The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (3.23.2026)
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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 March 23, 2026.
This week, our top 3 issues are these: 1) we examine what last week's successful NPRA lease sale means for Alaska (1:58), 2) we discuss the source and extent of the problems the AKLNG project is facing in the Legislature (17:26), and 3) we examine the upcoming challenges the Legislature faces in finalizing the FY27 budget (38:35).
The Weekly Top 3 is a regular weekly segment on The Michael Dukes Show. The Show broadcasts on Facebook and YouTubeLive as well as via streaming audio from the Show’s website weekdays from 6–8am. We join Michael weekly in the first hour of Tuesday’s show, from 6:25–7am, for a discussion between the two of us about our three issues.
Welcome And The Weekly Top Three
SPEAKER_01This 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 March 23rd, 2026. 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 a.m. I join Michael weekly in the first hour of Tuesday show from 6.10 to 7 a.m. 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, Medium.com. 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 examine what the successful NPRA lease sale means for Alaska. Second, we discuss the source and extent of the problems the AKLNG project is facing in the legislature. And third, we examine the upcoming challenges the legislature faces in finalizing the FY27 budget. And now, let's join Michael.
Why The NPRA Lease Sale Matters
SPEAKER_00Brad, uh, we got a lot of stuff to cover today. There's a lot of things happening around the state. Some of this I'm just shaking my head about. Let's get started though. Uh, number one, what does the NPRA lease sale? We've been hearing all about it all weekend, what does the N NPRA lease sale actually mean for Alaska from your perspective?
SPEAKER_01Well, Michael, I've got to say that that I was surprised at the at the level of success of the lease sale. Um, particularly after the the experiences that we've had with past lease sales uh uh and with with the Anwar lease sale and with the most recent Cook Inlet lease sale, I wasn't expecting uh that level of interest. I was expecting Conoco to uh uh sort of fill out the edges of uh acreage that it had in the NPRA as it as it explores more, discovers more, does more work, it realizes that they're that the formations that they're producing from or potentially may be producing from extend beyond the edges of the leases they have, and so they want to sort of want to fill in on the edges. And I sort of I sort of anticipated that, but I didn't anticipate uh Exxon coming back into the state, and I didn't anticipate uh uh Shell and Repsol uh forming a joint venture to uh to bring Shell essentially back into the state. That was those were surprises and good surprises. Um and then the other big better was uh was one of uh Bill Armstrong's uh numerous subsidiaries that he uses, funding vehicles that he uses to acquire Acreage. Um and that's a moderate surprise uh uh the extent to which uh the the extent to which they they bid in. Now, all of this, I mean, to put it in to put it in perspective, all of this is sort of within the existing sort of fill-ins within the existing uh outline of existing leases, within the outline of existing leases. Um Exxons is sort of a step out. I mean, Exxons goes toward the lake um in a way that uh no one has before because they've been restricted. Uh uh the lake's been off limits, the area around the lake's been off limits. And and Exxon uh stepping in there, I think, is a is is a sort of a step out. Um, but still, I mean, the presence of Exxon coming back into the state uh after uh essentially uh saying goodbye, um, and Shell coming back into the state in the way they did with Repsol is just is a surprise. So I think those, I think those mean good, I think those mean very good things. It probably also means, you know, I've tried to look at this in the bigger picture, and I've talked to some people in the industry about the bigger picture. It probably also means that there's some concern that lower 48 shale may be running uh running its course. Um a lot of the good shale prospects have been uh have been developed. Um the prospects that are being developed now are more marginal. They're still good, but they're more marginal. There are certainly international shale prospects that are developing uh uh in Argentina and and elsewhere. Uh, but it may mean that that shale is sort of run its course. And and as it's and as people are looking around for what's next, and and it's good news that people are looking around for what's next. I mean, uh five years ago, people were sort of saying it's a dying industry. Um uh we've we've seen the peak of production and we're gonna see it die off. People are no longer saying that. Um, but it it means as people look around for new opportunities um and they focus in the US, they're sort of refocusing in a way on Alaska. Not in a huge way. These aren't this isn't a huge lease buy, but but but they're re they're re uh there's some new attention or some reattention to Alaska. And so I think uh I think that means I think that means a good thing also. Now, having said that, in the in the big scheme of things, 163 million, though it seems like a large number, uh, and though it is the largest uh lease sale out in MPRA that we've had, uh, it's from a from the standpoint of the industry as a whole, sort of a drop in the bucket. So it's sort of what you can what you can view these things as is sort of, I mean, it's different for the different companies. For for Coneco, it's it's solid, fill in the blanks on some on some acreage that uh that that they're seeing uh borders their existing acreage and may have uh may have productivity, may have a role to play. So that's that's fairly solid. Um, but for Exxon and Shell and for Bill Armstrong's group, uh it's more sort of a bet, uh uh sort of a wager on uh whether there's uh potential out there. Um Armstrong sees extensions of of what he's found in Pika and elsewhere uh sort of extending to the west. And I think he's chasing those, uh, which it provides a good opportunity. I think Exxon's seeing a high potential around the lake if they can get in there, if they're actually going to be able to develop that. And the bids they made uh is sort of a bet on whether they can, a wager on whether they can actually ultimately have access, ultimately, you know, be able to follow through on those leases. And Shell Repsol, to some degree, I mean, Repsol seems to be sort of following what they've got with Pika. They're a partner with Oil Search in the Pika prospect. Uh, and Repsol seems to be somewhat following that, and having Shell on board with that sort of sort of hedges the risk a little bit. Right. Um, and so it's and so it's sort of it's a combination of with Conaco fill in the blanks with others, it's sort of a sort of a risk play. But you don't, it it's hard money, 163 million is hard money. Um, and it's and it's really those people saying we we see potential out here, and we're willing to sort of bet that sort of dollar figure on uh on providing access and sort of giving us the opportunity to explore and see see what there is out there.
