Socialized Energy?

[Andy]

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.

Interesting. I think I'd be asking... demanding... that the Alaskan legislature approve a tax abatement for a company to build a refinery in Alaska, as well as tax and royalty free status for oil used in Alaska for sale locally. Just continue them on exported oil from Alaska. You could still fund APF, while dropping the cost of local fuel and gas, with no need to raid the APF for a cost offset.

Logically, I am surprised one of the many independent oil companies has not done this... unless... Two possibilities... One, the companies are not willing to deal with the national outcry from Eco-nuts, and the smothering amount of red type, or Two, the issue is all the oil wells in Alaska are owned by one company, and they have no competition to make a refinery up there worth while. Hmmm...

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.

Each of my quotes was linked to the respective sources. However, I do now see where the borrowing stopped in 2006, not 2004, according to the OMB. So for only the last 2 years, the budget has in fact been balanced.

This is good... but I wonder how much of this good result is due to wise frugal spending, verses increases in revenue from oil prices? If the latter is the case, it may be even more unwise to release the spending, given that they have not likely tightened their spending belts, and eventually oil income will likely drop.

Also, your link, the CBR, shows only how much money is currently in the fund... not how much is owed to the fund. I have not been able to find specific numbers here, other than the links I gave last post.

Nevertheless, I do not quite understand how the CBR is run, or who owns the debt. Or why interest would have to be paid to a fund supposedly made specifically for filling budget shortfalls. Nor why the debt would need repaid.

That said... if they are paying interest on the debt, and according to the Alaskan budget they are... they should repay the debt before they start more spending.

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.

Agreed. Accept I don't want more governments having any money. It's a rare thing that your states population has successfully controlled your states legislature from blowing all the money. (psst: Social Security anyone?)

My main though, was that this new plan would remove the fiscal security blocks that enforced the controlled growth of the fund. The new plan will promise an ever increasing pay-out, regardless of fund performance. That could lead to a crash.

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.

Well.. be honest... anytime any politician/lawyer has so much as a penny of public funds... it could lead to fraud and miss-use. In fact that should be expected. Also, I'm amused this is a crisis. Last I checked I could go to any filling station in town and there was plenty of gas there. Crisis is that Earthquake in China. Or Katrina, or the tornados that ripped through a few towns a weekend ago.

It's hard to think the price of gas is a 'crisis' when people are willing to pay what equates to $32/gal for a double mocha lattes as Starbucks. Or spend $60 bucks for a dumb video game that glorifies stealing cars and mistreating women, and just being a general scum bag criminal. GTA IV has made $500 Million. But ooooOOoo gas is up another $1... crisis! Crisis everyone! It reminds me a bit of the teenager in high school that had a crisis because "she didn't call me!" after the dance last Thursday. This is not a crisis... at least not yet.

 

[Bunz]

Interesting. I think I'd be asking... demanding... that the Alaskan legislature approve a tax abatement for a company to build a refinery in Alaska, as well as tax and royalty free status for oil used in Alaska for sale locally. Just continue them on exported oil from Alaska. You could still fund APF, while dropping the cost of local fuel and gas, with no need to raid the APF for a cost offset.

Well there are 3 refineries actually. One on the north slope that sends nat gas to Barrow and the few other communities on the arctic coast(so fairly small) then there is one in North Pole(Fairbanks suburb) which serves just a portion of the gas used on the road system(as a side note, when in college in Fairbanks, I would get gas straight from the refinery for less than 90cents a gallon back inthe late nineties. And then the other is in Kenai that converts nat gas from Cook Inlet O/G for south central Alaska nat gas use and for a fertilizer plant. The problem with building a new refinery is the Federal regulation.

Logically, I am surprised one of the many independent oil companies has not done this... unless... Two possibilities... One, the companies are not willing to deal with the national outcry from Eco-nuts, and the smothering amount of red type, or Two, the issue is all the oil wells in Alaska are owned by one company, and they have no competition to make a refinery up there worth while. Hmmm...

Again federal red tape is the main obstacle. There are a few indy companies, but right now, something like %99 of production comes from the big three in AK. BP, Exxon and Conoco Phillips. Shell has recently purchased large chunks of offshore potential in the Chukchi Sea and in Bristol Bay.

Each of my quotes was linked to the respective sources. However, I do now see where the borrowing stopped in 2006, not 2004, according to the OMB. So for only the last 2 years, the budget has in fact been balanced.

My understanding is that it was paid off in 2006, but had not been borrowed against since 2004. Either way, the State of Alaska is very fiscally responsible when compared to most other states. I need to talk with a few friends in state government to get that explanation. I am more of a policy wonk rather than a fiscal nerd.

