Thursday, October 25, 2012

Another Alaska Dispatch story ...

The Alaska Dispatch yesterday ran an article under the headline "Oil companies agree: TAPS operational at least another 32 years."  The story reported on a settlement reached by the TAPS owners and the state regarding the depreciation life to be used in calculating TAPS rates.  

Since it is World Series season, a baseball analogy comes to mind.  Having reported the facts, the story then sought to turn the "single" (the story) into a "double" (a thinly disguised editorial) by comparing the settlement to other statements about the life of TAPS.

Specifically, the story continued with the following:
... the settlement seems to conflict with arguments by Gov. Sean Parnell, who has said the trans-Alaska pipeline -- the 800-mile umbilical cord that symbolizes the state's lifeblood industry -- is running low on oil and could shut down in as soon as eight years under certain conditions.  
Parnell’s state website to support his tax proposal, “Stem the Decline -- Grow Alaska,” cites a U.S. Energy Department report that says the pipeline could stop moving oil sometime between 2020 and 2035, it was a report that was widely debunked by energy experts.
Of course, the story contains no cites or links to the supposed "debunking" of the EIA's report by "energy experts."  The fact is that the EIA's report focuses on the potential economic life of TAPS, and reaches its conclusion based on the possibility that, due to Alaska's tax rates and other factors, it may no longer be economic to continue operating TAPS within the time span covered by the EIA study.  The FERC settlement does not attempt to reach the same level of economic analysis.  It is just a settlement.

And, interestingly, the Dispatch story contains absolutely no mention of Judge Sharon Gleason's state court decision late last year, which the Dipatch previously has emphasized, and which found that TAPS potentially could remain in service until 2065.  If the settlement undermines the Governor's position, one would think that it undermines Judge Gleason's as well.

But most importantly, the Dispatch article fails to address the real issue facing the state today.  That issue is not the life of TAPS, it is the production rate going through it.  As Deputy DNR Commissioner Joe Balash said at the time of Judge Gleason's decision, even "a 300,000-barrel a day throughput scenario … would be a ‘disaster,’ because at that level, the state budget would be in a ‘dire deficit."

In short, even though TAPS might continue operating, the state's fiscal situation would be crumbling around it.  For a more thorough discussion (and cites to the above quotes), see "It's the production rate ...."

Whether the Dispatch's efforts to extend the single into a double were successful likely is in the eye of the beholder.  To me, however, an old Dizzy Dean observation applies -- the Dispatch was "out by a mile."