June 10, 2025 • 55 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 June 9, 2025.
This week, our top 3 issues are these: 1) we discuss the issues surrounding the state’s threat to terminate the Cosmopolitan leases (2:01); 2) we explain why we believe a recent op-ed about state child care support fails to address the equally important question of #WhoPays for the support (19:29); and 3) we focus on why what didn’t happen at Governor Dunleavy’s sustainability conference is more important than what did (39:35).
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 June 9th 2025.
The weekly top three is aregular segment on the Michael
Duke Show.
The show broadcasts on bothFacebook Live and YouTube Live
(00:32):
as well as via streaming audiofrom the show's website.
Weekdays from 6 to 8 am.
I join Michael weekly in thefirst hour of Tuesday's show
from 6 10 to 7 am for adiscussion between the two of us
about our three issues.
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, youtube,
(00:54):
soundcloud, spotify and Substackpages, also on the Alaskans for
Sustainable Budgets website, aswell as the projects page on
national 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
(01:15):
week, you can also follow andparticipate in the discussion
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 discuss what
the issues are surrounding thestate's threat to terminate the
(01:38):
cosmopolitan leases.
Second, we explain why webelieve a recent op-ed about
state child care support failsto address a huge related issue.
And third, we focus on why whatdidn't happen at Governor
Dunleavy's SustainabilityConference is more important
than what did.
And now let's join Michael.
Speaker 2 (02:01):
Let's dive into today's discussions and talking
points.
We're going to start off withthe number one thing right out
of the gate.
The governor has decided tostart talking about some stuff
with the Cosmo unit, thecosmopolitan, the gas unit out
(02:26):
in the Cook Inlet, the onethat's run by Blue Crest, and
apparently they're threateningto revoke, to shut down.
Who knows, what do we got goingon here.
Speaker 1 (02:38):
So it's the commissioner of the Department
of Natural Resources, John Boyle.
It's not the governor.
Let's not elevate it more thanit needs to be.
Well, directly.
Speaker 2 (02:48):
You're right.
I'm sorry, I apologize, goahead.
Speaker 1 (02:52):
No, no, no, no, no, before the governor's allies
start complaining to us thatwe're invoking the governor's
name unnecessarily it isCommissioner of Natural
Resources, john Boyle.
The headline in the ADN andelsewhere around the state is
from a Nat Hertz article.
The headline is amid, alaskanatural gas crunch state could
(03:15):
revoke leases from company whosedrilling has stalled out.
Is is, as you said, blue crests, um, cosmopolitan unit that's
down near you, uh, off anchorpoint, uh in, uh in the cook
inlet, um, and there, and thestoryline basically is boyle has
(03:36):
issued a notice of default,which is a technical step, a
legal step that you do, uh, asan administrator of units and
leases in Alaska A notice ofdefault to Cosmopolitan for
breach of its plan ofdevelopment and the penalty for,
if you ultimately find them inbreach, the penalty, the
(03:59):
ultimate penalty, is toterminate the unit and terminate
the leases and upon termination, they revert back to the state
and it is a dramatic penalty.
In Alaska I can't recall a majorunit.
I can recall some minor leases,but I can't recall a major unit
(04:19):
that's gone through a default,at least in the last 30, 40
years in Alaska, and so it's afairly major step.
What's going on is thisCosmopolitan is a unit several
leases banded together into aunit that has some production
(04:40):
from oil, some production of oil, but has also has a huge
natural gas find, or at leastwhat cosmopolitan, what
Bluecrest says, is a hugenatural gas find in the Cook
Inlet that has never beendeveloped.
And the reason it hasn't beendeveloped is because it's
offshore and it would takeeither some some cutting edge
(05:04):
technology or just plunking a uhplatform out in the Cook Inlet
to uh out over over the over thenatural gas deposits to uh uh
to produce it, both of whichwould be very expensive and and
carry carry some risk.
Cosmopolitan's never undertakenthat investment.
Uh, because the economics of itare fairly difficult.
(05:29):
The problem with a huge find ora significant find like that is
you need a market to be able tomonetize.
If you're going to make thatinvestment, you need a market to
be able to monetize theproduction, the volume of
production that you're going toget out of it, to be able to pay
off the investment, to make areturn.
And the problem with the CookInlet at least since the time
(05:51):
when the Agrum plant shut downand we stopped exporting gas out
of the old Conoco Phillips LNGterminal the problem with the
Cook Inlet has been it's got afairly small market and it's got
significant coverage byexisting contracts of that
market.
So if you have a huge find, ifyou have a significant find and
(06:15):
you make all this investment andyou have to monetize it by
significant amounts ofproduction and significant
amounts of sale, there reallyisn't an opportunity to do that
in the cooking lot because youdon't have the markets that can
absorb that type of investment.
Speaker 2 (06:31):
So it's sort of a even with the Alaska, I mean,
even though we're challengedright now with our own gas.
It's not a, are you saying it'snot a big enough market to
offset those investments?
Speaker 1 (06:48):
market to offset those investments.
Well, the problem, thechallenge with it, is that shows
up sort of gradually over timewe start having exposure of
tranches of market that is notcovered by contracts and you
need production to sort of easeinto that.
That's why the incrementalismof LNG imports or the
scalability of LNG imports is soattractive, because you can
(07:11):
sort of ease into that one, oneship at a time, or adding
another, another ship on top ofthat, another delivery on top of
that, and so it's not really.
The market just doesn't show up.
Bam, all of a sudden.
I I'm not sure I've ever runthe economics, even if all the
market disappeared tomorrow.
Whether the scale of thatmarket availability is enough to
(07:36):
make cosmopolitan economic, itmay be, but it doesn't show up
that way.
The market doesn't show up thatway.
It shows up in these tranches.
So cosmopolitan has never beendeveloped.
And we have this.
I mean, as you correctlyquickly pointed out, we have
this juxtaposition of thiscookie and lick crisis of
(07:58):
production or of lack ofproduction, lack of gas,
compared to the cosmopolitanvolume sitting out there, the
field sitting out there.
That could help offset part ofthat issue.
So it's never been developed.
And now we're getting to thepoint.
I mean it's really sort of odd,right.
(08:20):
I mean you talk about thecooking, the crisis.
You got cosmopolitan sittingthere.
Blue Crest hasn't developedCosmopolitan and so you start
saying, well, why haven?
That was my question.
Speaker 2 (08:29):
Because if if it doesn't work for them because
they can't get enough investment, because there's not enough
money to be returned.
On the other side, I mean thestate of Alaska, the one of the
(08:53):
the the article made it soundlike the state is like oh,
there's just people chomping atthe bit to get in here and do
this and take over this leaseand do it.
Is there really?
Because if they were, wouldn'tthey want to buy the lease from
Bluecrest or wouldn't they wantto, you know, wouldn't they want
to at least partner up orinvest?
I mean, if the economics worked, wouldn't, you know?
I mean, that's the thing themarket needs to play out.
(09:14):
Is this kind of pressurehelpful?
Speaker 1 (09:17):
Yeah, I mean the thing.
The thing that you get a littleconcerned about is are there
investors out there and isBluecrest asking too much in
terms of participation, theeconomics of their participation
?
Is Bluecrest trying tonegotiate too hard a deal to get
those investors in here?
(09:38):
I doubt that.
I mean, I doubt that Bluecrestis saying, oh you know, you've
got to give us a chunk of moneyand you won't see a return for
10 years because we want to getour return first.
I doubt.
I doubt that that's what'sgoing on.
And so you really got to, yougot to question, you got to
question whether we gainanything other than you know
(09:59):
nice headlines of hey, you know,you guys didn't develop the
field, of hey, you guys didn'tdevelop the field, so we
terminated you.
Whether you gain anything otherthan those nice headlines.
Alaska has always been a bit oddnot odd, but odd compared to
the rest of the industry In thelower 48,.
When you have lease problemslike this, what happens and you
(10:23):
have economic fields and youhave good production or good
prospects, what happens and youhave, you know, economic fields
and you have good production orgood prospects, what happens is
somebody comes in and what'scalled top leasing in the lower
48.
The leaseholder, which is the,or the lessor, which is the
landowner or the mineralinterest owner, will negotiate a
lease with somebody that says,look, if this lease terminates,
(10:46):
you get the lease it's top, itsits on top of the existing
lease.
If the existing lease goes away, then that the top less or less
E, takes the position of the,of the, of the existing lessee,
and that sort of createslitigation about whether or not
the existing lease is is validor not.
We don't have that in Alaskaand Alaska goes out of its way,
(11:09):
frankly, to hang on to existinglessees because the investments
up here are so capital intensiveand so time intensive over a
span of years that once you'vegot somebody you want to sort of
keep them on the hook.
You want to threaten them everyonce in a while maybe, but you
want to keep them on the hookand keep pushing them, because
(11:32):
the time it would take torecreate where they are at any
given point would be significant.
The time investment it wouldtake for someone new to come in
and recreate where an existinglessee is at any given point
would be significant, even moreso in this case because the
facility isn't out there.
The facilities aren't out thereto produce this gas.
That's the problem.
(11:52):
Blue Crest hasn't put them in,hasn't made the investment to
put them in.
So a new lessee coming in wouldface the same issues as Blue
Crest, that is, you know, thetechnological challenge of
getting the facilities out thereand technological challenge of
getting the facilities out thereand the cost of getting the
facilities out there.
So have you really gainedanything by terminating this
(12:13):
lease?
So it's an issue.
I mean some people say oh well,there's gas, hillcrest or Blue
Crest isn't producing it and soterminate them and get somebody
else in there to produce thisgas.
It's not that easy.
There's a reason the gas isn'tbeing produced, there's a reason
that Bluecrest hasn't followedthrough on the lease obligations
(12:35):
and it's not clear thatterminating them is going to
advance the ball toward theobjective of getting that gas
produced anytime soon.
What the state really shouldwant to do, and probably what's
going on here, is the statewants to scare Blue Crest enough
and threaten the economics ofwhat they've invested already,
enough to force them into a saleto somebody Probably Hillcorp
(13:00):
Preferably Hillcorp who hasexisting know-how and existing
facilities inside the Cook Inletto come out and do this.
So there's a tension going onhere.
A game the state's playing,probably targeted ultimately on
a sale, but it's interesting andto hear people say, oh yeah,
absolutely, we ought toterminate that lease.
They haven't produced anything,it's time to get somebody in
(13:21):
there that will.
It's not that simple.
Speaker 2 (13:25):
Well, and how much of this is pressure?
Because blue crest and hillcorpwere in the midst of a deal in
late 23, uh, but they couldn'tcome to terms on profits and
cost splitting right, so theywere going to joint venture and
do some things.
So is this just a final thoughthere?
Is this just more of a powerplay to push that deal or to
push an outright sale?
Do you think I it of a powerplay to push that deal or to
push an outright sale?
Do you think?
Speaker 1 (13:46):
I.
It's a power play to pushsomething, uh, to push blue
crest to do something.
I think termination is probablythe last thing the state wants
to do.
But it's a power play to pushblue crest to do something.
And if and if hillcorp is thatsomething, I mean, then you have
further monopolization of thecook inlet.
That's not good either, butit's a push to get Blue Crest to
(14:08):
do something.
