March 25, 2025 • 46 mins
Welcome to The Weekly Top 3 — our look at the top 3 things on our mind here at Alaskans for Sustainable Budgets — for the week of March 24, 2025.
This week, our top 3 issues are these: 1) we explain why the proposal to combine the Permanent Fund corpus and earnings reserve both puts the corpus at risk and undermines significant performance incentives for the Permanent Fund Corporation (2:14); 2) we explain how Rep. DeLena Johnson and other Republicans are ignoring important data to put the interests of the oil companies ahead of those of Alaska families (15:58); and 3) we explain why we aren’t hearing much about Cook Inlet gas in this session (spoiler alert: it’s because the market solved the problem) (28:08).
For your information, following this episode, we are taking a three-week break from the show to go on a tour of Ireland. We will return to our seat and be ready to go again on Tuesday, April 15.
The Weekly Top 3 is a regular weekly segment on The Michael Dukes Show. The Show broadcasts on Facebook and YouTubeLive as well as via streaming audio from the Show’s website weekdays from 6–8am. We join Michael weekly in the first hour of Tuesday’s show, from 6:25–7am, for a discussion between the two of us about our three issues.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:10):
Hi, this is Brad Keithley, managing Director of
Alaskans for Sustainable Budgets.
Welcome to the Weekly Top Threethe top three things on our
mind here at Alaskans forSustainable Budgets for the week
of March 24th 2025.
The Weekly Top Three is aregular segment on the Michael
Duke show.
The show broadcasts on bothFacebook live and YouTube live,
(00:31):
as well as via streaming audiofrom the show's website weekdays
from six to 8 am.
I joined Michael weekly in thefirst hour of Tuesday show from
six 10 to 7 am For discussionbetween the two of us about our
three issues.
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, youtube,
(00:52):
soundcloud, spotify and Substackpages.
Also on the Alaskans forSustainable Budgets website, as
well as the project page onnational blog site mediumcom,
you can find past episodes ofthe weekly top three also at the
same locations.
Keep in mind that, in additionto these podcasts during the
week, you can also follow andparticipate in the discussion
(01:14):
with us of these and otherissues affecting Alaska's fiscal
and economic condition byfollowing us on the Alaskans for
Sustainable Budgets Facebookpage and through our posts on
Twitter.
This week, our top three issuesare these First, we explain why
the proposal to combine thePermanent Fund, corpus and
Earnings Reserve both puts thecorpus at risk and undermines
(01:37):
important incentives for thePermanent Fund Corporation.
Second, we explain howRepresentative Delaina Johnson
and other Republicans areignoring important data to put
the interests of the oilcompanies ahead of fairness to
Alaska families.
And third, we explained why wearen't hearing much about Cook
Inland Gas in this session.
Spoiler alert it's because themarket solved the problem.
(01:59):
For your information, followingthis episode, we are taking a
three-week break from the showto go on a tour of Ireland.
We will return to our seat andbe ready to go again on Tuesday,
april 15th.
And now let's join Michael.
Speaker 2 (02:14):
Let's dive into today's topics, Brad.
The first and foremost isapparently the Fairbanks Daily
Newsminer needs to take aremedial finance course, and
that's because they apparentlycan't figure.
Now I'll be honest with you,Brad.
I didn't read this whole storybecause I refuse to give the
Newsminer any money and theywon't give you a single story
(02:36):
for free.
They had an opinion piece thatwas talking about the permanent
fund.
Give us the full rundown here.
What's going on?
Speaker 1 (02:43):
So the headline of it is this is an opinion piece
from the Newsminer from over theweekend and the headline is the
case for consolidating thepermanent fund and we're seeing
a big push this session,increasingly this session, for
an effort to behind an effort toconsolidate the earnings
reserve and the permanent fundcorpus into a single account and
(03:06):
treat that as the permanentfund going forward.
What that would do is take awaythe safeguards that are in the
Constitution currently toprotect the corpus and allow the
legislature only access to theearnings reserve the earnings
that are generated by thepermanent fund, only access to
the earnings reserve theearnings that are generated by
(03:27):
the permanent fund.
It would eliminate thatsafeguard that's in the
Constitution currently, mergethe two together and allow the
legislature to start drawingfrom the corpus down the road
when earnings being generatedaren't sufficient to cover the
POMV draw.
This whole thing is beinggenerated.
In my opinion, this whole thingis being generated by the fact
(03:48):
that in five of the last sixyears I think it is the
permanent fund hasn't earnedenough to cover the POMV draw.
So between a combination ofthat and they've continued to
take the POMV draw, but betweena combination of not earning
enough to cover the POMV drawand the $8 billion that we've
(04:09):
talked about on previous showsthat the legislature took out of
the earnings reserve and movedover to the corpus on an ad hoc
basis, ostensibly to prepay forinflation proofing.
But the permanent fund isn'ttreating it that way, it's just
treating it as their money.
Now, as a result of drainingthe earnings reserve over the
last few years, between notearning enough and that $8
(04:32):
billion ad hoc draw, theearnings reserve is getting down
to a level that if thepermanent fund continues not to
earn enough to cover the POMVdraw, the earnings reserve won't
have enough to cover the POMVdraw.
So there's a lot of concernabout that in the legislature.
(04:53):
There's a lot of concern aboutthat constitutional protection
against getting at the corpus.
So the proposal is to merge theearnings reserve and the corpus
together so that when thecorpus or when the earnings
reserve when the earningsdoesn't cover the POMV draw
isn't enough to cover the POMVdraw, what the legislature will
(05:16):
be able to do is to go into thecorpus and start drawing down
the corpus.
Say, for example, as hasoccurred over the last several
years, the permanent fund onlyearns a 4% return on the
principal on the assets undermanagement, the POMV draw is 5%.
So if you're only generating a4% earnings and the POMV is a 5%
(05:39):
draw, obviously you've got apercentage shortage there.
What the proposal would dowould be to merge the two so
that when there's a percentshortage that the legislature
can then go in and take thatpercent out of the corpus and
continue to generate, continueto take 5% out of the permanent
(06:00):
fund on an ongoing basis.
The news minor goes off on thiseditorial that says this would
be a good thing, consistent withthe talking points that the
business community and otherswho want continued POMV draws.
The news minor goes off on thistangent and talks about how it
(06:22):
would be a good thing, and oneof the things they say here is
this First, it would protect thefund's principle, ensuring the
state's oil wealth continues togenerate returns indefinitely.
It does the exact opposite ofthat.
It doesn't protect theprinciple.
It enables the legislature toget at the principle to cover
(06:47):
any shortfall in the earningsreturns.
So I think the news minorreally has missed the whole boat
here.
I mean, all they're doing isrepeating talking points that
we've seen the supporters ofthis proposal come out with.
(07:08):
The supporters of this proposalcome out with and really is not
focusing on what actually isgoing on from a financial
standpoint.
There's a couple of otherthings that really bother me
about this One it eliminates thepermanent fund corporations
incentive to maximize returns.
If they don't get five nowcurrently, if they don't get 5%,
we start running into problemslike this.
We start running into theconstitutional protection that
(07:29):
we currently have that protectsthe corpus and so the permanent
fund.
As we wrote in our column lastweek in the Alaska Landmine, the
permanent fund really needs toget its act in shape and really
needs to begin to improve itsearnings.
Consolidating the two accountstogether would eliminate that
(07:50):
incentive.
Permanent fund corporationwouldn't care if they earn 2%,
3%, 4%, 15% in any given year,because it's all going to be
covered by the POMV draw.
It's all going to be covered bycovering the deficiency any
deficiency out of the corpus.
It also disincentivizes thepermanent fund corporation from
(08:11):
worrying about costs.
We've talked on the show aboutthe permanent fund corporation's
costs being massive.
Right now they're spending $860million per year in fees and
consulting agreements and thatsort of stuff to undertake their
(08:35):
current program.
That reduces earnings.
I mean that $860 million comesstraight out of earnings cuts
the bottom line.
So if you are worried aboutearnings and if you have to
focus on earnings, you worryabout the cost.
You worry about reducing that$860 million so you can increase
(08:55):
your returns, so you can meetthe POMV draw.
If you merge the two accountstogether and you don't have to
worry about covering the POMVdraw anymore, at least in the
near future, and you don't haveto worry about covering the POMV
draw anymore, at least in thenear future, and you don't have
to worry about covering the POMVdraw anymore, you forget about,
you don't worry about costs,because costs aren't driving.
Costs may be driving down yourreturn, but it's not affecting
(09:16):
your ability, affecting thelegislature's ability to go get
5% out of the permanent fund.
So I think the news miner, byjust regurgitating the talking
points that someone gave them,is really missing the boat.
They aren't thinking throughthe fiscal consequences, the
financial consequences of whatthis proposed merger would do
(09:37):
and they're leaving Alaskans atrisk of having the corpus
reduced every year that we don'thave earnings sufficient to
cover the POMB draw.
Speaker 2 (09:46):
Well and I mean I think that's blatantly obvious
in what you just pointed outthat, oh, this will protect the
principal.
No, this does exactly theopposite.
I mean, this has been whatwe've been warning about this
whole time is that if you mergethe funds and eliminate the
barrier, you then start peckinginto the seed corn.
That's you know what createsthe fund and allows it to earn
(10:10):
money, and 1% at a time.
If you start cutting into thatand again it removes all
restrictions on government,because that was part of what
the ERA function was waslimiting them to whatever was in
the earnings reserve.
They couldn't go beyond thatand they had to live within
their means.
This is just another method ofkicking.
Function was was limiting themto whatever was in the earnings
reserve.
They couldn't go beyond thatand they had to live within
their means.
This is just another method ofkicking the can down the road.
Speaker 1 (10:30):
Yeah, it's really a cover your ass.
It's a cover your ass for thepermanent fund corporation when
they can't get to 5% returns,either because they aren't
following a good strategy interms of developing reserves or
because their costs are way toohigh and eating their reserves.
