The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (9.22.2025)
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.
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 September 22nd 2025. 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.
Speaker 1:I join Michael weekly in the first hour of Tuesday's show from 6.10 to 7 am for a 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 can also 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. This week, our top three issues are these First, we explain why we think the Alaska media has completely whiffed on this year's real PFD story. Second, we explain why the North Slope Renaissance isn't producing the benefits for Alaskans they were led to expect. And third, we discuss what the termination of the Santos-Adnock deal likely means for Santos' Alaska project.
Speaker 2:And now let's join Michael. We're going to dive into it. Today. We've got three topics and each one is better than the last as far as I'm concerned. So let's start off with the Alaska media. You know I've had a lot of criticisms for the media in the state of Alaska. Alaska media. You know I've had a lot of criticisms for the media in the state of Alaska, primarily about how there's not any real investigative kind of aspect to it. It's just like let me resummarize this press release and put it out as a news story and not really a lot of balance on both sides, but this one on the PFD. Your comment is the Alaska media completely whiffs this story. Give me the rundown here, brad. What are we talking about?
Speaker 1: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, of websites and articles and stuff. News sources, newspaper, you, old man, you yeah, that's about what I said. News sources, news sites there we go and I've read all of the stories and none of them has what to me is the real PFD story. All of them sort of regurgitate the release from the Dunleavy administration of a thousand dollar PFD is going to be in your bank accounts or released to you or in the mail or whatever. However you receive it as of the first part of October. All of them focus on the thousand dollars as the story You're going to get a thousand dollars.
Speaker 1:None of them focus on what happened to the other $2,700. None of them focus on, start to focus on this is what the statute says, still says after all these years. This is what the statute says the PFD is. This is what the statute says that Alaskans share of the commonly owned wealth. Individual Alaskans share of the commonly owned wealth is. None of them start with that, which would be about $37,500 right now this year. None of them start with that and progress on to how that divides out that you get a thousand of that, that the remainder the remaining 2,700 or so, was withheld, diverted to government, what one ICER economist has called taxed, taxed to the government and then spent by the government and what it was spent on. None of them focus on what it was spent on and none of them focus on who the beneficiary of that $2,700 tax truly is, who the true beneficiaries are truly is who the true beneficiaries are. And the true beneficiaries are those who would otherwise have paid to fill that hole, that gap, that deficit in the state budget, that otherwise would have paid to fill that hole had the PFD not been taxed and diverted. And that's largely the top 20% converted and that's largely the top 20 percent. The oil companies and non-resident industries, all of whom, most of the two of whom, the oil companies and the and the top 20 percent escape with paying only a small share of that. Non-residents escape with paying nothing of that. That's the story. The story isn't. The story ends sort of with how much do you get. The story. The story ends sort of with how much do you get. The story begins with how much were you supposed to get, how much does the statute say that you're supposed to get. How much is supposed of Alaska's commonly owned wealth is supposed to go into individual Alaskans' pockets? And then what happened to that $3,750? What happened to that amount? How did it get divided up between what actually made it to your pockets and what was withheld, diverted and sent elsewhere?
Speaker 1:If Alaskans knew that story, alaska government would be a lot different. If Alaskans knew the story that they were taxed $2,700, falling hardest on middle of nowhere income Alaska families. If Alaskans knew they were taxed for two-thirds of the amount that they were owed. If they knew they were taxed for that amount that they were owed, that it was withheld, diverted to government, spent on government in lieu of and the beneficiaries are those who didn't get taxed in order to pay for that shared government.
Speaker 1:If Alaskans knew that story, there would be a big pushback on government. There would be a big pushback on legislators who are doing that. There would be a big pushback on the governor for allowing it to go forward without using additional powers like vetoing the entire budget until they get it right. There would be a big pushback on the governor. There would be the kind of response that some say they want in terms of pressure on holding and reducing spending. But legislators are getting off scot-free from that responsibility. The governor's getting off scot-free because the story being told Alaskans is only the back end of the story, the last step of the story, which is they get $1,000.
Speaker 1:The story is go to the beginning. Go to the beginning of the story, which is they get a thousand dollars. The story is go to the beginning. Go to the beginning of the story, which is the full statutory amount that's still in the statute, and then break out what's going on with that full statutory amount and and focus on who the beneficiaries of that statutory amount are. That's the story that should be told.
