Socialized Energy?

Id be curious as to what sort of comments anyone has about these proposals.

With energy costs skyrocketing the price of gas in my community just hitting $6.75 for unleaded, home heating fuel at $6.50 and higher in some places Alaska Governor Sarah Palin is proposing serious energy cost relief to Alaskans. Under her proposal, nearly a half a billion dollars would be used to offset electric costs for Alaskans. That money will largely be spent on the utility company/ co'ops level to offset the price of diesel used to generate power.

The more interesting proposal is the debit card for fuel system. Which would give Alaskans a debit card more or less, that could only be used to purchase fuel. Recipients would be based on those eligible to get the Permanent Fund Dividend.

 

What you need to do is have some sort of "mutualisation" whereby all citizens can assist and proably the best way is to do it through the energy providers then you could cross-subsudies users cost and supply requirements in a efficient and effective manner. For example those living in Florida and Texas do not (I assume) need their heating on all the time thus if their was a very nominal additional charge put onto their bills then that amount could be used to "subsidies" their countrymen up north in frozen testicles land!

Effectively you could "even out" the disparrities in costs by those massively populated states in the hot South paying a very small additional charge to subsidize Bunz and his buddies so they can thaw out their testicles when coming in from a day's fishing or bear fighting or whatever it is they do in these god foresaken arctic wastelands

 

You make some interesting points Scots, Ill attempt to address them.

This is one aspect of the two part proposal. The power rate segment. But instead of it happening on a nation wide level, it is happening within the state.

The main issue here is that the differences in needs of the states is to vast. The folks in Texas would never support heating Alaskan houses at thier expense...because they choose to live where its cold.
Much the same as Alaskans(well Alaskans probably wouldnt mind because we are generous people) wouldnt want thier money to subsidize air conditions in Florida because they choose to live in an oven. It would be never ending.

The beauty of this, is that Alaska can do it on our own. We dont need the south to put fuel in our tanks. We can afford it ourselves. The issue here is that with the high energy prices, the state makes truckloads of cash. The state currently has 8billion in surplus funds. This is on top of the %35 that gets saved off the top and put into the http://en.wikipedia.org/wiki/Alaska_Permanent_Fund

In the meantime, Alaskans due to its location especially those in bush Alaska like myself where transportation costs are very high for oil products(well everything really) runs the price to $6.75 a gallon. Which is nearly double what the rest of the country makes. Anchorage the biggest city is well above $4 a gallon.

But bear fighting? Lets go, just go ahead and put this steak in your jacket

 

Here's what I don't get: Why does Alaska get royalties on oil pumped there? Was the oil discovered on state or federal or private land?

 

It is state land.

 

IIRC Alaska does not recognize subterranean property rights -- everything under the surface of the earth belongs to the state. The Alaska Permanent Fund is basically an ongoing eminent domain payment.

 

The oil fields on the north slope are all state lands, surface, subsurface, the whole thing. As for other subterranean issues, that not entirely true. If it was, we would have drilled ANWR a decade ago from outside the refuge.

 

I'm sure Alaskan government policy is probably that it would if the feds were not telling them they couldn't.

 

My first thought is to check constitutionality of the entire proposal. I'm not exactly sure how royalties from state owned lands, fits in. However since I don't know much more about that, in general a state can do with whatever money they have, whatever they choose to do with it.

Now, looking at it from a logical fiscal perspective, there are some possible problems. Before that, there is an issue with the Alaskan state government being $4 Billion in debt, and with budgets constantly in the red each year. My rule is, if you are in debt and leaking, you shouldn't be handing out money.

Nonetheless, the first possible issue is from a long term pay-out. As the population grows, as more people sign up for APF (Alaskan Perm Fund), the cost will undoubtedly skyrocket. At $100 a month, that's $1,200 a year, per person in the state. Plus 60% off electric bills, per house hold in the state, is going to be a sizable chunk of change. Each year the number of house holds, and number of PFD (Perm Fund Dividend) applicants will increase (unless the population shrinks).

Logically, at some point, the cost of this pay-out will over take the income from royalties. When this happens the fund will collapse, and the thousands of Alaskans, who by then will be dependent on the APF, will be stranded.

The second issue is not every oil well continues forever. While there are significant ones that have... the oil production in these wells has been decreasing. Also, there is no promise wholesale crude will remain high. Likely? yes. Guarantied? No. If either the production drops or the prices drop, or a combination, the fund could lose money, and very very quickly. (I am actually getting the strange feeling oil prices may crash)

However, in either case, you have a state legislature that can't balance it's own budget, in charge of the APF. This seems like a bad plan. I think if I lived, there, I'd vote against this.

On a final note, I find it just a tad funny that so many whine about how much the oil companies are earning, yet the APF has now over $40 Billion from oil royalties.

 

There are two issues here. Royalties from the oil pumped from state lands. But there is also a PPT or Petroleum Profits Tax. But the issue here royalties.

Ah 4billion in debt since when? We have an 8billion surplus this year on top of already passing both capital and operating budgets, and the contribution to the APF and the CBR(contitutional budget reserve) This come out of the general fund and not the APF.

This is designed as a very short term(1-2 years proposal until relief comes in terms of energy prices through other means. As for the PFD, its growth has generally increased faster than the poppulation. Even though the poppulation is increasing steadily.

