Alaska editorials

Here is a sampling of editorial opinions from Alaska newspapers:

March 20, 2017

Ketchikan Daily News: EAS is essential

We might want to rethink this one.

President Trump proposes saving $175 million by eliminating Essential Air Service funds that pay for air transportation into rural communities.

In Alaska’s case, this would affect Ketchikan, Wrangell, Petersburg, Gustavus, Cordova and Yakutat. Southeast residents fondly refer to this daily service by Alaska Airlines as the “milk run.”

Alaska Airlines receives $7.93 million to provide the run. It’s subsidized because the communities north of Ketchikan wouldn’t receive airline service without it.

The alternative for the milk run’s island communities is various small air charter operators or the Alaska Marine Highway System. No roads connect the communities, unlike in rural Lower 48, where residents can drive to the next town, even if it is 200 or 300 miles off.

Alaska’s congressional delegation has lined up against eliminating EAS funds. Congressman Don Young took it casually: This “isn’t going anywhere.”

Indeed. This item needs to be reconsidered for its effect on Alaskans.

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March 15, 2017

Alaska Journal of Commerce: House Resources tells Armstrong thanks for nothing

The first time Bill Armstrong met former Gov. Sean Parnell several years back he pointed at a map of the North Slope and told him where he intended to find a huge amount of oil.

A confident Texas wildcatter is about as uncommon as a member of the House Majority that wants to raise taxes on the oil industry, but only one of them is actually good for Alaska.

As information has trickled out over the years since Armstrong and his former majority partner Repsol began exploring, he has been proven more and more right.

First there were initial drilling results that Repsol described as successful, and led to some preliminary paperwork being filed with the U.S. Army Corps of Engineers that indicated potential production of 60,000 barrels per day. That alone would have been a significant find, but it got better.

About a year later in late 2015, Armstrong swapped positions with Repsol to become the majority 51 percent owner and operator of the find, and the production estimate from the discovery in what’s now known as the Nanushuk play in the Pikka Unit doubled to 120,000 barrels per day.

Armstrong bought leases and drilled them this winter some 20 miles from his initial find, establishing that the Nanushuk play discovered at Pikka could easily hold more than 2 billion barrels of recoverable, high quality conventional oil.

Repsol billed this winter’s results as the biggest onshore conventional discovery in 30 years in a press release March 9.

Just five days later, and only four days after the bill was introduced, the House Resources Committee expressed its appreciation for the Armstrong-Repsol work by reducing the net present value of their discovery with legislation that would cut their deductions for development and raise their taxes across every range of prices once they reach production.

The process for the Resources Committee substitute bill was so rushed that a fiscal note from the Department of Natural Resources regarding the impact of provisions requiring approval of certain lease expenditures ranged from “minimal to significant.”

There has been no modeling on potential production impacts from raising taxes and cutting development deductions.

Talk about passing a bill to find out what’s in it.

This is just the latest episode in the neverending quest by Alaska Democrats to create a “heads we win, tails you lose” oil tax policy that isolates the state from the risk of exploration and low prices while allowing it to capture a majority share of the upside when a company like Armstrong or ConocoPhillips is successful.

Here’s what we do know about production.

During the last full fiscal year of the previous tax policy known as ACES that ended June 30, 2013, North Slope production was 531,000 barrels. That was down more than 200,000 barrels per day in the six years of ACES, or an annual decline rate of 5 percent.

Current North Slope production is averaging 520,000 barrels per day, which averages out to a 0.5 percent decline rate in just less than four years, or 10 times better than the rate under ACES.

Should the 5 percent decline rate have continued, we would be at about 433,000 barrels per day rather than the current 520,000. That adds up to 31.7 million additional barrels over just one year.

Democrats will cry til the cows come home that you can’t make a connection between the first production increase in 14 years with the tax policy they have staked so much political capital in overturning.

At current production rates, the North Slope will blow away the state forecast of 490,000 barrels per day and it is still a possibility we could see a second straight year of growth if the fiscal year finishes in June with a daily average greater than 514,000 per day.

It is always wise to not assume that correlation (production increasing) implies causation (changing oil tax policy in 2013).

But it is also a sound conclusion to recognize that the current tax law has certainly not hurt the state from a production or revenue standpoint. (The cashable exploration credits that are the source of so much budget angst predate the More Alaska Production Act by nearly a decade.)

It’s indisputable we’d receive no production taxes at current prices under ACES compared to about $2 per barrel under current law.

