September 23, 2025 • 52 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 22, 2025.
This week, our top 3 issues are these: 1) we explain why we think the Alaska media has completely whiffed on this year’s real PFD story (2:10); 2) we explain why the North Slope renaissance isn’t producing the benefits for Alaskans they were led to expect (16:31); and 3) we discuss what the termination of the Santos/ADNOC deal likely means for Santos’ Alaska Pikka project (35:50).
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 22nd 2025.
The weekly top three is aregular segment on the Michael
Duke Show.
The show broadcasts on bothFacebook Live and YouTube Live
(00:33):
as well as via streaming audiofrom the show's website.
Weekdays from 6 to 8 am.
I join Michael weekly in thefirst hour of Tuesday's show
from 6.10 to 7 am for adiscussion between the two of us
about our three issues.
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, youtube,
(00:56):
soundcloud, spotify and Substackpages, also on the Alaskans for
Sustainable Budgets website, aswell as the projects page on
national blog site mediumcom.
You can find past episodes ofthe weekly top three also at the
same locations.
Keep in mind that, in additionto these podcasts during the
(01:17):
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):
we think the Alaska media hascompletely whiffed on this
year's real PFD story.
Second, we explain why theNorth Slope Renaissance isn't
producing the benefits forAlaskans they were led to expect
.
And third, we discuss what thetermination of the Santos-Adnock
(02:02):
deal likely means for Santos'Alaska project.
Speaker 2 (02:07):
And now let's join Michael.
We're going to dive into it.
Today.
We've got three topics and eachone is better than the last as
far as I'm concerned.
So let's start off with theAlaska media.
You know I've had a lot ofcriticisms for the media in the
state of Alaska.
Alaska media.
(02:31):
You know I've had a lot ofcriticisms for the media in the
state of Alaska, primarily abouthow there's not any real
investigative kind of aspect toit.
It's just like let meresummarize this press release
and put it out as a news storyand not really a lot of balance
on both sides, but this one onthe PFD.
Your comment is the Alaskamedia completely whiffs this
story.
Give me the rundown here, brad.
What are we talking about?
Speaker 1 (02:51):
Well, I've read all of the stories that have been
published in the state, I think,because I read a broad
selection of newspaper, ofwebsites and articles and stuff.
News sources, newspaper, you,old man, you yeah, that's about
what I said.
News sources, news sites therewe go and I've read all of the
(03:15):
stories and none of them haswhat to me is the real PFD story
.
All of them sort of regurgitatethe release from the Dunleavy
administration of a thousanddollar PFD is going to be in
your bank accounts or releasedto you or in the mail or
(03:35):
whatever.
However you receive it as ofthe first part of October.
All of them focus on thethousand dollars as the story
You're going to get a thousanddollars.
None of them focus on whathappened to the other $2,700.
None of them focus on, start tofocus on this is what the
(03:57):
statute says, still says afterall these years.
This is what the statute saysthe PFD is.
This is what the statute saysthat Alaskans share of the
commonly owned wealth.
Individual Alaskans share ofthe commonly owned wealth is.
None of them start with that,which would be about $37,500
(04:19):
right now this year.
None of them start with thatand progress on to how that
divides out that you get athousand of that, that the
remainder the remaining 2,700 orso, was withheld, diverted to
government, what one ICEReconomist has called taxed,
(04:43):
taxed to the government and thenspent by the government and
what it was spent on.
None of them focus on what itwas spent on and none of them
focus on who the beneficiary ofthat $2,700 tax truly is, who
the true beneficiaries are trulyis who the true beneficiaries
(05:08):
are.
And the true beneficiaries arethose who would otherwise have
paid to fill that hole, that gap, that deficit in the state
budget, that otherwise wouldhave paid to fill that hole had
the PFD not been taxed anddiverted.
And that's largely the top 20%converted and that's largely the
top 20 percent.
The oil companies andnon-resident industries, all of
(05:28):
whom, most of the two of whom,the oil companies and the and
the top 20 percent escape withpaying only a small share of
that.
Non-residents escape withpaying nothing of that.
That's the story.
The story isn't.
The story ends sort of with howmuch do you get.
The story.
The story ends sort of with howmuch do you get.
The story begins with how muchwere you supposed to get, how
(05:50):
much does the statute say thatyou're supposed to get.
How much is supposed ofAlaska's commonly owned wealth
is supposed to go intoindividual Alaskans' pockets?
And then what happened to that$3,750?
What happened to that amount?
How did it get divided upbetween what actually made it to
(06:11):
your pockets and what waswithheld, diverted and sent
elsewhere?
If Alaskans knew that story,alaska government would be a lot
different.
If Alaskans knew the story thatthey were taxed $2,700, falling
hardest on middle of nowhereincome Alaska families.
If Alaskans knew they weretaxed for two-thirds of the
(06:37):
amount that they were owed.
If they knew they were taxedfor that amount that they were
owed, that it was withheld,diverted to government, spent on
government in lieu of and thebeneficiaries are those who
didn't get taxed in order to payfor that shared government.
If Alaskans knew that story,there would be a big pushback on
(06:57):
government.
There would be a big pushbackon legislators who are doing
that.
There would be a big pushbackon the governor for allowing it
to go forward without usingadditional powers like vetoing
the entire budget until they getit right.
There would be a big pushbackon the governor.
There would be the kind ofresponse that some say they want
(07:18):
in terms of pressure on holdingand reducing spending.
But legislators are getting offscot-free from that
responsibility.
The governor's getting offscot-free because the story
being told Alaskans is only theback end of the story, the last
(07:39):
step of the story, which is theyget $1,000.
The story is go to the beginning.
Go to the beginning of thestory, which is they get a
thousand dollars.
The story is go to thebeginning.
Go to the beginning of thestory, which is the full
statutory amount that's still inthe statute, and then break out
what's going on with that fullstatutory amount and and focus
on who the beneficiaries of thatstatutory amount are.
(08:00):
That's the story that should betold.
Speaker 2 (08:04):
Well, and this is again going back to what I was
saying, which is my complaintabout the news media in Alaska,
is that there is no deeper diveon most of this stuff.
It's very rare that you'll seean article that isn't just, as
you said, a paraphrase.
It's like they dropped thegovernor's press release into
(08:26):
chat, gpt and, just you know,rewrote it.
Or the same thing happens whenit's something coming out of the
legislature.
The Senate majority, the Housemajority, puts out a press
release.
They paraphrase the pressrelease.
That's the answer.
There is no give and take,there's very little.
If they have a comment from theother side, it's a one
paragraph or one sentence.
(08:46):
You know a little rebuttal onanything and there's no deeper
dive onto.
Where is the money?
As you said, with $3,700, right, that's what the, that's what
the PFD should have been $3,750,something like that.
So that means that they'retaking almost three quarters of
the dividend to then pay forgovernment.
(09:10):
And you're right, people justaren't paying attention.
They're so busy making a livingand doing their thing that
they're just not really payingattention.
As to why am I not getting thePFD and not putting in the
context of you're essentiallybeing taxed at this point?
Speaker 1 (09:27):
Yeah, and to some degree, michael, I blame
legislators also conservativelegislators as well for not
telling that story.
I mean, some of them voteagainst it, so they've got a
good story to tell.
I voted against it becauseyou're being taxed, and you're
being taxed way too heavily andyou're being taxed unfairly in
(09:49):
the sense that you're paying atax.
You middle and lower incomeAlaska families are paying the
tax instead of oil companies andnon-residents in the top 20%
shipping in as well.
The burden is falling on you.
It's a deeply regressive tax onyou.
It's a deeply regressive tax.
(10:09):
You're paying essentially twoto three to four to five to six
times more than what the top 20%is paying.
You're paying infinitely morethan what non-residents are
paying.
It's an unfair tax.
Legislators who vote against ithave that story that they could
tell, but they're not as far asI can tell.
I mean it's certainly notmaking the news media.
There's no, there's no, youknow.
On the other hand, senator orrepresentative thus and so said
(10:31):
this, and so it's, and so we'remissing the story altogether.
I mean it's sort of like we'vefallen into.
Okay, it's another.
You know, legislature makes upa number.
Bam, that's the number.
That's the story, not whathappened from the statutory
amount that's still on the books, never been amended, not not
(10:52):
starting at that amount.
And what happened to thosedollars is just boom.
This is the dollars you get.
Be happy, go on your way, don'task any more, don't ask any
questions, and that's you know.
We're not.
We're not going to.
We're not going to get Alaskagovernment reined in.
We're not going to get fairnessin our taxation.
We're not going to get a focuson resources that are being left
(11:16):
behind with the oil companiesor resources that are being left
behind with the Permanent FundCorporation in terms of not
maximizing the return.
We're not going to get a focuson that.
As long as the story is, youjust get this.
Don't ask what happened to therest of it and keep on going and
being happy.
If we had the full story, if wehad, this is the statutory
(11:39):
amount, this is what the statutesays.
Your share, your individualshare, of Alaska's commonly held
wealth is this year and this iswhat government took out of it.
These are the beneficiaries.
Until we have that story, we'renot going to get the push on
government spending or on othersources of revenue that we need
(12:00):
to make those happen.
Speaker 2 (12:01):
I'm shocked that they just don't even.
I mean, the simplest thingwould have been to mention that
the statutory amount would havebeen X $3,700, $3,750, whatever.
I mean, that would have atleast been, I guess, a little
more honest on it.
But here we are just sittingaround, you know well, just be
(12:24):
happy with what you get.
Speaker 1 (12:25):
Kind of is the answer that we're hearing right now
and it's a complete whiff allthe way through the media, all
the way through to must read.
It's a complete whiff.
None of them do that story.
None of them start at thebeginning and do the analysis to
the end.
All of them just start at theend and publish the end.
And you know what?
It's just shocking to me, trulythat they're just all ignoring
(12:47):
that story, all missing thestory, all missing the impact on
Alaskans, middle and lowerincome Alaska families by by not
telling the full story.
Speaker 2 (12:57):
Jeffrey says reporters are a product of a
modern education system.
I mean, I don't know whatthey're teaching in reporter
school these days.
Journalism school, um, you know, it obviously doesn't appear to
be any kind of deeperanalytical thought.
I mean, maybe that's, maybeit's a class and chat GPT these
days.
I don't know.
Speaker 1 (13:16):
You know there is.
There is investigativereporting.
I mean, the whole thing aboutthe, the, the delayed payments
for SNAP and the delayedqualifications for SNAP and the
delayed Medicaid payments all ofthat was investigative
reporting.
It certainly wasn't the stateputting out press releases
saying, hey, look at how delayedwe are.
