Monday, February 28, 2011

Spring is coming, right?

The calendar may say that spring is coming soon...but gosh darn, it's been a tipsy turvey couple of weeks as far as weather goes. From danged cold, to above freezing, to windy and bouncing back and forth between them. Once in a while we get some snow to liven up the challenge. Ugh. On Friday it was warm and we had mist, rain, fog, snain, sleet and snow. Of course as soon as the skies clear here in the winter, the temps drop which means everything is pretty much iced over. Double ugh. Today we have clear skies and big winds at work. I arrived to find the yard here pretty much drifted in. I already called the plow guy, but I am not too confident he can even bust it up with a pickup. I am probably going to have to find someone with a Bobcat to clean it out. Triple ugh.

With the "big plant" another three weeks out, I am already up to my eyeballs in flats with little bitty green things. Seeded another dozen yesterday, in fact, which brings the total up to well over 60. I had to transplant some things into three inch pots, which meant turning on the big light (the 600 watt HPS fixture on a rail) for the first time. Even though I took home one rack from work, which makes for a total of four...I could easily use at least two more. Oh well, just not in the budget at this point.

A couple years back I attempted to start some Tumbling Tom tomatoes, with dismal luck. This year, I tried again-with nearly one hundred percent germination. Which is great, and I hope its a harbringer of good seedings to come. In the meantime, I am constantly diddling with air flow, temperatures, and battling a bit of mold due to accidentally leaving my mini greenhouse in the garage shut one day too long. It's always a learning curve doing this at home, but hopefully one day I'll have the big greenhouse up (complete with heat!) and be able to avoid some of these issues.

I think most gardeners here in Alaska are optomists at the core. Who else would start umpteen bazillion plants when it's still winter?

Wednesday, February 23, 2011

Life in the Welfare State

There are examples all over the US, showing what life in a welfare state is like. In fact, history proves that we are, indeed, doomed to repeat the mistakes of the past.

I could lay out the story abou the last big bust in our economic cycle here, but since it was in the mid 80s, most won't have a clear memory of how it came about.

So looking to the future, it's very grim indeed.

Let's just say that no progress is made in allowing any drilling in the Arctic or offshore. This is very probable, due to government moratoriums, burdensome regulations, onerous tax structure and so forth.

This means that the Trans Alaska Pipeline will have to shut down when it reaches it's minimum operating threshold. It is currently at about 600,000 barrels a day, but declining between four and six percent every year. In fact, Alyeska (the pipeline service company that operates the entire 800 mile length) is having difficulties due to the cooler temperatures of the crude. So, what does it mean to the state and the people that live here? The "oil patch" provides about 80 percent of state income from royalties and taxes. The industry is the biggest employer apart from the state itself. I am fairly sure there will be a small amount of work left up there, for monitoring those wells and the extensive infrastructure that has been built to transport it. Many people believe that the companies who have invested billions of dollars in Alaska, just won't walk away from it. I beg to differ, I am sure they will be forced to do so by pressure from their Boards and shareholders.

Once this is nearly upon us, our legislature will finally act to do something positive-but it will be way too late-they are always reactive instead of proactive anyway and most are thinking about nothing but their own personal power and how to get re-elected. As the revenues decline from the pipeline, there will be occasional bump from the oil futures trading market. Any time the price of oil runs up over $90, the state gets a big flush of cash. This will calm most peoples' fears as to a functioning state budget....but, about ten years from now, it will be time to pay the piper on those retirement plans. This is a huge liability, in the billions. Naturally, no one is thinking about forward funding these, so I am pretty sure they will end up raiding the Alaska Permanent Dividend fund-not just for budget shortfalls, but to meet those PERS and TERS obligations. It won't be popular, and there may even be a sales tax, or income tax passed to stave off the inevitable. But it will happen, eventually.

Every governor for the past couple of decades has added to the size of state government. Even our much maligned (or admired, take you pick) Sarah Palin, grew government at an astounding pace. Once these programs and positions are created, it's extremely difficult to pare it back. The rest of us will learn to live within our means, but governments large and small never do. If it were up to me, I would freeze all hiring. Delete any position currently unfilled for six months. And ask each and every department to show efficiences by reducing their budget allotments. (Good lord, I sound like an accountant, don't I?) Those departments that show a significant savings by would get a small performance bonus. In this way, we could reward the thrifty and pare down the size at the same time. There are a number of programs that should be eliminated, but these will be fought over and I foresee a lot of squabbles down the road over those that benefit few, instead of the many.

