Commentary

Alaska’s moral compass

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Gérard Dicks Pellerin a-1640xl pc065135

Commentary

 

What is Alaska becoming?

The state that penned Alaska’s Clear and Equitable Share (ACES), a plan to use big taxes to maximize the people’s share of the wealth flowing out of the North Slope, now sits around plotting how to build a state-owned, state-run, natural gas pipeline free from federal taxes so as to screw the rest of the American people out of tax revenue.

Then the governor of the Alaska, having vetoed the funds to pay off hundreds of millions of dollars in oil credits owed small oil companies lured north to look for more oil and gas, sends his former attorney general to tell the Permanent Fund Corporation, a state-run business, to “help” said oil companies by buying their credits at 70 cents on the dollar.

Why not 50 cents on the dollar, or a quarter or a dime?

And if it’s good public policy to screw the blue-collar folk in the oil patch, why not go all in and “entice” some white-collar jobs?

The state badly needs a tech industry. Let’s offer Microsoft a few billion dollars to relocate its campus here from Redmond, Wash., and then once its move all the staff and equipment north to the Matanuska-Susitna Borough explain the fiscal and legal realities of Alaska:

Alaska rules

“Well, you know, we promised you $5 billion, and we are legally obligated. So you will get your money. But if you read the fine print, you’ll see that we’re only ‘statutorily obligated’ to pay out $10 million per year.

“But hey, 500 years from now you’ll have all your money just like we promised. Given inflation, the last payments might not be worth much in reality, and we’ll be deeply sorry about that. But you gotta understand, these are tough times in Alaska.”

And obviously tough times justify bad behavior.

Have you ever wondered how this might look to the rest of the country? Forget the chicanery on state debts and go back to that gas line for a minute.

A state that has so much oil money that it each years gives it citizens “dividends” of $1,000 and up wants the union of the other 49 states to grant it tax-free status for a profit-making, state-run, gasline company.

What would be the reaction from the majority of Alaskans, who live in the Anchorage and the Matanuska-Susitna region, if the North Slope Borough, the Fairbanks North Star Borough, and the City of Valdez put together a gas-line plan (they were once trying) and then asked the state to eliminate any Alaska taxes on the gas to make the pipeline economically feasible?

Given  the tax-free-gasline attitudes of the day, such a request would seem more than fair.

North Slope resources

The gas is a really a North Slope commodity, not an Alaska commodity, and a pipeline could be built to cross only the aforementioned municipalities. Why should Alaskans outside of the affected areas benefit? Actually, you could say the same for the hundreds of billions of dollars in taxes and royalties that have already poured into state coffers thanks to that North Slope oil.

Why should people in Anchorage or Wasilla or, God forbid, far off Ketchikan benefit from a resource pumped out of a place they’ve never visited and where most of them wouldn’t even be able to survive?

Let’s be honest for a minute. Most of the “Alaskans” these days collecting checks that stem from the investment of the state’s Arctic oil wealth wouldn’t last a week in the Arctic without a trusty Indian (or in this case Eskimo) guide. These Alaskans really don’t have any more of a “right” to benefit from the state’s hydrocarbon wealth than anyone else in the U.S.

That said, you can safely bet the house this wouldn’t stop Alaskans from protesting, no doubt vehemently, any sort of tax break for a gasline to benefit only the North Slope, Fairbanks and Valdez.

It’s a little ironic in more ways than one. There’s actually a layer cake of ironies here.

Pipeline full of irony

Start with the good liberals among us who have spent years debating ways to tax the oil industry to the max now joined in scheming a way to beat federal taxes, and then layer in Gov. Bill Walker, who wants a new state tax on almost everything, which is never good for business, but expects the feds to make a special Alaska exemption to remove the tax on the gasline of his dreams because it would be good for business.

As a cherry on top, you can put the tax credits, which were a promise to oil companies we’ve decided to temporarily ignore. This is not the old Alaska.

The is the new Alaska. In the old Alaska, a woman’s word was her bond. In the new Alaska, it’s only as good as the fine print written in invisible ink on a contract penned on a cocktail napkin. 

What does this say to the business world?

Oh wait, ExxonMobil CEO Rex Tillerson has already answered that question.

“Alaska is it’s own worse enemy,” he told Natural Gas Week almost exactly a year ago.

What has happened since those words were uttered? An Alaska liquified natural gas partnership involving Exxon, BP, ConocoPhillips and the state has gone from all-ahead slow to full-stop as the state maneuvers to take over management of the project and Walker goes spanning the globe in search of gas buyers.

“As Alaska takes the lead in developing its North Slope natural gas, it is absolutely critical that we go to the global market and meet with prospective buyers,” his office announced for him as headed for Korea and Singapore just days ago. “The Alaska LNG project would bring billions of dollars in new revenue to our state, provide affordable energy to Alaskans, and ensure a long-term supply of natural gas to Asian buyers.”

Economists have questioned the “billions” estimate, and even if the LNG project moves forward it will be a long time before the money starts coming in. The best-guess for a start-up date was 2025, but that now looks shaky.

This would be funny if it was funny.

But it isn’t.

Alaska used to be a state where people were rational,  worked hard , and cared about their neighbors, not just what they’d need to do to hang onto their next Permanent Fund Dividend check. Walker, the chief advocate for an Alaska income tax, seems to get the idea of everyone contributing to the collective good, at least monetarily.

He wants all of us, or at least those of you with paying jobs, to show a financial commitment to the state. But he doesn’t think the state needs to keep its financial commitments to oil companies, and he wants to be free of commitments to the federal government.

Give the governor big points for cheekiness on the latter.

