ASk (Alaska Skeptics)

First Meeting To Come

2008-10-15T21:16:00.000-07:00

Just a quick note. I've been a little preoccupied with life as of late, (never sign up for Facebook if you have time issues... it is a time bandit for me.) I had intended to hold the first group meeting this month and Peter and I were aiming for October 26th. I do not at this time believe that I can pull this feat off.

We have decided to take a friend's advice and I contacted David Shimek about about meeting at Metro Books and Music. He was; I found, a wonderful and considerate person who agreed that we could meet at his store as a group. It appears that Saturdays are our best bet for regular meetings. I will proceed with Metro Books and Music as our meeting place once I get myself in order.

If you have a chance, please drop by his business and thank him for his generosity. As for me; a bronx cheer might be in order due to the delays I have now caused. Be aware that a Bronx cheer is something you'll want to do in person. To do that of course you'll have to come to the meeting when I and Peter finally set a date.

As to the format and topic for the first meeting I propose what I originally proposed: America: Free Country or Christian Nation? Format can be a bit more tricky. I intend to moderate all meetings, so if you ever attended one of the "Socrates Cafe" meetings a few years back you'll no doubt recall that thoughtful discourse and debate can be done in a respectful manner. These meetings will NOT be an opportunity to call people names or shout and curse at those who don't share your views.

That being said, please await with or without baited breath the pending announcement for the first meeting.

-Bradley C. Roberson
ASk Co-Founder

Palin: Wrong for Alaska, Wrong for America, 5

2008-10-15T21:10:00.000-07:00

In my analyses so far I have tried to assess Palin’s judgment or, as I see it, her lack of good judgment. For example, I believe that she raised taxes on petroleum production to such a high level (the marginal rate under ACES has reached 90% before crude oil prices recently declined) that it threatens jobs and future production, and I also believe her polices regarding a gas pipeline will ultimately prove to be counterproductive. But these are complex issues and others will certainly have different views. Also, because of my ties to “Big Oil” I could be perceived as being biased.

To counter this and provide what I think is one of the clearest examples of Palin’s lack of judgment, I ask you to consider the following:

Imagine that you know a woman who is about eight months pregnant and engages in the following behavior:

A month before her due date she boards an airplane to attend a conference in a major city 3,000 miles away. While at the conference her water breaks and she begins having contractions that feel unusual. Shortly afterwards she calls her hometown doctor to report her condition. Despite the fact that the city where the conference is being held has some of the best medical facilities in the world, she elects to attend the conference rather than seek an on site medical evaluation. Also, knowing that she has tickets to fly home later that day, she doesn’t ask if it would be medically acceptable to fly during the call to her doctor.

After attending the conference she boards a plane for a six-hour flight bound for a mid-size city which is en-route to her home, but he elects not to alert the airline of her pregnancy nor the fact that her water had broken.

Her plane arrives in the mid-side city nearly a full day after her water broke. The city where she lands has three major hospitals that can be reached in about 15 minutes. But, instead of going to any of these, she and her husband drive nearly an hour in the darkness of a northern winter night, along a road with unlighted stretches that regularly ice over and the woman and her husband drive directly to a hospital in her small hometown, where she gives birth several hours later.

Regardless of the outcome, rational people understand that from the moment this woman boarded the flight to attend the conference she put her unborn child at risk. Moreover, her reckless judgment continued to put her unborn child at unnecessary risk with every subsequent decision she made.

These mirror the facts during the 30 hours before Sarah Palin delivered her youngest son. This story was reported in the Anchorage Daily News on April 22, 2008 and you can read the original report at http://www.adn.com/626/story/382864.html.

Like many other events in Palin’s life, this was spun into a virtuous story. Alaskans, many of whom despise Texas, praised Palin for making sure her son wasn’t born in that state. And Alaskans applauded the fact that Palin returned to work just days later – what a tough lady. But they conveniently neglected to scrutinize the risks to which she subjected her special needs child.

Where was her judgment? Where was her motherly instinct? It’s no wonder that Palin can exploit her 7-year-old daughter Piper just to lessen the negative reaction she knew would come and expose Piper to the “boos” of the crowd at a hockey game where Gov. Palin recently dropped the puck for the face-off. This shouldn’t be surprising when you consider Palin is the same mother who put her Downs-Syndrome child’s life at risk with her decisions just before his birth.

Sound judgment under challenging circumstances is one of the most critical qualities America needs in its national leaders. Given McCain’s age and known health issues, we cannot afford to take chances on Palin’s poor judgment.

David A. Chacon

Palin: Wrong for Alaska, Wrong for America, 4

2008-10-15T21:08:00.000-07:00

Palin as Reformer

Sarah Palin likes to paint herself as a reformer. But, if a reformer is defined as someone who improves upon the situation they came into by actively causing others to change their behavior so that prior abuses end, does Palin qualify?