SPEAKER_00Now, one of the biggest problems, of course, with this is that there was a court decision that said it was an injunction on certain things, uh especially uh stuff right around Tesha Book Lake. Um, and some of those tracks were still in the lease um and they were bid on. Uh and so I guess there's still some question as to whether or not um that's gonna come about. Is it, you know, the court case is gonna continue? These guys are still betting that these pieces will still be available. What do you what do you think, Garr?
SPEAKER_01Yeah, that's Exxon. I mean, I mean Exxon is the one who really went in that area. And and it's always been that area has always been defined as an area uh of high potential uh in the various analyses that the that the federal government has done of of of what the potential is of various leases out there. And it's always been defined as an area of high potential. Um I mean Exxon's betting is is betting a little bit of money, and it's and it's sort of a hedged bet because if they get excluded, precluded from developing those leases or exploring on those leases, exploring on those leases, if they get precluded from that, they get their money back. Um so it's sort of a hedged bet, but it's um um it's it's it's an expression by Exxon that we see potential there. We're willing to put a little bit of money down, and in the context of Exxon overall, this is very, this is sort of like pocket change. We're willing to put a little bit of money down to see if to see how that how that plays out. But the thing with Exxon is it they're they're they're gonna give some attention to it. I mean, Exxon is big on focus, right? On on not diversify, on not diffusing your focus over a lot of stuff. I'm focusing on potential big things. And and Exxon's essentially saying, we think this is worth enough that we're gonna give some attention to it. Uh a lot of years, decades probably down the road, whether that gets developed, at least a decade, down the road whether that gets developed and a lot of battles in between. But it's interesting that Exxon uh stepped up and did that.
Royalties And Alaska’s Production Tax Problem
SPEAKER_00Brad Keithly, Alaskans for sustainable budgets. All right, so the big question is what does this mean? Because a lot of this is on, of course, on federal land, and uh so we won't be seeing a lot of the uh dollars drain down into the state or as much as we should have, or you know, would have if it had been on state land, I guess I should say. So, what does it mean for the state if all of the stuff gets leased, if it gets explored, if it starts to get developed, how much is the benefit going to be towards uh Alaska in the in the end here?
SPEAKER_01Yeah, it's uh so so the One Big Beautiful Act contained a provision that changed the royalty share on on new NPRA leases. That was one thing that Nick Beggage accomplished uh or claims credit for uh in the One Big Beautiful Act and the Federal Act. And it changes the royalty share from what had been a 50-50 with the state, but with the the 50 that's going to the state, sort of held in trust for the local communities, uh, to a 70-30, if I recall correctly, off the top of my head, with that 70 not restricted uh on new leases. So it means something in terms of royalty that ultimately gets developed. The big thing for Alaska, though, in terms of federal, in terms of federal lands, is what is what our uh uh production tax uh provisions are. And as I've written and said on the show a number of times, I think we're vastly under collecting on what where our production tax ought to be right now. So we need to we need to address that need sooner rather than later. Uh we need to address production tax and uh and and position the state to benefit in terms of production tax off those leases as well. But with respect to these leases, we've got a while before that kicks in. Now, with respect to the existing leases, the existing development that's going on in MPRA and the existing production that's coming from MPRA, particularly Willow, we don't have the the luxury of time. We need to address production tax sooner rather than later, with respect to those.
Gas Prices Iran And LNG Volatility
SPEAKER_00Yeah, at the state level, uh, because that is not affected by the new one big beautiful bill stuff. So that's already locked in at a certain amount. And so we need to take a look at that. Renee had a question and uh asked her if it was about gasoline or natural gas. She says natural gas. She says, Brad, how far do you think gas prices will go? She says she's very worried. She's down in the lower 48, planning to move to Alaska. She goes, if it moves too high, my move is in question. I don't know how that would affect her move, particularly, but what do you think is going to happen with gas prices? Uh, I mean, with the whole volatility in Iran and Straits of Hormoes and yada, yada, yada. Uh, there's a lot of different questions in there, but what are your thoughts on gas prices, LNG?
SPEAKER_01Well, LNG prices, um, world LNG prices. I so I I think what I think what we're gonna see out of Iran is sort of a reset. We were on track to have a huge surplus in in LNG. We were on track to have a surplus in oil that was gonna drive prices down in both of those products uh from an oil standpoint down into the lower 60s, possibly hitting the 50s. That's that's sort of where the consensus was on where those prices were going. I think is I think we're not gonna continue to see the highs that we're seeing right now over an extended period. If we did, we'd see a huge demand reduction, demand destruction, um, uh, and uh, and we'd see you know a reset of supply-demand in any event. But I are I do think that we're gonna see a the consensus seems to be that we're gonna see a reset of prices into the into the high 60s, low 70s on a on a fairly long-term basis as a result of Iran. And I think we are gonna see some you know reset in terms of LNG prices on a longer basis uh as a result of Iran. So I don't it's not gonna be expensive. Let me try it this way. It's not gonna be as expensive as it seems like it is right now, uh, but it's not gonna be as cheap as uh or as inexpensive as we as we thought it was going to be uh before the Iran conflict uh started.
