The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (12.9.2024)
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 December 2, 2024.
This week, our top 3 issues are these: 1) we explain why the “simple answer” some claim solves Alaska’s outmigration issue is, in fact, a significant reason we are in a death spiral in the first place (2:17), 2) we explain why the Alaska LNG Phase I project, as discussed in the Wood Mackenzie report, isn’t a “private sector” project, but, in fact, a proposal that is already heavily subsidized by the state (14:51), and 3) we ask, where the heck is the Regulatory Commission of Alaska (RCA) on the Southcentral energy issue. The statutes say they should be at the center of it, but when we look around, they are nowhere to be found (35:32).
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.
Hi, this is Brad Keithley, managing Director of Alaskans for Sustainable Budgets. Welcome to the Weekly Top Three the top three things on our mind here at Alaskans for Sustainable Budgets for the week of December 9th 2024. The Weekly Top Three is a regular segment on the Michael Duke Show. The show broadcasts on both Facebook Live and YouTube Live as well as via streaming audio from the show's website weekdays from 6 to 8 am. I join Michael weekly in the first hour of Tuesday's show from 6 10 to 7 am for discussion between the two of us about our three issues. We post the podcast of our discussion following the show on the Alaskans for Sustainable Budgets Facebook, youtube, soundcloud, spotify and Substack pages. Also on the Alaskans for Sustainable Budgets website, as well as the projects page on national blog site mediumcom. You can find past episodes of the weekly top three also at the same locations. Keep in mind that, in addition to these podcasts during the week, you also can follow and participate in the discussion with us of these and other issues affecting Alaska's fiscal and economic condition by following us on the Alaskans for Sustainable Budgets Facebook page and through our posts on Twitter.
Speaker 1:This week our top three issues are these First, we explained why the simple answer some claim solves Alaska's out-migration issue is in fact the reason we are in a death spiral in the first place is in fact the reason we are in a death spiral in the first place. Second, we explain why the Alaska LNG Phase 1 project, as discussed in the Wood-McKenzie report, isn't a private sector project but in fact a proposal that is heavily subsidized by the state. And third, we ask where the heck is the Regulatory Commission of Alaska, or RCA, on the South Central Energy issue? The statutes say they should be at the center of it, but when we look around they are nowhere to be found. And now let's join Michael.
Speaker 2:Let's jump into it and start talking about the weekly top three. We've got some interesting topics so far today. Let's get started with the worst simple answer ever, right, the worst that Larry Persily he never fails to entertain and irritate at the same time. The simple answer, the worst simple answer ever.
Speaker 1:Well, the background of this is the recent news articles and released by the Department of Labor Alaska Department of Labor about where the state's population projections are heading. Us. Alex DeMarbon has a headline in one of last week's ADNs that said Alaska could be facing its first long-term decline in population and resulting economic slowdown. And the article really goes into a recent projection from the Department of Labor that shows population projections for the state as a whole and for select portions of the state, um, at its most extreme, that those projections show southeast alaska losing something like 25 to 50 yeah, I'm sorry we lost you there for a second brad, 25 to make you a little bit pessimistic, I'm sorry we lost that response to
Speaker 2:that, brad, I'm sorry we we lost you there for a second brad 25. To make you a little bit pessimistic, I'm sorry we lost that in response to that brad, I'm sorry we we lost you there for a second. You said uh. You said catch a can and southeast lost 50. And then what? Uh 20 wow, that study as you all right, we obviously are having a, uh, we're obviously having a morning moment. In response to that, uh, go ahead, I'm sorry, yeah, no, yeah, I'm sorry to that.
Speaker 1:Uh, larry, personally wrote an op-ed in the adn last week, the title of which is the simple answer to Alaska's out migration problem and, and personally goes through you know a bunch of a bunch of words. Uh, to get to. To get to this bunch of words.
Speaker 2:That's pretty much it. He goes through a bunch of words Uh, yeah, go ahead. I'm sorry, Just cause that's what it feels like sometimes, Although he does leave a few nuggets. That first one in the second paragraph where he goes the decline in working age residents ages 18 to 64 is especially noticeable in vacant public sector jobs, public service jobs, I mean. He immediately shows exactly what he's talking about.
Speaker 1:Well, eddie, that's sort of the wind up, that's sort of the get ready for the wind-up, and the wind-up comes in the last few paragraphs. Alaskans need to look at why younger people are not moving to the state as much as they did in years past and address those needs, which include good schools, housing, child care, strong university system, community services and parks and recreation activities that younger families seek. It means a retirement system for public employees, who are often paid less than their private sector counterparts. Make the state more attractive and they will come and they will build jobs and start businesses. In other words, it's a wish list for everything you want to spend money on, that you want the legislature to spend money on, and what you do is you package this up in an op-ed and says that's the solution to our out-migration problem, just spend more money. The problem with that simple answer is sort of the death knell for Alaska. The problem with that answer spending more money is where the money would come from. He personally doesn't address that, but he has in previous columns, and you know, as we all know, he's not a big fan of the PFD and so what he would do is as the legislature has done since 2017, he would add on additional spending and take it out of the PFD.