It's selective, investigativereporting.
(13:39):
It's on things that they wantfocus on, which is whatever they
select.
But if you're going to do that,if you're going to worry about
middle and lower income Alaskafamilies, worry about them.
If you're going to worry abouttheir income levels, worry about
it and focus on something thatis significantly impacting those
(14:02):
which the diversion, the taxingand diversion of the PFD.
Speaker 2 (14:08):
It's, it's interesting to to watch this,
like you said, especially whenthey find a story that they're
hot and heavy on or somethingthat that I think feeds into
their particular politicalnarrative, then, like you said,
then they dig deep into thething.
Otherwise, it's all business asusual.
Um, it's uh just business asusual and, uh, that's
(14:31):
unfortunate, that is absolutelyunfortunate, for sure.
Um, let's see, uh, remember theday, remember the days of 60
minutes.
Well, yeah, I mean, but eventhey have gotten.
I mean, I think it's, I thinkit's pretty obvious that there
(14:59):
is definitely a political slantto the journalism class, to the
journalistic class in thiscountry these days.
I think, for the most part, thevast majority of them seem to
be moving to a specificnarrative, which is government
is good and we should just, weshould just believe in all that
right.
Speaker 1 (15:08):
Well, and there you go, and we should have more of
it, which is the stories on Snapand on Medicaid.
We're not getting enough of it.
We need more of that.
We need more government.
But this is a story about.
I mean, I'm not saying I'venever said that we shouldn't
have government.
What I've been saying is whoshould pay for government, and
(15:29):
we should do it fairly and weshould do it equitably and we
should do it in accordance withthe statutes, we should do it in
accordance with the rule of law.
I mean this last week we've seena lot about the breakdown in
American society.
And where did it all begin?
Well, part of it begins whenyour state legislatures,
congress, president, but part ofit begins when the state
legislatures don't follow thelaw.
(15:50):
When they pass a statute,government signs it.
You have years and years andyears of following the statute
and all of a sudden, somelegislature decides well, some
governor, in the case of Walkerand then legislature ah, we
don't have to follow that law,we're going to, we're going to
do something else.
That is where the breakdown ofsociety starts when you, when
(16:12):
you're, when those in those whowe expect to set the laws, to
follow the laws, when they stopdoing that.
Speaker 2 (16:19):
Yeah.
Speaker 1 (16:19):
And they and they start going off in their own ad
hoc directions.
Yeah, and, and you know, if youwant to talk about where we're
going wrong, I think the PFD isa great story about where we're
going wrong.
Speaker 2 (16:31):
We're continuing now.
Brad Keithley, alaskans forSustainable Budgets the weekly
top three.
Well, brad, the AlaskaRenaissance doesn't mean what I
think it.
You keep using that phrase.
I don't think it means what Ithink it.
You keep using that phrase.
I don't think it means what youthink it means the Alaska
Renaissance.
I think we may have been toldsomething that was slightly
(16:52):
incorrect.
What do you, what do we gothere?
Hit me with the details.
Speaker 1 (16:56):
Well, eric Stone in Alaska Public Media has a story
that captured my attention whenI saw the headline.
The headline is what does aNorth Slope Renaissance mean for
Alaska's state budget?
And it picks up on the theme ofthis year's AOGA conference,
the Alaska Oil and GasAssociation conference, where
producer after producer got upand trade association after
(17:20):
trade association got up andsaid oh, we're having a
renaissance on the North Slope.
We're having all thisinvestment, we're having all
this development, we're havingall this new areas being
identified and developed.
The federal One Big BeautifulAct is going to increase.
That.
It opens new lands.
We're having a true renaissancein that we're having all this
(17:40):
drilling up here.
And Eric asked the question.
Eric Stone asked the questionin this article what does the
North Slope Renaissance mean forAlaska's state budget?
And he had two, two sources inthe story.
One was Bert Stedman and theother was Bill Wilikowski.
Stedman said oh, it means greatthings.
(18:02):
We're getting all thisadditional revenue and it's not
enough yet.
We're not out of the woods ofthe deficits we've been running,
but we're getting all thisadditional revenue and I think
it's even going to get betterover the next 10 years.
Wellikowski said somethingdifferent, but here's what's
really going on.
(18:24):
Alaskans in 2013 and 2014, whenwe had SB21 up were told this.
They were told if you agree toreduce production taxes from the
levels they were at ACES, we'regoing to attract additional
investment, we're going toattract additional development
of fields and we're going toattract additional production.
(18:46):
And you Alaskans are going tobenefit from that because as
production goes up, so willstate revenues.
They'll ride right on up withproduction.
So you're making an investment.
You Alaskans are making aninvestment by agreeing to reduce
production taxes from thelevels they are, in exchange for
(19:09):
essentially co-investing.
That reduction will be aco-investment with producers to
bring in new investment and tobring in new production and to,
as a result, increase revenues.
That's not what's happened.
What's happened is Alaskansagreed to reduce production
(19:29):
taxes.
Producers did make investments.
Producers are developing newfields.
Production levels are going up.
They're going up significantlybut the Alaskans share the
budget share isn't moving.
The royalties some claim allroyalties are going up.
(19:50):
When you look at it in gross,when you take into account the
revenue decline or theproduction decline from old
fields and the productionincreases coming from new fields
, state royalties are stayingthe same across the next 10
years.
They aren't going up.
They aren't followingproduction increases, and a lot
(20:12):
of that is because thoseproduction increases are coming
from federal lands.
Projected production increasesare coming from federal lands.
Projected production increasesare coming from federal lands,
all right.
So what's Alaskans share fromfederal lands?
What should Alaska be gettingfrom federal lands?
And the answer to that isproduction taxes.
So, going back to 2013, 2014,.
If you make this investment byreducing production taxes, we'll
(20:36):
have investment.
Production will go up and yourrevenue stream for production
taxes will go up.
Doesn't matter in that case ifit's from federal lands or state
lands, because production taxesapply to both.
What's happening with productiontaxes?
They're going down.
They are not only not stayingthe same, they're certainly not
(20:57):
going up proportionately to theincrease in production volumes.
They're going down over thenext 10 years and DOR recently
published a study that allowed astudy of two of the fields
Willow and Pika.
That allowed us to take a lookat what happens beyond the
10-year period.
And they continue going downover the next 10 years because
(21:20):
we continue to have newinvestment that drives state
credits to production taxes.
That continue to keepproduction taxes down.
We don't reach a point at whichproduction taxes start going up
, not even a delayed point.
We don't reach a point at whichproduction taxes start going up
, not even a delayed point.
We don't reach a point at whichproduction taxes start going up
because, by the time productiongets to the point, the field
(21:44):
production gets to the pointwhere the taxes come off, where
taxes reapply, I mean where thecredits come off.
The fields are in decline and sothe revenues.
Yes, the percent of revenuestarts going up.
Percent of production taxstarts, the realized production
tax starts going up, but thefields are in decline,
(22:05):
production's in decline, so therevenues keep going down.
Even though the percentage goesup, the revenues keep going
down.
So the answer to this questionwhat does a North Slope
Renaissance mean for Alaskastate budget?
It means bad things.
It means that Alaskans aren'tsharing in the promise made in
2013 and 2014.
And I was one of those makingthe promise back then Doesn't
(22:28):
mean they're sharing in thepromise of 2013 and 2014 that as
investments are made, asproduction increases, production
tax revenues, state budgetrevenues, will go up.
Bert is trying to say, oh well,revenues are going to go up
because we're getting revenuesfrom these new fields.
But when you look at we'regetting, you look at the
(22:55):
combination of the declineproduction decline in old fields
and offset by or in theproduction increase in new
fields.
It's staying level, andproduction tax from state lands,
which is where the only placewe get royalty royalties from
state lands are staying level.
Burt wants you to focus.
It's sort of like a magic trick, right?
It's sort of like don't lookover here, don't look over here,
(23:16):
look at my hand here, look atmy hand here.
Dollars are going up, dollarsare going up.
Well, look at both hands anddollars aren't going up.
And when you look at productiontaxes, dollars are actually
going down.
So the North Slope Renaissancemeans great things for the oil
companies, means great thingsfor production volumes, means
(23:41):
great things for development,means great things for the
bottom line of the oil companies, but it means that Alaskans
aren't getting what they werepromised in 2013 and 2014.
And I think that's a huge storythat Eric Stone completely
misses.
Speaker 2 (23:59):
Well, I mean, and I think you know, you got to kind
of give credit where credit'sdue Wilikowski, who I disagree
with almost everything he didsay that he'd like to prevent
oil.
He's talking about the oiltaxes like you were talking
about.
He said he'd like to preventcompanies from deducting
investments on federal land,like Willow, from state taxes
they owe on other projects.
(24:20):
He said why should we subsidizethat?
Why should the state of Alaskabe subsidizing hundreds of
millions to potentially billionsof dollars for production, for
exploration costs and drilling,for which we get zero royalties,
for which we get very little inproduction tax?
I mean he's making the samepoint.
I mean good for him.
This is what we should betalking about.
(24:41):
With production going up, weshould not be seeing our coffers
then running dry because we'rereceiving less and less.
And that's what you projected.
You showed it on paper.
Here it was, in the future,yeah exactly right, wilkowski.
Speaker 1 (24:56):
I mean Wilkowski to me is being too simplistic.
You cannot have, you cannotdiscriminate against production
from federal lands.
Your production tax cannot beset up to charge production from
federal lands more moreproduction tax than from state
lands.
You have to treat productionfrom federal lands in the same
manner that you treat productionfrom state lands.
You have to treat productionfrom federal lands in the same
(25:17):
manner that you treat productionfrom state lands.
Part of what Willikowski issaying, the broad sense of what
Bill's trying to create, is oh,we should not be giving the
federal lands the benefit ofthese credits, and it's not that
(25:38):
simple.
What is simple, what is thesimple thing, is we're not
getting what we were promised in2013 and 2014.
We're not getting a share ofthe benefit as production rises
in terms of state revenues.
That's the thing that we needto focus on.
Very simple Productionincreases.
(26:00):
Alaska state revenue shouldincrease.
That's not what's happening.
Speaker 2 (26:05):
But we can't get.
This is what kills me is wecan't get anybody on the
Republican side to even buy intoa conversation on changing oil
taxes.
I mean they don't even want todiscuss it.
I mean we talk about.
You know, we bang on theDemocrats and the bigger
government folks in so many wayson this program.
I mean Democrats andRepublicans.
(26:28):
But even the business as usualcrowd doesn't want to touch the
oil taxation discussion, eventhough it would put more money
in their coffers to be able tospend.
