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this is your host Casey - shocked Alaska conversations is supported by a community of Alaskans dedicated to our state if you'd like to view more information about the show you can find us at Alaska conversations com there you'll be able to find this podcast as well as our show archive the web site is another place to find information and data concerning the topics we discuss events upcoming guests and more about Alaska conversations if you have a question comment topic recommendation or a suggested guest you can email contact at Alaska conversations comm [Music] this is episode 4 my guest today is Professor Doug Reynolds he earned his PhD in economics from the University of New Mexico he has been a professor of economics at the University of Alaska Fairbanks School of Management for many years professor Reynolds has also conducted consulting and research in private industry focusing on resource economics dr. Reynolds welcome to Alaska conversations thank you very much today we're talking broadly about resources in Alaska but focusing primarily on oil I'm gonna take a second to set the stage and so forgive me for a short monologue but it is critical for me to make this statement this podcast is in its infancy and it is about Alaska issues I was dissatisfied with the outlets available to really dig into Alaska issues and I was waiting anxiously for somebody to take the reins I decided why not me and Alaska conversations was born if you enjoy the content like our Facebook page subscribe to our YouTube channel and get involved in the conversation this effort isn't about any particular podcast guest or topic it is about the conversation it is also important to be clear on the underlying goal of this podcast which is to facilitate the discussion between opposing sides when we think about issues if our recommended solution seems absolutely obvious to us and we cannot understand why it simply isn't done that way we are probably wrong it could also be the case that everything you or I think we know may be wrong so professor Reynolds thank you for coming in or I guess I've got you on the phone but thank you very much for participating in Alaska conversations so tell me a little bit about yourself or let everybody know a little bit about dr. Reynolds yeah I'm the professor at the University of Alaska Fairbanks now for over 20 years and they are in the middle of cutting so I have done some articles and so on as a as a private citizen only as an option to try and create some consulting options I haven't really done any consulting for a while I used to do some consulting here and there so that's just if they continue on the cut and I understand you know that's that's a whole different issue the cuts of the University and how that's going to work out that's a separation I want to get into that but knowing that they could have to cut I'm just setting up the trying to set up consulting as an option but I have been in other countries I've been to former Soviet Union right after the fall I was teaching there I was in Poland and some other countries I've been in Mexico so I've seen Norway I was two years and they've changed it in Norway so I've seen a lot of different countries there oil there but most of these countries are oil producer in countries like Alaska and you know it's it's interesting to compare how Alaska works with other countries have worked I like how you put in there other producing countries maybe Alaska would be what would be a good own country some of our you know at least in landmass value but Alaska oil is it's a quite a bit different than the other states and I think that's primarily because of our owner state ma you know our ownership model and the land ownership how royalties are distributed how we how we acquire money so oil in this state is something that enters into the category of everyone has an opinion on it it affects everybody all the time and like I said in the monologue it's one of those where most people have some sort of simple solution and yeah if they if Alaska would just do it this way we would usher in some sort of new utopia in Alaska and everything would be great and we would have all the services that we could ever need so yeah yeah so I'd like to establish just a few things about oil and this is for anybody who's tuning in or that's going to listen that that as an understanding of oil but maybe the terms aren't right so there are some terms that we're going to define before the conversation so I would like to talk about grow value wellhead value and perhaps the price of Alaska North Slope oil versus other more known benchmarks like WTI or Brent crude yeah so Alaska's ultimately the oil gets used in California really it should be going it should have always gone to Japan because you get a slightly better value in Japan but once they've set it up in for California it's basically kind of hard to change it over to Japan because they've set up all these refineries for the type of crude you get into California so that's basically where it's being sold and you get a little bit of a premium for it over the over the years it's that probably premiums gone down a little bit but you get a little bit of a premium for it over the West Texas price however there's a big cost to get it from the North Slope all the way down there so the wellhead value is different than what you get in California so Coll value and I don't know the exact numbers I don't keep track of those numbers something on the order of five five dollars less or ten dollars less something along those lines at the wellhead and obviously the more you can fill that pipe the better your cost but they negotiated a care of the difference in price from the wellhead to basically California a long time ago so can't really change it too much so then let's say it's let's say it's relatively is it could be seventy dollars in California but we could own we might get beginning today roughly sixty dollars on the on the slope at the wellhead just roughly I don't know the exact numbers I don't keep track of them every day so you get a little less until you sell your quantity times that price that's your revenue now you're going to subtract some cost and then there's a royalty that goes straight to the state and then you're going to do some sort of tax based on the revenues leftover for the producers and so that's the extraction tax the production tax and then which used to be called a severance tax and then