Follow our reviews of the 2014 legislative sessions (upcoming)

Acting Revenue Commissioner Marsha Davis has been booted upstairs to the Governor’s Office to assist Chief of Staff Jim Whitaker. Davis will continue to live in Anchorage. Meanwhile, new Revenue Commissioner Randy Hoffbeck is back in state and has taken over the top job at Revenue.

Former state revenue commissioner Sterling Gallagher is now a Special Assistant for Finance in Gov. Bill Walker’s office. Gallagher said he will be taking a look at the investment performance of state assets, some of which have been underperforming, he said.

Lower oil prices are beginning to be felt in Fairbanks in lower heating oil prices–reported most recently at $3.40/gal. and headed down–and that is threatening to upend a plan to build a small liquefied natural gas liquefaction plant at Prudhoe Bay and to truck LNG to the Interior city. Cost estimates of the LNG project are rising, which is increasing the expected price of gas to consumers.

Delivered costs could now reach $18 to $20 per million British Thermal Units, up from the revised target of $15 (originally, the target was $12). A delivered-to-consumers gas price of $18/mmbtu correlates roughly to an oil cost of $2.40/gallon, and a $20/mmbtu price is about the equal of $2.70/gallon.

The three Interior utilities being asked to sign up to buy trucked LNG are now worried that fuel prices edging down from previous highs of over $4/gallon will hike consumer resistance to paying the hefty conversion cost from oil to gas. If that happens it will undercut the demand for gas, undermining the economics of LNG trucking.

Another complication is that Hilcorp Energy, which owns Cook Inlet gas ans is the new owner of a small LNG plant in the MatSu Borough (formerly owned by Fairbanks Natural Gas) has offered to sell Cook Inlet gas as LNG to Fairbanks for $15 per mmbtu. WesPac Midstream, which hopes to develop a medium-sized LNG plant at Port MacKenzie, says it can supply LNG for $14.50 although the company has yet to nail down a gas supply. REI Alaska Inc., developing a one million LNG plant in Cook Inlet for export, said it can also supply Alaskan markets including the Interior.

The sudden drop in crude oil prices, nearing $80 per barrel on Oct. 15, has sent shudders through the state government. Ironically, the Department of Revenue has just started work on the Fiscal 2016 production and revenue forecast, which will be published in late November or early December. The drop in oil prices, which may last a while, pundits say, would undermine current FY 2015 revenues and push the $1.4 billion deficit that was projected at a $104/barrel average higher. In previous years a rule-of-thumb was that each $1 drop in oil prices, if it stayed low for the year, cost the treasury $50 million. Revenue officials say that’s more complicated now with the new SB-21 oil tax in effect. We’ll have to wait a few weeks until the revenue forecast to glimpse the future. (More on this in our upcoming Alaska Economic Report).

Alaska North Slope oil producers appear to have halted a long-term decline in annual production, state production data showed.
For the first 10 months of the state’s 2014 fiscal year, production has averaged 532,700 b/d, data through April showed. Preliminary data for May and June indicates the trend is likely to hold.
Average production for the 2013 fiscal year was 531,600 b/d. The state fiscal year runs from July 1 through June 30.
The figures are subject to adjustment, said Cherie Nienhuis, a petroleum analyst with the Alaska Department of Revenue, but the data indicates the state will end its current fiscal year on June 30 with North Slope output roughly on par with the previous year.

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Singapore’s Sovereign Wealth Fund (that nation’s Permanent Fund) is looking at an Alaska investment, Alaska Dispatch publisher and Anchorage Daily News owner (after May 5) Alice Roghoff told an Alaska World Affairs luncheon May 2. Roghoff was speaking on Arctic issues with former Lt. Gov. Fran Ulmer, who is chair of the U.S. Arctic Research Council.

Roghoff, a businesswoman, has been active on Arctic issues for years and is the co-founder of Arctic Circle, a private nonprofit that hosts seminars and conferences on matters affecting Arctic nations including the U.S. Her message May 2 was that there is a woeful lack of infrastructure on the western Alaska coasts to respond to emergencies from increased shipping–oil spills, vessel, crew and passenger emergencies, and the region needs new investment in docks and other facilities. Read the rest of this entry »

Alaska is back in the liquefied natural gas export business. The first LNG tanker has called at the ConocoPhillips LNG plant at Nikiski, near Kenai, since late 2012. This follows the company’s reactivation of the plant this spring, company spokeswoman said Friday. The plant has been in a suspended status since late 2012.

