From Sen. Bill Wielechowski <[email protected]>
Subject Cook Inlet Natural Gas Shortage, Shrinking PFD, and More
Date October 5, 2023 11:02 PM
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The latest from Senator Bill Wielechowski October 5, 2023 Senator Bill Wielechowski State Capitol, Rm 103 Juneau, AK 99801 800-550-2435 907-465-2435 [email protected] 1500 W Benson #315 Anchorage, AK 99503 907-269-0120 Contact My Staff Mercedes Colbert Chief of Staff [email protected] David Dunsmore Legislative Aide [email protected] Nick Moe Legislative Aide [email protected] Hunter Lottsfeldt Legislative Aide [email protected] Contact the Governor Governor Dunleavy's Anchorage office may be reached at 269-7450, or e-mail him at [email protected] Visit the state website Track Legislation Visit the Legislature's website Submit a Letter to the Editor The Anchorage Daily News welcomes and publishes a broad range of viewpoints. To submit a piece for consideration, email [email protected]. Send submissions shorter than 200 words to [email protected]. ________________ Dear Friends & Neighbors, I hope you are enjoying this fall weather. I would like to update you on the impending natural gas crisis in Cook Inlet and what the recent amount of the Permanent Fund Dividend means for our state's troubling fiscal situation. I also have updates from the Food Bank of Alaska and a comment opportunity for transportation projects. As always, don't hesitate to contact me to share your perspective or if you have any issues with our state government. My office is ready to help. Cook Inlet Natural Gas Crisis Coming Remember a few years ago, the threats of brownouts in Anchorage because we ran out of natural gas in Cook Inlet? Gas producers stopped drilling, demanding higher profits. Sure enough, the crisis was averted only after the Regulatory Commission of Alaska approved contracts that saw Anchorage's natural gas prices rise from among the lowest in North America to some of the highest natural gas prices in North America. Well - here we are again. If you haven't heard, we are on the verge of another natural gas crisis. Are we out of gas in Cook Inlet? According to the U.S. Geologic Survey, Cook Inlet has trillions of cubic feet of economically recoverable gas. Enough to power South Central for decades. So what's the problem? Well, one company has a virtual monopoly over this gas - and is simply refusing to explore for new gas. That's right - 85% of the gas in Cook Inlet is leased to one company - Hilcorp - a private company from Texas. Yet Hilcorp refuses to explore for new gas or offer new contracts to Alaska utilities - ENSTAR, Chugach Electric, MEA, Homer Electric, and GVEA. The failure of Hilcorp to follow the terms of their leases will be economically catastrophic for Alaska. The Utilities will have no energy supply for heat or electricity within the next several years and is forcing the utilities to search for new sources of natural gas - such as importing it from overseas at a much higher price. That's why several months ago, the utilities sent a letter to the Attorney General questioning whether Hilcorp was meeting the terms of their leases. I also wrote a letter to the AG asking for an investigation. I am still waiting for a response. In Alaska, just like every other state in the country, when an oil and gas company takes out a lease, they have a legal obligation to explore, develop, and produce oil and gas. The attorney who advised Alaska for many years, Spencer Hosie testified extensively about this. His testimony is definitely worth reading: Spencer Hosie's testimony to Senate Judiciary 5/7/2007. So what happens when those companies refuse to produce the oil and gas they have leased? There are court cases from all over the country where leases are forfeited, and damages are imposed on companies for violating the terms of their leases. Recently, I attended a legislative briefing hosted by ENSTAR Alaska. The topic was about Cook Inlet natural gas supplies and the options utilities have now that Hilcorp refuses to renew gas contracts. Homer Electric's gas supplies start expiring next March, and Chugach Electric's contracts begin expiring in 2028. Without new gas sales agreements negotiated, Alaska residents and businesses will see much higher energy prices and uncertainty. 2028 leaves little time to pursue alternatives. In response to Hilcorp's actions, the major utilities along the Railbelt (between Homer and Fairbanks) have also formed a working group to address this natural gas supply issue. The Utility Working Group hired Berkely Research Group late last year to develop a plan of options for meeting the natural gas demands. Hilcorp already receives billions of dollars in direct subsidies and tax loopholes from our state. It's long past time that Alaska acted like a sovereign and demanded that Hilcorp explore and develop the leases they are legally obligated to explore and produce. What about Renewable Energy? I am a huge supporter of increasing our renewable energy supply to create local jobs and self-reliant communities. That is why I introduced the community energy bill, SB 152. SB 152 sets up a virtual net metering program to pave the way for dozens of new renewable energy projects in Alaska. SB 152 could lead to a 40% increase in