the alaska business plan (10.24.2013)
TRANSCRIPT
The Alaska Business Plan:
BRAD KEITHLEY
PRESIDENT, KEITHLEY CONSULTING, LLC
OCTOBER 24, 2013
The Need and the Approach
Agenda
Where is Alaska now
Where we are headed
How do we create a “Morning
in Alaska”
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“Reasonable assumptions about potential new revenue sources suggest we do not have enough cash in reserves to avoid a severe fiscal crunch soon after 2023, and with that
fiscal crisis will come an economic crash.”
ISER, Maximum Sustainable Yield, FY2014 Update (January 2013)
3Where we are …
Where we are headed …
“Two options available to the state … are institution of a broad-based tax, and use of a portion of the earnings of the Permanent Fund. … It is anticipated that both options will be required in the
non-OCS case. The value shown above assumes a personal income tax, similar to the tax that was eliminated in 1980, will be
phased in between 2022 and 2026.”
Northern Economics and ISER, Potential National-Level Benefits of Alaska OCS Development (Feb. 2011)
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The effect on oil & gas
development …
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What is the way forward
… The Alaska Business Plan
1. Enact sustainable budgets
2. Co-invest in the development of
Alaska’s oil and gas
3. Enable Alaskans to participate
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1. Enact sustainable budgets 7
“In contrast to business-as-usual, there is no fiscal cliff associated
with the maximum sustainable yield strategy. Enhanced
financial resources, combined with new revenues from long-
term petroleum developments, would be sufficient to cover
General Fund Spending growing with population.”
ISER, Maximum Sustainable Yield, FY2014 Update (January 2013)
But there is more to be
done …
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The problem: government
is in the way …
A conundrum: the State irrevocably owns the oil & gas resources located on state lands (Section 6(i) of the Statehood Act)
Since statehood, the decision whether to develop those resources has been contracted out to third parties
But, as production has declined the state increasingly has attempted to drive the bus from the backseat through regulation and tax policy
Results has been to misdirect investment focus, away from the most economically efficient (and internationally competitive) projects
Need to develop a market-based solution
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2. Invest in the development
of Alaska’s oil and gas
The solution: make the state a market participant – in conjunction with private participants – not a back seat driver
Co-invest in the development of Alaska’s oil & gas through an investment fund
State refocuses on identifying highest return (best) economic projects
State and industry work as partners, not adversaries
The same solution the state and industry came to eight years ago, but got lost in the 2006 election
Alaska acting as an owner, not government
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3. Enable individual Alaskans to participate
Like state government, individual Alaskans also are disconnected from the development of Alaska’s oil & gas resources
View the industry as a source of tax revenue
Creates an adversarial, divide the pie approach
Alaskans should be provided the opportunity also to participate in the market, by investing personally in the development of Alaska’s oil & gas resources (a form of ESOP)
Become stakeholders in growing the pie
Create a program to enable Alaskans to invest all or a portion of their PFD directly in the development of Alaska’s oil & gas resources
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A note about SB 21 and
LNG …
… both are important, but neither is a silver bullet
SB 21 increases long
term revenues, but
not hugely
Similarly, LNG produces
some revenues, but
does not replace oil
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The Alaska Business Plan … 13
… Morning in Alaska
Bradford G. KeithleyPresident & Principal, Keithley Consulting, LLC
Publisher, Thoughts on Alaska Oil & Gas
keithleyconsulting.com
email: [email protected]
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