we get that severance tax and then there's a profit leftover and the federal government taxes that so it's a little convoluted usually everything everything in like markets and economics and you know buying and selling shares they like to keep things complicated to confuse people so they can fake company so if you think it's complicated that's the whole point is supposed to be complicated so you don't understand where you're losing or winning well when it comes to Alaska's production tax just objectively I think that we have a more complicated tax structure than most of the other states and a lot of that has to do with us being an owner state first the the royalty share we generally receive twelve and a half percent I believe on state lands at least yeah so that royalty share is that on par with industry average or is it a different yeah you you do you do a royalty you can do a royalty in Texas you get the owner land and we'll get some sort of royalty now that can be negotiated because it's a private owner and that goes directly to the owner and then there's taxes state taxes federal taxes but they're more of a profit oriented you could you could change it it's hard to change because everybody likes to define themselves well this is our this is arm pot of money or this is your part of money or this goes to this thing like so some of the royalty goes exactly to the Permanent Fund so once you have all these definitions of where pots of money are going to you that you hit you hate to change everything and the other thing with North Slope crude is that our numbers are quite lower than they used to be so what is a where are numbers do you have an idea of where numbers are today compared to where they where they once were and roughly how how quickly they've been falling well so roughly it was at two million barrels a day it's been about half a million days now a half a million barrels is still good concern was I would gone would have gone down to play 300 a half a million at 500 million or 500,000 barrels a day and would have gone down to 300,000 barrels a day or even lower and then the question is how how low can it go and that's another debate debatable issue hello it can go in the pipeline so but ever you know all all time all kinds of places around the world they they go up and then they start going down now they can go up again when there's specific changes like opening up new regions or maybe a specific technological change now when you think of Texas Texas has been open up for a long time so why did their production go way up well they had this new technology shell lol and so you say oh we can we can use shale oil in Alaska well actually using shale oil in Texas it's possible because there there's a lot of gas with the show well you have to be able to sell that gas or you have to flare it and not just that they use the gas and they have a extensive pipeline system already hood up that you're never far away from from a major pipeline to get hooked in although they are constrained a little bit lately but but the thing about it is when you're looking for this show you're often going to find gas and so if you're if you're doing a lot of drilling to find this resource and all you're finding is gas you're you're wasting a lot of money in Alaska because you can't sell the gas you can't do anything with it so it inhibits that exploration effort whereas in Texas you'll explore because if you find gas well that's okay we can sell it and they had really high prices around the turn of the new millennium so those those high prices and plaintiff eyes a lot of that shale exploration then when they finally started finding where more the oil resources were then they could exploit that but even then they still had a lot of gas and they'd still want to sell it so that makes it different than Alaska so there's there's an it's not just convoluted taxes that make this different there's other there's other physical aspects plus the cold plus the ice plus the the ice roads issue that's another issue you can get into the whole ice road issue so it's it's complicated and for us we're when we look at what we've been doing since about 2006 we've we've really got a net profits tax so some of the shale plays New Mexico Texas Colorado North Dakota etc they generally do a tax as far as I know that's on the gross value or wellhead value of the oil in Alaska we do it differently we have it on net profits so the state is sharing some of the cost risk associated with exploration I believe on the slope yeah I I haven't looked at it too closely how it all follows them how their tax is different differ for our taxes I would definitely want to look at it again and now there is the there is also the tax credit which is again another issue I'd the ideas that transcend of eyes new drilling getting new wealth although when they first put it in a lot of it had to do with oh we're gonna match Texas well Texas is doing shale oil you really can't do shale oil until you get a natural gas market set up on the North Slope and that won't be for sometimes it's going to be hard to do shell just in general oh but then there's the well there's other issues with with the tax credit but as far as the how you how you tack that it shouldn't matter that much you you should be able to adjust it sometimes you like it to be complicated to incentivize things sometimes you like it to be simple and yeah I don't know it's it's it's an issue well well step back a little bit from the precise taxes etc there is an argument going around or there's a discussion going around it happens every time that oil companies are releasing quarterly quarterly returns announcements to investors it's said that oil oil companies are finding their largest profits their greatest profit margins in Alaska so do you know if if oil companies really are finding their greatest profit margins on the nose north slope or is there a reason that that it looks that way well I would my you know I don't look into it that closely to really compare the tax structures and see how they're different but in general it looks does look like the the profits are higher here than in other states and and it should be compared and so then the question is well you know we had a vote on this and what what oh 14 I guess it was on the package change and then they're thinking about doing a new vote on a new tax so that's fine you wonder though why why haven't the legislature looked at it the legislative sessions all these years not just