Last week I gave a speech to the Alaska Support Industry Alliance discussing Judge Gleason’s recent decision on TAPS. The overheads I used for the speech are posted on these pages here.
In order to set the context for my remarks, at the outset I quoted a couple of pieces on the subject from Fairbanks Daily News-Miner columnist Dermot Cole’s column and blog. In one column, published on January 1, 2012, Dermot argued that Judge Gleason’s decision was a “good news for Alaskans.” (” … But the good news for Alaskans is that numerous oil company documents and expert testimony shows there is no reason to believe the pipeline will be shut down this decade or for a long time after. To the contrary, the oil companies are booking reserves far into the future and making plans to run the pipeline at lower rates, which means more decades of operation for the pipeline.”)
In my comments to the Alliance, I took issue with Dermot’s conclusion and suggested that the decision was largely irrelevant to the issue of Alaska’s economic well being. As I explained in the speech, the important factor in that regard is production rate — not reserve life — and Judge Gleason’s decision didn’t deal at all with current production rates. The further explanation of that view is reflected in the slides.
Interestingly, today I received an email from Dermot defending his position. I responded shortly after.
Dermot’s email argues that “[p]roduction is important. That is obvious. But the key points in the Gleason decision are the contradictions that you have missed or ignored.” Well, I didn’t miss or ignore them; I simply realized that they were irrelevant to the question of whether Alaskans are better off because of them.
As I explained in my response, “the fact that the oil production tail is going to extend longer than some have previously claimed strikes me as good news only for those of us that remain to turn out the lights on the economy. It means we can stay awhile longer before we do. As Scott Goldsmith, among others, have pointed out, however, with production falling below the levels necessary to fund state government at current levels … most of our peers will have left long before that, the economy will have shrunk to a fraction of its former self and life will be much different even for those of us that remain to the end. None of that strikes me as ‘good news’ for Alaskans.”
Because it helps further to draw the points that I think are important about Judge Gleason’s decision, I have attached the exchange with Dermot to this page. Dermot’s email to me is here; my response is here.