British mining giant Anglo American's abandoning the complicated, expensive and grindingly slow slog to develop the rich Pebble prospect in Southwest Alaska is understandable -- but you have to wonder how it must appear to other businesses and industries considering investments in Alaska.
Anglo American, which poured more than $541 million into the Pebble effort, points to its deep backlog of projects waiting for development. It says it is looking at higher-value, lower-risk undertakings, planning to cut by a third the nearly $950 million it spends annually on keeping afloat pre-approval stage, complicated, from-scratch projects such as Pebble.
All that may be a dodge, a way of saying Anglo American could see the handwriting on the wall and grew weary of trying to win anything resembling a fair hearing for Pebble in Alaska. With the Environmental Protection Agency poised, if not panting, to block Pebble ostensibly to protect Bristol Bay salmon -- based, mind you, on an assessment that could not even pass muster with its own peer review panel -- the $300 billion project's future must have seemed sketchy.
It is notable that Anglo American did not sell, likely because there were no takers in the current environmental and regulatory atmosphere. It simply folded its cards and opted to eat a $300 million post-tax penalty for pulling out.
The company's partner, Canada's Northern Dynasty Minerals, says it will soldier on, that it has the dough to shepherd the project through the state and federal permitting process. Its stock took a 33 percent hit when Anglo American, and its deep pockets, took a walk. Pebble potentially could produce 55 billion pounds of copper, 67 million ounces of gold and 3.3 billion pounds of molybdenum. Northern Dynasty does not plan to give up.
What does all this tell investors about Alaska? About special interests? About the environmental industry's power in this state? About the federal government's penchant for regulatory intrusion? Is there even interest in extracting and utilizing Alaska's vast wealth for anything but fueling ever-larger government? Some might scratch their heads.
Oil, for instance, pays for more than 90 cents of every dollar state government spends. A third of this state's jobs and half its economy depend on oil. Since statehood, Alaska's treasury has sucked up $164 billion in oil revenues. We pay no income tax, no state sales tax. We have billions stashed away. We each receive an annual dividend check. This fiscal year alone, Alaska stands to rake in more than $6.4 billion. But all that is changing. Revenues are dropping a smidgeon each year as North Slope production declines. Spending remains uncurbed. Alaska must produce more oil -- and we love to hate the people who can get it for us.
In 2007, the Legislature adopted Alaska's Clear and Equitable Share oil tax, a punitive monstrosity contributing to a marginal tax rate of more than 90 percent at higher oil prices. It drove investment for new oil elsewhere. Oil production is soaring in other places; it is slipping here. Go figure.
The Republican-led Legislature this year fixed ACES with Senate Bill 21 to encourage new North Slope investment and production. Studies show revenues under SB21 will drop for a few years and level off, or perhaps increase, depending on production. If ACES were intact, we would lose more in the long run.
The Left cobbled up an SB21 repeal referendum for next year's primary election to resurrect ACES, with its promises of immediate money -- and future misery. If you were running a North Slope oil company would you spend anything to increase production while the referendum is pending?
Investors watching us cut off our noses might be forgiven for thinking we are crazy. Crazy because we treat our partners as enemies. Crazy because we continue to put all our economic eggs in one basket. Crazy because we cannot build a gas line, despite decades of jabbering about it. Crazy because we cannot bring ourselves to mine Alaska's untouched jillions of tons of coal. Crazy because we have not yet built a dam on the Susitna River to provide affordable power for the Railbelt. Crazy because we cannot even build a new road. To anywhere. Crazy because we let economic Luddites rule Alaska.
Why would anybody or any industry even consider investing here? They would have to be crazier than we are -- and that is saying something.
Paul Jenkins is editor of the AnchorageDailyPlanet.com.