McGuire pushes Arctic policy for state

Anchorage Republican senator co-chairs Alaska Arctic Policy Commission, formerly headed PNWER, urges states to back Arctic drilling

Steve Quinn

For Petroleum News

Senate Rules Chair Lesil McGuire once served as president for the Pacific Northwest Economic Region organization, a collection of policy and industry leaders from Canada and Alaska, Idaho, Washington, Montana and Oregon. Her two-year stint ended in 2010, but her involvement remains strong. She served as lead when PNWER’s annual conference came to Anchorage in July.

McGuire, an Anchorage Republican, said one of the prevailing discussions was economic development in the Arctic, something she and Rep. Bob Herron, a Bethel Democrat, are tasked with as the state’s Arctic Policy Commission co-chairs.

McGuire spoke to Petroleum News about Arctic issues discussed between both groups, the commission’s upcoming meeting in Unalaska and her concerns over the prospects of oil tax reform being overturned by voters.

Petroleum News: Let’s start with PNWER. What’s the value of this organization when you have states that don’t exactly have the same interests as Alaska and vice versa?

McGuire: PNWER is a one of a kind organization and we’re so lucky to be part of it here in Alaska. It’s the only group of its kind that brings public policymakers and private sector leaders who have to deal with policy day in and day out that we make together, and it’s the only organization on top of that to brings together two countries to talk about things that directly affect economic growth. It’s a very targeted group. At the starting point, 650 delegates (were) here to learn about Alaska’s economic development in the Arctic, Cook Inlet and the Interior. The members from Alaska already here learn from other members about their economic development successes as well so we can share best practices.

Petroleum News: You spoke of the relationship with federal government in the past. Is there a way to use PNWER to enable Washington, Oregon, Montana and Idaho to align their interests with Alaska to have a louder voice?

McGuire: One of my goals as host committee chair was to invite our neighbors in the PNWER region of the United States to develop a vested interest in the development of the Arctic alongside Alaska. To become educated about what the opportunities were for jobs for North American supplies of energy to the people in their state and to see how their (federal) government was lagging behind other countries like Russia. It’s my hope that we build these allegiances and build these new partnerships. It’s my hope that we sent back plane loads of people who feel it’s in their best interest to promote development of the Arctic now.

Petroleum News: One of the conference’s reports detailed how the U.S. clearly lags behind in Arctic development. What are your thoughts on that assessment?

McGuire: The fact that Alaska has so much potential and on the other hand is so far behind in terms of rig count and wells drilled. (Former Alaska senator and federal pipeline coordinator) Drue Pearce showed a map with the number of wells successfully drilled in Russia, the number of polar class icebreakers to service these wells and the people in the Arctic. On the other hand she showed us Alaska and its lack of development; then she walked the crowd through how long it took Shell to secure its permits, all of the various federal agencies that had to weigh in and the cumbersome nature of the process. So that’s been on the forefront of everyone’s mind: how to get Alaska into a position where we can be better developed.

When I spoke about the Arctic, I said Alaska’s best days are yet to come. They are not behind us in the Prudhoe Bay development and the trans-Alaska pipeline. That’s just one chapter of Alaska’s history. The opportunity to develop the Arctic offshore and the methane gas onshore bring such a profound opportunity for Alaskans by way of jobs, social enhancements for people who live in that region if done carefully.

All of this requires good research, thoughtful people at the table. When the ability to insert ourselves into a dialogue with the federal government that has been another theme that comes up over and over: how often Alaska’s manifest destiny is thwarted by our inability to align goals with the federal government and navigate through the system. Then of course how successful our Canadian neighbors have been in their individual provinces and territories by executing economic development.

Bob Herron and I have had meetings with federal Canadian officials who have been charged with developing the Arctic policy over the last seven years. We want to work with those officials to help guide us in how to assert ourselves more into the federal process and make it more of a Northern vision.

Petroleum News: What else did you learn about where Alaska stands in Arctic development from people like one of your featured speakers, John Higginbotham?