the under this governor but the previous governor why haven't they looked at these taxes so what you have to remember is there's one other issue that kind of unseen underneath all this that playing at least some role maybe not the whole role but some role and that is Cook Inlet exploration cook lint in like natural gas because it is a mineral so it's under a mineral right lack of mineral rights and taxes is just the same only it value is much less because it's a natural gas than the North Slope but nevertheless it's under the this tax regime and the tax credit incentivizes the Cook Inlet exploration so back in a 13 Anchorage was in a crisis because they were running out of natural gas and the pressure was going down and one of the object of this tax credit was to incentivize additional exploration and it also incentivized exploration in the Cook Inlet and now they have more gas so it's kind of a quote unquote subsidy like a subsidy for the natural gas situation in the Anchorage area that is the point of the tax credits is to make sure Anchorage keeps its natural gas supplies abundant well there are other ways of doing that without having the tax credits you could put a small bowl but not a big pipe on a small-bore pipeline from the North Slope down to Anchorage and it would help development a lot of them say but I think the Anchorage legislators like the the way it works for them because they get a better benefit for them it's maybe a cost for the rest of the state but a benefit for the Anchorage area well yeah you're in you're in in Fairbanks suffering through a lack of lack of natural gas and myself out in Bristol Bay where we don't have any access to natural gas there is it statewide there they're disproportionately some infrastructure has been built and especially in South Central compared to other regions of the state where we're just missing out on some of the infrastructure but there are costs to getting that natural gas even a small-bore environmental concerns and etc that are that play into that I believe yeah I mean Canada's done a lot of these if you do the cost you you could do it you could get it either halfway the Fairbanks or all the way to Anchorage you could if you went halfway to anchor it to Fairbanks and it would only be 18 inches not these 20 I know they're talking about 30 inches or of course the big one with 48 inch nothing that big just a small bore for in-state youth you can do it and get both propane and natural gas and get a lot more BTUs in each inch and you could get halfway to Fairbanks and at least supply fair and then if you needed more in Anchorage you could finish the project to Anchorage you would still want Cook Inlet exploration and production and you'd still want to use cold and I don't mind saying that you can use coal you I think using coal is okay by the way I have a cold boiler in my yard I don't use it now but I was using it that that way you get more diversity of the energy supply laughs a little bit about the coal boiler I was just just making sure that nobody's getting too upset it's not like you're you're trying to destroy the world it's just it's something that's available to you and that's what you're using to heat to heat or do whatever it is that you're doing so I'm sure that you're that you're not intentionally trying to des
roy the earth well you know it's a good thing to talk about I just went to a conference to talk to all about the global warming now if you've ever been to India I've been in the I've been to China been to Mexico and do these developing areas where they they need what they need is development right there they're poor they're you know living hand-to-mouth that kind of thing and they need development and they're using coal and it's cheap and it works really well now we can maybe reduce our of energy non-renewable fossil fuels in Alaska but it's so limited the amount that we would save we have to be also considerate of you know people getting cold and people and and pollution that is you know coal can be actually as far as particulates can actually be very quite clean of course the natural gas is very clean I like natural gas and propane can be very clean and we can get it to a lot of places I just think a diversity and specific needs for specific locations can work what's great about the coal use up here in Fairbanks and actually they could do an anchorage I know Anchorage would hate it but they could do it they could build a big power plant right in downtown Anchorage and you get a lot of heat I mean that's what they do in Poland they have big power plants and they send the heat it's a coal powered and the heat and the power so you're actually getting with one carbon atom to to uses the heat and the power they could do it in downtown Anchorage it's really help we do it in downtown Fairbanks and we do it on our campus UAF campus so I know it sounds really bad and we're trying to save the world but you know you have to be at least somewhat flexible in situations where you know it is cold and you do need heat well I'm going I'm going to come back and talk a little bit about that here in just a second but let me circle back to to oil real quick something that that I don't have an answer to so Prudhoe Bay we started producing oil and we were producing 25 percent of the country's oil now we're producing about four percent of the country's oil and we're six largest producer probably in the country there's only a few things that could have happened number one we could deplete the we could have depleted the resources our our resource could be almost gone that doesn't seem to be the case when you look at reserves but I do know that fields have declining production values the other thing is that our tax structure isn't very attractive or it could be that just other locations are better plays do you have an idea of one of the three which one is probably playing the larger role or is it just combination now that's a really good question and again people are really confused about what is oil shale oil is different than conventional oil so our conventional oil let's come down sure and it's gone down on a fairly not a particularly quick rate and they're still finding some more but you can't do shale oil in Alaska and they're doing shale oil in Texas and shale oil in North Dakota and so I keep seeing this and it disturbs me to no end o Alaska isn't keeping up with Texas well they're doing shale oil you can't do it in Alaska because in order to do it you have to be