September 16, 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 September 15, 2025.
This week, our top 3 issues are these: 1) we explain why a recent op-ed by Senator Cathy Giessel proposes to make Alaska’s fiscal situation even worse than it already is (2:22); 2) we review recent data from the Department of Revenue that is telling us production taxes remain broken even well beyond the current 10-year revenue forecast (19:54); and 3) while the recent headlines are interesting, we explain what information we and other industry observers are really waiting for about the AKLNG project (37:29).
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 September 15, 2025.
The weekly top three is aregular segment on the Michael
Dukes Show.
The show broadcasts on bothFacebook Live and YouTube Live
(00:34):
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 610 to 7 am for adiscussion between the two of us
about our three issues.
We post the podcasts of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, youtube,
(00:56):
soundcloud, spotify and Substackpages.
Also on the Alaskans forSustainable Budgets website, as
well as the projects page onnational blog site mediumcom.
You can find past episodes ofthe weekly top three also at the
same locations.
Keep in mind that, in additionto these podcasts during the
(01:18):
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 explain why
(01:38):
a recent op-ed by Senator KathyGiesel proposes to make Alaska's
fiscal situation even worsethan it already is.
Second, we review recent datafrom the Department of Revenue
that is telling us productiontaxes remain broken, even well
(01:59):
beyond the current 10-yearrevenue forecast.
And third, while the recentheadlines are interesting, we
explain what information we andother industry observers are
really waiting for beforedeciding about the viability of
the Alaska LNG project.
And now let's join Michael.
Speaker 2 (02:22):
Well, let's get started here, brad, because
you've got a lot to cover today.
We're going to start off withitem number one, which is uh,
kathy geisel is just making itworse.
Right, I mean it could be, Imean she could be doing.
She's just making it worse.
Speaker 1 (02:39):
Hit me with it so let's set the stage a little bit
for Giesel had an editorial inthe ADN, an op-ed in the ADN,
this past week that just youknow, it was like fingernails on
a chalkboard to me.
But let's set the stage alittle bit for it.
Over the course of the next 10years, alaska is projected to
run a current law deficit.
(03:00):
That means the PFD paidaccording to the statute,
because there is no otherstatute right now.
I mean it means we follow thelaw.
Over the next 10 years Alaskais projected to run $18 billion
cumulative over the 10-yearperiod, $18 billion in deficits.
And that assumes it assumes thespring revenue forecast.
(03:24):
But it also assumes that wehold spending, overall spending
to inflation from the FY billion, $1.8 billion on average a year
every year for the next 10years.
That's the fiscal outlook forthe state.
(03:55):
If I were a leader in thelegislature, if I were governor
but if I were a leader in thelegislature, I'd be going.
This is issue number one.
We can't do anything else.
We can't be spending onanything else.
We can't be worrying aboutanything else until we resolve
our fiscal outlook.
Some want to do it through PFDcuts, deep PFD cuts.
(04:16):
Some want to do it throughother revenues.
Some want to do it in different.
Some want to do it through deepspending cuts, some want to.
People want to do it indifferent ways, but we can't do
anything else.
If you were a leader, you wouldsay looking at this outlook,
you would say we can't doanything else until we get this
resolved.
Kathy Giesel is Senate MajorityLeader, writes an op-ed in the
(04:40):
ADN this past week and itdoesn't mention that issue, the
fundamental issue, the fiscalissue, the issue that's going to
drive the state's budget overthe next 10 years.
Doesn't mention it at all.
Instead, the op-ed is entitledAlaska students deserve more
(05:02):
investment in our classrooms andthe entire op-ed is focused on
how we spend more, how we makethe deficits deeper given the
same revenues.
How we spend more.
How we make the deficits deeper.
Two paragraphs there are twosimple measures, according to
Giesel, that we can take tolimit class sizes and recruit
(05:25):
and retrain more qualified andexcited educators in Alaska.
First, restore a pension forpublic employees.
Second, we need to pay teachersa competitive salary that
reflects their impact on ourcommunities.
Spend more, increase the BSAmore over the next 10 years.
(05:47):
Nothing in there about howyou're going to pay for the $1.8
to $18 billion deficit thatyou're looking at over the next
10 years.
Nothing in there about howyou're going to deal even with
that, and certainly nothing inhere about how you're going to
deal with any increases.
If you want a poster, if youwant a synopsis, a time capture
(06:11):
of how Alaska has gotten intothe situation it's gotten into,
all you need to do is look atthe budget forecast and then
look at this op-ed.
They're just ignoringlegislative leadership, is just
ignoring the state that Alaskais in, the fiscal situation that
Alaska is facing.
They're just ignoring theirresponsibility to resolve an
(06:36):
outlook that, for any state,would be disastrous $1.8 billion
per year.
They're just ignoring that and,in fact, what they're doing is
writing op-eds that make it evenworse.
So it's a failure, absolute,undisputable failure on the part
(06:56):
of the legislative and Senateleadership, in particular
because of Giesel undisputablefailure that that they are
sending Alaska on a crash andburn course with respect to with
looking at its budget outlook.
Crash and burn course, not evenwhispering a second about how
(07:17):
to resolve that and then addingon and spend and spending more
on top of it.
It is, it is malpractice, it isan undoing of your duties.
You're ignoring your duties.
It's a horrible fiscalsituation to be putting the
state in.
Speaker 2 (07:37):
I got to say as I was reading this article to me it
was just more of the bait andswitch argument that we see,
specifically in this case inregards to education.
Again, the I.
To me it was just more of thebait and switch argument that we
see, specifically in this casein regards to education.
Again, the headline readsAlaska students deserve more
investment in our classroom.
So it's for the kids, right,but in the long run, what does
(07:58):
it end up being about?
It ends up being about publicemployee pensions and teacher
pay.
So it's not money going directlyinto the classroom, it's not,
you know, bolstering policies ornew programs or things that
they're going to do to try andfix the educational system.
So we've got two things.
We've got the fact that they'recompletely ignoring the 8
(08:18):
million pound gorilla in theroom, which is $1.8 billion a
year in deficits, and on top ofthat, they're not even
acknowledging things that wouldfix the educational problem.
To begin with, I mean there maybe some argument if you could
say this money that we're goingto spend is directly going to
impact the outcomes Damn thecost.
But no, they use the platitudesin the headline and then
(08:39):
everything is about spendingmore in the state it's.
I mean at this point, brad,it's a sickness.
Speaker 1 (08:49):
It is a sickness, michael.
And I don't think welegitimately can get to the
second issue about what we oughtto be doing in the classrooms,
where we ought to be directingmore money into the classrooms,
how we ought to be fixing this.
I don't think we canlegitimately get to that issue
to the extent it involvesdollars.
I don't think we canlegitimately get to that issue
to the extent it involvesdollars.
I don't think we canlegitimately get to that issue
(09:09):
until we fix the underlyingbaseline of where the state's
fiscal situation is going.
It's irresponsible to betalking about spending more
money, even if it's spent well,in good ways.
It's irresponsible to betalking about spending more
money until you've solved theunderlying fiscal issue.
(09:29):
Because what are we leaving?
I mean, yeah, okay, we're goingto educate the kids, but what
are we leaving these kids afterwe educate them?
We're leaving them deficitsthat go out to eternity.
We're leaving them with a CBRthat's been drained so that
their generation, the kids we'retraining, their generation,
doesn't have the same fiscalgeneration this generation just
(09:51):
used up in the last 10 years.
We're leaving them with anempty cookie jar.
We're leaving them with aneconomy where we are punishing
the economy by taxing, doing thevery thing from a fiscal policy
standpoint cutting PFDs thathas the largest adverse impact
on the economy, that takes themost from middle and lower
(10:13):
income 80% of Alaska families.
We are leaving the nextgeneration in a horrible fiscal
situation.
While we're talking about I meanit is rearranging boats or
rearranging deck chairs on theTitanic.
We're talking about, oh, we'regoing to make your education a
little bit better.
We're going to leave you atrash economy.
We're going to leave you atrash fiscal situation.
(10:36):
We're going to leave you withan empty cookie jar in terms of
the CBR.
When you run into the samefiscal situation that every
other generation's run into,we're going to leave you with
nothing in the cookie jar todeal with it.
But you're going to have amarginally better education
experience because we're goingto according to Giesel, because
we're going to pay teachers moreand we're going to have a
pension for them.
(10:57):
It is fundamentallyirresponsible to be worrying
about any spending items good,bad and different.
It's fundamentallyirresponsible to be worrying
about any additional spendinguntil we've solved the
fundamental problem that we havein this state from a fiscal
standpoint.
Speaker 2 (11:17):
Well, it's not just leaving them with an empty
cookie jar, brad.
It's like addictive, compulsivegamblers who basically leave
their kids $200,000 in debt asthey pass away, and that's their
legacy, because that's whatwe'll end up with.
We'll end up with kids who aregoing to be inheriting not just
no money in the bank, but thatthey were going to have to
(11:39):
figure out how to pay for allthis stuff at a billion plus
dollars a year in deficitsmoving forward, because we've
had all this nice to have stuff.
That's that's.
Come on here.
Speaker 1 (11:48):
And that's, and that's just, that's just an
inflation rate of 2.5%, exactly.
So if you've, if you spent, ifyou just kick that up to 3%,
that number goes above 2 billion.
I mean, that's, that's how,that's how much, that's how much
at the margin we're operating.
Speaker 2 (12:09):
And of course, that may not even be the true amount
of inflation, because I waslooking at some numbers that
somebody sent to me the otherday and the true numbers for
inflation in Alaska, based oneverything that's going on
nationwide and tariffs andeverything else, I mean it could
be upwards of 4%, 3.5%, 4%.
So then I mean, what's thenumber due then?
(12:31):
Two, two and a half, 2.6, rightBillion dollars a year.
Speaker 1 (12:36):
That may be a column.
That may be a column tocalculate it at different
assumptions about spendinggrowth rates, to sort of focus
on how big those numbers getvery quickly If you just make
minor tinkerings in the percentof growth.
Speaker 2 (12:52):
Well, and I don't think it can be emphasized
enough what you just said, andmaybe people out there missed it
Again the $1.8 billion deficitper year for 10 years, or $18
billion over 10 years, assumesthe government doesn't increase
the budget at all.
It's just baseline spending ofwhat we have right now with the
(13:14):
automatic.
You know whatever the automaticincrease is every year for COLA
, inflation, you know whatevercontracting, you know deals,
that's assuming that theyflatline the budget.
$1.8 billion, I don't think itcould be emphasized enough.
That is the rosiest assumptionthat we've ever.
You know that we could ever seeNot a 2% increase, not a 4%
(13:35):
increase, not a 1% increase,flatline, based on what we have.
It's $1.8 billion a year.
I mean, this is a crisis.
Speaker 1 (13:43):
One other fact people don't focus on.
I mean they focus on oh, we'regoing to hold spending at
inflation.
We need to adjust spending forinflation.
Our revenue isn't adjusting forinflation.
Our revenue, driven by the dropin production taxes, which
we'll talk about in just amoment, our revenue is dropping
as an absolute.
It's not even keeping zero.
(14:06):
It's certainly not adjustingfor inflation like spending,
like some assume spending should.