Palin’s reputation as a “reformer” began after she resigned from an appointed post she held as one of three commissioners on the Alaska Oil and Gas Conservation Commission (AOGCC). Palin was appointed to this post by then-governor Frank Murkowski as a consolation prize because she was not appointed to an open US Senate seat (that position went to Murkowski’s daughter Lisa). While at the AOGCC Palin found out that one of the other commissioners, Randy Ruedrich, had used the state’s e-mail for political purposes and appeared to have close ties to some of the oil companies he was regulating. Palin notified Gov. Murkowski, who did nothing – probably not an unexpected result given both Murkowski’s political allegiances and the relatively benign (compared to other Alaska politicians) nature of the infractions.

Ruedrich eventually resigned, and reporters began asking Palin questions about his resignation; but, at Murkowski’s request, she did not respond. Palin resigned her post at AOGCC a short time later, after rumors surfaced that she may have been connected to a cover-up of the Ruedrich situation. Some individuals who are well acquainted with Palin believe that another reason for her resignation was that she simply disliked the complex and detailed work associated with the job. In any case, Palin’s resignation was not needed to advance the investigation and subsequent punishment of Ruedrich.

Between the time Palin left the AOGCC and the time she became governor, a number of Alaska’s politicians were indicted on corruption charges. During this time, the Department of Justice and the FBI did the heavy lifting in the effort to fight political corruption in Alaska. While Palin had no active part in this effort, she is quick to insinuate that she had a major role in “reforming” Alaskan politics.

In the face of a perception of widespread corruption of politics in Alaska, after being elected governor, Palin did call for new ethics legislation. However, she left the legwork for writing ethics legislation to the Alaska legislature.

So, given that Alaska has passed the Omnibus Ethics Legislation (HB109), the question is: Has anything fundamentally changed that allows Palin to claim the mantle of “reformer?”

Alaska’s senior senator, Ted Stevens is currently on trial for failure to disclose “gifts” (a major remodel of his home) he received from Bill Allen’s VECO (the same individual who bribed a number of other Alaskan politicians who are currently serving prison sentences) and Stevens will likely win the general election, unless he is sent to prison.

Palin’s own Lt. Gov. Sean Parnell (who she supported in the primarily) was defeated by Don Young, Alaska’s long-time congressman, in spite of an ongoing federal investigation into Young. Even our new junior senator, Lisa Murkowski, was recently caught up in a scandal to purchase choice riverfront property at below market prices.

Moreover, there is growing dissatisfaction among Alaskans with Palin’s refusal to cooperate with the Troopergate investigation (Palin is alleged to have abused her power by pressuring Walt Monegan to fire her ex-brother-in-law, a trooper in his department). After Palin’s selection as the Republican VP candidate, Alaskan’s ire has been compounded by interference in the investigation from McCain’s camp.

One story that hasn’t received much attention is Palin’s choice to replace Monegan with Chuck Kopp. Within days of firing Monegan, Palin appointed Kopp as his replacement. However, Kopp ran into trouble almost immediately when it was revealed that he had sexual harassment reprimands in his personnel file for his previous position. But, it is believed Palin chose Kopp for his strong ties the fundamentalist Christian right rather than for his credentials in public safety. Kopp is a well-known figure in Alaska’s fundamental Christian movement. This was Palin’s attempt to placate the fundamentalist right in case she did get the VP nod because she had not previously advanced the fundamentalist agenda with her official policies.

Since becoming governor, Palin has used her line item veto power to punish politicians who did not support her agenda – in one case vetoing over 90% of the capital projects for one such legislator’s district. Palin later claimed her budget cuts represented “fiscal conservatism discipline” but the truth is that she provided no guidance whatsoever as to what should be submitted into the initial budget request – so naturally, many members loaded up the budget with pork that should have never gotten into the budget in the first place.

Since becoming McCain’s VP pick we have learned much more about Palin, including: she accepted money from tainted politicians (which she did not return until after her VP nomination), used her position as mayor of Wasilla to get a zoning variance for a fire hazard violation to sell her personal residence, and she used non-government e-mail addresses in an attempt to prevent the public from having access to certain correspondence (even though Palin campaigned on the slogan of “open and transparent”).

In summary, Palin has grossly exaggerated her role as a reformer. She has adopted many of the very tactics she previously criticized the “Good Old Boy” network for using. Alaska is not yet “reformed” and the FBI, the Justice Department and the Alaska legislature have done the real work thus far.

David A. Chacon

Palin: Wrong For Alaska, Wrong For America 3

2008-09-23T19:54:00.000-07:00

AGIA – Palin’s plan to progress construction of a natural gas pipeline
I’ll begin my analysis of AGIA (which stands for Alaska Gasline Inducement Act) with some general background information, which is helpful to evaluate Palin’s performance in progressing a natural gas pipeline for Alaska. AGIA, which provides $500 million in state money and an exclusive state license as incentives, is Palin’s gas pipeline plan. It is one of two major plans currently underway in the 30-year long saga to build a gas pipeline in Alaska. The other pipeline plan, which is proceeding with no state money, is named Denali and is a 50-50 joint venture between BP and ConocoPhillips.

