heat your homes.

But we are losing jobs, so it’s not only money but it’s jobs. The oil companies have been helpful when the going is good. Now the going is bad. We have to help each other because oil and gas are the two commodities that sustain Alaska in revenue. They have been since oil was found. I remember the days when I was going to high school, timber, fisheries and mining were the big revenue generators in those days.

Then when oil was discovered, the state put a lot more emphasis then they did with the other resources because that brings a whole lot more money than anything else. That’s what spurred the pipeline to be built. I remember my first job out of high school was a jug hustler out of Prudhoe Bay. There was one well. It was number one. The roads weren’t even there. It was just gravel runways and small buildings there. Sometimes the planes had to land on a river.

I remember those days right out of high school, then when I came back from the service in 1972 and I came back to a different world. We suddenly had a North Slope Borough. At that time, there was a boom in the oil and gas industry. Revenues were coming in. The borough was building airports and clinics and houses in all of the villages in the North Slope Borough. It was an important time. I came back to that. I went to work for the North Slope Borough as a tax assessor of all things.

I worked in the Borough. I was an assemblyman and a mayor. I’ve seen how oil revenue has changed our life. Right now it’s going to get harder. We do have Permanent Fund and a Department of Revenue that’s watching our money real closely, but this is still something we have never faced in a long time - if we ever did.

I mean the price of oil at $35 to $40 a barrel for a very long, sustained time? That hasn’t happened very often in the past. It’s the number one subject of discussion all over the state, especially down here where we make laws. We are working with the governor to help each other out in times of hardship. It is a hardship.

Petroleum News: Your committee just heard the governor’s royalty sale bill today in which it passed, with each member signing ‘Do Pass’ on the bill while it moved out of committee, something rarely seen.

Nageak: That’s a very good thing. I think that’s a revenue generator for the state, not only for the state but the companies that are involved in the process, corporations and people from Fairbanks all the way down to Kenai. I think that is going to be very helpful for all concerned. That’s a lot of money.

That is going to be helpful at this time. It couldn’t have happened at a better time, a time when we are having a hard time with revenue. I think this will help us out. I was real happy to hear that. It’s just welcome news. At least somebody is on our side.

But we can’t bask in that glory. We have to work hard and together with industry to come up with some solutions that is not going to hurt the bank accounts with both sides. One of the things is the tax credits at a time when it’s needed. We took care of some of those problems in Cook Inlet. We put it into the North Slope now.

Petroleum News: Another bill considered to be revenue generating for the state you folks heard last year. It’s Speaker (Mike) Chenault’s HB 100. It’s making its way through the Senate now and looks like the chances are good for passage with one more committee referral, that being Senate Finance. What are your thoughts on the bill?

Nageak: Whatever we need to do to generate revenue, I’m all for it. I think the speaker saw that need last year. Now we have a stronger need for that kind of activity. What we just passed and have been discussing with oil tax credits jibes with what the speaker did last year. We didn’t see it at the time. We saw it coming, but we didn’t think it was going to be that bad, but it certainly turned out that bad. We’ll see how things turn out and just hope the speaker’s bill helps the state.

Petroleum News: Now the credits in HB 100 don’t go into play until Agrium is up and running, and purchasing Cook Inlet gas, but do you wish the bill had passed last year and you would have had it in place?

Nageak: I think we had some other things going on so I don’t think we could have got it done. Now I think it’s fortuitous that we are getting it done at this time.

Petroleum News: OK, bringing Cook Inlet and the North Slope together, you folks have been getting updates on the AKLNG project. Right now the news hasn’t been very promising; this is something equally important to your borough. What is your take on what’s happening with the project?

Nageak: I know. It is. We’ll weather the storm to what’s happening now. LNG is going to be very helpful to us. Hopefully the price of LNG will sustain us for a while. It depends on what happens in the future. I didn’t see this coming with oil, the $35 to $40 a barrel. So we’ll have to see how the prices of LNG take off in coming months and coming years. We are always dependent on what the world markets will bear. We are at the whim of what the world does, what the world needs. And so we’re still dependent on oil and gas. We will be for the foreseeable future. If we do the things that need to be done legislatively and administratively, I think we can go a long way to create something that is going to sustain us for the next several years instead of the economy crashing. Everybody is concerned about the recession. That’s on everybody’s mind. We don’t know what’s going to happen with that situation. We’ll have to weather the storm in other ways and we all have to work together to make sure we are still a viable state.

Petroleum News: What would to like to see the administration do next with AKLNG.

Nageak: Just work with us. Tell us what they need. What do they need to keep this going? We’ve got to make sure there is a dialogue between the leadership and the administration. We can’t do it alone. We have to work together, both the administration and the Legislature because if we’re fighting all the time on this thing, we are not going to go anywhere. We have to work together. We have to come up with agreements that are amendable to both sides.