It's not even keeping up withthat.
It's not even keeping up withthat.
It's not even keeping up withzero.
It's dropping over the next 10years.
And so when you say about, whenyou talk about, oh, we'll just
keep spending at inflation,that'll do.
It Doesn't do it.
(14:27):
But if you tick spending up to2.75, to 3, to 3.25, to 3, to
3.5, it just widens that gapthat's growing over the next 10
years and it's irresponsible.
I mean to get back to Giesel itis absolutely irresponsible to
be talking about any spendinggood, bad and different, to be
(14:49):
talking about any spendingincreases until you first fix
that fundamental problem.
Speaker 2 (14:55):
Right, could be the best program in the world to
benefit the most people.
But if we can't pay for it andit puts us further behind the
caboose here, it's irresponsibleand I couldn't agree more with
that.
Willie says my favorite day ofthe week and good morning, good
morning Willie, good to see you.
Brian says that's in twentytwenty five dollars.
(15:16):
Right, yeah, because it couldget worse if we start looking
down the road and inflation, ohyeah, it could be worse.
Terry says give me a break, wedon't have any money.
And then Rick says they'rekilling the state in the name of
education.
I mean education is just thebiggest culprit.
But I mean, brad, this isreally it, right.
(15:37):
I mean they are killing thestate in the name of spending.
That's what it's all about.
Speaker 1 (15:42):
Yeah, exactly right.
I mean, Giesel's pension plandoesn't apply just to education.
The pension plan applies to allgovernment employees.
And sometimes people say, ohwell, we need an increase in the
construction budget, we needmore infrastructure, the
university needs more money,we're going to need more money
for corrections, we're going toneed more money for that or more
(16:03):
money for this.
It isn't just education.
Education is the most flagrantexample because it's the one
that gets the most op-eds aboutpeople driving for additional
education, but it's across theboard.
I mean you cannot.
I was reading over the weekendthe legislative priorities from
the Fairbanks, north StarBorough and from the Mat-Su
(16:24):
Borough and from various otherboroughs.
And it's all about spending.
Spend more in this area, spendmore, do more, build more
buildings, do this, do that andall that spending is more than
the rate of inflation.
And do all that and that willmake our life better.
Well, it's making our.
It may make some people's livesbetter, but it's making it
(16:47):
better at the expense of theoverall, at driving that deficit
number higher and higher andhigher.
We need to go back to basics.
We need to solve where thismoney, this alleged money, is
coming from.
We need to balance trulybalance the budget, as opposed
to these claims that legislatorsmake at the end of the session.
(17:09):
Oh, we balance the budget.
You balance the budget throughtaxes.
You balance the budget bypulling from the PFD through
taxes on middle and lower incomeAlaska families.
Be honest about it, they aren't.
But we need to solve where thissituation is going.
Some people say, well, we'lljust continue PFD cuts.
That's how we'll get throughthis.
If you adjust that two and ahalf to 3%, you wipe out PFDs
(17:31):
and you're still and you're andyou're running a deficit.
So it's not it.
You can't do anything else.
You can't do anything else.
You can't address construction,you can't address
infrastructure, you can'taddress the university, you
can't address anything elseuntil you get your fiscal house
in order.
Speaker 2 (17:49):
No, I mean, if you, you know, if you took all of the
PFD that was remaining I meanit's only $667 million You've
got a $1.8 billion deficit at a2.5% inflation rate, which I
said earlier.
I mean, I'm reading some thingsthat says it could be upwards
of 3.5% to 4% in inflation, buteven at the rosiest assumption,
(18:11):
$1.8 billion it doesn't evencover half of the deficit, half
of the deficit.
That's insane.
Speaker 1 (18:20):
Yeah Well, I mean, we've got to stop this focus on
spending, have got to act, havegot to become responsible and
ask themselves where is themoney coming from?
Before we get any more of theseop-eds on, particularly from
leadership, I mean, it'd be, youknow, you see Zach Fields write
(18:44):
this stuff every once in awhile.
Okay, it's Zach Fields, youknow, a backbencher, sort of a
backbencher in the House.
This is the majority leader ofthe Senate who's doing this, the
responsible body, the body thatis looking out for the
long-term, looking out for theoverall.
This is the majority leader ofthe Senate that's doing this.
And there's not a breath,there's not a single breath of
(19:08):
where's the money going to comefrom for all this, where's the
money going to come from to payfor the base deficit that we've
got as opposed, and not tomention, where's the money going
to come from for thisadditional spending.
There's not a breadth of thatin her entire op-ed.
Speaker 2 (19:24):
No, and I'm reminded of the press conference, the
presser, that they had last year, where they had Stedman and
Giesel and, I think, annieJosephson and some other people
up there they were talking about.
You know, well, next year isgoing to be tough.
Next year is going to be tough,and then Stedman's like but I
don't want to focus on that.
Well, wait a second.
This is the most critical thingfor the state of Alaska moving
(19:44):
forward.
You don't want to focus on it?
I mean, come on, we would justneed to focus on right now.
That's how we got here, becausewe just focused on the now and
we didn't focus on the future.
We're continuing the weekly topthree.
Brad Keithley, of course,alaskans for Sustainable Budgets
.
You can find him at ak4sbcom oryou can go argue with him over
(20:06):
on X or Facebook or wherever youwant to argue with the bat.
Uh, this week's uh, number two,number two, all right, all I
want to say is.
All I want to say is uh, I'munder on number two.
All I want to say is welcome tothe party, pal.
Uh, we've been talking aboutthis for months and now, all of
(20:27):
a sudden, everybody's findingreligion all of a sudden.
Well, dermot cole was the firstperson to talk about this kind
of thing and I'm like he talkedabout it 10 days ago.
Brad keithley's been talkingabout it on this program for
months, and that is, of course,10 years is only the beginning
of the problem.
When we're talking now about,uh, oil production, brad, um, I
(20:51):
guess you're you're, you're,you're the, you're the
copernicus or galileo of ourtime, where they wanted to stone
you, and now, all of a sudden,everybody's found religion well,
yeah, maybe.
Speaker 1 (21:02):
um, so the the lead-in to this.
We talked a lot last week aboutthe new study on pika and what
it's telling us about productiontaxes, and it it's telling us
that production taxes won'tstart from PICA a major field
won't start from PICA until fiveyears.
No zero production taxes fromPICA until for five years down
(21:25):
the road, or seven years downthe road and then another five
years where PICA stays onminimums, years down the road
and then another five yearswhere PICA stays on minimums.
And it helps explain why, overthe next 10 years, when you look
at the revenue forecast, yousee this dive in production
taxes over the next 10 years andyou can see that from PICA,
which, with the delay inproduction tax, startup and then
(21:49):
continuation on minimums.
There's something else fromthese studies.
There's the study of PICA thatwe focused on last week and then
there's also a study aboutWillow that the department
Conoco's Willow field, that theDepartment of Revenue released,
(22:10):
and there's something else fromthese studies that is as
significant, if not moresignificant, particularly when
you're looking around thelong-term.
You'll recall that when you hadWill Stapp on the show, the
last time you had Will Stapp onthe show, you were asking him
about production taxes towardthe end of the interview and
Stapp stumbled along somethingabout yeah, yeah, yeah, there's
a problem for the next 10 years.
It's on minimums and all thatsort of stuff.
(22:31):
But wait till we get to the2035 and wait till we get to the
next decade.
It's all gonna get better,because all that stuff's gonna
be gone.
All the problem over the next10 years is gonna be gone.
All of a sudden, we're gonnahave this spike in production
taxes.
You asked the appropriatequestion, which is well, how do
we get through the next 10 yearswith the $1.8 billion in
(22:54):
deficit?
But setting that aside, thestaff essentially tried to argue
that everything's going to befine.
Beyond that, the studies thathave been done by PICA and for
Willow are telling us somethingvery interesting and if you can
flip up that chart real quick, Iwant to talk through this
quickly.
I'll put it in the Fridaycolumn also, but I want to talk
(23:17):
about this real quickly.
There's been four studies doneof Willow one in February 23,
one of April 23, one of February24, and now the most recent in
August 25.
Two studies of PICA these arestudies by the Department of
Revenue about various revenuesources.
This is focusing on productiontaxes.
This chart focuses onproduction taxes, two studies of
(23:38):
PICA, one in March of 24 andone of August of 25.
And what these numbers are isthey are the average annual
production tax to be paid fromeach of these fields.
And so you look at Willow, youlook at the studies up until the
(23:59):
latest and they vary betweennegative $266 million a year
from Willow's startup at 29 to33, to Willow then going at $268
million in the February study,from 33 to 43, annually from 33
to 43, and then $112 million asWillow is on decline.
(24:23):
The Willow field's on declinefrom 43 to 53.
The study covers essentially 30years.
So that's the study that was inFebruary 23.
And if you look at the study,the numbers focus on the numbers
for 33 to 43.
In the middle column for WillowFebruary 23,.
(24:45):
$268 million a year.
April 23,.
The study $218 million a year.
April 23,.
The study $218 million a year.
February 25, $211 million ayear.
Those are the numbers that WillStaff has in mind when he was
talking.
He's saying look, yeah, it'sgoing to be bad for the next 10
years.
Looking at Willow, for 29 to 33, you know very low numbers,
(25:09):
negative numbers some years, butwhen we get to 33 to 43, the
next decade, it's going to getbetter.
And I'm assuming he had in mindthose numbers from the previous
studies, the latest Willowstudy.
Look at the latest Willow study,which is August 25.
And it shows $30 million a yearfrom 29 to 33.
(25:29):
Willow starts up in 29.
Year from 29 to 33.
Willow starts up in 29.
So it shows $30 million, $27million from a year from 29 to
33.
Look at what goes on in FY 33 to43.
This is the Department ofRevenue's study.
This is just taking theircalculations and turning them
into an annual average.
(25:50):
Look at what happens in 33 to43.
The projection is dropping,drops through every study.
But from the February 24 to theAugust 25 study it drops from
$211 million that Willow issupposedly going to contribute
in production taxes to the statebudget to $53 million, a drop
(26:11):
of $160 million plus or minus.
And then look at 43 through 53.
Instead of $90 million it dropsdown to less than $20 million.
Pica does the same thing.
When you look at the FY33 to 43average the middle column and
look at the PICA numbers, theMarch 24 study said PICA was
(26:34):
going to contribute over $100million in production taxes.
Now the new study shows it's$50 million, less than half.
That what's going on is as weget closer to field startup and
we're seeing the cost of thefield come in, the actual cost
(26:55):
of the field come in.
What we're seeing is it'sdriving down those total costs
which are a deduction fromproduction taxes.
Those costs are starting todrive down the production tax.
That's going to be realizedsignificantly.
Drive down the production tax.
That's going to be realized notonly in the initial startup
(27:15):
years FY29 to 33 in the case ofWillow, or FY27 to 33 in the
case of PICA not only in thosestartup years, but also in to
(27:38):
say don't go away the next 10years.
Yes, they're bad the next 10years, but they go away.
They don't go away In thedecade beyond that.
They stay bad and the revenuesbeing produced by production
taxes stay bad.
These may be the August 20, theAugust 25.
Numbers may even be high.
