Olson: Proud of off-the-radar service

Quiet House leader retirement pending after 12 years in office, spent mostly on House Resources and chairing Labor and Commerce

STEVE QUINN

For Petroleum News

House Rep. Kurt Olson is closing out 12 years of service, most notably as chair for the Labor and Commerce Committee. The Soldotna Republican was also called upon to chair the House Special Committee on Oil and Gas during a time when the Legislature came under heavy scrutiny during federal corruption investigations linked to oil taxes. Olson’s committee was hardly on the periphery. It received referrals for major bills such as SB 21, the most recent tax regime passed in 2013 and SB 138, the current gas line development legislation. His committees didn’t hear all of these bills normally relegated to just the Resources and Finance committees, but “we caught our share of them,” Olson said. The outgoing lawmaker reflected with Petroleum News on how the state got to its current state with oil taxes and what he hopes may lie ahead.

Petroleum News: In 12 years, what do you think the state has been able to accomplish? It’s taken a hit twice from huge market changes.

Olson: It’s not only the market, it’s also the timing. A number of things didn’t fall into place like we had originally hoped they would. Things got slowed down. We saw eight to 10 months lost at a crucial time due to a pipeline sizing study the governor felt was needed. In addition to slowing us down on any work, we ended up spending $30 million. Three of the biggest companies in the world and probably the biggest pipeline company in North America felt it wasn’t necessary.

Petroleum News: Do you think that delay hurt the state as far as advancing the project?

Olson: I think it may have slowed it down a number of years. Six months to a year ago, I was cautiously optimistic. I’m not optimistic at all that we will see it in the foreseeable future.

Petroleum News: Was it the market’s drastic changing, meaning chronically low prices and a glut in supply, or is it the direction the administration is heading, or a little of each?

Olson: I think it was a perfect storm: Obviously the market changes and the glut of gas not only in North America but all the emerging fields overseas. I think it was also the change in the people we have running the show. They lost an incredible amount of talent: Mark Myers; Marty Rutherford; (former AGDC board members) Drue (Pearce) who was also at one time the federal pipeline coordinator; Al Bolea who worked for BP and Richard Rabinow who worked for Exxon. They ended up with a different crew calling the shots.

Petroleum News: The loss most lawmakers cited as the most painful one was Marty Rutherford. How do you see it?

Olson: I would say it’s a combination of Marty, Mark and Dan Fauske as far as the depth and talent, Marty for being the most involved.

Petroleum News: So is it a matter that it was too much?

Olson: I think it was the governor putting people in who already agreed with his position. Most of those people were involved one way or another with the Port Authority. I think he was looking for people who thought the way he did rather than people may have possibly been needed to tell him not what he wanted to hear but what he needed to hear.

Petroleum News: Do you see this as a situation where the state is moving forward with a project that is uneconomic?

Olson: It’s uneconomic and I don’t believe it’s going to happen in the foreseeable future. I think it’s DOA. I can give you one slight example. How long has it been since TransCanada was removed from the slate of players? One year? Have you looked at their stock since then? It’s gone up about 25 to 30 percent that period (about $30 a share to $44 a share). What it appears to me is the financial institutions and stock markets seem to think that was probably a good move to get out, even though I don’t think they left on their own volition. I believe this will happen when it makes economic sense. I don’t see that it will be done at this point.

Petroleum News: So what do you think the state should have done? Slowed it down so it could be ramped up if the market takes a favorable turn? Or should they have mothballed it altogether?

Olson: That depends on what day it is could dictate what kind of answer I’d give you. Things change so fast. I think we missed the boat a while back.

Petroleum News: This hits close to your home. For 18 months to two years there was a lot of excitement on the Kenai. We saw land being purchased, jobs and field work being done. Now what are you seeing?

Olson: We are seeing a lot of people scrambling for jobs. I know I’ve got neighbors and friends who are looking for jobs who have been let go locally or on the North Slope. I’m sure it’s not just us. I’m sure it’s being felt in Anchorage, Fairbanks and all over the Kenai.

Petroleum News: So if you were still in office. What would you need to hear to keep things moving forward?