But they just don't even wantto talk about it.
Speaker 1 (26:36):
No, and the oil companies have got them scared
by saying oh well, we'll investour money someplace else if you
change oil taxes into Alaska.
That's not what would happen.
If Alaska revenues went up as ashare of increased revenues
from increased production, as ashare, then the economics of the
(27:00):
oil companies would work, stillwork.
What's happened is the way thecredits in SB21 are implementing
during this period of time isone credit is piling on top of
another, credit on top ofanother credit to give oil
companies super returns fromtheir investment during this
(27:21):
period of time, and they'retelling Alaskans oh wait, wait
for seven years till the GVRexclusion expires, or wait, wait
, wait.
The problem is, as you continueto develop through that time,
you continue running new GBR,you continue to run new
deductions that are beingdeveloped and Alaska's weight is
(27:41):
out there like 20, 30 yearsbefore these revenues show up,
and in that case production's ondecline.
So, yes, the percentageincreases, the percentage of our
share of the revenues increasesat that point.
But when production's ondecline and you see this in the
DOR, willow and PICA studieswhen production's on decline,
(28:02):
even though the percentage isincreasing, the revenue is
decreasing because productionvolumes are falling so fast.
Speaker 2 (28:12):
So we're on the lose-lose end of the lollipop,
is what you're saying?
Essentially, there is no upside, even in the 20 and 30-year
forecast, because by that time,while the percentages are higher
, the production is lower,meaning we have a net less take
anyway at the other end.
Speaker 1 (28:29):
Yep, yep, yep.
So it's not just about timevalue money, it's not just the
delay, it's the impact of thedelay against the production
curve decline.
Alaskans just never catch up.
We never achieve the goal of2013-2014.
As production increases, staterevenues will increase.
Speaker 2 (28:50):
And I think you hit on it.
Melissa comments in the chatroom.
She says they think the oilcompanies will leave if we
change it.
Brad's correct, it's a feartactic, because that's what we
keep hearing.
Well, if you change it, they'lljust take their ball in their
bat and they'll go home.
Well, no, that's our ball inbat, we own the diamond, we own
the field, we own the ball inthe bat.
If they want to go playsomewhere else, okay, somebody
(29:11):
else will step in, but they'renot going to do that.
But that's the fear, that's thetactic, right, that we keep
hearing.
Speaker 1 (29:17):
Yeah, and their economics are overachieving.
I mean, when you look at theoil company economics, they are
developing supra returns, superreturns, superior returns,
excess returns, whatever wordyou want to use, excess returns
let's land on excess.
They're developing excessreturns because we're deferring
Alaska's share for so long.
Speaker 2 (29:39):
Brad Keithley Alaskans for Sustainable Budgets
.
The weekly top three continues.
We're going to go.
We got one more.
I mean I wish we had an answerto this.
I mean we do have an answer tothis, but nobody wants to talk
about it.
I think that's the thing.
We should be re-examining ouroil taxation and maybe we should
(29:59):
just set it so that every 10years we re-examine the oil tax.
Maybe that should be somethingthat should be set in there.
Let's catch some comments herein the chat room.
David says maybe there's ananalogy between higher oil
production, lower state revenueand the more K-12 spending,
lower student achievement.
I mean you're reaching there.
(30:23):
I mean I can see what you'retrying to do there, but you're
reaching.
David says Brad, how much isAlieska charging for
transporting the oil?
Does the state have a play inthat?
I mean there is a servicecompany and there is a cost to
doing that, but I don't thinkthat that's affecting it that
(30:46):
badly, do you Brad?
Speaker 1 (30:48):
No.
So aliasca is basically, orTAPS charges are basically cost
of service.
They're basically the cost ofservice divided by volume is the
per unit tax charge.
There's no extra profit builtin there, but there's no
sub-profit built in there.
It's just whatever your cost isdivided by volume and that's
(31:09):
the per unit cost.
So yeah, Alaska, Alaska.
I mean the deductions play arole in the sense that they
reduce the gross revenue, themarket revenue, that the
producer receives.
But that's always been the case, We've always known that.
And Alyeska's charges haven'tchanged that much over the years
(31:31):
.
In fact, as a share of valuethey've declined because they've
remained relatively constant,but the price, the value of oil,
has gone up.
The price of oil has gone upover the decades, so the
percentage impact of Alyeska hasdeclined.
Speaker 2 (31:48):
Brian just says, if you know, they'll, just if they
left, if the producers, they'lljust start selling it off to the
native corpse, or let the stateof Alaska have it so we can
start our own oil company withBert as the CEO.
Oh man, please don't give themany.
Let's not give them any ideas,for sure, let me go back, go
(32:11):
ahead.
Speaker 1 (32:12):
Alaska is a good place to invest.
They're investing here becauseit's a good place to invest.
Alaska is a good place toinvest.
They're investing here becauseit's a good place to invest.
We've just created a system inwhich they're getting even more
on that investment than theywould require, than their
economics require.
In order to keep the investmentgoing, we are giving them the
state's share of production tax,the state's upside of the
(32:36):
increased production they'regenerating.
We're giving it to them and thefederal government, through the
, through the federal income tax, we're giving it to them
instead of retaining it forourselves.
As we said we would.
Speaker 2 (32:46):
As we said we would benefit in 2013 and 2014 as
resource owners right, which iswhat we have to consider that
every time we look at that wehave to remember that we are the
resource owners and so we needto be.
You know, the legislature issupposed to be looking out for
us.
I think Frank asks a validquestion that many Alaskans who
aren't privy or haven't seen theins and outs of this
(33:08):
specifically Frank says.
Why should the state subsidizeanything is the question why,
brad.
Speaker 1 (33:15):
Well, you want the investment here and Alaska is an
expensive place to invest andAlaska is a risky place to
invest and Alaska also has thegeopolitical risks the risks of
changes in regulatory regimes.
That changes your access toland and changes the
restrictions you have ondevelopment.
So you want to incentivizedevelopment in Alaska.
(33:38):
It's more risky, more costlythan, say, west Texas, so there
is a benefit to the state ofincentivizing that development.
The problem is we were told onething in 2013 and 2014 about
what we were doing we were goingto incentivize it.
In 2014 about what we weredoing, we were going to
(34:00):
incentivize it.
We were going to incentivizeinvestment by reducing the
production tax level from underACES.
We're going to incentivize thatproduction and then, when that
production took off, we weregoing to benefit from it by
increases in state revenues.
That's not happening.
So there's a reason toincentivize the development, but
the reason is you get thebenefit of those incentives of
(34:22):
that development once it occursand it's the back end of that
that we're not getting.
Speaker 2 (34:28):
Yeah, and it's, it's.
It's interesting to see how,you know, again, they don't want
to address this at all.
I mean, what about the idea ofAlaska has to examine their
taxes you know their tax schemeevery 10 years?
I mean, shouldn't we at least,shouldn't we at least analyze it
to say how is it working for us?
(34:50):
Right, and this is this is theproblem.
This is remember we talkedabout the extremes in state
spending and everything else.
You know, they run from oneside of the boat to, oh, we've
got so much we don't know whatto do with it.
Oh, now we're upside down.
It's the same thing with oiltaxes.
Right, it goes one way, oh,it's going to be so great.
And then it goes the other way,100%, you know, from ELF to the
(35:10):
ACES, to SB21, to whateverwe've got.
I mean, that's part of theproblem is that we keep running
from one side of the boat to theother.
Speaker 1 (35:18):
And that's an excellent point, Michael, and
it's really a point thatdescribes.
I mean there's been activity totry to relook at oil taxes.
Brenna led the initiative in2020, 2020, was it when we had
the last initiative on oil taxes?
Or 2022?
It's getting.
My memory is getting loose inthat regard, but we've had
(35:40):
people who want to look at it.
The problem is they want to runto the other side of the boat.
The problem is they want toadopt a tax regime that would
tend to go back to ACES, andACES didn't work.
Speaker 2 (35:50):
We are continuing now , Brad, Keithley, Alaskans,
Force, Sustainable Budgets theweekly top three, Final of the
three.
We're up to number three.
I mean we were trying to findsolutions but again, nobody
wants to take a deeper look.
Brad, we were just talkingabout this 10-year, the idea of
(36:12):
taking a 10-year look at it, andwe just I mean I'd love to do
that, but we just can't getanybody to really buy in on that
.
But let's move on to numberthree.
So the Santos deal with AbuDhabi.
I mean the whole thing hasfallen apart.
The whole thing has fallenapart.
What does that mean?
Because we heard that that wasgoing to be a big, you know,
(36:34):
uptick and more investment andeverything else for PICA.
So what does it mean, now thatthe Santos deal has fallen apart
, for us?
Speaker 1 (36:43):
So Santos?
The backstory on this is Santoshad entered into an agreement
with Adnock, the Abu DhabiNational Oil Company, for Adnock
to buy, essentially to buySantos, and Adnock was doing
that.
Abu Dhabi was doing that reallyfor the LNG, the Australian and
the New and Papua New Guineaand other LNG projects that
(37:08):
Santos has.
Adnock is trying to get big inthat business, in the LNG
business, and viewed Santos' LNGprojects as a great add to what
AdNoc was putting together.
And Santos has a couple ofprojects they've not funded yet.
That the expectation was, ifAdNoc came on board or if the
(37:28):
acquisition went forward, thatAdNoc has much deeper pockets
than Santos does and AdNoc wouldfund those additional LNG
projects that Santos has notbeen funding as a way of
developing Santos' LNG portfolioeven better.
Even more broadly, pica hasalways sort of been the tail end
(37:49):
of the story.
It's always been yeah, santoshas this great oil prospect up
in Alaska that it's beeninvesting in and is expected to
produce oil.
That wasn't the focus ofAdNoc's acquisition, speculating
(38:13):
that in order to focus AdNoc,if the acquisition went forward,
in order to focus attention onthe LNG projects, which is what
AdNoc was really interested inthat PICA would be put up for
sale or something would be donewith PICA in order to allow
AdNoc to keep the laser focus onSantos' LNG prospects, that
deal falling.
Adnoc has backed out of thedeal.
Santos is trying to spin itthat they backed out of the deal
(38:35):
, but AdNoc backed out of thedeal.
And so the question now is andthis shows up in an Alaska news
source, the TV station's websiteAlaska North Slope a PICA
project, alaska impact Unknownafter Santos merger deal dies.
Actually, the focus, santos'focus, now is going to be more
(38:59):
on PICA than it would have beenin the combined company.
As I said, adnox focus wasreally on the LNG prospects.
Pica was sort of the tail onthe dog Without Adnox
acquisition.