When they can't get to theearnings that they need to cover
(10:53):
the POMB draw, which has beenin four of the last six years,
when they can't get that,they're still covered.
I mean they don't worry aboutit.
From the business communitystandpoint, what they're seeing
is yeah, this is great.
I mean we get the 5% POMV drawregardless, so we don't have to
worry about taxes if thepermanent fund corporation fails
(11:13):
to do its job.
We just continue taking that 5%out every year, every year,
every year, regardless of whatthe permanent fund corporation
is doing.
So it's really a cover your assdeal for the Permanent Fund
Corporation in covering up thefact that they aren't generating
sufficient returns, either as aresult of failing to have good
(11:36):
investment strategy or as aresult of running too high costs
.
It's really covering up thePermanent Fund corporation's
failure.
Speaker 2 (11:45):
Rob just said and this is perfect.
I think Rob wins the internetfor today it's not set up to
protect the fund, it's set up toprotect the spend, and that
pretty much that pretty muchline.
That's it in a nutshell rightthere.
It protects the spend.
It takes away all the barriersto any future spend, to any kind
of, gives them no incentive tolive within their means or to
(12:07):
right-size government or doanything else.
This does nothing more thanprotect the current spending
habits which, as we've talkedabout in this program, are the
reason that we're here right now.
Speaker 1 (12:17):
Yeah, it protects the spend and it protects the
permanent fund corporation.
It eliminates the incentivesthat the permanent fund
corporation has to do its job.
And for those who haven't readit, the landmine column I did
last Friday shows the permanentfund corporation isn't doing its
job.
It's running deficient onreturns.
It's not pursuing a returnstrategy.
(12:39):
It's pursuing this is whatthey're doing.
It's pursuing a return strategythat justifies paying $860
million in fees to their friendsand neighbors to help them
manage the fund.
This proposal would do is justis protect them from that ever
being, ever coming, ever beingexposed or ever, ever affecting
(13:09):
uh, uh, the amount of uh, pomvdraw that the the legislature
can take and of course you do,randy.
Speaker 2 (13:16):
I think we should combine the two funds, because
that's the way other states andnations do it with their giant
sovereign wealth funds.
Did you?
Did you just miss all thepitfalls of what we're talking
about, Randy?
I mean, I'm just throwing thatout there.
I guess we should reward badbehavior, Brad.
That was Randy's argument manyyears ago is that we should just
(13:37):
give them as much money untilthey learn spending discipline.
Give them all the money theywant and eventually they'll
learn spending discipline.
That was essentially hiscommentary many years ago, but
that's where we're at right now.
That's what this would do.
This would prevent them fromhaving to do any kind of
self-analysis on their spendinghabits.
Speaker 1 (13:56):
Well, it's really sort of bizarre, michael.
We have this great protection.
Hammond and others that foundedthe Permanent fund built this
great protection in by sayingyou can't spend any more than
you earn.
That's essentially what it does.
The earnings reserve gathers inwhat's earned from the
permanent fund and that's thepot of money that can be spent.
(14:16):
You can't spend any more thanyou earn.
You can't invade the corpus.
The corpus continues to grow.
The corpus continues togenerate returns.
You can't spend any more thanyou earn.
That's the system we've set up.
That's the constitutionalprotection we have.
And now people want to takethat away.
They want to say that oh, ofcourse you can.
Of course you can spend morethan you earn.
(14:37):
You can go into the corpus.
For all that, you need to coverthis 5% draw, because we
wouldn't want to short anybody.
The 5% draw, the genius I mean.
What Randy and others wouldpropose doing is take away the
genius of the Alaska system, theprotection of the Alaska system
, by saying you can't spend anymore than you earn.
(15:01):
And Randy may want to do awaywith that, but it's not a good
strategy.
I wrote a column, probably overa year ago, that traced out if
we continue to have 4% returnsand we spent 5% of the 5% of the
corpus, or 5% as a POMB draw,and we only earned 4%.
(15:24):
How long the permanent fundwould last?
And it's not, it's like 25years.
It fades out fairly rapidly andthe numbers the POMV draw keeps
dropping down, down, down downas the corpus goes down.
But by gosh, they keep takingthat 5% out as they go.
Yeah, it's just, it's a simple.
It's a simple protection.
(15:46):
You can't spend any more thanyou earn.
Yeah, which?
Speaker 2 (15:50):
would, uh, which I thought.
Thought randy would be in favorof not spending any more than
we earn.
But uh, apparently it's.
Uh, it's all good.
Brad keithley, alaskans forsustainable budgets number two
of the weekly top three uh, wejust finished up talking about
the permanent fund and themetrics of that.
And then the second one isDelaina Johnson and I would
argue and company are choosingthe oil companies over Alaska
(16:13):
families.
What do you mean by that?
Speaker 1 (16:15):
So Delaina wrote an op-ed that was in the ADN this
weekend, the title of which isNow is not the time for Alaska
to raise oil taxes not the timefor Alaska to raise oil taxes.
And that follows on the typicalJoe Shearhorn Jim Jansen op-ed
of earlier in the week.
(16:36):
That said that had the titlestable oil and gas taxes in
Alaska have helped spur a NorthSlope boom.
Let's not jeopardize that.
Well, here's the deal.
And, Michael, if you have thatchart, let's throw it up.
And there we go.
So this chart and we've had iton the show before, but it makes
the point to me dramaticallythis chart shows, over the next
10 years starting in FY24, overthe next 10 years, projected
(17:00):
production volumes.
Those are on top.
Total production volumes are inblue.
Projected state productionvolumes from state lands are in
red and it shows projectedrevenues from that production in
terms of royalty and in termsof production taxes, severance
(17:20):
taxes.
On the bottom, in the dottedlines, the red is royalty, which
comes from state lands we don'tget royalty from federal lands
and the blue dotted line isproduction taxes from total,
from both state and federallands.
We get production taxes fromboth and what it shows is that,
(17:42):
while royalties are stayingfairly steady over the next 10
years, production taxes and thisis the state, this is the
Department of Revenue'sprojection.
It's not mine, it's not BillWilkowski's, it's not something
that somebody made up, it is thestate's forecast of production
(18:02):
tax revenues over the next 10years.
It shows that those productiontaxes are declining
substantially from nearly abillion dollars in FY24 all the
way down to less than $270million in FY31, before they
start coming back up a littlebit to $430 million by FY34.
(18:26):
In other words, a cut of nearlythree quarters before they
start working their way up backto about half of what they were
in FY24.
That's what the current taxcode is doing to production
taxes.
It's driving them down and downand down so that Alaskans, even
(18:48):
though production's going up bya huge percentage over the next
decade, the share that's goingto Alaskans of that production
through royalty and productiontaxes is going down dramatically
over the next decade.
So when Delaina and others saywhat's her headline when she
(19:11):
says now is not the time forAlaska to raise oil taxes, what
she's essentially saying is nowis the time for Alaska to suffer
a huge hit in the oil taxesit's receiving over the course
of the next decade and we knowspending isn't going to follow
that.
We know spending isn't going togo down at the same rate as
(19:31):
production taxes.
So who's going to take the hit?
Alaska families in one way oranother.
It's going to be in the form ofadditional PFD cuts, it's going
to be in the form of taxes ofsome sort on Alaska families.
But Alaska families are goingto be the ones to take the hit
out of trying to fill that gapthat's being created by the way
(19:53):
in which SB21 operates over thenext decade.
And so Delaina and others arelooking at it from the oil
company's perspective.
They're saying oh, we've got atax code that says X percent and
Y percent and G percent andthis exclusion and that
(20:13):
exclusion and this exclusion.
We want to keep that.
We want to keep those numbersall in place.
But look at what the impact is.
My point is look at what theimpact is.
The impact is that it's drivingproduction taxes down.
I don't think there is anybodywho's arguing for raising oil
(20:35):
taxes above the levels thatwe've experienced over the last
decade.
But now we've got through theproduction tax code, we've got
this driving drop in productiontaxes.
What it's time for is to adjustthe tax code so that Alaskans
continue to get a share ofrising production.
(20:56):
What it's time is for Alaskansto continue to receive about the
same level of revenues thatthey've received throughout as a
share of gross revenues, as ashare of production.
What Delaina and others arearguing is it's essentially is
it's time for Alaskans to takeless in oil taxes, take less
(21:19):
over the next decade, sufferdrops in oil taxes over the next
decade so the oil companies canmake more, the consequence of
which is Alaskans individuallywill have to pay more, either
through PFD cuts or personaltaxes on them to cover the
difference.
She's just looking at it fromthe state again, like the
(21:43):
Fairbanks Newsminer, they'rejust adopting talking points
from those who want to be ableto raid the corpus.
Delaina's just adopting talkingpoints from the oil companies.
She's not looking at the impacton Alaskans and on Alaska
families of what that tax code'sdoing over the next decade.
Speaker 2 (21:59):
Right, and of course, she's not offering any
guarantee that, well, we willlive within our means and we
will do no.
No, I mean, the costing and thebudgets of the state are going
to continue to increase.
It's I mean, it's a no-brainerat this point, and she's not.
Brian asks can Johnson backtheir argument with data, ie
(22:20):
charts, or are they arguing fromfields that they get from
lobbyists with spring in theircollective ears?
I think it's obviously thesecond one.
The oil companies are comingdown there because they don't
want to lose, they don't want tohave to pay more.
That's I mean, and that's theyshouldn't.
You know that should be theirposition, because they're a
private industry.
But we are the owners and thesepeople in the legislature are
(22:42):
supposed to be ourrepresentatives as owners and
they should be getting themaximum yield possible, and
instead they're saying well, no,no.
They said that they'll taketheir ball in their bat and
they'll go home if we increasethe oil taxes.
That's not going to happen.
That's not with the investmentsthat they've got in there and
everything else.
