Editor's note: The following message from petroleum consultant Dr. Pedro van Meurs was sent in reply to an open letter he received from "The Concerned." The open letter, dated Feb. 17, expressed concern about the current disagreement over Alaska's oil taxes and ended by requesting that Mr. van Meurs run for governor.
Dear members of The Concerned,
It was great fun to read your dispatch.
I love the T-shirt. Where can I order them? I have already a large following!
Yet, it also is a sad message from The Concerned. Members should indeed be VERY concerned. As you mentioned, I returned to Alaska to provide explanations on my world fiscal studies, which include Alaska. It was a sad experience. A new generation of young Alaskans is now trying to start businesses and get jobs. Yet, frequently, I got questions such as: With oil production declining, are there still opportunities in Alaska? Should we move to North Dakota or Texas?
At this time the future is indeed bleak. It does not have to be. Alaska has all the resources required on state lands to increase oil production and export gas and provide a prosperous future for Alaskans for several decades. However, the Alaska government has so far failed to put the policy and fiscal measures in place to achieve these goals. I will come back on this later.
However, first, let me respond to the fun part of your message.
Of course, I am ready to be governor of Alaska.
As a Dutch national there will be some obstacles, but if Arnold Schwarzenegger can do it, so can I. It will not take long for the North Slope Borough to figure out that with me as governor of Alaska, their property tax income will double during the next decade and will be maintained at high levels for generations to come. As a result I will be lovingly adopted as an Iñupiat grandfather based on Native custom. That should be it! None of this birth certificate nonsense.
Having worked for 16 years with the Inuvialuit and Inuit in the Canadian Arctic as their advisor, my experience in Arctic living far exceeds that of Governor Palin. For instance: Did she ever survive in -10-degree weather on her own in an igloo? No. Did she survive in a desolate location such as Banks Island on overcooked wild musk ox meat? No (By the way overcooked musk ox meat tastes like an old shoe). Did she ever survive on whale meat? No (Beluga meat tastes very good). I did all those things. Arctic living is not just racing around on a comfortable ATV, you know ... So, compared to Governor Palin, I certainly qualify as governor.
Of course, contrary to Governor Parnell, I have a detailed program ready that actually gets Alaska to 1 million barrels per day by 2025 through the pipeline. Instead, the governor just seems to make empty election promises about filling the line. From the introduction of HB 110, it is clear that he does not seem to know how to implement these promises.
So, if Alaskans in their utter desperation call on me to serve as governor, I am ready. It certainly would be an exciting retirement activity. I would be ready to serve, even if the lowly salary of governor would snooker me out of my consulting fees. Once you have become 70 years old, you have to do something for the greater good of mankind, rather than just drinking gin and tonic. Of course, I would move the yearly Alaska legislative session from Juneau to Nassau, Bahamas.
It is now necessary to give a more serious response.
Since 2006, the world oil and gas industry has moved on and left Alaska to its internal politicking. The higher oil prices, high gas prices in Asia and massive introduction of non-conventional oil and gas resources have created countless new and attractive opportunities for major oil companies outside Alaska. As a result, the three major oil companies in Alaska are now “harvesting” (sending cash out of Alaska) at a maximum rate. There is no significant investment by the major oil companies in projects that could reverse the decline of oil production.
Alaska has not lifted a finger to attract new investment from a fiscal perspective. In fact, Alaska does not even have useable fiscal terms for heavy oil, shale oil and natural gas that can be published in a simple investor brochure. How can Alaska attract investors in this way when other nations (Canada, Lower 48, Australia, Brazil, et al.) offer attractive well defined terms?
Governor Parnell introduced last year HB 110 apparently to stimulate investment. This bill is very poorly conceived. The bill provides attractive terms for “new oil,” but it is not specified how taxes on “existing” and “new” oil would be separated in a complex administrative procedure. If HB 110 would have passed, it would have taken a long time to write regulations to implement the bill. As a result very little investment would have taken place in new oil production, while the significant government-take reduction on existing oil would have accelerated the harvesting process, creating jobs outside Alaska.
The Senate is now considering a possible alternative bill which may be more beneficial to Alaska. But at this time it seems that only a bill relating to light oil might pass during this session. This means production will continue to decline, because total new oil production opportunities are limited.
Unless substantial policy and fiscal changes are introduced that encourage large scale investment in heavy oil, shale oil and natural gas in Alaska, as is being done in competing jurisdictions, the future of oil and gas production in Alaska is bleak.
It is indeed time for The Concerned to insist on such changes.
Thanks again for your great letter.
Pedro van Meurs
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch. Alaska Dispatch welcomes a broad range of viewpoints. To submit a piece for consideration, e-mail commentary(at)alaskadispatch.com.