Santos really has two bigfuture stories.
One is an LNG project inAustralia that they're starting
(39:20):
up in the near future that issupposed to be a big money
generator, and the other storythat Santos is selling about its
future is PICA.
The oil prospect up in Alaskais a big deal.
So in terms of corporateattention, pica is probably
going to get more corporateattention, more corporate
(39:43):
responsiveness going forwardthan it would have under the
AdNoc, under the AdNoc, if AdNochad acquired Santos.
The slight drawback of that isSantos won't have near the deep
pockets that a combined AdNocSantos would have had.
So funding is going to be alittle more scarce Santos
(40:07):
corporate-wide as a result ofthe failure of the merger and so
that may show up.
That may show up as PICAapproaches phase two or
additional phases or additionaldrilling.
Santos has prospects inadditional areas outside of PICA
that it's been exploring andhas put on track for development
(40:32):
at some point and the lack ofadditional, the lack of the deep
pockets that AdNoc was going tobring to that combined entity,
may show up in those additionalinvestments or it may not.
I mean if PICA stays, if Alaskastays a central part of the
(40:53):
Santos story, santos isn'tacquired, they're going to keep
wanting to focus as long as it'seconomic.
They're going to keep wantingto focus on the Alaska piece of
the story because that's thepart that they're selling to the
stock market right now.
So I think in the short term itmeans good things in the sense
that the corporate attentionthat otherwise might have been
(41:14):
diverted as a result of theacquisition, the corporate
attention that otherwise mighthave been diverted to the LNG
projects, remains focused onPICA as one of the big deals
that Santos is engaged in Longerterm.
I think that's probably still agood thing, because because
Santos will still will want tocontinue spinning that story of
(41:36):
Alaska oil being a big, big partof the of the company's future.
But funding, the funding won'tbe from as deep a pocket and so
the funding may become a maybecome an issue down the road.
Speaker 2 (41:50):
And that, and that, of course, spells some good news
for Alaska in the short term.
What does it mean long term?
As you said, they're justselling this now to the stock
market to keep their prices up,as this is what they're going to
focus on.
This is a good potentiality,but what does it mean in the
long run for the state of Alaska?
Do we see more revenues?
(42:11):
Do we see something more stable, or what do we see?
Speaker 1 (42:13):
Well, that sort of goes back to the second segment,
doesn't it?
We're not seeing revenues outof these development.
I mean, we're seeing royaltyrevenues.
That sort of match the declinecurve.
We have going elsewhere on theslope so that royalties are
generally staying.
State production from statelands is generally staying level
.
So royalties are generallystaying level, and so that's
(42:41):
good in the sense that we're notfalling further behind on the
royalty side.
But we're not seeing theaddition to the state revenue
stream from the production taxbecause of the way the
production tax is structured.
Production tax because of theway the production tax is
structured.
So it's good news in the sensethat it keeps Alaska resources
being developed, it keeps peoplebusy in terms of developing
(43:04):
those resources, it keepsadditional oil development on as
a prospect and it keeps sort ofreplacing the royalty revenue
sources that we're losing as aresult of decline.
But we're not anywhere nearreplacing the production tax
revenues and you have to go backI mean, production tax revenues
(43:25):
are a big deal Back in 2024,which is the baseline that I use
and others use to look at thesethings.
In 2024, production taxes wereequal.
The revenues from productiontaxes were over $900 million,
equal to royalty revenuesRoyalty revenues are sort of
(43:46):
staying level, but productiontaxes are going down.
The consequence is thatAlaska's revenue from its
production is going down overtime and so the additional
development of the fields whilepeople hail that as additional
development and isn't that greatand additional employees and
additional projects isn't thatgreat the production tax piece
(44:09):
of that development isn'tshowing up.
So it will mean good things toAlaska in terms of the
additional development.
It will mean good things toAlaska if we fix the production
taxes going forward so thatAlaskans share in the benefit of
the increased production.
But if we don't fix productiontaxes, from a production tax
(44:32):
standpoint it really doesn'tmean that much to the state
revenue stream.
Speaker 2 (44:36):
Right, brad, what are we?
What do you?
You focus on something nextweek quickly.
What's your?
What's your Friday?
Speaker 1 (44:42):
column about this week you know I'm working on.
What if we went to grossrevenues?
What if we went to a grossrevenue production tax?
What would that do for us?
Sort of picking up on thecomments Will's staff has made.
What if we went to a grossrevenue production tax?
What would that do for us?
Sort of picking up on thecomments Will's staff has made
and it's sort of all right,let's trash all this complexity
that we've created and let's goback to a simple system.
What would that take and whatwould that generate for us?
(45:02):
So it's continuing onproduction taxes.
It's a good question.
Speaker 2 (45:06):
Maybe that's the solution, brad.
Maybe just going back to thesimplest instead of this
multi-phased you know,intertwined 63 different bells
and whistles and levers thatneed to be pulled, each one
connected to another one, I mean, maybe just something simple
would fix it, instead of makingit so convoluted and complicated
(45:27):
that you can't predict.
That was the problem they'repredicting one things, but then
all the things line up to where,all of a sudden, what they told
us was going to happen is notgoing to happen, because, well,
I mean, the oil companiesfigured out how to game the
system, essentially, and that'sgood for them, that's what
they're supposed to do for theirshareholders.
(45:49):
But maybe something a littlemore simplistic would be better.
Speaker 1 (45:53):
Yeah, so gross revenues always should be the
standard that you, even thoughyou have a complex oil tax
system, you should always lookat the impact on gross revenues,
because that's sort of how youjudge your share.
Whether it's a fair share or aninadequate share is sort of
what the gross revenues are.
There's a reason if you want toincentivize a bunch of things.
(46:15):
There's a reason to make yourtax code complex, because you're
incentivizing some things,you're de-incentivizing other
things and you're doing thatthrough the tax code.
There's a reason to do it.
But you should always come backand look at gross revenues and
see what the impact of thosevarious tricks and tuning is
doing on gross revenues.
And when you look, I mean thisis sort of the proof of what the
(46:41):
oil tax code is doing to us.
When you look at gross revenuesduring the last decade, the last
10 years from 2014 to 2024,alaska plus or minus got about
six and a half to 7% of grossrevenues through the production
tax and you add that to whatwe're getting through royalty
and we were doing okay.
(47:02):
I mean we certainly weren'tpaying for the budget we were
spending, but we were doing okayin terms of our share of
revenues.
When you look at this comingdecade, we're down to like 3.5%
or 3% of gross revenues in termsof production taxes and we're
(47:23):
also not getting royalty on thefederal production.
So you're seeing a decline inthe gross revenues.
You're seeing a decline in thegross revenues.
You're seeing a decline in yourtest of fairness, substantial
decline in your test of fairnessover this next decade.
And that's how you know, that'show you can prove, how you can
test whether the operation ofoil taxes in this coming decade
(47:46):
is producing Alaska's fair share, because it's not producing the
share it produced even in thelast decade.
So one way to sort of just workthrough all that is to say, okay
, forget all that, forget allthe complexity, forget all the
incentives, forget all the bellsand whistles we tried to build
into this thing to incentivizethis activity as opposed to that
(48:09):
activity.
Forget all that.
Let's just go back to the basictest of gross revenues as a
fairness test and look at howthat would impact the state
revenues and look at how itwould impact producers.
And that is to say, look,instead of all these bells and
whistles we build on, let's justgo back to the last decade and
(48:30):
let's set a gross revenues,let's base production taxes on
gross revenues and match thelast decade in what we're
getting out of that, and I thinkthat's a good test.
Now some people are going to say, well, you still need bells and
whistles.
All right, if you need bellsand whistles, you always have to
(48:51):
come back and prove that thosebells and whistles match your
fair share, as determined on agross revenues basis as a share
of gross revenues, and you haveto prove that those bells and
whistles aren't going to resultin what we're seeing in this
next 10-year period, which is adepression of the state's take
below its fair share of grossrevenues.
(49:16):
So I'm going to go back andlook at that and look at gross
revenues and what that would do,and maybe that's the answer to
all this, because what we'redoing now sure as hell ain't
working out.
Speaker 2 (49:31):
You may need a new hobby, Brad.
I'm just saying Frank, kind ofbottom lines it.
For us, though he goes,adjusting the tax structure is
too much.
The simplest thing is justtaking the permanent fund.
But again, that's essentiallywhat they've been doing.
They don't want to penalize thedonor class.
(49:51):
They don't want to penalize thedonor class, right?
They don't want to penalizethose guys.
So the simplest thing is justtake the permanent fund.
So that's kind of what'shappening right now with this.
Instead of taking our fairshare and doing, you know, for
our own resources, it's justeasier to take the permanent
fund.
All right, Brad, final thoughtsfor today.
(50:11):
My friend Hit me with it.
Speaker 1 (50:16):
Well, here's, I guess , the ultimate final thought Are
we going to get a candidate forgovernor?
Are we going to get candidatesfor legislature that think about
these things and talk aboutthese things?
Are we going to get candidatesfor governor that recognize that
we're not getting our fairshare on a gross revenues basis,
we're not getting our fairshare out of the increased
production that's going on?
(50:37):
Are we going to get candidatesthat recognize that the
permanent fund cuts in thepermanent fund dividend is just
a tax on middle and lower incomeAlaska families and we have to
have a fairer, more equitableway.
If we're going to run thesehuge budget deficits, we're
going to have to have a fairer,more equitable way of filling
those deficits.
(50:57):
Are we going to get candidatesthat recognize that?
And, frankly, I guess whatwe're doing on the show is we're
trying to educate those who arecandidates or want to be
candidates or legislators, orwant wannabe legislators or
candidates for governor.
Educate them on what the issuesare and what they should be
talking about.
They aren't talking about ityet.
(51:17):
Maybe they won't, in whichevent we're doomed, but that's
really the ultimate question Arewe going to get candidates to
start talking about these?
Speaker 2 (51:27):
Yeah, I think it's a valid question and I appreciate
you asking those questions overand over and over again.
Brad, Thank you so much forcoming on board.
It's good to talk with you, myfriend.
We'll talk to you again soon,Michael as always thanks for
having me.
Speaker 1 (51:41):
Well, that's a wrap for another week's edition of
the weekly top three fromAlaskans for Sustainable Budgets
.
Thank you again for joining us.
Remember that you can find pastepisodes on our YouTube,
soundcloud, spotify and Substackpages, and keep track of us
during the week on Facebook andTwitter.
This has been Brad Keithley,managing Director of Alaskans
(52:02):
for Sustainable Budgets.
