House Resources sees significant bills

Co-Chair Dan Saddler discusses issues before committee, from permitting revisions to in-state gas line to oil tax change proposals

Steve Quinn

For Petroleum News

Rep. Dan Saddler began his second term in the Alaska Legislature with an appointment from the majority caucus to be co-chair of the House Resources Committee.

He joined incumbent co-chair Eric Feige to wade through some heavy-hitting, such as House Bill 4, the in-state gas line bill over which Saddler presided March 4.

A former legislative liaison with the Department of Natural Resources, Saddler moved the bill out of his committee March 4, then joined several colleagues and legislative aides for the annual trip Washington, D.C.

Saddler notes the intensely hectic pace that comes with a 90-day session and such meaty legislation before his committee.

Before advancing HB 4, and before the House passed HB 77 permit streamlining bill, and packing his bags, Saddler sat down with Petroleum News to speak on oil and gas issues before the Legislature.

Petroleum News: How, if at all, your work with DNR has helped you prepare for this position.

Saddler: There is a pretty steep learning curve for resource issues and having had a chance to work in the commissioners’ office as a special assistant in DNR for a couple of different commissioners gave me a familiarity with the issues, the law, the permitting process, the individuals — at a very basic level just the acronyms, what stands for what and how they all interface. It’s been tremendously beneficial in work not only as the co-chair for resources, but as a guy interested in legislative issues. It’s probably about the best preparation I could have had.

One of my duties was communications, among other things, so I had to understand what the department did, who the players were, what their function was, what their authorization was, so I got what amounts to a three-year overview and familiarization. I don’t mean to be dismissive of the overview process, but a lot of people came down for their first term not knowing how the different pieces fit. I largely had that already socked away.

Petroleum News: So what have you learned since you’ve taken the position as co-chair of resources?

Saddler: Issues became a lot more complicated than they ever appear. That for a young state we have already developed a significant, complicated and fairly finely tuned system of regulating and managing our resources. I’ll go into triteness here, but Alaska is a resource state; that’s our main business, so it’s not surprising that the statutory history is pretty complicated and tuned to what we have. I’ve learned the system we have; it’s fairly well developed already. We tend to be pretty forward thinking people and there is nothing that can’t be improved. We’ve seen some significant proposals on how we do things and how to make them better.

Petroleum News: Nothing that can’t be improved. Let’s talk about that. What do you think of the bills going through your committee and why do you think they are important?

Saddler: I think the department has gone through a process over the last several commissioners, but especially under Commissioner Dan Sullivan, they looked at the processes and decided we should be able to do better. As a representative in my current position, we hear complaints from representatives in the industries saying we would like to invest more in Alaska, we like the rocks, we like the resources, but there is this induced drag of the permitting system. The system is designed to protect the environment — and it’s appropriate that it should — but it’s important that it do so without unfairly and unnecessarily impeding the development we need for our economy. The commissioners have directed people to find out where we can smooth the edges, remove the clunks, to remove the redundancies, to improve efficiencies. I sat on the DNR subcommittee, and two years ago we looked at the backlog of permits and said we need to fix this, so we dedicated extra money and they got 38 percent reduction in their backlog. Once the backlog is done, the intent is to continue using those people to shorten the process. So the bills we have ask the people cycling the permits, you know the process, how can we improve it. That’s what we’ve seen with the bills last year. This is kind of mark two. So HB 77 is the permitting streamlining bill. Another permitting bill is HB 78, which is the wetlands primacy. That, as I see it, is the next phase of a long-term process of the state assuming primacy for environmental quality, regulation and protection. We did air quality; we just finished NPDES — water quality; now, we are going to see if it’s appropriate to take over primacy for wetlands. It’s going to be a bit expensive because we have so much of the country’s wetlands and because wetlands have such an important impact on development of power plants, communities and retail establishments in Alaska, it’s important to ask that question.

Petroleum News: Continuing on your theme of looking to improve, let’s go to oil taxes. Your colleague, Rep. Feige, says he’ll wait for the Senate version to come over. So as you wait, what are your thoughts right now on oil tax reform?

Saddler: The case is pretty clear. The system we have now is good at milking money out of the oil industry out of the short term, but it’s not real accepting of the long-term implications. We are getting good money; we’re getting good living from the oil industry. If we kill the goose to get all the gold at once, which is what I think ACES is doing, we might be rich for a few minutes, a few years, but we’ll be long-term poor. What I’ve told the people in my district — and it’s what they elected me on — is that it’s better to take a little bit less money now and take that money for a long time than it is to get a whole bunch now and watch it go away.

So I think the general concept of reforming oil taxes is important. Now the right method for doing so? The governor has proposed his bill. I think they make a reasonably good case that the capital credits is bleeding the treasury, and we are seeing a lot of outlay in credits and not the desire for output on production. Rule one in holes: if you’re in a hole, stop digging. The state is digging itself in a hole right now and the governor has come up with a very good faith effort to change that trend. It’s not enough to say the oil industry is making money. Certainly they are.

