The Weekly Top 3 (7.27.2026)

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 July 27, 2026.
The Weekly Top 3 is a regular weekly segment on The Michael Dukes Show. 

This week, our top 3 issues are these: 1) we discuss Enstar's petition for rehearing of its Cook Inlet storage proposal and where the process goes from there (2:10), 2) we discuss an issue that Hilcorp left out of its recent letter to the legislature, but we think is critical to understanding the S-corp issue (18:59), and 3) we explore where #AKLNG goes from here (37:28).

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.

Transcript

Welcome And Top Three Preview

SPEAKER_01 0:10

This is Brad Keithley, Managing Director of Alaskans for Sustainable Budgets. Welcome to the Weekly Top Three, the Top Three Things on Our Mind here at Alaskans for Sustainable Budgets for the week of July 27, 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 discuss NSTAR's petition for rehearing of its Cook Inlet Gas Storage Proposal and where that process goes from here. Second, we discuss an issue that Hillcorp left out of its recent letter to the legislature, but we think is critical to understanding the S-Corp issue. And third, we explore where AKLNG goes from here. And now let's join Michael.

NSTAR Pushes For Rehearing

SPEAKER_00 2:02

Let's talk about where we go from here. Um this week's topics start off with NSTAR's petition for rehearing on the storage proposal. Because again, as of last week, they got denied, uh, they got denied uh the uh the the Ken Eye Loop project by the RCA. Where where are we at on this? What's going on?

SPEAKER_01 2:24

So what we're seeing, I think, is NSTAR and RCA sort of struggling a little bit with each other, engaged in a little bit of a dance to try to achieve, NSTAR is trying to achieve its objective of essentially advance approval of this expenditure for the storage. And the RCA is struggling, I mean, and they're using sort of an extraordinary procedure to do that. And the RCA is sort of struggling to deal with that. Um, and and the stakes are not insignificant. NSTAR describes in its petition for rehearing of the commission's denial of NSTAR's initial application. NSTAR describes this um as its biggest expenditure, biggest capital investment in its history, $250 million, that will have a significant rate impact. So I can I you can understand from that why NSTAR wants advance approval. You can understand from that why the RCA is being very careful uh about advance approval. And what the what the NCA what the RCA did in its initial order uh denying was essentially to say, look, you haven't given us the RCA came up with reasons why you haven't given us enough to approve uh this this storage proposal, advance approval on this expenditure uh uh for the storage. And and what you see in NSTAR's uh uh petition for rehearing, very well written. I've got to commend uh the lawyers who drafted this and the people at the work at the at NSTAR who put it together, but very well written, sort of NSTAR going back in and saying, no, you didn't understand this piece, or maybe we didn't explain it well enough, and you didn't understand this piece, and you didn't understand that piece, in an effort to try to say to a continuation of the dance, saying, look, you know, there's enough here to give us advance approval. And it's and it's a and and NSTAR makes a good argument in the petition for rehearing. There's um there's a couple of things though that are still outstanding that I suspect will give the the the RCA trouble. Again, we're talking about $250 million capital investment that will have a rate impact. Um, and so I suspect there's a couple of things that will give the RCA trouble. One is the DNR uh approval

Why Advance Approval Matters

SPEAKER_01 4:45

of of the leases uh to granting the leases to the per the person, the company that NSTAR's purchasing the space from, the storage space from. And DNR still hasn't approved those leases. There's still a struggle between Hillcorp on the one part, on the one side and and and NSTAR's seller on the other part, on the other side uh about who owns uh the storage space. And DNR hasn't hasn't resolved that yet. NSTAR's response is look, in the past you've approved other things that have been contingent on, waiting on DNR approvals, and you haven't held up your process waiting on DNR to finish to finish their process. But they're there the NSTAR's analogies are to are to much more minor things than a $250 million capital expenditure. Um, and and there's the potential that DNR could attach conditions, you know, because DNR is caught in this struggle also, and it'll be looking for a way to to deal with the dance. Um, there's a potential that DNR could attach conditions that would have to its approval of the of the lease that would have material impact on on NSTAR's storage project and could have a material impact on on how the RCA feels about NSTAR's storage project. So that's still that's still sort of sitting out there uh unresolved. And the second thing that's sitting out there unresolved, it's you you got to dig on this one a little bit, but the RCA said, you haven't proven to us that you need the storage space. And NSTAR comes back in with a very good argument uh about why they need the storage space, either if it in the interim while they're waiting on either the big line or the LNG import uh line to be built after the LNG or after the LNG uh import uh facility is built and they're and they're uh using LNG imports. Uh very good uh reason why you need storage space in that also. Uh a decent reason, not the world's best, but a decent reason why they need the storage space if the big line is built and they go to phase and we go to phase two. Uh NSTAR, uh NSTAR's argument is our demand goes up and down, uh, and that will have rate consequences on the pipeline or have issues on the pipeline. And so we just want we want to be able to take at a steady rate uh over the course of a year. And the and the only way we can do that is if we have storage to put the gas in, uh, if it's coming to us in the summer when we don't have demand. So a decent argument on why they need the storage, uh, even if the big line is built. The the one circumstance that I'm not fully satisfied that they that they would need the storage is if the big line is built, phase one, if phase one of the big line is built, so you got the pipeline, but phase two is never built. They never find international purchasers, then you've got a huge line uh sitting there um uh feeding just South Central demand or South Central plus a little bit of demand. And and you can line pack, I mean, drawing up and down on the line will be a form of storage. And if there's no other users on the line, or there's very few other users on the line, like there might be a phase one gets if we get stuck in phase one, then you may not need a storage facility, um, a separate storage facility. So if you if you build the storage facility, you spent this $250 million, you're you're having a rate impact, and then phase one is built, and then we never get to phase two, then you've got you've built some redundancy. And the question is whether ratepayers should be paying for that redundancy. So I I I I think those questions are still hanging out there. And and and what NSTAR and the RCA is are still struggling to do now is in this is in this dance, trying to figure out something that will give NSTAR what they want for financing purposes. That is the ability to go to their uh capital sources and say, look, we've we've we've got this between the ditches, we're gonna be fine uh uh if everything else uh uh goes according to plan. Uh what they're looking for is struggling between that and the RCA sort of holding back its cards to make sure that there's not an unnecessary rate impact on consumers. I've thought about this, and and and this seems a situation which would be good to for the RCA to issue an order approving subject to conditions. Um, and the conditions including the resolution of the of the DNR in a satisfactory way that the RCA would then approve would then review after the DNR orders out. I'm not quite sure how to deal with the phase one issue, but but I'm I'm sure there's a way that that that minds can come up with that. And I and I think I think an order approving subject to conditions is one way to do it. Another is to sort of piggyback on the FERCS process of issuing preliminary determinations, which is essentially an order subject to conditions, but they call it something else. A preliminary determination that the that the project is in the public interest or the the project is prudent, uh, subject to uh uh subsequent uh uh uh things. In the first case, it's usually environmental, but subject to uh a preliminary deterrent determination, subject to these additional things. The dance I will say that NSTAR's rehearing application did a wonderful job advancing the dance. Now the question is, will the RCA respond to that and try to find a way to put this all together? Or will the RCA one more time say, throw up their hands and say, look, you still haven't proven proven the case?

