AD Header Dropdowns

AD Main Menu

Bypassing Juneau, oil industry appeals to public for tax breaks

Patti Epler

JUNEAU -- The oil industry is continuing to turn up the political heat on lawmakers reluctant to cut taxes on North Slope production even as Gov. Sean Parnell's proposed tax restructuring appears to be put off until next year.

At the same time, some legislators are continuing to examine ramifications of a tax reduction in light of new information being offered by industry executives in an effort to bolster public support for a tax break. 

BP Alaska president John Minge is slated to address an Anchorage oilfield support group on Thursday about the oil tax reform debate. Last week, ConocoPhillips chief executive Jim Mulva spoke to the Make Alaska Competitive forum and suggested if the tax cut is enacted North Slope operators might invest another $5 billion in Alaska.

With four days left before the Legislature adjourns, the speeches by top executives to sympathetic audiences in Anchorage rather than substantive meetings with lawmakers in Juneau has added to the tendency to dismiss whatever the industry might say as political posturing.

"I think that the reason is they don’t come and talk to us is they don’t really have anything to tell us," said Rep. Mike Doogan, who has been opposed to the governor's proposal because the industry has not convinced him that it will take the money it is saving in taxes and invest it back in Alaska.

He noted that Mulva didn’t talk about anything new, just projects the company already had on the drawing board, and that none of them involved new discoveries or new exploration. "Somebody else doing the same thing, it's not going to impress anybody," he said about Minge.

Opponents: Oil tax public relations lacks substance

Rep. Les Gara, another critic of Parnell's tax bill, said its easier for companies to make their pitches to a pro-industry group rather then the Legislature because they don't face tough questions.

"Until they actually start promising to do exploration in new areas, its all just PR," Gara said.

Jason Moore, spokesman for Make Alaska Competitive, said his group had asked Minge to speak to its members and others interested in the tax debate. The group wanted to hear from BP after Mulva's remarks last week.

BP spokesman Steve Rinehart said BP representatives have testified before legislative committees when invited. He did not directly respond to a question about why Minge didn’t meet with lawmakers in an effort to explain in more detail the company's plans for investment in Alaska. Rinehart did suggest senators did not seem open to hearing what the company had to say.

On Monday, Senate President Gary Stevens addressed the full Senate after handing over the gavel in order to make an unusual speech on the Senate floor. He decried the campaign by tax proponents such as Parnell and groups like Make Alaska Competitive as frightening citizens in order to get them to call lawmakers and urge passage of a measure that legislators don’t fully understand. In the speech and in interviews, he has called remarks like Mulva's "a wing and a hope and a prayer" rather then firm plans to do specific new development projects.

Critics of the tax proposal say they are being asked to give the industry $2 billion in tax cuts without data to support that large of a revenue reduction. A bipartisan coalition of senators along with some House members, primarily Democrats like Doogan and Gara, have cautioned a go-slow approach. They say they want more information including reports that won’t be done until September and more analysis before reaching a decision, probably next legislative session.

Parnell: Boost Alaska oil production

Parnell and proponents, including House Republican leaders, argue that the evidence is obvious. Oil companies have not drilled any new exploration wells on the North Slope and the production rate continues to decline year after year, they say. Reductions in revenue in the short term are necessary to keep the oil industry in Alaska, providing jobs and supporting the economy for the long term, the contend.

Sen. Bert Stedman, co-chair of the Senate Finance Committee and a member of the Resources Committee, has been a strong advocate of collecting and analyzing all the data before making such a huge public policy decision.  

He said Wednesday that he fully expects to get detailed information from North Slope producers when it comes up before the Resources and Finance committees next year. The companies have legitimate issues to raise and lawmakers have legitimate concerns about examining all the facts before making a decision, he said.

"Quite frankly, the comments from Conoco and BP should have been made in February," he said.

Stedman said he is amenable to sitting down with oil company executives and "it wouldn’t be out of the ordinary for the presidents of the three majors to come down and have a meeting with the Senate president, the co-chairs of Resources and the co-chairs of Finance."

Sen. Joe Paskvan, co-chair of the Senate Resources Committee, said Wednesday he welcomes any information about the companies' position even if it comes through a public forum like Make Alaska Competitive.

"I think more information is better than less information so I am pleased that the state now has Conoco's information," Paskvan said. "That’s another piece of the puzzle that the state Senate has been trying to put together for several months now, … so that we can solve this big math problem."

Paskvan wants to look at the whole picture at the same time -- not just tax cuts but the effect of billions of dollars in tax credits as well.

That in-depth treatment of the tax proposal will have to wait until the next legislative session, however. He said in the few days remaining in this session he will hear bills in his committee that are "cleanup" measures but that he won’t take on any more substantive bills like the oil tax measure as it was passed by the House.

Meanwhile on Wednesday, Sen. Bill Wielechowski, a member of the Senate Resources Committee who has been deeply involved in the oil tax debate this year as well as in previous years, released a detailed analysis of what Mulva said Conoco and its partners might invest if the tax climate were more attractive. Wielechowski compared the state's revenue outlook under the current tax structure to revenue if the governor's proposal was in place.

He concluded that even Conoco and the others invested $5 billion as Mulva suggested the reduction in the current tax rate would mean the state would still lose more than $10 billion between now and 2020. Alaska would give up about $13.5 billion in revenue under the tax change, while new investment of the magnitude suggested by Mulva would bring in only about $3.2 billion in that time, he said.

Moreover, he said, Conoco would realize a profit of about $3.6 billion in that time period compared to a profit of $2.9 billion under the current tax regime.

"This is quite frankly the analysis we should have been getting from the administration," Wielechowski said.

Wielechowski said he has been asking Parnell's staff for data and analyses but the Department of Revenue hasn't provided the material. So when Mulva last week provided some numbers he decided to run a preliminary cost-benefit analysis himself.

In 2007, when the current tax structure was being debated, "I had someone in my office literally every day," he said. "This year I've had someone from DOR in my office exactly one time."

He says he doesn’t believe Parnell has the facts supporting the tax cuts and that "every single reason for passing this bill has been shot down."

Contact Patti Epler at patti(at)alaskadispatch.com