SPEAKER_00I thought it was interesting that you brought up the decline in um shale and fracking. Um that is something that I hadn't considered and hadn't been following along with. Um as more and more of these easy fields get picked up and get dwindled down. Um, I mean, are we looking at a uh decline of what, 10 years, you think, before we start to get into some of the where it's just nothing but the harder fields left over, or where are we at with that?
SPEAKER_01Oh no, it's gonna be it's gonna be a fairly long tail, fairly long decline. But but the the the the feedback I was getting from the people I was talking to is the easy pickings is sort of over. The the big rush to shale is sort of over. Um and and the the the huge potential that people have seen out of shale is sort of over. And we're sort of in the in the plateau, if you will, if not heading toward, if not heading toward a decline, uh a long decline. Excuse me. So people are beginning to look around, companies are beginning to look around for uh uh what else, what what's next after shale. I mean, as I said, five years ago it was shale, and then there's nothing. We don't really need to worry about what's beyond that. We need to you know be developing wind farms or solar farms or whatever, biomass. Uh, but now is we're gonna continue with oil and gas and sort of what's next out there. So it I I I think Alaska, I think the MPRA sale benefited to a degree from that uh perception.
SPEAKER_00It's gonna be interesting. The one big beautiful bill. If we start uh if we start um uh with this new percentage, uh we're still gonna have to bust off some money for the uh for the local communities, but it will mean more money in Alaska's coffers. I wonder, I I know there's been some pushback from some Native groups and some support from some Native groups. I wonder how this is gonna make a difference in that. You mean the the increased royalty?
SPEAKER_01Yeah, yeah. It probably I what makes a difference, I don't think the increased royalty is going to have that big an effect. I I think what makes a difference where you see the native groups, groups aligning with the development or the or the lease sale and the development of these leases is native groups who who see benefits from contracting and from you know equipment and from uh local employment and and that sort of and local local revenues in terms of property taxes from particularly property taxes in in that sort of in that sort of context, versus those that don't see that as a big benefit, see you know the the reduced access to land or the or the or potential harm to land uh as uh as a bigger issue.
AKLNG’s Two Core Problems
SPEAKER_00Continuing now, Brad Keithley, Alaskans for sustainable budgets, the weekly top three. We are on to number two, which uh in which Brad asked the question uh what is the problem with AKLNG? Wow, Brad's asking all the good ones today.
Property Tax Proposal And Trust Breakdown
SPEAKER_01What is the problem, Brad, with AKLNG? Yeah, I probably should have made that plural, shouldn't I? Problems with uh problems, yeah. With with AKLNG. I we're we're in a in a sort of an odd period with AKLNG right now. I mean, it's the project the project from a commercial standpoint, commercial from the from the from the construction standpoint seems to be fairly solid. I mean, Glenn Farn seems to have lined up lined up a lot of the pieces that that they're gonna need to that you would need to construct construct the pipeline. Um and so that's sort of that's sort of set. But there's two big issues out there. One is will they ever have customers? And two, the relationship with the state. Um and that's the you know, you would think the relationship with as long as we've been doing this, as long as we've been at this, you would think the relationship with the state would be sort of set. But but the the challenge here is that the legislature's uh advisors, Gaffdy Klein, came in and and basically said, look, you you're you're not really aligned. The state scheme that you that we set up 10 years ago the last time we looked at AKLNG is not really aligned with where the with where this project's going to be. That project was sort of focused on a producer-led project. Uh, it was focused on uh big state active involvement. It was focused a lot on that line sort of being a common carrier line, being a uh uh a pipeline that that people would put product through as opposed to the pipeline buying and selling. Um, and so you're not really the the scheme that you've got set up isn't really set up for for uh for the current environment. Plus, you've got we've got all sorts of issues on the on the severance tax, production tax side. Um, and so and so you the the advisors came in essentially said you gotta told the legislature, you gotta look at this stuff. And the legislature uh is not really set up for looking at stuff. I mean, the legislature is really set up for taking advice from others, uh, particularly the administration. You particularly want the administration to be looking at these same things and giving advice to the legislature on uh on how to on how to deal with this, how to deal with these things. And the and the administration and the legislature just aren't getting along. Yeah. Uh in the right. I would be assuming that the legislature would listen to that advice. That's right. Yeah, there's just no trust in there. So you've got you've got sort of this this absence or this this vacuum uh that is that is created by the by the legislature, understanding they need to do something. They need to sort of relook at what they've done, um, but but this sort of vacuum on on leadership on on where they go. And the administration's response, and and so Glenn Farton's response to that, Glenn Farn, who is not, who does not really have to deal with states like Alaska in its other projects. It's two other projects, main U.S. projects, are in uh Texas. And so there's not really the state role in Texas that we have in Alaska for these sorts of natural resource developments. Um, and so Glen Farn, who's not really used to this uh environment, has not really stepped in and helped fill that vacuum with a lot of information from their side or a lot of or a lot of participation and interchange with the legislature from their side. In fact, they've sort of been standoffish in terms of interacting with the legislature on this. And the administration, I mean, this new proposed property tax raises questions, at least from the legislature side, I think valid questions about is Alaska really going to get out of this what we deserve, what we need, what we should have, um, out of this project. I mean, is the legislat the administration is not being very comforting in terms of in terms of Alaska getting out of the project, uh, you know, being very firm and saying, yes, Alaska's getting its fair share, and this is why we're getting our fair share. It's sort of the administration's just sort of added to the vacuum. By not being very active in playing a role in describing why Alaska's getting its fair share. And this new proposal