Brennan: Things change quickly
By Tom Brennan
The world has a way of turning upside down in what sometimes seems like a matter of minutes.
And often it is just that, a few minutes.
When they stopped for lunch last Sunday, 2o members of a Hotshot firefighting team in Prescott, AZ, were miles away from the blaze they were assigned to conquer.
But as they moved toward the neighboring town of Yarnell, a critical wind reversed itself and whipped the blaze into a firestorm that swept over them, killing 19 as they struggled to climb into their emergency shelters. The only one to survive was a lookout who sounded a warning and then hopped into the team’s vehicle to move it out of the fire’s path just moments before his lookout post was consumed by flames.
And in our own state, Alaska has gone from an energy powerhouse to an also-ran in the competition for oil and gas investment in the historic blink of an eye. Alaska isn’t entirely out of the game, but a petition drive by anti-oil liberals could soon put it there.
The problem is that the petitioners want to roll back the oil tax reduction passed during the last legislative session. That would return Alaska to its old position as one of the world’s most hostile environments for oil industry investment.
If the roll-back crowd is able to get enough signatures, the issue will be on the primary ballot next year. That would be a long time to keep the state’s future up in the air. And such uncertainty can be a serious disincentive to industry executives deciding where they will put their money.
I asked an old industry friend how the petition will affect such decisions if it gets on next year’s ballot. He said the companies will be polling like mad to find out how the tax rollback is likely to fare with the bulk of voters in the 2014 primary.
Then they will either spend their money – or they won’t.
Uncertainty is always present in the oil business, but winning new investments is often a function of how much uncertainty can be eliminated. That is one of the few critical functions over which Alaska has some control.
Unfortunately, it has a history of changing its mind at inopportune times. It is what some investors would consider a squirrelly business partner.
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In Puget Sound, refineries like BP’s huge Cherry Point facility are being converted to handle oil delivered by hundred-car tanker trains from North Dakota. For more than 40 years, Cherry Point has been a primary destination for tanker ships carrying Alaska crude, first from Cook Inlet and since 1977 from the trans-Alaska pipeline in Valdez.
There is still a lot of oil in the North Slope’s legacy fields — Prudhoe, Kuparuk and Alpine – so industry isn’t about to walk away from them. And vast reserves of gas, plus scattered pools of oil, remain untapped on the North Slope.
But assuming that those reserves will retain their value in the current marketplace is a fool’s strategy.
Another situation that has changed drastically in just a few years is that the United States – because of newly developed methods of extracting oil from rock – has become a net exporter of crude oil. This has changed the thinking of policymakers in Washington, who now find that their decisions have less impact on the price of oil than they might have just a few short months ago.
That is a rather frightening thought, since President Barack Obama and many members of the U.S. Congress enjoy using the oil and gas industry – essential to Alaska’s economy but an attractive target because of its size – as a punching bag.
Anti-oil measures on the state level will strongly influence decisions on the long-pending gas pipeline. That line will be so expensive that – if it is to be built — the state will need to stabilize its tax system.
And that will require a kind of self-restraint almost never seen in this neck of the woods.