looking and you have to be able to market your natural gas because you going to find a lot of natural gas when you're doing that and as you find this natural gas it cost a lot and you find the natural gas you can't sell it so you're wasting all your efforts so you're not going to do shale oil in Alaska it just won't work until we get a big pipeline and by the way we're not going to be able to compete very easily with even the Gulf of Mexico with with LNG liquid natural gas so so I don't want to get into that issue yet but just look at the oil it's only natural that if everybody is doing shale oil and they're expanding that we're not able to do that shale oil we had to do the conventional kind and it's on a slow decline just like Texas conventional oils on a slow decline in depth at some of the other tax structures and some of the other states but do you have an idea or have you heard whether we're on par with our tax rates higher lower or well I think I think it's definitely too low I think they should look at it but again the Anchorage area legislators aren't going to look at it because they like the fact that it has the tax credits that keep the Anchorage area resident full of natural gas so that's kind of the situation yeah they should look at it and I don't know the the actual vote on this actual change might be okay but it leaves us some of the tax credits I think it should be a straight tax for everybody it should be looked at it should be a little higher I think it's but that's not the reason we're at 4% the reason we're at 4% is because they can do shale oil we can't and so when they're when they're doing shale oil really as they are exploring the natural gasses offsetting some of their costs of exploration which is a huge cost to some of the oil companies is what I understand a little bit there yeah exactly and so that would incentivize more drilling and more production second thing yeah you you have to remember the natural gas price in the lower 48 was really high from about Oh 5 until Oh 10 and so they just were desperate for natural gas and they were drilled and they start finding the shale gas and they had pipelines in existence so you just had to connect out to another pipeline and you could start drilling and even the North Dakota which was mostly oil they weren't far from a natural gas pipeline so if they had found natural gas there they knew they could start sending it over to the pipeline that went to from Alberta to Chicago so that fact that they could incentivize the gas and then eventually they found where where the oil was was more to do with everything than whatever tax bracket they had we're talking about some of the oil tax credits we have a ballot initiative coming up that's going to put in front of the voters a decision one of the things that just for a clarification when we're looking at oil tax credits we're not paying the oil companies I don't believe what I understand is that those tax credits are offsetting the tax liabilities so we can offset tax liabilities down to zero but we don't go into the negative rates but perhaps you have a different understanding well that's true what you're saying is technically true but you can transfer the bat credit in terms of money for somebody to drill so it's basically incentivized drilling which is fine but really what their intent amaizing is a lot of drilling and cook inlet as well as the North Slope and so I don't think you necessarily need those tax credit all you need is a straight tax you should look at it should you should get the experts in and and you know compare it and so on that's what they should do but they haven't done and it's been wet ten years and the reason they haven't done it not quite ten years but the reason they haven't done it is because they like the tax credits they like the fact that there's incentives before for the Cook Inlet drilling yeah that's it that's a pretty big misunderstanding is that those the tax incentives frequently are geared towards Cook Inlet and we oftentimes forget about the I mean south-central legislators or individuals will call the Cook Inlet natural gas play you know cooking Renaissance or something like that we often forget that about the Cook Inlet play and I think that's a really great point that people should keep in mind additionally just before the podcast I looked up Texas's production tax and Texas has a four point six percent which is a little bit higher than our minimum so a lot of our taxes when we have the tax incentives are the tax credits we have a tax rate of thirty five percent of the net profit so Texas and Alaska are already not comparable because one's gross and one's net but then our tax credits go to the oil companies and they will offset the value or the amount that's owed to a minimum and usually that minimums that four percent or three percent two percent depending on the value we have had a lot of tax changes and Texas has had their production tax in place since 1951 and so it's a much more stable environment you a lot of experiences overseas do you do you find Alaska is a very stable tax environment should it be a stable tax environment is there anything that we can do or are we kind of on par with other oil-producing areas well that that's a good question though it always comes up I'm not convinced that changing taxes lightly is like the biggest deal in the world although they they claim it so Norway has kept theirs it's relatively high they kept it intact and there their production went down and their the exploration probably to gone down I don't know they did have one new exploration success lately but I don't think you know and they they've tried to keep it because of that very issue but they've kept it high and stable rather than going up and down in fact what I find is when when the next tax comes along and it's rather high they say oh you can't do that because it's disincentivize the exploration but then when we wanted once they say well that's what's lower they never say oh if you can't lower because that'll cause a change you know that'll that'll mean you're changing the taxes again and we don't want to have them change no they would never say that they're always saying oh if you're gonna lower it that helps us but then when they're high if you're making it higher that means you're changing the business environment so they come up with a convoluted argument one way but it's a different argument the other way so I mean you could you could run numbers but I would I