And and, and you know, blueCrest is sitting there going
look, we'd like to get money outof this deal, we'd like to do a
deal with somebody, but it hasto be on decent terms.
And so you know, we're stilltrying to find that person out
there.
Speaker 2 (14:22):
And, of course, creating a monopoly in the Cook
Inlet?
Never could.
I mean, you know, a monopoly atthis point is not a great idea,
but that seems to be thedirection everybody is trying to
push at this point.
It's kind of crazy.
Brad does this for fun.
Who pays Brad for his weeklycommentary?
I mean, brad does this for fun,I.
(14:44):
I mean, I know it's weird, buthe does it for fun.
Um, but yeah, the state is, Idon't know, this push.
Uh, why would you want toconglomerate any more power into
hill corp, who's already shownthat they will?
I mean, I guess, never let acrisis go to waste, right?
(15:05):
I mean, it just seems like amonopoly in this case doesn't
make much sense.
I mean it might make much sensefrom a vertical integration
standpoint of only having oneplayer out there so you don't
have to duplicate effort, etcetera, et cetera.
But it doesn't make much sensefor Alaskans, as consumers and
producers, to have a singlesource, because that means
(15:28):
they're kind of at the mercy ofthe single source, right?
Speaker 1 (15:31):
Yeah, we've sort of found that out.
But Hillcorp already has aneffective monopoly.
I mean, I did the HHI'sHirschman-Hirffendahl Index,
which is how you measure thedegree of market concentration,
uh, concentration in a market.
Um, I did the HHIs for a columna few, a few weeks ago and the
HHIs are off the charts.
(15:52):
I mean they're, they're in anyother market.
The department of justice, eventhe Trump department of justice
, or the federal tradecommission, whoever had
jurisdiction over it, would beall over it.
Uh, but the HH.
But we've already got effectivemonopolization and with
Hillcorp's pending acquisitionor proposed acquisition or I
don't know, may be completed bynow.
Acquisition of Marathon's LNGterminal, the old ConocoPhillips
(16:16):
LNG terminal, and turning itaround to use it as an import
heck, that increases the HHIseven more.
So Heck, that increases theHHIs even more.
So Hillcrop already effectivelyhas monopolization.
This would be a big step becausebasically, if they acquired
Cosmopolitan and if theyproduced it, it would take away
(16:37):
the potential competition of LNGimports into the Cook Inlet as
a potential competitor.
That has some constrainingeffect.
So it'd be another huge chunkin it.
But we're already at I meanwe're at the stage where what
was it last session, a yearbefore a year ago, when Kathy
(16:57):
Giesel brought up the potentialof fixing the C-Corp tax issue,
the S-Corp tax issue, hill Corpsent a letter that said, hey,
we'll just shut down the CookInlet investment.
They said kinder words thanthat, more lawyerly words than
that, but basically said we'llshut down investment.
And Giesel backed off.
So yeah, they're alreadyexercising monopoly power out
(17:19):
there.
This would be another step inthat.
Speaker 2 (17:21):
Yeah, it's a nice gas field.
To be ashamed if somebody putthe plug in it, right.
I mean, that was kind ofessentially what they said to
Kathy Giesel and got it scoredaway.
So what do you think happenshere, brad, as you look at this
tug of war?
Is it just a warning shot?
Is it just to play nice playball?
(17:41):
What do you think is going tohappen?
Speaker 1 (17:43):
I think Boyle keeps pressing.
I mean, we know the field'sthere.
Bluecrest has made publicstatements about it being proven
reserves, which means they havea high degree.
I've never really heard provenreserves about a field that's
never produced before, butproven reserves, and so they
have a high degree of, of, of,of, of a high sense that the
(18:08):
reserves are there.
And I think dnr keeps pressing.
But the problem is hillcorp, nothillcorp.
I mean blue crest sort of sitsthere and goes, yeah, okay, you
want to take it away from us.
You know, you know it's notgoing to improve your situation
any Right.
And Blue Crest keeps saying, oh, why don't we have Ada, give us
more money, give us more moneyto pursue the objective of
(18:32):
development.
It is not a good situation andthe reason it's not is because
of the size of the cookingmarket.
If we got an LNG line I don'tthink we will, but if we got an
LNG line down from the North andwe had an LNG plant, that would
change the dynamics a littlebit and Cosmopolitan would then
(18:53):
sit there going well, we havethe potential of being able to
export some of this and thatwould change the dynamics.
But by then we will otherwisesolve the cooking.
Speaker 2 (19:03):
And we're not just talking about one lease, chris.
Chris is talking about.
One lease is not a monopoly.
I mean, the problem is, is thatthere's not that many players,
that the one lease is not, thatit's just a continuation of a
monopoly.
That's already kind ofhappening, um, since there's
only really essentially threemain players in the cook inlet
and blue crest is one, so uh,with hillcorp being the dominant
(19:24):
giant.
That's what we're talking about.
Speaker 1 (19:26):
All right, chris needs to go back to Economics
101.
Speaker 2 (19:29):
The weekly top three continues.
We're on to number two of three.
Look, I can count, mom,one-sided analysis really
irritates Brad.
I mean Brad just gets and is itreally analysis?
I don't know know.
I read this piece and uh, um, Imean, you're calling it
one-sided analysis, I call it apablum for the masses.
(19:52):
At this point it's not evenreally it it.
I was just irritated readingthis article.
Brad.
It just like, talked down to melike I was five or something.
I I mean, it's just, uh, thewhole thing was so.
Go ahead, tell me about howthis one-sided analysis really
irritates you.
Speaker 1 (20:14):
Well, there's a paragraph that has an analysis
in it, and I'll get to theparagraph in a second, but, uh,
the opinion piece is from KevinBerry, who's a UAA economics
professor.
Uh, which is which is whatcaused my, caught my eye and and
made me want eye, and made mewant to read the piece, because
Kevin's pretty balanced abouteconomic issues.
The opinion piece is please andthank you, please and thank you
these are nice words that wecan say, and it's about the
(20:37):
legislature passing and, inKevin's view, Governor Dunleavy,
supporting the extension ofchild care credits, both
subsidies as well as tax creditsfor child care facilities and
child care employees.
In Alaska, providers arestruggling with an economic
model that cannot simultaneouslyprovide care that is affordable
(21:06):
to all families in need of carewhile also paying wages that
caregivers and teachers deserve.
This funding is a lifeline andbasically, as an economist, what
Kevin is saying look, theeconomics of child care
facilities don't work in the inthe current Alaska free market
(21:27):
you don't get.
Parents.
Potential users, potentialcustomers of the childcare
facilities can't afford theprices it would take to be able
to maintain these, create andmaintain these childcare
facilities and pay the wagesthat need to be paid to attract
the workers that would need tobe there to make the childcare
facilities and pay the wagesthat need to be paid to attract
the workers that would need tobe there to make the childcare
(21:47):
facilities work, that there's agap in market forces between the
willingness to pay or theability to pay on the part of
potential customers and theeconomics of what it takes to
make that business model, thebusiness model of of child care
work.
And so this funding and whatkevin's talking about with this
(22:07):
funding, this funding of of ofthe child care credits, tax
credits uh, for corporations,basically, because we don't have
taxes on anybody else childcare tax credits and the child
care subsidies, that funding isa lifeline to make those, the
economics of child carefacilities, work.
(22:28):
What you're doing is you'reessentially saying that that
there are, there can be,subsidies to the business side,
the business model side,subsidies in terms of payments
by government or tax credits tocorporations who would then fund
these child care facilities andmake the model work.
They can then keep the rateslow enough to make it attractive
(22:49):
to parents, to fit theeconomics of parents and all of
that.
You know I don't argue a lotwith that economic analysis, but
here's where I think Kevinfails.
Here's where I think thisarticle fails and why it just
irritated me to see it fail inthis way.
(23:09):
He's not considering at all theeconomic impacts, the economic
side of who's paying for thesecredits, the economic
consequences of generating therevenue necessary to fund these
tax credits, to cover the gapcreated by these tax credits or
(23:33):
to fund the subsidies, thedirect subsidies, that are being
paid by government to thatparticular business segment.
And we know it's not like it'sa mystery out here.
We know who the marginal sourceof revenue is for these sorts
of programs, and it's PFD cuts.
And PFD cuts hit the verypeople that Kevin tells us he's
(23:57):
talking about in this articlemiddle and lower income Alaska
families hit middle and lowerincome Alaska families hardest.
Indeed, one of Kevin's coprofessors at you in UAA
economics, matt Berman, has saidthat it pushes PFD cuts, push
(24:20):
more people into poverty, andyou can see how that was.
That is, if you're sitting onthe poverty line, above the
poverty line, you take out PFDincome, you drop them below the
poverty line, right, um, and soyou're pushing more people into
poverty.
You're, you're affecting middleand lower income Alaska
families.
You're pulling revenue out fromunderneath income from
(24:42):
underneath middle and lowerincome Alaska families.
You're making them poorer andmaking them more economically
challenged at the same time asyou're using that money and then
funding childcare.
So you're really subsidizingthose in the middle and lower
income Alaska families who are,uh, who have children and who
(25:07):
are able to put those childreninto childcare.
It's taking money out ofeverybody's pocket in order to
or in order to subsidize onesubset uh of uh, of that, of
that, uh, that group.
And it seems like the perfectopportunity when you're talking
about child care.
It seems like the perfectopportunity to talk about the
economics of the revenue side,the economic impacts on the
(25:30):
revenue side, as well as theeconomics on the market side, on
the spending side.
And Kevin just completelydoesn't, doesn't do it and I
think, I think that's a huge, ithugely irritates me, because
that's what economists should bedoing.
They should be talking aboutboth sides.
They shouldn't be talking aboutthe impact on both sides.
(25:51):
They should be concerned asmuch about doing what's what,
what they believe is needed todo on the market side as
spending side.
They should be as concernedabout doing what they believe is
needed to do on the market sideas spending side.
They should be as concernedabout doing what needs to be
done for those same goalspromoting families, keeping
families together, allowing twoincome families, promoting those
(26:13):
goals on the revenue side,because revenue policy can have
an equal effect, because revenuepolicy can have an equal effect
, equally damaging effect on therevenue side.
Revenue policy can, as spendingpolicy can.
So I think it's a huge loss, ahuge absence of analysis that
(26:34):
should have matched thatparagraph.
That's talking about what'sgoing on on the market side, on
the spending side.
Speaker 2 (26:40):
Well, what I find amazing is here's an economist,
a professor, right, I mean, he'san economist, and yet he's
advocating for the government tocome in and essentially distort
the market.
Right, I mean, already themarket distortions have happened
with regulation and everythingelse and basically saying that,
(27:00):
oh, the government needs to comein and bail this out because
it's not economically viable,caused in part by the viability
of.
But what about the personalresponsibility aspect, brad?
That's what kills me.
You talk about the oneparagraph that really caught
your attention.
What caught my attention was theparagraph was two paragraphs
before that, when he says I wantto thank our leaders in Juneau
(27:23):
who are making investments andmaking sure that access extends
to more families, that moremothers and fathers can work if
they choose and more kids haveaccess to quality care that
prepares them for a lifetime oflearning.
This funding will enable morefamilies to have the access to
the dignity of work withoutsacrificing the safety of their
(27:44):
children.
What that says to me is well,they're sacrificing their
children.