Speaker 2:Well, and this is again going back to what I was saying, which is my complaint about the news media in Alaska, is that there is no deeper dive on most of this stuff. It's very rare that you'll see an article that isn't just, as you said, a paraphrase. It's like they dropped the governor's press release into chat, gpt and, just you know, rewrote it. Or the same thing happens when it's something coming out of the legislature. The Senate majority, the House majority, puts out a press release. They paraphrase the press release. That's the answer. There is no give and take, there's very little. If they have a comment from the other side, it's a one paragraph or one sentence. You know a little rebuttal on anything and there's no deeper dive onto.
Speaker 2: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're taking almost three quarters of the dividend to then pay for government. And you're right, people just aren't paying attention. They're so busy making a living and doing their thing that they're just not really paying attention. As to why am I not getting the PFD and not putting in the context of you're essentially being taxed at this point?
Speaker 1:Yeah, and to some degree, michael, I blame legislators also conservative legislators as well for not telling that story. I mean, some of them vote against it, so they've got a good story to tell. I voted against it because you're being taxed, and you're being taxed way too heavily and you're being taxed unfairly in the sense that you're paying a tax. You middle and lower income Alaska families are paying the tax instead of oil companies and non-residents in the top 20% shipping in as well. The burden is falling on you. It's a deeply regressive tax on you. It's a deeply regressive tax. You're paying essentially two to three to four to five to six times more than what the top 20% is paying. You're paying infinitely more than what non-residents are paying. It's an unfair tax. Legislators who vote against it have that story that they could tell, but they're not as far as I can tell. I mean it's certainly not making the news media. There's no, there's no, you know. On the other hand, senator or representative thus and so said this, and so it's, and so we're missing the story altogether. I mean it's sort of like we've fallen into. Okay, it's another. You know, legislature makes up a number. Bam, that's the number. That's the story, not what happened from the statutory amount that's still on the books, never been amended, not not starting at that amount. And what happened to those dollars is just boom. This is the dollars you get. Be happy, go on your way, don't ask any more, don't ask any questions, and that's you know.
Speaker 1:We're not. We're not going to. We're not going to get Alaska government reined in. We're not going to get fairness in our taxation. We're not going to get a focus on resources that are being left behind with the oil companies or resources that are being left behind with the Permanent Fund Corporation in terms of not maximizing the return. We're not going to get a focus on that. As long as the story is, you just get this. Don't ask what happened to the rest of it and keep on going and being happy. If we had the full story, if we had, this is the statutory amount, this is what the statute says. Your share, your individual share, of Alaska's commonly held wealth is this year and this is what government took out of it. These are the beneficiaries. Until we have that story, we're not going to get the push on government spending or on other sources of revenue that we need to make those happen.
Speaker 2:I'm shocked that they just don't even. I mean, the simplest thing would have been to mention that the statutory amount would have been X $3,700, $3,750, whatever. I mean, that would have at least been, I guess, a little more honest on it. But here we are just sitting around, you know well, just be happy with what you get.
Speaker 1:Kind of is the answer that we're hearing right now and it's a complete whiff all the 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 the beginning and do the analysis to the end. All of them just start at the end and publish the end. And you know what? It's just shocking to me, truly that they're just all ignoring that story, all missing the story, all missing the impact on Alaskans, middle and lower income Alaska families by by not telling the full story.
Speaker 2:Jeffrey says reporters are a product of a modern education system. I mean, I don't know what they're teaching in reporter school these days. Journalism school, um, you know, it obviously doesn't appear to be any kind of deeper analytical thought. I mean, maybe that's, maybe it's a class and chat GPT these days. I don't know.
Speaker 1:You know there is. There is investigative reporting. I mean, the whole thing about the, the, the delayed payments for SNAP and the delayed qualifications for SNAP and the delayed Medicaid payments all of that was investigative reporting. It certainly wasn't the state putting out press releases saying, hey, look at how delayed we are. It's selective, investigative reporting. It's on things that they want focus 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 Alaska families, worry about them. If you're going to worry about their income levels, worry about it and focus on something that is significantly impacting those which the diversion, the taxing and diversion of the PFD.