McGuire: We are woefully behind. The excuse can’t simply be that the region is remote and expensive to operate in because when you look at the North Sea, when you look at Russia and when you look at what the Chinese are doing with other investment partners, you can see that the United States has a unique opportunity as landholders along the Arctic, yet we are woefully behind. There are countries who have no territorial stake in the Arctic and are far more advanced in their Arctic policies, in their dedications of resources to the Arctic and in their Arctic development as an investment prospect as part of their economic plans. Yet the United States, which clearly has such vested interest from a lands claims aspect and an economic aspect is horribly behind.

Petroleum News: So what can the state of Alaska do to spur this?

McGuire: By forming under statute the Arctic Policy Commission, the state has set a clear priority around the development of an Alaska-based Arctic policy. Appointing Bob Herron and me as co-chairs alongside 27 others who are experts from their respective industries and communities, and bringing us together to discuss the opportunities and making them a reality has been step number one.

Step number two has been our tenacious advocacy inserting this Arctic policy commission into every federal dialogue we can find with legitimacy. The first opportunity we had was in Barrow. We invited the federal group in town to give us an update on the first draft of Obama’s policy, and to explain how they came about that first draft, what their plans were, what their timelines were, then we could explain who we were and express a desire to have a liaison from their group, which they will send to Unalaska in August. They need to recognize we’re not mere stakeholders but a sovereign.

Step number three would be to continue policy drafting. We sent an initial draft to Washington June 28 that contains policies of our six working groups. We will continue with meetings in Washington and follow up preliminary report and a final report on Jan. 30, 2015. I would say Alaska intends to continue working through our delegates on the Arctic Council to make them aware of Alaska’s interest and needs.

McGuire: I want to transition into another effort Bob Herron and I are co-chairing as a result of this conference.

Our strategy is to come at it from two different angles. We’ll wear two different hats depending on how we want to deal with the problem. We decided what we will do definitively is to utilize the Arctic caucus to educate PNWER members — again those U.S. states and their policy makers — about what our Northern neighbors have already done that is resource development based, people based and Northern based. Use that group to help PNWER bring in other resources of the Canadians and other experts to help us offer input to the federal government of how important it is to involve the north in the development of an Arctic policy, using Canada as an example.

We met with the Arctic advisor (Patrick Borbey) to (Prime Minister) Stephen Harper. He walked us through the very diligent process that Stephen Harper went through. You have to understand Stephen Harper is the first northerner to be appointed Prime Minister; he’s an Albertan. He understands the importance of economic development. He also understands the importance of involving the northern people in policy development. He tasked Patrick with bringing in every federal agency that could be affected by Arctic policy and they have been crafting an Arctic policy for their country. That has led them taking over the chairmanship for the Arctic Council in May.

We can learn from this. What I said back in D.C. to the president’s advisors from the Department of Inter Governmental Affairs was this is a bit like the race to put the first man on the moon. That is what the Arctic represents in 2013 for the United States. This is the opportunity for our president to become engaged with something quite frankly Alaska has understood for years. We are an Arctic nation. It’s an opportunity for leadership at the federal level. It can’t be top-down. It can’t be from inside the Beltway. It’s got to be that government officials from D.C. coming here to listen to people of the Arctic understand security issues and understand what development means for job growth within the region.

Petroleum News: Looking ahead Unalaska next month, what do you want to accomplish with the Arctic Policy Commission.

McGuire: By then we will have an executive director to the commission and begin the process of refining in earnest the draft policy that we rushed out the door to the feds. We all worked as a commission diligently on something in time for the Obama administration to consider Alaska’s views. We spend the first day listening to the people living in the region about what the feel on Arctic development. In this case Unalaska is going to be such an important part of Arctic development from a marine transportation point and a logistics point. The people of that area have such job potential, but they will be impacted. We want to listen to the people of the region, the individual citizens like the marine pilots. We want to hear how they are viewing Arctic policy, what they would like to see in an Alaska policy and what they would like to see in a federal policy. Then we’ll go back into our working groups and reflect on all of the work that goes on between the meetings. One of the main things we’ll talk about are ports. We don’t have, as you know, the port system that will support the kind of Arctic development that Alaskans want and deserve in terms of the opportunities they should have for their future. We certainly don’t have the kind of Arctic port structure to support even today the marine transportation that is ongoing on the part of other nations are out ahead of us. That’s one of the things the people Unalaska want to talk about: the increased vessel migration through their region happening in the Arctic. In 2007 with the opening of both sides of the Northwest Passage they have new vessels coming through that waterway without having any port to support it.

