The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (6.8.2026)
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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 June 8, 2026.
This week, our top 3 issues are these: 1) we explain why the potential of ending up stuck in Phase 1 of the #AKLNG project poses an unacceptable risk to Alaskans (2:11), 2) we discuss what the lack of interest in the ANWR lease sale last week tells us about the North Slope oil situation (22:02), and 3) we explain why we think most, if not all, of the candidates for Governor seem oblivious to the signals Alaska consumers are sending about their economic situation (38:47).
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 Where To Listen
SPEAKER_01This is Brad Keithly, 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 June 8th, 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's 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 ask the question while we learned a lot this past week about the Alaska LNG project, is it really enough to demonstrate it's a good deal? Second, we discussed what the lack of interest in the ANWAR lease sale last week tells us about the North Slope oil situation. And third, we explained why we think most, if not all of the candidates for governor seem oblivious to the signals Alaska consumers are sending about their economic situation.
SPEAKER_00And now, let's join Michael.
Alaska LNG Hearings And Two Phases
SPEAKER_00So let's get started. Uh number one of the weekly top three. We learned a lot last week about uh AKL and G, but is it enough to get it over the line? That's your question today. And uh I'm interested to see what you have to say about it. Well, last week, excuse me.
SPEAKER_01Well, last week was a was a data-rich uh week in the LNG uh hearings. Um Glenn Farn finally uh was more forthcoming, although still within a range, but they were more forthcoming about the potential, the like the likely uh construction costs. Uh and we got a little bit more grounded with respect, well, a lot more grounded uh with respect to those potential construction costs than we had been before. Some are still doubting uh uh what NSTAR said about those construction costs, and you know, it hasn't been constructed, so there's a legitimate basis for doubting it. But but nevertheless, we got we got at least some narrowing of the of the of the construction costs that Glenfarn was uh that Glenfarn's talking about. And we also got uh some additional uh insight into the negotiations between Glenfarn and NSTAR about what's called the phase one uh gas contract. Now, the way the LNG uh project has been set up these last few years is in two phases. Phase one is the construction of the pipeline down to the Matsu, where it would interconnect with uh the NSTAR system and use that as a feeder pipe into the South Central uh uh gas supply. That's phase one, just the pipe itself from the north slope down to down to the Matsu. And then phase two is the addition of the additional kit or is the construction of the additional kit that's necessary for the for the export line. Uh one is a big uh uh uh processing plant or a big uh purification plant up on the north slope to handle additional supply the additional supplies of gas that would be necessary, the additional sources of gas that would be necessary for the um uh for the export volumes, and then the construction of the liquefaction plant itself down on the Kenai, and then the construction of a pipeline from the Matsu uh down over to uh the down over to the Kenai to uh to support the uh the export lines, the export volumes. So that's that's how it's been divided. And we got some insight into what one of the big issues has been what's that phase one price look like, uh, because there are very little volumes going through a very big pipe um uh in uh in phase one. And and the concern has been what the price, the price of those volumes are. So we got some additional insight into that in the course of the discussions. Right. Um and so we and so we so we know more than we did uh last week. But the question is, question in my mind, is it is it still good enough? Over the weekend, I tried to I tried to think of how I could formulate um uh some graph that that gave us some better look, some better understanding of what's going on here. And I've got two uh graphs that I put in a column uh you know on my Substack page yesterday. I discussed one of them sort of in the Friday landmine column, but then over the weekend I spent more time on them and came up with with two. And I I want to give those, I want to talk about those for a second.
Phase One Price Versus Market Reality
SPEAKER_01Um, okay, so this is the phase one rate, and this is the most difficult, the most problematic of the of the issues. This is the rate that would apply uh just to the volumes that are going in-state before the export facilities are built. Um, and and as you can see, well, there's three there's three lines on here. The red line is what's called the JKM price, which is the Asian LNG uh spot market uh price. The blue line at the top is what uh NSTAR and Glenn Farn talked about, the fixed price, talked about the price for phase one that they've agreed to, which is a fixed price escalated for inflation, fixed price beginning in 2029 when uh when phase one volumes would begin to live, uh begin to be delivered and escalated for inflation. And then the green line in the middle is an attempt at calculating what long-term contracts in the Asian Pacific uh market, LNG market look like. Basically, what those contracts do, what the Japanese and the Koreans have done over time, the Taiwanese have done over time, is develop an oil-indexed price uh based upon, um, to some degree, based upon the BTU value in a MCF of gas versus the BTU value in a barrel of oil, a fraction of the oil price that that is is reflects the energy equivalence of an MCF of gas. Uh, but it's a it's a price that's developed over time, a price approach that's developed over time that's been used extensively historically in the Japanese uh and the Korean markets for LNG. So these I've used these prices, the JKM price and the and the historic uh pricing model used in the Asian Pacific market, LNG, as as the proxies for what the price deliver the price of LNG delivered to South Central uh would look like. Uh the phase one, we're running short of cook inlet supply, so we need one of two things. We either need LNG supplies into South Central to supplement the cook in remaining cook inlet supplies, or we need the line down from the down from the slope. And this is an effort to look at the competitive position of those two. Um what you see is that and and I would say also that the red line and the green line, the two Asian Pacific uh LNG prices have been adjusted to reflect the costs of the additional kit that NSTAR says it would need to receive that it will need to receive import volume. So there's a there's a uh $5 additional charge on top of what the landed LNG would look like, price for the landed LNG would look like on top to account for the additional kit that NSTAR says it will need to to build to uh to uh