The gas that would be transported in the pipeline is located in Alaska’s Prudhoe Bay oilfield and the Pt. Thompson gas field. Both field are critical to the project and are owned primarily by the major oil companies (ExxonMobil, BP and ConocoPhillips).

Before AGIA, Frank Murkowski, the previous governor of Alaska negotiated a contract with the major oil companies to build a gas pipeline. Murkowski’s contract was widely criticized due to a combination of factors, including real flaws in his plan. Two major problems were that, at the time it was presented for a vote, the contract was not fully negotiated and the oil companies had not signed it.

In addition, there were legitimate concerns that the contract was in conflict with the Alaska constitution (with respect to contracting away the taxing authority of future legislatures) and state regulations (e.g. in regard to the definition of “Stranded Gas”). Theoretically, the issues with respect to Alaska’s sovereign taxing authority and state regulations could have been solved politically with an amendment and proper legislation; but Murkowski’s extreme unpopularity made that impossible.

Although Murkowski’s pipeline plan would have been rejected in any case, the deep-seated mistrust Alaskans have of the major oil companies didn’t help.

Also complicating any plan for construction of a gas pipeline are: 1) the Alaska public’s view that the natural gas it would transport is “their gas,” and 2) the constitutional requirement that the state “maximize” the resource value for the people of Alaska. Many Alaskan’s fail to properly recognize that ownership of the gas resource is transferred to the producer (i.e. “Big Oil”) at the point of production. The price paid by the oil companies to buy the gas from the state is the royalty, usually 12.5%. Because many Alaskan’s believe the gas in the pipe would be “their gas” they don’t see state levies against that gas as taxes even after the transfer of its ownership to Big Oil. Instead, Alaskans view taxes as a return of “their fair share of the gas’s value.” Additionally, the objective to maximize the resource value tends to cause Alaskan’s to focus on the short term at the expense of longer-term goals.

Palin’s the two major objectives in enacting AGIA were to 1) provide incentives for construction of a pipeline and 2) provide incentives for committing gas to be transported in the pipeline.

In addition, it was generally believed that AGIA was intended to prevent the major oil companies that controlled the undeveloped gas from owning a major portion of the pipeline (something Palin’s administration clearly wants) while attracting bids from independent pipeline companies, specifically Mid-American Pipeline Company and Trans-Canada.

Interestingly, two companies that had been expected to submit proposals under AGIA wrote letters to Palin explaining why they would not, or could not, submit a proposal. Both letters indicated that Palin would need a different way forward than AGIA. BG’s (British Gas) letter seemed to imply they wanted to hold separate negotiations with the state with a goal to liquefy the gas. The more insightful letter was from Mid-American (controlled by Warren Buffet) which cited “deepening and ongoing investigations into political and corporate corruption in Alaska” as the primary reason that it could not submit a proposal. In addition, Mid-American stated that ongoing litigation regarding natural gas leases merited consideration of a new way forward for Palin’s administration. Mid-America’s letter can be viewed at http://gov.state.ak.us/agia/PublicApplications/Declined/midamerican_letter.pdf

Side note: I hold that Palin’s self-promoted image as a reformer would not hold up to close scrutiny, and Mid-American’s letter, which clearly implies that Alaska’s political process had not yet been reformed sufficiently to allow it to invest in a gas pipeline project, is just one piece of evidence that Palin is not, in fact, a reformer – at most she is a dissenter.

In the end AGIA attracted five bids – and only one from a company that could legitimately be considered as having any chance of eventually constructing a pipeline. It’s also worth noting that nothing under AGIA requires a company to actually construct a pipeline – it only requires that certain preliminary work be done that any company would have to do before beginning a construction phase.

The Federal Energy Regulatory Commission (FERC) is the agency that has authority to issue construction permits and set tariffs – not the state of Alaska. AGIA included terms that are contrary to FERC regulations, specifically the requirement for “rolled in tariffs.” The FERC policy prohibiting rolled in rates is intended to encourage owners of known gas resources to commit those resources to a pipeline project by protecting them from paying costs attributable to other parties at later dates.

To explain the concept of rolled in tariffs, I’ll use an analogy. But first, I need to explain that there are about 30 separate leaseholders at Pt. Thompson. The leaseholders include major oil companies as well as individual people. It also important to keep in mind that the leaseholders will pay all tariffs of the gas pipeline.

So, imagine that a group of 30 people decide to establish a community and want water service instead of individual wells. To do this they will need a to construct a pipeline to bring water from a reservoir about 5 miles away. The community studies their needs, makes projections of population growth and looks at several construction options. To be cost efficient and meet current and projected needs, the group decides to build a 10-inch diameter main pipeline to the town center and distribute water to individual houses from there. Each town member pays a tariff based on the initial construction costs and the ongoing operating costs. Based on all this, lets say that the water rate is set at $2.00 per 1000 cubic feet of water use.

