Wednesday, July 4, 2012

Aligning Alaska's business interests

by Deborah Brollini

I’ve been putting off writing this piece for months. Mainly, because it is difficult content to understand for a novice audience, and God bless GCI, and ACS for uniting and aligning their wireless business interests. Both GCI, and ACS are Alaska corporations who are in the business of serving you, as well as rewarding their shareholders for your business. Alignment is not a new concept to the state of Alaska, and how we do business. There are huge opportunities for our state if the Governor, and the legislature would have a vision, and a plan for Alaska.

GCI and ACS were proactive by uniting their business interests prior to Verizon entering Alaska’s sandbox. Verizon by entering Alaska would be taking some of GCI and ACS’s market share. GCI and ACS by uniting, have consolidated their wireless business interest and will be offering statewide services utilizing GCI’s existing infrastructure. Verizon like ATT are unable to offer statewide wireless services in Alaska. This is a brilliant move by GCI and ACS which has this huge corporation scrambling to respond prior to entering the Alaska market. What GCI and ACS did was to look strategically at their business interests to find areas of commonality and seek opportunities for collaboration. Alaska could follow GCI and ACS ‘s lead by uniting our state’s business interests to move Alaska forward. Alaska needs to be looking at our oil business with vision, and to look at progressing oil projects forward strategically.

I’ve been spending time visiting with Willie Hensley, Alaska Native leader, and former Commissioner of Commerce and Economic Development with the Knowles administration. I asked him several months back about what was going on in the mid-90s that the oil production decline had flattened for several years. I also posed the question to many oil industry folks whom are retired oil executives today. The reason this peeked my interest was because it had to have been difficult to sell capital investment in Alaska with $12.00 oil. At the time I was working on the MIX project which was a collaborative $165M capital project with ARCO, BP and Exxon. I was the technical writer documenting the project on the front-end, and I had a difficult time understanding why the oil industry would invest so heavily on the MIX project with $12.00 oil. Willie shared with me that during the Knowles administration they started an initiative called "Market Alaska."

Willie stated that the Knowles administration realized early on that “Alaska’s oil companies, and the state’s futures were linked, and that our futures were joined at the hip.” It was important to the Knowles administration with "Market Alaska" that they reach out to the oil industry, and look for ways to reduce barriers that would influence the cost of projects, and the Knowles administration bent over backwards to reduce costs to entice capital investment. The opportunities for Alaska are endless if we were visionaries, and looked at our relationship with the oil industry as a partnership rather than enemies of the state. We need to get back to understanding that our futures are linked, and look at ways to partner with industry so all parties win.

ACS and GCI strategically looked at Verizon’s competition as a detriment to the health of their businesses and both companies constantly evaluate their competition. Alaska does not know where we stand in the world in regards to the competitiveness of our oil. Alaska through its legislature would prefer to exercise the “battle of the experts” than really look at our true competitiveness in regards to attracting capital investment. New capital investment would stem the decline in the Trans Alaska Pipeline (TAPS), which would offer up new projects employing Alaskans. The “battle of the experts” strategy is not working. Alaska has wasted enough time on this exercise while finite capital dollars that used to be directed towards Alaska are now dwindling. Our market share of capital investment dollars are going to other states, and provinces around the world. There is plenty of oil left on the North Slope yet to be developed. However, the non-conventional oil (heavy and viscous) are expensive to extract. It will take talent and billions of dollars of capital investment to extract this oil. Alaska could improve its market share of investment dollars by really evaluating our competitiveness and taking the politics out of it. This can be done with an Oil and Gas Competitive Review Board (OGCRB), which would evaluate our taxation policy, our regulatory environment and would seek out all stakeholders and provide the needed data to the legislature in order for the legislature to make decisions. It would become about the data, and less about egos, and the politics of the day.

Senator Lesil McGuire has proposed legislation over the past several years that would put into statute a OGCRB. The OGCRB she had proposed would be composed of selected Legislators, Commissioners and members of the public. As with a similar effort in Alberta that resulted in restoring oil and gas investment to the Province after a substantial downturn. The purpose of the OGCRB would be to create an ongoing body whose job it is to monitor Alaska’s position in the world oil and gas industry, and provide useful and, most importantly, ongoing insight to the Legislature on that subject. One of the anticipated results would be to lessen Alaska’s dependence on “Outside consultants” to help identify the state’s position in the oil and gas industry, and to significantly increase Alaska’s – and the Legislature’s – home grown ability to provide the same insight.

The Governor has the power through the executive order process to implement a OGCRB. The OGCRB could spend the next six months reviewing our position in the world, and have the review complete prior to the 2013 legislature gaveling in. This would put an end to the rhetoric, and get Alaska back in the game. The OGCRB could recommend opportunities for the state to partner with the oil industry permitting the state to share in the investment risk, as well as reap the rewards of new oil through TAPS, with the desired outcome of additional oil tax revenue. Additional tax revenue would allow the state to continue to fund schools, roads, public safety and etc. Oil prices are falling and capital investment is leaving Alaska, and we are simply running out of time. The Governor could put Alaska back on track and move Alaska forward with one stroke of a pen, and gift my children the bright future they deserve by executive order.

Alaska hasn't a second to waste, and the Governor could lead Alaska to a prosperous future. However, he must be bold, and he must act today.

What is a competitive review board?