Snarky Sarah: Palin's Petulant Personality Problem

There is NO Palin pipeline in place!!!!!!!! IT'S A BIG LIE!
GET THIS ADDRESS OUT TO EVERY BLOG YOU CAN!
 
http://www.andrewhalcro.com/palin_requests_talks_with_oil_executives


Palin requests talks with oil executives

Governor Sarah Palin has requested a conference call this week
with the CEO's of the major oil companies playing a role in
the potential development of Alaska's natural gas pipeline.

The requested participants include Tony Hayward from BP, James
Mulva from ConocoPhillips, Rex Tillerson from Exxon along with
others. According to my source, no one knows exactly what the
purpose of the call is, but some have never the less
speculated.

Last week in her address to the nation, Palin stepped far over
the line of truthiness (thanks Steven Colbert) when she told
the country, "I fought to bring about the largest
private-sector infrastructure project in North American
history. And when that deal was struck, we began a nearly
forty billion dollar natural gas pipeline to help lead America
to energy independence."

Nothing could be further from the truth.

In fact the state has done little more to move the gas
pipeline forward over the last twenty months than to grant a
Canadian company $500 million to push paperwork with no
guarantee a pipeline will be built.

Anchorage Daily News reporter Wesley Loy reported last month;

Palin said in her press conference that the state never before
had commitments to build this line. Now we do. That's
incorrect.

TransCanada has not promised to actually build the gas line,
one of the state's grandest and most frustrated economic
development dreams.

The state license, awarded under the Alaska Gasline Inducement
Act, or AGIA, which the Legislature passed at Palin's request
last year, is not a construction contract and does not
guarantee a pipeline will be built."

Since becoming Alaska's governor in December of 2006, Palin's
administration has had a very combative relationship with the
oil & gas industry in Alaska and has ignored any attempts
to communicate with them on development issues.

When the Alaska Gasline Inducement Act (AGIA) was introduced
and passed by the legislature in 2007, the administration
refused to entertain suggestions from the producers to make
the process more commercially viable. At the end of the day
the state had crafted a proposal that ignored all legal and
fiscal realities.  

So instead of negotiating with the producers, the
administration said they'd rely on public and share holder
pressure to force three of the largest oil companies in the
world to commit to paying for the most expensive privately
financed project in the history of the United States.

Even United State Senator Ted Stevens raised serious concerns 
about the process back in March saying; "financing terms
won't be set by the legislature, the governor or the Congress.
They're going to be set by the people who manage the
money."

Today, the state has awarded a $500 million inducement and
exclusive rights to TransCanada, while their CEO is on record
as saying that they cannot order one piece of steel pipe
without first gaining the financial support from the oil
companies. "Nothing goes ahead unless Exxon is happy with
it," CEO Hal Kvisle told the Toronto Globe and Mail in
August.

So what could the agenda be on this requested phone call by
Governor Palin?

Compromising on Point Thomson

The state is currently in litigation with ExxonMobil over the
development of Point Thomson, a gas field critical to the
economics of the Alaska gas pipeline. Alaska has only two
recognized gas fields and both have always been thought to be
critical to make the economics of the gas pipeline work.

During legislative testimony in June, Exxon's Alaska
Production Manager Craig Haymes said, "for 3.5bcf a day
pipeline for 25 years, you need 45 to 50tcf. That's how much
gas you need for that commitment. Prudhoe Bay is only 25tcf.
That means you need another Prudhoe Bay if Point Thomson is
off the table." 

The producers including Exxon, BP, ConocoPhillips and Chevron
have stated in legislative testimony that without Point
Thomson, there will be no gas pipeline.

This spring, Exxon proposed a court ordered plan that would
have them spend $1.3 billion to develop the field to bring on
line to feed a gas pipeline. The Palin administration rejected
what everyone has called a reasonable and viable development
plan, because they don't trust Exxon. 

After rejecting Exxon's plan, the administration has continued
to pursue litigation and has rejected Exxon's appeal for court
ordered mediation.

One of the thoughts is that in the conference call Palin could
offer to drop the Point Thomson litigation in exchange for the
producers agreeing to participate in the AGIA proposal to
build a gas pipeline.