The notion that oil wont always be here is exactly why we established the savings model we have. For the time when oil is not longer viable. As for the fund losing its value, it has grown steadily in the 3 decades or so it has existed. It is based on investment for its long term growth and the pricipal is designed to never go away until approved by the voters. Which failed miserably in 2000 when oil was 9-12$ a barrel range. Also at that point, Alaska was taxing pased on production. To they were getting them twice on the same barrel of oil in a way, but the formula is fairly complicated on how they did it then. Now it is based on profits generated from Alaskan oil.

Again, budget is fine, has been since 2001. No concerns whatsoever. Been surplus funds ranging into the billions since 2004. The Legs in Alaska are probably the most fiscally conservative on both sides of the aisle in the nation. The Permanent Fund is not controlled by the Legislature, it is controlled by a semi-public corportation known as the Alaska Permanent Fund Corporation. Just like we have the Alaska Rail Road Corporation.

Well if you are going back to the Exxon thread and my opinions on that, it deals with two very separate issues. One is a state government taxes and royalties assessed. The other results from a class action lawsuit that was lost by Exxon after they dumped 11million gallons of oil. Two very different things.
As a side note, final decision on the Exxon Valdez is expected next month.

 

Looks like Alaska could join OPEC.

 

Make me wonder a bit if at least part of the cause of high fuel prices in Alaska, might be your own taxation.

And in flipping around through the states online budget, I found Debt Service listing at $5.5, I assume million. So I wager you need to double check your governments finances. Looks to me they are at least $5 Billion in the hole or some legislatures wouldn't be running a campaign on paying $2.5 billion in debt down.

First, I never buy 'short term' plans. Short term has a nasty habit of becoming a long term. In 1898 the US government put in place a temporary luxury tax to pay for the Spanish-American War. The 'temporary' 3% tax on phone service was finely ended a mere 108 years after the war was over, in 2006. The US congress, literally vote to continue a 'temporary tax' every single year, for 108 years. It had to be voted on every year because it was 'temporary'.

Second, the PFD has grown faster than the population due to the way it is currently handled.

The current system, they take how much the fund earns over a year, increase the principal enough to offset inflation, and grow the fund... then they take out the maintenance cost of the fund... then with what is left over, they dole it out to the public. This secures the growth of the fund while paying out what is left over.

In short, no one knows for certain how much the PFD is going to be, because they only give out what is left after up-keeping the fund.

The new system is promising $1,200 per person, and 60% off electric bills state wide. This is regardless of how much the fund actually makes. What happens if the fund doesn't make enough to cover this? You lose principal, which will start a chain reaction, because as you lose principal, it will be harder to meet the pay-out demands for the next year, causing you to lose more principal... and on and on till the fund collapses.

But of course the biggest issue, which you actually brought up... is that this puts more control of the money in the hands of the legislature, which is exactly why the APF was placed in the hands of a separate corporation.

No, had nothing to do with that at all. I was referring to some who say "blaw blaw big oil is making money on us!"... well it looks like the Alaskan public has made $40 billion on us.

 

It is no secret the State of Alaska wants ANWR opened, our Congressional delegation wants it opened...but Alaskans far and away want ANWR open. Including those few hundred people who live within the actual refuge. They are pro-onshore development and anti-offshore oil development.

 

Yeah, dont think so. But it would be beneficial to have a vote there for sure. Alaskan oil by and large and through US code is for domestic use. Which rules out the exporting component of being in OPEC. But Alaska produces more oil than several members. Qatar, Indonesia and Ecuador.

 

Hi Andy, the quotes in this post are yours for the record.

Nah, just in my home town on the western coast of AK, our fuel supplies work out like this. Crude oil is pumped on the north slope. Travels for 3days IIRC, down 800miles of pipeline, onto a super tanker, and down to the lower 48 to be refined. Then it is loaded back onto a smaller barge and leaves(usually from WA or OR) and transits the Gulf of Alaska, around the Alaskan Peninsula and up to the small communities. So the transportation costs, and being small and isolated, the economy of scale works against us.

I think you are not quite understanding what the CBR is, and what it is designed to to. Which is basically a cash based credit card. In leaner times, it allows short term borrowing. But it hasnt been drawn on since FY2004.
http://fin.admin.state.ak.us/dof/financial_reports/resource/cbr_status_for_website.pdf
This is the most current status of the CBR.

This link is the supplemental budget, we also have the capital and operating budget. I am not sure where you are getting this 5billion in debt number.

Yes it does work brilliantly, a model that should be undertaken by more governments. Your writings on the formula and how the dividend is determined, it mostly accurate, except that it is based on the 5 year average of the revenues after the inflation proofing, fund maintenance and management etc.

I dont disagree, and I will freely admit I am a bit skeptical of this whole thing. Its a novel idea, and offers solutions to a crisis. Which is something I appreciate in politicians.
I dont know how much legs this will have. But it is the focus of a special session here in a few weeks. It is expensive, unsustainable, and could be subject to some serious fraud. Those details still need to be worked out.

Geez dont cheapen yourselves. Its been way more than $40billion. $40billion is just the %25 that goes to the PF and the interest it has made minus the billions it has payed out in dividends. I heard a number somewhere in the $500billion range over the last 30 years.