receive the LNG and bring it bring it into its system. So what you see here is is an interesting thing. Because of the Iran War, LNG, global LNG, particularly spot prices, are currently elevated. I mean, we have we've had Qatar being taken out as a as a source of supply. Spot prices are in big demand. The spot price of LNG, the red line, the JKM price, um has escalated as a result of that. So has the oil price, um, although not to the same extent because the way the Japanese have done the oil index, it doesn't fully reflect increases in oil prices. It doesn't also fully reflect drops in oil prices, but but it's not, it's been elevated somewhat. The green line, the long-term price has been elevated somewhat uh in reflection of to reflect uh the the Iran war. But what you see over time, and I went into this in much greater depth in the Friday column in the land last week's Friday column in the landmine, what you see over time is the JKM price coming down hard. Uh once uh the Iran War is over and Qatar is is exporting again. The expectation is we go back to the situation that uh that we anticipated before the Iran War occurred, which is of a huge amount of LNG coming into the market, driving the price uh of LNG down. And so you see the JKM price, the red, the red line, uh going down rapidly uh as those additional, as the Iran War is over and as the additional supplies, long-term supplies of LNG come online. The green line, the oil price index line, follows, is also trending down as the expectation is when the Iran War is over, that oil prices will go back to the to the to something approaching the situation they were in before the Iran War, uh, which is a moderate price as opposed to the elevated price that we've had as a result of the Iran War. Not diving down, but but but but trending down uh over time. So you see that in the current situation with the Iran War, the fixed price that that that NSTAR and um uh uh uh Glenfarn are talking about is a pretty good price compared to the elevated prices that we've got in the Iran War. But as as that as the effects of the Iran War uh uh wear off, and as particularly as the as the anticipated JKM price uh goes down, you see that the blue line at the top, you see that blue line persistently getting out of touch with the with the potential LNG, the prices for potential LNG supplies coming into the coming into sales, South Central. What that means is we should have a very serious concern about this phase one fixed price that NSTAR and Glenfarn have entered into. You can see that that price increasingly may get out of touch with the market over time if we're if we're stuck in that price.
SPEAKER_00Yeah, and just for folks who are listening on the radio, at the end of this chart out at 2035, the three lines, JKM prices at 1098, the oil prices are at $14 and $14.5, and the blue line, which is the fixed price as it trends upward with inflation, $18.56. So it's nearly double what uh Brad is predicting the JKM price would potentially be when the Iran thing is over and everything else. So you've got quite a wide spread at the very end, an $8 difference essentially at MCF price. For those of you who are on the radio can't see the chart. Yeah.
SPEAKER_01So it puts so it puts the in-state, the Alaskan state, if we're stuck in phase one, puts the Alaska in the in-state market at incre at an increasing economic disadvantage, Alaskans at it at an increasing economic disadvantage as as we're stuck on that fixed price escalator, escalator for the for the phase one prices as the uh as as the other as the free market supply prices for JKM and the oil market uh uh fall.
Phase Two Economics And The Big Bet
SPEAKER_01Now the question is, are we gonna be stuck in phase one? And that's and that's what the second chart look is an attempt to look at. The second chart is an attempt to look at uh if we build, if if Glenfarn builds phase two, uh what's the economics of that gonna look like? And again, we've got the JKM price, which is the red line, and we've got the long-term uh oil index line into the Pacific Rim markets uh in green there. And the and the blue line, which you see beginning in 2033, 2034, 2035, is that blue line is what the phase one, the phase two, the full volume price looks at, looks like into the export market uh when uh when we get when we get to that point. Um and this is based upon that the the blue line is now based upon the expectations, the the midpoint of the range that Glennfarn gave for the uh uh for the potential costs of constructing the full kit, the full phase two kit, the export or the yeah, the phase, the phase two kit, the full export volumes, and the potential uh cost of that, uh taking it from uh from a number of sources. It's an approximation, not perfect, but but it sort of gets you get you in the range. And what you can see is is at the construction cost that Glenn Farn's now talking about, at full volumes, the the phase one price, uh phase two price for uh the export volumes is is higher than JKM, uh higher than the spot price, but lower than the oil index price. So it means that that potentially, although you know there's a lot of factors involved here, but potentially uh the the phase the phase two price, the export price that Jake that uh Lenfarm's coming up with is going to be sort of at the margin of potentially competitive um into the Pacific market. Not super competitive, uh, but not so totally out of the market that it's ridiculous to even think about it. So you've got you've got you've got the potential that if if the construction costs come in around where Glenn Farn's now talking about them coming in, that there's no price escalation, you've you you've got the potential that there's that there that phase two may work. If phase two works, the in-state price dives considerably. And Alaska has has a has a great deal in terms of gas prices because the volume increase uh of the of the phase two of the phase two volumes drive the in-state price down to about $5 or $6 or somewhere in that range, considerably below where the phase one price is. If these phase two prices don't, if these phase two volumes don't come in, though, and Alaska is stuck in phase one, then you see the Alaska price escalating and and really getting making Alaska much less competitive, much, much, much less competitive in terms of the in-state price than uh than than where it's going with imported LNG. So the real the real question here that all this that all this creates, the real question is, is phase two going to go? If phase two doesn't go, then the phase two, phase one price it escalates uh out of out of market considerably. If phase two does go, then the in state price is good. I think, you know, so so that it comes down to this question. Do you agree to the phase one price before you know phase two is going to go? And I think the answer to that is no, you don't, because the risk is too great that we get stuck in phase one, that Alaska gets stuck in phase one and has to pay prices that are considerably out of market for uh for its in-state uh in-state gas supplies. But that's that's that's sort of where the debate is starting to come down to.