SPEAKER_00 10:21

The big challenge here, of course, is, and we're gonna get into this a little bit later, but is there's a timing issue because I mean we're running low on gas, right? I mean, that's the big thing. I mean, I was a little surprised when the RCA was like, Well, you didn't really give us a good reason. And I'm just thinking, wait, we've been talking about this for three months, or for uh more than that, you know, 10 months, that we're running out of gas and that we need to pay, you know, and their argument of storage and everything else. So um the re-hearing definitely, or the re-application definitely covered that uh rather well. Um, and and quickly, uh, here

DNR Leases And Pore Space Fight

SPEAKER_00 10:55

got about a minute and a half. Explain to me again this the uh you were saying, you know, Hill Corp and AIX and everything else, they're fighting out over who owns the. I mean, how do we not know who the ownership is or who the leaser is or whatever? How did that happen? We got two companies fighting over the same patch of ground, and you're like, wait a second, what do you mean who owns who owns the rights to this?

SPEAKER_01 11:15

I tell you, the lease situation in the cookinglet is is one strange animal sometimes. Uh, and I haven't I haven't spent a whole lot of time trying to drop into that, but you can have uh you can have disputes, and this is poor space. This isn't this isn't who owns the rights to produce the gas. AIX has been doing that, and AIX has been taking the proceeds from the gas. This is who owns the poor space, which is what's left after the gas is uh after the gas has been produced. This is sort of the empty space between the rocks, the empty container where the gas came from, right? Right. And so and so poor space can sometimes be subject to different different ownership. Get this, sometimes subject to different ownership than than the rights to produce the gas. And and I I'm gonna guess that if I got into the middle of the DNR proceeding, that would be what's what's going on. But it's not, it doesn't surprise me that you have this sort of dispute in the cook inlet. There's so many overlays, so many farm outs, so many, you know, uh reversionary interests, so so much that's gone on over the years in the cook inlet that you have sometimes a pretty uh pretty difficult uh situation. And this one being about pore space, um, sort of sort of falls into that into that crack.

SPEAKER_00 12:27

But it's not an as you pointed out, it's not unusual to give uh uh assessments based on preliminary findings with conditions down the road, like you can if this, then that kind of thing. That's not unusual. So it was kind of unusual for the RCA to say we need absolute certainty, or yeah, no, I so this is an extraordinary procedure, all right.

SPEAKER_01 12:48

I mean, nobody's ever asked for advance approval of $250 million before. Um, and so and so the RCA, I can see the internal RCA discussion. Well, how do we deal with this? Ah, let's just send it back. We and tell them we don't have enough because we because they don't have enough. Um, and and so let's just send it back and and you go write up a bunch of things that you think we need. And I can see the RCA doing that. I I think NSTAR's application is uh the re-hearing petition is let's get serious about this. Let's let's you know, let's let's close in on the dance and let's find the right steps to uh to accomplish what we want, which is some sort of determination we can take to the financial backers and what you want, which is to leave you some flexibility because we don't know everything yet. Um and I and I and I hope that's where they get to. I mean, I could see the RCA rejecting it again. I it wouldn't, I don't think it's useful for the RCA to do that. I think I think we need to bring this dance to to to some sort of some sort of positioning so that so that when the DNR issue is resolved and whatever we figure out on phase one, phase two, when that's resolved, they can go forward with this storage because they do need it. Um uh, but but you know, we're not we're not all the way there yet. And we just need to figure out where in the dance we sort of we sort of put things while while those pieces fall into place.

SPEAKER_00 14:10

The long and the short of it is the ratepayers are gonna be on the hook for 250 million dollars by the time it's all said and done. So your prices, they is going up no matter what at this point. Yeah. Craig says, if you don't got a wood stove, get one, because there's a lot of cold winters ahead of us. I mean, yeah, if you don't have a if you don't have an alternate heat source at this point, you uh you may wanna you may want to look into that. Um, because oof, man. And but it's not just the heat, it's the electricity, too. I mean, how much are you know how much our um uh how much of our electricity is being drawn by this stuff and and uh you know what are we get what are we gonna end up paying? That's what gets me is the is the the electricity costs because that's what I see, that's what I'm paying every month around here, like oof, how much higher can it get? You know, uh it's gonna be a it's gonna be a tough situation. Well, unfortunately, unfortunately it can get higher. I mean it's

Do We Truly Need Storage?