I am also certain we will have a two way exodus as well. Many will leave due to no work to be had, and others will arrive hoping to cash in on the generous welfare programs we currently have, and that oh so marvelous PFD every year. In general, I figure the state will lose residents, rather than continue its rapid growth. Lots of people will end up bankrupt (this is already happening, by the way) and will be forced to move south to start over near other relatives. Those of us who remain, will be the population that can be supported through limited state governments and what little industry remains. I grew up here in the 60s and 70s, and can tell you that life "pre pipeline" was not easy.

If we are exceptionally lucky, we'll still be employed at my household. As it is, I am not even sure of next month (oil field, of course) and may be facing some really tough choices in the next six months. Yet, even so, I can't imagine living anywhere else....and still plan on investing in Alaska's future with my greenhouse business. Even so, there is a real risk we could have some horrendous events take place that could slide us back to pre-WWII days. Thinking about my son's future here, I am very concerned that he will even have one.

When the money runs out, taxes are enacted which further strain the family budget, and economic activity essentially ceases....what then?

Wednesday, February 16, 2011

Alaska State (Welfare) Park

To sum up my argument here:

The north slope oil and gas development days are numbered. Between government prohibitions, environmental lawsuits, aging infrastructure, outrageous tax structure, etc, there is little doubt that it will eventually be mothballed. It will probably occur in stages once the operating threshold for the pipeline is reached, which at the current rate of decline is less than ten years away. There goes many thousands of jobs, and all the related jobs and businesses. And of course, there goes the plum of the arctic revenue stream-pff! Gone.

Gas development in Southcentral is basically dead as well. Aging fields mean less gas is being produced since new exploration and development is practically forbidden. Agrium closed-which produced fertilizers among other products, and now comes word that Conoco Phillips is closing the LNG plant as well. They've been shipping LNG to Japan for decades, but now the Japanese can purchase gas cheaper elsewhere. They are going to shut in the wells this spring-and there is no guarantee that they can be brought back on line next winter-when our demand goes back up. We really cold be facing a severe natural gas shortage as early as next winter.

Mining will follow the same path, mostly as the result of enviromental groups and activists. For decades, Alaska was powered by coal from Beluga, Sutton, and Usibelli. With the influx of people in the last two decades, has come a strong NIMBY segment. They don't want any mining at any time at any place, period end. Coal mining companies are next to Satan, since they are evil polluters, period. Funny thing is, I grew up at Usibelli. Great memories, played outdoors for years in the coal dust and I'm not dead yet ;) When I try to point out that Usibelli started a program for land reclamation well before it was required-and not only that, worked with UAF scientists and researchers to determine the best way to return the lands to native ground cover-I am vilified. Pff! No oil. No natural gas. No coal. They forget how cold it gets up here.

So all those jobs, and the money those industries produce for the state, will go away. So we've had umpteen years of various state administrations expanding the size of state government. If you don't believe me, just take a look inside any local phone book, under "State of Alaska" Look at the hundreds of phone numbers, with dozens of departments, agencies and so forth. Many thousands of Alaskans working for the state-whose operating budget is never adequately addressed. Eventually, the Permanent Dividend will be tapped to pay for this bloated government, likely about the time the unfunded liabilities come due. Those would be, the generous retirement contracts the state handed out like candy in previous years. As I recall, the state governmennt is actually the largest "employer" in the state-all afforded by the taxes and royalties from resource extraction. At some point down the road, the state will have to shrink, which is going to have some interesting effects.....

But before it reaches that point, people will be leaving in droves-those that can. With no jobs, the housing market, construction, and so forth will crash. Tourism and fishing cannot replace the lost income stream, not by a long shot. This is going to place a huge strain on welfare agencies, further stripping the state budget. People will be homeless, need food and shelter, unemployment, help with heating, you name it. We're already experiencing serious problems coping with the homeless and indignent already.....adding thousands of more families to the burden is going to mean that the state will be going to the feds for help.

The fed, of course, is beyond broke.

If you think the scenaio I have shared over these last posts is crazy...I hope you're right. I hope that saner, more competent minds will win the day in both Juneau, and DC. But considering the insanity shown every day in the media, I won't hold my breath. What our elected representatives are doing borders on criminal, in my opinion. Especially the Pollyanna's in Juneau.

Monday, February 14, 2011

Alaska State Park.....cont'd

To recap:

Oil exploration has halted on the Artic plain....development has been shelved of known reserves, such as Liberty. Further south, the Agrium plant (makers of fertilizers, etc) and the LNG plant on the Kenai have or are closing, due to not enough supply to meet the contracts. This is because there has not been much exploration or development in Cook Inlet either-partly due to tax structure and taxes, partly due to the smaller market here in Southcentral.