The tanker is the Excel, owned and operated by the Belgium-based Exmar shipping group, and it landed Friday morning, May 2. ConocoPhillips could not say how long it will take to load the vessel or the destination of the cargo, although presumably it is in Asia.

The company plans six LNG shipments this year at approximately one-month intervals. ConocoPhillips has authorization from the U.S. Department of Energy to export LNG from the Kenai plant for two years. Read the rest of this entry »

The education bill compromise (HB 278) and the capital budget (SB 119) are last items of business today. A revamped version of Knik Arm crossing legislation (HB 23) was adopted Friday morning. Knik Arm and educatin were the big stumbling blocks for adjournment, amnd the disagreement over the form of the Knik Arm bridge bill developed just this week. We spelled out major provisions of the SB 278 compromise in our report yesterday, Bulletin No. 9.

The compromise on HB 23, now passed, basically has the Knik Arm Bridge and Toll Authority, or KABATA, left with the authority to operate the bridge and collect tolls but for the state Dept. of Transportation and Public Facilities to build it.

A few bills are still hanging on House and Senate calendars this morning.

One important one that has now passed is SB 99, which makes changes in the Alaska Industrial Development and Export Authority’s SETS energy loan program, and also gives AIDEA authority to help finance two proposed Southeast underground mining projects, the Niblack multi-metals prospect and the Bokan Mountain rare earths prospect. A late amendment to the bill would also allow further state financing for the Blue Lake hydro expansion project at Sitka.

Here are some actions from Thursday:

Senate backs entrepreneurs’ security exemption, HB 308

HB 308, exempting three categories of securities issuances from state reporting requirements, and a small fee, passed the Senate on an 18-1 vote, Thursday. The bill exempts so-called “friends and family securities” issuances to ten or fewer persons, or 25 or fewer persons in Alaska, or offerings to holders of securities from the same issuer. The bill also allows Alaska Native Claims Settlement Act corporations to treat so-called “after born” stock issuances like original stock offerings in 1971. Sen. Pete Kelly (R-Fairbanks did not comment before casting the lone vote against the bill.

Scrap metal sales records bill passes legislature, HB 305

Alaska is joining the 49 other states in a crackdown on theft of new and scrap copper and other high value metals with Senate passage of HB 305, Thursday. House Speaker Mike Chenault’s original bill repealed an antiquated section of law requiring junk dealers to hold a business license and also be licensed by the Dept. of Revenue. State builders. Scrap dealers, builders, public utilities and police agencies asked for the addition of new terms requiring metal buyers to keep detailed records of all purchases of $100 or more for five years, including identification, vehicle and contact information of the seller.

Alaska is the only state without a law like HB 305, said Sen. Kevin Meyer, before the Senate vote. The bill takes effect Jan. 1, 2015. Sen. Hollis French, a former state prosecutor, said classification of false entries in a buyer’s records as a Class A misdemeanor, punishable by up to a year in jail, was too severe and cast what he called a “cautious no” vote.

Transportation Infrastructure Fund dies in Senate Finance Committee

Rep. Peggy Wilson, Thursday afternoon, confirmed the death of HJR 10, her proposed constitutional amendment to reestablish the dedicated transportation projects fund. The resolution, which passed the House twice in recent years, did so again this year on a 34-4 vote, March 13. It reached the Senate Finance Committee on April 2. Cochairman Kevin Meyer (R-Anch.) said it would “absolutely never, ever” leave the committee, according to Wilson.

The state Legislature’s 2014 session is headed toward its required April 20 adjournment. As of today, the Senate has passed the operating budget back to the House. Next stop is the conference committee. The Senate Finance Committee has also released its first draft of a capital budget with appropriations to finish the partly-built University of Alaska Anchorage engineering building, to fund more work on the billion-dollar Knik Arm bridge, and to add funds, but not complete, the partly-built engineering building at the University of Alaska Fairbanks and the extension of the Alaska Railroad to Port MacKenzie on Knik Arm, in upper Cook Inlet. Read the rest of this entry »

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