The reason they may be high isbecause both both Conoco now
(28:04):
with Willow, and Santos withPICA, are talking about
additional developments andSantos, with PICA, are talking
about additional developmentsand what those additional
developments will do is createadditional credits, additional
deductions that will drive eventhese numbers the August 25
numbers, down lower by creatingadditional credits to go against
production tax liability.
(28:25):
In those decades SB21 is brokenand it's not only broken for the
next decade.
We've seen that in the lastseveral revenue forecasts.
As you've looked at the decadeahead and you've looked at the
drop in production tax revenuesover the next decade ahead, sb21
(28:47):
is not only broken over thenext decade, it's broken over
the field life of these newfields coming on.
And the new fields are important.
Not only are they addingproduction, but they're also
replacing existing productionthat's been paying full
production taxes.
So when you take those intoaccount, you're having a
(29:11):
continued depression, depressiveeffect on production taxes over
not only the next decade butthe decade beyond that.
When legislators try to blowsmoke at you anymore and say oh
yeah, there's a problem over thenext 10 years and somehow they
dance around how the hell we'resupposed to get through the next
(29:32):
10 years.
But not only is there a problemin the next 10 years, there's a
problem beyond that as well,and the problem is that SB21
just doesn't generate Alaska'sfair share of the revenues being
generated by these projects isjust not generating it.
(29:53):
It is SB21 and the environmentwe've gone into is tilted much
more in favor of the companiesthan it is in favor of the state
.
There's not a balance anymore.
It's just tilting in favor ofthe companies.
Speaker 2 (30:04):
The worst part about this whole thing is that even in
this article, in the beaconfrom James Brooks, it mentions,
in fact, that it doesn't eveninclude the per barrel tax
credits.
The value of those credits arenot included in the new estimate
.
So I mean it's even worse thanwhat you're portraying here,
because, again, it doesn'taccount for everything.
(30:26):
But regardless, that was theone question that I had for Will
how do we make it through thenext 10 years?
Speaker 1 (30:33):
Well, now the question is much broader than
that the per barrel tax credits.
What's going on with PICA?
Or what's going on with Willow?
Is that Willow according to theDOR analysis, willow is staying
on minimums throughout theentire field life.
Now it never gets off minimumsand the per barrel tax credits
only come into play once you getoff minimums.
(30:54):
If you have a tax obligationabove the minimum, it starts
beating that tax obligation,starts reducing that tax
obligation.
We never get to the per barrelcredits with the willow field
the way that DOR has analyzed it, to the per barrel credits with
the willow field the way that,the way the DOR has analyzed it,
we barely at the tail end ofthe PICA.
(31:19):
We barely get above minimums,so we're barely getting into the
area where the per barrel taxcredits apply.
So, yes, it's worse, becausewhen you get out into that next
decade, the per barrel taxcredits are at least applying to
most of Hill Corp's productionfrom Prudhoe, but it's not
applying to any of this stuff.
(31:39):
This stuff is going down justbecause of the way SB21 is
operating.
Before you get to the perbraille credits.
Speaker 2 (31:45):
You know I give Brad a hard time about the whole beat
down and everything else, butwe got to laugh about it because
no, I mean, otherwise we'll cry.
I mean nobody's.
Nobody seems to be talkingabout this and the average
person is not really payingattention to it.
The listeners are, but thepoliticians, the people who we
(32:05):
elect to pay attention to thesethings, are not even you know,
are not even talking about,they're not even mentioning it.
They want you to ignore.
Let's not focus on that rightnow.
Let's not focus on that rightnow.
Oh, we'll wait 10 years, it'llbe fine.
That answer from Will Stapp wasjust to me.
It was just astonishing.
How do we get over the next 10years?
(32:27):
Well, you know, and that's allthese things, all these
Republicans, every time we talkto a Republican.
Well, you know, resourcedevelopment, that.
(32:47):
So how do we make it betweennow and then?
Even if that were true, even ifresource development was the
way out, how do you make itbetween now and then?
That's like saying I'm going toget that bonus in 10 years.
I just got to figure out how tonot live on the street for the
next 10 years before I get thebonus.
Speaker 1 (33:03):
Well, and what this number?
What these numbers are tellingyou, michael, is you're not
going to get the bonus in 10years.
I mean somebody's holding thatout and saying, oh, 10 years, 10
years, just make it 10 years.
We don't have savings anymore.
The only way we made it throughthe last 10 years was by
draining savings.
We don't have savings anymoreto make it through the next 10
years.
But those who are holding outand saying just wait 10 years,
(33:23):
it'll be fine, the numbers arenow telling you it's not going
to be fine in 10 years.
The numbers are telling youthat it's going to be as bad in
10 years.
These are not inflationadjusted numbers.
So when you say that, yes, butproduction revenues are going to
go up per year on Willow, forexample, are going to go from 27
(33:45):
million through 33 to 53million.
They're going to double from$33 to $43.
Well, spending has more thandoubled over that period of time
.
It's not keeping up with wherewe're heading.
This state it's a combination oftwo things.
I mean Giesel highlights theproblem in one by not talking
(34:09):
about it.
The problem is on the spendingside.
The problem's also on therevenue side.
Sb 21 was supposed to increaseproduction.
It's done that and supposed toincrease production taxes,
supposed to increase revenuesfor the state as production went
up.
Well, production's going up,something like projected to go
up something like 50% over thenext decade.
(34:31):
Production taxes are projectedto decline by 43% over the next
decade and now we're finding outthat even in the decade beyond
that, production taxes are goingto continue to be on the floor.
So we've got to address bothand we've got to have
legislators and administrationsthat step up to it and say look,
(34:54):
this is a problem that we'vegot, that we've got to solve.
This is a fundamental problemthat we've got to solve.
Speaker 2 (35:01):
Yeah, well, and that's the thing.
If you can't even admit it, ifyou can't even talk about it,
there is no solving it.
And that's where we're at.
I mean, we just we can't.
You know, you've been, you know, I know that Harold is in the
chat room talking for yearsabout oil taxes, and you've,
we've been talking about how theoil taxes are, are busted and
(35:21):
need to be fixed and need to beaddressed, and how the spending
also needs to come down.
And so now you've got bothsides of the aisle, you know,
climbering and clawing at youbecause we can't possibly cut.
And boy, we need that stabilitythat we can't, we can't touch
that oil tax because the I mean,you know, the church of oil is
like we can't do that.
And so you've got both sideswho are looking at you aghast.
(35:43):
But if nobody acknowledges thatthere's a problem and addresses
it, wow, what's it going tolook like when the yogurt hits
the rotor?
You know what I mean?
That's, that's going to be aproblem.
Speaker 1 (35:54):
Yeah, it's um, I mean , you cannot.
You cannot legitimately look atthese numbers and say we're
going to be fine.
You just can't.
You can't, you can't see thesenumbers and say, yes, we're
going to grow our way out ofthis through increased oil
development or increasedresource development.
(36:16):
The numbers are telling youthat, yeah, revenues go up,
producer revenues go up, butstate revenues aren't.
State revenues are going downover the next 10 years and they
aren't recovering in the 10years beyond that.
So what's the state supposed todo while this is going on?
Speaker 2 (36:38):
Yeah, alex makes a valid point.
Seems like mining taxes need tobe revised too.
Alex, I would agree.
I've talked about that foryears that the severance tax and
that the minimum tax thatthey're getting right now on
their net profit schemes.
But we can't even address theelephant in the room which is
oil.
If we can't get at the biggestpart of the problem, how in the
(37:00):
hell are we going to get them toaddress the mineral taxes?
I mean, I'm in agreement withyou.
You know we should not bepulling these minerals out of
the ground and getting thepittance that the state is.
But hey, you know no big deal,we just pay no attention to the
man behind the curtain.
You know what we need.
We needed to find benefitsprogram that would help the
state.
That would help the state.
Speaker 1 (37:23):
Yeah, that'll that'll help the state sink it.
I mean that'll that'll run usinto the iceberg even harder all
right.
Speaker 2 (37:30):
Uh, number three of the weekly top three, brad
keithley alaskans forsustainable budgets is our guest
.
Ak4sbcom is where you find him.
Um number three, brad.
Um.
Is there really progress on aklng?
We keep hearing about it.
We keep hearing a lot of peopletalking about it.
Keep all those, all thoseRepublicans who are all about
(37:52):
resource development.
Oh, it's going to, it's goingto be.
It's getting better, it'sgetting good, it's getting
better.
You know what this reminds meof?
This reminds me of the victorylap that Bill Walker took when
he signed it with Japan andChina and all these other people
.
You know.
Oh, it's just around the corner.
Just around the corner.
We've got more on the AK LNGunder Glenn Farn.
(38:15):
Give it to us.
Speaker 1 (38:16):
Well, we had a couple of headlines this past week
coming out of the worldwide.
There's a conference every yearcalled Gas Tech.
It's a global gas conference.
The LNG industry plays a rolein that and is playing a larger
role in it as it goes along.
There were a couple ofagreements, a lot of agreements
signed during GASTEC, a coupleof agreements related to Alaska.
(38:38):
One was an agreement betweenGlen Farn and Jura, a Japanese
electric company, japaneseelectric company.
The headline, james Brookswrote, was Japanese electric
company signs, tentativeagreement for gas from
Trans-Alaska pipeline project,the gas project.
The second was a headlinedeveloper proposed Trans-Alaska
(39:00):
gas pipeline signs deal withSouth Korean steel company, both
big headlines and both about,you know, deals being signed at
gas tech One, the one with Jera,was for the sale of LNG.
The one with the Korean SteelCompany, south Korean Steel
Company, was both for potentialpurchases of pipe for the LNG
line and the sale of LNG to theproject.
(39:24):
Big headlines and they made alot of buzz at Gastek.
I had friends who texted me orwho direct messaged me and said,
oh, things must be going on inAlaska.
The combined, all of the dealsthe deal with the Thailand oil
company, the Taiwanese company,the Taiwanese LNG purchase, the
(39:49):
Japanese purchase, the Koreanpurchase, all these combined
aren't half yet of the totalcapacity of the LNG line.
And for the LNG line to makeeconomic sense it needs to be
full, not just half full, notjust 75% full, not 80% full.
It needs to be full to drivethe unit costs down and make it
(40:10):
competitive.
So these are headlines thatindicate some progress on the
sales side, on selling potentialsales of LNG.
All of them, all of the dealsthat have been announced thus
far, none of them are firm.
All of them are contingent on awide variety of things.
None of them are firm.
(40:42):
All of them are contingent on awide variety of things.
Most qualify as letters ofinterest, which means, yeah, if
this happens and that happensand the other thing happens,
maybe we'll negotiate a firmdeal at some point.
Or barely over half of thecapacity of the LNG line.
So they aren't filling up theline Yet.
There may be more to come, buthere's the deal and here's what
all of those deals are waitingon and here's what you know,
(41:03):
real, those who are followingthis line from gas tech and from
elsewhere, this is what they'rereally waiting on.
They're really waiting on theupdated cost estimate.
To be competitive, alaska LNGhas to enter the market at a
competitive price, and theextent to which it's at a
(41:25):
competitive price is determinedby its costs.