And we're not talking aboutgouging them, as Brad said.
(23:02):
We're talking about bringing itback to the equitable position.
It was the last 10 years.
Speaker 1 (23:07):
Yeah, here's the deal .
Michael.
I mean, shearhorn and Jensenhave a sentence in their
argument that says somethingabout after five years, we'll
start seeing the benefits ofwhat we've done with production
taxes.
And what they're really excuseme, what they're really talking
about is that increase inproduction, increase in the blue
(23:30):
line, you see well, at about2028, the jump from the 400s up
to the 500s and then thecontinued jump up to the 600s by
2035.
That's what they're reallytalking about.
They're saying there will be abenefit and it'll be a benefit
in terms of increased production, but the problem is the tax
(23:52):
code isn't tied to production.
The tax code's tied to a bunchof other things that in 2013,
made sense.
But once we get to thisenvironment, the second decade,
once we get to this environment,no longer make that much sense.
And what happens in 2028 isproduction taxes keep going down
, even though production volumesare going up.
(24:13):
Production taxes are going downand they make the leap from.
Well, production volumes go up.
Everybody's going to benefit inthat.
No, they're not Right.
Look at the numbers.
Look at the Department ofRevenue numbers.
Speaker 2 (24:24):
They scream and say look, we're going to increase
our production by 25 or 30%, yes, but our take on it is going to
be 60%, less than what we'remaking today.
It's going to go up 25 to 30%,but our take is going from
almost a billion dollars down to$27, 270 million.
I mean, that's a huge, huge hit.
(24:47):
And they just like oh, and it'snot about velocity, we're not a
grocery store where we sellmore, we'll make more.
We sell more gas, but if wedon't have the right tax
structure, we're taking 70percent less than what we would
have been.
Speaker 1 (25:02):
They're leveraging up on this assumption that the oil
companies and some legislatorshave always made that as long as
production goes up, alaskanswill benefit.
Alaskans will see the benefits,will see the payback on what
they've done in terms of oiltaxes once production starts
rising.
And that's been the generalmantra that the oil companies
(25:26):
and others have pitched andthey're still pitching.
But when you look at the actualnumbers, delaina, when you look
at the actual numbers, you'reseeing the production taxes are
going down.
So if you really want to liveup to your title of your piece,
now is not the time for Alaskansto raise oil taxes of your
(25:48):
piece.
Now is not the time forAlaskans to raise oil taxes.
Well, it's also not the timefor Alaskans to reduce oil taxes
, which is what's going on underSB21.
With the provisions of SB21,over the next decade, let's just
keep the share that Alaskanshave of production revenues at
the same level that we've hadover the last decade, as opposed
to seeing this sort of collapsein those revenues over the next
(26:12):
decade.
Speaker 2 (26:12):
One of the big problems here, of course, is
that a lot of this newproduction is going to be coming
off of federal land versusstate land, right, so it's kind
of a different critter in thatregard.
Speaker 1 (26:24):
Well, it's not going to bump.
So, yeah, the federal land isthe difference between on the
top, the difference between thered line on the top and the blue
line on the top.
The red line state lands and theblue line is total.
So the difference between thosetwo is federal lands and what
you can see is that's notbumping royalties because we
don't get royalties out offederal lands and so royalties
are staying relatively flat,consistent with what the red
(26:47):
line on the top is doing.
But we do get production taxesout of production, off of
federal lands, and what you'reseeing is, even though that
production is going up, eventhough federal production,
federal lands production isgoing up, revenues are going
down.
Revenues from that productionare going down, and it's because
of the way SB21 operates.
(27:08):
What we need to do is go backin, look under the hood, fix
SB21 to provide the same shareof revenues to Alaskans out of
production that we had in thelast decade, that we had when
SB21 is set up.
We've just had some things gowrong with the way SB21 is
operating.
So if you want Alaskans tocontinue to benefit from
(27:31):
increased production, then weneed to go fix those things that
have gone wrong in SB21.
Speaker 2 (27:38):
This chart kind of says it all right here.
I mean it really does.
It just kind of lays it all out.
This is the problem.
I agree with you.
Uh, brian.
Brian said uh, can johnsonbacker argument with data charts
or no, it's all about thefields or what the lobbyists are
telling her at this point,because that chart right there
was enough to tell youeverything you needed to know
(27:59):
about what was going on with uhalaska, uh oil and the revenues
and where we're going on in thefuture.
It's astonishing.
We are coming back to BradKeithley Alaskans for
Sustainable Budgets, the weeklytop three.
We're on to number three,although I was just going to
(28:20):
make a comment on Anthony'scomment in the chat room.
He said the most frustratingpart is that everyone can
clearly see we're on a sinkingship fiscally and the crew is
telling everyone to remain calmbut the captain refuses to
return to land and instead ofdoing the same thing, it lets
hubris kill us all.
I mean that's kind of wherewe're at right now.
Um, I wouldn't disagree withthat, brad.
I mean kind of that's.
That's kind of par for thecourse at this point no, it is
(28:41):
michael.
Speaker 1 (28:41):
Everybody's, everybody's out for themselves.
Uh, in the?
In the case of the last segmentthat we talked about, the
Permanent Fund Corporation isout to protect its ass by being
able to continue to pay allthose fees to its consultants
and eliminate any incentives tohave higher earnings.
The business community is outto save its ass by having the
(29:02):
continued POMB draw, regardlessof what earnings are.
Everybody's trying to savethemselves.
Unfortunately, it's Alaska.
Families are getting screwed inthe process.
Speaker 2 (29:13):
Number three in the weekly top three.
Notice how you haven't heard alot about Cook-Henley Gas.
All of a sudden it just seemedlike that disappeared right off
the table.
It was a big topic, it was abig talking point, there was
articles all over the place andnow it's like, hmm, got super
quiet, brad.
Speaker 1 (29:33):
Yeah.
So, michael, we had at thebeginning of the year and all
throughout the session last year, we had all these various
proposals to give rebates onroyalty in order to encourage
production in the Cook Inlet andall sorts of other things A lot
of drive at one point for phaseone of the AKLNG line that
(29:57):
would bring gas down to SouthCentral and save us all.
And then, and over the courseof and you and I argued
throughout that that let's justlet the market work.
The market will bring productsto the Cook Inlet.
That will solve the problem ifwe just let the market work, if
(30:18):
we don't interfere with it, ifwe don't try to subsidize our
way to a solution.
And over the past month or so,I noticed that the cook inlet
hadn't made any of the topthrees.
It hadn't been the topic thatpeople were talking about or
people were writing about, orthat legislation was progressing
on that just suddenly had gone,or for a period of time, and
(30:39):
had gone quiet.
And I thought, and I think, andI thought it was useful to
think it's useful, uh, torecognize why that is.
It's because the markets worked.
There's an op-ed piece in theAMN from this past week that was
written by Arthur Miller andMark Wiggin of Chugach Electric
Association and it says whatwe're doing.
(31:01):
The title of it is what we'redoing to secure a natural gas
supply for South Central Alaska.
The title of it is what we'reDoing to Secure a Natural Gas
Supply for South Central Alaska.
And it goes on to talk aboutthe deal that they're working
with Marathon PetroleumCorporation, who owns the Kenai
refinery, certainly, but alsoowns the Kenai LNG plant that
sits next to the refinery, thatChugach is working with Marathon
(31:29):
and with Hillcorp, who proposesto buy that LNG facility and
turn it into an import facilityto bring imported LNG into
imported gas into the SouthCentral to solve our problem and
the progress they're making onit.
And they're making a lot ofprogress and they're making
progress on it in the frame thatChugach needs that gas to avoid
the gap.
(31:49):
I've got to commend, frankly,chugach Electric Association for
the transparency with whichthey've approached this problem.
They've been transparent fromthe beginning not always timely,
but transparent from thebeginning about the problem as
they see it and about thevarious steps they're taking to
deal with the solution.
And this latest op-ed fromWiggin and from Miller is
(32:13):
another example of that, anotherstep in the transparency.
But basically what they'resaying is we got this, guys.
We got this.
We've got to deal with Marathon.
We've got an existing Kenai LNGplant that we can utilize.
We can turn it around.
It's already FERC approved tobe turned around to become an
import plant.
Marathon and Hillcorp haveworked out a sales arrangement
between the two.
We're working out arrangementswith them for using that plant
(32:37):
to bring in gas to meet ourneeds.
And we got this.
We don't need any governmentbailout, we don't need any
government subsidies, we don'tneed any input from ADA or we
don't need any royalty relieffrom the legislature.
We got this.
That's our job.
That's what we're supposed todo.
We're supposed to cover our gassupply.
(32:58):
We got it.
We're doing it.
Nstar is doing it in adifferent way.
I'm not sure their way is goingto turn out to be as successful
.
But fortunately the Kenai LNGplant is scalable.
You can add to it, add to itscapacity as we go on, if others
find it useful to do that.
So I think what we found is themarket works and all of the
(33:24):
hand-waving and all of thelegislation that people
introduced and all of theconcern people had about Cook
Inlet going gasless or havingoutages just didn't work out to
be the case.
Once you let the market as youlet the market solve it.
I think that's a lesson bothfor this situation and for other
(33:47):
situations down the road.
There's one other article onthis that I think is useful.
It's in the Peninsula Eclarium.
Headline is Michecki reportsback on South Central Mayor's
Energy Coalition and it's whenthe crisis started, when people
started being concerned aboutrunning out of gas in south
(34:10):
central.
The south central mayors formedthis coalition.
Anchorage wasilla, uh, palmer,kenai and others formed this
coalition to look at the issueand to look at uh, to look at
solutions to it, and maceChickeyhas had a report back to in
some forum recently to talkabout it and basically it was
(34:32):
the same thing.
Basically, we got it, the marketgot it.