This is good... but I wonder how much of this good result is due to wise frugal spending, verses increases in revenue from oil prices? If the latter is the case, it may be even more unwise to release the spending, given that they have not likely tightened their spending belts, and eventually oil income will likely drop.

Well it is both, there have been times when AK has tightened its belt. Then when revenue is high it gets loosened.

Nevertheless, I do not quite understand how the CBR is run, or who owns the debt. Or why interest would have to be paid to a fund supposedly made specifically for filling budget shortfalls. Nor why the debt would need repaid.

Yeah, as I said before I am not fully sure how it works. Not sure if more than a few dozen know actually. In the media the CBR is often compared to a cash backed credit card.

That said... if they are paying interest on the debt, and according to the Alaskan budget they are... they should repay the debt before they start more spending.

Again, I am pretty sure the CBR is not in debt, but if it is, there is a scheduled payment system for that. The State is known to have an $8b surplus this year. After all three budgets, and contributions to the PF and CBR.

Agreed. Accept I don't want more governments having any money. It's a rare thing that your states population has successfully controlled your states legislature from blowing all the money. (psst: Social Security anyone?)

Alaska and its fiscal management as I said earlier should be a model for other states. But it comes through some interesting circumstances. Alaska is a young state obviously. So the writers of our constitution had the chance to learn from other places what works and what doesnt.

My main though, was that this new plan would remove the fiscal security blocks that enforced the controlled growth of the fund. The new plan will promise an ever increasing pay-out, regardless of fund performance. That could lead to a crash.

Two different accounts. The PF isnt being touched. That only comes with voter approval. This proposal is coming out of th general fund.

Well.. be honest... anytime any politician/lawyer has so much as a penny of public funds... it could lead to fraud and miss-use. In fact that should be expected. Also, I'm amused this is a crisis. Last I checked I could go to any filling station in town and there was plenty of gas there. Crisis is that Earthquake in China. Or Katrina, or the tornados that ripped through a few towns a weekend ago
It's hard to think the price of gas is a 'crisis' when people are willing to pay what equates to $32/gal for a double mocha lattes as Starbucks. Or spend $60 bucks for a dumb video game that glorifies stealing cars and mistreating women, and just being a general scum bag criminal. GTA IV has made $500 Million. But ooooOOoo gas is up another $1... crisis! Crisis everyone! It reminds me a bit of the teenager in high school that had a crisis because "she didn't call me!" after the dance last Thursday. This is not a crisis... at least not yet.

I have started a few threads about the ongoing political corruption scandal Alaska has had. 2 former state lawmakers are in federal prison in Oregon for taking money concerning the Petrol. Profits tax. Also, Senator Stevens and Rep. Young have also been mentioned but no indicted.
As for crisis, well it is not a crisis like a natural disaster or terror attack, but it very much is an economic crisis. The price of fuel has an effect on everything as you probably know. Groceries prices have jumped a minimum of %25 in the last 18 months. Fuel has doubled.
I can drive less, and I do, and have been for several years now. We have been paying more than $4 a gallon for over 2 years. But where it really begins to hurt is in the cost of diesel. Diesel is used to heat our homes, generate our electricity and power our fishing boats. So, me being a fisherman, I am looking at an extra 2bucks per gallon of diesel. That will equate to me needing to catch an extra 15thousands pounds just to make as much as I did last year, which I will tell you, I dont live high on the hog at all. Barely making it actually. There is already a steady migration into the urban areas, it will be a flood if there is no relief before the winter. I simply cant afford to heat my house at a cost of $900 bucks a month. Thats as much as a mortgage. I am seriously thinking about boarding up my house and moving into Anchroage for the winter to make ends meet. That is the second worst case scenario. The worst being, people freezing or going hungry over the winter because they either cant afford fuel, or have to skimp elsewhere.
So, yes in my objective opinion it is an absolute economic crisis.

 

[Andy]

Well there are 3 refineries actually. One on the north slope that sends nat gas to Barrow and the few other communities on the arctic coast(so fairly small) then there is one in North Pole(Fairbanks suburb) which serves just a portion of the gas used on the road system(as a side note, when in college in Fairbanks, I would get gas straight from the refinery for less than 90cents a gallon back inthe late nineties. And then the other is in Kenai that converts nat gas from Cook Inlet O/G for south central Alaska nat gas use and for a fertilizer plant. The problem with building a new refinery is the Federal regulation.

Again federal red tape is the main obstacle. There are a few indy companies, but right now, something like %99 of production comes from the big three in AK. BP, Exxon and Conoco Phillips. Shell has recently purchased large chunks of offshore potential in the Chukchi Sea and in Bristol Bay.

I'm not surprised. As red tape increases, the ability of small upstarts to succeed diminishes. Do a research project on regulations, controls and requirements on autos vs. the number of small upstart automotive business. You can just see the level of red type increase and independent autos go into extinction. Wager a research on oil companies would yield the same.