SPEAKER_00Right. And so to simplify it, the price looks good now based on the elevated Iranian prices or what the Iranian war has done to worldwide prices on natural gas and et cetera, the the the the price looks good now. But once the effects of the war go away, which we assume is going to happen in that five-year period, you know, uh, then it doesn't it doesn't get then it's not it, then it would be more affordable to bring in uh import LNG than having our own line. But again, if we start looking at the what about the we're out of time here, but that 30, give me the if it's a 30-year mark, what does it look like in 30 years?
SPEAKER_01Oh, the in state, if we're stuck in phase one, the 30-year mark is horrible. I mean, we're way the heck out of market at that point. Uh, and we've we've essentially gone into something that's put Alaska at substantial disadvantage from an energy cost price uh 30 years out. Um if phase if phase two goes, if the instate if the uh if the export volumes go 30 years out, we look really good.
SPEAKER_00Can we depend on imported gas is Terry's question.
Can Imported LNG Be Reliable?
SPEAKER_00And I've seen that question from several people when I first started talking about it as an option because nobody wanted to talk about imported gas. And we even had some of the diehard Republicans go, oh, well, they could just cut us off at the knees and we'd be without gas and nobody. And and again, I mean, we've seen enemies sell gas to each other, and the only time they ever shut it off was when there was a war going on. So hypothetically, I suppose it could happen, but especially if we ended up getting gas from uh, you know, somewhere in the United States or from Kitomet or someplace else. I mean, yeah, we're gonna get gas. I don't think that I think we can depend on it, Brad.
SPEAKER_01Well, yeah, the international gas market is becoming a lot like uh the international oil market. There's multiple there we're developing multiple sources of supply at multiple points around the globe. We're we're there we're there we're finding additional supply sources, uh gas sources that the LNG projects are being proposed to take advantage of around the globe. So it's becoming a lot more the oil, the LNG market's becoming a lot more like the oil market. I mean, it it's almost to the point we're getting to the point where, you know, we do the US, the West Coast in particular, uh West Coast, United States depends on imported oil and depends on imported imported products. And we're just we're we're fine with that, we're living with that because there's multiple sources throughout the globe that the West Coast can, West Coast refiners can can buy from. LNG is becoming like that. So I don't I don't think there's a real issue around uh depending upon imported LNG. We were only if we were only depending on one or two sources of supply in the globe, then yeah, that would be an issue. But that's not that's not where the market's going.
SPEAKER_00But I think Frank really nails it here when he says, can we depend on imported fuel food? I mean, it's the same kind of, you know, it's a market-to-market thing. I mean, somebody wants to get paid. Brian asked a valid question, I think, on your first chart where you said it was adjusted for the kit, uh, which is basically adjusted for the investment and build out in the import facility. And he says, Doesn't that kit debt get retired? The answer is yes, but that's on a what 20, 30 year window. What's what's the window for the for the kit to be amortized out over the course of uh of what a couple decades?
SPEAKER_01Yeah, it's probably a 30-year amortization, I would guess. And I mean, knowing how utilities do these things. Um, and you have replacements. I mean, the kit doesn't, um the the framework doesn't uh uh go away, but the kit has to be, I mean, you have to put in new parts and new facilities and and upgrades and that sort of stuff. So, I mean, there's sort of an ongoing uh capital cost associated with it. I mean, what Brian's suggesting is if the kit didn't have if the kit did amortize away and and it was still there, then the price would come down because the cost of the of the import kit would come down. And so uh uh importing supplies would be even better for Alaska in that situation. But um I it it's I mean LNG facilities wear down, and so you've gotta you've gotta continually be reinvesting in them to to to keep them operating.
SPEAKER_00So it's a it's a forever thing, is what you're saying. Maybe not at that rate, but it's a forever thing at some point. Um, you don't have to replace them every 30 years, but you have to do yeah, right. Deferred maintenance, right? That Terry, Terry's like pointed out the deferred maintenance on it. Um well, Brad, give me an over and under. If you had to make a prediction right now, what's your under on it on it actually on phase one and phase two actually being done?
SPEAKER_01If you want to split them out, I would say phase two is marginal. I would say phase two has a potential. I mean, more potential than I've thought before, uh, because those construction costs that Glenn Farn's now talking about are a lot lower than I thought what we were talking about before. So phase two has a potential, but it's certain, but it's not certain. And so, and so, and so given that risk of the phase two volumes, I think it's foolish for Alaska to enter into the phase one agreement, the fixed price agreement, and build that, build the pipeline for just the phase one, for the phase one volumes. I think it's foolish to do that without knowing where phase two is going. So I I think I think we condition phase one on phase two and and and we we under we we make the concessions that's been asked. For the phase two price.