Olson: You know I can’t even answer that right now. The changes that have been made by the current administration have pushed us back a number of years. We’ve seen small to medium sized projects being shelved. We’ve got good-sized finds on the North Slope and I believe the companies are waiting to see what’s being done with the tax credits and the tax structure before they are doing anything more. We can certainly use the oil to run through the pipeline. I don’t think they are looking for fiscal certainty, which was the catch-all phrase three years ago. I think they want to know that things aren’t going to be changed every two or three years. I tend to agree with them. They need to know what the rules are before they can make the investments they are making.

Petroleum News: Let’s talk about that. It seems like oil taxes and oil tax credits have been fiercely debated almost every year, if not every legislative session. Why do you believe that is?

Olson: It seems like it’s a difficulty in entering into long-term agreements. We have a change in the House, Senate or administration. We suffer from a lack of stability in all of the leadership. Look at what’s happening now. In many ways, I wish I were sticking around for two more years. I think you’re going to have fun these next two years.

Petroleum News: So why are you thinking another two years wouldn’t have been so bad?

Olson: Part of me thinks I have some institutional knowledge. I guess I’ll be doing it as letters to the editor and emails.

Petroleum News: Well the House losing a lot of institutional knowledge, either missing people who were voted out of office or retired, starting with you, Mike Hawker and Craig Johnson. How can that hurt the House regardless of how the new caucuses shaped up?

Olson: I know most of the people except most of the new ones coming in and I consider most of them to be friends. The House has been controlled by a Republican majority for almost 20 years or close to it. With that comes advantages that have been in place pretty much going back to statehood where the majority has extra staffing during session. They have the ability to give out higher pay ranges. They get extra staff as a committee chair. In many ways, that has spoiled a number of us. I was in the majority for 12 years and was really never in the minority. I was on the other side of a coup, but that lasted only three or four days. Having said that and what I was leading into, I think over the years I’ve chaired four or five committees, so I’ve got the experience of running a committee.

Now when you look down at the roster and at people making up the new House majority, the people with any kind of committee leadership or involvement are the three Republicans. We are going to be looking at a whole slate of people who are going to need to be brought up to speed on how things flow and how to run a committee. Unfortunately, that comes at a difficult time for the state.

Petroleum News: Could there be an advantage of having a different majority make up to bring new perspectives to the forefront?

Olson: The only experience I had was watching the Senate a few years ago. The only thing I saw were a few bills that were weighted in the middle. They were neither left or right. What you’ve got is the middle. If that’s what you’re looking for, I don’t think that will produce new ideas. I think when you’ve got something on the cutting edge has come out from one side or the other and has been slightly left or the right.

Having said that I think at the end of last session, you saw an example where everybody worked on a bill that basically nobody ended up liking but most people voted for it, the crime bill (SB 91). That was basically Johnny Ellis and John Coghill, who are basically about as far apart as two people could be politically and they were able to work together on that. It wasn’t perfect but it was necessary to start. That was done without a majority.

You asked why I’d like to be down there. I’d like to see how this is going to work out. I wouldn’t have organized with them. I would have been watching from the outside.

Petroleum News: So what do you think it’s going to take to get a stable tax regime or do you think what we have one now?

Olson: Ultimately we are going to have to have new sources of revenue. We are going to have to broaden the bases. We had two polls that were out, one by Rasmussen and the other by GCI, where there was overwhelming support for using the Permanent Fund. I had the chance to sit down with the governor and the former attorney general after the polls came about and discussed having an advisory vote. So if the numbers that were being put out to the Legislature were accurate, the governor would have the strength of the people behind it. That never happened.

I still think if the governor wants to utilize the Permanent Fund, he is going to have to have the support of the people. I don’t think that support is there at this point and time. That is the biggest pot we have available. The next would be the tax regime we tossed out. The one that made the most sense is we have the lowest tax rate for gasoline in the country. We could have tripled it from 8 cents to 24 cents a gallon and still had around the fourth of fifth lowest in the country.