That doesn’t consider the royalty share either, which ranges from 12.5 percent to 16.6 percent off the top and means the state has unquestionably benefited from the near-complete reversal of the previous decline rate despite the price collapse.

The Democrat leaders of the House Resources Committee are not wrong in their attempt to ensure the state is getting maximum value for either its direct cash investments in development or foregone revenue in exchange for additional production.

However, it seems the only place Democrats are willing to examine return on investment regarding state spending is where oil tax policy is concerned.They certainly have no interest in determining whether our health and education policies are working as those departments soak up billions in the annual budget while producing results that are mixed at best.

Any claim to the contrary is nothing more than the same lip service House Democrats paid to repairing the state’s reputation as an unreliable business partner while working behind the scenes to cement it.

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March 17, 2017

Fairbanks Daily News-Miner: Coast Guard a vital need

Alaska’s two U.S. senators are among a bipartisan group of 23 Senate members who signed a letter to the White House budget director earlier this month expressing grave concern about President Donald Trump’s proposed 11.8 percent funding reduction for the Coast Guard next year.

With Alaska having more coastline than any other state, it’s easy to see why Republican Sens. Lisa Murkowski and Dan Sullivan put their names on the letter.

The Coast Guard has a significant presence in Alaska. The Guard’s complement in the state includes about a dozen cutters, three air stations, six marine safety units, three small-boat stations and many navigation and support facilities.

Yet that presence is inadequate in today’s race for the Arctic. More and more, other nations are eyeing Arctic resources and business opportunities and are looking to exploit waterway openings created by a reducing ice pack. And as nations look to the polar North for wealth, their military forces increase.

Russia is chief among those nations. And the growing Russian interest in the Arctic is something that the Untied State - and particularly Alaska - should be wary of.

Russia has 41 icebreakers and 11 more in various stages of planning and construction. And the U.S.? The U.S. has the 41-year-old Polar Star heavy icebreaker and the 17-year-old Healy medium icebreaker. That’s it for active icebreakers.

A report in the respected magazine Foreign Policy says Russia in recent years also has established a new Arctic command, four new Arctic brigade combat teams, 14 new operational airfields and 16 deepwater ports.

Even China, far from the Arctic, is building a polar icebreaker, which is expected to launch in 2019. It is reported to be able to remain at sea for as many as two months and have a range of 20,000 nautical miles, a distance roughly equivalent to the Earth’s circumference at the equator.

On the point of another polar icebreaker for the United States, the senators’ letter says the U.S. is facing a potential eight-year gap in its ability to break heavy polar ice from the time the Polar Star retires and a new icebreaker is commissioned. Delaying construction of a new icebreaker would be “irresponsible,” according to the letter.

It’s an accurate statement.

The Coast Guard budget, the letter from the senators notes, has been declining since 2010. Its acquisition budget alone dropped 40 percent from 2010 to 2015, a decline reversed somewhat by Congress the next year.

The letter - signed by three Republicans, 19 Democrats and one independent who caucuses with Democrats - states that the Coast Guard’s “operational tempo is unsustainable as its infrastructure continues to age and becomes technologically obsolete.” It says the nation needs to invest in priority items such as polar icebreakers, national security cutters, offshore patrol cutters, fast response cutters and Great Lakes icebreakers.

The senators also brought attention to the human element by noting, as they see it, overdue attention to improving the support services for Coast Guard families. Areas of concern include the lack of sufficient military and civilian health care networks in some locations and child care.

The letter acknowleges the larger budget difficulty facing the nation but also flatly states that the proposed $1.3 billion reduction in the 2017-18 budget contradicts President Trump’s priorities of enhanced maritime safety and increasing investment in the nation’s military. Implementing the reduction would cause “catastrophic negative impacts” to the Coast Guard, it reads.

Assembling the annual budget in Washington is a complicated process in which neither the White House nor Congress - or Republicans and Democrats, for that matter - knows for certain how insistent the other will be on this or that proposal. The budget that President Trump has proposed for the Coast Guard is only a proposal. Congress will have a lot to say as it revises his blueprint.

With the Arctic undergoing great change and receiving attention from various other nations, however, it would seem that it is time to strengthen, not further erode, the Coast Guard, whose mission is “to protect the public, the environment, and U.S. economic interests - in the nation’s ports and waterways, along the coast, on international waters, or in any maritime region as required to support national security.”