SPEAKER_00Brad Keith, Lee Alaskins for Sustainable Budgets and the weekly top three. We're on through number two, which was a lot, but now we're into number or we were on through number one, which is a lot. Now we're into number two.
ANWR Lease Sale And What It Signals
SPEAKER_00What does the continuing lack of interest in Anwar? Been a hot minute since we heard about Anwar. Uh, but what is it, what does it mean for us? What does it spell? Does it spell prosperity or doom and gloom? Well, it's Brad, so we probably know where it's going. Oh, oh, shots, shots fired. Uh, Brad, what what do you say? What does the continuing lack of interest in Anwar tell you as a 30-plus year oil and gas consultant and attorney? What does it tell you?
SPEAKER_01So, so last week, in the middle of everything else about L and G, we had the opening of bids on Anwar. And in light of what happened in NPRA earlier this summer, um, can I say it's summer when it's only 45? Anyway, earlier this year in NPRA, in light of what happened in NPRA, I think there was some hope that the ANWAR bids uh would would come in that we'd have some significant ANOR bids. NPRA attracted Shell, attracted Exxon. I mean, NPR NPRA, the NPR NPR NPRA leasing sale was a big surprise in terms of the number of players that uh that bid in for acreage in uh NPRA. And I think building on that, the the X the hope was that we would see something of the same thing in the Anwar bids. We didn't. There were only two bidders in Anwar. Uh one was the state, Ada, who bid for some more leases in Anwar. Uh, and the other was a couple of bids by John Hendricks's Hex, uh, which Hendrix then followed up with this great press release about Hex, you know, expands from the Cook Inlet and is now a North Slow player. Well, he got he bought a couple of leases in Anwar. That's that's that's what he did. Um, so generally speaking, I think the the reaction to the Anmoir sale is another dud. I mean, there wasn't an Exxon, there wasn't a shale, there wasn't an Anadarco, there wasn't any of the any of the players that we've seen over on the eastern side, uh, or on the western side rather, on the western side in MPRA, there's not any of the players that we'd seen over there come in, uh come into Anmoir. So why is that? Why do we have why did we have what I think most would characterize as a successful sale in MPRA? Why did we have such a another dud uh on the on the Anwar side? And um uh I think I think the answer is we haven't seen the type of of results over on the eastern side of the slope, over next to uh Anwar, that we're seeing over in MPRA. I mean, over on the western side of the slope, we've seen Coneco's Willow uh project, we've seen Santos' Pika project, uh, we've seen all sorts of additional developments out there. We saw the Biden administration approve uh the Willow project in MPRA. So we've seen the federal government give some approval to some activity, uh, investment activity, development activity out in MPRA. So we've seen we've seen things over on the western side of the slope in terms of additional resource and additional uh development over on the west side of the slope, uh and and federal approvals for that additional development over on the west side of the slope that gives some hope that that maybe once now that Conoco's established a beachhead with the Willow project on the west side of the slope, and now that we've seen some indication that there's a significant resource out in the west side, that that people are are going in and evaluating it and saying, look, that this looks like it's a a good project and uh and and or a good area and one that's developable, and so people are are bidding on it. We've not seen that on the eastern side. Uh the eastern side has had uh the Dami is probably a big development that people have followed over time. On the eastern side, that was sort of a a much uh a very disappointing development. Uh the oil-bearing rocks were highly fractured, and so it was very difficult to find uh a significant uh volume of of oil that was producible. Point Thompson has its own issues. It's a high pressure condensate reservoir, uh, which is really very difficult to produce. Uh that that abuts Anwar, and so the concern is maybe that's the sort of geology you see have can continuing into uh into Anwar. There is some early exploration play on the eastern side. Um uh and maybe maybe we will see something come out of that uh that will that will give people an indication that the resource, that there is a resource on the eastern side that is developable. Uh, but right now you're just not seeing as much uh as much promise on the eastern side, either in terms of the resource, the available availability of resource, or in the ability to develop the eastern side in the way, in the same way the western side is being developed. So I uh so I I think the the answer to the question is why is Anwar continuing to be a dud? I think the answer is the industry is really waiting on somebody to prove the hypothesis that there's something on the eastern side uh uh going after. We saw on the western side with PICA and with Willow, we've seen on the Western side that that there is something going after that that majors are coming in, spending money, investing, that they're getting federal approval to make those investments. Um and I think on the on the western side we're seeing that the the people realize that, yeah, Alaska's back uh in terms of resource, and Alaska may be back in terms of the ability to develop that resource. Um and so we're gonna we're gonna go focus on that. But in terms of the eastern side, I just I I we're not seeing a big uh resource development on the eastern side, a big resource opening on the on the eastern side that's convincing people that the resource is there, and we're not seeing any development in the eastern side beyond Point Thompson, uh in which is not in the Anwar, which is on state lands. We're not seeing any development on the eastern side that gives people hope that uh that they could uh actually develop if they found something in in on the eastern side in Anwar that they could that they could develop it.
SPEAKER_00And of course, the big challenge with Anwar, and we had this discussion yesterday with Adam Crumb, which was a very interesting discussion, about because he touted again uh Pika and all the oil and all the money that was going to come for Pika. And I pointed out to him that, you know, again, higher production, lower, uh, lower taxation, lower income to the state. And um they kind of waffled on it and everything else. Right? I mean, people are they're still saying, oh, look, all the Pika's bringing in all this money. Pika's bringing in all this oil. We're gonna get it, we're gonna be rolling in dough again. And again, all this stuff that goes on in Anwar is going to be uh, you know, not only is it a lower take because it's a federal money, on top of that, anything else they can do tax-wise, I mean, we're not gonna be rolling in, they could build out the whole eastern side in Anwar, and we're still not gonna see the money that we saw from the North Slope.