We look forward to you joiningus again next week on the Weekly
Top Three.
Weekly top three.
Hi, this is Brad Keithley, managing Director of
Alaskans for Sustainable Budgets.
Welcome to the weekly top threethe top three things on our
mind here at Alaskans forSustainable Budgets for the week
of September 22nd 2025.
The weekly top three is aregular segment on the Michael
Duke Show.
The show broadcasts on bothFacebook Live and YouTube Live
(00:33):
as well as via streaming audiofrom the show's website.
Weekdays from 6 to 8 am.
I join Michael weekly in thefirst hour of Tuesday's show
from 6.10 to 7 am for adiscussion between the two of us
about our three issues.
We post the podcast of ourdiscussion following the show on
the Alaskans for SustainableBudgets Facebook, youtube,
(00:56):
soundcloud, spotify and Substackpages, also on the Alaskans for
Sustainable Budgets website, aswell as the projects page on
national blog site mediumcom.
You can find past episodes ofthe weekly top three also at the
same locations.
Keep in mind that, in additionto these podcasts during the
(01:17):
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):
we think the Alaska media hascompletely whiffed on this
year's real PFD story.
Second, we explain why theNorth Slope Renaissance isn't
producing the benefits forAlaskans they were led to expect
.
And third, we discuss what thetermination of the Santos-Adnock
(02:02):
deal likely means for Santos'Alaska project.
Speaker 2 (02:07):
And now let's join Michael.
We're going to dive into it.
Today.
We've got three topics and eachone is better than the last as
far as I'm concerned.
So let's start off with theAlaska media.
You know I've had a lot ofcriticisms for the media in the
state of Alaska.
Alaska media.
(02:31):
You know I've had a lot ofcriticisms for the media in the
state of Alaska, primarily abouthow there's not any real
investigative kind of aspect toit.
It's just like let meresummarize this press release
and put it out as a news storyand not really a lot of balance
on both sides, but this one onthe PFD.
Your comment is the Alaskamedia completely whiffs this
story.
Give me the rundown here, brad.
What are we talking about?
Speaker 1 (02:51):
Well, I've read all of the stories that have been
published in the state, I think,because I read a broad
selection of newspaper, ofwebsites and articles and stuff.
News sources, newspaper, you,old man, you yeah, that's about
what I said.
News sources, news sites therewe go and I've read all of the
(03:15):
stories and none of them haswhat to me is the real PFD story
.
All of them sort of regurgitatethe release from the Dunleavy
administration of a thousanddollar PFD is going to be in
your bank accounts or releasedto you or in the mail or
(03:35):
whatever.
However you receive it as ofthe first part of October.
All of them focus on thethousand dollars as the story
You're going to get a thousanddollars.
None of them focus on whathappened to the other $2,700.
None of them focus on, start tofocus on this is what the
(03:57):
statute says, still says afterall these years.
This is what the statute saysthe PFD is.
This is what the statute saysthat Alaskans share of the
commonly owned wealth.
Individual Alaskans share ofthe commonly owned wealth is.
None of them start with that,which would be about $37,500
(04:19):
right now this year.
None of them start with thatand progress on to how that
divides out that you get athousand of that, that the
remainder the remaining 2,700 orso, was withheld, diverted to
government, what one ICEReconomist has called taxed,
(04:43):
taxed to the government and thenspent by the government and
what it was spent on.
None of them focus on what itwas spent on and none of them
focus on who the beneficiary ofthat $2,700 tax truly is, who
the true beneficiaries are trulyis who the true beneficiaries
(05:08):
are.
And the true beneficiaries arethose who would otherwise have
paid to fill that hole, that gap, that deficit in the state
budget, that otherwise wouldhave paid to fill that hole had
the PFD not been taxed anddiverted.
And that's largely the top 20%converted and that's largely the
top 20 percent.
The oil companies andnon-resident industries, all of
(05:28):
whom, most of the two of whom,the oil companies and the and
the top 20 percent escape withpaying only a small share of
that.
Non-residents escape withpaying nothing of that.
That's the story.
The story isn't.
The story ends sort of with howmuch do you get.
The story.
The story ends sort of with howmuch do you get.
The story begins with how muchwere you supposed to get, how
(05:50):
much does the statute say thatyou're supposed to get.
How much is supposed ofAlaska's commonly owned wealth
is supposed to go intoindividual Alaskans' pockets?
And then what happened to that$3,750?
What happened to that amount?
How did it get divided upbetween what actually made it to
(06:11):
your pockets and what waswithheld, diverted and sent
elsewhere?
If Alaskans knew that story,alaska government would be a lot
different.
If Alaskans knew the story thatthey were taxed $2,700, falling
hardest on middle of nowhereincome Alaska families.
If Alaskans knew they weretaxed for two-thirds of the
(06:37):
amount that they were owed.
If they knew they were taxedfor that amount that they were
owed, that it was withheld,diverted to government, spent on
government in lieu of and thebeneficiaries are those who
didn't get taxed in order to payfor that shared government.
If Alaskans knew that story,there would be a big pushback on
(06:57):
government.
There would be a big pushbackon legislators who are doing
that.
There would be a big pushbackon the governor for allowing it
to go forward without usingadditional powers like vetoing
the entire budget until they getit right.
There would be a big pushbackon the governor.
There would be the kind ofresponse that some say they want
(07:18):
in terms of pressure on holdingand reducing spending.
But legislators are getting offscot-free from that
responsibility.
The governor's getting offscot-free because the story
being told Alaskans is only theback end of the story, the last
(07:39):
step of the story, which is theyget $1,000.
The story is go to the beginning.
Go to the beginning of thestory, which is they get a
thousand dollars.
The story is go to thebeginning.
Go to the beginning of thestory, which is the full
statutory amount that's still inthe statute, and then break out
what's going on with that fullstatutory amount and and focus
on who the beneficiaries of thatstatutory amount are.
(08:00):
That's the story that should betold.
Speaker 2 (08:04):
Well, and this is again going back to what I was
saying, which is my complaintabout the news media in Alaska,
is that there is no deeper diveon most of this stuff.
It's very rare that you'll seean article that isn't just, as
you said, a paraphrase.
It's like they dropped thegovernor's press release into
(08:26):
chat, gpt and, just you know,rewrote it.
Or the same thing happens whenit's something coming out of the
legislature.
The Senate majority, the Housemajority, puts out a press
release.
They paraphrase the pressrelease.
That's the answer.
There is no give and take,there's very little.
If they have a comment from theother side, it's a one
paragraph or one sentence.
(08:46):
You know a little rebuttal onanything and there's no deeper
dive onto.
Where is the money?
As you said, with $3,700, right, that's what the, that's what
the PFD should have been $3,750,something like that.
So that means that they'retaking almost three quarters of
the dividend to then pay forgovernment.
(09:10):
And you're right, people justaren't paying attention.
They're so busy making a livingand doing their thing that
they're just not really payingattention.
As to why am I not getting thePFD and not putting in the
context of you're essentiallybeing taxed at this point?
Speaker 1 (09:27):
Yeah, and to some degree, michael, I blame
legislators also conservativelegislators as well for not
telling that story.
I mean, some of them voteagainst it, so they've got a
good story to tell.
I voted against it becauseyou're being taxed, and you're
being taxed way too heavily andyou're being taxed unfairly in
(09:49):
the sense that you're paying atax.
You middle and lower incomeAlaska families are paying the
tax instead of oil companies andnon-residents in the top 20%
shipping in as well.
The burden is falling on you.
It's a deeply regressive tax onyou.
It's a deeply regressive tax.
(10:09):
You're paying essentially twoto three to four to five to six
times more than what the top 20%is paying.
You're paying infinitely morethan what non-residents are
paying.
It's an unfair tax.
Legislators who vote against ithave that story that they could
tell, but they're not as far asI can tell.
I mean it's certainly notmaking the news media.
There's no, there's no, youknow.
On the other hand, senator orrepresentative thus and so said
(10:31):
this, and so it's, and so we'remissing the story altogether.
I mean it's sort of like we'vefallen into.
Okay, it's another.
You know, legislature makes upa number.
Bam, that's the number.
That's the story, not whathappened from the statutory
amount that's still on the books, never been amended, not not
(10:52):
starting at that amount.
And what happened to thosedollars is just boom.
This is the dollars you get.
Be happy, go on your way, don'task any more, don't ask any
questions, and that's you know.
We're not.
We're not going to.
We're not going to get Alaskagovernment reined in.
We're not going to get fairnessin our taxation.
We're not going to get a focuson resources that are being left
(11:16):
behind with the oil companiesor resources that are being left
behind with the Permanent FundCorporation in terms of not
maximizing the return.
We're not going to get a focuson that.
As long as the story is, youjust get this.
Don't ask what happened to therest of it and keep on going and
being happy.
If we had the full story, if wehad, this is the statutory
(11:39):
amount, this is what the statutesays.
Your share, your individualshare, of Alaska's commonly held
wealth is this year and this iswhat government took out of it.
These are the beneficiaries.
Until we have that story, we'renot going to get the push on
government spending or on othersources of revenue that we need
(12:00):
to make those happen.
Speaker 2 (12:01):
I'm shocked that they just don't even.
I mean, the simplest thingwould have been to mention that
the statutory amount would havebeen X $3,700, $3,750, whatever.
I mean, that would have atleast been, I guess, a little
more honest on it.
But here we are just sittingaround, you know well, just be
(12:24):
happy with what you get.
Speaker 1 (12:25):
Kind of is the answer that we're hearing right now
and it's a complete whiff allthe way through the media, all
the way through to must read.
It's a complete whiff.
None of them do that story.
None of them start at thebeginning and do the analysis to
the end.
All of them just start at theend and publish the end.
And you know what?
It's just shocking to me, trulythat they're just all ignoring
(12:47):
that story, all missing thestory, all missing the impact on
Alaskans, middle and lowerincome Alaska families by by not
telling the full story.
Speaker 2 (12:57):
Jeffrey says reporters are a product of a
modern education system.
I mean, I don't know whatthey're teaching in reporter
school these days.
Journalism school, um, you know, it obviously doesn't appear to
be any kind of deeperanalytical thought.
I mean, maybe that's, maybeit's a class and chat GPT these
days.
I don't know.
Speaker 1 (13:16):
You know there is.
There is investigativereporting.
I mean, the whole thing aboutthe, the, the delayed payments
for SNAP and the delayedqualifications for SNAP and the
delayed Medicaid payments all ofthat was investigative
reporting.
It certainly wasn't the stateputting out press releases
saying, hey, look at how delayedwe are.
It's selective, investigativereporting.
