Tuesday, March 26, 2013

Alaska Gas| What is Valdez thinking ...

The City of Valdez has hit the airwaves with a campaign against HB 4, the enabling legislation for an instate gasline introduced by Rep. Mike Hawker and backed by Speaker Mike Chenault.  According to the City, the campaign "is geared at supporting what Valdez believes to be the better project ... a large-scale line capable of feeding overseas exports."

In the meantime, back in the real world Ernst & Young has released a new study on global LNG demand, supply and pricing.  The study is an effort to take a serious look at realistic demand and supply scenarios in an effort to identify where global LNG pricing may be headed.  In doing so, the study seeks to provide a realistic assessment of various supply options and how they fit into the overall global LNG supply outlook.

Mentions of Alaska in the study?  Zero, yep zero.  Mentions of Canada in the study, 16.  Mentions of the US Gulf Coast in the study, 6.

Sometimes, some Alaskans become confused between how they believe the world should think about us, and how the world really does.  This is one of those times.  The global LNG industry is leaving the station and Alaska is not on board.  Under various scenarios it is possible that Alaska may yet catch one of the last cars before the train fully leaves the station, but those scenarios are the equivalent of completing a Hail Mary pass.

Alaska certainly shouldn't forego other options in the meantime waiting for a receiver to come open.

Ironically, according to the AP news story reporting on Valdez's efforts, the city is supporting the estimated $900,000 ad campaign "using money it has won in challenges over taxation of the trans-Alaska oil pipeline."  That money has increased the cost of operating TAPS, reducing the netback -- and thus, the money received by the state from royalty and production taxes -- for North Slope oil.  Taking that into account, more than half of the money Valdez is spending on the effort actually is coming at the expense of state revenue.

Legislators may want to keep that in mind the next time they are asked about where they can make budget cuts.  With an increasingly tight budget, does the state really need to be indirectly funding Hail Mary passes aimed at itself.