Later, over time, another group builds a community 3 miles further away from the reservoir and they eventually want water service also. They study their needs and identify two options: 1) they can build a totally separate 8 mile long, 8-inch diameter pipeline from the reservoir to their community that will result in a tariff of $4.00 per 1000 cubic feet of water, or 2) they could connect onto the first community’s existing pipeline and have a lower tariff. Of course they would like to connect to the existing pipeline, but there are problems.

The first of many problems is that in order to transport water for both communities the original 10-inch diameter pipeline would have to be modified; more pumps and pressure control devices would have to be added. The rub – under Palin’s illegal AGIA scheme, the original community of 30 individuals would have to bear some of the cost to modify the original pipeline for the benefit of the second community.

This means the original community, the very individuals that took the risk of “going first,” would now have to pay more than $2.00 per thousand cubic feet – but they would get no additional benefits. In fact, if the total demand for water from both communities grows beyond the capacity of the modified pipeline, the original community would also be at risk of being prorated (forced to cut the amount of water they get) and/or face even higher tariffs to modify the pipe yet again – solely due to the decision of the second community to tap into the pipeline they initially developed.

It easy to understand why Alaska included this quasi-socialist arrangement in AGIA; it provides incentives for additional exploration after the original pipeline is in place. And, if more gas is found and produced, it would generate more tax revenue to Alaska, while shifting all the risk to the companies that built the pipeline initially. By doing so, AGIA is fundamentally flawed, which helps to explain why two major players in the pipeline industry took the unusual step of writing Palin to encourage her to seek another path forward. It also explains why other major companies did not submit a proposal under AGIA (and I’m referring to others besides ConocoPhillips and BP).

But, as stated above, rolled in tariffs violate FERC regulations for a good reason: the FERC, unlike Palin, realizes that requiring rolled in tariffs would create disincentives for companies to take the initial risk of building a pipeline.

One of the fundamental misunderstandings of Palin and her administration is that somehow they can “force” or provide state of Alaska incentives to get a pipeline built. The reality is that the pipeline will be built based on economics – an analysis of the likely future prices of natural gas, the cost of transportation and the expected volume and timing of gas to be produced. Each of these individual variables has risk, but their combined risk and the estimated $35 billion price tag makes this project a company potential company breaker. The fact that Alaska is offering $500 million in incentives has almost no effect on a company’s decision to construct a pipeline. It only provides an incentive for a company to do pre-construction studies.

Although Palin often implies that the pipeline is on a straight course toward construction, that is simply not the case. Neither Trans-Canada nor Denali have made commitments to construct a pipeline, they are only engaged in pre-construction studies – Trans-Canada using state money and Denali using its own $600 million. Further, the FERC has clearly stated that Alaska is interfering with progress and Palin’s attempts to involve more than one pipeline company would strain their resources and delay the issuance of any permits to go ahead with the project (only the FERC and NOT the state of Alaska can authorize construction of a pipeline). So, simply put, Palin’s AGIA has muddied up the waters.

Palin has advanced the argument that competition will result in construction of the pipeline sooner and with lower tariffs than negotiating with the resource owners. But this ignores the fact that the resource owners themselves have greatest incentive to build the pipeline quickly once the project becomes economic and build it at the lowest cost. Granted, each resource owner will evaluate whether the Alaska pipeline project is economic in light of all the other projects in their portfolio – and this could (and has) been in conflict with the state of Alaska’s position, but that is just the way free markets work. Tariffs are set based on costs of construction and operations and paid by the resource owners – so they have plenty of incentive to keep these costs low.

It is actually the pipeline companies that don’t have the incentive to keep tariffs low. Returns on pipelines are regulated by FERC (they generally range from 7% to 14%), which creates a situation in which if they lower the costs of the pipeline they receive a lower tariff, and vice versa (these costs are simply a pass through to the resource owners in the form of a tariff).

Ironically, ExxonMobil, a company reviled by Palin and most Alaskans, is playing a pivotal role in the effort to get a pipeline built and may turn out to be Palin’s most effective ally in this process. ExxonMobil is the largest owner of the Pt. Thompson natural gas, which is critical for any pipeline. The company has said it will be a major owner in any pipeline project. It has yet to commit to either the Denali plan or the Trans-Alaska plan – no surprise there because it is still too early. But, because it will eventually chose one of the two, ExxonMobil is the driving force behind the competition between the two. So, when ExxonMobil (not Palin) picks a winner based on its (and not the state’s) evaluation of timing for construction and cost structure, undoubtedly Palin will claim victory without acknowledging ExxonMobil (or anyone else) regardless of what company ExxonMobil picks.