In about six years, there won't be enough oil available at Prudhoe Bay to send down the line safely-production has declined to about 600,000 barrels a day and dropping every year. Since it takes so many years to bring a well online, we are reaching a critical turning point in operation of the pipeline. It represents over 80 percent of the state's entire revenues, and of course, has provided handsomely to our state and local governments, and a very long list of improvements-and ongoing liabilities. So, Prudhoe Bay is at risk for being mothballed between no off shore drilling, can't touch federal lands, impossible permitting processes, and punitive tax structure. 1000s and 1000s of Alaska jobs depend on hydrocarbon exploration and development.

No Pebble Mine, no Chuitna or Sutton of Chickaloon coal either, if the enviromentalists and NIMBYs have their way of course. Can't use it, even though the state depended on it for electrical production for decades. It's "too dirty" and poses health and environmental risks, etc-according to opponents. Never mind the jobs, the type of coal present, the sheer necessity of having some sort of resource extraction. So there goes another how many jobs? It will be substantial. Most of the nay sayers are happily consuming energy products in their modern houses, driving vehicles, never seeing the double standard. It's all about locking up the beauty that is Alaska forever. You know, keep it safe and pristine.


We are already a welfare state. That means, Alaska gets about $2 in federal money for every $1 we generate in federal taxes. We also have the tightest evironmental regulations anywhere on Earth. We have the strongest oversight, toughest permitting processes and highest taxes as well. Yet, despite this (and dozens of PACs and environmental activist groups) the major US developers would still prefer to produce in Alaska. After all, at least here you don't have your billion dollar investments seized and nationalized. But if they aren't allowed to explore, to drill, to build one blasted bridge for winter use-why would they stay? The legistlature has already proven they can (and will) change how business is done here at a whim.

Of course I am just touching on a small portion of the circumstances here in Alaska. A person must factor in what's happening in Washington, DC, and events around the world. Take into consideration the collapsing economy, the inflation rate (around 20 percent in just food alone here locally-if you haven't been living under a rock) and so on and so forth. The national debt will eventually break this nation, I can't see any other outcome.

What happens after that?

Wednesday, February 9, 2011

Welcome to Alaska State Park

Think that's a joke? From where I'm sitting, it's not far from the truth.

Yesterday, I got into a discussion about resource development with a couple of "died in the wool" anti-everything types. I admire their dedication and their viewpoints, but they aren't so welcoming to anyone who attempts to provide a little balance to the debate.

So, let's think about what is really happening up here in Alaska. First we'll start with some basic facts which can't be disputed. The State of Alaska is, of course, the largest state in the union. However, only a small fraction (less than ten percent) is "available" for regular folks-also known as residents. The rest is firmly in state and federal hands. We're talking Denali State Park, the Arctic National Wildlife Refuge, and so on and so on and so on....millions and millions of acres. In addition, there are preserves, native allotments, and refuges dotting the maps, from the Aleutian Islands on down to southeast.

The State is mandated to afford a means for resource development-it's actually in our state constitution. The State retains rights to all mineral resources on all lands it "owns". The issue of wildlife resources has been fought back and forth in court for decades, with the State eventually conceding most control to the feds. With each erosion of the 10th amendment accepted by our legislature (such as the issue of navigable waters) the state loses a bit more oversight of our lands, waters, and the animals that inhabit the state.

In the past few years, the legislature has trotted out some great sounding plans, which turned out to be not so great. ACES (Alaska's Clear and Equitable Share) increased taxes on North Slope production a whopping 400 percent. Nope, not kdding. Because of this, Alaska now ranks as number one for the highest tax structure in the entire world. Yes, you read that right: Highest taxes in the world. Coupled with the most challenging and harsh environment for oil and gas exploration and production on the planet...well, it has consequences. In the three years since it's passage, drilling on the North Slope has dwindled to.....nothing. Can't say as I blame the companies....who would want to invest all that money when the state ends up taking 87 percent? Of course that meant a lot of jobs....but, no one seemed to care. It was all about punishing the oil companies and filling already overstuffed state coffers, so that other pet projects could be done.

Then there is AGIA. Former Governor Palin's idea, to get a third party involved so that there wouldn't be any funny business over who could and could not ship any gas in the future. I thought it was a bad idea at the start, with the state promising a foreign company a half a Billion dollars if the deal fell apart. So here we are, a couple years into this debacle, and we still don't know the results of the Open Season that were promised "after November elections". I am sure a few people in Juneau know whether or not there were any results, but the rest of us have no idea. Between the time the plan was first planned and then brought to the Legislature, and today....gas prices have plummeted, and don't show any signs of going back up. So we have many millions invested into another scheme which is not likely to come to fruition. There are two other competing plans, and they too, are having troubles getting any commitments. And why is that? Because it's darn near impossible to proceed with oil and gas development in the state.