Speaker 2:It's, it's interesting to to watch this, like you said, especially when they find a story that they're hot and heavy on or something that that I think feeds into their particular political narrative, then, like you said, then they dig deep into the thing. Otherwise, it's all business as usual. Um, it's uh just business as usual and, uh, that's unfortunate, that is absolutely unfortunate, for sure. Um, let's see, uh, remember the day, remember the days of 60 minutes. Well, yeah, I mean, but even they have gotten. I mean, I think it's, I think it's pretty obvious that there is definitely a political slant to the journalism class, to the journalistic class in this country these days. I think, for the most part, the vast majority of them seem to be moving to a specific narrative, which is government is good and we should just, we should just believe in all that right.
Speaker 1:Well, and there you go, and we should have more of it, which is the stories on Snap and 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've never said that we shouldn't have government. What I've been saying is who should pay for government, and we should do it fairly and we should do it equitably and we should do it in accordance with the statutes, we should do it in accordance with the rule of law.
Speaker 1:I mean this last week we've seen a lot about the breakdown in American society. And where did it all begin? Well, part of it begins when your state legislatures, congress, president, but part of it begins when the state legislatures don't follow the law. When they pass a statute, government signs it. You have years and years and years of following the statute and all of a sudden, some legislature decides well, some governor, in the case of Walker and 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 of society starts when you, when you're, when those in those who we expect to set the laws, to follow the laws, when they stop doing that.
Speaker 2:Yeah.
Speaker 1:And they and they start going off in their own ad hoc directions. Yeah, and, and you know, if you want to talk about where we're going wrong, I think the PFD is a great story about where we're going wrong.
Speaker 2:We're continuing now. Brad Keithley, alaskans for Sustainable Budgets the weekly top three. Well, brad, the Alaska Renaissance doesn't mean what I think it. You keep using that phrase. I don't think it means what I think it. You keep using that phrase. I don't think it means what you think it means the Alaska Renaissance. I think we may have been told something that was slightly incorrect. What do you, what do we got here? Hit me with the details.
Speaker 1:Well, eric Stone in Alaska Public Media has a story that captured my attention when I saw the headline. The headline is what does a North Slope Renaissance mean for Alaska's state budget? And it picks up on the theme of this year's AOGA conference, the Alaska Oil and Gas Association conference, where producer after producer got up and trade association after trade association got up and said oh, we're having a renaissance on the North Slope. We're having all this investment, we're having all this development, we're having all this new areas being identified and developed. The federal One Big Beautiful Act is going to increase. That. It opens new lands. We're having a true renaissance in that we're having all this drilling up here. And Eric asked the question. Eric Stone asked the question in this article what does the North Slope Renaissance mean for Alaska's state budget? And he had two, two sources in the story. One was Bert Stedman and the other was Bill Wilikowski. Stedman said oh, it means great things. We're getting all this additional revenue and it's not enough yet. We're not out of the woods of the deficits we've been running, but we're getting all this additional revenue and I think it's even going to get better over the next 10 years. Wellikowski said something different, but here's what's really going on.
Speaker 1:Alaskans in 2013 and 2014, when we had SB21 up were told this. They were told if you agree to reduce production taxes from the levels they were at ACES, we're going to attract additional investment, we're going to attract additional development of fields and we're going to attract additional production. And you Alaskans are going to benefit from that because as production goes up, so will state revenues. They'll ride right on up with production. So you're making an investment. You Alaskans are making an investment by agreeing to reduce production taxes from the levels they are, in exchange for essentially co-investing. That reduction will be a co-investment with producers to bring in new investment and to bring in new production and to, as a result, increase revenues.
Speaker 1:That's not what's happened. What's happened is Alaskans agreed to reduce production taxes. Producers did make investments. Producers are developing new fields. Production levels are going up. They're going up significantly but the Alaskans share the budget share isn't moving.
Speaker 1:The royalties some claim all royalties are going up. When you look at it in gross, when you take into account the revenue decline or the production decline from old fields and the production increases coming from new fields, state royalties are staying the same across the next 10 years. They aren't going up. They aren't following production increases, and a lot of that is because those production increases are coming from federal lands. Projected production increases are coming from federal lands. Projected production increases are coming from federal lands, all right. So what's Alaskans share from federal lands? What should Alaska be getting from federal lands? And the answer to that is production taxes. So, going back to 2013, 2014,. If you make this investment by reducing production taxes, we'll have investment. Production will go up and your revenue stream for production taxes will go up. Doesn't matter in that case if it's from federal lands or state lands, because production taxes apply to both.