SPEAKER_00 15:05

it's already gotten higher in just the last since I took over last year, it's already gotten higher by about 17%.

SPEAKER_01 15:12

So yeah, I mean, I uh so the days of cheap gas are over. The days of cheap gas in the cook inlet are over. Um and and what if whichever direction we go, I mean, some people say, oh, if the big line comes, under one circumstance, if the big line comes, um and we have phase two, we have export customers, and uh a sufficient number of export customers paying full price. There's a big question about that, a sufficient number of export customers paying full price to absorb a big chunk of the cost of the of the facilities. Under that circumstance, we go back to fairly cheap gas, um less expensive gas than we're otherwise facing. But at least for a few years, we're gonna be in a in a you know what whether whether it's you know, somebody finds a new cook inlet field and you know they demand the the a higher price or to go out and do that, or uh whether we have LNG exports, we're gonna be paying higher prices at least for a few years.

SPEAKER_00 16:14

Yeah, no, I I definitely I definitely see that and feel that. And in a high energy industry, uh it's uh like radio. It's definitely uh it's definitely a uh an eye-opener when you're like, oof, do I want to do that or not? So it's uh it's great. Um, let's see. Oh, Brian says, don't worry. Brian says, hang on a little bit, global warming will be the problem. Sure. Sure, that's what's gonna so glad that's gonna that's gonna happen. Uh Rick says, some people are starting to wake up, the line is not going to magically appear. Legislators get it better get a move on because the gas is at least three to four years away. Worried now, just wait. How bad will it be in three years? I mean, that's if we even get beyond this. I mean, I think most legislators, Brad, are resigned to the fact that we're done and uh it'll be another governor and another legislature and maybe another developer before we ever see what's uh happening here.

SPEAKER_01 17:10

Yeah, we're gonna talk about that in uh in the third segment a lot, probably too much from my standpoint. But uh, but we're gonna talk about that in the third segment. But yeah, it's I mean, they're all inter those these two issues uh are intertwined. I mean, what NSTAR does is intertwined with what happens on on that front, and what happens on that front is intertwined with what's going on globally and and global competition and all sorts of other things. There's no there's nothing this is the tough. I mean, and and so the RCA is sort of sitting in the middle of this, right? Right. There's nothing that there's a stake, and you can say this is an absolute certainty. There's gonna be an absolute certainty that that XYZ happens um in terms of in terms of how this all plays out. So it is and so the RCA is saying, look, you know, I we some of us may have political careers down the road. We don't want to make a wrong decision here. So it's um in in uncertainty it things are difficult. But I but I but I but I do think that if you view this as a dance, and I've been involved in a number of these over the years, if you view this as a dance, NSTAR, the the RCA sort of NSTAR made its opening bid, the RCA responded with you know sort of no Trump or something, um as a bid, not a not a political statement, as a as a bridge bid. And uh and uh and uh and n star saying, well, how about you know three of diamonds or something? I it's they're they're they're trying to they're trying to find their way in a in an uncertain environment towards something that will be meaningful for both of them. Uh Terry said, well, or Rick said, welcome to the party, pal.

SPEAKER_00 18:49

Terry said the AA party. It's the Advil at alcohol party this morning. It's Tuesday's the AA day. You know, it's hard to be an AA today, that's for sure. The weekly top three continues. Brad Keithley, Alaskans for Sustainable Budgets.

Hillcorp’s Letter And The Missing Piece

SPEAKER_00 19:04

And number two of the weekly top three is what Hillcorp left out of their letter uh to the legislature. Uh, but Brad thinks it's critical uh to the issue. Uh Brad, what what are you what are you talking about here?

SPEAKER_01 19:19

All right. So everybody's familiar, I hope, with the background of how the legislature left things and the and the blame that some put on Hillcorp for causing the the disruption at the end of the legislative session about LNG and and and then Hill Corp wrote a letter back uh essentially saying this is why uh we uh we have concerns about what you were what you're trying to do with to us with the S-Corp. Um fairly long letter. Um and and you know if you read it on the surface without understanding how the world works, um, you sort of go, oh, yeah, that makes a lot of sense. And why is the legislature doing that? But here's here's my two cents on how the world works and why I don't have a lot of compassion for Hillcorp in this situation. Hillcorp's the operator of the two biggest fields on the slope. Prudhoe and well, potentially the two biggest fields on this on the slope, if you certainly the two biggest gas fields on the slope. Let me try it that way. Uh Prudhoe and Point Thompson. They're the operator of both. But they aren't the majority owner in either. They are a minority owner in both of them. Uh Prudho, uh, let's see, Exxon owns 36% 36.4%. And when you're a producer, these decimals matter, so I better better mention them. Exxon owns 36.4%. Exxon's the the plurality owner, it has the highest ownership stake in Prudhoe. Conico owns 36.8%, not that far behind. Hillcorp only owns 26.36%. So Hill Corp is the operator, but it's the third, only the third largest uh working interest owner in the field. And then Chevron has 1.16,