SPEAKER_01Yeah, under SB21, uh, as it has developed 10 years on, as it's gotten into its older age and develop the creaks and and and and problems that that happen when you get into an older age. Uh, as as as SB21 has got into the older age, we're seeing all sorts of problems that have developed as a result of some of the bells and whistles that were not obvious at the time SB21 was passed. And so, yeah, we do see, I mean, it you have to look no further than than the spring revenue forecast that Adam Crumb's own department, Department of Revenue, published. Yet you look no further than the spring revenue forecast that shows that as those additional volumes uh uh come on uh on the eastern side, or on the western side rather, and elsewhere, as those additional volumes come on, revenues from production tax uh are going down. And revenues from from royalties are staying flat because the the new production is coming from federal lands, which doesn't have royalty to the state. So you're so you're seeing a decline in in revenues, an absolute decline. I mean a drop in revenues from oil production going forward as a result of the bells and whistles that the creaks that are coming out in uh in in SB21 uh uh uh after the first 10 years.
SB21 Aging Credits And Falling State Take
SPEAKER_01So it's um um yeah, uh Adam Crum is just, I mean, I I don't think Adam ever understood his own department, much less anything else. I mean, I don't think he ever understood the revenue side of the state.
SPEAKER_00The look on his face when I talked about the governor's 10-year revenue forecast and how it showed that we were essentially broke was a little, I mean, he just, you know, again, he's the commissioner of revenue that puts out these reports, and he's because I'm talking about a fiscal plan, and we can't really have a fiscal plan and you know, and all this kind of stuff. It it is, it's somebody just said it's pretty disheartening, and and it is disheartening because again, he went on to try and tout how SB21 is the savior of us all and all these other kinds of stuff. I mean, I think the lobbying, uh, you know, he he he's he's been lobbied pretty hard, let's put it that way, uh, yeah into believing that.
SPEAKER_01Yeah, the talking points, the talking points that that that he has and other of these other of these candidates are running around, running around saying oil's gonna save us, it's just just stupid. I mean, uh you you have you need to spend all you need to do is spend like 15 minutes looking at the revenue forecasts that are coming, the spring and fall revenue forecasts that are coming out of the Department of Revenue, and you understand what's going on. You don't understand quite what's going on, you have to dig into it to understand what in SB21 has gone wrong. Um, and you have to spend some time going through that, which we've done, and I've got columns in the landmine that do that, but but you have to spend some time doing that. But in terms of the top line, in terms of the revenue line, 15 minutes with a revenue forecast tells you all you need to know about where revenues are going, revenues from oil are going. The more I mean, under SB21, as it as it has creaked into its old age, the more exploration we have, the more expiration development new development we have, the lower the the revenue. Not only the lower the percentage of take, but the absolute lower the revenue that's coming out of the out of production tax. So it's um it's a huge disappointment. Anyway, uh not only is not only does that mean the western side is not going to save us, we're not even gonna have the development on the eastern side that's even gonna enter into that discussion because the way it's going now, the eastern side is just not proving proving attractive to uh to potential uh bidders. Michael, I very seldom read the comments that are going on at the uh on the right, but I just saw this one from Barbara Haney. Can you pull that up? Because I want to discuss that. Uh uh Well, good, because I was going to as soon as well. There you go. Great minds think alike. All right. So Barbara says you would not have had any investment without SB21, but you have to go back into the history to understand there was zero exploration at the time. Well, there wasn't zero exploration, but there wasn't a whole lot. Um, and and she's and she's right on this point. SB21 was good at the time um uh because we were having very low exploration dollars uh in the state. And and as opposed to globally, there was a lot of exploration going on, but Alaska wasn't getting um its share of that. And SB21 uh was a good step at the time to make Alaska attractive again. What's happened is that is that SB21 uh has aged. Uh the credits that SB21 built in to attract producers have stacked on top of each other in a way that that wasn't projected uh at the time it was developed. I mean, like any mechanism, like machinery or electronics or anything, any mechanism, there are unanticipated consequences. And one of the unanticipated consequences was the way the credits are stacking on top of each other. It's not it's not the it's not what Barbara said uh in the uh uh in the case of zero uh or yafka uh overly generous, the write-offs were overly generous. It's not so much that, although that's a contributing factor, it's that the way that the GVR, the gross value reduction credit, uh works and the way it's sticking on top of, I mean, gross value reduction essentially says zero tax. We've talked about the effect on PICA, and we've looked at charts on PICA and other and Willow and how it works. But the gross value reduction provision essentially says uh no tax, zero tax on uh on new development, uh, on any new development, zero tax for like seven years on any new development. And so, and so it's that provision sitting on top of all the other provisions, all the other credits. Oh, and G VR also says that you're not subject to the to the tax floor, you're not subject to the 4% minimum uh gross uh uh gross proceeds uh tax. So you can see you can go below the 4%. Essentially, you know what that means is Repsol and Santos are paying zero tax for the first seven years, for the first seven years of your development. And as you continue to see that develop as you go out west, I mean it addition it has this sort of continuing effect on driving production revenues down. So it's that it's that provision, not foreseen. Because at the time, at the time we did SB21, we thought, you know, about three percent of the of the volumes are going to come from GBR. Now we're projecting over the next decade the the the revenue forecast is projecting we're going up to like 40 to 50 percent of the volumes are coming from GBR.