Big daddy money-bags

The federal government already spends about three times as much  money in Alaska as it gets back in taxes from Alaskans.

In 2010, the feds spent $15,197 per Alaskan and took in a paltry $2,565 per Alaskan. Federal spending in Alaska has fallen a bit since then, so the ratio might be a little better. But the reality has been and is that Alaska gets far more sent north from Washington, D.C. then it sends south to the nation’s capital.

So the rest of the citizens of the United States of America, who have been subsidizing Alaska since statehood even as we pocketed those PFDs and spent lavishly on state government, should now do us the favor of letting a state-run gas pipeline company operate tax-free, why?  Because we’re good enough, and smart enough, and doggone people like us?

If that’s the case, why ask only for tax-free status on the gasline?  Why not go all the way?

How about we push for a law that makes Alaska a tax haven? To hell with just a tax-free, state-run pipeline, how about we get Congress to exempt from federal taxes not just Alaska state-run businesses, but any company headquartered in Alaska. This will make up for our well known “shipping costs.”

And while we’re at it, let’s exempt all Alaskans from federal income tax. The state rewards us with a PFD for staying here. Why shouldn’t the feds make a contribution to keep all the pioneers hanging on far to the north in the nation’s “Last Frontier?”

It’s tough living in the north. The winter nights are long and dark and the weather can cause all kinds of havoc.

The federal government gave farmers from the Midwest land and money to start the Matanuska Colony in the 1930s. Sure it’s not as tough living in Alaska now as it was then, but modern-day Alaskans are a lot wimpier, so relatively nothing has changed.

Given this, shouldn’t government give us even more? We deserve to be taken care of, don’t we?  We shouldn’t have to pay our bills, should we? Our state-run businesses should get special treatment unavailable to other businesses or other Americans, don’t you think?

If it’s good for us, who cares about anyone else.

“So far, about morals, I know only that what is moral is what you feel good after and what is immoral is what you feel bad after,” the late writer Ernest Hemingway once observed. 

Thus I guess if everyone feels all right with the state turning its back on the deals its made with oil companies and others, and trying to rip off our fellow Americans worse than we do already, it’s all fine.

 

 

 

 

 

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5 replies »

  1. Walker is probably unaware, but there’s a whole social justice warrior industry built around pipeline hating. I’m sure they won’t notice any tax break legislation. If a tax break happens expect project killing strings attached.

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  2. Ted Stevens, perhaps more than anyone, imbued Alaskans with a sense of privilege and entitlement that remains unfettered to this day. That certainly can be seen in those who profess to “hate big government” and claim to admire a rugged individual lifestyle. Yet somehow they cannot see the hypocrisy inherent in supporting a program that hands out money for nothing other than filling out a form and consuming oxygen (and that last requirement has been waived now that we give a PFD check to dead people). These are same folks who would refuse to organize local governments to pay local taxes, yet will demand the state fund all local government services.
    I got to Alaska in the mid-70s’ and watched the evolution as oil money purchased a false economy that simply can no longer be sustained. We adopted a routine that would ship our resources out of state with the minimal amount of additional value added locally – and now that flawed approach is beginning to haunt us. With everything paid for our politicians, who had no reason to practice fiscal stewardship, rigged the political system to benefit themselves and their “keepers”. They discovered the “five Fs” that sustained a political career in Alaska: Faith, Firearms, Fallopian Tubes, Fear,and most of all – Free Stuff”. Also, they learned to promise that “next big thing” that would sustain Alaska beyond the current oil boom (e.g. Natural Gas export projects). That formula appears to be failing them especially now that they cannot afford to pay the hush money of the PFD which created a contract with Alaskans that traded a check for ignoring them. Alaska is changing permanently and what could appear to be lack of a moral compass might better be described as a complete denial of reality and the unavoidable reaction to that reality.

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  3. Craig, the sentiment in this piece contrasts that of your 5 piece 4 part series on fish which suggests that Alaskan commercial fishermen could stand to pay more in state taxes, that Alaskans statewide should share the utility from our local salmon runs, that a resident-only fishery on a federal migratory salmon resource is perfectly acceptable and should expand/have priority over other user groups which allow residents and non-residents alike to benefit, and that outside investment in our fisheries is bad. Talk about a layer cake of irony.

    The potential pitfalls of a state-owned pipeline greatly concern me, but I think some form of that option is at least worth exploring given the circumstances – while admitting that I could be more informed on the subject. I do know that it’s not Walker’s fault that global energy prices tanked and the majors backed out of a massive AKLNG pipeline project dependent on lucrative long-term LNG contracts which are impossible to secure given the market’s trend towards aggressive spot pricing.

    Regulatory instability is bad for all of our industries – that’s something we as Alaskans need to figure out. I’m not on board with all of Walker’s policies, but I am glad he’s not just giving up, and I’m glad he’s working on foreign markets for Alaskan resources. I know he’s not the only Alaskan representative doing this, and my moral compass thanks them.

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  4. Bill Walker is just one of many since statehood that ran Alaska for the rich and powerful and he is joined by many more in big business and state government that get enriched by selling Alaskans out and keeping competitors out of the natural resource extraction business at any cost, it a book, it’s a hit movie and it is history in the making, call it ” Alaska’s Moral Compass”!

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  5. I would guess that Walker will learn the impacts of immorality when he goes to Asia this fall. “Hi, I’m Bill Walker and would like you to build a LNG gas pipeline for me so I can sell lots of gas to you for cheap!” Response: “Ah yes, Walker san! You man that stiffed oil companies in Alaska for $350 million last year. Nice to meet you. Excuse me, so sorry, no can talk … er, have to take this call … “

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