would I would get it's a lot less of a be a big deal than and everybody's saying if you want if you want to really add business environment you know Venezuela could be it where they've nationalized things but you know most countries around the world of nationalized their their operations and then they bring in new you know health you know we couldn't do that so easily because we're under US law so much harder you wouldn't have a pretty hard deal to have a state government run and something not that we don't have those but it'd be a little harder to do and you have to bring in the oil companies so to do the searching do to run different operations well there seems to be some group that would like to see the state take over the natural gas pipeline would that fall under the category of nationalize or is that a different structure well then you could do that you could you could have a state owned and run just like a state court authority chances are this any big natural gas pipeline a big one that is would would lose money a small one which it should do okay but I'm talking 18-inch hundred bzf a year whereas these big ones are for btf a day the and the LNG project you're competing with the world on that project now you might be able to get a long-term contract from say Japan or even China the way that the US and China is going you can't trust China not that they're untrustworthy it's just that because of all the infighting you got to be careful with China and then Japan you could you can probably get a long-term contract but it won't be it won't be full the whole time that is they have their seasons of high-need and seasons of lo need so it's it's going to be hard to become competitive getting to Japan even compared to the Gulf of Mexico you can get around through the Panama Canal though that's lately it's hard to get through six to pannikin if the Panama Canal is working you can get through from the Gulf of Mexico to Japan cheaper than building a pipeline here and getting good Japan well it's uh it's a nice transition to something else that's interesting when we're talking about okay LNG and we can perhaps find a buyer in Asian markets that would be dependent on long term contracts as you mentioned in those long term contrast contracts are based on some negotiated price well we usually predict oil oil prices at the state level we use that to guide where we're headed with our policy and I would make the argument that futures are a terrible predictor of future prices in and so what I mean by that is Japan if the spot price of LNG is three dollars there's not a lot of incentive of making it of locking in a contract at twenty dollars it doesn't but that's not reflective of the price possibly going to twenty dollars so today there's very little incentive for somebody to write a futures contract at 80 or $90 a barrel especially not at a hundred and ten but that is trying to predict a future price with current conditions and there's just very little incentive to write those contracts to predict future oil prices does that make any sense er oh yeah ya know most people aren't aren't you know there's some contracts out say five ten years but there's very few contracts and the only ones that do it are I don't know not just speculators there's maybe a few refineries or Airlines or something but very few people are making those kinds of contracts now with LNG it used to be you'd have 10 20 year contracts and Japan did it a lot because they wanted to make sure they had the supply and it was hard to build these systems up now they're trying to make it more competitive it's very it's very hard to get a long-run contract for for LNG at a higher price the LNG goes for what they say in the Gulf at three to five dollars per entity compared to and that it's hard to compare natural gas oil because there are different price levels and different density but anyway yeah it's it's going to be a challenge to get a long run you almost need a long run price a contract and Alan gee they make anything work now and oil nobody's doing that they very rarely do that and you get the prize and it and I think we're in for a surprise we probably couldn't be in this surprise with the oil prizes in Alaska's favor obviously if it goes up correct so that's one of the things I like to keep in mind I'm glad that you clarified some of that up for some of the industry I would have I would have found that to be the opposite between LNG and oil but I'm glad that you clarified that a little bit now the other thing that one of the sides will say as we move into more and more of the oil debate is that Alaska really needs to start preparing for a post oil Alaska and a couple of problems with that number one I'm just wondering what you think a post oil Alaska would maybe look like but and second thing to keep in mind is that the state doesn't have a statewide sales tax we don't have a statewide sales tax and without either one of those two it's it's very hard to to have an industry grow and have it actually benefit the state yeah there's a good article about that there's some things to do in Alaska to develop economically specifically mining now I know it's controversial but I like the miners I think they do a good job sure there's cases here and there that you could better regulate but I think in general the mining industry is a good one now high tech is going to be hard to bring in or factories but any of these other industries that you try and bring in and you don't have an oil base or you have less and less than oil base even even still have oil if you if you add these industries you had people and then you had service you need services and roads and maintenance and all this stuff and you're still basing everything on an oil tax I mean that just doesn't work usually you have at least some in contact when there's more people there's more income when there's a lot of people there's less income and so they'll income tax or maybe a sales tax or an value-added of some sort will will match the growth and decline of any other industry so that you'll have them government resources to maintain everything schools and all sorts of other things and Alaska is a challenging location we did get used to those oil types is a very challenging geographic location and people want to be where they want to be I understand that but then these costs are much higher the more separated you are especially in villages and certainly even in Fairbanks but you know you kind of want to match that all those cost and need with at least some sort of different different tax regimen w