So the question is: What are the chances that ExxonMobil will choose Trans-Canada? There is almost no chance ExxonMobil will pick Trans-Canada: the reason is that Trans-Canada has a $10 billion “hairball” that it hasn’t coughed up and likely won’t be able to. The “hairball” is a liability disclosed on Trans-Canada’s SEC filings and it relates to money owed to partners that withdrew from a prior attempt it took at building the pipe. During that attempt Trans-Canada formed a partnership and spent money on a pre-construction study, when they were unsuccessful, partners withdrew, leaving Trans-Canada with the data from the study and the potential right to build the pipeline at a later date. The partnership agreement called for Trans-Canada to buy out the withdrawing partners, but it did not do this. That partnership agreement is still in effect and, if Trans-Canada is chosen to build the pipeline, it will have to deal with this liability – this situation puts too much uncertainty into a Trans-Canada pick.

Outside of AGIA, Palin has introduced unnecessary risk into the quest to build a gas pipeline when her administration tried to take back the Pt. Thompson leases (mostly to punish ExxonMobil, but it would also take away the rights of all other owners – including the individuals). As noted, this gas is critical to the project and by putting a cloud over its title, Palin puts any (Denali or Trans-Canada) pipeline project at great risk. (I may write more on this in a latter analysis).

And finally, Palin has not yet reached agreement with the major oil companies with regard to “fiscal certainty” (the need to set tax rates in a fashion that provides a reasonable amount of certainty – regardless of how high or low the taxes are). She is aware that this is a critical step that must be addressed before any pipeline can be built, but she continues to ignore it. I suspect she is doing so because she sees any agreement with the major oil companies as a threat to her popularity.

There are those that say Palin may be a victim of bad advice with respect to AGIA; but, if this is true, she is surely guilty of making poor choices to fill important state posts. Palin claims to have taken on big oil, but in reality she hasn’t “beaten” them and by failing to adopt a win-win view, she has violated the spirit of the constitution by failing to use Alaska resources for the maximum benefit of its citizens.

At a fundamental level Palin’s logic for AGIA is flawed in the following ways:
A $35 billion pipeline is not something that $500 million can prime (it works based on economics)
Any pipeline plan must be supported by the resource owners
Without support of the resource owners it cannot be financed
Eventually fiscal certain must be provided
A $10 billion “hairball” makes Trans-Canada an unlikely “winner”

Summary: Palin’s has subjected Alaska’s and America’s energy future to unreasonable risk due to her undisguised desire to punish the oil companies. Rather than demonstrating vision in passing AGIA she, once again, put her finger to the wind and did what was popular at the time.

Palin: Wrong For Alaska, Wrong For America Part 2

2008-09-21T20:12:00.000-07:00

{Note from Bradley C. Roberson: This post is part 2 of a guest article from a friend of mine who works in the oil industry. This article is concerned with ACES which is necessary background for the next article on on AGIA.}

ACES – Palin’s Tax on Petroleum Production
Alaska’s efforts to tax, regulate and promote growth of its oil and gas industry are complex and intertwined. In order to keep this analysis to a manageable length I will provide some necessary background, but cannot go into much of the complexity.

Before Palin passed her new tax plan called ACES (for Alaska’s Clear and Equitable Share), Gov. Murkowski, the prior governor enacted the Petroleum Profits Tax (PPT) approximately a year earlier. The PPT itself was adopted as an increase to Alaska’s predecessor tax regime. Like most taxes, the PPT had complexities. It contained incentives that were intended to enhance investment in-state investment and to correct the situation that, compared to international taxing authorities, Alaska had a lower tax-take at high prices and a higher tax-take at lower prices.

Two problems quickly arose which lead to the replacement of PPT. First and probably most important was that the PPT was believed to be tainted because Bill Allen, the CEO of VECO an Alaska-based oil services company, pleaded guilty to bribing members of the Alaska state legislature in exchange for their support of certain tax rates; and second, a revised State Department of Revenue forecast of future revenues showed a surprising drop compared to the revenue stream expected at the time the tax was initially passed.

The issue regarding whether the PPT was tainted is part of ongoing ethics investigations in Alaska and has caused the usually skeptical Alaska public to become even more suspicious of “Big Oil.” Although its practically considered fashionable to bash “Big Oil” (FYI, I work for a major) I point out that no one directly employed by a major has been indicted in the investigation into corruption here in Alaska.

The issue of state revenue shortfall was not well understood by Palin’s administration, the Alaska legislature or the general public. Perhaps because of the public’s mistrust of the oil industry, many people believed that oil companies were “manipulating” their tax calculations. One of the major factors leading to the lower state revenue was the exceptional high cost inflation that began impacting the industry at that time. Oil production requires tremendous amounts of steel and its cost increased sharply (perhaps due to demand from China) about that time. Another major factor was the Renewal effort that is currently ongoing on the North Slope. The major fields there are 30 years old and its time to replace much of the major infrastructure. This investment doesn’t necessarily increase the volume of oil produced (it insures that the volume doesn’t fall as fast); therefore costs increase rapidly on a per barrel basis. The investment credits and depreciation from Renewal reduce the state’s tax take.