Speaker 1:So think what you're doing. What you're doing is you're adding more money to make Alaska more attractive by taking more money, taking that very money out of the pockets of middle and lower income Alaska families. You're pulling that money right out of the pockets of the very people middle and lower income Alaska families working in Alaska families. You're pulling that money right out of the pockets of the very people you're trying to keep in the state and what you're doing is you're sending us into a death spiral. You want to spend more to attract more people, so you take more money through the PFD, take more money out of the very people you're trying to keep in the state and attract to the state. You have less people as a result of that, because you're taking money out of their pocket. Then you want to spend more money to attract. To say that you want to attract more people, you take more money out of their pocket and you just keep circling down and down, and down and down until until the problem gets. Problem gets very, very, very bad.
Speaker 1:The the thing, the thing you need to keep in mind, the thing that personally, just entirely ignores continually. On this issue, the thing you need to keep in mind is, when you do PFD cuts, you're taking it out of the pockets of only Alaskans. You're not taking the money out of the pockets of a broad base of industry and, as Ben Carpenter would do, out of an ultra broad base of Alaskans. You're taking the money out of industry and non-residents and everybody else. When you use PFD cuts, you're taking money out of the pockets of only Alaskans. So you're penalizing.
Speaker 1:You want people to stay in the state, you want people to come to the state, but you're taking money out of the pocket of only people who come to the state and stay in the state.
Speaker 1:You're not taking the money out of non-residents and the consequence of that is you make the economics of being in Alaska worse. But being a non-resident coming to Alaska and working in Alaska and then going away and taking your money and going away better, because you've created all these services for for Alaskans and for non-residents, but you're only charging Alaskans for them. It's it's a very, it's a very dangerous death spiral. I mean he says it's a simple answer. It's a simple answer to kick off a death spiral of continuing to go, continuing to go down and down and down.
Speaker 1:Maybe we need to spend more money in these areas, but by but, by doing it through PFD cuts, which is what he's advocated in the past. By doing it through PFD cuts, you're hurting the very people you're claiming you're trying to help and you're and you're, and you're making it economically for that more difficult for them in the state to stay in the state and you're essentially pushing them out of the state and not attracting anyone to come in in replacement. No wonder we've got an out migration problem. We're taxing the people. We want to stay.
Speaker 2:We're taxing the very people we want here and they're acting like in all the various articles that have been up recently talking about this and the opinion pieces. They're all acting like well, we just don't know why people are leaving. Well, because it's expensive to live here. And you don't care the private economy, and the private economy is stagnant and struggling and all you care about is the public economy. You wonder why nobody wants to come to the state. I mean, there's a reason.
Speaker 1:Well, yeah, and to pay for this public economy. The only people you're having pay for the public economy is Alaskans, working Alaska families. I mean, it's felt hardest by working Alaska families. That's who you're having pay for this. The non-residents who are benefiting from this, the industries that are benefiting from this Ben Carpenter's ultra-broad sales tax would have them contribute also but by using PFD cuts, you're just focusing it right on the very people. You're taking money out of the pockets of the very people that you want to stay, and you're having to take it much more deeply out of their pockets, since you're only focusing it on them. That's your base. Your entire base is the PFD. Since you're only focusing it on them, you're having to cut much more deeply out of their income to fund all these things than you would if you use an ultra broad base and spread the cost burden across a broad base.
Speaker 1:It's the most self-defeating fiscal policy you can possibly imagine. It's more self-defeating than any place else in the US. This fiscal policy is worse than Illinois, is worse than New York's, worse than California's. Because you're doing it, you're taxing the people. You're funding it on the backs of the very people, of this very small segment Alaska families, working Alaska families. You're taxing it on the back of that segment that you say you want to be helping and you say you want to grow, but you're taxing it by your but you're pulling all the money entirely out of them.
Speaker 2:Well, and that's the doom loop, right, that we talked about. I mean, that's the death spiral where fewer and fewer people are left to shoulder that burden, leaving less people who then later on decide they've had enough, and then they leave, and then it's a smaller group, et cetera, et cetera, and that's what we've been. That's kind of what we're facing right now. I mean, that's exactly the place that we're at with these people leaving. You see it, with the exodus over the last 10 years, yeah and you don't.
Speaker 1:And nobody's thinking about, nobody's thinking about the revenue side of this. I mean, everybody's saying, oh, we got to spend on, let's see, let's pick back up with personally. It's called good schools, housing, child care, strong university community services, parks and recreation, public retirement system and on and on and on. They're focusing on the spending side, but they're not focusing where this revenue is coming from. And the revenue is coming from the very people, only only from the very people that you want to stay. The jobs are there.