Speaker 1:What's happening with production taxes? They're going down. They are not only not staying the same, they're certainly not going up proportionately to the increase in production volumes. They're going down over the next 10 years and DOR recently published a study that allowed a study of two of the fields Willow and Pika. That allowed us to take a look at what happens beyond the 10-year period. And they continue going down over the next 10 years because we continue to have new investment that drives state credits to production taxes. That continue to keep production taxes down. We don't reach a point at which production taxes start going up, not even a delayed point. We don't reach a point at which production taxes start going up, not even a delayed point. We don't reach a point at which production taxes start going up because, by the time production gets to the point, the field production gets to the point where the taxes come off, where taxes reapply, I mean where the credits come off.
Speaker 1:The fields are in decline and so the revenues. Yes, the percent of revenue starts going up. Percent of production tax starts, the realized production tax starts going up, but the fields are in decline, production's in decline, so the revenues keep going down. Even though the percentage goes up, the revenues keep going down. So the answer to this question what does a North Slope Renaissance mean for Alaska state budget? It means bad things. It means that Alaskans aren't sharing in the promise made in 2013 and 2014. And I was one of those making the promise back then Doesn't mean they're sharing in the promise of 2013 and 2014 that as investments are made, as production increases, production tax revenues, state budget revenues, will go up. Bert is trying to say, oh well, revenues are going to go up because we're getting revenues from these new fields. But when you look at we're getting, you look at the combination of the decline production decline in old fields and offset by or in the production increase in new fields. It's staying level, and production tax from state lands, which is where the only place we get royalty royalties from state lands are staying level.
Speaker 1:Burt wants you to focus. It's sort of like a magic trick, right? It's sort of like don't look over here, don't look over here, look at my hand here, look at my hand here. Dollars are going up, dollars are going up. Well, look at both hands and dollars aren't going up. And when you look at production taxes, dollars are actually going down. So the North Slope Renaissance means great things for the oil companies, means great things for production volumes, means 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 were promised in 2013 and 2014. And I think that's a huge story that Eric Stone completely misses.
Speaker 2:Well, I mean, and I think you know, you got to kind of give credit where credit's due Wilikowski, who I disagree with almost everything he did say that he'd like to prevent oil. He's talking about the oil taxes like you were talking about. He said he'd like to prevent companies from deducting investments on federal land, like Willow, from state taxes they owe on other projects. He said why should we subsidize that? Why should the state of Alaska be subsidizing hundreds of millions to potentially billions of dollars for production, for exploration costs and drilling, for which we get zero royalties, for which we get very little in production tax? I mean he's making the same point. I mean good for him. This is what we should be talking about. With production going up, we should not be seeing our coffers then running dry because we're receiving 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:I mean Wilkowski to me is being too simplistic. You cannot have, you cannot discriminate against production from federal lands. Your production tax cannot be set up to charge production from federal lands more more production tax than from state lands. You have to treat production from federal lands in the same manner that you treat production from state lands. You have to treat production from federal lands in the same manner that you treat production from state lands. Part of what Willikowski is saying, the broad sense of what Bill's trying to create, is oh, we should not be giving the federal lands the benefit of these credits, and it's not that simple. What is simple, what is the simple thing, is we're not getting what we were promised in 2013 and 2014. We're not getting a share of the benefit as production rises in terms of state revenues. That's the thing that we need to focus on. Very simple Production increases. Alaska state revenue should increase. That's not what's happening.
Speaker 2:But we can't get. This is what kills me is we can't get anybody on the Republican side to even buy into a conversation on changing oil taxes. I mean they don't even want to discuss it. I mean we talk about. You know, we bang on the Democrats and the bigger government folks in so many ways on this program. I mean Democrats and Republicans. But even the business as usual crowd doesn't want to touch the oil taxation discussion, even though it would put more money in their coffers to be able to spend. But they just don't even want to talk about it.
Speaker 1:No, and the oil companies have got them scared by saying oh well, we'll invest our money someplace else if you change oil taxes into Alaska.