It also important to understand the deeply held Alaskan view of natural resource (oil) ownership and how this contributed to the state’s taxing policy. Two general principles under Alaska’s constitution are: 1) natural resources within state lands belong to the people, and the state government is obligated to obtain the maximum value for those resources. As a result of the first of these principles, many Alaskans fail to properly recognize the point at which legal ownership of produced oil transfers from the state to the producing companies. As I understand it, in general, the state owns the oil in the ground and the petroleum companies own the oil as it arrives at the surface and is “produced.” The price paid by the oil companies to the state for transfer of ownership is the royalty, usually around 12.5%. Any amount paid beyond this is a tax. And like every other tax, it is fundamentally a transfer to the state of property owned by a private person or company.

The phrase “It’s MY oil” is often heard here. Perhaps unconsciously, perhaps not, it is the concept under which the revenue the state receives from oil companies is considered a return of their property more so than a taking of profits (or property) from “Big Oil.” This view makes it politically easier to pass tax increases (although given the general feeling toward “Big Oil” it might not be difficult in any case).

The two principles combined have caused a predisposition to create policy that gives greater weight to short-term benefits over longer-term benefits, without properly weighting the two. In my view, this bias towards getting revenue in the short term at the expense of longer-term benefits is a fundamental flaw in ACES.

Within this environment Palin’s administration purported that ACES would: 1) be as transparent as possible to maximize public confidence and minimize risk of taxpayer manipulation, 2) provide a “fair share” of revenue to the state, 3) create an attractive investment climate for new oil and gas explorers to discover new fields, and for existing producers to re-invest in existing fields, including development of heavier oils and natural gas.

Under ACES, Alaska is protected when oil prices fall or production costs rise but the state retains a greater share of value when oil prices rise, a situation that would be very difficult to negotiate in a commercially based agreement.

There are two main consequences to the tax increases: 1) a reduction to investment in the most important sector of Alaska’s economy and 2) an erosion of “Fiscal Certainty” for the oil companies. “Fiscal Certainty” is a condition such that companies can predict their tax burden (which is ultimately in control of the state) with enough confidence that to justify the risk of making investments. It is particularly important to large capital projects. It is NOT synonymous with LOWER taxes – but simply the concept that taxes be predictable.

Whether ACES moved Alaska’s petroleum taxes to among the highest in the world is debatable, but what’s not debatable is the more than half a billion dollars of investment planned for Alaska that evaporated as soon as she signed the law.

Almost immediately after Palin passed ACES, ConocoPhillips cancelled a $300 million project to produce ultra low sulfur diesel (ULSD) in a plant near the North Slope. Based on my knowledge of changes in the capital budgets of the major oil companies in Alaska, I am confident that, in addition to this project, at least $200 million of projects have been cancelled in the since ACES passed. As it is written ACES will continue to impact investment. Perhaps more importantly, it put the Alaska at great risk should oil prices fall significantly from the over $100 per barrel level were at today.

It’s ironic that the first project impacted by ACES was a diesel plant because today Alaska is facing increasing tight supplies of diesel and has some of the highest diesel prices in the nation – over $5 per gallon. And, to make matter worse, the need to transport USLD hundreds of miles via diesel-hungry trucks will add to air pollution and erode any environmental benefit that comes from the switch to USLD.

Based on the loss of investment, I calculate that hundreds of high-paying construction and support jobs also fell prey to Palin’s tax plan. So far, it hasn’t been noticed because, thanks to current high oil prices, Alaska’s economy is red-hot. But many Alaskans are already seeing signs of softening demand for labor.

Palin likes to tout her “energy experience” and tell the American public that she will help make us independent of foreign oil. While I don’t have a good handle on how ACES has impacted oil production since its passage, or how it will impact future oil production, it is not unreasonable to believe that, if not modified it could result in many billions of oil being left un-produced.

The single major new development ongoing at the North Slope is BP’s Liberty project and is on federal land, where it is not subject to ACES (most of the North Slope is subject to ACES). This is a project that will require hundreds of billions of dollars of investment and generate hundreds of jobs. If Liberty had been on state land, and thus subject to ACES, it’s economic would not have justified that it go forward, and the toll from ACES would have been higher.

ACES moved through Alaska’s political process on the backs of the Democrats with little Republican support. The real wind filling the sails that took ACES from idea to law was the environment of corruption and mistrust of oil companies (guilt by association) that came from Bill Allen’s VECO, and the bad taste left in the mouths of most Alaskans from Murkowski, the prior governor, who pushed PPT through the legislature.