th oil there's a significant significant number of people that are really anxious and anticipating growth in in oil production moving us from 500,000 to maybe 800 or 900 thousand riyals a day if some of our most recent finds can come online people are excited about Anwar etc I take a little bit different view I will be delightfully surprised if our oil production recovers I'm not so sure that Alaska's in an environment anymore where it is attractive for companies to produce oil some of that is because of the shale and some of that has to do with other companies goldman sachs wants to get you know divest from developing oil here in the Seattle area they want to completely ban natural gas inside of their community Barclays it wants retirement accounts to be divested from oil and I believe that there's a few other large banks that finance these projects and Alaska is not a very large producer anymore so it is the you know the the opportunity cost of now investing in Alaska is not as large as it used to be you're not really missing out on anything well I agree we're probably not going to be you know another Saudi Arabia but it might maintain and then the level might maintain and we probably can keep the pipeline open and the production it might go up a little bit and then go down and if it's on Anwar or the National Petroleum Reserve that's federal land so it's under federal we get a little bit of money from it but not as much as you get on the state land so I mean yeah you have to you have to start preparing for less revenues on that side even if the production can stay steady or improve a little bit you're getting less taxes from these other lands and so yeah I mean we should we should start thinking now what what helped you know what when you think about the history of the US what really helped create you know a powerful economy out of it all and and that's infrastructure the railroads really in the 1800's were really big and just connecting the country creating all kinds of opportunities for factories to get their goods and setting up factories and all this stuff well I don't think we need any more roads or railroads in Alaska but we energy is really expensive and people don't understand it that you could you could bring a small-bore pipeline and get it to Fairbanks and you could get a lot more energy and you could get a lot more development and mining development for the entire state now that's not direct benefit to Anchorage but it's you know indirect and it starts building up the state and you get other thing if you have more room to expand outside of Anchorage Inc which is kind of penned in a little bit so if you really want to expansion you really want to do some things you you need to get outside of Anchorage and certainly Fairbanks has room and there's the bases but getting some energy that's cheap battlin you know everybody says they want to let's get a new industry and let's bring in some this or that and well how much is it going to cost and how much is the energy in the cost that's right yeah the energy costs are going to be enormous I would put some of our mining projects that would bring potential infrastructure the pebble Donlon corridor would probably bring in some infrastructure at least for some of the villages in the Lake Region and throughout some of the YK Delta however I put some of these projects not Donlan so much but especially pebble I put that in the category of Anwar where I just don't even if we can even if we pass regulations and GIS goes through and all of these different things I don't think that there is a national appetite for developing those types of projects I think pebble would be I think a lot of the people that would be using the the ore from pebble would just refused to to receive it and we'd continue to receive our or they would continue to buy from Chile and other places well yeah you're right like the whole not developing Anwar thing but you there's other people with money and they'll invest if they think if there's profit to be made on them gosh I know they were talking about Dubai company coming up and doing this LNG over that over the pole now I don't think I don't think it'll work great but they might try and see if because there's still too much ice during them the middle of the season and I don't think they can break out very easily but they were talking about LNG over the pole from Alaska and Dubai was doing it you know these companies from around the world they'll come here they'll develop it so it's a question of regulatory rules and I think you can make these things done cleanly and responsibly but that's just my opinion and I think they'll be financing and I think I think you can get you get things done Alaska does have a relatively strict regulatory environment as far how friendly we are to the environment per se oh one example would be having a subsistence board in association with Red Dog mine I mean that's an extremely unique power set up that I think probably is likely the only one in the in the world where you have a subsistence board which which is going to inform some of the decisions made by Red Dog etc and that that's a neat thing about Alaska you know there's those unique things the Native corporations are unique but that I don't know exactly how that set up that board but that's exactly the kinds of things you need you need innovation in local control now the Pebble Mine is obviously a problem because if it breaks it goes down into the salmon the Bristol Bay salmon area I guess it was and those two well there are two different boroughs actually so one and it's and of course maybe different tribes but they're different boroughs so the borough that going to get the brunt of the of everything going wrong which is in one borough and then the borough that's going to get the brunt of everything goes right it in a different borough so they can't cross fertilize each other very well you don't look like it to be one one borough that way everybody in the borough and and it gets the advantage if it if it goes right and everybody in the Burrell gets the disadvantage in terms of cost anyway if everything goes wrong I don't think it'll go wrong but you know there's always that chance just like Exxon Valdez I don't think that that the Exxon Valdez crash happened I don't think that means everybody in Alaska I hate oil I think they still love oil and they're glad we had have had an oil industry