Speaker 1:I mean, there's been other articles about how great the jobs are, great the jobs numbers are, how great the income level is, but we're filling it by out-of-staters who don't have to pay these taxes, who can fly up, do the job, go away, keep all the money to themselves, while at the same time, we're punishing the instaters by focusing the entire revenue burden on them. What people need to do, what the House majority needs to do House minority also what they need to do is focus on the revenue side and where this money is coming from. And suddenly they will. They will understand why we have an out migration issue because we're taxing the very people. We want to stay Right.
Speaker 2:Right, anyway, uh, I was saying Larry Persily, that guy man, he has never seen a federal or a government dollar that he doesn't want you to spend at any given moment. I mean this whole, it's just I don't know. I just I can see the snarkiness that is writing. When I read this it's like, oh, if all we did was just spend more money, got more money on government, things would just be better, brad.
Speaker 1:Yeah, right, right, yeah, we'd bring all these, we'd attract all these people up and then we just take money out of their pockets to pay for all these programs that we've just developed Just their pockets, I mean. Come to Alaska and be treated differently, be treated worse than if you just were a non-resident and came in and did a job and then went back to Oklahoma or Texas or or wherever you come from. If you move to Alaska, we're going to treat you worse by taking money out of your pocket, than we would if you came in as a non-resident.
Speaker 2:Yeah, no, that's exactly it. And again, just showing his hand so early that it was in that first sentence. It's especially noticeable in vacant public service jobs. Oh, come on, larry, there's a huge, huge dearth of our vacancy rate. In like, the hospitality industry has a huge vacancy industry. The restaurants, the hotels, retail is struggling right now to find enough workers. You're telling me that only the public sector workers are suffering. Everybody else is just fine. Fine, just fine, it's. The whole thing is just so irritating. All right, welcome back to the program. Thanks for coming in and joining us. We are ready to go. Brad Keithley is our guest. Alaskans for Sustainable Budgets. The weekly top three continues. We just talked about the worst simple idea ever. Now we're moving on over to the discussion on AKLNG, which is what I thought was a pretty viable and pretty apparent answer. No, private sector is not going to pay for AKLNG, especially if it's not affordable. If it made economic sense, they're all about it. If not, hey, by the way, not going to do it.
Speaker 1:Well, yeah, so there was an op-ed in the ADN this past week that a lot of people are jumping on and citing as sort of the rationale for why we need to keep going forward with AKLNG slope not on the North slope but near the North slope and uh, and build a pipeline down by Fairbanks and bring it on down to South central about a 10 billion plus uh uh costing, uh uh pipeline. And there was an ADN uh uh op-ed written by uh one of the IBEW guys, uh, one of the labor guys, that says building a gas pipeline for energy and economic security and in, in the course of the, in the course of uh this, this, this justification for the pipeline. Uh, the article, the op-ed, says this as both the governor and agdc officials have repeatedly made clear, alaska lng will only move forward if the private sector pays for it. That's why I take exception to the misconception that the state is being asked to pay for the pipeline. It is not. And then it says something very interesting Construction of the $10.8 billion Alaska LNG pipeline and other project components is predicated on securing private funding.
Speaker 1:The backstop commitment that Ada recently authorized is a state incentive that unlocks the $50 million in private investment needed to complete the final design before investors not the state decide whether to build. That's just BS. I mean, the entire paragraph is BS and it admits it's BS halfway through the paragraph by saying the only way that we can get even $50 million which is what? 0.02% or something of the $10 billion they need the only way they can get even $50 million is by the state agreeing to do a backstop ADA agreeing to do a backstop for the $50 million investment. Do a backstop ADA agreeing to do a backstop for the $50 million investment. Basically, what ADA has said is look, we need $50 million to complete the front-end engineering and design of the pipeline sort of the final specs, if you will, before you make a decision on whether to invest or not. We need $50 million to complete that.
Speaker 1:We can't get anybody in the private sector to put up the $50 million towards this. They would get an equity stake if they did but we can't get anybody to give up to put up the $50 million. So what we at it are going to do is we'll guarantee to pay you back your $50 million, $50 million, 0.02% or whatever it is of the 10 billion. We will guarantee the state will guarantee to pay you back your 50 million if, once we do the front engine, front end engineering and design, we can't find any more money. Uh out there to uh to build the pipeline.
Speaker 1:And so we can't even find 50 million. I mean the the paragraph itself admits we can't even find 50 million. I mean the paragraph itself admits we can't even find 50 million dollars of private money for this pipeline unless the state gives a backstop, unless the state gives a guarantee, right Insurance policy that will pay the private investor, the private sector, 50 million dollars of state money If the project doesn't go forward. It is the most hypocritical statement that you possibly can imagine to say that this is going to be a private sector project when you can't even find $50 million.
