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Thanks, Rick Rogers, Vice President, Lands & Resources for Chugach Alaska Corp. It’s an honor to participate in this 28th annual conference. You certainly have an impressive line-up of speakers who are expert in resource development and energy issues. So it’s a legitimate question you may be wondering but are too polite to ask out loud: what’s Begich know about “angle of deflection” or an “alluvial deposit.” Not much. But like many of you, I am keenly interested in Alaska’s energy future and concerned about our state’s current direction. Certainly Anchorage and much of the rest of Alaska is prospering today, in large part because of high oil prices. But I see a dark storm cloud on the horizon which poses a serious threat to our progress – an energy crisis in Alaska, America’s energy storehouse. As Alaska’s headquarters city, a community built on oil and gas, Anchorage’s continued prosperity depends on both reliable energy sources and a healthy energy industry. Today, I want to offer some proposals for preparing for that coming storm. I’m pleased to be followed to the podium this afternoon by two of my fellow mayors – John Williams of the Kenai Peninsula Borough and Edward Itta of the North Slope Borough. Both are good friends and visionary leaders. I’m glad to be in their company because increasingly, I believe Alaska’s communities are key to our state’s prosperity: both our economic well-being and our rich cultural diversity. Across the board - from climate change to the meth epidemic, from creating economic opportunities in our rural villages to devising an energy policy – Alaska’s communities are working together and setting our state’s agenda. Yet, I sense a growing frustration across Alaska. The state is enjoying record surpluses from 90-dollar oil and sits on a 40-billion-dollar saving account. But in towns and villages across the state, crime is on the rise, our schools are hard-pressed to make ends meet and many rural communities are disintegrating. We’ve got to do better. Certainly, I can’t forego this opportunity to boast a little about my own community. We’re working hard to create business-friendly climate here because we know it’s the private sector that creates permanent, well-paying jobs. Anchorage is in the midst of our 19th straight year of continued economic growth. We’ve got the most aggressive building boom in a generation, lower property taxes for most, and improvements to roads, buildings and parks from Eagle River to Girdwood. 2006 set a record for the second highest value in building permits ever – topping $800 million. Anchorage voters have shown their confidence in our community when in both 2004 and 2006, they approved every single proposition on the city ballot. That’s the first time that’s happened in 20 years, and includes millions in bonds to make our community more livable with improved roads, public buildings and parks and recreation facilities. The cornerstone in downtown Anchorage’s revitalization is the new Dena’ina Civic and Convention Center, named in honor of the Native people of our region. It’s now 67 percent complete, with the grand opening set for September ’08 – just in time for next year’s AFN convention. The Dena’ina Center will be a great venue for local events and will position Anchorage for many lucrative conventions we couldn’t even consider before because we lacked the space. I hope RDC considers it for a future conference. The new Dena’ina Center also has helped trigger development across our city, from the museum expansion to new investments in Mt. View, Eagle River, Girdwood and many points in between. As we invest in our community and work to improve our business climate, we’re working hard to limit the growth in property taxes used to fund city services. This year, property taxes comprise about 46 percent of the revenues used to provide city services, compared to 59 percent when I took office four years ago. Thanks to 37 million-dollars from the state over the past two years, the average single-family homeowner is seeing a property tax savings this year of about 363-dollars. Other parts of Alaska are prospering as well. A couple of weeks ago, I was in Fairbanks for the AFN convention and job growth there is up 23 percent over the past decade as the military, mining and construction industries fuel the Interior economy. I believe we can generate even more good news numbers by enhanced cooperation across municipal, borough and village boundaries. There are many examples already, from joint tourism promotion to increased collaboration on international cargo. Yet, I believe this progress is threatened by a pending energy crisis. Hard to believe in Alaska. The Southcentral region of Alaska has been blessed with a cheap, abundant source of oil and natural gas from Cook Inlet. This has warmed our homes and fueled our businesses for a couple of generations. Now, gas production from Cook Inlet is falling and known reserves are not sufficient to meet current demand – residential, commercial and industrial needs - beyond 2015. We saw just the tip of that iceberg with closure of the Agrium fertilizer plant on the Kenai and the resulting loss of nearly 300 jobs over four years. And Cook Inlet crude production is a pale shadow of its past. Daily production has dropped so low that Tesoro is forced to import more than 40 percent of its crude oil from foreign sources, including Indonesia, Africa and Norway. The energy situation is even more dire in much of rural Alaska, where costs are triple or more what we’re paying here. That’s contributing to the demise of many rural villages, which have simply ceased day to day operations, become insolvent or are forced to eliminate essential services. I don’t see much action by the state to deal with these issues. There’s no state energy policy and none in the works. Instead of a sense of excitement about building America’s largest ever construction project – an Alaska natural gas pipeline – what I hear is nervousness about putting all our eggs in the AGIA basket, with no guarantee