renewable energy generation on the Railbelt. It would allow renters and homeowners without adequate sun or wind to share the cost benefits of renewable energy projects. But even with a more ambitious renewable energy goal of 80 percent of all our power generation by 2040, the reduction of natural gas would be fewer than 12 Billion Cubic Feet (BCFs) than the 54 BCFs of natural gas currently used by all utilities each year. A robust natural gas supply for home heating, cooking, and power generation will still be needed. See the chart below for where the natural gas supply is currently distributed. I will keep monitoring the situation closely and continue advocating for Hilcorp to step up to the plate and honor its lease obligations to meet Alaska's natural gas needs. This chart shows the combined utilities' annual demand vs. the Cook Inlet supply estimates if Hilcorp continues with little investment in new wells. 2023 PFD Amount: $1,312 PFDs have started hitting Alaskan's bank accounts. It is important to note that when adjusted for inflation, this amount is one of Alaska's lowest dividends since the Permanent Fund was established. It's also a far cry from what the Alaska Statute says should be paid because the legislature adopted a 25/75 split formula. That's 25% for Alaskans and 75% for government. In 2013, I predicted that if SB 21, the bill that significantly reduced oil taxes, passed, it would result in the Permanent Fund being used to pay for state government. In 2016, I was unfortunately proven correct. It is clear that we must fix our trajectory before it's too late. That's why I worked with my colleagues earlier this year to introduce SB 114 to close the S-corp income tax loophole and reduce the money for per-barrel oil credits the state is giving away. These cuts to dividend checks for Alaskans take millions of dollars from our economy and thousands of dollars away from Alaska families who need it most. It is the most regressive way to balance the budget and puts the burden on working families. As Brad Keithley pointed out in his August 18th article, the PFD cuts often end up in the bank accounts of the oil industry and non-residents. We are currently enjoying years of historic returns on the fund investment. Last year, however, saw a negative return on investment for the fund. This year, the Permanent Fund Corporation predicts the fund will be out of spendable money in 3 to 4 years. A longer-term solution to Alaska's revenue issue must be found. Here are two slides from a presentation I gave in 2013 to several community groups warning of the threat to the dividend and our budgets if SB21 was passed. Volunteering at The Food Bank of Alaska At the Food Bank of Alaska, I helped pack up food boxes for seniors. It was great being able to give back, but it was also a reminder of the food crisis currently happening in our state. Many families face tough decisions around feeding themselves and their loved ones. This video will tell you how you can make a difference in our community. It shows the problem and the ways to get involved.  Transportation Comments Due 10/9 The Anchorage Metropolitan Area Transportation Solutions (AMATS) is accepting comments on its 2050 Master Transportation Plan (MTP). AMATS is a joint state-municipal agency responsible for transportation planning in the Municipality of Anchorage. The MTP is a long-term planning document used for distributing federal transportation grants in the municipality. Make your voice heard by submitting a comment here. There are a variety of proposed projects in East Anchorage that can be found on this interactive map. Below is a list of some of the transportation and transit projects in East Anchorage: Active Transportation Projects include: East Tudor Road to Glenn Hwy Pathway (MTP #NMO288) Study for Chanshtnu Muldoon Park Trail to E. 20th Ave (MTP #NMO0335) Boundary Ave to Debarr Rd Safety Study (MTP #NMO223) 6th Ave: Bragaw St to Cherry St (MTP #NMO043) Non-Motorized Pathway Connection from Trail at Patterson Street/Hunt Ave to Muldoon Road (MTP #NMO259) Patterson Street Non-motorized Corridor from Boundary Ave to Tudor Rd (MTP #NMO290) Pedestrian Infrastructure on Boniface Parkway from DeBarr Road to 22nd Ave (MTP #NMO091) Enhance shared roadways on Foothill Dr from Sherwood Ave to Cheney Lake Park and Foothill Dr to Patterson St (MTP #NMO189) Transit Projects: New Route 36th Ave - Establish a new East/West Connection from the airport to Muldoon/Debarr Transit Hub (MTP #TRN101) New Route Independence Park to connect Dimond Transit Center to Muldoon/Debarr Transit Hub. (MTP #TRN104) Different Ways To Comment (be sure to reference the MTP # when commenting): Email your comments: [email protected] Record a voicemail with your comments: 855-925-2801, project code 5397 Send your comments by mail: Permit & Development Center, 4700 Elmore Road, P.O. Box 196650, Anchorage AK 99519-6650 Submit your comment online near the bottom of this webpage. As always, please feel free to reach out to me or my staff anytime if we may be of assistance to you. Warmly, Alaska Senate Majority | Capitol Building, 4th Avenue & Main Street, Juneau, AK 99801 Unsubscribe [email protected] Constant Contact Data Notice Sent by [email protected]
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