Speaker 1:That's not what would happen. If Alaska revenues went up as a share of increased revenues from increased production, as a share, then the economics of the oil companies would work, still work. What's happened is the way the credits in SB21 are implementing during this period of time is one credit is piling on top of another, credit on top of another credit to give oil companies super returns from their investment during this period of time, and they're telling Alaskans oh wait, wait for seven years till the GVR exclusion expires, or wait, wait, wait. The problem is, as you continue to develop through that time, you continue running new GBR, you continue to run new deductions that are being developed and Alaska's weight is out there like 20, 30 years before these revenues show up, and in that case production's on decline. So, yes, the percentage increases, the percentage of our share of the revenues increases at that point. But when production's on decline and you see this in the DOR, willow and PICA studies when production's on decline, even though the percentage is increasing, the revenue is decreasing because production volumes are falling so fast.
Speaker 2: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:Yep, yep, yep. So it's not just about time value money, it's not just the delay, it's the impact of the delay against the production curve decline. Alaskans just never catch up. We never achieve the goal of 2013-2014. As production increases, state revenues will increase.
Speaker 2:And I think you hit on it. Melissa comments in the chat room. She says they think the oil companies will leave if we change it. Brad's correct, it's a fear tactic, because that's what we keep hearing. Well, if you change it, they'll just take their ball in their bat and they'll go home. Well, no, that's our ball in bat, we own the diamond, we own the field, we own the ball in the bat. If they want to go play somewhere else, okay, somebody else will step in, but they're not going to do that. But that's the fear, that's the tactic, right, that we keep hearing.
Speaker 1:Yeah, and their economics are overachieving. I mean, when you look at the oil company economics, they are developing supra returns, super returns, superior returns, excess returns, whatever word you want to use, excess returns let's land on excess. They're developing excess returns because we're deferring Alaska's share for so long.
Speaker 2: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 answer to this. I mean we do have an answer to this, but nobody wants to talk about it. I think that's the thing. We should be re-examining our oil taxation and maybe we should just set it so that every 10 years we re-examine the oil tax. Maybe that should be something that should be set in there. Let's catch some comments here in the chat room. David says maybe there's an analogy between higher oil production, lower state revenue and the more K-12 spending, lower student achievement. I mean you're reaching there. I mean I can see what you're trying to do there, but you're reaching. David says Brad, how much is Alieska charging for transporting the oil? Does the state have a play in that? I mean there is a service company and there is a cost to doing that, but I don't think that that's affecting it that badly, do you Brad?
Speaker 1:No. So aliasca is basically, or TAPS charges are basically cost of service. They're basically the cost of service divided by volume is the per unit tax charge. There's no extra profit built in there, but there's no sub-profit built in there. It's just whatever your cost is divided by volume and that's the per unit cost. So yeah, Alaska, Alaska. I mean the deductions play a role in the sense that they reduce the gross revenue, the market revenue, that the producer receives. But that's always been the case, We've always known that. And Alyeska's charges haven't changed that much over the years. In fact, as a share of value they've declined because they've remained relatively constant, but the price, the value of oil, has gone up. The price of oil has gone up over the decades, so the percentage impact of Alyeska has declined.
Speaker 2:Brian just says, if you know, they'll, just if they left, if the producers, they'll just start selling it off to the native corpse, or let the state of Alaska have it so we can start our own oil company with Bert as the CEO. Oh man, please don't give them any. Let's not give them any ideas, for sure, let me go back, go ahead.
Speaker 1:Alaska is a good place to invest. They're investing here because it's a good place to invest. Alaska is a good place to invest. They're investing here because it's a good place to invest. We've just created a system in which they're getting even more on that investment than they would require, than their economics require. In order to keep the investment going, we are giving them the state's share of production tax, the state's upside of the increased production they're generating. We're giving it to them and the federal government, through the, through the federal income tax, we're giving it to them instead of retaining it for ourselves. As we said we would.
Speaker 2:As we said we would benefit in 2013 and 2014 as resource owners right, which is what we have to consider that every time we look at that we have to remember that we are the resource owners and so we need to be. You know, the legislature is supposed to be looking out for us. I think Frank asks a valid question that many Alaskans who aren't privy or haven't seen the ins and outs of this specifically Frank says. Why should the state subsidize anything is the question why, brad.