We're solving it throughshort-term hopefully short-term
LNG imports, but they're beingdone in a way that if they need
to be long-term, they can be,because we're using an existing
facility that's scalable.
We're not going to have tobring trucks over the Alaska
(34:55):
Highway, we're not going to haveto do outrageous things.
We've got it and over time itmay be that we find that that
co-content supplies can bedeveloped at reasonable costs
and can fit into the into thesupply mix.
Over time we may find that theAKLNG line is built for its
(35:18):
bigger purpose of exporting gasand it can fit into the mix.
But in the meantime excuse me,in the meantime we've got this.
In the meantime, the market hasfound the solution.
So I find that encouragingexcuse me that we let the market
find the solution in this stateand that the market did find
(35:41):
the solution in the states.
It's not the perfect solution.
It's not the solution everybodywants.
It's not Alaska gas in the main, but it is better than having
blackouts and going dark.
It's better than huge statesubsidies paid either to cook
inlet producers or paid to builda phase one of the AKL and
(36:04):
G-Line, especially given thefiscal problems we're facing in
this state.
Well-developed solution thatwe're coming to, and one that I
think we ought to applaud atleast people who believe in
(36:28):
market solutions ought toapplaud as showing that the
market can work if you just letit have the opportunity to do so
.
Speaker 2 (36:31):
No, I mean I agree.
I think this is good and evensome of the things that was in
this report from the PeninsulaClarion.
It talks about the economics.
I mean, while it's PeninsulaClarion, it talks about the
economics.
I mean, while it's technicallyrecoverable the gas on the North
Slope it's not economicallyrecoverable at this point.
And they acknowledged that theimportation, even if it was just
on a short-term basis, was theonly way to stymie and to stave
(36:55):
off this shortfall of gas.
And it looks like I mean big,big kudos to Chugach and
everybody else outside of this.
Again, enstar is kind of stilldoing their own thing.
I don't know exactly whatthey're doing.
They're still talking about agas line and everything else.
But again, even Machicky inthis report said that the
(37:18):
projections of having gas by2031 might be rosy.
Might be rosy.
Come on, I mean that's sixyears away.
There's no way they're going tohave first gas deliverables on
a gas pipeline that you haven'teven permitted or broken ground
on in six years, not in this dayand age.
I know they built taps in threeor four years, but it's a whole
(37:41):
different world than it wasback in the 70s.
At this point I mean it's justnot going to happen.
Speaker 1 (37:47):
Yeah, NSTAR is off doing a deal with Glenfarn.
That is the way the explanationof it is sort of evolving.
Is it's phase zero of the issort of evolving.
It's phase zero of the AK LNGproject.
What they're talking about isbuilding an LNG import facility
(38:14):
at the site of where the AK LNGfacility would export gas, Build
an import facility to importgas for NSTAR for a period of
time and then turn that backover into an export facility
once the big line was built.
I'm not sure if that's tied tothe big line, if the big line
never goes, whether thatfacility ever gets built.
What Shoe Gatch has done isgone out to something that's
solid, a facility that sitsthere, a facility that exists,
(38:37):
and made a deal with Marathonand with Hillcorp to use that
sits there, a facility thatexists, and made a deal with
Marathon and with Hillcorp touse that existing facility
something we talked about fromthe beginning of this whole
issue.
Speaker 2 (38:44):
Right, right and again, not looking for any
bailouts or monies from thestate or from the federal
government or anything else.
They're doing it all withprivate money and they're doing
it on their own.
So again, the free market wins,as we have advocated for in
this show for a long time theirown.
So again, the free market wins,as we have advocated for in
this show for a long time.
The free market wins, and as itshould.
(39:05):
I know this has been floatingaround.
Rick was like Taiwan signed on.
You know, taiwan just signed agas purchase agreement, not a.
They didn't sign on for thepipe, they didn't sign on to
build any line.
They just raised their hand andsaid, sure, we'd love to buy
gas from the pipeline when it'sthere.
But this is the same kind ofthing we've seen since the
Walker administration.
Right, brad?
I mean he had contracts in handfrom Japan and other places.
(39:26):
Well, sure, if you build it,we'll buy gas from you.
But I mean that's an easy sellbecause they'll sure I'll sign
it.
When are you going to build it?
There's no idea.
It's a kudos and it's a featherin their cap to say we signed
the deal, but are they evergoing to be held to it because
the gas line doesn't exist.
Speaker 1 (39:44):
We signed a letter of intent with Taiwan.
We're probably going to sign aletter of intent with Korea.
It's the same thing Walker didwith China back during his
period.
The problem is, you sign aletter of intent.
The letter of intent is we willstudy getting into this project
(40:05):
and taking gas from thisproject.
Once you get into this project,once you start studying the
project, you understand theeconomics are horrible.
The economics of building thatline, the economics of making
the commitment to buy, theeconomics of of of building that
line, the economics of of ofmaking making the commitment to
buy the chunk of gas you have tobuy for the period you have to
(40:26):
buy it to pay that line off, uh,are horrible, is horrible.
There are much better dealselsewhere in the world.
So what's really going on, in myopinion, is they're signing
these letters of intent so theycan tell Trump yes, we're trying
, we're looking at it, we'restudying it.
Don't take it out on us.
We're trying to be goodneighbors, we're trying to be
(40:48):
good customers and we're digginginto it.
But you know we can't doanything.
That's not in our economicinterest.
So we need to study it and justlike Walker's deals with China
and the others did.
Over time they'll fade out.
We'll barely notice when theyexpire because it will become
(41:13):
obvious that it's not economic.
So I take, I take these lettersof intent that they've entered
into with a grain of salt andsay, yep, I understand why
they're doing that, I understandthe political nature of it, but
I'm going to wait till you showme the dollars.
Show me the actual dollars thatyou're spending on this stuff,
the actual 40 billion or 60billion or whatever it might be,
(41:34):
by the time you do theevaluation again.
Show me those dollars and thenI'll get excited about it, but
up until then it's just Walker,phase two.
Speaker 2 (41:44):
Well, because again, I mean I think Rick asked a good
question how do they recovertheir cost invested?
I mean, even if they did pledgebillions of dollars to do it,
how do they?
A sovereign nation?
How do they recover their costsin that?
I mean, is it free gas?
How is their cost recovery work?
I mean, it seems very amorphousto me.
Speaker 1 (42:05):
Well, what it is is they invest in the line.
I mean, the theory is theyinvest in the line, they get
tolls, payments for the usage.
As an investor, they'll receivea portion of the revenues or a
portion of the profits from theoperation of the line.
So it's an investment by them,just like it would be an
investment by a private company,and they would enter into
contracts to buy gas atcompetitive prices, and so they
(42:28):
get a gas supply and they get areturn on their investment
through the tolls from thepipeline.
But the problem is the tollsfrom the pipeline are going to
be pretty low.
I mean, the receipts from thepipeline are going to be pretty
low.
The gas, after you take intoaccount the pipeline costs, are
going to be pretty high.
And so at the end of it youfigure out that, okay, I've got
(42:51):
to commit for like 25 years tobuy this high-priced gas and the
only thing I'm going to getback from it are these tolls
from the investment in thepipeline that are going to be
low.
Just not a good deal.
So I mean, we've been down thisroad before.
We were down this road withWalker when he had all of these
letters of intent.
We know where this road goes.
Speaker 2 (43:11):
Yeah, yeah, no.
So I saw the headlines and itwas, you know.
I think people were like, oh,yay, uh, it's, it was.
You know.
I think people were like oh,yay, yay.
And I'm like wait, we've beenhere, we've been here, we've
done this, and uh, it is, uh,it's an interesting thing.
And yes, go ahead.
Speaker 1 (43:28):
Well, the only thing different this time that the
people will say oh, it's Trump.
Trump's going to force them todo it, or else he'll tear up the
amount of existence.
You'll do something.
The problem is, what you'reasking them to do is enter into
25-year commitments based upon afour-year presidential term.
If we've seen anything in thisnation, it is that we can change
(43:48):
policies on a dime.
So you enter into this 25-yearcontract, make this 25-year
commitment and you're onlyworried about the four-year
segment of Trump commitment, andyou're only worried about the
four-year segment of Trump.
And then, let's say, someDemocrat comes in or some
moderate Republican comes in atthe end of that four years and
all of a sudden, everything'schanged and all of the benefits
(44:09):
you thought you were going toget in terms of favored tariff
nation or favored tariff statusor something, go away.
But you've got this 25-yearcommitment, financial commitment
that you've made in themeantime, that's I mean at the
end of the day, that's what'sgoing to hit home with these
concerns.
Speaker 2 (44:26):
And there's, of course, the military aspect.
Brian brings that up From theTaiwanese perspective.
They need and want moremilitary aid, and this purchase
agreement buys favors with theadministration and the Congress
critters.
Yeah, I mean, it's exactly whatthey want.
They want protection from chinain their backyard, and so
they're hoping that they'll doeverything they can to uh, to
(44:47):
make it uh, you know, to make itlook more attractive, to help
them but once again, it's a 25year commercial commitment to
take this gas compared to afour-year time frame.
Speaker 1 (44:57):
yeah, this presidential term, and it's just
you have a tough time makingthose numbers work.
Speaker 2 (45:02):
Yeah, no, I agree.
All right, brad.
Well, it sounds like you got abit of a cold from your flight
or whatever, so you need to takesome Theraflu or whatever.
I'm sure there's some kind ofScottish remedy there that you
could take.
There is Michael and I may gotake some of that remedy here
after the show hot toddy and golay down for a little bit, so
(45:25):
you're all vented and ready togo.
Uh, brad, thanks so much forcoming on board and we look
forward to your, uh, to yourreport on your tour when you
come back.
Okay.
Speaker 1 (45:34):
Michael, thanks for having me and I look forward to
seeing you again in a couple ofweeks all All right.
Speaker 2 (45:38):
Thanks, my friend.