Rates Rise As Gas Runs Low

SPEAKER_01 21:05

and I think there's a couple of other owners as well. On the Point Thompson side, it's even more well, it's not as more lopsided, but it's but it's pretty lopsided. On the Point Thompson side, Exxon owns 62%, um, by far the majority owner. Hillcorp operates Point Thompson, but only owns 37%, and Chevron owns 1%, and there may be others that own fractions of a of a percentage as well. So when you come to investment decisions in those fields, and any fields that have any field that has joint ownership, um, when you come to investment in those decisions in those fields, it takes all of the working interest owners agreeing to the investment before the investment goes forward. No one with with in unless they're willing to undertake a lot of penalties, which very rarely does anybody do that. No one owner can go it alone on investments. The operator can't go it alone. The operator executes on the investments, but the operator can't go it alone on investments. And any working interest owner can't go it alone on investments. So everybody has to has to invest equal according to their percentage share in any uh uh in in any development that goes on in a field. So when Hill Corp says, you know, look, you know, we're not gonna invest if uh if you don't uh continue to to to subsidize us by excluding us from the from the corporate income tax, you know, that's that's essential to our investment strategy. Here's the problem I have with that. Exxon and Coneco are both subject to the corporate income tax. They both pay that and factor that in when they make investment decisions. And they nonetheless go forward with with with with making investments in those fields in particular. Uh when uh when when they you know when when the field does a development project, Exxon and Conoco are paying a corporate income tax that that arises out of uh their share of the production from from the additional investments they make. So they factor it in. So when Hillcorp says, oh, we can't do that, I just don't, I don't get that. Because because Conoco can do it and is doing it. Exxon can do it and is doing it on both in both Prudhoe and Point Thompson. Um and now Hillcorp says, well, we can't do that. We we can't stand that additional cost, or that additional cost would would mean that we have to charge more. Exxon and Conico have also entered into present agreements with uh with uh Glenn Farn. And to my knowledge, Glenfarn is not complaining about those. It's satisfied with the present agreements it's entered into with those two producers and satisfied with whatever pricing provisions are included in there. And those producers would have factored in the corporate income tax uh in in connection with uh with the investments that are in connection with those contracts that they will have that they the precedent agreements they've they've agreed with with Glenfarn. And so, and so that's from their standpoint, that's resolved. I don't get why Hill Corp. I understand why people say things. They want to, you know, create sympathy and make money for themselves. But I don't get why Hillcorp should be should be treated differently than Exxon and Conico, who have entered into press it agreements for a price that Glenn Farns finds satisfactory, that incorporates whatever they pay as a as part of the as part of their corporate income tax. Uh and and all of a sudden Hillcorp

Why S Corp Claims Ring Hollow

SPEAKER_01 24:55

gets to be treated separately, that that somehow when they sell their interest, their share of the working interest in the or their share of the production from the field, that they need some sort of special treatment uh uh in connection with uh in connection with their pricing. I this is this is uh just a fluke of history that we're dealing with. I mean BP also was subject to the corporate income tax, everybody was subject to the corporate income tax. Right. They all they all made their decisions based on that. Hill Corp comes in as an S-corp and and sort of sneaks through the loophole of sneaks through the tax without having to pay it. Um and and now is claiming that it's affecting their investment decisions uh when it's not when Kanico and Exxon are paying the same thing. When Kanico and Exxon are paying the tax and it's not affecting their investment decisions. So it's just, I mean, that's a factor, that's a big factor to me. So when I read the Hill Corb letter, I I read it and I go, yeah, okay, I I get so but but Kanico and Exxon are doing this, guys. And Kanico and Exxon are making the same investment decisions in those fields you are, and Coneko and Exxon are entering into the same contracts, same type of contracts with Blend Farn that you are. I don't get why you think you you you deserve some sort of special treatment out of all this.

SPEAKER_00 26:17

And this again, just to make the the I guess to to play along with what you're saying here, this is not unlike what Hillcorp is doing in other places, right? Texas and Louisiana. I mean, they're they're paying those prof they're paying those taxes in a different way. Now, again, I'm not one for advocating for taxes, but there is a there is a fairness and equity issue, I guess. They came up here and under a certain thing, they've gotten this uh this free pass for a number of years. If the legislature decides to change it and make it equitable with the C Corps, I've got no problem with it as long as the process is followed. Um, but uh the argument that somehow everybody else is doing it, but we can't do it, you're saying is ringing false.

SPEAKER_01 27:00

Yeah, it just it it just I mean it it just I I've been around this industry a long time, and and I know how decisions are made among working interest owners. I know how investment decisions are made, I know the process that they go through, I know the the economics, and everybody's got their own economics. Exxon has their own economics. I mean, a lot of this is Exxon says, okay, I've got a proposal at Prudhoe Bay, and I've got a proposal in Qatar or wherever I've got a big you know LNG project or I've got a big oil project. And how does one compare to the other? And do I make an investment decision here as opposed to there? Conoco does the same thing. Conoco says, I got that investment here, I got an investment, you know, Venezuela now or someplace else. And and and how do I make that? I I understand that process. Uh, but but when you get down to it, I mean, the process is what what are the costs gonna be of the Alaska project? And corporate income tax is gonna be a factor in both the Coneco and Exxon decisions. And if they go forward with the project, they're gonna, they're going to have said, yeah, we're gonna, we're gonna bear the the resulting impact of the corporate income tax on that. I don't get why Hill Corp gets a should get a pass uh on that. Again, you know, I didn't start this segment with 1.9 billion, but I'll but I'll but I'll throw it up now. Again, the state's facing a $1.9 billion deficit. And closing that deficit through through revenue is not is something is something we've got to find ways to do. We need to close a part of it through spending cuts. I understand that, but but close but but spending cuts won't close all that deficit. So closing this deficit through reasonable revenue measures is something that uh that we've got to do. And and this this one, I mean, I understand Hill Corp doesn't want to pay it, and I understand Hill Corps can can create all sorts of reasons why they they think they shouldn't pay it. But but this one is one that seems strikes me as reasonable. And the defense that I'm not gonna make an investment if I don't get this, uh just doesn't ring true because Conoco and Phillips or Conoco and Exxon are making those investments and they're paying the corporate income tax.