Speaker 1:Well, you want the investment here and Alaska is an expensive place to invest and Alaska is a risky place to invest and Alaska also has the geopolitical risks the risks of changes in regulatory regimes. That changes your access to land and changes the restrictions you have on development. So you want to incentivize development in Alaska. It's more risky, more costly than, say, west Texas, so there is a benefit to the state of incentivizing that development. The problem is we were told one thing in 2013 and 2014 about what we were doing we were going to incentivize it. In 2014 about what we were doing, we were going to incentivize it. We were going to incentivize investment by reducing the production tax level from under ACES. We're going to incentivize that production and then, when that production took off, we were going to benefit from it by increases in state revenues. That's not happening. So there's a reason to incentivize the development, but the reason is you get the benefit of those incentives of that development once it occurs and it's the back end of that that we're not getting.
Speaker 2: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 of Alaska has to examine their taxes you know their tax scheme every 10 years? I mean, shouldn't we at least, shouldn't we at least analyze it to say how is it working for us? Right, and this is this is the problem. This is remember we talked about the extremes in state spending and everything else. You know, they run from one side of the boat to, oh, we've got so much we don't know what to do with it. Oh, now we're upside down. It's the same thing with oil taxes. 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 ACES, to SB21, to whatever we've got. I mean, that's part of the problem is that we keep running from one side of the boat to the other.
Speaker 1:And that's an excellent point, Michael, and it's really a point that describes. I mean there's been activity to try to relook at oil taxes. Brenna led the initiative in 2020, 2020, was it when we had the last initiative on oil taxes? Or 2022? It's getting. My memory is getting loose in that regard, but we've had people who want to look at it. The problem is they want to run to the other side of the boat. The problem is they want to adopt a tax regime that would tend to go back to ACES, and ACES didn't work.
Speaker 2:We are continuing now, Brad, Keithley, Alaskans, Force, Sustainable Budgets the weekly top three, Final of the three. We're up to number three. I mean we were trying to find solutions but again, nobody wants to take a deeper look. Brad, we were just talking about this 10-year, the idea of taking a 10-year look at it, and we just I mean I'd love to do that, but we just can't get anybody to really buy in on that. But let's move on to number three. So the Santos deal with Abu Dhabi. I mean the whole thing has fallen apart. The whole thing has fallen apart. What does that mean? Because we heard that that was going to be a big, you know, uptick and more investment and everything else for PICA. So what does it mean, now that the Santos deal has fallen apart, for us?
Speaker 1:So Santos? The backstory on this is Santos had entered into an agreement with Adnock, the Abu Dhabi National Oil Company, for Adnock to buy, essentially to buy Santos, and Adnock was doing that. Abu Dhabi was doing that really for the LNG, the Australian and the New and Papua New Guinea and other LNG projects that Santos has. Adnock is trying to get big in that business, in the LNG business, and viewed Santos' LNG projects as a great add to what AdNoc was putting together. And Santos has a couple of projects they've not funded yet. That the expectation was, if AdNoc came on board or if the acquisition went forward, that AdNoc has much deeper pockets than Santos does and AdNoc would fund those additional LNG projects that Santos has not been funding as a way of developing Santos' LNG portfolio even better. Even more broadly, pica has always sort of been the tail end of the story. It's always been yeah, santos has this great oil prospect up in Alaska that it's been investing in and is expected to produce oil. That wasn't the focus of AdNoc's acquisition, speculating that in order to focus AdNoc, if the acquisition went forward, in order to focus attention on the LNG projects, which is what AdNoc was really interested in that PICA would be put up for sale or something would be done with PICA in order to allow AdNoc to keep the laser focus on Santos' LNG prospects, that deal falling. Adnoc has backed out of the deal. Santos is trying to spin it that they backed out of the deal, but AdNoc backed out of the deal. And so the question now is and this shows up in an Alaska news source, the TV station's website Alaska North Slope a PICA project, alaska impact Unknown after Santos merger deal dies. Actually, the focus, santos' focus, now is going to be more on PICA than it would have been in the combined company.
