Stevens: oil should benefit Alaskans

Senate president says progressivity a big issue in oil tax debate, but wants to encourage industry to explore, do new development

By Steve Quinn

For Petroleum News

Senate President Gary Stevens may have coined one of the most repeated phrases in this two-year legislative term.

“We will not be bullied,” Stevens said in a floor speech deemed rare for a Senate president.

Stevens was speaking in response to criticisms against the Senate, deemed “do nothing” for not acting on Gov. Sean Parnell’s bill to reduce oil taxes.

Stevens assigned House Bill 110, the governor’s production tax change bill, to three committees; it remains with its first assignment, the Labor and Commerce Committee.

He says he’s been portrayed as anti-oil for not pushing the bill through the Senate, and for following the Senate majority’s position in his speech.

But the Kodiak Republican stresses he understands the need for resource development — but it must be balanced with the state’s interest.

Petroleum News: You’ve got plenty to do as Senate president, so why spend time on the resources committee?

Stevens: I guess because it is so important. I was a general manager of a seafood processing company for five years. I invested in fishing boats, so I was very, very concerned about fishing. So in that aspect of resources, fishing is always important to me. I think it’s such an important issue.

Petroleum News: What are the priorities for resource development during the interim and leading into next year’s session?

Stevens: It’s exactly as my experience has led me in the fishing industry: to make sure the resources benefit all Alaskans. I think it goes right across the board: the fishing industry; oil and gas; mining; all of it. We have to make sure Alaskans benefit from these resources.

When I spoke on the floor of the Senate, questioning the governor’s $2 billion tax reduction for the oil and gas industry, I was painted as being anti oil and gas. That is certainly not the case. I know how important those industries are; I know how essential it is to the future of Alaska that we have a good, healthy oil and gas industry. It’s not as if I want to punish the oil and gas companies. That’s not true at all. I just think we have to control that development just as we have with fisheries to make sure the people benefit from it and make sure we get our fair share.

Petroleum News: The theme seems to be filling up TAPS or at least increasing throughput. How much responsibility should the state bear for something that is private enterprise?

Stevens: We do bear a little responsibility. I’ve heard all the argument that says if we don’t increase the volume and if we don’t get as the governor wants 1 million barrels a day, the pipeline is on the way out. Well, if you read Judge (Sharon) Gleason’s report, you find that’s not what she found. The funny thing to me is in the end of that court case, Judge Gleason said, if we did not have a pipeline today, it would be worth it to build a brand new one because the cost of that pipeline would be $10 billion to access $250 billion of resource. We have to keep our head about us and not listen to the few who say the sky is falling and if we don’t get 1 million barrels a day in that pipeline it’s going to be torn up. That’s not true. I think people who are running around saying that are doing a huge disservice; they are frightening a lot of Alaskans.

That pipeline is very important. I don’t know what the right amount is. At the beginning of the pipeline, we were putting 2 million barrels a day through that pipeline. That’s foolish. We did it because that’s what the oil industry wanted. That was not in the best interest of Alaskans. The best interest of Alaskans is to make sure we use that oil on our time schedule. We need to make sure the companies are profitable, make sure they are doing OK. We’ve got to make sure that oil is used on our timeline, not theirs. Two million barrels a day is simply too much. It’s pushing the system. They were just out there looking for trouble, I think, in putting that much oil in the pipeline. So what is the right amount of oil? I think even the governor’s 1 million a day may be too much. What is the right amount for Alaskans? Let’s look at that first and then decide. It’s not as if we want to punish them. We want to make sure we get our fair share out of it; it’s not there just for us. Who says our generation gets to use all of the oil out of Prudhoe Bay? Who says that? What about our children and our grandchildren? We should make the wisest use of that resource so that it benefits Alaskans now and into the future. Some people are out there saying some crazy things. You have to say, why, how and what do you mean? Let’s look at it. Show me the facts.

Petroleum News: Why was 2 million too much?

Stevens: We were putting 2 million barrels through the pipeline. Alaska has a right to say, wait a minute State of Alaska, wait a minute Legislature, why did you get rid of the oil so cheaply? Why did you use so much of it so fast? Why not spread it out to the best benefit of Alaskans over the long haul rather than use it all at once? I don’t think it would have been done differently because we didn’t know much about the oil industry at the time. We have to decide what we want and not necessarily what Big Oil wants. What’s good for Big Oil is not necessarily good for Alaska. We want to make Big Oil powerful; we want to make them happy; we want to make them stay in business, but we don’t want to give away the farm. It’s our responsibility to protect that resource for all Alaskans well into the future. I think we need to be wise about it and question some things we hear.