Speaker 2:All I got to do is consider the source on this opinion piece. This is one of the bigwigs with the uh, with the IBEW, right, so they're, they're looking at all the jobs and everything else, um, but I mean, this is, this is uh, this is really just kind of pie in the sky. This whole thing, uh, I mean he, he, he comments that, he says, uh, that he talks about the Wood Mackenzie report. You and I have talked about that and you know that the Wood Mackenzie report has some very rosy outlooks on a lot of that stuff. It takes a very optimistic view of some of these things and in some cases it's like best case scenario. So best case scenario that might happen. But even they don't say that it's a slam dunk.
Speaker 1:Well, but the Wood Mackenzie study is based on is is based on a project that has huge embedded subsidies in it. I mean we need it. We need to go back for a lot of reasons. We need to go back to the 2023 utility study that brg did before. Everybody was trying to politicize everything about south central energy to to shift it toward you know the thing that that will make them money. Uh, the.
Speaker 1:The 2023 study was pretty straight up, done straightforwardly by, by a, a very well respected set of economists, uh and and analysts energy analysts that looked at the various options. They looked at what 10 10 options for South Central Energy. One of those options and it had three subsets. One of those options was an in-state pipeline was essentially what the AKLNG Phase 1 project was. It looked at it at three levels private, truly private funded, 80% subsidized and then fully subsidized. The Wood-McKenzie study is based on the 80% subsidized project. So the Wood-McKenzie study starts with the assumption of a bunch of subsidies for the project to even get it to the to the point where it's barely where the, where the price point, that that that they come up with, and when McKinsey is barely um competitive with uh with current delivered uh imported LNG prices not competitive with future LNG.
Speaker 2:Right and we're on the hook for 80% of it. The state's on the hook for eight, eight, $10 billion.
Speaker 1:The state's on forking for $8 out of $10 billion. The state's forking up $8 billion of it. The delivered price from a privately financed pipeline would cost 250% more than the 80% subsidized pipeline. The 80% subsidized cost of supply, which is the delivered cost of gas into the NSTAR system. The cost of supply from the 80% subsidized pipeline, according to the 2023 study, was between $9.20 and $12.60, 80% subsidized. The cost of the truly private pipeline privately constructed, privately built, privately financed pipeline $28.20 to $37. That was the range. That's the privately financed pipeline.
Speaker 1:So when the ADN op-ed article says, as both the governor and AGDC officials have repeatedly made clear, akl and G will only move forward if the private sector pays for it, no, no, not even the Wood-McKenzie study says it's going to be privately financed. What the Wood-McKenzie study is saying is it's going to be 80% subsidized by the state and maybe you might get a thin veneer of private financing on there once the state has 80% subsidized it. But even then, even with that, you can't get $50 million. You can't get $50 million from the private sector to help finish the study on this thing without the state giving some guaranteed backup that you'll get your money back if it proves that it's as we all know it's going to prove is uneconomic. One other thing Tim Bradner, who's one of the great cheerleaders for the oil and gas industry and usually can twist things in very weird ways in order to make it come out good for the oil and gas industry Even Tim can't come up with a good story on this.
Speaker 1:In an article in the Frontiersman, the last couple of paragraphs are this but while AGDC's goal is a privately owned large LNG export project with financing guaranteed by long-term LNG purchase contracts, the phase one in-state pipeline, costing $10 billion plus, may be difficult to privately. Even the 80% subsidized pipeline may be difficult to finance privately because of Alaska's small population and lack of industrial customers. The state could this is Tim. The state could, however, step in to help fund the 42-inch pipeline through its $60 billion Alaska permanent fund. While the permanent fund is now invested out of the state in diversified assets, the legislature, if it chose, could allocate part of the fund. It was part of the permanent fund to ensure a supply of energy to the state's main population centers.
Speaker 2:So there's the kick. The kick is we're going to use the fund to secure loans. To put it all that I mean that's been the play, that's been the play for 25 years is that they want to get access to the permanent fund, and this is a good excuse to be able to do it, because if they do it once, oh, they can do it again. They can do it again down the road, and there's the death spiral, michael.
Speaker 1:There's the true death spiral, because what the numbers show, when you look at the futures projections for imported LNG, those prices are going down well below very high cost delivered price of gas into Alaska. That's not going to attract any industry, is not going to, is not going to be able to pay out the pipeline. You sunk, uh, using, uh, using Tim's numbers, you've sunk about a sixth, six to 50, 16% to 20%. You sunk about a six, six to a fifth of your permanent fund into this white elephant that you've built that's not attracting anything, not producing any sort of return, other than maybe if the state pays for it. And so you just wiped off the books a sixth to a fifth of your permanent fund asset that's not going to be earning anymore because you've invested in this white elephant. That means the true earnings from the permanent fund go down, the amount of the PFD cuts go through the roof, the amount of taxes go through the roof and we're just.