the administration has come out with, in terms of turning the volume, the property tax from a fixed tax uh uh into a volumetric tax, dependent entirely on volumes flowing through the pipeline, that's not very comforting because it's it's not A, the, the level of the tax produces a lot less revenue than than I think than one would anticipate under the existing tax structure. And and B, um, it's not very it's not very comforting in terms of will the revenue be there when we need it. I mean, it's sort of the volumetric tax the the legislature or the administration is proposing is sort of a down the road thing once the once the projects start. There's not a whole lot of upfront money of it uh to it. And both the legislature and the localities are saying, hey, we're going to need upfront money uh to deal with the potential costs that are coming down the road from uh from the project. So there's just sort of this this this donut hole that's been created where there's a lot of sides saying we need to do things, but not much guidance on what needs to be done. And into this vacuum, uh Kathy Geisel's stepped with her proposed legislation that I that that I I don't I don't think solves anything, but it's sort of it's sort of a response to hey, we know we need to do something, we know we need information, we don't seem to be getting information out of anybody, right? And so, and so what we're gonna do is we're gonna legislate that we get a lot of information, we get a lot of control because we're not comfortable the state's getting its fair share. Um uh if we're not comfortable from either, we're not being comforted either from Glenfarn or from or from the administration that we're getting our fair share. So it's it's just sort of this this vacuum that's been created. Um I I'm not a big fan of what Dunlevy's proposed on the property tax side. Now, I I understand the argument that upfront money, you know, forcing the the the project to pay upfront money on property that uh on property as it's installed or property once it what even once it starts flowing, paying big chunks of money, big pun chunks of uh property tax. I understand that that affects the economics, but there doesn't seem to be an effort to sort of to sort of find a middle ground. I mean, from a rate design standpoint, you can have a combination of some upfront money, some you know, fixed amount of money, um, and then a volumetric uh uh revenue charge on top of that. You can you can combine those two in a way that sort of tries to feed tries to deal with the these issues. And it looks like the Dunleavy administration has just sort of gone off the other end uh in terms of in terms of how it's proposing to deal with it. So I think there's I think there's a lack of, I think the fundamental is the legislature's been told by its advisors, its consultants, that it needs to re it needs to rethink some things that's in the existing legislation. Um and and and it thinks it does, and I think it does. Um and and so it's been told that, but it's not getting the information that it feels it needs or the comfort it feels it needs to be able to rethink those things, and it's not getting comfort. I mean, from the Dunleavy proposal of the property tax, it's not getting comfort that the Dunleavy administration is thinking through those things uh particularly well either. So it's a you know, with with only half the legislative session left to go, um, it's a it's a very odd situation to be in. Things things that you think we would have solved two or three years ago are suddenly just right being thrown up on the table now.
SPEAKER_00William, you talk about the Dunleavy administration going too far off the other side. I mean, I would almost argue that Giesel did the same thing. Instead of just asking for more information, now they want to have their hands in everything, right? Now they want to have override and and an oversight of every little part of the project. And that's that makes it a little less appetizing for private equity to want to come in and do this when it's going to be a politicized process at that point if this bill passes, right? There's a there's a trust issue though.
SPEAKER_01I mean, I mean, this is her reaction, and I and I well, I agree it's over over the edge, but it's a trust issue. She's not feeling the legislature as a whole, I don't think, you know, maybe the house is a little bit different, but the legislature as a whole, I don't think is feeling a real good comfort level from Glenn Farn. There's not there's not been a forthcomingness from Glen Farn. I mean, I remember back in the in the Murkowski administration when the producers, and I was part of that team, when the producers were negotiating the the contract, uh, the agreement with the administration, there was a lot of detail that went on. I mean, there was a lot of give and take between the producers and the Murkowski administration in terms of economics, in terms of in terms of issues, in terms of in terms of how things might play out. And there was a there was a really solid effort to bring all of this together in a in a document. Now that ultimately fell apart because the Murkowski administration fell apart, and then it fell apart because of the Shale Revolution in the lower 48. But but there was a lot of uh a lot of of effort, good faith effort between the producers and the administration and the Murkowski administration to try to come up with a with a solid agreement on how to deal with this. And when you look at when you look at projects elsewhere, British Columbia sort of went through the same process. They had a solid effort between government and industry to come up with uh the terms under which uh under which the the projects we could down in British Columbia would continue. There's not been that here. There's been, as I say, Glenn Farn's not used to dealing in an environment like this, and that's probably part of the issue, but there's not been that sort of give and take and that sort of solid integration, solid integrated effort uh uh that that at least has been obvious to the public. Um, and so I think there's just a level of trust. And so so when you when you view it that way, Giesel's response is sort of an overreaction to the lack of trust. It's sort of like we don't trust you, and so we're gonna regulate, we're gonna regulate everything. We don't, we there's no basis of trust on which to pull back and not regulate very much.
SPEAKER_00Yeah, and I know Glenn Farn was going on and on about proprietary information and competitiveness and everything else, but I remember, I think it was during the, I believe it was during the ACES debate, or it may have been during Walker's China thing. Um, I remember that there was um, you know, like a clean room or whatever where the legislators could sign an NDA and go look at the information. They couldn't share it publicly, but at least it would inform their decisions. Um, and there was an opportunity there for them to go and look at a lot of these proprietary numbers and things like that. Why doesn't Glenn Farn do something like that?