We can have all the volume inthe world, but if the costs are
substantially high, that perunit cost is going to be too
much and it's not going to bemarketable in the world market.
Costs are determined by twothings the cost of the pipeline
and the cost of the gas supply.
(41:45):
The pipeline the projectdoesn't have any gas supply yet.
The pipeline the projectdoesn't have any gas supply yet
but everybody assumes it'llenter into the gas supply at
some point and the gas supplywill be about a buck, which is
the general assumption in mostof the economics.
It may not be, but the cost ofthe pipeline is going to be a
(42:06):
substantial part of determiningwhether it's competitive.
All of the analyses that we seebeing done thus far are still
predicated on the old, nowdecade-old, projection of a $44
billion cost to build thepipeline, all of the components
that are necessary to get thepipeline up to the volumes that
(42:31):
it needs to be able to becompetitive internationally, to
deliver the volumes it needs todeliver internationally.
But that $44 billion estimateis a decade old, and so
everybody sitting there,everybody who follows this stuff
, is sitting there going allright, there needs to be a new
cost estimate.
You can't go to FID, you're notgoing to get financing, you're
(42:53):
not going to get people to signfirm contracts based on a
decade-old cost estimate.
When are we going to get thenew cost estimate?
Some of the messages I got fromGASTEC, with all of these
headlines about the signing ofthe deals, was has there been a
new cost estimate?
Are these based on the new costestimate?
(43:19):
Are these actually live deals?
Do people know what they'redoing?
And the answer is no.
We haven't seen a new costestimate.
There hasn't been a new costestimate made public.
There's no reference to newcost estimates in either of the
press releases that Blenfartissued around these deals, and
so we haven't seen the new costestimate.
And until we see the new costestimate a qualifying cost
(43:45):
estimate that meets thestandards of going to FID until
we see a new cost estimate, allof this stuff is just pie in the
sky.
Most of it I mean most of thecomments are well okay.
So they're trying to satisfyTrump.
They're trying to make itappear that we're making
progress on the Alaska LNGproject without actually
(44:07):
committing to anything, so thatin the tariff negotiations that
are going on, that the companiesor the countries can say, yes,
we're working on this, buteverybody's sitting around
waiting on the new cost estimate.
And that's going to be theheadline, that's going to be the
important headline, that's theone that's going to tell us
(44:27):
whether any of this stuff reallymakes sense and whether we're
actually making progress.
Speaker 2 (44:32):
And we haven't seen it.
And I'll remind you again thatthat original cost estimate of
$44 billion is 10 years old.
Tell me what hasn't gone up inprice with steel and everything,
with the tariffs and all theother things, covid and
everything.
Tell me one thing that hasn'tgone up at least 15 to 20
percent in price in the last 10years?
Right, I mean it's.
(44:52):
You just can't say that this isnot.
It would not be a surprise ifthis was a 60 billion dollar
project, or more.
Speaker 1 (45:00):
I mean, usually when you've got old cost estimates
you can say well, productivitygains, there's been productivity
gains, we're doing thingssmarter and better since that
last cost estimate and so weknow and so those are going to
offset the cost of inflationthat productivity will get more
bang for the buck out of thedollars we're spending.
(45:21):
But that's not the case withthe LNG pipeline, because most
of the cost is in kit, is inpipe, is in steel, is in
tangible things that have goneup significantly in price over
the last 10 years and there'sreally been no great
productivity gains that haveoccurred in the LNG industry.
(45:42):
Nobody's figured out how tomake LNG cheaper, how to limit
the amount of kit you need inthe liquefaction plant.
No one's figured out how tomake the kit that's needed to
extract CO2 up on the slope fromthe Prudhoe supply.
Nobody's figured out a newprocess that makes that cheaper.
(46:06):
So there's no.
There's the usual offset youhave in old cost projections
when you update them is you know, yes, everything's going up,
but productivity gains havedecreased the cost.
We don't see any of that here.
We don't see any of theproductivity gains.
So all of the pressure on thecost is pushing it up.
(46:29):
And until we get a costestimate and legislators are
going out saying, oh yeah, we'reclose, we're close, we get all
these deals.
Until you see a cost estimate,you can't say that.
And some people say, well, it'sfinancing and the government's
going to finance it.
Well, yeah, but they'refinancing the cost, the real
cost.
And unless the federalgovernment is prepared to just,
(46:52):
you know, write off a bunch ofmoney in financing this pipeline
and then not charging for allof the costs, it really doesn't
matter that you're gettingfinancing.
What matters is the cost, thecost itself.
And until we see an updatedcost study, we're not going to
be anywhere down the road onthis.
Speaker 2 (47:10):
Do you think it's coming?
I mean, do you think it's goingto be the next year?
Are we going to see a cost?
I mean, who knows what's goingto happen here?
A couple things that stuck outat me real quick, brad, on this
First and foremost, when theywere talking about Japan and the
Japanese deal.
I love this little quote at thevery end.
This week the news servicereuters reported that japan was
hiring energy consulting firmwoods mckenzie to assess the
(47:34):
feasibility of the pipelineproject.
Wood mckenzie worked for thestate on previous iterations.
This is the same wood mckenziethat came up with a report that
said in the rosiest applicationof an 80 uh subsidy, we'd still
be delivering at gas at threedollars over market value.
Right, I mean.
Right, I mean that's not a goodthing.
Speaker 1 (47:54):
And that would.
Mckinsey's study was based onthe $44 billion cost to the
pipeline as well.
So you know you ask a very goodquestion when are we going to
see a cost study?
When's this piece of the jigsawpuzzle, the largest piece of
the jigsaw puzzle, going to bedone?
There's a picture in the AlaskaBeacon article on the
(48:16):
announcement of the deal withJera.
And the picture is of the guyfrom Rex Cannon, who's co-star
or co-star co-president ofH-Star Alaska LLC, which is the
owner of the project.
There's a picture of Rexstanding in front of a
projection screen that'sheadlined targeted milestones in
(48:39):
the next five months, talkingabout all the things that are
going to fall in place in thenext five months Top 10 things
that are going to fall in placein the next five months.
None of them is the costprojection Right.
Speaker 2 (48:52):
I'm so glad you brought it up because I looked
at that and I went no costprojection and the one thing
that's glaringly otherwisemissing from this is finding
investors right, finding a wayto pay for it.
Those two things are not on theprojections for the next five
months.
Speaker 1 (49:09):
Well, number eight is complete phase one financing,
so you can say that they've atleast got some financing on
there.
But none of this, none of thistalks about the cost projection.
And without the cost projection, I mean when I talked to my
friends at GasTech and they said, oh, we got all these
announcements.
You guys must have a new costprojection, you must be really
(49:29):
making progress.
We don't have a cost projectionand we don't have an updated
cost projection.
And the response was well, howcould they be announcing these
deals if you don't have anupdated cost projection?
And the answer is well, you canannounce deals all day long if
they're not firm and binding andthey're intended for the PR
(49:49):
room at the White House.
That's your audience.
You can announce them all daylong, but for them to be
realistic, there has to be acost projection.
And until there's a costprojection and an analysis of
how that cost translates intothe market, then you know we're
just, we're twiddling our thumbs, we're enjoying the show, but
(50:12):
we don't have the substancebehind the show.
Speaker 2 (50:14):
Well, and you know what, If you look at that chart
and I'll post a link up so folkscan go read this article and
they can see the picture thathe's talking about because
number one on that picture, Ithink, really tells the tale
Number one on the targetedmilestone over the next five
months is to expand the Alaskateam.
So again, we got a group ofpeople who are all the special
(50:36):
people, who are all part of this.
We need to expand the Alaskateam, so we're going to spend
more money on the theater thatLNG has become and you know, you
know, millions of dollars willbe spent on setting the team up
and these people will be paidfor however long this charade
continues.
And then they'll come out andsay, well, it's just not cost
effective, but don't worry, wegot three years worth of
(50:59):
employment out of it for allthese folks who are part of the
special team.
I mean, that's what it feelslike.
Speaker 1 (51:05):
Alaska's study industry.
We've promoted Alaska's studyindustry.
Yes, the Alaska study industryapproves of this message.
There's another piece of this,michael, that's going to be
interesting.
There are things you went backto the old Wood Mackenzie study
tax rates that are embedded inthose economics and are going to
(51:33):
be, I would guess, embedded inany economics, but they don't
have state approval for thediscounted production tax rates.
So you can sort of see asituation in which they're
trying to create this impressionof a lot of progress and, oh,
we're ready to go to FID.
We don't have a cost projectionyet, but we're ready to go to
FID.
But the state needs to giveconcessions on these things like
(51:58):
property tax rates, needs togive concessions on these things
in order to make it work.
And and I can just see sort ofthis flood of of press and this
flood of discussion, this floodof built up excitement all of a
sudden hitting the legislaturenext session with a package that
says we need all this stuff outof you in order to make this
work.
Speaker 2 (52:18):
Right, which again makes that 10 year forecast and
things that we talked aboutearlier even less rosy than what
we have right now, becausethat's not even factored into
those things.
Yeah, brad, I just feel likethis is performative theater.
At this point, that's what Ifeel like.
I feel like this is all justperformative.
Somebody saw an opportunity.
They're going to glom moneyfrom the state millions of
(52:41):
dollars and they may be tryingtheir best, but in the long run,
it doesn't hurt them because,well, we got paid, and if that
project doesn't work out, we'llmove on to something else.
Well, we got paid, and if thatproject doesn't work out, we'll
move on to something else.
Meanwhile, alaska has builttheir hopes and dreams around it
, right, and all the politiciansare oh, it's going to be great
and it's.
There's no realism in thesethings.
Speaker 1 (53:01):
Yeah, and next week we may be talking about oh, they
finally released a costprojection and the cost
projection is going to becompetitive and so all this
stuff makes sense.
But until you have that costprojection, don't get your hopes
up.
Don't start betting on thisthing being delivered until you
have that cost projection.
Speaker 2 (53:16):
And that's where we sit right now.
All right, brad, final thoughtshere.
We've got about 45 seconds.
Speaker 1 (53:24):
Our leadership is leaving a lot to be desired.
I mean, you go from Giesel'sop-ed that talks about we need
to spend more, but withouttalking about how we pay for
even what we've already got onthe books much less spending
more.
Then you go to the secondsegment and talk about where we
(53:44):
are with production taxes andthat production taxes are going
down, even though we havelegislators saying, oh, just get
us through the next 10 years,It'll all be fine.
Now we're finding out it's notgoing.
Production taxes and thatproduction taxes are going down,
even though we have legislatorssaying, oh, just get us through
the next 10 years, It'll all befine.
Now we're finding out it's notgoing to be fine, even after the
next 10 years.
And now we're in and nowtalking about LNG without,
without having a cost projectionout there.
Our leadership is not servingus well, Michael, and it's going
(54:05):
to be a heck of a governor'srace when we talk about a new
leader.
Speaker 2 (54:09):
Brad Keithley.
Speaker 1 (54:10):
Thank you my friend Appreciate it.
Thank you for coming on board,as always.
Thanks for having me.
Well, that's a wrap for anotherweek's edition of the weekly
top three from Alaskans forSustainable 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
(54:31):
during the week on Facebook andTwitter.