Speaker 1:I mean that truly is an even bigger death spiral that we've set ourselves off on than even what Pursley is suggesting. So, yeah, it's. You know, if anybody tells you that the AKLNG Phase 1 project is going to be probably financed. Laugh in their face. It is not true. There's no way it's true. And even at an 80% subsidized level they're now saying oh well, we need the additional $10 billion out of the permit fund. Just go away.
Speaker 2:Did you find it interesting in that article from the Alaska Public Media talking about their retreat on South Central Energy, that even Peter McChiejki acknowledged that we're going to have to in the short term, that importing LNG is the only way to make it happen?
Speaker 1:Yeah, yeah, yeah, we're going to talk about that in the third segment. But yeah, even I mean even, totally even the IBEW guy acknowledges that. And here's another interesting thing A big part of Wood-McKenzie was saying look, the reason that AKLNG is better the 80% subsidized AKLNG project is better than imported LNG is because we don't have to build the kit for imported LNG, so we save the money on that and that helps make AKLNG more competitive. Well now Toll and Machicky and others are admitting well, we're going to have to have imported LNG in the meantime. This stuff just doesn't leap off a ship onto the ground, right, right, you got to build kit to do it. And if you're building the kit to do it, then you've already sunk the cost to have imported LNG and that makes the AKLNG project even less competitive.
Speaker 2:Right, exactly because you've already stood up all the infrastructure and everything to import it. Why bother at that point, right? I mean, look again, I would love to have Alaska gas, but it's got to make economic sense. If it doesn't, then you got a problem, and obviously this is not making economic sense to anybody who's got, who's, who are money people involved in this kind of situation.
Speaker 1:Can't raise $50 million, Can't get somebody to give $50 million toward this project without it, without a, without a state guarantee, yeah, it's not making any. The only people that you find pushing this program are people who you know union, who want, you know, the dues from additional union members. It's a public works project. I mean, what they're really advocating is a public works project. We need a bunch of jobs up here. We need a bunch of money up here. So let's have the state commit to it. It will tell people it's private sector finance, sector finance, but it's. But we know it's not going to be. But let's, let's sort of get them. Let's sort of get them involved in this. Where the rubber is going to hit, there.
Speaker 1:I'm really intrigued by what's going to happen in this legislative session. Who is going to stand up and say, yeah, we need to keep going down the AKLNG road. Who is going to do that? Because that person, the person that does that, you know they don't understand economics and you know they don't understand finance and you know they don't understand any sort of numbers. Because the start, even the starting point, the Wood-McKenzie study, is 80% public finance, so 80% subsidized. So it's, the legislative session is going to be interesting. I know a lot of people say well, we need Alaska resources, we need to do this and that for Alaska resources, but do we need to sink Alaska economically? Do we need to build a white elephant? Do we need to build a project that we can't even get somebody to commit $50 million to?
Speaker 2:I think our answer is a big heavy no on that. Donna points out that finance and economics are not the same thing. They're related, but they're definitely not. I mean the economics will drive the finance right, brad. I mean, if the economics aren't there, good luck getting finance at that point.
Speaker 1:Yeah Well, I mean, I guess finance and economics aren't the same thing. When you're talking about the state, uh, state finance, uh, because state finance is not driven, I guess, is not driven by economics, should be driven by economics, but it's. But sometimes it's more driven by politics or by make work, jobs or by you know a jobs program uh, than it is uh is by by economics in the private sector. Economics and finance are pretty closely related.
Speaker 2:Um Barbara says why would I want to prioritize the wood McKenzie study over others? Um, I, I only think that we referenced it because he referenced it right in this regard. He's the one that brought it up to begin with, but he's not even reading the whole thing. He's not even reading the right parts of it, or at least acknowledging that it's the right way.
Speaker 1:Well, the Wood Mackenzie study is interesting in that they don't talk about a private sector project. They just talk about the project as AGDC now defines it, as the AKLNG phase one, and they embed the 80% of subsidies into the Wood Mackenzie study. So you don't get a sense out of the Wood Mackenzie study of a comparison between what a state subsidized project is versus the private sector project, because the Wood Mackenzie study doesn't study a private sector project. It just starts with the 80% state subsidized project. You can see that in the study when you start looking at it. There's a cost sensitivity slide that shows you some of the subsidies that are built in there. But you can't tell if you don't know any better and you just read the Wood-McKenzie study, you just think you're looking at a private sector line. But you're not, because they've embedded all of the subsidies in there to begin with.
Speaker 2:So yeah, you can't, you can't tell.
Speaker 1:You can't use the Wood. Mackenzie study.
Speaker 2:Well, this RBG study, which we've talked about briefly but really nobody else has brought up, I guess my my bigger question and this is going to go into number three which is you know, where's the second study that the utilities did? Right, I mean the utilities. The utilities did a study. They said it was coming. They did the first one and it was not looking good. And they're like well, we need to do a deeper dive to really get the metrics on this. And then it's crickets. We haven't heard anything since.
