Permafrost Friday: Who can save Alaska in 2010?

        Alaska needs Ralph Samuels in 2010 and here's why

December 4, 2009: It is becoming more and more evident that Alaska's gubernatorial election in 2010 will represent a water shed event for the state's economic future.

Alaska's current economic realities are clear.

The Trans Alaska Pipeline, which has powered Alaska's economy for decades, paid handsomely for state government and allowed residents to live in the most tax friendly state in America, is in decline due in part to the fact that Alaska has become the least tax friendly state in America.

Two years ago when Gov. Palin with an assist from Lt. Gov. Parnell jacked up taxes on the oil & gas industry, they promised it wouldn't hurt investment. While Palin never knew what the hell she was saying when she was saying anything at all, Parnell kept dithering on about how having stability with the new higher tax structure was important.

The higher oil production taxes passed two years ago are beginning to have their delayed effect as more and more oil companies are shifting investment dollars to other global opportunities because of Alaska's high cost.

The natural gas pipeline, Alaska's next big economic boom, has been hijacked by dramatically changing market conditions and a state government that refuses to accept its limitations in trying to dictate the economic terms of the riskiest and most expensive oil & gas project in the world.

After the last three years of telling Alaskans that competition was the best way to get a natural gas pipeline built, we are locked into a contract with a company that doesn't possess the competitive assets to build the pipeline, although we're throwing $500 million at them.    

But above all, the biggest economic reality is that the current administration with their collection of gas line "experts" have been breathing natural gas fumes before charting Alaska's economic future.

Three years ago, Tom Irwin, Department of Revenue Commissioner, promised that AGIA would force a successful open season because they'd leverage public, political and oil company shareholder pressure to get BP, Conoco & Exxon to play ball.

AGIA will provide for an economical project they said. AGIA will attract oil & gas companies to commit their gas because if they don't we will sue them to take back their leases they warned.

Yes; it sounded as far fetched and asinine in 2007 as it does in 2009.

But here we are, six months from the promised land of the AGIA open season, but now these same people are telling us not to put too much emphasis on an open season.

Excuse me?

Most of us from day one predicted that AGIA's open season would fail. So with the July 2010 open season date closing rapidly, the administration is desperately trying to downplay the significance of a failed open season by now calling open season a "nebulous black box."

The harsh reality is that a failed open season will prove once and for all that this entire AGIA goose chase has been a complete waste of three years and that Alaskans have been misled by people who thought they could prop up a straw man and bluff three of the largest companies in the world into building the most expensive oil & gas project in the world.

Meanwhile, one man who seemed to have a realistic grasp about in-state gas projects, Harry Noah, was reportedly drummed out because he got tired of dealing with over sized ego's that were threatened by his work. 

It was Noah who once told me in one of our first meetings this past summer that Irwin and his Deputy Commissioner Marty Rutherford were more interested in the chess game of AGIA rather than facing reality that it was sure to fail.

Unfortunately for Alaska, Noah is headed back to his cherry orchards while Gov. Sean Parnell leaves Irwin out in left field, digging Alaska into a larger economic hole with AGIA.

Since his sudden ascension into the governor's seat in July, I have spoken privately and publicly that I believed Parnell would change directions by the end of the year.

I assured friends and colleagues that Parnell simply needed to get his feet on the ground before he started making changes. I was wrong. I was dead wrong.

Over the last few months it is become very clear that Parnell lacks the sense of urgency and the independence to fix what is clearly broken. 

In his speech to the Resource Development Council last month, where oil producers delivered grim news about Alaska's oil & gas industry, Parnell struck a tone that could only be described as detached from reality.

"Regarding resource development taxes, I don’t believe they should be used as a political football. Arbitrary changes don’t help anybody. If the state’s tax regime is not stable, companies can’t plan for the future," he stated.

That means so very little coming from a politician who stood with his former boss in September 2007, advocating for higher oil taxes, then disappeared like Jimmy Hoffa when the issue became a political football in the legislature and ended being twice as costly as the originally proposed Palin/Parnell ACES plan.

A month later in a speech to a statewide business group, Parnell told industry officials they should be thankful for a stable, albeit much higher, tax regime.  