Speaker 1:As I said, adnox focus was really on the LNG prospects. Pica was sort of the tail on the dog Without Adnox acquisition. Santos really has two big future stories. One is an LNG project in Australia that they're starting up in the near future that is supposed to be a big money generator, and the other story that Santos is selling about its future is PICA. The oil prospect up in Alaska is a big deal. So in terms of corporate attention, pica is probably going to get more corporate attention, more corporate responsiveness going forward than it would have under the AdNoc, under the AdNoc, if AdNoc had acquired Santos.
Speaker 1:The slight drawback of that is Santos won't have near the deep pockets that a combined AdNoc Santos would have had. So funding is going to be a little more scarce Santos corporate-wide as a result of the failure of the merger and so that may show up. That may show up as PICA approaches phase two or additional phases or additional drilling. Santos has prospects in additional areas outside of PICA that it's been exploring and has put on track for development at some point and the lack of additional, the lack of the deep pockets that AdNoc was going to bring to that combined entity, may show up in those additional investments or it may not.
Speaker 1:I mean if PICA stays, if Alaska stays a central part of the Santos story, santos isn't acquired, they're going to keep wanting to focus as long as it's economic. They're going to keep wanting to focus on the Alaska piece of the story because that's the part that they're selling to the stock market right now. So I think in the short term it means good things in the sense that the corporate attention that otherwise might have been diverted as a result of the acquisition, the corporate attention that otherwise might have been diverted to the LNG projects, remains focused on PICA as one of the big deals that Santos is engaged in Longer term. I think that's probably still a good thing, because because Santos will still will want to continue spinning that story of Alaska oil being a big, big part of the of the company's future. But funding, the funding won't be from as deep a pocket and so the funding may become a may become an issue down the road.
Speaker 2: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 just selling 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? Do we see something more stable, or what do we see?
Speaker 1:Well, that sort of goes back to the second segment, doesn't it? We're not seeing revenues out of these development. I mean, we're seeing royalty revenues. That sort of match the decline curve. We have going elsewhere on the slope so that royalties are generally staying. State production from state lands is generally staying level. So royalties are generally staying level, and so that's good in the sense that we're not falling further behind on the royalty side.
Speaker 1:But we're not seeing the addition to the state revenue stream from the production tax because of the way the production tax is structured. Production tax because of the way the production tax is structured. So it's good news in the sense that it keeps Alaska resources being developed, it keeps people busy in terms of developing those resources, it keeps additional oil development on as a prospect and it keeps sort of replacing the royalty revenue sources that we're losing as a result of decline. But we're not anywhere near replacing the production tax revenues and you have to go back I mean, production tax revenues are a big deal Back in 2024, which is the baseline that I use and others use to look at these things.
Speaker 1:In 2024, production taxes were equal. The revenues from production taxes were over $900 million, equal to royalty revenues Royalty revenues are sort of staying level, but production taxes are going down. The consequence is that Alaska's revenue from its production is going down over time and so the additional development of the fields while people hail that as additional development and isn't that great and additional employees and additional projects isn't that great the production tax piece of that development isn't showing up. So it will mean good things to Alaska in terms of the additional development. It will mean good things to Alaska if we fix the production taxes going forward so that Alaskans share in the benefit of the increased production. But if we don't fix production taxes, from a production tax standpoint it really doesn't mean that much to the state revenue stream.
Speaker 2:Right, brad, what are we? What do you? You focus on something next week quickly. What's your? What's your Friday?
Speaker 1:column about this week you know I'm working on. What if we went to gross revenues? What if we went to a gross revenue production tax? What would that do for us? Sort of picking up on the comments Will's staff has made. What if we went to a gross revenue production tax? What would that do for us? Sort of picking up on the comments 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 go back to a simple system. What would that take and what would that generate for us? So it's continuing on production taxes. It's a good question.
Speaker 2:Maybe that's the solution, brad. Maybe just going back to the simplest instead of this multi-phased you know, intertwined 63 different bells and whistles and levers that need to be pulled, each one connected to another one, I mean, maybe just something simple would fix it, instead of making it so convoluted and complicated that you can't predict. That was the problem they're predicting one things, but then all the things line up to where, all of a sudden, what they told us was going to happen is not going to happen, because, well, I mean, the oil companies figured out how to game the system, essentially, and that's good for them, that's what they're supposed to do for their shareholders. But maybe something a little more simplistic would be better.