This has been Brad Keithley,managing Director of Alaskans
for Sustainable Budgets.
We look forward to you joiningus again next week on the Weekly
Top Three.
Thank you.
Hi, this is Brad Keithley, managing Director of
Alaskans for Sustainable Budgets.
Welcome to the weekly top threethe top three things on our
mind here at Alaskans forSustainable Budgets for the week
of September 15, 2025.
The weekly top three is aregular segment on the Michael
Dukes Show.
The show broadcasts on bothFacebook Live and YouTube Live
(00:34):
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 610 to 7 am for adiscussion between the two of us
about our three issues.
We post the podcasts of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, youtube,
(00:56):
soundcloud, spotify and Substackpages.
Also on the Alaskans forSustainable Budgets website, as
well as the projects page onnational blog site mediumcom.
You can find past episodes ofthe weekly top three also at the
same locations.
Keep in mind that, in additionto these podcasts during the
(01:18):
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 explain why
(01:38):
a recent op-ed by Senator KathyGiesel proposes to make Alaska's
fiscal situation even worsethan it already is.
Second, we review recent datafrom the Department of Revenue
that is telling us productiontaxes remain broken, even well
(01:59):
beyond the current 10-yearrevenue forecast.
And third, while the recentheadlines are interesting, we
explain what information we andother industry observers are
really waiting for beforedeciding about the viability of
the Alaska LNG project.
And now let's join Michael.
Speaker 2 (02:22):
Well, let's get started here, brad, because
you've got a lot to cover today.
We're going to start off withitem number one, which is uh,
kathy geisel is just making itworse.
Right, I mean it could be, Imean she could be doing.
She's just making it worse.
Speaker 1 (02:39):
Hit me with it so let's set the stage a little bit
for Giesel had an editorial inthe ADN, an op-ed in the ADN,
this past week that just youknow, it was like fingernails on
a chalkboard to me.
But let's set the stage alittle bit for it.
Over the course of the next 10years, alaska is projected to
run a current law deficit.
(03:00):
That means the PFD paidaccording to the statute,
because there is no otherstatute right now.
I mean it means we follow thelaw.
Over the next 10 years Alaskais projected to run $18 billion
cumulative over the 10-yearperiod, $18 billion in deficits.
And that assumes it assumes thespring revenue forecast.
(03:24):
But it also assumes that wehold spending, overall spending
to inflation from the FY billion, $1.8 billion on average a year
every year for the next 10years.
That's the fiscal outlook forthe state.
(03:55):
If I were a leader in thelegislature, if I were governor
but if I were a leader in thelegislature, I'd be going.
This is issue number one.
We can't do anything else.
We can't be spending onanything else.
We can't be worrying aboutanything else until we resolve
our fiscal outlook.
Some want to do it through PFDcuts, deep PFD cuts.
(04:16):
Some want to do it throughother revenues.
Some want to do it in different.
Some want to do it through deepspending cuts, some want to.
People want to do it indifferent ways, but we can't do
anything else.
If you were a leader, you wouldsay looking at this outlook,
you would say we can't doanything else until we get this
resolved.
Kathy Giesel is Senate MajorityLeader, writes an op-ed in the
(04:40):
ADN this past week and itdoesn't mention that issue, the
fundamental issue, the fiscalissue, the issue that's going to
drive the state's budget overthe next 10 years.
Doesn't mention it at all.
Instead, the op-ed is entitledAlaska students deserve more
(05:02):
investment in our classrooms andthe entire op-ed is focused on
how we spend more, how we makethe deficits deeper given the
same revenues.
How we spend more.
How we make the deficits deeper.
Two paragraphs there are twosimple measures, according to
Giesel, that we can take tolimit class sizes and recruit
(05:25):
and retrain more qualified andexcited educators in Alaska.
First, restore a pension forpublic employees.
Second, we need to pay teachersa competitive salary that
reflects their impact on ourcommunities.
Spend more, increase the BSAmore over the next 10 years.
(05:47):
Nothing in there about howyou're going to pay for the $1.8
to $18 billion deficit thatyou're looking at over the next
10 years.
Nothing in there about howyou're going to deal even with
that, and certainly nothing inhere about how you're going to
deal with any increases.
If you want a poster, if youwant a synopsis, a time capture
(06:11):
of how Alaska has gotten intothe situation it's gotten into,
all you need to do is look atthe budget forecast and then
look at this op-ed.
They're just ignoringlegislative leadership, is just
ignoring the state that Alaskais in, the fiscal situation that
Alaska is facing.
They're just ignoring theirresponsibility to resolve an
(06:36):
outlook that, for any state,would be disastrous $1.8 billion
per year.
They're just ignoring that and,in fact, what they're doing is
writing op-eds that make it evenworse.
So it's a failure, absolute,undisputable failure on the part
(06:56):
of the legislative and Senateleadership, in particular
because of Giesel undisputablefailure that that they are
sending Alaska on a crash andburn course with respect to with
looking at its budget outlook.
Crash and burn course, not evenwhispering a second about how
(07:17):
to resolve that and then addingon and spend and spending more
on top of it.
It is, it is malpractice, it isan undoing of your duties.
You're ignoring your duties.
It's a horrible fiscalsituation to be putting the
state in.
Speaker 2 (07:37):
I got to say as I was reading this article to me it
was just more of the bait andswitch argument that we see,
specifically in this case inregards to education.
Again, the I.
To me it was just more of thebait and switch argument that we
see, specifically in this casein regards to education.
Again, the headline readsAlaska students deserve more
investment in our classroom.
So it's for the kids, right,but in the long run, what does
(07:58):
it end up being about?
It ends up being about publicemployee pensions and teacher
pay.
So it's not money going directlyinto the classroom, it's not,
you know, bolstering policies ornew programs or things that
they're going to do to try andfix the educational system.
So we've got two things.
We've got the fact that they'recompletely ignoring the 8
(08:18):
million pound gorilla in theroom, which is $1.8 billion a
year in deficits, and on top ofthat, they're not even
acknowledging things that wouldfix the educational problem.
To begin with, I mean there maybe some argument if you could
say this money that we're goingto spend is directly going to
impact the outcomes Damn thecost.
But no, they use the platitudesin the headline and then
(08:39):
everything is about spendingmore in the state it's.
I mean at this point, brad,it's a sickness.
Speaker 1 (08:49):
It is a sickness, michael.
And I don't think welegitimately can get to the
second issue about what we oughtto be doing in the classrooms,
where we ought to be directingmore money into the classrooms,
how we ought to be fixing this.
I don't think we canlegitimately get to that issue
to the extent it involvesdollars.
I don't think we canlegitimately get to that issue
to the extent it involvesdollars.
I don't think we canlegitimately get to that issue
(09:09):
until we fix the underlyingbaseline of where the state's
fiscal situation is going.
It's irresponsible to betalking about spending more
money, even if it's spent well,in good ways.
It's irresponsible to betalking about spending more
money until you've solved theunderlying fiscal issue.
(09:29):
Because what are we leaving?
I mean, yeah, okay, we're goingto educate the kids, but what
are we leaving these kids afterwe educate them?
We're leaving them deficitsthat go out to eternity.
We're leaving them with a CBRthat's been drained so that
their generation, the kids we'retraining, their generation,
doesn't have the same fiscalgeneration this generation just
(09:51):
used up in the last 10 years.
We're leaving them with anempty cookie jar.
We're leaving them with aneconomy where we are punishing
the economy by taxing, doing thevery thing from a fiscal policy
standpoint cutting PFDs thathas the largest adverse impact
on the economy, that takes themost from middle and lower
(10:13):
income 80% of Alaska families.
We are leaving the nextgeneration in a horrible fiscal
situation.
While we're talking about I meanit is rearranging boats or
rearranging deck chairs on theTitanic.
We're talking about, oh, we'regoing to make your education a
little bit better.
We're going to leave you atrash economy.
We're going to leave you atrash fiscal situation.
(10:36):
We're going to leave you withan empty cookie jar in terms of
the CBR.
When you run into the samefiscal situation that every
other generation's run into,we're going to leave you with
nothing in the cookie jar todeal with it.
But you're going to have amarginally better education
experience because we're goingto according to Giesel, because
we're going to pay teachers moreand we're going to have a
pension for them.
(10:57):
It is fundamentallyirresponsible to be worrying
about any spending items good,bad and different.
It's fundamentallyirresponsible to be worrying
about any additional spendinguntil we've solved the
fundamental problem that we havein this state from a fiscal
standpoint.
Speaker 2 (11:17):
Well, it's not just leaving them with an empty
cookie jar, brad.
It's like addictive, compulsivegamblers who basically leave
their kids $200,000 in debt asthey pass away, and that's their
legacy, because that's whatwe'll end up with.
We'll end up with kids who aregoing to be inheriting not just
no money in the bank, but thatthey were going to have to
(11:39):
figure out how to pay for allthis stuff at a billion plus
dollars a year in deficitsmoving forward, because we've
had all this nice to have stuff.
That's that's.
Come on here.
Speaker 1 (11:48):
And that's, and that's just, that's just an
inflation rate of 2.5%, exactly.
So if you've, if you spent, ifyou just kick that up to 3%,
that number goes above 2 billion.
I mean, that's, that's how,that's how much, that's how much
at the margin we're operating.
Speaker 2 (12:09):
And of course, that may not even be the true amount
of inflation, because I waslooking at some numbers that
somebody sent to me the otherday and the true numbers for
inflation in Alaska, based oneverything that's going on
nationwide and tariffs andeverything else, I mean it could
be upwards of 4%, 3.5%, 4%.
So then I mean, what's thenumber due then?
(12:31):
Two, two and a half, 2.6, rightBillion dollars a year.
Speaker 1 (12:36):
That may be a column.
That may be a column tocalculate it at different
assumptions about spendinggrowth rates, to sort of focus
on how big those numbers getvery quickly If you just make
minor tinkerings in the percentof growth.
Speaker 2 (12:52):
Well, and I don't think it can be emphasized
enough what you just said, andmaybe people out there missed it
Again the $1.8 billion deficitper year for 10 years, or $18
billion over 10 years, assumesthe government doesn't increase
the budget at all.
It's just baseline spending ofwhat we have right now with the
(13:14):
automatic.
You know whatever the automaticincrease is every year for COLA
, inflation, you know whatevercontracting, you know deals,
that's assuming that theyflatline the budget.
$1.8 billion, I don't think itcould be emphasized enough.
That is the rosiest assumptionthat we've ever.
You know that we could ever seeNot a 2% increase, not a 4%
(13:35):
increase, not a 1% increase,flatline, based on what we have.
It's $1.8 billion a year.
I mean, this is a crisis.
Speaker 1 (13:43):
One other fact people don't focus on.
I mean they focus on oh, we'regoing to hold spending at
inflation.
We need to adjust spending forinflation.
Our revenue isn't adjusting forinflation.
Our revenue, driven by the dropin production taxes, which
we'll talk about in just amoment, our revenue is dropping
as an absolute.
It's not even keeping zero.
(14:06):
It's certainly not adjustingfor inflation like spending,
like some assume spending should.
It's not even keeping up withthat.
It's not even keeping up withthat.
It's not even keeping up withzero.
It's dropping over the next 10years.