You're making choices and thereare consequences to those
choices.
Why do you have children ifyou're just going to farm them
off to somebody else?
For the dignity of work.
I mean, it's competingpriorities here and he's looking
(28:07):
to the government to be able tomake sure that everybody can
have everything all the time.
And that's the problem.
You're an economist.
That's not sustainable.
Speaker 1 (28:16):
Yeah Well, you're asking a different question, and
a valid question, and Icertainly don't want to argue
with the validity of it.
But you're asking a differentquestion than I am.
I mean, I'm asking a much more.
If you're going to ask astrictly economic question.
Speaker 2 (28:33):
I'm asking more of an overall arching question.
Yes, I understand question?
Speaker 1 (28:37):
Yes, I understand.
I'm asking, if you're going tosay this about the market side,
why don't you address therevenue side, the supply side,
at the same side, the moneysupply side at the same time?
Because they're both equally assignificant issues.
They both have the same equalimpact.
I mean, my God, you're talkingabout pushing people into
(28:59):
poverty have the same equalimpact.
I mean, my God, you're talkingabout pushing people into
poverty.
On the, on the, on the PFD,you're making PFD cuts, pushing
people into poverty, in order tosupport this, this lifestyle
choice, by, by a certainsub-segment of middle and lower
income and indeed upper income,uh, uh, indeed, top 20% Alaska
families.
I mean, there, there's nolimitation on who can, who can
(29:20):
uh access childcare, andcertainly you, you would expect
some of the top 20% uh are doingit.
So that's, that's, that's myissue.
I understand your issue, Um,and, and that may be a great
issue for you to talk about inthe, in the next segment or in
in in your segment, but, but Iwant to.
I, Kevin, Kevin, should havefocused on both.
Speaker 2 (29:45):
I definitely see your point, yeah, no, I definitely
see your point from an economicstandpoint of saying, hey, you
can't talk about one without theother.
What about the economic impactsof taking from one sector
versus defeat another?
Essentially, you know wealthredistribution in that regard.
I totally understand that.
I just find it ironic thatthese people you know that this
is obviously a there's obviouslya multiplicity of problems with
(30:07):
his opinion piece and you and Iare catching just two of them
together that are similar ordifferent.
Speaker 1 (30:13):
I mean, I mean it's it's part of the, it's part of
the much bigger issue of ofAlaska is a very expensive place
to live and Alaska is alsosmall sort of the same sort of
economic issue as thecosmopolitan issue.
I mean, you don't have, fromthe child care standpoint, you
don't have a broad enough basein terms of either customers or
(30:36):
workers to make the economicsquite work.
I mean, if you had a lot ofcustomers, then the economics
would work better, but Alaska isa small place.
We don't have that manyfamilies.
If you had a broad populationof workers, then the economics
would work better because youwould have a broader group of
people to bring in to help workin these things.
(30:59):
And so it's sort of you know,alaska is a tough place.
Basically, what we've done is wehave asked government to
support or government tosubsidize living in this tough
place, in this sort of economicenvironment by subsidizing
things that otherwise don't workin the limited market we have.
And that's, I mean, that wouldbe Kevin's answer, I think, to
(31:24):
your issue about why are wedoing this at all.
He would say look, alaska is atough place, the costs are high.
We need this sort of support inorder to maintain living up
here.
But my retort to that is okay,kevin, I'll give you that for
the sake of argument, for thesake of continuing this
(31:44):
discussion.
I'll give you that Then.
Why is it okay to be pullingincome out of the pockets of the
very people you claim to bepromoting?
Is it okay to be pulling incomeout of the pockets of middle
and lower income Alaska familiesin order to subsidize this one
sort of small subset of Alaskafamilies?
(32:05):
And it's not.
It's not.
Speaker 2 (32:07):
I mean, you're it exacerbates the same problem.
You don't think those people inmiddle and lower income are
having exactly the same problemtrying to get their own child
care, and now you're taking themoney from them?
I mean, it's a self-l ice creamcone at least, yeah.
Speaker 1 (32:23):
And to some degree I mean to some degree, to sort of
use this to make another point Isometimes try to make you're
pulling money out of the pocketsof middle and low-income Alaska
families to subsidize the top20%.
Because top 20% people aretaking or families are taking
advantage of child care as well.
There's no limit on thesubsidies related to income.
(32:46):
The subsidies go to child careproviders, the employees, or
they go to corporations who setup the tax credits go to
corporations who set up thechild care facilities, and so
there's no income limit.
You know, the president ofConoco's if he has children of
(33:09):
this age, probably doesn't, butthe children of the vice
presidents of Conoco can go totheir facility, the same as you
know the bottom rung employeescan go to those facilities, and
but yet top 20 percenters, butyet we're having middle and
lower income alaska families bethe ones to subsidize that by
taking, by taking income out oftheir pockets.
It is.
It is a.
It is a one-sided piece, in myview, a one-sided economic
(33:35):
analysis of the argument,designed to support the
subsidies but without thinkingthrough the consequences of
who's paying for the subsidies.
Speaker 2 (33:44):
Brad, this reminds me of a opinion piece that we were
listening to last week.
I'm sorry I'm scrolling back toit because I was just so
agitated by the attitude of theperson who wrote it and again,
(34:16):
it was talking about child careand things like that.
I'm sorry, I'm just trying toBecause I was just so.
Essentially oh, I don't see ithere right off the top, right
out of the gate, here in theopinion pieces, essentially the
guy's telling a story about howhe had two children I was
talking about Dunleavy'seducation and how the costs were
(34:39):
being higher and one kid wentto school out of state and then
didn't come home because theymade cuts to the university,
right.
And then he had another kid,who was another kid, who had
just gotten married and theyjust had a kid and they just
bought a house and they couldn'tafford child care and they were
both working.
(34:59):
And I'm thinking, why is this?
Why is any of this my problem?
I mean, they chose to, you know, go to work.
They chose to have a kid, theychose to buy a house, they chose
all those things.
And yet he's saying that whatwe need is we needed more
government subsidies so thatthey could continue to do all
the things that they wanted todo.
Where is the personalresponsibility aspect of these
(35:25):
things as well?
Speaker 1 (35:27):
Yeah, well, there isn't.
I mean Alaska we take forgranted.
I mean there was a piece that Isent you and Rob from the
Fairbanks News Minor about howheavily involved government
subsidies are up in Fairbanks.
Just shockers.
Like 70% of every dollar startswith the government up in
(35:53):
Fairbanks, either federalgovernment or the state
government Just shocked me.
I mean, we are a heavilysubsidized state and what you
get, both from the federalstandpoint and from the state
standpoint, and we're heavilysubsidized because it's
expensive to live up here wedon't have a huge market and so
you know we need price,basically price supports, in
(36:14):
order to have, in order to havethe kind of lifestyle that that
that people say they want.
I mean this goes.
We had, we had this discussionback in the early 20 teens with
the artificial football fields,right, the artificial, putting
artificial grass on footballfields.
It was.
We had a bunch of Texans whocame up here who had played on,
you know, played football andwon their kids to play football
(36:36):
and won their kids to haveartificial one, wanted to have
the latest and greatest one andto have artificial turf, and so
we had the government paying forartificial turf on the frigging
high school football fieldswhere you had like two games a
year, paying for artificial turfon the frigging high school
football fields where you hadlike two games a year, three
games a year, to subsidize thatparticular lifestyle.
In Alaska we've gotten used tothis subsidized lifestyle.
But now we've gotten to thepoint in the early 20 teens we
(36:59):
were subsidizing it.
In the mid 20 teens we weresubsidizing it on the backs of
future Alaskans because we weredrawing down savings in order to
maintain that lifestyle.
Well, we ran through those, weran through the pot that we had
set aside for future Alaskans.
And now we're starting to havecross-subsidization from middle
and lower income Alaska familiesthrough PFD cuts to some upper
(37:25):
income Alaska families throughthrough through childcare
subsidies.
And we've just gotten we'vejust gotten so used to it that
we complain when it's when, whenthere's not more, when we
complain that there's notadditional subsidies to make our
life even easier up here.
Speaker 2 (37:40):
Yeah, yeah, no, I mean, that's been the problem in
Fairbanks for years is thatwhen you've got, you know,
approaching 50% of the peopleare working for government in
one form or another.
You know, in the, in thatcommunity, and then on top of
that, everybody is, you knowthey're subsidized in one form
or another through some form ofgovernment spending.
(38:01):
It makes it very, verydifficult, you know, that makes
it very, very difficult to tosee that as from an economic
standpoint, for sure.
But yeah, this is, this isfrustrating to watch this whole
thing go on with this tug of warover.
You know why not just let thefree market work in the way that
(38:24):
it's supposed to?
We've got all this distortingand this malinvestment because
government is interfering atevery level instead of letting
the market sort itself out.
But it's just like we can't dothat, and this is all I think it
comes back to again the powerand the money of it.
Speaker 1 (38:41):
Yeah, it is.
That's part of it.
Certainly.
I mean legislators get to playhero by saying I'm going to
sprinkle some fairy dust on yoursegment of the population so
you can thrive.
I mean, why do we do it?
We do it because otherwise we'dhave 400,000 people instead of
750,000 people in the state.
(39:02):
I mean, if we went to a puremarket economy, the state would
be a lot smaller.
We saw what that was before oiland we would see it again.
And so what we've got is abunch of people who say, oh, we
don't want to go back to 400,000people.
And you know, we want to comeup here and we want to be able
to live the Alaska lifestyle,but we want to live it with
Texas price supports, you know,texas amenities, and so we want,
(39:24):
since nobody else is doing it,we want government to do it.
It's just it's.
I mean, kevin's article in thatrespect is just consistent with
a bunch of other with a bunchof other articles.
Speaker 2 (39:40):
We're going to continue on here.
Number three of the weekly topthree and that's what didn't
happen at the governor'sconference in Japan.
As he was trying to go outthere and shop the idea of an
Alaskan LNG line out to thevarious Asian markets, Brad,
what didn't happen?
That should have happened.
Speaker 1 (39:58):
Well, I'm talking about the governor's
sustainability conference lastweek where he had the three
administration officials and hada bunch of delegates over 1,000
delegates is what the reportsare at the sustainability
conference and had the three theSecretary of Interior,
secretary of Energy and theDirector or the Administrator of
(40:19):
the EPA up here.
You know, touring the NorthSlope, touring the Cook Inlet,
focused on Alaska LNG.
A lot of talk about Alaska LNGhere's what the New York times
and other publications said inApril was was the target, the
focus of this conference I'mquoting from the times uh
(40:42):
version a group created by MrTrump that is advising him on
domestic energy production, thenational energy dominance
council, is seeking to conveneofficials from the trade
ministries of both Japan andSouth Korea for a summit in
Alaska on June 2nd.
According to three people withknowledge at the summit at the
summit that they have receivedsigned letters of intent from
(41:10):
Japan and South Korea to investin Alaska LNG or purchase its
gas.
The people said Taiwan formallysigned a similar letter of
intent to purchase gas fromAlaska LNG last month.
So the goal let's just stepback a couple of months, the
goal of the conference and thegoal of getting the
administration officials up herearound the Governor's
(41:32):
Sustainability Conference was tohave trade officials from South
Korea and Japan participate andto sign letters of intent
similar to Taiwan at theconference, have a big signing
party under the lights at theconference.
