Thursday, July 24, 2014

The SB 21 debate (updated with video, audio and additional discussion) ...

Some reviews are in from the debate last night on Proposition 1 (the proposed repeal of SB 21).  The debate was sponsored by Alaska Common Ground, the Leagues of Women Voters of Anchorage and Alaska, the Anchorage Public Library, the University of Alaska-Anchorage Institute of Social and Economic Research (ISER) and Alaska Integrated Media.

Alaska Common Ground has posted a video of the complete debate on their website.  It is also available by clicking on the link above.  An audio of the debate is available here as part of Alaska Public Radio Network's "Addressing Alaskans" series.

Channel 2 gave what, in my view, was a balanced treatment of the discussion on their 10:00 pm report.   Amanda Coyne's take is included as part of today's "Loose Lips" column.   I know that Alex DeMarban from Alaska Dispatch News, Alex Gutierrez from the Alaska Public Radio Network and Margaret Hobson from national trade source Energy Wire also attended.  I also will post an update here with links to their or any subsequent reporting I come across.

For me, the debate reminded me a lot of an experience I had in a case before the Oklahoma Corporation Commission in the early 1980's.  At the time I was representing industrial natural gas consumers in a hearing that involved setting "allowables" -- production limits -- on natural gas delivered to the utility serving the consumers.  My position was that the allowables should be set in a way that allowed price competition among producers as long as takes did not exceed the maximum efficient rate of flow (MER) from any one source.  The producers argued that the allowables should be set in a way that provided all suppliers with an equal, proportionate share of the market based on the MER's.  The effect of that was to lock in an average price at a level which would make a number of industrial customers non-competitive, collapsing the market further.  The producers didn't believe that the industrial customers were sensitive to price -- just as Gregg Erickson and Sen. Bill Wielechowski argued last night that investment decisions are not sensitive to costs.

The Corporation Commission acted then, as now, as both the agency responsible for regulating utilities (similar to the Regulatory Commission of Alaska) and regulating oil & gas production (similar to the Alaska Oil & Gas Conservation Commission), but in this particular case was acting in its production role, which meant that most of the hearing room was taken up with lawyers representing oil & gas production companies.  Suffice it to say that they were not happy that an "outsider" from the consumer side was crashing their party and suggesting that the Commission do something different (take economics into account in setting allowables) than it had, to their clients' advantage, for as one argued to the Commission, "back to biblical times."

The hearing was a bruising experience, with the producers generally arguing that this was "their" proceeding and at one point one of the oldest and most respected producer lawyers publicly calling me a "Communist" for suggesting that economics should play a role in the Commission's decision-making.  With one exception, a friend I still have all these decades later, I can't recall another person in the hearing room that day being supportive of my arguments -- or even talking to me during breaks. And the Commission, in part not wanting to cause a riot among one of its key constituencies -- the Commissioners were elected and producers were a vital source of campaign contributions -- went the other way on the immediate point as Amanda suggests most of the crowd attending was predisposed to do last night.

But the thing that I recall most about that experience was talking a couple of years later to one of the Commissioners and a few of the producers in the room that day and listening to them, to a person, reflect on the fact that was the day they finally understood the economic realities of the time and how that subsequently changed their behavior -- and Commission and investment decisions -- going forward.

Last night Roger Marks and I argued the economic reality Alaska is facing; as Amanda points out, the other side based most of their positions, in front of a friendly audience, on "one liners about getting ripped off by the oil companies, and it being our oil."

Just as was the case in Oklahoma those many years ago, arguing economic reality was the right thing to do last night.  As one message I received after the debate from someone I respect and is listened to by others said:
I actually have been convinced reading and listening to you ... and a few others that I trust. I was never in favor of ACES, but I wasn't sold on SB 21 either (or HB 110 for that matter). I think you guys did great and have the facts on your side.  [As for the crowd reaction,] I think at the end they were just mad that you guys had the answers that they didn't think you'd have.
Alaskans -- like the Oklahoma producers that day back in the early 1980's -- are not above shooting themselves in the foot.  But I have faith that as many of those in the room last night and others think about the actual economic reality of the situation in which Alaska finds itself, they will come better to understand the choice we face and make the right decision going forward.