My understanding is that it was paid off in 2006, but had not been borrowed against since 2004. Either way, the State of Alaska is very fiscally responsible when compared to most other states. I need to talk with a few friends in state government to get that explanation. I am more of a policy wonk rather than a fiscal nerd.

I understand that completely. However, anyone can dream up beneficial social policy. Coming up with fiscal social policy, is a completely different beast. Just like Communism looks absolutely fabulous on paper. Seems perfect in practice. But flops consistently, fiscally.

The only key difference between a nice social policy dream in the gutter, and a nice social policy that works, is of course whether or not the numbers add up in the long haul.

Yeah, as I said before I am not fully sure how it works. Not sure if more than a few dozen know actually. In the media the CBR is often compared to a cash backed credit card.

Again, I am pretty sure the CBR is not in debt, but if it is, there is a scheduled payment system for that. The State is known to have an $8b surplus this year. After all three budgets, and contributions to the PF and CBR.

I'm smelling a Clintonesk fudging numbers game here. First, the CBR is not in debt. CBR is the creditor. The legislator is borrowing from the CBR to balance the General Fund.

Two different accounts. The PF isnt being touched. That only comes with voter approval. This proposal is coming out of th general fund.

Ah ok. This proposal is from the General Fund, and not the APF. In that case I'm completely against it. As much as I have concerns over using the APF for it, using the General fund is a horrible idea.

You are taxing the people... then turning around and giving it back to the people you taxed it from... MINUS a large cut for government. Instead, just cut taxes. If you had $1,000, and I taxed $300 away from you, then gave $100 back for fuel... wouldn't you be better off if I just cut taxes 50%?

Also, this is a common political trick to raise taxes. You start a give out program, then when you don't balance your budget, people scream and you raise taxes because "we just can't leave all these people out in the cold without fuel money!". Almost very government program follows this pattern.

My city did this exact thing. They wanted to build a stadium and connect a stretch of highway across down town. So they put up a tax to build both. Well the stadium would be owned by a corporation. The public voted it down because why should we pay for a building to be built, that we'd then have to pay to get into? However, we did need the highway built. The city came up with a clever plan... start construction on the highway, then half way through, with half of down town torn up, they 'ran out of money!'. Once again, they put back up for vote highway and stadium. Now we had to agree to the tax increase... and it passed.

I can almost promise that is what is going to happen if you fund this through the General fund. There is no way the general budget will keep up with the demand of this plan. I know this because Alaska doesn't have a AAA credit rating, and the reason given is because of the limited budget and limited ability to repay.

I have started a few threads about the ongoing political corruption scandal Alaska has had. 2 former state lawmakers are in federal prison in Oregon for taking money concerning the Petrol. Profits tax. Also, Senator Stevens and Rep. Young have also been mentioned but no indicted.
As for crisis, well it is not a crisis like a natural disaster or terror attack, but it very much is an economic crisis. The price of fuel has an effect on everything as you probably know. Groceries prices have jumped a minimum of %25 in the last 18 months. Fuel has doubled.
I can drive less, and I do, and have been for several years now. We have been paying more than $4 a gallon for over 2 years. But where it really begins to hurt is in the cost of diesel. Diesel is used to heat our homes, generate our electricity and power our fishing boats. So, me being a fisherman, I am looking at an extra 2bucks per gallon of diesel. That will equate to me needing to catch an extra 15thousands pounds just to make as much as I did last year, which I will tell you, I dont live high on the hog at all. Barely making it actually. There is already a steady migration into the urban areas, it will be a flood if there is no relief before the winter. I simply cant afford to heat my house at a cost of $900 bucks a month. Thats as much as a mortgage. I am seriously thinking about boarding up my house and moving into Anchroage for the winter to make ends meet. That is the second worst case scenario. The worst being, people freezing or going hungry over the winter because they either cant afford fuel, or have to skimp elsewhere.
So, yes in my objective opinion it is an absolute economic crisis.

Then perhaps in your state it is. I do wonder... how did people live in Alaska prior to oil? Is there no other way to heat your home? Electric? Wood burning stove? Coal? There is an old stone cabin that has been in my mothers family for generations. It doesn't have gas or oil. Just a very nice large wood slow burner. It heats the entire building very well, and very cheaply.

 

[Bunz]

Ah ok. This proposal is from the General Fund, and not the APF. In that case I'm completely against it. As much as I have concerns over using the APF for it, using the General fund is a horrible idea.

You are taxing the people... then turning around and giving it back to the people you taxed it from... MINUS a large cut for government. Instead, just cut taxes. If you had $1,000, and I taxed $300 away from you, then gave $100 back for fuel... wouldn't you be better off if I just cut taxes 50%?