Didn't happen.
Now there's reasons it didn'thappen.
(41:53):
South Korea is going through anelection in which the incumbent
administration, the incumbentpresident, was voted out and a
new president was voted in whohas significantly different
policies on in a number of areas, possibly including energy, has
(42:15):
a significant number of of ofissues on that.
So South Korea was in a was inthe middle of an election
campaign and really not not wellplaced to to come, come sign
things.
Japan, on the other hand, hassome political instability, but
was not in the same place asKorea and Japan could have.
(42:38):
I mean, it doesn't have internalreasons why it wasn't in a
position to do so, but alsodidn't.
They both had officials there,but the officials there at the
conference.
But the officials weren'tparticularly high ranking and
there was no discussion duringthe conference of those
officials being in a position tosign things, sign letters of
(43:02):
intent while they were at theconference.
So you really have to sort ofback up and say, okay, well,
this was the goal of having thethree administration officials
up there.
It was the goal of part of theconference to have a signing
party, a public signing partywith commitments, expressions of
commitments, by Japan and Korea, and it didn't occur.
(43:23):
What does that say about theprojects?
Speaker 2 (43:26):
Right, when you first sent me this topic, I thought I
had to go.
Is he talking about thesustainable energy?
I was cause.
You know cause, again, itdidn't really even make the news
that there were officials fromSouth Korea or Japan or you know
that was.
So I was like confused.
What does it say for it?
It doesn't look good from theoutside.
(43:47):
As a just a layman on theoutside looking in, it's like
wait, I thought this wassupposed to be the big beautiful
pipe thing.
I mean, what's go?
What's going on?
Speaker 1 (43:55):
Yeah, well, they made the most.
They made the most of what theyhad, which was they had three
administration officials thatcould tour and talk about things
and and say say great things.
Although when asked when thewhen the secretary of Interior
was asked whether the federalgovernment would help pay for it
, his reported answer, reportedin the newspapers was well, you
guys have a big sovereign wealthfund, you ought to pay for it,
(44:19):
not the federal government.
So they made as good a thing asthey could out of what they had
, which was the three initialsup from DC.
But it didn't meet the goalsthat had been set forth, the
objectives that had been setforth earlier.
(44:39):
And I think it does mean acouple of things.
The trade talks aren't very faralong because the Japanese and
the Koreans are not going tomake commitments to Alaska LNG
unless they're in conjunctionwith commitments on the US side
about trade.
And the Japanese-US discussionsare going slow on trade.
(45:00):
The Korean discussions are justgoing to wander around for a
while while the new governmentgets in place and figures out
what its trade policy is and howto approach the Trump
administration.
So it means the trade talks aregoing much slower, I think,
than one of the things it meansis that trade talks are going
much slower than otherwiseanticipated and I think for that
(45:21):
reason, clearly Alaska LNG isgoing to go at a much slower
pace.
It also means that we don't knowwhat the economics are and
nobody's going to make Taiwandid, but they're so ephemeral
they're.
So you know uh, uh, uh, oftenthe myths that they're not
really commitments.
Um, nobody's going to makecommitments, significant
(45:43):
commitments, until we know whatthe economics are.
And uh, and Glen Farn saysthey'll have the economics by
the end of the year, which issort of stunning.
Even Exxon couldn't pull thatoff when they were trying to tie
down the cost.
But Glen Farn says they'll havethe economics by the end of the
year and we're not going tohave people stepping up, we're
not going to have countries orcompanies, potential purchasers,
(46:05):
stepping up to make these sortsof commitments until we have
the economics down.
So it probably was.
If somebody had sat down,looked at the calendar and
looked at where we were on theeconomics and looked at where we
were on the trade negotiations,they probably wouldn't have
made that prediction or thatprojection back in April.
But they did and it didn'thappen.
(46:26):
It's significant that it didn'thappen.
The LNG conference made, or thesustainability conference made,
as much as they could aboutwhat with what they had the
three people up from DC, butthis core goal didn't happen and
it sort of tells us that thingsare not on as good a track as
some had hoped and has and assome had projected at the time
(46:49):
that they made those statements.
Speaker 2 (46:52):
60 seconds now, brad, you and I have talked about
this that there's a lot of piein the sky going on, a lot of
positivity.
It's as if we're going to talkit into existence.
But the economics are theproblem.
That's what doesn't lie right.
Speaker 1 (47:06):
The economics are the problem.
That's what doesn't lie right.
Yep, economics rule, economicsrule.
It has to pencil out People arenot going to jump, countries
are not going to jump and makethese commitments because of
trade deals, because the tradedeals go away in four years when
the administration changes.
So economics, fundamentaleconomics rule.
Speaker 2 (47:22):
And that's always been part of the problem with
the Alaska gas line is that theeconomics just don't work as
they sit right now.
Maybe something will change,but we won't know.
I mean Glenn Fard says the endof the year.
I think that's highlyoptimistic.
We'll see what actually happensout of that.
Yeah, I mean I've run intopeople Somebody bent my ear the
(47:44):
other day when I was at theharbor fest thing and they're
just, they're so excited.
The gas line's just going tocoming.
The gas line's coming, it'sgoing to be.
You know, the president's goingto make it happen, is going to,
and.
And my question was well, butagain, how does it get paid for?
And if the economics don't workout, are you okay with the
(48:06):
federal government picking upthe tab?
I mean, there's all theseproblems, but people are just
convinced that it is thesolution to all.
I mean, yes, it would be agreat solution to our problems
if it could work out.
But I'm just not convinced.
After years and years and yearsof hey, it's just around the
corner.
Hey, it's just around thecorner.
Hey, it's just around thecorner, I'm not convinced that
(48:28):
that's actually what's going tohappen here.
Speaker 1 (48:31):
Yeah, and you know people say oh well, we've got a
federal debt guarantee, that youknow, 30, some odd billion in
federal debt guarantee that'sgoing to make it happen.
That's what you know, I've beentold.
That's, brad, what you neverconsider.
(48:54):
You don't consider the impactof the federal debt guarantee.
Well, all the federal debtguarantee does is lower debt
costs.
It doesn't eliminate costs.
It's not a subsidy in the sensethat it takes $10 billion worth
of expenses that have to occuror $10 billion of investment,
and wipe it off because thefederal government's going to
pay for it.
That's not what the debtguarantee is.
What the debt guarantee says isif you issue debt and the
federal government backs it upif the project fails, once it
(49:15):
gets going, if the project fails, then the federal government
will pay out the debt paymentsand what that does is lower your
debt costs from I don't know.
Just to pick numbers out ofthin air from 10% debt costs
down to 6% debt costs.
I mean federal government debtcosts right now are 4%.
I mean the federal governmentdebt issuances are 4%, so it's
(49:36):
going to have some premium overthat.
So it lowers your debt costsdown.
Yes, that improves the economics, but not hugely.
It's not like you wipe out, youknow.
It's not like the federalgovernment is going to pay a $10
billion direct subsidy to takeout a bunch of the costs.
It's just going to lower yourdebt costs and that's not enough
(49:58):
.
I mean, I've run the economicsboth a long time ago and
currently.
That's not enough to move theneedle a whole lot that you're
going to reduce the debt costs.
So, yeah, people go aroundsaying, oh well, federal
government is going to come inwith this debt guarantee and
that's going to solve everything.
That's not going to solve much.
Speaker 2 (50:15):
No, I mean, what's the?
We were just talking about thisa few weeks ago.
I mean, you know, it was 2017,eight years ago they were saying
it's $44 billion.
I mean today, with tariffs andsteel and changes and, of course
, costs going up, I mean, whatare we talking about here?
Are we talking about an $80billion project?
Speaker 1 (50:37):
No, you could be.
I mean the contingency factor.
The way you do these deals isyou sort of price them based
upon the market of the day andthen you put in a contingency
factor.
The contingency factor onsomething like this has got to
be huge, because you don't knowwhat direction the
administration is going to go.
You don't know what's going tohappen uh, uh, out there in the,
in the, in the, in the world,in terms of uh, in terms of uh,
(51:00):
uh equipment costs, or in termsof materials costs, or in terms
of even employee costs.
You just don't know.
So by the time you add in thecontingency factor, you could
get a fairly high number.
And even if you exclude thecontingency factor, even if you
layer in lower debt costs, it'snot going to move those
(51:24):
economics all that much.
So I think, to get back to thepoint, the people in April who
were saying, yeah, we're goingto get signed deals, we're going
to have a signing party at thisconference in Alaska in early
June, I think they were just, Ithink they were really
overextending themselves.
They were out over their skis,uh, in a big way, and we've just
seen that.
We've seen that play out oncewe got to once we got to the
conference.
Speaker 2 (51:44):
Yeah, and I mean again, this is not one of those
things where you want to be ableto tell people I told you so
because you're sitting in thesecond train car.
When you said, I told you youwere going to go over the cliff,
you want to be on the outsidewatching the train go by, you
know, kind of thing.
So it's a difficult thing.
(52:04):
Brad, what are you watching forthe next couple weeks here?
What are you keeping an eye onin Alaska on this, since we're
kind of in the off season, so tospeak?
Speaker 1 (52:16):
Next big thing up is governor's vetoes.
What's he going to veto?
How's he going to explain thevetoes?
Are the vetoes going to be sobig the legislature gets
motivated to come back in?
Likely, not, uh, uh.
How many bills is he going toveto?
I read, I read, an interestingfact they haven't sent him.
(52:36):
Uh, the tax bill, the, the billthat hb1 or sb113.
Speaker 2 (52:41):
They haven't sent it to him yet yeah, and they're,
and they're waiting on.
Speaker 1 (52:44):
the speculation was they might wait until December
to send that to him so that hewould have to veto it right in
front of the right in front ofthe new start of the new
legislature and potentially useit as a way of overturning,
having that legislature come inand overturn it.
The budget vetoes are the nextbig thing and we're going to see
(53:08):
, you know, we're going to seewhether the governor's going to
walk the walk or walk the talkabout, you know, being cutting
down costs and you know,controlling spending and all the
sort of stuff he said over thelast eight years, or whether,
once again, he's going to, youknow, make a few clips here and
there and then sign the bill andgo on from there.
Speaker 2 (53:33):
But that's the next big thing on my-.
You think he's going to vetothe funding for HB57?
Speaker 1 (53:40):
I think he will do some veto of it.
Just to make his point, whetherhe will go down below the 600
mark, what is it?
700 now?
So whether per student bsaright increase, increase, so
whether he will 580 or whatever,yeah, whether he will go down
below the 600 mark, uh, but Ithink he will make.
(54:00):
He will certainly make some uhveto.
And I know the school boardsare just sitting on pins and
needles out there wondering whatthe hell?
You know, how how do they theirtheir budget for the coming
school year that starts at thesame time?
How do they do their budget forthe school coming school year
without knowing what thegovernor's number is going to be
?
But I think he'll make it.
I think he'll make some vetothere.
Speaker 2 (54:21):
And that'll just set us up for next year.
That'll just set us up for theargument for next year More
school funding.
That's what it'll be All right.
Speaker 1 (54:33):
All right, brad, thank you so much Appreciate you
coming in.
It's good to see you, my friendMichael.
As always, thanks for having me.