Appreciate it, enjoy.
Have a good time.
Thanks for coming on.
Speaker 1 (45:43):
Well, that's a wrap for another week's edition of
the Weekly Top Three fromAlaskans for Sustainable Budgets
.
Thank you again for joining us.
Remember that you can find pastepisodes on our YouTube,
soundcloud, spotify and Substackpages, and keep track of us
during the week on Facebook andTwitter.
This has been Brad Keithley,managing Director of Alaskans
for Sustainable Budgets.
(46:04):
We look forward to you joiningus again in three weeks for the
next edition of the Weekly TopThree.
Thank you.
Hi, this is Brad Keithley, managing Director of
Alaskans for Sustainable Budgets.
Welcome to the Weekly Top Threethe top three things on our
mind here at Alaskans forSustainable Budgets for the week
of March 24th 2025.
The Weekly Top Three is aregular segment on the Michael
Duke show.
The show broadcasts on bothFacebook live and YouTube live,
(00:31):
as well as via streaming audiofrom the show's website weekdays
from six to 8 am.
I joined Michael weekly in thefirst hour of Tuesday show from
six 10 to 7 am For discussionbetween the two of us about our
three issues.
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, youtube,
(00:52):
soundcloud, spotify and Substackpages.
Also on the Alaskans forSustainable Budgets website, as
well as the project page onnational blog site mediumcom,
you can find past episodes ofthe weekly top three also at the
same locations.
Keep in mind that, in additionto these podcasts during the
week, you can also follow andparticipate in the discussion
(01:14):
with us of these and otherissues affecting Alaska's fiscal
and economic condition byfollowing us on the Alaskans for
Sustainable Budgets Facebookpage and through our posts on
Twitter.
This week, our top three issuesare these First, we explain why
the proposal to combine thePermanent Fund, corpus and
Earnings Reserve both puts thecorpus at risk and undermines
(01:37):
important incentives for thePermanent Fund Corporation.
Second, we explain howRepresentative Delaina Johnson
and other Republicans areignoring important data to put
the interests of the oilcompanies ahead of fairness to
Alaska families.
And third, we explained why wearen't hearing much about Cook
Inland Gas in this session.
Spoiler alert it's because themarket solved the problem.
(01:59):
For your information, followingthis episode, we are taking a
three-week break from the showto go on a tour of Ireland.
We will return to our seat andbe ready to go again on Tuesday,
april 15th.
And now let's join Michael.
Speaker 2 (02:14):
Let's dive into today's topics, Brad.
The first and foremost isapparently the Fairbanks Daily
Newsminer needs to take aremedial finance course, and
that's because they apparentlycan't figure.
Now I'll be honest with you,Brad.
I didn't read this whole storybecause I refuse to give the
Newsminer any money and theywon't give you a single story
(02:36):
for free.
They had an opinion piece thatwas talking about the permanent
fund.
Give us the full rundown here.
What's going on?
Speaker 1 (02:43):
So the headline of it is this is an opinion piece
from the Newsminer from over theweekend and the headline is the
case for consolidating thepermanent fund and we're seeing
a big push this session,increasingly this session, for
an effort to behind an effort toconsolidate the earnings
reserve and the permanent fundcorpus into a single account and
(03:06):
treat that as the permanentfund going forward.
What that would do is take awaythe safeguards that are in the
Constitution currently toprotect the corpus and allow the
legislature only access to theearnings reserve the earnings
that are generated by thepermanent fund, only access to
the earnings reserve theearnings that are generated by
(03:27):
the permanent fund.
It would eliminate thatsafeguard that's in the
Constitution currently, mergethe two together and allow the
legislature to start drawingfrom the corpus down the road
when earnings being generatedaren't sufficient to cover the
POMV draw.
This whole thing is beinggenerated.
In my opinion, this whole thingis being generated by the fact
(03:48):
that in five of the last sixyears I think it is the
permanent fund hasn't earnedenough to cover the POMV draw.
So between a combination ofthat and they've continued to
take the POMV draw, but betweena combination of not earning
enough to cover the POMV drawand the $8 billion that we've
(04:09):
talked about on previous showsthat the legislature took out of
the earnings reserve and movedover to the corpus on an ad hoc
basis, ostensibly to prepay forinflation proofing.
But the permanent fund isn'ttreating it that way, it's just
treating it as their money.
Now, as a result of drainingthe earnings reserve over the
last few years, between notearning enough and that $8
(04:32):
billion ad hoc draw, theearnings reserve is getting down
to a level that if thepermanent fund continues not to
earn enough to cover the POMVdraw, the earnings reserve won't
have enough to cover the POMVdraw.
So there's a lot of concernabout that in the legislature.
(04:53):
There's a lot of concern aboutthat constitutional protection
against getting at the corpus.
So the proposal is to merge theearnings reserve and the corpus
together so that when thecorpus or when the earnings
reserve when the earningsdoesn't cover the POMV draw
isn't enough to cover the POMVdraw, what the legislature will
(05:16):
be able to do is to go into thecorpus and start drawing down
the corpus.
Say, for example, as hasoccurred over the last several
years, the permanent fund onlyearns a 4% return on the
principal on the assets undermanagement, the POMV draw is 5%.
So if you're only generating a4% earnings and the POMV is a 5%
(05:39):
draw, obviously you've got apercentage shortage there.
What the proposal would dowould be to merge the two so
that when there's a percentshortage that the legislature
can then go in and take thatpercent out of the corpus and
continue to generate, continueto take 5% out of the permanent
(06:00):
fund on an ongoing basis.
The news minor goes off on thiseditorial that says this would
be a good thing, consistent withthe talking points that the
business community and otherswho want continued POMV draws.
The news minor goes off on thistangent and talks about how it
(06:22):
would be a good thing, and oneof the things they say here is
this First, it would protect thefund's principle, ensuring the
state's oil wealth continues togenerate returns indefinitely.
It does the exact opposite ofthat.
It doesn't protect theprinciple.
It enables the legislature toget at the principle to cover
(06:47):
any shortfall in the earningsreturns.
So I think the news minorreally has missed the whole boat
here.
I mean, all they're doing isrepeating talking points that
we've seen the supporters ofthis proposal come out with.
(07:08):
The supporters of this proposalcome out with and really is not
focusing on what actually isgoing on from a financial
standpoint.
There's a couple of otherthings that really bother me
about this One it eliminates thepermanent fund corporations
incentive to maximize returns.
If they don't get five nowcurrently, if they don't get 5%,
we start running into problemslike this.
We start running into theconstitutional protection that
(07:29):
we currently have that protectsthe corpus and so the permanent
fund.
As we wrote in our column lastweek in the Alaska Landmine, the
permanent fund really needs toget its act in shape and really
needs to begin to improve itsearnings.
Consolidating the two accountstogether would eliminate that
(07:50):
incentive.
Permanent fund corporationwouldn't care if they earn 2%,
3%, 4%, 15% in any given year,because it's all going to be
covered by the POMV draw.
It's all going to be covered bycovering the deficiency any
deficiency out of the corpus.
It also disincentivizes thepermanent fund corporation from
(08:11):
worrying about costs.
We've talked on the show aboutthe permanent fund corporation's
costs being massive.
Right now they're spending $860million per year in fees and
consulting agreements and thatsort of stuff to undertake their
(08:35):
current program.
That reduces earnings.
I mean that $860 million comesstraight out of earnings cuts
the bottom line.
So if you are worried aboutearnings and if you have to
focus on earnings, you worryabout the cost.
You worry about reducing that$860 million so you can increase
(08:55):
your returns, so you can meetthe POMV draw.
If you merge the two accountstogether and you don't have to
worry about covering the POMVdraw anymore, at least in the
near future, and you don't haveto worry about covering the POMV
draw anymore, at least in thenear future, and you don't have
to worry about covering the POMVdraw anymore, you forget about,
you don't worry about costs,because costs aren't driving.
Costs may be driving down yourreturn, but it's not affecting
(09:16):
your ability, affecting thelegislature's ability to go get
5% out of the permanent fund.
So I think the news miner, byjust regurgitating the talking
points that someone gave them,is really missing the boat.
They aren't thinking throughthe fiscal consequences, the
financial consequences of whatthis proposed merger would do
(09:37):
and they're leaving Alaskans atrisk of having the corpus
reduced every year that we don'thave earnings sufficient to
cover the POMB draw.
Speaker 2 (09:46):
Well and I mean I think that's blatantly obvious
in what you just pointed outthat, oh, this will protect the
principal.
No, this does exactly theopposite.
I mean, this has been whatwe've been warning about this
whole time is that if you mergethe funds and eliminate the
barrier, you then start peckinginto the seed corn.
That's you know what createsthe fund and allows it to earn
(10:10):
money, and 1% at a time.
If you start cutting into thatand again it removes all
restrictions on government,because that was part of what
the ERA function was waslimiting them to whatever was in
the earnings reserve.
They couldn't go beyond thatand they had to live within
their means.
This is just another method ofkicking.
Function was was limiting themto whatever was in the earnings
reserve.
They couldn't go beyond thatand they had to live within
their means.
This is just another method ofkicking the can down the road.
Speaker 1 (10:30):
Yeah, it's really a cover your ass.
It's a cover your ass for thepermanent fund corporation when
they can't get to 5% returns,either because they aren't
following a good strategy interms of developing reserves or
because their costs are way toohigh and eating their reserves.
When they can't get to theearnings that they need to cover
(10:53):
the POMB draw, which has beenin four of the last six years,
when they can't get that,they're still covered.
I mean they don't worry aboutit.
From the business communitystandpoint, what they're seeing
is yeah, this is great.
I mean we get the 5% POMV drawregardless, so we don't have to
worry about taxes if thepermanent fund corporation fails
(11:13):
to do its job.
We just continue taking that 5%out every year, every year,
every year, regardless of whatthe permanent fund corporation
is doing.