SPEAKER_00 29:11

Uh, it'd be curious to see, I'd be curious to see what Conoco and Exxon's commentary is on this, um, you know, from their perspective, since again, even on and especially on Point Thompson, where Exxon owns 60 whatever percent of the field, I mean, they'd be like, hey, we we'd love to sell this, we'd be okay with that. I mean, it seems like they're letting Hillcorp do all the talking at this point.

SPEAKER_01 29:33

Well, I I I uh it's no great secret that all of the

Producer Silence And Election Stakes

SPEAKER_01 29:40

producers and all of the industry has sort of entered into a death pack with each other. None of us will speak ill about another one of us for fear that they'll then that everybody will then turn on us. Um, and so Exxon and Conaco, you're never gonna get them to talk about this. They're gonna they I mean they talk through Aoga, and Aoga is all is is all in this death pact also, and they'll say, yes, this is bad, because one of our members thinks it's bad. And so the the death pact is if any member thinks it's bad, then all of the members thinks it's bad.

SPEAKER_00 30:12

Uh just out of curiosity, do you think that the uh do you think that the S-Corp tax, the pass-through tax, will be uh priority number one in the upcoming session? Do you think that that uh that will be the next uh the next high watermark that people are trying to reach for here in the upcoming session since it failed uh again here in this one? Depends on the governor.

SPEAKER_01 30:33

I mean, if Bernadette's governor, we're gonna go through a big cycle like we did at the beginning of the Dunleby administration about, you know, I'm gonna cut, I'm gonna cut my way to out of this budget, and that'll fail. And but it'll take us a year or two before before we all realize that fails. If uh if if somebody else is elected governor, uh there are candidates where the S Corp would be part of a revenue package uh to try to address a portion of the uh uh of the deficit. And so that would that would raise its profile. To me, it should be not not the number one issue. Rev a revenue package, a reasonable revenue package. Reasonable fiscal package should be should be the number one issue. But this would be what this would be a part of that. It's just it's just too it's just too logical to say the other producers are paying it. Why can't you pay it? And and and it's just too logical to to to you know, when you think about this from the big picture, too logical a loophole to close, not to not to not to close it.

SPEAKER_00 31:37

You know, Craig, I can understand you having a uh uh be in discontent or disagreement with Brad, but you shouldn't put stuff out there that we just know is not true. Brad is not a huge walker supported.

SPEAKER_01 31:54

I mean just throw stuff out there. You know, it I think Craig dropped out of dropped out of the moon or something if he if he believes that. He hasn't he hasn't watched the last five years or 10 years of our discussion.

SPEAKER_00 32:06

No, he's just he's just very upset with the direction that you've taken everything here. Uh I had to laugh at the beginning of the segment uh because he said I was just looking for the comment. Uh he said basically he said, what's the over and under that Brad is going to mention uh um uh Texas billionaires in the in in the segment here. And Brad, that's not Brad's thing. It's never been Brad's thing. I I don't know how uh I don't know how Craig is, he's just it's like he's a broken record. You're just stuck in the book.

SPEAKER_01 32:38

But you know, what what what I what I what I don't know and what would be interesting, and I and it's either yes or no, is whether Craig's a Hill Corp employee or a Hill Corp or Hill Corp supplier employee. Yeah. Um and and whether that's drive what what what it factor that's uh that's having on his uh on his comments. But yeah, he he says that crap all the time, and it's pretty humorous.

SPEAKER_00 33:00

Yeah. Well, it's uh anyway, it's uh you know, I don't mind you having a difference of opinion with Brad. I mean, that's fine, or me or whoever, but don't just throw stuff out there that's uh that uh you know, I don't know any, yeah, right. Chris, the other Chris says, yeah, no one is a I mean that's that's it. No one is a Walker supporter. Um it's uh it's it's crazy.

SPEAKER_01 33:23

You know, you know, the sad thing about Walker, just just as an aside, the sad thing about Walker is he's actually trying to talk about a fiscal plan. It's the wrong one, but he's actually trying to talk about a fiscal plan. And I wrote a column this past week that I that said, you know, nobody's talking about a fiscal plan, none of the candidates are talking about a fiscal plan. And somebody, somebody sent me a note and saying, well, Walker is. And and you know, my response to that is, yeah, but I don't trust him. I mean, I I've been down this road, um, and and I don't trust, you know, the guy at all after what he did in 2016, so or 2017 or whatever year that was 2016, fiscal year 2017. There we go. Right, right. Um, I don't trust the guy at all. So I yeah, he's I I guess he's got a fiscal plan, but I actually haven't read that much of it because I just don't trust him uh uh personally uh uh with respect to he's not he's not trustworthy.

SPEAKER_00 34:18

I was a supporter of his in his first run uh and in his second. Oh watch out, Craig will be on you now up until the time that he uh took on uh Byron Millot. And then I was like, you've lost your mind. Um and so uh yeah, no, it's uh I don't know anybody who's a who's a uh a uh a walker, uh Bill Walker supporter around here. It's just it's just it's crazy, absolutely crazy. Um his physic, yeah, his fiscal plan is to eliminate the PFD. That's his fiscal plan. Let's just he says not. Yeah, oh yeah, but he wants to cash it all out and then give it take what's left. And uh, you know, we hope you like your ten thousand dollars or whatever, and the and the rest of us could just, you know, whatever.