SPEAKER_00Unintended consequences. You're not saying, I mean, you're agreeing that SB21 did good things when the investment was low or there was disinvestment. I mean, that it did some good things there, but it was the unintended consequences that you couldn't foresee 10 years down the road that's now rearing its ugly head. And that's why these things should never be set in stone because there are unintended consequences and unforeseen circumstances and kind of that perfect storm of all the things coming. That's why we need to be able to revisit these uh these different uh tax uh roles and these things, because otherwise, you know, we could just get rooked, uh, or it could go the other way, and the oil companies could get rooked. Right. I mean, that was the the the uh that was the the back in the the late uh late 70s, early 80s when they had I can't remember what the name of the of the tax structure was, but it was, you know, they were down into the eight dollar range for oil or whatever, and they're like, we can't continue this. And so they had to uh so they had to make those changes.
SPEAKER_01Well, that's where SP21 came from. SP21 came from the fact that ACEs, the the Sarah Palin era ACES uh way overtook uh in terms of in terms of the revenues um uh from the oil companies and was a distance under the oil companies invest. So SP21 was was an effort, SP21, which was 20, what, 2013, 2014? Uh we hadn't looked so 2013, 2014, uh following on ACEs, which was 2007. So seven years later, the oil companies were screaming about you know the fact that we weren't that that the Alaska tax structure had gone out of date. And so we came back in with SB21 and fixed the tax the problems that that ACES had created. I I've never done a in the industry, my entire time in the industry, I never did a contract that didn't have reopeners at some point. Um, and about the longest those contracts would ever go in terms of reopeners is 10 years, right? Um, and and so now SB21 was in 2013, 2014. We're now, you know, 10 or 12, 12, 13 years down the road from when we did SB21. It's time to go back in and look at that thing.
SPEAKER_00Yeah, no, I and I and I would agree. I I as much, I mean, I again I'm a fan of the oil companies. I like what they do. Uh I like that you know to have Alaskans open for business, et cetera, et cetera. But it can't be universally. I mean, these people who were like, you can't do anything to them, they are bread and butt. No, they're only 20% now. They're not the necessarily the bread and butter that they used to be. When they were providing 50, 60 percent, that's one thing. But uh, but here we are today. Brad Keithly, Alaskans for Sustainable Budgets, the weekly top three. We're down to number three, the final one for today. Um, most candidates seem oblivious to the signals that Alaska consumers are sending. And I'll tell, I know why. I mean, I could give it to you sure in in the in the the short form is this, because there's no connectivity between the government and the private economy. That's pretty much it. But most candidates seem oblivious to it. Brad, what are your thoughts on it?
SPEAKER_01Well, there was a couple, there's a couple of headlines, a couple articles this past week that Rob Myers, frankly, sent to me uh that uh that I think are they they're giving you a
SNAP Growth And Rising Debt Stress
SPEAKER_01signal. They're giving the they should be giving those who reading who are reading the news, keeping up with the news, a signal that the economy isn't, the Alaska economy, uh down in the bowels of the Alaska economy isn't isn't doing very well. One was uh Alaska is one of only two states to see an increase in SNAP participants in 2025. Um Alaska is, you know, the federal government went through a bunch of uh the Trump administration went through a bunch of reform. The I think the one big beautiful act uh has uh has a bunch of provisions that really tighten the screws on SNAP uh on SNAP uh uh participation, SNAP uh uh uh benefits approvals. Yeah, thank you. SNAP benefits. Um and and so you've seen most states have a reduction in SNAP benefits, SNAP participants over the past uh few years as a result of the act. Uh but Alaska and Hawaii are two states that have seen an increase in SNAP participants. What that tells me is that the economics of the Alaska economy, when you get down into lower middle and and and lower income brackets is not doing very well. That we have more people applying for SNAP, more people qualifying for SNAP than we did uh did even before. The second one uh is uh uh out of the um uh Anchorage Daily News, the headline is Alaskans are increasingly falling short on debt payments, state report says. And it's talking again about the creditworthiness of Alaskans and the fact that they're that they're falling further and further behind, particularly on credit card debt, but also on other categories uh of debt, and another indication that things are not going very well down the bowels of the Alaska economy. It there's something about the Alaska economy that that that I try to focus on once a month in a in a Sunday chart. There's something about the Alaska economy that's important to understand. When you look at the Alaska economy on average and Alaska, the Alaska consumers on average, it's looking like it's reasonably well. It's not setting any whirlwind records in the in among the states in terms of its strength, but it's looking reasonably well. But when you get spend time in the census data and you try to understand what's going on by income bracket, you see a huge divide. And and what's going on is the upper income brackets are doing well, indeed, probably doing better than they've done before. When you look at the income tax data, there's the the upper income brackets are growing in terms of in terms of income. But the but the middle and lower income uh brackets are are falling behind, falling further and further behind. So on average, when you average in what's going on in the upper income brackets with what's going on in the middle and lower income brackets, Alaska's looking okay. But when you break it out and start looking at it by income bracket, you begin to see a real divide uh in the data. And I think what these headlines are telling you is is that um uh is that when down in the in the bowels of the Alaska economy, in the middle and lower income brackets, um Alaskans are increasingly falling short on debt payments. There's an increase in in demand for SNAP authorizations, and you're seeing that you're seeing the effects of what's going on in the middle and lower income brackets become more and more obvious with programs like this or with issues like this um developing. I think there's a great, I think there's a great opportunity, but you don't hear candidates talking about that at all,