SPEAKER_01I just I don't think they're used to it. I don't think they're used to the to the to the situation. And and I think they've been very focused, sort of on the other side of the equation, trying to get commercial agreements out of, trying to get people to buy this stuff and trying to enter into commercial agreements over how they would build the pipeline. I think that's been their focus. They've sort of assumed that this that it appears, at least from my perspective, they sort of assume that the state's on side or on board. And so they focus they've they've had all of their attention uh on the on the other side. And so it's um it it it is there is a just a lack of I think I think trust. I mean and and and Giesel's used that word, but a lack of of sort of integration, uh, if you will, between the administration, the legislature, and the uh and and the project uh to try to bring these things, try to bring these things together.
SPEAKER_00Um it doesn't help that uh Glen Farn has promised already, I think they've missed two deadlines, and then they've got a third one this month for their final numbers and investment decision numbers, uh, because they said it first it was going to be in the fall, then it was gonna be in December, and now they're saying it's good, you know, the state said you got to have it in March, we got to know what's going on, and we're still not getting the numbers. So we still don't know what the magical number is. Is it 60 billion? Is it 44 billion? Is it 80 billion? Nobody knows. And that I think is leading to this, is is is you know, is adding to this whole conundrum of trustworthiness.
SPEAKER_01Yeah, uh again, uh I think that's I think that's a product of Glenn Farn not maybe not being used to uh operating in this environment. Those are made, those were made-up dates. I mean, those were dates, that's what a marketer does. I mean, that's what that's what your real estate agent does, right? You know, I've got other bidders on this property. You gotta do, you gotta decide by thus and so, or you're gonna lose out. I mean, those are always those those are those were those were marketing dates from the beginning. They weren't solid dates, they weren't real dates from the beginning. They were just sort of, let's try to push this along. Let's say, you know, let's put these dates out there and push people toward these dates. That's what that's what developers do. Um, you know, they they they set these these goals and they push people toward these goals, these artificial goals that they set out there. So that was never, I mean, I never took those as realistic. I always took those as, yeah, okay, fine. That's that's what you're gonna tell people today. I get it. And then and then sort of like Trump on, you know, we're gonna bomb all their stuff, bomb all of Orion's stuff. Well, when you get there, it's sort of like, well, not that date. It's gonna be some other date. Um, it's it's but it has led, I mean, people in the state probably believed it, and people in the legislature probably believed it. Um, and and it's led to that sort of, it has led to an erosion, an erosion of trust. I don't this doesn't get solved in the remaining legislative session. This doesn't get solved in the remaining year, I don't think. Um, I mean, you can say, you can say, well, we're gonna have another special session in an election year, that's unlikely, but you can say we're gonna have another special session and work through all this stuff. That's not gonna happen. You've got it, you've got to, you've got to have a lot of uh a lot of background meetings. You gotta have a lot of of give and take, you've got to have a creation of a level of trust, you've got to have a creation that that, you know, we're on the we're all on the same wavelength trying to achieve the same same objective. And that doesn't, that's not gonna happen in, you know, 30 days or 45 days or 180 days or or or any of any of those sorts of time frames. Right.
SPEAKER_00The likelihood of them having a special session during an election year is pretty darn low. I saw Bruce Tangerman said something. He said, Alaska makes dollars only four ways CIT, prop tax, production tax, royalties. He said royalty relief will be the next requirement. Production taxes are already being manipulated. CIT is its own goat rope, and AGDC gave away three-quarters of the Project Glen Farm. How much are we even going to make on this? It's turning into a break-even proposition.
SPEAKER_01Yeah, I mean, and that's part of the that's part of the the mistrust or the lack of trust out there. I don't think anybody has a good feel for this. The the last time I saw revenue projections, last time I know that revenue projections were published, state revenue projections from the project were in like three years ago. And now the administration has promised to update those and publish those in connection with this property tax proposal, but uh there's not a good feel. I mean, this is this is also part of sort of the lack of background development that's gone on. There's not a good feel, I I don't think on anybody's part, on on what the revenue stream is to the state that's going to result from this project. And so you're you're sort of groping around in the dark. And that's again part of what's going on with Giesel. I think she's she's sitting there going, I don't, you know, I don't even know what the revenue stream is. And so her response to that is give me a lot of control. Give me a lot of control over this project because I don't trust where it's going. And and and and it's an overreaction in terms of give me too much control, but but give me a lot of control because I don't understand where this project's going. I think you miss, I I mean, there's there's as always when you get into a situation like this, there's probably a lot of fault to go around. But I just don't think the administration has done a good job of outlining. I mean, they've done a great job of outlining what the what the big scope pictures are. I mean, yes, we get we get energy for Alaska. Yes, we get a lot of jobs in terms of construction. Yes, we finally will find a way to monetize the monetize the North Slope. But I don't think administration's done a good job of bringing it down into things I look at, which is a revenue curve and and and how the pieces of those revenue curve come together. Without that, I mean, just sort of throwing the property tax in the in the middle of it and saying, bam, let's go to a volumetric property, an entirely volumetric property tax uh in the middle of that, you you've got no context. You can't say, oh, we're otherwise going to get X, and this will reduce X by Y, but we'll still get X. I mean X minus Y. Right. There's there's no context, no context to see that.