What our commission is trying to do is help Alaska put us in a competitive position to address the challenges and opportunities of the growing Arctic.

Petroleum News: There are always criticisms of newly formed task forces as another layer of government or another think tank. What do you think you’ve accomplished so far?

McGuire: Appointing Bob and I co-chairs was a good move because we are both known for being people of action. In 13 years, I have not sat on a single taskforce where we don’t come out of it with an action item. So as far as what’s happened now, there is excellent progress. The most important thing that’s happened is we were able to insert ourselves into a federal process that was well under way without our knowledge and would have absolutely excluded Alaska as a formal participant. That was something Bob and I were able to do in the spring: Announce this formation of the Arctic Policy Commission and the diverse membership of it, all things the State Department simply could not ignore. We were successful in inserting ourselves into a federal making process that was well under way. When you look at the draft policy that came out, you will see that it was not crafted with Alaska’s input at all. We believe we’ve arrested that process. We have their attention. We have a liaison now from the federal government. We got the federal government to formally accept our draft recommendations on June 28. That was huge to get them to formally accept them and to put it in part of their process in crafting this policy.

Next, we formed six specific working groups with experts in areas of interest from the commission, which have been working since May. They work with staff and they have their own individual goals. Marine safety and marine shipping and vessel tracking systems as you can imagine is a priority. What are we looking at in terms of increased vessel traffic? Where should these ports be? How can Alaska be a participant in stimulating the dialogue on port development? Those are the questions we are asking.

We are slowly marching our way toward the preliminary product, which of course will be a final piece of policy that goes into the blue book, into our statutes. As a lawmaker, a bill is not just a bill. I try to bring that to light. Everything we work on and every piece of legislation is a tapestry of our community. This policy will be important and hopefully enduring.

Petroleum News: Is it possible to reconcile the two points of view, state and federal?

McGuire: From the federal point of view, I really view that as the first landing on the moon. We have to ask ourselves, what are the successes of this last frontier of opportunity? When you think of Alaskans and me being inherently an optimist, who have been for the last five or six years rightfully complaining about the decline of production in TAPS and setting their happy meter looking at how many barrels a day are going through that. For those of us who are pro development, we have not been very happy. It’s been daunting to look at. For those of us who want to see commercialization of our North Slope gas finally, we have not been happy for three decades. This can be something that provides opportunity for Alaskans in that next generation. I see this as jobs for tomorrow in the way TAPS was an economic boom for our parents’ generation.

Petroleum News: OK, moving closer to what would happen this year and possibly next year, what are your thoughts on the prospects of a referendum to overturn the tax regime change (Senate Bill 21)?

McGuire: I’m disappointed that it appears to have qualified. I’m not disappointed in Alaskans. Ever. But I’m disappointed that somehow in the process of putting this piece of policy together that is so important to our future, we have failed to communicate what it is and its importance to so many people in our state. I feel a sadness about it. I struggle to understand the underpinnings. When I’m able to say ACES as it existed had no linkage to what the state paid out in capital credits to production. We would be on the hook for a billion next year, like a credit card that came due. Once people understood that, people would say, ‘O.K. we’re with you.’ When you look at reduction of government take from any industry, you are going to see increased incentives to invest. It’s just that simple. We need to get more rigs out there. We need to get more wells drilled. The first step is to address your tax policy.

Petroleum News: Do you think this will have a chilling affect on investment?

McGuire: Absolutely. That is the travesty of it. We finally got to the right place in the Legislature where we could move forward and take the right steps to incent development. Take the right steps to turn our tax policy around. Now we are sending a confused message out there again. Every time we get some degree of certainty, we take five steps backward. That’s what’s sad.