of a successful applicant. All the while, extremely high energy costs and uncertainty is reducing our attractiveness to new business and industry. And record oil prices are masking our vulnerability to an economic downturn. This not good for my community, and it’s not good for Alaska. We’re not waiting for the state to bail us out. Let me outline what we are doing. Three years ago, the borough mayors of the Kenai Peninsula and Mat-Su Valley and I formed what we call the Tri-Borough Commission. With a combined population exceeding 60 percent of the state’s population, we encompass the vast majority of Alaska’s roads and other public infrastructure and serve as the state’s commercial headquarters. Recognizing that we’re a regional economy which crosses borough and municipal boundaries, we’ve joined together to produce our own energy policy. Its cornerstone should be delivering affordable and dependable energy to Alaskan homes, businesses and industries. Yesterday, we assembled nearly a dozen energy experts from Anchorage, Mat-Su and Kenai to start hammering out an energy policy. We hope to produce it by January, just in time for legislative action. I believe any such policy must have these three elements: First, increased oil and gas exploration and production across Alaska. Today’s high energy prices should encourage more development and the state should partner through incentives and policies to make it happen. I especially want to promote more drilling in Cook Inlet which directly benefits the Southcentral region. Let’s consider incentives, such as capital investment credits to encourage upgrades to existing platforms in Cook Inlet, credits for deeper drilling, and credits to offset the costs of exploration, especially offshore. Let’s build a gas pipeline that benefits our entire state, including rural Alaska. Alaska has never been better positioned to give our state and nation one more boom. Let’s encourage those who know how to build gaslines – the oil and gas industry – to get off the sidelines and compete for the best project for Alaska and America. We need a gasline process that is inclusive, not exclusive. The sheer scope and cost of any natural gas pipeline will require the resources of every company with an interest in North Slope natural gas, plus pipeline companies, financial institutions, and yes, the state of Alaska, if this massive project is to be successful. I hope the gasline process now underway is successful. But I worry, given the “winner take all” strategy we have chosen as a state. What if we choose the wrong winner? Without an open and transparent process that brings all the players together to compete to build the project with the best chance to succeed, the window may be shut on our opportunity to finally bring North Slope gas to market. Second, any energy policy must emphasize conservation and significantly increased use of renewable energy resources. And we must recognize that Alaska is at Ground Zero when it comes to global climate change. Again, here Alaska’s communities are leading the way with policies and specific actions to curb global warming. Most Southcentral communities and utilities are strongly behind the innovative Fire Island Wind Power program, which could generate up to 100 megawatts of power and help diversify the region’s energy mix. Third, is conservation. In Anchorage, just retrofitting the lights in City Hall will save $35,000 a year. Putting the 3,000 city computer monitors on a “sleep mode” when they’re not in use saves $84,000 a year and cuts carbon emissions the equivalent of taking 251 cars off the road. Another major step we can take to hold the line on energy costs is reforming the way we provide electricity to homes and businesses. Anyone who knows anything about electric utilities says having four of them serve a population the size of Southcentral Alaska is inefficient at best. That’s why we’ve spearheaded an analysis of merging the operations of the two largest utilities – Municipal Light and Power and Chugach Electric. A consultant’s report was issued last week which shows significant savings could be achieved through some form of joint operations. We’ve got a long way to go, but for the first time since the two utilities were formed more than half a century ago, there’s a real possibility for efficiencies and savings for ratepayers. I know all eyes – mine included – are on Juneau and what’s likely to emerge from the special session. Regardless of that outcome, it’s obvious that we’re in for a new era of oil wealth. Record high oil prices and a new oil tax are likely to produce a budget surplus of two to three billion-dollars. Let’s use this historic opportunity to finally adopt a long-term financial plan for our state. I believe it should include a combination of saving for future generations and investing for today’s generation. Across this state, communities are suffering from eroding infrastructure – deteriorating roads, leaking roofs, aging boilers, inadequate clean water. So let’s set aside a portion of our enormous oil wealth which communities can use as match to meet locally determined needs. It could spin off 100 to 200 million-dollars annually and allocated to communities and school districts for major maintenance and replacement projects through a matching grant program. Matching grant funds work. For nine years, until 2003, we had a community capital grant program. The program enjoyed outsized success because local governments understood their needs and capacities and made sensible decisions with their own money on the line. In Anchorage, we would invest those dollars with local contributions to continue building a livable, headquarters city. Alaska is prospering, as our state’s communities continue to set the agenda and improve opportunities for our citizens. We’ve got to take advantage of the historic opportunities before us to capitalize on Alaska’s new era of wealth to invest in our communities, to welcome industry with a positive business climate and address the pending energy crisis which threatens our prosperity. Thank you. ### |