Speaker 1:Yeah, I think we only hear about it on this show. I mean, I think we're the only ones, we're the only ones talking about it. It was done. There's, there's references. John sims and others made references to the study being done and made references to, to, you know, pieces of it, but they've never released it and so it's just, it's, it's sort of, it's sort of humorous. Um, you know, you look at you, look at what they're advocating for and you think, oh well, the study must have disproved that, or else they would release the study. I'd, you know, I'd use the study to back up my points, right, um, but but those points, but the study, the second study must, must undermine those points. And the second study was to focus in, on, on, on again a truly private sector. What the best private sector approach was the? The first study said, basically, it was imported LNG, presumably. The second study says that also. But people just don't want to jump on that, so let's just bury the study.
Speaker 2:Right, uh. Barbara goes on to say I guess I'm wondering what are the competing studies? And you mentioned again this RBG study. Uh, what BRG?
Speaker 1:BRG.
Speaker 2:BRG. And what is that? What is? What is the? Uh? Where is that study? Or what's the name of that group? What is brg?
Speaker 1:brg is a is a is a research group, um, sort of like wood mckenzie, uh, that was hired by the utilities in 2023 to study, study the options, and you can find the study. I usually go to the nstar page, the nstar cook inlet page, which has references or which has links to the BRG study, but you can also find it. They did present the study itself to the RCA and they presented it to a couple of legislative committees at the beginning of last session committees at the beginning of last session and that sort of disappeared in terms of references to it. But you can still find the study itself at the NSTAR Cook Inlet Pager and at the various early hearings in the legislature.
Speaker 2:They made the bad news disappear. Is that what you're saying? That you know, even with 100% private, it's going to be 200% of what it actually needs to be 250%, 250%, even at 80% subsidies, it's barely equitable. I just you know. It's mind-blowing. Brad Keithley is our guest. Alaskans for Sustainable Budgets. We're continuing on the weekly top three. We're on to number three. Budgets we're continuing on the weekly top three. We're on to number three. And the question is where the heck is the RCA, the Regulatory Commission of Alaska? Brad, we're talking about AKLNG and, of course, the big question is what's the RCA doing? I mean, they're the ones that are supposed to look out for our interests in the utility areas and everything else, and we got a crisis coming 2027, and they have been. It's all crickets. What's going on?
Speaker 1:Yeah, I don't know. So it's really. It's bigger than AKLNG, it's really bigger. It's really the South Central Energy situation itself. I mean it's being generated by the shortfall in Cook Inlet gas or the decline in Cook Inlet gas below needed levels, required levels, and one of the proposed solutions is AKLNG. But the problem is, the problem itself is where is our energy going to come from in South Central? What's the source of the energy going to be? And that includes an analysis of AKLNG, but it also includes an analysis of imported LNG, it includes an analysis of subsidies to cook inlet producers, it includes an analysis of renewables and that sort of stuff. And what's the right mix.
Speaker 1:There was an article in Alaska Public Media that sort of brought this to a head, said South Central mayors say time is running out for utilities to address the looming natural gas shortfall. And it's a report on a conference that the mayors, the South Central mayors, wasilla, kenai, peninsula, anchorage have been engaged in, conversations They've been engaged in to encourage a solution because they're the ones, their constituents are the ones that are going to be hit if we don't have a solution to the energy shortfall beginning in the latter part of this decade. And so there was a conference that was sort of meant as the culmination of the mayor's efforts, and it was just yeah, we got a problem, and and and and we don't have a solution to it yet. Uh, but, but mayors say, the headline is mayors say time is running out for the utilities to address the looming natural gas shortfall. Here's the, here's the. Uh, the thing that just stuns me In any other state, the regulatory commission, the public utilities regulatory commission, would be at the center of this, because they have in every state, including Alaska.
Speaker 1:They have the statutory obligation to supervise the activities and decisions of the utilities and make sure the utilities are operating in the public interest. You have these agencies because the utilities are monopolies. You give them certificated areas and there is no competition in those areas, and they can't have there is no competition in those areas. And so the trade-off is you have rate regulation and you have regulation of their operations by a public utilities commission to do what the market might if you had a competitive situation. And so these utilities play, these regulatory commissions play a central role. I mean the. The utilities have to report to them on what they're doing to have adequate supplies. They report to them on, on, on what they're doing to have adequate service. They report to them on on what they the authority to order the utility to do something different, or to come back and give it another look, or to do a variety of things to ensure that service is adequate at the lowest reasonable cost for the service.
Speaker 1:In every other state the Utilities Commission would be in the center of what we're facing. In South Central, in Alaska. You can't even find them on the platform. I mean there, there, there's no reference to them in in the, in the, in the mayor's discussion. It's all about.
