From The President - Rick Rogers
Alaska’s economic footings amid the churning global financial crisis
The sudden reality shock of our global economic crisis has many of us feeling like the coyote cartoon character. In a chase with the Road Runner, the coyote runs off a cliff and is doing fine until he looks down. Once he realizes there is nothing supporting him, he plummets to the ground. Many of us were blissfully ignorant of the house of cards that was underpinning our nation’s economy. We weren’t paying enough attention to warning signs that our prosperity was based on unsustainable borrowing, a housing bubble, and a series of compounding factors like bundling of subprime debt instruments and highly leveraged bond insurance.
While the economy in Alaska often runs countercyclical to the rest of the nation, we are far from recession proof. In just four months we have watched crude oil prices drop from $144/bbl to under $40. Base metal prices such as zinc and copper have followed a similar precipitous fall, and seafood prices and tourist traffic to Alaska are likely not far behind. Mineral explorers in Alaska are suddenly strapped for cash, when just months ago their biggest challenge was competing for limited skilled manpower and drilling contractors. This kind of market volatility amplifies the importance of maintaining and improving the fundamental underpinnings of our economy. Failure to enact sensible policies with respect to our resource industries could see Alaska’s coyote looking down into thin air.
Addressing the misuse of citizen ballot initiatives would go far in avoiding further erosion of our economic footings. Initiatives have recently been used for the purpose of undermining our very economic foundation. Look no further than the punitive cruise ship initiative which holds that industry to a technologically impossible discharge standard that far exceeds anything required by our own Alaska Marine Highway system or municipalities. Just months ago our mining industry was fighting for its survival due to an ill-conceived initiative designed to destroy the underpinnings of our resource economy. Fifty cent per pound zinc and a global recession provide sufficient challenges to these industries without the kinds of curve balls that destructive initiatives can throw. Representative Kyle Johansen continues to lead an effort to seek ways to make ballot initiatives more open and transparent without stepping on this constitutionally mandated citizen’s right. He deserves our full engagement on this important issue.
The Endangered Species Act (ESA) is the ten thousand pound gorilla moving into Cook Inlet and Alaska’s North Slope. Recent listings of the Polar bear (Threatened) and the Cook Inlet beluga whale (Endangered) under the ESA will require a full court press to mitigate the potential adverse impact to our economy. Never mind that the beluga population has stabilized since the subsistence take was significantly reduced or that Polar bear populations have been increasing, the listings are upon us. The Palin administration has challenged the listing of the Polar bear. The more recent Cook Inlet beluga whale listing is being closely scrutinized by many in the affected communities. Industry and community leaders are preparing to engage in the related rulemaking process. RDC will play a meaningful role in bringing our diverse membership together on this common issue with implications to oil and gas, fishing, mining, tourism and public works.
For years RDC and others have been calling for a long term State fiscal plan and framework to provide stability and help smooth the roller coaster of feast and famine budget cycles. Will the recent unprecedented volatility in oil prices mobilize our State administration and lawmakers to seriously engage this issue? The global financial meltdown has added an unprecedented degree of uncertainty to those investing in the exploration and development of Alaska’s resources. Continued inaction on fiscal planning compounds these risks and has a direct influence on critical resource exploration and development decisions. This will be heavy lifting but is critical and deserves our support and participation. Leaders in the business community and the legislature have emerged on this issue, will others follow?
Alaska’s economy is faring far better than the rest of the nation, but the volatility and uncertainty in the global economy means the wolf is at the front steps. Alaskans are not likely to directly influence the global financial mess, however, if there was ever a time for a steady hand at the tiller to support policies necessary to sustain our resource dependent economy, it is now.
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