Speaker 2 (54:36):
All right, we'll see you later.
Speaker 1 (54:37):
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
(54:57):
for Sustainable Budgets.
We look forward to you joiningus again next week on the Weekly
Top Three top three.
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 June 9th 2025.
The weekly top three is aregular segment on the Michael
Duke Show.
The show broadcasts on bothFacebook Live and YouTube Live
(00:32):
as well as via streaming audiofrom the show's website.
Weekdays from 6 to 8 am.
I join Michael weekly in thefirst hour of Tuesday's show
from 6 10 to 7 am for adiscussion between the two of us
about our three issues.
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, youtube,
(00:54):
soundcloud, spotify and Substackpages, also on the Alaskans for
Sustainable Budgets website, aswell as the projects page on
national 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
(01:15):
week, you can also follow andparticipate in the discussion
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 discuss what
the issues are surrounding thestate's threat to terminate the
(01:38):
cosmopolitan leases.
Second, we explain why webelieve a recent op-ed about
state child care support failsto address a huge related issue.
And third, we focus on why whatdidn't happen at Governor
Dunleavy's SustainabilityConference is more important
than what did.
And now let's join Michael.
Speaker 2 (02:01):
Let's dive into today's discussions and talking
points.
We're going to start off withthe number one thing right out
of the gate.
The governor has decided tostart talking about some stuff
with the Cosmo unit, thecosmopolitan, the gas unit out
(02:26):
in the Cook Inlet, the onethat's run by Blue Crest, and
apparently they're threateningto revoke, to shut down.
Who knows, what do we got goingon here.
Speaker 1 (02:38):
So it's the commissioner of the Department
of Natural Resources, John Boyle.
It's not the governor.
Let's not elevate it more thanit needs to be.
Well, directly.
Speaker 2 (02:48):
You're right.
I'm sorry, I apologize, goahead.
Speaker 1 (02:52):
No, no, no, no, no, before the governor's allies
start complaining to us thatwe're invoking the governor's
name unnecessarily it isCommissioner of Natural
Resources, john Boyle.
The headline in the ADN andelsewhere around the state is
from a Nat Hertz article.
The headline is amid, alaskanatural gas crunch state could
(03:15):
revoke leases from company whosedrilling has stalled out.
Is is, as you said, blue crests, um, cosmopolitan unit that's
down near you, uh, off anchorpoint, uh in, uh in the cook
inlet, um, and there, and thestoryline basically is boyle has
(03:36):
issued a notice of default,which is a technical step, a
legal step that you do, uh, asan administrator of units and
leases in Alaska A notice ofdefault to Cosmopolitan for
breach of its plan ofdevelopment and the penalty for,
if you ultimately find them inbreach, the penalty, the
(03:59):
ultimate penalty, is toterminate the unit and terminate
the leases and upon termination, they revert back to the state
and it is a dramatic penalty.
In Alaska I can't recall a majorunit.
I can recall some minor leases,but I can't recall a major unit
(04:19):
that's gone through a default,at least in the last 30, 40
years in Alaska, and so it's afairly major step.
What's going on is thisCosmopolitan is a unit several
leases banded together into aunit that has some production
(04:40):
from oil, some production of oil, but has also has a huge
natural gas find, or at leastwhat cosmopolitan, what
Bluecrest says, is a hugenatural gas find in the Cook
Inlet that has never beendeveloped.
And the reason it hasn't beendeveloped is because it's
offshore and it would takeeither some some cutting edge
(05:04):
technology or just plunking a uhplatform out in the Cook Inlet
to uh out over over the over thenatural gas deposits to uh uh
to produce it, both of whichwould be very expensive and and
carry carry some risk.
Cosmopolitan's never undertakenthat investment.
Uh, because the economics of itare fairly difficult.
(05:29):
The problem with a huge find ora significant find like that is
you need a market to be able tomonetize.
If you're going to make thatinvestment, you need a market to
be able to monetize theproduction, the volume of
production that you're going toget out of it, to be able to pay
off the investment, to make areturn.
And the problem with the CookInlet at least since the time
(05:51):
when the Agrum plant shut downand we stopped exporting gas out
of the old Conoco Phillips LNGterminal the problem with the
Cook Inlet has been it's got afairly small market and it's got
significant coverage byexisting contracts of that
market.
So if you have a huge find, ifyou have a significant find and
(06:15):
you make all this investment andyou have to monetize it by
significant amounts ofproduction and significant
amounts of sale, there reallyisn't an opportunity to do that
in the cooking lot because youdon't have the markets that can
absorb that type of investment.
Speaker 2 (06:31):
So it's sort of a even with the Alaska, I mean,
even though we're challengedright now with our own gas.
It's not a, are you saying it'snot a big enough market to
offset those investments?
Speaker 1 (06:48):
market to offset those investments.
Well, the problem, thechallenge with it, is that shows
up sort of gradually over timewe start having exposure of
tranches of market that is notcovered by contracts and you
need production to sort of easeinto that.
That's why the incrementalismof LNG imports or the
scalability of LNG imports is soattractive, because you can
(07:11):
sort of ease into that one, oneship at a time, or adding
another, another ship on top ofthat, another delivery on top of
that, and so it's not really.
The market just doesn't show up.
Bam, all of a sudden.
I I'm not sure I've ever runthe economics, even if all the
market disappeared tomorrow.
Whether the scale of thatmarket availability is enough to
(07:36):
make cosmopolitan economic, itmay be, but it doesn't show up
that way.
The market doesn't show up thatway.
It shows up in these tranches.
So cosmopolitan has never beendeveloped.
And we have this.
I mean, as you correctlyquickly pointed out, we have
this juxtaposition of thiscookie and lick crisis of
(07:58):
production or of lack ofproduction, lack of gas,
compared to the cosmopolitanvolume sitting out there, the
field sitting out there.
That could help offset part ofthat issue.
So it's never been developed.
And now we're getting to thepoint.
I mean it's really sort of odd,right.
(08:20):
I mean you talk about thecooking, the crisis.
You got cosmopolitan sittingthere.
Blue Crest hasn't developedCosmopolitan and so you start
saying, well, why haven?
That was my question.
Speaker 2 (08:29):
Because if if it doesn't work for them because
they can't get enough investment, because there's not enough
money to be returned.
On the other side, I mean thestate of Alaska, the one of the
(08:53):
the the article made it soundlike the state is like oh,
there's just people chomping atthe bit to get in here and do
this and take over this leaseand do it.
Is there really?
Because if they were, wouldn'tthey want to buy the lease from
Bluecrest or wouldn't they wantto, you know, wouldn't they want
to at least partner up orinvest?
I mean, if the economics worked, wouldn't, you know?
I mean, that's the thing themarket needs to play out.
(09:14):
Is this kind of pressurehelpful?
Speaker 1 (09:17):
Yeah, I mean the thing.
The thing that you get a littleconcerned about is are there
investors out there and isBluecrest asking too much in
terms of participation, theeconomics of their participation
?
Is Bluecrest trying tonegotiate too hard a deal to get
those investors in here?
(09:38):
I doubt that.
I mean, I doubt that Bluecrestis saying, oh you know, you've
got to give us a chunk of moneyand you won't see a return for
10 years because we want to getour return first.
I doubt.
I doubt that that's what'sgoing on.
And so you really got to, yougot to question, you got to
question whether we gainanything other than you know
(09:59):
nice headlines of hey, you know,you guys didn't develop the
field, of hey, you guys didn'tdevelop the field, so we
terminated you.
Whether you gain anything otherthan those nice headlines.
Alaska has always been a bit oddnot odd, but odd compared to
the rest of the industry In thelower 48,.
When you have lease problemslike this, what happens and you
(10:23):
have economic fields and youhave good production or good
prospects, what happens and youhave, you know, economic fields
and you have good production orgood prospects, what happens is
somebody comes in and what'scalled top leasing in the lower
48.
The leaseholder, which is the,or the lessor, which is the
landowner or the mineralinterest owner, will negotiate a
lease with somebody that says,look, if this lease terminates,
(10:46):
you get the lease it's top, itsits on top of the existing
lease.
If the existing lease goes away, then that the top less or less
E, takes the position of the,of the, of the existing lessee,
and that sort of createslitigation about whether or not
the existing lease is is validor not.
We don't have that in Alaskaand Alaska goes out of its way,
(11:09):
frankly, to hang on to existinglessees because the investments
up here are so capital intensiveand so time intensive over a
span of years that once you'vegot somebody you want to sort of
keep them on the hook.
You want to threaten them everyonce in a while maybe, but you
want to keep them on the hookand keep pushing them, because
(11:32):
the time it would take torecreate where they are at any
given point would be significant.
The time investment it wouldtake for someone new to come in
and recreate where an existinglessee is at any given point
would be significant, even moreso in this case because the
facility isn't out there.
The facilities aren't out thereto produce this gas.
That's the problem.
(11:52):
Blue Crest hasn't put them in,hasn't made the investment to
put them in.
So a new lessee coming in wouldface the same issues as Blue
Crest, that is, you know, thetechnological challenge of
getting the facilities out thereand technological challenge of
getting the facilities out thereand the cost of getting the
facilities out there.
So have you really gainedanything by terminating this
(12:13):
lease?
So it's an issue.
I mean some people say oh well,there's gas, hillcrest or Blue
Crest isn't producing it and soterminate them and get somebody
else in there to produce thisgas.
It's not that easy.
There's a reason the gas isn'tbeing produced, there's a reason
that Bluecrest hasn't followedthrough on the lease obligations
(12:35):
and it's not clear thatterminating them is going to
advance the ball toward theobjective of getting that gas
produced anytime soon.
What the state really shouldwant to do, and probably what's
going on here, is the statewants to scare Blue Crest enough
and threaten the economics ofwhat they've invested already,
enough to force them into a saleto somebody Probably Hillcorp
(13:00):
Preferably Hillcorp who hasexisting know-how and existing
facilities inside the Cook Inletto come out and do this.
So there's a tension going onhere.
A game the state's playing,probably targeted ultimately on
a sale, but it's interesting andto hear people say, oh yeah,
absolutely, we ought toterminate that lease.
They haven't produced anything,it's time to get somebody in
(13:21):
there that will.
It's not that simple.
Speaker 2 (13:25):
Well, and how much of this is pressure?
Because blue crest and hillcorpwere in the midst of a deal in
late 23, uh, but they couldn'tcome to terms on profits and
cost splitting right, so theywere going to joint venture and
do some things.
So is this just a final thoughthere?
Is this just more of a powerplay to push that deal or to
push an outright sale?
Do you think I it of a powerplay to push that deal or to
push an outright sale?
Do you think?
Speaker 1 (13:46):
I.
It's a power play to pushsomething, uh, to push blue
crest to do something.
I think termination is probablythe last thing the state wants
to do.
But it's a power play to pushblue crest to do something.
And if and if hillcorp is thatsomething, I mean, then you have
further monopolization of thecook inlet.
That's not good either, butit's a push to get Blue Crest to
(14:08):
do something.
And and, and you know, blueCrest is sitting there going
look, we'd like to get money outof this deal, we'd like to do a
deal with somebody, but it hasto be on decent terms.
And so you know, we're stilltrying to find that person out
there.
Speaker 2 (14:22):
And, of course, creating a monopoly in the Cook
Inlet?