Speaker 1:Yeah, so gross revenues always should be the standard that you, even though you have a complex oil tax system, you should always look at the impact on gross revenues, because that's sort of how you judge your share. Whether it's a fair share or an inadequate share is sort of what the gross revenues are. There's a reason if you want to incentivize a bunch of things. There's a reason to make your tax code complex, because you're incentivizing some things, you're de-incentivizing other things and you're doing that through the tax code. There's a reason to do it. But you should always come back and look at gross revenues and see what the impact of those various tricks and tuning is doing on gross revenues. And when you look, I mean this is sort of the proof of what the oil tax code is doing to us.
Speaker 1:When you look at gross revenues during the last decade, the last 10 years from 2014 to 2024, alaska plus or minus got about six and a half to 7% of gross revenues through the production tax and you add that to what we're getting through royalty and we were doing okay. I mean we certainly weren't paying for the budget we were spending, but we were doing okay in terms of our share of revenues. When you look at this coming decade, we're down to like 3.5% or 3% of gross revenues in terms of production taxes and we're also not getting royalty on the federal production. So you're seeing a decline in the gross revenues. You're seeing a decline in the gross revenues. You're seeing a decline in your test of fairness, substantial decline in your test of fairness over this next decade. And that's how you know, that's how you can prove, how you can test whether the operation of oil taxes in this coming decade is producing Alaska's fair share, because it's not producing the share it produced even in the last decade.
Speaker 1:So one way to sort of just work through all that is to say, okay, forget all that, forget all the complexity, forget all the incentives, forget all the bells and whistles we tried to build into this thing to incentivize this activity as opposed to that activity. Forget all that. Let's just go back to the basic test of gross revenues as a fairness test and look at how that would impact the state revenues and look at how it would impact producers. And that is to say, look, instead of all these bells and whistles we build on, let's just go back to the last decade and let's set a gross revenues, let's base production taxes on gross revenues and match the last decade in what we're getting out of that, and I think that's a good test.
Speaker 1:Now some people are going to say, well, you still need bells and whistles. All right, if you need bells and whistles, you always have to come back and prove that those bells and whistles match your fair share, as determined on a gross revenues basis as a share of gross revenues, and you have to prove that those bells and whistles aren't going to result in what we're seeing in this next 10-year period, which is a depression of the state's take below its fair share of gross revenues. So I'm going to go back and look at that and look at gross revenues and what that would do, and maybe that's the answer to all this, because what we're doing now sure as hell ain't working out.
Speaker 2:You may need a new hobby, Brad. I'm just saying Frank, kind of bottom lines it. For us, though he goes, adjusting the tax structure is too much. The simplest thing is just taking the permanent fund. But again, that's essentially what they've been doing. They don't want to penalize the donor class. They don't want to penalize the donor class, right? They don't want to penalize those guys. So the simplest thing is just take the permanent fund. So that's kind of what's happening right now with this. Instead of taking our fair share and doing, you know, for our own resources, it's just easier to take the permanent fund. All right, Brad, final thoughts for today. My friend Hit me with it.
Speaker 1:Well, here's, I guess, the ultimate final thought Are we going to get a candidate for governor? Are we going to get candidates for legislature that think about these things and talk about these things? Are we going to get candidates for governor that recognize that we're not getting our fair share on a gross revenues basis, we're not getting our fair share out of the increased production that's going on? Are we going to get candidates that recognize that the permanent fund cuts in the permanent fund dividend is just a tax on middle and lower income Alaska families and we have to have a fairer, more equitable way. If we're going to run these huge budget deficits, we're going to have to have a fairer, more equitable way of filling those deficits.
Speaker 1:Are we going to get candidates that recognize that? And, frankly, I guess what we're doing on the show is we're trying to educate those who are candidates or want to be candidates or legislators, or want wannabe legislators or candidates for governor. Educate them on what the issues are and what they should be talking about. They aren't talking about it yet. Maybe they won't, in which event we're doomed, but that's really the ultimate question Are we going to get candidates to start talking about these?
Speaker 2:Yeah, I think it's a valid question and I appreciate you asking those questions over and over and over again. Brad, Thank you so much for coming on board. It's good to talk with you, my friend. We'll talk to you again soon, Michael as always thanks for having me.
Speaker 1: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. Weekly top three.