In his RDC speech, Parnell added, "I have always believed that tax stability is key. However, there are those who might say that we have the wrong mix of risk-sharing and incentives. If the evidence is there, we can take another look, but the benefits would have to be demonstrable and outweigh the long-term benefits of stability."

Long term benefits of stability. How about a stable flight of investment capital to other markets and federal land or a stable decline in oil production? 

Furthermore, of course tax stability is important. However, when taxes are so high they become unhealthy to the economy, keeping them stable is counter productive.

Can you imagine if your doctor adopted the same philosophy without exception to your health?

"Joe, your cholesteral level is staying stable at 250 mg/dl. Even though your current level means you have twice the risk of suffering a massive coronary, I think the real key here is to keep everything stable."   

And Parnell's comments on the natural gas pipeline were even more detached from reality.

"Let’s put the gas line in football terms. For almost 30 years we were stuck deep in our own territory. But in the last few years we’ve finally begun moving the ball down the field," he told the RDC crowd.  

"My response to these armchair quarterbacks is this: We are making progress. We’ve chosen a game plan, and we’re moving the ball down the field. Why change strategies in the middle of a successful drive? As your governor, I’m going to stick with what’s working," Parnell added.

I don't know what game Parnell is watching, maybe he's not and is relying on the play by play from Tom Irwin, but that is the most absurd analogy I've ever heard about AGIA.

First and foremost, the state's doesn't have possession of the ball, let alone moving it downfield. In fact, the state doesn't even own a ball as all of those are owned the real players in the game.

As TransCanada's CEO wrote years ago to former Gov. Murkowski; there will be no movement downfield until the players who will build the project decide to the terms are right to move the ball.

And honestly, I don't know how anyone could look at today's gas pipeline strategy and say the terms are right for moving the ball downfield. AGIA has done little more than bring in a middle man onto the field that fails to add any value to the project. 

The producers said three years ago they needed long term fiscal certainty before moved the ball forward and they repeated that same requirement just three months ago during legislative hearings.

They also said three years ago that there must be resolution at Pt. Thomson, which today is still in litigation. All in all, I'd argue with the state's losing hand of AGIA and the glut of natural gas flooding the market over the last year, Alaska's natural gas pipeline is losing yardage. 

In all honesty, the only presence the state has on the field with AGIA is playing the role of the poorly choreographed pre-game show.

A show that lacks talent, has significant wardrobe malfunctions and all while taking valuable time away from the real game that should be happening on the field.

AGIA is like the school band that refuses to cede the field so the game can begin. 

But the key issue here for Alaskans is the lack of leadership in troubled times.

Alaska needs a voice of honesty, a voice of reason, a voice that is not afraid to give lawmakers political cover to propose changes to a broken fiscal system that will harm the state in the coming years.  

Parnell's recent public comments about continuing on the AGIA course, his defense of the state's tax structure in the face of declining oil production and decreased investment and the loss of Harry Noah, show that Parnell firmly believes carrying on Palin's policies is a grand idea.

Either that or Parnell doesn't want to alienate his former boss, who recently told KTUU that she planned on campaigning for him next year.

Parnell's two years as Lt. Governor were spent playing hand maiden to Palin's tax and spend policies and it's obvious that he's comfortable continuing that role, even though he can now chart his own course.   

And make no mistake, although Palin created this collection of economic tragedies, they're all Parnell's now. Over the last three years, from AGIA to tax hikes, Parnell supported them, advocated for them and now is electing to continue them.

Parnell has no excuses. None.

Every day his policies are allowed to continue and Alaska's economic growth is allowed to ebb, is just another day that should make Alaskans realize that we need an economic leader.

Alaska needs a leader that understands small business, rural economies and the growing dangers of rising government costs and decreasing state revenues.

Alaska needs a leader who has shown the foresight to stand on the House floor and represent the only vote against the proposition that Tom Irwin, Sarah Palin, Pat Galvin, Marty Rutherford and Sean Parnell were better suited to define private sector risks than the private sector.

Alaska needs a leader who will be a rain maker, not a care taker.

Run Ralph Run.