As opposed to Palin reaching across the aisle to the Dems, it was more akin to Democrats leaping over the aisle to Palin. The Republican stood back while the Democrats rushed to “punish” the oil companies rather than set a long-term tax policy that would maximize the economic growth of Alaska. And when it came time for Palin to inject discipline into the process and recast ACES from a tax that punishes oil companies to a tax that promotes Alaska’s long-term economic interest, Palin was invisible.

In summary, in passing ACES Palin showed neither leadership nor wisdom, but rather the politically opportunistic and populist instincts that have been the hallmark of her career.

(David Chacon lives in Anchorage, AK and works for a major petroleum company. He has more than 25 years of experience in the oil and gas industry.)

Palin: Wrong for Alaska, Wrong for America

2008-09-17T22:55:00.000-07:00

{Note from Bradley C. Roberson: This post is a guest article from a friend of mine who works in the oil industry. His analysis is provided here as an underscore to much of the talk about Sarah Palin's religion and executive preparedness. Here we have a member of the oil industry who was willing to vote for McCain originally but has become opposed to McCain for his choice of Vice President. Please feel free to post follow up comments or questions which Brad will relay to Mr. Chacon. As a skeptic, this point of view is not readily available to the mainstream and is a welcome addition to the other commentaries on Palin already posted.}

Since John McCain selected Alaska's Governor Sarah Palin as his running mate a short while ago, I have had numerous inquiries about my take on Palin because, as many of you know, I have lived in Alaska for the last four years. Therefore I've decided to provide some of my thoughts on Palin to those who wish to receive them.

I will base any comments I make on the best factual information that I have at my disposal and try to be fair but provide insightful analysis. I will not respond to questions that I believe are inappropriate, but will try to address the main questions I have gotten so far and any new questions I receive.

That said, you may what to know some of my basic political views, so here they are: A) I consider myself a independent moderate; B) I had planned to vote for McCain (making my decision even before he was the Republican nominee); C) I changed my mind as soon as Palin was announced as his VP choice; E) I now plan to vote for Obama

My Communication Plan

Since becoming Governor of Alaska, Palin’s three major objectives have been: 1) increasing taxes on the oil companies that operate in Alaska, 2) promoting the construction of a natural gas pipeline to market stranded Alaska gas, and 3) ethics reform. I’ll share some unpublished editorials I’ve written and supplement them with more detailed analyses. I’ll write on Palin’s tax policy first and follow up with articles on Palin’s other two objectives as time permits. After that, I hope to address Palin’s challenges and achievements as mayor of Wasilla and state of Alaska issues beyond Palin’s three main objectives. I hope to address the issue of “executive experience” and point out that it’s not measured by the amount of time someone has held an “executive title” but instead by the nature of the challenges they faced as a decision maker and the results that were delivered.

Palin: Wrong for Alaska, Wrong for America

As a long time supporter of John McCain, I decided some time ago that, if he got his party’s nomination, I would vote for him. My choice was based on a strong belief in McCain’s personal honor and integrity and his willingness to be a maverick by rejecting the far right fringe of his party. With McCain’s choice of Sarah Palin, Governor of Alaska, the state where I currently live and work, I will now vote for Obama.

Over the two years Palin has governed Alaska she has demonstrated her true colors – not as a conservative, but as a populist. And, as a populist she either doesn’t care about the long-term impact of her policies or doesn’t understand their impact. Palin’s most notable achievements have been substantially increasing taxes on the oil and gas industry – the foundation of Alaska’s economy – and intervening in the free market to give a foreign company a leg-up in the race to build a pipeline to get Alaska’s stranded gas to market.

Palin’s tax plan, named “ACES” for Alaska’s Clear and Equitable Share, raised taxes to such a high level that, since being passed less than a year ago, more than half a billion dollars of capital projects have been cancelled. Almost immediately after Palin passed ACES, ConocoPhillips cancelled a $300 million project to produce ultra low sulfur diesel (ULSD) in a plant close to Alaska’s oil producing region, the North Slope. Today, Alaska is facing increasing tight supplies of diesel and has some of the highest diesel prices in the nation – over $5 per gallon. And, to make matter worse, the need to transport USLD hundreds of miles via diesel-hungry trucks will add to air pollution and erode any environmental benefit that comes from the switch to USLD.

There has been a corresponding negative impact on jobs from ACES. So far, it hasn’t been noticed because, thanks to high oil prices, Alaska’s economy is red-hot. But many Alaskans are already seeing signs of softening demand for labor.

Palin’s policies to deliver Alaska’s stranded natural gas to market are poised to have negative impacts that are potentially even greater than ACES. Her plan, which goes by AGIA (Alaska Gasline Inducement Act) amounted to giving away $500 million of state money for a project that likely would be built without any incentives. Under AGIA pipeline companies were invited to submit applications that met its terms. Interestingly, the terms of AGIA were rumored to have been tailored to attract a bid from Mid-America Pipeline Company, but not only did AGIA failed to attract this bid, the only valid bid came from Trans-Canada, the eventual recipient of Palin’s largesse. After the media hype her administration put out about AGIA – it’s likely that Trans-Canada was chosen because it would have been too embarrassing for Palin if there were no “winner” and even more embarrassing if her administration chose any other applicant.