Also, this is a common political trick to raise taxes. You start a give out program, then when you don't balance your budget, people scream and you raise taxes because "we just can't leave all these people out in the cold without fuel money!". Almost very government program follows this pattern.

My city did this exact thing. They wanted to build a stadium and connect a stretch of highway across down town. So they put up a tax to build both. Well the stadium would be owned by a corporation. The public voted it down because why should we pay for a building to be built, that we'd then have to pay to get into? However, we did need the highway built. The city came up with a clever plan... start construction on the highway, then half way through, with half of down town torn up, they 'ran out of money!'. Once again, they put back up for vote highway and stadium. Now we had to agree to the tax increase... and it passed.

I can almost promise that is what is going to happen if you fund this through the General fund. There is no way the general budget will keep up with the demand of this plan. I know this because Alaska doesn't have a AAA credit rating, and the reason given is because of the limited budget and limited ability to repay.

A few things Andy, and I do appreciate and understand your frustration in your local government. But two things make these situations entirely different.
Firstly is the Alaska State Constitution. Where the resources belong to the people and will be used to maximum benefit of the people and future generations.

Secondly, we dont have taxes. No income tax, no sales tax(well some cities have sales tax but it is local only) Alaska government revenue comes from royalties and user fees largely.

Then perhaps in your state it is. I do wonder... how did people live in Alaska prior to oil? Is there no other way to heat your home? Electric? Wood burning stove? Coal? There is an old stone cabin that has been in my mothers family for generations. It doesn't have gas or oil. Just a very nice large wood slow burner. It heats the entire building very well, and very cheaply.

Prior to oil, as in oil revenues in Alaska? Or oil in general?

As for other sources of heat, electric is way more expensive than diesel, diesel is what generates out electricity. Coal? does anyone use that to hear thier houses anymore? To be honest, Ive never seen anyone use coal to hear thier homes in person. I always thought of coal as a more industrial fuel.

So lastly, is the wood stove method. Which I have two of them. One in the house, and one in the Maqi (steam bath/sweatlodge type building).
I burn more of the wood in the maqi, but it is expensive to get wood as well and lots of time and work. Knowing this was coming, I spent considerable time last winter getting trees and they are seasoning for next winter.

In the 90s, when the Monitor and Toyo type stoves came out there was a good push for people to minimize the wood stove as the primary heating source and switch over. Diesel was cheap, and wood stoves are dangerous, have health issues, and the existing timber close to communities was thinning. So, for me, I built my house with insulation, energy effeciency in mind, and have beyond what would be considered a 5 star energy rating.
But when it is below 0, my 2 monitors, and hot water heater will burn at minimum 75 gallons. When it was 2 bucks a gallon, the cost was no biggie, when it was 4 bucks, it was tougher, now with talk of 8 dollars, that is just to much. Unless one is independently wealthy, it is quickly becoming cost prohibitive to live year round in the bush.

 

[Andy]

Secondly, we dont have taxes. No income tax, no sales tax(well some cities have sales tax but it is local only) Alaska government revenue comes from royalties and user fees largely.

Then you have a very unique situation that is virtually unrepeatable anywhere else in the union. Go for it.

As for other sources of heat, electric is way more expensive than diesel, diesel is what generates out electricity. Coal? does anyone use that to hear thier houses anymore? To be honest, Ive never seen anyone use coal to hear thier homes in person. I always thought of coal as a more industrial fuel.

Up until the late 90s, my parents house in Ohio had a coal furnace. Of course, it was converted over to use natural gas. However it was still useable as a traditional coal furnace is the need should arise. I have no idea if people use it to heat their home are not. I'm just tossing out thoughts since it seems Alaskans are in a bit of a jam.

In the 90s, when the Monitor and Toyo type stoves came out there was a good push for people to minimize the wood stove as the primary heating source and switch over. Diesel was cheap, and wood stoves are dangerous, have health issues, and the existing timber close to communities was thinning. So, for me, I built my house with insulation, energy effeciency in mind, and have beyond what would be considered a 5 star energy rating.
But when it is below 0, my 2 monitors, and hot water heater will burn at minimum 75 gallons. When it was 2 bucks a gallon, the cost was no biggie, when it was 4 bucks, it was tougher, now with talk of 8 dollars, that is just to much. Unless one is independently wealthy, it is quickly becoming cost prohibitive to live year round in the bush.

I suppose I really don't know much more than what I've seen. The wood stoves my extended family uses seem to work great. Never thought much about them being dangerous or a health risk. Look like good heat for a little bit of wood. Hard to imagine wood being more expensive than oil, but then I have not really looked into it I suppose.

That said... if your state government has no chance of blowing a hole in their budget, and no chance of dumping tons of taxes on you... then by all means, spend the money any way you see fit, and I hope it works out for you.