Parrish: Finds Resources “fascinating”

Juneau Democrat enjoying freshman-year assignment on House Resources, says oil tax reform beyond upfront credits needed

Steve Quinn

For Petroleum News

House Rep. Justin Parrish says he sees nothing unusual about a Juneau representative sitting on the House Resources Committee. After all, the Senate has a Southeast lawmaker in Bert Stedman holding a seat on Senate Resources. A few years ago, Wrangell’s Peggy Wilson enjoyed working on House Resources, before she retired from the Legislature.

Still, Parrish, a Democrat, is among the youngest collection of lawmakers sitting in a House Committee. He’s among five freshmen, joining fellow majority caucus colleague Vice Chair Dean Westlake, and minority Republicans Chris Birch, George Rauscher and DeLena Johnson.

He calls the committee assignment “fascinating” as he wrestles with oil tax issues that seem to beset the Legislature almost yearly, and attempts to come up to speed on the prospects of the state advancing a project to market North Slope natural gas.

Parrish shared thoughts on his first year in office with Petroleum News, a few days after Gov. Bill Walker added HB 111, the Resource Committee’s bill to restructure the credit system and adjust certain rates.

Petroleum News: How does a guy from all the way down in Juneau, about as far away from the North Slope as you can get while still serving, find himself on the House Resources Committee.

Parrish: Well, I’ve got two of the largest mines (Kensington and Greens Creek) in the state. That’s an important resource. Southeast Alaska has some of the most valuable timber in the state. That’s an important resource. We’ve also got extensive fishing. We’ve also got excellent hydro power. I think it’s overdue for someone from Southeast to be represented on the Resources Committee.

Petroleum News: So then where is the learning curve? Oil and gas?

Parrish: Oh yes. It’s been really fascinating. We’ve had some world-class testimony over the year. Of course, I’ve been working with the administration to deepen my understanding as well.

Petroleum News: What have you learned in your first session and then special sessions? What overall and then you can work your way down to resources.

Parrish: Every time I take on some additional form of service throughout my life, I’m shocked to discover that the decision makers are people like you and I. I keep on waiting to find myself among philosophers and kings and be really out of place, but no, it’s regular people making these decision with the same limitations as most anyone.

In the Resources Committee, I’ve been really kind of appalled at the complexity of the legal system. It’s really a Frankenstein that we’ve been dealing with in terms of provisions, the way that the credits interact with the production taxes, interact with per barrel credits, interact with deals made decades ago in some cases.

I know the administration was blindsided just last year when they received significantly less in taxes than anticipated because the oil industry interpreted the law in a novel way, a way that hadn’t been anticipated. There are precious few people who understand the entirety of the oil tax law and I think that’s a problem.

Petroleum News: Legislative Budget & Audit hired three consultants who are to design financial models examining the state’s tax system. What would you like to learn from them?

Parrish: When we had our last consultant here (Rich Ruggiero), I met with him in the committee and as an individual legislator to try and figure out how we can get to a durable oil and gas tax regime. We’ve had oil and gas tax law debates almost every two years for the last 60 years, and that’s not wise. We should make a deal that works and stick to it. The current tax law is broken at the oil prices we are at right now. The oil prices I expect us to remain at. We need to fix it.

Petroleum News: The word durable seems to be elusive when people try to define it. The oil industry says when they hear critics say durable, it means they want more money. Some believe the word durable fits under SB 21 and say it needs to be left alone. How do you view this term?

Parrish: I think it’s got be a comprehensive definition. With cashable credits piling up and approaching $1 billion and having an effectively negative production tax rate, we are heading toward a citizens’ initiative and that’s unpredictable. I don’t think that’s anything people in the industry want to see. The fact is when people are really convinced they are getting a raw deal, they are not going to take it lying down.

Petroleum News: The citizens’ initiative failed three years ago. What makes you think another one would produce a different result?

Parrish: It failed narrowly when oil prices were high and the oil industry was paying most of the bills. Now oil prices are low and people of Alaska are not comfortable paying the bills for the oil industry.

Petroleum News: The governor added HB 111 to the call for the second special session. Even as you’re not on the conference committee, you’re still on Resources having to track developments. Would you have preferred to set this aside until later, as some would have done perhaps to the fall, or would you prefer to push forward?

Parrish: If we can get a deal which I think would be equitable and durable - and I think it would be equitable if it were durable - I’d like to see it happen sooner rather than later. However, there hasn’t been much willingness on the Senate side for much reform.

Petroleum News: So do you think you’ll be able to get closer to the reform you believe is needed once the consultants’ reports come back later this month?

Parrish: Hopefully. It’s my hope that whatever model we ultimately adopt will be significantly simpler than the regime we presently have in place.

Petroleum News: Go back to your first round of HB 111 hearings. Considering the volume, was it overwhelming? Daunting?

Parrish: It was fascinating. I was pretty enthralled with the series of presentations that were given: the industry, (tax director) Ken Alper, (Anchorage attorney) Robin Brena all had top-notch presentations. I was able to follow up with each of them with questions and I appreciated that.