even though we had the Exxon Valdez still so well there's I mean in in the the fishing industry has somewhat recovered from Exxon Valdez and the company has been settling that for four decades now and we just want to make sure that not another one of those happen it's interesting when you talk about so the when we're talking about pebble we're talking the lake and Penn borough combined with the Bristol Bay borough Bristol Bay borough first borough formed in Alaska by the guidance or the brainchild of J Hammond who everybody knows the J Hammonds story the Bristol Bay borough is going to annex as the fish they they're not going to see any benefit necessarily from pebble where the lake and Penn borough would would receive quite a bit of money and then you have the largest community in Bristol Bay Dillingham which is Dillingham which is not in a borough and so that's the complexity of the pebble argument so there should be ways of innovatively dealing with and I'm sure there are I haven't I haven't looked at that issue too closely so I know it's hard but I think you know innovation could could work well you also had a article that's where I I came up with the idea of us doing the podcast you an article that you wrote in Etienne which I found really interesting because you were it's not only that you were calling out goldman sachs for candy they're they're signaling to the environmental crowd but also that a lot of times these companies that are doing that aren't necessarily accomplishing anything so you know could you could you talk a little bit about what you what Goldman was talking about doing and in the recommendations you gave to him sure well you know I don't know exactly why they would even take select Arctic oil as being anything worse than any other oil or shallow oil for that matter but anyways maybe it's because of the polar bears or maybe to there caribou and you know they can they can drill for oil under a long distance I don't think they would have any problems the caribou would have no problem in fact several decades ago they were going to put reindeer where the where that North Slope area is Anwar as a way of development but I think oil would do a lot less damage to the reindeer caribou herds than having a reindeer herds there no as far as goldman sachs i mean it's it's obviously more about publicity than actual and you'll get people investing i think an n waar from all over from dubai or china or all over the place and different things so i don't think we have to worry about goldman sachs and per se but if they're really you know i'm gonna call out somebody why not call out Amazon doesn't Amazon because you're buying things online and you're having a chip one at one piece at a time rather than going to your local store where they're shipping and everything at one time and they're saving on the shipping cost and the carbon cost of the shipping per item you know why don't they go against Amazon but of course they'll never do that and probably make money with Amazon and the Amazon company is a company surrounding any one so great they make money that's what they're supposed to you but if they're into the environmental movement they should really look at you know specific issues that really could help now I suggested a should locate to Fairbanks Alaska because they could take their corporate jet quickly and easy to Southeast Asia or Europe whichever way they wanted to go probably a shorter trip than where where they're going from New York and if they have to go in two different locate a direction and then they would benefit from the coal power that gives heat and power at the same time and they could put their all their computer servers on the North Slope and view their trading there computerized trading that happens without a lot of input and there might be a connection in somewhat of a connection all the way over the pole from Europe to Asia and they could tie into that but I was just an idea it's absolutely incredible with Amazon out here in Bristol Bay obviously everything's flown or barged in and Amazon Prime member and Amazon sometimes I can't get a notebook shipped to me if I want a notebook because it's unavailable but I did get four tires for my pickup ship to me free of charge I don't know how they can possibly do that but I got their tyres delivered no shipping charges whatsoever right to my door unbelievable that's amazing so with with our oil industry one of the things I would say is that our oil industry often times it seems to be understood by everybody but nobody everybody has a very simple solution for our oil industry one thing that we should all be able to agree on is that we absolutely need oil right now because I don't know what it diversified Alaska would look like we've talked about some of the potentials but there's nothing that's going to come in tomorrow and start diversifying our economy I don't think that's exactly right I believe in the oil industry and there's probably more options there and especially offshore and there will be natural gas I mean eventually will develop it might be and 20 years from now it's always it's always been well 10 or 20 years will do it I think eventually it'll it'll be a factor and then yeah it goldman sachs isn't going to move to fairbanks anytime soon or even or even anchorage but you're right so just it's a hard transition it always is we are in Kazakhstan they're having a hard time their very own oil-dependent even though they have other industries they have coal but you know you just you slowly make changes as you can and keep the industry going as you can and then you know some other things as it looks viable set them up and do them and you know it's a hard transition no doubt again no doubt about it I one area where I think I disagree but there's no reason and this is just me disagreeing with you I don't have any evidence for this etc just my gut tells me that the more that we change the oil taxes the more that the companies would think about leaving you've made a great case for the reason why that might not be and I started the monologue by by saying that sometimes the things that we think we know we don't actually know and in this particular one I don't think that that we know exactly how an oil company is going to respond to a change in in taxes now you don't you know actually know and and and the other problem we have compared to Texas besides the shale oil thing is they do have a lot more companies so and it's a little it's a lot easier to