This creates problems as some companies like ConocoPhillips
have a small play in Point Thomson and a larger play in
Prudhoe Bay. In addition, it ignores the fact that AGIA just
simply won't work because the state's terms are too
perscriptive and TransCanada brings no value to the project. 

Also, the question was raised about Exxon's CEO Tillerson and
his willingness to participate in any discussions after his
company has taken such a rhetorical beating from Palin over
the last year. During a press conference last fall, Palin
stated that Exxon shouldn't let the door hit them on the way
out. 

But now, with the campaign trying to portray Palin as an
energy expert, she needs Exxon more than Exxon needs her.
Especially with the favored son of her gas pipeline strategy,
TransCanada, admitting that until Exxon is happy, the gas
pipeline will not happen. 

The shoe is clearly on the other foot. The question is how
does big oil, that Palin has claimed to be so tough on,
respond now that they clearly have the advantage.

 

Backing off the rhetoric of windfall profits tax

Another reason for the conference call could be to get an
agreement from oil company executives to shelve the rhetoric
about the windfall profits tax Palin signed as governor last
December.

In September of 2007, Palin proposed a $750 million dollar tax
increase on the industry. For weeks her administration
travelled the state convincing Alaskans that the tax hike was
justified and it would not impact development.

When the tax was eventually passed by the Alaska State
Legislature two months later, the increase had gone from $750
million to almost $2 billion and included a very steep
progressive tax component based on the increased price of a
barrel of oil.

Otherwise known as a windfall profits tax.

When asked about the massive increase from her original 
proposal as she was preparing to sign the legislation in
December, she commented to KTUU news that is was close enough
to what she originally proposed. 

Over the last nine months companies have been outspoken about
the impacts on Alaska's oil production at a time when
production is dropping between 6 and 8 percent per year.

In July, BP announced it's new development, Liberty, which is
a development entirely on federal land. The state will get no
production taxes and only a small amount of royalty over the
life of the project.

The new 90% ACES marginal tax rate does not make investing on
state land worthwhile, even with the tax credits. During the
ACES debate all the Palin administration focused on was
whether investors could make money under ACES. The question
they never examined was whether you could make more money
somewhere else.

Doug Suttles, BP Alaska's president, said due to the Governor
Palin's hefty ACES oil production tax adopted by the
legislature last fall, Liberty would not have been developed
on state land.

“If this were on state lands, it’s doubtful we’d have been
able to move it forward,” Suttles said. “Alaska is a very
high-cost environment for the industry."

Quite possibly, Palin wants oil companies to tone down the
rhetoric about Alaska's tax environment as she is trying to
position herself as having the energy answers. 

 

Opening communications

In two different interviews with Alaska oil company executives
over the last two weeks both have said they same thing;
currently there is no communication between the Palin
administration and the oil companies. No front channel, no
back channel...nothing.

With Palin now on the national stage, one of the thoughts
could be she wants to appear to be having a dialogue with the
same big oil she claims to have been getting tough with during
her term as governor.

"And despite fierce opposition from oil company
lobbyists, who kind of liked things the way they were, we
broke their monopoly on power and resources", Palin told
Americans on Wednesday night.

Again, nothing could be further from the truth. 

These companies hold hydrocarbon leases that were issued
decades ago. These leases granted them legal rights to develop
the oil and gas resources on state leased land and no
political speech changed that legal reality.

The bottom line is the Alaska Natural Gas Pipeline won't be
built until the state sits down and negotiates a fiscal
framework that defines the resource extraction terms for
natural gas. So far this administration has refused to hold
any discussions with the industry and has instead decided to
spend $500 million of tax payer money propping up a straw man
with hopes they'll force the oil companies to cave.

Like many, I have been critical of this process. It's been
further aggravated by the administration's refusal to engage
in good faith negotiations, while relying on public support
for supposedly standing up to big oil. The reality is they've
doing little more than ignore both fiscal and legal realities
while risking delays at a time when inflation is driving up
the cost of construction.  

If in fact the governor is requesting this conference call to
finally open lines of communications with these companies,
that's good for the state and the country.

Or maybe the call is a public relations stunt...    