Petroleum News: Was it more work than you thought it would be or do you feel like you knew what you were getting into?

Parrish: No. As far as the Resources Committee goes, it’s about what I figured. As far as the overall Legislature goes, it didn’t fully appreciate the volume of legislation I was going to go through, but I also didn’t realize the quality of help I was going to be receiving.

Petroleum News: As you look at the (oil) prices, in the time you’ve been in office, they bounced around a little bit, what worries you the most about this global market and how the state relies upon it?

Parrish: The steady increase in the number of drilling rigs is really, really worrisome to me. The Saudis have 200 rigs going after shale oil. Nigeria’s production is approaching peak after a slow down. We have an access of supply and that’s really bad for a supplier.

Petroleum News: Do you feel kind of helpless that it’s out of your control and even the leaseholders’ control.

Parrish: I can’t remember who said this but it’s something like this: You can’t control the wind but you can adjust your sail. So I wouldn’t say helpless. We’ve just got to adapt to the circumstances we find ourselves in.

Petroleum News: Let’s switch gears. You’ve been getting regular updates on AKLNG. Let’s start at the 40,000 foot view. What is your take on how things are going with AKLNG?

Parrish: I wonder if skeptical optimism is a term. I’m skeptically optimistic. If we are able to find an investor who is willing to put tens of billions of dollars into the project, God bless them. Thank you very much. It will be a valuable economic stimulus. However, I’m not convinced that it is at present an economically viable project. I think the Big Three have demonstrated that they agree with that assessment. I’m also skeptical about running another pipeline under Cook Inlet after the Hilcorp leaks.

Petroleum News: You have concerns about the leaks. Talk a little about that.

Parrish: Out of the larger leak, Hilcorp lost about 26 million cubic feet of gas, gas which the state of Alaska subsidized. I look at that and I think it’s wasteful. If it had been a leak for a few days. It’s understandable. This sort of thing happens. It’s a very turbulent area of water. They weren’t able to stop it for about one-third of a year. That’s really disquieting to me. If it’s the first kernel of popcorn that’s burst, it makes me worry about the rest of the aging infrastructure in place there.

Petroleum News: When things like this happen on a larger scale, the companies go before Congress. Would you like to see the Resources Committee conduct hearings on leaks that are prolonged? You don’t see that very often.

Parrish: I do believe they are accountable not only to their shareholders, but also the Legislature considering the amount of money we’ve subsidized them with over the years. I do think it’s more rightly the purview of the Alaska Oil and Gas Conservation Commission; however, if they fail to act, then we have a responsibility, too.

Petroleum News: So what would be your alternative? Another route or another port, like Valdez?

Parrish: I think there are other routes available. If for instance we want to maintain the years of permitting which have already been done, you can trace the same route, there is a port outside of Anchorage, which has decent acreage.

The Valdez route, it’s my understanding there is primary limitations. They don’t have a lot of flat land and I can certainly sympathize with that, but I wouldn’t rule it out. Honestly, I think with the trend toward the Arctic being more passable and more readily navigable, I don’t think we should dismiss out of hand fueling tankers from the North Slope. You would need an offshore pipeline, because it shallows real quick out there, however, you would only have to build maybe 50 miles of pipeline.

Petroleum News: Do you think maybe it’s time for people to think a bit outside of the box for lack of a better term or revisit other ideas such as that?

Parrish: Yes, but again if during this bidding season, the administration finds an investor who wants to go in big on a pipeline project, God bless them and I would be delighted to see that forward.

Petroleum News: What would you like to hear next from the administration?

Parrish: We found an investor.

Petroleum News: Do you feel like you’re getting enough information from AGDC? I know they have been delivering updates about every two weeks.

Parrish: The members of the board have made themselves very available, however, until they have got someone to pay for the gosh darn thing, it’s all theoretical.

Petroleum News: Closer to home, there was talk a few years ago of having LNG shipped to Southeast and having it become a fuel source right in your backyard so to speak. It didn’t get very far. What were your thoughts on it at the time?

Parrish: Juneau has got world class hydro opportunities as you know. We’ve also got plenty of timber. I have trouble sending more money out of town than we’ve got to (LNG company was from Lower 48 states).

Petroleum News: Even as you’re neither the co-chair nor vice-chair, what would you like to see on the House Resources Committee agenda in your second year? That assumes you get the oil taxes off your plate.

Parrish: If we deal with oil taxes that is going to get us to something fair and durable, I’m going to be very happy and perfectly content with my career in the Legislature forever - if it sticks. Sure, there are other little things like farming, because Alaska is very food insecure. We can look to other states like New York, where my sister’s boyfriend works in a timber mill. New York state has figured out how to make it economical. I think we can too. Our fisheries, of course, are an area of great interest and concern for me. But the 800-pound gorilla is and will remain the oil taxes and the oil subsidies.