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The Morning Headlamp - Gov. Walker needs AKLNG now more than ever


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More concerning news. British oil giant BP released a statement yesterday that it will eliminate 4,000 of the approximately 24,000 positions in its exploration and production units this year. "We have to make sure we have a competitive and sustainable business," David Nicholas, a company spokesman, said by telephone. "External market conditions are getting tougher." A statement released by the company's Alaska offices said the workforce reductions will include Alaska. Employees who attended company meetings held Tuesday morning said they were told BP Alaska would trim its workforce by 13 percent. That kind of cut to a workforce of 2,100 employees in Alaska would amount to about 270 employees. Headlamp is saddened to hear of more job cuts coming to Alaska on top of an already concerning economic forecast. The negative effect of BP cutting its Alaska workforce is further highlighted by findings in a 2014 report conducted by the McDowell Group,  that examined the economic impact of Alaska's oil and gas industry. The report found that for each "primary company" job, which these BP jobs are, 20 additional jobs are created due to the direct and induced spinoff effects. The compounding effects of BP shedding 270 jobs will ripple across Alaska's economy, and will likely add more former oil and gas industry workers to the unemployment lists that have doubled since late 2014.

No kidding! Governor Bill Walker issued the following statement Tuesday in response to BP's recently announced plans to cut about 270 Alaska jobs: "Today's announcement that BP will be cutting 4,000 jobs worldwide is concerning. However, this further emphasizes the need to pursue additional resource development opportunities in Alaska, including the 1002 section of ANWR and the Alaska LNG project. I am committed to continue working with producers like BP to address low oil prices and declining production, and ensure these companies maintain a strong presence in Alaska. I appreciate the contributions BP has made throughout our state, and am confident they will continue to be leaders in Alaska's oil and gas industry in the future."

For the past four months, Headlamp has been saying developing Alaska's tremendous oil, gas, and mineral resources to maximum benefit of our people should be at the forefront of our state's economic plan! We're pleased to see the Governor agreeing with us. As lawmakers return to Juneau in less than a week, Headlamp would strongly suggest they keep Gov. Walker's statement in mind and design policies that do not further hamper Alaska's primary industry. Given the sustained slump in oil prices, and forecasts for $20-25 per barrel oil, the simple fact is that increasing taxes on the oil and gas industry in Alaska has the potential to accelerate job losses.

BP's cuts are what companies do when revenues decline. In order to survive, the private sector finds efficiencies, streamlines operations, and makes painful yet necessary cuts. State government in Alaska must do precisely the same as part of its budget solution. Alaska's operating budget has increased from $3.02 billion in FY 2006, to $5.18 billion in FY 2016. Were Alaskans content with the level of services provided by state government in 2006? As an individual Alaskan, what has our state government done for you by spending an additional $2 billion per year? These are the type of questions Headlamp believes Alaskans must be asking if we are to survive this fiscal crisis. Unfortunately, there are too many Alaskans unwilling to face the reality that our government has become bloated. There are legislators, and many citizens, who think we can fix our fiscal crisis by taxing our number one industry into oblivion. Such preposterous ideas will not work, and would further harm Alaska's economy. Headlamp encourages policy makers to follow the lead of the private sector. Find efficiencies, streamline operations, and make the cuts, which yes will be painful, but are necessary to ensure Alaska's next generation is not burdened by crippling taxes.

First Non-Alaskan US LNG Exports Begins This Week. Platts reported that a tanker that will carry the first shipment of American liquefied natural (LNG) gas arrived in Louisiana Tuesday, symbolizing America's status as a major new supplier to Asia and Europe. The future for exporting natural gas remains bright according to the International Energy Agency (IEA). The IEA forecasts that global demand for natural gas is expected to be 50 percent higher by 2035 than it is now. LNG exports are likely to significantly reduce energy costs in Asia and Europe. The Obama administration opposed natural gas exports on environmental grounds before reversing position in late 2014 after the Russian occupation of Crimea. This is encouraging global news for Alaska's AKLNG megaproject. As Headlamp has repeatedly stressed, LNG has incredible global potential as growing Asian markets necessitate a reliable energy source. Alaska can't miss out on an opportunity to get in on the ground floor. Advancing AKLNG needs to be a top priority for policy makers during the upcoming legislative session.

 

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First Reads

BP to reduce Alaska workforce by about 270 jobs
KTUU, Steve MacDonald, January 12, 2016

BP to cut 13 percent of Alaska workforce as oil prices keep dropping
Alaska Dispatch News, Alex DeMarban, January 12, 2016

Cheniere's Sabine Pass Prepares for Imminent LNG Export
Platts, January 11, 2015

Profit pressure will complicate Alaska Permanent Fund's future
Alaska Dispatch News, Dermot Cole, January 12, 2016

The price of oil is still falling. And falling. How low can it go?
Associated Press, David Koenig, January 12, 2016

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