Resource Development Council

Embrace reform that benefits development

By Senator Lesil McGuire

As Chair of the Senate Energy Committee and Co-Chair of the Senate Resources Committee, I have traveled across Alaska and held hearings on energy issues in both urban and rural communities alike. In these hearings, I consistently heard Alaskans express their interest in seeing Alaska develop our renewable energy resources and a “new” economy.

During this past legislative session, bills like the Statewide Energy Policy (House Bill 306) and the Omnibus Energy Bill (Senate Bill 220) garnered headlines and understandably, generated excitement in our communities. By setting goals for renewable energy in Alaska, we inspire a generation of Alaskans to look locally for the resources to power their communities and economies into the future. By establishing programs like the Emerging Energy Technology Fund and the Energy Efficiency Revolving Loan Fund, we create the tools and funding to drive innovation and conservation in our energy sector; hopefully forming a foundation for a “new” economy. But our pathway to this “new” economy is essentially blocked by the same obstacles that stifle investment in Alaska’s traditional resource sectors. A convoluted and often arbitrary regulatory system, BANANA (Build Absolutely Nothing Anywhere Near Anything) attitudes, and litigation add unnecessary cost and suffocate both renewable and non-renewable projects alike.

In their more than a decade long fight to develop a large wind farm off the coast of Cape Cod Massachusetts, the proponents of the Cape Wind project have faced obstacles all too familiar to Alaskans. Permitting delays and potential litigation, as well as federal statutes and regulations, have led to cost increases and put ultimate construction of the project in jeopardy. In this, the Cape Wind proponents share a lot with the likes of Shell and ConocoPhillips in the OCS and NPR-A; or with Teck and NANA’s expansion of the Red Dog mine. The simple fact is that the current permitting environment challenges all forms of resource development. In these challenges I see an opportunity and believe that we must move beyond the renewable versus non-renewable debate to focus on the development of all of Alaska’s resources.

During the last session of the Legislature, we took several steps toward securing a sustainable and stable energy future for Alaska. For instance, my Senate Bill 309 made changes to the corporate income tax system to incentivize gas exploration in the Cook Inlet. It also made revisions to Alaska’s production tax system (ACES) and created a new incentive for offshore exploration in the Inlet. But in a session dominated by the big energy bills, legislation like Senate Bill 309, Representative Hawker’s Cook Inlet Recovery Act (HB 280) and those I sponsored on the regulation of renewable energy projects (SB 277 & 243) did not receive as thorough coverage in the Alaska media because their material provisions do not fit well onto bumper stickers. This is because each bill addresses aspects of the regulatory system and bills that deal with the regulatory system are inherently as complex as the issues they attempt to unravel. But all of these bills were passed by the Legislature and signed into law by the Governor; demonstrating that we can build a consensus which furthers resource development.

We can move forward by realizing that the central tension at the root of much of the regulatory debate is over different interpretations of the public interest. The truly insightful aspect Representative Hawker brought to the table in his Cook Inlet Recovery Act is in section 6, which directs the Department of Law to essentially consider the cost of doing nothing when deciding to intervene in the approval of a natural gas supply contract. HB 280 recognized that quibbling over price while supply evaporates is not in the public interest.

My Senate Bill 277 approached the development of renewable energy in a similar manner by removing the regulatory commission from the free commercial negotiation between a regulated utility and renewable energy power producer. SB 277 recognized that the current regulatory process in Alaska was duplicative and added substantial delay to projects (which ultimately increases the cost to ratepayers) while offering little incremental benefit to the consumer. Senate Bill 309 waived interest penalties on the underpayment of taxes under ACES due to a change in the regulations. Senate Bill 309 recognized that penalizing businesses that acted in good faith because the state changed the rules is ridiculous.

In their attempts to reform the upstream regulatory system, HB 280, SB 277, and SB 309 attacked analogous problems in order to spur either renewable or non-renewable resource development. Behind each policy change is the promise of hundreds of millions of dollars in private sector investment and good jobs for Alaskans.

My hope is that the resource development community will come together and move beyond any lingering debate around renewable or non-renewable resources to focus on regulatory reform that benefits all forms of resource development. The current local and national interest in transitioning to a “new” economy offers not only opportunities for innovation and sustainable development; but the chance to fundamentally recast the debate over regulatory reform and resource development for the maximum benefit of Alaskans, and our nation.

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