Never could.
I mean, you know, a monopoly atthis point is not a great idea,
but that seems to be thedirection everybody is trying to
push at this point.
It's kind of crazy.
Brad does this for fun.
Who pays Brad for his weeklycommentary?
I mean, brad does this for fun,I.
(14:44):
I mean, I know it's weird, buthe does it for fun.
Um, but yeah, the state is, Idon't know, this push.
Uh, why would you want toconglomerate any more power into
hill corp, who's already shownthat they will?
I mean, I guess, never let acrisis go to waste, right?
(15:05):
I mean, it just seems like amonopoly in this case doesn't
make much sense.
I mean it might make much sensefrom a vertical integration
standpoint of only having oneplayer out there so you don't
have to duplicate effort, etcetera, et cetera.
But it doesn't make much sensefor Alaskans, as consumers and
producers, to have a singlesource, because that means
(15:28):
they're kind of at the mercy ofthe single source, right?
Speaker 1 (15:31):
Yeah, we've sort of found that out.
But Hillcorp already has aneffective monopoly.
I mean, I did the HHI'sHirschman-Hirffendahl Index,
which is how you measure thedegree of market concentration,
uh, concentration in a market.
Um, I did the HHIs for a columna few, a few weeks ago and the
HHIs are off the charts.
(15:52):
I mean they're, they're in anyother market.
The department of justice, eventhe Trump department of justice
, or the federal tradecommission, whoever had
jurisdiction over it, would beall over it.
Uh, but the HH.
But we've already got effectivemonopolization and with
Hillcorp's pending acquisitionor proposed acquisition or I
don't know, may be completed bynow.
Acquisition of Marathon's LNGterminal, the old ConocoPhillips
(16:16):
LNG terminal, and turning itaround to use it as an import
heck, that increases the HHIseven more.
So Heck, that increases theHHIs even more.
So Hillcrop already effectivelyhas monopolization.
This would be a big step becausebasically, if they acquired
Cosmopolitan and if theyproduced it, it would take away
(16:37):
the potential competition of LNGimports into the Cook Inlet as
a potential competitor.
That has some constrainingeffect.
So it'd be another huge chunkin it.
But we're already at I meanwe're at the stage where what
was it last session, a yearbefore a year ago, when Kathy
(16:57):
Giesel brought up the potentialof fixing the C-Corp tax issue,
the S-Corp tax issue, hill Corpsent a letter that said, hey,
we'll just shut down the CookInlet investment.
They said kinder words thanthat, more lawyerly words than
that, but basically said we'llshut down investment.
And Giesel backed off.
So yeah, they're alreadyexercising monopoly power out
(17:19):
there.
This would be another step inthat.
Speaker 2 (17:21):
Yeah, it's a nice gas field.
To be ashamed if somebody putthe plug in it, right.
I mean, that was kind ofessentially what they said to
Kathy Giesel and got it scoredaway.
So what do you think happenshere, brad, as you look at this
tug of war?
Is it just a warning shot?
Is it just to play nice playball?
(17:41):
What do you think is going tohappen?
Speaker 1 (17:43):
I think Boyle keeps pressing.
I mean, we know the field'sthere.
Bluecrest has made publicstatements about it being proven
reserves, which means they havea high degree.
I've never really heard provenreserves about a field that's
never produced before, butproven reserves, and so they
have a high degree of, of, of,of, of a high sense that the
(18:08):
reserves are there.
And I think dnr keeps pressing.
But the problem is hillcorp, nothillcorp.
I mean blue crest sort of sitsthere and goes, yeah, okay, you
want to take it away from us.
You know, you know it's notgoing to improve your situation
any Right.
And Blue Crest keeps saying, oh, why don't we have Ada, give us
more money, give us more moneyto pursue the objective of
(18:32):
development.
It is not a good situation andthe reason it's not is because
of the size of the cookingmarket.
If we got an LNG line I don'tthink we will, but if we got an
LNG line down from the North andwe had an LNG plant, that would
change the dynamics a littlebit and Cosmopolitan would then
(18:53):
sit there going well, we havethe potential of being able to
export some of this and thatwould change the dynamics.
But by then we will otherwisesolve the cooking.
Speaker 2 (19:03):
And we're not just talking about one lease, chris.
Chris is talking about.
One lease is not a monopoly.
I mean, the problem is, is thatthere's not that many players,
that the one lease is not, thatit's just a continuation of a
monopoly.
That's already kind ofhappening, um, since there's
only really essentially threemain players in the cook inlet
and blue crest is one, so uh,with hillcorp being the dominant
(19:24):
giant.
That's what we're talking about.
Speaker 1 (19:26):
All right, chris needs to go back to Economics
101.
Speaker 2 (19:29):
The weekly top three continues.
We're on to number two of three.
Look, I can count, mom,one-sided analysis really
irritates Brad.
I mean Brad just gets and is itreally analysis?
I don't know know.
I read this piece and uh, um, Imean, you're calling it
one-sided analysis, I call it apablum for the masses.
(19:52):
At this point it's not evenreally it it.
I was just irritated readingthis article.
Brad.
It just like, talked down to melike I was five or something.
I I mean, it's just, uh, thewhole thing was so.
Go ahead, tell me about howthis one-sided analysis really
irritates you.
Speaker 1 (20:14):
Well, there's a paragraph that has an analysis
in it, and I'll get to theparagraph in a second, but, uh,
the opinion piece is from KevinBerry, who's a UAA economics
professor.
Uh, which is which is whatcaused my, caught my eye and and
made me want eye, and made mewant to read the piece, because
Kevin's pretty balanced abouteconomic issues.
The opinion piece is please andthank you, please and thank you
these are nice words that wecan say, and it's about the
(20:37):
legislature passing and, inKevin's view, Governor Dunleavy,
supporting the extension ofchild care credits, both
subsidies as well as tax creditsfor child care facilities and
child care employees.
In Alaska, providers arestruggling with an economic
model that cannot simultaneouslyprovide care that is affordable
(21:06):
to all families in need of carewhile also paying wages that
caregivers and teachers deserve.
This funding is a lifeline andbasically, as an economist, what
Kevin is saying look, theeconomics of child care
facilities don't work in the inthe current Alaska free market
(21:27):
you don't get.
Parents.
Potential users, potentialcustomers of the childcare
facilities can't afford theprices it would take to be able
to maintain these, create andmaintain these childcare
facilities and pay the wagesthat need to be paid to attract
the workers that would need tobe there to make the childcare
facilities and pay the wagesthat need to be paid to attract
the workers that would need tobe there to make the childcare
(21:47):
facilities work, that there's agap in market forces between the
willingness to pay or theability to pay on the part of
potential customers and theeconomics of what it takes to
make that business model, thebusiness model of of child care
work.
And so this funding and whatkevin's talking about with this
(22:07):
funding, this funding of of ofthe child care credits, tax
credits uh, for corporations,basically, because we don't have
taxes on anybody else childcare tax credits and the child
care subsidies, that funding isa lifeline to make those, the
economics of child carefacilities, work.
(22:28):
What you're doing is you'reessentially saying that that
there are, there can be,subsidies to the business side,
the business model side,subsidies in terms of payments
by government or tax credits tocorporations who would then fund
these child care facilities andmake the model work.
They can then keep the rateslow enough to make it attractive
(22:49):
to parents, to fit theeconomics of parents and all of
that.
You know I don't argue a lotwith that economic analysis, but
here's where I think Kevinfails.
Here's where I think thisarticle fails and why it just
irritated me to see it fail inthis way.
(23:09):
He's not considering at all theeconomic impacts, the economic
side of who's paying for thesecredits, the economic
consequences of generating therevenue necessary to fund these
tax credits, to cover the gapcreated by these tax credits or
(23:33):
to fund the subsidies, thedirect subsidies, that are being
paid by government to thatparticular business segment.
And we know it's not like it'sa mystery out here.
We know who the marginal sourceof revenue is for these sorts
of programs, and it's PFD cuts.
And PFD cuts hit the verypeople that Kevin tells us he's
(23:57):
talking about in this articlemiddle and lower income Alaska
families hit middle and lowerincome Alaska families hardest.
Indeed, one of Kevin's coprofessors at you in UAA
economics, matt Berman, has saidthat it pushes PFD cuts, push
(24:20):
more people into poverty, andyou can see how that was.
That is, if you're sitting onthe poverty line, above the
poverty line, you take out PFDincome, you drop them below the
poverty line, right, um, and soyou're pushing more people into
poverty.
You're, you're affecting middleand lower income Alaska
families.
You're pulling revenue out fromunderneath income from
(24:42):
underneath middle and lowerincome Alaska families.
You're making them poorer andmaking them more economically
challenged at the same time asyou're using that money and then
funding childcare.
So you're really subsidizingthose in the middle and lower
income Alaska families who are,uh, who have children and who
(25:07):
are able to put those childreninto childcare.
It's taking money out ofeverybody's pocket in order to
or in order to subsidize onesubset uh of uh, of that, of
that, uh, that group.
And it seems like the perfectopportunity when you're talking
about child care.
It seems like the perfectopportunity to talk about the
economics of the revenue side,the economic impacts on the
(25:30):
revenue side, as well as theeconomics on the market side, on
the spending side.
And Kevin just completelydoesn't, doesn't do it and I
think, I think that's a huge, ithugely irritates me, because
that's what economists should bedoing.
They should be talking aboutboth sides.
They shouldn't be talking aboutthe impact on both sides.
(25:51):
They should be concerned asmuch about doing what's what,
what they believe is needed todo on the market side as
spending side.
They should be as concernedabout doing what they believe is
needed to do on the market sideas spending side.
They should be as concernedabout doing what needs to be
done for those same goalspromoting families, keeping
families together, allowing twoincome families, promoting those
(26:13):
goals on the revenue side,because revenue policy can have
an equal effect, because revenuepolicy can have an equal effect
, equally damaging effect on therevenue side.
Revenue policy can, as spendingpolicy can.
So I think it's a huge loss, ahuge absence of analysis that
(26:34):
should have matched thatparagraph.
That's talking about what'sgoing on on the market side, on
the spending side.
Speaker 2 (26:40):
Well, what I find amazing is here's an economist,
a professor, right, I mean, he'san economist, and yet he's
advocating for the government tocome in and essentially distort
the market.
Right, I mean, already themarket distortions have happened
with regulation and everythingelse and basically saying that,
(27:00):
oh, the government needs to comein and bail this out because
it's not economically viable,caused in part by the viability
of.
But what about the personalresponsibility aspect, brad?
That's what kills me.
You talk about the oneparagraph that really caught
your attention.
What caught my attention was theparagraph was two paragraphs
before that, when he says I wantto thank our leaders in Juneau
(27:23):
who are making investments andmaking sure that access extends
to more families, that moremothers and fathers can work if
they choose and more kids haveaccess to quality care that
prepares them for a lifetime oflearning.
This funding will enable morefamilies to have the access to
the dignity of work withoutsacrificing the safety of their
(27:44):
children.
What that says to me is well,they're sacrificing their
children.
You're making choices and thereare consequences to those
choices.
Why do you have children ifyou're just going to farm them
off to somebody else?
For the dignity of work.
I mean, it's competingpriorities here and he's looking
(28:07):
to the government to be able tomake sure that everybody can
have everything all the time.