SPEAKER_00So I think Rob agrees with you uh as far as Glenfarn being kind of out of their depth in this, he says there's a cultural gap between the way Alaska is used to operating and the way Glenfarn is used to operating as well. So I think he agrees on that. He also mentions that Glenfarn has said that the feed study and cost estimate is done. They're just not releasing the number. Again, this goes back to my question of if you've got the number and you know it's there and you know you've got all the details. You we've done these NDAs before. We've had legislators be able to look at those numbers to be able to make those decisions. We, you know, you just need to be able to make that happen.
SPEAKER_01Yeah, and I'm not even sure there's confidence that the administration's seen those numbers. Now, feed, there's a difference between having feed numbers and and going to feed and deciding to go to feed. I mean, right, you don't decide to go to feed uh front-end engineering and design. You don't you don't design, you don't decide to do that until you have financing uh uh with within the ballpark and you've got you know uh uh sales agreements within the ballpark. We don't have we don't have that either. They may have a feed cost number, but they don't have the other pieces of feed that have that have come together uh as well. But I but I mean there's no i I don't have a sense, and I don't think the legislature has a sense that even the administration is comfortable, knows those numbers. I think I think there's a sense that the administration said, well, you know, whatever it is, it is. It's a private led project project. You you do you, yeah, yeah.
SPEAKER_00You do you. Tell us when you're done, kind of thing. We're not looking, we're not looking too deep on some of that stuff. Uh, but that's the difference between feed and FID, right? I mean, that's the uh because FID is final investment decision, that's when the real number comes out. Yeah. Right. Um Bruce Tant uh said uh he said it's starting to look like Governor Murkowski and Jim Clark's thousand-page gas proposal back in 2003. Don't read it, don't amend it, don't ask questions just to prove it. You think? Is it kind of is it looking at kind of the same thing?
SPEAKER_01Well, the problem, uh yeah, I mean, that was the perspective of some legislators back then. I the problem is we don't have a thousand-page document. I mean, the the thing with Murkowski was we had a thousand-page document, and there was a lot of effort put in on that. I mean, I contributed some number of those of those thousand pages, and there was a lot of effort put in on that uh between the administration and and the producers to try to negotiate it. Now, yeah, from the standpoint of the legislature, some legislators felt that they sort of got handed this pile of documents and said, you know, take it or don't look at it, just take it. But there's not even that this time. I mean, there's not even there's not even the sort of comprehensive thought-through sense that the administration and the and the project came to this comprehensive thought-through process on on how the state's going to share. It's sort of it it's it's murky in in the normal sense of the word, as opposed to in the murkowski sense of the word. Right. Right.
FY27 Budget Pressures And Election Year Spending
SPEAKER_00Well, it's like they said, what we have here is a failure to communicate, right? That's the whole problem when it uh comes down to it. Okay, uh, we're continuing with Brad Keithley, Alaskans for Sustainable Budgets, the weekly top three. We're on to number three, our final topic for today. Uh, and Brad says there is a building challenge uh on top of everything else that we've been dealing with. There's a building challenge in the fiscal year 27 budget. What what are we talking about here, Brad?
SPEAKER_01Yeah, so I tell you what is. I mean, when when I say we don't, there's not enough time left in this session to to to deal with deal with LNG. Even if they devoted every waking hour uh to trying to deal with LNG, I don't think there's enough time left in this session. But they're not gonna be able to devote every waking hour hour to dealing with LNG because there's there's their forces building that I think is gonna suck the oxygen uh out of the room, out of the remaining time in the legislature, and that is that is the FY27 budget. I mean, you can't not read an article, uh, you can't read a newspaper or a or a or a publication without seeing an article about somebody saying, oh, we need to spend more money on this. Education certainly has taken the lead. Uh, there are articles about how, yeah, we passed an increase last year, but it really wasn't enough. Uh, and and so we need more money for uh for K through 12. Uh, and look what's going on in Anchorage, and look what's going on in Matsu in terms of having to close schools because they don't have enough money. Um that's the argument being made. Um, and so we need more money out of the legislature on K through 12. Uh, we have the administration itself saying that there's a uh a maintenance problem, uh capital spending maintenance problem on schools, and that we're we may not have been doing this in the right way, and that we may need more money uh for capital spending on maintenance. Um, and and you can sort of go on and on and on down the list of people saying, of people arguing why we need more money. I mean, the Fairbanks News Miner uh uh sort of has it right. Uh they have a they have an article that or uh an editorial that says the illusion of easy money and the high price of overconfidence. And it's talking about you know the the the revenue forecast and and the forecast of additional money in F for FY uh 27 and what to do about that. And and they go through and say, you know, it we shouldn't spend it on dividends because they don't like to spend on dividends. We shouldn't spend it on dividends, we should put a lot uh sort of start to rebuild the CBR. Um but they should also, but they also say they should also, this is what they're talking about, the legislature, they should also direct one-time funds toward one-time uses, infrastructure projects, particularly those that unlock substantial federal matching dollars, fit that description. Strategic investments that strengthen Alaska's economy without committing it to ongoing costs that may not be able to sustain. So even the news miner who claims that it's trying to be conservative about this, is is is coming up with a list of things that that the legislature ought to be spending on. And then there is an op-ed that over the over the weekend that appeared in some of the papers with some guy arguing, uh, some guy from the southeast arguing that we ought to take all this oil money, this additional oil money we're gonna have at FY27, and we ought to invest it in renewables, uh, because that'll that'll lower energy costs of the state. I