Saturday, December 3, 2011

To buy or not buy Norway's house

Deborah Brollini
Alaska Energy Dudes and Divas

I know some Alaskans are a tad disgruntled over lawmakers taking a trip to Norway. However, the trip was far from a junket. I have been mystified by Norway’s economic success, and have had a difficult time wrapping my mind around their state-owned oil company Statoil, and how they invest in themselves in regards to resource development. Not to mention their $600 billion dollar permanent fund. There is a lot to be said for Norway’s success. However, can their success be translated into an Alaska success story?

Norway has had my attention for over a year now. Unfortunately, to date the public presentations, news stories, and sound bites have all fell short in articulating Norway’s investment strategy to the everyday Alaskan. It was not until I got my head into the weeds did I finally get Norway. It is not as complicated as one would think. But, it took some personal tutoring, and a little role-playing over coffee did I finally get it. But should Alaska buy Norway’s house?

Norway has a lot of curb appeal, and as far as the home inspector, there has been a lot of homeowner investment that has gone into their house. Homebuyers, and the mortgage lenders know exactly what they are getting into in terms of the seismic data to make some determination whether the property has value, and worth the investment.

Ira Perman, President of the Institute of the North and I discussed a hypothetical new “Brollini” oil find on the North Slope last month.   The seismic data showed a high likelihood of substantial oil within the Brollini field. We determined that Alaska should take a one-third interest in the field with our partners Statoil, and ConocoPhillips who each held a one-third interest in the Brollini field.  In addition, Alaska would be true partners with industry and would partake in the risk in the development of the oil, as well as the financial rewards after production.  The field began producing oil in 2011 and the field accumulated three million in profits. So, how will the state tax this new investment in my hypothetical world?

In my hypothetical world Alaska’s take was 75% of profits. Statoil, and ConocoPhillips would pay the state of Alaska $750,000 each in taxes, and get this, for Alaska’s investment… we get to keep the money! All $2.5 million of it. Investing in ourselves is Alaska’s future. Norway learned from us, and let us learn from them and their success.

We get to keep the money Alaskans!!!

3/4/13: In January 2012, I personally sponsored an all day "Norway debriefing" to educate Alaska leaders, legislators, and the public about the Institute's of the North's Norway trip. Ira Perman with the Institute of the North spent a great deal of time tutoring me about Norway, which led to the  coordinating of the meeting.   I used my own personal time, and personal funds to sponsor the meeting. I would not have been able to pull it off without the support of Senator Lesil McGuire and her staff, and Governor Sheffield allowing me to use the Port of Anchorage's facility to host the meeting