And that's the problem.
You're an economist.
That's not sustainable.
Speaker 1 (28:16):
Yeah Well, you're asking a different question, and
a valid question, and Icertainly don't want to argue
with the validity of it.
But you're asking a differentquestion than I am.
I mean, I'm asking a much more.
If you're going to ask astrictly economic question.
Speaker 2 (28:33):
I'm asking more of an overall arching question.
Yes, I understand question?
Speaker 1 (28:37):
Yes, I understand.
I'm asking, if you're going tosay this about the market side,
why don't you address therevenue side, the supply side,
at the same side, the moneysupply side at the same time?
Because they're both equally assignificant issues.
They both have the same equalimpact.
I mean, my God, you're talkingabout pushing people into
(28:59):
poverty have the same equalimpact.
I mean, my God, you're talkingabout pushing people into
poverty.
On the, on the, on the PFD,you're making PFD cuts, pushing
people into poverty, in order tosupport this, this lifestyle
choice, by, by a certainsub-segment of middle and lower
income and indeed upper income,uh, uh, indeed, top 20% Alaska
families.
I mean, there, there's nolimitation on who can, who can
(29:20):
uh access childcare, andcertainly you, you would expect
some of the top 20% uh are doingit.
So that's, that's, that's myissue.
I understand your issue, Um,and, and that may be a great
issue for you to talk about inthe, in the next segment or in
in in your segment, but, but Iwant to.
I, Kevin, Kevin, should havefocused on both.
Speaker 2 (29:45):
I definitely see your point, yeah, no, I definitely
see your point from an economicstandpoint of saying, hey, you
can't talk about one without theother.
What about the economic impactsof taking from one sector
versus defeat another?
Essentially, you know wealthredistribution in that regard.
I totally understand that.
I just find it ironic thatthese people you know that this
is obviously a there's obviouslya multiplicity of problems with
(30:07):
his opinion piece and you and Iare catching just two of them
together that are similar ordifferent.
Speaker 1 (30:13):
I mean, I mean it's it's part of the, it's part of
the much bigger issue of ofAlaska is a very expensive place
to live and Alaska is alsosmall sort of the same sort of
economic issue as thecosmopolitan issue.
I mean, you don't have, fromthe child care standpoint, you
don't have a broad enough basein terms of either customers or
(30:36):
workers to make the economicsquite work.
I mean, if you had a lot ofcustomers, then the economics
would work better, but Alaska isa small place.
We don't have that manyfamilies.
If you had a broad populationof workers, then the economics
would work better because youwould have a broader group of
people to bring in to help workin these things.
(30:59):
And so it's sort of you know,alaska is a tough place.
Basically, what we've done is wehave asked government to
support or government tosubsidize living in this tough
place, in this sort of economicenvironment by subsidizing
things that otherwise don't workin the limited market we have.
And that's, I mean, that wouldbe Kevin's answer, I think, to
(31:24):
your issue about why are wedoing this at all.
He would say look, alaska is atough place, the costs are high.
We need this sort of support inorder to maintain living up
here.
But my retort to that is okay,kevin, I'll give you that for
the sake of argument, for thesake of continuing this
(31:44):
discussion.
I'll give you that Then.
Why is it okay to be pullingincome out of the pockets of the
very people you claim to bepromoting?
Is it okay to be pulling incomeout of the pockets of middle
and lower income Alaska familiesin order to subsidize this one
sort of small subset of Alaskafamilies?
(32:05):
And it's not.
It's not.
Speaker 2 (32:07):
I mean, you're it exacerbates the same problem.
You don't think those people inmiddle and lower income are
having exactly the same problemtrying to get their own child
care, and now you're taking themoney from them?
I mean, it's a self-l ice creamcone at least, yeah.
Speaker 1 (32:23):
And to some degree I mean to some degree, to sort of
use this to make another point Isometimes try to make you're
pulling money out of the pocketsof middle and low-income Alaska
families to subsidize the top20%.
Because top 20% people aretaking or families are taking
advantage of child care as well.
There's no limit on thesubsidies related to income.
(32:46):
The subsidies go to child careproviders, the employees, or
they go to corporations who setup the tax credits go to
corporations who set up thechild care facilities, and so
there's no income limit.
You know, the president ofConoco's if he has children of
(33:09):
this age, probably doesn't, butthe children of the vice
presidents of Conoco can go totheir facility, the same as you
know the bottom rung employeescan go to those facilities, and
but yet top 20 percenters, butyet we're having middle and
lower income alaska families bethe ones to subsidize that by
taking, by taking income out oftheir pockets.
It is.
It is a.
It is a one-sided piece, in myview, a one-sided economic
(33:35):
analysis of the argument,designed to support the
subsidies but without thinkingthrough the consequences of
who's paying for the subsidies.
Speaker 2 (33:44):
Brad, this reminds me of a opinion piece that we were
listening to last week.
I'm sorry I'm scrolling back toit because I was just so
agitated by the attitude of theperson who wrote it and again,
(34:16):
it was talking about child careand things like that.
I'm sorry, I'm just trying toBecause I was just so.
Essentially oh, I don't see ithere right off the top, right
out of the gate, here in theopinion pieces, essentially the
guy's telling a story about howhe had two children I was
talking about Dunleavy'seducation and how the costs were
(34:39):
being higher and one kid wentto school out of state and then
didn't come home because theymade cuts to the university,
right.
And then he had another kid,who was another kid, who had
just gotten married and theyjust had a kid and they just
bought a house and they couldn'tafford child care and they were
both working.
(34:59):
And I'm thinking, why is this?
Why is any of this my problem?
I mean, they chose to, you know, go to work.
They chose to have a kid, theychose to buy a house, they chose
all those things.
And yet he's saying that whatwe need is we needed more
government subsidies so thatthey could continue to do all
the things that they wanted todo.
Where is the personalresponsibility aspect of these
(35:25):
things as well?
Speaker 1 (35:27):
Yeah, well, there isn't.
I mean Alaska we take forgranted.
I mean there was a piece that Isent you and Rob from the
Fairbanks News Minor about howheavily involved government
subsidies are up in Fairbanks.
Just shockers.
Like 70% of every dollar startswith the government up in
(35:53):
Fairbanks, either federalgovernment or the state
government Just shocked me.
I mean, we are a heavilysubsidized state and what you
get, both from the federalstandpoint and from the state
standpoint, and we're heavilysubsidized because it's
expensive to live up here wedon't have a huge market and so
you know we need price,basically price supports, in
(36:14):
order to have, in order to havethe kind of lifestyle that that
that people say they want.
I mean this goes.
We had, we had this discussionback in the early 20 teens with
the artificial football fields,right, the artificial, putting
artificial grass on footballfields.
It was.
We had a bunch of Texans whocame up here who had played on,
you know, played football andwon their kids to play football
(36:36):
and won their kids to haveartificial one, wanted to have
the latest and greatest one andto have artificial turf, and so
we had the government paying forartificial turf on the frigging
high school football fieldswhere you had like two games a
year, paying for artificial turfon the frigging high school
football fields where you hadlike two games a year, three
games a year, to subsidize thatparticular lifestyle.
In Alaska we've gotten used tothis subsidized lifestyle.
But now we've gotten to thepoint in the early 20 teens we
(36:59):
were subsidizing it.
In the mid 20 teens we weresubsidizing it on the backs of
future Alaskans because we weredrawing down savings in order to
maintain that lifestyle.
Well, we ran through those, weran through the pot that we had
set aside for future Alaskans.
And now we're starting to havecross-subsidization from middle
and lower income Alaska familiesthrough PFD cuts to some upper
(37:25):
income Alaska families throughthrough through childcare
subsidies.
And we've just gotten we'vejust gotten so used to it that
we complain when it's when, whenthere's not more, when we
complain that there's notadditional subsidies to make our
life even easier up here.
Speaker 2 (37:40):
Yeah, yeah, no, I mean, that's been the problem in
Fairbanks for years is thatwhen you've got, you know,
approaching 50% of the peopleare working for government in
one form or another.
You know, in the, in thatcommunity, and then on top of
that, everybody is, you knowthey're subsidized in one form
or another through some form ofgovernment spending.
(38:01):
It makes it very, verydifficult, you know, that makes
it very, very difficult to tosee that as from an economic
standpoint, for sure.
But yeah, this is, this isfrustrating to watch this whole
thing go on with this tug of warover.
You know why not just let thefree market work in the way that
(38:24):
it's supposed to?
We've got all this distortingand this malinvestment because
government is interfering atevery level instead of letting
the market sort itself out.
But it's just like we can't dothat, and this is all I think it
comes back to again the powerand the money of it.
Speaker 1 (38:41):
Yeah, it is.
That's part of it.
Certainly.
I mean legislators get to playhero by saying I'm going to
sprinkle some fairy dust on yoursegment of the population so
you can thrive.
I mean, why do we do it?
We do it because otherwise we'dhave 400,000 people instead of
750,000 people in the state.
(39:02):
I mean, if we went to a puremarket economy, the state would
be a lot smaller.
We saw what that was before oiland we would see it again.
And so what we've got is abunch of people who say, oh, we
don't want to go back to 400,000people.
And you know, we want to comeup here and we want to be able
to live the Alaska lifestyle,but we want to live it with
Texas price supports, you know,texas amenities, and so we want,
(39:24):
since nobody else is doing it,we want government to do it.
It's just it's.
I mean, kevin's article in thatrespect is just consistent with
a bunch of other with a bunchof other articles.
Speaker 2 (39:40):
We're going to continue on here.
Number three of the weekly topthree and that's what didn't
happen at the governor'sconference in Japan.
As he was trying to go outthere and shop the idea of an
Alaskan LNG line out to thevarious Asian markets, Brad,
what didn't happen?
That should have happened.
Speaker 1 (39:58):
Well, I'm talking about the governor's
sustainability conference lastweek where he had the three
administration officials and hada bunch of delegates over 1,000
delegates is what the reportsare at the sustainability
conference and had the three theSecretary of Interior,
secretary of Energy and theDirector or the Administrator of
(40:19):
the EPA up here.
You know, touring the NorthSlope, touring the Cook Inlet,
focused on Alaska LNG.
A lot of talk about Alaska LNGhere's what the New York times
and other publications said inApril was was the target, the
focus of this conference I'mquoting from the times uh
(40:42):
version a group created by MrTrump that is advising him on
domestic energy production, thenational energy dominance
council, is seeking to conveneofficials from the trade
ministries of both Japan andSouth Korea for a summit in
Alaska on June 2nd.
According to three people withknowledge at the summit at the
summit that they have receivedsigned letters of intent from
(41:10):
Japan and South Korea to investin Alaska LNG or purchase its
gas.
The people said Taiwan formallysigned a similar letter of
intent to purchase gas fromAlaska LNG last month.
So the goal let's just stepback a couple of months, the
goal of the conference and thegoal of getting the
administration officials up herearound the Governor's
(41:32):
Sustainability Conference was tohave trade officials from South
Korea and Japan participate andto sign letters of intent
similar to Taiwan at theconference, have a big signing
party under the lights at theconference.
Didn't happen.
Now there's reasons it didn'thappen.
