off the record
a VIP policy letter
from
Senator Kim Elton
Room 115, State Capitol, Juneau, AK 99801
* 465-4947 Phone * 465-2108 FAX

Edition # 244           Please feel free to forward           June 9, 2006

Where's Marty McFly and Doc Brown?
     Time machine could really inform gas debate 

     Here's the question: is the governor's gas pipeline contract predicated on going "back to the future"?
     I ask this because issues from our past can add perspective to the debate on how we attain a gas pipeline. It would be helpful if the time machine built by Doc Brown in the movie Back to the Future, carried Alaska policy makers instead of Marty McFly back in time. That's because some of the elements of the governor's gas line contract cede to huge modern-day oil companies authorities once exercised in Alaska by the 20th century Guggenheim syndicate and by absentee canned salmon companies.
     In the early part of the last century, the Guggenheims joined forces with J. Pierpont Morgan to try and monopolize Alaska's mineral resources. They built a railroad, and accessed the Beluga coal fields. They planned to extend their railroad north from tidewater and Beluga to capture even more of Alaska's mineral resources. They bought the Alaska Steamship Company to complete the link between the Alaska resources they were trying to corral and southern markets. Novelist Rex Beach incorporated some of this in The Iron Trail and James Wickersham, Alaska's non-voting delegate to Congress, solidified his place in the history of the Alaska territory history fighting the Guggenheim syndicate monopolists.
     Another back-in-the-20th century example is the activity of the Alaska Packers Association and its lower 48-based corporate members. They exerted their considerable economic powers in Congress to protect the canned salmon industry from territorial taxation and from rational fisheries conservation and attendant management measures. These corporados and their investors put the health of the large canned salmon companies way ahead of the financial health of the territory and viability of its fisheries.
     The tactics and power of the Guggenheims and fish packers and other absentee players exploiting Alaska's vast resources provided the fuel for our drive toward statehood. Finally, over the objections of absentee resource takers, Alaskans achieved a considerable amount of economic control when statehood was achieved in 1959. We finally were able to balance the economic health of our state with the economic health of Outside corporations.
     The question today is how many of those economic controls that we won with statehood do we give back to the modern day multi-national oil companies in order to encourage, but not guarantee, our gas pipeline dream of moving trillions of cubic feet of natural gas Alaskans own to markets down south.
     This is not a rhetorical question. The contract negotiated between the governor and modern day absentee corporate giants (Exxon, Conoco and BP) cedes:

1. our taxing authority over their oil and gas commercial interests in Alaska (Article 11);
2. our ability to collect taxes or royalty in cash instead of in gas (Articles 12, 13);
3. our judicial sovereign immunity protections (Article 26);
4. the deference and presumption of correctness ordinarily granted a sovereign in interpretation  of its regulations (Article 19);
5. our regulatory authority over their commercial interests in a pipeline (Article 8);
6. our ability, as owner of the resource, to set a timeline for construction in return for the numerous fiscal concessions offered (Article 5);
7. our gas ownership rights that should allow us control over the qualified project plan that governs development of that gas (Article 5).

     So, we can't raise taxes for long periods of time, we can't collect some of our taxes and royalties in dollars but must take volumes of gas instead, we can't say when construction must begin, we can't regulate intrastate activities, and we can't even stop the multi-nationals from changing the project plan in ways that can delay or fundamentally change pipeline plans.
     These are not insignificant concessions when put in the context that there is nothing, nowhere, in the contract that requires the multi-nationals to begin building a pipeline. All they must do, in the terms of the contract, is act in a manner "prudent under the circumstances" when making pipeline construction decisions. The burden of proof is on the state to prove they were imprudent. In addition, the state has to prove to an arbitrator (we can't go to court) that the multi-nationals weren't, for example, being prudent if they decide down the road that it makes economic sense to delay construction until 2015 or 2020. And, if the state tries to prove to an arbitration panel the delay isn't "prudent", the arbitrator is precluded from finding for the state if the companies simply made, according to contract terms, "errors in judgment."
     The governor's contract cedes all these rights--rights we gratefully assumed when we attained statehood in 1959. Those rights were especially precious after experiences with the salmon canners and the Guggenheims. Now the question for Alaskans and the men and women they sent to the state legislature simply is, given these contract terms: how do we balance our hearts and our heads.
     Does it make sense, in fulfilling our desire to craft a contract that may or may not lead to a pipeline, to: give up tax authorities; regulatory controls; and sovereign immunity?
     Is it necessary to cede statehood authorities we won 47 years ago designed to control the behaviors of profit-seeking corporations exploiting our resources for the benefit of huge and far-away corporations?
     Is it necessary to lock into practices of the past to perhaps secure a gas line?
     Must we go back to the future?

Phone: (907) 465-4947 Fax: (907) 465-2108 Mail: Sen. Kim Elton, State Capitol Juneau, AK 99801 Got a scoop? Call or email your tips and suggestions to any of the email addresses below: Email: Senator.Kim.Elton Jesse.Kiehl Paula.Cadiente Web: http://elton.akdemocrats.org

Capitol Undercurrents  

Words and precision--The senate special committee on Natural Gas Development spent three days working through gas line contract issues. The chair did a good job of promoting byplay between the administration, producers, explorers, legislators, and legislative consultants. It was far more effective than the 11-day tutorial by the administration at Centennial Hall a couple of weeks ago. One concern: a lot of the answers were prefaced by "the intent here" or "what we're aiming for". Often there was no disagreement over intent but much concern over the actual language in the gas line contract. We need to remember the lesson of Amerada Hess, the 15-year court dispute between the state and North Slope operators. That dispute often hinged on punctuation and language not nearly as fuzzy or ill-defined as in the gas line contract.

Out of sight, not out of mind--Some of the busiest minds in the legislature were behind closed doors to hammer out oil tax decisions worth hundreds, and hundreds, and more hundreds of millions of dollars each year to the state. The work was supposed to be done openly in the conference committee appointed to hammer out the differences between the senate tax bill and the house tax bill.

Heard in the hall--My staffer overheard another legislator's staffer tell the guv's flak Thursday: "23.5 percent, good enough for government work." The reference was to the argument over how much to tax oil companies. The companies and the governor want a 20 percent tax on net profits, the senate set a 22.5 percent level and the house wants 23.5 percent. In the end, the legislature failed to resolve the differences in the waning hours of the special session.

Robo run amok--One of my staffers last week got a phone call from a computer (in the biz, we call 'em robo calls) urging him to vote for a candidate for the U.S. Senate. The call had the voice of a member of the Virginia House of Delegates and rattled off a long list of issues and reasons to vote for one of Virginia's U.S. Senate candidates. That's one of the problems with robo calls--you can't tell a computer they dialed the wrong state.

Opponents, by the numbers--Nome Representative Richard Foster told us he's faced 18 opponents in his ten runs for his state house seat, including this year when he's unopposed. Our friend Kenai-Soldotna GOPer Kurt Olson is running for a second term this year and is already up to 11 opponents.