Speaker 1:Well, utilities have to face up to this and maybe, maybe they'll do it and we're running out of time. The utilities have to have to move forward, on, on on it. Where the hell is the regulatory commission? I mean, they're supposed to be all over this. They're under their statutory grant. They're supposed to be supervising utilities. If the utilities fail, it's not, it's not just the utilities failure, it is, it is the right in every other state. It is the regulatory commission's failure to super, to have adequately supervised, failure to super, to have adequately supervised, to have adequately guided, to have adequately, adequately challenged, to have adequately. You know, the utilities, utilities commission has the ability essentially to wipe out management if management's not doing not doing its job. Right In Alaska, we have a crisis brewing. We can all see it, the mayors see it, everybody claims they see it coming, but nobody's doing anything about it. What would you say, I mean, if you were the chair of the regulatory commission? What would be your?
Speaker 2:actions. What should they be doing to make all this work?
Speaker 1:Early in my career, in the 1960s and the 1970s, we had a national natural gas shortage. It was we shut down schools, we shut down industry. We had a curtailment plan, curtailment plans for every pipeline. And what was then the Federal Power Commission subsequently got renamed as the Federal Energy Regulatory Commission. The Federal Power Commission was right in the middle of that, ordering the pipelines to come up with plans on how they were going to deal with the shortfall. Ordering them when they didn't, when it was clear they weren't going to have enough gas, to develop curtailment plans that had certain criteria in it and to implement those curtailment plans when the situation hit. And then, on the other side, doing things. The Federal Power Commission had, in part, caused this problem by how they were pricing wellhead production. They had jurisdiction over wellhead production and on the supply side, the Federal Power Commission did things to increase, help increase the supply. We ultimately worked through that crisis a number of ways, one of which was the Natural Gas Policy Act of 1978. But it was in large part the federal power commission that uh, that was dealing with that. And they were. They were right in the middle of it. There wouldn't have been a conference like this, like the mayors just had uh. In that era there wouldn't have been a conference like this without the federal power commission at least being present, uh, if not playing the major role in that discussion. That's where the Regulatory Commission of Alaska should be right now. It should be in the middle of this.
Speaker 1:It's shocking to me you see this picture on the front of this article, south Central Mayor Say it's Time. And it's the NSTstar representative, the chugach representative, nat hurts, who I, who I hugely respect, but he's a journalist. Nat hurts, uh macecki, and then uh, and then uh, chris rose, who's from the renewable industry. You've got, you've got the mayors and the industry. You don't have the regulatory commission that has responsibility over this mess at the table. The House Resources Committee has held a couple of hearings in the last couple of weeks to deal with the issue. They've had the utilities. They've had other LNG providers, they've had a discussion of LNG imports. Nobody from the regulatoryulatory Commission of Alaska. I mean, when this hit in the 60s and 70s, in the lower 48 or in the US, when it hit in the 60s and 70s, there were legislative hearings after legislative hearings, with the regulatory agency, the Federal Power Commission, at the center of the table Right. You know being asked questions about what you're doing about this.
Speaker 2:None of that here. One minute, brad. What do we need to do now? What, what, what can we do to help this? Should we be reaching out to the RCA?
Speaker 1:We should be, you know, demanding that the legislators ask the RCA about what's going on. We should be the RCA should be asked to take front and center and describe what it's doing to solve this problem, to deal with this problem that the RCA is in part responsible for, because the utilities slid into this without the RCA redirecting going to do about the situation, because they have the authority to do something about it as the utilities continue to fail to act.
Speaker 2:Well, and I think the first thing I should ask is where is that second report? Where is that second report? We'd like to see that. I mean, what is it? Is it? Is it avoidance? I mean why, if the utilities have got this second report, which we can only assume, says, confirms what the first report said, which is AKL or that imported LNG is the way to go right now, are they just avoiding the bad news, or what? What's the problem here in your mind?
Speaker 1:Well, two things. I don't think. I think John Sims in the back of his mind, I think John Sims wants to run for governor and doesn't want to be political. John Sims, who's married into the Binkley family, um, uh, wants to run for governor and, I think, wants to be political about this. And the political thing is, you know, be rah-rah Alaska. We want Alaska resources and so SIBS doesn't want to be out in front making the decision to you know, to clicking the box and saying we're going to go import at LNG and starting to make the investment for that. Doesn't want to be out in front on that because you know it's not rah-rah Alaska.
Speaker 1:That's the thing the RCA would say. John, you want to be governor? Great, that's fine. Why don't you go do something else? Or we're going to order you to go forward with this project because you're not doing anything to meet the problem. I think they are ready to make the investment, but you keep having these hearings, these legislative hearings about oh no, we need to pursue Alaska, we need to have Cook Inlet, we need to subsidize the Cook Inlet or we need to subsidize AKLNG to the tune of $10 billion to do this because we want Alaska resources.