(41:53):
South Korea is going through anelection in which the incumbent
administration, the incumbentpresident, was voted out and a
new president was voted in whohas significantly different
policies on in a number of areas, possibly including energy, has
(42:15):
a significant number of of ofissues on that.
So South Korea was in a was inthe middle of an election
campaign and really not not wellplaced to to come, come sign
things.
Japan, on the other hand, hassome political instability, but
was not in the same place asKorea and Japan could have.
(42:38):
I mean, it doesn't have internalreasons why it wasn't in a
position to do so, but alsodidn't.
They both had officials there,but the officials there at the
conference.
But the officials weren'tparticularly high ranking and
there was no discussion duringthe conference of those
officials being in a position tosign things, sign letters of
(43:02):
intent while they were at theconference.
So you really have to sort ofback up and say, okay, well,
this was the goal of having thethree administration officials
up there.
It was the goal of part of theconference to have a signing
party, a public signing partywith commitments, expressions of
commitments, by Japan and Korea, and it didn't occur.
(43:23):
What does that say about theprojects?
Speaker 2 (43:26):
Right, when you first sent me this topic, I thought I
had to go.
Is he talking about thesustainable energy?
I was cause.
You know cause, again, itdidn't really even make the news
that there were officials fromSouth Korea or Japan or you know
that was.
So I was like confused.
What does it say for it?
It doesn't look good from theoutside.
(43:47):
As a just a layman on theoutside looking in, it's like
wait, I thought this wassupposed to be the big beautiful
pipe thing.
I mean, what's go?
What's going on?
Speaker 1 (43:55):
Yeah, well, they made the most.
They made the most of what theyhad, which was they had three
administration officials thatcould tour and talk about things
and and say say great things.
Although when asked when thewhen the secretary of Interior
was asked whether the federalgovernment would help pay for it
, his reported answer, reportedin the newspapers was well, you
guys have a big sovereign wealthfund, you ought to pay for it,
(44:19):
not the federal government.
So they made as good a thing asthey could out of what they had
, which was the three initialsup from DC.
But it didn't meet the goalsthat had been set forth, the
objectives that had been setforth earlier.
(44:39):
And I think it does mean acouple of things.
The trade talks aren't very faralong because the Japanese and
the Koreans are not going tomake commitments to Alaska LNG
unless they're in conjunctionwith commitments on the US side
about trade.
And the Japanese-US discussionsare going slow on trade.
(45:00):
The Korean discussions are justgoing to wander around for a
while while the new governmentgets in place and figures out
what its trade policy is and howto approach the Trump
administration.
So it means the trade talks aregoing much slower, I think,
than one of the things it meansis that trade talks are going
much slower than otherwiseanticipated and I think for that
(45:21):
reason, clearly Alaska LNG isgoing to go at a much slower
pace.
It also means that we don't knowwhat the economics are and
nobody's going to make Taiwandid, but they're so ephemeral
they're.
So you know uh, uh, uh, oftenthe myths that they're not
really commitments.
Um, nobody's going to makecommitments, significant
(45:43):
commitments, until we know whatthe economics are.
And uh, and Glen Farn saysthey'll have the economics by
the end of the year, which issort of stunning.
Even Exxon couldn't pull thatoff when they were trying to tie
down the cost.
But Glen Farn says they'll havethe economics by the end of the
year and we're not going tohave people stepping up, we're
not going to have countries orcompanies, potential purchasers,
(46:05):
stepping up to make these sortsof commitments until we have
the economics down.
So it probably was.
If somebody had sat down,looked at the calendar and
looked at where we were on theeconomics and looked at where we
were on the trade negotiations,they probably wouldn't have
made that prediction or thatprojection back in April.
But they did and it didn'thappen.
(46:26):
It's significant that it didn'thappen.
The LNG conference made, or thesustainability conference made,
as much as they could aboutwhat with what they had the
three people up from DC, butthis core goal didn't happen and
it sort of tells us that thingsare not on as good a track as
some had hoped and has and assome had projected at the time
(46:49):
that they made those statements.
Speaker 2 (46:52):
60 seconds now, brad, you and I have talked about
this that there's a lot of piein the sky going on, a lot of
positivity.
It's as if we're going to talkit into existence.
But the economics are theproblem.
That's what doesn't lie right.
Speaker 1 (47:06):
The economics are the problem.
That's what doesn't lie right.
Yep, economics rule, economicsrule.
It has to pencil out People arenot going to jump, countries
are not going to jump and makethese commitments because of
trade deals, because the tradedeals go away in four years when
the administration changes.
So economics, fundamentaleconomics rule.
Speaker 2 (47:22):
And that's always been part of the problem with
the Alaska gas line is that theeconomics just don't work as
they sit right now.
Maybe something will change,but we won't know.
I mean Glenn Fard says the endof the year.
I think that's highlyoptimistic.
We'll see what actually happensout of that.
Yeah, I mean I've run intopeople Somebody bent my ear the
(47:44):
other day when I was at theharbor fest thing and they're
just, they're so excited.
The gas line's just going tocoming.
The gas line's coming, it'sgoing to be.
You know, the president's goingto make it happen, is going to,
and.
And my question was well, butagain, how does it get paid for?
And if the economics don't workout, are you okay with the
(48:06):
federal government picking upthe tab?
I mean, there's all theseproblems, but people are just
convinced that it is thesolution to all.
I mean, yes, it would be agreat solution to our problems
if it could work out.
But I'm just not convinced.
After years and years and yearsof hey, it's just around the
corner.
Hey, it's just around thecorner.
Hey, it's just around thecorner, I'm not convinced that
(48:28):
that's actually what's going tohappen here.
Speaker 1 (48:31):
Yeah, and you know people say oh well, we've got a
federal debt guarantee, that youknow, 30, some odd billion in
federal debt guarantee that'sgoing to make it happen.
That's what you know, I've beentold.
That's, brad, what you neverconsider.
(48:54):
You don't consider the impactof the federal debt guarantee.
Well, all the federal debtguarantee does is lower debt
costs.
It doesn't eliminate costs.
It's not a subsidy in the sensethat it takes $10 billion worth
of expenses that have to occuror $10 billion of investment,
and wipe it off because thefederal government's going to
pay for it.
That's not what the debtguarantee is.
What the debt guarantee says isif you issue debt and the
federal government backs it upif the project fails, once it
(49:15):
gets going, if the project fails, then the federal government
will pay out the debt paymentsand what that does is lower your
debt costs from I don't know.
Just to pick numbers out ofthin air from 10% debt costs
down to 6% debt costs.
I mean federal government debtcosts right now are 4%.
I mean the federal governmentdebt issuances are 4%, so it's
(49:36):
going to have some premium overthat.
So it lowers your debt costsdown.
Yes, that improves the economics, but not hugely.
It's not like you wipe out, youknow.
It's not like the federalgovernment is going to pay a $10
billion direct subsidy to takeout a bunch of the costs.
It's just going to lower yourdebt costs and that's not enough
(49:58):
.
I mean, I've run the economicsboth a long time ago and
currently.
That's not enough to move theneedle a whole lot that you're
going to reduce the debt costs.
So, yeah, people go aroundsaying, oh well, federal
government is going to come inwith this debt guarantee and
that's going to solve everything.
That's not going to solve much.
Speaker 2 (50:15):
No, I mean, what's the?
We were just talking about thisa few weeks ago.
I mean, you know, it was 2017,eight years ago they were saying
it's $44 billion.
I mean today, with tariffs andsteel and changes and, of course
, costs going up, I mean, whatare we talking about here?
Are we talking about an $80billion project?
Speaker 1 (50:37):
No, you could be.
I mean the contingency factor.
The way you do these deals isyou sort of price them based
upon the market of the day andthen you put in a contingency
factor.
The contingency factor onsomething like this has got to
be huge, because you don't knowwhat direction the
administration is going to go.
You don't know what's going tohappen uh, uh, out there in the,
in the, in the, in the world,in terms of uh, in terms of uh,
(51:00):
uh equipment costs, or in termsof materials costs, or in terms
of even employee costs.
You just don't know.
So by the time you add in thecontingency factor, you could
get a fairly high number.
And even if you exclude thecontingency factor, even if you
layer in lower debt costs, it'snot going to move those
(51:24):
economics all that much.
So I think, to get back to thepoint, the people in April who
were saying, yeah, we're goingto get signed deals, we're going
to have a signing party at thisconference in Alaska in early
June, I think they were just, Ithink they were really
overextending themselves.
They were out over their skis,uh, in a big way, and we've just
seen that.
We've seen that play out oncewe got to once we got to the
conference.
Speaker 2 (51:44):
Yeah, and I mean again, this is not one of those
things where you want to be ableto tell people I told you so
because you're sitting in thesecond train car.
When you said, I told you youwere going to go over the cliff,
you want to be on the outsidewatching the train go by, you
know, kind of thing.
So it's a difficult thing.
(52:04):
Brad, what are you watching forthe next couple weeks here?
What are you keeping an eye onin Alaska on this, since we're
kind of in the off season, so tospeak?
Speaker 1 (52:16):
Next big thing up is governor's vetoes.
What's he going to veto?
How's he going to explain thevetoes?
Are the vetoes going to be sobig the legislature gets
motivated to come back in?
Likely, not, uh, uh.
How many bills is he going toveto?
I read, I read, an interestingfact they haven't sent him.
(52:36):
Uh, the tax bill, the, the billthat hb1 or sb113.
Speaker 2 (52:41):
They haven't sent it to him yet yeah, and they're,
and they're waiting on.
Speaker 1 (52:44):
the speculation was they might wait until December
to send that to him so that hewould have to veto it right in
front of the right in front ofthe new start of the new
legislature and potentially useit as a way of overturning,
having that legislature come inand overturn it.
The budget vetoes are the nextbig thing and we're going to see
(53:08):
, you know, we're going to seewhether the governor's going to
walk the walk or walk the talkabout, you know, being cutting
down costs and you know,controlling spending and all the
sort of stuff he said over thelast eight years, or whether,
once again, he's going to, youknow, make a few clips here and
there and then sign the bill andgo on from there.
Speaker 2 (53:33):
But that's the next big thing on my-.
You think he's going to vetothe funding for HB57?
Speaker 1 (53:40):
I think he will do some veto of it.
Just to make his point, whetherhe will go down below the 600
mark, what is it?
700 now?
So whether per student bsaright increase, increase, so
whether he will 580 or whatever,yeah, whether he will go down
below the 600 mark, uh, but Ithink he will make.
(54:00):
He will certainly make some uhveto.
And I know the school boardsare just sitting on pins and
needles out there wondering whatthe hell?
You know, how how do they theirtheir budget for the coming
school year that starts at thesame time?
How do they do their budget forthe school coming school year
without knowing what thegovernor's number is going to be
?
But I think he'll make it.
I think he'll make some vetothere.
Speaker 2 (54:21):
And that'll just set us up for next year.
That'll just set us up for theargument for next year More
school funding.
That's what it'll be All right.
Speaker 1 (54:33):
All right, brad, thank you so much Appreciate you
coming in.
It's good to see you, my friendMichael.
As always, thanks for having me.
Speaker 2 (54:36):
All right, we'll see you later.
Speaker 1 (54:37):
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
(54:57):
for Sustainable Budgets.
We look forward to you joiningus again next week on the Weekly
Top Three top three.
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