(13:39):
It's on things that they wantfocus on, which is whatever they
select.
But if you're going to do that,if you're going to worry about
middle and lower income Alaskafamilies, worry about them.
If you're going to worry abouttheir income levels, worry about
it and focus on something thatis significantly impacting those
(14:02):
which the diversion, the taxingand diversion of the PFD.
Speaker 2 (14:08):
It's, it's interesting to to watch this,
like you said, especially whenthey find a story that they're
hot and heavy on or somethingthat that I think feeds into
their particular politicalnarrative, then, like you said,
then they dig deep into thething.
Otherwise, it's all business asusual.
Um, it's uh just business asusual and, uh, that's
(14:31):
unfortunate, that is absolutelyunfortunate, for sure.
Um, let's see, uh, remember theday, remember the days of 60
minutes.
Well, yeah, I mean, but eventhey have gotten.
I mean, I think it's, I thinkit's pretty obvious that there
(14:59):
is definitely a political slantto the journalism class, to the
journalistic class in thiscountry these days.
I think, for the most part, thevast majority of them seem to
be moving to a specificnarrative, which is government
is good and we should just, weshould just believe in all that
right.
Speaker 1 (15:08):
Well, and there you go, and we should have more of
it, which is the stories on Snapand on Medicaid.
We're not getting enough of it.
We need more of that.
We need more government.
But this is a story about.
I mean, I'm not saying I'venever said that we shouldn't
have government.
What I've been saying is whoshould pay for government, and
(15:29):
we should do it fairly and weshould do it equitably and we
should do it in accordance withthe statutes, we should do it in
accordance with the rule of law.
I mean this last week we've seena lot about the breakdown in
American society.
And where did it all begin?
Well, part of it begins whenyour state legislatures,
congress, president, but part ofit begins when the state
legislatures don't follow thelaw.
(15:50):
When they pass a statute,government signs it.
You have years and years andyears of following the statute
and all of a sudden, somelegislature decides well, some
governor, in the case of Walkerand then legislature ah, we
don't have to follow that law,we're going to, we're going to
do something else.
That is where the breakdown ofsociety starts when you, when
(16:12):
you're, when those in those whowe expect to set the laws, to
follow the laws, when they stopdoing that.
Speaker 2 (16:19):
Yeah.
Speaker 1 (16:19):
And they and they start going off in their own ad
hoc directions.
Yeah, and, and you know, if youwant to talk about where we're
going wrong, I think the PFD isa great story about where we're
going wrong.
Speaker 2 (16:31):
We're continuing now.
Brad Keithley, alaskans forSustainable Budgets the weekly
top three.
Well, brad, the AlaskaRenaissance doesn't mean what I
think it.
You keep using that phrase.
I don't think it means what Ithink it.
You keep using that phrase.
I don't think it means what youthink it means the Alaska
Renaissance.
I think we may have been toldsomething that was slightly
(16:52):
incorrect.
What do you, what do we gothere?
Hit me with the details.
Speaker 1 (16:56):
Well, eric Stone in Alaska Public Media has a story
that captured my attention whenI saw the headline.
The headline is what does aNorth Slope Renaissance mean for
Alaska's state budget?
And it picks up on the theme ofthis year's AOGA conference,
the Alaska Oil and GasAssociation conference, where
producer after producer got upand trade association after
(17:20):
trade association got up andsaid oh, we're having a
renaissance on the North Slope.
We're having all thisinvestment, we're having all
this development, we're havingall this new areas being
identified and developed.
The federal One Big BeautifulAct is going to increase.
That.
It opens new lands.
We're having a true renaissancein that we're having all this
(17:40):
drilling up here.
And Eric asked the question.
Eric Stone asked the questionin this article what does the
North Slope Renaissance mean forAlaska's state budget?
And he had two, two sources inthe story.
One was Bert Stedman and theother was Bill Wilikowski.
Stedman said oh, it means greatthings.
(18:02):
We're getting all thisadditional revenue and it's not
enough yet.
We're not out of the woods ofthe deficits we've been running,
but we're getting all thisadditional revenue and I think
it's even going to get betterover the next 10 years.
Wellikowski said somethingdifferent, but here's what's
really going on.
(18:24):
Alaskans in 2013 and 2014, whenwe had SB21 up were told this.
They were told if you agree toreduce production taxes from the
levels they were at ACES, we'regoing to attract additional
investment, we're going toattract additional development
of fields and we're going toattract additional production.
(18:46):
And you Alaskans are going tobenefit from that because as
production goes up, so willstate revenues.
They'll ride right on up withproduction.
So you're making an investment.
You Alaskans are making aninvestment by agreeing to reduce
production taxes from thelevels they are, in exchange for
(19:09):
essentially co-investing.
That reduction will be aco-investment with producers to
bring in new investment and tobring in new production and to,
as a result, increase revenues.
That's not what's happened.
What's happened is Alaskansagreed to reduce production
(19:29):
taxes.
Producers did make investments.
Producers are developing newfields.
Production levels are going up.
They're going up significantlybut the Alaskans share the
budget share isn't moving.
The royalties some claim allroyalties are going up.
(19:50):
When you look at it in gross,when you take into account the
revenue decline or theproduction decline from old
fields and the productionincreases coming from new fields
, state royalties are stayingthe same across the next 10
years.
They aren't going up.
They aren't followingproduction increases, and a lot
(20:12):
of that is because thoseproduction increases are coming
from federal lands.
Projected production increasesare coming from federal lands.
Projected production increasesare coming from federal lands,
all right.
So what's Alaskans share fromfederal lands?
What should Alaska be gettingfrom federal lands?
And the answer to that isproduction taxes.
So, going back to 2013, 2014,.
If you make this investment byreducing production taxes, we'll
(20:36):
have investment.
Production will go up and yourrevenue stream for production
taxes will go up.
Doesn't matter in that case ifit's from federal lands or state
lands, because production taxesapply to both.
What's happening with productiontaxes?
They're going down.
They are not only not stayingthe same, they're certainly not
(20:57):
going up proportionately to theincrease in production volumes.
They're going down over thenext 10 years and DOR recently
published a study that allowed astudy of two of the fields
Willow and Pika.
That allowed us to take a lookat what happens beyond the
10-year period.
And they continue going downover the next 10 years because
(21:20):
we continue to have newinvestment that drives state
credits to production taxes.
That continue to keepproduction taxes down.
We don't reach a point at whichproduction taxes start going up
, not even a delayed point.
We don't reach a point at whichproduction taxes start going up
, not even a delayed point.
We don't reach a point at whichproduction taxes start going up
because, by the time productiongets to the point, the field
(21:44):
production gets to the pointwhere the taxes come off, where
taxes reapply, I mean where thecredits come off.
The fields are in decline and sothe revenues.
Yes, the percent of revenuestarts going up.
Percent of production taxstarts, the realized production
tax starts going up, but thefields are in decline,
(22:05):
production's in decline, so therevenues keep going down.
Even though the percentage goesup, the revenues keep going
down.
So the answer to this questionwhat does a North Slope
Renaissance mean for Alaskastate budget?
It means bad things.
It means that Alaskans aren'tsharing in the promise made in
2013 and 2014.
And I was one of those makingthe promise back then Doesn't
(22:28):
mean they're sharing in thepromise of 2013 and 2014 that as
investments are made, asproduction increases, production
tax revenues, state budgetrevenues, will go up.
Bert is trying to say, oh well,revenues are going to go up
because we're getting revenuesfrom these new fields.
But when you look at we'regetting, you look at the
(22:55):
combination of the declineproduction decline in old fields
and offset by or in theproduction increase in new
fields.
It's staying level, andproduction tax from state lands,
which is where the only placewe get royalty royalties from
state lands are staying level.
Burt wants you to focus.
It's sort of like a magic trick, right?
It's sort of like don't lookover here, don't look over here,
(23:16):
look at my hand here, look atmy hand here.
Dollars are going up, dollarsare going up.
Well, look at both hands anddollars aren't going up.
And when you look at productiontaxes, dollars are actually
going down.
So the North Slope Renaissancemeans great things for the oil
companies, means great thingsfor production volumes, means
(23:41):
great things for development,means great things for the
bottom line of the oil companies, but it means that Alaskans
aren't getting what they werepromised in 2013 and 2014.
And I think that's a huge storythat Eric Stone completely
misses.
Speaker 2 (23:59):
Well, I mean, and I think you know, you got to kind
of give credit where credit'sdue Wilikowski, who I disagree
with almost everything he didsay that he'd like to prevent
oil.
He's talking about the oiltaxes like you were talking
about.
He said he'd like to preventcompanies from deducting
investments on federal land,like Willow, from state taxes
they owe on other projects.
(24:20):
He said why should we subsidizethat?
Why should the state of Alaskabe subsidizing hundreds of
millions to potentially billionsof dollars for production, for
exploration costs and drilling,for which we get zero royalties,
for which we get very little inproduction tax?
I mean he's making the samepoint.
I mean good for him.
This is what we should betalking about.
(24:41):
With production going up, weshould not be seeing our coffers
then running dry because we'rereceiving less and less.
And that's what you projected.
You showed it on paper.
Here it was, in the future,yeah exactly right, wilkowski.
Speaker 1 (24:56):
I mean Wilkowski to me is being too simplistic.
You cannot have, you cannotdiscriminate against production
from federal lands.
Your production tax cannot beset up to charge production from
federal lands more moreproduction tax than from state
lands.
You have to treat productionfrom federal lands in the same
manner that you treat productionfrom state lands.
You have to treat productionfrom federal lands in the same
(25:17):
manner that you treat productionfrom state lands.
Part of what Willikowski issaying, the broad sense of what
Bill's trying to create, is oh,we should not be giving the
federal lands the benefit ofthese credits, and it's not that
(25:38):
simple.
What is simple, what is thesimple thing, is we're not
getting what we were promised in2013 and 2014.
We're not getting a share ofthe benefit as production rises
in terms of state revenues.
That's the thing that we needto focus on.
Very simple Productionincreases.
(26:00):
Alaska state revenue shouldincrease.
That's not what's happening.
Speaker 2 (26:05):
But we can't get.
This is what kills me is wecan't get anybody on the
Republican side to even buy intoa conversation on changing oil
taxes.
I mean they don't even want todiscuss it.
I mean we talk about.
You know, we bang on theDemocrats and the bigger
government folks in so many wayson this program.
I mean Democrats andRepublicans.
(26:28):
But even the business as usualcrowd doesn't want to touch the
oil taxation discussion, eventhough it would put more money
in their coffers to be able tospend.
But they just don't even wantto talk about it.
