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Like oil industry, Alaska Permanent Fund looks to North Dakota

  • Author: Pat Forgey
  • Updated: July 7, 2016
  • Published February 26, 2014

JUNEAU -- The Alaska Permanent Fund is joining the rush to the Bakken, the new North Dakota shale oil play that has had Alaska leaders fearful and envious.

Anger at being surpassed by North Dakota in oil production was used by those challenging Alaska's former ACES oil tax law in recent years, and it helped win passage of Senate Bill 21, an oil-tax rollback championed by the state's oil industry and Gov. Sean Parnell.

Now the state itself is investing in the Bakken and other oil and gas deals, the fund's board of trustees was told Wednesday while meeting in Juneau.

Riverstone Energy, a company backed by Alaska Permanent Fund money, has invested in hedge funds looking at energy plays as prime investments, Alaska Permanent Fund Corp. investment officer David Fallace told the trustees. Those funds include $100 million to Liberty Resources for Bakken investments and $50 million to Eagle Energy.

Eagle Energy is an Oklahoma company that has yet to deploy the investment. Carlyle International Energy Partners is looking at an exploration deal off the coast of Africa, and another hedge fund is looking at a refinery investment, Fallace said.

Alaska legislators, including Sens. Lesil McGuire, R-Anchorage, and Bill Wielechowski, D-Anchorage, have publicly urged more Alaska investment in the state's own oil industry. Both also backed earlier efforts that have helped spark a renaissance in Cook Inlet oil and gas production.

More recently they've urged more state activity on the North Slope as well, with McGuire urging that Alaskans be allowed to invest their own permanent fund dividends in a natural gas pipeline.

Wielechowski said the Alaska Permanent Fund is doing what it was supposed to do, investing in places that have high rates of return, but he would like to see investments in Alaska as well.

"I think Alaskans would love to see investments in the state of Alaska, particularly in the oil industry here," he said.

He warned that it is important how those investments were done, however.

"Unfortunately, what we do is invest in things that no one else wants to invest in, and that's not a good business model," he said.

Alaska's North Slope oil fields are extremely profitable, he said, and could make good investments.

McGuire said earlier that her investment proposal would have the state invest as a minority partner and would ensure a project's economic viability by making sure the partner had significant money at risk as well.

The trustees Wednesday also heard about state-backed hedge funds that were supporting research into promising cancer-treatment drugs that are now the subjects of studies at Memorial Sloan Kettering Cancer Center in New York and Fred Hutchinson Cancer Research Center in Seattle.

That new drug, developed by Juno Therapeutics, is showing some remarkable results in some cases, Fallace said.

If that drug were to "take off," it could "hopefully have a "meaningful effect on the portfolio," he said.

The news was so good that Jay Willoughby, the fund's chief investment officer, stepped in to offer a cautionary note.

The results seen in the studies "are spectacular relative to anything that these patients have been treated with, but there are still patients who are dying. Not everyone is being cured," he said.

That highlights the risks of such venture capital investments in cancer drugs or other areas, he said.

"A great multitude of things could go wrong," he said. "Expectations could go to zero at any point."

The corporation wants to line up what Willoughby called "a stable of advisers" who would be available to help vet such investments in areas where they don't already have expertise available. That's to ensure that the state makes wise investments, he said.

Willoughby said there were advisory firms already working for the fund that were able to advise on the energy and drug investments. Alaska already has investments in about 145 hedge funds, Fallace said.

APFC may may need to look to new, less traditional investments because of an unwillingness to invest more state money in stock and bond markets that appear overvalued and at risk of declines, Willoughby said.

Contact Pat Forgey at pat(at)alaskadispatch.com.

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