PFD Cuts As A Regressive Tax
SPEAKER_01really. Um I think there's a great opportunity for for candidates to start talking about middle and lower income Alaska families need a tax break. I mean, PFD cuts are a tax, right? We've we've been through this for an infinite. We even got Adam Crumb to agree to that yesterday. I mean he agreed to that. All right, so PFD cuts are a tax, and and it's a but it's a hugely regressive tax that hits middle and lower income Alaska families a lot harder than it does upper income families. It barely barely touches uh upper income families in terms of in terms of the share share of income. So PFD cuts are a tax. Alaskans need a tax break. Alaskans middle income Alaska families need a tax break. The last numbers, I think I have it here. The last numbers I did, I don't have it here. The last numbers I did, oh, there it is. The last numbers I did showed that lower quartile in terms of the impact of PFD cuts, PFD taxes on those in the lower quartile incomes is 20% of their of their income is being taxed, potential income is being taxed through PFD cuts. 7% in the lower middle quartile, 4% in the upper middle quartile, only 1% uh in the uh in the upper quartile. And by the time you get out to the top 5%, uh it's zero, effectively zero, because it's so small as not even to get to a the 1% uh figure. Um, and so you have a huge tax that are hitting middle and lower income Alaska families. You see these sorts of headlines that talk about the impact of these programs of what's going on economically with lower and middle, with middle and lower income Alaska families. And so I think I think there's a huge potential to talk about we need tax reform. We need tax breaks for middle income families that are being affected by you know four to seven percent uh government take uh from their incomes compared to two percent on a flat tax, compared to even less than that because of the because you shove so much of the burden off on off on non-residents, or you push more so much of the burden off on tourists and other non-residents, even less than that, even less than the two percent with the sales tax. We Alaskans need tax reform, middle and lower income Alaskans need tax reform at a at a rate that's not particularly burdensome to up if you use sales taxes, right? Not particularly burdensome to uh to the upper income. I think there's a huge opportunity. I mean, we've seen the appeal of middle income families need tax relief. We've seen the appeal of that argument in other states, we've seen the appeal of it at a national level. There's an opportunity to make that argument in Alaska. And I and I it and I'm just I'm surprised that no candidates, particularly when you see headlines like this that give you an indication of what's going on with the middle economically with middle and lower income brackets, particularly when you see those sorts of headlines. I'm just surprised there's no Canada picking up on that and talking about the need for tax cuts for middle income Alaska families.
SPEAKER_00Well, some people would argue that it's a feature, not a bug, that this working is intended, because now they're creating that dependency state that we were talking about. And look at it. I mean, we got the Medicaid thing where, you know, one-third of Alaskans, one third to nearly a half of Alaskans are on Medicaid in one form or another. We've got the uh the SNAP benefits, we've got all this other stuff. We're creating the dependency state. And I think some people like that. They want you to depend on government, and others are just going along for the ride because they're so tax averse that they can't, and they don't can't they don't consider the PFD cut attacks, uh, the Randy's of the world, that uh they'll do anything to avoid it, even if it means growing the government.
SPEAKER_01Yeah, it's a death spiral, though, right? I mean, so what you do is you say, okay, we got these government programs, they are they are you know taking care of middle and lower income Alaska families. We're so the the solution is to grow those programs to make sure that they fully take care of middle income, lower middle and lower income Alaska families. Well, guess what the revenue source is for growing those programs? It's more PFD cuts. So it's a death spiral. You're making them worse off by taking more income out of their pockets to give them, to give a share of them, some select share of them, a program that that costs more and then takes more out of out of the out of their pockets. It's a it's a death spiral. We need a candidate who starts talking about a growth spiral. You know, tax cuts that result in growth by increasing income to middle and lower income Alaska families, reduce the dependency, increase the amount in their pockets to be able to spend in the local economy, which they do, and and is a growth spiral in terms of lifting them out of the economic situation they're in, making them better off, reducing the need for government programs, and and making the local economy better because we've got more money in their pockets.
SPEAKER_00This is the biggest problem right here. Uh, what a uh higher PFDs could reduce the pull on programs, but we'll need to ditch the hold harmless provisions to see the bold full benefits. Yeah. I mean, I I uh I I mean I agree with this, but like I said, don't think that this is not just working as intended, that this isn't uh that this is some kind of bug. This in some people's minds is exactly what they want. They want that dependency because, again, it gives them the power and justifies the power that they're taking by being able to spend all this money.