Then again, the problem with that is we would have had a real problem with (aviation) gas. This could have caused us some problems with carriers like Fed Ex. I think we are going to have to look at all the aspects of it. We had an income tax when I moved up to Alaska in the 1970s. It’s going to be a tough sell at this point to re-implement it. A state sales tax will have an impact on Southeast and the Kenai Peninsula. If you would do it, Anchorage will start to implement one of their own. There are no easy answers. When you have one person calling the shots saying it’s my way or the highway - and we’ve seen that with other governors not just this one - it’s not going to work.

Petroleum News: One of the more high profile tax discussions is always oil tax, even though it’s the income tax affecting everyday Alaskans more so, do you see the oil tax talks even more volatile than last year?

Olson: I think you will. What’s changed other than the makeup of the organizations? The leadership has changed. The number of people hasn’t changed. The views haven’t changed.

Petroleum News: What do you think Caelus’ Smith Bay discovery will bring to the discussion of oil tax structure?

Olson: I don’t think it’s going to move forward until there are definite sideboards on any definite tax changes that are going to be put into place.

Petroleum News: Do you see this discovery as any kind of game changer for prospective tax changes?

Olson: I think it’s one of them. I think there are others. All are on the North Slope. I hear the governor is thinking of gas-to-liquids again for the North Slope. Having been to the only gas-to-liquids facility, I think they are in possession at least in the United States of what works and what doesn’t.

Petroleum News: Do you think it will take some creative or different thinking to advance new policy or generate new exploration beyond rehashing the same debate?

Olson: I’ve heard some wild ideas these last few years. I’ve heard of using dirigibles on the North Slope for who knows what. I’ve heard of using the top of the world route with more days per year they can get vessels through. So we may hear more ideas. I don’t know. I remember back in the early to mid-’70s there was talk of running the gas down through the McKenzie Valley. It was called the over the top route, but we would run it into Northern Canada and take it through McKenzie Valley into an Alberta hub. I think on a federal basis and a state basis, we’ll never see that. It may have made sense for the producers but it didn’t produce enough jobs. We need to factor that in. the whole thing is about revenue and jobs.

Petroleum News: Let’s look out of state to D.C. What do you think the new presidential administration could mean to Alaska?

Olson: I’m not going to touch that until that one until I see who gets the Department of the Interior. It would be a different answer for each of the five, six or seven people under consideration, plus there could be another five or six we don’t know about.

Petroleum News: Do you have a preference for an Interior secretary?

Olson: Not at this point.

Petroleum News: Would you say you’re more optimistic?

Olson: The way I feel right now, it could be someone whose name is not out there in the public right now.

Petroleum News: Obama essentially shut down the Arctic from development from the Interior’s five-year plan. Are you surprised?

Olson: Oh, no. I think we are going to hear of a few more between now and January. I think they are burning the midnight candles in D.C. coming up with things they can do by executive order.

Petroleum News: Do you think the Arctic is a good place for exploration? Shell had problems with its rig but they also cited regulatory problems as well.

Olson: I think it’s probably much more onerous offshore than it is onshore.

Petroleum News: Looking ahead these next two years, what would you like to see for the state in resource development? We’ve seen that a lot can happen in two years.

Olson: I’d like everybody to come to an agreement with something they can live with on the tax regime. They don’t have to like it but it has to be wrapped up where it’s not going to change in two years. That is going to be difficult. Look at the players - and I’m not going to name any of them - you’ve got people who are hard and fast on one side and others who are hard and fast on the other.

Petroleum News: Why is it so difficult to bring people of their extreme positions and closer toward the middle, even if it’s not the middle?

Olson: I think I’ve seen more finger pointing and blaming of other people on all sides this year, be it the House, the Senate or the administration. Even people in between, the oil companies. It’s either somebody else’s fault or we’re not listening or whatever. I don’t see anybody trying to find a solution.

Petroleum News: OK, so 12 years is a lot to serve and it’s coming to a close. What will you miss the most about it?

Olson: I really enjoyed committee work. For a long time, every bill moved out of committee with consensus. I was blessed with a good committee most of the time, and that made a difference. I had some real good minority members. That helped. Anything we moved, we were able to get the kinks out to where everybody could live with it. I certainly didn’t get everything I wanted it, but we put out a product we could live with.