The state is making money too. It’s not an absolute gain in the world. It’s a relative gain. If there are places where the industry can invest money and get a higher rate of profit and return, they are going to do that. I think Alaskans have somewhat begrudgingly come to the understanding that something needs to be change. Last few years, we’ve gone from everything is hunky dory, don’t change a thing to even the ardent supporters of the current system are saying, yeah it needs some changes.

Petroleum News: You’re going to Energy Council. On one hand there are lawmakers who defend the trip; on the other, there is criticism that it’s a bit of luxury this time of year. What do you hope to gain from it?

Saddler: Energy Council is a worthwhile investment of time. Our main source of income in state government and the economy is energy. Alaska is an energy state and these are the heavy-hitters among the continent of energy. It’s important to learn what we can. We got the first inclination that the paradigm had changed regarding AGIA, because this new fracking of shale gas was creating a new supply of gas down south, which was obviating a large-diameter gas line through Alberta, so Energy Council was important to understanding that. It’s a worthwhile dedication in time.

Saddler: It’s somewhat refreshing that they are not all about publicity. It’s a hard working event. We go there for early-morning meetings until mid-day, then talk to other policy makers. I’ve talked to FERC about the Watana Dam licensing process. I talk to the Pentagon about alternative fuels for military bases. I talked Arctic policy with the Arctic Council. It’s by no means a pleasure cruise. It’s a lot of hard work; it’s a lot of networking, lobbying members of Congress and their staffs about Alaska’s issues. People say Energy Council, but that’s shorthand for a lot of things that go on. We do carry Alaska’s message back there. We’ll talk to the Interior about legacy wells that BLM is not cleaning up. We hope to take another message about ANWR developing. Congress and the Senate turn over fairly regularly, especially the House of Representatives, and issues we in Alaska take for granted are just unknown to people back there. They don’t about ANWR; they don’t know the history and special status of the 1002 area; they don’t know that NPR-A stands for National Petroleum Reserve-Alaska. They don’t understand a lot of things about Alaska. It’s a process of continually re-educating people who make the decisions. I hope we can meet some new people in the Senate Energy Committee. We see decisions like the (Interior’s) NPR-A development, which the administration in Washington claim is a victory for opening up NPR-A for exploration when in fact they closed off half of it for exploration. It’s very frustrating for us back here in Alaska. So we see this as a chance to explain those points.

Petroleum News: Speaking of the Arctic policy, what are your thoughts on Shell’s decision to postpone exploration?

I’m disappointed that Shell is having to retrench. We’ve got great hopes for OCS production, but I respect that they want to do it right; they want to be safe; they want to trust their own technology and procedures. I have to respect them for going cautiously. I’m glad for Alaska’s sake Shell has the discipline and fortitude to go through the shakedown cruise to responsibly operate in a pretty harsh environment. I do believe it’s possible to keep pushing back the frontiers of technology and operations; I think Alaskans are fortunate that we’ve got a company with the resources and discipline of Shell to do this kind of work. They sunk a lot of money into Alaska. USGS and DGGS tell us that OCS is where the money is going to be in oil and gas. I’m hopeful they will do a pretty good job. I’m confident they will.

Petroleum News: What are your thoughts on the status of advancing a natural gas pipeline project, whether it’s a smaller line or larger line to an LNG export facility at tidewater?

Saddler: One of our caucuses guiding principles is to provide accessible and affordable energy to Alaskans. There is a hierarchy of projects to do that. Going from the small to the big, the governor’s to truck LNG down from the slope and build out the gas distribution network there is the quick. That’s a smaller term with the least cost. Then it goes to ASAP and AGDC proposal (House Bill 4). That is a well-targeted effort to bring gas to Alaskans at the lowest possible price at the quickest possible schedule. That’s one way to go about it. It’s also born out of frustration with the lack of progress from the large-diameter line. The larger line, of course the economics favor the larger volume and the lowest cost for everybody. In general, the larger proposal — APP or Alaska Pipeline Project — seeks to monetize Alaska’s gas. The smaller line, AGDC’s project, seeks to provide low cost gas to Alaskans with maybe a little bit left over for an anchor tenant or some export. Different goals, but I think it’s still appropriate to advance two gas line projects in parallel — one keeps the other honest — with the ultimate goal of course there would not be two pipelines built.

Petroleum News: You also noted discussions with folks in D.C. about cleaning up BLM’s mess from the legacy wells. It seems to be a priority with you folks so early this session. Is that true?

Saddler: It is. A large part of the attention on this issue is driven by what amounts to the hypocrisy of the federal government — Fish and Wildlife, EPA — castigating Alaskans for imagined or possibly small real environmental risks by developing ANWR and by developing NPR-A while at the same time under their direct control and their purview, we have all of these more than 100 leaking, poorly capped, unremediated well sites. The hypocrisy is notable — the shoe is on the other foot. It’s a chance for Alaskans to castigate the federal government, which so often castigates Alaskans for perceived problems when they have their own big, ugly problems that have been there for decades.