SPEAKER_01Well, Zach Fields, I guess, looks at it as as you know, we need more government employees, so we need more government union members, and and so that's more dues, and that's so that's more support for you know Zach's daytime job, which is being a uh union employee or Willowkowski's. I mean, yeah, I I I I understand that. But in terms of the gubernatorial candidates, in terms of you know, them focusing on the Alaska economy and focusing on out migration, I mean, this is a this plays a role in outmigration, right? You hit you hit middle and lower income Alaska families hardest. They're the if you look at the income tax data, they're the ones leaving. They're the ones that are that are that are out migrating. Top top 20%, top quartile are just they're happy. I mean, they're staying, they're growing, they're growing in number, but but the the middle and lower income Alaska families are the ones that are that that are leaving. So it play it plays into so many issues uh that are that are economically affecting the state. I'm just surprised that there's not a candidate who's picked up on it, particularly on the two sides, uh Shelly Hughes and JKT, both of whom run the fiscal policy working group in 19 in 2021, 2023, 2021, whatever year it was, both of whom were on the fiscal policy working group, and both of whom went into this issue in depth and understood the issue and came up with a with the proposed plan that they've now since abandoned the the thing that they're running for governor.
SPEAKER_00And we we we we pinged that off crumb yesterday and he just kind of deflected it. I mean, there's some good things, but you know, kind of I mean it just kind of deflected the whole thing, wouldn't commit to to doing anything on it and uh and everything else. So it's uh again working as intended. Uh Rob just said, we wonder why working age people are leaving the state. You and I have been talking about why working age people are leaving the state, and it's because they're getting taxed on their PFD, and there is no connection between the private economy doing well and the government doing well. And that's the problem. Without a lot of connectivity, it's going to continue to grow unchecked.
SPEAKER_01Yeah, and and let's look, let's, let's, let's look at what the PFD is. The PFD is the equivalent, the Alaska equivalent of royalty payments to landowners in the lower 48. In in Oklahoma, Texas, Louisiana, Arkansas, and New Mexico, Colorado, just you know, pick up producing state, West Virginia. In those states, landowners get royalty payments direct into their pockets that increases their ability. The, the, the, the, the fields are widespread. You got a lot of people who are benefiting from it. And so you get people who have economic strength, economic ability, who, you know, grow the local economies, make the contributions, you know, make the purchases in the local economy and grow the local economies. You have a growth spiral that go on in those states. The equivalent payment that's that's going on in Alaska, the the PFD, which is the equivalent of the royalty payment, the lower 48, you have a death spiral going on because governments are increasingly taxing it to pay for increasing government dependency programs that then are growing because you have people whose whose economic situation is declining because we're taxing their royalty payments. Um, and and we have an increased growing government dependency, which requires additional government spending, which reduces their royalty payments even more. You have a death spiral going on. You would think some candidate would be out there going, I want to talk about a growth spiral. I want to talk about making the Alaska economy stronger. And we can do it in a way that that restructures taxes, pushes a significant share of the burden off on non-residents, spreads the burden out much more broadly than it is right now, being focused on middle north uh Alaska families, and like occurs in Oklahoma and Texas and West Virginia and New Mexico and other producing states, results in a growth spiral. You would think there's a candidate out there that wants to talk about a growth spiral. But but you know, no, they just that they're they're not they're not thinking about this. Either they're too afraid of taking on the top 20% who are essentially paying no taxes now, they're too afraid of that, or they're they're not sharp enough to understand how you create a growth cycle.
SPEAKER_00Brad Keithly, uh Alaskans for
What Candidates Miss And Final Wrap
SPEAKER_00sustainable budgets. One final question. Uh Rick says, so Brad, what happens with no gas line? Coal, then electric appliance, lots of coal here. Can we use coal and create gas? I mean, I know now we're grasping at straws, but that's really the that's really the million-dollar question, is it not?
SPEAKER_01No, LNG imports. LNG imports are cheaper than, I mean, uh there may be people who want to argue with me about coal, but LNG imports are cheaper than any of those alternatives. And and there's a lot of LNG out there in the world. So uh I think that's where we go with no gas line for South Central.
SPEAKER_00All right. Brad Keithley, Alaskans for Sustainable Budgets. Thank you so much for coming on board. Um, are you are you liking any of the candidates, Brad, or are they all just looking poorly right now?
SPEAKER_01I want to like, I want to like Shelly. I want to like JKT because of their service on the on the fiscal policy working group, but they're just making it impossible with with their with their discussion of revenue and government spending. I mean, JKT wants to spend more on every government program that's out there. Uh Shelley uh somehow thinks magically if we make the economy better. Yeah, sorry about that. Um go ahead, JKT wants to JK JKT wants to wants to spend more on every government program. He's not talking about the good economics, growth economics. Right. Shelley out there is talking about you know resource development, but we've already talked about resource development under SB21. It keeps on going down in terms of in terms of revenues. So they're not talking about the right things. And so I want it, I want to favor, I want to be supportive of those, but they're just they're they're making it impossible.
SPEAKER_00All right. Brad Keithley, Alaskans for Sustainable Budgets. Thank you so much, my friend. We'll talk to you again next week.
SPEAKER_01As always, Michael, thanks for having me. Well, that's a wrap for another week's edition of the weekly top three from Alaskans for Sustainable Budgets. Thank you again for joining us. Remember that you can find past episodes on our YouTube, SoundCloud, Spotify, and Substack pages, and keep track of us during the week on Facebook and Twitter. This has been Brad Keithley, Managing Director of Alaskans for Sustainable Budgets. We look forward to you joining us again next week for the next edition of the weekly top three.