And so when you say about, whenyou talk about, oh, we'll just
keep spending at inflation,that'll do.
It Doesn't do it.
(14:27):
But if you tick spending up to2.75, to 3, to 3.25, to 3, to
3.5, it just widens that gapthat's growing over the next 10
years and it's irresponsible.
I mean to get back to Giesel itis absolutely irresponsible to
be talking about any spendinggood, bad and different, to be
(14:49):
talking about any spendingincreases until you first fix
that fundamental problem.
Speaker 2 (14:55):
Right, could be the best program in the world to
benefit the most people.
But if we can't pay for it andit puts us further behind the
caboose here, it's irresponsibleand I couldn't agree more with
that.
Willie says my favorite day ofthe week and good morning, good
morning Willie, good to see you.
Brian says that's in twentytwenty five dollars.
(15:16):
Right, yeah, because it couldget worse if we start looking
down the road and inflation, ohyeah, it could be worse.
Terry says give me a break, wedon't have any money.
And then Rick says they'rekilling the state in the name of
education.
I mean education is just thebiggest culprit.
But I mean, brad, this isreally it, right.
(15:37):
I mean they are killing thestate in the name of spending.
That's what it's all about.
Speaker 1 (15:42):
Yeah, exactly right.
I mean, Giesel's pension plandoesn't apply just to education.
The pension plan applies to allgovernment employees.
And sometimes people say, ohwell, we need an increase in the
construction budget, we needmore infrastructure, the
university needs more money,we're going to need more money
for corrections, we're going toneed more money for that or more
(16:03):
money for this.
It isn't just education.
Education is the most flagrantexample because it's the one
that gets the most op-eds aboutpeople driving for additional
education, but it's across theboard.
I mean you cannot.
I was reading over the weekendthe legislative priorities from
the Fairbanks, north StarBorough and from the Mat-Su
(16:24):
Borough and from various otherboroughs.
And it's all about spending.
Spend more in this area, spendmore, do more, build more
buildings, do this, do that andall that spending is more than
the rate of inflation.
And do all that and that willmake our life better.
Well, it's making our.
It may make some people's livesbetter, but it's making it
(16:47):
better at the expense of theoverall, at driving that deficit
number higher and higher andhigher.
We need to go back to basics.
We need to solve where thismoney, this alleged money, is
coming from.
We need to balance trulybalance the budget, as opposed
to these claims that legislatorsmake at the end of the session.
(17:09):
Oh, we balance the budget.
You balance the budget throughtaxes.
You balance the budget bypulling from the PFD through
taxes on middle and lower incomeAlaska families.
Be honest about it, they aren't.
But we need to solve where thissituation is going.
Some people say, well, we'lljust continue PFD cuts.
That's how we'll get throughthis.
If you adjust that two and ahalf to 3%, you wipe out PFDs
(17:31):
and you're still and you're andyou're running a deficit.
So it's not it.
You can't do anything else.
You can't do anything else.
You can't address construction,you can't address
infrastructure, you can'taddress the university, you
can't address anything elseuntil you get your fiscal house
in order.
Speaker 2 (17:49):
No, I mean, if you, you know, if you took all of the
PFD that was remaining I meanit's only $667 million You've
got a $1.8 billion deficit at a2.5% inflation rate, which I
said earlier.
I mean, I'm reading some thingsthat says it could be upwards
of 3.5% to 4% in inflation, buteven at the rosiest assumption,
(18:11):
$1.8 billion it doesn't evencover half of the deficit, half
of the deficit.
That's insane.
Speaker 1 (18:20):
Yeah Well, I mean, we've got to stop this focus on
spending, have got to act, havegot to become responsible and
ask themselves where is themoney coming from?
Before we get any more of theseop-eds on, particularly from
leadership, I mean, it'd be, youknow, you see Zach Fields write
(18:44):
this stuff every once in awhile.
Okay, it's Zach Fields, youknow, a backbencher, sort of a
backbencher in the House.
This is the majority leader ofthe Senate who's doing this, the
responsible body, the body thatis looking out for the
long-term, looking out for theoverall.
This is the majority leader ofthe Senate that's doing this.
And there's not a breath,there's not a single breath of
(19:08):
where's the money going to comefrom for all this, where's the
money going to come from to payfor the base deficit that we've
got as opposed, and not tomention, where's the money going
to come from for thisadditional spending.
There's not a breadth of thatin her entire op-ed.
Speaker 2 (19:24):
No, and I'm reminded of the press conference, the
presser, that they had last year, where they had Stedman and
Giesel and, I think, annieJosephson and some other people
up there they were talking about.
You know, well, next year isgoing to be tough.
Next year is going to be tough,and then Stedman's like but I
don't want to focus on that.
Well, wait a second.
This is the most critical thingfor the state of Alaska moving
(19:44):
forward.
You don't want to focus on it?
I mean, come on, we would justneed to focus on right now.
That's how we got here, becausewe just focused on the now and
we didn't focus on the future.
We're continuing the weekly topthree.
Brad Keithley, of course,alaskans for Sustainable Budgets
.
You can find him at ak4sbcom oryou can go argue with him over
(20:06):
on X or Facebook or wherever youwant to argue with the bat.
Uh, this week's uh, number two,number two, all right, all I
want to say is.
All I want to say is uh, I'munder on number two.
All I want to say is welcome tothe party, pal.
Uh, we've been talking aboutthis for months and now, all of
(20:27):
a sudden, everybody's findingreligion all of a sudden.
Well, dermot cole was the firstperson to talk about this kind
of thing and I'm like he talkedabout it 10 days ago.
Brad keithley's been talkingabout it on this program for
months, and that is, of course,10 years is only the beginning
of the problem.
When we're talking now about,uh, oil production, brad, um, I
(20:51):
guess you're you're, you're,you're the, you're the
copernicus or galileo of ourtime, where they wanted to stone
you, and now, all of a sudden,everybody's found religion well,
yeah, maybe.
Speaker 1 (21:02):
um, so the the lead-in to this.
We talked a lot last week aboutthe new study on pika and what
it's telling us about productiontaxes, and it it's telling us
that production taxes won'tstart from PICA a major field
won't start from PICA until fiveyears.
No zero production taxes fromPICA until for five years down
(21:25):
the road, or seven years downthe road and then another five
years where PICA stays onminimums, years down the road
and then another five yearswhere PICA stays on minimums.
And it helps explain why, overthe next 10 years, when you look
at the revenue forecast, yousee this dive in production
taxes over the next 10 years andyou can see that from PICA,
which, with the delay inproduction tax, startup and then
(21:49):
continuation on minimums.
There's something else fromthese studies.
There's the study of PICA thatwe focused on last week and then
there's also a study aboutWillow that the department
Conoco's Willow field, that theDepartment of Revenue released,
(22:10):
and there's something else fromthese studies that is as
significant, if not moresignificant, particularly when
you're looking around thelong-term.
You'll recall that when you hadWill Stapp on the show, the
last time you had Will Stapp onthe show, you were asking him
about production taxes towardthe end of the interview and
Stapp stumbled along somethingabout yeah, yeah, yeah, there's
a problem for the next 10 years.
It's on minimums and all thatsort of stuff.
(22:31):
But wait till we get to the2035 and wait till we get to the
next decade.
It's all gonna get better,because all that stuff's gonna
be gone.
All the problem over the next10 years is gonna be gone.
All of a sudden, we're gonnahave this spike in production
taxes.
You asked the appropriatequestion, which is well, how do
we get through the next 10 yearswith the $1.8 billion in
(22:54):
deficit?
But setting that aside, thestaff essentially tried to argue
that everything's going to befine.
Beyond that, the studies thathave been done by PICA and for
Willow are telling us somethingvery interesting and if you can
flip up that chart real quick, Iwant to talk through this
quickly.
I'll put it in the Fridaycolumn also, but I want to talk
(23:17):
about this real quickly.
There's been four studies doneof Willow one in February 23,
one of April 23, one of February24, and now the most recent in
August 25.
Two studies of PICA these arestudies by the Department of
Revenue about various revenuesources.
This is focusing on productiontaxes.
This chart focuses onproduction taxes, two studies of
(23:38):
PICA, one in March of 24 andone of August of 25.
And what these numbers are isthey are the average annual
production tax to be paid fromeach of these fields.
And so you look at Willow, youlook at the studies up until the
(23:59):
latest and they vary betweennegative $266 million a year
from Willow's startup at 29 to33, to Willow then going at $268
million in the February study,from 33 to 43, annually from 33
to 43, and then $112 million asWillow is on decline.
(24:23):
The Willow field's on declinefrom 43 to 53.
The study covers essentially 30years.
So that's the study that was inFebruary 23.
And if you look at the study,the numbers focus on the numbers
for 33 to 43.
In the middle column for WillowFebruary 23,.
(24:45):
$268 million a year.
April 23,.
The study $218 million a year.
April 23,.
The study $218 million a year.
February 25, $211 million ayear.
Those are the numbers that WillStaff has in mind when he was
talking.
He's saying look, yeah, it'sgoing to be bad for the next 10
years.
Looking at Willow, for 29 to 33, you know very low numbers,
(25:09):
negative numbers some years, butwhen we get to 33 to 43, the
next decade, it's going to getbetter.
And I'm assuming he had in mindthose numbers from the previous
studies, the latest Willowstudy.
Look at the latest Willow study,which is August 25.
And it shows $30 million a yearfrom 29 to 33.
(25:29):
Willow starts up in 29.
Year from 29 to 33.
Willow starts up in 29.
So it shows $30 million, $27million from a year from 29 to
33.
Look at what goes on in FY 33 to43.
This is the Department ofRevenue's study.
This is just taking theircalculations and turning them
into an annual average.
(25:50):
Look at what happens in 33 to43.
The projection is dropping,drops through every study.
But from the February 24 to theAugust 25 study it drops from
$211 million that Willow issupposedly going to contribute
in production taxes to the statebudget to $53 million, a drop
(26:11):
of $160 million plus or minus.
And then look at 43 through 53.
Instead of $90 million it dropsdown to less than $20 million.
Pica does the same thing.
When you look at the FY33 to 43average the middle column and
look at the PICA numbers, theMarch 24 study said PICA was
(26:34):
going to contribute over $100million in production taxes.
Now the new study shows it's$50 million, less than half.
That what's going on is as weget closer to field startup and
we're seeing the cost of thefield come in, the actual cost
(26:55):
of the field come in.
What we're seeing is it'sdriving down those total costs
which are a deduction fromproduction taxes.
Those costs are starting todrive down the production tax.
That's going to be realizedsignificantly.
Drive down the production tax.
That's going to be realized notonly in the initial startup
(27:15):
years FY29 to 33 in the case ofWillow, or FY27 to 33 in the
case of PICA not only in thosestartup years, but also in to
(27:38):
say don't go away the next 10years.
Yes, they're bad the next 10years, but they go away.
They don't go away In thedecade beyond that.
They stay bad and the revenuesbeing produced by production
taxes stay bad.
These may be the August 20, theAugust 25.
Numbers may even be high.