SPEAKER_01 35:03

Oh no, he's evolved beyond that. Now he's adopted essentially adopted Liesel's 2015 or 2016 position that now that the permanent fund is of a certain size and now the dividends would be of X size, let's change that. Let's change how we do things and let's move the permanent fund earnings over to the over to state government and let's let's let the the PFD be determined by you know the uh declining uh production tax revenues. So yeah, it's he he's he's not he's not any longer cashing it out. He's now got a new plan that's basically let's go back to where Liesel was.

SPEAKER_00 35:36

Yeah, which again, where Liesl? Wait, I'm looking for where's my crickets because I mean it's oh that's a that's Liesel Lisa Liesl McGuire. Who's that again? I mean, you know, uh, you know, I just she threw her name in the hat, then changed, then changed lieutenant governor candidates and Sarah Rasmussen now or somebody. Anyway, it's uh it's a uh I don't know, man. This elect may you live in interesting times is definitely a curse right now. Uh that's uh that's that's the whole thing right now. Uh eliminating the PFD, I think most of the legislature would be okay with that at this point. It would take it off their hands, get it out of the room, they'd quit fighting over it, and government could have all that money, and they wouldn't have to, uh they wouldn't have to be shamefaced every time somebody screamed about uh permanent fund dividends, Brad.

SPEAKER_01 36:25

Yeah, well, yeah, and they could blame it on Walker again. I mean, I it's it's um I uh again, I have I have not found a candidate I can support, a statewide candidate. And frankly, I'm having a lot of difficulty finding any legislative candidates I can support because they just aren't being realistic about the fiscal situation that that uh that that uh that we're facing. But you know, and Walker's and Walker says he has a plan, but I you can't trust you can't trust what that guy says.

SPEAKER_00 36:54

We had Matt Hale law on yesterday, and his answer was unbridled optimism. That was his answer when it came to it. I'm gonna lead from the front, unbridled up, because I was very specific. How do we survive the next 10 years, you know, going through this and that and the other thing? Unbridled optimism is what he started out with. And uh, there you go.

SPEAKER_01 37:15

Is he one of those production? We're gonna have production increases, and that's gonna solve everything. He did allude to that at one point. So here we go. Another guy who doesn't understand how the how the production tax system works.

SPEAKER_00 37:28

Okay, Brad Keith, Alaskans for sustainable budgets, uh, the weekly top three.

AKLNG After The Special Sessions

SPEAKER_00 37:34

We are on to number three. And so the big answer is, of course, uh, you know, everybody showed up, the the the like four legislators showed up in Juneau, right? And they got this, they got this snapshot of the chamber, and there's one guy out in the thing and the in the speaker, and uh they gabbled in, they gabbled out, and they're like, Yep, no, it's uh there you go, we're done. And um, you know, the they're not even coming back until the 10th of August. Everybody's trying to get re-elected, and uh it looks like that the Glen Farn, you know, a AKLNG project is potentially dead, and um maybe somebody will revisit it in the future. But I mean, and and of course we're running out of gas. So, Brad, where do we go with AKLNG from here? What what's what what happens next?

SPEAKER_01 38:22

You know, the problem, Michael. I'm gonna start with a problem, then I'm gonna talk about maybe solutions, but the problem is this is this in this past special session, in these past two special sessions, is that what we've been through now? The problem, the the issue has become more complex. The issue started out that Glen Farn needed certainty with respect to property taxes. Okay. And you know, and we'll sort of deal with that. And and everybody, you know, we had 30 days of hearings or whatever, Giesel called in and all that sort of stuff. And and so, and so we sort of the legislature sort of struggled and came around to an answer on that. But what the whole S-corp issue has has surfaced is there's a second tax certainty that Glenn, when you think about it now, given what happened at the end of this last last special session, there's a second tax certainty that Glenfarn is now saying uh has the legislature has to buy off on, and that is upstream tax certainty.

Upstream Tax Certainty Pandora’s Box

SPEAKER_01 39:26

What Glenn Farn's saying is if you start messing around with upstream taxes like the S-Corp tax or unmentioned, but certainly I'm I can see it sitting there, SB21. If you start, if you start messing around with upstream taxes with producer taxes, such that the producers will come and say, oh, well, I don't know if I can give you gas or I can sell you gas under these terms because the legislature is messing around with me. Um, that that now Glenn Farn is also asking for, this project is also asking for upstream tax certainty uh before before the project can go. Because Glenn Farn said, you know, we can't go without, we can't, we don't have a project if you can't resolve the the Hill Corp issue. And it's more than the S-corp issue. I mean, when you think about it, when you think about somebody saying, I need to be certain, a producer gets away with saying, I need to be certain about what my tax situation is before I'm gonna enter into this contract with with Glenfarn to supply them with the gas they need to be able to do this project. If if if you have producers saying that and Glenfarn echoing that, parroting that, then now we got to talk about, you know, good God, we got to talk about the SB21 issues that that we've got with uh with the with the upstream taxes to get those resolved, because you know, perish the thought we get in the middle, we we do this, and we get in the middle of uh of a session where we're talking about SB21, and every and Glenn Farn says, oh wait, you can't do that because you're gonna mess with our upstream contracts, and that'll undermine the project, and we don't know what we're gonna do. So it this has become this issue around this tax certainty that Glenn Farn's asking for has become much more complex as a result of the position that Glenn Farn took uh at the at the end of the legislative session. And I and it's gonna take a while to resolve that.