start up there whereas on the North Slope you you have once a while you have a lot of small companies helping the big companies and even Hill Court comes up there that'll be the big company then the small service companies go in and help but they're not the ones that are doing the overarching financing of any big project once in a while that happens with a small company to finance and go for a new project then often what they do is they sell out because everything is centered on Prudhoe Bay and the conditioning plant and the oil conditioning plants there and then getting into the pipeline so you have to work with that conditioning plant before you can get it into the pipeline so any new oil basically has to go in to Prudhoe Bay and get conditioned and so on otherwise it's a few cost costly to do it independently and get it it's directly into the into the pipeline so that means inevitably it's the two big players whoever those players happen to be at the time that are kind of running things and when you have two players you get a little less competition so that that is one aspect and it's hard to change the fact that you have two big players economical kind of a third player but they really don't do that much with the point Thompson and they're not doing too much yet with it they just sell into the normal Prudhoe Bay situation maybe they'll get some this gas over the over the pole thing going but it it does make it slightly different than Texas so that's more of a concern than the taxes I think they go with an even tax and yeah don't change it but don't keep it at weight exact now okay well we're looking at Alaska in general I think that the it becomes the poster child for for climate change we have some great examples of communities that are being devastated by a changing climate etc and we're also a long ways away from markets and so it becomes an easy an easy target for companies to say look that is not very responsible development we should be and then focus their efforts in Oklahoma where things are cheaper etc so all of this is to say do you see us being able to develop future resources responsibly in this state or do we need to take a little bit different approach to how we develop things well I there's two two issues obviously are you gonna have carbon at all and you really it's going to be a big hard changeover get away from any kind of carbon it's really going to be a much harder than people are expecting and by the way electric cars up in the cold are really hard to use the cold effect on the electric batteries more than other places now maybe some of the newer batteries they they don't but so being responsible in the sense of carbon I think I think we are responsible in the sense of any other pollutant than any other problems and wildlife issues I think we're very responsible as far as carbon is concerned I don't think anybody's responsible and and you know you go to New York and you see everybody driving around and you go to these LA and they're still driving around and they say well we don't want to drive as much well they're driving and you know so whether we're driving it to our little mind to get some gold doesn't mean we're destroying the earth that's any more than if you're driving to your IT job in San Francisco you're destroying the earth so you could just as equally say that the
ilicon Valley is irresponsible as you could say as Alaska's irresponsible but I think we do we are response when we do it you know responsibly with wildlife with weather pollutants carbon is a big issue it's going to be hard to change and and by the way I know on the North Slope I know I've been to Barrow and I can't say it a periodic yeah they they are getting washed in and they have to put burns up and stop the storms that are bigger now so they might have to move or they might have to put bigger burn firms or dikes or something or levees around it to keep the water from coming in or they could move it more inland it can be expensive they can do it slowly over time but yeah a lot of Alaskan native especially coastal areas but other places Q will have to change and that's expensive but we're not causing that I mean if you've ever been to India or you've ever been to you know South America or these other places they're using cold because they have to develop so I don't think it's going to stop anytime soon and we still have an entire entire most of the continent of Africa that is especially those without access to the coastline which is relatively undeveloped and they're going they're not going to be able to skip a step there they're going to have to continue to use carbon-based energy in order to develop even even with all of the donations in the world the infrastructure you can't lead over you can't leap the infrastructure I noticed that I spent time in Afghanistan and and and I think Alaska has some of this going on to where Alaska is that basically been around after the advent of the airplane as far as large large scale development where we started settle more more people moving in more migration into Alaska right so we didn't develop the same infrastructure as would have happened somewhere else we were large or we were not a state when the interstate compact law passed Congress and so we didn't get the same calculation as the rest of the lower 48 did all of those things play a role and so the underdeveloped world or the undeveloped world we're not going to be able to skip directly towards today's technologies because the rest of their infrastructure won't develop in a way that will allow their economies to grow in order to sustain that sort of development is my my initial guess on that yeah I think well today my guess is Ben professor Reynolds and I enjoyed the conversation I loved talking we will have a chance to talk other resource issues into the future and I've really really appreciated it is there any place that somebody somebody can find you obviously to the University of Alaska Fairbanks I don't know if you have anything else out there yeah I mean you can contact me at the University of Alaska Fairbanks all that informations on the web and then I do have a separate email just because I'm trying to think about being a consultant so it's SF DVR at yahoo.com so you know they're either one it's fine I'll be putting up your article that you wrote adn I'll put that on our website Alaska conversations calm and I appreciate it have a great day yeah thank you for contacting me and and doing this with me I appreciate it