So it's really a cover your assdeal for the Permanent Fund
Corporation in covering up thefact that they aren't generating
sufficient returns, either as aresult of failing to have good
(11:36):
investment strategy or as aresult of running too high costs
.
It's really covering up thePermanent Fund corporation's
failure.
Speaker 2 (11:45):
Rob just said and this is perfect.
I think Rob wins the internetfor today it's not set up to
protect the fund, it's set up toprotect the spend, and that
pretty much that pretty muchline.
That's it in a nutshell rightthere.
It protects the spend.
It takes away all the barriersto any future spend, to any kind
of, gives them no incentive tolive within their means or to
(12:07):
right-size government or doanything else.
This does nothing more thanprotect the current spending
habits which, as we've talkedabout in this program, are the
reason that we're here right now.
Speaker 1 (12:17):
Yeah, it protects the spend and it protects the
permanent fund corporation.
It eliminates the incentivesthat the permanent fund
corporation has to do its job.
And for those who haven't readit, the landmine column I did
last Friday shows the permanentfund corporation isn't doing its
job.
It's running deficient onreturns.
It's not pursuing a returnstrategy.
(12:39):
It's pursuing this is whatthey're doing.
It's pursuing a return strategythat justifies paying $860
million in fees to their friendsand neighbors to help them
manage the fund.
This proposal would do is justis protect them from that ever
being, ever coming, ever beingexposed or ever, ever affecting
(13:09):
uh, uh, the amount of uh, pomvdraw that the the legislature
can take and of course you do,randy.
Speaker 2 (13:16):
I think we should combine the two funds, because
that's the way other states andnations do it with their giant
sovereign wealth funds.
Did you?
Did you just miss all thepitfalls of what we're talking
about, Randy?
I mean, I'm just throwing thatout there.
I guess we should reward badbehavior, Brad.
That was Randy's argument manyyears ago is that we should just
(13:37):
give them as much money untilthey learn spending discipline.
Give them all the money theywant and eventually they'll
learn spending discipline.
That was essentially hiscommentary many years ago, but
that's where we're at right now.
That's what this would do.
This would prevent them fromhaving to do any kind of
self-analysis on their spendinghabits.
Speaker 1 (13:56):
Well, it's really sort of bizarre, michael.
We have this great protection.
Hammond and others that foundedthe Permanent fund built this
great protection in by sayingyou can't spend any more than
you earn.
That's essentially what it does.
The earnings reserve gathers inwhat's earned from the
permanent fund and that's thepot of money that can be spent.
(14:16):
You can't spend any more thanyou earn.
You can't invade the corpus.
The corpus continues to grow.
The corpus continues togenerate returns.
You can't spend any more thanyou earn.
That's the system we've set up.
That's the constitutionalprotection we have.
And now people want to takethat away.
They want to say that oh, ofcourse you can.
Of course you can spend morethan you earn.
(14:37):
You can go into the corpus.
For all that, you need to coverthis 5% draw, because we
wouldn't want to short anybody.
The 5% draw, the genius I mean.
What Randy and others wouldpropose doing is take away the
genius of the Alaska system, theprotection of the Alaska system
, by saying you can't spend anymore than you earn.
(15:01):
And Randy may want to do awaywith that, but it's not a good
strategy.
I wrote a column, probably overa year ago, that traced out if
we continue to have 4% returnsand we spent 5% of the 5% of the
corpus, or 5% as a POMB draw,and we only earned 4%.
(15:24):
How long the permanent fundwould last?
And it's not, it's like 25years.
It fades out fairly rapidly andthe numbers the POMV draw keeps
dropping down, down, down downas the corpus goes down.
But by gosh, they keep takingthat 5% out as they go.
Yeah, it's just, it's a simple.
It's a simple protection.
(15:46):
You can't spend any more thanyou earn.
Yeah, which?
Speaker 2 (15:50):
would, uh, which I thought.
Thought randy would be in favorof not spending any more than
we earn.
But uh, apparently it's.
Uh, it's all good.
Brad keithley, alaskans forsustainable budgets number two
of the weekly top three uh, wejust finished up talking about
the permanent fund and themetrics of that.
And then the second one isDelaina Johnson and I would
argue and company are choosingthe oil companies over Alaska
(16:13):
families.
What do you mean by that?
Speaker 1 (16:15):
So Delaina wrote an op-ed that was in the ADN this
weekend, the title of which isNow is not the time for Alaska
to raise oil taxes not the timefor Alaska to raise oil taxes.
And that follows on the typicalJoe Shearhorn Jim Jansen op-ed
of earlier in the week.
(16:36):
That said that had the titlestable oil and gas taxes in
Alaska have helped spur a NorthSlope boom.
Let's not jeopardize that.
Well, here's the deal.
And, Michael, if you have thatchart, let's throw it up.
And there we go.
So this chart and we've had iton the show before, but it makes
the point to me dramaticallythis chart shows, over the next
10 years starting in FY24, overthe next 10 years, projected
(17:00):
production volumes.
Those are on top.
Total production volumes are inblue.
Projected state productionvolumes from state lands are in
red and it shows projectedrevenues from that production in
terms of royalty and in termsof production taxes, severance
(17:20):
taxes.
On the bottom, in the dottedlines, the red is royalty, which
comes from state lands we don'tget royalty from federal lands
and the blue dotted line isproduction taxes from total,
from both state and federallands.
We get production taxes fromboth and what it shows is that,
(17:42):
while royalties are stayingfairly steady over the next 10
years, production taxes and thisis the state, this is the
Department of Revenue'sprojection.
It's not mine, it's not BillWilkowski's, it's not something
that somebody made up, it is thestate's forecast of production
(18:02):
tax revenues over the next 10years.
It shows that those productiontaxes are declining
substantially from nearly abillion dollars in FY24 all the
way down to less than $270million in FY31, before they
start coming back up a littlebit to $430 million by FY34.
(18:26):
In other words, a cut of nearlythree quarters before they
start working their way up backto about half of what they were
in FY24.
That's what the current taxcode is doing to production
taxes.
It's driving them down and downand down so that Alaskans, even
(18:48):
though production's going up bya huge percentage over the next
decade, the share that's goingto Alaskans of that production
through royalty and productiontaxes is going down dramatically
over the next decade.
So when Delaina and others saywhat's her headline when she
(19:11):
says now is not the time forAlaska to raise oil taxes, what
she's essentially saying is nowis the time for Alaska to suffer
a huge hit in the oil taxesit's receiving over the course
of the next decade and we knowspending isn't going to follow
that.
We know spending isn't going togo down at the same rate as
(19:31):
production taxes.
So who's going to take the hit?
Alaska families in one way oranother.
It's going to be in the form ofadditional PFD cuts, it's going
to be in the form of taxes ofsome sort on Alaska families.
But Alaska families are goingto be the ones to take the hit
out of trying to fill that gapthat's being created by the way
(19:53):
in which SB21 operates over thenext decade.
And so Delaina and others arelooking at it from the oil
company's perspective.
They're saying oh, we've got atax code that says X percent and
Y percent and G percent andthis exclusion and that
(20:13):
exclusion and this exclusion.
We want to keep that.
We want to keep those numbersall in place.
But look at what the impact is.
My point is look at what theimpact is.
The impact is that it's drivingproduction taxes down.
I don't think there is anybodywho's arguing for raising oil
(20:35):
taxes above the levels thatwe've experienced over the last
decade.
But now we've got through theproduction tax code, we've got
this driving drop in productiontaxes.
What it's time for is to adjustthe tax code so that Alaskans
continue to get a share ofrising production.
(20:56):
What it's time is for Alaskansto continue to receive about the
same level of revenues thatthey've received throughout as a
share of gross revenues, as ashare of production.
What Delaina and others arearguing is it's essentially is
it's time for Alaskans to takeless in oil taxes, take less
(21:19):
over the next decade, sufferdrops in oil taxes over the next
decade so the oil companies canmake more, the consequence of
which is Alaskans individuallywill have to pay more, either
through PFD cuts or personaltaxes on them to cover the
difference.
She's just looking at it fromthe state again, like the
(21:43):
Fairbanks Newsminer, they'rejust adopting talking points
from those who want to be ableto raid the corpus.
Delaina's just adopting talkingpoints from the oil companies.
She's not looking at the impacton Alaskans and on Alaska
families of what that tax code'sdoing over the next decade.
Speaker 2 (21:59):
Right, and of course, she's not offering any
guarantee that, well, we willlive within our means and we
will do no.
No, I mean, the costing and thebudgets of the state are going
to continue to increase.
It's I mean, it's a no-brainerat this point, and she's not.
Brian asks can Johnson backtheir argument with data, ie
(22:20):
charts, or are they arguing fromfields that they get from
lobbyists with spring in theircollective ears?
I think it's obviously thesecond one.
The oil companies are comingdown there because they don't
want to lose, they don't want tohave to pay more.
That's I mean, and that's theyshouldn't.
You know that should be theirposition, because they're a
private industry.
But we are the owners and thesepeople in the legislature are
(22:42):
supposed to be ourrepresentatives as owners and
they should be getting themaximum yield possible, and
instead they're saying well, no,no.
They said that they'll taketheir ball in their bat and
they'll go home if we increasethe oil taxes.
That's not going to happen.
That's not with the investmentsthat they've got in there and
everything else.
And we're not talking aboutgouging them, as Brad said.
(23:02):
We're talking about bringing itback to the equitable position.
It was the last 10 years.
Speaker 1 (23:07):
Yeah, here's the deal .
Michael.
I mean, shearhorn and Jensenhave a sentence in their
argument that says somethingabout after five years, we'll
start seeing the benefits ofwhat we've done with production
taxes.
And what they're really excuseme, what they're really talking
about is that increase inproduction, increase in the blue
(23:30):
line, you see well, at about2028, the jump from the 400s up
to the 500s and then thecontinued jump up to the 600s by
2035.