What Would Make AKLNG Real

SPEAKER_01 41:16

Um I think what what would what would bring clarity, and if I were Glenn Farn, which I'm not, but if I were Glenn Farn, what I would be focused on is getting customer contracts, the the export customer contracts, the thing that truly would make this project deliver much lower cost gas to South Central and to Alaskans and to data centers and whatever the heck we're gonna do with all this stuff. The thing that would truly make this project a big deal for Alaskans. Uh, if I were Glenn Farn, I would be, I would be focusing on getting those customer contracts in some sort of shape where I could come to the come to the legislature and say, look, I've got a customer contract. It's conditioned on XYZ from the legislature or XYZ from Alaska. So you need, if you do X, Y, and Z, I will have a customer con, I will have customer contracts. And if I have customer contracts, I am absolutely convinced I can deliver you $5, $5, $6, whatever the whatever the the phase, the in-state prize from phase two is. I can deliver you this price cat. And the legislature would stampede, uh, frankly, they'd run over anybody sitting standing in the way. They would stampede toward approving that. Because A, it would, it would, it would solidify the project. B, uh, it would result in lower price gas to uh rail belt, uh, rail belt consumers. They haven't they haven't done that though. Glenfarn hasn't done that. I mean, Glen Farn hasn't come and said, uh, you do XYZ and we gotta, we we've got contracts. They've said, I mean, on the whole production, on the whole property tax thing, they said, you need to do that so we can get financing, so we can go back and talk to customers and maybe get customers tied down to this, but there, but we're not sure we're gonna get customers tied down to this. And and we may be back with other things and and oh yeah, there's this whole upstream issue now that has to be resolved. And you know, it's just it's just it's just gone in a circle. If if they looked at it to me, if they looked at it from the endpoint and said, all right, the objective here is to get customers, export customers, right? Tie them down and and and and be able to go back to Alaska and say, look, we got them, right? We got these customers. All we have to do is build it and the build it and they will come. Um and and the contracts are all set up to do that. Uh but you know, short of that, short of that, short of that sort of, you need to do XYZ. And if you do XYZ, we will have a project. Short of that, um, I think we just keep spinning for you know however long the earth continues to rotate on its axis.

SPEAKER_00 44:07

Which will be a while, hopefully. Uh so no, I mean, and and that's it. So you don't think that uh I mean at this point, what's the over and under, Brad, on uh what's the over and under on some kind of gas line coming out less the tax certainty this session? Or is this a next session? Does Glen Farn hang out? Do they do they wash their hands and walk away? I mean, they get a payback. I know that there's a guaranteed 20 million or something from the state, so they're gonna get some money back. But I mean, what where do we go from here?

SPEAKER_01 44:40

I think Glenfarn, I think this exploded into a much bigger issue. I think this whole thing around the S-Corp and the upstream tax certainty exploded this into a much bigger issue at the end of the session. And I don't know how you put, I don't know how you got Humpty Dumpty put back together again. I mean, it's it's it's Glenfarn, in my opinion, Glenfarn shouldn't have said that. Glenfarn should have said we need property tax. And oh yeah, by the way, you need to you need to exempt us from this S-corp issue because that would affect our economics. But what you do upstream is your business. We're not gonna get into it. And the and we're not gonna say the project's dependent on. But they stepped off that, they stepped off that ledge, right? And and said, Oh, yep, you got to resolve upstream too. And I and that that's just that's just just a huge, huge issue. So I can't I can't see this getting resolved. I mean, the governor hasn't even proposed a bill, right?

SPEAKER_00 45:32

This is well, that was what surprised me is the governor was supposedly gonna come in with a clean bill at the beginning of session, and there's four legislators there and no bill from the governor. Whether I mean he could have still done his part, even if only four people showed up. At least he would have had a clean bill there to lay out in front of them, which I thought was a little weird that uh he had to maybe he just thinks it's just not gonna, I don't know. But I would have at least gone through the motions.

SPEAKER_01 45:56

Yeah, his argument is that well, I just don't want to talk to, I want to have all these discussions and we'll come to a consensus and then we'll introduce a consensus and everybody will come in and vote on it. Yeah, I don't, it's not gonna work that way. And and the gutter needs to stake out a position and needs to back it up and needs to be there personally to explain it and and negotiate around it. And

Governor Strategy And Legislative Reality

SPEAKER_01 46:14

so I just thought I, you know, it he he won't think he's given up. But in the in the in the way these things work, I think he has given up. And and and I just don't think I think he's gonna end his his his term without having without having delivered on the on the on the project. It's gonna be up to the next governor. And as I say, uh the one thing that that this last session did do is interject yet another huge issue into the middle of it, the upstream certainty issue. So it's um I I I don't have I don't know about overs and unders, but I don't have a really good feeling that this is trending toward a trend trending toward success unless Glenn Farn can come in and say you need to do XYZ. And if Glenn Farn said, we have a customer, we have a we have Japanese and Korean customers that are ready to sign on the dotted line. You have to do XYZ. And one of those XYZs is upstream certainty. If they if they said that, I don't know that upstream certainty would would, I they might run over anybody who I mean the legislature might run over anybody who argued about upstream issues in in that context. But they have to be able to say that we have real customers ready to go X with XYZ.

SPEAKER_00 47:28

I don't know, Brad. I think you might be being overly optimistic, something you never thought that I would accuse you of. That if they walked in hat in hand with the with the signed agreements that the legislature would fall over themselves to uh to get it passed. I mean, I dude, I think that that is because there are just people in the legislature that just don't want it to happen, right? For a variety of reasons. I mean, whether it's Willikowski and Company because they hate the oil companies and gas companies so much, or if it's other Democrats who don't want to, you know, they don't want to further uh you know put petroleum or or uh you know uh any kind of oil or gas production, or whether it's just people who know that Dunleavy is eyeing the future and the Murkowski run and they don't want to give him some kind of legacy or something. I mean, I I just I think it's awful. I think that's awful optimistic of you to say if they came back with a with a thing. I mean, it I I I just don't know if there's enough wherewithal to pull that through.