Over the last few days we've heard from both John McCain and
his campaign staff, promoting the idea that Governor Palin has
been tough on big oil.

Even Palin herself on the campaign website stated, "I've
stood up to the old politics as usual, to the special
interests, to the lobbyists, the Big Oil companies and the
'good old boy' network."

Possibly, the reason for the call could be to enhance the
image of a maverick governor telling big oil how the cow eats
the grass. This might play well in Peoria, but it won't do
anything to move the industry forward and build a gas
pipeline.

As governor for the last 20 months, Palin has consistently
criticized the oil companies for "sitting on Alaska's gas
reserves for the last thirty years." 

This is factually incorrect.

Due to the expense of the Alaska Natural Gas Pipeline, the
price of natural gas didn't even reach a level that allowed
for serious consideration of the project until 2002.

Over the last five years, oil companies have been working on
trying to develop the gas pipeline. In 2003, the Alaska State
Legislature unanimously reauthorized the Stranded Gas
Development Act. In 2004, the federal government passed the
Alaska Natural Gas Pipeline Act that created rules and
incentives the project. In 2005 & 06 the oil companies
negotiated a deal with the former governor that was not acted
upon by the legislature.

When Palin was elected in 2006, she took a different route,
instead attempting to bypass the oil companies and deal with
an independent pipeline company who has neither the balance
sheet or the necessary gas reserves to make the project
happen.

In addition, the state agency (AOGCC) that regulates the
development of hydrocarbons to prevent waste, testified that
even  if a natural gas pipeline was available today, they
wouldn't allow enough gas to be sold to make it viable because
the gas is still needed to help extract oil. With an estimated
3 billion barrels of oil still remaining in the ground on the
North Slope and oil being worth much more than gas, permission
to sell the gas would be denied.

So while the rhetoric may sound good to energy starved
Americans about how big oil has been sitting on Alaska's gas
reserves for the last thirty years....the economic reality is
much different. 

The fact is these companies don't make decisions based on
politics they make decisions based on economics. If they did
base decisions on political pressure, the Exxon Valdez
punitive damages case would have been settled over a decade
ago. 

Public Opinion

A recent opinion poll conducted by The Cromer Group between
August 18 - 21, shows by a margin of three to one, Alaskan's
believe the producers Denali gas pipeline project is better
for the state than the governor's TransCanada proposal.

In fact, polling results reveal the more Alaskans understand
the TransCanada proposal, the more they say the deal is too
risky.

Two questions which asked Alaskans how they felt about
TransCanada's idea to appeal to Congress for financial help
with the project drew the most concern.

Congress passed a loan guarantee for $18 million dollars in
2004 to help promote the development and building of the gas
pipeline. But TransCanada proposes to use that $18 million
dollars, not to get going, which is the purpose of the loan,
but to use some portion of the money to cover its cost
overruns. What this means is TransCanada is asking US
taxpayers to pay for any cost overruns of the project that
TransCanada is managing. Do you feel…(READ LIST)


1. The risk was too high and should not have been taken,
or/57%

2. The risk was worth it and should have been taken?/13%

3. Don’t see this as a risk /9%

4. Can’t Say /21%

 

TransCanada’s plan asks for the U.S. Government to assume some
of the project risk by agreeing to pay billions of dollars in
pipeline transportation fees as a “bridge shipper,” in case
initial gas commitments from the major oil companies are not
enough to run the gas line at full capacity. Do you feel…(READ
LIST)


1. The risk was too high and should not have been taken,
or/53%

2. The risk was worth it and should have been taken?/16%

3. Don’t see this as a risk /6%

4. Can’t Say /26%


And in the end, disregarding all the problems, all the ifs,
ands, or buts – which is your own personal favorite? Is it the
(ROTATE) Denali Alaska Gas Pipeline Project; the AGIA
-TransCanada Gas Pipeline Project; or the All-Alaska Port
Authority Gasline Project? 


1. Denali Alaska Gas Pipeline Project/45%

2. AGIA-TransCanada Project/15%

3. All-Alaska Port Authority Gasline Project/9%

4. None of these /3%

5. Can’t Say/28%