The reason they may be high isbecause both both Conoco now
(28:04):
with Willow, and Santos withPICA, are talking about
additional developments andSantos, with PICA, are talking
about additional developmentsand what those additional
developments will do is createadditional credits, additional
deductions that will drive eventhese numbers the August 25
numbers, down lower by creatingadditional credits to go against
production tax liability.
(28:25):
In those decades SB21 is brokenand it's not only broken for the
next decade.
We've seen that in the lastseveral revenue forecasts.
As you've looked at the decadeahead and you've looked at the
drop in production tax revenuesover the next decade ahead, sb21
(28:47):
is not only broken over thenext decade, it's broken over
the field life of these newfields coming on.
And the new fields are important.
Not only are they addingproduction, but they're also
replacing existing productionthat's been paying full
production taxes.
So when you take those intoaccount, you're having a
(29:11):
continued depression, depressiveeffect on production taxes over
not only the next decade butthe decade beyond that.
When legislators try to blowsmoke at you anymore and say oh
yeah, there's a problem over thenext 10 years and somehow they
dance around how the hell we'resupposed to get through the next
(29:32):
10 years.
But not only is there a problemin the next 10 years, there's a
problem beyond that as well,and the problem is that SB21
just doesn't generate Alaska'sfair share of the revenues being
generated by these projects isjust not generating it.
(29:53):
It is SB21 and the environmentwe've gone into is tilted much
more in favor of the companiesthan it is in favor of the state
.
There's not a balance anymore.
It's just tilting in favor ofthe companies.
Speaker 2 (30:04):
The worst part about this whole thing is that even in
this article, in the beaconfrom James Brooks, it mentions,
in fact, that it doesn't eveninclude the per barrel tax
credits.
The value of those credits arenot included in the new estimate
.
So I mean it's even worse thanwhat you're portraying here,
because, again, it doesn'taccount for everything.
(30:26):
But regardless, that was theone question that I had for Will
how do we make it through thenext 10 years?
Speaker 1 (30:33):
Well, now the question is much broader than
that the per barrel tax credits.
What's going on with PICA?
Or what's going on with Willow?
Is that Willow according to theDOR analysis, willow is staying
on minimums throughout theentire field life.
Now it never gets off minimumsand the per barrel tax credits
only come into play once you getoff minimums.
(30:54):
If you have a tax obligationabove the minimum, it starts
beating that tax obligation,starts reducing that tax
obligation.
We never get to the per barrelcredits with the willow field
the way that DOR has analyzed it, to the per barrel credits with
the willow field the way that,the way the DOR has analyzed it,
we barely at the tail end ofthe PICA.
(31:19):
We barely get above minimums,so we're barely getting into the
area where the per barrel taxcredits apply.
So, yes, it's worse, becausewhen you get out into that next
decade, the per barrel taxcredits are at least applying to
most of Hill Corp's productionfrom Prudhoe, but it's not
applying to any of this stuff.
(31:39):
This stuff is going down justbecause of the way SB21 is
operating.
Before you get to the perbraille credits.
Speaker 2 (31:45):
You know I give Brad a hard time about the whole beat
down and everything else, butwe got to laugh about it because
no, I mean, otherwise we'll cry.
I mean nobody's.
Nobody seems to be talkingabout this and the average
person is not really payingattention to it.
The listeners are, but thepoliticians, the people who we
(32:05):
elect to pay attention to thesethings, are not even you know,
are not even talking about,they're not even mentioning it.
They want you to ignore.
Let's not focus on that rightnow.
Let's not focus on that rightnow.
Oh, we'll wait 10 years, it'llbe fine.
That answer from Will Stapp wasjust to me.
It was just astonishing.
How do we get over the next 10years?
(32:27):
Well, you know, and that's allthese things, all these
Republicans, every time we talkto a Republican.
Well, you know, resourcedevelopment, that.
(32:47):
So how do we make it betweennow and then?
Even if that were true, even ifresource development was the
way out, how do you make itbetween now and then?
That's like saying I'm going toget that bonus in 10 years.
I just got to figure out how tonot live on the street for the
next 10 years before I get thebonus.
Speaker 1 (33:03):
Well, and what this number?
What these numbers are tellingyou, michael, is you're not
going to get the bonus in 10years.
I mean somebody's holding thatout and saying, oh, 10 years, 10
years, just make it 10 years.
We don't have savings anymore.
The only way we made it throughthe last 10 years was by
draining savings.
We don't have savings anymoreto make it through the next 10
years.
But those who are holding outand saying just wait 10 years,
(33:23):
it'll be fine, the numbers arenow telling you it's not going
to be fine in 10 years.
The numbers are telling youthat it's going to be as bad in
10 years.
These are not inflationadjusted numbers.
So when you say that, yes, butproduction revenues are going to
go up per year on Willow, forexample, are going to go from 27
(33:45):
million through 33 to 53million.
They're going to double from$33 to $43.
Well, spending has more thandoubled over that period of time
.
It's not keeping up with wherewe're heading.
This state it's a combination oftwo things.
I mean Giesel highlights theproblem in one by not talking
(34:09):
about it.
The problem is on the spendingside.
The problem's also on therevenue side.
Sb 21 was supposed to increaseproduction.
It's done that and supposed toincrease production taxes,
supposed to increase revenuesfor the state as production went
up.
Well, production's going up,something like projected to go
up something like 50% over thenext decade.
(34:31):
Production taxes are projectedto decline by 43% over the next
decade and now we're finding outthat even in the decade beyond
that, production taxes are goingto continue to be on the floor.
So we've got to address bothand we've got to have
legislators and administrationsthat step up to it and say look,
(34:54):
this is a problem that we'vegot, that we've got to solve.
This is a fundamental problemthat we've got to solve.
Speaker 2 (35:01):
Yeah, well, and that's the thing.
If you can't even admit it, ifyou can't even talk about it,
there is no solving it.
And that's where we're at.
I mean, we just we can't.
You know, you've been, you know, I know that Harold is in the
chat room talking for yearsabout oil taxes, and you've,
we've been talking about how theoil taxes are, are busted and
(35:21):
need to be fixed and need to beaddressed, and how the spending
also needs to come down.
And so now you've got bothsides of the aisle, you know,
climbering and clawing at youbecause we can't possibly cut.
And boy, we need that stabilitythat we can't, we can't touch
that oil tax because the I mean,you know, the church of oil is
like we can't do that.
And so you've got both sideswho are looking at you aghast.
(35:43):
But if nobody acknowledges thatthere's a problem and addresses
it, wow, what's it going tolook like when the yogurt hits
the rotor?
You know what I mean?
That's, that's going to be aproblem.
Speaker 1 (35:54):
Yeah, it's um, I mean , you cannot.
You cannot legitimately look atthese numbers and say we're
going to be fine.
You just can't.
You can't, you can't see thesenumbers and say, yes, we're
going to grow our way out ofthis through increased oil
development or increasedresource development.
(36:16):
The numbers are telling youthat, yeah, revenues go up,
producer revenues go up, butstate revenues aren't.
State revenues are going downover the next 10 years and they
aren't recovering in the 10years beyond that.
So what's the state supposed todo while this is going on?
Speaker 2 (36:38):
Yeah, alex makes a valid point.
Seems like mining taxes need tobe revised too.
Alex, I would agree.
I've talked about that foryears that the severance tax and
that the minimum tax thatthey're getting right now on
their net profit schemes.
But we can't even address theelephant in the room which is
oil.
If we can't get at the biggestpart of the problem, how in the
(37:00):
hell are we going to get them toaddress the mineral taxes?
I mean, I'm in agreement withyou.
You know we should not bepulling these minerals out of
the ground and getting thepittance that the state is.
But hey, you know no big deal,we just pay no attention to the
man behind the curtain.
You know what we need.
We needed to find benefitsprogram that would help the
state.
That would help the state.
Speaker 1 (37:23):
Yeah, that'll that'll help the state sink it.
I mean that'll that'll run usinto the iceberg even harder all
right.
Speaker 2 (37:30):
Uh, number three of the weekly top three, brad
keithley alaskans forsustainable budgets is our guest
.
Ak4sbcom is where you find him.
Um number three, brad.
Um.
Is there really progress on aklng?
We keep hearing about it.
We keep hearing a lot of peopletalking about it.
Keep all those, all thoseRepublicans who are all about
(37:52):
resource development.
Oh, it's going to, it's goingto be.
It's getting better, it'sgetting good, it's getting
better.
You know what this reminds meof?
This reminds me of the victorylap that Bill Walker took when
he signed it with Japan andChina and all these other people
.
You know.
Oh, it's just around the corner.
Just around the corner.
We've got more on the AK LNGunder Glenn Farn.
(38:15):
Give it to us.
Speaker 1 (38:16):
Well, we had a couple of headlines this past week
coming out of the worldwide.
There's a conference every yearcalled Gas Tech.
It's a global gas conference.
The LNG industry plays a rolein that and is playing a larger
role in it as it goes along.
There were a couple ofagreements, a lot of agreements
signed during GASTEC, a coupleof agreements related to Alaska.
(38:38):
One was an agreement betweenGlen Farn and Jura, a Japanese
electric company, japaneseelectric company.
The headline, james Brookswrote, was Japanese electric
company signs, tentativeagreement for gas from
Trans-Alaska pipeline project,the gas project.
The second was a headlinedeveloper proposed Trans-Alaska
(39:00):
gas pipeline signs deal withSouth Korean steel company, both
big headlines and both about,you know, deals being signed at
gas tech One, the one with Jera,was for the sale of LNG.
The one with the Korean SteelCompany, south Korean Steel
Company, was both for potentialpurchases of pipe for the LNG
line and the sale of LNG to theproject.
(39:24):
Big headlines and they made alot of buzz at Gastek.
I had friends who texted me orwho direct messaged me and said,
oh, things must be going on inAlaska.
The combined, all of the dealsthe deal with the Thailand oil
company, the Taiwanese company,the Taiwanese LNG purchase, the
(39:49):
Japanese purchase, the Koreanpurchase, all these combined
aren't half yet of the totalcapacity of the LNG line.
And for the LNG line to makeeconomic sense it needs to be
full, not just half full, notjust 75% full, not 80% full.
It needs to be full to drivethe unit costs down and make it
(40:10):
competitive.
So these are headlines thatindicate some progress on the
sales side, on selling potentialsales of LNG.
All of them, all of the dealsthat have been announced thus
far, none of them are firm.
All of them are contingent on awide variety of things.
None of them are firm.
(40:42):
All of them are contingent on awide variety of things.
Most qualify as letters ofinterest, which means, yeah, if
this happens and that happensand the other thing happens,
maybe we'll negotiate a firmdeal at some point.
Or barely over half of thecapacity of the LNG line.
So they aren't filling up theline Yet.
There may be more to come, buthere's the deal and here's what
all of those deals are waitingon and here's what you know,
(41:03):
real, those who are followingthis line from gas tech and from
elsewhere, this is what they'rereally waiting on.
They're really waiting on theupdated cost estimate.
To be competitive, alaska LNGhas to enter the market at a
competitive price, and theextent to which it's at a
(41:25):
competitive price is determinedby its costs.
We can have all the volume inthe world, but if the costs are
substantially high, that perunit cost is going to be too
much and it's not going to bemarketable in the world market.
Costs are determined by twothings the cost of the pipeline
and the cost of the gas supply.