As wasteful as AGIA is, the greatest risk to Alaska’s long held dream to build a gas pipeline is due to the Palin administration’s handling of Pt. Thompson, the gas field with the largest reserves needed to make any pipeline economically viable. Her administration is trying to expropriate this field thereby putting a cloud over ownership of Pt. Thompson’s gas. As long as this cloud exists, its difficult to imagine how any pipeline could be built. And that could cost Alaska tens of billions of dollars in investment and thousands of jobs. Palin’s clear animosity toward oil companies puts Alaska’s future economic development at risk.

These actions are contrary to the traditional conservative platform of promoting resource development. It’s no wonder that some nickname Palin “Hugo Girl” a reference to Hugo Chavez and simultaneous play on “You Go Girl” in deference to her self-described “hockey mom” image.

Beyond Palin’s policy failings, she brings the kind of baggage that calls into question not only her judgment, but also the judgment of the McCain campaign for choosing her as a running mate. Palin is currently being investigated for abuse of power with respect to the firing of Walt Monegan, Alaska’s Public Safety Commissioner. Her recent effort to hand out $1,200 of state money to pay for high energy costs in Alaska was not well thought out. It started out as a scheme to pass out debit cards to virtually every Alaskan man, woman and child – regardless of the fact that few children buy gas or pay utilities. In an effort to avoid a decline in the popularity she clearly cherishes, she morphed this plan into a cash payout to her constituency.

Palin’s governorship has been wrong for Alaska. But, this pales in comparison to how wrong Palin would be if she should ever be called to fill in for a McCain presidency. Palin has no international experience, no national security experience and no natural interest in these important topics. My fellow Alaskans and I have had over two years to understand the failings of Palin, the rest of the United States has only two months, but I am confident that will be enough time for Americans across this land to understand that Palin is wrong for America.

(David Chacon lives in Anchorage, AK and works for a major petroleum company. He has more than 25 years of experience in the oil and gas industry.)

Free Country or Christian Nation?

2008-09-07T12:47:00.000-07:00

It's an election year again. I happen to live in Alaska where Sarah Palin is from and it makes for some lively local discussion. Palin, McCain and the Republican party are not exclusive in their praise of the actively religious voters; the Democrats too opened their convention with a prayer and invoked the aid of invisible friends in each of their speeches. Both parties also participated in the Saddleback Forum which examined the candidates morals and religious belief.

What are we to do? Is this a Christian Nation as some would argue or is this a free country? Should politicians even engage in such discussions?

There are those who feel that America was set up by Christians for Christians. Is there any evidence that this nation was founded on Christianity?

There are those who feel that this nation was set up as a secular experiment for Christians and Non-Christians alike, or that though most people were Christian at the time, the founders set up a secular nation in anticipation of a need for elbow room for other beliefs. Is there evidence for that point of view?

In October we anticipate having our first public meeting. The venue and time will be posted here as soon as that information is available. Until then... feel free to post your thoughts on this topic here.

-BCR

p.s. I have a definite opinion on this matter.

Welcome To ASk (Alaska Skeptics)

2008-09-01T19:05:00.000-07:00

Hello to everyone. My name is Brad Roberson and I along with Peter Broady have decided to begin this group to further enhance the Skeptical communities of Alaska.

We will begin to meet monthly at a venue as yet to be determined for open forum discussion on topics relevant to skepticism, critical thought, matters of education, matters of faith and evaluation of claims which are testable.

We will link here in the coming days to both local and national resources within the larger Skeptical community to begin providing resources for those who are willing to ask.

The name of the group is ASk and is an acronym of Alaska Skeptics. We feel that the name is exactly right for the nature of a skeptical endeavor. Questions are what it's all about.

We hope to take this group to a national or global level of relevance and can only do so with your help. We will be looking for people who would be willing to present to our group on a number of different topics.

We would like for physicians, engineers, energy experts, magicians/illusionists, mentalists, students and teachers and anyone interested to find a welcome community in which to present their works and opinions on matters of a skeptical nature.

We hope to provide our resources to the local media to have a more circumspect presentation of newsworthy items rather than merely reporting the outrageous claims that are often made by persons of dubious intent.

We would also like to expand the educational resources available statewide for educators looking to expand the critical thinking process in their classrooms.

In short we need you. If you're a skeptic and you've been waiting for a group to form, this is it. If you have been looking for a skeptical forum in which to display your understanding, this is it.

Please check back frequently and tell everyone you know that we are here... All you have to do is ASk!

-Bradley C. Roberson
Co-Founder of ASk