Speaker 1 (26:36):
No, and the oil companies have got them scared
by saying oh well, we'll investour money someplace else if you
change oil taxes into Alaska.
That's not what would happen.
If Alaska revenues went up as ashare of increased revenues
from increased production, as ashare, then the economics of the
(27:00):
oil companies would work, stillwork.
What's happened is the way thecredits in SB21 are implementing
during this period of time isone credit is piling on top of
another, credit on top ofanother credit to give oil
companies super returns fromtheir investment during this
(27:21):
period of time, and they'retelling Alaskans oh wait, wait
for seven years till the GVRexclusion expires, or wait, wait
, wait.
The problem is, as you continueto develop through that time,
you continue running new GBR,you continue to run new
deductions that are beingdeveloped and Alaska's weight is
(27:41):
out there like 20, 30 yearsbefore these revenues show up,
and in that case production's ondecline.
So, yes, the percentageincreases, the percentage of our
share of the revenues increasesat that point.
But when production's ondecline and you see this in the
DOR, willow and PICA studieswhen production's on decline,
(28:02):
even though the percentage isincreasing, the revenue is
decreasing because productionvolumes are falling so fast.
Speaker 2 (28:12):
So we're on the lose-lose end of the lollipop,
is what you're saying?
Essentially, there is no upside, even in the 20 and 30-year
forecast, because by that time,while the percentages are higher
, the production is lower,meaning we have a net less take
anyway at the other end.
Speaker 1 (28:29):
Yep, yep, yep.
So it's not just about timevalue money, it's not just the
delay, it's the impact of thedelay against the production
curve decline.
Alaskans just never catch up.
We never achieve the goal of2013-2014.
As production increases, staterevenues will increase.
Speaker 2 (28:50):
And I think you hit on it.
Melissa comments in the chatroom.
She says they think the oilcompanies will leave if we
change it.
Brad's correct, it's a feartactic, because that's what we
keep hearing.
Well, if you change it, they'lljust take their ball in their
bat and they'll go home.
Well, no, that's our ball inbat, we own the diamond, we own
the field, we own the ball inthe bat.
If they want to go playsomewhere else, okay, somebody
(29:11):
else will step in, but they'renot going to do that.
But that's the fear, that's thetactic, right, that we keep
hearing.
Speaker 1 (29:17):
Yeah, and their economics are overachieving.
I mean, when you look at theoil company economics, they are
developing supra returns, superreturns, superior returns,
excess returns, whatever wordyou want to use, excess returns
let's land on excess.
They're developing excessreturns because we're deferring
Alaska's share for so long.
Speaker 2 (29:39):
Brad Keithley Alaskans for Sustainable Budgets
.
The weekly top three continues.
We're going to go.
We got one more.
I mean I wish we had an answerto this.
I mean we do have an answer tothis, but nobody wants to talk
about it.
I think that's the thing.
We should be re-examining ouroil taxation and maybe we should
(29:59):
just set it so that every 10years we re-examine the oil tax.
Maybe that should be somethingthat should be set in there.
Let's catch some comments herein the chat room.
David says maybe there's ananalogy between higher oil
production, lower state revenueand the more K-12 spending,
lower student achievement.
I mean you're reaching there.
(30:23):
I mean I can see what you'retrying to do there, but you're
reaching.
David says Brad, how much isAlieska charging for
transporting the oil?
Does the state have a play inthat?
I mean there is a servicecompany and there is a cost to
doing that, but I don't thinkthat that's affecting it that
(30:46):
badly, do you Brad?
Speaker 1 (30:48):
No.
So aliasca is basically, orTAPS charges are basically cost
of service.
They're basically the cost ofservice divided by volume is the
per unit tax charge.
There's no extra profit builtin there, but there's no
sub-profit built in there.
It's just whatever your cost isdivided by volume and that's
(31:09):
the per unit cost.
So yeah, Alaska, Alaska.
I mean the deductions play arole in the sense that they
reduce the gross revenue, themarket revenue, that the
producer receives.
But that's always been the case, We've always known that.
And Alyeska's charges haven'tchanged that much over the years
(31:31):
.
In fact, as a share of valuethey've declined because they've
remained relatively constant,but the price, the value of oil,
has gone up.
The price of oil has gone upover the decades, so the
percentage impact of Alyeska hasdeclined.
Speaker 2 (31:48):
Brian just says, if you know, they'll, just if they
left, if the producers, they'lljust start selling it off to the
native corpse, or let the stateof Alaska have it so we can
start our own oil company withBert as the CEO.
Oh man, please don't give themany.
Let's not give them any ideas,for sure, let me go back, go
(32:11):
ahead.
Speaker 1 (32:12):
Alaska is a good place to invest.
They're investing here becauseit's a good place to invest.
Alaska is a good place toinvest.
They're investing here becauseit's a good place to invest.
We've just created a system inwhich they're getting even more
on that investment than theywould require, than their
economics require.
In order to keep the investmentgoing, we are giving them the
state's share of production tax,the state's upside of the
(32:36):
increased production they'regenerating.
We're giving it to them and thefederal government, through the
, through the federal income tax, we're giving it to them
instead of retaining it forourselves.
As we said we would.
Speaker 2 (32:46):
As we said we would benefit in 2013 and 2014 as
resource owners right, which iswhat we have to consider that
every time we look at that wehave to remember that we are the
resource owners and so we needto be.
You know, the legislature issupposed to be looking out for
us.
I think Frank asks a validquestion that many Alaskans who
aren't privy or haven't seen theins and outs of this
(33:08):
specifically Frank says.
Why should the state subsidizeanything is the question why,
brad.
Speaker 1 (33:15):
Well, you want the investment here and Alaska is an
expensive place to invest andAlaska is a risky place to
invest and Alaska also has thegeopolitical risks the risks of
changes in regulatory regimes.
That changes your access toland and changes the
restrictions you have ondevelopment.
So you want to incentivizedevelopment in Alaska.
(33:38):
It's more risky, more costlythan, say, west Texas, so there
is a benefit to the state ofincentivizing that development.
The problem is we were told onething in 2013 and 2014 about
what we were doing we were goingto incentivize it.
In 2014 about what we weredoing, we were going to
(34:00):
incentivize it.
We were going to incentivizeinvestment by reducing the
production tax level from underACES.
We're going to incentivize thatproduction and then, when that
production took off, we weregoing to benefit from it by
increases in state revenues.
That's not happening.
So there's a reason toincentivize the development, but
the reason is you get thebenefit of those incentives of
(34:22):
that development once it occursand it's the back end of that
that we're not getting.
Speaker 2 (34:28):
Yeah, and it's, it's.
It's interesting to see how,you know, again, they don't want
to address this at all.
I mean, what about the idea ofAlaska has to examine their
taxes you know their tax schemeevery 10 years?
I mean, shouldn't we at least,shouldn't we at least analyze it
to say how is it working for us?
(34:50):
Right, and this is this is theproblem.
This is remember we talkedabout the extremes in state
spending and everything else.
You know, they run from oneside of the boat to, oh, we've
got so much we don't know whatto do with it.
Oh, now we're upside down.
It's the same thing with oiltaxes.
Right, it goes one way, oh,it's going to be so great.
And then it goes the other way,100%, you know, from ELF to the
(35:10):
ACES, to SB21, to whateverwe've got.
I mean, that's part of theproblem is that we keep running
from one side of the boat to theother.
Speaker 1 (35:18):
And that's an excellent point, Michael, and
it's really a point thatdescribes.
I mean there's been activity totry to relook at oil taxes.
Brenna led the initiative in2020, 2020, was it when we had
the last initiative on oil taxes?
Or 2022?
It's getting.
My memory is getting loose inthat regard, but we've had
(35:40):
people who want to look at it.
The problem is they want to runto the other side of the boat.
The problem is they want toadopt a tax regime that would
tend to go back to ACES, andACES didn't work.
Speaker 2 (35:50):
We are continuing now , Brad, Keithley, Alaskans,
Force, Sustainable Budgets theweekly top three, Final of the
three.
We're up to number three.
I mean we were trying to findsolutions but again, nobody
wants to take a deeper look.
Brad, we were just talkingabout this 10-year, the idea of
(36:12):
taking a 10-year look at it, andwe just I mean I'd love to do
that, but we just can't getanybody to really buy in on that
.
But let's move on to numberthree.
So the Santos deal with AbuDhabi.
I mean the whole thing hasfallen apart.
The whole thing has fallenapart.
What does that mean?
Because we heard that that wasgoing to be a big, you know,
(36:34):
uptick and more investment andeverything else for PICA.
So what does it mean, now thatthe Santos deal has fallen apart
, for us?
Speaker 1 (36:43):
So Santos?
The backstory on this is Santoshad entered into an agreement
with Adnock, the Abu DhabiNational Oil Company, for Adnock
to buy, essentially to buySantos, and Adnock was doing
that.
Abu Dhabi was doing that reallyfor the LNG, the Australian and
the New and Papua New Guineaand other LNG projects that
(37:08):
Santos has.
Adnock is trying to get big inthat business, in the LNG
business, and viewed Santos' LNGprojects as a great add to what
AdNoc was putting together.
And Santos has a couple ofprojects they've not funded yet.
That the expectation was, ifAdNoc came on board or if the
(37:28):
acquisition went forward, thatAdNoc has much deeper pockets
than Santos does and AdNoc wouldfund those additional LNG
projects that Santos has notbeen funding as a way of
developing Santos' LNG portfolioeven better.
Even more broadly, pica hasalways sort of been the tail end
(37:49):
of the story.
It's always been yeah, santoshas this great oil prospect up
in Alaska that it's beeninvesting in and is expected to
produce oil.
That wasn't the focus ofAdNoc's acquisition, speculating
(38:13):
that in order to focus AdNoc,if the acquisition went forward,
in order to focus attention onthe LNG projects, which is what
AdNoc was really interested inthat PICA would be put up for
sale or something would be donewith PICA in order to allow
AdNoc to keep the laser focus onSantos' LNG prospects, that
deal falling.
Adnoc has backed out of thedeal.
Santos is trying to spin itthat they backed out of the deal
(38:35):
, but AdNoc backed out of thedeal.
And so the question now is andthis shows up in an Alaska news
source, the TV station's websiteAlaska North Slope a PICA
project, alaska impact Unknownafter Santos merger deal dies.
Actually, the focus, santos'focus, now is going to be more
(38:59):
on PICA than it would have beenin the combined company.
As I said, adnox focus wasreally on the LNG prospects.
Pica was sort of the tail onthe dog Without Adnox
acquisition.
Santos really has two bigfuture stories.