Speaker 1:So Chugach is sitting there going look, you know, if the RCA is not going to push me, they're the ones that are supposed to be pushing me. If they're not going to push me, then what the heck? You know, I'll just sit back here and blame everybody, like everybody else is blaming everybody. Say, yeah, I'd really like Alaska resources and I'll just keep waiting for you right up until the time we run into the problem. It's the RCA that's supposed to be the adult in the room and say stop that, we don't have an alternative. Nobody's come to you to offer alternative, reasonably priced supplies.
Speaker 1:The LNG project is not going to economically pencil out without huge state subsidies. Nobody's coming forward with those subsidies. And so go forward and get this done. It's the RCA that's supposed to be the adult in the room to do that. But but you know, if they don't and and you know, maybe it's because they're a political animal too they're appointed by the governor, confirmed by the, confirmed by the legislature If they don't, then we just sort of sit in this stall mode, you know, with Sims saying, oh, I'd like to have Alaska resources.
Speaker 2:Nobody's come forward with Alaska resource, but I'd like to have Alaska resources and just sitting there, I'd like a pony.
Speaker 1:I mean, you know, yeah, it's sort of like that, michael. I mean it's, this is just so frustrating. Having seen how it's done in other states, how it's seen how it's done at the federal level, and it's not perfect. I mean, you got a regulatory agency. You wish the government was involved in this, you wish private sector would step up, but it's, it's not perfect, but but that's what the that's what the agencies are there to do. That's their responsibility.
Speaker 2:And part of the problem on this is the confusion that's being created by all these legislators who are saying, oh no, no, we need Alaska gas, that don't apparently don't understand the full ramifications of the situation, that there is no private investment available for this, there's not going to be because it doesn't pencil out, and yet they're stuck on this emotional question of Alaskan resources versus importing it. And while I understand it's, it's distasteful to import it, it's the only economically viable solution at the moment.
Speaker 1:Yeah, and and and, and. You know, maybe maybe they should pick up on the portion of, or maybe, you know, I should emphasize more of the portion of Doug tolls, that theBEW guy's op-ed, that says, yeah, well, we've got to have imported LNG for a while. Maybe they ought to pick up on that and say, yeah, okay, let's do that. And once you make the investment to do the imported LNG, then the problem sort of goes away because you've got the investment now you can do it. Now the economics are apparent, that imported LNG is cheaper than the $10 billion, the subsidized $10 billion investment to do AKLNG. And you just sort of let that go on and maybe that's where we ought to be picking up. Yes, even the AKLNG advocates now admit that we need imported LNG. So let's go forward, let's get the filings done, let's get the investments made, let's get the commitments done to do imported LNG.
Speaker 1:Because maybe that's where we pick this up.
Speaker 2:Again, it's not like you flick a switch and it just starts happening. I mean this is a process it's going to take until 2027 to get imported LNG stood up. I mean it's going to take a couple of years for all that stuff to happen. I mean it's just not like tomorrow, oh, we've decided, let's do it. It's not like going to the store and getting a carton of eggs. I mean you, you, you gotta, you gotta plan for it and you gotta get started now yeah, and as and as the, as at least the headline says.
Speaker 1:South central mayors say time is running out. Well, it is running out. And and and and. Now is that, when time's running out, now's the time to make the decision. And if, if sims won't make the decision, if Sims is concerned about the implications for his future political plans for making the decision, fine, rca, step up and do it. Rca tell him. So John can say you know, later on I didn't want to do it, but you know, the RCA made me do it. That's what the RCA is empowered to do, that's what it's there for to do those sorts of things.
Speaker 1:Well, and again, you'd think that the legislature would see that, and it's time for the RCA to.
Speaker 2:Yeah, You'd think that the legislature would see that as well and start to call on these things. You'd think Sims himself, if he really wanted it, he would be pushing for those guys to. He'd be calling hey, you guys want to come in here and tell me what to do so that I have some political cover. You got to do whatever it takes at that point. All right, Brad, what are you looking at for next week? We got less than a minute here.
Speaker 1:Oh well, the governor is going to come out on Thursday with his the DOR is going to come out with the spring revenue or the fall revenue forecast and the governor is going to come out with his budget and tenure plan. So next Tuesday's Tuesday's program will be all about will be all about that in various, in various ways.
Speaker 2:Yeah, there were one. I highlighted a piece in an article that basically made me look at it because it was like uh, they said something like uh, that, uh, oh, the next year is going to be kind of a tough year or a tough rep, kind of a billion dollar. Yeah, kind of a tough year, all right. Well, brad, thanks so much, appreciate it. We'll talk to you again next week.
Speaker 1:Michael, as always, thanks for having me. Well, that's a wrap for another week's edition of the Weekly Top Three from Alaskans for Sustainable Budgets. Thank you again for joining us. Remember that you can find past episodes on our YouTube, SoundCloud, Spotify and Substack pages, and keep track of us during the week on Facebook and Twitter. This has been Brad Keithley, Managing Director of Alaskans for Sustainable Budgets. We look forward to you joining us again next week on the Weekly Top Three.