SPEAKER_01 48:28

Oh well, maybe maybe in this legislature you're right. Maybe maybe I I was more focused on how could they get it in an in the next legislature. Yeah, okay.

SPEAKER_00 48:36

Maybe yeah, and maybe you're right. Although a lot of those players are running unopposed, so they're gonna same as some of the same players are gonna be back anyway, you know.

SPEAKER_01 48:46

I I will say this. I mean, we we would eat up whatever if they came in tomorrow and said, all right, here's the here's the contract subject to XYZ, you've got to do XYZ. I would say that there would be due diligence to be done on whether that's exactly what the contracts say and exactly what what the XYZ conditions are. And that would chew up a lot of time trying to trying to work through that. So it it is unlikely. You're you're it's a fair criticism of me to say it's unlikely that that would happen, that that would happen this session. But to get it to happen, maybe maybe I ought to say it this way, to get it to happen in any session, yeah, uh while the earth's still spinning on its axis, it get it to get it happened in any session, I think that's the thing it's gonna take. Because because this this sort of, well, we may do it if you do this, it's just especially when you sort of dig into it, especially the way the S-corp issue came up and and now surfaced upstream certainty. The way we're doing it now, I just don't think it ever gets it ever gets resolved because you just you keep you keep discovering new things that it's sort of subject to uh if uh as as it goes along.

SPEAKER_00 49:59

Joshua made a valid point, uh, just to backtrack a little bit here. He says SB21 is next. It's the one thing that could actually we should actually be talked about the per barrel credits, is actually subsidizing non-producers. Um he's uh that and the the G VR and and all the other things that are in SB21. I think it should be something that should be looked at. Um, I would agree with that. Um and maybe we need to have a maybe we need to have a whole massive uh discussion. I mean, if we're gonna talk about upstream and we're gonna talk about the S-Corp and everything else, maybe that should be part of the discussion.

SPEAKER_01 50:36

Well, if if Glenn Farn's gonna say that this whole thing is dependent on the upstream, uh the upstream producers, particularly Hill Corp, uh being happy and being satisfied and selling to us under under terms that are acceptable to us. Uh, if if if Glenn Farn's gonna say that, then yeah, we're gonna have to go into all that. Because I can I can easily, I mean, Hillcorp's kicking and screaming, screaming over the S-corp provision, right? I mean, that's that's that should be a no-brainer. We should have done that a long time ago. But hit but they're kicking and screaming over that. I mean, and and so imagine how much the kicking and screaming is gonna go on over the necessary old tax revisions. And and you know, if Glenn Farn's gonna, if Hillcorp's gonna say, well, we don't know if we're gonna sell gas to Glenfarn uh under these terms and conditions until we resolve this issue, then yeah, uh we're gonna have to go through it uh as part of as part of this process. That Pandora's box got opened at the end of the session by Glenn Farn conditioning its approval on Hillcorp being happy. And uh and that Pandora's box has a lot of parts in it.

SPEAKER_00 51:46

So there's a lot of there's a lot of stuff. And as Brian makes the point, the issue is never the issue, the issue is power. And uh that's what we saw in this last legislative session, right? That's what we saw in this last uh special session. The issue is what we saw in the regular session. All the power. They wanted to control everything, they wanted to run it. Willikowski, what he really wants is he doesn't want any private, he wants a state-run gas corporation. That's what he wants, uh, that the legislature's in charge of. The power is the issue. That's the uh that's the that's the long and the short of it here.

unknown 52:21

Yeah.

SPEAKER_00 52:21

Brett, what are you gonna be watching out here for over the next you know, 15 days or whatever as they as they wait around twist sitting on their phones and rotating?

What We Watch Next

SPEAKER_00 52:31

What are you uh what are you gonna be watching for?

SPEAKER_01 52:33

I'll see if the governor comes out with anything, with any proposal. I'll watch what Glenn Farn and Hillcorp uh say. I'll watch how the S Corp keeps playing out uh in the press. I'll watch the campaigns. I mean, we got an election go election cycle going on now. And and and we're gonna we're gonna get down to four uh in the governor's race. I'm not sure how the heck we're gonna do that and what percentage it's gonna take to get in the four. Maybe you know, six will get you in the four. Uh, but uh I'm gonna be watching that and what people say about that uh and and how how how candidates struggle to just to describe their fiscal plans in a way that actually, you know, worries about middle-income Alaska families, the ones that are leaving, you know, the ones that are leaving the state and uh and telling us goodbye.

SPEAKER_00 53:20

Quickly, can you rate the candidates that you see? I know you're you're not any candidate, but I mean, uh, you know, we keep hearing how Tom Begage is ahead, uh, but what then we see Bernadette is ahead, but Bronson is there. And any ideas to who's gonna come out, uh, any you know, predictions on maybe the top five or six in your mind, or are you just kind of watching? You know, Michael, I really don't.

SPEAKER_01 53:43

I I I sometimes wonder why candidates like Shelly Hughes, who I've said at I said at the beginning, I really wanted to support if she would have backed up the position she took in the con in the legislative fiscal policy working group. I really wanted to support. I keep wondering why why candidates like like Shelly or like Matt or or others who aren't or click who aren't being mentioned as falling into the top four in any of these polls. I keep wondering what their strategy is. You know, what why they why they think they're gonna get across the line.

SPEAKER_00 54:18

Where's their path to victory? That's the question. All right, Brad. Thank you so much, my friend. It's good to talk with you. We will see you next week. Appreciate you. Thanks so much.

SPEAKER_01 54:28

Thank you, Michael. Look forward to seeing you again.

Wrap Up And Where To Listen

SPEAKER_01 54:31

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.