1. The Alaska Business Plan:
The Need and the Approach
BRAD KEITHLEY
PRESIDENT, KEITHLEY CONSULTING, LLC
OCTOBER 24, 2013

2. Agenda
 Where
is Alaska now
 Where
we are headed
 How
do we create a “Morning
in Alaska”
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3. Where we are …
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“Reasonable assumptions about potential new revenue
sources suggest we do not have enough cash in reserves to
avoid a severe fiscal crunch soon after 2023, and with that
fiscal crisis will come an economic crash.”
ISER, Maximum Sustainable Yield, FY2014 Update (January 2013)

4. Where we are headed …
4
“Two options available to the state … are institution of a broadbased tax, and use of a portion of the earnings of the Permanent
Fund. … It is anticipated that both options will be required in the
non-OCS case. The value shown above assumes a personal
income tax, similar to the tax that was eliminated in 1980, will be
phased in between 2022 and 2026.”
Northern Economics and ISER, Potential National-Level Benefits of Alaska OCS
Development (Feb. 2011)

5. The effect on oil & gas
development …
5

6. What is the way forward
… The Alaska Business Plan
1.
Enact sustainable budgets
2.
Co-invest in the development of
Alaska’s oil and gas
3.
Enable Alaskans to participate
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7. 1. Enact sustainable budgets
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“In contrast to business-as-usual, there is no fiscal cliff associated
with the maximum sustainable yield strategy. Enhanced
financial resources, combined with new revenues from longterm petroleum developments, would be sufficient to cover
General Fund Spending growing with population.”
ISER, Maximum Sustainable Yield, FY2014 Update (January 2013)

8. But there is more to be
done …
8

9. The problem: government
is in the way …

A conundrum: the State irrevocably owns the oil
& gas resources located on state lands (Section
6(i) of the Statehood Act)

Since statehood, the decision whether to develop
those resources has been contracted out to third
parties



But, as production has declined the state
increasingly has attempted to drive the bus from
the backseat through regulation and tax policy
Results has been to misdirect investment focus,
away from the most economically efficient (and
internationally competitive) projects
Need to develop a market-based solution
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10. 2. Invest in the development
of Alaska’s oil and gas

The solution: make the state a market
participant – in conjunction with private
participants – not a back seat driver

Co-invest in the development of Alaska’s oil &
gas through an investment fund


State and industry work as partners, not
adversaries


State refocuses on identifying highest return (best)
economic projects
The same solution the state and industry came to
eight years ago, but got lost in the 2006 election
Alaska acting as an owner, not government
10

11. 3. Enable individual Alaskans
to participate

Like state government, individual Alaskans also
are disconnected from the development of
Alaska’s oil & gas resources
View the industry as a source of tax revenue
 Creates an adversarial, divide the pie approach


Alaskans should be provided the opportunity
also to participate in the market, by investing
personally in the development of Alaska’s oil &
gas resources (a form of ESOP)


Become stakeholders in growing the pie
Create a program to enable Alaskans to invest
all or a portion of their PFD directly in the
development of Alaska’s oil & gas resources
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12. A note about SB 21 and
LNG …
… both are important, but neither is a silver bullet

SB 21 increases long
term revenues, but
not hugely

Similarly, LNG produces
some revenues, but
does not replace oil
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13. The Alaska Business Plan …
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… Morning in Alaska

14. 14
For more information, contact …
Bradford G. Keithley
President & Principal, Keithley Consulting, LLC
Publisher, Thoughts on Alaska Oil & Gas
keithleyconsulting.com
email: bgkeithley@keithleyconsulting.com