mean, there we're we're entering this period where there's no end to the ideas that people are gonna have uh for additional spending. So I think that I think the great debate in the second half of the legislature is gonna be how do we how do we deal with all this? I mean, how do we deal with all these people seeing these dollars that are showing up in the revenue forecast and saying, oh, I'm really I'm just a one-time spend, or this is something that you ought to do with with excess oil money, or this is, you know, see how see how many jobs this would this would generate if we if we spend it on that. I think there's gonna be no end to people pushing forward and saying that uh that they know how to help help the state deal with uh with those with those additional revenues. And certainly there's gonna be people that say, oh, we ought to want to pay it out in PFDs. We haven't we haven't paid uh uh statutory PFD like forever in the last decade. And so we ought to be you know fulfilling the obligation, this is what the statute says, uh, in terms of PFDs. And and so it's gonna be it's gonna be that sort of push against an environment where we really don't know oil prices, where oil prices are going, because if the war ended tomorrow, there would be a hangover effect, particularly on the LNG side, because of the damage done to Qatar's LNG facility. But but maybe that's sort of the big, the only big thing that carries over uh in terms of if the war ended tomorrow in terms of terms of energy prices. So we really don't know where oil prices are going to go. Oil revenues, state revenues are gonna go. We've got a bunch of people saying, I got great ideas about how to spend the the this excess revenue it looks like we're gonna have. Um, and we got a legislature, some of whom are gonna be conservative and say, look, you know, we've been down this road before, you see this stuff go up and down. We're just going to sort of cut to the chase and go, you know, with a$68 barrel or or whatever the whatever the the price level they decide. You know, and I and my argument is we ought to go with the average of the last 10 years. We're going to see people try try to do that. That's I I think that's I there's going to be a lot of a lot of debate, I think, in this last half of the legislature about where the FY27 budget goes. So that's going to be that's going to be sucking oxygen uh out of the room. And and you know, people who say, oh, we got to settle L and G, there's just not going to be that much oxygen left in the room to be able to be able to do that.
SPEAKER_00They're going to be worried about, well, we've got to get this budget passed. And of course, like we said, and like we've seen in the past, uh, when they had that last spike uh in the early 20s, when Natasha Van Imhoff said, we've got so much money, we don't know what to spend it on. I mean, that's kind of the idea, right? All this money is going to be not thinking about what is the long-term thing. I mean, the news miner had it right as far as saying, you know, we should uh we should, if we're gonna spend it, it should be one-time money only on one-time things. Of course, and and you're talking about this education thing, and of course, all the education stuff comes from the fact that many of these districts decided to take one-time money like COVID funds and spend it on recurring costs instead, and then use that recurring cost money for one time. It just it's a it's a consistent problem where we're eating ourselves at this point.
SPEAKER_01Well, one-time money isn't one-time money. I mean, you spend you you build an infrastructure infrastructure project, you set money aside for the infrastructure project, but then we get into the situation that we're in now where we got a bunch of this stuff that we can't maintain. And and that's because at the time we did the projects, we didn't set aside, we didn't escrow or we didn't otherwise provide for operating costs. We just we wanted to build it. We wanted to you know give out these construction contracts. So we wanted to build these things, and and so that that was all one-time money because we're just going to build it. But it's not really one-time money. So when you do a bunch of that stuff, it adds to the long-term operating cost because you got to maintain them um uh over the over the over the long period. So it's there's just a lot of, I think, uh the the Iran situation and the spring revenue forecast has created a lot of uncertainty about what's gonna happen with the FY27 budget and sort of unleashed a lot of different pressures on uh on coming to grips with that budget. And I think that's what's I think that's what's gonna drive the legislature or take the legislature's time in this last half.
SPEAKER_00I mean, that's my fear is that they're gonna repeat exactly what they've done in the past when they got a windfall instead of being you know conscientious with it, they just spend it all. They just spend, you know, just just per down. Oh, look at all the stuff we can spend it. And that's my fears. That's where we're gonna be. Uh Brad, we got to.
SPEAKER_01And it's an election year on top of that. So that ad that adds to the fear.
SPEAKER_00Right. What can I get to you? What can I get for you? Because whatever they can add this year, they can then go back out on the campaign trail and said, look at what I did for you. Not, you know, not understanding the two and three and five and ten year uh uh costs of that, you know, look at what I did for you. And that's the that's the other dangerous part. 60 seconds, Brad. Here, final thoughts for today.
SPEAKER_01Well, I think I think the the theme, if there is a theme through here, is that is that there's a lot of uncertainty. There's uncertainty about the budget, there's uncertainty about AKLNG. NPRA is sort of certain, but it's but it's long-term, long-term benefits, not not anything, not anything near term. So I think there's a lot of uncertainty. And and the problem with Alaska, the challenge with Alaska historically has been when there's a lot of uncertainty, we spend more because because oh, you we may have more.
Who Buys Alaska LNG And What Futures Say
SPEAKER_00We got to get the confidence up, we got to get the confidence up, we've got to get people to believe in us again. And look, we got all this money laying around. We should do something with it instead of putting it away for that rainy day, which we know is coming. We know the rainy day is coming. David says, I don't think David is has been following this LNG debate. He says, just curious, why does this man think Alaska has no LNG clients? Who will Alaska sell to? Fairbanks, villages, lots will buy LNG. Not sure why he doesn't see this. And I said it's about volume, right? I mean, if we sold all of the gas that Alaskans needed to Alaskans, that's just a drop in the bucket in the economics of building a multi-billion dollar pipeline, right?