Stevens: That’s a very important issue. We were told we were taking so many profits from the oil industry that jobs were disappearing. As we looked at those labor statistics, we became aware well they are not disappearing. There are as many jobs as there have been in the past, slightly down from the highest, but very near the highest point in Alaska’s history. What appears to be the case is that outsiders are being hired, not necessarily Alaskans. The jobs are there but they are not going to Alaskans. What’s wrong with this picture? We need to look at that. We need to figure that out. Why are out-of-staters being hired by the support companies? Let’s find out the answers and correct the problems to make sure Alaskans are being hired.

Petroleum News: What are the tension points in the oil tax debate? Is it the progressivity? Is it the credits? Is it a balance between the two?

Stevens: I think progressivity is a big issue. I have no problem readjusting that progressivity. I think it is too high. When oil is high, when the prices are high, I think we are probably taking too much. I think we need to go in there and adjust that. Let’s do it wisely. Let’s encourage the industry to do what we want. Let’s give them credits and benefits to do the things we want, which is more exploration and development. We don’t necessarily want to give them a bigger share of the profits at Prudhoe, when in fact it’s a declining field. Let’s look at exploration and development outside of Prudhoe, development of heavy oil and development of shale oil. Let’s do the best we can to encourage the action we want from those companies rather than just giving away $2 billion for no apparent benefit of Alaska. I’m willing to listen to the governor. I certainly am. I think the governor is headed in the right direction. I question whether a million barrels a day is the right answer. I question whether $2 billion in lower taxes is in fact the right answer. I’m not saying he’s wrong. I’m not saying the industry is wrong. I’m saying we need to discuss this; we need to see facts.

Petroleum News: Let’s switch to infrastructure. Why do you believe an in-state line is worth examining?

Stevens: Everything is worth talking about. I know Alaskans are saying we have enormous gas deposits on the North Slope and with prices so low, if we can’t fill the pipeline then why not use it ourselves. That makes a lot of sense to me. The big question to me is how are we going to pay for it.

Petroleum News: Is this worth a special session?

Stevens: I don’t think so. That’s not my intention at all. I haven’t heard anyone suggest that. This is an initial report. We need to read it, study it and think about it. We often get balled out in the Legislature that we don’t act fast enough, but when we do act too fast, we make errors. I think time needs to be taken; it needs to be fully analyzed and vetted.

Petroleum News: Is there a point where you would like to hear something from TransCanada on the large-diameter line?

Stevens: Oh yes. I think if we come back in January and there is no actual progress, there are going to be serious questions. There are going to be people who will want to pull the plug. I think we’ve made some progress, so let’s give it a chance to play out. I don’t want to stop it prematurely. This may be one of our few real options in finding a market for Alaska’s gas.

Petroleum News: Are you concerned that you haven’t heard anything one year after the open season concluded?

Stevens: Oh, yes. That does concern me. We thought we would have heard by now. It would appear when you read TransCanada’s press releases that they do appear to be making progress, so I am anxious to hear from them and give them every opportunity. You’re right though at some point we have to say no, this is not going to work.

Petroleum News: What about the progress Shell seems to be making in getting some permits. It’s slower than most would like. They seem to be inching along.

Stevens: It’s very exciting. Shell is a hero in my books. They have put so much money in their operation. I’m proud of what they have done, the work they have put into it. I hope they are right and there are enormous resources there and they can develop it. The problems they put up with. It’s just unconscionable that the federal government put so many hurdles in the way.

Petroleum News: Does it strike you as odd that the federal government sells a lease, but they won’t award the permits?

Stevens: I have a friend who says when it’s cold enough and dark enough in New York City that’s when our oil and gas will be developed fully. I think that’s true. I don’t think the rest of the country has quite grasped the seriousness of the situation we are in, in terms of energy. As things get worse, as prices go up, as we depend more and more on foreign sources, I hope Americans will realize how important it is that we make good use of those resources wisely, and in a good sound, environmental way. Yeah, it’s a shame that things have come to this. Hopefully there is a bright light on the horizon and we might be able to get through this.

Petroleum News: What do you think it will take to convince the right people outside of Alaska that this is something that can be done, that needs to be done?

Stevens: I think it’s just a matter of time for folks to realize what a serious predicament that the country is in. I do believe one of the big issues is that we’ve got to make sure Alaska gets some benefit from that. The federal government has not acknowledged that as they have with the Gulf of Mexico.

Petroleum News: Do you have any final thoughts?

Stevens: I heard a speaker, a historian from the University of Alaska Fairbanks, ask when was the last time an oil executive was beheaded at Prudhoe Bay? It’s an interesting question. Of course it’s never happened. The implication there is Alaska is a safe place to drill. We are not going to nationalize that industry. We are trying to find ways to help. The folks who work up there are safe and protected. That’s an issue that has not received the recognition that it should. I don’t know what it takes to convince rest of the country that this is a good place to develop oil and gas.