That's what they're reallytalking about.
They're saying there will be abenefit and it'll be a benefit
in terms of increased production, but the problem is the tax
(23:52):
code isn't tied to production.
The tax code's tied to a bunchof other things that in 2013,
made sense.
But once we get to thisenvironment, the second decade,
once we get to this environment,no longer make that much sense.
And what happens in 2028 isproduction taxes keep going down
, even though production volumesare going up.
(24:13):
Production taxes are going downand they make the leap from.
Well, production volumes go up.
Everybody's going to benefit inthat.
No, they're not Right.
Look at the numbers.
Look at the Department ofRevenue numbers.
Speaker 2 (24:24):
They scream and say look, we're going to increase
our production by 25 or 30%, yes, but our take on it is going to
be 60%, less than what we'remaking today.
It's going to go up 25 to 30%,but our take is going from
almost a billion dollars down to$27, 270 million.
I mean, that's a huge, huge hit.
(24:47):
And they just like oh, and it'snot about velocity, we're not a
grocery store where we sellmore, we'll make more.
We sell more gas, but if wedon't have the right tax
structure, we're taking 70percent less than what we would
have been.
Speaker 1 (25:02):
They're leveraging up on this assumption that the oil
companies and some legislatorshave always made that as long as
production goes up, alaskanswill benefit.
Alaskans will see the benefits,will see the payback on what
they've done in terms of oiltaxes once production starts
rising.
And that's been the generalmantra that the oil companies
(25:26):
and others have pitched andthey're still pitching.
But when you look at the actualnumbers, delaina, when you look
at the actual numbers, you'reseeing the production taxes are
going down.
So if you really want to liveup to your title of your piece,
now is not the time for Alaskansto raise oil taxes of your
(25:48):
piece.
Now is not the time forAlaskans to raise oil taxes.
Well, it's also not the timefor Alaskans to reduce oil taxes
, which is what's going on underSB21.
With the provisions of SB21,over the next decade, let's just
keep the share that Alaskanshave of production revenues at
the same level that we've hadover the last decade, as opposed
to seeing this sort of collapsein those revenues over the next
(26:12):
decade.
Speaker 2 (26:12):
One of the big problems here, of course, is
that a lot of this newproduction is going to be coming
off of federal land versusstate land, right, so it's kind
of a different critter in thatregard.
Speaker 1 (26:24):
Well, it's not going to bump.
So, yeah, the federal land isthe difference between on the
top, the difference between thered line on the top and the blue
line on the top.
The red line state lands and theblue line is total.
So the difference between thosetwo is federal lands and what
you can see is that's notbumping royalties because we
don't get royalties out offederal lands and so royalties
are staying relatively flat,consistent with what the red
(26:47):
line on the top is doing.
But we do get production taxesout of production, off of
federal lands, and what you'reseeing is, even though that
production is going up, eventhough federal production,
federal lands production isgoing up, revenues are going
down.
Revenues from that productionare going down, and it's because
of the way SB21 operates.
(27:08):
What we need to do is go backin, look under the hood, fix
SB21 to provide the same shareof revenues to Alaskans out of
production that we had in thelast decade, that we had when
SB21 is set up.
We've just had some things gowrong with the way SB21 is
operating.
So if you want Alaskans tocontinue to benefit from
(27:31):
increased production, then weneed to go fix those things that
have gone wrong in SB21.
Speaker 2 (27:38):
This chart kind of says it all right here.
I mean it really does.
It just kind of lays it all out.
This is the problem.
I agree with you.
Uh, brian.
Brian said uh, can johnsonbacker argument with data charts
or no, it's all about thefields or what the lobbyists are
telling her at this point,because that chart right there
was enough to tell youeverything you needed to know
(27:59):
about what was going on with uhalaska, uh oil and the revenues
and where we're going on in thefuture.
It's astonishing.
We are coming back to BradKeithley Alaskans for
Sustainable Budgets, the weeklytop three.
We're on to number three,although I was just going to
(28:20):
make a comment on Anthony'scomment in the chat room.
He said the most frustratingpart is that everyone can
clearly see we're on a sinkingship fiscally and the crew is
telling everyone to remain calmbut the captain refuses to
return to land and instead ofdoing the same thing, it lets
hubris kill us all.
I mean that's kind of wherewe're at right now.
Um, I wouldn't disagree withthat, brad.
I mean kind of that's.
That's kind of par for thecourse at this point no, it is
(28:41):
michael.
Speaker 1 (28:41):
Everybody's, everybody's out for themselves.
Uh, in the?
In the case of the last segmentthat we talked about, the
Permanent Fund Corporation isout to protect its ass by being
able to continue to pay allthose fees to its consultants
and eliminate any incentives tohave higher earnings.
The business community is outto save its ass by having the
(29:02):
continued POMB draw, regardlessof what earnings are.
Everybody's trying to savethemselves.
Unfortunately, it's Alaska.
Families are getting screwed inthe process.
Speaker 2 (29:13):
Number three in the weekly top three.
Notice how you haven't heard alot about Cook-Henley Gas.
All of a sudden it just seemedlike that disappeared right off
the table.
It was a big topic, it was abig talking point, there was
articles all over the place andnow it's like, hmm, got super
quiet, brad.
Speaker 1 (29:33):
Yeah.
So, michael, we had at thebeginning of the year and all
throughout the session last year, we had all these various
proposals to give rebates onroyalty in order to encourage
production in the Cook Inlet andall sorts of other things A lot
of drive at one point for phaseone of the AKLNG line that
(29:57):
would bring gas down to SouthCentral and save us all.
And then, and over the courseof and you and I argued
throughout that that let's justlet the market work.
The market will bring productsto the Cook Inlet.
That will solve the problem ifwe just let the market work, if
(30:18):
we don't interfere with it, ifwe don't try to subsidize our
way to a solution.
And over the past month or so,I noticed that the cook inlet
hadn't made any of the topthrees.
It hadn't been the topic thatpeople were talking about or
people were writing about, orthat legislation was progressing
on that just suddenly had gone,or for a period of time, and
(30:39):
had gone quiet.
And I thought, and I think, andI thought it was useful to
think it's useful, uh, torecognize why that is.
It's because the markets worked.
There's an op-ed piece in theAMN from this past week that was
written by Arthur Miller andMark Wiggin of Chugach Electric
Association and it says whatwe're doing.
(31:01):
The title of it is what we'redoing to secure a natural gas
supply for South Central Alaska.
The title of it is what we'reDoing to Secure a Natural Gas
Supply for South Central Alaska.
And it goes on to talk aboutthe deal that they're working
with Marathon PetroleumCorporation, who owns the Kenai
refinery, certainly, but alsoowns the Kenai LNG plant that
sits next to the refinery, thatChugach is working with Marathon
(31:29):
and with Hillcorp, who proposesto buy that LNG facility and
turn it into an import facilityto bring imported LNG into
imported gas into the SouthCentral to solve our problem and
the progress they're making onit.
And they're making a lot ofprogress and they're making
progress on it in the frame thatChugach needs that gas to avoid
the gap.
(31:49):
I've got to commend, frankly,chugach Electric Association for
the transparency with whichthey've approached this problem.
They've been transparent fromthe beginning not always timely,
but transparent from thebeginning about the problem as
they see it and about thevarious steps they're taking to
deal with the solution.
And this latest op-ed fromWiggin and from Miller is
(32:13):
another example of that, anotherstep in the transparency.
But basically what they'resaying is we got this, guys.
We got this.
We've got to deal with Marathon.
We've got an existing Kenai LNGplant that we can utilize.
We can turn it around.
It's already FERC approved tobe turned around to become an
import plant.
Marathon and Hillcorp haveworked out a sales arrangement
between the two.
We're working out arrangementswith them for using that plant
(32:37):
to bring in gas to meet ourneeds.
And we got this.
We don't need any governmentbailout, we don't need any
government subsidies, we don'tneed any input from ADA or we
don't need any royalty relieffrom the legislature.
We got this.
That's our job.
That's what we're supposed todo.
We're supposed to cover our gassupply.
(32:58):
We got it.
We're doing it.
Nstar is doing it in adifferent way.
I'm not sure their way is goingto turn out to be as successful
.
But fortunately the Kenai LNGplant is scalable.
You can add to it, add to itscapacity as we go on, if others
find it useful to do that.
So I think what we found is themarket works and all of the
(33:24):
hand-waving and all of thelegislation that people
introduced and all of theconcern people had about Cook
Inlet going gasless or havingoutages just didn't work out to
be the case.
Once you let the market as youlet the market solve it.
I think that's a lesson bothfor this situation and for other
(33:47):
situations down the road.
There's one other article onthis that I think is useful.
It's in the Peninsula Eclarium.
Headline is Michecki reportsback on South Central Mayor's
Energy Coalition and it's whenthe crisis started, when people
started being concerned aboutrunning out of gas in south
(34:10):
central.
The south central mayors formedthis coalition.
Anchorage wasilla, uh, palmer,kenai and others formed this
coalition to look at the issueand to look at uh, to look at
solutions to it, and maceChickeyhas had a report back to in
some forum recently to talkabout it and basically it was
(34:32):
the same thing.
Basically, we got it, the marketgot it.
We're solving it throughshort-term hopefully short-term
LNG imports, but they're beingdone in a way that if they need
to be long-term, they can be,because we're using an existing
facility that's scalable.
We're not going to have tobring trucks over the Alaska
(34:55):
Highway, we're not going to haveto do outrageous things.
We've got it and over time itmay be that we find that that
co-content supplies can bedeveloped at reasonable costs
and can fit into the into thesupply mix.
Over time we may find that theAKLNG line is built for its
(35:18):
bigger purpose of exporting gasand it can fit into the mix.
But in the meantime excuse me,in the meantime we've got this.
In the meantime, the market hasfound the solution.