One is an LNG project inAustralia that they're starting
(39:20):
up in the near future that issupposed to be a big money
generator, and the other storythat Santos is selling about its
future is PICA.
The oil prospect up in Alaskais a big deal.
So in terms of corporateattention, pica is probably
going to get more corporateattention, more corporate
(39:43):
responsiveness going forwardthan it would have under the
AdNoc, under the AdNoc, if AdNochad acquired Santos.
The slight drawback of that isSantos won't have near the deep
pockets that a combined AdNocSantos would have had.
So funding is going to be alittle more scarce Santos
(40:07):
corporate-wide as a result ofthe failure of the merger and so
that may show up.
That may show up as PICAapproaches phase two or
additional phases or additionaldrilling.
Santos has prospects inadditional areas outside of PICA
that it's been exploring andhas put on track for development
(40:32):
at some point and the lack ofadditional, the lack of the deep
pockets that AdNoc was going tobring to that combined entity,
may show up in those additionalinvestments or it may not.
I mean if PICA stays, if Alaskastays a central part of the
(40:53):
Santos story, santos isn'tacquired, they're going to keep
wanting to focus as long as it'seconomic.
They're going to keep wantingto focus on the Alaska piece of
the story because that's thepart that they're selling to the
stock market right now.
So I think in the short term itmeans good things in the sense
that the corporate attentionthat otherwise might have been
(41:14):
diverted as a result of theacquisition, the corporate
attention that otherwise mighthave been diverted to the LNG
projects, remains focused onPICA as one of the big deals
that Santos is engaged in Longerterm.
I think that's probably still agood thing, because because
Santos will still will want tocontinue spinning that story of
(41:36):
Alaska oil being a big, big partof the of the company's future.
But funding, the funding won'tbe from as deep a pocket and so
the funding may become a maybecome an issue down the road.
Speaker 2 (41:50):
And that, and that, of course, spells some good news
for Alaska in the short term.
What does it mean long term?
As you said, they're justselling this now to the stock
market to keep their prices up,as this is what they're going to
focus on.
This is a good potentiality,but what does it mean in the
long run for the state of Alaska?
Do we see more revenues?
(42:11):
Do we see something more stable, or what do we see?
Speaker 1 (42:13):
Well, that sort of goes back to the second segment,
doesn't it?
We're not seeing revenues outof these development.
I mean, we're seeing royaltyrevenues.
That sort of match the declinecurve.
We have going elsewhere on theslope so that royalties are
generally staying.
State production from statelands is generally staying level
.
So royalties are generallystaying level, and so that's
(42:41):
good in the sense that we're notfalling further behind on the
royalty side.
But we're not seeing theaddition to the state revenue
stream from the production taxbecause of the way the
production tax is structured.
Production tax because of theway the production tax is
structured.
So it's good news in the sensethat it keeps Alaska resources
being developed, it keeps peoplebusy in terms of developing
(43:04):
those resources, it keepsadditional oil development on as
a prospect and it keeps sort ofreplacing the royalty revenue
sources that we're losing as aresult of decline.
But we're not anywhere nearreplacing the production tax
revenues and you have to go backI mean, production tax revenues
(43:25):
are a big deal Back in 2024,which is the baseline that I use
and others use to look at thesethings.
In 2024, production taxes wereequal.
The revenues from productiontaxes were over $900 million,
equal to royalty revenuesRoyalty revenues are sort of
(43:46):
staying level, but productiontaxes are going down.
The consequence is thatAlaska's revenue from its
production is going down overtime and so the additional
development of the fields whilepeople hail that as additional
development and isn't that greatand additional employees and
additional projects isn't thatgreat the production tax piece
(44:09):
of that development isn'tshowing up.
So it will mean good things toAlaska in terms of the
additional development.
It will mean good things toAlaska if we fix the production
taxes going forward so thatAlaskans share in the benefit of
the increased production.
But if we don't fix productiontaxes, from a production tax
(44:32):
standpoint it really doesn'tmean that much to the state
revenue stream.
Speaker 2 (44:36):
Right, brad, what are we?
What do you?
You focus on something nextweek quickly.
What's your?
What's your Friday?
Speaker 1 (44:42):
column about this week you know I'm working on.
What if we went to grossrevenues?
What if we went to a grossrevenue production tax?
What would that do for us?
Sort of picking up on thecomments Will's staff has made.
What if we went to a grossrevenue production tax?
What would that do for us?
Sort of picking up on thecomments Will's staff has made
and it's sort of all right,let's trash all this complexity
that we've created and let's goback to a simple system.
What would that take and whatwould that generate for us?
(45:02):
So it's continuing onproduction taxes.
It's a good question.
Speaker 2 (45:06):
Maybe that's the solution, brad.
Maybe just going back to thesimplest instead of this
multi-phased you know,intertwined 63 different bells
and whistles and levers thatneed to be pulled, each one
connected to another one, I mean, maybe just something simple
would fix it, instead of makingit so convoluted and complicated
(45:27):
that you can't predict.
That was the problem they'repredicting one things, but then
all the things line up to where,all of a sudden, what they told
us was going to happen is notgoing to happen, because, well,
I mean, the oil companiesfigured out how to game the
system, essentially, and that'sgood for them, that's what
they're supposed to do for theirshareholders.
(45:49):
But maybe something a littlemore simplistic would be better.
Speaker 1 (45:53):
Yeah, so gross revenues always should be the
standard that you, even thoughyou have a complex oil tax
system, you should always lookat the impact on gross revenues,
because that's sort of how youjudge your share.
Whether it's a fair share or aninadequate share is sort of
what the gross revenues are.
There's a reason if you want toincentivize a bunch of things.
(46:15):
There's a reason to make yourtax code complex, because you're
incentivizing some things,you're de-incentivizing other
things and you're doing thatthrough the tax code.
There's a reason to do it.
But you should always come backand look at gross revenues and
see what the impact of thosevarious tricks and tuning is
doing on gross revenues.
And when you look, I mean thisis sort of the proof of what the
(46:41):
oil tax code is doing to us.
When you look at gross revenuesduring the last decade, the last
10 years from 2014 to 2024,alaska plus or minus got about
six and a half to 7% of grossrevenues through the production
tax and you add that to whatwe're getting through royalty
and we were doing okay.
(47:02):
I mean we certainly weren'tpaying for the budget we were
spending, but we were doing okayin terms of our share of
revenues.
When you look at this comingdecade, we're down to like 3.5%
or 3% of gross revenues in termsof production taxes and we're
(47:23):
also not getting royalty on thefederal production.
So you're seeing a decline inthe gross revenues.
You're seeing a decline in thegross revenues.
You're seeing a decline in yourtest of fairness, substantial
decline in your test of fairnessover this next decade.
And that's how you know, that'show you can prove, how you can
test whether the operation ofoil taxes in this coming decade
(47:46):
is producing Alaska's fair share, because it's not producing the
share it produced even in thelast decade.
So one way to sort of just workthrough all that is to say, okay
, forget all that, forget allthe complexity, forget all the
incentives, forget all the bellsand whistles we tried to build
into this thing to incentivizethis activity as opposed to that
(48:09):
activity.
Forget all that.
Let's just go back to the basictest of gross revenues as a
fairness test and look at howthat would impact the state
revenues and look at how itwould impact producers.
And that is to say, look,instead of all these bells and
whistles we build on, let's justgo back to the last decade and
(48:30):
let's set a gross revenues,let's base production taxes on
gross revenues and match thelast decade in what we're
getting out of that, and I thinkthat's a good test.
Now some people are going to say, well, you still need bells and
whistles.
All right, if you need bellsand whistles, you always have to
(48:51):
come back and prove that thosebells and whistles match your
fair share, as determined on agross revenues basis as a share
of gross revenues, and you haveto prove that those bells and
whistles aren't going to resultin what we're seeing in this
next 10-year period, which is adepression of the state's take
below its fair share of grossrevenues.
(49:16):
So I'm going to go back andlook at that and look at gross
revenues and what that would do,and maybe that's the answer to
all this, because what we'redoing now sure as hell ain't
working out.
Speaker 2 (49:31):
You may need a new hobby, Brad.
I'm just saying Frank, kind ofbottom lines it.
For us, though he goes,adjusting the tax structure is
too much.
The simplest thing is justtaking the permanent fund.
But again, that's essentiallywhat they've been doing.
They don't want to penalize thedonor class.
(49:51):
They don't want to penalize thedonor class, right?
They don't want to penalizethose guys.
So the simplest thing is justtake the permanent fund.
So that's kind of what'shappening right now with this.
Instead of taking our fairshare and doing, you know, for
our own resources, it's justeasier to take the permanent
fund.
All right, Brad, final thoughtsfor today.
(50:11):
My friend Hit me with it.
Speaker 1 (50:16):
Well, here's, I guess , the ultimate final thought Are
we going to get a candidate forgovernor?
Are we going to get candidatesfor legislature that think about
these things and talk aboutthese things?
Are we going to get candidatesfor governor that recognize that
we're not getting our fairshare on a gross revenues basis,
we're not getting our fairshare out of the increased
production that's going on?
(50:37):
Are we going to get candidatesthat recognize that the
permanent fund cuts in thepermanent fund dividend is just
a tax on middle and lower incomeAlaska families and we have to
have a fairer, more equitableway.
If we're going to run thesehuge budget deficits, we're
going to have to have a fairer,more equitable way of filling
those deficits.
(50:57):
Are we going to get candidatesthat recognize that?
And, frankly, I guess whatwe're doing on the show is we're
trying to educate those who arecandidates or want to be
candidates or legislators, orwant wannabe legislators or
candidates for governor.
Educate them on what the issuesare and what they should be
talking about.
They aren't talking about ityet.
(51:17):
Maybe they won't, in whichevent we're doomed, but that's
really the ultimate question Arewe going to get candidates to
start talking about these?
Speaker 2 (51:27):
Yeah, I think it's a valid question and I appreciate
you asking those questions overand over and over again.
Brad, Thank you so much forcoming on board.
It's good to talk with you, myfriend.
We'll talk to you again soon,Michael as always thanks for
having me.
Speaker 1 (51:41):
Well, that's a wrap for another week's edition of
the weekly top three fromAlaskans for Sustainable Budgets
.
Thank you again for joining us.
Remember that you can find pastepisodes on our YouTube,
soundcloud, spotify and Substackpages, and keep track of us
during the week on Facebook andTwitter.
This has been Brad Keithley,managing Director of Alaskans
(52:02):
for Sustainable Budgets.
We look forward to you joiningus again next week on the Weekly
Top Three.
Weekly top three.
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