SPEAKER_01Yeah, I think um, I think it's what, 5%, maybe 10% of the total volume of the pipe. And if that's all we sell to, the the cost is like$50 an MCF compared to you know the current price of$8 in the cookinglet. So it's um uh it's yeah, that yes, there are people to sell to in Alaska, a lot of a lot of small volumes to sell in Alaska, but that's not that's not what makes this project go.
SPEAKER_00Yeah, you've got to have the bigger ones. And of course, who knows? Uh, I mean, Asia, I know Harold's been going on and on about how China and Japan and Korea and Taiwan, uh, you know, with the closure of Iran and everything else, that they may be in the market for gas and everything. I mean, maybe, but again, we're waiting to see where that comes out.
SPEAKER_01Yeah, on Mondays, on Mondays, I publish Monday mornings, I publish uh an update on the latest futures prices in the LNG market. I mean, there's a futures market on LNG as well as there's a futures market on oil. And it's really interesting to look at at what Monday's chart did. Monday's chart was a lot higher prices this year and next, but then the tail, then there was a huge tail on on the futures market uh that went back down toward the$7 range uh in both in both Japan-Korea, the JKM market, Jam, uh the Japan-Korea market, and uh and in uh in Europe. And so I yeah, I think uh market players at this point are still viewing the LNG situation as a short-term situation. Yeah, Qatar says it's going to be out for five years, maybe it's not, um if the war stop tomorrow. Um uh, and and yes, there are all these other projects on the board. And so I don't think, I don't think when you look at the futures market, I don't think market players are convinced this is a long-term issue. And nobody, people are not going to invest in Alaska LNG if they don't think it's a long-term player, if they don't think the long-term economics work. So, yeah, there's a lot of, I mean, you can create a case, you know, work yourself up into a froth about saying, oh my God, Japan's at risk, Korea's at risk, China's at risk, they all they ought to go out and find, you know, replacement for uh for LNG. Well, yeah, but there's additional LNG out there in the world, and there's not, you're not gonna, even if, even if the plant that got hit in Qatar is out for the five years, that's only a portion of Qatar's production. You're not gonna go out and invest$40 billion or$60 billion or whatever the heck the number is in Alaska LNG based upon a five-year gap or a three-year gap or a six-year gap. Right. Um, it's gotta, it's gotta be, there's there got to be longer-term dynamics, and the and the futures market at least is telling you that's not there.
SPEAKER_00Do you think there's still a possibility that Trump could turn this into a strategic thing where it's a national strategic asset or something like they did during the war, uh, World War II, where they built those pipe? Do you think that's still a possibility? Oh, sure. Oh, sure, that's a possibility.
SPEAKER_01But um, yeah, I was I was intrigued. The first tranche, you know, Japan and Korea have committed to these investment funds in the US. The the first tranche of the Japan funds, the Japanese investment funds, have already been announced. The the the uses of that first of the first tranche. And Alaska LNG wasn't one of those. There were other energy projects in the lower 48 that were part that were announced as part of that tranche, but not but not Alaska LNG. So um, yeah, I think there's I think there's still a potential. There's always a potential that uh that Trump does that. But I just don't um it there there's no indication this second that that that that he's gonna do that or that uh Japan and Korea are gonna suddenly you know view this as a as a hugely strategic asset in which to in which they have to invest.
SPEAKER_00Two minutes left, Brad. What do you think the outcome is going to be of this legislative session? I mean, are we just gonna be are we just gonna party like it's 1999 and spend all the money? Or what I mean, what do you think is gonna happen with all the players that are in there now?
SPEAKER_01Well, I hate to say this, but but I think Bert and Lyman uh will will play a good role, a positive role in one respect. I think they will try to put a constraint on spending. Um I think if if it were left to the House side uh and the House uh finance chairman and the House Finance Committee, I think they would spend like it's 1999 or whatever the hell the phrase would be. Um But I think I think Burton Lyme and Burton Lyman have been through this enough times, they've seen enough of these cycles that I think they'll try to be a constraint on spending. Now, I don't think I don't think they're good on the PFD, and I don't think they're good on a lot of other issues, I don't think they're good on the POMV, and I don't think they're in oversight of the of the permanent fund corporation. I don't think they're good on those things. But in terms of acting as a spending constraint, in in this situation where all of a sudden we have this fly up in projected revenues and and everybody wants to spend it, in this situation, I think they'll be, I think there'll be a good constraint. And I think what the rest of the legislature is gonna be is people coming up of, well, we can spend it on this, or we can spend it on that, or boy, education needs more money, or this needs more money, or this needs more money. And hopefully we see Bert and Lyman saying, Yeah, yeah, yeah, yeah, yeah, yeah. But we're gonna base the budget on$68 or$66 or whatever. We're gonna, we're gonna, what I think, I think we're gonna see them sort of push back on that and act act as a constraint. At least that's my hope. Because if if they if they go all over the over the edge and they say, ah, 70, 72, 74, yeah, uh, if they go over the edge and say, yeah, we're gonna spend at that level, then boy, I think we're just I think we're just digging ourselves a huge hole that two years from now or three years from now, we're gonna look back on and say, what the heck were we doing? Uh but I but I have some faith in in Burton Lyman, sort of acting as constraints in that regard.
SPEAKER_00All right. Well, that's it for uh Brad Keithly, Alaskans for Sustainable Budgets, aka forsb.com. Thanks, Brad. Appreciate it, my friend. Good to talk with you.
SPEAKER_01Michael, as always, thanks for having me. All right, we'll see you uh next week. 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 next edition of the weekly top three.