First, there is very lengthy (and expensive!) permitting process to go through. You have to have umpteen agencies' approval, and it can be halted at any time by a $100 lawsuit from any environmental group. Or, like with Pt Thomson, perhaps the Army Corps of Engineers will shut down the project. (They refused a bridge crossing, costing the company several hundred million dollars in lost revenues and about four or five seasons of exploration time-and 800 jobs too) Now, companies are forced to fund their own environmental impact studies, and the results have to be acceptable to a plethora of agencies and groups. For Alaska, five to fifteen years has become the norm for attempting serious resource extraction of any kind. Eventually, most companies give up, between uncertain and punitive actions by our legislature, stupendous tax burdens, and the huge costs of court actions. They just vacate their leases (which they paid millions of dollars for) and go to some other place where actually doing business is possible. Thier duty is to their shareholders after all. So less and less is flowing down the pipeline every year, with no real hope of increasing production. The only reason the state is "flush" is because of a) The outrageous tax structure, and b) The current price of oil. No one seems to remember the years that oil prices were under $30 a barrel, and yet plenty of activity was taking place up north.

As far as the North Slope goes, I see it this way: While the bloated state payroll merrily plans to spend, spend, spend those oil royalty and tax dollars, the legislature is "fiddling while Rome burns". Instead of facing the coming challenges head on, they have managed to name a state dog (last year) and designate "Marmot Day" this year.

On other resource issues, the uproar over Pebble Mine, plans by Usibelli and another company to ship coal, and other projects are hotly debated and staunchly opposed. The opponents forget that these leases have been held for years in some cases. At present, there is no way to effectively buy a lease, and then NOT develop it. This goes back to the state charter and constitution, remember? In the Sutton and Chickaloon areas, local residents are up in arms about plans to resurrect coal mining there. Aside from the obvious (Hello, you knew there was a mine there when you bought the property) they are forgetting the history of the region. Those mines provided much needed jobs and kept many people warm for decades before their arrival. Those mines would provide some much needed employment today too, if allowed.

It's easy to get frustrated with people opposed to development, but they see the risks and I understand them. Loss of habitat, pollution, ruining the environment for years to come-all very possible. Do I want to see salmon streams sacrificed? No! Of course I don't, my family fishes and hunts like many Alaskan residents do every year.

More later...........

Wednesday, February 2, 2011

Events conspire

to heighten awareness.

This past Sunday I spent seeding the first flats of the growing season. It sure lifts a gardeners' spirits to get the hands dirty, and smell the wonderful aroma of moist growing media. I also devoted some time to placing all my seeds in order, in loose categories, and into plastic boxes. Naturally, I discovered I didn't have enough of a couple items, and way too much of a few others-but that's okay, at least I know what I have, and can find it too! Previously, the seeds were scattered between a number of small cardboard boxes which made it easy to overlook things. I also worked on the planting schedule and boy, am I in for a real challenge. In about two weeks I am going to be full up...and scrambling for more space.

Monday evening I discovered that an armed break in occurred just a few blocks from my home, during the day on Sunday. So while I was happily filling, wetting, and seeding those flats, a young girl was sitting terrified, tied up, while two armed men robbed the house.

Sadly, no one knew what had happened or noticed anything amiss. I made phone calls to neighbors and related what had happened. Half are firmly in the "no big deal" camp due to the residence being known as a "drug house" because the owner was busted for pot nearly 20 years ago. The other half are pretty unnerved about it, like I am.

It meant a stern talk with my son about never, ever, opening the door for someone he does not know, period. It scared him a little, and that's probably a good thing, really. He's pretty naive about life in general, and while I would wish for him to remain free from the risks of the world, I know it's not a reasonable thing. It could have been us, since these armed home invasions are happening.

Of course this brings up something that has been bothering me a little bit lately. And that is: Why are these crimes not being reported? Because they are not. If you were basing your assumptions about crime in my area on the Troopers' Public Information Office press releases, or what is mentioned in the local paper, you'd think.....well, they are catching drunk drivers, serving warrants, and responding to accidents and civil matters. But you aren't reading about the meth labs, drug deals, marijuana grow operations that used to be so much in the news. It has pretty much disappeared from public view.

Which would lead a skeptic to conclude that someone (or several someones) have decided to scrub the news....or, at the very least, not let on just how bad things are out there.

I am not sure I want to know.