We have got to set aside our differences and work together. It’s a come to Jesus time. You know. That’s what it is.

Petroleum News: There are bills in both bodies that call for the Legislature to have two non-voting members on the Alaska Gasline Development Corp. board - one each from the House and Senate. The Senate’s version already passed and is due for a hearing in your committee; the House’s version belongs to the Speaker. What are your thoughts on putting legislators on the board?

Nageak: You know we are legislators and we see things differently from the administration as well as those people on the oil and gas side. We have to legislate. We have to take into consideration what’s good for the industry, what’s good for the administration and what’s good for Alaska. We have to come together on a lot of things instead of fighting. That’s what we need to do now. There are some differences between the administration and the Legislature, and of course in the long run it’s going to have an impact on the people who generate the revenue and that’s the industry. We have to make sure we keep abreast of what’s happening in the world market. They might be doing well in other parts of the world, but they aren’t doing well in Alaska. The cost of doing business in Alaska is so high in the first place. Then to have this recession - well, I shouldn’t call it that because it’s not yet - but with low prices and everything, it’s in the back of your mind. We all must work together - I know I keep saying we must work together - because we are all in this: the industry; the Legislature; the administration; the municipalities.

So yeah, I think we should have members of the Legislature on the board, absolutely. And we need one from the House and Senate. We are two different bodies. We see things differently sometimes. We see the big picture, but sometimes we see things differently. I think the board needs us.

Petroleum News: Still on the prospects of placing lawmakers on the AGDC board, the speaker has said he would like to be on the board, representing the House. Given where the LNG terminal is slated to be, does that choice make sense to you?

Nageak: Oh yeah. I hope he does. He’s got more experience in serving than we all have. He’s done it locally. I’ve done it locally. I know how important it is to have served locally and at the state level. So I hope he does.

Petroleum News: OK, let’s shift to one of your favorite subjects: ANWR.

Nageak: Oh, yeah. You know I’m the only legislator to be born in ANWR and I’m still for it. What really gets me is the United States government created instruments: Instead of setting up reservations, they set up corporations. What do corporations do? They make money. Where do they make money? From the assets they have. What is the asset in Kaktovik and the North Slope Borough that will set them up for a very long time? Oil. And gas. ASRC and Kaktovik Inupiat Corporation owns the land right there.

What really angers me is federal government created an instrument and closed the only asset they have to make money out of that asset. They closed it off. That really upsets me. What don’t they understand? Corporations need to make money to help their people and help themselves and we can’t even use that asset that we have under our land. That’s what really, really upsets me.

The other side is fighting to keep it pristine. It’s not always that pristine in the winter time. What those people on the opposing side, when they use pictures and videos of ANWR, what do they show? Summertime. All the beautiful green grass and snow peaked mountains. There is never a bad day in those advertisements. There is never a bad day. They don’t see the fog. They don’t see the waves coming. They don’t see the erosion. They don’t see all the things that my people have to see in that town.

I’ve hunted there a lot of times and I’ve fished there. I want to go back this summer. It’s been a long time since I went back to Kaktovik, and I want to go back. They can’t even use the asset they have to better themselves. The other side always comes in the summertime and sees all these things. They don’t come in the wintertime when it’s dark and cold. You can’t even see things during the better part of the day because it’s dark.

Polar bears are right in the village - right in the village. They come right into the villages. I saw a picture of one right outside my uncle’s house. But that’s my birthplace. My family and a whole lot of them want ANWR developed.

(Begins pounding desktop) They just want to be able to do something with their land. That’s an asset given them by the federal government. You have to let them develop their land as a corporation will do.

Petroleum News: Additionally, there is the issue of offshore drilling. Not everyone in Kaktovik favors it - or in Barrow - or in Point Hope. If you can’t get the locals to buy into offshore drilling, how do you reconcile that?

Nageak: I think there is progress in places like Point Hope. That is the only resource that makes money for the North Slope Borough. We aren’t allowed tax those resources beyond the three-mile limit. That has an impact on our municipal government. I just don’t understand how the federal government can live with themselves when they close off the only asset that the people have, which would generate millions of dollars for the corporations in town and millions of dollars for the municipality in taxes. And the state would benefit too in revenue.

Petroleum News: The state still doesn’t have anything in place with the federal government the way other states do in getting a larger royalty share. Do you ever see any kind of ANWR compromise where producers use directional drilling and extract the oil from state lands?

Nageak: They would never allow that. The environmentalists won’t allow that. That means that we won. They won’t allow that. You know they won’t allow that. They won’t allow any type of activity that looks like there is an oil well there, no matter if it’s on state land or corporate land. They don’t want to see that. They don’t want that picture of ANWR with an oil rig. They are going try to stop as much as they can. They have for a very long time. And they will keep trying. We need to have somebody in the White House who is going to be able to open up that place. We will see what happens.