So I find that encouragingexcuse me that we let the market
find the solution in this stateand that the market did find
(35:41):
the solution in the states.
It's not the perfect solution.
It's not the solution everybodywants.
It's not Alaska gas in the main, but it is better than having
blackouts and going dark.
It's better than huge statesubsidies paid either to cook
inlet producers or paid to builda phase one of the AKL and
(36:04):
G-Line, especially given thefiscal problems we're facing in
this state.
Well-developed solution thatwe're coming to, and one that I
think we ought to applaud atleast people who believe in
(36:28):
market solutions ought toapplaud as showing that the
market can work if you just letit have the opportunity to do so
.
Speaker 2 (36:31):
No, I mean I agree.
I think this is good and evensome of the things that was in
this report from the PeninsulaClarion.
It talks about the economics.
I mean, while it's PeninsulaClarion, it talks about the
economics.
I mean, while it's technicallyrecoverable the gas on the North
Slope it's not economicallyrecoverable at this point.
And they acknowledged that theimportation, even if it was just
on a short-term basis, was theonly way to stymie and to stave
(36:55):
off this shortfall of gas.
And it looks like I mean big,big kudos to Chugach and
everybody else outside of this.
Again, enstar is kind of stilldoing their own thing.
I don't know exactly whatthey're doing.
They're still talking about agas line and everything else.
But again, even Machicky inthis report said that the
(37:18):
projections of having gas by2031 might be rosy.
Might be rosy.
Come on, I mean that's sixyears away.
There's no way they're going tohave first gas deliverables on
a gas pipeline that you haven'teven permitted or broken ground
on in six years, not in this dayand age.
I know they built taps in threeor four years, but it's a whole
(37:41):
different world than it wasback in the 70s.
At this point I mean it's justnot going to happen.
Speaker 1 (37:47):
Yeah, NSTAR is off doing a deal with Glenfarn.
That is the way the explanationof it is sort of evolving.
Is it's phase zero of the issort of evolving.
It's phase zero of the AK LNGproject.
What they're talking about isbuilding an LNG import facility
(38:14):
at the site of where the AK LNGfacility would export gas, Build
an import facility to importgas for NSTAR for a period of
time and then turn that backover into an export facility
once the big line was built.
I'm not sure if that's tied tothe big line, if the big line
never goes, whether thatfacility ever gets built.
What Shoe Gatch has done isgone out to something that's
solid, a facility that sitsthere, a facility that exists,
(38:37):
and made a deal with Marathonand with Hillcorp to use that
sits there, a facility thatexists, and made a deal with
Marathon and with Hillcorp touse that existing facility
something we talked about fromthe beginning of this whole
issue.
Speaker 2 (38:44):
Right, right and again, not looking for any
bailouts or monies from thestate or from the federal
government or anything else.
They're doing it all withprivate money and they're doing
it on their own.
So again, the free market wins,as we have advocated for in
this show for a long time theirown.
So again, the free market wins,as we have advocated for in
this show for a long time.
The free market wins, and as itshould.
(39:05):
I know this has been floatingaround.
Rick was like Taiwan signed on.
You know, taiwan just signed agas purchase agreement, not a.
They didn't sign on for thepipe, they didn't sign on to
build any line.
They just raised their hand andsaid, sure, we'd love to buy
gas from the pipeline when it'sthere.
But this is the same kind ofthing we've seen since the
Walker administration.
Right, brad?
I mean he had contracts in handfrom Japan and other places.
(39:26):
Well, sure, if you build it,we'll buy gas from you.
But I mean that's an easy sellbecause they'll sure I'll sign
it.
When are you going to build it?
There's no idea.
It's a kudos and it's a featherin their cap to say we signed
the deal, but are they evergoing to be held to it because
the gas line doesn't exist.
Speaker 1 (39:44):
We signed a letter of intent with Taiwan.
We're probably going to sign aletter of intent with Korea.
It's the same thing Walker didwith China back during his
period.
The problem is, you sign aletter of intent.
The letter of intent is we willstudy getting into this project
(40:05):
and taking gas from thisproject.
Once you get into this project,once you start studying the
project, you understand theeconomics are horrible.
The economics of building thatline, the economics of making
the commitment to buy, theeconomics of of of building that
line, the economics of of ofmaking making the commitment to
buy the chunk of gas you have tobuy for the period you have to
(40:26):
buy it to pay that line off, uh,are horrible, is horrible.
There are much better dealselsewhere in the world.
So what's really going on, in myopinion, is they're signing
these letters of intent so theycan tell Trump yes, we're trying
, we're looking at it, we'restudying it.
Don't take it out on us.
We're trying to be goodneighbors, we're trying to be
(40:48):
good customers and we're digginginto it.
But you know we can't doanything.
That's not in our economicinterest.
So we need to study it and justlike Walker's deals with China
and the others did.
Over time they'll fade out.
We'll barely notice when theyexpire because it will become
(41:13):
obvious that it's not economic.
So I take, I take these lettersof intent that they've entered
into with a grain of salt andsay, yep, I understand why
they're doing that, I understandthe political nature of it, but
I'm going to wait till you showme the dollars.
Show me the actual dollars thatyou're spending on this stuff,
the actual 40 billion or 60billion or whatever it might be,
(41:34):
by the time you do theevaluation again.
Show me those dollars and thenI'll get excited about it, but
up until then it's just Walker,phase two.
Speaker 2 (41:44):
Well, because again, I mean I think Rick asked a good
question how do they recovertheir cost invested?
I mean, even if they did pledgebillions of dollars to do it,
how do they?
A sovereign nation?
How do they recover their costsin that?
I mean, is it free gas?
How is their cost recovery work?
I mean, it seems very amorphousto me.
Speaker 1 (42:05):
Well, what it is is they invest in the line.
I mean, the theory is theyinvest in the line, they get
tolls, payments for the usage.
As an investor, they'll receivea portion of the revenues or a
portion of the profits from theoperation of the line.
So it's an investment by them,just like it would be an
investment by a private company,and they would enter into
contracts to buy gas atcompetitive prices, and so they
(42:28):
get a gas supply and they get areturn on their investment
through the tolls from thepipeline.
But the problem is the tollsfrom the pipeline are going to
be pretty low.
I mean, the receipts from thepipeline are going to be pretty
low.
The gas, after you take intoaccount the pipeline costs, are
going to be pretty high.
And so at the end of it youfigure out that, okay, I've got
(42:51):
to commit for like 25 years tobuy this high-priced gas and the
only thing I'm going to getback from it are these tolls
from the investment in thepipeline that are going to be
low.
Just not a good deal.
So I mean, we've been down thisroad before.
We were down this road withWalker when he had all of these
letters of intent.
We know where this road goes.
Speaker 2 (43:11):
Yeah, yeah, no.
So I saw the headlines and itwas, you know.
I think people were like, oh,yay, uh, it's, it was.
You know.
I think people were like oh,yay, yay.
And I'm like wait, we've beenhere, we've been here, we've
done this, and uh, it is, uh,it's an interesting thing.
And yes, go ahead.
Speaker 1 (43:28):
Well, the only thing different this time that the
people will say oh, it's Trump.
Trump's going to force them todo it, or else he'll tear up the
amount of existence.
You'll do something.
The problem is, what you'reasking them to do is enter into
25-year commitments based upon afour-year presidential term.
If we've seen anything in thisnation, it is that we can change
(43:48):
policies on a dime.
So you enter into this 25-yearcontract, make this 25-year
commitment and you're onlyworried about the four-year
segment of Trump commitment, andyou're only worried about the
four-year segment of Trump.
And then, let's say, someDemocrat comes in or some
moderate Republican comes in atthe end of that four years and
all of a sudden, everything'schanged and all of the benefits
(44:09):
you thought you were going toget in terms of favored tariff
nation or favored tariff statusor something, go away.
But you've got this 25-yearcommitment, financial commitment
that you've made in themeantime, that's I mean at the
end of the day, that's what'sgoing to hit home with these
concerns.
Speaker 2 (44:26):
And there's, of course, the military aspect.
Brian brings that up From theTaiwanese perspective.
They need and want moremilitary aid, and this purchase
agreement buys favors with theadministration and the Congress
critters.
Yeah, I mean, it's exactly whatthey want.
They want protection from chinain their backyard, and so
they're hoping that they'll doeverything they can to uh, to
(44:47):
make it uh, you know, to make itlook more attractive, to help
them but once again, it's a 25year commercial commitment to
take this gas compared to afour-year time frame.
Speaker 1 (44:57):
yeah, this presidential term, and it's just
you have a tough time makingthose numbers work.
Speaker 2 (45:02):
Yeah, no, I agree.
All right, brad.
Well, it sounds like you got abit of a cold from your flight
or whatever, so you need to takesome Theraflu or whatever.
I'm sure there's some kind ofScottish remedy there that you
could take.
There is Michael and I may gotake some of that remedy here
after the show hot toddy and golay down for a little bit, so
(45:25):
you're all vented and ready togo.
Uh, brad, thanks so much forcoming on board and we look
forward to your, uh, to yourreport on your tour when you
come back.
Okay.
Speaker 1 (45:34):
Michael, thanks for having me and I look forward to
seeing you again in a couple ofweeks all All right.
Speaker 2 (45:38):
Thanks, my friend.
Appreciate it, enjoy.
Have a good time.
Thanks for coming on.
Speaker 1 (45:43):
Well, that's a wrap for another week's edition of
the Weekly Top Three fromAlaskans for Sustainable Budgets
.
Thank you again for joining us.
Remember that you can find pastepisodes on our YouTube,
soundcloud, spotify and Substackpages, and keep track of us
during the week on Facebook andTwitter.
This has been Brad Keithley,managing Director of Alaskans
for Sustainable Budgets.
(46:04):
We look forward to you joiningus again in three weeks for the
next edition of the Weekly TopThree.
Thank you.
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