(41:45):
The pipeline the projectdoesn't have any gas supply yet.
The pipeline the projectdoesn't have any gas supply yet
but everybody assumes it'llenter into the gas supply at
some point and the gas supplywill be about a buck, which is
the general assumption in mostof the economics.
It may not be, but the cost ofthe pipeline is going to be a
(42:06):
substantial part of determiningwhether it's competitive.
All of the analyses that we seebeing done thus far are still
predicated on the old, nowdecade-old, projection of a $44
billion cost to build thepipeline, all of the components
that are necessary to get thepipeline up to the volumes that
(42:31):
it needs to be able to becompetitive internationally, to
deliver the volumes it needs todeliver internationally.
But that $44 billion estimateis a decade old, and so
everybody sitting there,everybody who follows this stuff
, is sitting there going allright, there needs to be a new
cost estimate.
You can't go to FID, you're notgoing to get financing, you're
(42:53):
not going to get people to signfirm contracts based on a
decade-old cost estimate.
When are we going to get thenew cost estimate?
Some of the messages I got fromGASTEC, with all of these
headlines about the signing ofthe deals, was has there been a
new cost estimate?
Are these based on the new costestimate?
(43:19):
Are these actually live deals?
Do people know what they'redoing?
And the answer is no.
We haven't seen a new costestimate.
There hasn't been a new costestimate made public.
There's no reference to newcost estimates in either of the
press releases that Blenfartissued around these deals, and
so we haven't seen the new costestimate.
And until we see the new costestimate a qualifying cost
(43:45):
estimate that meets thestandards of going to FID until
we see a new cost estimate, allof this stuff is just pie in the
sky.
Most of it I mean most of thecomments are well okay.
So they're trying to satisfyTrump.
They're trying to make itappear that we're making
progress on the Alaska LNGproject without actually
(44:07):
committing to anything, so thatin the tariff negotiations that
are going on, that the companiesor the countries can say, yes,
we're working on this, buteverybody's sitting around
waiting on the new cost estimate.
And that's going to be theheadline, that's going to be the
important headline, that's theone that's going to tell us
(44:27):
whether any of this stuff reallymakes sense and whether we're
actually making progress.
Speaker 2 (44:32):
And we haven't seen it.
And I'll remind you again thatthat original cost estimate of
$44 billion is 10 years old.
Tell me what hasn't gone up inprice with steel and everything,
with the tariffs and all theother things, covid and
everything.
Tell me one thing that hasn'tgone up at least 15 to 20
percent in price in the last 10years?
Right, I mean it's.
(44:52):
You just can't say that this isnot.
It would not be a surprise ifthis was a 60 billion dollar
project, or more.
Speaker 1 (45:00):
I mean, usually when you've got old cost estimates
you can say well, productivitygains, there's been productivity
gains, we're doing thingssmarter and better since that
last cost estimate and so weknow and so those are going to
offset the cost of inflationthat productivity will get more
bang for the buck out of thedollars we're spending.
(45:21):
But that's not the case withthe LNG pipeline, because most
of the cost is in kit, is inpipe, is in steel, is in
tangible things that have goneup significantly in price over
the last 10 years and there'sreally been no great
productivity gains that haveoccurred in the LNG industry.
(45:42):
Nobody's figured out how tomake LNG cheaper, how to limit
the amount of kit you need inthe liquefaction plant.
No one's figured out how tomake the kit that's needed to
extract CO2 up on the slope fromthe Prudhoe supply.
Nobody's figured out a newprocess that makes that cheaper.
(46:06):
So there's no.
There's the usual offset youhave in old cost projections
when you update them is you know, yes, everything's going up,
but productivity gains havedecreased the cost.
We don't see any of that here.
We don't see any of theproductivity gains.
So all of the pressure on thecost is pushing it up.
(46:29):
And until we get a costestimate and legislators are
going out saying, oh yeah, we'reclose, we're close, we get all
these deals.
Until you see a cost estimate,you can't say that.
And some people say, well, it'sfinancing and the government's
going to finance it.
Well, yeah, but they'refinancing the cost, the real
cost.
And unless the federalgovernment is prepared to just,
(46:52):
you know, write off a bunch ofmoney in financing this pipeline
and then not charging for allof the costs, it really doesn't
matter that you're gettingfinancing.
What matters is the cost, thecost itself.
And until we see an updatedcost study, we're not going to
be anywhere down the road onthis.
Speaker 2 (47:10):
Do you think it's coming?
I mean, do you think it's goingto be the next year?
Are we going to see a cost?
I mean, who knows what's goingto happen here?
A couple things that stuck outat me real quick, brad, on this
First and foremost, when theywere talking about Japan and the
Japanese deal.
I love this little quote at thevery end.
This week the news servicereuters reported that japan was
hiring energy consulting firmwoods mckenzie to assess the
(47:34):
feasibility of the pipelineproject.
Wood mckenzie worked for thestate on previous iterations.
This is the same wood mckenziethat came up with a report that
said in the rosiest applicationof an 80 uh subsidy, we'd still
be delivering at gas at threedollars over market value.
Right, I mean.
Right, I mean that's not a goodthing.
Speaker 1 (47:54):
And that would.
Mckinsey's study was based onthe $44 billion cost to the
pipeline as well.
So you know you ask a very goodquestion when are we going to
see a cost study?
When's this piece of the jigsawpuzzle, the largest piece of
the jigsaw puzzle, going to bedone?
There's a picture in the AlaskaBeacon article on the
(48:16):
announcement of the deal withJera.
And the picture is of the guyfrom Rex Cannon, who's co-star
or co-star co-president ofH-Star Alaska LLC, which is the
owner of the project.
There's a picture of Rexstanding in front of a
projection screen that'sheadlined targeted milestones in
(48:39):
the next five months, talkingabout all the things that are
going to fall in place in thenext five months Top 10 things
that are going to fall in placein the next five months.
None of them is the costprojection Right.
Speaker 2 (48:52):
I'm so glad you brought it up because I looked
at that and I went no costprojection and the one thing
that's glaringly otherwisemissing from this is finding
investors right, finding a wayto pay for it.
Those two things are not on theprojections for the next five
months.
Speaker 1 (49:09):
Well, number eight is complete phase one financing,
so you can say that they've atleast got some financing on
there.
But none of this, none of thistalks about the cost projection.
And without the cost projection, I mean when I talked to my
friends at GasTech and they said, oh, we got all these
announcements.
You guys must have a new costprojection, you must be really
(49:29):
making progress.
We don't have a cost projectionand we don't have an updated
cost projection.
And the response was well, howcould they be announcing these
deals if you don't have anupdated cost projection?
And the answer is well, you canannounce deals all day long if
they're not firm and binding andthey're intended for the PR
(49:49):
room at the White House.
That's your audience.
You can announce them all daylong, but for them to be
realistic, there has to be acost projection.
And until there's a costprojection and an analysis of
how that cost translates intothe market, then you know we're
just, we're twiddling our thumbs, we're enjoying the show, but
(50:12):
we don't have the substancebehind the show.
Speaker 2 (50:14):
Well, and you know what, If you look at that chart
and I'll post a link up so folkscan go read this article and
they can see the picture thathe's talking about because
number one on that picture, Ithink, really tells the tale
Number one on the targetedmilestone over the next five
months is to expand the Alaskateam.
So again, we got a group ofpeople who are all the special
(50:36):
people, who are all part of this.
We need to expand the Alaskateam, so we're going to spend
more money on the theater thatLNG has become and you know, you
know, millions of dollars willbe spent on setting the team up
and these people will be paidfor however long this charade
continues.
And then they'll come out andsay, well, it's just not cost
effective, but don't worry, wegot three years worth of
(50:59):
employment out of it for allthese folks who are part of the
special team.
I mean, that's what it feelslike.
Speaker 1 (51:05):
Alaska's study industry.
We've promoted Alaska's studyindustry.
Yes, the Alaska study industryapproves of this message.
There's another piece of this,michael, that's going to be
interesting.
There are things you went backto the old Wood Mackenzie study
tax rates that are embedded inthose economics and are going to
(51:33):
be, I would guess, embedded inany economics, but they don't
have state approval for thediscounted production tax rates.
So you can sort of see asituation in which they're
trying to create this impressionof a lot of progress and, oh,
we're ready to go to FID.
We don't have a cost projectionyet, but we're ready to go to
FID.
But the state needs to giveconcessions on these things like
(51:58):
property tax rates, needs togive concessions on these things
in order to make it work.
And and I can just see sort ofthis flood of of press and this
flood of discussion, this floodof built up excitement all of a
sudden hitting the legislaturenext session with a package that
says we need all this stuff outof you in order to make this
work.
Speaker 2 (52:18):
Right, which again makes that 10 year forecast and
things that we talked aboutearlier even less rosy than what
we have right now, becausethat's not even factored into
those things.
Yeah, brad, I just feel likethis is performative theater.
At this point, that's what Ifeel like.
I feel like this is all justperformative.
Somebody saw an opportunity.
They're going to glom moneyfrom the state millions of
(52:41):
dollars and they may be tryingtheir best, but in the long run,
it doesn't hurt them because,well, we got paid, and if that
project doesn't work out, we'llmove on to something else.
Well, we got paid, and if thatproject doesn't work out, we'll
move on to something else.
Meanwhile, alaska has builttheir hopes and dreams around it
, right, and all the politiciansare oh, it's going to be great
and it's.
There's no realism in thesethings.
Speaker 1 (53:01):
Yeah, and next week we may be talking about oh, they
finally released a costprojection and the cost
projection is going to becompetitive and so all this
stuff makes sense.
But until you have that costprojection, don't get your hopes
up.
Don't start betting on thisthing being delivered until you
have that cost projection.
Speaker 2 (53:16):
And that's where we sit right now.
All right, brad, final thoughtshere.
We've got about 45 seconds.
Speaker 1 (53:24):
Our leadership is leaving a lot to be desired.
I mean, you go from Giesel'sop-ed that talks about we need
to spend more, but withouttalking about how we pay for
even what we've already got onthe books much less spending
more.
Then you go to the secondsegment and talk about where we
(53:44):
are with production taxes andthat production taxes are going
down, even though we havelegislators saying, oh, just get
us through the next 10 years,It'll all be fine.
Now we're finding out it's notgoing.
Production taxes and thatproduction taxes are going down,
even though we have legislatorssaying, oh, just get us through
the next 10 years, It'll all befine.
Now we're finding out it's notgoing to be fine, even after the
next 10 years.
And now we're in and nowtalking about LNG without,
without having a cost projectionout there.
Our leadership is not servingus well, Michael, and it's going
(54:05):
to be a heck of a governor'srace when we talk about a new
leader.
Speaker 2 (54:09):
Brad Keithley.
Speaker 1 (54:10):
Thank you my friend Appreciate it.
Thank you for coming on board,as always.
Thanks for having me.
Well, that's a wrap for anotherweek's edition of the weekly
top three from Alaskans forSustainable 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
(54:31):
during the week on Facebook andTwitter.
This has been Brad Keithley,managing Director of Alaskans
for Sustainable Budgets.
We look forward to you joiningus again next week on the Weekly
Top Three.
Thank you.
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