Regulations don’t get enough credit for Alaska’s resource success

Gov. Mike Dunleavy has been out on the speech circuit recently, promoting a vision of our state’s future with balanced and diversified development, but one still fundamentally based on natural resource industries. I’m pleased to see the governor with a positive message, because we’ve heard too much of the negative about fiscal deficits and bloated state budgets.

In his talk before the Anchorage Chamber of Commerce on Dec. 30, the governor mentioned the transition in developed nations away from fossil fuel energy toward energy based on electricity, much of it from renewable energy. But the new economy, the governor said, will still need natural resources like rare earth metals, which Alaska has. Despite the shift to the new economy, the demand for oil and natural gas will be with us for a while, and our state’s petroleum resources are growing again thanks to exploration, Dunleavy said.

Of course, governors are supposed to tout their states and its key industries. Washington state’s governor will talk about Boeing and its airplanes. West Virginia’s governor can be expected to promote coal mining. Dunleavy mentioned other industries, like tourism, which is a resource industry that depends on the preservation of wild and scenic landscapes.

Commercial fisheries should have been mentioned, however. It’s an important resource employing thousands that is indefinitely renewable as long as harvests are properly managed, which Alaska is required to do under its constitution. I would also like to have heard mention of Alaska’s people, certainly a renewable resource and one made more valuable if young Alaskans are educated in good schools and a first-class state university.

Still, I give Dunleavy credit for getting a positive message out. He has to walk the talk, however. I’d like to hear the governor’s ideas on how he would actually grow the economy, and I presume these will come in his annual State of the State speech he will soon give to the Legislature. Governors traditionally use this forum to air new policy ideas.

As for at least sustaining what we have now — our traditional resource industries like oil and mining — we’re in a good place, I believe. Oil explorers say the most important thing is to have good rocks, meaning good geologic potential. We do have good rocks. The second most important thing is to have a stable land management and oil and gas leasing system, and administrative tools to ensure property rights. We already have these in a well-managed Department of Natural Resources, which holds annual lease sales that have not seen lawsuits and delays in many years. Our Alaska Oil and Gas Conservation Commission, a regulatory agency, protects property rights of lessees among other things.

For mining, it’s similarly all about good rocks. We certainly have them. The Fraser Institute of British Columbia ranked Alaska as the fifth-best place in the world to explore in its most recent report. As with oil, good land management and protection of property rights is important for mining, and we have the Division of Land and Water Management and Division of Mining, which function well.

We also have the state Division of Geologic and Geophysical Surveys to do geologic reconnaissance and make information available, an important part of telling our story and marketing our rocks. Because we’re part of the U.S., we have a legal system to protect rights and settle disputes. That’s missing in a lot of countries.

To his credit, the governor is giving support to these agencies. Their budgets are either being held steady or suffering only light nicks, no small thing in the financial environment our state is in.

But here’s something else that’s important. A well-managed environmental regulatory system doesn’t burden industry – it protects it.

There are laws that set standards for protecting lands, water and wildlife, and government agencies must have the staff and resources to do thorough work to ensure that permits for development don’t just follow the law but can stand up in court if lawsuits are brought, as they frequently are. If the permit work isn’t done right, the project is likely to be stopped.

Here’s one other thing that’s often not recognized. If a regulatory agency has strict compliance guidelines and backs these up with inspections, this is good for industry because it’s protection. It diminishes the chances of being stopped in court and assures the public that work is being done properly. It’s the social “license” for economic development.

Think those litigious environmental groups are a nuisance? Think again. They keep the agencies, and industries, on their toes. That’s a good thing.

Not doing this can create huge costs and reputational damage for companies. The BP Macondo oil blowout in the Gulf of Mexico in 2010, also known as the Deepwater Horizon spill, is a prime example.

An aspect of this that is a little subtle is that a sturdy regulatory system gives protection for middle managers in industry who can see their maintenance budgets cut by home-office bean counters during cycles of low prices, for oil or any commodity. As everyone knows, lack of maintenance can create big problems down the road, like corrosion in pipelines that result in oil spills and shutdowns, for example.

Good regulators are as important in sustaining our natural resource industries as good land managers, geologists and scientists. We need them all to do truly balanced development.

Tim Bradner is copublisher of the Alaska Legislative Digest and the Alaska Economic Report.

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